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Operator: Good day, everyone, and thank you for joining us for the Gray Media, Inc. Q4 2025 Earnings Release Call. To signal for a question, please press star followed by the digit one on your telephone keypad. Also, today's meeting is being recorded. I am pleased to turn the floor over to Chairman and CEO, Hilton Hatchett Howell, for opening remarks and introductions. Welcome, sir. Hilton Hatchett Howell: Thank you, operator. Good morning, everyone. As the operator mentioned, this is Hilton Hatchett Howell. I am Chairman and CEO of Gray Media, Inc., and I want to thank all of you for joining our fourth quarter 2025 earnings call. As usual, all of our executive officers are here with me in Atlanta: Donald Patrick LaPlatney, our President and Co-CEO; Sandy Breland, our Chief Operating Officer; Kevin P. Latek, our Chief Legal and Development Officer; and Jeffrey R. Gignac, our Chief Financial Officer. And joining us for the first time is Alan Steven Gould, our newly appointed Vice President of Investor Relations, who many of you know from his prior role as a sell-side analyst. Alan joined us in December, and we are thrilled to have him on board. We will begin with a disclaimer that Alan will provide. We believe his insights will help us better engage with investors at a time when much is changing in our business. Alan Steven Gould: Thank you, Hilton. Good morning, everyone. I want to say how thrilled I am to join Gray Media, Inc. and work with this outstanding team. After many years as a sell-side analyst covering the media industry, I have tremendous respect for what Gray Media, Inc. has built and the strategic direction Hilton and the team are charting. Today, we filed with the SEC our Form 8-K, our fourth quarter earnings release, and updated slides. Later today, we will file with the SEC our annual report on Form 10-K. Net retransmission revenue and certain leverage ratios are among the non-GAAP metrics we may reference. These metrics are not meant to replace GAAP measurements but are provided as supplements to assist the public in its analysis and valuation of our company. Further discussions and reconciliations of the company's non-GAAP financial measures to comparable GAAP financial measures can be found on our website. All statements and comments made by management during this conference call, other than statements of historical facts, should be deemed forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those described in the forward-looking statements as a result of various important factors that are contained in our most recent filings with the SEC. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. I now return the call to Hilton. Hilton Hatchett Howell: Thank you, Alan. Today, we are very pleased to announce that our results for 2025 compared very favorably to our previously issued guidance for both revenues and expenses. Total revenue in 2025 was $792 million, above the high end of our guidance for the quarter. Total operating expenses before depreciation, amortization, impairment, and gain or loss on disposal of assets in the fourth quarter were $618 million, which was $5 million below the low end of our guidance. Notably, within these results, our broadcasting expenses actually declined as compared to fourth quarter 2024. On a full-year basis, broadcasting expenses declined by $78 million, or about 3%, in 2025 as compared to 2024. Net loss attributable to common stockholders was $23 million in 2025. Adjusted EBITDA was $179 million in 2025. Political advertising revenue of $12 million finished above our expectations for an off-cycle period. There is one particular item I would like to highlight from our fourth quarter financial results: our net retransmission revenue, which is our retransmission revenue less our network affiliation fees, returned to growth in 2025 as compared to 2024. You have heard us talk in prior quarters about the need to create a more sustainable model in light of subscriber trends. Returning to growth in net retrans is a clear sign of progress on this multiyear effort. On a full-year basis, our net retransmission revenue stabilized at $547 million in 2025, similar to 2024. In addition to these operating results, we have now completed our recently announced acquisition of WBBJ-TV in Jackson, Tennessee from Vaheckel for $25 million. We are continuing to work towards regulatory approvals and expect to close our other announced transactions in the next several months. We also continue to make progress in strengthening our balance sheet during 2025. We opportunistically issued a $250 million add-on to our second lien notes through a private placement. Now I will let Jeff provide additional details on that opportunistic transaction. We are entering 2026 poised to close our delevering M&A transactions, and we expect to both reduce our debt and leverage ratio through what we believe will be a fantastic 2026 political cycle for Gray Media, Inc. Our newscasts continued to attract engaged local audiences in 2025, we continue to enhance our local content offerings and have won prestigious journalistic honors, including a total of 10 national Edward R. Murrow Awards, the most of any media company in the United States. This honor underscores the culture of journalistic excellence that is across our company. We have added a number of local and regional live sports broadcasts throughout our portfolio. InvestigateTV premiered its third season in September and also launched a multiplatform project to educate viewers about AI. Yesterday, we announced a new program called Aging Untold that will launch across our footprint next week. This new series features a panel of experienced industry professionals offering insight and solutions for people entering a new chapter of life as well as their families and caregivers. We believe the program addresses the most important lifestyle topics that nearly everyone faces now or will soon face, and yet no one is really covering in-depth. We have also continued to renew and expand our local professional sports portfolio. And another example, just yesterday, we reached an agreement to broadcast an additional five A’s baseball games and will now broadcast 20 A’s games in Las Vegas. Meanwhile, our digital team is now very busily rolling out the transition of all of our digital apps and websites to the Quick Play platform powered by Google Cloud. This personalized streaming platform will revolutionize how our viewers find and connect with our content, and we are honored and excited to be Google’s first broadcast partner for Quick Play. In December, we renewed our affiliation agreement covering our 54 NBC markets for three additional years. Earlier this month, we renewed and expanded our Telemundo portfolio to include 47 markets, reaching 1,600,000 Spanish-speaking households. This was good timing with NBC hosting a very successful Super Bowl and the Winter Olympics, and the NBA All-Star events all this month, and with Telemundo providing the only Spanish-language broadcast for both the Super Bowl and this summer’s FIFA World Cup. Finally, we are continuing our efforts to bring in the right development partners to further monetize our investment at Assembly Atlanta. Our net capital investment in Assembly in 2025 was essentially zero. But we expect to have more announcements about the next phase of development as we move through 2026. One additional issue I would like to add is that we have struck a deal with Intense Tennis that will begin actually competing in June, and we will be carrying it here locally in Atlanta and on our Peachtree Sports broadcasting network. 2025 was a pivotal year for Gray Media, Inc. We are excited about entering 2026 on a firm foundation that will lead to enhanced value for all our stakeholders. At this time, I will turn the call over to Pat to address our operations. Donald Patrick LaPlatney: Thank you, Hilton. Fourth quarter core advertising revenue started strong in October, which was up low double digits versus a comp from 2024 that included significant political displacement, including financial, health, and home improvement. Finished the quarter slightly above the high end of our guidance, up 3% compared to 2024. In terms of our core advertising categories, we saw continued strength in services; legal again showed strong growth in Q4, and that trend continues as we look ahead to our guidance for 2026. There was also a nice pickup in gaming and lottery/gambling in the fourth quarter that is also reflected in our Q1 2026 guidance. Automotive finished fourth quarter down low single digits. Recall that in 2025, we were down 8% primarily on tariff uncertainty. For the full year, core finished down 3%. And it is encouraging that 2025 finished in positive territory versus the second half 2024. And our new local direct business continued to grow low single digits over the same period in 2024. Digital continued its healthy growth in the fourth quarter, up low double digits. Our sales teams continue to perform admirably in a challenging environment. Political ad revenue exceeded our expectations in fourth quarter 2025. Our guide for 2025 was $7 million to $8 million and our actual results came in at $12 million. Once again, we saw some revenue from issue advertisers supporting the President’s legislative priorities. We also saw good results in Virginia from the 2025 state governor and attorney general races. Our first quarter 2026 guidance is for core ad revenue to be approximately flat with 2025. Super Bowl generated $11 million on our 54 NBC affiliates and 47 Telemundo affiliates in 2026, compared to $9 million on our FOX affiliates in 2025. We will also benefit from the Winter Olympics on NBC in 2026, and 47 Telemundo affiliates in 2026. We are excited about the upcoming midterm election season. Across categories in the first quarter, as I mentioned before, legal services and lottery/gaming are bright spots. We are also seeing signs of improvement in auto, which is currently flattish. We estimate that our net revenue from the Games will contribute $15 million in the quarter versus $8 million during the 2022 Games. Our first quarter 2026 guidance for political is to be $25 million to $30 million, which compares to $26 million in 2022, which is a comparable period for the 2026 midterm elections. The map in 2026 looks to be very favorable for our TV station footprint, with all 10 competitive Senate races, nearly all of the 13 competitive gubernatorial races, and countless other competitive races in markets where we operate top-ranked local news stations. Jeff will now address the key financial developments. Jeffrey R. Gignac: Thanks, Pat. As Hilton mentioned earlier, we made further progress on our balance sheet during the fourth quarter. We completed a $250 million add-on to our 9.58% second lien notes at 102 and used a portion of the proceeds to call $125 million of our 10.5% first lien notes at 103. We finished fourth quarter with over $1.1 billion in liquidity and $232 million in availability under our open market debt repurchase authorization while also reducing our interest cost. Our leverage metrics at year-end 2025 were 2.43 times first lien leverage ratio, 3.65 times secured leverage ratio, and 5.8 times total leverage ratio, each using the calculation in our senior credit agreement. We expect that our delevering M&A transactions together with political revenue in 2026 will help us make significant progress on our leverage during 2026. Our expense reductions are once again reflected in our results. In 2025, our broadcasting station operating expenses, excluding network affiliation fees, were down $10 million, or 3%, compared to fourth quarter 2024. Let me elaborate a little bit more on net retrans as this is important to understanding our financial picture. Hilton mentioned the return to growth in fourth quarter 2025 versus fourth quarter 2024. In fourth quarter, our network affiliation expenses declined by 13%, while our retransmission consent revenue declined by 7% versus fourth quarter 2024. Remember, the WANF moving to an independent station affected both the revenue and expense sides of the net retransmission equation starting in third quarter 2025. That also means that our results are not comparable to our peers when you look at these numbers in isolation. Fourth quarter 2025 is the first quarter where the full impact of that change is reflected in our results. Our fourth quarter guide was for a slight decline in net retransmission revenue, but we ended up with growth in net retrans of about $4 million, which is largely attributable to better-than-expected subscriber trends. For the full year, net retransmission revenue finished at $547 million in 2025 versus $550 million in 2024, which is essentially flat. Our first quarter guide of $148 million to $156 million indicates that we expect continued modest growth in net retransmission revenue. And without giving a full-year guide, our current expectation is that net retransmission revenue will grow slightly for full year 2026 as compared to 2025. You will also notice that we are guiding Q1 broadcasting expenses to be down 3% at the midpoint versus 2025. This would be a similar decline to full year 2025, but less than the 7% year-over-year decline reported in fourth quarter 2025, which is primarily due to the timing of certain annual expenses as well as normal inflationary adjustments at year-end. We finished 2025 at $74 million of capital expenditures excluding Assembly Atlanta, which is in line with our revised guidance. Net of reimbursements related to public infrastructure at Assembly Atlanta, our net capital investment in Assembly Atlanta during 2025 was $1 million. We currently estimate that our 2026 company-wide CapEx will be approximately $140 million as we take advantage of bonus depreciation during political years. For some context, we have historically invested about $25 million more during political years. For 2026, the increase will be a little more than usual. We will also have several building-related construction projects within the TV business that we intentionally scheduled to coincide with our stronger cash position this year. This concludes my prepared remarks, and I will return the call back to Hilton. Hilton Hatchett Howell: Thank you, Jeff. And now, operator, we will open up the call to any questions that anyone may have. Operator: Thank you, gentlemen. And to our audience listening today, a reminder that it is star and one on your telephone keypad if you would like to join today’s question queue. Reminder also, if you are joining today on a speakerphone, initially we ask that you limit yourselves to one question and one follow-up. And then if you have additional, you are invited to resignal using star and one. We will hear first today from the line of Daniel Louis Kurnos at Benchmark. Daniel Louis Kurnos: Great. Thanks. Good morning. Nice results, guys. Outside of Nexstar, I mean, we will see a lot of moving pieces there. But if it does get done, Nexstar after the tweet seems pretty confident they are going to get their deal done by the end of the second quarter. If Hilton, just first for you, I have been asking everybody this. Does that change the way that you guys think as assets become available? It takes some of the risk off the table. The change had you guys maybe approach anything either larger, more transformative in addition to all of the accretive stuff you have already done? And then, Jeff, just a quick one for you. Appreciate the color on net. I know there is going to be timing delta with when you guys have renewals, but is modest growth in net retrans the right way to think about the trajectory from here on out with just some lumpiness in years when you do not have renewals? Thank you. Jeffrey R. Gignac: I will tackle the question for me first. So, yes, Dan. We have talked about the multiyear effort to get to a sustainable model on the net retrans side, which would start to look maybe more like inflationary growth type of arrangement. So that is what we are—that is, I think, the right way to think about that. Hilton Hatchett Howell: I am happy about it. I can reiterate Nexstar’s optimism about our own transactions. We have five different transactions before the FCC and the DOJ, and we are very optimistic about getting that closed, hopefully, very early in 2026. And then with regard to, you know, if Nexstar-TEGNA closes, sure, that will present a number of issues competitively. And it may put a little impetus on our company to get larger. But that is something that the whole industry is just going to have to take a look at. I wish Nexstar all the best. They, like we, believe that consolidation is important for the industry because it is critically important that we maintain local news in all of the markets, all the 210 markets across the United States. And as our industry faces broader competition from the massive companies, from Google to Meta to all the rest, getting larger is an absolute requirement. So, you know, we are delighted that they are optimistic, and I am personally looking forward to clarity in terms of what the rules are because you hate to launch a deal and then not be able to get it to completion. But we have got new optimism on that potential. Operator: Great. Thanks, Hilton. Thanks, Jeff. We will move forward to the line of Steven Lee Cahall at Wells Fargo. Steven Lee Cahall: Thanks. So a couple of questions pertaining to leverage. So, you know, Jeff, you said significant progress to leverage in 2026. I think the M&A deals you have announced are about a quarter turn of deleveraging. I think about something that sort of rounds to four times as, like, what significant progress means and if it maybe could get you towards that ZIP code to unlocking your equity value. And then sort of a bigger-picture follow-on, you know, you have done a lot to bring down leverage. But it is gradual. You know, an equity merger with synergies could do that in a much shorter amount of time or to a greater extent. I know you are being very patient and deliberate in terms of looking at those types of transactions. But could you just give us an update on the state of industry conversations between maybe yourselves and other levered broadcast and how we should just think about that continued opportunity? Jeffrey R. Gignac: Steven, we are not going to talk about private conversations. We have consistently said that we are—we will look at any transaction that we think makes sense for us and whoever the partner is. From the announced M&A, yes, about a quarter turn. If you could tell me exactly what the political number is going to be this year, I could give you a pretty good direction on exactly where we will land. But when I say progress, we have been pretty clear in our actions about what we are doing on the leverage side: managing the top of the capital structure, making sure we are proactive in having the runway that we need. We know the longer-term objective is to get back towards that four times. So now we have this political cycle plus the next one before our next maturity. We will continue to be judicious in lowering the quantum of debt outstanding and proactively addressing maturities as we have in the past. And then, so that is another avenue to help us accelerate that deleveraging. Steven Lee Cahall: And if I could squeeze in a quick follow-on, I certainly get the constructive direction of net retrans. Just to help us understand since WANF is in there right now, would it look even better if the WANF noise was not in there in 2026? Jeffrey R. Gignac: Look, WANF is in there, so I cannot speculate about what it would look like if it were not. It was all part of a broader negotiation, and you are seeing the results of not just that but a whole bunch of other negotiations that are out there and, importantly, the improving subscriber trends. So it is hundreds of contracts, like we have talked about, that all result in the number. And part of the reason we went to giving that number is both the gross retransmission revenue and the network costs create a lot of noise for us relative to peers. But the point here is that our net is getting back to growth, which is critically important. Part of what we have been doing is chasing the denominator because of the drag from net retrans. So that is also why we are pointing people to that, because that will also help us as the denominator flattens out and hopefully returns to growing here in the not-too-distant future. All of that will help us get to a better spot from a leverage point of view. Operator: Our next question today comes from the line of Aaron Watts at Deutsche Bank. Aaron Watts: Hi, everyone. Thanks for having me on. I had two questions, if I may. The first on advertising. Can you just talk a bit more about the health of the core ad backdrop? Based on what you are seeing so far in the year, what optimism do you have that core ad can grow as you move through 2026, acknowledging your first quarter guide and the robust political that is going to roll through? Donald Patrick LaPlatney: Yeah. So look, Aaron, it is Pat LaPlatney. I think given the large expected political, looking for growth in this kind of year can be challenging. And in Q1, we are calling it flat. Obviously, we have a lot of NBC affiliates. The month of February for us has been pretty strong with the Olympics and the Super Bowl. You have to remember that we also have non-NBC affiliates too. It is helpful. We are optimistic about the market, but we have to be fully aware that political is going to get really, really heavy once you get into August, September. And so that is going to impact the core numbers. Aaron Watts: Okay. That makes sense. And then if I could just ask one more: The potential for the NFL to reassess its TV rights this year has raised some concerns around economics and also potential dilution of content to digital platforms. Do you still view this potential renegotiation as an overall positive for the space and for Gray Media, Inc.? And I guess specifically on the side, you just renewed your affiliation agreement with NBC, who is in the midst of their first season with the NBA. Any learnings from that renewal that can be informative of how sports rights price increases absorbed by the networks might trickle down to the local affiliates? Like yourselves. Kevin P. Latek: You know, in general, extending the NFL contracts is a big, big positive for the industry. The NFL is a huge driver of audience for our TV stations. Keeping the NFL on broadcast is critical, and we fully believe that will happen. There is a lot of speculation out there—speculation around the platforms coming in, picking up a package. I am not going to comment on the NBC–NBA deal or anything else that is out there. It is a negotiation at the end of the day. I mean, there is going to be dialogue around how sports rights work their way through the ecosystem like they always do. I am not sure you can compare one directly to another, but net-net, keeping marquee sports on broadcast remains a positive for affiliates and viewers. Operator: Thanks. Craig Huber with Huber Research Partners, your line is open for our next question. Craig Anthony Huber: Great. Thank you. Just a housekeeping question. You said a few times here that your subscriber trends for retrans have improved. Can you just quantify that for us? I mean, how much better was the year-over-year that impacted your revenues in the fourth quarter versus how it was trending a year before? How much better is it, please? Kevin P. Latek: Hi, Craig. This is Kevin. We have not disclosed subscriber numbers, I think, ever. What we have said is our trends are similar to what is reported publicly for the ATV industry, given that we are fairly well dispersed from large markets to small markets. There are still declines overall in our ATV subs, but the rate of decline has slowed. We are seeing some improvement in the traditional MVPDs. There are still increases in virtual MVPDs. The net result is that there is still a rate of decline, but the rate of decline has slowed. Hilton Hatchett Howell: And I am not sure any other companies are providing much more clarity than that. So we are not going to provide more detail on that, and I do not think any of our peers are either. We pretty well disperse with the U.S. population. We have markets from Atlanta, Georgia to North Platte, Nebraska. So we are similarly situated to the broader ecosystem. Craig Anthony Huber: Okay. And then the second question on Atlanta Assembly, just update us, if you would, then as I typically like to ask you: How much money have you put into it on a net basis so far? The overall net cost of that project, and how much further out do you think until you will start to get a real proper return off that in terms of leasing out the space, etcetera, that you will be happy with versus that overall cost. Much further out is that that you think at this stage? Hilton Hatchett Howell: This is Hilton. We actually will have a number of transactions that we will likely be announcing through the course of 2026 that are not producing, you know, that we purchased when we bought the General Motors plant. And right now, we have got 80 plus or minus acres. And we have got a lot of potential joint ventures that will be opening up there soon, and we will be announcing. But right now, we cannot say too much about that one way or another. Jeffrey R. Gignac: To answer the other part of your question, Craig, it is around $630 million as of 2025, net of all of the reimbursements that we received through the end of the year. Craig Anthony Huber: That is a net number, right? Jeffrey R. Gignac: Net of reimbursements, yes. Craig Anthony Huber: Okay. Great. Thank you. I do have a follow-up. On the AI front, can you just give us some examples of how AI is helping you from a cost efficiency standpoint? Speed of what you guys provide on your services—news, advertising, etcetera. What is the benefit of AI so far? What are the examples that you are most excited about that you are implementing? And if it is not replacing human beings, how would you categorize that? I assume it is too hard to figure out how much potential cost savings it may have at this stage on an annual basis? Sandy Breland: We are seeing benefits really across the company. We unveiled our own app, Gray AI—sort of our own ChatGPT, if you will—and we are really finding it allows us to be much more efficient for time-consuming tasks, things that can be automated. For journalists, for example, it can help in converting a broadcast story to a story that will air on or run on other platforms. So things that previously would take hours can literally be done in a matter of minutes, allowing our journalists to spend more time on their important work of reporting and enterprise reporting. One thing to note, though, is that our internal policy is any final product is signed off on by a human. That is really important to us. But it certainly has allowed us to be much more efficient. And even in things like sales—prospecting, for example—the opportunities there allow us to really focus on the important core work and free up time for that work. It is a little early to quantify annualized cost savings. Quite honestly, we have really been using it to make us more efficient, more productive, and more responsive to our communities. Hilton Hatchett Howell: Listen. The way we are using Gray AI across the company is like having a thousand extra interns that we are not paying for. There are a lot of mechanical tasks like building a sales pitch or converting a story for the web or building and adding information to databases that people do that takes away from their creative energies. And if we could offload that to an intern—or a thousand interns—we would do that. And just like our intern policy, everything gets reviewed by a Gray employee before it becomes final. So if you want to talk expense savings, it is like saving the cost of a thousand interns. It is making us more productive, but we are thinking about this as efficiency to provide better, faster, more, and not about saving money. But it is one way to quantify a cost—it is like saving the money on a thousand interns. Operator: And we thank each of our audience members who shared their questions and comments today. Mr. Howell, I am happy to turn the floor back to you, sir, for any additional or closing remarks that you have got. Hilton Hatchett Howell: Thank you. So in closing, our fourth quarter was very busy, and we accomplished numerous objectives like the rest of 2025, and that will have long-term benefits for our company. We will continue to take actions to enhance our value for advertisers, our investors, and for the communities we serve. We thank everyone for joining the call today, and we look forward to our Q1 call coming up soon. Thank you. Operator: Ladies and gentlemen, this does conclude today’s Gray Media, Inc. Q4 2025 earnings conference call. We thank you all for your participation. You may now disconnect your lines.
Operator: Joining us today are Gregory S. Marcus, Chairman, President, and Chief Executive Officer, and Chad Paris, Chief Financial Officer and Treasurer of The Marcus Corporation. As a reminder, this conference is being recorded. An operator will be happy to assist you. At this time, I would like to turn the program over to Mr. Paris for his opening remarks. Please go ahead, sir. Thank you, Drew. Chad Paris: Good morning, and welcome to our fiscal 2025 fourth quarter conference call. I need to begin by stating that we plan to make a number of forward-looking statements on our call today, which may be identified by our use of words such as “believe,” “anticipate,” “expect,” or other similar words. Our forward-looking statements are subject to certain risks and uncertainties which may cause our actual results to differ materially from those expected or projected in our forward-looking statements. These statements are only made as of the date of this conference call, and we disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. The risks and uncertainties which could impact our ability to achieve our expectations identified in our forward-looking statements and our fourth quarter results, are included under the headings “Forward-Looking Statements” in the press release we issued this morning announcing Form 10-Ks, and in the “Risk Factors” section of our annual report, which you can access on the SEC’s website. Additionally, we refer you to the disclosures and reconciliations we provided in today’s earnings press release regarding the use of adjusted EBITDA, a non-GAAP financial measure, in evaluating our performance and its limitations, a copy of which is available on the Investor Relations page of our website at investors.marcuscorp.com. All right. With that behind us, this morning, I will start by spending a few minutes sharing the results from our fourth quarter and the full year, and discuss our balance sheet, liquidity, and capital allocation, and then I will turn the call over to Gregory S. Marcus who will focus his prepared remarks on where our businesses are today and what we see ahead for 2026. We will then open up the call for questions. This morning, we reported a quarter of solid execution and results, with both divisions delivering year-over-year revenue and earnings growth and outperforming their industries. In theaters, a film slate that featured a favorable film mix coupled with strong per-cap growth drove meaningfully improved market share. In hotels, our renovated properties were winning in their markets, attracting increased leisure demand at higher rates that drove our RevPAR outperformance, capping a record revenue and EBITDA year for the division for the 2025. Turning to the numbers and starting with a few highlights from our consolidated results, we generated consolidated revenues of $193,500,000, a 2.8% increase compared to the fourth quarter last year, with revenue growth in both divisions. Our fourth quarter operating income of $1,700,000 was negatively impacted by $5,200,000 of non-cash impairment charges in the theater division, which are excluded from adjusted EBITDA. Excluding the charges, our fourth quarter operating income was $6,900,000, growing 5.2% compared to operating income of $6,600,000 in 2024, excluding impairment charges and nonrecurring expenses in the prior year. We delivered $26,800,000 of consolidated adjusted EBITDA, a 3.6% increase over the prior-year fourth quarter. There is one unusual item in the fourth quarter below operating income that impacted our net earnings and earnings per share that I would like to highlight. Our fourth quarter and full-year income tax benefit includes an approximately $7,600,000, or $0.24 per share, benefit from federal and state historic tax credits earned related to the completion of the Hilton Milwaukee renovation. The impact of the credits is excluded from our adjusted EBITDA operating results. For the full year fiscal 2025, consolidated revenues increased just over 3% from the prior year with revenue growth in both divisions. Consolidated operating income for the year was $17,100,000. Excluding the fourth quarter theaters impairment charges, full-year operating income was $22,200,000 compared to operating income of $25,900,000 in fiscal 2024, excluding impairments and nonrecurring expenses in the prior year. Finally, adjusted EBITDA for the full year decreased 3.1% to $99,300,000. Turning to our segment results, I will start with theaters. Our fourth quarter fiscal 2025 total revenue of $123,800,000 increased 2.2% compared to the prior-year fourth quarter. It is important to note the shift in our fiscal calendar favorably impacted our revenue and attendance comparisons over the prior-year periods. Our fiscal year ended on December 31 this year compared to December 26 in fiscal 2024, resulting in five additional days in our fiscal fourth quarter during the busy week between the holidays compared to the prior year, while removing four days in late September when business is slower, and resulting in one net additional operating day for the quarter. The shift in our fiscal calendar and additional days between the holidays had a 6.8 percentage point favorable impact on admissions revenue growth and a 6.4 percentage point favorable impact on attendance growth compared with the prior-year fourth quarter. On a calendar quarter basis in both periods, comparable theater admission revenue increased 6.1% over 2024 with a more favorable mix of family films that played well in our markets. Comparable theater attendance decreased 5.7% in 2025 compared with the prior-year fiscal fourth quarter, while on a calendar quarter basis in both periods, comparable theater attendance decreased 12.1%. Average admission price increased 12.7% during 2025 compared to last year and was positively impacted by strategic ticket price optimization actions implemented during peak demand periods, changes to promotions during the holiday periods, and a higher mix of 3D tickets. According to data received from Comscore and compiled by us to evaluate our fiscal 2025 fourth quarter results using our comparable fiscal weeks, U.S. box office receipts decreased 1.5% during our fiscal 2025 fourth quarter compared to U.S. box office receipts in 2024, indicating our theaters led the industry, outperforming by approximately 7.6 percentage points. We believe our outperformance is primarily attributed to our strategic pricing actions with the slightly less concentrated film slate resulting in less than a one percentage point decrease in overall film cost as a percentage of admission revenues for the fourth quarter. For the full year, film cost as a percentage of admission revenues was flat compared to fiscal 2024. Per-capita concession, food and beverage revenues increased by 7.2% during 2025 compared to last year’s fourth quarter, which was driven by increases in incidence rate, higher merchandise sales, concessions pricing changes, as well as a favorable film slate that featured multiple titles appealing to family audiences, a genre where our circuit typically performs well. Our top 10 films in the quarter represented approximately 70% of the box office in 2025 compared to approximately 75% for the top 10 films in the fourth quarter last year. On the higher revenues, theater division adjusted EBITDA was $24,100,000, just under a two percentage point increase compared to the prior year. Reimbursements were $60,400,000 for 2025, a 5% increase compared to the prior year. Turning to the hotel division revenues and results, RevPAR for our owned hotels grew 3.5% during the fourth quarter compared to the prior-year quarter, driven primarily by higher revenues, as our newly renovated hotels continue to attract demand and drive higher rates. Our properties continue to perform well against the industry as a whole. Average daily rates grew 5.6% during the fourth quarter compared to the prior-year quarter, with our average occupancy rate for our owned hotels at 60.2% during 2025, a 1.2 percentage point decrease in our occupancy rate compared to 2024. The shift in our fiscal calendar and net one additional operating day in the quarter had an insignificant impact on the hotel division revenues and results. Based on data from STR, when comparing our RevPAR results to comparable upper-upscale hotels throughout the U.S., the upper-upscale segment experienced an increase in RevPAR of 0.8% during the fourth quarter compared to 2024, indicating that our hotels outperformed the industry by 2.7 percentage points. Comparable competitive hotels in our markets experienced a RevPAR decrease of 2% for 2025 compared to 2024, indicating that our hotels outperformed their competitive set by 5.5 percentage points, as well as a heavier mix of transient leisure demand at higher rates. Group demand remained generally steady during 2025, with group rooms representing 35% of our total room mix compared to 36% of our room mix in 2024, with our group mix in 2025 reverting to more typical levels. Finally, hotels’ fourth quarter adjusted EBITDA was $7,300,000, an increase of 3.4% compared to the prior-year quarter. Shifting to cash flow and the balance sheet, our cash flow from operations was $48,800,000 in 2025 compared to $52,600,000 in the prior-year quarter, with the decrease in cash flow from operations due to unfavorable working capital changes related to the timing of payments relative to our fiscal year-end. For the full year, cash flow from operations was $84,200,000 compared to just under $104,000,000 in fiscal 2024. Total capital expenditures for fiscal 2025 were $83,000,000 compared to $79,200,000 in fiscal 2024, which was primarily comprised of Hilton Milwaukee renovation project payments and maintenance projects in both businesses. During the fourth quarter, we repurchased approximately 118,000 shares of our common stock for $1,800,000 in cash. This brings our share repurchases for 2025 to just over 1,100,000 shares, or approximately 3.6% of our outstanding shares at the beginning of the year, returning approximately $18,000,000 in cash. Our cumulative buybacks since resuming share repurchases in the third quarter of 2024 are now over 1,800,000 shares, or approximately 5.7% of our outstanding share count when we began, returning nearly $28,000,000 in capital to shareholders. In total, over the last two years, we have returned over $45,000,000 in capital to shareholders through share repurchases and dividends paid during fiscal 2024 and 2025. We remain committed to returning capital to shareholders through our quarterly dividend and share repurchases. We plan to grow the dividend over time and opportunistically repurchase shares when we generate cash in excess of our near-term ability to reinvest or deploy for strategic growth. We are disciplined in our approach. While we often do not control the timing or availability of deals, we continue to actively search for opportunities to deploy capital to grow our businesses. Looking ahead, an overview of our current capital allocation priorities for 2026: We expect total capital expenditures of $50,000,000 to $55,000,000 based on our current portfolio of assets, with approximately $25,000,000 to $30,000,000 in hotels, and $20,000,000 to $25,000,000 in theaters. The timing of our planned capital projects may impact our actual capital expenditures during fiscal 2026, and we will continue to provide updates as the year progresses. We expect this decrease in capital expenditures to result in a significant increase in free cash flow in 2026, which will be allocated to opportunistic growth investments and returning capital to shareholders. With that, I will now turn the call over to Gregory S. Marcus. Gregory S. Marcus: Thanks, Chad. Good morning, everyone. We delivered another record year in our hotel division. With Chad covering many of the details of the quarter, I would like to start today by reflecting a bit on the year. As is often the case with our two divisions, the story of the year was a bit mixed, while successfully executing on some very big projects that we expect to have long-term returns. In theaters, while the box office came up short of expectations for the year, audiences continue to come out and have strong demand for the theatrical experience. We have periods of steady product supply. Because of the hits-driven nature of the business, the difference between a decent year and what would have been considered a great success was essentially one or two films that did not hit as expected. For our company specifically, our fourth quarter results were quite strong, with both businesses outperforming their industries. Theaters featured a diverse film slate with family content that played well in our markets and helped us achieve strong market share. In hotels, strong leisure demand, particularly at our recently renovated assets, helped us end the year on a high note. Importantly, the fourth quarter film slate featured a diverse mix of films across genres that played well in our Midwestern markets and appealed to wide ranges of audiences, particularly families. I will start today with our theater division. We achieved above-average market share for seven of the top 10 films in the quarter, including particularly strong share from Wicked, Zootopia 2, and Avatar: Fire and Ash. We exit the year with good momentum, and as we look ahead to 2026, we are encouraged by the growth opportunities that we see ahead. Chad went over the numbers for the quarter with you, including our strong per-cap growth for both concessions and food and beverage, as well as average ticket price that drove our outperformance for the quarter. Second-tier films beyond the top 10 also made important contributions to the overall box office, with mid-sized films like Regretting You, One Battle After Another, Marty Supreme, and Song Song Blue delivering compelling stories that audiences wanted to experience on the big screen, rather than sitting at home on their couch. The well-rounded holiday slate offered something for everyone, and it is a great example of when our industry is at its best. While we had great blockbuster films like Avatar and Wicked that drew big crowds, the box office was so much more than the tentpoles, with multiple films working at once that appealed to different types of audiences. Our market share was also strong with several movies in the second-tier films, including double our normal market share for the Milwaukee-based hometown favorite story, Song Song Glu. While the overall industry box office was softer than anticipated, we continue to believe this is largely a function of product supply and individual film performance. October was impacted by softer carryover from September releases than we saw last year, as well as a few titles that did not hit as we hoped. November’s slate had one less tentpole film over the Thanksgiving holiday compared to 2024, when the box office included Wicked, Moana 2, and Gladiator 2. This dynamic continues to illustrate the importance of maintaining consistent and steady product supply that is balanced throughout the year to support the momentum of moviegoing. And we had a more robust film slate in December. We again saw audiences come out as we would expect. As Chad discussed, we saw strong per-capita growth during the quarter, with the average ticket prices benefiting from our ongoing price optimization efforts. As we have discussed throughout 2025, this has been an evolving effort to strike the right balance between capturing price during peak demand periods, as we did during the busy holiday periods in the fourth quarter, and maximizing attendance by having various price points for different types of customers. In addition to optimizing price, we are focused on other opportunities to grow per-capita by looking at every step in the customer journey. During the fourth quarter, we began rolling out a new queuing line system that consolidates multiple concession lines into a single line that is then served by multiple concession attendants. The single line moves faster, improving customer perception, and is proving effective at increasing per-capita candy and merchandise sales. During the quarter, we made progress testing several initiatives that we believe will be drivers of per-cap growth in 2026. First, for a significant majority of our customers, their first interaction with us is the digital ticket purchase. While we have offered web- and mobile app-based ticketing for many years, we saw an opportunity to improve this purchase experience. We have completely redesigned our digital ticketing experience to make the purchasing experience as easy, fast, and frictionless as possible. In November, we launched a new digital ticketing experience for mobile web browsers and our mobile app, followed by the launch of an entirely newly designed marcusleaders.com website in early February. The new site simplifies finding the movie, theater, and showtimes that work for customers, while speeding up the process of seat selection and payments. We are very encouraged by the early feedback from customers. Second, we continue to focus on improving the customer experience for our best-in-class menu of expanded food and beverage options. Again, the goal here is simple. We know from experience that when customers order concessions, food, and beverage on our mobile app, they buy more as they are consistently presented with upsell and cross-sell offers. We are working to significantly improve our mobile web ordering experience and are going to make the ordering process as easy and frictionless as possible. We are well positioned for the ramp-up in business as we head into spring and summer movie season. Third, we are working on improving the digital ordering experience and fast, with integrated digital wallet payment options that significantly speed up the transaction process. In December, we began testing QR code food and beverage ordering for delivery to seats at two of our dine-in Movie Tavern locations, for those customers who want a fast digital ordering experience but have not yet downloaded our app. The QR code ordering is simple, and the early results have shown encouraging growth in F&B per caps at these locations. We are in the process of rolling out QR code ordering to all our 20 Movie Tavern and Dine-In theaters. This will be followed by a redesigned food and beverage digital purchase experience in our mobile web and app for all locations later this year. For those customers who prefer the more traditional purchase experience at the box office, concession stand, and our bars and restaurants, we began rolling out new tap-pay terminals in the fourth quarter, and we expect to have the rollout complete at all points of sale by the end of the first quarter. We expect these investments in technology will not only make the purchasing process easier for our customers and enhance per caps, we expect to get additional data and insight into our customers and their preferences through the new payment technology we are integrating across our various sales channels. We expect to leverage these insights to better tailor our communications and marketing with more customized offers and highlight coming events of interest. We believe it is very important to have programs that promote and incentivize repeat moviegoing, and we have created several with this goal in mind, including Marcus Passports, Marcus Mystery Movie, and Marcus Movie Club. These programs can also have the added benefit of bringing customers out to see a broader range of small and mid-sized films in addition to the blockbuster films, which we believe supports a healthier overall exhibition ecosystem. While these programs offer a lower ticket price in the short term, they are important drivers of long-term future income. In November, we reached the one-year anniversary of Marcus Movie Club, our subscription program that offers monthly or annual memberships with several great benefits for customers, including a 20% food and beverage discount, access to additional companion tickets for $9.99, and waived digital ticketing convenience fees. After our first year of Movie Club, we added free Marcus Mystery Movies as a new benefit for members, and we continue to look for ways to drive membership and usage of the program. Approximately 38% of members have selected the annual membership, which we believe supports our long-term goal of driving repeat moviegoing. Marcus Movie Club is one of several programs that promote and incentivize repeat moviegoing, including Marcus Passports, Marcus Mystery Movie, and our loyalty program Marcus Magical Movie Rewards, which now has 6,900,000 members. As we look ahead, we are very excited by a 2026 movie slate that includes several potentially very strong titles, including Jumanji 3, Toy Story 5, Minions and Monsters, The Odyssey, The Mandalorian and Grogu, Dune: Messiah, Spider-Man: Brand New Day, the Super Mario Galaxy movie, and Avengers: Doomsday, just to name a few. There are many more great films coming, as noted in today’s earnings release. The current slate has a stronger mix of tentpole films, and the grossing potential of 2026 franchises is greater based on their historical predecessor box office performances. Looking even further ahead, the early look at the 2027 film slate also looks strong with major franchises, including Shrek 5, Star Wars: Starfighter, Minecraft 2, Frozen 3, The Batman Part Two, Sonic the Hedgehog 4, Spider-Man: Beyond the Spider-Verse, The Legend of Zelda, Avengers: Secret Wars, and many more. We are excited about the momentum that is building in theaters and the film slate ahead in the coming years, and we remain very positive and optimistic about the long-term future for the industry and our theater business. Moving to our Hotels & Resorts division, you have seen the segment numbers and Chad shared the highlights of our performance metrics for the quarter, so I will focus my comments on the year overall and looking ahead. We are pleased to report that, after another strong quarter to end the year, our hotels team delivered another record-breaking revenue and adjusted EBITDA year in fiscal 2025. This is quite the achievement, given that we are comparing against a record fiscal 2024 that benefited from the Republican National Convention and election-related business that did not recur in 2025. Even more impressive considering that we also completed the largest hotel renovation project in our history at the Hilton Milwaukee, which disrupted operations and negatively impacted results with a significant number of rooms at the hotel out of service during the first half of the year. Even with the negative impact of the renovation, our RevPAR growth outperformed our competitive set for the year by 1.2 percentage points, and we really saw an inflection point once we completed the renovation, as we outperformed the competitive sets by over five percentage points in the second half of the year. The demand environment was mixed in 2025 with group demand generally remaining strong, particularly at our properties that play well to group business. Leisure demand was mixed across our portfolio in 2025 compared to last year, with some markets seeing softness while others were positive. Demand remains strongest at the upper end of the market, and our upper-upscale properties are performing well in an environment where consumers continue to gravitate toward premium experiences. While we have made significant capital investments in our hotels over the few years, we have also been disciplined with the returns required for these projects. Milwaukee is a good example of our approach. The Hilton Milwaukee renovation wrapped up in the fourth quarter with the lobby and lounge, public common spaces, ballrooms, meeting space, and updated 554 guest rooms. It looks fantastic, and it is a convention center hotel that Milwaukee can be proud of. As we chose not to renovate the 175-room west wing of the hotel and remove the rooms from the Hilton system at the end of December. Place. Running approximately 3% of in the year for the year. Place. Running approximately 3% of in the year for the year. Ahead of where we were at this time last year. Looking a bit further out to 2027, group pace is slightly behind where we were at this time last year for the next year out. Banquet and catering pace for 2026 and 2027 is ahead of where we were at this time last year. Based on the current demand environment and our future bookings, our outlook for 2026 remains positive. We are excited about the opportunities for future growth in the hotels business. I would like to once again express my appreciation for our dedicated associates at The Marcus Corporation. Chad Paris: On behalf of our Board of Directors and our entire executive team, thank you to all of our associates. Their outstanding work and commitment to serving our customers is responsible for our success. They are our most important asset, and we appreciate all that they do every day. Operator: Thank you. If you would like to ask a question on today’s call, please press star, and to withdraw your question, it is star followed by 2. We will now open for questions. We will go to Eric Wold from Texas Capital Securities. Your line is open. Please proceed. Eric Wold: Thank you. Good morning, guys. There was a lot of shifts in the pricing strategy last year. I guess, first question on the theater segment. You sounded like you implemented a few more things in the holiday period. Maybe give us a sense of what we should expect throughout 2026 in terms of cadence based on the programs currently in place, what you will come up against in this May, and how that should play out throughout the year? And then on the hotel side, given the comments you made around seeing increased leisure demand and higher ADR as the renovations have come to fruition last year, maybe give us a sense of what you are seeing in terms of bookings in 2025, and then as we look forward, what you are seeing with leisure versus group and if you expect to see more of a shift back to leisure in your mind? And if that is the case, what do you see as the implication of that? Chad Paris: Thanks, Eric. Yes, in terms of the cadence through the year, really, it is going to be the anniversarying of our price changes that we made midyear in 2025. I do not see customer sensitivity to price changes. We do want to continue to drive attendance, so it is really going to be more about per caps in that business on the F&B side, and that is where our focus is going to be. And then on the hotel side, you started lapping some of the headwinds in May. I would say, through the first part of the year, we are trying to be very thoughtful about customer sensitivity to price changes. Maybe give us a sense of what you will come up against in May and how that should play out throughout the year. Got it. Gregory S. Marcus: Let me start with the very last part of your question on group pace. You may recall at the beginning of 2025, we were seeing very significant increases in group pace early in the year, and then that flattened out a bit. We ended the year with growth that was mid-single digits, but we started the year much higher than that, and so we had a huge step-up early in the year last year, which is, I think, in part why our pace for 2026 is at, right at the moment, low single digit, because we had a big step-up last year. Timing of when those events get booked really can vary from year to year, and so I would not read too much into what we are seeing right now for 2027. It is still pretty early. Group overall remains healthy, and as we have said over the last few months, or a few quarters, our renovated properties are winning really well with groups. What we have seen, at least in the fourth quarter, is we are also doing a really nice job, even in the slow season, capturing strong leisure demand around the weekends, and we did that here in the fourth quarter. Upper-upscale continues to perform better than the lower end of the market. The nature of our properties—these “special assets”—is that they play in both the group and leisure. That is the good thing about our properties that we have talked about; our properties play well to that type of customer. If we see softening in one area, we can start to be more aggressive in another. Even in a flat overall demand environment in leisure, we can capture demand there. If you look at them, they are located and demo really well. We see a share nicely. Eric Wold: Got it. Helpful. Thank you both. Operator: Our next question comes from Michael Hickey from Stonex. Your line is now open. Please go ahead. Michael Hickey: Thank you. Hey, Greg, Chad. Congrats, guys, on a great 4Q with outperform. Greg, your 2026 setup here sounds very encouraging on both the theater side and the hotel side. The slate looks exceptional. It seems like it will meet your demand there. Do you see a sort of mid-single digit type growth on the top line, and the premise leverage step up—step up is a big word—relative to 2025 growth on the top line? Do you think you can exceed that and free cash flow conversion? And I have got a follow-up. Thanks, guys. Gregory S. Marcus: Well, you know, hope springs eternal. Hope is going to tell you hope springs eternal in the theater business. Soon. I mean, it certainly, as you said, on paper, looks good. It looks like it plays to our markets, and we talked about it, but this is an art form. We do not know how it is going to turn out. In 2025, we did not have one blockbuster over $500,000,000. That was a challenge, and it looks like the potential for these is better. We have a very significant PLF footprint. It is probably the highest penetration of PLFs in the industry. We are very focused on making sure that our prices are market appropriate and that we are offering the right product for the right customer, so when those customers are there, we are going to be able to capture the top line and the bottom line. Yet, as you know, our pricing strategies have lots on. We are prepared to capitalize and maximize on whatever comes our way. We have programs for the customers that do not want to spend as much—our Tuesday program remains very robust. A big push for us this year is going to be our Movie Club as we continue to really build that base of business. If you are in our theaters now, if you do not join the club, you are not paying attention. I mean, they are just really working hard to build that base of business. It reminds me a lot of the hotel business where you sometimes fill a hotel with a base of customers to sort of shrink the size of your hotel. And I think others in the industry who have seen a significant buildup in membership on the theater side enjoy that benefit of a continued income stream. So we are very focused on that as well. Then on the hotel side, we will continue to see the benefits of all the investment we have made in these properties. They look so good. We should see good performance as long as the economy stays solid, we will be in good shape. The only thing I would add on the film mix is that the family slate that we see ahead for 2026 should benefit a circuit like ours in the markets that we are in. In 2025, we did not really have a family animated film that hit, and we saw the power of that over the holidays with Zootopia. As we look at the slate for summer 2026, I do think that is a net positive for Marcus Theatres. And that dovetails nicely with the Hilton and that line in Milwaukee as our convention center continues to perform better. Chad Paris: Yes, Mike. I will take the last part of this question. In terms of contribution and leverage on the incremental revenue, historically the theater business contributes at around 50% on the contribution margin line to EBITDA. And with our step down in CapEx this year, I think our free cash flow conversion on that is going to be very strong. Michael Hickey: Very helpful. On M&A, you said “actively searching.” I do not know if I have heard that from you before. Are you a little bit more aggressive now looking at maybe some M&A? And I guess, with the Warner Brother deal hanging here, Greg, if that ices theater deals or not. Regardless of that, maybe some color there because I wonder how active the market is, but I do not think it has been great. And then on the hotel side, I am not sure how active the market is. So just curious where you are focusing your attention. Do you see the biggest opportunity, whether it is theaters, hotels, or maybe another area that could be complementary to your overall business today? Gregory S. Marcus: Transaction markets have been pretty slow across the entire industry. As interest rates went up, cap rates got elevated. The economy is strong enough, the businesses are okay, so there were not forced sales. People were doing well enough to wait, or at least they are going to try and wait. It is a waiting game. That has really slowed up that market a fair amount. That is a very good point. You are right. Look, I will sort of work back to this: a lot of private equity investors with a five-year hold write a pro forma and they write a cap rate, and if cap rates are 100 to 200 basis points higher, it messes up the returns pretty significantly. So they can wait. On the theater side, again, there is very, very little transaction activity that we are seeing. We will look at anything that would come our way if we think it makes sense. A big challenge a lot of these guys have are very expensive leases, and a lot of that needs to be figured out. But then you bring up a very interesting point, which we talk about, which is, okay, what other adjacencies can we have? We have worked through these huge capital investments that we have had to go through, and so now when we have free cash flow, we are looking at the leverage we can pull, whether it is buying back stock or dividends. If we can find good investments, we would like to make them. It is very tax efficient to not pay the capital out if we can keep it invested within the company for our investors. That can be a great return. And if we cannot, then we will distribute cash as we have talked about. Michael Hickey: Nice. Thanks, guys. Good luck. Gregory S. Marcus: Thanks, Mike. Operator: Our next question comes from Andrew Edward Crum from B. Riley Securities. Your line is now open. Please proceed. Andrew Edward Crum: Okay. Thanks. Hey, guys. Good morning. I want to ask about the occupancy rate. It was down year-on-year in 4Q. Was that election-related in the year-ago period? Was it the closing of the West Wing of the Milwaukee? Or was it something else? And would you anticipate that rebounding in 2026? Chad Paris: Hi, Drew. Yes, I would start with occupancy in the fourth quarter last year did get a benefit from a bunch of group business related to the election. That definitely provided a tailwind last year. I do think in some of our markets this year, there is clearly some softness. It is very much a mix story that is market-specific and, at times, even property-specific. It is not an obvious softening trend in our markets where we are at, and we are outperforming the softness generally because of the quality of the assets and the investments that we have made. So I think the way to think about it is we should look to outperform what our markets do, even if we see some of the softness. Andrew Edward Crum: Got it. Okay. Thanks, Chad. And then Mike’s last question focused on M&A. Given the opportunity to review the portfolio, in the past you guys have made selective divestitures. Any updates there? Any comments you can give us in terms of how you are thinking about that? Gregory S. Marcus: You know, look, we are always looking at our assets, and we come at it from a strong real estate mentality. One of the things that is important, as you saw in the last few years as the bubble came across the investments, is we have to look and decide, okay, is the investment going to be a good investment for us? And if we do not think the investment is the right investment for us, we can then divest ourselves of the asset, and that will happen occasionally. We do not have any major divestiture planned right this minute, but if something makes sense or the markets get very hot, we are always looking at that and saying, okay, what is the right long-term choice for these assets for our company? Chad Paris: And, Drew, we tend to immediately think about hotels in that context, but we own a lot of theater real estate, and portfolio management is an ongoing process. We are continuously looking at the performance of individual theater locations and highest and best use for the real estate. I would just suggest that store will continue to be part of a potential source of making changes, and we could add some locations too. In the past, we have monetized noncore real estate in our theater business. We might take investment and change some of the uses on some of our theater sites, and we can make investments to do that too. Again, one of our hidden assets is our real estate, and we have come at this for decades from a real estate perspective, and we may make investments on our properties that would maximize the highest and best use of that real estate. Andrew Edward Crum: Got it. Thanks, guys. Operator: As a reminder, if you would like to ask a question on today’s call, please press star. And to withdraw your question, it is star followed by two. Our next question is from Patrick William Sholl from Barrington Research. Your line is now open. Please proceed. Patrick William Sholl: Hi. Thanks for taking the question. Just maybe another question around capital allocation and M&A. Could you maybe discuss some of the differences in underwriting or opportunities in expansion, whether organic or M&A, and the differences in underwriting—just additional new builds versus the I know you talked about the difficulty with some of the leases and potential M&A—but any sort of update on those competing priorities? Chad Paris: Pat, I mean, we have looked at a number of things in the last year plus and done a fair amount of work on different opportunities. In the theater business, the challenge on M&A, consistently, has been the leases and the number of locations in a theater circuit that work and do not work when you look at a circuit overall. That mix of locations that do not work has made it very hard to get deals done if you are going to have to assume the lease. And so it really requires more of a ground game in looking and doing onesie-twosie type deals where you are picking up individual theaters in that space. That is really how we look at the underwriting—at a more granular level than in the past. New builds—we think about it. We think about attractive markets. But right now, with the product supply challenges, it is just tough to get the math to work on new construction. We are going to keep looking at it, but at the moment, it is not something I think you are going to see us do a lot of in the near term. Patrick William Sholl: Okay. And then on concessions, you had mentioned the QR ordering is helping to increase incidence. I was wondering what other components of the per-cap trends in the quarter—was it between pricing or mix and things like that? What else contributed to the per-cap trends in the quarter? Chad Paris: Yes. So in the fourth quarter, the QR code ordering actually had a really small impact. I think that is more of a 2026 benefit. We were doing a handful of test locations late in the quarter, but at those test locations, we are really encouraged by what we are seeing, and I think that is going to be a meaningful piece of our per-cap uplift for our dine-in theaters in the coming year. In the fourth quarter specifically, it was mostly incidence rate and capturing more customers. It was some of the queuing line benefit that Greg talked about and getting the basket size to grow with customers that are going to the concession stand. We have seen some traction with that, which is really encouraging. There was a little bit of price, but price was not really the primary component of what we saw in the fourth quarter. I think there was certainly some benefit in a holiday quarter of people making events of going out to the movies and just generally spending more, and I think that is encouraging to see the health of the consumer that we continue to see in the fourth quarter. Operator: Okay. Thank you. Chad Paris: Thanks, Drew. We would like to thank everybody for joining us today, and we look forward to talking to you once again in May when we release our first quarter 2026 results. Until then, thank you, and have a great day.
