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BNY Wealth chief investment officer Sinead Colton Grant analyzes market volatility, discusses the S&P 500 forecast and breaks down broadening earnings on ‘Making Money.' #fox #media #breakingnews #us #usa #new #news #breaking #foxbusiness #makingmoney #finance #economy #inflation #markets #stockmarket #investing #investment #sp500 #earnings #volatility #business #wallstreet #economicoutlook #growth #trends
The Trump administration is expected to soon announce new trade investigations, with the goal of replacing reciprocal tariffs recently ruled illegal by the Supreme Court. The probes will be conducted under Section 301 of the Trade Act of 1974, The New York Times and Wall Street Journal reported.
US stocks closed mixed on Wednesday as investors navigated rising geopolitical tensions and higher Treasury yields. The Dow Jones Industrial Average fell 289 points to 47,417.21, while the S&P 500 slipped 0.08% to 6,775.75.
Analysts' estimates and companies' guidance have weakened since the start of the year, resulting in a Q1 estimated total EPS growth rate of 11.5%.
Chris Merkel: Hi, everyone. Welcome to Exodus Movement, Inc.'s fourth quarter 2025 earnings call. I am your host, Chris Merkel, and with us today are Exodus Movement, Inc.'s Co-Founder and CEO, JP Richardson, and CFO, James Gernetzke. During today's call, we may make forward-looking statements. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may vary materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described in forward-looking statements in our earnings press release and our most recent Form 10-K filed with the Securities and Exchange Commission, available on the investor relations portion of our website. We do not undertake any obligation to update forward-looking statements. As always, feel free to visit our social media accounts on X or Reddit to submit questions for our investor relations team after our call. I will now turn the call over to JP to discuss Exodus Movement, Inc.'s fourth quarter and full year 2025. JP Richardson: Thank you everyone for joining. We want to try something a little different today. I have been told multiple times that my opening on earnings calls just does not sound like me, and I think that is a fair criticism, so we are going to keep this more conversational, a lot like how I speak publicly on interviews or even internally in company all-hands calls. So often, I love to tell stories, and today is going to be no different. A couple weeks ago, I took my kids skiing for the first time. My little boy, he is seven years old. And so we are on the bunny slope, where they teach the young kids, and he could barely stand up. He kept falling over and over again. And I am sure many of you with kids can relate to this. But he kept getting up over and over again. Ultimately, he asked about going up on a lift on the mountain to actually go down. His mom looked at him and she goes, son, you are not ready yet, and your dad does not think that you are ready yet. He said to her, he is like, I am going to show him. Meaning me, of course. So me admiring his determination I said, okay. Well, let us go. Go to the top of the mountain. Let us check it out. So we all went up, and he is going up and he went down, and, yeah, he fell a couple times, but he made it down without any issue. It was actually really impressive. Thinking about this moment with my kids and heading into this call today, it is kind of a lot like what 2025 felt like for this company. The market kind of knocked us around. Stock price and Bitcoin price just tested everyone's patience, and every single time the team just kept building. Even when we get knocked down, we just kept building. Focused. We are building the infrastructure that makes us less dependent on market conditions, these very market conditions in the first place. We will walk you through what we built and where we are headed. Let us do a brief look back into 2025. 2025 was the most consequential year in the history of Exodus Movement, Inc. This is because of what we built while the market has been pulling back. As you remember, early 2025, it seems like an eternity now, we rang the bell on the New York Stock Exchange. Ultimately, being on the New York Stock Exchange opened the door for more investors that could not touch us in the OTC markets. We announced Exodus Pay, one of the most important products in the company's history. In November, we closed the Grateful acquisition, and this gave us a live payment sandbox in Latin America, where every lesson in Grateful is making its way back into Exodus Pay. In the same month, we signed the W3C acquisition—I am going to come back to that in a moment. We expanded ExoSwap to more signed partnerships—I am going to talk about that even later. We expanded our tokenized equity to Solana through Superstate's Opening Bell platform. For full-year revenue, we grew 5% to $121.6 million. That growth came from improved monetization and B2B expansion, even as retail activity softened all the way toward the end of the year. Now for ten years, Exodus Movement, Inc. was built on speculation. When crypto is up, we thrive. When crypto pulls back, we feel it, much like what we are seeing in the markets today. As a public company, the stock reflects this reality directly. This model has served us well for a decade, but it is not enough anymore. Everything we did in 2025 was in service of one goal, and that is creating more revenue streams—revenue streams that do not depend on where crypto trades tomorrow. We are becoming a payments company—one that serves people whether Bitcoin is at $30,000 or $130,000. One that earns revenue from the daily financial lives of real people, not just trading activity. The product at the center of the shift is Exodus Pay. Most people use at least three financial apps—I am guessing many of you on this call are going to be very familiar with this. No doubt you have a banking app. You have a payments app like Venmo or Cash App. And you probably have a brokerage app like Robinhood or Fidelity. Exodus Pay makes it one. We are building the product that lets people send, spend, invest, and earn from a single interface. No seed phrases, no blockchain jargon, no L1, L2—which, later on, nobody cares about that stuff. No complexity. Self-custody should feel as easy as tap to pay. And at its core, Exodus Pay is built on stablecoins. Stablecoins are the dollars that move at Internet speed. You may have heard of them. We are making stablecoins usable for everyday payments—groceries, rideshare, restaurants, anywhere Visa or Mastercard is accepted. Again, from speculation-driven swap fees to revenue built on daily utility. What is going to power Exodus Pay is the product of W3C. So let us talk about the W3C acquisition. It remains the centerpiece of our vertical integration strategy. Let me remind everyone why this deal matters in the first place. The first reason this deal matters: we get to own the full payment stack from self-custodial wallet to the spend card at the terminal. No other wallet owns end-to-end payment rails. The second reason is revenue diversification. Our revenue today is heavily tied to swap volume. The third reason is the B2B2C infrastructure for partners. W3C already powers MetaMask, Ledger, OKX, and Kraken in their cards. Owning this infrastructure means Exodus Movement, Inc. can provide card programs and payment rails to other wallets and apps. This means more revenue from partners without acquiring those end users directly. We remain confident in the ability to close in 2026 and are working diligently toward closing. Switching to what seems these days like everybody's favorite topic, AI, because it is reshaping both how we build and what we build. Let us first talk about how we build. I actually write code every single day using Claude Code. Tasks that used to take me months now take me just hours. It is that wild how good these tools are these days. What is true for me here is true for our entire engineering organization. We are pushing hard toward a model where AI ultimately writes all of our code. We are not there yet, but the productivity gains we are seeing so far have already been quite significant. Now with what we build—how we think about the future here—is that we think AI agents represent an entirely new class of customer for Exodus Movement, Inc. These agents are going to need wallet infrastructure. They are going to need to send money, check balances, and make purchases. It is easy, when you think of payments apps like Exodus Pay, to think of the total addressable market as just 8 billion people of the entire world, right? But with AI agents, it will potentially be in the trillions because each one of these agents is going to need a wallet. Exodus Movement, Inc. aims to be the default wallet layer for this world. Let us hit on ExoSwap. ExoSwap continues to be a meaningful volume driver. In Q4, we signed—or in total, have—18 signed partnerships, 11 that are producing, $416 million in Q4 volume, 26% of our quarterly total. This strength shows that our infrastructure is trusted by other major platforms like Ledger and MetaMask. MetaMask just went live in December with Solana. Following the close of W3C, we are going to be able to offer card issuance as well to a lot of these partnerships that are using ExoSwap, especially a lot of the new ones. I want to leave you with this. Our revenue today does not yet reflect the magnitude of what we have built. We have invested significant resources—capital, talent, time—into infrastructure, acquisitions, and product development that have not yet hit the top line. I understand this. I understand the patience it requires from you, our shareholders. I want you to understand what is on the other side. We are shifting from a company built on speculation to a company built on payments—on daily utility, on infrastructure that earns revenue every time someone taps a card, invests into their future, saves for a rainy day, or buys their groceries. That is the company we are building. 2025 laid the foundation, and 2026 is where it starts to come to life. With that, I am going to hand it over to James to walk through our financial results. James, thank you. Let us start with Q4 and full-year revenue and swap volumes. James Gernetzke: Full-year revenue was $121.6 million. That is up 5% from 2024. Q4 revenue was $29.5 million, which represents a 3% decrease from Q3 and a 34% decline from the record Q4 we had a year ago. To put that year-over-year comparison in context, Q4 2024 was our highest revenue quarter in company history, in a quarter where we saw major industry catalysts like the U.S. election and Bitcoin topping $100,000 for the very first time. As a recent industry backdrop, digital asset prices were also in decline for most of Q4 2025 after briefly enjoying early October highs. Full-year swap volume was $6.89 billion, which is a 21% increase from 2024. This is a meaningful increase that demonstrates the underlying growth in the platform, even as digital asset prices declined. Q4 swap volume of $1.59 billion was down 9% sequentially and down 32% year over year, tracking the broader market pullback. ExoSwap, our B2B swaps platform, continued to be a significant volume driver for Exodus Movement, Inc. at $416 million of volume in Q4, or 26% of our total quarterly volume. Our growing B2B swap volume demonstrates that Exodus Movement, Inc. is increasingly a critical piece of infrastructure for the broader ecosystem. With regard to staking and other non-exchange revenue, full-year revenue from staking reached over $4 million for the year, nearly doubling 2024's total. Our improvements to Solana staking in particular drove this acceleration. This is recurring revenue that can be compounded for as long as the assets remain under stake. Fiat onboarding also saw a 28% increase in revenue versus 2024. Quarterly funded users—users who have actually put their money into Exodus Movement, Inc.—finished the year at 1.7 million. That is down 6% from last quarter and 11% from a year ago, reflecting the broader retail environment. Monthly active users at the end of Q4 were 1.5 million, down 35% from the previous year and unchanged sequentially. While monthly active users declined year over year in line with broader retail activity, our funded user base remained resilient, demonstrating the stickiness of our wallet. To pursue ownership of a full payment stack, during 2025, we funded $80 million of debt related to the W3C acquisition. While we initially used the Galaxy credit facility, we made the decision to pay off that debt prior to the end of the year. This resulted in the first reduction of our Bitcoin treasury in quite some time, and during 2026, we have continued to sell digital assets as we prepare for the next disbursement related to the W3C acquisition. As we have stated in the past, we believe that our treasury, including our Bitcoin treasury, is available to fund M&A and other growth initiatives, ultimately growing our Bitcoin treasury. On a related note, we continue to evaluate ways to demonstrate the power of tokenized equity. However, we are pausing our Bitcoin dividend plans as we are prioritizing M&A and other growth initiatives at this time. We remain committed to exploring opportunities afforded to us and our shareholders through tokenized equities as their use continues to grow. Finally, expanding on JP's earlier note regarding ExoSwap, MetaMask is a notable name that we signed towards the end of last year. Their wallet launched support in the final days of 2025 for Bitcoin. Initial results are slowly ramping up as MetaMask users gain familiarity with the new multichain functionality. Chris, with that, let us get back over to you for questions. Chris Merkel: Thank you, James. We will now open for questions. It is time for our analyst questions, and I see we have Andrew James Harte from BTIG. Go ahead, Andrew. Andrew James Harte: Hi. Can you hear me okay? Chris Merkel: Yes. Andrew James Harte: Great. Thanks for taking the question. JP, I thought your comments about agentic payments were really interesting. I think the idea was that agents are going to need the wallet infrastructure to operate out of. I guess, can you just expand on the steps needed to go from where we are today, both in terms of capabilities or potential partnerships or integrations, to make that a reality? That would be very helpful. Thank you. JP Richardson: Yeah. Great question. Ultimately, when you want to enable agents to be able to transact with wallets and send stablecoins, what you want to be able to do is have a world where the company or individuals that are using or leveraging these agents can maintain control over their wallets. I mean, I suppose what you could do, you could just set up an OpenClaude on your Mac mini, right, and have it go hog wild with Exodus Movement, Inc., then that would work today or should work today, right? But, again, what you want is to be able to say, okay, I have this mass amount of agents. Maybe I am a company in the travel industry, right? I am going to have an AI agent doing travel on behalf of consumers. Well, I need to be able to basically either give the consumer the ability to give access to, say, Exodus Movement, Inc. in that AI agent or, as a business, be able to give an AI agent access to a number of wallets that I have full control over and can control the keys as well. Effectively, what that means is that from the consumer perspective—again, I am just going to step into the shoes of an Exodus Pay customer—that means having Exodus Pay or Exodus connect directly to, like, a ChatGPT or a Claude. Actually, that is something that behind the scenes we have had working for a while, but we just want to make sure the user experience works really well. When it comes to the business side—again, that travel agent example—what that ultimately means is that we would have to produce back-end software for these agents to be able to, again, view all these separate wallets. There are a number of angles that we are looking at here. The one that we are most interested in in the short term is empowering consumers that have, again, just Exodus Movement, Inc. on their phone and are able to connect to, again, like, ChatGPT or even, in some cases, maybe even an OpenClaude as these agents become more commercialized and say, go ahead. Spend up to $500. I want you to go look for a flight, the best flight to, I do not know, Florida, right? Whatever it is. That is going to be critical, and to make all that work well and to make sure that the limits and restrictions are in, because, again, you do not—like, the worst-case scenario is if you say, okay, AI agent, you have full access to my wallet, be good with it, and then you find out it went and speculated and bought a bunch of Dogecoin from your entire wallet. You would be pretty upset about that. So there are a lot of security controls that have to come in place as well. Chris Merkel: Alright. Ed Engel from Compass Point is next up. Go ahead, Ed. Ed Engel: Hi. Thanks for taking my question. I just wanted to ask some questions about the cost structure here. Do you mind going through the costs or some of the one-time expenses we might have had in the fourth quarter related to M&A or anything else to call out? And then would it be fair to assume that might continue into the first quarter or maybe into the second quarter until the transaction closes? James Gernetzke: Yes. Obviously, we had the legal costs. There is the interest associated with the Galaxy loan. The interest, obviously, since we paid it off, is not going to continue. There are some legal costs as we go through the regulatory process. There are certainly going to be some legal costs, but my assumption would be that it would be slightly less as we go through that process. But there still will be some for sure. Ed Engel: Let us see. And sorry. And then you said some other one-time costs— James Gernetzke: Yes. And then we have our standard, similar one-time costs that we have seen for non-M&A items from previous quarters. So yes, to answer the question, the M&A continues. We are still out there looking for other businesses and other opportunities. Obviously, we do not have anything to report at this time, and we are very focused on getting W3C closed and integrated. But that does not mean that we are not still working on a pipeline. I would say that in general, I would expect over the next quarter or so that the costs should be slightly lower than previous quarters, but not zero. Chris Merkel: Alright. We have Gareth Gaceta up next. Hi, Gareth. Gareth Gaceta: Hi, guys. Can you hear me alright? Chris Merkel: Yes. Gareth Gaceta: Awesome. I was wondering if you could provide some detail on the drivers to the improved monetization in the ExoSwap in the quarter. Do you guys think that there might be future opportunities for similar expansion, or was it maybe more of a one-time event? James Gernetzke: Yeah. Let me start. I would say that in terms of ExoSwap, we have grown the book of business in terms of the number of partners that we are working with. As we grow that book, you will see different areas, different cost structures, etc., that come with it. Over time, as that product matures, we will start to get to a steady state. We do expect changes in the short term as the book continues to grow. We are pleased with the amount of new deals that have been signed and the work that is going on in that area. Now there are some—because this is a B2B2C, we are relying on the partners, and there is one partner that looks like it is probably going to stop operations over time. You will have those pluses and minuses, but I would say that we are definitely pleased with the direction and the amount of new contracts that have been signed and new partners that have come on. JP Richardson: Alright. Thank you, James. Chris Merkel: We have Michael John Grondahl from Northland. Go ahead, Mike. Michael John Grondahl: Thank you. So sort of two questions, guys. One, I think you mentioned 18 signed ExoSwap partners and 11 operating. When do you think the next, I do not know, the next wave, the next seven, are going to ramp up, and any significant partners in that next wave? And then secondly, I would like to understand better kind of the go-to-market with Exodus Pay. Is that only going to be within sort of ExoSwap and the trading customers, or help us understand how we are going to see that Exodus Pay offering in the real world. James Gernetzke: Let me start with the 11 and the 18. I think that we are seeing steady growth, and it is steady growth right now. In terms of significant names, we are pleased with the mix and the size of different clients that we are getting. Unfortunately, it is a B2B product. We need the client's consent to share the names, and I do not have any larger names that have shared consent to offer you, unfortunately, right now. But I could definitely say—again, just to reiterate—we are pleased at the growth that we have seen in that, and we are looking forward to that continuing for the rest of the year. So JP, on Exodus Pay— JP Richardson: Yeah. Let me hit a little bit more about the partners with ExoSwap here. Even though we cannot announce the names yet, the reality is that yes, we have signed other big partners, and we will be able to announce that in the future, which is going to be great. In addition to that, I think James had mentioned something that is really important: with the ExoSwap partnerships, we have to rely upon the partner's timeline. Often what you see is that the partner in some scenarios might just enable, say, one asset, so you can swap from one pair to the other, and it does not have support for other assets and other blockchains. As we march forward and they get one going—like, oh, wow, this thing is working really well—now let us enable it for these other blockchains and make it work really well there and keep that train going. We are going to see more and more of that, and we already have seen that, with timeframes that we will be able to announce in the future. I anticipate that will be the pattern moving forward: we will sign the partners, then there is the time to integrate, they go live on one blockchain, and then they expand out on additional blockchains. As we mentioned, we have some very big names in the industry that we have been working with for quite some time, and that becomes quite a strong testimonial as we start working with other partnerships. I think that is really important to call out. Now related to the question of—so you referred to it as ExoPay. I am assuming you were talking about Exodus Pay. So ExoPay—now, this is getting confusing—ExoPay is our fiat on-ramp, off-ramp. We have recently renamed that to ExoRamp to separate the confusion. To be very clear here: think of ExoSwap as allowing people to swap from crypto to crypto. ExoRamp allows people to onboard into crypto via a bank account or a debit card, or off-ramp in time. So it is basically fiat on-ramp/off-ramp. Exodus Pay, again, is our initiative to, as earlier in this conversation I had mentioned, bring the world of all these disparate financial apps into one single app, right? The biggest is banking, a payments app like Venmo or Cash App, and then a brokerage app—Robinhood or Fidelity, E*TRADE, whatever you use—all into one application with no crypto complexity whatsoever. Now, when you ask about go-to-market, we had a very early test group that we experimented with, and we had conversations with people at events at ETHDenver. Initial feedback was really good. We are marching forward. In fact, you are going to see something this week that is going to come out about another event that Exodus Pay is going to be a part of. Again, it is about mainstream payments, allowing people to easily use assets like stablecoins anywhere in the world that Visa or Mastercard is accepted, right? That is really important. The big aspect of go-to-market and how we think about Exodus Pay is that we want to align to big cultural moments. I am going to say that again. We want to align with big cultural moments. I wish some of you were not thinking, like, oh, does that mean he is going to go out and pull the trigger on a Super Bowl ad or something like that? We do not have any plans for that, but you never know. No, but we have no plans for that whatsoever. But who knows? When it comes to big cultural moments, there are things that you will see this year that will answer that question. It is about being a part of mainstream conversations, mainstream payment experiences. There is a lot more that we will be able to unpack in future conversations. It is going to be great. Chris Merkel: Alright. Kevin Dede from HC Wainwright. Hi, Kevin. How are you? JP Richardson: Kevin, we cannot hear you if you are speaking. Chris Merkel: Okay. Nope. Still cannot hear. Still cannot hear. Still cannot hear, Kevin. Kevin Darryl Dede: Can you hear me at all now? Chris Merkel: Okay. JP Richardson: Hi, Kevin. Sorry about that. It is tough being a tech analyst and keeping your tech working. Kevin Darryl Dede: So, JP, sort of a two-parter. I am going to think I am going to ask Mike's question in a different way. The progress you are making with ExoSwap clearly indicates that you are embedding yourselves with complementary businesses, right? It is proving the B2B model that you have developed at Exodus Movement, Inc. But with Exodus Pay, it seems to me that—I mean, I hear what you say about leveraging big cultural moments. I get that. But you are taking on a sizable amount of risk in spending versus trying to build a consumer-facing app. I am wondering how you are going to approach that risk, how you plan to allocate capital to it, and how you expect it to roll out. And then I would also like to hear about the roadblocks you have to seeing W3C complete, and the timeframe to that. You did not offer much detail there. JP Richardson: Kevin, can you just unpack the risk bit a bit more? I just want to make sure I really capture your question clearly. Kevin Darryl Dede: Well, in my mind, there is a little bit of controversy over Exodus Movement, Inc.'s development in the B2B world versus a consumer-facing app. And Exodus Pay, I think, is the culmination of your consumer-facing initiatives, and that is clear through today's call. What is not clear is the resources you will dedicate to building a consumer-facing business—arguably the most difficult thing to do in business. So I am just wondering how you are assessing the risk and allocating capital, and developing that capability. JP Richardson: Got it. Okay. You are probably going to hate this answer, but I am going to say it anyway. Exodus Pay is the evolution of what Exodus Movement, Inc. is today. We were born—and the way that we thought about Exodus Movement, Inc. from the early days—was all about empowering consumers to control their wealth. That was the piece of it. From 2015, there was actually—I had a conversation with our cofounder, Daniel, just recently, and he was like, JP, do you remember in the early days when we put our phone number inside the software? I am like, yeah, I do. Is that not crazy? People would call. I am eating dinner with my family, and my kid has got spaghetti pouring out of his mouth, and then the phone is ringing nonstop. I am trying—I am like, oh my gosh. I am eating? I share these stories because Exodus Movement, Inc. was always a company focused on consumer needs. Always. At that moment in time, the technology was not quite where we needed it to be. Regulations were not quite where we needed them to be. Mastercard and Visa were not quite where we needed them to be. The technology has now caught up where you do not have to think about the complexities of secret phrases and which layer you are on. You do not have to care about any of those things. The regulations have now started to catch up, especially with the Genius Act, in embracing stablecoins, right? That is really key and critical. Visa and Mastercard see what is happening, and that is why with W3C—which will be a good segue to talk about W3C in just a moment, per your other question—they see what is happening. That is why there is starting to be the rise of these crypto cards that allow you to connect the card directly to your wallet, your self-custodial wallet, so you have full control and you can go and you can tap to pay anywhere. Again, Exodus Movement, Inc. was always a company built on the consumer experience. I think it is really important to highlight and call out. Now related to W3C, as mentioned in the opening statements, we are very committed to getting this done. Anybody that has been through acquisitions knows there are all sorts of complexities that come with it. With this acquisition, there are a number of subsidiaries that blend into what we are buying as a company, and each one of these subsidiaries has different levels of complexity that we have to ultimately address. James, I am sure you can—you have been a big part of this as well along with me—you can probably add some additional color to this. James Gernetzke: Yeah. I think on the W3C front, we are in front of the regulators right now, and we are progressing toward it on the timeline that we brought up when we signed the deal. In terms of capital allocation, to put a finer point on JP's comments, because Exodus Pay is the evolution of Exodus Movement, Inc., that capital allocation, you should expect it to follow a similar path and the things that we said about our consumer business going forward in different fronts. Obviously, we have allocated a lot of capital to W3C and the B2B side. We still maintain that Amazon AWS playbook, even with the W3C acquisition. JP Richardson: It might be important to mention too that per capital allocation, one aspect that is going to be important here is that because Exodus Movement, Inc., even though we were focused as a consumer app early on, it was more about those in crypto. You are going to allocate capital and think, oh, we are going to target crypto people. Uh-oh, there is a bear market. Better pull back and not think about how to reach the mainstream. That was historically the thought process. But now shifting closer to the mainstream, bear or bull market, it does not matter, right? Because Joe Plumber does not think about the price of Bitcoin. Joe Plumber does not actually even care about the price of Bitcoin. Actually, Joe Plumber may not be our ideal target use case; it is going to be maybe a younger demographic. Let us say some 19-year-old watching college basketball on a Saturday or whatever it is, right? They may not really care about the price of Bitcoin, but they definitely care about how they spend money and how they think about the future. We still have to be thoughtful but yet bold when it comes to capital allocation when reaching that demographic. Chris Merkel: Thank you. There are no more questions. Thanks, JP, James, and all of our analysts for submitting your questions. Please visit our social channels on X and Reddit to submit your questions for management. Our investor relations team is standing by. Thanks for joining us today, and we will see you next quarter.
Operator: Thank you for standing by, and welcome to Wealthfront Corporation's fourth quarter and fiscal year 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. To remove yourself from the queue, you may press *11 again. I would now like to hand the call over to Matthew Moon, Investor Relations. Please go ahead. Matthew Moon: Good afternoon, everyone, and thank you for joining us. Today to discuss Wealthfront Corporation's fourth quarter and full year fiscal 2026 financial results, reflecting the periods ending January 31, 2026. On the line are David Fortunato, our Chief Executive Officer and President, and Alan Imberman, our Chief Financial Officer and Treasurer. After prepared remarks, we will open the line for Q&A. During the course of today's call, we may make forward-looking statements as defined under applicable securities laws. Forward-looking statements are subject to risks and uncertainties, and the company can give no assurance that they will prove to be correct. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Wealthfront Corporation files with the Securities and Exchange Commission, including our most recent Form 10-Q. Our discussion today will include certain non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from GAAP measures. Reconciliations of non-GAAP financial measures to comparable GAAP measures can be found in our press release accompanying this call, which is posted to our Investor Relations website at ir.wealthfront.com. I will now turn the call over to David Fortunato. David Fortunato: Thank you, and good afternoon, everyone. Fiscal 2026 was another successful year in which Wealthfront Corporation continued to deliver on its long-term objective of becoming the leading tech-driven platform for digital natives to turn their savings into wealth. We believe we make the best practices of personal finance accessible at low fees through technology and intuitive and convenient through user-friendly design and automation. At scale, this drives high margins, allowing us to share savings with clients, creating and engendering trust, driving asset retention and low-cost word-of-mouth growth, which once again drives high margins. This flywheel enables us to offer feature enhancements such as our recent ongoing cash APY increases that I will describe in more detail later on, and more broadly, helps our clients save more on every paycheck, earn higher returns on their savings, and borrow at lower rates. We remain grounded in our belief that the best way to build deep, long-term client relationships is to continue to delight clients by offering them more value than anyone else and focusing on their long-term financial outcomes. This informs our product development strategy and keeps us focused on our roadmap regardless of short-term market conditions. At fiscal year-end, total platform assets grew 17% year over year to a record $94.1 billion, with investment advisory assets of $48.7 billion, up 29% year over year, and cash management assets of $45.4 billion, up 7% year over year. Funded clients ended the year at roughly 1,420,000, up 17% year over year, and funded accounts of roughly 1,840,000, up 16% year over year, reflecting 1.3 funded accounts per funded client. Total net deposits in the year ended January 31, 2026 were $6.7 billion, including $400 million in net outflows in the fourth quarter. Fourth quarter figures reflected a cash-to-invest transition environment that resulted in the second-best quarter of total investment advisory cross-product flows, including a second consecutive record quarter of net cross-account transfers from cash to invest. This helped drive annualized organic investment advisory growth to 11% in the quarter, the highest since the market enthusiasm post U.S. election in the quarter ended January 2025, with monthly annualized organic growth accelerating throughout the quarter, ending at 15% in January. Recall, annualized organic growth is calculated as total net deposits in a given period multiplied by an annualization factor based on actual day counts in that period, divided by prior period ending assets. As we will discuss further, cash management net flows began to normalize in mid-January, roughly four weeks after reducing the client rate on December 19 and prior to the five basis point increase to the client APY on January 30. Net outflows from cash management were $145 million in February, a significant improvement from the $840 million in net outflows in January. Since February 16, cumulative cash management net deposits have been positive. However, we expect withdrawals due to tax time seasonality to begin later this month and continue up until the April 15 federal tax deadline. On the product development side, we continue to accelerate our product velocity. For example, in the fourth quarter, we bolstered both our cash management and investment advisory offerings, enhanced interoperability between both, and began to offer early access to Wealthfront home lending. For cash management, we introduced automated dividend sweeps from investment advisory accounts to cash management accounts and increased daily withdrawal limits up to $1,000,000 for qualified clients. In December, we began a measured rollout of our proprietary Wealthfront Treasury Money Market Fund, or WLTX X. It offers an attractive after-tax yield alternative for clients and their cash, particularly for clients living in states with high income taxes, given the state tax exemption on U.S. Treasury interest income. As of February, prior to general availability, the money market fund had just over $85 million in AUM. For investment advisory, we expanded availability of fractional shares into automated investing accounts and automated bond portfolios, helping to reduce cash drag and tracking error relative to our target portfolios. We also introduced dividend reinvestment plans as well as a broader list of stocks and ETFs that can be traded in the stock investing account. We continue to see strong uptake, particularly among younger clients, in this investment account. In November, we launched early access to home lending starting in Colorado, and have since expanded to Texas and California, with a full rollout to these states as well as early access in additional states expected to come later this year. We believe we can use technology to deliver a better digital experience and a lower rate, and we are deliberately scaling at a measured pace in order to maximize learnings to optimize our long-term outcomes. We aim to provide our clients home mortgage rates at least 50 basis points better than the national average. While we are in early days, we are proud to have delivered on this objective on average in the states in which we operate today. Beyond new product initiatives, we have increased the base APY on all cash management accounts by five basis points to 3.3% on January 30. Over the course of the past several months, the effective federal funds rate gradually stabilized higher within its target range, allowing us to pass more savings along to our clients. We could have simply taken this benefit for ourselves, but consistent with our business model, we are constantly looking for ways to give back to our clients, deliver better financial outcomes, and build trust. Our focus for Wealthfront Cash is to offer the best cash account experience for young professional savers. In this vein, we launched an incentive in early March in which clients that direct deposit at least $1,000 per month who also have a funded investment account will receive an ongoing 25 basis point boost to their cash APY. We expect this incentive to deepen existing client relationships as well as drive cross-product adoption for those clients using one of the cash management or investment advisory accounts today. We also anticipate new clients to diversify into both of these account types more quickly. Closing with current trends, today we published February metrics. As discussed earlier, when looking at intramonth trends, cash management net outflows peaked in mid-January prior to our five basis point increase to the client base APY. Cash management net outflows significantly improved to only $145 million in February versus $840 million in January. Investment advisory net deposits were $416 million, implying an annualized organic growth rate of 11%. Total net deposits were therefore $271 million in February and, along with market appreciation, led us to another month-end record of total platform assets of $95.2 billion. In turbulent times like these, the time-tested performance of a low-cost diversified index portfolio with the added benefit of automated tax-loss harvesting becomes more apparent. Aggregate investment account returns, most notably our automated investment account, benefited in January and February from the relative outperformance of international equities, contributing to a 2.8% month-over-month growth in January, and 1.7% month-over-month growth in February. Crucially, this performance stands in stark contrast to the returns of speculative asset classes that often falter when market conditions tighten. While others chase fads, our automated investing account is engineered to mitigate volatility and maximize after-tax outcomes. We believe the value of this product is even greater when you consider the strong year-to-date tax losses we have harvested for our clients. February tax-loss harvesting dollars were the highest since the widespread market volatility realized immediately before, during, and after Liberation Day last year. With that, I will now turn the call over to Alan Imberman to go over the financials. Alan Imberman: Thanks, David. Starting with the income statement and a high-level overview for the year. Revenue for fiscal 2026 reached a record $365 million, up 18% year over year. Adjusted EBITDA for fiscal 2026 also hit a new record of $170.7 million, up 20% year over year, reflecting an adjusted EBITDA margin of 47%, up one percentage point year over year. Moving now to the fourth quarter, revenue came in at a quarterly record of $96.1 million, up 16% year over year. Cash management revenue was $69.7 million, up 12% year over year due to both higher average cash management balances measured as the average of beginning and end of quarter figures and a higher annualized fee rate. The average cash management balance in the fourth quarter was $46.2 billion, up 10% year over year, and the annualized cash management fee rate was 60 basis points, up one basis point year over year. When the Fed reduces the Fed funds target rate, we typically wait until the Friday of the following week to reduce the APY we offer our clients. This creates temporary fee compression because the interest rate we receive from banks reprices lower immediately while the interest rate we pay to clients remains constant for a one-week grace period. Additionally, in a declining rate environment, the fee rate is negatively impacted by the inherent mathematical impact of converting annual percentage rates (APR) to annual percentage yields (APY). The inverse of this is true in an increasing rate environment. As David noted, we launched a new incentive in early March in which clients who direct deposit at least $1,000 per month and also have a funded investment account will receive an ongoing cash yield increase of 25 basis points. As a result of both the direct deposit incentive and the five basis points passed along to clients at the end of January, we now expect our first quarter annualized cash management fee rate to be in the range of 57 to 58 basis points. Because April is tax season and our clients are net cash taxpayers, we anticipate significant seasonal cash management net outflows to begin in March and continue up until the April 15 federal tax filing deadline. For context, net cash management outflows in April 2025 were $537 million, and we would expect this figure to be larger this year given the increase in total cash management assets. It may seem counterintuitive, but we are delighted to see tax-related outflows because it reflects the highly attractive financial profile of our clients and also means our clients are comfortable using the cash account to meet near-term liquidity needs, indicating use of the account as a primary operating account that generally gets replenished over time and are typically stickier over the long run. Investment advisory revenue was $25.8 million, up 31% year over year, and surpassed $100 million in annualized revenue for the first time, due primarily to a 30% year over year increase in average investment advisory balances to $47.3 billion. Our annualized investment advisory fee rate was roughly flat at 22 basis points versus the same period last year. Asset growth was driven by both strong markets and net deposits over the trailing twelve months, with organic net deposit growth accelerating throughout the quarter, ending at 15% annualized growth in January. Net cross-account transfer from cash to invest in the quarter set a new record for the second consecutive quarter, reflecting the compelling combination of a broad suite of investment products, overarching platform incentives, and targeted lifecycle marketing campaigns currently in place. Gross profit came in at a quarterly record of $86.6 million, up 17% year over year, reflecting a gross profit margin of 90%. Total GAAP expenses of $310.7 million included $248.3 million in stock-based compensation expense, of which $239 million reflected dual-trigger equity award expense recognized in connection with our IPO. GAAP expenses also included $5.3 million in employer taxes related to these dual-trigger equity awards. Adjusted operating expenses, that is, expenses excluding share-based compensation and employer taxes due to IPO-related equity awards, were $57.1 million, up 15% year over year due primarily to higher product development and general and administrative expense, partially offset by lower marketing expense. Adjusted EBITDA of $44.2 million was up 22% year over year and reflected an adjusted EBITDA margin of 46%, up two percentage points year over year. As we continue to invest in incentives and scale home lending, we expect adjusted EBITDA margins to decline sequentially but remain above 40% for the first fiscal quarter 2027. We continue to demonstrate significant operational and financial discipline, delivering a Rule of 40 metric of 62 for the fourth quarter. This is our fourteenth consecutive quarter, or more than three years, exceeding the Rule of 40 and underscores a business model that has successfully and consistently balanced robust top-line growth with the structural efficiencies of our automated platform. GAAP diluted net income was negative $134.8 million and GAAP diluted earnings per share was negative $1.31, both of which include the one-time impact of dual-trigger equity awards in connection with our IPO of $239 million. We believe that our adjusted EBITDA is a strong proxy for cash flow. For the fourth quarter, net cash provided by operating activities was $33.3 million and free cash flow was $33 million. This results in a free cash flow conversion ratio, that is free cash flow as a percentage of adjusted EBITDA, of 75%. January, however, is a seasonally lower free cash flow period as we pay out the majority of our accrued annual cash bonuses to our employees in that period. For the fiscal year, net cash provided by operating activities was $152.2 million and free cash flow was $151.1 million. This resulted in an annual free cash flow conversion ratio of 88%. Note, both quarterly and annual free cash flow figures are not adjusted for IPO-related expenses; therefore, conversion ratios are lower than they otherwise would have been had the IPO not occurred. Driven primarily by this robust free cash flow generation over the course of the year and over $130 million in net cash proceeds raised in our IPO in December, we continued to strengthen our debt-free balance sheet, ending the period with cash and cash equivalents of $440.8 million. At quarter end, we had roughly 186.5 million diluted shares outstanding. In March, we received board authorization to implement $100 million in share repurchases. We believe repurchasing our stock is attractive at current levels given our robust free cash flow generation, our debt-free capital structure, as well as the multi-decade opportunity to compound wealth with new and existing clients. Over the long term, our excess capital priorities are: invest in organic growth, including infrastructure and automation while also comfortably exceeding minimum capital requirements; evaluate opportunities to repurchase shares; and assess M&A with a preference to build versus buy. Any remaining capital would be added to our surplus reserves in order to bolster resilience and durability. Regarding February metrics, total platform assets ended at another month-end record of $95.2 billion, consisting of $50.0 billion in investment advisory assets, and $45.2 billion in cash management assets. Total net deposits were $271 million, and recall, February only has 28 days in the month. Investment advisory net deposits were $416 million, reflecting organic growth of 11% annualized. We continue to successfully drive cash-to-invest flows, bringing asset-weighted cross-product adoption, that is, assets held by clients with both cash management and investment advisory accounts, to roughly 61.5% at February, up over one percentage point since December. Cash management net flows began to normalize in mid-January, four weeks after reducing the client rate on December 19, and prior to the five basis point increase to the client APY on January 30. Net outflows from cash management were $145 million in February, a significant improvement from the $840 million in net outflows in January. Since February 16, cumulative cash management net deposits have been positive. However, we expect withdrawals due to tax time seasonality to begin later this month and to continue up until the April 15 federal tax deadline. In closing, our business is designed to be aligned with the interest of our clients. Simply put, we succeed only when they do. We believe that as long as we continue to deliver products that truly delight our clients, they will engage more broadly with us, entrust us with more of their wealth, and recommend our platform to their friends, family, and coworkers. We are deeply committed to this long-term journey alongside them. With that, we will now open for questions. Operator: Thank you. To ask a question, you will need to press *11 on your telephone. To remove yourself from the queue, you may press *11 again. You will be limited to one question and one follow-up to allow everyone the opportunity to participate. Our first question comes from the line of Ken Worthington of JPMorgan. Your question please, Ken. Ken Worthington: Hi. Good afternoon, and thanks for taking my question. I want to dig further into the rollout of mortgages and see how that is going. So what kind of reception are you getting from your customers in Colorado, where that offering is more seasoned? And can you see, based on the transfer of assets to title companies, how your penetration of eligible customers is looking thus far? David Fortunato: Hey, Ken. How is it going? Yeah. So we are progressing, I think, well. The thing that we are optimizing for—we talked a little bit in the prepared remarks—is less about directly trying to capture all of the volume that we reasonably can in Colorado and really maximizing the learning that we have both with our infrastructure and with the client experience. So as we have launched first in Colorado with the early access period and then in Texas and California, we are really focused on making sure that the experience that we are delivering to clients is good. There are things that we have to improve and we are working on. We have already rolled out a bunch of improvements with more to come. On the rate basis, we feel very good about underpromising and overdelivering on the quality of rate we are giving folks. We are still seeing significant home volume across the country. I think the stat that I saw was more than $400 million of wires to escrow and title companies in our Q4 went off the platform, which obviously is a significant chunk of the outflows that we saw. We have a bunch of things that we need to improve on the digital experience. We are making quick progress, but it is a huge area of focus for us. As we continue to expand the early access period, the real constraint that we have is that the experience that we are offering to clients is one that we feel good about, and we feel the clients will feel good about for the long term. We are not trying to build a transactional mortgage experience. We are trying to build a long-term relationship with clients, of which mortgages is just one step. Ken Worthington: Perfect. And then maybe to follow up, same topic. How do you see the ramp and the rollout to other states and the further penetration in existing states? How does that look as you move through the rest of the year? Is this really kind of an experimental year where you would not expect things to really ramp; it is just sort of getting the infrastructure? Or do you expect things to really ramp as we move throughout the year and as you get more comfortable with the offering? David Fortunato: So we certainly expect to go general availability in Colorado first. That will happen sometime this year. I would expect that we go general availability in Texas and California at some point this year. And I would expect that we launch early access periods in additional states. Exactly what percentage of our client base will be covered by general availability, I am less sure of. Our ability to roll out automation features and balance scaling headcount versus scaling through technology is the kind of core dance that we are doing, where we are trying to really scale with technology and limit headcount growth where needed, except where we are very confident in the volumes that we are seeing, and that is a credible strategy to be able to build sustainable volume over time. Alan Imberman: Thank you. Operator: Our next question comes from the line of Ryan Tomasello of KBW. Your question, please, Ryan. Ryan Tomasello: Hi, everyone. Thanks for taking the questions. Regarding the cash management fee rate guide for 1Q, I believe you said 57 to 58 bps. Is that a reasonable baseline for the remainder of the year, or how should we think about the potential for additional compression there to the extent these incentives you are offering continue to see strong uptake? David Fortunato: Hey, Ryan. Thanks. Yeah. The one thing I would say is the competitive environment has certainly evolved a bit over the last six months. And what we have seen is after the five basis point change and the direct deposit incentive, I think we feel much better about where we are in the competitive environment, and we are seeing that with the transition in cash net flows. As for how we think about the fee rate going forward, I will let Alan take that. Alan Imberman: Yeah, Ryan. So I would say the 57 to 58 is just the first quarter guide. It will really depend on the uptake as to how the rest of the year goes. The thing we like about incentives such as the direct deposit incentive is that we will only have to pay the extra rate when people give us more money or take on this additional incentive by performing the action of direct deposit and funding an investment account. And so as more people adopt it, we do expect to see potentially further degradation in the fee rate, but that would also signal that we have more clients building deeper relationships across the platform with us. And so that is the balance we are looking for there. Ryan Tomasello: Okay. Appreciate that. And then on the account growth, is it possible to isolate the specific trends within the investment advisory side of the business? Obviously, the trends on net deposit organic growth have been quite positive, but I would assume that there are also underlying positive trends on just the actual account growth side within investment advisory. Any color you can provide there? David Fortunato: Yeah. I mean, the investment account growth, as cash-only clients add investment accounts, is a key focus for us in any transition environment. And it has been probably the most significant focus inside of the company over the past three or four months. We focus on the flows because that is what ultimately leads to asset growth and, therefore, revenue growth because of our monetization strategy. But the way that we achieve that flow growth is both growing with clients over the long term and getting more clients to adopt investment products. It is too early to know exactly what the impact will be from the direct deposit incentive that we are trying. I think we are looking forward to being able to talk more about that as we get additional data in, but we have been pleased with the early response. Obviously, direct deposit takes some time to come through. There is a little bit of a lag. So we have not had a direct deposit cycle since that incentive launched. But the past incentives that we have run around investment account adoption, along with the macro environment in January and February being more conducive to investment, have helped our focus on investment cross-product adoption and new client investment growth as well. Operator: Our next question comes from the line of Devin Ryan of Citizens Bank. Please go ahead, Devin. Devin Ryan: Thank you. Hi, David. Hi, Alan. How are you? David Fortunato: Doing well. Thank you. Devin Ryan: Good. Question, another one just kind of cash account. And just some of the outflows kind of late last year, early this year, do you have a sense of whether that money was going toward other online banks paying higher rates, or was it going to brokerages or maybe just, you know, bill pay without kind of gross flows? I would love to get a sense of that. And then do you have a sense of the remaining balances that are maybe more pure rate chasers? And how much of that is remaining? I appreciate that is probably difficult to quantify, but would love to just get some thoughts on that and some of the behavior that you did see kind of late last year into early this year. David Fortunato: Sure. I am happy to give a high-level answer, and then if Alan has anything he wants to add, he can chime in. So what we saw, I think, is broadly consistent with what we had discussed previously, and that is that as rate cuts occur, the larger number of rate cuts that occur in consecutive succession leads to more folks evaluating what they are doing with their cash. So we had three cuts in a row. It takes several weeks for cash net flow activity to normalize post Fed rate cut, which I think we had talked about before. We normally have a really good idea sort of four to six weeks after a rate cut has gone through. One of the interesting things that we saw in January was both: January is a seasonal high period for investing, which I think amplified some of our desire to drive additional cash-to-invest adoption, because January is a great period for folks to reevaluate their finances and think about opening investment accounts. And so we did lean into that in January, and I think some of what you see in the January numbers is that. The other thing I would point out is that the gross versus net distinction in cash flows, especially because of the liquidity features that we offer—free wires, free instant transfers, the ability to send money to escrow and title companies to buy a home—we do a lot of gross flows for cash management. We did a calculation where we look at the recapture rate of those gross flows by client in the quarter, and we are recapturing a majority of the gross withdrawals. That is consistent with what we have seen in prior periods, that we saw from clients in our Q4, and we think it shows the value of the cash management account really sustaining even as clients reach goals. Maybe they are purchasing a house or putting a down payment down. Maybe they are buying a car. They come back to the account, and we do recapture a significant chunk of those assets. I think the sort of high-level question that you asked about what are folks doing with their money is: there are folks that are doing some of all of the things that you described with their money. It is our job to be the best place for our clients to invest for the long term, the best place to save for the long term. We want to deliver the best mortgage experience that they can get anywhere as well. It will take us time to do some of those things, especially the mortgage, but that is really what the focus of the business is—leading with product and delivering the best product and the best value to our clients across their broad financial needs. Devin Ryan: Okay. Great detail. Thank you so much. I guess a follow-up here on the repurchase authorization, $100 million buyback. Can you talk a little bit about expectations, pacing, and intent there? I think it is a strong signal. Obviously, the company has a lot of liquidity here, so in theory, even potentially more behind that. So just love to get a sense of how much is signal versus intent to actually step in and buy shares here down from the IPO price? Alan Imberman: Yeah. Hey, Devin. It is Alan. What I would say is that we think the shares are extremely attractive at the current price. We are in a position, as you mentioned, to have a very strong balance sheet and free cash flow generation such that we can make this investment, and we will compare our ability and our willingness to repurchase against, obviously, other opportunities that we have to invest in. But we do think that we will be purchasers of our shares, especially at the current levels. Operator: Thank you. Our next question comes from the line of Daniel Perlin of RBC Capital Markets. Your question please, Dan. Daniel Perlin: Thanks. Good evening, everyone. I guess I just wanted to kind of circle back a little bit on the home lending side. And I guess the broader context is, I heard everything you said in your prepared remarks, but how do you think that rollout, product reception, and expectations as you think about the ensuing year are going relative to when you kind of addressed investors around the IPO? I mean, it sounds pretty consistent, but it also sounds like there are some nuanced differences maybe. So I just want to make sure I understand that. Thank you. David Fortunato: Sure. So I think we know a lot more about the areas that we need to improve to deliver the best digital experience that we can to clients. And we are putting in focused work on those areas and gradually expanding as we go. We understand a lot more about the operational challenges and where we need to invest to drive operational efficiency so that we can do so as efficiently as possible with as digital a back-end experience as we can. The result of those things is we want to build, like we have with cash and like we have with investments, a sustained low-cost advantage in being able to deliver the products so that we are able to share the savings with clients and get them the best financial outcome. So there is a lot more that we understand with the volume of loans that we have done so far. We will continue to learn and prioritize both the operational efficiency and digital experience wins as we move along, continuing to let people off the early access list and go general availability in Colorado first. I think our understanding and our learnings are generally consistent with what we have communicated in the past. We obviously have a lot more detail now from operating in the space, operating in more states, and doing more loans than we have in the past. Daniel Perlin: Yep. That is great. Just a quick follow-up. So it was really good to see the net deposits turned positive in February. And this pivot, as you guys had telegraphed from cash management to investment advisory, was kind of taking place. I think the question that I have is, you have this weird dynamic right now where the environment may or may not produce lower rates in the near term. It might be sustained for longer. I am just wondering how you guys think about positioning yourselves maybe more in the near term in an environment where that might be the case. It might be an unfair question because it is impossible to answer, but it does feel like there is a lot more volatility around expectations for rates. So just how you are posturing maybe as we go through the next, I guess, couple of quarters. Thank you so much. David Fortunato: Yep. So I think we feel good about our competitive positioning after the five basis point change and the 25 basis point direct deposit incentive. Obviously, we do not know what the market is going to do in the future. We do not know what rates are going to do in the future. We do think that we are well positioned from the investment side because of our focus on global diversification. That has put us in a good position over the last few months, and what we have really seen resonating with clients is in uncertain environments, investing with global diversification is a real selling point. We sort of do not think about positioning ourselves based on what is going to happen over the next few months, but we feel good about our position because of the investments we have made over the last few years in cash, investment, and home lending also, that if rates come down, we feel like we are in a good position to help clients continue to invest or invest more. We feel like we are in a good position to be able to help them buy homes that have become more affordable at lower interest rates while also helping them continue to save for the long term and get access to liquidity as needed using tax-advantaged tools like the Wealthfront money market fund. As we have continued to build out our offering, our goal is really to help clients across the broadest range of financial situations be able to put their savings and investments to work. And that has been the focus, and we feel good about the position because of the diversity. We cannot predict the future, but we can prepare for it, and that is what we have done. Operator: Thank you. Our next question comes from the line of James Jarrow of Goldman Sachs. Your question please, James. James Jarrow: Good afternoon, and thanks for taking the question. Could you just update us on the success of the match programs in the invest business so far? How much has this been driving the flows in that side of the business? And perhaps if you could just also comment on the ROIs there and how you structure that to ensure strong ROIs. David Fortunato: Hey, James. So I would say we are constantly experimenting with incentives. The most successful incentives that we have done for cash-to-invest adoption have actually not been the deposit matches. It has been other types of incentives that we have run to encourage cash-to-invest adoption. We are happy with the initial response to the direct deposit incentive having driven a fair amount of investment account opening. It is still early, and so we will have to see how that evolves over time. We will have to see how that evolves with new clients and if the cross-product adoption rate early in the client tenure improves as we expect it to. I think, generally, our incentives have been successful with the second-best quarter in our history at cross-product flows of cash to invest and a second record quarter of net cross-account transfers from cash to invest. But I do not think that we have overly focused on match as the driver of those. We have looked at a variety of incentives and are pursuing the ones that we feel deliver the best overall outcome to the company and to our clients. James Jarrow: Okay. Thank you so much. That is super helpful. I just wanted to ask a bigger-picture one. So let us say we get to a terminal Fed funds of roughly 3%, which obviously there is uncertainty as to whether we will get there. But how would you think about the right way to model the mix of your client assets across cash versus investment advisory? In other words, what percentage of client assets would you expect to be cash versus investment advisory? Alan Imberman: Hey, James. It is Alan here. Yeah. I think it is a difficult question in the sense that there is more going on than just the level of rates. Clients are accumulating more wealth, and as we have shown in our prospectus, as clients obtain a certain level of cash, they start putting incremental dollars to work and investing, and so you start to see the investment account, which grows faster as well, really continue to grow. And that is what we have seen over the past few quarters. And did not discuss this last time, but investment advisory assets have now overtaken cash assets pretty clearly. And so when we are modeling it, I think it depends on, as well as younger clients coming in who start with cash because they are early in the journey in savings. So I think you have to have more variables than just the level of rates. I think you have to have variables around clients that are coming in and then our existing clients and their behavior. And, again, we have control over that in some of the incentives that we offer. And so that is probably how I would think about it. James Jarrow: Okay. Thanks a lot. Alan Imberman: Thank you. Operator: Our next question comes from the line of Alexander Markgraff of KBW, KBCM. Your question, Alex. Alexander Markgraff: Thanks. Hey, David, Alan, Matt. Thanks for the question. A couple here. I guess just first, David, from a product standpoint, if I look at the releases in 2025, pretty busy. Just sort of curious how you think about calendar 2026 or fiscal 2027 using the sort of digestion year versus carry-forward of velocity framework? And then, Alan, just as a follow-on to that, maybe just some comments on spend priorities in the context of David's comments would be helpful. Thank you. David Fortunato: Hey, Alex. I guess our focus as a product development and technical organization is to be able to build automated products so that we can continue to focus most of our technical talent on delivering new products to clients and improving our existing products. We have a lot left to build. I would say that one of the things that we have seen over the past couple of years is that our roadmap only ever gets longer of things that we want to focus on and we want to get out to our clients. As we continue to build a deeper understanding of our clients' financial situations through both the qualitative and quantitative research that we do into their financial lives, we continue to have new ideas and be excited about those ideas. And so the focus that we have really is on prioritizing and focusing on the things that we think will make the biggest impact to our clients' financial outcomes and have the biggest impact on our business, but we really want to continue to accelerate product velocity, if anything, to continue to get products out to clients and improve the existing product experience so that Wealthfront Corporation is delivering the best value of any provider in the space. Alan Imberman: Yeah. What I would say to add to that in terms of the spend, as I mentioned in the prepared remarks, the investment in home lending as well as our incentives are really where we are putting a lot of resources. We continue to work on incentives and really strengthening the core as well while we invest in home lending. And so that has not changed. We continually look at our business model flywheel and kind of prioritize around that. And so we are continually trying to figure out ways to automate to generate savings, share those savings with clients to help their financial outcomes, build that trust, get them to refer us, and grow with word-of-mouth. And some of that is used through incentives. And so we will continue to use that as our framework for how we invest. Alexander Markgraff: Awesome. I appreciate that. And then, Alan, maybe just a quick follow-up, more sort of model mechanics question on the money market fund. Understanding there are a lot of factors that determine the ramp of that, but just as we see that sort of mix into the model, just a reminder on how that sort of affects the revenue lines would be helpful. Alan Imberman: Yeah. So it will be inside of cash management. We are in a fee waiver period right now. I think starting March 1, the fee is a quarter of a percent on the management fee. And then in terms of, as David mentioned, it offers a really good after-tax yield for folks in states with high income tax. And so we will have to see in terms of the growth once we roll it out to general availability. But that is where it will fit, and that is the monetization on the product. Alexander Markgraff: Awesome. Thank you both. Appreciate it. Operator: Please press *11 on your telephone to ask a question. And as there are no further questions in queue, I would now like to turn the conference back to David Fortunato for closing remarks. Sir? David Fortunato: Thank you. I want to thank everyone for joining the call and for your continued interest in Wealthfront Corporation. We look forward to staying in touch and updating you on our progress in the months ahead. Thanks all. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Matthew Moon: Everyone else has left the call.
