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Operator: Good morning, and welcome to Campbell Soup Company’s second quarter 2026 Question and Answer Session. After the introductory remarks, we will open the lines for questions. As a reminder, this conference is being recorded. I will now turn the call over to Rebecca Gardy, Chief Investor Relations Officer. Ms. Gardy, you may begin. Rebecca Gardy: Good morning, and thank you for joining the Campbell Soup Company second quarter 2026 Earnings Question and Answer Session. Earlier this morning, we released our earnings press release, earnings slide presentation, and management’s prerecorded remarks, including both the transcript and the audio of the remarks. All of the Q2 earnings materials are available on our website. At the conclusion of today’s live Q&A session, we will post the transcript and an audio replay of this call. During today’s call, we may make forward-looking statements, which reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, which could be inaccurate and are subject to risk. Please refer to slide 3 of our earnings presentation or our SEC filings for a list of factors that could cause our actual results to vary materially from those anticipated in the forward-looking statements. Because we use non-GAAP measures that we believe provide useful information for investors, we have provided a reconciliation of each of these measures to the most directly comparable GAAP measure in the appendix of our earnings presentation. Non-GAAP measures are not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Joining me today are Mick Beekhuizen, Chief Executive Officer, and Todd Comfer, our Chief Financial Officer. We will now open for questions. Operator? Operator: Thank you. Our first question today comes from Andrew Lazar from Barclays. Andrew Lazar: Maybe focusing in on Snacks to start with. From a top-line standpoint, what are you seeing in the key areas here of Goldfish, Fresh, and Salty? And so what is the plan for progress in the back half? And I guess for Salty specifically, you called out heightened competitive intensity, around which there has been plenty of discussion lately in the category. I am trying to get a sense of what the solution is. Is it lower everyday prices, higher promotional spend, bonus packs, etc.? And what sort of magnitude are we talking about? And then just on the margin side, the 7% snack segment margin was a bit of a shock. Given the investments that need to be made, is that the sort of level we should be thinking about for the next few quarters? I know it is a lot. I was hoping we could dig into that a little. Mick Beekhuizen: Thank you for the questions. We will take them one by one. So Snacks’ top line, Salty, I will comment on, and then Todd, if you can take the margin. And I will give the broader lead-in around the margin. If you look at the Snacks top line, three key focus areas: first, Goldfish; second, Fresh Bakery; and then Salty. Let us go through each of these pieces. With regard to Goldfish, we need to make sure that we maintain the Goldfish momentum. We had momentum, as you saw in our prepared remarks, going throughout the first half. We need to see that sequential progress throughout the second half of the fiscal year, and that is really with regard to in-market consumption. Then when I go to Fresh Bakery execution, we ran into execution challenges as we described. When I look at the remainder of the year, I expect that in Q3 we will likely see some continued headwinds, and that is partially self-inflicted as we reduce some market promotional activity in order to make sure that on-shelf availability and service levels are improving, and then by the fourth quarter we are working towards back to more normalized levels. When I get to Salty, we need to improve our overall competitiveness within that part of our Snacks portfolio, and it is predicated upon three key focus areas: first, making sure that we improve our competitiveness from a pricing perspective; second, focusing on the daily blocking and tackling, or the in-market execution, which is absolutely critical; and third, evolving our portfolio with innovation, which is primarily focused on premium, better-for-you, as well as flavor exploration. All that being said, within Salty, we expect we are going to make some progress throughout the second half, but it will take some time. With regard to your specific question around Salty pricing—and my comments really come back to the chips side of the business—Salty for us consists of two key pieces: first, pretzels; and second, chips. That is really where we are seeing more of that competitive pricing dynamic playing out, and you have heard that also from some of the other players in the space. What are we doing there? It is really focused on promotional activity. It is going to be very surgical, and we are going to make sure that we are competitive in the areas that matter during the times it also really matters—so again, just making sure that we are competitive in key moments. There is always a continued opportunity around some of the price pack architecture; however, that is going to take a little bit longer. From a margin perspective, obviously, poor performance, down 390 basis points in the quarter. Todd Comfer: As we mentioned in the script, about a quarter of that was the bakery performance that Mick just mentioned, and three quarters of it, quite frankly, is just when net sales were down 6%, there is a very large deleverage both in our plant network and also as we continue to invest in marketing and SG&A. When you are down 6%, that math on margin is challenging. For the second half, we will do a bit better on Snacks margin in Q3. We are still in the process of stabilizing bakery. We are still going to have a fair amount of spending, particularly in marketing, in Q3. So we will see some margin improvement in Q3, nothing dramatic. I think we will see a lot better performance in Q4, because we feel very strongly we will have the bakery performance stabilized much more greatly at that point. We will have lower marketing year over year, and then we have a lot of activity on Goldfish in the quarter, which is by far our highest margin product line in the Snacks portfolio, so that should help margin as well. Operator: Our next question comes from Tom Palmer from JPMorgan. Tom Palmer: Maybe to start off, I wanted to get a little more detail on the Fresh Bakery challenges. The remarks to Andrew and in the prepared remarks indicate that they emerged before the winter storms. It seems like they are related to execution challenges. I am just trying to understand where you are seeing this. Is this a production issue? Is it a challenge with route to market in terms of servicing customers? And then just how you are addressing it in terms of resolving it here over the next couple of quarters? Thanks. Mick Beekhuizen: Let me address it. With regard to Fresh Bakery, I mentioned this in my prepared remarks as well. It is really focused on both the manufacturing as well as distribution disruptions, and it was exacerbated by the January winter storm. But you are right, we already started to see that throughout the quarter. It is really coming back to making sure that we have products available on the shelf. That comes back to service as well as the in-market execution piece. We deployed a cross-functional team and we are already seeing measurable improvements across the board. At the same time, I am also very conscious that we need to make sure that we are making sustainable improvements. As a result, we are investing in the business so that the changes that we are making are sticking, so that we can service this business better going forward. As I mentioned, we already started to see progress over the past, call it, four weeks. We have to continue to work through that in the third quarter, and then we are working towards normalization in the fourth quarter. Tom Palmer: And then on capital allocation priorities, you noted the plans to focus more on debt reduction versus share repo. There is the dividend, which equates to a little over two-thirds of EPS at guidance this year, and then you have the La Regina acquisition soon to close. It seems like there also might be some investments needed to support the business. Maybe just an update on how you see this all balancing out? Todd Comfer: I will take that one. Cash flow obviously has become extremely imperative for us just given the debt leverage we are currently at and the takedown in the earnings. We will continue to invest in our business. We will reallocate some of our marketing money, as we have mentioned, into promotional activity to get sharper price points, but the net effect of that will be that is part of the reason why it is impacting our earnings. We are going to have to get really tight on capex. As you know, we already took it down $50 million for the year. Working capital is going to have to be really tight. We are going to have no more share buybacks; even anti-dilutive share buybacks we will not do. The dividend is extremely important to us, but we will not be increasing that dividend anytime soon. We mentioned a $100 million cost reduction in overhead that is going to take place over the next couple of years, and that is in place to help cash flow as well. The La Regina acquisition in the near term is not going to be significant from a cash flow perspective. We will make one payment of roughly $140–$150 million before the close of the year. If you remember, that second payment, we have the option of issuing equity. That second payment comes a year from now, so if we need to issue equity instead of cash, we have that ability, and then the second half of buying up the 51% is probably a few years off. But rest assured, cash flow preservation is heightened for us right now, and getting that leverage down closer to three than to four is imperative for us. Operator: Our next question comes from Peter Galbo from Bank of America. Please go ahead. Your line is open. Peter Galbo: I actually wanted to go back on the Salty Snacks points, Mick, that you were making. I think I heard you correctly: the focus is really to be more promotional within chips versus maybe moving the everyday. Obviously, your largest competitor is making it more of an everyday shift. Why is promotional the right route or tactic for that within chips when you have, I guess, the 800-pound gorilla that is doing a more permanent shift on the price side? Mick Beekhuizen: Let me give you a little bit more context around it. As I mentioned, we are going to take a surgical approach. That is important, and the other aspect of it is we are going to make sure that we continue to be competitive with our brands. If we look at the brands that we have with Cape and Kettle that both play more in the kettle subcategory, we believe that with the brand positioning itself, we have a right to win with these brands. That is important to recognize, and accordingly we need to make sure that we continue to lean into that brand’s right to win. Back to your point around value: values are absolutely critical. We have been pretty diligent in the past about making sure that we continue to maintain a competitive position. We are going to continue to look at key channels, and if I look at what the competition is doing, making sure that we stay competitive within those channels. What we are seeing right now, most of the time, can be resolved with our overall promotional strategy. There could be instances where we have to reset some of the pricing more permanently, and if so, then we will do that. I do not want you to take away that we are just going to solve this with pure promotional activity. I think it is going to be that surgical approach that I led in with. Peter Galbo: Thanks for the additional context there. And, Todd, I think you gave some color around the EPS cadence for the back half, but just wanted to clarify that. I believe Q3 looks similar to Q2, and then you would see a normal step down in Q4 just to hit the $0.90 you need to deliver in the back half at midpoint. Do I have that math right? Mick Beekhuizen: You have it correct. Peter Galbo: Perfect. Thanks very much, guys. Operator: Our next question comes from Megan Clap from Morgan Stanley. Please go ahead. Your line is open. Megan Clap: Hi, good morning. Maybe we could just pick up there on the Q3 to Q4 cadence, and, Todd, maybe follow up on some of the margin commentary you gave Andrew in the first question. So if Q3 operating EBIT growth performance looks similar to Q2, obviously an improvement expected in the fourth quarter. As you think about the margin profile, it would imply improvement in margins as we get into the fourth quarter. I think typically Q4 is a lower margin quarter for you. Can you, whether by segment or on a consolidated basis, unpack the expectations as we go sequentially from Q3 to Q4 that would imply that step-up in margin? Thank you. Todd Comfer: Absolutely. A couple of factors give us more confidence that Q4’s profile will be better than in Q2 and Q3. One, if you remember, the Sovos ERP conversion that brought volume into Q3 last year out of Q4—we will lap that, so we will get a benefit organically. We will get a benefit from that volume coming back into Q4 this year. We do anticipate Snacks stabilization—not going to be all the way to right—but we believe the Snacks margin will improve sequentially as we get into Q4. Tariffs—we will start to lap some of the tariffs in Q4 of last year. That year-over-year hurt will not be as great in Q4 as it has been in the first part of the year. And we will have lower advertising spend in Q4. It will be up in Q3; it will be down year over year in Q4, and that will help the margins. Megan Clap: Okay, great. And maybe just one follow-up while you said on the stabilization in Snacks. From an organic sales perspective, Q3 to Q4, can you help us understand what you are expecting now for Snacks for the year? I know the compare does ease in both segments in the fourth quarter on the top-line perspective, but should we still be thinking about Snacks declining in the fourth quarter? Todd Comfer: It is going to take a while. We have a lot of good activity going on, but Snacks will probably be down about 4% in the second half. That is going to be fairly balanced between Q3 and Q4, probably a little bit better in Q4 than Q3. But we are not anticipating a big sequential increase benefit on the net sales line. We do think we will stabilize margins. They will get better. They will not be all the way upright, but we do think the margin profile will get better as we end the year. Megan Clap: Okay. Great. Thank you so much. Operator: Our next question comes from Michael Lavery from Piper Sandler. Michael Lavery: Just wanted to understand a little bit better—you said that some of the marketing spending will shift to promo spend. I get the need for some of the pricing adjustments or stepped-up promo spending, but it seems like the ideal is to walk and chew gum. Why not both? Is it just maybe being handcuffed given where you are on the leverage, or is there a way to get both? Do you have the right marketing spending level, and how do you think about balancing the need for that versus the pricing? Todd Comfer: To be clear, our anticipation is marketing spend year over year will be up. As we started the year, we were hoping it was going to be up a bit more than we are now forecasting, but it will be up year over year. I would love to be spending more marketing money versus trade if the market would allow it right now, but we just think it is prudent to be competitive in certain areas where we have price gaps in the marketplace, whether it is on broth or on chips. We are not talking about dramatic changes in our trade philosophy or spend. We will spend more. Some of that will get funded by marketing. There will be an incremental hit to the P&L, as we have mentioned. The anticipation is marketing will still be up, but we are going to lean in a little bit more heavily into price. Mick Beekhuizen: And I think, Michael, to add to that as we go through the year, we are taking a very balanced approach. I want to make sure that we reiterate that, because on core brands we are going to continue to make sure that we build them. If there is one brand that we are continuing to support—and we will continue to support—it is RAO’S on the Meals & Beverages side, and you see the positive effect from that in the results. Another brand on the Snacks side that we must continue to support with marketing is Goldfish. So we are being very selective in how we are allocating our dollars and our support between trade and marketing. Michael Lavery: That is helpful. And just to follow up on the pricing approach. You touched on the promo increases, but then you have also talked about sharpening value architecture and some of the price pack architecture. You also touched on at least considering some list price adjustments. Can you give a sense of phasing and where you are in that process? Would I have heard it correctly that any list price adjustments are not decided but just under consideration? And on the price pack architecture, how much is underway versus under consideration? Mick Beekhuizen: Let me unpack it. Some of the price pack architecture is going to take longer if it requires changing some of our package formats. But it might also mean—around, for instance, Goldfish—that we lean into an area that we see is actually working and is providing value to the consumer, such as multipacks within Goldfish. That has been working, and we need to make sure that we continue to lean into that space because we have a moment here with that particular pack. That is also what I mean when I mention price pack architecture. Then there might be some of the larger pack sizes that we have within Goldfish where we are leaning a little bit more into promotional activity in order to make sure that we hit a good price point that is providing that value for the consumer. Obviously, the promotional activity, as I mentioned, is a bit more of the focus right now—again, very surgical. I can see, for instance, on chips—if we are finding ourselves where certain list price gaps are just too large—we might selectively adjust. But the latter I expect to be smaller than the trade component. Todd Comfer: Michael, this work is underway. We will do some things in the shorter term, but some of the activity that we are doing will take a little bit of time. As we look at some of the price slopes, particularly in our Snacks business, some of them are just out of whack. We have price per ounce in some sizes that are below where they should be and, conversely, some that are above. We need to get those aligned. It is going to take a little bit of time, but if we can execute that really well, there is some margin to be had. Michael Lavery: Okay. Great. Thanks so much. Operator: Our next question comes from Max Gumford from BNP Paribas. Max Gumford: Another one on Snacks for me. Really just on this recovery. It has been ongoing for some time now. We have not seen the volume grow in a couple of years. At what point do you stop talking about a recovery to what you view as a normalized level of growth, and maybe reset your expectation for what normalized growth is? Asked differently, what is giving you the confidence that this is still a segment where there is a reasonable chance of growing sales organically at the levels you have at the past Investor Day? Thanks very much. Mick Beekhuizen: Let me unpack that. With regard to Goldfish, based on the brand that we have, we have a right to win, and we believe that we have an opportunity to grow that business. We are seeing sequential improvement. We are obviously not all the way back to right yet, but I feel pretty confident around that, also because of the differentiated positioning of the brand. It has good better-for-you credentials, and we need to make sure that we amplify those. It is a brand that fits well with what consumers are generally looking for. We need to make sure that we tell that story and provide the value in the marketplace, and net-net we can, as a result, grow that business. I feel pretty good about the Goldfish side of things. If I look at Bakery as a whole, people continue to focus on moments of indulgence, and that comes back with cookies. We have been able to grow our cookies business now for four quarters in a row with the Milano innovation, and we have some incremental innovation that recently came out with Chessmen. I feel pretty good about our overall cookies business. The cookies category has not been growing, so we need to make sure that we continue to differentiate our cookies business, and that, as a result, fuels the growth. With regard to Fresh Bakery, as I described earlier, we need to make sure that we get the execution right, and at that point I believe we should be able to get that back to, call it, at least a flattish top line. That is with regard to Bakery. When I get to Salty, if I look at the two pieces of our business, we are playing in subcategories that are growing. Within pretzels, the pretzel subcategory has been growing, and we have two great brands with Snack Factory as well as Snyder’s of Hanover. Snack Factory has been growing. We have made some sequential progress on Snyder’s of Hanover. We have more work to do on it in order to get that back to growth, but because we are participating within a growing subcategory, I feel if we gain our fair share, we should be able to grow that business. On the chips side, that is obviously a more competitive space, as we have been discussing. Although the subcategories that we are in—kettle chips with Cape Cod as well as Kettle Brand—are well positioned within the kettle chips subcategory, which is the growing part of chips, the competition has increased over the past 12 to 24 months. As a result, we have more pressure and we are losing share there. That is why we need to do the work that I described earlier to make sure that we get a fair share of that growing subcategory. Finally, you have Late July. Late July’s positioning is exactly what consumers are looking for. It is growing. It is a little wonky between different quarters because of some promotional activity, but overall I feel very good about that brand. Hopefully that gives you some context to unpack our overall Snacks portfolio. Around why we believe we should be able to grow it, it is because the brands that we have and the subcategories that we are in are well positioned with what the evolving consumer is looking for. The consumer is looking for that premium, better-for-you, and flavor exploration experience, and our brands can provide that. Max Gumford: Great. Thank you. And then on Goldfish, back in 2023 you announced you were investing about $100 million in the Richmond manufacturing facility to expand Goldfish capacity. Since then, at least based on what we are seeing in tracked channel data, volumes have been in decline. Can you talk about any capacity utilization impacts you have seen as a result of that expansion and your view on your ability to fill that capacity going forward? Thanks very much. Todd Comfer: What you just described, unfortunately, is part of the reason why we have a 7% margin in Q2. One of the issues—not everything—but one of the issues is deleverage in the P&L. We invested, particularly in Goldfish but in other areas coming out of the pandemic, where we thought volume would continue to grow. It obviously has not. When you have higher fixed costs and your business is in decline a bit, that is really bad for margins, and that is what you are seeing. Our job as a management team is to make sure we can get that volume back, and the P&L really starts to improve if we can do that. It is as simple as that. We have to get Goldfish volume going in the right direction, or we will continue to have these margin hurts. Max Gumford: Great. Thanks very much. Appreciate it. Operator: Our next question comes from Robert Moskow from TD Cowen. Please go ahead. Your line is open. Robert Moskow: Hey, thanks for the question. Just a couple more add-ons. I wanted to ask about distribution for your Snacks business. Your competitors talked about double-digit gains, and I wanted to know if you have seen distribution losses as a result of that. And then secondly, Todd, oil is jumping all over the place. It is going to have an impact on diesel, and I wanted to know if you could talk about how that may impact the cost structure of the DSD network. These are independent routes, so it is a little complicated. Wanted to know if you could help us. Thanks. Yeah, great, thank you. Mick Beekhuizen: Todd, why do you not take the second one, and then I will come back on the first one. Todd Comfer: Absolutely. Obviously, an incredibly fluid situation. Oil is bouncing all over the place right now, and I do not think anyone knows how this is going to play out in the next few weeks and, more importantly, months and years. The good news is right now, we are about 85% hedged on all commodities, including things like diesel for freight, and resins, and other plastics and aluminum that could get impacted by what is going on in the Middle East right now. There could be some impact to this year. It is not going to be significant. If this continues for several months—if oil remains where it is as we start the fiscal year—obviously things are different. This will start to have an impact on our business and everyone’s business if oil remains elevated, not just on freight but on other products that leverage oil in their products as well. More to come on that. Hopefully this will get resolved. As I mentioned in prepared remarks, we have no incremental cost embedded in our forecast from it. There is a little bit of risk there, but nothing substantial. If we are sitting here three or four months from now and oil is still elevated, we are going to have to address it, either through pricing or really sharpening our pencils on getting more cost out of the system. Mick Beekhuizen: When I look at overall distribution, Rob, with the strength of our brands, you continue to see distribution opportunities, and we are also gaining some of that distribution. It is more profound in areas like Goldfish where we have a right to win. It is a well-positioned brand, and we continue to work with our retail partners in growing that brand. In some of the more competitive areas, such as chips, I see a mix of some gains and losses and, as a result, a little bit more net neutral around the distribution side. When I think about what we are doing about areas like that, if we have great innovation, we find that our retail partners are excited about making sure that we gain that incremental distribution, and you see that, for instance, in cookies. Cookies have done really well with the Milano as well as the Chessmen innovation, and as a result, we have seen continued distribution gains in those areas. Hey, Rob, one impact you mentioned—the independent DSD—just so we are clear: they are independent operators. They are responsible for their fuel costs and other operating costs. So there is no direct impact to us. But, obviously, if they do not have a competitive route where they can make money, ultimately at some point in time it impacts our ability to grow these businesses as well. We will have to be cognizant of that, but they are responsible for their fuel costs. Robert Moskow: Thanks for that. Operator: Our next question comes from David Palmer from Evercore ISI. Please go ahead. Your line is open. David Palmer: Thanks. I am wondering if there is a bigger long-term comment to be made about the Snacks business. Sometimes when you have a margin of a segment get down towards what looks like maybe 10% this fiscal year, the implied valuation of it is compressed. There is something perhaps liberating about that in terms of how you are thinking about it. You have Mohit—he is joining from a company that spun out DSD and sold cookies; in other words, they rethought that business more completely. I am just wondering if you think that this is maybe a time when you can really think about the complexity of the business, what you own in it, so you can put the resources you want against the good stuff within it. I know there is limited detail that you could share, but maybe you can make a comment on that and I have a quick follow-up. Mick Beekhuizen: We have spoken about this in the past. We are obviously operating the portfolio that we currently have. We are big believers in the brands that we have. We will always continue to make sure if there are alternatives that create better shareholder value that we take those into consideration. When I look at our current Snacks portfolio, another way of looking at some of what we are talking about—particularly with regard to the margin—is that there is a lot of opportunity here. You see that, hopefully, throughout our commentary—the action orientation and making sure that we go after these different areas. Making sure, as Todd mentioned, that we are stabilizing our top line is absolutely critical. Growing areas like Goldfish, which will help from an overall mix perspective, and making sure we get that Fresh Bakery execution right are all going to help margins. We are not going to stop with those initiatives. Continued focus on that elevated productivity level is really important—that is both within the plants as well as within our logistics network. Finally, Todd already mentioned the cost savings, whether they are with regard to a network or within our SG&A. We are going to continue to work on those areas, although some of them might take a little bit longer. We will always continue to look at all the different alternatives, but we are focused on the portfolio that we have and making sure that we work that as hard as we possibly can. David Palmer: Thanks. Just a quick one on the other side of the business. I think a lot of your comments in your prepared remarks are really true about the cooking behaviors of the younger generation, and you are leaning in on that with this new condensed sauces business. I wonder about how incremental you think that can be. On the other side, how much should we be worried about ongoing market share slippage on the broth side? Your broth business has flattened out lately. I am wondering how you are thinking about perhaps reviving growth there, or at least forestalling whatever progress is being made by private label getting back on shelf. Thanks. Mick Beekhuizen: Thank you for asking the question. We did not talk as much about the Meals & Beverages side of the business, but the in-market growth that we generated during the second quarter and the strong performance of RAO’S are obviously something that we are very excited about. The other thing that is really working within the M&B portfolio, as you are describing, is the overall focus on cooking occasions, and our portfolio is catering very well to that. Also, products within the soup aisle—broth on the one hand, and on the other, our condensed portfolio—have actually been doing relatively well because of the parts of the business that are focused on cooking and are being used as an ingredient. A little over half of the condensed portfolio in the second quarter has been the growing part of the portfolio. On the flip side, the eating side has been declining, so net-net, condensed has been relatively flat during the quarter. We are seeing that differentiated proposition that we can provide with our condensed cooking soups—which are being used as an ingredient, like cream of mushroom and cream of chicken—and we are now expanding that into Campbell’s condensed sauces, and we believe we have a right to win with that. What does that do? It allows us to start transforming more and more of the soup aisle into an ingredient that we are providing. It provides convenience and comfort at a very attractive value proposition. I am very excited about the Campbell’s condensed sauces. We are going to introduce that in June. I think it will be incremental to what we are currently providing, and I think we are going to learn a lot with that introduction. It is a great complement to our condensed cooking soups as well as broth. With regard to broth, broth has been a growing category. The two great brands we have within that category—Pacific as well as Swanson—both continued to grow during this past quarter, albeit, as you are pointing out, with a little bit of share pressure, which we anticipated because of private label recovery. We are going to continue to make sure that we stay competitive within the space and also focus on how we can grow that business, as it is a very attractive value proposition that fits right within that cooking behavior. Pacific has been growing double digits. The pressure has probably been a little bit more on Swanson. Todd also mentioned earlier that we are watching very closely the price gaps to some of the private label participants and making sure that, as a result, we stay competitive during key drive periods like the holiday period. Operator: Our last question comes from Jim Salera from Stephens. Please go ahead. Your line is open. Jim Salera: Yes, good morning. Thanks for taking our question. Mick, I wanted to build on David’s question there and ask if you could give us some details around Meals & Beverages in the back half of the year—particularly what we should expect on pricing given some of the competitive dynamics you just highlighted. Is there still opportunity for modest net price realization in the back half of the year? And embedded in your updated guidance, do you have incremental at-home consumption given some of the pressures on the consumer? Typically that benefits that portion of the business. Any detail on that would be helpful. Todd Comfer: I will take pricing first. We will still have positive net price realization in the second half. It will not be as great as it has been, just because of some of the investments we have made in broth. We are actually making a little bit in RAO’S as well, but we still will have positive price. Mick Beekhuizen: From a consumption perspective, you are probably going to see a little bit of pressure in the second half. You saw that in Q2 we did really well from an in-market consumption perspective, driven by the holiday period. Our products typically do very well during that period, and that was also very evident again during this holiday period. On top of it, as you saw, we had very healthy growth with regard to RAO’S. RAO’S grew in-market consumption 14.5% during the second quarter. As I mentioned in the past, we expect for the full year high single digits, and that is still what I am expecting—so a little bit of that disproportionate growth during the second quarter. Overall, I expect continued growth with the RAO’S brand. However, that leads to a little bit lower overall consumption growth in Meals & Beverages in the second half of this fiscal year. I think you are hovering probably around minus 1% to 0%. That is probably what you are going to see in the second half. Operator: And we are out of time for questions today. This will conclude today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Hello, and thank you for standing by. My name is Regina, and I will be the conference operator today. At this time, I would like to welcome everyone to the Infinity Natural Resources, Inc. Fourth Quarter 2025 Earnings Conference 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 this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star 1 again. I would now like to turn the conference over to Tom Marchetti, Vice President of Investor Relations. Please go ahead. Tom Marchetti: Thank you, operator. Good morning, and thank you for joining Infinity Natural Resources, Inc.’s fourth quarter and full year 2025 earnings conference call. With me today are Zack Arnold, our President and Chief Executive Officer, and David Sproule, our Executive Vice President and Chief Financial Officer. In a moment, Zack and David will present their prepared remarks with a question and answer session to follow. An updated investor presentation has been posted to the Investor Relations section of our website, and we may reference certain slides during today's discussion. A replay of today's call will be available on our website beginning this evening. Before we begin, I would like to remind everybody that today's call may contain certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. All statements that are not historical facts are forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those forward-looking statements. Please review our earnings release and the risk factors discussed in our SEC filings. We will also be referring to certain non-GAAP financial measures. Please refer to our earnings release and investor presentation for important disclosures regarding such measures, including definitions and reconciliations of the most comparable GAAP financial measures. With that, I will turn the call over to Zack. Zack Arnold: Thank you, Tom, and good morning, everyone. Before I begin, I would like to formally welcome Tom Marchetti to our team. Tom will lead our investor relations function and is a great addition to the team. We appreciate everyone joining us today to review Infinity Natural Resources, Inc.’s fourth quarter and full year 2025 results and to discuss our outlook for 2026. Overall, 2025 was another transformational year for Infinity Natural Resources, Inc. Importantly, we did what we said we would do during the IPO process. We continued to add scale. We have significantly increased production, we have grown our operating cash flow, we have expanded our asset base through acquisitions, we have accessed the capital markets, we have entered into strategic partnerships, and we preserved our operational and financial flexibility. We have been busy. Most importantly, our Appalachian platform continues to deliver strong operational and financial execution across both our extensive Utica position in Ohio and Marcellus position in Pennsylvania. Our results during the fourth quarter and year overall are underpinned by our strong well performance across our asset base as well as the disciplined execution of our development program. Our teams remain focused on improving drilling and completion efficiencies, extending lateral lengths, and maintaining capital discipline as we develop our high-quality asset base. Before reviewing our operational activity for the quarter, it is worth highlighting the strength and flexibility of our development portfolio across Appalachia. We have over 390 locations across our portfolio, representing more than ten years of inventory when developed on a two-rig program. Our returns in oil- and liquids-weighted projects are strong, especially true in today's oil environment, and our gas returns are strong as well. Balance and optionality: it is how we build our business in order to maximize value for our shareholders. Well costs are consistent across our position, whether in our Ohio Utica development or our dry gas Marcellus wells, which allows us to allocate capital efficiently across our development opportunities depending on commodity conditions. In addition, much of our drilling and completion design is standardized across our development program; utilizing common equipment and consumables packages allows us to efficiently shift activity between Ohio and Pennsylvania. Combined with our extensive drilling inventory across these development areas, this portfolio provides significant operational, commodity, and financial flexibility as we allocate capital across our assets. As a result, our development program can be adjusted to prioritize the highest-return opportunities while maintaining disciplined growth. During the fourth quarter, we continued to operate one drilling rig across our base asset. We added a second rig in January, bringing our total operated rig count to two, advancing development across our diversified portfolio. During the fourth quarter, net production averaged 45.3 MBOE per day, bringing full-year production to 35.3 MBOE per day, exceeding the high end of our guidance range for fiscal year 2025. When compared to 2024, the company was able to deliver year-over-year growth of approximately 46%. During the fourth quarter, we spudded nine wells totaling approximately 142,000 lateral feet, while finishing completions activities and turning into sales six wells totaling 103,000 lateral feet, evenly split between Ohio oil-weighted projects and Pennsylvania dry gas projects. For the full year, we turned 23 wells into sales, including 12 wells in Pennsylvania and 11 wells in Ohio, reflecting our balanced development approach across our asset base. Our development program continues to emphasize extended lateral development and operational efficiencies that support strong capital returns across both our Utica and Marcellus positions. For calendar year 2025, our average well turned into sales exceeded 15,700 lateral feet. The longer laterals helped to reduce our per-foot drilling cost. It is not just about drilling longer laterals. It is also about cycle times, getting those wells online, and having them track our anticipated well performance. We continue to target six to seven months cycle times on our development projects ranging from three to five wells, which we believe is one of the fastest cycle times in the industry. With regards to well performance, we placed a lot of wells online in 2025. We are pleased with the performance of those wells to date, and they continue to track in line with our type curve expectations across both development areas. Looking forward, we intend to operate two rigs throughout calendar year 2026. While the world is ever changing these days, especially with commodities, we anticipate allocating slightly more capital towards natural gas-weighted development based on wells turned into sales during the year. Approximately 30% of our projected wells turned into sales will be on the asset we recently acquired, developing our rich gas locations in the Utica Shale of Eastern Ohio. Turning to our recent acquisitions, on February 23, we closed the previously announced $1.2 billion acquisition of Ohio Utica assets from Atero Resources and Antero Midstream. This transaction is a highly complementary bolt-on to our existing position in Ohio, adding extensive inventory across multiple phase windows directly adjacent to our legacy acreage, further supporting our long lateral development strategy. Just as importantly, the transactions included ownership in the associated midstream system, which provides us with attractive midstream costs and further reduces well breakevens across the acquired asset. We intend to devote a rig to the development of these assets during the year beginning early in the second quarter, and we expect our first pad from the acquired position to come online during the second quarter. As we begin developing this inventory, we expect to increase production from these assets meaningfully in the coming months and years. Not to be forgotten with all of our activities, we also completed the Chase acquisition, which increased our working interest in our dry gas South Bend field in Pennsylvania. Transactions like this, where we can increase working interest in assets we already operate, are typically among the most attractive investments that we can make using our equity as they increase our exposure to future development and production without requiring incremental corporate overhead or G&A. This acquisition represents another milestone for Infinity Natural Resources, Inc. as it is the first time post-IPO we have used our equity to acquire assets. Together, these transactions expand our development inventory, increase our participation in high-quality drilling projects, and strengthen the strategic position of our Appalachian platform through enhanced infrastructure and marketing advantages. In conjunction with the Antero transaction, Infinity Natural Resources, Inc. successfully issued $350 million of perpetual convertible preferred stock to two highly respected energy investors, Quantum Capital Group and Carnelian Energy Capital. We believe the strong demand from these investors reflects confidence in both the quality of the underlying assets and our long-term development strategy. This hybrid equity structure is consistent with our philosophy of maintaining a strong and flexible balance sheet. We were able to raise significant equity capital above our IPO price while reducing outstanding debt and preserving financial and strategic optionality for the company. Importantly, this capital supported our election to increase our participation in the Ohio Utica acquisition to a 60% working interest, deepening our ownership in an asset we know well and believe strongly in, while maintaining balance sheet discipline as we continue to advance development across our Appalachian platform. Looking more broadly at the market environment, we continue to see strong structural demand for natural gas-associated liquids across North America. Recent geopolitical developments in the Middle East have strengthened crude prices across the forward curve through 2030, representing another opportunity for us to demonstrate the value and flexibility of our unique asset base. With our development activities in the fourth quarter, we have significant oil-weighted volumes planned for 2025. We have taken this opportunity in the commodity markets to lock in attractive oil hedges for 2026 and 2027 using a balance of swaps and collars. Additionally, we are evaluating our development plan as to whether we should accelerate any additional oil projects to take advantage of attractive prices. We cannot predict whether this will be a short-term event, but we will continue to monitor the situation to see if elevated oil prices prove to be longer lasting and warrant additional development of our oil inventory. On a more micro level and for our Ohio Utica liquids production specifically, we are witnessing increased regional demand dynamics. Condensate and other light hydrocarbons produced from liquids-rich plays such as the Utica are used both as refinery feedstock and as diluent for heavier crude oils. As production of heavier barrels from regions such as Canada and Venezuela increases, producers require additional volumes of condensate and other light hydrocarbons to blend those barrels to move them through pipeline systems and into refineries. Given our proximity to regional refining markets and infrastructure, we believe our Ohio Utica liquids production is well positioned to serve this demand. Turning to natural gas, global demand for U.S. LNG continues to expand, and with additional liquefaction capacity expected to come online over the next several years, U.S. natural gas supply is increasingly positioned to serve global energy markets. Domestically, rising electricity demand is expected to drive additional natural gas consumption within the U.S. power sector. Looking ahead, we remain focused on executing a disciplined development program that balances growth with capital efficiency. Our diversified asset base across our Appalachian platform provides flexibility to allocate capital toward the highest-return opportunities depending on market conditions. With that, I will turn the call over to David to review our financial results and outlook. David Sproule: Thank you, Zack, and good morning. Our financial results for the fourth quarter and full year reflect the strong operational execution delivered by our team throughout 2025. During the fourth quarter, net production averaged 45.3 MBOE per day, and we generated adjusted EBITDAX of $94 million, representing adjusted EBITDA margin of approximately $3.76 per Mcfe, or $22.58 per BOE. During the quarter, we realized average prices of $51.22 per barrel for oil, $3.14 per Mcf for natural gas, and $23.56 per barrel for natural gas liquids, with realized pricing reflecting regional market conditions and differentials across Appalachia, consistent with our expectations during the quarter. For the full year, adjusted EBITDA totaled $261 million, reflecting continued production growth combined with disciplined cost management. Operating costs during the quarter averaged $5.56 per BOE, reflecting continued operational efficiency and increasing contribution of natural gas production from Pennsylvania within our overall portfolio. We believe that we maintain one of the lowest operating cost structures in Appalachia, supporting our strong capital efficiency metrics. We continue to witness our costs decline approximately 36% during the fourth quarter when compared to the prior year. As we continue to expand our natural gas volumes in Pennsylvania, we would anticipate experiencing further declines in our overall cost structure as those volumes are on our wholly owned midstream system. During fiscal year 2025, we incurred approximately $326 million in capital expenditures, including drilling and completion CapEx of $274.7 million, land spend of $35.5 million, and midstream and infrastructure investments of approximately $16.1 million. Our development program will pursue strategic opportunities. As Zack mentioned previously, during the fourth quarter, we also completed a $350 million strategic equity investment in the form of a perpetual convertible preferred security, which is convertible into common equity at $21.36 per share, which is above our IPO price, aligning investors with long-term equity value creation. This hybrid structure provides permanent equity capital that allowed us to repay a portion of the revolver borrowings used to finance the Ohio acquisition, while also supporting an increase in our working interest of the transaction to 60%. Importantly, the structure limits immediate dilution to existing shareholders and preserves balance sheet flexibility relative to incremental debt. At year-end, we had net debt of approximately $148 million and total liquidity of approximately $227 million. Before turning to our outlook for 2026, it is important to note that our guidance reflects both the operational progress discussed earlier as well as the capital structure initiatives completed during 2025 and 2026. Our development program is expected to operate two drilling rigs during 2026, including one rig deployed across our legacy assets in Pennsylvania and Ohio, and one rig dedicated to the recently acquired Ohio Utica assets beginning early in the second quarter. This level of activity supports continued production growth while maintaining capital discipline and operational flexibility across both areas. Looking ahead, we expect to continue advancing development across all areas within our portfolio and anticipate turning into sales 31 gross wells during calendar year 2026, consistent with the development plan outlined in our investor presentation. In 2026, we expect to turn four oil-weighted wells in line on our Ohio Utica asset. For 2026, we expect net production to average between 345 and 375 MMcfe per day, representing growth of approximately 70% year-over-year. Development capital expenditures, which are a combination of drilling and completion as well as midstream capital expenditures, are expected to range between $450 million and $500 million. With that, I will turn the call back to Zack for closing remarks. Zack Arnold: Thank you, David. To summarize, 2025 and early 2026 has been a transformative period for Infinity Natural Resources, Inc. as we continue to execute operationally, scale our Appalachian platform through strategic acquisitions, and reinforce the balance sheet with new long-term equity partners. We enter 2026 with a strong operational foundation, expanded development inventory, and a strengthened capital structure. Our position across oil-weighted Ohio Utica, rich gas Ohio Utica opportunities, and dry gas Marcellus and Utica development provides the flexibility to continue delivering sustainable growth and value for our shareholders. Operator, please open the line for questions. We will now begin the question and answer session. Operator: A question, press star then the number one on your telephone keypad. We kindly ask that you please limit your questions to one and one follow-up. Our first question will come from the line of Michael Scialla with Stephens. Please go ahead. Michael Scialla: Hi. Good morning. Wanted to ask about your 2026 plan. Your CapEx guidance is a fair bit above annual assessments. Can you talk about any changes you made from—you gave some soft guidance back in mid-December when you did the call on the Antero acquisition. Any changes that you have made since then? And any things that might be in there that, David, you mentioned—you know, midstream is built into that. I wanted to see if you could break that out at all. Thank you. Zack Arnold: Michael, Zack speaking here. Thank you for that question. I think it is a timely one. First and foremost, I would want to point you back to slide seven and ten of our investor deck showing how well we performed last year. We have had cost improvements from a D&C perspective and continue to have great capital efficiency and EBITDA margin. So this capital guidance range that we are talking about and that you are trying to interpret is not a reflection of drilling cost concerns. We continue to execute very well there, and we are gaining scale, so we expect additional synergies and improvements. What I think is helpful to understand is some things related to the acquisition. First of all, we have an additional 9% of CapEx. Now we took on additional working interest from the Antero deal than what we knew when we were talking before. Also, the first pad out of the gate, the English pad, will be completed by us and the capital borne by us. So that is 19,000 lateral feet on three separate wells. So that is a lot of lateral footage with completions activities that are coming to us. Another point on the Ontario deal, we wanted to make sure we had a rig ready to go as quickly as we could, and we did not want to have the asset close and be looking for a rig. So as a result of that effort, we picked up the rig before close, and that rig has been drilling on INR projects. So effectively running two rigs across our base business for part of this first quarter. So those things are all adding to it that were a little bit different than when we visited before. You talked about midstream. I think that is an important component of this too. And while we do not break that out, we more than doubled the size of our midstream with the acquisition of Antero. We are actively developing in both areas that require midstream investments, and so we will expect to spend money in both areas, PA and Ohio, as we build out midstream. And I think for us, we do not break it out because it is a little bit fungible and it still gives us some flexibility in our pad selection and where we are deploying capital between drilling wells that do not require midstream—maybe you add an extra well to that pad—versus somewhere where you need to add midstream to allocate dollars there. Couple other things just to point out too is we want to make sure we maintain flexibility in that capital guidance for what we did last year, which is pick up working interest. Our land group has been incredibly skilled at the ground game and adding in working interest and lengthening laterals. So we do not want to surprise somebody if we end up with more interest or longer laterals than we talked about. And now that we are running two rigs, the timing component becomes a little bit magnified, where if those rigs gain pace and start drilling faster because we have rigs that are having shorter rig moves because they are staying in Ohio instead of bouncing back and forth between Ohio to PA, for example, and we pull