Operator: Ladies and gentlemen, thank you for standing by. My name is Desiree, I will be your conference operator today. At this time, I would like to welcome everyone to the California Water Service Group Q4 2025 and full-year earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. I would now like to turn the conference over to James Lynch, Chief Financial Officer. You may begin. Thank you, Desiree. James Lynch: Welcome everyone to the fourth quarter and full-year 2025 results call for California Water Service Group. With me today is Martin Kropelnicki, our Chairman and CEO; Shilen Patel, our Chief Business Development Officer; and Greg Milleman, our Vice President of Rates and Regulatory Affairs. Replay dial-in information for this call can be found in our quarterly results earnings release, which was issued yesterday. The call replay will be available until April 27, 2026. The Company has a slide deck to accompany today's earnings call on the Company's website at www.calwatergroup.com. The slide deck was furnished with an 8-K and is also available. As a reminder, before we begin, before looking at our fourth quarter 2025 results, I would like to cover forward-looking statements. During our call, we may make certain forward-looking statements, and because these statements deal with future events, they are subject to various risks and uncertainties, and actual results could differ materially from the Company's current expectations. As a result, we strongly advise all current shareholders and interested parties to carefully read the Company's disclosures on risks and uncertainties found in our Form 10, Form 10-Q, press releases, and other reports filed with the Securities and Exchange Commission. I will now turn the call over to Martin. Martin Kropelnicki: Thanks, Jim. Good morning, everyone. I cannot think of a more appropriate way to kick off our 100th year of operations as an essential utility than by quickly talking about two deals we announced. First and foremost, yesterday, we executed an agreement to purchase the Nevada and Oregon operations from Nexus Water. We have been busy working with them over the last few months to put that deal together, and we will be talking about the deal later on today. Secondly, in December, we announced we have reached an agreement to purchase the outstanding minority interest in the Texas joint venture that we help start, BVRT Holdings, and become the sole owner of seven Texas water and wastewater utilities. In addition, while we do not have a general rate case decision for the 2024 rate case for California yet, we know it is actively being worked on, and we expect to get a rate decision soon. Based on what we are seeing and where the commissioner is in the process, questions they are asking, etc., we know it is actively being worked on and we know it is a priority within the commission to get that done soon. In addition, during the quarter, we filed and we are expecting a decision for our consolidated rate case in Texas, and we have also filed a rate case in the state of Washington. So if I can get everyone to go to page five, please. We will do a quick recap on what we did for the year. First and foremost, we went into the fourth quarter really ahead of budget and performing well. But I think as many of you saw, we had a major storm on the West Coast in December, and the financial results in December were clearly affected by wet, cold weather. This is really the second time we have had an atmospheric river that really hit the whole West Coast. Normally, if you think about California, it is a long state, and while we might get wet weather in Northern California, the demand for water services stays high in Southern California because it tends to be warmer. This is one of those storms that was from all the way from the Canadian border all the way down to the Baja Coast on the California side, to the Gulf of Mexico, and so we had a pretty big weather impact that Jim will be talking about later. As a highlight for 2025, we invested a record $517,000,000 into our infrastructure systems, and that includes an additional $52,300,000 invested in the fourth quarter alone. In 2025, we increased our annual dividend by a record 10.7%, and that was followed by our 59th annual dividend increase earlier this year in 2026 by an additional 8%. We received, during the fourth quarter, our extension for our cost of capital in the state of California, which allows us to retain a 10.27% ROE until January 2028. I believe this is one of the highest ROEs of a water utility in North America. And we have received approval to increase interim rates by the commission. When the decision did not come out in December, the commission gave us the green light to implement an interim rate increase of 3% that we implemented in January in California. So overall, a busy year from that perspective on the rate side. In addition to that, we also maintained our A+ stable credit rating from S&P, which I believe is one of the highest rated utilities in North America. There is a lot to get into in the details, so I am going to turn it back to Jim to go through some of the details on the financial results. Jim? James Lynch: Great. Thanks, Martin. In Q4 2025, revenue was $220,000,000 and that compares to $222,000,000 in 2024. Net income for the quarter was $11,500,000, or $0.19 per diluted share, compared to the prior year period of $19,700,000, or $0.33 per diluted share. As Martin mentioned, our results in the fourth quarter were negatively impacted by the strong statewide weather pattern over much of California during the month of December that created exceptionally wet and cold weather. Moving to slide six, you can see the impact of this and other activities during the fourth quarter on our earnings results as compared to 2024. While tariff rate changes and other regulatory activities generated an increase of $0.48 per share, the weather-induced consumption decline led to a $0.59 earnings per share decrease. In fact, of the $12,700,000 in consumption decrease experienced in 2025, $14,600,000 of it occurred in the fourth quarter. In addition, the three-year conservation program approved in the 2021 rate case ended in Q4, with final expenses and the expense true-up reducing earnings by $0.10 per share. Slide eight shows our 2025 year-end financial results. As many of you know, the Company's delayed 2021 rate case decision resulted in 2023 interim rate relief, which was recorded in 2024. So in reporting our results, we have presented both the GAAP and non-GAAP measures for 2024, essentially removing the impact of the 2023 interim rate relief from our 2024 results. Operating revenue for 2025 was $1,000,000,000. This compared to $1,370,000,000 in 2024. When compared to non-GAAP 2024 revenue of $949,300,000, our revenue for the year actually increased by $50,800,000, or approximately 5.4%. Net income attributed to Group was $128,200,000 compared to net income of $190,800,000 in 2024. Again, when compared to 2024 non-GAAP income of $126,800,000, our net income increased $1,400,000, or 1%. In 2025, diluted earnings per share was $2.15 compared to $3.25 in 2024. And, again, removing the 2023 rate relief from our 2024 numbers, the non-GAAP 2024 earnings per share was $2.16, which was essentially flat when you compare it to 2025. Turning to slide nine. The primary drivers of our 2025 diluted earnings per share were tariff rate changes and other regulatory activities, consumption decreases of $0.19 per share, and depreciation expense increases of $0.18 per share. Combined, these added $1.05 per diluted share. Turning to slide 10, the increases were primarily offset by wholesale water rates that, net of the volume decreases, reduced diluted earnings per share by $0.27, and by income taxes, which were lower year-over-year due to lower taxable income and the related effects on our income tax rate. We continue to make significant investments in our water infrastructure during 2025 to ensure the delivery of safe, reliable water service. Our capital investments for the quarter and year-to-date were $152,300,000 and $517,000,000, respectively. This record level of annual investment represents a 19.8% increase over construction levels in 2024. As a reminder, our capital investment estimates for 2026 and 2027 presented on this slide do not include $235,000,000 of anticipated remaining PFAS project expenditures, which we expect will be incurred over the next few years. In addition, the estimates do not include any capital investments required in Nevada or Oregon. The positive impact of our capital investment program and what it is having on our rate base is presented on slide 11. If approved as requested, the 2024 California GRC, coupled with planned capital investments in our utilities in other states and our recently announced system acquisitions in Nevada and Oregon, would result in a compounded annual rate base growth of almost 12% through 2027. Moving to slide 12. We continue to maintain a strong liquidity profile to execute our capital plan, to fund BVRT greenfield utility growth, and to integrate Nevada and Oregon systems. At year-end, we had $51,800,000 in unrestricted cash and $45,600,000 in restricted cash, along with approximately $470,000,000 available on our bank lines of credit. We maintain credit facilities totaling $600,000,000 that are expandable to $800,000,000, with maturities extending to March 2028. On October 1, 2025, we issued $370,000,000 in long-term financing, which consisted of a combination of Group notes and Cal Water first mortgage bonds. We also renewed our ATM program in May 2025 with a $350,000,000 shelf registration, and completed $1,500,000 of program sales in the 2025 fourth quarter. Importantly, underscoring the strength of our balance sheet, both Group and Cal Water maintained strong credit ratings of A+ stable from S&P Global. And finally, in January 2026, we declared our 324th consecutive quarterly dividend of $0.33 per share. We also announced our intended 2026 annual dividend of $1.34 per share. The $0.10 per share increase represents an 8.1% increase over 2025. This would be our 59th consecutive announced increase. So we had a lot going on in 2025, and we are really looking forward to 2026. With that, I will turn it back over to Martin. Martin Kropelnicki: Alright. Thanks, Jim. And just to remind everyone, 2025 was the third year of the rate case. When you look at the press releases, people might say, well, you are essentially flat year-over-year. You are off a penny year-over-year, but remember coming out of COVID, there was a pretty big spike in inflation. We have absorbed those costs within that period, and we are waiting for rate relief on that. Historically, the third year of the rate case in California, being approximately 92% of our total operations, we really feel that inflationary lag in that third year. So all in, I am happy with how we ended up the year. We would have ended up stronger if we did not have that atmospheric river really wipe out the West Coast consumption here in December. But, overall, I think we finished the year in a good position as we wait for the rate case in California. I am on slide 13, and I want to talk a little bit more about the deal with our friends at Nexus Water. When you look at slide 13, this acquisition is meaningful because it strengthens our position as a leader in the Western US by adding two additional states and diversifying our geographic footprint. In addition to that, it also increases our regulatory diversification by X. If you exclude BVRT, this adds about 40% to our operations outside the state of California. So the geographical diversification and the regulatory diversification, we think, are really, really important. At year-end 2025, the acquired systems represent about $109,000,000 of rate base and a purchase price of approximately two times rate base, consistent with our allocation of capital and our disciplined approach to looking at acquisitions. In addition, at the proposed purchase price, we believe this deal will be accretive within the first year, backing out some of the one-time integration costs that we will have entering these two new markets, closing the deal, and welcoming the Nexus employees to California Water Service Group once the deal is approved by the regulatory commissions in the appropriate jurisdictions. So overall, we are really happy with this deal. We expect it to be accretive the first year, and we look forward to integrating the systems onto our platform. Moving on to slide 14, it just gives you an illustration of what the footprint looks like as we operate and expand into a total of eight states. So again, diversifying out of California, extending our footprint in these other states, and I was doing some work in preparation with our board and looking back in 1926 when we were founded, and we started with four little water systems in Northern California and how they have grown. At some point, we bought the system called Bear Gulch in the 1920s and early 1930s, and I am sure some people thought, why would they want to buy a system down in Silicon Valley? All it is is farmland down there. So, you know, as we acquire these new systems, you know, we like to think of them as seeds in robust markets that will grow over time, and that is consistent with our capital strategy. Look for systems in growing markets that we can continue to invest capital in and grow out their infrastructure to continue to improve service and spread our baseline cost over a larger base. Both states, Oregon and Nevada, operate under a hybrid ratemaking framework, which really provides some visibility into the future rate relief for capital investments that are needed. In addition, Nevada allows for a DSIC, which we think is a regulatory best practice, and the framework is consistent with our existing long-term infrastructure investment strategy. On slide 14, this deal will add about 36,000 equivalent residential units, so it is water and wastewater. With a larger footprint, we see opportunities to optimize our corporate costs and leverage our base to allow us to lower the overall marginal cost for customers while making sure we meet and exceed water quality standards and build resiliency into the system. We will also benefit from strong regulatory relationships within the states. We were very impressed with the employees and the states of Oregon and Nevada. As we know, we are big believers in strong regulatory relationships, and we believe that is the underpinning of the long-term stability of the system and our success on the regulatory side. In addition, these systems come with embedded growth pipelines, including both tuck-in acquisitions and other opportunities to add around the existing systems to grow out. So we are excited about that. And then finally, we were very impressed with the staff and the asset quality of the systems. When you look at deals, I think most of you know Shilen as our Chief Business Development Officer, but a lot of times you go look at someone and they look different than you or they operate different than you. You know, we were very impressed with the operation in Nexus Water. Looking at slide 16, I am going to hand that over to Shilen. It is not surprising for those of you that know Rob McClain and the management team at Nexus. They do a very good job, not only with their people, but with the quality of their systems that they operate in. So we look forward to a smooth approval process with the commissions in Oregon and Nevada, integrating the systems onto our platform, especially in the state of Nevada, which we deem as a high-growth state. Shilen has also been our General Manager in Texas, managing our Texas operations. Shilen, you want to talk about the transaction we executed and what is going on in Texas? Shilen Patel: Yes. Thank you, Martin. We have entered into an agreement to acquire the remaining outstanding membership interest in BVRT in Texas. As you recall, it was a joint venture, and we are acquiring a minority. Upon closing, we will become the sole owner of seven regulated water and wastewater utilities located in the high-growth corridor between Austin and San Antonio. As you can see on this slide, at 2025 year-end we have more than 19,000 committed customers, about 5,000 are connected currently, with an additional 20,000 likely in the next foreseeable future, and then about 100,000 in the long-term potential customers as our systems grow and mature. The transaction will require our Texas subsidiary to file a change-of-control application, and it is contingent on regulatory approval and other customary closing conditions, including the PUCT and also California Water Service Group board approval once we receive PUCT approval. Strategically, consolidating full ownership enhances governance, simplifies the structure, and allows us to fully capture the long-term growth and infrastructure investment opportunities within this market. We continue to expand through ongoing system buildouts, with sustained customer growth and infrastructure enhancements, really positioning the platform to support that growth. I am really looking forward to continuing to build on the successes that the team locally have put in place for the last six to seven years. Martin, I will turn it to you. Martin Kropelnicki: Sure. Thanks, Shilen. Greg Milleman: Turning to the 2024 California general rate case, we are expecting a proposed decision very soon. As we previously reported, in the case we proposed to invest $1,600,000,000 in water infrastructure in order to continue providing safe and reliable water service to our customers. We also requested revenue adjustments of just a little under $3,000,000 over the three-year period. Given where we are in the process, and given the fact that the commission can vote as early as 30 days after the proposed decision is issued and oral arguments are made, we believe that if the commission were to issue a proposed decision by March 5, there would be adequate time for the commission to consider and adopt the final decision at the next voting meeting on April 9. Obviously, we will provide an update when we receive the proposed decision. Turning to slide 18. I will provide a brief update on regulatory activity across our other jurisdictions, and I will start with Hawaii. In November 2025, we filed a rate case in Hawaii for our Kapalua district requesting $2,200,000 in annual revenues to recover higher operating costs and system improvements. Additionally, in October 2025, the Hawaii PUC approved a $4,700,000 annual revenue increase for Hawaii Water's five Waikoloa systems, with a two-year phase-in that began in October 2025. Moving to Texas, during 2025 interim rates were adopted and implemented in July 2025. These rates are not subject to refund, and we are waiting on a final PUCT approval that is currently pending. Moving to Washington. In September 2025, Washington Water filed a rate case with the Washington Utilities and Transportation Commission requesting a $4,900,000 annual revenue increase to recover costs of system investments and rising operating costs. We expect the case to be completed and new rates implemented in 2026. Overall, these filings demonstrate our continued investment in infrastructure, proactive regulatory engagement, and disciplined efforts to align rates with the cost of providing safe, reliable service. Martin, back to you. Martin Kropelnicki: Thanks, Greg. And I am now on that last page. So what are we focused on in 2026, our centennial year? First and foremost, we are committed to a timely completion with Nexus Water for Nevada and for Oregon and working with Nexus Water to completely transition there, and in a way that is good for customers and good for the employees. We expect to successfully close those transactions on time. We will continue to pursue growth opportunities in these high-growth areas, as well as change-of-control applications that we are working on. And then, of course, once we get the 2024 rate case done, it is a three-year cycle in California, and then we have the rate case that Greg just mentioned in Hawaii and in Mexico—well, it just keeps moving forward. As Greg mentioned, we have a lot of regulatory activities going on, whether it is the acquisitions we announced or planning the 2027 general rate case. Again, just to remind everyone, the primary growth engine at California Water Service Group is really the reinvestment of existing capital into our rate base. And as Jim said, we were just about 10% year-over-year in CapEx. That is the primary growth genetics, any of the PFAS stuff. And then, secondarily, we plan on strategic acquisitions like what we have done here with Nexus that add to the existing platform. But having criteria that we use to evaluate acquisitions is really important because we want to maintain that 10% cadence on the CapEx line, while balancing public health and sustainability and reliability. Affordability continues to be an issue. We know and understand that. We have been able to keep our rates affordable and maintain our rate base growth and ensure our systems are resilient, and we are building resiliency into our systems as we deal with things like climate change. And then, of course, lastly, we continue our disciplined strategy on the regulatory side, working with our regulators, staying focused on the rate cases, getting those to put us to the needs of our customer, and continuing with our capital replacement program. So we will continue looking at that and making sure we are being disciplined. With that, Desiree, we will open it up for questions, please. Operator: We will now open for questions. If you would like to ask a question, press star then the number one on your telephone keypad. Martin Kropelnicki: I would say that the California Water Association over the past three or four years has been really focused on educating the commissioners about the impacts of the delays on customers, and we have seen actions moving to get the cases out on a more timely basis. Second, one of the lead advocates for that is the commissioner that is assigned to our case, Commissioner Matt Baker, and he is very focused on getting decisions out on time. And then the third thing with where we are feeling where our proposed decision should be coming out pretty soon is the water division staff at the commission has been asking us for information to help them process and get to publish the PD. Very similar to what they did in the 2018 GRCs right before the PDs came out. And that long term, the cases will come out on a more timely basis. So that is where I feel. And then short term for our case, we see it coming out in the very near future. James Lynch: We were not getting questions. As Greg said, we got a lot of questions at the very, very end, and then the stuff was submitted, and then we waited and waited and waited and waited. There was not a lot of communication. Martin Kropelnicki: I was being politically correct in my opening comments, Davis. But you know, in the last rate case, it was just kind of like a black hole. The PD came out all of a sudden. It has been really different in this case. The judge, when it was delayed, gave us the 3% interim rate increase right away, which we thought was good. They have been asking questions throughout the process, which is good. And so we have seen a lot of activity, which leads us to believe they are very focused on it. They have not given us any assurances of a date, but it has been very clear that they have made it a priority at the commission. I think the other big thing that has changed now from where it was in the 2021 rate case is affordability is a big issue. And when you deal with things in California like the skyrocketing electric rates that people had to deal with and gas rates that are up, you know, the commissions are getting more scrutiny about rate increases. And so you cannot get a rate case out and have the idea of making our rate increase look worse than what it really is. I do not think the commission likes being in that position. And while you have an assigned ALJ, it can vary commissioner by commissioner. The real hearing officer really is the commissioner because they deal with those complaints from customers when rates go up. And so the commissioner kind of sets the tone in these cases. So I think we are fortunate we have Baker assigned to our case, who used to run the Office of Ratepayer Advocates. He has been setting the tone: we need to get the rate cases out on time and be reasonable and diligent in our approach. So I think for now, I frankly expect to get a decision here relatively soon. Obviously, when it comes out, it is material. So we 18 it right away when it comes out. Davis: That is super helpful, and thank you both for all the details there. Davis: Maybe my second question, Martin, I appreciate you bringing up the DSIC in Nevada. I was just going to ask about maybe the friendliness of operating environments, or specifically any key regulatory mechanisms in either Oregon or Nevada that are worth calling out, either that are in place now or that you might be pursuing. That would be helpful. And I think, Jim, you also mentioned in your comments, CapEx, of course, does not include potential investments in these, and maybe it is too early to say, but any thoughts on what those might look like would be helpful too. Greg Milleman: Yeah. Sure. Let us start with Nevada. Nevada has a very reasonable commission environment, which is positive. They also have decoupling in Nevada. They allow construction work in progress in rate base. They have a mechanism for interim rate memorandum accounts if your case is late. They allow adjustments for changes in your water production costs from your wholesalers, and their cases take about six months to complete. In Oregon, they have a hybrid system of a rate case with a historic test year that allows about a half year of capital improvements in your first year being included in the case. In addition, Nevada allows for a DSIC. They are allowing consolidated or statewide rates to be phased in over six years for the water systems. In Oregon, about half of the systems are nonregulated wastewater systems. Nexus has treated them as they treat their regulated entities, and they file a rate case for those entities. Those are the kind of frameworks in the two states. James Lynch: Yeah. And I think as far as the CapEx goes, Davis, as a result of that, there is kind of a capital plan in their last rate case. So as we move forward and get more familiarity with the systems, that number could change. But I would expect in the first couple of years, somewhere between $20,000,000 to $30,000,000 in CapEx between the two systems. First of all, they are historic. We can clearly work through them, but Nevada did file a pre-approval of what the levels are going to be at least in Nevada. We feel there is also a lot of opportunity there for tuck-in acquisitions around the systems, especially in Nevada. I think there is some great opportunity there that we are going to be able to take advantage of, not only because it provides us the diversification that Martin talked about, but because there is an opportunity for us to continue investment growth. Davis: Super helpful again and thank you. Maybe if I could be greedy and sneak in one more quick one. I saw yesterday the EPA appears to have officially moved forward now with the PFAS push-out that has been talked about for a few quarters. I know we have talked about this before, and Martin, you have said your plans here probably will not change. Continue to make the upgrades as they come. But maybe just give any update on funds that are flowing as a result of the class action suit, and then if that first piece is indeed correct. And thank you very much. James Lynch: Yeah. No. Good question, Davis. I think I have used the example: it is really hard to look at a mother with their child and say, yes, there is something in the water that is not safe, but do not worry about it for three years. That just does not work. And I think consumers have gotten fairly well educated on water, because, you know, as a utility, our product is consumable, and it is ingested. There is no room for error on water quality. It is absolutely critical. That is why it is in our bonus plan. That is why it is published right up front. We show what the ramifications are. Our goal is to meet all primary and secondary water quality standards every moment that we operate in. Obviously, as this becomes a new MCL, we have to be compliant with it. So we are moving forward with our plans. What we have seen when you have had this fight between the states and feds on when does it go, where does it go—if the feds have said, hey, we might delay this three years—we have seen states say, okay, but we are going to make it effective sooner. Because, again, I do not think anyone wants to not protect their citizens. I think that is really important. So we are moving ahead as planned. In 2025, I believe we spent about $20,000,000 on our PFAS programs, and that is really getting all the program logistics up, the planning for all the construction, putting the contracts out to bid, procuring all the materials, and scheduling out. We are running it as a corporate, group-sponsored program. There is a PMO—project management office—with a very good engineer leading that program. The senior management team gets updates on it all the time, and everything is being scheduled out. We are going to continue going full steam ahead. I expect in 2026 we are going to spend between $50,000,000 and $70,000,000 on PFAS. Again, that is incremental to the capital numbers that Jim has shared. In terms of recoveries, what is the net amount that we have recovered so far? Is it forty-some-odd million? James Lynch: The net amount is slightly below $40,000,000 after the attorneys have taken out their share of the proceeds. But we continue to work on other opportunities to fund those investments. We have a pretty strong grant program underway that is really going to help us, I think, in some of our more challenged districts and states. So we are looking at potential grant dollars in addition to the recovery dollars. The other thing I would just add is that $235,000,000 that we are anticipating in terms of spend for PFAS, you have to think of it in two tranches. One is the treatment, and the other is where new wells need to be drilled in order to either replace old wells or to put new wells in where we do not believe there is as big of a contamination problem. The treatment is going to be in place much quicker than the wells. It usually takes us three, four, five years depending upon the permitting process to get those wells going. A majority of the treatment, we anticipate right now, will be put in place by the 2020 step—well, it is phased, but yes. Davis: Outstanding. Thank you very much. Appreciate all the detail. Martin Kropelnicki: Alright, Davis. Have a good day. Please feel free to call with follow-up. Take care. Operator: And, again, if you would like to ask a question, press star then the number one on your telephone keypad. There are no further questions at this time. I would like to turn the call back over to Martin Kropelnicki for closing remarks. Martin Kropelnicki: Alright, Desiree. Thank you everyone for joining us here today. Obviously, 2026 is starting off with a bang. We have plenty to do on our agenda at California Water Service Group, and we will look forward to integrating the acquisitions that we talked about, the Nexus acquisitions as well as the BVRT acquisitions that we announced, getting the rate cases—staying focused on the rate cases, getting those to put us as quickly as possible—and then continuing with the PFAS treatment in our capital program. There will be plenty to talk about at the end of Q1, and we will look forward to giving you an update then. So until then, thanks for joining us today. Be safe, and we will talk to everyone soon. Thank you. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0. Any member of our team will be happy to help you. Please standby. Your meeting is about to begin. Good morning, ladies and gentlemen. Thank you for standing by. Today's call is being recorded. Welcome to the Ellington Financial Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants have been placed in listen-only mode. The floor will be open for your questions following the presentation. If you would like to ask a question during that time, simply press star then the number 1 on your telephone keypad. If at any time your question has been answered, you may remove yourself from the queue by pressing star 2. Lastly, if you should require operator assistance, please press star 0. It is now my pleasure to turn the call over to Alaael-Deen Shilleh. You may begin. Thank you. Alaael-Deen Shilleh: Before we begin, I would like to remind everyone that this conference call may include forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical in nature and involve risks and uncertainties detailed in our annual and quarterly reports filed with the SEC. Actual results may differ materially from these statements, so they should not be considered to be predictions of future events. The company undertakes no obligation to update these forward-looking statements. Joining me today are Laurence Penn, Chief Executive Officer of Ellington Financial Inc.; Mark Tecotzky, Co-Chief Investment Officer; and JR Herlihy, Chief Financial Officer. Today's call will track the presentation. Our fourth quarter earnings conference call presentation is available on our website, ellingtonfinancial.com, and all statements and references to figures are qualified by the important notice and end notes in the back of the presentation. With that, I will hand the call over to Larry. Laurence Penn: Thanks, Alaael-Deen. Good morning, everyone. Thank you for joining us today. I will begin on slide three of the presentation. Ellington Financial Inc. closed out 2025 on a high note, capping a year of consistently strong performance, portfolio growth, and liability optimization. In the fourth quarter, and building on the momentum established throughout the year, our adjusted distributable earnings continue to substantially exceed our dividends. We further expanded our investment portfolio from our unsecured notes offering and from our RTL securitization, which I will discuss later. While we were deploying the proceeds, I am all the more pleased with these results and ADE of $0.47 per share, which once again exceeded our $0.39 per share of dividends. For the fourth quarter, we reported GAAP net income, given that we experienced some short-term drags and we continue to enhance our balance sheet. Our results were driven by exceptional performance in our loan origination and securitization platforms, with outsized contributions once again from our Longbridge segment. Our results were also reinforced by excellent credit performance across our residential and commercial loan portfolios. In early October, we successfully completed a $400,000,000 unsecured notes offering, our largest to date, marking a significant step forward in the evolution of our capital structure, and are encouraged by the significant premium at which the bonds continue to trade today. Consistent with our stated intentions, we used a portion of the offering proceeds to reduce short-term repo financing. During the quarter, we also capitalized on the continued strength of the securitization market, completing seven additional securitizations over the course of the quarter. Most notably, in November, we completed our first securitization of residential transition loans. This securitization carries a revolving structure. So as our securitized RTL loans pay off, we can effectively reuse the securitization debt on a non-recourse, non mark-to-market basis to finance our flow of new RTL originations. Subsequent to year end, we completed our first securitization of agency-eligible mortgage loans. This expansion allows us to term out financing, replacing repo financing and further enhancing balance sheet resilience and capital efficiency. With that securitization, we have now expanded our EFMT-branded securitization shelf to encompass five different residential loan sectors across all of our major residential loan strategies. Since launching our RTL strategy back in 2018, RTLs have generated consistently strong returns on equity for us. The aftermath of 2022 and 2023, however, as credit spreads widened and the yield curve inverted, securitization economics for RTL were typically unattractive relative to simple repo financing. That calculus has now shifted. The yield curve normalized, with securitization spreads relatively tight, and with the rating agencies taking a more constructive view of the product, securitization economics are now superior for RTL. The result is attractive long-term non mark-to-market financing, helping us manufacture high-yielding retained tranches and enhance EFC's overall portfolio returns. As to our agency-eligible loan strategy, we initiated that strategy just last year, adding about $250,000,000 of loans in that sector over the course of 2025. This move reflected a more general theme that we have highlighted on our prior earnings calls: moving into sectors where the GSEs are gradually reducing their footprint, which clears the way for private capital to step in and capture attractive risk-adjusted returns. We view the agency-eligible sector, particularly those subsectors where we think LLPAs are too high, as presenting a potentially significant long-term opportunity for EFC, especially given all the obvious synergies with our underwriting abilities, our sourcing channels, and the quality of our securitization platform. We also believe that the opportunities in the agency-eligible sector space only get better as policymakers appear increasingly receptive to an expanded role for private capital. Shifting over to EFC's balance sheet, we continue to focus on optimizing our capital structure and maximizing our resilience. In the fourth quarter, thanks to our unsecured notes offering, we almost doubled the proportion of our total recourse borrowings represented by long-term non mark-to-market borrowings, and we increased our unencumbered assets by about 45%. Alongside these balance sheet enhancements, we continued to lean into attractive investment opportunities in the fourth quarter. We deployed a portion of the proceeds from the notes offering into new investment opportunities, expanding our portfolio by 9% even after accounting for all our securitization activity. Our portfolio continues to benefit from strong origination and acquisition volumes across non-QM loans, agency-eligible loans, closed-end second-lien loans, proprietary reverse mortgages, and commercial mortgage bridge loans. By year end, we had largely deployed the full proceeds of the notes offering to generate the precise amount of proceeds we needed to redeem our highest-cost tranche, and all this momentum has carried into 2026, positioning the portfolio for continued earnings strength into the new year. In January, with our common stock trading at a premium to book value per share, we raised common equity on an accretive basis, net of all deal costs. The issuance was not only accretive but highly targeted. We sized the offering to announce the redemption of our series A preferred stock, and we announced the redemption of that tranche immediately following the closing of the offering. The coupon on our series A preferred stock was over 9%. So starting tomorrow, when the required 30-day notice period ends and the redemption of that tranche is completed, our common shareholders will immediately see the benefit of a lower overall cost of capital. We will continue to monitor the preferred equity market with an eye toward potentially refinancing that capital at a later date and at a lower cost. With that, please turn to slide five and I will turn the call over to JR to walk through our financial results in more detail. JR? JR Herlihy: Larry. Good morning, everyone. For the fourth quarter, we reported GAAP net income of $0.14 per common share on a fully mark-to-market basis and ADE of $0.47 per share. On slide five, you can see the ADE breakdown by segment: $0.35 per share from credit, $0.04 from agency, and $0.13 from the Longbridge segment. Partially offsetting these results were net realized and unrealized losses on some of our other credit hedges as well as losses on residential REO. On slide six, you can see the portfolio income breakdown by strategy. In the credit portfolio, net interest income increased sequentially, and we also generated net realized and unrealized gains on non-QM retained tranches and forward MSR-related investments. We continue to benefit from excellent earnings from our affiliate loan originators along with strong credit performance across our loan businesses, including sequentially lower 90-day delinquency rates and continued low life-to-date realized credit losses in both our residential and commercial loan portfolios, as shown on slide 15. In the agency strategy, declining interest rate volatility and tightening agency yield spreads were broadly supportive of our portfolio in the fourth quarter. We generated strong results, led by net gains on both long agency RMBS and interest rate hedges. The Longbridge segment had another excellent quarter as well with positive contributions from both originations and servicing. Origination profits were driven by sequentially higher origination volumes, continued strong origination margins, and net gains related to two proprietary loan securitizations completed during the quarter. On the servicing side, steady base servicing net income, net gains on interest rate hedges, and a net gain on the HMBS MSR equivalent all contributed positively. Turning now to portfolio changes during the quarter, slide seven shows a 15% increase in our adjusted long credit portfolio to $4,100,000,000 quarter over quarter. Non-QM loans, agency-eligible loans, closed-end second-lien loans, commercial mortgage bridge loans, ABS, and CLOs all expanded. Our portfolio of retained RMBS tranches also grew, reflecting the securitizations we executed during the quarter. These increases were partially offset by the impact of loans sold in securitizations. Our short-duration loan portfolios continue to return capital at a healthy pace. For our RTL, commercial mortgage, and consumer loan portfolios, we received total principal paydowns of $207,000,000 during the fourth quarter, which represented 12.7% of the client fair value of those portfolios. On slide eight, you can see that our total long agency RMBS portfolio decreased slightly to $218,000,000 coming into the quarter. Slide nine illustrates that our Longbridge portfolio decreased by 18% to $617,000,000, as continued strong proprietary reverse mortgage loan origination volume was more than offset by the completion of two securitizations. Please turn next to slide 10 for a summary of our borrowings. At December 31, the total weighted average borrowing rate on recourse borrowings decreased by 32 basis points to 5.67% overall, as the impact of lower short-term rates and tighter repo spreads more than offset the impact of a higher proportion of unsecured notes. Meanwhile, we lengthened the term of some of our larger warehouse lines, and as a result, the overall weighted average remaining term on our repo extended by 38% quarter over quarter to nearly nine months, which is detailed on slide 24. Quarter over quarter, net interest margin on our credit portfolio decreased by 28 basis points, with lower asset yields more than offsetting a lower cost of funds. Our average asset yield declined, but that was only because we had a higher proportion of our assets constituting loans held in warehouses pending securitization. This larger warehouse portfolio was the result of the deployment of the proceeds from the notes offering. The NIM on agency decreased by nine basis points driven by a decrease in asset yields. At December 31, our recourse debt to equity ratio was 1.9 to 1, up modestly from 1.8 to 1 as of September 30. As noted earlier, we issued $400,000,000 of unsecured notes during the quarter, a portion of which replaced repo borrowings. However, the remaining proceeds were deployed alongside incremental borrowings into new investments and securitizations, and higher total equity, resulting in a modest net increase in the overall leverage ratio. For the same reason, our overall debt to equity ratio increased to 9.0 to 1 from 8.6 to 1. As Larry mentioned, our balance sheet metrics strengthened meaningfully during the quarter. Quarter over quarter, out of our total recourse borrowings, the share of long-term non mark-to-market financings increased to 30% from 17%, and the share of unsecured borrowings increased to 18% from 8%. Unencumbered assets also grew meaningfully, increasing 45% to $1,770,000,000, which was about 90–95% of total equity. Over time, we expect to continue this shift toward a greater proportion of unsecured, non mark-to-market, and longer-term financings through additional unsecured note issuance and securitizations, and the replacement of our highest-cost repo borrowings. We view this transition as a fundamental evolution of our balance sheet that is enhancing risk management and earnings stability, and which we hope will also support stronger credit ratings for EFC and lower borrowing cost over time. As I mentioned last quarter, we selected the fair value option on our notes, as we have for our other unsecured debt. We mark them to market through the income statement. As a result, we expensed all associated deal costs in October rather than amortizing them over the life of the notes. And with credit spreads tightening during the quarter, we also recorded an unrealized loss in the notes for the quarter. These nonrecurring items, together with some short-term negative carry pending full deployment of the new note proceeds, represented a significant drag on our GAAP earnings for the quarter. At year end, book value per share was $13.16, and the economic return for the fourth quarter was 4.6% annualized. With that, I will pass it over to Mark. Thanks, JR. Mark Tecotzky: This was a highly productive quarter for EFC. We continued to execute our loan-origination-to-securitization playbook, completing seven securitizations in Q4 across a variety of loan types, and that momentum has carried into 2026. Over the course of 2025, we expanded our footprint well beyond non-QM where we started. Our securitization platform now encompasses second liens, reverse mortgages, residential transition loans, and agency-eligible loans. Over time, EFC has gotten a lot more efficient at maximizing profitability and managing risk across the full life cycle of a loan. From purchase commitment through securitization exit, we target a gain-on-sale profit to the securitization trust while hedging execution risk along the way. Then at securitization time, we work to create high-yielding retained investments while adding to our growing portfolio of call options. When executed well in a cooperative market, this process is a virtuous cycle that is accretive to earnings at each step and is a key driver of the results we have delivered over time. Another benefit of our large securitization platform is that it allows us to provide consistent, competitive pricing to our origination partners and our affiliated originators. First, we earn a levered return while ramping for a deal; then at securitization, we sell in securitizations which typically comprise more than 90% of a given deal, and we retain things at attractive yields. What is more, the growing value of our stakes in those affiliated originators continued to generate strong results for EFC both during the quarter and throughout 2025. But we were not just productive on the asset side of the balance sheet. As Larry and JR mentioned, we are excited about the long-term benefits to EFC of being a Moody's- and Fitch-rated bond issuer. The combination of the substantial non mark-to-market financing we have built from being an active securitizer and now our latest bond issuance with very broad institutional participation has been important to protect earnings as asset spreads have tightened, and in the fourth quarter, we were able to both extend term and lower our repo financing spreads even further. I do not mean to imply that there is anything wrong with using repo as a financing tool. There is not. Repo markets functioned extremely well throughout 2025. We have also achieved tighter spreads in the investment-grade bonds, steadily reducing our dependence on short-term mark-to-market repo financing. There were several important government policy announcements this past quarter and throughout 2025 that are relevant to EFC. The announcement of $200,000,000,000 of GSE MBS purchases was probably the most prominent. I will not go into details because there are not many, but I will point out that this is not quantitative easing. Unlike QE, it is unlikely to meaningfully reduce duration or negative convexity in the market, and, critically, it does not create bank reserves. What it has done is put a floor under agency MBS spreads and, by extension, other AAA-rated mortgage bonds like non-QM, second lien, and agency-eligible AAA tranches. But perhaps the more important point is that we are operating in a time of heightened policy uncertainty: potential restrictions on institutional purchases of single-family rentals, G-fee reductions, LLPA changes, mortgage insurance premium cuts are all on the table, each carrying implications for prepayment speeds, for the relative attractiveness of private-label versus GSE execution, and maybe even for home prices. We have been focused on thinking carefully about these uncertainties and positioning the portfolio accordingly. As shown on slide four, our strong net portfolio growth was strong in the fourth quarter even after taking into account our strong securitization volume. This reflects years of methodically building out our capabilities to make it easy for partners to sell us loans while continuing to build symbiotic relationships with originators. Our goal is not to compete on price alone, but to differentiate through service quality and creative loan programs that respond to evolving markets. Not everything went according to plan this quarter. There have been some well-publicized challenges with bank loans, and our CLO portfolio, while small, was a modest drag. The RCL strategy also underperformed, weighed by securitization costs and REO workouts. Delinquencies there remain quite manageable, and in fact, we have seen strong resolution outcomes in January. We also had small losses in CMBS and ABS. Given that these kinds of air pockets were spread widely across credit-sensitive markets in Q4, the price drop is well beyond any change in fundamental value. If anything, these dislocations are creating opportunities. Looking ahead, we need to keep our eye on credit. The housing market is showing somewhat broader signs of weakness than a year ago, and more and more borrowers are having trouble staying current. We have kept significant credit hedges in place as shown on slide 20, which I view as idiosyncratic rather than systemic, and we will look to add securities where our analysis indicates attractive value. We continue to invest in our technology and sourcing to grow our loan origination footprint, which has been a key driver of our returns. Now back to Larry. Laurence Penn: 2025 was an important year for Ellington Financial Inc., and I would like to close by highlighting what we achieved and how those accomplishments position us for 2026. I will group 2025's achievements into five categories. First, we covered our dividend—adjusted distributable earnings in each of the four quarters of 2025—marking six consecutive quarters of dividend coverage. That consistency is particularly meaningful given how volatile markets have been. It underscores both the resilience of our earnings engine and the benefits of our diversification. Second, we significantly strengthened our liability structure. Over the course of the year, we completed 25 securitizations compared to just seven in 2024. We added several attractive new facilities. We improved terms on existing secured financing lines. Taken together, these efforts supported not only portfolio growth but also a meaningful and deliberate evolution of our funding profile—one that is more durable, more flexible, and better suited to support our long-term objectives—and set the stage for more notes offerings in the future. We issued $400,000,000 of unsecured notes. Third, our loan originator affiliates had exceptional performance. They grew origination volume, gained market share, and made excellent earnings contributions to Ellington Financial Inc.'s bottom line. Our vertical integration continues to provide us with a tangible competitive advantage, driving loan sourcing, supporting securitization scale, and strengthening our earnings power. Fourth, we continue to keep realized credit losses exceptionally low, which is a testament to our underwriting discipline and the depth of our asset management capabilities. Our delinquent inventory remains modest in size and is resolving nicely. Remember, we mark to market through the income statement, so for any loans that we expect to resolve below par, we have already taken that hit. Fifth, and central to our growth story, we expanded our portfolio by almost 20% year over year to nearly $5,000,000,000 while remaining disciplined on credit and risk management. That growth reflects both the payoff from technology initiatives and the addition of new strategic equity stakes with forward flow agreements to our diverse roster of sellers. The flow we are seeing at Ellington from our residential loan origination portal, which we launched just twelve months ago, is currently around $400,000,000 per month and growing. The success of our loan portal is a powerful demonstration of how Ellington's proprietary technology can scale EFC's sourcing footprint, improve underwriting efficiency, and deepen EFC's vertically integrated model. Complementing our investments in technology, we added two new strategic loan originator equity stakes in 2025, each paired with forward flow agreements that provide high-quality recurring loan flow. As to strategic initiatives, I am pleased to report that we are now in contract to acquire a small residential mortgage servicer, and are awaiting regulatory approval. Once completed, this acquisition will further enhance our vertical integration by bringing more servicing capabilities in-house. While it will take some time to build out the platform and design the servicing protocols, I believe that this acquisition will ultimately provide us with better control over our servicing outcomes and strengthen our ability to manage our loan portfolios across market cycles, especially for delinquent assets. Together, these technology and strategic initiatives were key drivers of our portfolio growth in 2025, and we expect them to continue to support momentum in 2026. Our priorities for 2026 are clear. We are focused on growing our loan origination market share while maintaining strong credit performance, which, together with our securitization platform, should drive disciplined portfolio growth. I am also pleased to report that 2026 is off to an excellent start. We are estimating that EFC generated an economic return of approximately 2% in January, with loan production and portfolio growth remaining strong, particularly in our non-QM, commercial mortgage bridge, and reverse mortgage loan businesses. Over EFC's nearly twenty-year history, I believe that we have consistently demonstrated disciplined stewardship of shareholder capital and a willingness to act opportunistically when market conditions are favorable. The common stock offering we executed efficiently with institutional orders alone and our decision to redeem our series A preferred stock reflect that approach. We evaluated a range of alternatives, including refinancing our series A preferred with new preferred equity, but given the persistent wide pricing we have seen in the preferred market, we felt the choice was clear. Using a targeted common stock offering, which was more than two and a half times oversubscribed, underscored strong market support for the transaction and its rationale. In summary, I believe that expanding our loan sourcing, securitizing frequently and efficiently, strengthening our liability structure, and optimizing our capital base, all combined with our disciplined risk and liquidity management, position Ellington Financial Inc. to deliver resilient earnings and stable dividend coverage over time and across market environments. Our team deserves a lot of credit for all the hard work they have put in to help make this happen. With that, we will now open for questions. Operator, please go ahead. Operator: Thank you. If you would like to ask a question, press 1 now on your telephone keypad. Once again, that is 1 to ask a question. We will take our first question from Douglas Harter with UBS. Please go ahead. Your line is open. Douglas Michael Harter: Thanks, and good morning. Hoping you could talk a little bit more about the decision to buy the servicer. Should we assume that we could get those outcomes without doing it in-house? Or is it more a way to kind of optimize the loan portfolio? And then just a clarification, is this something that would just be used for the Ellington portfolio, or could it be used for third-party clients? And, you know, is this entity owned within EFC, or is it going to be owned at broader Ellington? Laurence Penn: Hey, Doug. So there were really a few considerations. There has been a tremendous consolidation in the servicing industry. You saw Mr. Cooper buy Rushmore, and now Mr. Cooper being bought by Rocket. So the big-box servicers are bigger, and there is less high-touch servicing capability out there to work with borrowers that hit any kind of challenge. If they hit a speed bump, have a loss of income, get behind in a payment, we believe that it is important for us to generate the best risk-adjusted returns, that we have best-in-class protocols and best-in-class technology for handling later-stage collection. So this is not about scaling something to be a low-cost Fannie servicer where you are just dealing with servicing for massive efficiencies. This is just the recognition that as there has been consolidation in the servicing industry, there are not a lot of good alternatives to work with borrowers that hit any kind of challenge. So, you know, we just concluded that if we wanted to achieve that, it was something we had to build. We think that there is not enough of those capabilities out there in the marketplace that we could sort of assume that we could get those outcomes without doing it in-house. Owned within EFC. The way I think about it is our job right now is to build out the technology, to build out the protocols, to have this servicer be what we regard as best in class, and to demonstrate that to ourselves by seeing its servicing metrics—roll-to-delinquency rates and how you deal with borrowers that hit a speed bump—and how well it is operating efficiently. So the first thing, we need to build it, get it to where we want it to be. There is a lot of sort of champion–challenger. Once we do that, I certainly think that there is going to be other investors in the mortgage space that are going to recognize there is not a lot of capability out there now for later-stage collections and might well have an interest in benefiting from what we are building. Operator: Thank you, Doug. We will move now to Eric Hagen of BTIG. Please go ahead. Your line is open. Eric J. Hagen: Can you discuss conditions right now for applying repo to the retained tranches held from securitization for non-QM and RTL? Have the terms improved, and are there scenarios where you could apply even more leverage to the retained tranches, and what would the returns look like? Mark Tecotzky: Sure. I can take it. I mentioned in my prepared remarks, the repo market functioned really well this year. You had a gradually declining fed funds rate, and then the Fed injected some reserves into the system where they thought bank reserves were getting low. So repo functioned extremely well. Financing spreads on retained tranches are relatively low. I would say that those retained tranches are sort of inherently levered. You are dealing with small tranches at the bottom of the capital stack in securitization, where most of the cash flow is coming from excess spread. So those tranches, by nature of the investment and their leverage, already have a lot of price volatility. I do not see us wanting to add more leverage on those tranches. We tend to operate the company very conservatively when it comes to repo. By that, I mean that we have internal haircuts that are significantly higher than the advance rates our repo lenders would give us. So we might have loan strategies where lenders would lend us 90–95 cents on the dollar versus the loan, and internally, we will think that we want to only borrow less than that to make sure we have cash on hand if you have spread volatility, things like that. We have plenty of ability to raise leverage if we want to. I do not feel as though, given the inherent price volatility, the retained tranches are probably a place where we would look to add it. Laurence Penn: I was just going to add that, sure, we have some financing in that. But if you think about our long-term goals around our financing structure, liability structure, think about unsecured notes, which we did a debt deal at 7 3/8, now trading in the high sixes. Think about our preferred equity, eight-ish percent on preferred. It is our unsecured notes. Those are really more the instruments of financing that. Now, of course, those are not as low cost as repo, but remember, we are looking for this virtuous cycle, as Mark said. If we are well into the teens just on an unlevered yield and we are financing at 6–7%, it does not take much leverage, just from those instruments, to have 20% plus ROE. So we do not really need a lot of leverage. And you think about the kind of repo that we said we paid down when we did that notes offering in October in the fourth quarter—it was exactly the higher-cost repo that we would pay down first. Eric J. Hagen: Thank you very much. Thank you. Operator: We will move on to Trevor Cranston of Citizens JMP. Please go ahead. Your line is open. Trevor John Cranston: Hey. Thanks. Mark mentioned the government policy announcements during the quarter and the potential impact they have on Ellington. Can you maybe expand a little bit on specifically how you guys are approaching the agency-eligible market, given the potential for changes to LLPAs or G-fees, which could come about, I suppose, over the course of the year, and sort of how that flows through to pricing, prepay, and convexity risk on those types of loans? Thanks. Mark Tecotzky: Sure. Hey, Trevor. It is a great question. We do not have a crystal ball. We have a lot of resources to monitor potential policy changes, and I would say with this administration, lots of things are on the table. So the genesis of agency-eligible investor loans and second homes getting securitized in the private-label market—you have seen this off and on for the last five years. It certainly has accelerated some. The reason is that the loan-level price adjustments combined with the G-fee are so far in excess of expected losses in those markets that the private-label market has better pricing on the credit risk there, and it is overall better execution for loan originators. So it is flowing that way. Now, if there is a big change in LLPAs, it is possible the math could tilt back to Fannie/Freddie, and you could see a reduction in volume there. I would say right now the execution is not close. So a small change in LLPAs I do not think is going to move the needle. You are still going to see the lion's share of that volume in the higher LLPA category, not the super low LTV stuff, but still go in private label. We have to watch it. That is why I wanted to put that in the prepared remarks: pricing structures in the market are in place now, and if pricing structures in the market change, it can change the economics and the opportunity set and what we do. I would say right now it would take a fairly significant change in LLPAs and G-fees to swing the pendulum back over to GSE execution on those loans. But it can certainly happen, and that is something that we can monitor. We cannot hedge it, and we cannot control it. Now, the other implication is on the prepayment side of things. If you have a big enough change in LLPA—sort of like when people talk about prepayment models, they talk about elbow shifts—and changes in LLPA represent an elbow shift. You basically make certain loans more refinanceable. So when we evaluate either premium investments in that space or the IOs you create, you know, an inverse IO, you have a prepayment model, and the prepayment model is calibrated to current market levels. The prepayment model does not know that an LLPA cut or a G-fee cut can happen in the future. So what we do to take into account that risk right now in those sectors is ramp up speeds higher than what you would get just to a calibrated model now. We think it is enough for risk. That is something we want to manage to and take into account and properly probability-weight when we look at the distribution of recurrent returns. I would say that we are not the only ones in the market to view this as a heightened risk. So you can dial up your prepayment speeds on those sectors and still buy things at market levels with very attractive returns. It is not as though the other market participants are ignoring this risk or turning a blind eye to it in the pricing. Trevor John Cranston: Yep. That makes sense. Okay. Thanks very much. Mark Tecotzky: Thanks, Trevor. Operator: Thank you. We will now move on to Bose George of KBW. Your line is now open. Frank Gilabetti: Good morning, guys. Thanks for taking my question. You had another strong quarter in origination activity. Can you just discuss the current margins year to date, the current competition you are seeing? Laurence Penn: Mark, why do you cover the forward space? I will cover the reverse space. Mark Tecotzky: Sure. So in the forward space—non-QM, second liens, agency-eligible investor—I would say the competitive landscape in 2025 was competitive, but I would not characterize it as cutthroat competition. When we would think about our loan-level pricing that we put out every day, or where we are going to buy bulk packages from either affiliated originators or just originators we partner with, we could price things at levels such that I thought we had a gain on sale securitizing them and retain things at attractive yields. I think that it was competitive, but you could still price things with the margin. It was not the case in 2025 that the pricing pressure seemed cutthroat or that you were not compensated for taking the risk you are having to take on. Laurence Penn: Thanks. And then let me cover the reverse space. Let us separate it into two parts: there is the HECM originations—the FHA-guaranteed product—then there is proprietary. Rates have not changed much recently and are still high relative to 2020–2021. So HECM volume, industry-wide, has not grown a lot recently. If rates do drop, it would have a lot of room to grow substantially. We are—Longbridge has been at times the highest, second highest, always in the top three originators in the HECM space. There is competition. The margins—gain-on-sale margins—are driven to a large extent by spreads in the marketplace as to where you can sell the Ginnie Mae, the HMBS. That was certainly a tailwind in the last half of last year. It has been nice margins. But right now, margins are excellent, and volumes are quite steady. On the prop side, there is competition in the prop space, and again the gain-on-sale margin is going to be driven a lot by the securitization exit spreads. As long as securitization spreads remain tight—which, as I said, we just did record low spreads on our last deal on our AAAs—the gain-on-sale margins there I think will continue to be excellent. The volume there is growing as the products—the proprietary products—are expanding. We make tweaks to them all the time, and we feel really good about volumes there continuing to increase for Longbridge. Frank Gilabetti: Great. That is very helpful. Then I would love to get your thoughts on the potential changes to bank capital standards and whether you think banks could become more active? Mark Tecotzky: You know, it is interesting. All the credible mortgage researchers that have years of experience and access to data expected much more significant bank buying in 2025 than they actually saw. What you have seen them doing instead is, with these big negative swap spreads, just buying treasuries and match funding them with swaps. We have not seen a lot of bank buying in pass-throughs or CMBS holdings as well as their pass-through holdings. In Q4, you saw, I think it was the first time in many years, that banks reduced their pass-through holdings. Spread levels now are tighter than what they were for most of 2025. So maybe these capital regs will change things. I just do not know. I think it is certainly possible you could see them retain more loans. There has been some of that going on, especially the adjustable-rate loans like the 7/1 loans. I know some of these regs are intended to have banks get more involved in the servicing market. I think that is something you could see them do. But the big players in servicing—and the big transactions, the big sales, the big buyers—it has mostly been on the nonbank side for a while. We will have to see. Operator: Thank you. We will now move on to Timothy D'Agostino of B. Riley Securities. Your line is open. Timothy DeAgostino: Yeah. Hi. Thanks for the commentary today. I guess, at the start of '26, it would be great if you could maybe lay out some of the biggest priorities or what is on the top of mind for management in accomplishing in 2026. Understanding that integrating the mortgage servicer, increasing long-term financing, maybe within the portfolio, whether it is the allocation or in the capital stack using more cash to buy back preferred or something like that. It would just be great to get maybe a couple points that you all are looking to accomplish in '26 that are kind of at the top of mind. Thank you. Laurence Penn: Mark, let me handle the capital structure side of it, and then you could talk about what we are looking at in terms of maybe from a portfolio allocation perspective. On the capital structure side, look, we just did redeem that preferred. We have another preferred that is going to become callable at that point, and it becomes callable at that point. Of course, there is a chance we could call that as well. It is something that we would absolutely consider at that time. We also will continue to monitor the preferred market. We saw some of our peers, in terms of where they issued preferred, and we did not like it, did not like the prints that we saw. We did not think that was appropriate for us to issue there. But should an opportunity arise, we could absolutely look to replace the preferred that we redeemed with probably similarly sized preferred. I think that you look at our capital structure right now, and as I mentioned, we think that our marginal use of that capital is better than the coupon on the preferred. There is no reason we are in no sort of real hurry to call it. We have a lot of optionality when that happens. As long as that spread is a little tighter than the last one, we could be in the market with certainly another offering later in the year. We will see. You know, there is no real science around this, but I think most companies would probably look at just a slightly higher percentage of the equity base in preferred as something that was more typical in the space. So I think that is something that we will monitor throughout the year. And then, absolutely, I think if we need the capital—and I mentioned the fact that our unsecured notes, the Moody's- and Fitch-rated notes that we issued early in the fourth quarter—they have tightened. Of course, we would love them to continue to tighten. JR Herlihy: Hey, Tim. Thanks for the question. I would say that those five categories Larry laid out—covering the dividend with ADE and continuing to have consistent and strong earnings; strengthening our liability structure; supporting our originator affiliates, more market share growth; managing through delinquencies—we talked about how delinquencies declined quarter over quarter; make a lot of progress cleaning up sub-performers, continue on that theme; and then continuing to grow—are really key to our performance and growth accomplishments in 2025 and are very relevant to your question for 2026. Just looking at the numbers, we were almost $5,000,000,000 of portfolio holdings at year end. That was $2.5 billion a little more than two years ago, and leverage has actually declined over that same period from 2.3 to 1.9. So we have been able to accomplish that growth without taking up leverage. Looking forward in 2026, I do not want to just say more of the same, but kind of continuing to expand on each of those themes, supplementing them with additional strategic relationships with originators and continuing to add on the technology front, just improving the overall earnings quality, if you will, that we are delivering to shareholders. We want steady earnings, steady book value, dividend coverage, and keep that franchise going. And by the way, think about some of our peers—other mortgage REITs—that have hit some big stumbling blocks where they can borrow money, especially on an unsecured basis, has suffered immensely. We want to be the most attractive for debt investors to place their money in our space. My doubling comment is really about credit and Longbridge. We have taken agency down, and that has taken leverage down, and I am really focusing on the credit and Longbridge portfolios when I give that statistic. Mark Tecotzky: I would just leave you with one thought. What we talk about in the earnings call, what you see in the earnings presentation, is what EFC is currently doing—how we drove returns in 2025 and the focus of this call, Q4 2025. But it is almost twenty-odd years since this company has been around—private and then going public—and over that time, we have generated returns in a lot of areas, and I think it speaks to the breadth of the capabilities of Ellington Management Group. You have seen CRT be a driver from time to time, legacy nonagencies, unsecured consumer, auto, aircraft; you have seen us involved in mobile home lending. We have tremendous capabilities in CLOs, tremendous capabilities in buying distressed commercial loans. There are so many capabilities, skilled PMs, experienced researchers across almost all structured products within Ellington. I fully expect in all these areas that we are not always going to be doing what we are doing right now. The opportunity set for Ellington Financial Inc. will evolve over time. You could see an opportunity in auto; you could see an opportunity in unsecured consumer. Those have been small parts of the portfolio recently, but they can get interesting and exciting and priced really attractively over time. I put in that thing about the policy risk now because it is true. We are thinking about it. We are trying to position for it. We can predict what is likely, but we do not have a crystal ball to predict exactly what is going to happen. The resources and capabilities that Ellington Financial Inc. is able to access by its shared services agreement with Ellington Management Group, I think, gives us a tremendous opportunity set. Laurence Penn: I want to highlight one sector, Mark, which is the small-balance commercial sector. Look, everyone knows that there are sectors of the commercial mortgage market that have been under a lot of stress, and I think we have done a great job in terms of managing our portfolio with really minimal issues there. That has put us in a great position. We are seeing auctions from sellers, and it is such a highly fragmented market. It is a very sometimes geographically localized market. So we do not compete—certainly not with big banks—on those bridge loans. Sure, spreads have tightened overall, but our financing spreads have also tightened commensurately. That has been a growth area for us recently. I think it will continue to be. The technicals are, well, bad for sellers, good for buyers. So I think that is definitely an area where we are going to continue to see stress and opportunity. Timothy DeAgostino: Awesome. Well, quick second question: regarding book value today, I might have missed it earlier, but could you give us an update, whether that be in a dollar figure or just directionally? JR Herlihy: Good morning, guys. Thanks for taking the question. We mentioned an economic return of approximately 2% for the month of January. We have not put out January month-end yet. We should be putting those out again in the next few days—early next week. So that would imply that book value is up one-ish percent, net of the dividend. Those numbers are rough now, but that is the direction. Operator: Thank you. We will now move on to Jason Weaver with JonesTrading. Your line is open. Jason Weaver: Awesome. Thank you again for the time this morning. Congrats on the quarter. Just thinking about—in the prepared remarks, you spoke to the expanded opportunity set, partially due to the expansion of the seller network. Given the growth in size and flexibility of your financing capacity, would it be fair to expect a wider range on intra-quarter recourse leverage and a greater acceleration of securitization activity moving forward? JR Herlihy: Could you repeat that? And a greater acceleration of securitization deals? Jason Weaver: Yeah. So, you know, given how the flexibility and scope of your financing platform has increased markedly, would it be fair to expect a wider range on leverage moving quarter to quarter? JR Herlihy: Yeah. So, certainly, intra-quarter, like if we showed month-end recourse debt-to-equity, it fluctuates. We had two deals that had not closed as of January and closed in early February. Pushing those forward from January would have taken leverage down, but they were still on balance and closed early in the month of February. So there is certainly noise within a quarter. We will see expansion to the extent we can do more. I think thematically, our securitization pace has been really high. We are off to a strong start. We are through six, seven weeks of 2026. We are ahead of the pace of 2025, which was almost above three times faster than 2024. So that acceleration continues, at least so far. I think if something happens where we feel like securitization spreads—let us say they widen out—we do not like them, then I think it is quite possible that we would have more loans in warehouse at quarter end and slightly higher leverage, but that would be somewhat temporary. Jason Weaver: Got it. Thank you for that. And then the new RTL securitization that you priced, can you speak a little bit more to the structure there? Specifically, I was wondering what the reinvestment period window looks like. Laurence Penn: Sure. As I mentioned, it is a revolver. I believe it is a two-year reinvestment period. So every month we can replace basically the loans that pay off with new loans. It is important because the average life is obviously a lot less than two years for those loans, so it makes the financing a lot more efficient. Jason Weaver: Got it. That makes sense. I appreciate the color. Laurence Penn: Alright. I think, operator, I think that is it. Look, I apologize for the delay. Thanks for sticking around for the call. We will make sure that we pay the phone bill on time next time. We appreciate your patience. It was a great quarter. We look forward to a great year. Thank you. Operator: We thank you for participating in the Ellington Financial Inc. Fourth Quarter 2025 Earnings Conference Call. Your line is now disconnected, and have a wonderful day.
Operator: Please continue to stand by for the Loar Holdings Inc. Q4 conference call. We will begin momentarily. Greetings, and welcome to the Loar Holdings Inc. Q4 and Full Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone requires operator assistance during the conference, as a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ian McKillop, Director of Investor Relations. You may begin. Ian McKillop: Thank you, Brock. Good morning, everyone, and welcome to the Loar Holdings Inc. Q4 and Full Year 2025 Earnings Conference Call. Presenting on the call this morning are Loar Holdings Inc.’s Chief Executive and Executive Co-Chairman, Dirkson R. Charles; Executive Co-Chairman, Brett N. Milgrim; Treasurer and Chief Financial Officer, Glenn D’Alessandro; as well as myself, Ian McKillop, the Director of Investor Relations. Please visit our website at loregroup.com to obtain a slide deck and call replay information. Before we begin, we would like to remind you that statements made during this call, which are not in fact, are forward-looking statements. For further information about important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, please refer to the company’s latest filings with the SEC available through the Investor Relations section of our website or at sec.gov. We would also like to advise you that during the call, we will be referring to adjusted EBITDA, adjusted EBITDA margin, and adjusted earnings per share, each of which is a non-GAAP financial measure. Please see the tables and related footnotes in the earnings release for a presentation of the most directly comparable GAAP measures and applicable reconciliations. To begin today, I will now turn the call over to Dirkson. Dirkson R. Charles: Thanks, Ian. Good morning to my mates and all our partners participating on this call. I am Dirkson, Founder, CEO, Executive Co-Chairman of Loar Holdings Inc. As you all know, Loar Holdings Inc. was founded fourteen years ago with the mission of building an aerospace industrial cash compounder, wrapped in a culture that all our mates can be proud of. Fourteen years into our journey, I am as excited about our future as I have ever been. In 2025, we once again delivered predictable and consistent financial performance, exceeding all our key annual financial goals. Sales, adjusted EBITDA, adjusted EBITDA margins, and free cash flow were all annual records for Loar Holdings Inc. But my excitement really comes from looking forward to 2026 and the opportunity to break all those records we set last year. Look. Looking into the future, all our end markets have strong tailwinds. The commercial aftermarket has experienced an increase in the average age of the in-service fleet. Pre-COVID, the average was approximately 11 years. Today, it sits at fourteen-plus years. The older the fleet, the more demand for aftermarket parts. We love that. This is a trend we can expect to continue well into the 2030s, as delivery of new aircraft continues to fall short of demand. In addition, the commercial aftermarket has witnessed a decrease in the number of aircraft retired each year. Historically, 2.5% of the fleet is retired. However, from 2022 through 2025, the retirement rate has continuously decreased, reaching a low of 1.5% in 2025. Aging fleets, reduced retirement, all lead to one thing: greater demand for our parts into the future. With regards to the equipment manufacturers, who are sitting on record backlogs of orders for future delivery, they have done an excellent job in addressing ongoing supply chain challenges, shortages of skilled labor and raw materials, constrained production, and geopolitical uncertainty to now be able to increase production. For example, Airbus and Boeing plan to produce approximately 1,900 and 1,300 aircraft over the next two years, respectively. This would represent a compound annual growth rate increase of 15% over 2025 production rates. Our proprietary products that align fit on these aircraft will generate increased sales for us as production ramps. Now, with regards to the defense market, which has been heavily influenced by the current geopolitical environment, European nations have increased their military spending to the highest percentage of GDP in decades. In the U.S., there is talk of a $1.5 trillion defense budget. Combined, these trends will lead to greater opportunities for us to provide more products and solutions. So given our balanced portfolio, 50% OE, approximately 50% aftermarket, the broad spectrum of our products across all end markets, combined with executing all along all our value drivers, we expect to continue to grow sales at 10%+ organically and adjusted EBITDA at 15%+ annually into the foreseeable future. We continue to grow inorganically as well. Every time we add a new member to our family of companies, we view it as adding capabilities to the Loar Holdings Inc. toolkit. The larger the toolkit, the larger the revenue synergies. I am pleased to welcome our new mates from L and B and Harper. L and B brings new capabilities to our toolkit and we are excited to add our new mates to the team. Harper is a company I have personally known for eighteen years and could not be happier knowing that this once employee-owned company chose us to carry their brand into the future. No option, just a good old-fashioned getting to know each other and realizing that our culture is made for a perfect match. Bob and Carla, welcome to team Loar Holdings Inc. With that said, Loar Holdings Inc. is a family of companies with a very simple approach to creating shareholder value. First, we believe that providing our business units with an entrepreneurial and collaborative environment to advance their brands, we will generate above-market growth rates. Since our inception in 2012 through the end of calendar year 2025, we have grown sales and adjusted EBITDA at a compound annual growth rate of over 30–40%, respectively. Second, we executed along four value streams. We identified pain points within the aerospace industry and look to solve those problems through organically launching new products. In calendar year 2026, we expect that new product growth will be the number one driver of our organic growth as we qualify new parts in the first half of the year, fueling increased sales starting in 2026. As you all know, we track this pipeline of opportunities monthly. This pipeline represents a list of opportunities derived from listening to our customers, identifying their pain points, and developing direct solutions for them. These solutions are created from the sharing of ideas, best practices, and customer synergies across the group, which directly results in a high degree of collaboration that we foster across our business units. The pipeline represents over $600 million in sales over the next five years without including the benefit of top-line synergies we expect to achieve since adding the capability to produce fans, motors, interior latching mechanisms, and C-track fittings to our toolkit through the additions of L and B and Harper. We are focused on optimizing the way we manufacture, go to market, and manage our companies to enhance productivity. Each year, we will identify initiatives that will allow us to continually improve our performance, with a focus on one or two major efforts that can be expected to expand margins. We continuously investigate ways to improve our mine collect, gather, and utilize data. Enhancing our management ERP and other systems and processes allows us to efficiently leverage data and drive financial and operational efficiencies. Each year, we achieve more price than our cost of inflation, which is one of the levers we use to continuously improve margins year after year, except for the occasional temporary dilution due to acquiring a business with diluted margins or incurring costs because of being a public company. Regardless of these temporary headwinds, we continue to improve our margins. Most importantly, we are committed to developing and improving the talent of our mates because our success is solely, solely a result of their dedication and commitment. To all my mates, as always, thank you so much for your commitment and hard work. I will now turn it over to Brett to walk you through the key characteristics of our portfolio and our commitment to our inorganic growth. Brett N. Milgrim: Thanks, Dirk, and good morning, everybody. One of the key drivers of our exceptional performance this quarter and this year, and maybe more importantly our consistent performance over a very long period of time, is because we have a very diverse portfolio of products that covers virtually all end markets, platforms, customers, and is balanced across the OE and aftermarket spectrum. Said another way, we have content on virtually anything that flies today, and that is by design as opposed to relying on any particular platform, end market, or specific product line. We just want to have exposure to and be balanced across a very large and growing overall aerospace and defense market. We accomplish this through a very broad portfolio, the vast majority of which consists of proprietary products, which allows us to drive growth, achieve value pricing, and create strong customer relationships and corresponding cross-selling opportunities. Effectively, we have positioned ourselves to capture the 20-, 30-, 40-, or even 50-year annuity that any one particular platform may provide, whether it is a commercial aircraft, military aircraft, or in part of its OE or aftermarket portion of its life cycle. Our proprietary products are not only growing as a percentage of our total portfolio, but also growing in the aggregate, as we have a long history now supplementing our organic growth with M&A activity and a large pipeline of opportunities. What we are seeing today with M&A is a very active market with many willing potential sellers, but as such, we think a market like this requires an appropriate amount of discipline, whether it is related to price or just the quality of the assets for sale. That discipline is something we have been very focused about in creating the portfolio we have today, and as a result, we have done one to two deals a year for a fairly long time now, irrespective of macro conditions or the like. So we remain a very active and consistent acquirer of assets and fully expect 2026 to be another active year. In fact, since going public less than two years ago, we have invested over $1.1 billion of capital in M&A, which is far and away our greatest use of free cash flow and, along with strong organic growth, has resulted in us doubling the size of the business in two years as a public company when you include our latest announced deals. To Dirk’s earlier point, we feel very confident in a business model that, through organic means and acquisition-related growth, can at least triple every five years, and we are certainly ahead of that pace since becoming a public company. Our newest family members, L and B and Harper, both represent the type of businesses that we want in the portfolio. Obviously, we have not had the chance to speak since announcing the closures of either L and B or Harper, but we are really excited about both. I think these companies represent what I was mentioning earlier—two very different product lines serving different end markets and customers—but both are right down the middle of the types of businesses we want to own: proprietary content in niche markets with meaningful aftermarket opportunities. Just to review two of the names that are on this page here, LMB—I think most of you know because that is a business that we announced many, many months ago—we are very glad to finally have closed that, I think, in December. LMB is a business located in the southern portion of France. It is a great business that manufactures what we call engineered cooling devices and solutions. Said another way, think customized and ruggedized fans, and motors and systems that go into niche applications in military content, whether it is an aircraft or a ground vehicle. It is a 100% proprietary product portfolio with what we think is a very, very meaningful opportunity to increase the aftermarket side of the business today, which is less heavily weighted towards currently. It also serves an end market that we have not really had a lot of exposure to, but it has a lot of tailwinds today, which is the European defense market. So we think that is going to be very strong for the next couple of years. And it is a business that today is margin accretive to overall Loar Holdings Inc., and it has a real growth opportunity to enter the world’s largest military market here in the U.S., which it does very, very little of. So we are very excited about the opportunities in front of us. Harper, as Dirkson referenced, is actually a business that we have been familiar with since our days at McKechnie. This is a business that, again, we call interior securing components, but think interior latching mechanisms and the like. We are familiar with it through McKechnie because we had a latching business called Hartwell back in the 2007 to 2010 time frame, and we are very familiar with Harper due to its stellar reputation, high-quality products, and excellent, excellent relationship with Boeing. So Harper serves a completely different market than LMB in that it primarily serves the commercial market. Like I said, it has an excellent, excellent representation with Boeing. They have been recognized as one of Boeing’s most trusted suppliers, and we think that relationship can foster further cross-selling opportunities with Boeing, with other parts of the commercial market, and really be a value-added piece of the portfolio. We are really, really excited about both LMB and Harper. We can already see the collaboration with other business units, as we think these new products are going to be value added to the overall portfolio, which Ian will tell you about next. Ian McKillop: Every quarter, we share this slide about highlighting our products, but the real power of this portfolio is not just any one of these products. It is the combined capabilities that Dirkson spoke about earlier. We have added two new capabilities: interior latching assemblies, as you can see in the top right; hyper fans and cooling devices, with our acquisition of LMB. This product offering, with over 25,000 SKUs, of which no one SKU makes up more than 3% of our overall revenue, brings our customers something that is incredibly unique: a set of capabilities that can serve them and can be adjusted to meet their needs. I will now pass the call back to Glenn. Glenn D’Alessandro: Thank you, Ian. Good morning, everyone. Let me start by discussing sales by our end markets. This comparison will be on a pro forma basis as if each of our businesses were owned as of the first day of the earliest period presented. This market discussion includes the acquisition of Applied Avionics in Q3 2024 and BeeLite in Q3 2025. It does not include our latest acquisitions of L and B Fans and Motors or Harper Engineering. We achieved record sales during calendar year 2025. In total, our sales increased to $500 million, which is a 15% increase as compared to the prior year. Our Q4 sales were also a record, increasing 17% versus the prior-year quarter. These increases were driven by strong performances in commercial aftermarket, commercial OEM, and defense. Our commercial aftermarket sales saw an increase of 19% in calendar year 2025 versus 2024. It increased 34% in Q4 2025 versus Q4 2024. This is primarily driven by the continued strength in demand for commercial air travel and an aging commercial fleet. Our total commercial OEM sales saw an increase of 11% in calendar year 2025 versus 2024. It increased 8% in Q4 2025 versus Q4 2024. This increase was driven by higher sales across a significant portion of the platforms we supply, along with an improvement production environment for commercial OEMs. The increase of 19% in our defense sales in calendar year 2025 versus 2024 and 14% in Q4 2025 versus Q4 2024 was primarily due to strong demand across multiple platforms and an increase in market share as a result of new product launches. Defense sales will continue to be lumpy given the nature of the ordering patterns of our end customers for our products. Let me recap our financial highlights for 2025. Sales increased 19.3%, or 16.9% excluding acquisition sales, over the prior period. Our gross profit margin for Q4 2025 increased by 320 basis points as compared to the prior-year period. This increase was primarily due to our operating leverage, the execution of our strategic value drivers, as well as a favorable sales mix. Our increase in net income of $9 million in Q4 2025 versus Q4 2024 is primarily due to lower interest. Adjusted EBITDA was up $10 million in Q4 2025 versus Q4 2024. Adjusted EBITDA margins were 38.7% due to our operating leverage, the execution of our strategic value drivers, and a favorable sales mix. This was partially offset by additional costs associated with being a public company, including Sarbanes-Oxley compliance, and additional organizational costs to support our reporting, governance, and control needs. For the full year of 2025, sales increased 23.2%, or 12.7% excluding acquisition sales. Our gross profit margin for the full year was 52.7%, which is up 330 basis points as compared to the prior-year period. Our net income increased $50 million in calendar year 2025 versus 2024. This was driven by lower interest expense and higher operating income. Our adjusted EBITDA was a record $189 million in calendar year 2025. This is up $43 million versus 2024. Adjusted EBITDA margins were up 180 basis points due to our operating leverage, the execution of our strategic value drivers, and a favorable sales mix. This was partially offset by the additional costs associated with being a public company. We do not see an increase in these types of public company costs going forward. We believe the run rate of these costs is fully reflected in our calendar year 2025 results. Our free cash flow conversion, which is defined as cash flow from operations less capital expenditures, was 138% for calendar year 2025, and it is 160% if you exclude a one-time $10 million tax benefit we received from the One Big Beautiful Bill Act. Let me now turn the call back over to Dirkson to share our outlook for 2026. Dirkson R. Charles: Thanks, Glenn. Look, we are extremely excited to share upward revisions to our 2026 outlook. As I said earlier, each of our end markets is experiencing strong demand tailwinds. So our focus is on executing our value drivers to continue to position us to at least, as Brett said earlier, at least triple adjusted EBITDA every five years including acquisitions, as we have done consistently since our inception except during COVID. As always, our view is on a pro forma basis assuming we own all of our business units since the beginning of 2025. With that said, we still expect commercial OEM and aftermarket growth will be low double digits in 2026 for all of the reasons I highlighted earlier, while our defense end market sales will be up mid-single digits, as we come off a fantastic year of 19% growth in 2025 over 2024. As we have always said, growth in the defense end market will be choppy. These market assumptions, along with the additions of L and B and Harper to our family of companies and our continued execution of our value drivers, allow us to meet or exceed the following for calendar year 2026: net sales between $640 million and $650 million; adjusted EBITDA between $253 million and $258 million; adjusted EBITDA margin of approximately 40%. Once again, we demonstrate our ability to continually improve margins. Net income between $59 million and $63 million, while adjusted EPS between $0.76 and $0.80 per share, which is a reduction in our guide only because of the incremental non-cash depreciation and amortization related to the acquisitions of L and B and Harper, as well as the interest associated with funding those acquisitions. As we discussed earlier, capital expenditures will be in line with our historical rate of approximately 3% of sales, at $19 million. We have increased full-year interest expense to $80 million because of the funds we borrowed to fund the acquisitions of L and B and Harper. We expect both acquisitions to meet our investment hurdle of doubling adjusted EBITDA in three to five years and to be accretive to earnings in calendar year 2027. Our effective tax rate 25%, depreciation and amortization of $75 million, and non-cash stock-based comp of approximately $17 million. Share count remains the same, 97 million. So look. Please note that all of the amounts I have just outlined for you relating to calendar year 2026 performance assume no additional acquisitions. However, as Brett said earlier, our drumbeat is to complete one or two acquisitions each year. We just cannot predict the timing of such acquisitions, and I will add that the activity around acquisitions is even at a higher level than it was when we chatted last quarter. So we are excited about that also. Operator: Okay, with that, we will now be conducting a question-and-answer session. If you would like to ask a question, please press star-one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star-two if you would like to remove your question from the queue. If using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question today comes from John Gordon of Citi. Please proceed with your question. John Gordon: Hey, guys. Thanks for taking my question. I have one clarification and one kind of more real question. The clarification is obviously we see the revised outlook and across all the metrics that I think drive the stock most, it has gone up—margin, you know, EBITDA, etc. And I think the analysts that are close to the name kind of understand what is going on here. But I wanted to just give you a chance to spend an extra second on the adjusted EPS kind of revision lower and what is driving that, and just make sure that it is super clear for everybody. Yeah. Glenn D’Alessandro: John, thank you for asking the question. I really appreciate that because we realized that can be a little bit confusing for folks. Look. When we gave our guide last quarter, we did not have the acquisitions included in it, right. So that did not include LMB and it did not include Harper. And happens always when you are doing an acquisition, you incur accounting, legal fees, and the like—let us call it, we call those transaction expenses, right. That is incurred, that affects EPS. In addition—those are one-time in nature though—yeah. In addition, we are required for accounting reasons to write up the assets and also write off some of the intangible assets to amortization. All non-cash that gets charged against net income. All of those are what is driving the change, including the additional interest, to the EPS. So non-cash mostly is the biggest driver. John Gordon: Got it. Thank you. Sorry for a second there. That is very helpful. My sort of more real question is you sounded very optimistic about the M&A pipeline. And that is something we have heard from other companies as well. And we have seen it in rising deal activity across A&D. You mentioned one to two M&A deals a year. I wanted to just sort of press on that. And the question is could we see an elevated rate above that range for a bit? Could we see deal size go up? You know, how do you think that this kind of more active and maybe more interesting deal environment manifests itself for Loar Holdings Inc. versus historical norms? Brett N. Milgrim: The short answer, John, is yes and yes. Meaning we are seeing more deal flow. We are seeing more active sellers. We are just overall seeing a more active market in this space, given what we see as good visibility, good performance, and quite candidly, good valuations, which makes for active sellers. Like I said before, though, that also means that we need to have more discipline because we need to make sure that we see the requisite returns in anything we do. So we talk about one to two deals a year simply as a proxy, given the historical trends. In any given year, it could be significantly more. It really just depends on the opportunities in front of us, and we will always, always be opportunistic and always, always be disciplined such that if prices get too high or quality of assets for sale are too low, or there are things that we do not see the return in, we are not going to do it simply and exclusively because it is an “active market.” We have been very, very consistent over, I think, a relatively long period of time now. And I think our track record kind of speaks for itself. So I use the one to two deals as a proxy and nothing more. And we are going to be opportunistic as we go here in 2026. John Gordon: Appreciate it. Great color. Thanks, guys. Brett N. Milgrim: Yeah, no problem. Thanks, John. Thanks, John. Thanks, John. Operator: The next question is from Kristine Liwag of Morgan Stanley. Please proceed with your question. Kristine Liwag: Hey, good morning, everyone, and thanks for all the color you have provided. You know, in the quarter, you guys called out 17% organic sales growth. I was wondering if you could talk about the building blocks of that organic growth. It is pretty robust above industry market. So if you were to look at, you know, on a same-store, you know, apples-to-apples, volume, what would it have been? And then also how much of this growth was from your new product introduction? And how do we think about this throughout 2026? Dirkson R. Charles: Hi, Christine, and thanks for asking the question. In terms of what is driving our—I will use your terminology—organic growth. Look, I think I have said this before. Prior to the most recent time, I would say volume was the biggest, the biggest driver, if you break it up between volume, price, and new business. But as we think about 2026 and going forward—and 2025—the new product introduction is really the largest driver of our organic growth and which is where we think we actually differentiate ourselves from others, because that is $600 million of opportunity that I talked about earlier. We are actually at the cusp now of really starting to get the benefit of that. So in 2026 and beyond—so since 2026, 2027—we expect that will be the largest driver of organic growth going into, you know, the next 12, 24 months. Brett N. Milgrim: Yeah. And just to add something, you know, for the calendar year 2025, I think our quote-unquote organic growth is actually better than as represented as the number we put in the Q, and you saw it on what Glenn’s slide—pro forma growth, which really is the more appropriate measure to measure organic because it gives us credit for the organic growth in the acquisitions we did—was actually closer to 15% relative to the 12.9% as reported. So 15% organic pro forma growth, as if we had owned all the businesses at the beginning of the initial period, I think, is really, really spectacular and something that we are very proud of. Kristine Liwag: Thanks for the color, guys. I mean, these are standout numbers. And, you know, following up on the deal dynamics, being able to close LMB fans and motor, you know, being a French asset. You know I think it seems like a pretty incredible way to close that kind of deal, especially with the French government ownership. When you are looking at the pool of available assets, how much more interest do you have in expanding out international capabilities? Is there more of a potentially roll-up fragmented pool you can pull from in the European market? And how does your ability to close LMB give you confidence that maybe, hey, you have got another rich pool to pull from. Yeah. Brett N. Milgrim: Excellent question. So look, as you guys know—and you know, particularly Christine—it is a global industry, aerospace that is. And so I think over time you will see us continuing to do more and more outside the borders of the U.S. specifically. That being said, the opportunity set remains huge, particularly for the size deals that we are looking to acquire. We have more opportunities than we will ever get to. I have said that many, many times. And in Europe in particular, now that we have four businesses over there, which really serve as a base of infrastructure and management, talent, and resources that we never had before, it exponentially increases our ability to build off those things, to own more assets. So Europe obviously is a very big market. We are just getting started there. So whether it is Europe, the U.S., or elsewhere, I think you are going to continue to see us expand internationally and, you know, mirror the footprint of the overall industry. Kristine Liwag: Super helpful. And if I could sneak a third one in, you know, we mostly focus on your commercial aerospace business, but defense has been also seeing significant increases. You know, Dirkson, you talked about the potential $1.5 trillion. And look, in Europe, if they want to increase to 5% of GDP, you are seeing fairly large numbers across the board. What we have seen is that the concern about the ability of the supply chain and the industrial base to support this growth has been a priority. When you look at your role as a supplier in this environment with strong operational skills, I mean, look at your margin and your ability to deliver to your customers. How do you see yourself in that ecosystem? What problems could you incrementally solve and could you see outsized growth in your defense business versus what top lines are just from that vertical integration and the supply chain and your ability to be able to get product in the hands of your customer? So not to lead the witness, but—and maybe I did a little bit—it would be helpful to understand how you think about that defense growth. Ian McKillop: Yeah, I mean, you know, Christine, this is Ian. We always view defense growth as lumpy, right. But I think that actually, given that fact, we have a very strong operational mindset that we can react when our customers need us to react. So I think that is positioned us well because you are right. I mean, across the global environment, everything is pointing to strong tailwinds in defense. And our team is ready to meet that need, should it be there or when it is there. So I think we are well positioned to capture those things. And I think, you know, to Dirkson’s point on that $600 million list of opportunities, right? Defense opportunities are in there. And so we are focused on helping support our customers in the way they need it. And we welcome any new opportunities as they come. Dirkson R. Charles: If I can add. And by the way, Christine, that is another really, really great, great question. I just want to piggyback a little bit on what Ian was leading you. So yes, we think that we could solve a lot of the supply chain—I will use your terminology—issues relative to the plethora of capabilities that we have, right, which is why we think about our toolkit. And I will tell you that we have had numerous conversations with customers that lead to opportunities that are not adding to that $600 million at this point. So I will just give you an example. LMB—there are a number of opportunities where we could solve issues on this side of the pond that are not being solved overseas because of the lack of the customer synergies that LMB had existing by itself, right. So we will be able to solve a lot more issues with the supply chain because we can now introduce that capability to customers on this side of the pond. That is just one. There is a plethora of others. And so I would not be surprised if—giving a little bit of guidance here—if that $600 million went up significantly by the time we get to the next quarter in terms of the opportunity set, driven by your question. There is going to be a number of defense opportunities that we can be helpful with, adding those capabilities. So great, great question. And by the way, congratulations on the promotion. I heard. Thanks, Erickson. Operator: The next question is from Sheila Kahyaoglu, Jefferies. Please proceed with your question. Sheila Kahyaoglu: Good morning, guys, and thank you so much. I have three questions, if it is okay. So maybe I will start on the acquisitions—Harper and LMB. I know you guys have given lots of color, and I appreciated on LMB what it does. And Harper too, given it is such a great supplier to Boeing. Maybe can you clarify the 100% proprietary products? How much are the process? Do you own the manufacturing, the IP? It all? As I have been asked a few times, and I think, you know, there are some misconceptions around the type of assets you guys buy and what proprietary means. And then as you think about the scope, I think LMB makes a lot of sense. As you answered to Christine on expanding it, how do you think about other markets Harper or other suppliers Harper could get into? Thanks. Dirkson R. Charles: No. Another really good question. Let me, let me, let me start from your last and I will go to your initial question. Okay. Let us start with Harper—100% proprietary. 99.9%. Some of them are listening, so I will be totally straight. 99.9% proprietary. And the way we think about proprietary—I will use this terminology. I know there are lawyers listening—but we think of it as where you are the primary source. I will use that terminology of the product that you are supplying. It is your design. 99.9% for Harper. Their design, their names on the drawing. You cannot go anywhere else to get that part than to go to Harper. So let us take that definition and expand it to the total portfolio of Loar Holdings Inc., because we get this question a lot. When we did our S-1 two years ago, we said 85% of our portfolio was proprietary. I will tell you this today, because we just recently did that math: 85% is now 89%. So it is all heading in the right direction. And the reason being is because that is where the growth is coming from—our proprietary products. And that is where we are investing our capacity, and not just inorganically, but also organically. So that has grown tremendously. And the other place you can see it—and you can check the box as to whether or not you have a business or a portfolio that is really proprietary—is to look at margins. That is one of the reasons—we do not talk about it a lot—but it is one of the reasons why our margins continuously go up and to the right, right, because we are investing in the proprietary nature and products where we are solving issues for our customers, using those proprietary products. So it is increasing tremendously. Now I will go back to Harper. Harper is one of four companies—four out of thousands of suppliers to Boeing—that has a collaborative agreement. Now what does that mean? That means they are joined at the hip. That means Boeing has an issue, they pick up the phone and they call Harper relative to capabilities that Harper has. Here is the beauty of what we have just done by adding them to the Loar platform: they now pick up the phone and call Harper; Harper calls the group and says, can you solve any of these problems? So we have expanded that collaboration with Boeing to include all of the Loar business units. That is the way we think about it. So no, we are excited about it for the reasons I just answered—that Christine’s question—but I am super, super excited about Harper and the relationships and synergies I am going to get from adding the company. Its reputation, its capabilities, and most importantly, the talented folks in that building to our team. Sheila Kahyaoglu: It makes a lot of sense. I am going to ask another one. You know, on these two deals, how do we think about the pathway to accretion on EPS? And how do we think about accretion on cash EPS? Brett N. Milgrim: Well, it is very simple—growth, and growth is a function of all the things that Dirkson Charles just spoke about. So in every deal we do, as I think you know, we have said many, many times, we look to see a path to doubling EBITDA, at least, in no more than three to five years. Quite frankly, in certain cases—and I will use one that you all know, since it was the first deal we did going public—Applied Avionics is well ahead of that schedule. We think for LMB and Harper—and quite frankly for any deal going forward which we use debt financing for, which by definition will make it dilutive to net income—we think most of these deals, but in particular Harper because you asked about it, will be accretive within a year. So in 2027, on a net income basis, we think Harper will be accretive. And that is a function of growing the earnings, growing the EBITDA, and, you know, doing all the things that we do to add value for these businesses. Does that answer your question? Sheila Kahyaoglu: Yes, it does. Thank you. And then last one, the 34% commercial aftermarket growth was pretty stellar. Any way to parse that out? Dirkson R. Charles: Let me start with this. So I am—a little bit about who I am. So my lucky number is 13. Everybody is going to go, why are you saying this? I am saying it for one reason—born January 13th. So 13 is my lucky number. The only time I do not like 13 is when I have to report earnings every 13 weeks. That is the only time I do not like 13. So there is good and bad to reporting 13 weeks at a time, right? The great news is we have proprietary products in the aftermarket. That is a high demand, right. We have customers who—I will give you an example—distributors who want to be exclusive. And we 100% say no, right. But again, the demand exists. What we saw in the fourth quarter—tremendous demand for our parts. Folks placing orders. It actually, I would say, positively surprised me—again, it is only 13 weeks, right—because usually at the end of the calendar year, most people are trying to manage inventory. In this case, we have customers who want to distribute our products, and we are just seeing more of it. Now, going forward, as I said earlier, where we see growth and where we really put our foot down on growth is on new business introductions. And I will use two examples—the only two I ever use—brakes. We got about a dozen programs that we are working on. Half of them are now certified. The other half we hope to have done by the end of the year. That is why I am excited about the second half of the year growth rate. I will go back to Harper one last time. Harper makes the locking mechanisms that go in the cockpit door barrier for Boeing aircraft. Now, you always hear us say we are so, so awesome on Airbus. Nobody ever asks about Boeing. Boeing. Yeah. So Boeing—Boeing—now having Harper as part of us, it gives us the opportunity in the aftermarket to really chase those parts, right, in terms of cockpit barriers. So as we think about growth in 2026, commercial aftermarket will continue to be low double digits for the year. Maybe a little choppy. But really, really strong given the strength in the fourth quarter that we have seen this year. So, Sheila, if I can just say this—because thanks for asking the question—we see no slowdown in demand for commercial aftermarket. And I think it is reflected in our numbers. Sheila Kahyaoglu: Great. Thank you guys so much. Operator: The next question is from Ken Herbert of RBC Capital Markets. Please proceed with your question. Ken Herbert: Yeah, hey, good morning, everybody. As I think about—just to follow up on that point—and maybe as we think about, you know, call it double-digit organic growth in your commercial markets in the guide for 2026, can I interpret what you are saying that new business will be the largest contributor to that growth relative to volume and price? Dirkson R. Charles: Yes. Okay. Can I—can I? That is the right short answer. So let me just say something relative to that, right, because we say this all the time and this is probably a good time to really send this message across. Brett always says—I listen to him say it all the time—that we use price as just the filler. Discretionary, right. It is discretionary. Can we increase price significantly? 100%—every day of the week, all day long. That is what proprietary means—going back to the previous question. We want to grow—five years from now, we will be three times the size. Check, check, check that box. We want to grow up to be a company that people do not point at and go, you are gouging me, right. You are chasing price above everything else. We want to truly partner with our customers, right. And so yes—Ken, the answer to your question is yes, we are focused on new business and that is going to be a big driver. Brett N. Milgrim: Yeah. And just as it relates to price, you know, again, with the caveat being that we want to drive margins only one way. So I think there is a slide in our investment deck that we put in the appendix that shows you over the last five, six, seven years, margins have only gone one way. We will have our margins start with a four in front of it. I think everybody on the IPO road show had asked us, when are we going to reach 40% EBITDA margins? And of course, you know, at the time we cannot give specific guidance in that regard. But here we are just two years later, and I can tell you unequivocally, margins are only going one way—and that is up. That Brett. Ken Herbert: Hey, maybe just to—yeah—just to clarify one other point, the up 34 in the fourth quarter, I think, Dirkson Charles, was any part of that from, like, new distribution agreements or maybe any pull forward ahead of either price increases or inventory build in the channel? I just want to make sure there was not—not anything unusual, but understand the dynamics of that 34%. Dirkson R. Charles: No. No. Great, great question. The short answer, again, is no. No pull forward, no special distribution agreements. I will tell you that we have distributors that are fighting over their end customer and wanting to be good, you know, suppliers to them. And again, whether it is a kit that they are trying to put together and our parts are included, or they want to be able to say, I can sell that part that no one else can, right? We are just seeing more demand, Ken. But no, no pull ahead. None of that. Ken Herbert: Okay. Perfect. And just one final question on the 2026 guide. Do you have any—how would you frame the risk around the commercial aftermarket versus OE growth? And to what extent maybe have you sort of de-risked the guide relative to what could be choppiness on the OE side versus what sounds like pretty consistent sort of aftermarket performance? Dirkson R. Charles: Great question. So let us start with OE. So on the OE side, what we have done—if you take Boeing and Airbus build rates—depending on the product line that we are producing, we have discounted it anywhere from 10% to 20%—10% at the low end, 20% at the high end—relative to the build rates that people are projecting. So could there be upside there? Absolutely. With regards to the aftermarket, yes, I do agree with you that we believe that that is going to continuously grow significantly double digits. Again, the only problem I have is reporting every 13 weeks, right. Can we have a period of time where it is 14% and then the next quarter it is, you know, 9.5% or whatever? Absolutely. But over the year and the long term, double-digit growth is what we seek. Ken Herbert: Thanks, Dirkson Charles. Dirkson R. Charles: Thank you, sir. Thanks, Ken. Additional questions. Operator: At this time, I would like to turn the floor back over to Dirkson Charles for closing comments. Dirkson R. Charles: Look. Thanks, everyone, participating on today’s call. I love it when we can share our story. We are super, super excited about our future. I will say for the third time, maybe the fourth. Given what we have done over the last 14 years, we expect to continue to do the same, which means adjusted EBITDA goes from $1 today to $3 five years from now. That is our focus and that is how we want to build this business. And we want to build it in a very special way. We want to have great mates living in a great environment, not being gouged customers, but growing the business consistently. We want to build this aerospace and defense cash compounder for a very, very long time. So look, with that I have two things to say. One. Happy birthday, Ellen. Thanks for participating on the call. You know who you are. And two, I look forward to talking to you guys in 13 weeks—even though you know it is 13 weeks. Thanks, guys. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference.