Operator: Good day, and welcome to the Velocity Financial, Inc. Fourth Quarter 2025 Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. I would now like to turn the conference over to Christopher J. Oltmann, Treasurer. Please go ahead. Christopher J. Oltmann: Thanks, Rocco. Hello, everyone, and thank you for joining us today for discussion of Velocity Financial, Inc.'s fourth quarter and full year results. Joining me today are Christopher D. Farrar, Velocity Financial, Inc.'s President and Chief Executive Officer, and Mark R. Szczepaniak, Velocity Financial, Inc.'s Chief Financial Officer. Earlier this afternoon, we released our results, and you can find the press release and accompanying presentation that we will refer to during this call on our Investor Relations website at www.bellfinance.com. I would like to remind everyone that today's call may include forward-looking statements, which are uncertain and outside of the company's control, and actual results may differ materially. For a discussion of some of the risks and other factors that could affect results, please see the risk factors and other cautionary statements made in our communications with shareholders, including the risk factors disclosed in our filings with the Securities and Exchange Commission. Please also note that the content of this conference call contains time-sensitive information that is accurate only as of today, and we do not undertake any duty to update forward-looking statements. We may also refer to certain non-GAAP measures on this call. For reconciliations of these non-GAAP measures, you should refer to the earnings materials on our Investor Relations website. And finally, today's call is being recorded and will be available on the company's website later today. I will now turn the call over to Christopher D. Farrar. Christopher D. Farrar: Thanks, Chris, and I would like to welcome everyone. I appreciate you joining our 2025 year-end earnings call. Pleased to report another incredible year of performance and very proud of what our team accomplished. Through hard work and dedication to our vision, we recognized record levels in originations, portfolio growth, new securitizations, book value, pretax ROE, and earnings. Credit belongs to my amazing team members who are talented and passionate about our mission. I believe they are our greatest asset. From a macro perspective, we see healthy activity in the fixed income markets as our deals are oversubscribed and spreads are tight. Our pipeline is growing, our end real estate markets are healthy, and we are optimistic about our prospects going forward. In terms of our specific results, core net income increased by 52% to $111,000,000, which also drove a new record level of pretax ROE of 26%. Importantly, we achieved this growth while maintaining our margins and credit discipline. With respect to originations, we increased volume by 49% to a record $2,700,000,000, driven by increases in productivity from our account executives. Increased volume also set a record for our capital markets team with nine new securitizations and $2,600,000,000 in new issuance. On a net basis, the portfolio grew by 28% versus the prior year, and our asset management team successfully resolved $331,000,000 in NPLs with net recoveries of $30,000,000. At year-end, we entered into a transformative partnership whereby we sold $129,000,000 of NPLs and retained the servicing rights for the entire pool of loans. This transaction drove significant earnings in Q4 but also freed up approximately $50,000,000 in working capital and will drive future earnings from the servicing fees earned. All in all, a great transaction as this team continues to impress and drive meaningful results to the bottom line. From a liquidity perspective, we have never been stronger, as we issued our first rated unsecured debt offering for $500,000,000 in January, which gives us greater flexibility and makes us less reliant on short-term warehouse lines. This new capital will help us execute our long-term plan of growing book value and maximizing shareholder returns. Looking forward, we have great momentum and are well positioned to continue our growth. That concludes my prepared remarks, and we will turn over to Page three in the earnings presentation. 2025 was really just a fantastic year for us. You can see growth across the board, 26% pretax ROE, grew book value by 21%, and maintained a very healthy NIM at 3.6%. Turning to Page four, digging into the fourth quarter, you can see core net income of $36,300,000, or $0.93 a share, up from $0.60 a share from Q4 2024. I mentioned that the NIM was very healthy and stable at 3.59%. In terms of production, dollars were $634,000,000 for the quarter, up 12.5% from the prior year. I mentioned the activity in both the portfolio and NPLs. As a result of that NPL sale, NPLs were down to 8.5% at the end of the year. Again, hitting on the asset management team, they continue to do a great job of realizing net gains, and we have expanded our disclosures in this year's 10-Ks and in these earnings materials. We are reflecting total revenue that we recognize from the NPLs, and that really just shows we have always made those fees and made that income, but it has been difficult to suss out in the financials. So we broke that out and showed the activity from regular accrued interest as well. As you can see for the quarter, that was a total of $7,600,000. So that team continues to do a great job for us. In terms of financing and capital, I mentioned that we have done a number of securitizations in the year. We did do our second private securitization where we had one investor taking down the entire transaction, and we like that execution and think it is a great diversification as we move forward. I mentioned the strong liquidity position, $92,000,000 in unrestricted cash and plenty of warehouse capacity. As I mentioned in my opening remarks, we are really proud of the NPL transaction we were able to close in the fourth quarter, recognizing $13,400,000 of net income as a result of that sale and releasing about $50,000,000 of working capital to fund future production. With that, I will turn it over to Mark for Page five. Mark R. Szczepaniak: Thanks, Chris. Hi, everyone. Another year is in the books for Velocity Financial, Inc., and as Chris had mentioned, Velocity Financial, Inc. is really ending the year strong. If we go to Page five and look at our loan production, total loan production for the fourth quarter was just under $635,000,000 in UPB. As Chris mentioned, that is a 12.6% year-over-year increase from about $563,000,000 in Q4 2024. The strong production growth in 2025 included the weighted average coupon on new Q4 held-for-investment originations continuing to come in strong at just a little over 10%. Originations in Q4 also continued at tight credit levels, resulting in a weighted average loan-to-value for the quarter just under 63%. 2025 total year loan production is $2,700,000,000 in UPB. That was almost a 47.5% year-over-year increase over the $1,900,000,000 in production for 2024. Over 6,600 loans were originated during 2025. The strong 2025 production was a result of continued organic growth of our borrower base and strong demand for our product. As a result of the continued strong growth in production, if you look at Page six, it shows the year-over-year growth in our overall loan portfolio. The total loan portfolio as of the end of the year for 2025 was $6,500,000,000 in UPB, which is a 28.4% increase over the $5,100,000,000 as of 12/31/2024. The weighted average coupon on our total portfolio at the end of the year was 9.7%, as Chris mentioned, a 21 basis point year-over-year increase. The total portfolio weighted average loan-to-value remained consistently low at 65% as of 12/31/2025, and the average loan balance remained consistent at about $390,000. On Page seven, it shows our recent quarterly portfolio net interest margin. You can see 2024 and 2025 have very, very consistent net interest margins. It is not on the slide, but on an annual basis, our portfolio-related net interest margin was 3.61%, about a 1.4% increase over our 2024 net interest margin of 3.56%. For the year, our portfolio yield increased 39 basis points year over year, while our portfolio cost of funds increased year over year by only 18 basis points. The portfolio yield increase is mainly driven by strong loan production during the year and higher loan coupons, and the increase in the portfolio cost of funds is mainly due to an increase in the securitization market yields. On Page eight, our nonperforming loan rate at the end of 2025 was 8.5% compared to 10.7% at the end of 2024, and the decrease, as Chris mentioned, was a combination of the sale of $129,000,000 in UPB of NPL loans sold during Q4 as well as a combination of continued strong resolutions during the entire year by our special servicing department. The table to the right of the page shows our loans held-for-investment portfolio, including both our amortized cost and fair value loans, and shows the total year-over-year net nonperforming loan valuation allowance we have for our nonperforming loans. As of 12/31/2025, the amortized cost loan portfolio had a $4,500,000 CECL reserve and the fair value portfolio had a $48,300,000 valuation adjustment allowance for a combined valuation allowance on the entire loans held-for-investment portfolio of about 81 basis points. Both of these valuation adjustments are required under U.S. GAAP. The unrealized valuation adjustment on our nonperforming fair value loans represents the value for which the loans, under U.S. GAAP, could be sold out in the secondary market. However, we do not plan on selling NPL loans since our in-house special servicing department has a history of producing net gains and very successful resolutions on these loans. Turning to Page nine, it shows our CECL loan loss reserve, which we said was at $4,500,000 for the end of the year, or 22 basis points of our outstanding amortized cost held-for-investment portfolio, and the CECL loan loss reserve does not include the loans being carried at fair value. For 2025, our net gain/loss from loan charge-offs and REO-related activities at the bottom of that table is a net loss of $3,700,000, mainly as a result of a couple of large legacy loan charge-offs. These were smaller loans; we wanted to clean those up. We do not have those types of loans in our portfolio anymore, so that loss is well above our historical loss experience. We do not foresee these types of losses going forward because of the continued favorable resolutions of our nonperforming loans and that significant loss allowance adjustment that you saw on the previous page for the fair value loans. Page 10 presents the enhanced disclosure that Chris was mentioning on our nonperforming loan resolution activity. So the first set of four columns there is what we have always shown in the past. We go up to the net gain or loss on NPL loan resolution, which brings in the amount of default interest and prepayment fee income over and above contractual principal and interest. But what we had not really shown was what is the contractual interest that we go back and pull in. Under GAAP, you have to reverse that out when a loan goes nonperforming. Once we resolve the loan, we are collecting all of that contractual interest in cash. We wanted to bring that in to show the total amount of revenue that we bring in when we resolve these loans. So in this table, we have added columns for net accrued interest and total recovered on the far right. We felt it was important to add the amount of contractual interest, net of any advance write-offs, that is also collected on resolutions for the efforts of our special servicing team. For 2025 Q4, NPL resolution total dollars recovered, including net contractual interest, was $7,600,000, or 9.8% over the UPB, compared to $7,500,000, or 10.8% over UPB, for 2024. Now if you look at the full year 2025 on this table, the total amount recovered on the resolutions of NPL loans was $30,000,000, or 9% of UPB, compared to $22,300,000 total recovered in 2024, or 8.8% over UPB. Page 11 shows our durable funding and liquidity position at the end of the year. Total liquidity as of December 31 was just under $117,000,000, comprised of about $92,000,000 in cash and cash equivalents and another $25,000,000 in available liquidity in unfinanced collateral. In addition, our available warehouse line capacity at December 31 was just under $600,000,000, with a maximum line capacity of $935,000,000. So there is plenty of capacity and available capacity on the warehouse lines. In Q4, we issued two securitizations, 2025-P2 and 2025-5, with a total of $646,300,000 in securities issued. As Chris mentioned, in January 2026, we completed a public rating process for Velocity Financial, Inc.—it is our first time getting a corporate rating. We were rated by both Fitch and Moody's, and we issued $500,000,000 in unsecured debt. That is a five-year term debt, fixed rate at 9.38% interest, due in 2031. The proceeds of the $500,000,000 debt were used to pay off $215,000,000 of corporate securitized debt that was set to mature in 2027, so we paid that off, and the balance of it was to pay down, as Chris mentioned, our shorter-term warehouse lines. And then in February, we issued the first 2026 debt, 2026-1, with $355,000,000 in securities issued. That concludes my 2025 financial recap. Chris, I would like to now give the presentation back to you for an overview of Velocity Financial, Inc.'s 2026 outlook and key business drivers. Christopher D. Farrar: Thanks, Mark. On Page 12, our markets are very healthy. We like the backdrop there. Credit is stable. We are not reaching to hit our targets or our volumes; we are remaining disciplined there. Capital markets are great. The securitization market in particular is very robust, and we have a deep bench of investors supporting us there. Then I think from an earnings perspective, we think NIMs should remain where they are, and we think we can continue growing the portfolios. We are very positive about the future in 2026. So with that, we will conclude our presentation and open it up for questions. Operator: Thank you. We will now begin the question and answer session. Today's first question comes from Steven Cole Delaney at Citizens Capital Markets. Please go ahead. Steven Cole Delaney: Good afternoon, everyone, and congratulations on an excellent year. We do appreciate Mark's comments on Page nine about the REO, and we may want to follow up with you on that. But, obviously, an outstanding performance. Chris, I am curious, looking ahead, one of the things, if you think about the broader financial markets—and let us talk about the rates market—God, I do not know how many times you turn on CNBC and they were talking the Fed and yada yada. We do not know what the Fed will do. But the futures market, as of a week ago when we updated our internal rate forecast, is showing somewhere between two and three 25 basis point cuts in 2026. Now who knows what we get? And more importantly, the ten-year is really being kind of cranky at 4.20%, and that is, what, 50, 60 basis points off the recent twelve-month lows. I guess what I am trying to say is you have performed the way you did in terms of origination volume, and your clients are obviously finding deals, and they can afford the current rates. Let us just say if we get some short-term rate relief, and if the ten-year were to come down 50 basis points or whatever, how impactful is that to the demand from your borrowing universe for additional loans? I am just curious what the mindset is. And I am curious if you have any material floating-rate loan concentration in your portfolio where, if we did get a break in the five- to ten-year range, is there the possibility of showing somebody some kind of a mini-perm type of a loan structure vis-à-vis just a SOFR-type floater? Thank you for commenting on that, if you would.
Operator: Greetings, and welcome to the CuriosityStream Inc. Fourth Quarter and Year End 2025 Results Conference Call. At this time, participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the call, it is now my pleasure to introduce your host, Tia Cudahy, Chief Operating Officer. Thank you. You may begin. Tia Cudahy: Thank you, and welcome to CuriosityStream Inc.'s discussion of its fourth quarter and full year 2025 financial results. Leading the discussion today are Clint Stinchcomb, CuriosityStream Inc.'s Chief Executive Officer, and Phillip Brady Hayden, CuriosityStream Inc.'s Chief Financial Officer. Following management's prepared remarks, we will be happy to take your questions. But first, I will review the safe harbor statement. During this call, we may make statements related to our business that are forward-looking statements under the federal securities laws. These statements are not guarantees of future performance, but rather are subject to a variety of risks, uncertainties, and assumptions. Our actual results could differ materially from expectations reflected in any forward-looking statements. Please be aware that any forward-looking statements reflect management's current views only, and the company undertakes no obligation to revise or update these statements, nor to make additional forward-looking statements in the future. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC website and on our Investor Relations website, as well as the risks and factors discussed in today's press release. Additional information will also be set forth in our annual report on Form 10-Ks for the fiscal year ended December 31, 2025, when filed. In addition, reference will be made to non-GAAP financial measures. A reconciliation of these non-GAAP measures to comparable GAAP measures can be found on our website at investors.curiositystream.com. Unless otherwise stated, all comparisons will be against our results for the comparable 2024 period. I will now turn the call over to Clint. Clint Stinchcomb: Thank you, Tia, and good evening, everyone. CuriosityStream Inc. was built on one timeless idea. Curiosity changes the world. That every breakthrough begins with a question. A thousand years ago, Leif Erikson sailed west into the unknown and discovered a new world. Nearly a millennium later, Neil Armstrong stepped onto the lunar surface carrying the same enduring message across time. Discovery belongs to the bold, and curiosity is our compass. From ocean waves to moondust, that spirit propels us forward today. In that same spirit of bold exploration, we delivered strong full year 2025 results. Revenue grew 40% to $71,700,000 from $51,100,000 in 2024. Adjusted free cash flow increased 46% to $13,900,000 from 2024. Q4 revenue rose 36% year over year to $19,200,000 from $14,100,000, and adjusted free cash flow climbed 33% to $4,300,000. These gains reflect the strength of our complementary revenue pillars: licensing, driven by high volume and heavily structured video fulfillments for AI model training; subscription sturdiness through operational execution and new partnerships; amplified by cost discipline that expanded gross margins to 60% in Q4 from 52% a year ago, and reduced nondiscretionary G&A expenses by 33% year over year. In 2026, we believe our annual licensing revenue will exceed our overall subscription revenue. We believe we will grow our subscription revenue by low to mid single-digit percentages because of three key drivers: new pricing, which we began rolling out March 1; new wholesale and retail partnerships; inorganic growth from existing partnerships. The recurring, reliable, and predictable revenue from subscription services cements our foundation. Why do we believe we will see licensing revenue eclipse subscription revenue in 2026? Why do we believe licensing will be robust and durable for the foreseeable future? What is the impact to top line, bottom line, and margin expansion? Well, we have covered some of this before. Many investors, analysts, and commercial partners tell us it bears repeating. CuriosityStream Inc.'s licensing business is durable because it is built on assets that are durable, that are scarce, rights-aware, difficult to replicate, and increasingly valuable across multiple end markets. We are not talking about a single opportunistic window. We are talking about a monetization model anchored in premium, unscripted, and scripted media, enriched structured metadata, flexible rights, and growing demand from AI developers and traditional media companies. CuriosityStream Inc. has built a large differentiated content library of rights to nearly 3,000,000 hours of premium factual content plus sports, plus news, plus general entertainment, animation, and film, finished and raw, supported by more than 200 content and data partners and flexible licensing rights. This is not commodity inventory. It is scaled, unscrapable, curated, a corpus that took years of capital, relationships, editorial focus, and dense work to assemble. Enduring revenue streams are almost always rooted in assets that are hard to replace and expensive to rebuild. Demand is broadening, not narrowing. Beyond repeat business from existing customers, we expect our overall roster of partners to more than double in 2026, and potentially increase five to six times in 2027 as the fine-tuning of open-source and certain proprietary models opens opportunities for hundreds of companies. Historically, licensing meant selling finished programs or package rights to broadcasters, streamers, and pay TV partners. That business remains alive and healthy. And in 2025, we announced new license agreements with linear broadcasters, educational platforms, digital-first outlets, global streaming services, and, of course, next-generation AI training developers. This diversification makes licensing more durable and cycle-resilient. Traditional media licensing is healthy and not going away, but AI licensing is accelerating much faster and driving the bulk of our growth here. Over the next five years, AI model development, model refresh cycles, geographic expansion, enterprise fine-tuning, education applications, systems, and multimodal search should all support continued appetite for premium licensed corpus. For AI licensed partners, as their model sophistication grows, so does the need for more video inputs. Developers require large volumes of high integrity, rights-aware training inputs. Premium broadcast video, clean audio, scripts, captions, study guides, metadata, and derivative assets have utility well beyond entertainment viewing. They help train, tune, evaluate, ground, and improve multimodal systems. The more advanced models become, the more they need high-quality, structured, legally licensable data rather than undifferentiated scraped material. So key to note that rights-cleared, structured media will become more valuable over time, not less. There is plenty of media on the open web, but much of it is noisy, duplicative, poorly labeled, low quality, or legally ambiguous. By contrast, CuriosityStream Inc.'s corpus is assembled, curated, and increasingly productized for commercial use cases. The premium quality of our video also helps us stand out, as we have video captured with top-tier equipment like RED cameras, HDR formats, and Blackmagic workflows, delivering cinematic excellence with real-world visual depth. This means sharp, high-resolution footage that captures subtle details from the textures of ancient ruins in history to the fluid motions in wildlife sequences. For AI training, this translates to superior data for tasks like object recognition, scene understanding, and generative video. Said plainly, we generate competitive escape velocity through our expanded data structuring and metadata capabilities that are designed to meet partner volume requirements and bespoke specifications. We are not merely selling files. We are not merely selling clips. We are selling usable datasets. That distinction is critical. In AI, a rights-cleared file has value. A rights-cleared file with strong metadata, taxonomy, provenance, segmentation, and packaging has much more value. That creates pricing power and maintenance. Further, our licensing model benefits from operating leverage and the fact that the standard industry licensing practice in the AI space is one of nonexclusivity. I cannot emphasize enough the value of this dynamic. As our critical-mass corpus is now assembled and the infrastructure is largely in place, each new partnership carries attractive incremental economics, as our hard costs to create or license in content are largely de minimis. We will continue to increase our volume through rev-share constructs that minimize cost and risk. We can now monetize the same video multiple times in multiple forms across multiple geographies and buyer classes. Of course, durability does not mean inevitability. We have to execute. We have to move the ball forward every day. We need to continue acquiring and negotiating sufficient scopes of rights, enriching metadata, segmenting our corpus intelligently, protecting quality, and packaging assets in ways that map directly to buyer workflows. We need to stay disciplined on pricing and avoid treating the library like an undifferentiated commodity supply. We also need to manage legal and policy developments thoughtfully. But all of these are execution challenges. These are not reasons to doubt the model. In fact, a market that increasingly values provenance, trust, and rights discipline should favor CuriosityStream Inc., not hurt it. Our view is informed. Our view is straightforward. CuriosityStream Inc.'s licensing of video, audio, images, scripts, and related data products is durable because it rests on scarce assets, diversified demand, strong reuse economics, and a market shift toward high-quality licensable content. It can continue to grow significantly because we are still early in the monetization curve. It will be lumpy over three- and six-month tranches. But as Warren Buffett often said, we would rather have a lumpy 15% than a smooth 12%. Traditional licensing is meaningful. AI licensing is scaling rapidly. And the strategic value of curated, rights-aware, metadata-rich premium media compounds over time. This is why we believe licensing will remain a critical and durable growth engine for the long-term, foreseeable future. In summary, we believe that we will continue double-digit growth in both revenue and cash flow driven by subscriptions and licensing expansion. We intend to pay 2026 dividends from cash generated by operations as we did in 2024. Our balance sheet remains strong with over $27,000,000 in liquidity and no debt, which we believe gives us financial flexibility. I will now hand the call over to our CFO, Phillip Brady Hayden, who I am sure will emphasize that, among other attributes, at today's share price, we are a growth company that also offers a dividend yield of 10%. Thank you, Clint, and good evening, everyone. Our full financial results are presented in the back of the press release that we just issued a few minutes ago as well as the 10-Ks that we will file in the next few days. But let me quickly go through some of the results that we want to highlight for the fourth quarter as well as full year 2025. In the fourth quarter, we reported revenue of $19,200,000 at the high end of our guidance and a 36% increase compared to $14,100,000 a year ago. For the full year, revenue was $71,700,000, a 40% increase from last year. Likewise, we reported another quarter of positive adjusted EBITDA, which came in at $1,100,000. This was an improvement of $3,100,000 from a year ago, and also our fourth sequential quarter of positive adjusted EBITDA. For the full year, adjusted EBITDA was $8,200,000, a $14,300,000 improvement from 2024. Adjusted free cash flow exceeded our guidance in the fourth quarter at $4,300,000, which is also our eighth consecutive quarter of positive operating cash. For the full year, adjusted free cash flow was $13,900,000, a 46% increase from $9,500,000 in 2024. Licensing revenue was $9,800,000 in the fourth quarter, an increase of $6,100,000 from last year, while subscription revenue came in at $9,100,000. For the full year, subscriptions were $37,000,000, while licensing came in at $33,200,000. This was an increase of over $25,000,000 from 2024 and driven by continued growth in AI training fulfillments. Fourth quarter and full year gross margins were 60% and 57%, respectively, each of these improving from last year. Within cost of revenue, storage and delivery costs increased during the year in light of the high volume of video we put into AI licensing agreements. For the full year, combined costs for advertising and marketing plus G&A were higher by 24% compared to last year, although this increase was the result of noncash charges for stock-based compensation of $14,400,000, or about $0.24 on a per-share basis. G&A also included an adjustment to payroll costs for incentive compensation, as well as a number of one-time expenses associated with our August secondary stock offering. Were it not for the noncash SBC, the incentive comp adjustment, and the common stock sale, G&A would have declined by over $1,000,000 in 2025. For the full year, net loss was $6,400,000 compared to a net loss of $12,900,000 in 2024, representing an improvement of over 50% in net loss. While our revenue was up materially from last year, the 2025 net loss was driven by the one-time charges, incentive comp adjustment, and noncash SBC. Were it not for these specific charges, we would have posted positive earnings for the year. And as we said earlier, adjusted EBITDA was $1,100,000 in the fourth quarter compared to a loss of $1,900,000 a year ago. And for the full year, adjusted EBITDA was $8,200,000 compared to an adjusted EBITDA loss of $6,000,000 in 2024. For the full year, adjusted free cash flow was $13,900,000, a 46% increase from $9,500,000 in 2024. This totals well over $20,000,000 in operating cash that we have generated over the last two years. On October 14, 6,700,000 of our warrants expired unexercised. While these warrants have been trading well out of the money for some time, this expiration of all of the company's outstanding warrants reduces potential dilution and should eliminate any lingering share overhang associated with these instruments. In December, we paid $4,700,000 for our fourth quarter dividend. Including our $0.10 special dividend paid in June, this brings our total dividends paid to $22,000,000 for all of 2025. We ended the year with total cash and securities of $27,300,000 and no outstanding debt, and we believe our balance sheet remains in great shape. Based on yesterday's share price, CuriosityStream Inc. is generating an adjusted free cash flow yield of over 8% and a current dividend yield of over 10%. Given where our shares have recently been trading, we just announced that our Board has increased our share repurchase authorization to $6,000,000, and we plan to selectively resume our repurchase activity in the coming weeks and months. Moving to guidance. For 2026, we expect revenue in the range of $38,000,000 to $42,000,000 and adjusted free cash flow in the range of $6,000,000 to $9,000,000. For the full year, we continue to believe we will achieve double-digit growth in both revenue and cash flow in 2026, and that a full year of positive GAAP earnings is achievable. With that, we can hand it back to the operator and open the call to questions. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions. This is Brent. We are ready to take questions. Go ahead. We are experiencing some technical difficulties. Thank you for continuing to hold. We will be with you as soon as we can. Again, appreciate you continuing to hold. Thank you again for your patience. This is the CuriosityStream Inc. year end 2025 earnings call. We are still having technical difficulties. If you are in the question queue right now, would you please email your questions in reply to the email that you are about to receive, and we will take questions over email shortly. Thank you so much, and thank you for continuing to hold. Thank you for holding. This is the CuriosityStream Inc. 2025 year end earnings report. Our first question today comes from Dan Medina from Needham. Dan Medina: Could you please update us on whether LLM licensors are renewing their deals with you and how the nature of second contracts is different from the earliest LLM contracts you licensed? Clint Stinchcomb: Thank you, Dan, for that question. Really appreciate it. The answer is yes. Virtually everyone has renewed or will renew. And the beauty of the second agreement is it is always easier because you have the paper in place. Same thing with the third agreement. Same thing with the fourth fulfillment. So without a doubt, we are seeing repeat business. At the same time, we are seeing a lot of new potential partners express interest and express either very high volume and specific requirements that we are working aggressively to fulfill right now. Thank you, Dan. Dan Medina: Any change in the pace of adding other companies' libraries to your ability to license hours to the LLMs? Clint Stinchcomb: We are like the Golden Gate Bridge there, Dan. We are constantly in acquisition mode. We have built and amassed, I think, an extraordinary library. We have been told just this week by the most valuable by market cap companies in the world that we have the best video corpus for AI training. So we have video in place. We have paper in place with the world's biggest companies. We have enhanced our human talent. We have done the necessary things to ensure the sturdiness of our subscription services, and feel really, really good about the year, Dan. Dan Medina: Can you give us some cases of how LLMs are using the information you licensed to them in the market to make money, tools, and apps? Clint Stinchcomb: I think it is a great question, and I think that if you look at the evolution of what our technology partners are looking for and are working toward, if you start with 2020 with large language models, there was a lot of text that started there. And that was designed to help teach the models to read, to help create document summarizers, knowledge Q&A, support bots, act as coding copilots. We transitioned up the scale to kind of multimodal AI, which is text, which is images, which is audio, which is video, and that led to video summarization, camera assistance, text-to-image, text-to-video, and agentic AI. Obviously, that is part of the spectrum now, and that is where systems plan, use tools, and act autonomously. And the use cases there are research agents, travel booking assistants, code agents, data ops agents, CRM bots. There is almost an infinite number of use cases. And then I think certainly an exciting stage that we are in the early stages of right now is physical AI where the content is being used to embed AI into robots, into cars, into drones, into devices. And similarly, I think, an infinite number of use cases here with warehouse robots, self-driving cars, home robots, delivery drones, factory arms, all kinds of things. So extraordinarily exciting, difficult to stay up with all of the use cases, but the good news is we have such a variety, such a strong scope of video and data, that we are able to fulfill a large scope and scale of requirements. Jason Kreyer: Clint, you called out 2026 as the greatest year in company history. Can you unpack that from a metrics standpoint, perhaps with some more clarity on your goals for the base streaming business and then the licensing opportunity? Clint Stinchcomb: Thank you for that question, Jason. So we made a lot of progress in 2025. We talked about the increases in cash flow and top line revenue, in the size of our library, and the quality of our library. And so as it relates to our subscription business, and that includes wholesale and retail subscriptions, we are confident that we are going to grow that at low to mid single digits, and we are really confident in that because we have new partnerships coming on every month with channel stores around the world for CuriosityStream Inc. for CuriosityStream Inc. You, and even for CuriosityStream Inc. Catholic Stream. We have new wholesale relationships that are rolling out over the next several months, and even now. And we took a price increase March 1. That is going to take a while to roll through our financials. But with those three things and with the marketing money that we are spending, we are very confident that we will grow our subscription business in the low to mid single digits. And so, based on what Phillip shared, that is off a base of $3,637,000,000 a year. On the subscription side, we are confident that, or I am sorry, on the licensing side, we are confident that we are going to eclipse our subscription revenue because of the work that we have done to date. We are experiencing and anticipating a lot of repeat business from existing partners and customers. And at the same time, I think that our new Chief Commercial Officer, John Belaid, has brought an extraordinary amount of velocity to our efforts right now. And so in working with our key people here, our ops team, we are going way beyond the obvious top six to eight companies that are in the space and anticipate expanding our roster really significantly this year. Now, again, that will be choppy, but the opportunities are big. I am glad that I lived to work through this period of time because we have the goods. We have really unique advantages. We need to execute, but I have never in my career been so close to so many big opportunities at the same time. Thanks, Jason. David Marsh: On the subscription front, how many new platforms are you expecting to launch during FY26? And how many new countries do you think you could launch with existing partners? Clint Stinchcomb: Great question, Dave. Thank you. Well, I think just this year alone, we have already launched with Apple in Canada as one of many examples. And we anticipate that over the course of this year, probably 12 to 20 new platforms. Some of these are not all created equal. Some are larger than others. Some deliver more opportunity than others, but certainly 12 to 20 over the course of this year. And the beauty of all of that is the partners that we are working with are good at growing subscribers. So I feel really confident about our ability to grow that side of the business, and it is sturdy. David Marsh: If I heard you correctly, it sounded like SG&A would have been down $1,000,000 year over year without the nonrecurring charges. So would mid $20 millions be a good expected run rate for fiscal year 2026? Phillip Brady Hayden: Good question, Dave. We do not provide guidance on the expense side, but I think those are fair numbers. Obviously, with stock-based comp, that is a little bit of a wild card because of the way we award our grants and the way the accounting treatment is applied to those. It can be somewhat difficult to predict. But I think if you take out stock-based comp, we are actually looking at G&A other than SBC below $20,000,000. I think your range is certainly fair. David Marsh: Any M&A opportunities you might consider? Clint Stinchcomb: Thanks for that question, Dave. We will always do what is in the best interest of our shareholders. I think that the M&A environment will be exciting this year, will be ripe. If you look at some of the deals that have been done most recently with the big companies, those are a lot more around synergies. But we believe that if we continue to execute, continue to post good increases, continue to show the value of our subscription business and our licensing business, that we will have the opportunity to consider whatever combinations are in the best interest of our shareholders. Patrick Sholl: Could you provide any additional color on the market for content to license for AI training and how your partnership with Versus Video Training Library supports these efforts? Clint Stinchcomb: So Versus is a really good company. They are a technology partner of ours. We have worked with them for a long time. They help us to organize our content, for the most part, help to clip our content, and they help us manage an increasingly large volume of content as we are organizing fulfillments there. Now, we did a lot of licensing agreements before we started working with Versus, but I think they are helping us by handling some of the work on the organization side, helping us to do even more. As far as the content that we offer today, a lot of people rightly think of CuriosityStream Inc. as a company focused in the factual media space. And certainly, we are. And certainly, we have a whole variety of content there. We have a corpus today that is a collection of content from not just ourselves, but from over 200 partners. And so in addition to the full range of factual content—crime, heist, historical crime, espionage, travel, food, culture, home—we also have a good corpus of scripted content, which is really hard to acquire for a variety of reasons—dramas, comedies, westerns, action films, adventure films, mystery, family faith films, etc. And we also have a broad collection of sports—American football, soccer, surfing, tennis, basketball, billiards, boxing, drifting, lots of combat sports. So we have a full corpus there. That is something that gives us a unique advantage and enables us to engage with virtually everybody on the planet who has video licensing needs for training and other purposes. Patrick Sholl: With the price increase implemented March 1, what is the timing of it being fully implemented and expectations on churn? Clint Stinchcomb: It will take a year to fully implement just because we have so many people on annual subscriptions. I think what you will see in the first month is probably 3% to 4% of all of our customers, 5% maybe, who become part of that, and so that will roll out over time. With our pure direct customers, obviously, it will not roll out fully until everyone has renewed their agreement. On the partner side, most of those subscribers are monthly, and it takes some of them a little bit longer to roll out the pricing increase, but we anticipate that over the next handful of months, everybody will. So we will get significant benefit this year, and we will continue to get benefit through February next year. Patrick Sholl: Any additional commentary on the cadence of guidance and expectations on the full year? Clint Stinchcomb: I will speak to that for a minute, and then I will hand over to Phillip for his point of view as well. We got into the half year because many of the partnerships that we are working on are large and have the potential to be very large, and they are a little bit lumpy. The benefit to working with the biggest companies in the world is you know you are going to get paid. You are not chasing people to get paid. However, sometimes the payment schedules can be a little different than certain other companies. So the cash revenue can be a little bit lumpy in light of these big licensing opportunities. And so we are extremely confident in the year that we are going to have this year. Without giving specific year-end guidance, like we said, our intent is to pay our dividend from cash from operations. And our belief is that our licensing revenue will exceed our subscription revenue. So we feel good about where we are going to end up. We have said double-digit increases in both cash flow and top line revenue, and that is what we are working toward every day and are confident that we will achieve. Phillip Brady Hayden: The only thing I will add is the revenue cycle for these deals, and we have talked about this before, but it is generally between four and six months. We are delivering content. We are then recognizing the revenue. We go through an acceptance process. We are not issuing our POs until we are actually getting paid under most of the contracts that we are doing. So the entire cycle can last as long as six months, and it has just become very difficult for us to predict with much precision exactly when the numbers are going to hit. I will say, as we get closer to midyear, I think there is a good chance we will narrow our guidance and revise it into Q2. We know it is a little bit broad, having the $38,000,000 to $42,000,000 and $6,000,000 to $9,000,000 on the cash flow side. But our plan would be to narrow that to the extent that we can here during the second quarter. Clint Stinchcomb: And I know that it is March 11, and people are probably wondering what we are going to do in the first quarter. And what I will say is the good news about much of what we are doing today is it is not seasonal. Our intent is to do the best deals that we can, and obviously for the company, but for our partners, because we believe that those will lead to additional opportunities. We said double-digit increases in cash flow and top line revenue for the year. That may seem a little conservative to people or a little lukewarm in light of the fact that we did 40% to 46%, but our intention as we give guidance is to beat that guidance. And that is the approach that we are taking, and we believe that over the year, that will yield the best results for us. Thank you for that question, Patrick. Tia Cudahy: Clint, Phillip, thank you. This is the end of the CuriosityStream Inc. Q4 and year end 2025 earnings call. Thank you again to all of the participants on the line staying with us through the technical difficulties. Have a nice evening.
Operator: Hello, everyone. Thank you for joining us, and welcome to the Stitch Fix, Inc. Second Quarter Fiscal Year 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press 1. To withdraw your question, please press 1 again. I will now hand the call over to Cherryl Valenzuela, Head of Investor Relations. Please go ahead. Cherryl Valenzuela: Good afternoon, and thank you for joining us today for the Stitch Fix, Inc. second quarter fiscal 2026 earnings call. With me on the call are Matt Baer, Chief Executive Officer, and David Aufderhaar, Chief Financial Officer. We have posted complete second quarter 2026 financial results and a press release on the Quarterly Results section of our website, investors.stitchfix.com. We would like to remind everyone that we will be making forward-looking statements on this call, which involve risks and uncertainties. Actual results could differ materially from those contemplated by our forward-looking statements. Reported results should not be considered as an indication of future performance. Please review our filings with the SEC for a discussion of the factors that could cause the results to differ, in particular, our press release issued and filed today, as well as our Annual Report on Form 10-K for fiscal 2025 and subsequent periodic reports filed with the SEC. Also note that the forward-looking statements on this call are based on information available to us as of today's date. We disclaim any obligation to update any forward-looking statements except as required by law. Please note that fiscal 2024 was a 53-week year due to an extra week in the fourth quarter. As such, references to consecutive quarters or year-over-year revenue growth rates on this call are based on an adjusted 52-week basis, removing the impact of the extra week to provide a comparison that we believe more accurately reflects our performance. During this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the press release on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. Finally, this call in its entirety is being webcast on our Investor Relations website and a replay of the call will be available on the website shortly. I will now turn the call over to Matt. Matt Baer: Thanks, Cherryl. Good afternoon, everyone. Q2 was another strong quarter marked by our fourth consecutive quarter of year-over-year revenue growth. We continue to successfully execute our transformation strategy and are seeing the cumulative impact of those efforts to both strengthen the foundation of our business and reimagine our client experience. The enhancements we have rolled out over the past 18 months, including greater flexibility, meaningful improvements we have made to the quality and breadth of our assortment, and new AI features, are driving increased client engagement and durable revenue growth. As a result, we are solidifying our position in the market and our role as our clients' retailer of choice for apparel, footwear, and accessories. Getting into the specific numbers, revenue exceeded our outlook and grew 9.4% year over year to $341.3 million, supported by broad-based demand that remained resilient across all income cohorts. Revenue per active client, our highest revenue per active client as a public company, reached $577 in Q2. We achieved this growth while driving leverage in our business. Q2 was our eighth consecutive quarter with a contribution margin greater than 30%. Adjusted EBITDA also exceeded our outlook and was $15.9 million, or 4.7% of revenue. We also continued to gain market share and significantly outperform the broader U.S. apparel and accessories market during the quarter, highlighting the strength of our value proposition. Our 9.4% year-over-year revenue growth in Q2 contrasts with the 0.5% contraction the total U.S. apparel, footwear, and accessories market sustained in the same period, according to the latest Circana data. Our growth this quarter was anchored by the Fix channel. By leveraging our unique curation capabilities and expert stylists, we have leaned into head-to-toe outfitting and strategic category expansion. This high-touch approach is resonating deeply. Both our women's and men's Fix businesses grew double digits, contributing to a nearly 10% year-over-year increase in Fix average order value, our tenth consecutive quarter of growth. A key driver of this performance is the increased flexibility we have integrated into our service. Adoption of our larger Fixes, which offer up to eight items in a Fix versus the original five, continues to grow. We are also seeing high resonance with other newer formats, such as themed Fixes and Fixes built around a Freestyle item of a client's choosing. The average order value for these Fixes are, in aggregate, nearly double that of a traditional five-item Fix. We have also fundamentally improved the selection of items within each Fix. The growth in Fix average order value was driven by higher average unit retail, which grew 7.7% year over year, our sixth consecutive quarter of growth. The increase was largely fueled by a more compelling assortment and favorable mix. External pricing factors, including tariffs, were not a significant driver of the change. In Q2, we successfully captured seasonal winter demand for warm layers, with outerwear a top growth category in both our women's and men's businesses, up 26% combined. We also saw strong demand for denim, up 17%. In addition, activewear and athleisure were strong contributors to our performance in the quarter, growing 37% year over year combined. We also saw strong demand for special occasion and social events or night-out styles, which grew 46% this quarter. Of note, we have also been expanding our assortment in strategic categories where we are seeing increased demand, such as footwear and accessories. Footwear grew 33% year over year across our men's and women's businesses, with sneakers alone up 46%. Accessories grew 51% year over year across both lines of business. As we mentioned last quarter, we believe expanding our relevance in activewear, athleisure, footwear, and accessories can unlock a significant wallet share opportunity. We estimate our fair share within our existing client base in these categories represents approximately $1 billion in incremental revenue. We also continue to optimize our brand mix. We are pairing more of the brands clients already know and love with private brands that are purpose-built from our data to offer exceptional quality and value. Within our private brands, we saw strong performance from Market & Spruce, Montgomery Post, 41 Hawthorn, and WeWander, with revenue from each up more than 35% year over year. The work we have done to optimize our assortment and brand mix set the stage for a strong holiday performance. This achievement was fueled by a deeper selection of seasonally relevant merchandise and a strategic promotional cadence, which delivered record Freestyle sales during the Black Friday/Cyber Monday period and sustained broader momentum through the end of the calendar year. Importantly, we achieved this growth while maintaining strict discipline within our Fix business, driven primarily by our enhanced Freestyle-exclusive promotional capabilities. We continue to be encouraged by our active client trends. This quarter marked our seventh consecutive quarter of improvement in year-over-year active client growth rates, reflecting the disciplined and methodical progress we are making to build a healthier client base. Of note, our men's business, after returning to sequential growth in active clients last quarter, returned to year-over-year growth in Q2. We are also excited by the early results we are seeing from Family Accounts, which enable a client to manage multiple accounts within a single household. This feature is emerging as a lower-cost way to grow family wallet share while unlocking new ways for clients to shop for others and supporting gifting behavior. Our holiday results reinforce our confidence in its potential as an efficient acquisition lever in future key gifting moments. Taking a broader view of our performance, we ended Q2 with active clients of 2.3 million, in line with our expectations. Here are a few highlights. New clients grew year over year for the second consecutive quarter. Three-month LTVs for new clients have now grown year over year for 10 consecutive quarters and remain at three-year highs. Reengaged clients also grew for the second consecutive quarter and the number of clients on recurring shipments continued to grow year over year. We also just completed a quarter in which we had the highest retention rate in nearly four years. We are encouraged by the early signals from Stylist Connect, our new platform for near real-time client-stylist collaboration. While still a recent addition, it is already helping us strengthen relationships between our clients and our stylists. Clients who engage in the feature are significantly more likely to request the same stylist for their next Fix. We believe these positive trends confirm the improved quality of our new and returning client cohorts and will lead to greater client retention, higher revenue predictability, and improved profitability over the long term. We remain on track to deliver positive sequential net adds in Q3. A key driver of our performance is how we are leveraging technology and innovation, and AI specifically. Technology and innovation have been at the core of Stitch Fix, Inc.'s business since day one. Since our founding, Stitch Fix, Inc. has capitalized on the latest technology advancements as well as data science and proprietary algorithms to provide a superior retail experience. Our proprietary data and algorithms remain a competitive advantage. We know more about our clients, their fit, their budget, and their style preferences prior to them ever receiving a Fix. We also have a continuous loop of both direct and indirect data from our clients as well as nuanced insight on our merchandise assortment on how specific items fit. We have billions of data points to leverage. Because we know our clients so well, we are able to leverage AI to deliver incomparable client experiences. One way we are putting this data to work is through our AI Style Assistant, which empowers our stylists by helping clients better articulate what they are looking for. This tool captures richer signals that enable our stylists to curate Fixes that better meet each client's specific needs. We are also leveraging AI to inspire clients and help them discover the styles they will love. A clear example is Stitch Fix Vision, our AI-powered styling platform that provides clients with personalized imagery of them in a wide array of shoppable head-to-toe outfit recommendations based on their own style profile and the latest fashion trends. Clients who have engaged with Vision use it on a consistent basis, with 75% returning to use it again in subsequent months, and that engagement has translated into increased sales. We saw an over 100% lift in Freestyle spend over a 90-day period for clients who used the feature. As we further execute our strategy, we are confident in our ability to maintain a balance between growth and profitability. Our unique data-driven model, which combines personalized styling expertise, AI-powered recommendations, and a compelling assortment across Fix and Freestyle, enables us to meet clients where they are while driving both engagement and spend. This integrated approach creates a powerful feedback loop between human insight and technology, strengthening client relationships and improving unit economics over time. The investments we are making in our client experience, AI capabilities, and merchandise mix are designed to drive durable revenue growth while preserving margin integrity. These strategic drivers are performing in line with our expectations, supporting our improved full-year revenue guidance, as we remain focused on finishing the year strong. As the business continues to scale, we believe we will be able to generate increasing leverage and deliver consistent, sustainable profitability over time. I want to thank our team for their focus and execution, and our clients, partners, and shareholders for their support. With that, I will turn it over to David to discuss our financial results and outlook in more detail. David Aufderhaar: Thanks, Matt, and good afternoon, everyone. Our second quarter results reflect continued progress against our strategy and the momentum we are building across the business. We delivered strong revenue growth and disciplined expense management while continuing to invest in the client experience and innovation. These results underscore the benefits of our methodical approach to strengthening the business and positioning Stitch Fix, Inc. for consistent and sustainable performance over time. Now, let us turn to the numbers. Revenue was $341.3 million, up 9.4% year over year, exceeding our outlook. Fix average order value rose 9.8%, driven by more items per Fix and higher AUR, reflecting strong demand for larger Fixes and our improved assortment. We ended Q2 with 2.3 million active clients, in line with our expectations. Revenue per active client was $577, up 7.4% year over year, marking the eighth consecutive quarter of year-over-year growth and the highest RPAC we have reported as a public company. The growth in RPAC confirms that our strategy is effectively leading to increased client engagement and spend, ultimately driving a higher share of wallet from our clients. Gross margin was 43.6%, slightly above the midpoint of our FY 2026 range of 43% to 44%, with contribution margins remaining strong above 30% for the eighth straight quarter. Advertising was 8.5% of revenue in Q2, slightly below our expected range of 9% to 10%. As we have discussed, we are being deliberate in how we invest, prioritizing efficiency and long-term client quality over near-term volume. Q2 adjusted EBITDA came in at $900,000 or a 4.7% margin, outperforming expectations on strong revenue and disciplined expense management. We ended Q2 with $240.5 million in cash and investments and no debt. Inventory was $122.1 million, up 11.4% year over year, reflecting investments in our client experience and increased demand. Turning to our outlook for Q3 and FY 2026. For full-year FY 2026, we expect total revenue to be between $1.33 billion and $1.35 billion. We expect total adjusted EBITDA for the year to be between $42 million and $50 million, and we continue to expect to be free cash flow positive for the full year. For Q3, we expect total revenue to be between $330 million and $335 million. We expect Q3 adjusted EBITDA to be between $7 million and $10 million. For the second half of the year, we are tightening our revenue guidance range, reflecting greater confidence in the underlying momentum we are seeing while continuing to be thoughtful and realistic about the environment ahead. We expect growth rates to moderate as we lap a strong two-year AOV stack. We believe there remains opportunity to continue driving steady AOV improvement. Ongoing enhancements to our client experience, including a stronger, more relevant assortment, continued category expansion, increased Fix flexibility, and the use of AI to support more dynamic client engagement, provide a durable foundation for that progress. At the same time, we believe our methodical approach to rebuilding our active client base is working. We are encouraged by continued improvement in active client trends and remain confident that sequential net active client adds will be positive in Q3. Over time, as both AOV and active clients improve, we believe this positions the business for compounding growth. We continue to expect full-year gross margin to be approximately 43% to 44%, and full-year advertising costs to be between 9% and 10% of revenue. In closing, we are encouraged by the progress we are making across the business. Our focus on delivering a strong client experience, rebuilding our active client base with discipline, and maintaining financial rigor is driving improved performance and positioning us well for the remainder of the year. With that, Operator, we can open up the line for Q&A. Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, please press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please hold while we compile the Q&A roster. Your first question comes from the line of Dana Telsey from Telsey Advisory Group. Please go ahead. Dana Telsey: Hi, everyone. Nice to see the progress. I wanted to get some more color on what you are seeing from the current consumer. It sounds like the AURs are being well accepted. Is that existing brands, new brands? You have brought on new brands over the past couple of months. How has that gone? And then we would love to know more about active client growth and, sequentially, how you are thinking about it going forward. Thank you. Matt Baer: Hey, Dana. It is Matt. I appreciate the comment on the progress that we have made. The team has done a phenomenal job driving this continued outperformance from a revenue growth standpoint, so I appreciate that. I heard about three questions there: a check-in on how we are seeing the consumer and how that has impacted our AUR performance, the impact between private brands and national brands, and then an update on our active client count. I will answer the first two, and David can jump in with additional color as well as answer the third on the client count piece. In terms of the consumer, one of the things that gives us additional confidence in our ability to continue to perform and sustain this momentum is that we are seeing equally positive performance across all different income cohorts within our client base. We are seeing that strength across the board, and the increase in AUR that we have been able to deliver is reflective of continuing to improve the quality of our assortment overall. Within our private brand portfolio, we have been investing to deliver an even higher quality product while maintaining exceptional value for the end consumer, and our clients have really resonated with that. That is why we were excited to share the outsized growth that we are seeing within many of our private brands within our portfolio. We also continue to strategically add market and national brands in order to meet the needs of our clients and fill white space. In addition to the brand piece, something else that we have talked about on prior calls that is part of our merchandise-focused transformation is investing in newness and making sure that we stand for style and trend. In the second quarter, sales from new styles were up roughly 50% year over year. So that investment that we are making into new product is also resonating extremely well with our clients. As you know, having the best assortment is critical for delivering RPAC and revenue growth, so we feel good about the work that we have done there and the way that it is helping to drive that performance across the board. David Aufderhaar: And then, Dana, on active clients, first, the results we saw this quarter were definitely in line with our expectations. As a reminder, we have seasonality in our active clients where Q2 and Q4 tend to be a little bit seasonally softer quarters for us around active client growth, and we are certainly encouraged by being able to continue to commit to seeing sequential client growth in Q3, and we are confident we remain on track to do that. In terms of size and shape, we are just returning to quarter-over-quarter growth, so we probably anticipate that Q3 client growth to be a little less than 1% quarter over quarter. But, again, we are encouraged with those results. Taking a step back, we continue to be encouraged with the overall trends that Matt called out earlier in his remarks around new client acquisition, reengaged clients, and client retention. That really goes back to that methodical approach that we have been talking about the last few quarters where we are focused on rebuilding a healthy client base, and that continues to be our focus. One of the metrics we have been calling out a lot lately is that 90-day LTV, and that was up 5% year over year. It was the tenth quarter in a row that we have seen year-over-year growth, confirming that we are bringing healthy clients into the mix. From a go-forward perspective, we will provide more detail on specific numbers around Q4 next quarter, but our focus continues to be around sustainable, profitable client growth, and using that methodical approach, we absolutely expect year-over-year comps to continue to improve. Our goal is to return to year-over-year active client growth in FY 2027, so we are definitely encouraged with the results we are seeing. Matt Baer: Thank you. Operator: Thank you very much for your question. Your next question comes from the line of Dylan Carden from William Blair. Dylan, your line is now open. Dylan Carden: Thanks. The comments around revenue per decelerating as you lap harder comparisons. I mean, you already kind of started to lap some of those comparisons. So can you give a sense of what is behind that, or is that just general caution? I have some follow-ups. David Aufderhaar: Yeah. Dylan, are you talking about the back half revenue comps? Dylan Carden: Correct. David Aufderhaar: I got it. Over the last couple of quarters, we have consistently guided to a deceleration in the back half of the year, and actually this back-half guide is an improvement from last quarter's guide. There are a couple of factors that I would call out. First is what we have been discussing the last couple of quarters: there are more challenging AOV comps in the back half of this year. We have had 10 consecutive quarters of AOV growth, and Q3 and Q4 last year had AOV growth of 10% and then 12%. Our guidance in the back half of this fiscal year still assumes healthy AOV growth, but it is probably in the 4% to 6% range. That is the first factor. The second, when you think about Q2 to Q3, we had a really strong holiday season compared to last year in Q2, and that does not necessarily play forward into future quarters. One data point there: December was our highest revenue comp in the quarter at around 12% year-over-year growth, and the holiday period also created a little bit of pull-forward activity from Q3 into Q2. Lastly, considering the macro environment and current trends in consumer sentiment and some of the volatility we are seeing, we think it is prudent to assume some headwinds in spending in the coming quarters. All of that is factored into our guide for the year, but again, we are encouraged with what we are seeing, and we are encouraged with the guide that we have been able to provide where we raised the low end of the full-year revenue guide. After significantly increasing our full-year guide last quarter, as a reminder, if you take the last two quarters and add them together, we raised the midpoint of our revenue guide by about $35 million over those two quarters and our EBITDA by almost $9 million. So we are encouraged with what we are seeing with those trends. Dylan Carden: Very good. Thank you. And then I am curious on the assortment, Matt, maybe. Do you have it where you want it now, particularly as you start thinking about maybe the women's business with that influx? Matt Baer: Yeah. Hey, Dylan. I appreciate the question. Ensuring that we have best-in-class assortment is a perpetual area of focus for us. We are always going to challenge ourselves to make sure that we have the right brands, the right mix, and the right breadth and depth within that, and we are always going to continue to drive an improvement there. We have talked about previously that the initial focus as part of our transformation was more heavily weighted towards our men's business. We feel really good about where we are there, and we also feel great about the progress that we have made across the board within our women's business. As I noted, our women's Fix business was up double digits from a revenue perspective last quarter, which is a strong signal in terms of the strength there, but also a recognition that we still have opportunity to improve the assortment even further, which gives us greater confidence in our ability to sustain the gains that we are seeing across the board. In addition to that, I would point back to something that was in the prepared remarks and that we have talked about previously around this $1 billion wallet share opportunity that we have with our existing client base across footwear, accessories, activewear, and athleisure. We are delivering outsized growth in those categories, but because of the relatively smaller base that they started at, we still have an exceptional opportunity to continue to lean in there. That is part of what enables us to increase engagement with clients, deliver success with larger Fixes, increase our wallet share, and ultimately continue to deliver these outsized market share gains that we have delivered. Dylan Carden: Excellent. And then just last one on the repeat customers that are some of the higher that you have seen. Is that proven out to be greater wallet share across use cases? Is that just spending more on existing categories? How should we think about how people are coming to you more and more? Matt Baer: If I understand the question correctly, Dylan, the work that we do is to ensure that we are able to serve clients across a variety of use cases. Whatever use case that a client comes to us for—for example, if they are starting a new job and we need to update their wardrobe with the appropriate workwear—through that client-stylist relationship, we are also able to navigate them to other use cases. It is why we were excited to share in the prepared remarks the success that we have seen in social occasion dressing and in night-outs. That is also why we are seeing outsized growth in activewear and athleisure as well. Because we have such great assortment across the board for all of these different use cases, that expansion of use cases with our clients continues to be one of the drivers that is helping propel the revenue growth. We are going to continue to lean into that, as well as continue to lean into head-to-toe outfitting across footwear and accessories. Operator: Thank you very much for your question. Your next question comes from the line of Jessica Tian from Bernstein. Jessica, your line is now open. Jessica Tian: Hi, thank you for taking my question and congrats on the quarter. I had a two-part question on the guide. First, on the H2 guide, it looks like the Q2 beat on adjusted EBITDA did not fully flow through to the full-year outlook. Should we read that primarily as conservatism on your part, or is there anything in the underlying margin trend that caused you to hold back some of that upside? And then second, on the Q3 active client sequential inflection, with new clients growing year over year for the second consecutive quarter and five-year low dormancies last quarter, can you talk about what is driving the expected sequential increase in the adds? Should we think about that improvement as coming more from reduced dormancy or is it coming more from new clients? Thank you. David Aufderhaar: Yes. Thanks, Jessica. On the EBITDA guide, I think we are encouraged with increasing the full-year guide. If you look at the full-year guide, I think we increased the low end of the guide by around $4 million and the high end of the guide by $2 million. So we definitely still feel like we have a healthy flow-through of EBITDA for the year. On the active clients and the sequential inflection, I think Matt might have called this out in his prepared remarks as well, but we are really seeing strength across all three of those cohorts that we tend to call out. New acquisition was up year over year for the second quarter in a row. Reengaging clients was up for the second quarter as well from a year-over-year perspective. Client retention is looking healthier than it has been in quite a long time. I think that is a big part of our focus, the client retention side, and it comes back to that full loop of making sure that we are bringing in those high-LTV clients that engage with the service. For our existing client base, all of the new client features and the improved assortment that Matt called out as well create stickier relationships from a client perspective. All three of those things are trending in the right direction, and that is why we have felt comfortable calling out that sequential improvement and the sequential quarter-over-quarter increase in Q3. Operator: Thank you very much for your question. We will now move on to the next question from David Bellinger from Mizuho. David, your line is now open. David Bellinger: Hey, everyone. Thank you. I want to ask on the Q3 guidance. Revenue growth up something above 2% at the midpoint. I think, if I am hearing you correctly, a lot of that deceleration from this quarter has to do with lapping positive revenue growth last year, some of this AOV uptick. Is there anything else that explains the deceleration? Any other context around the external pressures that you have started to factor into the guidance? You have got gas prices moving up. Is any of that starting to show up in the business? Can you just remind us how gas prices moving higher has historically affected Stitch Fix, Inc.? David Aufderhaar: Yeah, David. I think outside of what we called out on the AOV comps earlier—and that is certainly the bigger factor around the change quarter to quarter—the second callout was really the holiday period. That is a big part of the sequentials. We had a really strong holiday period this Q2. That is not necessarily something that plays forward. On the macro side, when you see the consumer sentiment where it is, the February jobs report, gas prices certainly going up—and gas prices for us, that is not discretionary spend. If someone is having to spend more on gas, that just means less in their wallet for discretionary spend like apparel. Certainly those things we have taken into account in that back-half guide. The other thing that you can see, because of the point in time where we are this year, you can back into a Q4 guide as well. We are encouraged that between Q3 and Q4, you still see an acceleration in revenue growth at the midpoint, where the midpoint in Q4 calculates to something closer to 4%. So we are encouraged with that as we close out the year. Matt Baer: David, what I will add as well is that, while not to minimize the impact of gas or challenges on the consumer in the broader macro environment, something that we have talked about previously is how we are uniquely situated to perform really well if and when the overall wallet for our clients shrinks. Our clients and stylists have a very deep and enduring relationship that allows them to have a real conversation around how budget might be shifting month to month, week to week, quarter to quarter. We have the breadth and depth of assortment across all different price points, so we can meet our clients where they are at any given time. We continue to see us perform relatively well in those periods where the consumer is potentially challenged. That is what gives us so much confidence that, wherever the overall market goes, we will continue to be a market share gainer. David Bellinger: Very helpful. My second question, I want to ask about GLP-1 usage. That seems to be a relatively new and positive customer driver. Can you help frame up any exposure to the business? Are these customers more sticky, more engaged? Can you simply get more of them as GLP-1 usage becomes increasingly popular? Thank you. Matt Baer: Yeah, David. I appreciate that question as well. Again, the uniqueness of our service and that superior level of service that we provide to each of our clients positions us extremely well to serve clients going through a body transformation. We have made it a real point of emphasis to market that capability of our service. We are out in market and have been for a while explaining to consumers that, for those on a GLP-1 medication, as their body transforms, they have the ability to work with a personal stylist to help ensure that they have everything that they need so that they can dress in clothing that fits at each stage of that weight loss journey that they are on. We have seen positive results in terms of how that is helping them improve their confidence and their ability to get dressed and outfit themselves on a daily basis. We have seen that also show up in our data as well. Client mentions of weight loss in their Fix request notes, as an example, have tripled over the last two years. It has actually surged 75% year over year just this past quarter. What that tells me is that the work that we have been doing to improve the segmentation and targeting within our marketing capabilities is working extremely well, and that the quality and superiority of our service is resonating with those clients. We will continue to lean in, and we will continue to serve that demographic at a high level. Operator: Thank you. There are no further questions at this time. I will now turn the call back to Matt Baer, CEO, for closing remarks. Matt Baer: Thanks. To wrap up, as I said, we are incredibly pleased with the strong results we delivered this quarter and the improved guidance that we shared for the back half of the year. We believe we are uniquely positioned to lead in this moment of AI innovation, and that is because of how seamlessly data science and AI are integrated into our business, how deeply and personally we know our clients, and how holistically we have integrated our expert stylists. Due to the significant improvements we have made to our experience and assortment through our transformation, we are capturing increased market share and outperforming the broader apparel retail market. We are also building a stronger client base, with seven consecutive quarters of improving year-over-year active client trends and, as we noted, the expected growth in active client count in the third quarter. We are confident the growth in our business will continue and that this growth will be sustainable. It is important to note that since the start of our transformation, we have improved our contribution margins more than 500 basis points, and we have maintained contribution margins above 30% for the last two years. I appreciate everyone's interest in our business and look forward to sharing future updates with each of you in the future. Operator: This concludes today's call. Thank you for attending, and you may now disconnect.
