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Aki Vesikallio: Welcome to Hiab's Full Year 2025 Results Call. My name is Aki Vesikallio. I'm from Investor Relations. Today's results will be presented by CEO, Scott Phillips; and CFO, Mikko Puolakka. As a reminder, please pay attention to the disclaimer in the presentation as we will be making forward-looking statements. Before handing over to Scott and Mikko, let's take a quick look at the highlights of the year. Market environment was characterized by increased trade tensions and uncertainties and our orders received remained at past 2 years level. Sales declined by 6%, but we increased our comparable operating profit margin and achieved a new record of 13.7%. Also, our Services business had a record year. Strong cash generation continued, and we acquired ING Cranes, significantly expanding our presence in Brazil. Let's then view today's agenda. First, Scott will present the group level topics and strategic development. Mikko will go through the reporting segments, financials in more detail and the outlook. After Mikko, Scott will join the stage for key takeaways before the Q&A session. With that, over to you, Scott. Scott Phillips: Thank you, Aki. And good morning, everyone, from my side. So starting first with the demand environment. I'd characterize the full year situation as our orders remaining on a similar level to the prior 2 years. As you can see visually on the left-hand side of the slide, the last 3 years were quite on a similar level, and we've talked about the demand environment that's led to that. Drawing your attention a bit more to the right-hand side of the slide, going into the numbers. First, starting with comparing quarter versus quarter. Orders received for the quarter last year were EUR 375 million -- or in 2025, EUR 375 million versus prior year of EUR 414 million for a 9% change in actual exchange rates, 6% change in constant currencies. And for the full year, orders received were EUR 1.48 billion versus prior year EUR 1.509 billion or a 2% change in actual exchange rates and essentially flat in constant currencies. As a consequence, our order book has decreased to EUR 534 million ending 2025 versus EUR 648 million in 2024, so a decrease of EUR 114 million or 18%. So summarizing the overall environment, relatively stable and on a similar level in constant currencies. The decrease was primarily from our delivery equipment orders in the U.S. in 2025, somewhat offset by increases in our lifting equipment in Europe and APAC and other parts of the Americas and an increase overall in our Services business. So in summary, our overall order book decreased only in Equipment and not in Services business. So looking in more detail within the regional perspective, starting on the left-hand side of the slide, our orders received for last year for 2025 were 54% in EMEA, 39% in the Americas and 8% in APAC. On a quarterly basis, looking into the numbers, that translated into EUR 208 million in fourth quarter in EMEA versus EUR 218 million in the comparable period or a 5% decline. However, for the full year, EMEA order intake was EUR 794 million versus 2024, EUR 736 million or an 8% increase. In the Americas, however, we saw a decline in fourth quarter to EUR 137 million versus prior year of EUR 164 million or a 16% decline, a bit more acute in the U.S., and I'll provide a bit more color on that in a second. For the full year, total order intake was EUR 572 million in the Americas versus prior year EUR 668 million or 14% decline. In Asia Pacific, we saw a slight decline in the comparison period on a quarterly basis at EUR 30 million versus EUR 32 million in the prior year, a 5% decline. However, for the full year, we saw a 10% increase to EUR 114 million versus EUR 104 million in the comparison period. Now summarizing the operating environment. We saw a gradual recovery, if you look at it on a full year basis, in both EMEA and APAC. However, in the U.S., we continue to see soft demand, however, on a relatively stable level if you think about the last 3 quarters. Now why is that? The first -- the main reason, of course, are the trade tensions that elevated the level of uncertainty in the demand environment, in particular in the U.S. that led to our customers being quite cautious and especially shows up in our results as we are a short-cycle business in both our Equipment and Services. Now looking into our sales for the full year. As you see on the left-hand side of the slide, we had a decline sequentially from 2024 to EUR 1.556 billion or 6% decline in actual exchange rates, 4% decline in constant currencies. Looking into the quarter, our sales was EUR 396 million versus EUR 412 million or a 4% decline in actual exchange rates, relatively flat in terms of constant currencies. And our share of services in the quarter was 29%, the same level that it was the prior year. However, for the full year, our services as a percent of sales was 30%, so up 2 percentage points versus the comparison period. Now in summarizing the overall revenue environment, clearly, our sales in the second half were lower than the first half by 9%. Currencies had an impact on the results by 2 percentage points in the negative direction on a full year basis. And as I mentioned earlier, our share of services sales increased from 28% to 30%. Now looking more deeply on a regional basis in terms of the sales environment for 2025. EMEA represented 50% of our overall sales; the Americas, 44%; APAC, 7%. And on a quarterly basis, EMEA was EUR 212 million, up 3% in the comparison -- versus comparison period. In the Americas, however, we were down 14% versus comparison period at EUR 154 million. And in APAC, we were up slightly or by 8%, EUR 30 million versus EUR 28 million in the comparison period. And really pleased to report that our Eco portfolio sales as a percentage and in absolute terms increased nicely year-over-year to EUR 135 million or 34% of sales. And then on a full year basis, on a -- looking at -- starting with the EMEA region. Full year sales were down slightly 2%, EUR 785 million versus EUR 804 million. In the Americas, we were down 10% in revenue, EUR 662 million versus EUR 735 million and in APAC, EUR 110 million versus EUR 108 million or up 1%. Eco portfolio sales for the full year in absolute terms, up to EUR 572 million versus EUR 476 million or 20% positive variance. And on a percentage basis, increased from 29% to 37%. So summarizing the regional environment. Our Americas sales decline came wholly from the U.S., somewhat offset by growth in other regions or other markets within the region. In EMEA, our sales declined slightly in the full year, but grew towards the end of the year. We started to convert the uptick in the order intake from the first half of the year as we moved into the end of the year last year. Our Asia Pacific sales increased nicely. And then as I mentioned earlier, our Eco portfolio sales increased in our circular solutions, decreased somewhat in our climate solutions. Now looking into how our sales translated into profitability. As you can see on the visual on the left-hand side of the slide, the slope continues to be nicely positive in the prior 3-year period of time. And that's, of course, despite the fact that we have a lower sales level year-over-year from '24 to '25. Looking at it into more detail, starting with the quarterly view, our comparable operating profit was EUR 47 million versus the comparison period of EUR 41 million. Mikko will go into more details in terms of what that variance means, but it's a 15% positive variance quarter-over-quarter. On a full year basis, our comparable operating profit was EUR 213 million versus 2024 EUR 217 million, so a 2% negative variance. But in relative terms, we had a nice 50 basis points improvement from '25 to '24 to 13.7% versus 13.2%, which translated nicely into an improvement in our return on capital employed, looking at it on a last 12-month basis at 30.8% versus 28.2% in the prior year. So our full year profitability in quarter 4 was burdened significantly by lower U.S. equipment sales. However, it was somewhat offset by looking at it on a total basis, a nice 100 basis points improvement in our gross profit margin. So a nice example of executing on our strategy. At the same time, as we had communicated previously, we were targeting lower SG&A costs, so that somewhat offset the decline in the top line, all of which translated nicely into improving our return on capital employed, largely driven by a nice reduction in our net working capital that we continue to execute. Now speaking of how the strategy is developing, I thought I'd transition a bit into how are we doing relative to what we talked about in our Capital Markets Day in 2024. I'll start first with the next step in our evolution of our operating model. As we've stated earlier, we are quite adamant about driving radical transparency and accountability and operating our business such that we have decision-making and ability to act on behalf of our customers at the point that's closest to impact to our customers. So the next step in our operating model to drive further transparency, accountability and empowerment is a change that we're making into our organizational structure at the Hiab leadership team level. So we're streamlining our business from 6 to 5 global functions, which we show here. And similarly, we will then evolve our business operations, organizational design to 3 business areas is what we're proposing, all of which should be effective as of April 1st, pending the outcome of our labor negotiations. And if we're able to move forward on executing this plan, then the way that the organization will look will be organized into 3 business areas, 2 equipment business areas, Lifting Solutions and Delivery Solutions, one led by Magdalena Wojtowicz, our Delivery Solutions led by Hermanni Lyyski. And then Michael Bruninx will continue to lead our Services business as a business area. Now we're doing this, as I mentioned earlier, as a logical next step, both to simplify our organizational design and enable us to more effectively add additional business units, divisions in the future. At the same time, it's key to our success in order to shrink the levels of organization from our colleagues within Hiab that impact our customer outcomes on a day-to-day basis, with those that are located in our product management, sales support, R&D organizations to bring those constituents closer together so that we can act and react more effectively on behalf of our customers, either addressing day-to-day problems and opportunities or allowing seamless communication, being able to understand more deeply our customers' applications and translating those insights into the next-generation solutions. By aligning our sales end-to-end with our business areas, we think that will significantly drive further accountability to the overall result in terms of customer experience, financial outcomes and our own employee experience. And as I mentioned earlier, we think this organizational design will allow us to be much more agile and adapt to changes in our business in the future. So we think this is a key enabler to continue to drive the successful execution of our strategy and ensure long-term success. Now just to give you a bit of color on the cost savings program that we announced previously with our Q3 results. As previously communicated, we target approximately EUR 20 million of cost savings within the year, coming primarily from 2 vectors. On the one hand, the most significant piece of the cost savings that we are targeting will be personnel-related costs. Unfortunately, as a consequence, that could result in as many as 480 roles reduction globally. And then at the same time, we have a number of nonpersonnel-related activities that we plan to undertake, that will also deliver cost savings according to our plan. All told, we estimate that our planned one-off cost would be approximately EUR 30 million. This will be reflected in items affecting comparability and of course, certainly subject to change as we complete the negotiation and the planning process and move into implementation. Concurrent with this action is a next step in executing on our supply chain strategy. So we announced that we would plan to change our -- the ZEPRO tail lift assembly. The change would involve reducing and closing the operation in Bispgarden, Sweden, transferring the work to our facility in Stargard, Poland. And the rationale here is pretty straightforward. We hope that we can improve efficiency, better leverage the facility that we have in Stargard, help ensure and secure competitiveness of the brand by reducing our bill of material cost, which should be a key enabler to driving future growth within this important brand within our overall Hiab portfolio. So we think these are necessary actions, both in terms of executing the strategy as well as reacting to the declining order book, as we previously communicated the rationale, to continue to reinforce and build our credibility on delivering a good track record of results and continue to focus on value creation despite the level of -- despite the top line development. Now looking further into a few additional insights on how our strategy execution is going. I'll start first with on the left-hand side. Really proud to announce that we've recently signed 2 new dealers in the U.S. in line with our strategy we communicated in '24. So recently, we announced that we had closed and signed agreements with MGX, a subsidiary of Manitowoc as well as Custom Truck One Source. Now this brings us up to 16 new dealers that we've signed since we first announced this piece of the strategy in terms of growth in North America. And this brings us quite close to having now full coverage in the U.S., especially for our Hiab loader crane business, and we're inching closer in getting full coverage as well in our critical delivery solution businesses as well. So really pleased with this development, proud of the work that the team has done on behalf of achieving this critical objective in our strategy, both in the U.S. as well as here in Europe. The second piece that I'd like -- I'm very proud to report is that we now have achieved a critical milestone. We're over 25,000 service contracts. As you'll recall, in 2024, we communicated we were targeting to be above 50,000 by the end of 2028. So we're nicely on track. And this is a critical element for us in order to ensure that we can continue to drive improvements in terms of our capture rates. And that's critical to our parts and other recurring revenue business within our Services business area to be. At the same time, we also talked about another key data point. We were targeting to be above 90,000 units connected by the end of 2028, and we're now on a level of 56,000 units connected. So well on track on those 2 critical elements of the service growth strategy. And then finally, on this particular slide, I'll end on highlighting that we did complete a strategic acquisition of ING in Brazil. This is critical to our growth in the Americas strategy as well as giving us increased coverage and penetration in one of our key segments that we called out as part of the strategy as well, and that was our Construction segment. So the combination of ING and ARGOS, we think, positions us quite nicely as complementary portfolios and will enable and catalyze significant growth in that part of the world. So a big warm welcome to all of our new colleagues from ING to Hiab. Now just closing and recapping on our strategy. Proud of the work that the team is doing in terms of executing on the strategy. We remain keenly focused on our step-by-step approach to ensure that we are in leading niche attractive end market segments that are quite nicely aligned to essential industries that we learned about during the time of COVID. We seek to be #1 or 2 in each of those exposures in order that we can set the tone in terms of technological superiority and deliver through that and backed up with a second to none service offering, then we know that's critical to delivering the best customer experience in the industry. We talked about how we intended to grow faster than the market. There were 3 critical pieces to the strategy. One was we had 4 targeted segments that we seek to grow in, and we're progressing nicely in 2 or arguably 3 out of the 4 segments. We've yet to see the tailwind coming through in construction, but we continue to take steps in order to expand our share into the Construction segment. We talked about growing in North America, in particular, through increasing our coverage geographically. And so as I mentioned earlier, we're now up to 16 new dealers that we've onboarded towards that end. And of course, critical to our success as well as our customers' success is growing our Services business. Now at the same time, we also talked about how we would improve profitability, which you see coming through in the results of improved profitability versus declining top line. And so we've talked quite a lot about improving our efficiency through higher business excellence and ensuring that we continue to execute through our decentralized operating model for the reasons that I gave earlier. And then finally, it's important to note that all of which is designed to help enable that we have sustainable industry-leading value creation across the business cycles. And the team is progressing quite nicely according to that plan. Now what does that look like in terms of the numbers? We are behind in terms of our progress on delivering 7% across the cycle as we're at 5.5% now after the latest quarter. We're right on schedule or slightly ahead even in terms of delivering 16% at 13.7% in the last 12 months. Similarly, we remain nicely ahead of schedule in terms of our return on capital employed as we remain above 25% as we have at last 12 months of 30.8%. So with that, I'll turn it over to Mikko. Mikko Puolakka: Thank you, Scott, and good morning, ladies and gentlemen, also from my side. Let's first have a look on the Equipment segment's performance in quarter 4. Equipment segment's financial performance was quite uneven between the lifting and delivery equipment in quarter 4. Order intake totaled EUR 258 million. This was minus 13% year-on-year. But if we clean the currency impact, so 10% down in constant currencies. Delivery equipment orders declined, especially in Americas, while then the lifting equipment orders were actually flat year-on-year. So actually quite nice development there, very much also supported by the European market area. On a full year basis, the orders decline came solely from Americas. We start in equipment business the year 2022 -- 2026 with EUR 140 million lower order book. And to compensate this, we plan to reduce cost by EUR 20 million this year, as Scott described earlier. Equipment sales was EUR 280 million in quarter 4. This is a decline of 5% from previous year or again, minus 2% in constant currencies if we clean the -- especially the U.S. dollar weakening. In quarter 4 and on a full year basis, the Equipment segment comparable operating profit was negatively impacted by the lower sales, especially in the short-cycle delivery equipment and as mentioned earlier, especially in the U.S. market. Sales in the U.S. was EUR 25 million lower in quarter 4 than in the comparison period. And this had roughly a EUR 10 million negative impact in the Equipment segment profitability in quarter 4. We had some nonrecurring costs in the operative results, EUR 3 million in quarter 4 and EUR 10 million for full year. And without this, the comparable operating profit would be 13.4% in quarter 4 and 13.8% for full year. Equipment segment's profitability, as I mentioned earlier, was negatively impacted by the lower sales in the U.S., and this was partially offset by fixed cost reductions based on that cost savings program which we announced 1 year ago. Lower volumes impacted also the gross profit margin as certain factory overheads do not scale 100% with the volumes. We had a EUR 1 million negative impact from FX translation effects mainly due to weaker U.S. dollar, also as mentioned earlier. And then we had a positive impact coming from basically 2 elements. Firstly, in quarter 4 2024, we had EUR 15 million costs, mainly related to the restructuring of our Italian operations. And then secondly, our SG&A costs were lower in the Equipment segment due to the cost savings program, which has been -- which has started in 2024. So on like-to-like basis, without the previously mentioned nonrecurring costs in quarter 4 2025, the comparable operating profit was 13.4%, so on the same level as in 2024 despite a 5% decline in sales. Then on Services. So Services continued to grow, very much supported by growing the number of connected equipment and service contracts, like Scott highlighted earlier. The weaker U.S. dollar had a significant impact on our Services top line. In constant currencies, Services quarter 4 orders would have been EUR 122 million, so up by 4%. And on full year basis, the orders would have been in constant currencies EUR 479 million, up by 7%. We have seen good growth in recurring services like spare parts and maintenance services, while then the installation services declined due to the lower new equipment sales, as you have been -- have seen in the previous pages. Services quarter 4 profitability was impacted by low installation services volumes and a EUR 1 million booking, kind of nonrecurring booking to cover the deficit in our self-funded healthcare system in the U.S. On a full year basis, there has been a good development in services profitability, mainly supported by the recurring services growth. And on full year basis, Services delivered a record high EUR 109 million comparable operating profit, and this is 23.2% margin. So nice progress in Services. When we look at the Services profitability bridge, sales in constant currencies contributed positively to profitability. So kind of service volumes were developing well. As mentioned earlier, the recurring services had a positive impact on the growth, while installation services declined. Lower installation services had also a negative impact on gross profit margin because, for example, rents for the installation workshops are fixed. FX translation had a negative impact on Services profitability and as mentioned earlier, stemming very much from the weaker U.S. dollar. And as mentioned earlier, we booked EUR 1 million to cover the U.S. healthcare deficit program. And here, basically in the picture, it's illustrated in the other bar on the right side of the bridge. So without this EUR 1 million, Services profitability would have been 22% in quarter 4. Next, let's have a look on Hiab's total financials. So Hiab's quarter 4 comparable operating profit improved EUR 6 million from the comparison period despite the 4% decline in sales. Main contribution came from not having similar kind of EUR 15 million nonrecurring costs, which they were in quarter 4 2024. Here, those nonrecurring costs are pictured in the other bar on the right-hand side of the bridge. We have had a negative gross profit impact coming from the lower sales in the U.S., as mentioned earlier. And luckily, this has been partially also offset by growing revenues in EMEA and APAC, as also illustrated earlier. Our quarter 4 operating profit included EUR 5 million items affecting comparability, and these are mainly related to the planning of the EUR 20 million restructuring program for this year. The tax rate for the full year was developing favorably. It was 25% versus 27% in 2024. And our net profit was EUR 33 million for quarter 4 and then EUR 151 million for full year. Our cash generation continued on a good level also in quarter 4, amounting to EUR 56 million. EBITA contributed EUR 53 million to cash flow. And then we released EUR 27 million from inventory in quarter 4, while on the other hand, the accounts receivables increased from quarter 3 due to higher invoicing in the latter part of the year. Full year cash flow from operations was EUR 308 million. So really strong performance from the whole organization. Hiab has a very, very strong balance sheet to support the strategic priorities like organic and inorganic growth. Our net cash declined from quarter 3. Here, basically, the main driver is the EUR 100 million additional dividend, which was paid in October 2025. ING acquisition did not impact the net cash position as the transaction was closed in January 2026. On the debt side, we have basically one major bond, EUR 150 million, that's maturing in November 2026. And basically, the rest of our interest-bearing liabilities are mostly IFRS 16 lease liabilities. Hiab's Board of Directors is proposing a 50% dividend payout for the Annual General Meeting in March according basically to the maximum of our dividend policy. This dividend proposal would be EUR 1.17 per B share and the total dividend payout would be EUR 75 million. Dividend payment date would be April 2, 2026. We have provided an outlook for 2026, and this outlook is basically based on few key assumptions. And let me elaborate some of those. As Scott indicated earlier, there has been gradual recovery in EMEA and in APAC. However, the U.S. demand is still uncertain. That has remained stable during the last 3 quarters. Trade tensions are still expected to cause uncertainty around customers' investment decisions. Our last 12 months rolling order intake has been on EUR 1.5 billion level, and we start the year 2026 with EUR 114 million lower order book compared to 2025. Our outlook incorporates the planned earlier mentioned EUR 20 million cost savings for 2026. This would be visible mainly in the reporting segments and then mostly visible in the second half of 2026. For group administration also from -- for the outlook purposes, full year 2025 is a good base level for modeling. In addition, we are doing certain system development to simplify our processes and further improve our cost efficiency. And this will increase the group administration cost level by roughly EUR 5 million in 2026, mainly skewed towards the second half. So based on these assumptions, we estimate that the 2026 comparable operating profit margin exceeds 13%. And as in previous years, this is the floor level. And then, I would like to hand the presentation back to Scott for the summary and final remarks. Scott Phillips: Thank you, Mikko. All right. Managed to get this to go the right direction one more time. So thank you very much, Mikko, again, and I'd like to leave you with 5 key takeaways. One, thinking through the demand environment, we have seen a gradual recovery if we look at broadly the full year 2025 in both EMEA and APAC, especially positively impacting our lifting equipment business. However, we do see a continued tough environment in the U.S. for our delivery equipment. And as I mentioned earlier, we've seen it quite stable in the prior 3 quarters. So we'd like to think that, that's at a trough level. Number two, despite the decline in sales, we reached a record high comparable operating profit margin. So a nice example of the impact that we're creating through executing on the strategy. Similarly, key takeaway number three is that we're targeting to lower our cost level by approximately EUR 20 million in 2026 compared to 2025, which Mikko just elaborated. Number four, we continue to execute on the strategy, as I've mentioned a few times previously, with a focus on both growth opportunities, but at the same time how we increase our relative value creation potential and all of which should lead to our aim