Operator: Welcome to the FTI Consulting Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Mollie Hawkes, Head of Investor Relations. Please go ahead. Mollie Hawkes: Good morning. Welcome to the FTI Consulting conference call to discuss the company's fourth quarter and full year 2025 earnings results as reported this morning. Management will begin with formal remarks, after which, we will take your questions. Before we begin, I would like to remind everyone that this conference call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act, including the company's outlook and expectations for full year 2026 based on management's current beliefs and expectations. These forward-looking statements involve many risks and uncertainties, assumptions and estimates and other factors that could cause actual results to differ materially from such statements. For a discussion of risk factors and other factors that may cause actual results or events to differ from those contemplated by forward-looking statements, investors should review the safe harbor statement in the earnings press release issued this morning. A copy of which is available on our Investor Relations website at www.fticonsulting.com as well as other disclosures under the heading of Risk Factors and forward-looking Information in our annual report on Form 10-K for the year ended December 31, 2025, our quarterly reports on Form 10-Q and in our other filings with the SEC. Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this earnings call and will not be updated. FCI assumes no obligation to update these forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law. During the call, we will discuss certain non-GAAP financial measures. A discussion of any non-GAAP financial measures discussed on this call and reconciliations to the most directly comparable GAAP measures are issued in the press release and the accompanying financial tables that we issued this morning. Lastly, there are 2 items that have been posted to the Investor Relations section of our website for your reference. These include a quarterly earnings presentation and an Excel and PDF of our historical, financial and operating data, which have been updated to include our fourth quarter and full year 2025 results. With these formalities out of the way, I'm joined today by Steve Gunby, our CEO and Chairman; and Paul Linton, our Interim Chief Financial Officer and Chief Strategy and Transformation Officer. At this time, I would like to turn the call over to our CEO and Chairman, Steve. Steve Gunby: Thank you, Molly. Welcome, everyone. Thank you all for joining us today. As I guess some of you have seen already this morning, we reported once again record fourth quarter revenues and record results for this year. I'm hoping that many people on this call know by now that those sorts of record results are not unusual for us. But in this case, given the challenges we faced when we started the year, I'd like to pause on those results a bit more than I typically do and reflect a bit on just how we got here. If you remember, at the beginning of 2025, we talked about the fact that in 2025, we were probably facing more headwinds than I think perhaps we've ever faced during my time here. We talked about the fact in the second half of the year, most of our businesses were slow. In fact, we thought some of the markets we were in were slow, and we are bringing that slowness into 2025. We talked about the fact that though we have a terrifically competitive Tech business. It was facing dramatic declines in second request activity. We talked about the fact that FLC, which was showing the strength we always thought that business could command, was now facing uncertainty regarding demand due to the potential regulatory enforcement changes in the United States. And perhaps most important, on top of all that, we talked about the major challenges we were facing within our Compass Lexecon business, E con. It's a great business, with the world's leading professionals but a business that was facing truly substantial disruption heading into 2025. If you remember that discussion, those discussions of the headwinds from the beginning of the year -- the fact that in the face of all those challenges, our teams delivered the 11th year in a row of adjusted EPS growth and another record year of revenue to me, at least, and I hope some of you, is incredibly powerful, may be more powerful and more noteworthy than just simply another record year and maybe more -- even more powerful than our results in the years where everything seemed to go right. The ability to deliver those sorts of results in the face of those challenges. To me, it's about as convincing an argument for the resilience of this company as I could imagine. And to me, it underscores something that I will come back to, which is not just the powerful trajectory of this company over the last while because powerful trajectories [indiscernible] looking backwards with the incredibly bright future that, that sort of performance portends for this company. So let me take a moment to go back through that year in a little bit more detail. In terms of the negative headwinds we talked about at the beginning of the year, unfortunately most to them turned out to be real. The impact of the slowdown in second activity request, the second activity levels actually did happen and in fact, it worsened in the first half of the year. And CorpFin had an even slower first quarter than we expected. And Compass Lexecon, though we were able during the course of the year to attract some terrific talent, the adjusted EBITDA impact we faced in 2025 was actually substantially worse than we anticipated at the beginning of the year. So how in the face of all that, did we end up with this record year? As Paul will talk about, we did have some onetime things that helped us this year, but those are not the primary story. The primary reason we delivered those sorts of powerful results is because we have such a set of multifaceted powerful businesses, not one great business, but multiple great businesses. with people in those businesses who take responsibility, who take responsibility for making the core investments that drive the business. Who take responsibility for standing by those investors, working them so they can come to fruition. The sorts of actions that we have driven in those businesses in a lot of places around the world, in prior years and in '25 were the actions that allowed us to overcome the headwinds we faced. Let me give a little bit more detail. And let me start with a difficult story, the Tech story this year, at least for parts of the year. Tech business did have a slow year overall. Important, what we always do when we face a business that's slow is evaluate, is it because of the competitive position? Or is it because of transient market factor. If it's -- our position is strong, we continue to support that business, continue to invest in that business. And if you remember, we have, over the last few years, talked about just how powerful our Tech business is, how it strengthened itself competitively and how much share it has gained as a result. When we looked at Tech performance this year, we did not find that those truths have changed. We found the market was slow. Second requests were slow. So we supported that business, the great teams we have in that business, we invested, we attracted talent. And so when the market started to turn later in the year, we were the beneficiaries. So even though Tech business did have a down year overall. You can see in that down here, you can see the resilience that competitiveness and that strength and it began to show up once again in tech's fourth quarter results. In ECon, the situation is a bit different. There, the economics did not improve as the year went on. If you remember, the Compass Lexecon disruption really only started to hit us somewhere in the middle of the second quarter and intensified as the legacy revenue from the professionals who departed slowed down as the year went on. And though we were able to add some terrific talent, talent that we believe over the long term will be terrific assets for this business, those investments in 2025 as usual at the outset hurt the P&L. So unlike Tech, Compass Lexecon did not do a u-turn in terms of quarterly results in 2025. Actually, the year got worse as it went on. And overall, the impact was worse than we anticipated at the beginning of the year. As I alluded to above, what happened is that those results in Compass Lexecon and Tech were overcome by truly terrific performances in the rest of our businesses, businesses in CorpFin and FLC and in Stratcom. I can't do possibly do justice to all the efforts by all the people to make that come to fruition. In CorpFin, for example, there are so many things that made a difference. The results there are attributable to both things we did within the year with really terrific nimble management but also the result of powerful multiyear investments that teams have made in different practices and different geographies. Investments that, for example, have allowed us to transform over the last few years, our restructuring business from what at one point was primarily a U.S. credit or right restructuring business to be a global leader in restructuring, playing and leading in many places on both creditor and company side, which in turn, I believe, makes us right now the #1 or #2 position in restructuring in more markets around the world than any other player. Those sorts of moves individually look small, but collectively, they have allowed us to move from a position 15 years ago when we were not the prime player to win, say, the bulk of the global Lehman Brothers bankruptcy to today where we are top of mind team, the top of my team, I believe, to help with the massive global engagement, whether it's Hertz or Steinhoff a couple of years ago or this year with Sunnova Energy, Spirit Airlines, Wolfspeed or others. And that is just talking to the transformation of our restructuring position equally or perhaps even more powerfully are the result of our investments our teams have made in building multiple businesses beyond restructuring. Our set of transaction businesses, which delivered record results this year even in slow markets and our transformation set of services, which despite having some extraordinary slow market, delivered a terrific second half of the year. And our teams did all that while continuing to recruit record levels of senior talent and promoting our next generation of experts, which, of course, bodes extremely well for our future. In FLC, the progress we have seen reflects the great positions we have built now over multiple years, combined with enhanced leadership and enhanced communication, of those capabilities to the market. Entering the year, however, even with that strength, we had concerns about headwinds from policy shifts like the slowdown in FCPA and other changes in regulations. In the face of those headwinds, our performance in FLC this year, have to be honest, actually astoundedly. I think there were a couple of different factors that particularly drove it. First of all, in slow markets, it is often the case that the strongest players tend to take share, and I believe the actions and investments that leadership have taken, particularly in the U.S. but not limited to the U.S. over the last few years has positioned us to win some of the biggest jobs in the market. If you win the biggest jobs in the market, even if there aren't that many big jobs, you can be up when the market is down. And I think that was part of the reason we were successful this year. The other reason, I think, was the nimbleness of this team in multiple places around the world. Our leaders believe in the proposition that we have built, but they also understand there are multiple potential markets for those propositions. And so understand that the federal government is enforcing certain regulations, but the state governments are, we need to go talk to the people who are working with the state AGs. Our folks did that sort of pivoting activity this year. And that nimbleness allowed us to grow and extend our relevance with clients even though certain places, which have been a big source of revenue in prior years were slow in the face of the regulatory changes. Let me turn to Stratcom. Stratcom, as you know, after close to 10 years of growth, had a bit of slowness over the past couple of years. And so early in 2025, the leadership team did reevaluate some of the bets and they took some corrective action. But at least as important, that team also had the confidence to continue to make investments in many parts of the world and in many parts of the business where we've been succeeding and have conviction. Those sorts of investments in areas like corporate reputation, public affairs, M&A, activism, crisis, together with some terrific promotions and hires in prior years, drove a powerful return to growth for Stratcom this year. If you add this all up, the headwinds certainly were there in 2025. The combination of Tech and ECon added up to almost $100 million of adjusted EBITDA headwind last year. Those headwinds were partially overcome by some onetime benefits like positive litigation settlement. But the primary factor driving this outperformance was $135 million of adjusted EBITDA growth in the other 3 segments. Let me leave 2025 behind. And if I may share a few thoughts about where I believe that leaves us going into 2026 and beyond. Entering '26, we still have some substantial headwinds, particularly early in the year. The most substantial one involves Compass Lexecon, which Paul will talk about, where we have the full cost impact in our P&L, but still haven't yet started to see anywhere near the full benefit of the people we've added. And critically, in the first couple of quarters, we are cycling the part of the year last year before the disruption really started to impact us. So for the first half of '26, the year-on-year comparisons will be quite difficult for Econ Consulting. The second headwind relates to onetime benefit even though they weren't the primary reason we outperformed in 2025, there were some significant benefits in last year's first quarter, mainly again the positive legal settlement I mentioned. So again, early in the year, we have the issue of cycling those. The third headwind is different, more fundamental and more related to the business and something we've seen from time to time in the past. As you've seen, we continue to add senior head count last year. And given our low leverage expert model, we will continue to add senior head count when the right people become available. And as you know, that investment is a negative hit to P&L initially. Although we are a senior-led model and even with AI-created efficiencies, we do need also superb junior people to support those senior people. And because of caution coming into last year, we didn't do quite as good a job as we could have been adding the terrific junior people to support the senior people. And so we are looking to add junior talent, particularly in the second half of the year. So because of those near-term headwinds, though we are targeting are clearly targeting stronger revenue growth and targeting solid growth in adjusted EPS again next year. We are not yet back to forecasting the sort of double-digit growth in EPS that we have averaged since 2017, not yet back to that. Let me try to put '24, '25 and our outlook for '26 into a broader perspective. If you look over the last 24 or 30 months, many competitors have faced some of the slowest markets they've seen in many years. And some like us have had their own idiosyncratic disruptions of significance, ours obviously being the disruption in Compass Lexecon business. And we've been affected by those. Of course, we have, all companies are, and all companies face those sorts of things over time. If in the face of that, we achieved the midpoint of our guidance in 2026. Notwithstanding all that, we will deliver adjusted EPS growth for the 12th year in a row. And we will do that while continuing to invest in great senior talent and junior talent. We will have the largest, most powerful group of senior and junior professionals that we've ever had, we will be working on the most powerful set of assignments, brand building assignments, supporting our clients on their most critical issues and opportunities, which in turn will further enhance our brand. To me, that shows once again, yes, there are lots of idiosyncratic effects that can affect you and they can affect you substantially for a bit. They are a short-term transient market forces that can be a headwind. But my 40 years of professional services say that if we focus on the things you can control, the things you believe in, making sure you have great value propositions in areas of real importance for clients and you focus relentlessly on being the best in those over any intermediate period. The factors you control, trump the idiosyncratic factors and you persevere, you succeed no matter what the markets are. I think the last 2 years as well as the last 5 and 10 have shown that. They show the immense power of having great teams of committed leading experts, particularly in today's increasingly disrupted world. All of that leaves me notwithstanding any headwinds we faced in '25 or facing '26 or beyond enormously confident about the power and future trajectory of this company. With that, let me turn this over to you, Paul. Paul Linton: Thank you, Steve, and good morning, everybody. But as Steve said, we delivered another record year. So I'm pleased to take you through our full year and quarterly performance and provide our guidance for 2026. Beginning with our full year 2025 results. Record revenues of $3.79 billion increased 2.4% compared to 2024, which reflects record performance in our CorpFin, FLC and Stratcom segments as each of those businesses delivered double-digit organic growth in 2025. This robust growth more than offset declines in our Economic Consulting and Tech segment, which, as Steve discussed, faced headwinds this year. Important, even with those headwinds, which were worse than we anticipated at the beginning of 2025, the breadth and depth of our offerings allowed us once again to deliver record revenues as well as record adjusted EBITDA of $463.6 million and record GAAP and adjusted EPS of $8.24 and $8.83, respectively. Now turning to the details of the fourth quarter. Revenues of $990.7 million increased 10.7% compared to the prior year quarter. As discussed in our Q3 earnings call, we expected the fourth quarter seasonal slowdown across the business. Instead, revenues increased 3.6% sequentially with every business, except FLC delivering sequential growth. Fourth quarter net income of $54.5 million increased 9.7% compared to the prior year quarter. The increase in net income was partially offset by an $11.8 million valuation allowance expense again certain prior year foreign deferred tax assets. GAAP EPS of $1.78 increased 29% compared to the prior year quarter. Adjusted EPS of $1.78 increased 14.1% compared to the prior year quarter. As a reminder, Q4 '24 adjusted EPS excluded an $0.18 special charge related to severance. Both GAAP and adjusted EPS included the valuation allowance expense which reduced EPS by $0.38. SG&A of $213.6 million compared to $208.1 million in Q4 of 2024. The increase was primarily due to higher variable compensation, legal and business development expenses, which were partially offset by lower bad debt and travel and entertainment expenses. Adjusted EBITDA of $106.2 million or 10.7% of revenues compared to $73.7 million or 8.2% of revenues in the prior year quarter. Our fourth quarter effective tax rate of 37.1% compared to 16.9% in Q4 of 2024. Absent the valuation expense, our effective tax rate would have been 23.6%. Billable head count decreased 3.2% and non-billable head count decreased 2.5% compared to the prior year quarter. Now turning to our performance at the segment level for the fourth quarter. Corp Fin record revenues of $423.2 million increased 26.1% compared to the prior year quarter. The increase was primarily due to higher demand and realized bill rates in turnaround and restructuring, which grew 25%, transactions, which grew 46% and transformation, which grew 13% as well as higher success fees. Notably, in transactions, our strength is more than just market driven. For example, our top 20 engagements in Q4 2025 more than doubled in size compared to Q4 2024. Our engagements have expanded in size and scope as we bring more of our services to our clients across the deal life cycle. In turnaround restructuring, our record quarterly revenues were driven by rules in some of the largest bankruptcies around the world from Spirit Airlines in the U.S. to Prax Oil Refinery in the U.K. and Azul Airlines in Brazil. In the fourth quarter, turnaround and restructuring represented 47%, transformation represented 28%, and transactions represented 25% of segment revenues. Adjusted segment EBITDA of $80.1 million or 18.9% of segment revenues compared to $44.7 million or 13.3% of segment revenues in the prior year quarter. The increase was primarily due to higher revenues, which was partially offset by an increase in compensation particularly variable compensation and higher SG&A and pass-through expenses. Sequentially, CorpFin revenues increased 4.5%, primarily due to a 10% increase in transformation a 6% increase in turnaround and restructuring services -- or revenues, which was partially offset by a 4% decrease in transactions. Turning to FLC. In FLC, revenues of $192.9 million increased 9.7% compared to Q4 2024. The increase was primarily due to higher realized bill rates for risk and investigation services. Notably, financial services has been a key driver of growth throughout 2025, as this industry is facing a convergence of regulatory and technological fits. For example, we have been hired by many leading financial services companies to evaluate whether the use of AI models by our clients and their partners are in compliance with regulatory standards. The assessment requires expertise in data analysis and understanding of applicable laws and regulations as well as experience and credibility with the regulatory agencies. Adjusted segment EBITDA of $23.8 million or 12.3% of segment revenues compared to $18 million or 10.2% of segment revenues in the prior year quarter. The increase was primarily due to higher revenues which was partially offset by an increase in variable compensation. As I mentioned earlier, FLC was the only business that saw a sequential revenue decline. However, the decline was only 1% compared to an extraordinary Q3, which had record quarterly revenues. FLC's fantastic performance this year showcases how much deep expertise matters. When the clients are facing their most high stakes challenges. And important, our ability to shift our focus as clients' needs change. This is reflected not only in the headline cases or expert supported but also in our revenue per billable professional, which has increased 22% over the last 3 years. Economic Consulting revenues of $176.2 million decreased 14.5% compared to Q4 of 2024. The decrease was primarily due to lower demand for non-M&A and M&A-related antitrust services which was partially offset by higher demand for financial economic services and higher realized bill rates for international arbitration services. Adjusted segment EBITDA of $1 million or 0.6% of segment revenues compared to $15.8 million or 7.7% of segment revenues in the prior year quarter. The decrease was primarily due to lower revenues and an increase in forgivable loan amortization, which was partially offset by lower compensation and bad debt. As you may recall, in Q4 of 2024, Economic Consulting had higher than usual bad debt related to one completed matter. Sequentially, ECon revenues increased 1.8% primarily due to higher national arbitration service revenue. In Technology, revenues of $99 million increased 9.3% compared to Q4 of 2024. This increase was primarily due to higher demand for litigation and M&A-related second request services. Adjusted segment EBITDA of $14.8 million or 14.9% of segment revenues compared to $6.6 million or 7.2% of segment revenues in the prior year quarter. This increase was primarily due to higher revenues. Sequentially, technology revenues increased 5.3% primarily due to higher information governance and litigation services. Important, our technology revenues increased 7% and adjusted segment EBITDA increased 69% in the second half of 2025 compared to the first half of 2025 due to higher second request and litigation revenues. Stratcom's revenue of $99.4 million increased 14.8% compared to Q4 of 2024. That increase was primarily due to higher demand for corporate reputation services and an increase in pass-through revenues. Adjusted segment EBITDA of $19 million or 19.2% of segment revenues compared to $13.8 million or 15.9% of segment revenues in the prior year quarter. This increase was primarily due to higher revenues, which was partially offset by higher pass-through expenses and variable compensation. Sequentially, Stratcom's revenues increased 11.2% and primarily due to a $3.4 million increase in pass-through revenues and higher-than-expected demand for corporate reputation and financial communications services. Stratcom's fantastic Q4 and record 2025 performance underscore the relevance of our expert-driven model when clients are facing [ bet ] the company issues and the value of that expertise is reflected in our higher revenue per billable professional. Let me now discuss key cash flow and balance sheet items. Net cash provided by operating activities of $152.1 million for the year ended December 31, 2025, compared to $395.1 million for the year ended December 31, 2024. The largest driver of the year-over-year decline was higher forgivable loan issuances. In Q4, we issued $3 million in forgivable loans net of repayment following $18 million, $72 million and $162 million of forgivable loans to existing and new employees and affiliates net of repayments in Q3, Q2 and Q1, respectively for total issuances of $255 million in 2025. During the quarter, we repurchased 519,944 shares at an average per share price of $160.58 for a total cost of $83.5 million. During full year 2025, we repurchased 5.3 million shares or 15% of our shares outstanding at an average price of $163.07 for a total cost of $858.6 million. As of December 31, 2025, approximately $491.8 million remained available under our stock repurchase authorization. Base sales outstanding of 88 days at December 31, 2025, compared to 97 days at December 31, 2024. Now turning to our 2026 guidance. We are, as usual, providing guidance for revenues and EPS. We estimate that revenue will range between $3.94 billion and $4.1 billion. We estimate GAAP EPS will range between $8.90 and $9.50. We do not expect there to be a variance between GAAP and adjusted EPS. Our 2026 guidance reflects several key factors that shape our outlook. First, I want to address an issue that is a major focus in the marketplace, AI. Embedded in our guidance is our experience that the proliferation and broad adoption of AI will continue to be a significant positive for FTI. Important that we are not a software developer or reliant on commodity services. FTI is a low leverage, expertise-driven firm. We leverage technology in many places, which is in support of highly expert-driven work and crisis situations and in times of transformation. Our competitive advantage is we have senior people, we're able to operate in high-stakes matters where clients need accountability and judgment and people who can quickly help them navigate those situations for the right results. Our history has shown that FTI has benefited in periods of disruption. When risk is elevated and when markets are facing discontinuous change, regulatory shifts or heightened litigation or businesses need to be rebuilt or restructured. We are already finding that AI is generating entirely new categories of work. For example, we are supporting clients in a new set of high-profile disputes which involve AI companies and how users are interacting with AI, from ownership of AI generated content, the harm caused by AI misinformation and bias, the unauthorized use of data and privacy concerns. We believe the rapid pace of AI innovation, experimentation and adoption will be one of the most disruptive events in our lifetime. And that disruption is and will drive demand for our experts. Second, the midpoint of our revenue guidance reflects a 6.1% year-over-year growth. To achieve the midpoint of our range, we expect aggregate revenue growth across CorpFin, FLC, Tech and Stratcoms to exceed that midpoint. CorpFin, FLC and Stratcoms are coming off record performances in 2025 and enter 2026 with solid momentum. This is particularly true in transactions and restructuring, risk and investigations, construction solutions and data and analytics and corporate reputation. And as is typical for our business, this momentum is supported by several large engagements. As those matters conclude, they may not be immediately replaced, which we have reflected in our guidance. Tech rebounded in the second half of 2025 and enter 2026 on a much strengthened trajectory. Third, our guidance assumes a multiyear rebuild in our Compass Lexecon business. We are excited about the talent we have retained and attracted and we believe this business has one of the strongest benches of academic economists globally. While we have stabilized our cost base, we continue to face headwinds as we cycle a first half 2025 that was not fully impacted by the revenue -- by revenue disruption or increased cost of retaining and attracting talent. As a result of these tough comparisons on certain compensation costs in Q1 we expect Economic Consulting adjusted segment EBITDA to reach its lowest point in Q1 2026. We expect the business to no longer be a drag on year-over-year EBITDA growth in the second half of 2026. Fourth, we continue to invest in talent. In 2025, we announced 85 senior hires. And in 2026, we plan to build teams around these leaders while selectively adding junior, senior -- sorry, adding senior professionals, where we see the right opportunities. We also expect more junior hiring in parts of the business were hiring lagged in 2025. Fifth, while we remain committed to disciplined cost control, we expect SG&A expenses for the full year to be approximately $45 million higher than in 2025. In particular, Q1 2026 SG&A is expected to be approximately $30 million higher than Q1 2025, primarily due to legal settlement gains in Q1 2025 that will not recur. We will also hold our all Senior Manager -- Senior Managing Directors meeting in April of 2026, resulting in higher event-related expenses primarily in Q2. And lastly, we expect an effective tax rate of 22% to 24%, which compares with 27% in 2025. Overall, our guidance reflects our best judgment at the midpoint and recognizes that our largely fixed cost structure can lead to outsized earnings impact from modest changes in revenue. Before I close, I want to emphasize a few key themes that I believe underscore the attractiveness of our company. First, our diverse portfolio of services allows us to support our clients regardless of economic cycles. From turnaround restructuring to M&A to cybersecurity investigations to crisis communications. Second, as discussed, we are a top destination for great talent. Third, our management team is focused on both growth and utilization. Fourth, our business generates excellent free cash flow, and we have a strong balance sheet that provides us the flexibility to boost shareholder value through organic growth, share buybacks and acquisitions when we see the right ones. These factors combined are powerful and they have been consistent across quarters and years. That consistency has allowed us to deliver 8 years in a row of record revenues and in 11 years in a row of adjusted EPS growth. Importantly, we delivered this performance not only in the areas where market factors were on our side, but also in areas where we faced headwinds, such as 2025. We are tremendously confident in the power of this company and its potential. With that, let's open up the call for your questions. Operator: [Operator Instructions] Our first question today comes from Andrew Nicholas with William Blair. Andrew Nicholas: I wanted to start with one that's pretty similar to the one I started with last quarter, which is just on Economic Consulting. Specifically, how would you -- how much of the kind of stabilization quarter-over-quarter or even the improvement in terms of year-over-year declines would you attribute to the market environment versus improved productivity from some of your recent hires? And on the latter point, just a broader update on how you're feeling about the ramp in productivity of the academic focused hires in particular as you look ahead to '26? Steve Gunby: Thank you, Andrew. Look, I think, as Paul indicated, I think we are not yet at the bottom of the economics of our ECon practice, primarily driven by the Compass Lexecon situation. And of course, the year-on-year in the first half of this year will continue to be a drag given the fact that the impacts really didn't hit us until somewhere in the middle of the second quarter. And I think that's because we've added costs, both to retain people and we've added these great people. And as of yet, we have not yet seen material revenue gains. We've seen some individuals who brought revenue. Some of the people who came, who can bring revenue are still required by their contracts to be doing revenue with the prior employers. And then some of the people we hire are more early-stage academics who have longer-term futures. So it is a slow ramp on the revenue side, particularly in the U.S., is really what I'm talking about. I think -- and particularly in the U.S. antitrust business, there's really 3 different businesses here. The U.S. finance business was hit on the comp line to help retain people, well, we didn't really lose anybody, and the revenue was actually up in '25, and we feel like that's in pretty good shape. The European business was down even though we didn't lose much talent. And that might have been market conditions. It might have been us being a little distracted by the fight to keep our people. But we are expecting that to get back to solidity by the second half of the year. And we have early signs that it is -- the revenues are coming back there. The real issue is the U.S. antitrust business, where we invested a lot to add that talent and it's slow progress. I think it's an amazingly good group of economists. It is not an aggressive group of business developers. And so you got to get out there and let the lawyers know that you have these great talent. And I think it's taken a while for us to do that. I think we're now finally doing it in a bigger way, and we're getting receptivity as you might imagine. And I think if you look recently for example, the [ Med case, ] which was a major, major case a few weeks ago, the judge cited our testifiers, Dennis Carlton, John List, these are the leading academics that we're talking about. But I don't think most lawyers knew that John List was with us until then, and we're changing that. But I think it's a work in progress, but it's a worthwhile endeavor, but I can't tell you it's a median rebound there. Does that help? Andrew Nicholas: Yes, absolutely. No, that's super helpful. And then I guess my follow-up question. Paul, you talked about AI and the defensibility of the model. in this kind of new AI paradigm. But I'm curious maybe addressing or talking about it from a different perspective, which is on the restructuring front. To the extent that AI is a disruptor as we expect it to be. Do you expect that to positively impact demand for restructuring or business transformation? And if that's the case, how do you feel you're kind of situated from a staffing or capacity perspective to capture that upside and drive growth in that business in that type of scenario? Paul Linton: Maybe I'll start and then see if Steve wants to weigh in. We -- I think we believe we've built the #1 or #2 global restructuring practice. So from that standpoint, we benefit from disruption in markets as businesses have to go through financial difficulties, whether we're helping on the creditor side or on the company side. So from that standpoint, I think we feel well positioned to benefit. Now the timing of disruption from AI or from other factors, I think that's anyone's guess how quickly that will unfold. Surely, there will be winners and losers as AI disrupts business, various businesses in various industries, whether that hits in '26 or '27 or '28 I think that's less certain. Regardless, I think we're well positioned once it starts to happen and once it starts to unfold. Steve Gunby: Maybe I could just broaden that point here. I think that the key thing is our company exists because there is disruption in the world. If the world were calm, no bankruptcies, no crisis, no litigation, no difficulties, no M&A, no stress I don't think my company would exist. We exist because the world is complicated, changes fast. It has disruptive elements. It has -- there's litigation, somebody does you wrong, you sue somebody. And it takes real expertise to navigate those and to win the litigation and to dive in to figure out what happened on the cyber account and so forth. So our company exists because in times of crisis and disruption, you need the leading experts. You don't need technology. You need leading experts who know how to use the latest technology, and that's what we are, which is why we are finding that AI so far -- and we believe going forward will be a positive for our company. So I hope that's helpful, Andrew. Operator: [Operator Instructions] The next question comes from James Yaro with Goldman Sachs. Unknown Analyst: [ Divyam ] here on behalf of James. I know you touched upon this aspect in the prepared remarks, but could you update us on the impact of AI on the business? What are the impacts you are seeing thus far. You've talked about this being a positive for the business in 2026. Could you elaborate around -- more around that aspect where you will see any benefits? And whether there are any more negative impacts, which you can foresee? Steve Gunby: Yes. Look, I think risk a little redundancy. I think the main places where we're seeing the benefit is more on the revenue side. Do we have some efficiency gains? Of course. Will we need as many people summarizing EU regulations in Brussels at the lowest level, the summarization function? You don't need as many. But do you still need people who understand what EU regulations are going to do. The impact on the company? Or are they going to actually enforce it the advice, the value-added, you need that. You need that. And by the way, as the world gets more disruptive and there's EU regulations on AI, you need people who could do that and understand AI and so forth. And so -- we think our Brussels business is a growth business. Do you tweak the leverage a little bit? Yes, you tweak the leverage. But mostly, so far, we're not finding it on efficiency. And we haven't yet torn apart all our cost structures and then are claiming big dollar gains on that. Where it is, is, this disrupted world is triggering demand. And the last question said, will it trigger more bankruptcies and so forth? We suspect it will at some point. I don't think that's where it is. But I think as Paul referred to, in our FLC practice, where the regulatory changes, you have AI companies that are, what do you call, fintech companies that are using AI models that somebody has to go into that fintech company and figure out, is it violating regulatory standards. And that requires somebody who understands regulation, who understands the regulators and is credible with the regulators who could testify in court if they needed to and understands how to tear apart in AI algorithm. How many people do you know that can do that. And so we get work from this. And we think that the more disruption happens from AI, the more of those sorts of things are going to happen, whether it's crisis, communications around those sorts of things or it's bankruptcies around those sorts of things or it's investigations around those sorts of things. So that's why we're feeling like over the next years, this is a positive force for a firm that is like ours, a low leverage, expert-driven firm positioned against disruption. Does that help? Unknown Analyst: Yes, that is super helpful. As a follow-up, there appears to be some market disruptions that are impacting the capital market, which could impact a few of your businesses. Could you speak to whether you're seeing any impact thus far? And could there be some if this AI disruption continues? Steve Gunby: Yes. No, of course, I don't know which ones, there seems to be less disruption in the market. But for example, I think we were involved in one way or another in a couple of the private credit perturbations that happened a while ago. And obviously, we have capability to help in any sort of credit thing there, whether it's investigations, fraud investigations or its bankruptcy or it's advising creditors on those sorts of things. To the extent that I think Jamie Dimon said when you see a cockroach, you rarely see just 1 to the extent he's right. We're positioned on that market to be of help to people. But I think in general, when there's economic dislocation something pops out, whether it's bankruptcy or it turns out that somebody who's committing fraud or somebody just needs to advice or there's M&A opportunities, and we are positioned against all of those. Does that help? Unknown Analyst: Yes. Again, that's helpful. One last question from our end. You reduced debt by $145 million Q-o-Q and repurchased less debt and at least what we thought. Could you help us think through the capital deployment priorities from here and view on the ability to add leverage from here? Steve Gunby: I didn't understand the point about us reducing debt less than you expected. Is that the question? Or you're saying going forward? What's your question? Unknown Analyst: No. So debt reduced by $145 million Q-o-Q in 4Q '25 and the repurchases were less than what we had at least thought about heading into the earnings. So just wanted to get some clarity around the capital deployment priorities heading from here. Steve Gunby: Yes. Look, I think our capital strategy has been the same for -- since I've gotten here, which is part of the thing that makes our company -- the 2 things that create value for our shareholders are organic growth and the ability to sustain organic growth. And then given that it's organic growth primarily, and it's not acquisitions, we can grow organically and have very positive cash flow. And so therefore, the other issue is for us to use our cash wisely. And our definition of why, is, use of cash is dependent on circumstances. A-plus acquisitions that come along, they don't come along that often, and they don't come along with the right culture of people that often and they don't come along with the right culture and cheap and reasonable price. But when they do, when we have them, we do them. Historically, that's not been the primary use of cash. When we had high expense debt, we got rid of some of the high expense debt. And then on share buybacks, we have been very opportunistic. Our experience is that our company is a sustained growth engine and sometimes the market believes and then at least 3 times in my 10 years here, the market has fallen out of belief. One in 2017 when -- even though we were forecasting reaffirmed guidance, the stock dropped back into the 30s, one at the end of 2020 when we said the restructuring boom from COVID was over and yet, it didn't mean demise for our company because our testifiers were now able to go back in court and the stock dropped from 154 to I think, 96. And then the third, candidly, this year, where we clearly expressed the view of headwinds. But we also expressed the view that those were temporary headwinds that we thought we could overcome. And we don't believe the market fully understood. And so we don't buy shares back every quarter, but when we believe the market has fundamentally overgeneralized a short-term hit, and we think we can create value for our shareholders by going in. And so I think all 3 of those times, we bought well north of 5% of our company back. And so that's what we monitor. And if we find the right opportunities, we're not afraid to jump on it. And as you've mentioned, whatever you say about our debt situation, is tiny, right? I mean I think our net debt in the fourth quarter might have been $100 million, which puts us like 1/4 of EBITDA. So I think we have plenty of opportunity to do whatever seems to make sense going forward. Does that help? Operator: As there are no analysts left in our queue, this concludes our question-and-answer session. Steve Gunby: Let me just say thank you all for your attention and your support. It was an interesting year with a fair amount of challenges. I have to say I'm so excited about our team's ability to weather those challenges and important different than when I got here 10 years ago, how many people in our company have now the confidence to if they have a slow quarter to continue to invest behind great businesses and great people. We have now proved time and time again that, that works for the multiyear trajectory. And it builds a firm that people want to join and be part of. It's a fun journey, we look forward to continuing it with you. Thanks for your time. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and welcome to the Vericel Corporation Fourth Quarter 2025 Earnings Call. Today's call is being recorded. At this time, I'd like to turn the call over to Eric Burns, Vericel's Vice President of Finance and Investor Relations. Please go ahead, sir. Eric Burns: Thank you, operator, and good morning, everyone. Joining me on today's call are Vericel's President and Chief Executive Officer, Nick Colangelo; and our Chief Financial Officer, Joe Mara. Before we begin, let me remind you that on today's call, we will be making forward-looking statements covered 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 should not be relied upon as representing our views as of any subsequent date. Please note that a copy of our fourth quarter financial results press release and a short presentation with highlights from today's call are available in the Investor Relations section of our website. I will now turn the call over to Nick. Dominick C. Colangelo: Thank you, Eric, and good morning, everyone. As highlighted in our preliminary financial results release last month, the company had a strong close to the year and delivered outstanding financial and business results in the fourth quarter with significant revenue and profit growth and continued progress across a number of key business initiatives. From a financial perspective, the company generated record fourth quarter total revenue, which increased 23% over last year and exceeded our guidance for the quarter. This strong revenue performance drove significant margin expansion and profit growth as the company delivered record net income, gross margin of nearly 80% and adjusted EBITDA margin of 40% for the quarter. We also ended the year with approximately $200 million in cash and investments and no debt as we continue to elevate the company's top-tier financial profile. We also achieved several key business objectives in the quarter, including the successful completion of the MACI sales force expansion, and the initiation of the MACI Ankle clinical study and made substantial progress on other long-term growth initiatives as we remain on track to begin commercial manufacturing of MACI in our new facility this year and to potentially launch MACI outside the United States in 2027. MACI's second half momentum continued in the fourth quarter with record revenue of more than $84 million, representing 23% growth versus the prior year. This performance was driven by strong underlying fundamentals as we had the highest number of MACI implants, implanting surgeons, surgeons taking biopsies and biopsies in any quarter since launch. MACI's performance was particularly strong in December across all key performance metrics, including biopsy and implant procedures as our commercial and operations team executed exceptionally well to close the year. MACI's leadership position in the cartilage repair market has continued to strengthen since we launched the product in the U.S. in 2017. Over the past 9 years, MACI has generated compound annual revenue growth of 24% and has delivered revenue growth of 20% or more in each of the last 3 years. Notably, as of the end of 2025, more than 20,000 patients have now been treated with MACI. We believe that MACI's strong clinical profile, together with the surgeon and patient benefits of a simpler, less invasive surgery, have driven MACI's strong growth and will continue to do so moving forward. In addition, MACI's best-in-class pricing and reimbursement profile with prior authorization approval rates remaining over 95% for commercial patients in 2025, demonstrates the significant clinical value MACI represents to payors, hospitals, surgeons and patients. With this strong MACI foundation in place as we move into the new year, we're focused on executing on 3 strategic imperatives that we believe will position the company for sustained, strong revenue and profit growth in 2026 and the years ahead. First, we're focused on capitalizing on our larger MACI sales force, which will meaningfully increase our reach across the entire MACI customer base. Starting the year with a significantly larger footprint provides an opportunity to not only continue to drive the expansion of new MACI surgeons, but also to drive deeper penetration and increased utilization within our current MACI surgeon base. We're also implementing a number of important commercial excellence initiatives across the organization. We've made significant investments in new tools and additional resources to enhance our commercial analytics and standardize best practices across our larger sales team, which we believe will elevate execution across our commercial organization and drive deeper penetration within our surgeon user base, unlocking another key growth driver for MACI. Based on these initiatives and the quality of our entire expanded sales force, we expect that MACI sales rep productivity will return to 2025 levels as early as next year. Our second strategic priority is to leverage MACI Arthro to drive continued strong growth in smaller cartilage defects, principally on the femoral condyles, which represents the largest segment of MACI's addressable market. As we discussed throughout 2025, we've been very successful in training physicians on the MACI Arthro technique with approximately 1,000 surgeons trained to date. Importantly, MACI Arthro trained surgeons have continued to demonstrate a significant increase in biopsy and implant growth following training, and for those surgeons that have completed the MACI Arthro case, even higher biopsy and implant growth and higher conversion rates. With this foundation in place, our objective is to leverage MACI Arthro to drive significant growth in the treatment of small condyle defects, which historically have represented a smaller percentage of our overall patient volume and a lower growth segment for MACI. Notably, growth in the small condyle defect segment accelerated in MACI Arthro's first full year on the market in 2025 as this segment became one of the highest MACI implant growth segments along with the patella segment, which consistently has been our highest volume and fastest-growing segment. We believe that the positive trends are driven by the fact that MACI Arthro is a less invasive procedure with the potential for improved patient outcomes. Early data from ongoing investigator case series suggest a significant reduction in postsurgical pain, improved range of motion and a meaningful acceleration in the time line to achieving full weight bearing following MACI Arthro treatment. These initial results suggest very positive patient outcomes that could also lead to shorter overall rehab and recovery time lines. We expect these case series to be presented at upcoming industry meetings and in publications, and we continue to work with additional surgeons as they complete MACI Arthro cases to collect prospective outcomes data in our MACI clinical registry. Our third strategic imperative is to leverage our life cycle management initiatives to position the company for sustained longer-term growth. To that end, we initiated the Phase III MACI Ankle MASCOT clinical study in the fourth quarter. A potential MACI Ankle indication represents a substantial growth opportunity with an estimated addressable market of more than $1 billion and would also enable the company to expand into other areas of the orthopedics market. We also remain on track to initiate commercial manufacturing for MACI in our new facility this year, which will allow the company to potentially commercialize MACI outside the United States. We're taking a staged approach to MACI OUS expansion with the first phase targeting a planned launch in the U.K. The U.K. represents an ideal first step for MACI OUS expansion as there's clearly defined expedited approval and reimbursement pathways, a high level of awareness and surgeon advocacy given that MACI was previously on the market in the U.K. and concentrated points of care with a dozen or so centers of excellence for the treatment of cartilage injuries. We expect to submit a marketing authorization application to the U.K. MHRA in the middle of this year and potentially launch MACI in the U.K. in 2027 as we seek to expand the long-term growth and value creation opportunities for the company. In summary, the company executed extremely well in the fourth quarter, generated record revenue and financial results, while achieving a number of key objectives that help position the company for continued growth in 2026 and beyond. I'll now turn the call over to Joe to discuss our financial results and 2026 guidance in more detail. Joseph Mara: Thank you, Nick, and good morning, everyone. As Nick referenced, the company had an outstanding close to the year with record fourth quarter revenue of $92.9 million and 23% growth versus the prior year. For the full year, total revenue increased to $276.3 million, which was above the high end of our guidance range for the year. MACI also had a strong close to the year with record fourth quarter revenue of $84.1 million, representing 23% growth versus the prior year and 51% sequential growth versus the third quarter. For the full year, MACI revenue increased 21% to $239.5 million, and Burn Care fourth quarter revenue was $8.8 million, which was above our guidance range for the quarter. For the full year, Burn Care revenue was $36.8 million, consisting of $32.1 million of Epicel revenue and $4.7 million of NexoBrid revenue. The company's substantial growth in the fourth quarter translated into significant margin expansion with gross profit of more than $73 million in the quarter or 79% of revenue and adjusted EBITDA of more than $37 million or 40% of revenue, representing the company's highest quarterly margins in any quarter to date. On a full year basis, the company also delivered meaningful margin expansion with 74% gross margin, an increase of nearly 200 basis points compared to the prior year and 26% adjusted EBITDA margin, an increase of over 300 basis points versus the prior year, which were both above our guidance to start the year despite the incremental investments in 2025 for our new facility and the MACI's sales force expansion. GAAP net income also grew nearly 60% to $16.5 million for the full year as the company's profit growth continues to significantly outpace our strong revenue growth. Finally, the company generated full year operating cash flow of $52 million and ended the year with approximately $200 million in cash and investments, an increase of $35 million during the second half of the year as the expected inflection in our cash generation following the completion of our new manufacturing facility is now being realized. Turning to our financial guidance. We are entering 2026 with a great deal of momentum and have gotten off to a very strong start of the year in the first quarter. Consistent with our commentary on our prior earnings call regarding 2026 revenue for both franchises, we expect total company revenue this year of approximately $316 million to $326 million. For MACI, we expect another year of strong revenue growth. And as a starting point for our guidance, we expect MACI revenue of approximately $280 million to $286 million for the full year. Our initial guidance reflects a continuation of current MACI key growth driver trends, including surgeon growth, biopsies per surgeon, conversion rate and price to start the year, recognizing that there is an opportunity for outperformance based on the momentum in our key performance indicators, our expanded sales force and the commercial initiatives that we have put in place. As part of our initial framework, we expect a similar quarterly mix of MACI full year revenue as last year and importantly, a similar growth rate for MACI each quarter this year versus the prior year. For Burn Care, we are maintaining our run rate approach to guidance with revenue of approximately $9 million to $10 million per quarter, recognizing that revenue can vary on a quarterly basis. For the full year, this points to approximately $36 million to $40 million of total Burn Care revenue. Of note, we are not assuming any additional NexoBrid revenue in our initial guidance related to a potential BARDA award, although there is a reasonable possibility for incremental NexoBrid BARDA revenue during the year. For the first quarter, we are on track to exceed 20% total company revenue growth as we are off to a very strong start to the year for both franchises. MACI's fourth quarter momentum has continued into this year with MACI performance trending toward higher first quarter growth than in recent years and Burn Care performance trends have also been strong to start the year. As such, we expect MACI revenue of approximately $54 million to $55 million and Burn Care revenue of $9 million to $10 million for the first quarter. Moving down the P&L. For the full year, we expect gross margin of approximately 75% and adjusted EBITDA margin of approximately 27%, which accounts for additional costs related to our new Burlington manufacturing facility, the incremental investments related to our MACI sales force expansion and increased MACI Ankle MASCOT clinical trial expense as patient enrollment begins. We expect total operating expenses to be approximately $220 million for the full year and anticipate a similar level of spend each quarter. For the first quarter, we expect gross margin of approximately 70% and adjusted EBITDA margin of approximately 10%. Overall, 2026 is set up to be another positive year for the company with strong top-line revenue growth as well as continued margin expansion and profit growth. As we look ahead, we believe that the durable growth of our portfolio positions the company to sustain strong top-line growth in the years ahead and supports our midterm revenue and profitability targets. This concludes our prepared remarks. We will now open the call to your questions. Operator: [Operator Instructions] We'll move to our first question, Ryan Zimmerman with BTIG. Ryan Zimmerman: Busy morning for a lot of us, so I'll try and squeeze in both questions. But I think there was a number of price increases on MACI that were taken in 2025. Correct me if I'm wrong on that, Joe. But how do you think about kind of the mix of price versus volume? If you reflect back on 2025, particularly on volume, I think, investors are rightly concerned that price drove some of the growth. And then as you look ahead to '26, how do you think about that balance as well? Joseph Mara: All right. I'll start -- do you want to ask your second question or just start there? Ryan Zimmerman: Sorry, let's just start there. Sorry, Joe. Keeping me honest. Joseph Mara: Yes. So look, from a pricing perspective, obviously, that remains a key growth driver for us. Nick talked about in his prepared remarks, our kind of access position remains very strong. I think over 95% of our commercial cases from a prior authorization perspective are approved. So kind of looking back historically, and I would say looking forward, certainly, pricing kind of has been and will remain part of our growth algorithm. If you look at the second half of last year, obviously, there was a significant improvement in the MACI performance. I'd say that step-up was volume driven, although, of course, I would say both price and volume play a part in the growth. Ryan Zimmerman: Yes. Okay. And then one of the other key, I think, variables to the algorithm is new doctor growth. And so as you think about kind of who is adopting Arthro, I'm curious if you could reflect on maybe kind of existing or same-store sales dynamics relative to kind of new doctor growth. And appreciate the comments you gave about those adopting Arthro certainly being more robust. But is that a reflection of your existing customer base or potentially new doctor growth? Dominick C. Colangelo: Ryan, I'll start. It's Nick. I think the sort of ratio of trained surgeons that we talked about previously has held throughout the year. So about 2/3 come from existing MACI users split between kind of former patella users and patella and condyle users and then about 1/3 from sort of either prior open targets who had not adopted MACI at that time and then obviously, the new arthro-only surgeons. So that's kind of remained relatively consistent. And I'd say the dynamics that we see once the surgeons are trained regardless of which bucket they come out of sort of hold true in terms of obviously increasing if they're new, but even sort of former users increasing both biopsy and growth rates. And then particularly when they start doing Arthro cases, their growth rates for both biopsies and implants are even higher, and their conversion rate was higher for the year as well. So all obviously very encouraging trends for us as we move forward. Operator: We'll go next to Mike Kratky with Leerink Partners. Samuil-Hrabar Gatev: This is Sam on for Mike. So just during your 3Q '25 earnings call, I think, you had mentioned that 20% growth for MACI would kind of be a good starting point for fiscal 2026. But the current guidance kind of implies growth slightly below that at roughly 18% at the midpoint. Is this just a function of kind of 4Q being a little bit better than expected? And is there anything that materially changed from then versus now when you issued the new guidance here? Joseph Mara: Yes. So I'll start. I mean I'll just give a quick update on the guidance maybe overall. And I would say just on that last part, I mean nothing certainly materially changed. I think if anything, we probably really ended the year a bit stronger across the business, which was great. So just in terms of the guidance framework, to your question, I would say, if you look at both franchises, it's really consistent with the commentary we gave in the last call. So on the MACI side, the guidance is kind of in that low to mid $280 million range. That's consistent, I think, right on top of consensus or very close. We talked about in the last call, having that similar year-over-year incremental growth, which I think accomplishes as well kind of the midpoint of that range and the $282 million or $283 million is right in line with last year, which is about a $42 million increase. I'd say on the specific question around the 20%, I mean, obviously, there's a range around MACI. We want to be prudent to start the year. But what we said in the last call, in addition to having that similar incremental growth was, I think coming into the call, there were analysts kind of on either side of that number. And I think we were comfortable with something at that range, but I think we try to be clear that we were not going to guide above that. So I think more than anything, it's probably just being prudent on the MACI side, but we feel really good about the start of the year on MACI and the full year. And then just quickly on Burn Care, I think that's important as well. So that one is pretty straightforward. We said last quarter, we're going to maintain this run rate framework, which I think has worked well in the last couple of quarters, in particular, call it, $9 million to $10 million per quarter, get to $36 million to $40 million or $38 million at the midpoint. One thing that is probably a bit off coming into the call is we referenced the high 30s last quarter, but if you actually look at external estimates, they're kind of more into the lower 40s. So that's obviously impacting both Burn Care and the total company external starting point. So I do want to point that out. So you put that together, I think we have a nice balanced guide, something around, call it, mid-280 or middle of that range rather and high 30s in Burn Care, you're probably around 320 or so at the midpoint, which we think is a very balanced starting point. And then just briefly on Q1, because I think, that's important as well in the context of the guide. So just to reiterate what we said in the call, we think we're off to a great start on track to exceed 20% as a company for the quarter. The MACI metrics have been really strong, and we are guiding Q1 higher than we've trended and certainly higher than we've guided in the last couple of years. So obviously, feel good about MACI. Burn Care has had a strong start as well. So very much on track to that run rate for Q1. So we think that sets us up well. And then lastly, just on the MACI question and just generally, I think as we talked about in the last call, I'd say we just want a very, I would say, prudent and disciplined start of the year in our initial guide. So MACI has a ton of momentum, we have a number of initiatives, including the increased sales force. We did see some inflection in some of our growth drivers in the second half, but we're not baking any of that in. We're assuming pretty similar trends on a full year basis. And similarly, I would say, on the Burn Care side, there's certainly an opportunity for incremental BARDA revenue. I think that's a reasonable possibility, but we're not baking that in. So I think it's prudent on both franchises. And just one last point on MACI. We did make the comments. If you look at the full year growth rate at the midpoint of that range, it's actually right in line with our Q1 guide. And so we felt like starting the year with not only a similar mix of business because we know our business is seasonal, but pretty -- or essentially consistent growth rates, really the same growth rate across all 4 quarters was a good way to start the year, and I think positions us really well to potentially outperform on that if we execute well. But I think it's a prudent way to start the year, again, just given the seasonality of our business. Operator: We'll go next to Richard Newitter with Truist Securities. Felipe Lamar: This is Felipe on for Rich. So just on the sales force expansion, you guys pretty quickly expanded your territories about 30% in the last couple of months. So I'm just wondering like just talk me through like rep adds and the strategy for the year and I guess, how you expect those new territories to ramp? And then just a second question, if you could give some guidance and expectations for free cash flow ramp for the year, that would be helpful. Dominick C. Colangelo: It's Nick. I'll start with the sales force expansion one. And obviously, we're really excited about the expansion. As you will recall from last year, we decided to accelerate the expansion into Q4 because we wanted to support what we knew were going to be significantly higher volumes in Q4 and make sure that we were positioned to take advantage of this momentum in MACI for the entire year and not kind of have the sales force expansion in the first third of the year. So really excited about that. Obviously, the larger footprint, as I mentioned on my prepared remarks, will increase our reach across the surgeon base and really gives us an opportunity to drive expansion of surgeons and deeper penetration in our existing surgeons. And I would just say, I think the team executed flawlessly on the expansion. Obviously, people outside of the company can worry about disruption when you're expanding the sales force in your largest quarter. So great job by our sales and commercial leadership team to execute and put a plan in place, great job by both the new and existing reps in the fourth quarter to not only drive our highest quarter ever, but to position us well as we come into 2026. As we mentioned earlier, these are extremely experienced and talented reps that we think, together with our existing sales force are going to drive strong performance as we move forward through the year. So that's an important piece of it. I mentioned on the call that we expect our rep productivity to kind of get back to last year's level as quickly as next year. So really excited about the opportunity for the sales force expansion and what it's going to mean for our business. Joseph Mara: Yes. And then in terms of kind of the sort of cash flow question, I think probably the best way to think about -- we're not guiding to that specifically, but obviously, we think we are in an inflecting cash flow position, which is great. Generally, I think what we talk about is our adjusted EBITDA is a good proxy for operating cash flow. It doesn't always line up because there could be collections at the end of the year and some timing differences. But kind of over time, that tends to be a pretty good proxy for the most part. And then you kind of look at our run rate on the CapEx side in the last couple of quarters, it's been in the low single-digit millions, obviously, much lower as we've gotten back to more of a steady state after getting through the building projects. So that's probably the right way to think about it, but we don't have a specific number we've guided to there. Operator: And we'll move next to Mason Carrico with Stephens. Mason Carrico: In the context of your MACI outlook for this year and recognizing your comments, Joe, that leaves some room for upside, how should we think about what's baked in, in terms of the larger sales force conversion rates, maybe surgeon growth that's in the guide today? Joseph Mara: Yes. So again, from a MACI perspective, I think we wanted to start the year with a very balanced view. Obviously, Q1 is off to a good start. And so I think as you think about the key growth drivers there, as I said, I would say you can think of those as similar on a full year basis, whether you're talking about kind of some of the key biopsy drivers or whatnot. I wouldn't say there's anything specific or kind of baking in, in terms of the new sales force. I think it's probably more just overall looking at the overall trends. To kind of Nick's earlier point, I think we have pretty high expectations of our new adds and are excited about just the increased reach and frequency we're going to have. So we do think that can be impactful over time, but we're actually not really baking anything into the guide. And obviously, it's a long sales cycle, so you want to have a little bit of patience there. But obviously, at the same time, we expect that to kind of get back to our rep productivity rates pretty quickly. So I think there's certainly an opportunity if the teams can do a good job to help drive that outperformance, but nothing specific that we've baked in, assuming kind of any sort of inflection in trends. Mason Carrico: Okay. Would you be able to share any thoughts or anything you can point us to on how conversion rates for MACI tracked over the course of 2025? What proof are you seeing that Arthro might be able to improve the conversion rates and really shorten that time from biopsy to implant? Dominick C. Colangelo: Yes. So I think on an overall basis, as Joe mentioned, that conversion rates were relatively stable for the year. But as I mentioned, within that segment of MACI Arthro trained surgeons that actually performed a case, again, we see higher biopsy and implant growth rates than MACI Arthro trained surgeons generally, which are higher than the overall average. And then we do see higher conversion rates for those MACI Arthro implanting surgeons as well. So that's the evidence, as I mentioned on my earlier remarks. Operator: And we'll move next to Jeffrey Cohen with Ladenburg Thalmann. Jeffrey Cohen: So in particular, could you unpack OpEx a little bit for your '26 guide? And curious on the sales force expansion from last year, if there's any pull-through or any anticipated expansion for this year in R&D as well? Joseph Mara: Yes. So I think we gave guidance at the total company level. So we said approximately $220 million on a full year basis in OpEx. Probably the easy way to think about that is, call it, $55 million a quarter, pretty consistent, including the first quarter. I think to your kind of question and point, I mean, one thing we've been talking about is as we move into '26, there are some incremental costs that are going to flow through the P&L, including on the OpEx side. So to your question on the SG&A side, certainly, it's the expansion of the sales force. So it's roughly 30 people. You can think of that as probably something in the $10 million range on an annual basis. And then I'd say a pretty meaningful increase on the R&D side as well as part of that, where you can think about, obviously, the Ankle trial, which was kind of in a start-up phase is now thinking of kind of more sites, and patient enrollment and whatnot. So those are really the 2 key drivers from an OpEx perspective that we baked in on a full year basis. Jeffrey Cohen: Okay. And then as a follow-up, with the Arthro surgeons out there, the anticipation for '26 is being driven by new surgeons or repeat surgeons? Are there 1,000 more surgeons to reach this year, or are you seeing more drive from existing physicians? Dominick C. Colangelo: Jeff, it's Nick. As I mentioned in my remarks, I mean, the sales force and MACI Arthro combined, give us a greater reach on the sales force side. And then with MACI Arthro, we expect to continue to train surgeons, but we're really focused given the dynamics you see with those trained and implanting surgeons on sort of the depth of penetration that you can achieve with those surgeons in their practice. And so that is a meaningful piece of what we're doing. We've already trained a good portion of our existing MACI users. Again, I think we'll continue to do that, and it will bring new surgeons into the fold with MACI Arthro. But again, getting depth into those practices is really a key growth driver and the subject of a lot of our commercial excellence initiatives that we referenced earlier on the call. Operator: We'll move next to Caitlin Roberts with Canaccord Genuity. Unknown Analyst: It's [ Michaela ] on for Caitlin. Our first one is, are you continuing to see dormant Epicel accounts reactivated given NexoBrid? And what does the next stage of NexoBrid adoption look like, if you can give any more color there? Dominick C. Colangelo: So we definitely see more Epicel dormant accounts. So that has continued as we've sort of, I think, just by way of reference, we now have our entire Burn Care team of 17 territories cross-selling both products. So you certainly see additional dormant accounts each year coming on board. Again, it's a pretty sporadic patient base. And so you can have hospitals that may or may not see a patient in that particular year, but we definitely are bringing on additional Epicel accounts. And then on NexoBrid, obviously, changing the standard of care takes time, but we're continuing to see progress there. We launched the product with about 90 target accounts. To date, over 70 accounts have actually placed orders for NexoBrid. So good penetration on the overall number of accounts. And as we've talked about on prior calls, it's really about how do you move all of the accounts up the curve to be consistent users, which is what we're in the process of doing. So we remain sort of optimistic on what NexoBrid can do as we move forward. And as Joe mentioned, while we're not baking any sort of BARDA award revenue into our guidance, we think that is a strong possibility for the year. And if so, that will reinforce NexoBrid as a standard of care in addition to sort of some important financial enhancements for the company as well. Unknown Analyst: And then maybe just another quick one from us. Do you have any updates on when the MACI Arthro 2.0 instruments will be launched and maybe what improvements you're making? Dominick C. Colangelo: Yes. So that's an ongoing process. We wanted to have MACI Arthro instruments on the market for a sufficient period of time in the first year and then gather feedback on enhancements that would be most important to continue sort of a journey of making MACI Arthro a simpler, less invasive procedure. So I'd say we're kind of gathering up that market input now depending on changes, these things can be by the time you develop new instruments, go through the sort of validation process, the approval process, et cetera, it's, call it, an 18-month or more process. So that would suggest maybe next year, probably at the earliest that we would have additional enhancements. Operator: We'll move next to RK with H.C. Wainwright. Swayampakula Ramakanth: Just a quick question on gross margin. So you recorded 79% gross margin in the fourth quarter, but the 2026 guidance calls for a margin of 75%. So I'm just trying to understand the 400 basis point compression. Is that coming from trying to get the manufacturing start-up activities going? Or is it some amount of depreciation baked into it? And when all is said and done and the MACI manufacturing is completely transitioned into the Burlington facility, what could be the steady-state margin profile? Joseph Mara: And thanks for the question. I would say, just a reminder, when we talked about the 79% margin, that's based on our Q4 performance in 2025. And so we do see some seasonality in terms of margins and just because our business, particularly MACI is so Q4 driven, of course, in terms of the mix of the year, we do tend to see our margins scale up in that quarter. So when you look on a kind of more apples and apples, I would say, full year basis, last year, on a full year basis, we did 74% next year for 2026, rather, we're guiding to 75%. So some increase on a year-over-year basis. Broadly, I would say there are kind of some additional costs that we are absorbing as we move into the new facility here in Burlington and now have kind of multiple facilities that we're operating, but I still feel like that's the right guidance assumption for the year. And then longer-term, just a reminder, we said on the gross margin side and we think we can get into the high 70s by the end of the decade. And I would say just generally kind of already being on a full year basis in the mid-70s and trending that way this year to start the year, I think we're pretty well positioned in terms of that kind of long-term target that's out there. And then maybe just to bring your Q4 data point back, I think Q4 is helpful when you look at those margins because we tend to grow into similar margins over time as the company grows more on an annual basis. So it is a good marker to look at. But again, I think on a full year basis, it is an increase on the gross margin side. It's just comparing Q4 to full year. Swayampakula Ramakanth: One quick question on the ex-U.S. business. So as you were stating, Nick, that you're planning to submit to the U.K. regulatory authorities in mid-2026 or in 2026. So how are you planning the commercial infrastructure there? Is this going to be a direct launch by you, or do you plan to enter into some sort of a partnership to initiate that business? Dominick C. Colangelo: Yes. Thanks RK. So as I mentioned on -- in my prepared remarks, the U.K. is a very attractive first step for us for MACI OUS expansion because I mean it is an expedited approval pathway, mutual recognition pathway. So that is very attractive as well as established reimbursement pathways. And I also mentioned there's a concentrated call point. So there's a dozen or so centers of excellence where patients in the U.K. with cartilage injuries are treated, which means it doesn't require a big commercial footprint. So we would absolutely plan to commercialize on our own in the U.K. Operator: We'll take our next question from Josh Jennings with TD Cowen. Joshua Jennings: I know you're not breaking out MACI Arthro contributions directly and we're thinking about the MACI franchise holistically. But I was hoping maybe qualitative, you can just share with us just whether the MACI Arthro launch in 2025 exceeded your internal expectations or in line with your external expectations, but it seems like it's exceeded it and including what's going on in this first quarter of 2026, where you're combating historical, seasonal trends and you're going to -- thinking you're going to deliver 20% growth or forecasting 20% growth of that MACI franchise here in 1Q '26. Dominick C. Colangelo: Yes, thanks Josh. So yes, I mean -- I think when you look at different dimensions of the MACI Arthro launch, I mean, surgeon training, as we said, we've now trained a meaningful portion of our surgeon base, which is great. Their behavior, as you mentioned, and I've mentioned a couple of times, is exactly what you'd want to see in terms of increasing growth rates and now for MACI Arthro implanters having higher conversion rates. I'd say when you look at MACI growth overall, we had nearly a couple of hundred basis points of growth. And when you look at that in the context of the increased growth rate in our small condyle defect segment, it clearly accounted essentially for that accelerated growth for the year for MACI. So yes, from that perspective, we're very pleased. Obviously, we entered last year with 150 trained surgeons. We enter this year with kind of more like 900, as we mentioned early in the year that's now grown since that time. And so there's an opportunity if those trends continue to really sort of meaningfully impact the business as we move through 2026 and beyond. Joshua Jennings: And then I know -- I was just hoping if you could share some details on this BARDA RFP, it sounds like the team is more optimistic that will come through. But what's left? Is it just administrative sign-off? And then I think this is in the public domain, but maybe just help us think about if that does come through, what type of revenue contributions in 2026 and beyond could this BARDA RFP deliver for Vericel? Dominick C. Colangelo: Yes. So as you're aware, there were kind of 3 components to the RFP from BARDA. One was kind of strategic stockpiling for national preparedness and procurement revenue that would result from that. There was a desire to add additional indications for blast trauma and funding for that and then for a room temperature stable formulation as well. So there were kind of 3 components to it that would flow through our income statement differently. That obviously was impacted by the government shutdown initially. As you're well aware, there were parts of funding for 2026 that were pushed out to the end of January, and that's still an ongoing issue. So while HHS was funded for the year as of the close of January, that's only a few weeks ago and so obviously, getting the machinery up and running takes a little time, it seems. But we do think there's a pretty strong possibility that we'll be able to get that award done this year, and it would have the impacts that we mentioned. The RFP obviously set forth the stockpiling numbers, starting with 2,750 units and then additional procurement down the line. The exact revenue that would come out of that, we're not prepared to share right now. It's obviously subject to the negotiations on pricing and so on, but as that moves forward, we can share more about that. Operator: And that will wrap our question-and-answer session. I will now turn the call back over to CEO, Nick Colangelo, for any additional or closing remarks. Dominick C. Colangelo: Okay. Well, thanks, everyone, for joining us this morning. As we've mentioned, the company had an outstanding fourth quarter and is very well positioned to continue to deliver on what we believe is a unique combination of sustained high revenue growth and profitability in 2026 and the years ahead. We look forward to providing further updates on our progress on our next call. So thanks again, and have a great day. Operator: Thank you. That will conclude today's conference. Ladies and gentlemen, we thank you for your participation. You may disconnect at this time.