Operator: Greetings, and welcome to the Digimarc Corporation Fourth Quarter Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Charles Beck, Chief Financial Officer. Please go ahead. Charles Beck: Welcome, everyone, to our Q4 earnings call. I am Charles Beck, Digimarc Corporation's CFO, and I am joined today by Riley McCormack, Digimarc Corporation's CEO. On the call today Riley will provide a business update and I will discuss Q4 2025 financial results. We will be followed by a question-and-answer forum. We have posted our prepared remarks in the Investor Relations section of our website and will archive this webcast there. For those of you dialing in, this is a reminder that we are simulcasting the presentation we will walk through today. If you would like to follow along with the slides, I would encourage you to join our webcast as referenced in our earnings press release shared earlier today. Before we begin, let me remind everyone that today's discussion contains forward-looking statements that have risks and uncertainties. Please refer to our press release for more information on the specific risk factors that could cause actual results to differ materially. Riley will now provide a business update. Riley McCormack: Thank you, Charles, and hello, everyone. On this call, we will walk through Digimarc Corporation's Q4 performance, highlight our strategic progress across product innovation and commercial execution, share updates on our financial metrics such as ARR and free cash flow, and provide clarity on where we are focused in 2026. Since our last call, we have made significant progress in advancing adoption of our secure gift card solution. Achieved a critical milestone by signing our first commercial order, and are laying the rails for future orders by advancing initial rollout plans with eight North American retailers, including four of the largest. You signed IP licensing agreements with two of the world's largest and most respected technology companies, providing validation of the relevance and value of our inventions by two companies widely regarded as leaders in the new era of AI. We secured an upsell with an existing customer to expand their use of our anti-counterfeiting solution to allow for the authentication of tax stamps, a new application for our solution. We added two new logos in the digital space, one a global consumer goods company and the other an AI-powered content generation company, demonstrating a business model or vertical does not impact the need for digital trust and integrity solutions. And we signed a deal with another major CPG to enable their participation in end-to-end market demonstrations of Digimarc Corporation Recycle in Germany, the second European country running a scale validation of our solution's real-world ability to create higher quality and quantity of plastic recyclate. We achieved both positive non-GAAP net income touching on our financial highlights in Q4 and positive free cash flow in the quarter, two milestones Digimarc Corporation has not achieved in over twelve years. We ended the year with just under $13 million of cash and investments and no debt. And we expect to generate significant ARR growth in 2026. As a reminder, our three focus areas are retail loss prevention, product authentication, and digital trust and integrity, and we serve these markets with the seven solutions you see listed on this slide. In addition, and as demonstrated by the business highlights just discussed, we continue to selectively engage outside of our three focus areas when the opportunities represent low-distraction revenue and/or advance our positioning in longer-term strategic areas. Before we dive further into the details of our progress in the quarter, I want to remind investors of the focused strategy we communicated last year, as it provides important context for an issue that is front of mind for all investors but particularly those in the software space. Last year, we shared that in the wake of the relentless acceleration of AI models and agents, a vacuum of trust and authenticity is being created. Trust is fast becoming the only currency that matters, and we believe that the future will belong to companies that make that currency scalable. This is why we are building the trust layer for the modern world. A foundation that is needed more now than ever and is emerging as a significant opportunity we were created to lead. Today, as investors weigh the ever-increasing risk that AI's rapid advance poses to workflow and task automation software functionality, Digimarc Corporation's strategic focus positions us as one of the select software companies poised to benefit from this irreversible trend. As opposed to threatening our business, AI's advances instead are driving an increased need for solutions that make trust verifiable and authenticity scalable, the two things that all of our solutions are purposely built to do. Moreover, our competitive moats are not relying on the size of our code base and/or our number of prebuilt integrations. Instead, they are built upon our vast intellectual property, our multiple network effects, our ability to bridge the physical and digital domains, all of which remain unaffected by the advent of AI. As a result, we are well positioned amongst our software peers because we welcome an even greater AI disruption. Instead of compromising our opportunity set and/or eroding our competitive moats, this disruption is acting as a tailwind to our business by expanding the trust vacuum our solutions are built to fill. Our greatest near-term opportunities are in retail loss prevention and more specifically our secure gift card solution. On this front, we have made substantial progress towards gaining widespread adoption, aided by the industry's hyper-focus on finding an answer to the fraud that is creating an existential threat to their business. Results to date demonstrate the power of our solution: strong fraud reduction, improved checkout experience, and high scalability across printers, brands, and retailers, all without any adverse impact on sales. Due to the positive impact that we expect our secure gift card solution to have on our 2026 and beyond results, we wanted to provide investors with additional information and transparency to ensure they have a full understanding of the opportunity ahead. We have posted a gift card investor supplemental on our Investor Relations section, a hyperlink to which can be found on this slide. The U.S. serviceable addressable market for our solution is an estimated 3 billion to 5 billion cards annually. The global SAM is 7.5 billion to 17 billion cards annually. Commercial activity against that SAM is accelerating, supported by ecosystem partnerships, growing regulatory pressure for secure packaging, and large retailers preparing for initial rollouts in 2026. With key workstreams to enable large gift card printers now largely complete, our focus for 2026 is commencing large-scale rollouts of Digimarc Corporation-enabled firmware across retailers' front-of-store scanners, and catalyzing significant adoption of our solution by the gift card brands that are sold through those stores. As a reminder, our current go-to-market model is to monetize the gift card side of the network and provide our scanner detection software for free. One of the longest lead-time dependencies and the greatest source of historic timing risk has been the scanner vendors shipping generally available versions of their firmware running our latest software. This is a prerequisite for retailers to begin their in-store firmware refresh process, which itself is a requirement for the industry to capture the value from printers, brands, and program managers licensing our solution. Over the last few months, the three major scanner vendors have all publicly committed to timelines to complete this critical gatekeeping activity. More recently, based on evergreen commitments these vendors continue to make to their largest retail customers, we believe it is a matter of weeks until the most relevant scanner models from these industry-leading vendors have GA firmware that incorporates our latest software. With the expectation that this historically significant risk factor is weeks away from being predominantly behind us, we are advancing the rollout plans of Digimarc Corporation-enabled firmware with our initial cohort of retail partners and are excited with the information we can publicly share. We currently expect all Chinook's locations to be carrying Digimarc Corporation-secured gift cards this spring, and approximately 600 stores of a major U.S. retailer to be doing the same this summer, with plans to greatly expand that number for holiday 2026. In addition, we are in various stages of planning initial rollouts with an additional six retailers, including three of the largest in North America. When including the major U.S. retailer that I referenced a moment ago, our initial cohort of retailers includes a humbling list of widely respected industry leaders, including four of the largest retailers in North America. Turning now to gift card enablement, earlier in this quarter we closed our first secure gift card commercial order representing over $500,000 in ARR. This order is comprised of gift cards from six closed-loop and open-loop brands, and represents the first batch of gift cards that will appear at Schnoke stores in early spring and the approximately 600 stores of the major U.S. retailer in the summer. As we describe in greater detail in our gift card investor supplemental, we expect our pricing to increase over three stages based on our solution's adoption, maturity, and scale. Using our current Digimarc Corporation-subsidized pricing, this first order represents less than 0.1%, or 10 basis points, of our U.S. SAM described earlier. We are in conversations with additional open-loop and closed-loop brands comprising both third-party and first-party issuers supporting the retailer rollout planning already discussed. In all instances, our conversations with the brands are being aided by the retailers and the gift card networks, both of whom hold enormous power in this ecosystem. Recall that one of the most powerful aspects of this opportunity is that fraud is a zero-sum game. The belief that laggards will face an increasing percentage of an ever-increasing amount of fraud remains at the very front of ecosystem participants' minds. In our last few quarterly earnings presentations, we have shown a slide that described the gift card ecosystem at a very high level. This updated slide replaces that slide and is included in the gift card investor supplemental that I referenced earlier. It provides more detail of the ecosystem we are enabling as we lay the rails for what we expect to accomplish in 2026 and beyond. Turning now to product authentication. ARR from our anti-counterfeiting solution continues to grow, driven by customer upsells and new customer wins. Brands face rampant counterfeiting and IP theft, with bad actors advancing their technology and processes to replicate packaging and security features with alarming accuracy, something made ever easier with the advancement of AI. Decentralized supply chains and omnichannel sales make counterfeit detection more difficult, forcing brands to be reactive against emerging threats. Many security measures require trained inspectors and specialized tools, limiting accessibility, increasing costs, and reducing scalability. Digimarc Corporation's secure and scalable covert and connected solution provides superior results when compared to competing analog solutions, such as tags, codes, inks, or labels. We closed multiple upsell deals with existing customers for our anti-counterfeiting solution, reflecting both increased contract value and the expansion of our solution to new geographies and new brands. As we have repeatedly stated, when we solve our customers' most challenging problems, we expect to be an upsell and cross-sell company. We closed an upsell with an existing customer to expand their use of our anti-counterfeiting solution to allow for the authentication of tax stamps, representing a new application of our solution. We also secured an upsell with one of the world's leading pharmaceutical companies as they expand our solution across more of their products around the world. A prospect who originally contacted us for the use of our anti-counterfeiting solution is now progressing in our digital pipeline, something that happened almost immediately after we told them about our offering in this space. This shows the synergistic nature of our authentication focus and related solution suite, as well as the greenfield nature of our work in the digital trust and integrity space. Piracy of their digital assets was a problem this organization had previously thought unsolvable, until they engaged with us. Looking ahead, we are soon to enter print trials for the application of our solution to cigarette tipping paper, bringing our solution down to the stick level, where a large percentage of the counterfeiting occurs. There are an estimated 5,000,000,000,000 cigarettes sold each year, representing a sizable unit total addressable market, assuming our solution meets the market's needs. Turning now to digital trust and integrity. We exceeded our conservative 2025 ARR assumptions in this space and look to accelerate our traction throughout 2026. Problems of trust and integrity in the digital domain existed prior to the advent of AI, but AI has created new ones while making prior ones worse and/or harder to solve. The work of C2PA has created wide awareness that our technology addresses many of these problems, and our history, our credibility, our expertise, our experience, and our first to market with and co-leadership of the digital watermarking component of the C2PA standard are all coalescing to ensure that we are well positioned to serve this ever-growing wave. I want to use this call to provide more background information on one of our four in this area: leak detection, and specifically the version of our solution that provides leak detection for web content. We featured this solution in a recent press release case study with a Fortune 100 global technology company. Our leak detection for web content solution addresses a significant gap in the data loss prevention space: low-tech, image-based leaks of internal company information. Risk assessments sometimes refer to this as a mobile picture path, and it has long remained an identified risk without a risk reduction method. These leaks happen when an employee, contractor, or people working at trusted third parties like suppliers or outsourcing firms use their phones to take pictures of screens showing sensitive and confidential information. These images can be shared externally on social media, news sites, online forums, and more, causing harm to the owners of that sensitive and confidential information. Companies like Coca-Cola, HP, TD Bank, and even CrowdStrike have made the news in recent months due to image-based leaks exposing everything from dashboards, IT security details, customer data, product designs and images, and factory layouts. These stories reveal how low-tech leaks can bypass the best DLP stacks, resulting in financial losses, lost competitive advantage, and legal and reputational harm. While photo-based leaks are nearly impossible to prevent, especially when people work remotely, Digimarc Corporation enables companies to identify leakers quickly so they can take action, prevent future leaks, and gain insights to build a more trustworthy workforce and extended ecosystem. Our leak detection for web content solution adds a covert security layer to on-screen content, without impacting the user experience or interfering with day-to-day work activity. When sensitive information is captured via screenshot or photo, Digimarc Corporation's covert resilient security layer is captured along with it. Then, when an image is discovered online, our customers simply upload it to the Illuminate platform to help identify the source of the leak—fast, effective, and scalable across global workforces and ecosystems. Our other version of leak detection provides leak detection for media assets, and in Q4, we signed a deal with the global consumer goods company to help them address unauthorized sharing of sensitive digital content by trusted channels under embargo. Our customer has already received tangible benefits from our solution's real-world efficacy, and we expect to grow our deal with them over time. We also signed an internal compliance deal with an AI-powered content generation company interested in supporting attribution, auditability, and responsible commercialization of their user-generated content as rights holders' scrutiny of GenAI intensifies. While we are focused on our authentication use cases, we continue to support identification use cases that could drive future growth. We are advancing our position in these longer-term strategic areas and are confident in our ability to win when the time is right to pursue them. An example of this is recycling, where we are progressing well in both the Belgium and Germany end-to-end market demonstrations of our solution's ability to impact real-world change. Digimarc Corporation-enabled product volume is expected to reach critical mass in sorting centers by midyear in Belgium, and by Q3 in Germany. We believe these live cradle-to-rebirth activities will result in the production of a new fraction of PCR feedstock that is not possible using current sorting technologies. This would provide tangible proof of our solution's ability to, among other things, create new end markets for recycled plastic, something that is critical for the industry's ability to comply with the sunrise of the EU's Packaging and Packaging Waste Regulation. We also closed an upsell deal with one of our engaged customers in Q4, and have multiple opportunities in our pipeline across both our Automate and Engage solutions. I will now turn the call over to Charles to discuss our financial results. Charles Beck: Thank you, Riley. Ending ARR for Q4 was $13.7 million compared to $20 million for Q4 last year. The decrease reflects the loss of two large customer contracts outside of our focus areas, the $3,500,000 DRS contract in Q2 and the $3.1 million retailer contract that I stated on the last call would lapse in Q4. Excluding these two items, ARR grew $400,000 year over year. That growth, however, was largely muted by higher other customer churn and choosing to be strategically price aggressive on solutions outside of our focus areas. As I have stated previously, we expected higher churn as we sharpened our go-to-market focus. For 2026, we expect to deliver significant ARR growth, with contributions from all focus areas but the largest single driver being our secured gift card solution. On that front, our goal is to progress our targeted retailers and brands toward meaningful adoption for holiday 2026, which we would expect orders in summer and early fall. We also expect there to be continued ramp for the spring 2027 refresh cycle and beyond, which we would expect orders in late fall and early winter. Time is of the essence as we work to maximize holiday orders, and we are singularly focused on hitting the necessary deadlines to do exactly that. As we begin to penetrate the large opportunity ahead of us in the gift card space, we will be transparent with the percentage of our ARR generated from gift card orders. At least initially, we do not believe these deals will have our typical annual contract terms, but will instead have a shorter duration. As I alluded to earlier, the gift card market is characterized by the presence of two recurring orders that occur at least two times a year, if not more frequently, which provides us some ability to project the next twelve months of revenue based on incoming orders. This accounting for a shorter duration will likely understate our true run-rate demand, especially as we are increasing our penetration of retail stores, brands, and the percentage of SKUs issued by those brands. Total revenue for Q4 was $8.9 million, an increase of $200,000, or 3%, from $8.7 million in Q4 last year. Subscription revenue, which accounted for 60% of total revenue for the quarter, increased 6% from $5.0 million to $5.3 million. The increase reflects $1.4 million of license fees paid during the quarter from the two IP licensing deals that Riley referenced earlier. The increase from these deals, as well as growth in other areas, was partially offset by the impact of the two previously mentioned customer contracts that ended during 2025. While we do not talk about IP licensing often, it is a normal and recurring part of our business, although that revenue can be lumpy. For background, we have generated well over $100 million of IP license revenue over our company's history. The reason we are highlighting the deals signed in Q4 is that, in addition to their size, they were with two technology market leaders and highlight the value of our IP. As a reminder, we do not include IP licensing deals in ARR. Service revenue decreased 2% from a rounded down $3.6 million to a rounded up $3.6 million, reflecting slightly lower commercial service revenue. Subscription gross profit margin was 90% for the quarter, five points higher than Q4 last year, largely reflecting lower subscription platform costs. Our platform costs are now $200,000 lower per quarter than they were at the beginning of 2025. We expect further reductions in these costs in 2026 as we continue to focus on ways to optimize our platform. Service gross profit margin was 57% for the quarter, down two points from 59% in Q4 last year. The decrease was due to a more favorable mix of revenue and cost last year. Operating expenses were $10,000,000 for the quarter, down $4,400,000, or 31%, from $14,400,000 in Q4 last year. Important to note, we incurred $500,000 of costs during the quarter directly related to the two IP license deals previously mentioned. Otherwise, operating expense would have been down $4.9 million year over year. The large reduction in expenses reflects lower headcount costs due to the reorganization in 2025, as well as lower non-headcount cash costs from our ongoing corporate streamlining efforts. While we will continue to be diligent pursuing ways to operate more efficiently and effectively to ensure that we are maximizing the return of every dollar we spend, as mentioned on the last call, we are increasing our overall investment in the business to support growth ahead. Non-GAAP operating expenses, which exclude non-cash and non-recurring items, were $6,500,000 for the quarter, down $5,400,000, or 45%, from $11,900,000 in Q4 last year. Excluding the aforementioned $500,000 of IP license costs, non-GAAP operating expenses would have been $5.8 million lower, exceeding the target we set out on our Q4 earnings call a year ago. Again, the decrease is mostly due to the impact of the reorganization and our ongoing non-headcount streamlining efforts. Net loss per diluted share for the quarter was $0.19 versus $0.40 in Q4 last year. Non-GAAP net income per diluted share for the quarter was $0.05 versus a non-GAAP net loss of $0.22 in Q4 last year. Regarding cash flow, we ended the quarter with $12,900,000 in cash and short-term investments with no debt. We generated positive free cash flow of $700,000 in the quarter, compared to negative free cash flow of $4,400,000 in Q4 last year, an improvement of $5,100,000. That improvement was despite a negative change in working capital of $1,000,000 year over year, largely due to the timing of customer receipts, otherwise the improvement would have been even greater. For Q1, we expect a free cash flow loss of $1 million to $2 million. Included in this number are some additional headcount investments I mentioned earlier that we are making to accelerate our growth, as well as approximately $500,000 of year-end related public company compliance costs that we incur in Q1 every year. Also included in this number is approximately $1,000,000 in expenses we expect to pay in Q1 largely related to one-time tax and legal costs associated with implementing a new corporate structure. We expect a large cash-on-cash return from this investment, as the new corporate structure will allow us to realize substantial ongoing cash savings, primarily through implementing an alternative long-term employee equity incentive program favored by conscious entities such as REITs. In addition to these substantial ongoing cash savings, we believe this new program will maximize shareholder value in three other ways when compared to the current program: by reducing future dilution; helping us attract and retain the key talent needed to drive and support our expected growth; and directly tying the realization of all equity-based compensation issued under this new program, including time-based awards, to shareholder value creation. One last point to note regarding this new structure: it will require the issuance of a new CUSIP number, something a few investors have historically expressed a desire for us to do. The details of our new corporate structure, including a robust Q&A section, will be described in greater detail in our S-4 filing due out tomorrow, which incorporates our annual proxy statement. For further discussion of our financial results and risks and prospects for our business, please see our Form 10-K that will be filed with the SEC. I will now turn the call back over to Riley for final remarks. Riley McCormack: Thank you, Charles. In the wake of the relentless acceleration of AI models and agents, a vacuum of trust and authenticity is being created. Trust is fast becoming the only currency that matters; the future will belong to companies that make that currency scalable. We believe Digimarc Corporation is ideally positioned to lead that charge. We are focused on delivering a future where humans and intelligent systems alike can verify what is real, protect what matters, and move forward with confidence. We are focused on filling the ever-expanding vacuum by positioning ourselves to deliver trust in every interaction spanning both the physical and digital worlds. We are building the trust layer for the modern world, a foundation that is needed more now than ever and is emerging as a significant opportunity we were created to lead. We are capitalizing on the convergence of key trends driving increased demand for our solutions, positioning ourselves as one of the select software companies to benefit from, not be a casualty of, the relentless advance of AI. We are advancing our secure gift card solution by aligning key industry partners as we progress toward widespread adoption of our solution. We signed our first commercial order and are advancing initial rollout plans with eight retailers, including four of the largest in North America. ARR from our anti-counterfeiting solution continues to grow, driven by customer upsells and new customer wins. We also continue to grow the universe of form factors to which our authentication solution is applicable, securing an upsell for tax stamps and entering print trials for tipping paper, which continues to grow our TAM. We believe our decision to prioritize the long-term opportunity in digital trust and integrity is paying off. We exceeded our conservative 2025 ARR assumptions in the space and look to accelerate our traction through 2026 as early results show the near-universal need for solutions in this greenfield area. We continue to be well positioned to address very large problems outside of our current focus areas when the markets are ripe. We signed IP licensing agreements with two of the world's largest and most respected technology companies, providing validation of the relevance and value of our inventions by two companies widely regarded as leaders in the new era of AI. We signed a deal with a major CPG to enable the participation in end-to-end market demonstrations of Digimarc Corporation Recycle in Germany, the second European country running a scaled validation of our solution's real-world impact. We achieved both positive non-GAAP net income and positive free cash flow in Q4 2025, two milestones Digimarc Corporation has not achieved in over twelve years. We expect to generate significant ARR growth in 2026. We will now open for questions. Paul will now open the call for questions. Operator: Hello, Paul? Paul, can you hear us? Charles Beck: Apologies. There may be some technical difficulties here. We apologize, but it appears that there may be an issue on the tech side with our conference call service here. Riley McCormack: So we are unable to reach anybody at the call center service. We think their service is down. We apologize for this technical difficulty. Obviously, any investors who want to reach out to Charles and me, please do so. Have a great rest of your day. Thanks.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Fossil Group, Inc. Fourth Quarter and Full Year 2025 Earnings Call. At this time, all parties are in listen-only mode. This conference call is being recorded and may not be reproduced in whole or in part without written permission from the company. I will now turn the call over to Christine Greany of the Blueshirt Group to begin. Christine Greany: Hello, everyone, and thank you for joining us. With me on the call today are Franco Fogliato, Chief Executive Officer, and Randy Greben, Chief Financial Officer. Before we begin, I would like to remind you that information made available during this conference call contains forward-looking information, and actual results could differ materially from those discussed during this call. Fossil Group, Inc.’s policy on forward-looking statements and additional information concerning a number of factors that could cause actual results to differ materially from such statements is readily available in the company’s Form 8-K, 10-Q, and 10-K reports filed with the SEC. In addition, Fossil Group, Inc. assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. During today’s call, we will refer to constant currency results as well as certain non-GAAP financial measures. Please note that you can find a reconciliation of actual results to constant currency results and other information regarding non-GAAP measures discussed on this call in Fossil Group, Inc.’s earnings release, which was filed today on Form 8-K and is available in the Investors section on fossilgroup.com. I will now turn the call over to Franco to begin. Franco Fogliato: Hello, everyone, and thank you for joining us. 2025 was a transformative year for the company, defined by operational excellence and financial performance that exceeded our expectations. We took bold steps to advance our turnaround plan, delivering strong execution against the three pillars we laid out just one year ago. Those include refocusing on our core, rightsizing our cost structure, and strengthening our balance sheet. We built a brand-led, consumer-focused operating model, assembled an exceptional management team, and established a culture of accountability. We recently appointed a new Chief People Officer, who will be a valuable part of our efforts to continue strengthening our organizational capabilities, culture, and customer-first mindset. I am incredibly proud of our teams and want to thank everyone across the organization for their energy, passion, and hard work, and for upholding our commitment to keep the consumer at the center of everything we do. Our turnaround efforts gained traction quickly, enabling us to end the year ahead of our initial plan. We delivered full-year performance above the updated guidance we provided halfway through the year. Net sales totaled $1.0 billion, gross margin expanded 380 basis points to 55.9%, and we reduced SG&A by over $100,000,000. This drove a positive adjusted operating income of $11,000,000, a year-over-year improvement of $48,000,000. Now I will turn to the operating highlights and key accomplishments of 2025. First and foremost, we created a positive brand platform for the future. We accomplished this by improving the customer journey and delivering a robust pipeline of product innovation, all supported by powerful heritage brand storytelling. At the same time, we successfully established a full-price selling model by radically transforming our promotional cadence across channels. This enabled us to return the business to healthy gross margin in the mid-50s and improve the profitability in both our wholesale and direct-to-consumer channels. Importantly, this has strengthened our wholesale partner relationships, creating a powerful flywheel effect that is delivering benefits across all channels. Next, we reenergized our core licensed brands Michael Kors, Emporio Armani, Armani Exchange, and Diesel. Most notably, strategic investment in point of sale and a renewed focus on specialty watch retail enabled us to improve our in-store presentation and performance in the wholesale channel. We also drove momentum in our traditional watch business by prioritizing our most scalable markets in the wholesale channel, including the U.S. and India. This resulted in wholesale traditional watch growth in our core brands of 2% globally for the full year in 2025. At the same time, we took clear action to rightsize our cost structure and instituted a culture of strict cost control. Lastly, and as importantly, we transformed our balance sheet. We now have the runway and flexibility to support the next phase of our turnaround, build a sustainable, profitable business model, and deliver long-term value creation. We have entered 2026 well positioned to leverage our foundational assets, including our 40-plus-year heritage, iconic brand, innovative design, global reach, and talented teams. Also notable, the industry is experiencing strong momentum across markets and demographics. At the same time, our comeback is capturing increasing attention from consumers, partners, and the press. Just last month, I was at the Inhorgenta watch and jewelry show in Munich, where many of our brands were center stage. In 2026, we will be making more bold moves on our journey to reinvent Fossil Group, Inc. and lead the industry. It is an exciting time for the company, as we continue to foster a collaborative, creative, and energetic culture, accountability, and a stronger commitment to win. We are turning the page to a new chapter and evolving our three strategic pillars as follows: returning to profitable growth, optimizing our operating model, and building shareholder value. Over the next three years, this evolution of our turnaround is expected to generate a return to top-line growth, high single-digit adjusted operating margin, and positive free cash flow. More on our financial outlook shortly. But first, let us talk about the initiatives we will be executing against to further advance our turnaround. Within our first pillar, returning to profitable growth, our teams will be focusing on defined initiatives across the positive brand platform to fuel innovation, deepen consumer engagement, grow the traditional watch business, and reinvigorate our jewelry and leather categories. In 2026, we will be fueling innovation through design, technology, and storytelling. This includes reigniting key icons, continuing to delight our customers with culturally relevant collaborations, reviving one of Fossil’s most sought-after Y2K innovations, and introducing a selective group of premium products. Let me take you through the roadmap. Starting with our watch icons, which make up a significant portion of our business, we will be innovating and expanding upon key collections including our Everett, Arlo, Machine, and Raquel platforms and our watch rings. Additionally, we will be doubling down on our Minis collection across all of our top women’s platforms. Following the success of 2025 collaborations such as Fantastic Four, Galactus, Minecraft, Xiaobai, and Superman, we will continue activating culturally relevant partnerships with both new and returning properties in 2026. These collaborations deliver highly engaged audiences, customer acquisition at scale, and meaningful earned media. Importantly, as we anniversary successful 2025 partnerships, we are focusing on converting collaboration shoppers into long-term Fossil customers, improving retention and lifetime value. One of our most significant introductions this year is the return of Fossil BigTick, a bold animated movement that combines analog craft with digital innovation. Originally introduced in the late 1990s, BigTick is one of Fossil’s most recognizable and emotionally resonant designs. The designs are geared towards the millennial watch consumer nostalgic for Y2K, Gen Z consumers seeking an analog-forward accessory, and the male watch enthusiast looking for a big, bold watch to match his style. Earlier this month, we launched a nostalgic, limited-edition Y2K capsule, quickly followed by a reinvention of BigTick Machine. Initial response from consumers and acclaim from the press have been tremendous thus far. Our BigTick marketing campaign reflects the evolution of our creative strategy, featuring a dynamic animated concept built around the idea that everything BigTick touches becomes larger than life. Its bold storytelling reinforces product distinctiveness while driving momentum in real events. We have a lot more exciting BigTick innovation coming and anticipate the momentum will continue to build as we roll out additional collections throughout the year. Another significant innovation coming later this year is the introduction of Signature, Fossil’s first premium platform in more than a decade. Rooted in craftsmanship and timeless design, the collection represents an important evolution for the brand and is designed to resonate with watch enthusiasts and collectors alike. Signature will also introduce a new level of technical sophistication and assembly that reflects Fossil’s continued commitment to quality and innovation. We look forward to sharing more details in the coming quarters. While we are first and foremost a watchmaker, our jewelry and leather offerings expand our expression as an accessories brand. Our strategy for this category focuses on staying true to our brand DNA of quality, value, and timelessness. We are positioning the business with modern designs, including jewelry introductions inspired by our most important watch collections, and increased personalization through engravable offerings. We will be supporting all of this product innovation with a focused, high-impact marketing roadmap. In 2025, we concentrated our investments in priority markets, and the results validated that disciplined, brand-led investment drives stronger engagement and return. This year, we will continue scaling this approach, deploying our resources to opportunities where we can build further brand equity and accelerate growth. Our 2026 storytelling is designed to celebrate Fossil heritage, reinforce our quality and design credentials, and elevate cultural relevance. A great example of this is our exciting partnership with brand ambassador Nick Jonas. Nick has proven to be an authentic and highly engaged partner, currently anchoring campaigns across Nick Jonas Collection, Machine, and BigTick. Moving now to our omnichannel initiatives, which are designed to modernize our brand expression in wholesale, improve our e-commerce business, and optimize our Fossil store portfolio. In the wholesale channel, we are focusing on our top customers in must-win markets, including the U.S., France, Germany, and India. For example, in the U.S., the strength of the Fossil brand, our robust product pipeline, and engaging campaigns are driving growth with key partners. Additionally, we are expanding distribution to specialty and energy retailers that can help build brand awareness and create excitement among the younger demographic. In the e-commerce channel, we have reshaped our business through two major actions over the past eighteen months. First, we dramatically reduced our discount posture by more than 50%, establishing a full-price selling model. Next, we implemented a comprehensive redesign of the Fossil site, featuring richer storytelling and a more seamless customer journey. The result is a smaller but more profitable sales channel with higher AUR across the entire marketplace. As we pursue long-term growth, we will continue to deliver consistent price and promotion while investing in personalization, inspiration, and more cohesive brand representation to drive customer engagement and strengthen brand perception. In the retail channel, we are optimizing our store portfolio and deploying our Store of the Future strategy in the U.S. and EMEA. We are very pleased with the initial results from our Store of the Future concept, which blends lifestyle selling, data-led decision-making, and a purpose-driven strategy. Importantly, it is shifting our selling culture to proactive clienteling and outreach, personalized service, and community focus. This has resulted in improvement across key performance indicators, including AUR and conversion. Turning to our core licensed brands, we are focusing on initiatives to return the brands to sustained sales growth. We believe there is a significant opportunity to unlock potential in Michael Kors jewelry and men’s watches. Our strategy for Kors jewelry is centered on modern, wearable design while leaning into one of our strongest assets, the MK logo. We have recalibrated our pricing architecture to improve accessibility and enhance our competitive position. In men’s watches, we are returning to proven Michael Kors design codes and investing behind hero platforms that have historically driven scale. We will do this by focusing on bold, confident styling, recognizable attributes, and strong perceived value within key price tiers. For the Emporio Armani brand, we are pursuing opportunities in select markets outside of China, where there is strong local demand for premium products and additional runway in the wholesale channel to broaden assortment and leverage long-standing partnerships. We are also continuing to drive the Armani Exchange brand, which is experiencing strong momentum across major markets, including the U.S. and India. Key initiatives include elevating our retail presence, expanding distribution, building on the success of our icons, and delivering localized product offerings. Turning now to the final area of focus under our growth pillar, we see a significant opportunity in India, which has been the fastest-growing large economy in the world for the past four years. It is an important strategic market where our brands have category leadership, strong momentum, and secular tailwinds. I was in India last month with other members of our executive team as part of our focus on unlocking the full potential of this geography, where we are experiencing growth across all channels and brands. In 2026, we will be building further brand heat across our portfolio by broadening our assortment, entering premium price points, and introducing limited editions, all supported by dynamic storytelling. We will also be increasing our footprint to expand distribution, opening additional wholesale doors with both new and existing partners, and opening new Fossil retail stores. We have a highly seasoned team in India who is committed to driving continued growth and rapidly scaling the business. Moving now to our second turnaround pillar, optimizing our operating model. We made significant progress toward rightsizing our expense structure in 2025. With this improved baseline and an emphasis on stricter cost control, we are well positioned to continue to drive optimization across the organization. We will be focused on initiatives to strengthen our omnichannel strategy and go-to-market execution while prioritizing operational investment and infrastructure improvements. Key areas of focus include sharpening our go-to-market execution to elevate point-of-sale engagement, reducing complexity and improving business agility, enhancing our digital and technology infrastructure, delivering best-in-class supply chain performance, and prioritizing high-impact projects and key performance indicators. I will now turn to our third and final pillar, building shareholder value. The rapid progress we made in year one of the turnaround, our accelerating profit profile, and our strengthening balance sheet give us the conditions to create lasting value for all of our stakeholders. We expect to continue improving profitability, affording us the optionality to strategically invest for growth and value creation. Building on the strong execution and financial performance we delivered in 2025, we are pleased to be raising the financial targets we introduced one year ago. As a reminder, we previously communicated a 2027 sales target of at least $800,000,000. We now expect to surpass that benchmark one year earlier than planned. In 2026, we expect sales in the range of $945,000,000 to $965,000,000, highlighted by a return to top-line growth in the fourth quarter. Additionally, we expect positive adjusted operating margin of 3% to 5% and breakeven free cash flow. Our commitment to operational excellence and returning the business to profitable growth is grounded in a focus on disciplined accountability and performance. I am grateful to our teams, partners, and shareholders for their continuing support of Fossil Group, Inc. and look forward to reporting to you on our progress throughout the year. Before I turn the call to Randy, I would like to acknowledge the current geopolitical climate. As a global company, we are disheartened by the events occurring in the Middle East, and we are closely monitoring the safety and well-being of our employees and partners in the region. Now I will turn the call to Randy to discuss the financials. Randy Greben: Thank you, Franco. 2025 was a year of tremendous progress on multiple fronts. I am pleased that we gained strong traction on our turnaround initiatives, delivered financial results ahead of our expectations, and transformed our balance sheet. Our 2025 performance reflects the strength of our brands, strategies, and teams, and demonstrates that we have the right building blocks in place to drive long-term growth and profitability. Now I will turn to the specifics of our fourth quarter and full-year performance. Net sales for Q4 totaled $274,000,000, reflecting a decline of 20%, including four points of impact from store closures. For the full year 2025, net sales were $1,000,000,000, including 330 basis points of impact from store closures and 80 basis points of impact from the exit of connected watches. Fourth quarter gross margin came in at 57.4%. That is up 350 basis points from last year and reflects the ongoing strength of product margins as well as our focus on full-price selling, which allowed us to drive structurally higher margins over the past 12 to 18 months. Indeed, full-year gross margin for 2025 was 55.9%, representing 380 basis points of expansion versus 2024, even with the continued and compounded headwind of minimum royalty guarantee shortfalls, which, as previously shared, are expected to be materially abated in full-year 2026. In 2025, we executed against several initiatives that drove a meaningful improvement in gross margin. Specifically, we substantially lowered our discount rate, strengthened our supply chain, negotiated better terms with key suppliers, retooled our open-to-buy processes, and implemented targeted price increases. I am pleased to note that all of these actions not only improved our underlying gross margin profile but also enabled us to largely mitigate tariff headwinds throughout the year. The fact that we were able to absorb the impact of tariffs in 2025 while delivering a return to healthy gross margins demonstrates the agility of our supply chain and is a testament to our teams around the globe. Looking at 2026, we expect to continue to offset the current rate structure through our mitigation strategies and have not embedded material rate changes or any tariff refunds into our forward-looking guidance. Moving now to operating expenses. Strict cost control enabled us to lower SG&A expenses by 16% versus prior year. The improvement is attributable to 49 fewer stores in operation versus a year ago, as well as lower compensation and administrative expenses. During Q4, we closed six additional stores, ending the year with 199 locations globally. All 49 closures in 2025 occurred at natural lease expiration with minimal closing costs. Given the improving performance of our fleet, we expect to reduce our number of store closures down to approximately 15 locations this year. As we continue to focus on improving our cost structure, our teams are acting with financial discipline and rigor. I am pleased to note that on a full-year basis, we slightly over-delivered on our full-year SG&A savings target of $100,000,000. Zooming out, the successful delivery of 2025’s SG&A savings target was a key follow-on to work that began in 2023. In total, the company’s SG&A levels have been rightsized by more than $250,000,000 over the last 36 months. And while the lion’s share of this work is behind us, we are never done. As Franco mentioned, in 2026, we expect to further optimize our operating model by capturing efficiencies throughout the organization. We will be directing resources toward go-to-market execution, operational investments, and infrastructure improvements. Looking now at our bottom-line performance in Q4, strong gross margins north of 57% and exceptional expense management translated to a profitable quarter, with adjusted operating income totaling $11,000,000. We also achieved positive adjusted operating income for the full year, also at $11,000,000. This is notable after two consecutive years of losses on the bottom line and is another very tangible demonstration of our turnaround taking root. Turning to the balance sheet. We ended the year with $96,000,000 in cash and cash equivalents, $67,000,000 of availability under our asset-based revolver, and no utilization of our ATM program. Year-end inventory was $152,000,000, down 15% from last year, consistent with sales and in line with our expectations. It is worth noting that we have brought inventory levels down by more than $200,000,000 over the last three years. The reduction in inventory, particularly in the last year, has not only seen us become more appropriately balanced in terms of weeks of supply and churn, but, as importantly, it occurred as we rebalanced our overall inventory position to include far more full-margin products. Strengthening the balance sheet was a key pillar under the first phase of our turnaround, and we delivered on that in spades. We are pleased to have entered 2026 in a healthy position with the right combination of liquidity and debt maturity horizon. Now let us take a look at our outlook for 2026 and beyond. We are incredibly proud of the work our teams are doing and believe we are poised for another year of strong execution as we embark on the next evolution of our turnaround plan that Franco just laid out. Provided there is no significant disruption in the macroeconomic environment, we expect our turnaround pillars to deliver the following outcomes for full-year 2026: worldwide net sales of $945,000,000 to $965,000,000, including approximately $21,000,000 of impact related to retail store closures. That is down 4% to 6% and represents a significant improvement in the rate of decline versus last year. For added context, the impact of store closures and the extra week in 2025 is worth about 360 basis points. And it is worth reiterating the point that Franco made a few minutes ago. Based on the guidance we are providing today, we now see 2026 as the sales low point under our turnaround, one year earlier than previously planned, and materially higher than the approximately $800,000,000 in revenue we indicated for 2027 one year ago. As we look at the cadence of the year, we anticipate that 2026 will be second-half weighted, with year-over-year declines slowing through the year and an expected return to top-line growth in the fourth quarter. This is in line with seasonal trends but, more importantly, reflects the compounding benefits of our turnaround initiatives. This includes the lapping of last year’s store closures and selected further closures this year, the sunsetting of some noncore small licensed brands, and our watchstations.com website, and the comping of last year’s inventory reset as we shifted our focus to full-price selling. Importantly, we anticipate that gross margins will remain healthy in the mid to upper 50s. Further, we expect that the intra-quarter volatility we have experienced, particularly in Q3 of previous years, should be largely abated with the benefit of our minimum guaranteed royalty relief. Additionally, expense control is expected to drive another year of meaningful SG&A reduction and enable us to achieve SG&A leverage. While we will be investing in marketing to support the robust pipeline of innovation that Franco spoke about, total marketing dollars are expected to be down slightly versus 2025. We are positioned to achieve improved profitability in 2026 and expect adjusted operating margins to be in the range of 3% to 5% on a full-year basis. Additionally, our focus on improving cash conversion is expected to result in breakeven free cash flow as we drive the business to be cash-generating in 2027 and beyond. With innovative product offerings, favorable watch industry dynamics, and talented teams, we are looking forward to building upon the foundation and track record we established in year one of our turnaround. To that end, we are rolling forward our previously communicated three-year outlook by one year. In 2028, we expect our turnaround plan to be driving mid-single-digit sales growth, high single-digit adjusted operating margins, and positive free cash flow. Looking further ahead, we believe our brand-led, consumer-focused, and increasingly optimized operating model will deliver benefits well into the future. Now I will ask the operator to open the call to Q&A. We will now open for questions. Operator: We will now begin the question and answer session. Our first question comes from the line of Tom Forte with Maxim Group. Tom, please go ahead. Tom Forte: Great, thanks. Franco and Randy, congrats on the strong quarter and year. I have three questions. I will go one at a time. I apologize to the extent that you may have commented on these during the prepared remarks. Question number one, what were the drivers of gross margin in the quarter, and what gives you confidence the improvements are sustainable? Franco Fogliato: Hi, Tom. Thank you. We are excited. Look, we made significant progress. I think you remember, we always said that the fourth quarter last year was the beginning of the new strategy toward the end of the fourth quarter. We wanted to build a smaller company, more profitable. We wanted to change the model from very promotional into a full-price selling model. And we are continuing with this strategy. We are very excited. I am thankful for the work the teams have done globally to drive this strategy, and the strategy is paying very much shareholder value. Not only have we seen a better gross margin with our DTC, but we have seen incredible AUR increases across the marketplace as we become less promotional through the marketplace. We are excited. We are a product and marketing company. We built greater relationships with our partners. And I have just got back from the trade show, as I mentioned in my earlier remarks. There is great momentum. We have seen customers that we have not done business with for years. They are coming back to us now because we are leading by example. So very, very encouraged. Randy Greben: Thank you, Franco. And, Tom, wonderful to hear from you. The only thing that I would add is, while Franco likes to say 2025 is in the past and we are now living in 2026, if you look at 2025, our gross margin performance was actually quite sustainable and consistent, other than the dip that we took in the third quarter, which, as we have spoken about, was related to royalty shortfalls. As we have successfully renegotiated our minimum guarantees for 2026, that third-quarter divot should not be in place, and you should see that continued sustained performance. So, really, the past is a very positive indication. We have already locked in the improvement that we were seeking for 2026. Tom Forte: Alright, wonderful, and I appreciate both of you answering all my questions. Alright, so question number two. It looks like you are guiding to an inflection point in sales and a return to growth in 2026. What gives you confidence you will be able to achieve that goal? Franco Fogliato: Yeah, look. The last eighteen months have been a transformation of the company. We are in the middle of the journey. We see the light at the end of the tunnel, a smaller company returning to growth. And we are excited about the opportunities. I keep saying I am excited about what we have done, but that is history. I am excited about what we are delivering to the market now in terms of innovation. But I guarantee you, we are more excited about what is coming next. You know, the pipeline takes eighteen months to get there. We are so excited about the opportunities. We think as we are driving a smaller DTC, we have seen a very good return from our wholesale channel, beyond our expectations in 2025. Consumers are very resilient. They love our portfolio of brands. Customers have a long-term relationship with the company. We are driving the company to get back into growth because the company has incredible assets and incredible brands. Tom Forte: Alright, excellent. Alright, so third and final question for me. It seems like you have already made a number of adjustments to manage expenses. In the next evolution of your turnaround plan, you talk about further improving the cost structure. What more can you do that you have not already done? Franco Fogliato: Yeah, it is a great question. Let me take the lead, and then I will have Randy jump in, and he is driving that. Look, as an organization, we are driving continuous improvement that we are really anchoring into the discipline of managing the company. We will constantly evaluate what we do and constantly find a better way to do that. It is all about the innovation, the way we bring the product to market, the focus on driving the business. We are so pleased because, honestly, since we refinanced the business in November, this is a different company. Everything we do is about how we grow and become more efficient. We are very, very pleased. I think there are plenty of opportunities still there. We are looking at store performance, market performance, channel performance. This is really part of what we want to drive—accountability and focus on driving shareholder value. Randy Greben: So a few things that I would like to add, if I could. If you think about the work that we have done to manage expenses, it has been very broad, and we are quite proud of the breadth and depth of where we have made adjustments to our business. One of the things that is important as we look into the future is the continued optimization of the business. And if you think about ways that that may play out, we have lots of opportunity as it relates to the simplification of our technology stack, places in which we can leverage automation or AI. And then, as you move forward into the more medium-term horizon of our turnaround, that is when we start to play a little bit of offense as well, and we get the benefit of sales leverage as we return to growth. Tom Forte: Thank you for taking my questions. Franco Fogliato: Thank you very much. Operator: Your next question comes from the line of Owen Rickert with Northland Capital Markets. Owen, please go ahead. Owen Rickert: Hey, guys. Congrats on a great quarter, and the outlook is pretty solid here. I have about four questions for you. I guess, firstly, you know, deepening consumer engagement is cited as a key growth driver going forward. Can you just maybe elaborate on what that means tactically? Is that more marketing spend in the first half of the year? And, I guess, how are you measuring an engagement improvement? Franco Fogliato: Yeah, great. Hi, Owen. Thanks again. Look, we are excited that we are a product and marketing company. Part of the strategy in the turnaround plan was to refocus the company on the fundamentals. When I joined the company and we assembled a world-class management team, we clearly said product takes time. And we saw some of that coming through fall 2025. Really, spring 2026 is very exciting. You have seen we launched BigTick with Fossil. It is an incredible success, and we are just at the beginning. So we think innovation in product and the way we bring storytelling to the market will be the key differentiator. Think about the animation we just launched with BigTick. This is, to us, just the beginning. When I think about our core licensed brands, which is really the second pillar of returning to growth—think about Michael Kors, Armani, Diesel—those are world-class brands that consumers are shopping every day. We see good momentum. We are investing in jewelry. We are investing in traditional watches. We see great momentum there. And the third pillar we are really, probably to some extent, proud of is really our Indian market that has been overperforming the company. India is the fourth-largest economy in the world and has been one of the fastest growing in the last few years. It is an industry that is growing. We are very well positioned there. We have seen strong growth, and we think that market will continue to grow for us. So very excited. It is early days. Look, we are here for the long run. We think that as we get the company back to the fundamentals, the opportunity is there, and we are really focused on driving these performances going forward. Randy Greben: The only thing that I would add is, Owen, you suggested in your question that we would be spending more on marketing. Our anticipation is actually that we will be spending slightly less on marketing in 2026. We will certainly be spending the marketing dollars that we do spend better. We will be more optimized in terms of the way we deploy our funds—smarter media mix modeling, smarter use of ambassadors. We have got a robust pipeline of initiatives that we expect to really drive efficiency as we work through this year and into the next. Owen Rickert: Got it. Thanks, guys. Next for me, you mentioned those three pillars of the next evolution—profitable growth, optimizing the operating model, and building that shareholder value. I guess, how do you think about sequencing those? Is profitable growth the prerequisite for everything else, or are the three pillars running in parallel? Franco Fogliato: Look. Let me take this, and then I will leave Randy to dig in and give you more visibility. Look, we always said that returning the company to growth is a priority. We think the reason why we have done everything we have done so far is because we believe the company has an opportunity to return to growth. We also see the industry coming back, which is very encouraging. And it is very pleasing to see younger generations coming back into traditional watches. All of this is very exciting. The first eighteen months for me with the company have been simply fantastic. They have been exciting. And I look every day at all the opportunities, and I think, we are doing the right work to focus on what matters, which is really profitable sales. And once we are really driving this and we see our DTC stabilizing because we are less promotional and we continue to invest in our wholesale channel, there is no reason why the company should not grow given the strong assets we have here. Randy Greben: Owen, I do not necessarily view them as sequential. There really should be a flywheel effect. If you think about the third pillar, building shareholder value, that should be borne through an improvement in profitability, our ability to grow and then strategically invest for growth, and, of course, to generate cash, all borne through efficiencies in the operating model and growing the top line. So much less about sequencing, more about getting all three to fuel each other. Owen Rickert: Got it. Got it. Super helpful, guys. And then we are seeing some pretty nice tailwinds with consumer adoption. I guess, as you think about the consumer you are trying to target, has your view of that target consumer for, I guess, the Fossil brand and licensed brands evolved through this transformation process or this turnaround process at all? Franco Fogliato: Owen, thanks for the question. This is probably the most impressive thing I have seen in my career: the resilience of our consumer. Literally, we moved from a model that was highly dependent on promotional sales into a model highly dependent on full-price sales. And we have seen no slowdown. We have seen consumers coming back, buying our product. We saw that we lost some consumers in our Fossil brand, and, to be honest, I am not even sure we wanted them because they were looking for deals. And we got back some of the consumers we lost because we were very promotional. And there is only one way of defining that: the resilience of our brand. So we are very pleased with this. So thanks for asking the question because every time we discuss internally, that is probably the biggest and best surprise we had. I would have thought we would have been impacted more, but it did not happen. The consumer came back, and they were, “We love what you guys are doing for Fossil.” And the BigTick response is just a phenomenon, as we are capturing not only the cohort of consumers that saw BigTick in the 1990s, but we are catching this new generation that wants a real brand. So very exciting. Thanks for asking. Owen Rickert: Great. Great. And then last for me, guys. When you talk to your wholesale partners today versus, let us say, a year ago, how has that conversation been evolving? Are they leaning in more, asking for more products, more marketing support? What is the qualitative feel of those relationships right now? Franco Fogliato: It is a great question. Look, we are on the phone with them, obviously, weekly. Some of them are decades-long relationships. They are impressed. They are impressed with the speed of change we have driven with the company. They love the consistency. And I recall—I think I said this in the previous call—the first time I met with them, in October or November 2024, they said, “We love your story, but we have heard the story before.” When I met them again in Q1 2025, they said, “Well, you have been consistent. Keep going this way.” And now they recognize we are walking the talk. And they love it. And, to be honest, the results are paying. They are seeing more sales support for our brands. They are seeing more margin because they are less promotional. And suddenly, from being probably not very inspiring, we went to leading by example. And we have great relationships. I was in Munich, in Germany, for the trade show—jewelry and watch trade show—and, literally, a year ago, they were happy we were back, but this year was really surprising. They are coming, and we literally had customers that had not done business with us for years. They are back and want to deal with Fossil Group, Inc. You know, this company has got a great reputation, and it was one of the reasons I thought this company had an opportunity to have a much stronger future. And I think the first indications from our partners are very encouraging. Owen Rickert: Great. Thanks for taking my questions, guys. Franco Fogliato: Thank you, Owen. Thank you so much. Operator: That concludes our question and answer session. I will now turn the call back over to Franco for any closing remarks. Franco? Franco Fogliato: Thank you, everyone, for listening to today’s call. We are excited about where we are headed and look forward to talking with you after the Q1 results. Operator: That concludes today’s conference call. You may now disconnect.