to continue to have an extremely strong balance sheet with excellent cash flow. So with that, I think I'll turn it over to you, Aki. Aki Vesikallio: Thank you, Scott. Thank you, Mikko. With that, operator, we are ready for the Q&A session. Operator: [Operator Instructions] The next question comes from Antti Kansanen from SEB. Antti Kansanen: It's Antti from SEB. A couple of questions from me. I'll start with the comments on the U.S. demand, which you are talking about an uncertain environment, but at the same time, not expecting any incremental weakness anymore. So could you maybe open up a little bit on those comments in a sense that have you seen something start of, let's say, '26 in the first couple of months that would indicate that your own business has stabilized? Is this more comment on what you are looking at the leading indicators and the overall macroenvironment on -- especially on the U.S. delivery side? Scott Phillips: Yes. How about I start with that. Thank you, Antti. In terms of the U.S. side, to elaborate more broadly, we really see that the same factors that have led to the demand environment, especially that we saw in the latter part of Q1 last year and then, of course, through Q2, 3 and 4 should continue into 2026. So we aren't at this point seeing any variables that would lead us to believe that the environment gets more, let's say, unstable or an imminent additional risk. So we feel like we have pretty good visibility in terms of the risk. The environment, at least at this point, continues to be quite similar as it was in '25 and also somewhat similar to the prior year period as well in terms of we still see more robust demand from our larger key account customers. So a good portion of the business is still driven by bigger, more lumpy key account orders, which accounts for a bit of the negative variance if you think about Q4 '25 versus Q4 of '24. So on the other hand, we still see pretty significant pressure on our small and medium-sized customers who are, to the extent possible, delaying decision-making with the environment at hand that it's hard to understand the level of cost out into the future that they'll actually experience relative to the environment that they'll experience when they take possession of the equipment. So we do still continue to see with small and medium-sized customers softer demand through delayed decision-making. Antti Kansanen: Yes. Just maybe a reminder on how the start of '25, let's say, Q1, Q2 and especially on the smaller clients in the U.S. Is this kind of a tough comparison if we think about the run rate that you're now entering this year versus what it was 1 year ago? Scott Phillips: Yes. I'll answer it this way, and hopefully, I hit the point you're getting to, Antti. If you think about the Q4 '24, we had a rather large key account order that hit our order intake in Q4 that we didn't match in the comparison period in '25 and Q4. We had a couple of nice sized key account orders in '25, but not at the magnitude that we had in '24, which accounted for primarily the variance, especially in the U.S. market that you're mentioning. Now if you think about the beginning of '25, the demand environment from the U.S. did give early indications that it might uptick if -- as we examine more closely the development sequentially throughout the year of order intake and particularly in the U.S. But of course, once the trade tensions manifested themselves, then, of course, we've seen a pretty consistent level of demand as a consequence from that point forward. And we still see that carrying forward into '26 at this point. Antti Kansanen: All right. And then a couple of more, let's say, housekeeping related profitability questions. First is on the service profitability and understand the EUR 1 million negative impact that you point out. But the margin trend is still a little bit different than what we saw on second and third quarter on the top line, that's not really that much different. So is there something more in play? Just trying to get my estimates right for this year. Is that kind of the '24, '25 margin level a bit too challenging for current environment? Or how should we think about that? Mikko Puolakka: Yes. Thanks for the question. So basically, quarter 4 service profitability without this EUR 1 million, U.S. healthcare deficit coverage was 22%. And this is lower than, for example, as you indicated, lower than quarter 1, 2 or 3. And here, basically, the other underlying reason is the lower installation volumes what we have had in Services throughout 2025. And this is due to the fact that the Equipment order book has declined and the equipment volumes have been lower. So there has been less installation volumes during quarter 4. There are certain kind of fixed costs like rents for the installation workshops, and this has lowered the services profitability. That's basically the -- those are the underlying reasons. Antti Kansanen: So the installation volumes that impact service profitability dropped in Q4 versus the previous 2 quarters? Mikko Puolakka: Yes. And also compared to quarter 4 2024. Antti Kansanen: Okay. And then the last one was on something that you said on the group admin side, I mean, EUR 11 million for the quarter, if I remember now, a bit higher than what it has been. Is this a number that then you will further increase by, what was it, EUR 5 million annually going into this year? Mikko Puolakka: There are certain fluctuations, quarterly fluctuations in the group admin costs. So that should not necessarily be used as a run rate. But if you think the full year 2025 and what I indicated in the outlook that on top of that we anticipate to have roughly EUR 5 million related to the systems development, which is then expected to generate cost savings in the later -- kind of in the later years once the system landscape has been simplified. Operator: The next question comes from Panu Laitinmaki from Danske Bank. Panu Laitinmaki: I have a few. I will start with the U.S. market outlook, going back to the previous discussion. What do you think is the underlying reason causing the uncertainty? Is it that your product prices have increased and the customers are kind of -- they need to digest that? Or is it just the uncertainty around like what happens with the tariffs next? Scott Phillips: Yes, thanks for the question. Just to clarify a bit, we still see the hangover from a couple of years prior where we still have a bit of the inflationary environment that we inherited from the COVID situation, followed by the increase in interest rates. Then, of course, the new variable that entered the equation last year was then the changing trade environment as a result of changes in tariff regime. So where we see a slight difference that I hadn't articulated earlier is we do see that more acutely impacting our, let's say, retail last mile type customers. So broadly speaking, we see it impacting still similarly in our building construction supplies, waste and recycling, construction logistics. But where we do see a difference here is in our retail last mile customers, if you're looking for a bit of what changed kind of sequentially through the year in 2025 and certainly more so in the second half of the year. Now that both impacted the top line and as Mikko articulated earlier, also created a situation where we weren't quite able to keep up with cost out relative to the change in the top line. So we had a bit of trapped or under-absorbed costs that we'll attend to throughout this year, if you will, as part of our cost savings. But that mainly are the underlying factors there. So you still have the inflationary environment, the additional variable trade tensions, where we do see a bit of change in behavior who, based on the changes in demand was most impacted were the retail last mile customers. Panu Laitinmaki: Okay. Then on the market outlook in Europe, could you talk about like what are you seeing there? And how are the different segments performing, especially interested on defense and construction? Scott Phillips: Yes. Yes, we certainly saw in Europe a nice or, let's say, a steady pickup in our Logistics segment, which shows up in part of our lifting solutions. We still see a relatively stable construction environment. So we're yet to see real evidence of, let's say, a sustained uptick in the demand curve, but we have seen some green shoots there where we've perhaps -- well, we picked up our sales. Whether it's an issue of gaining market share or not, we're not sure. I'd say more broadly, in some geographies we're up, some down. So on balance, we're saying we're relatively stable in terms of the overall market shares in that segment. At the same time, of course, we're seeing a pickup in defense logistics. However, it's important to note that, that's one area of our business where you'll tend to see a large spread in from taking the order or having order received versus the revenue recognition. Often, those contracts are multiyear contracts to be delivered over a longer time series. So then the time between order received and rev rec might be long-ish. So there'll be a bit of a spread between our order intake development versus seeing that in revenue side, keep that in mind, and some of which will be dependent upon our partners in the transaction and how they choose to fulfill the orders that they have to the various military organizations that they provide those solutions to. And then in terms of services, similar story more broadly speaking, we continue to see a nice steady uptick in both order intake as well as services, primarily -- or in revenue rather, and then primarily driven by the execution of the strategy, as I had mentioned earlier in the presentation. We see the nice uptick in our ProCare contract coverage. It's working nicely for both our dealers as well as executing in terms of the direct sales. And we have more to come there. Similarly, we see a nice uptick in connected units that are turned on, and now we're able to engage more meaningfully with our customers on an ongoing basis relative to how the installed base is performing. But then at the same time, it also gives us a unique opportunity to engage with them in terms of the actual cost and productivity and safety outcomes that they're experiencing. And that's translating into better services revenue uptake as well. Panu Laitinmaki: All right. Then my final question is on the guidance, or actually 2 things around the guidance. First one is that can you comment if the more than 13% margin is a guidance for each of the quarters this year? So will it be higher than 13% every quarter? And then more importantly, what are the kind of swing factors in the guidance? You said that it's a floor, and I get that it's quite early in the year, so it's probably conservative. But what are the kind of positives that could drive margin higher than the floor level? And any comments around those? Mikko Puolakka: Yes. Thanks for the excellent question. As I mentioned in the kind of background of the outlook, we have incorporated the EUR 20 million cost savings in that outlook. And based on the labor union or labor works council negotiations, we anticipate that the new organization could come into force in quarter 2. So that means that mostly those savings would be visible in the second half of 2026. So from that point of view, I would say that one can't say that it's every quarter above 13%. This is a full year outlook, and we aim at being above that 13%. Operator: The next question comes from Andreas Koski from BNP Paribas. Andreas Koski: A number of questions from me as well. So if I can start with the backlog development. You now have a backlog that is 18% lower compared to 1 year ago. And I wonder how will this impact sales in 2026 compared to 2025, i.e., is there a lower absolute amount from the backlog that will be delivered in '26 compared to what we saw in '25? Scott Phillips: Yes. I'd say that -- Andreas, thanks for the question. So I'd say the right way to think about the backlog and then how we are thinking about the sales realization in '26 is as follows. So on the one hand, if I come back to the prior question from Panu, the lower order book by EUR 114 million means that we have been that much less visibility to our revenue curve into '26. So that's an influencing factor in terms of where we set the floor. Having said that, we've set the floor 100 basis points higher than we did in each of the prior 2 years. On the other hand, then what I would say is the right way to think about the revenue recognition for '26 is a bit more a factor of looking at the trailing last 12 months order intake. And then as we've indicated, we're at or about the EUR 1.5 billion range. So that's for us the right starting point of how we think about the potential for this year and then how it relates into setting the outlook for '26. But at this point, we don't give the outlook relative to the top line development, primarily because we have -- we're a short-cycle business, so we have this 4 to 5 months' worth of visibility into our revenue curve with where our order book stands, which is quite at a normal level now. Andreas Koski: Understood. And is it fair to say that, it sounds like you expect the recovery to continue in EMEA and APAC, and you are now saying that the U.S. market is at trough. So in total, it sounds like you expect total orders to move upwards from the stable level that we have now seen for a number of years? Is that the correct reading of what you're saying? Scott Phillips: Well, what we're saying is that we are -- if you look at the trends throughout '25, we see a nice recovery in EMEA and APAC. But of course, if you think back to Q4, for example, so Q4 compared to the comparison period, we had a negative variance, whereas we had positive variance for the entire year. So there is still a bit of variability, which is also part of why we're at this point not providing guidance on order intake or revenue for the year. And at the same time, we see that if the environment in the U.S. continues as it was in '25, then we would expect for the demand environment to look similar to what it did in '25 at this point. Andreas Koski: Okay. Understood. And then on the 16 new dealers that you have signed since the beginning of 2024, are most of them at full speed now? And do you see that you are performing better than the market because of these new dealer agreements? Scott Phillips: Yes. Excellent question. And I would say, broadly speaking, not yet. Many of the dealers that we've onboarded have been into the latter half of '24 and then throughout '25. So we're, let's say, sequencing the onboarding of the dealers, which, of course, is quite a nice and involved process in terms of getting them up to speed on our offering, getting the systems behind the support and then at the same time, getting everyone in both the dealers as well as on our side up and mobilized in order to help ensure and secure that our dealers are able to deliver on behalf of today's and tomorrow's customers. So we're at varying stages of mobilizing the dealers. So I would say, broadly speaking, no, all 16 dealers aren't at full speed yet, but some of which are and we're over time getting all of the dealers up to speed. And then we would anticipate to continue to add additional dealers as we progress through '26. Andreas Koski: Understood. And then quickly on the balance sheet. Is the Board considering any more extraordinary dividends in the years to come? Or is the priority now to do acquisitions and grow organically? Scott Phillips: Well, I'd say that we have a full mandate to leverage the balance sheet to catalyze growth, both organically and inorganically and continue to explore ways in which we would successfully deliver value creation back to our shareholders. Operator: The next question comes from Tom Skogman from DNB Carnegie. [Audio Gap] [Operator Instructions] The next question comes from Mikael Doepel from Nordea. Mikael Doepel: This is Mikael Doepel from Nordea. So a couple of questions from my side. First of all, how big part of your total revenues or orders was the defense business in 2025? Scott Phillips: Yes. On an order basis, our defense for full year '25 is approximately 7%, so a little bit up from 24%. Mikael Doepel: Okay. That's very clear. And then secondly, if you look at 2026, I mean, I understand that you have your cost [indiscernible]. But if you look at the underlying trends in costs, how do you see that developing in terms of material costs, in terms of labor costs? And also, are you still adjusting pricing upward [ or downwards ]? Just a bit on the price-cost equation? Scott Phillips: Yes. So in terms of material cost, there -- we still have in our execution plans specific actions that are both process related as well as design related that we think on balance are going to provide favorable variance in terms of our bill of material cost. Labor cost, of course, we have the statutory increases that we assume will come. We don't yet have visibility in terms of what the magnitude of that impact will be, which we're taking into consideration relative to our cost savings program. And then in terms of our pricing environment, as always, we -- there are certain products that we surely are seeking additional pricing for, which we've already announced, both in terms of equipment as well as the services side of the business. And there may be a number of SKUs where we go into this year with flat pricing. It all depends on the market list pricing, which is the nature of the environment in which we compete in. Mikael Doepel: Okay. No, that is clear. And then just related to pricing, just a brief follow-up. So do you see -- I mean, in terms of tariffs, would you say that you are still fully able to compensate on that? Or is that having -- or do you expect that to have some sort of impact on your margin in 2026? Scott Phillips: Yes. Broadly speaking, the answer is yes. And of course, there are always -- there's always variance around timing, Mikael. But broadly speaking, so far, yes. Mikko Puolakka: All in all, as discussed earlier, basically, our principle has been to treat the tariff as a cost element. So we pass that cost to our customers. We don't put the profit margin on the tariff. And basically, in last year the tariffs had roughly EUR 20 million impact kind of tailwind to our order intake and then roughly EUR 15 million in sales. Aki Vesikallio: Related to pricing we have also one question from the webcast. So our customers pushing back more on pricing compared to prior periods now? Scott Phillips: I'd say, as always, our customers are seeking for the best possible price. So -- and we have great customers, so we have tough negotiators. But I wouldn't say that it's a different level of environment as compared to what we're normally seeing. So it's our obligation to offer the best possible price. Operator: The next question comes from Antti Kansanen from SEB. Antti Kansanen: Maybe you already answered on the previous one, but I was just wanting to ask how much of that kind of 0% organic order growth in '25 was pricing? I mean you said that tariffs had a EUR 20 million impact, but how about price increases otherwise? Mikko Puolakka: Yes. In -- I would say that in our Equipment business globally without the tariffs and in Europe and in Americas, I would say that the pricing has been fairly flat in 2025 compared to 2024. In Services we have done certain low single-digit price increases, mainly to reflect, for example, topics like labor inflation. And then as mentioned earlier, we have implemented in the U.S. since the inflection of the tariffs then the tariff surcharge. But it's not in the price list, but it's a separate kind of cost item in the customer invoice. Antti Kansanen: And this is kind of positive or neutral versus kind of cost increases that you have accrued? Mikko Puolakka: I would say neutral. Yes. Antti Kansanen: Okay. And then, I mean, I understand that there's no sales guidance, but I'll try anyways, because you mentioned that kind of the 12-month rolling order intake, a good starting point, around EUR 1.5 billion, that's also the Q4 run rate we are right now. Then you'll add EUR 50 million plus from the Brazilian acquisition and then you are kind of seeing European market recovering, U.S. market not coming down. So if I then add that scenario, that would be a growing top line and maybe together with the savings also growing earnings. Is there something that I'm misunderstanding here or being too optimistic? Mikko Puolakka: So one topic to consider is that we had still in -- if you look at the run rate for the revenues, we had more than EUR 400 million revenues in the first and second quarter of 2025. And that was still coming from the -- a bit higher kind of order intake run rate from 2024 and the backlog as well. So perhaps looking the kind of second half -- well, like I said, the rolling 12 months is the indicator what we are using for kind of sizing our costs and planning the operational activities. Antti Kansanen: Sure. And then the ING acquisition, is there anything you want to point out on how much margin dilutive that would be on the Equipment business, if anything? Or is there some kind of cost saving synergies that would already impact this year's numbers? Mikko Puolakka: There is a certain PPA impact. I would say that on an EBITA level, it would be fairly stable as an Equipment business. But then on an EBIT level, there is a certain PPA element, which we will then open as we proceed in 2026 reporting. Operator: The next question comes from Tom Skogman from DNB Carnegie. Tomas Skogman: I would just like to start by asking, do you have expectations for larger defense orders in '26? I guess these are projects that are discussed for a long time. What do you know? Scott Phillips: Yes, I'll start there and please chip in, Mikko, if I miss something here. But the backlog is pretty robust and exactly as you described, Tom, we've pretty fairly well known and understood. As we have discussed maybe since late '24, however, we have seen a number of, let's say, shorter cycle opportunities that have popped up. And that's maybe one of the key differences that we've seen in the demand environment with defense logistics. So whilst we have a view today in terms of what the value of the backlog is and what each individual opportunity is, it could easily be so that there are new opportunities that present themselves throughout the year that we didn't foresee as we speak right now. So that's probably the one change. In terms of the expectation of how we'll convert that this year, extremely hard to call as those orders are frustrating at best to dial in as part of a forecast. I'll put it that way. Mikko Puolakka: But overall, I would say that the funnel looks good for the defense business. Scott Phillips: Yes. Mikko Puolakka: But the timing is... Scott Phillips: Timing is really difficult to call. Yes. Tomas Skogman: Okay. And then on your Service business, how large share of sales in 2025 related to installation of new equipment? Scott Phillips: Yes, you can think of it this way. Our nonrecurring revenue for 2025 was around 24%, 25%, which is linked to our new equipment sales. Installation specifically slightly down probably from the last time that I think we had this conversation, so between 10% and 15%. Tomas Skogman: Okay. And then what about the utilization rates of your equipment? I didn't see any slide on that when you have your sensors. Is it still the situation in the U.S. that equipment is used a lot, but they don't order? Scott Phillips: Yes. We've seen a lot of change in variability in the utilization. Some periods have been up, some down, also changes as it relates to equipment in Europe versus equipment in the Americas. So on balance, fairly stable as it related to the prior year period. But to your point, Tom, it's -- we're still in this environment where our customers are sweating the assets. That's no question about that. Tomas Skogman: And then when you get new distributors, is it so that they start by building up an inventory? Or do you need to ship kind of things just to display to them? Or how does it usually work now when you get this kind of larger new distribution contracts? Scott Phillips: It depends on the nature of the equipment. Some equipment is advantageous for the distributors to have inventory of other equipment. It's not necessary based on our lead times. So it all depends on the focus of the particular dealer. Not so insightful if I make a broad statement of some dealers will build up a bit of inventory because they're going to focus more on longer cycle business or longer lead time businesses versus others that will have, let's say, relatively short-cycle equipment. Having said that, an example where that's a bit counterintuitive is the tail lifts would be a great example where we have distributors in Europe that do maintain a level of inventory because of the need for less than 1 day fulfillment, both in terms of the tail lift as well as the parts that are associated with the tail lift. So it all depends. Tomas Skogman: Yes. But the U.S. distributors do not really have inventories of cranes for it? Scott Phillips: Correct. Tomas Skogman: And then the EUR 10 million cost saving, how is it split between OpEx and SG&A cost? Mikko Puolakka: Part of the -- Part of these cost savings come -- we have not specified how much comes to the SG&A cost. Part of that will be visible also above gross profit. But overall EUR 20 million savings in '26 versus the 2025 cost level. Yes. Scott Phillips: Yes. And just a bit more color. If you think about it compared to '25, then we anticipate a bit more shift towards the below gross profit level cost savings. But at this point, too early to say as we need to complete the labor negotiations process first. Then we can provide a bit more color on that as we progress through the year, Tom. Tomas Skogman: And then finally, with the current FX rates and especially the dollar rate, how big impact do you expect it to have on EBIT after all hedges and everything basically? Mikko Puolakka: Well, I would say that if we would take, say, 10% weakening of the U.S. dollar from the, let's say, average second half of U.S.-euro rate, that would -- that 10% would mean roughly EUR 8 million decline in comparable operating profit. Operator: There are no more questions at this time. So I hand the conference back to the speakers. Aki Vesikallio: Okay. Thank you for the good questions and for the presentation and answer for Mikko and Scott. We will be back on 24th of April with our first quarter results, 2026. Thank you. Scott Phillips: Thank you, everybody.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to assist you. Hello, and welcome everyone joining today’s Onity Group Inc.’s Full Year and Fourth Quarter Earnings and Business Update Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. To register to ask a question at any time, please follow the operator’s instructions. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Valerie C. Haertel, Vice President of Investor Relations. Please go ahead. Good morning, and welcome to Onity Group Inc.’s full year and fourth quarter 2025 earnings call. Please note that our earnings release and presentation are available on our website at onitygroup.com. Speaking on the call will be Chair, President and Chief Executive Officer Glen A. Messina and Chief Financial Officer, Sean Bradley O’Neil. As a reminder, our comments today may contain forward-looking statements made pursuant to the safe harbor provisions of the federal securities laws. These statements may be identified by reference to a future period or by use of forward-looking terminology and address matters that are uncertain. Forward-looking statements speak only as of the date they are made, and involve assumptions, risks, and uncertainties, including those described in our SEC filings. In the past, actual results have differed materially from those suggested by forward-looking statements and this may happen again. In addition, the presentation and our comments contain references to non-GAAP financial measures such as adjusted pretax income. We believe these non-GAAP measures provide a useful supplement to discussions and analysis of our financial condition because they are measures that management uses to assess the performance of our operations and allocate resources. Non-GAAP measures should be viewed in addition to and not as an alternative for the company’s reported GAAP results. A reconciliation of these non-GAAP measures to their most directly comparable GAAP measures and management’s reasons for including them may be found in the press release and the appendix to the investor presentation. Now I will turn the call over to Glen A. Messina. Glen A. Messina: Thanks, Valerie. Good morning, everyone. And thank you for joining our call. We are looking forward to sharing our results for the fourth quarter and full year as well as reviewing our strategy and financial objectives to deliver long-term value for our shareholders. Let’s get started on slide three. Our fourth quarter and full year results again demonstrate the effectiveness of our strategy and the strength of our execution. We delivered record earnings through sustained growth and profitability that enabled a significant partial release of our deferred tax valuation allowance. Our balanced business and MSR hedging strategy performed effectively as rates move lower in 2025 with higher origination earnings offsetting lower servicing earnings. Our fourth quarter results were impacted by $14,000,000 of incremental MSR runoff due to higher delinquencies driven by the changes to the FHA loan modification rules and the government shutdown. We believe this will stabilize in 2026. Sean will talk more about this later. Finally, we executed a strategic partnership with Finance of America Reverse to reposition our participation in the reverse mortgage market to simplify the business, which we believe will drive future earnings growth and improve shareholder returns. Glen A. Messina: Overall, we had a great 2025. And I am proud of our team and what they accomplished. Considering the macroeconomic environment, our liquidity position, and our continuing investment in talent and technology, we are excited about the potential for our business in 2026. Let’s turn to slide four to review a few key financial trends. Over the last three years, we have delivered continued growth in adjusted revenue through steady growth in total servicing additions, servicing UPB, and dynamic asset management. The combination of revenue growth and focus on continuous process reengineering has driven steady improvement in operating efficiency. This has resulted in solid double-digit adjusted ROE over the past several years, notwithstanding the adverse impact of the FHA rule changes and government shutdown which was roughly a three percentage point impact in 2025. Our sustained and growing profitability has driven continued growth in book value per share which was accelerated this year through the deferred tax valuation allowance release made possible by our actions to transform our business. Let’s turn to slide five for more about the capability of our balanced business. There is no better proof of the effectiveness of our balanced business model than our results in 2025. You can see on the left the contrast in how originations and servicing contribute to the company’s financial performance as interest rates change throughout the year. With higher rates in the first half, both servicing and originations were profitable, and servicing was the primary earnings driver. In the second half of the year with falling rates, originations took over as the primary earnings driver. We believe our balanced business is performing as intended and our scale in both servicing and originations enables us to perform well with high or low interest rates. Let’s turn to slide six for more about our growth actions and focus. In 2025, our originations team delivered 44% year-over-year volume growth, versus 18% for the overall industry. In business-to-business, our enterprise sales approach, product breadth, and client service delivery model have been highly effective growth enablers. Consumer Direct is demonstrating strong growth, driven by declining rates in 2025 and improved execution. We continue to deliver industry top-tier recapture performance versus the industry averages and our target peers. We are launching new and upgraded products and services to expand our addressable market, access higher-margin market segments, and manage operating capacity for surges in refinancing activity. We have continuously invested in technology and process optimization to enhance the customer experience, reduce cost, and improve scalability and competitiveness in both business-to-business and Consumer Direct. To highlight how far we have come, our fourth quarter funded volume was the highest we have ever originated. Now please turn to slide seven for an example of how our technology is continuing to enhance refinance recapture performance. We have been investing across four categories of AI—robotics, natural language processing, vision, and machine learning—to improve business performance and competitiveness on several dimensions. While not exhaustive, this slide illustrates the approach we follow in deploying AI to improve recapture performance. As we look across the refinance customer journey and improved customer experience, we are aligning AI efforts with key points along the journey that contribute to an improved refinance recapture rate. Our biggest performance gains have come from using machine learning to bring together internal and external data about our customers, their loan, and our processes. This has helped us enhance communications, manage capacity more dynamically, and better inform decisions and actions across the borrower journey. We use machine learning to identify customer and loan-level characteristics that we believe are predictive to total MSR return, including expected loan performance and recapture propensity. This helps shape our MSR investment and asset management decisions. Other elements of our AI strategy include large language models and robotic process automation that are targeted to improve the human–machine interface and operations capacity, streamline processes, and reduce cost. Ultimately, all these investments resulted in improved borrower experience. Let’s turn to slide eight to see what we have accomplished in subservicing. We continue to see a high level of interest amongst prospective clients to explore servicing options and alternatives. Our second half subservicing additions of $33,000,000,000 were over two and a half times the first half level, driven by new relationships, our existing clients, and synthetic subservicing with our MSR capital partners. And we expect that momentum to continue into 2026, with projected subservicing additions of $28,000,000,000 from these clients. We expect to board eight new clients in 2026 and have another eight new agreements under negotiation. We continue to see attractive growth opportunities in small balance commercial, where subservicing UPB is up 31% year-over-year. While the requirements are more complex than performing residential servicing, we believe the returns are better. We have the expertise and we are investing to drive continued growth in 2026. Overall, we are excited about the growth potential in subservicing, and we continue to invest in our sales and operating capabilities to pursue a robust opportunity pipeline. Regarding our subservicing relationship with Rithm, we expect the transition to begin in 2026. As a reminder, the Rithm subservicing is one of our least profitable portfolios before and after corporate allocations. We expect to adjust our cost structure and replace the earnings contribution from the Rithm portfolio with more profitable business that is better aligned with our current growth focus. We do not expect the removal of these loans to have a material financial impact for the full year 2026. Let’s turn to slide nine to talk more about how we have grown our servicing portfolio. We have increased our owned MSR portfolio, with our objectives to grow earnings and book value, as well as reload our portfolio for recapture opportunities. Owned MSR UPB is up 15% year-over-year, versus total industry servicing growth of 2% for the same period. Our servicing UPB at the end of 2025 is up 9% over the prior year, with $49,000,000,000 in servicing additions net of runoff more than offsetting planned transfers to Rithm and other client deboardings. MSR demand is keeping prices elevated. Several of our clients have taken the opportunity to monetize their MSRs and are replenishing their portfolio as industry originations volume increases. Our ability to grow our servicing portfolio while our clients execute opportunistic MSR sales highlights the power of our originations capability and the success of our growth strategy. Let’s turn to slide 10 to discuss our servicing platform. We have built a strong servicing platform that delivers top-tier performance on multiple dimensions. We service 1,400,000 loans on behalf of more than 3,000 investors and over 100 subservicing clients, including forward, reverse, and business purpose residential mortgages. We have been recognized by Fannie Mae, Freddie Mac, and HUD for industry-leading servicing performance. And our automation center of excellence has also been recognized by SSON as best in class. Based on the MBA 2025 servicing cost study, our fully loaded servicing operating expenses are materially lower than the large nonbank servicer average for both performing and nonperforming loans. Our continuous focus on improving the customer experience is evidenced with high satisfaction ratings from our borrowers and subservicing clients on key dimensions of our performance. While we are not the largest servicer in the industry, we deliver top-tier performance for customers and investors and are positioned to fiercely compete with anyone regardless of size. Let’s turn to slide 11 to discuss our industry environment for 2026. We believe the macro environment is largely favorable for housing and housing finance. MBA and Fannie Mae are projecting 15% year-over-year growth in total industry origination volume, driven by strong double-digit growth in refinance volume. The current administration has identified housing affordability as a priority which could be a catalyst for growth in both refinance and purchase originations. We believe GSE privatization can be beneficial for the industry to restore competition and foster innovation amongst the GSEs, create opportunities for nonagency product expansion, and attract capital to the industry. MSRs continue to be in high demand, driving strong pricing and values, and M&A activity continues, especially in servicing. We are equally mindful of potential headwinds that could impact the industry in 2026. We believe the FHA modification rule changes will continue to adversely impact delinquencies and MSR runoff, before normalizing through the second quarter, at levels slightly below year-end 2025. This assumes no further program changes or general credit quality deterioration. Unfortunately, we are seeing an increased willingness to tolerate frequent and sometimes protracted government shutdowns over budget disputes. We are also seeing increased competition in forward residential subservicing. There is evidence in discussions of an evolving K-shaped economy which may give rise to increased delinquencies and defaults in certain portfolio segments. Finally, housing supply continues to be one of the biggest constraints to housing affordability, limiting purchase origination volume. On balance, based on what we know today, we expect the environment to be net favorable and we believe our balanced business is well positioned and an attractive option for investors interested in the mortgage sector. Let’s turn to slide 12 to review our priorities for 2026. This year, we remain focused on executing our proven strategy, following through on our simplification actions, and investing to drive profitable growth. We remain committed to driving organic growth enabled by our enterprise sales approach, value delivery model, and new product development. We will evaluate opportunistic bulk acquisitions and M&A if the economics are compelling and we believe it contributes to maximizing value for shareholders. Investing in technology remains a key priority to drive recapture, service excellence, and reduce cost using our previously described technology investment prioritization framework. In servicing, we are committed to transitioning out of the legacy Rithm subservicing and focusing our participation in the reverse mortgage market as a subservicer. Finally, we expect to deploy capital to grow high-yielding MSRs and other investments and support our capital structure objectives. For 2026, we are targeting an adjusted ROE range of 13% to 15%, which is the equivalent to 16% to 18% before the increase in our equity from the deferred tax valuation allowance release. Now I will turn it over to Sean to discuss our results in more detail. Sean Bradley O’Neil: Thanks, Glen. Let’s turn to slide 13 for a recap of key financial measures by quarter. Revenue continued the strong growth trend exhibited in 2025, up 25% in the fourth quarter year-over-year and 6% sequentially. I would note that typically the fourth quarter is a seasonally weaker period for originations across the industry, but as you will see, originations at Onity Group Inc. continued to grow revenue and pretax income. Our adjusted return on equity was 7% for the quarter, and 17% when adjusted for the material impact of the governmental actions that Glen referred to. We have shown the magnitude of these actions on our results on every slide with adjusted ROE. As a result of our ongoing profitable operations in servicing and originations, and the release of $120,000,000 of our existing valuation allowance in the fourth quarter, our book value per share increased more than $11 quarter-over-quarter and $17 year-over-year. Now let’s turn to slide 14 for the pretax income results of our origination segment. Originations adjusted pretax income was significantly higher both year-over-year and sequentially, reflecting an improvement above the already strong third quarter performance we saw recently. This performance was driven by record levels of origination volume in both our Direct and B2B channels. The volume was also supported by an increase in Ginnie Mae volume as well as new product volume from closed-end seconds and our newly launched non-QM product suite. Please turn to slide 15 for details on the originations volume. B2B volume continued to top a record third quarter with higher volume and improved margins versus the prior year and quarter. This increased volume and margin was supported by a strong enterprise sales force, the breadth of our product offering, and our ability to deliver a positive customer service experience. Consumer Direct volume was up sharply, reflecting the continued strong performance. Importantly, we improved Consumer Direct’s revenue per loan and average loan versus the prior quarter. Please turn to slide 16 for our servicing segment performance. Servicing was profitable but impacted by higher-than-expected MSR runoff expense. While both UPB and revenue continued to improve in the fourth quarter, higher MSR runoff more than offset that improvement. Besides interest-rate prepayment-driven runoff, the remainder of the runoff was driven by two distinct government actions. The more impactful being the change FHA made to loan modifications that took effect on 01/2025 and the second being the six-week government shutdown from October to November. The combined impact was higher delinquencies and delayed cures, with fewer borrowers moving from delinquent to current status. This impacted November and December runoff expense by approximately $14,000,000 which is represented on the slide by the dotted box. Please turn to slide 17 for details on government actions in Q4 impacting servicing profitability. An FHA program change that was announced earlier in 2025 took effect on October 1, and replaced some COVID-era programs with more normative loan modification policies. Some of those included removing the ability to go into a loan modification without a three-month trial period. This trial period usually has some percentage of the loans falling out as they fail the trial. Also, the ability to modify was limited to once for 24 months, and some other loss mitigation structures that had existed since COVID were ended. The effect on the entire industry was a higher overall delinquency rate for FHA borrowers of about 80 basis points in the fourth quarter versus the third quarter. These FHA program changes may accelerate some loans into foreclosure status in the near term that may have benefited from the prior HUD rule. The FHA modification impact was exacerbated by the longest government shutdown to date, which occurred at the same time, ceasing the delivery of needed paychecks for borrowers over that period, which also contributed to higher delinquencies. Overall, based on our experience, analytics, and available industry data, we expect delinquencies to continue to trend higher in the near term and stabilize by 2026, down from Q4 levels but still elevated. Please turn to slide 18 for an assessment of our continued strong hedging performance. Once again, our MSR hedge strategy continued to perform well and as intended in the fourth quarter. As a reminder, our strategy is designed to mitigate interest rate risk and our hedge has been effective as you can see on the graph. Prior to 2024, we increased our hedge coverage ratio such that by 2024, we were seeking to hedge the majority of our interest rate risk. When we compare our results with information in the public domain, we believe we provide an effective MSR hedge at an efficient cost relative to our peers who also hedge a significant portion of their book. Given that an MSR hedge is dependent on the interest rate and related derivatives markets, we frequently review and assess our hedge strategy to manage risk and optimize liquidity and total returns. Please turn to slide 19 for an overview of the valuation allowance. On 12/31/25, we released a valuation allowance that was offsetting our net deferred tax asset. This action was part of our ongoing quarterly review per ASC 740, which considered, among other factors, our consistent profitability over the last several years to enable the release. In addition to immediately improving net income in the fourth quarter, which also contributed to our strong improvement in book value per share, the positive impact on our equity improved our DE ratio considerably, moving us to 2.6x. We will continue to assess the remaining valuation allowance of $26,000,000 which is predominantly offsetting state tax NOLs. Currently, we do not expect any material changes to the valuation allowance in the near future. The increase in equity will bring adjusted ROE down by about 300 basis points such that our guidance for full year 2026 goes to 13% to 15% versus the 16% to 18% it would be absent the valuation allowance release. Overall, the release of the substantial majority of our existing valuation allowance is another indicator of our recent improvements in profitability and affirmation of our strategy and execution. Please turn to slide 20 for observations on liquidity. To start with, at year-end 2025, our liquidity was $2.5 billion, of which $181,000,000 was unrestricted cash and the remainder was MSRs that were pledged but undrawn on a bank line. Then in late January, we opportunistically conducted an add-on high-yield offering where we issued $200,000,000 of notes identical to our Q4 2024 high-yield issuance but at an effective yield of 8.5%, which is about 140 basis points better than our 2024 issuance. We have not yet closed our Finance of America Reverse MSR transaction, which is awaiting Ginnie Mae approval, but when that closes, we will recognize roughly $100,000,000 in proceeds as disclosed in previous 8-Ks and press releases. Our approach to deploying excess capital is to immediately de-risk our balance sheet by replacing mark-to-market MSR bank financing with longer-term non-mark-to-market high-yield proceeds. We then consider other uses for the capital, such as increased participation in MSR bulk purchases and higher volumes in the B2B originations channel with retained MSRs. In addition, we have received board approval to launch a $10,000,000 share buyback program, which we can fund with liquidity as of year-end 2025, or M&A opportunities. We think these various transactions provide ample capital to pursue various growth strategies in 2026. On slide 21, we provide guidance for full year 2026. As Glen mentioned earlier, we expect to deliver an adjusted ROE of 13% to 15%, which includes the impact of the valuation allowance release on increased equity. For modeling purposes, I would indicate our effective tax rate in 2026 is projected to be modestly higher than the federal and state levels due to some permanent expense disallowances, and we presently anticipate an effective tax rate of 28% to 30%. Furthermore, the combined impact of the Rithm-related restructuring and Finance of America indemnifications and restructuring costs are expected to be in the range of $19,000,000 to $20,000,000. Those indemnifications and restructuring will impact GAAP net income but not our adjusted ROE. We anticipate a 5% to 15% increase in servicing book UPB growth and this includes the nonrenewal of the Rithm contract, which had roughly $32,000,000,000 of UPB at the end of 2025. We expect to continue to maintain a high hedge effectiveness to protect the value of the MSR and continue to control expense growth to be commensurate with revenue growth. Overall, I am pleased to report a record quarter for net income that substantially increased book value per share for our shareholders. Back to you, Glen. Glen A. Messina: Thanks, Sean. Let’s turn to slide 22 for a few comments before we open up the call for questions. We remain committed to accelerating profitable growth and creating value for all stakeholders. I am proud of the team’s relentless focus on delivering on our commitments. Our strong 2025 results, led by record originations volume, validate our balanced business and its ability to perform through market cycles. We have built a technology-enabled, award-winning servicing platform that is efficient, delivers differentiated performance, and service excellence. We are delivering profitability comparable to our peers at a more attractive valuation, underscoring our commitment to strong shareholder returns. All of this comes together to suggest a share price that we believe has significant upside. And we intend to continue to take the necessary actions and maintain agility in a dynamic market to harvest that value for the benefit of all shareholders. Overall, we could not be more optimistic about the potential for our business. With that, operator, let’s open up the call for questions. Operator: Thank you. If you would like to ask a question, please press star then one. Once again, that is star one to ask a question. We will take our first question from Bose Thomas George with KBW. Your line is open. Bose Thomas George: Hey, everyone. Good morning. Just on the FHA impact on the MSR that you noted. So it is $14,000,000 in the fourth quarter. You noted there will be some impact in the first quarter and the second quarter. Can you help quantify that as well? Glen A. Messina: Bose, good morning, and thanks for your question. Look, you know, we certainly have quantified the impact for the fourth quarter because we go through a very intense analysis looking at every attribute of the MSR portfolio to see what impacted runoff, whether it is scheduled payments, unscheduled payments, escrow balances, delinquencies. Hard to predict right now on a go-forward basis how customers are going to perform throughout the course of the year. We have done a fair amount of modeling to support our estimation that we would expect this to stabilize by the second quarter. We think that is enough time for it to set a new norm, so to speak. And once your delinquency is at a new norm level, if you think about it, even if it is higher than it was previously—I will just pick some numbers. If it was 8% in one quarter and went up to 10%, that is a 200 basis point increase. That is an adverse impact to MSR valuation, and that is similar to what we saw in the fourth quarter. If it stays at 10% versus 10%, there is really nothing that flows through the MSR runoff line for delinquency because there was no incremental delinquency and no incremental change. So, right now, we are monitoring it closely. We are keeping an eye on how consumers are behaving. But with some of the new rule changes, and in particular, Bose, this requirement for consumers who are seeking a modification to do an attestation to say that they have the financial resources to complete the modification and go through, it is consumer behavior. It is hard to predict. We are keeping an eye on it to see how consumers are reacting to that. So, yeah, we would love to be able to give you a number. It is X in that quarter, Y in that quarter, but right now, it is just a little difficult to see. Bose Thomas George: Okay. Yeah. That makes a lot of sense. And then just on the origination side, with the government shutdown, was there an impact in terms of making it harder to recapture some of those FHA loans as well, or was the origination cycle alright even during the shutdown? Glen A. Messina: You know, interestingly enough, from a refi perspective, we did not see a material impact as a result of the government shutdown. I mean, it was just a tremendous quarter for us, a record-setting quarter from a refinance perspective. And, with lower rates as we can see from the MBA refi application index, continuing to chug along quite nicely. So, the refi expectations for the industry, at least coming out of the gate, seem to be reasonable and appropriate. So did not see any impact there. Excited about how our recapture platform is performing, and looking forward to working with our team to maximize performance of our recapture platform. Bose Thomas George: Okay. Great. Actually, just one more for me. The 13% to 15% guidance number, is that a post-tax number? So is that after that 28% to 30%? Glen A. Messina: No. Adjusted ROE is always on a pretax basis, Bose. It is a pretax income look. Yeah. It is pretax. Again, it does take into consideration the $120,000,000 increase to the equity base for our earnings for 2025, which is net-net a good thing. But we are conscious of making sure we can generate competitive return on equity on both a pretax and after-tax basis, and we will be mindful of our return on investment hurdles over the course of 2026 to make sure that we can deliver competitive returns. Bose Thomas George: Okay. Great. Thanks. Operator: Once again, if you would like to ask a question, please press star then one. We will take our next question from Eric Hagen with BTIG. Your line is