forward a well into the year, and that is another $10 to $15 million that hit your CapEx budget. And those back-of-the-year CapEx spends do not reflect themselves in 2026 production. So a lot of things going on there, but I think for us, we want to make sure we give ourselves the flexibility to react and be able to plan our business without surprising anybody as other projects come up. And there are certainly capital projects we have not budgeted before that I think could be interesting, including for the deep dry gas unit. Michael Scialla: I appreciate that detail, Zack. I guess just to clarify, in terms of well costs, you are not anticipating any OFS inflation or anything. You are still anticipating well costs to at least stay flat or maybe even trend down. Is that right? Zack Arnold: Yes. That is correct. Michael Scialla: Great. And then I wanted to follow up on—you mentioned the Deep Utica, which you have budgeted for this year. Anything more you can add on that play—why you decided to—I know you guys have gone back and forth on when you were going to drill that first well. I guess, what helped you decide to put it in the 2026 plan, and what do you think your exposure there is if the play works? Zack Arnold: Yeah. You know, we wanted to budget for it. We will still maintain the flexibility to choose to do it or not do it as we see gas prices and other factors, maybe oil prices, ripple through our decision-making process. But we set ourselves up with a rig that is capable and experienced at doing this. One of the things we wanted to do was make sure we set ourselves up for success to the greatest extent possible, and we are really excited about some of the deep dry gas Utica experience that we have added to our internal staff and to our field staff as well. When we get to the right project and we do have a permit in hand, we have a rig that is capable and experienced drilling this, we will be positioned to execute. David Sproule: Hey, Michael. This is David Sproule. I think you can look at the development plan that we have, and the development of that well would be towards the latter half of this year. We would not anticipate that well coming online this year. You know, I think we have always been excited about the Utica. That has not changed. It has only been more excitement about what we see in the dry gas Utica. There are plenty of offset development activities to us. We have been watching those. So I think for us, it is just consistent with our overall theme of kind of walking before running with regards to developing it. But we are very excited about the prospectivity therein. Michael Scialla: Sounds good. Appreciate it, guys. Zack Arnold: Thank you. Operator: Our next question comes from the line of Timothy A. Rezvan with KeyBanc Capital Markets. Please go ahead. Timothy A. Rezvan: Good morning, folks, and thanks for taking our questions. Michael actually took some of the ones I was going to hit at, but I want to dig back in on the Deep Utica first. It looks like you have a spud plan or you may have recently spud that well in the Deep Utica. I know there is a Cooper Pad in Armstrong County. Can you give any context? Have you spud this well yet? I recognize you do not plan to complete it this year, but is that definitely happening, or is it still kind of a TBD? Zack Arnold: Yeah. So I will make a sort of technical differentiation here for you. If you are watching stuff online, when you set the conductor it triggers a regulatory spud. So we view that as really just preparation for a true spud and do not want to get anybody confused as to what is specifically going on. I think what David said a moment ago is most accurate—that we have got it really, like, the capital towards the back half of this year and production really not coming in until next as we look at it today. The other thing I would note here, Tim, for you and everybody listening is if you think about our development in the South Bend field, remember, we have multiple horizons that we are targeting. So one of the good things about our position that is unique is that we have dry gas Marcellus there and dry gas Deep Utica. And so as we come in and develop Marcellus, we can come back in and develop Deep Utica. So, you know, consistent with our approach there, consistent with our view of maintaining optionality, that is kind of what you are seeing when you see that alert from a regulatory spud. Timothy A. Rezvan: Okay. Okay. Okay. We will stay tuned. Sounds like nothing imminent on that front. And then I appreciate the comments on CapEx. So Zack, as my follow-up, we talked about a year ago and you mentioned, you know, Infinity wants to stay nimble, but you cannot be schizophrenic, you know, as you sort of chase commodity prices. You know, cycle times seem to be ever shorter and sort of more violent today. How does the board think about that balance—sort of chasing kind of what you are seeing on the screens in a day versus the cycle times you have? How nimble can you be and sort of how locked in is this 2026 program? Zack Arnold: Sure. So I will give a little bit of color as to what we have done and what to expect. So we already this year have turned in line four oil-weighted wells. So it feels like that is—maybe that is a testament as to why you cannot be schizophrenic in your capital deployment, because these wells are now—we are very excited to have them on. If we had been fully focused on natural gas, we would have missed a lot of this exposure. We anticipate another pad coming online by midyear. And so the oil volumes that we are bringing in in this calendar year. As far as how we deploy capital differently, our development plan did not come together in the last two weeks. You know, our development plan has been thoughtfully put together and presented to the board. We really like the projects both in oil and gas. And you will always have the slide in our investor deck where you see the returns at different prices. So we will always evaluate if there is an oil project that we should swap in or tuck in, but it becomes not necessarily always the most prudent thing for us. So we will take some time here. We will see if these prices stay. That is a big part of the question. Is this a blip? We do not want to move the rig from a gas project to an oil project, and it turn out to be a headache. We have seen that on the gas side from time to time. So we will continue to have our land teams and our regulatory teams and our construction teams be prepared for that optionality. And we will see what the next quarter brings. Timothy A. Rezvan: Okay. Thank you. Zack Arnold: Thank you. Operator: Our next question comes from the line of John Freeman with Raymond James. Please go ahead. John Freeman: Morning. Just wanted to flush out maybe how to think about the production cadence as we go through the year. Obviously, appears to be a pretty back-half-weighted program with—you have only got four of the 31 wells coming on in 1Q, and maybe just how to think about how we progress through the rest of the year just to give us a little bit of help on that side. David Sproule: Yeah. I think, John, you know, we think back to some of the comments that Zack made earlier about cycle times, I would push you to think about that. When you bring a rig out and you start drilling holes, it is a good rule of thumb for us that it is kind of six months from spud to turn in line for us—six to seven months after that. So to your point, as we ramp up development, much like what you witnessed in 2025, we would anticipate a considerable ramp through the middle of the year and into the fourth quarter as well. So, you know, we started the year, albeit relatively slow. We have turned in, as Zack noted already, four wells—four very long oil-weighted wells. We will start picking up pace with regards to the turn-in-lines through the balance of the year. John Freeman: Perfect. Thanks. And then just a quick follow-up on that. How many DUCs did you all enter 2026 with? David Sproule: The interesting thing here, John, is the timing of where that calendar falls. I think we entered the year with eight that we had, and we were in the process of drilling a couple more wells during where December 31 fell. Of those eight DUCs that we carried into the year, we have turned into sales four of them. We turned in two wells in Carroll County, and we turned in two wells in Garza County, and we are actively completing the remainder. John Freeman: Got it. Thanks, guys. Nice quarter. David Sproule: Thank you. Appreciate it. Operator: Our next question comes from the line of Sam Cox with RBC Capital Markets. Please go ahead. Sam Cox: Hi. Good morning. Thanks for taking my question. I just wanted to touch on the rig cadence for 2026. Obviously, certain macro conditions—what would need to happen to evaluate a potential third operated rig? Thanks. Zack Arnold: That is a great question, Sam. I think for us, we are cognizant of our portfolio and the returns that we have. So we are really excited about that. I think we are probably more likely to maybe consider additional frac crews, I would say, than drilling rigs at this stage. But it is difficult to say. I mean, honestly, three weeks ago, oil prices were a little bit different than they were during the straight kind of considerations that we are seeing right now. So, you know, if oil prices stay extremely elevated from spot relative throughout the remainder of the year, that is something that we would evaluate. But I want to caution you to think that we are not wind socked here. We are systematically exploiting the reservoirs that we have in a prudent manner. So, you know, we would like to maintain optionality. We built into our forecast the ability to maintain optionality both in natural gas and oil. So we have flexibility to do the right things. But we are going to let other people kind of wind sock with the commodities and make that determination. Today, we are just systematically exploiting what we have. Sam Cox: Got it. No. I appreciate that. Then you also recently added some long-term hedges to the disclosure this time. How are you all thinking about your hedging strategy? David Sproule: Sure. It is always—hedging is always interesting. Right? You always look back with the hindsight of 20/20. You know, it is not shocking—everybody would like to have higher hedging prices. I think we are not speculating on—I mean, we are really not speculating on oil price or natural gas price. What we do is de-risk our development program. You know, if you look on slide eight, you can see the returns that we have here for oil-weighted or natural gas-weighted projects. So when we can get to a situation, whether it be a swap or collar, that we can lock in really attractive discounted returns on investment, we will do that. The other thing I would note is we stay true to our tenets here. You know, we have talked about hedging when the rig shows up. We have talked about hedging when the completion crews show up. Zack was talking about the activities that we had. We entered the year with eight oil-weighted wells that we were completing and turning into sales. So we have layered on hedges. You know, obviously, some of those hedges are a little bit lower than maybe the spot is on 2027, but not by much. But we are looking to systematically de-risk our development plan and lock in those returns as we dedicate to our shareholders, and we have done that. So we are pretty proud of what we have done. Sam Cox: Got it. Appreciate it, guys. Thanks. Operator: And our next question will come from the line of Nicholas Pope with Roth Capital. Please go ahead. Nicholas Pope: Good morning. Fourth quarter saw a big jump in oil volumes. Just three wells brought online in Ohio. I mean, it was obviously, I think, the strongest quarter you all have seen. Just curious if there is anything, I guess, performance-wise from the wells over there in Ohio that you all saw that kind of really supported that, or if it was just really where in the Utica you guys were drilling in the quarter. It was just a really big jump. So just kind of curious if that was performance, timing, or just location that was kind of driving that really strong oil number. Zack Arnold: Well, thank you for noticing. We were really excited with those results too, and I think the projects that we brought in in 2026 were—or 2025, excuse me—were fantastic. Really a testament to the operational team making sure cycle times were fast, and execution of long laterals was done flawlessly. So kudos to them for putting us in a position to talk about these volumes. And then kudos to the land department for making sure that our working interest was high, because volumes are important, but having a high working interest in those volumes is even more critical. And I think from a performance perspective, we do not think those performances are anomalies. That is how we expect to perform, and we are very excited with the way that those projects have worked in the back of the year. Nicholas Pope: That makes sense. Jumping around a little bit, I know you did not provide explicit guidance here. But unit operating cost, gathering cost, were both down throughout the year. SIG acquisition of midstream assets, a lot of capital spend in 2026 implied kind of in the midstream businesses. Directionally, trying to understand where those costs are going with that midstream investment. And is there also going to be line items kind of growing for midstream revenues outside of the operating cost line items? Like, how is that going to be supported? What buckets? David Sproule: Sure. I am going to take the operating cost question first, and then I will come back to the midstream revenue question second. With regards to operating cost, what you have witnessed in 2025 is an increased activity in Pennsylvania as well as managing our costs down in Ohio. So let me unpack that just a little bit. Remember, in Pennsylvania, on our gas assets, our Marcellus assets there, we own the midstream. So we do not have a meaningful GP&T charge. The second thing is volumetrically, the natural gas wells that we put on are significantly larger than the oil-weighted wells that we put into sales in Ohio, just from a petrophysical aspect. So as you think about the blending of that, not only are you blending in a lower cost structure, but you are also blending it in with higher volume. So, naturally, you are seeing some of that decline happen. We have witnessed declines from an LOE, in particular, basis in Ohio. We have seen consistent GP&T in Ohio. But on a blending aspect, you are seeing a decline quarter over quarter and year over year with regards to our overall cost structure for 2025. We would anticipate that to continue as we bring on more natural gas volumes as well as when we bring on more volumes associated with the acquired properties from Montero. Antero properties—again, we own the midstream. So while there are additional expenditures associated with fractionation activities on some of the wells, we can reduce our overall blended cost—or continue to reduce our overall blended cost—by integrating those assets there. Turning to the midstream side, you know, we do generate some third-party midstream revenues on our system. We have done that; you can see that in the line item for revenues that we have for midstream. It is a great opportunity set for us as we think about the future, not only for our assets in Pennsylvania, but our assets that we have acquired from Antero. We have a very large system. Currently today, we are capable of moving upwards of 1.2 Bcf per day of capacity. So we have a very big midstream system that is definitely on our radar and strategic in endeavors to expand volumes associated with third parties onto that system. Nicholas Pope: Got it. That is all very helpful. I appreciate it. I appreciate the time this morning. Thanks, everyone. Operator: This concludes the question and answer session. I will hand the call back over to Zack for any closing comments. Zack Arnold: Alright. Thank you all very much for your interest in Infinity Natural Resources, Inc. We were very excited to talk about the quarter and the upcoming year, and look forward to visiting again soon. Operator: Thank you. This concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Ladies and gentlemen, good morning, and welcome to Cadre Holdings, Inc.'s Fourth Quarter 2025 Conference Call. Today's call is being recorded. All lines have been placed on mute. If you would like to ask a question at the end of prepared remarks, please press star one. At this time, I would like to turn the conference over to Matthew Berkowitz of the ICR Group for introductions and the reading of the safe harbor statement. Please go ahead, sir. Matthew Berkowitz: Thank you, and welcome to today's conference call to discuss Cadre Holdings, Inc.'s fourth quarter results. Before we begin, I'd like to remind everyone that during today's call, we will be making several forward-looking statements, and we make these statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our best estimates and assumptions based on our understanding of information known to us today. These forward-looking statements are subject to the risks and uncertainties that face Cadre Holdings, Inc. in the industries and markets in which we operate. More information on potential factors that could affect Cadre Holdings, Inc.'s financial results is included from time to time in Cadre Holdings, Inc.'s public reports, filed with the Securities and Exchange Commission. Please also note that we have posted presentation materials on our website at https://www.cadre-holdings.com, which supplement our comments this morning and include a reconciliation of certain non-GAAP financial measures. I'd like to remind everyone that this call will be available for replay through 03/25/2026. A webcast replay will also be available via the link provided in yesterday's press release, as well as on Cadre Holdings, Inc.'s website. At this time, I would like to turn the call over to Cadre Holdings, Inc.'s Chairman and CEO, Warren B. Kanders. Warren B. Kanders: Good morning. And thank you for joining Cadre Holdings, Inc.'s earnings call to discuss our results for the fourth quarter and full year 2025. I am joined today by our President, Brad E. Williams, and Chief Financial Officer, Blaine Browers. Fiscal 2025 was another year of steady progress for Cadre Holdings, Inc. Our focus remains consistent: building a company that delivers mission-critical technologies for professionals operating in demanding environments while generating disciplined and sustainable growth for our shareholders. Throughout the year, we made progress in three areas: strengthening our portfolio, integrating our businesses, and continuing to build demand across our core markets in public safety, defense, and nuclear safety. First, we expanded our capabilities with the acquisition of CARS Engineering. CARS is a well-regarded provider of engineered solutions serving the nuclear safety market. The business brings deep technical expertise and long-standing customer relationships that fit well with our strategy of investing in specialized companies that operate in highly demanding environments. During the year, we also signed an agreement to acquire TIER Tactical, a company widely recognized for its advanced protective equipment and strong reputation with military and law enforcement customers. That transaction closed earlier in 2026, and we are excited to welcome TIER to the Cadre Holdings, Inc. platform. We believe their capabilities and product portfolio are highly complementary to our existing businesses and further strengthen our position in mission-critical safety solutions. At the same time, we continued integrating the businesses we have brought into Cadre Holdings, Inc. over the past several years. Building a strong portfolio is only the first step. Real value comes from operating as a cohesive platform, aligning leadership, sharing engineering capabilities, and strengthening how we go to market. We made solid progress on that front in 2025. Operationally, we also saw strong demand across many of our end markets. Our team secured a number of meaningful contract wins during the year, particularly in advanced sensor technologies and blast mitigation seating, areas where performance and reliability are essential. These programs reinforce the trust our customers place in our technologies and in the Cadre Holdings, Inc. brands. As a result, we continue to build backlog, providing increased visibility as we move forward. That backlog reflects both the strength of our portfolio and the long-term nature of many of our customer relationships. Importantly, we entered the new year with a strong balance sheet. That financial strength allows us to remain disciplined but also opportunistic, continuing to invest in the businesses while pursuing acquisitions that expand our capabilities and market reach. We maintain an active M&A pipeline and are focused on opportunities that fit our strategy and meet our return thresholds. Stepping back, what is encouraging is the consistency of our progress. Year after year, we have continued to strengthen the platform, expanding our capabilities, integrating our businesses, and serving the markets where our technologies truly matter. I would like to thank our employees across the organization for their commitment and expertise, as well as our customers and partners for their continued trust. And I want to thank our shareholders for their ongoing support. With that, thank you for being with us today. I will turn the call over to Brad. Brad, over to you. Brad E. Williams: Thank you, Warren. On today's call, Blaine and I will provide a Q4 update and business overview, including recent trends and financial performance as well as our 2026 outlook followed by a Q&A session. We will begin on slide five. We delivered on our strategic objectives in the fourth quarter, driven by strong and recurring demand for our mission-critical safety products combined with the continued implementation of our operating model. Favorable mix in the quarter reflected higher duty gear volume and lower distribution volume. Orders backlog was up significantly. 2025 order growth plus the addition of CARS engineering division in April results in a nearly 50% increase in our backlog versus last year. This includes the blast exposure monitoring system, or BMO, contract that we discussed last quarter. As a reminder, this is a $50,000,000 IDIQ contract and represents a major achievement for our team and a key milestone in our work with the U.S. military. Based on the expectations we had previously outlined for 2025, you will recall that we saw a higher mix of larger opportunities that had been delayed. In fact, our Med-Eng, ICOR Technology, duty gear, Defense Technology, and armor categories have been extremely busy and successful winning larger opportunities in South America, Eastern and Western Europe, UAE, and parts of Asia. Large opportunities typically bring challenges around visibility of closing and booking the opportunity. With that said, we continue to have additional larger opportunities that are still in play that we have not closed that we expect continued progress on throughout 2026. Turning to M&A execution, as you heard from Warren, we completed the acquisition of TIER Tactical last month. Its addition to our portfolio advances Cadre Holdings, Inc.'s strategic focus on mission-critical products with high margins, strong cash flows, and compelling growth tailwinds. It also opens the door to international markets and provides access to new customers based on long-standing relationships. The integration process is underway. We have started our first 100 days of functional integration activities which have included initial site visits by both TIER and Cadre Holdings, Inc. teams. Based on our initial diligence, we kicked off two projects to evaluate product use of TIER capabilities within two different Cadre Holdings, Inc. businesses. TIER has shown an impressive dedication to manufacturing processes that deliver customers best-in-class solutions. We look forward to leveraging their engineering capabilities as well as employing core Cadre Holdings, Inc. operating model tools to unlock additional opportunities across the organization. While TIER is our latest acquisition and our teams are focused on integration, we are certainly not done when it comes to M&A, and we are actively evaluating a robust funnel and high-quality strategically aligned businesses to add to our portfolio. Critical to our success is Cadre Holdings, Inc.'s ability to generate significant free cash flows through cycles, which enables us to both pursue acquisitions and make strategic investments in core organic growth, while also returning capital to shareholders. We have paid 17 consecutive quarterly dividends since going public and recently raised our dividend to $0.40 per share on an annualized basis. Turning to slide six, we continue to operate in two markets defined by durable long-term demand drivers. On the law enforcement side, we see rising safety threats globally, coupled with resilient and growing spend on protection equipment. There is bipartisan commitment to public safety in the U.S. and across Europe supported by growing defense budgets. On the nuclear safety side, long-term demand is tied to policy and commercial tailwinds across our three market segments: environmental management, national security, and nuclear energy. I will speak more about some of the dynamics we are seeing in the nuclear market in a moment. The next two slides outline more current developments in our business environment. Trends in North America law enforcement remain positive, highlighted by significant federal investment in government agencies. From a geopolitical perspective, global conflict is on the rise, underscoring the importance of the work that we do. As we have discussed previously, the opportunity for Cadre Holdings, Inc. to play a more meaningful role generally comes when hostilities end, and we can provide various EOD offerings to address unexploded ordnance. In our consumer channel, while overall consumer demand is down, we have benefited from the strength of the Safariland brand and new product introductions. During 2025, we saw growth in this channel of 7% for the full year and 15% growth in the second half of the year, both versus prior year. Turning next to the latest market trends affecting our nuclear on slide eight, we continue to see multiple multidirectional support driven by expanded government and commercial programs. On the national defense front, expanding government mandates for weapons modernization and production are driving consistent and growing demand. The broader nuclear power space also continues to support growth opportunities for Cadre Holdings, Inc. The momentum in this market segment has only grown greater. Based on our follow-the-fuel strategy tied to the expanding nuclear fuel cycle, we are seeing stronger-than-expected opportunities in our funnel related to nuclear ventilation and containment systems and criticality alarm systems. Our third nuclear market segment is environmental management, where we support nuclear material processing, handling, and remediation. A development to call out in this area has been a recent executive order aimed at repurposing the U.S. plutonium stockpile to fuel nuclear reactors. Historically, Alpha safety products were used to transport stabilized plutonium to sites where it was down blended with uranium and ultimately packaged in a criticality control overpacks per shipment. Following the executive order, this down blending program has slowed, which has directly reduced demand for some Alpha safety products. Additionally, we have seen a shift in priorities at multiple nuclear sites toward pit production programs. With resources heavily focused on rebuilding plutonium production infrastructure, waste disposition programs are currently receiving less operational focus. As a result, plutonium material movement has slowed. While this will have a near-term financial impact, keep in mind this development pertains to only one subsegment of the nuclear group. Blaine will discuss this in greater detail, but overall, the broader Cadre Holdings, Inc. Nuclear Group outlook remains positive. Before I turn the call over to Blaine, I would like to highlight another major win for Cadre Holdings, Inc.'s Med-Eng subsidiary that Warren alluded to in his introduction. Earlier this week, we announced that Med-Eng has been awarded $86,000,000 in contracts by General Dynamics European Land Systems, or GDELS, to provide blast attenuation seats designed to protect occupants from mine and roadside explosive threats. These are life-saving seats that highlight differentiated expertise in blast physics and integration into military vehicles. We are honored to be awarded these contracts, which mark an important endorsement of Med-Eng's breadth of engineering and product development capabilities. Production and first delivery of the larger of the two programs will begin in 2026 and continue until 2031, while the second contract will run in parallel beginning in 2026 and continue through 2029. With that, I will now turn the call over to our CFO, Blaine Browers, to speak more about M&A, Cadre Holdings, Inc.'s Q4 financial results, and 2026 outlook. Blaine Browers: Thanks, Brad. I will kick off my comments by spending a moment to underscore Cadre Holdings, Inc.'s M&A track record and the momentum we expect to carry into 2026. As you can see on slide nine, the acquisition of TIER completed in February marks our sixth acquisition since going public. Each of these transactions has been in line with our thoughtful and patient approach and met our highly selective key criteria focused on strong margins, leading and defensible market positions, recurring revenues, and cash flows. Looking ahead, we maintain a robust acquisition pipeline in both the public safety and nuclear markets and intend to grow our diversified portfolio of mission-critical safety businesses through disciplined capital allocation. Turning to slide 10, we highlight the criteria that guides our process when evaluating potential transactions. Overall, we anticipate additional M&A in 2026, and continue to see attractive opportunities to broaden our product range, enter new markets, and increase customer wallet share. On the next two slides, we have provided a broader overview of the TIER acquisition which represents another step forward in the strategy we have articulated over the last several years. As Brad discussed, we have begun the integration process and look forward to the beginning of this next phase of growth together. TIER brings significant hard armor capabilities via their large presses and autoclaves that will be a significant resource addition to the Cadre Holdings, Inc. armor businesses. We are excited about how the strengths of both companies will complement each other and enable new growth opportunities. Another key point to highlight is that the TIER Tactical customer base has minimal overlap with Cadre Holdings, Inc.'s existing Safariland armor business. On slide 11, we show TIER and Cadre Holdings, Inc. armor revenue by customer channel which illustrates how complementary the two brands will be in the marketplace. TIER serves a worldwide customer base, including top-tier special ops units, government agencies, and militaries. You can see that 66% of its revenue is derived from international customers, while U.S. federal and U.S. military totaled 27%, both areas where Safariland does not have a major foothold today. Turning now to a summary of Cadre Holdings, Inc.'s financial performance, slide 14 details our fourth quarter and full year results. Fourth quarter top- and bottom-line results were down versus last year's record Q4, while our full year net sales, net income, and adjusted EBITDA increased significantly year over year. In Q4, Duty Gear and Armor product lines saw revenue and margins in line with our expectations, but we did experience revenue timing shifts in our nuclear businesses and EOD product lines, some distribution softness and run-rate, and a slight impact in our chemical luminescence product due to the government shutdown. Notably, 2025 adjusted EBITDA of $111,700,000 marked a record for the third consecutive year and 2025 gross margins improved 140 basis points. Similar to what we have seen in the past, irrespective of party, there can be uncertainty as a new administration gets their footing. We have seen similar impacts in the past, but these impacts have been short-lived. We have also seen the resiliency of our business as we exit these transition periods. I would like to reiterate that we have had two significant wins in public safety that reinforce our optimistic view of the future with the blast sensor contract and the blast attenuation seat contract, both of which have multiyear horizons for our life-saving products and are two of the biggest contracts in our history. I would also like to highlight the fact that the gross margins for the full year 2025 for public safety products, excluding distribution and nuclear, were up 188 basis points on a full-year basis, which further reinforces the strong execution of the teams and sets the stage for strong EBITDA margins as we see more typical growth. Illustrated on slide 15 is net sales and adjusted EBITDA growth year over year, including our 2026 guidance, which I will discuss more in a moment. Our full year outlook implies year-over-year revenue and adjusted EBITDA growth of 22%–24%, respectively, at the midpoints. You can see that over the last several years, Cadre Holdings, Inc. has delivered consistent and stable growth. Our resilience is a key differentiator with the businesses that are largely unaffected by economic, geopolitical, and other cycles. On slide 16, we present our capital structure as of 12/31/2025. After completing the acquisition of TIER Tactical, our leverage is just under 3x, not including TIER's earnings. If you adjust for TIER's adjusted EBITDA contribution, our leverage drops to about 2.5x. We believe Cadre Holdings, Inc.'s strong free cash flow generation coupled with the strength of our balance sheet gives us ample financial flexibility to continue to pursue organic and inorganic opportunities. We provide 2026 guidance on slide 17. Net sales are expected to be between $736,000,000 and $758,000,000. Our adjusted EBITDA guidance is between $136,000,000 and $141,000,000, implying adjusted EBITDA margins of approximately 18.5%. Guidance indicates organic growth for both Public Safety and the Nuclear businesses to be in the 3% to 5% range, as well as continued implementation of our pricing strategy of a 1% price increase net of material inflation. Brad discussed near-term headwinds for one of our nuclear businesses, which is reflected in our guidance. From a profitability perspective, these declines represent negative mix, and that impact is considered in the outlook. We believe over time, as we realize these commercial nuclear opportunities in our funnel, that our nuclear mix will return to what we have seen in the past. As we look at the quarterly cadence of revenue, similar to the past, we expect the second half of the year to be heavier with a lighter Q1. Public Safety businesses have their larger opportunities timed for later in the year. For example, the blast sensor order is expected to ship later in the year as the team ramps up production on this new product line. We expect Q1 to be up year over year, driven by TIER, but organically down in the quarter driven primarily by armor project timing combined with armor material constraints, lower distribution revenue, and Alpha project timing. Expect Q1 to be very similar to Q3 of last year on the revenue line, with margins around 39% due to volume and mix, as we have discussed. We do expect margins to climb as we exit Q1 as the mix improves and volume increases, and EBITDA margins in the low teens in Q1 for the same reason. This does not include the impact of the inventory step-up for TIER, or amortization, as part of the purchase accounting. Overall, our businesses are performing well. We expect continued strong demand in 2026 across our core markets in public safety and nuclear safety. I will now turn it back to Brad for concluding comments. Brad E. Williams: Thank you, Blaine. We continue to execute well against our strategic priorities, and our strong 2026 outlook reflects our confidence in the business's fundamentals and the effectiveness of the Cadre Holdings, Inc. operating model. We believe the combination of Cadre Holdings, Inc.'s track record of superior execution, resilience in the face of economic, political, geopolitical, and other cycles, as well as the dedication of our talented teams around the world, will continue to drive strong results moving forward. Beyond our core organic growth initiatives, we are actively evaluating compelling M&A opportunities and remain committed to targets with strong financial profiles, durable competitive advantages, and structural growth drivers. In conclusion, we are excited to continue to build our platform and further our market leadership supported by Cadre Holdings, Inc.'s entrenched positions and favorable industry trends across our law enforcement, first responder, military, and nuclear end markets. With that, operator, please open up the lines for Q&A. Operator: Thank you. We will now open for questions. If you have dialed in and would like to ask a question, please press star one. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Excuse me. Again, it is star one if you would like to ask a question. And our first question comes from the line of Lawrence Scott Solow with CJS Securities. Your line is open. Lawrence Scott Solow: Great. Thank you. Good morning, everyone. I guess just first, kind of question, Brad, very encouraged to see the kind of organic outlook returning to a somewhat normalized rate there in the 3%–5%. So if I do my math somewhat correctly, it looks like you were down about 2% organically in 2025, and you kind of outlined a bunch of larger orders pushed out. I am just curious, like in this environment, is it kind of a domino effect where some of the things that were pushed out from 2025 into 2026, or then you are seeing stuff go from 2026 to 2027, or, you know, is there any catch up? Just kind of curious on your visibility. Obviously, with geopolitical stuff, you know, Iranian conflict, all that other stuff. Eventually, stuff like that probably should be good. But in the short term, government shutdown, partial shutdown, there is some of this stuff also kind of impact your visibility for the current year? Brad E. Williams: Hey, Lawrence, it is Brad. Thanks for the question. You know, the good news is when you look at when there are large opportunities within this business, or quite frankly many other businesses I have been in, you have good visibility to those. So, you know, that mix of large opportunities that we talked about last year, we have closed a lot of those opportunities. They are sitting in our backlog now. We talked about blast seats we announced earlier this week. We just talked about it. That was something that we were expecting more toward the end of last year, but we have got that one in the bag now. We also have the sensor program which was the other one that, you know, we thought we would get earlier in the year last year, but we ended up having more toward the end of the year last year. And then we have other ones that, you know, we cannot disclose the customer base for competitive reasons, but there are other larger opportunities within multiple categories that, you know, they are funded, but there are various details around those orders that have kept those orders from getting booked at the moment. So we continue to work those, work them hard. And I am also proud to say, I mentioned in the prepared remarks that our international teams have been closing a lot of various orders within many different countries within not just a single business unit, but multiple business units. And, you know, we are really proud of the traction that we have been making there. Lawrence Scott Solow: Right. So it certainly sounds like a temporary thing. Right? I mean, it feels like your backlog continues to grow. Question just on the nuclear front. So I guess kind of that shift in prioritization, less cleanup on the plutonium side, more focus on plutonium build out. I guess, in theory, you know, you are taking it from one hand and giving to the other hand, but that giving to the other hand may take a little bit longer so you have potentially a build out. So you have a temporary short-term negative impact. Is that kind of a good way to look at that in terms of how you view it? And if I could just slip one more. Just margin outlook, it looks like the implied kind of midpoint is slightly up, almost pretty flattish. Is that, and I know TIER is sort of accretive. So is most of that impact just on the mix side in nuclear? Is it kind of dragging the margin this coming year? Blaine Browers: Yeah. I think there is, you know, a timing difference when we think about an existing revenue stream for nuclear related around that down blending and then the pickup on the commercial nuclear side. There is a timing lag just because of the size and significance of those projects for it to pick up. It is kind of point one. And then the second point, which Brad brought up, is really just the mix change and the impact in margins that has. You know, down blending is a very highly technical side of the business with, you know, margins that go with the kind of technical expertise required. You kind of have this twofold, you know, kind of impact. You know, what we are excited about, though, is how robust that commercial nuclear energy funnel has become since acquisition. Right? If you kind of rewind back when we started, and I think this is the great thing about the portfolio, is we play in all three of these end markets. So over the long run, we are comfortable there are plenty of revenue opportunities, not only to offset that loss, but really to continue to drive growth in that segment. That is really it. Yeah. It is that mix impact. Lawrence Scott Solow: Gotcha. Okay. Great for the color. Appreciate it. Blaine Browers: Absolutely. Operator: And our next question comes from the line of Eegan McDermott with Jefferies. Eegan McDermott: Hey. Good morning. Thank you, guys, for taking the question. It sounds like some of those bigger orders are still being pushed to the right and we have seen some recent wins. But for the remaining contracts, what gives you confidence that they are delayed and not lost at this point? Brad E. Williams: 100% confidence that they are delayed and not lost at this point. That is the type of visibility that we have to those. I cannot go through the details for, you know, those specific ones, but the visibility is 100% there. Especially one, two, actually, larger orders in one of our business units that, you know, has been awarded to us, let us call it. Right? So we look at the products that we have that have been specified, no issue there. So definitely no losses. High confidence in those. It is just a timing situation, and they are both two different specific situations taking place. Eegan McDermott: Understood. That is helpful. Thank you. Maybe if I could follow up on CapEx. You guided in the $10,000,000 to $14,000,000 range for 2026. It is obviously a step up from recent years. And maybe just some commentary on that if you could, and should we be thinking of that as going towards capacity expansion or focused on any specific area of the business? Blaine Browers: Yeah. Really, the uplift from historical is around capacity, in particular in the nuclear area or the nuclear businesses, where we have some site buildouts. And you go back in history, you know, we have had periods where we get closer to, you know, not quite 2% of revenue, but closer to 2% of revenue as we talk about. And generally, what drives that is capacity expansion, buildings, and that is the case for this year. Outside of that investment in one of our sites, the CapEx is very, very typical for the rest of the businesses. Eegan McDermott: Great. Thank you. Blaine Browers: Thank you. Operator: And our next question comes from the line of Matthew Butler Koranda with Roth Capital. Your line is open. Matthew Butler Koranda: Hey, guys. Appreciate the detail on the organic components of the 2026 outlook. Just wondering what are you factoring in from TIER from a revenue contribution standpoint? It sounds like it is still going to be accretive on EBITDA margin, but wanted to hear a little bit more about revenue and then cadence of revenue from TIER throughout the year. Blaine Browers: Yeah. Our outlook with TIER out of the gates is a conservative approach, as, you know, we do with all acquisitions. So we have them laid in at about $100,000,000 on a full-year basis. Given that we closed in February, that would put them in the high eighties to low nineties baked into guidance. And then EBITDA margins, you know, right where we talked about in that 20% range. As we move forward in the year and, you know, get a little closer to the team's process and develop, you know, more confidence in the funnel, we will adjust accordingly from there. But, you know, we feel comfortable with where we are starting with them. Matthew Butler Koranda: Okay. And then on the blast seat contract, I was curious how that ramps up. I know you said there is contribution in 2026. It sounds like probably later in the year. Maybe any color on how you are thinking about the ramp up and contribution to sales in the back half of 2026? And then just on a go-forward basis, I guess, is it kind of a run-rate type deal through the two contracts’ terms that you gave in the press release? Any additional kind of thoughts on the way to thread that into the model would be helpful. Brad E. Williams: Hey, Matt. It is Brad. So think of it this way, new program. We wanted to get it out as soon as possible to getting the $86,000,000 PO in our hands. So what the team is working on now with GDLS is the production planning side of things for 2026. So we actually have just started that here in March so that we can begin ordering parts and begin to get the supply chain cranked up. And then there are some sample deliverables as we go into the fourth quarter as we go into that phase of the project overall. So, you know, most of this revenue will be timed into 2027 and beyond for the schedule that I mentioned earlier. Matthew Butler Koranda: Okay. That is helpful. Thanks, guys. Operator: And our next question comes from the line of Jeff Van Sinderen with B. Riley Securities. Your line is open. Jeff Van Sinderen: Just wanted to circle back to down blending for a moment if we could. Would you expect down blending funding to increase again at some point, or might down blending be replaced by some other sort of disposal process? And is that one that Cadre Holdings, Inc. could be involved with? And then can you tell us a little bit more about the General Dynamics seat attenuation product? What all you are supplying there? Maybe a little more about the vehicles that the seats are going into, and is there potential for follow-on orders from General Dynamics? And just maybe what the overall outlook is for Med-Eng, just given the recent wins? Brad E. Williams: Jeff, overall, it is hard to tell. What we are referencing is an executive order that went out last year that directed—it was really directed from the DOE—to decrease the down blending of excess plutonium, except in areas that are required by law. So you can go read the executive order, but that is roughly what the executive order says. Then what we have seen by working with some of our customers like LANL and Savannah River and those folks is things have shifted more toward pit production programs with the goal of increasing pit production since the U.S. has, quite frankly, been producing zero pits over many years since the Cold War ended. So that seems to be the focus at the moment. That does drive additional opportunities. They are different opportunities compared to what cleanup activities would look like with our high-end containers that Blaine had already mentioned that bring higher margins within that product category for us. And what it shifted to is from a commercial nuclear standpoint and more of the nuclear ventilation and containment type systems that we have within the Alpha Safety business unit, and then also criticality alarm systems, also within the Alpha Safety business unit. You know, the good news is the funnel for those two product categories has been growing significantly since this shift has been happening. We have got various companies that are in the enrichment side of things and also fabricators that we have an extensive list of quotes that are going on with them that we are pursuing at the moment for these offsetting type opportunities. It is not a category that we have talked a lot about in the past. It is a category that, you know, we have an approximate installed base of 13,000-plus seats that are out there that we have designed and manufactured over time across 15 to 18 different distinct configurations. So, you know, we have been doing this for about 18 years. So the team at Med-Eng has a lot of experience on the crew survivability side of things. So think of it as the product is a purpose-built blast attenuation type seat. It is engineered to protect occupants of tracked and wheeled combat vehicles and then also other vehicles within, you know, militaries. So these vehicles, anytime there is a blast that happens, you know, it could be under the vehicle, it could be close to the vehicle, this is a way to protect the occupants that are sitting in these seats in the vehicle. We do have field-proven performance with various situations where vehicles have experienced those types of blasts and lives have been saved due to these blast seats that we have. So that gives you a little more detail and a little more color around what we do in this category. The team—very proud of this team—they have been working really, really hard to continue to build up the funnel and land some of these projects as they come about in these programs, and we are proud to be working with GDLS on this. It is a customer that we have a lot of experience with, whether it is General Dynamics USA, General Dynamics Canada, General Dynamics Europe, obviously the UK. We have experience working with them overall. So we are happy to have this program. Jeff Van Sinderen: Good to hear. Thanks for taking my questions. Blaine Browers: You are welcome. Operator: And our next question comes from the line of Mark Eric Smith with Lake Street. Your line is open. Mark Eric Smith: Hi, guys. First question for me, just wanted to ask about TIER, kind of synergies as we think about their facility and opportunities maybe with some of your current Safariland products. You know, what is maybe built into the guidance? What opportunities there are as well as maybe cross-selling opportunities and if there is anything built into the guidance for that? And the second one for me is just kind of housekeeping and maybe for Blaine. Just can you just walk through a little bit more on the Q1? You gave some numbers around maybe Q1 on revenue and margin. If you could just review that, and then curious if there is, you know, some continued transaction costs that roll over into Q1. Brad E. Williams: Hey, Mark. It is Brad. Great question. The short answer is there is zero built into the guidance related to TIER synergies. As you know, our first 100 days as we get out of the gates, we focus on all the functional-related activities—IT, finance, accounting, tax, treasury, compliance, you name it. That is the immediate focus with the teams as we bring people into the Cadre Holdings, Inc. organization. We have kicked off a couple of projects. I cannot go into details of those projects because it would bring up some potential competitive-type situations out there. But we have kicked off two projects that I have approved within actually two separate business units. One is within our armor business unit. Another is within our Med-Eng business unit. To work with the TIER folks together on looking at how TIER capabilities can be used within those two parts of those businesses. So we are really excited about those two projects. I would call them lower-complexity projects that have higher opportunities of success as we go forward to get our feet wet with the TIER team working with our Cadre Holdings, Inc. business units. Blaine Browers: Yeah. Absolutely. So we said revenue really in line with Q3 of last year, which was right at $155,800,000. Gross margins around 39%, with EBITDA margins in the low teens. And there will be some carryover on transaction costs into the year as we close the deal. Mark Eric Smith: Perfect. Thank you. Blaine Browers: Absolutely. Operator: And our next question comes from the line of Jordan J Lyonnais with Bank of America. Your line is open. Jordan J Lyonnais: Hey, good morning. Thanks for taking the question. On the organic backlog decline, is it fair to think that most of that should be from the environmental cleanup work inside of the nuclear business? And then, for 2026, the verticals that we should see this 3% to 5% organic growth—if it is commercial versus true defense—what probability of win do you guys have around the commercial side coming through that gives you the confidence we will see that shift to make up for the environmental down? Blaine Browers: And you are talking backlog sequentially, Jordan, is the question. Right? Okay. Yep. Yeah. It is kind of as we expect. There were a number of larger projects. Our backlog had increased coming into or at the end of Q3, and then as those large shipments went out. So, you know, duty gear had some large orders Brad mentioned on some international wins that got shipped in Q4 that lowered their backlog. Nothing alarming, but it is kind of a little bit spread amongst a lot of the businesses. You know, just calling attention to year over year. If we look back to where we were, you know, December 2024, we are still up organically pretty significantly. So I think kind of use that as a base point just to ground on that backlog growth on a year-on-year basis. And then, you know, on the commercial nuclear side, you know, we have always had these products that we are talking about. So I think the “how do we come around the probability of win” is really relative to our past track record in this area. The real difference here is not that it is new products or new uses. It is just the sheer number that we are seeing. So if you think about ventilation containment as an example Brad mentioned, that is something the business has done for many, many years, both in fuel production as well as in remediation. So this is not a new application. You know, when you think about the competitor side, it is the same competitors they have competed against in the past. Very similarly with the criticality accident alarm systems. Same set of circumstances, same competitors, same application. And that is what gives us comfort around those future wins. This is not a new market for us by any means. Jordan J Lyonnais: Got it. Thank you so much. Operator: And that concludes our question and answer session. We will now turn the conference back over to Brad E. Williams for closing remarks. Brad E. Williams: I would like to thank everyone for joining our call today and your continued support of Cadre Holdings, Inc. Operator, that will conclude the call. Operator: Thank you. Ladies and gentlemen, this concludes today's conference call, and we thank you for your participation. You may now disconnect.