Operator: Good morning, ladies and gentlemen, and welcome to the Hormel Foods Corporation First Quarter Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, February 26, 2026. I would now like to hand the conference over to Florence Makope. Florence Makope: Good morning. Welcome to the Hormel Foods conference call for the first quarter of fiscal 2026. We released results this morning before the market opened. If you did not receive a copy of the release, you can find it on our website, hormelfoods.com under the Investors section, along with supplemental slide materials. On our call today is Jeff Ettinger, Interim Chief Executive Officer; John Ghingo, President; and Paul Kuehneman, Interim Chief Financial Officer and Controller. Jeff, John and Paul will review the company's fiscal 2026 first quarter results and provide a perspective on the remainder of the year. We will conclude with the Q&A portion of the call. [Operator Instructions] At the conclusion of this morning's call, a webcast replay will be posted to the Investors section of our website and archived for 1 year. Before we get started this morning, I'd like to reference our safe harbor statement. Some of the comments we make today will be forward-looking, and actual results may differ materially from those expressed in or implied by the statements we will be making. Please refer to our most recent annual report, Form 10-K and quarterly reports on Form 10-Q, which can be accessed on our website under the Investors section. Additionally, please note, we will be discussing certain non-GAAP financial measures this morning. Management believes that doing so provides investors with a better understanding of the company's underlying operating performance. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Further information about our non-GAAP financial measures, including comparability items and reconciliations are detailed in our press release, which can be accessed on our website. I will now turn the call over to Jeff Ettinger. Jeffrey Ettinger: Thank you, Florence, and good morning, everyone. We are pleased to report solid results for the first quarter of fiscal 2026. We delivered organic net sales growth of 2%, which marks our fifth consecutive quarter of organic net sales growth. We also achieved adjusted diluted earnings per share of $0.34. This outcome was driven by the strength of our protein-centric portfolio that continues to resonate with consumers and operators. A highlight of the quarter was the results we delivered in both our Foodservice and International segments, both with high single-digit organic net sales growth, coupled with impressive segment profit growth. This strong performance was partially offset by the decline in our Retail segment. We will review segment performances in greater detail shortly. On our fourth quarter call, I outlined the key actions we are taking to strengthen our business and position Hormel Foods for both top line and bottom line growth in fiscal 2026. We have started to see the benefit of these efforts. Our protein-centric portfolio continues to demonstrate its advantage. In response to last year's persistent inflation and key commodity inputs, our pricing is now implemented as we have begun the second quarter. Our Transform and Modernize initiative remains beneficial, and our restructuring program is progressing as planned. The financial benefits from this program will start to materialize more meaningfully in the second quarter. Finally, we continue to enhance collaboration across the organization. Overall, the solid start to fiscal 2026 gives us conviction as we look ahead. For Q2, we expect to deliver another quarter of top line growth and adjusted diluted EPS that is in the range of flat to slightly up compared to last year. For the full year, we have also reaffirmed our organic net sales and adjusted diluted earnings per share guidance. Paul will discuss our financial results and guidance in more detail. Our success will be fueled by focusing on our core strength in protein solutions, while making the operational improvements necessary to drive long-term value creation. Before I hand the call over to John, I wanted to take a moment to recap our recently announced definitive agreement to sell our whole-bird turkey business to Life-Science Innovations. This transaction supports our goal of reducing our exposure to volatile commodity-driven businesses and sharpening our focus on our value-added protein portfolio. I also want to be clear about what this transaction does and does not include: the sale involves the hen side of our turkey complex, which are the female birds that you would typically enjoy during the holidays. Included with this transaction is our Melrose, Minnesota whole-bird production facility; our Swanville, Minnesota feed mill; and associated transportation assets. LSI will also assume supply contracts with dedicated third-party hen growers. The transaction is expected to close by the end of our fiscal Q2. So now let me emphasize what this transaction does not include: the sale will not affect our value-added turkey products, and we will continue to own and use the Jennie-O brand name; value-added turkey will remain a strategic and important part of our growth story; in addition, Hormel Foods will retain the right and ability to sell our Jennie-O Oven Ready whole birds and turkey breast. We will continue to own and operate all of our other turkey plants, feed mills, transportation assets and turkey barns associated with raising and processing the male or tom turkeys for our Jennie-O value-added turkey products. Another point I wanted to make clear is that the majority of Jennie-O's whole-bird sales for the 2026 holiday season will remain part of our reported results in fiscal 2026. Under the agreement, LSI will provide co-manufacturing services to Hormel through the end of fiscal 2026 to ensure uninterrupted fulfillment of customer orders during the transition. This strategic move creates a more focused turkey portfolio that enables increased investment in the value-added aspects of our Jennie-O business, where we can drive substantial margin expansion. We are committed to working with LSI to ensure a smooth transition for our team members, customers, consumers and suppliers. We began the year with strong execution from our team, and I am confident in our near- and long-term profitable growth opportunities. We are well positioned to continue delivering sustainable value. At the same time, we know there is more work ahead, and we are committed to executing with urgency and precision. With that, I will turn the call over to John. John Ghingo: Thank you, Jeff, and good morning, everyone. We had an encouraging start to fiscal 2026 with strong performance in both our Foodservice and International segments. This demonstrates the strength of our protein-centric portfolio and our strategic positioning, both at home and away from home across all dayparts. These results were achieved in a challenging consumer environment marked by industry-wide limited retail consumption growth, and notable headwinds in foodservice channels as operators and consumers remain cautious. In this backdrop, we are committed to creating and marketing compelling branded offerings for our consumers and a solutions-based portfolio that makes protein easy for our operators. Now let me go into the details of our segment performance, starting with Retail. First quarter organic volume and organic net sales for the Retail segment declined. While our branded portfolio performed fairly well, top line was meaningfully impacted by our strategic exit from select non-core private label snack nuts items. That said, Circana's latest 13-week data ending January 25 showed total Hormel dollar sales were up over 2%, indicating that our portfolio continues to resonate in today's consumer environment. Several of our priority brands delivered year-over-year dollar sales consumption growth, including Jennie-O ground turkey, Planters snack nuts, Hormel Gatherings party trays, Applegate meats, and Hormel entrées, among others. This adds yet another quarter to a long-running pattern of consistent dollar consumption growth across our priority brands. However, even with this encouraging consumption data, reported top line and profitability remained challenged in retail in the first quarter. In addition to lower net sales, profitability was further pressured by expected increases in raw material costs and unexpected increases in logistics expenses. As a reminder, the second wave of retail pricing went into effect at the beginning of Q2 aimed at offsetting some of the cost pressures. Revitalizing the Retail segment remains a major focus, and we have a solid foundation with leading brands and protein-centric offerings to support our plan. We have meaningful strategic actions underway to strengthen both top line performance and profitability, including investments in a number of critical capabilities needed to win in today's retail and consumer landscape. Our Foodservice segment performed well in the quarter, and this marked the segment's 10th consecutive quarter of organic net sales growth. This growth continues to be broad-based across channels and was driven by strong performance from premium prepared proteins and branded pepperoni. Our solutions-based portfolio continues to add value in a challenging overall foodservice environment where operators need solutions that help them deliver high-quality, delicious offerings with ease. It's no surprise that brands such as Austin Blues smoked meats, Hormel Fire Braised meats and Hormel Natural Choice meats delivered strong volume and net sales growth in the quarter. The segment profit growth was equally impressive as our pricing continues to align with market movements. Our International segment benefited from all 3 of our go-to-market models. Net sales growth in the segment was driven by our multinational businesses and branded exports, led once again by SPAM luncheon meat. We delivered strong segment profit growth for the International segment this quarter, reflecting the importance of our balanced model. When we look beyond segment performance, the larger trends in consumer behavior and protein demand strongly affirm both where we stand today and where we're going. I spoke to this extensively at the CAGNY conference last week. Our path forward continues to start with the consumer, and it's anchored in the unique position we've built in the protein space over the years. As we highlighted at CAGNY, protein isn't a passing trend. It's an enduring long-term movement. As we follow the consumer and sharpen our focus on protein-led growth, our strategy must also evolve. We are refreshing our purpose and mission to better reflect our direction and ambition. We have also rolled out 7 strategic priorities that are guiding our work, and I'd like to take a few minutes to tell you how each of these tie to our first quarter results. As we look at strengthening our protein-powered brands, the Planters brand delivered both consumption and net sales growth in the first quarter. We are leaning into the inherent power of nuts with sharper positioning and a stronger media campaign. Coupled with a steady stream of new and exciting varieties for consumers in search of flavorful satiating snacks, Planters is back on offense. A second brand to highlight is the SPAM brand. Our China-based innovation team continued to set the pace with the launch of SPAM chicken in the first quarter. This is an important evolution for this iconic brand. We launched both the canned and single-serve pouch in the Philippines, providing the familiar value and convenience of SPAM now in a highly penetrated protein format, chicken. We are also building enterprise-wide growth platforms that leverage our scale across markets and channels. Our Here For The Snacks campaign is a great example of this type of enterprise thinking. Now in its second year, this retail portfolio event brought together snacking solutions from priority brands, including Herdez, Hormel chili, Hormel Gatherings, Hormel pepperoni, Planters and Wholly Guacamole, all ahead of the big game. These efforts create meaningful lift. Hormel Gatherings, for example, delivered double-digit volume and dollar consumption growth in the latest 4-week period. Our renewed commitment to origination is equally important. Innovation allows us to solve real pain points and extend into new categories and eating occasions. A strong example is our Flash 180 chicken platform. After the strong performance of Flash 180 chicken breast, operators signaled demand for a high-quality crispy chicken solution. And with chicken tenders appearing on roughly 40% of menus, there was a clear opportunity to broaden our lineup. Flash 180 tenders launched late last fiscal year and in the first quarter are already demonstrating adoption rates consistent with some of our successful historical foodservice launches. A second innovation is Hormel Black Label oven-ready bacon, offering true convenience and driving increased household usage of bacon. Our team is focused on expanding distribution and building trial. And this convenient, mess-free disposable tray is already resonating strongly with younger consumers and 60% of its sales are being generated through e-commerce. All of this growth requires a strong foundation. Through our Transform and Modernize initiative, we continue to strengthen our supply chain end-to-end. In the first quarter, the Hormel production system progressed beyond its foundational phase and the facilities that have fully implemented the model are now driving continuous improvement, increasing efficiency and are freeing up capacity on our core manufacturing lines. At the same time, we are simplifying the company. In the first quarter, we finalized a new strategic partnership for the Justin's branded business. This partnership better aligns the business with an ownership model that can appropriately support and resource the Justin's growth plan. Regarding the pending whole-bird divestiture that Jeff covered, I'll simply add how energized I am about the opportunity this creates. This move allows us to sharpen our focus and accelerate growth in our value-added Jennie-O turkey business, an area where we're already seeing strong momentum. For example, our Jennie-O ground turkey dollar sales consumption was up double digits in the first quarter, and the brand is winning both in-store and through e-commerce with highly relevant occasion-based marketing. We're also modernizing our technology and data backbone so the organization can move faster, make better decisions and innovate more effectively. The team made great progress in the first quarter, completing another phase of our order-to-cash modernization and bringing us closer to retiring our legacy system. In addition, we are also leveraging technology more to drive our growth agenda. We have incorporated weather-driven demand intelligence into our advertising decisions for Hormel chili, allowing us to better align media spending with consumer buying patterns. And this targeted approach is already delivering stronger returns on investment. Our final priority is all about acceleration through our people, capabilities and our culture. After more than 130 years of operating, Hormel has built a rich culture and has developed strong institutional knowledge, especially as it relates to our understanding of proteins and how to solve pain points for consumers, customers and operators. The success that Hormel has enjoyed would not be possible without our people and culture. We are continuing to evolve as a company for the next generation of consumers. And what you've seen more recently is that we are complementing our homegrown strengths, by bringing in external leaders with world-class capabilities in areas such as marketing, analytics, technology, e-commerce, and supply chain transformation. This blended leadership team truly represents the best of both worlds, and their collective strength is what enables us to bring our purpose and strategic imperatives to life. With that said, I would like to highlight a few of our recent leadership appointments. We took an important step towards enterprise alignment with the recent creation of a new role, Group Vice President of Enterprise Business Performance and have appointed Jeff Baker to lead this critical function. With more than 35 years of experience across many parts of Hormel Foods, Jeff brings unparalleled company knowledge and a proven track record of delivering results. Jeff is working across all business units and our supply chain to strengthen decision-making and to ensure strong execution. We recently appointed Natosha Walsh as our new Group Vice President of Retail Sales. Throughout her more than 25 years with Hormel Foods, Natosha has distinguished herself as a strategic leader who understands every dimension of our business. Her extensive experience, unmatched knowledge of our brands and channels and the strong trusted relationships she has built with customers across the industry make her an exceptional choice for this role. To further support our growth strategy, we have created a new enterprise-wide marketing leadership role. We are excited to welcome Jason Levine as our new Enterprise Chief Marketing Officer. Jason brings more than 2 decades of consumer packaged goods experience, having led marketing, innovation and brand modernization for multiple organizations, including a multibillion-dollar portfolio. In just a few weeks, I've been energized by the insights that Jason has already brought to the leadership team and the marketing organization. And finally, I wanted to introduce Domenic Borrelli, who officially joined us this week as Executive Vice President of Retail. He brings a strong history of driving consumer-led growth within mature legacy brands and categories, and has a deep understanding of how to deliver results by staying closely connected to consumers, fostering strong customer relationships and guiding teams with clear strategic direction. Domenic is the right leader to build on the team's foundation, and many of you will have the opportunity to meet him as he begins engaging with our teams, customers and the investment community. When you put all focus areas together, you start to see a very clear picture of where we are headed. We're aligning our brands and platforms to the biggest consumer trends, modernizing the systems and structure that power our business and reinforcing our culture with the talent and capabilities to win. That's the journey we're on, and it's one that positions us exceptionally well for long-term sustainable profitable growth. With that context on our strategic direction, I will turn the call over to Paul to review our first quarter financial results in more detail and discuss our 2026 guidance. Paul Kuehneman: Thank you, John. Let's take a closer look at our fiscal first quarter results. Q1 net sales were just over $3 billion, a 2% organic net sales increase compared to the prior year and our fifth consecutive quarter of organic net sales growth. Our Foodservice and International segments led the company's organic net sales growth and were partially offset by the decline in the Retail segment. Gross profit continued to be hampered in the first quarter with top line growth more than offset by higher input costs and higher-than-expected logistics expenses. As expected, commodity input costs, mainly for beef, pork trim and nuts were a headwind in the first quarter. For context, beef remained a significant inflationary pressure across the industry and pork trim increased 12% compared to last year. While remaining high from a historical perspective, we did see some relief on bellies. We are still expecting to see a modest improvement in most commodity markets in the back half of the fiscal year. During the first quarter, we observed freight capacity tightening, driven by severe winter weather and industry dynamics. This has created modest upward pressure on transportation costs. We continue to monitor this to assess whether these pressures persist for the remainder of the year. For the first quarter of fiscal 2026, adjusted SG&A and adjusted SG&A as a percent of net sales were comparable to the prior year. The reduction in marketing and advertising expenses was due to timing of investments and offset by higher employee-related and legal expenses. We continue to expect an increase in marketing and advertising spend for the full year compared to last year. As a reminder, due to the timing of our corporate restructuring, we expect the financial benefits we announced last quarter to flow through beginning in quarter 2. Also remember, these actions will result in savings to both cost of goods and SG&A and will be partially offset by strategic investments in technology, people and brands. Adjusted operating income for the first quarter was $247 million, and adjusted operating margin was 8.2%. The effective tax rate for the first quarter of 2026 was 22.4%. Our solid results in the first quarter led to diluted earnings per share of $0.33 and adjusted diluted earnings per share of $0.34. We continue to maintain a position of strong liquidity, supported by continued improvements in operating cash flow. Cash flow from operations was $349 million, up $26 million from last quarter. Capital expenditures were $69 million, with the largest projects this quarter related to the ambient meat snack facility in Jiaxing, China and continued investments in data and technology. We still expect the capital expenditures for fiscal 2026 to be in the range of $260 million to $290 million. Finally, we remain committed to the dividend, and we are proud of our Dividend Aristocrats status. We paid our 390th consecutive quarterly dividend, returning approximately $160 million to stockholders during the quarter through dividends. Turning now to guidance. We are reiterating our adjusted full year fiscal 2026 guidance. We continue to expect organic net sales growth of 1% to 4%. As John discussed, we believe our protein-centric portfolio puts us in an advantaged strategic position going forward. In fiscal 2026, we continue to expect adjusted operating income growth of 4% to 10%, and adjusted diluted earnings per share to be in the range of $1.43 to $1.51 per share. Regarding the pending whole-bird turkey transaction, we expect it to have a minimal impact on our adjusted financials in fiscal 2026. The majority of whole-bird turkey sales for fiscal 2026 will remain part of our reported results. We currently believe the impact to net sales in our fiscal 2026 results will be reduced by approximately $50 million. We expect the larger impact of this divestiture to be reflected in our results in 2027. On an annualized basis, this business typically generated net sales between $200 million and $275 million and has exhibited high volatility and low margins. Additional adjustments to our GAAP guidance will be provided after the close of the transaction, which we expect to occur by the end of the second quarter. Turning to key input cost assumptions in our outlook. We expect overall commodity costs to ease somewhat in the back half of fiscal 2026. Specifically, we expect pork input costs to decline compared to fiscal 2025, but still remain above the 5-year average. Beef costs remain high and are expected to be a headwind throughout fiscal 2026, and nut costs are anticipated to be elevated from the prior year. Gross margin expansion is expected to be driven by a variety of factors, including pricing benefits, mix improvements and productivity gains from our Transform and Modernize initiative. To reinforce Jeff's earlier commentary for Q2, we expect to deliver another quarter of top line growth and adjusted diluted earnings per share that is in the range of flat to slightly up compared to last year. We expect sequential improvement from the first quarter, benefiting from a full quarter of our restructuring actions and the second wave of retail pricing now implemented. This range also considers pressures from commodity input costs and elevated logistics expenses, we saw a rise in the latter half of the first quarter. To conclude our remarks, we are encouraged with the early success to start the year, and we remain confident in the plan we are executing to achieve our reaffirmed adjusted fiscal 2026 results. With that, I will turn the call over to the operator to begin our Q&A portion of the call. Operator: [Operator Instructions] Your first question comes from Tom with JPMorgan. Thomas Palmer: Maybe we could just start out on 2Q? You noted the expectation for EPS to be flat to slightly up year-over-year. Could we maybe unpack this outlook segment level expectations, for instance, or maybe when discussing the logistics headwinds, any details on kind of where this is coming from and when it might start to taper off? Jeffrey Ettinger: Yes. Thanks for the question, Tom. This is Jeff. Let me provide some added color on Paul's remarks, about Q2 a couple of minutes ago. So as we were heading into this year after a year of solid top line growth, but challenged bottom line results in fiscal '25, we tried to make it clear both to the Street and to our team that our goal for fiscal '26 was to return to bottom line growth consistent with our long-term algorithm. We also said that this recovery would likely come sequentially over the course of the year. And we're definitely pleased that our Q1 adjusted EPS turned out a little better than the minus $0.02 to $0.04 we had talked about on the last call, but we also recognize that the adjusted EPS was still $0.01 below last year. Heading into Q2, our expectation is continued sequential improvement. We should reap the benefits of the completion of the second wave of retail pricing, which was aimed at offsetting some of the cost pressures we've talked about for the last several quarters. And on top of that, we will now start having full quarters of benefit from our SG&A actions. But as you point out in your question, we are carefully watching the more challenging freight cost environment we referenced in our comments. And at this point, I mean, they've been going on for a couple of months, and it's kind of too early to tell whether they are a seasonal issue or whether they're something that will be with us for more of the year. So all told at this point, we believe we remain on a path to generate the sequential but modest bottom line improvement in Q2, hence, the comments that both Paul and I made about seeing adjusted EPS coming in at flat to slightly above last year, while we will continue to generate top line growth. And we do remain confident in the guidance we've provided for the full year. Thomas Palmer: Okay. Also wanted to just ask on the whole turkey divestiture. Maybe, one, just any added details on kind of the rationale? It was helpful to get some of the commentary about longer-term margin benefit and the annualized sales expectations, but also kind of where do we sit, I guess, when looking at the volatility of this business is -- should we look at 2026 as being perhaps a more favorable year for the whole turkey business? Yes, just any added details there. Jeffrey Ettinger: Yes. This is Jeff again. Let me talk about more of the kind of the financial side of it, but then I want -- I'd like John to be able to comment on where we saw this fitting in terms of our long-term view of this consumer landscape. As Paul pointed out in his comments, we not only said that, hey, we think the net sales impact for fiscal '26 will be roughly $50 million. We have most of our whole turkey sales booked already, and we have custom manufacturing arrangements with LSI to fulfill those. And then Paul gave you a kind of a generalized typical range of $200 million to $275 million. Obviously, that's in 2027. It will depend on how many whole turkey LSI decides to run through the plant. It will depend on what the pricing is and so forth. But that gives you an idea of what typically the sales of whole birds and bone-in and breast from the hen complex were in Hormel's results. In terms of the bottom line, we've said it's highly volatile and it's low margin. We have not previously provided specific margin breakout for the whole bird piece of the business. What we can tell you is that in a typical year, it is significantly dilutive to retail margins. There have been isolated years of more meaningful profitability, but those are outliers. John, do you want to comment on the more consumer side of our thinking? John Ghingo: Tom, and just to touch a little bit on the strategic rationale that part of your question. We continue to see an opportunity with turkey to accelerate our efforts, but really against, what I'll call, the value-added consumer opportunity. And if you look at turkey, it is on trend in so many ways with consumers and with our operator partners in Foodservice. So this transaction will really allow us to increase our focus and accelerate the efforts on that part of the business, in particular, from a Retail perspective or thriving ground turkey business, our turkey breast business, other value-added formats. These are all consumer opportunities. We continue to drive really strong growth behind those platforms. You can see the ground turkey business just this recent quarter was up over 15% for us in dollar consumption. So we want to continue to drive that. When I talk about Foodservice, turkey has become a critical part of our solution set for our operator partners across channels in Foodservice. If you think about formats like premium oven-roasted sliced Turkey, which we leverage across noncommercial and commercial foodservice outlets, it's really operators looking to deliver premium experience with less labor or another example of where we have really plugged turkey in quite well is in the K12 segment in schools. And if you think about really interesting alternatives for that K12 segment where we bring flavor and exciting formats to turkey through our Foodservice business, things like turkey taco meat, turkey jalapeño popper meatballs, turkey nuggets. There's just a lot of opportunity there for the poultry segment, and our leadership position in turkey gives us a lot of room. So whether it's Retail or Foodservice, accelerating -- increasing our focus, accelerating our efforts by -- through this transaction, what that looks like is really spending more of our time, the focus of our team, our resources, our energy and conversations with our customers, really driving against the value-added parts of the business and not as much on what I would call the whole-bird part of the business, which really is more commodity-driven, more relying on holiday demand. But certainly, to your point on volatility, very subject to those commodity fluctuations year-to-year. Operator: Your next call comes from Leah with Goldman Sachs. Leah Jordan: I wanted to ask about the Retail segment as it was a little light versus our expectations. And I know you called out some logistics headwinds, but we also still haven't seeing the full benefit of your recent pricing actions. So seeing if you could provide more detail on the key puts and takes for the Retail segment in the quarter? And then how we should think about them as we move throughout the year? John Ghingo: Great. Leah, it's John. I'll take that question. Obviously, a very good question. For me to talk about Retail, what I'll do is I'll start up at the top line and kind of work my way down to margins. I would say, overall, for Retail, we feel good about the consumer takeaway we're seeing across our branded portfolio. Despite what is a choppy environment, a strange consumer backdrop, we continue to feel good about the consumption on our branded portfolio. That being said, in the quarter, Retail top line net sales performance was down 2%. That year-over-year decline was driven by a strategic exit of certain private label nut items. The branded portfolio, on the other hand, continues to see fairly strong consumer takeaway. I mentioned in my remarks that Hormel's total dollar consumption was plus 2% on the quarter in the latest 13 weeks of Circana data. In fact, our priority brands drove that. They were up 3% on the quarter in terms of dollar consumption growth driven by Jennie-O, Planters, our Mexican brands, pretty broad-based growth, our Hormel Gatherings, Applegate continued to grow. So a nice cross-section of our priority brands really driving consumption growth, which I think does speak to the relevance of our protein-centric portfolio in this environment. That being said, profitability for the quarter, certainly below prior year. And if you kind of look at how things play out, a significant driver compared to prior year is certainly the commodities. And we're still experiencing the very high commodity markets that we saw soar on us late last year and those markets have us clearly facing increased COGS significantly above -- our COGS significantly above where they were prior year. And as we mentioned on the call last quarter, we announced 2 waves of retail pricing. The first one took effect in Q1; and the second wave, the one that we announced later in Q4, we mentioned we wouldn't expect to see the benefits of that second wave of pricing until Q2. And so overall, the way I would describe the pricing is, the actions have been well accepted. The elasticities where we've implemented the pricing actions are generally playing out in line with our expectations at this point, We will continue to get additional benefits from that second wave of pricing action in Q2 and beyond. And in general, on Retail to go to kind of the outlook part of your question, we're working on 3 primary aspects to improving our margins on that business. Pricing is one, as I mentioned, right, that's critical following the commodity increases we've seen. But our Transform and Modernize initiative is a second aspect. We continue to drive productivity and efficiency across our entire supply chain. That work is ongoing and is very important. And then the third aspect of improving margins on the Retail business is mix. And when I talk about distorting resources driving growth behind our priority brands, those are the businesses that tend to be margin favorable for us. So that's a part of it. But it also is a part of pulling back and at times exiting and walking away from certain businesses, which are in the lower margin part of our Retail portfolio. And you continue to see us doing that as well. So that's kind of the dynamics that they're playing out. What I will also say is in the first quarter, in addition to those high commodity markets, we began to experience unexpected increases in freight and logistics costs and that really popped up in the latter part of the first quarter. I'll ask Paul if you can comment a little bit, Paul, on what we're seeing unfold there. Paul Kuehneman: Yes. Thanks, John. So we did see, as Jeff and John pointed out, some significant tightening in the industry and specifically across the refrigerated sector in the back half of our first quarter. Spot rates began to increase as there were severe winter weather events and driver availability did tighten. These pressures have continued in early quarter 2. And obviously, we're still seeing some severe weather events across the United States. So we're continuing to closely monitor these conditions surrounding the industry dynamics such as carrier exits and driver shortages as we head into quarter 2. Operator: Your next call is from Ryan with Barclays. Ryan Edward Lavin: This is Ryan on for Ben. So we want to look a little bit more at Foodservice and understand. So volumes were essentially flat. And with that, are your pricing tools all implemented over in Foodservice? I know there's a little bit of delay on the Retail, but want to understand the dynamic of how Foodservice customers are responding to those price increases and what you're seeing from the top line and the margins there going forward? John Ghingo: Yes. Thank you for the question, Ryan. This is John. I'll take that. So we are very encouraged by the start to the year in our Foodservice segment. We did see that strong top line growth with 7% organic net sales growth, and that's 10 consecutive quarters, as we've mentioned in our prepared remarks. So the heart of our Foodservice model, we think, is really a differentiated advantage model, which has allowed us to continue to drive top line growth in what is still, I'll say, a challenging foodservice environment overall. We know traffic continues to be challenged in a number of the different aspects of foodservice. What we lean into there, the way we've been able to continue to drive the growth is 3 aspects. One is our direct sales team. We feel like this is a real competitive advantage for us. Our team is out on the street, working with operators, working with our partners every day and figuring out how we can help them in the challenging environment, right? So that's a critical aspect. The second piece is our portfolio of innovative solutions. We add value for the operators, and we do help them with pain points. We help them with efficiency. We help them with reducing labor. We help them get high-quality products on their menus in affordable ways. And so the solutions-based portfolio is important. And then finally, the critical aspect is we have a very diversified channel set on our Foodservice business. So even when overall, there are some headwinds in the industry, we can still work hard to find pockets of growth, which enable us to really sustain that. Now on a net sales basis, we were plus 7%. Our volume came in flat, which obviously, with prices going up, with protein markets going up and prices flat volume delivery is a good delivery, I would say. To your question on pricing, typically, there is a lag time on our Foodservice. The prices will follow the markets. And as we talked about in Q4, we saw a pretty dramatic rapid increases in the markets, and we knew we would take a little bit of time to catch up on that. First quarter, definitely, we did see our pricing coming back in line with the market movements, which did help us on the margin side, recover what we had basically lost in Q4. So that is the heart of what kind of is going on in terms of Foodservice, which is strong top line growth, pricing catching up with the markets that we saw explode on us late last year. Operator: Your next question comes from Heather with Heather Jones Research. Heather Jones: I just was wondering, first, a detailed question. If you could give us a sense of how much of the volume decline in retail was related to this snack nuts exit and it sounds like to a lesser degree, the deli, and how you all are thinking about that trajectory over the rest of the year? John Ghingo: Heather, yes, it's John. I'll take that question. So obviously, just stepping back on volume overall with rising protein markets, increasing prices, volume growth is more challenging. That said, we do feel good about flat volume delivery in Foodservice. We feel good about a little bit of volume growth in International, and Retail is clearly where we had our volume decline. And to answer your question, the way I would think about volume in the Retail segment is really in 3 buckets. The first bucket is what you're alluding to, which is the exit of that private label snack nuts business, which was, let's say, a less strategic business for us. That was one of the drivers of the volume decline. But there are two other aspects I would touch on. The second one is we did have a couple of declines, I'll say, on acute businesses with some soft consumption, SKIPPY being one of the areas where we have some volume softness right now. So there was some volume softness on a couple of businesses, including SKIPPY. And then the third one, maybe the most obvious, but certainly all of the pricing in the portfolio and the elasticity dynamics around that pricing, which we expected. And as I mentioned, elasticities are playing out in line with our expectations, but there is some volume coming out as a result of the pricing actions overall across the portfolio. So that said, looking forward, I do feel like we can continue to drive growth and volume growth on our Retail portfolio. If you look at our priority brands, even in the latest 13 weeks from a consumption standpoint, we do have volume growth in a number of spots on our priority brands: Planters, Hormel Gatherings, Applegate, our Mexican portfolio. So we are growing volumes in a number of places. We'll obviously continue to invest with consumers and drive increased volume in pockets. But the reality is in this environment with pricing, there will be some throttling of that volume. Heather Jones: Okay. And my follow-up is just as you all have taken a closer look at the business over these last few years -- sorry, these last few months, when I look at the Retail segment on profitability using just '25 has dropped roughly 1/3 since '21. Volumes are down some, but margins are down considerably. The Foodservice piece has grown nicely. But just as you've taken a look at the business, I was wondering if you could just sort of flesh out for us like the opportunity to return to the margin levels we saw in the past? Are there any structural changes that are going to limit that ability? How much do you think it's related to company-specific execution issues? And just how you're thinking about maybe the next few years and what that Retail business will look like? John Ghingo: Yes, sure. I'll comment a little bit on that, Heather, just to give you a little bit more depth around what I talked about earlier in Retail. Last week, I spoke extensively at the CAGNY conference about kind of our new lens on our opportunity as a company. And we believe we have a really strong opportunity with our brands and capabilities in the Retail segment to win with consumers. We're in the process of pivoting our brands into some big consumer opportunity spaces, modernizing and refreshing our brands, modernizing our capabilities as a company. I talked a lot about that in terms of some of the investments we're making in areas like data, technology, analytics, e-commerce. So there's a lot of pivot happening to make sure we can unlock those opportunities. But I will tell you, when I look at our portfolio, and I look at our roster of brands and what we call our top 8 priority brands, which I talked about at CAGNY, when I look at our next sources of growth, which are incredibly aligned with future consumer trends, we have a lot of opportunity to drive growth and profitable growth. So the lens we brought to that was a consumer lens, but it certainly was also a financial and strategic lens to say, how do we make sure we're driving the parts of our portfolio where we have strategic advantage, where we have strong margins, where we have consumer opportunity, so we can drive growth and favorable mix over time on the Retail business. And then the capability piece is what is it going to take to deliver all of that. So we feel very good about the outlook for our Retail business, our ability to do that over time. We feel like we're making the right investments now to continue to make that pivot. Operator: Your next question comes from Chris with Bank of America. Christopher Downing: It's Chris Downing on for Pete. Two quick ones on the whole bird business divestiture. One, how should we think about this transaction relative to the WholeStone Farms transition you went through in 2018 on the pork side? What would be some of the similarities and differences? And two, can you remind us what percent of the legacy Jennie-O portfolio whole bird was? I believe at last disclosure, it was around 20%, but I just wanted to double check that. Jeffrey Ettinger: Chris, this is Jeff. I'll tackle this one. So I mean, I would look at the turkey complex that Hormel has owned is differently than the pork complex. Hormel at its peak in the pork complex was like the #6 or 7 player. Another dynamic in it is in the Upper Midwest, there are anticorporate farming laws that apply to beef and pork. And so Hormel never had a vertical operation here in the Upper Midwest. We did own farms at Mountain Prairie out in the Western area for a while and with Farmer John. But again, it was a small percentage of the business. So I think in that case, the notion of having somebody else take over some of the deep verticality of that business made a lot of sense. On the turkey side, Jennie-O has been the big player, 1 of the 2 or 3 big players in the industry for a long time. We think we are an effective low-cost producer. We have substantial tom assets that we are retaining indeed, we talk about selling the Melrose plant, but we're actually keeping plants in Barron, Faribault, Willmar, Montevideo and Pelican Rapids. So I think they're different. I mean the mentality of ultimately, a, there may be opportunities to get closer to the consumer and not be as vertical. It's a logical question. We did ultimately identify the whole bird business as being less strategic and more volatile, and hence, thought it was better owned, frankly, by LSI. But otherwise, no, we're committed to the Tom aspect of the business, and we think it gives us an important continuity of supply and cost advantage ultimately for those value-added products. In terms of the percentage, I mean, I think we could follow up with you on that. I mean I don't think you're way off, but it's at the $200 million to $275 million. I mean it's been a while since obviously, we reported Jennie-O as its own segment, but I hope that gives you some ballpark. Operator: Your next question comes from Rupesh with Oppenheimer. Rupesh Parikh: So just going back to the full year guidance. So given your 2Q guide implies a pretty significant profit acceleration in the back half of this fiscal year. So just curious on your confidence in being able to drive that improvement as we get towards the back half of the year. Jeffrey Ettinger: Thanks, Rupesh. This is Jeff again, I'll tackle that. And we're pleased to be off to the solid start that we've talked about today. We're happy with our fifth consecutive quarter of organic net sales growth and glad to be $0.02 ahead of our bottom line target after Q1. In light of the logistics cost trend, we think our confirmation of both our top and bottom line annual guidance range should be seen as a prudent yet confident sign. And we would remind you that as we head through the year, we're expecting sequential profit improvement, and there's a number of levers or drivers to that. We should see benefit from the pricing actions. We should continue to see T&M benefits. We will benefit from ongoing SG&A savings. We expect modest improvements in many of the commodity markets in the back half. And frankly, in Q4, we had some onetime discrete events that hurt us last year that we don't expect to happen again, obviously. And so that should be a benefit as well. Rupesh Parikh: Great. And then maybe one follow-up question. Just on the Retail segment. I know you've gotten a number of questions so far on the call. As we think out maybe the exit rate from a top line perspective, would you be -- would you expect to be closer to flat on the organic net sales line for Retail as you get towards the end of this fiscal year? Just trying to get a sense of the exit rate. John Ghingo: I mean for our segment detailed guide in Retail, I think on net sales, we continue to -- you're right in terms of where the private label nuts business really has been and where it exists here for the first quarter. I do think that for volume, we expect modest declines just given the private label nuts and the elasticities related to pricing within the Retail segment. And as we stated back at the start of the fiscal year back in November, retail for segment, we're going to have modest declines in volume with net sales in low single digits to flat, and that's where we kind of think we're still going to be. Operator: [Operator Instructions]. Your next question comes from Pooran with Stephens. Pooran Sharma: I wanted to maybe start off with understanding what percent of your profits are now commodity? I think in your 2023 Investor Day, it was about 10%, but you've made some moves. You sold off Mountain Prairie. Now with the sale of commodity, I was just wondering how we should think of Hormel profits in terms of value-add and commodity? Paul Kuehneman: Yes. This is Paul, I'll try to answer that, but we really don't track that answer specifically. This could be something that Florence and the IR team follow up with you later. Obviously, as you know, we have had declines here with the sale of Mountain Prairie and then the definitive agreement here with the whole-bird turkey operation, which will limit some of our commodity growth as well as what we went through with the reorganization, and what we call Project Tower internally with looking at our turkey operation full and reducing some of the harvest levels a couple of years ago. So they can follow up with you more on that, but it definitely is down from where it was back in '23. Pooran Sharma: Okay. Appreciate the color there. I wanted to -- for my follow-up, I wanted to ask about whole bird, sorry to pile on here. But I know you had a procurement strategy for Jennie-O before where I believe you were an overall buyer of dark meat just given the prevalence of your ground turkey product. Does the sale of the whole-bird business because in your prepared comments, you mentioned breast in there as well. Does this change your procurement strategy at all at Jennie-O? Jeffrey Ettinger: This is Jeff. No, it really doesn't. I mean the tom complex, if you will, we mentioned the farms and feed mills and plants that we have related to that. But for many years, Jennie-O has also supplemented its own production with the purchase of certain raw materials that are key to many of our value-added items, and that will continue. There is an aspect of the contract whereby we can get a small amount of some of the dark meat products from LSI on the hens that they bone out. And so that would be one minor change, I guess, to the operation. John Ghingo: And I would just add also to what you heard in the call, we identified bone-in and breast as a product coming off of the hand. So that's not really breast me that's going into the value-added product coming off of tom turkey. So that is a finished good product that's coming off of a hen only. Operator: All right. Thank you so much. That concludes our Q&A session. I will turn the call over to Jeff. Please go ahead. Jeffrey Ettinger: Thank you very much. I appreciate everyone's questions today, and we thank you for joining us, particularly at this early hour. We are pleased with our solid start to fiscal 2026 and the momentum we are building across our business. The initiatives we have implemented are positioning our company for continued success, and we look forward to updating you on our progress throughout the year. Thanks very much. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again, press star 1. I would now like to turn the conference over to Brian Dingerdissen. You may begin. Christopher H. Franklin: Shareholder approval in record speed compared to similar deals over the years, and we are very proud of that. As we move to slide six, you can see that by year-end 2025, we completed the seven filings in the states required. This was another substantial accomplishment in an incredibly short period of time and I truly appreciate the efforts of our teams involved. At this point, we have received the initial procedural schedules in most of the states, and based on those schedules, we continue to believe that we will close the transaction in 2027. As you may recall, three states have statutory timelines, but the others do not. I may not be able to promise this regulatory approval phase will proceed in the same record speed as our shareholder approval, but I can certainly say I am proud of the constructive regulatory relationships that we have built over the years, and I firmly believe that this mutual trust that we have built will lead to a constructive outcome. So let us turn our focus to reviewing the past year's successes on slide seven. 2025 was truly a banner year for Essential Utilities, Inc., and I am very proud of what our team across every function has accomplished. I would like to highlight some of these as I think they speak to the drive for consistency and excellence I have emphasized in our calls over the years. Financially, we delivered 2025 earnings per share of $2.20, above our guidance range of $2.07 to $2.11. Even without some of the nonrecurring, I will call beneficial items, noted in our 10-Qs and 10-K throughout the year, we would have ended up above the guidance range. This represents our continued commitment and legacy of delivering on the guidance that we provide investors. And Dan will discuss this outperformance in more detail, but suffice it to say, we delivered another strong year of earnings. Alongside growing earnings per share, we also increased the quarterly dividend by 5.25% in July. That is 35 increases in 34 years for anybody keeping score, and 80 consecutive years of paying dividends. I am also happy to report that this earnings per share and dividend growth was achieved while we increased capital investment for the benefit of our customers. In 2025, we invested a record $1.4 billion in regulated infrastructure, helping to improve reliability and resiliency for our communities. Operationally, 2025 saw our water business adding more municipal wastewater systems across Pennsylvania and North Carolina. We continue executing on our industry leadership on this issue. We are also pleased for our natural gas segment. I am just so proud of what the team accomplished in 2025. Of course, both businesses have continued robust main replacement. Throughout the year and across both segments, we replaced or retired over 400 miles of main in 2025. It is really worth noting that these successes demonstrate that our work on the merger did not distract us from our core operational goals and obligations to our customers. These are fundamental to our success as a company and our fidelity to its mission. In 2025, we were also named to USA TODAY's America's Climate Leaders for the third consecutive year. Essential Utilities, Inc. has been named as one of Newsweek's America's Most Responsible Companies for the fifth consecutive year. Regarding sustainability, I have been consistent and steadfast in my message to you over the years. Our focus on the environment, our focus on the community, and our focus on people continue to guide us through 2026. American Water shares a similar commitment, which makes our combination only more compelling. Another central area of focus for us tied to sustainability is maintaining our commitment to delivering high-quality, affordable service for our customers. Amid ongoing national and state discussions around affordability, particularly the impact on customer bills, I want to reiterate that our approach is grounded in making responsible investments in replacing aging infrastructure, sustaining high-quality water, and strengthening system reliability while carefully managing our operating costs. By balancing these priorities, we work to support customer affordability while at the same time sustaining our financial performance. And with that, let me turn the call over to Dan to review our financials for the year. Daniel J. Schuller: Thanks, Chris, and good morning, everyone. Let us begin on slide nine with a high-level view of the full-year results, and then we will get into the details on the waterfalls. As Chris described, our 2025 was very strong with revenues up 18.6%. Let us recall that this year-over-year GAAP EPS comparison includes previously disclosed prior-year items related to the gain on sale of the Pittsburgh-area energy project, as well as the unanticipated weather we experienced in 2024. On slide 10, we have the revenue waterfall for the year. Revenue has increased $388.5 million, or 18.6%, from about $2.1 billion a year ago to near $2.5 billion this year. Approximately $177.6 million of that increase is the result of regulatory recoveries. Purchase gas tax repair credits to customers contributed $57.2 million, while the “other” category of $30 million consists of reduced weather normalization credits to our gas customers due to colder-than-normal weather in 2025. Next on slide 11, our O&M slide, we see O&M expenses up about $52.3 million, or 0.9% year over year, with an increase of $8.5 million in water production costs, contributing increases in power, purchased water, and chemicals. Operating expenses related to newly acquired water and wastewater systems added $1.7 million. The “other” category reduced O&M by $2.6 million, including the positive impacts of higher capitalization in the gas business, lower spending on materials and supplies, and some insurance-related benefits, offset by expenses related to the merger with American Water. If we normalize out the merger expenses, insurance proceeds, and growth, we get to a year-over-year increase more in line with historic norms. Moving to slide 12, our earnings per share waterfall. We begin with 2024 GAAP EPS of $2.17. As a reminder, we made a few adjustments to arrive at a non-GAAP income per share of $1.97 for 2024. These adjustments included the removal of the one-time gain from sale of the Pittsburgh-area energy project, and adjustments for unanticipated weather along with the associated tax impact. You will find the reconciliation in the investors section of our website and as an appendix to this deck. In 2025, we picked up $0.46 from regulatory recoveries, an additional $0.15 from higher gas volumes, and an incremental $0.01 from water growth. These are partially offset by $0.02 from lower water volume, $0.09 from higher expenses, and $0.48 from “other.” Now, “other” includes $0.24 from the prior-year gain on sale from the energy project, as well as increased depreciation, amortization, interest, and taxes. As we have discussed in the last couple of earnings calls, in 2025, our expectation was that we would achieve GAAP earnings per share above our guidance range of $2.07 to $2.11 due to nonrecurring benefits, and indeed, we finished the year with full-year GAAP EPS of $2.20. Let me point out a few nonrecurring items from our 10-Qs and the upcoming 2025 10-K that contributed to this favorability. We had the release of an income tax reserve regulatory liability based on the February 2025 Aqua Pennsylvania rate order, and we had a favorable regulatory asset adjustment based on the February 2025 Aqua Pennsylvania rate order. We had the closure of the P&G sales and use tax audit. And then in the second quarter, we had a benefit related to decreased bad debt expense. A second of those was actually tied to a COVID-related reserve. And in the first quarter, we had a benefit from insurance proceeds. These were partially offset by merger-related expenses for banking, legal, and other matters. However, even excluding these one-time items, both good and bad, we still had strong financial performance that would have exceeded our range. We remain committed to our long-term goal of delivering 5% to 7% EPS growth for the three-year period of 2024 through 2027. Given the impact of one-time items in the 2025 results, for a better sense of 2026, I would use that long-term CAGR of 5% to 7% off the non-GAAP income per share of $1.97 in 2024. I will conclude my remarks on slide 13 with a discussion on regulatory activity. In 2025, Essential Utilities, Inc. completed regulatory recoveries that total $101.5 million of incremental annualized revenue, with $92.6 million of this related to our water and wastewater business, and the remainder to our gas business. Thus far in 2026, Essential Utilities, Inc. has completed regulatory recoveries that total $12.4 million across our water, wastewater, and natural gas businesses. Looking ahead now, our water and wastewater segment has filed for regulatory recoveries with a requested annualized revenue increase totaling $101.9 million. We continue to manage our regulatory activity to minimize regulatory lag, maintain safe and reliable service, and earn an appropriate return on the capital we invest, while always considering affordability for our customers. This will, in a similar manner to the past, continue throughout 2026 as we approach our anticipated combination with American Water. And with that, I will turn it back over to Chris. Christopher H. Franklin: Alright. Thanks, Dan. Let us move to slide 15 to recap our water and wastewater acquisitions for the year and take a look forward. During 2025, Essential Utilities, Inc. completed three acquisitions of water and wastewater systems for approximately $58 million, which represent over 12,700 new customers. I want to touch on some recent news you may have heard regarding the city of Chester and the Chester Water Authority. We respect the court's ruling. The Supreme Court in Pennsylvania communicated its decision regarding the city of Chester and the Chester Water Authority. We stand ready to participate in any process where our company can be part of an overall solution that assists the city of Chester to exit bankruptcy and ensure utility customers in the region receive quality water at affordable rates. Now looking forward, we have three signed purchase agreements for systems in Pennsylvania and Texas, which we expect to close in 2026. Notably, last month, the Pennsylvania Public Utility Commission approved Aqua Pennsylvania's acquisition of the assets of the Greenville Municipal Water Authority without modification. I will remind you that progress on our DELCORA transaction, the fourth pending item listed here, continues to be stalled by a stay put in place by a federal bankruptcy court judge related to the bankruptcy of the city of Chester. As we noted in November on our third quarter 2025 earnings call, we remain optimistic about the consolidation of water and wastewater systems in the United States, and look forward to leveraging the combined resources of Essential Utilities, Inc. and American Water to accelerate our business development work through 2027. Hopefully, we will see some movement on DELCORA now that the Supreme Court has ruled. All right. Let me conclude my remarks on slide 16. We are reaffirming our 5% to 7% multiyear earnings per share guidance. As Dan noted earlier, this 5% to 7% CAGR should be applied to our 2024 non-GAAP income per share of $1.97 as this strips out the favorability of nonrecurring items in 2025. This includes acquisitions expected to close in 2026 but excludes DELCORA. We also remain committed to maintaining a strong balance sheet, improving cash flow and debt metrics, and delivering consistent dividend growth, while keeping our payout ratio between 60–65%. In 2026, regulated infrastructure investments are expected to be $1.7 billion. And finally, I want to reaffirm our PFAS commitments. We are continuing to execute our multiyear plan to ensure that finished water does not exceed the federal maximum contaminant level of EPA-regulated PFAS chemicals as we embark on EPA timelines and our anticipated merger with American Water. Listen. All in all, I commend the 2025 performance of the entire Essential Utilities, Inc. team for an excellent year, and I reiterate our company's commitments to all its stakeholders as we embark on what I anticipate will be another strong year and a productive lead-up to our anticipated merger with American Water. I am going to conclude the formal remarks for the day, and we will open it up for questions. Operator: We will now open for questions. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. 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 a question. Our first question comes from Paul Zimbardo with Jefferies. Please go ahead. Paul Zimbardo: Hi. Good morning, team. Hi. Good morning. How are you? I am good. I am good. Thank you for taking the questions. The first was, and I apologize I have missed it, did you quantify what the non-GAAP 2025 would be if you made those adjustments, both sort of positive items, and then we noted the transaction costs as well? Daniel J. Schuller: No. We did not say it specifically. We just gave you the nonrecurring items there. You can find all those numbers in the Qs and then in the 10-K that will be released later today. You will see that we still sit favorable to our guidance range, really, as we have projected throughout the course of the year. Paul Zimbardo: Okay. Understood on that. And broadly, on the regulatory strategy, could you describe what is the timing for the next round of Pennsylvania rate cases? Daniel J. Schuller: Yeah. So the way I think about it, we have not announced it officially. But for both PNG and Aqua Pennsylvania, we have been on a two-year cadence historically. So I would use that same cadence. That would have us filing relatively quickly here. Paul Zimbardo: Okay. Okay. Then the last one I had was just I noticed that the small tweak on the language on the credit metrics is 12% plus versus the prior range. Anything to read into or things that you are trying to communicate from that? Daniel J. Schuller: I guess all we would probably say is, as we finished out the year and concluded our financial reports, it looks like we are in a nice position there in terms of FFO to debt. We should be above that 12% threshold for Moody’s and for S&P. So we feel good about those credit metrics. Paul Zimbardo: Thank you very much, team. Operator: Our next question comes from Travis Miller with Morningstar. Please go ahead. Travis Miller: Thank you. Hi, everyone. With some of your plans for regulatory activity with the merger, is there any chance that you could combine regulatory sign-off for the merger? Or would those be two separate filings in any of the states? You are about rate cases? Rate cases or surcharges, any kind of rate-related type of regulatory activity? Is that something you could combine somehow, either settlement or through the proceedings? Or are they all considered separate? Daniel J. Schuller: They are separate dockets and will be adjudicated separately in each case. I do not see those being combined, Travis. Travis Miller: Okay. Just thought I would check there. And then when you talk about the participate in along those lines? Take me through what might develop or what you could participate in along those lines? Christopher H. Franklin: It is such a great question. Now that the Supreme Court has ruled and said that the water authority, the Chester Water Authority, is actually owned by itself, right? The city argued that it should be owned by the city. And in that case, the city could sell the asset and exit bankruptcy with the proceeds. Now that the city does not have an asset to sell, somebody has to figure out—obviously, the receiver in this case along with the bankruptcy court judge—how they are going to exit bankruptcy or declare bankruptcy. And I think that is what is happening in the background. Where I think it is important for us is for DELCORA. You will remember that there is a small reversionary stub piece, if you will, of the contract that says if DELCORA sold, in this case to us, that the city assets, the Chester city assets, that were subject in place in 1972 when this addendum was put together, would revert to the city. I think there is an opportunity here for us to pay something for those assets. It is not going to nearly cover bankruptcy. We are talking maybe a little bit above our current purchase price at rate base. It is a minor amount in comparison to the almost $350 million they owe. But it could be a help in some way. At this point, what we would like to see is the bankruptcy judge allow the PUC proceeding to take place on DELCORA, and then we can begin this negotiation on the reversionary portion of the contract. Is that clear? As clear as I suppose it could be. It is a fun type of option for all of us. Travis Miller: Yep. No. That is all I had. Operator: This concludes the question-and-answer session. I would now like to turn the call back over to Chris for closing remarks. Christopher H. Franklin: Thank you. Operator: Thank you. You may now disconnect. This concludes the call. Thank you for joining. Brian Dingerdissen: Thanks for joining. As always, we are available for follow-up questions that you might have. Have a great day. Thanks for being with us.