open. Sean Bradley O’Neil: Hi. This is Brendan on for Eric. Do you think that there is an ideal interest rate environment for the subservicing business? And are there any catalysts you see to add a lot of scale in the subservicing business in the near term, or is that really a long-term growth opportunity? Glen A. Messina: Good morning, Brendan. Thanks for your question. Look, we have seen steady opportunity in subservicing. Quite frankly, it is not necessarily a function of interest rates, although in particular for the independent mortgage bankers, the privately owned independent mortgage bankers, when people are going through a refinancing wave, there is a tendency for privately owned independent mortgage bankers to hold more MSRs on their balance sheet for tax planning and tax management strategy. And because originations, retail originations in particular, tend to be cash flow positive during refinancing cycles, it provides more cash for the privately owned independent mortgage bankers to hold MSRs on their balance sheet. So during the last two years, we have seen a cycle where, I will use the term IMBs, independent mortgage bankers, IMBs were selling MSRs to harvest cash because origination margins were really quite thin. You know, I think it is an opportunity now with rates coming down for them to reload their portfolio. And we would expect to see growth there. Over the past couple of years, the big catalyst for subservicing has been, quite frankly, the amount of subservicing platforms that have changed hands. There were probably five platforms in the last two to two and a half years that have changed hands. And anytime you have that kind of disruption in the marketplace, it creates opportunities. It is an opportunity for subservicing clients to rethink and explore their options and alternatives. More recently, just yesterday, we saw the announcement of PennyMac’s acquisition of Cenlar. First off, my congratulations to David Spector and Jim Daras. I have a lot of respect for both those people. It looks like it was a good transaction for them. But, look, I would expect, as we have seen previously, it will create an opportunity for clients to rethink: What do I want to do? Do I want to stay here? Do I want to go? Whatever. It does create more people coming into the market to consider their alternatives. We love that. Quite frankly, as you have seen, we have grown our subservicing business quite nicely this year, $48,000,000,000 total subservicing additions this year. We have got another $28,000,000,000 in the hopper that we expect to board in the first half. Eight new clients signed up that are going to be boarding in the first half. Eight new contracts under negotiation. Love the momentum we have there. I think the subservicing business has always been fiercely competitive. Cenlar has been a competitor in the marketplace for years. And they are formidable, expecting to continue to be a formidable competitor. But I think this creates net-net opportunity to grow. Bottom line. Operator: Thank you. Sean Bradley O’Neil: And how much capital do you think will become available once the Rithm portfolio is fully transferred? Glen A. Messina: In terms of capital availability with the transfer of the Rithm portfolio, subservicing generally does not free up capital because we do not have an investment in that portfolio. So that in and of itself will not free up capital. Closing the sale of the reverse mortgage business, the MSRs, to Finance of America Reverse, we expect that will free up roughly $100,000,000 of capital, and convert that all to subservicing. And we are just tremendously excited to be partnering with Brian Libman and his team over at Finance of America. Operator: Thank you very much. And this does conclude the Q&A portion of today’s call. I would now like to hand the call back to Glen for any additional or closing remarks. Glen A. Messina: Thank you, operator. I would really like to thank our shareholders and key business partners for their ongoing support of Onity Group Inc. I also want to thank and recognize our board of directors and our global business team for their hard work and commitment to our success in delivering a terrific 2025. And I look forward to updating you on our progress in our next earnings call. Thank you so much for joining. 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, everyone. Welcome to the PBF Energy Inc. fourth quarter 2025 earnings conference call and webcast. If anyone should require operator assistance during the conference, please press 0 on your telephone keypad. Please note this conference is being recorded. It is now my pleasure to turn the floor over to Colin Murray of Investor Relations. Sir, you may begin. Thank you, Angeline. Good morning, and welcome to today's call. With me today are Matthew C. Lucey, head of refining, and Joseph Marino, our CFO. Our 10-K filing, including supplemental information, is available on our website. Before getting started, I would like to direct your attention to special items, which are described in today's press release. Also included in the press release is forward-looking guidance information. For any questions on these items or other follow-up questions, please contact Investor Relations after today's call. I will now turn the call over to Matthew C. Lucey. Thanks, Colin. Good morning, everyone, and thanks for joining our call. I want to address three key topics. One, status of Martinez. Two, our fourth quarter performance, and three, the near-term outlook for the market and our company. First, the status of Martinez. Bottom line is we are on the cusp of restarting the refinery. All the construction work will be done this weekend. Next week, the plant will be turned over to operations and will commence a safe and methodical restart. We expect to be fully operational in early March. We set a high bar for the team, but we would not be where we are today without the efforts and ingenuity of all involved. The Martinez team, a representative workforce, our suppliers, and many others who worked collaboratively along the way. Our team overcame numerous challenges to get us to this point. A safe, successful startup will be the culmination of their efforts. We eagerly look forward to getting back to full operations this quarter and supplying the California market with much-needed fuels. Point two, Q4 performance. We exited 2025 on a strong trajectory. Our fourth quarter results were a sequential improvement over prior quarters and demonstrate the exposure of our system to torque with improving crude differentials. Even with expected seasonality, product cracks remained relatively strong as the quarter progressed. We directly benefit from improving crude dynamics. Increasing supply of heavy and medium crudes improved the light-heavy spreads, and our predominantly coastal, highly complex refining system directly benefited. Point three, outlook. The market landscape taking shape in 2026 is looking very good. Refining fundamentals should remain supported by tight refining balances with demand growth lining up well compared to transportation fuel capacity additions. Most of the refinery additions are in Asia and have a very high petrochemical yield. Sour crude differentials began widening in the middle of last year with OPEC+ taper and now have additional tailwind in 2026 of Venezuela barrels entering the open market. PBF Energy Inc. is particularly well suited and highly leveraged to this improving market dynamic. And in California, with Martinez almost behind us, we look forward to participating in a market that is tighter on products and looser on crude. The near-term outlook for the company is certainly buoyed by the $230,000,000 in achieved efficiencies that we reached in 2025 and are now firmly in place. Incidentally, our RBI effort is not complete. We have identified an additional $120,000,000 of run-rate savings, for a total of $350,000,000, that we expect to achieve by the end of this year. We remain focused on controlling the aspects of our business that we can control. To be successful and enhance value for our investors, we must operate safely, reliably, and responsibly, and we must do it as efficiently as possible. With a fully restored Martinez, constructive market dynamics, and $230,000,000 of achieved efficiencies, we should have the company set up to be clicking on all cylinders and drive positive results for our shareholders. I will now turn the call over to Michael A. Bukowski. Michael A. Bukowski: Thank you, Matt. Good morning, everyone. Before updating on the progress of RBI, I will provide a few comments on fourth quarter operations and our Martinez refinery. On the West Coast, I commend the Martinez team and all who have been involved in the rebuild effort. The unplanned nature of the project created a host of challenges that the organization met through creative problem-solving, ingenuity, and, above all, teamwork. The team has not only overcome these challenges, but they have executed the work so far with industry top-quartile safety performance. My thanks to all involved in the project and all the safe work that has been completed to date. Outside of Martinez, aside from a few minor issues, our refineries operated reasonably well in the quarter. We kicked off a robust 2026 capital program in January, beginning with a turnaround at Torrance. I am happy to report that the mechanical portion of the turnaround has been completed per plan and the units are in the startup phase. We have a busy year on the turnaround front in 2026. We previously provided guidance on the locations and total anticipated expenditure for the year. These activities are weighted to the beginning and end of the year, leaving Q2 and Q3 relatively light from a planned maintenance perspective. I am also happy to report that we are seeing results from our RBI program. By the end of 2025, we achieved our goal of $230,000,000 of annualized run-rate savings. This goal represents $0.50 a barrel, or approximately $160,000,000, reduction in operating expenses against our 2024 benchmark and is incorporated in our 2026 budget. Additionally, we reduced capital and turnaround expenditures by $70,000,000. While our 2026 total capital guidance is higher than 2025 on an absolute basis, this is driven by an increased level of turnaround activity. The savings reflect comparison against a year with similar scope. We started this program with centralized efforts in procurement, capital projects, organizational design, turnarounds, and site efforts at our Torrance and Delaware Valley refineries. As of today, all refineries are engaged in RBI and are contributing to the savings goals, and we are also working on a secondary cost initiative. As part of the overall RBI program, we have identified over 1,300 initiatives focused on improving operational and organizational efficiency. Some of these initiatives are small and some are in the millions of dollars in terms of benefits, but they all sum up to a more competitive and improved cost structure. The average value per initiative is in the half-$1,000,000 range, and we have implemented over 500 initiatives to date. Outside of our capital and energy initiatives, the biggest opportunity we identified is our procurement practices. We are implementing a centrally led procurement team, which brings value by leveraging our purchasing power across our refineries. Through this initiative alone, we expect to realize over $35,000,000 in annual savings by revamping our procurement model. While we are improving our maintenance efficiency and reducing energy consumption, our main priority will always be to focus on safe, reliable, and responsible operations across our system. With that, I will now turn the call over to Joseph Marino for our financial overview. Thanks, Mike. For the fourth quarter, excluding special items, we reported adjusted net income of $0.49 per share and adjusted EBITDA of $258,000,000. Our discussion of fourth quarter results excludes the net effect of special items, including $41,000,000 incremental OpEx related to the Martinez refinery, a $394,000,000 gain on insurance recoveries, a $313,000,000 LCM inventory adjustment, a $2,000,000 loss related to PBF Energy Inc.’s 50% share of SBR’s LCM adjustment for the quarter, and approximately $8,000,000 of charges associated with the RBI initiative, as well as other items detailed in the reconciling tables in today’s press release. The $394,000,000 gain on insurance recoveries related to the Martinez fire is a result of the third unallocated payment agreed to and received in the fourth quarter. This brings our total insurance recoveries in 2025 to $894,000,000, net of our deductibles and retention. Going forward, we will continue to work with our insurance providers for potential additional interim payments. However, the timing and amount of any agreed-upon future payments will be dependent on the amount of incurred, covered expenditures plus calculated business interruption losses. Our Q4 P&L reflects incremental OpEx at Martinez of $41,000,000, $164,000,000 in total year-to-date, that we are reflecting as a special item because it relates to construction of temporary equipment to restart undamaged units and other fire-related non-capital expenses. While we anticipate recovering a portion of this amount through insurance, the specific amount will be determined as we finalize the claims process. Shifting back to our normal quarterly results discussion, also included in our results is a $21,000,000 loss related to PBF Energy Inc.’s equity investment in St. Bernard Renewables. SBR produced an average of 16,700 barrels per day of renewable diesel in the fourth quarter. SBR’s production was as expected, but results reflect the impact of broader market conditions in the renewable fuel space. While we saw improved pricing on the credit side, much of this was offset by higher feedstock costs. Throughout the year, we have seen impacts from tariffs and regulatory uncertainty cascade through the feed markets. The policy landscape continues to shift, adding volatility to the business. PBF Energy Inc.’s cash flow from operations for the quarter was $367,000,000, which includes a working capital draw of approximately $80,000,000, mainly due to movements in inventories and falling commodity prices. As a preview, we expect first-quarter CapEx and working capital outflows primarily related to the Martinez restart and normal seasonal inventory patterns. Our Board of Directors approved a regular quarterly dividend of $0.275 per share. Cash dividends paid totaled $126,000,000 in 2025. Cash invested in consolidated CapEx for the fourth quarter was $124,000,000, which includes refining, corporate, and logistics. This amount excludes fourth-quarter capital expenditures of approximately $273,000,000 related to the Martinez incident. 2025 CapEx, excluding Martinez, was approximately $629,000,000. On the surface, this figure is lower than expected, due primarily to CapEx pools that had not yet been cash settled as of year-end that will flow through this year. Given that and the noise related to the Martinez rebuild, 2025 and 2026 capital programs should be more broadly considered over a two-year period. Once the Martinez insurance claim is settled, we will be able to provide additional clarity. We ended the quarter with $528,000,000 in cash and approximately $1,600,000,000 of net debt. At quarter end, our net debt-to-cap was 28% and our current liquidity is approximately $2,300,000,000 based on current commodity prices, cash, and borrowing capacity under our ABL. Maintaining our firm financial footing and a resilient balance sheet remains a priority. As we look ahead, we expect to use periods of strength to focus on reducing both our gross and net debt. Operator, we have completed our opening remarks. We would be pleased to take any questions. Operator: Thank you. In a moment, we will open the call to questions. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you would like to remove your question from the queue. Please unmute your handset before pressing the star key. One moment, please, while we queue for questions. Your first question comes from the line of Manav Gupta from UBS Financial. Please go ahead. Manav Gupta: Good morning. Congrats on a strong result. My first question is when you look at PBF Energy Inc. as a percentage of total feedstock, you probably use more medium and heavy sours than anybody else out there in the U.S. refining system. Now we are already seeing those diffs widen out, could be a function of additional Venezuela barrels coming in, some of the other stuff, but I am basically trying to understand, you know, Chevron has said they can increase production by 50% from Venezuela. As these additional crude barrels come to the U.S. and maybe hit the global markets, can you help us understand the tailwind it will create for PBF Energy Inc. from this point on? Matthew C. Lucey: Manav, thanks for the question, and you are right on point. In regards to PBF Energy Inc.’s ability, and everyone will tout their own numbers and such, but no one on a relative basis consumes or has the ability to consume as much heavy and sour material as PBF Energy Inc., upwards of 55% or 60% of our total throughput capacities. You know, so the famous, you know, who is the best boxer? Well, who is pound-for-pound the best boxer, in regards to relative ability? So you have in our system, it is 200,000,000 barrels a year that we process medium sour or heavy sour barrels. That packs a punch, going back to my boxing, in terms of every dollar you get on crude diffs equates to a $200,000,000 improvement for our business. And as you say, I am not sure anyone is as levered as we are in that regard. And so as we see incremental barrels come on, and this started back in the spring. OPEC, OPEC+, started taper, and there is going to be a lag to that. We saw that even over the fourth quarter, even before the news on Maduro hit. And then we, a number of weeks ago, with Venezuela coming online, that just is more supply into our marketplace. And the reality is the impact to the U.S. refining system with those sanctions being lifted is instantaneous. Yes, there will be many, many years of investment and potential growth in Venezuela, but overnight, essentially, the market has been opened up from where it was fairly curtailed under the Chevron program prior to it essentially all being available into the U.S. Gulf Coast and to the U.S. market. So that is very, very positive for the industry and PBF Energy Inc. in particular. Manav Gupta: Perfect, sir. My follow-up quickly is on Martinez. I think you have actually listed February 16 as the day when all the construction comes to an end, which is just four days, so not much can go wrong there, but I am just trying to understand, to make an airtight case, what should we be watching between February 16 and probably March 7 to make sure that the refinery actually is able to fully restart by March. I mean, your competitor, which was looking to close the refinery in April, looks like he is closing now. And then the pipelines, they may get there in three years. So you could see much above mid-cycle earnings for three and a half to four years if you can get this project fully up and running. If you could talk a little bit about that. Thank you. Matthew C. Lucey: Absolutely, Manav, and you are right. We are essentially right up against the finish line here. It has been an incredible process to go through, and I must commend the team out there. And it is not only just the folks in Martinez. You had a large number of PBF Energy Inc. employees that even were not in San Francisco that dedicated the better part of a year and brought this facility up much faster, mind you, than outside consultants were saying. But the marketplace in California, I think, is going to be particularly interesting. You have a much tighter product market. We have talked a lot about that. And what we have talked about prospectively is now upon us. The competitor in San Francisco that you alluded to by press reports has now been shut down or ceased operations. And so you have got a very, very tight product market, upwards of 250,000 barrels a day of gasoline that needs to be imported. You have got a significant amount of jet fuel, over 50,000 barrels a day of jet fuel. And indeed the state imports an additional 50,000 barrels a day of RD into the state. And so the logistics constraints just associated with that amount every day, putting aside the floor that is in place that needs to attract those barrels into the market, we think it is set up attractively on the product side. But you cannot ignore the crude side as well, where you have got fewer buyers of California crudes. As such, we are seeing our pipeline and all the infrastructure that we have in place being more utilized, which is very good news. And so, we have talked a lot about it. We think California is going to be particularly interesting with the new dynamics, and there have been a lot of shifting dynamics. But in regards to Martinez, as we said, over the next couple days, we will wrap up the work. There will be a methodical restart. We have not run that cat cracker in a year, and we are going to take our time and do it right. And like I said, our full expectation by very early March, we are up and producing products. Manav Gupta: Thank you for the detailed response. Looks like 2026 is going to be a much stronger year for you than 2025. Thank you so much. Matthew C. Lucey: Thanks, Manav. Operator: Thank you. The next question comes from the line of Ryan M. Todd from Piper Sandler. Please go ahead. Ryan M. Todd: Thanks. Good morning. Maybe to start on the refining side, on margin capture improved significantly in the fourth quarter. Can you talk about some of the drivers of the improvement and how some of these trends, including things like crude differentials, might remain a tailwind for 2026 and beyond? Matthew C. Lucey: Yes. Crude differentials is the big story. First of all, it is running reliably, and nothing beats reliable operations. But in terms of impacts, widening crude differentials, you will simply see our capture rate go up. And we are managed, I think I said before, to the degree that crude differentials widen, we get 100% of that. And that is where we get paid for the complexity that we have. So it is across our system. Obviously, Toledo has its own dynamics being a Mid-Con refiner. But all of our other refineries being coastal complex refiners, as cost crude improves on a relative basis to other benchmarks, our capture rate is set to increase. And as I said before, every dollar of improvement equates to $200,000,000 on an annual basis. Ryan M. Todd: Thanks. Maybe a follow-up on the refinery business improvement initiatives, RBI, as well. Can you maybe provide a little more color or granularity of, like, of the $230,000,000, the run rate that you have captured to date? Could you bucket where you have seen those improvements? What have been the biggest drivers? And as we look forward towards the incremental improvements expected over the course of this year, kind of where should those improvements show up and how should we see them flow through the results? Michael A. Bukowski: Okay. This is Mike. Thanks for the question. For the $230,000,000, as we said, $160,000,000 of that is in OpEx. Of that OpEx breakdown, it is largely driven by what we call third-party spend. And so things like our procurement practices, how we interact with our vendors or suppliers, service providers, and material suppliers. That is a big piece of it. The other piece is in the area of energy consumption. We have made a lot of strides being able to improve our efficiency across our refineries. On the capital side, it is largely driven by turnaround performance. And this is something that actually started prior to RBI where we have implemented rigor and discipline in our turnaround planning and scope development practices. We have been on this journey, as I said, for over two years where we focused on getting very predictive in our results, but now we are morphing into a phase where we are driving competitiveness. And we are seeing our expected improvement as we move through different benchmark quartiles. We are also working on our sustaining capital, which is essentially any capital required for regulatory requirements and/or capacity maintenance, and to be as efficient as possible in how that spend is allocated. I think about the $120,000,000 going forward in the future, I think improvement in the third-party spend, you probably will see most of that in the area of energy and continued— Operator: The next question comes from Neil Singhvi Mehta from Goldman Sachs. Please go ahead, sir. Neil Singhvi Mehta: Yeah. Good morning, Matt, and good morning, team. Just wanted to build on the balance sheet comments from the opening remarks. You said you are at $1,600,000,000 in net debt. Matt, as you think about the optimal balance sheet, what is the right level of net debt as you think about it, either as a percentage of your capital structure or on an absolute basis? And talk about the path to get there. Matthew C. Lucey: Well, again, what is optimal is a funny question. It sort of depends on the market and what you are operating in. And to the degree you are in a very, very strong market, you need to take that opportunity to not only delever, but somewhat get under-levered, just because of the cyclicality of our business. And, you know, you saw that over the last couple cycles when, coming out of 2022, we got ourselves under-levered. And even in the difficult part of 2024 and part of 2025, where we certainly had headwinds from a crude perspective, we never got to an uncomfortable place in regards to leverage as we took on some net debt as a result of that marketplace. So, the capital structure and debt, in my personal view, where you are going to allocate capital as you are entering what looks like a very, very constructive marketplace, you start to blend debt repayment with returning cash to shareholders because as we reduce net debt, we should see a dollar-for-dollar essentially return for shareholders as you move your enterprise value from debt to equity. So our near-term focus for sure, as we generate cash, will be to reduce debt. And then, we do not spend a lot of time talking about money that we do not have in hand yet. So, as we go through that, we will evaluate step by step. But there is a huge value for us in paying down debt as we enter the cyclically strong period. Neil Singhvi Mehta: Yeah. Matt, the follow-up, which is, as I think about the product markets going into this year, we have really good strength in the curve on the distillate heating oil side, and then you have got relative weakness in gasoline, and there is some seasonality to that as well. But just as you think about the spread between those two products, do you see a scenario where gasoline catches up through the year? And just your thoughts on the fundamentals of the underlying products. Thomas O’Connor: Hey, Neil. It is Tom. In terms of addressing that comment sort of really around gasoline, I think starting there is, obviously, there is seasonal swoons sort of coming out of the fourth quarter with gasoline stocks rising with very high utilization. You know, we have now entered the maintenance period, past restocks, which were the area probably of the greatest bloating that took place, have started their draw. We are into the seasonalities, and I think it is really kind of coming around the changing dynamic which has been taking place for the last year or so in the Atlantic Basin and, obviously, now the effects