Narrator: Culture eats AI for breakfast. AI is everywhere, but real transformation is still rare. At CI&T Inc, we do not treat AI as a side initiative. We treat it as structural change. That means integrating AI into how decisions are made, how teams build, and how value flows, end to end. We start by defining where AI truly matters, across value streams, not isolated use cases. We redesigned the software engineering cycle embedding human and AI collaboration to accelerate learning and delivery. We connect strategy, governance, and architecture into one coherent operating model with responsible AI built in from day one. And we orchestrate the ecosystem around it, so platforms, agents, and partners operate as one system, because AI does not scale in fragments; it scales when culture, process, and leadership align. Culture eats AI breakfast. And that is how we make AI transformation real. Good afternoon, and thank you for joining us for CI&T Inc fourth quarter and full year 2025 earnings call. Eduardo Galvan: I am Eduardo Galvan, Director of Investor Relations. Joining me today to discuss our results and strategic milestones are Cesar Gon, our Founder and CEO; Bruno Guicardi, Founder and President for North America and Europe; and Stanley Rodrigues, our CFO. We are excited to share the details of a landmark year for the company. Before we begin, I would like to remind you that our remarks today will include forward-looking statements. These statements, including our business outlook, are based on the management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. We caution you not to place undue reliance on these forward-looking statements as they are valid only as of the date when made. Additionally, we will discuss certain non-GAAP financial measures. We believe these provide a more comprehensive view of our underlying operational performance. For a full reconciliation of these measures to the most directly comparable GAAP metrics, please refer to the tables in our earnings release. Today's session is being recorded, and all participants are currently in a listen-only mode. Following our presentation, we will host a Q&A session. To participate, please submit your question via email to investors@ciandt.com. The full presentation deck is available on our Investor Relations website and a replay of this call will be posted shortly after we conclude it. With that, I am pleased to hand the floor over to our Founder and CEO, Cesar Gon. Good day, everyone. Cesar Gon: It is a privilege to share our results for 2025, our fifth year as a public company. Three years ago, I suggested that while software has been eating the world, AI has fundamentally changed the menu. It is not just another wave. It is a different ocean. In our latest partnership with MIT's Sloan Management Review, we explore why 95% of organizations still see little measurable returns on their AI investment. The companies that successfully scale AI are not necessarily those with the largest budgets, but those brave enough to redesign their culture. The real constraint on change is the speed of learning. We recently published a paper offering a map for organizations willing to close the gap between AI's potential and real-world performance. The manual has changed. The question is whether organizations have the appetite to embrace it. AI adoption is no longer discretionary; it is a structural necessity. Yet we see a clear productivity paradox. Organizations that effectively orchestrate people, processes, and technology can unlock productivity gains of up to 20x, compressing innovation cycles from years into weeks. So why do most companies struggle to capture value? Three reasons. First, the tool trap: treating AI as software instead of transforming the operating model. Second, the learning gap: the real constraint is how fast the workforce learns to work with AI. And third, fragmented governance: without a unified backbone like CI&T Inc Flow, initiatives remain isolated experiments. At CI&T Inc, we know transformation is never just technology. It is fundamentally human. That is what separates the 5% who scale AI from the 95% who only experiment. Success in this new environment requires more than tools; it requires architecture. CI&T Inc has codified decades of lean digital expertise into our AI transformation framework, designed to convert AI potential into financial performance. It focuses on three priorities. First, identify high-impact value streams. Second, define measurable business outcomes. Third, align the operating model to scale AI across the enterprise. This is powered by CI&T Inc Flow, orchestrating humans, AI agents, data, and governance into a single management system. And we have already reskilled our workforce around this model, enabling our clients to scale AI with real business impact. Now let us turn to our financial highlights. In the fourth quarter, CI&T Inc delivered record revenue of $134.3 million, representing 19.3% organic growth compared to Q4 2024. On a constant currency basis, growth was 13.9% year over year, exceeding the top end of our guidance range. Our adjusted EBITDA margin was 18.4%, demonstrating stability and resilience as we continue to scale. Adjusted profit margin reached 14% for the quarter. For the full year 2025, our organic revenue growth at constant currency was 13.2%, positioning CI&T Inc as the fastest-growing company among our peer group. This is high-conviction growth. We continue to invest in the foundations of our future leadership in AI services: our CI&T Inc Flow platform, our people, and our global sales engine. Stanley will provide a deeper dive into our financial metrics shortly. This marked our fifth consecutive quarter of double-digit organic growth, reflecting the compounding impact of our strategy. Our performance is driven by the trust of our strategic enterprise clients and our ability to deliver measurable outcomes in complex environments. Over the past three years, we have embedded AI into our core offerings and are entering what we call the acceleration phase, where our proprietary IP amplifies the value we deliver. As a result, our AI-powered offerings are expanding our pipeline, increasing engagement quality, and growing wallet share within existing accounts. To bring this to life, let us look at a few case studies that demonstrate how we are converting this framework into tangible business outcomes. Narrator: Bula, digital-native fintech, found a new beat in software delivery, and CI&T Inc Flow was not background noise. It was wired into the system. What took months collapsed into weeks. Productivity grew up to 10 times. GenAI, not as hype, but as infrastructure. Every commit is high in rhythm. Every release on tempo. Business momentum with Bula and CI&T Inc. Narrator: Valleys to Coast provides a lifeline for 18,000 residents across the UK, but disconnected systems were limiting their impact, with critical information locked in separate platforms while families on housing lists waited for their homes. CI&T Inc partnered with Valleys to Coast to change that. We built a unified digital platform that connects housing management and repairs in real time, transforming fragmented data into a single, trusted source of truth. This is not just about technology. It is about human and real outcomes. From syncing customer details to accelerating property turnarounds, we are ensuring repairs happen on time and families get their keys faster. With less manual work and clearer data, Valleys to Coast can now reinvest where it matters most, supporting the residents and communities at the heart of its mission. That is the power of connected data. That is CI&T Inc. Valleys to Coast Representative: Working with CI&T Inc, we have improved the lives of real people. We now put the right information in front of our teams instantly, accelerating property turnarounds and reinvesting our time back into the community. Narrator: New York, January NRF 2026, retail's biggest stage. On stage, from production to customer experience, the power of agentic ecosystems. Melissa Minco of CI&T Inc with Tony D'Onofrio of Sensormatic and TD Insights. Real conversations, real execution, CI&T Inc and AI connecting operations to demand. From production to experience, end-to-end systems, connected enterprise. No fluff, just proof. We are at the top, not by narrative, by delivery. CI&T Inc is a leader in the ISG 2025 report, recognized as a leader in enterprise data modernization and AI services in the ISG Provider Lens, AWS Ecosystem Partners 2025. Eduardo Galvan: A global benchmark for evaluating technology providers. Daily excellence, industry recognition. Cesar Gon: This is a moment to look back, not with nostalgia, but with numbers that speak in bold. The CI&T Inc and AWS partnership has evolved year after year. Today, more than 60% of our portfolio runs on AWS. In Latin America alone, the business grew 10 times year over year. We are one of just 19 partners worldwide selected for the AWS Generative AI Partner Innovation Alliance, a global initiative co-creating the next generation of GenAI solutions. BASF, Educas, C6 Bank, not just logos; proof points. CI&T Inc accelerates AWS. AWS amplifies CI&T Inc. The results we are seeing with our clients—collapsing months into weeks and achieving 10x productivity gains—are a testament of what is possible when AI becomes a core capability rather than just hype. To explain how we are crystallizing this success across our global footprint, I will invite Bruno to discuss our evolving delivery model and the strategic offerings driving these outcomes. Thank you. Bruno Guicardi: Pleasure to be here to discuss the evolution of our delivery model and the strength of our global offerings. We finished 2025 with a global team of 8,000 CI&T Inc’ers, averaging 6,400 AI tech professionals over the period, a 14% increase from 2024. These are not just developers. They are consultants, designers, and engineers who empower our clients by blending strategy, customer-centric design, and advanced AI engineering. As Cesar touched upon, people are the heart of an AI-first transformation. Our framework recognizes that this journey is multidimensional. You cannot simply install AI. You must advance people, processes, and technology simultaneously. We believe that breakthroughs in technology can only be sustained if they move in lockstep with organizational maturity. As the services industry evolves into a hybrid of IP and talent, we are empowering our people to be architects of solutions and platforms. Through CI&T Inc Flow, our teams can create, share, and reuse autonomous agents across the entire enterprise. By integrating lean principles and robust governance with our talent and technology, we are enabling our clients to move past simple efficiency gains and toward a complete reinvention of their business models. Now let us see how we are fundamentally redefining the unit economics of software production. CI&T Inc is capturing a massive performance arbitrage. By staying relentlessly ahead of the curve, the productivity gap between CI&T Inc and non-AI or low-performing vendors is widening into a significant competitive moat. We are navigating this through a staged evolution. Today, we are in the AI-augmented phase. We follow AI-native talent. We are already realizing 2x gains in individual productivity across the board. In more mature engagements, we move to AI-coordinated efficiency. By integrating autonomous agents into the workflow, we achieve 5x gains by collapsing lead times across the entire value stream. And we are continuously working towards a 20x performance increase through AI-orchestrated reinvention, where AI coordinates the entire journey from concept to market. This evolution of our delivery engine demands a corresponding evolution in our business model. To capture the value of this 20x potential, we are gradually transitioning our clients to modern engagement models. We are moving beyond time and materials toward fixed price, outcome-based, and consumption-based contracts. This allows us to decouple our revenue from headcount and participate directly in the value we create. We are not just watching the industry change. We are architecting the new standard. To see the technology making this 20x leap a reality today, let us look at our newest offering, the agentic SDLC. Historically, software development was a linear, human-dependent relay race. Our agentic SDLC breaks this model by deploying an ecosystem of autonomous AI agents that mirror key development roles. These agents orchestrate the process to eliminate systemic waste, such as waiting times and handoff errors, while our senior engineers provide the strategic guardrails to ensure every output is enterprise-ready. The backbone of this system is the enterprise knowledge base. This 360-degree data repository enables agents to continuously evolve, making decisions based on each client's specific context. This coordination of agentic speed and human strategic supervision is what unlocks unprecedented performance levels. We partner with clients to map and reinvent their entire SDLC, migrating their legacy processes into our agentic platform. We are already seeing the financial and operational impact of this shift. With a life sciences client, we have secured over 8x productivity gains. We have seen development cycles that previously took 8.5 days collapse to just half a day. With Bula, as seen in our client case video, what used to take months is now delivered in weeks. They achieved up to 10x productivity increases through end-to-end automation across coding, documentation, and testing. Agentic SDLC is a structural engine that allows us to deliver superior value at a lower cost to serve. By compressing product creation cycles from months to days, we are fundamentally shifting our business model. We are moving from a labor-intensive delivery model to an IP-led model where our margins can expand significantly, without traditional constraints of linear headcount growth. Our momentum and competitive edge are being validated by the world's leading ecosystems. 2025 has been a landmark year of recognition. CI&T Inc earned the AWS Generative AI Services Competency seal and was selected as one of only 19 partners worldwide in the AWS GenAI Partner Innovation Alliance, giving us early access to emerging technologies that keep our clients at the forefront of innovation. Our data expertise was also highlighted by Databricks, which recognized CI&T Inc as LATAM Enterprise Data Warehouse Partner of the Year for 2025, underscoring our ability to modernize legacy data foundations into high-value assets for agentic orchestration. Our strategic positioning is consistently validated by the industry's most respected independent analysts, including Forrester, Gartner, Everest, and ISG. Most notably, Forrester has named CI&T Inc a leader in modern application development services for 2025. In the ISG Provider Lens reports, we were recognized as a leader in enterprise data modernization and AI services, while Gartner Peer Insights rates us as a strong performer in custom software development services. Together, these accolades show that CI&T Inc is not simply following market trends, but helping define the new gold standard for our industry. Now I invite Stanley to guide us through our financial performance. Stanley Rodrigues: Thank you, Bruno, and good afternoon, everyone. It is a pleasure to provide more detail on what has been a year of exceptional execution and financial discipline for CI&T Inc. In Q4 2025, we delivered robust revenue of $134.3 million, representing a 19.3% increase on a reported basis, fully organic. On a constant currency basis, we grew 13.9% year over year. This performance is significant, as Cesar mentioned. It marks our fifth consecutive quarter of double-digit organic growth. In a volatile macroeconomic environment, this consistency is a clear differentiator, proving the resilience of our business model. For the full year 2025, total revenue reached $489.7 million, an 11.5% increase over 2024, or 13.2% on a constant currency basis. By balancing high-velocity top line expansion with stable margins, we are successfully compounding value for our shareholders. The narrative for 2025 is defined by the quality and composition of our growth. Our performance is anchored by our two most significant markets. Latin America delivered an outstanding 26.8% revenue growth for the full year, fueled by a rapid acceleration in digital and AI across the region. In North America, we maintained a solid and steady trajectory, with revenue growing 9.2% year over year, reflecting our maturing presence in the world's most competitive tech market. From a vertical perspective, we continue to see strong demand across our core sectors, specifically in financial services and retail and consumer goods verticals, where the demand for measurable AI-driven efficiency is reshaping how technology budgets are allocated. I want to double click on the quality of our client partnerships. At CI&T Inc, our objective is to be the partner of choice for high-impact strategic transformations. The results of this approach are clear. Revenue from our top 10 clients grew 16.5% year over year in 2025. It is important to note that each of these top 10 accounts now generates a minimum of $10 million in annual revenue. This outsized double-digit growth within our most deeply embedded accounts is a powerful market sign. It proves that even in our largest partnerships, we are finding new high-value opportunities to drive impact through the agentic SDLC and AI-driven reinvention. Beyond our existing base, we are equally encouraged by our new client onboarding. Throughout 2025, we saw a consistently strong pipeline and robust conversion rates. This balanced portfolio of regions, loyal top-tier clients, and diverse industries provides us with a very solid foundation for the year ahead. Now let us discuss our profitability and cash flow. For the fourth quarter, adjusted EBITDA reached $24.8 million, an 11.6% increase year over year, resulting in an adjusted EBITDA margin of 18.4%. The margin decline was driven by two specific headwinds: the unfavorable foreign exchange environment and the resumption of payroll taxes in Brazil. In addition, we have been deliberately investing up front in our AI platform, our workforce reskilling, and global sales initiatives as a strategic choice to accelerate our top line growth. For the full year 2025, adjusted EBITDA was $89.4 million, up 9.1% from 2024. This resulted in a full-year margin of 18.3%. In 2025, cash generated from operating activities reached $81.2 million, representing a remarkable 90.8% cash conversion rate from adjusted EBITDA. Our free cash flow totaled $45.8 million, which represents a cash conversion rate of 91.3% from adjusted profit. This level of conversion is a testament to our operational efficiency and disciplined working capital management. It provides us with significant balance sheet flexibility to continue funding our strategic pivot toward an AI, agentic model while maintaining a strong, de-risked financial position. Turning to the next slide, let us look at how our top line momentum translated into bottom line results. For the fourth quarter, adjusted net profit reached $18.8 million, a 41.8% increase year over year. This pushed our adjusted net profit margin to 14%. Consequently, our adjusted diluted earnings per share rose to $0.14, marking a 48% increase from the previous year. For the full year 2025, adjusted profit was $51.9 million, up 16.9% compared to 2024, with margins expanding 50 basis points to 10.6%. Our full-year adjusted diluted earnings per share grew to $0.39, a 20% increase over the prior year. This earnings outperformance was driven by two key factors. First, our disciplined management of SG&A expenses. Second, the strategic execution of our share repurchase program. By reducing the share count at what we believe are highly attractive valuation levels, we have successfully amplified the value delivered to our shareholders. In summary, 2025 was a year of consistent, high-quality execution. We delivered five consecutive quarters of double-digit organic growth, maintained a resilient margin profile, and achieved elite-level cash conversion. Combined with our active buyback program, CI&T Inc is demonstrating its ability to be both a high-growth AI leader and a disciplined compounder of shareholder value. We enter 2026 with a stronger balance sheet, a more efficient delivery model, and a clear path to continued outperformance. I will now turn the call back to Cesar for our business outlook for 2026. Thank you. Cesar Gon: Our 2026 outlook reflects our commitment to sustaining growth while continuing to invest in the shift towards an AI operating model. For Q1 2026, we expect revenue of at least $134.7 million, representing 21.5% growth year over year, or 14.3% at constant currency. For the full year 2026, we expect revenue in the range of $548.4 million to $568 million, implying organic growth of 12% to 16% year over year, with a midpoint of 14%. This includes a favorable FX tailwind of approximately 300 basis points, and we expect our adjusted EBITDA margin to be in the range of 17% to 19%. Before we open for questions, I want to thank all CI&T Inc’ers around the world. Your commitment to innovation, continuous learning, and delivering exceptional value to our clients makes these results possible. With that, we are ready to begin the Q&A session. Thank you. Narrator: The future of business is tech. The future of tech is business. Eduardo Galvan: We solve it. Tech-integrated business solutions. CI&T Inc. We will now open for questions. I will announce each participant's name. Once you hear your name, please unmute your line and ask your question. Then when you are done, please mute your line. The first question comes from Abby from JPMorgan. Abby, please go ahead. Abby: Hi. Nice to see you guys. This is Abby on for me. Thanks for taking my question. So I was wondering if you could walk us through the guide and some of your assumptions. Q1 looks pretty strong, but on a constant currency, organic basis, it seems like it is going to decelerate from this year. So can you just walk us through that? Cesar Gon: Thanks, Abby. Great to see you. Well, I think after five consecutive double-digit growth quarters, we were able to really forecast it. We ended the year with a very strong exit rate, so we are now able to forecast a very strong Q1 and then project continuity almost at the same pace. Our guidance assumes that we will have an average FX rate of 5.3 in terms of Brazilian reais to the US dollar on average along the year. If we look at the low end of our guidance, basically it reflects macro uncertainty, and the high end, where we want to be, reflects our current strong commercial pipeline, 30% higher now than the same period last year, and keeping a very good level of conversion, certainly driven by AI demand and the differentiation achieved for our main offerings. We are seeing Brazil and the US basically expanding at a good pace. This last Q4, we could see our main regions all expanding and also our five main verticals expanding sequentially. So I think it is a good start. Of course, there is a lot of things to do, I think we were able to guide what I believe is the fastest growing, and we will continue to be the fastest growing company among our peer group. Abby: Yeah. That is great. And just as a follow-up, are you guys seeing any impacts from the geopolitical uncertainty so far in Q1? Cesar Gon: So far, no. Even Europe has a very good, strong, solid start for the year. In Brazil and the US, we are also expanding. Abby: Thanks. Great job, guys. Cesar Gon: Thank you. Eduardo Galvan: Thank you, Abby. The next question comes from Leonardo Sintra from Itaú. Leo, please go ahead. Leonardo Sintra: Hi, everyone. Thank you for taking my questions. I just want to check about your expectation regarding the performance from the top one client and your top 10 clients throughout 2026, and if you could give us a little bit more breakdown about the Flow adoption between the different sectors. Thank you. Cesar Gon: Sure. Thank you, Leo. I will start with the segments. Q4 was a very good quarter for our five main verticals. We expanded almost 14% in life sciences as the largest expansion, but even financial services had an amazing year, and we sequentially expanded more than 3%. So we continue to see demand around all our five main verticals. Regarding the top clients, I think also Q4 was basically, on average, we expanded 21% year over year in our top 10 clients. Excluding top one, we expanded 17% year over year, and if you look ex-top 10, it is 18% year over year. So on average, all the cohorts are expanding, and we continue to see our strategy working around our top clients and also the new clients we landed last year. Sequentially, we grew among eight of our top 10 clients from Q3 to Q4, so very solid. And we will see our top one continuing to expand, but for sure less accelerated than last year. Bruno Guicardi: I can take the other one. It was about the Flow adoption rates. We do not see a lot of difference across verticals in AI adoption. It is pretty much, you know, our teams' adoption at this point continues very high, close to 100%. Just really a few laggard clients that do not want it to be used in their environments, which, again, is very minimal. So at this point, it is at full-blown utilization, and as I mentioned in my remarks, we are over the assistant phase and really moving into restructuring processes and workflows to actually deliver a way bigger impact at this point already. Leonardo Sintra: Very clear. Thank you, guys. Eduardo Galvan: Thank you, Leonardo. Our next question comes from Brian Bergen from TD Cowen. Hi, Brian. Brian Bergen: Hey, guys. Good to see you. On the AI and agentic activity and the workloads you are working on there, curious if you can give us a sense of the mix of new work that is the modernized version of what you have always done as high-value custom build solutions, but now leveraging GenAI and the Flow platform, versus newer areas for you like agentic-led managed services where you may be displacing some of the larger legacy vendors? I am just trying to ask this because I am trying to understand the different avenues of demand and how clients are thinking about this right now. Cesar Gon: Sure. Thanks, Brian, for the question. In general terms, we categorize the demand in two groups. The first one, as you mentioned, is we continue to see a big wave of foundational spending. It means large-scale projects regarding upgrading legacy technology applications or data foundations and really accelerating cloud migration. These are foundational moves if you want to explore the full potential of the AI-driven world. And the second, what I believe is a big trend now, is direct AI investment. We see a relevant budget allocation for AI solutions, and then we are talking about hyperfusion around the software demand lifecycle. We see a lot of demand regarding customer experience journeys now reinvented with AI. In Brazil, it is around WhatsApp, but globally it evolves toward conversational commerce and so on. We also see broad programs regarding AI-first transformation. That means looking at the end-to-end business model and structure of our clients and finding out the best way to really build a strong AI strategy around specific value streams or business units. And finally, we also see a growing number of what we call use cases around GenAI, meaning optimizing everything that is labor-intensive or data-intensive. Now business processes can be redesigned and reshaped with the new AI capabilities. So basically two groups: foundational demand and then what we call AI direct investment. Brian Bergen: Okay. And if I could ask a follow-up on margin. Can you comment on the drivers of adjusted EBITDA margin going forward? You have had ramped workforce investments and Flow investments in 2025. It looks like that will persist based on the guide for 2026. Curious how you envision this ultimately playing out, where a crossover point may be for the potential to start recovering margin, particularly gross margin, as you benefit from all these investments and the productivity yourselves? Stanley Rodrigues: Brian, thanks for the question. With regard to gross margin, you are right. In 2025, we saw a play in that gross margin. We saw bold investments toward people, meaning investing in preparation ahead of the strong pipeline we experienced throughout the whole year. We also had investments in AI itself, towards the platform Flow. We also had some headwinds in terms of FX, especially towards the end of the year. We had about 8% devaluation of the real in Q4 itself. If you combine that with investments in sales and efficiency and operating leverage that we saw in 2025, we get to this 18.3% EBITDA. If we go to 2026, the guidance we provided pretty much talks to that. The midpoint talks to that 2025 number. And what that means is we are continuing in that, I would say, winning AI strategy, meaning that we are investing in our AI platform. We are preparing teams ahead of the opportunities that we see in the pipeline. We have a strong pipeline, usually 30% bigger than the same period in the previous year. So this is allowing us, Brian, to expand the wallet share, which is very good, and also acquire new clients. So we are repeating, of course. We are leading in the sector, and that is a winning strategy. We will continue to do that formula, let us say, and that is why we are guiding that range of EBITDA. Brian Bergen: Okay. Understood. Thank you. Eduardo Galvan: Thank you, Brian. Next question comes from Luke Morrison from Canaccord. Hey, Luke. Go ahead. Luke Morrison: Hey, guys. Good to see you. Excellent results. Thank you for taking the question. So maybe I will just start dovetailing somewhat off of Brian's question. Thinking about the productivity improvements you are seeing with Flow, as you think over the long term, over a multiyear period, how do you think about the relationship between headcount growth and revenue growth over time? Should we expect revenue per employee to rise as you roll out these new pricing models and you see more productivity from your existing headcount, or are you thinking this growth phase still requires adding people at roughly the same rate as you are growing? Cesar Gon: Thanks, Luke. I can start here; Bruno, you can add if you want. We see the rise of AI and the agentic solutions as provoking an inevitable space for an evolution in the commercial and pricing models in our industry. In terms of the midterm, we see the future of our industry evolving from basically the time-and-materials model to value-based pricing models, more closely tying the business to business outcomes. And this is, for sure, an opportunity to gradually monetize the intellectual property embedded now in everything we do, and also experiment with different business models for the agentic architecture that, for sure, will dominate the future of IT investment. Proactively, we are introducing all these different approaches with our clients. We have, I would say, encouraging early results. But as I mentioned, we see this as a midterm opportunity. It will translate our superior performance into margin and scalability, and, of course, give our clients more options to better connect outcomes to the investments they are making. So I think it will be gradual, but inevitable, change in our industry. Luke Morrison: Yep. Makes sense. Very helpful. And then maybe just to double-click on the new pricing model evolution, you talked about experimenting with consumption-based subscription models for Flow access at your Analyst Day last October. Maybe just update us on how those conversations are going with clients. Are you seeing a willingness to pay for Flow as a standalone platform, or is that still primarily a differentiator that is helping you win business today? Bruno Guicardi: Primarily it is a differentiator. Of course, with clients, when they see the type of performance, they want to share in the success—like, “I want that for myself.” But we are not leading with that. We are not trying to push a product. They are seeing what our teams can do and the performance of those teams, and they ask, “How are you doing this?” Then we actually enter another sort of engagement, which is more of a transformation engagement: “Let us teach you how to achieve that type of performance,” which includes a different toolset and a different usage—not only our agents, but also the third-party tools available in the market. But again, that is more on the backtrack of them seeing a different performance compared to all the public reports that you can read everywhere. There is a lot of frustration out there on utilizing and transforming AI into real value. When you say you can do 5x, it is usually faced with a lot of skepticism. Our approach is more show than tell: this is what we are actually doing and this is what we are achieving. Then we can break that big wall of skepticism and have those conversations. That has been the approach. Eduardo Galvan: Our next question comes from Cesar Medina from Morgan Stanley. Hi, Medina. Cesar Medina: Hey. Thanks for taking my question. I guess you both—Bruno and Cesar—sort of just answered one of them, but let me ask in a different way. When you are thinking of the changes in trends—Cesar mentioned, for instance, that your main customer will continue to grow robustly but should slow down relative to 2025—can you walk us through the changes in trend that you are seeing between projects that are more discretionary spending versus other projects that are take-out-cost and things like that? That is the first part of the question. The second question: exactly the same thing as changes in trend, but instead of by client, by region. What are you seeing in the US, Brazil, and then new markets? Cesar Gon: Sure. Thank you, Medina, for the questions. We see both trends: foundational investments now with a much better return-on-investment equation regarding legacy and data modernization. We continue to capture these very large-scale endeavors to modernize decades of technical debt in our clients. Then we are seeing also this trend of direct AI investments with different shapes and colors. On average, we see our engagements basically accommodating multiyear contracts with more spot demand. So we do not see meaningful differences in terms of the duration of our engagements or the ticket size in both kinds of demand. Regarding markets, the US and Brazil: we are very confident and very well established in terms of land-and-expand—acquiring new customers in these markets and continuing to increase our wallet share among our global clients. We see our new markets as more exploratory—Europe and Asia—that now represent 10%. We had an amazing Q4 for these regions, but it is even harder to predict. We see a solid forecast for our main markets in North America and Latin America. Cesar Medina: And when you see your pipeline, last year you had a big ramp-up of very large projects for international, like Brazilian customers. When you think of this pipeline, do you have similar opportunities this year, 2026, on that front? Cesar Gon: Yes. And when we say expand, it is a very important game because these large companies—we need to move from one geography to another, from one business unit to another. It is a long-term strategy to continue increasing our wallet share year over year, quarter over quarter, as we establish our reputation. What plays in favor of our approach is Flow and our discipline of metrics. When we can clearly demonstrate the kind of results we are achieving, the natural response from our clients is giving us more opportunities to expand along the way. This is basically the expansion strategy, and as you know, we have very, very large companies operating around the world. So it is fertile soil for long-term expansion. Cesar Medina: Very simple. Thank you. Cesar Gon: Thank you, Medina. Eduardo Galvan: Thank you, Medina. Our next question comes from Gustavo Farias from UBS. Hi, Gustavo. Please go ahead. Gustavo Farias: Can you hear me? Eduardo Galvan: Yes. Now we can. Gustavo Farias: My question is regarding the alternative billing model. When you go from time and materials toward fixed or even outcome-based, there is probably a higher risk-reward profile. If you could comment on which of those alternative models are gaining more traction and what you are experiencing in terms of the effective margin upside gains in each of them, that would be very helpful. Thank you. Cesar Gon: Sure, Gustavo. Thank you. We are experimenting with seven different models now. Basically, it is a hybrid moment where we combine time and materials with price per unit—that is basically throughput—with price per consumption using our agent computing unit for the SaaS agent solutions, and outcome-based. I think it is too early, but of course all these models potentially have a better margin if you know how to execute. We are very confident in our ability to execute these engagements, which allows us to be very confident in the predictability of these new models. Also, it is part of the evolution of services becoming an IP-based game. Flow is not only our management system for AI, but it is also the stack where we are building our vertical solutions, all the IP that tackles specific vertical opportunities by industry. It is part of this evolution. For sure, all these models potentially can increase not only our margins, but our scalability in terms of headcount. But it will be, as I mentioned, an incremental midterm game—not something that is going to happen from Friday to Monday. We are very, very confident in our ability to execute. Gustavo Farias: Great. Thanks. Just a follow-up, if I may. Just to confirm, there is nothing from this potential upside, like you said, embedded in this year's guidance for margins, right? Cesar Gon: For 2026, we are guiding the natural evolution of our pricing models, but we believe that our clients will be, let us say, conservative. They are willing to test different models, but it will take a few years to really see this as a relevant part of our P&L. As I mentioned, it is inevitable not only for CI&T Inc, but for the whole industry. It is just a transition that will take a while, especially because of the cohort of our clients—these large companies—they tend to move in a very consistent and careful way. Gustavo Farias: Alright. Thank you very much, guys. Cesar Gon: Thank you, Gustavo. Eduardo Galvan: Thank you, Gustavo. That concludes our Q&A session. Thank you all for attending our event today. I will now invite Cesar to proceed with his closing remarks. Cesar? Cesar Gon: Sure. Thank you, Galvan. Thanks, Bruno and Stanley, for joining me. Thank you all for joining us today, and of course, a special thank you to all CI&T Inc’ers around the world. Congratulations on another record quarter. Let us keep pushing. And a special thank you also to our clients for choosing CI&T Inc as a partner for this exciting new AI-driven innovation era. Stay well. See you soon.
Operator: Thank you for standing by, and welcome to Netskope, Inc. Fourth Quarter and Full Year Fiscal 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. I would now like to hand the call over to Michelle Spolver, Chief Communications and Investor Relations Officer. You may begin. Michelle Spolver: Good afternoon, and thank you for joining us today. With me on the call are Netskope, Inc. CEO and Co-Founder Sanjay Beri and CFO, Andrew Del Matto. The press release announcing our financial results for the fourth quarter and full year fiscal 2026 was issued earlier today and is posted to our Investor Relations website at investors.netskope.com along with a supplemental presentation. Before we begin, let me remind everyone that some of the statements we make on today's call are forward-looking, including statements related to our guidance for the first quarter and full 2027 fiscal year, growth opportunities, competitive position, and the impact of AI adoption. These forward-looking statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated by these statements. Additionally, these statements apply only as of today, and we undertake no obligation to update them in the future. For a detailed description of risks and uncertainties, please refer to our SEC filings as well as our earnings press release. Finally, unless otherwise noted, all financial metrics we discuss on this call other than revenue will be on an adjusted non-GAAP basis. We have provided reconciliations of these non-GAAP financial measures against the most directly comparable GAAP financial measures in our earnings press release. Now let me turn the call over to Sanjay to discuss our business and high-level Q4 financial performance. Thanks, Michelle. Sanjay Beri: Welcome, everybody, and thank you for joining us to discuss Netskope, Inc.'s fourth quarter and fiscal year 2026 results. We ended the year on a high note with results that exceeded our guidance across all key metrics. Our focus on delivering a market-leading platform for networking, security, and analytics for the modern world of cloud and AI is resonating well with customers and driving both new and expansion business. Strong global execution resulted in robust fourth quarter results, highlighted by record net new ARR of $57 million and ending ARR of $811 million, representing true organic growth of 31% year over year. Revenue in Q4 grew 32% year over year to $196 million, and revenue for the full fiscal year 2026 also grew 32% to $709 million. We continue to leverage the investments we have made in our Netskope One platform and NewEdge Global Private Cloud network to drive efficient growth, which is reflected in the five percentage point improvement in operating margin in Q4 and an 18 percentage point improvement for the full fiscal year 2026. We are also very pleased to generate $12 million in free cash flow for fiscal year 2026, marking a notable milestone of Netskope, Inc.'s first ever year of positive free cash flow. We also saw a strong mix of both new logo growth and customer expansion across key verticals and geographies. The average number of products per customer increased to 4.4. Customers are solving key use cases through the adoption of our Netskope One platform of 25 security, networking, analytics, and AI products. This is reflected in our net retention rate of 116% and 22% growth in customers with over $100,000 in ARR year over year. Andrew will give more color on our Q4 and full year fiscal 2026 financials in a few minutes. We have had many innovations, go-to-market, and operational highlights during the quarter, and one theme that threaded prominently across all of these was AI. Netskope, Inc. is uniquely positioned as a significant beneficiary of the AI super cycle because we have engineered a unified AI-native fabric that eliminates the legacy trade-off between performance and security. We have organically built the Netskope One platform as the intelligent edge—an inherently adaptive architecture where our native AI fluency and active context are seamlessly integrated into our global infrastructure defined by its performance, resilience, and dynamic orchestration. I would like to spend some time today walking through the four pillars of our AI strategic framework, which demonstrate why Netskope, Inc. is the essential engine powering the scale of the modern AI enterprise. First, Netskope, Inc. is an AI-native platform with sovereignty and privacy by design. From day one, we were engineered as an AI-native platform. Our competitive moat is architectural, not a single bolt-on feature. Since our inception, we have leveraged and integrated AI as foundational across our platform. In the early days, we used shallow and deep learning, and today, we further augment these capabilities with generative AI models to deliver maximum impact for our customers. Every implementation follows our core principle of privacy by design. We believe intelligence should never come at the cost of data privacy or sovereignty, and we operate a library of more than 190 proprietary purpose-built, specialized AI models optimized for security and network performance. This quarter, we continued to enhance those models, and our AI labs released additional models that are used in our new AI security products. Unlike competitors using just generic LLMs, Netskope, Inc.'s intelligence is purpose-built, high speed, and hyper accurate. The second key pillar in our AI strategy is enabling and securing AI in real time. While legacy and first-generation SASE vendors perform so-called post-event autopsies with out-of-band scanners, Netskope, Inc. provides real-time, in-line AI security for corporate and shadow AI. We do not just see that an AI transaction is happening. We understand the data and intent within it and take real-time granular action. Let me explain. Most solutions simply see a connection. Netskope, Inc. understands the deep interaction. Because our proxy is natively AI fluent, we possess the active context to determine dynamically in real time the specific AI app instances, activities, data, and more. We also determine the semantic intent of prompts and responses in real time and enforce in-line policy. Our Netskope One Agentic Broker—one of a number of new AI products we announced earlier today—also seamlessly applies this to all MCP transactions, either sanctioned or unsanctioned. This is why at Netskope, Inc., we are not just observing and enabling the AI revolution. We are the engine generating the high-fidelity data that secures it. In today's world, the most valuable asset is not just the AI model. It is the unique real-time data and transaction telemetry that understands the intent and lineage behind every interaction. Netskope One generates a vast and proprietary set of AI-fluent metadata and data for trillions and trillions of transactions a month that traditional security tools simply cannot see or generate, decoding the complex language of AI agents, generative AI apps, AI tools, and cloud JSON in mid flight. But while the power of our unique data is a competitive moat, our purpose is singular—the dynamic protection of our customers and their nonhumans and humans. We leverage this unprecedented visibility to protect our customers, ensuring that they can innovate at the speed of AI without ever compromising the integrity or sovereignty of their most sensitive information. We apply in-line decisiveness—or put another way, we make granular go or no-go decisions in flight. This allows us to stop sensitive data from entering prompts and block poisoned AI responses or injection attacks before they ever reach a customer's environment, protecting users, apps, and autonomous agents alike. And our Netskope One AI Guardrails, also announced today, take this to the next level. These deep contextual controls are necessary for enterprises to move from prohibiting AI to enabling AI with confidence. We do not just see more. We protect better, turning our unique data into the ultimate foundation of trust for the agentic era. Our third AI strategy pillar centers around providing differentiated and unmatched performance and resilience through our NewEdge AI infrastructure. AI transactions are uniquely sensitive to latency. Legacy networks create a latency tax that breaks AI performance. Conversely, our NewEdge infrastructure—the world's largest, high-performance private security cloud—is the AI Fastpath. It is the most resilient, high-speed highway for AI transactions globally, including AI applications and agents hosted in public, private, and new clouds. It is also an agile edge. Our infrastructure is defined by performance, resilience, and dynamic orchestration. We process complex security at the edge, closest to the agent, app, or user, reducing lag for secure real-time inference while allowing the network to dynamically adapt to the high-velocity traffic patterns of the AI era. And lastly, our fourth AI strategy pillar is a platform built organically and natively for the agentic economy, with an AI-fluent proxy and for autonomous operations. The perimeter has shifted from being filled with people to entities. Netskope, Inc. uniquely addresses this with a platform that specifically speaks the language of AI. As we mentioned, our architecture and native AI-speaking proxy innately understand APIs and JSON. This AI-native visibility enables hyper-granular zero trust control over AI transactions that other vendors simply cannot see. Through our just announced Netskope AI Gateway, we extend this enforcement anywhere—public cloud, private data center, or the edge. We also just released our first autonomous Netskope AI agents, which have already been met with exceptional customer feedback. One of the areas our agents will address will be automating operations. These classes of agents from Netskope, Inc. automate complex network and security tasks, drastically reducing the human-in-the-loop requirements for global enterprises. Our recently released ZTNA AI agent has been received very well in this area. And finally, we offer universal governance. By marrying our market-leading data protection with our newly introduced Netskope AI Guardrails, we secure and moderate for acceptable use all communications, whether via Model Context Protocol (MCP) via our Agentic Broker, prompts, or ShadowAI, for humans and nonhumans alike. Because of these unique and highly differentiated four pillars of our AI strategic framework, many of the world's most sophisticated enterprises choose to secure, accelerate, and analyze their AI transactions through Netskope, Inc. As a result, Netskope, Inc. has become one of the most definitive sources of enterprise AI data usage and trends in the world. We were pleased to announce today the Netskope AI Index, which consists of a first-of-its-kind interactive view of real-time AI usage across the world—data covering virtually every country, industry vertical, and company size—providing a granular view of AI adoption and attributable intelligence that positions Netskope, Inc. as the authority that customers and the public can cite when describing the real-world trajectory of the AI economy. We have also kept our foot on the gas innovating across our Netskope One platform of security, networking, and analytics products, and in other related areas. Let me share a few recent examples. On the data security front, we strengthened our competitive edge with the introduction of Netskope One Data Lineage. Data Lineage enables security teams to track and visualize the movement of sensitive data across their entire organization through various levels of origin, usage, and access, including visibility into when that data propagates or evolves. We also introduced new capabilities and integrations to improve secure connections to enterprise applications from unmanaged or BYOD devices. Enterprise browser support was expanded to a new range of iOS and Android mobile devices, while deeper integration with our Remote Browser Isolation and Private Access solutions provides a range of highly secured deployment models to enable users to connect to private apps through web browsers on their unmanaged devices. And on the networking and infrastructure side, we delivered our DNS as a Service that enables customers to point their DNS traffic to Netskope, Inc. for resolution, which can then use our DNS content filtering and security to provide secure access for often overlooked and unprotected use cases like guest Wi-Fi access. Our continued innovation expands our robust Netskope One unified platform of 25 security, networking, analytics, and AI solutions, providing more opportunity to land and expand with customers. We are an organically built, truly integrated, modern platform for the AI and cloud era. I want to emphasize this point about platforms in the context of what we repeatedly hear from customers. They are telling us that while they desire truly unified platforms over a slew of point solutions, they also are not seeking a single platform for all their security and networking needs. The unification they desire in a platform is what Netskope, Inc. uniquely delivers. We built our AI-native Netskope One organically, not through M&A, which results in a disjointed, cobbled-together solution and often frustration for customers. Our 25 products share one common code base, one engine, one console, and one network, providing both better efficiency and a seamless customer experience. And our NewEdge private cloud runs Netskope, Inc.'s full stack of products at high speed at all of our more than 120 locations. To illustrate how our customers are adopting our Netskope One platform, let me pivot to our go-to-market accomplishments during Q4. We saw significant customer wins across verticals and geographies, with customers turning to the Netskope One platform to enable AI adoption, modernize their security and infrastructure, consolidate vendors, and replace legacy and first-generation cloud security products. I will touch on some key wins and expansions across common use cases. First, customers are choosing the Netskope One platform for modernization to facilitate secure access from human and nonhuman identities to their AI ecosystem, including generative AI apps and LLMs, cloud apps, web apps, and private apps. One notable win was a large global manufacturer who sought better data visibility and control and the ability to safely allow the use of AI in cloud. They chose six Netskope, Inc. products to secure generative AI and cloud access, protect their data, and improve their network performance. We also landed a top regional health system in the US who initiated a modernization selection process to replace its legacy security and network infrastructure after previously suffering a severe and costly breach. We shined in this competitive bake-off, and the customer purchased 11 products within our Netskope One platform, including our next-generation SWG with AI controls, ZTNA Next, Advanced DLP (which includes proprietary AI models from our AI labs team), Borderless WAN, Cloud Firewall, Enterprise Browser, and other products to replace legacy firewall and networking products. Customers also continue to turn to Netskope, Inc. for our superior unified data protection. For example, one of the largest hotel companies in the world with operations in nearly 150 countries was a notable unified data expansion win during the quarter. This client needed continuous real-time visibility into the full breadth of its data security posture. They also needed to confidently manage and protect sensitive data across cloud, on-premises, and hybrid environments including AI and cloud data stored. They purchased Netskope, Inc.'s DSPM solution and are now using 14 products in the Netskope One platform across its organization. Many customers also deploy our suite of Netskope One to modernize their infrastructure, including replacing legacy VPNs with our zero trust architecture, branch firewalls with our Borderless SD-WANs, and migrating their networks to our high-performance private cloud, especially as they adopt more AI and cloud where performance becomes even more critical. For example, we landed a Canadian gaming company that needed to modernize their network for AI and cloud, provide secure remote access to their global workforce, and meet governmental regulatory requirements. This customer replaced legacy hardware products at more than 5,000 locations with Netskope, Inc.'s Borderless SD-WAN and ZTNA Next secure access solutions and purchased our Next-Gen Secure Web Gateway, with added AI protections, for secure generative AI usage. In another win, a European government chose us to modernize its legacy on-prem security infrastructure and drive data sovereignty. They wanted to consolidate multiple point solutions into a single centrally managed platform to protect sensitive data while meeting strict government regulatory requirements. The organization purchased our comprehensive Netskope SSE platform covering security for AI, web, cloud, and data. Finally, our global fast and resilient NewEdge private cloud network makes us particularly well suited to deliver globally distributed and highly regulated customers the data sovereignty and regulatory compliance that they require. For example, we landed two of the largest banks in Africa in two separate deals. One was a unified data protection deal that we successfully baked off against a primary competitor. The other was a network modernization deal where we replaced the same competitor with Netskope, Inc.'s market-leading SSE solutions and higher-performing NewEdge private cloud. Our local data centers in Africa were a driver for the wins, as we are able to deliver superior performance and data sovereignty to these customers. The geographic and vertical diversity of these customer wins and use cases is a testament to our clear technical differentiation and disciplined execution across all regions. Our new customer wins were all competitive bake-offs against primary competitors, where the capabilities of the Netskope, Inc. platform proved itself in extensive POVs. We continue to land with multiple products and have seen strong growth in multiproduct adoption across our customer base. As of the end of Q4, 56% of our customers were using four or more Netskope One products, and 27% were using six or more products. I am pleased with the strong performance of our go-to-market team across the globe. Our newly hired sales reps are ramping, and our tenured reps are delivering strong productivity. We put great leaders in place and recently filled some of our remaining key sales leadership positions, including the appointment of Joe Welch to lead our US public sector vertical, an area where we are underpenetrated but have strong opportunities. Joe is a seasoned veteran with decades of public sector experience in this space. We are also continuing to hire highly talented reps in all geographies, many of whom are joining us from key competitors across our space. I just returned from our annual sales kickoff, and I can tell you that our team's excitement, energy, and conviction is truly palpable. Our momentum is only building. As part of our comprehensive go-to-market strategy, we also continue to strengthen our relationships with system integrators and strategic partners. During Q4, we partnered with the largest GSI in the world on a major enterprise deal in the energy sector, supporting digital transformation and zero trust for approximately 80,000 employees. Other recent engagements include a large government defense customer in Asia Pacific and a major health care customer in North America. This key partner holds over 150 certifications on the Netskope, Inc. platform, and their support extends our global operations. This is just one example of how we are partnering well on large-scale, partner-driven enterprise transformations globally. On the technology partner side, Netskope, Inc. also recently achieved the Amazon Web Services Security Competency status for AI Security. This competency assures AWS customers that Netskope, Inc. has met technical and quality standards to deliver best-in-class solutions for securing AI workloads across AI security use cases. In closing, I want to reiterate that we are in the early innings of an AI super cycle that is exposing a fundamental flaw in legacy and first-generation SASE architecture. Legacy security acts as a latency tax on AI performance, forcing enterprises to choose between safety and speed. We believe the next decade will be defined by a structural shift towards an intelligent edge architecture built specifically for an autonomous agentic economy. Netskope, Inc. is uniquely positioned for this era for three reasons. First, we have an architecture for the future. While legacy vendors proxy the past, Netskope, Inc. is the distinctly AI-native proxy with innate fluency to secure the languages of the future—APIs, JSON, and the emerging protocols like MCP. Two, we also scale without friction. We have eliminated the security tax. Our AI Fastpath infrastructure has unique capabilities to perform complex, real-time security at the speed of AI inference. And three, finally, we are an intelligence moat. Our advantage is rooted in active context and the real-time AI-fluent proprietary data we generate. While others count traffic, we understand intent. Our proprietary data from trillions of real-time transactions, validated by the Netskope AI Index, makes us the indispensable source of truth for the AI economy. Sitting squarely at the intersection of cloud, AI, networking, and security, Netskope, Inc. has a massive market opportunity, which is projected to grow to at least $149 billion by 2028. We have just begun to scratch the surface and look forward to what is to come. The plumbing of the AI era is being laid today, and it will take many years to fully realize. By unifying high-speed performance with deep semantic intelligence, Netskope, Inc. is not just selling a platform. We are providing the essential adaptive fabric to the modern AI enterprise. For the next, 2026 was an incredible year of growth and expansion for Netskope, Inc., and our IPO in September was just the beginning of our public company journey. We see an incredible path ahead as we attack the AI security and networking opportunity with exciting new products, continue to bring more customers onto our platform, expand business with existing ones, drive further innovation, ramp our sales team, and drive awareness globally. I am proud of what we have accomplished—particularly our first full year of positive free cash flow generation and industry-leading ARR growth at scale. I look forward to seeing many of you at RSA in a few weeks, where we will demonstrate and share more about our AI strategy and new products, and engage in other ways in the months ahead. With that, let me now turn it over to Andrew to provide financial details on the fourth quarter and our outlook for the first quarter and fiscal year 2027. Andrew? Andrew Del Matto: Thank you, Sanjay, and hello, everyone. As Sanjay shared, Netskope, Inc. had a very successful fourth quarter, closing out the year on a strong note. We continue to deliver significant growth as our investments in NewEdge, new product innovation, and our go-to-market organization continue to pay off. Before I share Q4 and fiscal year 2026 results, let me remind you that all financial comparisons are on both a year-over-year and non-GAAP basis unless stated otherwise. For the full year 2026, we are proud of what we accomplished. We delivered revenue of $709 million, or 32% growth; ARR of $811 million, up 31% year over year; net new ARR of $193 million, up 35% versus fiscal 2025; operating margin improvement of 18 percentage points while continuing to invest in our innovation and go-to-market engines; and we generated $12 million in positive free cash flow, which marks Netskope, Inc.'s first fiscal year of positive free cash flow and an improvement of $163 million over fiscal 2025. This translates to a 30 percentage point free cash flow margin improvement year over year. Moving on to Q4 results. ARR grew 31% to $811 million at the end of Q4. As Sanjay noted, we also had a record quarter for net new ARR of $57 million. Q4 revenue grew 32% to $196 million. We also experienced strength across geographies. In Q4, revenue in the Americas grew 32%, EMEA increased 36%, and APJ grew 26%. Our teams executed well, and our investments in our sales organization are paying off. In terms of customer metrics, the number of customers generating more than $100,000 in ARR in Q4 grew 22% year over year to 1,531. Enterprise and large enterprise customers are our focus, and more than 85% of our ARR comes from $100,000-plus ARR customers. Note that the average ARR from this customer cohort grew to more than $450,000 per customer. This is indicative of our success in both expanding our installed base and securing significant new enterprise deployments. Our Q4 net retention rate, or NRR, was 116%, while our churn and downsell rates remained at historic lows. Composition of deals varies quarter by quarter, but our consistently strong NRR reflects our customers' ongoing confidence in Netskope, Inc.'s platform and expansion of their deployments as they consolidate vendors and modernize their infrastructure. Customers view Netskope, Inc. as a long-term strategic partner given our commitment to innovation and ability to deliver products that solve the complex and evolving security challenges in the cloud and AI era. In addition to NRR, we look at multiproduct adoption to demonstrate our expansion opportunity within our customer base. As Sanjay mentioned, at the end of Q4, 56% of our customers were using four or more products versus 48% a year ago, and 27% were using six or more products, up from 22% a year ago. We are pleased with this progress and believe our 25-product Netskope One platform gives us a clear opportunity to continually expand within our growing customer base as they consolidate more of their security and networking stack with us. Moving on to the rest of the income statement. We saw the benefits of Netskope, Inc. being built to scale. Gross margin was 76%, an increase of approximately five percentage points from Q4 last year. Our gross margin expansion is being driven by the efficiency of our NewEdge architecture, which is generating better unit economics as we scale. Q4 operating expenses totaled $171 million, up approximately 3% sequentially. Operating margin improved five percentage points year over year to negative 10%. R&D expenses improved 100 basis points year over year to 36% of revenue, driven by earlier investments in a common data platform and hiring in high-talent, cost-efficient locations. Sales and marketing expenses remained flat at 40% of revenue as we continue to invest in quota-carrying sales reps. Our consistent improvement in gross margin and operating margin reflect the operating leverage we have unlocked as our earlier strategic investments in infrastructure and talent begin to compound. Net loss per share was $0.04 using 395 million weighted average shares outstanding. As a reminder, our non-GAAP EPS excludes the change in fair value of the convertible notes we issued prior to our IPO. Fully diluted share count using the treasury stock method was approximately 503 million shares as of 01/31/2026. We generated $4 million in free cash flow in Q4, representing a 2% free cash flow margin. Note that this was driven by our laser focus on efficiencies and in the first year of our transition to annual billings. We are pleased with our ability to drive positive free cash flow, as this demonstrates the leverage inherent in our model. While we will continue to realize the benefits of being built to scale on margins and cash flow, our path to sustainable positive free cash flow is not expected to be linear. The timing of cash collections can vary quarter to quarter, and we expect to continue investing in the business for long-term growth. And finally, we ended the fourth quarter with $1.2 billion in cash, cash equivalents, and marketable securities. Before I share our guidance for the first quarter and fiscal year 2027, let me briefly outline some factors that should be considered. We are continuing to make investments in our business, most notably in R&D and sales and marketing. We are continuing to hire sales reps across the globe to support our expanding market opportunity aligned to the AI super cycle that Sanjay noted. At the same time, we are leaning further into our AI roadmap and expanding our AI-native Netskope One platform with additional products to support our customers' AI adoption journeys both today and in the future. While we are adding AI engineers and data scientists to drive further innovation in this important emerging area, we are also empowering our teams with AI tools to drive efficiencies in development and other areas of our business. We expect to see most of the impact from these investments to operating margin during the first half of the year, leading to improving operating margin in the second half of the year. As we look at gross margin, we are on track to achieve our long-term target of 80%. With the foundational investments we have made in NewEdge, we now expect margin gains to come through top-line growth and continued optimization. Now that gross margins improved into the mid-seventies, we expect progress from here to be more gradual and may not follow the linear step function seen in recent quarters. Also, as we have discussed in the past, we are shifting customers to annual billing on multiyear contracts where possible. Billing annually will improve predictability and consistency of our cash flows. I am pleased to highlight that this transition is occurring faster than we originally expected. While it is difficult to predict exactly how this will impact future free cash flow, we expect to see the most significant impact in Q1 with negative free cash flow in the range of $50 million to $60 million. We expect that to improve in the second quarter, return to positive free cash flow during the second half of the year, and to end the full year with positive free cash flow in the range of 2% to 4%. We will continue to provide you with quarterly updates as we progress throughout the year. We began this billing transition a year ago and expect to see the bulk of the impact this year. And finally, we believe we are uniquely positioned as a significant beneficiary of the AI super cycle due to our unified AI-native fabric that eliminates the trade-off between performance and security. At the same time, we are early in the year, still have a large portion of our sales reps ramping, and we are continuing to establish our reporting cadence as a public company. And while AI and cloud adoption are driving significant interest in platforms like Netskope, Inc., we recognize that macro and geopolitical factors have the potential to impact customer spending plans. We have built our guidance with these factors in mind. Let me now provide our guidance for Q1 and fiscal year 2027. As a reminder, these numbers are all non-GAAP unless stated otherwise. For Q1 fiscal 2027, we expect revenue in the range of $197 million to $199 million, representing growth of approximately 26% at the midpoint; operating margin of approximately negative 16%; net loss per share of $0.06 to $0.07 using approximately 405 million weighted average common shares outstanding. We expect to see the largest free cash flow impact of our transition to annual billings in 2027 with much of that impact in Q1. As I mentioned, we expect negative free cash flow in Q1 of $50 million to $60 million. For the full year fiscal 2027, we expect revenue in the range of $870 million to $876 million, representing growth of approximately 23% at the midpoint; gross margin of approximately 77%; operating margin of approximately negative 10%, gradually improving from negative 16% in the first half of the year; net loss per share of $0.19 using approximately 415 million weighted average common shares outstanding; free cash flow margin in the range of 2% to 4%. Note that the annual billings transition is estimated to reduce our free cash flow margin by approximately six percentage points, which is reflected in this guidance. As noted earlier, we expect that to improve in the second quarter, return to positive free cash flow during the second half of the year, and end the year with positive free cash flow. We have highlighted these modeling points in the appendix of our investor presentation. In closing, we remain confident in our ability to execute on our long-term strategy and innovation, driving strong and durable revenue growth and capturing share of our expanding opportunity. We remain focused on prioritizing disciplined execution and strategic investments that strengthen our competitive advantage and continue to drive growth and margin expansion. Innovation drives our flywheel for growth. As such, we will continue to invest in data and AI engineers while utilizing AI to drive efficiency and product velocity. We will also continue to invest in go-to-market while remaining fiercely committed to delivering profitable growth. Thank you for your time today. With that, I will turn it over to the operator for Q&A. Operator: Thank you. To withdraw your question, please press 1-1 again. We will now open for questions. Our first question comes from the line of Brian Essex with JPMorgan. Your line is open. Brian Essex: Great. Good afternoon. Thank you for taking the question and congrats on some solid results. Maybe one question for Sanjay and then a follow-up for Andrew. I guess, Sanjay, where would you assess that we are in the maturation cycle with respect to enterprises knowing what they need to secure AI? Are your AI security announcements ahead of the curve, or are these approaches that you are already seeing CIOs demand as they look to, kind of, you know, secure their, you know, AI estate? And then, you know, for Andrew, could you maybe just help us understand the context of the sequential revenue guide? Looks like Q1 would imply only up a couple of million dollars. So we would love to understand the puts and takes there. Thank you both. Sanjay Beri: Yes. Great question, Brian. So I think, first of all, from an AI perspective, most organizations are in the infancy. They are in the first inning. 