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Operator: Good morning, and welcome to the Kohl's Corporation fourth quarter 2025 earnings conference call. All participants are in a listen-only mode. After the speakers' remarks, we will conduct a question-and-answer session. As a reminder, this conference call is being recorded. I would now like to turn the call over to Trevor Novotny, Director of Investor Relations. Thank you. Please go ahead. Thank you. Trevor Novotny: Certain statements made on this call, including those regarding our projected financial results, business outlook, and future initiatives, are forward-looking statements. These statements are based on current expectations and assumptions and are subject to certain risks and uncertainties that could cause Kohl's Corporation’s actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, the factors described in Item 1A, Kohl's Corporation’s most recent Annual Report on Form 10-K, and as may be supplemented from time to time in Kohl's Corporation’s other filings with the SEC, all of which are expressly incorporated herein by reference. Forward-looking statements relate to the date initially made and Kohl's Corporation undertakes no obligation to update them. In addition, during this call, we may refer to certain non-GAAP financial measures. Please refer to the cautionary statement and reconciliation of these non-GAAP measures included in the investor presentation filed as an exhibit to our Form 8-Ks as filed with the SEC and available on our investor relations website. Please note that this call will be recorded. However, replays of the call will not be updated, so if you are listening to a replay, it is possible that the information discussed is no longer current, and Kohl's Corporation assumes no obligation to update such information. With me this morning are Michael Bender, our Chief Executive Officer, and Jill Timm, our Chief Financial Officer. I will now turn the call over to Michael. Michael Bender: Thank you, Trevor. Good morning, everyone. Thank you for joining Kohl's Corporation’s fourth quarter earnings call. Before I begin this morning, I want to express my sincere gratitude to the entire Kohl's Corporation team. 2025 was a year of substantial change and notable progress. I appreciate the way our teams adapted and committed to new ways of working. We are ending 2025 in a stronger position than we started, though important work remains ahead of us. Thank you for your continued dedication and belief in Kohl's Corporation. During this transformational time for our business, we are taking a long-term view. We take accountability for our performance each quarter, while making decisions for the long term with the understanding that progress will not be a straight line. Over the past year, our efforts have been focused on resetting our foundation. This focus is intended to stabilize the business and strengthen our operational ability to build for a stronger future. In 2025, we made meaningful progress and this aggregate work has us moving forward in the right way. While we have made progress addressing issues and strengthening areas of our foundation, that work will continue to be the focus for most of 2026. Addressing operational opportunities and modernizing our processes and ways of working is critical for what comes next for Kohl's Corporation. There are no shortcuts. We are confident that the work we are investing in now is essential to improving our business and getting back to growth. During today’s call, we would like to discuss three items with you. First, we will review our fourth quarter performance. Next, I will provide an update on how we will execute against our key initiatives in 2026, and lastly, Jill will give more details on our Q4 financial performance as well as give guidance to 2026. Although we are not pleased with our top-line results in the fourth quarter, as comparable sales decelerated to down 2.8%, we are pleased with our strong inventory discipline and expense management helping to deliver diluted earnings per share of $1.07, well ahead of last year. We also strengthened our balance sheet, ending the year in a strong cash position with no borrowings on our revolver. While not the primary driver of these sales results, severe weather was responsible for about 70 basis points to our comparable sales decline as approximately half of our stores were closed during the winter storms toward January. Beyond the impact of winter storms, we have identified two primary factors impacting our Q4 top-line results. First, we have an opportunity to better execute our fall seasonal business. The softness in this category uncovered some operational opportunities for us regarding our inventory depth and allocation. We did not consistently have the right product in the right quantity in the right places. This issue was outsized in our smaller format stores which meant we were not consistently able to meet the demand in key moments. However, we continued to experience positive growth in our year-round businesses including the emphasis on core basics and essentials, which were not impacted by inventory allocation issues. Second, we needed to offer breakthrough pricing during our key holiday shopping periods to drive more excitement for customers to choose Kohl's Corporation. During the fourth quarter, we lost some competitive ground during high-traffic shopping windows, including Black Friday, Cyber Monday, and the week following Christmas. We know consumers are more value conscious and there is opportunity for us to regain share during these windows through strong promotional statements that better align to our customer needs and priorities. Consistent and differentiated value statements across marketing, in-store, and online will be a catalyst to improve our performance. While acknowledging and addressing these issues from Q4, we remain committed to the path we are on to improve the business. This year, we made significant progress resulting in a 300 basis point improvement in our comparable sales from last year. There were a number of areas that drove progress this year, beginning with our Kohl's card customer who improved 120 basis points from the third quarter, now running down mid-single digits. While this performance is not where we ultimately want it to be, we are encouraged by the significant progress we have made from the first half of the year, where these shoppers declined in the mid-teens. The re-engagement of this shopper is instrumental to Kohl's Corporation’s long-term success as they are the most productive customer we serve. Additionally, we remain pleased with the performance of our non-Kohl's card customers and new customer acquisition. Overall, we are proud of the progress we have made toward re-engaging our Kohl's card customers while continuing to attract and serve new customers. Next, we have made solid progress across our proprietary brand portfolio. Although these brands were down 3% overall in the quarter, our proprietary apparel was flat with the decline primarily driven by our home business. Our juniors business, which grew 8% in the quarter, continues to benefit from investments in our proprietary brand, SO. We are furthest along in our progress with this category as it has faster turns and shorter lead times. We are excited about taking this momentum from the juniors business and expanding the efforts throughout the remainder of the women's category. Petites is another area within women's that continued its great momentum, running up 26% to last year. This category benefited from the in-store presence we built with key proprietary brands LC Lauren Conrad and Simply Vera Vera Wang. Our men's and kids departments also showed strength in proprietary brands, both running positive comps in the fourth quarter. This strength was driven by brands like FLX, Tek Gear, Jumping Beans, and Apartment 9. Our home business underperformed largely due to softness in seasonal decor, particularly within our proprietary brands. We bought too deep, which limited customer choice for the various holiday celebrations. We also have an opportunity to be more competitive by offering better value through sharper price points in key seasonal items. Moving to the remaining lines of business, our accessories business continues to outperform. Our Sephora business grew 2% with comparable sales improving to flat in Q4. This was driven by our expanded holiday gifting sets and continued strength in our fragrance and hair care categories led by brands such as YSL, Valentino, and Paioli. Excluding Sephora, our accessories business increased low single digits led by the expansion of Impulse to nearly all doors in Q3 helping deliver over a 40% comparable sales increase versus last year. We also saw positive performance in our jewelry business with strength in our fashion and bridge jewelry. Our footwear business underperformed the company due to softness in active footwear and boots. We expected our boots business to remain soft in the fourth quarter and proactively reduced our buys based on pricing expectations. The strength in dress and casual footwear across men's and women's businesses partially offset this category softness. Beyond our category performance, it is also important to acknowledge that the consumer is behaving differently in this challenging macroeconomic environment. We know our core low- to middle-income customers continue to face financial pressure and they are seeking value. As we expect this customer behavior to persist, we are adapting our strategies to ensure we are delivering great value to better serve this customer. We have taken immediate action to address the opportunities and to build upon our strengths. As we move into 2026, we will continue to work on our key initiatives. This work is essential for setting up Kohl's Corporation for long-term success and will take time. In 2026, we are committed to continuing the progress we laid out in 2025 and have clear, actionable insights that we can build on. Starting with our first initiative, offering a curated and more balanced assortment that fulfills the needs across all our customers. As we work through our merchandise strategies, our goal is to invest in key styles and categories while reducing redundancy to ensure we have a purpose behind each product and brand. By exiting out of unproductive styles and offerings, we can reinvest into higher turning items to drive a more balanced assortment. In our apparel businesses, we are focused on increasing our investment into our basics, while also right-sizing our assortment offering in trending categories. By strengthening our core apparel business category, we ensure that our customers can consistently rely on us for the essential, high-quality items they need for daily life. In addition to our core business, we continue to find ways to curate our assortment into more fashion and relevant categories such as denim, dress, and activewear. In our women's business, we are broadening our denim assortment with more styles and fit through our key national partners such as Levi's and enhancing proprietary brands such as LC Lauren Conrad and Sonoma. Additionally, we will build on the momentum in juniors by introducing the Office Edit by SO to provide a new compelling assortment in the casual and dress categories. For our men's business, we are investing in the key item programs within proprietary brands such as Tek Gear and Sonoma, and we will expand upon successful brands like FLX with our new offerings of FLX Golf, premium pant, and fleece. In our kids business, we will differentiate with our proprietary brands by introducing merchandising statements and an expanded assortment of under $10 entry price points in SO and Sonoma. We will also expand key brands like Jumping Beans into Baby and FLX Kids to all stores by Q2. Last, we recently launched our new proprietary tween brand, Sea and Sky, in Q1. We are driving the next phase of growth in our Sephora at Kohl's Corporation business by strategically curating an exciting assortment. We successfully launched MAC, a leading makeup brand, in over 850 of our Sephora at Kohl's Corporation stores this month. This launch immediately delivers enhanced newness and a strong value proposition to our customers. Recognizing that newness is vital in the beauty industry, we are also preparing to expand assortment with proven brands like Tarte and Charlotte Tilbury. Additionally, we see further opportunity in 2026 to build on the successful launch of our Impulse initiative. Following the rollout of an Impulse queue line in nearly all of our stores, we have identified more ways to inspire our customers and drive highly incremental, impulsive shopping behaviors. To capitalize on this, we are implementing the Deal Bar and an Impulse toy tower, both of which are specifically designed to offer compelling value on items like seasonal home decor and trending toys with all products priced under $10. We are excited to roll out these offerings this