Operator: Good morning, and welcome to Franco Nevada Corporation's 2025 year end results conference call and webcast. This call is being recorded on March 11, 2026. [Operator Instructions] I would now like to turn the conference over to your host, Candida Hayden, Senior Analyst, Investor Relations. Please go ahead. Candida Hayden: Thank you, Joanna. Good morning, everyone. Thank you for joining us today to discuss Franco-Nevada's year-end 2022 results. Accompanying this call is a presentation, which is available on our website at franco-nevada.com, where you'll also find our full financial results. Presentation is also available to you on the webcast. During our call this morning, Paul Brink, President and CEO of Franco-Nevada, will provide introductory remarks followed by Sandip Rana, Chief Financial Officer; who will provide a review of our results, followed by Eaun Gray, Chief Investment Officer, who will provide a review of our recent acquisitions. This will be followed by a Q&A period. Our full executive team is available to answer any questions. Participants may submit questions by the telephone or via the webcast. We would like to remind participants that some of today's commentary may contain forward-looking information, and we refer you to our detailed cautionary presentation. I will now turn over the call to Paul Brink, President and CEO of Franco-Nevada. Paul Brink: Thanks, Candida, and good morning. 2025 was a record-breaking year for Franco-Nevada driven by higher precious metal prices and growing production. Thanks to a strong fourth quarter, we achieved the top end of our revised 2025 GEO guidance range. Big focus for us is growing the business profitably. So it's a proud moment when the annual earnings increased by roughly 75%. The more than $1 billion in earnings is close to a 60% earnings margin a level of profitability that's impressive in any sector. In January this year, we increased our dividend for the 19th consecutive time. For the record rise in our 2025 cash flow, we announced a higher-than-normal 16% dividend increase. Our 2026 GEO guidance shows good growth over 2025 with further growth in our 5-year outlook. In many ways, this is just a baseline. With the abundant cash flow and capital in the gold sector, the draws will be turning on the 70,000 square kilometers of mineral [indiscernible] that we cover globally. We've identified $250 million of exploration spend on our Canadian assets allowed this year. So we expect a multiple of that on our global portfolio. A restart of Cobre Panama would add significant further growth and the Panamanian government's willingness to approve the processing stockpiles as a positive step in that direction. While our goal is to be a go-to gold stock, we recognize the cyclical nature of commodities and the benefits of some commodity diversification. Our guidance this year is based on $70 per barrel oil. The last I saw WTI prices were $85 a barrel. If that sustained our 2026 guidance may be too conservative. 2024 and 2025 have been 2 of our best ever years for capital deployment, adding 6 quality long-dated assets to the portfolio that contribute to our 5-year outlook and help sustain those production levels over the next decade and beyond. Our strategy of being the financial bank of strong teams has worked wonders. We've seen the [indiscernible] discovery share prices increased tenfold, and they're now some of the dialings in the sector. Post year-end, Eaun and the team have backed to other teams in North America, Patty Downey and the Ozon team win Kasperadi from Hecla and Richard Young and the IA team developing their suite of assets in Nevada. Most recently, we've backed [indiscernible] and the Minerals 260 team developing the Bullabulling assets in Western Australia. We're delighted that their share price is up 50% in the couple of weeks since the transaction was announced. By making their shareholders successful, we believe we can open the eyes of the Australian markets to the power of our financing model. You will have seen in our asset and the term royalty ounces representing MI&I resources and streams and royalties, where the economics are 100% attributable to us. In the deals we have done since year-end, we've added 820,000 royalty ounces. That's an undiscounted value of over $4 billion at today's gold prices. Our average cost was $770 an ounce, a fraction of the cost you see in other transactions in the sector. We're committed to promoting sustainable mining, and we're delighted to be made by the corporate nights in 2026 as one of the 100 most sustainable corporations globally. To wrap up, we're excited about the outlook for Franco-Nevada in 2026, with the industry's largest portfolio of gold royalties, no debt, $3.1 billion in available capital we really are uniquely positioned to create further shareholder value. Over to you, Sandip. Sandip Rana: Great. thanks very much, Paul. Good morning, everyone. As Paul mentioned, Franco Nevada reported record financial results for fourth quarter and year ended December 31, 2025. Our diverse portfolio of royalty and stream assets performed well and continued to benefit from higher precious metal prices. Slide 4 provides a recap of the company's performance against the revised guidance provided for the year. The updated guidance range was 495,000 to 525,000 total GEOs sold. Of this total, the company guided 420,000 to 440,000 precious metal GEOs, with the balance being from diversified assets. With strong performance from a number of assets during fourth quarter, the company finished the year with 519,106 GEOs sold, which was near the top end of the guidance range. For precious metal GEOs, we slightly exceeded the top end of the range with 440,140 GEOs sold. The diversified assets, which include our nonprecious metal mining assets and energy assets, resulted in 78,966 GEOs sold for the year. On Slide 5, you will see a summary of commodity prices for fourth quarter and full year 2025 and 2024, and Gold and silver prices increased significantly year-over-year, with the average gold price higher by 56% in the quarter. However, the 2 strongest performers during the fourth quarter were silver and Platinum, each up 75% and and 74%, respectively. The strong silver price performance resulted in a stronger gold silver ratio, which benefited our silver assets, in particular, Antamina and while our west -- and also our Western Limb Platinum stream, which benefited from stronger platinum price. For diversified commodities, prices for iron ore remained essentially flat year-over-year oil was lower, but we saw a significant increase in natural gas prices year-over-year. The strong performance from our assets, combined with record gold and silver prices resulted in record financial results for 2025 as seen on Slide 6. Revenue was higher by 64% and adjusted EBITDA of 74% and adjusted net income, 74%. This was also the case for fourth quarter as compared to prior year as seen on Slide 7. Total GEOs sold for the quarter increased 18% to $141,856 compared to 12,063 in fourth quarter 2024. Precious metal GEOs sold in the quarter were $127,959, higher by 34% compared to prior year. 50% of total GEOs sold were sourced directly from mines where precious metals are the primary commodity. For the quarter, we received strong contributions from a number of key assets. Antamina, where we benefited from both higher deliveries as fourth quarter was the highest delivery period during the year and also benefiting from higher silver price when converting to GEOs. Both Guadalupe and Antapacay had strong production quarters. And at Hemlo, we benefited from the leverage that net profit interest provide. As you know, the Hemlo NPI is difficult to forecast as it depends on how much mining is performed on Franco-Nevada's Interlake lands. During fourth quarter, we benefited from both higher production on our lands as well as higher margin per ounce with the rising gold price. In addition to the strong performance from those assets mentioned, we benefited from asset acquisitions that were new contributors to Franco-Nevada during fourth quarter. Western limb, Porcupine and Cote. Diversified GEOs sold were 13,697 for the quarter compared to $24,498 for prior year. This was partially due to lower diversified revenue than prior year, but the larger impact for the reduction in GEOs sold is due to the impact of higher gold prices when converting revenue to GEOs. As you can see from the chart, total revenue increased by 86% for the quarter to $597.3 million, which is a record for Franco-Nevada. Precious metals accounted for 90% of revenue. Adjusted EBITDA, also a record, was 95% higher for the quarter at $541.2 million compared to $277.4 million in fourth quarter 2024. With respect to costs, we did have an increase in cost of sales compared to Q4 2024 due to higher stream ounces sold. Depletion increased to $87.3 million versus $60 million a year ago. has received more GEOs from Antapaccay and Antamina and began depleting our recent transactions, Yanacocha, Western Limb, Porcupine and Cote. These assets are higher per ounce depletion assets. Finally, adjusted net income was $356.2 million or $1.85 per share for the quarter, both up 94% versus prior year. Slide 8 highlights the continued diversification of the portfolio. 85% of our full year 2025 revenue was generated by precious metals, with revenue being sourced 88% from the Americas. No 1 asset generates more than 13% of revenue as we have one of the most diverse portfolios in the industry. Slide 9 illustrates the strength of our business model to continue to generate high margins. As you can see over the last number of years, as the gold prices increased, our margin per geo has remained fairly constant. The cash cost per geo has increased from $242 in 2020 and to $325 per GEO in 2025, a 34% increase over this 5-year period. However, the margin has increased from $1,528 per geo, in 2020 to $3,110 per GEO in 2025, a 204% increase while during this period, the average gold price increased 194%. Our business model is very profitable as royalties and streams are usually top line revenue interest with either no cost or a fixed payment associated. As a result, as seen on Slide 10, our adjusted EBITDA margin for 2025 was 91%. And when accounting for depletion and taxes and other costs, our adjusted net income margin was 59%. As we look forward, Slide 11 summarizes our GEOs sold guidance for 2026. Beginning in 2026, we will be adopting a fixed GEO conversion ratios based on the pricing assumptions that you see on the slide. This methodology replaces our previous variable GEO conversion ratios based on actual average commodity prices. and is intended to make our GEO guidance better reflect production volumes. Our total GEOs sold are expected to range from 510,000 to 570,000 ounces with 90% from precious metals and 10% from our diversified assets. As you can see, we have provided guidance ranges for gold, silver and PGM ounces and for diversified assets, we are providing a revenue range. The main drivers for the GEO sold increased year-over-year are for precious metals, we will be benefiting from full year contributions from a number of assets, both acquisitions and new mine starts. Cortez Gold, Porcupine, Casa Berardi, IA and Valentine Lake, and we will continue to benefit from the ramp-up of new mines that began production over the last couple of years, Greenstone and Solaris Norte. Please note that we have not assumed any contributions from Cobre Panama. First Quantum has stated that they are awaiting formal approval to process stockpiled ore, which would produce approximately 70,000 tons of copper and result in stream deliveries to Franco-Nevada of approximately 23 ounces of gold and 265,000 ounces of silver. Timing of deliveries would be dependent on when formal approval is received. Also on the slide, we provided guidance for depletion, tax and funding commitments. Slide 12 illustrates our outlook for 2030, which is 555,000 to 615,000 GEOs sold. Main contributors will be contributions from new mines, Stibnite Gold, Copper World, SK Creek, Cascabel and Tacataka; contributions from expansions that are either underway or planned [indiscernible], Detour Lake and Castle Mountain. We do anticipate a step-down in deliveries at Candelaria in the second half of 2027 and at Antapacay in the second half of 2020. For the energy assets, we've assumed an increase in production over the next 5 years, resulting in an increase in GEOs, but have kept commodity prices flat at $70 a barrel WTI and $3 Mcf natural gas. Overall, when you look at the outlook for GEO sold, the company has approximately 13% built in organic growth from 25 to 2030 at budgeted commodity prices, excluding Cobre Panama. Cobre Panama is a large growth driver if the mine were to restart, should production restart, there's the potential for maturely higher geos depending on the conditions of the restart. Based on the average of the next 5 years of the Cobre Panama mine plan, the stream could contribute between 150,000 to 175,000 GEOs to Franco-Nevada per year. With a Cobre Panama restart, the company has approximately 45% built-in growth to 2030. As we look past 2030, Franco-Nevada has a very deep portfolio of assets that should begin to contribute meaningfully over time. I won't go into the specific details as shown on Slide 13. And but overall, these assets have the potential to generate over 220,000 GEOs to Franco-Nevada over time. Each asset is a different stage of development. And when looking at this group of assets as a whole, they contain approximately $6 million measured and indicated and 1.7 million inferred royalty ounces. Our royalty ounce is net of any cost such as stream costs, so it represents a 100% cash flow to Franco-Nevada before taxes. But even beyond that, we have not included any upside from over 230 exploration assets which provide additional optionality. And in this price environment, we are seeing exploration drilling increasing on our lands. We look forward to seeing what positive news is released on some of these options over time. And with that, I will pass it over to Eaun, who will highlight the recent new additions to the portfolio. Eaun Gray: Thank you, Sandip. It's been an exciting year so far as we've delivered meaningful growth with several large acquisitions in key gold mining districts. This growth has come at a low cost per ounce of resource, which Paul highlighted earlier. Starting with our [indiscernible] stream, we were delighted to support Patty Downey and his team and the acquisition of this established producer in Quebec. We have confidence in Patti and his team to execute their plans, and in particular, are excited by the increased exploration the property will now receive -- for too long, this project has been underloved. The extensive land package and deep cover, our team sees great promise to extend mine life at increased grades. Similar to our investment with Discovery, we see focused management as key to the success of this mine and is now in place, so the future should be bright. We're also excited to have completed the financing with i80 in February. This is the third financing we've completed with Richard Young and his team speaking to the strength of that relationship. We structured this royalty to dovetail the company's growth plans with a step up to 3% in 2031. The royalty covers all of the precious metals assets and over 200 square kilometers of key gold trends in Nevada, our name sake. We'll see cash flow starting immediately with Granite Creek, expanding with our communities and ramping up with the development of Mineral Point, which we envisage as a large-scale project. A significant portion of the financing is earmarked for acceleration of development in all 3. Finally, I'd like to briefly touch on our first sizable acquisition in Australia for some time, the Bullabulling loyalty. We historically have held a royalty on a portion of the deposit but with the renewed focus on the asset by Minerals 260, we quickly realized the larger potential of this project, which is a short distance from Kalgoorlie, a key gold producing region. We're delighted as Paul said, to be working with Tim Goyder and Luke McFadden, who lead the team at Minerals 260. We expect the PFS in the next few months, which should better define the project parameters for the market. The expanded resource has already been published, but extensive drilling has since been completed and will continue. Given the brownfield nature of the project in a well-established historical mining area, we see a rapid path to production with meaningful contribution to our Australian business. To conclude, I would highlight that we're debt-free with significant cash flow generation, which positions us well for continued acquisitive growth. With that, I'll hand it over to the operator for any questions. Operator: [Operator Instructions] First question comes from Josh Wolfson with RBC Capital Markets. Joshua Wolfson: Yes. First question is just on South Arturo. Very strong results in the fourth quarter. I'm wondering if you can provide any more information on expectations for 2026 and if that's assumed as well for 2030. Sandip Rana: Josh, Sandip here. Yes, no, South Toro was a very strong performer in the quarter. they are mining the open pit ahead of schedule. It's going to carry on into 2026. So 2026 should be a strong year. And what we've seen in the first part of this year, it is occurring. But starting in 2027, we do see it falling back off. So it's really a 2026 benefit with minimal for 2030. Joshua Wolfson: Okay. And then the minimum deliveries still apply for 2027, correct? Sandip Rana: Yes, correct. Joshua Wolfson: For Cascavel, a couple of questions there. I mean, first is for the stream buyback, should we assume that, that -- assuming it's the gold payable that's going to be received, should we assume that that's reflected in production for guidance? And then similarly for 2030. Is there any additional disclosure the team can provide in terms of what the production volumes are there? Sandip Rana: Sure. So for the buyback on the screen, we are receiving ounces those ounces are not included in our guidance at this stage. We have been notified they will be delivering GEOs for the roughly $40 million buyback that's been calculated. But as I said, it's not in our guidance. We're still working on how to account for that buyback. And as we decide that we'll provide additional disclosure. As per 2030 Cascabel mine Start is in our outlook, and it's probably a range between 15,000 to 20,000 GEOs. Joshua Wolfson: All right. And then one last question. Just on Musslewhite. Very strong quarter they reported previously by the operator. It looks like the NPI didn't pay out as high as expected. Is that something we should expect to occur, I guess, as a true-up in 2026? Or is there something more we should be aware about? Sandip Rana: So yes, the Orla did report very strong Q4. We do not have an estimate of the NPI at this stage. And as you know, one of the major deductions is capital. And so we made an accrual once we get the actual number from Borla, we will make an adjustment in all likelihood, there will be a true-up but as to the quantum unknown at this time. Operator: The next question comes from Larry Lee with CIBC. Chunshan Liu: Paul, Sandip and Eaun, I guess my first question would be on energy prices. So if we look at the 2026 guidance, oil is calculated using $70 a barrel because of recent events, we've seen the oil price strengthen. So I'm wondering if you can give us a little more sensitivity around how that would impact Franco-Nevada. As you know, Francois on a few, if not the only company -- royalty company that has exposure to energy. Sandip Rana: Sure. Larry. So as you're correct, we used $70 per barrel WTI in preparing our guidance a $5 increase in the WTI price is essentially a 7% increase in energy revenue. Chunshan Liu: Sounds good. And I guess on a similar topic, now that we're looking more towards unlocking value of the portfolio, I kind of want to ask about Cobre Panama. So from that perspective, I'm wondering what's the next step after the environmental audit conclude? When should we expect a potential decision from the government? Is that something you can share with us? And how long does it take to -- for the assets ramp up and deliveries to restart for Franco? Paul Brink: Thanks for the question. The -- the best information that's out there was the government themselves, President Molino, saying his target is the summit to try and have a resolution on the issue. So we'll pull that something can be achieved in that sort of time line. In terms of a ramp-up, the -- my understanding is that the -- once you've got a go decision that it would be roughly 6 months to get to 50% of production in 12 months to get to about 90%. Although the -- if the company is allowed to go ahead with the processing of stockpiles, that does allow them to operationalize. They're already increasing their workforce. It would allow them to start at least one of the trains, the mill trains. So I expect that could accelerate the ramp-up time line. Chunshan Liu: Perfect. Sounds good, Paul. I guess I have just one last question, if that's okay, is I want to ask about the balance sheet. So Franco currently holds about $1.1 billion in publicly traded equity investments, and that's a significant increase from just $770 million in Q3. So I'm wondering what would be strategic positioning for the public traded equity investments? Could that be a potential source of liquidity? How should we look at it? Paul Brink: So the large part of those equities are shares that we obtained in supporting GM and Discovery Silver. We are -- our intent is to be their financial bankers. I want the market to know that we're in those stories. So we intend to be long-term holders of the stock. but at the same time, we are -- if there are good opportunities, if we have got good returns, there is the potential that we'll take some money off the table. But we are long-term investors. And so principally, with the is to realize the value that we think both teams can add in their companies. Operator: The next question comes from Heiko Ihle with H.C. Wainwright. Heiko Ihle: I'm going to follow up with one of the last questions that was asked. I mean the oil segment, we're 3 weeks away from Q1 being over. Do you have a year-to-date figure of cash receipts? And also, I'm cognizant the high prices didn't really start until a couple of weeks ago or really just 2 weeks ago. But maybe a bit of color of what number we should be modeling out for the full quarter? Sandip Rana: Sandip here, you're right that this event is recent. I do not have a number off the top of my head. If anything, the real benefit to this, if this carries on, will be a Q2 event for us. And as part of our Q1 results, we'll provide additional color as to sensitivities, et cetera. Heiko Ihle: You wouldn't be willing to give us a quarter-to-date guesstimate on receipts, though, would you? Sandip Rana: Not right now, no. Heiko Ihle: Okay. Fair enough. And then just thinking out loud, I mean, like now there's talk about mines getting put into the straight and just geopolitical risk factors are lowering even more so than they have been over the past couple of years. Just maybe a bit of color on where internally you move your discount rates and your risk-based premiums for acquisitions that you're thinking and willing to make? Paul Brink: That would be a long answer to that question. Other than that, I think you -- the main point you make is a very good point is the -- we've seen deglobalization. We've seen the world breaking into trade blocks and now you have an added dispute on top of that. it does raise risk globally. We try to be a low-risk way to invest in this business. We need to have most of our assets in good jurisdictions. We're very glad that, that is the case. Very glad that in terms of the recent deals over the last number of years, most of that has been in Canada, the U.S. and Australia. We think those are super jurisdictions. We will continue to do deals that are across the board, but we do like having most of the assets in good jurisdictions. And obviously, when you're going into jurisdictions when there's more risk, you've got to think about the discount rate. You've got to think about the size of capital that you're putting at risk. But in particular, we think about the payback and you want to make sure if there is a bit more jurisdictional risk that you're getting a faster payback. Operator: The next question comes from Tanya Jakusconek with Scotiabank. Tanya Jakusconek: First one, I'm going to start with Sandip on just how you're going to be showing guidance. I understand that you put out your commodity pricing, and that's what you're going to use for the year. So when you report, should I be thinking that the GEOs that you're going to be reporting every quarter would be exactly on those commodity prices you've outlined, but your revenue is actually going to be on what was realized per quarter. I'm just trying to understand how you're going to show it. Sandip Rana: That's correct, Tanya. Revenue will berealized [Audio Gap] Tanya Jakusconek: Clarity. So my next question then is going to go back to the guidance. And I want to go back to 2030 because we were quite off on 2030. So I'm trying to understand if it's possible for you, would you be able to take that guidance range and break that out to what is gold in that 2030 guidance for what is silver and what the other diversified. Sandip Rana: I think we would break it out just between precious metals and diversifying, but I can give you a call after and can give you some color. Unknown Analyst: Okay. And then in that guidance as well, you gave us what the contribution from Casabe would be. I don't have the new deposit coming in at an Cai. Would you happen to know how much is in there as well? And then is this new Australian Bullabulling in there in your 2030 guidance as well? Sandip Rana: So I don't have the [indiscernible] number in front of me. Bullabulling is in there, but it's minimal ounces. Tanya Jakusconek: Okay. That's very helpful. And then I'm just trying to understand also, maybe Eaun wants to take this 1 just on the environment. that you're in because it's moving quite fast these commodity prices. So maybe just an idea of what you're seeing out there. Any opportunities for you to double down on RECONNECT areas of investments that you already have exposure to. And then obviously, we saw the big weeks in transaction on Antamina as we're trying to understand how many other big ones are is that you're also seeing? Paul Brink: Thank you, Tanya, for the question. I would say, overall, it remains a very robust seen a number of transactions. We're very proud of the deals that we got done year-to-date. My expectation is you'll continue to see similar kind of deal environment to what we've seen over the last 2 years despite the changes to prices just based on what we're seeing at the moment. What I'm very excited about is given the deal that we've done in Australia, the deal that BHP did, I think the streaming market is very much in consideration by CFOs in the mining industry at the moment, and that should drive further activity going forward. So I'm quite hopeful on that front. Tanya Jakusconek: And what is the size of the deal environment you're seeing? Because you can run the truck through the 0 to $4.3 billion. Most -- what are most of that you're seeing? Are we still in that 100 to 300 or 100 to 500. I'm just trying to understand what the majority are separate from these big ones. Eaun Gray: Yes, Tanya, unfortunately, it's really hard to handicap. I would say at the moment, you're going to see a range, similar sizes to what has taken place. So for the last year or so, that's what I would expect in the market going forward. So there are larger transactions and smaller transactions. We'll see what actually crosses the finish line. Tanya Jakusconek: And is your focus on mainly on precious metals right now? Or are there opportunities in other metals as well? Eaun Gray: That really hasn't changed. We remain open to investments outside of precious metals, but precious metals make up the majority of what's in the pipeline at the moment. Operator: There are no further questions on the phone line. I will now turn the Q&A session back over to Candida Hayden, who will take questions from the webcast. Candida Hayden: Thank you, Joanna. Our first question comes from Rene Picifrom Palisade Capital based on the recent transactions or investments in Canada, U.S. brackets, Nevada and Australia, it would seem that you may have made a strategic decision to focus on OECD-type post countries, developed countries, is this just a coincidence or happy occurrence or deliberate. Paul Brink: As I mentioned earlier on in terms of how we think about the portfolio, it's -- make sure that most of the assets are in great mining jurisdictions, we're blessed. The A lot of our assets are in Canada, U.S., Australia, but also in Chile, Peru, Mexico, Brazil. These are all great mining countries. We continue to invest in all of them. So it is the -- yes, what we've done does reflect our strategy is a happy coincidence that of all our deals are in Canada, U.S. and Australia, it is a happy coincidence. Candida Hayden: Thank you, Paul. There are no further questions from the webcast. This concludes our 2025 year-end results conference call and webcast. We will host our Investor Day on Wednesday, April 8, 2026, -- the in-person presentation will be hosted at the Lumi Experience Center in Toronto at 2:00 p.m. Eastern Time. The presentation will also be available to view virtually. Details will be available on our website. We expect to release our first quarter 2026 results after market close on May 12, with the conference call held the following morning. Thank you for your interest in Franco-Nevada. Operator: Ladies and gentlemen, this concludes your call for today. We thank you for participating, and we ask that you please disconnect your lines.
Operator: Good day, everyone, and welcome to the Consumer Portfolio Services, Inc. 2025 Fourth Quarter and Full Year Operating Results Conference Call. Today's call is being recorded. Before we begin, management has asked me to inform you that this conference call may contain forward-looking statements. Any statements made during this call that are not statements of historical facts may be deemed forward-looking statements. Statements regarding current or historical valuation of receivables, because dependent on estimates of future events, are also forward-looking statements. All such forward-looking statements are subject to risks that could cause actual results to differ materially from those projected. I refer you to the company's annual report filed 03/12/2025 for further clarification. The company assumes no obligation to update publicly any forward-looking statements as a result of new information, further events, or otherwise. With us here is Mr. Charles Bradley, Chief Executive Officer; Mr. Danny Bharwani, Chief Financial Officer; and Mr. Michael Lavin, President and Chief Operating Officer of Consumer Portfolio Services, Inc. I will now turn the call over to Mr. Bradley. Charles Bradley: Thank you, and welcome, everyone, to the fourth quarter and year-end conference call. 2025 was a very good year. We might have expected it to be even better, but we did not quite get the growth we were looking for. But still, overall, a very strong year. We focused on credit. We focused on keeping our margins. All in all, it was very good. Couple of highlights. We renewed, or actually, we signed a new warehouse line with Capital One for $150 million. We also signed a $900 million prime forward flow commitment. Both of those will be very instrumental in how we grow and what we are going to do in 2026. But more highlight than that is the fact that, you know, credit is readily available. The company has done well enough to where lots of people, banks, and such, not to mention on the securitizations, are very eager to either buy our bonds or lend us money. So we are in a very good spot in terms of moving into 2026. 2026, you know, is a quick peek, already looks like it could be very, very good. So 2025 was really good. Again, we had focused on getting the 2022 and 2023 paper, which was not particularly profitable and did not perform as well as we would have liked. I think at the beginning of 2025, that was almost 40% or more of the portfolio. Today, it is 2026. We would expect that number to gradually decrease over the year to where it is de minimis by the end of 2026. So getting that kind of piece of bad credit out of the portfolio is very good. Portfolio is nearly $4 billion. We expect that to grow substantially in the coming year. Now reached a size where we are really at a good size in terms of our industry standing. Overall, we are in a very good position. Credit remains strong. Interest rates look good. We will get back to that more, but for now, I will turn it to Danny to go through the financials. Danny Bharwani: Thank you, Brad. Looking at some of the numbers, revenues for the fourth quarter, $109.44 million, an increase over the $105.3 million in 2024. For the full year 2025, revenues were $434 million, a 10% increase over the $393 million in 2024. The interest income on our fair value portfolio is the main driver of our total revenues, and that is actually up 16% year over year. The fair value portfolio now sits at $3.6 billion and is yielding 11.4%, remembering that that yield is net of expected losses. Outside of interest income, the other component of our revenues are fair value marks. These are adjustments to our fair value portfolio that we occasionally record to revenues as needed. We had no marks in 2025, compared to $5 million in the fourth quarter of the year before. For the full year, we had fair value marks of $6.5 million compared to $21 million the prior year. In terms of expenses for the fourth quarter, $102.2 million is a 4% increase over the $98 million in 2024. For the full year 2025, expenses were $406 million, which is 11% higher than the $366 million in 2024. The biggest component of that increase is interest expense. Interest expense was $59 million in the fourth quarter. It was $53 million in the fourth quarter a year ago, and that is a 13% increase. The increase is largely due to our higher securitization debt balance from our higher loan portfolio. Our loan portfolio, which I will cover when we look at the balance sheet, but the loan portfolio is actually, the securitization debt from that loan portfolio is up 15% year over year. Looking at pretax earnings, $7.2 million for the fourth quarter, compared to $7.4 million in 2024. For the full year, pretax earnings were $28 million compared to $27.4 million for the full year 2024. If you look deeper into the numbers and exclude the fair value marks, pretax income would have been $7.2 million in the fourth quarter, compared to $2.4 million in the fourth quarter of 2024. So there is some significant improvement there if you strip out the marks and focus on interest income. For the full year, the pretax income would have been $21.5 million in 2025, compared to $6.4 million in 2024. Again, there is significant improvement in 2025 if you exclude the nonrecurring items. Net income for the quarter, $5 million compared to $5.1 million in the fourth quarter of 2024. For the full year, net income, $19.3 million compared to $19.2 million in 2024. Similar trends for net income as pretax income, but again, if you exclude the fair value marks in 2024, which were higher than 2025, there is significant improvement there. Diluted earnings per share, $0.21, is flat from the $0.21 in the fourth quarter last year. For the full year, $0.80 versus $0.79 in 2024. Moving now to the balance sheet. Our total cash, cash and restricted cash, finished the year at $172.2 million, which is up from $137.4 million at the end of 2024. Our fair value portfolio is up 10% to $3,655,000,000 compared to $3.3 billion at the end of 2024. Looking at our debt, I guess the biggest jump would be from our securitization debt we talked about earlier, 15% higher to $2,986,000,000 compared to $2,594,000,000 in the prior year. Moving to shareholders' equity. The $309.5 million ending balance for equity at December 2025 is a 6% increase over $292.8 million at the end of 2024. Equity continues to climb and currently sits at an all-time high for us. This translates to a book value, measured on a fully diluted basis, of about $13 a share. Looking at other important metrics, our net interest margin, $50.1 million in the fourth quarter, compared to $52.8 million in the fourth quarter of 2024. Full year net interest margin, $202.5 million, flat from $202.3 million in 2024. Again, the fewer marks in 2025 from the fair value portfolio have an impact on that. If you strip that out, the net interest margin would have been $50.1 million versus $47.8 million. And for the full year, $196 million versus $181 million, which is an 8% increase year over year. Our core operating expenses, $43.4 million in the fourth quarter, compared to $46.2 million, is a 6% decrease. For the full year, core operating expenses of $177 million are down 2% from $180 million last year. So besides growing our auto loan portfolio and increasing our interest income, we have also put a lot of focus on improving operating efficiencies, which you can see in the decline in our core operating expenses as a percentage of the managed portfolio, which is now down to 4.8% from 5.6% a year ago. I will turn the call over to Mike. Michael Lavin: Thanks, Danny. A few operational notes today. In 2025, we originated $363,000,000 of new contracts. For the full year of 2025, we purchased $1,638,000,000 of new contracts compared to $1,682,000,000 during the same period in 2024. So pretty good year, as Brad said, but a little flat. In 2025, it ended up being our third-best origination year in our thirty-five-year history. This, despite our continued practice of originating with the tight credit box, which we did in 2025. We heard from the trenches that dealers were reporting lower foot traffic, and we saw at times increased and, in some cases, irrational competition for less business. So overall, when you consider all the factors that were against us, $1,620,000,000 was a pretty good year. In 2025, we grew our portfolio of assets under management from $3,760,000,000 to $3,779,000,000. And for the full year, we grew the portfolio from $3.4 billion to $3.7 billion, which is an increase of 8.24%. Our focus in Q4 and as we turn to the new year is to grow via, one, hiring new sales reps and adding new territories. I think the second one is adding more active dealers to our funding dealer pool. We have been successful doing that. In the fourth quarter, we added about a thousand in December alone. Three, we have a goal to drive our applications from 250,000 a month to 325,000 a month. And four, we started doing this in the fourth quarter and into this year so far as mix and strategic risk initiatives that we have seen be successful so far. Also in the fourth quarter, we implemented our Generation 9 credit scoring model that, as with our previous generation models, utilizes AI/machine learning in its development. We have found that, at least so far, the new model has increased our approvals 11%. So they were running in the low 40 percentiles, and now they are running in the low fiftieth percentiles. It has kept our cap capture flat, which is good news. And, you know, doing the math, it has increased our total fundings about 8.4% just by implementing that new model. Also in the fourth quarter, as Brad alluded to, a little more detail on the partnership regarding the prime program. We partnered with a large credit union to source, originate, and service prime auto loans. As part of that deal, we get an origination fee and a servicing fee to sell that credit union prime auto loans that we source. Interestingly, the credit union has committed to buying up to $50,000,000 a month, $600 million annually. Over eighteen months, $900 million. But it is important to note that we think that the growth will be a slow buildup, as we kind of have to rebrand ourselves to our dealer base as more of a full-spectrum lender, considering we have been a subprime lender for thirty-five years. We are getting good feedback from the dealers. We are growing month over month. But, again, it is going to be a slow build. I kind of compare it to when we started our meta near-prime program years ago. It did not come out of the gates too strong, but eventually, you know, it is now 5% to 6% of our originations, and we are kind of hoping the prime program gets to be about the same. Just sort of following up on what Danny said on our OpEx. We were able to decrease it year over year from 2024 to 2025 by 14%. One note is on the employee cost front, we were able to lower employee cost as a percent of the portfolio from 2.6% in 2024 to 2.4% in 2025. And, you know, we did this despite growing the portfolio 8.24%. That is a little more evidence that we have properly scaled the business. We are at the right size. And, you know, as we continue to grow in 2026, we look for that OpEx to continue to trend downward. Turning to credit performance, the total DQ greater than thirty days for the full year 2025 was 14.77%, as compared to 14.85% for the full year 2024. The total annualized net charge-offs for the full year 2025 were 7.76% as compared to 7.62% for the full year 2024. Further, repossessions were down a little bit year over year. Potential DQs, which we call pots, were down year over year. And extensions remain at our historical average as a percent of the portfolio. Our extensions are also about the same as benchmarked against our competitors in the subprime space. So taken together, our improved portfolio performance in 2025 was quite an accomplishment considering the macroeconomic headwinds we faced in servicing with affordability, stubborn inflation, increased interest rates, some stagnant wage growth affecting, you know, some of our customers' cash flow. We found that using the right collection techniques and processes, you know, along with our customers still prioritizing their car payments, sort of fought off those trends. I mean, to lower delinquency year over year in this environment is quite a tip of the hat to our servicing department. Looking more closely at the vintage performance, we continue to see significant positive credit performance sort of starting with our 2023v vintage and continuing vintage over vintage through 2025. Now that it has more time to season, we are sort of looking at the 2024 vintage performance as being a positive result, probably due to our credit tightening that we took in early 2023. And we continue to do today. It is early, but a steep peek at our 2025 vintages shows even better potential for that performance than the 2024s. As Brad alluded to, the trouble of 2022 vintage and 2023 vintages are running off quickly. And as compared to our competitors' credit performance, the Intex data that our bond investors use to evaluate the space reveals that we remain among the very best credit performers in the subprime space when you compare us apples to apples to our competitors. Finally, turning to recoveries, they remain somewhat relatively light, settling into the 28% to 30% range. We typically want them to be in the low forties. But our analysis suggests that there is a light at the end of the tunnel. Our data revealed that recoveries for vehicles from the 2022 and 2023 vintages, those cars are actually driving down our overall recoveries. So, for example, in Q4 2025, looking at Q4, vehicles from the 2022 vintage were recovering at about 20.5%, and vehicles from the 2023 vintage were recovering 22.9% on the recovery. Compare that to, you know, recoveries on the 2024 vintages are more palatable at 36.3%, and recoveries for the 2025 vintage, at least so far, are hitting 43.4%. So we feel once the 2022 and 2023 vintages sort of flush out, as Brad said, by the end of this year, our recoveries will get back to normal. And as everybody knows, recoveries are a critical part of reducing our losses and increasing our net income. And with that, I will throw it back to Brad. Charles Bradley: Thank you, Mike. Switching over, taking a look at our industry. Normally, not a lot going on in the industry. As we have sort of pointed out already, it was a little bit slow. Traffic was down in the dealerships. And that seems to have changed in 2026 so far. But the interesting notes were GLS, one of our friendly competitors, got purchased. I think that is a good, it was a very good valuation, or extremely good valuation. So having that happen was interesting. Also, Flagship, which had kind of been sinking for a while, was purchased also, but, again, more at a discount. I think Flagship, for instance purposes, had ceased originations when they were sold, but that would be, you know, some of the M&A movement in the industry. And lastly, Prestige, more recently, stopped originating loans as well. You do not really see a lot in our industry. More importantly, we have seen almost no new entrants into our industry in, like, five years. So it has gotten to the point where unless you really have some size, we will call a minimum of a billion-dollar portfolio, you are really in a tough competitive standpoint within the industry. So being at $4 billion and on our way growing puts us in a very good spot. Having a couple of our competitors go away and maybe try and reinvent themselves is fine. Certainly Prestige is not. And then having to say, also GLS puts a valuation on the industry players, all good news across that board. I think, you know, the industry is very solid without having people blow up. The trichloro thing was a bump in the road, but really had nothing to do with the real industry. It did affect the market slightly for us in doing securitization, and that had no impact whatsoever. So moving into the future, what we care about, as we have mentioned many times, are the interest rates and unemployment. We believe the interest rate environment is very positive. If anything, the interest rates may come down as opposed to go up. Down is obviously way better. As long as they are not going up, we are kind of fine with where they are, but it would be nice if they came down a little bit more because those pretty much go straight to the bottom line, those improvements. Unemployment seems to be relatively steady. Unemployment could bounce around a little bit, and we really would not be affected. We really do not want unemployment to skyrocket. Obviously, that could trigger a recession, which is all bad. But we do not really see any of that. We see unemployment holding steady. We see interest rates steady or coming down. It really sets us up for a very good environment right now. Generally, other than the Iran war, which hopefully will go away pretty soon, the economy seems very stable and very strong. Again, we would think 2026 and beyond look very positive in terms of where we are going with the company. So having said that, I mean, the goal in 2026 is to focus on growth. We want those margins to improve through better interest rates. We want the overall portfolio performance to improve by getting rid of that 2022–2023 paper. We believe a good economy is good. We think we are, as I mentioned earlier, in great position to raise money. We did a residual deal recently, which is cheaper by a bunch than the last couple we have done. So again, there are a lot of favorable tailwinds as we move into 2026. So we are really looking forward to see what we can do this year. Got a bunch of stuff going the right way. We raised the money. We have the warehousing. The credit model looks great. We are very positive in terms of where things go from here. With that, thank you all for attending the conference and the conference call, and we will speak to you in a month or two. Thank you. Operator: Thank you. This concludes today's teleconference. A replay will be available beginning two hours from now for twelve months via the company's website at www.consumerportfolio.com. Please disconnect your lines at this time, and have a wonderful day.
Operator: Greetings, and welcome to Broadwind, Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Thomas A. Ciccone. Thank you. You may begin. Thomas A. Ciccone: Good morning, and welcome to the Broadwind, Inc. Fourth Quarter and Full Year 2025 Results Conference Call. Leading the call today is our CEO, Eric B. Blashford, and I am Thomas A. Ciccone, the company's vice president and chief financial officer. We issued a press release before the market opened today detailing our fourth quarter results. I would like to remind you that management's commentary and response to questions on today's conference call may include forward-looking statements which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factors section of our latest annual and quarterly filings with the SEC. Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release issued today. At the conclusion of our prepared remarks, we will open the line for questions. With that, I will turn the call over to Eric. Eric B. Blashford: Thanks, Tom. And welcome to our call. 2025 was a pivotal year in our evolution as a leading manufacturing partner of choice for global OEMs in power generation and critical infrastructure, while becoming a leaner, more diversified business equipped to deliver profitable growth through the cycle. The divestiture of our industrial fabrication operations in Wisconsin in the third quarter represented an important step in optimizing our asset base and increasing our balance sheet optionality, which positions us to redeploy capital toward higher value opportunities. Our fourth quarter performance was in line with the preliminary results we issued in early February 2026. Fourth quarter results were impacted by a raw material supply disruption in our Heavy Fabrications business associated with an OEM customer's directed buy program, which reduced manufacturing throughput and operating efficiency during the period. The company has implemented corrective actions to address the issue, and expects operations to normalize during 2026. Demand conditions and customer activity were strong during the fourth quarter, supported by robust project activity across our Gearing and Industrial Solutions segments. Orders were led by 38% year-over-year growth in the Gearing and Industrial Solutions segments, partially offset by a 20% year-over-year decline in the Heavy Fabrication segment reflecting the divestiture of the Wisconsin operation. Gearing orders increased to nearly $9.7 million as we saw strength in power generation, along with some resurgence in oil and gas and the wind aftermarket. In March 2026, we received a $6.0 million follow-on order for precision machined gearing components used in midsized natural gas turbines which power data centers and other applications. This order represents the second half of the significant order we received in July. Within the Industrial Solutions business, we received orders of $11.1 million. In summary, the team and business continued to perform well as we sharpen our focus within adjacent higher margin precision manufacturing verticals. This past quarter, we quickly identified and addressed the supply disruption by working with our customer to bring on an alternative supplier, minimizing the overall impact to our business. Furthermore, recent strategic actions to divest our Wisconsin facility position us for increased balance sheet strength and flexibility, while improving capacity utilization at our Abilene facility and reducing overhead costs. Despite the volatile trade policy environment, our 100% domestic manufacturing base remains a key competitive advantage as we partner with tier one OEMs who value our deep technical expertise, commitment to quality, and on-time service. With that, I will turn the call over to Thomas A. Ciccone for a discussion of our fourth quarter financial performance. Thomas A. Ciccone: Thank you, Eric. Turning to Slide five for an overview of our fourth quarter performance. Fourth quarter consolidated revenues were $37.7 million, representing a 12% increase versus the prior-year period. The fourth quarter increase was driven primarily by strength within the Industrial Solutions segment, in which revenue was up 60% year-over-year. Furthermore, the fourth quarter revenue level within the Industrial Solutions segment represents a 40% increase versus the average over the past four quarters. We believe that this volume level will continue based on current customer indication. Outside of our Industrial Solutions segment, lower Gearing deliveries were more than offset by increased revenue within the Heavy Fabrication segment, which benefited from increased wind revenue versus the prior-year quarter. Adjusted EBITDA declined to $1.9 million versus the prior year of $2.1 million. Despite higher volume, adjusted EBITDA decreased due primarily to lower capacity utilization within our Gearing segment and operating inefficiencies associated with the directed-buy raw material supplier issue we referenced in our February 5 press release. Fourth quarter orders were strong, nearly $39.0 million. Orders increased within our Gearing and Industrial Solutions segments, driven by strength in the power generation, oil and gas, and natural gas turbine verticals. Orders decreased within our Heavy Fabrication segment, reflective of our exit of the Manitowoc facility late in 2025. Turning to Slide six for a discussion of our Heavy Fabrication segment. Fourth quarter orders were nearly $18.0 million, a 20% decrease versus the prior-year quarter. However, after backing out the $6.3 million in industrial fabrication product line orders received for the Manitowoc facility in the prior year, orders increased more than 10% on an adjusted basis due to meaningful tower orders being recognized in the current-year quarter. Fourth quarter revenues of $21.6 million are up 6% versus the prior-year quarter. Despite delays associated with the raw material supply issue we experienced, we were still able to recognize increased wind tower and repowering revenue in the fourth quarter. However, adjusted EBITDA was down versus the prior year due to manufacturing inefficiencies associated with the aforementioned raw material supply issue. Turning to Slide seven. Q4 Gearing orders remained strong at $9.7 million, an increase of 38% versus the prior-year fourth quarter. We ended 2025 with approximately $26.0 million in backlog, a level we have not reached since 2023. As we noted in the prior quarter, we continue to see strength in the power generation and oil and gas verticals, and that momentum continued into Q4. Additionally, as we announced via this morning's earnings release, we recently received just over $6.0 million in follow-on orders from a leading OEM in the natural gas turbine segment of the power generation end market. Including this order, we have already booked almost $11.0 million in Q1 orders. Segment revenue was $7.0 million, down almost 8% versus the prior-year quarter. We recognized an adjusted EBITDA loss of $0.3 million compared to $0.1 million of adjusted EBITDA in the prior-year period. Due to the lower revenue levels, earnings were adversely impacted by reduced capacity utilization. As volumes recover, expect operating leverage to improve in 2026. Turning to Slide eight. Industrial Solutions booked over $11.0 million of orders during the fourth quarter, a 38% increase versus the prior-year quarter. Orders remained at an elevated level; the resulting backlog again hit a new record level of over $38.0 million at the end of the fourth quarter, eclipsing the previous record of $36.0 million set at the end of Q3. This quarter represents the fifth straight quarter setting a record backlog level. Q4 segment revenue was $9.4 million, up both sequentially and versus the prior-year quarter, reflective of the elevated order levels received recently. Fourth quarter revenues represent a 60% increase over the prior-year quarter and is the highest revenue level ever recorded within the segment. We believe this business will operate at these elevated revenue levels throughout 2026. Adjusted EBITDA of $1.5 million, or almost 16% segment EBITDA margin, increased significantly over the $0.6 million, or 10% segment EBITDA margin, reported in the prior-year quarter, reflective of the increased revenue levels. Turning to Slide nine. We ended the fourth quarter with total cash and availability on our credit facility of nearly $25.0 million. This is down from the prior year, and we were carrying significantly lower working capital levels as we had received advance payments from our major customer late in 2024. Working capital levels were flat during the quarter and we expect them to remain relatively consistent moving forward. Finally, with respect to our financial guidance, today we are reaffirming our full-year 2026 guidance. We expect full-year 2026 revenue to be in the range of $140 to $150 million and adjusted EBITDA to be in the range of $8 to $10 million. That concludes my remarks. I will turn the call back over to Eric to continue our discussion. Eric B. Blashford: Thanks, Tom. Now allow me to provide some thoughts as we move into 2026. We continue to make a decisive shift toward increasingly stable, growing power generation markets with an emphasis on oil and gas, renewables, and potentially nuclear. Our strategic emphasis is on pursuing the highest growth and highest margin opportunities that leverage our precision manufacturing expertise. Our facilities in Abilene, Texas; Chicago; Pittsburgh; and Sanford, North Carolina, near Raleigh, have more than 600,000 square feet of manufacturing space ready to serve our customers. Quarter upon quarter of repeat wins within the Gearing and Industrial Solutions segments from power generation, specifically within distributed power, as well as growing opportunities in both small-frame utility-scale natural gas turbines, support our strategy to expand in this market. Quote activity continues to increase in both Gearing and Industrial Solutions, generated by our ability to solve the complex precision manufacturing and sourcing challenges faced by customers in this growing market. So we are expanding resources to meet this demand in both divisions. In our Gearing segment, we continue to execute our strategy to move beyond traditional gearing markets through opportunities in other precision machined products. We are pleased with the increasing level of customer activity we are seeing in various new infrastructure-related markets such as road maintenance, cement plants, and aggregate material processing, along with some early green shoots in defense. Recent sizable orders we received from the power generation sector are the beginning of a multiyear cycle for which we are prepared. The expansion of our capabilities to serve the high-speed gear segment, such as the dynamic balancing capabilities I mentioned earlier, allow us to bring more processes in-house, decreasing lead times while improving quality and profitability. In Industrial Solutions, continued growth in the natural gas turbine industry driven by the global demand for power is having a positive commercial impact on our business. New data center installations are driving increased demand for distributed power solutions, including those that provide redundancy, and many of our key customers are adding significant production capacity in order to meet both the current and foreseeable future demand from power generation. We are proud to have recently received the 2025 supplier quality and delivery award from our largest customer, in recognition of our quick response to their significant growth in demand, all while meeting their strict quality and delivery requirements. In our Heavy Fabrication segment, we believe that domestic onshore wind tower activity will continue at its present rate through 2026 and into 2027. We have good visibility for tower production into 2026 and good customer indications beyond that. We are seeing increased quoting activity for our PRS line of natural gas pressure reduction units and expect sales to increase proportionately. In summary, I am pleased with the order growth and strategic actions we have taken this year as we continue to demonstrate our strong execution of our strategic priorities. Our divisions are well positioned to support the nation's growing need for power generation and infrastructure improvement, which we see as long-term opportunities for us. Our quality, quick response, and ability to solve complex manufacturing challenges for our customers continue to help us win new opportunities. We have reduced our cost structure, are investing wisely, and are taking strategic actions to refocus our resources toward higher value and growing end markets. We value our people and are committed to keeping them safe, fulfilled, and productive. This year, we will be implementing an ISO 45001 occupational health and safety readiness program, with plans to add that certification to our existing ISO 9001 and AS 9100 certifications. Our 100% U.S.-based plants are expanding capabilities to take advantage of opportunities afforded by the pro-domestic manufacturing policy backdrop afforded by the current administration. We are encouraged that our order intake continues to grow, positioning us for improved utilization of our manufacturing footprint in 2026, as we strengthen our foundation for steady, profitable growth serving the power generation, critical infrastructure, and other key markets with high-quality precision components and proprietary products to capitalize on improved demand in the years ahead. With that said, I will turn the call back over to the moderator for the Q&A session. Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Eric Stine with Craig-Hallum. Your line is now live. Eric Stine: Hi, Eric. Hi, Tom. Hi, Eric. Good morning. Good morning. So I know Gearing and Industrial Solutions backlog is up 2x or more year-over-year. You did mention your expectations for revenue for Industrial Solutions in 2026. I am curious if you could just talk about Gearing a little bit. I know that, I mean, obviously, the demand is there, but the quarter was limited by utilization. So just curious, maybe thoughts on that, steps you need to do to get through that, and what 2026 growth might look like in Gearing throughout the year? Thomas A. Ciccone: Sure. Yes. So as you mentioned, our backlog is about double from where we entered 2025. So we are expecting significant growth within that segment in terms of revenue. For sure, double-digit growth can be relied on there. We are entering with a much stronger backlog. So it is about execution versus commercial success this year. Eric Stine: I mean, on execution, can you talk about that a little bit? I mean, this is not limited by timing of when customers want these components. It is more about you driving higher throughput, or just any details about how the year ended and why 2026 may be different or may be limited at the start, or anything along those lines? Eric B. Blashford: Well, I can add a little bit. This is Eric. With the backlog that we have, we are working towards the customers' requested dates, which are spread out throughout the year. So I would say there is a ramp up going to happen in Q1 with steady revenue in Q3 and Q4. Again, much visibility for the full year. Some of our backlog is into 2027, but most of it is 2026. If that helps you. Eric Stine: Yeah. No. That is helpful. Okay. Maybe, after selling Manitowoc, the balance sheet is in solid shape. You talked about redeploying it to different areas. That includes bolt-ons and some new capabilities. Maybe it is hard to share, but if there is anything you can share about areas that you think need added to, whether organic or inorganic? Eric B. Blashford: Well, we are definitely focused on power generation and critical infrastructure in all of our divisions, and our M&A search is in those areas, especially with grid or power generation. I think we are entering a super cycle for power generation and grid both. It is going to last at least ten years. And that is where my focus is, my targets are, in M&A. Also for organic growth, in BIS, which is obviously power generation, and in Industrial Solutions, and in Gearing with power generation in these turbines that are, I would call, midrange, which are 100 megawatts and less. Eric Stine: Got it. And maybe, so these are not, I mean, I guess bolt-on certainly implies that these are not necessarily significant acquisitions, but more about adding capabilities, whether it is a new product line, new manufacturing footprint, that sort of thing? Eric B. Blashford: Yeah. So they would be bolt-on acquisitions to our existing platforms. Eric Stine: Okay. Alright. Thank you very much. Eric B. Blashford: Thank you, Eric. Operator: Our next question comes from Justin Clare with ROTH Capital Partners. Your line is now live. Justin Clare: Hey, good morning. Thanks for taking our questions here. I wanted to just start out on capacity outlook for Industrial Solutions. You mentioned that you are expanding the capacity there, I think, by 30% to accommodate future growth. So just wondering, with that added capacity, how much potential revenue might be supported for the Industrial Solutions segment when it is fully utilized? And then if you could speak to how you anticipate utilization increasing over time here. Eric B. Blashford: Sure. Just for clarification, our footprint is increasing 30%, but our capacity, we have already doubled it through staffing and equipment. So that floor space is just over and above that. So I think we can easily double our revenue, if not maybe 2.2 times more than 2025 revenue, in our existing facility before we end up having capacity constraints. We are right now only operating at one shift, so we can add another shift if necessary. So I think we could certainly get into the $70.0 million range, revenue within our existing facility. Justin Clare: Okay. And any sense for the timing in which you might be able to achieve that level of revenue, given the visibility you have into demand and the discussions that you are having with your customers? Eric B. Blashford: Well, the growth in the combined cycle natural gas utility-scale natural gas turbines, which we serve in that market, is really, really strong. Our primary customers, their primary customer, GE, says orders increased 77% in 2025 alone. So I expect that the demand will be there from our primary customer and others all the way through 2030. So with customer indications, I think we have got a real strong chance of hitting that revenue number over the next several years. Justin Clare: Got it. Okay. That is helpful. And then maybe shifting over to the Heavy Fab business here. The backlog was down in Q4, but that partly reflects the Manitowoc divestiture. Wondering if you could speak to the underlying demand trends that you are seeing, the visibility you have, and maybe the timing for backlog conversion? And what you are expecting in terms of the cadence in orders in terms of the timing of bookings relative to when revenue will be recognized. Eric B. Blashford: Sure. As has been the practice in the market for some time now, our customers tend to release orders about six months or so in advance of their production needs. We have got good visibility for towers and adapters into Q3 2026, and customers have indicated that level of volume should continue through the remainder of 2026 and into 2027. Thomas A. Ciccone: Yeah, just to add to that, Justin, you asked about converting backlog. We see this as a ratable conversion consistent through 2026. So we are not seeing any spikiness in terms of revenue. It should be pretty ratable over the period. Justin Clare: Okay. Got it. That is helpful. Thank you. Operator: Our next question comes from Amit Dayal with H.C. Wainwright. Your line is now live. Amit Dayal: Thank you. Good morning, everyone. Thanks for taking my questions. Eric, with respect to sort of the 20% roughly level of organic year-over-year revenue growth you are guiding for, with the kind of visibility you have right now, and some of the macro conditions, I mean, they look favorable. Do you think this is a level of growth you can maintain for the next few years, at a minimum? Eric B. Blashford: Well, the markets that we are growing into have CAGRs of about 6% year-over-year, but in the great demand cycle that we are in, the products that we are in, such as natural gas turbines in medium and high capacity, the growth is beyond that CAGR that I mentioned to you. So I think we can, in those two divisions, achieve that kind of growth rate going forward over the several years, really through 2030, which is as far as we can see out now. Amit Dayal: Okay. Understood. And then the $6.0 million follow-on order, is this with just one customer? And then adjacent to that, are there other opportunities similar to this that you may be pursuing that are in the pipeline but not in the backlog? Eric B. Blashford: Sure. Again, this is the power generation market, which we are really excited about. That is the market that we are attacking because we have the capital equipment in place. We have got the certifications in place. We have got the customer relationships in place now. That is one customer that we are talking to with regard to that particular order, but we are talking to several others in that space. Amit Dayal: Okay. And, you know, just given sort of the recent volatility around events taking place in the Middle East, your exposure to the oil and gas space, are you seeing a little bit more inquiries, etcetera, or activity from that segment right now? Eric B. Blashford: We are. Several of our customers, now the orders are not huge like they were several years ago, but they are, I would call them, substantive, and it is multiple customers. So I think what they are doing is hedging their bets, if you will, that there could be a disruption in their supply, which sometimes comes from overseas. But there is demand, because the price of oil is an indicator of demand in the U.S., and our customers are in the fracking and drilling U.S.