of what we will see on the West Coast, which will, as Matt was talking about, in terms of the 250 a day of gasoline which needs to be imported there, sort of changes a little bit of the dynamic—or not a little bit, changes the dynamic—in the Atlantic Basin. Obviously there are flows leaving the Atlantic Basin heading to California. So that will continue to drive the bosuns in terms of that tighter market and be also a little bit underreported, right, just kind of continuous need to be, is that we have seen constant revisions basically to the DOE demand side of the equation from the weeklies. A little bit more on, obviously, focus more on diesel than on gasoline. And on the diesel equation, I think it is a bit of the same kind of story as we saw in gasoline. You saw inventories rise towards the end of the fourth quarter, but PAD 1 over the last two weeks has gone from sort of looking in a moderating space to now we are at or below the five-year in quite some time, in a very short amount of time. Excuse me. So, the incentives are going to continue to be there. I mean, we see the refining balances tight, and the additions which are coming this year are more in the second half of the year and very high in the petrochemical side. So the outlook for products, we are certainly constructive. Neil Singhvi Mehta: Thank you. Operator: Thank you. The next question comes from Doug Leggate with Wolfe Research. Please go ahead. Doug Leggate: Thanks. Good morning, everybody. Matt, it is great to see Martinez coming back. It has been a long time coming, but I wonder if I could turn my questions to the insurance part of that. What we are trying to figure out is how much of the insurance proceeds that have come in so far have still to be paid out in terms of repairs. And I guess related, how do you even begin to quantify the lost opportunity cost given that margins were obviously distorted by the fact that Martinez was offline? So trying to get an idea how the net cash balance normalizes when you have paid out everything and received everything you expect to get. That is my first one. I have got a follow-up, please. Joseph Marino: Sure. From an insurance standpoint, the proceeds we received so far have been unallocated, and they will be unallocated likely through the end of the claim. So do not have a definitive outline of how much we received so far as it relates to capital expenses or BI or other operating costs that we incurred. But we do feel very good from an insurance standpoint that all the property-related capital rebuild costs will be fully covered. And then the BI, to answer your second part of the question, which covers part of that lost opportunity, that is a bit of a nuanced process where we work through with the insurance providers, and we have developed a model indicating how we would have performed if no incident occurred and how, compared to how the market performed, and we will be paid out accordingly to recover a good portion of the losses during that period. Matthew C. Lucey: The reality is on the BI side—and, Doug, there is a whole cottage industry around your question—which is there are a lot of nuances, a lot of gray, and there is a lot of science and math as well. And it all sort of blends together. Bottom line is I believe we have an extraordinary relationship with the underwriters, in terms of something that has been developed over many, many years. I think performance to date in regards to recovering insurance is far better than your sort of average events such as this in regards to how we are doing in regards to recovering. Once you get towards the end, there will be haggling and negotiating around the edges. We have been able to cover a lot of ground over this year. The good news, and again, we will come back to the good news, is the work is essentially complete here. And so the event should be behind us, which means in short order thereafter, we should be able to clean up on the insurance side. Doug Leggate: Okay. Thank you for that. My follow-up, guys, and Colin and I have gone backwards and forwards on this now. I will tell you honestly, we have removed the liability for RINs from our assessment of your valuation after talking to him, but I wanted to ask the question about your RIN liability and why, if you could articulate for everyone listening, why you believe that would never have the equivalence of net debt and how it may have been impacted by the fact that RIN costs have obviously ballooned significantly since new RVO was proposed at the beginning of the year. Matthew C. Lucey: I am sorry. You are going to make my negotiation with Colin—he is going to be requiring more money now. But what was your connection between RVO and net debt? I missed that. I am sorry. Doug Leggate: Okay. So you have a RIN obligation, or a liability on your balance sheet. But my understanding is you never expect to pay that. I am assuming that the liability will have gone up as a consequence of what has happened to RIN prices. And what I am asking is, why should we assume that that is never an actual liability in terms of something you have to pay out, and therefore, it does not have the equivalence of net debt. Joseph Marino: Maybe just to clarify a bit there, we do ultimately have to settle on the RINs obligation, and that is an annual settlement process. But it is a rolling liability. In other words, we continue to incur it as we operate our business. So to the extent you settle one period, you are going to be incurring another. So from a cash flow perspective, it is essentially going to be neutral from that standpoint. Matthew C. Lucey: Think of it as working capital. Joseph Marino: Exactly. It is just like any other working capital accrued obligation. Doug Leggate: Alright. I will take it offline with Colin again. But thanks, guys. Appreciate it. And regards to RINs going up, they have gone up. Matthew C. Lucey: And the reality is they have gone up. They have essentially doubled since the beginning of last year. The RIN fight is different than it was ten years ago. Obviously, we have SBR, which buttresses our exposure. And the market has evolved. It is not perfectly efficient and so therefore there are still winners and losers. So you have that aspect and you also have the potential for rising RIN prices which go into the price of gasoline. And so we have seen RIN prices double over the last thirteen months. We are working very hard in Washington, not only on the winners and losers part, but also to make sure they understand that if they are not careful, RINs can escalate even further and really impact the price of gasoline. So we have been pretty active on that front. Doug Leggate: Appreciate it, guys. Thank you. Joseph Marino: Thank you. Operator: Thank you. The next question comes from Phillip Jungwirth from BMO Capital Markets. Please go ahead. Phillip Jungwirth: Thanks. Good morning. On the Q1 throughput guidance, East Coast is a bit light versus the annual numbers. There is not any planned turnaround. So is this just the winter storm impact that we are seeing? And then West Coast would be implied to run mid-90% utilization for the rest of the year after the Torrance turnaround and Martinez startup. So what is the confidence in seeing the higher utilization after the first quarter on the coasts to take advantage of what should be a higher margin environment? Matthew C. Lucey: It is highly confident. Look, Martinez, we do have a hydrocracker turnaround in Q2. But Torrance is finishing up work now and is essentially clean for the rest of the year. Martinez will be thereafter. In regards to the East Coast, there is nothing extraordinary that stands out. That is for sure. Phillip Jungwirth: Okay. Great. And then coming back to the wider crude diff conversation, is this something that you think can be sustained midyear or into the second half? Just as we see higher summer demand, Canadian OPEC hitting the pause, new complex refinery startups at year-end? Or do you think there is enough tailwind here with Venezuela rising, Canadian crude production, where this can be the new normal? Just trying to understand what is seasonal versus structural here on crude diffs in your view. Thomas O’Connor: Yes, Phillip, it is Tom. I think you raised a great question in terms of the sort of structural seasonal aspects. But I think the way that we are looking at this is that in some aspects, you had effectively a barrel which has not been able to trade freely. And that is something that has been going on in the marketplace for quite some time, whether it is tied up by sanctions or different aspects of predominantly Russia, Iranian, Venezuelan, and you basically have distorted those markets and have effectively forced them and pushed them to the Pacific Basin for consumption. So I think in that aspect, from everything that we are seeing here today, from the Venezuela sort of liberation of their crude market, I think that takes that to putting it sort of into the structural camp as opposed to being seasonal. Because in some aspects, we are going to be at a scenario where if the U.S. continues on its growth in terms of the imports that are coming from there, it is going to eventually start to tax the ability for coking capacity in the U.S. and we will start to fill that out. I do not think we are there yet. But I think the other thing that is important to note through this whole thing when we are talking about the crude differential situation is that what we are starting to see at this point is sort of persistent improvement in the light side of the barrel. We are not sitting here this year talking about prolific growth in the U.S. market for shale. We have gone through a situation—certainly a little bit more seasonal—but we have seen very, very strong strength in Dated Brent, and that has been coming from the disruptions that have been taking place in the Black Sea with CPC. You also had freeze-offs in the United States, but you sort of have a little bit of a push and a pull when it really kind of translates to the crude differentials, and I certainly see from our seats that we are not missing anything that also in the U.S. is going to show up and having grown a million barrels year-over-year with enough of the information that we see in the marketplace. Matthew C. Lucey: Yes. Strong Canadian growth, strong American growth, maybe sort of under the radar as well, barrels coming into the marketplace. These are dynamics—and relatively flat shale—these are dynamics that we have not seen in a long time. Paul Cheng: It does seem that you have shown some benefit in here. Can you tell us that with the inflation, higher natural gas price, but continued benefit from the RBI, how should we expect in 2026 that you think that you will have enough initiative to offset the increase from the higher throughput because Martinez is coming back, the inflation, and also the higher natural gas price? Or that may not be able to fully offset yet? So that is the first question. And the second question is that— Joseph Marino: Oh, okay. Please go ahead, Joe. Sorry, I did not mean to cut you off there. But just to answer the first question, yes, the RBI savings that we have put forth out there are net of inflation. And so if you are looking at the 2026 guidance on OpEx versus what we have done in 2024, I think one of the key things to point out, because the RBI savings are embedded in that guidance, is that we are using a natural gas price assumption that, if you look compared to what natural gas prices were back in 2024, that is going to be an increase. But if you normalize for that, you would see that the savings for RBI are baked in for 2026. Paul Cheng: And, Joe, you are saying that a lot of work has been done on the energy intensity. So what is now the sensitivity for every $1 move in natural gas price? What is the impact to your cost structure? Phillip Jungwirth: Generally, a dollar increase will equal about a $100,000,000. Paul Cheng: I am sorry. A $1 would equal a $100,000,000 increase. A $100,000,000? Okay. Matthew C. Lucey: $100,000,000. Joseph Marino: Alright. Great. And the same question is that sequentially, from the third to the fourth quarter, the West Coast margin jumped significantly and the industry margin actually went down. So trying to understand that, and you are still in the process of fixing Martinez. So what caused that big improvement in the margin capture in the fourth quarter? And is there any one-off benefit that we should be aware of? Matthew C. Lucey: No. Not anything one-off. I mean, it speaks to the same thing we have been talking about across the system, which is running reliably, running more efficiently, and then lowered crude cost is the driver. Nothing more complex than that. Paul Cheng: Yeah. But the industry margin actually was down, but your capture or your actual realization was up quite meaningfully. And your operation, you said, was not that much different with Martinez. It is still under repair. So, I mean, yes, our operation, we need—can you tell us, give us some idea how the operation has improved in the fourth quarter versus the third quarter that led to such a big improvement in your capture? Matthew C. Lucey: I, again, draw you to the cost of crude. I am not sure the industry margin that you are looking at. I stick with my answer. Reliable, efficient operations, and the cost of crude are going to be the driver. And indeed, I serve you California as a microcosm of our broader business, where you have got a tight product market and a looser crude market. California is its own unique little market with its own dynamics, and obviously it has had closures there which have made the product market much, much tighter. But you also have a dynamic crude market in California that you are unable to export California crude. So as refiners come off and there are fewer buyers of crude, your crude differentials are set to improve. Now going forward, in terms of getting out of the third quarter to fourth quarter prospectively, and clearly with Martinez up and running, we view it as an incredibly dynamic and attractive market for us on the lookout. Again, we are going to have a clean run rate on Torrance. Martinez does have a hydrocracker turnaround in Q2, but then it will be a clean run there. And you are going to have a very tight market and a loosening crude market. Paul Cheng: Alright. Will do. Thank you. Operator: Thank you. The next question comes from Jason Daniel Gabelman with TD Cowen. Please go ahead. Jason Daniel Gabelman: Good morning. Thanks for taking my questions. I wanted to ask on CapEx because 2025–2026 turnarounds, as you mentioned, are a bit active. How do you see kind of the turnaround schedule trending after this? Should we take kind of last year and this year as a normalized cadence, or do you think it is more active and throughput should expand in future years? Matthew C. Lucey: I will make a comment and hand it over to Mike. This year is particularly large. We have, I think, close to 30%, 28% I think was the number I saw, more man-hours with all the work we are doing this year over last year. And by the way, I know it is hard to reconcile RBI, but you see a higher turnaround number for this year, but the man-hours have gone up 30% and our cost went up 10%. So if you look closely, and we can help you sort of dissect it, you will see the benefits of our RBI program. This year is a particularly heavy turnaround year, as this is what our business is. It is not ratable in that regard. But we absolutely will normalize going out over the years after. Michael A. Bukowski: I would look at 2027, 2028, 2029 to be more, in terms of the scope, more indicative of what we had in 2024–2025 kind of averaged together. It is going to come down off the high that we have in 2026. Jason Daniel Gabelman: Great. And my follow-up is just going back to the insurance proceeds. And I know you have tried to steer us away from trying to break out those proceeds from business interruption insurance and then the cost to fix Martinez. But I noticed in your financials, you do attribute part of it in cash flow from ops and then part of it in cash flow from investing. So is that split indicative of the interruption insurance versus the insurance to fix the equipment, or do we not look at it that way? Jason Daniel Gabelman: I think at the moment that is an accounting convention that we have elected to present that. That is not necessarily indicative of where it is going to end up when the claim is settled. So when the claim is settled, that is when the final kind of allocation will be available. Jason Daniel Gabelman: Alright. Thanks, all. Joseph Marino: Leave it there. Thank you. Operator: We have reached the end of the question and answer session and will now turn the call over to Matthew C. Lucey for closing remarks. Please go ahead. Matthew C. Lucey: Thank you very much for participating. And as I said, we look forward to very positive results in the quarters to come. Have a pleasant weekend. Talk to you soon. Operator: Thank you. This concludes today’s conference, and you may now disconnect your lines at this time. Thank you for your participation.
Operator: Welcome to Nebius Group N.V.'s Q4 2025 Earnings Conference Call. The presentation will be followed by a Q&A session. If you would like to ask a question, you can click the Ask a Question tab in the top right of the live stream player. Then just type in your question and click submit. You can submit questions at any time during the presentation, and the Nebius Group N.V. management team will try and answer as many questions as they can during the Q&A portion of the call. I will now hand over to Neil Doshi, VP, Head of Investor Relations, to start the call. Neil Doshi: Thank you, and welcome to Nebius Group N.V.'s fourth quarter 2025 earnings conference call. My name is Neil Doshi, Vice President of Investor Relations. Joining me today are Arkady Volozh, Founder and CEO, and our broader management team. Our remarks today will include forward-looking statements, which are based on assumptions as of today. Actual results may differ materially as a result of various factors, including those set in today's earnings press release and in our Annual Report on Form 20-F filed with the SEC. We undertake no obligation to update any forward-looking statements. During this call, we will present both GAAP and certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. The earnings press release and shareholder letter are available on our website at nebius.com. I will now turn the call over to Arkady Volozh. Thanks, Neil, and thanks to everyone for joining this call. Well, 2025 was a very strong year for us. Arkady Volozh: Our team did an outstanding job scaling capacity and delivering it to customers with speed and reliability. We also made great progress in developing our own hyperscale AI cloud. But, before going into more detail around our 2025 results, I want to take a step back. It is hard to believe we only launched this company a year and a half ago. At that time, we had built the foundation of a global AI cloud business growing at exponential scale. And we have been operating with very high intensity, building and scaling at extraordinary speed. Today, we are already one of the world's leading and most reliable AI cloud compute providers. We have attracted a diverse pool of clients who value the quality, performance, and flexibility of the platform we built from the ground up. And we have an amazing team who every day seem to do the impossible. And I know they will continue to do so. With this foundation, we are proud of what we have achieved and confident about what we will be delivering. Now back to 2025. As I said, it was an excellent year. We exceeded our financial targets, and we significantly exceeded our capacity plans, setting the stage for the next phase of scale. Demand remains robust, and our pipeline continues to grow substantially. We sold out of capacity in Q3 and Q4 last year, and we are already now in 2026 also sold out. Even before we bring capacity online, it is often sold out. As a result, the average contract duration of new cloud customers grew by 50%, and the prices of GPUs did not fall even on previous generations of GPUs, as the industry may have expected. Customers are demanding more compute and increasingly sophisticated solutions to run their AI workloads. AI startups are quickly evolving to real customers with revenues from their products resonating with real customers. Their demand quickly grows from hundreds of GPUs to tens of thousands. This is already a range the market saw from the biggest customers last year. We are seeing the same trends in the enterprise, who are utilizing AI for more and more vital business processes. Meanwhile, access to compute remains constrained. This imbalance creates a favorable environment for us as we secure and deploy more capacity into a robust demand environment. To capture this opportunity, we are accelerating our capacity plans. Just today, we announced nine new data centers across the globe. Last quarter, we said we would secure 2.5 gigawatts of power by the end of the year. We are already at more than 2 gigawatts now in February, which is why we are raising our forecast for 2026 to more than 3 gigawatts. And we are well on track to deliver 800 megawatts to 1 gigawatt of those as available data center capacity. Just like we spoke about last quarter. Capacity is one of two dimensions of our growth. The other is product. Our main strategic focus is to scale our core AI cloud business, which is our multi-tenant AI cloud. We will expand our platform both organically and through targeted acquisitions that can enhance and accelerate the development of this platform. We recently launched Token Factory, and this is an example, a testament, actually, to our in-house capabilities. And we are also very excited about our recent acquisition of Tavily, which adds agentic search capabilities to our customers and also brings almost 700,000 developers to our platform. Based on the strength in demand, we are reiterating our strong execution; we remain confident in our plans for the year ahead: our annualized run-rate revenue of $7 to $9 billion by 2026. When we announced this target three months ago, there were questions about our ability to get to this range. Over the last few months, our conviction in this range has become stronger. Why? Because we exceeded the high end of our 2025 ARR guidance and showed more than $1,200,000,000 ARR. Because we already contracted more than 2 gigawatts of capacity, and are on track to exceed 3 gigawatts this year. Because we have already delivered all of our capacity for the Meta contract. Because we are on track to deliver the capacity for Microsoft through the course of 2026 exactly as planned. And lastly, the demand for our AI cloud continues to be strong. Pricing is strong. We are seeing more and more customers coming into the platform and committing larger and longer contracts. Everything we build, we sell. We are in the very early days of one of the biggest industrial and technological revolutions in history. That is what we believe. And Nebius Group N.V. is quickly becoming the AI cloud provider of choice. I want to thank again all of our employees for their dedication and hard work, as well as our shareholders for your trust and support. And we will continue to deliver. I will now turn the call over to our CFO, Dado Alonso. Dado, please. Operator: Thank you, Arkady. Indeed, 2025 really was a fantastic year, with great execution and delivery, Dado Alonso: We exceeded the targets we set, outperforming our ARR guidance and achieved positive EBITDA at the group level. We also raised significant capital to fund our growth during the year. Now, let me provide some color on the results, discuss our financing plans, and then I will conclude with 2026 guidance. In Q4, we delivered group revenue of $228,000,000, representing year-over-year growth of 547%. Revenue grew 56% from Q3 to Q4. Annualized run-rate revenue for the core business stood at $1,200,000,000 at December, exceeding the high end of our Q3 guidance range of $1,100,000,000. The results of our core AI cloud business were even more impressive. Revenue grew 830% year over year, and 63% quarter over quarter. This was driven by high utilization, strong pricing, and strong execution. As Arkady noted, we sold out our capacity once again in Q4, as demand continued to significantly exceed available capacity. Even as we delivered such strong growth, operating leverage and spending discipline enabled us to achieve notable progress on the bottom line. Group adjusted EBITDA inflected positively in Q4, consistent with our guidance, driven by the strength in our core AI cloud business, where adjusted EBITDA margin expanded from 19% in Q3 to 24%. Turning to the balance sheet, we ended the year with $3,000,000,000 in cash and cash equivalents and generated $834,000,000 in operating cash flow in Q4, which was primarily comprised of upfront payments from our long-term agreements. These early cash flows will continue over the course of the year as we execute against these commitments, providing us with significant visibility into future cash flow. Our cash on hand, projected operating cash flow, and strong balance sheet position us very well to fund our capacity build-out plans for 2026. I will share more detail about our capital plans in just a moment. Now I will turn to 2026 guidance. As Arkady mentioned, we remain confident in our ability to generate annualized run-rate revenue of between $7,000,000,000 and $9,000,000,000 by 2026. For the full year, we expect to achieve between $3,000,000,000 and $3,400,000,000 in revenue. Starting in Q2, we expect to begin bringing online some of the new sites we announced today, with the majority of the planned capacity to be deployed in the second half of the year. As of early February, Meta’s capacity was fully deployed and we are now fully servicing their contract. After delivering the first tranche of our Microsoft commitment on time, we expect to continue to deliver the remaining tranches throughout the year, with the majority expected in the second half. We expect Microsoft to begin contributing to revenue at the full annual run rate in 2027 once we have deployed all of these tranches. On adjusted EBITDA, we expect group adjusted EBITDA margin to be approximately 40% for 2026. We expect EBIT to remain at a loss in 2026 as we progress against our capacity expansion plans, deploy GPUs, and invest in R&D that will significantly enhance our technology stack and our future AI product. We believe the return on these investments are attractive and we remain committed to our medium-term EBIT target of 20% to 30%, with the potential to go higher. Starting in Q1 2026, we are updating our depreciation schedule from four years to five years, to reflect what we are seeing in the market and in our current utilization commitments. This approach is aligned with accounting best practices, and we continue to be conservative on this front. Arkady Volozh: Now, Dado Alonso: turning to CapEx. In order to capture the large and growing opportunity that we see for the future, we plan to invest in CapEx in the range of $16,000,000,000 to $20,000,000,000 in 2026. We already have about 60% of the capital needed for this range from our balance sheet, existing operations, and commitments. We evaluate several funding options available to us on a consistent basis, and will deploy two guardrails when we look at capital alternatives. First, we will focus on raising debt relative to our business needs and will be prudent with respect to the cost of capital. Second, we will be