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Operator: Good day, and welcome to Ciena Corporation's fiscal first quarter 2026 financial results conference call. All participants will be in listen-only mode. To withdraw your question, please note this event is being recorded. I would now like to turn the conference over to Gregg Lampf, Vice President of Investor Relations. Please go ahead. Gregg Lampf: Thank you. Good morning, and welcome to Ciena Corporation's 2026 fiscal first quarter conference call. On the call today is Gary Smith, President and CEO, and Mark Graff, CFO. Scott McFeely, Executive Adviser, is also with us for Q&A. In addition to this call and the press release, we have posted to the investors section of our website an accompanying investor presentation that reflects this discussion as well as certain highlighted items from the quarter. Our comments today speak to our recent performance, our view on current market dynamics and drivers of our business, as well as a discussion of our financial outlook. Today's discussion includes certain adjusted or non-GAAP measures of Ciena Corporation's results of operations. A reconciliation of these non-GAAP measures to our GAAP results is included in today's press release. Before turning the call over to Gary, I remind you that during this call, we will be making certain forward-looking statements. Such statements, including our quarterly and annual guidance, commentary on market dynamics, and the discussion of our opportunities and strategy, are based on current expectations, forecasts, and assumptions regarding the company and its markets, which include risks and uncertainties that could cause actual results to differ materially from the statements discussed today. Assumptions relating to our outlook, whether mentioned on this call or included in the investor presentation that we posted earlier today, are an important part of such forward-looking statements and we encourage you to consider them. Forward-looking statements should also be viewed in the context of the risk factors detailed in our most recent 10-Ks and our forthcoming 10-Q. Ciena Corporation assumes no obligation to update the information discussed in this conference call whether as a result of new information, future events, or otherwise. As always, to allow for as much Q&A as possible today, we ask that you limit yourselves to one question and one follow-up. With that, I will turn the call over to Gary. Gary Smith: Thanks, Gregg, and good morning, everyone. Today, we reported strong fiscal first quarter financial performance. We delivered revenue of $1.43 billion in the quarter, our highest ever and at the top end of our guidance, reflecting strong execution across the business. Demand is incredibly strong with exceptional order activity in the quarter. This, along with long-term planning conversations with customers, gives us confidence in the durability of demand and our ability to drive growth as we move through the year and into 2027 and beyond. Adjusted gross margin came in at 44.7%, which was ahead of expectations, and we continued to drive increased profitability, illustrated in part by our adjusted earnings per share of $1.35, which is more than double our EPS in Q1 of last year. These record results reflect Ciena Corporation's market leadership and reinforce our role as a critical provider of the high-speed optical systems and interconnects that enable AI workloads to scale and to be monetized. In fact, we are taking meaningful share of the increase in AI-driven connectivity spend as customers trust our technology leadership, deep collaboration, and proven execution. To this end, we believe 2025 will ultimately stand out as one of our strongest years of market share gains, and we believe it will be even stronger in 2026. With our recent inclusion in the S&P 500, we may have new listeners on the call, so allow me to begin with a brief summary of our business. At the highest level, Ciena Corporation is the global leader in high-speed connectivity. We build solutions that move enormous amounts of data across cities, data center campuses, countries, and oceans, quickly, reliably, and at massive scale. Through industry-leading optical systems and interconnect solutions along with automation software and services, we power the world's most advanced networks, helping service providers, cloud companies, hyperscalers, governments, and enterprises meet explosive connectivity demands, especially in an increasingly AI-driven world. Our foundational business has always been to address connectivity needs in the wide area network, or WAN, spanning subsea, long-haul, metro, and data center interconnect, or DCI. We remain the undisputed global leader in this domain. Today, much of this business is driven by the continued adoption of cloud services across our global customer base and the network infrastructure required to support it. It is also increasingly fueled by the rise of large-scale AI data centers that need to be interconnected with DCI solutions linking data centers across campuses, regions, and continents. Additionally, service providers around the world have begun reinvesting in their optical transport infrastructure alongside autonomous networking capabilities, both to support surging AI-driven traffic growth across their networks and to improve operating efficiencies. And service provider and cloud provider customers are increasingly working together to deliver connectivity through managed optical fiber networks, or MOFN, as they navigate regulatory requirements and capacity needs in the U.S. and in other new and emerging geographies around the world. By way of example, our orders in India were up 40% year over year, reflecting ongoing high demand specifically for MOFN in that country. Together, we view these as structural multi-year demand drivers that reinforce the critical need to serve WAN-connected connectivity requirements, fueling both our growth and continued momentum. We expect revenue from the MOFN application will continue to be an important contributor to overall service provider growth going forward, and we are uniquely well positioned to further strengthen our leadership in high-speed WAN connectivity for service providers, cloud providers, and the growing group of neoscalers from whom we saw increased momentum in the quarter for both direct and MOFN-related design wins. In parallel to this, we are focused on the significant expansion of our addressable market opportunities in and around the data center. It is now well understood that cloud providers are investing heavily in data centers to deliver on both the current and future promises of AI. In just the last few weeks, we have seen announcements from the four largest global hyperscalers that outlined a step-function increase in their 2026 CapEx to more than $600 billion in aggregate, driven by infrastructure needs related to AI training and inference workloads at massive scale. These build-outs involve several areas of opportunity for Ciena Corporation, not only in the WAN, but increasingly in and around the data center, including scale across, scale out, scale up, and our unique data center out-of-band management solution, or DCOM. I will start first to discuss the scale across, which is really an application supported in part by our interconnects portfolio, which is emerging as AI data centers grow in size and begin to hit power and space limitations. To overcome these constraints, customers are distributing compute across multiple sites and using high-speed performance optical networks to interconnect them, effectively creating one single AI training environment that operates across distance. We believe that we are in the very early stages of this wave of opportunity, and we are already experiencing extraordinary demand, with three hyperscalers choosing to use our optical solutions for their training applications across distance, which we have talked to you about in recent quarters. And all three hyperscalers are significantly ramping, including additional orders for multiple additional from the first hyperscaler we announced in Q3 2025. We are addressing this demand for scale across solutions with our RLS platform, the de facto industry line-system standard for cloud providers, as well as our 800ZR pluggable optics. To underscore this, we realized a second consecutive record quarter for RLS shipments and revenue. We expect to expand our role in scale across applications with the introduction of our new RLS HyperRail solution. HyperRail delivers an order-of-magnitude increase in fiber density within existing rack footprints, helping customers scale traffic while reducing, and in some cases avoiding, costs and complexity associated with adding substantial numbers of amplifier huts. The solution, developed in close collaboration with our hyperscaler and service provider customers, represents another inflection point for Ciena Corporation, and we expect to be first to market again. In fact, we will be demoing the first prototype of our HyperRail system at the OFC trade show in a few weeks’ time. This solution, we expect, will begin standardization at 2026 and will ramp in 2027, allowing us to capture share and incremental value as these distributed AI training expands across regional clusters and moves to further distances. In addition to scale across, we see meaningful opportunities inside the data center, including the scale-out connectivity between racks and scale-up connectivity within racks. As we know, the physics of copper inside the data center is reaching its limit. While there will be a place for copper solutions with shorter distance scale-up interconnects, network architectures will include more optical co-packaged interconnects, and over time, as data rates and bandwidth requirements continue to increase, coherent optical connections will overtake IMDD ones for shorter reaches to address growing capacity volumes inside the data center. And as the world's leading high-speed connectivity company, we are investing meaningfully to intersect these important use cases. We continue to demonstrate progress toward our in-and-around-the-data-center growth objectives, and our expanding interconnect portfolio, including ZR and ZR+ pluggables and optical components, is well positioned to address the rising power and space constraints associated with those evolving scale-up and scale-out architectures. We have just reached an important milestone with our first product introduction following the Nubis acquisition last fall, which addresses scale-out and scale-up needs. Last week, we announced the Vesta 206.4T optical engine, which is the industry's first high-density, low-power, open-ecosystem pluggable CPO solution. Samples of the Vesta product will be available in calendar Q2 2026, and we are actively discussing Vesta, as you would expect, with our cloud provider customers and partners, and we are excited to be showcasing it at OFC again in a few weeks' time. For scale-up opportunities inside the rack, where XPUs are getting faster and driving heat and power concerns, we are advancing the Nitro Linear Redriver technology, also from our Nubis acquisition. We believe this is a critical element to active copper cabling solutions, which extend the distance that signals can travel and reduce power by up to 80% versus AEC-type solutions. We also expect samples of the Nitro Redriver to be available in calendar Q2 2026. Finally, our data center out-of-band management, or DCOM, solution continues to represent another significant opportunity inside the data center. Leveraging our XGS-PON and routing and switching platforms, DCOM was initially designed with Meta to meet hyperscale provisioning and configuration requirements. We continue to work with them and are engaged in technical discussions with two other major global hyperscalers. Let me summarize by emphasizing that demand in Q1 2026 was unprecedented, reflected in very strong order intake and a meaningfully higher backlog. We executed well and demonstrated strong performance on both top and bottom lines. This exceptional demand was broad-based across service providers, hyperscalers, and an expanding set of neoscalers. Opportunity continues to build in waves, from our traditional and expanding WAN business to multiple applications in and around the data center. Furthermore, to monetize AI for both training and inference workloads—the latter of which represents another significant growth vector still in its infancy—the foundational requirement is again high-speed connectivity. These dynamics, combined with our deep collaborative customer relationships that improve our long-term visibility plus our continued focus on execution, give us increased confidence for multiyears of strong growth and profitability ahead. I will now turn the call over to Mark to cover our financial performance and guidance in more detail. Thank you, Mark. Mark Graff: Thank you, Gary, and thanks everybody for joining the call this morning. As Gary noted, demand remains robust and has been, in fact, increasing. We are focusing our resources to not only strengthen our financial results, but also to secure near- and long-term supply and manufacturing capacity to deliver for both our customers and our owners. The results delivered in Q1 are a testament to the progress we are making and will continue to make. With that, I would like to update progress against our financial priorities previously discussed. We continue to make progress to our next milestone of 45% gross margin, as witnessed by our 44.7% gross margin performance in Q1. Q1 results benefited from product mix, inclusive of contributions from incremental demand for capacity infills, the execution of cost reductions, and early progress on advancing the value exchange with our customers. Longer term, an improving price environment, new product inflections like HyperRail, and focused cost optimization all provide opportunity to deliver improved gross margins. Our balance sheet continues to be a source of strength with working capital improving, driven by cash from operations yielding $228 million in Q1, a decrease in cash conversion of three days, and inventory turns growing to 3.2 times. With respect to capital allocation, we are taking a balanced, disciplined approach, prioritizing R&D to advance our technology leadership in the fastest growing segments of the market and to drive product velocity, all while holding OpEx levels approximately flat to 2025, delivering significant operating leverage. We are investing our CapEx to expand capacity, scale output, and meet rapidly growing demand. In Q1, capital expenditures were $74 million, inclusive of the accelerated capacity investments. For context, this is approximately two to three times our average CapEx over the last twelve quarters. Let me take a moment to comment on the industry supply and its impact on Ciena Corporation. As you have heard from many others in the industry over the last few weeks, the supply landscape remains challenging. To be blunt, our revenue in the first quarter would have been higher but for these constraints. Our close relationships with customers give us early visibility into their demand and our need to expand capacity to address it. We have been working with partners to scale by way of two key initiatives. First, we continue to partner with contract manufacturers with respect to their manufacturing capacity and output expansion, which is yielding strong results. Second, we are deeply engaged with component vendors, which is where more of the industry challenges exist, to secure and expand supply, including through responsible long-term purchase commitments. As shown by our Q1 results, we are navigating the supply environment well and are investing to expand capacity. However, we expect demand will continue to outstrip supply, at least for the next several quarters. Turning to Q1, as Gary noted, revenue reached $1.43 billion, up 33% year over year and a quarterly record for the company. Our optical revenue was up over 40% year over year, led by Waveserver and RLS product lines, each of which were up over 80% from the year-ago period. We had three greater-than-10% customers, including two global cloud providers and one Tier 1 North American service provider, with strong MOFN activity. Regarding backlog, as Gary discussed, our order intake has been incredibly strong over the past ninety days, leading to a new record by a significant margin. Given the extraordinary nature of the demand, we want to share with you that backlog has increased by approximately $2 billion this quarter to exit Q1 at approximately $7 billion. In fact, nearly all new orders we are taking now will be for fulfillment in fiscal 2027, providing ongoing confidence in our outlook. As a result, we expect backlog to continue to grow throughout the year. Rounding out Q1, adjusted operating expense met expectations, leading to an adjusted operating margin of 17.9%, 190 basis points over the midpoint of our December guide. We achieved adjusted net income of $197 million in the quarter, which delivered an adjusted EPS of $1.35, more than double a year ago. We exited the quarter with a cash balance of $1.4 billion after purchasing approximately 400,000 shares for $81 million under the current repurchase authorization. Before I discuss our Q2 and updated 2026 outlook, I would like to make a few comments on tariffs. As you know, on February 20, the Supreme Court struck down the IEEPA tariffs originally implemented in March 2025. As previously stated, these tariffs have been immaterial to our financial results. While we have noted this ruling as a subsequent event in our forthcoming 10-Q, it has not had any impact to our reported results. The administration has announced a new global replacement tariff under a separate legal authority with final rates still pending. Based on current information, we believe that these developments will have an immaterial effect on our business. Obviously, we are monitoring new developments and working closely with customers and suppliers to assess any future impacts. Now, with respect to our view for the remainder of the fiscal year and Q2, given the current dynamics, we now expect to deliver revenue for fiscal 2026 between $5.9 billion and $6.3 billion, essentially raising our year-over-year growth rate from 24% to 28% at the midpoint of the range. We believe this range appropriately balances the strong market demand with ongoing industry supply conditions. Given our Q1 results and the expectations for Q2, we expect our 2026 gross margin to be between 43.5% and 44.5%, one point above our December guide and 130 basis points improvement above 2025. With the first half exceeding our expectations and the supply challenges we are actively managing, we now expect first-half and second-half gross margins to be roughly equivalent. And we now expect adjusted operating expense of approximately $1.52 billion to $1.53 billion, resulting in adjusted operating margin of 17.5% to 19.5%. This small difference in OpEx is really due to the stronger demand environment. In Q2 2026, we expect to deliver revenue in the range of $1.5 billion, plus or minus $50 million; adjusted gross margins between 43.5% and 44.5%; and adjusted operating expense of approximately $375 million to $390 million, which will result in an adjusted operating margin of 17.5% to 18.5%. To conclude, we had a strong start to fiscal 2026. Demand for our technology is robust and durable. We see multiple waves of opportunity ahead, from continued AI training to expanding inference workloads, both domestically and internationally, to new HyperRail solutions and faster interconnects inside the data center as higher-speed requirements come online. We continue to offer market-leading, innovative technology that uniquely enables AI both in the WAN and in and around the data center, and we continue to thoughtfully allocate shareholder capital to deliver value to both our customers and our owners. Given all these opportunities, we are confident our momentum will extend beyond 2026. With that, we will now take questions from the sell-side analysts. Operator: We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Our first question comes from Amit Daryanani with Evercore ISI. Please go ahead. Amit Daryanani: Yep. Thanks for taking my question. I guess I have two from my side. One of the things, just on the gross margin side, really impressive performance in the first half of the year despite some the supply chain issues folks are having, and I think mix was slightly negative. Just spend some time on what are the ups levers on gross margins that are helping you out, and are you seeing a shift in pricing at this point whatsoever? That would be really helpful to understand. Mark Graff: Sure. Hey, Amit. It is Mark. Yeah, I agree. We had a very strong performance. We are quite happy with the 44.7% that we printed this morning, and it is really driven by a couple of things. We saw customers requiring increased capacity, both in hyperscalers and in service providers, that increased their infill rates, and so we got quite a bit of tailwind from that. Secondly, I think the engineering team has done a wonderful job of engineering cost reductions into our products that is really separate from the supply chain activities that you are seeing us increase revenue with. So between those two things, I think we are really seeing some good tailwinds. Moving forward, I think we have got a few more levers that we are going to start working through. You mentioned price increases. One of the things that we are trying to do is really balance the price increases with our share position in the market, and I think what you have seen is we have been able to increase our gross margin as well as increase our share, and so I think we are doing a really good job of balancing those two things. I think moving forward, you will see even more aggressive cost reductions, and then the price increases that we talked about at the end of last year—those really have not started to fully kick in until the second half of the year. So I think that creates additional tailwinds for us. So all in all, again, I think we are making really good progress towards that 45% waypoint, and you should see that throughout the year. Amit Daryanani: Got it. And then if I would just follow up, how do you see the pluggables market, especially with 800-gig ramping up through fiscal 2026 and 2027? And if you could just maybe compare and contrast a bit about your positioning in 400 versus 800, that will be helpful as you go into the next cycle. Thank you. Scott McFeely: Yeah, I mean, we have seen pluggable revenue increase period over period, and we have talked in the past about our interconnect business, and we went from 2024 to 2025, that doubling sort of in the rearview mirror, and then we talked about it as a major portion of our inside and around the data center with our aspiration to triple that this year, and we are well on track for that. So we do see significant growth. From a competitive perspective, as we have talked about in the past, through choices that we made to focus early introduction of the technology in the last generation more on our systems business and our pluggable business because that was a bigger opportunity, we were not necessarily first movers in that market, so that probably cost us some share and probably cost us, actually, frankly, some margin dollars. That is not the case in the 800-gig. We are first to market there, and 800-gig is moving quite along. Now, I will say, though, and I just want to make sure people understand this, is that we are talking about capacity adds across the portfolio. It is not just pluggables. Mark mentioned the growth that we are seeing on Waveserver. If you want to be the strategic supplier to the web scalers, they have networks that span campuses, metros, national networks, submarine networks. You have to have all the things in the toolkit, and we are seeing increases across all of those components, system business and pluggables. Operator: And the next question comes from Simon Leopold with Raymond James. Please go ahead. Jeff Cocci: Yeah, thanks, guys. Jeff Cocci in for Simon. So just a couple of housekeeping items. Can you give RPO for the quarter and the percentage of the $7 billion backlog that is product? And then, while you are doing that, maybe you could just give the percentage of sales that are ZR pluggables for the quarter. And then I guess my second follow-up would be what percentage of the telco revenue is now MOFN, and how did traditional telco grow? Thank you. Mark Graff: Yeah, there were quite a few questions in there, Jeff, so let me start. If you think about the backlog, I think right now roughly 80% is products and software, and the rest I would think about as services. We are not going to really disclose the percent of pluggable revenue in the quarter. As Scott said, we expect that to triple year on year, and we are on track to deliver the 800 pluggable ramp that we talked about. Sorry, I lost track of all your questions. Scott McFeely: What else did you have? What— Mark Graff: RPO and then percentage of telco that is MOFN. Gary Smith: I will take percentage on the MOFN thing for you. By the way, I would say the interconnect is somewhat of a proxy at this stage for pluggables to some extent, so we clearly disclose all of that. I would say you are looking at about 10% to 15% of our service provider business being MOFN. We have visibility to a fair amount of it, but not all of it. We partner with service providers on identifying some of these particular build-outs, and we are seeing a good steady ramp in that. You are seeing service provider growth; I think in the first quarter, it is like 22%. Of that growth rate, MOFN is a big contributor to it. But I think overall, it is going to be about 10% to 15% of our total service provider business. Mark Graff: And then RPO, if you think about RPO as a percent of the orders that we took in Q1, Jeff, you should be thinking roughly 60%. Jeff Cocci: Great. Thanks, guys. Operator: And the next question comes from Ruben Roy with Stifel. Please go ahead. Sahid Singh: Hey, guys. This is Sahid Singh on for Ruben Roy. I guess just digging into and following up on the last set of questions around backlog, you guys have gone from $5 billion last quarter to $7 billion this quarter. I think you just said 80% of the $7 billion is products and software. And so if I just apply that 80% to the 5, that is implying $1.6 billion in product and software growth, which, you know, loose math and loose assumptions there. So then I am thinking through, okay, last quarter you said Meta expanded their DCOM engagement, the RLS customer expanded, there are a couple more hyperscalers added on, and we are talking hundreds of millions per opportunity as you have mentioned. So could you just help us bridge the gap and perhaps provide some color as to what the incremental here is relative to the expansions that were announced last quarter or the new hyperscalers that were announced? Gary Smith: Yeah, I would say that first of all, it is very broad demand that we are seeing. It is very strong on service providers, submarine, MOFN, and obviously hyperscalers. And I would also say hyperscalers in their various applications, because I think the point to note is we have very broad relationships with most of them now, across multiple applications—submarine cable, long-haul, metro, in and around the data center, and with things like DCOM inside the data center as well. So basically, if you look at all of those from an order point of view, they were all up and to the right. And I think that is sort of systemic around the drive of the traffic outside the data center now. You are seeing growth in cloud, general cloud. You are seeing inference. You are seeing this new market of training now emerge. As I said in my comments, we have now got three hyperscalers deploying us for training, and we are at the very, very early stages of that. So you put all of that together and that yields the incredible demand that we saw in Q1. And as Mark said, despite the fact that we are ramping our capacity for delivery as seen in our results, demand is going to continue, we believe, to outstrip our ability to supply, and that is going to continue for, we believe, this year. And so we are going to end up with a larger backlog than we have right now as we turn the year, despite the fact that we are ramping our capacity strongly throughout the year and obviously through 2027 and 2028. Mark Graff: Yeah, and the one thing I just maybe want to clarify a little bit for you: that 80% is across the entire $7 billion of backlog, not just the $2 billion increment. So you can look through where we ended Q4 to where we are ending Q1 and back into, I think, the information you need. Sahid Singh: Yeah, I think I got you there. The $2 billion was simply coming from the incremental, as you are saying, but I assumed 80% was sustained through last quarter as well, which may not be the case is what I am understanding. Okay. On the follow-up, maybe just touching on what Amit had asked at start of the call around pricing. How much of pricing increase is currently baked into backlog relative to volume? Mark Graff: Yeah, we are probably not going to give you that number specifically. As we disclosed in Q4, the pricing increases that we talked about were really on the new orders, and because we had such a big backlog at the time, most of that was going to be seen in the second half. So you should expect those price increases to show up in Q3 and Q4. Operator: And the next question comes from Meta Marshall with Morgan Stanley. Please go ahead. Meta Marshall: Great, thanks for taking the question, and congrats on the quarter. Maybe just on impressive operating levers that you guys are out of the business? And just where are you finding those levers to keep OpEx flat as I assume bonus plans need to reset? There is obviously a lot of projects that you are working on with various hyperscalers. And then second, did you mention whether there were any 10% customers within the quarter? That is just a small nit, thanks. Mark Graff: Yes, Meta. So on OpEx, first part of your question, we were able to hold OpEx flat year on year, really, for three reasons. The first is, if you recall last year, each quarter it seemed that we were increasing our OpEx guidance to take into account the increased performance that we were doing last year. We basically reset that, and we were able to scoop that increment and reinvest that back into the business. So that is one. Two is, you will recall, we announced a small RIF—somewhere between 4%–5% of the population. We have been able to harvest those savings and reinvest into the business. And then you will recall that we ceased further investment in our 25-gig PON activity. So those three things, we were able to scoop those up, reinvest them back into the business, and that met our needs year on year and so, nominally, that is how we got to that flat OpEx and the, to be honest, quite impressive operating leverage. On the 10% customers, we had three. We had two hyperscalers and one Tier 1 North America service provider that is pretty exposed to MOFN. Meta Marshall: Great. Thank you. Operator: And the next question comes from Karl Ackerman with BNP Paribas. Please go ahead. Karl Ackerman: Yes, thank you. I have two, Mark. I will ask both of them for you. Could you speak to the duration of this accelerated CapEx spending, which seems driven by enhanced visibility you now see extending over a multiyear period? And for my follow-up, you also spoke about more aggressive cost reductions to support margins. I am curious if you could expand on that and whether that relates primarily to further outsourcing to the EMS partners or if there are other things we should consider. Thank you. Mark Graff: Yeah, so let me take those, and on the second one, maybe Scott can add some more color here. On the duration of CapEx, you will remember in our December call we talked about we doubled our CapEx year on year, and within that doubling of CapEx, we were increasing our productive CapEx by 50%. So really think about working with our contract manufacturers to expand their manufacturing capacity. Now, obviously, that has some lead time, and so we are investing through the year, and we expect that increase in capacity to start showing up towards the end of the year. And the intent was really to set up a 2027 plan for us. I am not going to go into 2027 yet, but the intent is to invest in 2026 and to realize the benefits in 2027. On the cost reductions, I would not say that it is more outsourcing to EMS folks. I think our engineering and product teams are really looking at the cost components of the products and looking at different materials, different solutions, and trying to drive a lot of those costs out. I would also remind you that we have got the most vertically integrated supply chain, and that drives a lot of both cost advantage for us, but I would say right now, more importantly, supply stability. And so between those two things, as I said, we are starting to see the ability to increase revenue as well as bring in a little better cost profile. Scott, if you have got something to add. Scott McFeely: Yeah, I think on the cost reduction piece, I think of it as three levers. One is we are driving a lot more volume through the machine, and we do have some fixed costs; you get a tailwind there. That is the first one to get your mind around. On the engineering aspects or design aspects that Mark talked about, think of it as a couple of things. Number one is where you do not change the function of a product, but you are going after the cost base of it, and that can be through more vertical integration, that could be through substituting parts for different parts, that could be opening up your supply chain to multiple other sources, and we are pushing on all of those levers, by the way. The other piece of the design stuff is as you go from generation to generation, where you are changing the function of the products, you get back to those price-value conversations with customers and, you know, sticking more dollars into our pocket as we do those transitions, and those are going on all the time to some degree. The third piece—and we did not talk a lot about it—it is not all on the lines that you said where we are depending more on the EMSs, but we are constantly looking at that supply chain design, the whole ecosystem design, and trying to optimize that to get cost out of it as well. So it is not the engineering design, but the supply chain design. And we are pushing on all of those, and that is why you are seeing the results you are getting. The team is doing a good job executing on those, and there is more in the future. Karl Ackerman: Very clear. Thank you. Operator: And the next question comes from George Notter with Wolfe Research. Please go ahead. George Notter: Hi, guys. Thanks very much. Was curious about your comments about the progress with the value exchange with customers. Obviously, you are raising pricing. I know it is going to come through later in the year as you eat down the backlog. But just stepping back and thinking about the space, you have got higher memory costs, you have got component suppliers that are being really aggressive on price—they are repricing their own backlogs. It just seems like it is an environment you guys could be more aggressive on price and even perhaps reprice your own backlog. So I am just curious, why not be more aggressive here given the supply-demand dynamics and what is going on in the supply chain? Thanks a lot. Gary Smith: Yeah, George, this is Gary. I think you know we have talked a lot about the good things that we are doing to manage our margins and the rest of it, including the value we are balancing, but it is a balance to it all, and that is what we are trying to strike as we go through this. You are seeing it translate into improved financial performance in all dimensions—market share gains, revenue, gross margin improvement, and operating leverage. We are seeing that, and it is a confluence of things. Scott talked about some of the cost reduction stuff. Mark talked about the value exchange. All of those things are happening and are getting weaved into the business over time. As you know, we take a very long-term view of how we run the business, and I think we see this as a multiyear opportunity for us, and we will strike a balance between those challenges of supply chain, because you have got a lot of shortages going on right now as well, which we are navigating through pretty well. So, it is the confluence of those things that result in the approach that we are taking. Mark Graff: Gary said it well. Pricing is a lever, George, but we are also looking at can we improve cash conversion, can we get better terms and conditions, can we get longer-term purchasing commits with maybe some more non-cancelable, less risky terms as we satisfy this quite large backlog. We are not taking pricing off the table, so we should say that. And you are right, we are seeing some cost increases coming from the supply chain, and we are in early days of having those conversations with customers, so I do not want to get too far into that. But I think we are trying to pull on all the levers and overall, I am pretty pleased with the progress we are making so far across the board. George Notter: Got it. Super. Anything new competitively? Obviously, the competitive environment is, I guess, more benign than it has been in recent years. You have had some consolidation among competitors. Anything new in terms of their behavior on pricing or terms or just general competitiveness in the space? Thanks. Gary Smith: On the WAN business, I think you articulate the environment well there. We are fortunate because we have got such close relationships with the hyperscalers to get out in front, as Mark said, around the capacity and component supply to that, which is showing up in our growth rate. We were able to stay out ahead of that, and we took market share in 2025, and I think we will take even more market share in 2026. This is all really now about—we are on our next generation of line systems with the HyperRail; we are on our next generation of modem technologies in their various forms. So, our competitive position continues to improve there. Obviously, as you get in and around the data center, particularly inside of it, it is a different set of competitors. It is a different set of dynamics. What we bring to the table there is our leading high-speed technology and our systems knowledge, frankly, and translating that into the component purchase we believe is meaningful, and we have got a lot of the hyperscalers leaning in with us on that. But it is a different ecosystem and environment. We have got new and different competitors there, some of which are very large. So we do not underestimate that, but we think we are coming from a position of strength and uniqueness around our optical technology, as you are really looking at the opticalization—if that is a word—of the data center, as the electrical stuff runs out of steam from a physics point of view. And we are starting to pick off some of those applications where that is most pronounced. DCOM, I think, is a decent example of that. We have got the new technology that we announced in market from the Nubis acquisition. So that is going to be a different set of competitors for us. Operator: And the next question comes from Tal Liani with Bank of America. Please go ahead. Operator: You there? You might be on mute. Operator: Kyle? Operator: Alright, we will move on to the next. Tim Long with Barclays. Please go ahead. Go ahead. Alyssa Shreves: Hi, this is Alyssa Shreves on for Tim. I just had two quick ones. Were you seeing any dynamic in the quarter with the order growth? Was there any trend in customers trying to get ahead of pricing actions, or was it really just underlying demand kind of driving the growth there? And then I had a follow-up. Gary Smith: Pure underlying demand across the board. Not driven by pricing thresholds or anything. There is so much demand for capacity out there across the board. Service providers have not invested in their optical infrastructure for about five years—they have been so preoccupied with 5G, etc.—that there has been an under-invest in the optical infrastructure in the world, and you are seeing very strong growth from the service providers and MOFN activity as well. And then you have got hyperscalers with the across training, clustering, new market for optical that is really ramping pretty significantly. And then you have got the inside-the-data-center optical moves as well. So across the board, Alyssa. Alyssa Shreves: Okay, that is helpful. And then just a quick one on APAC. The orders for India in the quarter were really strong. Should we expect the region to be driving APAC this year? Just given last year was more mediocre growth in the region, it was down the prior year. Should we expect a step change now with India? Gary Smith: I think that India will probably be very, very strong and robust this year, largely driven by MOFN. Obviously, it is the fastest growing Internet market in the world. All of the hyperscalers are leaning in and playing there, and because of the regulatory environment, they have to really partner with local folks and service providers to provision their optical networks. So I think that is going to be very sustainable. We are seeing an uptick in the amount of projects there. I would say overall, we are going to see good growth out of Asia Pacific this year in a number of areas, including Japan. That is largely driven by two things. One, my point earlier about service providers have largely underinvested in optical in the last five years, so that is beginning to play a part in it. The second part of it is the increase in MOFN activity in the whole Asia Pacific area, and submarine cable being a part of that too. Alyssa Shreves: Great. Thank you so much. Scott McFeely: Thank you. Operator: And the next question comes from Tal Liani with Bank of America. Please go ahead. Tal Liani: This time, you hear me? Operator: Yes. How are you doing? Tal Liani: I got so excited, I broke my headset. I have a question about the risk of early ordering. What we are seeing in every cycle is that when there are constraints, customers start ordering much, much earlier, and that creates big increases in backlog and then declines. How can you manage it? So I am sure you probably do not know if there is or to what extent, but is there any way you can manage early ordering through pricing the way Cisco does it, or any other way in order to mitigate the phenomenon? So you do not have what we had in 2022 or 2023, whenever we had the previous cycle. Gary Smith: Tal, that is a good question. First of all, I think having suffered through that, we are suitably sensitized to it, and we learned some lessons through that, one of which is visibility into things like installation and what are they actually doing and when with the equipment. I would say that the dynamic here—the service providers—is good steady growth. We have good visibility into that and what they are doing with it. And they were the main folks that were having the challenges around the ordering piece. The hyperscalers, I think we have deep collaborative relationships with them. They are our biggest services customers as well, and you saw our installation services were up 42% in the quarter. That gives us, and we have unique visibility into, what they are doing and deploying across the board there. So, given the scale of this, this is deep and collaborative relationships with them around precisely what are they trying to do, where. And so that gives us good confidence and visibility in the way we structure our agreements with them, given these lead times and the rest of it, which they are mindful of. I think we have great assurance—another way of saying this—in the quality of our backlog. Mark Graff: Yeah, I think the only thing that I would probably add, Tal, is when we talked about value exchange, part of that is making sure we have got the right terms and conditions in place so that we do not get stuck holding the bag, and we have not really seen a lot of people pushing back on that. Tal Liani: Got it. Second question is on margins. The risk is that in times like that, the component pricing will keep going up, and you start to see it. It started with memory. We start to see it now with other companies or other types of components. What can you do going forward? What can you do in order to mitigate the future risk? I understand what you are doing now and how you are trying to mitigate the current risk, but are there any forward pricing or forward purchase commitments, etc., you can take in order to mitigate the future increase in component pricing? Or what are you trying to do, or how are you trying to address it? Mark Graff: Yeah, Tal, I think there is—again, we keep coming back to this word “balance.” I think we are really focused on ensuring that we have got the secure supply to satisfy the demand that we are looking at, and we are locking in the pricing as we know it today with our component suppliers and the contract manufacturing folks. All that said, there is still future risk of them repricing their backlog, and we are having conversations both on our supplier side as well as on the customer side, so that we are not getting squeezed in the middle. But, again, it is the balance of pricing and supply on one side and pricing and share on the other. And I think given the results that you have seen and the basis of our raise, I am feeling pretty comfortable that we are striking those right tones. Tal Liani: Got it. Great. Thank you. Operator: And the next question comes from Atif Malik with Citi. Please go ahead. Adrienne Colby: Hi, it is Adrienne Colby for Atif. Thank you for taking the question. I wanted to ask another one about gross margin. With the 800ZR pluggables ramping in the latter part of the year and also with the pricing increases kicking in, why would we not see gross margin expansion in the second half? Mark Graff: The guide that we gave was a good range based on what we see from the product mix and from the supply chain challenges that we are trying to work through—again, that balance that I talked about before. From our seat right now, we think that is a pretty good guide. As we make more progress, we will give you guys updates. Adrienne Colby: Great, that is helpful. Thank you. And then just as a follow-up, I was wondering if you could provide some more color on the momentum that you are seeing with neoscalers, maybe just in the relative size of the opportunities, if most of that is falling in cloud direct versus MOFN. Gary Smith: Yeah, we are seeing, obviously, an emerging ramp here around a bunch of the—loosely called—the neoscalers, which encompass a fair range of different players. I would say largely right now MOFN-orientated, given the capital expenditures, time to market for them, etc. But what is clear from it all is that the network is now a real priority for them. And I think that plays through to the hyperscalers too. There has been such a maniacal focus—and continues to be, obviously—on things like power, GPU accessibility, etc. Now it is really about the network. The traffic is beginning to come out of the network both for inference and for training. And the neoscalers are obviously seeing that too. So they are leaning in on the network. We are also beginning to see some of them wish to have control of some of that network as well and do their own builds. We are cautious about that approach given the financial structure of some of those neoscalers—not all of them. But we are seeing across the board the neoscalers leaning in on their whole network requirements, largely really, Adrienne, currently going for MOFN. Operator: Thank you. We will take one other question today. Thank you. The next question comes from Ryan Koontz with Needham & Company. Please go ahead. Ryan Koontz: Great, thanks. You touched on scale across a bit. It seems like we are very early in the momentum around that area. Can you maybe expand on those projects—where we are in terms of a rough count, how your visibility is improving there relative to backlog and specific scale across projects? Thank you. Gary Smith: Hi, Ryan. We shared—I think it was in Q3—we announced the first large hyperscaler rollout. We have actually seen during the course of this quarter additional sites being added to that. Again, I would say all of these currently that we are seeing are in North America, which is, I think, to be expected. We have added two more hyperscalers to that that are also rolling this out. I think we are in the very, very early stages of this, and in talking with them, though, the plans are large and expansive, as you would expect for the scale of what they are trying to do here. It is absolutely enormous. So we are at the very early innings of this whole training, clustering. I would say that what we are also observing is there are—all of these hyperscalers we talk about homogeneously; they are not. They have very different business models. They have very different architectures both inside the data center to some extent and certainly outside from a networking point of view. Their training varies as well. And so you have got lots of different variables in there in terms of distance, capacity, speed, etc. They all want low latency, and they all want super high speed, but you are seeing a lot of variables about how they are clustering this. And again, I would say we are at the very early stages of this, Ryan. Ryan Koontz: Really helpful. Thanks for that, Gary. One last question on DCOM here. Great early move here; seems like you have got a big lead in this opportunity to bring PON to out-of-band. Do you feel like that space is defensible for you, and how do you sustain a competitive advantage there? Thank you. Gary Smith: I think there are a number of elements to that sustainability. I think it is deep collaboration, first off, and understanding and intimacy, and obviously Meta were incredibly helpful in instigating that. But there are different use cases; they are slightly different in the different hyperscalers. The dependability of it is we are very vertically integrated into it. We own the core technology, and it is the software that we are putting on that as well. We are uniquely positioned about that. So we think it is the combination of all of those elements—the collaboration, the vertical integration, the uniqueness and high speed of it, and then all of our software integration capability, and also, by the way, installation, which we are also doing. It is the confluence of those things that provide—we think it is quite defendable. Operator: Really helpful, Gary. Thank you. This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the Global Ship Lease, Inc. Fourth Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. I would now like to turn the conference over to Thomas Lister, Chief Executive Officer. You may begin. Thank you very much. Thomas Lister: Hello, everyone, and welcome to the Global Ship Lease, Inc. Fourth Quarter 2025 Earnings Conference Call. You can find the slides that accompany today’s presentation on our website at www.globalshiplease.com. As usual, Slides 2 and 3 remind you that today’s call may include forward-looking statements that are based on current expectations and assumptions and are, by their nature, inherently uncertain and outside of the company’s control. Actual results may differ materially from these forward-looking statements due to many factors, including those described in the Safe Harbor section of the slide presentation. We would also like to direct your attention to the Risk Factors section of our most recent annual report on our 2024 Form 20-F, which was filed in March 2025. You can find the form on our website or on the SEC’s website. All of our statements are qualified by these and other disclosures in our reports filed with the SEC. We do not undertake any duty to update forward-looking statements. The reconciliations of the non-GAAP financial measures to which we will refer during this call, to the most directly comparable measures calculated and presented in accordance with GAAP, usually refer to the earnings release that we issued this morning, which is also available on our website. I am joined, as usual, today by our Executive Chairman, George Youroukos, and our Chief Financial Officer, Anastasios Psaropoulos. George will begin the call with high-level commentary on Global Ship Lease, Inc., and then Anastasios and I will take you through our recent activity, quarterly results and financials, and the current market environment. After that, we will be pleased to answer your questions. So turning now to Slide 4, I will pass the call over to George. Thank you, Tom. George Youroukos: And good morning, afternoon, or evening to all of you joining us today. Both the supportive supply and demand trends and heightened geopolitical uncertainty that we have previously highlighted remained firmly in place throughout 2025 and then, in recent days, have clearly ratcheted up even more. Tariffs, the prospect of new port fees in the US and elsewhere, security concerns in and around the Red Sea, and now the situation in Iran shifting from tense to violent conflict—the list goes on. These and other factors have all combined to increase unpredictability and volatility, fundamentally alter and fragment trade patterns, and make supply chains more inefficient as a consequence. At the same time, and perhaps surprisingly, given the noise, aggregate global containerized trade increased in 2025 by 5%, with import volumes to the US also growing year over year. In this environment, demand for midsize and smaller container ships has remained remarkably strong. As a result, we have continued to lock in charter coverage at attractive rates, with $2,240,000,000 in contracted revenue over the next 2.7 years, with 99% contract coverage for 2026 and 81% in 2027. Maximizing optionality remains a key focus for us in order to both mitigate risk and seize value-accretive opportunities. With this in mind, we have transformed our balance sheet, reduced debt, and increased liquidity, all serving to bolster our resilience and agility in the process. This progress has been reflected by the affirmation of our strong credit ratings by leading rating agencies and has also supported payment of a quarterly dividend, which we raised again with a dividend paid in December 2025. On an annualized basis, we now pay $2.50 per common share. Another thing at the front of our minds is strategic but highly selective fleet renewal. We were pleased to announce a transaction in December for three vessels that make our fleet younger and larger, and replace some of our aging cash cows, which we had previously monetized at a cyclically attractive flat price. Tom will discuss this more in a few minutes, but we see these as great ships that are in the post-Panamax sweet spot, acquired at a fantastic price, de-risked right out of the gate, and with compelling upside potential. In short, just the sort of deal for which we keep our powder dry. Taken together, this progress and these successes are possible because we have worked diligently to maximize optionality in order to manage risks and seize opportunities in a cyclical industry and a turbulent world. On Slide 5, we thought that it would be helpful for newer investors, and a nice refresher for our friends who have stuck with us and made money with us over time, to put our current status in some historical context. Over the past five years, we have transformed the business and dramatically increased all of our key earnings and cash flow metrics while simultaneously de-risking our balance sheet. And we have returned capital to shareholders both by way of opportunistic share buybacks and by introducing a dividend, which we have repeatedly upsized as we made progress on delevering and building our contract cash flow. And our share price has responded accordingly, tripling over the period. The profound improvements that you can see here are a testament to a dynamic capital allocation policy, the discipline and patience to stick with it through the cycle, and the ability and confidence to seize opportunities as they arise. We fully intend to continue building on this track record, generating shareholder value by making Global Ship Lease, Inc. even more competitive, robust, and resilient for the long term. With that, I will turn the call over to Tom. Thomas Lister: Thank you, George. Hello again, everyone. Please now turn to Slide 6, where you will see our diversified charter portfolio. As of December 31, we have over $2,200,000,000 in forward contracted revenues, with 2.7 years of remaining contract cover. Throughout 2025 and the first two months of this year, we added 52 charters, including options exercised, for $1,260,000,000 in additional contracted revenues. So it has been a pretty good year. Turning to Slide 7, we take a look at our dynamic capital allocation policy, through which we are able to mitigate the risks and capitalize on the opportunities inherent in the natural cyclicality of our industry, not to mention the so-called black swan events the industry seems now to be confronting on a regular basis. We have delevered our balance sheet to reduce risk and build equity value. Our increased cash position has made us more resilient and capable of handling whatever may arise, from upheaval in the Middle East, to tariffs, to an evolving regulatory landscape, and, of course, to opportunities as they appear. And, as always, a top priority is returning capital to shareholders, and in late 2025, we upsized our dividend yet again to reach $2.50 per share on an annualized basis. We aim to provide investors with a liquid and stable platform from which they can participate in the shipping cycle, maximizing access to upside opportunities while minimizing exposure to downside risks. Slide 8 shows our patient and disciplined approach regarding investments. As you can see from the chart, we have a strong track record of buying ships during market downturns when asset values are low and then contracting them on super lucrative charters to lock in the good times of the upcycles. It is easy to say “buy low,” but it is much more difficult to do, especially as access to capital also tends to be constrained during downturns. That being said, I would underline the following points. First, our capital allocation policy is dynamic and has us well prepared to pounce on value-accretive opportunities when they arise. Second, our relationships throughout the industry give us insight into nascent deal opportunities, often before they are known in the broader market. And third, our combination of long-term focus and balance sheet strength puts us in a position to take a holistic and through-the-cycle view of risk, returns, and option value. Which brings us to Slide 9. On December 1, we announced the purchase of three high-specification, fuel-efficient 8,600 TEU container ships that were built in 2010 and 2011, and had already been fitted with valuable eco-upgrades by their previous owners. This deal was executed on short notice with cash on hand, is de-risked from the get-go, and offers high upside potential in the years to come. Moreover, as these are sister ships to high-demand, high-earning ships already in the Global Ship Lease, Inc. fleet, we have the added advantage of extensive firsthand knowledge of their operating and commercial profiles. By purchasing the ships with below-market charters attached, we were able to achieve an aggregate purchase price of $90,000,000, which is not far off what a single ship would cost charter-free, meaning this is essentially a three-for-the-price-of-one deal. Added to which, their aggregate scrap value alone is around $40,000,000, and long-term historic average charter rates for ships like these are over $40,000 per day. So we are looking at just the sort of low-risk, high-upside-potential deal we like very much. And there is a nice symmetry in that we funded this fleet renewal almost to the dollar with proceeds from the sale of much older, smaller ships that we had monetized at cyclically high values during the course of 2025. With that, I will pass the call to Anastasios to discuss our financials. Anastasios? Anastasios Psaropoulos: Thank you, Tom. Slide 10 shows our finance highlights in 2025. I would like to emphasize a few key takeaways. Full-year earnings and cash flow were up compared to 2024. Our cash position is $637,000,000, of which $164,000,000 is restricted. The remainder ensures that we can fully cover our covenants, working capital needs, and manage the potential financial implications of geopolitical issues, which seem to be arising with increasing frequency and intensity. It also provides dry powder from a position of almost net zero debt, both for CapEx to keep our existing fleet commercially relevant and for disciplined investments in fleet renewal when the right opportunities emerge. And all of this without compromising our ability to reliably pay a healthy and recently enlarged dividend. The latest $85,000,000 refinancing has pushed our average debt maturity to 4.5 years and our blended cost of debt down to 4.49%. We also realized a $46,200,000 gain from the sale of four older ships, and we have strong credit ratings from the leading credit agencies. Slide 11 highlights our progress in delevering our balance sheet and building equity value. The graph on the left shows our lower outstanding debt, which stood at $950,000,000 at the end of 2022, was under $700,000,000 at the end of 2025, and is on track to be well below $600,000,000 by the end of 2026. The graph on the right tells a similar story, but with broader context. We have worked diligently to reduce our leverage from 8.4x in 2018 to 0.5x today. These comprehensive efforts are shown further on Slide 12, where we have lowered our borrowing costs from a blended 7.56% in 2018 down to 4.49% in 2025. We have also maintained low breakeven rates through multiple years of inflation by aggressively reducing our interest expense. This keeps us both competitive and resilient in any market environment. With that, I will turn the call back over to Tom to discuss the market and our fleet. Thomas Lister: Thanks, Anastasios. On Slide 13, we put our fleet in context, restating our focus on midsize and smaller container ships between 2,000 TEU and 10,000 TEU. In contrast to the really big ships, which require specialized port infrastructure and tend to be constrained to the big East-West “mainlane” trades, midsize and smaller container ships are highly flexible and can be employed worldwide without being reliant on or captive to any industry or country. As such, they provide the liner companies, our customers, with valuable optionality at a time when trade patterns are in flux. And, by the way, it is often overlooked that roughly three-quarters of containerized trade by volume already takes place in the non-mainlane North-South and intraregional trades, like intra-Asia. We will discuss this further over the coming slides. On Slide 14, we turn to the situation in the Middle East, a subject that is, of course, top of mind for us as it is for many across the shipping industry and beyond. We will not pretend to be geopolitical analysts or forecasters here, but we can provide some facts and context. Fundamentally, two key Middle East shipping chokepoints, the Red Sea and the Strait of Hormuz, are now more or less closed at the moment. First, the Red Sea and Suez Canal, through which around 20% of containerized trade volumes would normally transit. Here, the initial green shoots of cautious optimism have been decisively cut back, with the Houthis calling for renewed vessel attacks in the southern Red Sea. Even before this setback, a large majority of transits continued to go the long way around, around the Cape of Good Hope, which absorbs around 10% of global fleet supply in the process. Recent updates suggest that this is likely to remain the case for the time being. The new chokepoint to address is the Strait of Hormuz, through which shipping traffic has pretty much ceased since the outbreak of hostilities, with multiple major regional ports suspending operations in part or in full. While it is more famously a gateway for global energy flows, a normal year would also see between 3%–4% of global container volumes move through the Strait of Hormuz, serving ports such as Jebel Ali in Dubai, which is the ninth-busiest port in the world, as well as Doha, Abu Dhabi, and Dammam in Saudi Arabia. While the overall volumes themselves are not huge, the knock-on effects are much bigger given, among other things, the importance of Jebel Ali as a transshipment hub and the challenges of serving Gulf destinations by alternative routes. So this is a big deal. Container supply chains, which were already complex, now have additional challenges and inefficiencies to confront. We will see how the liner companies adapt, but we are, of course, in the very early days of all this. In summary, the situation is highly dynamic, and the longer-term implications are unclear. However, the paramount concern for the industry amid the turmoil is, and must continue to be, seafarer safety. Turning to another source of disruption, on Slide 15 we look at tariffs. While the sands keep shifting on this issue, looking back to February, tariffs under the first Trump administration could be at least directionally instructive in how things develop moving ahead. As expected, the tariffs in 2019 did indeed result in a reduction in direct trade between the US and China. Perhaps unexpectedly, however, there was an increase in demand for midsized and smaller container ships during this period as supply chains shifted and decentralized. Intraregional trade, particularly intra-Asia containerized trade volumes, rose. Trade networks grew more complex and more inefficient, and those conditions tend to be supportive of earnings for providers of shipping capacity like Global Ship Lease, Inc. Slide 16 is where we cover some of the other geopolitical and regulatory trends affecting the shipping world. This slide is backward-looking, as who knows what other surprises 2026 has in store. USTR port fees were introduced by the US in October 2025, and while they caused some disruption, the industry was able to adapt to the new circumstances given the lead time with which they were announced. However, China’s port fees did not offer the same lead time and were much more disruptive as a result. Fortunately, the port fees from both countries were suspended until the fourth quarter of 2026. While these policies and their implications have been deferred for now, the situation was a reminder of how fast things can change and how optionality is more valuable than ever within the current global framework, both for us and for our customers. Notably, the White House’s recently unveiled Maritime Action Plan points to the possibility of future such port fees. Along with the rest of our industry, we will certainly closely monitor future developments on this front. The IMO’s net zero framework faced a similar delay to 2026. This decision is expected to provide a boost to existing conventionally fueled vessels such as those in the Global Ship Lease, Inc. fleet. Amidst this heightened geopolitical uncertainty, we will stay prudent, disciplined, and agile, doing our best to maintain and to leverage the optionality at our disposal. On Slide 17, we highlight supply-side dynamics and scrapping trends, where little has changed from last quarter. Both idle capacity and scrapping activity have remained near zero. With minimal slack in the system due to fragmented and inefficient supply chains, the charter market rate environment has remained strong, and charterers have proven willing to pay attractive rates even for late-in-life ships. Unsurprisingly, owners have responded by keeping those ships on the water and profitably in service for as long as possible. Slide 18 shows the order book, which has grown meaningfully in recent years, but importantly, mostly in the larger vessel segments where Global Ship Lease, Inc. does not participate. For ships over 10,000 TEU—in other words, the really big ships—the orderbook-to-fleet ratio stands at 55.5%, which drives the overall orderbook-to-fleet ratio to almost 35%. However, for the size segments below 10,000 TEU, the ones relevant to Global Ship Lease, Inc., that number halves to 16.9%, with deliveries spread over the next five years or so. In addition to the smaller order book, if we were to assume all ships 25 years or older were scrapped through 2030, the sub-10,000 TEU fleet would actually shrink more than 6%. If supply remains low and rates remain high, we will be happy to continue locking in coverage at attractive rates. If, on the other hand, the market were to experience a normalization or even a downturn, we would expect the arrival of new ships to be offset, in large part at the very least, by a sharp rise in scrapping activity. Similarly, we would expect such a scenario to yield interesting investment opportunities for a patient and well-capitalized owner such as Global Ship Lease, Inc. We take a look at the charter market on Slide 19, and it is important here to remember that our daily breakeven rate is just over $9,800 per vessel per day, which is well below market rates. In these supportive conditions, we have been hard at work locking in as much charter coverage as possible, to the tune of $2,240,000,000 over the next 2.7 years or so, providing good forward visibility and insulation against any downside turbulence. And on that note, I will turn the call back to George on Slide 20. George Youroukos: Thank you, Tom. To summarize, we have continued building our forward visibility on cash flows, now with $2,240,000,000 in contract revenues over 2.7 years, with 99% coverage for 2026 and 81% for 2027. Optionality remains a core focus. Even with the deferral, for the time being, of US and China port fees and of the IMO’s net zero framework, the geopolitical and regulatory environments remain volatile, and we are constantly at work to make Global Ship Lease, Inc. more resilient, robust, and able to capture opportunities. The current situation in the Middle East and around the Strait of Hormuz, of course, adds more complexity to a situation that was already highly complex and dynamic. The supply chains have become fragmented, decentralized, and increasingly inefficient, which drives further demand for midsize and smaller container ships. We have successfully delevered, pushed down our cost of debt, extended our average debt maturities, and lowered our daily breakeven rates to well below market rates. Our fortress balance sheet, which brings us close to being net-debt neutral, positions us well for the opportunities and challenges of the market. We increasingly look to renew our fleet in a disciplined, prudent manner to support earnings now and into the future. And we always look to return capital to shareholders. To this end, we increased our quarterly dividend in 2025, now up to $2.50 per share on an annualized basis. Finally, looking back on the last five years, it is gratifying to see the credit rating agencies acknowledge the progress we have made. Much more gratifying still is to see the stock price triple over the same period, and we will do our best to ensure that positive momentum continues. Now, with that, we will be very pleased to take your questions. Thank you. Operator: We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star then the number one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. Our first question comes from the line of Liam Burke with B. Riley Securities. Liam Burke: Yes, thank you. Hi, George, Tom. George Youroukos: Hi, Liam. Liam Burke: Hello. This is probably bad timing for this question, understanding the geopolitical situation both in the Red Sea and the Strait of Hormuz. But the gap between charter and freight rates is staying wide. All things being equal, is there anything that you would anticipate to have those movements converge, in terms of freight and charter rates converging? Thomas Lister: Good question, Liam. I will have a crack at it and no doubt George will add to it. It is very difficult to comment on the freight market side of that equation, which is obviously much more responsive to day-to-day events, given the contract cover is much more limited in terms of duration. However, I can comment on the charter side of things. What we are seeing is that appetite from charterers remains to lock in charters at attractive rates. So, at least for the time being—and it is very difficult to predict anything in today’s slightly crazy world—but for the time being, we are seeing our customers looking to continue to lock in charters at high rates for meaningful durations. Of course, it is worth highlighting at this stage that 99% of our positions for 2026 are already contracted, and over 80% for 2027 are already contracted, but broadly speaking, there is still charter market appetite. Liam Burke: Great. Thank you. Your leverage ratios are low. You pay a very healthy dividend through the cycle. What about the cash, and how do you see allocating it this year and next year? Thomas Lister: Sure. In this cyclical industry, the way to make genuinely attractive returns for our shareholders is making sure that we have cash to move on opportunities—ideally at the bottom of the cycle, when no one else has capital. That is when you make the most money for shareholders within shipping. So holding that cash on our balance sheet, we see as super valuable in that respect. In fact, the three ships that we mentioned during the course of the call, these three 8,600 TEU ships that we acquired at the tail end of last year, are a perfect representation of that. We went from zero to completion within about 30 days or so on that deal, and you can only do that if you have capital at your disposal, which, happily, we did. Liam Burke: Great. And I apologize for asking such a specific question, but Anastasios, SG&A jumped considerably. Is there a one-timer in there, or is that just another level to anticipate? Anastasios Psaropoulos: No. It has to do with the valuation of the incentive plan that we have, calculated in the order we have calculated. It is a non-cash item, and you could see much more detail in our upcoming 20-F. Liam Burke: Great. Thank you, Anastasios. Thank you, Tom. Thomas Lister: Pleasure, Liam. Thanks a lot. Operator: And, again, if you would like to ask a question, press star then the number one on your telephone keypad. Our next question comes from the line of Omar Nokta with Clarksons Securities. Your line is open. Thank you. Omar Nokta: Hi, guys. Good afternoon. Thank you for the update. You obviously touched on this, Tom. I think—Hi, Tom. I think you talked about this and maybe touched on it also in response to Liam’s question, but just about what is going on in the Middle East and the turmoil and whatnot. There has been clearly a lot of focus on the impact on energy and exports out of the region. But in terms of containers—and presumably it is a lot more of an import market than export, I would think—but just in general, what has been the impact? We have seen a spike in different commodity prices, and we have seen energy shipping rates go through the roof. What have you seen here over the past few days with respect to your business? Have you seen any shift in the freight market dynamics or time charters? Thomas Lister: I would say not in time charters. The appetite remains, as I mentioned to Liam, from charterers at attractive rates and for attractive durations. I think in the freight markets, the industry is just struggling to adjust to this massive curveball. Although only 3%–4% of containers actually flow into or out of the Persian Gulf, there is a tremendous volume actually transshipped there, particularly in Jebel Ali. So although the overall numbers are comparatively modest in percentage terms as far as global trade is concerned, the ramifications through the liner company networks are considerable. I think one analyst calculated that roughly 10% of the global fleet actually under normal circumstances calls at ports within the Persian Gulf. So, although the volumes in terms of import and export are not huge, the implications for liner companies’ networks are much bigger than that, and that confusion and complexity breed disruption in the networks, which breeds inefficiency, which breeds the necessity for more ships. That is what we are seeing so far, but it is very early days. George, do you want to add to that? George Youroukos: Yes. What I would add is that we see clearly the statement of Houthis that they will resume their attacks in the Red Sea, so the Red Sea is out of the question right now. There was a process where planners were returning slowly, but right now this is not the case. And then the second thing—we should see this very similar to COVID. There is going to be a big region that is not going to be serviced by ships until this conflict is over or at least this conflict is to a point where ships can cross the Hormuz. There is going to be a big starvation of cargos in the region. As you can imagine, this is going to create disruption, and I think it will lead to raising the freight rates at the point when passing through the Hormuz is possible but not clean-cut as it was before the war. I think the freights are going to go up for the ships that are going to go through, and once the Hormuz is open completely, there is going to be a lot of cargos that need to go that have not been going for a while, and hence backup trade in the ports. They are going to be waiting, and all of that—a similar mini situation over the region, a mini situation of COVID, I would imagine. So if you ask me, I think the earnings of liner companies should increase for a period of time, and the fleet is going to tighten further for a period of time again. Omar Nokta: Thanks, George. That is quite helpful. And thanks, Tom. You answered the second question in there for me, so thank you. And then maybe just one final quick follow-up on the balance sheet. I noticed a big jump in the long-term restricted cash, going from $23,000,000 to $113,000,000 quarter over quarter. Is that actual restricted cash due to a financing, or is that just a long-term bank deposit? Anastasios Psaropoulos: It is actually, Omar, a revenue received in advance. Like the previous time that we had in our account, we have received a revenue received in advance, which has to be restricted, and it will be released following the service of the charter. Omar Nokta: Okay. And how long of a duration is that? Anastasios Psaropoulos: If I remember correctly, it is three years. Omar Nokta: Okay. Okay. Thanks, Anastasios, and thanks, guys. I will turn it over. Thomas Lister: Omar, I think, just to correct, I think it is actually five years. Five years. Omar Nokta: Okay. Thank you. Operator: There are no further questions at this time. I would like to turn the call back over to Thomas Lister for closing remarks. Thomas Lister: Thank you very much, operator, and thank you, everyone, for joining today’s call. We look forward to regrouping for our 1Q earnings once they are ready. Stay safe. Thanks for joining. Bye-bye. Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining in. You may now disconnect.