-based space. Amit Dayal: Okay. Yeah. That is all I have, guys. I will take my other questions offline. Thank you. Eric B. Blashford: Thanks, Amit. Operator: We have reached the end of the question and answer session. I would now like to turn the call back over to Eric B. Blashford for closing comments. Eric B. Blashford: Yes. Thanks, everyone, for being on the call today and your interest in our company. We look forward to coming to you again at the end of Q1 to talk about our results. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Thank you for joining Ur-Energy Inc.'s Year End 2025 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If you have joined via the webcast and you wish to submit a question, please use the Ask Question button in your viewer window. If you have dialed in, please press star 1. Please note this conference is being recorded. I will now turn the call over to Alex Ritchie, General Counsel and Corporate Secretary of Ur-Energy Inc. Thank you. Alex Ritchie: Thank you. Today's discussion includes forward-looking statements within the meaning of applicable securities laws. Forward-looking statements are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results to differ materially. We do not undertake to update or revise any forward-looking statements except as required by law. Slide two contains disclaimers that relate to forward-looking statements, risk factors and projections, and cautionary notes to investors. Please consider these carefully along with the risk factors in our Annual Report on Form 10-K that was filed on 03/10/2026. I will now turn the call over to our CEO and President, Matt Gilley. Matt Gilley: Thank you, Alex. Thank you everyone for joining us today. Slide one. As many of you know, I joined Ur-Energy Inc. midway through 2025. From my perspective, it was a year of strong execution and meaningful progress. Across our operations, development pipeline, and financial position, we delivered tangible improvements that position the company for production growth in 2026. Slide two disclaimer. As Alex mentioned, we will likely make forward-looking statements today. Please read the disclaimer at your leisure. On to Lost Creek, Slide three. At Lost Creek, our focus on operational execution translated into significant year-over-year gains. We ended the year with 406,000 pounds of product in inventory, an increase of 21% over 2024. We increased pounds drummed in 2025 by 65% over 2024. We also improved wellfield flow rates, increased pounds captured by 40%, and increased our profit per pound sold by more than $12. Our average cash cost per pound sold, including severance and ad valorem taxes, was $42.89. These results reflect stronger wellfield performance, improved plant throughput, and disciplined operating focus. Slide four. Ongoing drilling at Lost Creek continues to create value. As detailed in our updated S-K 1300 technical report, the measured and indicated resource is now estimated at 11,900,000 pounds and the inferred resource is at 10,400,000 pounds. The estimated mine life at Lost Creek was extended by nearly three years, and the post-tax net cash flow increased to $442,000,000, roughly 45% more than the previous estimate. The NPV with an 8% discount rate is now estimated at $244,000,000, with an internal rate of return of almost 66%. Slide five. We still only drilled a portion of the more than 35,000 contiguous acres at the Lost Creek property. As our Chief Operating Officer, Mr. Steve Hatten, said in yesterday's press release, every time we drill Lost Creek, we have been fortunate to increase the resource base. This underscores Lost Creek's scale, longevity, and long-term growth potential. On Slide six in Shirley Basin, at our Shirley Basin project, we made substantial progress towards bringing our second ISR production facility online. The initial processing plant construction is nearing completion, with all ion exchange columns installed and heat tanks in place. To support start of operation, we have drilled 469 injection and production wells. In Mine Unit 1, Header House 1 is ready to begin initial injection and recovery from the well pending approval from the state environmental department. They began their pre-operational inspections in late February and are looking at our wellfield data package, so that process is underway. The March 2024 technical report for Shirley Basin estimated a nine-year mine life and 8,800,000 pounds of resource in the measured and indicated categories. The estimated post-tax net cash flow is $119,000,000. The NPV with an 8% discount rate is $82,000,000, and an internal rate of return of 69%. The estimated all-in cost is $50 per pound. During 2025, we grew our Ur-Energy Inc. workforce by 55% and welcomed 56 new team members. The majority of those were added to support Shirley Basin, but we also strengthened our operational, technical, and corporate teams across the company. We are proud of the team we have built. Slide seven. From a financial perspective, we ended the year with $123,900,000 in cash, driven largely by the successful closing of our 4.75% convertible senior notes. Our cash position as of 03/04/2026 is $115,300,000. That does not include $18,500,000 that we will receive this month for $24.724700000.0 warrants that were exercised last month for about 12,300,000 of our common shares. All of our outstanding warrants were exercised over the last few months except for an insignificant number that expired. The strength of our balance sheet gives us the flexibility to fund Shirley Basin commissioning, continue ramp up at Lost Creek, and disciplined resource growth. And while we are not taking any victory laps just yet, it is worth pointing out that we finished the year with a positive gross profit of $74,000. A milestone, but an encouraging milestone, as operations and production continue to improve. On Slide eight, at our Lost Soldier project, we installed 18 aquifer test wells in late 2025 to support the evaluation of the potential for ISR development. Aquifer testing will begin this month, followed by baseline environmental studies for permitting and for additional permit—pardon me. Lost Soldier is just 17 miles from the Lost Creek process plant, which could mean an opportunity to develop it as a satellite operation using our existing infrastructure. We have also started work on a technical report for the project that we expect to complete by the end of this year. At our North Hassel project in the Great Divide Basin, drilling continues to deliver very encouraging early results. Through February, we drilled 32 wide-spaced holes totaling 33,000 feet. Seven of those intersected significant uranium mineralization, including 13 intercepts exceeding our Lost Creek cut-off grade. These results suggest multiple stacked roll front horizons, with grade and thicknesses comparable to Lost Creek, supporting the potential for future ISR development. The results include two standout holes, about 1.5 miles apart, that intersected significant stacked mineralization at similar depths, giving us some early confidence in the potential scale of the system. And North Hassel is only 18 miles from Lost Creek. Once we wrap up the 50-hole program at North Hassel, we will move the rigs over to our Lost Creek South project this summer. Lost Creek South is located adjacent to Lost Creek, and we are planning a 120-hole drill program there this year. These exploration programs are critical to expanding our development pipeline, growing our resource base, and diversifying potential future production across multiple projects. Slide nine, wrapping up. As we entered 2026, we continue to optimize our operations at Lost Creek while our second ISR facility, Shirley Basin, is making significant progress towards startup. Our combined estimated mineral resource totals 21,000,000 pounds in the measured and indicated categories, and 10,400,000 pounds in the inferred category, as of 12/31/2025, providing a strong resource base for our production. We have contracted for sales of 1,300,000 pounds in 2026. We plan to cover those sales with pounds in inventory and new pounds that we produce at Lost Creek and Shirley Basin. And on March 4, we had 379,000 pounds in conversion facility inventory. With our growing resource base and strong balance sheet, we believe Ur-Energy Inc. is well positioned to benefit from positive uranium market fundamentals and increased demand for secure U.S. uranium supply. And with that, I will turn it back to the operator to open it up for questions and answers. Thank you. Operator: Thank you. At this time, we will be conducting a question-and-answer session. If you have joined via the webcast, please use the Ask Question button on your viewer window. If you have dialed in, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue, and you may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. The first question today is coming from Sundari Iyer from B. Riley Securities. Sundari, your line is live. Sundari Iyer: Thank you. Hi, Matt. Thanks for taking my question, and congratulations on the quarter. I just have two questions. Starting with the 1,500,000 commitments, including the 250,000 loan repayment. With current inventory levels, can you help us understand what gives the confidence in meeting these deliveries and increasing utilization from the current levels to the 50–60% range? Matt Gilley: Certainly, Sundari, and thanks for the question. So, look, when you talk about what gives us that confidence, it is what we are seeing now with the current ramp up of operations at Lost Creek, combined with the positive progress on construction at Shirley Basin. We do our mine planning. We do our analysis of risks and opportunities. As we go through this year, our plan, which is a very solid plan we have gone through very carefully, is to be able to make our deliveries of 1,300,000 contractual sales for the year from the existing inventory as well as the new production that we will be bringing on during the year. There are a lot of different parts there. We are seeing a continued ramp up of operations at Lost Creek. We are seeing the wellfield continue to produce high-quality uranium in solution. The improvements in the plant are really taking shape. The team at the Lost Creek plant is expanding. We have a very strong business improvement program in place there. We brought on key individuals, as well as we are going to be adding sand filters to the front of the Lost Creek plant over the next several months. These are the parts from Lost Creek that give us the confidence. Shirley Basin is the positive construction. We are on track to be able to start moving solution through the plant this month, and we are on track to begin shipping resin deliveries in the second quarter. That is all coming together nicely. We still require pending environmental approval from the state of Wyoming. Those are all on track, and they seem clear. We cannot always predict when we will get those, but everything seems on track, and we are very confident in our ability to ship. Sundari Iyer: Thank you, Matt. Thank you for that update. I will turn it over. Matt Gilley: Okay. Thanks, Sundari. Operator: Thank you. The next question will be from Anthony Tagliari from Canaccord Genuity. Anthony, your line is live. Anthony Tagliari: Good afternoon, Matt and team. Thanks for taking my questions. Just curious on the product loans that you have outstanding. Given your cash balance, when should we expect that this might get repaid? Would it be by the deadline in November? Would you settle it earlier? And then maybe on the settlement, does it have to be settled by replacing the physical or could it be cash settled as well? Thanks. Matt Gilley: Alright, Anthony. Good questions. We have a 250,000-pound loan with a trading entity that is due in November. As you pointed out in your question, Anthony, we have multiple options on how and when we repay this loan. With our cash balance, we could always have the opportunity to pay back that loan by buying pounds on spot. Regarding the payment of the loan, the loan is to be repaid in physicals. That is not necessarily our physicals, but the loan is to be repaid in physicals. We are not going to pin down exactly how we are looking at that. What we are doing, Anthony, is looking at our opportunities. If we were to see a short-term decrease in spot price, that could give us an opportunity to get that loan off of our books at a very favorable price. Other than that, we look at other opportunities. We have not pinned down, and we are not projecting, a certain path on that. We do know that loan is outstanding. It is due in November, and we have the contingency plans in place to fulfill that loan. Anthony Tagliari: Great. Thanks. That is very clear. Maybe just as a follow-up. How should we think about the cadence of realized prices through 2026? Do you expect a ramp in prices or to stay fairly consistent? How should we be thinking about that? Matt Gilley: We have not given, specifically, a price per pound for 2026. But you can see in our 10-K the detail that shows we are contracted to deliver 1,300,000 pounds for proceeds of up to $82,000,000. Those contracts are all different stages and different prices throughout the year, so there is not a ramp up through the year. Those were contracts that were signed multiple years ago for delivery in 2026. You can do the math and come out with the average price per pound, and you should think of it as an average because of the way that the contracts come in and the way that we deliver onto those contracts. It is not a ramp up, but it is a series of different prices at different slots. Anthony Tagliari: Thanks, Matt. I will pass it on. Operator: The next question will be from Geoff Graham from Northland. Geoff, your line is live. Matt Gilley: Good afternoon, Geoff. Thanks for the time. Geoff Graham: Hey, Matt. Was curious at Lost Creek, given we are a couple months plus into the quarter, any commentary you can share on how production has trended thus far in Q1 relative to Q4 levels and maybe how you are expecting that asset to ramp throughout the year? Matt Gilley: Good question again. I am going to be hesitant to be too specific because I want to keep everything nice and tight as far as disclosure. Ramp up certainly continues at Lost Creek. I will say in December, we had a significant weather event of 11 days of power disruption from a windstorm that came through Wyoming with winds well over 100 miles an hour. The plant delivered beautifully through December, and the teams responded to that power outage and really did a fantastic job of stripping resin and drumming uranium. January is rough as we reloaded the resin. We are back on track for February. March looks on track for very positive. So the ramp up continues, Geoff. I am being very coy in giving you real specifics yet, but you will get those numbers as soon as they are available. We see the steady path for ramp up at Lost Creek and, with Shirley Basin, deliver into that 1,300,000 pounds. That is our standard answer there, Geoff, and that is what we are committed to. Geoff Graham: Fair enough. We will stay tuned. For my follow-up on the cost side of the equation, any thoughts on where cash costs go in 2026? Should we expect as Lost Creek ramps up we see some downward pressure on the cost side? And how might the introduction of Shirley Basin pounds impact some of that arithmetic? Matt Gilley: We are not giving cost guidance, but I will tell you that in an ISR operation, your costs are incredibly fixed. So it is really a function of pounds drummed, or pounds sold. The more pounds you sell, the lower your cost per pound. It really is an incredibly fixed cost structure. The wells are the wells, the electricity is electricity, the same number of people are there regardless of how many pounds you drum, and the cost of the reagents is really just oxygen and carbon dioxide, and they are relatively minor in the big scheme of things. So it is quite a linear relationship between pounds drummed and sold and cost per pound. Geoff Graham: Got it. Okay. Thank you. I will turn it back. Operator: Thank you. The next question will be from Joseph Reagor from Roth Capital. Joseph Reagor: Hey, Matt. Thank you for taking the questions. I guess most might have been answered. But on the regulatory front, some of your peers have noted that because there is this rush to get production up across the industry that there have been regulatory processing delays. Is that what you are dealing with at Shirley Basin? And then on that note, do you have a timeline on when you will get regulatory approval there to get started with production? Matt Gilley: Joe, thanks for the question. I will start off with the answer, then I am going to hand over to Ryan. He is our VP for Regulatory Affairs. I think the commentary you are hearing about the delays in the process from the increase in activity is fairly focused on Texas. But nonetheless, there is a growing amount of activity across the industry that does impact everyone. With regards to the timing of the regulatory approvals, we certainly anticipate those to be approved this month. I will pass this over to Ryan for some more color. Ryan, do you mind answering Joe's question? Ryan: Absolutely. The one thing that I would add is Ur-Energy Inc. has an excellent working relationship with our regulators in the state of Wyoming. We work very closely with them in partnership to come to those approvals. As Matt said, all indications are that we are under timely review for those wellfield data packages and approvals to start Shirley Basin. There is nothing that causes us or points us to likely delays. We are working with the state and they are as well. A concern that you have mentioned is as there is more activity, those resources at the state do get stretched, and we are aware of those, and we monitor those and we work with the state as we try to overcome those delays. But as far as Shirley Basin is concerned, everything is on track. We are working closely with the regulators and anticipate receiving those approvals soon. Joseph Reagor: Okay. And then just as a quick follow-up, if you had the regulatory approval in normal course, when would that header house have started production? I realize it is ready now, but how long ago was it ready? Matt Gilley: I am sorry to mislead you in my commentary, Joe. We are building the plant. We are on track. We have the header house ready for production on schedule. We have it ahead of the production plant, just because that is good planning. We will be mechanically ready for the plant to receive solution on Monday of next week, and that is when we are going to be loading the first resin tank. Then any delays past then would be due to waiting for regulatory approvals. Joseph Reagor: Okay. Alright. Thanks for the clarity on that and the color in general. I will turn it over. Operator: The next question will be from Mike Kozak from Cantor Fitzgerald. Mike, your line is live. Matt Gilley: Yeah. Good afternoon, Mike. Mike Kozak: Thanks for hosting the call. It has been a while since you guys have done an earnings call, so I appreciate it. Most of my questions have been answered already. I had one housekeeping-type one left, though. I noticed there was a large discrepancy between pounds drummed and pounds captured at Lost Creek in Q4, much wider than any other quarter I can recall. Could you give some detail on what drove that in Q4 and whether to expect that to mean revert in Q1? Thanks. Matt Gilley: Mike, good question. Mr. Steve Hatten, this is a COO question. Steve Hatten: How is it going, Mike? The biggest difference is you heard Matt talk about issues we had with not environmental, but with the environment, where we had some power down. At these facilities, we run the plant on generator power, and the wellfield is all on line power. If we have a major power outage, that can affect the production that we see coming in versus what we can do in the plant. So any variance, for instance, if you see production lagging coming in from the wellfield, that gives the plant a chance to still process material, and vice versa. If the plant is doing maintenance for whatever reason, you will see the wellfield captured come up versus the plant go down. Mike Kozak: Okay. That makes sense. That is very helpful. I appreciate it, Steve and Matt. I will revert back, and best of luck on the Shirley Basin ramp up this year. Matt Gilley: Alright. Thanks, Mike. Operator: Thank you. As a reminder, if you have dialed in and wish to ask a question, please press star 1 on your phone at any time. Next question will be from Justin Chan from SCP Finance. Justin, your line is live. Justin Chan: Hi. Thanks, operator. Thanks, Matt, for hosting the call. My first one is on getting a sense of milestones through the year in terms of ramping up towards that 1,300,000 pounds delivered, and let us leave aside moving the loan around for a sec. What would you like to see at each operation when we speak at this time next quarter? At Lost Creek, maybe get a bit more granular in terms of mine units and header houses, and at Shirley Basin, if you could provide some more detail, that would be really helpful. Matt Gilley: Thank you, Justin. I will answer at a general level, and then I will turn it over to Steve to give you some more color on the number of header houses and very granular details. When we talk about milestones for the year, we are looking for the continuing ramp up of Lost Creek, and it is fairly linear for the entire year. The Shirley Basin milestones we are looking for are the delivery of solution into the plant in March, and then the loading of resin and the shipping of resin to initiate in the second quarter to the Lost Creek facility. For the mine unit at Lost Creek, the ramp up is fairly linear. The plant itself is going to have a lot more loaded resin delivered to it, and we are anticipating the plant at Lost Creek to have a ramp up that is not linear, but really peaks in the third quarter. We get initial deliveries coming in in the second quarter, and then you see a large jump in the third and fourth quarters for the amount of pounds that are drummed at the Lost Creek facility. Steve, do you want to give any clarity on header houses? Steve Hatten: Sure. One of the big things—and as you are very aware—this is a stepwise production at any ISR facility. You have to get the drilling ahead first, and then that focuses on so much of the germination and pattern layouts. Then we get those patterns installed, then they go into surface construction, and then that turns into flow into the plant. One of the things that we have really stretched ourselves out on over the last year or so is to develop those new areas. We are actively developing Mine Unit 5, getting that monitoring going there so we can get it tested and be in production later this year. But Mine Unit 1 Phase 2 has been very productive from a construction standpoint. The rigs spent a lot of last year and are focused heavily this year on getting that done. We have already seen Header House 14 come on. Header House 15 is in research mode to bring grade up, and 16 is in the pipeline next. That continues throughout the course of this year, as Matt said, in a linear fashion to bring up both production flow and grade—the two components that make up production. Those are the main components for the header houses, and I think Matt hit it spot on on Shirley. We have our targets for initial excipient movement in the wellfield in the month of March. Then we expect in the second quarter to bring that into realized capture—true significant capture on resin—which means shipping over to Lost Creek and getting that turned into drum production. Does that help? Justin Chan: Yeah. That was really helpful. Maybe for each, what is a good deployment rate of bringing new header houses or mine units online through this year—on a monthly or quarterly basis? Steve Hatten: I will continue answering, and then Matt can stop me if he wants to. What we like to see at Lost Creek—typically at a 1,000,000-pound-per-year production rate—you are looking at about eight to 10 header houses a year for construction, drilling, and readiness. At Shirley Basin, as you have seen in our previous press releases, we are anticipating much higher flow rates there. We will determine how that plays out during the first year of operations. We are going pretty heavy there initially and trying to get six to eight header houses on this year. Then, depending on how that production-grade curve goes and the flow comes in from each area, you are going to see us possibly—this is one of those forward-looking statements—scaling back to six, maybe eight, header houses year over year. What we have seen initially from our first drilling has been very good for us. We have been very happy with the pounds that are showing up under pattern there, but that is still early. Justin, does that give you the color you are looking for? Justin Chan: Yeah. That was fantastic. Thanks, Matt and Steve. Maybe just one last one. I led the witness a little bit on the question, but to hit your targets more holistically, is it a case of deployment of wellfield development and header houses, or is it also on the plant side of things? Are there improvements you would like to see there in order to hit those numbers? What are the keys to hitting those targets this year? Matt Gilley: The key business improvement initiatives right now are focused on the plant. The Lost Creek wellfield just delivers, and we are well ahead on the drilling there. We have deployed a lot of drills at Lost Creek over the last two years, and we are well advanced on the drilling of header houses and patterns at Lost Creek. Shirley Basin is in the same mode. The wellfield there is well developed, and it is on track and on schedule. The key business improvements for this year are focused on plants. If you then drive down into a subset of that, it is on fines management and what we are doing to remove fines coming into the plant so that it reduces the complications that fines in the plant cause with the resin tanks. That is where the key focus is right now. You will see in our 10-K that we are dedicating some fairly significant capital towards upgrading the water treatment at Lost Creek, and that is both on the front end with the fines and sand filters in front of the plant as well as on the back end with the reverse osmosis and water treatment for delivery of the water back into the shallow aquifer and/or surface discharge. Justin Chan: Thanks, Matt. Is that more of an IX issue going into the IX plants? Or just to clarify. Matt Gilley: It is an IX issue, where fines in the IX columns cause inefficiencies. It is about keeping the fines out of the resin column. The resin columns act as a sand filter. If you put fines into them, then you create a fine layer on top of the resin, and it makes it inefficient. You have to clean that out. So we are working on improving that part of the system. Justin Chan: Understood clearly. So it is essentially fines clogging it up. Matt Gilley: Fines are bad. It is great—fines are actually kind of good for us in that a significant portion of our uranium is in the fines. So fines are making uranium, but removing fines from the solution before it enters the plant is the real key. Justin Chan: Understood. Thanks a lot. That was really useful color. I will free up the line. Operator: Thank you. The next question is coming from Matthew Key from Texas Capital Securities. Matthew, your line is live. Matthew, please, your line is live. Please check your mute button. Matthew Key: Sorry about that. Good afternoon, everyone. Thanks for taking my questions. I wanted to ask about future sales commitments and whether you are working on, or if it is possible to fold in, some incremental commitments in 2027 and 2028, or are talks at this point mostly for 2029 and out? Matt Gilley: Hey, Matthew. Thanks for the question. Our talks right now are mostly for 2029 and beyond. That is where we are focusing. We are comfortable with our sales book right now. As many of our peers have done, we do not see the necessity to have our book completely committed several years in advance. We are looking for opportunity. We are a uranium miner, and we are very optimistic and bullish on the uranium price. We like the idea of having some pounds in inventory that we can place opportunistically when the time is right. Matthew Key: Got it. That makes sense. Just a broad one for me—most of my questions were asked. Are you thinking about M&A in the current environment? Any targets out there that could potentially be compelling, or do you see the need for mergers in this space right now? Matt Gilley: When you say the need for M&A, we do not necessarily say there is a need for M&A. We do say that adding more resource base to Ur-Energy Inc. will have a very valuable contribution to the company. We recognize that more resource is going to help this company a lot. It is going to provide us with what we need to continue to advance. How we get those extra pounds—we are already focused on exploration both in the Great Divide Basin in general as well as mainly adjacent to Lost Creek. Lost Creek has a lot of open ground on almost all sides. It is open for expansion and exploration. We are not going to—when it comes to M&A specifically, we are going to answer like every corporation answers when they are asked that question. What I can also say is that part of the catalyst for the convert issue at the end of last year was so that we would have funding available such that if an opportunity were to arise, we could act on that opportunity. That was part of the catalyst for why we went for that convert raise, and those funds are available for our use in a very prudent and disciplined manner. Matthew Key: That is very clear. I appreciate all the color, and best of luck. Operator: Thank you. The next question will be from Heiko Ihle from H.C. Wainwright. Heiko, your line is live. Heiko Ihle: Hey there. Thanks for taking my questions. Matt Gilley: Hey, Heiko. Heiko Ihle: Just following up on Matthew’s question a little bit. Can you walk me through what you are seeing with the demand for longer-term pricing as opposed to spot? How desperate are the buyers, and are they pushing towards longer-term contracts? What kind of pricing structures are they guiding towards? Matt Gilley: Thanks for the question, Heiko. I was wondering who was going to ask that question. I am not going to use the adjective desperate. But I am going to say that the interest in securing uranium supplies for use in the nuclear industry is growing and is vibrant. We get a lot of requests for proposals. We are careful in what we look at. As we touched on before, we are not interested in over-obligating in the near term. We have a curve going in front of us of our commitments. We have a model that we have built on what we are looking for, committing our forecast production in every year ahead of us, and it peters out after six years. Then, of course, each year, the wave moves forward. From the standpoint of pricing, what we are seeing right now is that pricing certainly has a market-related component. That market-related component is becoming more meaningful in the majority of the way that pounds are being sold going forward. I do not think I am telling you anything unique to Ur-Energy Inc. at all. That is the same commentary you are hearing from other producers. But the industry is moving more towards market-related contracts and certainly de-emphasizing a term with escalation. Heiko Ihle: What are you seeing with geopolitical demand factors as things are progressing, especially given what happened the last couple of weeks? Matt Gilley: On the geopolitical standpoint, I hope from the U3O8 standpoint, geopolitical does not come in as much as you would think. Kazakhstan is still the world's major producer and still feeds into the market. You see a lot of geopolitical coming from the enriched side of the fuel cycle. From our standpoint, producing U3O8, we do not see the geopolitical as far as the world market. What we are seeing—and we have seen significantly over the last couple of months—is the idea of U.S.-based production. Not U.S.-legal production, but U.S.-based production. We feel—this is a very forward-looking statement—that there is growing potential for U.S.-based production to see a meaningful premium compared to U.S.-legal production. That is part of the reason that we are being careful with the deployment of contracts. We want to be able to keep some material available for opportunistic placement in contracts that have a premium for U.S.-based supply. Heiko Ihle: That is helpful. I will get back in queue. Thank you. Operator: Thank you. Operator: There are no other questions from the phone lines at this time. I would now like to hand the call over to Valerie Kimbell, IR Director at Ur-Energy Inc., for webcast questions. Valerie? Valerie Kimbell: Thank you, Paul. Our next question is regulatory in nature. How confident are you in your abilities to navigate regulations that might be reinstated down the road? Matt Gilley: Thank you, Valerie. How confident are we in navigating regulations that may be reinstated down the road? I am not necessarily sure. I am going to ask Ryan—do you have an idea of the basis of that question, Ryan? Ryan: I do not know if I entirely have a basis, but I would say we are actively monitoring all rulemakings, and we are actively participating in those processes. As part of our management of our business, we are aware of those, and we keep track of any changes to regulations or policies and are responding and working with regulators appropriately to minimize risk to our operations. Matt Gilley: Thanks, Ryan. I think that question might be pointed towards some work that is being done on the ISR binding regulations. Ryan, do you want to summarize your involvement and you as a representative for Ur-Energy Inc. in that rulemaking? Ryan: Absolutely. As you know, there are major changes to the Nuclear Regulatory Commission, much of which was directed by Executive Order 14100. In response to that, the NRC will be issuing draft rules in the coming months on ISR. We are very much involved in that process. We have been involved with NRC commissioners, national groups, National Mining Association, Wyoming Mining Association, Nuclear Energy Institute, a number of different groups that are all watching that, and we are all participating as much as we can to ensure we understand how that will affect our business and ensure that it is appropriate for the business that has been established over the last fifty years or so. I could go in more detail on why ISR rulemaking is needed, but at this point, I will just leave it at that, Matt, unless you want me to expand further. Matt Gilley: I think that is a great summary. Thank you very much, Ryan. Valerie, are you feeling the question is answered? Valerie Kimbell: Yes. Our next question concerns new technology. Do you have any plans to work with new technologies of uranium productivity? For example, Lightbridge Fuel or some other company looking to up the efficiency of uranium power. Matt Gilley: Thanks, Valerie, for that question. I am relying heavily on Ryan today in this call. Ryan, we as Ur-Energy Inc. are quite active—and I am very proud of this—in the advancements in the uranium industry. First, I am going to ask Ryan to give a quick summary on what we are doing with the DOE labs for initiatives in advancing uranium. Ryan: For sure. Overall, in our culture as a company, we are always looking to advance and to increase efficiencies and look at new technologies. That is something that we have always participated in. To give a flavor of what Matt was talking about, we have partnered with National Laboratories to look at a number of different issues. We, in essence, partnered with those laboratories to say, here are some struggles that we may have or that could use some efficiencies, and they are working very closely with us. It is exciting to see. These are national labs across the United States. It is not just a single national lab, but this is all with the Department of Energy. We have some exciting things that we are looking at. As far as your question regarding fuel and new fuels and things of that nature, while we may be a provider of the source material for those fuels, we are not actively engaging in those fuel fabrications like you mentioned, Lightbridge. That make sense, Matt? Matt Gilley: Yeah. That makes sense. I will also stress that the recent commitment of over $2,000,000,000 towards the advancement of the enrichment capacity of the U.S.—we are involved in discussions with all of those parties with regards to the potential to supply them with U3O8 as they are doing their testing and as they are doing their ramp up of their facilities, and we build those out. If you are involved in the nuclear industry in the United States, you are involved with us. Is it Valerie? Valerie Kimbell: There are no more questions. I will hand it back over to you for closing remarks. Matt Gilley: Alright. Everybody, I was thrilled with the interaction, the number of questions, and the interest in Ur-Energy Inc. I am thrilled to be here. I could not be more proud of the operations and our teams. Thanks everybody for being on this call. This was a great restart of the quarterly earnings call, and I am very excited about being able to talk to you in the next three months. Thank you. Operator: Thank you. This does conclude today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Guardian Pharmacy Services, Inc. Fourth Quarter Earnings Release Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. This call is being recorded on Wednesday, 03/11/2026. I would now like to turn the conference over to Ashley Stockton. Please go ahead. Ashley Stockton: Good afternoon. Thank you for participating in today's conference call. My name is Ashley Stockton, Vice President, Investor Relations for Guardian Pharmacy Services, Inc. I am joined on today's call by Fred Burke, President and Chief Executive Officer, and David Morris, Chief Financial Officer. After the close today, Guardian Pharmacy Services, Inc. posted its financial results for the quarter ended 12/31/2025. A copy of the press release is available on the company's Investor Relations website. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release, as well as in our Annual Report on Form 10-K to be filed with the SEC, including the specific risk factors and uncertainties discussed therein. We do not undertake any duty to update any forward-looking statements, which speak only as of the date they are made. On today's call, we also will use certain non-GAAP financial measures when discussing the company's financial performance and condition. You can find additional information on these non-GAAP measures and reconciliations to their most directly comparable GAAP financial measures in today's press release, which again is available on our Investor Relations website. I will now turn the call over to Fred for commentary. Fred Burke: Thank you, Ashley, and good afternoon, everyone. We appreciate your continued interest as we review another very strong quarter and year for Guardian Pharmacy Services, Inc. Turning briefly to the fourth quarter, we delivered results that exceeded our expectations across the board, reflecting solid execution throughout the organization. David will walk through the quarterly details in more depth. What I would like to focus on today is our full-year 2025 performance, including our key financial results and major accomplishments. Looking back, 2025 was one of broad-based execution and disciplined investment, with results that were ahead of plan. Our annual performance was anchored by organic revenue growth of 13%, driven by new resident additions, script growth, and higher acuity. Acquisitions, three of which were completed midyear, complemented our organic results and brought full-year reported revenue growth to 18%. Adjusted EBITDA grew 27% year over year with margins expanding 50 basis points to 7.9%. This increase occurred even as we integrated acquisitions that remain early in their path to profitability, navigated a branded inhaler category headwind, which was an unintended consequence of the American Rescue Plan, and absorbed new public company costs. That performance reflects disciplined execution, operating leverage, and the scalability of our model. Importantly, this earnings strength translated directly into cash generation and balance sheet flexibility, allowing us to invest for continued growth while further strengthening our financial position. We continue to deploy capital toward acquisitions and greenfield startups in attractive markets, while also investing in new data analytics capabilities. Even with these investments in growth, technology, and infrastructure, we increased our cash balance by approximately $60,000,000, reflecting the strong cash-generating nature of our model. Lastly, we delivered a full-year return of 27%. This performance underscores our disciplined approach to capital allocation. Our financial results ultimately reflect the operational and clinical value we deliver every day. From that perspective, 2025 was a strong year clinically and reinforced the value Guardian Pharmacy Services, Inc. brings to the broader health care network. Our pharmacists continue to play a critical role in medication management and care coordination. Through comprehensive medication reviews this year, our pharmacists performed more than 100,000 clinical interventions, benefiting approximately 74,000 residents. These interventions address serious risks such as duplicate therapies and drug allergies, helping prevent adverse events. Through our proactive insurance optimization program, we helped residents achieve an estimated $56,000,000 in cost savings, illustrating the tangible economic value our teams deliver every day. Our vaccine clinics administered over 120,000 vaccines during the third and fourth quarters, a 9% increase in script volumes for the full vaccine season with a material improvement in profitability year over year. In addition, we continued to invest in our customer service efforts. By way of example, we completed the rollout of our HIPAA-compliant secure messaging systems branded Guardian Hub and Guardian Note. This investment helps improve real-time visibility for facility partners into the prescription order status, from intake to fulfillment to delivery, enhancing service reliability and workflow efficiency. Importantly, our impact is not anecdotal. These outcomes are measured and tracked through our data and analytics platform, clearly demonstrating our ability to deliver differentiated clinical outcomes, reduce adverse events, and drive meaningful cost savings. In doing so, we deepen our partnerships across the care continuum and reinforce our clear, durable competitive advantage. Now, with 2025 in the rearview, I want to turn my focus to the future, and I will start with the IRA, since that is one of the most significant shifts our industry has experienced in over a decade, impacting pricing, reimbursement dynamics, processes, and payments. In January, we announced that we expect to offset the anticipated EBITDA impact in 2026 from this policy change, an important milestone as we navigated the unintended consequences of the legislation. In addition to the pricing and reimbursement changes, the IRA also introduced a new operational complexity with the launch of the Medicare Transaction Facilitator, a government-run payment clearinghouse. We are closely monitoring operations in the early days of this new environment, which involves various third parties, to make sure the systems, processes, and pricing adjustments are functioning as intended. Our objective is to avoid disruption to customers, service levels, partner relationships, and, importantly, cash flow. At the industry level, the IRA has created pressure across the long-term care pharmacy ecosystem. Within that context, we believe Guardian Pharmacy Services, Inc.'s scale, operating discipline, and local service model position us well to provide stability and consistent service as the industry works through this transition. These attributes are also becoming increasingly important in light of other changes in the industry. Stepping back, the long-term care pharmacy environment continues to evolve with ongoing consolidation at the facility level and increasing operational complexity. At the same time, demographic tailwinds are expected to accelerate. As the calendar turned to 2026, the first cohort of the silver tsunami entered their eighties, and with each successive year, the number of people in that cohort increases dramatically, which we anticipate will create an incremental tailwind. As occupancy rates rise, we believe operators will need to place greater emphasis on stability, consistency, and efficient clinical and operational processes. We believe both these dynamics favor pharmacy partners like Guardian Pharmacy Services, Inc. who can help reduce the labor burden on facilities and reliably deliver increasingly sophisticated capabilities. We have also seen recent industry developments, including a bankruptcy filing by an institutional long-term care pharmacy. We are monitoring developments and, as always, we are evaluating market opportunities through a disciplined strategic lens, with a focus on aligning our current geographical presence, operating model, culture, and long-term objectives. With these changes in mind, we believe the need for dependable, high-quality pharmacy service is becoming increasingly important to facility operators. Our priority remains to continue supporting our partners with consistent, reliable execution. With that backdrop, let me turn to our outlook. When we provided guidance in mid-January, we did so earlier than usual to signal that our adjusted EBITDA growth trajectory remained intact despite the IRA. At that time, we did not yet have full visibility into our final 2025 results. With the year now complete, we are updating our outlook to reflect what we now can see with greater clarity. As always, we frame guidance on an annual basis, grounded in what we can forecast with confidence, especially in a period of industry change. We also distinguish carefully between structural improvements in our business and favorable dynamics that can vary quarter to quarter. Reflecting the durable portion of our recent outperformance and applying our low double-digit growth framework, we are raising our 2026 adjusted EBITDA guidance to $120,000,000 to $124,000,000. This outlook reflects the ongoing drivers of our business and reinforces our confidence in the company's continued growth momentum. We are maintaining our current revenue forecast of $1,400,000,000 to $1,420,000,000 as new pricing flows through from the IRA. In summary, we delivered consistent outperformance this year and exited with solid momentum that we expect to continue into 2026 as we focus on driving durable growth, expanding margins as we scale, and investing to support long-term value creation for our shareholders. Most importantly, I want to recognize the people at Guardian Pharmacy Services, Inc., the pulse behind our organization and the reason we continue to deliver. Thank you for your continued focus and efforts. I will now turn the call over to David to walk through the financial details. David Morris: Thank you, Fred, and good afternoon, everyone. I am pleased to review another strong quarter in which we delivered results ahead of our expectations. We ended the quarter serving over 205,000 residents, an increase of 10% year over year. Script volume grew 14% year over year while revenue increased 17% year over year to $397,600,000, atop 12% organic growth. Gross profit rose 27% to $85,500,000 with gross margins expanding to 21.5% from 19.8% a year ago. Performance in the quarter reflects structural improvements, including stronger vaccine economics, improved contribution from acquisitions and greenfield startups, as well as continued success with our plan optimization initiatives. Let me start with vaccines. Vaccine script volumes were up 3% year over year, in line with our expectations, as some volume was pulled into the third quarter. More importantly, we saw an increase in profitability due to better vaccine purchasing and reimbursement. We also benefited from contributions from greenfield locations which are ramping efficiently and performing ahead of our initial expectations. Acquisitions also contributed to the outperformance, as we implemented purchasing and reimbursement programs sooner than anticipated in our Pacific Northwest additions. Both locations also began onboarding national accounts earlier than is typical. Our greenfield startup and acquisitions made over the last two years as a group continue to dampen our overall margin by approximately 90 basis points. We also continue to see success from our plan optimization initiatives, which helped to increase our Medicare Part D mix within the portfolio, supporting better coverage and lower out-of-pocket costs for residents plus improved reimbursement for us. In addition to the structural improvements, a portion of our upside in our gross margin was due to favorable payor dynamics and other quarter-to-quarter variability. While incorporated in our results, we do not forecast this continuing in our outlook. Moving down the income statement, adjusted SG&A was 13% of revenue versus 13.7% in the year-ago period. This reflects increasing scale efficiencies and improved labor leverage. D&A was consistent with the third quarter at $5,700,000. Stock-based compensation declined to approximately $1,000,000 as we sunset the pre-IPO equity program. Adjusted EBITDA increased 53% year over year to $39,500,000, with margins expanding to 9.9%, reflecting the operational drivers I just outlined along with the favorable variability noted earlier. Adjusted EPS came in at $0.37 a share. Turning to the balance sheet, the business continues to generate strong cash flow. During the quarter, we increased our cash balance to $66,000,000, up from $36,000,000 at the end of the third quarter and $5,000,000 at the end of 2024, highlighting our strong cash conversion rate of approximately 60%. We achieved this annual performance while continuing to invest for future growth, funding four new acquisitions and ongoing investments in several de novo greenfield startups from operating cash flow. To recap, our Wichita acquisition earlier this year and our Montana purchase later in the year expanded our operational footprint in key growth markets. We also added locations in Washington and Oregon midyear, establishing a platform in the Pacific Northwest to better serve our national accounts. Building on that momentum, we are actively engaged in discussions with several pharmacies that we believe would be strong additions to our platform and an excellent cultural fit. Importantly, we remain in a very strong financial position with ample liquidity and internally generated cash flow to support these investments. Now let me walk you through how we are approaching our outlook for 2026. For the full year 2025, we delivered adjusted EBITDA of $115,000,000, ahead of our most recent guidance range of $104,000,000 to $106,000,000 and well above our original outlook of $99,000,000 at the midpoint issued a year ago. As noted, fourth quarter results included favorable variability, which we do not forecast continuing in our 2026 outlook. We also forecast acuity remaining at current levels. We view the adjusted EBITDA run rate of our business as we exit 2025 to be approximately $110,000,000. Building on that foundation and reflecting low double-digit growth from the durable drivers of our business, we are raising our 2026 adjusted EBITDA guidance to a range of $120,000,000 to $124,000,000. We are maintaining our current revenue forecast of $1,400,000,000 to $1,420,000,000 as the new pricing impact flows through from the IRA. As always, our outlook does not include the impact of future acquisitions. On a more granular basis, we expect the quarterly distribution of revenue and adjusted EBITDA, as a percent of the full year, to be very similar to what we experienced in 2025. We will continue to see seasonality from vaccine contributions weighted toward the fourth quarter. D&A should be roughly $21,000,000 for the year. Following the additional annual LTIP grants we issued on March 1 this year, we expect our stock-based compensation expense to step up to a quarterly run rate of approximately $3,000,000. Our effective tax rate is expected to normalize to approximately 26% in 2026. Looking beyond 2026, additional branded drug negotiations under the IRA will take effect in 2027 and 2028. We expect these impacts to be much smaller than the 2026 revenue impact, approximately a $65,000,000 revenue headwind in 2027. As a result, we view these incremental impacts as manageable within our existing growth framework. In closing, we are pleased with how we finished the year. The fourth quarter capped a period of consistent execution and reinforced the durability of our operating model, positioning us well as we move into 2026. I also want to echo Fred's recognition of our employees, whose dedication drives our performance every day. Operator, we will now open the line for questions. Fred Burke: Thank you. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. Should you wish to cancel your request, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Thank you. Your first question comes from the line of John Ransom from Raymond James. Please go ahead. John Ransom: Hey, good afternoon. Can you hear me? David Morris: Loud and clear. John Ransom: Hello? Great. I am having some tech issues, David. So just still trying to process the 4Q feed. I know there were some nonrecurring things in there, but could you help us understand what is durable, what was vaccine, and what is not recurring in the quarter? David Morris: John, you are breaking up just a little bit, but we are guiding to our run rate we talked about as we ended the year, approximately $110,000,000 of EBITDA. And the variability with all the change going on in the industry that we had in the fourth quarter, we are not projecting that into our base. And we mentioned the things that related to that. There are always puts and takes with our PBM payors. Typically, they net out. In Q4, we had a net positive. So that is one thing that is not in our base that we are continuing. Also, increasing acuity is not in our base. So those are the main drivers that are not in there. John Ransom: So did the vaccine program contribute more this year than last year? I know it was a big success for you last year. David Morris: It continued to be significant both revenue- and profit-wise in Q4, but we had some improvement on the reimbursement side and the buy side. So it continued to grow with our business. But the margins did expand slightly. John Ransom: Okay. And then just kind of taking a step back. I know you are probably tired of talking about the IRA negotiations, but I think one thing you mentioned before was you wanted to take this opportunity to try to balance the profit contribution between generics and branded to better reflect the fact that 90% of your script volume is generic. So maybe just kind of talk about, at a high level, knowing you have got contract confidentiality, but just at a high level, what were you able to get done from a contracting standpoint to kind of better balance the two profit streams. David Morris: John, that is something we have been working on even before IRA, and we have made progress with several payors in 2025. You mentioned that 92% of our prescriptions that we dispense are generic, and I can say we are moving forward in a positive manner, aligning the gross margin dollars with that activity. John Ransom: Okay. And then just finally, you had mentioned a stat a couple of calls ago that if you were to run everything at your margin, you have got a number of pharmacies now that are not at mature margin. Is that gap between potential margin and realized margin still what it was a couple of quarters ago? David Morris: It is a little bit more. We said 80 basis points last quarter. It was closer to 90 basis points in Q4, and that is the investment we are making for future locations and future accretive profitability. John Ransom: Okay. That is it for me. Thank you. David Morris: Thank you, John. Operator: Thank you. Your next question comes from the line of David MacDonald from Truist. Please go ahead. David MacDonald: Yes. Good afternoon, everyone. Just a couple. I wanted to follow up on John's first question a little bit. On the vaccine program, you highlighted a couple of things that improved profitability. I think you used the word materially. It did not sound like any of those would not be durable. Are we thinking about that correctly? And then, if we look at the better assumed margins in the 2026 guidance, is there one or two things that kind of stand out in terms of what is incrementally driving those margins better than your prior expectations? Fred Burke: Yeah. Let me start with the vaccine clinic. David Morris: The profitability was slightly improved in 2025 versus 2024. That is durable and will continue into 2026. And I think the midpoint of our new guidance is 8.6% for our adjusted EBITDA margin. And, David, that is really a factor of us continuing our year-on-year adjusted EBITDA growth rate in the low double digits while the revenues remain flattish. The combination of that will take us to midpoint adjusted EBITDA of about 8.6%. So we will see it go up. Fred Burke: And I will pipe in, Dave, to add to David's comments that, yes, the vaccine clinics have contributed materially to our full Q4, and we would expect to see that next year. It is part of our business. David MacDonald: And then, you mentioned some of the competitive dynamics in terms of a competitor out there. Can you spend a minute on the opportunity around either share gain with some struggling competitors, potentially more aggressive on the M&A side, or pace of greenfields around some of the areas where you see maybe some outsized opportunities? Just some of the disruption that some of the competitors are seeing, or certainly at least one, and the opportunities that potentially raises for you? Fred Burke: Very difficult topic to expand on because we are participating in the bankruptcy process. But all the things you mentioned could potentially represent opportunities for us as we move forward and that process is complete. David MacDonald: And then just one last one. You mentioned labor as a benefit on the margin side. Obviously, as you scale, you get increased efficiencies. But on the labor side, are you seeing both efficiencies and some improvement in just labor inflation? Or is that more just as you get bigger, you are able to better leverage the labor force that you have got in place? David Morris: Dave, it is more of the latter. The existing platform that scales labor is what is driving the efficiencies. David MacDonald: Okay. Thanks very much. That is all for me. Fred Burke: Thank you. Operator: Thank you. Once again, that is star and one to ask a question. Your next question comes from the line of Raj Kumar from Stephens. Please go ahead. Raj Kumar: Hey, good afternoon. Maybe just touching on the prepared remarks around faster ramp-up in the recently acquired facilities. As you think about the large and regional accounts and what that constitutes as part of the current resident base, any framing on the remaining opportunity on that front? And then also, since ALF is your core end market, there has been a lot of activity around divestitures or disposition of operations from certain large regional accounts of yours, and maybe if there is any impact that you see on that front or any color on how you ensure continuity of service and continue to cover the residents while these operational changes go on in the background. Fred Burke: I will take the latter question and then hand it to David. As the industry undergoes consolidation—I am speaking now about the assisted living operators, our core market segment—we believe that it provides us with opportunity. In fact, the one example that I am assuming you are citing ended up being exactly that. We have maintained service at all the facilities that we were serving, and it has given us an opportunity to meet new operating groups and show them what we can do. So, on balance, those types of dislocations represent, in our opinion, an opportunity for us. David Morris: And then, Raj, on your first question, we mentioned that we were able to integrate and achieve scale earlier with the platforms, particularly those that we closed in the Pacific Northwest. They vary. We talk a lot about, on average, it takes four years, plus or minus, to bring acquisitions up and achieve the synergies. Things like operating systems, purchasing platforms, and national accounts that can come on sooner or later impact these businesses. In the Pacific Northwest, we were able to do some of these things earlier. Raj Kumar: Got it. And then, thinking about the M&A pipeline, there have been estimates where 60% of long-term care pharmacies are at risk of shutting down given cash flow constraints and IRA pricing. As we think about your strategy and what is available from an M&A standpoint in terms of your typical tuck-ins, are you seeing a buyer’s market on that front? And then relative to the inherent opportunity post-acquisition, does that still remain the same, or do you see more upside based on the assets that are coming into the market? Fred Burke: Good question, Raj. I want to start by emphasizing that we believe very strongly in being supportive of our industry, and the last thing we want to see are our industry colleagues under duress. That is why we have worked so hard and diligently with our trade group, the SCPC, to mitigate the effects of the various changes that are occurring on the policy front from DC. That said, it is early days. We are going through the first implementation of this IRA which, as I mentioned in my remarks, introduces new processes, reimbursement procedures, cash flow, etc. I am hopeful that our industry colleagues can manage their way through it. Potentially, it could impact our opportunity on the M&A front, and we certainly would welcome that opportunity with like-minded operators, but it is too early to call on that for sure. Right now, it is something we will be watching as we move forward. David Morris: Raj, as it relates to our pipeline, we had a robust pipeline in 2025 and it continues to be robust in 2026. As Fred said, as we are navigating all these industry changes, we are going to continue to take a disciplined approach. We see like-minded operators and territories that we want to expand into. I think we are adopting a very consistent approach to what we have had the last couple of years. Raj Kumar: Got it. Thank you. Fred Burke: Thank you. Operator: Thank you. There are no further questions at this time. Ladies and gentlemen, this concludes today's call. Thank you for participating. You may all disconnect.