spring to maximize key seasonal moments including Valentine's Day, Easter, and Mother's Day. In footwear, as we transition to spring, we expect our dress, casual, and active categories to gain momentum. We are focused on improving our inventory position and reducing overall choice to deliver better clarity on the sales floor while ensuring greater depth in key styles our customers are seeking. And lastly, in our home category, we will deliver more value through our investment into key proprietary brands such as The Big One, while simultaneously growing newly launched brands such as Mariana, Hotelier, and Mingle & Co. In addition, we will leverage key national brand partners who continue to deliver newness and innovation, including brands like Shark and Ninja. And finally, we are taking immediate action to recapture our seasonal decor business through offering greater customer choice and sharper price points on key items. Our second initiative is our focus on reestablishing Kohl's Corporation as a leader in value and quality. Value continues to be a focus and is especially important given the macroeconomic uncertainty. The majority of our customers are low to middle income. These consumers have been consistently under pressure and are being thoughtful with how they are spending their discretionary income. It is clear that when we offer value, it resonates with this customer. Kohl's Corporation has an opportunity to deliver more consistent, competitive value to all of our customers. In 2025, we took important initial steps to enhance our promotional strategies and increase brand eligibility in our coupons. These actions proved to be a critical first step, resulting in an improved trend particularly among our Kohl's card and loyalty customers. In 2026, our focus remains on building upon the momentum we have established and deepening our commitment to delivering undeniable value to every customer. We are executing a strategy that includes simplifying our promotional statements and deploying more personalized real-time offers. This allows us to be more targeted, rewarding our most loyal and deal-savvy customers while ensuring a compelling value breaks through to a broader customer base. We are also making meaningful investments to amplify our proprietary opening price point brands, which provide exceptional quality at an accessible price. These strategic adjustments will strengthen our competitive position and ensure we deliver incredible value to all customers. A key element of Kohl's Corporation’s value proposition is the power of our high-quality proprietary brands. This year, we are committed to increasing our investment into proprietary brands’ inventory, marketing, and experience. In the women's business, we are excited about the work we are doing to key proprietary brands, LC Lauren Conrad and Tek Gear. In stores, we are elevating the experience to improve findability and inspire our customers. To achieve this, we are adding improved signage for better wayfinding, highlighting key styles with mannequins, and adding “find your fit” communication to better help customers find the product and fit they desire. This experience will be completed with our LC Lauren Conrad brand in Q1, and we will complete the Tek Gear experience in Q2. We are also excited to build off the momentum of another strong proprietary brand in FLX. Last fall, we introduced FLX to our kids category in 300 stores. Currently, we have expanded this to 600 stores in Q1 and expect it to be rolled out in all stores by Q2. In addition to the investment we are making into our proprietary brands’ inventory and experience, we will be supporting them with a new marketing campaign celebrating our “By Kohl's” brands. The “By Kohl's” campaign will put a spotlight on the great brands that customers can find only at Kohl's Corporation. We will focus on several “By Kohl's” brands by highlighting style, quality, fit, and aesthetic. To accomplish this, we will be leveraging our Kohl's mom this spring, utilizing a strong cross-channel campaign, including fun social content, TV, and digital video. We are also creating a landing page on our website and app to better highlight the proprietary brands to our customers. And lastly, our third initiative is delivering a frictionless experience across our omnichannel platforms. A frictionless experience starts with reestablishing trip assurance for our customers. To address this, we are making deliberate changes to both our planning and supply chain process. Specifically, we are committed to investing in depth with plans to increase it in the high single digits while simultaneously curating our choice counts for greater clarity and relevancy. This strategy includes protecting our replenishment receipts and heightening our in-stock levels, all while improving inventory turn to ensure the freshness of receipts. These adjustments are designed to ensure that the right product, with sufficient depth, is available at the optimal time across all our stores. Encouragingly, we are already yielding positive results from the implementation of some of these disciplines. We successfully executed a substantially smoother transition of our spring receipts heading into 2026. Our spring seasonal categories have started strong. To complement our investments in clarity and depth, we are focused on delivering a more consistent shopping experience through improved inventory allocation, which directly strengthens our omnichannel performance. By increasing inventory depth and improving in-stock levels, we are better positioned to leverage our store-enabled fulfillment tools such as BOPIS and BOSS. These omnichannel options provide our customers with greater speed and convenience while allowing us to utilize our ship-from-store capabilities more efficiently. We will continue to refine these tools to ensure a frictionless and reliable experience across all touch points, regardless of how or where our customers choose to shop. In addition to stores, we have an opportunity to modernize our capabilities and enhance our digital experience. We are focused on delivering a better experience and deeper connections through advanced personalization and contextual relevance, making every interaction with Kohl's Corporation more meaningful for the customer. We are enhancing our omnichannel capabilities across all digital touch points such as search, findability, and availability, as well as elevating our store-enabled services as key differentiators to maximize convenience and create the seamless, integrated shopping experience. And last, we are actively modernizing our site structure and foundational data architecture. This ensures our digital ecosystem is discoverable, high-performing, and fully prepared for a future driven by AI and agent technology. Now before I hand the call over to Jill, I would like to reinforce my perspective on the year. We have made meaningful progress in strengthening our foundation. I am confident that we are on the right path. While our fourth quarter results presented clear opportunities, we have already taken immediate action and are poised to build upon the strengths we have established. We are leaving 2025 in a measurably stronger position than when we entered it, and we are unwavering in our commitment to driving continued progressive improvements throughout 2026. I will now turn the call over to Jill. Jill Timm: For today’s call, I will provide additional details on our fourth quarter results and outline our fiscal year 2026 guidance. Net sales declined 3.9% in the quarter and 4% for the year. Comparable sales declined 2.8% in Q4 and declined 3.1% for the year. The decline was primarily driven by a decrease of transactions, specifically in stores. Store sales declined mid-single digits for both the fourth quarter and the full year, primarily due to a decline in transactions. Additionally, as Michael noted, our stores experienced a negative impact in January due to unforeseen weather conditions. Digital sales grew low single digits in the fourth quarter and were flat for the year. This performance was primarily driven by higher traffic, offset by lower conversion. We are pleased to have established a critical point of stability, ending the year flat. However, our goal was to drive more substantial growth in Q4, following the headwinds of the previous year. Our digital business has a higher penetration of our Kohl's charge customer, and although we are seeing improvement in this customer’s performance, it is still down mid-single digits, pressuring our digital business. In addition, we need to further elevate conversion through better availability and findability, which are being addressed through the inventory strategies Michael outlined. Moving down the P&L, Other Revenue, which consists primarily of our credit business, declined 9% to last year in Q4, an improvement from the third quarter driven by better Kohl's card performance. For the full year, Other Revenue declined 10%. As a reminder, at the beginning of the year, we shifted certain credit-related expenses from SG&A against our Other Revenue line. For the upcoming year, we will lap this adjustment so our Other Revenue should normalize and reflect the relative performance of our Kohl's charge customers. Gross margin in Q4 expanded by 25 basis points to 33.1% of sales. This expansion was driven by continued strong inventory management resulting in lower clearance markdowns. This was partially offset by increased cost of shipping as our digital penetration increased 220 basis points to 35% of total sales for the quarter. For the full year, our gross margin expanded by 34 basis points to 37.5% of sales. SG&A expenses decreased $76 million, or 4.9%, in Q4. Excluding the shift of credit-related expenses, SG&A declined 4.1%. The decrease in SG&A was driven by lower store, marketing, and fulfillment-related expenses. For the year, SG&A expenses decreased 4.1%, and excluding the shift of credit-related expenses, SG&A declined 2.8%. Depreciation expense was $174 million in Q4, a decrease of $9 million. For the year, depreciation declined $43 million to $700 million. The decline was mainly driven by closures of stores and one of our e-commerce fulfillment centers last year. Interest expense was $59 million in the fourth quarter and $288 million for 2025. This was a reduction of $15 million for the quarter and $31 million for the full year. The decrease was a result of the execution of an open market debt repurchase at a discount of $11 million in the fourth quarter and lower utilization of the revolver throughout the year. Our tax rate was 18% in Q4 and an adjusted tax rate of 16% for the full year. Adjusted net income in the fourth quarter was $125 million, resulting in adjusted diluted earnings per share of $1.07. Adjusted net income for 2025 was $186 million, or adjusted diluted earnings per share of $1.62. Moving on to the balance sheet and cash flow, we ended the year with $674 million of cash and cash equivalents, an increase of $540 million from 2024. Inventory decreased approximately 7% compared to last year. Our disciplined inventory management has enabled the more timely flow of transitional receipts, positioning us with stronger, fresher spring inventory as we enter 2026. Operating cash flow was $750 million in Q4 and $1.4 billion for the full year, a $700 million increase from 2024. Our capital expenditures were $64 million in Q4 and $372 million for the year. In addition, we achieved our goal of fully exiting the revolver with no borrowings at the end of the year, and we further deleveraged our balance sheet by buying back $87 million of long-term debt at a discount to par value during the quarter. In 2025, we returned $50 million to shareholders through our quarterly dividend. As previously disclosed, the Board, on February 25, declared a quarterly cash dividend of $0.125 per share payable to shareholders on April 1. Now let me provide details on our outlook for 2026. We believe the actions we are taking as well as the strategic initiatives laid out by Michael will allow us to continue making progressive improvements for the business in 2026. Our outlook reflects our confidence in our ability to execute against these initiatives with great discipline while considering the uncertain macroeconomic environment we continue to operate in. We remain cautious as our core low- to middle-income customers remain choiceful with discretionary spending. Our outlook for 2026 is as follows. For the full year, we currently expect net sales and comparable sales to be in the range of a 2% decrease to flat versus 2025, operating margins to be in the range of 2.8% to 3.4%, and earnings per share to be in the range of $1.00 to $1.60 per share. Now let me share some additional guidance details. We expect Other Revenue to be down 4% to 6%. The decrease is due to lower accounts receivable balances driven by sales underperformance in 2025 by our credit customer. Gross margin to be flat to down slightly, driven by increased