Operator: Greetings. Welcome to the Distribution Solutions Group, Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press 0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Sandra Martin. You may begin. Sandra Martin: Good morning, and welcome to Distribution Solutions Group, Inc.'s Fourth Quarter and Full Year 2025 Earnings Call. Joining me on today's call are Distribution Solutions Group, Inc.'s Chairman and Chief Executive Officer, Brian King, and Executive Vice President and Chief Financial Officer, Ron Knutson. In conjunction with today's call, we have provided a financial results slide deck posted on the company's IR website at investor.distributionsolutionsgroup.com. Please note that statements on this call and in today's press release contain forward-looking statements concerning goals, beliefs, expectations, strategies, plans, future operating results, and underlying assumptions subject to risks and uncertainties that could cause actual results to differ materially from those described. In addition, statements made during this call are based on the company's views as of today. The company anticipates that future developments may cause those views to change and we may elect to update the forward-looking statements made today, but we disclaim any obligation to do so. Management will also refer to certain non-GAAP measures, and the reconciliations to the nearest GAAP measures are available at the end of our earnings release. The earnings release issued earlier today was posted on our Investor Relations website. A copy of the release has also been included in a current report on Form 8-K filed with the SEC. Lastly, this call is being webcast live on Distribution Solutions Group, Inc.'s Investor Relations website and a replay will be available through March 19. I will now turn the call over to Brian King. Brian? Brian King: Thanks, Sandy. Good morning, everyone, and thank you for joining us. As events unfold in the Middle East, we are actively assessing any potential implications for our business, our customers, and impact on the broader supply chain. Our thoughts and prayers are with the military personnel and civilians who are in harm's way and with their families. We will continue to monitor the potential implications for global markets and are committed to operating with resilience, discipline, and care during this period of elevated uncertainty. We are not where we want to be at the end of the quarter, but our confidence and vision for the future remains strong. 2025 was a critical internally focused reinvestment, retooling, and digesting year for Distribution Solutions Group, Inc., as well as one where we managed through some dynamic pricing and supply chain and numerous one-time cost curveballs. While it was a dizzyingly dynamic year, through our daily North Star commitment to staying focused on investing in the business with a lens on long-term value creation, our urgency to offset shifting rules in the marketplace sharpened our focus on core fundamentals of building a better Distribution Solutions Group, Inc. Enhanced focus on execution tools and talent, and on timely accountability across the organization, made us prioritize not delaying targeted significant investments in capabilities and talent to position the company for long-term success. As a result, we go into 2026 with an enhanced perspective on our competitive positioning and long-term levers to drive performance across our North American and global platforms. As I reflected, we navigated challenging headwinds in 2025, including a government shutdown, shifting demand environment and macroeconomic pressures and emotions, including those driven by fluid tariffs where our diligent and largely effective efforts to recapture margin still left us short. Our financial results fell short of our expectations in the fourth quarter and for the year, and we own that. However, besides progress in our transformative investments, we enjoyed consistent operational affirmations in the marketplace around our value-added lines of business. Our teams delivered important new business and wallet share wins; each vertical held on to business on the back of service and capabilities, and made meaningful progress in our customer-facing capabilities and partnerships in 2025. We leaned in on improved discipline, heightened institutional adaptability, enhanced Distribution Solutions Group, Inc.'s more broadly presented refined value-added solutions confirmed by the marketplace. All of which add up to real 2025 successes and maturity of the business that will make us stronger in the longer term. Turning to Slide four. For the full year, we delivered total revenue growth of 9.8% on one less selling day, resulting in $1,980,000,000 in annual revenue. Organic average daily sales grew by 3.6%, reflecting solid underlying execution. Cash flows in 2025 were strong; we generated $84,000,000 of cash from operations, on top of $56,000,000 in 2024. Adjusted EBITDA finished at $175,000,000, short of our expectations. These results demonstrate our continued focus on cash generation, working capital efficiency and profitability. Throughout the year, demand remained healthy across aerospace and defense, semiconductor-related technology, renewables, and as the year progressed, industrial power. During the fourth quarter, we began to see demand soften in renewables in North America, which we are actively managing by pivoting growth initiatives in that sector towards the strong renewables demand growth for Distribution Solutions Group, Inc.'s improved presentation of capabilities in the global marketplace, and expanding our efforts on other end markets where we enjoy exceptional customer partnerships and strong secular and strengthening cyclical momentum, such as in industrial power, technology, and aerospace and defense. Our expanded platform capabilities and ability to support our historic customers and similarly discerning customers on a more global stage are supporting an expanding and accelerating set of dialogues. As we've discussed on previous calls, our financial results will not be linear. The fourth quarter is a good example of that. However, these results are certainly not indicative of our long-term plans or confidence in the future. While we anticipate some quarter-to-quarter challenges to balance earnings with our recent commitment to accelerate our talent recruitment transitions and accelerated investments, we are committed to making decisions that prioritize driving a stronger and more profitable Distribution Solutions Group, Inc. in the longer term for all of our committed stakeholders, but recognize, like in this quarter, the timing of some of those decisions unintentionally lined up with some margin near-term pressure and taxed near-term earnings more than leadership expected. While we didn't want to delay investments and talent decisions to unnaturally smooth earnings at the expense of building a better company, our leadership team still expects much better profitability performance from our Distribution Solutions Group, Inc. platform of capabilities. Let's turn to slide five to discuss our business initiatives. Gexpro Services delivered outstanding operating results in 2025 driven by the strength of the aerospace and defense, technology and renewables end markets we serve. Despite some fourth quarter sales softness, full-year organic average daily sales increased 12.3%, with full-year ADS up 13%. We continue to invest in the technology and industrial power end markets, driven by expanding infrastructure needs and increasing AI-driven demand. Our order backlog and new business pipeline remained strong in both segments. While renewables slowed in North America in 2025, we shifted our investment focus towards global strategies with encouragement of exceptional partners across technology, industrial power, aerospace and defense, and the power generation cycle. We are seeing a meaningful growth opportunity in India, while Southeast Asia is progressing more gradually due to the timing of customer qualifications. Both regions remain relatively small today, but continue to show excellent acceleration perspective and current customer engagement across more of our proven value-added capabilities at Distribution Solutions Group, Inc. and Gexpro Services. Our European business remains strong, with increasing diversification across multiple verticals. Gexpro Services is also expanding its value-added service offerings using robotic automation and AI-enabled tools that enhance customer capabilities across VMI, kitting, manufacturing, and ecommerce solutions. Since bringing Distribution Solutions Group, Inc. together, Gexpro Services went from approximately $350,000,000 in revenue to just under $500,000,000 mostly organically. Adjusted EBITDA has expanded from approximately $35,000,000 to $64,000,000 in 2025, with margins expanding nearly 300 basis points to 12.8%. This margin expansion reflects scale, broader geographic reach, enhanced value-added capabilities, and disciplined execution of operational efficiencies that leverage our cost structure. As we confidently lean into further investment at Gexpro Services, we are balancing strong optimism around marketplace pull on us to support growth opportunities with an expectation to drive earnings growth while making the important long-term investments in capabilities, geographies, and talent to support performing for our customers at a level that adds to the reasons we are winning wallet share and new mandates. As a reminder, Gexpro Services launching new customer programs requires upfront investment of significant time and margin, but results in exceptionally sticky customer engagements where we are critical to our customers, and our commitment to doing our job for them thoughtfully and exceptionally reaffirms the partnership between us and our customers. The upfront effort and investment can cause a bit of deleveraging of profits in any given quarter as programs ramp up, or mature programs slow, like the shift we felt on the margin in the fourth quarter as new programs in global renewables come on but domestic programs slow, or as we felt a year or so ago in technology. The great news is that the new business pipeline continues to expand even as mature programs may fluctuate based on each customer's program momentum. We also continue to win significant wallet share. We rarely lose programs. Expanding what Gexpro Services does as a part of Distribution Solutions Group, Inc. allows us to expand our engagement with our customers. Gexpro Services continues to be one of the most exciting growth levers for Distribution Solutions Group, Inc. Looking ahead, we are excited and focused on investing even more deliberately in additional organic and inorganic initiatives to sustain and extend the strong long-term momentum we see at Gexpro Services. Next, Lawson Products. Average daily sales increased 2.7% in the fourth quarter, continuing the momentum from the third quarter when average daily sales grew by 3%. Although new VMI installations and wallet share expansions led to organic sales growth throughout 2025, Lawson’s smaller account local revenue continued to be challenged in the fourth quarter; some of the Salesforce and selling tools transformation over the last couple of years have distracted our resources from doing the exceptional job our customers champion from our unique service model and that we expect. Lots of focus and tools teamed with additional investment in talent and process improvements are focused on getting this right for our customers, sales team, and for Distribution Solutions Group, Inc. EBITDA margins were negatively impacted by a slight customer mix shift, deliberate strategic investments, and unexpectedly elevated health care benefit costs in the quarter and for the full year. Ron will discuss in more detail in a moment. Recently, Lawson has made strategic investments in two leadership roles to strengthen the team through more capabilities and accountability. We brought on Jim Slunka as Chief Revenue Officer and Hillary Bryant as Chief People Officer. Jim joined Lawson in January 2026 and brings a proven track record of commercial transformation, having led sales and operations for a $1,800,000,000 omnichannel enterprise, overseeing more than 2,000 sales professionals, delivering a six-year sales CAGR of 8% and expanding gross margins by 300 basis points. He brings strong discipline around accountability, urgency, process, and commitments to a team-focused enthusiasm for excellence and winning, all consistent with being a former West Point athlete and officer. We are thrilled to welcome Jim to Lawson and Distribution Solutions Group, Inc. and are confident in the immediate impact he will have on the organization. Hillary brings deep global HR leadership experience, most recently managing a worldwide HR organization for a $1,400,000,000 industrial technologies company with approximately 4,000 employees. She offers a great complement to Jim, bringing a renewed discipline and energy to employee engagement and corporate culture while elevating a clear cadence around growth-focused expectation, urgency, and rewards. These important investments, alongside others that have also been recruited over the last years, put in place critical pieces to now have a stronger ensemble of experience, been-there-done-that leadership, collectively adding meaningfully to our sales and operating foundation as we pursue improved growth and execution in 2026. Turning to our 2026 growth priorities. We are focused on continuing to capture market share and expanding wallet share in our national accounts, including Lawson, Kent, and government, while reestablishing our commitment to offering the highest level of consistent service out of our Salesforce for our customers. And with that, a return to growth out of our smaller local accounts, driven by their efforts and the investment we have made in them. A key leading indicator of our growth is in new VMI installations, or internally what we refer to as ship-to locations, which we are currently ramping up after a challenging couple of years as we've been working through our Salesforce transformation. We continue to leverage technology to increase sales effectiveness and are improving the rigor and consistency of sales rep activity supported by our CRM tool, enhanced training commitment for new FSRs, and a real focus on our DSMs’ consistent cadence with our established FSRs around driving growth and consistency in the customer experience. We are also in the early stages of rolling out across our field customer-facing team a route optimization tool that we have been developing that will give them back expensive and frustrating transit time and more opportunity to serve and grow our customers. Although a smaller piece of our business, our ecommerce channel continues to deliver double-digit growth, and we are encouraged that more than 30% of customers purchasing through the site are new to Lawson. As we move forward, we remain focused on commercial excellence, the customer experience, and technology to accelerate growth and continuously improve how we serve our customers while also providing flexibility to our customers. Additionally, we are working more closely with our vendor partners to deliver solutions to our customers and to support our commercial team. At our recent sales leadership meeting in February, approximately 50 vendors presented their products and services to our sales team. We are working with a number of those channel partners to improve our product costs, as we have in turn invested to support them and our customers with our significant recent investment in our selling and servicing capabilities. We expect some nice progress this year out of our sourcing partnerships. Moving on to the Canadian branch division. The team made solid operational and synergy progress in the fourth quarter and across the full year despite macroeconomic headwinds and tariff-related uncertainty that pressured industrial end markets, especially in Canada, throughout 2025. As expected, fourth quarter revenue declined sequentially due to typical holiday season softness and weather, leading to operational deleverage. In 2025, we completed four facility consolidations, with the final consolidation expected by the end of the first quarter. As we discussed last quarter, because Source Atlantic's purchase price was largely tied to tangible assets, our first full year of transformation meaningfully derisked this investment for us, and we continue to believe this was a strong strategic acquisition to grow and scale our Canadian operations. Although the revenue headwind out of the gate has us a full year behind our ambitious profitability objectives our Distribution Solutions Group, Inc. team embraced when we acquired Source Atlantic in late 2024, and more recently, the recruited Canadian leadership team reaffirmed that underwriting. There's still significant profitability tuning work ahead; we are encouraged by our framework and expanding profitability insight and discipline that we are building, the team we put in place, and the path and significant progress they are demonstrating to us in the marketplace as the first year of ownership is now closed. At the TestEquity Group, we are investing at a renewed, feverish pace in the long-term platform we can better see now in this vertical. A massive investment in additional leadership capabilities and tools was made in the business, especially during the last part of 2025. A shift was made concurrent with these investments around dialing up a more intense focus and intentional allocation of resources, driving a structurally higher margin shift discipline out of a daily cadence around the vertical's growth priorities. And each team member owns specific accountability on discrete levers to impact that outcome. When we committed to these investments, we fully expected a J-curve recovery, with near-term transitions impacting performance, followed by improved revenue growth and profitability as our strategic initiatives take hold. For the full year, average daily sales increased 2%, and organic daily sales grew 1%, driven primarily by Test & Measurement, Rentals, and Chambers. In the fourth quarter, revenue grew 0.9% on one additional selling day, supported by continued momentum in rental and refurb chambers, and TEquip. While Test & Measurement end markets were under in the fourth quarter, we remained focused on disciplined execution of our growth and profitability prioritization initiatives and are beginning to see the tighter strategic lens and accelerated pacing around cadence and accountability at work. The result is we are seeing engagement deep into the organization take place, and the affirming pipeline activity evolving towards our areas of most differentiated capabilities, teamed with our higher margins and return on capital opportunities, including value-added solutions used in rental, Test & Measurement solutions, Chambers, and accelerating the growth and mix around our most value-added elements of our electronic production supply offer. To strengthen our margins and earnings, we are currently seeing some accelerating customer engagement building around our core Test & Measurement expertise, where we have reinforced with a renewed and discrete effort around rededicating resources focused on T&M customer solutions selling, improving our competitive moat, at a time when we believe the marketplace has passed the trough and we are seeing acceleration. We also have major initiatives underway to simplify and unify the digital ecosystem. Enhancing the customer experience through ERP consolidation, customer service, and ecommerce platform integration is foundational to our strategy, and we are actively leveraging AI applications to accelerate execution. At the same time, we are strengthening performance management, incentives, and accountability as we establish new key leadership roles. We're excited about the progress Barry is making to drive a much more disciplined approach to the portfolio of value-added capabilities and products offered across the TestEquity Group vertical. And for the employees, we appreciate their support of his accelerated operational pace and accountability, including the shifting of time and resources towards more differentiated growth areas, to drive his objectives around mix shift rather than only adding incremental costs in elevated areas of focus. Looking ahead, we are actively increasing our account base and deepening penetration among our existing customers while using new product introductions and private label offerings to expand customer choice and enhance margins. Encouragingly, a growing backlog in January and February 2026 signals momentum to come. In 2026, we recognize that the full impact of these initiatives typically takes several quarters, but we are confident they will result in a structurally stronger, more competitive, materially higher margin TestEquity business over time. With that, I'll turn it over to Ron for details on our fourth quarter and full year financials. Ron? Ronald J. Knutson: Thank you, Brian, and good morning, everyone. Turning to Slide six and starting with our full year results for 2025. As Brian mentioned, consolidated revenues for the year were $1,980,000,000, up 9.8% compared to 2024. Incremental revenue from our 2024 acquisitions was $121,500,000, and our organic average daily sales growth for the fiscal year was up 3.6% over 2024. For the year, adjusted EBITDA was $175,200,000 or 8.9% of sales, and GAAP net income per diluted share was $0.18 for the year versus a GAAP net loss per diluted share of $0.16 a year ago. Non-GAAP adjusted EPS was $1.24 for the year compared to $1.44 per share a year ago. Full year margins in 2025 were 80 bps lower than in 2024, primarily due to sales mix shifts, employee-related costs, and other investments. Fourth quarter revenues were $482,000,000, up 0.2% versus a year ago, which translated into flat organic sales compared to 2024. For the quarter, we generated adjusted EBITDA of $35,400,000 or 7.4% of sales. Each of our businesses experienced lower year-over-year EBITDA margins primarily due to sales mix shifts, some incremental bad debt expense, and higher employee-related costs, namely health care benefits. Cash flow from operations was strong, with $16,900,000 for the quarter and $84,000,000 for the full year, on top of strong results in 2024. Before I move on to the individual verticals, I wanted to comment briefly on the Distribution Solutions Group, Inc. consolidated margin for the full year and for the quarter. For the full year, adjusted EBITDA was 8.9% compared to 9.7% for the full year 2024. I would break the 80 bps compression into two buckets. The first is primarily longer-term people investments of approximately 20 bps. The remaining 70 bps was driven by timing items and nonrecurring items such as health care costs, specific customer bad debt reserves, and some lower margin to win specific customers. From a timing perspective, many of these items hit in the fourth quarter, resulting in a larger impact on our fourth quarter margins of 7.4%. Longer-term people investments impacted the quarter by approximately 25 bps. Other items impacting the quarter that we would classify as timing or nonrecurring include health care approximately 40 bps, customer-specific bad debt approximately 20 bps, recruiting and leadership start-up approximately 25 bps, mix shifts within Gexpro Services approximately 25 bps, and timing benefits realized in 2024 which is about 40 bps. Now moving on to slide seven and starting with Lawson. Full year revenue increased $12,000,000; average daily sales grew by 2.6% and organic average daily sales declined by 1.2%, primarily due to lower military customer sales. Adjusted EBITDA for the year was $51,600,000 or 10.7% of revenues for the full year. For the quarter, Lawson's average daily sales were up 2.7% and its adjusted EBITDA was $7,700,000 or 6.7% of sales. In the Lawson-based business, the margin compression from the prior year was primarily due to sales mix of about 60 bps, higher employee-related health benefit costs of approximately 100 bps, and employee costs and timing of incentive accruals approximately 110 bps. As Brian mentioned, Lawson's most significant sales initiatives focus on new VMI installations and increased share of wallet, which are leading indicators of revenue growth. We are continuing to accelerate the adoption of our CRM platform to improve sales rep productivity and grow the core business, and are currently in the early stages of route optimization planning. We are also expanding our ecommerce platform. This is a cost-effective way to do business, and one third of our customers on the site are new. Although sales are still small on ecommerce, we experienced about an 18% revenue growth in the fourth quarter. Turning to Slide eight. Full year sales for the Canadian segment were $221,400,000 in USD, up $96,300,000 primarily due to the Source Atlantic acquisition included for a partial year in 2024. Fourth quarter sales for the Canadian segment in USD were $55,100,000, reflecting some seasonal softness. Market softness for projects in manufacturing end markets persisted, mostly in Eastern Canada; however, current backlogs have increased meaningfully. Full year adjusted EBITDA was $15,600,000, 7.1% of sales, while fourth quarter margins were 6.6%. Margins were compressed slightly due to items such as first-year Sarbanes-Oxley compliance work. The Bolt Supply standalone business drove sales by 7.8% in local currency and generated a 14% margin for the full year. We continue to make progress on planned synergies around gross margins and branch consolidations between Bolt and Source Atlantic. Turning to Gexpro Services on slide nine. Full year revenue was $496,700,000, representing organic average daily sales growth of 12.3% and total ADS growth of over 13%, driven primarily by end market strength in aerospace and defense, technology, and renewables for most of the year. Recall that we highlighted tougher sales comps in the fourth quarter, which declined 1% on an average daily sales basis, generating $119,400,000. Full year adjusted EBITDA was $63,700,000 or 12.8% of sales. For the quarter, margins pulled back to 11.7% from 13.3% a year ago, on a lower Q4 sales base, the sales mix on lower renewables, and some strategic employee investments. Value creation initiatives for Gexpro Services continue to include Distribution Solutions Group, Inc. cross-selling, acquisition synergies, and expanded VMI, kitting, manufacturing, and ecommerce offerings. Lastly, I'll turn to TestEquity Group on slide 10. Full year sales were $783,200,000 with average daily sales growth of 2%, driven primarily by Test & Measurement, Rentals, and our Chambers business. Organic average daily sales for the year were up 1%. Fourth quarter sales were $192,900,000 with average daily sales up 0.9% versus a year ago. TestEquity's adjusted EBITDA for the year was $51,000,000 with adjusted EBITDA margins of 6.5% versus 7.3% for all of 2024. Margins were pressured by a sales mix shift, higher bad debt expense, and higher employee-related expenses, including the build-out of a leadership team, and nonrecurring favorable items from a year ago. Fourth quarter EBITDA margins were similar to full-year margins at 6.4% of sales. The new leadership team has aligned priorities through performance management, incentives, and accountability. Moving to page 11. We ended the year with total available liquidity of $469,000,000, and for 2025, our free cash flow conversion—defined as adjusted EBITDA less working capital investment, less CapEx—was approximately 85%. In December 2025, we expanded our senior secured credit facility through 2030. The new facility includes $700,000,000 of term debt and a $400,000,000 revolving credit arrangement, an increase over the previous $255,000,000 revolver. This puts us in a strong liquidity position to best drive shareholder returns through our capital allocation playbook. We ended the year with unrestricted and restricted cash totaling $75,300,000 and net debt leverage of 3.5 times. We continue to prioritize growth initiatives that enable cross-channel and collaborative selling across our customer base, expand our digital capabilities across our platform, and drive growth through an asset-light model. We invested $26,800,000 in net CapEx, including rental equipment, and we plan to invest a similar amount of $25,000,000 to $30,000,000 in 2026. As we've highlighted in the past, we have invested nearly $450,000,000 in M&A by acquiring nine highly complementary businesses to expand our portfolio, leverage scale, and grow through product adjacency and services. We closely manage working capital across our businesses, and net working capital was $473,500,000. As we mentioned, Distribution Solutions Group, Inc. generated $84,000,000 of cash from operations for the year, similar to 2024 before retention payments, and a testament to management's close monitoring of our working capital. Our strong cash generation in 2025 positioned us to be more active in share repurchases. In November 2025, the board authorized an increase to our existing stock repurchase program for an additional $30,000,000 in shares of Distribution Solutions Group, Inc.'s common stock, taking the total aggregate authorization amount to $67,500,000. In 2025, we returned $23,500,000 to our shareholders through opportunistic share repurchases and have approximately $30,000,000 remaining in the authorized pool. I'll now turn the call back over to Brian. Brian King: Thank you, Ron. Despite external headwinds and periods of demand volatility in 2025, we have a clear line of sight on initiatives well underway to drive sales growth and structurally higher margins. We delivered total revenue growth of almost 10%, reaching just under $2,000,000,000, supported by mid-single digit organic growth despite the burden on profitability of macroeconomic and policy challenges and an ISM remaining below 50 for all of 2025, and our deliberate investments into the business in 2025. As we enter 2026, our focus is firmly on execution and demonstrating a return to improved profitability with our expected growth while balancing critical long-term value-unlocking investments. Our revenue growth strategy prioritizes high-margin businesses, strong and sustainable cash flow generation, disciplined capital allocation, and operational excellence. We are investing to be a company that is easy to work with and for, leveraging digital and AI-enabled capabilities to respond faster to customer needs, improve operational efficiency, strengthen sales rigor, and capture margin opportunities. These efforts are supported by an accelerating level of data-driven insights that guide and improve decision making and enable us to deliver our differentiated products and solutions, enhancing our customer experience. Operating across more than 50 countries, serving over 220,000 customers, and approximately 760,000 unique products requires agility and focus. We remain nimble, ready to pivot when needed, to sustain growth while focusing on delivering improved profitability. Our leadership teams are renewing our confidence to shareholders and our colleagues that we are driving and expect growth with enhanced profitability, and with a commitment to further tune capabilities and consistent service and culture that emphasizes from our field team around volume and revenue growth for both existing and new customers. I am confident in our enhanced leadership teams and our recent investments in them across all of our verticals and their ability to execute on their re-underwritten priorities and value creation initiatives as they enjoy line of sight on building structurally higher margin and more defensive and growing businesses, with a commitment to generate strong free cash flow and an aligned incentive structure around driving accelerating long-term value for our shareholders. Our teams remain highly aligned with the shareholders and each other, collaborating and competing together to continue to win more often. Each is accountable and appropriately incentivized to deliver results for our shareholders and for Distribution Solutions Group, Inc. and all of our colleagues. We will continue to evaluate acquisitions that strategically fit and enhance our long-term competitive position to win in our current focus areas and end markets, or that complement them, as well as opportunities that can accelerate our growth and profitability objectives to enhance and accelerate driving long-term shareholder value. In addition to strengthening leadership within our verticals, after a thorough evaluation on ways to improve and enhance our corporate strategy and M&A capabilities, we recruited Sean Dwyer to lead Distribution Solutions Group, Inc.'s efforts and dedicated team while working closely with the vertical leadership and our LKCM Headwater teams. Sean comes to us with a background in investment banking and experience leading similar efforts at large public companies. Through his public company roles, he has led over $30,000,000,000 in 36 transactions. It's great to have Sean on board to add structure, perspective, and to collaboratively lead this critical component of Distribution Solutions Group, Inc.'s growth strategy. As we look ahead in 2026, we're excited about the added capability, discipline, and prioritization we've invested in across all our verticals. While most of this comes at a cost, we are confident in these investments and in the improved performance returns the investments will deliver. The first couple of months of 2026 have seen sales growth. We expect the first quarter to remain under margin pressure as we continue to digest initiatives, and then we expect to see an improved margin expansion trajectory consistent with our longer-term objectives as we move into the middle of the year. I'm proud of the heavy lifting from our colleagues and what it accomplished in 2025. And as I reflect on where we are versus the much smaller and less evolved Distribution Solutions Group, Inc. that we pulled together four years ago, we remain focused on building a better Distribution Solutions Group, Inc., on its many commercial growth initiatives and ongoing process and structure optimization. We celebrate working together to build a more valuable enterprise—one that consistently generates cash flow and long-term shareholder value. Finally, I want to thank our employees for their dedication and hard work throughout the year. Your commitment and the strength of our culture have enabled meaningful progress across our strategic priorities. We will continue to push, test, and adapt as we improve long-term performance. I also want to thank Distribution Solutions Group, Inc.'s board, our shareholders, our shareholder partners, and the LKCM Headwater team as we continue advancing our specialty distribution model together. And with that, operator, will you please open the line for questions? Operator: Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your phone at this time. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Your first question for today is from Thomas Allen Moll with Stephens. Thomas Allen Moll: Good morning, Brian. How are you? Thanks for the time. Brian, I want to start on the comment you just made regarding the sales pacing year to date. I think I heard you say sales are up year over year in January and February. So maybe just can you confirm that? And if you're able to give us the daily sales pacing and the number of selling days for the quarter, that'd be appreciated as well. Brian King: Yeah. We'll let Ron do it. He's got them in front of him. Ronald J. Knutson: Yep, Tommy. Good morning. This is Ron Knutson. Just to add some commentary around Brian's notes relative to the first couple of months of the year: we have seen growth—really, I would say, in the low single digits—if we look at January and February versus a year ago. ADS so far for the first couple months is kind of flattish versus Q4, but up against a year ago. We're seeing a little bit of pressure continue within our Canadian branch business that both Brian and I commented on in our prepared remarks, but the other three pieces of the business are seeing some growth here in the first couple of months. Relative to the second part of your question—number of days—on a quarter-over-quarter basis, it shifts a little bit just because of the weighting, and we've got Gexpro Services on a 4-4-5, but essentially it's relatively consistent. 2026 has 63 selling days versus 2025 having 63 as well. Brian King: And I’d just add—one of the things I was referencing when I said that was on the TestEquity vertical. We were seeing some backlog build there in orders and RFPs—momentum—and it's really around the Test & Measurement side, as we've seen some messaging from manufacturers about a little bit of accelerated activity in that space. January—quite transparently—I wasn't happy with the flow-through on profitability relative to how we budgeted or what I expected. As the fourth quarter came together and the first month of the year, we saw some revenue lift, but we still suffered some of the same challenges of adding expenses around leadership and otherwise in the first month. We're seeing improvement on that, we believe, in February and expect that again in March—the releveraging of our cost structure with the pickup in revenue. But there were changeover expenses and some one-times and things that created noise in the fourth quarter and in January. Thomas Allen Moll: Brian, you anticipated my follow-up, which was on margin. Going back to the numbers that Ron gave us in the prepared remarks, there were a series of one-timers in Q4; I just added up all those basis points, and it was about 150 basis points. So my starting point on bridging was I just took the 7.4% you reported in Q4 plus 150 bps, which gets you to 8.9% as an implied baseline to start to think about the first quarter. That would be up a little bit year over year, though. Based on what you just said, that makes me think perhaps that's a bit too aggressive of a baseline. Anything you can do to help? Brian King: That number would be consistent with how margins flowed through for the year last year. When I look at it, the first quarter's still going to have a little bit more margin degradation from our average last year. Whereas the second and third quarters, we would expect that the EBITDA margin will be back towards—above—what last year's average was. If that's helpful. Ronald J. Knutson: If I go back to 2025, we were sitting at about 9%. And, Tommy, we do get burdened with some other items that we didn't call out specifically—payroll taxes reset on us, which typically drags our margins a little bit going from Q4 into Q1. The other area I would point to is we do have some resetting of some incentive accruals, as you can imagine—lower dollars in '25 based upon performance—and we certainly budget to hit higher goals going into the next year. So we'll have to reestablish some of those accruals as we work throughout the year as well, and those typically get spread pretty evenly throughout the year until we start to reforecast to a greater degree later in the year. So we do have some offsets that'll probably push our way through here yet in the first quarter. Brian King: But I would say, Tommy, the exercise you did is the same one I did yesterday when I was preparing my remarks—adding up Ron's remarks and then double-checking it against where we were for the quarter so far. Directionally, you're right on. I think it's just going to be a little below—January's not indicating to me that we're going to get to the level you said. Thomas Allen Moll: Understood. Shifting to some more strategic questions on TestEquity: you have new leadership there, and you've talked before and again today about refining the customer value prop, go-to-market, centralizing some functions, etc. What can you share about the progress to date and what's ahead in 2026? Brian King: The pacing on the team and the depth of our leadership bench is just very different than it has been. Adding Barry was critical, but it was not just adding Barry—Barry brought with him an ensemble of other executives, and we were able to really keep so many of the people that had key institutional knowledge and that we had a lot of confidence around. We did double some of our leadership expense. The total burden at the top of that company is different than it was four or five months ago. But with that has come a high level of cadence and drill-down insight. After we made the Conres acquisition, we were able to get a lot more accountability around the efficiency in our rental and used business, our calibration strategy, and our Chambers business has been taking off, so we've been trying to build out our Chambers offering and portfolio and our inventory and stock. We've been working through a more cohesive strategy around the total Test & Measurement go-to-market value proposition to the customer—so it's not just isolated to margins on new product. On top of that, we have a lot of smaller value-added capabilities inside of the TestEquity Group—some which came with Hisco and some which we had acquired. By breaking them each apart and drilling accountability and ownership on each of those verticals, we're able to see very different contribution margins among different ones. Within our EPS business, we've got parts of it that are more commodity—volume-oriented—but our channel support to that can be similar to our more discrete specialty parts of the same EPS business. The flow-through margin on those looks quite a bit different. The team is reenergizing the Salesforce on how they're spending their time and how we're delivering our messaging in the market and to our employees, around where the levers are to pull a lot more attention and acceleration through the parts of the business that have very different structural contribution margins. That focus kind of started 100 days ago, but it's trickling down through the organization more recently. Our Chief Commercial Officer who's been important to the business we made President of Mexico for all of DSG, so we could bring our cadence together across all three of our verticals in Mexico, enabling more cross-sell wins and total revenue growth. That's the business he had built for Hisco. Then we added another Chief Commercial Officer at the senior executive level to really focus on these lines-of-business efforts. Barry's got a lot of confidence in all the specialty businesses that we have and how it all rolls together, and some of the profitability inside that business has been masked by areas that have been whipping around—where we've either had too high cost to serve relative to contribution margin, and not enough focus by our Salesforce on the much higher contribution margin opportunities. We're seeing that shift. Thomas Allen Moll: Appreciate the insight. Operator: Your next question for today is from KeyBanc. We'll go to Katie Fleischer for Ken Newman. Katie Fleischer: Hi, everyone. Was wondering if we could start on tariffs and if you're anticipating any material impacts from the recent news, and how you're thinking about price/cost as we go into 2026? Ronald J. Knutson: I'll start it off. I know we've talked about tariffs in the past relative to the value of the imports that we do and our ability to pass along the majority of those from a customer relationship standpoint. I think your question is more pointed towards the recent news. I would say it's probably too early to tell yet in terms of what direct impact that may or may not have on Distribution Solutions Group, Inc. Certainly, we're evaluating the situation, trying to stay current with it. At this point, we're moving the business forward assuming that a lot of these costs that have come through to us the last 12 to 18 months will probably continue to be out there until we get further direction on where this may end up. Brian King: Katie, we've got a consulting firm we're using across our portfolio companies at LKCM Headwater, and we have some businesses that have been much more significantly impacted than Distribution Solutions Group, Inc., but it's allowed us to be informed on ways and levers that we should pull and also how to navigate or engage on the recent SCOTUS ruling. We ended up leaving some dollars on the table last year, for sure, but our team did a great job managing both pricing as well as sourcing costs and where we source things across Distribution Solutions Group, Inc. Much of it was mitigated by the end of the year, but we did end up with a drag on earnings; much of it was mitigated as we look prospectively for this year by actions taken throughout last year. Now we've got to see whether there are additional moves we need to make or whether there will be additional shifting in where the tariff burdens are going to be—and whether that informs any of our sourcing or pricing decisions this year, or whether we're contesting or protesting that we believe we should get any refund. Right now, it's really early to know how that's going to work. Katie Fleischer: That's helpful. And then just revisiting Tommy's question a bit on trends year to date—any other color you're able to provide on the segments? And then maybe for Lawson specifically, how are you thinking about these mix impacts within that segment, and should those normalize as we move through the year? Brian King: I'll start with Gexpro Services. That one's pretty easy. Gexpro Services has several key end markets that are spooling up. The power generation space has gotten a lot of attention; it's a key area for that business and its history coming out of GE—so it'll enjoy some positive leverage there. The aerospace and defense vertical is very important to it; we know what's going on around the world, and we expect a firm year there with growth. The domestic renewables business—historically about two-thirds domestic, one-third international—the domestic business is down. We really started to see it tick down mid fourth quarter, and that trend is continuing. At the same time, countries like India—where we had ~$4,000,000 of revenue in renewables in 2024—are tracking toward ~$14,000,000 this year. We're backfilling with our capabilities, manufacturing/vendor partners, and renewable developers’ programs around the world. That is backfilling, but not entirely, and there are different contribution margin dynamics as you spool up new relationships versus mature engagements. As we're taking on more opportunities at Gexpro Services, there are launch costs associated with that. We believe that Gexpro Services' margins seen throughout last year are consistent with how we think that business will continue to operate—we don't expect significant deterioration in EBITDA margin there this year. On the TestEquity side, we're seeing strong interest in Test & Measurement equipment. Our EPS business continues to see some softness. A key area is tech manufacturing—it's been soft, saw some firmness last year, and it's the biggest part of TestEquity Group’s EPS business. The Chambers business is very strong. The rental and used market is getting more attention and focus for us; it has a lot higher contribution margin and was a source of strength last year—with renewed strength now—part focus, part acceleration in demand in T&M. Ron, on Lawson? Ronald J. Knutson: Relative to Lawson, we continue to see an increase in what we call ship-to or VMI installations, particularly in our larger locations within strategic relationships and within our Kent Automotive business. There’s a renewed focus on the core local business where, historically over the last couple of years, we've seen the most pressure. We've seen flattening out in ship-tos there, but as Brian mentioned, we had our sales leadership meeting in mid-February and there is a ton of focus being put on reallocating resources to grow that piece of the business. That core local business is about 45% of Lawson's total revenue. Overall, Lawson is seeing some increase moving through January and February. We’ve got great insight into a number of locations around specific customer wins, and with Jim coming on board in January, there’s renewed focus around making sure those sites get installed on a monthly basis. Katie Fleischer: Got it. That's it for me. Thanks. Sandra Martin: Thanks, Katie. Operator: Your next question for today is from Kevin Steinke with Barrington Research. Kevin Steinke: Great, thank you, and good morning. I wanted to follow up on the earlier margin discussion. I believe in a response to one of the earlier questions, you mentioned that you thought the second and third quarter adjusted EBITDA margin could be above the full year 2025 average of 8.9%. So you're thinking kind of a similar or better cadence for second and third quarters? Brian King: I think we believe it's going to relever up higher than that. If you look at last year, our second and third quarter EBITDA margins were above that 8.9%. We expect it will be consistent with that or above. Ronald J. Knutson: Where we're going to see the most pressure is really here in the first quarter. Then, as Brian noted, second and third would be an acceleration north of what we posted for the full year. Typically, for us, the second and third quarters are the strongest quarters. That uplift generally starts in March—a longer month in terms of selling days—so we get additional operating leverage there, and then Q2 and Q3 both have 64 selling days. Brian King: Looking back at last year, Q2 was 9.7%, and Q3 was 9.4%, versus the 9.0% in the first quarter and the 7.4% that we posted in the fourth quarter. That gives you some sense of how the quarters fit together. Kevin Steinke: Got it, that's helpful. I wanted to also follow up on Lawson. You mentioned continuing challenges in the small account side—maybe some loss of focus during the transition period. I know you've been experimenting with various things to serve the small account customer base—inside sales, service reps who do the unpacking, ecommerce. Are those still the areas you want to continue to work on, or is it more about getting the actual sales rep back more frequently? Any more thoughts on how you're approaching that? Brian King: You just walked through all of them, which is great. The shift of some tiny customers—too small to service with the cost to serve of having a rep—toward inside sales and ecommerce has helped. Our revenue there is not where we've really lost volumes. We may have lost some ship-to locations, but we've seen pretty good traction out of that total effort. Where we saw pressure was with the compression of our Salesforce two years ago as we were getting set for new Salesforce initiatives and technology tools. We saw some of our smaller core customers not get the level of service we'd expect. We had fewer salespeople, and as you might imagine, they covered bigger customers or strategic/national accounts first. That caused a natural trend of losing some ship-to locations with less volume and raised concern about whether our salespeople were spending as much time on the smaller street business that used to be a lot of their earnings. Our strategic/national account initiative grew from zero to being as large as our street business. Feeding our salespeople those national accounts may have created some behavioral challenges we didn’t fully appreciate until we got more insights out of the CRM. With better data analytics and feedback surveys, we heard a consistent market message from smaller accounts asking us to come back out and provide consistent service. Now we’ve got a very proactive initiative around it, and we're seeing a relift back in those base accounts—at least the ship-to number—after several years of significant declines in locations. You don't see it in the top line as much because you're picking up the strategic accounts. But at the profitability level, mix shift matters—premium pricing out of smaller accounts versus bigger accounts—and the flow-through contribution margin hit, combined with deliberate investments in the Salesforce, created deleveraging. There was a swing in profitability we felt more acutely in Q4. We knew there would be a J-curve as we reinvested in the Salesforce and got sellers back into territories that were open or consolidated. We're also investing in field support—service reps and focused new-account or reengagement sellers—to support FSRs so they have more time to get back in front of customers. For higher volume relationships, a service tech can efficiently scan bins, place orders, and handle restocking, freeing up the sales rep to develop accounts and drive wallet share. It's a cost center we've layered in, but we’re seeing strong early indications that it’s a model we want to continue to lean into. It allows our FSRs to make more money by increasing total revenue throughput and serves customers at a higher level. This dynamic has been a drag of several percentage points of growth a year in recent years—offset in part by national sales efforts. Military was another area with a real shift in buying behavior; we're working on reengaging given it’s historically been a strong end market for us. Ronald J. Knutson: Two quick additions. First, our strategic business is really sticky—great customer relationships servicing multisite locations—so it drives solid, sticky gross margin dollars. We love that part of the business and continue to expand it and invest to win new accounts. Second, within core local customers, ship-tos over the last year or so have been flattish—most of the decrease took place prior to the beginning of 2025. Now, with core local at about 45% of revenue, it’s a renewed focus on getting that base growing again—changes in incentives, focus, and a lot of emphasis at the recent sales leadership meeting on where that business historically had been, where we sit today, and where we need to take it. Kevin Steinke: Great, thank you for all the color. Lastly, on the M&A pipeline—given your strong liquidity and the extension and expansion of your credit facility, looks like you'd be set up to explore and maybe execute on some opportunities. Brian King: We highlighted that Sean joined us maybe 100 days ago or less—a critical addition. We've spent the better part of the last year to year and a half evaluating our business development/M&A and corporate strategy function. Sean has significantly increased the funnel in just 100 days and has strong buy-in from the vertical leaders and our team about where we want to spend our time and effort. We had a few things last year that were high priorities we hoped to get done that didn't get done—none are off the table, but we just weren't able to get them over the goal line. Right now, we’re focused on some smaller tuck-in acquisitions that significantly bolster areas of strength or focus in a few verticals. We would expect some small tuck-ins over the first half of this year. The three we’ve prioritized would add significantly to the margin construct of those verticals, though they are small tuck-ins. Kevin Steinke: Got it. Understood. Thanks again for all the insight. Brian King: Thanks, Kevin. Operator: We have reached the end of the question and answer session, and I will now turn the call over to Brian King for closing remarks. Brian King: Appreciate everybody's engagement and your time this morning. We look forward to stronger quarters in the future, and I appreciate everybody continuing to be supportive and engaged with us. Have a great next several months. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0 and a member of our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0 and a member of our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Welcome to the Stabilis Solutions, Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode. Following the presentation, we will open the line for questions. Lastly, if you should require operator assistance, I would now like to turn the call over to Andrew Lewis Puhala, Chief Financial Officer. Mr. Puhala, please go ahead. Good morning. Andrew Lewis Puhala: And welcome to Stabilis Solutions, Inc. fourth quarter 2025 results conference. I am President and CFO of Stabilis Solutions, Inc. And joining me today is our Executive Chairman and Interim President and CEO, J. Casey Crenshaw. We issued a press release after the market closed yesterday, detailing our fourth quarter and full year operational and financial results. This release is publicly available in the Investor Relations section of our corporate website at stabilissolutions.com. Before we begin, I would like to remind everyone that today’s conference call will contain forward-looking statements within the meaning of the Private Securities Reform Act of 1995 and other securities laws. These forward-looking statements are based on the company’s expectations and beliefs as of today, 03/05/2026. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. The company undertakes no obligation to provide updates or revisions to the forward-looking statements made in today’s call. Additional information concerning factors that could cause those differences is contained in our filings with the SEC and in the press release announcing our results. Investors are cautioned not to place undue reliance on any forward-looking statements. Further, please note that we may refer to certain non-GAAP financial information on today’s call. You can find reconciliations of the non-GAAP financial measures to the most comparable GAAP measures in our earnings press release. Today’s call is being recorded and will be available for replay. With that, I will hand the call over to J. Casey Crenshaw for his remarks. J. Casey Crenshaw: Thank you, Andy, and good morning to everyone joining us on the call. We closed out 2025 with strong execution as we successfully wound down operations on two major multiyear contracts: our truck-to-ship marine bunkering contract with Carnival Corporation and our contract with a leading global provider of mobile power generation servicing an electrical cooperative in Louisiana. The completion of these agreements resulted in a year-over-year decline in revenue and adjusted EBITDA for the fourth quarter. The conclusion of the contracts during the quarter reduced fourth quarter revenues by approximately 28%. In both cases, we remain in a strong position to continue supporting these clients as they assess their future needs for our integrated last mile LNG solutions. Their ongoing engagement is a testament to our platform and the strength of our team and our people. As we move into 2026, we continue to see significant, significant and growing demand across our key markets. That said, we expect lower revenues and profitability in the first half of the year as we bridge toward the startup of several new customer contracts that are expected to begin in mid-2026 and early 2027. As we announced on February 17, we were awarded an estimated $200,000,000 two-year contract to support behind-the-meter power generation for a U.S. data center. Upon commencement, it will represent the company’s largest ever contract in operation. Deliveries will begin in 2027 and are expected through 2029. As the United States continues its historic investment in data center infrastructure, the rapidly expanded power needs of these facilities create a substantial opportunity for behind-the-meter LNG-based power generation. Over the past several months, we have seen a notable increase in customer interest in LNG for both commissioning and bridge power for U.S. data centers where pipeline-delivered gas or electrical power is not available. Our last mile LNG solutions network is a highly reliable solution in these environments. We are also seeing strong demand in our aerospace market where commercial launch activity remains robust. Our commercial team continues to pursue opportunities with both new and existing customers in this sector. At the same time, we work toward FID on our Galveston liquefaction project. We are also seeing strong long-term demand trends for the marine bunkering offtake. We continue working toward a final investment decision on the Galveston facility. We are in active discussions and negotiations with potential project equity sponsors and lenders on the financing structure. In parallel, we have 60% of the facility’s planned capacity contracted and are working to sell the remaining available capacity. We continue to work with our advisors on a special purpose vehicle structure funded with project-level debt and equity from third-party investors. This structure is expected to create long-term value for all stakeholders while enabling Stabilis Solutions, Inc. to further expand our core operations amid accelerating end market demand for flexible LNG fuel solutions. As we work toward FID, we are actively engaged in engineering design and ordering long-lead-time items to maintain the project schedule. We remain committed to providing periodic updates to our shareholders as key project milestones are achieved. In summary, 2026 represents an important transitional year for Stabilis Solutions, Inc. Achieving FID on our Galveston liquefaction facility will mark a foundational milestone, positioning the company for meaningful change in long-term value creation. At the same time, our commercial and operational teams remain focused on delivering best-in-class service, reliability, and quality across our other growth markets. Contracts we have in hand provide strong visibility into sustainable multiyear growth beginning in 2027 with momentum building as we progress through late 2026. As always, we remain committed to creating sustainable long-term value for our shareholders and look forward to keeping you updated in the quarters ahead. With that, I will turn the call over to Andy for a detailed review of our financial performance. Andrew Lewis Puhala: Thank you, Casey. I will begin with a discussion of our fourth quarter performance followed by an update on our balance sheet and liquidity. Fourth quarter revenue decreased 23% year-over-year driven by a 22% decrease in lower rental and service revenue. At an end market level, marine bunkering revenues fell 42% year-over-year while power generation revenues decreased 56% due to the conclusion of the large multiyear contracts in both markets. This was partly offset by a 17% increase in aerospace revenues and a 12% increase in industrial revenues compared to the same quarter last year. Adjusted EBITDA was $1,500,000 during the fourth quarter, compared to $4,000,000 last year. Adjusted EBITDA margin was 11.5%, down from 23.2% in the fourth quarter of last year. The decrease in our adjusted EBITDA margin primarily relates to the conclusion of the two large contracts, a nonrecurring favorable SG&A adjustment, and a gain on asset sale, both occurring in the prior-year quarter. Cash from operations totaled approximately $670,000 for the quarter. Liquidity at quarter end was $10,200,000, consisting of $7,500,000 of cash and approximately $2,700,000 of availability under our credit facilities. Capital expenditures totaled $3,100,000 during the quarter, primarily related to early engineering and design work and long-lead items for the proposed Galveston facility. In 2026, we anticipate $1,000,000 to $2,000,000 of additional capital in the project and for routine maintenance CapEx. Additionally, we expect to invest additional capital into mobile equipment and related assets required for the significant data center contract set to begin in early 2027. This capital investment will be funded by prepayments made by the customer. That concludes our prepared remarks. Operator, please open the line for the Q&A session. Operator: Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press 1 on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing 2. Thank you. Our first question comes from Martin Whittier Malloy with Johnson Rice. Please go ahead. Your line is open. Martin Whittier Malloy: Good morning. Congratulations on all the progress you have made on the data center front and Galveston LNG and aerospace. A lot of moving parts here, a lot of positive news. First question I have is about data centers, and I think there is a growing recognition that behind-the-meter power for these data centers might be utilized over a longer period of time, and then you have some temporary backup power needs. Can you maybe talk about what you are seeing in terms of customer demand in the data center market? And I know this contract that you have talked about is for two years in initial length. Can you talk about opportunities to extend that? J. Casey Crenshaw: Yes, sure. Happy to. And by the way, thanks for joining today and I appreciate your feedback. So when we think about the last mile LNG solution for the behind-the-meter data center or high-speed computing area, there are really a couple of different areas that Stabilis Solutions, Inc. can participate really well in. And I am going to take it from the shortest to longest duration. The first is around the commissioning of these facilities, where it could be 50 to 100 megawatt volume and could last anywhere from three to nine months, where they are working to commission blocks of these data centers, and these are one range of activity. They may be waiting on gas pipeline or different power electrical hookup during that period of time, but they are trying to commission the facilities in advance of that, whether it be the water, the cooling, and all the different things they are commissioning. The second, which is similar to this other project, is what we call a bridge solution where we are providing last mile LNG solution to a power generation company and they are providing either a two- to five-year bridging while they are waiting on the natural gas pipeline or the power lines to be brought into the facility. And so there is a chance that things do not work out on perfect scheduling and there are extensions to those contracts. And the last is there is a growing volume of permanent gas power generation for data centers, and LNG becomes a backup solution on those. So they have a pipeline connected in, they have natural gas, they have natural generators that are running off natural gas, but they bring in LNG as a backup solution in case there is any outage or issues with the pipeline. So I hope that explained the three different sectors and where we participate in the space of behind the meter for specifically data centers. And I want to add Stabilis Solutions, Inc. is actively providing distributed power activities around all different types of applications, not just data centers. But data centers are definitely a growing area right now for the company. Martin Whittier Malloy: Okay. And I was wondering if you might be able to, you know, this contract is much larger than what we have seen previously. Could you talk about any factors that we should consider in thinking about EBITDA margins on this kind of contract that would cause it to be above or below or on average with historical averages, or maybe not the specific contract, but just in general, larger contracts that you might be looking at. J. Casey Crenshaw: Well, there are a couple of different things we have worked on this one. And one is to have the client support us on additional CapEx that is related to the project and to be able to perform around contracting third-party supply, etc. So we have structured the contract to give the most solution around very strong results for the client and protecting the downside for Stabilis Solutions, Inc. if there is any delay or gap in service. And so we have done that through customers supporting us with credit enhancing features to support us on the CapEx and the OpEx related to locking down the supply to support them. That is one thing we have done as a risk mitigator. When I think about EBITDA margins and some of that stuff, I feel it is consistent with historical business, and we do not prefer to give any project-based specific details around that out, other than to acknowledge that it is not it for the clients and stakeholders and it is not anything different than historically would be provided other than they provided a lot of credit enhancement to protect us in case there are any scheduling delays. Martin Whittier Malloy: Great. Thank you. Very helpful. I will get back in queue. Operator: Thank you. Our next question comes from Tate H. Sullivan with Maxim Group. Please go ahead. Your line is open. Tate H. Sullivan: Hi, thank you. Good day. A follow-up to your last comments too on the two-year contract estimated revenue of $200,000,000, do you base that on forward prices for your LNG supply? Or can you go a little bit into how you generate that $200,000,000? J. Casey Crenshaw: Yes. So that is based on—thank you for the question and thank you for being on the call today. And that is a good question. That is based on expectation of the cost of the LNG and all the additional costs associated with delivering it, and that is based on their expected demand that they have given us over that two-year period. Not any extensions or none of that. So maybe I hope that answered the question. Tate H. Sullivan: Okay. Yes. Thank you. And then when you talk to customers such as the data center owner or operator, what are the pricing discussions like when they are talking about diesel generators versus backup energy storage systems, or how do you address any pricing concerns from customers of LNG and other solutions? J. Casey Crenshaw: Yes, I think that is a great question. And I think when we really think about where—and I hope we are being clear about this to you guys—that these three different areas where LNG really can participate. One is the shorter term, you know, three months to one year where we are doing the commissioning and support. Sorry, them on the power generation for the commissioning. That is probably the least price sensitive area. Bridging is more price sensitive. And then that final area is the most price sensitive, if you are permanent installed power base, you know, are competitive projects and they are looking at what their kilowatt per hour and everything is. And so, you know, we are always comfortable competing with diesel. But if you look at kind of, you know, grid cost power or you are looking at pipeline cost, those are normally cheaper than an LNG turnkey solution. Tate H. Sullivan: Okay. Thank you for the background. Thanks. Have a good day. J. Casey Crenshaw: Thank you. Operator: Thank you. Our next question comes from William Dezellem with Tieton Capital. Please go ahead. Your line is open. William Dezellem: Thank you. I have a group of questions. First of all, discuss with this large contract how you are going to fulfill a couple hundred million in revenues. I mean, it is clearly, that is not—presumably, that is not coming from George West. So walk us through just practically how this will unfold, if you would, please. J. Casey Crenshaw: Bill, thanks for the question. I appreciate that because I think that will add some clarity. This project is not in a region that is going to be supported by our own liquefaction facilities. So we are using our third-party network. We speak a lot about this third-party network of Stabilis Solutions, Inc., you know, through our acquisitions and the buildup of who Stabilis Solutions, Inc. is today through a number of companies that did not have their own liquefaction capacity and always used third parties. So we are using third-party liquefaction offtake agreements, and we are providing the turnkey LNG solution providing the logistics and then the on-site storage and regasification of the molecule back to the gaseous state to hit the generator. So that is, you know, the way we are doing it. And there is LNG available in these regions in these markets. And it really provides an easy data point of why Stabilis Solutions, Inc. is unique and special in the fact that we do have our own liquefiers and then we have the ability to provide this kind of turnkey solution even if we are not making the LNG ourselves. So I hope that answers it. Yes. It is not in the Gulf Coast region, and due to some confidentiality protections, we do not talk about where it is in the United States or in North America. William Dezellem: So, Casey, with that in mind, is there any reason that you could not do, I mean, hundreds of these type of contracts? And I recognize there are not hundreds out there, but really an unlimited number since it is not your molecule that is being consumed. J. Casey Crenshaw: Well, eventually, yes. Bill, that is a great question. So let us break it back down to those three options. One is the commissioning. We can do a lot of those. Those are really good, you know, six months to one year projects. Really good, lots of that is available. We are working on lots of conversations around that. And then this bridging project is really good as well. Yes, we can do a lot more. It is not limited by our liquefiers, but there is some limit to the total available LNG out in the different regions and how far we can move it via truck. So what happens is it becomes more price sensitive. And then when you then look at the backup solution at longer term, that is where, you know, the economics of these facilities, how long they are bridging, what their timeline is, all plays into the price that they are willing to pay and how far we have to move it to provide that. So first phase, the commissioning testing, lots of opportunity, lots of availability, just really strong. Bridging a little bit less, two to five years. There are some projects that will absolutely do that. We do believe we can scale that as well. And then the backup is a really strong longer-term opportunity where they really do not want to do the backup with diesel if they could help it. They want to continue to do their backup with natural gas, and they want to be toggling between grid prices and their own behind-the-meter power generation is kind of the perfect world for these data centers. And, you know, there is still, you know, to be honest with you, we are still early stages in the development of how to optimize the power on all of these, and they are just trying to get them in. So what we are excited about at Stabilis Solutions, Inc. is that we are an active participant in the distributed power market. This is the data center part of it. We are excited that we are working on it. We have been talking to you guys about it. We are equally excited about the aerospace business. We are equally excited about the marine bunkering activity and what we are seeing there. But this is an area that we are recently seeing contracting activity and we are delighted to be able to share with you guys some tangible contracted success around the space. In the data center, distributed power we have been in and doing and continuing to do. William Dezellem: Thank you. One additional data center question before we jump to marine bunkering. So is rolling stock a limitation at some point because of production capacity, or is this—I guess I am trying to understand what other limitations are there besides the ones that you aptly laid out in your response to my question? J. Casey Crenshaw: Well, I will go over all three of them. One is third-party supply or self-generated supply. And some of these projects are long enough, they may want us to build liquefaction nearer to the facility. So some of them are that bridging where they say, hey, could you consider putting a plant up nearer the facility and truck it in. So it is the molecule availability, and it is the logistics equipment, and then it is on-site storage and regasification equipment. All three of those are gating items and are really determined by the volume needed at the site and the distance. So we go into this with the largest logistics fleet and regasification fleet in the country due to the fact that Stabilis Solutions, Inc. had consolidated and been in this space in a number of end markets for years. And so we have the largest cryogenic fleet and regasification storage fleet in the United States. So that is an inherent benefit. As we continue to have growth in this space beyond what our logistics and on-site storage equipment and even liquefaction is, these customers are working with us to support and enhance the credit of the contracts to allow this solution, which we saw in this project where they were supportive of that on how they handled the contracting. So in this contract that we have discussed, we are adding logistics equipment. We are adding, you know, n+3 kind of protection around on-site storage and regasification. So they are super supportive on making sure they have everything in place that performs for their data center needs. William Dezellem: Alright, thank you. And then moving to the Galveston facility, since we are talking about FID by the end of the month, I mean, that looks like it is fully on track. But I will take the negative side of the question: what could derail it at this point since we are 25 or 26 days away from the end of the quarter? J. Casey Crenshaw: Yes. Well, hopefully, we have laid it out. There are a couple different things that we are in conjunction working on. One is the additional offtake. So we said we have 56% of the offtake contracted. We are in active discussions with customers around contracting the balance of the facility. The balance of the facility offtake agreed to optimize the capital structure in the project. Secondly, the capital structure. We are still in active negotiations and working with our capital partners, both the term debt part and then the preferred equity kind of sponsor in the SPV. So those work in conjunction with the offtake, and so we are working all that as one group. And then we are working to have the timeline be consistent with what our clients that have already contracted need that to be. So long-lead items, engineering, so we continue to work on it while we are trying to get that locked up and finalized. William Dezellem: One derailleur of timeline might be a global war, which we happen to start this past weekend or started this past weekend. So that kind of changes the dialogue. J. Casey Crenshaw: We think it enhances the need for stable, low-price, consistent fuel in the United States, specifically in the Houston Ship Channel. We think this enhances the project long term and shows why Stabilis—means Greek for stable—means having capacity and supply in the Houston Ship Channel, Galveston area is positive for the United States and the customers that call on these ports. So we think it is an enhancer, but it definitely is a new variable that got inserted in the process this week. So I hope I have laid it out. There is the commercial side. There is the financing matching with that. And then there is just the lead time and execution for the current clients that have the 56% of the offtake. And then there are kind of third-party things that are in play like the conflict in the Middle East, which is driving up the global cost of LNG, which is making the LNG that we can produce more optimal for our clients to contract. William Dezellem: That is helpful. And let me ask relative to the Carnival contract not being renewed. As it was shore to—or truck to—ship, would you please walk us through the dynamics of why they are not renewing, then what they are going to do for fuel in the intermediate time period before the Galveston plant is up and running. J. Casey Crenshaw: Sure. I will give you a little bit of color. I cannot always—we cannot speak for our client, but I will speak to what we understand and what we are, you know, pretty comfortable telling you guys is that they would have liked to have extended that contract. The Jones Act vessel that they had contracted separately that we delivered to, that delivered the fuel to them, was no longer going to be available starting in 2026. And that availability of a Jones Act bunkering vessel for this project is what made the extension not happen. William Dezellem: So they had, you know, verbally and letter agreements— J. Casey Crenshaw: Told us they wanted to extend it. But it was based on them having that available vessel, and that vessel was not available. That changed their ability to extend. In the medium term, short term, they will have to either have their vessel rerouted to an area where they may get LNG, whether that be The Bahamas, or do some routing difference, or they will have to use marine gas oil, which is called MGO, which we refer to as MGO. It is their alternative fuel source. Does that answer your question or is there any follow-up to that? William Dezellem: Yes, it answers the question, but maybe this is highlighting the lack of equipment for bunkering—that maybe that I certainly did not appreciate or understand. So maybe just as my final question, would you lay out the supply-demand dynamics of the bunkering vessels that exist and how rare or prevalent they are and why this particular bunkering vessel was no longer available to continue the contract. J. Casey Crenshaw: Absolutely. I think the best way to think about it is the maturity of the different bunkering markets. And I would say the most mature bunkering market with Jones Act bunkering vessels is in the Florida or the southern part of the United States in the Florida area. It was the first to start adopting and became the earliest, and I believe my number may be off by one, but I think it was about five Jones Act vessels that are bunkering LNG in the United States, and they are all in Savannah or in Georgia down through Florida. And so that is the availability of Jones Act LNG bunkering vessels in the United States, there are five or six and those are all in that area. And so that area was developed first. And so one of the reasons we are excited to bring this to the Gulf Coast and, over time, in other areas is because it is not a new technology. This is adopted, is working. It is just a shortage of vessels. And so that vessel was able to be moved back and have plenty of work over in that region. William Dezellem: That is helpful. Thank you, and good luck with the FID process. Operator: Thank you. We will move next to Ed Proskovich with WP Capital. Please go ahead. Your line is open. Ed Proskovich: Good morning. Casey and Andy, I have been involved in Stabilis Solutions, Inc. for some years, probably going back to GTLS—GTLS, Chart Industries’ initial investment. I have just a quick question, a good follow-up question. I see you have leased or chartered a vessel from Seaspan, the Garibaldi? I am wondering how that fits into the SLNG picture since it cannot bunker the United States, but it could bunker places in The Caribbean or Panama Canal. Hello? Operator: Just one moment please. We are having technical issues. Please remain on the line. To our location line, we are having technical issues. Speakers are back in conference. Ed Proskovich: Anyway, hey, guys. Hey, I have been a holder since the Jeep days. I really like the company. Everything is super. I have one question that feeds in well to the previous question. I see we leased a bunkering vessel, granted not Jones Act approved. Can we get any updates on that? What is it going to be used for? Are we not going to use it or what? J. Casey Crenshaw: Well, we are still in process on that. We would like to circle back with you on the next call. That was a plan to work toward trying to support our clients and customers, but let us circle back with you on the details on that. But— Ed Proskovich: Okay. We are not prepared to go over that— J. Casey Crenshaw: Just yet. Okay. I will speak to you guys later. Thanks for joining, and we appreciate you being a shareholder and being active on the call today. Thank you. Thanks, Ed. Ed Proskovich: Okay. Thank you very much. Bye. Operator: Thank you. We do have a follow-up from Martin Whittier Malloy with Johnson Rice. Please go ahead. Martin Whittier Malloy: Thank you for taking my follow-up question. Just wanted to ask kind of a bigger-picture question relating to aerospace. I guess the potential has been out there for years that we might see something more on the contracting side there with respect to aerospace. Now with more demand for LNG for, yeah, data centers, manufacturing, bunkering, is there any change in the way that the aerospace companies, space companies, are viewing their LNG supply and maybe trying to secure it more with a contract, have more visibility on the security of the supply there? J. Casey Crenshaw: Well, I will start and I will let Andy kind of come back on this. Like we do have contracted work we do with them. And it is done on one-year and re-extended contracts, etc. And we have a number of contracts inside the space. But when we think about contracting, we are talking about multiyear take-or-pay type discussions. And so we are contracted, they are just not multiyear take-or-pay contracts. And, you know, it is an exciting time for them. Their commercial consistency on really, you know, making money, sending stuff up and how that works with satellites and what their total business is and how that interlocks with the data center AI kind of growth and macro—they are really together. They are actually coming together on activity, not separating. And we do think there is going to be a lot of need for closer supply both in Florida and in the other areas where they launch and how they go about that. And then there are still quality differences on what their rockets need and how they need it. We continue to work with all of our clients in that area about how we can put, you know, specific-purpose liquefiers in for them, how we can contract longer term. They are, as they are continuing to grow their needs and develop more consistent flights, I think that is becoming more and more of a question and an issue. You know, obviously, some of them like to self-perform everything. Some of them want to do more outsourcing. So, you know, I think there is just a blend there. So not trying to not answer it real directly, but I do want to say we are contracted with these good companies. We do expect to see meaningful growth in overall revenue in 2026 versus 2025. North of 30-plus percent growth, maybe more than, more 40% growth in that space. That is our expectation and we are seeing it grow. But we have not today a line of sight on putting an asset in for one of them yet as in the liquefier fit for purpose. And we are actively having discussions with that being available. We just have not got that contracted yet. Martin Whittier Malloy: Great. Thank you. Very helpful. Appreciate it. Operator: Thank you. We will move next with Spencer Lehman, a Private Investor. Please go ahead. Your line is open. Spencer Lehman: Hi, good morning. I am very excited about what you guys are doing, what you have got lined up. Sort of my dream come true. After many years. And I just turned 90, so I think maybe I am going to get a chance to watch all this develop. I do wonder if you had considered the possibility of instead of going alone, maybe merging with a larger company where all the financing could be done by their balance sheet. But it looks like the train sort of left the station. Right? And is that still a consideration? Or you think you can handle this whole thing? It seems like it is pretty ambitious for such a small company, but you feel pretty confident? J. Casey Crenshaw: Yes, Spencer, we do. And first of all, just thanks for being a long-term shareholder and we are more excited than you because we are just big believers in how this turnkey LNG solutions is just a game changer on all three of these growth markets, aerospace and the distributed power and the marine bunkering, and we are just, you know, wildly excited about it. Yeah. You know, I think we laid it out that in the marine bunkering project where we are doing a lot of infrastructure right now, we are talking about how to finance that through a project financing special purpose vehicle and we think that is the most optimized capital structure. It allows us to retain our equity, while we believe the equity is not fully priced into the opportunities and growth of Stabilis Solutions, Inc. And so it allows us to have growth without meaningful dilution. And so we still believe that is the right path. When we look at distributed power, customers are supportive and credit enhancing to help us meet that growth with them. And when we look at space, you know, we are absolutely—or aerospace—available to put in some assets and do some stuff if they contractually would like us to do that. So we are not against putting debt, enhancing the capital structure, or really doing anything that unlocks value for the shareholders. And furthermore, we have a duty to unlock that value for the shareholders. And so you are not going to hear us in the management team saying never say never on anything. Our goal is to grow the company profitably with these three big end markets that we are discussing. For you shareholders to know that we want to grow the company, and we believe this is a growth space—both infrastructure, logistics—there is just all kinds of growth. And as we need to tap different financial markets to accomplish that, we have a duty to go do that and we intend to. And so we appreciate the question. Right now, we feel like we have got adequate support with the clients and the contracts right now. But we do not want to pretend there is a negative bent on anything other than profitable growth for our shareholders and for our stakeholders. Spencer Lehman: Well, thank you. And I think that is a great answer, and I am very pleased that you try to keep the dilution at a minimum. So thank you very much. J. Casey Crenshaw: We are in alignment there. Okay. Spencer Lehman: Alright. Go get them. Thank you, Spencer. Appreciate you joining this morning. Sorry our phone got disconnected. Yeah. Okay. Operator: Thank you. We will move next to George Berman with Cabot Lodge Securities. Please go ahead. Your line is open. George Berman: Good morning, and I also want to join the previous callers congratulating you to a very, very good job. I think things are looking definitely up, up and away for us. One particular question I have, I discussed this with your CFO a few times. We are owners of an ownership stake valued at about $10,000,000 on your balance sheet that is throwing off about $1,000,000 a year with a China joint venture. Is there any chance of maybe monetizing that because I think that would add some nice firepower for your current projects. J. Casey Crenshaw: Well, I appreciate the question. And we are really proud of that stake with that partnership with BAMKO and with our joint venture in China. We are proud of the company. We are proud of the management team. And we are delighted to be partners with Baumco in that business. Because we are not the majority shareholder and we are a partner and heavily represented on the board, we do not control all the perfect timing of how that strategic asset would be monetized. There are specific things in the joint venture agreement that allow it to be monetized at certain time periods. And those are specific. But it is a wonderful company. I think there is a lot of value, but I think the negative with that is, you know, the geopolitical challenges associated with China right now make that a bit of a, you know, is this the most time to do something there or not? Should we wait till things normalize better? Is that a better step-up value? But it is a great company. It is a wonderful group over there and if you know, that was part of the existing company that Stabilis Solutions, Inc. reverse merged into. You know, one of the only assets inside the company as we reverse merged into it. But we are delighted to have that. We participate as board members, both me and Andy, and are actively in that and have an executive that watches it and is in China working on it for us. And the million dollar plus a year that you received is nothing to shake a stick at either. We are proud of their performance and their consistency on providing the shareholders dividends and cash dividends as it relates to that business. George Berman: Right. And you are currently—you have the one big plant in, I believe, it is George, Texas, produce the LNG. You also mentioned last year on a conference call that you had already acquired the necessary equipment to build a second one. Has that gone any further? Is that part of the overall picture right now where to put it? J. Casey Crenshaw: Yes, that is. We have two liquefiers, one in Port Allen, real near Baton Rouge, Louisiana, and one in George West, Texas. And then we acquired a complete additional plant to—we call it a train or a plant or a liquefier—to install. The best place to install that is George West. That is where we would like to install it because the construction cost is lower and we get the benefits of having all the infrastructure already there. However, we have both marine clients and distributed power clients and space clients all looking at maybe they would like it near their offtake agreement. And so we have left it as an uninstalled asset to try to come up with where the most interested customer and client might want it with the longest term, you know, opportunity and offtake being. So it is available to deploy and has not been finalized on where that deployment is because we have not had the customer finalization of where to put it. George Berman: Right. So you would say—or we could say—that you basically right now are in the driver’s seat, fielding offers, and whatever is most appropriate for the company, you can take it and proceed. J. Casey Crenshaw: Yes. I appreciate the comment. We believe customers are in the driver’s seat. We are just waiting on which one would like to have that availability and that surety of supply. We are kind of under their direction. But it is a valuable strategic asset to have and have the ability to deploy it quickly relative to a greenfield application. George Berman: Right. Right. Well, Mr. Crenshaw, I also want to thank you for taking over the leadership there. I think we are definitely going in the right direction, and I will be looking forward to much higher equity prices once we get the financing for these big opportunities on the ground. J. Casey Crenshaw: Well, I agree that we have a great team here. I am looking forward to higher equity pricing for all of us as well. We have an amazing management team here. Andy, you will get to speak to a lot—our CFO, our balance of team here with Matt and Sage and Colby and just can go on and on with our team here. I mean, it is hard for me to throw out names because we would have to throw them all out. We have an incredible team, the most skilled turnkey LNG solutions team in the world. And these three core markets that we talk about with the best team in the world, period. Getting to the most profitable growth and the most profitable projects is something that we need to keep working on and optimizing for the shareholders. But we have a great team, a great set of assets, great set of logistics, plants and customers and end markets, and we are just so lucky to have all of our good clients. And we are working hard to keep them. And even though we had these two contracts roll off, the fact that we are still working with both clients and active with both clients is a testament, as we stated earlier, to our company and our team and people. So thank you for calling in today. George Berman: Thank you. Operator: Thank you. This concludes the Q&A portion of today’s call. I would now like to turn the floor over to Andrew Lewis Puhala for closing remarks. Andrew Lewis Puhala: Well, thank you all for joining the call today and your support of the company, and we look forward to keeping you updated as we have things to share and look forward to speaking with you on next quarter’s call as well. Thank you. Operator: Thank you. This concludes today’s Stabilis Solutions, Inc. Fourth Quarter 2025 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.