mindful about the shareholder dilution if we choose to issue equity. Given our balance sheet and minimal debt, we are fortunate to have many additional options to finance our growing business. For example, we are currently exploring adding corporate debt and asset-backed financing to our balance sheet. Our at-the-market equity program, which we have not used at all to date, remains an additional alternative for opportunistic capital. In addition, our equity stakes in ClickHouse and other businesses such as AV Wright can also be future sources of capital. We are excited about these holdings, especially as the market recognizes their significant value. As an example, it was recently reported that ClickHouse’s valuation was approximately $15,000,000,000 in the most recent funding round. So the wide array of funding options available to us allows us to fund growth in a way that is balanced, disciplined, and aligned with returns rather than committing to a single path. In conclusion, 2025 was a year of strategic progress for Nebius Group N.V., and we executed with focus and discipline across our business, generating strong momentum as we enter 2026. In the year ahead, we will continue to scale rapidly to capture the meaningful market opportunity in this once-in-a-generation moment in our space. And with that, I will turn the call back over to Arkady Volozh. Arkady Volozh: Before we turn the call over to Q&A, I want to provide one more update. After this earnings call, Neil Doshi, our VP of Investor Relations, is moving into a new strategy function role. And we would like to thank Neil for all his great work in building out our IR function to date. And I am also extremely pleased to welcome Gili Ostolovich, who will be our new VP of Investor Relations. Gili brings with her deep research and strategic finance experience from Goldman Sachs, UBS, and Minda.com. And we are very excited to have her onboard. With that, let us go to Q&A. Dado Alonso: Great. Neil Doshi: Right. We are just collecting some questions from the portal. And we will begin Q&A in just a moment. Alright. The first question from our investors on the portal is: Nebius Group N.V. is moving quickly to both bring demand online and to build a strong foundation for future capacity. What are you seeing in the market that gives you conviction that the demand for AI will continue to justify these investments? Let us give that to Arkady. Arkady Volozh: Well, first of all, we all look around and see what is going on practically everywhere. How we change our habits in everyday private lives, what happens in our corporations, in our company, for example. How much of Dado Alonso: now and Arkady Volozh: utilizing AI capabilities in coding. And, actually, we now see the whole industries are actually changing. Look at the recent example again, coding, or look at the movie industry, or look at the research. Whatever you do now, you do it with AI. But, again, these are just general notions, but our conviction is mostly based on what we are seeing directly in our business. We see directly signals in all sectors of our business. First of all, in the large accounts, all large clients are talking to us, and not only to us, but the whole market about expanding, renting more capacity and more GPUs, because their AI businesses are growing. There is this ongoing, ongoing organization that actually will lead to more contracts everywhere. But we are, as you know, much more focused on our AI cloud business. And in AI cloud, we have these two major sectors, AI startups and enterprise. And look at AI-native customers. What happened to them in 2025? Some startups disappeared, but some of them are becoming real companies, real enterprises of the future. And they started getting traction. Their products became more and more used by their customers, and they are scaling quickly, scaling with real revenues, real demand. And we see such customers, such companies who were used to order hundreds of GPUs, thousands of GPUs. Now they are ordering tens of thousands of GPUs. And this is actually a magnitude of what we saw in the largest consumers last year. Frontier models were ordering tens of thousands of GPUs just a year, two years ago. Now it is yesterday's startups at this level. Again, this is real business. These are real customers of them paying real revenues. So AI traction is visible. There are a lot of customers from the sector starting with Cooco, Coosa, or Odo, Hicksville, Fodorov, Genes, Molecular, different sectors, and they all have the first structure, and they are becoming, as we speak, real companies. Actually, it is the future enterprise. And on the other hand, there are enterprise clients who involve more, who are actually switching most of their everyday business processes to AI and generate new profits through those AI implementations. We see the growing number of such customers, growing contracts from each of such a customer, the number of GPUs is growing, the duration of the contracts is growing. As I said, the average duration for new customers grew 50% last year. So from the signals we see from all the sectors of the market, from big clients, hyperscale labs, from AI startups becoming enterprise clients, for enterprise going AI everywhere, we see positive signals, and we just need to build more for them, more data centers, more tools. And if we could build faster and even more than we have today, we would do it. So we are building because it is three-year growth. Neil Doshi: Right. Thank you, Arkady. Next question is from Josh Baer from Morgan Stanley who asks about our CapEx financing plans, especially now that we have $16 to $20,000,000,000 of CapEx guidance out there. How are we thinking through to meet these expectations for CapEx? Ophir? Arkady Volozh: Alright. I am Ophir Nadav, the COO and Board Member of Nebius Group N.V. Usually, I am not participating in these calls, but given the importance Tom Blackwell: of this question, most for our business and as well as to the investor community, I will take this one. Operator: Basically, Tom Blackwell: this question has two parts. First, what is the optimal capital expenditure for our business in 2026? Second, how is this CapEx going to be financed? And, obviously, these questions are connected or related. So let us start actually with the second question, or the second part. How are we going to finance the CapEx? So obviously, we will first finance it from our cash flows. We have our cash on hand. We have cash that is generated from our core business. But most importantly, I would say, we have a significant amount of cash that we received and will continue to receive in 2026 from the favorable terms of our long-term agreements. We are talking about a significant amount, and these cash flows will actually finance the majority, actually around 60%, maybe even more, of all of our CapEx needs in 2026. So how are we going to finance the remaining amount? The rest Dado Alonso: So Tom Blackwell: we all know we have a very healthy balance sheet. By the way, not by coincidence, because we are working very hard to have a very prudent, disciplined, healthy balance sheet. And as of today, we do not have any corporate-level debt. We do not have any asset-backed financing, even though we have multibillion-dollar revenues from long-term contracts. We do not have any bank report. And we did not have it to date by choice. Arkady Volozh: But Tom Blackwell: moving into 2026, and as we all know, an optimal capital structure in our business should include also debt. This should obviously be changed. And we plan during 2026 to use some of the tools that I mentioned in order to move toward a more optimal capital structure. Dado Alonso: So Tom Blackwell: having said all that, from the financing point of view, we believe that the $16 to $20,000,000,000 CapEx makes a ton of sense, and we will be able to finance it while keeping a very healthy, disciplined balance sheet. But moving to the first part, the first question, what should be our optimal CapEx for 2026? I mentioned, actually, Arkady said it time and again. Given that we are a fully vertically integrated company, our CapEx is basically divided into three parts. Less than 10% is used for securing power. And given the importance of power to our business and given the importance of securing power for our future hyperscales, we are moving full force ahead in order to secure as much power as possible given the relatively low cost of it. And I think that on this call, it was mentioned that we already secured a significant amount of power and we will continue to do so. The second part of the CapEx: building the data center. This is approximately 20% of the total CapEx. And we invested in building data centers. We invested this amount, and it turned out as we expected: that it became one of the best investments that we made. Why? Because when we have data centers ready, almost ready, where we can deploy GPUs in a very short period of time, we can serve this capacity on very attractive and favorable terms. We have done so to date and we plan to do it also in the future. We see the demand. We see the interest. We have a clear visibility on the demand for 2026 and for 2027, both from our cloud clients as well as from AI labs and hyperscalers. And we are positive that these investments, with the interest that we are getting from all these players, will play out again very beneficially for our company, as it did so in 2025. The remaining part of the CapEx is to deploy the GPUs. Again, this is a significant part of the CapEx. The beauty is that we deploy the GPUs in a short time period when we have great visibility about the demand and about the prices and about our margins. And we are very confident. We do not view it as a very risky place to be. So having said all that, we believe that $16 to $20,000,000,000 CapEx for 2026 makes the most sense for us. First of all, it is based on our visibility on the demand for 2027. It is based on the interest that we are getting from various buyers, both in our cloud platform and the AI labs and the hyperscalers. It will enable us to meet our $7 to $9,000,000,000 ARR in 2026. But more importantly, it will also put the foundation for our hypergrowth 2027 and beyond. But speaking about CapEx and investments, I think that it is worthwhile also to address two additional points. One is ATM. As you all know, we launched our ATM program last November. As of today, we did not use it at all. Actually, we do not have any concrete plans to use it also in the near future. However, it is another tool in our toolbox that will enable us to use it when it will make the most sense for our business as well as our shareholders. And this is another tool that will enable us to keep a prudent, balanced, disciplined balance sheet. And another point that I think was mentioned is obviously with non-core businesses. We are fortunate enough to have over a 25% stake in ClickHouse and our ownership in AV Wright. These non-core businesses, these stakes, are worth many billions of dollars as of today. This is great, but it is less interesting by itself. Most importantly, we truly believe that these stakes will significantly increase in the midterm. And when they do, they will enable us to continue growing our business in a hyper-paced mode, 2027 and beyond, while using this capital and continuing to keep a very disciplined balance sheet. We are really happy with these potential capital injections for the future. There you go. I think that gives the right overview of the CapEx needs and the ways to finance it. That was very helpful, Ophir. Thank you. Neil Doshi: Alright. Next question comes from Alex Platt, D.A. Davidson. Can you help us bridge to not only the 800 megawatts to 1 gigawatt of connected power guidance, but now to the 3 gigawatts of contracted power guidance by year end. Andrey? Tom Blackwell: Yeah. Arkady Volozh: Thanks, Neil. For everyone. So what we can see now is we are accelerating the build-out deployment of the capacity in 2026 greatly. And we expect that the acceleration will continue in 2027 and beyond that. Andrey Korolenko: So what we are doing is we are, as Arkady mentioned, doing the investments in building the foundation for 2027 and for the years beyond. We are well on track of achieving our goals that we mentioned about 2026 of this 800 megawatts to 1 gigawatt goal around year end. And we do that by launching a lot of sites with a mix of smaller and larger projects, and some of our bigger projects starting to come online in the end of this year. And in addition to that, in addition to the sites that we mentioned today, we have multiple ongoing projects, and we expect that some of these additional sites may materialize this year. So basically, expect that the colocations will help us grow faster starting in Q2 this year and ramping throughout the year. Our own projects, which are substantial in size, will really start to ramp up in 2027 and beyond. And that relates directly to the contracted power. Great. Thank you, Andrey. Neil Doshi: Andrey, maybe just staying with you. Andrew Beal from ArrayTech is asking about an update on the New Jersey data center site. Andrey Korolenko: Yeah. With New Jersey, we are very pleased with the progress there. We delivered the first tranche to Microsoft on time, and we are well on track to deliver the remaining commitments on time as well. We believe that our partners secured the components in the supply chain, and they are working extremely hard to get everything online. We also have some safety margin buffer times in our projects. And while all projects can have some fluctuation, we have built our plans with a large margin of safety. And we have high confidence of executing this. Great. Thanks, Andrey. Neil Doshi: Alright. Looks like we have a question from Alex DeVal from Goldman Sachs. Looks like Nebius Group N.V. came in light on revenue versus consensus for Q4, but ARR was ahead of expectations. So which is the more meaningful metric and are there any timing considerations? And then just more broadly, lumping this with the ARR question, can you help us understand the difference between ARR guidance of $7,000,000,000 to $9,000,000,000 and the revenue guide for 2026. So, Dado, maybe you can take this. Dado Alonso: Thanks. Let me take it one by one. On the first question, of course, we were very pleased with our ARR of $1,200,000,000, which exceeded our ARR guide. Our revenue came in the middle of our guidance, which actually was what we anticipated. Look, as we are in hypergrowth phase, ARR is the north star metric. Now, on the next question around the difference between ARR and revenue guidance, let me say that first and foremost, at Nebius Group N.V. we are really taking a prudent approach to our revenue guidance. As we communicated, for 2026, our guidance is $3,000,000,000 to $3,400,000,000 in revenue. The difference between ARR and revenue is logical. Our revenues and ARR reflect the deployment schedule of our capacity throughout the year, with the majority of this capacity being installed in the second half of the year, as Andrey mentioned. We need also to consider that our largest enterprise partnerships are also still ramping. So the revenue guide simply reflects the ramp-up in capacity coming online. Tom Blackwell: Great. Andrey Korolenko: Thank you, Dado. Neil Doshi: Question from Alex Platt from D.A. Davidson. How should we think about your progress against the $7,000,000,000 to $9,000,000,000 of ARR guide? And are you really dependent on the large hyperscalers to get to that range? Marc, why do you not take this? Thank you, Alex. First of all, let me clarify. Our 2026 ARR target is not dependent on any new mega deals. Marc D. Boroditsky: As we bring on our planned additional capacity, combined with the already strong pipeline and our go-to-market plans, we are very confident in our ability to deliver our 2026 ARR target. Our continued success with AI natives and the early progress we have seen with ISVs and enterprises set the foundation for capturing the market this year. Based on the traction we are experiencing and our extensive research on our total market opportunity, we are leaning into the verticals we have already laid out: healthcare and life sciences, media and entertainment, physical AI, and retail, which give us ample runway to capture share and grow our business. While we are happy to service large strategic customers like hyperscalers, we will remain opportunistic with such large deals as we look to balance the opportunity with the long-term positioning we plan to achieve with our AI cloud. Neil Doshi: Great. Thank you, Marc. Now let us take a question from the portal. Can you provide an update on where you stand as it pertains to the delivery schedule with Microsoft and Meta? And remind us again about how those two contracts layer in throughout the year. Maybe on the first part, we will have Andrey, and then, Dado, you can take the second part on the contract layering. Andrey Korolenko: Yeah. Thanks, Neil. As I mentioned earlier, the first tranche to Microsoft was delivered according to the plan in November. And the remaining capacity is on schedule, ongoing. All of the remaining tranches will be delivered throughout the whole 2026, and more than half of them will land during the second half of the year. About Meta, early in this month, we delivered both contracted tranches to Meta on time, and we are now fully in servicing stage. And, Dado, can you comment on the financials? Dado Alonso: Of course. Thank you, Andrey. The deployments in Meta, as Andrey just mentioned, went live early February. As such, we expect to recognize 12 months of revenue for the first tranche and roughly 11 months for our second tranche. As for the Microsoft deal, we expect revenue to ramp over the course of the year in line with our plans to deliver the capacity tranches, which, as Andrey mentioned also, will happen throughout the year with the majority expected in the second half. So, Microsoft will begin to deliver a full-year revenue starting in 2027. And as we execute on these commitments, we expect them to contribute positively to our medium-term EBIT margin target of 20% to 30%. Neil Doshi: Great. Arkady Volozh: Thanks, Dado. Neil Doshi: Another question from the portal. What drove the upside in the December 2025 ARR? And as you look into Q1, what are the demand trends that you are seeing in the market today? Marc, why do you not take this? Marc D. Boroditsky: Certainly. The upside in December ARR came from solid execution and strong pricing and utilization. We continue to make great progress in adding new logos and expanding with existing customers. On the second point, we are seeing very strong pricing across all families of GPUs, and we are at full utilization as we continue to sell out all available capacity. On Q1 demand, it remains extremely robust, and we are seeing the same trends that we shared in 2025 carrying into 2026. Three things that give me tremendous confidence and excitement as we enter 2026 are continued pipeline growth, positive deal trends, and the progress we are making with our vertical strategy. The pipeline creation trajectory in Q1 is on track to exceed $4,000,000,000, and as we expand our available capacity and add sales coverage, we expect it to continue to increase. In terms of deal trends, they are all moving in the right direction. Deal terms are getting longer, and average deal sizes are increasing. In Q4, we saw nearly twice as many transactions completed for over 12 months in duration over what we succeeded with in Q3, while average selling prices increased by more than 50%. As an example, we are sold out of Hoppers, and those that are coming up for renewal, often off of short reserve agreements, are getting renewed at 12 months or longer, Arkady Volozh: while we are Marc D. Boroditsky: actually seeing pricing nudging up. Lastly, we are focusing on customers with premium workloads and use cases, which is resulting in superior terms, including increasing those who are willing to prepay for securing future capacity. Neil Doshi: Great. Thanks, Marc. We had another question from the portal. There are headlines of data center equipment shortages in the market. How is Nebius Group N.V. handling this situation, ensuring access to these products? And do you expect it to have any impact on your deployment? I think, Andrey, this would be for you. Andrey Korolenko: Yeah. Thanks, Neil. Arkady Volozh: On Andrey Korolenko: the data center delays, well, generally, building the data centers is quite a complex task. And no one can get away from all the risks. But I think we are in quite good shape of managing this risk. And as you saw today, we are well ahead on our contracted power, and we are developing nine contracted sites we announced today. And the main idea and the main strategy is to have a portfolio of sites, so we are not dependent on any specific single data center project to achieve our guidances and deliver our plan. And it is pretty important to understand our differentiation: we are a full stack Tom Blackwell: cloud. Andrey Korolenko: Allowing us to enjoy the flexibility that it provides, that we are not dependent on any site. We can move the loads in between, we can provide it from different locations. We iterate to ensure that we have enough capacity. And the second one is we already contracted the majority of our long-lead items around our own sites to ensure the capacity deployment beyond 2026 as well. And the second part of the shortages is the memory and storage. The first important point is our largest deals with Microsoft and Meta. We were able to secure the necessary components last year for the full scope of those contracts, and we secured it in 2025, before any price increase. And for the remaining, we are confident in our supply chain to get the parts we need to continue to deliver the capacity. Neil Doshi: Maybe sticking with you. A few of our analysts are asking, with the announced nine new sites for data centers that are going to be a mix of owned and colocations, how do you evaluate when you want to buy versus lease, and how do you expect this mix to shift longer term? Andrey Korolenko: I think we discussed it quite a few times. Generally, we are focused on bringing most of our largest projects as self-developed projects. There are three main reasons. First, we get much better total cost of ownership with this. We have much more control over the execution of the project because we have expertise and experience of building our own sites. We also can achieve greater efficiency at scale because, generally, we tailor the design specifically for what we need and for our technical requirements. But this takes time, and we use leases and partnerships to fill the gaps before we are at full speed with our own ones. So just to sum up, the preference is to develop the infrastructure ourselves. But, again, we still need partners and leases occasionally to support the growth. Great. Thank you, Andrey. Neil Doshi: Next question from Josh Baer at Morgan Stanley. It is really around the software stack. What are the most common software tools that your broader customer base—startups and large enterprises—are using and paying for from your AI cloud, and what proportion of your customers utilize your software and services in addition to your compute capacity? And then any color on just how much ARR comes from the software stack today? Marc, why do you not take this? Marc D. Boroditsky: Certainly. Thanks, Josh, for the question. As I think you know, our AI cloud is purpose-built for AI and is battle-tested with our AI customer base. At this stage, 100% of our AI cloud customers are utilizing our AI cloud software, obviously. So we have a 100% attach rate. We are very excited, by the way, about the new products that we have launched, like Token Factory and the Aether releases, which have opened up TAM and give us an opportunity to expand into enterprise. Our new acquisition of Tavily also extends our platform capabilities by providing agentic search for AI developers, creating more routes into accounts. I should also mention that we continue to see demand for embedded storage from customers across key verticals, including physical AI, media and entertainment, and healthcare and life sciences. As a result, we are creating solutions that are vertically specific to meet the demands of these customers. We are really in the early stages of our monetization journey, but our software and services make our platform sticky, which enables us to charge more on a relative per GPU-hour. We are exploring other monetization models including consumption-based, such as per-token pricing with Token Factory, so Josh, stay tuned for more monetization in the future. Neil Doshi: Great. Thanks, Marc. Another question from Alex DeVal from Goldman Sachs. It is really on the 40% EBITDA margin target that we gave. What gives us confidence in that? Dado, can you take this one? Dado Alonso: Nebius Group N.V. is scaling, and as we do, so will our margins. Sure. Thanks for the question, Alex. Let me bring the bigger picture. Now, let us come to adjusted EBITDA margin guidance. In Q4, the group achieved adjusted EBITDA margin of 7%. And for 2026 we are expecting to reach 40%. We see a tremendous demand for our AI cloud business, and we are investing appropriately to serve this demand. As we reported, the margin of the core AI cloud business is actually significantly higher than the group. And as we scale the AI business, most of our revenue and margin will continue to be driven by the core AI business. So we expect, of course, the other businesses to still operate at EBITDA loss in 2026, but their contribution to EBITDA will be smaller and smaller. So, the guidance of 40% adjusted EBITDA margin reflects the current expansion stage of the business. Arkady Volozh: Great. Neil Doshi: Thank you, Dado. We have a few of our analysts, including James Kisner from WaterTower Research, asking about Tavily. What is the strategic rationale behind Tavily? How is this complementary to your existing offering? And really, is there a lot of demand for this product from your cloud customers? Roman, why do you not take this? Arkady Volozh: Yeah. Thank you for the question. I was afraid we would not come to it. It is quite an exciting event. Roman Chernin: For us, and we are super excited to announce our first M&A deal with the acquisition of Tavily and welcome the Tavily team and Tavily customers into the Nebius Group N.V. family. Tavily is an agentic search company. They connect AI agents to the web. Tom Blackwell: And Roman Chernin: it very much fits in our strategy to become and to be the platform where all the AI developers from startups and enterprises are building their AI applications and agents. Tavily got quite a significant progress. They already serve many Fortune 500 customers. And they have great adoption in the developer community and are loved by developers. We will continue to evaluate potential acquisitions of companies that can deepen customer engagement, stickiness, and increase our lifetime value and strengthen our positions as a full-stack AI cloud provider. And this game is so large that we obviously will not build everything ourselves. We will be in the strategic opportunities and we will be in the strategic partnerships, moving forward looking for the companies and partners that have a great product, great developer experience, and similar to our DNA, to build a platform that will be loved by AI developers long term. Andrey Korolenko: Great. Arkady Volozh: Thank you, Roman. Neil Doshi: We have another question just on capital allocation and M&A. In terms of build versus buy, like, Nehal Chokshi is asking this from Northland. Arkady, when you are thinking about capital allocation, especially whether it is investing in capacity, Arkady Volozh: Yeah. Neil Doshi: or doing M&A, how do you think about this? Arkady Volozh: What we are building here, we are building one of the largest platforms for AI developers to build their applications. The largest platform means two dimensions: the scale and functionality, product. And we could allocate capital between these two dimensions. We need to build scale. That is why we need to build all these data centers and buy all those hundreds of thousands of GPUs. And we need to build the product, and we build this product both organically, internally, by our own developers. But we do not cover everything, so we go into acquisitions. And we spend some capital on acquisitions as well, to enhance our product, to get more talent, and ultimately to develop more, even faster. And Tavily is a perfect example of such an increase. Hopefully, not the last one. Neil Doshi: Great. Thank you, Arkady. I think we are at the top of the hour. So thank you, everyone, for joining our fourth quarter 2025 earnings call. And next quarter, Gili will be leading the earnings process. Thank you, everyone.