proprietary brand sales offset by an increase in digital sales and promotional offers as we drive more value for our customers. SG&A dollars to be in the range of down 0.5% to down 1.5%. These savings will be driven by lower store payroll, marketing, and supply chain costs. Depreciation and amortization of $700 million, interest expense of $285 million, and a tax rate of 22%. We will continue to manage inventory tightly and expect inventory to be down low- to mid-single digits, and capital expenditures to be in the range of $350 million to $400 million. As we anticipate the new initiatives to take time to have an impact, we expect sales to build throughout the year. And although we are pleased with our start to Q1, specifically in our spring, seasonal, and year-round businesses, there is a lot of quarters still ahead of us. We expect Q1 comparable sales to be down low single digits with the remaining metrics balanced by quarter. We will now open for questions. As a reminder, to ask a question, please press star followed by the number 1 on your telephone keypad. Our first question comes from Charles P. Grom from Gordon Haskett. Please go ahead. Your line is open. Charles P. Grom: Thanks very much. Can you just talk about the “By Kohl's” campaign that you are going to launch this spring, what it is going to involve, and then laterally, what is your expectation for comps in 2026 amongst your Kohl's cardholder given the recent improvement that you saw in the back half of 2025? Michael Bender: Maybe I will take the first half of the question, Charles, and Jill can handle the second part. As far as the “By Kohl's” campaign, we have actually launched that already, and it is a continuation of our effort to make sure that the power of our proprietary brand portfolio is showcased and emphasized. So there is a marketing element to it that brings some of our most important proprietary brands together like FLX and others. It is also an opportunity for us to continue down the path, as we have been talking to you over the last three to four quarters, about the importance of the proprietary brand portfolio to our customers in general, but in particular to those that are Kohl's card-carrying members. It is a mouthful, sorry. And so it is an important next step for us to be able to showcase those brands in a way that elevates them and allows us to tell stories in an inclusive manner across both of our platforms of stores as well as digital. Jill Timm: In terms of the Kohl's charge holder, you know, obviously, it has continued to lag our performance this year, but showed stepped improvement from down mid-teens to down single digits at the end of the year. I would expect this to continue to improve based on a lot of the efforts that we are putting forth. First, they do over-penetrate in proprietary brands, so as we are making that investment back into those brands, it has resonated with that customer, one, because it provides incredible value. It is opening price point. We also need to restore the trip assurance with this customer, so investing back into depth will help with that as well, so when they come in they can find what they are looking for. A couple other key things that we have done is the coupon eligibility resonated with this customer as well as, as we have bought back into jewelry and petites. So I think you are going to see a build in this customer. It will probably still lag in the front half of the year. I think it will catch up in the back half of the year. The good news is our non-Kohl's charge customer has been running positive, and we continue to see new customer acquisition up as well. So those are definitely driving our business. We just need to get this customer back into parity with our comps, and I think that will happen more in the back half of the year as some of these new strategies start resonating more with that customer. Charles P. Grom: Okay. Great. And then just on the credit revenue line, you are guiding down 4% to 6%. Is there any geographical shift across the P&L that is happening? Or just maybe explain why you expect it to be down? And then just bigger picture, is there a way to size up how much of an impact the shift away from your proprietary brands over the past handful of years has actually had on your credit business given that I believe that the cardholders likely over-index to owned brands versus nationals? Just trying to understand the implications on some from credit because of the shift away from mix in recent years, and I guess the opportunity that that indirectly presents. Jill Timm: Yeah. I would say it is going to lag, so that is why we are down and lagging from a sales perspective. We are coming into the year with less accounts receivable, which is what really generates that interest revenue and the late fee revenue for us. So it is always going to lag. You make your purchase in month one. We do not start billing you till 30 days later. You do not start getting accrued into interest for 30 days, and then it really builds and accumulates. So it is always going to lag top line just given the lag of those purchases. I would agree. As we move into proprietary brands, they definitely over-penetrate into that category. We were really void of an opening price point in our store over the last couple years because we had not invested into proprietary brands, and this customer was finding that value elsewhere. The good news is she continued to shop us. We just got less frequency from this customer. So as we brought back coupons, we have brought back proprietary brands, we are starting to see that reaction to our customer, which is really what is driving that 120 basis point improvement in that comp from Q3 to Q4 and really moving from down mid-teens to down single digits by the end of the year. So big improvement. We continue to expect to see improvement, but it will lag on that credit revenue line just because of how the interest and late fees accrue the balances. Michael Bender: Got it. Charles P. Grom: Thanks a lot. Operator: Our next question comes from Mark R. Altschwager from Baird. Please go ahead. Your line is open. Mark R. Altschwager: Thank you. Good morning. Michael, you outlined several initiatives today. Which of these do you view as the most immediate catalyst for recapturing market share in 2026? Furthermore, how should we think about the scaling here, where these assortment pivots and other initiatives provide enough lift to drive a return to comp growth? Michael Bender: Yes. Thanks for the question, Mark. I would say, just carrying on Jill’s comment around proprietary brands, that has been a significant focus for us in the past, call it, eight to nine months or so in terms of restoring what we believe to be the proper balance. Again, we are not targeting a specific number that we are looking for from a mix perspective, but proprietary brands, for a number of different reasons, are really a focus for us in bringing and restoring the activity that we need with our customer. Jill mentioned the importance of the Kohl's credit card-carrying customer. They index heavily toward proprietary brands, so that will be a big focus for us. I think also beyond that, making sure that the continuation of the brands that we will be pushing forward, both national as well as proprietary, will be a big part of that. Our focus right now also is on making sure that we provide, I will say, maximum value to our customers. And so you are seeing us offer more in the way of, call it, $10 and under items. So look at toys as an example. We have a toy tower that we are rolling out to stores that has price points $4.99, $7.99, $9.99. Then the Deal Bar, which we have recently rolled out as well, which, if you walk into the entry of our store, provides another impulse opportunity and a pickup for customers, beyond what you can see as you are checking out in our queue line. So those are just a couple of examples of where we are focused right now. And more to come. Mark R. Altschwager: Thank you. And Jill, to follow up on the EBIT margin guidance, calling for about 50 basis points of compression at the low end. What specific headwinds are captured in that lower end, that 2.8% floor? What are you incorporating in terms of changes to tariff rates, if any, and just any further color you can provide on the expected cadence for the year on EBIT margin would be helpful. Jill Timm: Yeah. I think the biggest thing from an EBIT is on the down two it is just harder to leverage our SG&A costs just given the fixed-cost nature of our business. So I think we have done a really incredibly good job of bringing down our expenses over the last couple of years. We will continue to operate with that discipline into 2026 as well, but I think it just puts pressure on the EBIT expansion. Obviously, at flat, we are expanding the margin. So I think that shows our discipline in terms of how we are managing expenses, that we are able to have some expansion on the top end of the guidance. From a margin perspective, I think we have managed our tariffs incredibly well. We have actually offset that. So I do want to give a shout out to our sourcing and buying teams on how they have managed this dynamic environment in terms of still being able to expand our margin this year by over 30 basis points and 25 basis points in the fourth quarter. Next year, really, we are going to manage it the same way. So we think we have the right mitigation tactics to manage through tariffs. The big thing that we want to make sure that we are going after is value. We know we serve the middle- to lower-income customer. We know they have to be choiceful with their discretionary spend. And so a lot of what we are talking about today is how we can stand for value, whether that be through our proprietary brand portfolio, through the price points that Michael indicated with the $10 and under, also making sure that we are going to be able to break through with our promotional values as well. We want to give ourselves some room to be able to do that. We know our proprietary brand will be a tailwind in the mix as we definitely move more into sales there. But we also see digital as a growth opportunity. We were happy to get to a point of stability and putting a flat comp for the year, but we really think this can be a growth engine for us as well into 2026, which will then add some pressure to margin. So those are kind of some puts and takes. So margin, I would say, is not going to be a driver of the EBIT expansion, but rather it is going to be around our expense management and then obviously getting to that flat comp allows you to expand it on the top end. Michael Bender: Thank you. Operator: Our next question comes from Robert Drbul from BTIG. Please go ahead. Your line is open. Robert Drbul: Just a couple of questions from me. On the women's business, as you think about this year and I think the progress that you made last year, where are the biggest opportunities ahead? And I guess on the same line of questioning would be just in home, I think you think about what you have learned sort of Q4 in home, soft home, tabletop. Can you just talk through that category as well? And just curious on sort of online versus in-store, how you would merchandise that category? Thanks. Jill Timm: Sure. So from a women's perspective, I would say one big callout is juniors, Robert. It was up 8%, really seeing momentum behind our SO proprietary brand. Which, as you know, juniors is our fastest-turning business. We are probably the most mature in that curve in terms of how we went after our proprietary brand portfolio. So I think that is kind of the litmus test for us and really what we are going to continue to chase after, and that is where women's will continue to lead to. I think there are a couple of opportunities if I think about women's. We are in a denim cycle. So you are going to see us leaning into our proprietary brands LC Lauren Conrad and Sonoma, but also great national brand partners like Levi's. So that is going to be coming to life in our store as well. We know we had a little bit too many choices on our floor, so they are really going to be curating that assortment and putting more depth in so we can be in stock on those basics that we need. We went a little too far, I think, this year into core knits and sweaters, so we know we have an opportunity to curate that better as we get to the back half of the year. I am really excited about our spring seasonal selling. A lot of the changes that we learned from our missteps in fall seasonal, we have corrected, and we are starting to see that momentum as we called out with our spring seasonal businesses, which will only grow in volume as we move into March and April. So we are excited about that opportunity in front of us. So I think that women's really has the right formula from a juniors perspective, and they are going to continue to follow that as we move into the new year. From a home perspective, I think what we learned there was on seasonal decor, people like more