Operator: Hello, everyone, and welcome to the BJ's Wholesale Club Holdings, Inc. Fourth Quarter Fiscal 2025 Earnings Call. My name is James, and I will be your operator for today. If you would like to ask a question during the presentation, the conference call will now start, and I will hand it over to Diana Raschow. Please go ahead. Diana Raschow: Good morning, and welcome to the BJ's Wholesale Club Holdings, Inc. Fourth Quarter Fiscal 2025 Earnings Call. Joining me today are Robert W. Eddy, Chairman and Chief Executive Officer; Laura L. Felice, Chief Financial Officer; and William C. Werner, Executive Vice President, Strategy and Development. Please remember that we may make forward-looking statements on this call that are based on our current expectations. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say on this call. Please see the risk factors section of our most recent SEC filings for a description of these risks and uncertainties. Please also refer to today's press release and latest investor presentation posted on our investor website for our cautionary statement regarding forward-looking statements and non-GAAP reconciliations. I will now turn the call over to Robert W. Eddy. Robert W. Eddy: Good morning, and thank you all for joining us. We are pleased to share that we closed out fiscal 2025 with strong momentum, delivering solid comparable club sales growth and strong profitability. Throughout the year, we navigated a dynamic environment marked by a more cautious, value‑seeking consumer, tariff‑related and geopolitical uncertainties, and broader macroeconomic volatility. Even with these challenges, our team remained focused and resilient, consistently delivering value, convenience, and quality for our members. We also achieved several meaningful milestones in 2025 that strengthened our business and reinforced the momentum we are carrying into the year ahead. We grew our membership base by more than 500,000 members, the largest annual increase in recent years, underscoring the relevance of our value proposition and the loyalty of the families who rely on us. We successfully opened 14 new clubs, the most we have ever opened in a single year, expanding our reach into new markets with sales, membership, and profit performance all well above expectations. We also advanced our digital capabilities, with digitally enabled sales penetration reaching 16% as more members embraced the convenience of omnichannel services. All of these are material accomplishments that create a structurally higher lifetime value for both members and shareholders. Ultimately, these achievements helped drive record full-year earnings per share, reflecting the strength of our model and disciplined execution across the business. As always, our team demonstrated an incredible commitment to our purpose: to take care of the families that depend on us. This purpose guided our decision-making and enabled us to deliver the dependable experience our members count on, no matter the conditions. That was especially evident late in the quarter when winter storm Fern, one of the largest storms in recent years, brought significant snow and ice across much of the U.S., impacting nearly our entire club footprint. We pride ourselves on being open and in stock for our members when they need us most. In the days leading up to the storm, we set a daily record for gas volume that was 20% higher than our previous daily record, reinforcing that we are a destination in times like these. Our team worked tirelessly to keep our clubs open and ensure that our members had access to the essential supplies they needed, from groceries and household goods to ice melt and emergency items. Their remarkable efforts really showed our purpose of taking care of the families that depend on us. I am incredibly proud of the way that they showed up for our members and communities. Turning to our fourth quarter sales performance, we delivered merchandise comparable club sales growth of 2.6%, reflecting our 13th consecutive quarter of market share gains and 16th consecutive quarter of traffic growth. Our perishables, grocery, and sundries division grew comps by 2.3%, driven by solid unit growth supported by improvements in assortment and merchandising. Even after lapping the chain‑wide rollout of Fresh 2.0, we are still seeing strong, steady comp performance in perishables, clear proof that this is not a onetime lift but a real, lasting shift in how our members shop with us. These results reinforce the importance of our core consumables franchise, which continues to demonstrate consistency even in a volatile operating environment. In general merchandise and services, comps increased by 4.3%, which outperformed our expectations for the quarter, driven by changes in merchandise mix. While we are pleased with our progress, it is important to note that general merchandise can be variable quarter to quarter, given the discretionary nature of many of these categories. As such, we would not expect performance at this level every quarter, but we are encouraged by the traction we are seeing as our broader transformation efforts take hold. Turning to membership, the foundation of our business and one of our greatest strengths, we ended the year with over 8,000,000 members, a new high for our company. In comp clubs, this growth reflects strong acquisition, continued loyalty from our long‑tenured members, and the ongoing relevance of our value proposition. Our growth was also the result of opening our 14 new clubs this year. Growing both the comp and total member bases is incredibly important to our future success. For the fourth consecutive year, we achieved a 90% tenured renewal rate. This level of loyalty is rare in retail and speaks directly to the consistency of the experience we deliver and the relevance of the BJ's Wholesale Club Holdings, Inc. membership model. We also saw continued strength in our higher‑tier memberships. Penetration increased to 42% this year, demonstrating strong adoption of the enhanced benefits in our higher‑tier offerings. These members are among our most engaged and the highest-spending cohorts, and we see meaningful opportunity for continued growth here. What stands out this year is not just the growth of membership, but the quality of that growth. The combination of more members, exceptionally high renewal rates, and deeper engagement among our most loyal tiers reinforces the health of our model. It also gives us tremendous confidence as we look ahead, because strong membership is the engine that powers everything else: traffic, share gains, and long‑term profitable growth. As our membership base grows in both size and quality, we continue to make it easier for members to shop with us whenever and however they choose. Digital engagement remains a major unlock for convenience, and this quarter, digitally enabled sales grew by 31%, driven by strong adoption of BOPIC, same‑day delivery, and Express Pay. These services have consistently been among the most meaningful drivers of digital growth, with more than 90% of digital orders fulfilled directly from our clubs—an efficient and member‑friendly model that has contributed significantly to our momentum. Our digital business also achieved a milestone this quarter, posting its highest sales day ever on Black Friday, and then surpassing that record again on Cyber Monday. This performance reflects not only high engagement, but the continued maturation of our digital portfolio. We are increasingly seeing members tap into our digital conveniences for different shopping occasions, underscoring how ingrained these capabilities have become. For example, a member stocking up in club ahead of a winter storm may be more inclined to use Express Pay to make that shopping trip faster and easier. We are also continuing to lean into AI to create even more seamless and intuitive experiences for our members. Our AI shopping assistant, Ask Bev, is designed to enhance the member experience through more personalized, intuitive, and efficient product discovery and support. And behind the scenes, AI is enhancing our merchandising enrichment and platform reliability. Value remains foundational to how we serve our members, and we continue to see that resonate across all income levels, particularly in a period where many consumers are becoming more selective with their spending. A strong pricing position is central to our model. Our advantaged structure allows us to consistently deliver meaningful savings—up to 25% better than traditional grocery. We are relentless about maintaining that edge for members. This commitment to value is one of the reasons we continue to see steady renewal rates, strong traffic, and healthy unit growth in our core businesses. Our own brands are another important way we help members manage their budgets without compromising on quality. In fiscal 2025, own brands represented 27% of our merchandise sales, and we remain on track toward our long‑term goal of 30%. These products offer significant savings and are an increasingly important part of how families shop our clubs. That loyalty, combined with higher margins, makes this effort powerful for our company. We also create value through compelling discounts and promotions. A recent example is our Big Game event, where members who spent over $150 received a $15 digital bounce‑back coupon, providing members with a high‑impact way to save during a key seasonal moment. At a time when members are making careful decisions with every dollar, our focus on great prices, quality products, and highly curated assortments ensures we remain a trusted destination for families looking to get more value out of every trip. We continue to make meaningful progress on expanding our footprint and bringing the BJ's Wholesale Club Holdings, Inc. model to more communities. In the fourth quarter, we opened seven new clubs, a great finish to a year that saw us open 14 new clubs. We are so proud of our 2025 class of club openings, which saw us open clubs in eight different states. These clubs as a whole are delivering sales, membership, and profit that are well above expectations, and we are very excited for our continued accelerated club growth. The success in our new clubs and new markets is a testament to the team working on new clubs, whose mission is to make the next opening even better than the last. The team is ready for our first‑half‑of‑the‑year openings in the Dallas–Fort Worth area, and I have a tremendous amount of confidence that we will deliver for these new members and communities, as we have proven time and again in our new club program. We remain on track to deliver our commitment of 25 to 30 new clubs over 2025 and 2026, and as we look out at the new club pipeline, we would expect this pace of openings to continue over coming years. Our sustained expansion reflects our confidence in the relevance of our model, our ability to serve more members across more geographies, and our long‑term commitment to profitable growth. Before I hand things over, I want to take a moment to recognize our team members across our clubs, our supply chain, and our club support center. Their commitment to taking care of the families who depend on us is what enables our performance quarter after quarter. Their hard work, especially in dynamic environments like this one, continues to inspire me every day. As we look ahead, we remain confident in the strength of our model and our ability to execute on our long‑term priorities. Our business is built to win in both stable and uncertain environments, and the investments we are making today put us in a strong position to continue delivering value for our members and sustainable growth for our shareholders. With that, I will now turn it over to Laura L. Felice to walk you through the financial results in more detail. Laura L. Felice: Thank you, Bob. Before I dive into the numbers, I want to acknowledge the exceptional work that our teams across our clubs, distribution centers, and support functions. Their continued focus on serving our members and strengthening our operations played a major role in delivering our fourth quarter results. Now let me walk through the financial highlights for the quarter. Net sales for the fourth quarter were approximately $5,400,000,000, an increase of 5.5% over last year. Total comparable club sales, including gasoline, rose 1.6%, with fuel prices continuing to run down mid‑single digits year over year. Excluding gas, merchandise comparable sales increased 2.6%, and we were pleased to see growth in both traffic and units. Traffic strengthened as the quarter progressed, helped in part by members stocking up ahead of the late‑January winter storm. Within our grocery, perishables, and sundries business, comps were up 2.3%, supported by strong performance in categories like nonalcoholic beverages, candy, and snacks. Unit growth was approximately 1.5%, and price remained up year over year as we have seen inflation continue to moderate. Our general merchandise and services division comp increased 4.3% in the fourth quarter, driven by strength in consumer electronics and apparel, even as home and seasonal remained a drag on the business. Membership fee income rose 10.9% to roughly $129,800,000, supported by healthy acquisition and retention trends across the chain as well as an annual fee increase in January 2025. Our membership base remains vibrant, and we continue making progress in improving member mix quality. As we look ahead, we expect membership fee income growth to moderate as we fully lap the fee increase and return to a more normalized run rate. Turning to our gross margins, excluding gasoline, our merchandise margin rate was down about 50 basis points year over year, driven by changes in merchandise mix. SG&A expenses totaled $818,200,000, representing slight deleverage as a percentage of sales, primarily due to new club openings and continued investment in our key strategic initiatives. Our gas business outpaced the broader industry. Comparable gallons were up 0.1%, significantly better than the low‑single‑digit declines seen elsewhere. Fuel margins were generally stable during the quarter, resulting in profitability modestly ahead of expectations. Adjusted EBITDA for the quarter increased 1% to $266,500,000, supported by steady cost discipline. Our effective tax rate for the quarter was 25%, slightly below our statutory rate of roughly 28%. Altogether, fourth quarter adjusted EPS of $0.96 increased 3.2% year over year. For the full fiscal year, we delivered adjusted EPS of $4.40, reaching the high end of our revised guidance range. Looking at the balance sheet, inventory levels increased 3.1% year over year in absolute terms and were down 2% on a per‑club basis, reflecting strong execution by our teams. In‑stock levels improved about 40 basis points versus last year and reached record highs, a testament to better merchandising alignment and operational efficiency. Our capital priorities remain unchanged. We continue to invest in areas that drive long‑term value: membership, merchandising, digital capabilities, and real estate. We ended the quarter with net leverage of 0.4 times, giving us substantial flexibility. During the quarter, we bought back approximately 1,300,000 shares for $117,700,000, bringing the full‑year repurchases to roughly 2,600,000 shares for $252,400,000. This accelerated pace of repurchases underscores our confidence in the long‑term strength of the business and our ability to generate consistent cash flow. We ended the year with approximately $750,000,000 remaining under our current authorization, and expect to remain thoughtful and opportunistic with future repurchases. Looking ahead to fiscal 2026, we expect comparable sales excluding gas to grow 2% to 3%, and we are guiding to adjusted EPS of $4.40 to $4.60. Our multiyear focus on building a stronger, more efficient, and high‑quality business is yielding real progress, and we remain confident in our ability to deliver sustainable long‑term growth. We expect slight deleverage in our SG&A driven by accelerated new club openings, particularly with continued outsized growth in depreciation. We will also continue to invest to ensure our new market growth performs at or ahead of our expectations, as well as making sure we deliver unbeatable value to our members every day. We plan to further invest in our supply chain network to support the long‑term growth and are excited to open our automated distribution center in Ohio in 2027. We are planning for an effective tax rate of approximately 27% for the year, with the lowest rate in the first quarter when we typically experience a windfall from stock compensation. Given the evolving landscape, we are not contemplating the impact of recent tariff news and evolving macro uncertainty on our current assumptions. Tariffs may shape the trajectory of inflation and broader consumer demand, and ultimately influence our results this year. We continue to believe we are well positioned to offer our members the value that they are seeking every day. Before I hand it back to Bob, I would like to thank our team members for their continued dedication to our company, purpose, and communities, and their contributions to another great year of delivering in a dynamic environment. Bob, back to you. Robert W. Eddy: Thanks, Laura. Before I wrap up, I just want to take this opportunity to reflect on the incredible progress our team has made on behalf of our shareholders. Looking back over the last three years, we have grown our member count by 1,500,000 members—that is over 20%—and increased our annual MFI run rate by more than $100,000,000, while delivering 90% tenured renewal rates. We have driven digital penetration from 9% to 16%, generated $3,300,000,000 in adjusted EBITDA, and produced more than $2,600,000,000 in operating cash flow, including over $1,000,000,000 this year. We have opened 29 clubs as part of a $1,700,000,000 capital investment into our business, with returns on new clubs well into the double digits. We have accelerated the pace at which we are expanding and have a pipeline to support this level of growth going forward. As part of this effort, we have also added about $500,000,000 of owned real estate onto our balance sheet. On top of this capital investment, we paid down well over $300,000,000 of debt, bringing our net debt ratio down to 0.4 times, and repurchased well over $500,000,000 worth of shares, retiring about 5% of our share count in the process. The club business is a long‑term share gainer and a great business to be invested in because value wins. By delivering the assortment, value, convenience, and membership experience our members love, we will be rewarded with growth in the lifetime value of our members. This lifetime value is the foundation of the equity value that accrues to our shareholders. As we look out towards this year and beyond, we are more excited than ever for both the progress we have made and for the opportunity to create even more value for our shareholders by investing for the long term and delivering value to our members in everything we do. We are at a unique moment in time as it relates to the growth of the club channel. Now more than ever, we are here to play to win. Operator: Thank you, Bob. As a reminder for our audience, please press star followed by the number 1 on your telephone keypads. We will now open for questions. Our lines are now open for questions. We now have Michael Allen Baker from D.A. Davidson. Go ahead, please. Your line is now open. Michael Allen Baker: Great. I wanted to ask about merchandise margins, down 50 basis points. In the press release, you said mix. I guess I heard strength in consumer electronics and TVs; I suppose that was probably part of it. But what else drove the lower merchandise margin? Can you talk about sort of inflation—cost inflation versus price inflation? I know one of the hallmarks has been trying to give value back to customers. Just how that whole pricing dynamic is playing out, please? And what should we expect for 2026? Thank you. Mike, I will ask one more. You talked about continuing the pace of openings—25 to 30 every two years. You are only in 21 states right now. How long can you grow 25 to 30? I guess what I am getting at is have you looked at the art of the possible? Could this be a nationwide concept? How many stores could you have over time? Robert W. Eddy: Maybe I will take the lead here, and Laura can fill in behind me. We are pretty proud of our quarter. You brought up margins in your question and our pricing stance and a few other things. So let me talk a little bit about it in the broadest sense, and Laura can add in some details if she sees fit. The largest contributor to our margin performance against our expectations during the quarter was the mix of the business, and it is mix towards general merchandise. You remember that for us, general merchandise is slightly lower margin than some of the other parts of our business, and within general merchandise, consumer electronics tends to be the lowest gross margin within general merchandise. You remember when we talked about how Q4 might roll out for us, we had restricted buys in a lot of our general merchandise categories to try and manage exposure to tariffs and markdowns and things, and that played out exactly the way that we thought it would. So within the four big businesses in general merchandise, we had a good quarter from a CE perspective. Our apparel business continues to grow. It has been growing for a few years now pretty steadily and had another good quarter there. And then, as expected, we had a tougher quarter in our home and seasonal businesses. Those were more subject to tariffs. That is where much of our inventory cuts happened, and those two businesses had negative comps. So the mix issues associated with that were the predominant cause of the 50 basis point decline in merchandise margins. We also made considerable investments in value during the quarter in our grocery business, and we will continue to do that in the future. As you know, value is the most important thing that we provide our members every day. We take our pricing gaps very seriously. They improved during Q4 because of these investments that we made, and we will continue to do that as we can to provide our members the best value every day. You know we always try and spend into the beat. We saw that we were having a quarter where we could do that and decided to take that option on our members' behalf. So we are very happy with our quarterly performance and made all the numbers work out on our shareholders' behalf. Yeah. On your question about store growth, let me start out, and then William C. Werner can fill in. He obviously runs our real estate portfolio. This year was a fantastic year for us from a real estate growth perspective—opening 14 new clubs, a bunch of new states, a bunch of existing markets for us as well. I would tell you that this new class of clubs is the best class of clubs we have opened in any of the years since we have gone public. Just a couple of data points: our membership in these clubs is up over 30% versus what we planned; our on‑time renewal rates in our new clubs are about 900 basis points higher than our chain average at this point; and I talked about in our prepared remarks that our new clubs are well into double‑digit return on capital. So we are really excited about the performance we have had so far. The team has done a fantastic job getting these clubs open on time this year. We have got another 12 or so to go in this new year and a really robust pipeline. I will hand it over to Bill, and he can address the rest of your question. William C. Werner: Yeah. Mike, maybe the one simple idea I will give you and the investment community to think about as it relates to our growth is as we continue to take share, the models continue to update the viability that we have to open up in new markets. We have seen that this year with markets like Selma, North Carolina, and Sumter, South Carolina. They probably would not have been on our radar a handful of years ago, and in pretty short order, not only were they on our radar, but we were able to go there, execute, and those clubs are both off to amazing starts, which gives us a lot of confidence in terms of going into new and different markets into the future. I would tell you that we enter the Dallas–Fort Worth market later next month. Our team is confident, but certainly not complacent, as we go into these in terms of how we execute with the success that we have seen. If anything, the early engagement and the hustle of the team on the ground there in the Dallas market has been pretty awesome. I was down there last week and spent some time with the team and with some community leaders, and we heard feedback across the board that the way that we have engaged with the community down there is something that they have never seen before. We are really excited to get those clubs open. It will be a nice milestone for the company as we show the success that we will have down there, and that success creates opportunity for the future. As we sit today, we are really excited, we are really confident, and more to come. Michael Allen Baker: Thank you. Robert W. Eddy: Thanks, Mike. Operator: Thank you, Michael, for that question. Next up, we have Peter Sloan Benedict from Baird. Go ahead, please. Your line is now open. Peter Sloan Benedict: Hey, good morning, guys. Thanks for taking the questions. First, just around the merchandise comps, any way to quantify maybe how impactful Fern was—maybe some of the stock‑up activity that happened at the end of the quarter in 4Q? And then, as you are thinking about the year ahead here, any cadence we should think about? I know there is a lot of puts and takes. Maybe your view on SNAP and the changes there. Just anything that you are contemplating that we should be aware of in terms of the cadence of comp in 2026? That is my first question. And, again, my follow‑up is just maybe a little longer‑term picture. You know, the return to kind of the algo that you guys have. This year there is obviously a lot of puts and takes. You have the investments that are going on. I am just curious, as you get a bunch of these new clubs up and running, when do you start to kind of maybe return the business model to the algo? Is that something that could occur in 2027? Is it 2028? Just conceptually, how does that work in your mind? Thank you. Robert W. Eddy: Thanks. Good question. Obviously, winter storm Fern was a big deal, particularly in our footprint along the East Coast. I would start out with our feeling that largely storms are a net push. You get the buildup on the front side of it—and that can be a little buildup or a big buildup depending on the size of the storm and how well forecasted it is—and then you obviously suffer the downside of storm effects: closing stores, power losses, people not driving, and deloading the pantry that they just loaded up. So on the whole, storms are generally a push. Fern was very big and impacted most of our footprint, and it was certainly very well forecasted—a week out, everybody was saying we were going to get a big storm. We did have a pretty large buildup in front of the storm, and, obviously, it was big and impactful, and so we had a pretty large fall‑off after the storm. The thing to think about is the net impact, and I would say it was a slight positive to the quarter. The downside of the pantry deloading and the travel effects and such, and the supply chain effects, actually crossed the fiscal year a little bit, and so we saw some of the downside leak into February, and I think this is a normal effect. We have seen some weather in the Northeast in February as well, and so February's comps were a little lower than our plan, but all of that is normal weather stuff. Our team did a great job serving our members. Certainly, we proved our destination status—that stat that we put in the prepared remarks of beating our daily fuel volume record by 20% was pretty insane to do that. Our supply chain team really was pretty heroic, beating records of how many cases we moved day after day as the buildup happened, and our club teams did a wonderful job staying open when we could and keeping everybody safe and serving our members. Overall, a very slight impact to the quarter, and I would say a slight impact to Q1 on the negative side as well. From a guidance perspective, there is certainly a lot to balance in the stacks and what is going on, so I will give that question to Laura. Laura, what do you say about guidance? Laura L. Felice: Yeah. Hey. Good morning, Pete. From a comp perspective, we put out a range of 2% to 3% for the full year. What we did not talk about in the prepared remarks is the cadence of the two‑year stacks, and those accelerated slightly in Q4, as they did in Q3. When we look at the year coming up, I would point towards the two‑year stacks as a starting position. Remember that the first quarter of last year was the high watermark from a comp perspective, and so we have built the plan on that, which would imply the lowest comps in the beginning of the year and growth as we progress through the year. Robert W. Eddy: Thanks, Pete. We are really taking a very long‑term approach to what we are doing here. We talked a lot about our real estate growth. That impacts our depreciation and our EPS performance, but with all that said, I thought this is a pretty good year. We are very proud of our progress—the growth of our entire franchise last year: growing total merchandise sales by more than 6%, membership by 7%, MFI by 9.5%, adjusted EBITDA by 6%, EPS by 9%. Those are all fantastic results. And then, in the prepared remarks, all the three‑year stats, I think, are even more impressive. While we are not satisfied and still want to grow faster, we have a lot to be proud of. We think our shareholders should be happy with our performance, and we will continue to make long‑term investments like in real estate and in value to really get our franchise flywheel moving faster for the future. Operator: Thanks, Peter. Just another reminder for our audience: If you would like to send your questions in, you may do so by pressing star followed by the number 1 on your telephone keypad. In the interest of time, we ask that we limit our questions to just one question per participant. Thank you. Let us move on to Edward Kelly from Wells Fargo. Go ahead, please. Your line is now open. John Park: Hey, good morning. This is John Park on for Ed. Thanks for taking my questions. I guess, can you talk a little bit more about the underlying membership trends? How much of the MFI increase was from the fee increase? And any changes in discounting lately that you guys are doing? Robert W. Eddy: Good morning, John. Thanks for your question. There is certainly a lot to be proud of in our membership growth. We talked about a little bit of that in our prepared remarks, but 500,000 member growth this year; 1,500,000 over the past three years; 10% MFI growth for the year, a little bit more than that for the quarter; another year of 90% renewal rates; improvements in our higher tier—really just sustained, fantastic performance in our membership base. This continued growth in member count will continue, including with as many as 12 new clubs next year, and, obviously, some of that MFI growth was the fee increase, as you pointed out. We are quite optimistic on our ability to continue to grow our membership franchise, and as we do, we will continue to optimize for the best mix of acquisition and retention and rate, and MFI dollar growth. As you might imagine, those things somewhat compete with one another, and so we are trying to optimize the best result for our overall business. When you think about the concept of discounting, I would take you all the way back to many years ago when our chief acquisition model was a free trial model, and we moved away from that towards a discounted membership model tied to easy renewal. Folks that get a discount have to sign up for automatic renewal, and they pay full fee in the second year and beyond. Most membership models use a discounting model at this point, including our two club competitors. The team has done a really nice job optimizing those three things—member count, the rate that the members pay, and the renewal rate. The team also does a nice job varying and trying to optimize in the channels in which we offer these discounted offers, and they obviously change offer constructs and things as we go—really trying to figure out what the best value is for each segment of membership and, again, trying to optimize the business for us and for our shareholders. As we move forward, we will do a lot of the same—trying to optimize what we offer, when we offer it, and who we offer it to—and I expect we will see continued great growth in total membership, MFI dollars, and renewal rates. Laura L. Felice: The one thing I might add on to that is Bob talked about the new club growth and members we are acquiring in the new club. As we step back and look under the numbers—we have talked about this in prior quarters—we are also really proud of the membership growth in comp clubs which, as you know, is really important to the long term of our business. Think about 2% to 3% comp club member growth, which is a fantastic set that we are proud of as we move forward. John Park: Awesome. Best of luck, guys. Operator: Thank you, John. Moving on, we now have Katharine Amanda McShane from Goldman Sachs. Go ahead, please. Your line is now open. Katharine Amanda McShane: Good morning. We had a longer‑term question as well. Just with the success that you are seeing with your digital growth, do you think your stores are able to keep up with this level of fulfillment, and are there any investments that need to be made going forward to further support this growth, either in the tech stack or with assets? Robert W. Eddy: Hi, Kate. It is a good question. We have had sustained, fantastic growth in our digital business. I think it was 31% this quarter, and somewhere near 60% on the two‑year stack—obviously bigger going backwards—and it has really been the engine of convenience that our members love, whether it is buy online, pick up in club, same‑day delivery, or Express Pay. Getting that penetration up to 16% of our business has been a big win, and I expect it to go even further as we go because our members, quite frankly, love all these options. As you know, about 90% of our entire digital business is fulfilled by our clubs, and so you are right to ask the question. I would tell you that we are relatively unconstrained from this perspective. We can pump a lot more volume through our average boxes. In certain very high‑volume clubs, we have constraints. We are working around those constraints by investing capital, by investing in labor, by moving volume around the chain, by using different providers to help us do it. I do not really see a ceiling on our digital growth going forward, and we will work hard to make sure we do not have a ceiling there. We continue to invest in all of our digital properties. Our digital team is fantastic at really improving the experience every day on a relatively inexpensive basis, and they do it day in and day out, and when they say something is going to be done, it gets done. We have come to very much value that as we talk to our members and offer new things to our members, and, obviously, our members are reacting well to that. I do not really see that changing in the future. We are happy to take all the digital growth that comes to us. Katharine Amanda McShane: Thank you. Operator: Thank you, Kate. Moving on, we now have Steven Emanuel Zaccone from Citi. Go ahead, please. Your line is now open. Steven Emanuel Zaccone: I wanted to follow up on the earnings guidance for the year. Laura, you mentioned some SG&A investments—can you help us understand how big they are? And then on the merchandise margin outlook, I want to follow up there. How should we think about that for 2026? Obviously, mix was a factor in the fourth quarter, but you did reference earlier last year making some price investments, or investments in general, to provide value for consumers. How do you see that playing out in 2026? Laura L. Felice: Thanks. Good morning, Steve. Maybe I will start on your SG&A question. We spoke a little bit about that in the prepared remarks—so, slight deleverage. We are continuing to invest in the new club growth and ramp that growth. Going into Texas at the end of the first quarter, as Bill talked about, and into the second quarter, we are certainly investing to win there. We know we are off to a strong start, as Bill already talked about as well, but we want to make sure we set ourselves up for success. So some deleverage largely as we look on the new club ramp, and it is largely D&A. From a merchandise margin perspective, we do not guide to merchandise margins on an annual basis. I would say the fourth quarter was certainly the low mark on a year‑over‑year basis as we went backwards a little bit. Remember that for the full year, we rounded it out flat. What we are after this year is continuing to manage the business—making sure we are making price investments where they make sense—all after going towards our long‑term lifetime value of membership and the guidance we have set forth. Steven Emanuel Zaccone: Okay. That is helpful. Thanks very much. Operator: Thank you, Steven. Moving on, we now have Mark David Carden from UBS. Go ahead, please. Your line is now open. Mark David Carden: Good morning. Thanks so much for taking the question. I want to ask a bit about the Texas ramp. I know the stores are yet to open, but you have been doing some initial promos. How has interest been just relative to what you have seen in other markets? And then how have you handled any supply chain challenges, just given distance from current DCs? Is there a set number of clubs you need to open before it makes sense to add a new DC to that region? Thank you. Robert W. Eddy: Hi, Mark. Why do I not ask Bill to take over that question? William C. Werner: Yeah. Hey, Mark. Listen, I will start with the engagement down in the Texas market and then come back to some of the infrastructure. The engagement has been amazing out of the gate. I mentioned earlier I was down there with the team last week. We have had the team on the ground for many, many months already, engaging with the community, and we have a ton of data given the acceleration of all the recent openings in terms of what we expect from engagement and membership from the clubs that we opened so far. As we sit here and look eight to ten weeks out from the openings, we are seeing exactly what we thought we would see in terms of overall engagement and membership sign‑up, so all signs are positive so far in terms of the entry. I am really excited. The team has done such an amazing job. I am really proud of everything that they have done, and I am really excited to see the results of all their hard work. In terms of the infrastructure, we have been planning for this investment for a while now. We will serve the market with a combination of distribution from our existing distribution infrastructure as well as some hyper‑local support on the ground, and then we will continue to scale as we have done all along. As I think about how we have moved over the last handful of years to some of the adjacent western markets from where we are today—Columbus, Indianapolis, Nashville, and Detroit—that certainly has created a new distribution footprint for us, and we have served that along the way. We will continue to amplify how we serve that with the new distribution center that we are building out in Columbus as we speak. That is a major investment for us, and it will yield significant operational efficiencies for us as well as savings as we get it open. The opportunities that we have to invest in the expansion have been driven by the success of the new clubs, and it is a great challenge to work through, and we are excited for everything that we are doing. Robert W. Eddy: We are really bullish, as Bill said, about our ability to be successful in Texas. I will offer you one statistic we heard this week: there are more homes being built in the Dallas–Fort Worth market than in the entire state of California. It is certainly a place with very, very high growth. Our team has been doing fantastic work on the ground. The initial membership sign‑ups are well ahead of our pre‑opening plan. Obviously, the numbers are small until the boxes actually open, but the engagement we have seen with the folks in these communities that we will enter has been very strong. We are obviously respectful of this challenge—it has certainly got great competition in the neighborhood—and we want to make sure we offer Texans products and an experience that they like. I think we are off to a pretty good start so far, and we will invest heavily in this market to try and get it right, and we will give it our best shot every day. Mark David Carden: Thanks so much. Good luck, guys. Operator: Thank you. Moving on to the next participant, we have Oliver Chen from TD Cowen. Go ahead, please. Your line is now open. Oliver Chen: Thanks a lot. Hi, Bob and Laura. Regarding general merchandise and the variability that you are seeing, what should we expect in terms of guidance with home and seasonal? And related to that, the category management program as well as fresh in the year ahead—any major catalyst there or changes or more innovation that you are doing there that will underpin some of the comp guidance? Thank you. Robert W. Eddy: Hi, Oliver. Thanks for your question. Maybe I will start, and Laura can fill in whatever I missed. If you look at the complexion of our business in the fourth quarter, you saw quite a mix. Our grocery business performed very well—certainly, perishables is the most important part of that business. We lapped the full chain rollout of Fresh 2.0 during the quarter, and we continue to see steady gains in our perishables business. That has been impacted by some food deflation in that category, but even without that, we had a good quarter. We saw some improvement in our grocery business, and hopefully, that translates into our sundries business as well, as we start to pull some of the same levers there. In general merchandise, we had a good quarter from a CE perspective, where we could chase some inventory and sell it. The prospects for our home and seasonal businesses are kind of varied at this point in time. We need to continue to improve our merchandise mix and our assortment and our value in those categories. Our merchandising team has made strides, and they continue to get better. We obviously are still working on our merchandising team at this point, and we hope to have some news to announce in the next couple of weeks from that standpoint. I would look at home and seasonal as a longer‑term growth initiative. We will continue to grow CE. We will continue to grow apparel. We know what to do in those categories. In the future, we hope to build on that growth in home and apparel. With respect to CMPs, that program is still going on. It has been a successful program for us. Versus our older program we called CPI, which was much more margin‑focused, this has been much more assortment‑focused, and I think what you will see from us in the future is a better mix of those two thoughts. We are trying to put the right thing on the shelf, but also trying to get some more margin performance so that we can make further investments in value—making sure that we are offering the right everyday price, the right promo, the right product—and, obviously, paying the right cost for that product is a fundamental part of the retail equation and making sure we can run the business in the best way for our members and our shareholders. Lots of good stuff to be proud of in the merchandising world and lots of work to come in the future. Oliver Chen: Thanks a lot. Best regards. Operator: Thank you, Oliver. Next up, we have Rupesh Dhinoj Parikh from Oppenheimer. Go ahead, please. Your line is now open. Rupesh Dhinoj Parikh: Just going back to inventory, I know last year your team planned conservatively on the discretionary front, just given some of the tariff headwinds and uncertainty out there. Just curious how you are thinking about inventory over this year. Do you feel like you have sufficient inventory on the discretionary side? So just high‑level thoughts there. Thank you. Robert W. Eddy: Hi, Rupesh. Our inventory is in great shape. Let me first congratulate our supply chain team and our merchandising team for another great performance this quarter, where although total inventory was up 3%, on a per‑club basis it was down, and our in‑stocks improved by 40 basis points. The team continues to do a great job getting better and more efficient for our members. We need continued gains on that front, and our team has great plans to keep pushing in that regard. With respect to total inventory levels in the business going forward, there is nothing really to think about from a grocery business perspective—that is just about optimizing what we are doing there. From a general merchandise perspective, we have ramped up our inventory in the coming year. We have made bigger buys to support both the new clubs that we are bringing on and, hopefully, comp growth in our general merchandise business as well. Where we were very conservative last year from an inventory buy perspective, we are being slightly more aggressive this year—nothing crazy—but we do have plans to buy more inventory, and, hopefully, we have picked the right items and our members love the assortment and the value that we offer. Rupesh Dhinoj Parikh: Great. Thank you. Best of luck. Operator: Thank you, Rupesh. That is it for the questions queue. With that, it concludes today’s call. Thank you all for joining. We appreciate your time. You may now disconnect your lines, and have a great day.
Operator: Good day, and welcome to the NN, Inc. fourth quarter 2025 earnings conference call. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Joseph Kameniti, Investor Relations. Please go ahead. Joseph Kameniti: Thank you, Chloe. Good morning, everyone. Thanks for joining us. I am Joseph Kameniti with the NN, Inc. Investor Relations team, and I would like to thank you for attending today's earnings call and business update. Last evening, we issued a press release announcing our financial results for the fourth quarter and full year ended 12/31/2025, as well as a supplemental presentation, which has been posted to the Investor Relations section of our website. If anyone needs a copy of the press release or the supplemental presentation, you may contact Alpha IR Group at NNBR@alpha-ir.com. Joining us today from NN, Inc.'s management team are Harold C. Bevis, President and Chief Executive Officer; Christopher H. Bohnert, Senior Vice President and Chief Financial Officer; and Timothy M. French, our Senior Vice President and Chief Operating Officer. Please turn to slide two, where you will find our forward-looking statements and disclosure information. Before we begin, I would like for you to take note of the cautionary language regarding forward-looking statements contained in today's press release, supplemental presentation, and the Risk Factors section in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025. The same language applies to comments made on today's conference call, including the Q&A session, as well as the live webcast. Our presentation today will contain forward-looking statements regarding sales, margins, inflation, supply chain constraints, foreign exchange rates, tax rates, acquisitions and divestitures, synergies, cash and cost savings, future operating results, performance of worldwide markets, general economic conditions and economic conditions in the industrial sector, including the potential impacts or ramifications of tariffs, impacts of pandemics and other public health crises and/or military conflicts, the company's financial condition, and other topics. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside the company's control, which may cause actual results to be materially different from such forward-looking statements. The presentation also includes certain non-GAAP measures as defined by SEC rules. A reconciliation of such non-GAAP measures is contained in the tables in the financial section of the press release and the supplemental presentation. Please turn to slide four, and I will now turn the call over to CEO, Harold C. Bevis. Harold C. Bevis: Thank you, Joe, and good morning, everyone. Thanks for spending a few minutes with us as we give you an update on the business and the state of the transformation in 2026. On slide four, I will begin with spending some time discussing the highlights of the fourth quarter. And Joe, can you advance to slide four? Mine looks like the webcast is slow. Thank you. 2025 marked NN, Inc.'s third consecutive year of improved results, and we were able to increase adjusted EBITDA results toward recent company highs and our adjusted operating income grew meaningfully, showing a significant improvement versus 2024. And we were able to fund a large vintage year of growth programs with our free cash flow. Importantly, we completed the majority of the heavy-spending portion of our transformation plan, which saw us close and consolidate four plants and right-size about 800 people. Second point is we are well underway in showing success in strategically evolving our business portfolio. We are intentionally shifting our sales profile towards higher-value end markets and higher-value capabilities and intentionally shifting away from low-value commodity automotive part-making and certain markets in the automotive arena. We are fixing and/or exiting the unprofitable plants that we inherited and business trips, and we are replacing this business with new wins in desirable areas. Our new business wins program continues to perform well, and we continue to focus it away from commodity auto part business. We have now won more than $200 million worth of new business since the launch of this transformation plan in mid-2023. Ahead of us this year are record levels of program launches. On top of that, we have a pipeline now that stands at over $800 million of high-quality prospects. One fun point that I wanted to point out is that we recently achieved our first new business win in the data center market. It is now a key target market for NN, Inc. and we fit nicely into it. We are making the high-precision watertight couplings that go into water-cooled computing equipment. In 2026, we are already migrating a bigger portion of our cash flow used toward investment in new business since the majority of our cost restructuring has been completed. Now we are in a better position to fund growth-related CapEx. In 2026 versus 2025, we are roughly doubling the amount of capital spending that we are putting into the business for growth purposes. That ability to fund comes from a higher level of EBITDA as well as completion of projects. 2026 is going to be a year where NN, Inc. returns to net sales growth, and it is happening right now in the first quarter. This is going to be an important pivotal year in our transformation, and our 2026 forecast calls for an end to focus on top-line growth going forward. One caveat that I want to point out, and Joe touched on it and it is in our risk factors in our 10-Ks also, is that volatility remains high in our markets. We are a supply chain participant in a lot of global supply chain decisions, and there is a lot of influence by tariffs, precious metals pricing, and ongoing geopolitical unrest. The volatility has increased a little bit here with the Middle East happenings. Except for that, we have the same type of risk factors this year as we had last year. Turning to slide five in the deck, I wanted to give a little more detail on Q4 and the full-year 2025 metrics. Our fourth quarter came in at $104.7 million; our full year at $422.2 million. This is a little lighter than we had hoped. Some of our main end customers reduced their inventory positions towards the end of the year and are now getting caught up in the first quarter, and we are feeling it. Tim, Chris, and I had not seen a good, healthy backlog of typical business since we have been here, and we are happy to say that we do have backlogs here in the first quarter because people are getting caught up with some of their end-of-the-year decisions to reduce their inventories, and we are having a good quarter. But a takeaway on our sales is that we were able to rationalize some commodity, no-profit automotive parts, and we have largely done that with these plant closings and exits, and we are happy to say that that is largely behind us. Our adjusted operating income also has been nicely improving. Adjusted EBIT, which is what we are focused on as well, in the fourth quarter was $3.3 million, and we had $14.2 million for the full year. Those results are roughly three times the prior year, and we foresee and forecast a nice improvement this year again. The results are coming from a leaner, more efficient operating model across all of our operations, and we are running a cleaner set of business through our machines because we have rationalized some of the low-end stuff. Now we have a more structurally supportive model to deliver positive operating income and adjusted EBITDA. Our adjusted EBITDA continues to improve. It was almost $13 million in the quarter, $12.9 million for the full year. These results were above prior year and also pushing towards company highs. Despite the continued weakness and volatility in the global automotive and commercial vehicle markets, we were able to perform at that level. Our adjusted EBITDA margins are forecast to expand again this year, and the Q4 margins were up 90 basis points year over year, and we are continuing to improve in line with our long-term goal that we have stated in past talks like this, 13% to 14%. Our new business wins continued on the same pace, and we were awarded more than $4.07 billion for the full year. We exceeded our guidance and expectations. We were still somewhat capital-limited last year on this topic because we were spending a lot of money on restructuring still, and we have more to spend now on a go-forward basis. That is one reason why we have increased our goals now that we are intending to pursue new business. The key wins were concentrated in our focus areas and especially beneficial to us last year and continuing is the surging defense electronics industry in the United States. We are directly benefiting from that, and it is immediate ramp-up type of business. We continued to secure new awards that were at accretive gross margins and are still averaging over 25%. We are positioned to continue winning business in 2026. We have a couple of large foundational programs underway right now in medical and in defense, and they are going to be gateway wins for us. We already have a large multiyear re-win in our electrical power business that we have accomplished this year year to date, where we beat out two large global competitors and secured that business on a go-forward basis. Our adjusted gross margin performance was 18.8% in the fourth quarter and 18.5% for the full year, which again has us trending towards our five-year goal of 20% consolidated gross margins, and in this area, we are ahead of our plan and we are encouraged by our progress. This strong performance is driven by the operating improvements that I have touched upon here a couple of times, as well as the shifting in our portfolio towards our profit business. On cost and operational leadership, it is an ever-present goal for us as a manufacturer to be better and better at manufacturing with a continuous improvement mindset, and we accomplished our goals in 2025. SG&A as a percentage of sales continued to drop as well and is now at 10.9%. We have all but eliminated an expensive executive layer that was here when we arrived, and we have reinvested some of that payroll savings into a bigger business development team. We are happy to report that we achieved our cost-out targets of $15 million for the year, which offset all inflation and pricing and implemented the re-rationalizations that we wanted to do, and we have plans for another $10 million out this year. This operational performance and ability to lower costs has helped us overcome the rapid rise in precious metal cost inflation, which has been a big deal for us that we have been able to conquer and still increase our ratios on top of it. Please turn to slide six, Joe. I wanted to talk a little bit about 2026, and then Chris and Tim are going to add portions to it as well. As already mentioned, we are forecasting revenue growth in each quarter and across the full year of 2026, and that growth is happening. It started immediately in January, as I mentioned, because there was some curtailment of supply chains at the end of 2025, which are now being refilled, and we will continue growing through this year. The global automotive markets are expected to grow slightly in 2026, a couple of percent, but the growth outlooks are very region-specific, and so we have outlooks for North America, South America, EMEA, and Asia that are specific to the region and take into account adoption rates of EVs as well as affordability issues. The commercial vehicle market is expected to begin growing this year in 2026, and it has already started out that way with strong orders over the last three months. Just yesterday, ACT Research came out with the February orders, and they were some of the highest orders ever received for that time of the year. There is an EPA 2027 mandate that is forthcoming, and the long-awaited pre-buy in that market seems like it has started, and we will benefit from that and are benefiting from that, and that is one of the sources of our positive back orders right now too. We have a strong supply chain of orders in that area already, and it happened rather quickly. It happened in December, January, February. Our 2026 outlook calls for gross margin growth and adjusted EBITDA growth, and this will be balanced through the year, also starting in Q1. Our outlook for this year is supported by gradually improving markets. We do not really see any V-shaped recoveries, if you will, the hardest growth that we are participating in, the most upward, is U.S. defense business. It is likely to get stronger as all the munitions are being used and weapons are being used, and that is where we are participating in that. We are seeing increased volumes. We do have another $10 million cost-out program this year, and we have a record amount of new business launches that is underway, and we have a record amount right now in the quarter. So we have a lot of positive tailwinds right now in the business, and we are thankful for that. Tim and Chris, please knock on wood after I said that. Unfortunately, although our sales rates and production rates of U.S.-made cars are growing, we expect the U.S. auto parts market to remain volatile. Industry forecasts call for automobiles to be made and sold, but there are continued supply chain issues stemming from global tariffs, U.S.-caused trade wars, a fundamental reset that is going on between vehicles and internal combustion engines, overall affordability of U.S.-made vehicles, EPA resets, and now war in the Middle East on top of the Russia-Ukraine war. The automotive supply chains in the world are very global, and these are very disruptive things that are happening right now. The new normal will be volatility, and I would just say it is continuing. It does require tactical maneuvering on our part. As a supply chain participant, really, we are a taker on a lot of these decisions that are at the OE level. But we are upsizing our new growth program, and we have more CapEx to spend this year, and therefore, we have set higher goals and we are committing to a higher outcome. We are now looking to achieve between $70 million to $80 million of new wins this year, and I will just tell you, we have already started off this year in the first quarter on that pace. Overall, we still remain capital-constrained due to our capital stack, and I will give you an update on that later. But we have incrementally increased the amount of CapEx that we are going to spend on growth. It is very deliberate; it is very intentional. Tim and I approve them one by one. We look at every one of them. What market are they in, who is the customer, what is the part, do we want to spend money on that, do we want to spend money on that right now? I can tell you that we are hands-on with the growth topic. It is very deliberate. Overall, we are excited for this year. We can see that it is going to be stronger than last year. Our performance in the first quarter is already on track to achieve higher outcomes, and we are off to a good start. With that as an introduction, I will now turn the call over to Christopher H. Bohnert and Timothy M. French, and then I will come back and review some of the market information later. Chris? Christopher H. Bohnert: Thank you, Harold. Good morning, everyone. Today, I will be presenting our financial information on both a GAAP, or an as-reported basis, and pro forma basis to provide transparency into our operating results, primarily due to the exit of certain unprofitable business in this year and part of last year. I will start on slide seven, where we detail our financial results for the fourth quarter. I will get into the full year as well. Slide seven shows our as-reported GAAP results on the left side, pro forma adjustments in the middle, and pro forma results on the right side, as we have done in previous quarters. As a reminder, we use these adjustments to provide a representation of how management views and makes decisions about our business on a current and go-forward basis. The pro forma specific adjustments to the fourth quarter include last year's contribution from strategically rationalized sales volumes and the impacts of foreign currency translation on our non-U.S. operations. On an as-reported basis, net sales for the quarter were $104.7 million, declining by about $1.8 million versus last year's fourth quarter. On a pro forma basis, accounting for the adjustments I referenced earlier, our net sales increased $1.4 million, up about 1.4% versus the prior-year fourth quarter. Adjusted operating income for the fourth quarter was $3.3 million compared to $2.4 million in last year's fourth quarter. On a pro forma basis, operating income was down slightly to $3.2 million, or about 5.7% versus the prior year. Our adjusted EBITDA was $12.9 million, as Harold mentioned, for the quarter, up from $12.1 million a year ago. On a pro forma basis, adjusted EBITDA increased $1.1 million, or 9.3% year over year. Adjusted EBITDA margin was 12.3% of net sales. This represents about a 100 basis point improvement on an as-reported basis, expanding 90 basis points on a pro forma basis, so a nice increase there. Now turning to slide eight for the full year 2025. Our pro forma results and comparisons also normalize for the sale of the Lubbock business, which was divested in 2024. On an as-reported basis, net sales for the year were $422.2 million, declining $42.1 million versus last year. On a pro forma basis, adjusting for the sale of Lubbock, strategically rationalized sales volumes, and FX impacts, net sales decreased $7.4 million, or 1.7%. Adjusted operating income for the year was $14.2 million, up $9.1 million from $5.1 million in the prior year. On a pro forma basis, the results marked a steep improvement, more than doubling from the $7.0 million in 2024 on a pro forma basis. Adjusted EBITDA for the year was $49.0 million compared to $48.3 million for the prior year. Pro forma, our results increased $2.2 million, up about 4.7%. Adjusted EBITDA margin was 11.6% of net sales, representing an expansion of about 70 basis points on a pro forma basis. We worked through the transformation across our business; we have grown our adjusted EBITDA now towards pro forma company records. Meaningfully growing our operating income, and we have expanded our margins and advanced margin capture toward multiyear targets. Notably, we have done this work to improve our structural profitability despite a smaller top line, which has reflected the impacts of our exit of dilutive sales volumes. We are now prepared to continue delivering our growth through our operating income and adjusted EBITDA, coupled with an expected return to sales growth beginning in 2026. Now I would like to turn to slide nine, where I will detail our performance across our operating segments. For year-over-year comparisons, I will be speaking to our pro forma numbers. In our Power Solutions segment, where our business consists largely of stamped products, net sales for the quarter were $45.5 million, up $5.9 million, or 14.9%, compared to $39.6 million in the prior-year period. This improvement was driven by the increase in precious metals pass-through pricing, as well as the benefit of new program launches in electrical and defense business. This improvement was partially offset by lower sales volumes concentrated in one stamping products customer. For the full year, Power Solutions pro forma net sales of $178.6 million improved 5.3% compared to pro forma net sales of $169.6 million. Power Solutions adjusted EBITDA results as reported of $6.4 million increased $0.8 million versus last year's fourth quarter of $5.6 million. This improvement was driven by sales growth, particularly in defense and electronics products, and was further supported by operational cost reductions, higher margins, and an overall improved sales mix. On a full-year basis, Power Solutions segment adjusted EBITDA of $30.7 million improved by $3.0 million, or 10.8%, compared to the full-year results of $27.7 million as a function of our adjusted EBITDA growth, 90 basis points versus 2024. We won an additional $3.1 million in new business awards for the segment in the fourth quarter, bringing the full-year total to $13.2 million. Our wins have largely been concentrated in key target growth markets of electrical, defense, and electronics products, which we expect to remain strong growth sectors for our business. Christopher H. Bohnert: Now turning to slide 10, our Mobile Solutions segment, which covers our machined products business. Net sales for the fourth quarter were $59.3 million compared to the prior year of $63.8 million. Net sales comparisons were primarily impacted by the rationalization of dilutive business and lower volume in North American auto customers, partially offset by favorable foreign exchange effects. For the full year, pro forma net sales of $244.0 million declined $25.0 million, or 9.3%, compared to results of $269.0 million in the prior year. We note that while we observed weakness in the North American auto markets across the year, our sales comparison was largely concentrated to one specific auto part customer which had pushed out volumes due to its own production disruptions. Our fourth quarter adjusted EBITDA in the Mobile Solutions segment was $10.0 million, up slightly versus last year's fourth quarter on a pro forma basis. Quarterly adjusted EBITDA results reflected our successful shedding of unprofitable sales, which has improved the margin mix of the business, combined with overall lower operating costs. These factors have helped drive adjusted EBITDA margins to 16.9% for the quarter, up about 160 basis points from the same period a year ago. For the full year, Mobile Solutions adjusted EBITDA of $33.5 million declined 4%. Notably, adjusted EBITDA margins of 13.7% showed expansion of about 70 basis points for the full year versus full-year 2024, displaying the impact of business rationalization and footprint consolidation. On the new business front, we continued achieving new wins in innovative programs totaling $26.2 million in the fourth quarter and $58.6 million for the full year. We won over 200 individual award programs in 2025, including machined parts in defense and medical markets, as well as high-quality automotive programs focused on more innovative next-generation fuel efficiency for internal combustion powertrains. Thank you. With that, I will turn the call over to Tim, who will discuss our commercial and operational progress. Tim? Timothy M. French: Thank you, Chris. I will begin with slide 11. Our new business momentum has continued to build and is now translating into meaningful scale and future growth. As Harold mentioned towards the top of the call, over the trailing three years, we have secured over $200 million of new business wins. With quarterly commercial performance remaining consistently strong across that timeline. Importantly, these awards are coming in at an average gross margin of about 27% and are concentrated in strategic markets where we see the best long-term value. It is worth noting that the implied margins on these wins are meaningfully above the multiyear goal of 20% and higher than current levels for the business. As these programs launch, they will be accretive to the overall margin profile and help support profitability and earnings improvement. Over the last three years, we have fundamentally rebuilt our sales pipeline, which had atrophied in the years before the launch of the transformation. Now our pipeline sits strongly at $800 million of potential opportunities. Our commercial execution is focused on disciplined growth. We are winning where our technology and differentiation matter most, particularly across defense, medical, data center, and other high-reliability applications. Supporting this outlook, our global team of roughly 40 commercial and technical personnel are actively pursuing and executing against the pipeline. These opportunities convert to wins, launch cadence steps up meaningfully. 2026 will be a very big year for launches as we expect to launch over 100 programs. As I mentioned, the new programs are margin accretive and continue to shift our mix towards structurally stronger, higher-reliability end markets while reducing relative exposure to commodity automotive. Overall, the combination of strong bookings, a deep pipeline, and strong launch schedule gives us confidence in the durability and quality of our growth trajectory. Turning to slide 12, I will briefly touch on our long-term roadmap. Notably, we remain well on track to meet our long-term goals that we have laid out as part of our enterprise transformation. Our 18.5% adjusted gross margins consistently showing improvement in each sequential quarter and pulling in line with our 20% adjusted gross margin goal. Our adjusted EBITDA, supported by an improved, leaner, and more efficient operating structure, is expected to continue improving and delivering on higher margin rates. Expect to grow at a 10% compounded annual growth rate, reaching $80 million in adjusted EBITDA by 2030. Overall, we see approximately 5% market growth, further supplemented by the benefit of approximately 2% share gain, as we hone our commercial efforts in electric grid, data center, defense, electronics, and medical markets. As we do this, we are strategically deemphasizing less valuable elements of our portfolio, with the explicit intent to continue lowering our overall portion of the company attached to commodity automotive parts. In parallel, we will continue advancing our successful cost-out programs across our operations. In 2026, we aim to drive approximately $10 million with cost rationalization, which will help offset pressure from inflation and pricing. And finally, as we move forward, we are going to continue sharpening our focus on areas critical to our growth that align with our highly valued capabilities. These include robotics— Harold C. Bevis: Did we lose Tim? Operator, can you hear Tim? Timothy M. French: Can you not hear me, Harold? Joseph Kameniti: Yeah. I can hear you. Timothy M. French: Okay. Well, then just closing, these include robotics, artificial intelligence, automation equipment, as well as opportunities for material and vendor substitution. With that, I will turn the call back over to Harold. Chris, are you able to hear me? Christopher H. Bohnert: Yeah. I can hear you, Tim. Operator: Harold, is your line muted? Everyone, please stand by while I check the speaker line. Harold, please proceed. Harold C. Bevis: Thank you. Tim, are you there? Timothy M. French: Yes. I am. Harold C. Bevis: Okay. I got dropped for some reason. Are you to me now? Timothy M. French: Yeah. I completed, and we are ready for you on slide 13. Harold C. Bevis: Thank you. I apologize to the listening group here. I got dropped off the call somehow. I would like to talk about the markets for a moment, starting with the electrical grid and data center market, which is 60% of our sales, that there is a strong market outlook for this year. There are many announcements being made to expand aggressively the data center infrastructure. We participate in this market in the U.S. and in China. There is a big announcement by Amazon and a lot of the data center builders, and we continue to see growth in this area. The next market underneath that on the chart is the China automotive market, where we have been in that market for about twenty years, in the China automotive market and the China commercial vehicle market, and the China data center market now. But the automotive market has a good outlook for the year. It started off at the beginning of the year kind of weak. BYD and Geely being big end OEs that we service, they have had some timing issues in their local market. But this remains a strong element of the NN, Inc. portfolio, both sales for use in China as well as the export market for those vehicles and those parts. On the commercial vehicle side, we expect to see this market improving this year. As I previously mentioned, the growth looks like it is going to be sooner than had been forecast, as orders have come in strong for the first few months of the year already, and there are structural reasons for that if you follow that market, so it looks sustainable. It is not a fluke. Defense electronics is 10% of our business, and it is growing strongly, specifically with an end customer we serve being Raytheon and the desire for their missile defense systems. We are basically increasing our production capacity and our ability to make larger parts as well. Our own organic growth here is expected to remain strong through the year, and it is building, and we have already been given multiyear volume increase outlooks from several customers as forward indication of what we need to do. On industrial, we are really tied into GDP-level growth here, a lot of building products as well, like smoke detector parts and security system parts, and our primary focus in this area is innovation takeover business, and we are having good success. Medical remains a steady and growing market for us. For us specifically, we have been increasing the breadth of our team that focuses on this market. We now have a very large, strong pipeline of opportunities, and I mentioned earlier in my initial comments, we are on the edge of foundational large programs that will enhance our credibility. Global automotive is North America, South America, and Europe. We carry tempered expectations for the year here, not negative per se but tempered by volatility. The view here is that we will continue to participate in the high-end part of the market for very precise parts, and our goal here is over time to hold our sales flat by re-winning the amount of sales that go into production and replacing them, staying flat, keeping our capacity equally full, not going backwards, and it is not a focus area for us. It is really a hold-your-own kind of area, and this part of the company's portfolio will shrink over time. Intentionally. On page 14, in December, we announced that our Board had launched a committee to look at our financial and strategic options. We have previously discussed in some of our calls together that our capital stack is problematic. There is basically too much debt plus preferred equity, and we would like to solve that over time. We are looking at various options here. We really have no updates that are concrete. I just want you to know that it is underway. It is a Board process, and it is ongoing, and when there is something big to say, we will say it. But right now, we do not have anything, and instead, we are just focusing on looking at our options and basically letting the business grow right now, which is what is happening. Turning to slide 15, I would like to talk about 2026 and what our guidance is. We are guiding to net sales growth, which is meaningful to us: $445 million to $465 million in sales, which covers the consensus outlooks on us, anchored by the new program launches which Tim walked through, and they are expected to occur through the year, and we have already been winning new business that is immediate ramp-up for this year. So this will be a strong area for us during 2026. We have overall strengthening of some of our end markets, as I mentioned, commercial vehicle markets coming back after a three-year freight recession, and defense is growing much stronger than anyone had expected. No one had expected President Trump to be able to go through as many munitions as we have in a short amount of time, and we participate in the reloading of that supply chain. Adjusted EBITDA—we are starting with a wider range here as the year starts, and we will narrow it and focus it as the year unfolds. But as I mentioned, the first quarter is already starting off very well, and it is supported by higher contribution margins. Our mix is naturally higher now and we have unit volume growth underway, and we expect that to continue through the year, and so we are going to have good mix. Usually people talk about getting hurt by mix; we are going to benefit from mix, mix that we have caused. Furthermore, we are going to reduce costs another $10 million this year to more than offset the inflation and pricing agreements that we have in place, and we are going to increase our new business wins target to $70 million to $80 million. We have a long-term goal to get to $600 million in organic sales, as Tim touched on. We do have EOPs during the five years, so another way to think about it is our sales plan is replace EOP plus another $200 million. To do that, we have to win above that $200 million rate because we do have EOPs during the period as well. As mentioned, our pipeline is more than sufficient. We are running over a 20% hit rate and carrying an $800 million prospective pipeline. This is just a matter of doing the job on a continuous basis and making it happen. We have continued to add key personnel in defense, electrical products, data center products, electronics, and medical. We are looking forward to this year, and we are excited about this year, and we think that it is going to be a nice record year for the company. With that, I would like to turn the call over to our operator to answer any questions that you might have. Operator: Thank you. We will now begin the question-and-answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. Our first question today comes from John Edward Franzreb with Sidoti. Please go ahead. John Edward Franzreb: Good morning. This is Justin on for John. Harold C. Bevis: Hello, Justin. John Edward Franzreb: Hey. Can you expand on the data center end market opportunity, including any additional color on the size, expected ramp timeline, and margin profile of your first direct data center win? Harold C. Bevis: Yes. We have a couple of product angles into the data center market. We are focused on the cabinetry that houses the equipment and specifically the cooling. It is a very high-precision, micron-tolerance type setup so that the cooling does not escape the cooling system and damage equipment, and it plays right into our capability as a very precise, micron-level tolerance achiever. The first entry point was to become an approved supplier to the equipment-building crowd as a provider of watertight coupling, and it turns out it is very much needed. The cabinets are dense with this type of product. We are putting our hands around the size of the TAM. It is a very specific thing, and we do intend to report out on it in our next public call. We have a team underway with that right now. The second product that we are targeting into the data center market is cable assemblies. At the top of the rack is a distribution of the electricity busbar as well as high-voltage cable assemblies, and we can make those also. The new team we hired at the end of last year from the electrical products background, with Mohammed Farhad as our leader technically, and then Tim Merrill and three other people that are account managers that know the industry well, are now prospecting. We do have formal pipelines, and we do have customers delineated, and that is what we are doing. It is not a long ramp-up either. It is not like the gestation period for getting onto a medical equipment or an automobile or commercial vehicle. It is an immediate ramp-up kind of industry because the supply industry is behind. There is a need for more gigawatts of power in data centers than is in place, so it is an immediate ramp-up business for us. We are quite excited about it. John Edward Franzreb: Very helpful. Thanks for the color there. Maybe shifting gears to transformation, with the heavy lifting behind you, including plant closures and exiting dilutive businesses, what does the roadmap for sustaining sales growth in 2026 look like? Harold C. Bevis: Yeah. So roughly speaking, if you look at the 10-K and the numbers that Chris and his team have put out there, we are going to be doubling our capital spending. The biggest use of our free cash flow is cash interest to service our debt, and the second is CapEx, and so we are increasing the amount of CapEx that we are going to allocate to growth to really continue the paths that we are on. So this year, growth primarily, 85% to 90% is from new wins, and it is going to come from wins that preceded the beginning of the year. We are ramping up business that we already won. This year's wins primarily will benefit 2027 to 2028, with the exception of areas that are immediate ramp-up like data center, like defense ramp-ups that are happening right now, like the volume increases that are going on in commercial vehicle platforms where we are already approved. There is just an increased production rate. So 2026, we can see very well, Justin, and the new wins program for this year will create the outline for 2027 and 2028. John Edward Franzreb: Great. Thanks. Good luck in 2026. I will turn it back. Harold C. Bevis: Thank you, Justin. Operator: The next question comes from Rob Brown with Lake Street Capital Markets. Please go ahead. Rob Brown: Congratulations on all the progress. On the kind of the ramp of new business in 2026, I think your chart showed a pretty strong ramp of sort of full program kind of ramp rates. But what is the cadence of ramp in 2026 in terms of revenue this year versus future years? Harold C. Bevis: Yeah. You want to take that one? Timothy M. French: Sure. Obviously, when we are ramping up launches, it is not an immediate turn-on of the peak annual sales. So we are launching over 100 programs this year, and we would expect to see somewhere around between $20 million and $25 million of revenue from those launches that occur in 2026. But you also have to keep in mind that we launched programs in 2025 that will continue to escalate as well. But from launches purely in 2026, it will be between $20 million and $25 million of revenue. Rob Brown: Okay. Great. That is very helpful. And then on your CapEx outlook, I think doubling that would put it around $25 million to $30 million. What sort of CapEx activity are you planning, and what program areas do you need CapEx for? Harold C. Bevis: You want to do that, Tim? Timothy M. French: Sure. The bulk of our CapEx goes towards growth programs. We will be spending well over $15 million in growth programs, and it is not focused on any specific area. It is tied to a program launch and capability requirements within that. But 75% of our CapEx spending will be focused on capital required for launching new business. Does that answer your question? Rob Brown: Yep. Very good. Thanks, Tim. I guess one last question just on Q1 activity. You mentioned some strength in Q1. How much visibility do you have beyond that? Is Q2 looking strong as well, or is that really hard to say at this point? Harold C. Bevis: We have released orders into the second quarter already, and we have, Rob, a real healthy backlog already. We have a shippable backlog that hit us a little bit by surprise with the strength that happened in commercial vehicles over the last few months. We have forecasts with our customers. Generally, we force specificity through our raw material lead times, so we can already see Q2. Yes. For Q3 and Q4, we do not have firm releases that go out that far, so we just have expectations from our customers, and it is looking to be very, very consistent with the sales guidance we just gave. I wanted to add another point to your last question, Rob, on CapEx. If you look at our net CapEx last year, it was about $10 million, and this year it is going to be about $20 million, and to Tim's point, it is primarily going to be on more growth, funding more growth programs that will help this year and next year, and primarily next year. Primarily, the capital spending for this year will help make 2027 larger because we are basically saying yes to more programs. In fact, we yesterday said yes to a pretty large program that was about $1 million of capital, for example, and it will take about six months to get the machine. It is one machine that we need, that we are out of capacity on, and we already have the load for it. The spending this year, primarily the extra spending, will primarily help next year. The $10 million kind of rate, we had already pre-spent that with programs that we were awarded last year. So absolutely inflecting up intentional growth in these target areas, and it is already hitting the first quarter. Rob Brown: Okay, great. Thank you. I will turn it over. Timothy M. French: Thank you. Operator: We will conclude our question-and-answer session, and I would like to turn back to Harold C. Bevis for any closing remarks. Harold C. Bevis: Thank you, Chloe. Thank you, everyone, for staying on the phone for a bit with us, and we are pretty happy to report this update on the business. It is quite positive. It is a nice inflection point for us to be reporting on growth and growth and growth now, and we want to get more growth. It has been our game plan all along to get the ugly restructuring out of the way. We had to part ways with about 800 employees and sever them and pay those severances. We had to close four plants. But it is behind us, and we are thankful for that, and we have a more profitable, cash-generative company now, and we are using it to our advantage to be competitive in the areas where we want to. We are off to a good start. Thank you for your support, and we look forward to speaking with you again in the future. With that, we will end our call for today. Timothy M. French: Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Greetings, and welcome to the Olaplex Holdings, Inc. Fourth Quarter 2025 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Oriolo, Vice President of Investor Relations. Thank you. You may begin. Michael Oriolo: Good morning, everyone. Welcome to our fourth quarter fiscal 2025 earnings call. Joining me today are Amanda Baldwin, Chief Executive Officer, and Catherine Dunleavy, Chief Operating Officer and Chief Financial Officer. Before we start, I would like to remind you that management will make certain statements today are forward-looking, including statements about the outlook for the Olaplex Holdings, Inc. business and other matters referenced in the company's earnings release issued today. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied by such statements. Additional information regarding these factors appears under the heading “Cautionary Note Regarding Forward-Looking Statements” in the company's earnings release and the filings the company makes with the Securities and Exchange Commission that are available at www.sec.gov and on the Investor Relations section of the company's website at ir.olaplex.com. The forward-looking statements on this call speak only as of the original date of this call, and we undertake no obligation to update or revise any of these statements. Also during this call, management will discuss certain non-GAAP financial measures, which management believes can be useful in evaluating the company's performance. The presentation of non-GAAP financial measures should not be considered in isolation as a substitute for results prepared in accordance with GAAP. You will find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures in the company's earnings release. A live broadcast of this call is also available on the Investor Relations section of the company's website at ir.olaplex.com. Additionally, during this call, management will refer to certain data points, estimates, and forecasts that are based on industry publications or other publicly available information as well as our internal sources. The company has not independently verified the accuracy or completeness of the data contained in these industry publications and other publicly available information. Furthermore, this information involves assumptions and limitations, and you are cautioned not to give undue weight to these estimates. For today's call, Amanda will start by providing highlights of fourth quarter and fiscal year performance and discuss the progress we have made on our strategic areas of focus. Then Catherine will discuss our financial results and 2026 outlook. Following this, we will turn the call over to the operator to conduct the question-and-answer session. With that, I will now turn the call over to Amanda. Amanda Baldwin: Thank you, Mike, and good morning, everyone. I am pleased to be here today to share that for the full year of 2025, we delivered on our financial expectations while advancing our transformational goals. Net sales were flat at $423 million and adjusted EBITDA margin was strong at 22.2% even as we invested to strengthen our foundation for the future. The year ended on an encouraging note, with fourth quarter revenue growth of 4% and adjusted EBITDA outperforming expectations. I am incredibly proud of this team and feel that we are well on our way in our transformational journey to deliver long-term sustainable growth built on the incredible scientific foundation that is at Olaplex Holdings, Inc.'s core. As a reminder, in 2024, we focused on the research and foundational work needed to build a brand and a business at a global scale. We began the development of our innovation and marketing functions, reconnected with our pros and our partners, designed new business processes, and assembled an experienced and passionate executive team. In 2025, we introduced our Bonds and Beyond vision to create a foundational health and beauty company powered by breakthrough innovation that starts with and is inspired by professional hairstylists. We moved from planning to making that vision a reality across three priorities: generating brand demand, harnessing innovation, and executing with excellence. As I reflect on where we are today, we have reclaimed our rhythm, sharpened our tools, and solidified what we believe is a stable investment model. Now we step into a new chapter focused on optimizing our investments and moving faster with both purpose and precision. From the start, we have called out that transformation is not linear, and that remains the case. But we believe that we have made great progress toward delivering long-term value creation in an industry that is healthy and growing. Our industry remains vibrant. According to Euromonitor, premium hair care is forecasted to grow at 6% to 7% through 2029. We believe hair care is in the early innings of premiumization, with premium hair care representing only 20% of the overall hair care market. As beauty, health, and wellness continue to converge, we believe Olaplex Holdings, Inc.'s scientific capabilities, new brand positioning, and transformational agenda position us well to participate in and get back to leading the premium hair care market. As I just mentioned, to capture this objective, we introduced our Bonds and Beyond vision and outlined three strategic priorities for 2025: generate brand demand, harness innovation, and execute with excellence. I am pleased to share progress against each. Our first priority in 2025 was to generate brand demand. To achieve this, we launched a comprehensive new visual identity supported by a 360-degree marketing engine. We successfully refreshed the brand across every touch point, physical and digital, in an effort to ensure that our market presence reflected both our scientific credibility and the emotional resonance of our professional heritage. This transformation included a revamped website featuring elevated brand storytelling, refreshed in-store visual merchandising across our key retail and professional partners globally, and a revitalized content strategy spanning social media, influencer partnerships, and education. The results of this relaunch were clear and measurable. According to our brand health tracker at the end of 2025, brand awareness rose 7%, sentiment improved 3%, and purchase intent trended upward against our pre-launch baseline. We saw significant gains in key brand associations, specifically, we saw improvement in Olaplex Holdings, Inc. as essential to my beauty routine, and Olaplex Holdings, Inc. as containing special ingredients. Beyond sentiment, we significantly expanded our share of voice. In 2025, we increased earned media value by 14% year over year, engaged with nearly 4,000 creators, and generated approximately 2 billion impressions across our 2025 campaign. Our commitment to a pro-first philosophy remains at the center of the flywheel of our business. We moved beyond simple outreach to execute a multilayered strategy designed to put the pro back in the picture. A key highlight was our market blitz program. By deploying teams across seven high-density markets, we reestablished direct, high-touch relationships with stylists. These markets outperformed the baseline, driving average sell-through mid-teens higher on a percentage basis in the 60 days following an activation. In an effort to foster long-term retention, our newly scaled professional education team overhauled nearly 60 core educational assets, modernizing our curriculum to be modular and digital-forward. By integrating these assets with our field efforts, we are providing the professional community with a platform designed to reinforce our position as their most trusted partner. With our new visual identity and 360-degree marketing engine now fully operational, we believe the foundational work of our brand relaunch is complete. As we transition into 2026, our focus shifts from building the engine to high-performance execution. We are committed to raising the bar with every launch, better optimizing our investments, and remaining agile as we continue to sharpen our messaging in a dynamic market. Our second priority for 2025 was harness innovation. Over the past two years, we have worked to systematize our go-to-market engine, aiming to transform our scientific heritage into a consistent pipeline of high-impact launches. We aim to capture the unmet needs for both pros and consumers with the right product, timing, and global support. The potential of this engine was on full display this year, Olaplex Holdings, Inc. delivered four of the top five prestige hair care launches in the industry, according to Circana. To further fuel our long-term trajectory, we made the strategic acquisition of Pervala Bioscience. Pervala specializes in transformative, bio-inspired technologies that can be utilized to enter additional verticals across health and beauty. With a highly curated portfolio of only approximately 30 SKUs, we see significant white space ahead of us. Our third priority for 2025 was to execute with excellence. We have built out the people, processes, and tools we believe are needed to drive executional excellence and efficiency on a global scale. We developed integrated business planning, established clear KPIs, and implemented data analytics designed to improve our speed and outcomes. Additionally, we executed an international realignment that aims to ensure consistent execution globally and prioritizes investments of both time and dollars in markets with the greatest growth potential. We built a strong culture and believe we have hired the right talent that is committed to our vision and driving results. In conclusion, we continue to refine our approach as part of our transformation. Putting in place all the building blocks I have just discussed has already led to sales and sell-through metrics moving in the right direction. After a 35% decline in 2023, and an 8% decline in 2024, we stabilized sales in 2025. While for the full year of 2025, sell-through remained down, we exited the year with improving trends. In fact, in December, we recorded positive sell-through in key accounts reflecting the cumulative efforts of our strategic priorities over the year. The team and I are energized by and confident in the road ahead. So now turning to 2026. In 2026, we will enter a new chapter of our transformation. We have moved beyond the heavy lifting of a strategic recalibration and process building. Today, our focus shifts from our successful initial implementation to crisp execution, optimization, and the deliberate acceleration of our Bonds and Beyond strategy. We believe our foundational pillars are now firmly in place: a 360-degree marketing engine, a robust innovation pipeline, a realigned international strategy, and a strong leadership team. With our core infrastructure stabilized, productive partnerships, and the professional community reengaged, we are ready for our next phase. To drive this next phase, we have identified three strategic priorities for 2026 that continue to align with our Bonds and Beyond framework. First, energize our hero products. Second, fuel science-based innovation. And third, expand our diversified, scalable, go-to-market model. Let us dive into each of these. Our first priority is to energize our hero products. This year, we are utilizing our 360-degree marketing engine to maximize the productivity of our core franchises, which remain the most significant contributors to our brand health and overall volume. As I mentioned earlier, in December, we recorded positive sell-through in key accounts, reflecting the cumulative efforts of our strategic priorities over the year. In 2026, we intend to build on our sell-through momentum by positioning our heroes as the definitive choice in the market. We are upgrading and expanding our core assortments by capitalizing on what makes Olaplex Holdings, Inc. unique, specifically our proprietary claims and compelling proof of performance. We intend to continue to elevate our science-meets-style positioning through targeted marketing support and elevated storytelling. To support these assortments, we are focused on turning our brand awareness into consistent, repeatable conversion. Our second priority is to fuel science-based innovation. Olaplex Holdings, Inc. has always been about bringing technical solutions to real-world hair concerns, and in 2026, we are focused on doing that with even greater emphasis. This year, in addition to our heroes, we are continuing to build out our foundational portfolio. Our R&D and new product development processes have been refined to quickly prioritize innovation that addresses specific, meaningful consumer and professional needs. Our disciplined approach allows us to pursue growth in new verticals that are a natural extension of where we exist today. We are focusing on targeted, science-backed solutions that simplify the user experience and deliver visible results, and as a result, we expect to bring even more innovation in 2026 than we did in 2025. Our third priority is to expand our diversified, scalable go-to-market model. Following the success of our 2025 initiatives, we are focused on sharpening our execution across every channel. First, we intend to capitalize on our renewed professional momentum. After successfully reengaging the stylist community this past year, 2026 is about turning that advocacy into a high-velocity flywheel, ensuring our pro partners have the tools and support to remain our most powerful brand ambassadors. Second, we are deepening our point-of-sale partnerships to ensure our marketing and messaging translate well at every touch point, and utilizing key promotional windows to drive visibility while protecting our premium positioning. Finally, we intend to scale our global reach in a disciplined, repeatable way. Through our three-tiered international strategy, we are prioritizing high-potential regions and improving local execution. This priority also includes efforts to optimize our points of access to meet our consumers where they shop and ensure that as we extend our footprint, we do so with an unwavering commitment to brand integrity. The execution of our three priorities is already visible in our first activations of 2026, which center on the three icons that started it all: No. 1, No. 2, and No. 3. In January, we relaunched our original pro-focused No. 1 Bond Multiplier and No. 2 Bond Perfector with new messaging, education, and available as stand-alone products. This was in direct response to stylists' feedback, intended to remove purchase friction and allow pros to restock their backbars with greater flexibility. This relaunch is a critical reset moment for our professional community. We are currently executing a global retraining program with our partners aimed at allowing our pros to be the ultimate authority on bond building and hair health. Additionally, last week, we unveiled our most significant product innovation for 2026, No. 3+. Over a decade ago, we created the at-home treatment category with No. 3 Hair Perfector. It became a global phenomenon, selling on average one unit every six seconds since 2019. Nevertheless, consumer needs have evolved and so has our science. No. 3+ represents the next evolution in bond repair. Powered by Olaplex Holdings, Inc.'s patented bond-building technology and its new Damage Defense Cationic Complex, No. 3+ now repairs damage across the hair's inner structure and surface simultaneously. It delivers the long-term strength Olaplex Holdings, Inc. is known for, while providing the immediate softening and conditioning that today's consumer looks for, all in a fast, intuitive, three-minute in-shower treatment. The result is hair that is visibly transformed with clinically proven results: three times stronger, three times softer, and healthier-looking after just one three-minute use. In addition, we launched a backbar size to ensure that this new technology is available to our pro community. We believe the opportunity for this product is significant. Our internal research, supported by Circana panel data, indicates that there are approximately 40 million prestige hair care consumers who experience daily damage from heat, mechanical stress, and the environment, yet are not currently using a prestige treatment. Many of these consumers find the category overwhelming and the marketing claims confusing. It is our job to offer a solution. To mark the launch of No. 3+, we have built on our Billion platform with the launch of a campaign “Science Never Looked So Good,” inviting consumers into the Olaplex Holdings, Inc. lab to discover the innovation behind the formulas that have defined the bond repair category for over a decade. The work features actor and comedian Chloe Fineman as Olaplex Holdings, Inc.'s Chief Hair Officer, whose long-term relationship with the brand through her stylist, Olaplex Holdings, Inc. ambassador Jacob Schwartz, offers an authentic perspective on how advanced hair repair shows up in real life. The campaign brings joy and approachability to complex hair science, reinforcing Olaplex Holdings, Inc.'s transparent, science-led, and future-focused approach to hair care innovation. To maximize this moment, we are coordinating a unified global launch across media, influencers, and retail and pro partners. This includes a refreshed visual identity for our No. 3+ packaging that elevates our package design to match our scientific credibility. This refreshed packaging will be brought across our entire portfolio, reflecting our new brand identity with a phased implementation. In summary, we entered the year with brand momentum, a robust innovation pipeline, stabilized margins, and strong cash flow. Our strategic priorities are designed to accelerate our Bonds and Beyond vision. We believe that we have the right model, the right team, and the right actions in place to create long-term shareholder value built on the incredible scientific foundation at Olaplex Holdings, Inc.'s core. With that, I will turn it over to Catherine to review our fourth quarter and fiscal year 2025 results and 2026 outlook. Catherine? Catherine Dunleavy: Thank you, Amanda, and good morning, everyone. We are pleased with our results, which reflect the disciplined execution of our transformation plan. For the full year 2025, we delivered or exceeded the expectations we shared across net sales, adjusted gross profit margin, and adjusted EBITDA margin. Beyond the numbers, we have fundamentally strengthened our operating architecture, implementing more rigorous processes and establishing what we believe is a more stabilized adjusted EBITDA margin base upon which we can build for long-term growth. Fourth quarter net sales reached $105.1 million, a 4.3% increase year over year, led by strong holiday performance across professional and D2C channels. For the year, sales were $423 million, or flat year over year. Perhaps most encouraging and reflective of our transformational progress is our fourth quarter ending velocity. While total fourth quarter sell-through was slightly lower compared to the prior year, we exited December with positive year-over-year sell-through trends across our key accounts. We are moving into 2026 with clear sequential momentum. By channel, professional increased 18.9% year over year in the quarter to $36.8 million, with net sales increasing 5.5% for the year. In the fourth quarter, growth was driven by high-impact U.S. innovation and strong participation in global holiday events. As we execute our three-tiered go-to-market strategy, we deliberately shifted international volume towards the professional channel as a primary growth engine. Specialty retail declined 14.5% year over year in the quarter to $24.7 million, with net sales decreasing 8.3% for the year. This reflects our deliberate strategic pivot in international distribution, moving volume away from retail distribution partners towards pro partners. Additionally, sell-through remained down on an annual basis, but we saw encouraging momentum exiting the fourth quarter as our initiatives hit the market. Despite the top-line decline, retail outperformed our expectations in the fourth quarter. It is important to note that we believe inventory levels at our key partners are healthy. Direct-to-consumer increased 6.6% year over year to $43.6 million in the quarter, with net sales increasing 3.1% for the year. Our revamped digital strategy successfully captured demand around key shopping events. In the fourth quarter, we delivered strong holiday performance, which led to richer replenishment activity. Over Cyber Weekend, we outperformed select retail partners' expectations with our Wash and Shine kit ranking number one in shampoo and conditioner and our No. 7 ranking number one in hair oil within the premium hair care category. Additionally, we successfully sold on TikTok Shop during the fourth quarter, and while a small contributor to overall revenue, it significantly outperformed our expectations. We expect to expand the strategic channel in 2026 with a focus on recruiting new customers and boosting our overall content engine. By region, in 2025, U.S. net sales were down approximately 3% with international sales up approximately 3%. U.S. net sales remained down while we continue to focus on sequentially improving sell-through. International benefited from the execution of our new go-to-market strategy and our increasingly disciplined promotion process. Adjusted gross profit margin for the quarter was 70.6%, up 200 basis points year over year, driven by supply chain management, which offset lower margin on new products that have not yet reached full production scale or efficiency. Fiscal year 2025 adjusted gross margin was 71.8%, a 40 basis point improvement. Adjusted SG&A was $61.4 million for the quarter and $211.4 million for the year, an increase of $40.8 million year over year. This increase is aligned with our strategic priorities and primarily reflects increases in sales and marketing, which increased $5.9 million year over year in the quarter compared to the previous year and $26.7 million for the year. We entered 2025 with a clear intent to invest in our brand, our people, and our core infrastructure. We believe that we have now reached the right level of investment, and our focus in 2026 turns to refining and optimizing this spend. Adjusted EBITDA was $12.9 million for the quarter, representing a 12.2% margin. This compares to a 17.4% margin in the fourth quarter 2024. For the year, adjusted EBITDA was $93.9 million, representing a 22.2% margin compared to 30.7% in the prior year. This year-over-year change reflects the strategic investments in marketing and people we are making to position our business for sustainable long-term growth. We generated positive operating cash flow again in the fourth quarter. For the year, we generated operating cash flow of $58.7 million, reflecting strong management of our working capital and the power of our asset-light business model. We ended the quarter with cash and cash equivalents of $318.7 million and debt of $352.3 million. Inventory was $60.2 million, down $15 million from $75.2 million in 2024, representing our improved working capital discipline. Regarding our 2026 outlook, we expect net sales in the range of approximately minus 2% to plus 3% versus fiscal year 2025, adjusted gross profit margin between 71% and 72%, and adjusted EBITDA margin of 21% to 22%. This guidance assumes no material impact from tariffs. While the trade environment remains fluid, we believe our global supply chain is minimally exposed. Furthermore, it does not include disruption that may occur from the geopolitical environment. The full range of our outlook balances the momentum we see exiting 2025 and the confidence in our 2026 plan with a recognition that we remain in a state of transformation. Key drivers of our net sales guidance include improved sell-through. We expect sell-through to improve sequentially and turn positive for the year. The range reflects the magnitude and the pace of this recovery. Brand evolution and supply chain. 2026 marks the rollout of new packaging following our February 2025 visual identity launch. While we have robust plans in place, managing this transition alongside a multiyear innovation pipeline adds operational complexity. Our outlook prudently accounts for these evolving supply chain processes. Additionally, this guidance reflects a normalized impact from promotional activities in 2026 as compared to 2025. Macroeconomic context. Finally, we continue to monitor an uncertain global macroeconomic environment and shifting consumer sentiment. Ability to hit the high end of the range is tied in large part to the speed and effectiveness with which we execute on our three core priorities: energizing our hero products, fueling high-impact innovation, and expanding our diversified go-to-market model. As we continue through our transformation, we expect the slope of our demand to be weighted toward the second half of the year. We expect sell-through for both our heroes and our new launches to build sequentially throughout the year as our strategic initiatives take full effect. Specifically, for the first quarter, we expect sales to land below our full-year guidance range on a percentage basis compared to the prior year. We are strategically pacing the sell-in of No. 3+, whereas early 2025 innovation sell-in was more concentrated to the first quarter. Furthermore, EBITDA will be significantly pressured in the first quarter as we front-load marketing to support No. 3+. For the remaining of the year, we expect to see marketing efficiency improve year over year. We will also begin to fully lap our 2025 foundational investments, which started late in 2025, which we believe will allow us to optimize marketing spend. We expect non-sales and marketing operating expense to increase as we annualize the 2025 investments in people and processes that we believe are integral to the success of our transformation. Importantly, we believe our expected 2026 adjusted EBITDA margin range is a sustainable base upon which we can execute our vision, drive sustainable long-term growth, and unlock Olaplex Holdings, Inc.'s true potential. We entered 2026 with stable revenue and EBITDA margins, and are squarely focused on executing our transformation to support our long-term growth. As it relates to our capital allocation, we possess an advantaged asset-light business model that generates consistent, robust cash flow. This, along with our strong balance sheet, allows us to invest in opportunities to accelerate our strategic priorities and drive growth, explore tuck-in acquisitions similar to Pervala, and expand our long-term potential, and evaluate opportunities to return value to shareholders. In conclusion, we met or exceeded our financial expectations in 2025 while restoring brand momentum and strengthening the fundamentals of our business. We are navigating this transformation with discipline, and we enter 2026 with more stabilized margin and clear strategic priorities designed to accelerate our Bonds and Beyond vision and move Olaplex Holdings, Inc. towards consistent long-term value creation. Operator, we are now ready to take questions. Operator: Thank you. We will now be conducting a question-and-answer session. Please limit yourselves to one question and one follow-up, and requeue for any additional questions. The first question is from Susan Anderson from Canaccord Genuity. Susan Anderson: I guess maybe just to start out, maybe if you could talk about, I guess, just the discrepancy between the specialty retail and DTC. I guess, the retailer destock in the quarter? Did the specialty retail channel kind of play out as you expected? And then as we look to next year, you mentioned just first quarter being a little bit lower, but maybe also if you could talk about kind of the cadence the rest of the year and then any major launches you are expecting to impact the sales of the quarters? Thanks. Catherine Dunleavy: Thanks for the question. So let me take the first one you were asking about, which is our specialty retail. And again, we run the business and encourage everybody to look at it as our flywheel, and we also run the business for a total year. Our job is to put the product in front of the customer wherever they want to buy it, and initiatives that we might put in place that appear in the pro channel may actually drive revenue into the D2C channel. So we feel very pleased with the way our flywheel is working. Specialty retail, as we mentioned, outperformed expectations in the fourth quarter, and sell-through did improve sequentially in the fourth quarter versus the third quarter level. We had strong exit rate sell-through velocity, and our top customers turned positive. Additionally, when you look at consolidated retail performance, there continues to be noise with our international realignment, which serves as a headwind to that channel. So in conclusion, in retail, we are pleased with the momentum we are seeing, and sell-through turning positive we believe sets us up for a nice 2026. The second part of your question was about just the first quarter and going through the year. Let me take us on the journey of where we are as a company. 2025 was really our year of initial implementation. We went from planning in 2024 to our initial implementation in 2025. We introduced our Bonds and Beyond vision. We had our first three priorities against that vision: generate brand demand, harness innovation, execute with excellence. We are pleased, as Amanda just went through, with the progress we have made. We successfully relaunched our brand. We launched a full 360 marketing campaign. We accelerated our innovation. We built people, processes, and tools we need to actually execute. We executed our international alignment. And the progress was measurable. Sales were flat after an 8% decline in 2024 and a 35% decline in 2023. Sell-through improved sequentially throughout the year. Awareness, sentiment, purchase intent all increased. We had four of the top five prestige hair care launches. So we are in a much healthier place as we enter 2026 than we were in 2025. The first quarter revenue is going to be below the range and EBITDA significantly below the range. In the first quarter of last year, 2025, we had a very significant pipe for our No. 4 and No. 5 launch, and the pipe for the No. 3 this year is more balanced throughout the year. However, we are putting a lot of marketing spend against the launch of No. 3, which we expect to benefit all the rest of this year and well into the future. And that laps 2025, where we had not yet started to invest in marketing. We think we started at the end of the first quarter. So those two factors combined really drive our EBITDA margin outside of the range for the first quarter. As you think about the second and third and the fourth quarter, we expect sell-through to sequentially improve as we go through the year as we launch our innovations and our initiatives take effect, and our marketing outside of the first quarter you will start to see leverage. We put in place our foundational investments in 2025, and we get to benefit from those in 2026. That benefit will be partially offset by the people cost from the hiring that we did in the back half of 2025 annualizing throughout 2026. So for the year, our SG&A cost will be relatively flat, and we are confident in the EBITDA margins that implies. And we plan to hit our guidance just like we did in 2025. Susan Anderson: Okay. Great. Thanks for all the color there. Good luck this year. Catherine Dunleavy: Thank you. Operator: The next question is from Sidney Wagner from Jefferies. Please go ahead. Sidney Wagner: Can you share more on those additional verticals across beauty? Just curious, maybe any sense on timing of those? And then where do you see the most opportunity or consumer permission? And then one more just on where are the easy wins in share gain opportunity? You mentioned that you were seeing premiumization in hair. We have certainly seen that as well. How do you think about the TAM in terms of maybe a mass shopper trading up to prestige for the first time? Anything strategically or from a marketing perspective that you need to do to capture those consumers? Thank you. Amanda Baldwin: Hi, Sidney. It is Amanda. I will talk about that. And, obviously, innovation is the lifeblood of Olaplex Holdings, Inc. and certainly something that we have been focused on from, you know, over two years ago when I joined the organization. Job number one was to get this innovation engine going because there is so much opportunity. I would really focus this on things that we see as opportunity within hair care and the fact that we are a 30-SKU business, which if you look in comparison to other competitors in the market, the large competitors in the market, is significantly under what you might see. And as we talked about innovation and our strategy going forward this year, I think there are two different buckets. One that we are highlighting is the impact of hero SKUs, No. 3+ being obviously the most important of that and a real core launch for us this year. I think that there is a lot of opportunity, to your point about bringing people into this industry and into the premiumization. Through hero SKUs is often how one is able to do that. We have done research, and we alluded to this in the call today, that there are a significant number of consumers. We all experience daily damage due to everything that is going on, and our launch around No. 3+ today is that many do not yet understand the power of a treatment to fix that. And one of the things that I have seen in the hair care category, and we spent a lot of time, you know, again, very research-driven, very data-driven, a lot of social listening, and I have concluded that this is the highest passion, highest confusion category that exists in beauty, which I think is an extraordinary opportunity for us as a brand given that we are very fact-based and science-led. And so we will really be focusing, and I think we have talked over the last couple of years about the opportunity to put the marketing and the education behind our hero SKUs. We are now ready for it. We have not been ready for it yet, and so I think that is a really, really important moment for us. The second that we highlighted was this idea of science-based innovation and finding other areas where we can compete. You know, I will not share yet the future innovation pipeline in this organization. But I will say that it is quite robust, and as Catherine spoke to, we expect to have more innovation coming this year than we have in the past and just getting that engine going. We see a lot of white space in areas where we just simply do not compete. And lastly, that Pervala acquisition allows us to do these things with forward-thinking science and efficacy-driven positioning. Catherine Dunleavy: Yeah, I would just add on that, you know, as Amanda said, one of the first things she did when she came was to restart that innovation engine. We worked throughout 2025 to put in place robust operating processes that allow us to focus innovation and get to market as quickly as we can. We look out not just in 2026, but we have a multiyear innovation calendar where we have competing priorities for every slot that there is. We have more products that could fill that, so it is a nice place to be when you think about the strength of our innovation pipeline that has been built. Operator: The next question is from Owen from Northland Capital Markets. Please go ahead. Owen: Can you just walk us through and provide maybe a little more color on the strong performance in the professional channel and whether it was distributor restocking, new salon wins, stronger sell-through per door, the Blitz program—just any more color there would be great. Amanda Baldwin: I can speak to that. Nice to hear your voice, Owen. So really, there were two things that were job number one and job number two. Job number one was innovation. Job number two was get back to supporting the pro. This is the heritage of the brand, and so we really have been focused on this as the center of our flywheel from day one. It is a lot of different moving pieces, as you spoke about, that really come to being in contact with the pros, supporting the channels in which they purchase. The Blitz program was a very important piece of this, and I would also highlight our education program. That is something that is really brand new, overhauled over the course of approximately the last year when we put leadership in place into our education team, built out that team, built out the assets, and this—this, I think, of pro is something that does operate slightly different than the consumer business. It is much more human-to-human and education-focused than you might see in what I will call classic marketing in a consumer business. So we are just starting to see the benefits of that. We also had benefits of how we are handling promotions in that channel across the organization. We are just being a lot more thoughtful and disciplined in that approach. So there is a combination of a lot of things. And lastly, the international realignment that you also spoke about is the other key driver of this, and that was really about making sure—and this has been a story also over the course of the last two years—making sure that we have the right partners who are invested in supporting the pro is a really important piece of how we are thinking about our international business. Owen: Got it. Super helpful. And then secondly for me, focusing on that international front, strong year-over-year growth there. What markets drove that performance? And does 2026 guide assume that international continues to grow faster than domestic? Catherine Dunleavy: Thanks for the question. We really manage our business as a global business, as a global flywheel, and so we do not typically break out regional performance. We are pleased with our international strategy. We believe that it is what you are seeing in the numbers, and we are optimistic about our global guidance for 2026. Operator: The next question is from Olivia Tong from Raymond James. Please go ahead. Olivia Tong: Great. Thanks. Good morning. First question is just around the top-line progression, better understanding the Q1 expectation on sales. You mentioned obviously the base period comparison to a driver of a tougher start to the year, but I am a bit confused by that as you saw a lot of destocking last year, and it sounds like that is less of a factor this year. So, you know, when I look at the comps on a one-year basis, you have got a negative; on a two-year basis, you have the least demanding comp on a two-year stack. So just wondering if you could provide a little bit more color on sort of the cadence as the year progresses. And then what gets you on a full-year basis from the high end to the low end of the year given it is plus or minus a few points around flattish? Just trying to understand what is embedded in that expectation. Catherine Dunleavy: Thanks for the question. So let us talk about the first quarter. As we have consistently said, we manage the business annually, especially as we are moving through a transformation. Revenue performance in the first quarter is largely driven by the timing difference in the innovation shift. In 2025, we had a large concentration of shipments of No. 4 and No. 5. This year, we are strategically phasing in our No. 3+ innovation. So that is what you are seeing in the numbers. I can talk about the adjusted EBITDA margins again. You know, we will be significantly pressured in the first quarter as we are investing to support that launch, and you are going to see that return during the entire year. Amanda Baldwin: I would just build on that also to say that it was a very deliberate and strategic choice to launch No. 3+ at this moment in time. And so I think we have the opportunity to focus on our hero and really think about how that can build throughout the entire year. So it is just a very strategic choice to make sure that we are coming out of the gate strong. Operator: The next question is from Katie Sarah Grafstein from Barclays. Please go ahead. Katie Sarah Grafstein: Thanks. When you think about the development of the prestige hair care category over time, why do you think it has been less developed than the other prestige beauty categories? And is there a benefit of being a scaled player in this category just as you think about the importance of the pro channel? Thank you. Amanda Baldwin: Yes. Thanks for the question. I think there are a couple of different things at play. I think that historically in prestige hair, the channels were much more tightly defined than they exist today. So the flywheel that we are talking about is relatively new. The history of premium hair, if you rewind, I am going to go with probably ten years ago, there was a very strong line between products that were available in the pro channel for salons and things that were available elsewhere. So you really did not see premium or pro hair available outside of the salon. So just the size opportunity and scale opportunity of the channel has changed dramatically as we are able to access retail channels and direct-to-consumer, which is obviously where much of the business in the beauty industry is happening. I think the other thing is actually intention of the consumer. Like I said, there is a lot of passion around hair. I think that there is a growing interest in hair and how it actually works. It is something that I think we have actually seen in the skincare industry before. I think it is an interesting model of comparison to look at where there was a probably earlier-stage prestige skincare business, and we have seen that grow significantly over time as people have learned to understand the impact of a more premium product and the impact of science on the efficacy and the results that we see. I think that is why Olaplex Holdings, Inc. is so well positioned at this moment in time, and I would venture to say that Olaplex Holdings, Inc. really started the conversation around scientific and science-led hair care. And we are really excited to get back to leading that conversation. So I think it is a lot around consumer behavior. There is channel behavior. And what we are seeing from our partners around the globe is that they are very excited about what the potential is in this category, which I think bodes well for our future. Operator: The next question is from Andrea Teixeira from JPMorgan. Please go ahead. Andrea Teixeira: Hi, good morning, Amanda and Catherine. Thanks for the question. I was hoping if you can please talk about your distribution and shelf into this innovation? And is the outlook that you are embedding in 2026 for distribution to be flattish, or any movement up or down? And then when you think about sell-in and sell-out, I was just hopeful to see how you exit. And you talked about sell-through getting better in December, which is encouraging. But I was hoping to see as you launched March, I just want to see how those dynamics have been playing out and the same with the pro, anything that you have—you talked about the backbar and then the way they have been encouraged with the relaunches. So just to feel like how the sell-through, the sell-in and sell-out have been pacing and consumption in general. If you can talk about consumption into the first few months of the year, that would be wonderful. Thank you. Amanda Baldwin: Yes. What I can say is that there is no pull forward of anything in this launch, and we do not talk about specifics of exact distribution. But I think if you go in and you look at our product on shelf, you will see the No. 3+, and it really looks great in stores. And so we are very pleased that we are starting to really hit our stride around all the investments that were made in visual merchandising and the opportunity around the brand. So that is what I would comment at this point. Operator: This concludes the question-and-answer session. I would like to turn the floor back over to Amanda Baldwin, Chief Executive Officer, for closing comments. Amanda Baldwin: I just wanted to say thank you to everyone for being with us here today, and we hope you have a great day. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the OTC Markets Group Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising 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 speaker today, Daniel Zinn, General Counsel and Chief of Staff. Please go ahead. Daniel Zinn: Thank you, operator. Good morning, and welcome to the OTC Markets Group Inc. Fourth Quarter and Year-End 2025 Earnings Conference Call. With me today are Cromwell Coulson, our President and Chief Executive Officer, and Antonia Georgieva, our Chief Financial Officer. Today’s call will be accompanied by a slide presentation. Our earnings press release and the presentation are each available on our website. Certain statements during this call and in our presentation may relate to future events or expectations and as such may constitute forward-looking statements. Actual results may differ materially from these forward-looking statements. Information concerning risks and uncertainties that may impact our actual results is contained in the Risk Factors section of our 2025 annual report and is also available on our website. For more information, please refer to the safe harbor statement on slide three of the earnings presentation. With that, I would like to turn the call over to Cromwell Coulson. Cromwell Coulson: Thank you, Dan. Good morning, everyone, and thank you for joining us. I will begin by reviewing our year-end 2025 results at a high level and will then turn to our priorities for 2026. For the full year 2025, gross revenues grew 13%, bringing us to over $125,000,000 for the first time in our history, while our net revenues grew by 12%. The company achieved double-digit gains across all four quarters last year, with each business line contributing to our strong results. For the year, OTC Link was up 17%, Market Data increased 15%, and Corporate Services was up 8%. OTC Link's performance primarily resulted from increased trading volume across our markets. In times of increased market activity, we focus on providing reliable service trusted by our broker-dealer subscribers. Meeting that standard across all of our ATSs is a direct result of the hard work and dedication of our business, infrastructure, and technology teams. Market Data benefited primarily from price increases that took effect at the start of 2025, supported by new sales in certain product areas. While pricing power is a critical part of long-term competitiveness, especially in inflationary environments, we prioritize consistently adding value to our subscribers, expanding our distribution networks, signing new clients, and growing unit counts. While not materially impactful to our revenue during 2025, our OTC Link and Market Data teams established the foundation of our overnight trading business. Moon ATS, which facilitates overnight trading in exchange-listed securities, gained traction in the fourth quarter as a result of our team's onboarding subscribers and educating the global trading community. The momentum in NMS securities on Moon and the lessons learned will serve us well as securities markets move to 24/5 and longer. Our Corporate Services business not only delivered solid revenue growth for the year, but also ended the year with 17% revenue growth in the fourth quarter. These increases resulted from the success of our OTCID Basic Market, launched in July, as well as price increases and strong new sales in our OTCQX and OTCQB markets. Over the long term, our Corporate Services business remains strategically focused on client success and retention, helping connected companies close the investor and broker information experience gap with exchange-listed securities. Our operating expenses also increased last year, up 7%. Compensation and benefits remain the largest components of our expense base, as we continue to invest in our people. I am grateful for the hard work and dedication of our colleagues, and thrilled that our trajectory last year reflects each person's contributions. With revenue running faster than expenses last year, our operating margin also rose back above 31% for the year. We remain committed to achieving sustainable growth over the long term. Overnight trading and the OTCID Basic Market were our primary strategic initiatives during 2025. Although our work on each is far from over, I am pleased with our progress thus far. On overnight trading, Moon ATS saw a substantial increase in volume traded during the fourth quarter as our broker-dealer subscribers used the system to trade thousands of exchange-listed securities between 8:00 p.m. and 4:00 a.m. We face significant competition in this space, with one established player already controlling a majority of the market share, and the listing exchanges planning to enter the space as early as this year. In this increasingly competitive landscape, we believe that Moon ATS offers an elegant, reliable, and cost-effective solution for our current subscribers and an opportunity to expand and scale our network. Our overnight trading initiative is also focused on educating and onboarding subscribers to our OTC Overnight Market. Although we have not yet had trading take place in this market, the OTC space is where we can offer a unique value proposition. Over 12,000 OTC securities trade on our daytime markets, and more than 9,000 of those are non-U.S. Providing global investors access to these securities during hours more convenient for non-U.S. time zones remains a key part of our vision for overnight trading. Our second priority initiative last year was the OTCID Basic Market. Following its launch, OTCID experienced a rapid uptake as qualifying companies chose our services to publish a baseline of ongoing information. It is well aligned with our strategy of connecting more companies to their U.S. trading market to improve market quality one security at a time. OTCID enhances our offerings for corporate clients, filling a gap below the premium OTCQX and OTCQB markets. With a disclosure- and management certification-driven service, OTCID allows more companies to connect without the price, float, or financial requirements of our higher-level markets. It is a simple entry point for companies to start to stream information, gain a foothold of liquidity, or test the waters. We have designed our premium markets to provide the functionality for connected companies to supply data that will improve the quality of the market for their securities. In comparison with Pink Limited securities, our objective is to clearly flag risks. Investor-focused companies need to be actively connected to the market, consistently updating investors, with management teams willing to certify compliance with regulations. Otherwise, gaps in communication can lead to information asymmetries, disruptive corporate actions, and discounted valuations that diminish their market quality. The connected companies on our OTCQX, OTCQB, and OTCID markets represented approximately 25% of all securities traded on our platforms at the end of 2025 and contributed roughly 31% of the dollar volume traded on our markets during the fourth quarter. Our primary focus is to increase the percentage of connected companies and related dollar volume on our markets. When we empower public companies to connect to our Corporate Services, actively publish ongoing information, and demonstrate global governance standards, our markets become better informed and more efficient. These are the core activities that improve the quality of each company's individual trading market, open up more investor accounts, and expand overall investor interest. As we move these metrics higher, we will improve overall market quality and further separate companies on our premium markets from the imperfections and inefficiencies of securities orphaned on our Pink Limited Market. Preparing for the introduction of tokenized and digital asset securities into our markets is another strategic priority for 2026. As the SEC and Congress continue their work to provide regulatory clarity in these areas, it is vital that we prepare to support our FINRA member broker-dealer, market data customers, and other market participants as they innovate around these new technologies. We also continue to advocate for modernizing digital asset regulation without undermining market integrity. We believe a technology-neutral approach rooted in existing regulatory principles will foster responsible growth, prevent regulatory arbitrage, and reinforce confidence in U.S. market structure. Our regulatory priorities extend further, with a particular focus on capital formation, state Blue Sky laws, and disclosure-based initiatives that will improve the often-overlooked market functionality that provides the backbone of our capital markets. Being public should not be painful, and we need to both lower the burdens on public companies and increase the benefits. We have achieved 50-state Blue Sky compliance for our own shares, so we will use that knowledge to efficiently map the path to national compliance for our corporate clients. International companies on our markets, and the dollar volume traded in these companies, has trended higher in recent years. This is due to a number of factors, including our premium markets for issuers, improved broker-dealer trading functionality across our ATSs, increased access to our market data, and targeted outreach by our Corporate Services team. Continuing to grow our international presence remains a key objective for 2026. We are focused on educating non-U.S. companies about how best to use our market structure, data, and disclosure tools to connect with more investors and build their brands in the U.S. I look forward to updating you on our progress with each of our 2026 core initiatives throughout the year. We have a long history of paying regular quarterly dividends and a special dividend at the end of the year. It is a conservative strategy that gives us operational flexibility and financial resilience. In reviewing companies with similar strategies, we have decided to increase our quarterly dividend to better balance the ratio between quarterly and special dividends. We will also look to opportunistically resume buying back shares in the public market. As such, I am pleased to announce that on March 2, our Board of Directors declared a quarterly dividend of $0.30 per share payable later this month. This dividend reflects our ongoing commitment to providing superior shareholder returns. With that, I will turn the call over to Antonia. Thank you, Cromwell, and thank you everyone for joining us today. Antonia Georgieva: I would like to start by thanking our entire OTC Markets team for driving our business to record revenue, and for the successful execution of our key projects for 2025. I will now review our results for the fourth quarter and year ended 12/31/2025. Any references made to prior period comparatives refer to the fourth quarter or the year ended 12/31/2024. A review of our fourth quarter results is included on page seven. We generated $32,700,000 in gross revenues, up 15% as compared to the prior-year period. Revenues less transaction-based expenses were also up 15%. OTC Link's gross revenues increased 7%, driven by a 12% increase in transaction-based revenues from OTC Link ECM and OTC Link NQB with Moon ATS contributing as we benefited from a higher number of shares traded on those platforms. As an offset, transaction-based expenses also increased 12%. Additionally, OTC Link saw a 6% increase in usage-based revenues, including OTC Link ATS messages due to a higher number of messages and the Quote Access Payment service due to the increased volume of trading activity. Trading volumes remain highly unpredictable and could decline in the future. OTC Link finished the fourth quarter with 117 subscribers on OTC Link ECM, and 77 subscribers on OTC Link ATS, compared to 114 and 82, respectively, at the end of the prior year. OTC Link had 145 unique subscribers to our ATSs at the end of 2025, up four from 2024. Revenues from Market Data licensing increased 17% quarter over quarter, reflecting a 25% increase in the registrar-based revenues, a 14% increase in revenues from direct-sold licenses, and a 3% increase in revenues from data and compliance solutions. Within the 32%, primarily due to price increases from 2025 combined with a 3% increase in professional user count. Nonprofessional user revenues declined 4% as a result of an 18% reduction in reported nonprofessional users, which more than offset the impact of the price increases. Historically, in the normal course of business, we have seen significant changes in the number of nonprofessional users as market volumes and retail participation on our markets fluctuate, and we may experience further decline in the future. Broker-dealer enterprise licenses and internal licenses drove the growth in direct-sold licenses. Broker-dealer enterprise license revenues increased due to the combined effect of price increases and subscriber growth, while internal system license revenues increased due to subscriber growth. Increased revenues from data services and the Blue Sky data product contributed to overall growth in data and compliance solutions revenue, partially offset by lower revenue from EDGAR Online. Corporate Services revenues increased 17% in the fourth quarter. The impact of annual incremental pricing adjustments effective 01/01/2025 and improved sales, combined with a steady average number of OTCQX companies, resulted in an 8% increase in OTCQX revenues. OTCQB revenues increased 11% due to the same factors combined with a higher number of companies on the OTCQB market. In the fourth quarter, we added 41 OTCQX companies compared to 22 in the prior-year quarter, and finished the period with 574 OTCQX companies, up 1%. On OTCQB, we added 71 new companies in the fourth quarter compared to 61 in the prior-year period and finished the quarter with 1,106 OTCQB companies, up 5%. The launch of OTCID on 07/01/2025 resulted in a substantial number of Pink companies upgrading to OTCID and receiving access to DNS as a result. In addition, select Pink Limited companies also chose to subscribe to DNS. The resulting increase in DNS subscribers combined with price increases from the beginning of the year drove a 55% increase in related revenues compared to the prior-year period. As of 12/31/2025, 1,052 companies traded on the OTCID Basic Market, up from 1,035 companies at launch on 07/01/2025. Overall, we had a combined 1,508 OTCID companies and Pink Limited subscribers to DNS and other products at the end of the fourth quarter, representing a 13% increase from 1,338 companies at the end of the prior-year period. Month-to-month variability in our Corporate Services subscribers is driven by new sales, offset by non-renewals, corporate events, and compliance downgrades. Turning to page eight for our full-year results. In 2025, we generated gross revenues of $125,300,000, up 13%. OTC Link revenues increased 17%, driven by the same factors as previously mentioned. Transaction-based expenses increased 39%. Market Data licensing revenues increased 15%, also driven by the same factors as previously discussed, with nonprofessional user revenue increasing 1% for the full year due to price increases offsetting the decline in nonprofessional user count. Corporate Services revenues increased 8%, with a 46% increase in revenues from our OTCQX and OTCQB markets as well as a 29% increase in revenue from the OTCID market and the DNS product, driving the overall increase. During 2025, we added 137 new companies to OTCQX compared to 83 in the prior year, and 293 new companies to OTCQB compared to 190 in the prior year. The retention rate for the annual OTCQX subscription period that began on 01/01/2025 was 96% compared to 93% for the prior year. The net increase of seven in OTCQX companies reflects the 137 new sales, partially offset by 130 OTCQX removals. For the annual OTCQX subscription period beginning 01/01/2026, we achieved a 95% retention rate. Turning now to expenses on page nine. On a quarter-over-quarter basis, operating expenses increased by 6%. The primary drivers were a 6% increase in compensation and benefits, and a 9% increase in each of IT infrastructure and information services costs, and professional and consulting fees. Compensation and benefits comprised 61% of our total operating expenses during the fourth quarter, unchanged from the prior-year period. In the fourth quarter, income from operations increased 32%, while net income and diluted earnings per share each increased 28%. Operating profit margin expanded to 36.3% compared to 31.6% in the prior-year quarter. On a year-over-year basis, on page 10, operating expenses were up 7%, driven by similar factors. Compensation and benefits comprised 63% of our total expense base in 2025 compared to 64% in the prior year. Turning to page 11. For the full year, income from operations increased 19%, and net income increased 14%. Operating margin expanded to 31.5% compared to 29.9% in the prior year. Our diluted earnings per share increased commensurately to $2.58 per share compared to $2.26 per share. In addition to certain GAAP and other measures, management utilizes adjusted EBITDA, a non-GAAP measure which excludes non-cash stock-based compensation expenses. Our adjusted EBITDA was $47,600,000 for the full year 2025, and our adjusted diluted earnings were $3.94 per share, each up 15% compared to the prior year. Cash flow from operating activities for 2025 amounted to $48,600,000 and free cash flows were $48,400,000 compared to $32,900,000 and $31,600,000 in the prior year, respectively. Turning to page 12. During 2025, we returned a total of $32,600,000 to investors in the form of dividends and through our stock buyback program, a 10% increase from the prior year primarily related to an increase in the special dividend. We remain focused on growing our business and delivering long-term value to our stockholders. With that, I would like to thank everyone for your time and pass it back to the operator to open the line for questions. Operator: We will now open for questions. Please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Our first question comes from Steven Silver with Argus Research Corp. Steven Silver: Thank you, operator, and good morning, everybody. Thanks for taking the questions. Cromwell, you had mentioned that you are looking to build on the momentum in Corporate Services in 2026. And there were a lot of new companies added to OTCQX and QB, but a lot of that was offset by companies leaving as well. Just curious as to your high-level thoughts on momentum in Corporate Services given the flow of companies coming on and off those markets over time? Or markets, rather. Cromwell Coulson: Yes, Steve. I think that is a very good question. You know, every subscription business deals with churn, and there are different reasons for churn. Clients get taken over. Clients go to competitors. Clients have financial distress. And so targeting how we are selling our service into securities that have a foothold of trading liquidity in the U.S., and educating and engaging those companies to use the Corporate Services tools we have built to create better information on investor screens, and better data in brokers’ machines to really close the gap in functionality from the user perspective with exchange-listed securities. And then there are all the activities that once a company takes ownership of a symbol, that they can do around their brand, around their current investor base, and around their potential investor base. You know, successful companies over the long term connect share ownership with other communities of consumers and business partners. And that part of it, I think is for us going to be an important strategy going forward. One bright light is you have seen large issuers joining OTCQX and seeing the value there. And that is, you know, part of it when you use the OTCID to change the conversation. We are addressing churn at the low end by having a product for anybody who is willing to publish and certify information, and it brings in other companies wanting to use our full suite. Steven Silver: Great. And one more if I may. You talk a little bit about increasing visibility into OTCID and ATS Moon contributing to revenues in 2026. But then you mentioned that OTC Overnight is still kind of building that connective tissue and has not yet commenced trading. Is there a timeline for that? Is that anticipated to launch in 2026, or is that still maybe a little further out? Cromwell Coulson: Well, it is live. The industry is figuring out NMS overnight. And the real activity is, while it is broad, most of the activity is trading in a narrow list of names by the bulk of the activity, and it is a big lift for the industry. So the industry is moving thoughtfully forward on that. My belief is that we will see some activity this year. It is a chicken-and-egg game, but the same brokers trade these during the daytime. So it is moving through the development queues for firms, and it will move along. And I have always said, we wanted to do NMS because our clients want that now. And what we learned from NMS is going to be incredibly helpful in bringing the complexity of OTC securities into overnight trading. Steven Silver: Great. Thank you so much for the color, and best of luck throughout the year. Operator: Our next question comes from Brendan Michael McCarthy with Sidoti. Brendan Michael McCarthy: Great. Good morning. Congratulations on a strong quarter and strong year. I just wanted to circle back to the Corporate Services segment and a follow-up question there. On OTCQB, which looks like you had really strong growth in total dollar volume, also very strong growth in dollar volume per security. Is there any, you know, noticeable trend going on there? Cromwell Coulson: Fannie Mae and Freddie Mac. Bill Ackman’s tweets. Brendan Michael McCarthy: Got it. That makes sense. And what is the pivot to? Okay. Simply— Antonia Georgieva: Just to add to that. As we launched our OTCID campaign, that gave us an opportunity to reengage with our entire addressable market for our tiered markets. And many of our potential subscribers considered the full lineup of offerings, and many ended up opting for higher tiers such as QB, as they were being approached to evaluate or consider OTCID. So we saw some of that upselling contribute to the number of companies and the volume as well. Brendan Michael McCarthy: That makes sense. I appreciate the additional color there. And on that topic, Antonia, I think I saw OTCID had just a small drop in subscribers from Q3. Is that primarily due to uplisting, or is there anything to read through there? Antonia Georgieva: In terms of OTCID, you will see fairly regular ups and downs. We have a highly automated process to tag companies as qualifying for OTCID, and around reporting cycles, you may see certain companies being somewhat late, perhaps in filing or failing to meet any of the criteria that the automated process looks for to tag them as OTCID. What we do see is that movement month to month, so I would not necessarily read too much into it. We will continue to monitor the trends in ID subscribers over time, but it is too early to say what that trend really looks like, and the month-to-month variability has to do with just regular filing cycles and other events that occur at our company. Brendan Michael McCarthy: Understood. Brendan Michael McCarthy: And wanted to ask a question on OTC Link. Can you talk about your pricing strategy there? I think I read in the annual report that you are considering potentially competing on price going forward. Maybe talk about your pricing strategy and how that plays into your competitive position. Cromwell Coulson: We—our pricing strategy is a Costco-type strategy, which is subscription-based with quality products on the shelf. And when you buy volume, you get great value. I mean, we like to make money. We do not like to make as much money as the exchanges. Brendan Michael McCarthy: Got it. Thanks, Cromwell. Last question for me. Just wanted to ask about tokenization. It just seems to be a growing topic of discussion across many different industries. We saw ICE announce plans for the New York Stock Exchange to develop a platform for on-chain tokenized securities. Are you taking a similar approach here, or are you awaiting regulatory clarity? How can investors think about your stance on the topic? Cromwell Coulson: We are very involved in the discussion. So there are a lot of tokenized assets that are not securities. There are not many lawful tokenized securities yet. So there are a lot of different discussions and experiments about how these securities will trade, how efficient such trading will be, what is the cost of such trading. We are deeply involved in discussions with regulators, with how do we bring tokenization into the complexity of securities markets, which we have an experience and history of helping brokers trade, publishing data out on them, and assisting issuers in demonstrating their compliance with securities law, and helping brokers understand the risks and lawfulness of different securities. All of that complexity is showing up. We will be there with tokenized securities when they are free trading and lawful. Brendan Michael McCarthy: Understood. Understood. That is all for me. Thank you. Operator: Our next question comes from Walter Hopkins with Eighteenth Square. Walter Hopkins: Hi. Thanks, and congrats on the big quarter and the year. First question is just a sort of high-level question about the company’s overall strategy with organizing the markets. Do you think the current state of the market, with the addition of OTCID, likely reflects the end state of how OTC Markets Group Inc. sort of views the organization of the market into OTCQX, QB, ID, and Pink Limited? Cromwell Coulson: Thank you, Walter, for that question. I would say it is our current state. Bringing out OTCID lets us improve the standards for the higher markets. I would view that standards are always going to be a work in progress. But if you think about the four—if you add the Expert Market, five—buckets that we place securities in, they are pretty well formed from our perspective. They will be tuned over time. We will both add and remove standards as we learn, with the ultimate goal of incentivizing issuers to maximize the amount of information, governance, compliance that actually improves market quality and their investor experience and the broker experience. Now, OTCID was launched in the middle of last year. It is very new. It seems old to us. However, our user bases are just learning to understand it. So this is a long-tail build-out, and we have work to do around building the positive momentum of our premium markets, but we also have work to do educating investors about the reasons for risks and discounts in the Pink Limited Market and the responsibility lying with the managements of those companies, that they have chosen proactively not to do the base-level things that are fiduciary for shareholders and a company that wants to be compliant with rules and regulations in all jurisdictions where they operate or they have investors. That is really important. And as we build that out, you know, that understanding across all the different constituencies, the tiered market structure will become more powerful. And, you know, the future is on screens and in machines. That is where our markets are built for. But the information does not come directly from us. We need others to buy in, and when they buy in, it becomes more powerful. Walter Hopkins: Thank you. And next question is about Moon. Congrats on creating Moon’s success and traction out of thin air. It seems to kind of follow a tradition at OTC Markets Group Inc. creating new products that customers value without, you know, necessarily investing a lot of CapEx. I just have a couple questions on it. To the extent you are willing to share, it looks like daily volume is up significantly so far in Q1. Can you share the sort of run rate that you are seeing so far in the quarter? Antonia Georgieva: We will start putting out more information about Moon volumes in the near term. At that point, you will be able to see more specific statistics. Walter Hopkins: Okay. Thank you. Cromwell Coulson: Walter, the view of platforms is it really takes five years to turn it into a profitable franchise when you are doing the electronic platform business. And so you are doing these steps to gain traction, and then you are building out on it. And it is—you know, we have got a great team, but it is a grinding and elbow grease and one-on-one conversations to really build it out and understand how we can provide unique value to our broker-dealer clients on a competitive basis. Walter Hopkins: Understood. I saw that a competitor suggested that once you get to breakeven, that they thought they would see 90% incremental margins above breakeven. And I guess that is just two questions on that. You know? Is it—given the existing broker-dealer network and the sort of upfront investments that came through IT expense—are—is OTC Markets Group Inc. already at breakeven on the overnight trading side? Cromwell Coulson: They have a different understanding of transactional businesses than I do. So I wish I had that magic, but we are not so special. We have to work harder. Walter Hopkins: Okay. And I saw that they also said that they expected, you know, about half of the revenue to come from transaction volume and the other half to come from market data licensing. Does that seem like a realistic split for OTC Markets Group Inc.? Cromwell Coulson: They have a different view of competitive dynamics in the market data business than I do. Walter Hopkins: Okay. Okay. Understood. And then the last question is just kind of a technical one. I noticed that the OBV drove the GAAP taxes up a good bit, but drove down the near-term cash tax payments. So maybe this one is for Antonia. Do you mind just describing what is going on there and what you might expect the medium- and long-term effect on cash taxes to be? In other words, you know, what is the normalized effective cash tax rate look like for the company? And is it lower? Antonia Georgieva: I will ask our Chief Corporate Controller, Jeff Jim, to weigh in on those questions. Walter Hopkins: Thanks, Antonia. Jeff Jim: Walter, as you have seen on cash flow, where we disclose our tax payments over the past three years, the trend is going down because the OBB were allowed a more beneficial deduction on R&D credits as well as its deductions. So for the next couple years, you will see very similar trends, and with the adjustments, there is a lingering tax benefit that we will take in 2026, and then you will see a slight upward trend in cash taxes. Therefore, for your benefit, the accounting standards were expanded, particularly focusing on additional disclosure in the tax notes. So we provide significantly more enhanced disclosure about our GAAP provision for income taxes as well as cash tax information in the back. If you would like to review that in our annual filing, it is a newly adopted standard, so newly provided enhanced disclosure. We will be happy to follow up with you with a more thorough discussion, but please review our new tax disclosure in Note 14 to the annual report. Walter Hopkins: Okay. Thank you. That is all for me. Thank you all. Operator: Our next question comes from Jonathan Isaac with Quilt Investment Management. Jonathan Isaac: Hi. Thanks for taking my question. Congrats on the quarter. Can you hear me okay? Antonia Georgieva: Yes. Jonathan Isaac: Great. Great. Wondering, can you discuss changes to your capital allocation philosophy? You mentioned in the preamble paying a higher quarterly dividend and better balancing the quarterly and the special dividend, but you also mentioned—and this is music to my ears, by the way—opportunistic buybacks. In the past, buybacks have mostly been used to limit the impact of stock-based compensation, if my memory serves. What specific metrics do you think about when considering opportunistic buybacks? And what influenced you to evolve your capital allocation philosophy? Thanks. Cromwell Coulson: Well, Jonathan, we should question everything, and then we should look around and see what other successful companies have done, especially ones that tend towards enduring. So, you know, looking at our dividend strategy, looking at our buyback strategy, and looking at the ratio, from—you know, I took a look at Hermès as a company that, you know, builds sustainable value over time. You know, they are a luxury brand product, but they put real value into their products. They are not incredibly greedy about margin, and they have had a special dividend for a long time. Then if you switch over to the financial services industry, the CME is an example too. And as you and others have pointed out about in-the-market buybacks, for us, the desire is to be buying back some shares in the market as well. The challenge with buying back in the market is around—you know, let us say 10% for argument’s sake—of our stock turns over in a year. Now I think it is fantastic that we have happy shareholders who do not want to sell. We have a lot of community banks in our market that have the same problem. And I do not think it is actually a problem. I think it is a great thing if you have shareholders who are with you for the long term, so you do not have to run your business quarter to quarter, and the CEO does not have to spend a third of their time convincing new people to buy their stock because others are flipping out of it. However, starting to buy back in the market, and doing it in a manner that we are not putting our finger on the scale, is important. We are a profitable, cash-flow-positive company, so we will look opportunistically. We do not want to be doing it in a manner which could feel overwhelming to other buyers wanting to come in. But we will be opportunistic. And, you know, we are in a position with our financial strength and cash flow, where a mixture of quarterly dividends, special dividends, and buying back stock both as we have to give employees consistency around their stock compensation and, as you said, reduce dilution, but also in the market as well. So I think that is kind of how we look at the lens today, and, you know, we will, as we move forward and find areas in which we can deploy capital for shareholders, we may adjust it. But if we are creating more capital than we need, we are a big believer in being the kind of company that sends its excess capital back to shareholders because we have a group of very intelligent shareholders who know how to deploy that capital in other areas. Jonathan Isaac: Great. Thanks. Considering the firm’s large cash position, which is rather idiosyncratic for your industry, should we expect the new capital allocation philosophy to potentially result in a lower cash balance or even in a net debt position over time? Antonia Georgieva: Jonathan, one clarification on the cash position. There is a clear and well-defined seasonality in our cash position if you look over the years, with the fourth quarter and year-end cash position tending to be the largest, considering that we have an annual renewal cycle for our OTCQX subscription that starts in the fourth quarter of the year prior to the new cycle of QX subscriptions. So we tend to have significantly more collections and cash inflow in the fourth quarter, followed usually by a meaningful reduction in the same cash balance by the end of the first quarter in connection with year-end expenses related to incentive compensation and taxes. So it is more appropriate in our view to look at the cash balance as an average over the year or to trace its general evolution quarter to quarter, rather than focus exclusively on one particular quarter that happens to be our high point. Cromwell Coulson: And, Jonathan, you know, there is a course they teach using spreadsheets at Harvard Business School called “Everything looks better with leverage,” and then every market cycle, there is the school-of-hard-knocks course called “Until it does not.” We run our books conservatively. Now, if we were to acquire something, we would look at debt, but just leveraging up our balance sheet because it makes the numbers look better is not really what I have any interest in for the company where I have the majority of my personal wealth and many of my friends, family, and colleagues here have significant amounts of. It could look better in the short term. Now, if there was a durable cash flow asset that we could buy, that can change. And the companies that you are comparing us to are larger; they have a history in the capital markets. For the most part, they are in the S&P 500. So they have an incredibly low cost of equity capital, and they have a low cost of debt. So, you know, I think that is not something that is in our strategic outlook anytime in the near future. Jonathan Isaac: Thanks for taking my questions. Operator: That concludes today’s question-and-answer session. I would like to turn the call back to Cromwell Coulson for closing remarks. Cromwell Coulson: Thank you, operator. I want to thank each of you for joining us today. I would encourage you to read our full 2025 annual report, the risk statements, and the earnings press release for more information. Links to both are available on our Investor Relations page of our website. On behalf of the entire team, we look forward to updating you on our key initiatives that will continue to shape the integrity and competitiveness of the public markets. Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, and welcome to the Park-Ohio Holdings Corp. Fourth Quarter and Full Year 2025 Results Conference Call. At this time, all participants are in a listen-only mode. After the presentation, the company will conduct a question-and-answer session. Today's conference is also being recorded. If you have any objections, you may disconnect at this time. Before we get started, I want to remind everyone that certain statements made on today's call may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. A list of relevant risks and uncertainties may be found in the earnings release as well as in the company's 2024 10-K, which was filed on March 6, 2025, with the SEC. Additionally, the company may discuss adjusted EPS, adjusted operating income, and EBITDA as defined on a continuing operations or consolidated basis. These metrics are not measures of performance under generally accepted accounting principles. For reconciliation of EPS to adjusted EPS, operating income to adjusted operating income, and net income attributable to Park-Ohio Holdings Corp. common shareholders to EBITDA as defined, please refer to the company's recent earnings release. I will now turn the conference over to Mr. Matthew V. Crawford, Chairman, President, and CEO. Please proceed, Mr. Crawford. Matthew V. Crawford: Great. Thank you, Daryl, and welcome, everyone, to our end of 2025 fourth quarter conference call. I am very proud of our Park-Ohio Holdings Corp. team throughout 2025 and especially during the fourth quarter. Strong cost management combined with the benefit of improved productivity in key locations offset demand volatility in many industrial end markets, caused by tariffs and general economic uncertainty. This uncertainty also delayed new business launches throughout the year and some new business awards in a few cases. Also during the fourth quarter, we made cash management a priority and met our debt reduction goal of $40,000,000. Most importantly, though, we focused on our long-term goals regarding asset allocation, durable growth, and deleveraging. Regarding asset allocation, we continue to invest above our maintenance capital levels as we improve productivity and lower our cost to serve through automation, information technology, and vertical integration. While we continue this journey through 2026 and beyond, we are beginning to see the positive impacts on new business and improved profit flow-through. Our growth capital investment, which represented more than a third of our total capital expense, will not only underpin our significant growth in 2026, but is also targeted in products and services where we have above-average margins and a sustainable competitive advantage. Lastly, while we are still above our target— Patrick W. Fogarty: We have some music— Matthew V. Crawford: —there, Daryl. Are we okay, or did everyone hear that last sentence? Operator: You are okay. I apologize for the technical difficulties. Matthew V. Crawford: Okay. I am going to reread the last couple sentences just in case. I will read the last paragraph. I apologize if anyone heard music there for a few seconds. Most importantly, we focused on our long-term goals regarding asset allocation, durable growth, and deleveraging. Regarding asset allocation, we continue to invest above our maintenance capital levels as we improve productivity and lower our cost to serve, through automation, information technology, and vertical integration. While we continue this journey through 2026 and beyond, we are beginning to see the positive impacts on new business and improved profit flow-through. Our growth capital investment, which represented more than a third of our total capital expense, will not only underpin our significant growth in 2026, but is also targeted in products and services where we have above-average margins and a sustainable competitive advantage. Lastly, while we are still above our target net debt leverage ratio, our cash performance in the fourth quarter and the investment we have made toward 2026 growth, including additional working capital, should put us in a good position to take a step forward in this area. So we start 2026 extremely excited to be rewarded with above-average growth, and with solid incremental operating leverage in all profitability metrics. Thank you for your support, and thank you to all of our outstanding partners in our business. Now over to Pat to cover the quarter results. Patrick W. Fogarty: Thank you, Matt, and good morning. Overall, we are pleased with our accomplishments in 2025, many of which will support future sales growth and drive improved operating margin and free cash flow. Our accomplishments during the year included the following. First, we refinanced our $350,000,000 senior notes with new senior secured notes maturing in 2030. In addition, we amended our revolving credit agreement to extend the maturity date by five years. Refinancing completed during 2025 provides us with the capital structure to support our sales growth and investment in future years. Second, we invested $12,000,000 in information technology during the year and began the implementation of new ERP systems in Supply Technologies and in our Industrial Equipment Group. We expect significant benefits from these investments, including lower working capital levels, lower operating costs, and improved information flow to and from our supply base and our customers. In Supply Technologies, we broke ground on a new state-of-the-art North American distribution center which will be operational this year. This important investment will significantly improve how we service our customers and provide best-in-class warehouse operations with lower costs, lower working capital, automated sorting and kitting, and additional value-added services to support our customer. Also, in our fastener manufacturing business, we invested in automation equipment to improve plant floor productivity and operating margins in several locations. Our capital investments in this business are focused on increasing production capacity to meet the strong demand for our self-piercing and clinch products. In Assembly Components, we won new business during the year, rolling over $40,000,000 of incremental annual sales which will launch in the second half of this year and continue through 2027. We also implemented product price increases as well as plant floor improvements to increase profitability in 2026. And finally, in our industrial equipment business, we achieved record annual bookings totaling $217,000,000, including a record $47,000,000 reduction heating order placed by a leading steel producer. As a result, our backlogs were $180,000,000 at December 31, an increase of 24% over the prior year levels. Patrick W. Fogarty: Before I discuss our fourth quarter and full-year results, I want to comment on our 2026 guidance. As outlined in our press release, we expect consolidated revenues to grow to $1,675,000,000 to $1,710,000,000, an increase of 5% to 7% over 2025 consolidated revenues, driven by sales growth in each business segment. We expect adjusted earnings per share to increase to $2.90 to $3.20 per diluted share, an increase of 7% to 19% year over year. EBITDA, as defined, to range from 8% to 9% of net sales and we expect full-year free cash flow to range from $20,000,000 to $30,000,000. In our Supply Technologies segment, demand in power sports, industrial equipment, and heavy-duty truck end markets are expected to recover from low production levels in 2025, and we expect continued sales growth from electrical distribution customers supporting the AI data center expansion and continued strong growth from semiconductor, aerospace, defense, and agriculture end markets. Also, our fastener manufacturing business will continue to expand its products into new applications and will benefit from the continued use of lightweight materials and electrification. Patrick W. Fogarty: In our Assembly Components business segment, sales of our molded and extruded rubber and fuel-related products are expected to grow year over year, driven by increased production volumes and business launched in 2025 and improved customer pricing. In our Engineered Products segment, revenues are expected to be at record levels in 2026 driven by strong new equipment backlogs in many end markets including oil and gas, steel, and aerospace, and continued growth in global aftermarket demand. In addition, our forging equipment business recently won a new equipment order with an aerospace customer, and strong aftermarket order activity will drive an increase in 2026 revenues. Our Engineered Products segment is also seeing increased order activity from customers supporting the expansion of AI data centers. For example, we recently were awarded new business for power generation products including transformers and power generators used to control and regulate power to data centers. And we are actively responding to strong demand for our forged products from turbine generator customers who also provide power for data centers. Turning now to our fourth quarter and full-year results. Our fourth quarter was highlighted by operating cash flow of $49,000,000 and free cash flow of $36,000,000. We used our free cash flow and excess cash to reduce long-term debt by $40,000,000 during the quarter. Our full-year operating cash flow increased $42,000,000 from $35,000,000 in 2024, with the increase driven by lower working capital usage compared to 2024. CapEx totaled $40,000,000 in 2025 with investments in information technology totaling over $12,000,000 during the year. Consolidated fourth quarter net sales were $395,000,000, an increase of 2% year over year. The sales growth was driven by higher sales in our Supply Technologies and Assembly Components segments. Engineered Products demand was stable year over year as growth in our Industrial Equipment Group offset lower sales levels in our Forged and Machine Products Group. Full-year sales totaled $1,600,000,000, a decline of 4% from 2024 levels, with the decline occurring primarily in North American industrial end markets. Patrick W. Fogarty: Our fourth quarter gross margin is 17.3%, which was 70 basis points higher than a year ago, resulting from higher sales levels and implemented profit improvement initiatives across several of our businesses. Full-year gross margins were 17% in 2025, which were comparable to 2024 gross margins despite the lower sales levels. Excluding special items in both periods, fourth quarter adjusted operating income increased 4% to $20,000,000 compared to $19,000,000 in the 2024 period. Special items in the fourth quarter included a non-cash write-off of certain assets in our Forged and Machine Products Group, totaling $8,900,000 to align our investments in tooling and production assets with current business levels. Our effective tax rate was 12% in 2025, which is lower than the U.S. statutory tax rate due to research and development tax credits recognized during the year. We expect a more normalized tax rate in 2026 ranging from 18% to 20%. Adjusted earnings per share in the fourth quarter was $0.65 per diluted share compared to $0.67 in 2024, with the decrease due primarily to higher interest expense in the 2025 quarter. Our full-year adjusted earnings per share was $2.70 compared to $3.59 in 2024. And with respect to our segment results, in Supply Technologies, fourth quarter sales were $187,000,000 compared to $182,000,000 in the 2024 period, and operating income increased 31% to $21,000,000 compared to $16,000,000 last year. Operating income margin was up 240 basis points and was 11.1% of sales compared to 8.7% last year. The improved year-over-year fourth quarter results in 2025 were driven by higher sales and favorable impact of cost control measures taken during the quarter. Full-year sales in this segment were $748,000,000 compared to $776,000,000 in 2024, driven by lower customer demand in certain end markets, primarily in North America, including power sports, heavy-duty truck and bus, and industrial and agricultural equipment, offset by continued strong demand in data center, electrical, and semiconductor end markets. Full-year operating income in this segment was $72,000,000 compared to $75,000,000 in 2024. Operating margin was 9.7% in both periods, due to our efforts to reduce variable operating costs given lower demand levels. In our Assembly Components segment, fourth quarter sales were $92,000,000, up 2% from $90,000,000 a year ago. Adjusted operating income was stable at approximately $4,000,000 in both periods. Full-year sales in this segment were $381,000,000 compared to $399,000,000 last year. Lower unit volumes on certain auto platforms and production delays on new business launches impacted revenues during the year. Full-year adjusted operating income was $22,000,000 in 2025, compared to $27,000,000 in 2024, with the decrease driven by the lower unit volumes. We expect our operating margins in this segment to improve, resulting from expanding our rubber mixing, production plant floor automation, and improved margin flow-through from increased sales. In Engineered Products, fourth quarter sales were approximately $116,000,000 in both 2025 and 2024. We continue to see strong sales in our industrial equipment business, which grew 5% but was offset by lower sales in our Forged and Machined Products business. Fourth quarter adjusted operating income decreased to $3,000,000 due to lower profitability from the Forged and Machine Products Group. Full-year sales in this segment were $471,000,000 compared to $482,000,000 in 2024. The decrease was driven primarily by the closure of a small manufacturing operation in 2024 and lower demand from the railcar end market, which impacted our Forged and Machine Products Group. We continue to see growth in our industrial equipment business in 2025, driven by 7% growth in our aftermarket business. Adjusted operating income was $17,000,000 compared to $21,000,000 last year, with the decrease driven by lower sales levels and lower profitability in our Forged and Machine Products business. We expect significant improvement in operating profits in this segment in 2026, based on our strong new equipment backlogs, aftermarket demand, and operational improvements made in several of our plants. Now I will turn the call back over to Matt. Matthew V. Crawford: Great. Thank you, Pat. Before I turn it over to questions, I do want to emphasize Pat's comments around the fourth quarter. We returned to growth in the fourth quarter. Year over year, we were down a bit, but as I mentioned, things were a bit choppy earlier in the year regarding tariffs and global uncertainty in the industrial market. So getting back to growth in the fourth quarter is great. We plan on building on that in 2026 meaningfully. I also want to point out that we continue to absorb some expenses related to some of the IT transformation, new business launches, etcetera. So I think we will begin to see payback in 2026 and be able to build on that going forward as well. So some of the improvements, I think, are being masked by that. But we are very excited to demonstrate a big step forward in 2026. With that, I will turn it over and answer some questions. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, you may press star 1 on your telephone keypad. You may press star 2 to remove your question from the queue. One moment please while we poll for your questions. Our first questions come from the line of Steve Barger with KeyBanc Capital Markets. Please proceed with your questions. Jacob Moore: Hi. Good morning. This is Jacob Moore on for Steve Barger today. Thanks for taking our questions. Good morning. I just wanted to start with the guide. Specifically the 5% to 7% sales growth. I see at least one mention of pricing in the slide. So can we just begin with your assumptions for price versus volume in that overall sales number? Then maybe you could finish with a by-segment view of growth contributions for the year. Patrick W. Fogarty: Sure. This is Pat. The price increases that are included in our 2026 sales guidance is primarily in our Assembly Components group. And I would say it is a small part of the increase that we are seeing in revenues. We will see an increase in revenues relating to tariffs and the recovery of such tariffs with our customer base in our Supply Technologies segment. But I would say the majority, call it 75% of our growth in 2026, will be a result of production volume increases from our customers. And then relative to improvements in gross margin by business, I am going to refrain from giving any type of guidance on segment profitability in 2026 other than we expect improved flow-through in each of the business segments based on the increase in revenue that we are guiding to. So as we have experienced in 2025, and really for the last year and a half, our operating margins in both Assembly Components and Engineered Products group are below our expectations. And we expect improvement in each of those segments in 2026. Matthew V. Crawford: Jacob, I want to add to that while I completely agree with Pat's comments. There are tactical pricing discussions going on across the business. As you can see, a lot of our backlogs are very strong. So we are quoting new business in multiple areas. And we are also making sure that we dissect our customer base and our current pricing models and standards coming into the new year. So every one of our business continues to be evaluated, and I could think of a dozen different pricing conversations going on right now. Much more tactical, I think, than we would have seen in the past. So I think to Pat's point, the growth leans heavily towards new business or expanded current relationships. You know, that does not mean a percent or two in our model is $25,000,000 or $30,000,000 in price increases. So those are happening consistently across the board on a more tactical basis. Jacob Moore: Understood. That is really helpful. Thank you. And I want to dig into sales growth by segment as well, if you could comment on that. Patrick W. Fogarty: Yeah. Once again, we will not comment on individual business segments. But I would say, as I mentioned in my comments, that our guidance on increased revenues are across the board. And so they vary across the board. Engineered Products will be at record sales levels in 2026. We see continued growth in Assembly Components based on new business that we have already launched. That new business will be at full production levels in 2026. And then in Supply Technologies, we have seen nice growth in the AI data center space, where our business is focused on the switchgear manufacturers, those customers that provide digital infrastructure around data centers. We are seeing nice growth in that business. For example, two years ago, we had very little revenue in that space. Today, revenues are approaching $150,000,000 annually with that end market. So we expect that to continue into 2026 and beyond. Matthew V. Crawford: Jacob, I think that to Pat's point, we will see it across the board. AI and defense and power management really affecting Engineered Products and Supply Technologies. But we have talked consistently about the large $40,000,000 in new business that we have launched inside of Assembly Components. So, without commenting specifically, I think it should be relatively broad-based. I think it also depends. We have had significant backlogs in Engineered Products. As we can clear those backlogs, that should be a tailwind as well. Jacob Moore: That is really good color. I appreciate it. And if I could just follow up with the last one here on free cash flow. I know you are guiding to $20,000,000 to $30,000,000. The last couple of years have been in the low single-digit millions. I know you have been investing, you highlighted, but it sounds like you still have a lot to juggle this year too. So I want to ask what makes you confident that you have turned the corner, that the asset base can start to consistently produce cash flows? And what is your confidence level in that guidance? Matthew V. Crawford: Yes. Great question. Pat can give you a better answer. But I do want to comment. I talked earlier about volatility going back a couple years in the supply chain. Then I have talked, I think, about volatility in demand last year related to tariffs and global uncertainty. These last couple years have been really difficult to manage supply chain issues and demand issues. It has been not the best environment to predict the business needs of your customers and to manage your suppliers. So we have been heavy consistently, and I think we have been transparent on that, on working capital. I think as we come into 2026, whether it is some of the productivity tools we have talked about or whether it is just a little better visibility. I commented, I think, back in the second quarter call of last year, that while the sales were relatively stable year over year for the business, and let us use Supply Technologies as a kind of last mile; that is a good proxy for the economy. There was total turmoil under the hood in terms of end market. And aerospace and defense and AI was holding it up. Other key markets, most of the other key markets, were down. So that was a very difficult environment. We predict something slightly more, better visibility, and we are more prepared, I think, to handle it. So I think we can manage the business a little better on the cash side because of that. And, again, we are also going to begin to benefit from some of these data management tools as well. But it was a tough year last year to manage these things on top of investing heavily in the business. Patrick W. Fogarty: And, Jacob, I would add that our free cash flow estimates are a result of increased profits but also lower working capital usage relative to every dollar of sales increase. So we still have some embedded working capital that we expect to harvest in 2026. But we expect that as a percentage of sales, our growth will not require us to invest in as much working capital as we have in the past. Jacob Moore: Got it. Thank you very much. I will jump back in queue. Operator: Thank you. Our next question comes from the line of Dave Storms with Stonegate. David Joseph Storms: Good morning, and thank you for taking my questions. Matthew V. Crawford: Morning, Dave. David Joseph Storms: Wanted to just go back to the guide here, and maybe just get your thoughts on general cadence for 2026. Should we expect that it will be maybe a more typical seasonal year? Or is there anything that we should keep an eye out for that might throw that off? Patrick W. Fogarty: I think we would expect a similar trend of sales in each business segment as we have in the past. So I do not see anything that would change the look of the individual quarters in 2026. David Joseph Storms: That is perfect. Thank you. And then just wanted to kind of turn to the record backlog you have in EP. Is there anything more you can tell us about that? Maybe expected burn rate? Are there any outsized contracts in there that are going to demand a lot of focus, margin profile, anything like that would be very helpful. Matthew V. Crawford: I do not think there is anything unusual in there. I would say that our expertise in managing large power has provided more opportunity across the industrial segment, including things like data centers and AI. So the breadth of opportunity, I think, has grown in what 30 years ago was largely focused on the steel market and some related forming markets and hardening markets. So I would say the breadth of managing large power has increased the opportunity, if you will. So I would say that is a tailwind in the business. We are a global leader on the technical side in managing large amounts of power in industrial spaces. So we have names on our customer list that we just would not have seen five years ago, and trying to do things that they were not trying to do five years ago in battery steels and high-strength steels and so forth, as well as new energy markets and things like that. So I do think that that is a particular tailwind. You know, I also think we have talked a lot about durable sales. We love our aftermarket business there. And we continue to reinforce and support what increasingly is a global effort to upgrade the industrial space. I know our team, including Pat here, was just in Europe. I mean, we are absolutely seeing green shoots in the reinvestment of the industrial space over there. Whether that means new facilities, which we do not see as much of there, but certainly upgrading old facilities. So I think those markets are continuing to show life globally. David Joseph Storms: That is great color. I really appreciate that. And then maybe one more for me. You have mentioned a couple times now, we have talked about this in the past, the automation and information systems improvements. Just would love to get an update on how you think those are going, how much more runway you have there, and just any further thoughts on that. Matthew V. Crawford: Yes. That is a great question. And we are attacking this piece in lowering our cost to serve on multiple fronts. And I say it a lot because it is really something we did not focus on as much when we were growing so quickly over the years. First, I will start with data management. Our efforts, enterprise-wide in some cases, but more often by the different segments, to invest in tools that begin with creating really clean data. A lot of people want to talk about AI, and we have some tremendous use cases going on both on the sales funnel side and on the productivity side. But the reality of it is the journey begins with really getting clean, usable data. So I am very excited at the strides we are making to manage data better and give the tools to our— I have talked a lot in the past about the strength of our management teams increasingly, and giving them the tools to have the visibility to do everything from manage pricing and manage cash flow and working capital the way that we discussed. The opportunity is huge, particularly in a business like Supply Technologies. So I would say that. I think on the automation side, we continue to attack vigorously costs in the business that a few years ago were not a big deal. So, for example, warehouse space. Warehouse space has been explosive in terms of costs. So opening up, as Pat mentioned, a new distribution center, a larger one, allows us to have increased volumes and velocity, which allows us to invest in automation tools. Our flagship fastener manufacturing facility up in Toronto just invested several million dollars in finishing and packing equipment. This is not just about doing things more cheaply; it is about doing more. So we are really looking at those kinds of investments too, which are not just robotics. They are about really stripping long-term costs out of the business model while growing. It is about productivity today, but it is really about getting the flow-through that we talked about on the next $100,000,000 in sales. And then lastly, you did not mention it, but I will. When we talk about durable sales at higher margins, the vertical integration piece, particularly in Assembly Components, we have a wonderful footprint in the U.S., Mexico, China, a global footprint, and with very competitive position products with tremendous know-how, and I think it is critical that we continue to invest in the whole value stream. So as we look at improving material science and mixing capabilities on the rubber side, this is going to be really important to controlling our value stream. David Joseph Storms: Understood. Thanks for that commentary, and good luck in the next quarter. Matthew V. Crawford: Thank you. Patrick W. Fogarty: Thanks, Dave. Operator: Thank you. Our next questions come from the line of Jim Dowling. Please proceed with your questions. Jim Dowling: Two big picture questions. Pat mentioned the data center business running at a rate of $150,000,000. Could you expand that and give us your top five end markets across the entire company and what percentage of the total those top five might be? For example, steel, automotive, energy, etcetera. Matthew V. Crawford: Well, I will take the least exciting one, Jim, because that will give Pat a second to think. You have known us when automotive, light truck and auto, was north of a third of the business. Today, I will give Pat a chance to think, but that number probably hovers closer to about 20%, a little over 20%. So we have meaningfully culled the herd, so to speak, and gotten rid of some business that was too focused, I think, not just on the automotive space, but too much on the North American automotive space, and I think also were more capital intensive. So we have moved out of those businesses today. While that is still our biggest market, I want to be very clear that that is a business that today not only is global in nature, we compete very successfully in Asia, for example, but also I think it is a business that is extremely well diversified into products where we either have IP or we have business process or hard assets that put us in a very, very durable competitive position. So that is still our biggest market. But we really like where we are relative to the customer mix and the products that we are supplying. And while we do not see it in the margins yet, Jim, that is probably our biggest opportunity, as we have repositioned that business and invest in that business for growth. Are we looking to be 50% or 40% or even 30% OE automotive? No. But we like where we are today, and we will continue to invest in those positions that we have great accretive margins. Patrick W. Fogarty: Yeah. Jim, this is Pat. We are very fortunate to be a very diversified industrial company. Matt talked about the auto side of the business as that has decreased over the years. But within that block of business that we have, we are very diversified in terms of products, in terms of customers, in terms of the type of auto platform that we are providing our products to. Once you get beyond that, heavy-duty truck, semiconductor, power sports, steel, AI data center-related, electrical, oil and gas, are the top markets that would follow. And each of those individual markets do not represent more than 15% of our revenue base. So no one end market is really dominating our revenues. From that perspective, we are very diversified. Jim Dowling: In broad terms, what percentage of the business is going for OEM application versus aftermarket? Patrick W. Fogarty: I would say that Supply Technologies is 95% OE. Obviously, we do not always track perfectly what the OE does with that, because we do sell to their service arms too. So tracking exactly what goes into their service areas versus their direct OE business can be difficult. But you can think of that as primarily an OE supplier. I think on the aerospace side, even the MRO side, I guess, is still, in some cases, going into assemblers. I think on the automotive side, again, the vast majority is OE. We do sell aftermarket, both direct aftermarket on the extruded hose side. We also sell, obviously, to customers that use them as service parts. But, again, in both those cases, I would say that. I think on the equipment side and the forging business side, the equipment side is a bit more discrete in terms of their building capacity or improving capacity or investing in productivity inside their plants. And then the aftermarket, which is a $150,000,000 part of that business, is obviously all aftermarket. And that is, again, one of the exciting parts of the business model. So, while I would say in general the first two are largely OE-based, I think that the Engineered Products business is a bit more complex and skews a little bit more towards not being entirely OE. Jim Dowling: Okay. Thanks. One last for me. How did China do last year versus the previous year? Matthew V. Crawford: China continues to be a good market for us. We have, I think, in a couple different ways. First, I think that we have really reshaped— I talk a lot about allocation of capital. While we have invested less money— we generate cash in China, and we generate cash exporting cash out of China— we have really focused on the businesses we have there that we can be successful with. So the products we sell there today, the service and the customer we service, are often sometimes Chinese companies, but in most cases, global companies are looking for global partnerships. So that gives us a little buffer from a competitive standpoint. It is a tough market to do business in, no mistake. But it is a growing market. It is a market in which we have accretive margins. And, again, it is not one that we are necessarily pulling back from, albeit more often we will see that as a jumping off point for Southeast Asia and other areas of even faster growth. Jim Dowling: Okay. Thank you. Operator: Our next questions come from the line of Steve Barger with KeyBanc Capital Markets. Please proceed with your questions. Jacob Moore: Hi. Thanks for letting me jump back in. I just wanted to ask about the other part of your strategy that I have not touched on yet, which is reshaping the portfolio. I know, Matt, you have talked about it a little bit already today, but I just wanted to ask you a little more directly. Is the current portfolio set of assets that you want to be in longer term? Matthew V. Crawford: I think we are constantly tweaking and thinking about where we want to allocate capital. I think that we made the big moves over the last couple years. And I think I have often said I really like the businesses we are in. Each of them, I think, has real opportunity for growth. And not only growth, but durable growth at accretive margins. Having said that, I think that we are not operating at the highest level across the board. So we will continue to fine tune that as we go forward. But, again, I think that from a revenue perspective, the core businesses we have are fantastic. Patrick W. Fogarty: Yeah, Jacob. We have discussed on prior calls, and I know Matt has highlighted, the allocation of capital strategy, that we are allocating capital to our best products, our highest margin businesses. And to the extent that there are businesses that are not going to get fed the same amount of capital, those are the businesses that we will make decisions on going forward. But right now, we are happy with where we are at. Jacob Moore: That is really good color. Thank you. And then just the last thing from us, and it is maybe one for each of you. Pat, what do you see as the variables or watch items that could drive upside or downside to your 2026 outlook? And for Matt, what programs, initiatives, or trends are you most excited about this year and why? Matthew V. Crawford: Those are some big questions, Jacob. So let me just comment and say I think that, as I mentioned earlier, we have a little better visibility this year going into the planning year. I would say, only half joking, that last year, pretty early in the year, the economic uncertainty and the specter of tariffs changed our ability to plan the business and made some of our business plans almost irrelevant by the end of the first quarter. So I think this year, a lot of the inventories that were really overbuilt or pre-bought or prebuilt at the beginning of last year, a lot of that inventory is cleared in some of our traditional markets. A lot of the transportation markets in particular. I am not talking auto. Some of the markets have been at historic lows. For example, the train market, and the track market. Some have been reasonably soft, the heavy-duty truck market. So there are a number of markets that we have some exposure to that have been sort of bumping along the bottom. So I think those businesses are in a position— those markets are in a position to stabilize, perhaps a little upside. That should allow us to benefit from some of the faster-growing areas of the business that Pat has recognized. What do I think the risk is? It is less, I think, on the customer side this year and more on the macro side. It is somewhat surprising to me that the markets, with the exception perhaps of the oil market, have been as calm as they have been. And most of our key customers have been insulated from that. But it is hard to imagine that an inflationary cycle that burns through this global economy, or here in the U.S., because of the ongoing war on two fronts, would not in some way impact our business. It may help on the aerospace and defense side, but it probably will create some challenges and some demand chaos as we saw last year. So those are a couple things we are thinking about. And that is one of the reasons we continue to invest well above our historic norms is because we want to be in a better position to respond to that kind of activity. Patrick W. Fogarty: Hey, Jacob. This is Pat. To answer the question directed at me, obviously higher production levels in the end markets that we serve will drive higher levels of profitability. But I think more importantly than that, and because our guidance reflects where we think the end markets are going to be, better throughput of our products through our plants— whether that be in our capital equipment business; the more we can push through the plant, the more efficiently we push new equipment orders through our plant— will drive profitability. The same is true in our manufacturing plants in Assembly Components. The more efficient we become, the better absorption we are able to obtain, and the higher levels of profitability will result. And so those are the two areas that we are focused on, and that will drive any upside that we might see in our 2026 guidance. Jacob Moore: Okay. Thank you very much. I know we had a lot for you today, so I really appreciate your help. Matthew V. Crawford: No. Great. Thank you. Operator: We have reached the end of our question-and-answer session. I will now hand the call back over to Matthew V. Crawford for any closing comments. Matthew V. Crawford: Great. Thanks, everyone. Appreciate your attention and your patience as we transform this business going forward. Thank you. Have a great day. Operator: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
Operator: Good morning, and welcome to Ranger Energy Services, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Joe Meath, Vice President, Finance. Please go ahead. Joe Meath: Good morning, and welcome to Ranger Energy Services, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. Appreciate you joining us today. Before we begin, Ranger Energy Services, Inc. has issued a press release outlining our operational and financial performance. The press release and accompanying presentation materials are available in the Investor Relations section of our website at www.rangerenergy.com. Today's discussion may contain forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Further, please note that non-GAAP financial measures will be referenced during this call. A full reconciliation of GAAP to non-GAAP measurements is available in our latest quarterly earnings release and conference call presentation. Joining me today are Stuart Bodden, our Chief Executive Officer, and Melissa Cougle, our Chief Financial Officer. Stuart will begin with a strategic and operational overview outlining our accomplishments in 2025, and provide an outlook for Ranger Energy Services, Inc. for 2026. Melissa will then walk through a financial summary of the results for Ranger Energy Services, Inc.’s fourth quarter and fiscal year. Following their remarks, we will open the call for Q&A. With that, I will turn it over to Stuart. Stuart Bodden: Thanks, Joe, and good morning, everyone. I appreciate all of you joining us today to discuss our fourth quarter and full year 2025 results. I will spend some time walking through our operational performance during the quarter, highlight the strategic milestones we achieved in 2025, and then talk more broadly about the trajectory we see for the business as we move into 2026. Let me start with an overview of the year. We posted total company revenue of $547,000,000 with adjusted EBITDA of $73,200,000. I am pleased with how the organization executed throughout 2025, particularly against the backdrop of a market environment that required discipline, adaptability, and continued focus on operational performance. Across the board, our teams delivered consistent execution in the field, maintained strong alignment with customers, and supported the integration of new assets and capabilities that will position Ranger Energy Services, Inc. well for the long term. In the fourth quarter specifically, activity levels were generally consistent with our expectations. The market continued to reflect the same characteristics we have spoken about over the past several quarters: relatively stable demand, customers focused on high-quality service execution, and a continued emphasis on efficiency and cost management. Against that backdrop, Ranger Energy Services, Inc. continued to perform well. Our well service operations, wireline offerings, and ancillary services demonstrated solid utilization and maintained the margin profile we had built through disciplined pricing, cost control, and operational efficiency. Let me turn now to a few of the strategic initiatives that shaped the year. Starting with the American Well Services acquisition. We completed this transaction with a strategic intent to broaden our footprint, enhance scale, and strengthen our service offerings in the Permian Basin. I am pleased to report that the integration is progressing well. Our focus during the fourth quarter, and continuing into early 2026, has been on ensuring that the combined operations function cohesively, that our teams remain aligned with the expectations we established at the outset, and that our shared best practices are implemented efficiently. All of these areas have integration milestones that are on track and being achieved. The operational overlap continues to progress well, and we see nothing approximately 120 days into our combination that would derail our long-term synergy plans. We have maintained transparency with our teams and customers, and we have ensured continuity of service while beginning the process of capturing efficiencies that the combined platform enables. The AWS team has been collaborative, and their operational culture aligns well with Ranger Energy Services, Inc.’s emphasis on safety, efficiency, and reliability. The acquisition also strengthens our customer reach and enhances our competitive position. We are solidifying relationships with operators who value scale, responsiveness, and the ability to execute consistently. We continue to see opportunities to drive incremental value from this combination as we move through 2026, and we are encouraged by early results. The other strategic initiative that saw meaningful progress in 2025 was our ECO rig program, which has been one of the most exciting internal developments in our history. As many of you know, ECO represents a significant advancement in well technology—one that reduces emissions while also delivering greater overall control and safety on location. As we rolled out our first two ECO rigs in 2025, we continued to validate the platform's performance with customers, and the feedback has been very reassuring. As one example of the efficiencies of our ECO rigs, in the first 450 hours of deployment last year, one of our ECO rigs used less than 22 hours of generator power, with the balance coming from the onboard battery system being recharged through the regenerative capabilities of the rig. At the beginning of this year, we signed a contract for 15 ECO rigs to be built with a key operator in the Lower 48. This contract reflects a few important themes. First, customer interest remains strong. Operators are increasingly looking for ways to improve operational efficiency and safety on-site while also reducing emissions. ECO directly addresses those needs and provides a flexible platform that can work independently or leverage infield or coal power. Second, the platform is beginning to demonstrate real, measurable value. We have worked to quickly address any issues identified, and we are starting to quantify the operational efficiencies produced. The theme we continue to hear from operators is that the ECO platform is differentiated. We are still early in the broader adoption curve, but the pace is accelerating—faster than what we initially expected when we launched ECO. The pipeline of interest remains robust, and as customers gain more experience with this technology, we expect those conversations will continue to mature. ECO is one of the most meaningful strategic investments we have made as a company. We are excited about the momentum it continues to generate heading into 2026. Outside of the accomplishments on the growth side with AWS and ECO, our legacy core Ranger Energy Services, Inc. businesses have continued to perform well despite the headwinds that were present through most of 2025. Our high-spec rig fleet continued to benefit from operational consistency, steady workload, and disciplined labor management—areas that have long been strengths for Ranger Energy Services, Inc.—with holiday scheduling at year-end showing more resiliency than expected. Although our ancillary services segment performed well as a whole, the situation was more nuanced, with some service lines finding new growth avenues in the fourth quarter, while others contended with white space. Finally, our wireline services continued to navigate a challenged business environment in the fourth quarter. That said, we have seen recent signs of improvement and experienced a couple of key customer awards. We also maintained our commitment to capital discipline throughout the year and deployed capital in a balanced and deliberate manner, investing in opportunities that support our strategic goals while maintaining flexibility on the balance sheet. As Melissa will discuss in more detail later, our free cash flow generation allows us to both pursue growth opportunities and return meaningful capital to shareholders. In 2025, we used approximately $40,000,000 of our free cash flow towards the purchase of American Well Services, while also repurchasing nearly 1,000,000 of our own shares last year, which represents almost 5% of shares outstanding. This disciplined approach to capital deployment positions us well as we move into 2026, where we expect to continue generating healthy levels of cash while also supporting the rollout of our ECO fleet and completing the integration of AWS. Let me now touch briefly on the broader 2026 outlook. We expect the operating environment to remain generally stable and similar to 2025 from an activity level standpoint, making 2026 a year of execution and strategic evaluation. We will continue to integrate American Well Services, support our teams in the field, advance the rollout of the ECO platform, and explore opportunities to strengthen our service offerings where it aligns with our capabilities and our financial strategy. We will stay focused on the fundamentals: safety, efficiency, cost control, and customer service, and we will continue to make decisions that support long-term shareholder value. Despite expectations for a relatively flat 2026, there is reason to be excited about the future looking to 2027 and beyond. Our pro forma financial profile with the AWS acquisition gives us an annual EBITDA generation opportunity of more than $100,000,000 in 2026, with room far beyond in a supportive macro environment when commodity supply begins to tighten. By 2027, we expect to have 15 new ECO rigs operating in the Lower 48, and we believe more contracts for further rig deployments will be underway, providing for an ever more differentiated service offering with best-in-class assets. Over the next 18 to 24 months, we believe the U.S. onshore market will see activity improvement, and Ranger Energy Services, Inc. will be ready with high-quality assets to be deployed. Both oil and gas markets are seeing more incremental support than expected this year, even before geopolitical developments in the past seven days. Whether taking a near, medium, or long-term view, we will remain disciplined in our deployment of capital, ensuring long-term value creation. Before I hand things over to Melissa, I want to again thank the entire Ranger Energy Services, Inc. team for their hard work and commitment throughout 2025. The company delivered solid results through consistent execution, thoughtful decision-making, and strong discipline at every level of the organization. We have momentum entering 2026, and we are confident in our ability to continue building on that foundation. Our field personnel continue to be the heartbeat of this organization, and throughout 2025, our crews delivered safe, reliable, and efficient work for our customers in a variety of operating conditions. And our commitment is evident in the trust we continue to earn from operators across all service lines. As we have said before, Ranger Energy Services, Inc. differentiates itself through execution, and our teams continue to validate that every day. With that, I will turn the call over to Melissa to walk through our financial results. Melissa Cougle: Thanks, Stuart, and good morning, everyone. I will now take you through our financial results for the fourth quarter and full year 2025. Starting at the top line, revenue for the fourth quarter was $142,200,000, up from $128,900,000 in the third quarter and essentially flat with $143,100,000 reported in 2024. The sequential increase reflects higher activity in our High Specification Rigs and Processing Solutions and Ancillary Services segments brought about from a partial quarter of included AWS results. These increases were partially offset by continued softness in wireline. Breaking out the revenue by segment, High Spec Rigs generated $92,300,000 of revenue in the quarter, up meaningfully from $80,900,000 in the third quarter and up from $87,000,000 in 2024. Rig hours grew 16% sequentially to 128,500 hours in the quarter. Processing Solutions and Ancillary Services contributed $37,500,000 of revenue, representing a 22% sequential increase from Q3. This reflects both organic performance and the contribution of service lines acquired through the American Well Services transaction. Wireline Services revenue was $12,400,000, down from $17,200,000 in the third quarter and consistent with expectations given lower completed stage counts during the quarter. On the profitability side, net income for the fourth quarter was $3,200,000, or $0.14 per diluted share, compared to $1,200,000, or $0.05 per diluted share, in the prior quarter. Adjusted EBITDA for the quarter was $20,300,000, representing a 14.3% margin, compared to $16,800,000, or about 13%, in the third quarter and $21,900,000 in the fourth quarter of the prior year. The sequential improvement reflects stronger revenue and margins in our High Specification Rigs and Processing and Ancillary segments, partially offset by continued margin pressure in wireline. When looking to 2026, we did see heavy winter storm impact in January that will likely put our first quarter results largely in line with Q4, although early March activity levels give us confidence that our full year 2026 goals remain within reach. Turning to the full year, Ranger Energy Services, Inc. generated $546,900,000 of revenue compared to $571,100,000 in 2024. While modestly below last year, the result reflects consistent execution and a generally stable operating environment in our core business, with some softening in activity in specific service lines in wireline and ancillary segments. Full year adjusted EBITDA was $73,200,000, representing a 13.4% margin, compared to $78,900,000 and a 13.8% margin in 2024. From a segment perspective, full year financial results remain stable and aligned to the drivers we have outlined throughout the year. HSR continued to anchor our earnings profile with strong utilization and disciplined pricing. Processing and Ancillary delivered improved performance driven by the incremental contribution from the AWS acquisition. Wireline saw headwinds related to lower utilization and pricing and remains an opportunity set for Ranger Energy Services, Inc. in the future. Turning to CapEx, Ranger Energy Services, Inc. continues to invest capital in a disciplined and measured manner. Total capital expenditures for 2025 were $26,100,000, down from $34,100,000 in 2024. The year-over-year decrease reflects reduced growth spending, as 2024 included approximately $10,000,000 of growth-related CapEx. Growth capital in 2025 was deployed selectively and focused predominantly on the ECO rig deployments. We continue to employ the same rigorous return on capital screening for growth investments that have served us well for several years. Our full year 2026 pro forma financial profile of more than $100,000,000 of annual EBITDA remains supported with a highly disciplined approach to capital deployment. Maintenance CapEx is anticipated to be aligned with historical trends and run at approximately 4% to 5% of revenue. ECO CapEx will push that number higher this year, but recall that these contracts include provisions that include upfront CapEx in many cases that will result in deferred revenue and/or guaranteed hourly commitments in the future. We will call out specific ECO spend that is significant in future periods. Turning now to cash flow, which continues to be one of the most important elements of Ranger Energy Services, Inc.’s financial profile. For the full year 2025, cash provided by operating activities was $69,000,000 compared to $84,500,000 in 2024. The year-over-year decline reflects financial dynamics such as lower profitability in wireline, timing of working capital, and costs associated with integration activities. Free cash flow for the full year was $42,900,000, or $1.89 per share, compared to $50,400,000 in 2024. Our EBITDA-to-free-cash-flow conversion rate posted at nearly 60% for a third straight year in a row. This strong and consistent cash flow generation continues to be a hallmark of Ranger Energy Services, Inc.’s financial model and reflects disciplined operational execution and tight control over capital spending. In 2026, we expect that our free cash flow conversion rate will be closer to 50% as a consequence of the timing of ECO rig capital, and we will be transparent about those impacts and expectations as the year develops and as delivery and payment timing is more solidified. We also ended the year with $67,700,000 of total liquidity, consisting of $57,400,000 of availability on our revolving credit facility and $10,300,000 of cash on hand. We finished the year with $3,500,000 in outstanding borrowing. Ranger Energy Services, Inc. was able to optimize working capital through the end of the year and finish in an incredibly strong liquidity position. We do expect to see borrowings in the first quarter as we anticipate a working capital build as spring arrives and activity levels increase, coupled with typical labor costs unique to the first quarter. On the capital returns front, we take great pride in sharing that we returned over 40% of free cash flow to shareholders in 2025 through a combination of dividends and stock repurchases. During the year, we repurchased nearly 1,000,000 shares at an average price of $12.26, totaling $12,300,000. This capital return strategy continues to be an important part of our value creation framework and reflects our confidence in Ranger Energy Services, Inc.’s long-term cash generation capability. As we enter 2026, we remain focused on maintaining operational discipline, supporting the integration of AWS, pacing the deployment of our ECO fleet, and continuing our track record of consistent financial performance. With that, I will turn the call back over to Stuart. Stuart Bodden: Thanks, Melissa. As we close out the fourth quarter, I want to reflect on the progress we have made and the opportunities ahead. The acquisition of American Well Services is a clear example of our disciplined approach to growth. It is a transaction that enhances our scale, expands our service offerings, and strengthens our position. With AWS, we are not changing who we are. We are building on what we do best. Our integration plan is already in motion, and we are confident in our ability to execute. We have done this before, and we will do it again with measured urgency, precision, and a focus on creating value for our customers and shareholders. At the same time, our ECO Hybrid Electric Rig program continues to gain traction. These rigs represent the future of well servicing, and the AWS acquisition gives us a better platform upon which we can accelerate that future. We are committed to being the best well services provider in the Lower 48 on behalf of our customers, employees, and shareholders. Strong free cash flows and strong returns to investors remain our guiding principles, and we will continue to make our strategic decisions and allocate our capital with discipline and foresight. With our balance sheet in excellent shape, our integration playbook in action, and our technology roadmap expanding, I am more optimistic than ever about the next chapter for Ranger Energy Services, Inc. I want to thank our Ranger Energy Services, Inc. employees, customers, and shareholders for their partnership and commitment this past year. With that, operator, we will now open for questions. Operator: We will now begin the question-and-answer session. The first question comes from Don Crist with Johnson Rice. Please go ahead. Don Crist: Morning, guys. Hopefully, you all are doing well this morning. Stuart Bodden: Yeah. We are. Good morning, Don. How are you? Don Crist: I am doing well. My first question is surrounding the ECO buildout and the conversations you are having with customers there. Just an update on how those conversations with other operators are going and, as a second step to that, what is the capability of your partners? Do you have a lot of capability there to put a lot more orders on the books? Just any comments around that. Stuart Bodden: Yeah. Thanks for the question. Obviously, very excited about the contract that we signed earlier in the year. We are in a couple of pretty advanced conversations. I think what we found historically is sometimes it takes a while and then it happens really fast. But we are having really, you know, kind of very productive conversations. As far as manufacturing, we have been working with our vendor pretty closely and feel like we can expand manufacturing if needed. I would highlight these are refurbs, and so there are some things that we can do on our side to streamline the process and increase throughput. So we do not feel like manufacturing should be a bottleneck for us. There are some long lead time items that we are pretty mindful of, but other than that, again, we feel like we can respond to the market demand. Don Crist: That is reassuring. And I do not believe you mentioned it in your prepared remarks—I did want to touch on the plug and abandonment contract that you put in the press release. The comment about regulatory agencies, I do not know if you want to disclose who this contract is with, but if I remember correctly, this could probably expand your P&A fleet pretty significantly. Any comments around that? Stuart Bodden: Yeah. It is the Texas regulator, so it is public—you can look it up. What this is, Don, and I think one of the reasons we are excited about it and wanted to call it out in the script, is that these are for complex wells in particular. We really have been trying to position ourselves on some of the government P&A programs as a contractor of choice for some of the more complex P&As. And so that is really what this represents. And you are right. I think it is something that we think we have growth opportunity within this regulator and in other states as well. Don Crist: Okay. And how many rigs do you think that is going to occupy? I mean, if I remember correctly, it was low single digits that were kind of dedicated to P&A in the past. Any kind of metrics around that? Stuart Bodden: Yeah. It is still kind of three-ish, plus or minus depending on the program at the moment. But certainly, if we needed to ramp it up, we could. But it is kind of low single digits right now. That is right. Don Crist: Okay. And one for you, Melissa. As we kind of think about CapEx for the ECO rig program through the year, any kind of metrics around quarter-by-quarter dollar amounts that we could kind of put in the model? Melissa Cougle: So what I would say, Don—it is a very good question, that is part of my comments around it—we will let you know. A lot of it depends because there are progress milestone payments. You will see a little bit start to trickle in in the first half of the year, but the reality is most of that CapEx really starts to show up as we make milestones and we start to have deliveries month after month in the back half of the year. So I think we have got a long way to really organize how that flows. We have a model, but I also think we are too early in the build cycle to probably give hard guidance on that. That said, I think you will see light build in the first half of the year as just kind of some progress payments are made, but then it will really ramp up in the back half of the year. And just calling attention to the wording was pretty intentional when we said the conversion rate has deteriorated a bit this year on timing, because in some cases we have capital coming in from customers timed alongside this. So what you will see is—and I am just trying to get a sense of the complexity—you might see us lay out capital that ultimately ends up getting refunded to us further down the line too. But we will try to call that out each quarter to any degree it is material, which I suspect it will start to be material as well in 2026. Don Crist: But it is safe to say that you should still build cash through the quarters, even with this CapEx? Melissa Cougle: Yes. I think the one thing we were calling out, Don, is Q1. There are a few things going on in Q1—actually less so on the ECO side, more just to do with seasonality and working capital builds. So I think you will not see cash start to really come in until Q2, Q3, Q4. But our guide right now is closer to a 50% conversion rate for the year, and most of that will show up, as is typical, in the later quarters of the year and not in Q1. Don Crist: I appreciate the color. Thank you so much. I will turn it back. Melissa Cougle: Thanks for the question. Thanks, Don. Operator: The next question comes from Derek Podhaizer with Piper Sandler. Please go ahead. Derek Podhaizer: Good morning. Stuart Bodden: Good morning, Derek. Derek Podhaizer: Patrick is my cousin. Sticking on the ECO rig buildout, should we think about the 15 rigs plus the two rigs under operation as far as maybe like a percentage of your fleet? And then where could this go if you continue to execute on additional contracts? And then also, are these all incremental rigs to the fleet, or are you replacing some of your older legacy assets? Just maybe some color on that as well. Stuart Bodden: Yes. I will try to take it in pieces. Obviously, we have the two in the field and a contract for 15 to 17. Right now, once they are deployed, that would be a little less than 10% of the active fleet, which does include some rigs that are constantly in refurb, repaint, maintenance, etc. As far as the conversations, I think it is really hard to put a number on it, and the reason I say that is that based on the conversations we are having, there is a scenario where it could be the same number again, but I think probably it looks like the next contract would be for less than 10, most likely. So that gives you a sense. And then I think depending how the next 18 to 24 months go, we do think there is longer-term demand for this. Remind me of your second question, sorry, Derek. Derek Podhaizer: Just as far as incremental or replacement. Stuart Bodden: It is very customer dependent on that answer. I think for a lot of the ones that we are deploying right now, if there is not a change in the macro environment, they will do some replacement of existing rigs. I think what we had highlighted is that given who the customers are that are interested in ECO, the rigs that get displaced tend to be high-spec and very high-quality rigs, and so we are certainly thinking that they will find homes pretty quickly. That said, I think we want to be open and transparent that the first wave of ECO rigs will replace some of our existing rigs. Derek Podhaizer: Right. That makes sense. That is helpful. And then how should we think about the earnings power with the ECO rig buildout? Just looking at your margins right now in High Spec, you are in the low 20s to end the year. As we move over the next 18 to 24 months and these start to become a bigger part of your rig mix, where could those margins start going to when we also start thinking about integrating AWS, and now with the buildout of ECO, how should we think about the margin profile? Melissa Cougle: It is a good question, Derek, and I would tell you we are still working on how that can come together. Again, you have a little bit of timing. Each one of these contracts sort of looks and flavors itself out differently. So in some cases where you would have a contract that has more upfront capital, we will have deferred revenue, which actually turns into amortization. So you are not going to get—even though we are getting probably pulled-forward returns—it is not going to be as readily obvious in margins because it will be an amortization item as opposed to a current revenue item and collection item. On the inverse side, where we get more hardcore rate uplift over the like, you will see margin uplift. So it is going to be a little bit of a mix of both coming through the pipeline. On the AWS side, what we are seeing is the best of operating leverage and the worst of operating deleverage, because what we saw, for example, in December, where we had a lot of good activity in utilization, we saw real margin expansion in just one single month. That said, the winter storm in February hit us hard, and we had the opposite effect. So I think we are still trying to get a better cadence and flow. I think there is margin to be expected this year. I just think it is too early to tell you that it is 200 bps or 100 bps or 300 bps. It is probably not 5%, though, I would tell you that. Derek Podhaizer: Right. Right. Great. That is all helpful. Thank you. I will turn it back. Stuart Bodden: Thanks, Derek. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Stuart Bodden for any closing remarks. Stuart Bodden: Thank you, operator. Thank you, everyone, for joining. Thank you for your interest in Ranger Energy Services, Inc., and have a great day and a great rest of the week. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, ladies and gentlemen, and welcome to the Miller Industries, Inc. Fourth Quarter 2025 Results Conference Call. Please note, this event is being recorded. And now at this time, I would like to turn the call over to William G. Miller at Miller Industries, Inc. Please go ahead, sir. William G. Miller: Good morning, everyone. And thank you for joining us for our fourth quarter and full year 2025 earnings call. I want to begin by thanking our employees around the world for dedication throughout the year. Our results and strategic progress reflect the commitment and passion of our team, our suppliers, our customers, and our shareholders. As always, our remarks today will include forward-looking statements. Actual results may differ materially. Please refer to our SEC filings and the Safe Harbor statement included in today's presentation. I would like to start with a brief overview before I hand the call over to Deborah L. Whitmire, who will review our results in greater detail. We were pleased to deliver a fourth quarter that led to generating full year revenue in line with our revised expectations despite a challenging industry environment. I am incredibly proud of the way our team rose to the challenge this year, focusing on operating discipline in the areas of the business within our control. We have over 1,500 employees across Tennessee, Pennsylvania, France, the United Kingdom, and Italy. And our footprint gives us unmatched reach, capability, and reliability. During the year, we made many difficult but necessary decisions to protect the long-term health of the business. These included strategically decreasing production in response to elevated field inventory in our North American distribution network, rightsizing our cost structure for the current environment, and strengthening our supply chain to mitigate the impacts of tariffs. We also achieved meaningful milestones, completing the acquisition of OMARS in an effort to expand our European footprint and take advantage of the strong demand we are seeing in the region, particularly for our heavy-duty products. More on that shortly. Our core philosophy remains exactly as it has been since day one. Miller Industries, Inc. has the best people, the best products, and the best distribution network in the towing and recovery industry. That philosophy is the backbone of Miller Industries, Inc.'s 35-year history and continues to position the company for future growth. I want to directly acknowledge our teams across the United States, Europe, and the United Kingdom, who delivered through a challenging market and delivered recalibration of production. Their execution enabled us to finish the year with momentum and enter 2026 from a position of strength. I will now turn the call over to Deborah L. Whitmire, who will provide an update on our financial results in more detail, before returning with some more specific thoughts on our markets in 2026, capital allocation priorities, and guidance. Deborah L. Whitmire: Thank you, Will. Before I begin, I would like to note that we closed the acquisition of OMARS on December 2, so our fourth quarter results only reflect approximately one month of contribution from OMARS. For the fourth quarter, revenue was $171,200,000, down 22.9% year-over-year as expected. This decline reflects our decision earlier in the year to reduce production and allow distributor inventories to return to historically normalized levels. Gross profit was $26,500,000, or 15.5% of sales, and diluted EPS was $0.29 per share. We saw sequential improvement in retail order activity late in the quarter, and that momentum has continued into 2026 consistent with our expectations. As a result, we have already begun to increase production levels at all the U.S. facilities to meet this demand. For the full year 2025, revenue was $790,300,000, down 37.2% from 2024. Gross profit was $120,400,000, or 15.2% of sales, and net income was $23,000,000, or $1.98 per diluted share. With distributor inventory now back to historical levels, we have greater visibility into retail demand and are operating with an improved production cadence. Our SG&A expenses increased on a year-over-year basis for both the fourth quarter and full year 2025 primarily due to one-time expenses related to the voluntary retirement program in the third and fourth quarter, and as we executed planned workforce transitions across the organization. Also, transaction and integration costs related to the OMARS acquisition, which represent an important investment in our European growth strategy, and higher stock compensation expenses to retain key leadership talent and further align the executive team to the interest of shareholders. These were all planned and strategic investments and expenses that advance our future growth strategy. Now I will turn the call back to William G. Miller to discuss our markets and our outlook for 2026. William G. Miller: Thank you, Debbie. In the domestic market, we now see normalized distributor inventory, steadier retail demand, and improved sales order entry. As we move into 2026, we expect production levels to rise methodically throughout Q1 and Q2 to match this demand recovery. Our export business remains a major, and the 2026 outlook is very encouraging. Three drivers stand out in particular: consistent European demand; growing demand in other international markets such as Australia, Japan, Mexico, Indonesia, and many others; and a robust pipeline of global military RFQs, which we will discuss further later in the presentation. These should provide a strong multiyear growth tailwind. In the acquisition of OMARS and our expansion of GEA, both will play large roles in this expected growth. Our integration of OMARS, Italy's premier towing equipment manufacturer, continues to progress extremely well. As we have previously shared, we expect our OMARS acquisition to be accretive in the first year. OMARS provides Miller Industries, Inc. with new sales, a stronger brand presence in Europe, and a strategic manufacturing and distribution hub in a key growth reach. OMARS is critical to our long-term growth in the European market. This acquisition should also increase U.S. production levels to supplement OMARS integration capacity and equip them with the necessary resources and scale to capitalize on the strong demand for their products. At Zuzain in France, our €8,000,000 expansion is on schedule and is anticipated to double their heavy-duty integration capacity. We are expected to complete the expansion project by mid-2027. Meanwhile, at Boniface in the United Kingdom, we are investing in production efficiencies to increase capacity and support the growing need for both light- and heavy-duty products. Demand in Europe remains strong, and to support this, our U.S. operations, especially Uttarwat, increased heavy-duty production capabilities. We will supply Xizhe, Boniface, and OMARS with reduced lead times, consistent quality, and increased production volumes. Earlier, I mentioned our robust pipeline of military RFQs. We began 2026 with more than $150,000,000 military, with production scheduled to begin in 2027, with the majority of revenue to be recognized in 2028 and 2029. We are also actively engaged in a substantial pipeline of additional military RFQs. This level of military activity is unprecedented for our company and represents a major long-term growth factor. To service future demand, we are beginning one of the most significant projects in our history: a 200,000-plus square foot addition to our Oodawa facility. This estimated $100,000,000 investment should unlock new capacity, streamline heavy-duty workflow, and enhance our manufacturing efficiencies. With more than $150,000,000 in military commitment secured and additional global RFQs underway, the new facility will be key to producing global, high-volume, defense-grade recovery vehicles as well as meeting increased demand for our global export markets while maintaining the ability to service our North American customer base. We anticipate the new facility will be production ready in late 2027. As we continue our strong cash generation, and debt continues to decline, we anticipate funding the majority of our expansion organically through operating cash flow over the next several years. We remain disciplined in how we allocate capital, focusing on five key priorities: paying a consistent quarterly dividend, which the Board of Directors increased 5% to $0.21 per share this quarter; debt reduction, which has been reduced to $20,000,000 in January 2026 through our diligent reduction in working capital; share repurchases, including $2,200,000 in 2025; selective M&A opportunities; and ongoing investments in automation, innovation, people, and capacity. We are extremely proud that we have paid our dividend for 61 consecutive, and in 2025, we returned approximately $15,100,000 to shareholders between our dividend and share repurchase program. This balanced approach strengthens the company while also returning value directly to shareholders. For 2026, we expect revenues between $850,000,000 and $900,000,000. We also expect that performance will accelerate into the second half of the year as manufacturing activity increases throughout the first and second quarters and product mix normalizes. We anticipate that revenue will approach $250,000,000 per quarter by the 2026. Additionally, as product mix shifts to a historical percentage of manufactured product and chassis, we would also expect gross margins to return to historical levels in the mid-13% range for the full year. We look forward to meeting with investors to speak about these exciting developments throughout 2026 at the Three Heart Advisors Conferences in New York, Chicago, and Dallas, at D.A. Davidson's Industrial Conference in Nashville, and additional non-deal roadshows to be scheduled. We always welcome continued dialogue with our shareholders. In closing, I want to emphasize that 2025 was a difficult year, and our team managed multiple challenges extremely well. We now enter 2026 with normalized distributor inventories, stronger retail demand visibility, a growing international platform, major military momentum, a significant expansion of our U.S. manufacturing footprint, and a strengthened balance sheet. We are exceptionally well positioned for long-term global growth, and I am proud of the work our team has done to get us here. As always, I would like to thank our employees, customers, suppliers, and shareholders for their ongoing support of Miller Industries, Inc. Thank you again for joining us. Operator, please open the line for questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two. And if you are using a speakerphone, please select the handset before pressing any key. First question comes from Michael Shlisky at D.A. Davidson. Please go ahead. Michael Shlisky: Absolutely. Good morning, guys. So help me understand, yes. Hey, guys. So I guess I am, I guess I am trying to figure out the margin story first. I would just say that the gross margin expectation for 13% range is better than you have seen in the past for the mix that you are expecting. I am trying to make sure that the cost suggestions that you have undertaken are kind of having the desired effect. Or at least that we might see on the operating margin line an improvement when you consider your cost reductions, you know, now that they are behind you. Or is it better or worse than it has been in the past? It is what I am trying to figure out here. I believe they are normalizing. William G. Miller: I think our margins are better than they were pre-COVID levels in 2019, where we saw margins in the mid-12% to high-12%. But I think you will see that return back to, on an average year, if you look at 2023 and 2024, in those mid-13s, although we did have some fluctuations quarter to quarter due to chassis availability and timing of shipments of chassis. But I think over a year period, you are going to see them normalize back in the mid-13% range. Michael Shlisky: So the cost reductions that you have had, the people cost, etcetera, that you have done over the last 12 months, they have not had any impact on margins? Or I am just trying to figure out whether you are seeing a better margin profile. Maybe it is operating margin rather than gross. Do you feel you are going to get the benefit that you are expecting on the margin end from all those cost reductions? William G. Miller: Well, most of our people reduction was hourly employees that were focused on the reduction or lower levels of production. As we start to ramp back up, we will intentionally add some people back. We did have some retirements that will help on the SG&A level. However, some of those employees have also been replaced as we moved on, and we progressed to the had plans to replace them throughout the process. Michael Shlisky: Okay. That makes sense. I get it. That is totally fair, Will. And then the top line outlook, I think back a year, what happened back then, you know, we on our end were blindsided by some of the, you know, how fast tightened. I think some of that even surprised you in the swiftness of how the market changed and things that happened in 2024. So the outlook you have now for 2026 at this time of the year, do you feel like you have got a better sense of the confidence in this time around than you had this time last year? What has changed, etcetera, that makes you feel like you have got the $850,000,000? William G. Miller: I think our confidence level is higher this year. We saw an abrupt change and downward projections mid-year last year, and really a couple of things. We have utilized the technology that we have internal to be able to better analyze and project what our distribution needs and retail activity is going to be on an average basis. We have a lot more—we had the data, but actually putting it into a format to be able to project what we think future needs will be. Also, distribution inventory is back to, as we said, historical average levels. We are starting to see that order intake pick back up. And really what we are looking at is retail activity. Retail activity or retail demand from our distributors to the end users was consistent throughout all of 2025, and we see that consistency moving right back into 2026. So, really, what we are projecting is that we are just ramping back production to meet the average retail demand levels that we saw consistent through 2025 and into 2026 so far. Our confidence level is pretty high. Michael Shlisky: And so you would characterize the mix between the chassis-plus-tow sales and the tow-only kind of packages as more normalized in 2026 and in your current outlook? William G. Miller: Absolutely. Michael Shlisky: And does that mean that is 50/50 or some other kind of fraction? William G. Miller: No. It is not one-for-one, as you realize, that we do have distributors that provide their own chassis—what we call customer-supplied chassis. You also have municipalities that drive their own chassis along with all of our export product and our sales over in Europe. So it is not one-for-one, but it is returning to a normalized level. I mean, every tow body that we manufacture does have to have a chassis to create a tow truck, but that does not mean that we sell every chassis with the body. Michael Shlisky: Right. Okay. Just switching over to OMARS real quick. You have an outlook for accretion in 2026, if I am not mistaken. But it sounds like your description of it, Will, was more that OMARS is going to help in a lot of other ways, help your U.S. capacity, help your European business with some synergies and cross-selling and some cross, I guess, cross-manufacturing. Your comment that it was going to be accretive just based on, you know, just layering in the existing OMARS P&L, it is something that there is a lot more accretion that could happen once the synergies start to roll. Is that a verification? William G. Miller: Yes. It is more of a long-term play. Right? Currently, you are going to see their P&L drop in dollars, and we do believe that they will be accretive in year one. However, moving forward, we are now focused on, in our European facilities, what product we should build where and what is most successful. And also looking at purchasing throughout those three facilities and how to best purchase product. And then augmenting OMARS’ heavy-duty production, which they make a great heavy-duty product, but also giving them additional production capabilities in the United States so we can export to them to increase their sales capacity, similar to what we are doing with Xizhe, as both Xuzhou and Boniface currently use about 50% of their heavy-duty product manufactured in the United States that they sell in the European market. So we believe there is a significant level of synergies other than bringing on just their additional revenue to our organization. Not to mention they have an amazing state-of-the-art factory with some great capacity and capabilities as well. Michael Shlisky: Sounds great. I appreciate all the color. I will pass it along. Thank you. William G. Miller: Thank you, Mike. Operator: Thank you. We have no further questions. I will turn the call back over to William G. Miller for closing comments. William G. Miller: Thank you. I would like to thank you all again for joining us on the call today, and we look forward to speaking with you on our first quarter conference call. If you would like information on how to participate and ask questions on the call, please visit our Investor Relations website at millerind.com/investors, or email investor.relations@millerind.com. Thank you. May God bless you, and may God bless our troops. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.
Operator: Thank you for standing by, and welcome to REGENXBIO Inc.'s fourth quarter and year-end 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. I would now like to hand the call over to Patrick Christmas, Chief Legal Officer of REGENXBIO Inc. Please go ahead. Patrick Christmas: Good morning, and thank you for joining us today. Earlier this morning, REGENXBIO Inc. released financial and operating results for the fourth quarter and year ending 12/31/2025. The press release is available on our website at www.regenxbio.com. Today's conference call will include forward-looking statements regarding our financial outlook in addition to regulatory and product development plans. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from those forecasted and can be identified by words such as expect, plan, will, may, anticipate, believe, should, intend, and other words of similar meaning. Any such forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties. These risks are described in the Risk Factors and the Management's Discussion and Analysis section of REGENXBIO Inc.'s Annual Report on Form 10-K for the full year ended 12/31/2025, and comparable Risk Factors section in REGENXBIO Inc.'s Quarterly Reports on Form 10-Q, which will be on file with the Securities and Exchange Commission and available on the SEC's website. Any information we provide on this conference call is provided only as of the date of this call, 03/05/2026. We undertake no obligation to update any forward-looking statements we may make on this call on account of new information, future events, or otherwise. Please be advised that today's call is being recorded and webcast. In addition, any unaudited or pro forma financial information that may be provided is preliminary and does not purport to project financial positions or operating results of the company. Actual results may differ materially. I will now turn the call to Curran Simpson, President and CEO of REGENXBIO Inc. Curran? Curran Simpson: Thank you, Patrick. Good morning, everyone, and thank you for joining our call today. 2026 is set to be a pivotal year for REGENXBIO Inc. With great focus on advancing our late-stage pipeline in 2025, we enter the year with near-term topline Phase 3 readouts and ongoing commercial readiness activities in Duchenne muscular dystrophy and wet AMD. Last but not least, we are also entering the pivotal Phase 2b/3 program, named NAVIGATE, for diabetic retinopathy being developed in collaboration with our eye care partner AbbVie. Our clear focus on execution in 2025 has led to a robust set of important catalysts to transform REGENXBIO Inc. from a late-stage development organization to a commercial entity. Today, I am joined by Steve Pakola, our Chief Medical Officer, who will walk through the ongoing clinical advancement of our programs, and Mitchell Chan, our Chief Financial Officer, to provide our financial updates. With that, let me start with RGX-202, our late-stage Duchenne program. I am pleased to report that momentum for RGX-202, our potential best-in-class gene therapy for Duchenne, remains strong. We completed dosing in our pivotal study last fall and are seeing robust enrollment in our confirmatory trial, reflecting continued enthusiasm from the Duchenne community. Our growing clinical dataset, including the 18-month Phase 1/2 NSAA results shared in January, demonstrate meaningful differentiation from the known natural history of Duchenne across multiple validated measures. Combined with a favorable safety and biomarker profile to date, we believe RGX-202 has the potential to deliver durable, clinically meaningful benefit. With less than 1% of the global Duchenne population having received an approved gene therapy and no approved option for patients aged 1 to 3, the unmet need remains significant. We look forward to sharing additional Phase 1/2 data next week at the Muscular Dystrophy Association's annual meeting and topline data from our pivotal study early in the second quarter as we advance towards a BLA submission. We look forward to engaging with FDA midyear to discuss our planned BLA submission using the accelerated approval pathway. We have FDA engagement planned ahead of the pre-BLA meeting and intend to support our primary microdystrophin endpoint with significant functional data both in the pre-BLA meeting and at the time of submission. By 2026, we will have 12 months of functional data on the majority of pivotal trial patients. In addition, with the enrollment momentum in our confirmatory study, our safety database continues to expand. In our retinal disease programs, our partnership with AbbVie continues to progress. Topline data for subretinal Cirovec in wet AMD are expected in Q4 this year. ATMOSPHERE and ASCENT represent the largest global gene therapy program in this indication, and if approved, Cirovec would be the first gene therapy for wet AMD. I am also pleased to share that site activation plans are also underway in the NAVIGATE pivotal study in diabetic retinopathy, with first patient dosing expected next quarter, triggering a $100 million milestone from AbbVie. Finally, turning to our MPS programs, since receiving the CRL for RGX-121 two weeks ago, we have also received the clinical hold letters for both RGX-111 and RGX-121. We believe that the requirements to remove the holds are addressable and, in fact, had already been in the process of addressing them. We continue to work on the CRL response and are working towards a Type A meeting with the goal of resubmitting the BLA. We remain committed to the MPS community, the Hunter syndrome patients waiting for a treatment for this devastating disease. As we enter 2026, our focus is clear: execute against our key milestones and bring the hope for transformative gene therapies closer to patients in need. With that, I will turn it over to Steve. Steve Pakola: Thank you, Curran. I will start with the RGX-202 program for the treatment of Duchenne. As Curran mentioned, we are incredibly excited that enrollment in the AFFINITY DUCHENNE pivotal trial completed in October 2025. As a reminder, this study enrolled ambulatory patients aged 1 and older and is the most advanced clinical-stage gene therapy program for Duchenne. RGX-202 has demonstrated a highly differentiated safety and efficacy profile with consistent, robust microdystrophin expression in the Phase 1/2 study. This includes the positive NSAA data we disclosed in January. As Curran referenced, the 7.4 average improvement compared to the recognized CTAP model observed at 18 months is striking. These results are generally consistent with the October 2025 data showing all patients exceeded their expected functional outcomes when compared to CTAP, as well as matched external controls at 12 months. It is important to note the majority of these patients were 8 years and older at dosing, an age when functional decline is expected, making these functional outcomes even more impressive. The Duchenne patient and physician communities continue to highlight the excellent safety profile of RGX-202 to date. As reported in the Phase 1/2 study, we have seen no SAEs or AESIs, including no thrombocytopenia or liver injury. We attribute this to our proactive immune suppression regimen, our novel construct, and our field-leading product purity, with more than 80% full capsids. We are very pleased with how these differentiated elements enable us to deliver 202 at a 2e14 dose and maximize the potential for efficacy without compromising safety. Next week at MDA, we are thrilled to share additional new Phase 1/2 data on podium, including functional and safety outcomes. With this momentum in our pivotal study, and results to date in the Phase 1/2 study, we look forward to sharing topline data from the pivotal study in early second quarter this year. Turning now to our Cirovec franchise, which is advancing one-time treatment for wet AMD and diabetic retinopathy, or DR. Enrollment is complete in ATMOSPHERE and ASCENT, our two large pivotal studies intended to support global regulatory submissions for subretinal wet AMD starting next year. The data from the subretinal program have been excellent, with durable outcomes reported through four years in the Phase 1/2 trial. Additionally, Cirovec recipients in the fellow eye bilateral dosing study demonstrated a 93% reduction in annualized anti-VEGF injection need at 12 months, with 60% of recipients remaining injection-free through that timeframe. We look forward to sharing topline results from ATMOSPHERE and ASCENT with AbbVie in Q4. We are very excited to be advancing Cirovec into pivotal stage for DR using in-office suprachoroidal delivery with AbbVie. This progressive vision-threatening disease is a public health priority globally. It remains a leading cause of vision loss among working age in the U.S., and a one-time treatment could change the way this disease is treated for millions of people. Site activation activities are underway in the Phase 2b/3 NAVIGATE trial. This is a double-masked, sham injection-controlled trial evaluating Cirovec at 1e12, which is the same as dose level 3 in the Phase 2 ALTITUDE trial. The Phase 2b portion of the study will enroll 136 patients with nonproliferative DR, or NPDR. The primary endpoint is a two-step or greater improvement on the Diabetic Retinopathy Severity Scale, or DRSS, at one year. As a reminder, in the Phase 2 ALTITUDE trial, at two years post-treatment, with dose level 3 and short-course prophylactic topical steroids, no intraocular inflammation was observed. The majority of subjects achieved DRSS improvement, with 50% achieving at least a two-step improvement without any additional DR treatment. Cirovec at dose level 3 also reduced the risk of disease progression, demonstrating a greater than 70% risk reduction in vision-threatening complications compared to historical control. As Curran mentioned, we are working towards addressing the clinical holds for RGX-111/121. And in the interim, we have received the final genetic analysis from the SAE in the RGX-111 study. The analysis of the resected tumor was conducted by an independent third-party lab and, as we reported, detected an AAV vector genome integration event associated with overexpression of a proto-oncogene, PLAG1. Clonal integration of AAV vector elements into the PLAG1 gene was detected in the tumor tissue. Analyses supported classification as a PLAG1 family neuroepithelial tumor and are consistent with the hypothesis that AAV vector integration at the PLAG1 site contributed to tumor formation. Of note, this participant had a background of factors that could have contributed to risk of oncogenic transformation. This child underwent an unsuccessful stem cell transplant at four months of age with loss of donor chimerism, and he received chemotherapeutics that may have contributed to DNA damage. Notably, the report concludes, based on formal neuropsychological testing and developmental pediatrician assessment, that the patient's neurocognitive development is above average, which indicates mitigation of MPS I disease. We anticipate the analysis will be published in a peer-reviewed journal this year, and we are pleased that the patient continues to do well. Finally, I would like to express my sincere gratitude to all the patients, families, clinicians, site staff, and patient advocacy representatives who have supported these trials. With that, I will turn the call over to Mitchell to review our financial guidance. Mitchell? Mitchell Chan: Thank you, Steve, and good morning, everyone. REGENXBIO Inc. ended the quarter on 12/31/2025 with cash, cash equivalents, and marketable securities of $241 million, compared to $245 million as of 12/31/2024. This year-end figure reflects the $110 million upfront payment from Nippon Shinyaku in 2025 and the $145 million in net proceeds received from the royalty monetization with HealthCare Royalty Partners in 2025, offset by cash used to fund operating activities through the year. We continue to invest in de-risking our late-stage program in 2025. R&D expenses were $228 million for the year ended 12/31/2025, compared to $209 million in 2024, with much of this cost going to pivotal trial execution and manufacturing of RGX-202 and Cirovec. We also continue to bring meaningful revenue recognition in 2025, with total annual revenue being $170 million. This includes the upfront license revenue under our Nippon Shinyaku collaboration as well as an increase in royalty revenue for Zolgensma and Evrysdi, both of which are included in our royalty monetization agreement with HealthCare Royalty. We expect the December 31 cash balance reported today to fund our operations into early 2027. This cash runway guidance does not include the $100 million development milestone we expect to receive from AbbVie upon first patient dose in the NAVIGATE study or any additional funds from the May 2025 HealthCare Royalty agreement, which together could extend our runway into 2027. This guidance also does not include any future revenue from our MPS programs. In all, we find ourselves in a strong position to leverage multiple funding options as we advance towards multiple product launches. Curran Simpson: Thank you, Mitch. As you heard today, our strong execution has positioned us for an exciting and transformational year ahead as we share pivotal readouts and look to enhance the treatment landscape in Duchenne, wet AMD, and diabetic retinopathy, representing large indications and commercial opportunities. Our investment in in-house manufacturing and co-development with world-class partners keeps us in a strong position as we approach commercialization. Last week, we joined the rare disease community in recognizing Rare Disease Day, and I would like to take a moment to acknowledge these patients, families, and community leaders. We know they are counting on us to deliver innovative new medicines, and we greatly appreciate the support they have shown us, particularly on our rare programs recently. Their needs are significant and urgent, and we are inspired by their commitment to raise awareness and give voice to the critical need for new therapies. With that, I will turn the call over for questions. Operator? Operator: Thank you. To remove yourself from the queue, you may press 11 again. We ask that you please limit yourself to one question and one follow-up to allow everyone the opportunity to participate. Please standby while we compile the Q&A roster. Our first question comes from the line of Mani Foroohar of Leerink Partners. Please go ahead, Mani. Mani Foroohar: Hey, guys, thanks for taking the question. So as we get closer to data and regulatory clarity in terms of submission around DMD, obviously, there is a lot of debate and concern around whether a controlled trial or an appropriate control arm could be; obviously, there are both Sarepta and Elevidys have seen that in the confirmatory and pivotal studies, respectively. What gives you confidence on your path to accelerated approval and on the design of your confirmatory study, which is a little bit different than both of those competitors? That is helpful. And as a clarifying question, when you talked about reaching alignment, submitting the protocol, including the confirmation study protocol, can you give a sense of when that happened and if those interactions were with FDA and CBER under the current leadership, or under the prior leadership preceding Dr. Peter Marks? Curran Simpson: Thanks, Mani. I think there are a number of aspects to that that give us confidence. I think, number one, the fact that the protocol was prospectively reviewed by FDA. We received comments on the design of the study and the stats plan around comparison to external controls. We feel like we have, and none of that has changed. We have not altered the pivotal protocol through execution. I think the second pillar of that is there is not a narrow difference between the results we are seeing on functional outcomes versus natural history comparatives, and this is matching many patients against the patient treated. So I think that the fact that we have such compelling data specifically in the older patients, where they are typically in a decline phase, I feel will sort of trump the concept of a placebo arm, which we do not think is ethical. And I think the other aspects of how that relates to the confirmatory study: the confirmatory study was included in the original protocol as in addition to the pivotal design. So, again, that was reviewed by FDA. We are really pleased with how the enrollment is going there. And one thing that enrolling as quickly as we have on the confirmatory study does in a positive way is it increases the number of safety exposures that we have at the time of filing. We are talking about roughly 50 total rather than the 30 that were in the pivotal group. So a broader safety database at the time of review, which will be very helpful. Because in our end-of-Phase 2 meeting, one of the things that we heard as a ticket to accelerated approval was similar efficacy but improved safety, and that was pre–black box warning for Elevidys. So I think we are in an even stronger position now around our dataset, and we look forward to discussing that with FDA in our pre-BLA meeting. Yeah. I can comment on the latter part of the question. It was under the prior leadership. This was roughly 2024 that these discussions took place. But I would say the review team that we spoke to and that this was reviewed by is pretty largely intact from what we can tell to date. Steve, if you want to discuss just the prospective nature of the data plan. Steve Pakola: Sure. Thanks for the questions, Mani. So, highlighting what Curran mentioned, the importance of prospective design. This was all set as of those discussions that Curran met. So, for example, the primary—this is accelerated approval—so we were very clear in our design of the primary being microdystrophin. We were also very clear in the secondary functional endpoints that we were looking at and the methodology for assessing that. So this is not a case where midstream we changed something or we looked at data and adjusted how we were looking at the data. And, Mani, one thing I would add in general is we understand the environment and where people are trying to assess FDA's position. From the very beginning of the study, we knew about the controversy around microdystrophin as a biomarker reasonably capable of predicting clinical benefit or functional benefit. And I think that is why the way we have designed the study and in the way we are approaching FDA, we are maximizing the functional data that we bring to the review. And I think that is an incredibly important aspect of how we are approaching this, because we feel like the functional data really supports the improved biomarker data that we have over current therapy. Operator: Thank you. Our next question comes from the line of Judah Frommer of Morgan Stanley. Please go ahead, Judah. Judah Frommer: Yes, hi, good morning, guys. Thanks for taking the question. Maybe just a follow-up on 202 to start. If FDA does end up wanting potentially longer duration follow-ups, specifically for safety, and you go down the path of a traditional approval, what would that entail? What would the trial's role be in that scenario? And then just on the Hunter's program, there is an approval decision coming up for Denali. What would you hope to learn from that program as you go back to FDA to discuss once you are well with them? Thanks. Do you have those heparan sulfate assays, if it is a relatively simple addition to the submission? Curran Simpson: Sure. Hi, Judah. I think if FDA expects longer-term functional data, the time points I would keep in mind is we completed enrollment of the pivotal study in October. So at that point this year, we will have 12-month data on the full pivotal dataset. And then, of course, there is time for QC of the data and then incorporating that into a filing. But it is a near-term event that we would have functional data on the full pivotal dataset. And then if you consider that maybe there is a larger sample size required, the fact that we immediately went into enrollment of the confirmatory study just keeps working towards more data as we go through the year. So I feel like there is no discontinuity between our pivotal and our confirmatory dataset, but we feel like the data we have seen in the Phase 1/2 is already strikingly different from natural history, and so more is not always better in that case, given the unmet need that we are seeing, the prevalent market continuing to grow. So we feel like we are in a good place, notwithstanding as well the safety profile that we are showing. We have investigators clamoring for something where they do not have to worry post-treatment of these events that have been seen in high-dose AAV. On the outcomes for 121, we certainly will pay a lot of attention to Denali's PDUFA decision, and in particular, the fact that part of that submission—and significant element of that submission—is heparan sulfate–based biomarker. If you go on ChatGPT and pull up D2S6, it clearly says that it is a subcomponent of heparan sulfate. So we see them as the same. But in the event that FDA continues to not necessarily see them the same but endorses heparan sulfate, we will be in a great position with our data to pivot to that if that is what is necessary. But we feel really strongly that our dataset using D2S6 shows really good biomarker reduction, very consistent across patients who we know are neuropathic from external reviews. And so we look forward to the Type A. But I think to your point, it will be helpful to see decisions on Ultragenyx's program and Denali's program to see how that may or may not affect ours. We do. Operator: Thank you. Our next question comes from the line of Annabel Samimy of Stifel. Your line is open, Annabel. Annabel Samimy: Hi, thanks for taking my question. I am going to be original and ask about 314. So I noticed that you were moving forward with dose level 3, and I know also that you had agreed with AbbVie to conduct a Phase 2 trial to test the higher dose, but you are going with dose level 3. So I guess the question is, why is it not going straight into a Phase 3? Does the Phase 2/3 also count as part of that pivotal? And just curious about what you found with the L4 that made you go with the L3, and what does this mean for wet AMD? Thanks. Just to follow up, are—like, I know that you are exploring deals for in wet AMD. Are you not going to move forward with that one, given the profile for DL3? I guess I am just trying to understand if there is any safety question with the L4. Curran Simpson: Great, Annabel. I will comment a bit on the trial and what is coming, and Steve can comment a little bit on the dose selection. Keep in mind for the Phase 2 studies on diabetic retinopathy, it is a relatively small sample size, but strikingly good results in terms of what we were seeing on two-step improvement, etc., that we have published. The goal really of the Phase 2b, as it stands now, is to expand that dataset to a higher number of patients and confirm that result. But it is sequenced to be off an interim look and then directly into a larger pivotal study. And I think that is just prudent risk management as we develop the program and move forward. The patients that are treated in the Phase 2b will certainly contribute to the safety database that will be created for DR. So they are helpful in some ways managing the size of the pivotals that we have to run. Now I will let Steve talk a little bit about the dose selection. And on wet AMD, wet AMD is just a trickier indication in terms of reading the tea leaves and looking for a signal in terms of efficacy compared to DR, where there is no other treatment, and you are really looking at pretty binary assessment of things like actual improvement in DR. So I think it is just more straightforward to make a decision on DR as compared to wet AMD. So we and AbbVie are continuing to evaluate the data. Steve Pakola: Sure. First, Annabel, thanks for raising certainly one of our big priorities, which is DR, given what a massive unmet need that is where we certainly believe a one-time treatment is really what is needed for this disease to make the ultimate impact. And the other thing I say is on the dose selection and the Phase 2b/3 concept is it is a real validation of not only our commitment but also AbbVie's to embark on a Phase 2b/3 program. So, as in any program, we do the dose escalation to really look at safety and efficacy. I think one of the aspects was with the time that we took to evaluate dose level 1, dose level 2, dose level 3, the longer we look, the more compelling dose level 3 became. And it really reached a point of pretty remarkable results where we were definitely hitting our target product profile, where the durability to actually see 50% of patients not only be stable but actually have at least a two-step improvement in diabetic retinopathy was really quite compelling. And I think, clinically, even more meaningful for clinicians is the fact that there was a dramatic reduction in vision-threatening complications—over 70%—compared to what you would anticipate without treatment based on natural history data. So I think this constellation was really what drove the decision for us and AbbVie. If you are already at your target product profile, and meaningfully with short-course topical steroids, zero cases of IOI, which is really the