90% of their usage of AI is shadow AI, meaning they actually did not bring it in, their end users did. And so when you think about that concept, you harken back to this really just being very early. And so from an AI security perspective, our focus is always to skate to where the puck is going, anticipate what they will need, and deliver a best-of-breed solution to solve this problem—discover their AI, guardrail it, control it, and then enable it with precision. And so that is what these new products do, building upon our previous capabilities to enable AI. So we will share more at RSA and beyond as well on that. Andrew? Andrew Del Matto: Yeah. Thanks, Brian. In terms of the Q1—I think you are talking about Q1 guidance—again, first year as a public company, and so we are going to remain prudent, as we have said in the past, and so there is that. We do have reps ramping, and we talked about before they tend to ramp more later in the year, let us say, and we still have quite a bit of ramping going on with terms of the reps that have come in over the last year. And then finally, there are some geopolitical, macro headwinds that probably happened over the last, you know, I would say the last couple of weeks. Brian Essex: Right. Right. Thank you both. Very helpful on both fronts. Operator: Thank you. Our next question comes from the line of Meta Marshall with Morgan Stanley. Meta Marshall: Great. Thanks, and echo congratulations. Maybe for Sanjay, just in terms of, you know, are you seeing—I think during the IPO process, you kind of talked about these four main use cases that people were, kind of, coming in with. Are you seeing any changes in what either those use cases are, or as you start to expand more of the product portfolio that you are selling, just any changes to, kind of, where a majority of people are coming in? And then maybe a follow-up. Just in terms of, you know, maybe the net new ARR growth this quarter—net expansion stepping back from Q3—just any commentary on, kind of, what you saw there would be helpful. Sanjay Beri: Thanks. Great question. So from a use case perspective, when you look at our top use cases, they were, come in to help people enable cloud and web no matter where they are. The second was securing and enabling AI. I will say that has moved up in the stack. Every conversation I have, people come to us and say, look. We already run all our AI traffic through you. We released the Netskope AI Index today—it is probably the first definitive source of worldwide AI tracking by vertical, by geo, and by size of customer. Well, that kind of shows you the amount of AI traffic traversing the NewEdge network. And so what people have come to us to say is, look. You are the Fastpath to AI. Help us secure it, enable it, guardrail it, and let us say yes to it. And so that is a top, top use case that they are coming to us with, and that has been elevated. Obviously, the other ones—remote access, modernize my infrastructure, converge, consolidate, simplify my network security app—all of those are still top of mind, but definitely the AI one has been raised. And so we are very excited about that, to be blunt, because we feel like, hey. This is what we were born for. Right? Our proxy is really a JSON, API, MCP-fluent proxy. Start with cloud and now AI. It is sort of a one-two punch in a good way for us. So we are very excited, obviously, about what is to come, to be blunt, in the many, many years because we are early, obviously, in the AI super cycle. As far as net new ARR, we had, obviously, a high comp in Q4 of last year. You can see that as you kind of metric it and you watch through that growth. We are, obviously, happy to record the highest net new ARR we have ever had. You saw the growth in our customers of over $100,000 in ARR, right, in 23-plus percent, and, obviously, strong upsell as well. And so for us, the other big point to remember is we really started hiring and ramping our reps mid year, so beginning in Q3 last year. It takes about 12 months for them to ramp to full productivity, and, and so that is another big piece for us that we continue to drive. Operator: Great. Thanks. Thank you. Our next question comes from the line of Robbie Owens with Piper Sandler. Robbie Owens: Great. Appreciate you taking my question this afternoon. Wanted to ask more high level just around revenue model. And as you think forward—and I know it has been disclosed here—you are primarily a seat-based model. And obviously, there are some concerns in the market what seat-based models look like going forward, especially in light of all the recent layoffs. So as you add new modules and new capabilities, do you see that shifting more either towards traffic or capacity or things that will—it will be an underlying seat-based model that you are protected by adding more modules on top. So would just love some color. Thanks. Sanjay Beri: Yeah. It is a great question. So when you look at what we do, we run the traffic for most enterprises. We run everything. All their generative AI traffic, all their agentic traffic, their cloud traffic, their on-prem traffic—it goes through us. The reality, though, is there is no free lunch on our network. And so if you are going to run users through our infrastructure, which is what obviously people do, you pay for that by user. If you are going to run agentic traffic, right, whether it is server-side or client-side, whether you have an AI agent, you pay by transaction. And so all of the new products we released today, they are charged by transaction. What is a transaction? It is a prompt and a response. Right? That is kind of the token for the agentic economy, and that is how we charge. So no matter what people run and what that balance is over time, we are going to make money off that. And so you will see, and you have already seen, four new products today—all transaction-based—which essentially maps to what you can think about as tokens. Operator: Thank you. Our next question comes from the line of Gray Powell with BTIG. Your line is open. Gray Powell: Okay. Great. Thanks for taking the question. Yeah, so maybe one on the product side. So one of your larger network security peers, they appear pretty bulled up on the potential for improved demand in the SD-WAN markets and the opportunity for legacy replacement this year. Netskope, Inc. also often receives high marks on WAN capabilities. So I am just interested—what are you seeing in your pipeline, and then how often are you having discussions where both security and networking are buying centers that are involved in deals? Andrew Del Matto: Yep. Great question. So first of all, you are right. Like, in an organization, when you map out the structure, you have a CIO and you have the security leader and the infrastructure ops leader. You also now have an AI leader, and we often train all our reps—go after that square. You have to hit all four. Now where buying decisions are made, it can be in one or it could be multiple. But we obviously hunt across all of those. For us, we are a networking and a security company for the cloud and AI era. Right? And so we think about consolidation of both. The SD-WAN—what does it do? It is for speed. It is for performance. It is for resilience. And that is how we view it. And so we offer it in software form factor on your endpoint. Right? You can put it in your infrastructure. And we have seen great growth in it. You saw a great win we had in a very large distributed organization where they combined our SD-WAN as a smart on-ramp to our NewEdge network and all our security functionality. And so that concept, often called unified SASE by analysts, for us, we can deliver on that. And so what do I see in the future? Well, look at agentic traffic. The key is that agentic traffic is going to come from a user working remote. It is going to come from an oil rig, which is running AI on it. It is going to come from agents, right—many of them running on servers. All of that traffic needs to be accelerated. And that is really what the AI Fastpath is. We are the best path for agentic and non-agentic traffic, whether you are doing inference or beyond. So SD-WAN is just one small part of that fast story. Gray Powell: Okay. Thank you very much. That was helpful. Thank you. Operator: Next question comes from the line of Matthew Hedberg with RBC. Your line is open. Matthew Hedberg: Great. Thanks for taking my question, guys. Andrew, I think in your prepared remarks, I am curious—was that you said deal composition can change from quarter to quarter, sort of the reason why NRR ticked down by a couple 100 basis points? Or just, I am just trying to get a little more clarity on that element. Andrew Del Matto: Well, first of all, we view a 116% NRR as very strong, to be frank. I think anything in the mid to upper teens is something we would be very happy with, Matt. But look. NRR does vary quarter to quarter. Some quarters, we have more upsell. Some quarters, we have more new logo revenue. You know what? I think we have said that before. And note that Q4 a year ago was one of the strongest, if not, you know, a record quarter from an upsell perspective—Q4 of FY '25. That being said, looking forward, we have a large installed base. Average customer has, I think, 4.4 products. We have 25-plus products, four new products announced today—again, as Sanjay said, transaction-based—so a lot of white space and, you know, hopefully, a lot of upside there. And just want to mention that downsell and churn remain at historic lows. So retention remains very strong. Matthew Hedberg: Got it. Thanks, Andrew. Operator: Thank you. Our next question comes from the line of Brad Zelnick with Deutsche Bank. Your line is open. Brad Zelnick: Great. Thank you so much for taking the questions. A lot of good information that you have revealed, you know, in these results. I have got one for Sanjay, one for Andrew. Sanjay, you spoke to a lot of this in your remarks, but I just want to hit it head on. It is great to see the unveiling of Netskope One AI Security today, and I think there is consensus that network traffic will grow exponentially as AI agents are rolled out into production. My question is, with the massive throughput requirements that agentic east-west traffic may demand, why is SASE and more specifically Netskope, Inc. best positioned to secure this traffic versus maybe a virtual firewall vendor? And then just quickly for Andrew—Andrew, just why is the shift to annual billings happening faster, and should we expect to see that result in maybe an unexpected benefit to ARR and revenue as you get better pricing? Sanjay Beri: Thank you very much. Thanks for the question. So when you look at agentic traffic, what is, like, an AI agent doing, and what are people most worried about it doing? Well, an AI agent unleashed will go access your endpoint. Guess what? Netskope, Inc.—we monitor that. We have our endpoint data protection. It will go access your cloud apps, right, over the Internet. That is what we do. We monitor it, understand what are they accessing, restrict what it can access dynamically, whether it is a shadow agent or not. Your on-prem data—that is what our AI-enabled ZTNA does. And so I guess the summary is when you look at what Netskope, Inc. does, we have a sensor that sees all traffic that goes back on-prem, to your cloud, to your AI applications—no matter where it goes—to a website. We also have a sensor on the endpoint where we do our data protection and beyond. And then we also have a sensor which looks at all out-of-band activity, right, when you look at our lineage around understanding how these applications work, with CASB and beyond. And so we are in this unique spot where the world is about—do you have unique data? Can you generate proprietary data that no one else can see or has? And that is what we do. Because we are the most performant, largest cloud private network, because we have the ability to interpret this data at a much more granular level, we understand the agentic interactions at that granular detail. And as a result, our policy enforcement—our 1,000 of them have chosen us to secure their agentic traffic. Brad Zelnick: Very helpful. Andrew Del Matto: Yeah. And, Brad, great question on the billings. Look. I would remind everybody that, you know, the billings transition provides strong predictability and consistency of both billings and free cash flow, ultimately. We added a slide 24 to help illustrate the transition and where we are. I would point everybody to the 78% growth in the future billing commitments—the future committed billings. And the interesting part about that is we can see what is coming. We can actually see the dates we bill. We can obviously model collections better. And, again, we have been free cash flow positive, and that will, obviously, tilt up later in the year. But as far as, like, why going faster? It is just really strong execution. We have been very focused on it internally. We have been inspecting the deals, so to speak, and making sure that we are communicating with the salespeople and helping them through the transition, along with our customers. And then just in terms of pricing, I mean, the way we really think about pricing is we focus on value. You know, we have high win rates, and so pricing to us is more about selling the value of our products. And quite frankly, you know, we will continue to focus on that. We have new products to offer—I think a stronger story with the new AI products coming out—and those are the things I would really look to, to strengthen the trend on pricing. Brad Zelnick: Awesome. Thank you so much for taking my questions. Operator: Thank you. Our next question comes from the line of Jonathan Ho with William Blair. Your line is open. Jonathan Ho: In terms of your profitability guide for 2026, I know you talked a little bit about investments. You help us understand maybe where you see the most opportunity to place those investments? And what would be, sort of, the timeframe for us to see perhaps an inflection in growth as you spend more on R&D and sales and marketing? Thank you. Sanjay Beri: Yep. Great question. So from an investment perspective, obviously, you have seen our yearly guide, but you also saw that we are investing upfront. And when that upfront investment is, it is really in AI—continuing to AI-enable our R&D team. So when you look at the world today that we live in, I believe that every engineer can be a 10-times engineer. And AI is not about by coding something or so on. It is about making your elite engineers 10 times more productive and 10 times more focused on architecture. And so what do you have to do to enable that? Well, you want to invest in AI orchestration. That could be to help them automate workflows, to automate their validation and testing, to automate, sort of, the rote stuff that they have to do, so they can focus on the unique part. And so that is what we are doing in Q1—investing in that in the first half, in that AI tooling. Now what you will see after that is you will see in the second half and beyond that we really do not need to ramp our R&D in terms of headcount as what you may have thought, right? We can be a lot more efficient. And so this is about laying continually the groundwork for R&D efficiency. You have got to invest a little in AI tooling, and then you see a lot of that benefit from an R&D leverage. And you will see that, obviously, as we continue our R&D percentage of revenue downwards. And so that is probably one of our bigger investments. The second is in the sales and marketing. We mentioned that really mid last year, we started bringing on more reps, and those reps take about 12 months to ramp. Well, one, not only do we continue to invest in enabling them, but we are hiring more teams, right? And we know what is in front of us in terms of the TAM for the next decade—one of the most durable TAMs you will ever find in any industry, including security, where we operate on the far right of security, right? We operate the network. We operate the infrastructure, the highway, to everything that you can think of. And so we want to take advantage of that and continue to ramp and hire from a sales perspective. But we are doing that very responsibly, with this notion of being very efficient in R&D by investing in tooling. And so that is really our upfront investments in the first half. And that is why you see what you saw from the guide on Q1, Q2 versus the rest. Operator: Thank you. Thank you. Our next question comes from the line of Richard Poland with Wells Fargo. Your line is open. Richard Poland: Hey. Thanks for taking my question. Just a quick one for me. I think it was Andrew—you mentioned the geopolitical, macro headwinds kind of happening over the last couple of weeks. I just wanted to clarify on that. Is that something that, you know, you are starting to see show up in demand and pipeline? Or is it just, kind of, you are observing what is going on in the macro environment, so you are taking some extra cautionary steps in the guide. Alright. Andrew Del Matto: Fair question, Rich. I think, you know, it is something—I think we can all recognize that there have been more events in the last couple of weeks. So it is something just to consider in terms of being prudent, in our mind. To keep in mind, we have a, in terms of that area of the world, so to speak, we have a very small percentage of our business. So I do not—it is less about that and just more about, you know, what I would call kind of a more macroeconomic risk. Richard Poland: Okay. Great. Thanks, guys. Just prudence. Operator: Thank you. Our next question comes from the line of Shrenik Kothari with Baird. Your line is open. Shrenik Kothari: Yeah. Thanks for taking my question. So the AI Fastpath is really, as you said, shifts focus from not just securing AI to securing at scale with AI-native fabric and the new modules that you announced. So as it pulls the conversation away from, like, traditional kind of FTE-based pay cost towards more broader discussion, can you talk a little bit about how the AI Fastpath has been progressing—your pipeline right now? And then I have a quick follow-up. Thanks. Sanjay Beri: Sure. Yeah. It is a great question. Like, we have always believed that ultimately nobody implements security unless it has a great end user experience. In the agentic world, performance matters more. Agents talk constantly, right? They can talk at a rate that is 100 times a human. And so it accentuates the need for a fabric that can operate and perform and be resilient worldwide. If you look at our infrastructure, it is the largest private cloud in the world. It is the largest highway or airspace for AI. And so those 120-plus data centers, with our architecture and software and memory operating at high speed on all agentic traffic—that is a huge advantage for us. And what we tell customers is just try it. Just measure it. You will see a very, very noticeable performance difference. Whether you are an AI agent or you are an application, you are a user, right? You are an IoT device. And so the AI Fastpath is the next evolution of that for the AI era. You are going to a coding application, right? You are going to any of the thousands of generative AI apps you can see on the AI Index. We are going to be the fastest path to get there. We are going to handle that. We are not going to throw it on the public Internet. We are going to get you there directly. And so for us, the AI Fastpath is a big part of how we think about the agentic era—its performance, resilience, in addition to security—and we are combining them all. Operator: Thank you. Our next question comes from the line of Eric Heath with KeyBanc. Your line is open. Eric Heath: Hey, thanks for squeezing me in and solid finish to the year. Sanjay and Andrew, over 30%. Maybe just one for you, Sanjay, and maybe a quick one for Andrew. Sanjay, just following up on some of your comments about the customer wins in the quarter being, I think, all of them competitive bake-offs, and I think we all kind of really appreciate the static set of competitors it has been for a long time, but there are some incremental competitors out there that have popped up in the last couple of years. So curious if you could just talk to whether the competitive set—who you are bumping into in these deals—is changing at all. And then, Andrew, if I could, just any high-level guardrails you want to give us on ARR for the year would be great. Thanks. Sanjay Beri: Great. So from a competitive perspective, we have, you know, 25 products. We just released four. One of the great things about efficiency in R&D that you have seen—obviously, R&D percentage of revenue going down, obviously the supercharging of it with AI and the need to not, you know, not to hire as many from an R&D perspective—you are also seeing velocity increase. I think I previously said that we release on average two products a year or so. Well, we have already released four-plus, and I think that trend will continue for us. And so we are very excited, obviously, about that supercharging. And as a result, because of the breadth of what we do, we do see different competitors. For example, in the data protection area—which, you know, data, frankly, is what drives the agentic world—we would have seen still some, a lot of the legacy folks, right? You cannot imagine how much legacy Broadcom Blue Coat and all the rest is out there in Symantec and Trellix and so on. Whereas perhaps in the traditional kind of web world, proxying web, you would see your competitors that you may see in a Magic Quadrant that you would expect. And then when we delve into, sort of, what I called about the AI Fastpath—the performance—you really do not see anything there because the network is obviously just very different, very unique from that perspective. And so I think, like, we hit across a cross section of competitors. But what is noteworthy is our win rate of over 80% if we get to a POC, a proof of concept, right? That has held. And so our nirvana is just get to a POC—whether it is about enabling, securing AI, securing cloud, converging, consolidating your network infrastructure. That is why we are growing our sales teams. That is why we announced the GSI partnership and that win with the largest GSI. And that is why we continue, you know, to power through in the mid market with our MSPs. It is just—that is why we went public, to be blunt: drive awareness. And so that awareness takes time. It is coming. And we definitely have the platform that, when you get to knock that door open, we will win. Andrew Del Matto: And, Eric, on ARR, again, you know, while we do not guide, maybe I can be helpful with how to think about modeling. You know, last quarter, we ported the history. I would do the same thing. You can see that, I think, ARR was about a point below revenue growth. So, you know, I would say if I were modeling, kind of, at a point above, point below—something like that, right in that range. Eric Heath: Awesome. Thank you, gentlemen. Operator: Thank you. Our next question comes from the line of Shaul Eyal with TD Cowen. Your line is open. Shaul Eyal: Thank you. Hi, good afternoon. Andrew, maybe can you talk to us about ASP patterns in light of rising memory prices? Sanjay Beri: I will take that question. So for us, when you look, first of all, at our landing and our average ARR per deal size—you can calculate it—it continues, you know, for our customers to continue to go up. When you look at memory, I think that, in one case, people often talk about that as when you sell boxes and appliances and everything ships with memory. That is obviously not really what we do in the majority of cases. For us, it is our infrastructure. It is our network. What runs on it is our software. And so we feel good about our guide for this year in terms of incorporating what you just said. Obviously, that is a fluid environment, so we will watch that for next year. But we definitely feel good about the guidance we have given from a financial metric perspective that incorporates all of what you described. The reality is that for us, when you think about us, we process all this traffic. You can see it. You should go to ai-index.netskope.com. And when you look at that traffic, what matters there is what you do when you see it. And, ultimately, that, in many cases, is our moat. It is uniquely taking those transactions and generating very unique, granular data that can then inform your security policies, your security analytics, optimization of that, your guardrails, and so on. And so for us, obviously, we are excited about continuing to drive more into our existing infrastructure, which can more than handle what we need to drive for this year. Operator: Thank you, Sanjay. Thank you. Our next question comes from the line of Trevor Walsh with Citizens. Your line is open. Trevor Walsh: Great. Hey, team. Thanks for taking the question. Maybe just a quick one for you, Sanjay. Just wanted to square some of the comments that you made both in the prepared remarks and your responses to some of the questions. You said that the AI revolution is exposing legacy architectures within SASE. Is that going to result in, like, just breaking of those legacy or more just dissatisfaction, just generally, with performance? And then secondarily to that, is there some sort of leading indicator that investors could use to just determine whether or not more of that breaking or dissatisfaction is going to come once AI and agent traffic is getting to a certain point? Maybe the AI Index you just released gives us clues there. Just trying to get a sense of when we really start seeing the wheels fall off, potentially, of other players, if that makes sense. Sanjay Beri: It is a good question. So I would look at it in two sides. One is the infrastructure and the network side, and one is security—because you kind of need both. On the infrastructure and network side, the agentic era will expose networks that were built, for example, in the public cloud, where you are going to get way worse performance. When you have more interactions back and forth, the performance difference becomes bigger, right? It became big with cloud. It will become bigger with AI. And so, one, your infrastructure. The second is, for us, we run all services everywhere—120 data centers. Everything we do runs everywhere. We do not hairpin people to a public cloud for one, to your own infrastructure for another. And so just the purity and the modernness of our architecture and our infrastructure, it leads to just better performance. And AI accentuates that. So, one, I do think the infrastructure and the network of others gets exposed. The second is, remember, since the beginning of Netskope, Inc., we have always said we are not trying to build a web proxy, right? We were building a modern API/JSON proxy. And it sounds technical, but what does it mean? The language of AI is that. The language of AI is APIs and JSON. I have a patent sitting outside my door here, which is real-time interpretation of Internet traffic at the API level. And the reality is that the AI era is about that. How do I say to someone that, hey, you can use a personal instance—or you cannot use a personal instance—of Gemini, but you can use a corporate version? And if you want to send sensitive data there, you can only do that with a corporate version. How do I have all these policies that guardrail and enable people to use AI, yet satisfy the business policies they want? You need something that truly understands the new language of the Internet, which is really what AI accentuates. And so for us, one of the engines to our car is a high-speed, distributed, in-memory, API/JSON proxy. That is unique. And so I remember this customer who came to me and said, Sanjay, I bought a SASE. I bought it, and it was working. But then I started adopting AI and cloud, and I have to bypass 70% of all traffic because all it can do is block the app or allow it. I do not want to block AI. I do not want to allow it either. I want something more granular. Right? And that customer moved all their traffic to Netskope, Inc., right? It is close to 100,000 users and agents and beyond. And they are very happy. And so I think that will happen more and more over time. But as you know, it is an enterprise, and an enterprise does not do things instantly. And so that will be a transition that will happen over the next many years. Trevor Walsh: Great. Thanks all. Appreciate it. Operator: Ladies and gentlemen, due to the interest of time, our last question will come from the line of Michael Romanelli with Mizuho. Your line is open. Michael Romanelli: Yeah. Hey, guys. Thanks for squeezing me in here. So, Sanjay, you touched on this in, you know, prior response, but how does your sales capacity today compare to where you were a year ago, both in total as well as in the number of ramp reps? And then separately, I guess, how would you characterize or assess your pipeline, you know, as we head into fiscal 2027? Thanks. Sanjay Beri: Yeah. It is a great question. So for us, we obviously started ramping, hiring more reps really full force last year. And you can see that in, sort of, the S&M spend as well as it ramped early midyear last year. And it takes about 12 months for us to ramp those reps. And so if you look at that, it is really, for us, in the second half of the year when a lot of those reps will be fully ramped. And, by the way, for fully ramped—as you know, when you get a rep, we do not throw them into a place and give them a bunch of existing accounts. They are hunting new greenfield accounts. So they get on, they start hunting those accounts. They build their pipeline. They get the POC, do the MSA. That is why you have those ramp times, to be clear. And then we are continuing to hire. And so we are building that rep funnel for next year as well. And so, really, that is the best way for you to think about it—bunch of those fully ramped reps coming online in the second half of the year. Michael Romanelli: Beautiful. Okay. Great. Operator: Thank you. I would now like to turn the call back over to Michelle for closing remarks. Michelle Spolver: Thank you, Towanda, and thank you all for joining us today and also staying a few minutes over. Look forward to engaging with you in the weeks and months ahead, including at RSA this month, where we will be sharing more about our AI strategy as well as demonstrating our newly announced AI products. Thank you all. Have a good evening. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good afternoon, and welcome to the Petco Health and Wellness Company, Inc. Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Roxanne Meyer, Investor Relations. Please go ahead. Roxanne Meyer: Good afternoon, and welcome to Petco Health and Wellness Company, Inc.'s Fourth Quarter Fiscal 2025 Earnings Conference Call. Joining me on the call today are Joel Anderson, Petco Health and Wellness Company, Inc.'s Chief Executive Officer, and Sabrina Simmons, Petco Health and Wellness Company, Inc.'s Chief Financial Officer. In addition to the earnings release, we have posted a slide presentation on our website at ir.petco.com. I would like to remind everyone that on this call, we will make certain forward-looking statements which are subject to a number of risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties include those set out in our earnings materials and SEC filings. In addition, on today's call, we will refer to certain non-GAAP financial measures. Reconciliations of these measures can be found in our earnings release, presentation, and SEC filings. With that, I will turn the call over to Joel. Joel Anderson: Thanks, Roxanne, and good afternoon, everyone. Thank you for joining us to discuss our fourth quarter and full year results. I am pleased to share that Q4 sales were in line with our outlook and we performed better than our adjusted EBITDA quarterly goal. Looking back on 2025, we successfully delivered on our robust agenda to strengthen our economic model and improve retail fundamentals, which resulted in significantly higher cash flow and profitability year over year. Specifically, the year, we achieved a 21% increase in adjusted EBITDA, a 77% increase in operating cash flow. Our healthier EBITDA and opportunistic debt paydown drove a meaningful reduction in our leverage ratio at year end, allowing us to start the year with greater financial flexibility. This was no small feat, and I am exceptionally proud of our team. We collaborated across the organization. We strengthened our culture. We communicated expectations, and we acted with urgency and decisiveness. It is important to note that the majority of our senior leadership team, which is exceptionally well tenured and talented, has only been together for about one year. We enter 2026 with a running start, something we did not have in 2025. Some of the most recent additions to the team include Sabrina Simmons, CFO, who many of you already know; Michael Romanco, Chief Customer and Product Officer; and Joe Venizia, Chief Revenue Officer. The entire team's work has been transformative, and yet we are just getting started. In addition to strengthening our financial foundation in 2025 and rebuilding the leadership team, we completed our Petco North Star strategy, including a comprehensive customer segmentation and needs analysis. This work is already shaping how we prioritize assortment, services, and experiences, and it also informed our updated brand positioning: where the pets go to live their real life. One key takeaway from the segmentation work is the identification of who our most important engaged customers are. That segment we call Passionate Explorers. These are pet parents who are highly invested in their pets and seek innovation, expert support, and a welcoming shopping experience across the full pet journey. 2026 will be informed by this strategy work, and execution will center on four growth pillars I will review in detail later on this call. They are, number one, compelling product driven by increased newness, brand launches, and own brand expansion; number two, services at scale, leveraging our wholly owned vet, grooming, and training ecosystem; number three, trusted store experience, focused on driving traffic, engagement, and basket; and finally, number four, an integrated omnichannel model improving convenience, loyalty, and repeat behavior. With that, I will now turn it over to Sabrina to provide details on our fourth quarter financial performance and our 2026 outlook. Following her remarks, I will discuss the specifics of our growth strategy for 2026, and we will then open it up to your questions. Sabrina Simmons: Thank you, Joel. Good afternoon, everyone. As we have discussed, our primary goal all year was improving profit and cash generation through our economic model, namely expanding gross margin rate, leveraging expense, and expanding operating margin. We are glad to report that we achieved this goal each and every quarter. For the full year 2025, we expanded our gross margin rate 66 basis points to 38.7%, leveraged SG&A 124 basis points to 36.6%, improved our operating profit by $100,000,000 and expanded our operating margin by 190 basis points, increased adjusted EBITDA 21.3% to $408,000,000 with a margin of 6.8%, and we delivered positive GAAP net income for the year. Additionally, free cash flow improved 276% versus the prior year to $187,000,000. These results enabled significant progress in achieving our goal of lowering our leverage ratio. Our net debt to EBITDA improved from 4.2x when we entered the year to 3.0x at the end of 2025. Now turning to the fourth quarter results, which reflect another quarter in which we delivered on our commitments while building a stronger foundation. In line with our outlook, net sales were down 2.4% to $1,520,000,000 with comp sales down 1.6%. As expected, the decline reflects our decision to move away from unprofitable sales, which was our strategy throughout 2025. As a reminder, the difference between total sales and comp is driven by the 25 net store closures in 2024 and the additional net 16 closures in 2025. The number of 2025 closures came in a bit favorable to our expectations, driven by a combination of improved store performance and favorable rent negotiations that supported improved unit economics for those locations. We ended the quarter with 1,382 stores in the U.S. Fourth quarter gross profit dollars were $581,000,000 while our gross margin rate expanded 37 basis points to 38.3%, including the sequential increase in tariff impact, which we anticipated. Moving to SG&A, for the quarter, SG&A was $549,000,000 or 36.2% of net sales, leveraging 62 basis points. The $23,000,000 decline in year-over-year expenses was partially driven by lapping last year's consulting costs. Marketing expenses increased $7,000,000 in the quarter. For Q4, our expanded gross margin and expense leverage resulted in operating margin expansion of 98 basis points, and our operating profit increased $14,000,000 or 83% in the quarter. Adjusted EBITDA increased 10.6% or $10,000,000 to $106,000,000, and our adjusted EBITDA margin expanded 82 basis points to 7.0% of sales. Moving to the balance sheet and cash flow, Q4 ending inventory was down 9.7% versus our 2.4% decline in Q4 sales. We continue to manage inventory with discipline, which is one of the drivers of our improved cash flow profile. For the year, free cash flow was $187,000,000, an increase of $137,000,000 or 276% versus last year. Our ending cash balance was $257,000,000, an increase of $91,000,000 versus last year, including having voluntarily paid down $95,000,000 of debt. As many of you have heard me state, our approach to our debt refinancing was opportunistic, and we are pleased to have executed the refinancing with favorable terms. We replaced a fully variable debt structure with a more optimal mix of fixed and floating, and extended our maturities to 2031, providing us ample flexibility. On our first call together last March, we stated our goal of reducing our leverage ratio to 2.0x or less. We are thrilled with the progress we have made in just one year. As we said, we started fiscal 2025 at over 4.0x, and in just a single year, we have reduced that to 3.0x, enabled by our focus on driving improved profitability and cash flow. With our retail and financial fundamentals strengthened, we are well positioned to turn more of our focus to regrowing top line and driving sustainable profitable growth over the long term. Now turning to our outlook. We are starting the year from a position of strength while continuing to navigate a bumpy macro backdrop. Of note, our guidance assumes that fuel prices normalize by the end of the quarter. For the first quarter, we expect net sales to be down 1% to flat versus the prior year, with comp sales roughly flat at the midpoint of the range, as we begin to build into the growth initiatives Joel will outline in a minute. We expect adjusted EBITDA to be between $92,000,000 and $94,000,000. Now turning to the full year, we expect net sales to be flat to up 1.5% versus last year as our growth initiatives take hold and build over the course of the year. Of note, similar to 2025, we expect net store closures between 15 and 20 in 2026. As is typical, store closures are weighted toward the back half of the year. We estimate the full year spread between total sales and comp sales to be about 50 basis points, though it will vary somewhat by quarter. This expectation implies positive comp sales for the year. We expect adjusted EBITDA to be between $415,000,000 and $430,000,000, with an overall goal of delivering on the economic model for the full year. To provide additional color on other line items, for the full year, we expect net interest expense to be about $125,000,000, capital expenditures of about $140,000,000 with an ongoing focus on ROIC, which we improved in 2025 by three percentage points, depreciation and amortization to be about $200,000,000, similar to last year, and finally, to be helpful with your models, we expect stock comp to increase by a low double-digit percent versus last year. As a reminder, stock comp will remain well below years prior to 2025. In closing, I want to thank our teams for executing on our transformation with great discipline, resulting in our significant growth in profitability and cash flow. I will now turn the call back over to Joel. Joel Anderson: Thank you, Sabrina. With our foundation firmly in place, I am energized to walk you through the specifics of our 2026 strategy that will drive our expected growth. As you know, we outlined a three-phased approach to our turnaround. We laid the foundation in phase one and phase two, and we are now entering phase three, which is about driving sustainable top-line growth. Internally, this phase three strategy is called “Reach for the Sky,” which is all about looking up and driving forward, leveraging our competitive advantages, and capitalizing on the growth opportunities we see across our business. It is also about the opportunity I see for Petco Health and Wellness Company, Inc. to be reimagined and broadened beyond primarily being a commodity-driven business. This is about the blue-sky opportunities Petco Health and Wellness Company, Inc. has to engage with pet families through the ups and downs and the real-life experiences of raising a pet. Our team has tenaciously driven cost savings and now will continue with that same rigor while driving sales and reaching forward. Petco Health and Wellness Company, Inc. is the only national fully integrated and comprehensive pet care ecosystem. Our vision for the Reach for the Sky strategy is centered around leveraging our differentiated store-based model to bolster our competitive positioning, increase relevance, and improve store productivity. We plan to fuel our growth by offering product newness and differentiation as well as further strengthening our community of pets and their humans through our unique store experiences, integrated omnichannel model, and wholly owned services. We are in the early innings of capitalizing on the significant opportunities that we see to gain share of wallet across all our businesses. The groundwork in 2025 has served us well. We expect these initiatives to grow sales and become more impactful as they materialize throughout 2026 and beyond. Now I will outline the detailed framework of our Reach for the Sky plan to drive sales within each of our four pillars. I will begin with our compelling product offering, specifically within consumables. This is roughly half of our business today, and in the U.S. alone, it is a $54,000,000,000 market. I will talk about four key catalysts within consumables to jump-start growth beginning this year. First, fresh food is one of our biggest opportunities. We have been a primary destination for fresh food for a long time and are continuing to build on that foundation by expanding the assortment. This category at Petco Health and Wellness Company, Inc. experienced healthy growth in 2025, and we expect the momentum to continue in 2026. This is an example of a category that exemplifies a significant advantage our store ecosystem brings. Beginning in Q1, we are adding additional freezers amounting to over 1,000 incrementally over the course of the year, which will enable us to expand our range of offers meaningfully. Our focus on driving share of wallet in the fresh food category is intentional. Of note, those that buy fresh food from us make over four more trips per year and spend over 50% more annually than dry-food-only dog customers. Secondly, we will launch new national brands. This area starts with communication. I have personally met with the leaders of several of our key consumables partners. They are aligned with our goals and objectives and excited about the renewed energy and focus of growth at Petco Health and Wellness Company, Inc. At the center of our strategy will be infusing a high degree of newness, including a significant number of new brands and flavors being added this year. The majority of these are launching in the first half. We expect these to generate excitement and customer interest. We look forward to discussing these with you in future quarters. Third, we are increasing the frequency of product drops. Historically, we set consumables merchandise annually with one big cat and dog food reset. As you can imagine, this did not provide our customers with multiple reasons to see what is new at Petco Health and Wellness Company, Inc., and often, we are the last to roll out a new innovation or flavor. We are changing this approach meaningfully by continuously layering in product newness throughout the year, both in consumables and supplies. This is designed to create excitement and freshness of product and will entice our customers to walk our aisles more frequently. And fourth, we are ramping our own brands business. This is within consumables and supplies. Own brands account for about 20% of our sales today and have the potential to become more meaningful over time. As part of our own brand strategy, we will anchor our focus on our strongest seven private labels, which already account for a significant percentage of our own brand sales, therefore leveraging the strength of these brands and increasing their presence and relevance. This focus on owned brands is intended to allow us to go faster and fill in voids our national partners do not have visibility to. In terms of key initiatives in consumables, we plan to offer new formulas and packaging in dog food. In supplies, we will expand our own brands business across categories and offer newness and innovation more broadly, such as in beds, bowls, collars, leads, and toys. And as we have mentioned prior, the margins of owned brands are significantly above that of national brands. In the supplies and the companion animal category specifically, we are introducing new assortments that we believe will further differentiate us from competitors. An example is newness in insects, such as jumping spiders and tarantulas, which we see as a newer pet trend in the United States. This customer basket is also likely to include ancillary supplies and consumables. Additionally, we launched “gardening with your pet” this month, a new category for us in nearly all of our stores. It includes gardening products and plants that provide customers with pet-friendly options. Moving on to our services pillar, we also see abundant opportunities to continue growing our wholly owned services business, which is a key aspect of our differentiated model. Services include vet hospitals, vaccination clinics, grooming, and dog training. This business was a strong performer in 2025, and we are expecting continued growth in 2026. While we took a purposeful pause in constructing new vet hospitals last year, we have been laser focused on improving productivity of our existing locations. In 2025, we optimized a significant number of our approximately 300 hospitals, and we will work on increasing the productivity of the still roughly 25 underutilized locations this year. Know that even after we complete these, there is still a sizable runway for driving higher sales and productivity improvements from these 300, and we will be focused on maximizing their potential. Bottom line here is that we are committed to the vet business as a key growth engine and are in the early innings of assessing the longer-term opening cadence and growth opportunity. That said, you should expect us to start growing our hospitals in 2027. We will keep you updated on plans as they come together. I would like to emphasize that our key competitive advantage in this space is that our vet hospitals are wholly owned and are part of the store. We uniquely have the opportunity to capitalize on retail traffic and to share customer information. As we have discussed prior, the opportunity is twofold: grow the vet business, as well as become a full-service pet needs provider by cross-selling food, prescriptions, and supplies. I am pleased to announce that we are adding technology and functionality beginning later this year and into 2027 to better enable us. The goal is to drive incremental trips and increase sales per customer. We are now operating at a scale that gives us the depth of expertise, breadth of coverage, and overall respect of the industry to be a desired employer of choice for veterinarians and vet techs to grow their careers at Petco Health and Wellness Company, Inc. The third pillar of growth opportunity I want to discuss is our key competitive moat, our differentiated high-touch store ecosystem. Our stores represent a significant portion of our total sales, and so they remain a key focus for us. We have changed leadership, reorganized how we operate, and unified our center-of-store operations with our services. We have also physically brought our stores and services leadership together three times in less than twelve months so that communication can be cascaded with one voice and expectations are clearly aligned. Our goal is to leverage stores to build community, excitement, and customer loyalty through frequent newness, higher levels of customer engagement—such as holding fun events for families and pets—and through wholly owned services that promote repeat visits. The end goal is to drive both traffic and basket. Our marketing efforts will be centered around driving traffic to our stores by building awareness for our product newness and in-store experiences. We will also capitalize on a more engaged customer in stores by focusing on increasing basket size. Specifically, we launched a major training initiative in February for all district and regional managers to promote cross-selling opportunities. This initiative is being cascaded to all stores this quarter. We estimate that successful cross-selling can drive one to two additional trips as well as a higher sales per customer over a six-month period. An example of this is a focus on converting grooming customers to purchase merchandise by giving groomers access to a customer's purchase history across the store. To give a sense as to how impactful this initiative could be, about half our dog customers currently do not buy dog food from us, so you can imagine the opportunity to capture a much greater share of their wallet. What backs our confidence in the long-term viability of the store model is that shopper demographics are also on our side. Industry data tells us that 34% of Gen Z customers shop exclusively in stores. Interestingly, this group's preference for an in-store experience is much higher than Gen X or millennials and is virtually in line with boomer preferences. We see this as a huge long-term opportunity, with the Petco Health and Wellness Company, Inc. model well positioned to capture Gen Z's desire for experiences and connections. Our field leaders are excited about these opportunities, and we will have more to share with you as the year progresses. The final pillar of our Reach for the Sky initiative is centered around integrated omnichannel. We call it integrated omnichannel because a significant portion of customer transactions leverage a combination of our digital capabilities and our stores. We made great progress in 2025 fixing our foundation, including minimizing unprofitable sales, improving e-commerce fill rates, fixing page load time, and adding new capabilities. While we will keep making improvements, it is time we start to grow our digital capabilities in 2026. One of the biggest opportunities we have is to turn up the dial in marketing. We have overhauled our media buying mix, which is taking hold in Q1, and our new branding, “Where the Pets Go,” will become more pronounced as our creative is reimagined to better support this fun-loving energy our physical stores bring to life. Additionally, we will relaunch the loyalty program later this year. Our goal is to offer a more personalized and relevant loyalty experience that is seamlessly integrated within our app. Our results from this initial pilot, which concluded in December, were encouraging. The next wave of our pilot began last week and will run through the spring season. We look forward to sharing an update on our Q1 call. A second key omni sales growth initiative we are excited about is visibility for our repeat delivery customers to now pick up their orders in store, which encourages our fresh food customer to visit our stores more often. This is an example of us leveraging the omnichannel model to maximize our growth opportunity. We believe this will aid in growing traffic, conversion, as well as basket size. In conclusion, I am proud of the long-term strategy we implemented last year to rebuild the foundation of our economic model, recruit an amazing team, and complete a comprehensive customer strategy to fully understand how we can win at Petco Health and Wellness Company, Inc. We delivered significant financial improvements. It is with this backdrop that I am confident in the actions we are taking to drive sustainable sales growth and profitability. We expect to start to see benefits beginning in Q1 and growing throughout the year. Specifically, the outlook that Sabrina provided implies a flat comp in Q1 at the midpoint. This would mark an inflection from the negative comp in Q4. For the full year, our outlook assumes our comps will be positive, with increases modestly above our total sales growth. Importantly, we believe our ability to gain market share is not entirely reliant on a cooperative macro environment or pet industry sales growth. Our Reach for the Sky initiatives are in many ways self-help in nature and designed to further differentiate Petco Health and Wellness Company, Inc.'s merchandise and services versus our peers. We are approaching 2026 the same way we did in 2025. We developed a strategy. We assigned leaders. We track milestones. And we execute. As the months go by, I am confident you will continue to appreciate how driven we are to deliver on our commitments, and I trust that 2025 is a great proof point for what is to come in 2026. I want to thank our teams for their dedication and hard work. While it is hard to single out any one team, the milestones our field teams achieved were truly incredible. We asked a lot of them, and they responded positively to every challenge. Our stores are the heart and soul of Petco Health and Wellness Company, Inc., and it is great to see them playing offense. Collectively, we are well positioned for our Reach for the Sky plan, and I am excited about its potential. Petco Health and Wellness Company, Inc. truly is where the pets go to live their real life. I would now like to open it up for your questions. Operator? Operator: We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question is from Michael Lasser with UBS. Please go ahead. Michael Lasser: Good evening. Thank you so much for taking my question. I feel you have provided a lot of great information on the strategy, the focus. How are you thinking about what is going to lead Petco Health and Wellness Company, Inc.'s growth from here? Is it going to be consumables first, which will then translate to the other parts of the business? Is this going to be services-led, which will then translate to other parts of the business? And how have you thought about the need to make further price investments, promotional investments, and other discounts in order to generate same-store sales growth over time? Thank you very much. Joel Anderson: Yeah, thanks, Michael, and really great question. A lot to unpack there. I think it is less about which one is going to lead, and what I hope you took away from what I just took you all through is whereas last year we were telling you what we were going to do to deliver growth, on this call, I showed you how we are going to do it, and we gave, as you said, specific examples in all four pillars. We are working simultaneously, Michael, on all four of them. Having said that, product probably takes the longest because you have your existing product that you have to sell through, then the new product will begin to come in. I can tell you we have about 25 new brands or flavors coming this year, as well as resets throughout all of supplies and many of the other areas like companion animals. All of that will take time throughout the year, and it will happen actually starting this quarter. But I am really pleased that in all four of those pillars, you are going to begin to see change starting right now in Q1. As for your pricing comment, you know what? We started in on that back in 2024, and we really feel like we got our pricing right throughout 2025. It is something that is dynamic, and we are watching it closely, and we will continue to adjust as necessary, but we feel like we have got our pricing in good shape for now. Sabrina Simmons: Yeah, I would just add to that, Michael, that we are definitely focused on delivering healthy margins for the year. It is an important focus, and we will stay competitive, we will stay adaptable, but we have still, you know, nice levers at our disposal to deliver on the healthy margins. We will continue to look, as Joel just said, where needed, we will participate in promos for sure to help drive traffic where appropriate, and then remember, we have this whole initiative of mix, where we are moving toward our own brand, and that should also support delivering on healthy margins. Michael Lasser: Thank you so much. Operator: The next question is from Oliver Wintermantel from Evercore ISI. Please go ahead. Oliver Wintermantel: My first question is about the drivers of the increase of the gross margins. And then as a follow-up—so maybe the first one is for Sabrina—Joel, for you on the growth initiatives, so inventories were down this year, which obviously helped free cash flow. With all these, you know, four pillars of initiatives, do you expect inventories then to increase this year, and what is the impact of that on your free cash flow outlook? Thank you. Sabrina Simmons: Yes, so I will just go through the gross margin levers one more time. We are very focused on delivering healthy margins, and we are going to continue to use and review our pricing. We are going to deliver on promos where appropriate and they make sense and they help us drive traffic in, etcetera. And we are focused on mix. So those are the big levers that will help us deliver on our goal of keeping those gross margins really healthy. With regard to inventory, yes, we did a lot of cleanup in 2025 on inventory. Some of the silver lining, if you will, of the tariff imposition in the spring last year was that it kind of forced us to get very disciplined about cutting off the unproductive tail of SKUs. We are past that now. As we look forward to 2026 for growth, we definitely want to invest inventory behind that. The important thing to us is that we remain disciplined in managing that inventory. So even as we invest in inventory, we will look to keep the growth in inventory at or below sales growth and keep that relationship very tight. Joel Anderson: I think you captured it all. Yep. Thanks, Oliver. Oliver Wintermantel: Thank you. Operator: The next question is from Kaumil S. Gajrawala with Jefferies. Please go ahead. Kaumil S. Gajrawala: Hi. Thank you, first of all, for all the detail on, you know, the plans for 2026. I guess there has been some oscillation over the years between you being specialty and premium and being mainstream. You mentioned a lot of national brands, which sort of makes me imply perhaps more of a mainstream look. But curious, you know, when you think about the brand of PepsiCo and—or sorry, the brand of Petco Health and Wellness Company, Inc.