Operator: Conference will begin in one moment. Thank you for your patience. Greetings and welcome to the Frequency Electronics, Inc. third quarter fiscal 2026 earnings release conference call. As a reminder, this conference is being recorded. Any statements made by the company during this conference call regarding the future constitute forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements inherently involve uncertainties that could cause results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences are included in the company's press releases and are further detailed in the company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the company undertakes no obligation to update these statements for revisions or changes after the date of this conference call. It is now my pleasure to introduce your host, Thomas McClelland, President and Chief Executive Officer. Good afternoon. Thomas McClelland: And thanks for joining Frequency Electronics, Inc.’s third quarter fiscal year 2026 earnings call. With me today is our CFO, Steven Bernstein. On our second quarter fiscal 2026 earnings call in December, I discussed our vision for how we see the growth in our company developing in the coming years. Specifically, I told you that the exciting growth prospects we have in large and growing end markets, which are larger than our historical addressable markets, will come in addition to continuing strength and growth in our ongoing businesses in space and defense. These new markets, such as quantum sensing, proliferated satellites, and alternative position, navigation, and timing programs, are built upon our industry-leading capabilities in our core space and defense programs. I also told you on that December call that we anticipate multiple awards in the coming months, some of which are as large or larger than the biggest ones we have historically announced. Today, we are very pleased to report significant progress on all of these fronts. In a separate press release that came out at the same time as our earnings report after the close of market today, we announced that we were awarded two contracts, valued at approximately $45 million. One of these contracts is in the domain of Frequency Electronics, Inc.’s traditional space satellite programs, and one is part of the new proliferated satellite paradigm. Customer confidentiality prevents us from discussing these with greater specifics at this time, but there are two important points to consider. First, of course, is that these contracts reflect our ability to continue to win meaningful contracts in our traditional space business while also winning significant business in our next-generation markets at the same time. In other words, while our business is never perfectly linear, we are definitely not projecting a dislocation in which the traditional business wanes while the new business replaces it. Rather, they will both grow and pave the way for us to become a substantially larger company. Second, we are already actively working on additional contracts of similar magnitude in both our traditional and new business lines, and anticipate additional awards in this calendar year. On the December call, I also told you that while backlog in any given quarter can fluctuate given newly funded awards and what is converted into revenue in a given quarter, based on what we are seeing coming down the road, we believe it is reasonable that we could see backlog north of $100 million in the not too distant future. Our January quarter-end backlog was at a new record for Frequency Electronics, Inc., and, of course, this backlog amount was prior to the award of the contracts announced today. This new business announced today will start to enter backlog in this current fiscal fourth quarter, which should help us make further progress towards the $100 million mark in the near future. Now that $100 million level, by the way, is not meant to indicate a level we are capping at, but a level we are currently building towards. Adding more awards like the ones we announced today could push us well past that over time. Steven will provide more financial details a little bit later, but I would make a few financial comments here. For the third fiscal quarter, we reported revenue of $16.9 million, essentially the same as the second fiscal quarter. This revenue number is down year-over-year because of the particularly strong execution we exhibited in fiscal 2025, which allowed the company to produce revenue on certain programs in fiscal 2025 that we had originally expected to produce over a much more extended period of time well into fiscal 2026, essentially pulling forward some revenue as we have discussed in previous calls. Nonetheless, this was still the fourth highest quarter of revenue in the past ten years, with only three higher quarters having occurred within the past four quarters. As we said on the December call, though our business does not proceed in a perfectly linear fashion, we have established a new higher base and we anticipate building upon that base now and in the years to come. Before I turn things over to Steven, I would like to make a few comments on the current state of the world and how it relates to Frequency Electronics, Inc.’s business. Obviously, most immediately, our country is now at war. As we have discussed on previous calls, we are involved in numerous defense programs, including Golden Dome, the Patriot missile system, the B-2 bomber, and the Terminal High Altitude Area Defense missile system, the THAAD system, as well as other multi-domain defense systems. Missile systems and interceptors have been in the news quite a bit over the past two weeks, and I would like to remind you of remarks we have made previously on our calls. Our exposure on major missile programs is principally in the missile batteries, which are ground-based units used to detect, track, and intercept incoming threats, generally by firing missiles at those threats. As the government increases the deployment of these batteries, our business will expand along with that, and we have already seen that in the current quarter. Further, the early days of this war as well as the action earlier this year in Venezuela have shown an increased reliance on traditional jet fighters and naval fleets, as opposed to next-generation defense technologies. Similar to our discussion earlier on our space positioning in the traditional and emerging markets, we believe this military deployment is a good example of how there remain strong opportunities in our traditional defense business even as we are engineering products for next-generation modalities. We expect defense to continue to be a meaningful and growing business for Frequency Electronics, Inc. for many years. Meanwhile, in the Ukraine-Russia war and in the Strait of Hormuz, GPS jamming has become ubiquitous, creating dead zones that threaten civilian aircraft, telecom and financial systems, shipping firms, and NATO allies. The need for alternative position, navigation, and timing systems, Alt PNT, including the use of quantum sensing and magnetometers, is paramount, and we expect to be a part of that solution set in the years to come. In fact, in this current fiscal year, we have already won some new business in both magnetometers and other quantum sensing, including business won out of our new Colorado facility. We expect a lot more Alt PNT business in the years to follow. Our technology is used in systems and programs that play critical roles in keeping our country and our military safe. We are very proud of this work, and it creates an additional sense of mission for our team. I would like to thank our employees, our customers, and our shareholders, all of whom we serve by carrying out this important work. Lastly, we will be participating in two investor conferences in the fiscal fourth quarter, and we look forward to meeting with a number of you at the Craig-Hallum New Space Conference on March 25 and the Morgan Stanley Golden Dome and National Security Innovation Summit on June 15. I will now turn the call over to Steven to provide some more financial detail, and I look forward to taking your questions during the Q&A following Steven’s remarks. Steven? Steven Bernstein: Thank you, Tom, and good afternoon. For the three months ended 01/31/2026, consolidated revenue was $16.9 million compared to $18.9 million for the same period of the prior fiscal year and substantially similar to the second quarter of this fiscal year, as Tom mentioned earlier and which we have described on the past several calls. The components of revenue: revenue from commercial and U.S. government satellite programs was approximately $4.2 million, or 25%, compared to $11.2 million, or 59%, in the same period of the prior fiscal year. Revenues on satellite payload contracts are recognized primarily under the percentage-of-completion method and reported only in the FEI New York segment. Revenues from non-space U.S. government and Department of Defense customers, which are recorded in both the FEI New York and FEI Cypress segments, were $12.5 million compared to $7.4 million in the same period of the prior fiscal year and accounted for approximately 74% of consolidated revenue compared to 39% for the prior fiscal year. Other commercial and industrial revenues were $180,000 compared to approximately $367,000 in the prior fiscal year. The revenue for the three months ending 01/31/2026 was lower than the revenues in the prior period partly as a result of certain space programs in the FEI New York segment during the prior fiscal year that were being expedited during the period due to very aggressive schedules. In addition, several new space bookings anticipated for the three months ending 01/31/2026 are now anticipated in fiscal ’26 Q4. For the three months and nine months ending 01/31/2026, both gross margin and gross margin rate decreased compared to the same periods in the prior fiscal year. The decrease in gross margin and gross margin rate is attributable to a change in the mix of high-margin production satellite programs in the prior-year periods versus lower-margin programs with significant nonrecurring engineering efforts during the three months ending 01/31/2026. Going forward, the mix of programs will vary in any given quarter, but in general, we expect our gross margin to move up over time, particularly as we add more business with a higher rate of unit production and follow-on business from successful programs. For the three months ending 01/31/2026 and 01/31/2025, selling, general, and administrative expenses increased by approximately $213,000 and were approximately 21% of consolidated revenue, up from 18% in the prior year. The increase in SG&A expenses during the three months ending 01/31/2026 was due to fluctuations in various expense accounts that make up SG&A. R&D expense for the three months ending 01/31/2026 increased to approximately $1.8 million from $1.4 million for the three months ending 01/31/2025, an increase of approximately $327,000, and were approximately 10% and 8%, respectively, of consolidated revenue. Fluctuations in R&D expenditures will occur in some periods due to current operational needs supporting ongoing programs. The company plans to continue to invest in R&D in the future to keep its products at the state of the art. In total, operating expenses increased approximately $540,000, but this includes approximately $500,000 of nonrecurring expenses, so we anticipate showing more operating leverage going forward as additional revenue should expand at a much faster rate than expenses. For the three months ended 01/31/2026, the company reported operating income of approximately $1.3 million compared to operating income of approximately $3.5 million in the prior fiscal year. Operating income decreased due to lower revenue, lower gross margin, and increased SG&A described earlier. Other income (expense), net, is derived from various sources. The majority of the approximately $200,000 of investment income for the three months ending 01/31/2026 was from interest income and unrealized gains on assets held in the Frequency Electronics, Inc. deferred compensation trust. This yields pretax income of approximately $1.4 million for the three months ending 01/31/2026 compared to approximately $3.6 million pretax income for the three months ended 01/31/2025. For the three months ending 01/31/2026, the company recorded an income tax benefit of approximately $127,000, which includes a discrete tax benefit of approximately $568,000. The discrete income tax benefit is primarily due to a stock compensation windfall deduction. For the three months ended 01/31/2025, the company reported an income tax benefit of $11.8 million, which included a discrete income tax benefit of $11.9 million. The discrete income tax benefit in the comparable period is primarily due to the release of the valuation allowance. Consolidated net income for the three months ended 01/31/2026 was approximately $1.6 million, or $0.16 per share, compared to approximately $15.4 million, or $1.60 per share, for the same period of the previous fiscal year. Our fully funded backlog at January 2026 was approximately $83 million, a new all-time high for Frequency Electronics, Inc., as compared to approximately $70 million for the previous fiscal year ended April 30, 2025. The company's balance sheet continues to reflect a strong working capital position of approximately $32 million at 01/31/2026 and a current ratio of approximately 2.6 to 1. The amount of cash reported as of the quarter end January 31 should represent a low point going forward, which is a combination of investments made by the company, purchases of stock, and collections coming in early in the fiscal fourth quarter that were in just after the third quarter. Specifically, we have already collected over $11 million of cash since 02/01/2026, and we expect that to continue building through the quarter. Additionally, the company is debt free, and the company believes that its liquidity is adequate to meet its operating and investing needs for the next twelve months and the foreseeable future. I will turn the call back to Tom, and we look forward to your questions shortly. Thomas McClelland: Thanks, Steven. We will now open for questions. Operator: Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset while we poll for questions. Once again, please press 1 if you have a question or a comment. The first question comes from Jeff Van Rhee with Craig-Hallum. Please proceed. Jeff Van Rhee: Great. Thanks for taking the questions. A couple for you here, guys. So, Tom, the proliferated win—talk to me about what you are learning out in the marketplace and your ability to win in these proliferated constellation deals. I know it is something you have sort of felt your way through. Looks like you have got some success and you are sort of guiding to continued success. Where do you have the right to win? Where do you win? Where do you not have a right to play? Just what have you learned there? Thomas McClelland: Well, I think when we can provide some technical edge, we are very successful. We are seeing that, and that is what the win that we announced today reflects. When there are systems that have minimal technical requirements and all of the emphasis is just on the lowest possible cost, then it is a much bigger challenge for us. Jeff Van Rhee: Mhmm. Realizing your hands are somewhat tied, talk to me to the degree you can on the $45 million. I think you said there is a couple wins in there. Are these roughly equal in size? I know you said one was proliferated, one was not, but just rough proportion of what is in there? Thomas McClelland: Well, I am going to dodge that one a little bit, Jeff. But let me just say they are both significant. Jeff Van Rhee: And in terms of the coming into funded backlog, I think that phrasing was they will start to come into backlog. I mean, can you give us some swag at how quickly that is going to play into the backlog? Thomas McClelland: Just a reminder that we talk about funded backlog. So it is a question of the funding profile on each of these programs. But the reality is that it will be pretty significant in the quarter that we are in currently. I do not think I can say a whole lot more than that at this point. Jeff Van Rhee: Okay. And, Steven, on the cost structure, I was unclear. I think you referenced there were some unusuals in there. Obviously, R&D has bumped up considerably over the last few quarters. I am trying to understand what the steady-state OpEx levels are going forward. So just what was in there this quarter that was one-time and not? Steven Bernstein: Well, we have in the general operating expenses— we still have investments that we are making into Colorado. It is the largest piece of that. And once that is done, it should normalize pretty much. That was one of the larger pieces of it. Jeff Van Rhee: And so when you say normalize, are we going to go up from this level as we go forward into future quarters, or was there unusual in here and we should step down from here? Steven Bernstein: Well, again, operating expenses in general—unfortunately, there is always some bump, whether at 3%, 4%, 5%, based on just the normal growth of normal expenses. So I do not see any—unless something changes, I do not see a large increase, but I do not see a large decrease. Jeff Van Rhee: Okay. Maybe last for me. Tom, with respect to Turbo, I know you had given some color commentary in a few prior quarters that you felt it had the potential to go from a couple million to maybe $20 million in the out year if things go right. Just your updated thinking on Turbo based on market reception, pipeline, etcetera? Thanks. Thomas McClelland: I think if anything, we are more optimistic about Turbo. We are beginning to see significant revenue at this time, and every indication is that this is going to grow dramatically over the next—even over the next couple of quarters and definitely over the next couple of years. Jeff Van Rhee: Got it. Thanks so much. Operator: Our next question comes from Chris Pokosky, private investor. Please proceed. Chris Pokosky: Hello. Thank you for taking my questions. And congratulations on the new wins. Could you clarify what exactly is the proliferated satellite? Is it the Starlink-type satellite? I am not asking if it is Starlink or not, just if it is that type of satellite. Thomas McClelland: It is actually a pretty good question. I am not sure I really like that term “proliferated satellites,” but it is one that is being used out there. I think the distinction we are trying to make is between what we call traditional satellite systems, where there may be three to five satellites in a constellation, oftentimes in geosynchronous orbits, versus these newer satellite systems that are being envisioned at this point in time, often, but not always, in low Earth orbit, but consisting of many, many more satellites, typically from 300 to, in some cases, many thousands, and SpaceX is now talking about a constellation of a million satellites. But I think that the real distinguishing feature is the thought process that goes behind these systems. What has become very clear recently is that satellites are vulnerable from our enemies, and this has been demonstrated recently that both the Chinese and the Russians in particular have the capability to destroy other satellites. When we have a satellite system that has only a couple of satellites in it, if one of those satellites gets destroyed, it is a huge loss for us. It can represent billions of dollars, in fact. So the idea is, instead of having a couple of satellites worth a billion dollars each, to have a system where there are many more satellites, but the individual satellites are much less costly. The simple way I like to look at it is that the system itself may overall cost the same amount of money, but instead of those costs being distributed over a few satellites—three, four, five satellites—it is distributed over 300 or a thousand satellites. In order to make that approach work, obviously the individual satellites have to cost a lot less. So that is what we end up looking at. We look at individual satellites. The contribution that we make in our product to an individual satellite has to cost a lot less than what we would deliver for one of the traditional satellites. And then, of course, another important feature is that if you are going to launch 300 instead of three, you need to do it at a much more rapid pace than is necessary for the three satellites. So the production rate has to increase dramatically. This lower cost and more rapid production makes for a significantly different manufacturing approach than with the traditional satellites. We are actually investing in order to really get involved in a very significant way in this new kind of satellite business. One of the attractive features is that, on an ongoing basis, many of these systems are envisioned to have just a continuous ongoing production of satellites. The idea is that the individual satellites are intended to have a shorter lifetime—instead of fifteen years for traditional satellites, maybe three to five years for the newer satellites—and so we get into a production mode where we are delivering on a scheduled basis, say, the first 300 satellites in a 300-satellite system, but as soon as we are done delivering the 300 satellites, we have to start all over again, because the first satellites that were launched are nearing the end of life and have to be replaced with new ones. So it makes for potentially a much more continuous kind of production, and that is something that we think makes for a much more predictable business, and it is also in many ways more attractive business than the traditional satellites where we would have a large-scale production activity over a couple of years, and then when we are finished with three or four satellites, we are done perhaps for the next decade until people are talking about potentially replacing those satellites. Anyway, it is probably a more long-winded answer than you wanted, but let me leave it at that. Chris Pokosky: That was very appreciated. Please feel free to be as long-winded as you want. So it seems like there will be some headwinds or some tailwinds for gross margins. I am sure having continuous production would really help gross margins. But then having a new satellite program which requires limited cost, that might hurt gross margins. So do you think you will be able to keep your gross margins on this new proliferated satellite program? And is there going to be, like, a learning period where gross margins will be lower? Thomas McClelland: It is a good question, and something we have talked about on previous calls. I think we do anticipate, in the short run, somewhat lower gross margins on the proliferated satellite business as it gets refined in the initial years. But at the same time—and it is really one of the things we are trying to emphasize today—is that the traditional satellite business is still alive and well, and that is a business where our gross margins are very strong. So whereas we have to invest to some extent in the proliferated satellites, we have really good gross margins with the traditional satellites. I also want to emphasize that, in the long run, we anticipate very strong margins for the proliferated satellite business as well. Chris Pokosky: Okay. And you mentioned that in this current quarter things are going—this $45 million—some of it is going to the funded backlog. Are you allowed to tell us when actual production would start? Thomas McClelland: That is something I think we are not prepared to get into. It is a very early stage of these programs, and the schedules are being worked out now with our customers. Chris Pokosky: Alright. Thanks. Good luck. Thomas McClelland: Thank you. Next question is from Michael Eisner, private investor. Operator: Michael, please proceed. Michael Eisner: Congratulations on the two contracts and future contracts. Most of my questions are answered. Can you comment on Golden Dome? Thomas McClelland: I do not think there is a whole lot I can say. From our point of view, Golden Dome is just sort of being defined at this point in time. We have spoken specifically in the past and earlier today about some of the programs—Patriot missile and THAAD—which I think are, in some ways of thinking, considered part of the Golden Dome concept. We are also involved in several other missile programs, which we cannot talk about in specific. But we are very, very involved in a number of things that are part of the Golden Dome concept. And, of course, satellites are also a very, very important part of the Golden Dome concept, and we are very involved in that also. Other than that, Michael, I do not think I can really get into any specifics. Michael Eisner: Comment. Frequency Electronics, Inc. has been around 60, 70 years, and Frequency is a nice name, good name, respected name. Did you ever think of adding to Frequency—maybe Frequency Quantum Sensing, for example, or Timing—the more what the company actually does? Thomas McClelland: We have thought about it, and there have been all sorts of suggestions along the lines that you are suggesting right now and quite a number of other ones also. I do not think I want to say a whole lot more than that. But, at the moment, we are sticking with the 65-year-old name that we have. Michael Eisner: Yeah. I just thought because it does so much more now, and we keep on—it sounds like from this call—getting involved with more stuff in technology. I did not say technology company. Thomas McClelland: One thing I will say: we have given some thought to this kind of thing, and I am not going to say one way or the other what the future will bring, but I think there is—we have just been talking about it—there is a tremendous amount of business that we are looking at at this point of time, and we are anticipating very, very significant growth. I think the important thing to do is concentrate on executing that business effectively, and that is what we are focusing on, and we feel that is way more important than the name we provide to the company. Michael Eisner: Okay. That is fine. Thank you. See you. Operator: Once again, if you have a question or a comment, please press 1. We have a follow-up coming from Jeff Van Rhee with Craig-Hallum. Please proceed, Jeff. Jeff Van Rhee: Great. Thanks. Yes, just a few from you guys. In terms of the script, Steven, I might have missed it. I thought you had said you had some bookings push-outs, and I did not quite catch it. I think you said Q1 went to Q4. Just that for me. And then, Tom, you have been talking about $100 million backlog you thought in relatively near future—sounded like slightly different verbiage here, so maybe it is not quite as near as you thought it had been. Just connect those two dots for me and help me understand what is going on there. Thomas McClelland: I think that, again, we cannot really get into quantitative specifics. But I do think that the $100 million mark is going to be breached relatively quickly. Just what we talked about today—the numbers—our backlog is up from what it was last quarter slightly, and we just announced today $45 million of new contracts, and that is going to begin hitting the backlog this quarter. There is more in the input pipeline, so we are very quickly approaching the $100 million mark. Jeff Van Rhee: Mhmm. Yeah. Understood. And just back to the original question, Steven, did you reference contracts pushing out from Q1 to Q4? And if so, can you expand on that? Steven Bernstein: To Q4, and that is why some of the revenue was down and dropped because— Thomas McClelland: I said they pushed from Q3. The very specifically—the contracts that we just announced. One of the frustrating things in the satellite business is our wonderful government—they like to get their satellite hardware as quickly as possible, but they are not so fast in executing contracts. Jeff Van Rhee: To say the least. Okay. Thanks so much. Thomas McClelland: Alright. Operator: Next question comes from Robert Smith with Center for Performance Investing. Robert Smith: Good afternoon, Tom. Steve. Hi. I just wanted to congratulate you, Tom, on your transforming this company and positioning it for future growth, and I am hopeful that you can continue to execute, and I think you are doing a wonderful job. And kudos to you. Grateful to be aboard. Thanks so much. Thomas McClelland: I appreciate it, and we will do our best. Operator: Our next question, we have a follow-up actually from Chris Pokosky, private investor. Please proceed. Chris Pokosky: Hello. Thanks for taking my follow-up. I wanted to ask if you can expound a little bit on the alternative position and navigation. Now, obviously, there is GPS jamming all over the place. How do you help address that, and would that lead to your devices being actually deployed in kind of the terrestrial—in the boats and cars and so on? Thomas McClelland: For alternative navigation, there are dozens or more things that people are considering. I think it is maybe worth just a little bit of discussion about this. We all have come to depend on GPS, Global Positioning System, over the last couple of decades, but the one thing that distinguishes GPS is the “G” part of it—the global. It is available literally any place on the surface of the Earth. When people talk about alternatives to GPS, sometimes they talk about other satellite navigation systems which are potentially also global in reach, but in general, people like to talk about things that are not satellite systems. The whole idea is that the satellite Global Positioning System is vulnerable—the satellites can be destroyed or damaged by our enemies in particular—and also the signals can be jammed. If you just replace one satellite system with another satellite system, you have essentially the same problems that you had with the original system. So people talk primarily about non-satellite alternatives, and in general, the non-satellite alternatives are not global in reach. That means that, usually, when you talk about alternatives, you are talking about employing multiple approaches to navigation. One alternative may work in a particular environment—say, an urban environment—and another approach will work over the ocean or in the middle of the desert someplace. With all of that preliminary being said, there are a couple of things that we are involved in and think are going to become important over the next couple of years and probably over the next decade. One of them that we are working on very actively right now is so-called magnetic navigation. The idea here is that the magnetic field around the surface of the Earth is not exactly constant. It varies by small amounts, and the exact magnetic field and direction is location sensitive. So if you have a very accurate map of the magnetic field in a region on the surface of the Earth, and you have a means of measuring the magnetic field, then you can compare your measurements to the magnetic map and locate yourself with really quite good precision—probably not at this point in time with the same precision that we get from GPS, but under the right conditions, it can be pretty close to that. That is something that we are pursuing. We are pursuing the magnetometer end of this—the sensor for measuring the magnetic field—and, of course, that by itself is not going to allow you to navigate. You also have to have the magnetic maps, which, by the way, is something that we are looking at: helping to improve the existing magnetic maps of the surface of the Earth. Another alternative to GPS that is considered is really a similar kind of concept, but you can imagine using a combination of fixed terminals on the surface of the Earth and drones, and those fixed terminals and drones effectively act as a mini GPS system. The drones are equivalent to the GPS satellites, and in a localized area, that kind of configuration provides a means of very, very precise localized navigation. These are just a couple of things that Frequency Electronics, Inc. is actually involved in, in terms of alternative navigation. There are, of course, many other things that people talk about—various detecting radiofrequency signals from radio stations and using that, inertial navigation, and various other things. I will just leave it at that for now. Chris Pokosky: Well, thanks for the thorough answer. And are you getting any revenue right now? I guess production revenue will be a couple of years out. Thomas McClelland: We are, because the U.S. government is very interested in developing these technologies and they are funding development activities. So we are getting revenue from those development funds. But we anticipate over the next decade turning that development revenue into product-based revenue. Chris Pokosky: Alright. Thanks again. Operator: The next question is from Sam Nelson, private investor. Sam, please proceed. Sam Nelson: Hi, Tom. Thanks for taking my question. I was just trying to get a better idea of, with the new contracts, how that award might ultimately flow through the backlog. I think on previous calls, you had described how ultimately the impact might be, like, 10x the initial value that is realized on the backlog, and just to clarify, I was wondering if we could look at these new contract awards in a similar way where the initial realized amount of the contract that is falling in backlog—could we 10x that, or what might the impact ultimately be? Thomas McClelland: I think, without making specific kinds of statements, that the 10x approximation is reasonably valid here. The contribution to backlog depends on the initial funding on these contracts. Something along those lines—again, not providing specific guidance. Sam Nelson: Okay. Thank you. Operator: Okay. We have no further questions in the queue. I would like to turn the floor back to management for any closing remarks. Thomas McClelland: Thank you for taking the time to listen and participate in today’s earnings call, and we look forward to providing further updates in the coming months. Thank you. Operator: This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good afternoon, everyone, and welcome to the Tilly's, Inc. 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 that today's event is being recorded. At this time, I would like to turn the floor over to Gar Jackson with Investor Relations. Please go ahead. Gar Jackson: Good afternoon, and welcome to the Tilly's, Inc. fiscal 2025 fourth quarter earnings call. Nate Smith, President and Chief Executive Officer, and Michael Henry, Executive Vice President and Chief Financial Officer, will discuss the company's business and operating results and then host a Q&A session. A copy of Tilly's, Inc. earnings press release, please visit the Investor Relations section of the company's website at tillys.com. From the same section, shortly after the conclusion of the call, you will also be able to find a recorded replay of the call for the next 30 days. Certain forward-looking statements will be made during this call that reflect 2026; actual results may differ materially from current expectations based on various factors affecting Tilly's, Inc. business. Accordingly, you should not place undue reliance on these forward-looking statements. A more thorough discussion of the risks and uncertainties associated with any forward-looking statements, please see the disclaimer regarding forward-looking statements that is included in our fiscal 2025 fourth quarter earnings release, which is furnished to the SEC today on Form 8-K, as well as our other filings with the SEC referenced in that disclaimer. Today's call will be limited to one hour. We will include a Q&A session after our prepared remarks. I will now turn the call over to Nate Smith. Nate Smith: Thank you, Gar, and good afternoon to everyone joining us today. We finished fiscal 2025 surpassing our expectations on both the top line and bottom line for the fourth quarter relative to our outlook provided in early December. We ended the fiscal year with six consecutive months of accelerating positive comp momentum and 18 consecutive positive comp weeks. That momentum drove our first profitable fourth quarter and first positive comp sales fiscal year since fiscal 2021. Our momentum has continued to start fiscal 2026 with a 20% comparable net sales result in February. We have meaningfully improved our merchandise assortments and evolved our brand and digital marketing efforts to improve our customer engagement. Additionally, we have closed underperforming stores and sustained solid operational execution, delivering significantly improved results compared to last year. From a merchandising perspective, we began fiscal 2025 looking to reinvigorate our brand mix and to clean up excess aged inventory. With each passing quarter, our comparable net sales results and product margins improved as these changes were being made, ultimately leading to comp sales growth throughout 2025, which is momentum we are carrying into early fiscal 2026. Our merchandising teams put in a lot of effort to make the necessary changes to drive these improved results, and I am confident in their abilities to drive further improvements in fiscal 2026. I would especially like to acknowledge Michael Singulani, who we just promoted to Chief Merchandising Officer, for his leadership and tireless efforts in turning our sales trajectory around over the past year and setting us up for such a strong start to fiscal 2026. Good product offerings need to be supported by effective marketing strategies and tactics to help new customers realize who we are and what we have to offer, to update existing customers on changes we have made, and to reintroduce Tilly's, Inc. to former customers who may have disengaged from our brand. We believe our marketing team's efforts to drive greater consumer awareness and consideration for Tilly's, Inc. have made a significant impact through engaging campaigns, refreshed content, and exciting events, as evidenced by our growing TikTok following and reversing declines in our active customer loyalty program membership. These efforts will continue in various ways throughout fiscal 2026 to build upon the successes achieved in fiscal 2025. In terms of store real estate, with the improved store comp trends we have seen over the last seven months and counting, and because our unit economics support it, we are now pivoting from a store closure posture to a disciplined approach to new store openings in fiscal 2026, with a plan to open four to six new stores. We will remain selective and reasonably conservative in our future expectations for new stores, but it is encouraging to reach an inflection point of feeling the confidence to begin strategically considering store growth again. Fiscal 2025 was a year of significant store optimization, resulting in 21 total store closures. We are proud of the fact that we were able to deliver sales growth in the fourth quarter with 17 fewer net stores. At the present time, we have four known store closures that will take place late in the first quarter, and while that number may change as the year progresses, we do not currently expect to close a significant number of additional stores this year. Our infrastructure investments in a price optimization tool during 2025 and in warehouse management software in mid-fiscal 2024 have now been producing the anticipated benefits we expected. Our price optimization tool has contributed meaningfully to our improved fourth quarter product margins. The new warehouse system is now helping drive significant labor efficiencies within our store and e-commerce distribution centers. Further investments in our business are expected to continue during fiscal 2026, including an AI-driven merchandise allocation tool that we believe will lead to greater operating efficiencies over time. In closing, we are very excited about our prospects for fiscal 2026. We believe our turnaround is real, the fundamentals are fixed, our top line is growing, we are looking to reinitiate store growth, and we must continue to build upon the progress made thus far. The team has done the hard work. Now we are optimizing. We are not yet profitable on an annualized basis, but we see a clear path to get there after generating profit in two of the last three quarters. We built forward momentum in our business throughout fiscal 2025, and that momentum has carried into an unprecedented start to fiscal 2026. Given current trends, we expect to deliver further improvement in both top line and bottom line performance in each quarter of the year. We look forward to discussing our progress with you as the year progresses. I will now turn the call over to Mike to share the details about our fiscal 2025 fourth quarter operating results and to introduce our fiscal 2026 first quarter outlook. Michael Henry: Thanks, Nate. We finished fiscal 2025 with stronger sales and product margins than we anticipated, along with lower expenses, to achieve our first profitable fourth quarter since fiscal 2021. Details of our fourth quarter operating results compared to last year's fourth quarter were as follows: Total net sales of $155,100,000 increased by 5.3% despite finishing fiscal 2025 with 17 fewer stores than a year ago. Comparable net sales for the 13-week period ended January 31, 2026, including both physical stores and e-commerce, increased by 10.1% with increases from both physical stores and e-commerce of 10.3% and 9.8%, respectively. That strong fourth quarter comp performance was enough to pull full-year comp sales slightly positive for the first time since fiscal 2021 at plus 0.3%. Total net sales from physical stores increased by 3.6% despite our 7.1% reduction in year-over-year store count. Net sales from physical stores represented 72.3% of total net sales compared to 73.5% last year. E-commerce net sales represented 27.7% of total net sales compared to 26.5% last year. Gross margin, including buying, distribution, and occupancy expenses, increased to 33.2% of net sales, an improvement of 720 basis points compared to 26% of net sales last year. Product margins improved by 470 basis points as a result of higher initial markups and lower total markdowns associated with operating with reduced and more current inventories than a year ago. Buying, distribution, and occupancy costs improved by 250 basis points, or $1,900,000 in the aggregate, primarily due to lower occupancy costs associated with our reduced store count and partially offset by increased shipping costs associated with our online net sales growth. Total SG&A expenses were $48,900,000, or 31.5% of net sales, a reduction of $3,500,000 or 410 basis points as a percentage of net sales, compared to $52,400,000 or 35.6% of net sales last year. Significant SG&A reductions compared to last year's fourth quarter were attributable to store payroll and related benefits of $1,600,000, primarily related to our reduced store count; lower noncash impairment charges of $700,000; reduced e-commerce fulfillment labor of $700,000; and a variety of smaller reductions across several line items. Operating income improved to $2,600,000, or 1.7% of net sales, from an operating loss of $14,100,000, or 9.6% of net sales last year. Income tax expense was $18,000, or 0.6% of pretax income, compared to $200,000, or 1.8% of pretax loss last year. Both years include the continuing impact of a full noncash valuation allowance on our deferred tax assets. Net income improved to $2,900,000, or $0.10 per diluted share, compared to a net loss of $13,700,000, or $0.45 per share last year, representing an improvement of $16,600,000, or $0.55 per share, versus last year's fourth quarter. Turning to our balance sheet. We ended fiscal 2025 with total liquidity of $87,800,000, comprised of cash of $46,300,000, no debt, and available borrowing capacity of $41,500,000 under our asset-backed credit facility. Net inventories were 10.8% lower, with an improved inventory aging compared to a year ago. Total capital expenditures for fiscal 2025 were $4,700,000 compared to $8,200,000 in fiscal 2024. Turning to 2026. Comparable net sales for the first month of the year ended 02/28/2026 increased by 20.1% relative to the comparable period of 2025. Based on current and historical trends, we currently expect the following for our fiscal 2026 first quarter operating results. Total net sales to be in the range of approximately $119,000,000 to $125,000,000, translating to a comparable net sales increase of 16% to 22%, respectively. We currently expect to generate product margin improvements of 310 to 330 basis points compared to last year's first quarter; SG&A to be approximately $44,000,000 to $45,000,000 before factoring in any potential noncash store asset impairment charges, which may arise; pretax loss and net loss to be in the range of approximately $10,100,000 to $8,000,000, respectively, with a near-zero effective income tax rate due to the continuing impact of a full noncash valuation allowance on our deferred tax assets; and loss per share to be in the range of $0.34 to $0.27, respectively, compared to a loss per share of $0.74 in last year's first quarter, with estimated weighted average shares of approximately 30,100,000. We currently expect to end the first quarter with 220 total stores, a net decrease of 18 stores, or 7.6%, from the end of 2025. We are not in a position to provide annual guidance given we cannot predict our comparable net sales performance for the balance of the fiscal year with any certainty. However, for illustrative purposes regarding our potential to return to profitability in 2026, and subject to various assumptions with respect to product margins, inventory levels, and expenses, we estimate that it would take an annualized comparable net sales increase of approximately 8% to 9% to begin generating profitability for fiscal 2026 as a whole. In closing, as Nate noted earlier, we are optimistic about our prospects in fiscal 2026 based on the sequential improvement in our comparable net sales trend we achieved from quarter to quarter throughout fiscal 2025 and into our strong start to fiscal 2026. Operator, we will now go to our Q&A session. Operator: At this time, we will begin the question-and-answer session. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Again, that is star and then one to ask a question. Our first question today comes from Matt Koranda from Roth Capital. Please go ahead with your question. Matt Koranda: Hey, guys. Nice work in the quarter. I guess, first off, curious about the composition of the strong comp. The fourth quarter in particular? It looks like, based on the comments from the last time you guys gave public commentary, it probably accelerated in December and January, so I wanted to hear about the acceleration in comp, but also, if you can break down traffic versus ticket for that period, that would be helpful as well. Michael Henry: Sure, Matt. So, going back to the beginning of the third quarter, we did a plus one in August, plus one in September, plus six in October, then a plus eight in November, plus 10.6 in December, plus 12.4 in January, and, as we just said, a plus 20.1 in February, and March is off to an even stronger start than that so far. So really significant acceleration in our comp sales trend from month to month, on top of the quarter-to-quarter performance we were achieving throughout fiscal 2025 from Q1 through Q4. So just really excited to see this kind of performance. Our conversion rate has been super strong. It has been a high-teens, double-digit percentage increase compared to last year. Traffic has been improving, both stores and e-commerce performing, all departments positive. So, pretty much everything is moving in a favorable direction. Matt Koranda: Got it. Okay. Good to hear. And then I guess just wanted to hear a little bit about what you think is working in the assortment. Obviously, really strong acceleration all the way through the February commentary you gave, and it sounds like March sounds pretty good. What is working? What do you think is driving higher traffic? And is there something in the assortment in particular? Is it a better marketing posture? Maybe just help us identify the big levers you pulled. Nate Smith: Thanks, Matt. This is Nate. Mike and I were talking last night about this, and, you know, we were constructing what we figured this question would come. It really is across every category. We are not seeing any spike in any particular category. We are seeing strength across the board, both genders, and kids. So, I think, obviously, our private label is working as well. So I think when we think about what was causing some of our struggles, it started with the assortment. We feel very strongly now our assortment across the board, across all categories, is where it needs to be, and we mentioned Michael Singulani coming in and taking charge of that and now being promoted to the CMO role. So I think that was a huge component of it. Let us also note the inventory situation was addressed too. So now we are selling far more full price than we were, say, a year ago, when we were selling a lot of off-price with aged and obsolete inventory. So our inventory levels are healthier. Our assortment is stronger. We have obviously rationalized some of our underperforming stores, and the consequence of all that is now really healthy margins. Matt Koranda: Okay. Alright. That is helpful. Thanks, Nate. On the store openings, it sounds like you are telegraphing net opener of stores this year considering the four to six you mentioned in terms of opens and only a handful of closures near term. What determines the path forward on further expansion, I guess? Maybe just help us understand your head at on store expansion over maybe a medium to longer term? And then what are we factoring in, maybe for Mike, on CapEx for the store expansion this year? Nate Smith: So, to your first question, Matt, I think we feel good about our unit economics. We feel good about our ability to execute. For me, it is more the consumer spending environment in the long term. If the macro does turn against discretionary retail spending, certainly double-digit comps will become harder to sustain, no matter how well we execute. But, largely speaking, I would say we are leaning into it this year and can only expect to be more aggressive in 2027, the way we are viewing our business. Michael Henry: Yeah. In terms of total CapEx, we do not expect our CapEx to reach $10,000,000 in the aggregate. It has been less than that each of the last two years, as we noted in our prepared remarks. It should be in a similar neighborhood; I would say not more than $8,000,000 to $9,000,000 would be our expectation as we sit here today. And, you know, look, we are still on the path of recovery. We struggled for a lot of 2025. So we have lost productivity in terms of sales per square foot. Finishing fiscal 2025, we are— Operator: Ladies and gentlemen, we seem to be having a technical difficulty with the main speaker line. Please stay on the line. We will be reconnecting here momentarily, and, again, we do apologize for the audio break. We are reconnecting Mr. Henry's line. One more moment. We should have him back on the line for you. Thank you. This is the conference operator once again. We have reconnected Michael's line into the conference. Michael, we still have Matt on the line for you if you would like to continue with the Q&A. Michael Henry: Yes. Sorry about that, everybody. We had some sort of technical glitch happen here that booted us out of the line. So apologies for that little hiccup. We are back. Hey. Can you guys hear me, by the way? Operator: Yes. We can hear you. Can you hear us? Yes, sir. We can hear you. Matt Koranda: Alright. Got it. Just want to make sure. I think, Mike, you may have, you kind of dropped off when you were talking about CapEx for stores—probably no greater than $8,000,000 to $9,000,000—and then it started getting a little choppy. So maybe if you want to finish commentary around that, that would be helpful. Michael Henry: Yeah. I started talking about our sales per square foot—that we are ending fiscal 2025 at roughly about $260 per square foot, which is still well below where we have been as a business in the past—and we would expect ourselves to continue to improve on that metric. And, as we do, it will continue to give us greater confidence in even expanding the rate of store expansion that we have noted for this year to even higher levels in future years, is what we would expect to be able to do. So lots of room yet to continue to improve this business. We struggled a lot through fiscal 2022, 2023, 2024, 2025, and we are just beginning to regain that lost ground that we struggled with for that three-to-four-year period. So we will walk before we run. We will continue to be reasonably conservative in our expectations for new stores. They have to be at the right economics, but it is nice to reach this inflection point where we are starting to look ahead and feel confident about our ability to reinitiate growth. Matt Koranda: Okay. Great. Maybe just last one from me. It was helpful to hear commentary on the zone in which you would be profitable from a comp perspective. Just curious if there are any other assumptions that we should be embedding in that profitability outlook, or hypothetical, I guess, profitability outlook? Is there more gross margin leverage embedded in that assumption with an 8% to 9% comp? Is there more you can do on SG&A expense that gets you to the breakeven line, or is it just a simple, sort of comp assumption you are making? Nate Smith: No. So, good question. So Mike talked about the sales per square foot. We have targets we want to hit. But on the other side of that, we are really on the efficiency journey now—what we are calling it. And we see a clear path with things like our price optimization tool, where we will continue to see margin upside. We have our AI solution to planning allocation rolling out here later part of the latter part of this year with Impact Analytics. We will be launching RFID latter part of this year, which will give us, obviously, better inventory accuracy resulting in a reduction of stockouts, and it will also cut our manual inventory counting time by probably 80% to 90%. And then we have a series of back-end efficiency projects as it relates to all of our product handling and fulfillment processes, to include store labor efficiency is another workstream we have underway. So we are approaching this from both sides—not only sales per square foot, but what we would consider to be efficiency on the back end. Michael Henry: Yeah, and just to add on to that, an 8% to 9% comp increase does not correlate to a proportionate increase in SG&A. To the efficiency comments that Nate is making from a variety of angles, the aggregate increase in SG&A, despite continuing minimum wage increases and other cost pressures, would not cause SG&A in the aggregate to go up as much as you might expect with an 8% to 9% comp. We do also expect to continue to improve product margins this year—more in the front half of the year than in the back half of the year. If you follow the cadence of our product margin improvement that we achieved each quarter through fiscal 2025, we are still going to have a meaningful amount in Q1. It will start to moderate, but still be triple digits in Q2, if all goes as planned, and then it would more moderate in Q3 and Q4. Matt Koranda: That makes sense. Thanks, Mike, and I appreciate it, Nate. Operator: Ladies and gentlemen, at this time, I am showing no additional questions. I would like to turn the floor back over to management for any closing remarks. Nate Smith: I would just like to say thank you for joining us today, and we look forward to sharing our fiscal 2026 first quarter results with you in early June. Have a good afternoon. Have a good evening. Operator: With that, everyone, we will be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.