big sensitivity in the retina community when it comes to safety, we really had what we needed to go forward. And, you know, once you hit your target product profile and you are really, frankly, plateauing in terms of the results that you would anticipate, and you are seeing durability, that made it a clear decision for us and happy to move forward. Curran Simpson: Yeah. So wet AMD is just a trickier indication in terms of reading the tea leaves and looking for a signal in terms of efficacy compared to DR where there is no other treatment, and you are really looking at pretty binary assessment of things like actual improvement in DR. So I think it is just more straightforward to make a decision on DR as compared to wet AMD. So we and AbbVie are continuing to evaluate the data. Operator: Thank you. Our next question comes from the line of Alec Stranahan of Bank of America. Please go ahead, Alec. Alec Stranahan: Hey, guys, thanks for taking our questions. Two for me as well. I guess, first, just on the functional data, could you just remind us how much of this you will be providing at the topline? I guess, how many patients you expect you will have at that point for the 12-month functional data. And then just on MPS I, curious how the neoplasm in the MPS I patient maybe shifts benefit-risk discussion with the FDA, and I guess what kind of mitigation measures you are considering here, given it sounds to be AAV-related? Thank you. Got it. Very helpful. Thank you. Curran Simpson: Thanks, Alec. I can speak a bit on the topline data plans. So I think as we have previously discussed, we will have, obviously, a safety data update on the full cohort, which is n=30. We will have biomarker topline data for the primary endpoint for the full pivotal dataset as well. In terms of functional data, we have not set a specific time for the release of the topline data, so it is a little bit in flux, but I would set an expectation of roughly seven or so patients at 12 months for functional data. And then, of course, throughout the remainder of the year, we will consider updating that as additional data comes in. Historically, we did report some nine-month data early in the Phase 1/2 studies. I think we are going to try to avoid that because that really does not work well with most of our natural history comparisons that we would like to make. And I think on top of it, we just feel nine months is too early to judge stability of effect on function. But as we go past 12 months, then I think we get to a meaningful level of functional data, and they are well past the removal of immune suppression agents. Steve Pakola: And I can jump in as well, Alec, on the MPS I neoplasm. So you, of course, hit the nail on the head of, well, what does this mean in terms of the overall benefit-risk? And our view, and what we hear from clinicians as well, is that on one hand, you have the risk of a rare event such as tumor, which is not completely unanticipated given the fact that we know that integration can happen with AAVs. And, in fact, it is even included in AAV gene therapy labels for that reason: the potential risk. So fortunately, it does seem to be a very rare event. We have over 6,000 patients treated with AAVs of different sorts by different sponsors, and here is a case where an integration happened at a proto-oncogene. So the clinical community, if we raise this with the investigators and KOLs in the space, almost instinctively, their first response is, okay, there is a rare risk of a tumor versus a 100% risk of inexorable decline and irreversible brain damage. So it really comes down to that context for this devastating disease with such unmet need that the clinicians—it has not changed their view of the favorable benefit-risk. So, from our view going forward, as far as mitigations that you raised, just as in this patient, we can look at periodic MRI. We have already looked at that in the other patients, not only in the 111 program, but also 121, and not seen any other evidence. And, of course, full disclosure in the investigator brochure and informed consent. And with that knowledge, clinicians and the patient families are able to make that assessment about benefit-risk. Operator: Thank you. Our next question comes from the line of Paul Choi of Goldman Sachs. Please go ahead, Paul. Paul Choi: Hi, thank you, and good morning. Thank you for taking our questions. I have two on RGX-202, please. First, with regard to the data you will have next week at MDA, can you just clarify what patient numbers you will have and additional duration of follow-up, or should we just think of—or will it just be additional details on the 18-month data that you previously presented? And my second question is, you have, in your press release, talked about the functional data to date in the context of a CTAP analysis. Can you comment on whether, in terms of your FDA interactions, there is alignment on using these kinds of analysis versus sort of conventional North Star analysis? Any clarity there on the FDA's acceptance of that evaluation framework would be helpful. Thank you. Curran Simpson: Thanks, Paul. I think, because the MDA manuscript is in deep editing mode with Steve, I will let Steve cover the expectations for MDA next week. But it will be, I think, a pretty substantial update—maybe the last update, if you will—in terms of Phase 1/2 data as we transfer over to our pivotal program. But, Steve, maybe you want to comment on what to expect. I think one thing I would add on MDA is we have a poster that will accompany the podium presentation. We have not talked a lot about benefit to cardiac in Duchenne, and part of the reason for that is that we expect those types of outcomes to be much more long term in terms of seeing that in the clinical setting. So what we are providing at MDA is a preclinical model specifically showing the differentiation of our construct using the C-terminus in potentially preventing cardiac deterioration, if you will. Just something to have a look at as part of the total dataset. Some additional preclinical data that we think really supports what we have known from our preclinical work, where we saw good biodistribution in the MDX model in cardiac muscle. So stay tuned there. Steve Pakola: Sure. So, all patients with the primary endpoint, I think, is obviously a key aspect for what we would anticipate. We are almost there, actually, in what we have disclosed before. I think function—the key thing is more patients and longer follow-up. We are really excited about the fact that we have already disclosed previously last year and early this year several different cuts of functional data. We are really happy with what we have seen at dose level 1 and dose level 2, even out to 18 months with dose level 2 for the CTAP. So it is just really a great chance to keep building on that base of functional data. The consideration on the different ways of looking at function and what to compare to—CTAP—I think it is important to note that the program does not hinge on CTAP. It is really a supportive analysis. So our view is the totality of the data is important, that in looking at control data from external databases, it is very comforting and very validating if—and that is what we have seen to date—by different ways of looking at it, you see very consistent results. But certainly, our primary approach from a functional basis, and this is what we have prespecified as well, is the traditional approach separate from CTAP. Where that includes, as well, the propensity score weighting. So I think that is going to give audiences also a sense to see how the results are looking compared to what one would anticipate based on prior analysis. So we are going to be looking at all this, and I think you can anticipate seeing several different ways of looking at comparison to expected trajectory without treatment. And the other key thing is continued safety. So to the earlier question about how much long-term safety—each update is not just the functional, but a chance to show continued differentiation on safety. Operator: Our next question comes from the line of Luca Issi of RBC. Please go ahead, Luca. Luca Issi: Oh, great. Thanks so much for taking my question. Maybe, Steve, any update on safety for DMD? You obviously have a very strong scientific hypothesis around sirolimus and eculizumab and, you know, empty-to-capsid ratio, etc. But, you know, we have seen obviously more setbacks for the field on the safety side from Pfizer and Sarepta than we would have liked. So I guess what percentage of your patients have ALT and AST elevations at this point, and how are the kinetics of those curves in terms of both, like, peak and area under the curve, compared to Sarepta and Pfizer? I do not think we have seen those curves before, so any context there would be much appreciated. And maybe quickly, Steve, also on the CRL for MPS II, now public, why do you measure heparan sulfate at baseline versus after therapy using two different routes of access? I think the CRL notes that you used ICV at baseline versus spinal tap after therapy, which obviously created some variability. So we are just curious for why you decided to do that. Thanks so much. Steve Pakola: Sure. So, on the safety aspect, there are several reasons why we anticipated having a differentiated safety profile: the higher purity, the specific construct, and our immune modulation regimen. And I think the key factor is we have not changed our immune modulation at all since the beginning of the study. So I think that gives comfort in how to analyze the type of safety data that we are seeing. Phase 1/2, we continue to see no cases of liver injury. So it is 13 patients, but zero out of 13 is clearly different from existing therapy, where that rate is 40%. So we look forward to showing some more details on that from the Phase 1/2 study at MDA as well. Also on thrombocytopenia, no cases of thrombocytopenia as well, which is one of the key complement-mediated signals of complement activation that could signal potential risk for other more serious events. So we continue to see the differentiation that we would like to see and look forward to showing more data going forward. And, of course, we will have the topline results in the first half of the second quarter, which will be another cut for you to get more comfort on the data. So onto the CRL, there was, yes, some comment about the potential impact of route of taking the sample. There was consistency, actually, in the vast majority of patients utilizing the same approach. We actually have the benefit of screening and baseline measurement where we have total consistency of ability to match like-for-like or apples-to-apples in terms of the same method of sampling, and we see really the same results in terms of change from baseline. So that will be part of our response—showing that analysis more clearly and more upfront so that they can get comfort around that difference. Operator: Thank you. Our next question comes from the line of Brian Skorney of Baird. Please go ahead, Brian. Brian Skorney: Hey, good morning, team. A couple of questions from me. Maybe going back to some questions around the D2S6 subunit discussion on the Hunter application. There is a lot of talk about it, and I think references this was a discussion point in the mid- and late-cycle review meetings. I guess at any point were measures of regular heparan sulfate discussed and submitted in the application process? Seems like something that could have been addressed during the review. And can you share what the HS data look like in the CSF and the other organs with us? And then on DMD, given what you have been through in the Hunter review, what sort of dynamics and questions are you looking to have answered in the pre-BLA meeting with the agency? And, you know, I guess the bottom line is, does anything coming out of your BLA meeting matter if it is not coming directly from the division head? Curran Simpson: Thanks for the question. I will take the DMD one, and then maybe have Steve talk through the heparan sulfate data, which we did provide limited heparan sulfate data during the review, but it was quite late in the review cycle. But I think in terms of what are the outcomes we are looking for in the pre-BLA meeting, I think that is the point at which, if you recall all the way back to the original protocol and our end-of-Phase 2 meeting, one of the things that we discussed with FDA was correlation of the microdystrophin results to functional outcomes was something that was an expectation of FDA. Now, importantly, there was no specified number of patients of data that had to be provided to make that correlation. I think that was something that everyone considered would be a review issue at the time. I think as we have seen in our Phase 1/2 data, there is a very strong correlation that we are seeing to date: all of our patients above the 10% threshold, and we are seeing the majority of patients having not just sustained function or lack of disease progression, but improvement in age groups where you would not expect it. So I think we have really compelling data, which at the time of the BLA discussion, pre-BLA discussion, I think will be very helpful—hopefully to encourage we are ready to file the BLA. The timing of the pre-BLA meeting is optimized now to provide maximum functional data at the time of discussion. So we have moved it out slightly, but it does not really alter, I think, the overall speed at which we can file, which we could file immediately after that meeting. Typically, a pre-BLA meeting will incorporate feedback from FDA leadership. So I think that is why that is an important event for us. And obviously, ahead of that, we are going to do as much as we can informally outside of that process to assure ourselves of a positive outcome. Is that helpful? Yeah. Thank you. That is helpful. Steve Pakola: Yeah. Thanks for the question, Brian. So, to start off, D2S6, it is important to note that biologically, it is the substrate that directly would link to the enzyme that we are reconstituting with treatment. So that is why, prospectively, that is what we put forward throughout the program. We do measure heparan sulfate, and likewise, we see, not too surprisingly, a dramatic reduction in heparan sulfate. And I guess similar to the earlier question about different routes of sampling, in our response to the CRL we will certainly lay out, in greater detail, our heparan sulfate results. The other thing is we really have an opportunity to clarify a lot of the factors, not just the biomarker. And function is another area where our clinicians are very positive about what they are seeing. And, as you would expect, the longer the follow-up, the greater clarity you can anticipate seeing. So we can certainly show longer-term follow-up, which is one of the pathways that the FDA listed as a way to deal with the CRL. Operator: Our next question comes from the line of Luca Issi of RBC. Please go ahead, Luca. Luca Issi: Oh, great. Thanks so much for taking my question. Maybe, Steve, any update on safety for DMD? You obviously have a very strong scientific hypothesis around sirolimus and eculizumab and, you know, empty-to-capsid ratio, etc. But, you know, we have seen obviously more setbacks for the field on the safety side from Pfizer and Sarepta than we would have liked. So I guess what percentage of your patients have ALT and AST elevations at this point, and how are the kinetics of those curves in terms of both, like, peak and area under the curve, compared to Sarepta and Pfizer? I do not think we have seen those curves before, so any context there would be much appreciated. And maybe quickly, Steve, also on the CRL for MPS II, now public, why do you measure heparan sulfate at baseline versus after therapy using two different routes of access? I think the CRL notes that you used ICV at baseline versus spinal tap after therapy, which obviously created some variability. So we are just curious for why you decided to do that. Thanks so much. Steve Pakola: Sure. So, on the safety aspect, there are several reasons why we anticipated having a differentiated safety profile: the higher purity, the specific construct, and our immune modulation regimen. And I think the key factor is we have not changed our immune modulation at all since the beginning of the study. So I think that gives comfort in how to analyze the type of safety data that we are seeing. Phase 1/2, we continue to see no cases of liver injury. So it is 13 patients, but zero out of 13 is clearly different from existing therapy, where that rate is 40%. So we look forward to showing some more details on that from the Phase 1/2 study at MDA as well. Also on thrombocytopenia, no cases of thrombocytopenia as well, which is one of the key complement-mediated signals of complement activation that could signal potential risk for other more serious events. So we continue to see the differentiation that we would like to see and look forward to showing more data going forward. And, of course, we will have the topline results in the first half of the second quarter, which will be another cut for you to get more comfort on the data. So onto the CRL, there was, yes, some comment about the potential impact of route of taking the sample. There was consistency, actually, in the vast majority of patients utilizing the same approach. We actually have the benefit of screening and baseline measurement where we have total consistency of ability to match like-for-like or apples-to-apples in terms of the same method of sampling, and we see really the same results in terms of change from baseline. So that will be part of our response—showing that analysis more clearly and more upfront so that they can get comfort around that difference. Operator: Our next question comes from the line of Ellie Merl of Barclays. Ellie, your line is open. Eduardo Martinez-Montes: Hi, this is Eduardo on for Ellie. Thanks for taking our question. I think you mentioned you expect 12 months’ functional data from the majority, if not all, of the pivotal patients in the fall of this year. How should we think of those data in context of the regulatory strategy? Could those be submitted as a supplement? And could that extend the review timeline? Curran Simpson: That is a good question. I think that it will likely be a result of the discussion that we have at the pre-BLA meeting in terms of what level of functional data is required to submit. There is no point to submit early if we are going to get additional data requests. So I think getting clarity on that with FDA will be very helpful. We will be in a position—and we have already, obviously, completed our nonclinical work in that module well along. We have completed substantially the manufacturing work related to the BLA, and that module will be ready quickly. So I think, to answer your question, the timing of the full filing for the BLA will be dependent on the clinical data and the functional data that we incorporate into it. The chance to add it is the 120-day safety update that is part of a BLA submission. That has historically been very difficult to include additional clinical data beyond safety as part of it. So I am not confident that we would be able to add at that point more functional data. So I think when we file, we want to be confident that that is acceptable with FDA. Yeah. The BLA submission could happen directly after the pre-BLA meeting. One of the topics in the pre-BLA meeting will be the timing of submission with FDA. So I think post that meeting, we will be in a good position to update on the overall filing timeline. But, yes, it is possible that we can still file within 2026. That is really dependent on these ongoing discussions. Appreciate it. Thank you. Operator: Our next question comes from the line of Daniil Gataulin of Chardan. Daniil, your line is open. Daniil Gataulin: Alright. Hey, good morning. Thank you guys for taking my question. On 202, you mentioned a pre-BLA meeting in mid-’26, but also additional planned interactions in the first half. What is the agenda for those meetings? And secondly, what do you expect the regulatory path and timelines to look like for European approval? Curran Simpson: In terms of the regulatory interactions, we have planned meetings with FDA ahead of the pre-BLA meeting to get at some of the questions we have today around our data analysis methods, some of which are new because we have been able to access additional natural history databases. And as Steve mentioned, and we have published additional CTAP data. So just trying to ensure that when we deliver our pre-BLA package, it is in line with FDA expectations. We have not discussed the timing of those meetings, but they will be interspersed with things like topline data and our pre-BLA meeting as we go forward. So the whole idea here is to de-risk the pre-BLA meeting with ongoing dialogue with FDA and ensure that we are fully aligned so that we have a high-probability submission in terms of FDA acceptance. And I think, again, that is why we continue to publish our functional data, because that is what we think is the most compelling aspect of this on top of safety. There is a huge unmet need in Duchenne, and we see the prevalent population actually growing. We see a pretty narrow payer band in terms of patient ages that are being reimbursed, and so we expect there to be a lot of energy around additional therapies being made available, and with our data, we think we have a compelling case to do that quickly. Is that helpful? It is. Thank you. And with respect to the regulatory path and timelines for Europe approval. For European approval, right now, we are getting feedback on designs that include a placebo arm that are feasible to run ex-U.S. We do not have a specific timeline that we have put out in terms of when that study would start, but we will be more specific about that post that official feedback from EMA. Got it. Okay. Alright. Thank you very much. Operator: Thank you. Next question comes from the line of Bill Mahon of Clear Street. Bill, your line is open. Bill Mahon: Hey, good morning, and thank you. So it seems that there is kind of a broad effort to read the 121 CRL and extrapolate that to 202. So I was just hoping that you could point out specific points within the 121 CRL that you expect to differ in 202 and not keep it from approval. And then I know, Steve, you mentioned that 6,000 patients have now been treated with AAV in one form or another. Is there a difference in the rate of AAV-associated neoplasms across different tissue types or serotypes or disease states? Curran Simpson: Yeah. It is a great question. I think there are some real clear differences between 121 and 202, and some of it goes back to the history of development for both programs. The 121 program really was based on a biomarker premise, meaning D2S6 being reasonably likely to predict clinical benefit, and we felt like we had closed that loop in terms of the RMAT designation we got on the program in 2023. In the case of 121, sometimes you need several years of post-treatment follow-up for those patients to clearly state that they are deviating from natural acquisition of skills and cognitive improvement. And so going into that filing, we did not have the extent of clinical data supporting the biomarker that we do on 202. So in Duchenne, thinking ahead on that and knowing that there was controversy around microdystrophin within FDA, we leaned in heavily on recruiting as quickly as we possibly could and also putting together the functional data to correspond directly with the biomarker data. And so we know going into the review process that we will need both. So that was not the case on 121. We were really relying on the biomarker premise and that supporting data, but we only had, at the time of filing, six months of clinical data. In this case, for Duchenne, even going back to dose level 1, we will have beyond two years’ worth of data showing durability of effect, and then for DL2, as we mentioned, several of our patients—maybe half the cohort—out past 12 months. So a much different discussion with FDA that will be armed with clinical data showing correlation to what we think are very positive biomarker results that show benefit. So I think that that is probably the main difference between how we see it—between how those programs will go and why we think 202 will be, you know, more successful in providing that kind of data. Steve Pakola: And from the actual results, we also have the benefit of the safety differentiation again. And I think also the greater your data is, the clearer you can believe that there is an actual difference. So I think the 8-and-older data in particular that Curran mentioned earlier, where patients are not just stable, they are actually improving. So I think that goes into the delineation here as well, where that is definitely not something one would anticipate without treatment and even with existing therapy—to have an actual improvement in those tough-to-treat older boys. Yeah, from preclinical data and clinical data, there does not appear to be any particular difference between different serotypes in terms of the rate of integration. So I think that is why, across different programs, that issue is raised—that there is the possibility that, given that there is rare integration, at some point you could have the integration basically go where you do not want it to go. But, no, there is no real strong evidence of a particular predilection. Of course, you look at other factors like where do you give the drug, what is the promoter, what is the target tissue, and those are the aspects that give us a lot of comfort in terms of how this is really walled off from our other bigger opportunities of 314 and 202. Operator: Thank you. Our next question comes from the line of Sean McCutcheon of Raymond James. Please go ahead, Sean. Sean McCutcheon: Hey, guys, thanks for the question. Now that you have announced NAVIGATE, with the Phase 2b focusing on two-step DRSS improvement, how are you thinking about, if at all, the flexibility on that endpoint on binary or ordinal DRSS going into Phase 3, particularly as it relates to pulling out a benefit at one year versus the two-year timeframe where you saw the clearest benefit on two-step improvement at dose level 3 in ALTITUDE? Thanks. Curran Simpson: I think I will let Steve take a shot at that. Steve Pakola: Thanks, Sean. Yeah. We are very pleased with the FDA's openness to looking at different types of endpoints and not just the traditional binary two-step improvement or two-step worsening, and the precedent that is now out there. We and AbbVie decided to stick with the traditional two-step change that has traditionally been used. But I think you raised a great point, and it is one of the positives of the Phase 2b/3 design that we have. Yes, we are starting with the at-least two-step improvement, but we have the flexibility to take into account that data to assess is it more sensitive or, in another way, power per number of patients that you have if you use an ordinal endpoint. And I think it is reasonable to think that that may be the case, because we are seeing benefit on both ends. We are seeing not only a higher rate of patients improving, but also, critically, a higher percent of patients who are not getting worse. So an ordinal endpoint, when we look at things with AbbVie, is certainly an option. Operator: Our next question comes from the line of Yi Chen of H.C. Wainwright. Please go ahead, Yi. Eduardo Martinez-Montes: This is Eduardo on for Yi. Just a quick question going back to 202. I am curious if you have used the CTAP method to apply towards placebo arms in the Elevidys study. Obviously, one of the big gripes with the historical competitors is that the placebo arms do not necessarily track with them. So I am curious if you have actually used that method to see if you predict the placebo arms in these other randomized trials. Steve Pakola: Yeah. So there are different studies out there, of course, and there is always the caveat you have to mention about cross-study comparisons and specifics that might be different. Certainly, when we look at what is out there with Elevidys in terms of CTAP or other models, particularly in the older boys, again, we do not see this evidence of older boys getting better versus just stabilization. So a lot of differentiation tends to be driven by the control data and approach. But, again, I guess I would circle back to it is important to look at CTAP, external matched control, and also the propensity score weighting. So I think when we have our next data updates, it is going to be easier for the clinicians in the broader community to try to compare what has been seen previously. But, again, what we are seeing so far, if we continue to see that, we feel very confident about the differentiation by whichever method that we will be presenting. Thanks so much for answering the question. Operator: Thank you. Ladies and gentlemen, that does end the Q&A portion of our call and conclude today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Invivyd, Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Katie Falzone, Senior Vice President of Finance. Please go ahead. Katie Falzone: Thank you, operator. A short while ago, we issued a press release announcing our Q4 2025 financial results and recent business highlights. That press release and the slides that we are using on today's webcast can be found in the Investors section of the Invivyd, Inc. website under the Press Releases and Events and Presentations sections, respectively. Today's discussion will be led by Marc Elia, Chairman of Invivyd, Inc.'s board of directors. He is joined by Timothy Lee, Chief Commercial Officer; William Duke, Chief Financial Officer; and Dr. Robert Allen, Chief Scientific Officer. During today's discussion, we will be making forward-looking statements concerning, among other things, our corporate and commercial strategy, our research and development activities, our regulatory plans, certain financial expectations, our future prospects, and other statements that are not historical facts. These forward-looking statements are covered within the meaning of the Private Securities Litigation Reform Act and are subject to various risks, assumptions, and uncertainties that may change over time and cause our actual results to differ materially from those expressed or implied today. Forward-looking statements speak only as of the date of this call, and Invivyd, Inc. assumes no duty to update such statements. Additional information on the risk factors that could affect Invivyd, Inc.'s business can be found in our filings made with the U.S. Securities and Exchange Commission, including our most recent Form 10-K, which are also available on our website. I will now turn the call over to Marc. Marc Elia: Thank you, Katie, and good morning, everyone. I will make a few quick remarks by way of executive summary, and then we will discuss our clinical progress. Of note, this morning, you may have seen that we have brought an esteemed physician-scientist into the Invivyd, Inc. fold to serve as our Chief Medical Officer. Michael was unable to join our call this morning; I am sure many of you will enjoy hearing from him going forward. After the clinical discussion, Timothy Lee, our Chief Commercial Officer, will review our work with PEMGARDA, and some of our pre-commercial preparation for VYD2311. William Duke, our Chief Financial Officer, will touch on our financial results for Q4, then we will be happy to take your questions. Now on to the highlights. Our Revolution clinical program is well underway, with the aim of providing Americans with an option for what we believe is needed protection from symptomatic COVID disease. We know investors have many questions about our progress, and we will provide as much detail today as we can. Our commercial work with PEMGARDA continues, and we were pleased to demonstrate growth in the fourth quarter. Commercial activities are establishing an attractive basis for broader commercialization of VYD2311, if approved, by demonstrating the power and durability potential of Invivyd, Inc. monoclonal antibodies. We are continuing to build awareness and understanding of our work with monoclonal antibodies among HCPs, professional societies, vulnerable populations, and government public health entities. We believe that the ongoing American experience with COVID vaccination has left an extraordinarily high medical and economic value opportunity to advance standard of care via monoclonal antibody prophylaxis. In the pipeline, we are excited to begin clinical exploration of our antibodies in long COVID and post-vaccine syndrome as disclosed earlier this quarter. We are very interested that the Advisory Committee on Immunization Practices, or ACIP, a group which advises the U.S. Centers for Disease Control, has recently announced that they are having a full discussion on both topics. The ACIP meeting is currently scheduled for March, and we will be watching with interest. Our collaboration with key academic thought leaders in this space, the SPEAR study group, has yielded a clinical trial design we are moving with all haste to action in light of the substantial unmet need for millions of Americans suffering from long COVID and vaccine injury. In the fourth quarter, we were pleased to share our identification of a highly potent, potentially best-in-class RSV antibody. As you may know, there are today two RSV antibodies approved and recommended for the prevention of RSV in certain neonatal and pediatric populations, and we believe the properties of our antibody are highly competitive with standard of care. As we advance our work across multiple infectious diseases, you may notice a special interest in pediatrics. RSV, COVID, and indeed other viruses exert substantial medical burden on both the elderly and the very young, as well as immunocompromised persons. Finally, as previously guided, expect us to update the Street on our measles program in the first half of this year. In light of the substantial and rapidly growing burden of disease, we are excited to share our progress with you, as well as describing what we see as the potential medical value of such an antibody, which we hope can be both first and best in class. Slide five. Moving on to our clinical update. On slide six, we know that there are investors who are new to the Invivyd, Inc. story, and so we would like to review quickly the medical and scientific background for our work with VYD2311, which hopefully will add context to the updates we provided on the Declaration study in our press release this morning. First, it is important to remember that SARS-CoV-2 has been an extraordinarily unwelcome and ongoing medical burden on the human species. As an ACE2 receptor accessing betacoronavirus adapted for high human virulence and transmissibility, it has exerted medical toll in two distinct phases. In the initial pandemic phase, the virus swiftly moved through the human population, exerting substantial morbidity and mortality, especially among vulnerable populations such as the elderly, and people with relevant comorbidities such as preexisting cardiovascular and renal disease. After vaccination and mounting seropositivity, we see a predictably less violent mortality but still extraordinary medical burden from this virus generally in the same populations. As a vascular, prothrombotic, immunomodulatory virus that circulates pervasively, we now see accelerated human aging and broad health effects in Americans from acute infection, with attendant risks through the substantial growth in long COVID prevalence. Even American economic data collected by the Fed appears to show an unwelcome, impressive growth in American disability since COVID entered our population. We must be less tolerant of this burden. Second, given all of the relevant sociopolitical and medical aspects of this controversial field, we must touch on the evidentiary and regulatory history we have in COVID prophylaxis. The mRNA-based COVID vaccines were each formally studied in a single placebo-controlled clinical trial in 2020. These studies assessed vaccine safety and efficacy versus placebo in a seronegative American population against highly immunologically responsive Wuhan-derivative virus variants, for about seven to eight weeks before unblinding. These studies demonstrated high short-term protection and short-term safety. However, these original datasets also reflect the last opportunity we had as a species to assess absolute safety in randomized, placebo-controlled trials. Given the broad vaccine mandates and rapid virus spread, we as a human species are now all routinely exposed to SARS-CoV-2 and its spike protein, which we see as a type of toxin. And absent a new medical option, we as a species have no real opportunity to avoid exposure to spike protein chronically going forward. Shortly after those original vaccine studies and rollout, our entire species became immunologically educated or seropositive, either through the original campaign or circulating virus, all while undergoing excess morbidity and mortality. Omicron phylogeny virus arose quickly following an evolutionary acquisition of population immunity. Omicron viruses are defined by immune evasiveness or the functional avoidance of human immunologic pressure, whether vaccine-induced or natural. One major consequence of Omicron virus was a natural, predictable, apparent reduction in COVID vaccine efficacy, which has been reliably estimated by epidemiologists at CDC over the past years, and was directly measurable in diminished vaccine titers when vaccine manufacturers updated COVID vaccine compositions from Wuhan-variant virus to Omicron BA.4/5 virus. These analyses can be seen in the relevant vaccine labels, and we see them as predictive of diminished efficacy. COVID vaccine boosts have undergone five structural updates since Wuhan virus vaccines, just on the basis of immunologic comparison. Ongoing new placebo-controlled vaccine studies should provide us all with more insight into these issues in the coming quarters. By contrast, Invivyd, Inc. is now conducting its third randomized, placebo-controlled trial for a COVID monoclonal antibody in five years. Our antibodies change one to the next, rather like the vaccines, to make allowance for virus evolution, although we hope to stay ahead of virus variation rather than chasing it from behind. On a percentage basis, our antibodies change by about the same tiny amount as vaccine antigens, but in contrast to COVID vaccines, we see our antibodies as a much more natural, welcome approach to prophylaxis than serial exposure to spike protein in vaccine form. To us, given the apparent short duration of vaccine-induced protection and the potential risks of administering spike protein in either mRNA or protein form, it is natural to now move to supplemental immune support via monoclonal antibody to exert protection. From an evidentiary and regulatory point of view, our antibodies have undergone more extensive placebo-controlled characterization than the COVID vaccines, including now multiple placebo-controlled clinical trials and, in our recent CANOPY study, long-term characterization of pemivibart in a modern seropositive population and against Omicron virus variants. That brings us to our latest antibody, VYD2311, designed as an alternative to COVID vaccination. VYD2311 is much more potent than pemivibart in vitro, and has a longer measured half-life—properties which we believe may combine to deliver equivalent protection to PEMGARDA, but in a much more scalable and convenient intramuscular form. You can see on slide eight a reminder of the initial pieces of the Revolution clinical program. The Declaration study is a triple-blind, randomized clinical trial once again evaluating the safety of VYD2311 and its ability to reduce the risk of symptomatic disease versus placebo. Our target enrollment for Declaration is approximately 1,770 human subjects, randomized 1:1:1:1—three active arms, one placebo arm. We were recently notified that the Declaration clinical trial has reached target enrollment, and indeed, as is normal in these situations, may modestly over-enroll as sites are given permission to complete any ongoing screening and enrollment before closing. Of note, recently, the Declaration Independent Data Monitoring Committee, or IDMC, conducted a prespecified review of unblinded safety and tolerability data associated with initial experience of Declaration subjects. While the IDMC is completely separate from Invivyd, Inc., we are pleased to relay their written communication to us following that review, which included three recommendations. First, that pregnant and breastfeeding women may now enroll in the study. Second, that women of childbearing age enrolled in the study are no longer required to use contraception. And third, that prespecified safety visits at days 8, 38, and 68 post dosing are no longer required. Finally, Declaration is a study designed to assess the performance of VYD2311 in lowering the risk of symptomatic, PCR-positive COVID-19 versus placebo. In every infectious disease prophylaxis study, a sponsor like us faces an unknown so-called attack rate, or the rate of infection observed in the study, to power our efficacy assessments. Because monoclonal antibody technology in COVID has typically involved a very high efficacy hazard ratio or VE traditionally, it has not taken more than a high single-digit or low double-digit number of events in a study to generate statistical significance. As you may recall, alignment with the FDA on the VYD2311 clinical development pathway included recognition that in our CANOPY clinical trial, pemivibart’s placebo-controlled arm demonstrated robust exploratory efficacy with strong statistical support on the basis of nine total COVID events at three months. America is in the middle of a COVID wave, and we are pleased with the speed of our study recruitment. The majority of our recruitment has occurred only in the past few weeks, and COVID events have begun to appear in our study. We see Declaration event accumulation as on track to date, and on a projected basis, we anticipate suitability for robust assessment of VYD2311 effectiveness if the clinical performance of VYD2311 matches our modeling and prior experience with COVID antibodies. Of course, attack rate in the community and in our study is outside of our control and could change going forward. As a result, Declaration includes a prespecified upsizing algorithm to allow for additional patients in the trial should our event rate projections indicate that Declaration would benefit from more statistical power. This resizing feature is dependent on overall progress, and at this point, our best estimate is that such an analysis would take place in approximately April. We will make an announcement to the Street about our next steps one way or the other at that time. However, depending on overall recruitment rates, with which we have been very pleased so far, a modest upsizing to add statistical power may not meaningfully delay our achievement of “mid-year” timing guidance for Declaration, which we consider as Q2 or Q3 2026. Of course, any upsizing would have some level of timing impact, but we would endeavor to stay within our original guidance boundaries. When we get to that point, we will be happy to provide any updated timing estimates. Irrespective of the overall number of COVID events, we are looking forward to data and believe that it may be a profound next step for our company and for infectious disease medicine if Declaration can demonstrate attractive VYD2311 safety, high antiviral titers, and a demonstration—for the third sequential time—of the vaccine-free protection that an avid monoclonal antibody can provide. With that, I would like to turn the call over to Timothy Lee to discuss our commercial update. Tim? Timothy Lee: Thanks, Marc. It is a pleasure to update you all on our work. As we see it, more and more clinicians are turning to monoclonal antibodies. And, frankly, it is common sense. Thomas Paine once wrote that common sense is often the most powerful kind of reasoning. In health care, when evidence accumulates and risk is clear, the logical course becomes difficult to ignore. Our goal is straightforward. It is not simple. We want to give people a choice as they seek protection against COVID. We believe that choice has significant potential because there are still millions of individuals who remain vulnerable and underserved. The medical community increasingly recognizes the importance of antibody therapy, and the long-term consequences of COVID continue to be serious. From in utero exposure risk to children, neurological effects, cardiovascular complications, and more, avoiding infection matters. That perspective is reflected in clinical guidelines. Leading organizations, including the Infectious Diseases Society of America and the National Comprehensive Cancer Network, recommend monoclonal antibodies for prevention of SARS-CoV-2 infection in appropriate high-risk patients. This inclusion of PEMGARDA in the NCCN guidelines for B-cell lymphomas underscores that recognition. We are encouraged to see growing interest and utilization across hematology, oncology, rheumatology, infectious disease, transplant, neurology, and other appropriate specialties. The adoption curve is expanding, and that momentum reinforces our belief in the long-term value of this platform. There is a great deal reflected here on this slide. Many of these data points we have discussed on prior calls. I am pleased that we continue to grow PEMGARDA to serve certain adults and adolescents who are moderately to severely immunocompromised, thus leaving them vulnerable to infection from SARS-CoV-2. What you are seeing is Invivyd, Inc. is building a category. This category has served to expand upon the foundation that is PEMGARDA. Nationally, we see continued growth of accounts who have utilized PEMGARDA, clearly understanding the benefits of protection offered by antibody therapy. We have created this durable foundation with a high degree of accounts reordering PEMGARDA at 77%. We continue to increase available sites of care nationally and across multiple specialties, showing a high confidence for repeat utilization. Our GPO sites of care continue to grow, and the team has been busy providing education at conferences across the nation in hematology, oncology, rheumatology, neurology, pulmonology, transplant, and more. As a team that is defining a treatment paradigm, we are in the right places talking to the right audiences, and our position is strengthening after each engagement. We secured more than 15,000 contracted GPO sites, significantly expanding our commercial footprint. Taken together, these milestones position us to evolve beyond serving a more limited patient population that we have today with PEMGARDA. With our next-generation monoclonal antibody, we see the potential to redefine COVID prevention, moving toward a vaccine-alternative strategy designed to protect broader populations against viral infection. Invivyd, Inc. is proud to partner with Lindsey Vonn because she exemplifies the power of disciplined preparation as the foundation of enduring strength. In her memoir, “Rise: My Story,” Lindsey writes, “Preparation is the one thing I can control, so I have always controlled it to a capital T.” Lindsey prepared at an elite level to always perform at her best, and that requires foresight to minimize anything that can get in her way. That mindset really mirrors our approach. Invivyd, Inc.’s monoclonal antibody platform is built on the belief that proactive immune protection—preparing the body before viral exposure—is the most effective way to preserve performance continuity and long-term health. Viruses should be kept in check to allow everyone to give their best performance. Staying well helps you continue showing up for the moments that matter, and antibodies can help a person stay well. For this reason, Lindsey is an amazing partner to help educate on the importance of antibodies in all of our well-being. With that, I will turn the call over to William Duke to discuss our financials. Bill? William Duke: Thank you, Tim. I will quickly review our financials, and then we will open the line for your questions. Our PEMGARDA net revenues continued to grow in the fourth quarter, up 31% over third quarter 2025 and up 25% over fourth quarter 2024. Full net revenues in 2025 totaled $53.4 million, reflecting our continued efforts on driving awareness in the market. After raising over $200 million in 2025, we ended the year with $226.7 million of cash and cash equivalents. This leaves Invivyd, Inc. well capitalized through anticipated pivotal data for VYD2311 in mid-2026 and, depending upon continued PEMGARDA growth and continued operational discipline, potentially well beyond. With that, operator, please open the line for questions. Operator: Our first question comes from the line of Patrick Trucchio with H.C. Wainwright. Your line is now open. Patrick Trucchio: Thanks. Good morning, and congrats on all the progress. Just a couple of follow-up questions from us. Just curious, I think it was mentioned that the potential trial resizing decision in the Declaration program could occur around April depending on event rates. Can you talk a little bit more about that, what the specific statistical criteria would be that would sort of trigger that decision, whether enrollment expansion may be needed? And then just separately, I think, beyond symptomatic PCR-confirmed COVID, I am wondering if you are collecting secondary endpoints such as viral load, symptom duration, or health care utilization, and how that could help the clinical benefit profile that is emerging. Marc Elia: Sure. Thanks for the questions, Patrick. Happy to do my best to enlighten. So on your first question on the resizing, everything we do related to powering is, of course, effectively a two-by-two matrix. Right? You have to understand both the expected VE for which you are powering and then the number of events that accumulate that would allow you to project a final study power. And so right now, as we sit here, we feel pretty good about our progress in the study. All of these algorithms are essentially prespecified, of course, to avoid the potential for bias. And so I think the way I would look at it is like this. And again, I am speaking in concepts because, of course, we are not at that resizing yet, and we do not know what the next few weeks will hold. I think if we were to not trigger the upsizing trigger, it would be because we are highly confident in our ability to statistically assess even a lower-than-anticipated VE, or hazard ratio. And if we do, it really could not even be read as a concern about underpowering as such. It would be simply because the way the trigger is designed it would serve to potentially add power in case the target efficacy is lower than we might otherwise anticipate. So we think of it as really a safety mechanism to ensure, to the best of our ability—which, again, is unfortunately subject to that—the best of our ability to support the power of the study in case VE pencils out as lower than our modeling would suggest. Now the good news in all of that is actually related to the speed of our recruitment. The upsizing target is not particularly onerous. Okay? So you can imagine, in your mind’s eye, approximately another 30% of the study or so as an upsize target. And importantly, of course, that cohort would be time-shifted, right? A little deeper into the spring and then into the summer, which you might imagine collectively would add to the probability that you accumulate more cases, for example, in a future COVID wave. So while perfect is unavailable here and we are not endowed with godly insight into the future weeks, what we can confidently say is we are very pleased with what we are seeing, and we truly do not know whether such a resizing would be triggered. I think what is nice to consider is that if it is, we would simply be in a position to feel better about ultimate study powering. And I think, stepping back way back to reflect on this endeavor, our goal is to have a successful study, if that is what the clinical profile of 2,311 allows. And so to the extent that such an upsizing might incur a relatively modest timing and overall financial penalty, I think we would rather “make the mistake” of having upsized and then only later find out we did not need to, than do it the other way around. So I hope that adds some level of color around the design and thinking. I think it will be very difficult for us to elaborate much more because we speak to the Street only periodically. And, of course, these things occur semi-stochastically. Right? We have just recruited up the bulk of the study. We just have most of the exposure out there, and so far, things are looking great. So we will make sure to update you as we go forward. In terms of secondaries, of course, you can imagine in a study like this, we will be recording all manner of interactions between participants and, for example, the health care complex, which is behind one of the questions you asked. And I am sure a great deal more will always come from this study as it did from CANOPY. I think I would caution on expecting meaningful powering of low-frequency clinical events, e.g., hospitalization or death. I think that would be well beyond the intended power of this exercise. But I think that is also for a reason. Meaning, at this stage in the game, I think we see pretty clear linear biophysical truth—if not, you know, that is sort of a level beyond plausibility, but let us just say it like that—that if you do not get sick from SARS-CoV-2, it is pretty unlikely for you to be hospitalized with SARS-CoV-2 or die from SARS-CoV-2. And so our progress as a species, I think, over these last six years has demonstrated that one of the best ways to stay well is to not get sick. And that is really what we are fixated on trying to demonstrate here. I think that is an evergreen principle. I think it has been well elaborated in all manner of these studies. I think those relationships are pretty clear in all of the data, even from the vaccines. And so our primary focus is really on, I guess, a revisit of what was an earlier-in-the-pandemic message: do not get sick. Most good things, we would think, would follow linearly and logically from that. I think that is the regulatory paradigm in which we are pleased to operate. And I would suspect that if we are successful going forward, there will be many, many opportunities, as our antibodies move into bigger and bigger populations, to demonstrate these kinds of things in, you know, classically post-approval registry and other-type situations in which we will all look eagerly to make sure that we are right—in effect, that not getting a symptomatic infection following virus is just a globally good thing. So, again, not trying to be coy or not answer. I think we will collect a lot of stuff. I do not know how meaningful many of those endpoints will be from a quantitative empowering standpoint, but they will certainly be collected. Patrick Trucchio: Yeah, that is really helpful. If I could, I would just like to ask about the measles antibody program. I think there is an update expected in the first half of this year. Can you give us a little bit more detail on what the envisioned use case is? Is it outbreak prophylaxis? Is it sort of a pediatric bridge therapy, you know, before newborns could get the vaccine? Or are we looking at more of a broader prevention strategy? Marc Elia: Great. So thanks for asking, and I hope it does not diminish your interest when we are in a position to more formally update. So I will just stay in concept land for a little while. Look, you have hit upon the use cases, I think, quite nicely in large part. Right? One of the things we very much like about this modality is that there is not a pharmaceutical premise that we—or use case we—prosecute separate from what native human immunobiology prosecutes. So why do we all have antibody suites? It is to prevent the presentation of symptomatic disease, to treat and knock down viremia once an infection is established, and yeah, as you know, that means we could use such an antibody theoretically for treating active disease. It means we could use—and by the way, that is, we have noted in the past, I think, something that sometimes we will use intravenous immunoglobulin, or IVIG, to do. You could imagine, of course, responding to outbreaks with essentially ring immunization via monoclonal antibody, which might be, you know, an enhanced way to look at the kinetics and potency of what we are able to put on board relative to vaccination. And then more generally, you highlighted something there that I think we have been putting a lot of thought into, which is—I think you used the concept of bridge to vaccine. We think about it almost more in the sense of vaccine enhancement. Meaning, I would just observe, and I think this is noncontroversial, children—babies—are born without a fully developed adaptive immune system, especially the B suite. And so there are data demonstrating that delaying vaccination actually has the ability to improve the profile of vaccination, meaning higher, more durable titers from vaccinating older and older kids, and potentially lower possibility of seronegativity or failure to seroconvert after vaccination, not to mention the potential benefits associated with allowing for early childhood neurocognitive, motor development, all these other things. So look, we are going to be in a position, we hope, to contemplate a lot of things that really, I think, the medical complex has not been in a position to contemplate before, and that is because, justifiably, absent other tools, I think that pediatric schedule is thoughtfully assembled in order to try to have the least vulnerability possible beginning with vaccination at an early age. Well, certain antibodies, especially, you know, nirsevimab (Beyfortus) and others, have demonstrated the benefits associated with passive prophylaxis in the very young. There may be other benefits we can explore going forward, but look, it is premature to say more, although Robert Allen is leaning in, and that usually tells me he wants to add something. So I am going to stop in a second. But I guess I would just say stay tuned because I think we are really intrigued by the potential for some use cases, as you put it, that just have never been contemplated before. And I think our view is there is a potential substantial quantum of medical and potentially economic value to create. Dr. Robert Allen: Yeah, I would agree with that answer. And I think that the main thrust of this has come from inbound requests from HCPs for something to provide them with a solution in cases where they have a need for treatment or for post-exposure prophylaxis for measles. And this antibody has been designed with those use cases in mind, as well as some of the potential future use cases that Marc mentioned. So that is really where we are headed with this antibody at this point. Patrick Trucchio: Terrific. Thanks so much. Operator: Thank you. As a reminder, to ask a question at this time—our next question comes from the line of Tom Schrader with BTIG. Your line is now open. Tom Schrader: Good morning. Congratulations on the progress. I think you are making positive event comments, and certainly the safety news is fantastic. We have talked a little bit, Marc, about your ability to sculpt the trial a little bit to try to hit hot-spot areas. If you could talk in broad brushstrokes about how well that has gone, and is that in fact self-enforcing—that the people who enroll are, in fact, they know they are in areas where it is a big deal? And then a more specific question: On the myocarditis monitoring, is that going to be clinical myocarditis—yes/no—or is that a more detailed study where you are looking at, I do not know, muscle protein, things like that? Or is that a deeper study, or is that just the rare clinical myocarditis event? Thanks. Marc Elia: Hey. Good morning, Tom. Thanks for the questions. Happy to give you some view here. So, okay, listen. With respect to the Declaration study, the what we have been discussing is, on the margin, our ability to have sites that are in areas that are, we believe, undergoing some level of community COVID attack rate. Right? Now you can see some of that in the ways that we see it—whether it is clinical sequencing, whether it is wastewater sequencing, or sometimes whether it is, for example, emergency department or, you know, sort of one of those things called the sort of, like, low-acuity walk-in clinic kind of census data on where people are reporting symptomatic, positive COVID. So, look, we operate a U.S. study with a relatively broad catch area because a lot of this was designed in October, November, December timeframe, and we were not in possession of such a map. But, you know, we have some ability on the margin to try to place exposures where we see COVID. I think it is also a risk to over-interpret the map because these things move. And they move fast. And so, for example, over the next few weeks or months, to the extent that air conditioning goes on across the U.S. South, the map can move. But we feel pretty well prepared and pretty well configured to hopefully keep seeing event accrual. Now is it self-reinforcing? I could not even begin to answer because I have never even contemplated such a thing. So I guess I will leave it as I do not know. But we will see, in hindsight, whether there is any discernible behavioral aspect to it. On myocarditis, I think at first pass, this is going to be a yes/no exercise mainly because the LIBERTY study where we are looking for that is small, and I think the risk of overt myocarditis or pericarditis following vaccination is relatively low. Now, like all clinical studies, we gather samples. We will look at data. There can always be room for more detailed exploration or follow-up. And again, if we were to see such an event following vaccination, I think we would become very—I will not speak on behalf of the broader scientific or academic community or regulators—but I imagine a lot of people might be interested in that. I just want to double underline: myocarditis/pericarditis is not something we see with antibodies. Right? This is a function of studying mRNA-based COVID vaccination in our comparative and combination LIBERTY study. So, look, we will see. Right? LIBERTY is certainly not powered, or even close to powered, to detect events that we would imagine are at that lower frequency. But let us all find out together. Tom Schrader: And if I can ask a quick follow-up, you apparently have an RSV antibody you like. That would seem to be a high bar. That has been a very active area for a long time. Can you give us any detail on maybe what you are improving or how hard you think it would be to have an antibody that was good enough to take on what is a pretty entrenched competition? Thanks. Marc Elia: Sure. And now I really saw Dr. Robert Allen’s body language change, so I know he is going to have some thoughts on this topic. But I would just say this. You know, the RSV antibody field goes back, I believe, to 1998 with palivizumab, or Synagis, and was really only updated at the molecular level, I want to say—and forgive me if I am wrong—in 2023 with the arrival of nirsevimab (Beyfortus). Now nirsevimab is a lovely antibody. We think ours is a lovely antibody, and I think it has some properties that we see as quite compelling. And so, you know, typically in the pharmaceutical industry, when we look at a blockbuster, high-growth antibody space, it is hard to sit back and conceive of the fact that that will be the one thing forever and only and always. And indeed, at the molecular level, we really like what we are seeing and expect to have the ability to compete. I will let Robert elaborate in a minute, but I would also just note we look at RSV as a really attractive component of an emerging strategy. You might well notice now as we go from COVID to RSV, perhaps to measles, perhaps onward to other viruses in which having a commercial portfolio and a real presence in pediatrics has the potential to open or expand on a field that is, I would argue—by contrast to your assertion—in its infancy, no pun intended. Nirsevimab, in year three now, is early. I think its dramatic commercial success is a function of the quality of the medicine. And so, to the extent that we feel great about the quality of our medicine, I can say we are very much looking forward to competing. And now that is a long way off, but we have opportunity in front of us to be clever in clinical trial design, to be clever in, you know, some other aspects that might define our overall profile. And now that Robert is good and warmed up, why do you not add color as you see fit? Dr. Robert Allen: I think, you know, what you can know is that we learned a lot in the era of generating COVID antibodies about trying to be upfront about addressing evolutionary drift. Drift represents a change in context that deserves to be addressed periodically. When we look at RSV, in the time since the screening was done for the two known actives that are in the market now, there has been a considerable amount of drift, and really the design of our program was meant to address that. And with that drift, also address some of the known liabilities for the two known actives and overcome those liabilities by design. And so this is where we find ourselves with a very high-quality antibody that is contextualized by the recent evolutionary past of that virus. And I think that, as we see with RSV, we can depend on it to drift—not as much as SARS-CoV-2, rather—but it will drift, and so we will continue to address that as it comes up. It is really the overall strategy that we have with our antibodies: to be very upfront about updating antibodies periodically to match the environment that we find ourselves in. I hope that helps. Tom Schrader: Yeah. That is perfect, thank you. Dr. Robert Allen: Thank you. Operator: And I am currently showing no further questions at this time. I would like to hand the call over to Marc Elia for closing remarks. Marc Elia: All right. Well, thank you very much, all of you, for joining us this morning. We will look forward to having, I am sure, some follow-up calls throughout the day. Have a great day. Thank you. Operator: This concludes today’s conference. Thank you for your participation. You may now disconnect.
Operator: Hello, and thank you for standing by. Welcome to ATN International, Inc. Fourth Quarter 2025 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, please press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. I would now like to hand the conference over to Michele Satrowsky. You may begin. Michele Satrowsky: Thank you, operator, and good morning, everyone. I am joined today by Brad W. Martin, ATN International, Inc.’s Chief Executive Officer, and Carlos R. Doglioli, ATN International, Inc.’s Chief Financial Officer. This morning, we will be reviewing our fourth quarter and full-year 2025 results and providing our 2026 outlook. As a reminder, we announced our 2025 fourth quarter results yesterday afternoon after the market closed. Investors can find the earnings release and conference call slide presentation on our Investor Relations website. Our earnings release and the presentation contain certain forward-looking statements concerning our current expectations, objectives, and underlying assumptions regarding our future operations. These statements are subject to risks and uncertainties that could cause actual results to differ from those described. Also, in an effort to provide useful information for investors, our comments today include non-GAAP financial measures. For details on these measures and reconciliations to comparable GAAP measures, and for further information regarding the factors that may affect our future operating results, please refer to our earnings release on our website at ir.atni.com or the 8-K filing provided to the SEC. Now I will turn the call over to Brad. Brad W. Martin: Good morning, and thank you for joining us to discuss ATN International, Inc.’s fourth quarter and full-year 2025 results. Before I get into the details, I want to recognize the exceptional work of our teams across all of our markets. The progress we delivered this year, both in our financial performance and the underlying health of the business, reflects their commitment to operational excellence and to building long-term value for our customers and shareholders. Our fourth quarter results show the continued execution of our strategic plan and further validate the operational improvements we have been implementing across our business segments. We grew revenue, expanded adjusted EBITDA, and improved operating income while continuing to expand our base of high-speed broadband homes passed and high-speed subscribers. For the full year, that execution translated into higher operating profitability, stronger cash generation, and a business that is better aligned with our strategic focus on mobility, high-speed data, and differentiated carrier and enterprise solutions. While there is still more work ahead to fully optimize the business, I believe we are on the right track. 2025 was a turning point for ATN International, Inc., as we shifted from stabilizing the business to clearly demonstrating progress against our strategy. We increased net cash provided by operating activities, reduced capital intensity while continuing to invest in our networks, and grew and improved the quality and durability of our mobility and high-speed subscriber bases across our markets. At the same time, we improved operating income, expanded full-year adjusted EBITDA, and held revenues essentially flat year over year. Together with the recently announced pending sale of our Southwest U.S. portfolio of towers, this positions us to enter 2026 with greater resilience, more flexibility, and with a clear focus on our core strategic objectives. Let me take a moment to review the performance of our two business segments in the fourth quarter. In our International segment, our network investments and focus on service quality are driving growth in mobility and high-speed data subscribers and contributing to adjusted EBITDA expansion. We are seeing the benefits in better network performance, stronger customer retention, and higher data usage, which together support a more durable earnings profile in these markets. We remain focused on deepening customer relationships, continuing to upgrade our networks, and optimizing our operations to further enhance profitability and long-term value. In our U.S. segment, we are seeing tangible benefits from the strategic shift we have been executing in response to changing industry dynamics, particularly in combat. As our large carrier customers have expanded and matured their own product offerings, our approach has been to deepen our role as a partner, to increase carrier managed services while steadily pivoting away from legacy subsidized and lower-margin consumer offerings in certain Southwest consumer markets. This strategy is gaining traction, and we are seeing improved performance as a result, particularly in the 2025. We have a durable presence in Alaska and New Mexico anchored by fiber, fiber-fed fixed wireless infrastructure that is supporting growth in the consumer broadband and carrier services. Over the past year, number of homes passed by high-speed broadband increased 25%, driven primarily by Alaska’s deployment of fiber-fed fixed wireless solutions across Anchorage, Fairbanks, Juneau, and the Kenai Peninsula. These efforts contributed to fourth quarter revenue growth and create opportunity for additional subscriber growth. At the same time, our structural cost actions drove higher operating income and improved margins, particularly in the 2025. Domestically, our broadband infrastructure expansion continued to progress as planned, with several government-supported projects advancing through key milestones during the quarter. These investments remain central to our long-term U.S. growth strategy, enhancing our network capabilities and creating new revenue opportunities as deployments are completed. We continue to leverage available government funding, including federal broadband programs, while maintaining a careful, disciplined approach to capital deployment and aligning spend with the highest return opportunities. We also recently advanced several important strategic initiatives. First, we received notice of provisional BEAD awards and preliminary commitments totaling more than $150 million in key markets such as New Mexico and Alaska, expanding our opportunity past additional homes with fiber and high-speed broadband in underserved communities, and reinforcing our position as a partner of choice in these regions. We are approaching these programs selectively, and expect to invest approximately 10% to 15% of total project costs with our own capital, ensuring that these supported builds align with our financial return thresholds and long-term infrastructure strategy. We currently expect these initiatives to begin contributing to our business results in 2027 and beyond. In addition, we completed the sale of certain U.S. spectrum assets, allowing us to unlock value and further optimize our operations, reinforcing our focus on infrastructure and service-based revenue streams. Taken together, these actions support the long-term growth potential of our U.S. business and demonstrate our ability to attract incremental government funding for network expansion and monetize non-core assets in a disciplined way. Just after year-end, we took another important step with the announced pending sale of our Southwest U.S. tower portfolio for up to $297 million in total cash consideration. Upon full completion, we expect the divestiture to modestly reduce revenue and EBITDA associated with those assets, while providing meaningful proceeds to strengthen our balance sheet and support our long-term growth plans. This transaction unlocks value from an asset we have built over many years, and importantly, allows us to sharpen our focus across ATN International, Inc. on our mobility, broadband, and carrier services business. Combined with the operational improvements we delivered in 2025, the tower sale increases our financial flexibility and enhances our ability to invest in sustainable long-term value creation. Throughout 2025, we did what we said we would do: advance our strategic plan to improve the profitability and cash generation of our operations, maintain high-quality revenue streams and customer relationships, optimize our operating structure, and strengthen the balance sheet. We also grew our mobility and high-speed subscriber base across our markets. These outcomes reinforce our confidence that we are building a stronger, more efficient ATN International, Inc. Looking ahead, we are encouraged by the steady momentum across our business segments and remain focused on disciplined execution. Our priority for 2026 is to convert the network and system investments we have made over the past several years into margin expansion, cash flow, and further balance sheet strength. We are entering the year with positive momentum in both our International and U.S. business segments with a more efficient operating model. We are maintaining a disciplined approach to capital allocation and leveraging available government funding to support continued network growth while enhancing returns. The pending tower sale is a key milestone in unlocking asset value and strengthening our balance sheet, and we intend to use the added flexibility to support our highest priority growth opportunities. Before I turn it over to Carlos for a detailed review of our financial performance, I want to leave you with a clear takeaway. Our 2025 results show that ATN International, Inc. is stronger, more efficient, and better positioned than it was a year ago. We remain confident in our ability to build on this progress and generate long-term value for our shareholders. With that, I will hand it over to Carlos for a detailed review of our financial performance. Carlos R. Doglioli: Thank you, Brad. And good morning, everyone. Let me walk you through the 2025 results and provide some context on our 2026 outlook. Our fourth quarter capped a year of improved financial performance, especially in the second half of the year. Total revenues for the fourth quarter grew 2% to $184.2 million, compared with $180.5 million in the prior-year quarter. Excluding construction and other revenues, communication service revenues increased 3% driven by growth across multiple service offerings. For the full year, revenues were essentially flat at $728 million and in line with our expectations. Increases in carrier services, construction, and other revenues offset decreases in mobility and fixed revenues driven in part by our transition away from legacy offerings in our U.S. markets. Operating income was $15.7 million in the fourth quarter, up from $8.7 million in the same period last year. The improvement reflects the benefit of cost management efforts, including reductions in selling, general, and administrative expenses, and gains on asset dispositions. For the full year, operating income increased to $28.4 million compared with an operating loss of $0.8 million in 2024, which included a $35.3 million goodwill impairment charge. Net loss attributable to ATN International, Inc. stockholders in the fourth quarter was $3.3 million, or $0.32 per share, compared with net income of $3.6 million, or $0.14 per diluted share, in the prior-year quarter. The change reflects the absence of an $8.9 million tax benefit that positively impacted Q4 2024, along with higher other expense resulting from marking a minority equity investment to market in 2025. For the full year, our net loss narrowed to $14.9 million, or $1.38 per share, versus a net loss of $26.4 million, or $2.10 per share, in 2024. Adjusted EBITDA for the fourth quarter was $50.0 million, up 8% from $46.2 million in the prior-year quarter. For the full year, adjusted EBITDA increased 3% to $190.0 million compared with $184.1 million in 2024. The year-over-year growth in both the quarter and the full year reflects our ongoing focus on cost management and margin improvement. Turning now to segment performance. Our International segment continued to deliver top-line growth and margin expansion in 2025. The combination of targeted capital investments in support of our commercial progress and disciplined cost management contributed to higher adjusted EBITDA even as we navigated heightened competitive dynamics in certain markets. Specifically, for the fourth quarter, International revenues increased nearly 3% to $97.3 million from $94.8 million in the prior-year quarter, and for the full year 2025, revenue was up 1% to $381.9 million from $377.5 million for full-year 2024. Adjusted EBITDA for the International segment increased 1% to $32.7 million for the fourth quarter and approximately 4% to $131.6 million for the full year. In our Domestic segment, during the fourth quarter, revenues increased 1% to $86.9 million from $85.8 million in the prior-year quarter, and for the full year 2025, revenue declined just under 2% to $346.1 million compared with $351.6 million for full-year 2024. Adjusted EBITDA for the Domestic segment increased 11% to $21.6 million for the fourth quarter, and declined approximately 2% to $78.5 million for the full year. Our results for the segment reflect the impact of transitioning away from legacy and subsidy-driven revenue streams in the first half of the year and the benefits of stronger performance in carrier solutions in the second half, supported by continued margin improvement efforts. Total cash, cash equivalents, and restricted cash increased to $117.2 million at December 31, 2025, compared with $89.2 million at the end of 2024. Total debt was $565.2 million versus $557.4 million a year ago, resulting in a net debt ratio of 2.36x as of year-end, an improvement from 2.54x at 12/31/2024. Just as a reminder, approximately 60% of total debt resides at the subsidiary level and is non-recourse to ATN International, Inc. parent. Net cash provided by operating activities increased 5% year over year to $133.9 million, driven in part by improved working capital management. Capital expenditures for the full year were $90.0 million, net of $84.6 million in reimbursable capital expenditures, compared with $110.4 million, net of $108.5 million in reimbursements, in 2024. Our capital spending for the year was in the lower end of our guidance range, driven by the timing of some investments that are now expected and incorporated in our 2026 outlook. The year-over-year reduction in net capital spending also reflects our commitment to maintaining more normalized levels of CapEx. We maintained our quarterly dividend of $0.275 per share, paid on January 9, 2026 to shareholders of record as of December 31, 2025. We did not repurchase any shares during the quarter. Turning to the 2026 outlook. As Brad mentioned, earlier this month, we announced that our ComNet subsidiaries agreed to sell a portfolio of 214 Southwestern U.S. towers and related operations to an affiliate of Everest Infrastructure Partners for up to $297 million in an all-cash transaction. We continue to expect the initial closing to occur in 2026 with gross proceeds of approximately $250 million to $270 million, with additional closings occurring over the following twelve months tied to construction and operational milestones. For full-year 2026, and excluding any impact from the pending sale of our U.S. tower portfolio, we expect adjusted EBITDA to increase modestly from 2025 levels to a range of $190 million to $200 million. Our 2026 outlook incorporates a headwind of approximately $5 million related to the conclusion of high-cost funding support for our U.S. Virgin Islands market. Based on current expectations of the second quarter timing of the initial closing for the tower sale, we would anticipate a reduction of approximately $6 million to $8 million to that annual adjusted EBITDA outlook. We also expect capital expenditures to remain within a disciplined range of $105 million to $115 million, net of reimbursable expenditures and reflective of the timing of some investments initially expected in 2025. Together with available government funding, this supports continued network growth while maintaining our focus on cash generation and managing leverage. We plan to revisit and update our 2026 outlook as appropriate after the initial closing of the tower portfolio sale. Before handing the call back to Brad, let me provide some insight into how we expect the quarters to play out in 2026. In the first quarter, we expect adjusted EBITDA to improve compared with the prior-year period, and we expect the second half of the year to deliver the majority of our annual results, consistent with our typical business seasonality. As part of the actions embedded in our plan to achieve our adjusted EBITDA outlook for the year, we expect to incur restructuring and reorganization expenses of $3 million to $4 million in the first half, with most of those costs occurring in the first quarter. Looking ahead, our financial focus remains unchanged: drive operating efficiencies to support margin expansion, continue to allocate capital in a disciplined way, maintain a healthy balance sheet, and expand cash flow. We believe our 2025 results and 2026 outlook show progress toward our long-term objectives and are in line with maximizing shareholder value. With that financial overview, I will turn the call back to Brad for closing comments before we open it up for questions. Brad W. Martin: Thanks, Carlos. To summarize, we closed 2025 with solid operating momentum, stronger cash generation, and a more focused, higher-quality revenue mix that supports our long-term strategy. We are entering 2026 with a healthier balance sheet, more efficient cost structure, and a clear line of sight to further benefits of our strategic initiatives and the pending tower transaction. We will now open for questions. Operator: Thank you. Ladies and gentlemen, as a reminder, to ask a question, please press *11 on your telephone, then wait for your name to be announced. To withdraw your question, please press *11 again. First question comes from the line of Greg Burns with Sidoti. Greg Burns: Morning. Could you just help us understand maybe how the sale of the tower assets might impact your business model in the U.S.? Does that in any way impact your ability to provide managed services to carriers? Brad W. Martin: Morning, Greg. Yes, so really, it is an unchanged business model. Today, we provide our carrier managed services on third-party towers and owned towers, almost about half and half. So really, the continuation business model will remain. We will just be doing more on third-party towers. Greg Burns: Alright, great. And then I see you continue to grow your high-speed data subscribers. Total broadband subscribers continue to decline. Are we nearing a point where maybe some of these legacy services that you are turning down or deemphasizing stop detracting from the overall growth of that business? Or what should we expect next year in terms of maybe your view on broadband subscriber growth? Brad W. Martin: So, Greg, yes, as you mentioned, some of the broadband reductions have been from us shutting down legacy services. That is inclusive of legacy copper services in some markets where we have overbuilt and shut down services and decided not to rebuild in areas, and similarly, in areas in the Southwest where we have taken down where we had unprofitable areas, and we decided to not necessarily compete at the consumer level as we mentioned in my prepared remarks. We will be continuing to partner with major carriers. Yes, we do have BEAD outcomes I spoke to in my remarks. We do expect that to be a key driver in the out years to expand our high-speed subscriber base and obviously expand our assets and facilities. Greg Burns: Okay. And with the expansion of the high-speed data to reach your network in Alaska, could you just talk about maybe some of the changes you have made in your go-to-market or sales strategy to start to accelerate maybe the penetration and growth of your services? Brad W. Martin: Yes. So Alaska, our Alaska market has been historically heavily weighted towards enterprise and carrier. In this past year, they announced a pretty large build-out of a fixed wireless solution. We have been building fiber facilities, fiber-to-the-home, in certain areas of Alaska as well. We do have a new leadership team in Alaska in the last couple of years. We are investing in back-office platforms to effectively enhance the customer interaction, so that is something we are targeting and continue to focus on improving our ability to execute there. But we have work to do. We did see some progress in the back half of the year on subscriber acquisitions, specifically in Alaska. Albeit starting on a small base, but we did actually show over 11% year-over-year improvement in our high-speed data subscribers. Greg Burns: Okay. Thank you. Thank you. Operator: Ladies and gentlemen, I am showing no further questions in the queue. I would now like to turn the call back over to Brad for closing remarks. Brad W. Martin: Thank you, operator. Thank you all again for joining us today and for your questions. We are encouraged by the progress we have made in 2025. We are confident in the path that we are on. We are focused on executing against the priorities we have outlined on today’s call. In the weeks and months ahead, our teams will be meeting with many of you at conferences and one-on-one meetings. We look forward to continuing the dialogue and continuing to update you on our progress as we move to 2026. Thanks. Have a great day. Operator: Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Thank you for your continued patience. Your meeting will begin shortly. Press star-zero, and a member of our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. A team member will be happy to help you. Thank you. Good day, ladies and gentlemen, and welcome to the fourth quarter 2025 ACRES Commercial Realty Corp. earnings conference call. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions to follow at that time. If anyone requires assistance during the conference, please press the appropriate key. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Kyle K. Brengel, Vice President, Operations. You may begin. Kyle K. Brengel: Good morning, and thank you for joining our call. I would like to highlight that we have posted the fourth quarter 2025 earnings presentation to our website. This presentation contains summary and detailed information about the quarterly results of the company. Before we begin, I want to remind everyone that certain statements made during this call are not based on historical information and may constitute forward-looking statements. When used in this conference call, the words “believes,” “anticipates,” “expects,” and similar expressions are intended to identify forward-looking statements. Although the company believes these forward-looking statements are based on reasonable assumptions, such statements are based on management's current expectations and beliefs and are subject to several trends, risks, and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties are discussed in the company's reports filed with the SEC, including its reports on Form 8-K, 10-Q, and 10-K, and in particular, the risk factors of its Form 10-K. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to update any of these forward-looking statements. Furthermore, certain non-GAAP financial measures may be discussed on this conference call. A presentation of this information is not intended to be considered in isolation as a substitute to the financial information presented in accordance with GAAP. Reconciliations of non-GAAP financial measures to the most comparable measures prepared in accordance with generally accepted accounting principles are contained in the earnings presentation for the past quarter. With me on the call today are Mark Steven Fogel, President and CEO; Andrew Dodd Fentress, Chairman of ACRES Commercial Realty Corp.; and Eldron C. Blackwell, ACRES Commercial Realty Corp.'s CFO. I will now turn the call over to Mark Steven Fogel. Mark Steven Fogel: Good morning, everyone, and thank you for joining our call. Today, I will provide an overview of our loan operations, real estate investments, and the health of the investment portfolio, while Eldron C. Blackwell, our CFO, will discuss the financial statements, liquidity condition, book value, and operating results for the fourth quarter 2025. Of course, we look forward to your questions at the end of our prepared remarks. The ACRES team remains focused on executing on our business strategy by investing in high-quality CRE loans, actively managing the portfolio, and growing earnings for our shareholders. In the fourth quarter 2025, we closed new commitments of $571,000,000, offset by loan payoffs and net unfunded commitments totaling $127,200,000, producing a net increase to the loan portfolio of $443,800,000. The weighted average spread on newly originated loans is 2.83%. New loan production in 2025 and in 2026 put us in a position to structure and price a new CRE securitization in January. On February 12, we closed ACRES 2026-FL4, a $1,000,000,000 deal that has leverage of 86.5% and a weighted average debt spread of 1.68%. The weighted average spread of the floating-rate loans in our $1,800,000,000 commercial real estate loan portfolio is now 3.35% over 1-month Term SOFR rates. The portfolio generally continues to perform, demonstrating sound and consistent underwriting and proactive asset management. The company ended the quarter with $1,800,000,000 of commercial real estate loans across 53 individual investments. At December 31, our weighted average risk rating was 2.7, a decrease from 3.0 at September 30, and the number of loans rated 4 or 5 was 10, down from 13 at the end of the third quarter. The portion of our CRE loan portfolio rated 4 or 5, based on the company's economic interest, was 17% at December 31, down from 32% at September 30. During the quarter, another 4-rated loan paid off at par, highlighting again that the vast majority of our 4- and 5-rated loans do not suffer principal losses. Looking back through our history, when ACRES assumed the management contract of ACRES Commercial Realty Corp. in 2020, the company had 23 loans with a par balance of $411,000,000, or 24% of the portfolio, risk-rated either 4 or 5. As of 12/31/2025, only two of those 4 or 5 loans remain unresolved in the portfolio. Our exceptional asset management team created sponsor-specific solutions to successfully resolve 21 of those loans, $368,000,000 of par value, recognizing a loss of only $4,800,000 on those resolutions, or just 1.3% of the par balance of those loans. We expect the same or better results on the remaining 4- or 5-rated assets in our portfolio as we work actively and strategically with our sponsors to create positive resolutions. The majority of these assets have manageable stabilized LTVs of 80% or less. To further highlight this point, as a firm since inception twelve years ago, ACRES has incurred minimal realized losses on almost $8,000,000,000 of invested capital. We are also excited to announce that we sold one of our REO assets collateralized by an office property in Austin, Texas, this quarter, which resulted in an earnings available for distribution, or EAD, gain of $1,300,000. During the quarter, we charged off a legacy $4,700,000 mezzanine loan that was originated prior to ACRES Management in 2018 and whose loss was fully reserved for and recognized in both GAAP and book value in 2022. We recognized the EAD impact this quarter in connection with settlement of that loan. We will now have ACRES Commercial Realty Corp.'s CFO, Eldron C. Blackwell, discuss the financial statements and operating results during the fourth quarter. Eldron C. Blackwell: Thank you, and good morning, everyone. GAAP net loss allocable to common shares in the fourth quarter was $3,000,000, or $0.43 per share. GAAP net loss for the quarter included $10,700,000 in net interest income, which was an increase of $2,300,000 over the prior quarter. This increase in net interest income was driven by net loan originations of $443,800,000 and corresponding facility draws during the quarter. GAAP net loss for the quarter also included a $3,000,000 net increase; the performance of our net real estate operations to net income of $156,000; and a $1,500,000 net loss on the sale of the previously mentioned office property in Austin, Texas. We saw a decrease in current expected credit losses, or CECL, reserves of $1,300,000, or $0.19 per share, as compared to a decrease in CECL reserves during the third quarter of $4,000,000, which was primarily driven by loan payoffs and net improvements in the model credit risk of our CRE portfolio, offset by a general decline in projected macroeconomic factors during the quarter. Also, as previously mentioned, ACRES Commercial Realty Corp. recorded a charge-off of $4,700,000 on a mezzanine loan that was fully reserved for in 2022. The total allowance for credit losses at December 31 was $20,400,000 and represented 1.11%, or 111 basis points, on our $1,800,000,000 loan portfolio at par, and was composed entirely of general credit reserves. Excluding the loss from the mezzanine loan that was fully reserved for in 2022, EAD for the fourth quarter 2025 was $0.20 per share. When the mezzanine loan is included, the company reported an EAD loss of $0.48 per share as compared to earnings of $1.01 per share for the third quarter. Book value per share was $30.01 on December 31 versus $29.63 on September 30. Additionally, during the quarter, we used $10,000,000 to repurchase 493,000 common shares at an approximate 33% discount to book value at December 31. In December 2025, the authorized amount was fully utilized, and since November 2020, the company has repurchased 5,300,000 shares at an average discount to book value of 49%. Available liquidity at December 31 was $108,000,000, which comprised $84,000,000 of unrestricted cash and $24,000,000 of projected financing available on unlevered assets. Our GAAP debt-to-equity leverage ratio increased to 2.8x at December 31 from 2.7x at September 30 from net originations on our CRE loan portfolio. At the end of the fourth quarter 2025, the company's net operating loss carryforward was $32,100,000, or approximately $4.89 per share. With that, I will now turn the call to Andrew Dodd Fentress for closing remarks. Andrew Dodd Fentress: Thank you, Eldron. We are pleased with continued execution of our plan to drive shareholder value. In the fourth quarter, we originated $571,000,000 of new loans, we repurchased shares at accretive levels, sold an REO asset, improved the credit quality of the portfolio, and positioned the company to resume paying a dividend to common shareholders. Mark Steven Fogel: Since assuming the role of manager in July 2020, ACRES Commercial Realty Corp. book value has increased a total of 66%. Andrew Dodd Fentress: All the team here at ACRES is energized by the opportunity that we see in front of us, both in the asset class and the competitive landscape. We will continue to deploy capital through careful underwriting, and then manage each investment to the optimal outcome for shareholders. We greatly appreciate your continued support and investment in ACRES Commercial Realty Corp., and we look forward to your questions. This concludes our opening remarks. I will now turn the call back to the operator for questions. Operator: Thank you. Press star-one on your keypad. To leave the queue at any time, press 2. Once again, that is star-one to ask a question. We will pause for just a moment to allow everyone a chance to join the queue. Our first question comes from Matthew Erdner with JonesTrading. Please go ahead. Your line is now open. Matthew Erdner: You touched a little bit more on the loans that you guys completed this quarter. It is a really impressive number in terms of net loan growth. I heard you mention the 2.83% spread there, but could you give any additional kind of color on that? And then, as well, what the current pipeline looks like? Mark Steven Fogel: Sure, Matt. This is Mark. The color on that portfolio is it was mostly multifamily-type execution. The average loan size was probably about $40,000,000 to $50,000,000. Spreads range between 2.50% and 3.25%, and we purposely focused our origination effort on multifamily this quarter and the next quarter in that we were in the process of looking to execute a new CLO, and CLO execution was extremely dependent on a significant amount of multifamily. On the bright side, our CLO execution includes reinvestment opportunity to do up to 40% of our assets outside of multifamily. Matthew Erdner: Got it. And then how long is that reinvestment period? Is it 24 months? Mark Steven Fogel: Thirty months. Matthew Erdner: Got it. Awesome. And then, with the additional kind of equity investments—page 11 of the deck—what is your plan for that? Would we, or should we, expect an exit from any of those assets as we go through the year? Mark Steven Fogel: I think on one of them right now, you can expect an exit at one of the smaller land deals that we have. We are actually under LOI right now to sell that asset. One of the other assets is out on the market right now. We expect that we will get some offers during the year, and we will make a decision based on where those offers come in. Matthew Erdner: Got it. That is helpful. And then last one for me, I just noticed something on the balance sheet. Non-controlling interest jumped up to about $130,000,000, call it, from about $1,000,000. I was just curious what that was. Andrew Dodd Fentress: Sure. This is Andrew. The company sold a position, or a portion, of its previously issued financing arrangement with JPMorgan, and so that interest is recorded as an NCI. Matthew Erdner: Got it. That is helpful. Thank you, guys. Operator: Thank you. We will now move on to Christopher Muller with Citizens Capital Markets. Your line is now open. Christopher Muller: Hey, guys. Thanks for taking the questions. Nice to see originations come in really strong, and based on your illustrative earnings slide, it looks like there is some, at least, ability to grow the portfolio and push leverage a little bit. Could we see this pace of deployment we saw in the fourth quarter in the near term, or was that mostly due to the CLO execution in January? Mark Steven Fogel: No, Chris. We expect we will see a decent amount of additional deployment. A significant amount of it occurred in 2026. We are projecting net growth in the portfolio of $500,000,000 to $700,000,000 in 2026. Christopher Muller: Got it. That is great to hear. And, I guess turning gears a little bit, I believe the capital loss carryforwards expired at the end of the year. So thinking about potential upside to book value, would any future gains on REO be fully taxed going forward, or are there any other offsets that would apply? Eldron C. Blackwell: Hey. This is Eldron. No. We—well, let me start with—we still have remaining NOLs to reach $2,100,000 at the QRS, so that is available to us. That is a when, not an if. But as long as we continue to have depreciation and some of our normal operating expenses, I do not expect in the future that any gains on those capital items would be taxable. Christopher Muller: Got it. That is helpful. Eldron C. Blackwell: Yeah. We also have NOLs in our TRS, so any activity down there is also protected. Christopher Muller: Got it. Got it. So there is still a little bit that will flow through. I guess just a quick clarifying one. The $3,400,000 of realized losses on core activities, was that just the mezzanine loan write-off that you guys talked about, or is there something else in there? Mark Steven Fogel: That was a big chunk of it. We recorded a $4,700,000 EAD loss attributable to this mezzanine loan that we inherited as part of our taking control of the REIT and recorded a specific reserve for that back in 2022. Christopher Muller: And the specific, or the CECL, reserve release in the quarter, that was a specific reserve release related to this asset. Is that right? Eldron C. Blackwell: Part of it was a specific reserve, the $4,700,000. The other $1,300,000 was just improvement in net credit of the portfolio on our general reserves. Christopher Muller: Got it. Got it. Got it. I appreciate you guys taking the questions today, and great to see the capital deployment picking up. Mark Steven Fogel: Thanks, Chris. Operator: And once again, if you would like to ask a question, please press star-one on your keypad now. Thank you. We will move on to Gabe Poggi with Raymond James. Your line is now open. Gabe Poggi: Hey, good morning, and thanks for taking the questions. I have got a couple. For year-to-date originations, has there been any change in spreads? Has there been any mix shift away from multifamily? Just anything you could provide there would be helpful. Pardon me. Mark Steven Fogel: In 2026, originations to date have mostly been multifamily. As said, we were geared towards ramping up for our CLO. Spreads overall in that portfolio are about 2.83%. We are seeing spreads come down on the multifamily side, for sure, across the board. But as I said, we are looking at other asset classes for reinvestment activity and, going forward, you will see a different type of mix within our portfolio. We are pretty heavily weighted towards multifamily right now and would expect that some of that will start to fall off over the course of 2026. Gabe Poggi: Got it. So is the goal there to kind of maintain that 2.83% spread while mixing out to other asset classes, or are you content to kind of have asset yields bleed a little bit lower just because of the competitive nature of the market? Mark Steven Fogel: No. Our intent is to be above and beyond 2.83%. There are certainly a lot of opportunities in other asset classes where spreads are better. There is more risk-reward opportunity in self-storage and office and retail. Historically, our portfolio has been only 60% to 65% multifamily, and that is where we expect it to get back to. Gabe Poggi: Okay. Thanks for that. Question on repayments in 2026. You have got about $400,000,000 update there. Obviously, the CECL reserve has come down. Do you expect just a normal cadence of repay activity for 2026? Anything in there that we should be aware of? Mark Steven Fogel: No. We expect that repayments in 2026 will be—we are projecting about $500,000,000 of repayments in 2026, mostly older vintage assets. And importantly, what that does for us, if you mix in new originations in 2026, is it brings down our older vintage, call it 2023 and older-type assets, down to about only 15% of the portfolio. Gabe Poggi: Thank you for that. And one more, and this is kind of a high-level question. But as you guys think about ramping the portfolio—right, in Slide 14 in the deck—and taking total leverage to three and a half, because of the capital structure and prefs versus common, you tilt more to a higher leverage ratio on the common level. Where is the comfort level as you think about leverage to the common? Where do you want to max out there in that ramp? I see the current state, the mid, and then the full tilt, but just how do you think about that in the bigger macro environment—where the comfort level is leveraged to the common equity? Thank you. Andrew Dodd Fentress: Yeah, Gabe. It is Andrew. I think what we show is we are inside of our comfort level at that—inside of four turns. And I do not think you will see us go above that. Gabe Poggi: Got it. So inside of four on total, my words, leverageable capital, which then could push the leverage on the common higher, but total leverageable capital inside of four. Andrew Dodd Fentress: Correct. Gabe Poggi: Okay. Helpful. Thank you, guys. Operator: At this time, there are no further questions in queue. I will now turn the meeting back to our presenters. Andrew Dodd Fentress: Thank you, everyone. We appreciate your support, and we look forward to reconnecting with all of you in the coming weeks. If you have any questions, please reach out to myself or Eldron. Have a great day. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Hello, everyone, and welcome to Burlington Stores, Inc. Fourth Quarter 2025 Earnings Webcast. Please note that this call is being recorded. After the speakers' prepared remarks, there will be a question and answer session. If you would like to ask a question during that time, please press star followed by 1 on your telephone keypad. Thank you. I would now like to turn the call over to David Glick, Group Senior Vice President, Treasurer and Investor Relations. Please go ahead. David Glick: Thank you, Operator, and good morning, everyone. We appreciate everyone's participation in today's conference call to discuss Burlington Stores, Inc.'s fiscal 2025 fourth quarter operating results. Our presenters today are Michael O'Sullivan, our Chief Executive Officer, and Kristin Wolfe, our EVP and Chief Financial Officer. Before I turn the call over to Michael, I would like to inform listeners that this call may not be recorded or broadcast without our expressed permission. A replay of the call will be available until 03/12/2026. We take no responsibility for inaccuracies that may appear in transcripts of the call by third parties. Our remarks and the Q&A that follows are copyrighted today by Burlington Stores, Inc. Remarks made on this call concerning future expectations, events, strategies, objectives, trends, or projected financial results are subject to certain risks and uncertainties. Actual results may differ materially from those that are projected in such forward-looking statements. Such risks and uncertainties include those that are described in the Company's 10-Ks and in our other filings with the SEC, all of which are expressly incorporated herein by reference. Please note that the financial results and expectations we discuss today are on a continuing operations basis. Reconciliations of the non-GAAP measures we discuss today to GAAP measures are included in today's press release. As a reminder, as indicated in this morning's press release, all profitability metrics discussed in this call exclude costs associated with bankruptcy-acquired leases. These pre-tax costs amounted to $8 million and $5 million during 2025 and 2024, respectively, and $35 million and $16 million for the full fiscal years 2025 and 2024, respectively. Now here is Michael. Michael O'Sullivan: Thank you, David. Good morning, everyone, and thank you for joining us. I would like to cover three topics this morning. Firstly, I will discuss our fourth quarter results. Secondly, I will review our full year 2025 results. And thirdly, I will talk about our outlook for 2026. Then Kristin will provide additional details. Okay. Let's start with our fourth quarter results. Total sales increased 11%. This was on top of 10% total sales growth last year. The fourth quarter is by far our largest quarter of the year, so to grow total sales by double digits on top of double digits is especially impressive. It shows that we are continuing to take retail market share. Comparable store sales increased 4%. We knew coming into the quarter that we were up against 6% comp growth from last year and that we had some tariff-related gaps in our assortment. We expected our sales to be within our guidance range of 0% to 2%. So we were very pleased to handily beat this guidance and to deliver a strong two-year comp stack of up 10% for the fourth quarter. Our buying, planning, supply chain, marketing, and store teams executed very well to chase this trend. I am not going to spend a lot of time dissecting the details of our Q4 comp performance, but I would like to call out two important items. Firstly, our elevation strategy. This has been a focus over the last couple of years: elevating the assortment to offer better, more recognizable brands, higher quality, and more fashion, all at terrific values. There is clear evidence of the success of this strategy in our internal sales data. For example, when we analyze our sales by price point, we see that the highest comp growth rates are in the higher price buckets. In other words, despite the economic pressure she may be feeling, our customer is responding to the great values we are offering at these higher price points. These trends drove a mid-single-digit increase in our average unit retail in the fourth quarter. The second point I would like to make is that although we are pleased with our ahead-of-plan comp growth, as we hindsight the quarter, we can see that there were important categories where we could have done more business. I will explain what I mean, and we will talk more about this in a few moments when I discuss the full year. But before I move on to our full year 2025 results, let me just touch on Q4 earnings. In the quarter, we achieved 100 basis points of operating margin expansion and 21% earnings per share growth. Again, this is the largest quarter of the year, so we are especially happy with this performance. Now let's discuss our results for the full year 2025. For this discussion, I am going to read the headlines, but then I would like to spend most of the time talking about how, in response to tariffs, our operating strategies shifted in 2025 and how this impacted these sales and earnings results. The headlines are that in 2025, we delivered 9% total sales growth on top of 11% total sales growth last year; 2% comp sales growth on top of 4% comp sales growth last year; 80, that is eight-zero, basis points of operating margin expansion on top of 100 basis points last year; and 22% earnings per share growth on top of 34% earnings per share growth last year. What really jumps out from these headline results is that we drove extraordinarily strong earnings growth on a relatively modest comp sales increase. Let's talk about that. When we started the year 2025, as usual, we planned our business for low single-digit comp growth. So we believed or hoped that we might be able to chase to mid-single-digit comp growth for the year. Our initial 2025 focus and operating strategies were consistent with this comp sales outlook. But then in April, things changed. The introduction of tariffs forced us to recalibrate. It was clear that if we ignored the margin impact of tariffs, then this would significantly reduce our earnings growth. Over the last few years, we have worked hard to build our operating margin. And in 2025, we decided that we were not going to allow tariffs to set us back. So we took numerous actions to offset the impact of tariffs. We talked about these actions in our quarterly calls in May and November. They included pivoting away from and planning down receipts in categories which faced the greatest negative margin pressure from tariffs. These categories were mostly in our home businesses. Reducing inventory levels across the store to drive a faster turn and thereby generate lower markdowns. Raising retails in select, fast-turning categories where there was limited resistance or pushback from the customer. And aggressively going after expense savings across the P&L. These actions were very successful. In May, despite the initial shock of tariffs, we were confident enough to reiterate our earnings guidance for the year. In August, we took this guidance up. In November, we took our guidance up again. And today, we are reporting actual full year results featuring 80, eight-zero, basis points of operating margin expansion and 22% earnings per share growth. These numbers are well ahead of the original earnings guidance that we issued on this call in March. So let's talk about sales. As I said a moment ago, at the start of 2025, we planned our business for low single-digit comp growth but hoped we would be able to chase to mid-single-digit. We did not. We did not because the actions we took in response to tariffs were a drag on sales. Of course, we knew this. We knew that cutting receipt plans for businesses most impacted by tariffs was the right thing to do for earnings growth, but that it would likely dampen our sales upside. This impact showed up in Q3 and Q4. In Q3, unseasonably warm weather hurt our outerwear business. That can happen. We do not control the weather. But in the past, when this has happened, we have been able to lean on non-seasonal businesses, particularly home categories, to pick up some of the slack. That did not happen because our home assortment was the most impacted by the shift away from businesses with the greatest margin pressure from tariffs. Without these assortment gaps in Q3, we would likely have driven more sales. That said, given tariffs, our earnings growth would have been lower. My commentary is similar for Q4. I know it seems like an odd thing to say given that we are reporting strong percent comp growth on top of 6% comp growth last year. But I am convinced that we could have done even more sales in the fourth quarter. For example, toys. There are categories that are very important in Q4—gifting and housewares—where we could have done more business and driven higher comp growth across the chain. At the start of 2025, we had much higher full year sales plans for these businesses. But once tariffs were introduced, it made sense to pull back. We could have made a different decision. This would likely have delivered a stronger comp increase but with lower earnings growth. Wrapping up on the full year, let me reiterate that we are very pleased with our results. 80 basis points of operating margin expansion on top of 100 basis points last year; 22% EPS growth on top of 34% last year. One of the reasons why I have taken a few minutes to go through all this and to provide a full analysis of the drivers of our 2025 results is that it helps inform how we are thinking about the sales outlook for 2026. In fact, this is a good segue to talk about that sales outlook. I tend not to use the word “bullish” very often. But I am going to use it now. We feel very bullish about our sales outlook in 2026. Barring some black swan event, we think that we have an opportunity to really drive sales this year—comp store sales and total sales. There are several external and internal factors that are driving this optimism. On the external side, based on our trends in the fourth quarter, our view is that our customer looks quite resilient right now. Add to that, we expect that the current tax refund season is going to be more favorable than recent years. As we have said in the past, our core customer is very sensitive to tax refund payments. And the early signs and expert predictions are very positive. So we think there may be sales upside, especially in the first quarter. Staying on external issues, we do not know what will happen with tariffs this year. It is very uncertain. But we believe that the industry and our supply base have now adjusted to them. And the tariffs are unlikely to represent the same margin challenge that they did last year. Let's move on to the internal drivers of our optimism. There are two things to highlight. Firstly, in 2026, we will be up against our easiest comp sales comparisons for some years. In Q1, in Q3, and even in Q4, we look at the comp numbers that we posted last year and we feel like we have tremendous opportunity. As I explained a moment ago, in the back half of 2025, we had significant tariff-related gaps in our assortment, especially in our home businesses. These gaps held back our sales trend. Now that the industry and our supply base have adjusted to tariffs, we plan to go after these assortment opportunities in the back half of 2026. Secondly, we expect continued progress on our Burlington 2.0 initiatives, including the completion of our Store Experience 2.0 remodel for the balance of the chain. And we are also excited about the rollout of additional Merchandising 2.0 capabilities, especially regional and store-level localization. Since our last quarterly call in November, these favorable external and internal factors have caused us to reconsider and take up our sales plans for 2026. That is why we are raising our comp guidance to 1% to 3% for the full year. This is modestly higher than our typical model. That said, you can divine from my comments that we think there may be potential upside to this guidance. And we are positioned to chase the sales trend. There is one other important point to make. Although we are very excited by the sales outlook, we do not plan to go after this sales opportunity at the expense of margins. We have made huge progress expanding our operating margin over the last couple of years. We are confident there is more to come, and we anticipate that any ahead-of-plan sales in 2026 will drive further operating margin leverage. At this point, I would like to turn the call over to Kristin. Kristin? Kristin Wolfe: Thank you, Michael, and good morning, everyone. I will provide more details on the financials. First, starting with the fourth quarter, total sales grew 11% and comp store sales grew 4%, well above the high end of our guidance. As Michael noted earlier, this Q4 growth is on top of last year's 10% total sales growth and 6% comp store sales growth. Our Q4 adjusted EBIT margin expanded 100 basis points versus last year. This was 50 basis points above the high end of our guidance. The gross margin rate for the fourth quarter was 43.7%, an increase of 80 basis points versus last year. This was driven by a 60 basis point increase in merchandise margin and a 20 basis point decrease in freight expenses. Product sourcing costs were $232 million versus $217 million in 2024. Product sourcing costs levered 30 basis points as a percentage of sales, driven by supply chain productivity and cost savings initiatives. Adjusted SG&A costs in Q4 were 40 basis points lower than last year. The leverage in SG&A was primarily driven by leverage from store payroll and occupancy costs on higher sales in the quarter. Q4 adjusted EBIT margin was 12.1%, and our adjusted earnings per share in Q4 was $4.99. Both of these were well above the high end of our guidance. Our Q4 adjusted EPS represents a 21% increase versus the prior year. At the end of the quarter, comparable store inventories were up 12% versus the end of the fourth quarter in 2024. Our reserve inventory was 40% of our total inventory versus 46% of our inventory last year. We are very happy with the quality of the merchandise, the brands, and the values that we have in reserve. We ended the quarter in a very strong liquidity position, with approximately $2.2 billion in total liquidity, which consisted of $1.2 billion in cash and $926 million in availability on our ABL. We had no borrowings outstanding at the end of the quarter on our ABL. During the quarter, we repurchased $59 million in common stock, bringing our annual share repurchases to $251 million. At the end of Q4, we had $385 million remaining on our share repurchase authorization, which expires in May 2027. In Q4, we opened one net new store, bringing our store count at the end of the year to 1,212 stores. In Q4, we had two new store openings and one closing. I will now move on to discuss our full year 2025 results. Total sales increased 9% on top of 11% in 2024. Comp store sales increased 2% on top of 4% in 2024. Our operating margin for the full year expanded by 80 basis points. Merchandise margin increased by 40 basis points despite the negative impact from tariffs. Freight expenses improved by 20 basis points and product sourcing costs levered by 20 basis points. We also achieved 30 basis points of leverage on adjusted SG&A. This leverage was offset by 20 basis points of deleverage in higher depreciation and amortization costs. In terms of store openings, for the full year, we opened 131 new stores, while relocating 18 stores and closing nine stores, adding 104 net new stores to our fleet. I will now move on to our 2026 guidance. This guidance excludes expenses associated with bankruptcy-acquired leases of approximately $8 million in 2026 versus $35 million in 2025. For 2026, we expect total sales growth in the range of 8% to 10%. This assumes 110 net new store openings. We anticipate that approximately 60% of these new stores will open in the first half of the year, with the balance opening in the fall. We are forecasting comp store sales for the full year to increase 1% to 3%, and our adjusted EBIT margin to be in the range of flat to an increase of 20 basis points versus last year. This results in adjusted earnings per share guidance in the range of $10.95 to $11.45, an expected increase of 8% to 13%. Capital expenditures, net of landlord allowances, are expected to be approximately $875 million in fiscal 2026. I would now like to move on to guidance for the first quarter of 2026. This Q1 guidance excludes expenses associated with bankruptcy-acquired leases of approximately $6 million each in 2026 and 2025. We expect total sales to increase 9% to 11%. Comp store sales are assumed to increase 2% to 4% for Q1. We are expecting adjusted EBIT margins to be in the range of down 60 to down 100 basis points over 2025, which results in an adjusted EPS outlook in the range of $1.60 to $1.75 versus last year's first quarter adjusted earnings per share of $1.67. I would now like to turn the call back over to Michael. Michael O'Sullivan: Thank you, Kristin. Before I turn the call over to questions, I would like to reinforce a few of the key points that we have discussed this morning. Firstly, we are very happy with our Q4 performance: 11% total sales growth, 4% comp sales growth, 10% two-year comp stack, 100 basis points of operating margin expansion, and 21% increase in earnings per share. Secondly, we are also pleased with our full year results. We achieved 80 basis points of operating margin expansion on top of 100 basis points last year, and 22% earnings per share growth on top of 34% last year. In 2025, in response to tariffs, we had to adjust and make choices. We took actions to address the margin impact of tariffs and to drive earnings growth. The results are clear. This strategy was spectacularly successful. And thirdly, we are feeling bullish about 2026. There are external and internal factors that are driving this optimism. We think there may be upside to our sales guidance. And we anticipate that any ahead-of-plan sales should help drive additional operating margin expansion. I would now like to turn the call over for your questions. Operator: Thank you. We will now open for questions. If you would like to ask a question, please press star followed by 1 on your telephone keypad. Again, that is star followed by 1 on your telephone keypad. Kindly limit your questions to one question and one follow-up. Your first question comes from the line of Matthew Robert Boss of JPMorgan. Please go ahead. Matthew Robert Boss: Great. Thanks, and congrats on another nice quarter. So Michael, to break down the fourth quarter further, could you elaborate on what drove your ahead-of-plan sales? And in particular, what makes you think that you could have done even more sales in the fourth quarter than your reported results? Michael O'Sullivan: Well, good morning, Matt. Thank you for the question. As I said in the script, overall, we were very pleased with our trend in Q4, a strong 4% comp growth on top of 6% comp growth last year. So 10% two-year stack. That said, the breakdown of this comp growth by business was very, very different to how we had originally planned it. Let me explain that. Over the last few years, we have had enormous success growing our home businesses. Especially in the back half of the year, home has been a real engine of growth for us, with categories such as gifting, home decor, housewares, bedding, toys, and seasonal decor. Now our original plan for 2025 was to significantly expand those areas, starting in Q3 and then into Q4. We believed that we had a significant sales opportunity. Now with the introduction of tariffs in the spring, we faced a different set of economic choices. If we had maintained our original plans in those areas, we could have driven higher sales. But because of tariffs, we had to adjust. You know, the way I think about this is our mission is not just to chase sales; it is to chase profitable sales. And looking back, I am very pleased with how smartly and flexibly our teams responded in that situation. When tariffs were announced, we set about remixing our plans to focus on businesses that were less impacted by tariffs—you know, certain categories in apparel, footwear, beauty, and accessories. So not surprisingly then, coming back to your question, our comp growth in Q3 and Q4 was strongest in these specific businesses. I would say that our merchandising teams in those categories did a great job delivering terrific assortments that drove our comp sales in the back half. The flip side, of course, was that our comp growth in our most important home and holiday categories was lower. Of course it was. As I said, we deliberately lowered the mix of these businesses in response to tariffs. And it was that remixing that really enabled us to drive such extraordinary earnings growth in 2025. Now the last part of your question— which businesses could have delivered more sales then? It is all the categories that I mentioned: gifting, home decor, housewares, bedding, toys, seasonal decor. Now despite the gaps in the assortments in those businesses, we still turned very fast. So that tells me that if we had had more receipts, then for sure, we could have done more business. But those additional sales would have come with unacceptably low margins. Let me wrap up my answer by looking forward, though. We are excited for 2026. The math is different now. The industry has had the chance to adjust to tariffs—you know, tariffs are still here, but they are lower now than they were last summer. You know, as I have described, last year we started out with ambitious sales plans in our home businesses, but we had to shelve those plans in response to tariffs. That opportunity—that sales opportunity—has not gone away. And in 2026, unlike 2025, we see the chance to go after that opportunity aggressively and profitably. Operator: Your next question comes from the line of Ike Boruchow of Wells Fargo. Your line is now open. Ike Boruchow: First question for Michael. I think I have a question on the comp guidance just for 2026—1% to 3%. It is higher than you normally give us. I know it is relatively small, but it is a deviation from your typical guide. How can you give us a little bit more color on how we should interpret this along with your—cannot help but hear the word “bullish” and think that is a change from you as well. So just how should we interpret this? Michael O'Sullivan: Yeah. Good morning, Ike. Yeah. Growing up in the UK, “bullish” really is not a part of the vocabulary. But yeah, I am using “bullish” this time around. So let me answer your question. As you know, we typically plan our business and guide to flat to 2% comp growth, with the goal being to chase any sales upside. You know, in the fall, when we started to put together our 2026 budget, flat to 2% was our starting point. And that was the—obviously, that was the initial guide that we discussed in November. So over the last two months, we have had a chance to really look at the outlook for 2026. And obviously, we have torn apart and analyzed our 2025 performance. Now based on all that, we see a lot of potential upside. You know, again, as I said in the prepared remarks, there are external and internal factors that are driving our optimism. On the external side, based on our fourth quarter sales trends, our customer looks pretty resilient to us. We also think the tax refunds are likely to create some momentum, certainly in the first quarter. And while we do not know what will happen with tariffs, we think they are unlikely to present the same margin challenge that they did last year. Now on the internal side, specific to Burlington Stores, Inc., if you like, we see an opportunity to drive sales as we look at Q1, Q3, and even Q4, as we lap issues in those quarters—especially tariff-related assortment issues in the back half. Now with all that said, let me reassure everyone that, you know, we are an off-price retailer. Our overall playbook has not changed. We are still going to plan sales conservatively, manage the business flexibly, and then chase any upside. I should also make the point that although raising guidance to 1% to 3% is not a very significant change, it does matter. It gives our merchants a little more open-to-buy so they can be more aggressive as we start the year, as we start the quarter. It gives them more of a head start, if you like, as they chase the sales trend. The other data point that I should call out is our inventory level. At the end of Q4, our comp store inventories were up 12%. Now that kind of increase is very unusual for us. But it was deliberate. And it is another indicator that we see potential sales upside in 2026—especially in Q1. Ike Boruchow: Got it. And then a quick follow-up for Kristin. On the margins—just the 1Q down 60 to 100—can you just elaborate what exactly are the moving pieces there? Because the full year seems pretty solid, but what is going on in the first quarter that we should take note of? Kristin Wolfe: Hi. Good morning. Thanks for the question. It is a great question—glad you asked. Let me start with the full year, and then I will touch on the Q1 dynamic specifically. So for full year 2026, 1% to 3% comp store sales growth and operating margin flat to up 20 basis points. Going down the P&L, we are assuming relatively flat merchandise margin as we invest and reinvest any favorability from cycling tariffs to better support better brands, higher inventory levels in stores—all of this to drive sales. Similarly, for the full year, we are expecting relatively flat freight and product sourcing costs as our continued productivity and cost saving initiatives are still there, but mostly offset by new DC start-up costs this year. Then in SG&A for the full year, we expect to see about 20 basis points of leverage at a 3% comp. That is what is driving the full year guidance. And it is worth reiterating: we continue to expect 10 to 15 basis points of incremental leverage for every point of comp above the 3%. So now to your specific question about the first quarter—it is an outlier for the year. We are guiding lower margin in Q1, but we absolutely expect margins to increase in Q2, Q3, and Q4. We have some unique factors going on in the first quarter. First, we have some pressure on gross margin. We will not have anniversary tariffs—that puts some modest pressure on markup. And we also have a markdown timing shift into Q1 from Q2. Secondly, as it relates to our supply chain costs, we will see some deleverage specifically in Q1 that is related to the start-up costs from our new Savannah distribution center, which we plan to open in the second quarter. And then the last thing going on in Q1 is we are lapping a few one-time favorable items from Q1 last year. Michael has talked about how aggressively we went after expense savings across the P&L in response to tariffs, and there were some levers that we pulled specifically in April to drive savings that we are now lapping in Q1. These are the primary deleverage items that drive the down 60 to 100 basis points for Q1. And again, just to reiterate, we do expect EBIT margins to increase to varying degrees for each of Q2, Q3, and Q4 to offset the lower operating margin in Q1 and net out to that flat to plus 20 basis points for the full year. Operator: Your next question comes from the line of Lorraine Hutchinson of Bank of America. Your line is now open. Lorraine Hutchinson: Thank you. Good morning. Michael, we are expecting tax refunds to be much higher than last year. In 2021, you saw a significant sales lift from these stimulus checks. Should we think of higher refund checks in the same way? Michael O'Sullivan: Good morning, Lorraine. Thank you for the question. At a very high level, I would say that the answer is yes. Whether it is a tax refund check or a stimulus check, it puts extra money in our customers' pockets, and that is always a good thing and helps to drive comp sales. That said, there are a couple of very important differences, I think. Firstly, the stimulus checks back in 2021 were much more significant and more expansive. They went to everybody. For the one big beautiful bill, it looks like there are many different pieces to it. And it does not affect everybody equally. So it is difficult to tell how much it will impact our customers. You know, our expectation is that the impact will be much less significant than the 2021 stimulus checks. The second point to make is that the 2021 stimulus checks—they were a one-time thing. So in 2022, you will remember, we were up against them. The one big beautiful bill is a change in the tax code. And in that sense, it is permanent. So any sales lift that comes from it should be sustained rather than a one-time event. Anyway, I guess boiling it all down, it is difficult to know how big an impact it might have. We have built in some upside to our plans, and we are ready to chase. Lorraine Hutchinson: Thank you. And then wanted to follow up on inventory. You spoke earlier about the comp store inventory up 12%. But your reserve penetration was lower than last year at the end of the fourth quarter. Are you happy with your inventory levels? And maybe more broadly, how are you feeling about merchandise supply and off-price availability? Kristin Wolfe: Good morning, Lorraine. This is Kristin. I will take the first part of your question on inventory. Michael kind of spoke to it on the higher inventory levels in an earlier question, talking about our approach for 2026 sales guidance. But at the end of Q4, our comp store inventories, as you noted, were up 12%. This was deliberate, and we feel very good about the amount of inventory and the freshness of that inventory. The primary driver of the higher inventory is we wanted to be prepped and stocked for higher traffic, due to the higher tax refunds as well as the underlying trend of our business and sales anticipated in Q1. In addition, the other dynamic is we did a great job delivering transitional receipts in Q4, such that our assortment was fresh—there is newness in the store as we move from holiday and into spring. And we are continuing to improve our capabilities to better localize assortments by geography and climate, and these strategies contributed slightly to higher comp store inventory levels at the end of Q4 versus last year. So that is on in-store inventory. On reserve inventory, our reserve penetration was lower than last year, but at 40% of total inventory, it is really more in line with historical levels at the end of Q4. In 2023, for example, it was slightly higher than this—we saw 39% at that time, the end of 2023. And as we look at that inventory that we have in reserve, we really feel good about the quality and the values and the brands that will help support sales and support our ability to chase in 2026. Michael O'Sullivan: And then let me jump in on the last part of the question—on off-price merchandise availability. I would describe the buying environment for off-price right now as excellent. I think you have probably heard the same thing from other off-price retailers. There is plenty of supply in the market across most categories. You know, I mentioned in the prepared remarks that we think there may be sales upside in 2026. Well, it is important to add that we see plenty of off-price merchandise availability to help fuel that sales trend. Kristin Wolfe: Thanks, Lorraine. Operator: Your next question comes from the line of Brooke Siler Roach of Goldman Sachs. Your line is now open. Brooke Siler Roach: Good morning, everyone. Firstly, I have a quick question about the monthly cadence of comp sales in 4Q. In particular, I am wondering how your business performed in January and your comp trend exited the quarter. Thank you. Kristin Wolfe: Good morning, Brooke. It is Kristin. I will take the question. It is a good question. As we look at it, it makes the most sense, given the timing of holiday, to look at and speak to November and December combined. And for that two-month period in Q4, our comp sales increased mid-single digits. And as we got closer to Christmas, that trend accelerated. So we were really pleased with this holiday performance and the sales trend we saw, particularly given the strength of our holiday season last year. Then as we moved into January, that strong trend and momentum continued. January also ran a mid-single-digit comp. And I will point out that our comp in January would have been even stronger if not for the significant winter storm that impacted many of our major markets late in the month. It was widespread and led to several hundred store closures. This disruption cost us about a point of comp on the full quarter and several points for the month of January. Now to the last part of your question, once we dug out from the winter storm, we resumed that strong comp store sales trend. Momentum has continued into February, such that Q1 is off to a very strong start. We have a lot of the quarter ahead of us, of course, but so far, good. Brooke Siler Roach: That is great to hear. As a follow-up, I was hoping you could speak to sales trends by customer demographic. What are you seeing in terms of sales trends by different income groups? And are there any callouts on trends for other demographic groups that we should be aware of? Thank you. Michael O'Sullivan: Yeah. Good morning, Brooke. It is Michael. I will take that. It is a good question. It is something we look at all the time. We slice and dice our internal sales data just to see if there are any pockets of weakness or pockets of strength. So let me tell you what we are seeing. You know, on sales trends by different income segments, as we analyze the performance of stores based on median household income of the surrounding area, our comp sales trends in the fourth quarter were very broad-based. It is true that our stores in lower-income trade areas had a slightly higher comp than the rest of the chain, but it was very close. In other words, all income cohorts performed well in the fourth quarter. So when you segment our customers based on household income, every segment is looking fairly resilient right now. On the second part of your question—other demographic groups—again, there is not much to call out. When we look at performance of our stores based on ethnicity of the surrounding area, again, the trends look fairly broad-based. For example, stores in high Hispanic trade areas—if I exclude the southern border—those stores are pretty much right in there with the rest of the chain in terms of comp performance. So, you know, overall, as we look across demographic segments, income and ethnicity, etcetera, we are not seeing any major pockets of weakness at this point. Brooke Siler Roach: Thanks so much. I will pass it on. Michael O'Sullivan: Thank you. Operator: Your next question comes from the line of Adrian Yee of Barclays. Your line is now open. Adrian Yee: Great. Thank you very much. It is really nice to see Burlington 2.0 kind of really coming into its own. Thank you. A little bit more color on the elevation strategy. How should we be thematically thinking about the pyramid of sort of good, better, best—where it was, where it is going to? Your other off-price competitors that are doing a similar strategy—they are also opening stores in your market. So just how do we think about how you are differentiated on the product? And then, Kristin, a little bit more on the supply chain, but maybe more from a qualitative benefits over multi-year horizon. How do you think about productivity, capacity utilization? And are you running anything in tandem? Like, are you running, you know, legacy DCs or something that we can roll off, you know, in the next twelve to eighteen months? Thank you. Michael O'Sullivan: Good morning, Adrian. Thank you for the questions. Obviously, I will take the first one on the elevation strategy. Yeah. We are very pleased with what we are seeing in our elevation strategy. It has been a major focus for us for the last couple of years: elevating the assortment to offer better, more recognized brands, higher quality, and more fashion, all at great values. You know, we are very encouraged by the results. And our internal data shows us that by elevating our assortments, we have been able to drive higher customer perception scores, stronger comp growth in higher price buckets, and ultimately, higher average unit retail and higher transaction size, which is what you should be seeing if you have a successful elevation strategy. Now one aspect of this that I am especially pleased about is that we have successfully pursued this elevation strategy without taking a hit to margin. You know, that has always been the major challenge in off-price. When you increase the mix of better brands or you raise the quality or you take more fashion risks, then that can really pressure your merchandise margin. When you elevate the assortment like that, and the AUR goes up, the typical pattern is that markup is pressured and markdowns increase. It takes skill to elevate the assortment without hurting merchandise margin. So the fact that we have been able to elevate the assortment and at the same time have actually expanded our margins is, I think, a clear testament to the strength and the talent of our merchant teams. By offering a terrific assortment with great value at higher price points, we have been able to convince the customer to trade up and to spend more. And, yeah, as I say, over the past couple of years, we have elevated the assortment, but it is really important to point out that we, at the same time, have expanded our margins. And, Kristin, do you want to take the second question? Kristin Wolfe: Yes. Adrian, on supply chain—I appreciate the question. I will speak to both qualitatively and quantitatively. We do continue to make significant progress reducing supply chain expenses as a percentage of sales. That has certainly been a focus. We are doing this through numerous productivity initiatives in our DCs and cost savings projects across supply chain. So for 2025, supply chain costs levered 20 basis points, and this was on top of 50 basis points of leverage in supply chain in FY 2024. So we are seeing that leverage. This spring, 2026, we are going to go live in our newest DC in Savannah, Georgia. We are really excited about this new asset. It is more than twice the size of our current largest DC. It is highly automated. It is built for off-price processing. Now kind of near term, as you would expect, there are significant start-up expenses associated with opening a new facility of this size, and that will drive some deleverage in 2026. And for 2026 overall, we expect supply chain costs as a percentage of sales to be relatively flat for the year as these new DC start-up costs are then offset by our continued efforts around productivity and cost savings initiatives elsewhere in the supply chain. You see this dynamic more in Q1, where we are expecting about 10 to 20 basis points of deleverage on this line. And then as the year goes on, we expect that deleverage to moderate as we offset with these cost savings initiatives. Now sort of on the qualitative point in your question, it does typically take two or so years for a DC to be fully ramped up. Over time, we absolutely expect this state-of-the-art design-for-off-price DC to drive cost efficiencies for us, notably significantly faster processing time. And additionally, based on the physical locations of our vendors and our store base, we believe over time we can see some modest leverage in freight related to this new DC. So we are continuing to invest in new distribution centers and, over time, we will modify our DC footprint to have the majority of our supply and processing go through our more efficient DCs. That will take time, but that is the plan that we are continuing to execute. Adrian Yee: Fantastic. Thank you very much. Best of luck. Michael O'Sullivan: Thanks, Adrian. Thank you. Your next question comes from the line of Mark R. Altschwager of Baird. Mark R. Altschwager: Great. Thank you for taking my question. Michael, can you talk about the pipeline for new stores and relocations? Michael O'Sullivan: Yes. Good morning, Mark. Yeah. I am glad you asked this question. I am really very excited about our new store program and our new store pipeline over the next couple of years. When we—you know, going back a little bit—when we laid out our long-range plan back in November 2023, we said at the time that we thought we could open roughly 500 net new stores over the next five years, or approximately 100 net new stores per year on average. We are running slightly ahead of this. And not only are we ahead in terms of number of new stores, we are also very—it is important to say—we are also very happy with how those stores are performing. We expect new stores to achieve about $7 million in sales in their first full year. Our new stores are running in line with that. We then expect them to comp above the chain for their first few years in the comp base. And, again, recent cohorts are actually outperforming these expectations for comp growth. That means that our overall investment returns for new stores are very strong, well above our hurdle rates. The other aspect of our new store program that I am excited about and I want to call out is our store relocation and downsizing programs. You know, as you know, we have a lot of older, oversized stores in the chain. In 2025, we relocated 18 of those stores to smaller format locations, mostly in busier nearby strip centers. Now with those relocations, we are seeing a good sales lift and a reduction in occupancy costs. So driving much improved earnings. In 2025, we also physically downsized about 20 existing stores. Now this is a new and growing program for us. When we downsize the store, we reduce the footprint of the store, and we either return the excess space to the landlord or we sublease it to a co-tenant. Now as we reduce the footprint, we have refurbished, modernized, and improved the reduced space. With our downsized projects, we are seeing very strong returns driven by significantly lower occupancy costs. In many cases, we are also seeing a sales lift. We have many stores in the chain that are candidates for our downsizing program. So we expect that program to grow over time and become more important. Now wrapping up my answer, we obviously have a much, much smaller store base than our off-price peers. And we therefore have much, much more room for growth. So we are very excited about our new store program and our new store pipeline, including the 110 net new stores that we plan to open in 2026. And we are also excited by our relocation and downsize programs as I described. These programs are not only going to help us expand our store base, but they are going to help us transform it. Mark R. Altschwager: That is very good color. Thank you. And just a follow-up. In the prepared remarks, you talked about some of the localization initiatives and how that seems to be ramping up. Can you give us a little bit more detail? Michael O'Sullivan: Yeah. Sure. It is actually another really great question. Localization—it is hard to overstate this—but I think localization is a major opportunity for us. It is a capability that our off-price peers have had and have invested in for many, many years. And it is an area where we frankly are a long, long way behind. You know, there have been times over the last several years—there are even times now—when I walk one of our stores, say, in a beach community or in the South in the summer, I look around, and it looks like Burlington Coat Factory has come to town. So we need to—we have a huge opportunity to improve and get better at customizing and localizing our assortment not just based on the region and the climate, but also based on income levels and demographics of the trade area. Now, you know, this is a business problem where people, process, and technology—including, by the way, artificial intelligence—can make a huge difference. And we have known for some time now that it is a major opportunity for us. Indeed, we have talked about it with investors. But we also recognized that it would be difficult for us to make significant progress on localization until we had really strengthened and upgraded our foundational merchandise planning and allocation systems. Over the last couple of years through Merchandising 2.0, that is what we have done. And we are now in a position to really start going after localization. Now, you know, I know from experience that this is not a capability that we can build overnight. But I am very excited about some of the initiatives that we have begun to roll out—better store and class-level planning and forecasting, much stronger localization analytics, new store assortment planning and trending, seasonal flow and event planning, assortment distortions based on income and demographics, and an expansion and redesign of our merchandise planning regions. You know, if you go back and look at the history and the growth of our off-price peers over time, you will see that localization was a major unlock in their evolution and growth. As I say, we are a long way behind. We have a lot of work to do. And it is going to take some time. I think that over the next several years, localization is going to be a key driver for us. Mark R. Altschwager: Thanks again. Operator: Thanks, Mark. Our last question comes from the line of Dana Telsey of Telsey Group. Dana Telsey: Hi. Good morning, everyone, and nice to hear the progress. Your operating margins were very strong in the fourth quarter as well as for the fiscal year. Can you just walk us through the puts and takes of the margin drivers? Thank you. Kristin Wolfe: Good morning, Dana. Thanks for the question. I will start with Q4 and then I will go into full year. As Michael discussed and we talked about on this call today, we took deliberate actions in 2025 to drive our operating margin and earnings growth. In Q4, the biggest contribution was an increase in gross margin. There was an 80 basis point increase versus last year. Sixty of that 80 basis points came from merchandise margin. Merchandise margin was driven by lower shortage as well as the actions we took to mitigate tariffs that Michael talked about today. The other 20 basis points came from lower freight expenses. Similarly, on product sourcing costs, supply chain cost savings helped us leverage 30 basis points in the quarter. And then we achieved 40 basis points of leverage in SG&A. This was mostly driven by sales leverage in store payroll and occupancy expenses. And all of these items more than offset deleverage we saw from higher depreciation expenses in the quarter. For the full year, many of the same levers drove the 80 basis points of improvement in EBIT margin. And as a reminder, this 80 basis points of improvement was on top of 100 basis points of improvement in 2024. Gross margin for the year increased 60 basis points. That was made up of merchandise margin of 40 basis points and freight expenses of 20 basis points. Supply chain savings drove a 20 basis point leverage for the year with cost savings initiatives. And SG&A drove 30 basis points due to many of the cost savings initiatives we put in place earlier this year that we described. These improvements more than offset 20 basis points of deleverage we saw in depreciation for the year. And just one last point on margin. I want to reiterate that we believe the margin gains we achieved in 2025 are absolutely sustainable, and we believe we have further margin expansion opportunities ahead of us. We will be laser focused on driving sales in 2026, but we have opportunities over time to drive faster turns, generate more supply chain savings, and leverage SG&A expenses, particularly as we deliver a stronger comp store sales increase. Operator: That concludes our question and answer session. I would now like to turn the call back to Mr. Michael O'Sullivan for final remarks. Michael O'Sullivan: Let me close by thanking everyone on this call for your interest in Burlington Stores, Inc. We look forward to talking to you again in May to discuss our first quarter 2026 results. Thank you for your time today. Operator: Thank you for attending today's call. You may now disconnect. Goodbye.
Operator: Good day, everyone, and welcome to MediWound Ltd.'s Fourth Quarter and Full Year 2025 Earnings Call. Today's conference call is being recorded. At this time, I would like to turn the conference call over to Gaia Seamus of LifeSci Advisors. Please go ahead. Gaia Seamus: Thank you, operator, and welcome, everyone. Earlier today, premarket open, MediWound Ltd. issued a press release announcing financial results for the fourth quarter and full year ended December 31, 2025. You may access this press release on the company's website under the Investors tab. I would ask you to review the full text of our forward-looking statements within this morning's press release. Before we begin, I would like to remind everyone that statements made during this call, including the Q&A session, relating to MediWound Ltd.'s expected future performance, future business prospects, or future events or plans are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements may involve risks and uncertainties that could cause actual results to differ materially from expectations and are described more fully in our filings with the SEC. In addition, all forward-looking statements represent our views only as of today, and MediWound Ltd. assumes no obligation to update or supplement any forward-looking statements, whether a result of new information, future events, or otherwise. This conference call is the property of MediWound Ltd., and any recording or rebroadcast is expressly prohibited without the written consent of MediWound Ltd. With us today are Ofer Gonen, Chief Executive Officer of MediWound Ltd., and Hani Luxenburg, Chief Financial Officer. Barry Wolfenson, EVP of Strategy and Co-Development, is also participating in today's call. Following our prepared remarks, we will open the call for Q&A. Now I would like to turn the call over to Ofer Gonen, Chief Executive Officer of MediWound Ltd. Ofer? Ofer Gonen: Hi, and thank you, Gaia. 2025 was a pivotal year for MediWound Ltd. We ended the year with two significant growth drivers firmly in place: a Phase III VALUE trial advancing as planned, and an operational and expanded manufacturing facility for NexoBrid positioning us for long-term commercial growth. At the same time, we strengthened our balance sheet and outlined a multiyear revenue trajectory. Despite the ongoing conflict with Iran, we at MediWound Ltd. are fully prepared and will continue operating with the resilience and discipline that have guided us through similar challenges in recent years. Our team remained focused on our clinical milestones and commercial objectives, continuing to support patients and partners worldwide. Let me walk you through the progress. Let us start with an update on EscharEx, our late-stage enzymatic debridement therapy for chronic wounds. Enrollment is ongoing in the global Phase III VALUE study in venous leg ulcers, with the majority of sites active and enrolling. We are targeting enrollment of 216 patients across approximately 40 sites in the United States and Europe, and we expect both the prespecified interim assessment and enrollment completion by year-end 2026. Importantly, we are expanding the EscharEx clinical program beyond just VLUs. We have aligned with both the FDA and EMA on the Phase II protocol in diabetic foot ulcers and plan to initiate the study in 2026. In addition, a prospective investigator-initiated study in pressure ulcers is also expected to begin in 2026. This expansion broadens the clinical footprint of EscharEx across the three major chronic wound indications. We continue to see meaningful industry validation; B. Braun has joined the EscharEx clinical development program through a research collaboration agreement and will take part in the planned Phase II study in diabetic foot ulcers. This adds to the existing collaborations with Coloplast, ConvaTec, Essity, Mölnlycke, Solventum, and MiMedx. Taken together, continued clinical execution, regulatory alignment, expansion into additional indications, and industry engagement support the advancement of EscharEx as a long-term growth driver for MediWound Ltd. Now turning to NexoBrid. Our expanded manufacturing facility is now operational, increasing the production capacity sixfold to support growing global demand. Commercial availability from this site remains subject to regulatory approvals, which we expect in 2026. In the United States, adoption continues to expand, with utilization across more than 70 burn centers, representing the majority of Vericel's approximately 90 target accounts. To illustrate the driver of demand, here are some of the latest examples. Recently published real-world data from the Israel Defense Forces covering nearly 5,000 documented combat casualties showed that NexoBrid was clinically applicable in 71% of war-related injuries. In addition, a 15-year military analysis across multiple conflicts demonstrated a 50% increase in the proportion of severe burns among wounded soldiers. In parallel, we reported peer-reviewed prospective data showing that NexoBrid reduced embedded particles in ablation and blast injuries by more than 90%, supporting the role in acute trauma care. More recently, survivors in the tragic bar fire in Trans Montana, Switzerland, were treated with NexoBrid in medical centers across Switzerland, Italy, and Germany, underscoring the importance of pre-deployment of an advanced burn therapy for mass casualty events. Taking all this together, growing clinical evidence from both military and civilian settings reinforces NexoBrid's role in the treatment of severe burns. Following regulatory clearance of our expanded facility, we intend to prioritize support for national preparedness initiatives, including stockpiling and collaboration with military and emergency response systems. With that overview, I will now turn the call over to Hani. Hani? Hani Luxenburg: Thank you, Ofer, and good morning, everyone. Let us turn to our financial results for the fourth quarter and full year of 2025. Revenue for the fourth quarter was $1.9 million compared to $5.8 million in 2024. The decrease was primarily driven by lower development services revenue, mainly attributable to the U.S. government shutdown, which delayed budget approval and the initiation of new contracts and agreements. Gross profit for the quarter was $300,000, or 14.9% of revenue, compared to $900,000, or 15.5%, in the prior-year period. R&D expenses were $4.5 million compared to $3.0 million in 2024, reflecting continued investment in the EscharEx VALUE Phase III study. SG&A expenses totaled $3.6 million compared to $4.0 million in the same period last year, mainly reflecting lower marketing and share-based compensation expenses. Operating loss for the quarter was $7.8 million compared to $6.1 million in 2024. Net loss was $7.2 million, or $0.56 per share, compared to a net loss of $3.9 million, or $0.36 per share, in the prior-year period. The increase was primarily attributed to lower noncash financial income from the revaluation of warrants. Adjusted EBITDA loss was $6.5 million compared to a loss of $4.9 million in 2024. Looking at our performance for the full year 2025, revenue for the year was $17.0 million compared to $20.2 million in 2024. The decrease was primarily attributable to the U.S. government shutdown and lower product sales to Vericel. Gross profit was $3.3 million, or 19.2% of revenue, compared to $2.6 million, or 13%, in 2024. The margin improvement reflects a more favorable revenue mix. R&D expenses increased to $14.0 million compared to $8.9 million in 2024, driven by investments in the EscharEx VALUE Phase III trial. SG&A expenses were $14.2 million versus $13.1 million in 2024, mainly reflecting higher marketing authorization order expenses. Operating loss for the year was $25.3 million compared to $19.4 million last year. Net loss for 2025 was $23.9 million, or $2.10 per share, compared to $30.2 million, or $3.30 per share, in 2024. The reduction in net loss was primarily driven by $2.2 million of noncash financial income from the revaluation of warrants in 2025 compared to $10.7 million of noncash financial expenses in 2024. Adjusted EBITDA loss was $20.3 million compared to $14.8 million in 2024. Turning to our balance sheet, as of December 31, 2025, we had $53.6 million in cash, cash equivalents, and deposits compared to $43.6 million at year-end 2024. During 2025, we used $21.4 million in cash to fund our operating activities. In addition, our balance sheet reflects the completion of a $30.0 million registered direct offering and $3.5 million in proceeds from Series A warrant exercises. We believe our current cash position provides the financial flexibility needed to advance our key program and continue execution on our strategic priorities. That concludes my review of the financials. Ofer, back to you. Ofer Gonen: Thank you, Hani. So before we conclude, let me briefly address our outlook. We reaffirm our revenue guidance of $24 million to $26 million for 2026, $32 million to $35 million for 2027, and $50 million to $55 million for 2028. This guidance assumes continued support from BARDA and the U.S. Department of War, and the 2028 outlook includes potential initial contribution related to EscharEx, subject to regulatory approval. These projections reflect the foundation we built in 2025 and the milestones ahead. In summary, 2025 was a year of infrastructure build-out and clinical advancement. We advanced our Phase III program for key milestones. We completed and commissioned our expanded manufacturing facility. And we strengthened our balance sheet and established a multiyear revenue framework. As we move into 2026, we are focused on disciplined execution, advancing EscharEx towards pivotal milestones, securing regulatory approvals for our expanded facility, and converting our operational progress into meaningful long-term value creation. Operator? Operator: Ladies and gentlemen, at this time, we will begin the question-and-answer session. Using a touch-tone telephone, to withdraw your questions, you may press star and 2. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. So, again, that is star and then 1 to join the question queue. We will now open for questions. Our first question today comes from Josh Jennings from TD Cowen. Please go ahead with your question. Josh Jennings: Morning. Thank you for taking the questions, and I hope everyone on the team is safe, and we are thinking about you guys. I wanted to start with just a question on NexoBrid and the manufacturing expansion project that has been successful. Just maybe review the pent-up demand in international regions and the timing. I think you can take this all into your multiyear guidance forecast, just the timing of MediWound Ltd. filling that demand over the next 12, 18, 24 months. Ofer Gonen: Hey, Josh. Good speaking with you. So our expanded manufacturing is now operational, and the capacity has now increased sixfold. The commercial output in this site remains subject to regulatory approvals that are expected later in 2026. Once we are approved by EMA or FDA, the product that we are manufacturing during the validation process that we are doing now can be released to the market. Our guidance assumes a regulatory approval clearance in 2026. I think it is an assumption that we believe is reasonable given where we stand today. As for the demand, it is much larger than we can actually manufacture across the territories. Having said that, I do not know if it will be the case once we can manufacture. Therefore, we guided according to what we expect, and I hope it will be better going forward. Josh Jennings: Thanks for that, and congratulations on the pace of the VALUE trial, and it sounds like things are going well there. I wanted to ask about the pressure ulcer trial. It is my understanding that, just in terms of your team's assessment of the peak sales in the U.S. down the line for EscharEx, it does not include contributions from the pressure ulcer indication. Maybe just talk about or review the size of that opportunity in the U.S. and how that will be unlocked with this trial. Thanks for taking the questions. Ofer Gonen: I have to admit that I did not hear anything. Is it because of my line or because of yours? Do you hear me? I am sorry. It may have been because of my line. Can you hear me now? I do not hear you. Operator, is it his line? Should I reconnect? Operator: I am hearing both of you. Are you able to hear me, sir? Can you, sir? Ofer Gonen: Yes, I hear you loud and clear. Josh, can you speak again? Josh Jennings: Certainly. Can you hear me now? Ofer Gonen: Yes. Can you repeat the question? Sorry. Josh Jennings: Sorry for the technical difficulties. Maybe that was on my line. Yes, I was just saying that you are making nice progress on the VALUE trial, which is a good signal. I just wanted to dive a little bit deeper into the pressure ulcer indication. My understanding is that that is not included in your team's assessment or forecast of peak sales in the U.S., which is a little bit of conservatism there. But just wanted to either review that pressure ulcer indication and the kickoff of this pressure ulcer study later this year. Thanks for taking the question. Ofer Gonen: Okay. Barry, do you want to take this one? Barry Wolfenson: Sure, absolutely. As you know, we are going to start an investigator-led pressure ulcers study this year, and along with that, we will have a third-party market research project initiated that will replicate what we did with regard to diabetic foot ulcers and venous leg ulcers. And so, ultimately, those peak sales, as you mentioned, will increase. I think from a back-of-the-envelope perspective, I would say to think about pressure ulcers as the third of the big three ulcer types along with DFUs and VLUs. There are probably more pressure ulcers than there are the other two. We still need to do the work to see how many of them require debridement and would be applicable to EscharEx. But back of the envelope, I would anticipate that when all is said and done, it will be roughly a third of the business. Josh Jennings: Thanks for that, Barry and Ofer. Appreciate it. Operator: Our next question comes from Jeffrey Jones from Oppenheimer. Please go ahead with your question. Jeffrey Jones: Thank you very much for taking the question. Josh and Ofer, I hope everyone is safe there. You mentioned in the 2026 revenue guide that this assumed continued support from BARDA and DOW. Can you clarify how much of that is based on new contracts that are not currently committed versus the award that you are anticipating, and perhaps give us an update on what you know there? Ofer Gonen: Hi, Jeff. So good to have you on as well. Let us start with BARDA. In August 2025, BARDA issued an RFP covering stockpiling, warm-temperature stable formulation, and trauma and blast injury indications. Vericel, which holds the U.S. commercial rights on NexoBrid, is leading the process in the United States. We will provide full technical and development support. Now, with federal operations normalized, we expect BARDA to resume progress on this RFP and related development and procurement activities, subject, of course, to standard government processes. I cannot add more to that. As for our collaboration with the Department of War, as you know, NexoBrid room-temperature stable formulation is being developed for a nonsurgical burn treatment for the use for the U.S. Army. We have been awarded to date a total of $18.2 million in nondilutive funding from the U.S. department for order to support this development. We are moving forward. So part of the revenue is supposed to be from BARDA and part of it from the Department of War. Jeffrey Jones: Thank you for that. You mentioned the research collaboration in the context of the DFU study, I believe. Can you speak in a little more detail about what some of these collaborators are providing and how that guides to your long-term strategy in VLU, DFU, and beyond? Ofer Gonen: Okay. Barry, do you want to speak on this? Barry Wolfenson: Sure. I mean, as you mentioned in the call, between the VLU and the DFU study, at this point we have seven of these research collaborations, all with market-leading advanced wound care companies. They include Coloplast, through their acquisition of Kerecis, Essity, Solventum, Mölnlycke, ConvaTec, MiMedx, and now the most recent one being B. Braun. Just a little bit about B. Braun: they are one of the world's leading privately held medtech companies. They are headquartered in Germany, founded in 1839. They generate over $9 billion in annual revenue, operate in over 60 countries, and employ more than 60,000 people globally. They are known for products that are used daily across hospitals, surgical centers, dialysis clinics, and outpatient settings, so they are a perfect partner when it comes to wound care. They have a big wound care franchise. Specifically with B. Braun, they are taking part in the DFU Phase II study. As with the other collaborators, they will be supplying one of the key products that is for optimal care of wounds, which will be used in both arms of the study. Specifically, they are supplying their market-leading antimicrobial wound cleanser, Prontosan, to be used during dressing changes. So each of these collaborators are putting in one kind of product, whether it be a wound dressing. In the VLU study, compression therapy is required. Post wound healing, there is a different kind of compression device that keeps everything in place. So they all supply things that are needed for the standard of care in wound care, and it allows for the study design to be that only one thing needs to be changed between the two arms, and that is the active and the control, and so it reduces any sort of variability in the study, and we get cleaner results. For the companies, the collaborators, they get the benefit of having their product used as standard of care in these very, very large, hopefully successful studies, and it also provides the opportunity for relationship building between MediWound Ltd. and these collaborators. So as we get closer to the product making it to the market, and if there are any partnering transactions to consider, all these companies will be up to date with the program, know the details of it intimately, and it will just facilitate conversations at that time. Jeffrey Jones: Great. Thank you very much for the detail. We will get back in queue. Operator: Thank you. Our next question comes from Swayampakula Ramakanth from H.C. Wainwright. Please go ahead with your question. Swayampakula Ramakanth: Thank you. This is RK from H.C. Wainwright. Good afternoon, Ofer, and I am glad to hear your voice. Just a couple of quick questions. On the VALUE trial, which includes the provision of adaptive adjustment that you could do at a 65% enrollment mark, what clinical scenarios would there be if you had to increase your sample size, and if you end up doing that, what sort of an impact would it have on your timeline? Ofer Gonen: Hi, RK. So thank you for joining. Yes, as you mentioned, the prespecified interim sample size assessment will be conducted after approximately 65% of the patients complete the treatment. Based on this assessment, the study may continue as planned, which means that the sample size stays 216 patients. The sample size may increase if necessary. We want to preserve the approximately 90% statistical power. As you know, at MediWound Ltd., we succeeded in all the 14 clinical trials that we conducted and all the three Phase II studies that we conducted with EscharEx. So we have no intention not to make it to the finish line in this study as well. So the outcome could be the study should finish the enrollment as planned, which means 216 patients, and as we guided, it would be by the end of 2026. If, let us say, we are at 80% statistical power, not good enough, we will increase the number of patients. If it is increasing by 20–40 patients, it means adding another couple of months to the study and another few millions of dollars, which is not a drama. If the outcome is that we need to increase it by 100 patients, it will be at least six months, and it will cost us another $10 million. Let us hope that the data will be very similar to what we saw in the Phase II studies, and we will be able to finish the enrollment by the end of this year. Swayampakula Ramakanth: Thank you for that. And then the question I have on supply chain for the clinical studies: as we understand how things are in and around Israel at this point because of what is going on in the geopolitical world, is that impacting anything in terms of supplying clinical product to the various centers, and if so, how are you managing it? Ofer Gonen: So it is a great question because we just had a discussion about it this morning. We checked in across the sites in Europe and in the United States. There is enough EscharEx that can support continuation of the trial for the next at least six months, so we are in a good place. On top of that, the other ancillaries are from global companies, so all of them should be in the sites. So we do not anticipate any issue regarding the supply chain that will impact the clinical study. Swayampakula Ramakanth: Thank you for that. And then the last question from me is, the revenues for 2025 were below what was expected, and is that partially a stocking issue through Vericel, or is it the pull-through in some of these active burn centers? Hani Luxenburg: RK, so the revenue for 2025 totaled $17.0 million, as you said, less than the $24.0 million that was expected. The decrease was primarily due to the U.S. government shutdown, which delayed, as you imagine, the budget approval and the initiation of new contractual agreements. There was a small part that belonged to the sales to Vericel, but the main part is the U.S. government shutdown. Swayampakula Ramakanth: So when you say that, I was just wondering about the 2026 revenue guidance. How much of the BARDA RFP award expectation is in the $24 million to $26 million that you are talking about? Ofer Gonen: We are not sharing the split. We have potential of getting from BARDA, potential from or indirectly by Vericel. We have potential to get it from the DOW, and we have revenue from product. We feel comfortable achieving the $24 million to $26 million, but we are not giving the split. Swayampakula Ramakanth: Thank you. Thank you both for taking all my questions. Operator: Next question comes from Chase Knickerbocker from Craig-Hallum. Chase Knickerbocker: Hello, everyone. This is Jake on for Chase. Wondering if you could provide a little bit more color and further discuss the decision to move forward with a Phase II for DFU rather than the adaptive Phase II/III design as previously planned. What kind of feedback from the FDA did you receive that indicated that this was the best path forward? Ofer Gonen: Hi, Chase. Good to have you with us. So the main program, as you know, is the VLUs, and we decided to expand the program into two additional chronic wound indications, as said, DFU and pressure ulcers. There are some changes in the administration. We are not certain that it will be required to execute a very large Phase III study in order to have an approval for a DFU indication. We consulted with the agencies, both with EMA and FDA, asked them what they are expecting to see in order to see the advantage of EscharEx in treating DFU patients, and the outcome was this study with 50 patients, as we detailed in our corporate deck. And if I may add, it is a 50-patient study, which is the kind of Phase II, and if we see that we need to have additional, I do not know, 100, 150 patients to finalize the Phase III, we will do it study after study. So it is a kind of a timing impact, but we are not certain that it will be done before the product is approved. Chase Knickerbocker: Appreciate that color, Ofer. That is helpful. And then same type of question on the pressure ulcers. Is it your understanding that the pressure ulcer would require a separate Phase III to get the potential EscharEx label? Barry Wolfenson: Thank you for the question. As Ofer intimated in his answer with regard to DFUs, there is a change in the stance with regard to the FDA and how they are trying to make it, let us say, easier for drugs to be approved, the most notable thing being that they are moving from the need to do two well-designed, well-controlled Phase III studies in order to get approval, and they are moving that to needing only one. And when we look at that, and we also look at, if you recall, at the end of last year, the FDA agreed that our second primary endpoint would be the facilitation of wound closure, which basically takes the onus of the closure portion away from EscharEx and puts it into the hands of already approved products like a CTP or an autograft. We intend to have a discussion with the FDA around the necessity of these large-scale Phase III studies for each and every indication, i.e., DFU, pressure ulcers, or any other chronic wound indication that is out there. The necrotic material on these wounds is all very similar from wound to wound to wound. We have excellent data and a growing base of data that EscharEx works on all of that necrotic material, owing to its several different enzymes that are in the API and multiple different targets towards the necrotic material. And we believe, in the end, that it would be likely sufficient to have, as we are doing in the DFU study, a well-designed Phase II study complemented by post-marketing real-world data to expand the pack insert to include additional indications. Chase Knickerbocker: Appreciate that additional color, Barry. Thanks for taking the questions. Operator: Thank you. Our next question comes from Michael Okunewitch from Maxim Group. Michael Okunewitch: Hey, guys. Thank you so much for taking my questions today. I guess to start off, I would like to ask a little bit about the pressure ulcer program, and in particular, the strategic considerations around prioritization in chronic wounds. We know about the prioritization between VLUs and DFUs, but pressure ulcers do seem to be a little bit overlooked in this market. So I am curious if you could comment on the market and why pressure ulcers seem to be prioritized less so than the other two chronic wounds. Ofer Gonen: Hi, Michael. I do not think it is less prioritized. The largest unmet medical need is definitely at venous leg ulcers, because these wounds are extremely painful, and you do not have any alternative. The knife, the scalpel, is not an alternative for that. Pressure ulcers are very different one from another, might be very deep. There are all kinds of complications that might be associated. For us, it seems to be the more complicated ones to treat. So we are going to start with relatively mild pressure ulcers. Having said that, it is important for us, as Barry said previously, EscharEx works on burns, it works on wounds, it does not care which type of wounds it is applied on. So our motivation is making sure that when we are very close to the finish line, having data in our venous leg ulcer trial, to make sure that everyone understands—the potential partners, the investors—that everyone understands how large this market is and how big is the unmet medical need. So the current trial with pressure ulcers will be a very small trial. We will do in parallel, as Barry said, that just demonstrates that EscharEx can debride. By a third-party consultant and market research, we will understand exactly the portion of the patients that need to debride their wounds, and only then we will know how large is our accessible market. I hope I answered your question. Michael Okunewitch: Thank you. I appreciate that. And then could you just provide an update on the status of the head-to-head study? Are there any additional outstanding items before you can get that up and running? Ofer Gonen: Yes. So, as you know, the main focus of the company, and this will definitely determine our value, is the Phase III study. In parallel, we need to conduct some supportive studies that we are doing. One of them is a PK study, for instance, one of them is a human factors study. We are doing all kinds of small trials to support the BLA submission. Specifically regarding the head-to-head study versus collagenase or other types of nonsurgical standard of care, we are doing that in order to support future market access discussions. We guided, and we are going to do that, that we will start the trial around mid this year, maybe the second part of the year. For us, it is a very important study, since it will enable us to determine what the actual price of EscharEx will be. Michael Okunewitch: Alright. Thank you. And then one last one for me before I hop into the queue. In terms of your enrollment, the complete enrollment targets for the VALUE study and the interim analysis, is that based on the current rate of enrollment, or does there need to be some additional ramp or acceleration at the sites to meet that? Ofer Gonen: To protect the study integrity, we are not sharing enrollment numbers or trends. But we feel very comfortable with the target that we gave, which means interim assessment and completion of the enrollment of the study by the end of the year. Michael Okunewitch: Alright. Thank you very much for taking my questions today. Operator: And our next and final question for today comes from Scott Henry from A.G.P. Please go ahead with your question. Scott Henry: Thank you, and good afternoon. First, just to clarify, as far as the interim analysis, when you talk about year-end, should we expect that to mean Q4? Ofer Gonen: Hi, Scott. I would expect it to be by year-end. Hani Luxenburg: Which means in the end, in the end of Q4. Ofer Gonen: I do not want to overpromise. Scott Henry: Okay. That is helpful. Thank you, Ofer. And then with regards to revenue and timing, as far as the BARDA revenues, I assume there were none in 2025. Should we expect any revenues in 2026? Just a couple of weeks left in the quarter. You might have a sense at this point. Ofer Gonen: So once BARDA agreement is signed with Vericel, I guess all of us will know. Our revenue guidance assumes that the initial revenue from those specific agreements will be only from Q2. Scott Henry: Okay. Great. So when we do model this out, just confirming, we should really expect a pretty significant increase in revenues in 2026 over the first half of 2026, given the manufacturing capacity coming on stream, given the BARDA revenue. So just want to make sure I am thinking about that correctly. Thank you. Hani Luxenburg: Yes. Scott, it was always that the second half is better in revenue than the first half. Of course, given the fact that in our model BARDA's revenue will be only recorded from Q2, and also the capacity will increase at year-end or the second half. You are very much correct. Scott Henry: Okay. Great. Thank you for taking the questions. Ofer Gonen: Thank you so much. Operator: And ladies and gentlemen, with that, we will be ending today's question-and-answer session. I would like to turn the floor back over to management for any closing remarks. Ofer Gonen: Thank you, everyone, for joining us today. We look forward to updating you again on our quarterly call. Operator: And with that, we will conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.