—and what its assortment says about the retailer, how are you thinking about what that assortment is going to say from a branding perspective? And you said something fascinating earlier on, you know, Gen Z's preference to, you know, shop in person, looking similar to baby boomers. Do you have a sense of why that is or what has changed, that generation versus the generations prior? Joel Anderson: Yeah. Look. You are absolutely right. I think in prior years, we narrowed our aperture, and I think as I look forward, we have to be there for all customers. And as a new pet parent adopts a pet, they go through several stages of that life. And, you know, one of those stages might be, I just need to get my dog fed. And as that dog becomes part of the family, they might decide to, you know, upgrade what their dog is being fed for food, and they focus on health and nutrition. And so the focus we have done over the last couple years is really to widen the aperture, and so one of the unique advantages of being a specialty retailer is that we are able to carry that specialty, premiumization, unique product, but we are also there, you know, for the customer that, you know, affordability is their primary need. And so I think we really have widened, and I feel really good about where assortment is today. As for Gen Z, I mean, obviously that is a bigger statement than just as it relates to pets. But, you know, like any good retailer, you have to understand your core customer, and we did the research, and part of that research, we studied, you know, what the makeup was of the age of our customer, and then that, you know, coveted 18 to 34, that younger customer—we skew about five percentage points higher than some of the other pet retailers. And so that happens to work out nicely because what also is a characteristic of that demographic is they like shopping in stores. And so I think there has been more of a return to stores that serves us well with who our demographic is. And, you know, as we did the customer segmentation work, we took advantage of that, and that is something we are really focused on going forward. But it worked out to be a nicely nice fit with who our customer is. Operator: The next question is from Steven Forbes with Guggenheim Securities. Please go ahead. Steven Forbes: Hi, Joel. Given the goal of services at scale, I was curious—like you did with dog food—if you can frame what percentage of your customers today engage in services in some form or fashion. And then, given the customer segmentation work you did around the Passionate Explorer, curious if you can maybe expand on, you know, what you are sort of focused on in 2026 to make sure that specific cohort is engaging. Joel Anderson: Yeah, let me take that cohort first. What we really learned about the Passionate Explorer is that they value discovery, they look for expertise—which plays in nicely to our services side—they seek innovation, and they are also somebody that shops more frequently and spends more with us. So our new merchandise strategy is certainly going to resonate with them: frequency of newness, innovation, the store events, and it also acts as a halo for all the other segments. And services is a really important part of the Passionate Explorer. Obviously, we have a lot of room to grow in services. As an example, you know, the hospital side of it, the vet side of it, it is only in about, you know, 20% of our chain—roughly 300 stores—so lots of room to grow there. Grooming is in all our stores, and, you know, that is an area we talked about on a couple, three calls now, where we have been improving the technology, we have been making it easier to make appointments, and so I see a lot of growth opportunities there as well. But, you know, one of the reasons I have said it many times: services is our moat, a point of differentiation for us, and we are going to keep leaning in on services. Sabrina Simmons: And what I will add to that, Steve, is that what is really important to us is to leverage the whole ecosystem, because what we know is the NSPAC for a customer who engages in more than one channel or in services is five times higher than our other customers. So it is really just expanding our relationship with our customer wherever they want to shop and making sure we are getting that loyalty, retention, and higher spend. Operator: The next question is from Simeon Gutman with Morgan Stanley. Please go ahead. Lauren Ng: Hi, this is Lauren Ng on for Simeon. Thanks for taking our questions. First, you mentioned 50% of dog customers do not buy dog food from Petco Health and Wellness Company, Inc. Curious what parts of your strategy outlined today will capture these customers if they are already loyal to, you know, certain brands and platforms? Will you be able to leverage your private label for this? And just quickly following up, you talked about entering Phase III today. Can you share how much of Phase III is currently implemented versus maybe how much room there is to grow? Joel Anderson: Yeah, great pickup from our prepared remarks. Probably the main reason I shared that with you is, you know, it is always easier to grow if you start with your current customers. And as part of our, you know, deep dive into who our customer is, where they shop with us, how they buy from us, that was a real big insight for us. And so, as an example, you know, prior to just recently, our groomers had no knowledge of whether a customer—a dog customer—bought food from us. And now we have enabled our groomers with technology to see every customer that comes in: when is the last time they bought dog food from us, what type of dog food are they buying, is it helping their sensitive skin or problem they have? And so that is just one example of us being able to cross-sell. And we believe, you know, the first place we are going to see growth is, you know, as Sabrina just alluded to, you know, NSPAC, you know, really growing the net spend per average customer. And I think we have a real opportunity with our dog customers that are not buying food from us today. As for Phase III, I would say from what the customer sees, very little has been implemented yet. From a strategy and teamwork internally, we have workstreams on every one of those I outlined for you today, plus a few others. So they are in various elements of being lit up for the customers. You know, product may be being shipped right now. Some may not come till second or third quarter. But very little of it, and you can see from our guide that, you know, we expect comp store growth to gain as the year goes by. Operator: Again, if you have a question, please press star then one. The next question is from Peter Benedict with Baird. Please go ahead. Peter Benedict: Hi, guys. Thanks for taking the question. So I wanted to—well, two questions. One, I just—Sabrina, if you could expand on kind of the fuel cost comment you made. I think you said something about fuel costs normalized. Just maybe help us understand maybe the variability with all the macro stuff going on with oil, etcetera. And then my second question is on your expanded fresh effort. You mentioned more freezers. I am just trying to understand, is it you are expanding the frozen fresh product? How about the refrigerated or chiller-based fresh? And I am curious, is it new brands, or you are expanding with existing brands? Maybe just expand upon that effort around Fresh a little more, if you would. Thank you so much. Sabrina Simmons: Sure. I will start with the fuel comment. So it has been a bumpy ride the last week or so, so we were just trying to be helpful with regard to, you know, our base assumptions in our forecast. But here is how fuel impacts us, and it is similar to every retailer out there. We have our inbound ocean, and that sort of lags. It comes in later into our P&L through cost of goods sold. And then we have our outbound from our DCs to our stores, a lot of it trucking—that can impact more rapidly. And then we have our parcel shipping that can also be impacted. So we have incorporated in our scenarios in the range we gave absorbing some of the volatility we have seen in gas prices over the last week or so. But, you know, the base assumption is that things start to normalize after Q1. Joel Anderson: Good. And then, you know, as it relates to fresh and frozen, you know, we look at that as one, and it ebbs and flows, and some of it is dependent on when our vendor partners are bringing out new product. And I think the most important fact you should take away from that is I am not just telling you we are going to grow fresh. You are seeing that we are making capital investments, and in this case, the example was the additional freezer coolers. But we also expect fresh to grow as well, and there are several new lines coming out middle of this year. So that is a category that grew significantly in 2025, and we see more growth coming in 2026. And, you know, some customers use it as a topper, some customers use it as a full meal, and so, you know, sometimes you need fresh and sometimes you need frozen depending on how you are using it with your respective pet. But big growth area for us. We are really excited about it. Operator: The next question is from Zachary Fadem with Wells Fargo. Please go ahead. David Lantz: Hey, guys. This is David Lantz on for Zack. Thanks for taking our questions. I guess, first one for me, within the 2026 outlook for top-line growth, what are you assuming for the broader category, and how did your performance stack up to peers in Q4 from a share perspective? And then one more: within Q1 and the midpoint of the guide being flat comp, is there anything we should keep in mind that is embedded within that for stimulus and/or, you know, store closures from winter storms here quarter to date? Joel Anderson: Well, look. I am not going to break it down by, you know, specific areas. I think the focus on our end is to grow overall top-line growth, and some of that will come from consumables, obviously, because that is over 50% of our business. But, you know, we are really—as you can tell from my comments—we have got initiatives in all aspects of the business: services, consumables, companion animal, supplies. And, you know, obviously, with us intentionally reducing, you know, unprofitable sales last year, you know, we gave up some market share. And with our growth this year, we will start to gain that back. Sabrina Simmons: Yeah, and I would just add to that, you know, this year is really more about another self-help year as we look to grow sales. We are not overly reliant—we are not counting on big tailwinds from the sector. I mean, we feel like we have all of these opportunities that Joel outlined, and these initiatives are going to really support our outlook. And, you know, as for how we think about our share, even though, yeah, we gave up a little top line in 2025, we really grew a lot of bottom line. So we have cleaned up the business. We are coming from a strong foundation. There is an opportunity, as Joel said, to first grow share of wallet with our current customers. I think the next opportunity to pick off is sort of small independents and small chains who have about four percentage points of market share in the pet sector. So there are lots of opportunities for us to go after without being overly reliant on any tailwinds. And on Q1, you know what? We have taken into account—there are so many pluses and minuses in this kind of noisy macro we are living through. So, sure, I mean, on the plus side, you have got, like, the tax refunds coming in—all, you know, can only be a positive. On the minus side now, you know, as we just talked about, you have some fuel pressure. So we have kind of tried to bake those scenarios within our guidance, and we do not—we have not been overly reliant on any of those levers because, again, even with the taxes, one does not know how much will go to savings versus spending, etcetera. Now what we like about this environment—or what we like about our customers, I should say—is our customers skew to the higher end of the income spectrum. So that is good news for us because that end of the spectrum can obviously withstand macro changes without it being as large of a percentage to their overall well-being. Joel Anderson: Then as far as weather goes, you know, first quarter is always volatile. It was volatile last year, volatility in it this year. The way I think about it big picture is by the time the quarter is done, the volatility kind of evens out with pluses and minuses, and that is kind of how we thought about it in the guide for this year. Operator: This concludes our question and answer session. I would like to turn the conference back over to Roxanne Meyer for any closing remarks. Roxanne Meyer: Great. I want to thank everyone for joining the call today, and we look forward to updating you on our progress. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sonida Senior Living, Inc. Q4 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 then the number 1 on your telephone keypad. I would now like to turn the call over to Jason Finkelstein, Investor Relations. Jason, please go ahead. Jason Finkelstein: Thank you, operator. All statements made today, March 11, 2026, which are not historical facts, may be deemed to be forward-looking statements within the meaning of federal securities laws. The company expressly disclaims any obligation to update these statements in the future except as required by law. Actual results or performance may differ materially from forward-looking statements. Certain factors that can cause actual results to differ are detailed in the earnings release that the company issued earlier today, as well as in the reports that the company files with the SEC, including the risk factors contained in the Annual Report on Form 10-Ks and Quarterly Reports on Form 10-Q. Please see today’s press release for the full Safe Harbor statement, which may be found in the Form 8-K filing from this morning or at the company’s Investor Relations page found at investors.sonidaseniorliving.com. As further described in the company’s current report on Form 8-Ks, filed with the SEC this morning, the company completed its previously announced acquisition of CNL Healthcare Properties, Inc., or CHP, through a series of steps ending with a forward merger of CHP within into a subsidiary of the company, with such subsidiary surviving the CHP merger, as a result of which the company now indirectly owns all the assets of CHP. Unless otherwise specifically noted, or the context otherwise requires, the information presented on today’s call does not reflect the closing of the CHP acquisition. Please also note that during the call, the company will present non-GAAP financial measures. For reconciliations of these non-GAAP measures to the most comparable GAAP measure, please see today’s earnings release. If you would like to follow along during today’s call, you can find Sonida Senior Living, Inc.’s fourth quarter and full year 2025 earnings presentation in the Investor Relations section of the company’s website. In addition, we have included supplemental information within our presentation, consistent with prior quarters’ releases. I will now turn the call over to Sonida Senior Living, Inc. President and CEO, Brandon M. Ribar. Brandon M. Ribar: Good afternoon, and thank you for joining us on our fourth quarter and year-end earnings call. This morning, we announced the completion of our previously announced merger in which Sonida Senior Living, Inc. has acquired CNL Healthcare Properties, or CHP, for a total consideration of $1.8 billion. The transaction closed on an accelerated timeframe with the overwhelming support of shareholders from both Sonida Senior Living, Inc. and CHP. More than 95% of votes received supported the transaction, a reflection of the significant value proposition delivered to shareholders of both companies. I am thankful for the substantial effort put forth by both parties and our respective advisers. The transaction significantly enhances the company’s competitive positioning, including benefits of scale with additional accretive investment opportunities, increased trading liquidity, and balance sheet strength, accelerates our growth profile, and is expected to deliver earnings accretion to Sonida Senior Living, Inc.’s shareholders. It is worth pointing out that based on the accretive asymmetrical collar structure that was put in place, we have issued approximately 8 million fewer shares than originally anticipated based on the reference price at the time of the announcement, resulting in material additional value creation for both legacy Sonida Senior Living, Inc. and CHP shareholders. Further, based on yesterday’s closing price, which is above the high end of the collar range, CHP shareholders received $7.22 of total consideration, which compares favorably to the $6.90 of value they would have received had the stock remained in the collar range. We are excited to welcome all of the CHP shareholders to Sonida Senior Living, Inc. We assure you that every day we strive to create significant value and returns to our investors. The company has been on quite the journey over the last three years. Including this transaction, we have added 93 communities to our portfolio of owned real estate since 2024, nearly all of which are high-quality assets in growth markets that are newer than most of the competition in the market. We will continue to strive for excellence in our operational capabilities and customer service across each community we manage. I will provide additional color on the integration work completed since the transaction was announced last November later in my remarks. Switching to the performance of our business, I am pleased with the progress and continued momentum in the fourth quarter, which continues into 2026. The impact of investments in our labor model and the restructuring of operations were evident in our fourth quarter results and continue to trend well in the early months of 2026. Growth in both our same store and acquisition portfolios accelerated in Q4, and we are optimistic that with Q1 results, we will continue the trend of year-over-year and sequential quarterly improvement in top-line and bottom-line metrics. For the full year 2025, Sonida Senior Living, Inc. net operating income increased more than 22% and adjusted EBITDA at share improved 28%, a testament to both the earnings potential of assets purchased in 2024 and our operating team’s ability to drive organic asset growth while limiting our incremental G&A. We continue to see improving trends in the first quarter based on occupancy improvement in the same store portfolio alongside an accelerated recovery in newly purchased communities. Additionally, for the full year 2026, we are targeting growth in our revenue per occupied room at or above our same store growth achieved in 2025. Our portfolio top line continued to deliver sequential growth and year-over-year improvement driven by both occupancy and rate, highlighted by accelerated recovery in our acquisition communities. I would like to quickly highlight the accelerated recovery in our acquisition communities. The 19 communities acquired in 2024 performed exceptionally well, with a sequential occupancy improvement of 290 basis points from Q3 to Q4. Comparing Q4 2025 to Q4 2024, for these communities total occupancy improved 820 basis points, revenue increased more than 22%, and NOI margin expanded from 21% to 28%. This further demonstrates the growth potential in 2026 and beyond and is a reflection on the caliber of real estate we acquired and our team’s operating capabilities. Given both the scale of the CHP transaction and Sonida Senior Living, Inc.’s track record of successfully integrating communities into our operating platform with minimal periods of disruption, we are extremely optimistic that this merger will continue to drive improved performance trends and significant upside in a combined platform. Heading into 2026, our operating team will place added emphasis in two specific areas: the consistent delivery of excellent clinical care and services that support the health and well-being of our residents, and the continued development of a labor model that rewards our strongest employees and furthers our retention efforts. We are proud of the work done in recent years to reduce our turnover by more than 30 percentage points. However, we still have room for improvement. Kevin will provide additional detail on our efforts across the labor side of the business, as well as progress across key operating metrics in Q4. I will quickly touch on the work completed over the previous four months on post-transaction integration and our updated view on synergies, corporate and operational. We have spent considerable time working with the operators across the existing CHP portfolio to understand areas of opportunity and assess potential strategic relationships. Our first priority is minimizing operational disruption for residents and community team members. Two key components to the effort are creating additional incentives for strong ongoing performance at the operator level and maintaining continuity within the CHP asset management function in the pro forma Sonida Senior Living, Inc. platform. Performance at the CHP operator and asset level has continued to trend favorably post announcement, with strong results in Q4 and positive trends as well early in 2026. We previously identified value-creating synergy in three components: the reduction in the cost associated with managing the 54 SHOP assets and the operational benefits communities will experience as part of the Sonida Senior Living, Inc. platform. Kevin will provide further detail in his comments, in addition to our plans for reporting changes in Q1 consistent with real estate-heavy peers, including the REITs. The addition of high-quality real estate located in strong growth markets further enhances the near- and long-term earnings power of our portfolio. On the combined portfolio, we will also accelerate deleveraging through strategic asset dispositions, enabling Sonida Senior Living, Inc. to recycle capital into higher growth, higher quality assets. This approach will apply to approximately 10% of the portfolio based on community count and subject to operational trajectory and market dynamics. We also expect the company’s free cash flow generation post transaction to provide significant capital for reinvestment in both internal ROI projects and new acquisitions. The commitment of a new upsized $405 million revolver at close of the transaction will further increase our available capital to capitalize our robust investment pipeline during the remainder of 2026. Finally, I will touch briefly on the company’s capital structure. We are pleased to have reached an agreement with Conversant Capital for the early conversion of its Series A convertible preferred stock into common equity. As disclosed earlier today in our Form 8-K, the convertible preferred originated in 2021 with the Conversant recapitalization and, as of 12/31, had an outstanding balance of $51.25 million carrying an 11% coupon, which we have been paying in cash. Under the terms of the new agreement, the Series A will be converted into common equity at $32 per share, thereby eliminating a high-cost and onerous remnant of the company’s legacy capital structure. This more than $5 million of additional annual free cash flow savings will be used to reinvest in opportunities in excess of the current 11% cost of capital. Pro forma for the conversion, Conversant will be fully aligned with all shareholders, with all exposure via common equity. The transaction simplifies our capital structure, reduces our cost of capital, accelerates our deleveraging, and improves the pro forma free cash flow profile of the business. Note that the impact from this subsequent event is not reflected in the financial information being shared in today’s earnings presentation. These operating results and the continued value-creating growth of our platform, including the CHP transaction, depend on the strength and capabilities of our local and regional leadership. We are proud of the compassion and commitment to results delivered every day in our Sonida Senior Living, Inc. communities. Our focus will intensify further on retaining, developing, and recruiting new talent as we grow. Employee turnover and leadership turnover within our communities continue to trend favorably. Kevin will share additional details on companywide trends, and I am confident these retention levels are a result of the investments we have made in wages, benefits, and the positive and supportive culture at Sonida Senior Living, Inc. We continue to attract high-level talent in the operating and support functions due to elevated interest in career opportunities with Sonida Senior Living, Inc., and I am confident we will continue to attract top-notch talent with a commitment to providing high-quality care and services to our residents. Our near-term strategy and focus remain consistent as we accelerate our growth trajectory. Our mission is to continue building a best-in-class real estate portfolio with geographic purpose that enables our owner-operator model to deliver differentiated FFO and NOI growth. Operational performance based on retention and development of strong local and regional leadership, combined with advanced technology platforms to improve resident outcomes and operating efficiency, remain the linchpin to our success. Continued acquisitions in our primary geographies, along with strategic expansion into additional markets, will create further benefit operationally, including additional product offerings and pricing options, efficiencies in sales and marketing costs, and labor efficiencies. I will now turn the call over to Kevin for a detailed discussion of our Q4 financial performance. Kevin J. Detz: Thanks, Brandon. I will pick up on slide 16 with some commentary on Q4 and full year 2025. For our total portfolio at share for Q4, the company realized a 5.9% increase in REVPOR when comparing to the same quarter in the prior year. Annually, the year-over-year REVPOR growth was 8.8%, which reflects an elevated rate profile from our acquisitions and outsized rate increase on our same store portfolio during the year. On an annual basis, adjusted EBITDA grew 28% through a combination of our same store portfolio’s steady growth and the high-paced growth of our 2024 acquisition cohort. The same store portfolio picked up an additional 20 basis points of sequential occupancy gains in Q4 on the heels of growing our Q3 occupancy by 90 basis points to close out a strong second half of overall occupancy gain. With the 19 communities from the 2024 acquisition cohort moving into the same store portfolio in 2026, we anticipate accelerated occupancy gains as these communities achieve full stabilization. Moving to our acquisition portfolio in more depth on slide 18, the company realized an annual 680 basis point occupancy jump from 2024. Just as significant, most of this top-line performance flowed through, with the acquisition portfolio’s community NOI margin expanding 550 basis points to 24.7% from its 19.2% average. This one-year look at our 2024 and 2025 acquisitions validates the company’s strategy of acquiring underoperated quality assets in strong submarkets at significant discounts to replacement cost. Further, due to the timing of the four community acquisitions that came online in 2025, this year’s NOI margin success was largely driven by the 2024 acquisition. Because of this, we believe there is a similar significant runway for outsized KPIs on the 2025 acquisition cohort in the upcoming year. Moving to total portfolio highlights on slide 19, the company grew its year-over-year total portfolio NOI at share by 22%, or $15 million on an annualized basis. Note that the overall year-over-year occupancy and margin percentage for the total portfolio at share is unfavorably impacted due to the acquisitions coming in at lower starting average occupancy and margin levels. Moving ahead to slide 20, where I will briefly touch on our new reporting portfolios for 2026 and beyond, going forward our communities will be presented in one of three portfolios: same store, non-same store, and triple net lease. This simplified grouping aims to create more meaningful comps to our peer set and more closely aligns with how management thinks about the business and the company’s core portfolio. Earlier, Brandon referenced our strategy to upgrade our portfolio to a higher quality and younger community composition. To support this strategy, the company anticipates pruning its portfolio by approximately 10% based on community count, both legacy Sonida Senior Living, Inc. as well as CHP communities, and recycling capital out of communities with limited long-term growth prospects. Note that these communities represent significantly less than the 10% of NOI as they are less profitable than the company’s core assets. These noncore assets will be reported in our non-same store portfolio, along with our four stabilizing communities that came online in 2025 and other communities where targeted reinvestments and/or care conversions are in flight. The pro forma impact of bifurcating these noncore assets out of our same store portfolio yielded a 16.2% year-over-year NOI growth rate when comparing Q4 2025 to Q4 2024. The related pro forma NOI margin percentage on this future-state same store portfolio of 27.8%, coupled with the recent execution of another successful annual in-place rate renewal campaign, positions the company for near- to mid-term achievement of breaking the 30% NOI margin threshold. Hitting once more on occupancy on slide 21, our same store occupancy gained 20 basis points sequentially in the last quarter of the year, which is typically the softest quarter of the year in terms of resident demand and tours. Despite this, we believe the widened sales funnel from our investments into digital marketing during 2025 allowed us to convert an outsized percentage of tours to move-ins, particularly in the second half of the year. We also believe that with similar strong demographics and our increased submarket density, the CHP portfolio will be favorably impacted by the overlay of Sonida Senior Living, Inc.’s digital marketing and SEO capabilities. On to the same store rate discussion on slide 22, looking ahead to 2026, the average annual rent renewal rate on in-place leases for the recent March 1 renewal was 7.9%, which was applicable to 96% of the total same store residents. For context, the same percentage one year ago on a similar resident lease count was 6.8%. Additionally, the level-of-care revenues for 2025 increased 11.4% compared to prior year. Both these KPIs confirm that our thoughtful and detailed approach to rate setting, which is anchored by our investments in technology and close collaboration with community leaders on market rate analysis, is sustainable and will position us to continue to expand margins. We believe our pricing power will also benefit from the pruning of a handful of under-earning communities and increasing overall demand as occupancy levels continue to rise. On the CHP portfolio, we are excited to see how the investments made in our clinical technologies will expand the capture of more timely and accurate care reassessments-related ancillary revenues. Diving into margin drivers and NOI more broadly, we will move ahead to slide 23 to discuss same store operating expense trends. As a percentage of revenue, total labor excluding benefits decreased 40 basis points from the previous quarter and also decreased slightly from the same quarter in 2024. In our Q3 earnings call, we discussed several communities’ labor not being flexed timely amidst a rapid spike in occupancy during that quarter. Using our proprietary labor tools, we identified the drivers of the labor misses and implemented more stringent labor controls and close monitoring oversight through our corporate support center. These measures took root and supported reduced labor levels towards the end of Q3 and fully into Q4. For the fourth quarter, hours relative to occupancy decreased 2%. Additionally, absolute direct labor and overtime decreased approximately, and on the non-labor expense front, $200,000 from Q3 to Q4. Absolute operating costs decreased slightly from Q3 2025 to Q4 2025, resulting in a favorable expense trending over the same period. Based on the structural changes to our labor control program in 2025, and positive early trending in 2026, we are encouraged by a solid foundation of unit economics around overall labor dollars. On the G&A and synergies front, we will revisit slide 11 for some of the merits of the CHP acquisition. We previously identified value creation in three distinct and separate areas: first, the reduction of total company G&A; second, the reduction in costs associated with internalizing management of a portion of the 54 SHOP assets; and third, the operational benefits CHP communities will experience as part of the Sonida Senior Living, Inc. platform, not necessarily limited to communities for which Sonida Senior Living, Inc. will start to operate directly. Our initial guidance contemplated only the reduction in G&A, with a range of $16 million to $20 million per year-one run-rate synergy. Based on our diligence, this synergy estimate continues to be appropriate, largely in part due to the immediate termination of CNL’s advisory fee in connection with the close of the transaction. Beyond this initial guidance, we have identified further opportunities for future synergies tied to the latter two areas. Since November’s acquisition announcement, the initial discussions we have had with CHP’s third-party operators and our combined company deployment structure analysis have provided us with clear visibility into both top- and bottom-line upside that should gradually be realized through planned integration activities. Starting with our first full combined reporting period in Q2, we will introduce additional reporting metrics such as normalized FFO, consistent with real estate peers. Closing out my prepared comments, we will move to the balance sheet on slide 24. The CHP acquisition has allowed the company to take a significant stride towards its short-term leverage target of 6.0x to 6.5x. The capitalization includes two term loans totaling $525 million at S + 195 bps, with the ability to push down to S + 130 bps as the company further reduces its leverage levels. Beyond the upsizing of the company’s revolver to $405 million that Brandon referenced earlier, the accordion feature provides for an additional $320 million of debt capacity to support the company’s growth initiatives. In total, the bank debt provides for total capacity of $1.25 billion and was led by blue-chip banks, including seven first-time lenders to Sonida Senior Living, Inc., as well as the re-upping from our two legacy corporate lenders, BMO and RBC. We are extremely pleased with the execution of this syndication and the support that the bank group can provide to our ongoing growth. Back to you, Brandon. Brandon M. Ribar: Thanks, Kevin. 2026 is off to a strong start on all fronts. The combination of organic growth across our 96 communities, coupled with the addition of high-quality assets within the CHP portfolio, provides opportunity for accelerated growth. On the people front, our leadership team across the community, regional, and central support level has never been stronger or more motivated to create great outcomes for our residents, team members, and key stakeholders. Plans are in place for the successful integration of new communities on a responsible and productive timeline, and further strategic relationships with select new managers offer additional growth opportunities. We welcome our new shareholders as of today, and the additional institutional investors seeking a differentiated owner-operator platform. We are truly excited about the future ahead and thankful for the consistent support from our existing investors. This Sonida Senior Living, Inc. team remains fully dedicated to the successful execution of our organic and inorganic growth objectives. This concludes our prepared remarks. Operator, please open the line for any questions. Operator: At this time, if you would like to ask a question, press star and the number 1 on your telephone keypad. To withdraw your question, simply press 1 again. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Ronald Kamdem with Morgan Stanley. Please go ahead. Ronald Kamdem: Great. Congrats on closing the merger. I am sure that was a lot of work to get done. I guess my first question, and I can appreciate I think you mentioned normalized FFO guidance is coming in Q2, but I think the presentation had $1.20 sort of on a run-rate basis and so forth. I was just wondering if you could talk through, at a high level, what the adjusted EBITDA and interest cost and any other assumptions that were going into that number post merger. Thanks. Brandon M. Ribar: Yeah, Ron. Thank you for the congrats. The team did a ton of work over the last handful of months, and I think in terms of what is going to go into the calculation, we will continue to get that information out as we release in Q1 and all the various components that are going to go into it. Our goal has been to make it comparable with the other large-scale reporters on the REIT side, so you should expect that there will be consistent puts and takes around those numbers as we convert them over to providing that additional information. Ronald Kamdem: Great. And then my second question was just on the 10% of the portfolio that is to be pruned. Any idea of the speed of that? Is that over the next six to twelve months, or how are you thinking about that? And is that capital going into more acquisitions in the pipeline? Is it paying down debt? Is there more development CapEx to spend? Just how are you thinking about those sources and uses? Thanks. Brandon M. Ribar: Yeah. I would say that we do want to make progress on that front right out of the gate, so I would expect, in the six- to twelve-month timeline, that we will be in the market on a handful of those assets. As Kevin mentioned in his script, they are not really high NOI contributors in terms of the percent of the total portfolio. Dollars from those transactions would first go to delever the company and then would be available for recycling into assets that we feel reflect what the go-forward portfolio represents, which are high-quality, newer-vintage assets in strong growth markets that have a really good growth trajectory. So think about it in terms of reducing the low-growth assets and recycling that into higher-growth, newer, long-term hold assets. Ronald Kamdem: Great. And then my last one, if I may, is just on the portfolio changes. I think you said 16% plus—16% to 17%—same store NOI pro forma for the new same store pool. Is that a good run-rate number? Is there any puts and takes in terms of comps or anything like that? Because I think the reported number was sort of 6.5% for Q4, so that is a big delta. Just wondering if there are any other puts and takes around that. Thanks. Kevin J. Detz: Hey, Ron. This is Kevin. I appreciate all the comments. We think about that number as just a jumping-off point from 2025 in terms of how that new bucket, that redefined bucket of assets, performed, not necessarily relative to the peer set. As we release the blocks to model this out and then normalized FFO metrics, you will get more insight as to what we think that NOI growth percentage would be. But right now, what we are seeing, particularly on the rate environment and the stabilization of rate hours and labor, we think that is a pretty good number in terms of what we can expect from that new same store portfolio. Ronald Kamdem: Great. Thanks so much. That is it for me. Operator: Your next question comes from the line of Wes Golladay with Baird. Please go ahead. Wes Golladay: Hey, everyone. Congrats on getting the merger completed. Follow-up on Ron’s question: when you look at your new same store pool, it looks like there is going to be a lot of occupancy gain and also some pricing power in the legacy portfolio. But that 6% or 7.9% rate increase, is that for the legacy pool or the current pool? Kevin J. Detz: That is for the legacy pool that just got pushed through last week, March 1. Wes Golladay: Okay. And then you talked about working on your labor model, boosting retention. Do you think that will be all completed within this year? Brandon M. Ribar: I do not think we will ever be fully complete on optimizing our labor model. The reality is we are always going to be working on it. I think we feel really good about the market right now in terms of being able to retain our people at levels of wage increases that are in line with our expectations and inside of what we experienced last year. So I think that the areas in the middle of last year that we saw a challenge in or invested in additional labor costs, we feel confident that trends we saw in Q4 are continuing in the early part of this year. We have a significant amount of resources dedicated to ensuring stability on that front, and then also working, as we bring new communities into the fold, on areas of opportunity within their labor models. So that will be a heavy focus for us this year. Wes Golladay: Okay. And then on the disposition front, you did mention selling lower income-producing assets, but can you talk about what is your long-term plan with the net lease assets? Will those be any part of the dispositions this year? Brandon M. Ribar: I would say that, right out of the gate, clearly there is a very attractive profile from a cash flow perspective that we have shared in terms of our expectations around stabilized free cash flow. So there is a really strong component to that. It is not our core business, but I think that we will conduct ongoing evaluation of how the market is looking at those types of assets and opportunities. So no immediate plans. I think that we will be thoughtfully considering how that continues to look in the market and whether or not there is an opportunity that makes sense to sell and recycle the capital. But, realistically, immediately we are going to see the benefit of two really good operators in there that are delivering really stable cash flow through those leases. Wes Golladay: Great. Alright. Thanks a lot. I will hop back in the queue. Operator: That concludes our question-and-answer session. We will now turn the call back over to Brandon M. Ribar for closing remarks. Brandon M. Ribar: Thank you all for participating in the call today. We appreciate all the support. We are excited around the announcement this morning of the completion of the merger and look forward to continued discussions next time we chat around results. Take care. Operator: Ladies and gentlemen, this concludes today’s call. Thank you all for joining. You may now disconnect.
Operator: Good day, and welcome to the biote Corp. Fourth Quarter and Full Year 2025 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Szymon Serowiecki, Investor Relations. Please go ahead. Szymon Serowiecki: Thank you for joining us today. This afternoon, biote Corp. published financial results for the fourth quarter and full year ended December 31, 2025. This news release is available in the Investor Relations section of the company's website. Hosting today's call are Bret Christensen, Chief Executive Officer, and Bob Peterson, Chief Financial Officer. Before we get started, I would like to remind everyone that management statements during this call include forward-looking statements regarding, among other things, the company's financial results, future performance and growth opportunities, business outlook, strategic plans, anticipated benefits, goals, research and development, manufacturing and commercialization activities, its competitive position, regulatory process operations, benefits of its solutions, anticipated impact of macroeconomic conditions on the business, results of operations and financial conditions, and other matters that do not relate to historical facts. These statements are not guarantees of future performance. They are subject to a variety of risks and uncertainties, some of which are beyond the company's control. Actual results could differ materially from expectations reflected in any forward-looking. These statements are subject to risks, uncertainties, and assumptions that are based on management's current expectations as of today. biote Corp. undertakes no obligation to update them in the future. Therefore, statements should not be relied upon as representing the company's views as of any subsequent date. For discussion of risks and other important facts that could affect their actual results, please refer to our SEC filings available on the SEC's website and in the Investor Relations section of our website as well as risks and other important factors discussed in the earnings release. Management also refers to EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures to provide additional information to investors. A reconciliation of the non-GAAP to GAAP measures is provided in our earnings release with the primary differences being stock-based compensation, fair value adjustments, certain liabilities, and other non-operating expenses. Please refer to our fourth quarter 2025 earnings release for a reconciliation of these non-GAAP measures to the most comparable GAAP measures. I will now turn the call over to Bret Christensen. Bret Christensen: Thank you, Szymon. Thank you all for joining us. I will provide a summary of our key strategic and operational accomplishments in 2025 and discuss our priorities in 2026. Bob will then review our fourth quarter financial results and provide our 2026 financial outlook. After our comments, we will open the call for your questions. 2025 was a pivotal and productive year for biote Corp., marked by important changes to the biote Corp. team, our processes, and our culture. Through our decisive actions, we achieved progress against our strategic plan, and I believe we became a more resilient, more disciplined, more effective organization. These qualities position biote Corp. to drive increased and sustainable growth in the large and underserved market of hormone replacement and therapeutic wellness. As you recall, our top three strategic objectives were, one, prioritizing and accelerating new clinic growth; two, maximizing value from existing top-tier clinics; and three, strengthening accountability and discipline throughout the company. I will begin with our progress on new clinics, which are fundamental to generating consistent revenue and earnings growth over the long term. To accomplish this goal, we rebuilt a significant portion of our commercial team and recruited new leadership and talent who bring fresh energy and a high-performance mindset to our business. To help ensure their success, we have empowered our sales team with upgraded tools and training and designed a new incentive compensation framework that aligns with our high-growth objectives. We also completed the restructuring of our commercial team by geographic region and by sales role. This new structure has two key advantages. One, it enables us to provide a higher level of service to our existing accounts; and two, it allows for us to remain laser-focused on driving new clinic growth and optimizing new practitioner success. We ended 2025 with over 90 salespeople, up from approximately 60 at the time of our sales reorganization last May. I am pleased to report that our new team members are stabilizing clinic attrition and maximizing new clinic starts in the fourth quarter. In addition, from mid-November to present, we have seen an acceleration in the number of practitioners attending our trainings, with all of our training sessions at full capacity. This reflects our recent success in recruiting new practitioners and broadening our training options for them. Because the number of new biote Corp. certified practitioners is typically a leading indicator of procedure growth in the future, we plan to build on this momentum by continuing to invest in our commercial organization in 2026. Our second strategic objective was to maximize value from our top-tier clinics. To accomplish this, we deepened our relationships with existing practitioners, which reinforced our role as an essential partner that is committed to their success. Second, we continue to introduce innovative, science-based solutions that promote patient health span and vitality and advance the standard of care. And third, to minimize unanticipated clinic attrition, we leveraged data analytics to evaluate and refine contract and incentive models that strengthen the longer-term value equation of our top practitioners. Turning now to our third strategic objective. We emphasized accountability and discipline in our pursuit of operational excellence. Most importantly, we have strengthened and refined the internal processes and systems that underpin our operating model. These enhancements improved our data analytics and productivity, enabling more consistent execution. Having strengthened our core capabilities, I am cautiously optimistic we will reaccelerate procedure revenue growth and scale the business with greater efficiency. I would now like to comment on our strategic plans for 2026. Over the past year, we have laid the groundwork for a more efficient and more disciplined operating model, one that positions us to deliver stronger and more consistent financial performance in the years ahead. In 2026, we will focus on advancing the progress we achieved in 2025. For example, we will be making a sizable and necessary investment in our sales and technology capabilities. Specifically, we intend to expand our sales personnel from over 90 at the end of 2025 to approximately 120. Concurrent with this investment in our commercial team, we will be investing in our leading-edge technology platform in 2026. This investment is designed to facilitate a more efficient and seamless practitioner journey from initial training and certification to driving a successful biote Corp. clinic over the long term. We also anticipate that this investment will enhance long-term practitioner retention while expanding sales of our biote Corp. branded dietary supplements and other healthy aging solutions. I am confident now is the right time to make these investments, which we believe are essential to accelerate growth, expand our market opportunity, and further enhance engagement with existing practitioners. While this step-up in expenses will impact our adjusted EBITDA in 2026, we believe these planned investments position our team to reach our long-term strategic, operational, and financial objectives. I will now turn the call over to Bob Peterson to review our fourth quarter results and provide our financial guidance for 2026. Bob Peterson: Thank you, Bret, and good afternoon, everyone. Unless otherwise noted, all quarterly financial comparisons in my prepared remarks are made against the 2024 fourth quarter. Fourth quarter revenue was $46,400,000, a decrease of 6.9%. Procedure revenue declined 13% to $31,800,000, while dietary supplement revenue grew 16% to $11,700,000. Similar to recent quarters, procedure revenue was primarily impacted by a lower number of net new clinic additions and lower procedure volume during 2025. As Bret noted, in 2026, we anticipate increasing our investment in our sales capabilities to capture a larger share of our available market opportunity. Dietary supplement revenue increased 16% to $11,700,000, primarily driven by the continued growth of our e-commerce channel. Dietary supplements represent an important and complementary market growth opportunity, strengthening patient engagement with biote Corp. by meeting their evolving needs for safe and effective healthy aging solutions. Looking forward, we forecast our dietary supplements revenue will grow at a mid to high single-digit rate in 2026. Gross profit margin was 68% compared to 71.8%. The decrease was due to a $1,300,000 charge to inventory during 2025 as a result of the impact of a voluntary recall of specific lots of hormone pellets shipped by Asteria Health. We could see a potential near-term impact to gross margin if our product mix includes more third-party manufacturing. Our long-term goal is to meet customer needs through our Asteria site. Excluding this charge, gross margin reflected the benefit of efficiencies gained from vertical integration of our 503B manufacturing facility and effective cost management. Selling, general, and administrative expenses decreased 25.1% to $24,700,000. The decrease reflected lower legal expense and a temporary decrease in headcount. Net income was $2,600,000. Diluted earnings per share attributed to biote Corp. stockholders was $0.06, compared to net income of $3,500,000 and diluted earnings per share attributed to biote Corp. stockholders of $0.10. Net income for 2025 included a gain of $1,200,000 due to changes in the fair value of the earn-out liabilities. Net income for 2024 included a loss of $800,000 due to changes in the fair value of the earn-out liabilities. Adjusted EBITDA decreased to $11,700,000, with an adjusted EBITDA margin of 25.2%. This compares to adjusted EBITDA of $15,100,000 and adjusted EBITDA margin of 30.3%. Both adjusted EBITDA and adjusted EBITDA margin decreased due to lower sales and reduced gross profit, partially offset by lower operating expenses as a result of our sales reorganization. For the 2025 year, cash flow from operations was $35,200,000. As of 12/31/2025, cash and cash equivalents were $24,100,000. Now turning to our financial outlook for 2026. As previously mentioned, we anticipate investing to advance our sales and technology capabilities. While this planned investment will cause a step-up in operating expenses in the near term, we expect the benefit will be evidenced by an improvement in our procedure revenue expected to start in 2026. With respect to our 2026 revenue guidance, year-on-year procedure revenue is expected to decrease at a mid to high single-digit percentage rate in 2026, which includes a potential revenue and profit impact related to the recall. We anticipate an expected return to year-on-year procedure growth in 2026. Dietary supplement revenue is expected to grow at a mid to high single-digit rate from 2025. Overall, we forecast 2026 revenues above $190,000,000 and adjusted EBITDA of greater than $38,000,000. I will now turn the call back to Bret for his closing remarks. Bret Christensen: Thanks, Bob. I am pleased with the progress the entire biote Corp. team has achieved in the past year. We laid much of the foundational groundwork that I believe will enable us to drive a higher and more consistent level of financial performance. Our planned investments in 2026 represent a key inflection point for biote Corp. that I believe are essential to effectively address our large market opportunity and build long-term, sustainable shareholder value. Operator, let's now open the call for questions. Operator: Thank you. We will now begin the question and answer session. The first question will come from Leszek Sulewski with Truist Securities. Please go ahead. Jeevan: Hey, this is Jeevan on for Les. Thanks for taking our questions. What is your take on the FDA's removal of black box warnings for certain HRTs and maybe how this could potentially impact demand? And then also for the voluntary recall, can you elaborate on any feedback and whether you see this event changing the regulatory bar or competitive dynamics in the space? Bret Christensen: Yeah. Hi, this is Bret. Thanks for the. First, on the black box warning that was removed now really almost just a little less than a year ago, that along with the entire talk track of the FDA seems to be a positive tailwind for us and others. It is a good sign that finally hormone optimization is getting recognized as a great option. It has always been a good option for men and women are getting the attention that they deserve as there are still no FDA-approved options for women for testosterone therapy. So all in all, it is a great thing for us. It reinforces what we have known, that there is no harm that comes from testosterone and a tremendous amount of benefit that patients can get through different modalities of HRT. So it is a good thing. We look for continued support from clinicians and patients alike for awareness. As far as the recall goes, as you know, we, at January, we announced a partial recall, a voluntary recall that we are doing just out of an abundance of caution, working hand in hand with the FDA. So the feedback has been good. We are working hand in hand with the FDA on almost everything that we do. So communication to our customers, taking the product back, refilling those orders, all of that has been done in planning with the FDA. So we are in lockstep with their guidance in this entire recall. Our customers have been responsive, and we are happy with where we are at so far. Operator: The next question will come from Kaitlyn Joan Korich with Jefferies. Please go ahead. Kaitlyn Joan Korich: Hi, everyone. Good evening. Thanks for taking my question. I just wanted to drill into the procedure revenue growth in the first half, and is it purely the number of procedures that will be down while the number of practitioners are ticking higher, or is there also some element of promos or discounting that we should be considering? Any color there, and also, if anything has changed in the competitive environment would be helpful. Thank you. Bret Christensen: Yeah. Hi, Kaitlyn. This is Bret. I will start with that, and then Bob can add some specifics. Throughout last year, we highlighted an increase in attrition. And for us, when we talk about attrition, we are talking about practitioner and clinic attrition. And so while that has been stable for us for years at around 5%, last year, we highlighted that accelerated to high single digits. And so that is where we have exited the year in 2024. The lower volume that we are highlighting in 2026 in the first half until we return to growth in the second half really is just that same attrition that we have experienced at a higher rate in the past. Remember, with an annuity model, we live with that attrition for 12 months. So attrition was higher last year, and mostly that was clinic attrition, which does mean lower volumes. So that is where we exited the year. We anticipate that will change this year. We will return to growth in the second half through volume growth. But the majority of that lower procedure revenue was volume. Bob Peterson: That is right. And I think the only other thing to add there is, as Bret mentioned, we are in the process now of watching some of those new customers that are coming in the door. And wanting to see, he highlighted in the remarks that trainings were full. We will need to continue to watch those individuals to make sure that they are productive and start quickly. I cannot stress enough, we are in the, you know, we are about a month, month and a half into the recall, and we just want to continue to monitor the impact there also. I think that gives a little bit of additional color. Kaitlyn Joan Korich: Got it. Thank you.