Operator: Good afternoon. Thank you for attending today's TechTarget, Inc. fourth quarter 2025 financial results conference call and webcast. My name is Tamiya, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press 1 on your telephone keypad. I would now like to pass the conference over to your host, Charles D. Rennick, General Counsel. You may proceed. Charles D. Rennick: Thank you, Tamiya, and good afternoon, everyone. The speakers joining us here today are Gary Nugent, our Chief Executive Officer, and Daniel T. Noreck, our Chief Financial Officer. Before turning the call over to Gary, we would like to remind you that in advance of this call, we posted our press release in the Investor Relations section of our website and furnished it on Form 8-Ks. You can also find these materials on the SEC's website at www.sec.gov. A replay of today's conference call will be made available on the Investor Relations section of our website. Following opening remarks from Gary and Dan, they will be available to answer questions. Any statements made today by TechTarget, Inc. that are not historical, including during the Q&A, may be considered forward-looking statements. These forward-looking statements, which are subject to risks and uncertainties, are based on assumptions and are not guarantees of future performance. Actual results may differ materially from our forecast and from these forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors section of our most recent periodic report filed on Form 10-K and the forward-looking statement disclaimer in our earnings release filed earlier today. These statements speak only as of the date of this call, and TechTarget, Inc. undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. Finally, we may also refer to certain financial measures not prepared in accordance with GAAP. A reconciliation of certain of these non-GAAP financial measures to the most directly comparable GAAP measures, to the extent available without unreasonable efforts, accompanies our press release. And with that, I will turn the call over to Gary. Gary Nugent: Thank you, Charles D. Rennick, and good afternoon, everyone. As always, we appreciate you taking the time to join us today, and your interest and engagement mean a great deal to us. I am pleased to report that Q4 2025 marked another step forward in our journey to establish TechTarget, Inc. as the indispensable partner to the B2B technology industry. During 2025, we laid the groundwork to return the business to top-line revenue growth in 2026 and accelerate that growth in the years ahead. Today's agenda is slightly different from previous calls. I will begin with an overview of our strategic progress and some market positioning. And following that, Chief Financial Officer, Daniel T. Noreck, will provide an overview of our financial performance. And then afterwards, we will open the floor for your questions. Let me start by highlighting the significant strides we have made in combining and transforming our business to become a market leader in what is a large and dynamic addressable market—a $20 billion addressable market—where we currently only hold a 2.5% market share, and the opportunities for expansion and growth remain substantial. In 2025, we achieved full-year revenue of $486.8 million on a combined company basis, in line with our guidance of being broadly flat year over year. Importantly, we delivered a strong 10% growth in adjusted EBITDA to $87.3 million, exceeding our guidance of $85 million. I think this demonstrates our ability to drive meaningful margin expansion through strategic focus and operational excellence. Our combination plan has been the key driver of this progress as we seek to leverage the breadth and the scale that the combination affords us. We made significant progress in consolidating, integrating, automating, and leveraging AI technology to improve our processes and systems that underpin the business—making ourselves easier to do business with and easier to work for—improving quality and productivity. On our products, by unifying our intelligence and advisory operations under the Omnia brand, we have created a comprehensive market intelligence platform. Bringing together the expertise of Canalys, Wards, and ESG under the Omnia banner simplifies our market positioning while enhancing the cross-selling opportunities. I think that Omnia’s award in November as the Analyst Firm of the Year by the Institute of Influencers and Analyst Relations (the IIAR) is a true recognition of the strength of this approach. We also streamlined and integrated our portfolio of brand-to-demand products. Launching the TechTarget, Inc. portal in September, the platform was the first offering to leverage our combined audience dataset, providing our clients with expanded reach and enhanced intent signals—over a 40% increase year on year. It also offered seamless integration with industry-leading marketing automation, client relationship, and sales enablement platforms and a unified customer experience. Additionally, we repositioned Netlite to address the cost-conscious demand generation market. This move, in particular, delivered exceptional results in terms of revenue and bookings growth while expanding our addressable market coverage. Our product roadmap for 2026 is compelling, as we leverage AI technology to enhance existing and launch new capabilities. I will talk a little bit more about this slightly later on. On the subject of our go-to-market strategy, we focused on the largest customers and the most dynamic, highest-growth markets. Thus, we increased our investment and coverage, establishing dedicated sales and service teams to deepen our relationships and strengthen our position in the most influential technology companies in the industry. This approach resulted in revenues growing double digit year over year from this cohort. On audience and audience membership, a key differentiation of our company is the role that we play in informing, educating, and shaping the buy side—the buying journey. Our expert, original, trusted editorial content remains a vital investment, and I am proud to share that in addition to the 48 prestigious awards for the strength and the quality of our journalism in 2025, and despite the changing patterns in search traffic due to AI answer engines, we leveraged the breadth of our network and reoriented our editorial and our audience membership development focus. Today, less than 45% of our traffic is sourced from search. Crucially, in 2025, our audience membership grew and our members became more active on our network. We learned that our prowess in search is a transferable asset and skill in this new AI answer engine world. Notably, our citations from AI answer engines increased in volume over 235% year over year. As we have discussed before, we see that the conversion rates to permissioned audience members are two to three times that of traditional search. On the subject of AI, as I have said before, we firmly believe that generative and agentic AI will be a huge positive for our business. We have made significant progress in adopting and embedding AI across four strategic areas of the business. The first one we call conversational AI interfaces—making our proprietary market data and our permissioned audience data more easily accessible and actionable by our clients. In the first half of this year, we will launch the AI research assistant, a multilingual conversational AI interface that will unlock a wealth of value from our proprietary intelligence and market data. Starting in 2026, we will debut a suite of AI-powered go-to-market intelligence solutions. This suite introduces advanced AI skills—the equivalent of apps—that allow marketers to generate actionable insights by synthesizing TechTarget, Inc.’s permissioned audience data and coupling that with their own internal and external web assets. The key capabilities will be AI-driven problem identification: by analyzing the specific content being consumed across our network, our AI will identify the actual business problems that buyers are researching, allowing go-to-market teams to move beyond broad targeting and engage prospects with differentiated messaging tailored to their immediate and specific needs. And AI-driven content insight: performance-based recommendations that will pinpoint which content topics and brand investments are successfully addressing buyer pain points, ensuring the strongest ROI on their marketing spend. Whether utilizing our pre-built AI skills or deploying their own, our customers will be fueled by our AI-powered go-to-market intelligence, making TechTarget, Inc. an indispensable fixture of the modern martech stack. The second area that we are focusing on is personalized audience experiences—bringing the wealth of expert, original, and trusted content from across our network to our audiences, rather than us taking them to the content—creating personalized content experiences based upon a deep understanding of their company, their role, their business problem, and where they are in their buying journey. The third area is enhancing the efficacy of our go-to-market programs, both for ourselves and our clients, as we improve the precision of our targeting and content and campaign effectiveness. Finally, the fourth area is automating our operations—enabling our experts to deliver deeper insights more efficiently and enabling our operations and customer success teams to deliver our products and services to our customers with increased quality and effectiveness. Talking with our customers, particularly with our larger customers, a key takeaway is an increasing desire on their part for integrated solutions rather than point products. Our customers are looking for partners who can provide scale solutions to their scale problems—precisely what the new TechTarget, Inc. was built to deliver. Taking just one prime example, in 2025, a key customer of ours lamented that they had to engage with over 30 supplier companies of our ilk in order to service their scale needs. Following a strategic review and a decision to focus on fewer, larger relationships, they have consolidated those relationships down, and I am delighted to see that we were a natural partner to partner with. Further, those same technology companies are keenly aware that they must deliver a clear ROI from the substantial investment that they have made in R&D and AI. We are very well positioned to be an essential partner in providing a range of products and services to help them achieve that. Our ambition is to become the indispensable partner to the B2B and technology industry—informing, educating, shaping, and connecting buyers to sellers. In 2026, our objective is to return the business to top-line revenue growth for the full year, with adjusted EBITDA expanding to $95 million to $100 million. Our strategy is to continue to build our house on the land that we own, by which I mean producing original, trusted, authoritative content that informs, educates, and shapes the industry through our expert analyst and editorial capabilities, and in doing so, nurturing that proprietary market and our permissioned audience membership data asset. We are going to continue to leverage the breadth and scale of the product portfolio to deliver a unified and integrated customer experience. We are going to continue to focus our go-to-market efforts on the largest customers and the hottest markets where scale solutions solve scale problems. We are going to continue to make ourselves easier to do business with and easier to work for—adopting AI across all disciplines to improve quality, enhance productivity, and in particular, to amplify the expertise of the 1,900 colleagues that ply their trade at TechTarget, Inc. I am incredibly proud of the progress that we have made, and I want to express my gratitude to our dedicated colleagues and their teams for their hard work and commitment. It is their efforts that have positioned us to seize the opportunity that lies ahead. Thank you for your time. I look forward to updating you on continued progress in the quarters ahead. I will now turn the call over to Daniel T. Noreck to discuss our financial results in detail, and then we will be happy to take your questions. Daniel T. Noreck: Thanks, Gary, and good afternoon, everyone. I am pleased to be able to report on 2025 results that I think delivered in line with or ahead of our guidance and market expectations, which demonstrated both our operational discipline and strategic execution capabilities. We delivered full-year revenue of $486.8 million, which Gary mentioned earlier, was right in line with our guidance of being broadly flat compared to the $490.4 million we achieved in 2024 on a combined company basis. While revenues remained stable, our focus on operational excellence and strategic reorganization with accelerated delivery of cost synergies drove strong margin expansion. Our adjusted EBITDA reached $87.3 million, comfortably exceeding our guidance of $85 million, representing a healthy 10% increase from 2024’s $78.8 million on a combined company basis. This translated to an adjusted EBITDA margin of 17.9% in 2025, a meaningful improvement of 180 basis points from the prior year. Our fourth quarter performance was particularly strong with revenues of $140.7 million, representing a solid 3% year-over-year increase on a combined company basis. Q4 adjusted EBITDA of $41.6 million represented a 56% year-over-year increase, with our adjusted EBITDA margin expanding to around 30% compared to approximately 20% in the corresponding quarter of the prior year on a combined company basis. Our Q4 performance reflected some seasonality in the business but also benefited from our strategic initiatives that are gaining traction, which allowed us to accelerate the realization of cost savings, along with some favorable phasing impacts. Our quarterly progression throughout 2025 tells a story of building momentum. Following the seasonally slower first quarter, each of the remaining quarters of the year showed positive sequential revenue progression, a trend we expect to continue in 2026. From a year-over-year perspective—on the comparative combined company measure—revenue performance consistently improved from minus 6% in Q1, narrowing to minus 2% in Q2, getting back to growth in Q3 at plus 1% and plus 3% in Q4. Our balance sheet also reflects a strong financial foundation that supports our strategic initiatives while maintaining the flexibility to capitalize on growth opportunities that may arise. At the end of 2025, we had cash and cash equivalents on the balance sheet of around $41 million and had utilized around $107 million of our $250 million unsecured five-year revolving credit facility, resulting in net debt of approximately $66 million, not vastly different to the approximately $62 million at the end of 2024, despite significant cash expenditures in the year on acquisition, integration, and restructuring costs. Our free cash flow reflects the impact of our integration and restructuring investments in 2025. On an adjusted basis, we delivered meaningful cash flow, demonstrating the strong underlying cash-generation characteristics of our business model. Net debt at year-end relative to adjusted EBITDA for the year was just 0.8x and slightly lower than at the end of 2024, illustrating the strong cash-generating characteristics of our business. Now quickly turning to our guidance for 2026. Following the substantial progress made with our combination program in 2025, the priority for 2026 is to build on the foundations laid and to return to growth in 2026. Our assumption is that the market environment will remain similar to that in 2025. Nevertheless, we expect to grow our revenues in 2026. Coupled with our continued cost discipline, annualization of synergies, and operational leverage, we expect our adjusted EBITDA to grow further to a range of $95 million to $100 million, marking a further meaningful improvement in our adjusted EBITDA margin. Q1 2026 will reflect this trend. This guidance reflects our confidence in the progress we have made through our strategic initiatives and the strong foundation we have established for sustainable growth. In conclusion, our financial model is built to scale efficiently. Every additional dollar of revenue delivers substantial incremental margin, highlighting the strength of our unit economics. This structure enables us to grow profitability and free cash flow over time. With that, we are now happy to answer your questions. Operator, will you please open up the line for Q&A? Operator: Absolutely. We will now begin the question and answer session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason at all you would like to remove that question, please press star followed by 2. Again, to ask a question, please press star 1. The first question comes from Eric Martinuzzi with Lake Street. You may proceed. Eric Martinuzzi: I wanted to, first of all, congratulate you on the fourth quarter results and overachieving versus the adjusted EBITDA for the year. But I was particularly impressed with the go-to-market strategy results. Your comments in the press release talk about an approximate 10% growth in revenue from your largest customers. Was that a full-year basis, or is that a Q4 metric, Gary? Gary Nugent: Hi, Eric. Good to hear from you. That is a full-year basis, and on a combined company basis. Eric Martinuzzi: Okay. And then, you know, there was a time when the different tiers of customers—if I go back to, like, 2024—you talked about the 7,500 customers that the combined entity had and that there were 70 customers that were over $1 million a year in billing. Is that the tier of customers that we are talking about here, or are you stratifying the customer base differently? Gary Nugent: Oh, no. We are stratifying the customer base differently. It is not the same. If you recall, we have identified about $10 billion of our $20 billion addressable market sits with about 150 to 200 clients in the marketplace. We then further prioritize that down to a cohort of 30 portfolio customers and then a further 120 or so customers that are what we would call majors. The number that I am quoting for you is for that cohort of 30. Eric Martinuzzi: Okay. And then is there—you know, you have got so many different products that you are offering customers now. What was resonating with that largest cohort? First of all, did they contract in their use of any of the products? And then what was it that they expanded their use of? Gary Nugent: Well, you appreciate it is a bit of a mixed picture when you go down to the individual customer level. I would say, if there was a trend there, we saw really strong demand for demand—so there was strong demand for our demand products. That was encouraging to see, in particular as we consolidated and rationalized the demand portfolio and did a better job of the market positioning of that. Secondly, content. Content was generally a strong theme last year as customers were looking to really establish a distinctive voice in the marketplace, to stand out from the noise, and to leverage the expertise we have—our analyst and our editorial expertise—to really give them a bit of brand association. Eric Martinuzzi: Alright. And then, given the total revenue on a pro forma combined basis actually declined 1%, obviously the smaller customers contracted to sort of offset the success that you had with the higher tier—the, as you put it, the 30 portfolio customers. Was there any themes to recognize across the smaller customer base—either, you know, smaller enterprise or SMB themes? Gary Nugent: It is a good—what I suppose this email would talk to is much more about international markets for us. I think what we saw in particular was in the Asia Pacific region and the triangle between Singapore, China, and Korea—well, it is not tying up by the fourth point to square, is it? Add Tokyo to that. That was definitely a market that was challenged last year, in particular some of the macroeconomic situation with Asian technology companies looking to export their businesses internationally. That was probably the area where I would see the trend really was. I think then we just also saw in that small to medium end of the IT marketplace that that was a market where—I do not think that was the odd—but there was deal—there was customer churn in that market in the small to medium end. Eric Martinuzzi: Got it. Alright. And then, Dan, as we are doing our modeling here for 2026, obviously the top line—did not want to put too fine a point on it—but as I am looking at the growth that you had in the back half of 2025 on the pro forma combined, you were up 1% in Q3, you were up 3% in Q4. Is it a prudent starting point to kind of take the blend there and say, hey, if we are going to grow, let us maybe start with a 2% and just use that as a baseline, or is that too aggressive? Daniel T. Noreck: Eric, I think that the way you are laying it out makes sense. I think you could go maybe a little higher than that 2%, but I think the way you are thinking about modeling makes sense to me. Eric Martinuzzi: Okay. And then last question is around the source of the incremental adjusted EBITDA. Obviously, revenue is not going to be—revenue, we are planning on it to be a little bit higher in 2026, but, you know, let us just, for discussion’s sake, say we are talking about a flat revenue in 2026 versus 2025. In 2025, that adjusted EBITDA number was around the—what was it? Yeah, $87.3 million. And yet you are guiding to kind of a midpoint of $97.5 million. So just to keep it simple, call it $10 million of incremental adjusted EBITDA. What is it that is getting you there? Is this primarily going to be driven by further synergies on bringing the two entities together, or what is driving that? Daniel T. Noreck: Eric, if you think about where the synergies landed in 2025, they were really back-half loaded. So you are really going to start to see the impact of that throughout the full year, as opposed to just being contained to the second half of the year. Eric Martinuzzi: Got it. Okay. Thanks for taking my questions. Gary Nugent: Thank you. Thanks, Eric. Thank you. Operator: As a quick reminder, if you would like to ask a question, please press 1 on your telephone keypad. There are no more questions remaining at this time. This concludes today's conference call. Thank you for your participation. You may now disconnect your line.
Operator: Good morning, and welcome to the Serve Robotics Inc. fourth quarter and full year 2025 financial results conference call. I am France, and I will be the operator assisting you today. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star-1 on your telephone keypad. If you would like to withdraw your question, please press star-1 again. Thank you. I would now like to turn the call over to Steve Webb. Please go ahead. Steve Webb: Thank you, operator, and good afternoon, everyone. I am Steve Webb, Serve Robotics Inc.’s SVP of Marketing and Communications. Welcome to Serve Robotics Inc.’s fourth quarter and full year 2025 earnings call. With me today are Serve Robotics Inc.’s Co-Founder and CEO, Ali Kashani, and our CFO, Brian Read. During today's call, we may present both GAAP and non-GAAP financial measures. If needed, a reconciliation of GAAP to non-GAAP measures can be found in our earnings release filed earlier today. Certain statements in this call are forward-looking statements. You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements. We do not undertake any obligation to update any forward-looking statements we make today, except as required by law. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issued today as well as the risks and uncertainties described in our most recent Annual Report on Form 10-K and in other filings made with the SEC. We published our quarterly financial press release and our updated corporate presentation to our Investor Relations website earlier this morning, and we ask you to review those documents if you have not already. With that, let me hand it over to Ali. Ali Kashani: Thanks, Steve. Morning, everyone, and thank you all for joining us. A year ago, we told you that we would deploy 2,000 autonomous robots across the country by the end of 2025, that we would expand from a single city to a truly national footprint, and would prove that this technology works, not just in a lab or a closed campus, but on open sidewalks in dense cities, navigating the full complex of urban life. We did all of that and then some. Today, a fleet of 2,000 Serve Robotics Inc. robots have been activated across 20 distinct cities in six major metropolitan areas, from Los Angeles all the way to the Washington, D.C., corridor. We launched Atlanta, Dallas, Chicago, and Miami. We expanded aggressively in every existing market. We also added DoorDash alongside Uber Eats. This gives us access to over 80% of the U.S. food delivery market. We also completed four strategic acquisitions since early 2025, met or exceeded our revenue guidance every single quarter, and through all of it, we maintained a 99.8% delivery completion rate and a proud safety record. So let me say it again: 20 times the fleet, national scale, four acquisitions, and near-perfect reliability. And in Q4, we once again delivered revenue above guidance as we drove 400% year-over-year growth in the quarter. This is not incremental progress. This is a company that is defining a category in real time. But before I get into the quarter, let us look at the broader trends. We are living through one of the most consequential technology transitions of our lifetime. For the past few years, the world has marveled at what AI can do with words and images and code. The next frontier—the one that will reshape our physical world—is physical AI, machines that can see and think and act in real environments alongside people. As we try to anticipate what this future looks like, I find it really helpful to think about the evolution of computing so far. First, it was the personal computer. Then came the Internet. It connected information. It connected people. Next, we put computing and connectivity in every pocket and in every device. We connected the physical things too. As a result of all this, all of commerce and every industry is now digital and connected. Each leap along this path was worth trillions. Fast forward to today, AI has taken over our digital lives over the past few years, arguably becoming the fastest rising rung of this evolution of computing. Physical AI is the natural next phase that is right around the corner. It is the moment when this intelligence leaves the digital realm and enters the streets. And like computing and the Internet before it, the companies that build the platforms for physical AI will define this era. NVIDIA CEO Jensen Huang has called robotics and physical AI the next multitrillion-dollar industry. Every major AI company is racing to build models for the physical world. The investment thesis is pretty clear. The companies that build the platform and own the data will capture the value. And here is what is important. You cannot build physical AI from a research lab. You need robots in the real world gathering real data, encountering real edge cases, and at real scale. That is the flywheel, and it is exactly what Serve Robotics Inc. has built. Every transformative technology goes through the same arc. We are at a very familiar inflection point. Autonomous robots are here to fundamentally shift how we leverage technology in our lives. The question is no longer will this work, as we have seen by our progress last year. Now the question is, how fast can you scale? 2025 was the year we proved the technology. Looking ahead, 2026 is the year we compound the business model. Last quarter, I said that beyond 1,000 robots, the system tips. Scale changes everything. The economics improve. The partners lean in. Learning accelerates. At 2,000 robots, the system does not just tip. It compounds. We are now accelerating the flywheel. We discussed this concept last quarter when we described how more miles lead to more data, better models, and a more capable fleet. This is the flywheel that should be at the core of any physical AI company, and we have really organized our strategy around it. Every investment we make—every acquisition or deployment or partnership—they are all designed to strengthen a specific step of that flywheel and, as a result, make the whole system spin faster. So let me walk you through it: the four steps in the Serve Robotics Inc. flywheel. Step one is amassing data. Physical AI runs on large amounts of data. This is not just some data you scrape off the Internet. This is data collected in real environments. It is collected by robots at scale. Every mile our robots travel enriches our dataset. Every edge case, every construction zone or rush hour or unmarked crosswalk, they all sharpen our models. And this data is proprietary. You cannot just download it on the Internet or simulate it with the same depth and richness. You have to live on the sidewalks. And no one is better positioned for it than Serve Robotics Inc. What is new and exciting is that we are no longer just collecting data from a single environment. Today, our data spans multiple and distinct physical domains. On sidewalks, thousands of robots are mapping the world in 20 unique cities across the country. Every new neighborhood brings new edge cases and new pedestrian and traffic dynamics, new weather patterns. All of that enriches the models network-wide. In hospitals, our recent acquisition Diligent Robotics has a fleet of nearly 100 robots called Moxie, and they are navigating some of the most challenging indoor environments in robotics. These are multilevel facilities with tight corridors, constant foot traffic, high-pressure operations. Moxie robots have completed over 1,000,000 deliveries across more than 25 hospitals, and counting. So, sidewalks and hospitals and beyond—multiple domains, with wide-ranging geographies, all feeding a single robotics and autonomy platform. There is no one who is doing all this and realizing the value of the combination of indoor and outdoor data collection from commercial-scale fleets. The second step of the Serve Robotics Inc. flywheel is the models. Data is a raw material, but step two is where we take everything our robots are seeing and experiencing, and we turn it into better AI models. This is where another recent acquisition comes into focus. VYU Robotics brought us a specialized team that builds end-to-end models for physical AI. We are building systems that empower us to train across all our operating domains, indoors and outdoors, so that what a robot learns in Los Angeles would help a robot in Dallas, or what a Moxie robot learns navigating a hospital corridor could improve a Serve Robotics Inc. robot that is navigating an obstructed city sidewalk. That kind of cross-domain learning is really significant, and it is a compounding advantage that will widen every quarter. Also, our acquisition of Phantom Auto brought us one of the most capable robot connectivity stacks with extremely low latency. This enables us to operate at a large scale and across a significant geographic region because we can reliably assist robots remotely in real time. What is underappreciated here is that every time a remote supervisor assists a robot anywhere in the country, we generate high-quality training data. Our operations, which are empowered by this connectivity stack we acquired, are a conduit to collecting more data and more edge cases, and it is paired with a considerable training dataset, all collected at a faster rate than ever, feeding right back into our models. I should also mention the talented team of engineers that make all of this possible. When you have one of the largest autonomous robot fleets, plus data from multiple physical domains, and the infrastructure to turn all of this into deployed AI, that is where the best people want to work. Retention across our team has been really strong because people love building on real robots in the real world with significant, unique data. The flywheel attracts talent, and talent accelerates the flywheel. The third step of the Serve Robotics Inc. flywheel—after you gather the data and develop the models—is to deploy those models into the real world. Better models only matter if you can actually get them onto live robots. That is pushing all that improved autonomy out to the fleet that is in the real world where the edge cases live. This is where our fleet scale and our partnerships become a strategic asset. Uber Eats and DoorDash combined serve over 80% of the U.S. food delivery market. We are now a multiplatform fleet. We see robots finishing a DoorDash delivery, then picking up an Uber Eats order on the way back. That kind of interoperability drives utilization, and, of course, utilization is the key to both our economics and our data collection. Our merchant network has expanded to over 4,500 available restaurants and retail partners today. Just this morning, we announced a new partnership with White Castle, one of America’s most iconic restaurant brands. And our geographic pipeline also continues to develop. We are in active discussions with city officials across the country, from New York to Boston to San Jose—and even internationally, Vancouver and Toronto and Sydney and Melbourne. As we evaluate all this new wave of market launches, each market will represent a natural extension to our existing footprint, and we are really excited to share more about our plans throughout 2026 as these initiatives progress. And this is the critical point. Every deployment, across every domain, into every new city, generates new, unique data that feeds directly back into step one. And the cycle continues. Finally, the fourth step of the Serve Robotics Inc. flywheel is monetization. This is the step that makes the whole flywheel self-sustaining. When you monetize your fleets, you fund the next turn of the cycle and make the flywheel accelerate much faster. The companies that figure this out early, and can get paid to collect their proprietary data, have a real advantage over those who have to pay for their data. Tesla is the obvious example. They collect massive amounts of road data to train their models by simply selling cars to consumers. One way we are really advancing our monetization is by increasing our revenue sources rapidly. Delivery fees are, of course, our core business. It is continuing to accelerate as we scale geographies. But branding and advertising saw a 50% increase in Q4 year over year. With 2,000 robots moving through high-density neighborhoods, we have effectively built a neighborhood-level media network on wheels. Advertisers’ response has been exceptional, and we are building a robust bookings pipeline. Over time, we believe advertising and branding can represent as much as 50% of our fleet revenues. Think about what that means. It monetizes miles that are already being driven, at nearly zero marginal cost. Also, data and platform revenues are emerging. In 2026, we plan to further invest in our data and platform capabilities to strengthen the foundation of our robotics solution offering. By offering the platform that powers our deployed robots to external partners and other robot operators, we expect this new revenue base to mature and become a meaningful, high-margin contributor. Also, going forward, healthcare revenue from Diligent Robotics will be another meaningful contributor: nearly 100 Moxie robots across over 25 hospital facilities, with each facility generating over $200,000 in annual revenue. This is already a fully functional business unit that is generating both meaningful data and meaningful revenues. Here is what ties everything together. Every dollar of revenue funds more robots, which leads to more data, which helps us create better models, which leads to even more deployments and more revenues. And the cycle repeats. The monetization does not just sustain the flywheel. It accelerates it. I think that our acquisition strategy also deserves a moment of its own. We have completed four acquisitions in the last twelve months. Every acquisition we have made maps directly to a step or two of the Serve Robotics Inc. flywheel. Phantom Auto strengthens our data collection and our deployment scale as well. VYU Robotics strengthens our model creation. Diligent Robotics further strengthens our data gathering by introducing a new operating domain and also boosts our monetization through recurring revenues with compelling economics. And last but not least, Veebo strengthens our delivery robot monetization by boosting our partnerships with restaurants and major QSRs. This is all deliberate. It is a flywheel-driven strategy. Each deal is designed to make the flywheel stronger. Now let me bring this back to our 2025 progress, and specifically, our Q4 results. In Q4, we exceeded our revenue guidance once again. Total revenue for the fourth quarter was $900,000, representing nearly 400% growth year over year, and also meaningful sequential acceleration. Full-year 2025 revenue came in above our $2,500,000 guidance at $2,700,000. We completed the deployment of our 2,000th robot in mid-December, on time and on plan. Q4 alone, we deployed nearly 1,000 robots. That is in a single quarter. That is more than many robotics companies’ entire fleet size. Delivery volume grew 53% quarter over quarter in Q4, and roughly 270% for the full year versus 2024. This is the compounding effect of fleet at scale. Also, it is the geographic expansion and the deepening platform partnerships, all of which are working in concert as we start to see the benefits. And we expect this growth to continue as we deploy new robots and also optimize their operations and utilization. Our merchant base has also expanded to over 4,500 restaurants and retail partners today. This is a more than 10x increase from roughly 400 a year ago. We now reach over 1,700,000 households in our metro areas. This covers a population of over 3,750,000 people. And we did all of this while maintaining our 99.8% delivery reliability and also our strong safety record. This is the part that I am most proud of. Scaling fast is hard, but scaling fast while maintaining quality and safety is what really separates us. Okay. I want to close with where all of this leads to. A year ago, we had roughly 100 robots. Today, we have 2,000. The path is clear from here to 10,000 robots and well beyond. This would be across more cities, more verticals, even internationally. We have the engineering and operations roadmap and also a track record of execution. The hardest part—building the platform and proving the technology, earning the trust of our partners and cities and consumers—these are all tailwinds now. What excites me most is that each additional robot we deploy makes the entire system more valuable. The data gets richer, the models get sharper, the economics improve, the partnerships deepen. This is the nature of a platform business with a flywheel at the core. We are just entering that phase where the compounding effect and the acceleration of the flywheel become visible. With the Diligent Robotics acquisition, we have extended this platform beyond the sidewalk and into hospitals. That is not a one-off. It is a signal of where things are heading. The robotics platform we are building will be general enough to operate wherever very, very intelligent machines are needed to move safely among people, and mature enough to deliver real commercial value right away. We are not building a delivery company. We are building the operating layer for how robots integrate into our lives. That is the long game, and we are playing it from a position of strength. 2025 was the year of proof. 2026 is the year of compounding returns. I have never been more energized about what is ahead. And with that, let me hand it over back to Brian. Brian Read: Thank you, Ali. Good morning, everyone. Entering 2025, we set explicit operating targets around fleet expansion, revenue growth, and geographic scale, and we delivered against each one of them. More importantly, we strengthened the economic foundation of our business while doing so. That operating discipline will continue to define Serve Robotics Inc. into 2026. I will walk through the details. Total revenue for Q4 2025 increased over 400% year over year to $900,000. Full-year 2025 revenue was $2,700,000, exceeding our guidance of $2,500,000 and representing growth of 46% over the prior year. Fleet revenue was $700,000 for the quarter, growing 50% sequentially. Branding saw record bookings during the quarter as our expanded fleet attracted larger advertising commitments. We also recorded our first revenues related to data monetization in the quarter, an early signal of the data and platform opportunity ahead. As Ali and I have mentioned, these opportunities will continue to evolve through 2026. Software revenues were over $200,000 in the quarter. Our transition to recurring software revenue continues to progress, with our recurring software base now representing approximately 70% of software revenues. More broadly than software, we noticed the shift in revenue quality during the year. Our underlying recurring revenues, defined as revenue excluding one-time agreements, grew over 3x during the year. That shift increases revenue visibility while reducing volatility as we scale. Beneath the top line, Q4 margins reflect the largest single-quarter deployment in our history, with nearly 1,000 new robots. When deployments occur at this scale, newly introduced cohorts initially operate below steady-state efficiency. That is expected and by design. What matters is the trajectory as that fleet matures. This past year, we observed average daily operating hours per robot climb 56% to over 12 hours compared to Q4 last year. Cost per delivery trended down quarter over quarter during the year as our operations team gained experience and our systems continued to mature. Collectively, along with other metrics, these trends give us confidence in continued margin improvement moving into 2026. As reflected in our 2025 results, the operational infrastructure required to support our larger fleet was established this past year: expanded market operations, built fleet maintenance capabilities, remote supervision systems, and deployment capacity ahead of 2026 revenue, and, of course, the achievement of our 2,000-robot deployment milestone. As we move through 2026, we expect a growing portion of that infrastructure to be absorbed across a larger and more productive fleet. GAAP operating expenses for Q4 were $34,300,000, reflecting the cost of deploying nearly 1,000 new robots and expanded operational capacity across new cities within Alexandria, Virginia, and Fort Lauderdale, Florida. On a non-GAAP basis, excluding stock-based compensation of $6,300,000, operating expenses were $25,200,000. R&D remains our largest investment area, at $15,900,000 on a GAAP basis or $12,000,000 on a non-GAAP basis. This is directed towards advancing our AI stack, integrating capabilities from the VYU and Phantom Auto acquisitions, and building the data infrastructure for our growing fleet. G&A spending stayed lean and purposeful, decreasing from the prior quarter by $2,000,000 to $11,100,000 on a GAAP basis and $9,100,000 on a non-GAAP basis. We expanded to one new metro area and nine new cities during Q4 and anticipate a flattening of our G&A expense growth even as we continue to scale through 2026. As I mentioned, we will continue to manage operating expenses with discipline, aligning investment with measurable deployment milestones. Interest income generated in the quarter was nearly $2,000,000. Additionally, Q4 reflects a $3,800,000 tax benefit related to deferred tax liabilities associated with the VYU acquisition, resulting in a partial release of our valuation allowance. Turning to the balance sheet, we closed the year with $260,000,000 in cash and marketable securities. Capital expenditures for the quarter were $16,500,000, representing the tail end of our costs for the 2,000-unit build. Our liquidity position provides strategic flexibility in a capital-intensive industry where balance sheet strength is a competitive advantage. We continue to evaluate additional funding opportunities opportunistically. Adjusted EBITDA was negative $28,000,000. As revenue scales and per-unit economics improve, we expect sequential improvement in adjusted EBITDA margins throughout 2026. Turning to our outlook, today, we are raising 2026 revenue guidance to approximately $26,000,000. The improved outlook is primarily driven by the acquisition of Diligent Robotics, which we believe represents a high-return use of capital while broadening our platform, expanding our addressable market, and increasing the proportion of revenue derived from durable recurring contracts. To fund that acquisition, we moderated our planned 2026 capital expenditures. As a result, we redirected a portion of planned near-term fleet investment toward a significant new market opportunity that is expected to contribute roughly $7,000,000 of revenue during 2026, primarily through recurring healthcare contracts. Looking beyond 2026, we continue to expect this newly combined core business to deliver sustained, accelerating growth. We have previously discussed a $60,000,000 to $80,000,000 annualized revenue run rate associated with the full utilization of our fleet. Internally, we view that level less as an endpoint and more as an intermediate milestone as our business continues to scale exponentially. Our growth is expected to be driven in part by disciplined geographic expansion. As Ali touched on earlier, we are in productive discussions to extend our footprint across additional U.S. markets and, over time, pursue selective expansion into major international cities like Toronto, Sydney, Tokyo, Madrid, and London, among many others. We expect 2026 capital expenditures of $25,000,000 associated with the production and deployment of additional robots as we continue expanding the fleet and increasing the volume of real-world operating data that strengthens the flywheel. Recent acquisitions are expected to increase our 2026 operating base by approximately $20,000,000 to $30,000,000. Non-GAAP operating expenses in 2026 are expected to be approximately $160,000,000 to $170,000,000, reflecting continued investment in autonomy development, fleet scale, and platform capabilities across both delivery and healthcare robotics. Let me close with this. The investments we are making in 2026 are specifically designed to strengthen the plan Ali described. We are expanding the fleet, improving the autonomy stack, and increasing monetization opportunities across the platform as the flywheel accelerates. Serve Robotics Inc. has evolved into a diversified robotics platform with multiple revenue streams spanning delivery, advertising, data services, software, and now healthcare automation. In the age of physical AI, we are using our strength in autonomous robotic delivery to build a generational robotics company that will define this era. I will hand it back to Steve for Q&A. Steve Webb: Thank you, Ali and Brian. We will now move into the Q&A session. But first, I would like to say a big thank you to all the investors and analysts who submitted questions via email. Thank you so much for your engagement. The first question we have is related to new robots. Serve Robotics Inc. deployed 2,000 robots last year. What is the goal from a unit deployment perspective in 2026 and beyond that? Ali Kashani: Thank you. I am happy to take this one. So over the next few years, we expect to deploy thousands more robots. But in the short term, as we have shared in the past, before we go on and share a detailed plan, we want to really let the recent growth settle in, and we want to gather all the data and learnings from last year’s 20x fleet growth. We have the capacity to continue growing our revenue right now. On the other hand, manufacturing and supply chain, as we all know, require certain lead time. So we are already working on the supply chain for the next batch of robots, so that we can expand to new major markets as they become available quickly. But the time between now and when the supply chain and manufacturing of the robots would be available is a good time for us to really hone in on our playbooks and get them refined based on the existing growth. And we do not really want to be deploying more robots until we get all the current ones fully activated on a daily basis. Brian Read: Yes, if I can wrap up on that, Ali. In the prepared remarks, we talked about CapEx guidance being approximately $25,000,000 during 2026. A significant majority of that will be for the Serve Robotics Inc. fleet expansion. But we are going to continue to invest not only in Serve Robotics Inc. but for additional Moxie robots and look to accelerate their growth as well. I think, Ali, exactly as you summed up, in this time period—Q1 2026—we are looking to optimize the performance of the full fleet. And most importantly, we retain control over that CapEx timing and also the OpEx deployment costs as that fleet continues to grow. Steve Webb: Great. Thanks, Brian. On to our next question. What percentage of the 2,000 deployed robots should be daily active by the end of first quarter? Ali Kashani: I am happy to take this one as well. So from manufacturing and deploying robots to reaching full utilization of the fleet, as we have discussed in the past, there are several steps that take place. You start with, obviously, creating the depots in each new market, building the operational footprint, which includes hiring and training staff. So this is a lot of the work we have already done. And then the next step after that is getting any requirements by local municipalities, any stage gates, all of that addressed. We need to then activate neighborhoods with our delivery partners, onboard local merchants, and then once all of that is done, we can have robots at full operational hours every day. We would focus on operational efficiency—it is a question of where to put the robots, how to move them around, all of that—so that we capture the maximum demand. So we expect that by the middle of this year, as I said before, before we manufacture any additional robots, we would get all of the existing robots on a fully active daily basis and shift our focus to that operational optimization. We are timing everything again so that we have that full utilization, the full activation of these robots, before manufacturing new ones, given the lead times for manufacturing. Steve Webb: Ali. On to the next question. We received this one about the acquisition of Diligent Robotics. How are the integration efforts going, and what are your plans for growing the healthcare business? Ali Kashani: That is a great question. So we covered some of this earlier, but I can dig in a bit more. We have always intended for our autonomy platform to extend beyond just food delivery and into many other environments, including, in this case, hospital and healthcare. As we looked at Diligent Robotics during our acquisition process, it became pretty clear very quickly that it is the right time and right company for us to expand our scope. So this acquisition actually strengthens our flywheel, as I mentioned earlier, by really enriching our data further. It also creates a more balanced and resilient revenue base for us, and it opens up, obviously, new market opportunities and a new growth engine. We are already starting to integrate our platform capabilities with Moxie robots, but this will take some time. As we do this integration work, we are creating a repeatable playbook for expanding into new verticals and operating in multiple domains. Brian Read: On the second part of that question for the revenue, and just to give a little bit more color, these are existing, established recurring revenue contracts that we were able to acquire through Diligent. And so these are different than our demand cycle for current food delivery. The $7,000,000 number we referenced in the prepared remarks is for revenue here in 2026. And I think it is important, from an integration standpoint, we are going to continue to focus on additional investments into the healthcare business around engineering headcount and infrastructure to support that team through their next phase of growth. Our business development team and sales teams are looking at other opportunities in the pipeline. Several of those are currently being evaluated, and we are going to make the best decisions to drive long-term revenue growth. Ali Kashani: Great. Steve Webb: On to the next question. Is optimization of the fleet a linear process, or are there step functions? And if so, what would cause that? Ali Kashani: Yes. You know, we touched on the steps earlier. Of course, we are pushing a lot of these steps at the same time, but you are never going to get everything done at the same time. I think going from that deployment to full, full utilization steps are pretty important. There are many factors that affect that utilization, and those steps kind of outline, as I said, as I mentioned earlier. Overall, though, we are seeing that our more mature markets are further along on that optimization curve. We mentioned this earlier: 2026 is really about compounding returns for us. 2025 was all about building that infrastructure. So in 2026, we are going to be really laser-focused on optimization and efficiency of the fleet, both on the sidewalk and in the hospitals. Steve Webb: And we have enough time for one more question. Can you speak more about your plans to expand internationally? What is the time frame for those city launches? Ali Kashani: Yes. That is an exciting one to end on. Let me maybe give some context on our thinking here. So we have really built a great foundation for expansion. We are now in 20 cities, six major metros. We have really proven the tech at scale, built the operational playbook, a way to launch new markets efficiently. So this work really supports that international expansion well. We are now in active discussions with city officials and partners in multiple international markets, from Canada to Australia, Japan, Spain, and many other countries. We are considering major cities, dense urban environments, strong delivery markets, and municipal governments that are really leaning into autonomous robots on sidewalks. I want to emphasize that we are going to be disciplined and intentional about these expansions, especially weighing our growth opportunities here in the U.S. versus markets abroad. We have learned from our U.S. expansions to date that the right way to go to a new market is methodical, and we want to really be measured as we identify the right partners and the right expansion cities. We do get a ton of inbound interest to consider, but we want to be very selective. And we see this ultimate growth opportunity internationally as a 2027 opportunity, but 2026 is for us to lay the groundwork for it, just as we laid the groundwork for this year last year by expanding to new cities. In the meantime, our robots obviously will continue and collect more data in more than 20 cities today and expanding by the end of the year, and we will keep making that flywheel move faster and become more durable so that we can enable even further rapid growth and expansion. I will just end by saying this again. I have never been more energized and excited about what is ahead for Serve Robotics Inc., and I cannot wait to see Serve Robotics Inc. robots operating in cities across the globe. Steve Webb: Great. Thanks, Ali, and thanks, Brian. That is all the time we have for today. I would like to thank everyone for joining us again. Thank you for joining us on the call today. Operator: Ladies and gentlemen, thank you all for joining, and that concludes today’s conference call. All participants may now disconnect.