Operator: Fourth Quarter and Full Year 2025 Earnings Conference Call. Good afternoon, and welcome to Global Net Lease, Inc. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, as a reminder, this conference is being recorded. I would now like to turn the call over to Jordyn Schoenfeld, Vice President at Global Net Lease, Inc. Please go ahead. Thank you. Jordyn Schoenfeld: Good morning, everyone, and thank you for joining us for Global Net Lease, Inc.’s fourth quarter and full year 2025 earnings call. Joining me today on the call is Michael Weil, Global Net Lease, Inc.’s Chief Executive Officer, and Christopher J. Masterson, Global Net Lease, Inc.’s Chief Financial Officer. The following information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please review the forward-looking cautionary statement section at the end of our fourth quarter 2025 earnings release for various factors that could cause actual results to differ materially from forward-looking statements made during our call today. Also during today's call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating the company's financial performance. Descriptions of those non-GAAP financial measures that we use, such as AFFO and Adjusted EBITDA, and reconciliations of these measures to our results as in accordance with GAAP are detailed in our earnings release and supplemental materials. I will now turn the call over to our Chief Executive Officer, Michael Weil. Mike? Michael Weil: Thanks, Jordyn. Good morning, and thank you all for joining us. 2025 was a transformational year for Global Net Lease, Inc., as we executed a series of deliberate and highly impactful actions that materially reshaped our financial and operational profile, strengthened the quality and focus of our portfolio, and established a more durable foundation for our company's long-term growth. The centerpiece of our transformation in 2025 was the successful execution of our $1.8 billion multi-tenant retail portfolio sale, which accelerated our deleveraging strategy, materially strengthened our balance sheet, and completed our evolution into a pure-play single-tenant net lease REIT. This portfolio simplification improved the overall efficiency of the company by driving meaningful reductions in operational complexity, which allowed us to lower both G&A and capital expenditures. The multi-tenant retail portfolio sale was a significant milestone in our disposition program launched in 2024, through which we have completed approximately $3.4 billion of sales to date. The disposition program included $995 million of occupied single-tenant non-core assets at a 7.6% cash cap rate and $2.0 billion of occupied multi-tenant assets at an 8.2% cash cap rate, and concluded in December 2025 with the sale of the McLaren campus for £250 million at a 7.4% cash cap rate. The McLaren sale generated approximately £80 million, or $108 million, of value above its original acquisition price and further enhanced the quality and focus of our portfolio, as it increased the proportion of investment-grade tenants among our top 10 tenants to 80% in 2025 from 73% in 2025, while also reducing our exposure to the automotive industry. The net proceeds from these non-core asset sales under our disposition program were deployed with clear priorities. We applied capital directly to deleverage our balance sheet, reducing outstanding debt by more than $2.8 billion since 2023 and improving net debt to Adjusted EBITDA from 8.4x to 6.7x over the same period. This improvement meaningfully enhanced our financial flexibility and positioned us to act from a position of strength in the debt capital markets. This enabled us to further de-risk our balance sheet by executing a $1.8 billion refinancing of our revolving credit facility, which secured improved pricing, enhanced liquidity, and extended the maturity from October 2026 to August 2030, including two additional six-month extension options, and extended the maturity from October 2026 to August 2030. Our decisive actions were recognized by the credit rating agencies, with Fitch upgrading Global Net Lease, Inc.’s corporate credit rating to investment-grade BBB- from BB+, and S&P Global lifting our corporate rating to BB+. These upgrades marked a major milestone for the company and validate the progress we have made in reducing leverage, improving portfolio quality, and strengthening our overall credit profile. Finally, as our disposition program continued to generate incremental proceeds, it provided additional flexibility to pursue other value-enhancing initiatives. Beginning in 2025, this included the opportunistic repurchase of 17,200,000 shares through 02/20/2026, at a weighted average price of $7.88, with continued deleveraging. We have been disciplined in deploying capital in a manner we believe balances accretive share repurchases with continued deleveraging. We repurchased shares representing total repurchases of $135.9 million and an implied AFFO yield of approximately 12%. Our outperformance in 2025 was driven by disciplined execution of our corporate strategy, which translated into meaningful shareholder value creation, reflected by Global Net Lease, Inc.’s total return delivering 32% in 2025 compared to a 6% return for the net lease sector. We have begun to close the valuation gap with our peers through disciplined execution in 2025, and while we are pleased with the results achieved so far, we also believe there is a clear path to continued growth by the execution of our 2026 corporate objectives. We are evolving from a strategy centered primarily on deleveraging and dispositions to one focused on the accretive recycling of capital. This includes remaining selective and opportunistic with asset sales, particularly those that materially reduce our office exposure, and redeploying proceeds accretively into single-tenant industrial and retail acquisitions on a leverage-neutral basis. Importantly, we continue to actively evaluate our office portfolio and are currently marketing the sale of several assets, and we will provide additional details as the transactions progress. At the same time, we are evaluating multiple redeployment opportunities that can be funded within our existing capital framework and meaningfully contribute to earnings growth, executed on a leverage-neutral basis, preserving the balance sheet quality we have worked to establish. Turning to our portfolio, at the end of 2025, we owned 820 properties, spanning nearly 41 million rentable square feet. Our portfolio’s occupancy stands at 97% with a weighted average remaining lease term of 6.1 years, and a high quality of earnings with an industry-leading 66% of tenants with an investment-grade or implied investment-grade rating. It has an average annual contractual rental increase of 1.4%, which excludes the impact of 19.6% of the portfolio with CPI-linked leases that have historically experienced significantly higher rental increases. On the leasing front, we delivered strong results across the portfolio, reflecting the depth of our asset management capabilities and the quality of our tenant relationships. In 2025, we executed leases on more than 3.7 million square feet and achieved renewal spreads of approximately 12% above expiring rents. During the year, we completed multiple lease extensions with high-quality tenants, including Home Depot, GXO, and FedEx, at an office asset. New leases in 2025 carried a weighted average lease term of approximately 5.2 years, and renewals completed during the period had a weighted average lease term of approximately 6.5 years, further supporting cash flow visibility and the durability of earnings. We remain focused on engaging with tenants well in advance of lease expirations to drive occupancy, retention, and rental growth, while maintaining a long-term perspective on portfolio stability. Our continued efforts and results in limiting exposure to high-risk geographies, asset types, tenants, and industries are a testament to our intentional diversification strategy and credit underwriting. No single tenant accounts for more than 6% of total straight-line rent, and our top 10 tenants collectively contribute 29% of total straight-line rent, with 80% being investment grade. We carefully monitor all tenants in our portfolio and their business operations on a regular basis. Everyone can look at the detail of each segment of our portfolio, which can be found in our Q4 2025 investor presentation on our website. I will now turn the call over to Christopher J. Masterson to walk you through the financial results. Christopher J. Masterson: Thanks, Mike. Please note that, as always, a reconciliation of GAAP net income to non-GAAP measures can be found in our earnings release, which is posted on our website. For the fourth quarter 2025, we recorded revenue of $117,000,000 and net income attributable to common stockholders of $37,200,000, reflecting a strong finish to the year driven by disciplined execution. AFFO was $48,500,000, or $0.22 per share, exceeding our revised 2025 AFFO per share guidance range of $0.95 to $0.97, and then $0.99 per share for the full year 2025. Looking at our balance sheet, the gross outstanding debt balance was $2,600,000,000 at the end of 2025, a $2,100,000,000 reduction from the end of 2024, and our net debt to Adjusted EBITDA ratio was 6.7x based on net debt of $2,500,000,000, down significantly from 7.6x at the end of 2024. Our debt is comprised of $1,000,000,000 in senior notes, $324,200,000 on the multicurrency revolving credit facility, and $1,300,000,000 of outstanding gross mortgage debt. As of the end of 2025, 98% of our debt was effectively fixed through either contractual fixed rate or interest rate swaps, providing strong visibility into future interest expense. As a result of significant debt reductions from asset sales, refinancing activity, and improved borrowing costs, our weighted average interest rate stood at 4.2%, down from 4.8% in 2024, driving a 45% reduction in quarterly interest expense to $42,600,000 from $77,200,000 a year ago. Interest coverage ratio was 2.9x, reflecting the combined benefits of lower leverage and reduced interest cost. From a debt maturity perspective, we have limited expirations only $95,000,000 of debt maturing in 2026. Given our strong liquidity position, we expect to address this maturity through refinancing onto a multicurrency revolving credit facility. We will continue to manage borrowings effectively on our revolving credit facility to take advantage of its lower interest rate spreads across currencies, generating approximately 170 basis points of interest savings based on rates as of 01/30/2026. As of 12/31/2025, we have liquidity of approximately $961,900,000, and capacity on our revolving credit facility was $1,500,000,000, compared to $492,200,000 and $460,000,000, respectively, as of the end of 2024. Additionally, we had approximately 216,000,000 shares of common stock outstanding and approximately 219,100,000 shares outstanding on a weighted average basis for 2025. Beginning in 2025, and through 02/20/2026, we have repurchased 17,200,000 shares totaling $135,900,000 under our share repurchase program. We repurchased shares at a weighted average price of $7.88, well below recent trading levels, which has since increased approximately 20%. These repurchases were executed and delivered in a highly accretive manner, which we believe created meaningful value for shareholders. We are pleased to establish initial 2026 guidance of AFFO in the range of $0.80 to $0.84 per share and net debt to Adjusted EBITDA in the range of 6.5x to 6.9x. The 2026 guidance assumes a gross transaction volume of $250,000,000 to $350,000,000, inclusive of both acquisitions and dispositions. This initial guidance also reflects our focus on reducing office exposure, along with the optionality to redeploy net sale proceeds in a disciplined, leverage-neutral manner we anticipate would drive earnings growth. I will now turn the call back to Mike for some closing remarks. Michael Weil: Thanks, Chris. The actions we executed throughout 2025 represent a decisive and comprehensive repositioning of Global Net Lease, Inc. as we enhanced the overall quality of the company by simplifying the portfolio, materially reducing leverage, strengthening liquidity, and improving our credit profile, with what we believe is a clear path to earnings growth. These were not incremental changes, but deliberate and coordinated actions taken by Global Net Lease, Inc. to reset the company's trajectory. We look ahead to 2026 from a position of strength and meaningfully expand our strategic flexibility as we enter the next phase of growth. Driven by disciplined capital recycling, alongside a continued emphasis on further deleveraging over the long term. Our strategy prioritizes monetizing select office assets and redeploying capital into accretive acquisitions of single-tenant industrial and retail assets that enhance earnings durability and portfolio strength. We are currently reviewing a number of accretive acquisition opportunities that align with this approach and support our long-term objectives. With a streamlined operating platform and enhanced financial flexibility, we intend to execute this plan with discipline. On behalf of the entire management team and board, I want to sincerely thank all of our shareholders and analysts who have put their trust in Global Net Lease, Inc. as we have accomplished all of these corporate goals. We intend to remain on this path with a continued focus on thoughtful execution and long-term value creation. We are available to answer any questions you may have after the call. Operator, please open the line for questions. Thank you. Operator: We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. 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. Thank you. Our first question comes from the line of Mitch Germain with Citizens JMP. Please proceed with your question. Michael Weil: Hey. Good morning, Mitch. Mitch Germain: Michael, I would like to get some perspective on the McLaren office sale. Was that a reverse inquiry, or was that an asset that you were marketing? Michael Weil: Good morning or good afternoon, maybe, and congrats on the year. There was just natural interest in that asset. As many people know, it is a very well-known campus. An independent third party having a relationship with McLaren, as I have kind of talked about in the past, I wanted to make sure that they had an opportunity to see the asset before we took any action. And through kind of their ownership structure, it proceeded that way. So, no, it was not a highly marketed transaction. We had an inquiry. Mitch Germain: Do you think that you could replicate that kind of pricing for additional office sales, or do you think that is not representative given the quality of the property and brand that is the tenant of the asset? Michael Weil: Yeah. So we actually believe, Mitch, that the net lease office portfolio within Global Net Lease, Inc. is in many cases equivalent value to what we sold McLaren for. And one of the reasons that we have identified that as a 2026 goal is because we can say that; I think the best way to prove value is to execute on it. So, we are not at a point where we want to disclose specifics, but we have a number of office assets that have significant interest, and I am very comfortable that this is the area of pricing that you will see. We will probably have announcements on several office assets, maybe end of first quarter, but definitely second quarter. Mitch Germain: Great. Last one for me. Just talking about capital allocation. Excuse me. Given the attractiveness or the discount that you could buy your stock back at, I mean, how does that weigh in? Because it definitely seems like there might be a shift in deployment for asset rather than stock here. So just curious in terms of how the buyback fits in your overall strategy on a go-forward basis, please? And thank you. Michael Weil: Sure. Thank you, Mitch. So the buyback remains a very important tool that we have at our disposal. We are going to continue to evaluate opportunities, as I said, but we are certainly not going to just put money out for the sake of saying we bought certain assets. There is still benefit to opportunistically retiring more shares of Global Net Lease, Inc. As you said, and I completely agree, two or three months ago it was a no-brainer. That stock buyback was much more accretive than anything that we could see in the market. There will still be a reasonable expectation this stock is worth buying back. But we will be more active in evaluating acquisitions. Again, I think we have been extremely deliberate and very disciplined in how we have approached this last 18 months of Global Net Lease, Inc.’s performance, and there is nothing that we are more focused on than continuing that. Thank you. Michael Weil: Thanks. Operator: Our next question comes from the line of Upal Dhananjay Rana with KeyBanc. Please proceed with your question. Michael Weil: Hi, Upal. Upal Dhananjay Rana: Hey. How is it going, and good morning out there? Good morning. You know, just on the office asset dispositions, is there a particular strategy you are trying to accomplish there that either improves your portfolio the most or showcases the embedded value in your office portfolio? Michael Weil: Yeah. It definitely—we want to highlight the implied value of the office because I think there is a bit of a disconnect in the market. You know, single-tenant net lease, investment grade with duration is still a valuable asset class. The other thing that we are really focused on is we have heard from a lot of shareholders, and frankly, the feedback is they believe that Global Net Lease, Inc. will be a better portfolio more heavily weighted to industrial primarily, and also retail. So we certainly do not want to dismiss that value either. So we are going to intentionally market the office to really unlock value here. So, you know, as Mitch asked and as you bring up, our asset management team is working very hard on identifying the right brokers, talking to potential buyers, and then we will redeploy into the asset classes of net lease industrial. You know, that is real value. You know, when we can do this in kind of the same—let us just call it mid-7s range, maybe a little lower, maybe right there. Some retail. But right now, I am really focused on industrial. So I think that is the way to proceed into 2026. Upal Dhananjay Rana: Okay. Great. That was helpful. And can you talk about the decision to provide transaction guidance? And maybe you can break down how much are dispositions and how much are acquisitions? Michael Weil: Yeah. So I think that it was important that we make it very clear. You know, we spent the last, call it, 18 months aggressively pursuing a disposition strategy because it was really the important part of what we could do. It was very, very important. You know, we lowered our leverage. We lowered our cost of capital. We sold about $3.4 billion. We are ready now. As I talked about last quarter, kind of just alluding to—but we are really ready to get back on what I think of as the offensive. And we will evaluate opportunities. We will take our time and, as we have done in the past, we will disclose when we believe that the deal is at a point that it has real assurity. But we are also going to, as I said, continue with a few more opportunistic dispositions and beneficial acquisitions for the long term. So, no, we are not at a point right now where we want to break out the transaction volume, but we did want people to know that there will be growth in this portfolio starting this year—earnings growth. But we really also are focused on, frankly, still more focus on continued deleveraging. We are going to do that through the combination of opportunistic share repurchase, the proceeds from dispositions, and then acquisitions itself. We have got— Upal Dhananjay Rana: Okay. Great. That was helpful. And then last one for me. On acquisitions, what cap rates are you eyeing and what investment spreads are you targeting there? And are these acquisitions likely to be in the U.S. or abroad? Michael Weil: Well, we have not provided that level of detail in our disclosure, Upal. So what we are committed to is accretion and AFFO growth. So, you know, as we take a look at cost of debt and cap rates, you know, the market is one where you really have to selectively pick and choose your acquisition targets. It will give us an opportunity to work with developers, with certain brokers in the market, the relationships that we have, as I have said in the past, to make sure that we are able to maintain buying cap rates that allow for that type of growth. So, without giving more detail than I can, that is how we will underwrite the opportunity to buy in the U.S. and the U.K. and Europe. We will certainly consider opportunities in the U.K. and Europe, as well as, of course, the U.S. So the team is busy. Everyone is very excited to be back at that part of the job that, you know, we had kind of put on hold for the last two years. But it will be a very selective process. It will continue to have duration. It will have credit tenants primarily, investment grade or implied investment grade. And I think fair to say predominantly in the industrial space. And thanks, Upal. Talk to you soon. Operator: Our next question comes from the line of John P. Kim with BMO Capital Markets. Please proceed with your question. Michael Weil: Hi, John. John P. Kim: Hey, Michael. Hi, everyone. Just wanted to ask about your strategy change. So over the last few years, you have been prioritizing strengthening the balance sheet, and your stock got rewarded for it last year. With your leverage of 6.7x? And now it seems like you are shifting to offense and focusing more on growth. I guess my question is why stop now? Michael Weil: So we are not stopping, John. I think that is a great question. By no means are we saying, hey, we are now going to just do a 180-degree turn and go 100 miles an hour and just be blind to acquisitions so that we can line the balance sheet and say we bought this and we bought that. We will continue to look at different opportunities, including share repurchase, select acquisitions, etcetera. That will give us an opportunity to continue to take leverage into consideration. So I think for right now, it is important that we have that opportunity to selectively grow. We are going to balance the things that we know are important to the market. But we are going to start putting our foot back in the water on some potential acquisitions. It will still continue to have a focus on leverage. John P. Kim: And you mentioned the office pricing in mid-7s. Is there anything unique about the disposition cap rates? And if there is any secured debt associated with these assets or locationally, are they unique? And if you can give us just a quantum on how much you are looking to sell and buy this year. Michael Weil: So, what is unique about these assets compared to office in general is that the net lease characteristics of office are just stronger than the overall U.S. office market. We have a majority of our tenants that are investment grade. We have got good duration on the portfolio. And these are tenants that people are comfortable with. They are typically, as I have said over many quarters, mission critical to the companies themselves. They are predominantly office, but they have a component of R&D or light assembly and storage. So just for the long-term operation of the tenant’s business, these are important assets. And because of that, they have a successful return-to-office program that has been in place for probably longer than most office properties. It is typically a local buyer who will acquire these properties. It could be a 1031 buyer. But we have sufficient evidence that we will be able to trade at these types of levels and really prove value for these properties. We have not specified dollar value of what we will sell, but we will continue to update quarterly. John P. Kim: And then in terms of acquisitions, your shares are probably trading at approximately an 8.5% AFFO yield. Is that the hurdle rate for acquisitions that you are looking at? Or are there other factors that would lead to different cap rates on acquisitions? Michael Weil: I mean, as I say over and over, because it is the primary focus, it is driven by accretion. So we have those targets. Now we look at everything overall: the proceeds from dispositions, the combination of stock buyback, and then acquisitions itself. We know where we need to be, and that will drive our kind of go/no-go on those acquisitions. John P. Kim: Okay. Thank you. Michael Weil: Thanks, John. Operator: Our next question comes from the line of Jay Kornridge with Cantor Fitzgerald. Please proceed with your question. Michael Weil: Hi, Jay. Good morning. Jay Kornridge: Good morning. No. I guess just sticking with the theme here of the office sales. I guess I just wanted to clarify: are there any other maybe non-office dispositions you would be eyeing to reduce certain tenant exposures this year? And then, what are you trying to get the office segment down towards? Michael Weil: I think that it is important that we evaluate the contribution that the stabilized office portfolio makes to the overall earnings of Global Net Lease, Inc. So I think that if we can take a subset of the office portfolio and prove value, my hope is that it gives people the confidence that there is no reason to sell at a price that we do not think represents the types of values that we are talking about. And we will intentionally continue to lower our exposure to office, but we do not want to get into any kind of rushed sale because then you lose the opportunity to really maximize value. And because of the performance of the office portfolio, we will continue to update our view. You know, right now, I think that to be prudent, we probably are leaning a little bit more towards the U.S. market, just because there is some uncertainty as it relates to U.K. and Europe. We are very comfortable there. We have a great team in place. We know the markets very well. You know, it is just part of the overall 2026 operating plan to do that. As far as other assets, there are certain assets that, for a number of reasons—it could be a tenant’s plan at an asset, potential value from redevelopment, or other factors—yes, we will potentially dispose of certain other assets during the course of the year. Jay Kornridge: Okay. Thanks for that perspective. And then just, as you think about shifting more offensively, you referenced having a priority for industrial and some retail. But as you think about your investment outlook for you guys going forward, do one of those two markets between the U.S. and Europe present a more favorable environment? Michael Weil: You know, as the U.S. is working through tariffs and trade relationships and things like that, for the time being, I think that the U.S. is just a little easier to understand. But, again, by no means do I want to say that we do not value the U.K. and European assets that we own. One of the great things about them is they are typically not export businesses. They are operating businesses that supply their local markets in the U.K. and Europe. So they have not been impacted by recent tariffs and trade agreements. So to come back to what I have already said, Jay, yeah, I think for right now, we are most focused on the U.S. Operator: Our next question comes from the line of Michael Gorman with BTIG. Please proceed with your question. Michael Patrick Gorman: Hi. Good morning. Thanks for the time. Hi, Michael. Just a quick one for me. Fourth quarter run rate would annualize to about $0.88 a share, understanding you have to make an adjustment for the McLaren sale, which was very late in the quarter. When I think about the accretion from capital recycling, it feels like maybe there are a couple of points that we are missing here that would maybe kind of push the guidance down to that $0.82 midpoint from where I would expect it to be. Is there anything else going into guidance in 2026 that might be a headwind against some of the growth metrics that you guys are talking about here? Christopher J. Masterson: Well, I think it is probably worth just pointing out within the fourth quarter, we did have some tax benefits that we identified as part of our year-end process, which did give us a little over $0.01 in AFFO. So that is something that kind of throws off fourth quarter run rate. Michael Patrick Gorman: Yep. That is super helpful. Thank you. And then, Mike, maybe just one quick one. We spent a lot of time talking about the portfolio and asset transactions going into 2026. Are there any potential vacant asset sales that you are targeting for 2026 that maybe could provide funding for acquisitions and also benefit maybe from a debt-to-EBITDA perspective? Michael Weil: You know, the majority of the assets that had that vacant component had been addressed in 2025. There are a few important assets that we are looking at from that disposition standpoint that, yes, will have free cash post-sale that we will be able to deploy. You know, we have taken an approach with the guidance, $0.80 to $0.84, because we are really at the beginning of the year. Those are definitely numbers that are backed up by what we know in the portfolio. But there are certain things that are kind of macro-type events. You know, we think that there could be some benefit in Fed pricing as we come into spring that could open up opportunities in the market that we think we are well positioned to take advantage of. So the overall idea is to continue to execute the business, to be very smart and deliberate, and to look for opportunities that we think are going to be there primarily kind of in the summer and second half of the year. Michael Patrick Gorman: Great. Thank you for the time. Michael Weil: Thanks, Michael. Operator: As a reminder, if you would like to ask a question, press 1 on your telephone keypad. Our next question comes from the line of Craig Gerald Kucera with Lucid Capital Markets. Please proceed with your question. Michael Weil: Yeah. Hey. Good morning, Craig. Craig Gerald Kucera: Mike, you made mention in the past that you were looking to reduce your c-store exposure, and I think you had worked that down from maybe 5% or so of the portfolio last year to maybe a little bit more than 1% through the third quarter. Are you where you want to be on that front, or do you still think you might make some additional sales? I am just trying to get the final breakdown, just one second, on gas and convenience. Michael Weil: Because, yeah, as you said, it was definitely an intentional strategy to reduce our exposure. Gas and convenience is an asset class that has resilience, but it is very operator driven. So we are definitely comfortable at 1%. We have taken the real risk out of what we saw from an operator standpoint. And I think the team did a great job of getting value for those assets, and, you know, let us move into some things that just are a little bit easier to forecast. Craig Gerald Kucera: Okay. That is helpful. Changing gears, I want to talk about your 2026 office lease expirations, which I think are a decent amount of the total in ’26. Are those more concentrated in the U.S. or Europe? And how are those discussions going so far? Michael Weil: They are more heavily weighted to Europe and the U.K. The conversations are going well. Tenants are engaged. We are figuring out opportunities. We know that for the most part, tenants are going to renew. There are a number of conversations that will be playing out over the next one to two quarters. I will be with the team next week in London, and we will be really digging in on some of these conversations. Craig Gerald Kucera: Okay. Great. And just one more for me. I guess as you are thinking about selling office, just given the McLaren sale, it would appear that there is stronger demand in Europe and the U.K. But are you expecting to also be able to sell out of the U.S. portfolio as well? Or is it going to be more heavily weighted overseas? Michael Weil: No. We definitely see the U.S. market equivalently strong. It is just, obviously, McLaren was based in the U.K. And we always felt that McLaren was a special credit in the portfolio. You know, the building was so specifically designed for them. It was a large single-tenant building. So when we had that opportunity, we were thrilled. We loved owning it, and we also loved selling it at that price. But as we think about office opportunities in the U.S., very strong market as well. And, Craig, I am sorry. I just want to go back to your last question and put a little clarification around it. I believe the 2026 lease maturity on office is about 3.1% of straight-line rent. So it is something we are focused on, and we expect to have a lot of success with renewals. Operator: We have no further questions at this time. Mr. Weil, I would like to turn the floor back over to you for closing comments. Michael Weil: Thank you. Great. Well, thank you, everyone. We always appreciate you taking time to join us, not only for what we have accomplished in 2025, but the year ahead. We are very excited about the disproportionate amount of potential in the coming year. This is a business where you come to work every day, and you just grind it out. And that is what we are already doing in 2026. I think that we will have some announcements that are very interesting and beneficial for the company and, most importantly, for our shareholders. So we look forward to speaking again soon. And if anyone does have specific questions for Chris or Ori or myself, please reach out. We are always available for conversation. Thanks, everybody. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Operator: Greetings and welcome to the PENN Entertainment Fourth Quarter 2025 Earnings Call. I would now like to turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead. Joseph Jaffoni: Thank you, Nicky. Good morning, everyone, and thank you for joining PENN Entertainment's 2025 Fourth Quarter Conference Call. We'll get to management's comments and presentation momentarily as well as your Q&A. During the Q&A session, we ask that everyone please limit themselves to 1 question and 1 follow-up. Now I'll review the safe harbor disclosure. Please note that today's discussion contains forward-looking statements. Forward-looking statements involve risks, assumptions and uncertainties that could cause actual results to differ materially. For more information, please see our press release for details on specific risk factors. . It's now my pleasure to turn the call over to the company's CEO, Jay Snowden. Jay, please go ahead. Jay Snowden: Thanks, Joe. Good morning, everyone. I'm joined here in Wyomissing by Felicia Hendrix and Aaron Laberge as well as other members of our senior executive team. I'm pleased to report PENN's diversified retail portfolio delivered another solid quarter during which retail adjusted EBITDA grew year-over-year after adjusting for poor weather in December. In our Interactive segment, we successfully rebranded our U.S. online sportsbook to the Score Bet on December 1 and achieved positive adjusted EBITDA in December, driven by continued momentum from our iCasino products disciplined cost management and strong online sports betting hold rates. 2026 is an exciting year for us in which we expect to generate year-over-year segment adjusted EBITDAR growth of 20%. And we are well positioned to benefit from the strategic investments we have made over the last several years and are laser-focused on improving free cash flow generation, deleveraging and opportunistically returning capital to shareholders. I want to highlight the foundation that set us up nicely to deliver on our goals for this year and beyond, which are summarized on Slide 6 of our investor presentation. First, our diverse retail business is healthy and growing, generating sustainable free cash flow. In addition to anniversarying much of the new supply in several of our key markets, we will have 2 more retail growth projects opening by the end of the second quarter this year. and we're seeing continued momentum at 2 that we opened last year. Second, we expect our Interactive segment to inflect to breakeven adjusted EBITDA for the full year, which would represent a $268 million year-over-year improvement. Third, we have rightsized our maintenance capital spend on a go-forward basis, which we'll touch upon more later. And fourth, we will begin to realize synergies from our corporate restructuring and cost optimization initiatives. The new organizational structure we announced in early January will allow us to become a leaner and flatter organization, enabling business leaders to be more empowered and drive greater productivity. All in all, we expect to save over $10 million in annualized run rate expenses for the company as we streamline the organization, which will mostly phase in over the first half of the year. The operational benefits are already in flight. In terms of rightsizing our property maintenance CapEx, we have done an excellent job over the last 6 years of upgrading our casinos, refreshing our slot floors and investing in non-gaming amenities like updated hotel rooms, new tel sports books, new restaurants and entertainment venues. In addition, our dockside to land-based growth projects are expected to meaningfully reduce our maintenance CapEx cost going forward. With the improvements we have made to our properties, we feel comfortable with bringing our recurring maintenance CapEx levels down by $20 million and returning to near pre-COVID level spending. Slide 7 really drives some of the significant free cash flow we expect to generate in 2026 and beyond. Importantly, this growth in free cash flow will enable us to delever meaningfully in 2026 and opportunistically return capital to shareholders. In fact, we expect to generate more than $3 per share of free cash flow in 2026 and reduce our lease-adjusted net leverage by more than 1 turn. Returning now to our results for the quarter. On the retail side, we experienced another quarter of year-over-year growth in theoretical revenue across all rated worth and age segments with our older demographics and VIP play contributing meaningfully to these results. The bad weather in December negatively impacted segment adjusted EBITDA by approximately $7 million. In addition, our segment was negatively impacted by new supply, Bossier City and New Orleans, in those markets in Louisiana and our Midwest segment was impacted by new supply in Council Bluffs, Iowa. Core business trends were otherwise stable across the portfolio with regional strength in Ohio and St. Louis as well as our LaBerge, Lake Charles property. We're seeing continued momentum at our new hotel tower at M Resort in Las Vegas, which is capturing previously unmet demand including booking 2 of the largest groups in the property's history recently. In December, the property achieved record gaming volumes. And in January, we generated record net revenue at M. Meanwhile, the new Hollywood Casino Joliet is delivering strong results both from new and reactivated customers with a nearly 13% year-over-year increase in the number of active players helping to drive meaningful increases in both gaming and nongaming revenues. The early performance of these projects provides us continued confidence in the anticipated success from the upcoming ownings of the Hollywood Columbus Hotel Tower and the new Hollywood Casino Aurora, in addition to our new council properties scheduled to open in late 2027 or early 2028. As we said previously, we anticipate all of these development projects to generate approximately 15% plus cash-on-cash returns. On the interactive side, we experienced rec gaming revenue in the fourth quarter driven by the continued growth of our stand-alone Hollywood Eye Casino products and increased cross-sell as well as improvements in our online sportsbook product offering and operations. Revenue growth, excluding tax gross-up of 52% year-over-year was primarily attributable to iCasino growth of 40% plus and online sports book growth of 73%. including strong revenue and positive adjusted EBITDA in December, our first month operating as theScore bet in the U.S. Additionally, adjusted EBITDA improved $70 million year-over-year in the fourth quarter, driven by strong adjusted flow-through of 95%. We are encouraged by the upward trajectory of the interactive business. Our sports book is maturing through a more disciplined regionally focused marketing strategy that prioritizes iCasino jurisdictions. Our reduced fixed media spend provides us much more marketing flexibility to strategically invest more in Canada as well as the U.S. hybrid states with both iCasino and online sports betting and in customer cohorts with more compelling returns, particularly as we look ahead to new market openings like Alberta, which is anticipated later this year in 2026. Importantly, we've retained users through the Score Bet rebrand and continue to engage them across our ecosystem. Retention and new user growth will remain our top interactive priorities and the foundation for our long-term growth in that segment. The positive trends in our Interactive segment give us confidence to recommit to achieving breakeven adjusted EBITDA in 2026. And with that, I'll turn it over to Felicia. Felicia Kantor Hendrix: Thanks, Jay. Our Retail segment generated revenues of $1.4 billion adjusted EBITDAR of $456.4 million and segment adjusted EBITDA margins of 32.3%. Inclement weather in December negatively affected retail adjusted EBITDAR in the quarter by $7 million, with the largest impact in the Northeast segment. We expect the combination of our high-quality portfolio plus our new growth projects to generate year-over-year retail net revenue and adjusted EBITDA growth in 2026, For retail net revenues, we forecast a range of $5.7 billion to $5.85 billion and retail adjusted EBITDA will range from $1.86 billion to $1.98 billion. . As you think about your quarterly modeling, the severe weather in the first quarter thus far has negatively impacted retail adjusted EBITDA by approximately $5 million to $10 million. For the second quarter of 2026, at our new property in Aurora, we expect to have approximately 2 weeks of downtime as we look to open the new land-based facility. And as you know, our second half results will benefit from the opening of all 4 of our retail growth projects. All of these items are reflected in our guidance. Our Interactive segment in the fourth quarter generated revenues of $398.7 million, including a tax gross-up of $182.7 million and adjusted EBITDA loss of $39.9 million. For 2026, we expect Interactive revenues of approximately $1.6 billion inclusive of an estimated tax gross-up of about $760 million or a revenue improvement of roughly 20% year-over-year, excluding the tax gross-up. This growth will be a function of the playbook we initiated in December as we transition to the Score Bet sports book in the U.S. and shifted our focus and resources to our U.S. iCasino states in Canada with a focus on iCasino and cross-sell. Complementing our revenue growth is a more rationalized cost structure. Our marketing expenses will decline significantly year-over-year as we made our last payment to ESPN in December 2025. We anticipate our marketing spend to come in approximately $150 million lower than in 2025 as we align spending with our revised regional strategy focused on iCasino and Canada. With performance and brand spend fully in our control, we will adjust allocations based on results. Further, we have rightsized our interactive operations to fit our new structure with payroll and G&A declining proportionately. As a result of our revenue growth expectations and more rationalized cost structure, we continue to expect our Interactive segment to generate breakeven adjusted EBITDA in 2026 and note that we will expect all components, U.S. OSB, iCasino and our Canadian operations to generate positive contribution margin in 2026. This forecast does not contemplate any new jurisdictions launching in 2026, including Alberta. As we look to full year 2026, we expect U.S. OSB MAUs to decline year-over-year given the transition from ESPN BET to the Score Bet while U.S. eye Casino as well as Canadian OSB and iCasino MAUs should increase year-over-year, reflecting our strategy to realign our digital focus. We expect the OSB and iCasino hole rates to remain around 9% and 3.7%, respectively. As for quarterly EBITDA cadence, the first 3 quarters of 2026 should generate small adjusted EBITDA losses, and we expect the fourth quarter to be profitable. We expect the other category adjusted EBITDA to be a loss of $119 million for 2026. The table on Page 9 of our earnings release summarizes our cash expenditures in the quarter, including cash payments to our REIT landlords, cash taxes, cash interest on traditional debt and total CapEx. Of our total $190 million of CapEx in the quarter, $85 million was project CapEx, primarily related to our 4 development projects. We ended the fourth quarter with total liquidity of $1.1 billion, inclusive of $687 million in cash and cash equivalents. On November 3, 2025, PENN received $115 million in funding from GLPI at a 7.79% cap rate in connection with the second hotel tower construction at the M Resort Las Vegas. In conjunction with the opening of the $360 million Hollywood Aurora in late 2Q we expect to receive $225 million in funding from GLPI near project opening and the remaining $21 million from the City of Aurora by the end of the year. We have elected not to take GLPI capital in connection with the construction of our Columbus hotel tower. The combination of this funding with a strong free cash flow and more optimized CapEx spend Jay discussed earlier, will enable us to delever nicely throughout the year. Total 2026 CapEx will be $445 million, which includes $225 million of project CapEx, down from $408 million in 2025 and $220 million of maintenance CapEx compared to $239 million in 2025. We expect total cash payments under our triple net leases to be $1 billion in 2026. For 2026 cash interest expense, we project $145 million. For cash taxes, we do not expect to be a cash taxpayer in 2026 given the favorable tax deductions enabled by the One Big Beautiful Bill in addition to our acquired NOLs and various tax credits. Our basic share count at the end of the fourth quarter was 133.2 million shares. After the June 20 repurchases of the convertible notes, we now have 4.5 million potential dilutive shares from the remaining convertible notes stub and about 1 million dilutive shares from RSUs and stock options. I will now turn it back to Jay. Jay Snowden: All right. Thanks, Felicia. In closing, I want to say that I'm proud of what our property interactive and corporate teams were able to accomplish in 2025, including the resilience shown on the retail side and the successful rebranding of our OSB product to the Score Bet. I couldn't be more excited about the many catalysts we have ahead of us in 2026, including the opening of our new Aurora property and the Columbia Hotel. The continued ramp of Joliet and the M Resort Hotel tower and achieving breakeven in Interactive. I'm also excited to welcome our 3 new board members, Heather, Jeff and Fabio, who bring a lot of relevant experience and fresh perspectives to our board. We look forward to this being a year of strong execution at PENN with an emphasis above all on free cash flow generation and deleveraging and transforming our strategic investments into consistent long-term returns and value creation for our shareholders. . And with that, can we please open the line for the first question. Operator: [Operator Instructions] We'll take our first question from Brandt Montour with Barclays. Brandt Montour: Thanks for all the details this morning. Maybe starting off on digital and drilling into that top line '26 target of 20% revenue growth ex gross up. Jay, maybe you could put a finer point on that or just flesh it out a little bit. We know that you're growing iGaming in excess of that. there's more moving pieces on the OSB side with handle down because of, obviously, the exit of and then, of course, hold was probably a benefit or was a benefit here in the recent months. And so we kind of really don't know what the run rate top line OSB is at right now. So just what's growing faster within that 20% iGaming. But if you could just flesh out what's going to get you to that 20% and how conservative it is? Jay Snowden: Yes. Happy to, Aaron, feel free to jump in as well. certainly being driven primarily by growth in iGaming. We've seen really strong growth rates throughout 2025, and I'm happy with what we're seeing so far at the start of 2026, our products continues to get better on the stand-alone Hollywood app. We're seeing really, really strong retention. We were before the rebrands and obviously, we weren't affected as much on the iGaming side from the sports betting rebrand of ESPN BET to the Score Bet, so primarily driven by iGaming growth. We also expect to see NGR growth on the sports betting side despite lower handle. As you can imagine, we've taken a really, I would say, refreshed look at our entire database on the interactive side. If you look at from a retention perspective across the worst cohorts and the interactive database the top -- we sort of break it down into 8 different categories and the top 4 are virtually unchanged from a retention perspective. both before the rebrand and after the rebrand on a month-over-month basis. So feeling really good about retention at the mid-worth and high-worth segments. And where you're seeing falloff on the retention side is where we're doing that by design is at the lowest worth segments. Most of those are unprofitable customers. And so pulling back on reinvestment at the low worth is going to help on flow through overall. It's going to lower our promotional reinvestment overall and focusing on our higher worth VIP and mid-worth customers just generates much more efficient business. So you'll see NGR growth despite some handle declines in 2026. Aaron LaBerge: Yes, not much to add. I mean eye Casino is currently growing faster than 20% right now, which we're happy about. Obviously, OSB is going to continue to go down. But as Jay mentioned, we're going to moderate that with lower promotional expenses to improve flow through. So we feel pretty good right now with what we're looking at for the year. Brandt Montour: Okay. That's super helpful, guys. And then over in the retail, the promotional environment was a headwind in '25. To some extent, there was obviously supply pressure. Can you just talk about those 2 items? Obviously, they're related into '26 and what you're expecting for the year? Jay Snowden: Yes. We're happy to share that we're seeing less impact. I think there was some sort of initial shock to some changes in reinvestment and some customer shifts and movements in a couple of markets. It's really primarily where we felt it the most is in a couple of markets in Louisiana, really 3 markets, Baton Rouge, New Orleans and, of course, Bossier City, which we talked about. And then in Council Bluffs, Iowa, the combination of new competition, new supply in Omaha, Nebraska and then another competitor in Council Bluffs, where we saw some higher reinvestment levels. We're seeing that all starts to sort of fade and we do lap finally. We lapped the opening of the new supply in Bossier City here this month in February. We're feeling good about trends at our properties in Bossier City now that we've lapped that opening. . There'll probably be some residual impact maybe the next month or 2. But we should be in the clear, I would say, in mid Q2 in terms of Bossier City. And I would say Councils Bluffs, there was a pretty major expansion of a new competitor in Omaha, I believe it was April of last year. So by the time you get to mid to late Q2, you've anniversaried the new supply shocks and competitive reactions. So I think the second half of the year should be feeling pretty good in terms of that acting then as a tailwind when you look at it on a year-over-year basis. Operator: We will move next to Barry Jonas with Truist Securities. Barry Jonas: Yes, Jay, why don't I take that second question you gave there maybe expanded as we think about the guidance range. Maybe what are you assuming between the range for new supply impact, something like more first half versus second, but also any assumptions embedded there for new project growth, anything for One Big Beautiful Bill. Just want to get a sense like what the -- what the difference is between the high and the low end of the guidance range. Jay Snowden: Yes. We anticipated and contemplated all of the factors that you just highlighted, Barry. I do think that as I look at what consensus looks like by quarter, we probably feel stronger about the second half of the year than the first half. There's some weather impacts here in the first quarter that Felicia highlighted between $5 million and $10 million impact. We built that into our full year guide. So that's no change to the full year guide. But in terms of the cadence from Q1 to Q2, Q3 and Q4, there's a little bit of noise in Q2, and that we'll be opening our Aurora property. And you'll recall that when we opened Joliet, we had to shut the property down for 2 weeks. And so there's obviously a cost headwind to not generating revenue, but still having the costs flow through the P&L as we get ready to open Aurora. . The second half of the year, we really feel like we're in the clear. We're going to have all 4 of our growth projects that we've been talking about for the last couple of years. We'll be open, 2 of them fully ramping, the ones that we opened in 2025. And feeling pretty good about launching the other 2. They're likely to open at the very end of Q2. The current construction schedule has us opening the Columbus hotel as well as the Aurora property, really at the tail end of Q2, call it, end of June. We'll firm that up in the next probably 1 month or 1.5 months publicly, but that's the way I would model it. And as you think about same-store versus new when you look at the EBITDA projection or guide for 2026, we look at our same store, including the markets with new supply as being basically flat year-over-year from an EBITDA perspective. And then the upside you see on a year-over-year basis, the 3% growth overall is being driven by the 4 growth projects. Barry Jonas: Got it. And then I wanted to follow up on interactive, really nice to see the breakeven guidance this year. But at least conceptually, how should we be thinking about the maybe profitability scenarios for the segment in the years ahead. Clearly, new iGaming legalization will be a major factor, but it does seem like the royalties are a major positive today that could tail off at some point. Jay Snowden: Yes. We are the only market we're aware of that is going to launch new this year is Alberta. That will happen. We leave some time around midyear that hasn't been firmed up yet, but that's what we're anticipating. That should be a good market for us. Obviously, our strongest market, I've highlighted before, has been Ontario from a market share and a contribution margin perspective. So we expect Alberta to be a good market, reasonable tax rate similar to Ontario, both online sports betting and online casino. There will be some investment that goes into that mark similar to when we launched Ontario, but we would expect to have similar market share results in that market as well. The Score brand really does carry across the country. It's not just specific to the province of Ontario. So feeling pretty good about that. And I think to answer your question of how does breakeven in '26, what does it look like? How does that bridge to '27, '28. We just need, I think, another couple of quarters to see what is the revenue trajectory, both on the iGaming side as well as in OSB? How does the launch go in Alberta? So look, we're in control of all of the levers. That's a great feeling as we here head into 2026 here. And we feel really comfortable with being able to achieve breakeven. There's different paths to getting there, which would impact what your '27 and '28 outlook is. So we just need a little bit more time under our belt. We're feeling good about the first couple of months post rebrand. We provided you some KPIs in the slide presentation for what December and January look like on a combined basis. And feeling pretty good about that. It's actually quite rare that when you go through a rebrand and you're making assumptions, obviously, you're building out what your assumptions are and then make adjustments on the fly. We've been really close to what we assumed we would be from a retention as well as a new user perspective. There's been little tweaks here and there that we've made. But overall, feeling pretty good about what we anticipated and what we're seeing in the business. Operator: We will move next to Jordan Bender with Citizens. Jordan Bender: I want to start on the casino side. So the bulk of the project CapEx is coming to an end in the coming months outside of Council Bluff. Jay, you might not be able to say anything on it today, but how do you view the development pipeline in the casino business over the next coming years? Jay Snowden: Yes. I'll answer it, I guess, sort of internally looking if that's where you're headed directionally, I'm happy to answer thoughts on externally. But within PENN, we do have a few more projects that we're analyzing right now. I've mentioned before on our other calls that we've got some other aging river boats in markets like Louisiana, Mississippi and 1 more actually in Illinois, that actually -- as we do the analysis, the return profile looks quite similar to what we're seeing in Joliet real time and in M-Resort. Now that 1 is hotel expansion, but we'll we anticipate with Aurora, the water to land conversion. So I would say stay tuned on that. We've been analyzing these for some time, and I think you should expect to hear more about that here in 2026. But you're right in terms of project CapEx, it's was really at its peak in 2025 at over $400 million, and Felicia highlighted the first half of this year as we sort of finished up at Columbus and Aurora, another $225-ish million. So that there'll be some Council Bluff spend as we get to the end of 2026 and head into '27. We anticipate that property opening up sometime towards the end of '27, it might leak into early '28. Anything else that we have planned as long as it pencils and we've got the support locally, which are all the things that we're working on right now and you should anticipate hearing more about that in the coming quarters. Jordan Bender: Great. And then on the follow-up for the interactive guide, a lot of positive comments around kind of what's going on following the rebranding but the guidance I believe you guys did go from breakeven to positive to just breakeven. Can you kind of just flesh out what you're seeing in real time that's caused that shift? Jay Snowden: Yes. Look, you have to take a midpoint when you're putting out a guide. And so I think that just feels comfortable right now. Again, we were positive EBITDA in December. I feel good about the business result in January. We're still in the middle of February. Super Bowl overall actually worked out in our favor. We did well, not so much on the Moneyline wagers, but player props definitely worked in our favor and same game parlay most of the star players did not score touchdowns in that game. So overall, Super Bowl was good. The other sports in February have been okay. So hold has been, I would say, pretty close to where we anticipated through the first 2 months of the year on a combined basis. So just -- we've built our budget from the bottom up, and it told us that we felt comfortable putting breakeven out there, and we're delivering against that now. obviously continue to update all of you on our quarterly calls as to how the year is progressing. But in terms of being 2.5 months, close to 3 months post rebrand we're right where we wanted to be. Operator: We will move next to Dan Politzer with JPMorgan. Daniel Politzer: I wanted to follow up just on regionals. I know you called out the first quarter, you've seen a little bit of weather impact, but perhaps the other side of that, have you started to see any of the stimulus benefits, the tax refunds start to flow through. And historically, what is the relationship between those tax refunds and maybe the uplift that you would see in your properties? Jay Snowden: Yes, it's a good question, Dan. It's really hard for us to know when we see really good volumes on a weekend, how much of that is -- there's been a break in the weather. How much of that is that there's tax refunds are starting to flow, and they're higher than people anticipated. So I think the answer is that we're seeing some of all of that. I would tell you that as bad as the weather was in January, and that really hit us across every 1 of our segments, regional segments other than West but even hit us in the south, You'll recall the storm was really across the country. And then in February, Midwest weather has actually been fine. It's the Northeast where we've gotten beat up. We had to shut down a couple of our properties early this week. So there's definitely noise there, but I would tell you that when the weather breaks, whether it's a weekday or certainly on the weekends, we're seeing really strong volumes. We're seeing really strong spend per customer when they visit. And I think that's probably going to continue now that the tax dollars are starting to flow through into people's accounts. we would anticipate finishing up February strong. The weather looks good in the 10-day forecast really across the country. And March is set up to be a good month. The calendar doesn't work in our favor as well in Q1. Something else to keep in mind, we had an extra weekend day this year in January, which is the weakest month of the 3. Last year, you had an extra weekend day in March, which is the strongest month of the 3. So something to keep in mind, again, just in terms of your quarterly modeling, Q1, maybe not as strong as maybe you would anticipate relatively speaking, but it's going to get stronger throughout the year, especially for PENN as we have the second half of the year, the 4 growth objects all open and starting to hit a run rate that we're comfortable with. Daniel Politzer: Got it. That makes sense. And then just pivoting to capital allocation. I think in your slide, you refer to those capital return optionality. One, it is a 2-part. Is there a number for the full year for the repurchases that you ended up doing? I'm not sure if there was any incremental versus when we got the update on the last call? And then how are you thinking about that capital return as you referenced the optionality with returning to shareholders versus reducing debt versus some of those growth investments that might be on the horizon? Felicia Kantor Hendrix: Yes. Thanks, Dan. Yes. So in 2025, as you know, we set out to purchase 350 million shares. And as we discussed in our last quarter, we ended up buying back [ 354 million ] for 2025. And just putting that into context, that's about 14% of our shares outstanding in '25. And then since 2022, we repurchased $1.1 billion of stock or 25% of our shares outstanding. So we've demonstrated repurchases are an important part of our capital allocation strategy and continue to be so, but also delevering and investing in our development pipeline, where we expect to generate 15% cash-on-cash returns are also important parts of our capital allocation strategy. So we talked about earlier that we expect to generate $3 per share of free cash flow this year. . And then you couple that with the $225 million in funding we should receive from GLPI for Aurora before the end of the second quarter. And then the remaining $21 million that we'll receive from the city of Aurora before the end of the year, all that's going to enhance our liquidity and reduce our leverage. So really then, at the end of the day, it's about our balance, right? And we'll remain focused on all 3 of those components, buyback delevering and investing in our growth throughout the year. Operator: We will move next with Joe Stauff with Susquehanna. Joseph Stauff: I wanted to ask maybe a couple of questions to dig in a little further on the early returns, obviously, Julia and M Resort. And just kind of lessons and how we think about the ramp from here, we can all see the Joliet kind of win per unit per day somewhat flattening out. I don't know if that's the weather or maybe there are some marketing campaigns that you are thinking about. But -- and also in M Resort, obviously, you have a lot more capacity. You talked about record gaming volumes in December in January. So I was wondering, is that a function of higher capacity, higher visitation. What are you seeing there in terms of maybe derisking, say, the 15% cash on cash return going forward? Jay Snowden: Yes. No, good questions, Joe. Let me take a step back for a second, just in terms of the hotel expansion projects versus the water to land conversions. The hotel project expansions, you see really a more immediate pack positively to incremental revenues and incremental EBITDA. And the reason for that, I think, is relatively intuitive, which is that you're adding a hotel. There's not a whole lot of labor add. You've obviously got housekeeping front desk, valet. But the Columbus property and the M Resort property were built for more hotel rooms, right? In the case of Columbus built for a hotel in terms of restaurant capacity, entertainment venue capacity, gaming floor. We don't have to we didn't have to invest in expanding any of those areas as part of those projects. So we knew that we had a lot of demand -- unmet demand that we couldn't handle at the M Resort and we were sort of cultivating these relationships with many of these groups and conventions that would come through. And then they would just outgrow us because we only had 390 rooms. We've essentially almost doubled the capacity pretty close to 750 total rooms at M now. And so we've got groups both coming back and new large groups coming in for the first time. we can deliver a level of service and personalization that they just won't find on the strip because those hotels are so large and those groups sort of can get lost. So feeling really good. I mean if you look at the resort results, which we do every day and you look at occupancy and you look at ADR, you almost don't even realize we added -- we doubled the number of rooms because the occupancy has been almost as strong as it was prior year with half the room, the same thing on an ADR basis. So we're feeling really good about M Resort, the return profile gets us even more excited about Columbus. Columbus, believe it or not, this is kind of an odd step, but it's our #1 property in the portfolio from a cross-property visitation standpoint, and that's with no hotel today. So we obviously are feeling really good about being able to generate much stronger VIP cross-sale from other markets, both in Ohio and outside of Ohio that it is a destination for us. especially during the Ohio State football season. So that's kind of the hotel expansion wrap up. I would say. As it relates to Joliet, we're feeling really good because remember, and you've been there, Joe, you were there for the grand opening. That property was really the first location or amenity or offering to open up in what is a very large mixed-use development called Rock run. There's actually a 250-plus residential development that's opening up right next to our later this year. There's a 285-room flagged hotel that's opening up within walking distance of our property sometime in 2027. There's a number of restaurants and entertainment venues. I mean this is -- it's a real mixed-use development. For those of you that have been St. Charles, Missouri close to the Ameristar property there. It's the same developer. And we expect to have a similar critical mass when all is said and done over the next couple of years. So Joliet as good as the start has been. And the way I sort of summarize the demand figures that Joliet, we've seen our active database, which we covered on the call earlier, 130% growth from pre to post. We see daily visitation has doubled. Our table volumes have doubled. Our nongaming revenue doubled and our slot revenue is between 40% and 50% growth. And so I think there's an opportunity to still grow that slot business higher than that base of 40% to 50%. And anything above that just makes the return profile that much stronger. And the difference, again, between the hotel expansions versus these water to land casino conversions is that when we first opened, like we did at Joliet, the first few months, you've got a lot of slot leased product on your floor figuring out what your customers are gravitating toward from a slot content perspective. You have all of your restaurants open every day, all of your bars and a lot of entertainment programming, you're figuring out what works. And so your margins are going to be lower those first call it, a couple of quarters post opening. And then you start to fine tune. And I think we're the best of business at doing that. And so you should expect the margins for Joliet over the next couple of quarters continue to improve. And by the time you hit the 1-year anniversary, you're really cranking from a top line and a bottom line perspective. I would expect the same sort of cadence from quarter 1 to quarter 4 post opening for Aurora as well, whereas Columbus, you're going to see a more immediate impact both on the top line and bottom line as well as in your margins. Joseph Stauff: And just a follow up. Is the Aurora property, the newer property, obviously, is that also opening up? I hadn't been there. in a mixed-use development as well similar to Joliet? Jay Snowden: It is not, but we stand to benefit that we literally sit next to immediately adjacent to the Chicago premium outlets. And when you're entering and exiting that mall, which is -- I don't have the stats in front of me, it's millions and millions of vehicles and people per month. And when you're exiting the Chicago Outlet Mall, you're at a stoplight, you turn left to go on the interstate or you go straight and you roll right into our parking drug. So I would say it's actually a little bit better in the sense that just from a timing perspective, it's already developed and already has critical mass on a daily basis. And so we stand to benefit the Chicago Premium outlets really don't have any sort of mid-tier or higher end restaurant offerings, and that's something that we will have. Remember though we don't have a hotel at our Aurora property today on the water, we will have a hotel, we'll have a spa, outdoor entertainment, lots of restaurants. It's a sort of a bigger more higher-end amenity mix version of what you saw at Joliet. So we're feeling really good about being able to feed off of the Chicago Premium Outlet Mall there as well. Operator: We will move next to Shaun Kelley with Bank of America. Shaun Kelley: Jay or Felicia, if you could just remind us on the kind of size or scope around the Alberta launch costs. Ontario was quite a while ago, and I can't actually remember if it was done under the sort of more of the Score model before your acquisition. But just kind of if you could help us put some parameters around if that market goes, I know the timing is a little uncertain. But if that market does open this year, what's the kind of range of J-curve investment you guys might expect to make there? That would be helpful. Jay Snowden: Yes. We're still sort of finalizing our marketing launch plans there and taking the best of in terms of what works with our Ontario launch and eliminating the things that didn't work. So I would say it's going to be probably somewhere in that $15 million to $20 million range, but give us another quarter to fine-tune our marketing plans and get back to you. on that. Obviously, it's a really important market. And we've all learned through the years that those initial sign-ups, you get those are the most valuable customer cohorts that you end up with. And so we got to make sure that we launched successfully in Alberta like we did in Ontario and when you do, you tend to hold on to your market share much more effectively. So I would say stay tuned. But generally speaking, that's probably the range. Shaun Kelley: Perfect. And then sort of a strategic follow-up, Jay, last quarter, you had, I think, some really defined views the broader prediction market landscape, we continue to see a lot of sequential growth in that business. I'm kind of curious on twofold. One, any identification you guys have on just your kind of core business on handle metrics as to any impact you might be seeing. But I think much more importantly, just your kind of -- as this continues to evolve, we continue to see spin-offs of more and more gaming like mechanics. Where do we sit today from where we were 3 months ago on your view? And how do you think the industry is kind of coming together here as it relates to this because we have seen, obviously, the CFTC come in with some pretty public remarks blessing these markets and continue to see a lot of people moving forward? Jay Snowden: Yes. It's a fully loaded question on a really controversial topic. I laid out a lot of my thoughts on the last call. I would say those thoughts really haven't changed. What has continued to evolve is that it's really clear as mud today in terms of where this is going from a legal perspective. You've got regulators and attorneys general that are suing prediction markets and then you have the prediction markets that are suing regulators and trying to beat them to the punch, It's obvious to anybody who's ever been in the gambling business. And even those who aren't that sports betting is gambling. I don't know how you defend that, that it is not. And I know regulators have taken that view. It really puts the PENNs and the MGMs and the Caesars of the world in a very awkward position. We have our land-based businesses that generate tremendous cash flow. We employ thousands and thousands -- tens of thousands of team members across the country. We are big contributors to our communities. And those gaming licenses are the most valuable assets we have. We're not going to put those at risk. So when regulators say this is illegal gambling don't do it, we don't do it. But there are those that are able to do it and are doing it in other states. And so it's just -- it's very -- it's confusing. I would say, the impact overall in terms of what we're seeing today on our sports betting business we can't really tell what the impact is. We all see the handle trends. I think there's lots of variables that impact handle, prediction markets certainly are 1 of those, how much we don't know today. This really can't get in front of the U.S. Supreme Court fast enough. I mean, that would be my ultimate perspective and answer because we're just going to keep seeing this get delayed and delayed and delayed and the businesses get bigger and broader and what are they doing? We don't know the answers to some of those questions. But we're obviously not going to put our licenses at risk. We're going to stay very close to our regulators. I do think, as I said on the last call, that we as an industry of land-based casinos that aren't able, aren't allowed participate in prediction markets, we've got -- I think the best defense is offense, and we've got to figure out how to play more offense here. And I've got ideas. I've shared that with some of my counterparts. And we continue to discuss those ideas with our regulators as well as lawmakers on how we can play more offense as an industry and turn this into a win for them, meaning the states and also for the operators like us. Unknown Executive: And I would say on the sports betting side, you're seeing a lot more competition on the marketing side going after sports betters directly. So we are seeing that versus going after investors, they're going after sports betters. So that's become pretty evident over the short term here. Operator: We will move next to Chad Beynon with Macquarie. Chad Beynon: I wanted to ask about the main iGaming bill that was passed, obviously, unique in terms of the partners that are there. You guys have a good database and could potentially partner with somebody. Can you talk about if this bill goes into existence in terms of operations, maybe your opportunity to benefit economically in that market? Jay Snowden: Sure, Chad. I mean that's -- I can't answer that 1 today because we're still in discussions. I would just take a step back. What happened in Maine is mind blowing. We've been operating as a casino entity there for 2 decades. We've invested hundreds of millions of dollars. We've employed hundreds of Mainers. We're great -- we're -- as involved in the community as you're going to find any business leader. And the governor in Maine decides to hand a monopoly to a third party that's never invested dollar in the industry. I don't understand that. It doesn't make sense to me. It shouldn't happen. That said, it's being challenged legally as it should be and we'll see where it goes. If it ends up standing, then we're going to do our best to figure out a way to compete in that market. But the way that this was done was not popular publicly, and that's very evident. And I'm not sure how the governor concluded that was the best course. But it is what it is. We'll figure out a way to compete if it doesn't upstand legally. Chad Beynon: Okay. And then separately, on the retail guide, it looks like margins are going up by a few basis points, 45% flow-through at the midpoint. You guys are going to benefit from the new properties. You talked about the returns there. But just as we think about the same-store expenses, maybe labor, utilities, et cetera, the nontax items. Do you have high confidence that there's not going to be much inflation in '26? And if you hit those revenue targets, at least at the midpoint that you can hit on that flow through? Jay Snowden: Yes. From what we can see today, Chad, I would say, yes. We have a couple of labor negotiations in 2026 that we thought we've got a pretty good handle in terms of what the outcomes -- the range outcomes will be. Got a good handle on utility and insurance expenses, things of that nature. So it really is more of a -- think about it as a first half of the year, you're still going to feel some impact from those new supply markets that we haven't anniversaried yet or in the process of anniversarying. You've got the Aurora opening, which again, will be -- will hurt margins at least for the first quarter, maybe 2 quarters. The other 3 growth projects that we've -- we'll be ramping at Joliet and margins will be in a really good place. certainly the second half of the year, M Resorts margins are in a great place right now. Columbus will be out of the gate in a great place. So that's sort of the impact. Just think about it maybe as a first half of the year, maybe not as much upside same-store [indiscernible] at the second half of the year, you'll probably start to see more upside in terms of margin growth the same-store level. Operator: We will move next to Jeff Stantial with Stifel. Jeffrey Stantial: Jay, Felicia, Aaron. Maybe starting off on the Interactive business. We haven't seen a bit of an uptick in the promotional environment this quarter on the sports side of things. The private operators continue to spend quite aggressively and then some of the larger operators have come out with parley insurance and other initiatives like that. Jay or Aaron, whoever wants to take this. Is this something you're noticing an impact on retention in sports that you could actually pinpoint in the quarter? Are you fast following any of the parlay focused generosity initiatives? And if you could just help us think about, I guess, overall sensitivity and the projections to the promotional environment, specifically in sports, just given the shift in strategy, that would be helpful. . Aaron LaBerge: Yes. This is Aaron. We are seeing that in sports, although as you know, our strategy has really shifted to focusing on iCasino in hybrid states. and in Canada. So when we're looking at OSB only states, we're taking a much more methodical look at our promo dollars and users that we're trying to retain and attract. So we have great retention at the high end of value, kind of the promo chasers and the people that are looking for gimmicks and promos in the low end tend to be churning out, which is what we expected. And then we use that money to reinvest in hybrid states where there's iCasino and sportsbook. So it is happening, but we are not necessarily competing in that market anymore as vis-a-vis Fandora Draftkings, we don't see ourselves in that realm, although we do try to find opportunities to provide value where they don't. But your observation is true. It is getting competitive, but we're kind of staying out of that right now. Jeffrey Stantial: That's great. And then maybe staying on the Interactive business. Felicia, in the past, you've given us some frameworks for just thinking about market share across the 2 verticals, maybe without having to get into specific numbers this time, can you just talk directionally on how you think about overall market growth relative to market share expansion on the casino side that's sort of embedded in the '26 guide. Jay Snowden: Yes. I'll grab that one. This is Jay. I would say that we expect -- we've essentially said it already. We would expect to continue to grow our market share on the iCasino side and see that our handle share will shrink on the OSB side. That's the best way to think about it. We're really focused on retention and driving profitable new users as first-time betters into the ecosystem. So [indiscernible] we're hyper focused on the states that offer both online casino and OSB. OSB only states we're likely to have a different new sign-up offer. We actually already deployed that, that differentiation between OSB only versus hybrid. And so that's where it's going to be in 2026. We feel we also have a great opportunity on reactivation, people that over the last several quarters and years have registered and signed up and made deposits, maybe taking advantage of a promotion and they're either inactive, dormant or they're not as frequent players with us or gambles with us as we would anticipate. So we're really focused on reactivation as well. And that's really, all of that just feeds into the P&L story for this year. It's going to be a much more efficient approach to the business and 1 that we think will generate a much higher return long term. Operator: We'll take our next question from David Katz with Jefferies. David Katz: I wanted to just talk about the land base or retail portfolio. You've made some obviously very effective investments in upgrading that. And do you have a pipeline of more of those? Should we expect to see more of those kind of upgrade projects? Clearly, the retail landscape has gotten much more competitive post-COVID. Jay Snowden: Yes. I had mentioned earlier, David, we do have some more opportunities in states like Louisiana, Mississippi and actually 1 more of our water-based facilities in Illinois. So we're analyzing the return profiles on those projects, working with local leaders, lawmakers, community leaders and figuring out which of those may make sense for us as long as they hit our return profile that we're comfortable with, which would be that 15-plus percent cash on cash. We've got others that we believe will fit that return profile. We just have to make sure that everything else lines up and I would say stay tuned for more on that here in 2026. David Katz: I appreciate it. If I could just follow up to that end. I don't expect you to give us a number today and in this forum, right? But is it a majority of the portfolio, right? Is it 2 to 3 properties, 3 to 5 properties? Any order of magnitude, I think, would be helpful here. Jay Snowden: It would be certainly low single digit, less than a handful, but yes, there's -- across those 3 states I mentioned, call it, 3 or 4 projects that we're looking at right now. . Thanks, David. And Nicky, we'll take 1 more question, please. Operator: We do have a question, comes from the line of Stephen Grambling with Morgan Stanley. Stephen Grambling: Thank you for sneaking me in here. This should be maybe a quick one. Just -- I know that you gave a guide that implies kind of an OpEx growth rate on the property side. Just curious if you could provide any more details on some of the puts and takes that maybe underpin that. Jay Snowden: Yes. I would say a pretty typical year of OpEx growth we're comfortable with the flow-through on the incremental revenues that we're showing there at around 45% could end up being a little bit better than that, but you're going to have typical growth in your labor number primarily annual merit increases. Like I said, we have a couple of labor negotiations that we're working through. So primarily there, we don't anticipate strategically any changes in our marketing reinvestment overall. You're going to have some natural growth in areas like insurance, sometimes utilities, but that would be driving the lion's share of it, Stephen. All right. Thanks, everyone, for joining. We look forward to catching up with you again next quarter. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the NovoCure Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Adam Daney, Head of Investor Relations. Please go ahead. Adam Daney: Good morning, and thank you for joining us to review NovoCure's Fourth Quarter and Full Year 2025 performance. I'm joined on the phone today with our Executive Chairman, Bill Doyle; CEO, Frank Leonard; and CFO, Christoph Brackmann. Other members of our executive leadership team will be available for Q&A. For your reference, slides accompanying this earnings release can be found on our website, www.novocure.com, on the Investor Relations page under Quarterly Reports. Before we start, I would like to remind you that our discussions today during this conference call will include forward-looking statements, and actual results could differ materially from those projected in these statements. These statements involve a number of risks and uncertainties, some of which are beyond our control and are described from time to time in our SEC filings. We do not intend to update publicly any forward-looking statements, except as required by law. Where appropriate, we will refer to non-GAAP financial measures to evaluate our business, specifically adjusted EBITDA, a measure of earnings before interest, taxes, depreciation, amortization, and share-based compensation. We believe adjusted EBITDA is an important metric as it removes the impact of earnings attributable to our capital structure, tax rate, and material noncash items and best reflects the financial value generated by our business. We do not provide forward-looking guidance for adjusted EBITDA on a GAAP basis due to the inability to predict share-based compensation expenses contained in the reconciled GAAP measure of net income without reasonable efforts. Reconciliations of non-GAAP to GAAP financial measures are included in our press release, earnings slides, and in our Form 10-K filed with the SEC today. These materials can also be accessed from the Investor Relations page of our website. Following our prepared remarks this morning, we will open the line for your questions. I will now turn the call over to our Executive Chairman, Bill Doyle. William Doyle: Thank you, Adam. I'll begin this morning with a brief review of our 2025 accomplishments and look ahead to 2026. Our CEO, Frank Leonard, will then discuss recent commercial updates. And finally, our CFO, Christoph Brackmann, will walk through our fourth quarter financial performance and 2026 guidance before opening the line for questions. 2025 was a year of progress and change at NovoCure. We generated a record $655 million in net revenues last year, an 8% increase from 2024. We presented final data from 2 large randomized trials in plenary sessions at major medical congresses, followed by publications in leading medical journals. We submitted PMA applications to the FDA for the use of TTFields therapy to treat pancreatic cancer and brain metastases from non-small cell lung cancer. And we rolled out product enhancements designed to improve the TTFields therapy experience for both patients and physicians. 2025 was a strong year of execution, setting the stage for a catalyst-rich 2026. We expect to reach a number of regulatory, clinical, and commercial milestones this year. The first milestone was reached earlier this month with the approval of Optune Pax for the treatment of locally advanced pancreatic cancer, and we have submitted regulatory filings for Optune Pax in Europe and Japan. We expect Optune Pax to be a significant contributor to our long-term growth and are eager to begin treating patients in the coming weeks. We also expect a decision from the FDA on our brain metastases PMA later this year. On the clinical front, we are on track for top-line readouts from both the PANOVA-4 and TRIDENT trials this year. PANOVA-4 is a Phase II trial exploring the use of TTFields, atezolizumab, a checkpoint inhibitor, and chemotherapy in metastatic pancreatic cancer with top-line data anticipated next month. TRIDENT is a Phase III trial exploring earlier use of TTFields concomitant with radiation and temozolomide in newly diagnosed GBM, which we expect to read out in Q2. We are also on track to complete enrollment of our next Phase III trial, KEYNOTE D58, studying Tumor Treating Fields, temozolomide, and the checkpoint inhibitor pembrolizumab in newly diagnosed GBM by year-end. Turning to our commercial portfolio. We anticipate a number of national or regional launches of our 3 products this year. This includes Optune Gio launches in Spain, Czechia, and the Canadian province of British Columbia, and Optune Lua launch in Japan and Optune Pax launches in the U.S. and Germany. Before I hand the call over to Frank, I would like to touch on one update from this morning's press release. Dr. Nicolas Leupin, our Chief Medical Officer, resigned from the company effective February 25. Following Nicolas' departure, we have decided to combine our scientific and clinical organizations to accelerate our R&D execution and shorten the cycle from scientific insight to clinical relevance. Dr. Uri Weinberg, our Chief Innovation Officer, will now also assume the role of Chief Medical Officer. Dr. Weinberg joined NovoCure in 2008 and has been instrumental in establishing and leading a number of our scientific and research and development functions over the years. Uri is well qualified to take over this dual mandate. I would like to personally thank Nicolas for his contributions to NovoCure and to congratulate Uri on his expanded role. With that, let me hand the call to Frank to walk through recent updates. Frank Leonard: Thank you, Bill, and good morning. I'm excited to speak to you in my new role as CEO and at a time when NovoCure is evolving into a multi-indication platform company. 2025 was our most successful commercial year to date, and we expect to carry this positive momentum into 2026. Our business remains core, our GBM business remains core to our commercial operations. In 2025, we saw substantial active patient growth across all our major markets. OUS markets were the biggest driver, including 10% year-over-year growth in Germany, 19% in France, and 29% in Japan. We also saw 4% active patient growth in the U.S., which had been flat in recent years. In 2026, we expect growth rates to stabilize in the low to mid-single-digit range as these markets continue to mature. We should also see a tailwind from new market launches in Spain, Czechia, and British Columbia, though first-year revenue contributions are likely to be modest. Turning to Optune Lua. We are preparing to launch in Japan. Japan represents a promising opportunity for Optune Lua, given first and second-line use of immune checkpoint inhibitors is standard of care in Japan. We expect to receive our final reimbursement approval in the coming weeks. We will then be able to launch in Japan with national coverage and pricing. As we've previously stated, the Optune Lua launch has been slower than we originally projected in the U.S. and Germany. We have rightsized our marketing spend based on the current demand and are prioritizing investments in indications with a higher return potential, such as pancreatic cancer. Finally, I will turn now to our newest FDA approval, Optune Pax for locally advanced pancreatic cancer. We are very pleased to have received FDA approval and appreciate the agency's partnership throughout the review process. The industry standard time for PMA reviews is between 9 to 12 months. In the case of Optune Pax, the FDA review was completed exactly at the 180-day mark, with approval received on February 11. We've commenced our Optune Pax launch and are now certifying prescribers and receiving prescriptions. We have designed the launch plans for Optune Pax to make prescribing and starting patients as easy as possible for physicians, including emphasizing the use of our HCP portal to enable digital prescriptions. We are also giving the prescriber more discretion in patient selection rather than detailing to a preferred patient profile. We are also able to leverage our established torso sales force for the Optune Pax launch. The existence of a trained team significantly lessens the educational burden of onboarding a new team and enables us to take advantage of the established team's deep knowledge of TTFields therapy. This team has built extensive connections with physicians, which will prove invaluable given that some medical oncologists treat both lung and pancreatic cancer patients. There are a lot of similarities between GBM and pancreatic cancer that give us confidence in both the market opportunity and our ability to commercialize Optune Pax. Both cancers are typically diagnosed at a late stage and are incredibly difficult to treat. Both cancers have properties that limit the bioavailability of systemic therapies, making these tumors prime targets for a physical treatment approach. And both tumors have limited approved therapeutic options for patients. We are eager to begin treating patients in the coming weeks. Now is an exciting time to step into the CEO role at NovoCure. Since I joined the company in 2010, we have had numerous clinical, regulatory, and commercial milestones across multiple indications, and we are now primed to enter our next era of substantial growth. I'm thankful for the opportunity to lead at such an exciting time, and I want to thank all of my colleagues for their dedication and support during the transition. I'll now pass the call over to Christoph to review our Q4 and full-year 2025 financials as well as our guidance for 2026. Christoph Brackmann: Thank you, Frank. We closed 2025 with continued momentum, delivering record net revenue for both the quarter and full year. Fourth quarter net revenue was $174 million, and full year net revenue totaled $655 million, representing 8% year-over-year growth for both periods. Growth was primarily driven by continued expansion in ex-U.S. markets, particularly Germany, France, and Japan, reflecting solid underlying demand and increased active patient count. Foreign exchange provided a tailwind of approximately $5 million in Q4 and $11 million for the full year compared to 2024. We recognized $3.5 million from Optune Lua claims in the quarter, including $2.4 million from non-small cell lung cancer. For the full year, Optune Lua revenue was $10.4 million, including $5.8 million from non-small cell lung cancer patients. I would also like to briefly address the recent Medicare billing situation. Earlier this month, CMS notified us that our billing privileges were halted due to an administrative issue identified during the DME supplier revalidation process. We engaged with the agency quickly, submitted a corrective action plan the following business day, and completed our required reinspection. Two days ago, we were notified that CMS rescinded the revocation and directed that our Medicare enrollment and billing privileges be reinstated retroactively to December 17, 2025. As a result, we do not expect any negative impact on revenue recognition from this matter. We are pleased that the issue is resolved and are appreciative of the agency's partnership in addressing the issue swiftly. Looking ahead to 2026. This morning, we issued annual net revenue guidance at constant exchange rates of $675 million to $705 million, representing year-over-year growth between 3% and 8%. This assumes Optune Gio net revenue growth in the low to mid-single digits and net revenue contributions from non-GBM products of $15 million to $25 million compared to $10 million in 2025. Moving down the P&L. Fourth quarter gross margin was 76% and 75% for the full year compared to 79% and 77% for the fourth quarter and full year 2024. The decrease was primarily driven by a decrease in prior period collections in the U.S. and increased costs associated with the HIV rates and tariffs. For 2026, we expect gross margin in the mid-70s percentage range. Research and development costs in the quarter were $61 million, an increase of 19% from the same period last year, and $225 million for the full year, an increase of 7%. The quarterly increase was driven by increased costs related to the KEYNOTE-58 and LUNAR-2 Phase III trials and regulatory costs. Sales and marketing expenses in the quarter were $69 million, an increase of 2% from Q4 2024, and full year sales and marketing expenses were $240 million, flat year-over-year. The increase in the quarter was driven by increased marketing activities related to new indications. G&A expenses for the fourth quarter were $43 million, a decrease of 41%, and $178 million for the full year, a decrease of 6% from 2024. The primary driver for the quarter was lower share-based compensation expenses related to 2020 PSUs triggered by the approval of Optune Lua in 2024. As noted in the 10-K today, we will have a similar charge in Q1 triggered by the Optune Pax approval. Net loss for the quarter was $24 million with a loss per share of $0.22. Full-year net loss was $136 million or $1.22 per share. Adjusted EBITDA in the quarter was negative $16 million and negative $34 million for the full year. Our cash and investment balance at the end of Q4 was $448 million. In the fourth quarter, we repaid $561 million of convertible notes in cash. We believe our current funds available, coupled with diligent expense management, will provide the necessary bridge as we bring new revenue streams online. Therefore, we have decided not to go beyond the $200 million already drawn from our current credit facility. As we look ahead to 2026, we are determined to make material progress towards our goal of driving profitable growth in the coming years. This morning, we issued adjusted EBITDA guidance of negative $20 million to breakeven for full year 2026. Overall, this reflects an acceleration of our plans to achieve adjusted EBITDA breakeven, driven by both our expectations of revenue growth as well as diligent expense management across the organization. With that, I'll turn the call back to the operator for Q&A. Operator: [Operator Instructions] Our first question comes from Jason Bednar with Piper Sandler. Jason Bednar: Congratulations on the recent approval of Optune Pax. There's probably too many topics to choose from this morning. There's a lot going on here. But why don't I start first with the guidance? This is obviously a first for NovoCure, glad to see it. So can you talk about why it made sense now to give the guidance versus past years? And then can you break out some of the contributions included within the revenue guide around maybe things like you're assuming with new international markets? I think you called out Spain, Czechia, and Canada. And then as well as whether you're assuming anything in the revenue and EBITDA guide from previously denied claims. Frank Leonard: Thanks, Jason. This is Frank. I'll start with top line, and then I'll hand it to Christoph to go into some of the assumptions. First, I just want to also say thanks for the recognition of the many positive headlines we had in the last quarter and closing out 2025. It certainly has been an exciting time here at NovoCure. Jason, as I came into the role as CEO, one of the things we did is really try to spend as much time with our investor community as possible. One of the core messages that we've heard is that we need to speak more clearly in terms of setting expectations of what we can accomplish in the coming year. And we're taking that first step today with guidance where we really want to send the signal first at the top line that we are committed to returning the company to steady growth. And this is the first year where the Optune Pax will build a foundation that we can make even stronger going out to 2027. Two is that we're sending a very clear signal that we want to drive to adjusted EBITDA breakeven as a possibility this year because we've heard the message loudly and clearly that we need to have both growth and profitability. And lastly, I think I just would emphasize that as a company, we're trying to send a signal that we're moving up the maturity curve. We've been a public company for 10 years. We think this is a necessary and important step to take right now. So Christoph? Christoph Brackmann: Yes. Thank you. So yes, on the specifics on guidance or the underlying assumptions, on the revenue side, there's really 3 areas that we are thinking of in terms of growth. There's our GBM business in established markets where we expect growth in the low to mid-single-digit growth -- mid-single-digit range. Then we have GBM in newer markets. So an example of this would be Spain or Czech or also the recent approval in Canada that we announced. Now these will be modest contributions in 2026 as we ramp in 2026 in those markets. And then the third bucket of growth would be new indications. And yes, that's also where -- as you can see, we say we are expecting contributions in the range of $15 million to $25 million. So growth over prior year connected to the launches that we have with Optune Lua in Japan and Optune Pax in the U.S., as well in other markets. Operator: Our next question comes from Vijay Kumar with Evercore ISI. Kevin Joaquin: This is Kevin on for Vijay. Just one on Optune Gio. It looks like the guidance assumes a low to mid-single-digit revenue growth. My understanding is that this market, over the long term, is more of a mid-single-digit growth type of market. Is this just conservatism embedded in the guidance? Or are you seeing a change in the market growth rate? Frank Leonard: Thank you for the question, Kevin. No, we are not seeing -- we're not signaling a conservatism or a moderation. We're trying to signal that we believe the -- number one, we believe there are still many patients who will benefit from Optune Gio with glioblastoma. As a reminder, we think in our mature markets, we're on average, about 40% of the patients are getting a prescription for Optune Gio. And we think based on the data that we've already generated, that number should be significantly higher. And so the range is really intended to reiterate our ability that we've shown last year to grow in that mid-single digits range, but at the same time, to provide that guidance of a band that reflects all of the assumptions that could come into revenue, including -- just including the various puts and takes on when revenue comes online. Operator: Our next question comes from Larry Biegelsen with Wells Fargo. Larry Biegelsen: Congrats on the Pax approval as well coming in earlier than expected. So on that product, can you just talk about, based on the approved label, how do you think the device will be prescribed? And specifically, what are the lessons learned from the lung launch that you can apply here to ensure success? And I have a follow-up regarding the guidance. Frank Leonard: Yes. Thanks, Larry. This is Frank. I'll start, and I might turn it to Christoph at the end to just comment on the market size itself. So first, we're very pleased with the approval for Optune Pax, both the label that we received as well as the timing. And I think that the quality of the data that we brought to the FDA should really be underlined in that sense that we were able to secure this 180-day review cycle. Optune Pax is being approved for locally advanced pancreatic cancer in a first-line setting in concurrent use with nab-paclitaxel plus gemcitabine. And so I want to emphasize that's a first-line patient with locally advanced disease, so still focal disease. We think this is a highly motivated patient population. It's a population also that has had really very limited treatment options to date. And we think this fits very nicely with our overall value proposition to physicians and to patients, that we can bring this unique physical approach to layer on top of the existing systemic therapies that, quite frankly, have not been successful enough in pancreatic cancer. So to answer the question directly, we believe within that label, that really is the core population that we can pursue first, and we're very happy that that is because we believe it's a highly motivated patient and a highly motivated physician. And Christophe, could you comment a bit on the market assumptions? Christoph Brackmann: Yes, sure. So we estimate the TAM for locally advanced pancreatic cancer in the U.S. to be 15,000 patients on an annual basis. This is down from about 60,000 patients being diagnosed with PDAC on an annual basis, and then about 1/3 is in the locally advanced pancreatic setting. Operator: Our next question comes from Jonathan Chang with Leerink Partners. Unknown Analyst: This is Albert Aginis on for Jonathan Chang. Congrats on the approval of Optune Pax. Regarding that topic, how much sales force are you allocating for Optune Pax? Do you foresee or have you recruited new commercial team members to accommodate for this launch? Or is it more of a reallocation of the current commercial team? William Doyle: Thanks, Albert, for the question. We are very pleased that we have an established team that we've trained over the last 2 years to detail our Optune Lua product. That team that's already in the field and fully established is being -- repurpose is probably the wrong word, but I should say, tasked now with leading our pancreatic launch. So we're not adding incremental sales headcount at this time. We are simply leveraging the team that we have. Operator: Our next question comes from Emily Bodnar with H.C. Wainwright. Emily Bodnar: Congrats on the Optune Pax approval. So you guided to the $15 million to $25 million in revenue for Optune Lua and Optune Pax this year. I'm curious if you could kind of give some more detail into how we should be thinking about revenue contribution, specifically for Optune Pax this year, as you're kind of getting reimbursement plans in place? And then maybe a follow-up to the prior question. How much of your sales and marketing force that you already have is kind of in place for HCPs that are going to be covering locally advanced pancreatic patients based on your GBM and non-small cell lung cancer launches? Frank Leonard: Excellent. Thanks, Emily. I'll start, and I'll turn it over to Christoph. Just as a reminder for everyone, as we launch in a new indication, we do, as a medical device, need to go through a process of working with the payers to establish coverage policies and in some cases, having updates to our contracts with the payers in the United States to then move towards a position where we have a more direct correlation between active patients and revenue. At the start, we will start all of the patients, and we'll begin working through an appeals process, just as we've done with glioblastoma and lung before, and it's a process that we're quite familiar with, and we're confident we're going to be able to work through it. But that will mean that in this launch period, you will see revenue not correlate directly with active patients because there will be a lag as we establish the coverage policies and the payment policies with payers in the United States. I'll flag that as always, for us, one of the most critical steps in that process is to secure an inclusion in the NCCN guidelines for the treatment of locally advanced pancreatic cancer. We have submitted that application, and we're hopeful to be included soon. And we think that will be one of the material steps this year towards securing the coverage policies that will drive some revenue this year, but ultimately, it will be revenue that will come next year. Christoph? Christoph Brackmann: Yes. I think the only thing to add to what you said, Frank, maybe would be that similar to what we said for Optune Lua, we expect it will take us about 1 to 2 years to get coverage on a more routine basis for commercial payers. And that's also connected to the launch success, right? The more patients that we have on therapy, the easier we'll get to get coverage policies. Frank Leonard: And Christoph, there was also a question about sales and marketing expenses. Christoph Brackmann: Yes. So in terms of sales and marketing expense, as we -- I mean, as Frank alluded to earlier, we are basically reusing this field force. So when we built the field force for NACLC last year and earlier, basically, we thought of it as a Torso-focused field force. And so from a field force perspective, there is no incremental -- very small incremental spend, if any, incremental spend on the pancreatic launch will be on the marketing side. Part of that already we had in Q4 of last year. Operator: That concludes today's question-and-answer session. I'd like to turn the call back to Bill Doyle for closing remarks. William Doyle: So in closing, I'd like to underline that 2025 was a year of strong execution at NovoCure with record net revenue and record active patients. We're very pleased with our 2 Phase III presentations and publications and the 2 PMAs submitted, which we think really create the foundation for success in the future. We're set to maintain that momentum with a catalyst-rich 2026. We're pleased to have already received the PMA approval for PANOVA for Optune Pax, and to have submitted the regulatory filings in the EU and Japan. And we're looking forward to the top-line results from PANOVA-4 and TRIDENT. On the commercial side, we expect to maintain our momentum as has been discussed on this call, and we're really excited to bring our products to patients in new markets, particularly Spain, Czechia, and in British Columbia. We've really tried to emphasize to everyone today that we're focused on driving to profitability. As Frank said, 10 years in the public markets, we're ready to guide, and we're ready to make that one of our primary goals. We see a path to profitability and, in fact, the potential to reach adjusted EBITDA breakeven this year. With that, I'd like to end by thanking you all for your continued interest and focus on NovoCure. And in particular, I need to thank my colleagues. 2025 was a year of accomplishment and change as we position the company for the exciting future that we see ahead of us. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day, and welcome to AMERISAFE, Inc.'s fourth quarter 2025 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Kathryn Housh Shirley. Please go ahead, ma'am. Kathryn Housh Shirley: Thank you, operator, and good morning, everyone. Welcome to the AMERISAFE, Inc. fourth quarter 2025 investor call. If you have not received the earnings release, it is available on our website at amerisafe.com. This call is being recorded. A replay of today's call will be available. Details on how to access the replay are in the earnings release. During this call, we will be making forward-looking statements intended to fall within the safe harbor provided by the securities laws. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Actual results may differ materially from the results expressed or implied in these statements if the underlying assumptions prove to be incorrect or as a result of risks, uncertainties, and other factors, including factors discussed in the earnings release, the comments made during today's call, and in the Risk Factors section of our Form 10-Ks, Form 10-Qs, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. I will now turn the call over to Janelle Frost, AMERISAFE, Inc.'s President and CEO. Janelle Frost: Thank you, Kathryn. Good morning, everyone. We are pleased to close out 2025 with a strong ROE of 18.5% and a combined ratio of 91.3%. These returns are hard fought in a competitive environment. We are in a prolonged soft market with workers' compensation carriers facing 12 consecutive years of rate decline. Under those constraints, understanding risk, pricing them appropriately, and managing the cost of claims are essential to sustained underwriting profitability. At AMERISAFE, Inc., our specialized underwriting for niche industries, our focus on safety services for our policyholders, and personalized claims management are producing consistent returns and are also why we are noted as a disciplined underwriter. I will now turn the call over to Vincent to share the success of our incremental growth strategy. Vincent: Thank you, Janelle, and good morning. In 2025, gross premium written grew 11.7% compared to 3.9% growth in 2024. This is our seventh consecutive quarter of top-line growth. For the full year, GPW increased 6.7%. Voluntary premium, the primary component of GPW, increased 10.5% in the quarter and 10.2% for the full year, compared to 4.6% in 2024. This growth is across states and classes, and most importantly, within our existing geographical footprint and risk appetite. As we have discussed in numerous prior quarters, our focused efforts on deepening relationships with the right agents who target our classes and recognize our value proposition continue to fuel increased new business opportunities despite steady competition. And our commitment to servicing our policyholders with outstanding safety and claims services support strong renewal retention in both policy count and premiums. Retention for policies for which we offered renewal was 93.7% for the quarter, which we feel is a very strong result in this competitive environment. Renewal retention, along with the new business growth, increased in-force policy count by 10.2% for the year. Audit premium and adjustments, another important component of GPW, remains positive, adding $3,500,000 in the quarter compared to $2,500,000 in 2024. For the full year, audit premium and adjustments contributed $12,600,000 to GPW, compared to $20,200,000 in 2024. The year-over-year audit premium decrease is consistent with the recent moderating trend as expected and discussed in prior quarters. The sustained growth in GPW is beginning to meaningfully reflect in net premium earned, which was $73,600,000 in the quarter and $283,000,000 for the year, growing 10.7% and 4.6%, respectively. Turning briefly to components of premium, payroll growth remains positive in our classes of business, with the majority continuing to come from wage growth, which was 6.1% in the fourth quarter and consistent with recent prior quarter's trend. Wage growth is a tailwind for premium growth. Meanwhile, filed rates continue to see downward pressure. Though the average rate of decline has been decreasing overall, we still expect rate change to be in the negative mid-single-digit range based upon 2026 filings to date. That concludes the overview of premium results. I will hand the call back to Janelle for more information on claims and other financial metrics. Janelle Frost: Thank you, Vincent. Turning back to my CFO days, allow me to share the details of our claims and other pertinent financial results. The current accident year loss ratio was 72% for the full year, which is an increase from 71% in the first three quarters and from the previous year. Last quarter on this call, we discussed the upward pressure on the loss ratio from continued rate pressure. In addition, severity is up. We ended the accident year with 25 claims with incurred values over $1,000,000 compared to 18 at the end of accident year 2024. I do not think it is shocking when looking at absolute dollars that the cost of claims continues to increase and that more claims reach the $1,000,000 threshold. Nonetheless, severity is up and we adjusted our accident year loss ratio accordingly. As for prior accident years, we had $7,600,000 of favorable development in the quarter, or a favorable 10.4%, and $33,900,000 of favorable development for the full year, or a favorable 12%. Combined with the current accident year, we reported a loss ratio of 64.5% for the quarter and 60% for the year, compared to 56.4% and 58.1%, respectively, in 2024. To round out the combined ratio, the expense ratio was 29.2% for the quarter and 30.4% for the full year. Our total underwriting and other expenses were $21,500,000. We improved operating scale in the quarter as net earned premium increased with our growth strategy. During 2025, net income was $10,400,000, or $0.55 per diluted share, and operating net income was $9,800,000, or $0.51 per diluted share. For the full year, net income was $47,100,000, and net operating income was $41,800,000, compared to $55,400,000 and $48,400,000, respectively, in 2024. Our effective tax rate for the full year was 19.9%, compared to 19.7% from the prior year. Turning to our investment portfolios, net investment income increased 2.5% to $77,100,000 in the fourth quarter and decreased 7.6% to $27,000,000 for the full year. For the quarter, the yield on new investments increased, driving our tax-equivalent book yield to 3.83%, or three basis points higher than 2024. The investment portfolio is high quality, carrying an average AA- credit rating, with a duration of 4.3 years. The composition of the portfolio is 60% municipal, 21% corporate bonds, 3% U.S. Treasuries and agencies, 8% equities, and 8% in cash and other investments. Approximately 44% of our bond portfolio is comprised of held-to-maturity securities, and the net unrealized loss was $5,500,000 at quarter end. As a reminder, held-to-maturity securities are carried at amortized cost; therefore, unrealized gains and losses on these securities are not reflected in our book value. Our capital position is strong with a high-quality balance sheet, solid reserve position, and conservative investment portfolio. At quarter end, AMERISAFE, Inc. carried roughly $797,000,000 of cash and invested assets. Finally, just a couple of other topics. Book value per share was $13.39 after paying a special dividend in December 2025. We will file our Form 10-K on Friday, February 27, 2026, after market. With that, I will open the call up for questions and answers. Operator? Operator: Thank you. We will now open for questions. Once again, that is star one if you would like to ask a question. We will now take our first question from Matthew Carletti with Citizens. Matthew Carletti: Thanks. Good morning, Janelle. Janelle Frost: Good morning, Matt. Matthew Carletti: Let's see. Maybe let us start with what you are observing with frequency and severity. Can you just help us with, you know, I know these sorts of claims can be pretty lumpy at times. So was there a frequency that took place towards the end of the year, or was this a little bit more over the year? And then as you look at those, say, 25 claims, are there similarities within them that you noticed, or were they pretty broad spread across, whether it be areas of your book or injury types, that sort of stuff? Janelle Frost: Yeah. So I will start with let us talk about overall frequency for a moment. So we obviously had, Mhmm, I think a 7.8% increase in reported claims in 2025. Now compare that to, as Vincent mentioned, policy growth of 10.2%. So frequency is right on par with what we expect it to be for the overall book. To your point about the 25 claims, yeah, I would call that a frequency of severity. So, 25 claims, as you mentioned, that can be lumpy. I can say about those 25 claims, if you look at the average severity of those claims, it is actually lower than 2025 was, even though 2025 only had 18 claims. The claims are consistent in terms of, if I look at the cause of loss or even the industry groups which the claims came from, it very much mirrors the entire book. So there was not something specific to a particular class or type of injury that made those claims stand out more so than the rest of our book of business. As I mentioned in my prepared remarks, sometimes we think about, we have always used $1,000,000 as our threshold, right, in reporting those claims, but, you know, obviously, over the years, as medical severity upticks or just severity overall upticks year over year over year, the $1,000,000 in 2025 is not the same as $1,000,000 in 2022, for example. Yeah. We like to keep that measure consistent just so we can compare it. But nonetheless, there were 25. I consider that a frequency of severity enough that we felt like it was appropriate to take the loss ratio up a point. Matthew Carletti: That makes sense. Maybe I can just switch to the growth for a minute, which was great. Can you just give us a little more color on, I mean, you have talked a bit in the past about a very concerted effort that you are making in terms of driving that growth. Are there particular areas in the book that you are seeing particular success, or is it more broad-based across the book and, you know, whether that be geographies, areas of exposure, however you want to look at it? Janelle Frost: Yes. We are excited because the growth that we are seeing is across the book. You know, I mentioned we are going to file the 10-K on Friday. When you see the 10-K, you will notice the industry classes. There is not a lot of shift in the mix there in terms of, Mhmm, you know, 47% of our book is still construction, followed by trucking, logging, lumber, agriculture. No real shifts there. If you look at the top 10 states, I think if you compare 2024 and 2025, I think the top 10 are still the same states. There may be a little shift in the five, six, and seven spots. But all in all, the top 10 states are exactly the same. Vince, do you want to add anything about industry groups or states? Vincent: Yeah, sure. Janelle mentioned 10-Ks being released Friday. The industry groups we report on—construction, trucking, logging, agriculture, manufacturing—those are internal groupings of classifications. There is a grouping that is going to show up in the 10-K this year called services. We consider that ancillary to our primary industries. It has historically been in the, I call it, the dreaded “other” category of premium. But there has been enough growth in the underlying components of that in the last couple of years to warrant breaking that out of “other.” So services are going to appear on the list. It is not because there has necessarily been shocking growth, but it is an area we are having success in. We have also had a little bit of increased success in the agriculture space. And part of that is dependent upon individual states where we are seeing growth. Janelle Frost: Yeah. So, for example, Vincent mentioned we are going to have that services line. It went from 5.3% of the book in 2024 to 5.8%, so not a significant change. Whereas agriculture did go from 6% to 7.3% of the book. Matthew Carletti: Okay. Okay. That is helpful. One last one, if I could. Maybe, Janelle, I will ask you to put your CFO hat back on. Janelle Frost: Awesome. Matthew Carletti: Just on the favorable development you saw in the quarter, any color you can give on accident years or what drove it? Was it just claims closures or something else? Janelle Frost: Yes. No. It is closing and settling claims. So the accident years were roughly $500,000 in 2022, $1,000,000 in 2021, and then 2020 and prior with the remainder—$6.9 million to add back. Matthew Carletti: Very helpful. Thank you so much. Janelle Frost: Thank you. Operator: We will now take our next question from Mark Hughes with Truist. Mark Hughes: Yes, thanks. Good morning. Janelle Frost: Good morning, Mark. Mark Hughes: Janelle, is it fair to say the uptick in the current accident year, it is essentially you got more large claims than you had expected or was assumed in your 71% loss number, but it is just normal volatility? Janelle Frost: Yeah. It is definitely, I would say, an increase in frequency of severity, enough that we felt moving the loss ratio was the appropriate measure. Mark Hughes: Yeah. So, when we think about 2026, if it was just kind of a tough year, it is lumpy. You have always made that point. And every time you have had a lump, it has always dropped back down. Janelle Frost: Mhmm. Mark Hughes: So what is the 2026 loss pick? Back to 71? Janelle Frost: Great question. I do not know exactly what lies in 2026 as of yet. But I will say this, and we talked about it on the call last quarter as well. There is pressure. There was pressure on that 71. And then having that frequency and severity is what pushed us toward, hey, let us move this up to 72. And as Vincent mentioned in his prepared remarks, the loss costs, the underlying loss costs, are still mid-single digit. That adds pressure to that loss ratio. At this point, I am inclined with the 72 to keep the 72 for 2026. Mark Hughes: And then the favorable development, it was down a little bit year over year relative to earned premium. You had been running kind of steady year over year heretofore. Was that influenced by this frequency and severity issue, or was this just kind of a maybe changed your mindset a little bit, or was this— Janelle Frost: No. Good. No. Very good point. That is not related to the frequency of severity in 2025. That is just simply the claims that we closed or settled in that particular quarter, which also can sometimes be lumpy. But no, not related to the large claims for 2025. Mark Hughes: So you would not necessarily ascribe any meaning to that little variability? Janelle Frost: Yeah. Which I would expect. I guess the other—That is not unexpected in my mind. Mark Hughes: Okay. Yeah. The alternative being you have had great reserve development, and maybe it is just not as easy as it used to be, so to speak. Janelle Frost: Nothing has changed in our reserving practices. And, you know, I always like to—I think I say this on every call just because it is so essential to who we are as a company. We rely heavily on those case reserves. And nothing has changed in the reserving practices that establishes those case reserves. Mark Hughes: Any observations about underlying medical inflation? I think you said the 25 claims were actually lower severity even though above $1,000,000. Is there some more medical involvement that has bumped more over a million? Janelle Frost: Yeah. Certainly, the medical inflation or the medical pressure that we see are the same ones we have talked about on the last two calls. Home health—again, the severity of the injuries that we deal with—there is normally a home health component of some kind with these claims. There is still a tremendous amount of cost pressure for home health. And then DME, which for us is, I am thinking more in terms of prosthetics. So, obviously, we unfortunately have a lot of amputees or people that require prosthetics. And the cost of prosthetics is certainly under pressure. Mark Hughes: Yeah, very good. Any inflections, though—nothing obvious around medical inflation—the sustained pressure, but— Janelle Frost: I wish. I wish that were the case, but no. And when I say I wish, I wish it were easing on the medical side, but I do not see that happening. Nothing on a macro basis that would be moving that needle. Mark Hughes: Yeah. And competition—I think you said relatively steady. Vincent: Yeah, Mark. I would say that is a fair description of it. Mark Hughes: And then evergreen question about the next construction job. They are important for your policyholders. Anything change there? Janelle Frost: No. The individual economies, if I want to term it that way, for the industries that we insure seem to be holding up well. You know, Vince mentioned the wage growth numbers that we are seeing—it is higher than the national average. So I feel like that speaks well to the jobs being there. They have the employees that they need because we are not really seeing an uptick in employee count. So that bodes well, I think, for our insured base. Mark Hughes: Then how about anything on the sustainability of growth? I think you have put some new initiatives in place. You have been building your distribution network. I think in some cases, you have been experimenting or pushing a little bit more with renewal premium and getting some very satisfactory results. Are we going to be lapping any of that stuff such that this really nice period of strong growth may be less achievable in 2026, or is there sustained momentum? Vincent: Mark, I will jump in on that. You have hit on the cornerstones of the growth efforts—the increased effectiveness with agencies. I will expand on that specifically. In the last four years, we have reduced our contracted agency count by over a third, but yet we are getting more opportunities and more binds. And I think that speaks to evidence of that effectiveness in terms of improving those relationships. On the processing side and operations, we are just really executing well on all of our fundamentals. The collaboration we have spoken about in past calls between sales, safety, and underwriting is operating at a high, I would say, sustainable level. We still have competition to deal with. But to the extent we are in control of the opportunities coming in and our ability to convert them, I think the trend is sustainable. Mark Hughes: Okay. Appreciate that. Thank you. Operator: You are welcome. As a reminder, we will now take a question from Robert Edward Farnam with Breen Capital. Robert Edward Farnam: Hey there, and good morning. I just have one topic I want to talk about, and it is undocumented workers. So, looking at your class codes, you think, alright, there may be some proportion of the employees that you are insuring who are undocumented. I am not sure if that proportion has changed over the last year or so. I am just trying to get a feel for if that is the case and if there are more documented workers and fewer undocumented workers, do you foresee any change in claims patterns because of that? Janelle Frost: Yes. Let me think about—let me talk about it from the premium side, the employee count side. We have not seen any shift that we can account for or that we can point to and say, that is because of undocumented workers. So no major change there. As Vincent mentioned, our agriculture book actually grew in 2025. From a claims perspective, it is quite interesting. Obviously, we know we have claimants that are undocumented workers. As far as how we handle that claim, how we address that claim, how we try to close and settle that claim—no different than any other claim in our book of business. What we do find is that, on occasion, when it is an undocumented worker and they have a desire to return to their home country, that can actually accelerate maybe a little bit in terms of being able to close or settle that claim. But all in all, undocumented workers I would consider to be awash in terms of, are we collecting the premium for their payrolls? I believe the answer is yes. Has that changed for us, given everything that is happening and what we read in the national news? I would say no. And it does not change our approach in terms of how we handle the claim. Robert Edward Farnam: Okay. Great. I just wanted some color on that, and that works for me. Thanks. Janelle Frost: Yes. It is a great question. Definitely something that we are monitoring to see if it can be impactful to the book. But as of 2025 and where I sit today, I can say no. It is not impactful. Robert Edward Farnam: Great. Thank you. Operator: Thank you, Robert. It appears there are no further telephone questions. I would like to hand the conference back to Ms. Frost for any additional or closing comments. Janelle Frost: AMERISAFE, Inc. is well positioned to sustain our growth into opportunity in underwriting profitability by relying on our expertise in turning risk. Thank you for joining us today. Operator: And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.