Operator: Good morning, ladies and gentlemen, and welcome to the Alnylam Pharmaceuticals, Inc. Q4 and Full Year 2025 Earnings Conference Call. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on Thursday, 02/12/2026. I would now like to turn the conference over to Christine Lindenboom. Please go ahead. Good morning. I am Christine Lindenboom, Chief Corporate Communications at Alnylam Pharmaceuticals, Inc. With me today are Yvonne L. Greenstreet, Chief Executive Officer; Tolga Tanguler, Chief Commercial Officer; Pushkal P. Garg, Chief Research and Development Officer; and Jeffrey V. Poulton, Chief Financial Officer. For those of you participating via conference call, the company slides can be accessed by going to the Events section of the Investors page of our website. Christine Lindenboom: investors.alnylam.com/events. During today's call, as outlined in Slide 2, Yvonne will offer introductory remarks and provide some general context. Tolga will provide an update on our global commercial progress. Pushkal will review pipeline updates, clinical progress, and upcoming milestones, and Jeff will review our financials and guidance before we open the call to your questions. I would like to remind you that this call will contain remarks concerning Alnylam Pharmaceuticals, Inc.’s future expectations, plans, and prospects which constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our most recent periodic report on file with the SEC. In addition, any forward-looking statements represent our views only as of the date of this recording and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements. With that, I will turn the call over to Yvonne. Yvonne? Yvonne L. Greenstreet: Thanks, Christine, and thank you everyone for joining the call today. Alnylam possesses a truly unique profile in the biotech industry, underpinned by our established and sustainable innovation engine, coupled with commercial excellence driving durable long-term growth. We are the leaders in RNAi therapeutics with a proven organic product engine and a reproducible and modular process for developing our medicines that has resulted in outsized historical success rates. We also have a high-yielding pipeline with over 25 programs currently in active clinical development. There are now six Alnylam-invented medicines on the market that are collectively generating several billion dollars in annual revenues and treating hundreds of thousands of patients around the world. This broad execution across all areas of the business was clearly evidenced in 2025, which was a transformational year for Alnylam. In terms of commercial and financial performance, we achieved a landmark approval of Amvuttra for ATTR cardiomyopathy, and driven by the success of that launch, delivered nearly $3 billion in combined net product revenues, which was 81% growth compared to 2024. Importantly, we met or exceeded all of our ambitious Alnylam P5x25 goals. And with today's announcement, we can now officially declare that we have achieved GAAP profitability for the 2025 full year and expect to sustain profitability going forward. On the pipeline and platform side, in 2025, we initiated three Phase 3 studies and our clinical pipeline with four proprietary CTAs in addition to five that were filed by our partners. We also developed and launched a potential best-in-class enzymatic ligation-based RNAi manufacturing platform called Cyrillis. We believe this platform will enable us to greatly expand our capacity and bring RNAi therapeutics to more patients around the world while reducing the cost of goods. While 2025 was a defining year for the company, we are now focused firmly on the future, harnessing our success to accelerate innovation and scale impact. To that end, we are excited to have recently shared our new set of five-year goals, Alnylam 2030. And these goals rest upon three strategic pillars, starting with achieving global TTR leadership while building a durable TTR franchise. We aspire to lead this market in revenue by 2030 and across the period, and to launch nuceresiran in 2028 for polyneuropathy and 2030 for cardiomyopathy. The next pillar is growing through sustainable innovation, where we plan to deliver two or more transformative medicines beyond TTR that have blockbuster potential. We also aspire to achieve delivery of RNAi to 10 tissue types, and have a pipeline of over 40 clinical programs by 2030. The high-yielding platform and outsized historical probability of success combined with our rigorous and disciplined approach to portfolio management, we believe this is the right place to focus our efforts and resources. And we expect to invest approximately 30% of our revenues in non-GAAP R&D across the period to accelerate organic internal innovation and selectively access external innovation. Given our expertise and leadership in this space, we believe this is a prudent allocation of capital that has the potential to deliver significant growth in the future. The final pillar of our 2030 goals is scaling with discipline and agility to drive sustained, profitable growth. This includes striving to achieve over 25% revenue CAGR through 2030 and to deliver a non-GAAP operating margin of 30% across the period. It is important to note that this operating margin goal is only through 2030, which is the year we aim to achieve regulatory approval for nuceresiran in ATTR cardiomyopathy. And if nuceresiran is successful in demonstrating the best-in-class profile that we expect, we believe it would drive swift patient uptake and, given the lack of any royalty obligations for nuceresiran, potentially drive our operating margins to the mid-40s post 2030. Through these goals, I hope you can appreciate that we are building on Alnylam for the future, delivering continued long-term growth underpinned primarily by our RNAi innovation platform. With that, let me now turn the call over to Tolga for a review of our commercial performance. Tolga? Tolga Tanguler: Thanks, Yvonne. Good morning, everyone. It is a pleasure to show how we are continuing to bring Alnylam’s transformative therapies to patients around the world. Q4 represented another quarter of strong growth for Alnylam. We delivered $995 million in combined net product revenues, representing 121% growth year over year and 17% growth versus prior quarter. While our TTR franchise remains the primary growth engine, we are also seeing continued momentum in our rare disease business. Let me start there. Our rare disease portfolio continues to deliver meaningful impact for patients and consistent performance for our business. In Q4, our rare franchise generated $136 million in net revenue, up 26% versus the same period last year, driven by increased patient demand and favorable order timing in partner markets. As a result, GIVLAARI and OXLUMO together became a $500 million franchise in 2025, reflecting continued growth more than five years post launch. With that, let us turn to the TTR highlights. Q4 was another robust quarter for our TTR franchise, continuing the strong launch trajectory we saw in Q2 and Q3. Global TTR net revenues reached $858 million, up 18% versus the prior quarter, and representing 151% growth year over year. In the U.S., net revenues for our TTR franchise grew 20% compared with Q3 2025 versus 222% versus Q4 2024. The quarter-over-quarter growth was primarily driven by a continued increase in U.S. patient demand, partially offset by an increase in gross-to-net deductions and an unfavorable inventory channel impact. Outside the U.S., revenues grew 13% versus the prior quarter, and 47% year over year, underscoring continued global momentum. We continue to be very pleased with the early signs in Japan roughly six months into the cardiomyopathy launch as we continue to track in line with leading launch analogs in the industry. In Germany, we recently aligned pricing for Amvuttra for the ATTR cardiomyopathy opportunity, reflecting the significantly larger prevalence of the cardiomyopathy indication relative to the polyneuropathy indication. As expected, this will create a modest near-term impact on total TTR revenue in Q1, but importantly, it positions us to compete effectively and participate in a substantially larger cardiomyopathy market in Germany. Yvonne L. Greenstreet: As we have previously mentioned, Tolga Tanguler: we anticipate launching Amvuttra for ATTR cardiomyopathy in additional international markets throughout 2026 following the completion of local pricing and reimbursement reviews. Yvonne L. Greenstreet: As we continue to launch across ex-U.S. markets, Tolga Tanguler: we are building global momentum that we expect to carry through 2026 and beyond. Finally, Yvonne L. Greenstreet: our international performance reflects the continued strength Tolga Tanguler: of our hereditary ATTR polyneuropathy legacy business, which remains robust despite competition. Broader engagement in the category is expanding awareness and diagnosis, ultimately benefiting patients and reinforcing Alnylam’s leadership role in shaping the field. Now let us turn to the U.S. ATTR cardiomyopathy-specific dynamics. Looking back on 2025, our confidence in the size, growth, and continued under-penetration of the ATTR cardiomyopathy category has been reinforced. Despite approximately 40% volume CAGR over the past six years, the majority of patients with ATTR cardiomyopathy remain untreated. Against that backdrop, we are highly encouraged by Amvuttra’s early momentum. In its first few quarters, performance relative to relevant specialty analogs supports the potential for a breakout launch, reflecting strong customer demand, the value of Amvuttra’s differentiated profile, and disciplined commercial execution. When we look at the early launch data, what is most encouraging is not just the pace of uptake, but where Amvuttra is being used and why. Yvonne L. Greenstreet: First, Tolga Tanguler: Amvuttra is rapidly establishing itself as an important choice in new treatment starts. By just the second quarter post launch, Amvuttra approached parity with tafamidis in share of new starts based on available estimates. While these available data will continue to evolve, the early signal is clear. Prescribing dynamics in ATTR cardiomyopathy are shifting. Second, we are gaining traction in first-line patients. Establishing Amvuttra as a first-line option remains our strategic priority, and we are making meaningful progress. In parallel, Amvuttra has quickly become the preferred option for stabilizer progressor patients, consistent with its differentiated and orthogonal mechanism of action. Third, this momentum is underpinned by broad and durable access. Following completion of our 2026 payer policy discussions, we can look ahead with increased confidence to even broader patient access for Amvuttra in 2026 versus last year. Over 90% of payers now provide first-line coverage, with the large majority of patients able to initiate treatment without step-through requirements. Most patients incur zero out-of-pocket costs, and approximately 90% can access treatment within 10 miles of their home, supported by a broad, well-established network of sites of care. As we enter 2026, we remain clear-eyed about where we are. The ATTR cardiomyopathy launch is still in its early stages, just three quarters in, and there is important work ahead. At the same time, we have established the foundations for durable growth, underpinned by a strong value proposition, broad access, and steadily increasing customer demand. Looking forward, we see meaningful opportunity to further expand the category by improving diagnosis and treatment rates, and we are investing accordingly through targeted efforts in education and awareness, evidence generation, and diagnosis enablement to ensure sustainable, long-term impact for patients. We look forward to sharing more details at our upcoming investor webinar where we will mark the one-year anniversary of Amvuttra’s U.S. FDA approval for ATTR cardiomyopathy on 03/24/2026, and highlight our progress for patients and the long-term growth and durability of our TTR franchise. With that, I will hand over to Pushkal. Thank you, Tolga, and good morning, everyone. As Yvonne highlighted earlier, 2025 was indeed a year of substantial pipeline progress and platform innovation for Alnylam. First, we initiated three Phase 3 studies in 2025. Pushkal P. Garg: ZENITH is our event-driven cardiovascular outcomes trial for zalesiran in patients with uncontrolled hypertension at high CV risk. We aim to enroll approximately 11,000 patients and, if successful, plan to launch around 2030. TRITON-CM is our event-driven outcomes trial for nuceresiran in ATTR cardiomyopathy. Approximately 1,200 patients will be enrolled in this study with launch also expected in 2030, if successful. And TRITON-PN is an open-label study of nuceresiran in approximately 125 patients with hereditary ATTR polyneuropathy. If successful, approval in this indication is expected in 2028. We also expanded our clinical pipeline, taking four new Alnylam-led programs into the clinic: ALN-2232, our first RNAi therapeutic directed to an adipose target, ACVR1C, with the potential to lead to durable weight loss, particularly reduction in visceral fat that is associated with poor cardiometabolic health; ALN-5288 targeting MAPT or tau for Alzheimer’s disease and other rare tauopathies; and two new programs for which we are not yet disclosing details due to competitive reasons, ALN-4285 and ALN-4915. Our partnerships also continue to generate progress with five new partner-led programs entering the clinic in 2025 across a range of indications with significant unmet need. We are also excited for our partners at Regeneron, who remain on track to submit a U.S. regulatory application in the first quarter for cemdisiran in generalized myasthenia gravis with potential approval anticipated later this year or early 2027. And finally, as Yvonne mentioned, we also launched Cyrillis, our proprietary enzymatic ligation manufacturing platform. As a result, we ended 2025 with a pipeline of over 25 clinical programs spanning multiple therapeutic areas across rare, specialty, and prevalent indications, representing a tremendous opportunity for improving patient health and creating value in the years ahead. Among these many programs, there are several that represent the next wave of transformative near-term RNAi therapeutics from Alnylam, each of which has multibillion-dollar potential. In the cardiovascular metabolic space, we are excited about zalesiran, targeting angiotensinogen with the aim of achieving continuous control of blood pressure with just two doses per year. For metabolic diseases, we see compelling opportunities to address substantial unmet medical need and gaps in treatment left by GLP-1s in both overweight/obesity and type 2 diabetes. And in neuroscience, valesiran targets amyloid precursor protein for the potential treatment of cerebral amyloid angiopathy and Alzheimer’s disease. APP is a genetically validated target for both of these diseases and CAA in particular represents a blue ocean opportunity. ALN-HTT02 employs a unique exon 1 targeting approach with the potential to address Huntington’s disease, a disease with no approved therapies, through deep and widespread lowering of the huntingtin protein in the brain. And in hematology, ALN-6400 offers an exciting opportunity for a pipeline-in-a-product, targeting plasminogen to address a wide range of bleeding disorders with a unique approach that has the potential to reduce bleeding without increasing the risk of thrombosis. Our first indication is hereditary hemorrhagic telangiectasia, which affects approximately 70,000 patients in the United States. We will share important updates across many of these programs over the year, as outlined in our 2026 pipeline goals. In the first half of the year, we plan to complete enrollment in the CAPRICORN I Phase 2 trial of marvesiran in patients with CAA, and initiate three Phase 2 trials. The first of these has already been achieved, which is a Phase 2 study of ALN-4324 in patients with type 2 diabetes. This study is now actively enrolling patients. For marvesiran in patients with Alzheimer’s disease, and another for ALN-6400 in a second bleeding disorder. Importantly, we expect to have clinical de-risking data this year on several of the programs I just mentioned. Specifically, we expect to share Phase 1 and 2 results from the ALN-6400 program and Phase 1 data on both our Huntington’s and ACVR1C programs in the second half of the year. And with that, let me now turn it over to Jeff to review our financial results and 2026 guidance. Jeff? Thanks, Pushkal, and good morning, everyone. Jeffrey V. Poulton: I am pleased to be presenting a summary of Alnylam’s full year 2025 financial results and providing our comprehensive financial guidance for 2026. Let us begin with a summary of our P&L results for the full year. Total global net product revenues for 2025 were nearly $3 billion, or 81% growth versus 2024, driven by a more than doubling of revenue in our TTR franchise, primarily from the strong performance in the U.S. following our Q2 launch of Amvuttra in ATTR cardiomyopathy. These full year results were more than $800 million above the original 2025 product sales guidance we provided last year, a testament to the strength of our ATTR cardiomyopathy launch performance. For the full year, collaboration revenue was $553 million, or 8% growth compared with 2024, and included a $300 million development milestone in Q3 associated with the dosing of the first patient in our ZENITH Phase 3 cardiovascular outcomes trial for zalesiran. Royalty revenue for the full year was $104 million, representing a 90% increase compared with last year driven by higher Leqvio sales from Novartis. Gross margin on product sales was 77% for the full year, representing a 4% decrease compared with 2024. The decrease in margin was primarily driven by increased royalties on Amvuttra, as higher revenues in 2025 resulted in an increase in the average royalty rate payable to Sanofi compared with the prior year. Our non-GAAP R&D expenses of approximately $1.2 billion increased 17% compared to last year, primarily driven by costs associated with the initiation of three Phase 3 clinical studies, including the ZENITH Phase 3 cardiovascular outcomes trial for zalesiran and the TRITON-CM and PN studies for nuceresiran. Christine Lindenboom: Non-GAAP SG&A expenses of approximately $1.0 billion increased Jeffrey V. Poulton: 22% compared to last year, primarily driven by increased investments in support of the Amvuttra ATTR launch in the U.S. We achieved full year non-GAAP operating income of $850 million, representing a $755 million increase compared with last year, driven primarily by the strong top-line results that I previously highlighted. I am also pleased to share today that we achieved profitability on both a GAAP and non-GAAP net income basis both in the fourth quarter and for the full year 2025, more than delivering on our P5x25 non-GAAP profitability goal. I would like to take a moment to thank the Alnylam employees who made this milestone possible through their active engagement and scaling our business with discipline over the past five years. Finally, we ended the year with cash, cash equivalents, and marketable securities of $2.9 billion compared with $2.7 billion at the end of 2024. The primary drivers of the $200 million increase in cash during the year include improved operating performance and proceeds from the exercise of stock options, partially offset by net proceeds utilized during our convertible refinancing in Q3. Now I would like to turn to our financial guidance for 2026. Starting with net product revenues, we are reiterating the combined net product revenue guidance for Amvuttra, ONPATTRO, GIVLAARI, and OXLUMO that we communicated in our J.P. Morgan press release dated 01/11/2026. We anticipate combined net product sales for our four commercial products will be within a range of $4.9 billion to $5.3 billion, representing combined full year growth compared to 2025 of 71% at the midpoint of the guidance range, or more than $2.1 billion in growth. On a franchise level, the guidance is broken down as follows. Total rare, $500 million to $600 million, representing full year growth compared to 2025 of 10% at the midpoint of the guidance range. Total TTR, $4.4 billion to $4.7 billion, representing full year growth compared to last year of 83% at the midpoint of the guidance range. As Tolga noted in his prior comments, it is still early days in the ATTR cardiomyopathy launch but we are pleased with our initial momentum and the strong fundamentals which support the long-term growth potential of our TTR franchise. As we highlighted at the J.P. Morgan conference, the 2026 TTR product sales guidance is underpinned by three key assumptions. First, we anticipate U.S. TTR category growth will remain brisk and consistent with prior years. Second, in the U.S., we continue to expect a modest decrease in net price as our cardiomyopathy business continues to scale. Specifically, we forecast a mid-single-digit net price decrease for Amvuttra in 2026. Third, given the impact on our polyneuropathy business associated with lower cardiomyopathy launch pricing in international markets, we expect international TTR revenue dollar growth in 2026 will be consistent with 2025. I would also like to provide some color on Q1 phasing assumptions associated with our full year TTR revenue guidance. For Q1, we expect considerably lower quarter-on-quarter TTR revenue growth compared with the $134 million of TTR growth that we delivered in Q4 2025. The lower growth expectation in Q1 is driven by a variety of factors, including the following: first, unlike in Q4, when our international markets contributed $23 million in quarterly TTR revenue growth, we are expecting an approximate $25 million reduction in Q1 international revenues, with the primary driver of the decrease attributable to our cardiomyopathy launch in Germany; second, modest quarter-over-quarter TTR growth in Q1 compared with the $111 million of U.S. quarterly growth achieved in Q4 due to fewer product shipping weeks in Q1 and the expected impact of annual insurance reauthorizations. Beyond Q1, we expect higher quarterly growth for the balance of the year in the U.S., and we remain confident in our full year TTR product sales guidance. Now returning to our full year 2026 financial guidance. Our collaboration and royalty revenue guidance range is $400 million to $500 million, representing a decrease of 38% compared to 2025 at the midpoint of the guidance range, driven by the one-time $300 million zalesiran development milestone achieved in 2025 that I previously mentioned that will not recur this year. We expect the collaboration revenue associated with our partnerships with Roche and Regeneron as well as Leqvio royalties from Novartis will drive the majority of our collaboration and royalty revenue this year. Our guidance for combined non-GAAP R&D and SG&A expense is a range between $2.7 billion and $2.8 billion, with the midpoint of the range representing 26% growth versus 2025. Growth drivers for R&D expense this year include increased investment in clinical studies, including the continuation of pivotal Phase 3 studies for zalesiran and nuceresiran, as well as early pipeline investment to deliver three to four new INDs and support expansion of delivery into new tissues. Growth in SG&A will primarily be driven by ongoing launch activities to support Amvuttra for ATTR cardiomyopathy in the U.S. and select international markets. Let me now turn it back to Christine to coordinate our Q&A session. Christine? Christine Lindenboom: Thank you, Jeff. Operator, we will now open the call for questions. Please limit yourself to one question each, then get back in the queue if you have additional questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any key. One moment for your first question. I have Paul with Fifth. Please go ahead. Jeffrey V. Poulton: Good morning. Can you hear me okay? Yvonne L. Greenstreet: Yes. We can. Thank you. Tolga Tanguler: Okay. Great. Good morning. Thanks so much, and appreciate you taking my question. Jeffrey V. Poulton: I was wondering if you could just comment on what you are seeing so far in 2026 in terms of new patient adds and the mix of first line for vutrisiran versus tafamidis switches and how you see that evolving over the course of this year and what is assuming guidance? Pushkal P. Garg: Thank you. Yvonne L. Greenstreet: Yeah. No. That is a great question. I think it is important just to underscore how pleased we are with the Amvuttra launch so far. Coming out of the gate strong, we are building towards an analog-beating launch and really building a long-term franchise that is incredibly important. All the fundamentals are in place to drive continued Amvuttra growth, which I think is underscored by our 2026 guidance and our 2030 goals. But, Tolga, maybe you will speak specifically to Tolga Tanguler: Yeah. I mean, how you see the market. Thanks, Yvonne. Good morning, Paul. Look. As Yvonne highlighted, what really drives our confidence in reiterating the guidance is the fundamentals. If you think about it, we have actually improved our first-line access. We are clearly seeing a strengthening physician and patient preference, and even more importantly, category growth with more patients entering the market. Those trends were in place heading into J.P. Morgan and have continued to build, and that is why we remain confident in the year. Great. Thank you. Yvonne L. Greenstreet: Next question, please. Tolga Tanguler: K. Your next Operator: question is from Salveen with Goldman Sachs. Please go ahead. If I Christine Lindenboom: just follow up on the confidence here in the guide for the year for the TTR franchise. Just speak to the choppiness that we are seeing coming out of the scripts for the first quarter to date and then how you think about the pricing dynamics as you look to a new potential market entry this year or next year, as well as the growth dynamics in Europe. Thank you. Yvonne L. Greenstreet: Hey, Tolga. Yeah. So let me take the pricing question Tolga Tanguler: first. We feel very well positioned from an access standpoint for this year. The large majority of patients have already first-line access without required step edits, and most