Operator: Hello, everybody, and welcome to the Bumble Inc. Fourth Quarter 2025 Financial Results Conference Call. My name is Eliot, and I will be your coordinator today. If you would like to register a question during today's event, I would now like to hand over to William Paul Taveras, Investor Relations. Please go ahead. William Paul Taveras: Thank you for joining us to discuss Bumble Inc.'s fourth quarter and full year 2025 financial results. With me today are Bumble Inc.'s Founder and CEO, Whitney Wolfe Herd, and CFO, Kevin Cook. Kevin Cook: Before we begin, I would like to remind everyone that certain statements made on this call today are forward-looking statements. These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on the beliefs, assumptions, and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call. Descriptions of factors and risks that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in today's earnings press release and our periodic filings with the SEC. During the call, we also refer to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for, or in isolation from, our GAAP results. Reconciliations to the most comparable GAAP measures are available in our earnings press release, which is available on the Investor Relations section of our website at ir.bumble.com. With that, I will turn the call over to Whitney. Whitney Wolfe Herd: Hello, everyone, and thank you for joining us. We have a lot to cover today. I would like to recap what has been a very productive first year in our transformation and the excitement building inside Bumble Inc. as we work toward our platform and app relaunch in just a few months. I do not want to sugarcoat the challenging process that we are working through, but I am proud of our team, their pace of execution, and early accomplishments. Starting with performance, we closed out 2025 with fourth quarter revenue and EBITDA at the high end of our guidance ranges as we continue to emphasize financial discipline, balancing investment and sustainable long-term growth with healthy margins and cash generation. Kevin will provide perspective around the financial strides that we have made in just a moment. Turning to our transformation, the headline today is that we believe the heavy lift of our quality reset is behind us, and we are full steam ahead on product innovation. Before getting into the details, I want to set context. When I returned as CEO about a year ago, I came back with a clear focus: to rebuild this company from the inside out and return to what originally made Bumble Inc. so successful. What people come to Bumble Inc. for is to find love and make in-person connections, and they favor us for a simple but powerful reason: we build trust with women. We believe that when women feel safe, confident, and intentional about who they meet, the entire ecosystem works better. You get healthier interactions, a more balanced member base, and better outcomes for everyone. Our goal is to continue to lead in this area and to build the most woman-centric dating product in the market across features, design, and outcomes—one that solves real pain points women face in dating today. In 2025, we accomplished our most important goal: putting trust, authenticity, and member outcomes first. We also are running the company with sharper discipline so we can invest where it matters most and execute faster. We knew that doing this the right way would create near-term pressure, and it did. The choices we made were intentional. We began by raising standards across the platform and fundamentally changing how we approach acquisition. Performance marketing was reduced by well over 80% year over year. That was a deliberate shift away from volume-based acquisition and towards higher-intent, organically driven growth as we return to our roots of brand organic marketing. Despite raising the bar on new members and dramatically limiting marketing, Bumble app registrations and active users have stabilized. We proved two things through this exercise. First, demand for what we offer—the promise of human connection, relationships, and potentially love—is strong and enduring. Second, we believe the Bumble Inc. brand has tremendous affinity with our target audience. As we tighten trust and authenticity standards, user metrics behaved as expected. Although trust and safety is a competitive advantage and the work never ceases, we believe Q4 marks the completion of our quality reset. As we move into early 2026, trends suggest the rate of sequential member base decline is slowing, consistent with the expectation we shared with you on our last call, and the quality reset is working as designed. We have talked on previous calls about our internal framework improving the mix of our member base by emphasizing approved members, and removing accounts that were not here for the right reasons. Members who are truly here to find love and connection will be more engaged, and that is what we are in fact seeing as our mix improves. Engagement quality is improving significantly, with Bumble app week one in the U.S. up materially and monthly retention trending higher as well. These progress points demonstrate that the member experience is getting better due to the nature of the quality reset, even before we innovate the product. At the same time, we have improved the quality of our monetization base. Payer penetration for Bumble subscribers has increased, and the portion of payers choosing subscriptions has risen from 80% to 89% as we reduced certain promotional activities related to consumables. We anticipate that this shift reflects stronger intent and a greater alignment between value delivered and value paid for. Taken together, these improvements likely signal that we are building a healthier funnel from registration to engage to monetization. The data shows that our foundation is now stronger, with a higher-quality, higher-intent member base and a more sustainable payer mix. But this essential foundational work can only take us so far. To fully recover and return to growth, we must focus on product and technology innovation, which is where our efforts are now. Since the beginning of the year, I have personally spent 90% of my days with our tech and product teams reimagining what finding love looks like in the era of AI. We are rearchitecting the entire Bumble experience from start to finish, and I am taking a very hands-on role in shaping the core user experience across onboarding, profiles, and matching. As we rebuild the experience, one thing is clear: we cannot deliver the innovations we are creating on our legacy tech stack. That is why we are building the new Bumble experience on our cloud-native technology stack built with AI productivity at its core. The launch is targeted for Q2 this year. What we are calling tech stack 2.0 is not just a back-end upgrade. It is a fully new platform that will transform how we build and ship product. We expect it to allow us to deliver member experience improvements more quickly and intelligently, deepen personalization, support how our monetization model evolves over time, and serve as the foundation for more potential product launches in the future. These are all things that we have been unable to execute effectively on with the current tech stack, a fact that has limited our ability to deliver the innovations that our members should expect from us and compete better with other offerings in the category. Given the significant tech debt, the fact that we have been able to execute a major member base reset without being able to deliver the innovation that we need is a testament to the enduring strength of our core product and our brand. This makes me excited to show what we can do once our new platform is live. The platform development is currently being executed by our newly consolidated product and technology organization, led by our Chief Product and Technology Officer, Vivek Sagi, and supported by the engineering-led innovation hub that we built in Austin over the last six to nine months. The buzz in the building is strong, and our renewed energy is already accelerating our pace. We are working more tightly across teams, putting member satisfaction and product at the center of our daily work, and building with clearer accountability and execution. Our new tech stack will enable us to deliver an experience built around people, not just profile. Across the industry, members are dissatisfied with being reduced to images and potentially dismissed with a swipe. Bumble 2.0 introduces a chapter-based structure designed to help members tell their stories more authentically and understand one another more deeply. This will enable them to see matches with stronger compatibility signals, build confidence in the experience, and get to meaningful in-real-life dates more quickly. Before the rollout of the new Bumble Date, we are continuing to deliver updates on our legacy 1.0 tech stack that improve outcomes and address the most consistent pain points that we hear from members. We are addressing global member feedback, particularly women's feedback. One example is a new “Really Into You” tab, which we began testing last month. While results are early, they have been positive, showcasing the importance of strong signals of intent. We also rolled out tests of Profile Guidance and Suggested Date. Profile Guidance delivers personalized, actionable feedback on bios and prompts, guiding members step by step to help truly reflect who they are. Suggested Date is a new feature designed to make expressing date intent effortless, and to get people offline as quickly and confidently as possible. Beyond the major updates that we are making to Bumble Date in the near term, we are also actively infusing AI into the core Bumble experience and recommendations algorithm. Our objective is not simply to layer AI features onto the product, but to build the underlying system that reflects how people actually meet, connect, and form relationships so AI can operate within that structure. Done right, AI helps the network function better by prioritizing fewer, more relevant matches over volume, combating swipe fatigue, and moving members more efficiently towards real-world connection. What differentiates our approach is not just the AI technology, but the depth of the proprietary data that we have built over more than a decade. AI on its own is neither a moat nor disruptor to online dating. Its effectiveness depends on high-quality, scaled interaction data, and the hardest part of building a successful dating platform is earning trust and building that member base at scale. We believe that we have one of the largest and most nuanced datasets of real human connection in the world, leaving us uniquely positioned to use AI in ways that are more personalized and effective than any potential new entrant. To that point, we have talked in the past about building a standalone AI experience. What we learned in the development process is that the best way to launch a standalone product is to start with enabling it on preexisting datasets. We formed a team to focus on a standalone product feature. We call it “b,” that is integrated in the core member base to accelerate development and iteration. “b” is designed to become a personal dating assistant and matchmaker, learning members' values, relationship goals, communication style, lifestyle, and dating intentions through private conversations, then using those insights to identify mutual compatibility to find better dates with a higher degree of confidence and relevance. Importantly, this work is grounded in our longstanding commitment to privacy and trust, ensuring members remain in control of their data. A pilot of these core functionalities is testing internally and will be launched in beta soon. In addition to reimagining the dating experience, we continue to expand how people connect through Bumble BFF. We recently launched an important update that makes groups discoverable, allowing members to find and join communities based on shared interests. Early response has been encouraging, with a 17% increase in the number of active groups in just two weeks since launch. Looking ahead, we have a series of product updates planned as fast follows, including the introduction of functionality designed to bring members together in curated, real-world settings. And these are not just BFF initiatives. Ultimately, they extend into dating. We see an exciting opportunity around group dating as we reimagine the Bumble experience. While the millennial dating experience was more one-to-one, Gen Z searches for love differently, and group socializing is a big part of that. The event capabilities that we are introducing take us firmly in this direction. They create more pathways from digital interaction to in-person connection, and can further strengthen engagement. We see significant potential here both in deepening engagement within BFF and in creating new on-ramps into Bumble Date as members move fluidly between friendship, community, and romantic connection within our broader ecosystem. Our goal with all of this work is to transform people's expectations of what a dating application is. We plan to deliver a product people actively choose and want to use—one that reestablishes Bumble Inc. as the most culturally relevant and trusted dating brand. I am highly focused on realigning with the cultural zeitgeist and being the dating app of choice for our core audience, which is women and men, ages 21 to 35 predominantly. To get there, we are doubling down on our unique playbook of hyperlocal organic marketing and community-driven growth, rather than broad, undifferentiated spend, to really reposition Bumble Inc. to the center of dating culture. It is already working. We are seeing Bumble Inc.'s woman-first positioning strengthen as awareness among single women in the U.S. has increased, and Bumble Inc. continues to lead in favorability among scaled dating apps among women. And we continue to see that influencers and other relevant people in culture want to work with Bumble Inc., despite a highly competitive environment. This is the equity that we are building as we bring Bumble Inc. back to the center of dating culture. We are energized by the innovation underway and the clarity of the roadmap ahead. The products that we are bringing to the market this year represent a meaningful evolution for Bumble Inc., and we believe that they will redefine how people experience connection on and off of our platform. Brand and member experience are central to our foundation, and equally so is our operating health. We have strengthened our business on both fronts. Over the past year, we have added key leaders and resized and reshaped our organization to increase execution velocity and the pace of innovation across product, engineering, and go-to-market. We have improved focus, aligned teams more tightly to outcomes, and accelerated progress on our turnaround roadmap. We have gained efficiency across the company to fund targeted investment in our strategy, and we have streamlined and focused our marketing approach on reinforcing what our brand stands for and emphasizing organic, high-quality acquisition channels. We expect the moves we have made will help preserve our attractive cash flow profile. To summarize, 2025 was a successful year in executing our transformation. We believe we are well on our way to rebuilding Bumble Inc. around what has always made us different: listening to women and delivering a trusted, high-quality experience that drives real-life connection and love. We are clear-eyed about the work ahead, but confident in our ability to unlock a step change in the member experience beginning in 2026, which in turn should enable us to monetize more effectively over time. By resetting the foundation of the business—how we acquire members, how we engage them, and how we monetize—we believe we have positioned the company to grow again as we restore Bumble Inc. to what has always been at the heart of our success. With that, I will turn it over to Kevin to walk through the financials. Thank you again. Kevin Cook: Thank you, Whitney, and hello, everyone. In the fourth quarter, we delivered results at the high end of our guidance ranges. Revenue reflected the expected impact of our trust and safety initiatives— a deliberate reset of the member base—while profitability and cash flow demonstrated the underlying resilience of our model. Over the past year, we have managed the business with discipline, balancing targeted investment in product with careful cost control and a focus on strengthening our financial foundation. I will walk through our quarterly and full-year results before turning to our outlook. Unless otherwise noted, my comments are on a non-GAAP basis and comparisons are year over year. Total revenue for the fourth quarter was $224 million compared to $262 million in the year-ago period. Bumble app revenue was $181 million compared to $212 million a year ago. Adjusted EBITDA was $72 million, representing a margin of 32%, compared to $73 million and 28% in the prior-year period. The quarter reflected what we believe was the most acute top-funnel pressure associated with our quality reset actions. For the full year, total revenue was $966 million compared to $1.07 billion in 2024. Adjusted EBITDA was $314 million, representing a margin of 32%, compared to $304 million and 28% in the prior year. Selling and marketing expense was $161 million, representing 17% of revenue, compared to $259 million, or 24% of revenue, reflecting a more focused and efficient approach to member acquisition with greater emphasis on targeted and organic channels. We expect to maintain disciplined marketing spend in 2026 while incrementally increasing investment to support the rollout of our new products and in select member acquisition. Development expense was $96 million, representing 10% of revenue, compared to $84 million, or 8% of revenue in 2024, consistent with our plans to increase investment in core product innovation, AI capabilities, and platform modernization. General and administrative expense was $115 million, representing 12% of revenue, compared to $108 million, or 10% of revenue, reflecting disciplined cost management as we navigate the reset, offset by indirect taxes. We believe this balanced approach—containing overhead while prioritizing product investment—supports both operational efficiency and long-term value creation. I will now turn to the balance sheet and cash flows. For the full year, we generated $250 million in operating cash flow, $239 million of which converted into free cash flow. As discussed on our last call, we are taking active steps to optimize our capital structure. We completed the buyout of all our outstanding TRA liabilities in the fourth quarter for $186 million in cash. We ended 2025 with $176 million of cash and cash equivalents and have continued to generate substantial cash flow throughout the first quarter. Similarly, we are currently in discussions to refinance our existing debt obligations due January 2027, totaling $588 million as of December 31. Consistent with our intention to deleverage the business, we repaid $25 million of our current Term Loan B in August 2025. In addition to eliminating the full TRA liability from the balance sheet, we expect to repay a portion of our outstanding debt and refinance the balance. Turning to guidance, we believe the most challenging portion of the quality reset is behind us, and we have turned from adding incremental friction at the top of our member acquisition funnel to improving the experience with product innovation. We expect a lag between these product improvements and our reported financial performance metrics. As such, the sequential stabilization in our business metrics, including active users and payers, has not yet been reflected in our year-over-year revenue growth. For 2026, we expect total revenue in the range of $209 million to $213 million, including Bumble app revenue of $171 million to $174 million, and adjusted EBITDA of $76 million to $80 million, representing a margin of approximately 37%. As we move through 2026, we expect our revenue headwinds to moderate as the impacts of recent trends in our operating metrics flow through the financials. Improvements in revenue will be primarily a function of new product adoption, and further retention, payer penetration, and average revenue per paying user gains based on enhanced functionality as well as incremental monetization opportunities. An important contributor to our margin performance will be the continued implementation of alternatives to in-app purchases in the U.S. In the fourth quarter, direct payments contributed approximately one percentage point of year-over-year gross margin expansion. We currently expect the benefits to increase through 2026, as we are already seeing increased adoption in January and February. We believe this shift in billing methods meaningfully enhances the long-term profitability of the business. In closing, the actions we have taken over the past year have been made to support our financial and operational foundation in light of our transformation work. We are entering this next phase supported by a highly efficient, cash-generative business model and a cost structure better aligned to our strategic priorities. Operator, we will now take questions. Operator: Thank you. When preparing to ask your question, please ensure your device is unmuted locally. We will now open for questions. First question comes from Nathaniel Feather with Morgan Stanley. Your line is open. Please go ahead. Nathaniel Feather: Thanks for taking the question and congrats on the quarter. I guess first, thinking through a pretty ambitious product roadmap over the course of 2026, when you say registrations and active users have stabilized, as we look out over the course of the next year, what is the path to get those to start to accelerate and really improve? And of all of these kinds of changes you are talking about, help us think through the timing of when that might potentially happen. And then on the profitability side, adjusted EBITDA margin showing a really nice step up quarter over quarter—can you help us think through what are the puts and takes that are leading to that improvement? Thank you. Whitney Wolfe Herd: Thanks, Nathaniel, for the question. I will take the first part of the question, and we will talk about returning to user growth. I think it is important to just reemphasize that we just undertook something incredibly difficult without any product innovation to support us. Let me explain what I mean by that. We just underwent a membership overhaul, essentially, where we went in and we said quality is the goal—quality and safety and authenticity—which are the three most important things to women in dating, particularly when they date online, and we are going to take this on while we are still essentially under construction because we are still operating on our legacy tech stack. The fact that we were able to have registrations and active members stabilize during a transformation with little product innovation to support is actually quite remarkable, which is exciting for the next phase of this, which we said in the remarks, which is rolling out, to your point, a very ambitious but very doable 2026 product roadmap. Once 2.0 back-end infrastructure is up and running, and once we have migrated the 1.0 system to the 2.0 system, innovation becomes a lot more seamless, a lot quicker. The volume at which we can innovate becomes so much more plentiful than what we have seen in the past, and we have a very long roadmap covering what I said in the prepared remarks of solving women's pain points but also delivering these really incredible innovative features, tools, and ways of connecting that we believe will accelerate these cohorts. I think it is also important to note the oldest Gen Z right now are 28 years old, so we are just entering this peak intentional dating window, and when you look at our roadmap, it is extremely focused on reengaging this next generation who are stepping into intentional dating. On the timing front, what we said in our prepared remarks is exactly the way to think about things. This starts as soon as 2.0 is in flight, and it will be a very consistent drumbeat of innovation. We are super inspired and committed, and we are building with innovation at the core. I hope that answers the question, and I will kick the profitability piece over to you, Kevin. Kevin Cook: Thanks, Whitney. Hey, Nathaniel. On profitability for Q1, we continue to be committed to operating discipline, so we are pleased to see continued adjusted EBITDA margin expansion. I will say Q1 is probably slightly elevated. We are expecting—as Whitney highlighted, and you heard from our prepared remarks—to launch significant new product beginning in Q2 in market, so you will see a slight increase in marketing to support new product innovation and some very specific product marketing around new enhancements to product. You will also see product development costs increase midyear slightly in order to support 2.1, 2.2, and the fast follows that Whitney was describing earlier. I do believe that structurally, our margin profile is higher than it has been historically. We are much more efficient today than the business has been in the past. We are not guiding the year here, obviously, but we do see the opportunity for sustained very high adjusted EBITDA margin throughout the year, and, to the extent that we inflect growth in the business, there is enormous operating leverage in the model. Nathaniel Feather: Helpful. Thank you. Operator: We will now turn to Shweta Khajuria with Wolfe Research. Your line is open. Please go ahead. Shweta Khajuria: Thank you for taking my questions. First is on these product revamps. Whitney, how are you thinking about measuring progress, and what will be some of your milestones as you track that the revamp is going well and how you measure it? And is there something that you plan to share with us in terms of metrics, whether it is either top of the funnel or some internal metrics that you are following that would help us get a sense of how it is going? Because we may not see the impact on monetization just yet, but if engagement is improving, that would be a good sign. The second is on investment on the tech replatforming. Is there additional investment that you are expecting, or how should we think about that? Thank you. Whitney Wolfe Herd: Shweta, nice to hear from you, and thanks for the questions. You know, Shweta, can you hear me okay? Shweta Khajuria: Yes. Whitney Wolfe Herd: Sorry about that. We were having challenges with the microphone. The way we think about outcomes, or KPIs—how we measure this—is really about member outcomes. What we have started to share with you today, as you saw, is that the deeper-funnel improvements are really what measure the health of this business and how it is performing for members. If you have really good top-of-funnel results but negative bottom-of-funnel results, you do not have a healthy consumer business, and this industry and this product are inherently dependent on the outcomes that we drive for our members. The way we are thinking about 2.0 outcomes is not dissimilar to the way we think about it right now, but ultimately it is: are our members satisfied? Are they getting what they came for, which is high-quality dates with people they actually want to meet? Are those dates safe? Are they reliable? And are they converting into what they came to look for? This is precisely how you drive top of funnel, because when people come, have a good experience, go on great dates, they tell their friends, and that is the flywheel. That is everything we are focused on. In order to arrive at that outcome, we had to really enhance the way in which people discover one another. We had to focus on quality. Quality in this instance is about helping people show up better. How do we get you to showcase yourself in a way that is actually driving curiosity from members so that you can create matches and go out on great dates? You will see this come to life in 2.0, but ultimately it is all about the outcomes and the success that our members find. Alright. Kevin Cook: Hello, Shweta. You had a question, I think, about the tech stack and the investment required. Recognize 2025 was an investment year from a product development point of view, and we are continuing with that investment in 2026. Over the course of 2025, we built a new, modern AI-oriented engineering organization primarily in Austin, Texas, and so much of that investment is behind us, including both on product and on the platform. You will see some additional investment throughout 2026, of course. Things to recognize: there is a lot of efficiency in our engineering efforts currently, and we are benefiting substantially from the application of AI in our product development. In terms of appreciating the level of investment required, there are some infrastructure costs based on the existing set of offerings—primarily data center costs—that we continue to maintain while at the same time we are building this cloud-native, AI-led tech stack that you have heard a lot about already. There is some duplication of costs for a portion of 2026 in that respect. Longer term, you will see a continued modest level of product development expense increase tied to revenue, just to continue to produce the sort of innovation that we are expecting, but you should see some efficiency—some operating leverage—in that line once we have got the duplicate costs taken out of the system. Whitney Wolfe Herd: Okay. Thanks, Shweta. Thanks, Kevin. Operator: We will now turn to Steven Zhu with UBS. Your line is open. Please go ahead. Moore Robley: Hi. This is Moore Robley in for Steven. Thank you for taking my question. Appreciate the color on direct billing, and I was just curious if you could frame how big of a potential this could be for you all this year, given how much of a contributor this is to the EBITDA guide. I understand there are some trade-offs between efficiency and causing user friction. And then a second question: how should we expect the new product initiatives to be rolled out globally across the Bumble-affiliated apps? Additionally, do you see any opportunities with respect to international expansion? Thanks. Kevin Cook: I will take the direct billing question. You are right. We saw in Q4 a full percentage point of gross margin expansion as a result of alternative billing. In Q4, we implemented our Apple Pay program, and what we have seen is a very, very rapid adoption by users of Apple Pay. In fact, as of today—quarter to date—we have already got more than half of our U.S. iOS payments being made through Apple Pay. It is a very cost benefit, or improvement, to gross margin. We believe it is mostly sustainable based on our understanding of the various cases and settlements to date. There are, as you know, some changes that are occurring in that regard, so we have not built all of the long-term benefit into our model. Clearly for Q1, we are far enough into the quarter that we have great confidence in our adjusted EBITDA guide there. But as I think about the year, we have hedged that number slightly. We have not seen, by the way, any friction. When we built plans, we did think that there could be some impact on revenue. There has not been to date, and we are about three months into the program. We have noted too that there seems to be an improvement in renewals as a consequence of using these alternative billing methods, which was somewhat unexpected but obviously welcome. Whitney Wolfe Herd: On the other portion of the question, the back-end infrastructure—what we are calling tech 2.0—that will be applied to the entire portfolio, with the exception of BFF, because that lives on the Geneva infrastructure. As you will recall, we acquired Geneva largely due to how great their tech, their team, and that infrastructure is that they have, which was super enabled for groups and beyond one-to-one, which is going to be a huge part of our focus in 2026 and beyond. We really believe— not to go on too much of a departure—but we really believe that one of the largest opportunities for us is bringing people together in groups of people. Really taking this beyond one-to-one is inherently how a lot of the Gen Z cohort chooses to socialize and meet and date. To put a pin in this, tech 2.0 will be rolling out to all products that are on legacy infrastructure, and will be enabled globally. That will be replacing any legacy systems. Thank you. Operator: We will now turn to Eric Sheridan with Goldman Sachs. Your line is open. Please go ahead. Eric Sheridan: Thanks so much for taking the questions. Maybe two that build on some of the answers so far and just trying to take it a little bit further. When you look at the current competitive landscape of investments against growth and investments against product that you see across the dating horizon, how are you thinking about positioning yourself competitively in a 2.0 world of where you think the biggest opportunity for both incremental growth of new users or reengagement of existing users or legacy users sits for the company when you think about that competitive landscape? And then second question would be—and maybe it is qualitative more than quantitative at this point—how are you thinking about the incremental margin structure of the company in a fully deployed 2.0 world relative to 1.0 on the other side of the investment cycle? Thanks so much. Whitney Wolfe Herd: Thanks so much, Eric, for the question. I will take the first part, and then I will make one comment on long-term investment strategy, and then I will kick it to Kevin for the particulars. This is really an important topic. First and foremost, let us back up and actually look at what makes Bumble Inc. so unique and sets us apart inherently from any of our competitors. The most important part of our differentiator has been core to us since I started this company in 2014, and that is our obsessive focus on women. We have become a trusted women's brand. This stands true even today on, quite frankly, somewhat outdated technology and product offerings. We are not up to par with our product right now, but we will be, and our brand is so resonant and our brand carries us in such a way that this is a strong driver for us in 2.0. When you see the rollout of 2.0—and I know I mentioned this in the prepared remarks—I have been in every pixel, every meeting, so deep in the details, reimagining what the dream women's app would look like in 2026 to reengage women, both Gen Z and millennial alike, and Gen X, frankly, because this is a highly monetizable cohort. They are also equally looking for love and connection. How could we reimagine this and innovate our way to be the preferred dating platform and connection platform for women? I want to reemphasize that women and the trust that we have with women, and the authentic design system of putting women first—beyond just a function of who goes first or who does not—this is inherently what sets us apart. The second thing is I am a firm believer that the future is beyond one-to-one in any sense of exclusivity. Do I believe that there is still a huge demand for intentional one-to-one dating? Absolutely. Please do not misunderstand me there. I think we have not seen our potential through with one-to-one dating, and we are very excited about that opportunity globally. But what is really exciting is using Bumble Inc.'s brand and leveraging this brilliant new technology infrastructure to really go beyond just this small dynamic of one person seeing one person, connecting with one person—bringing people together in groups of people, whether that is a small group, a mid-sized group, or even a large group—and getting people in real life. This is such an opportunity for us, and we know that we have a right to win because of the strength and the favorability that our brand brings. That leads to my final point, which is the number one thing that women want when it comes to dating, particularly online, is trust and safety. This has been at the core of our DNA for years. We have been a leader in the category, even passing laws to drive safer initiatives for women online, and we are going to be doubling down on this in every sense of the word. We are going to be getting out there much more broadly. I am going to be putting myself out there for a 2.0 relaunch in a way I have never been before, and we are going to reignite this trusted, safe, women-first dating product and brand so that we can bring people together in the real world as quickly and efficiently as possible. Kevin Cook: Hey, Eric. On the operating cost point with respect to the updated platform, the way to think about it is we are operating from these very old data centers today. When we cease reliance on the data center and have a true cloud platform, operating costs will be substantially lower. With respect to innovation, innovation will become much less expensive and more rapid. We will be able to iterate in a way that is not possible today. That should unlock—separate question, but it should unlock—some incremental monetization or revenue opportunity as well. With the modern platform and what is contemplated in terms of new product introduction, you will see a greater reliance on AI. You will see an offset perhaps in token costs associated there, but there should be a net benefit to operating margin from our move to the modern platform. Eric Sheridan: Great. Thank you. Operator: We will now turn to Cory Carpenter with JPMorgan. Your line is open. Please go ahead. Cory Carpenter: Hey. Good to talk again. You alluded to the chapter-based structure—curious if you could elaborate on your vision there and then the role that you see the swipe playing on the 2.0 platform. And then just bigger picture, once 2.0 is out, how radical the change will users see and how quickly of a change will they see in the app once you roll it out? Thank you. Whitney Wolfe Herd: Hey, Cory. It is great to chat again. It has been a while. Yes, let us talk about the chapter-based profile. We basically took the stance that the last decade has reduced people down to profile, and this has happened across the internet. Ultimately, dating only works when you really understand the story of someone. This is where chemistry and connection really happen. It is the intersection of someone going from just a stranger that you dismiss to someone you are genuinely interested in. As we reimagined the profile, we thought, why not bring people to life as a story? Everyone has a story to tell, and this is where people become interesting. What you will see in this chapter-based approach will not be just your standard, flat, non-interesting profile that everybody has become so used to across platforms. This is really an opportunity to capture the essence of who you are so that you go from being Cory of whatever town you live in with whatever age you have listed and just some photo—you turn into who you truly are—and this will ignite curiosity from the people that are exposed to your story. This is also a gateway to allow people to interact more dynamically. Today, on the current Bumble app, you can either broadly swipe right or broadly swipe left, which is a no, on someone’s profile. You are saying, “Yep, Cory is in,” or “No, Cory is out,” in one swift go, and this reduces the options for people to actually get better matches. We will be introducing more dynamic ways for somebody to express interest in your story, rather than just your profile, and this is going to drive more dynamic engagement, spark better conversation, and ultimately drive better KPIs across the board—like engagement and chances to get better conversations going. You will also see us take a much more deliberate approach to getting people offline versus just in what people refer to as dead-end chat zones. We are really trying to chip away at member complaints like, “I have all these chats that just sit,” or “They expire,” or “These matches never went anywhere.” We are trying to get people to understand who each other are and get them out in the real world as confidently, quickly, and safely as possible. On how big of a change this will be when members start interacting with 2.0, this has been top of mind for the product team. We are going to piece-by-piece expose members in very controlled groups to different portions of the new 2.0 experience. We are going to rigorously test every single portion of the experience, make sure that no KPIs are damaged, that monetization is strong, and that we do not accidentally hurt anything. Once we have tested and, if needed, iterated, and once we feel that this is safe, we will start to roll it out slowly in very controlled market expansion. Once we get to a certain place where we feel that everything is going in the direction we want, that is when it will start to migrate to the entire world. You can expect that to be a multi-week thing, not a multi-month thing. As far as our confidence in getting 2.0 out the door in our projected timeline, we are very confident. Teams and systems are all in a great place, and we are very excited about this next chapter. Kevin Cook: Awesome. Thank you. Operator: We will now turn to Robert Coolbrith with Evercore ISI. Your line is open. Please go ahead. Robert Coolbrith: Great. Thank you very much. I just wanted to ask a follow-up on Cory’s question. As I think there was a second part there about swipe mechanic, is that still going to be a core part of the user experience? And then as you move into these more detailed, chapter-oriented profiles, two questions there: what is the strategy for getting existing users to fill those out and engage with the more fulsome profile? And secondarily, is there any trade-off or impact on paid user conversion versus user retention as you make some of those changes? Does it slow down people’s consumption of profiles, which has, I think, historically been a way that you have driven paid user conversion? Thank you. Whitney Wolfe Herd: Thanks so much for the question. The good news is we have thought about all of these things top to bottom, left to right, for a very long time, and we have teams making sure that revenue and monetization mechanics have been thought through and that there is a do-no-harm approach to revenue and monetization with the 2.0 experience. I want you to take some consolation in that—that we are not going to just roll something out that topples our monetization strategy. We are being very modest and very conservative with that. In fact, we have set up and positioned the new profile to have new gateway opportunities for better monetization over time. On the swipe piece, the way we are phrasing this internally is: what does life look like beyond the swipe? That does not necessarily mean this binary situation of it is either there or it is not. It is much more nuanced than that. We are testing several iterations of engaging opportunities of how you would get to a match. The swipe is the way you get to a match. If the match is the goal, the swipe is the mechanism. We are testing several mechanisms to get you to a wanted and mutual match as quickly, efficiently, and in the most compatible way as possible. The mechanism of swiping may dynamically shift, and in certain markets, we may test with no swipe. In other markets, we may preserve the swipe. We have multi-mechanism tests that we are going to be running to make sure that we do what the members want the most, that serves our members best, that is in line with the KPIs that suggest we are getting people to the best outcomes, and, of course, that does not disrupt revenue and preserves the strength of the revenue side of the business. I hope that has answered the question. Robert Coolbrith: That is great. Thank you very much. Whitney Wolfe Herd: Oh, sorry—there was a second part of that: how do we get people to fill in the more robust parts of the onboarding? This has been a long game. When I came back a year ago, I knew that this is where we would be this year, but I needed a year to get to the quality transformation. What was a huge part of that quality transformation overhaul? It was trying to drive more of what we called approved members. What constitutes an approved member? Someone who has adequate information in their profile—enough intel that we have to work with to drive compatibility on the back end—enough photos, selfie verification, and, hopefully, ID verification. We have already been planting the seed for this moment for the last several months by trying to drive people to fill in more information. We have made a ton of progress there, so it is not a cold start situation where all of a sudden we have a brand-new profile and we have no information. We are being really thoughtful in how, what, and where we ask you to fill in more information. It is not going to feel punitive, stressful, or exhausting. It is going to be dynamic and fun. As we talked about with “b,” our AI assistant, down the road we are going to be able to get much more robust information about who you are and what you are looking for, and really understand your story through more engaging mechanisms—whether that is voice or typing—but in a conversational format like an AI product. This is going to be the long game of how we get more dynamic information. It is a step-by-step plan, but the good news is we have already made a lot of progress. Operator: As another reminder, if you would like to ask a question, please press 1 on your telephone. Ladies and gentlemen, we have no further questions, so this concludes our Q&A and today's conference call. We would like to thank you for your participation. You may now disconnect your lines.
Operator: Greetings. Welcome to Codexis, Inc. Reports Fourth Quarter and Fiscal Year 2025 Financial Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the call over to Georgia Erbez, Chief Financial Officer and Chief Business Officer. Please go ahead. Georgia Erbez: Thank you, operator. With me today are Dr. Alison Moore, Codexis, Inc. President and CEO, and Britton Jimenez, Senior Vice President, Sales and Marketing. During this call, management will make a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including our guidance for 2026, revenue, anticipated milestones including product launches, facility expansions, technical milestones, and public announcements related thereto, as well as our strategies and prospects for revenue growth, path to profitability, and successful execution of current and future programs and partnerships. To the extent that statements contained in this call are not descriptions of historical facts, regarding Codexis, Inc. are forward-looking statements reflecting the beliefs and expectations of management as of the statement date, March 11, 2026. You should not place undue reliance on these forward-looking statements because they involve known and unknown risks, uncertainties, and other factors that are, in some cases, beyond Codexis, Inc.’s control and that could materially affect actual results. Additional information about factors that could materially affect actual results can be found in the Codexis, Inc. filings with the Securities and Exchange Commission. Codexis, Inc. expressly disclaims any intent or obligation to update these forward-looking statements except as required by law. I will now turn the call over to Alison. Alison Moore: Thank you, Georgia, and thanks everyone for joining. At Codexis, Inc., our mission is to generate manufacturing solutions using biocatalytic enzymes. Building on our history of innovative enzymes, and our established relationships with the biopharmaceutical industry, we are now focused on RNA medicine. We have developed the ECOsynthesis manufacturing platform, which is short for enzyme-catalyzed oligonucleotide synthesis, and has been developed to address many of the challenges experienced with the current siRNA production technology. The number of siRNA medicines in development are growing at a rate of 5% to 10% per year, and current production technologies will not be able to keep up with demand. The impact of these powerful new therapies may be compromised if they cannot be produced at scale. It is not a medicine if you cannot make it. The total addressable annual market for production technologies in five years is estimated to be $2 billion, and we intend to establish Codexis, Inc. as a key technology provider in this market. Let's talk about how we are doing that. Last year was pivotal in both the focus and momentum of the company. We achieved a number of important milestones in 2025 in platform performance and industry engagement, demonstrating tangible and significant interest from our customers who are all invested in making powerful siRNA therapeutics, and demonstrating that we are at the forefront of biocatalytic enzyme innovation by developing technologies that can improve large-scale manufacturing of oligonucleotides, and potentially even deliver superior therapeutic asset activity. We reached an important technical milestone in delivering our platform, having synthesized 10 grams of a commercially relevant siRNA using full sequential ECOsynthesis. Importantly, we shared detailed product quality data from this synthesis demonstrating no quality barriers related to our production technology. We are continuing to scale up the production in 2026, currently operating at 100-gram scale in our Eco Innovation Lab, and heading toward half a kilo scale by the end of the year. In addition, we had a client utilize our ligase to manufacture a 3-kilogram batch of siRNA, a tremendous achievement in chemoenzymatic production, an important growth sector of our business. In terms of building a robust supply chain to support our ECOsynthesis, we made significant progress in production infrastructure. Our ECOsynthesis process involves a suite of purified enzymes. To enable efficient, high-quality supply of these enzymes, we have modernized our non-GMP production capability in Redwood City and achieved ISO 9001 certification. This certification provides confidence to our customers that we are operating under a particular quality standard. This milestone was reached in 2026, and since then, we have passed a facility and quality management system inspection by a large pharmaceutical customer, readying Codexis, Inc. for ECO enzyme supply. With respect to GMP production capability, we are fully engaged in our capital project to retrofit our new GMP plant that was leased in 2025. We will begin construction in the second half of this year and expect it to be fully operational by the end of 2027, further enabling the adoption of the ECOsynthesis platform and serving our customers with GMP siRNA. Innovation is a cornerstone of our company and our culture. In 2025, we introduced a new feature of our ECOsynthesis platform, which is the ability to generate siRNA with specific stereochemical control. We presented our first data demonstrating stereoisomer resolution at TIDES U.S., and we are building the ability to control stereoisomer configuration at both the 3’ and 5’ ends of the siRNA molecule. In addition, we are exploring the biological impact of this control, and believe this could be a tremendous asset to those customers who seek ways to improve the potency and purity of their product. We will always be striving to lead the industry in innovations that are meaningful and directly relevant to the needs of our customers. On the commercial front, at the start of 2025, our goal was to market our ligase and full ECOsynthesis products and services by contracting with a broad range of customers in siRNA product development. We saw engagement from a range of innovators, from large pharmas to emerging growth biotechnology customers. Britton will give a full update on our commercial activities later in the call. Our goal at the beginning of 2025 was to have one CDMO arrangement signed in 2025. We surpassed that goal by signing three agreements, one each with Bachem, Nitto Avecia, and Axolabs, highlighting the motivation from major providers who clearly understand the current limitation of standard solid-phase chemical processes. Each of these partnerships is initiated with feasibility work in our own labs using a specific therapeutic asset sequence. In 2025, we returned our heritage small-molecule biocatalysis business to a healthy profit margin, and have seen stabilization in revenue. The pipeline of drugs in late-stage clinical studies remains robust, and should fuel growth in this area for at least the next three to five years. This remains an important part of our business as it supports the investment that we are making in ECOsynthesis. Operationally, we paid close attention to our costs and made the hard decision to realign our work in the fourth quarter. The savings we expect to realize from these efforts will partially offset the cost of our GMP facility, allowing us to make this important investment with minimal increase in our cash burn. Georgia will give you a more detailed description of our financial expectations. We ended the year in a strong cash position fueled by the $37.8 million technology transfer agreement we signed with Merck in the fourth quarter, and we expect our current cash balance to fund operations and capital expenditures through 2027. It is remarkable that in just a short time we have moved enzymatic siRNA synthesis from an exciting idea to a reality. We are proud of the progress we have made in 2025 to achieve liftoff of the ECOsynthesis platform. We look forward to showing our customers and investors additional tangible proof of the value of the technology in 2026. To walk you through our commercial achievements and plans for 2026, let me turn it over to Britton. Britton Jimenez: Thanks, Alison. Broadly speaking, 2025 was the year we moved our ECOsynthesis manufacturing platform from an attractive concept to a promising and viable business. 2025 was also the year where our platform advanced from technical feasibility to being capable of supporting preclinical development as our customers progress towards IND and other regulatory submissions. And now I want to share more details on our revenue drivers for 2026. We spent 2025 building and refining our sales messaging and filling the customer pipeline for our ECOsynthesis services platform. We have 55 opportunities in the sales pipeline with 40 individual companies, demonstrating strong continued interest in our ECOsynthesis technology. The industry knows there needs to be a change, and we intend to be the best option for them, whether they are a drug innovator or a CDMO. I would like to spend a moment breaking down the stages of our agreements with innovators, what they entail, and offer a plan for how they could evolve. Our arrangements with CDMOs are slightly different, and I will review those as well. We announced last week a contract with an emerging biotech company. Under this contract, we will supply the innovator with 50 grams of siRNA material made using our ECOsynthesis manufacturing platform. To clarify, this is fully enzymatic synthesis of a siRNA drug substance. Once we deliver the material, they will be able to perform preclinical testing on the asset. Upon meeting the goals of this testing, the innovator plans to use our process to move their drug candidate into clinical studies. This is an exciting proposition for us, as it is the first time we have a line of sight to having a drug made from the ECOsynthesis platform move into human studies. Financially, this low 7-figure contract is fairly evenly split between services and product revenue, and is expected to be completed over the next 12 months. This contract is the prototype of how we enter into evaluation agreements with our customers. Once the customer decides to move their drug candidate forward, we enter into a new multi-year agreement that will incorporate licensing fees, milestone payments, as well as a clinical supply agreement. The dollar value of these contracts will vary based on the size of the clinical trial and the amount of material we must produce to meet the customer's needs. If the product is developed successfully, we will enter into a commercial supply arrangement. We will continue to provide updates throughout 2026 on examples of these types of contracts. We have also created relationships with CDMOs, all of which are currently in the technology feasibility assessment phase. Once this phase has been completed, we expect the relationship to move to an adoption phase where we will transfer our production-scale process to their facility. We expect to work under a commercial agreement that would consist of upfront licensing fees plus referral revenue-sharing arrangements. We expect referrals to be bilateral. We will refer our customers to our preferred CDMOs and likewise, our CDMO partners will refer customers to us who are looking to improve their manufacturing process. Our small-molecule biocatalysis business remains stable and profitable. As we mentioned on our last earnings call, we support 14 programs in late-stage clinical development. We have had data readouts on three of those studies, two of which were positive. Our customers are in the process of seeking commercial approval for those programs, and we are already seeing activity in preparation for supporting commercial launch. As we mentioned late last year, this is evidence that our historical business is starting to show sustained growth again for the next few years. We still have additional opportunities to add to this late-stage pipeline, and we will continue to service the needs of our customers who seek value-added enzymatic solutions to their drug manufacturing activities. As Alison mentioned earlier, we are focused on enabling technology innovation in the oligonucleotide market. We are already having conversations with customers about how to employ stereoisomer control to deliver improved productivity and potentially improved potency. With further technological development and demonstration of the importance of this approach, this has the potential to be an important offering in our commercial portfolio. In addition to product and service sales, I want to take a moment to note Codexis, Inc.’s rich history in business development and technology licensing. One of our strengths is identifying innovative ways for our customers to benefit from our technology. Whether it is exploring fields outside our core focus, or out-licensing our CodeEvolver technology, we have had a long practice of signing licensing deals. The agreement we signed with Merck late last year is evidence of the importance of this strategy, having provided us $38 million of non-dilutive capital. We remain committed to this practice and intend to sign a licensing-type deal in 2026. I hope you can appreciate the feeling of excitement we have for our prospects in 2026 and beyond. We are aligned behind our ECOsynthesis technology and are energized to truly make 2026 a demonstrable success. With that, I will now turn the call over to Georgia for a discussion of our financial results for the fourth quarter and full year 2025. Georgia Erbez: Thanks, Britton. Good afternoon, everyone. Today, I will provide a brief overview of our financial results here on the call and invite you to review our 10-Ks filed today for a more detailed discussion. Total revenues were $38.9 million for 2025, compared to $21.5 million in 2024. The increase was primarily due to the Merck Technology Transfer Agreement executed in 2025. We do expect a small amount of revenue under this agreement to be recognized in 2026. For the year ended 12/31/2025, revenue was $70.4 million compared to $59.3 million for the prior year. Product gross margin was 64% for 2025. For the year ended 12/31/2025, product gross margin was also 64% compared to 56% for the prior year. During both the three-month period and the full-year period, the increase was primarily driven by product mix, and declines in several low-margin products that were replaced with more profitable product sales. We expect gross margins to be stable in 2026 at the levels we were able to sustain in 2025. Turning to operating expenses, R&D expenses for 2025 were $11.7 million compared to $12.1 million in 2024, largely driven by lower employee-related costs and lower stock-based compensation expenses. R&D expenses for the year ended 12/31/2025 were $52.3 million compared to $46.3 million for the prior year. The year-over-year increase was primarily due to higher employee-related costs, higher lab supplies expense, and the internal reclassification of certain employees to the research and development function, partially offset by a decrease in outside services related to manufacturing and regulatory expense. Selling, general and administrative expenses were $11.2 million for 2025 compared to $13.0 million in the prior year period. The decline was largely due to lower employee-related costs and reduced use of outside services. SG&A expenses for the year ended 12/31/2025 were $47.1 million compared to $55.1 million for the prior year. The decrease was primarily due to lower stock-based compensation expenses, lower legal expenses, and reduced use of outside services. The fourth quarter 2025 expenses also include a one-time restructuring charge of $3.4 million related to the reorganization announced in November 2025. Throughout 2025, we sought ways to reduce our operating costs and improve gross margins. The improvements I just mentioned were prior to the benefits realized from the reorganization. We anticipate our operating expenses will also show improvement in 2026. We intend to use these savings to partially fund the planned increase in capital expenditures associated with our GMP facility build-out. For 2026, the combination of operating expenses and capex should be similar to what we experienced in 2025. Net income for 2025 was $9.6 million compared to a loss of $10.4 million for 2024. Net loss for the year ended 12/31/2025 was $44.0 million compared to $65.3 million for the prior year. We expect 2026 revenue to be in the range of $72 million to $76 million. For the first quarter, we are comfortable with the current consensus estimates. Similar to quarterly trends we saw last year, we expect the 2026 revenue to be more heavily weighted towards the second half of 2026 versus the first half. Codexis, Inc. ended 2025 with $78.2 million in cash, cash equivalents, and short-term investments, which we expect will be sufficient to fund our planned operations and capital expenditures through 2027. With that, I will now turn the call back over to Alison. Alison Moore: Thank you, Georgia, and thank you, Britton. ECOsynthesis is a disruptive technology that can radically alter the landscape of oligonucleotide manufacturing. As with any potentially disruptive technology, the first step is to show that it can actually work. In 2025, we achieved that. The next step is to show that the technology is useful to our customers. We believe we also demonstrated that in 2025 by having success in multiple feasibility studies with our customers. The next step is to support the deployment of our technology into our customer pipeline. We intend to make significant progress in this regard with several customers in 2026. We also want to show the value of our approach in longer-term contracts with higher dollar values committed to each one. This is a lofty goal, but one we are determined to achieve this year. Our goals for 2026 are simple. Show our investors proof of success. We can do this by signing the types of contracts I mentioned above and also new innovative licensing deals. We will also be focused on financial performance, meeting our revenue targets while being mindful of our expenses, which is everyone's responsibility within Codexis, Inc. We want to continue to innovate in the field of RNA medicine using our skills and experience in biocatalytic enzymes. We will be presenting at the TIDES meeting this year and will showcase our work on stereoisomer control. This important new development has the potential to be our next product offering. We will also communicate our ongoing progress in scaling up our ECOsynthesis manufacturing platform and making progress toward achieving half-kilogram scale by the end of this year. Later this year, we will plan to begin the retrofit construction of our GMP facility, which is an important strategic asset for the company, and we will keep you updated on our progress there as well. 2026 is shaping up to be the year when ECOsynthesis is not just an alternative production technology, but the technology of choice for our customers’ RNA medicine. We are excited by our prospects and the dedication and achievements of our employees who have been instrumental in making the ECOsynthesis technology a reality. Now we will be happy to take your questions. Operator? Operator: Thank you. Our first question is from Allison Bratzel with Piper Sandler. Please proceed. Allison Bratzel: Hey, thanks guys and thanks for taking the question. I know of late you have been highlighting the potential value for stereoisomer control and the potential to yield a superior drug profile. Could you just talk to when might we see that validated either preclinically or clinically? And are any of your existing 55 opportunities actively exploring this? Thank you. Alison Moore: Thanks so much for the question. We are working very hard on this this year because we think that the opportunity may be very important. We are already examining the biological activity of some of the stereo configurations that we can generate using the ECOsynthesis platform. We are going to show more substantive data around those stereo configurations at the TIDES U.S. meeting. And over the whole course of this year, we will be doing further work to associate those stereo configurations with the possibility of improved potency. This is based on a published precedent. In addition, we have had several conversations with customers who have pipelines that include siRNA assets, and they are also interested to collaborate with us to elucidate the opportunity for their particular assets. So we have a lot of activity in this area for 2026, and we expect beyond. Operator: Our next question is from Kristen Kluska with Cantor Fitzgerald. Please proceed. Richard Miller: Hi, this is Richard Miller on for Kristen. Just a quick question. Could you help us kind of understand the general process of how you got to the recently announced deal? Thank you. Alison Moore: Are you referring to the deal in the recent press release? Richard Miller: Yes, that is correct. Alison Moore: I think I will ask Britton to speak about the history of that relationship and how we think about that deal and the potential for the future progress in that relationship. Britton Jimenez: Yeah, Alison, thanks. This deal in particular is very, very exciting. This is, as we mentioned in the press release, a small organization that has a cardiovascular asset that are looking and understand that what they are trying to achieve, the current industry cannot meet their needs. And so from very early on in their development of this asset, they have been in discussions with us because they know they have a challenge and they need to figure out a way to address that challenge and be able to bring their product to market. So these discussions have been going on for many, many months with this organization, and they are very, very excited working with us. We are very excited working with them because we both believe that the ECOsynthesis manufacturing platform can meet their needs and deliver the materials that they need for their clinical asset that eventually will get into commercial production as they work their way through the different clinical trials they need to go through. Operator: Our next question is from Matthew Hewitt with Craig-Hallum Capital Group. Please proceed. Matthew Hewitt: Afternoon and congratulations on your progress. Maybe just to dig in a little bit more on the 50-gram contract. Could you walk us through, so this initial agreement is for low 7 figures. Walk us through the process. So this is preclinical work. What happens next? Assuming the data comes back positive, where do they go to, what, you know, what phase do they move into? What does that contract look like? I am assuming it is much larger than 50 grams. So help us extrapolate what this could ultimately become as this moves from a preclinical study into maybe, at some point, a commercial product. Alison Moore: Yeah. I will start with that, Matt. Thank you. So we like this prototype, and we hope that we would fill our book of business with a pipeline of these. So the example is that we commit to feasibility studies. We have been talking about that over the last year, where we determine if our technology and the particular sequence and construct that a company is interested in progressing, if there is a good match. We have seen that across numerous molecules now and are really starting to build a database and also build credibility across our current customers about the capability and power of the platform. So this contract that you are referencing was also initiated as a feasibility study, so a service-type contract. And as we continue sharing data with this particular client in this contract, we will be completing this component of this contract with the delivery of 50 grams of material that this customer will then use to do preclinical studies with, and they will start to create their early-stage comparability assessment of our product. Beyond this preclinical work, one would expect that if the data continues to look successful, that the company will be interested in progressing product generated using the ECOsynthesis platform into an IND submission, and they would be generating toxicology material and GMP material suitable to start a clinical trial. If our production platform continues to be their designated manufacturing process, then our aspiration is that we will become their manufacturing partner and provide ultimately commercial material to them, assuming that their asset proceeds through development. Matthew Hewitt: That is helpful. Is there a way for us to—and I am not asking for specific numbers—but how do we think about as that scales through development from, you know, preclinical to tox studies and beyond, how do we think about that low seven figures? Does that become mid seven figures? Does it become multiples of that? I am just trying to figure out what can this become if you and your partner are successful with this specific program. Alison Moore: Well, I think, one way to think about it, I am going to—you know, this is just an example that we wanted to share. And like I said, what our aspiration is to build a portfolio of such customers. And I also referenced that we have been doing feasibility that we think has been incredibly valuable with multiple customers over the last, you know, 15 months or more. And we have provided those services in a way that has been very easy for those customers to try to use the ECOsynthesis technologies to test them out. But we are moving forward with a powerful technology that is more and more recognized, and we absolutely would expect that licensing deals associated with technology, the opportunity to commit to this technology, would be much more significant in terms of the kind of revenue that they would earn for Codexis, Inc. In addition, as you know, after our GMP facility is operational, we will be selling product. In addition, we think that some of these things will go hand in hand. Some customers may want to license the technology completely and bring the technology in-house, in which case we will supply enzymes. Smaller companies may want to purchase GMP siRNA from Codexis, Inc. direct, and we will be able to do all of those. Certainly, if our technology delivers a superior asset and we can prove that, then again, we would expect that that could generate increased value for Codexis, Inc. and our shareholders. Matthew Hewitt: Got it. And if I could sneak one more in, and this one might be a little more geared towards Georgia. But what type of visibility do you have into the $72 million to $76 million revenue guidance that you have this year? I guess, how much of that do you feel like you have got line of sight or contracts in hand versus how much of that is still something that you expect to receive over the remainder of the year? Thank you. Georgia Erbez: I mean, it is a good question. And, you know, we are sitting in the early part of 2026. So the way that we build our projections is to look at historical buying practices of our clients and make assumptions moving forward. As you said, at the beginning of the year, you always have a certain amount of your projections that are speculative, that are unknown, and this year is not any different. But the base of our business is from what we look forward to from our past buying practices of our customers. So we do have line of sight on quite a large percentage of this business, but, you know, it is still early in the year. Matthew Hewitt: Got it. Thank you very much. Operator: Our next question is from Dan Arias with Stifel. Please proceed. Dan Arias: Yes, hi guys. Thanks for the questions. Alison, maybe a high-level one here. You guys are entering a new phase with what you can do. So I guess I am just curious where you think the industry finished 2025 when it comes to total siRNA demand? I mean, I remember when you first talked about this pivot towards ECOsynthesis back in 2023, I believe. You had a slide that said that it was like a thousand kilos a year and that by the next decade, it could be 30,000 kilos. So I know these big picture questions are sort of tough to answer, but for those that are kind of trying to keep tabs on this scale-up journey, where does it feel like we are at the industry level right now? Alison Moore: Yeah. That is a great question. I think that the siRNA therapeutic pipelines seem very vibrant at the moment. Of course, we can look right at the end of that, we can look at commercial assets. There are several commercial assets now, so that total number is growing. You can see that the commercial asset revenue line is growing. We also know that there are a couple of very large indication-size siRNA assets sitting in some large pharma pipelines. And then, through those types of customers and our interactions with them, we also understand that there is an extremely large number of siRNA assets in preclinical and early-stage clinical trials. So I myself look at the clinical trial numbers on fda.gov, and I count them sometimes, and those are growing very nicely. To your point about demand, you are correct that the estimates on demand, you know, they vary significantly, but we are, I think, confidently looking at something like—I will give you a broad range—10 to 30 tons, 10 to 30 metric tons of oligonucleotide material required by 2030. So I think that there is a very significant addressable market there, and we intend to have a significant piece of that. Dan Arias: Yep. Okay. Very helpful. And maybe just a follow-up. Georgia, how much gross margin variability do you see when you think about that mix of outsourced business versus partners that are taking ECO in-house directly over, say, the next 12 to 24 months? Is that something that represents a mix question, and so therefore a profitability question? Or do you not see it that way? Georgia Erbez: No. We do not really see it that way. The ECO business right now has been primarily services, so there is not a lot of gross margin you can calculate off of ECO, that side of our business right now. So the gross margin is really calculated on product sales only, and so that right now, the majority of that is our historical biocatalysis business. And the gross margins are pretty stable there. We were able to sustain a 64% gross margin for the entire year. I mean, there was some quarterly variability, but we got 64% gross margin in the fourth quarter plus for the whole year. So we feel pretty good about having that margin, or close to it, with some margin of error around that through 2026. We see that as being pretty stable now. Dan Arias: Okay. Thank you. Operator: Our next question is from Brendan Smith with TD Cowen. Please proceed. Brendan Smith: Great. Thanks for taking the questions, guys. I wanted to actually ask about the revenue mix from here and maybe just gut check a few modeling assumptions. I understand your color around the legacy biocatalysis business. But is it fair to assume at least kind of incremental or modest growth of that segment over the next two years? Or should we interpret kind of this broader strategic pivot to mean ultimately winding down in biocatalysis revenues as some of these newer partnerships take more and more share of revenue growth? Just kind of checking in on how we should think about the split of your growth over the next few years. Thanks. Alison Moore: Yeah. Please, Georgia. Georgia Erbez: The bulk of our growth is—we really do expect that to come from the ECO side of the business. Our base business, the small-molecule biocatalysis business, has stabilized, and we do—we mentioned that we had a pipeline of products that are in late-stage clinical testing. We have had data readouts on three of those. Two were successful. We do expect that that side of that pipeline of opportunities will continue to fuel growth for the next few years. But it is more—the higher growth rate we expect to come from the ECO side of the business. I hope that answers your question. Brendan Smith: Sure. Yep. Sounds good. Thank you. Operator: There are no further questions at this time. I would like to turn the conference back over to management for closing remarks. Alison Moore: Thank you so much, everybody. I hope you can tell we are so excited about what is ahead and really appreciate you joining for our call today. Thank you. Operator: Thank you. This will conclude today’s conference. You may disconnect at this time and thank you for your participation. Dan Arias: Goodbye.