Operator: Star Bulk Carriers Corp. Conference Call on the fourth quarter 2025 financial results. We have with us Mr. Petros Pappas, Chief Executive Officer; Mr. Hamish Norton, President; Mr. Simos Spyrou and Mr. Christos Begleris, Co-Chief Financial Officers; Mr. Nicos Rescos, Chief Operating Officer; Mr. Constantinos Simantiras, Head of Market Analysis; and Mrs. Charis Plakantonaki, Chief Strategy Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. I must advise you that this conference is being recorded. We will now pass the floor to one of your speakers today, Mr. Spyrou. Please go ahead, sir. Simos Spyrou: Thank you, operator. Thank you, operator, and I would like to welcome you to our conference call. Good morning, ladies and gentlemen, and thank you for joining us today. For the 2025 financial results, before we begin, I kindly ask you to take a moment to read the safe harbor statement on Slide number two of our presentation. In today's presentation, we will review our fourth quarter 2025 company highlights, financial performance, capital allocation initiatives, cash evolution during the quarter, operational performance, our continued investments in the fleet, developments on the regulatory front, and our perspective on industry fundamentals. Adjusted EPS was $0.16. The fourth quarter was characterized by solid profitability and our perspective on industry fundamentals. Turning to Slide three, developments on the regulatory front, adjusted EBITDA was $126,400,000, demonstrating even in a moderate rate environment the strong cash-generating capacity of our platform. We continue to actively return capital to our shareholders. During the fourth quarter, we repurchased 1,200,000 shares, totaling $37,900,000. Year-to-date during 2026, we have repurchased approximately 1,900,000 shares. In addition, our Board of Directors declared a $0.37 per share dividend for the fourth quarter, payable on March 19, to all shareholders of record as of 03/09/2026. For the 2025, our net income amounted to $65,200,000, while adjusted net income reached $74,500,000. Our balance sheet remains a key strategic advantage. Total cash and cash equivalents are approximately $459,000,000, outstanding debt is approximately $1,000,000,000, and we have an undrawn revolving capacity of $110,000,000. Importantly, we also have 27 debt-free vessels with an aggregate market value of approximately $630,000,000. This unencumbered asset base provides substantial financial flexibility to fund growth opportunities. Dividend policy. Going forward, we intend to distribute 1% of our free cash flow of $0.5 per share. We have also authorized a new $100,000,000 share repurchase program on substantially the same terms as the prior program. This dual-track approach—dividends plus opportunistic buybacks funded from vessel sales—allows us to dynamically allocate capital depending on the market conditions and the discount or premium of our shares relative to the intrinsic value. These initiatives reflect both our confidence in the company's forward cash flow visibility and our commitment to maintaining a competitive and sustainable capital return profile. On the top right side of Slide number three, you can see our per-vessel daily performance metrics for the quarter. Time charter equivalent came at $19,012 per day per vessel. Combined daily operating expenses and net cash G&A expenses came at $6,444 per day per vessel, resulting in a daily cash margin of approximately $12,570 per vessel per day before debt service and CapEx. These numbers highlight the operating efficiency of our platform and our ability to generate meaningful cash flow even at mid-cycle rate levels. Slide number four summarizes our capital allocation track record over the last five years. Since 2021, we have executed approximately $3,000,000,000 in value-enhancing actions including dividends, shares repurchases, and debt repayment. During this period, we have returned $13.49 per share in dividends, representing approximately 55% of our current share price. We have reduced our total net debt by 47%, bringing leverage to a level where it is below 65% of the current demolition value of the fleet. At the same time, we expanded the fleet opportunistically through accretive fleet acquisitions, issuing equity at or above NAV, thereby increasing scale while protecting per-share value. The result is a larger, more efficient platform with materially lower financial risk and significantly enhanced free cash flow per share potential. Slide number five illustrates the movement in our cash balance during the fourth quarter. We began the quarter with $457,000,000 in cash and generated $101,000,000 in operating cash flow. In summary, during the fourth quarter, we delivered solid profitability, strengthened our liquidity position, continued to delever, returned meaningful capital to shareholders, and preserved significant optionality for future capital allocation. Our balance sheet resilience, operating efficiency, and disciplined capital allocation framework position us well to navigate market volatility while continuing to enhance per-share value. With that, I will now pass the floor to our COO, Nicos Rescos, for an update on our operational performance and the continued investments we are making in our fleet. Please turn to Slide seven, covering our operational performance. Nicos Rescos: We continue to run one of the most cost-efficient platforms in the drybulk sector. Star Bulk Carriers Corp. continues to rank at the top amongst listed peers in RightShip safety scores. Daily operating expenses for Q4 came in at $5,045 per vessel, and net cash G&A at $1,399 per vessel. This operational cost discipline has not come at the expense of quality, as illustrated. Moving to Slide eight, on the newbuilding front, all eight of our customers’ newbuildings are on track for delivery during 2026. Importantly, we outline our fleet-wide investment program. Financing is well advanced. We have secured $130,000,000 of debt against the five Qingdao vessels and expect a further $74,000,000 against the three Qingling vessels. Our vessel upgrades made meaningful progress during 2025, fitting 13 additional vessels with energy-saving devices and six with high-efficiency propellers. In total, we have now completed 55 out of 80 ESD total installations across the fleet, with another 14 planned for 2026. We have also nearly completed our telemetry rollout with digital monitoring equipment, which totals approximately $55,600,000, with around 1,585 off-hire days for the full year. At the bottom, you can see our expected drydock schedule for 2026, and the top right of the page shows our CapEx schedule, illustrating both the newbuilding payments and our vessel efficiency upgrade spending alongside the corresponding debt financing. Turning to Slide nine for our fleet update. Continue to optimize our fleet through selective disposals, prioritizing the sale of older non-eco tonnage to reduce our average fleet age and improve overall efficiency. During Q4, we delivered three vessels to their new owners: the Supramax and Panamax Star Runner, Star St. Piper, and Star Remy. In December, we agreed to sell Star Stomington, an Ultramax, which was delivered to her new owners in February. Looking into Q1 2026, we have committed two additional older vessels for sale—an inefficient Capesize and a Kamsarmax, Tascar and Star Mariela—with deliveries expected in April. We will continue to maintain seven long-term chartering contracts which provide commercial flexibility across market cycles. Star Bulk Carriers Corp. operates one of the largest dry bulk fleets among U.S. and European listed peers, with 141 vessels on a fully delivered basis and an average age of approximately 12.1 years. Thank you. Please turn to Slide 10. I will now pass the floor to our Chief Strategy Officer, Charis Plakantonaki, for an update of recent global environmental regulation developments, where we highlight our progress across ESG priorities. Charis Plakantonaki: Despite the one-year postponement of the IMO net-zero framework in October 2025, we remain committed to our strategy to reduce greenhouse gas emissions from our fleet operations. Alongside the ongoing renewal of our fleet, we continue to enhance energy efficiency of our vessels through targeted technical and operational measures, including the successful testing of hull cleaning robots and silicon antifouling coatings. In 2025, the Star Bulk Carriers Corp. fleet achieved an average C rating in the RightShip greenhouse gas rating. We also maintained our B score in the 2025 Carbon Disclosure Project Water Management submission, effective environmental management. Comply with FuelEU Maritime, and consistent with last year, we entered into a pooling agreement with an external party to cover 100% of our CO2 deficit for 2026 and part of 2027, purchasing surplus units, the most cost-effective compliance strategy. On the technology front, we completed the deployment of Starlink and installed onboard firewalls across the fleet. As part of our artificial intelligence strategy, we delivered the company's first custom-built AI application while continuing to leverage AI within existing systems to develop new tools to further automation and optimization. The well-being of our people remains a priority. During Q4 2025, we contracted a comprehensive company-wide employee survey to listen closely to our teams and identify tangible actions to better support them in their roles. I will now hand the floor to our Head of Market Analysis, Constantinos Simantiras, for a market update and his closing remarks. Constantinos Simantiras: Thank you, Charis. Please turn to Slide 11 for a brief update of supply. During 2025, 36,200,000 deadweight was delivered and 5,200,000 deadweight sent to demolition, resulting in net fleet growth of 31,000,000 deadweight, or 3% year-over-year. The newbuilding orderbook has grown over the past three years, reflecting limited shipyard capacity through 2028, high shipbuilding costs, and ongoing uncertainty around wind propulsion technologies. Contracting remained under control, decreasing to 45,800,000 deadweight during 2025, but remains at relatively low 12.8% of the fleet. The IMO's recent decision to postpone adoption of the net-zero framework will likely extend this uncertainty into 2026. That said, we have seen a noticeable uptick in contracting in the Capesize segment over the past few months. Meanwhile, the fleet continues to age, and by 2027, approximately 50% of the existing fleet will be over 15 years old. Moreover, the rising number of vessels undergoing the third special survey and drydocks is estimated to reduce effective capacity by approximately 0.5% during 2026 and 2027. On the operational side, average fleet steaming speeds have recovered from last year's historical lows, stabilized at around 11.1 knots over the past two quarters, incentivized by firmer freight rates and lower bunker costs. Over the coming years, stricter environmental regulations are expected to continue to support slow steaming and help constrain effective supply. Finally, for 2026, we anticipate congestion to follow typical seasonal patterns, though there could be some upside for the supply and demand balance. Global port congestion dropped to a six-year low during the fourth quarter 2025 but has since returned to long-term average levels. Let us now turn to Slide 12 for a brief update of demand. Moving to Clarksons, total drybulk trade grew 1.3% in volume and 2.1% in ton miles during 2025. This was driven by record bauxite and minor bulk exports plus a solid recovery in iron ore, coal, and grain volumes. Strong Atlantic exports, longer Pacific distances, and ongoing ore-related inefficiencies supported ton miles growth throughout the year. Red Sea crossings improved somewhat during the fourth quarter after the October ceasefire, but they are still roughly 40% below 2024 levels and geopolitical risk in the region remains high. China's total dry bulk imports were essentially flat during 2025, as the 4.2% decline during the first half was fully offset by a 4.1% rebound through the second half, with iron ore and coal imports reaching new all-time highs during December. Meanwhile, imports to the rest of the world continue to recover in 2025, with notable strength in the second half amid reduced uncertainty in international trade relationships, supported by lower commodity prices, a weaker U.S. dollar enhancing affordability, and resilient demand in key regions. Non-China import volumes grew 3.2% throughout the year. Growth was mainly driven by Southeast Asia, India, and the Middle East, with additional support from Africa and intra-Asian trade. Looking ahead, drybulk demand is projected to grow by 0.6% in tons and 1.9% in ton miles during 2026. The IMF recently raised its 2026 global GDP forecast by 0.2% to 3.3%, with upward revisions of 0.3% for both the U.S. and China. The trade truce between the U.S. and China, new agreements with major partners, and the recent decision by the U.S. Supreme Court on presidential authority to invoke reciprocal tariffs should reduce uncertainty, support economic activity, and demand for raw materials. That said, elevated Chinese stockpiles across a range of commodities, slower industrial production, and softer fixed asset investment present downside risk, though these should be partly offset by new mine capacity ramping up. Breaking it down by key commodities, iron ore trade grew 2.2% during 2025 and is projected to rise 1.9% in 2026. For the first time since 2020, China crude steel production fell below 1,000,000,000 tonnes, down 4.5% overall in 2025 and 11% in Q4, as a result of policy curbs on steel supply and the ongoing real estate slowdown, while steel output in the rest of the world increased by 1.2%. Domestic iron ore output declined by 2.5% in 2025, while stockpiles at Chinese ports currently stand close to all-time highs after the Q4 import surge. Looking ahead, Chinese iron ore imports are expected to remain broadly flat in 2026, while stronger Brazil volumes and the gradual ramp-up of high-quality exports from West Africa should support ton mile growth over the coming years. Coal trade contracted 5.6% during 2025 and is projected to decline another 2.5% in 2026. Volume experienced a strong recovery in the second half but stayed below 2024 levels. Strong renewable expansion in China should continue to pressure demand. Domestic production in China and India is outpacing consumption growth and stockpiles remain high. Indonesian coal exports are expected to decline further in 2026, following announced production cuts of up to 25%, which could tighten volume but potentially support ton miles through longer-haul flow from Southeast Asia and global focus on energy security. Furthermore, domestic production in China and India is outpacing consumption growth and stockpiles remain high. Indonesian coal exports are expected to decline further in 2026, following announced production cuts of up to 25%, which could tighten volume but potentially support ton miles through longer-haul flow. Furthermore, global focus on energy security should provide support for coal trade over the next years. Grain trade grew 2.9% in 2025 and is projected to serve 7.8% in 2026. Second-half 2025 volumes jumped 10%, led by robust exports from Brazil, Argentina, and Australia, plus better-than-expected U.S. shipments. Black Sea exports remain subdued but should gradually recover over the next two years. More important, China’s resumption of U.S. soybean purchases under the trade truce will carry into 2026, boosting ton miles. Minor bulks grew 5.2% in 2025 and are projected to expand by 2.1% in 2026. Minor bulks carry the highest correlation to global GDP and continue to benefit from healthy macro outlooks across major economies. That said, growth should moderate somewhat next year due to rising protectionism and a slowdown in growth of West African bauxite volumes after last year's 33% surge. As a final comment, underpinned by a favorable supply backlog, tightening environmental regulations, and easing trade tensions, we remain optimistic about the drybulk market outlook. In a period of heightened geopolitical uncertainty, we remain focused on actively monitoring our diverse scrubber-fitted fleet to capitalize on market opportunities and deliver value to our shareholders. Without taking any more of your time, I will now pass the floor over to the operator to answer any questions you may have. Operator: Thank you. We will now be conducting a question-and-answer session. And our first question will come from Christopher Robertson with Deutsche Bank. Christopher Robertson: Thank you, operator, and good morning, team. My question is just related to the underlying demand and ton mile expansion happening in the iron ore market with Brazil and West Africa, where, let us say, underlying demand for the commodity remains flattish, similar dynamic or maybe even slightly weaker, but ton mile demand has held stable or expands because of the geographical dispersion of where the commodities are coming from. Are there any other commodities that have a similar dynamic or tribal commodities that have the geographical dispersion of where the commodities are coming from? Any commentary around that would be helpful. Petros Pappas: Hi, Chris. So besides bauxite and iron ore, we see a very strong trade on grains, which are going to be increasing by about 7.5% to 8%. And as most of them are coming from Brazil, we will get extra ton miles from there. We also see demand from West Africa on smaller vessels, and that is going to create congestion as well because of construction projects that they got. I think this is going to be a positive as well. Now, minor bulk coal—coal minor bulk coal—coal exports. This might also increase ton miles as imports may have to come from further away. So we think that overall there is other possibilities as well. But the bauxite and the iron ore trade are actually going to be big pluses. Christopher Robertson: Yes, it makes sense. Thanks for the color there. Just kind of following up on the potential for greater congestion in West Africa. Are there any of the projects, whether it is rail or trucking or the ports themselves, etcetera—are there any projects right now to build out that infrastructure a bit more to make the supply chain more efficient? Kind of what is going on there that may lead to congestion maybe going up in the short term, but being alleviated in the long run? Petros Pappas: Well, I do not know details about that. What I know is that Supramax/Ultramax calls in West Africa have increased by about 30% during the past year. Now if our analyst knows anything about the projects, he can— Constantinos Simantiras: I would add that it is exactly what you said, Chris. We expect that we will have in the short term an increase in congestion and, over the next few years as the infrastructure is upgraded, this will gradually go down, but this is not something that would take place in one to two years. Christopher Robertson: Got it. Yeah. That is super helpful. Thank you very much. I will turn it over. Petros Pappas: Thank you, Chris. Operator: We will go next to Omar Nokta with Clarkson. Omar Nokta: Good afternoon. I just wanted to ask maybe just about the capital return policy. The decision, I guess, to boost the dividend payout, does that come about simply just given the strong share performance we have seen here recently? Or is there more to it? Clearly, move back to 100% payout or maybe somewhat similar to how it was prior to the focus on the buybacks last year. Just a bit more detail on that. Hamish Norton: Hi, Omar, it is Hamish Norton. Basically, the better the share does, the stronger the incentive to pay dividends as opposed to a share repurchase. And, you know, so there is nothing really more to it than that. Omar Nokta: Okay. Thank you. And then just a follow-up into that. As we think about free cash flow, is earnings a good representation of that—approximate what free cash flow looks like? I know quarter to quarter is going to be changes. Or any color you can give on that? It is not terrible. But is earnings a good way to look at it? Do you think it understates free cash flow? Christos Begleris: So if I may add—hi, Omar, this is Christos. A few things. First of all, debt repayment is slightly higher than depreciation, and therefore, the free cash flow is lower than net income. And also, as you will see, the change in net working capital—so in a market that rises fast, you would expect the working capital change to be greater, thereby reducing the free cash flow. Whereas in a market that is reducing, the change in working capital will be positive, and therefore, that is boosting the free cash flow available for dividends. Omar Nokta: Okay. Thanks, Christos. And thanks, Hamish. That is it for me. Thank you. Petros Pappas: Thank you, Omar. No closing comments, operator. Thank you very much. Operator: And this now concludes our question-and-answer session. I would like to turn the floor back over to management for closing comments. You may disconnect your lines and have a wonderful day. Thank you. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference.
Operator: Good day, everyone. My name is Janine, and I will be your lead operator for today's call. At this time, I would like to welcome everyone to the Ashford Hospitality Trust, Inc. conference call this morning. All lines have been placed on mute to prevent any background noise. After today's presentation, there will be an opportunity to ask a question. To ask a question, please press star 1 on your touch-tone phone. To withdraw your question, please press star 1 again. I will now hand the call over to Chief Financial Officer, Deric S. Eubanks. Sir, please go ahead. Deric S. Eubanks: Thank you. Good morning, everyone, and welcome to today's conference call to review results for Ashford Hospitality Trust, Inc. for the fourth quarter and full year 2024 and to update you on recent developments. On the call today will also be Stephen Zsigray, President and Chief Executive Officer, and Christopher Nixon, Executive Vice President and Head of Asset Management. The results, as well as notice of the accessibility of this conference call on a listen-only basis over the Internet, were distributed yesterday afternoon in a press release. Stephen Zsigray: New growth and 6.2% growth in comparable hotel EBITDA. These results underscore the impact of the strategic decisions our team has made over the past several quarters and the strength of our high-quality, geographically diverse portfolio. Total revenue growth meaningfully exceeding RevPAR growth is reflective of the efforts that our asset management team and property managers have taken to grow ancillary revenues, and that discrepancy widened even further in December. Voyager Street has a prime location in proximity to major demand generators in downtown New Orleans. Post-conversion, we expect the new Tribute Portfolio property to realize a 10% to 20% RevPAR premium compared to pre-conversion. With a really improving transaction and financing market, we look forward to updating you on our progress with GrowAHT and the many opportunities that lie ahead for Ashford Hospitality Trust, Inc. I will now turn the call over to Deric to review our fourth quarter and full-year financial performance. Deric S. Eubanks: Thanks, Stephen. For the fourth quarter, we reported a net loss attributable to common stockholders of $131,100,000, or $23.83 per diluted share. For the full year, we reported a net loss attributable to common stockholders of $82,500,000, or $17.54 per diluted share. For the quarter, we reported AFFO per diluted share of negative $2.21, and for the full year, we reported AFFO per diluted share of negative $4.84. Adjusted EBITDAre for the quarter was $45,200,000 and $235,900,000 for the full year. At the end of the fourth quarter, we had $2,600,000,000 of loans with a blended average interest rate of 7.9%, taking into account in-the-money interest rate caps. Considering the current level of SOFR and the corresponding interest rate caps, 77% is effectively floating. One loan has two additional one-year extension options, subject to the satisfaction of certain conditions, with a final maturity date in December 2027. The 703-room Marriott Crystal Gateway Hotel located in Arlington, Virginia had a final maturity date in November 2026 and a floating interest rate. The new nonrecourse loan totals $121,500,000 and has a three-year initial term with two one-year extension options. During the quarter, we also successfully refinanced our mortgage loan secured by hotels that were used to pay down our strategic financing. The refinancing resulted in approximately $31,000,000 of excess proceeds and $37,000,000 of SOFR plus 4.75%. The loan was extended with no paydown and continues to have an outstanding balance, subject to the satisfaction of certain conditions. The loan is interest-only. Subsequent to quarter end, we completed the sale of the 115-room Courtyard Boston Downtown located in Boston, Massachusetts for $123,000,000, or $1,070,000 per key. When adjusted for the anticipated capital expenditures, the sale price represented a 5.9% capitalization rate on net operating income for the trailing twelve months ended 09/30/2024, or 12.3 times hotel EBITDA for that same time period. The previous loans had a combined outstanding loan balance of approximately $438,700,000. Subsequent to quarter end, we closed on a $580,000,000 refinancing, and the BAML Pool 3 loan together with the Westin Princeton for the same time period. Excluding the anticipated capital spend, the sale price represented a 6.9% capitalization rate on net operating income for the trailing twelve months ended 09/30/2024, or 14.3 times hotel EBITDA for that same time period. Keyes Pool D loan, together with hotels previously part of the company's Keyes Pool C loan and Keyes Pool E loan, secured by 16 hotels, has a two-year term with three one-year extension options, subject to the satisfaction of certain conditions, and bears interest at a floating rate of SOFR plus 4.37%. We used approximately $72,000,000 of the excess proceeds to completely pay off the remaining balance on our strategic financing, including the exit fee. The remaining excess proceeds were used to fund transaction costs and reserves for future capital expenditures. We ended the quarter with cash and cash equivalents of $112,900,000 and restricted cash of $107,600,000. The vast majority of that restricted cash is comprised of lender- and manager-held reserve accounts and $2,600,000 related to trapped cash held by lenders. At the end of the quarter, we also had $21,000,000 due from third-party hotel managers. This primarily represents cash held by one of our property managers which is also available to fund hotel operating costs. We ended the quarter with net working capital of approximately $122,000,000. As of 12/31/2024, our consolidated portfolio consisted of 73 hotels with 17,644 rooms. Our share count at the end of the year consisted of approximately 5,800,000 fully diluted shares outstanding after taking into account our recently completed one-for-10 reverse stock split, which is comprised of 5,600,000 shares of common stock and 100,000 OP units. Additionally, as Stephen mentioned, during the quarter, we announced plans to close the offering of the Series J and Series K non-traded preferred stock on 03/31/2025. Since launching the offering in 2022, we have raised approximately $195,000,000 of gross proceeds from the sale of our Series J and Series K non-traded preferred stock. While we are currently paying our preferred dividends quarterly or monthly, we do not anticipate reinstating a common dividend in 2025. This concludes our financial review, and I would now like to turn it over to Chris to discuss our asset management activities for the quarter. Christopher Nixon: Thank you, Deric. In the fourth quarter, we delivered strong performance across our geographically diverse portfolio. Comparable hotel RevPAR increased by 3% over the prior-year period, reflecting solid demand and the impact of our strategic revenue management initiatives. Our Washington, D.C. properties delivered a healthy group performance this period. Group dynamics and corporate transient demand are improving, and we are starting to see accelerating benefits from our GrowAHT initiatives. December was a particularly strong month with a 12% increase in hotel EBITDA over the prior-year period. During the fourth quarter, Embassy Suites Crystal City produced a 22% increase, driven in large part by the successful execution of several GrowAHT initiatives that were in full swing. Booking activity remained strong, with group pace continuing to accelerate across our portfolio. Group room revenue for the fourth quarter increased by 5% over the prior-year period, demonstrating the resilience of our portfolio and the effectiveness of our strategies. I would now like to go into more detail on some of the achievements completed throughout the quarter. With the presidential election cycle presenting both opportunities and challenges, our team implemented an aggressive strategy to drive results. We focused on targeted marketing to political organizations supporting the election, particularly security and campaign teams. Additionally, booking volumes have been robust. 2025 group room revenue pace for the broader portfolio remains strong, currently pacing ahead by 5% over the prior-year period. We added over $13,000,000 in additional group room revenue during the fourth quarter for 2025, representing an increase of approximately 6% compared to the prior-year quarter for 2024. Turning to gross operating performance, I am pleased with our results as fourth quarter gross operating margins expanded by approximately 141 basis points relative to the prior-year quarter. Renaissance Nashville delivered a strong fourth quarter gross operating profit increase of 10% on 3% total hotel revenue growth. Ideally positioned near Downtown Music City Center, this property benefited from recent initiatives aimed at enhancing its operating performance. These initiatives included adding a valuable ancillary revenue stream and cutting other operational expenses. Additionally, our team strategically utilized a supply chain procurement system throughout the year, resulting in over $130,000 in food cost savings for the full year. These efforts underscore our ongoing commitment to operational efficiency and margin expansion, reinforcing our ability to drive sustainable profitability across our portfolio. One hotel that I would like to highlight this quarter is Le Méridien Fort Worth Downtown, which opened during 2024. Thanks to a combination of strategic partnerships, proactive marketing, and early activations, our asset management team has successfully capitalized on the hotel's incredible amenities, achieving total revenue growth ahead of our initial budget by 21%. A key driver of this early success was our focus on strong community engagement, even before the hotel's grand opening and ribbon-cutting events. We partnered with Fort Worth Sister Cities International, the Fort Worth Chamber, and Downtown Fort Worth, Inc. to improve awareness prior to the opening. Additionally, the hotel conducted exclusive hard-hat tours for prospective customers and community partners, generating early excitement and demand. To attract business travelers, we introduced Bonvoy room packages and brought on a dedicated business travel sales manager to engage with companies in the downtown area and establish corporate accounts. Simultaneously, to position the hotel as a vibrant social and dining destination, our team launched dynamic food and beverage activations, including live music and happy hours at the upscale lobby restaurant and a stunning rooftop lounge. Further, an aggressive early rate strategy for group bookings, secured through strategic collaborations with our other properties in the area, helped establish a competitive market presence with additional overflow blocks. By positioning itself as a premier venue for group events and conferences, this upscale boutique property has delivered an exceptionally strong performance right out of the gate, and I am excited about its long-term potential. As Stephen mentioned, this quarter marked the successful completion of our strategic repositioning of Crowne Plaza La Concha Hotel in Key West, Florida, into Autograph La Concha, now part of Marriott's Autograph Collection. Ideally located on Duval Street in Old Town Key West, this transformation followed a $35,000,000 investment, including upgrades to the lobby, bar, restaurant, exterior, guest rooms, bathrooms, corridors, pool, and meeting space. A key enhancement was the conversion of a previously underutilized spa into premium rooftop suites, offering some of the best views in Key West. I am equally excited about the conversion of our La Pavion Hotel in downtown New Orleans to a Tribute Portfolio property following a $19,000,000 investment. This renovation included extensive exterior work, upgraded guest rooms and bathrooms, a refreshed restaurant, and a reimagined hotel lobby bar. The new Bar Eighteen O Three pays homage to the rich history of both the hotel and the city, named after the year Emperor Napoleon signed the Louisiana Purchase. These conversions exemplify our ability to unlock embedded value in our portfolio, and looking ahead, we expect La Concha and La Pavion to benefit significantly from Marriott sales distribution and loyalty platforms, enhancing long-term performance and value. As part of our GrowAHT initiatives, we implemented strategic measures during the fourth quarter to drive hotel EBITDA, focusing on food and beverage, parking, and labor expenses to enhance profitability while maintaining service standards. We conducted audits of revenues of all outlets and gift shops to optimize offerings and improve margins. Parking fee and a store preservation fee adjustments will provide additional revenue streams. We also partnered with Remington to reduce allocated expenses. We launched a day-use hospitality program, monetizing hotel amenities. On the labor front, we refined staffing models, optimized schedules, and leveraged technology to improve efficiency while preserving guest service. As we move into 2025, we will continue identifying opportunities to further drive hotel EBITDA and maximize value. Turning to capital expenditures, in 2024, we completed the extensive guest room and public space renovation at Embassy Suites Dallas and began the guest room renovation at Embassy Suites West Palm, which is on track for completion during 2025. Additionally, renovations at Residence Inn Evansville and Courtyard Bloomington are progressing well. At Hilton Garden Inn Austin, a restaurant and meeting space renovation will modernize the property and capitalize on its prime downtown location. In 2025, we will execute several PIPs to support brand franchise agreement renewals while enhancing guest experience. Later in the year, we plan to embark on public space renovations at Hampton Evansville and Westin Princeton. These initiatives underscore our commitment to asset excellence and delivering superior guest experience. In total, we expect to spend between $95,000,000 and $115,000,000 in 2025 as we continue to enhance and elevate our portfolio. In summary, group business continues to show solid growth. Demand remains strong across key markets, and our ancillary revenue initiatives are performing well. Looking ahead, we are actively rolling out additional GrowAHT initiatives aimed at enhancing operational performance, all designed to drive efficiency, lower cost, and improve profitability. We remain optimistic about our portfolio's outlook for 2025 and confident in our ability to unlock additional value. That concludes our prepared remarks, and we will now open up the call for Q&A. Thank you. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press 1 on your touch-tone phone, and you will hear a prompt that your hand has been raised. If you are using a speakerphone, please lift the handset before pressing any keys. Should you wish to withdraw, please press 1 again. Our first question comes from the line of Jonathan Jenkins from Oppenheimer. Sir, please go ahead. Jonathan Jenkins: Good morning. Thanks for taking my questions. First one for me on the Grow initiative. Chris, I think you noted some changes in benefits that you are already seeing here in 4Q. But can you maybe quantify the benefits that you have seen and provide some color on the ramp period and cadence throughout the year and maybe some additional color on potential opportunities that get you to that $50,000,000 target? Christopher Nixon: Yes. Great question, Jonathan. Thanks for the question. So we have begun rolling out all initiatives. I would say more than half of the initiatives are fully rolled out and underway. Obviously, we have seen the impact of performance that a number of these initiatives started having immediately with the December numbers we have cited. We look ahead to Q1 and January; that outperformance is pulling through, so we are very optimistic. Many of the initiatives will continue to roll out through the course of the year. We are very happy, but we are not satisfied. As we are going through 2025, we are still identifying new initiatives and potential new partnerships and things we can do to build on. I would say roughly half of the initiatives have been fully rolled out, and then the remainder will be rolled out throughout the remainder of the year. Jonathan Jenkins: I believe you talked about 20% to 30% RevPAR premiums in or above that, which is impressive. And then switching gears to the conversions, Stephen. Think those assets have largely stabilized, or is there additional ramp period from here? And then more broadly, any additional thoughts regarding conversions in the portfolio and how much of an opportunity that could be? Christopher Nixon: Yeah. Hey, Jonathan. This is Chris. I will take that. We are very encouraged by the performance of the conversions. As Stephen indicated, we underwrote pretty aggressive returns, and both hotels are outperforming that. In La Pavion, the outperformance is north of 40% in January. That continued through February, and that is accounting for normalizing for Super Bowl impact. So when you remove Super Bowl, the hotel is still performing at that level, outperforming underwriting. When you throw an event like Super Bowl in there, it is through the roof. La Pavion was sold out for four straight nights over Super Bowl with a RevPAR which exceeded $900. So extremely strong performance. The hotel continues to ramp. Down in Key West, we are starting to see the broader market soften a little bit in occupancy, so it is great that we are up, which is obviously great news for us. Occupancy has outperformed the market, but where we have really seen the benefit is on the ADR side, with ADR gains that are significantly outperforming underwriting. We are seeing strong distribution performance, as we expected, from Marriott. But performance at both hotels is kind of blowing our underwriting out of the water. I think there is still some additional runway before that stabilizes. Jonathan Jenkins: Okay. That is excellent. And then switching gears to the transaction environment, can you provide some additional color there? And has there been any noticeable difference in portfolio deals versus one-offs that are worth calling out? Any changes in bid-ask spreads or pickup or changes in conversations you have been having as of late? Any additional color there would be helpful. Christopher Nixon: Yeah. We have definitely seen improvement in the financing market, and that has driven improvement in transaction markets, certainly driven optimism that 2025 is going to be a much better year for transactions. From our perspective, I expect that we will continue to sell a handful of additional assets, but I would caveat that and say that we are going to continue to be very disciplined. We want to ensure that we are getting optimal value on our sales. There does remain a bid-ask spread in a handful of markets, and so we need to explore several different opportunities. We are not going to transact on all of them similar to what we have done in prior quarters. But we also expect to continue to deleverage and improve our balance sheet overall. Jonathan Jenkins: Okay. That is good. And then lastly for me, if I could, just a clarification question on your floating rate exposure. I assume that increased sequentially, just the expiration swaps. Is that the case? And more broadly, is there any additional color you can provide to us on how you are thinking about your fixed versus floating rate exposure? Do you expect to get into swaps to lower that floating exposure? Deric S. Eubanks: Yeah, Jonathan. This is Deric. I will take that. It is a combination of interest rate caps burning off as well as SOFR dropping back below strike prices on those caps. That is why we are more floating now. Historically, we have always preferred floating-rate financing just because it has more flexibility. We think it is more of a natural hedge to our business, and we believe over time that you will typically pay less floating. Obviously, that has been a challenge for us over the last year or two. But I think you will continue to see us have a mix of fixed and floating, sort of a bent to more floating. Jonathan Jenkins: Okay. Very helpful. I appreciate all the color, everyone. Thank you for your time. Operator: That concludes our question-and-answer session. Thank you for joining today’s call, and we look forward to speaking with you all again next quarter. That concludes our conference call for today. Thank you for joining, and you may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Fortrea Q4 and Full Year 2025 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Tracy Krumme, Senior Vice President of Investor Relations. Please go ahead. Tracy Krumme: Thank you. Good morning, everyone, and welcome to Fortrea's Fourth Quarter and Full Year 2025 Earnings Conference Call. With me today on the call is Anshul Thakral, Chief Executive Officer and Director; and Jill McConnell, Chief Financial Officer. Before we begin, please note this call is being webcast. There is an accompanying slide presentation, which can be found on the Investor Relations section of our website, fortrea.com. During this call, we'll make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to significant risks and uncertainties that could cause actual results to differ materially from our current expectations. We strongly encourage you to review the reports filed with the SEC regarding these risks and uncertainties, in particular, those are described in the cautionary statement concerning forward-looking statements and risk factors in our press release and presentations that are posted on our website. Please note that any forward-looking statements represent our views as of today, February 26, 2026, and that we assume no obligation to update the forward-looking statements even if estimates change. During this call, we will also be referring to certain non-GAAP financial measures. These non-GAAP measures are not superior to or a replacement for the comparable GAAP measures, but we believe these measures provide investors with a more complete understanding of results. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is available in the earnings press release and the earnings call presentation slides that are provided in connection with today's call. Lastly, I would like to add that Anshul, Jill and I will be attending the Barclays Level Healthcare Conference on March 10 in Miami. If anyone would like to meet with us on these dates, please contact me or a sales representative from the firm. And with that, I'd like to turn the call over to Anshul Thakral, Chief Executive Officer and Director. Anshul, please go ahead. Anshul Thakral: Thank you, Tracy. Good morning, everyone, and thank you for joining us today. I'm pleased to report our fourth quarter and full year 2025 results. Before I begin, I want to express my sincere appreciation to our colleagues across Fortrea, our Board of Directors, our clients and our broader stakeholder community. This was my first full quarter here, hard as that is to believe, given how deeply rooted I feel at Fortrea. The progress we will cover today reflects a tremendous amount of dedication across our entire global community, and I'm proud to share it with you today. We delivered solid fourth quarter and full year performance in line with our guidance despite a challenging and uneven operating environment. Jill will walk through the financials in more detail, but I want to highlight a few key points upfront. We delivered revenue and adjusted EBITDA in line with our full year expectations. We closed the year with a Q4 book-to-bill of 1.14x and a trailing 12-month book-to-bill of 1.02x reflecting improvement in demand during the second half of the year. We generated positive operating and free cash flow in Q4, resulting in positive operating and free cash flow for the full year. Importantly, we exceeded our gross and net savings targets, delivering approximately $153 million in gross savings and $93 million in net savings for the year. We continued to strengthen our balance sheet through disciplined debt payout using cash on hand, reinforcing our commitment to improving our capital structure. We expanded our leadership team, welcoming Aggie Gallagher as General Counsel in the fourth quarter. More recently, we appointed Dr. Scott Dave to lead our clinical pharmacology business. Dr. Oren Cohen, who previously led this business is now fully dedicated to his role of Chief Medical Officer, where he is focused on strengthening our clinical development and medical expertise as we continue to leverage our scientific and therapeutic experience with customers. Stepping back to the broader environment, the macro backdrop remains cautious. But importantly, it continues to show signs of stabilization and early recovery. Funding activity rebounded meaningfully in the second half of 2025 with the strongest activity in the fourth quarter. Large pharma budgets have largely stabilized following pipeline reprioritizations and the market is currently signaling improving biotech funding flow through 2026. With this backdrop, we are seeing higher client engagement levels, shorter decision-making time lines and more concrete customer conversations, particularly within biotech. That said, we continue to expect our recovery to be somewhat uneven in the first half of 2026, which reflects the new business wins we saw earlier in 2025. Looking further ahead, we're cautiously optimistic about building momentum in the second half of the year as outsourcing trends remain steady and access to capital looks to improve. Through all of this, our focus remains unchanged. Disciplined execution and positioning Fortrea to win as demand continues to recover. Our solid performance is built upon 3 pillars of excellence: commercial, operational and financial. We use these pillars to prioritize our actions and measure our progress in our journey to growth and margin expansion. I'll provide an update on our commercial excellence and operational excellence pillars, while Jill will discuss the financial excellence pillar. Starting with commercial excellence. We secured significant new and repeat wins in the quarter, underscoring both our differentiated capabilities and the strength of our client relationships. Q4 notable wins included a long-term clinical pharmacology partnership award with the top 5 large pharma company, several FSP renewals from long-standing large pharma clients and a healthy balance of Phase II and Phase III global clinical development wins across biotech, midsize pharma and large pharma as well as across various therapeutic areas. Overall, I really like the mix of our current pipeline. As I said last quarter, we have a commercial framework to expand our commercial opportunities, which we call the 3 Rs: Reach, Relevance and Repeat. These 3 Rs guide how we are rebuilding growth, strengthening execution and improving consistency across the organization. First, Reach, expanding the top of the funnel and increasing access to customers. Over the last several quarters, we've taken deliberate actions to broaden our operature. We've restructured our global sales organization to increase capacity and capabilities focused on hunting new client relationships. We're building our inside sales, otherwise known as our Reach engine, focused on early-stage qualification needed to Fortrea prospects and general biotech outreach. And we've made executive-led customer engagement a standard part of our go-to-market discipline. Second, Relevance, creating bespoke solutions that leverage our recognized therapeutic and scientific expertise, in ways that are relevant and resonate with clients. Our clients have come to expect that Fortrea leads with science. Now we are infusing our medical expertise deeper into how we deliver our clinical programs. As I mentioned earlier, Dr. Oren Cohen is now spending all of his time as Chief Medical Officer to deepen relationships with clients. He's engaging earlier in the scientific dialogue and collaborating closely with our physicians and therapeutic leaders to ensure Fortrea's solutions address the complex development challenges our clients face. We also have been sharpening our focus on biotech opportunities, assembling biotech ready teams that understand the unique constraints and needs of the biotech sector as they advance scientific innovation. On the flip side, we maintained strong discipline, including a willingness to walk away if opportunities do not meet our strategic or margin criteria. Third, Repeat, earning the next study by delivering consistently and creating long-term relationships. We've strengthened the interface between sales, delivery and project management to ensure seamless handoffs, improved visibility and streamlined client experience. This focus is showing up in execution and our clients are noticing the difference. Our Net Promoter Score which is how we track client satisfaction improved year-over-year. Now let me share some progress we have made under our operational excellence pillar. As a provider of professional services, operational excellence is baked in how we manage projects. We continue to optimize our approach to project management with a relentless focus on the client experience based on reliable and predictable delivery. Let me share some recent updates. We've created a stronger alignment to evolving regulatory requirements with risk-based quality management embedded as a cornerstone of how we deliver quality and oversight across the development life cycle. Notably, we've streamlined the design of our project management capabilities reducing touch points for customers and creating more direct interaction with our therapeutic and scientific leads. We have also streamlined our planning and global processes removing repeat actions and simplifying workflows. These process changes are enabled by technology. Now given technology underpins so much of operational excellence, let me take a pause here from the quarterly updates and address the topic of technology more holistically, particularly as it relates to AI in our industry. I'm very aware that there has been a great deal of discussion and frankly, concerns raised in the recent weeks about how AI will impact the CRO sector. So here's how we are thinking about it. Speaking broadly, we see AI as a force multiplier that can accelerate execution and ultimately can drive more science, more trials and more growth. AI is a way to advance science faster, which ultimately expands demand for CROs rather than shrinking it. AI is a margin and productivity level, not a people replacement or a cost cutter. AI will automate specific task level work rather than replace core CRO roles. It eliminates routine and repeatable work and improves throughput and standards. It is part of a broader push to compress trial time lines to pause, but with a hard boundary, quality is nonnegotiable. Examples of AI in use across our industry today include case and take in reporting in pharmacovigilance, central monitoring documentation checks and alert triggers, site selection and study design optimization. At Fortrea, more specifically, we are making focused investments in AI, machine learning and other advanced technologies and workflow automation and orchestration to drive speed, reduce costs and improve quality in clinical research. Our industry-leading accelerate platform remains central to that strategy. By integrating real-time role-based insights across the trial ecosystem, we are able to reduce manual effort, accelerate decision-making and improve quality at scale. You may recall, last quarter, I reported that the AI-enabled risk radar update to accelerate was in production, and we are beginning to roll out the CRA mobile app Digital Assistant and our start My Day platform to increase CRA productivity. We advanced deployment of these tools in the fourth quarter and introduced further innovation. Currently, we're wrapping up a pilot of our new feasibility intelligence engine which enables Fortrea partner with clients at the beginning of the program to make better informed feasibility decisions that improve operational outcomes. With all of our investments in technology, we are ultimately driven to improve the efficiency of drug development, streamline the experience for clients and investigator sites and improve the overall quality of clinical trials. From project management, to streamline processes to face deployment of AI-enabled tools, we track our operational excellence progress in terms of outcomes. Are we delivering faster better or changing the experience for our clients. That is the key question. For example, we recently accelerated recruitment by 3 months in a complex respiratory study and completed enrollment in a Phase II Alzheimer's study. These achievements matter to our clients and make a meaningful difference to the patients who will eventually benefit from new treatments. As a service-driven organization, our people are the foundation of operational excellence. Beyond adoption of new technology and processes, we prioritized employee engagement and development. I'm pleased to report that in our recent annual engagement survey, our overall scores improved year-over-year. Alongside a significant increase in response rate, scores increased across all categories with most exceeding cross industry benchmarks. I said earlier that I am proud of Forte's performance and recent progress, but I'm even more proud of the impact our work has on patients. I continue to make time to meet with our teams and clients in person around the world. A few weeks ago, I had the pleasure of visiting our clinical research unit in Dallas, Texas, just days after a significant winter storm disrupted the region. While the weather created disruptions, our research did not stop. Members of our team stayed overnight to ensure study volunteers were cared for and that planned dosing continued on schedule. During the visit, I met with our principal investigator and observed an ESMO bridging study in progress. Demand for these studies is growing as the global regulatory environment evolves, and our global clinical network has earned a tremendous reputation for delivering this critical work. Moments like this reinforce what sets Fortrea apart. The dedication of our physicians and clinical operations teams united by our shared purpose of bringing new treatments to patients faster. Before I turn it over to Jill, let me close with a few key points. Fortrea is executing against a clear strategy and building momentum. This is a high-quality business with strong fundamentals now operating with greater discipline, focus and accountability. We've taken meaningful steps to strengthen our commercial engine and improve our cost structure. We are advancing operational excellence from streamlining project delivery to transforming our processes and tools and we're innovating in ways that are meaningful to clients. These actions position us well to benefit from an improving market. While this remains a journey, the direction is clear. Early proof points are in place, and we are confident in our ability to deliver consistent long-term value creation. With that, I'll turn the call over to Jill. Jill McConnell: Thank you, Anshul, and thank you to everyone for joining us today. Let me start by thanking the entire Fortrea organization for our solid performance in 2025. We navigated another year of significant change and as always, the grit and resilience of this team persevered. In my prepared remarks, I'll cover the primary factors that influence our fourth quarter performance including progress against our previously shared cost optimization initiatives, improvements in cash flow and our expectations regarding liquidity and capital structure. I will also provide our outlook and 2026 guidance. As Anshul stated, we delivered a solid fourth quarter and full year 2025. I am very proud of what the team achieved, particularly our ability to execute and deliver results in line with our guidance. Before getting into the details, I'd like to highlight our progress towards financial excellence, the third pillar of our growth strategy. First, as part of our rightsizing initiatives, we delivered full year cost savings of $153 million growth and $93 million net, exceeding our original target. Second, we generated positive full year operating and free cash flow with another significant improvement in DSO in the fourth quarter, reflecting continued improvement in our order to cash process. Finally, demonstrating our continued commitment to financial discipline and balance sheet strength, we paid down approximately $76 million of our senior secured notes in the fourth quarter using cash on hand. Now I'll cover the financial results in more detail. Fourth quarter revenue was $660.5 million, 5.2% lower than the prior year quarter. The decline was driven primarily by lower pass-through costs in both our clinical pharmacology and clinical development businesses as well as continued FSP headwinds. The decline in pass-through cost was driven by steady mix. Full year 2025 revenue of $2,723.4 million, in line with our guidance range, increased 1% year-on-year. The increase was driven primarily by higher revenue in our Clinical Pharmacology business, partially offset by lower FSP revenue. On a GAAP basis, direct costs in the quarter decreased 4.8% year-over-year primarily due to lower head count and personnel costs. These reductions were achieved despite the planned reintroduction of variable compensation as we remain focused on rewarding our talent while maintaining cost discipline. SG&A in the quarter decreased 30.5% year-over-year, driven primarily by lower TSA and IT-related costs. Looking at underlying controllable SG&A on a sequential basis, fourth quarter SG&A was 4.8% lower than the third quarter of 2025 and 23% lower than our fourth quarter 2024 run rate as a result of execution of our SG&A specific cost optimization initiatives. These results also include the impact of reintroducing variable compensation. I'll discuss progress on our ongoing transformation efforts across the organization later in my remarks. Net interest expense for the quarter was $23.2 million, broadly in line with the prior year quarter. For the full year, we recorded an income tax charge of $3.2 million, resulting in an effective tax rate of negative 0.3%. The annual rate differed from our statutory rate, primarily due to the nondeductible goodwill impairment. Our book-to-bill for the quarter was 1.14x, broadly in line with the third quarter. Book-to-bill for the trailing 12 months was 1.02x, Backlog was $7.7 billion, and cancellations remained in line with historical trends. Adjusted EBITDA for the quarter was $54 million, compared to $56 million in the prior year period. The decline versus the prior year quarter was driven primarily by the reintroduction of variable compensation, partially offset by the benefit of our cost savings initiatives. Adjusted EBITDA for the full year was $189.9 million towards the higher end of our guidance range. The decline versus the prior year was primarily the result of lower FSP revenue clinical pharmacology mix, the reintroduction of variable compensation as well as the negative impact of lower research and development tax credits. These impacts were largely offset by the benefits of our cost savings initiatives. Moving to net loss and adjusted net income. In the fourth quarter of 2025, net loss was $32.5 million compared to a net loss of $73.9 million in the prior year period. Adjusted net income for the quarter was $9.2 million compared to $16.6 million in the prior year period. Adjusted basic and diluted earnings per share for the quarter were $0.10 and $0.09, respectively. Turning to customer concentration. Our top 10 customers represented 56.8% of revenue for the year ended December 31, 2025. Our largest customer accounted for 18.1% of 2025 revenue. As I comment on cash flows, please note that all references to prior year cash flows are for the entirety of Fortrea, as we had not segregated cash flows from discontinued operations for the businesses sold in June 2024. To more clearly see full year and fourth quarter cash flow metrics, please refer to the investor presentation posted to our website this morning. Our cash generation in the fourth quarter was particularly strong, enabling us to deliver positive operating cash flow and free cash flow for both the quarter and full year. In the fourth quarter, we generated positive operating cash flow of $129.1 million and free cash flow of $121.6 million, both of which exceeded our expectations. For the year ended December 31, 2025, operating cash flow was $113.5 million compared to $262.8 million in the prior year period. And free cash flow was $88.3 million compared to $237.3 million in 2024. Recall that 2024 benefited from the net proceeds of $297.9 million upon the initiation of our $300 million securitization program. On a comparable basis, excluding the impact of the securitization, operating cash flow improved year-over-year by $148.6 million and free cash flow improved by $148.9 million reflecting meaningful underlying improvement in cash generation in 2025. Cash flow performance for both the quarter and the year was driven by a significant improvement in day sales outstanding. DSO was 16 days at year-end, improving by 17 days sequentially and 24 days year-over-year, reflecting continued enhancement in our order to cash processing. We also benefited from favorable payment timing during the fourth quarter. Net accounts receivable and unbilled services for continuing operations were $589.7 million of December 31, 2025, compared to $659.5 million as of December 31, 2024. This reduction is primarily driven by the improved cash collections during 2025. We ended the quarter with no borrowing on the revolver consistent with the third quarter. Our positive operating cash flow in the quarter combined with our undrawn revolver throughout the quarter resulted in available liquidity in excess of $600 million. Looking ahead, we are currently targeting full year 2026 operating cash flow to be positive. We anticipate first quarter cash flow to be negative, primarily driven by variable compensation payouts and a partial reversal of some timing-related DSO benefits. We are targeting first quarter use of cash to be more than offset by positive cash flow generation over the remainder of the year. With our targeted EBITDA and significant add-backs available under our credit agreement, we expect to maintain ample liquidity and significant flexibility under our financial covenants for the foreseeable future. Our capital allocation priorities continue to focus on driving organic growth and improving productivity alongside debt repayment, the latter of which was evidenced by the $75.7 million repurchase of our senior notes at par during the fourth quarter of 2025. Since the spin, we have paid down approximately 35% of our original debt. This has strengthened our balance sheet and improved our capital position, underscoring our disciplined approach to financial management. Backlog burn rate of 8.6% in the fourth quarter was lower than in prior quarters due primarily to lower pass-through costs. Now I'll give an update on execution against our cost reduction plans. I am pleased that we exceeded our annual targets for both growth and net cost reductions in 2025 with the difference between gross and net savings being reinvestments back into our people. Consistent with the timing and expectations we communicated last quarter, the fourth quarter was a strong period of execution, particularly across our SG&A specific savings program. Turning to our transformation plans for 2026 and beyond. We believe the primary lever to our margin transformation is sustainable revenue growth, which is why we are laser-focused on strengthening our commercial engine. The second half of 2025 was a step in the right direction. We've made several changes that support more stable book-to-bill performance, including strengthening commercial leadership, improving opportunity qualification, simplifying the proposal generation process and engaging the entire leadership team in building and reinforcing customer relationships. As our commercial engine matures and the market environment continues to normalize, we anticipate that these changes could enable more stable book-to-bill performance over time. With our attractive 50-50 split between large pharma and biotech customers, we believe we are well positioned to capitalize on demand across our end markets. Margin improvement remains a multiyear journey, supported by 2 primary building blocks. The first is revenue growth, as I mentioned earlier. The second is continued structural cost actions, including ongoing rightsizing of the organization and improvement in efficiency, all while maintaining our commitment to quality delivery. As the element of revenue growth and continued cost optimization come together, we are targeting an achievable path back to adjusted EBITDA margin more in line with peers over time. Turning now to 2026 guidance. Using exchange rates in effect on December 31, 2025, we are targeting revenue in the range of $2.55 billion to $2.65 billion and adjusted EBITDA in the range of $190 million to $220 million. The year-over-year anticipated decline in revenue primarily reflects the impact of [indiscernible] bookings in the first half of 2025, continued FSP headwinds and anticipation of reductions in pass-through costs. The targeted improvements in adjusted EBITDA are driven by our continued efforts to rightsize the business and improve our efficiency and agility. We will continue our cost savings programs in 2026 targeting incremental cost reductions of approximately $70 million to $80 million in gross savings and $40 million to $50 million in net savings as we move closer to normalized compensation levels by the end of 2026. In terms of quarterly progression, the first quarter has historically demonstrated a step sequential reduction as billable hours can be impacted by the timing of holidays and certain expenses increased at the start of the year. We anticipate a similar pattern this year. From a margin perspective, we expect gradual improvement as the year progresses and anticipate exiting 2026 on stronger footing. The team at Fortrea has demonstrated remarkable focus and resilience, and we welcome the opportunity to have our full engagement centered on our customers, our employees and our shareholders. We will continue on our transformation journey sharpening our execution against the 3 pillars previously described. Through it all, our employees remain engaged and committed to quality delivery. Our customers signaled that their experiences with Fortrea grow stronger and our investors understand that we are putting the right building blocks in place to improve our financial performance over time. We are confident in the direction we are taking and are excited about the future of Fortrea. Now we'll open the call for Q&A. Operator, please open the line. Operator: [Operator Instructions] Our first question comes from the line of Patrick Donnelly with Citi. Patrick Donnelly: Anshul, you sound cautiously optimistic on the overall backdrop, particularly on the biotech side, it does seem like the market has firmed up. You talked about the funding piece, obviously. Can you just talk through the outlook a bit? You mentioned the uneven first half. Is that more just a comment on the past bookings rolling through, but feeling better about the position on new bookings front going forward. Just given your conversations with customers, are you seeing any changes on the share front? Would love you to talk through a little bit on the overall backdrop here for bookings going forward? Anshul Thakral: Sure, Patrick. I'm happy to. Thanks for that question. And let me take the second part of your question first here. The comment around recovery in the first half, that is a comment around the 2025 first half bookings and how that reflects in revenues. But -- what I -- the words I use are cautiously optimistic because I do think the environment is improving. We see signs of improvement. We see signs of stabilization. We see signs of early recovery. Let me give you some evidence. Our engagement level with clients is significantly higher than it was in the first half of 2025. We think the decision-making time line will come back to more of a normal pace that we would expect within the industry. Our conversations with customers have become a lot more constructive, both big pharma and little pharma. So in the world large pharma, what we're seeing is a lot of the turnaround pipeline reprioritization, all of that sort of subsided as things matured in Q3, Q4, and we moved on to having very constructive dialogues about the 2026 pipeline. In our world of biotech, we're seeing a shorter time line in terms of decision-making. We're also seeing an increase in our people coming now from our biotech customers. So all of these things added together, I use the words cautiously optimistic because we've had some of this momentum during the back half of '25. I'd like to see some more of that momentum before I drop the word cautious in front of my statement. Patrick Donnelly: Understood. Okay. That's helpful. And then maybe one for Jill. The quarter definitely saw some encouraging signs on the margin, EBITDA cash flow front. It seems like '26 implying continued improvement. Can you just expand a little bit on the key margin levers? It sounds like a steady ramp throughout the year is the right way to think about it there. And if you were to see any upside to revenue, how should we think about the potential flow through to the bottom line? You did talk about revenue growth being the key driver. So I just wanted to talk through that. Jill McConnell: Sure, Patrick. Yes, I mean, you're right in my remarks in terms of the progression through the course of the year. We do see usually a bit of a step down in the first quarter, and then it improved over the course of the year. The key drivers, it is revenue growth. And I think as we've said previously, that is going to be the key to getting back to peer margins over time. And in this year, we're seeing a bit of a step back in revenue. It's roughly split quite frankly, between pass-through mix and then some continued headwinds in FSP primarily, but we're going to continue with the cost savings optimization. So the cost journey is what's going to help us well. Revenue is still a bit measured to continue to expand the bottom line. We're very focused on delivering both margin and adjusted EBITDA dollar improvement. And we think that with what we demonstrated this year around the cost savings and hitting those goals, we feel good. Most of what we've built into the guide has already been initiated for this year. So I think when revenue comes back, assuming the demand environment continues to be supportive, we would expect that to flow through pretty strongly, especially in the beginning as we continue to pick up some of that trapped demand that we have. And obviously, in time as we grow more, we would have to revisit perhaps our -- the people side of things. But for now, we believe you will see pretty strong drop through when the revenue starts to come back. Operator: The next question comes from the line of Elizabeth Anderson with Evercore ISI. Eric Coldwell: Maybe just to talk about the back half of '25 bookings a little bit more. Anything you would call out in terms of like mix composition or steady start times or something? Or is that sort of very characteristic to what we we generally think about in terms of the timing of those bookings starting to phase in. And then anything to call out timing-wise on the accounts payable side, the debt number seems to have flipped around a little bit, and I just didn't know if there was a timing aspect of that at all? Anshul Thakral: Elizabeth, thanks for the question. There's nothing specific to call out on the bookings. I think the -- if I look at the mix of our new business coming in, in the last 2 quarters, it's in line with what I expect in terms of therapeutic area mix, in terms of study mix of types of studies that are coming in. We've had strength in both clinical pharmacology as well as our full-service business in the late stage, a mix of Phase II and Phase III. So I'm actually quite happy of the quality and mix of what we're putting into the backlog over the last 2 quarters, but nothing that would be one thing to call out there as ask Jill to comment on the second part. Jill McConnell: Sure. Yes. Elizabeth, from an accounts payable perspective, there are a couple of things that are impacting it. It has come down to quite a lower level compared to where we were at the time that it's been in a year ago, there's a few factors for that. One, we had inherited a pretty significant payment hold at the end of the quarter as we completely unwound that. that last year, you would remember, we still had some significant onetime in TSA and other costs that were coming in. And so those would have been sitting in the AP balance at the end of the year. And then honestly, with the introduction of the new ERP, we've improved those processes and had to -- and that's allowed us to be a lot more efficient in what we're doing. I would expect -- I wouldn't expect the AP levels to go down much more from this. I think they're probably at a place where they would stay or be in and around that level, but it is mostly around improvement and unwinding some of the things that were spin related. Operator: The next question comes from the line of Eric Coldwell with Baird. Ishan Majumdar: You've already addressed a couple of these, but I was hoping maybe you could give a little more color on some of the commentary around RFP flow. It sounds like it's improving. If you could add any detail on that would be great. And then Anshul, you said you're happy with the bookings mix. I was hoping we could get some better directionality on bookings mix in the fourth quarter in terms of FSP versus full service or direct versus indirect. I'm interested in your win rate. And then finally, new to Fortrea clients, are there any updates on that front? Because I know that was a big initiative for you to not only retain and grow existing clients but also to bring new clients into the fold? Anshul Thakral: Okay. Great, Eric, thanks for the question. I think it's a multipart question. I'll do my best to answer as much of it as I remember. In terms of the mix of bookings, we don't typically comment on pass-throughs versus direct. But I will tell you, there's nothing unusual in Q3, Q4. It is in line with what I would expect to see in terms of the mix of the type of work coming in. It was a good healthy mix of Phase II, Phase III which is good for Fortrea. We'd like to see some more of those larger Phase III come in. So I was very proud of the team in what they were able to achieve. I'll give a couple more comments around the bookings. We have seen a pickup in full service work, which has been a lot of my push has been to be very selective when it comes to FSD. We want to continue to be strategic and we want to continue to be disciplined. FSP does cause a lot of headwinds when you're on a margin improvement journey. And so I'm very proud of the team that the shape of our pipe, the shape of what's coming in has been towards the FSO world, which is more what I would like, and it is more of where strategically I've been pushing the team. In terms of our win rate, I think our win rates are where I would like them to be. The win rates have been modestly consistent across Q3, Q4. The new-to-Fortrea customer HICA that the company had in Q2 subsided very quickly in Q3 with the CEO being put in place. And for me, I've instituted that all deals our executive led engagements, all of our biotech and biopharma customers are getting a different level of executive involvement than they typically would have been in the commercial process, and we're doing that pretty consistently. That took away any fears that new-to-Fortrea customers would have, and I saw none of that hesitation in Q4. What I did like about Q4 from an RFP flow, that was another one of the questions that you asked, but I liked about Q4 was we had a lot more RFP flow coming from biotech. So we saw growth in our biotech RFP flow, which is consistent with, I think, what some of my peers have said and consistent with what we're seeing in the market. And I was very proud of Fortrea's win rates in that space. Hopefully, that helps, Eric. Ishan