Operator: Okay. Hello, everyone, and welcome to Viant Technology Inc.’s fourth quarter 2025 earnings conference call. My name is David, and I will be your operator today. Before I hand the call over to the Viant Technology Inc. leadership team, I would like to go over a few housekeeping notes for the program. As a reminder, this call is being recorded. After the speakers’ remarks, there will be a question-and-answer session. If you plan to ask a question, please ensure you have set your Zoom name to display your full name and firm. If you would like to ask a question during the call, please use the raise hand function located at the bottom of your screen. Thank you for your attendance today. I am now happy to turn the call over to Nicholas Todd Zangler, SVP of Investor Relations for Viant Technology Inc. Nicholas Todd Zangler: Thank you. Good afternoon, and welcome to Viant Technology Inc.’s fourth quarter 2025 earnings conference call. On the call today are Tim Vanderhook, Co-Founder and Chief Executive Officer; Chris Vanderhook, Co-Founder and Chief Operating Officer; and Lawrence J. Madden, Chief Financial Officer. I would like to remind you that we will make forward-looking statements on our call today, including, but not limited to, statements regarding our guidance for Q1 2026 and other future financial results, our strategy, our platform development initiatives, including Viant AI, our pipeline and potential partnership opportunities, growth of our total addressable market, our share repurchase program, and industry trends that are based on assumptions and subject to future events, risks, and uncertainties that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of today and we undertake no obligation to update or revise these statements except as required by law. For more information about factors that may cause actual results to differ materially from forward-looking statements, and our entire Safe Harbor statement, please refer to the news release issued today as well as the risks and uncertainties described in our Annual Report on Form 10-K for the year ended December 31, 2025, under the heading “Risk Factors,” and in our other filings with the SEC. During today’s call, we will also present both GAAP and non-GAAP financial measures. Additional disclosures regarding these non-GAAP measures, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, are included in the news release issued today and in our earnings presentation, which have been posted on the Investor Relations page of the company’s website and in our filings with the SEC. I will now turn the call over to Tim Vanderhook, Chief Executive Officer of Viant Technology Inc. Tim? Tim Vanderhook: Thanks, Nick. And thank you all for joining us today. We delivered strong fourth quarter performance achieving new company records across all key metrics. Revenue increased 22% year-over-year, and contribution ex-TAC increased 19% year-over-year, both above the high point of our quarterly guidance range. When excluding political advertising, revenue and contribution ex-TAC increased 28% and 24% in the quarter, respectively, and more accurately reflects the true strength of our business. Growth was broad-based across verticals, driven by accelerating CTV demand, strong digital out-of-home and mobile demand, increased utilization and further adoption of Viant Technology Inc.’s addressability solutions, and expanded use of the Viant AI product suite. Adjusted EBITDA increased 45% year-over-year to $24,700,000 for the quarter and exceeded the high end of our guidance range. Our fourth quarter performance completes a solid year for Viant Technology Inc. In 2025, revenue increased 19% to $344,000,000. Contribution ex-TAC increased 18% to $209,000,000, and adjusted EBITDA increased 29% to $57,000,000. While these are standout results as reported, our underlying performance was far stronger than these results indicate. Our contribution ex-TAC rose nearly 20% in 2025 while absorbing the effects of tariff-related pressure, cycling a difficult political comparison, and navigating the migration of a material client off platform due to a corporate merger. We were also able to increase adjusted EBITDA nearly 30% while absorbing incremental operating expenses associated with our strategic acquisitions of IRIS.TV and Locker. As we shift our focus to 2026, we foresee a year of accelerating performance attributable to a number of catalysts worth noting. First, we see a healthy ad environment, evidenced by strengthening customer demand trends observed through this point in the quarter. Our new flagship customer Molson Coors is live and actively deploying ad spend in the first quarter, with plans to ramp throughout the year and in the years to come. Joining Molson Coors are several major U.S. advertisers who have recently launched ad campaigns with Viant Technology Inc., including WHOOP, the human performance company behind world-class wearable technology. Other notable wins include a leading CTV streaming service, a national charitable foundation, and a national convenience store chain. We expect these advertisers to significantly ramp ad spend in the coming quarters, and we look forward to securing additional major U.S. advertiser wins throughout the year. We also expect major tentpole viewership events to drive incremental ad spend to the CTV channel this year. In February, the most-watched Winter Olympics since 2014 averaged 23,500,000 U.S. viewers, and the 2026 World Cup is projected to exceed a prior record of 26,000,000 U.S. viewers later this year. Both marquee events are hosted by providers within our Direct Access Premium Publisher program—Peacock for the Winter Olympics and Fox, Peacock, and various virtual MVPDs for the World Cup. Furthermore, we anticipate strong contribution from political advertisers in the second half of the year, fueled by midterm elections and the ongoing shift of political budgets from linear TV to CTV. Within our addressability suite, we expect to benefit from ramping adoption and increased utilization of IRIS ID, our industry-leading content identifier. And finally, I could not be more excited about the recent launch of Outcomes, our new branded AI decisioning solution powered by our AI Lattice Brain and intelligence layer, which is aimed at winning performance budgets across advertisers of all sizes. Chris and I are going to spend the bulk of our time today highlighting the capabilities, features, and use cases associated with the launch of Outcomes. But I do want to provide an update on recent performance and progress across all three of our key strategic priorities: CTV, addressability, and Viant AI. The migration of advertising dollars from linear television to CTV continues to accelerate, and our platform is strategically positioned to serve advertisers capitalizing on this shift. Reflecting this market dynamic, our customers increasingly directed their purchasing decisions towards CTV, with total CTV spend on our platform reaching a new all-time high in the quarter and representing 46% of total advertiser spend. For the second consecutive year, CTV contribution ex-TAC increased by more than 40%, over two-and-a-half times the broader industry growth rate. This outsized adoption reflects Viant Technology Inc.’s strategic investments in CTV infrastructure, publisher relationships, and addressability solutions, which collectively position Viant Technology Inc. as the platform of choice for CTV campaign deployment across the open internet. Contributing to our outsized CTV growth is the continued expansion of our Direct Access Premium Publisher program. Direct Access offers advertisers an efficient, targetable, and measurable path to purchase CTV ad inventory. By facilitating transactions directly with publishers, we can bypass bidstream resellers, allowing advertisers’ spend to be allocated to working media, not middlemen, driving better returns for our clients. For the full year 2025, nearly 50% of CTV ad spend on our platform was transacted through our Direct Access Premium Publisher program, which includes CTV streaming services from leading providers like Disney, Paramount, Peacock, and many more. Our addressability suite is the bedrock of our buying platform. It includes the industry’s leading audience identifier, Household ID, and the industry’s leading content identifier, IRIS ID. Viant Technology Inc.’s Household ID, our patented deterministic audience targeting and measurement solution, continues to see strong utilization amongst advertisers and was a meaningful contributor to top-line growth in the quarter. Household ID delivers superior addressability for advertisers looking to leverage their first-party data to reach specific audiences and measure campaign performance. Our Household ID is truly ubiquitous, embedded in over 80% of all programmatic bid requests and over 90% of all CTV requests. And with 95% of all household addresses mapped to our ID graph, we can match advertisers to addressable audiences at a massive scale, with Household ID offering approximately four times the coverage of competing audience identifiers. IRIS ID, our proprietary content targeting and measurement solution, continues to proliferate amongst publishers, enabling advertisers to deploy contextual campaigns at greater scale. In just over a year since its acquisition, the presence of IRIS ID within the CTV bidstream has grown fivefold, reaching nearly 50% of incoming CTV bid requests during the first quarter. IRIS ID empowers advertisers to target CTV inventory at the show level, going beyond the app, making it possible for advertisers to bid on unique contextual signals like emotional sentiment, tone, and brand suitability. This is made possible through direct integrations with the publishers’ own content management systems, providing Viant Technology Inc. with a meaningfully higher resolution of contextual intelligence. Looking across our client base, financial institutions use IRIS ID for brand-safe ad placement, targeting categories like fine art and family, and content that conveys inspiration and reflection. Outdoor fashion retailers deploy IRIS ID for brand relevance, targeting categories such as nature and travel, and content that exudes reliability and ruggedness. Given the enhancement in performance, we have seen several advertisers and agencies mandate the use of IRIS ID across their entire CTV budgets, which is quite the endorsement and one that is likely to incentivize further adoption across CTV publishers. In the quarter, revenue attached to IRIS ID utilization increased 90% sequentially. Moving on to Viant AI. In early January, we announced the launch of the fourth phase of Viant AI, our AI decisioning functionality. AI decisioning introduces a new standard of autonomous optimization. It moves beyond initial ad campaign setup, providing for real-time campaign refinement and the technological agility to continuously react to fluid market conditions, with the goal of delivering optimal campaign outcomes. The launch of AI decisioning was accompanied by the introduction of a new branded solution appropriately named Outcomes, which we have built to service performance advertisers. At the surface level—the user interface level—Outcomes asks for just four basic inputs: the name of the advertiser or the advertiser’s product or service, the budget, the flight dates, and the goal, be it incremental revenue, return on ad spend, or per action. Once submitted, the advertiser’s work is done, and Viant AI does the rest. Beneath the surface is a decisioning architecture purpose-built for autonomous campaign operation, which we call the AI Lattice Brain. Based on the advertiser inputs, the Lattice Brain constructs the most optimal media plan by leveraging differentiated and proprietary signals unique to Viant Technology Inc. from within our intelligence layer. Signals that support a multitude of functions: for identity resolution, Lattice Brain utilizes signals like Household ID and our custom identity graph to build and execute sophisticated audience targeting strategies, frequency capping, and sequential messaging capabilities. For supply quality evaluation, Lattice Brain leverages our unique integrations with Direct Access Premium Publishers and our custom supply scoring models. These models rank supply paths based on impression quality, brand safety, fraudulence, bot activity, and more, providing critical intelligence that informs channel and publisher mix modeling and price discovery. For performance enhancement, Lattice Brain taps our high-fidelity signals like IRIS ID, along with attention and creative placement scoring models to maximize campaigns for viewability, engagement, and overall impact, aligning media delivery directly to advertiser-defined outcomes. Our AI Lattice Brain operates against a signal set that no competing DSP or standalone AI tool can replicate, because it is dependent on proprietary identifiers, unique supply integrations, and optimized intelligence that accumulates only through our integrated stack. Importantly, Lattice Brain launches with this intelligence already in place, activating against the mature, high-fidelity signal foundation from day one. As campaigns execute, our platform continuously incorporates incremental performance data—data further sharpening precision and efficiency. We believe this flywheel to decide, execute, measure, and refine, operating against the highest-fidelity proprietary signals, is capable of delivering newfound levels of ad efficiency and performance that compounds over time. Historically, advertisers and agencies have been burdened with the responsibility of manually constructing and executing ad campaigns. They have had little choice but to navigate a highly complex and fluid bidstream, which operates at the staggering speed of up to 15,000,000 bid requests per second. Independently, this is a difficult task, even with the use of our proprietary data signals at their disposal. But with the launch of Outcomes, the onus shifts to AI, and performance optimization becomes autonomous. Outcomes assumes the role of media planner, trader, and data scientist, autonomously optimizing every decision in service of the advertiser’s defined performance objective. As the culmination of all four phases of Viant AI, Outcomes is a complete autonomous performance solution. Governed by our Lattice Brain decisioning architecture, it leverages proprietary data signals within our intelligence layer to deliver measurable performance outcomes in a way that has not been done before. We have built the open internet’s first fully autonomous AI-powered ad product, designed to compete for performance budgets against the walled gardens. In a moment, Chris will discuss our go-to-market strategy and run through a few early case studies that demonstrate the effectiveness of our new Outcomes solution. Before concluding, I want to briefly address the broader industry discussion around AI and its impact on software platforms, including companies like Viant Technology Inc. We believe AI strengthens businesses built on proprietary data and domain-specific infrastructure. In our case, AI amplifies the structural advantages already embedded in our platform. There is an insurmountable gap between the theoretical ability to assemble a DSP interface using AI tools versus operating a scaled, enterprise-grade, programmatic platform supported by irreplicable infrastructure. While an LLM may generate generic bidding logic against commodity signals, our AI operates against deterministic household-level identity, proprietary content-level signals, exclusive direct access supply paths, and years of accumulated optimization intelligence. LLMs cannot replicate a Household ID covering over 115,000,000 U.S. households, selectively embed IRIS ID across more than 1,400 publisher content management systems, or recreate direct publisher integrations representing over 75% of addressable CTV through prompt engineering alone. While AI may transform user interfaces across categories such as CRMs and analytics dashboards, at Viant Technology Inc., AI is not an overlay. It is fused with proprietary data and programmatic infrastructure. That fusion defines our platform architecture and reinforces our competitive positioning. In summary, we delivered on our commitment to reaccelerate top and bottom-line growth in the fourth quarter, anchored by our three strategic priorities: CTV, addressability, and Viant AI. Our business is strategically aligned to capitalize on the industry’s largest and most transformative growth opportunities, where we continue to lead and innovate. We believe this positioning uniquely equips Viant Technology Inc. to capture the next wave of brand and performance budget growth in 2026 and beyond. With that, I will pass it over to Chris. Chris Vanderhook: Thanks, Tim. I will provide an update on our customer go-to-market strategy, particularly as it pertains to the launch of Outcomes. But first, let us take a step back and survey the broader advertising landscape. This year in the U.S., total advertising dollars are expected to reach nearly $450,000,000,000. Of this, 30% will be allocated to brand budgets, while 70% will be allocated to performance budgets. Today, performance budgets have largely been dominated by search and social walled gardens, including Google, Meta, and Amazon. With the launch of Outcomes, we intend to compete directly for performance budgets, aiming to divert spend to the open internet by leveraging a complete end-to-end view of attribution across the entire customer journey, connecting initial CTV exposure to final conversion. Our go-to-market approach starts with our existing customers, where we see an opportunity to drive significant organic growth as we increasingly service their performance budgets, in addition to their existing brand budgets. Virtually all of our customers allocate spend to search and social walled gardens as part of a well-rounded holistic marketing strategy. We intend to leverage our existing relationships to showcase the effectiveness of Outcomes and win new performance budgets from our existing customers. This initiative is well underway, and I would like to highlight a few examples of our Outcomes product at work. Over 20 existing customers have extensively tested Outcomes, with a number of them implementing Outcomes on an ongoing basis, one of which is MacKenzie-Childs, a luxury home décor brand and prominent seller of tableware, kitchenware, and decorative home furnishings. In our initial tests, we ran two separate ad campaigns for MacKenzie-Childs, each identical in scope, with both campaigns seeking to maximize sales conversions over the same time period with the same budget. The only difference was that one campaign was planned, executed, and optimized by a human expert, which served as our control group, while the other campaign was planned, executed, and optimized by our new fully autonomous Outcomes solution. We even handicapped Outcomes by restricting the use of retargeting strategies, which would have further enhanced performance, and yet still, the campaign utilizing Outcomes delivered a 58% lower cost per conversion compared to the control group. Let me clearly articulate this result. For this test, the human expert campaign was able to generate a $135 sale for every $33 spent on advertising, while Outcomes was able to generate a $160 sale for every $14 spent on advertising, a 58% reduction in cost per outcome. So for the same budget, Outcomes generated over 180% total sales versus the control campaign. There are two primary reasons behind Outcomes’ superior performance. First, at any given moment amongst trillions of potential campaign configurations, by definition, there must exist one ideal campaign that best allocates spend across the right channels, publishers, audiences, and content, and does so at the right price to yield the most optimal outcome. In the pursuit of this optimal outcome, we believe our AI Lattice Brain is simply far better at digesting and interpreting all of our proprietary data signals—inputs utilized to create the most ideal campaign. And second, in a fluid marketplace, the ideal campaign configuration is always changing. Lattice Brain is uniquely capable of iterating and redesigning campaigns in real time in response to fluid market conditions at a speed that is simply impossible for humans to replicate, and therefore, it is far better equipped to continuously reconfigure for the most ideal campaign configuration, which results in driving superior business outcomes for the customer. In another client test, UMass Global, a private university with over 19,000 students, pitted Outcomes against human experts with a goal of driving high-intent student inquiries. Even with a short training period, Outcomes achieved an 82% lower cost per outcome compared to the control group. Kampgrounds of America, one of the nation’s largest campgrounds franchise businesses, tested Outcomes during a recent holiday season with a goal of driving confirmed purchase events. Outcomes delivered a 76% reduction in cost per purchase event compared to the control group. Tire Discounters, one of the largest tires and automotive service retailers in the U.S., recently tested Outcomes seeking high-intent lead events. Outcomes delivered a 43% reduction in cost per lead compared to the control group. Uqora, a biotech healthcare company, saw a 95% reduction in cost per outcome, while the Alzheimer’s Association saw a 68% reduction in cost per outcome. And the list goes on. Based on these results, we believe Outcomes is clearly capable of driving a meaningful inflection in return on ad spend for advertisers. As utilization scales amongst our existing customer base, we see an immediate opportunity to accelerate organic growth. We believe that over time, clients will move toward autonomous platforms that deliver increased performance and greater reliability in achieving outcomes. Beyond our existing customers, Outcomes enables Viant Technology Inc. to aggressively pursue performance budgets across the more than 10,000,000 advertisers currently spending with search and social walled gardens. And because virtually all of these prospective advertisers are yet to utilize the highly effective CTV channel, we simply need to prove that their first dollar allocated to CTV via Outcomes will outperform their next dollar allocated to search and social walled gardens, where we believe they are already overinvested and seeing diminishing returns. We are also seeing strong enterprise adoption with major U.S. brands, including Molson Coors, as they partner with Viant Technology Inc. across a broad range of industry verticals. We recently announced a partnership with WHOOP, the performance company behind world-class wearable technology, where Viant Technology Inc. was designated as their DSP of record. WHOOP chose Viant Technology Inc. because they recognize CTV as the most digital channel for growth and value our capacity to deliver measurable incremental results via proprietary, high-fidelity data signals. With aggressive growth ambitions, WHOOP plans to deploy a sizable ad budget over the next two years through Viant Technology Inc.’s buying platform. We believe major U.S. advertisers are increasingly partnering with Viant Technology Inc. because of our unique value proposition—rooted in independence, CTV leadership, proprietary data and addressability solutions, and AI capabilities. To capitalize on recent momentum, we have expanded our enterprise sales team, appointing tenured executive sales leaders across key industry verticals, including healthcare, CPG, QSR, retail, and travel and tourism. These seasoned leaders bring deep, long-standing relationships with major U.S. advertisers and are tasked with securing new flagship accounts. And to best serve the diverse needs of major U.S. advertisers who manage both large brand budgets and large performance budgets, our buying platform remains flexible in use. Advertisers may choose to run campaigns manually as they have traditionally done, or they can choose to leverage various individual components of our AI suite, including AI bidding, AI planning, and AI measurement and analysis, or they could choose to go all in on autonomous advertising, delegating the entire construction and execution process to our Outcomes solution, powered by our Lattice Brain AI decisioning architecture and intelligence layer. In closing, I want to reiterate that our long-standing vision has always been to deliver autonomous advertising to the open internet. After years of dedicated investment, focus, and persistence, we are thrilled to be in market with a fully autonomous buying platform, uniquely equipped with proprietary, high-fidelity data signals. With this new asset, we see an unprecedented opportunity to expand our total addressable market and accelerate growth throughout 2026 and beyond, winning incremental spend from our existing customers, performance advertisers, and major U.S. brands. And with that, I will turn it over to Lawrence to provide more detail on our financial performance. Lawrence? Lawrence J. Madden: Thanks, Chris. Before I begin, I would like to remind everyone that we have posted a presentation on our Investor Relations website that includes supplemental financial information to accompany today’s call. We concluded 2025 with a strong fourth quarter, executing against the key strategic priorities Tim outlined—CTV, addressability, and AI—and translating that momentum into record financial performance. Before diving into our detailed fourth quarter results, I will provide a high-level summary of our full-year performance. For the full year of 2025, we achieved record results across all key metrics. Revenue totaled $344,200,000, increasing 19% year-over-year. Contribution ex-TAC totaled $208,700,000, increasing 18% year-over-year. Adjusted EBITDA totaled $57,400,000, increasing 29% year-over-year, and adjusted EBITDA margin expanded by approximately 250 basis points year-over-year to reach 28%. Finally, non-GAAP net income totaled $41,100,000 in 2025, increasing 19% year-over-year. I will now move on to our results for the fourth quarter. Revenue for Q4 was $110,100,000, up 22% year-over-year and 5% above the high end of our guidance range. On a sequential basis, revenue increased 29% from Q3. Contribution ex-TAC for Q4 totaled $64,600,000, up 19% year-over-year and 1% above the high end of our guidance range. On a sequential basis, contribution ex-TAC increased 22% from Q3. Both revenue and contribution ex-TAC represent record results for a quarterly period. It is important to note, as Tim mentioned, our underlying business is performing stronger than our reported results indicate, primarily attributable to the difficult comparison brought about by last year’s high political ad spend contribution. When excluding political ad spend contribution from the prior-year election cycle, which weighed on revenue growth by approximately 600 basis points and contribution ex-TAC growth by approximately 500 basis points in the quarter, revenue increased 28% year-over-year and contribution ex-TAC increased 24% year-over-year on a pro forma basis. New customer momentum also remains strong, as evidenced by the recent announcement of a new multi-form, multiyear partnership with WHOOP, alongside a number of recently established wins with other major U.S. advertisers, including Molson Coors. We believe these trends reinforce our strong competitive positioning and support our ability to continue outperforming the broader programmatic market over the long term. We delivered strong performance across most customer verticals in Q4, with financial services, public services, and CPG leading the way. Advertisers continue to select Viant Technology Inc. for access to emerging digital channels, with CTV adoption reflecting the broader industry shift toward premium addressable video. In Q4, customer-directed CTV purchasing accounted for a record high of 46% of total platform spend, with nearly half running through our Direct Access Premium Publishers. CTV spend reached an all-time high in the quarter, as advertisers increasingly prioritize CTV to drive performance outcomes. Advertisers industry-wide continue to shift their media mix towards emerging digital channels such as CTV, streaming audio, and digital out-of-home. Reflecting this secular trend, customer-directed purchasing on our platform across these channels collectively represented approximately 54% of total platform spend for the year, up from 51% in 2024 and 43% in 2023. Viant Technology Inc. remains well positioned as a leading partner for advertisers moving beyond traditional display to capitalize on next-generation media formats. Reflecting advertiser preference for high-impact, measurable formats, customer-directed video spend, inclusive of CTV, reached a record high and represented 63% of total spend in the quarter, underscoring Viant Technology Inc.’s strong positioning to serve this demand. Non-GAAP operating expenses totaled $39,800,000 in the fourth quarter, representing a 7% year-over-year increase and an 8% sequential increase. Notably, operating expenses include strategic investments related to the acquisitions of IRIS.TV, which closed in November 2024, and Locker, which closed in February 2025, both of which expand our long-term product capabilities and are intended to support long-term growth. Excluding these acquisitions, organic non-GAAP operating expenses increased a modest 5% year-over-year and increased 8% sequentially, reflecting continued operating leverage and disciplined expense management. Importantly, we remain focused on scaling efficiently. Even as we continue to invest in innovation across Viant AI and our broader technology stack, we are delivering measurable gains in productivity, increasing trailing-twelve-month contribution ex-TAC per employee by over 8% year-over-year, marking 10 straight quarterly increases—a clear signal of improving operational efficiency. Adjusted EBITDA for Q4 was $24,700,000, exceeding the high point of our guidance by 5% and growing 45% year-over-year and 54% sequentially. Adjusted EBITDA as a percentage of contribution ex-TAC was 38% for the quarter, above our guidance range and representing nearly 700 basis points of improvement over the prior-year period. Non-GAAP net income, which excludes stock-based comp and other adjustments, totaled $19,000,000 for the quarter, up 37% from $13,800,000 in the prior year. Non-GAAP basic earnings per Class A share outstanding was $0.23 in the fourth quarter compared to $0.17 in the prior year. In terms of share count, we ended the quarter with 63,300,000 total shares outstanding, consisting of 17,600,000 Class A shares and 45,700,000 Class B shares. We ended the quarter with a strong balance sheet, including $191,200,000 in cash and cash equivalents, $219,200,000 in positive working capital, no debt, and full access to our $75,000,000 credit facility. During the quarter, we generated $33,100,000 of cash flow from operations and $28,200,000 of free cash flow, up 101% and 132%, respectively, year-over-year. We also remain disciplined in our capital allocations. Since launching our share repurchase program in May 2024, we have returned $59,600,000 to shareholders. As of March 9, approximately $40,400,000 remains available under our current authorization. We intend to continue executing this program with a focus on maximizing value for long-term shareholders, particularly during periods when our stock is undervalued. We believe our strong financial foundation, combined with consistent execution and a balanced capital allocation strategy, positions us well to capture growth opportunities and drive shareholder value in the quarters ahead. Turning now to our Q1 outlook. For 2026, we expect revenue of $83,000,000 to $86,000,000, up 20% over the prior-year period at the midpoint; contribution ex-TAC of $49,000,000 to $51,000,000, reflecting 17% year-over-year growth at the midpoint; non-GAAP operating expenses of $40,500,000 to $41,500,000, up 10% year-over-year at the midpoint; and adjusted EBITDA of $8,500,000 to $9,500,000, representing a 67% year-over-year increase at the midpoint. Finally, we expect an adjusted EBITDA margin as a percentage of contribution ex-TAC of 18% at the midpoint, representing over 500 basis points of improvement over the prior-year period. The midpoint of our guide assumes record Q1 performance across revenue, contribution ex-TAC, and adjusted EBITDA. I would also like to make a couple of general observations about our outlook for 2026. In 2026, we expect contribution ex-TAC growth to continue outpacing the broader U.S. programmatic market, which is projected to grow approximately 13%, driving further market share gains. We expect year-over-year growth rates in revenue and contribution ex-TAC to accelerate sequentially as we move through 2026, primarily driven by new client onboarding, ramping organic growth, and political contribution in the back half of the year. We also expect revenue and contribution ex-TAC to continue growing faster than non-GAAP operating expenses, leading to continued adjusted EBITDA margin expansion in 2026. In closing, we delivered another record quarter, executing against our strategic priorities and advancing innovation across our platform. We believe we are well positioned for sustainable long-term growth given our strategic alignment with secular growth trends, including CTV, addressability, and Viant AI. I will now turn the call back over to the operator for questions. Operator? Operator: Thank you, Lawrence. We will now proceed to the Q&A session. If you would like to ask a question, please use the raise hand feature in your controls located at the bottom of your Zoom window. Our first question comes from Jason Michael Kreyer with Craig-Hallum. Jason? Jason Michael Kreyer: Alright. Thanks, guys. I appreciate that. Maybe I will start off just where you ended that, Larry. You talked several times about the opportunity for accelerating growth through 2026. Maybe frame expectations for the year relative to the guide for Q1. Kind of what drives that upward swing as 2026 progresses. I want to step back and maybe talk about the late-stage deal pipeline that you guys had talked about a couple of quarters ago. Just want to get an update on how you feel that has progressed the last few months. How you feel about win rates in deals that have closed, and then just maybe what has been your ability to add or to replenish that pipeline of additional late-stage opportunities? Lawrence J. Madden: Yeah, certainly. Thanks, Jason. Well, if you break down—we have talked a lot about the tailwinds we are having right now—and if you break them down relative to our Q1 guide, which can kind of speak to what we see in the future quarters, first of all, in Q1, we had limited contribution from Molson Coors and WHOOP. Both of those advertisers onboarded during the quarter and only have spent modestly. We expect that for both of them to significantly ramp beginning in Q2. Similarly, with Outcomes, really a lot of early stages of testing, very little contribution in Q1, and as we move through the quarters, we expect that to obviously contribute nicely. We have talked about other customer wins that we have not announced—we talked about them a bit generically—many of those are also ramping up in the second and third quarters, so we expect to get a lift from that. And relative to Q1, you know Q1 is historically our lowest quarter, and I think this year, based on our mix of clients, maybe we are over-indexed a little bit towards customers that have the most negative seasonality in Q1, which impacted Q1 guide a little bit, certainly relative to Q4. But we see a nice ramp up as we move through based on the new clients we are winning, Outcomes coming through and starting to build up, that it will build nicely. We are very confident that it will build nicely as the quarters progress in terms of growth. Tim Vanderhook: I would just—I will start with that. One of the big areas of investment around operating expenses is building out the enterprise sales team, and so I think we have done a great job of putting leaders in place that are from high-quality places. We have pulled leaders in vertical categories from Yahoo and many other very high-quality companies. So that investment is going to continue to replenish that sales pipeline. It is not just the win rate, I would say. We are beating much larger competitors at late stage in the game. We are always up against a very large competitor, and typically you are seeing the advertisers select Viant Technology Inc. for the innovation that we are pumping out. So that pipeline continues to grow. We talked to most investors—we mentioned last year around $250,000,000 of pipeline. We have closed very big wins in that. Some of those have been delayed to this year. A lot of times when we do not win a customer, they have chosen not to make a change until a future period because it is a fairly big lift to change platform providers, and so I think some of those will get kicked into the back half of this year as that determination of when to switch. You want to add anything? I would just say, though, in these pitches, it is becoming very apparent of our advantage around our proprietary data—both around Household ID, the continued scaling of IRIS ID, our supply quality models that do not get enough attention but clients find incredibly valuable, our Direct Access program of being able to be directly connected to the largest content owners in the world. All of that is really opening a lot of eyes with a lot of these large brands. And really these large brands, I think they all have a commonality: they have to drive higher growth. And they have—many of them are looking at their playbook that they have run for the last four or five years, giving the largest platforms in the world most of their money. While those companies have outsized growth, the largest platforms in the world, their business suffers. And I think we are a great counterpunch to that, and a lot of marketers are really taking a look at the proprietary data that we have and saying that is a way for them to deliver more growth in the future years. Jason Michael Kreyer: Perfect. Thanks, guys. Appreciate it. Tim Vanderhook: Thanks, Jason. Operator: Our next question comes from Laura Anne Martin with Needham. Laura? Laura Anne Martin: Somebody just has to tell you that because—and I am going to ask about your growth in the quarter. So when we look at DV360, their third-party was down 2%, The Trade Desk up 13% in net revenue, you guys up 19% in net revenue. Really big size difference—like, you guys are tiny compared to those two. My question is, are you taking share from these—you just said you were taking share from these bigger companies. How much of this is sustainable over time? Because I sort of feel like Wall Street thinks globally scaled large footprints have competitive advantage over smaller companies. Right now, you are disproving that, but convince me that small can win at these much higher revenue growth numbers than Google and Trade Desk, who are your sort of globally scaled competitors in your direct business, because these numbers are amazing. And then I wanted to drill down on IRIS ID. I remember at CES a year ago, we were talking—you had just bought IRIS. Maybe it was two years ago, I am sort of forgetting. You said it was up five times year-over-year, and you are now at percent of the incoming CTV bidstream had IRIS IDs. What is the gating factor there? Would you expect that to get to 75%, 100%? What is stopping more usage, or do you expect that kind of up 5x to continue over in 2026 and 2027? Tim Vanderhook: Why do you not take IRIS? Chris Vanderhook: Yeah. So with IRIS, we have seen incredible adoption of the IRIS ID. What that means is that we need content owners to carry it, and we have made announcements with some of the largest content owners, the largest television networks. We have had the IRIS technology in and of itself to be able to run computer vision, to contextualize video, pull out emotional sentiments, check for brand suitability. This is checking a lot of boxes for marketers. Most marketers, I will say, are completely unaware of the fact that when they buy CTV, they are only able to buy at the app level through other platforms. So you can only buy the app. A lot of these large apps have 20,000 to 30,000 titles of content, so a brand may not be the right fit for half of those content titles. And most brands are unaware of that, and when you give them that problem statement, IRIS completely answers that. That is number one. Number two, marketers have been testing it. As we said, revenue grew 90% from Q3 to Q4. So huge growth. Why? Because they see the performance improvement. When they see the performance improvement, they bid higher for those IRIS IDs that are relevant for that brand. It is driving, on average, we have said, a 466% increase in conversion rate. Forget upper-funnel metrics—brand awareness and consideration—just straight up conversion rate and sales. So marketers bid up for it, content owners get more money for it, that increases the amount of content owners that will then carry the IRIS ID. So we are at approximately 50% now. We believe we are going to continue to scale that. We think it is reasonable that we would get to 70% penetration this year, and so the future looks really bright for IRIS, and it is also really bright for our customers because they are taking advantage of that and they are driving greater returns. Again, being a buy-side player, we only care about what drives our customers’ business. If we drive their business and their growth, they are going to spend more money on our platform. Tim Vanderhook: So, your first question—can the smaller company beat the larger companies? I think we are proving it now, and we really believe it is sustainable over the long run due to proprietary data. When you can only target at the app level and not deliver the performance, that is really a big gating item. The second concept here is that the large platforms have been self-reporting their own success back to these brands. Meanwhile, the total sales of the brand are actually down. So these things are not correlating, and they have had now half a decade or a decade of working with these larger companies where this is just a continual output year after year. So they have really lost faith in the reported metrics that the platforms are using. I think they are looking for an independent buy-side platform to help them understand what is driving success for their business. So what drives our success? It is proprietary data and Viant AI, which is the automation and the autonomy where they can get way more productive with their media dollars at work. And I would add to that Direct Access. By pulling out all the middlemen, the same dollar has more working media. They are getting more ad impressions per dollar than they were prior to Direct Access being there. It is really the combination of all of this that is driving better efficiency when you work with Viant Technology Inc. relative to—you mentioned Google, The Trade Desk, and Amazon. Amazon has a different type of perspective where they are really good at subsidizing businesses in the near term—you are seeing that with their 1% fees that they have been out in the marketplace—or bundling of the products of AWS plus subsidization. But in the end, Google and Amazon—the two very large platforms that we compete with—those platforms sell media. We help the buyers of that media allocate their budgets appropriately across. We are only on their side of the table. We are not on the other side of the table. And I think that is another thing that the Fortune 500 or large advertiser set has come to grips with—is like, actually, I cannot believe these numbers because I have a decade’s worth of data that says it does not correlate to overall business results. And I need a partner just on my side with proprietary data and the automation of the workflows to actually improve efficiency of their business. So I firmly believe that it is sustainable. When it comes to WHOOP, we beat The Trade Desk. When it comes to others, we beat Google. You are seeing with down on third-party. So we have proven it many times. And although Amazon has had a banner 2025 year in the space, that I do not believe is sustainable over the long run as marketers are smarter and smarter to not trust a platform whose selling them media—or ads is a better way to say it. You cannot trust the metrics that you are looking at. Laura Anne Martin: Thank you very much. Great numbers. Tim Vanderhook: Thank you. Thank you. Operator: Our next question comes from Tom White with D.A. Davidson. Tom? Tom White: Great. Thanks for taking my questions. Nice end to the year, guys. Maybe just with regards to your commentary about the expansion of your addressable market, you know, if I think back, it seems like a lot of the recent product innovation that you have launched were initially conceived around going towards the smaller end of the market, right—those search and social advertisers. But over the last several quarters and thus far this year, it seems like you are getting traction with the bigger boys with some of this innovation or at least getting their attention. When you look out to 2026, 2027, 2028, what is the bigger opportunity, do you think, for you? And then just if you could quickly comment on IRIS ID as a competitive moat. Obviously, you guys have a head start there, and the numbers look great, but what is stopping any of the other big platforms from going out and trying to convince content owners to start embedding this ID or coming up with something similar? Thanks. Chris Vanderhook: Yes. I will answer the first one on the expanding TAM. You have to have what we see as a commonality—you think in big brands, they have brand-based budgets where they are looking to raise awareness and consideration for their products and services that might pay in a future period, but they also have performance-based budgets where they have to get sales now. And really what you have to do is create ad products that address both of those, and that is really what we have aimed to do. And if I look at these DTC brands, many of them start only in performance. But they quickly realize that they tap out in Meta or Google’s Performance Max or Demand Gen or Search—they tap out there because they cannot drive growth after a certain period. So then they realize, oh, we have to invest in our brand to raise our baseline sales. And so what we are seeing is that when we go down market to these direct-to-consumer e-commerce companies, we are seeing that what they need is they need to tap into CTV. That is really going to drive growth for them. But they need tools; they need a level of workflow that they are used to in some of these platforms like Meta’s Advantage Plus or Google’s PMAX. So we deliver that with Outcomes. But they are tapping into a really high-growth channel that not only drives brand awareness but also is capable, as I said, with solutions like IRIS ID, they can drive the lower-funnel performance for sales now as well. So, what is bigger? Look, the down-market DTC and e-commerce companies are small businesses. Meta and Google—they have an audience of 10,000,000 businesses that buy advertising from them. If you look at the open internet, I do not know, 10,000 to 20,000 companies buy advertising in the open internet. And how many companies buy television? Maybe 1,000 to 2,000, something like that. So we are looking at addressing—we want to, again, all marketers of all sizes have similar challenges. You have to create products for both. But we see them both equally as appealing. Tim Vanderhook: On the IRIS ID question on why someone could not just copy it, it really is the network effect of IRIS ID, and it is why we hit it so hard last year in scaling that ID. Network effects of tying the ecosystem around this identifier, and that is why getting to critical mass was so important for us in 2025 in scaling that. How do we do it? We have done over 1,400 integrations with content management platforms—all various content management platforms. Even a big content owner, they will have many content platforms underneath it. So we have done all these integrations—again, over 1,400. That takes time, resource, and effort to actually get done. Or you could just adopt the IRIS ID. And every big platform would have to go do the similar types of integrations to replicate what the IRIS ID brings. The second area of network effect is just the OpenRTB protocol that we operate in. There is only one spot for a content object in the OpenRTB protocol, and IRIS ID is implemented nearly 50% of the time in that spot. So the content owner is really not incentivized to bring a second one in because you cannot even get it through the RTB protocol with IRIS ID installed. So there are a number of factors there. I would just ladder it up in total to network effects of this content identifier that we captured in 2025. Tom White: Thank you. Very interesting, helpful color. I appreciate it. Tim Vanderhook: Thanks, Tom. Maria Ripps: Great. Thanks so much, and congrats on the quarter. First, I wanted to ask about Outcomes. You mentioned that you ran pilots in Q4 with a number of clients implementing Outcomes. Anything you can share maybe on the initial conversion rate and where you see that over time? And then how should we think about incremental uplift to monetization as you roll out this functionality across your broad advertiser base? And then would love to hear your thoughts on The Trade Desk–OpenAI partnership and what that means for the programmatic space more broadly and then for your platform more specifically. And what are your thoughts on being involved in some of those emerging AI services? Tim Vanderhook: I do not have the exact numbers on conversion rate, but there are just a number of factors. Obviously, the cost efficiency relative to the sales that Chris touched on in our prepared remarks—really, really good compared to what anybody has seen from an autonomous platform. So I think overall conversion rate is hard to give you an exact answer to that other than we are beating what the current status quo is, which is manual optimization or some level of automated optimization that is out there today. Chris Vanderhook: And I would just say, you know, the real through line here about the performance improvements is the fact that we have proprietary data signals that are extremely valuable. But when you couple that with an autonomous workflow, the speed of that is what is driving the improved campaign results or the performance improvements. And it is doing it at a level of reliability for marketers that is way greater than that of human-based, stressed-out workflows. When I think of the jobs of traders—the gun that they are under, so to speak—they have to come up with the optimization strategies and the tactics that they are going to pull, and they do that on a day-to-day basis. And it is an absolute grind, and that leads to an instability in the reliability of the metrics. And really the autonomous workflows that we have put out here are really driving tremendous value, and it is what we think marketers over time are going to continue to adopt. Tim Vanderhook: Yeah. Obviously, the number of users using bots is really exciting when you look at it as a brand new channel. It is kind of like social when it started to originally emerge and users flocked to it. So there is a ton of real estate available there for advertising. I think OpenAI’s strategy in partnering with third-party DSPs is kind of like Facebook’s early strategy. They were a part of RTB; everyone was involved, and then they pulled it all back and went with their current go-to-market. So we are always a little slower in going to work with organizations like this because we are mindful that they may change strategy overnight, like you saw with agentic checkout with commerce transactions—that has already been abandoned. So I would caution investors about putting any level of excitement until you really see what is the ad format, how does it actually work, and what level of data would be shared. I think the announcement around The Trade Desk—it does not really fit with the RTB protocol as we do. You would have to have sensitive user-level data be sent across. Usually, big platforms do not pass that level of granular information due to consumer privacy reasons. So the truth is we do not know what OpenAI is thinking here at Viant Technology Inc. We are watching, but there is a huge amount of users, a huge amount of real estate and time spent, and certainly a whole bunch of interesting insights that OpenAI knows no one else knows—kind of like search data is unique. But when I chat with an application, I am very rarely ready to buy right now. I am usually middle of the funnel doing some research and information. So although very interesting and exciting—so exciting around future opportunity—I do not think that is a 2026 revenue generator in a large scaled way. Of course, these guys are innovating at incredible rates, and so I may eat my words in the back half of the year, but we are watching, we are paying attention to it, and it appears to be chatbots appear to be a brand-new channel that is opening up tons of available inventory for advertisers. So as we learn more and go throughout the year, we will certainly participate where it makes sense. Relative to The Trade Desk, I think Criteo—who has actually been announced; I do want to say The Trade Desk was a rumor, and interesting timing there. But Criteo has been announced—that makes more sense around product listing or shopping-based ads that they could provide given Criteo’s customer base. So Criteo feels more like a natural fit. I would say The Trade Desk and Viant Technology Inc. seems a little bit different. Maria Ripps: That is very helpful. Thank you. Chris Vanderhook: Thanks, Maria. Operator: Our next question comes from Matthew Dorrian Condon with Citizens. Matt? Matthew Dorrian Condon: Thank you so much for taking my questions. My first one, just to follow up on some earlier comments about Amazon. They have announced new partnerships with Netflix and their integration with Roku. It seems that they are obviously pushing more and more into the ability to service third-party inventory. Can you just talk about how you would expect—I mean, obviously, today, a lot of spend is going through Prime Video and into Amazon’s own platforms—but they are clearly more aggressively going after that third-party inventory. Just how do you see that shaping up in 2026 and 2027? Why are they not as big a threat as maybe the media seems to portray them? And then just a follow up on—I believe when you landed Molson, they talked about findability being the key metric that was the reason why they went with you guys. For WHOOP, was there a similar metric that they found? What was the product that really got them over the goal line to go with Viant Technology Inc.? Thanks, guys. Tim Vanderhook: Well, I do not want to say they are not a threat. They are a threat. They are subsidizing their products. They are doing the bundling strategy that Google executed. So it definitely is a threat, and at Viant Technology Inc., we are paying a lot of attention to Amazon. So I do not want to discount Amazon as a competitor in the space like some others have. I think we do focus on Amazon. But what Amazon knows—they know a lot about customers of Amazon. They know very little in all the other retailers like Walmart, CVS, all these other products. And so if you are a QSR, is Amazon DSP a good fit for you? Likely not based on the proprietary data that they have. If you are a product that is sold through Amazon, Amazon DSP makes a lot of sense to actually partner with to track the sales and reach consumers on Netflix or some of the other platforms. I caution the other big content owners out there because if Amazon runs the same playbook as Google, what they do is they say Prime Video outperforms every other app on the buy. And it is all about—by doing that integration—we bought the ad, but hey, the Roku app was not as good as Prime Video. I can basically write what the report is going to say, as long as they follow that same strategy—and they have been. So I think they have a major trust issue when it comes to what they are reporting in the platform if the transaction does not happen on Amazon.com. That being said, a lot of products and services are sold on Amazon, and I think it makes sense for those customers to use the Amazon DSP in that way. But if your product is also sold in 50 other retailers, the Amazon DSP really is not a good fit for you. Chris Vanderhook: Yeah. So they had a huge focus on CTV. This is a growth brand. They are very focused—they are a fast-growing company. They are very focused on continuing to grow their brand. And in CTV, what do you want? You want addressability—both in terms of “I want to reach the right households, the right people,” and then “I also want to know what type of content they are consuming so I can make my ad relevant to that content.” That drives performance. So, yeah, heavily looked at our addressability solutions. A lot of clients kick the tires hard on that right now, and they see our scale relative to other players is—ours is dramatically larger. And one of the big reasons is we have been at this—this is not a two- or three-year effort. We have been at this for over ten years. We are a leader in this space. So I expect many more brands to continue to focus around addressability. A lot of people think addressability is just for targeting. The largest advantage of addressability is measurement—for you to truly see, “I showed a CTV ad, did I get a sale?” But it is not just that. It is what else did they do in the journey? “Oh, we showed a CTV ad. They then went to Google, searched, later were exposed to a social ad, and then purchased.” That level of visibility that you can give to a marketer and help them properly allocate their money accordingly is incredible. Without an addressability solution for measurement that we offer, they will continually just put money to whoever showed the last ad—which marketers are increasingly not falling for anymore. Tim Vanderhook: I just want to add to that too, not about WHOOP, but about Molson around the addressability solutions of IRIS. If you are a regulated industry like alcohol, you cannot show ads in children’s content, and so IRIS becomes a critical content identifier as well for you to actually deploy money with confidence that you are not going to get a fine for showing ads in children’s content. And it is the combination of these two proprietary data signals that we have that is really pulling the large enterprise customers our way. Operator: Okay. Our final question will come from Barton Evans Crockett with Rosenblatt. Barton? Barton Evans Crockett: Okay. Thanks for squeezing me in. So I was wanting to ask two questions, really. First is, just looking at the growth rates that you are talking about, contribution ex-TAC ex-political up 24% in the fourth quarter, but slowing to the high teens in the first quarter. Do you see the ex-TAC revenue number at some point returning to what you were doing in the fourth quarter? And I know there were some seasonal factors in the first quarter, but that is kind of a notable slowdown. So I was wondering if you could address that first. And then the things I was just wondering about in terms of the LLM debate—you mentioned that it might be easy for an LLM to code an interface, but the value is really elsewhere, kind of the data and presumably the execution. Would it make sense for someone like a Viant Technology Inc. to perhaps use an LLM, though, as an interface, as a way to perhaps penetrate clients that are now wedded to The Trade Desk interface at the agency level—essentially to be an MCP where the execution is through you, but maybe the front end is Claude? Is that conceivable? Could that be an opportunity over time? Or is that something that is just not on the table because of the risk of them getting too much leverage or scraping your data? Tim Vanderhook: Yeah. First is it is just the mix shift of our advertisers in the way that they spend their money. It is better to look at it on an annualized basis. So if you look at our contribution ex-TAC on an annualized basis of 2025, we are going to, hopefully, outperform that in 2026 given the customer wins. And as we mentioned, WHOOP, Molson Coors—some of the large advertisers were, I do not want to say de minimis in Q1, but slowly coming on, learning, understanding how things go. So those ad spends will kick in in the later quarters. And so I think the biggest thing to take away from our call is we are going to grow these numbers sequentially throughout the year. And as you look at the second half, political really kicks in—about half the money is spent in Q3 and about half the money is spent in Q4, roughly, is the way that it goes all the way up until that election cycle. So I would really caution everyone to look rather than quarter-to-quarter—when you look at advertising-based businesses, there is some seasonality. There is a mix shift of the various advertisers on our platform that is really driving the Q1 number that you are seeing. But I can tell you the pipeline is strong, the growth of our business is very strong, and we think we will deliver just like we did last year. No. Look, the Viant AI interface is an LLM interface today. The users of that interface are not with the traditional self-service user interface. So I think we have already delivered on that. It is getting users comfortable with that. I hate to say old habits die hard, but people like to click buttons. It is just a lot of work, and they want to know, is there a hallucination in the data? So a lot of this is test and learn and users getting comfortable with this new interface. That is a big one. As far as an MCP, it is certainly going to be a big factor in the future. We are thinking it each and every day. But again, the market is moving so fast quarter to quarter. You kind of have to project out, and so I think if the interface is your moat, you are in serious trouble in 2026 this year and in the outer years. So I think we have a lead there. We delivered it, I think, eighteen months ago or so. We delivered that interface to customers for them to initially test and learn on, and people love it because there is no training, there is no certification. You do not need to go to Trade Desk Academy for two weeks, and still make mistakes after that. So I think overall, interfaces are dead. Dashboards are dead. You really want an LLM to deliver the info. And I would just say, Chris Vanderhook: what we are doing today—if you look at digital advertising and programmatic—these are human workflows. There are entire organizations that are built around these human workflows. When Tim is saying old habits die hard, although there is an incredible amount of innovation, and I believe that we are leading in that. We are the ones who are bringing from human-based workflows to autonomous workflows—autonomous being the key word. Where is all of tech going? It is going autonomous. So we are leading there. However, if I rolled out and said all brands today, “If you want to interact with me, you must build your own agent that then plugs into my MCP,” we are so far away from that today. I know that there are early—I would say—kind of the green shoots that are out there that we are looking at, and I think those are going to be in the DTC e-commerce space that we are first going to see that. We are very focused on that market. So as we think about our own go-to-market as going after these DTC and e-commerce brands, we think that is a really good solution there. But over time, it does make a lot of sense that an agent will come to the infrastructure that provides all of this and will want to go to infrastructure with incredible proprietary data, which we also have. So, we do look to enable that in the future. And let me just add, we believe Tim Vanderhook: that the LLM is the commodity. It is the proprietary data on top of that LLM which is unique, or the application layer tied to the RTB infrastructure that we actually have. And I think, getting to Chris’s point here around humans—right now you have humans in a five-step process. The human is in the middle of it all. We have taken the human out of the middle and put it at the very front of the line. You set the guardrails, you set the goals, and then you let autonomy actually happen. And so that is really the big difference that I see. The LLM—most of their moat is with consumers. ChatGPT has 650,000,000 consumers spending tons of time per day on that. That is not commoditized—that is very valuable as a media seller. But for us, from an enterprise perspective, the LLMs are commoditized. I could swap out Gemini with OpenAI. I could swap out OpenAI with DeepSeek. It does not really provide noticeable levels of difference in the output sets there or noticeable levels of difference in quality. So to me, from an enterprise perspective, the LLM is the commodity. Proprietary data is the moat. And I think the commodity piece—the reason why many of them give you back the same answer—is that they are all trained off of the same data. They are all trained off of scraping the web, all of them. Certainly, you could argue some of them have proprietary data assets—certainly. That is very—I think that is becoming understood that that is the piece that is commoditized. But that said, to your core question, will we enable third-party agents to be able to interface through an MCP into our infrastructure? Yes. Barton Evans Crockett: Okay. That is interesting. Thank you. Tim Vanderhook: Thanks, Barton. Operator: —concludes the Q&A portion of the call. Thank you. Chris Vanderhook: Thank you, everybody. Operator: Have a good evening.