choices. And so we went a little too deep in some categories. And we needed to give more choices from that perspective. So they have already corrected from that. We will move into it. So we know as we go into next year, do not go too deep on the Santa Claus and snowman, but have a little bit more array from a choice perspective and then having sharp price points. And so as we think about where we can add more value, particularly as we get into that seasonal business, that is where we will go. So we have a couple of places along the way. We did some small testing in Valentine's Day. See Mother's Day, Father's Day. So we have some moments to make sure we get it right before the big holiday season, but we feel good with the progress that that team has made and the steps they have already taken to correct what we saw during the holiday season. Robert Drbul: I guess, and if I could just ask a follow-up, which would be on the marketing expense, when you think about sort of how you are approaching reengaging with some of your credit customers, but also noncredit customers. Where did you end up in marketing, and can you just talk through the plans for 2026 in terms of, you know, leverage, not leverage, in terms of how much you are going to spend? Thanks. Jill Timm: Sure. I think marketing this year, we end up close to a similar ADAS as last year. Kinda that is my metric for how I look at the productivity. What I would say is we always look at opportunities. That team has done an amazing job of finding productivity and making our working media work harder for us. So it has been a way for us to save some money. However, we spend a lot of time with our Chief Marketing Officer about where and how we can invest back into drive sales. So if we see opportunities, we are definitely making those investments and making sure we get the return back off of the money. So even though there is some savings, I think if you look at that productivity factor, you will see it is pretty in line with where we have been. And it is a place that, if you look at versus where we plan to be, we will tend to invest back into because we know we can get the sales, particularly in digital. It is a very easy way for us to invest in, get some search terms, get some paid traffic in moving our digital business forward, and getting really good ROI out of it. So I think we have a very good system in terms of how we measure marketing, then how we make those investments to make sure we are getting the return back from an organization perspective. Michael Bender: Great. Thank you very much. Operator: Our next question comes from Dana Telsey from Telsey Group. Please go ahead. Your line is open. Dana Telsey: I know you have a very store base related to profitability. How are you thinking of openings and closings this year? And the small-store boxes? What is the game plan and remodels? And then, Michael, as you talked about the initiatives for top line growth, how do you see the framework of the store changing either by category, obviously at the impulse lanes? What does footwear and active mean for you this year? Thank you. Michael Bender: So I will try to take some of those questions. Thanks, Dana. The question around stores, and we have talked about this before, I think we have a store base of 1,150 stores roughly. The vast majority, well over 90%, are profitable. And as we look at that store base on an annual basis, we will continue, from a hygiene perspective, to make sure that we believe that those stores are positioned in the right spot and delivering what we need. So I would not anticipate any sort of grand plan of saying we are taking stores out or adding stores at this point. The focus for us is actually on optimizing what we already have, and we will be focused on making sure that we continue to push the stores’ productivity as far as we can going forward. We will look at stores like we do on an annual basis, like I said, and to the extent that there are opportunities for us to either relocate, those are opportunities for us. We can do that. But no major change in the store base expectation at this point. Jill Timm: I think, if footwear’s doing well from a dress casual perspective, we are seeing some green shoots there, particularly, like, in sandals. We knew boots was going to be tough. We bought that down just given the exposure to tariffs in that category. So that was an anticipated piece. I think the big piece of it for us, as you mentioned from an active perspective, is getting innovation and some movement from an innovation perspective in the footwear business. We have been working really closely with our top three partners. I think we do expect to see some momentum build in that category throughout the year, but I would say we would probably be set better from that perspective for back-to-school into fall, just because of the change that it does take to get there. So I would say, from a footwear perspective, I expect it to probably lag the front half of the year, but by the back half of the year, get back into parity from a comp perspective, just given we do have a big active footwear business and that will take some time to bring that innovation through from that perspective. And then in terms of, I think, your last question, if I wrote it down correctly, was the top-line framework for store changes. I think, you know, we have made some big changes in the last couple years. Obviously, Sephora coming in was a big moment for us. We had some missteps with the jewelry, so bringing jewelry back in, showing that and showcasing that, having accessories have a home behind the Sephora pad, and moving juniors back to the front of the store were some big showcases that we had in 2025. Clearly, putting juniors in the front was working. That cross-shopability with Sephora had persisted and been consistent for us, which is a good thing. Impulse lines and queueing lines have come in. We now have that in all stores, which we finalized at the end of the year. So that was a white space opportunity for us. And you are now going to see gifting zones as well, and those are going to be with the $10 price points. You are going to have more table towers, whether that be impulse, gift deals, and also in toys. And then we did some in-store showcases of our brands. So you will see, if you come in, we are showing more around Lauren Conrad. So you are going to have elevated signing, mannequins, really a much more curated assortment. That should be in stores now. And then Tek Gear will be the secondary brand that we are going to be supporting as well to showcase it. So investing in the proprietary inventory. We are investing in the marketing to build awareness, and we are investing in the in-store experience, as well as you are going to see it on our digital experience as well for the customers to showcase those brands. So really putting our effort behind growing back those proprietary brands which, as we know, provide incredible value and also resonate with that core loyal customer of ours as well. Michael Bender: And, Dana, just to add on to what Jill was saying, what you are hearing her talk about is trying to bring some fun and excitement back to particularly the store environment. So we talked to you before about the storytelling nature of—and what is important in being able to not only curate the right assortment, which is what our customers are asking for, but also do some storytelling. So whether it is the use of mannequins, the way we position an LC Lauren Conrad brand, like Jill just mentioned, in our stores, those are all important aspects of us being able to actually bring some fun back to the Kohl's Corporation environment and make sure that what we are offering is not just an item at a price but also a story around it, so that whether it is the entire outfit that we can display and talk to from a mannequin standpoint, those are the kind of things that are important for us that we think will help enhance the experience in-store for our customers as they engage with us. And then similarly online as well, telling that same story so there is a pull-through of that thread all the way through the experience that a customer can have where they want to engage with us online or in-store or all the different versions in between, like BOPIS and the rest. Operator: Our next question comes from Oliver Chen from TD Cowen. Please go ahead. Your line is open. Oliver Chen: Hi, Michael and Jill. Regarding trip assurance, what is the timing of that happening? And there are some things you can do sooner you have been doing than making happen. But how does it phase in quarterly? And as we also model Other Income, should we know about the comparisons and drivers throughout the year, as in profitability? Your company is quite sensitive to that line. It sounds like a lot is under your control, but what could be risk factors to the upside and downside on Other Income for us to consider? And third, you have been on an inventory management journey for many, many years. I think it is different now, but what is different in terms of breadth versus depth? It sounds like there are some decisions that were made that were self issues in terms of what you are choosing to do with basics and others. Thank you. Michael Bender: Yeah. So on the trip assurance question, Oliver, what I would tell you is that that work is well underway, and we have been focusing on that in large part in 2025 and it will continue into 2026 as well. The whole focus there is our customers count on us to actually have what they are looking for, whether it is online or in-store, particularly in-store. And what we have been doing is curating the assortment to the point where we have the appropriate level of choice and in many cases that means reducing the choice offerings that we have but at the same time actually going deeper on that so that, particularly in the basics area, and that work will continue. Our teams, collectively across the organization, have been working diligently on that over the last several months, and we feel like we are making good progress in that area. Jill, do you want to talk about the income? Jill Timm: Sure. I think when you reference Other Income, you are referencing the Other Revenue, Oliver. But it is going to be about our credit sales, and I think, you know, that is where it is going to ebb and flow. So as I mentioned, coming out of this year we have a lower accounts receivable balance just because it has been lagging. We need to build that back. So the guide of down 4% to down 6% will lag the comp just because of the ways that that build happens, the way that it revolves, and it generates that revenue. So I would say, you know, we are staying down flat to down two. We know our credit card customer needs to continue to improve. I think, you know, we can see that improvement more in the back half of the year, but it will still cause a lag on the Other Revenue line. So I think if you kind of look at that spread that we gave you, it is probably a good spread to use as we move into the current year. There are no reclassifications, so it is very pure this year. So it should be an easier way for you to be able to model that. Oliver Chen: Has been a great new recruitment tool. What is your latest thinking on the best adjacencies next to that, and where are we given that there are lots of nice conversion opportunities? And lastly, Michael, this is simple but hard, but what do you think it takes to positive comp in stores? Like, there are a lot of great things happening, but what is your visibility or your thoughts on which ones will be the critical drivers just to get back to positive comps on multiple years of negative comps? Thank you. Michael Bender: Sure. On the Sephora question, we feel very good about the partnership there. In terms of the adjacencies, you know, we have moved juniors across from Sephora. So we feel like that was a positive move and is paying dividends for us in terms of a customer coming in for a Sephora purchase and then turning out and seeing what is available. That is a younger, oftentimes more diverse, more digitally savvy customer that comes in to shop for Sephora, and we want to make sure that the product that they see outside of the Sephora portion of the store is consistent with what they are looking for, and that move with juniors has been a big part of that. As far as getting back to growth, I do not want to pinpoint a date and a time to say it is going to happen. But the kinds of things that we are doing in terms of the progression that we have been on over the past year in particular, but over the last couple of years, I would say, are, I think, indicative of the progress that we are making. We have mentioned proprietary brands. We have mentioned the culling of the assortment. Those are all things that we think are right. I talk to the team all the time here about—I use the analogy—that we have got to get the product right, because that is what people ultimately come for. Experience and all the other things