Majumdar: It does. And I know it was a 4 heart question, but I am going to ask a follow-up. On Q1 specifically in terms of the phasing, I know you briefly touched on that, but just given the lumpiness in the pass-through revenue and how much that can gyrate quarter-to-quarter coupled with the seasonality and the impact of still working through the transition and rebuild of the company, the bad 1H '25 bookings, et cetera. Can you just help us hold our hand a little more on modeling, so we don't get ahead of our skates going into Q1? Jill McConnell: Yes. Sure, Eric. Happy to. So I think, again, we know -- I talked about the fact that we saw a bit of a step down sequentially in revenue, a lot of that driven by the pass-through mix. We're expecting that to continue. And in fact, part of the reduction year-on-year, a good chunk of the reduction year-on-year is related to that. So I think revenue-wise, it's going to be broadly similar to what we saw last year. That would be our expectation. But you'll see a little bit of improvement in margin just because of all the cost savings initiatives that we've done. But Remember, as we've been on the journey to reintroduce variable comp, we did a step change in that in 2025, we have a little bit more headwind to absorb there. Plus we always see some pick up in early on employment some other taxes in the year. So that impacts the first quarter. But that should hopefully give you some sense of what Q1 would look like. Ishan Majumdar: And just to be clear, Jill, when you say revenue similar, are you talking in terms of growth rate or absolute dollars? And then same question on margin, is it -- or profit, is it you said margin would improve a little bit. I assume that was a year-over-year comment while down quarter over quarter up year-over-year. Okay. Jill McConnell: Correct Yes. Operator: The next question comes from the line of David Windley with Jefferies. Derik De Bruin: And appreciate the information. The customer mix, I guess, and revenue growth metrics along with your clinical pharmacology business, I'm trying to disaggregate a little bit. Your top customer appears to have grown in the high 20% range. You also had, as you had earlier described, this kind of large and perhaps somewhat unique, albeit you told me not completely unique clinical pharmacology package in GLP-1s, burned quickly, incorporated a lot of sites, not all of which were yours, which drove some of the excess pass-through. I guess what I'm getting at is to what extent did those overlap, and to what extent are these trends continuing or repeatable? In other words, is some of the headwind that you have to say, overcome in '26 because you don't get a repeat CP package like that. And maybe you also are not expecting to see a top customer continue to outgrow the rest of the base as fast as it has? Anshul Thakral: Okay. So I'm going to try to disaggregate some of that, David. And I think when we talk later, we can talk in more detail on that. I'm not sure we're following the same statistic in terms of our largest customer growing 20%. I don't think that was the right math for us, I think. But we can sit back and... Derik De Bruin: Sorry, in '24, wasn't it 14-ish percent and '25, it was 18%. That's -- so if that's wrong, I apologize. Jill McConnell: You're talking about from the full year, sorry. Anshul Thakral: We thought you were trying to say in the fourth quarter were like looking at fourth quarter data are from full year -- from a full year basis, yes. Yes. For a full year basis, yes. That's correct. Jill McConnell: It actually stepped down a little bit though in the fourth quarter just relative. So, yes. Anshul Thakral: We've been -- the diversification of customers has been clearly a priority, and that's taking shape. And we saw good progress on that metric in Q3 and Q4. You asked a couple of different questions there on clinical pharmacology, let me try to just aggregate them. Yes, I've mentioned in the past that in our clinical pharmacology business, we saw pass-throughs in the middle of last year that were those we can't predict. They come from 1 or 2 large studies from a client where we need to use multiple sites on the mass of the client. And that study causes those types of pass-throughs. That was a onetime event that has happened, those revenues largely burned last year. Now to say whether or not we would get a study like that this year, I don't see one in the pipeline, but you never know. As their journey continues, our journey also continues in terms of us continuing to be able to do on board on our own sites. But I can't predict when those types of studies are going to come. And that's what we talked about in Q3 also for that type of a clinical pharmacology study. With that said, we've seen strong demand for our clinical pharmacology business. It continues to grow quarter quarter in terms of not just the pipeline, but the demand for services. So we're actually very happy with how that business is tracking and we continue to make pushes to increase organic capacity within our wherever we can. Hopefully, David, that answers your questions. Let me know if I missed some. It's a multipart question. Let me let know if this one [indiscernible]. Operator: [Operator Instructions] Our next question comes from the line of Jailendra Singh from Tourist Securities. Jenny Cao: Anshul, I want to go back to your comment about you describe it the fourth multiplier that accelerate execution and expand demand for CRs. Clearly, the way CRO shares have traded recently. There's a lot of fear out there in terms of CRO services getting disrupted. I would love your thoughts there. And additionally, can you elaborate on how all this focus on beginning to influence customer conversations or your differentiation. For example, our biotech and large pharma looking at AI-enabled execution is a key factor while deciding on ERS? Just give us some a little bit more color there. Anshul Thakral: Sure, Jailen. I'm happy to talk about this. As you can imagine, this topic comes up very often right now. But I think the topic is being driven more by sentiment and headlines, the changes we're actually seeing on the ground in terms of either customer behavior or demand. As I've mentioned, I think the AI adoption in clinical trials remains early is cautious is highly constrained by regulation, liability, data integrity, GCP requirements. Many of you on this call have read written papers and reports around this topic. And I think the whole industry is kind of aligned on that. I want to make sure that market sentiment doesn't get too far away from the reality on the ground. As a result, look, we're not seeing AI replace the need for large-scale clinical execution, patient recruitment, monitoring or regulatory grade delivery. I do think AI is going to accelerate pipeline more than it is going to eliminate work. So I know as I talked to our suite of our large pharma company, AI is already having impact in terms of the world of discovery, in terms of the world of decision-making, in terms of the world of being able to move pipelines forward not necessarily in the terms of replacing human labor, even on the pharma side to be able to run the actual clinical trials and do clinical development. As I said a couple of times, I think I do see this as a force multiplier, and the more we can move science forward the faster, the more science there is for us to develop. I actually think it will have a positive impact in how our market grows. As far as the behaviors in outsourcing, that was the second part of your question, we've not seen large pharma or biotech materially change anything in their outsourcing behavior as a result of does AI come up as a topic of conversation and essentially every proposal? Yes, it does. It comes up in all of my conversations. But I find that we as a industry are fairly aligned now how I see in our peers talk and we're fairly aligned with our customers and our clients in biotech and pharma. So we are seeing AI's ability to improve some oversight, ability to improve some trial design, ability to improve internal decision-making and ability to give us some efficiencies in the areas of past automation. But certainly, it's more of a productivity tool and not a replacement tool and that's been pretty consistent in the conversations I'm having, and it has not been an influence in any RFP or proposal that we've seen thus far. Hopefully, that answers your question, Jailendra. Operator: The next question comes from the line of Max Smock with William Blair. Michael Ryskin: Maybe just following up on a portion of Eric's question earlier on mix. I wonder if there's any detail you can give around expectations for direct fee revenue versus pass-through revenue in 2026. Just how changes in mix that are going to impact margins this year? Jill McConnell: Sure, Max. I mean in terms of the evolution of revenue, I think we're expecting continued growth in our clinical pharmacology business. both service fee, probably more stabilization to some of the points that Anshul made, more stabilization of pass-throughs rather than the significant growth we saw there last year, but it will still be a factor. It does impact clinical pharmacology revenue a bit differently, as you know, just the way revenue recognition works. And then I mentioned that we are expecting further headwinds in FSP. And then the -- so when you think about year-on-year, if I'm talking about [indiscernible] having stable pass-throughs, the reduction that we're projecting is related to our full-service business. And I think as Anshul said, we've been focused on increasing the pipe in those. But I think '25 was -- there was a phenomenon around a handful of studies some of which I've called out previously that we're driving really high rates of pass-throughs that 1 of them in particular, finished early. We hit the endpoint early as that winds down. We're seeing some of that impact in the numbers for next year. So when you think about the year-on-year reduction, it's roughly split about half and half between service fee and pass-through with [indiscernible] growing and then the impact on the other business. Operator: The next question comes from the line of Ann Hynes with Mizuho Securities. Ann Hynes: Just on the margins, I know you said you want to get to peers over time. Can you give us a sense, is it high teens, low 20s? Like what is your ultimate goal and maybe a timetable, that would be great. Anshul Thakral: I think that's a great question. I'm happy to give some foot there. I think it's hard to look at peers when most of our peers are not necessarily in the public market. But our belief is mid-teens is where a pure-play CRO like ours is the group have a large central labs business or other ancillary services like SMOs, et cetera, at the lungs. So that is our goal, and that's what we're targeting. It is a multiyear journey, and it is going to take some time to get there. I've been here for about 2 quarters at this point. I'd like to get a full year under my belt and I would like to spend some time doing some form of an Investor Day and actually having some discussions and giving more details around what that time line and time frame looks like well for later this year. Ann Hynes: Okay. Great. And then I don't know if I missed this, but did you talk about what -- how cancellations trended? And maybe gross bookings growth, that would be great as well? Jill McConnell: Ann, we haven't had a question on it. And I briefly mentioned in the remarks, we've actually continued to see historic low levels and cancellation trends, nothing made around of the ordinary. So just kind of par for the course. Anshul Thakral: It's been stable and consistent at this point. Operator: Our final question comes from the line of Justin Bowers with DB. Luke Sergott: Anshul, appreciate [indiscernible] on in the bottle with respect to AI. But with your comments on accelerating discovery is that -- is that something that you're seeing like more near term or in the last like 12 to 18 months? Or is that just sort of like a longer duration observation over the last several years. So that's part one. And then part 2 would be, when you think about the buckets in clinical trial ops, like, which functions do you think are most addressable in the near term? Anshul Thakral: Happy to talk about both. And just to be clear, I didn't let the [indiscernible] out of the bond, I think [indiscernible] escaped a couple of weeks ago, and that's been a conversation topic for everybody. Look, in terms of discovery, that's not an area we're in, but this is the conversations we have with our clients. And I would say that has been happening now for a period of time. I can't give you exact time frame, but it's not just the last few months. There's been a lot of conversation around how the use of not just AI, prior to AI in the use of data. and the ability to process large amounts of data, how can our clients get better at what's moving through the discovery funnel and what's getting out to the clinic faster and faster. And that conversation has continued. It continues to grow. I only offer that as an observation. And what I hear from our clients and where these tools are having the most impact early on. In terms of things that I talked about in earlier too, look, we see levels of task automation in pharmacovigilance. We're already doing it on our end. We have our own tools that have been deployed in pharmacovigilance, such as case being extra. We're seeing it in forms of centralized monitoring, where there's things that we're doing in terms of being able to issue alert earlier, being able to look at the data, being able to automate some fairly mundane tasks in centralized monitoring. We're already seeing some impact there. And we're starting to see some early impact in the world of data management when it comes to data cleaning, when it comes to being able to look at queries and being able to actually reduce some into labor in what we have to do in that space. We're not seeing an impact in anything that we would be doing at the site itself. Relationships or the size conversations with the sites, the actual physical monitoring of the data right now. Hopefully, Justin, that answers your question. I was just seeing if we were done with the questions, then I would close out, but I wanted to answer. Thank you. As we come to a close today, I want to thank you for your thoughtful questions. and continued engagement. Our performance this last quarter reflects the discipline and operational rigor we have really embedded throughout this organization. We continue to make progress against our strategic initiatives. We continue to strengthen our foundation and enhance our ability to serve clients globally. What matters to our clients is what matters to us most, and we remain focused on delivering high-quality execution and long-term value. The message is we are focused, we're disciplined, and we are focused on executing and executing well, and we're confident in the direction that the company is beginning to take. So with that, I thank you for your time. And for those that will be in town and look forward to seeing the Barclays conference on March 10. Thank you. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Chord Energy Corporation fourth quarter 2025 earnings conference call. Following the presentation, we will conduct a question-and-answer session. At this time, all lines are in a listen-only mode. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on Thursday, February 26, 2026. I would now like to turn the conference over to Bob Bakanauskas, Vice President of Investor Relations. Please go ahead. Bob Bakanauskas: Thanks, Josh, and good morning, everyone. This is Bob Bakanauskas. Today, we are reporting fourth quarter 2025 financial and operational results. And we are delighted to have you on the call. I am joined today by Danny Brown, our CEO; Michael H. Lou, our Chief Strategy Officer and Chief Commercial Officer; Darrin J. Henke, our COO; Richard N. Robuck, our CFO; as well as other members of the team. Please be advised that our remarks, including the answers to your questions, include statements we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently disclosed in our earnings releases and conference calls. Those risks include, among others, matters that we have described in our earnings releases, as well as in our filings with the Securities and Exchange Commission, including our annual report on Form 10-Ks and our quarterly reports on Form 10-Q. We disclaim any obligation to update these forward-looking statements. During the conference call, we will make reference to non-GAAP measures and reconciliations to the applicable GAAP measures can be found in our earnings releases and on our website. We may also reference our current investor presentation, which you can find on our website. I will now turn the call over to our CEO, Danny Brown. Thanks, Bob. Good morning, everyone, and thanks for joining our call. Danny Brown: Last night, we issued our fourth quarter and year-end results and our updated investor presentation. The materials cover key strategic, operational, and financial details, along with our 2026 outlook. I plan on highlighting a few key points, then we will open it up for Q&A. So, looking back at 2025, in summary, it was an exceptional year for Chord Energy Corporation. We continued to improve the business, evolving our development program, driving efficiencies, and enhancing free cash flow. Chord Energy Corporation consistently delivered results that exceeded expectations, while improving the quality and depth of our inventory and enhancing profit margins, yielding significant incremental free cash flow. Looking specifically at volumes and capital, through their commitment and dedication, the team was able to deliver higher production while capital came in below our expectations. My sincere thank you to all of our employees who have positioned us for continued success. 2025 oil volumes exceeded original guidance by more than 1,000 barrels per day, while capital came in approximately $60,000,000 lower. Since combining with Enerplus in 2024, Chord Energy Corporation has lowered its capital spending nearly $100,000,000 while delivering 6,000 barrels per day more oil production. Slide eight shows Chord Energy Corporation drove $160,000,000 of free cash flow improvement in 2025 from controllable items, including less capital, lower LOE, lower production taxes, lower G&A, and improved marketing costs. Importantly, the $160,000,000 of run-rate improvements represent 23% of our estimated free cash flow in 2026, and we anticipate making meaningful further progress. Since the pandemic, Chord Energy Corporation has been laser focused on disciplined capital allocation and delivering strong return on capital. We believe making good investments, whether in organic well activity, lease acquisition, or large-scale M&A, is foundational to building a strong and resilient organization, and in delivering robust return of capital. And this shows in our results. Slide six shows that since 2021, Chord Energy Corporation has returned $6.7 billion of capital to shareholders, which is particularly impressive given it is higher than our current market cap. Importantly, we accomplished all of this while significantly growing the business on both an absolute and per-share basis, and while keeping our leverage well below that of our peers. Stated differently, Chord Energy Corporation has firmly positioned itself as a leader in the Williston Basin, leveraging its scale and operational capability to grow volumes in a capital-efficient way, leading to strong, sustainable free cash flow generation and substantial shareholder returns. Turning to the fourth quarter briefly, Chord Energy Corporation delivered another consecutive quarter of solid operating performance. Oil volumes were at the high end of guidance, capital was below the low end of guidance, and both were accomplished with strong cost control. Accordingly, adjusted free cash flow for the fourth quarter was $175,000,000, substantially exceeding expectations, and we returned approximately 50% of this amount to shareholders. After our base dividend of $0.30 per share, all incremental capital return was utilized for share repurchases. As we look forward to 2026, Chord Energy Corporation’s plan builds upon last year's success and remains focused on optimizing capital allocation, generating strong returns, and improving continuously. Last year, Chord Energy Corporation set a goal of converting 80% of its inventory to long laterals. I am happy to report that we achieved that goal by year-end 2025, which was earlier than expected. Chord Energy Corporation’s operational improvements and move to longer laterals have significantly lowered our cost of supply. Slide 15 highlights Chord Energy Corporation’s inventory improvement in 2025, replacing our low breakeven inventory mostly through improvement of the organic portfolio but also through select M&A. As you can see, we had tremendous success, including conversion to four-mile laterals, while also driving capital and operating costs lower, and it is a testament to the hard work and dedication of our team. In addition, Chord Energy Corporation lowered the weighted average breakeven of its inventory by more than 10% through several efforts, and we have attempted to highlight the benefit of a shift to longer laterals on slide 10 of our investor presentation. Through long laterals and improved execution, Chord Energy Corporation has driven per-foot drilling and completion cost to a very attractive level, and this is demonstrated with program-level capital efficiency improving year over year. If you look at volumes delivered relative to capital spent—essentially, the inverse of an F&D calculation—you can see the 2026 program is more efficient than 2025. Additionally, Chord Energy Corporation’s future F&D cost on a company level has trended 22% lower over the past few years, clearly demonstrating that things are going in a positive direction. And speaking of 2026, despite some severe weather we have seen in North Dakota to begin the year, Chord Energy Corporation’s 2026 plan is in line with the preliminary outlook we issued in November. As a reminder, we intend to run a low to no oil growth program, yielding average volumes of 157,000 to 161,000 barrels of oil per day, with capital of $1,400,000,000. From an activity standpoint, we are currently running five rigs, split fairly evenly between three- and four-mile wells, and one full-time frac crew, with the spot crew scheduled to drop around the end of the summer. We expect approximately 80% of TILs will be longer laterals. At benchmark prices of $64 per barrel of oil and $3.75 per MMBtu of natural gas, we expect to generate approximately $700,000,000 of free cash flow in 2026. So in closing, Chord Energy Corporation remains committed to delivering affordable and reliable energy in a sustainable and responsible manner, and we have a compelling history of disciplined capital allocation, consistent execution, and high shareholder returns. We are proud of what we have built: a scaled and resilient organization with low decline, significant low-cost inventory, and very attractive exposure to the next crude upcycle, while generating strong free cash flow and shareholder returns in the current commodity price environment. And with that, I will hand the call over to the operator for questions. Operator: If you are using a speakerphone, please lift the handset before pressing any keys. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you wish to decline from the polling process, please press the star button followed by the number two. You will hear a prompt that your hand has been raised. One moment for your first question. First question comes from Neal Dingmann of William Blair. Please go ahead. Neal Dingmann: My question is just on the long-term plan. It is really interesting. You guys were early putting this out, I think, if I recall back in early 2024, and since then, oil has diverged between $55 and $87. Your plan has remained as consistent as ever. So I guess my question is, is there much that would cause that to change in any direction, whether it is prices or something else that caused you to diverge from that long-term plan? Danny Brown: Hey, Neal. Thanks for the question. We are really happy with the quarter and the outlook for the organization. I would say as we think about our activity levels, the great thing is we have built a really resilient company, and because of that, we think we are able to weather through some of these commodity price cycles and still generate really meaningful free cash flow and shareholder returns. And so I think the volatility of our activity program may be a little muted relative to others because of that resiliency we have in the organization. From a capital allocation decision-making standpoint, if we saw really significantly lower oil prices, clearly we would go back and look at the plan to say, does this make the most sense from a capital allocation perspective? And so you could see a movement in the program, but with where we are at now and down to levels far lower than where we are trading currently, we feel really happy with the plan, the free cash flow generation, and the shareholder returns that we have got. Neal Dingmann: Great point. And then just my second on fixed cost specifically. You and I have always talked about, I know Bakken generally having a bit more fixed cost than other areas of the Permian. But it is definitely notable when you look at your breakeven cost. Those continue to come down. Could you talk about things that you all are doing? Is it to mitigate these costs? Is it things you are doing to lower the fixed cost, or are you just focused on what you can more of the variable? Or how are you able to continue to decrease breakevens, as the Bakken still has some of the fixed cost it does? Danny Brown: Neal, I would say it is an organization-wide effort to drive our cost structure as low as we can responsibly get to. That includes capital efficiency improvements. That includes operating expense improvements. That includes what we do from a marketing and midstream, so a GP&T side. So it is really everyone focused on driving improvement through the business. We just think it is absolutely critical. And when you produce a commodity, you have to make sure that you are focused on your margins, and we are very keenly focused on our margins. The great thing is that we have, I think, built organizationally tremendous momentum around this, and we have seen success through a combination of multiple efforts, so not just the capital side, but also from an operating expense and really all elements of our cost structure as an organization. And then we highlight in our investor presentation the $160,000,000 of run-rate free cash flow improvement we saw in 2025, which is really covering on the capital side in our F&D, and we are very focused on continuing to improve. These are run-rate type numbers that will carry with us into 2026, and we expect to see improvement on this as we move forward. So there is a lot of excitement in the organization around it, and I think we have got more that we can deliver as we move forward. Neal Dingmann: Well said. Thank you, Bob. Danny Brown: Thanks, Neal. Operator: Next question comes from Oliver Huang of TPH. Please go ahead. Oliver Huang: Good morning, Danny and team, and thanks for taking the time. Wanted to start on organic inventory. As we kind of think about the adds highlighted in the material here last night, any sort of color on which parts of the basin you all are seeing this come from? How much more running room is there beyond what has been highlighted if this year's four-mile program goes according to plan? Danny Brown: Oliver, what I will say is that it is really across the basin that we are seeing this improvement. So it is not like it is one specific area, but really as you think about the 1,300,000 acre position we have, it is really extensive. And as we have lowered our cost structure, we have just really been able to continue to work to really refine and improve our inventory position, materially improving the breakeven on our inventory and the geometry of our development program as well as incorporating some new assets we have got into the development program. So some things that we always thought were inventory are just now better inventory than we had before, and then some things before that would not have made sense for us to drill now have really compelling returns as we look at the cost structure we are able to apply against it. So it is across the basin. As we continue to improve the business as we move forward, I have no doubt that we will continue to see organic inventory flow into the system. We think about this largely on the upfront side, and I think it is common to think about this from your upfront capital costs, which is important, and we have seen a lot of improvement around that, but it is also about how we operate the wells. And so as we are able to have these wells flow longer over time, have higher production delivery over time, it also has a benefit to us there because we are seeing more production from the base wells and the inventory to replace production as we move forward, which will have lower cutoff rates as we move forward and just have us rethink the whole inventory. We are really working all aspects of it to get more from the wells that we have got, more from future wells, both from a capital and the OpEx and a productivity side, and it just has a really bright outlook for our overall inventory position. Oliver Huang: Okay. That makes sense. Thanks for that detail. And maybe for my follow-up question, we noticed in the 2026 outlook, the oil cut is showing an improvement from both Q4 and 2025 levels. Just how much of this is driven by leaning more into the western acreage where wells carry a lower GOR profile? And also any sort of color on how you all are thinking about GOR trends through the 2030 timeframe for your portfolio? Danny Brown: Yes. It is a great observation, Oliver. So you are right. As we think about the 2026 program, broadly, it is activity around the basin. We are not concentrated in a single area, but it has got a little bit more of a weighting over to the western side of the portfolio. As we move more out of the historic core of the basin, we do see a lowering GOR, and that is reflected a little bit in what you saw for us in 2026. As you would expect, we are always monitoring the performance of our wells. We are monitoring where our specific development activity is anticipated to be. There are nuances around shrinking yields that we get from various processes, plates we get, and how we account for that in our three-stream production modeling. Broadly speaking, as we look at the wells in the core of the basin, we expect their GORs to continue to increase, but they will be increasing on a declining base. As our new production comes online, that will come in with a little bit of a lower GOR relative to the production. We are trying to balance all that in the projections that we put out there. Oliver Huang: Perfect. That makes sense. So as we are kind of thinking through the next few years, maybe just very minimal increases to the oil cut is probably a good starting point. Danny Brown: Yes. I would say that is a great way to frame it. We do not anticipate seeing an increase in our gas cut, and it may be that our oil weighting increases, but it will be very slight. Operator: Next question comes from Derrick Lee Whitfield of Texas Capital. Please go ahead. Derrick Lee Whitfield: Good morning, all. Great update today. Wanted to lean in on Neal’s earlier question with my first question. You guys have done a remarkable job of lowering your breakevens and increasing free cash flow per share. Referencing slide eight, where do you see the greatest levers to further improve the business on the D&C and base production front over the last several years? Danny Brown: Hey, Derrick. Really appreciate the question. I really like slide eight of our deck because it just demonstrates the sort of tangible results we have got from a lot of the efforts we have going on in the organization. I would say I am not focused on any one particular area of this. We think we have got opportunity really across every one of these buckets, and we are seeing progress on every one of these buckets, whether it be production operations, opportunities from our base wells, opportunities to lower not just where we see optimization opportunities from the base production, but we have got workovers that would be included in this, and the continued opportunity to see our cost structure fall as more longer laterals flow into the system in our development plans. One of the things I know about drilling and completions is as we get more of these under our belt, our performance on them will get better. We have just seen that time and time again. So I really have a lot of optimism for each one of these buckets and expect us to continue to deliver improvements over what you see on slide eight in every one of them. Derrick Lee Whitfield: That is great, Danny. And thinking about the use of surfactants in new well completions and for workover operations. Billy, one of the larger operators in the basin in Chevron is acknowledging surfactants in prepared remarks today. How are you guys thinking about the use of surfactants in boats? Darrin J. Henke: Yeah. Great question, Derek. It is very top of mind. We are focused heavily on the production side relative to the chemicals and surfactants at this point, but we are also looking at adding them on the completions as well, studying that. We have pumped 19 chemical and surfactant treatments already, and we are evaluating those results. As we get additional results throughout the year, we will, of course, report back on those. We are constantly studying our competitors, be it in the basin or other basins as well. If we are not the first company to be trialing some of these treatments, then we are going to be early adopters as we see that the results merit additional pumping. So in a nutshell, we have pumped a number of jobs already. We are studying the results of those jobs, and of course, look forward to success with those. There will be more of those down the road. We have thousands of wells that we could do that on potentially, nearly 5,000 wells PDP based. Danny Brown: Hey, Derek. I will just add on to that a little bit too. We are talking specifically about surfactants here, but I would say maybe as a broad comment, if you see or read something that someone else is out there trialing, you should assume that we are doing the same thing in here. Either we are already doing it or we are quickly picking up that same information and looking to trial it internally. We are doing that as a matter of course, but we also know we are doing other things as well that we are excited about and think can drive potential improvement for us as we move forward. But we have generally been an organization that likes to put up some results first to be able to come out and talk about that specifically. So we will continue to work these things, and as we see results and have news to share, we will absolutely be doing that. Derrick Lee Whitfield: Alright. Fair enough. Great update to you guys. Operator: Next question comes from Paul Michael Diamond of Citi. Please go ahead. Paul Michael Diamond: Thank you. Good morning. I was wondering a bit more on slide eight. And let us talk about $30,000,000 to $50,000,000 in annual run-rate savings given new negotiations in marketing. Can you talk a bit about the specifics there and, I guess, the opportunity set you see going forward? Michael H. Lou: Hey, Paul. Thanks for the question. This is Michael. The team has done a great job on the marketing midstream side, and some of the things that we have seen is this basin has a maturity to its midstream infrastructure throughout the basin. Contracts have been long-term contracts, but they have been around for a while. So a lot of those contracts have come up or are coming up. As those contracts near their term, we are able to get in new contracts that are at lower cost points, which is fantastic. The teams are continuing to look at that, and I think we still have additional opportunity on that side. It really spans across oil, gas, and water, and really throughout the basin across many, many contracts. Keep watching. I think, as Danny mentioned, each of these buckets have room to move. The marketing and midstream side is no different. You can hear the excitement from the team on this. Really, it is corporate-wide, and what I love about it is it really shows the commerciality that our whole teams are looking at in terms of not only reducing costs, but really just getting better and more efficient across the organization as a whole. Some of that is coming with production improvements, some of that is coming through cost reductions, but overall, just raising the free cash flow profile of the company not only on a short-term basis, but on a long-term basis. Paul Michael Diamond: Got it. Appreciate the clarity. And then just a quick follow-up. Talking to slide 15, you added 300-odd last year through a combination of organic acquisitions and then the ground game. In guidance, you guys plan on TILing about 150 locations in 2026. I guess how do we think about you breaking down organic versus M&A? Should we think about that breakdown being somewhat similar? Is that a reasonable trend? Or was that an outlier year? Danny Brown: Paul, clearly, this is something we are going to be really focused on. And I think, for any one year, it may look different. M&A, as you have seen, we have been very disciplined on this over time. We are going to pick our spots. When we see something that makes sense for us to do from an M&A perspective, when we think we will be a better organization on the back end of it, you may see us do something like that, and that would obviously impact this chart. Then the efforts we have got internally should be continuing to drive organic inventory replacement. So I think the buckets will be the same. The percentage of any buckets may differ a little year over year, and it is just going to depend upon the opportunities we are able to identify as we move forward. Operator: Next question comes from Noah B. Hungness of Bank of America. Please go ahead. Noah B. Hungness: Good morning. I wanted to maybe lean on the 2026 decline rate. You guys have given us a bit of detail on the production shaping, but I guess I was curious if you could give any color maybe on what the 2026 exit decline rate looks like versus maybe the 2025 decline rate. Danny Brown: Yes. I think the decline rates year over year broadly look similar on an annual basis, and really that is how we think about things. I do not think there is a whole lot of changes we incorporate. As we have said, on a longer-term basis, we may see a little bit of moderation in decline, assuming we continue to run a maintenance-level program, as longer laterals have a larger and larger portion of our overall production base. We expect to see a modest shallowing of our corporate decline rate, but again, it will be small—very small single-digit percentages in that, but helpful from a reinvestment rate perspective. It is a tailwind that we have got but not a huge tailwind, at least not right now. Noah B. Hungness: And then for my second question, could you maybe talk about was any of your capital activities affected by Winter Storm Fern in 1Q? And if so, what does that mean for the timing of capital spend through the year? Darrin J. Henke: Yeah. Great question. No. I would say it is winter in North Dakota, and the program looks pretty similar to what our expectations were last fall. Our teams did a fabulous job getting production back online where we did go offline on production and getting activity back out. We are definitely one of the best in the basin when it comes to recovering from a winter event. Noah B. Hungness: Well said, Darren. No. That is helpful color. Thank you. Operator: Next question comes from Carlos Escalante from Wolfe Research. Carlos Escalante: Hey, good morning team. This is Carlos on for John. Thank you for having us. First question, I would like to lean on what you are doing with the longer laterals. It seems to us that as you drill in 2026 and spud a lot of those, but you do not TIL the same amount in 2027, meaning capital, there is a carryover effect in your capital efficiency in 2027. Obviously, you are not guiding to 2027. But can you perhaps give us a sense of capital efficiency as a whole? On order of magnitude, how would you guide to 2027? Danny Brown: Yep. Broadly speaking, Carlos, I appreciate the question. Again, and I will reiterate your comment that we are not guiding to 2027 at this point. We are just now coming out with 2026. From a capital efficiency perspective, the sort of roll-in of the TILs from the capital deployed in 2026, all of which we think will be helpful to a 2027 program. We are really pleased with what we are seeing in 2025. We feel very good about what we accomplished for 2026. We have got some nice tailwinds with our development program, which we think will be helpful to the 2027 program. Carlos Escalante: Operators have tried out for type oil development optionality. I mean, obviously, it is a fundamentally different play than the Permian Basin with less stack optionality. But just wondering if there is anything that you can highlight to us, remind us what the optionality is, and also acknowledging that you do not need this today because you have a healthy inventory as you do right now. Danny Brown: Thanks for the question, Carlos. I will start with the last comment. The great thing about our program is we think we have got a lot of really good inventory in front of us. It is a very repeatable Middle Bakken program. The Bakken delivery from a well has the lowest standard deviation of delivery from any Lower 48 basin out there, and so it is very repeatable development. Our spacing is conservative, with no need to put an adjective around that. It is conservative-spaced Middle Bakken program, and we have got a ton of it. We have a great inventory picture for the organization. Obviously, we are aware of the full column that sits underneath our acreage position there. We are watching what others do. We watch what folks do in and out of basin, and we will respond as would be appropriate. But the great thing is we have a really deep inventory set with what we have got currently and feel great about our plan. Operator: Next question comes from Nicholas Pope of Roth Capital. Please go ahead. Nicholas Pope: Good morning. There are several comments on an uptick on spend in the midstream in 2026, mostly focused on water disposal. In the market optimization line item, water disposal optimization, curious if there is anything that has changed with the water production out of the wells, or if this is just kind of further what you comment on the late stage of the development of Bakken and some of the contracts that are in place there? Or if anything has materially changed with the field-level production of water out there. Michael H. Lou: Hey, Nick. Good question. This is Michael. So just thinking about the midstream, and I like the way you kind of characterize that. We talked a little bit earlier that as we move into areas that have lower GORs, those areas also have slightly higher water. I would say the water systems overall are more mature, but there are not quite as many of those as oil and gas side. As we talked about midstream deals earlier, oil and gas side has kind of more mature systems overall, especially on the oil and gas. The water systems, we are talking about a lot of call flattening in the basin. There are some areas that we are looking at whether or not it makes sense for us to invest some in the water side, really to juice our E&P returns overall. These are good projects that will boost our E&P productivity and return. So incrementally, it is not a lot of capital overall, but it is very productive capital for us to spend. Nicholas Pope: Got it. And so, total disposal capacity across the basin—you did a nice job of highlighting the movement of oil and where things are across the basin—but for capacity for water, are you all comfortable with the total capacity in the near term? They have been able to handle all the water that this basin is going to produce? Michael H. Lou: Yes. The disposal capacity is totally fine. Just recognize that disposal capacity is also a little bit more localized than maybe oil export or gas export capacities. Overall, that is baked into all of our economics and our thoughts. There is a need to try to get water disposal a bit closer to your wellbores overall, and so that is why there is some ongoing capital spend on the water side. I do not think it really changes things as we move forward. Nicholas Pope: Hi. Good morning. Thank you. In your 2025 reserves, I was wondering, did the full impact of your lateral length extensions get captured in your reserves? Darrin J. Henke: As you are probably noting, the three-mile wells that we have delivered, we have captured that in our reserves. But as you probably know, we had actually just recently TILed the four-mile wells. So that is probably on the early side. Obviously, there might be one or two wells on that front, but it is not really fully captured when we think about the full PUD development. But it is pretty straightforward from the standpoint that what we saw in the three-mile results resulted in the type of uplift that we talked about. Nicholas Pope: Great. Thanks. I was just curious about how the timing of that worked out. And just a little while ago, you were mentioning that we can consider the inventory to be conservatively spaced. And at least for me, so much of the focus on the longer laterals, I know, raises the tier of maybe outer parts of the footprint to make locations viable that would not have been with shorter laterals. Are there implications for infill drilling in the more mature parts of the footprint, especially given the cost structure improvement that four-milers can introduce into the mix? Danny Brown: No. It is a great question, and I think the answer is yes. There probably are beneficial implications as we get better at drilling these longer laterals. I think also, we do not talk about it very much because it is not a meaningful part of our program—it is a more meaningful part of some other operators’ programs—in these alternative shaped wells. We like it as a tool in the toolkit, but we are fortunate that we have got such a great and extensive acreage position that we do not need to drill a lot of alternative shaped wells. We can drill long straight wells, which we like better. But the combination of longer wells and alternative shaped wells, I do think, has some implications to infill drilling. The important thing is we think as these costs get down, we are effectively draining the reservoir. We have got good reservoir contact area. We think we are effectively draining the reservoir with what we have got now. But where these longer laterals and, maybe more importantly, the alternative shape wells can come with the infill drilling, it may allow us to go back in and capture some reserves that have not been really effectively drained. If you do not have the ability to drill these alternative shaped wells, you may not be able to access that very well. The combination of longer laterals and alternatives, I think, has a beneficial implication to infill development programs. We really have not quantified that yet, so I would say that is going to be a lot of upside to what we think about now. As our cost structure on these gets lower, as our ability to execute them gets larger, it probably just gets better from there. But quantifying that, it would be a small piece of our overall inventory as we think about it today, but certainly a nice potential incremental opportunity for us to evaluate and continue to add in. Operator: There are no further questions at this time. I would now like to turn the call back over to CEO, Danny Brown, for final closing comments. Danny Brown: Thanks, Josh. To close out, I want to thank all of our employees for their continued hard work and dedication. We feel great about our competitive position and have a lot of low-decline, high oil cut production base paired with a deep inventory of highly economic, conservatively spaced oil-weighted locations. Our strategic actions and continuous improvement have created what we believe is a valuable and increasingly rare asset in our ability to deliver going forward. With that, I appreciate everyone's interest, and thanks for joining our call. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line.
Operator: Thank you for your continued patience. Your meeting will begin shortly. As a reminder, please be sure to silence all cell phones and laptops. Stand by, your meeting is about to begin. Good morning, everyone. My name is Beau, and I will be your conference operator today. Welcome to Ecovyst Inc.’s fourth quarter 2025 earnings call and webcast. Please note, today’s call is being recorded and should run approximately one hour. Currently, all participants have been placed in a listen-only mode to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. Lastly, if you should need operator assistance, please press 0. I would now like to hand the conference over to Mr. Gene Shiels, Director of Investor Relations. Gene Shiels: Good morning, and welcome to Ecovyst Inc.’s fourth quarter 2025 earnings call. With me on the call this morning are Kurt J. Bitting, Ecovyst Inc.’s Chief Executive Officer, and Michael P. Feehan, Ecovyst Inc.’s Chief Financial Officer. Following our prepared remarks this morning, we will take your questions. Please note that some of the information shared today is forward-looking information, including information about the company’s financial and operating performance, strategies, our anticipated end-use demand trends, and our 2026 financial outlook. This information is subject to risks and uncertainties that could cause actual results and the implementation of the company’s plans to vary materially. Any forward-looking information shared today speaks only as of this date. These risks are discussed in the company’s filings with the SEC. Reconciliations of non-GAAP financial measures mentioned in today’s call with their corresponding GAAP measures can be found in our earnings release and in the presentation materials posted in the Investors section of our website. I will now hand the call over to Kurt. Kurt J. Bitting: Thank you, Gene, and good morning. Overall, we are very pleased with our fourth quarter results and the execution of our strategic objectives. Regeneration services contributed to a solid quarter. In terms of financial results, the fourth quarter was also a significant quarter in the context of our ongoing portfolio transformation. We completed the divestiture of the Advanced Materials and Catalysts segment earlier than expected for a sales price of $556 million, utilizing $465 million of the net proceeds to pay down our term loan, leading to a net debt leverage ratio of 1.2x at year end. This transaction has transformed the company, initiating a new focus to drive progress by delivering reliable sulfur solutions for clean fuels and critical materials. In 2025, we began executing on our capital allocation strategy with the acquisition of the Wagaman sulfuric acid assets for approximately $40 million and repurchased just under $50 million of common stock. We enter 2026 with a strong balance sheet and significant liquidity that we believe positions us well to continue our capital allocation priorities directed at growth, both organic and inorganic, and the continued return of capital to our stockholders. Turning to the demand trends on slide five, our demand outlook for 2026 remains positive, underpinning the volumetric growth we anticipate. We expect favorable contractual pricing for regenerated sulfuric acid and stable pricing for virgin sulfuric acid. In 2025, U.S. refineries underwent extensive maintenance, including our customers. This year, we expect our refining customers to run at high utilization, benefiting from favorable alkylate economics. With less planned customer downtime than in 2025, we anticipate higher sales for our regeneration services in 2026. We are also anticipating higher sales of virgin sulfuric acid in 2026, with demand growing in mining, which accounts for 20% to 25% of our sulfuric acid sales, especially for copper, to support energy infrastructure in some areas. For 2026, we currently expect sales into the nylon end-use to be relatively flat compared to 2025. And while the balance of our industrial exposures are diversified, further weakening of macro factors could translate into softer demand in some areas. The integration of the Wagaman sulfuric acid production assets acquired in May has enhanced our supply network, allowing us to meet anticipated growth in demand for this year. Looking ahead, we anticipate that mining demand for sulfuric acid will increase as many traditional high-grade ores are depleted. Solvent extraction electrowinning processing of copper, which utilizes sulfuric acid for mineral extraction, is expected to become more prevalent. Ecovyst Inc. is well positioned to support expanding mining applications. Accordingly, we are investing approximately $20 million in growth capital in the Gulf Coast region for projects aimed at increasing storage capacity and improving rail logistics, thereby strengthening our ability to serve the evolving needs of the mining industry. Lastly, the long-term outlook for our Chem32 ex situ catalyst activation business remains positive. With future growth supported by the recently completed expansion at our Orange, Texas site. I will now turn the call over to Michael P. Feehan, who will review our financial results. Michael P. Feehan: Thank you, Kurt, and good morning. We closed out the year with a solid financial performance in the fourth quarter. Delivering full-year adjusted EBITDA of $172 million, ahead of our previously provided guidance. As a reminder, with the divestiture of the Advanced Materials and Catalysts segment, the results for the business are reported in discontinued operations for all periods. My comments this morning pertain to the reported results from continuing operations. Our strong fourth quarter results were driven by continued sales growth in both volume and pricing, resulting in adjusted EBITDA of $51 million, 8% ahead of the prior year. We generated $78 million of free cash flow, of which we used $20 million in the fourth quarter for share repurchases. And with the proceeds from the sale of the Advanced Materials and Catalysts business, we paid down $465 million of our term loan, resulting in a 1.2x net leverage ratio, leaving $265 million of available liquidity. Diving a bit deeper into the numbers, fourth quarter sales were $199 million, up $51 million, or 34%. Excluding the $28 million impact of higher sulfur cost pass-through in price, sales were up 15%. However, this was more than offset by higher sales of virgin sulfuric acid, including the contribution from the acquired Wagaman assets, and favorable contractual pricing for regeneration services, partially offset by higher planned fixed manufacturing costs, including incremental costs of the acquired Wagaman assets, and by unplanned and extended customer downtime. The 8% increase in adjusted EBITDA for the fourth quarter reflects the favorable volume and price impact at the sales level and favorable contractual pricing for regeneration services. While the adjusted EBITDA margin decreased 630 basis points compared to 2024, this reduction primarily reflects a significant increase in sulfur costs, which we passed through with no material impact on adjusted EBITDA. The pass-through effect accounts for approximately 500 basis points of the period-over-period decrease in margin. Turning to the adjusted EBITDA bridge, I will highlight the major components of the change in adjusted EBITDA for the quarter. As previously noted, sulfur costs in the fourth quarter were approximately $28 million compared to the year-ago quarter, with the pass-through having no material impact on adjusted EBITDA. Our price/cost impact was a positive $8 million for the fourth quarter, primarily driven by favorable contractual price in our regeneration services business. And while we had lower regeneration services volume in the quarter due to unplanned and extended customer downtime, higher volume from our virgin sulfuric acid sales, including the contribution from our Wagaman acquisition, drove the nearly $6 million volume benefit in adjusted EBITDA. Other costs increased approximately $11 million, the majority of which reflect incremental fixed cost associated with the acquired Wagaman assets, along with higher planned manufacturing costs associated with general inflation. As we move to cash and debt, for the year, we generated adjusted free cash flow of $78 million, which included both continuing and discontinued operations. We utilized our cash generation to execute on our capital allocation strategy, including the $41 million acquisition of our Wagaman sulfuric acid assets and share repurchases aggregating $47 million for the full year. We currently have approximately $183 million remaining under our share repurchase authorization. With our significantly reduced leverage, our ample liquidity, and in light of our historic cash generation capability, we believe that we have significant flexibility as we look to fund our growth initiatives, both organic and inorganic, and continue to return capital to shareholders through an active share repurchase program. Turning to our 2026 outlook, we currently anticipate full-year sales to be in the range of $860 million to $940 million, with the favorable volume and price impact at the sales level, and the pass-through of higher sulfur costs of approximately $125 million compared to 2025. As we have previously discussed, we expect higher turnaround activity at our manufacturing plants in 2026, in part due to the addition of the Wagaman assets. Given the scope and number of turnarounds planned for the year, we expect turnaround costs to be higher by approximately $8 million in 2026. With the higher expected volume, we expect higher sales volume for both virgin sulfuric acid, driven by higher projected mining demand and sales of oleum grades used in the production of nylon precursors, and higher volume for regeneration sulfuric acid, as we expect less customer downtime compared to 2025. We also anticipate continued favorable contractual pricing in regeneration services. With the favorable volume and price impact at the sales level, partially offset by higher manufacturing and transportation costs and additional turnaround costs, we expect full-year adjusted EBITDA to fall in the range of $175 million to $195 million. We are opportunistically investing growth capital in 2026, including the funding of a number of projects to debottleneck assets and accelerate organic growth. These include the ongoing expansion of tank storage and adding additional rail capacity in the Gulf Coast. As a result of these growth projects, we expect higher capital expenditures this year, approximately $20 million higher, resulting in a range of $80 million to $90 million. As a result of the higher growth capital spending, as well as an expected $10 million increase in working capital, driven by the impact of higher sulfur costs on inventory and accounts payable and the associated pass-through impact on sales and accounts receivable, we expect adjusted free cash flow to be in the range of $35 million to $55 million. In addition, with the significant reduction in our term loan, we expect interest expense to be approximately $18 million to $22 million in 2026. With our current cash balance and expected free cash flow generation, we plan to continue to execute on our capital allocation strategy, driving value for shareholders through growth opportunities and further share repurchases in 2026. As we move to the next slide, I will provide some directional guidance by quarter for next year. As you will recall, our results for 2025 reflected significant planned customer downtime, as well as a higher level of planned turnaround activity at our sites. While we have an active turnaround schedule in the first quarter, with three of our seven planned turnarounds, increasing our expected turnaround cost, we do not expect the same negative impact on sales volume from the customer downtime. For the first quarter, we expect continued favorable contractual pricing, and we expect increased volume for virgin sulfuric acid, driven by high alkylate demand and regeneration activity during the summer driving season. As has been our usual practice, our presentation slides include some commentary around turnaround cadence by quarter for the year. The cost for individual turnarounds can vary by site and scope, and the timing is subject to change. We expect first quarter adjusted EBITDA to be up $8 million to $13 million compared to 2025. We expect the second and third quarters to be peak quarters for adjusted EBITDA consistent with historical experience. I will now turn the call back to Kurt for some closing remarks. Kurt J. Bitting: Thank you, Mike. We are extremely pleased with our progress in 2025, and I want to thank my Ecovyst Inc. colleagues for their efforts in supporting our customers, delivering on our commercial objectives, and for their contributions as we continue to implement our strategic plan. In a challenging demand environment, our business demonstrated resilience in 2025. Sales of virgin sulfuric acid increased, in part driven by the acquisition of our Wagaman sulfuric acid assets. As the integration of the Wagaman site continues, we are benefiting from the positive network effect Wagaman’s assets have on the reach and capability of our supply chain. In terms of demand driven by high refinery utilization, the favorable business fundamentals of our regeneration services business remain unchanged. Although our regeneration services business was adversely affected by a significant number of unplanned and extended customer outages in 2025, in 2026, we are expecting growth for both our virgin sulfuric acid sales and the value represented by alkylate economics for our regeneration services business. With stable pricing expected for virgin sulfuric acid and continued positive contractual pricing for regeneration services, we look beyond 2026 and believe the demand outlook remains positive for all of our businesses. The divestiture of the Advanced Materials and Catalysts business at year end represents a transformative event in our ongoing portfolio optimization. As we move forward, driving growth for the eco services platform, we will do so with a more stable and predictable business profile, a significantly strengthened balance sheet, and with a cash generation capability and liquidity position that we anticipate will provide for significant capital allocation flexibility. This year, we are increasing our capital budget to support targeted organic growth projects that we expect to strengthen our service offering for mining clients. Key initiatives include expanding Gulf Coast storage and optimizing logistics, which will strengthen our service offering. These projects are scheduled for completion in 2027. In 2025, we repurchased approximately $50 million in common stock, and during 2026, we plan to continue this strategy with additional repurchases totaling between $25 million and $40 million. We plan to take a disciplined approach towards inorganic growth, prioritizing accretive acquisitions that extend our reach to customers and end segments. Concurrently, we remain committed to returning capital to stockholders through an active share repurchase program. In summary, our focus this year will remain on driving profitable growth, positioning Ecovyst Inc. for future opportunities, and optimizing value for the benefit of our stockholders. At this time, I will ask the operator to open the line for questions. Operator: Thank you, Mr. Bitting. Ladies and gentlemen, at this time, if you do have a question, please press. We will go first today to John Patrick McNulty of BMO Capital Markets. John Patrick McNulty: Yes, good morning. Thanks for taking my question and congratulations on a solid year. Just wanted to dig into the Wagaman opportunities a little bit more. So you have had the asset for a bit of time, you have made some investments in it. I guess, can you help us to think about how much capacity that has freed up for you and as a result, how much growth you could necessarily get without having to put in much capacity or incremental capacity? Because it sounds like you are even further trying to unlock some flexibility with the storage increase and the rail increase. So I guess, can you help us to contextualize all this? Kurt J. Bitting: Sure. Thanks, John. So the Wagaman sulfuric acid assets that we added last year, of course, added roughly around 10% of volume to the overall network. It came along with its own customer book and sales, which we are obviously servicing. We are really seeing the positive network effect. It is a force multiplier with our Gulf Coast network where all the sites now can back each other up in terms of turnarounds and so forth, and enable themselves to take advantage of additional opportunities that they may have had to pass on if they were on their own. It fills the cracks in terms of the supply network and allows us to take advantage of more opportunities. It also is our only site that has a deepwater vessel dock. We actually did export a ship of sulfuric acid there. It adds a lot of capability to our overall site. As we move forward, the way we look at our Gulf Coast network and the investments that we are making, we clearly want to focus the Houston production more to the West. We are making additional investments that we talked about on our logistics and storage capabilities, which are going to be Houston-based to service more of the Gulf Coast assets with that plant, and the Wagaman assets and the production that that brings allows capacity into our Gulf Coast system, enables us to further service that and take advantage of the rising tide on the mining demand. Does that make sense? John Patrick McNulty: Yes, completely. That definitely helps. And then, I guess, on the regen contract pricing, can you help us to quantify that a little bit? It sounds like you were getting some benefits in 2025. It sounds like that is a continual kind of repricing, but how should we think about the lift in 2026? Michael P. Feehan: Yes, John, thanks for the question. Yes, it is going to be a similar lift. I think, as we have talked in the past, every year the contractual agreements that we have start to roll off. It is usually between 15% to 20% a year; it just depends on the size of the customers and how they shape up. With basic costs going up, with the inflation and how the contracts are structured, with indexing and other factors, it does provide a benefit. So it is a continued benefit similar to what we saw this year. That is going to extend into next year, and again, it just depends on timing of when some of those customer contracts come up and when they are put in place. John Patrick McNulty: Thanks very much for the color. Just regarding the weakness that you are citing in industrial applications—nylon, obviously, we have seen some pretty promising indicators with U.S. PMI inflecting, maybe nylon bottoming out—but are there any specific applications that you want to call out or factors that you would highlight, which is giving you some caution here? Kurt J. Bitting: Patrick, thank you for the question. Our basket of what we call industrial uses spans a very wide spectrum. As you know, sulfuric acid is the most widely used chemical in the world, and there is anything from core alkali production to nylon to other petrochemicals. There are a lot of different things and a lot of different drivers there. We just see some caution in some of those areas. I do not think it is over-caution or a real worry. We service such a wide and diverse basket of folks there that could be impacted by any of the global things going on between tariffs or some of the downturns in some of the chemical end markets. For us, our biggest one is, as you referred to, nylon. As we have clearly pointed out, we expect to be roughly on par with where we were in 2025, so we do not really project any degradation there. Operator: Thank you. We will go next now to Patrick David Cunningham of Citi. Patrick David Cunningham: Hi, good morning. On a go-forward basis, as you think about CapEx or acquisition multiples, how do the economics of greenfield versus debottlenecking compare to current existing virgin facilities? It seems like there is a lot you may want to do or need to do to meet long-term mining demand. Kurt J. Bitting: Yes. That is a great question. I think with the way we have treated our sites over the past, I would say, 10 or 15 years, the demand from the mining sector has risen, and we are going to continue to do that—debottlenecking in our sites from both the production standpoint as well as the logistics standpoint. As that rising tide happens with mining, we are able to stay ahead of it by making the logistics and storage investments that we just talked about. We have got some additional debottlenecking that we can do. We can leverage more of Wagaman’s production into our Gulf Coast system, and we are going to continue that pattern, enabling us to stay ahead of the demand and further service that. Operator: Thank you. We will go next now to Aleksey V. Yefremov of KeyBanc Capital Markets. Aleksey V. Yefremov: Thanks. Good morning, everyone. I just wanted to follow up on the same subject. The expansion that you are undertaking in 2026, is it tied to any specific ramp at your customers in mining or elsewhere that you anticipate? In other words, do you have contracts or some sort of indication from your customers that they will need additional volumes for sulfuric acid, specifically as it relates to copper? Kurt J. Bitting: We have long-term relationships with those customers, and we are confident that the demand will be there. It is a mixed bag of what is driving that additional demand—there are actually some new projects that have come online, and there is also additional demand from existing mines. We have been servicing a lot of these mines. So we feel it is appropriate for us to add this additional capacity. We have the logistics capacity to meet that growing demand long term, coming from our plants in the Gulf Coast. Aleksey V. Yefremov: And as a follow-up, how would you characterize the current state of the merchant acid market either right now or if you have a view on 2026—is the market sort of long, tight, or about balanced from a supply-demand perspective? Kurt J. Bitting: Thanks for the question. I would say it is in a balanced position. In our call, we talked about pricing being stable. I would say it is leaning towards a balanced market, however, there are certain segments of the market that are all over the board in terms of the different end-use applications. Some of those are up, some of those may be down. On the whole, our view at this point is a push in general. Other sectors that use sulfuric, like mining, are obviously rising. The long-term trend, certainly as you look at things like mining, is growing demand there. Operator: We will go next now to David L. Begleiter with Deutsche Bank. David L. Begleiter: Thank you. Good morning. Kurt, on your full-year guidance, the low end looks maybe a little conservative. What would you need to see to get the low end of the range? And conversely, what type of drivers would you expect to see to get to the high end or above that range for the year? Kurt J. Bitting: Thank you for the question. Starting at the high end of the range, if there is a lift in things like virgin acid pricing that comes about because of demand growing and it putting upward pressure on pricing in the virgin sulfuric acid market, that would help. Our outlook on regeneration, as we talked about, is expected to run at pretty high utilization. We expect a pretty healthy year in terms of regeneration. I do not think there is going to be tremendous movement on that because that is a stable, contracted business, and we do not expect spot volumes that become available. On the low end, it would largely be driven by things like unplanned customer outages similar to what we had last year, or potentially a macroeconomic event that causes a deterioration in either pricing or volumes on virgin sulfuric acid. Conversely, if there is some positivity and pricing, or spot, we could trend toward the upper end. David L. Begleiter: Very clear. And, Kurt, now with the balance sheet restored to strength, how do you see Ecovyst Inc. in three to five years? What do you want to be? Where do you want to go? From an inorganic standpoint, in terms of M&A, what could be additive to the portfolio that you are looking at today or maybe down the road? Kurt J. Bitting: Thanks for the question. The Board and the management team are carefully looking at our capital priorities as we focus on maximizing the value for our shareholders over the long run. Number one, we see opportunities in front of us in mining and other spaces. That is going to entail us investing in organic growth as we see the demand for sulfuric acid and the sulfur molecule grow. We want to make investments there and continue to be a leading supplier in that space, so we can further service our existing customers or existing industries that we service in a better way. Number two, growth through sensible and accretive acquisitions—accretive bolt-on acquisitions that make sense that are either adjacent to us from a chemistry standpoint or a service standpoint—to become bigger. And finally, as we have talked about with our flexible capital allocation strategy, we still see value in share repurchases as well as a tool. It is a flexible strategy that allows us to push in all three of those directions, which we think can help us drive better value for shareholders over the long run. Operator: Thank you. We will go next now to Hamed Khorsand at BWS Financial. Hamed Khorsand: Hi. Sorry if I missed this, but are you done with the investments you need to make at Wagaman? And in the near future, as you further integrate it, are you able to deliver the sulfuric acid to mining that might be a little bit higher in demand, or are your contracts pretty much fixed on volume? Kurt J. Bitting: Thank you for the question. Good to talk to you, Hamed. The integration is going well. We talked about it—It has had a positive network effect on our ability to supply our customers in the Gulf Coast. We have owned the site now for about nine months. The site is going to have a maintenance outage this quarter. There are still some additional investments that we want to make in the near future as we further integrate it and try to raise the operating rate on the location. From an operating and integration standpoint, there will be some investments made, and we expect that there will be further investments necessary if the nylon or industrial end markets are as weak as you are expecting. As we have talked about before, and I know people have followed the company, most of our virgin sulfuric acid business is not 100% supply contracts. We have very close relationships with our customers. They provide us great and accurate forecasts into what they are going to do, not only in mining but in some of the other sectors in terms of industrial. That helps us plan as we look at our year and say where we are going to place our volume. If there is a downturn or something unexpected, we do have the ability to place some additional product into different end-use segments and move things around—probably not all of it, but some portion thereof—whether it is into mining or other industrial segments that may be in the Gulf Coast. We have some flexibility to move around net volumes. Operator: We will go next now to Laurence Alexander of Jefferies. Laurence Alexander: Good morning. Just can you give a higher-level view on your M&A opportunity set? When you look at the landscape in terms of other assets producing sulfuric acid, is there any titration in terms of the quality of the assets? Can you separate out the market in terms of the addressable versus the assets that you would just not like—is it 30% to 40% of the market that you would have no interest in? Or is it potentially all of interest? Kurt J. Bitting: Thanks for the question. We would generally be interested in all those types of assets because we would have use for both since we are a leader in both spaces. We are pretty broad in terms of our sulfuric acid and the end uses we service. We service a wide swath of the market. We are not just a regeneration sulfuric acid producer or just a virgin sulfuric acid producer like some of the others out there. I would also say that extends to other exposure in terms of making sulfur derivatives for water treatment or various things where the sulfur molecule is important, as well as services where, obviously, the regeneration services, our hazardous waste services business, our Chem32 businesses all serve very high-value service businesses. Expanding further into those spaces would also be of interest. Laurence Alexander: Thank you. Operator: Ladies and gentlemen, just a quick reminder: any further questions today, please press. And, gentlemen, it appears we have no further questions in queue at this time.