Operator: Good day, everyone, and welcome to Elutia Inc. Fourth Quarter 2025 Financial Results Call. At this time, all participants are in a listen-only mode. After this presentation, there will be a question-and-answer session. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 11 again. Please note this conference is being recorded. Now it is my pleasure to turn the call over to Sonali Fonseca. Please proceed. Sonali Fonseca: Thank you, operator, and thank you all for participating in today’s call. Earlier today, Elutia Inc. released financial results for the fourth quarter and full year ended 12/31/2025. A copy of the press release is available on the company’s website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws, which are pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. All statements contained in this call that do not relate to matters of historical fact or relate to expectations, predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including, without limitation, those relating to our operating trends and future financial performance, are based upon our current estimates and various assumptions. These statements include material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For lists and descriptions of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our public filings with the SEC, including Elutia Inc.’s Annual Report on Form 10-K for the year ended 12/31/2024, and in our subsequent periodic reports on Forms 10-Q and 10-K, accessible on the SEC website at www.sec.gov. Such factors may be updated from time to time in Elutia Inc.’s other filings with the SEC. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, 03/11/2026. Elutia Inc. disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements because of new information, future events, or otherwise. Also, during this presentation, we refer to gross margin excluding intangible asset amortization, which is a non-GAAP financial measure. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure is available in the company’s financial results release for the fourth quarter and full year ended 12/31/2025, which is accessible on the SEC’s website and posted on the investors page of the Elutia Inc. website at investors.elutia.com. With that, I will turn the call over to Elutia Inc. CEO, Randy Mills. Randy Mills: Thank you, Sonali. Good evening, and welcome to our fourth quarter 2025 earnings call, from our Gaithersburg, Maryland facility, and I am super glad to be here. Wherever you are, however you may be listening, welcome. We are super glad to have you. I am going to try to keep my comments brief tonight, but on that point, you know I may fail. We have so many exciting things going on in Elutia Inc. right now, and I am eager to share them with you. With that, let us just jump in. Here is a forward-looking statement slide that basically says what Sonali just said. And then really quickly on our conference call, so what is on the agenda today? We are going to go over some of the basics. You may have heard this, but we also have a lot of new callers on the call today, so be patient as we go over things like our mission and what we are good at, where we are headed as a company. We made a couple of announcements in that press release that are kind of important, and so we will be updating some of those things there. Matt is going to then talk about finance topics. And then lastly, we will close the call and take your questions. So let us start out with our mission. Humanizing medicine so patients can thrive without compromise. Humanizing medicine. Humanizing medicine. Every 98 seconds, a woman in this country is diagnosed with an invasive form of breast cancer. That means even if I keep my remarks short today, there will be 18 new cases diagnosed during this call. Three of those are going to die during this call. Ten will have breast reconstruction. And three are going to have a serious complication from that surgery. Who are these people? These are our mothers. These are our wives. These are our friends. And our daughters. You know them. That is humanizing medicine. I am looking around this room right now at a group of brilliant overworked, tired professionals. And the look on every one of their faces is the same. Randy, let us go get at this. So why do we think we can fix this appalling problem? Well, let us look at what we are good at. What we are great at, actually. We are great at combining an optimal biological matrix, and we use the biological matrix to hold an implant in place and regenerate into the patient’s own healthy tissue. That is an essential part of the surgery. But what we do that no one else does is we combine that with powerful antibiotics for sustained antibiotic release that prevents infection and these other complications that we are talking about. Infection is the number one complication of surgery, period. And we have the ability to significantly reduce it. And this is not theoretical. Right? We have already done this. LU Pro, we launched in January. We got it through a 194 VACs in nine months. We got it up to an $18 million run rate because physicians loved it. And most importantly, it worked. So that is what we are doing with 41X in breast reconstruction. We cannot do this without an incredible team and I am super pleased to announce that we have done a great job adding some serious horsepower to our team this last quarter. I would like to welcome Guido Nils as our new board member. He is an operating partner at Edsburg Woodlands and the former Chief Operating Officer of Guiding Corporation. He is also, importantly, a longtime friend and mentor of mine. And we are blessed to have him join the team. I would also like to welcome Pete Ligotti as our new Chief Commercial Officer. Pete joins us with a brilliant 30-year career, including 20 years at Integra. Some more time at NuVasive where he ran a successful business. He is going to be coming in here, and he is going to be spearheading our commercial efforts as we move towards the launch and commercialization of 41X. Welcome to both of these gentlemen, to the Elutia Inc. crew. Okay. So where are we headed? I want to be really clear about all this so everybody understands. We are going to solve a really big problem that exists right down in breast reconstruction, and why this is such a transformational opportunity for us really comes at the intersection of three things. One is, it is a really big market. It is a really big market, and that matters. Breast reconstruction is a $1.5 billion market. But it is also a really big market that is facing an enormous problem. As I said, 15% to 20% of breast reconstruction patients will develop a serious postoperative infection. It is just unacceptable. We can do better. We have to do better. And the good news is that our technology platform is almost purpose built for this specific problem. Our first FDA-cleared drug-eluting bioenvelope turns out to be a really, really great way of addressing breast reconstruction infection. And so that is what we are going to do. So digging in here a little bit, breast reconstruction is a really big market. There are 102,000 breasts reconstructed after mastectomy annually. That means there are a lot of biological meshes that are already being used. Biological meshes are already used in 90% of these surgeries. So what does that mean? It means we do not have to train a surgeon on some brand-new technology to solve their problem. We just take a technology that they are used to, that they are familiar with using, and make it much better so it solves their number one problem. Human ADMs, human acellular dermal products lead this market and they are expensive. We are talking about $7,500 to $9,500 per breast. That makes them 65% or more of the total implant spend during a breast reconstruction procedure. So this is a really, really big market. But it is a market that confronts some very unique challenges. When I talk about the postoperative infection rate being 15% to 20%, people look at me and think, oh, that just could not be. It is. It definitively is. I want to explain just a little bit about why we see such high infection. And I am not going to go through all the slides. Some of you may have seen this. I have a longer series on this. But I do want to show you what is really at the root of this. So in a mastectomy, all of the breast tissue has to get removed. If all of the breast tissue is not removed, the woman’s mastectomy is not complete and they have to go through follow-up and surveillance and mammograms and other types of things and still have the risk for redeveloping breast cancer. So all of this tissue has to be removed. Well, one of the things that you should sort of know about breast tissue is that the blood supply for the anterior, or the front, side of the breast all goes through this breast tissue that has to get cut out. And so when a mastectomy is done and that tissue is removed, the blood vessels and therefore the blood supply for the front half of the breast is removed with it, and that closes off that blood supply. And what does that do? Well, that creates a situation where you have an area of the body that your blood flow cannot reach, where your immune system cannot readily reach, and very importantly, where postoperative antibiotics cannot reach. You can give somebody oral antibiotics or you can give somebody IV antibiotics, but if they do not have a vasculature to a particular area, those antibiotics are not going to flow there. And this is what sets up the very unique problem that we see in breast reconstruction. And that is what leads to these exceedingly high infection rates. As I said, one in three women suffer a serious complication, but 15% to 20% experience infection. This is not one paper. This is not some esoteric citing. This is the registry. This is what all of the data says. In fact, put it into real specific numbers. The registry data says it is 12% to 37%. You want to put the real numbers about it. So when we say 15% to 20%, we are not exaggerating. On that number, if anything, we are being conservative. And this is validated every time we go out and talk, particularly with the academic centers where they really track these numbers very, very closely. That leads up to one in five implant loss, so they have to go back and this whole thing comes out. It leads to a massive economic burden for the hospital, a $48,000 economic burden to the hospital. So the hospital certainly should be highly motivated to address this problem. But I just want to keep in mind and go through our mission here in humanized medicine. We are also talking about a woman that started this journey because she was diagnosed with cancer. Not an augmentation. She was diagnosed with cancer. And the number one goal in that woman’s mind is curing herself from that cancer. And that involves chemotherapy. It involves surgery. It involves radiation sometimes. And when an infection pops up, all of that stops. None of that can go on until that infection is resolved. And so this is a significant problem on so many different fronts. And it is one that, if you cannot tell, we are very, very passionate and committed to solving. So the great thing about this anatomical problem that is set up during the mastectomy is it kind of creates a perfect environment for what we do. So what if we flip the script on this and instead of trying to deliver this antibiotic systemically, we delivered it locally. We actually delivered it where the breast implant and the drain are, through the mesh, which is naturally there anyway to hold the implant in place. Well, the exact opposite would happen. Instead of concentrations being very, very low of antibiotic, the concentrations would be very high. And they would stay high for a long period of time. And then the best part, they would not have any systemic effects. So you could have high therapeutic concentrations of antibiotics right there in the breast site without any of these systemic side effects that you sometimes get when you deliver systemic antibiotics. And this was the concept that we started out with a very long time ago. This was the premise behind EluPro, and when we started using EluPro in humans, we saw it was completely valid. And then we got more data on this specifically in breast reconstruction. So there is some really great data out there on what happens if you deliver antibiotics locally into the breast reconstruction spacers. Two different studies particularly that I will reference here. One of them uses a plaster antibiotic plate. Now that does not sound like a great way to treat a woman who is undergoing breast reconstruction, to put a piece of plaster in her breast. But when the risk of postoperative infection is 15% to 20%, desperate times call for some pretty desperate measures. So they gave this a shot. They impregnated this plaster with this antibiotic and they looked at it in just the general breast reconstruction population. What they saw was a 62% reduction in infection risk. We are talking about going from 12.6% to 4.8%. This is not a small study. We are talking about an n of 593 patients in here. So a significant proof of concept that if you deliver these antibiotics locally, you can do a really, really good job of preventing infection. Another version of this was tried, but in a much, much higher-risk setting. Here, what they were looking at is instead of using these big plates, they used these little plaster beads. Again, they are this plaster material. And they put those into the breast cavity. What they were looking at here were women who had very, very poor, in fact pathologically poor, blood flow to the anterior side of the breast, something we call mastectomy skin necrosis. And this is where there is just literally no blood supply to the front part of the breast, and that front sort of breast tissue starts to die. When that happens, your risk of infection skyrockets. And so here, they saw an 82% reduction in infection. We are talking about going from 36% down to 6%. Again, n of 75 here. You might say, well, I guess maybe this problem is solved. Not really. Even the authors, and these are friends and champions of Elutia Inc. who were behind these studies, will tell you this is a suboptimal solution to a very serious problem. No woman likes that plaster put in there. No plastic surgeon wants to make antibiotic beads off-label in the back part of their surgical center. They do not stay in place. They drop down into the inferior side and into the gutters of the breast. They do not provide uniform coverage, and they elute the antibiotic way, way, way too quickly. But it did show that this concept definitively works. And that is why we created NXT 41X. We are combining these powerful antibiotics, rifampin and minocycline. So these are antibiotics that specifically target the pathogens we know we see in breast infection. And it delivers them in a uniform field for an extended period of time. It might be 30 days. Wow. What is this 30 days about? The drains that are placed at the time of surgery stay in 17 days. And so you want a couple of weeks of extra coverage. That is what that is about. And we combine these powerful sustained antibiotics with an optimal biologic matrix. And that matrix I will refer to as 41. It is just the matrix by itself. And we put those two things together and we made something purpose built for the problem that we are trying to solve, which is postoperative infection in breast cancer surgery. So let us talk about the roadmap and how do we get from here to there. Right now, we have SimpliDerm, which I am going to talk about in just a second, but that is our current product that is used in the breast reconstruction space. It gives us a lot of practical, on-the-floor experience in this space. The real excitement starts with 41 and 41X. So 41 is our base matrix. So when I say NXT 41, I am talking about just the biological matrix alone, without antibiotic. It is a phenomenal matrix in its own right. If we were not a drug-eluting biologics company, we would be talking about this incredible NXT 41, but we cannot leave good enough alone, primarily because it does not solve the biggest problem in breast reconstruction. But what we do is we use 41, from a regulatory standpoint, to set the foundation for 41X. We announced today that we have already submitted to FDA NXT 41. Let me just sort of pause and reality check everybody. We know we are going to get questions from FDA. We know we are going to need to respond to them thoughtfully and professionally, and we know that is probably going to take a little while. So let us be patient. Let us give our incredible R&D team the time to do the professional job they need. If something significant happens, I promise we will update you on it. In the meantime, we expect clearance sometime in 2026 for 41. And that will serve as the platform for NXT 41X, which is the base matrix combined with the rifampin and minocycline. And if we put the timelines together, we expect clearance for NXT 41X towards the end of the first half of 2027. So we are looking at a second-half launch of that product. Okay. What is going on inside the company? Well, you can sort of divide it up into three major workstreams. The first one is obviously development. No surprise here. That group is focused pretty heavily on the approval of a highly differentiated product that significantly improves outcomes in plastic and reconstructive surgery. That starts with our 41 base matrix and rolls seamlessly into our 41X drug-eluting matrix. I said we are here in our beautiful Gaithersburg facility. Well, that allows me to introduce manufacturing, because this is our manufacturing facility here, where we have enough capacity to make 41X for the foreseeable future. I think we have something like $120 million in revenue-generating capacity for 41X with just one shift right now. We have this great manufacturing facility. And then, basically, I could sum up manufacturing’s job right now into two things. One, ensuring adequate supply of perfect quality tissue. And two, driving down cost of goods. So that is what they are working on. And then lastly, we now have Pete Ligotti coming in and heading commercial, building these KOL partnerships. I am going to tell you, we do not have a problem getting a meeting and building strong relationships with our KOLs. We have, and are continuing to build, a very robust KOL team of champions. And there is really no secret to it. We are able to do it not because we have great personalities, but because we are addressing their number one problem and the number one problem that their patients are facing right now. In addition to that, Pete is working on developing health economic models, obviously spending a lot of time on reimbursement strategies, and generally preparing for launch readiness of 41X. So now let us turn a little bit to SimpliDerm. We are exploring SimpliDerm strategic options. We announced that in the press release today. You might ask, well, why now? Well, we have gotten to the point where our confidence with the 41X program really dictates that this is now the time for us to focus all of our time, all of our resources, all of our energy on making sure we do a great job with that platform. SimpliDerm is a great product, and whoever gets this asset is going to get a really, really wonderful product. Acellular dermal matrix that is used in soft tissue reconstruction. It has great handling. It is sterile. It is hydrated and ready to use, which is what the plastic surgeons want. 100 million lives covered is a big deal. Some people think they could introduce their own acellular dermal product really quickly and just get it on the market. It turns out reimbursement in the acellular dermal matrix market is a really big deal. So we have 100 million lives covered across two of the largest payers, Anthem and UnitedHealthcare, as well as nine regional plans. Patent protected, obviously. It is completely standalone. So for us, it is a completely segregable business that does not cause any disruption. And whoever gets it, it is EBITDA accretive. So no incremental capital investment is required. It is really a beautiful plug-and-play technology. We will keep you updated on this, and we will see how that process goes. Lastly, I would not be able to say any of the great things that I am saying today, and we would not have been able to make any of the progress that we are making, without our incredible Elutia Inc. crew. We are proud to be recognized for something we already knew. Elutia Inc. is a great place to work, and we were certified by the Great Place to Work certification. The results, I thought when I saw them, I was really proud. It proved we are a mission-driven organization. We are also a merit-driven organization. 54% women, 62% of our leadership roles are occupied by women. 50% have advanced degrees. We are a brilliant group. Not me. But the team. An entire third of our organization has a doctorate. And we are a committed group. Our average tenure, 6.3 years. The advantages, if you are wondering, so what is the advantage of this Great Place to Work certification? Well, the certification is kind of nice. I guess you can hang it on the wall. But what it means is that, compared to our noncertified peer competitors, we tend to outperform on financial metrics by fourfold. We are able to attract job seekers because of the Great Place to Work certification with a 15 times higher attractiveness, and our turnover of certified workforces is about half that of the regular U.S. workplace. So I am going to end my comments there by thanking this tremendous team for frankly making my job such a joy. And with that, I will stop talking, and I will turn it over to Matt Ferguson. Matt Ferguson: Okay. Thank you, Randy. And before I start my remarks, I would just like to say I so appreciate the passion and the leadership that you brought to the organization, and I support all of the comments that you just made about our mission and our market, our opportunity, and probably most importantly, our team. And with that, we put out our earnings press release today with quite a bit of detail in it, and we will put out our 10-K in a couple of days. That will have even more detail in it. So I am just going to hit a few highlights and not take very long here. But moving into a summary of our fourth quarter financial results, from a revenue perspective, we did $3.3 million in revenue, and that compares to $2.8 million in the year-ago quarter. That is up 16%. So we were very pleased with that performance. That was really driven by the return to direct distribution for both our cardiovascular and our SimpliDerm product lines, as we have talked about. The return to direct distribution has also had a very positive effect on our gross margins. So on an adjusted basis, which is probably the better indication of how things are really performing from a business perspective, we had an adjusted gross margin for the fourth quarter of 66.8%. That was up 12 points from the prior-year quarter, when it was 56.5%. So really nice results there. Our net loss from continuing operations, so that is excluding the bioenvelope business that was divested on October 1, was $6.5 million, versus $7.2 million a year ago. And then probably a more relevant metric in terms of our operating performance, our adjusted EBITDA, which is a non-GAAP metric but excludes certain noncash, nonrecurring, noncore operational metrics, was a loss of $4.2 million in the quarter compared to $3.4 million in the year-ago quarter. On our balance sheet, a lot has changed in the last quarter. As you know, our total cash on hand plus the $8 million that we have in escrow is $44.4 million. So it puts us in a really nice position from an overall cash point of view. That is after having paid off all of our debt with SWK that took place at the beginning of the fourth quarter as well. That was about $28 million that went to pay off that debt. And then just from a share count point of view, we have 42.8 million common shares outstanding as of the end of the year. In addition to that, there are 4.5 million pre-funded warrants that are outstanding, so a total of 47.3 million. And all of those common shares outstanding now are Class A common shares. So what that means is that all of our Class B common shares, which were held by one entity, were converted during the quarter and sold into the market. So that, as you know, is essentially an overhang that is gone now, and we are very pleased to get that behind us. One of the effects that we have seen as that has gotten behind us is that we recently came back into compliance with all of Nasdaq continued listing requirements. We put out that release at the beginning of last week, and I would just like to thank all of our investors out there who have put their trust and their capital into Elutia Inc. and helped support that return to compliance there. So moving on, just to take a step back and at a big-picture level, 2025, and really all of 2025, represented a real strategic reset for the company. And the biggest event in that really was the $88 million sale of our bioenvelope business to Boston Scientific, which, again, allowed us to pay off all of our outstanding senior debt to SWK, left us with $44.4 million of cash on the balance sheet and in escrow that will come in later this year, and it really allows us to be completely focused and extremely well resourced for the continued development and the launch of NXT 41, which we truly believe will be transformational in the market starting next year. So I guess with that, the last thing I would like to mention is just that we have tried to be very active in getting this story out, which we truly believe in. We have been active in getting it out to investors, and we are going to continue to do that. We have two conferences coming up in the next couple of months. The first will be just next week, the Sidoti Small Cap Conference, which is an online conference, and then in May, we have the LD Micro Conference, which is a live conference in Los Angeles. So if any of you are attending those events, we would very much love to meet with you there. So with that, in summary, before turning it over to questions, I would just like to reiterate the three key points of our story. We have a validated technology platform, as has been proven by the sale of our EluPro product and our bioenvelope business last quarter to Boston Scientific for $88 million. We have a truly blockbuster pipeline underway, which is really starting with NXT 41 and a $1.5 billion market. And then we are in a great position from a resource point of view. We have a fantastic team. We have a great facility that we are sitting in here today. And we have a strong balance sheet, which will take us through that approval and into commercialization. So with that, I will open it up to questions, and back to you, Operator, to start that off. Thanks. Operator: Thank you so much. We will now open for questions. As a reminder, to ask a question, simply press 11 to get in the queue and wait for your name to be announced. To remove yourself, press 11 again. We have a question from the line of Frank Takkinen with Lake Street Capital Markets. Please proceed. Frank Takkinen: Great. Thanks for taking the questions. Congrats on all the progress. Congrats on 41 submission to the FDA. I was hoping to start with a few questions around that. I know it is a question along the lines of trying to predict the unpredictable, but as you are working internally, what kind of questions are you preparing for from the FDA, and how do you think about the challenges you might have to go through to get it to market, or if it should be a relatively streamlined process? And then secondly, once you do get 41 across the goal line, how quickly can you shift the filing to 41X and resubmit? Randy Mills: Okay. I am just making some notes, Frank. So, Frank, thanks for the questions. I think everyone should view the review process and respect the review process the way we do. The timelines that we have laid out for clearance are fairly conservative. And they are fairly conservative because we want to make sure that we do a really professional job. Now I would say, first and foremost, we submit a high-quality application with everything in it that we think is necessary for a clearance. We do retain a lot of backup data and supporting data on all the necessary points. But as a matter of sort of regulatory strategy and best practices in regulatory science, you do not over answer a question with FDA. You just be prepared to explain the rationale for the things that you did answer. And so that is really the strategy that we have going on. There is no question that biocompatibility for a product like this is a big question in mind, and a big focus right now in the Food and Drug Administration. We know that. We feel pretty good about our product there. We know that when we get into 41X, if we just remember back to the days from EluPro, that things like in vitro elution were a real big point with them. You probably remember the IVE days, Frank. And so we are prepared for any and all of it, but we are prepared for it in a very humble and respectful way. And that is the timelines we have set up that have that in place. And I would just sort of encourage everyone to just keep that in mind. I would not be pulling forward any timelines until we tell you that is probably a good idea. With regards to how fast we roll into 41X, I would say just to keep in mind the whole purpose of 41 is to improve the efficiency of 41X. We have no intention of commercializing 41. It is not a drug-eluting matrix, and so it does not fit with our high-level thesis. So, really, the only reason that we are doing it is for regulatory efficiency. And therefore, the team will learn from the 41 submission. They will call any audibles that they need to as a result of what we learned from the 41 submission. But clearly, their plan is to go pretty efficiently from 41 into 41X. And if at any point we think that that might not, that 41 might no longer serve that purpose, well then we might change the plan. Right? Even pull forward a 41X submission. But right now, we anticipate, in the timelines, an approval pretty efficiently after 41. Frank Takkinen: Got it. Very helpful color. I was hoping to ask a little bit more about commercial. Appreciate some of the comments you made there. But kind of related to SimpliDerm, I think we have talked about just having experience in that space via SimpliDerm could help the commercial readiness of the organization once 41X is approved. How do you think about balancing that readiness that SimpliDerm could have helped with versus the strategic process? And then at the same time, what are you maybe doing from a commercial readiness perspective in light of that transition that is occurring? Randy Mills: Right. So, Frank, let us go through this with the three things that really help us get ready for 41X. One is just the base understanding of this market, how it works, and that includes the reimbursement. Right? So we have done that. We do know and we do understand how this current market works, how reimbursement works here, who the players are, literally the logistics of a breast reconstruction product. So we think we check that. You will remember, by far, the most important thing in the commercialization of EluPro was the value analysis committees, like the VACs. And I will be completely honest here. We learned more about how to do that with EluPro than probably we learned or are learning from SimpliDerm. My 194 VACs in the time that we did that, I mean, that was so key to the explosive growth of that product. And we feel, and we have a team that understands that. We know what to do from a VAC package standpoint. We feel pretty good about that. The third piece, though, was KOLs, and, you know, key opinion leaders and who are the thought leaders in this space. And here is, Frank, where our thought process has really flipped, and it really started flipping when we were able to go last October to the big plastics and breast meeting in New Orleans and just cold call some of these marquee leaders in the field of plastic and reconstructive surgery and say, hey, would you mind having a conversation with us? We are trying to develop a locally delivering biological matrix for breast reconstruction, you know, deliver antibiotic, try to prevent infection. Our dance card filled. And it filled with some of the brightest, strongest thought leaders in this space, and that continues to this day. We have no problem getting meetings with these KOLs and engaging in very meaningful, very enthusiastic conversations with them on how we can best design, build, and deliver a product that is exactly what we need. And so when that last piece sort of started to happen was when we sort of made the decision we are probably pretty good here and can start moving up, particularly with the progress the R&D team is making with the filings. Frank Takkinen: Yep. Yep. That is perfectly clear. I got it. One last I wanted to ask, Randy. Obviously, the data is really impressive with plate as well as the powder with 60% and 80% plus reductions. How do you think, and it is a speculative question, but how do you think NXT 41X could compare from an infection reduction perspective in relation to some of these other techniques that are being used today? Randy Mills: Yeah. We would be thrilled with a 50% reduction. Anyone would be thrilled with something like that. We have some advantages, though, over those techniques that are delivering those results. Those advantages are uniform distribution. So as I said, with the plates and the beads, those things have mass to them and they notoriously sort of fall down into the breast gutters and do not provide uniform coverage. The second thing is the teams that were doing that work know that antibiotic comes out of that real fast, and therefore it does not provide a particularly long-term coverage. We targeted this 30 days, and we targeted the 30 days because the drains come out at day 17, and if the drains are still in, particularly with this, there is a pistoning that can happen with the drains from the outside to the inside, you are constantly introducing and have the potential to introduce bacteria back into that surgical field. So we felt pretty strongly that you needed to have antibiotic coverage that persisted after the drains were pulled. So we feel like we have probably built a better solution than the ones you are seeing with these really fantastic results. I cannot knock what they are seeing. But I think I want to caution everyone here again to a little bit of humility and perspective. There is a percentage of these cases that have such severe necrosis. This is where the vasculature to the breast is so compromised that it does not matter what you would put in there. The tissue just dies. And in that case, we can add antibiotics all day long, but we are not going to prevent what ultimately is going to become something more like a gangrenous infection and the complications from those. And that is really just an unsolvable, at least at this time, consequence of the base mastectomy. So does that help? Frank Takkinen: Yeah. That is perfect. Appreciate the color. Thanks, guys. Operator: Thank you so much. And ladies and gentlemen, this concludes our Q&A session and our conference for today. Thank you for participating. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Target Hospitality Corp. Fourth Quarter and Full Year 2025 Earnings Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on Wednesday, 03/11/2026. I would now like to turn the conference over to Mark Schuck. Please go ahead. Thank you. Mark Schuck: Morning, everyone, and welcome to Target Hospitality Corp.'s Fourth Quarter and Full Year 2025 Earnings Call. The press release we issued this morning, outlining our fourth quarter and full year results, is available in the Investors section of our website. In addition, a replay of this call will be archived on our website for a limited time. Please note the cautionary language regarding forward-looking statements contained in this press release. This same language applies to statements made on today's conference call. This call will contain time-sensitive information as well as forward-looking statements, which are only accurate as of today, March 11, 2026. Target Hospitality Corp. expressly disclaims any obligation to update or amend the information contained in this conference call to reflect events or circumstances that may arise after today's date except as required by applicable law. For a complete list of risks and uncertainties that may affect future performance, please refer to Target Hospitality Corp.'s periodic filings with the SEC. We will discuss non-GAAP financial measures on today's call. Please refer to the tables in our earnings release, posted in the Investors section of our website, to find a reconciliation of non-GAAP financial measures referenced in today's call and their corresponding GAAP measures. Leading the call today will be Brad Archer, President and Chief Executive Officer, followed by Jason Paul Vlacich, Chief Financial Officer. After their prepared remarks, we will open the call for questions. I will now turn the call over to our Chief Executive Officer, Brad Archer. Brad Archer: Thanks, Mark. Good morning, everyone, and thank you for joining us on the call today. We entered 2025 with a clear mandate to advance our strategic growth priorities, diversifying our contract portfolio, and accelerating our transition into high-growth end markets. We made significant progress on these priorities, and our disciplined execution resulted in the most successful period of contract awards in Target Hospitality Corp.'s history. Since February 2025, we have secured more than $740 million in long-term contract awards across a broad range of end markets, including over $495 million supported by our expanding WHS segment. This strong momentum is driven by an unprecedented capital investment cycle across AI infrastructure, critical minerals, and power generation development. To capture this opportunity, we launched Target Hyperscale, demonstrating our ability to deliver highly customized solutions through a vertically integrated accommodations platform that scales with customer requirements. Our vertically integrated capabilities, unmatched across the U.S., combined with accelerating end market demand, have established a core strategic growth vertical for the company. We believe Target Hospitality Corp. is at an inflection point, supported by strong execution and an unprecedented pipeline of opportunities. Strengthening market fundamentals have laid the foundation for a robust and expanding pipeline of more than 20,000 beds, creating meaningful opportunities to continue advancing our strategic growth priorities. Turning to our segments and accelerating momentum on key strategic growth opportunities, our HFS segment continues to support our world-class customers by meeting their evolving labor allocation needs through premium service delivered across our extensive network. Target Hospitality Corp.'s vertically integrated operating model and network scale enable us to serve customers through all phases of the business cycle, reflected in customer renewal rates consistently above 90% and average customer relationships of more than five years. Moving to the rapidly expanding WHS segment, our WHS segment continues to benefit from accelerating demand across large-scale AI infrastructure, critical minerals, and power generation projects. Target Hospitality Corp.'s vertically integrated accommodations platform and scalable solutions are uniquely suited to support these increasingly remote infrastructure developments. These capabilities, supported by our differentiated service offerings including Target Hyperscale, position us to meet rising demand in this high-growth sector. Since February 2025, we have secured more than $495 million in multiyear WHS awards, driving the reactivation of nearly 3,000 beds across our asset base and demonstrating the value of modular and highly customizable offerings. Our ability to deliver speed-to-market solutions and scale with customer needs has supported multiple expansions at our data center community, which has grown 320% from its initial 250-bed footprint in just a matter of months. Additionally, today's announcements of the West Texas Power Community and Pecos Power Community further underscore our ability to rapidly deploy assets to meet this accelerating end market demand. Combined, these awards immediately reactivate more than 1,800 beds in Pecos, Texas, and represent over $150 million in multiyear contracts. Across our WHS segment, we have reactivated nearly 3,000 beds in less than a year, supported by long-term committed revenue contracts across a diverse customer base. A successful reactivation of existing assets has reduced our remaining available inventory to approximately 3,000 to 4,000 beds, depending on customer-specific requirements, and highlights the extraordinary momentum of the current AI-driven capital investment cycle. As data center and power generation projects extend into more remote areas, the need for high-quality workforce accommodation has intensified and become essential to their success. Target Hospitality Corp.'s scale and fully integrated solutions uniquely position us to help customers attract and retain skilled labor nationwide and has established Target Hospitality Corp. as a trusted partner. These dynamics have created the largest commercial pipeline in our history, with active discussions representing more than 20,000 beds. The WHS segment has become a core strategic growth platform and a key driver of our strategic growth initiatives. I will now hand the call over to Jason to discuss our financial results and 2026 outlook in more detail. Jason Paul Vlacich: Thank you, Brad. Fourth quarter total revenue was approximately $90 million, with adjusted EBITDA of approximately $7 million. A meaningful portion of quarterly revenue is generated by construction services tied to the workforce hub contract in our Workforce Hospitality Solutions, or WHS, segment. This lower-margin revenue stream, combined with elevated initial operating and mobilization costs associated with recent WHS segment contract wins, temporarily compressed margins. As the workforce hub contract transitions to higher-margin services-based revenue and our new WHS awards continue to scale through 2026, we expect consistent and sustained margin expansion. Our HFS South and All Other segments generated approximately $36 million in quarterly revenue. Target Hospitality Corp.'s customers in these segments continue to value our premium service offerings and extensive network scale, which provides consistent hospitality solutions aligned with their labor allocation demand. While we experienced some moderation in our HFS South segment, this network continues to provide strategic value and reliable cash flow. Its stability supports our long-standing customer base and provides consistent cash generation to advance our growth initiatives and further strengthen our balance sheet. Moving to the expanding WHS segment, this segment's fourth quarter results, which include our workforce hub contract and the data center community contract, generated approximately $40 million in revenue, primarily related to construction services activity associated with the workforce hub contract. As we announced today, the importance of the workforce hub contract led to additional modifications and scope expansion during the fourth quarter. The increased scope of the contract raises the total contract value to approximately $170 million, reflecting a 25% increase from the original contract value. With construction activity substantially complete, we anticipate the workforce hub contract will support margin expansion through 2026 as the contract shifts to higher-margin, services-focused revenue. Regarding the data center community contract, as we previously announced, the strong pace of customer development activity has supported two 400-bed expansions to this community. As a reminder, these expansions will be phased in 400-bed increments over 2026. The first 400-bed expansion is scheduled to be operational by April 2026, with the second 400-bed expansion scheduled to be operational in June 2026. Following the completion of both expansions, the community will be capable of supporting over 1,000 individuals. In total, the data center community contract is expected to generate approximately $134 million of committed minimum revenue over its initial term through May 2028. Additionally, as the data center community expansions are completed, we anticipate enhanced margin contribution from this contract as the community scale will allow us to capture greater efficiencies from our fully integrated operating model and strong unit economics. As we announced today, the accelerating industry activity across AI infrastructure and power generation development supported two new contract awards utilizing our existing West Texas assets. The West Texas Power Community contract is expected to generate approximately $129 million of minimum committed revenue over its 47-month term beginning March 2026, supporting a community of up to 1,400 individuals. And the Pecos Power Community contract is expected to support up to 400 individuals while generating over $23 million of minimum committed revenue over its 26-month term beginning April 2026. In total, these contracts support the reactivation of over 1,800 beds with more than $150 million of multiyear committed minimum revenue serving multiple customers in a project-dense region. While the Pecos and West Texas contracts are centered on fixed minimum revenue commitments, there is an opportunity to capture additional variable revenue from incremental customer demand above the committed minimum. Importantly, the Pecos and West Texas contract awards leverage our existing assets and community locations, enabling immediate customer use, with a combined capital investment of only $4 million to $8 million. These contracts are expected to be immediately margin accretive and demonstrate our ability to rapidly deploy existing assets to support customer demand. Our Government segment generated approximately $14 million of revenue during the quarter. The declines compared to the previous year were driven by the termination of the PCC contract, partially offset by the reactivation of our Dilley, Texas, assets. Corporate expenses were approximately $18 million for the quarter, which includes a true-up to the 2025 short-term incentive plan to reflect the significant progress made on executing Target Hospitality Corp.'s strategic growth initiatives, including multiple fourth quarter contract awards. Our 2026 outlook also accounts for potential incentive payments that may be implemented this year. Total capital spending for the quarter was approximately $16 million, focused on growth in our WHS segment, including the data center community expansions. Target Hospitality Corp.'s strong business fundamentals and durable operating model supported strong cash conversion, resulting in over $74 million of cash flows from operations and $66 million of discretionary cash flow for the year ended 12/31/2025. These fundamentals are reflected in the strength of our balance sheet and our ability to maintain significant financial flexibility through prudent capital management. During 2025, we executed the largest commercial pivot in our history while maintaining a strong balance sheet and capital flexibility. We ended the quarter with zero net debt and total available liquidity of approximately $183 million. Target Hospitality Corp. continues to advance its strategic growth initiatives focused on enhancing revenue visibility, consistent cash flow, and strengthening margin contribution. This momentum and positive operating environment support our 2026 outlook, which includes total revenue of between $320 million and $330 million and adjusted EBITDA of between $60 million and $70 million, with capital spending, excluding acquisitions, of between $65 million and $75 million. As recent contract awards and community expansions come online and scale through 2026, we expect revenue and adjusted EBITDA to build steadily throughout the year. The additional operating scale and improved unit economics should support continued margin expansion through 2026 and into 2027. Together, these factors are expected to position us to exit the year with an annualized revenue run rate of more than $360 million and adjusted EBITDA exceeding $90 million. This strong momentum is driven by significant growth in our WHS segment, which is projected to become our largest operating segment by 2026, contributing more than 40% of consolidated revenue based on the current contract portfolio. Target Hospitality Corp. is well positioned with a flexible operating model and an optimized balance sheet as we continue to evaluate a robust growth pipeline focused on continued expansion of our WHS segment, which we believe offers the greatest opportunity to accelerate value creation for our shareholders. As we pursue these opportunities, we will remain focused on maintaining the strong financial profile we have built while maximizing margin contribution through our efficient operating structure. With that, I will hand it back to Brad for closing remarks. Brad Archer: Thanks, Jason. We made significant progress executing on our strategy in 2025, positioning Target Hospitality Corp. to capitalize on powerful long-duration demand trends across AI infrastructure, power generation, and critical minerals. This strong execution drove more than $740 million in new multiyear contracts, including over $495 million within our rapidly expanding WHS segment. We are also engaged in advanced discussions on additional opportunities that reflect the accelerating development activity across AI and related power generation projects. These secular tailwinds are supported by a multi-trillion-dollar investment cycle to expand AI and data center infrastructure. Additionally, supporting this infrastructure development will require substantial growth in U.S. power generation capacity, with national energy consumption expected to double by 2030. Against this backdrop, we continue to evaluate the most active and robust growth pipeline in Target Hospitality Corp.'s history. With strengthening market fundamentals, we are actively pursuing opportunities representing more than 20,000 beds, highlighting the depth and durability of demand in this end market. Target Hospitality Corp.'s unique capabilities, combined with strong execution, position us as a trusted provider in this rapidly expanding marketplace. With a deep pipeline, strong balance sheet, and a scalable vertically integrated platform, we are well positioned to drive sustained growth and long-term value. We are excited about the opportunities ahead and believe they will play a central role in advancing our strategic initiatives and delivering continued value for our shareholders. Thank you for joining us on the call today. We will now open the call for questions. Thank you. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any of the keys. One moment please for your first question. Your first question comes from Scott Schneeberger with Oppenheimer. Scott, please go ahead. Daniel Erik Hultberg: Good morning. It is Daniel on for Scott. Thank you for taking our questions, and congratulations on the new contract wins. Starting off with the new contracts, could you please elaborate a little bit on the pipeline? I mean, you still have some assets in West Texas. Good to see some of it, but could you please discuss the pipeline, the potential to reactivate the remaining West Texas assets, and how we should think about the ripeness of that? Thank you. Brad Archer: Yeah, Daniel, this is Brad. Let me just give a high level on the pipeline. We have said this many times over the past few quarters, but it continues to grow, right? It is the strongest, most actionable pipeline we have ever seen. As we mentioned, a 20,000-plus bed opportunity. That is after we removed, you know, several thousand beds, and we have added back to that, right? And it continues to grow. We have been alluding to this fact for several quarters that our pipeline is getting stronger and more mature, right? This started over a year ago. We started planting seeds with the customers in these projects, having negotiations, and now we are beginning to harvest, right? It is in the way of executing contracts, which is what you have seen in our release. And it is just funny. Those happened both in one week. I do not expect that always to happen in the future like that. But what I would tell you is we do expect to keep stacking wins throughout 2026. We have mentioned we are in advanced late-stage negotiations with multiple customers. I am not going to get into details there, but it is a very healthy pipeline. If you look at available fleet, that is absolutely being quoted within those 20,000 beds, right? We expect that to be taken at some point. And then we would look to, you know, in the market, if there is available fleet to purchase, and we have secured line times at multiple factories as well, have a great relationship with the manufacturing base out there. So at some point, we would expect to have to reach into that as well, just by the supply and demand that is out there at this point. Daniel Erik Hultberg: Got it. Thank you. I think Jason mentioned earlier there is potential for variable revenue contribution. Could you please elaborate on that? Jason Paul Vlacich: Yeah, absolutely. So that is related to the two new contracts that we announced today. The over $150 million contract value is literally just the fixed minimum amount. Within that, there is a lease component, which is relatively straight line, and then there is a built-in fixed minimum bed committed amount that is attached to a manning curve, so it is not exactly straight line. And then on top of that, there is a variable component attached to those contracts. The all-in rate on those, the head-and-bed for those two new contracts, is right around $100 a night. So there is definitely potential for variable upside. None of that is built into our outlook. So our outlook is materially based on fixed minimum amounts. Daniel Erik Hultberg: Got it. Thank you. A final one for me. Any more color you can provide on how to think about the cadence as we move through this year and any unique modeling dynamics we should think about as it comes in the early? Jason Paul Vlacich: So with respect to our outlook and how that is going to trend, Q1 is going to be the low point as these contracts start to ramp up. Obviously, the two new ones that we announced are immediately accretive. One of those has already started. Another one is going to start in April. But, for example, the expanded data center community will ramp up kind of full force in Q3. Q2, in the power community contract in Nevada, will ramp up June, so you will see the full effects of that in Q3. I would say that is how you would pace it. Q1 is the low point, and then it will continue to ramp up in Q2, much further in Q3 and Q4, until you get to that run rate that we announced on the call for everything that has been contracted, right? None of that includes the variable upside related to the two new contracts. So that over $160 million of annual run rate revenue, over $90 million of adjusted EBITDA on an annual basis, is all based on fixed minimum revenue commitments for everything that has been contracted, and none of that obviously includes the upside related to the pipeline. Basically, you will see that come to fruition in Q4. Brad Archer: So, in short, the low point is Q1, and it builds from there. Jason Paul Vlacich: Yeah, totally different by the end of the year, right? And not taking into account, like I said, any new projects or the upside on anything that we have signed. Daniel Erik Hultberg: Got it. Okay. Thank you, guys, and congratulations. I will turn it over. Operator: Thank you. Your next question comes from Stephen David Gengaro with Stifel. Please go ahead. Stephen David Gengaro: Thank you. Good morning, everybody. Brad Archer: Good morning. Stephen David Gengaro: So a couple of things. The first, just to follow up on the point, when you talk about the run rate exiting 2026, is that just based on announced contracts to date? Jason Paul Vlacich: Absolutely. Yes. Stephen David Gengaro: And when you say run rate, do you mean December or fourth quarter? I mean, I do not want to get too granular, but is $22 million sort of the EBITDA guide for 4Q? Or is that— Jason Paul Vlacich: Yes. It is Q4. Stephen David Gengaro: Okay. Q4. Great. Thanks. The two other kind of higher-level questions: when you mentioned the capacity you have in inventory of 3,000 to 4,000 beds, and you have been talking to a lot of customers about opportunities, are you seeing urgency from the customers yet? Is there any feedback you get or implications from customers that they are getting concerned about available capacity, or is that still not a thing from their perspective yet? Brad Archer: Look, that is the fear, right? Not having the capacity, not having the amount of rooms. If you even just look at the contracts we just signed and you look at the 1,400 and the 400, those are existing beds, right? And they are paying to hold every one of those beds. Different when you are building it new. You have time to put in 250, then another 250, then another 250, very similar to our other project on the data center side. But the fear is there, and it is real, right? This pipeline we are talking about, this is not pie in the sky. It is an executable pipeline. Did we win it all? No. But they are real. They are funded. That is what is on this pipeline. So folks, especially when you look in these clusters where multiple data centers and multiple power plants—if you look at the Permian Basin area—there is already a lack of rooms, if you will. On top of that, you are starting to add new power plants and new data centers. It is fear, but it is warranted, right? The supply and demand, I would just say, in a lot of those areas are very much in our favor. Stephen David Gengaro: Okay. That is helpful. And then the other quick question, the HFS South business, the oilfield had a better-than-expected fourth quarter from kind of a completions perspective, but your numbers were down a little bit. Is that just seasonality and noise? I am sort of expecting that business to be kind of flattish 2026 versus 2025. Is that a reasonable starting point versus your guide? Jason Paul Vlacich: Yeah, that is absolutely right. Built into our guidance is HFS basically steady state year over year from 2025 to 2026, and the fluctuations you see there are just moderate seasonality, normal course, not fluctuating outside of our expected ranges. Stephen David Gengaro: Okay. Great. Thanks. I will get back in the queue. Thank you for the color. Jason Paul Vlacich: Thank you. Operator: Your next question comes from Gregory Thomas Gibas with Northern Securities. Please go ahead. Gregory Thomas Gibas: Great. Hey. Good morning. Brad, Jason, thanks for taking the questions. Congrats on the new contract wins. Jason Paul Vlacich: Thank you. Gregory Thomas Gibas: I guess, a follow-up on what was just discussed in terms of capacity in your remaining inventory. You mentioned 3,000 to 4,000 beds of remaining inventory. Wondering if you could maybe speak to rough plans on what you intend to acquire just given the 20,000 or so active pipeline? And I guess the pricing you are seeing around it. Once you put those 3,000 to 4,000 beds to use, how you would think about how you would work into future contracts the acquisition of new capacity. How would that be reflected in those contracts? Jason Paul Vlacich: Yeah. I will start off, and Brad can certainly chime in on this. In terms of incremental beds above and beyond our inventory, first of all, all of that is going to be built into the economics of the contract. Many of these contracts come with upfront capital requirements from the customer as well, and a lot of their projects do phase over time, so that allows us to be measured in our approach towards capital allocation to these growth projects. We also have multiple tools available. We have secondary market purchases that we have done in the past to secure more beds. Project-level structures, and contract terms that bake in a lot of that upfront capital to meet our minimum return thresholds. That is how we would approach it, and that is how we have approached it in the past. We have already had advanced discussions with those suppliers, as Brad mentioned earlier. Brad Archer: Yeah. We have a very good relationship with suppliers across the U.S., right? So capacity wise for us, I do not believe will be an issue. I would take you back to the data center project that we started last year, the way it built up over time that Jason was talking about. We also got money down from the customer. So on financing, that helps a lot. All those beds are not put in at one time, even though that was quicker than what was anticipated. It still worked out. For the phases, we got some money down, and then we were able to bring in the buildings and set those up and get them performing for the customer, right? We are still in that mode of constructing that site and increasing the capacity. On true capacity from manufacturing or buying within the market, we feel pretty good about where we sit at this point. Gregory Thomas Gibas: That is great. Appreciate the color. And, if I could just maybe more strategically, as I am following developments on Camp East Montana at Fort Bliss and nearby government facility, just given the strong demand you are seeing within the private sector, I wanted to get a sense of whether you are even interested in pursuing those government-related opportunities at this point and how you are thinking about that. Brad Archer: Yeah. To be blunt, we are focused on growing the WHS segment, which we believe offers the greatest value creation opportunities. Much more commercial when we are dealing with that. It is projects that are ready. It is much more predictable at this point, and that is where our focus is. Jason Paul Vlacich: And I would just add to that, really still on contract structures and committed counterparty risk breakdown. Gregory Thomas Gibas: Yep. Makes complete sense. I appreciate that. Lastly, as it relates to the pipeline, I appreciate the color you provided there. If you could characterize it further, I wanted to get a sense—because I know that the previous data center contract, nice to see the expansion there where it started at 250 beds and is now over 1,000 and the ability to get up to 1,500. As it relates to that 20,000 pipeline or so, would you say that is maybe how things would be structured going forward with additional contracts, in that it starts small with continued expansion? Or would it perhaps be more like we just saw, the 1,400 with the power community? Could you speak to the relative size of those opportunities in that pipeline? Jason Paul Vlacich: Yeah. I think size-wise, they range from smaller than 1,000 to much greater than 1,000. We are seeing some really large projects for long duration. The range is big. As far as how they build up, when they get bigger, it just takes longer to put them in. They want this first initial wave, and then it builds up over time, very similar to what we have already shown the market. I think it would probably be a little bit longer than that on the buildup. You have time to get them done. You just cannot build everything that they are wanting all at once, nor can they hire 3,000, 4,000, 5,000 people all at once. But remember, they are not the only company doing the hiring. They are in these clusters. We are looking at five and six of these data centers around a two-hour radius, if you will, on a drive. They could be literally in the same twelve-month to eighteen-month period hiring 30,000 to 35,000 craftsmen in that area. If there is one doing a workforce hub, the others are doing a workforce hub. It takes time to get their own folks hired, and it takes time for us to build out the project. So it starts, if you will, very similar to what we have shown, and then it continues to build up. However, the start could be bigger, and the buildup could be longer as well, because, again, we are seeing much bigger projects than 1,000 beds. On the 1,400, that was a reactivation, so obviously we were able to move really quickly on that because we did not have to move any beds. It was strategically located for the customer, etc. It was literally signed and started billing a few days later. That is what was great about reactivations—they are always going to be faster. Gregory Thomas Gibas: Yep. Makes sense. That is helpful. Thanks very much, guys. Operator: We now have a question from Raj Sharma with Texas Capital Bank. Please go ahead. Raj Sharma: Yeah. Thank you for taking my questions. Congratulations on the solid new wins. I wanted to understand the 20,000 beds, the pipeline exceeding. Could you give how much of this pipeline is, in the next couple of years you think achievable versus the next five years? Can you give some color on the cadence? And then I have some follow-on questions. Jason Paul Vlacich: Yeah. So the cadence here would be within the next twelve to twenty-four months, all of that 20,000. Are we talking to some that is longer out? Yes. But it does not make the pipeline at this point. They have not been FID. They might not have the land. They might not have the power. What we are talking about here is actionable within the next twelve to twenty-four months, some much sooner than that. I would say one to twenty-four months is how I would look at it. Brad Archer: Yeah. These are advanced-stage projects. Raj Sharma: Got it. And then as the hyperscale, the data center, and the power generation sort of accelerates, are you seeing situations—I know there was an earlier question on this—where workforce housing is becoming a bottleneck? If so, is that giving you pricing power or longer durations when you negotiate these contracts? Jason Paul Vlacich: Yeah. We are definitely seeing workforce housing becoming a critical component to getting their project done. They are using it as a competitive tool to attract the workforce, keep the workforce, retain the workforce, and get more productive. So that is definitely working in our favor. When I talk supply and demand, it absolutely helps on maximizing your price. Raj Sharma: Got it. And then on the CapEx requirements, you have given a guide for this year. Is that to be assumed—is that $65 million to $75 million, if I sound correct? Jason Paul Vlacich: Yeah. That is right. It is $65 million to $75 million, and much of that is growth CapEx tied to contracts that we have already executed. Incidentally, that range is materially aligned with what we spent last year. Raj Sharma: Got it. And do you expect that to continue for the next year as well, given your pipeline? Also, could you talk about the cadence through the year and the financing of this CapEx? Jason Paul Vlacich: Yeah. So the CapEx range that we gave does not require any real incremental financing above and beyond our current liquidity. We are well positioned on that. Obviously, any incremental capital that would go above and beyond that would be related to pipeline wins, and those would be built into the economics of those contracts. We have multiple avenues to fund, including growing cash flows from operations. We have the strongest balance sheet that we have ever had as a public company—the first year as a public company that we have exited the year with no debt—and lots of capacity. That being said, the contract structures will be built such that the economics will help fund our minimum return thresholds for sure in the CapEx requirement. There could be incremental CapEx for incremental wins, but certainly nothing we anticipate for the stuff that we have already executed on. Raj Sharma: Thank you. Then, just lastly, on the Pecos facility, I wanted to clarify the 8,000 idle beds. Any news on reactivating or contracting to the government on those? Jason Paul Vlacich: Yeah. I would say a lot of those West Texas assets are very fungible, and we could use them for multiple customers, and a lot of them have been leased out on the new contract wins. At this point, we are really focused on growth in the WHS segment and the pipeline around that, and that is where we see the most value added and the most accretive opportunities for our shareholder base. Brad Archer: Yeah. Let me just put something in there as well. We have already talked about almost 3,000 beds out of that 8,000, right? So there are 3,000 to 4,000 left, just to get a map, right? To your question, I would tell you, just to be more direct, as we look throughout 2026, I would expect those beds to be put in use under WHS. That is where the growth is at. That is where we are focused. That is where the capital is going to go. I am pretty confident that is where they go. Raj Sharma: Oh, fantastic. Thank you for the color and the clarification. I will take it offline. Again, congratulations on the wins. Appreciate it. Thank you, guys. Jason Paul Vlacich: Thank you. Operator: As a reminder, if you wish to ask a question, please press 1. You have another question from Stephen David Gengaro with Stifel. Please go ahead. Stephen David Gengaro: Thanks, and thanks for taking the follow-up. You have the 3,000 to 4,000 idle beds. When you think—when you listen to the contracts you are involved with right now—when you exit 2026, would you be disappointed if the bulk of those beds were not under contract? Brad Archer: 1,100%. Let me give you a little thought on how we look at these beds. Again, when you look at supply and demand—and it is in our industry’s favor at this point—we are sitting with what we believe are some valuable assets. We strategically want to place not all of them on one prime, but we think we have the ability and the pipeline to be strategic here. As we said, these projects build up over time. The thought is, can you use 500 to help win a project? Can you use 750 to help win a project? Can you use 1,000, where you do not drop them all in one, and get multiple contracts out of it versus one? Strategically, that is how we are looking at it. But we would absolutely be upset if we did not have these out in 2026, based on our pipeline. We have been in this market now going over a year, planting the seeds, as I said. Things are starting to grow, and we are starting to harvest. We like where we sit in the market. Stephen David Gengaro: Based on the network approach you take in that business, is there any idle capacity in HFS South that could be mobilized? Jason Paul Vlacich: Yeah. There is a little bit. I would tell you we think we are pretty optimized in that area, especially West Texas. I would also tell you we have a great customer base there with some really long-term, twenty-plus-year customers we are going to make sure we take care of. There is a lot of work in the Permian. We think we can take that business in other ways besides continuing to deplete the HFS side of it. But we will take every opportunity to high-grade those rates and high-grade those beds as needed while we still take care of the right customers that we have had for many, many years. It is a great question. Stephen David Gengaro: Cool. Thank you for all the details. Operator: There are no further questions at this time. I will now turn the call over to Brad Archer for closing remarks. Please continue. Brad Archer: Thank you. In closing, I want to reiterate again that Target Hospitality Corp. is at an inflection point. The hyperscalers are making trillion-dollar investments in remote America. They need us to make those investments work. There is no one else who does what we do at this scale in these locations. We are not an amenity. We are not a nice-to-have. These projects are remote, and timelines are nonnegotiable. Workforce housing is as critical as the fiber in the ground. We also did not stumble into $740 million in contracts. We built the platform, proved the model, and the market needs us. The build-out on AI infrastructure, data centers, and power generation across this country is one of the most consequential investment cycles in American history that I have ever seen, that most have ever seen. The problems we have solved and are solving now are helping transform that infrastructure, and in doing so, it is fundamentally transforming Target Hospitality Corp. With that, I want to thank all of you who have joined us on our call today and for your continued support of Target Hospitality Corp. Operator, that concludes our call for today. Operator: Ladies and gentlemen, this concludes the conference call. Thank you for your participation. You may now disconnect.