that are wrapped around it are important as well, and we are working on those as well. But we have got to get the product right to make sure that that is what the customer continues to come back around for. So we will continue to focus on building that space to get back to growth eventually. What I would tell you is that if you look at the progression that this organization has been on over the last, call it, a couple years, we had a negative 6 comp two years ago. We produced a minus 3 comp this past year in 2025. We are giving you guidance, as Jill mentioned in her commentary, of being flat to down 2. We came out of the fourth quarter roughly around a 2% if you back out the weather impact of the 70 basis points that we mentioned. And so we are guiding on the low end of where we are already performing. And if you build these capabilities on top of that, that is what we believe will get at least back to flat. And we have the ambition, obviously, to get back to growth through this eventually. And that is what the aim is. We understand that that is the lifeblood of any business, to grow. But we also want to be measured and disciplined in the way that we get there, particularly against the backdrop of the environment that we are operating in from an economic standpoint. Oliver Chen: Thanks for those details. Appreciate it. Best regards. Operator: Our last question today comes from Michael Binetti from Evercore. Please go ahead. Your line is open. Michael Binetti: Hey, guys. Thanks for all the detail here. Just on the comps, Jill, you suggested, you know, that we would be building to the flat to down 2% through the year. Maybe just a thought on trying to connect that to your comment on first quarter. Sounds like seasonal goods and some of the holiday decor was the headwind in fourth quarter, but the decor was stronger if the spring seasonals are getting better and the core was stable. How should we think—I am trying to think about trends in first quarter relative to the negative two to flat for the year. And then I am also curious. It sounds like, you know, with the coupon and shifting to expanding the coupon a little bit deeper, as you said, shifting to more of the entry-level price points to drive value, sounds like a good idea, very important. Can you just talk about how you are thinking about the range of outcomes for units versus AUR that could support the negative two to flat comp for the year? Jill Timm: Sure. So I think from a comp perspective, Michael mentioned it well. We anchored the low end on our current performance. If you look at fall, we exited the year down two. The flat shows that we are going to have progressive improvement throughout the year. So, really, by starting at the low singles that I guided for Q1, you would actually say your exit rate has to get positive to exit at a flat. So we do know we have to make some changes. Obviously, we had some missteps with fall seasonal. We made those corrections with spring. It started out great. It is a small portion of the business right now, so I think caution. I do not want to become overly optimistic. That is, you know, as you know, not my nature, but we feel good with that business. We feel good with our year-round business, which has actually continued to perform well even through the fourth quarter. So I think we are cautiously optimistic there, but there are a lot of macro headwinds. And we know our consumer is low- to middle-income. They are under a lot of pressure. Obviously, a lot of things happening today that are taking their discretionary income. So we also want to be mindful of the environment that we are operating in. We are kind of balancing that as we enter into this year. We also know a lot of these investments into depth are going to happen as the year progresses. We mentioned footwear. We know we have some new innovation, but we do not expect that till the back half of the year. So there are things that are happening, but it does take some time to make those moves. So we wanted to make sure we gave ourselves that room within the guide to be able to make those changes. And as we continue to show progressive improvements throughout the year, that will show that these efforts are working. But I think, as Michael mentioned in his prepared remarks, it is not going to be a straight line. I mean, there are going to be some ups and downs, and it is not just within these four walls that we get to control what is happening. We do have to be mindful of the external environment, which brings us to why the coupon and the opening price point is so important. We know that our customer, particularly the low- to middle-income customer, is going to over-penetrate in these value brands, so we need to bring that to them. We have seen—you know, gosh, I think if I look back for the last 20 quarters, Michael—we typically have seen a pretty flat average transaction value. Our issue continues to be traffic. So whether we are bringing in higher price point or lower price point, they will fill that basket. Our average transaction value typically has stayed relatively flattish. It really comes down to driving traffic, which you have heard a lot more about marketing in this call because we know we need to continue to drive that traffic both in stores and digitally. We have done an incredible job digitally. Our traffic was very solid in the fourth quarter. We need to continue to do that to the stores. And I think the investments we are making in that experience, like Michael outlined, is a way for us to bring in some more traffic as well as just a better flow of goods. We transitioned in January, which is probably the first time we have done that in a long time—bringing in newness, having those transitional goods. It gives that customer a better reason to shop. And just on that inventory management, it affords us more currency of inventory and pulling goods faster, which we also think could be a driver of trips. So I feel well positioned as we enter the year. But I would say that I am also just cautious, being mindful of the macro environment that we are operating in. Michael Binetti: Okay. Thanks a lot for all the help, Jill. Jill Timm: Great. Thanks, Michael. And we are out of time for questions. This will conclude today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Q4 2025 KVH Industries, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Anthony Pike. Please go ahead. Anthony Pike: Thank you, Tanya. Good morning, everyone, and thank you for joining us today for KVH Industries, Inc.'s fourth quarter results, which are included in the earnings release we published earlier this morning. Joining me on the call is the company's Chief Executive Officer, Brent C. Bruun. A copy of the earnings release and a recording of today's call will be available on our website at ir.kvh.com. This conference call contains forward-looking statements that are subject to uncertainties that may cause actual results to differ materially from those expressed in these statements. Words such as “expect,” “may,” “intend,” “anticipate,” “will,” and similar expressions identify forward-looking statements, which include projections, plans, initiatives, and other future events. We undertake no obligation to update these statements, and you should review the cautionary statements in our most recently filed Form 10-Q under the heading Risk Factors. We will also discuss adjusted EBITDA, a non-GAAP financial measure. Our press release defines this term and reconciles it to GAAP net income or loss. Brent? Brent C. Bruun: Good morning, everyone, and thank you for joining us. The maritime connectivity market is undergoing a fundamental transformation, and 2025 was the year KVH Industries, Inc. proved it is positioned to lead it. Let me explain what I mean. For years, the maritime satellite industry was built on GEO technology: reliable, established, but limited in speed and capacity. The arrival of LEO constellations changed everything. Vessels that once relied on modest bandwidth can now access high-speed, always-on connectivity at sea. New providers are entering the market, customer expectations are rising, and the addressable opportunity is expanding rapidly. KVH Industries, Inc. saw this shift coming. We made a deliberate strategic decision to reposition our business around LEO airtime, subscriber growth, and high-value managed services. 2025 was the year that strategy began to pay off. Here is what we delivered. In the fourth quarter, service revenue grew to $28.3 million, a 27% increase from 2024. We contracted for our second Starlink data pool, a 300% increase from our initial pool, representing a $45 million 18-month commitment. We made this commitment with confidence. Demand for LEO airtime across our customer base is strong and growing. And we delivered our strongest adjusted EBITDA quarter of the year. For the full year, service revenue grew 2% to $98.4 million. That headline number understates the real momentum in our business. Stripping out the $7.7 million in U.S. Coast Guard revenue that did not reoccur in 2025, underlying service revenue grew 11%, a meaningful reflection of what our core maritime connectivity business looks like. We grew our subscriber base by approximately 2,000 vessels, a 28% increase, ending the year with more than 9,000 vessels under contract. That is a significant and growing installed base that generates recurring revenue and creates the platform for everything we are building. We surpassed 1,000 CommBox Edge subscribers. CommBox Edge will be integral to our vessel-based managed IT solution, which we plan to introduce in the coming weeks. This is the next chapter for KVH Industries, Inc., moving beyond connectivity into a broader, higher-value managed service relationship with our customers. We also expanded our global footprint, successfully completing the integration of a maritime communications customer base in the Asia-Pacific region, adding more than 800 vessels and more than 4,400 land-based subscribers. And we delivered $8.1 million in adjusted EBITDA for the full year, including $3.1 million in the fourth quarter alone, reflecting the operating leverage we are beginning to generate as the business scales. None of this happened by accident. We made deliberate choices: investing in LEO capacity, growing our subscriber base, reducing operating costs by 17%, and selling our Middletown facility to strengthen our balance sheet. The result is a company that is leaner, more focused, and better positioned than it ever has been. That financial strength gives our board the confidence to act. Given our recent top-line growth in a rapidly growing market, improving profitability, positive free cash flow, and no debt, our board continues to view our common stock as undervalued. With that said, the board has authorized an increase in our share repurchase program from $10 million to $15 million, which we believe is a prudent next step in returning value to our shareholders. Looking ahead, the satellite communications industry is undergoing a significant transformation. We are still in the early stages of that shift. In the coming years, new LEO-based providers will come to market, expanding the opportunity further. With our growing subscriber base, our demonstrated ability to integrate and scale new satellite technologies, and our vessel-based managed IT solution launching in the coming weeks, we believe KVH Industries, Inc. is uniquely positioned to capture this expanding market and deliver differentiated, high-value services to our customers. We enter 2026 with momentum, financial strength, and a clear strategy, and I have never been more confident in KVH Industries, Inc.'s direction. With that said, I will turn the call back to Anthony to review the financial details. Operator: Anthony? Anthony Pike: Thank you, Brent. With respect to our fourth quarter financial results, service gross profit was $9.8 million, which is up $1.1 million from the prior quarter. Service gross margin was 34%, which remained flat compared to the prior quarter. Airtime depreciation expense, which is a non-cash charge, represented 89% of service revenue in the fourth and third quarters, respectively, which impacted these gross margins. It is also worth noting that our cost of service sales related to our legacy network will reduce in 2026 as our minimum bandwidth commitment reduces by $7 million compared to 2025. As Brent mentioned, total subscribing vessels at the end of Q4 were just above 9,000, which is up 1% from the prior quarter and 28% from the beginning of the year. Vessel growth in the fourth quarter was lower than prior quarters this year due to the termination of two Southeast Asian low-ARPU fishing fleets. These two fleets contributed very little to our service gross profit. Total subscribing vessels were up 8% in the fourth quarter excluding the loss of these fleets in Q4, and 37% from the beginning of the year. Q4 operating expenses totaled $10.5 million compared to $9.5 million in the prior quarter. However, Q4 operating expenses included $900,000 of nonrecurring costs, which related to transaction costs from the acquisition we completed in Q4 as well as some restructuring costs. As Brent mentioned, our adjusted EBITDA for the quarter was $3.1 million, and capital expenditure for the quarter was $2.4 million, of which $1.4 million related to our ongoing ERP project and the fit-out of our new U.S. headquarters. Both of these projects will conclude in 2026. This compares to adjusted EBITDA of $1.4 million and capital expenditure of $1.6 million in the third quarter 2025. Our ending cash balance of $69.9 million was down approximately $2.9 million from the beginning of the quarter, and this decrease was driven by the acquisition we completed in Q4. Overall, we are very pleased with the fourth quarter performance, which shows a continuation in the execution of our strategy to focus on our recurring revenue business and the transition from our legacy to a LEO-driven maritime satcoms market. Our subscribed vessel count continues to grow, churn in our legacy network is being managed well, revenue has increased for the third quarter in a row with consistent margins, and our costs have remained under control, all of which resulted in our strongest quarterly adjusted EBITDA performance of the year. With all that considered, our guidance for 2026 is revenue of $130 million to $145 million and adjusted EBITDA of $11 million to $16 million. This concludes our prepared remarks, and I will now turn the call over to the operator to open the line for the Q&A portion of this morning's call. Operator? Operator: We will now open for questions. 