Operator: Welcome to CPI Card Group Inc.'s Fourth Quarter 2025 Earnings Call. My name is Kate, and I will be your operator today. If you are viewing on the webcast, you may advance the slides forward by pressing the arrow buttons. The call will be open for questions after the company's remarks. If you would like to get in the queue for questions, please press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Now I would like to turn the call over to Michael A. Salop. Michael A. Salop: Thanks, operator. Welcome to CPI Card Group Inc.'s fourth quarter 2025 earnings webcast and conference call. Today's date is March 5, 2026, and on the call today from CPI Card Group Inc. are John D. Lowe, President and Chief Executive Officer, and Tara Grantham, Interim Chief Financial Officer. Before we begin, I would like to remind everyone that this call may contain forward-looking statements as they are defined under the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. For a discussion of such risks and uncertainties, please see CPI Card Group Inc.'s most recent filings with the SEC. All forward-looking statements made today reflect our current expectations only; we undertake no obligation to update any statement to reflect the events that occurred after this call. Also, during the course of today's call, the company will be discussing one or more non-GAAP financial measures, including, but not limited to, EBITDA, adjusted EBITDA, adjusted EBITDA margin, net leverage ratio, free cash flow, and net sales growth excluding the impact of the accounting change implemented in the second quarter. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in the press release and slide presentation we issued this morning. Copies of today's press release as well as the presentation that accompanies this conference call are accessible on CPI Card Group Inc.'s investor relations website investors.cpicardgroup.com. In addition, CPI Card Group Inc.'s 2025 Form 10-K will be available on CPI Card Group Inc.'s investor relations website. On today's call, all growth rates refer to comparisons with the prior-year period unless otherwise noted. The agenda for today's call can be found on slide three. We will open the call for questions after our remarks. I will now turn the call over to John D. Lowe. John D. Lowe: Thanks, Mike, and good morning, everyone. We are very pleased to report strong fourth quarter performance and solid results for 2025, a year which featured significant strategic, operational, and technological advancements. As we discussed throughout the year, we anticipated our business to accelerate in the fourth quarter, and we successfully executed to deliver that growth with a record quarter, growing revenue 22%. In addition to the contribution from AeroEye, this performance exceeded our expectations. We delivered strong growth across our debit and credit portfolio in the fourth quarter, driven by sales of contactless cards and ongoing double-digit growth from our software-as-a-service-based instant issuance solution. Revenue growth and the resulting operating leverage contributed to a 34% increase in adjusted EBITDA in the quarter and a 170 basis point increase in margins, and we generated exceptional cash flow. For the full year, we delivered 13% revenue growth and 5% adjusted EBITDA growth despite more than $4,000,000 of tariff expenses. We generated $60,000,000 of cash from operating activities and $41,000,000 of free cash flow, both large increases over 2024, allowing us to maintain net leverage around three times at year end. Overall, I am proud of our team's execution, which resulted in a solid end to 2025 and significant advances with our strategic initiatives. Now before I cover some of our significant accomplishments in 2025, I would like to take you to slide five covering how CPI Card Group Inc. is continuing to evolve with the market and the successes we are having executing on that strategic evolution. After being CEO for two years, and after nearly eight years here at CPI Card Group Inc., I have recognized we are a company that is constantly adapting with our markets, evolving with technology, and finding new solutions for our customers in whatever forms they need. Historically, the company has been and remains a leading producer of debit and credit cards for the U.S. market, and chances are we are in your wallet. However, while debit and credit card production and personalization are solutions we focus on advancing every day, they do not define CPI Card Group Inc. or the key role that we play in the U.S. payments market. We are broader than that, with deep value in what we have built over many years and continue to build. We are a connector, an innovator, a company that educates our customers on the next big thing and how their customers can pay, and more importantly, how they can stay top of wallet both physically and digitally. At our core, our solutions help our customers win, allowing them to enable their customers to pay whether in the form of a physical debit, credit, or prepaid card; a digital mobile wallet; a digital card; a service that provides cloud-based instant issuance; or other evolving digital alternatives. To summarize, CPI Card Group Inc. has evolved into a payment technology company that provides a comprehensive range of physical and digital payment solutions for thousands of U.S. financial institutions, processors, fintechs, prepaid program managers, and more. Our proprietary platform and expertise uniquely position us to deliver today and into the future as the market expands and payment methods evolve. Our strategy is to continue providing payment technology solutions that help our customers win, driven by three primary growth pillars that underpin our value proposition. First, a proprietary technology platform with a vast reach into the U.S. payments ecosystem. Second, our marketable base of thousands of deep and broad relationships across the U.S. payments market. And third, our proven track record of delivering evolving payment solutions that reflect changing market needs. Let me spend a few minutes discussing each of these pillars. Starting with our proprietary technology platform and a vast reach into the U.S. payments ecosystem, our capabilities make it simple for any customer to offer flexible payment solutions to their customers. Over more than fifteen years, CPI Card Group Inc. has built a vast network of technology integrations and connections. In simple terms, we call these connections into the payments ecosystem pipes so an issuer's payment programs can be agnostic to any service provider, maintaining their sticky, long-term relationship with CPI Card Group Inc. while offering their customers, U.S. consumers and businesses, the payment options they want. Our connections are broad and include thousands of financial institutions, fintechs, credit union service organizations, program managers, processors, core banking systems, payment brands, mobile providers, and mobile app development companies, among others. We prove this every day when we see our customers change their processor or banking core, where we simply move the pipes to maintain our relationships. CPI Card Group Inc. enables payments and informs the market on what is next. Today, it is debit, credit, and prepaid accounts accessed via cards, mobile wallets, and apps. While probably many years away, we may see other forms for consumers to pay gain broader market acceptance, such as crypto and biometrics. CPI Card Group Inc.'s platform expands with our customers' growth and their ambitions to meet market needs. Our second pillar is our marketable base. As CPI Card Group Inc. has evolved, our long-standing deep and broad relationships continue to grow. Through a robust network of thousands of customers, partners, and service providers, CPI Card Group Inc. solutions reach deep into the U.S. consumer base. As the market shifts to add new payment methods, the fundamental need to securely deliver payment credentials does not change. That is where CPI Card Group Inc. shines with our reach. As consumer needs evolve beyond the physical and complementary digital issuance and usage grows, issuers count on CPI Card Group Inc. to enable innovative solutions to meet those needs. We have kept their trust by always delivering. That trust, built over decades, is why our customers count on CPI Card Group Inc. for their ongoing payments innovation. They know we will execute. And if you are developing an innovative service that adds value for issuers, CPI Card Group Inc. can connect you to our broad marketable base, further solidifying our value. Our final pillar is our evolving payment solutions. By leveraging our proprietary technology platform and our marketable base, CPI Card Group Inc. has a proven track record of delivering evolving payment solutions that reflect changing market needs. Through significant investments in digital solutions, we are increasing CPI Card Group Inc.'s value to customers, driving new and incremental recurring revenue streams, and expanding access to CPI Card Group Inc.'s platform to enable future digital capabilities. So why are we doing this? According to a prominent study, digital issuance was the number one new capability debit issuers planned to introduce in 2024 and remained the most cited priority for 2025, and we hear the same directly from many of our customers. Additionally, we expect digital issuance to not only be incremental, but to outnumber physical cards as penetration grows. That will be positive for CPI Card Group Inc.; we would expect digital to have greater economics than physical. Let me give you one example to demonstrate what all this means, and that is our software-as-a-service-based instant issuance business. The value of instant issuance is not rooted in delivering a payment card. It is about enabling issuers to instantly provide account access to their customers through a cloud-based service that is plug-and-play for a financial institution. We spent over a decade building the pipes to deliver the service to virtually any financial institution in the U.S. We integrated with and connected to all the major players in the financial ecosystem, resulting in CPI Card Group Inc. being able to offer the service to nearly any issuer regardless of what processor, core banking system, or other relationship they operate through. With instant issuance, we leveraged our proprietary technology platform, provided a service to our marketable base, and evolved our solutions to provide a plug-and-play cloud-based service meeting the needs of the market. In this case, the solutions enable account access leveraging a payment card, but we have been evolving to use these pillars to provide access to mobile wallets and other forms as well, which indicates where we see our solutions going in the future. To summarize our evolving strategy, our decades-long-in-the-making connections, people, and solutions enable payments both physically and digitally for a broad and expanding customer base, and these customers count on us to deliver what is next. CPI Card Group Inc. will continue to evolve with the market, delivering market evolution to our customers while creating more value for our shareholders along the way. Let me take you to slide six for how we will execute and share our progress. To advance our strategy and drive long-term growth, we recently announced a new organizational structure, promoting several leaders to new roles, heightening the focus on our customers, our operations, and our digital capabilities. Along with the structure change, we are also reorganizing our reporting segments. Driven by the success of our software-as-a-service-based instant issuance and other digital solutions, and to better reflect how we manage CPI Card Group Inc. today, this change will provide more visibility on our technology-driven solutions, as well as highlight the growth and diversification of our business. Our new reporting structure includes three segments: Secure Card Solutions, Prepaid Solutions, and Integrated PayTech. Secure Card Solutions represents our business as a leading debit and credit payment card and personalization provider in the U.S. market, and we estimate we produce about one out of every four cards in the U.S. We believe we have gained significant market share over the years, and we will continue to push to gain more share in growing markets through innovation, quality, and customer service. Prepaid Solutions consist of our market-leading open-loop prepaid card and secure packaging solutions as well as our growing prepaid healthcare payment solutions. We intend to grow our value in the prepaid market by creating innovative packaging for our open-loop market, expanding into the larger closed-loop market, and providing fraud-preventing chip-based solutions to the broader prepaid market, which we believe should further expand its value. Integrated PayTech, our newest segment, which was formerly a part of our debit and credit segment, has reached the success level where it now represents more than 20% of CPI Card Group Inc.'s profitability. We need Integrated PayTech to reflect its value, the profit of integration CPI Card Group Inc. has built over the last decade into the U.S. payments ecosystem, enabling it to provide ever-evolving payment technology to our customers. This segment represents an incremental addressable market opportunity additive to physical payment cards. When we help our customers stay top of wallet digitally, we are not only creating greater value for our customers, we are adding incremental growth per customer for CPI Card Group Inc., and we expect those who adopt digital usage to do so in greater number than they do with physical cards, using that same credential across multiple mediums, such as a mobile phone, watch, tablet, or laptop. As we continue to grow our pipes into the U.S. payment ecosystem, our addressable market for these solutions continues to grow. For a bit more context on Integrated PayTech's profile, it has roughly 55% gross margins, approximately 40% EBITDA margins, and a 95% plus customer retention rate, and an expected growth rate of over 15% in the coming years, as we intend to invest to accelerate our digital solutions growth faster than we did with our instant issuance solutions. Now let us turn back to the 2025 results. I would like to highlight some key accomplishments on slide seven. In Secure Card Solutions, we acquired ArrowEye and made significant integration progress, paving the way for future revenue and cost synergies while driving strong results during the process. ArrowEye contributed $43,000,000 of revenue and more than $6,000,000 of adjusted EBITDA in less than eight months in 2025, implying approximately $9,000,000 of adjusted EBITDA on an annualized basis even before most of our expected synergies have been realized. Post-acquisition, ArrowEye has signed more than a dozen new customers, showing the value proposition they have in the market when combined with CPI Card Group Inc.'s packaging. We also completed the build-out and transition to our new state-of-the-art Secure Card production facility in Indiana, which will provide operational efficiencies, increased capacity, and additional capabilities. And we invested in automation in our Colorado facility, which we believe will drive even more efficiencies. We believe these investments have already helped us gain share in 2025, including being a key driver to winning another four years with Valera. Valera is one of our larger, long-standing secure payment card customers and the premier payments credit union service organization in the U.S., servicing 4,000 financial institutions. We made significant improvements to our personalization operations, which allow us to continue to increase capacity and maintain high quality all while driving greater efficiency as we grow. We believe these advancements were a key contributor to winning one of the largest credit unions in Texas in 2025. And we expanded our metal card offerings, providing market-competitive options to our marketable base. This expansion, while still small relative to the overall market position, contributed to our strong contactless card growth during the year with nearly $15,000,000 in metal sales in 2025. In Prepaid Solutions, we developed production and operational capabilities to enter the closed-loop prepaid market, which we believe has volumes greater than five times the open-loop market and will increase in value as fraud prevention features are further adopted. We had a successful start in the fourth quarter and have already signed multiple deals since launch, including with a leading provider TDS Gift Cards, who services many blue-chip customers in the U.S., such as Uber, DoorDash, and others. Our reputation for quality, innovation, and execution in the open-loop market is proven, and we are leveraging these attributes to drive our closed-loop expansion. While our prepaid business was down in 2025, we see strong signs of the transition starting to occur in the prepaid market. Fraud continues to drive either higher-value packaging or greater use of chip-embedded gift cards, both of which would result in a unique market position for CPI Card Group Inc., as we are the only U.S. company that is a leader in both categories. And in our new Integrated PayTech segment, we grew revenue nearly 20% as we continue to increase our instant issuance penetration and further built out integrations and customer pipelines for our evolving proprietary technology platform, including to expand the addressable market for push provisioning for mobile wallets. We expect to continue to see great things out of this segment, including strong growth and high margins, leveraging our market-leading value proposition. One driver of our expected growth is our recently signed deal with a large U.S. processor and global leader in payments and financial technology, where we have gained preferential access to more than 450 financial institutions and 3,500 banking locations, representing an opportunity to grow our software-as-a-service-based instant issuance solution footprint by 25% over the coming years. We also invested in an Australian fintech and program manager, Carta, to introduce into the U.S. chip-embedded prepaid cards which enhance security and provide a user-friendly physical-to-digital experience. Our ownership in Carta after our investment is 20% with the option to purchase an additional 31%. As we have worked with the Carta team, we continue to be impressed by their growth as a program manager in Australia, a large opportunity to grow their digital card validation solution, branded as Safe to Buy, in the U.S. prepaid market, and their potential value as a program manager in the U.S. Our agreement with Carta also makes us their exclusive U.S. supplier of their Safe to Buy solution, providing contactless prepaid cards with chip technology embedding Carta's Safe to Buy applet. Carta's solution eliminates the need for data to be printed on cards, significantly reducing the risk of prepaid fraud. And as a reminder, prepaid gift cards in the U.S. rarely are embedded with chip technology. So between Carta's technology to reduce fraud and CPI Card Group Inc.'s prepaid and chip solutions, we were a perfect fit to drive meaningful and positive change in the prepaid market. We are currently in the second stages of a pilot for this solution with a large national retailer across hundreds of locations in the U.S., and we are seeing encouraging results. Overall, we are proud of what our teams delivered in 2025, and we look forward to continuing to advance these initiatives and their benefits over the next several years. In 2026, we expect to deliver good growth again, and Tara Grantham, our new Interim CFO, will give you more color on our outlook in a few minutes. Tara brings a wealth of CPI Card Group Inc. and industry knowledge and experience to this role, including most recently leading CPI Card Group Inc.'s enterprise growth and strategy area, and previous leadership of our financial planning and analysis and treasury teams, among others. She has been with the company for nearly ten years, and I want to congratulate Tara for being promoted into this new role, and I am happy to have her join us for the call today. Tara will now take us through the fourth quarter results and 2026 outlook in more detail. Tara Grantham: I am pleased to be here and look forward to meeting many of you in the coming months. I will begin the detailed review on slide nine with the fourth quarter results. Fourth quarter revenue increased 22% to a record $153,000,000, which reflects a strong $18,000,000 contribution from ArrowEye as well as double-digit organic growth from our debit and credit portfolio. Debit and Credit segment revenue increased 40% including the impact of ArrowEye. Organic growth for this segment was 20%, driven by strong sales of contactless cards and continued excellent performance from our instant issuance solutions. Our personalization services also delivered a solid sales increase in the quarter. Prepaid revenue declined 27% compared to the exceptionally high prior-year fourth quarter, when sales increased 59% to $33,000,000, but revenue increased 4% compared to the third quarter. As we said at the beginning of the year, we expected prepaid growth to be constrained due to comparisons with the very strong year in 2024, and we ended the year down 3% when adjusting for the impact of the revenue recognition accounting change in the second quarter. And as John said, the prepaid market is transitioning, but we expect that to be a positive for CPI Card Group Inc. We began closed-loop prepaid shipments in 2025, and we expect this business to ramp significantly in 2026. Turning to profitability, fourth quarter gross profit margin declined from 34.1% to 31.5%, although it increased from 29.7% in the third quarter. Compared to prior year, the margin decline was driven by increased production costs including increased depreciation and tariffs, and unfavorable sales mix, partially offset by benefits from operating leverage on sales growth. Mix trends stabilized, though, and were comparable to the third quarter. Production costs in the quarter compared to prior year included $2,000,000 of increased depreciation primarily related to ArrowEye and a new Secure Card production facility and $1,600,000 of tariff expenses. Fourth quarter SG&A expenses increased $3,300,000 from the prior year primarily due to ArrowEye integration costs of $1,800,000 and the inclusion of ArrowEye operating expenses, partially offset by reduced medical benefit expenses compared to a high level in prior year. Our tax rate for the quarter was 27%, which brought our full-year rate to 31%, higher than anticipated coming into the year due primarily to nondeductible expenses related to the ArrowEye acquisition. Net income increased 9% in the quarter to $7,400,000 as the benefit of sales growth was offset by integration costs related to ArrowEye and a higher tax rate. Fourth quarter adjusted EBITDA increased 34% to $29,400,000, and margins increased by 170 basis points from 17.5% to 19.2% driven by sales growth and the resulting operating leverage. Full-year results and variance explanations can be found on slide 10. Highlights for the year include revenue increasing 13%, led by double-digit growth from contactless cards and instant issuance solutions and a $43,000,000 contribution from ArrowEye following the May 6 acquisition. We believe ArrowEye is already benefiting from being part of CPI Card Group Inc., driving strong execution and increasing its ability to sell into the market. Net income decreased 23% to $15,000,000, reflecting $6,000,000 acquisition and integration costs and a higher tax rate, partially offset by lower debt retirement costs compared to prior year. Adjusted EBITDA increased 5% to $96,500,000 as profitability from increased revenue was partially offset by the impact of unfavorable sales mix and $4,400,000 of tariff expenses. Turning to slide 11, we had very strong cash flow generation in the fourth quarter and for the full year. Our cash flow generated from operating activities for the year increased from $43,300,000 last year to $59,500,000 in 2025, with $40,000,000 generated in the fourth quarter. The increase in operating cash flow was driven by lower working capital usage, including better receivables and inventory management, and cash tax benefits from the U.S. Budget Reconciliation Bill. Full-year free cash flow increased from $34,000,000 in prior year to $41,000,000 in 2025, driven by lower working capital usage, partially offset by increased capital spending. We spent $18,000,000 on CapEx in 2025, double the prior-year level, as we invested heavily in our new Indiana production facility and other advanced machinery to support operating efficiency, capacity expansion, and new capabilities such as closed-loop prepaid. On the balance sheet, at quarter end, we had $22,000,000 of cash, $25,000,000 of borrowings on our ABL revolver, and $265,000,000 of senior notes outstanding. Our net leverage ratio at year end was 3.1 times as cash flow generation mostly offset the funding of the ArrowEye acquisition in May. During the course of 2025, significant capital allocation included the acquisition of ArrowEye for $46,000,000, an investment in Australian prepaid fintech Carta, and completion of the new production facility in Indiana, as well as retirement of $20,000,000 principal of our 10% senior notes in July. Before turning to our 2026 outlook, I would like to share the new business segment reporting John mentioned we are implementing this year on slide 12. Beginning with the first quarter reporting, our business segments will include Secure Card Solutions, Prepaid Solutions, and Integrated PayTech. Secure Card Solutions includes our debit and credit card production and personalization businesses, including our ArrowEye on-demand solutions. This business should provide steady growth over time driven by ongoing cards-in-circulation growth and share gains from our leading innovation, quality, and service. As noted in our appendix slide, cards-in-circulation in the U.S. continue to increase, with the latest U.S. cards-in-circulation trends from Visa and Mastercard showing a 7.5% compounded annual growth rate for the three years ended September 30. Prepaid Solutions, which has not changed from our prior prepaid segment, includes our open-loop gift cards and secure packaging, healthcare payment solutions, and closed-loop. We expect open-loop growth to be driven by continued innovation in fraud prevention packaging and the introduction of chip cards into the prepaid market, and overall segment growth to benefit from expansion of healthcare and development of our closed-loop solutions. Our third business unit is Integrated PayTech. As John said, as our success has grown, we are now breaking this out as our fastest-growing, highest-margin unit consisting of strong recurring revenue businesses that rely on our vast and expanding technology connections into the U.S. payment ecosystem to provide various payment solutions to our customers. The majority of our revenue in this segment today is driven by our software-as-a-service-based instant issuance solution, but we expect to ramp digital push provisioning for mobile wallets and other digital solutions in the coming years. On a pro forma basis, this segment would have represented 14% of our 2025 revenue and more than 20% of our EBITDA at an 18% growth rate with EBITDA margins of approximately 40%. Over the next few years, we expect more than 15% annual top-line growth from the Integrated PayTech business segment, while the EBITDA growth will be impacted by investments to accelerate our top-line growth. Turning to our 2026 financial outlook on slide 13, we expect another good growth year while continuing to invest heavily toward our strategic initiatives. We are currently projecting high single-digit revenue growth with growth across our portfolio, led by expected double-digit growth from our Integrated PayTech segment. Our adjusted EBITDA outlook for the year is low- to mid-single-digit growth, which reflects benefits from sales growth and cost savings activities, partially offset primarily by approximately $4,000,000 in incremental spending to drive Integrated PayTech growth and penetration and other technology investments. Our outlook reflects $6,000,000 of tariff expenses, similar to our instant issuance trajectory, which took years of investment before scaling and turning into a high-margin, recurring revenue business. We are still in the investment phase with many of our digital solutions, which is impacting our overall near-term profitability. While some level of PayTech investments will continue into future years, we expect our digital solutions profitability to expand greatly once revenue begins to ramp and scale in the next two to three years. Regarding tariffs, there is still uncertainty on how the newly announced tariffs will be applied and what permanent tariffs may be enacted later in the year. At this point, our outlook reflects estimates based on a full year of the tariffs we paid in 2025. We are working hard and pursuing various avenues to seek refunds for tariffs paid in 2025 based on the recent Supreme Court ruling. We expect a tax rate between 30%–35% in 2026 and strong cash flow conversion, with capital spending likely similar to 2025 levels as reductions in spending on physical capital are replaced by increased technology capital spending. We would also expect free cash flow conversion at similar levels to 2025 and continued improvement in our net leverage ratio, ending the year between 2.5 and 3 times. As we complete integration of ArrowEye in 2026, we are projecting approximately $5,000,000 to $7,000,000 of final integration costs. Similar to 2025, we expect revenue and EBITDA levels to ramp during the year, with the fourth quarter again being the largest, although revenue growth rates will benefit early in the year from the addition of ArrowEye. However, we expect adjusted EBITDA in the first half of the year to be flat to down slightly with prior year due to digital and technology investments and a slow start of the year in prepaid. Overall, we believe the environment is healthy, and our momentum is strong, and we look forward to delivering a good year in 2026 while continuing to invest and advance various key strategic initiatives for long-term growth. I will now turn the call back to John for some closing remarks. John D. Lowe: Thanks, Tara. Turning to slide 14 to summarize before we open the call for Q&A, we had an exceptional fourth quarter with revenue growth acceleration, strong adjusted EBITDA growth and margins, and excellent cash flow generation. For the full year, we achieved solid revenue and adjusted EBITDA growth and generated over $40,000,000 free cash flow. We accomplished many strategic and operational objectives, including the ArrowEye acquisition and investment in Carta, the completion of our new Secure Card production facility, entry into the closed-loop prepaid market, and the ongoing build-out for our other digital solutions. We are excited about our new organizational structure to drive our strategy and the long-term opportunities to enhance incremental growth. We intend to continue leveraging our expanding proprietary technology platform, our extensive marketable base, and our evolving portfolio of payment solutions to meet the market needs, drive growth, and enable our customers to win. We are confident in our strategies and teams, and we expect to deliver another good year in 2026. Operator, we will now open the call up for any questions. Operator: We will now open the call for your questions. If you would like to ask a question, press star then the number 1 on your telephone keypad. Your first question comes from the line of Jacob Stephan with Lake Street Capital Markets. Your line is open. Jacob Stephan: Hey, guys. Good morning. Congrats on the results. Welcome, Tara. Maybe just to touch on something that you kind of talked on, the closed-loop market being five times larger, so pretty significant opportunity for you guys. How are these sales cycles any different from, you know, potentially other prepaid deals? And, you know, do you have to change anything internally to kind of capture this market? John D. Lowe: Yeah, Jacob, good morning. So it is interesting. The closed-loop market, you are right, five times larger in volume, probably slightly higher than that. The value of closed-loop we expect to continue to grow and become even greater as we expect packaging to become more pervasive, if you will, across the United States mainly due to regulatory changes and fraud. From the sales cycle perspective, we actually have a slightly accelerated sales cycle versus our normal, just our broader portfolio in general. And that is because, you know, on the open-loop side, we have been working for most all the program managers that are out there. With the addition of ArrowEye, now we work for all of the major program managers. So we have relationships with, I would say, more than half the market that is already selling into the closed-loop space. So as we build out our capabilities, we have the proven ability to execute and deliver, and so that has given us the right, if you will, to move into the closed-loop market fairly quickly, winning some deals, locking down contracts, and really building out the whole operation in late last year. And, ultimately, we believe we are going to have a decent growth out of that in 2026. Jacob Stephan: Okay. Got it. Helpful. Maybe just to kind of put a cap on that. So can you kind of help us think through the recent announcement with the TDS, and, you know, how the closed-loop opportunity kind of plays into the high single-digit growth guidance for 2026? I know you guys kind of talked about that being an important driver this year. John D. Lowe: Yeah. Yeah. No. And, Jacob, good question. There are a lot of moving parts in our business. We have diversified quite a bit over the years. You know, the prepaid market in general is—it is kind of odd because it is actually a little bit choppy right now, but that is positive for us. And the reason I say that is because if you look at the broader prepaid market, fraud has been prevalent for a number of years. It has been a bit of a cat-and-mouse game. That has caused, on the open-loop side where we are the market leader by far, that has caused significant kind of improvement in fraud-preventive packaging, if you will, that, you know, we are constantly trying to innovate with our customers to stay ahead of the, you know, I would say, the criminal activity from a fraud perspective. But because of that, you are also starting to see on the closed-loop side the same thing happen. Right? You are starting to see states' regulations that say the closed-loop gift card has to be in a package or has to have a chip in it. And you are starting to see, as an example, the open-loop side, just like, you know, our investment in Carta, where we own 20%, have a call option to grow to 51%. We are using their unique technology with one of our larger customers on the prepaid side and ultimately one of the larger national retailers in the United States to go through a second stage of pilot where we are putting chips in prepaid cards to reduce fraud, and those results have been very strong. That said, it creates kind of this environment in the prepaid market where the program managers, the distributors, others, the merchandisers are trying to understand, okay, do we move towards greater packaging? Do we move towards putting chips in prepaid cards more broadly? It is more expensive. But, ultimately, you know, if you think about CPI Card Group Inc. and what we do, right, we are by far the leader in open-loop packaging. We have the scale that no one else in the market has. We are also one of the leaders in the United States from a chip-embedding perspective in the debit and credit market. So we are the only player in the U.S. market that has strong capabilities on both sides. And so while the prepaid market is choppy this year, and actually, you know, we are starting the year slow, and we would expect that to ramp up over the course of the year but still have a fairly flat year to slow-growth year, ultimately, over the long term, it is going to be really positive for us given how we are positioned in the market. So I know a lot to take in there, but hopefully that helps. Jacob Stephan: Yeah. And you kind of touched on my last question. Obviously, fraud has been a pretty important theme over the last, you know, year, year and a half. As we kind of look out to 2026 and maybe even beyond, you know, is there potentially another sort of, like, recurring revenue-type business that you would be interested in, you know, potentially acquiring with, you know, AI kind of boosting fraud rates? And I am wondering if there is any sort of additional software solution that can help on the fraud prevention side that you guys might be interested in? John D. Lowe: Well, we do already resell one major fraud solution that uses AI in their modeling, if you will, in their machine learning, to prevent fraud on the debit and credit side. That is something that—they are a fairly large player in the debit and credit market—connected into a lot of the processors to kind of—it builds off our proprietary technology platform and our ability to provide those types of services to our financial institution base broadly. But fraud is a market that is constantly changing, and so from an acquisition perspective, it would have to be a software that is proven and has an ability to constantly pivot on the fly. So right now, our strategy on fraud is really to help from kind of the production perspective as well as producing technology from what Carta produces to be able to prevent fraud on the prepaid side where we believe there is probably a lot more value, and ultimately, on the debit and credit side, provide solutions from a more commercial perspective. But if you think about on the prepaid side of our business, what Carta does—they are taking data off the prepaid card and ultimately using their solution to not only reduce fraud just by the fact that you cannot steal the data off the card, but their solution also loads the prepaid gift card onto your mobile wallet and is a digital issuance platform as well. So there are kind of multiple value propositions on the Carta side. But from a fraud side, it is constantly changing, so it has to be someone who has really unique technology to look at them from an M&A perspective. Jacob Stephan: Okay. Got it. I appreciate it, guys. Thanks. Operator: Your next question comes from the line of Craig Irwin with ROTH Capital Partners. Craig Irwin: So, John, when I look at my wallet, I am seeing new cards from Chase, Wells Fargo, and Fidelity, provided by CPI Card Group Inc. These are large issuers. Now I am not asking you to comment about any of these specific large issuers, but I am sure there are probably others. Can you maybe just give us a high-level commentary on, you know, these customers that I do not think you did a lot of business with over the last several years? Are you seeing an increased capture rate with large issuers? You know, what was the contribution, if you could give us color, on the 40% growth there in debit and credit from large issuers? John D. Lowe: Yeah. Craig, thanks for the callout. We will be happy to have you on our marketing team anytime you want to join. But, no, in all seriousness, the largest—we are based—I mean, we have said this over time. We work with about half of them. You know, you mentioned a couple different names there. One of those we are actually doing metal with as part of our metal growth. I will not name names, but—so very positive in terms of our relationships we have with the large issuers. We have been growing share over the last, I would say, five years with the larger issuers. But I would not comment specifically on their growth rates in Q4 or 2025. What I would say is just broadly the larger players in general. So go beyond the large issuers that are the names you are thinking of. Think of the credit union service organizations. We mentioned Valera this morning, that we signed another four-year deal with. Think of the large processors out there. There are a number of partners that we have that are fairly large that we also have been growing share with. And so we are excited about our position in the debit and credit market. Our Secure Card Solutions side, between our card production, our personalization business, the acquisition of ArrowEye, really gives us a unique value proposition and allows us to continue to execute on our strategy and win share not only in the large issuer market but in the broader FI, fintech, and other markets. Craig Irwin: Thank you for that. My second question is about headcount. Right? When I looked at your K, I saw you now have about 1,700 employees beginning 2026. It is up about 13% or a little over 13% consistent with your revenue growth last year. Now that does not kind of point to leveraging the model. And I know there are a bunch of initiatives you were staffing up, particularly on the technology side and some of these things with, you know, incredible long-term potential. Can you maybe flesh out for us, you know, where you would likely be hiring in 2026? And, you know, would you expect mid- to high single-digit growth consistent with revenue, or do we potentially see a more tempered rate of hiring? John D. Lowe: So a lot of our hiring last year, when you just look at a headcount perspective, was through the acquisition of ArrowEye. Right? I mean, they have—I do not know the exact number, I think it is 250 people roughly in Las Vegas. So fairly decent-sized business there. So you have to kind of take that into account, Craig. But if you went out and looked at who we are hiring and who we have hired over time, it has been predominantly in the go-to-market side to try to, you know, push our solutions further into the market, expand our go-to-market efforts, as well as on the technology side within our Integrated PayTech segment. So those are probably the two areas where we will continue to invest in, and we continue to invest broadly in the business as we grow. But I think if you stripped out ArrowEye, you would realize we are definitely growing in the number of people that we have, but I would not say we are not getting leverage out of the model, and you saw that in Q4 from our growth in Q4 and what we pushed to the bottom line. Craig Irwin: No, that—an excellent quarter, the fourth quarter. Congratulations. Thanks for taking my questions. I will hop back in the queue. Operator: Your next question comes from the line of Hal Goetsch with B. Riley Securities. Hal Goetsch: Hey. Questions on CapEx. CapEx was up, you know, from $8,000,000 to in the high teens. You said it is going to be similar to that in 2026. Is this a number we should expect going forward, or is this a number that might come back down after, you know, a two- or two-year investment period. John D. Lowe: Yeah. That is a good question, Hal. I would say it probably will come down in the outer years. It has grown, you know, quite a bit in 2025 as we built out closed loop. We built out Indiana. But I would say it is more on the physical side in 2025 than more on the digital side in 2026 and what we might expect in coming years. But, Tara, do you want to add to that? Tara Grantham: Yeah, just to add to that, we did spend about $5,000,000 in CapEx in 2025 on our new factory in Indiana. So that is going away. But we are replacing that with higher investments in our technology spend. So that is on the CapEx side to the growth of our Integrated PayTech business and also to help upgrade some of our other technology as well. I will say that even with that CapEx spend, we are expecting similar cash flow conversion in 2026 as we had in 2025. So we are happy to be investing in the business and continuing to convert on the cash flow side as well. Hal Goetsch: Yep. Goal is to drive leverage down even while investing. So could you share with me on the tax side? It seems like your tax rate is higher than most of the companies I follow that are, you know, mostly domestic. And I think you said over 30%. Is that correct? And what was the cash flow impact, free cash flow impact, this year from the big, beautiful bill or tax change that might have lifted free cash flow this year, and what might be the impact next year from tax law changes to your free cash flow? Tara Grantham: Hal, we did get a slight benefit; I do not think it is a huge number. I think it is in the few-million range. Just on the tax rate in general, I think the big impact this year was due to the ArrowEye acquisition and integration costs that are not necessarily tax deductible. But I do not know if you have any other comments. Yeah, so we are expecting a benefit between 2025 and 2026 from the U.S. budget bill of $3,000,000 to $5,000,000 across 2025–2026. Just a reminder, though, that that is a cash impact, and it does not impact our ETR. Hal Goetsch: Yeah. And follow-up, last question for me. On kind of, like, modeling. Are you going to provide pro formas for the new three segments going back maybe at least quarters for 2025? That we can project trends and margins off of? Thank you. John D. Lowe: Hal, I think we did. I think there is a filing this morning, if I am not mistaken. It has 2025 quarters as well as the full year. Hal Goetsch: Okay. Terrific. Thanks. Operator: As there are no further questions in the queue, I would now like to turn the call back over to John Lowe for closing remarks. John D. Lowe: Thanks, operator. Well, first, I would like to thank all of our CPI Card Group Inc. employees for what they accomplished in 2025 and their ongoing commitment to serving the company, our customers, and executing on our strategy to win in the market. I hope everyone enjoyed learning more about CPI Card Group Inc.'s evolution this morning. We are proud of our 2025 and year-end performance, and we look forward to sharing more on our progress in future calls. Thank you all for joining, and we hope you have a great day. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good morning. My name is Becky, and I will be the conference operator today. At this time, I would like to welcome everyone to the Bowman Consulting Group Ltd. Fourth Quarter and Fiscal Year 2025 Conference Call. All lines will be placed on mute for the presentation portion of the call, with the opportunity for questions and answers at the end. Please note that many of the comments made today are considered forward-looking statements under federal securities laws as described in the company's filings with the SEC. These statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and the company is not obligated to publicly update or revise these forward-looking statements. In addition, on today's call, the company will discuss certain non-GAAP financial information such as adjusted EBITDA, adjusted net income, and net service billing. You can find this information together with the reconciliations to the most directly comparable GAAP information in the company's earnings press release, filed with the SEC and on the company's Investor Relations website at investors.bowman.com. Management will deliver prepared remarks, after which they will take questions from research analysts. A replay of this call will be available on the company's Investor Relations website. Mr. Bowman, you may now begin your prepared remarks. Gary P. Bowman: Okay. Thanks, Becky. Good morning, everyone, and thanks for joining our year-end earnings call. Bruce Labovich, our CFO, is with me this morning, along with Dan Swayze, our Chief Operating Officer. First, I would like to welcome all new Bowman Consulting Group Ltd. employees who joined us this quarter, including those from RPT Alliance who joined in December. After my introductory remarks, I will turn the call over to Bruce, who will cover our financial performance and technology initiatives, and then Dan will discuss operational successes, including where we are winning and why. I will end the call with some closing statements before opening it to Q&A. Going forward, we plan to periodically introduce members of our leadership team to provide deeper insight into specific aspects of our business. Let us start with fourth quarter and full-year results. You know, it is hard to believe that 2025 was our fourth full year as a public company and the final year of our emerging growth company status. I am pleased to report that we delivered another record year as we advanced our efforts to become an ENR Top 50 firm. We achieved our goals of generating double digit in gross revenue, double digit growth in gross revenue, organic net revenue, and adjusted EBITDA. In addition, we increased our capture rate for public contracts with growth of approximately 28%. We entered 2026 with a record backlog of over $479,000,000, a 20% improvement over the prior year. We strengthened our position in our existing markets through acquisitions, acqui-hires, and organic workforce expansion. Our increasing breadth of services, growing scale, and redoubled commitment to relationship building produced new order growth for the year that was particularly strong in power utilities, transportation, and natural resources, all of which are markets where we are seeing increased, durable, long-term demand. Our book-to-burn ratio continues to be over 1x, a level which I am proud to say we have achieved consistently since our public debut in 2021. The 2026 is so far no exception, sales this quarter outpacing the fourth quarter. With the successful acquisition and integration of several consequential acquisitions during the year, and these results as a springboard, I am confident we are positioned for another breakout year in 2026. With that, I will turn the call over to Bruce to review our financial performance in greater detail. Bruce? Great. Thanks, Gary. Bruce J. Labovitz: I am going to start with a little off-script nod to Gary in light of recent announcements. When I came to Bowman Consulting Group Ltd. in 2013, we were a $50,000,000 company with around 450 employees. Gary's vision of achievement at the time was a diversified $100,000,000 revenue company where people could thrive and grow. For the past thirteen years, he has been deliberate in his leadership with a conviction about growth and a steadfast commitment to our culture. So, with $490,000,000 in revenue to end the company's thirtieth anniversary year, and 2,500 committed professionals living our values every day, I think it is fair to say Gary is qualified for membership in the Overachievers Club. On behalf of everyone at Bowman Consulting Group Ltd., I want to publicly thank you for all you have done. Okay. Turning to the fourth quarter and full year 2025, I am pleased to be here today discussing another breakout year for Bowman Consulting Group Ltd. With quarterly gross revenue of $129,000,000, we have now had two consecutive quarters at a revenue run rate of greater than $500,000,000. Net service billing, which we use interchangeably with net revenue, was $14,600,000 in the quarter, up 16.2% compared to last year. At an 89% net-to-gross ratio, up 200 basis points over last year, gross was disproportionately achieved through net revenue. For the full year, gross and net revenue were up 14.914.5% to $490,000,000 and $434,800,000 while maintaining a net-to-gross ratio of 89%. We again generated double digit growth of organic net revenue at 12.4%. Gross margin for the quarter was 55%, up 190 basis points from last year, and 53.4% for the full year, up 120 basis points over last year. SG&A for the full year was down 250 basis points compared to the prior year. Combined overhead for the year, in other words, the combination of all labor, both direct and indirect with SG&A, was down 400 basis points compared to the prior year. We believe this reflects an evolving mix of business in the scaling strategy we have been working towards for several years. Pretax net income for the year was $11,200,000 as compared to a loss of $8,900,000 in the prior year. Net income was $12,800,000 for the full year as compared to $3,000,000 for the prior year. With issues related to research and experimentation capitalization resolved, tax benefits had a lesser impact on our fourth quarter and the full-year results. Moving forward, tax is projected to have a more normalized impact on our statements, including simplifying the calculation of changes in working capital on our operating cash flows, no longer splitting the effect above and within the working capital. With Section 174 capitalization no longer an issue, it is key to note that we do still benefit from other permanent research and development credits that reduce our effective tax rate and never expire. We believe the turnaround in pretax GAAP profitability this year is the result of the improved labor utilization, scale, and full integration strategy we have been executing to achieve efficiency in operations. We are pleased to see meaningful increase in EPS, both GAAP-based and adjusted. On a GAAP basis, our basic and diluted EPS of $0.74 and $0.73 were up 300% year-over-year. On an adjusted basis, our basic and diluted EPS of $1.72 and $1.68 were up nearly 40% from the prior year. Holding our share count through buybacks also helped. With absolute growth in all market verticals this year, we continue to advance our objective of increased revenue diversification. Revenue distribution continued to shift positively in 2025, with transportation at 21.2%, power and utility at 22.4%, natural resources at 11.5%, and building infrastructure down to 44.9%. We expect this trend and trajectory to continue in 2026. Our geospatial operations continue to be increasingly consequential and represented approximately 26% of 2025's gross revenue as a service that was spread across all markets. In the aggregate, around 30% of total gross revenue was derived from government or public funded work assignments, an area where we expect to continue to grow over the short and long term. Organic net revenue growth was 11% in the fourth quarter and 12.4% for the full year, excluding UP E3I, SOLAs, and RPT. Broken down by vertical for the quarter and for the full year, Natural Resources led the way with 2927% growth, and utilities delivered 1113% growth. Transportation grew 622%. And building infrastructure was up 96%. Organic growth rate in transportation in the fourth quarter was a function of delayed contracting and notices to proceed in 2024. While we caught up in 2024, the delay created a skewed growth curve for the year. All is well within our transportation business, and we continue to win consequential new awards. I think it is also worth pointing out the steady increase in organic net revenue growth in building infrastructure throughout the year. I am optimistic that this represents a developing trend for that market. Backlog increased 20% to $479,000,000 on 12/31/2025, up from $399,000,000 at the 2024. While every vertical is up, the biggest gainer was power and utilities, where we were particularly active with business development and acquisitions. Excluding purchase backlog in place at year end, the increase was 18.5% at $473,000,000. Sales of new work after closing an acquisition would not be considered acquired backlog. In the case of RPT, while we have very strong visibility into projects and schedules, work is released in more frequent phases that keep their forecasts high but their backlog low relative to the overall companies. Cash from operating activities for the full year increased by nearly 50% to $35,800,000 from $24,300,000 in the prior year. Net working capital increases adjusted for the UTP changes represented the equivalent of a roughly four-month investment in gross revenue. Reducing that investment by 25% through process automation and operational efficiencies could add seven to eight percentage points to cash flow conversion. This is high on our to-do list in 2026. Net debt at the end of the year was $179,000,000, including the all-cash acquisition of RPT on December 5. Leverage was 2.45x trailing twelve months, and 2.06x the midpoint of our 2026 guidance. We expect increased cash flow from operations during the year to continue to reduce this debt throughout 2026. On March 3, we executed a third amendment to our credit facility with BofA, TD Bank, and PNC to increase the maximum borrowing to $250,000,000. We increased the facility to ensure we have sufficient access to affordable capital to continue funding investments in organic growth, innovation and efficiency, accretive acquisitions, and stock repurchases. As of today, we have available liquidity of approximately $150,000,000. During 2025, we periodically repurchased $18,800,000 worth of our common stock at an average price of $27.51 per share. We continue to view stock repurchases as a means of addressing liquidity and valuation dislocations, as opposed to a commitment to the return of capital. Assuming market stability and a rational valuation of our equity, our top priorities remain investment in organic and inorganic growth. We remain steadfast in our commitment to investment and innovation. The BIG Fund, our internal technology incubator, is funding ideas presented by our employees to make impactful investments that advance our capabilities, improve the efficiency of our workforce, and decouple revenue growth from headcount growth, increase the value of our services, and extend customer engagement. It is admittedly a tricky time in our industry with respect to innovation in AI. We need to be sure we are prioritizing investment in processes and services relating to deliverables sold at stable values, as opposed to efficiencies that merely cannibalize the work of work sold by the unit. We are making significant investments this year in our fleet of geospatial imaging assets, including high-resolution, high-altitude scanners, along with improved capture vehicles, including planes, UAVs, drones, boats, all of which increase collection rates and data processing efficiencies by as much as 30% to 40%. We continue to integrate the technologies we have developed in-house with tools we purchased in the recent Orcus acquisition, and we are launching PAC, our Port Asset Conditions Kit, which provides GIS-enabled, digital twin-based life-cycle asset management to port and marine operators. As opposed to the traditional software-as-a-service subscription model, we have put forward a services-powered-by-software model that engages our integrated digital platforms with customers through a professional services arrangement that combines process automation and professional intervention. As we develop our suite of AI- and GIS-enabled tool sets, we believe we are well positioned to monetize the library of assets in our growing digital services and advisory practice into a unique value proposition for our customers and shareholders. In connection with yesterday's release, we increased our full-year 2026 guidance to a range of $495,000,000 to $510,000,000 and an adjusted EBITDA margin of 17% to 17.5%. At an 88% net-to-gross ratio, this would represent $563,000,000 to $580,000,000 of gross revenue. Increased net revenue guide includes the recent RPT acquisition without contemplating any future acquisitions. At the midpoint of our net revenue guidance, this represents approximately 16% absolute growth over last year. Pro forma, to exclude RPT's 2025 revenue from the basis and from next year, from this year, we are projecting just over 12% organic net revenue growth. We expect revenue during the year to again be nonlinear, with the first and fourth quarters representing around 47% of net revenue and the second and third to be around 53% of net revenue. This should not be construed as quarterly revenue guidance, but rather as a guideline for relative weighting of the quarters throughout the year. I am now going to turn the call over to Dan Swayze, our Chief Operating Officer, who is joining us today to provide insight into the question of where we are winning and why. Dan has been with Bowman Consulting Group Ltd. for over three and a half years, and spent two decades in senior leadership roles in civil and engine and energy-related engineering. At Bowman Consulting Group Ltd., Dan's focus as the Chief Operating Officer is on the management and execution of our portfolio of services across markets. Dan, welcome. Gary P. Bowman: That is nice, Bruce. Thank you. Dan Swayze: Thank you, Bruce, and good morning, everyone. I know a lot of our team is listening to the call today, and I sincerely thank them for all they do and their commitment to Bowman Consulting Group Ltd. I am very proud of our team. Today, I am going to focus on where we are winning in the market and why those wins are becoming increasingly repeatable. In other words, our right to win. Over the past several years, we have been deliberate about building differentiated capabilities in markets where technical depth, geographical reach, capacity, execution consistency, and integrated end-to-end ability creates a competitive advantage. Our acquisition strategy across the country created integrated service delivery teams in our various markets. In our data center and mission critical practice, we are increasing our win rate by meeting our clients where they are. Data center programs are rarely single-service projects. They are multiphase, multiservice opportunities. For example, combining the electrical and mechanical engineering forces from our E3 acquisition, the fire and life safety design services from our Fisher acquisition, with our established capabilities in civil planning and engineering, we have a strong service offering our clients can rely on. Our ability to deliver consistent technical standards across jurisdictions while maintaining strong relationships positions us as a long-term partner rather than a one-time design provider. As major operators continue to deploy capacity into new regions, we are following them into those markets, pairing local engineering knowledge with the strength of our national platform. As a result, we are expanding wallet share and deepening our engagements in a durable growth market. This approach increases client stickiness. The power utility sector remains a robust market for our organization, spanning electric, oil and gas, as well as renewables. Bowman Consulting Group Ltd. is actively involved in supporting the development and expansion of new power supplies for utilities, addressing the evolving and urgent need for bridging power for data centers, and the rapid deployment of compressor stations for the midstream movement of natural gas. The services we provide for our natural gas clients are provided through a combination of several acquisitions, including MPX, Survein, RPT Alliance, Excellence Engineering, and Burke Engineering. Our approach leverages a comprehensive suite of services, seamlessly integrating a unique collection of geospatial expertise and equipment with proven engineering solutions to address the evolving needs of our clients. This multiservice, end-to-end strategy ensures we can consistently deliver innovative, reliable, one-stop-shop outcomes across a diverse landscape of our clients' needs. Being an early establishes incumbency, and incumbency is an important element to our right to win. Our geospatial engagements often create pull-through opportunities for related engineering and advisory services. Recent investments in new aircraft and advanced LiDAR sensors directly strengthen our competitive position. These advanced capabilities allow us to support complex infrastructure initiatives, including utility expansion both in electricity and natural gas, damage assessments, land acquisition, land development, and other large-scale public works projects. As an example, we were recently renewed for a five-year agreement with the U.S. Army Corps of Engineers to provide photogrammetric mapping and related survey services. Being awarded this renewed agreement reflects both past performance and technical differentiation. We are also continuing to build strength in transportation across the U.S., where our extensive history of time of delivery and our expansive portfolio of creative bridge and highway design create a meaningful competitive opportunity. Our comprehensive transportation services offerings are an amalgamation of our acquisitions of McMahon, Speece Lewis, and Exeltek, and our legacy teams in the Chicago area, providing end-to-end solutions. Transportation agencies prioritize demonstrated experience and capacity to deliver on comparable assets. The depth of our expertise and project experience in these regions drives repeated wins. Across these markets and others we participate in, the pattern is consistent. We win where specialized technical expertise matters. Past performance and incumbency create barriers to entries to our competitors. Our national presence enhances client value, and our integrated geospatial and engineering delivery improves client outcomes. Our operational investments, including workflow modernization, data integration, and selective automation using AI and machine learning, support these markets by improving throughput and timely delivery of superior outcomes. These investments are in service of a larger objective to strengthen our competitive standing in the market where we see durable demand and long-term growth potential. We are not pursuing growth indiscriminately. We are concentrating on efficient use of capital, leveraging our talent, and embracing technology in markets where we have established credibility and where our integrated platform creates measurable differentiation and competitive advantage. The result, we continue to successfully deepen client relationships, enhance our right to win multiservice assignments, and strengthen our foundation for sustained revenue growth. Our competitive position in the industry has never been stronger, and our right to win continues to broaden throughout our markets. With that, I will turn it over to Gary. Gary P. Bowman: Great. Thanks, Dan. As Bruce mentioned, our focus on execution, organic growth, and strategic acquisition was evident in our results. We exited 2025 with strong momentum, some of the best margins in the E&C group, and a backlog which foreshadows another year of double-digit revenue growth. We enter 2026 with a renewed focus on disciplined growth and continued operational improvement along our service platform. While change in the occupant of the CEO chair is ahead of us, the core of this company, its senior leadership and professional workforce, is as intact, cohesive, and aligned in its mission. With the exceptional talent we have at every level of this organization, I am really excited for the future of the company I founded some thirty years ago. With that, I will now turn the call back to Becky for questions. Operator: Thank you. Please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Aaron Spychalla from Craig-Hallum. Your line is now open. Please go ahead. Aaron Michael Spychalla: Yes, good morning. Thanks for taking the questions. First, maybe on the RPT acquisition. Good morning. Thanks. On RPT, you know, can you just maybe talk a little bit about, you know, what that brings to your offering, you know, and early on on just how integration is going there and kind of potential synergies within the platform? And then maybe second on EBITDA margins. You know, good performance in the quarter, 17.3%. Just thinking about the guidance for 2026, were there anything, you know, noteworthy from a driver perspective in the fourth quarter? And what are some of the factors you are incorporating for 2026, and how are you thinking about potential for upside there? Gary P. Bowman: Morning, Aaron. Yes. I will start off with the second part of the question. Actually, integration there is well ahead of any other acquisition that we have done. It is pretty much, you know, integrated from an operating and financial perspective. It is on its way from a platform perspective. And so we jumped right on that one because the, you know, the opportunity is right ahead of us to grow that business in connection with the rest of the components of Bowman Consulting Group Ltd. And so it is integrated. It really extends our product offering in LNG. I will let Dan talk for a second about the extension of the LNG and data center product offering. Dan Swayze: Yes. If you go back to what we talked about a minute ago and you think about our right to win, RPT's skill set and client reach puts us right into the whole midstream movement of natural gas. Feeding liquefied natural gas centers also gives us that opportunity to provide more consulting engineering services for those building pipelines. I will also say we have already been successful in several cross-selling efforts where, you know, the combination of services has gotten us into projects that we otherwise probably would not have been necessarily a lead contender for. Bruce J. Labovitz: Yes. Again, I think, Aaron, we have demonstrated that, you know, that margin is not necessarily always consistent, you know, throughout the quarters, but then we look at the year as being able to deliver from what was the sixteen, you know, high sixteens this year to what we think will be mid sixteens, you know, next year. So it is continuous improvement in margin. It always has to do with the timing of the acquisition of labor relative to the starts of projects. That is our biggest driver of margin in any particular period, is the, you know, how well we time the collection of labor with the realization of revenue. So I think that we continue to, as we scale, grow margin over overhead, and as we implement, you know, better and better workflow process automated processes, we optimize labor. So I think we can increase by another, you know, we are projecting another, you know, 50 to 50 plus basis points of margin expansion this year, 50–80 points, and I think those are the key drivers. Aaron Michael Spychalla: Alright. Thanks for taking the questions, Gary. You know, congrats on the retirement, and best of luck to everyone moving forward. Gary P. Bowman: Thank you, Aaron. Thanks. Operator: Thank you. Our next question comes from Mincho from Texas Capital Bank. Your line is now open. Please go ahead. Mincho: Good morning. Great. Thank you very much, and congrats on a really strong year. You mentioned that the building segment saw some organic growth this quarter and that there were some developing trends. Can you talk a little bit about the opportunities that you are seeing there? Also, on Slide eight, you provided some gross margin by vertical, and I was just wondering if you can talk about how that has trended over the last few years. I am assuming that it is kind of expanded just with the scale that you have. But can you talk a little bit about expectations for 2026, just directionally? And then just finally, your natural resources segment obviously had strong organic growth this quarter and just in the year. And I do not think Dan spoke too much about that segment, but can you just provide a little more detail about where that demand is coming from? Seeing any green shoots there? Gary P. Bowman: So is that put at work optimistic that this is a developing trend. I am not sure we are ready to call it yet. I think one thing that we are expecting to see at some point is a focus on affordability of housing. And we are already seeing it at the state level. You are seeing the requirements for permitting being loosened and stimulus for more affordable housing. That is where we really thrive, is in creating supply for builders and for the home building and multifamily market. So we saw some good positive movement there. It is geographical in nature. Some pockets of the country, you know, are better at times than others. But we are optimistic that that is an early indicator of, you know, some opportunity for bigger growth in that market again. Bruce J. Labovitz: Across the—you mean, you broke up a little bit there, so I think the question was about the gross margins by vertical and expectations on those for the year, I am going to assume that was the question. Yes. And so it is consistent with where we were in the third quarter when we started reporting on gross margin by vertical, with transportation being more of a cost-plus kind of market, but with longer-term commitments and longer engagements that reduce turnover costs there and create stability in workforce. And we think that the other three markets continue to have favorable gross margins, and I do not see anything that is going to erode those throughout the course of this year. If anything, processes, you know, process automations can help to improve those slightly. Gary P. Bowman: Yes. So in some respect, that is a little bit of the catchall for what does not fit into categories, but it includes environmental, it includes mining, it includes water resources, it includes agricultural imaging and orthoimaging, and it includes land services associated with assisting landowners in acquisition of easements and other rights of way when it is not land acquisition for a power utility or for a road, bridge, or highway. So it is a large category for us in terms of the number of things that fit in there. A lot of exciting projects that, you know, are developing in that area, particularly with water resources, particularly with high-altitude aerial imaging, and in the land services business. Operator: Thank you. Our next question comes from Andrew John Wittmann from Baird. Your line is now open. Please go ahead. Andrew John Wittmann: Hey, great. Good morning, and thanks for taking my questions. I have a few here. So where do I want to start? I guess I do not know. Maybe I am reading into it too closely, but in your press release, it talked about 2026 being—I forgot the exact terminology—more of an organic year. That sounds like a little bit of change. You said in your script here that your priorities are still organic growth and inorganic growth. And so just feels like maybe there is a change there. Is there more kind of organic focus in '26 than in the past? And if that is correct, why the change? And then, Bruce, in your comments, you talked about some things that are going to be kind of a priority on collecting working capital this year. Could you just elaborate on that a little bit more? It does feel like there is some working capital opportunity, maybe at lots of places, including your receivables. What is a realistic goal here for DSOs and progress through '26? And then a couple of model-focused ones: you talked about a more normalized tax rate—what is the effective tax rate that you think is applicable here in '26? And on seasonality, last year the second quarter adjusted EBITDA margin was higher than the third quarter, which is atypical. Should we expect the higher margin in the third quarter than the second quarter in '26, or is there a reason that last year’s pattern would repeat? Gary P. Bowman: Andy, this is Gary. There is really—there is not a fundamental change. We are still committed to inorganic growth. We are a little narrower in our focus with strategic and moving toward bigger opportunities. So you are seeing maybe a less frequent—certainly less frequent—announcements. But we are just as committed as ever to a strong growth of a strong combination of inorganic, inorganic growth. Bruce J. Labovitz: I think there is an evolving nature of the market that there is opportunity to invest in the expansion of our services, right, through investment in technologies and innovation, and that is all organic. So, you know, we continue to be investing in expansion of our capabilities, expansion of the capability of our workforce to generate revenue. But as Gary said, I think we will do less frequent small—yeah, but still be focused on acquisition. And in the meantime, be focused on internal investment in organic growth. But thanks for bringing it up, because I think it is an important—absolutely—point of distinction there. We want to clarify that. Bruce J. Labovitz: Yes. One thing I will point out that, you know, we are already so far past in the year, it is hard to remember that at the end of the year, there was a government shutdown, and that did slow collection on a portion of our receivables. Not because they were not collectible, but just because, you know, getting them processed was slower in a portion of our business. So it gives a little bit of extension of receivables from that artificial impact. Getting work through working capital is an important focus for us. Certainly, getting work to be billable—not necessarily that we are not earning it—but getting it to the point of billing and collecting it, you know, is something that, you know, we are working towards narrowing down. And so I think reducing, let us say, work in process, which is a component of working capital, will be a focus this year. And, you know, we are always working on collections, Andy. It is one of the great challenges that, you know, never seems to completely get solved. But between that, between—you know, we implemented a new—not a new—we upgraded our ERP system throughout in 2025. We think that will help facilitate the process of processing work to—follow on Bruce's point, always work on the collections. The thirty, thirty-one some years, we—it is in our DNA. We have to keep the cash flowing. Bruce J. Labovitz: Yes. I would say that it is, you know, on our statutory, less our R&D credits, it is somewhere in that high teen 20 kind of range. Bruce J. Labovitz: No. I do not think it is necessarily a repeatable pattern from last year. I think we had a—we talked about it in the second quarter of last year—there were a few exceptional items that, you know, sort of hit on all cylinders. I am indicative of—I think that, you know—yeah. I would not necessarily say that that is a pattern permanently. Gary P. Bowman: Thanks, Andy. Operator: Thank you. Our next question comes from Tomo Tomasano from JPMorgan. Your line is now open. Please go ahead. Tomasano: Good morning. Thank you. And, Gary, although we have only recently met, I would like to express our respect and appreciation for your leadership and culture as you prepare for your retirement. I would like to kick off: you raised your 2026 net revenue guidance to $495 to $510,000,000. Which segments or projects are driving this upward revision and/or your current $479,000,000 backlog? What proportion do you expect to convert to revenue in 2026? And as a follow-up on the upcoming CEO transition, could you talk about how you are ensuring management stability and continuity? Are there any qualitative KPIs or targets related to succession and strategic continuity? Gary P. Bowman: Thank you, Tomo. Bruce J. Labovitz: Generally speaking, Tomo, we turn somewhere between 70–80% of backlog in a year. In a twelve-month period. So I think it is a little longer. Sometimes it gets a little shorter. But generally speaking, we think of 70% to 80% of backlog in any moment as having a twelve-month tail to it. In terms of where we think we are going to continue to see growth, obviously, power is an area that we expect to, you know, to contribute to the growth year-over-year. A big chunk of that guidance increase was from the acquisition of RPT that happened after last quarter's conference call. So that is all power-related in that bit of the increase. The rest of it is between natural resources and transportation. Transportation. Gary P. Bowman: We are—we—effective communication. We are doing retention, economic retention packages for some key people. And, really, the communication, the assurance of the continuation of our culture. So, you know, a qualitative view of success in the succession is certainly retention of our key staff, retention of our leadership, and continued forward execution of our strategic plan. Bruce J. Labovitz: Yes. We have got 2,500 people who depend on the continued success of this company every day, and we take that responsibility very seriously. And, you know, the Board takes that responsibility very seriously. And so we are all wholly committed to the long-term successes. We are all invested in the long-term success of this company and in seeing this through without any disruption in service to our customers, in service to our employees, and, you know, in value generation to our shareholders. You know, I will also follow-up there, Tomo, as a member of the Board, I am not on the search and selection committee, but certainly I have input. But I would not have made this move if I did not have great confidence in the Board getting this right both for the legacy—my legacy, candidly, personal legacy, and my personal economics. I am still the largest single shareholder in the company, and I intend to continue to own a tremendous amount of the stock in the long run. So I have a real vested interest in the success. Tomasano: Thank you very much. That is all from me. Operator: Thank you. Our next question comes from Liam Burke from B. Riley Securities. Your line is now open. Please go ahead. Liam Burke: Good morning, Gary, Bruce, Dan. Gary, congratulations on your retirement. When you reach critical mass here on the front end of the infrastructure project, has there been any competitive pushback from some of the larger specialty contractors that are looking to move into your space, since it is probably the most profitable piece of the project? And across the board, you had good growth across all your business segments. Do you see any pockets of weakness, or is your diversification allowing you to move right past it? Bruce J. Labovitz: Are you talking about in the power space or—sorry, infrastructure writ large, Liam? Liam Burke: Power space? Let us go infrastructure at large. Bruce J. Labovitz: Yes. There is a real line of distinction in the industry between, I would say, the construction companies—I think that is what you are asking about—and the engineering firms. And while there is a collegial relationship between, we have not felt threatened. Dan, you can tell if you have, you know, felt it from the ground up, from, let us say, specialty construction contractors trying to make their way into the engineering world. Dan Swayze: No. In some cases, we are working for those contractors. So it is not really a threat that we see. Bruce J. Labovitz: Yes. If anything, I would say it is drawn the other way, in that there is such a resource constraint in this space that, you know, it is an all-hands-on-deck kind of mindset. And there are functions of the construction process that the specialty contractors need help with. The equipment providers, the GCs, you know, need help. There is no effort to share risk on that part of the process, but there is an effort to bring in help. Liam Burke: Mhmm. Right? Bruce J. Labovitz: Yes. Right now, I would say that there are no pockets of weakness. There is no negative, you know, connotation to any of the markets or segments. Obviously, we are keeping an eye on the growth rate of the building infrastructure space. Still our biggest and continuing to grow, and we have hopes for it to accelerate. So I would not characterize it as weakness. It is getting attention from us to make sure that, you know, we keep our staffing right and our—and all of our overhead right for that group. But on the others, as I use the same phrase, it is an all-hands-on-deck effort to try to keep up with power and transportation and natural resources. The good news, Liam, as we have talked about, is that in our workforce, it is very fungible across the four markets. So we do not have silos of workforce that are only able to do one thing. You know, the base of our labor pyramid really is very cross-disciplined and cross-market capable. And so, you know, we focus on that kind of business model deliberately. Gary P. Bowman: Thank you, Liam. Operator: Thank you. Our next question comes from Jeffrey Michael Martin from ROTH Capital Partners. Your line is now open. Please go ahead. Jeffrey Michael Martin: Good morning, Gary, Bruce and Dan. Bruce and Gary, I wonder if you could touch on RPT. I know that they were constrained for growth, and you have owned it roughly three months now. Just curious how much you have been able to staff up for RPT during the initial three months, and maybe give us a glimpse at what your hiring plans are for that business in particular, as well as touch on just general availability of labor and ability to staff up in front of larger contracts in general. And then I wanted to touch on geospatial. You mentioned that is roughly—I think 26%, 24% of your net revenue. Sounds like you are making further investments in geospatial. Can you elaborate on general demand trends you are seeing there, and also touch on the competitive dynamic? And could you tie that into your CapEx and equipment acquired and capital lease projections for this year? Gary P. Bowman: Yes. It is Gary. I will jump in. As we were doing our due diligence on RPT, and certainly part of the attraction is all the opportunities in the space that they are in and their being down as a single office operation in Houston. But being in Houston, there are pockets of the oil and gas industry that are—especially the oil industry—maybe up until this past week, that have been soft, and there has been a good availability of labor down there. So we have found the ability for the RPT group to staff up as flexible as any of our pieces of business. It has been also, you know, with them becoming part of a much larger organization has given them access to staffing that has availability of utilization as well. So we have tamped down the shortage by adding capacity from our system. The other thing that we have been doing a lot of now is insourcing things that they used to outsource. Yes. And so we are finding, you know, they are using survey. They are using our fire protection. They are using our mechanical, and we are grabbing—essentially, we are grabbing more work from their clients, which is, again, putting a little more stress on the need for people. But it is what we do for a living, is making sure that we can meet demand with supply. Bruce J. Labovitz: Yes, Jeff. Geospatial is pretty much at the core of everything that we do. A lot of the work we do originates with imaging, processes through imaging, and utilizes survey and scanning and three-dimensional iteration throughout the life cycle of the asset. So we do not think of it as a vertical because it is a service that really supports every bit of business that we do. It is kind of at the epicenter of our services portfolio. So, you know, we are making investments in that space because it is evolving so quickly. And those that are ahead have distinct advantages, and geospatial is one of those service lines that creates, as Dan mentioned, incumbency. Incumbency is such a valuable asset in the life cycle of asset work. So we are buying high-resolution scanners. We are buying imaging technology that does underwater LiDAR. You know, we are buying vehicles that collect data, whether that is from the air, from the water—you know, we are improving the operational efficiency of our altitude fleet, which spends a lot of time, let us say, chasing weather. And if we can shorten the chase, we get more productivity out of it. And there is plenty of work to be done there. So geospatial is—we think it is really a critical part of the overall product we deliver. And so we want to be a leader in our fleet. Bruce J. Labovitz: It is generally included—I mean, it is included in that bucket. We may—and, again, we sort of talk about an average of 3–4% spending on CapEx. Episodically, it may be, you know, a little bit higher and a little bit lower in years. This may be one of the little bit higher years as we continue to improve that fleet. But as revenue is growing, you know, you absorb that CapEx from a percentage perspective as well. So I do not think it is going to, you know, in any way put it off the charts, but it, you know, it could pop at a point or so this year. But then these are long-lived assets. So, you know, you buy them in one year, they last for several years. Jeffrey Michael Martin: Thank you. And, Gary, congratulations on your retirement. Gary P. Bowman: Thank you, Jeff. Bruce J. Labovitz: Look forward to seeing you guys in a couple of weeks. Operator: Our next question comes from Sharif Al Sabahi from Bank of America. Your line is now open. Please go ahead. Nabi (for Sharif Al Sabahi, Bank of America): Good morning, everyone. This is Nabi. I am on with Nadeetha for Sharif. Just on the full-year guide, you raised the net revenues for the full year, but the EBITDA guide was maintained. Could you talk about the margin profile of recent acquisitions like RPT? Does it come at lower margin with other cost optimization measures in the business holding margin steady at 17–17.5? Or on the flip side, is it slightly accretive, and are there other temporary investments in the business that we should be aware of that are holding margins back a little bit? And also, net leverage—think you mentioned around 1.9x, just higher than historical levels. Could you remind us of your target range again? Could we see leverage structurally closer to the high end of your range for a period of time as Bowman Consulting Group Ltd. gets more acquisitive, or is there a plan to delever to historical levels over the near to medium term? Lastly, on the $25,000,000 BIG Fund, can you give us a sense of how much has been committed versus funded, and the runway there? Gary P. Bowman: Good morning. Bruce J. Labovitz: Yes. So I am not sure I would characterize it as holding margins back in a sense that if we continue to grow margin, we are growing it—we are committing to grow it, you know, another half to 50 to 50 plus basis points during the year. So we are very much focused on expanding margin over time. RPT is a high-margin business. But again, as a percentage of our overall business, you know, even being a significantly higher-margin business does not necessarily drag the whole business along from a margin perspective. We think that, you know, being able to get 17.5% margins is a pretty high bar for the industry. And I think that, you know, as—if you asked about, you know, contributors to that, certainly, sort of this concept that we introduced about decoupling revenue growth from headcount growth does not mean shrinking your workforce, but it means growing revenue faster than you grow workforce, and that increases margin. And that is from the tools that we are employing and investing in, as sort of as one of the earlier questions about organic investment and investing in these processes and service line expansions, I think, will add margin over time. We have talked about that, you know, we believe that this is a high-teens margin business without innovation and an even higher one with, and, you know, it is a journey that we continue to be on. Bruce J. Labovitz: Yes. So we have typically been in the, you know, the one-and-a-half kind of range. We want to—you know, the mid-ones. We made this acquisition of RPT on December 5, so did not get any of the benefit at year-end for any of the, you know, the EBITDA from that acquisition, but had all the leverage on our balance sheet. When we look ahead, it is about, on a pro forma basis, about 2x. That is before we start paying that down with cash flow, you know, that we will generate from this year. So we hit 50% cash flow generation this year. We think that is going to continue to improve. So, you know, at an EBITDA of, you know, of—in the seventeens margin on, you know, on $500,000,000 of revenue, there is going to be a good deal of cash flow to be used to pay that down. Now we will continue to be growth-oriented. And to the extent that we identify another acquisition, yeah, we would certainly—you know, there could be additional leverage from it, but there would also be significant amount of EBITDA from it. So you will see us structurally, you know, try to achieve a below 2x, keep it in that, you know, 1.5x to 2x range, which has been our sort of our target. But we have been consistent that episodically, we will be higher as we invest, you know, in growth. Bruce J. Labovitz: Yes. So I would say that we are roughly about halfway into it in terms of committed. It does not mean it has all been expended. There is a lot of proof of concept, a lot of proof of returns, you know, and a lot of other factors that, you know, over the next twelve to eighteen months, we would, you know, fund the projects that have come forward. Some of it is the investment in assets in geospatial that will facilitate some of these additional services. But I would say we are about halfway into ideas that would be funded. Gary P. Bowman: Thanks so much. Operator: As we have no further questions on the line, I will now hand back to Gary Bowman for final comments. Gary P. Bowman: Thanks again, Becky. Well, thanks to everybody for joining us on the call today. We are very pleased with where we are at, pleased with the prospects for the year. And thanks certainly to all the employees and to our investors for all the faith that you put into us. Have a great day, everyone. Operator: This concludes today's call. You may now disconnect your lines.
Operator: Good day. Welcome to Teads Holding Co.'s fourth quarter and full year 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the call over to Teads Holding Co.'s Investor Relations. Please go ahead. Good morning. Matt (Investor Relations): And thank you for joining us on today's conference call to discuss Teads Holding Co.'s fourth quarter and full year 2025 results. Joining me on the call today we have David Kostman and Jason Kiviat, the CEO and CFO of Teads Holding Co. During this conference call, management will make forward-looking statements based on current expectations and assumptions, including statements regarding our business outlook and prospects. These statements are subject to risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. These risk factors are discussed in detail in our Annual Report on Form 10-K for the year ended December 31, 2024, as updated in our subsequent reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the call's original date, and we do not undertake any duty to update any such statements. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the company's fourth quarter and full year 2025 results announcement for definitional information and reconciliation of non-GAAP measures to the comparable GAAP financial measures. Our earnings release can be found on our IR website, investors.teads.com, under News and Events. With that, let me turn the call over to David. David Kostman: Thank you, Matt. Good morning, everyone, and thank you for joining us. About a year ago, we brought Outbrain and Teads Holding Co. together. The goal was and still is to build a best-in-class digital advertising platform that delivers results across every screen, from the phone in your pocket to the TV in your living room and for every advertiser objective, from branding to actual sales. Year one was a transition. We managed the friction of merging two different cultures, technologies, businesses, while navigating some tough market conditions. Also make a deliberate choice to build a sustainable premium marketplace and walk away from some low-quality revenue. It was a hard call, but we believe it was a necessary one to protect our marketplace and ensure that we can grow our business with the world's biggest brands. The lessons we learned allowed us to sharpen our focus in the second half of the year. We have simplified the org chart, right-sized our cost, and brought in fresh leadership. Now we believe we are moving into 2026 with strong alignment on our strategic priorities and a well-defined execution plan. We expect this to be the inflection point and the year we return to growth. Looking at Q4, we hit the high end of our guidance on ex-TAC, beat our adjusted EBITDA target, and generated positive free cash flow. Beyond the numbers, there are a few key indicators I want to highlight. First, CTV is accelerating. Our focus on the living room is paying off. We crossed the $100 million annual revenue mark with growth hitting 55% in Q4, and with strong growth on the home screen placements. Second, performance cross-selling was scaling. We saw a 300% jump in sales to enterprise customers compared to Q3. Now to be clear, that is still just a few million dollars per quarter, but we believe it demonstrates how much headroom we have to grow. Third, in Q4, we renewed several of our joint business partnerships with leading global brands and have many more in process of resigning in Q1. The feedback from surveying our partners, one year into the merger, is excellent, highlighting creative excellence, innovation, and media-added value, and the renewals demonstrate the strategic nature of these relationships. On the operational side, we expect that our December restructuring would save us between $35 million to $40 million annually. In addition, we have added top-tier talent like Molly Spielman, our Chief Commercial Officer, Danny Christian, our Chief Marketing Officer, and Eiralee Jain, who heads our North American business. We have also flattened the leadership structure to make sure our teams can move faster and drive speed and accountability. For 2026, the strategy for our enterprise advertisers is built on three pillars. First, we will continue to lead with our CTV offerings by focusing on two clear differentiators: home screen leadership and omnichannel branding to performance. On the home screen, we are continuing to win. We are not just another ad midstream. We are an entry point to the living room and TVs. And our leadership is anchored by our strategic partnership with leading OEMs like LG, Samsung, NVIDIA, and Vizio. In Q4, we further solidified our position by expanding our relationships with LG, signing exclusive partnerships in Italy and Greece, and in Q1 of this year, we expanded our footprint through an exclusive partnership with Samsung TV in certain regions in Asia-Pacific. We are further expanding this reach through new integrations with Google TV and Rakuten, all focusing on integration of these OEMs and bringing these premium, highly visible, and valuable placements directly into Teads Ad Manager. In terms of scale, we have access now to well over 500 million addressable TVs globally and already ran well over 3,500 campaigns on home screens. What we hear from our partners is that they choose to work with Teads Holding Co. due to the unique combination of our direct relationships with the most premium brands of the world through our 50-plus joint business partnerships, the quality of our creative services in ensuring the creatives are well adapted to the unique environment of the home screen, and the integration with our platform, Teads Ad Manager, which makes transacting on multiple OEMs easier and faster. And we are proving that CTV plus web is a winning combination. Our thesis is simple: using the big screen for awareness, then retargeting on mobile drives measurable sales. For example, our recent partnership with Accor, a global hotel operator, demonstrated that omnichannel activation on Teads Holding Co. not only drove 23% lift in brand favorability, but also a 17% increase in purchase intent. That is a massive win for our advertisers and a differentiator for Teads Holding Co. Second point on enterprise: we are deepening our strategic relationships with agencies. We are working on integration of our audiences with the world's leading agencies and on other data collaborations. A great example of this is our new integration with Havas, which allows their planners to activate our audiences directly from their own planning environment, driving both speed and efficiency. Third, we are scaling our performance business for enterprise advertisers. We are integrating performance capabilities, leveraging Outbrain know-how directly into Teads Ad Manager designed to create a frictionless experience for agencies buying full funnel. And we are advancing our algorithmic capabilities and investing in superior post-campaign measurement. We expect these investments to drive continuous improvements in ROAS and overall campaign performance for our enterprise advertisers. Turning to our direct response advertisers. They are purely focused on ROAS, plain and simple, and internally on driving efficiencies that grow profitability. The 2025 trimming of our supply and demand sources to ensure higher quality will impact our year-over-year comparisons early on, but the foundation of our business is significantly stronger today than it was a year ago. We also see here exciting opportunities such as running direct response performance campaigns on CTV. In Q4 of last year, we had several million dollars of such sales. One general comment: you will hear our peers discuss supply path shortening as a new initiative, but for us, it is a foundational architecture. We provide a straight line to the source of premium supply, whether that is an LG home screen or a top-tier global publisher, which is one of the reasons we can deliver superior outcomes from branding to performance. AI is the engine behind many of these growth areas. It is both a performance driver for our clients and a productivity tool for our engineers and teams. On the algorithmic side, we have progressed on the integration of our AI and data infrastructure, and we are already seeing tangible results. In addition, by using LLM models to sharpen our predictive delivery, for example, by analyzing the content of ads to extract additional relevant signals, we are achieving two goals at the same time. We are hitting better KPIs for our advertisers, specifically by lowering the cost per acquisition, and we are seeing the path forward expanding our own margins at the same time. We are also investing in transitioning from manual campaign setups and toward agentic-driven goal setting, which we believe will simplify the experience for our partners and allow our technology to optimize for outcomes more effectively. To sum it up, I believe the heavy lifting of the transition is behind us. We have used the second half of last year to build a leaner, faster, and better Teads Holding Co. We saw some positive indicators in Q4 into Q1. We have started the year with strategic clarity, a well-defined execution plan, and the right leadership, which I am confident will allow us to make 2026 a breakout year. I will now turn it over to Jason to walk through the financials. Jason Kiviat: Thanks, David. As David mentioned, we achieved our Q4 guidance for ex-TAC gross profit at the high end of our range and exceeded our range for adjusted EBITDA, generating positive adjusted free cash flow in both the quarter and for the full year. Revenue in Q4 was approximately $352,000,000, reflecting an increase of 50% year over year on an as-reported basis, primarily reflecting the impact of the acquisition. On a pro forma basis, we saw a year-over-year decline of 17% in Q4. I spoke last quarter about the drivers of volatility in our top line, stemming from both legacy Teads Holding Co. operating businesses. I will reiterate them briefly here in the context of what we anticipate for 2026. But an important takeaway is that since we last reported in November, we have seen a more stable top line. Within our enterprise clients, we saw a deceleration in our top line starting in June that we attribute largely to operational challenges and distraction of the merger. This primarily impacted us in several key markets, most notably the U.S. and U.K. However, the changes we implemented in leadership and operations in Q3 are yielding positive indications in Q4 and into Q1, giving us confidence that we can see a return to growth by Q4 of this year. TPV growth has accelerated, top line in the U.K. has stabilized, and our sales of performance campaigns to enterprise customers, including cross-selling, is accelerating. Within our direct response clients, through both strategic decisions around quality and external factors, including deliberately exiting lower-quality demand and supply sources from our ecosystem, we turned a small but meaningful segment of arbitrage-based customers. This impacted our revenues primarily in H2, and most meaningfully in Q4. And while we feel we have a healthier long-term business from these changes, we expect that this will impact our year-over-year comps through much of 2026. The year-over-year comparison impact for 2026 is expected to be a headwind of approximately $20,000,000 of ex-TAC with the vast majority of that in H1, phasing down to a minimal amount by Q4. X-TAC gross profit in the quarter was $152,000,000, an increase of 122% year over year on an as-reported basis and a decline of 19% on a pro forma basis. Note that ex-TAC gross profit growth is outpacing revenue growth due to a net favorable change in our revenue mix post-acquisition, as well as the continuation of improvements to revenue mix and RPM growth that we have been seeing for the last few years. Other cost of sales and operating expenses increased year over year, primarily reflecting the impact of the acquisition as well as a non-cash impairment in goodwill. As a result of recent declines in our share price and overall market capitalization, we were required under accounting standards to perform an impairment assessment and ultimately recorded an impairment to goodwill of around $350,000,000. This accounting adjustment is entirely non-cash and does not impact our liquidity, operating cash flows, or our debt covenants. I also want to be clear and emphasize we fully believe in the fundamental strategy of our omnichannel full-funnel offering, but as we have reported, the operational challenges have led us to a timetable longer than we initially anticipated, resulting in this impairment charge. As our actions exemplify, we are committed to returning to growth and improving profitability, and to that end, in the quarter, we recognized $6,000,000 of restructuring charges, primarily related to the reduction in force we announced largely executed in December. The restructuring is expected to save approximately $35,000,000 to $40,000,000 annually from the elimination of both filled and unfilled roles. Adjusted EBITDA in Q4 was $37,000,000, and adjusted free cash flow, which, as a reminder, we define as cash from operating activities plus CapEx, capitalized software costs, as well as direct transaction costs, was approximately $3,000,000 in the fourth quarter and $6,000,000 for the year. As a result, we ended the quarter with $139,000,000 of cash, cash equivalents, and investments in marketable securities on the balance sheet, and continue to have €15,000,000, or about $17,500,000, in overdraft borrowings, classified in our balance sheet as short-term debt. Additionally, we have $628,000,000 in principal amount of long-term debt at a 10% coupon due in 2030. As we have said in the past, we are always evaluating our cost and capital structure opportunities to improve our financial profile. In that regard, we are evaluating opportunistic alternatives that may be available to us to strengthen our balance sheet and build a more durable capital structure. Now I will turn to our guidance. We are focused on operating as a cash flow generating business. We have taken recent steps to improve our cost structure, we will continue to look for opportunities as we further advance our integration and leverage the exciting avenues to streamline operations that are now available with AI. We have taken steps to realign our team, appoint new leadership, and enhance our focus on the areas that we feel will help us return to top line growth. While we feel good about the steps we are taking and the progress we are seeing, we acknowledge the uncertainty of the overall environment and how it may impact the timeline and progress as we pursue a return to top line growth. With that, we have provided the following guidance. For Q1 2026, we expect ex-TAC gross profit of $102,000,000 to $106,000,000. We expect adjusted EBITDA of breakeven to $3,000,000. And for full year 2026, we expect adjusted EBITDA of approximately $100,000,000. While this level of annual EBITDA could potentially result in a small use of cash, we are comfortable with our cash balance and borrowing ability, and additionally, we see opportunities to generate positive free cash flow this year. Now I will turn it back to the operator for Q&A. Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Laura Martin with Needham and Company. Please proceed with your question. Laura Martin: Sure. Thank you very much for taking the questions. On the salesforce, I was just wondering, are we pretty much staffed up now on the salesforce from the integration, and do you expect smooth sailing going forward on those kinds of hires? And then secondly, I was really interested, David, in your comments on the exclusive deals with Samsung and LG. Are those for home page programmatic the way Nexon is talking about, or is that for—I was just wanting you to expand on what rights you have that are exclusive right now. Thank you. David Kostman: Thanks, Laura. Good morning. So first on the salesforce, we are confident we have the right leadership team and the right team in place. So do you anticipate smooth sailing? Nothing is smooth, but we are very confident. We have a good team. I think we replaced the people we wanted to replace, and I am very confident with what I have seen the last few months with the new leadership. On the home screens, we have been at this for about two years working on a home screen. So we have exclusive in certain geographies with LG. We have an exclusive relationship in certain geographies with Samsung. We had until last year an exclusive relationship with Vizio, which now also NexGen is involved. But what we do and where our advantage is really that we work directly integrated between Teads Ad Manager and the home screen. It is a very unique special format, and the advantages we have around creative adaptation to the different formats and the ability of advertisers to really buy and optimize across multiple OEMs in one platform, that is a huge advantage. You can activate it programmatically, but when you activate it programmatically, it is very different in terms of the, you know, outcomes that you can drive. The premium brand relationship we have directly are a big factor why these companies work with us exclusively. We have a global footprint in more than 50 markets. They do want those premium brands on that home screen. I mean, there is no tolerance for the type of brand, so that is a huge advantage that we have. So between Teads Ad Manager direct integration, ability to run campaigns across multiple OEMs, the creative adaptation, and the premium brands, that gives us a, you know, a huge scale and then I think a huge heads up on that business. And it is also driving other parts of our business. We talked on—I mentioned on the call the omnichannel, so the ability to activate on the home screen and then on the web is a big advantage. And the ability to drive just performance campaigns. So we believe we have a two-year head start there, and it is a great differentiator for us. Operator: Our next question comes from the line of Matthew Condon with Citizens. Please proceed with your question. Matthew Condon: Thank you so much for taking my questions. The first one, just can you provide additional color just on the securitization of the business, and just what trends are you seeing so far in Q1? Do you see confidence that you have got this back on the right track? My second one is on the organizational changes. Just do we have the right team in place today across the entirety of the business? And should we expect anything else and or any other changes going forward? Thank you so much. Jason Kiviat: Thanks, Matthew. So this is Jason. I could take the—I think I got—this is a little broken, but I think your first question is about Q1 trends and what gives us confidence, so if I miss anything you said, I will just start there. Yeah. Look. I think we are seeing improvements in Q1. Right? Maybe—I know the numbers might be a little funky with the timing of the acquisition last year being a few days into February, and so the pro forma and the as-reported periods are slightly different. On an as-reported basis, we are guiding, you know, at our midpoint to something, you know, fairly flat year over year for ex-TAC. And on a pro forma basis, it is down, but not down to the same level we saw in Q4 where we were down a bit more. So what we are seeing, you know, in this early part of Q1 and what we expect for the full quarter is, you know, closing of the gap quite a bit here, and, you know, that means we are better than what is typical in Q1 relative to Q4. And it is really concentrated in the areas that we are focusing on, which obviously when you are focusing on something and you see improvement in it, it gives you some confidence. Right? So, you know, CTV is accelerating, you know, through the home screens and the omnichannel as David said. You know, we are focused on driving more performance sales. Obviously, a big part of the kind of synergies of the combination, and we do see momentum there. And then I know I have talked a little bit about some of the operational challenges that have been driving the headwinds for much of the last year or six months or so. And, you know, U.K. and U.S. are the countries I have kind of called out. You know, in the U.K., we do see a relative improvement and a big shrinking of the gap, you know, starting in Q1 here. As David mentioned, in the U.S., we had new leadership in Q1, and we do feel good and gain some confidence from the pipeline that we see in March and beyond. So, you know, cautiously optimistic, but, you know, we have taken meaningful steps to focus and reduce cost and focus and realign around the things that we think will drive growth, and we are starting to see good indications of those things. David Kostman: And I think, maybe in terms of the team, I am very comfortable. I mean, we started the year with a very clearly defined execution plan. We sort of elevated to the leadership team some people from the product and tech side. So I am very comfortable with where we are. We rolled out very specific goals and targets. And I think the execution plan is well defined with the right team at this point. Matthew Condon: That is very helpful. Thank you so much. Operator: Our next question comes from the line of James Heaney with Jefferies. Please proceed with your question. James Heaney: Yeah. Great. Thank you, guys. Just what are the assumptions behind the full year EBITDA guide? How should we think about the linearity of growth and margin as we move throughout the year? And then any color you can maybe also provide around linearity of ex-TAC gross profit growth? I think you said getting to growth in Q4, but any other things to think about moving throughout the year? Jason Kiviat: Sure. Yeah. Thanks, James. I will take that. It is Jason. I mean, our guidance of approximately $100,000,000 of EBITDA, it does not, you know, imply a full year ex-TAC growth on a, you know, on a pro forma basis. But we do expect to get to growth by the end of the year by Q4. So maybe some color on kind of how we see that playing out, you know, a couple points of context. You know, for one, I did mention on the call, we have this year-over-year, you know, comp headwind—about $20,000,000 of ex-TAC from the quality cleanup. And just to put that into kind of when we see that happening, you know, it started to really impact us, you know, fully in Q4, and, you know, maybe about half of the impact we talked about in Q3 from the supply cleanup and some of the early impacts there. So the full impact, about $8,000,000 of a headwind in Q4 of ex-TAC, and we expect that same $8,000,000 to impact Q1 and Q2 as well before starting to, you know, shrink in Q3 and be de minimis for Q4. So the comps do ease as the year goes on. That is the biggest kind of headwind that we see kind of moving forward. And, generally, you know, we expect it will take a few quarters to build back to growth from the year-over-year decline that we reported in Q4. We see improvement, as I said, in Q1. We think it will take a few quarters to get to growth, but believe, you know, that our changes in focus, leadership, and operations are driving this change, start to see it in Q1 from the things we did last year, and the things that we are doing in Q1 will help more and more as the year goes on. So on a pro forma basis, we expect to see improvement each quarter of the year and then Q4 being where we hit the positive growth. In terms of expenses to get to EBITDA, you know, obviously, you can see in our guidance for Q1, it is substantially reduced expenses from, obviously, from the restructuring and the step-up of, you know, full year of synergies now that we have compared to last year. So you can see the lower cost base, and that is even, you know, despite FX headwinds of a few million dollars that we see from the weakening of the dollar versus, you know, the euro and the shekel. But, you know, for the rest of the year, a few million dollar step-up probably in Q2 and Q3 just based on seasonality, revenue-related items, and some, you know, fully staffing where we have some empty roles right now, and then a normal Q4 seasonal step-up as you have seen in our results this year as well would be what I expect. James Heaney: Yeah. Very thorough answer. Thank you. Maybe just quickly, for either of you, anything on just specific ad verticals that you would want to call out in terms of strength or weakness? I mean, any particular standouts that you would want to highlight. Thank you. David Kostman: Maybe I will take that. I mean, there is nothing really that is material. I mean, we do not have any vertical that is sort of double digit even. So we see some weakness in CPG and automotive, some strength in health and finance, but nothing really of note. James Heaney: Great. Thank you. Operator: Our next question from the line of Zach Cummins with B. Riley Securities. Please proceed with your question. Zach Cummins: Hi. Good morning, David and Jason. Thanks for taking my questions. I wanted to ask about the Google TV opportunity. I mean, can you maybe go a little more into detail around that announcement, and what type of growth opportunity does that unlock for you as we move forward in 2026 for CTV home screen? David Kostman: Overall, CTV home screen is a huge opportunity for us. We are, as I said, I mean, two years into it. We have a huge base of OEMs. We added Google TV to that. I am sorry. This is the New York background noise. So we added Google TV recently. We added TCL, Vewd, and many others. So the overall opportunity is huge. I mean, it today accounts for a big percentage of our CTV business. We have grown 455% and expect similar growth rates or better for this year on the business. And I said it earlier, I think we have clear differentiators there. I think the direct access is a big differentiator. The premium direct premium advertiser relationship is a big advantage, and that is why I think these OEMs and other applications on CTV really sign up with Teads Holding Co. in order to make sure that that experience on the home screen is the best they can offer to the audiences. So it is a large opportunity and it also helps us to, as I mentioned earlier, to omnichannel sales, sell more campaigns to our advertisers also around the online video, combining the CTV home screen and the web. So it is a very big opportunity. It is a big area of investment for us, and we are very excited about it. Zach Cummins: Understood. And my one follow-up question is just around the proactive cleanup of some of the inventory throughout 2025. Obviously, a meaningful headwind when you think of ex-TAC over the next couple of quarters. But is that process largely behind us now? Do you have the ideal mix of inventory now that you are focusing more so on enterprise-level brands? David Kostman: Yes. I think it is behind us in terms of executing on that cleanup or trimming of supply and demand quality. So we walked away from about $20,000,000 in revenue. The impact will continue into the first half of this year. It was about an $8,000,000 headwind in Q4. It will continue through the first half of this year, but we have a much healthier network. We are actually delivering better ROAS for our performance advertisers, and the network and the marketplace is much more suitable for the premium brands we work with. Zach Cummins: Great. Well, thanks for taking my questions, and best of luck with the rest of the quarter. Operator: And this concludes—we have reached the end of the question and answer session. I would like to turn the floor back over to David Kostman for closing remarks. David Kostman: Thank you very much for attending today. As you can hear, we are somewhat encouraged by the sequential trends that we see. We do believe that 2026 will be an inflection point for us. We are very focused on execution and also finding the sort of right to invest in the attractive growth areas that we see, like CTV. So excited about the future and look forward to updating you. Operator: Thank you. And this concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation. Have a great day.