Operator: Good morning, and welcome to Public Service Enterprise Group Incorporated's Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. Ladies and gentlemen, thank you for standing by. My name is Rob, and I will be your operator today. At this time, all participants will be in listen-only mode. Later, we will conduct a question-and-answer session for members of the financial community. At that time, if you have a question, you will need to press star then the number one on your telephone keypad. To withdraw your question, press star then the number two. If anyone should require operator assistance during the conference, please press star then zero. As a reminder, today's conference is being recorded today, February 26, 2026, and will be available for replay as an audio webcast on Public Service Enterprise Group Incorporated’s Investor Relations website at investors.pseg.com. I would now like to turn the call over to Carlotta Chan. Please go ahead. Carlotta Chan: Good morning, and welcome to Public Service Enterprise Group Incorporated's Fourth Quarter and Full Year 2025 Earnings Presentation. On today's call are Ralph LaRossa, Chair, President and CEO, and Daniel J. Cregg, Executive Vice President and CFO. During today's call, we will discuss non-GAAP operating earnings, which differ from net income as reported in accordance with generally accepted accounting principles (GAAP) in the United States. We include reconciliations of our non-GAAP financial measures and a disclaimer regarding forward-looking statements on our IR website and in today's materials. Public Service Enterprise Group Incorporated's earnings release, attachments, and slides for today's discussion are posted on our IR website at investors.pseg.com. We will also discuss forward-looking statements and estimates that are subject to various risks and uncertainties. Our 10-Ks will be filed later today. Following our prepared remarks, we will conduct a 30-minute question-and-answer session. I will now turn the call over to Ralph LaRossa. Ralph LaRossa: Thank you, Carlotta. And thank you all for joining us to review Public Service Enterprise Group Incorporated's fourth quarter and full year 2025 financial and operating results and our financial outlook for the year ahead, and our long-term projections through 2030. But before I dive in, I would like to thank our employees who, once again this past week, prepared and restored our system from yet another intense combination of winter weather and single-digit temperatures that brought over two feet of heavy snow and 60-mile-per-hour winds to our service areas in New Jersey and Long Island. I cannot say enough about our crews' dedication throughout this entire winter season working in freezing conditions to keep the lights on and our customers warm. Now, starting with our financial results, Public Service Enterprise Group Incorporated reported net income of $0.63 per share for the fourth quarter and $4.22 per share for the full year of 2025. Our non-GAAP operating earnings were $0.72 per share for the fourth quarter and $4.05 per share for the full year of 2025. Also, earlier today, we announced our dividend declaration for 2026, setting the indicative annual rate at $2.68 per share. This is a $0.16 per share increase, an increase of approximately 6% over last year's dividend and higher than last year's increase of $0.12 per share, all reinforced by our confidence in our long-term projection. Starting with operations, on 02/07/2026, we had a seasonal gas send-out peak when temperatures dipped below 10 degrees Fahrenheit, registering the fifth-highest send-out in our history. During that same cold snap, PSE&G's appliance service business responded to nearly 2,000 no-heat calls per day compared to an average of 600 calls on a typical winter day, and our electrical systems also performed well, with a comparatively small group of customers affected, and PSE&G was able to restore service to virtually all customers within 24 hours. Beyond the storms seen in 2026 to date, Public Service Enterprise Group Incorporated's full year results for 2025 were achieved while facing multiple severe storms and extreme weather events throughout the year that stressed our electric and gas systems. PSE&G's response, guided by our operational excellence model, achieved excellent results in safety, reliability, and customer satisfaction measures. I am also very proud of the work Public Service Enterprise Group Incorporated is doing in support of New Jersey's efforts to minimize utility bill increases. Last July, we implemented several summer relief initiatives in cooperation with New Jersey regulators to help our customers manage the impact of PJM-related electric supply costs that PSE&G passes through to customers. The latest example of our efforts occurred on February 1 when PSE&G held its residential gas rate flat for the remainder of the winter 2025 through 2026 heating season. Extending the stability of our gas rates further highlights PSE&G's favorable residential gas bill profile, which is not only the lowest cost in the state, but also the lowest in the region. And there is more good news to report on the customer front. Earlier this month, the New Jersey Board of Public Utilities approved the results of the latest electric supply auction known as the Basic Generation Supply Auction, or BGS, which will result in a 1.8% reduction in the average monthly bill for PSE&G residential electric customers starting June 1 when seasonal electric use is at its highest. Over the next several months, we will introduce even more ways to help our customers manage and save on their utility bills with increased budget billing education, new time-of-use rates, and more energy efficiency solutions. PSE&G also received approval to extend the three-year GSMP II program, which will continue our efforts to reduce methane emissions, a powerful greenhouse gas. We know that our cumulative progress from these programs has reduced our methane emissions by over 30% systemwide from 2018 levels. And recent winter weather has validated how effective our gas system investments have been by reducing both the number of pipe breaks and low-pressure issues compared to similar low-temperature events in the past. Our operating performance continues to be a positive differentiator in the state and the region. PSE&G received the 2025 ReliabilityOne awards for Outstanding System Resiliency, Outstanding Customer Engagement, and, for the 24th year in a row, Outstanding Reliability Performance in the Mid-Atlantic region. PSE&G ranked number one in customer satisfaction among large electric utilities in the East Region, according to the J.D. Power 2025 U.S. Electric Utility Residential Customer Satisfaction Study. PSE&G ranked number one in customer satisfaction among large electric utilities in the East Region according to the J.D. Power 2025 U.S. Electric Utility Business Customer Satisfaction Study, marking the fourth consecutive year PSE&G has earned the top position in this segment. And PSEG Long Island, yes, PSEG Long Island ranked number one in customer satisfaction among large electric utilities in the East Region, capping an eleven-year rise from the bottom of the rankings since PSEG Long Island took over the operation of the electric grid on Long Island. And by the way, PSE&G was number two in that same study. Finally, PSEG Long Island was awarded a five-year contract extension to continue as the electric transmission and distribution operator on Long Island and the Rockaways through 2030. We look forward to continuing our constructive partnership with LIPA that has enabled us to become the best performing overhead electric service provider in New York State and, like PSE&G in New Jersey, a top performer nationally for reliability and safety. 2025 was a successful year for our company, both operationally and financially. 2025 was a successful year for our company, both operationally and financially. PSE&G executed on its capital plan, investing approximately $1 billion in the fourth quarter and approximately $3.7 billion in total for the year, in regulated capital spend. On the generating side, PSEG Nuclear posted a 91.2% capacity factor for the full year, producing approximately 30.9 terawatt-hours of 24-by-7 carbon-free baseload power for the grid, including during the intense June 2025 heat wave when New Jersey needed it most. Public Service Enterprise Group Incorporated's non-GAAP operating earnings for 2025 were at the high end of our narrowed guidance range of $4.00 to $4.06 per share, extending management's track record of delivering results that either met or exceeded our earnings guidance for the 21st consecutive year. Turning to our outlook for 2026. First, we initiated a non-GAAP operating earnings guidance in the range of $4.28 to $4.40 per share, an increase at the midpoint of 7% over 2025 results. Our 2026 guidance is based on our investment program at PSE&G and expected nuclear output realizing market prices that exceed the nuclear PTC threshold. And we are approximately 95% hedged for the remainder of 2026. We will also keep to our longstanding practice of stringent cost control and continuous improvement to support affordability and benefit our customers. Regulated capital spending is forecasted in the range of $22.5 billion to $25.5 billion over the same period and supports a rate base CAGR of 6% to 7.5%, with over 90% focused on regulated investments. For the 2026 to 2030 period, $24 billion to $28 billion of regulated capital spending is forecasted, and our solid balance sheet supports execution of this robust five-year capital plan without the need to issue equity or sell assets. Second, we updated Public Service Enterprise Group Incorporated's GAAP earnings growth outlook to 6% to 8% through 2030. With these updates, we are raising Public Service Enterprise Group Incorporated's long-term non-GAAP operating earnings CAGR to 6% to 8% through 2030. This higher growth rate is supported by our best-in-class utility operations executing on a customer-focused infrastructure modernization and energy efficiency investment program. This regulated growth is supported by nuclear generation ownership, a significant cash flow generator and therefore a differentiator among our peers. Potential growth beyond our forecasted 6% to 8% CAGR range could be achieved through opportunities to contract existing and additional generating output to provide for residential universal bill credits and through incremental regulated capital investments. We look forward to constructive dialogue with the BPU on these issues, including the exploration of regulatory reform to again offset electricity supply rate increases. Now turning to the legislative front, in the past few days, a bill was reintroduced in the state legislature to establish a new natural gas power plant procurement program at the BPU and incentivize development of new natural gas power plants in the state. This gas bill pairs with an earlier bill that established a new nuclear procurement program also within the BPU that was introduced at the start of this legislative session. We look forward to working with policymakers to advance energy strategies and resources that secure affordable, reliable, and diverse energy supplies, and support legislation that would increase competition for generation supply should New Jersey decide to pursue new in-state generation. The supply-demand dynamic we are seeing in New Jersey as prompted executive orders to be issued to explore supply options. The executive orders also direct the BPU to again offset electricity supply rate increases, provide for residential universal bill credits, and through incremental regulated capital investments, including the development of an additional 3,000 megawatts of community solar and battery storage. We have been cooperatively working with policymakers since last November, and we look to help New Jersey achieve the high-priority goals of these executive orders. We have sites with grid connection capability and pipeline supplies, as well as the in-house expertise to build new supply here in New Jersey with prevailing wage labor. And as we have previously mentioned, we are well positioned to help meet that need. I will now turn the call over to Daniel, who will walk you through our 2025 financial results and the outlook for 2026. And then I will rejoin the call for Q&A. Daniel J. Cregg: Thank you, Ralph. And good morning, everyone. Public Service Enterprise Group Incorporated reported net income of $4.22 per share for the full year of 2025, compared to net income of $3.54 per share for 2024. For the fourth quarter of 2025, net income was $0.63 per share, compared to $0.57 per share in 2024, and non-GAAP operating earnings were $0.72 per share for 2025, compared to $0.84 per share in 2024. Slides eight and ten detail the contribution to non-GAAP operating earnings per share by business segment for the fourth quarter and full year of 2025. PSE&G reported non-GAAP operating earnings of $352 million for 2025 compared to $378 million in 2024. Compared to 2024, distribution margin increased by $0.07 per share, mostly reflecting incremental gas margin from the third quarter GSMP II roll-in, an increase in the number of customers, and higher gas demand. Higher investment in energy efficiency also contributed to distribution margin in the quarter. On the expense side, distribution O&M increased $0.04 per share compared to 2024, primarily due to higher reserves related to bad debt and operational costs. Weather during the fourth quarter, measured by heating degree days, was 9% colder than normal and 23% colder than 2024. As a reminder, the Conservation Incentive Program, or CIP, decouples weather and other economic sales variances from a significant portion of our distribution margin, all while helping PSE&G promote the widespread adoption of energy conservation, including energy efficiency and solar programs. Under this CIP, the number of electric and gas customers drives margin, and the residential customer growth for both segments was approximately 1% in 2025. Depreciation and interest expense rose by $0.20 per share, reflecting higher levels of depreciable plant and long-term debt at higher interest rates. Lastly, distribution-related taxes were $0.05 per share higher compared to 2024 due to plant-related taxes and lower write-offs. On the capital front, as Ralph mentioned, PSE&G invested approximately $1 billion during the fourth quarter. And for the full year 2025, our capital spending totaled approximately $3.7 billion with continued investments in infrastructure modernization, energy efficiency, and distribution reliability and resiliency investments supporting growing customer demand. For 2026, our planned capital investment program for the regulated business is approximately $4.2 billion. Our 2026 to 2030 regulated capital investment plan amounts to $22.5 to $25.5 billion, which compares to our prior plan of $21 to $24 billion, and is expected to produce a compounded annual growth in PSE&G's rate base of 6% to 7.5% through 2030, starting from a year-end 2025 balance of approximately $36 billion, which includes construction work in progress. The $1.5 billion increase in regulated investments is primarily driven by anticipated load growth due to data centers and other new customers. We also rolled forward our five-year regulated capital plan through 2030, plus other incremental investments. These investments help us maintain our best-in-class reliability and customer service, as well as meet New Jersey's energy savings goals. Earlier this month, the BPU certified the results of the annual New Jersey BGS auction that was held to secure electricity for customers that have not selected a third-party supplier. Based on the competitive auction results, the cost of electricity supply on PSE&G residential electric bills will decline by 1.8% starting June 1, 2026. This decrease reflects the net impact of a lower overall 2026 BGS price that will replace the 2023 auction result that contained higher energy costs. Moving to 2025, PSEG Power & Other reported a net loss of $37 million for the fourth quarter compared to a net loss of $92 million in 2024. Non-GAAP operating earnings were $10 million for the fourth quarter compared to non-GAAP results of $43 million for 2024. PSEG Power & Other reported net income of $366 million in 2025, compared to $225 million in 2024, and non-GAAP operating earnings were $284 million in 2025, compared to $292 million in 2024. Referring to the fourth quarter waterfall on slide nine, net energy margin was flat compared to the prior-year quarter as higher gas operations were offset by the absence of zero-emission certificates at our 100% owned Hope Creek nuclear plant and lower generation volume due to the scheduled refueling. O&M was $0.04 per share higher during the Hope Creek refueling outage as we transitioned the unit from an 18-month to a 24-month refueling cycle going forward, which will yield additional megawatt-hours as well as O&M savings over the long term. Depreciation expense was $0.01 per share favorable compared to 2024, and taxes and other were $0.01 per share favorable compared to the year-earlier quarter, driven by a contribution to the PSEG Foundation. Interest expense rose by $0.04 per share, reflecting incremental debt at higher interest rates. Non-operating expenses were $0.02 per share higher compared to 2024. On the operating side, the nuclear fleet produced approximately 7.2 terawatt-hours during the fourth quarter of 2025, compared to approximately 7.3 terawatt-hours in 2024, mostly driven by the Hope Creek refueling outage, and for the full year 2025, nuclear generation was approximately 30.9 terawatt-hours, up slightly from 30.6 terawatt-hours in 2024. Capacity factors for the nuclear fleet were 83.7% and 91.2% for the quarter and full year of 2025, respectively. Touching on some recent financing activity, as of December 2025, PSEG total available liquidity remains strong at $2.8 billion, including approximately $130 million of cash on hand. On the financing front, in December, PSEG Power amended its existing $400 million, 364-day variable-rate term loan, which increased the balance to $500 million and extended its maturity to December 2026. Liquidity was supported by solid cash from operations during 2025, totaling more than $3 billion and higher working capital balances. As of December, PSEG's variable-rate debt consisted of the 364-day term loan at Power for $500 million, which matures in December, and our level of variable-rate debt represents approximately 6% of our total debt. Looking ahead, our balance sheet supports the execution of Public Service Enterprise Group Incorporated's five-year capital spending plan, which is dominated by regulated CapEx, without the need to sell new equity or assets through 2030 and provides the opportunity for continued dividend growth. Funds from operation to debt is projected to be in the mid-teens through 2030, comfortably above our minimum threshold. Now, before I conclude my remarks, let's review earnings drivers for 2026 as outlined on slide five. First, we are starting with a higher rate base of approximately $36 billion at year-end 2025, and that is up about 7% over year-end 2024. In addition, clause-based recoveries for investments in distribution infrastructure and CEF Energy Efficiency II are expected to contribute to utility margin. On the distribution side of the business, electric base rates for 2026 are projected to be stable. As we discussed on the third quarter call, PSE&G's annual FERC transmission formula filing was implemented on January 1, with an $82 million increase in annual transmission revenue subject to true-up. Like last year, we do not expect to book earned revenue on January 1, with an $82 million increase in annual transmission revenue subject to true-up. At PSEG Power & Other, the zero-emission certificate amounts earned by our New Jersey nuclear units concluded in May. And just as a reminder, expected generation output for 2026 is approximately 95% hedged. Our nuclear refueling cycle for 2026 includes a spring refueling at Salem Unit 2 and fall refuelings at Salem Unit 1 and Peach Bottom Unit 2. Hope Creek is scheduled for its next refueling in 2027 following the completion of fuel cycle extension work in 2025 and a shift to a 24-month refueling outage schedule. As we continue to stringently manage our controllable costs, we will see interest and depreciation expense that will rise with a higher investment balance at PSE&G and higher interest expense at PSEG Power and Parent related to refinancing maturities at higher current interest rates. In closing, we are proud to have delivered, for the 21st year in a row, on meeting or exceeding our earnings guidance, and we carry that confidence forward to our full year 2026 non-GAAP operating earnings guidance of $4.28 to $4.40 per share, 7% higher at the midpoint over 2025 results. We increased our dividend by over 6% and updated our long-term non-GAAP operating earnings CAGR to 6% to 8% using a higher baseline for the second year in a row. Earnings growth beyond our forecast is achievable through opportunities to contract our existing output and planned uprates, as well as from incremental regulated capital investment. That concludes our formal remarks. And we are ready to begin the question-and-answer session. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. If your question has been answered and you wish to withdraw your polling request, you may do so by pressing star then the number two. If you are on a speakerphone, please pick up your handset before entering your request. One moment, please, for the first question. The first question is from the line of Shahriar Pourreza with Wells Fargo. Shahriar Pourreza: Hey. Good morning. Hey, guys. Good morning. Good morning, Ralph. How are you doing? Ralph LaRossa: We are good. How are you? Shahriar Pourreza: Not too bad. Not too bad. Busy. Busy. Can you just maybe talk about the timing of the bill, so next steps, will there be, like, an IRP process? Could there be, like, a PPA where you earn a return on the PPA, assuming a generator wins the RFP? And how do we, like, work through things like air permits and turbine queue backlogs? I guess, how do you think about this whole process around this for some time around new gas? Ralph LaRossa: Yeah. Boy, there is a lot there. But you also answered your own question a little bit. That is your answer, Shar. Because, you know, much of it is in play, right? As you said. And many of those variables that you laid out are the exact variables that policymakers need to come to grips with. Right? So there are a couple of bills that are floating down in Trenton right now that will help enable new nuclear and potentially new gas. I think the governor already has the ability to move on a lot of solar and potentially battery storage. So the way we have been thinking about it is trying to help policymakers think through and then enable the opportunities for gas or for new nuclear. And that is really what we have been trying to do is help them think through that at this point. It does not drive the output. The IRP will make recommendations as policymakers will, in quite a few different settings, and they will be the ones that really own that as they go forward. But I think that process, again, just informs the output. We could help out with an IRP for New Jersey. We could help out with an IRP for PSEG. We do all the time on Long Island. But they are not going to be the decisions. They do not carry the word of law. Right? Shahriar Pourreza: Got it. And then just lastly, can you just maybe help us quantify, like, what level of hedges and upside versus the PTC you are kind of embedding in that 6% to 8%? Is the bottom end of that CAGR kind of anchored in PTC out years? Daniel J. Cregg: And so I think you are looking more at a market view to try to get you to what that out year looks like. I think that market view is supported by some of the fundamentals that you are seeing out there. And if and as that moves over time, which we would expect that it would, we will take that into account as we are making our comments and updating what is going on. But I think that is the way to think about it. Shahriar Pourreza: Got it. That is perfect. Thank you, guys, so much. Much appreciated. Daniel J. Cregg: Thanks, Shar. Operator: Our next question is from the line of Nick Campanella with Barclays. Nicholas Campanella: Good morning, everyone. Thanks for the updates. Ralph LaRossa: Good morning, Nick. Daniel J. Cregg: Thank you. Nicholas Campanella: You know, when you had a five to seven, you kind of talked about it being nonlinear. And now you have the six to eight, which is great to see. And I just recognize you have things like refueling outages and timing of rate case outcome at some point in this plan. So just maybe you can talk to whether this CAGR is linear or not? And you may fall within the CAGR 27, 28, and just the kind of critical drivers that people should be paying attention to here? Thank you. Daniel J. Cregg: Yeah. So, Nick, I think, you know, we have talked about for the last three years about being more predictable. And, yes, our goal remains to be as linear as possible. But we work really hard to do that. Right? There will be structural changes that happen where we have to modify, and right now, I think the structural change has been the supply-demand curve, and we have seen that. And it has taken us above the PTC floor. So we adjusted. Our goal remains the same, which is to be a predictable, delivering the results that we said we were going to deliver. And I think we have been able to achieve that by investment. So with that is our effort to be as linear as possible. That does not mean we will be 100% linear. But I think our, you know, effort is to continue to be as predictable as we can be. And we feel confident in the plan that we put forth today. Nicholas Campanella: Thank you. And I recognize that you forecasted the base off a higher midpoint of 26 as well. So, thank you for that. Maybe just, you also can talk about, you know, nuclear contracting. You talked about nuclear contracting to kind of put you above that range. Just maybe what is the latest thoughts on that at this point? I know the prior state administration was very focused on bringing data centers to the state. How is that kind of looking over this new administration? And just maybe anything you can offer, the most near-term things that you ought to be able to think about as this administration comes in and settles in on their views on this, and what your conversations have kind of been with customers on that? Thank you. Daniel J. Cregg: Yeah, Nick. And I think that the story is fairly consistent. I think that, obviously, the facilities that we do have in Pennsylvania, where I think there has been a more firm view over time and more stability with respect to who has been in the governor's office there, as well as some of the smaller opportunities that we have more locally within New Jersey. And we have talked about a lot of the applications that the utility has seen. And so there is, I think, less opportunity for something of a sizable scale in New Jersey just from the standpoint of where the administration has been. To the extent that that changes and the receptivity is increased there, there could be incremental opportunity. But I think for the time being, the more fertile ground right now would be Pennsylvania for something larger and some of the smaller New Jersey locations, and I think those discussions have progressed well. Ralph LaRossa: Yeah. And I would just add, Nick, just from a normal rhythm of transition for administration like this, in the way it works in New Jersey, there is a real focus now. First of all, let us staff up, and I think the governor has done a great job of getting a number of people in place not just in our industry, but in other areas that matter to the state run well. And I think the second thing they need to do is really focus on the budget for New Jersey. And so that is where my understanding from conversations we have had is the focus of the governor right now. When she gets through that process, I think economic development will be right behind that as an area of focus, and we are already having conversations on that. I chair, Choose New Jersey, about the role we will play in the organization and the areas of focus, but that has not been finalized yet. Nicholas Campanella: Understand that this RBA process is going on right now. And there are discussions around extending the RPM collar for another two years and extending, you know, a, a week or two ago, a $4.20 per megawatt-day number was kind of thrown out there. Just what are your kind of thoughts on that? Okay. And then if I could just throw in one follow-up on through 2030, and then what is kind of embedded at the current cap rate in the plan? Daniel J. Cregg: Look. I think embedded within your question, Nick, is the fact that you have got a market out there where you can see what things are looking like, but it will remain somewhat dynamic as you step through time. And that is the best information that we have as well. And so what we are doing is trying to look at what that looks like. I think we feel good about where we are and how it all fits together within the plan. But I think it is those same market signals that we see that you are seeing out there. I mean, a reminder, I would highlight the fact that the location of our facilities is in the PECO zone. So if you are thinking about pricing and trying to do math to figure out what this means in the out years, that zone is most highly correlated to the actual generator buses where we run. So West Hub trades north of that. We said it trades about 20% above what we would be seeing from where our generator bus is. And so it is those market points that we look at to try to derive where we are headed within the plan and what we put forth to you. And we think we are in a really good place against that backdrop, but that is what we look at as we go forward. Nicholas Campanella: Okay. I appreciate the thought. Thank you. Operator: Our next question is from the line of William Appicelli with UBS. Ralph LaRossa: Morning, Bill. Daniel J. Cregg: Rob, maybe you want to go to another one and see if Bill rejoins? Operator: Sure. The next question would be from the line of Julien Patrick Dumoulin-Smith with Jefferies. Julien Patrick Dumoulin-Smith: Hey, Julian. Hi, Julian. Hey. Good morning to you guys. Thanks for the time. I appreciate it. Look. Let me follow, and by the way, nicely done on the CAGR increase. Got to hand it to you guys. If I could, on the gist of what Shar and Nick were asking us about here. Let us talk about the overlap between the BPU here and what next steps are from both and how they might overlap. Right? Because clearly, there is a certain degree of legislative process of mutual alignment between the two in theory. Can you comment a little bit on timeline? I know Shar was kind of pressing at that as well here. Ralph LaRossa: Yeah. Look. I think you are going to have a little bit of give and take that will continue as people find their footing in this new legislative area and how the regulator is going to work. The administration is finding their footing, but the administration recently introduced these two bills that would kind of direct the BPU to do certain things. The BPU has the ability to do certain things today. You know, go out and procure gas, to go out and procure new nuclear. Right? We had the exact process in the past. But they are limited in what they can do. So they could use a little more direction to make the process a little cleaner for them by some legislative changes. So I think I cannot tell you it is going to happen in the next 30 days, and I cannot tell you it is going to happen in the next six months. And it all comes out of the back end of the last 12 months of discussions about the need for us to change that balance somehow. The scarcity is there, and we have got load increases that have taken place across PJM, even if we do not have a data center in New Jersey, and we do have higher electricity costs from a supply standpoint. The load increases are happening right across the river, and it is impacting the pricing here in New Jersey. So I think the BPU has recognized that they do not want to be in the same level of import that they are. I mean, policymakers feel the same way, and they want a little more control over the pricing of the product that ultimately residents of New Jersey hold us all accountable for. Julien Patrick Dumoulin-Smith: Got it. And if I can zero in a little bit, guys, on the 2026 guide here, and thanks again for your help earlier, how do you think about what the breakdown is between the regulated utility side of that year-over-year increase versus what is reflected in power? And then even within power, can you comment a little bit about where you guys are hedged? I know you said you are 95% for this year. Just comment a little bit about where you are relative to that floor, if you will. Want to make sure we are all on the same page here. Just as that starting point. Daniel J. Cregg: Yeah. I mean, obviously, we are north of it because that is how we described it and how we put it out there. I think to go much beyond that, we would start to break down the pieces beyond what our overall guidance is. And so I think, just maybe repeating a little bit what I said before, Julian, if you think about what the market signals are that are out there, that is what we are leaning on. I would say that 2026, we gave you a 95% hedge. 2027, I think it is fair to say that we are largely hedged for that year. And in 2028, I think if you think about a ratable approach over three years that we have talked about, we have leveraged that liquidity to be able to hedge up a fair bit of 2027–2028, but 2029 and 2030 remain more subject to market forces as we go forward. Well, let me try this differently. How do you think about earned returns in the current year here for the utility and or what is implied year over year in growth on an EPS basis? Yeah. Look, Julian, I think we have been pretty clear about the fact that where the structural changes will make changes. And when the changes are not structural, we will look at what opportunity sets we have for maintenance activities that might be in a four-year cycle and try to look at that from a predictability standpoint for the investment community. So we look at our plans every year. We adjust to that. And, again, I just want to reinforce that we are really happy with the pattern that we have talked about from an earnings standpoint. We were really happy with the top end of the five to seven we have been running for the last couple of years, but we thought the scarcity issue of power was enough to change our thought process to be in that six to eight, based upon where prices are, driven by both the capacity and the energy side. Julien Patrick Dumoulin-Smith: Excellent, guys. Thank you much. Operator: The next question is from the line of William Appicelli with UBS. William Appicelli: Yes. Hi, Ralph. Dan. Thank you. Apologies for that technical problem. Just maybe building on some of these other incremental regulated capital investments, and forgive me if you already addressed it and I missed it. But I guess, where in the spectrum would those fall? And what types of projects are we talking about there? Ralph LaRossa: I think they come in really two buckets. Right? There is incremental transmission that is in the PJM region. We have been active in that process, and we are successful, as we have talked about a bunch of times, in Maryland. And we continue to look at those opportunities when they present themselves. There is a very specific effort going on in the state of New Jersey right now about being ready for solar. And the need for us to make sure that our distribution system is ready, that has been an ongoing process to continue to make sure that this focus on solar and batteries at the Board of Public Utilities, and there were comments received on that in the last couple weeks down there, if I recall correctly, can be enabled by the distribution system that they are going to be interconnecting to. And then the third bucket is the opportunity for us to participate on the generation side again, depending upon where policymakers land on that front. So I would say all three of those are the areas that we talk about around the table on a regular basis. Daniel J. Cregg: And then on top of that, Bill, I would just add that, embedded within kind of the base plan that we have in front of us, things that Ralph mentioned could add to that. I would still characterize what we put out as the updated capital forecast as there is nothing in there that is a single project that is a huge part of the capital. It is all stuff that sits in front of us and is shorter term in nature, and we can kind of knock out without a whole lot of red tape that we have got to get through or challenges we have got to get through. It is just kind of a basic set of capital that we know we can achieve. Ralph LaRossa: No. It is a really good point that Dan is saying. I mean, everything I just said is above and beyond. We are not building in a percentage of any one of those buckets as we put out this capital forecast. These are small projects that are really, 90% of them are being based upon end of life on the regulated side. So, you know, I have kind of been telling my family anyway, if you think about what we do every day in replacing the infrastructure, it is just like the Portal Bridge. For those of you that are in the New Jersey region and see New Jersey Transit delays right now as they upgrade that, the infrastructure in New Jersey is old and we have an opportunity to make upgrades as a result of that. William Appicelli: Alright. No. That is very helpful. And then just one other one on the O&M side. I guess, what is embedded, you know, in the plan in the six to eight? On that front? Just to do at the utility level. Daniel J. Cregg: Yeah. As we build our plan, and Ralph has often described it this way, we take a look at what is in front of us and whatever kind of an inflationary assumption we have there, and then we look to the businesses to try to pull back on that to end up in a more reasonable place from a cost-cutting perspective and overall cost management perspective. So, if you have got a 3% inflationary assumption, you can pull that down to 2% to 2.25%. Everybody is looking for opportunities within those budgets to try to move to a better place. So that is kind of how we structure it and how we move forward on it. We know that we do have our labor agreements that are running out through 2027, and those will get re-upped and have an effect as well. But we kind of lay out a baseline plan and then pull back some efficiencies to get to where our final plan lands. Ralph LaRossa: Bill, it is relatively flat with some inflation, and then we back it off, as Dan said. I know some people think we talk about, you know, finding pennies in the couches, which I actually like. My wife and I still have a little bucket that we put our pennies in. So it is not the worst thing in the world to go looking for them because they all add up at some point. William Appicelli: Okay. But some assumption on the re-upping of those labor agreements is reflected in this plan? Daniel J. Cregg: Oh, yeah. That is all in there. There are no expectations of major dislocation there. William Appicelli: Okay. Alright. Thanks very much. Operator: The next question is from the line of Michael P. Sullivan with Wolfe Research. Proceed with your question. Michael P. Sullivan: Good morning, Michael. Hey, Ralph. I think for a while now, you all have had in your slide deck over the forecast period 90% regulated earnings. Is that still true under this updated plan? Or any sense you can give us of what the mix is over the forecast period? Daniel J. Cregg: No. I mean, what I would tell you, Michael, is I hope that number goes down a lot because that means power prices are going to go up. We are going to do better. I would think about the utility side of the business continuing to do what it does, and to the extent that we see some movement up from a power price perspective, given the demand-supply dynamic that you are seeing, you might see a modest shift there. And again, kind of the tongue-in-cheek way of saying it is I hope it goes down a lot because that means that we are doing better on the other side of the business. But I would not think about any major shifts compared to what we have seen in the past. It is going to be more modest as we step through time. Ralph LaRossa: Okay. Michael, I may even go a little bolder than that. We have said this also for a long time in our decks. The PTC floor is a regulated-type return. And so when we think about it from that perspective, you could argue that the merchant is only above the PTC floor. Right? Because the federal government has regulated that PTC floor as the return for the nuclear plants. So I know it is not traditional regulated, but when we think about it from a risk profile standpoint, it sure feels a lot like that. Michael P. Sullivan: Okay. No. That is totally fair. But it just sounds like you are not going to tell us what your merchant assumption is above, out in time. Daniel J. Cregg: Well, we are going to tell you what our earnings projections are, and we are going to meet them as we have done. Michael P. Sullivan: Okay. And then on the utility side, I just think, historically, the rate base kind of rebase of the CAGR has been a bit higher than we saw this past year. And anything to make of that? Or what is kind of driving that? Daniel J. Cregg: Oh, from the standpoint of the baseline? Look. I would think about that rate base as growing the 6% to 7.5% that we have put out for the past couple of years. And I think that that is still consistent. I would say, to our credit, that has been on a growing base that for some years has been above that. And so continuing to grow 6% to 7.5% has been a consistent CAGR growth. To the extent that what you are implying is correctly that that rate base has grown more than that the last few years, we have continued to grow 6% to 7.5% off of that higher base, which implies a little bit higher growth. Michael P. Sullivan: Okay. Great. Thank you. Operator: The next question is from the line of Anthony Crowdell with Mizuho Securities. Please proceed with your questions. Anthony Crowdell: Hey. Good morning, team. Hey, Ralph. You went to double game last night. I hear the opening ceremonies are really exciting. Was he the fan applauding in the beginning? I know there was some booing going on of some of the elected officials. That is awesome. Hey. I just have a cleanup question. I believe the BPU is in a 180-day pause right now coming from the governor's executive order. I believe it is a 180-day pause of no increase in rates. Just curious if that includes outcomes of any of the rate riders. And then also, if you could talk about what happens at the end of the 180-day pause, maybe some of the things changed by the prior administration. Ralph LaRossa: Our esteemed CFO did. We did not make it down there last night, but our esteemed CFO did. Daniel J. Cregg: It was fantastic. Anthony, all I heard was USA chants, and they were deafening. It was fantastic. No. So, the pause that they put in place was on regulations that were passed in the months leading up to the election. And so they paused them. I do not know if it is 180 days or 90 days, but they basically said, hey, listen. If we were going to change the speed limit on the Turnpike and that was a change that was put in place by the prior administration, it will not go into effect for another 90 or 180 days. And so there were a few things there that were on the fringes to our business, but nothing after we did the review that would impact our business. And I mean that from a labor-wage standpoint, from a benefit standpoint, from any of the above. So no impact on that as a change, but those regulations were regulations that were changed by the prior administration in the months leading up to the election. Anthony Crowdell: No. That is fine. I know you are looking for pennies in the couch, but do you know when the 90-day ends? Daniel J. Cregg: Yeah. No. It is 90 days after she took office. So I want to say it is April, May. I think she took office on January 12 if my memory is right. Anthony Crowdell: Perfect. Thanks so much. Daniel J. Cregg: Thanks, Anthony. Operator: Our next question is from the line of Jeremy Tonet with JPMorgan. Jeremy Tonet: Hi. Good morning. Daniel J. Cregg: Good morning, Jeremy. Jeremy Tonet: Alright. Thanks for all the color today. Just one last question for me. As we think about future generation in the state of New Jersey, you have talked about the ability to host SMRs in the past. I am just wondering any updated thoughts you might be able to provide on how likely that is to, I guess, come to fruition or just thoughts on the topic in general. Ralph LaRossa: Yeah. I would put our—look, if we were advocating, we are advocating on a nuclear front for big nuclear. We think that that makes the most sense based upon our property and our footprint. But there could be other places where it makes sense for people to put small SMRs and to try that technology out. I think also from a gas facility standpoint, we have said that we have a site that makes a ton of sense where we have pipes and wires ready to it as well. So, yeah, SMRs, from our standpoint, would not be the highest and best use of our property. Remember, our early site permit is technology agnostic. So we could go in any direction on that. But we would be open to people if that was really what folks wanted us to enable. Jeremy Tonet: Got it. That is helpful. I will leave it there. Thanks. Operator: Our next question is from the line of Nicholas Amicucci with Evercore ISI. Nicholas Amicucci: Hey, good morning, Ralph and Dan. How are you? Ralph LaRossa: Good morning, Nick. Daniel J. Cregg: I would hold on to those pennies because there is probably some scarcity value associated with that. Ralph LaRossa: Exactly. Exactly. They add up. Nicholas Amicucci: Yeah. So actually wanted to kind of continue down the nuclear rabbit hole here if we could for a little bit. Just as we think about, you know, kind of the nuclear fuel and how you guys are hedged out through, you know, over the course of the capital plan. Just knowing that, you know, Russia is kind of going offline in 2028. How are you guys kind of—are you guys kind of front-loading or kind of prebuying any type of nuclear fuel just to ensure that, you know, affordability kind of does not go too haywire? Daniel J. Cregg: Yeah. Look. When I start thinking about nuclear fuel, the first thing I think about is the fuel in the reactor because that is most of what we are going to be using for the next couple of years. Then I look to where we have contracted, and we are contracted out for the next few years for most of what we are going to need. I also think about what is going to be purchased from places where we are going to purchase from. And if I think about movements with respect to supply-demand pricing, you could see some modest movements in prices, but I do not think anything that is going to be all that dramatic. Prices that sit somewhere around $50 and fuel that sits somewhere around $78 on the overall scheme of things. The availability is a critical aspect for us, and I have no question that the fuel that is being produced is the fuel that is going to be produced. And if Russian fuel does not come here, Russian fuel will go somewhere, and that will displace fuel, and we are going to continue to see availability. It is only when you get to the tail end of that five-year period when things are going to change. And, not to get too deep into world markets, but I think conceptually, we are hedged out for the next couple of years in pretty good shape, and you could see some modest movement in prices. Nicholas Amicucci: Got it. Great. And then if I could as well, I know, Ralph, you have been kind of a big proponent on more large nuclear relative to SMRs. But I think if I understand correctly, Governor Sherrill is more—she is, just given her naval background, more in tune with SMRs. But is there anything, any kind of, I guess, appetite from her just given that, you know, we did have, a couple months ago, the DOE type of procurement of the 10 AP1000s. I mean, is there any opportunity for you guys to partake in those allocations, the Brookfield Westinghouse selection? Ralph LaRossa: Yeah. Look. I think we have said we will continue to educate and advocate on behalf of the state probably to a nauseam now. And so we will be there advocating that we want to help enable exactly that. I do not want to predetermine a selection for something like an AP1000. I think that is one that it appears that DOE is firmed up on, but I also hear that all the i’s are being dotted and t’s crossed. So we will be there advocating as far as we are going right now. And I think the education that is ongoing for the incoming administration is something that we are also trying to help with. Nicholas Amicucci: Perfect. Thanks, guys. Daniel J. Cregg: Thanks. Operator: Thank you. Our last question is from the line of David Arcaro with Morgan Stanley. David Arcaro: Hey. This is Amanda on for Dave. Thanks so much for taking my questions. Daniel J. Cregg: Hi, Amanda. David Arcaro: Hey. So maybe lastly, just on the executive orders, how are you thinking about the scope of the current BPU study? And are there any financial impacts currently contemplated in the long-term plan based on any potential changes? Or do you think it is still too early to assess those changes? Daniel J. Cregg: Yeah. I think it is too early right now. There are a lot of conversations going on. You can look across the country and see a number of different ways that things have changed from a regulatory standpoint and how utilities have been compensated for the utilities that have been involved. We have looked at many of those, and I think many of those at the end of the day have worked out. It is just a different way of thinking about things and providing those returns for those utilities. So we have not changed. We have not put any different regulatory process in place in the projections that we have made. But we fully expect that the outcome is going to be an outcome that makes sense for both us and for the customers. David Arcaro: Great. Thanks so much. And maybe just a quick follow-up. With the two new commissioners in the BPU, any initial comments on conversations with them, just based on the first few months of their appointment? Daniel J. Cregg: Yeah. No. Our team has continued to meet with folks, but our conversations have been limited to, I would basically put it, meet and greets at this point. David Arcaro: Got it. Thanks so much again. Operator: This is all the time we have for questions. I would like to turn the floor back to Mr. LaRossa for closing comments. Ralph LaRossa: Thank you, Rob. I had a couple of comments prepared, but I actually started this call, as you heard, talking about the great work of our team. During the last storm, our facilitator here today, Rob, actually started our morning off by thanking us for the work that was done and communicated during the storm. So I just want to reinforce the thank you to the team. We can talk all we want about finances and the outcomes that we have here, but if we do not deliver on our operational mandates day in and day out, no regulatory construct is going to matter for us, and our plants will not run. So I thank the employees every day. And when I get comments like we just received from Rob when we opened up this call, it makes it all worthwhile. So, Rob, thank you, not only for facilitating the call, but for reinforcing for all of us that what matters is the work that is being done day in and day out by our employees in the field. With that, thank you, Rob. We are going to be out quite a bit over the next month and a half and look forward to seeing you and the in-person conversations. Operator: Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, everyone, and welcome to the MYR Group Fourth Quarter 2025 Earnings Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now turn -- like to turn the call over to Jennifer Harper, Vice President of Investor Relations and Treasurer, for introductory remarks. Jennifer Harper: Thank you, and good morning, everyone. I would like to welcome you to the MYR Group conference call to discuss the company's fourth quarter and full year results for 2025, which were reported yesterday. Joining us on today's call are Rick Swartz, President and Chief Executive Officer; Kelly Huntington, Senior Vice President and Chief Financial Officer; Brian Stern, Senior Vice President and Chief Operating Officer of MYR Group's Transmission and Distribution segment; and Don Egan, Senior Vice President and Chief Operating Officer of MYR Group's Commercial and Industrial segment. A copy of yesterday's press release announcing our fourth quarter and full year 2025 results, can be found on the MYR Group website at myrgroup.com under the Investors tab. A webcast replay of today's call will be available on the website for 7 days following the call. Please note today's discussion may contain forward-looking statements. Any such statements are based upon information available to MYR Group's management as of this date, and MYR Group assumes no obligation to update any such forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly, these statements are no guarantee of future performance. For more information, please refer to the risk factors discussed in the company's most recently filed annual report on Form 10-K. Certain non-GAAP financial measures will also be presented. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in yesterday's press release. With that, let me turn the call over to Rick Swartz. Richard Swartz: Thanks, Jennifer. Good morning, everyone. Welcome to our fourth quarter 2025 conference call to discuss financial and operational results. I will begin by providing a summary of the fourth quarter and full year results, and then we'll turn the call over to Kelly Huntington, our Chief Financial Officer, for a more detailed financial review. Following Kelly's overview, Brian Stern and Don Egan, Chief Operating Officers for our T&D and C&I segments, will provide a summary of our segment's performance and discuss some of MYR Group's opportunities going forward. I will then conclude today's call with some closing remarks and open the call up for your questions. We closed 2025 with strong financial performance in the fourth quarter and full year revenues of $3.7 billion. A steady backlog of $2.8 billion at the end of 2025 reflects a healthy bidding environment and the continued investment in infrastructure to meet the growing electrification needs across the U.S. and Canada. Our work this year underscores the stability and expansion of our clients' relationships as well as our measured pursuit of new opportunities. We continue to see strong bidding activity across our business segments, and are closely monitoring these opportunities and positioning ourselves to strategically pursue and execute projects with operational excellence. As always, our success is grounded in an unwavering commitment to our customers through safe and reliable project execution. Our teams are dedicated to helping our customers advance their business objectives, and I'm grateful for their continued hard work. Now Kelly will provide details on our fourth quarter and full year 2025 financial results. Kelly Huntington: Thank you, Rick, and good morning, everyone. For the year ended December 31, 2025, we reached record annual revenues of $3.7 billion. Full year net income of $118 million and EBITDA of $233 million. Our fourth quarter 2025 revenues were $974 million, which represents an increase of $144 million or 17% compared to the same period last year. Our fourth quarter T&D revenues were $531 million, an increase of 18% compared to the same period last year. The breakdown of T&D revenues was $330 million for transmission and $201 million for distribution with increases of $64 million in revenue on transmission projects, and $17 million in revenue on distribution projects from the prior year. Work performed under master service agreements continue to represent approximately 60% of our T&D revenues. C&I revenues were $443 million, a record high for our C&I segment and an increase of 17% compared to the same period last year. C&I segment revenues increased primarily due to an increase in revenue on fixed price contracts. Our gross margin was 11.4% for the fourth quarter of 2025 compared to 10.4% for the same period last year. The increase in gross margin was primarily due to the fourth quarter of 2024 being negatively impacted by certain T&D clean energy projects and a C&I project. In the fourth quarter of 2025, gross margin was also positively impacted by better-than-anticipated productivity, favorable change orders and a favorable job close out. These margin increases were partially offset by an increase in costs associated with inefficiencies on certain projects. T&D operating income margin was 7.4% for the fourth quarter of 2025 compared to 6.7% for the same period last year. The increase was primarily related to the fourth quarter of 2024 being negatively impacted by certain clean energy projects. In the fourth quarter of 2025, T&D operating income margin was also positively impacted by a favorable change order and better-than-anticipated productivity. These operating income margin increases were partially offset by an increase in costs associated with project inefficiencies on certain projects. C&I operating income margin was 6.6% for the fourth quarter of 2025 compared to 3.9% for the same period last year. The increase was primarily related to a larger portion of our C&I projects progressing at higher contractual margins, some of which are nearing completion. In the fourth quarter of 2025, C&I operating income margin was also positively impacted by better-than-anticipated productivity, a favorable change order and a favorable job close out. These operating income margin increases were partially offset by an increase in costs associated with inefficiencies on certain projects. Fourth quarter 2025 SG&A expenses were $65 million, an increase of $8 million compared to the same period last year, primarily due to increases in employee incentive compensation costs and employee-related expenses to support future growth. Fourth quarter 2025 interest expense was $1 million, a decrease of $1 million compared to the same period last year. The decrease was attributable to lower interest rates and lower average outstanding debt balances during the fourth quarter of 2025 as compared to the same period last year. Our fourth quarter effective tax rate was 21.2% compared to 40.9% for the same period last year. The decrease was primarily due to changes in state tax rates used to measure our state deferred income taxes and lower permanent difference items. Fourth quarter 2025 net income was a record $37 million compared to $16 million for the same period last year. Net income per diluted share of $2.33 compared to $0.99 for the same period last year. Fourth quarter 2025 EBITDA was a record $64 million compared to $45 million for the same period last year. Total backlog as of December 31, 2025, was $2.8 billion, a 9.6% increase from the prior year. Total backlog as of December 31, 2025, consisted of $1.0 billion for our T&D segment and $1.8 billion for our C&I segment. As a reminder, our backlog includes projected revenue for only a 3-month period for many of our unit price, time and equipment, time and materials and cost plus contracts, which are generally awarded as part of a master service agreement. However, our master service agreements typically have a much longer duration. Fourth quarter 2025 operating cash flow was $115 million compared to operating cash flow of $21 million for the same period last year. The increase in cash provided by operating activities was primarily due to the timing of billings and payments associated with project starts and completions, higher net income and lower contingent compensation payments associated with a prior acquisition. Fourth quarter 2025 free cash flow was $85 million compared to free cash flow of $9 million for the same period last year, reflecting the increase in operating cash flow, partially offset by higher capital expenditures to support future growth. Moving to liquidity. We had approximately $265 million of working capital, $59 million of funded debt, $408 million in borrowing availability under our credit facility and $150 million in cash and cash equivalents as of December 31, 2025. We have continued to maintain a strong funded debt-to-EBITDA leverage ratio of 0.25x leverage as of December 31, 2025. We believe that our credit facility, strong balance sheet and future cash flow from operations will enable us to meet our working capital needs, support the organic growth of our business, pursue acquisitions and opportunistically repurchase shares. I'll now turn the call over to Brian Stern, who will provide an overview of our Transmission and Distribution segment. Brian Stern: Thanks, Kelly, and good morning, everyone. The T&D segment delivered steady fourth quarter and full year results, supported by a healthy mix of smaller to midsized jobs and ongoing master service agreements. Our performance reflects the continued application of our core business principles around safety, quality and reliable execution. Bidding activity remains healthy as backlog, revenue, margins, and income increased from 2024 to 2025. We continue to expand relationships with long-term clients and pursue opportunities with new and existing clients, building on the positive industry outlook. This quarter, Great Southwestern Construction executed a new 7-year master service agreement in Kentucky for transmission line construction and maintenance projects. L.E. Myers was awarded a transmission project in Virginia as well as transmission work in Iowa. In addition, Sturgeon Electric won two transmission projects in Oregon and transmission work in Arizona. Both Sturgeon Electric and High Country Line Construction were awarded station and line work in Washington, California and Arizona. Harlan Electric was selected to perform multiple jobs throughout New Jersey and Pennsylvania. According to electric -- Edison Electric Institute industry data, investor-owned electric companies are projected to invest approximately $178 billion in transmission construction between 2025 and 2028. This level of planned investment reflects an ongoing need for grid modernization and the increased capacity to accommodate load growth. As utilities invest in these upgrades, we believe we are well positioned to benefit from expanding backlogs and long-duration project pipelines. With our experience, we continue to position ourselves to capture future 765 kV projects along with 500 kV and 345 kV transmission and substation projects over the next 10 years. MYR Group subsidiaries are prepared to pursue and perform these opportunities across the U.S. and Canada. In summary, we are proud of our accomplishments in the fourth quarter and all of 2025. We will continue to actively bid and execute projects of varied capacity, size and complexity across the U.S. and Canada, while maintaining our consistent focus on safety and the development of our dedicated workforce, who ultimately enable us to take on the important work ahead. I will now turn the call over to Don Egan, who will provide an overview of our Commercial and Industrial segment. Don Egan: Thanks, Brian, and good morning, everyone. Our C&I segment achieved solid results in the fourth quarter, thanks to the health of our core markets. We continue to see steady bidding activity and increases in backlog as we strategically monitor and pursue new opportunities in collaboration with our valued customers. We believe our ability to safely and skillfully execute projects of various sizes continues to create many long-term opportunities in our core markets. Data centers continue to be one of the most active areas of investment nationwide, fueled by the accelerating need for cloud, AI and digital infrastructure. Industry researchers expect this demand to remain robust through 2026, with utilities and developers working to expand power capacity to support this surge. Infrastructure-related construction is also benefiting from ongoing commitments in transportation, clean energy, wastewater and fresh water treatment facilities. Our ever-expanding network of clients continues to engage us early on upcoming opportunities in these segments. Our teams across all subsidiaries continue to execute and pursue an array of work. During this period, we were awarded multiple data center projects in Colorado, Arizona, California and New Jersey. In addition to data centers, our subsidiaries were awarded projects in clean energy, manufacturing and industrial projects in California and Arizona. These accomplishments highlight our ongoing momentum and solid market presence throughout the U.S. and Canada. In conclusion, we believe our core markets remain healthy and the depth of our customer relationships continues to create new opportunities. This success is driven by our dedicated employees whose commitment to quality and safety is at the heart of everything we do. Thank you, everyone, for your time today. I will now hand the call back to Rick for his closing remarks. Richard Swartz: Thank you for those updates, Kelly, Brian and Don. We are proud of our fourth quarter and full year 2025 performance, which demonstrated the strength of our sound business strategies and our ability to maintain and expand long-term customer relationships across both segments. We believe our core markets are well positioned for continued growth as investment in electrical infrastructure accelerates. We remain committed to safely executing projects, strategically bidding opportunities and supporting our customers in an ever-changing energy environment. We believe our proven track record of collaboration, integrity and dependable project delivery puts us in a strong position for opportunities ahead. We are excited to play a meaningful role in strengthening the electrical infrastructure that keeps our communities running. I would like to thank our employees for their invaluable contributions and our shareholders for your continued support of MYR Group. I look forward to the year ahead. Operator, we are now ready to open the call up for your comments and questions. Operator: [Operator Instructions] Our first question comes from Sangita Jain of KeyBanc. Sangita Jain: First, Rick, can I ask you for your thoughts on the large transmission market out there? I know you were optimistic on late 2026 potential bookings for 2027 revenue. Just wondering if you're seeing the same type of trend right now. Richard Swartz: We are. Nothing's changed on that side. I mean it takes a while to bring these projects to market, and we've known that. So we're in good conversations with our clients, and we believe we'll capture some of that work that will start to burn in '27. Sangita Jain: Got it. And then, Kelly, maybe for you, cash flow has been really, really strong this year. So I'm trying to figure out if some of that was catch-up from the pending payments from last year's solar projects or if there's any meaningful advances in new projects that we should be aware of? Kelly Huntington: Yes. Thanks, Sangita, for that question. Yes, a very strong year for cash flow and particularly in the fourth quarter. A lot of that is driven by our lower DSOs. We're now -- we've been in the mid-50s versus the historical average of around 70. And that's driven by a combination of things. We saw a 16-day improvement if you look year-over-year with 11 days of that in the third quarter. Part of it is getting beyond those -- the problem projects that we had in 2024. But I'd say a larger factor is just that we have a very strong net overbuild position, really driven by some of the large fixed price work that we have on the C&I side, in particular. So I think that does represent potentially a little bit of a headwind as we look forward. And part of that will depend on the mix of work that we have as far as awards this year and how much of it is some of that mid- to large-sized fixed price work that can have a more favorable billing profile versus more MSA weighted, which is great work to have, but doesn't have quite as positive of the cash flow profile. Operator: Our next question comes from Julien Dumoulin-Smith of Jefferies. Brian Russo: It's Brian Russo on for Julien. Could you just comment more on the strength in the T&D backlog at $1 billion, looks like it was up about 20% year-over-year, quite a bit of improvement from the year-over-year progression that we've been seeing in the last few quarters. Just curious, are any of the new projects, in particular that Kentucky MSA agreement included in the December backlog? And then also, is there any Xcel $500 million 5-year MSA in that December backlog as well? Richard Swartz: As far as the backlog goes, I'd say on the Xcel stuff, very little of that is in that backlog as of now. I mean we said it would be a slow start to the year and then kind of progressing throughout the year and increase. So again, not too much of that in our backlog right now because we only count 90 days of that MSA work, as Kelly highlighted in her script within our backlog. When we look at the Kentucky side, that work really will start later this year. So not much of that in there. So again, we've seen great activity in the markets out there, and we're being selective on what we take on and really focused on long-term relationships with clients. 90% of our business is return clientele. We're always looking for those one-off projects as additive. But again, how do we grow with our existing clients, and that's where our focus is at. Brian Russo: Okay. Great. And just a follow-on there in T&D. We saw a very large Texas-based wires company announce a rather robust 5-year capital plan update. And can you just remind us what your positioning is currently in Texas? And then maybe what your level of activity has been kind of in the past up-cycles in capital spend that we've seen? Richard Swartz: Yes. Texas has been a good market for us. for the last decade. I mean it's been a good market. We continue to see that grow. We're excited about some of the opportunities that are out there with some of the 765 work, but even some of the 500 and 345 work we're -- we do that every day. So I think the 765 is upcoming. We're excited about our positioning on that. But again, we're seeing good activity, not just in Texas, but across the nation. Lots of good opportunities out there. Brian Russo: Okay. And the strong C&I margins in the fourth quarter, plus 6%, how does that fit into the 5% to 7.5% operating margin target step-up you're guiding towards this year? And then just kind of tie that into the backlog. Are there still projects still to be completed that would be in that old kind of 4% to 6% target? Or are those really nearly all burned? So everything from here on out is really in the new 5% to 7.5% range? Richard Swartz: Well, I would say our forecast when we look at it for the year is operating within the midpart of both our T&D and C&I margin profile. So in that midpoint of that, we see good opportunities out there. We continue to see good activity in the market. So with that being said, we haven't changed from what we said last quarter on both from a revenue standpoint, we look at that 10-ish percent growth in both segments and as a company overall. And then we look at operating in those -- that mid part of that range. So good opportunities there, and I think we'll continue to do everything we can to increase our margins from our standpoint as far as what we do from a prefab standpoint, from an efficiency standpoint, from utilizing our equipment better, and we'll continue to try to maximize on that side. Operator: Our next question comes from Justin Hauke of Baird. Justin Hauke: Great. So I had two quick ones here. The first one, I was just going to ask about -- in your backlog, you break out what you expect to book over 12 months and what you expect to book beyond 12 months. And it looks like almost all the backlog increase this quarter was kind of the longer duration backlog. And so I guess I just wanted to understand the components of that. Is that some of the data center work from C&I that you're talking about? And so like your -- the duration of your projects is just extending because the size is getting bigger? Or maybe just kind of how to think about that. Richard Swartz: Sure. On our larger project side, I would say those go out a little way. So they go out -- some of those data centers take 18 months to construct or so, 18 to 24 months when you look at the larger projects, and that goes for transportation work. Some of that goes beyond that. They're 4- or 5-year projects. But again, good activity on the small and midsize that's burning quickly. But on the larger projects, it does take a little longer to construct those projects. Justin Hauke: Okay. And then I guess my second question, not to be myopic, I guess, but obviously, there's been a lot of winter weather all over. 1Q is not typically your productive quarter versus the summer. But just curious if there's anything you would be thinking about or you want to communicate in terms of potential weather impacts in the first quarter that would be unusual that have occurred thus far? Or maybe it's not, maybe it's just in line with kind of normal seasonality? Richard Swartz: I think for us, we always did our work on normal seasonality. I think there's always going to be some storms that take place if it's -- I don't think [indiscernible] always affects us in the way that maybe really wet weather where we can't traverse the right-of-way. That seems to affect us a little bit more. But again, we're always monitoring the weather, and it really has to do where those -- what projects are affected. You can see in any given area, I mean, you can be 50 miles away and it really affects one area and it may not affect the other. So again, the weather hasn't affected our business across, I guess, the country everywhere equally. So I would say we'll -- we continue to look at that. Weather is the biggest impact we can have. But again, it hasn't affected us across the country as a whole, just in some select areas. And with that, sometimes we have some offset of some storm and other type works that we're doing for repair. But again, our base business is that day-to-day MSA and just construction projects. We like storm work. But again, we're not dependent on it. Kelly Huntington: Yes. And I would just add a little bit broader context, Justin, and looking at first quarter revenues, we are expecting that we will trend in the first quarter a little bit above that full year rate of about 10% growth, and that's really driven by first quarter last year, we had a little bit slower start. So it is a bit of an easier comp compared to the rest of the year. So just as you're thinking about modeling that, we would expect a little stronger revenue growth in the first quarter. Operator: Our next question comes from Caitlin Donohue of Goldman Sachs. Caitlin Donohue: Just focusing on the data centers, you outlined a few awards this past quarter. How are you seeing that project pipeline shape up for 2026, 2027 as you're speaking with your customers? Richard Swartz: The conversations are strong on that side. It's not just '27 and '28. I mean we're having conversations with customers that go well beyond that time frame. So again, I think our awards are always lumpy just on how long it takes the projects to get finalized. But again, great conversations going forward. So good activity in that market. But again, not completely dependent on that market by itself. We like the diversification we have with transportation, health care, some of that other work we do. So good opportunities on that side also. Caitlin Donohue: That's helpful. And then just on capital allocation strategy for 2026. We've seen CapEx step up a little bit. You've done buybacks in the past. How are you thinking through MYR Group's strategy for the year? Kelly Huntington: Yes. We are seeing great opportunities to continue to grow our business organically and through acquisitions. And so I think as we've talked about before, we'll continue to prioritize our capital allocation to growth. We do use share repurchases opportunistically. And I think the last 2 years are a great example of that with deploying over $150 million at an average price of $117. So -- but I think at this point, really focused on the growth opportunities that we see both organically and from acquisitions. Operator: Our next question comes from Manish Somaiya from Cantor Fitzgerald. Our next question comes from Brian Brophy of Stifel. Brian Brophy: Just want to kind of continue the conversation on the large transmission opportunity and some potential awards you may see there. Would those -- assuming you see something in the back half of '26, as you kind of alluded to, would those projects be additive to growth in 2027? Or would you have to pull resources from somewhere else to meet some of that demand? Richard Swartz: I don't see us having to pull any resources. I mean we've done a good job of retaining our employees, recruiting and developing people. So to us, that's additive. And it goes into '27 and beyond. So it's not just the work that's going to start in '27. We see the cycle being much longer than that. So I think it's a decade worth of growth out there, and we're going to capitalize on it where we can, and there's some great opportunities we feel coming our way. Brian Brophy: Great. Yes, that's good to hear. And then just as a follow-up to that, how do you think about some of the large transmission wins potentially impacting the profile of the business -- margin profile of the business at all, maybe not from an individual project standpoint, but capacity utilization overall. Should we think about that being a margin driver? Richard Swartz: Yes. I think it can show, I guess, marginal -- margin increases on that side. Again, it's how can we better utilize our equipment, how can we take labor out of the field and do more things on the prefab or the kitting side. So we're always looking at that side and being a solution provider for our customers. So I think along with that, we're always looking to enhance our margins. But again, our relationships with our clients are long term. So it's not always -- on this side, it's -- they're a regulated business. We'll continue to, I guess, push margins where we can, but more from an efficiency standpoint than what I'd call ever reaching out and trying to gouge our customers or anything like that. We really build on long term. Again, over 90% of our business is return clientele, and we always want to make sure we maintain those relationships. Operator: Our next question comes from Manish Somaiya from Cantor Fitzgerald. Manish Somaiya: Can you hear me? Richard Swartz: Yes. Manish Somaiya: Okay. Wonderful. Rick, I have the first question for you. In the press release, we talked about the bid environment being steady. Maybe if you can just give us a sense as to what you're seeing in terms of pricing by geography, by end market? And what are you walking away from business that may not be attractively priced? So maybe if you can just give us a sense of what's going on in the marketplace. Richard Swartz: I think for us, our -- I would say we've got a select client list. We're not trying to be everything to everyone, if that makes sense. So if on the -- let's take C&I as an example, if it's a customer we've done work for a long time with or somebody that's a continued relationship or we can build a continued relationship, we're really focused on that side, not the one-off ones. We're not focused on bidding a project that has 20 bidders on it. We like the customers that have select bid lists or we have teaming arrangements with. So with that side, good activity, good opportunities there. I would say, market by market when you're talking geographies across the U.S., some are a little tighter than others still, but we see those areas that are maybe not as busy as others getting busy in the future. So we're always monitoring that. We've got 65-plus offices across the U.S. and some in Canada. And with that, we're always using that local expertise to help us pick what work we want to go after, which ones really fit us and which ones don't. So along the way, we always evaluate those opportunities. And again, we're seeing good activity in all our marketplaces. Manish Somaiya: And I know we talked a bit about the data centers. Maybe Don can shed some more light. Are the customers on the data center side, hyperscalers, GCs, developers? Maybe if you can just give us a sense. And then as it pertains to backlog, is -- it seems, obviously, everybody is doing more data center work. But would you say that the backlog on the C&I side is diversified? Or is it kind of more concentrated? Don Egan: Well, I'll answer that question first. It is -- our backlog is very diversified. Yes, you're absolutely correct. There is a lot of activity in the market, and we're having conversations with end users, the hyperscalers, general contractors, developers. It's ongoing conversations on a very regular basis, if that answers your question. Manish Somaiya: And in terms of the customers on the data center side, would it be hyperscalers or general contractors, developers? Don Egan: Again, as I stated, it's all the above. We are having conversations with hyperscalers on a daily, weekly basis, same with general contractors and end users, owners. Manish Somaiya: Okay. And then just lastly, Rick, from a high level, obviously, you guys don't give guidance, but what would be the puts and takes for '26 as you kind of look at your internal benchmarks and targets? How should we think about the risks and opportunities? Richard Swartz: Let me go back to Don's question real quick, the one you asked for him. I would say the other side on data centers is it's not just the new construction. I think that's really what has the headline, but a lot of it is the retrofits in existing buildings, too. Existing data centers that have been there, I mean, they're living buildings. They're always changing the technology. So as that happens, that repeat work for us is very important. And once we're in a data center, we tend to stay there for a long time. So it's not just the new builds. It's also that retrofit work. That's the only thing I would add to that. When we look at kind of the puts and takes going forward, I would say the biggest impact we can always have on the T&D side is weather. Other than that, the activity in the market other than something that would -- we don't see right now from any of our conversations with our client would be any kind of slowing in the market. But we don't see that nor do we anticipate it. So it's really the weather on our T&D is the biggest impact. And then the timing of these projects, how quick they roll out would be the other kind of risk out there because it's not if these projects are going to be built, it's when. So sometimes you can see a 2- to 4-month push on projects, but it's not like they're going to be pushed out years. And that's kind of how we see it now. And then the other side on the T&D side that I'd probably highlight is permitting. Sometimes that can push a project out a little bit. But again, it's not if the projects are going to be built, it's when. So again, good activity on both sides, both T&D and C&I. Operator: Our next question comes from Tim Moore of Clear Street. Timothy Michael Moore: Great job with your backlog growth and book-to-bill. My equipment utilization tailwind for the T&D side was already asked. So I just have two questions remaining. Maybe, Rick, you can maybe walk us through or even Kelly elaborate on kind of the trade-off in your selectivity for staffing for maybe like an 18-month data center versus cross-selling a more medium-sized utility project. I know they're are separate segments, but I'm just kind of wondering if you could talk a bit more to like the regional staffing playing in, cross-selling opportunity. And if it is a new customer, not more than 90% incumbents. Richard Swartz: Yes, I'll start there. Like what you just said, I mean, 90% of our business is return clientele. We're always focused on that. We're always trying to cross-sell. There's lots of opportunities on that side, especially on data centers where the substation in that side might be on -- within the owner side of it rather than the utility side. So either way, we're able to construct that portion of the project. I would say we're always looking at those opportunities. We're always going to focus on our long-term clients first. And then we'll take the one-off ones later. If they're just going to build one project and out, that's probably not our focus. But if they're going to build multiple projects, that's where we're focusing. And I think we've done a very good job on, as an example, some of our data centers where there are facilities that are -- they build one building, then they move into the next. And as they build out their campus, it's a great place for us. There are some of them where we might be on -- as an example, we're on building 3 of maybe a planned 12 buildings. So again, this goes out for many years forward, and that's really where our focus is. Kelly, do you want to add? Kelly Huntington: I think you covered that well, Rick. Thanks. Richard Swartz: Okay. Timothy Michael Moore: Great. That was really helpful. The only other question I had, given your liquidity and the cash and the bolt-on acquisition opportunity, can you maybe just talk high level about the philosophy? Is your priority within T&D more of the electrical contractors? And then on the C&I side, is it to build geographic scale like in the Southeast? Just kind of curious if you can add any color. Kelly Huntington: Sure. I can start on that one... Richard Swartz: Go ahead, Kelly. Kelly Huntington: I was just going to say on the T&D side, we definitely focus on electrical contractors. We do have really good geographic presence across the U.S. and up into Canada and Ontario on the T&D side. So we also look at opportunities that would be ancillary services like right-of-way or foundation or environmental work. Those can be of interest to us as well. On the C&I side, I would say really two primary screens from a strategic perspective. First would be the geographic fit because we don't have quite as consistent of coverage as we do on the T&D side and then really taking a close look at the end markets they serve. So does that acquisition opportunity have a similar profile as far as exposed to those higher growth tend to be less cyclical, more complex core markets like we are. So those would be the main things we're looking at, really still focused on tuck-in acquisitions in the places we know and the risk profiles that we understand as well. Operator: Our next question comes from Jon Braatz of KCCA. Jon Braatz: Rick, your markets are very strong, and I think you -- and you've indicated that the top line, you could see 7% to 10% type of revenue growth. But should the opportunities present themselves as they might, do you have the ability, the capacity, the labor force and infrastructure in place to maybe accelerate that growth as we go forward? Richard Swartz: Yes. I mean we've got that opportunity. I think if you look back in our history, we've grown more than that in certain years, and we -- other years, we've tamed that back a little bit. Again, it's timing of the awards, how they happen. I see good opportunities out there, but where we're really focused is controlled growth also. I think anybody could really add revenue at this point, but could they do it profitably. And for us, it's maintaining that right amount of growth, so we can be profitable. We're definitely capable of doing more than that. But we have said for this year, we anticipate growing in that 10%-ish range. So a little more than the 7%. But again, making sure we have controlled risk and then we take on the right opportunities. Jon Braatz: Sure. Given the strength of the market and the number of projects out there and so on, I sense that you could be more selective and maybe the risk profile of the work that you're doing has improved. Would that be a fair statement? Richard Swartz: Sure. We're always focused on that as we select our projects is how do we limit our risk, how do we partner with our customers? How do we make sure that we have those kind of conversations. But again, derisking our projects is definitely important to us, and that's one of the evaluations we go through as we look at projects is I would say we have less risk in our backlog today than we had in our backlog a year ago or 5 years ago. Operator: I'm showing no further questions in the queue. I would now like to turn the call back over to Rick Swartz for additional closing remarks. Richard Swartz: To conclude, on behalf of Kelly, Brian, Don and myself, I sincerely thank you for joining us on the call today. I don't have anything further, and we look forward to working with you in the future and speaking with you again on our next conference call. Until then, stay safe. Operator: Thank you. This concludes today's conference call. We thank you for your participation, and you may now disconnect.