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question will be coming from the line of Christopher David Quilty of Quilty Space. Your line is open, Chris. Christopher David Quilty: Thanks, gentlemen. Good results here. I had a question for you just first on the acquisition. I cannot remember when you bought it in the quarter. Is that $2.5 million sort of a good run rate that we should assume for that business on a go-forward basis? Anthony Pike: Yes. The business is actually a bit larger, Chris. But yes, $2.5 million is really the net impact. We did have a number of vessels that we were providing our VSAT service through this particular customer, and obviously, we will pick up the incremental margin on that, but $2.5 million per quarter is a pretty accurate close estimate. Christopher David Quilty: And I am assuming part of the acquisition is you will—would you actively convert those over to LEO, or let them sort of mature on their own? Brent C. Bruun: No. We will actively look to understand our customer base, we will work with them, and we will provide them with the best solution that is available for them. Our LEO-based services, to a large degree, are the best services that we could provide today. As we have demonstrated, we are doing great in providing LEO services. We are growing our installed base, the usage is up, and we have our new data pool, so it goes without saying that is our focus. Christopher David Quilty: And on the new data pool, Anthony, should we assume similar margin trends that we have been seeing with the prior pool? And the length of that of 18 months, I think, is shorter than your original plan, or was that also 18 months? Brent C. Bruun: Let me jump in there first, Anthony. It was a similar 18-month commitment. The fact of the matter is we depleted the pool prior to 18 months, so it might appear like it was less, but we still had some runway to go on that, which we did not need, which we are hopeful will be the same case with our next pool. As far as the margins, we anticipate consistent margins, but as I am sure you are aware, Starlink has implemented a terminal access charge, which in essence is a pass-through, so that might have a slight impact on the overall margins for the Starlink piece of our business, but I will let Anthony answer the specific question. Anthony Pike: Just as Brent said, really, the only change we expect on margins is probably driven a little bit by the terminal access charge. From a dollar gross profit perspective, that should not be materially affected at all, and the new deal we have should help us maintain our margins. Christopher David Quilty: Very good. And when you look at the product margins here, obviously, I actually just signed up for Starlink, and my antenna is free now—at least on the consumer side. We have seen some pressure across enterprise. Is that a business where you think you can maintain a breakeven, or does that become a loss leader over time? Brent C. Bruun: The plan is to maintain breakeven, but it is an enabler to the airtime. Breakeven or slightly better. Christopher David Quilty: Got it. Great. I will circle back into the queue. Brent C. Bruun: Thanks, Chris. Operator: I am showing no further questions. This will conclude today's program. Thank you for participating. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Custom Truck One Source, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. Please note this conference call is being recorded. I would now like to hand the conference call over to your host today, Brian Perman, Vice President of Investor Relations for Custom Truck One Source, Inc. Brian Perman: Thank you, Operator, and good morning. Before we begin, we would like to remind you that management's commentary in response to questions on today's 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 the company's filings with the SEC. Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during the call in the press release we issued this morning. That press release and our fourth quarter investor presentation are posted on the Investor Relations section of our website. This morning, we also filed our 2025 10-K with the SEC. Today's discussion of our results of operations for Custom Truck One Source, Inc., or Custom Truck One Source, Inc., is presented on a historical basis for the three months and year ended 12/31/2025 compared to prior periods. Joining me today are Ryan McMonagle, CEO, and Christopher Eperjesy, CFO. I will now turn the call over to Ryan. Ryan McMonagle: Thanks, Brian, and good morning, everyone. We delivered a strong finish to 2025 with record quarterly revenue driven by continued momentum in our core end markets, and strong execution by our team. In the fourth quarter, we generated revenue of $528,000,000. Adjusted EBITDA was $121,000,000. Up more than 18% year over year. For the full year 2025, we saw record revenue of $1,944,000,000, up 8%, and adjusted EBITDA was $384,000,000, up 13% compared to 2024 and ahead of the midpoint of our guidance. The key driver of our performance in the quarter was continued strength in our rental business, as the improvements we saw in the third quarter in the transmission and distribution markets continued into Q4. Our rental fleet averaged just under 84% utilization during the quarter, the highest in almost three years, supported by continued growth in OEC on rent. Average OEC on rent in Q4 was just under $1,400,000,000, up 14% year over year. During Q4, both utilization and OEC on rent reached historically high levels, while we saw the anticipated seasonal slowdown in both measures in December. So far in 2026, both have rebounded as expected with utilization currently at approximately 82% and OEC on rent well above year-end level. We ended the year with total OEC of $1,640,000,000, the highest quarter-end level in our history, supporting our expectation for continued growth in our rental business. Our trucks and equipment continue to power the people who strengthen and build critical infrastructure in the U.S. and Canada. The market has been focused on the durability of demand in T&D and our ability to convert improving rental KPIs into earnings and cash flow, and we believe our Q4 results speak directly to that. Bidding activity and ongoing conversations with our customers lead us to believe that these conditions will persist through 2026 and beyond. While TES performance in the fourth quarter was below our expectations, end market demand is healthy and order activity remains strong. While TES saw sequential revenue growth in the quarter, revenue was down 8% year over year, primarily due to our customers pulling forward capital spending to earlier in the year in anticipation of potential tariffs and price increases and an atypical year-end dynamic, with some customers deferring deliveries into 2026. Additionally, we did not fully experience the lift in spending of our customers taking advantage of the accelerated depreciation provisions in last year's federal tax and spending bill. Despite those facts, TES finished the year with revenue of $1,100,000,000, up 4% for the full year and our highest annual level ever. New sales order backlog ended the year at $335,000,000, up more than $55,000,000, or 20%, from Q3. Our backlog has continued to grow so far in 2026, and as of yesterday, stands at around $370,000,000. As we have noted in prior periods, backlog can move quarter to quarter with delivery timing and production schedules, so we also focus on order activity and conversion. We saw strong year-over-year net order growth of 21% in Q4 driven by year-over-year growth of 12% in orders won during the quarter, with particular strength coming from local and regional customers. Despite slower growth in the infrastructure end market, the continued strength in order growth in our ongoing conversations with our customers provide us with the confidence to expect another year of growth in TES. This confidence is increased by our recently announced partnership with HyAV, a manufacturer of truck-mounted cranes and forklifts. This partnership strengthens our ability to serve customers across multiple end markets while supporting our long-term growth strategy. It broadens our product portfolio, enhances our service capabilities, and allows us to deliver more complete solutions in key markets we already serve, such as building supply, forestry, and rail. In addition, this year, to better support our TES customers post-sale and grow our parts and service revenue, we are investing in a focused initiative to expand our aftermarket service capacity. This effort, which will impact multiple locations in our existing branch network, will ensure that our TES customers continue to get the high level of post-sale service that they have come to expect from Custom Truck One Source, Inc. Both the HyAV partnership and our expanded parts and service offering highlight our commitment to continuing to invest in TES and position our sales business to grow its presence and market share and to strengthen our connection with our customers. Before I turn it over to Chris, I want to highlight a few items related to 2026. First, beginning with the quarter ending 03/31/2026, we will move from our current three-segment reporting and will report results under two segments: Specialty Equipment Rentals, or SER, and Specialty Truck Equipment and Manufacturing, or STEM. This change aligns our segment reporting with how we currently evaluate the business and provides enhanced transparency to investors, with a clear basis of comparison to the industry peers of each of our primary businesses. We plan to provide additional details prior to reporting Q1 2026 earnings, including recasting historical financials and our 2026 guidance to align with the new reporting structure. Second, we are providing our full-year 2026 outlook. We expect revenue in the range of $2,005,000,000 to $2,120,000,000 and adjusted EBITDA in the range of $410,000,000 to $435,000,000. Chris will provide additional details in a few minutes. Our 2026 guidance reflects our continued optimism about our business, as long-term sustained end market demand buoyed by secular megatrends and our ability to provide exceptional execution on behalf of our customers set us apart from our competition. Our long-standing relationships with our strategic suppliers and customers continue to be keys to our success. I continue to have the highest degree of confidence in the Custom Truck One Source, Inc. team and want to thank everyone for their hard work and dedication that helped achieve our strong results in 2025. We look forward to updating everyone soon. With that, I will turn it over to Chris to walk through the numbers in more detail. Christopher Eperjesy: Thanks, Ryan, and good morning, everyone. I will start with consolidated results for the quarter and full year, then discuss segment performance, our balance sheet, liquidity, and leverage, and finally, our 2026 outlook. Our fourth quarter and full year 2025 results reflect stronger operating performance across the business and improved rental fundamentals, particularly in our T&D end markets. For the fourth quarter, total revenue was $528,000,000 and adjusted EBITDA was $121,000,000. For the full year, record revenue of $1,944,000,000 was 8% ahead of 2024, and adjusted EBITDA was $384,000,000, a year-over-year increase of 13%. Before I