Operator: Greetings, and welcome to UiPath's Fourth Quarter and Full Year 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Allise Furlani Head of Investor Relations. Thank you. You may begin. Allise Furlani: Good afternoon, and thank you for joining us today to review UIPath's fourth quarter and full year fiscal 2026 financial results which we announced in our earnings press release issued after the market closed today. On the call with me are Daniel Dines, Founder and Chief Executive Officer; and Ashim Gupta, Chief Operating and Financial Officer, to deliver our prepared comments and answer questions. Our earnings press release and financial supplemental materials are posted on the UiPath Investor Relations website. These materials include GAAP to non-GAAP reconciliations. We will be discussing non-GAAP metrics on today's call. This afternoon's call includes forward-looking statements regarding our financial guidance for the first quarter and full year fiscal 2027 and our ability to drive and accelerate future growth and operational efficiency and grow our platform, product offerings and market opportunity. Actual results may differ materially from those expressed in the forward-looking statements due to many factors, and therefore, investors should not place undue reliance on these statements. For a discussion of the material risks and uncertainties that could affect actual results, please refer to our annual report on Form 10-K for the year ended January 31, 2025 and our subsequent reports filed with the SEC, including our annual report on Form 10-K for the year ended January 31, 2026, to be filed with the SEC. Forward-looking statements made on this call reflect our views as of today. We undertake no obligation to update them. I would like to highlight that this webcast is being accompanied by slides. We will post the slides and a copy of our prepared remarks to our Investor Relations website immediately following the conclusion of this call. In addition, please note that all comparisons are year-over-year unless otherwise indicated. Now I would like to hand the call over to Daniel. Daniel Dines: Thank you, Allise. Good afternoon, everyone, and thanks for joining us. I want to start by thanking the people who made this year possible. Our employees, we executed with discipline and purpose. Our customers who trust us with their most critical workflows and our partners who have made a genuine bet on our platform. This is a team effort, and I feel that every day. We delivered another strong quarter, beating the high end of our guidance across all metrics and closing out a year of disciplined execution. Fourth quarter ARR reached $1.853 billion, up 11% year-over-year, driven by $70 million of net new ARR and the revenue of $481 million, up 14% year-over-year. Alongside that growth, we've achieved full year GAAP profitability for the first time in our company's history. We grew fourth quarter non-GAAP operating income to $150 million, a 31% margin, a reflection of the operational progress we made throughout the year driving meaningful efficiency while continuing to invest in growth. And in Q4, we posted our strongest sequential net additions of customers with $1 million or more in ARR in 2 years with deals over $1 million, up over 50% year-over-year, a reflection of both improved sales execution and deepening enterprise platform adoption. I have never been more energized. What we are seeing now goes beyond a single quarter, we are at an inflection point in how software is built. Advances in AI are dramatically reducing the time and cost required to create software. And that has led to understandable questions in the market about how value will be created going forward. Historically, moments like this don't eliminate software, they shift where value is captured. Enterprises don't simply pay for code they pay for trust, for operability and for government, the ability to run complex systems reliably, securely and with full accountability. As the cost of building software falls, the value of platform that can safely govern, orchestrate and scale that software rises. And there is a second dynamic that I find even more exciting. When building becomes cheaper, more gets built, more processes get automated, more edge cases get addressed and more systems become autonomous. That expansion does not shrink the need for enterprise orchestration, it increases it. And this is precisely the environment UiPath is designed to operate in. , We entered this new agentic era with 4 advantages. First, a unified platform combining deterministic automation, agentic automation and enterprise-grade orchestration with governance, security and scalability built in. This is the full stack, it is what wins new logos and drives expansion across our base; second, a powerful installed-based flywheel, thousands of enterprises run mission-critical workflows on UiPath today. And within those workflows, there are opportunities for agents to be deployed and the overall process to be orchestrated. Third, 2 decades of enterprise trust and governance, deployment experience that AI plus automation is expected to deliver accountability, auditability, observability and reliability at scale; and fourth, deep vertical expertise with enterprise-wide reach, regulatory depth in the industries where the stakes are highest paired with the horizontal ability to orchestrate across the entire enterprise. Let me spend a few minutes on each. Driver one. Our agentic -- our unified Agentic automation platform. As AI makes intelligence more accessible, what matters is execution. Enterprises are getting answers to complex questions faster than ever before, and yet they still struggle to reliably execute complex cross-system processes with accountability and compliance built in. The goal now is to pair the insight they are getting with the actions and execution that our platform enables, financial reporting, claims processing, regulatory compliance. This cannot be improvised. They must be institutionalized. Enterprise automation requires 2 modes, deterministic for precision audibility and agentic for reasoning and adaptability. Most vendors offer 1 or the other, UiPath id purpose-built to integrate both under a single control play, allowing enterprises to move from experimentation to scale production grade deployment. Most people think orchestration means agent to agent coordination. Real enterprise orchestration brings together agentic automation, deterministic automation and humans because that is how work actually gets done. We offer that and the full execution layer underneath it, governing how our transaction moves from start to finish and ensuring that it completes reliably every single time. This is what Maestro is built to do at enterprise scale. What makes Maestro uniquely powerful is its architecture. It is built on Temporal, the most modern workflow technology featuring durable execution and trusted by the most demanding technology companies in the world. Workflows are defined in a way, AI agents can generate and modify it directly while remaining fully transparent to business stakeholders and auditors in a world where AI agents are increasingly the ones creating and maintaining workflows that distinction matters enormously. The customer results make this concrete, a U.S.-based semiconductor company fail to deploy an agentic workflow with another vendor after more than a year of trying with UiPath, they were successful in under 2 weeks leading to a 7-figure expansion across Agent Builder, Maestro and Test Cloud. Today, they run over 3,000 automations and have sales more than 2 million hours and, One New Zealand who went from proof of concept to production grade pilot in 5 weeks reduce 4- to 5-day order-to-cash process to 10 minutes, and they are now scaling this across their B2B sales operations. With UiPath, they expect roughly $20 million in cost savings this year as they plan to further leverage the platform to support their broader transformation programs. Driver two: the flywheel inside our installed base. The most important story this quarter is the economic shift underway inside our installed base. Customers are not experimenting with AI, they are expanding their operating model on our platform. AI product ARR, which includes agentic, IDP and Maestro, reached nearly $200 million this quarter, with strong growth fueled by agentic. But the number I keep coming back to is this, the number of customers above $100,000 in ARR who have bought AI products grew 25% year-over-year and they spend nearly 3x as much as those who have not. Additionally, 16 of our top 20 deals this quarter included AI products. All of this is clear evidence that agentic automation is becoming central to our largest customers' roadmaps. Importantly, this AI growth is layering on top of a core unattended automation business that continues to grow. We are not seeing AI agents replacing deterministic unattended automation in production we are seeing customers extending their processes with AI. A major U.S. airline illustrates this well. Building on their deterministic foundation, they are now deploying Agent Builder, Communications Mining, and Maestro to automate Procure-to-Pay and Supplier workflows, a blueprint for how customers move from task automation to end-to-end process orchestration, and how that journey drives platform-wide expansion. This is the flywheel. Every workflow automated creates new surface area for agents. Every agent deployed drives more automation, deeper integration, and broader platform adoption. Testing is another area where we see a significant and underappreciated expansion opportunity. As agentic workflows and applications sprawl, traditional QA simply cannot keep up. Forrester named UiPath a Leader in The Forrester Wave for Autonomous Testing Platforms in Q4 2025 with Test Cloud receiving the highest possible scores in 7 criteria including vision, roadmap, and automation creation, orchestration, and execution. A global technology company is a strong example, standardizing their entire automation program on UiPath, expanding into Test Cloud, and planning to implement UiPath Agents and Maestro to automate supply chain workflows. Turning to driver 3, Governance. Building an agent is becoming easier. Making it enterprise-grade is not. Enterprise-grade agents require deterministic execution with traceability, exception handling, and audit trails that satisfy external regulators. We see this play out in how customers choose us. An American credit union selected UiPath as we were one of the only solutions to meet their strict banking security and governance requirements. And a European automobile manufacturer chose UiPath as the foundation of their agentic AI strategy, selecting Maestro because we could deliver Enterprise-grade governance, error handling, and human-in-the-loop safeguards at the level their compliance standards demand. In both cases, governance was not a consideration, it was the deciding factor. And that brings us to driver 4, vertical depth. It's not just about governance, it's about knowing the domain deeply enough to manage and operate it at scale for real Impact. That is why vertical depth matters more in the agentic era, not less. As building becomes easier, differentiation shifts to domain-specific workflow intelligence, especially in industries where the cost of getting it wrong is existential. At Vive in February, we launched agentic AI solutions purpose-built for healthcare, targeting revenue cycle management, medical records summarization, claim denial resolution, and prior authorization. In line with that strategy, we acquired WorkFusion in February. Bringing purpose-built agents for financial crime compliance, with deep anti-money laundering and know-your-customer expertise directly into our platform, extending our reach into the highest stakes compliance workflows inside global banks. Healthcare and financial services are 2 examples of a broader strategy. We pair vertical depth with the horizontal reach to orchestrate across every function of a global enterprise, a combination that neither horizontal or vertical platforms alone can match. And great platforms don't scale alone. Our partners are building practices, joint solutions, and go-to-market motions around our platform. Our expanded partnership with Deloitte is a strong example. Together, we launched Agentic ERP, embedding AI agents into mission-critical finance and operations workflows. A Fortune 20 oil and gas company that is migrating to SAP S/4HANA is already scaling through the partnership, expanding Test Cloud coverage from 10% to roughly 50% of their SAP environment while building new agentic use cases across the migration. Accenture tells a similar story. Together we deployed a global agentic sales order entry solution for a strategic life sciences customer, reducing processing time by 1/3 unlocking automation for orders previously too complex to handle, and orchestrating autonomous agents transforming the orders while navigating 150,000 exceptions. Before I close, I want to give you a preview of what's coming next on our product roadmap. Over the last few months, the world has changed. The boundaries of what is possible have shifted faster than most people expected. We have spent years building a unified platform for exactly this moment. And what it can now unlock with the next generation of coding agents, it's something I'm genuinely excited about. Our platform is evolving into 1 where coding agents can participate across the entire automation life cycle. Agents will work with subject matter experts to discover processes and identify exceptions. They will work with business analysts to generate process definitions. Since developers in building automation, deploy those automations into production and help manage them at runtime. The first capability of that vision ships in the next couple of months and it targets a problem I hear in nearly every customer conversation. Their automation backlog is growing faster than their ability to build. The ROI exists. The executive sponsorship exists. The constraints have been the time, cost and specialized skills required to build and maintain production-grade automations. AI coding agents will generate and maintain production-grade unattended UiPath automations in hours instead of weeks. AI accelerates how automations are built. It does not change the platform they need to run on. For example, every one of those automations still needs our platform, Maestro for orchestration, process intelligence and observability, governance for control and auditability, granular access control and credential vaults for security. As we look ahead, we expect to cross $2 billion in ARR this fiscal year, a milestone that reflects the durability of what we have built and the expanding role we play in how enterprises operate. Finally, we invite you to join our annual Agentic AI Summit on March 25, which will be live streamed on our website. Please reach out to our Investor Relations team for details. With that, I'll turn the call over to Ashim. Ashim Gupta: Thank you, Daniel, and good afternoon, everyone. Before turning to the financials, I'd like to provide a quick operational update. Over the past year, we strengthened our operating model, tightening coordination across teams and driving greater consistency and efficiency in how we go to market and serve customers. The result is more predictable execution, tighter alignment across sales, customer success and product and greater operating rigor across the business. We've built a more disciplined and scalable global sales cadence. The entire company has been enabled and is focused on pushing our AI capabilities into every deal, customer conversation and across our internal operations. As we move to fiscal 2027, our priorities are focused on translating these structural advantages into durable growth. First, accelerating growth across our customer base, expanding penetration inside our installed base, scaling AI adoption on top of deterministic automation and deepening our vertical solution strategy in regulated and mission-critical industries where our platform is most differentiated. Second, driving faster time to value. Selling software is only part of the journey. Our forward-deployed engineers, services organization, post-sales team and partner ecosystem continue to improve their coordination to ensure customers realize value quickly and at scale. Third, scaling operating leverage, including internal adoption of our own agentic capabilities and continued focus on cost discipline. Across engineering, support and internal operations, we are deploying UiPath agents to streamline workflows, reduce manual work and accelerate execution, and we are already seeing productivity gains from these deployments. We expect this to become an additional source of operating leverage as adoption deepens. These initiatives reinforce the scalability of our model and give us confidence in the next phase of margin expansion. We reached an important milestone on profitability this year. When we first introduced our long-term model, we targeted non-GAAP operating margins of approximately 20%. In fiscal 2026, we surpassed that, delivering a 23% non-GAAP operating margin while continuing to invest for growth. Given the strength and scalability of our model, we are updating our long-term non-GAAP operating margin target to 30%. We are equally focused on GAAP profitability. Over the past several years, we have driven meaningful improvement in GAAP expenses as a percentage of revenue, including stock-based compensation, which declined to 18% of revenue from 25% last year, and we expect that trend to continue. We expect to be meaningfully GAAP profitable in fiscal 2027 and are committed to expanding GAAP profitability over time. Turning to the quarter. Unless otherwise indicated, I will be discussing results on a non-GAAP basis, and all growth rates are year-over-year. I also want to note that since we price and sell in local currency, fluctuations in FX rates impact results. Fourth quarter revenue grew to $481 million, an increase of 14%. Normalizing for the year-over-year FX tailwind of approximately $16 million, revenue grew 10%. Total revenue for fiscal year 2026 was $1.611 billion, an increase of 13% year-over-year. Normalizing for the year-over-year FX tailwind of approximately $30 million, revenue grew 11%. ARR totaled $1.853 billion, an increase of 11%. Net new ARR was $70 million. This included a $14 million year-over-year FX tailwind. As organizations adopt an AI-first operating model, they are accelerating cloud migration to deploy, orchestrate and scale automation seamlessly. We ended the year with over $1.2 billion in cloud ARR, which includes both hybrid and SaaS, up over 20% year-over-year. I want to highlight one data point that speaks directly to where the platform is headed. Among customers with more than $1 million in ARR, 90% are using our AI products. When we look at customers with more than $100,000 in ARR, approximately 60% are using our AI products. That level of attachment is a retention and expansion flywheel, and it gives us high confidence in the durability of the customers we are focused on the most. Across our broader base, 42% of customers with over $30,000 in ARR use our AI products, which provides a significant runway for expansion. We ended the quarter with approximately 10,750 customers. We continue to be successful in signing new enterprise logos that align with our strategy of targeting long-term customers with a propensity to invest, including new logos like Enterprise Products Partners, Helix Electric, [ Veonet ] Vision and a U.S. construction company consolidating on UiPath. They chose us to replace multiple point solutions with a single platform and plan to expand beyond deterministic automation, deploying agentic capabilities across loan originations and mortgage operations. As with prior quarters, the vast majority of customer attrition continues to be at the lower end. To provide a bit more color, when we take a closer look into our total logo count, for full year 2026, customers that spent over $30,000 in ARR increased 7% year-over-year. Customers with $100,000 or more in ARR increased to 2,565, while customers in $1 million or more in ARR increased to 357. Dollar-based gross retention was best-in-class at 97%, and our dollar-based net retention rate remained at 107%. Adjusting for FX, dollar-based net retention was 106%. Remaining performance obligations increased to $1.475 billion, up 19%. Normalizing for the FX tailwind, which was approximately $64 million, RPO grew 14%. Current RPO increased to $913 million, up 13%. Turning to expenses. We delivered fourth quarter overall gross margin of 86% and software gross margin was 92%. Fourth quarter operating expenses were $263 million. We ended the year with 3,981 total employees. I want to reiterate a significant milestone. For the first time in company history, UiPath delivered a full year of GAAP profitability. For the full year, GAAP operating income was $57 million, and we delivered our second consecutive quarter of GAAP operating income at $80 million in the fourth quarter. Fourth quarter non-GAAP operating income was $150 million, representing a 31% margin. Full year non-GAAP operating income was $370 million, a 23% margin and over 600 basis points of margin expansion year-over-year. Fourth quarter GAAP net income was $104 million. Full year GAAP net income was $282 million. Fourth quarter adjusted free cash flow was $182 million, bringing full year adjusted free cash flow to $372 million. We ended the quarter with $1.7 billion in cash, cash equivalents and marketable securities and no debt. During the fourth quarter, we repurchased 780,000 shares at an average price of $12.83. For the full fiscal year, we returned approximately $337 million to stockholders, repurchasing 30.9 million shares at an average price of $10.92. Since January 31, under our 10b5-1 plan, we have repurchased an additional 14 million shares at an average price of $12.11 through March 10, 2026, completing our $1 billion stock repurchase program. Following the completion of the program, our Board has authorized an additional $500 million in repurchase capacity. This reflects our confidence in the durability of our cash flows and our commitment to disciplined capital allocation. Now turning to guidance. Our guidance philosophy remains unchanged. We base our guidance on what we see in the pipeline and apply prudent assumptions, particularly as the federal and macroeconomic environment remains variable. Our guidance reflects continued momentum across the business and includes WorkFusion's contribution aligned to our ARR definition. WorkFusion strengthens our position in financial services automation through its advanced agentic technology, an area where the demand for compliant auditable agentic workflows is accelerating. Also included our current foreign exchange rates, including a modest headwind from the yen and a modest tailwind from the euro, which in aggregate have an immaterial impact. Turning to the specifics of our guide. For the first fiscal quarter 2027, we expect revenue in the range of $395 million to $400 million, ARR in the range of $1.894 billion to $1.899 billion, non-GAAP operating income of approximately $80 million. And we expect first quarter basic share count to be approximately 525 million shares. For the full fiscal year 2027, we expect revenue in the range of $1.754 billion to $1.759 billion, ARR in the range of $2.051 billion to $2.056 billion, non-GAAP operating income of approximately $415 million. Before I close, I want to leave you with a few final modeling points, including the following: first half revenue to be approximately $795 million, second half revenue to reflect similar seasonal patterns as fiscal 2026, with approximately 30% of total revenue in the fourth quarter. First half net new ARR to be approximately $73 million and second half net new ARR to reflect similar seasonality as fiscal year 2026 with the fourth quarter being our strongest quarter. We are encouraged by the momentum we're seeing as customers accelerate their shift of workloads to the cloud. While this is an overall positive, we anticipate that growth in our SaaS offerings will create approximately a 1% headwind to total revenue growth for the full year. Fiscal year non-GAAP gross margin to be approximately 84% as we scale our cloud offerings; non-GAAP operating income to reflect similar seasonality to our top line metrics. Fiscal year 2027 non-GAAP adjusted free cash flow of approximately $425 million, also to follow normal seasonal patterns. Lastly, we are committed to managing stock-based compensation and for full fiscal year 2027, we expect dilution to be between 2% to 3% year-over-year, excluding any buyback. Thank you for joining us today, and we look forward to speaking with many of you during the quarter. With that, I will now turn the call over to the operator. Operator, please poll for questions. Operator: Hello, and thank you for your patience. I will now hand the call over to Daniel Dines. Daniel Dines: Hello, everyone. Thank you for coming back after our outage with the service provider for our Investor Relations conference calls. We are ready to take questions. I hope that you guys get the chance to listen to the end of our reading. And also, we have published online the entire transcript of the -- of our earnings calls. So thank you again and apologize for the delay. We are ready to take questions. Operator: [Operator Instructions] And our first question comes from the line of Bryan Bergin with TD Cowen. Bryan Bergin: First one I have is just as it relates to net new ARR. And as you build the 2027 outlook, just how are you thinking about net new ARR expansion potential here on an FX-neutral basis? Sorry if I missed what you said on FX contribution assumptions as it relates to 1Q and the full year. But just trying to unpack that looking ahead. And then my follow-up is going to be on margins. So on op income margin, I appreciate the update on the 30% target. Just want to dig in on how you're thinking about the potential kind of the moving parts of that as it relates to gross margin and OpEx components moving forward? Ashim Gupta: Yes. So Brian, great to hear from you. When you think about the IRR contribution, I think our guidance kind of says that, there's really no significant or material FX contribution from that versus our prior guidance. So as you look at it, really, FX is a minimal impact from where our previous estimates were. The second piece of it is, from a margin standpoint, you look at the moving pieces and definitely across the board, there is opportunity to agentify and to use the technology advances across every function. That includes engineering, G&A as well as sales and marketing, which gives us really the ability to continue to reinvest in growth as needed. But we're going to look at it in a balanced way in terms of what makes sense for the company. And you can see our commitment to operating margin expansion over the last 2 years. And then just back to the IRR, I want to just give a little bit of color. When you look at our base, we have a sizable Japan business. So we have headwind from the yen, and tailwind to the euro, and they basically net out to be an immaterial impact for the full year. So we're really pleased with the progress. As Daniel commented and I did in the script, we really feel positive about the expansion that we're seeing within our customers and our ability to stabilize our net new ARR, and that's kind of reflected in both our performance as well as our guidance. Operator: And our next question comes from the line of Sanjit Singh with Morgan Stanley. Sanjit Singh: Daniel, thank you for the disclosure on the ARR traction -- I'm sorry, the AI traction with respect to ARR, of the $200 million, that was great to see. In terms of the composition of that, could you give us any details on sort of the split between IDP and what you're seeing on the agent side. And to the extent you can sort of disclose that, I'd just love to hear about the underlying momentum with the agentic side of the house, including Maestro as you go into next year? Daniel Dines: Sanjit, we have really a great momentum on diffusion of the AI within our platform. We have not provided clear ratios between different components of what we put into the AI. And I will let Ashim to comment further. Ashim Gupta: Yes, so like when you look at the way we price, we actually allow pretty good fungibility between our AI and Agentic products actually, both in some of our old pricing as well as our new pricing. So we don't really materially split it out. Of course, IDP hasn't been in the market for a longer period of time, for like the last 2.5 to 3 years. So IDP definitely has a good portion of the IRR. But agentic is a significant portion, and we see that in the platform. If you can see that in the deals and the commentary that we're giving and selling as a part -- that we talk about in our script. So from that standpoint, we can't really split it apart but we also see them as complementary because remember, IDP also includes IXP, which is not like simple document processing. It really uses advanced technology to be able to parse different documents using different models and that is part and parcel of the way we price. Sanjit Singh: Yes, that's great. That's great context. And then just a follow-up on the guide, Ashim, on 2 aspects. One, in terms of WorkFusion, how should I think about that contribution when I sort of calculate what the guidance implies from a net new ARR basis? I think there are some reports out there that they are around $25 million ARR toward the end of last year. So I just want to sort of stand to check that. And then from this time last year, there was some concerns around build as you guys are pretty cautious on the federal business. Just your sort of underlying assumptions about Fed going into next year, maybe the first half of this year given some of the headwinds you saw this time last year? Ashim Gupta: Yes. So the first thing is the $25 million is not accurate. That's the first thing I can say categorically. The second piece is, they also had a different method of ARR -- of accounting. So when we brought it back, even the numbers that have been out there also do not account for it. We -- It is actually below our materiality threshold, Sanjit. So that gives you an indication. We really look at this like a tuck-in acquisition in terms of where it is. And from that standpoint, you can also just see kind of the strength overall within our guidance, and we've been transparent that, that includes the WorkFusion contribution, but it is immaterial, and we don't break it out. Sanjit Singh: And then just on the Fed piece? Ashim Gupta: Yes, sorry. On the federal government, we're actually seeing a really good traction there. I would say just like the environment, I would say the federal government is a dynamic economy. But I would say our team has done an incredible job connected at really high levels within the organization. And I'll let Daniel comment on some of his discussions and his views of it. But within certain agencies, we feel very well strong position. And then there are some agencies, of course, that are going through their changes. But overall, we're actually very bullish about the way our teams are executing and the opportunity that exists there. Daniel Dines: Yes. And we are seeing an increased appetite for more long-term projects, strategic projects, especially in the department of war. Operator: And our next question comes from the line of Michael Turrin with Wells Fargo Securities. Michael Turrin: Just to start, maybe a higher level one. You had some commentary, but just in terms of budgets and what you're seeing around categories like automation and AI, it would be great to get just a top-down view there and also how you're positioned to capture that in the market where there's just an increasing number of vendors also positioning agentic solutions, which may be newer to market, but might also insert some noise into those conversations. Daniel Dines: Look, I think we are really well positioned to help customers with the diffusions of AI within their enterprise workflows. We are -- we have -- we built Maestro, which is essentially a process orchestration technologies that -- and at its core, is a new powerful workflow engines. That's -- that gives us a very interesting advantage in the market right now. So we all know about the impact of the coding agents. I would say that this will translate for us. And I'm extremely bullish about it into a much faster adoption curve for our customers. We aim to use coding agents to enable our platform for coding agents that will accelerate dramatically the time to value for our customers. And that, of course, includes creation of AI agents, deployment of agents in the context of enterprise workflows. I would like also to stress how important is the combination between deterministic automation and agentic automation into the context of the same platform that can orchestrate both what I would say, humans, agentic, and deterministic automation. Michael Turrin: Ashim, just you gave some texture. I know the commentary and the guidance on the call was pretty similar to entering fiscal '27 as '26, but it sounded like in some of the prior answer that maybe public sector is trending a bit better. So just any more context you'd give us around how you're characterizing the current environment, the visibility you have into the model for the forward year at this point and just how you're thinking about the contribution from the AI product portfolio as that scales in fiscal '27? Ashim Gupta: Yes. I mean we really continue to characterize it as variable. And I'll double-click just again for anybody who's new in terms of what we mean by that. I think we do see pockets of strength and we see pockets of pressure or fluctuations that happen from a macroeconomic standpoint. And at the same time, those tend to move around quite a bit. Like right now, our bullishness in terms of public sector feels really good. Last time on this year, if you remember, we kind of awful -- felt a lot of uncertainty in that area. We're seeing strength in areas like financial services and health care, international markets like Australia. And then there's -- obviously, the Middle East conflict is there, so there's uncertainty there. So we really characterize it as variable. As I commented in the script, we continue to kind of maintain a very consistent guidance philosophy. We look at our pipeline. We have really deep inspection. We get a lot of signal from the field. Daniel has spent a lot of time with customers over the last 3 months, 4 months. We have -- we've been very in touch with kind of the field in terms of hearing. And then the other piece is, we obviously have a very strong now statistical and forecasting models between our finance and our ops team, and we triangulate the 3 of them. So we talked about kind of putting the appropriate prudence in the -- in for guidance, accounting for the variability in macroeconomic environment, and we've done so. And at the same time, when you look at our guidance, I do think it also reflects kind of stabilization of net new ARR and what the potential is yielding in terms of the traction our teams are making in the agentic market and how we're positioned. So that's how I would characterize our guidance. Operator: And our next question comes from the line of Kirk Materne with Evercore ISI. Chirag Ved: This is Chirag on for Kirk. You highlighted multiple industry partnerships, right, Veeva -- like with Veeva and certain vertical solutions like health care and financial crime, would you highlight health care and finance as the 2 verticals that are showing the strongest willingness to spend right now on agentic AI initiatives? Or are there others that you would flag? And when you think about agentic automation at scale, what does success look like in terms of repeatable playbook and sales cycle impact here? Daniel Dines: I think you got it very right. It's the health care. And I think we nominate it within the health care in particularly, I would say, parts of revenue cycle management, denials, prior authorization. It's a very important type of processes for us. Financial industry has been since the beginning of the company, our stronghold, and we strengthened it with the acquisition of WorkFusion with our big foray into financial crimes. And I would add also the public sector as an important vertical for us that we are eyeing. Operator: And our next question comes from the line of Terry Tillman with Truth Securities. Terrell Tillman: I have two. So first on Maestro, it is my impression, it's vendor agnostic from an agentic standpoint. Are you all seeing situations where it's involved in managing agents from system of record companies or AI-native businesses? Or is it mostly like a control plane for your own agents? And then I have a follow-up. Daniel Dines: Yes. I think Maestro, it's kind of agnostic in terms of what kind of agents it can manage. Of course, for our own agents, that are built with Agent Builder, we have very tight integrations. But we have also brought agents built with open source frameworks like the LangGraph type of agencies, first-class citizens in our platforms. And in terms of using -- utilizing agents built on system of record applications. Of course, we are -- we facilitate using them in our platform. I would not say we manage them. It's more or less like you can call an API that is provided by that platform. But I want to be specific, the all agents that are built with open source framework can be deployed and executed in the context of the security and governance that our platform provides. Terrell Tillman: Yes. That's a good clarification on the API side. Thank you, Daniel. And I guess, Ashim, the SaaS shift, that was an important call-out, 1% impact to growth as we look into FY '27. I'm also curious though, is there also starting to be this impact of timing dynamic or around consumption or scaling volumes related to the actual agentic solutions that we need to kind of appreciate that's not going to show up in revenue yet. Ashim Gupta: No. I mean, remember, we do -- we still price on kind of a bundle, meaning on a subscription, consumable-type hybrid model, meaning we sell kind of use it or lose it units that are there. So we're not on a consumption basis of accounting, so to speak. We're still on an ARR basis of accounting. So I would say there's -- it's not about any trailing or any delayed impact that you would see there. At the same time, I think our agentic solutions are scaling and our customers are adopting more and more as we talked about in the script and sales are moving very well for us. And that obviously is what's contributing a little bit to our SaaS side of it. Operator: And our next question comes from the line of Radi Sultan with UBS. Radi Sultan: Daniel, in your prepared remarks, you mentioned this growing backlog of automations you're seeing at customers. I just wanted to double click on that, like how big is that tailwind of AI unlocking more automatable workflows. And you mentioned the AI product ARRl, but just how material is that sort of pull through to the core automation business as well? I just love to get your thoughts there. Daniel Dines: Yes, that's an acute observation. Because of the huge interest in AI, it's actually driving renewed interest in automation. I think in most cases that we are seeing, people expect that the use of AI will result in some sort of automation. And it's becoming more clear that AI and Agentic AI and deterministic automation are very complementary. So basically, any AI initiatives surfaces more opportunities for deterministic automation, especially in our case for unattended deterministic automations. Radi Sultan: Got it. And then just a follow-up for Ashim. Just as you think about the ARR and revenue guide for the year and we think about sort of what the biggest drivers are, you guys really extended the product portfolio over the past 12 to 18 months. And just as we think about AI product, test cloud vertical solutions, sort of core RPA. Like how should we think about sort of what the biggest drivers are of that sort of growth next year as you kind of think about the guide? Ashim Gupta: Yes. I think if you just look at some of the metrics that we disclosed, right, 90% of our $1 million-plus customers haven't incorporated AI products, right? I think that is a great -- to me, kind of a great tell of the success of the AI products and the ability for us to expand. And we've also talked about the number of customers that still have room to adopt those AI products that are there. So from our standpoint, AI and agentic is going to lead the way. But at the same time, as Daniel talks about, they're not a separate stream. They actually are very synergistic. As people pull forward AI and agentic products from us, it actually also pulls through the rest of the platform, whether that is IDP, IXP, unattended robots, et cetera. And we see that. We are very purposeful in discussing that we are seeing growth rate within kind of the core RPA business and we look at that as very synergistic as we go forward. The other thing to highlight is we're super excited about our test automation business. And that is still in its infancy, but we really see that having good traction in the market, and that can also be -- that is also a growth driver for us as we enter this year. Operator: Our next question comes from the line of Scott Berg with Needham & Company. Scott Berg: I've got 2. Daniel, we've been doing some work with partners here. It's become very evident and clear that your partner strategy seems to be resonating really well right now across several different -- or your vertical strategy, excuse me, is working well across several verticals. But my question is, as you look into '27, are you able to lean into that strategy even more so given the success you're having there lately? Or do you feel like you're already at kind of a maximum effort. Daniel Dines: On the contrary, I think we are at the beginning of our vertical strategy. We are doubling down our focus on investments into this year. So if I can summarize our product strategy, I think there are 3 major pillars that we are seeing right now. So we focus on adopting coding agents all across our platform. So every single artifact is building on our platform will be built primarily by coding agents. Second its process orchestration that really drives everything Agentic AI and deterministic workflows. And third, it's vertical solutions. And we have seen clearly more of a move into customers that have a higher demand of kind of an outcome-based vision by use case-based type of solutions that they want to adopt. Scott Berg: Got it. Very helpful there. And then Ashim, I was hoping you can drill down in the quarter a little bit I know there's a $14 million tailwind around FX for ARR. But what was your assumption of that number going in the quarter? I get a lot of questions, to try to kind of back into the math in terms of how much incremental impact it might have been versus your expectations 90 days ago? Ashim Gupta: Yes, it was honestly right. It was just right in line with that. As I talked about, like I think the yen you could see has an inverse correlation to the euro and the net for both of those tended to be 0. We see that both as we look into the current year as we've seen FX rates move as well as the current assumption that we see there. So from both our guidance standpoint and our results, we really see an immaterial impact to that. The driver for our beat in the quarter was really just sales execution. And we're -- we feel very strong about the customer response as we've seen about the traction that we're getting within our AI products. FX did not have a material impact versus our guidance. Operator: And our next question comes from Kingsley Crane with Canaccord Genuity. William Kingsley Crane: I think the idea of AI on top of deterministic automations, is really resonating. Just on this idea of Agentic really being about pulling through to the whole platform. Just trying to get a sense of how that ends up playing out from a deal timing perspective? Like -- is the customer typically renewing at a much higher rate? Is it happening where they'll adopt AI and then through the life cycle of their contract, they'll realize that they need more automation? Just trying to get more color on that. Ashim Gupta: I think it's all of the above. Honestly, like we've seen the customers renew just at renewal, expand into AI products. We have very good examples of that, both within -- across every vertical and every geography. There's also areas that they're still working through their POCs, but it's bolstered their renewal and their confidence given our road map. And the POCs are moving well, so they would expand just a little bit as they continue to kind of dip their toe in the water. So from our standpoint, it's not one single motion. It really depends on the customer or the circumstance. But what is encouraging to us is the success that our proof of concepts the feedback that we're getting from customers that as Daniel talked about governance matters and the full extent of our platform is a difference maker for us. William Kingsley Crane: Great. And then just a quick follow-up. That #1 OSWorld ranking for Screen Agent definitely impressive, and that's still holding up. Just curious like how specifically Screen Agent is driving more automation growth within customers. And just a reminder on the unit economics that's affected by running Opus versus running high-q, things like that. Daniel Dines: Yes. I think we are still in the early innings of deployment of the screenplay agent. We are seeing really good use cases from our customers. They -- the powerful use of this screenplay agent is that it is used in the context of autonomous workflows. So basically, the best we combine like using deterministic UI automation technologies. And in the places where it's extremely difficult to define in rules how to use the screen when the screens are -- have a high degree of variability. Our customers are using the screenplay agent. So that basically extended our platform in a few use cases that we couldn't basically touch before. But again, I think it's still early to comment on how does it help with the platform adoption. Operator: And our next question comes from the line of Arsenije Matovic with Wolfe Research. Arsenije Matovic: I just kind of wanted to go back and expand kind of on the ARR guidance methodology in terms of that conservatism. Like what does that mean? And I understand we're not going to be talking about inorganic from WorkFusion, $20 million, whatever it is. Even if you strip out that number growing at the 65% rate the CEO talked about. Is there a way that it still looks a little bit less conservative in that guide? And if there is a little bit less conservative [indiscernible] dynamic where it's just, hey, larger renewal cohorts and also more confidence in that execution tailwind that you started to see exiting the year? Ashim Gupta: Yes. So one is I just want to correct, Like, I don't think we should -- the metrics that we talked about, as I said, we bring it on at a different ARR methodology. So I really want to caution everybody to use kind of those -- those assumptions. It's immaterial for a reason as we've done that test. The second piece is, while the business was growing at 65%, remember, we also have overlapping customers, et cetera. We really view this as a technology tuck-in that can drive utilization and stickiness across our Agentic and AI platform. And of course, we do see potential there for the upsell, but we also have to go through an integration period with the company. And that is all baked into our guidance from that standpoint. We look at it as our core business continues to be very strong, and we are stabilizing net new ARR. And with AI and Agentic, we do feel bullishness about the overall business. But given the macroeconomic environment continuing to be variable, we do layer the appropriate prudence that is there. Arsenije Matovic: Got it. And then just in response to an earlier question, I didn't really kind of get the in line with the constant currency guide. Can we just clarify what was the constant currency ARR growth rate implied in the guide for revenue and for ARR growth because the communications throughout the year on tailwinds and incremental headwinds has kind of laid up a weird kind of analysis to figure out what the actual core constant currency growth was? Ashim Gupta: Yes. From our standpoint, we gave the $14 million, which we assumed -- which we -- for the guidance that was there, but the growth rate remains 11% for us. It is largely a material year-over-year. Operator: And our next question comes from the line of Siti Panigrahi with Mizuho Securities. Phil Winslow: This is Phil on for Siti. So you guys raised the long-term non-GAAP operating margin target to 30%, which is a meaningful step up. Can you walk us through what gives you confidence in that number? And what is the time frame of achieving that target? Ashim Gupta: Yes. So right now, we're in and around 23% north of that. We've shown really good progress and scalability over the last couple of years, in particular. The first thing is we just continue to operate with really good discipline. And so we constantly are moving investments to higher return areas. And so when you're able to do that, it obviously creates a scalability of expansion. The second is we believe in the productivity that is being unlocked right now with agentic and that agentification within our own business is something that is very exciting for us and our teams to unlock further steps of productivity. And that includes all areas within the company. We can be more productive, expand and support our broader road map, really with similar technology spend just because of the advances that are there or R&D spend. The same goes with our G&A function as well as our sales and marketing function. So we're really seeing that scalability just even with the technology advances as well. In terms of time frame, it's a long-term margin target. We -- as it implies, that's kind of within a 3-year time frame from our standpoint in and around it. And at the same time, like we don't take -- we're not waiting for 3 years. We're going to continue to execute and drive productivity as we see fit. Operator: And our next question comes from the line of Koji Ikeda with Bank of America. Koji Ikeda: I'm going to ask one on dollar-based net revenue retention. So it's down 1 point to 106% when adjusting for FX. And so looking into fiscal '27, what are the main drivers we should be thinking about, whether that's product, geography, vertical or maybe something else in there that can drive expansion in that metric? And how should we be thinking about the dollar-based net revenue retention assumptions that are embedded in the guide? Is that flat, up or down from the 106%? Ashim Gupta: Yes. I think when you look at overall net new ARR stabilizing, like we don't really see a difference in the mix shift between net new logos as well as expansion. We see them both as areas that will continue. We've kind of operated in this 80-20, 70-30 split. So that gives you, I think, enough data to be able to see that net new ARR stabilizes over this period of time from where we are. In terms of what gives us confidence or kind of how we see that expansion, again, as we spoke about earlier, it is really around our AI and Agentic products. And then with that, really pulling through the overall platform, including deterministic automation, continuing to expand across our customer base. Operator: Our next question comes from the line of James Kisner with Water Tower Research. James Kisner: I guess first, just -- from the foundational model perspective, I mean has the Anthropic supply chain risk designation, have you seen any kind of ripples from that at all? Is there any kind of exposure at all any change in behaviors out there? And then just on the WorkFusion acquisition, does that portend potentially future acquisitions and other verticals for agentic capabilities? Daniel Dines: Yes. In relation to Anthropic, our strategy was from the beginning to be model agnostic. And we -- 1 of the features that many of our customers have requested this to give them the capabilities of choosing what model and even bring their own model to be used by our platform. So we do offer Anthropic models but they are optional and not mandatory. And from this perspective, there is zero impact on our working relationship with public agencies in the U.S. About WorkFusion, Yes, it's -- we are always looking into the market, especially for tuck-in acquisition that gives us the talent, technology, and expertise in a particular vertical. Operator: And with that, ladies and gentlemen, that does conclude the question-and-answer session. I would now like to turn the floor back to management for any closing remarks. Daniel Dines: Well, thank you so much for listening to this call. And once again, I would like to apologize for the outage that we experienced, and I'm looking forward to meeting many of you in the coming days. Thank you. Operator: Thank you. And with that, ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation, and you may now disconnect at this time, and have a wonderful rest of your day.
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