move to the segments, a quick note on our GAAP results. For the fourth quarter, GAAP net income was approximately $21,000,000, and for the full year, GAAP net loss was approximately $31,000,000. Year-over-year comparability on net income was impacted by the $23,500,000 gain on a sale-leaseback transaction in 2024. Excluding that prior-year sale-leaseback gain, underlying net income improved meaningfully year over year, reflecting higher gross profit, disciplined SG&A management, and lower interest expense. Turning to our segments. In ERS, fourth quarter revenue was $207,000,000, up 20% versus the same period last year, driven by strong double-digit growth in both rental revenue and rental sales activity. For the full year, ERS saw 17% year-over-year revenue growth. We finished 2025 with rental adjusted gross margin and rental sales gross margin at the highest quarterly levels of the year, allowing ERS to grow its adjusted gross margin for the year despite a less favorable mix of rental and rental sales. The strong performance in ERS in the fourth quarter and for the full year was driven by significant improvement in our key rental KPIs throughout the year. In Q4, utilization averaged 83.6%, up approximately 470 basis points versus Q4 2024. Average OEC on rent in the quarter was $1,380,000,000, up $166,000,000, or 14%, versus the same period in 2024. For the year, average utilization and OEC on rent were up more than 500 basis points and 14%, respectively. On-rent yield in the fourth quarter was 38.7%, reflecting both sequential quarterly and year-over-year increases. Non-rent yield remained within our targeted upper-30s to low-40s range, and we continue to see opportunities for rate improvement as transmission mix grows and pricing discipline holds. Our improved metrics throughout 2025 reflect both increased rental activity and the continued scaling of our fleet to meet demand. Net rental CapEx in Q4 was more than $40,000,000, and our fleet age at year-end was just over 2.9 years. Our OEC in the rental fleet ended the year at almost $1,640,000,000, up more than $120,000,000 versus the end of 2024, and up $15,000,000 in the quarter. The growth in OEC reflects our strategic investment given the strong demand environment we continue to experience across our primary end markets, particularly in T&D. While we expect to continue to invest in the fleet in 2026, we expect maintenance CapEx to be lower in 2026 compared to 2025, which should contribute to increased free cash flow generation this year. In TES, fourth quarter equipment sales were $284,000,000. As Ryan noted, the year-over-year decline primarily reflects purchase timing, including equipment purchases pulled forward earlier in the year and continued pricing pressure on certain truck sales. While quarterly revenue was down versus 2024, full-year TES revenue was up 4% and set a new annual record. Gross margin in the segment was 15.6% in Q4, the highest quarter of the year and up from 15.0% in Q3. The improvement reflects our expectation that market pricing pressure would ease somewhat in the second half of the year as inventory levels began to come more into balance. Importantly, our new sales backlog ended Q4 at $335,000,000, up more than $55,000,000 sequentially and within our expected range of roughly four to six months. We have continued to see strong order growth so far in 2026, and our backlog currently stands at approximately $370,000,000, up more than 10% since year-end. In APS, fourth quarter revenue was $37,000,000. Gross margin remained stable at 27%. Full-year APS gross margin was just under 24%, a year-over-year improvement of almost 120 basis points. Turning to the balance sheet and liquidity. With 2025 adjusted EBITDA of $384,000,000 and net debt of $1,650,000,000, we finished the year with net leverage of 4.3x. This represents an improvement of almost a quarter turn from 2024 and a half turn from the quarter-end high of 4.8x at the end of 2025. Availability under our ABL was $248,000,000 as of December 31, and based on our borrowing base, we have more than $200,000,000 of additional availability that we can potentially access by upsizing our existing facility. Free cash flow generation and deleveraging remain key focus areas for us. We made tangible progress in the fourth quarter. Inventory declined by more than $100,000,000 during Q4, which supports lower working capital needs and lower interest expense on our variable-rate floor plan liabilities over time. We expect to continue to reduce inventory and floor plan balances in 2026, which will contribute to free cash flow generation. With respect to our 2026 guidance, the macro demand environment across our key end markets remains very strong. We expect the TES segment to continue to benefit from a favorable macro demand environment as well as our strong relationships with our key customers and chassis and attachment suppliers. Our strong order backlog supports this. In our ERS segment, we had strong momentum in 2025, and we expect this trend to continue in 2026. Demand for our equipment that serves the T&D end markets continues at record levels, and we expect the vocational rental market to provide incremental growth as we further penetrate this expanding end market. We finished 2025 with an average age of our fleet at just over 2.9 years, down more than a year since the beginning of fiscal 2022. As a result, we expect to be able to significantly reduce our overall investment in our rental fleet in 2026 while continuing to generate growth. We expect to grow our rental fleet based on net OEC by mid-single digits in 2026, with a net investment in our rental fleet of approximately $150,000,000 to $170,000,000, a meaningful reduction from over $250,000,000 in 2025. After prior years' investments in inventory driven by the strong demand environment, we expect to continue to make progress on further net working capital improvements in 2026 as we continue on our path of reducing inventory months on hand to our targeted range of below six months. As a result, we expect to generate more than $50,000,000 of levered free cash flow and reduce our net leverage ratio to meaningfully below 4x by the end of fiscal 2026, while progressing toward a 3x net leverage target in 2027. Our initial 2026 guidance reflects total revenue in the range of $2,005,000,000 to $2,120,000,000 and adjusted EBITDA in the range of $410,000,000 to $435,000,000, resulting in year-over-year revenue growth of 3% to 9%, and adjusted EBITDA growth of 7% to 13%. We expect non-rental CapEx of $40,000,000 to $50,000,000. Our segment guidance for 2026 is as follows. We are projecting ERS revenue of $725,000,000 to $760,000,000, TES revenue of $1,125,000,000 to $1,200,000,000, and APS revenue of $155,000,000 to $160,000,000. Finally, as Ryan mentioned, beginning in Q1 2026, we will report our results under two reportable segments, Specialty Equipment Rentals, or SER, and Specialty Truck Equipment and Manufacturing, or STEM. Upon implementation, the new SER segment will consist of our historical ERS segment and a proportion of our historical APS segment, and the new STEM segment will consist of our historical TES segment and a portion of our historical APS segment. We will also begin reflecting intercompany activity between the two segments, which will ultimately be eliminated in consolidation. This new segment reporting reflects how we currently manage the business and how we allocate resources, and we believe this new presentation better reflects the positioning of Custom Truck One Source, Inc.'s strategies and operations portfolio. In early April, we will provide more information, including a recasting of certain historical financial information to align with and provide comparability to the new two-segment reporting going forward. We also will recast our guidance based on the new two-segment reporting at that time. We believe our new segment realignment will better reflect key economic drivers, capital intensity, and margin profiles of the respective new segments, as well as align our external reporting with how management allocates capital and evaluates performance. In addition, we believe this change will allow us to provide a clearer picture of the true earnings potential of each segment. In closing, I want to echo Ryan's comments regarding our continued strong business outlook. Despite significant macroeconomic uncertainty last year, our 2025 results and the continued strong fundamentals of our end markets allow us to be optimistic about the long-term demand drivers in our industry and our ability to produce significant adjusted EBITDA growth this year. With that, Operator, we can open up the lines for questions. Operator: Thank you. Your first question today comes from the line of Scott Schneeberger from Oppenheimer. Your line is open. Daniel Hultberg: Hey, good morning, guys. This is Daniel on for Scott. Thank you for taking our question. Regarding the guidance, what do you expect to see in the market to achieve the high end of that range? And what could be potential upside drivers? Thanks. OEC on rent yield inflected to year-over-year expansion in the fourth quarter. How do you view the pricing environment and pricing as a contributor on a go-forward basis? Thanks. Ryan McMonagle: Yeah. No. Daniel, good to talk to you. And look, I think our guidance is really an indication of what we see happening in the market right now. So we are seeing really strong T&D demand, Daniel. So I think the high end would be that continuing or improving throughout the year. And then I think it would be some of the vocational market or the infrastructure market seeing a pickup. So we are starting to see some positive trends so far this year, but I think that would be picking up even further. And, obviously, any of the political or economic uncertainty that is out there right now, if that calms or there is less of that, that would be a positive tailwind for us as well. Yes. So we are seeing good demand there, Daniel. You are right. It did inflect to the positive. I think OEC on rent was up meaningfully versus where it was this time last year, last 2024. And so we are seeing the opportunity to increase price. Obviously, there is some inflation coming through there in terms of the cost of adding new assets into the rental fleet, but we did pass some price increases through at the end of last year, beginning of this year, so starting to see some of that. Some of that you see in the numbers as we reported in terms of on-rent yield as well. Operator: Your next question comes from the line of Michael Shlisky from D.A. Davidson. Your line is open. Michael Shlisky: Hi, good morning. Thanks for taking my questions. The 84% almost you saw in 4Q for utilization, multi-year high, but you have always said it sounds like a little bit above what you used to call your sweet spot at around 80%. Operationally, have you gotten to a point where you can sustainably keep it at 84% and be able to serve customers properly, given that you are not going to be investing as much in 2026 in some new assets? Just give us a sense as to how you are going to balance the availability of assets and what looks like to be a little bit higher utilization going forward. And being where you are now and maybe just through most of the first quarter here, have you seen any one-time storm impacts in the Northeast and parts of the country that saw some big-time snow and some of the clogged drains and downed power lines, etcetera? Or was it very much a T&D-focused, everyday business? And then lastly, from my end, some quarters you give us a sense of first half or second half, how you might be earning. Are there any unusual seasonality items in any given quarter of the year? Anything you can comment on 2026 first half, second half, anything being pulled forward in the first quarter, etcetera? Ryan McMonagle: Yeah. Michael, good to talk to you, and thanks for the question. I would say this. I think the team has done a great job of executing on keeping the fleet up and running. And so I think we are really proud of how the team is performing there. I would still say the right way to think about normalized levels is that high-70s to low-80s. As you know, Q4 is generally when utilization peaks just because of all of the transmission equipment that is going out after the summer, and so that is what we saw really at the beginning of Q4. And so I think the team has done a good job. I think execution is important. I think, as you know, we have de-aged the fleet, the fleet is now under three years. I think we said 2.9 years is the age of the fleet, and so, obviously, that helps from keeping utilization high. And so I think we are in a good position heading into Q1. I mentioned in my comments that we are back at about 82% from a utilization perspective, and that is a very strong level from an overall utilization perspective. I would say it is the latter. It is T&D-focused everyday business. We are seeing strong demand in transmission right now, and then I would say good continued demand on the distribution side of things. Christopher Eperjesy: Yes, Michael, this is Chris. I think historically we have talked about the first half/second half split being, on the revenue side, mid- to high-40% first half, and then low-50s to mid-50s second half of the year. Similar on EBITDA. EBITDA is a little more, I would say, broader spread, so mid-40s in the first half to mid-50s in the second half of the year on the EBITDA side. Just to give a little bit of color for Q1, we do expect it to be a strong quarter. Directionally, we think top-line revenue will be up mid- to high-single digits, and EBITDA, we think, will be up double digits year over year. And based on Ryan's comments, a big driver of that is going to be our rental business. So I would index higher on rental versus new sales, but we think it is going to be a strong first quarter. Operator: Your next question comes from the line of Justin Hauke from Robert W. Baird. Your line is open. Justin Hauke: Oh, great, thanks for taking my question here this morning. I guess I just wanted to, and I appreciate, as always, the commentary about the orders being the driver of the TES segment. But I guess if I just look at the backlog where you were a year ago, you had $370,000,000 of backlog, you did $1,100,000,000. Backlog is a little bit lower, I guess in February it is probably about flattish, but you are looking for pretty good growth there. So I was just thinking about the order trends and, given the pull-forward in demand that you saw in 2025, maybe just talk about the cadence of how you expect the TES segment to perform throughout the year and just the confidence behind it. Thank you. I guess my next question, I think one of the other factors you were thinking about in the past for demand in 2026 on the sales side was some of the emission standards that were going to be hitting in 2027 that looks like have been pushed back. I am just curious if that is something where you are seeing any deferrals on that side or anything from the emission standards? Thank you. Ryan McMonagle: Justin, good to talk to you, and thanks for the question. Look, I think 4% growth for the year, we feel good with that number for last year for 2025. You are right. The leading number that we are watching—there are two numbers that we are watching. One, backlog—so it was up sequentially from Q3 to Q4, up 20%. And then the number that I watch closely is orders won. So orders won in the quarter were up 12% versus last fourth quarter, and so I think that is a positive indicator. And then, as we have talked about, sitting here as of yesterday, I think we gave guidance that backlog was up to $370,000,000. So it is back right to that four months on hand number, which is broad guidance that I think we have given in the past. And so I think that plus, obviously, how the first two months are shaping up are where we have some comfort in the growth range that we provided, which I think is 3% to 9% growth for the segment, and I think that feels pretty good. Do remember last year, we saw Q2 was a very big quarter for us last year because we felt it was that real big pull-forward from some of the tariff activity. So I would think about smoothing it out a little bit. Yeah. It is a great question, and we are still watching it. The EPA mandate 2027 is still in play. I think we are still waiting on more clarity around the warranty component of that in particular, still. So, if you look at the order boards from some of the OEMs, especially around Class 8 chassis, at the beginning of this year, I think they would say that they are seeing some pre-buy activity from some of the over-the-road customers. I would say we have not seen a lot of it yet. There could be a little bit of an uptick this year from pre-buy, but we feel like we are in a great position with our chassis OEM suppliers, have good inventory on the ground, and then we just have such good relationships with those OEMs that we feel like we will be able to continue to get the chassis that we need to meet demand from our customers. Christopher Eperjesy: No, I think Ryan nailed it. We did have—I think we mentioned in Q2 that we had two months that were above $100,000,000, which were the first non-December months that were above $100,000,000. So as you are looking at how this year is going to play out, certainly, Q2 of this past year was much stronger than what would typically happen for the reasons Ryan just laid out. Operator: Your next question comes from the line of Nicole DeBlase from Stifel. Your line is open. Naim Kaplan: Hi, good morning from Deutsche Bank. Yeah, this is Naim Kaplan; I do not know what happened there. So, yeah, thanks for taking my question. You continue to speak about the strength of vocational. So kind of just wondering what gives you confidence in that sustainability and any part of vocational in particular that is standing out. Okay. That is helpful. And then on gross margins, so they were up year over year in ERS, but down in TES relative to prior year. Do you have any color on that and maybe the outlook for those segments in 2026 in terms of gross margins? And I have the same question on ERS as well. Okay. Perfect. Thank you for your time, and I will pass it on. Ryan McMonagle: Yeah. I would say we are seeing good strength in transmission and distribution in particular. So I think that is where we are seeing good demand, which obviously is into our forestry business as well right now. So I think we are seeing really, really good demand there. I think we did make the mention that we did not see as big of a year-end buy in some of the vocational categories. So, dump trucks, water trucks, service trucks, roll-offs—a lot of those are where we normally see a big year-end buy where we did not see that happen last year. We are seeing decent order uptick in those categories, and so I think that is where we have some level of confidence that that will improve heading into 2026. But I think the broad theme of transmission and distribution, which is 55% to 60% of our overall revenue, is certainly where we are seeing the strongest demand right now. Christopher Eperjesy: Yes. This is Chris. I will start. We have kind of given an indication—I think I heard you ask about TES, so I just want to make sure. We have given guidance that our range is to be within a 15% to 18% gross margin range over a cycle. Throughout the year, we talked about pricing pressure, that there was more product available out there, so we were seeing some of that, and so we were at the lower end of that range. We started out the year at just over 15%, and Q3 was 15%, but then we did see about a 60 basis point increase here in Q4 to 15.6%. But I think the way to continue to think about it is we are going to target to stay within that range and do everything we can on the cost side, and where opportunistically we can take pricing, we will. But no specific guidance to give other than the guidance we have given to stay within that narrow range. So ERS—just focusing on rental—you know, we have talked about low- to mid-70% adjusted gross profit range. We were much stronger than that in Q4. I think it is the highest it has been for some time, certainly the past couple of years, at 78%. That really was driven by high utilization and lower repair and maintenance relative to the size of the fleet. And so we would expect, with this higher level of utilization, that we should be able to continue to stay in that mid-70% plus range. And then on the used equipment side, we have been in that roughly mid-20s to high-20s range, and do not expect to be any different than that on a go-forward basis. Operator: Your next question comes from the line of Brian Brophy from Stifel. Your line is open. Brian Brophy: Yeah. Thanks. Good morning, everybody. Appreciate you taking the question. With net CapEx coming down this year, curious how much you expect to age the fleet by as a result and how much runway there is to continue to age the fleet after this year? Thanks. Understood. That is helpful. And then any color on what drove SG&A lower relative to a year ago in the fourth quarter? And how are you guys thinking about SG&A this year? Thanks. Appreciate it. I will pass it on. Ryan McMonagle: Yeah. Great question and good to talk to you. Look, the fleet is young right now at 2.9 years, and so we think there is the ability to age the fleet months, I think, would be the right guidance, not years, with the activity of this year. And the fleet being so young at 2.9 years, I think there is plenty of room to be able to age it. So I think it is in a good spot, and as Chris' guidance was lowering the maintenance CapEx components while still being able to grow the fleet overall in 2026, you are right that there will be some aging. We do not expect it to have a meaningful impact on gross margin or utilization performance in the fleet, and so we think it is a good time to do that with the demand environment as strong as it is right now. Christopher Eperjesy: And I think another way to characterize it is if you look out over the last four years, on average, it has been about a quarter of a year to 0.3 years of de-aging of the fleet each year. I think the important point is it will not de-age. We will not be continuing to de-age, so that is really where we are picking up the bulk of the net investment this year. Yeah. We have been taking a closer look at SG&A and, where possible, being disciplined. We certainly have made, in certain places, some cuts. We are certainly looking at controlling our spending everywhere we can. The way I would look at 2026 is modest growth, so low single-digit type of growth, and I would not expect there to be any material increase year over year. Operator: Again, if you would like to ask a question, press. Your next question comes from the line of Abe Landa from Bank of America. Your line is open. Abe Landa: Maybe just first on the inventory levels, which have been moving lower. How much lower do you expect it to be this year? What is the potential impact on the floor plan? And then maybe how much current months on hand do you have? That is very helpful. And then maybe a question on the re-segmentation. Why today? Is there any sort of structure or any cost actions that need to be taken that are associated with it? And I guess, lastly, is there anything we should read into the recent implementation about maybe the future of Custom Truck One Source, Inc., whether it is one or two entities. Great. Thanks for answering my question. Christopher Eperjesy: I will start. So we finished the year at $930,000,000. I think our net investment in inventory, which is the way we look at it—so we look at inventory less the floor plan payables—was about $275,000,000. We have given guidance that on our whole goods inventory side, which is the vast majority of our inventory, our target is to get below six months, which we think we can get close to by the end of this year, which would be roughly another $100,000,000, maybe a little bit more than that, but roughly $100,000,000 of gross inventory. And then, typically, the way we think about that is 30% to 50% of that would flow through to the net inventory number as we pay down the floor plan of, call it, 70% to 85% of the value of the inventory. And so it would probably provide between $25,000,000 and $50,000,000 of net working capital pickup in 2026. I would not read anything into it. Currently, this year, this is the way we are managing the business. We think it will provide a little bit better clarity to investors in terms of how they look at the business because they are two very unique businesses with different investment profiles. One is a little more asset intensive. One is a little bit asset light. Margin profiles are different. And the APS segment really is supportive of those two different segments. If you look on the ERS side, it really is supporting keeping the rental fleet up and running. And so we just felt like today we are running the business as these two segments, and we think it makes more sense to report that way. And there is no associated cost with the re-segmentation. Certainly nothing to do with the re-segmentation. We certainly are always looking at our cost structure in any given year. We have continuous improvement and other initiatives that we do. But I would not say there is anything specifically related to the re-segmentation. We always look at our sites. We rationalize sites. We add sites. That I would say is not directly correlated with the re-segmentation. Operator: And that concludes our question and answer session. I will now turn the call back over to Ryan McMonagle for closing remarks. Ryan McMonagle: Thanks, everyone, for your time today and your interest in Custom Truck One Source, Inc. We appreciate the continued engagement and look forward to updating you next quarter. In the meantime, please do not hesitate to reach out with any questions. Thank you again. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.