patients are continuing to pay zero out of pocket, partly supported by our value-based agreements. And, in fact, utilization within those agreements has been rather minimal to date. In terms of on our pricing, our net price declined mid-single digits in 2025, and our 2026 guidance assumes a similar mid-single-digit decline, and that dynamic is fully integrated into our outlook. Now in terms of 2027, obviously too soon for us to be able to provide specific guidance, but we felt really well positioned as we entered 2026. Yvonne L. Greenstreet: Thanks, Tolga. Next question, please. Operator: Your next question is from Kostas with Oppenheimer. Please go ahead. Tolga Tanguler: Congratulations on the strong year. A question on seasonality from us. Have you seen any seasonality during the fourth quarter, potentially patients who pushed the injection to the next quarter because of the holidays and whether this can be a tailwind to 2026? Thank you. Yvonne L. Greenstreet: Maybe, Tolga, that question for you. And I think we only spoke to, you know, Q1 phasing, and that is actually kind of very typical in the industry. But, Tolga, do you want to Tolga Tanguler: Right. So I would actually really step back and start thinking about rather than on monthly fluctuations, looking at the quarterly, you know, the total growth of this category. If you think about historically, while quarterly growth has fluctuated, the longer-term category trend has been one of robust and really well-sustained growth on the order of about 40-plus over the past several years. So even within Q4, we have seen momentum improve as we exited the quarter. Now as Yvonne highlighted, Q1 has been rather specific across the industry in terms of the seasonality. We are certainly seeing some of that, but we believe that from that seasonality, it is really not impacting the underlying momentum that we are building in the category. Thank you. Yvonne L. Greenstreet: Next question, please. Operator: Your next question is from Ritu with TD Cowen. Please go ahead. Good morning, guys. Hi. Good morning. Thanks for taking the question. I wanted to ask about the gross-to-net pattern over 2026. Tolga, you mentioned mid-single digits. Is that going to be sort of a stepwise adjustment in Q1 and then flat through the rest of the year, or is it going to be gradual? Basically, I am asking are all the access discussions for the full year done? And also, if you can comment about Christine Lindenboom: per Salveen’s question, whether Operator: potential longer-term competitive dynamics are factoring into how you are thinking about gross to net over the year. Thanks. Yvonne L. Greenstreet: Maybe, Jeff, you start on the general gross-to-net question, and Tolga, you may have some additional perspectives. Yeah. Ritu, again, the guidance for the U.S. market for pricing this year is a mid-single-digit Jeffrey V. Poulton: net price decrease similar to what we did in 2025. And that would be expected to be gradual over the course of the year rather than sort of all upfront in the first quarter, gradual. Tolga Tanguler: Yeah. And in terms of the 2027 outlook, as we highlighted, it is really too soon for us to make any comments at this point. We do not know what their data is going to look like. We do not know what their label is going to look like. But what I can say is given how well we are positioned in terms of Part D versus Part D, we believe we are really well positioned in terms of being able to manage our growth. And, in fact, if you think about the guidance that we provided, or I should say our objectives from 2030, we are assuring that our 2030 CAGR growth of 25% certainly incorporates some of that thinking. We believe we are going to be able to preserve and increase the value of this category. Operator: Thank you. Alright. Thank you. Your next call comes from Maury with Jefferies. Please go ahead. Jeffrey V. Poulton: Hi. Good morning. Thanks for taking my question. You commented a little bit on this at J.P. Morgan, but just wondering for the five-year strategy, you mentioned the select external innovation as part of the approximate 30% revenue R&D spend. Can you just elaborate on that? Should we anticipate additional partnerships like the Roche one with zalesiran? Or other forms of licensing? And is there anything more on timing, size, scope of an external BD deal? Yvonne L. Greenstreet: Yeah. No. Thanks for that question. Look. I think it is important to highlight that we really are focused on our rich internal pipeline, which is truly spring-loaded for growth. But, given our strengthening financial position, it does make sense to start to become open to select innovation that could provide access to technologies and earlier-stage medicines that are complementing our existing commercial portfolio and our R&D pipeline. And I think important also to state that we have a very high science and financial bar, both for our internal innovation, but also as we look to assess opportunities externally as well. Thank you. Next question. Operator: Alright. Your next question comes from Tazeen with Bank of America. Hi, good morning. Thanks for taking my question. On nuceresiran, you talked about the time that you could potentially launch at the beginning of 2030s, let us say, 2030-ish. How should we be thinking about the impact Christine Lindenboom: to your operating margin once that product becomes available? And just practically speaking, even if it might have the better profile that you described as less frequent dosing, Operator: how long do you think it would take for patients to appreciate something like that, be it the base, switching from vutrisiran to nuceresiran when it becomes available? Christine Lindenboom: Thanks. Yvonne L. Greenstreet: So there are a couple of questions here. I will just reiterate maybe the remarks that I made earlier, which is, we are really excited about nuceresiran. We believe that this is, if it is successful, which we have high conviction in, it is going to have a best-in-class profile which is going to lead to swift patient uptake. And this is going to be without the royalty obligations for nuceresiran. So, clearly, this will have a significant positive impact on our margins post 2030. And as I said, we are looking at potentially driving margins to the mid-40s by Tolga Tanguler: 2030. And just to Jeffrey V. Poulton: tack on to that, if you look at what consensus gross margins are for our business out to 2030, Tazeen, it is mid-70s, and I would say the vast majority of that is related to the royalty that we pay Sanofi. So that tells you about the opportunity to improve margins post 2030 if we have the kind of profile that we expect with nuceresiran. Tolga Tanguler: Great. Yvonne L. Greenstreet: Thank you. Next question, please. Operator: Your next question is from Luca with RBC Capital Markets. Please go ahead. Pushkal P. Garg: Oh, great. Thanks so much for taking my question. Congrats on the progress. Maybe if I can pivot to the pipeline, Yvonne L. Greenstreet: Pushkal. Could you just talk a little bit about Huntington’s? Again, Pushkal P. Garg: assuming that maybe later this year you will show us some initial pharmacodynamic data on the mutant and the CSF. But we all know that huntingtin is a relatively slow progressive disease. So I am assuming that the clinical data like cUHDRS is going to be pretty preliminary. Would that be fair? And if so, are you willing to start the pivotal Phase 3 trial with just target engagement data in hand? Are you going to wait before doing so until you see a clear functional signal there? So I guess the question is, maybe walk us through what kind of go/no-go decision Jeffrey V. Poulton: to start a Phase 3 trial for Huntington’s. Thanks so much. Yvonne L. Greenstreet: Wow. That is a great question, and thank you for asking a question about the Huntington’s program. It is a program that we have high conviction in for addressing what I think we all know is an incredibly devastating disease, but there is quite a lot in that question. Pushkal. Pushkal P. Garg: Yeah. Luca, happy to address it. As I mentioned, as you highlight, the unmet need in Huntington’s, I think, is undisputable. We are very excited about the approach we have. We have an siRNA that targets the overall huntingtin protein, but specifically also targets this exon 1 segment that is thought to be necessary actually for disease propagation, and so we think we have a very unique approach. Unfortunately, prior approaches have not really addressed this. Interestingly enough, the one approach that does is the approach, and we have all seen some recent data coming from there that suggests potentially, through natural history data, there may be a favorable trend there emerging in terms of efficacy. So we are very excited about the approach. We are in a Phase 1 program right now in Huntington’s patients where we are really trying to see convincing evidence of lowering of huntingtin as well as safety. You will recall that prior efforts in this space have been challenged because they cannot get the high levels of knockdown, beyond about 20%, and then they have been associated with safety concerns: NfL increases, ventricular enlargement, etc. So I think those are the first two things, Luca, that we are going to be looking for. Can we get to good levels of knockdown? We would like to get to over 50%. And can we do that durably and safely for a period of time? As we have mentioned, we will put out some data at the end of this year. You are right that I would not expect a lot in terms of clinical data at that point in terms of cUHDRS. This is a relatively modest number of patients, and so we are hoping that, again, if we see those two signs, then to your second part, look, given the unmet need, this is a program we are very much going to try and accelerate as quickly as possible. We want to do that in a responsible way, but you will look to us to see what anything we can do to bring this forward to patients as quickly as possible, and we will keep you posted on that. Yvonne L. Greenstreet: Thanks, Pushkal. Thanks so much. Next question, please. Your next question Operator: is Miles with William Blair. Please go ahead. Pushkal P. Garg: Hi. Thanks for taking the questions. Another one on the pipeline for obesity. Gena Wang: Just what is the rationale for prioritizing the ACVR1C asset over something like INHBE in your Phase 1 trial? And then is the target product profile for that that is going to come out of that data, is it something that is equivalent to what we are seeing from your peer in Arrowhead, or are you going for something superior on the efficacy side? Thanks very much. Pushkal P. Garg: Straight for you. Yeah. Thanks, Miles. We see a tremendous opportunity in the overweight/obesity space and the diabetes space. GLP-1s have obviously revolutionized that space, but we think we all recognize there is a lot of unmet need to aid in weight loss, A1c reduction, without the muscle loss and the tolerability issues that happen with GLP-1s. We have prioritized ACVR1C because both in our preclinical work, based on the genetics, preclinical models, as well as some of the emerging data that you are seeing coming from Arrowhead, you see that ACVR1C appears to be the more potent target, and so we have certainly prioritized that. We are interested in INHBE, but we think ACVR1C is more interesting. I think when you look at the Arrowhead and Wave data, there are questions about the monotherapy magnitude of weight loss they can deliver. And I think this is a space where we are going to have to be particularly thoughtful. We are uniquely positioned to be thinking about unique patient segments that we might be able to target, looking at unique combinations that can bring disproportionate benefit to patients within this space. That is the reason for prioritizing ACVR1C. And, as I said, we expect to have some results to share at the end of the year. Tolga Tanguler: Thank you. Christine Lindenboom: Next question. Operator: Your next question comes from Mike with Morgan Stanley. Please go ahead. Jeffrey V. Poulton: Good morning. Thanks for taking the question. Maybe I could Gena Wang: ask a question just on cardiomyopathy and trends there, particularly for market share. Obviously, you have had some great share gains in the second-line setting and also Jeffrey V. Poulton: positive trends in the front line. Just Teraesa Vitelli: curious, particularly in frontline as we move through the year, do you expect those share trends to continue to increase? Thanks. Yvonne L. Greenstreet: Yeah. No. We have been very pleased by the broad and balanced kind of access that Teraesa Vitelli: we are seeing. Yvonne L. Greenstreet: Tolga? Tolga Tanguler: Yeah. I mean, as you saw, Mike, in the data we shared particularly around new-to-brand dynamics, we are approaching near parity with tafamidis. The goal and intent was to demonstrate that in a growing and increasingly competitive category, we have been able to make meaningful and rapid headway. Now in terms of 2026, obviously, we reiterated our full year 2026 guidance. What gives us the confidence is the continuous progress we are making in terms of first-line access, rising physician and patient preference, and also, importantly, healthy category growth. Those were the drivers heading into J.P. Morgan, and we continue to see them strengthened. That momentum supports our outlook for 2026. Yvonne L. Greenstreet: And, of course, we are going to be having the investor webinar in March, which will be an opportunity to rethink about how we are building this very exciting franchise for the future. Thanks for that plug. Okay. Tolga Tanguler: Next question. Operator: Your next question comes from Ted with Piper Sandler. Please go ahead. Teraesa Vitelli: Great. Thank you very much. And just maybe digging a little bit deeper in terms of the external partnering. Should we be more thinking complementary technology then from your comments earlier, Yvonne? Whether that be delivery types or other RNA mechanisms? Thanks. Yvonne L. Greenstreet: Yeah. No. I think that is absolutely correct. We are looking at areas where there is good strategic fit. Some opportunities are complementary to what we are doing. You touched on delivery. That is one potential approach to consider. We have a very exciting internal pipeline, so we are going to be very judicious about what external innovation actually helps us accelerate our internal innovation and also complements our current portfolio. But, Pushkal, do you want to add anything to that? No. I think you have covered it, Pushkal P. Garg: I think we are going to be looking at that landscape of things that are complementary from a technology perspective that help bring medicines to more patients more rapidly. Tolga Tanguler: Great. Teraesa Vitelli: Okay. Yvonne L. Greenstreet: Thanks. Next question, please. Operator: Your next question is from Ellie with Barclays. Please go ahead. Hey, guys. Thanks for taking the question. Maybe just a big-picture one across the emerging early-stage pipeline. Which programs are you most excited about, or do you think are the most de-risked? And then a second question, you mentioned for the U.S., you expect a mid-single-digit net price decrease in 2026. What would you expect for 2027? Should we expect something similar or more or less with a new competitor? Thanks. Yvonne L. Greenstreet: Wow. I think it started off with trying to get us to say what our favorite programs are. Yeah. I mean, Ellie, I think Pushkal P. Garg: it is like choosing between your children. We have some very exciting opportunities. In terms of your question about which are most de-risked, obviously, nuceresiran is about as de-risked as possible. We have no doubt that TTR silencing aids in both polyneuropathy and in cardiomyopathy, and that drug will get to 95% silencing in twice-a-year dosing. Zalesiran has shown blood pressure lowering, compelling blood pressure lowering, in four studies now—Phase 1 and three Phase 2s of increasing stringency on top of background medicines with a durable profile. There is a wealth, as Professor Williams highlighted last year at ESC, of data that suggests that continuous control of blood pressure should lead to outsized benefits in terms of cardiovascular outcomes. I think that is fairly de-risked. As you look forward, we have a number of other programs where in the period of 2026 and 2027 we are going to get very compelling data that leads to de-risking. Think about data coming out on Huntington’s, or in CAA as I just mentioned in my comments to Luca, and we will get some proof-of-concept data on a number of different programs in overweight, obesity, diabetes, and a number of programs that we actually have not named. And then, of course, the plasminogen program where we have already seen convincing data that we shared last year at R&D Day in terms of proof of mechanism, that we are seeing clot stabilization, very strong genetics. I think that has been significantly de-risked. You see confidence in there. We have kicked off one Phase 2. We have talked about kicking off a second Phase 2, and we are moving rapidly with that program. I am excited about the opportunities that lie ahead and, as I said, the number of exciting potential to help patients and create value. Yvonne L. Greenstreet: Yeah. That is great, Pushkal. I think the really unusual story about Alnylam is we actually have a de-risked organic product engine, and this gives us tremendous leverage, helping us to accelerate the pace of innovation and allowing us to scale with this proven platform into what is going to be a multi-franchise growth company. As Pushkal highlighted, there are a number of near-term opportunities for us to really turn these programs into important medicines for patients. Just Tolga Tanguler: do you want to add any perspective? Jeffrey V. Poulton: On the pricing question, I think that Ellie had asked about. Again, what we have said consistently since we have launched in the U.S. with cardiomyopathy in the label is we have expected gradual net price reductions over time as the business scales. Again, we are entering year two. Year one was mid-single-digit price decrease. That is what we are expecting in year two. Over the longer-term guidance that we have given, 25% CAGR, that is the expectation across the period at this point. Yvonne L. Greenstreet: That is great, Jeff. Apologies. When we get these multipart questions, sometimes one of the questions slips off the list. Tolga, did you have something to multipart answer to that as well? Tolga Tanguler: To support Jeff’s point, in terms of how anticipating new competition may impact the pricing, as we reiterated, first of all, we are really well positioned from an access perspective. We have established credibility and durability of this franchise in 2026, and if you think about the potential emerging competition, we are already actually in that competitive field with the polyneuropathy indication, and we have been able to secure great access to the patients with limited copay. I would anticipate, and obviously we provided our goals for 2030 and that value growth of 25% CAGR remains, so we are comfortable with providing that perspective for 2027 as well. Good. Well, I hope we covered everything you asked. Next Yvonne L. Greenstreet: next question, please. Operator: The next question comes from Corey with Evercore ISI. Please go ahead. Jeffrey V. Poulton: Hey. Good morning, guys. Thanks for taking the question. I guess Michael Eric Ulz: it is related somewhat to what you were just talking about, but with the competitive silencer data obviously expected this year, I am interested in your latest views on potential for that asset to attain a differentiated label based on their trial, and how you think about that having a potential commercial impact on Amvuttra if it were to actually be the case? Thank you. Yvonne L. Greenstreet: Okay. That is both a commercial and a development perspective in that question. Tolga, do you want to make a few remarks, and then we will hand it Tolga Tanguler: I mean, it is obviously difficult to assess the impact without seeing their data, and it would be premature to speculate on the specific role they are going to play. That said, it is really important to highlight this category remains very large and significantly underserved. Additional entrants will certainly help drive diagnosis and treatment rates, which we believe ultimately will benefit patients and expand the category. From our perspective, we feel very well positioned. We have a head start given our rapid, deep, and sustained knockdown profiles, strong clinical data package, and, obviously, quarterly dosing. Jeffrey V. Poulton: So Tolga Tanguler: maybe, Pushkal, you can Gena Wang: Yeah. I think, Corey, we are looking forward to seeing the results, as obviously we do not have a magic crystal ball. We will see what the results are. Our expectation is the study will be positive. They have shown good knockdown that occurs over a period of some months, and so I would expect—and they have a large outcome study, both in monotherapy and in combination—so I would expect the results to be positive. We will be on the lookout for a couple of aspects of this. First, we will want to look at the safety profile that emerges. This is an ASO in a large population that is somewhat older and frailer, so it will be interesting to see how that emerges. And then on the efficacy side, I expect to see favorable impacts on the outcome parameters, as we have shown with HELIOS-B with vutrisiran. There is some speculation that they will have a stronger signal, for example, in the combination because they will have a larger number of patients on top of a background stabilizer. My hypothesis would be I do not see any reason why the treatment effect size would be any different than what we have already established in HELIOS-B. They may have a tighter confidence interval or stronger p-value in that subgroup, but in terms of the effect size, I do not expect it to be materially different, and I think it would be consistent with what we saw. Your question is the most critical one, which is how is that going to impact the label? I would just point out that our label already provides data for both on and off a stabilizer, and it specifically points out that the treatment effects were consistent in both populations, so we have a very broad label. I do not foresee how the label would be materially different based on the statistical significance in that one subgroup, but that remains to be seen. That is how I would map it out. Teraesa Vitelli: Very helpful. Thank you. Next question. Operator: Next question. Next question comes from Danielle with Truist. Please go ahead. Gena Wang: Hey, guys. This is Alex on for Danielle. Thanks for taking the question. Just a question on Amvuttra access in community centers. Do you have a sense of how much of the market is not currently accessible due to the high cost of Amvuttra and potential hesitancy to stock the drug? Just curious if you have a sense of what proportion of new diagnoses are coming out of the community centers versus what proportion of Amvuttra patients are actually being managed in the community settings. Thanks so much. Tolga Tanguler: Let me just take that very quickly. As we highlighted from a payer perspective, first and foremost, because I think you highlighted whether there is an access issue, we feel really well positioned from an access standpoint. Again, the large majority of patients have first-line access to Amvuttra, and that is regardless of where those patients are. In terms of accessing the medication, as we highlighted, our experience is that it is very broad and balanced. In terms of the community setting patients, we have been able to secure alternative site-of-care agreements where 90% of the patients already have Amvuttra injection within 10 miles of their residences. We are continuing to expand that network, but I think we reached that critical mass already within 2025, and we continue to work on that. Yvonne L. Greenstreet: Perfect. Well, I believe that was our last question. I would like to thank everyone for joining us today. Clearly, 2025 was a remarkable year in which we delivered a blockbuster launch of Amvuttra in TTR cardiomyopathy, we made significant advancements across our pipeline, and we achieved sustainable profitability. As we begin this next chapter of our story, we look forward to executing on our 2026 goals and the broader 2030 strategy to both accelerate innovation and scale impact. Thanks to everybody who joined the call, and have a great day. Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for participating, and you may now disconnect.
Operator: Hello, welcome to P10, Inc.'s fourth quarter and full year 2025 conference call. My name is Kevin, and I will be coordinating your question-and-answer session. As a reminder, today's conference call is being recorded. I will now pass the call over to your host, Mark C. Hood, EVP and Chief Administrative Officer. Mark, please go ahead. Thank you, Operator, and thank you all for joining us. On today's call, Mark C. Hood: We will be joined by Luke A. Sarsfield, Chairman and Chief Executive Officer, and Amanda Nethery Coussens, EVP and Chief Financial Officer. After our prepared remarks, Richard J. Jensen, EVP, Head of Strategy and M&A, and Sarita Narson Jairath, EVP, Global Head of Client Solutions, will join us for our Q&A session. Before we begin, I'd like to remind everyone that this conference call as well as the presentation slides may constitute forward-looking statements within the meaning of the federal securities laws including the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect management's current plans, estimates, and expectations and are inherently uncertain. Actual results for future periods may differ materially from those expressed or implied by the forward-looking statements due to a number of risks and uncertainties that are described in greater detail in our earnings release and in our periodic reports filed from time to time with the SEC. The forward-looking statements included are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements as a result of new information or future events, except as otherwise required by law. During the call, we will also discuss certain non-GAAP measures that we believe can be useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measure is available in our earnings release and our filings with the SEC. I will now turn the call over to Luke. Thank you, Mark. Good morning, everyone, and thank you for joining our fourth quarter and full year 2025 earnings call, which also marks our inaugural call as P10, Inc. Our name and brand usher in an exciting new chapter for our company. The P10, Inc. name and branding represent the work we have done to expand our platform, more fully integrate our strategies, and reinforce our enduring commitment to delivering durable alpha for clients. Before I discuss our financial results, I would like to provide some background on our new company identity, which aims to capture our growth trajectory as a cohesive, integrated enterprise. Over the past two years, our broad leadership team has embarked on a significant strategic transformation that continues to drive meaningful improvements across our platform. During this time, we doubled down on our strengths and further evolved into a world-class firm with more than $43,000,000,000 in assets under management. Over the past two years, our fee-paying assets under management have increased by 27%. Importantly, our robust growth is not attributable to a single asset class. Luke A. Sarsfield: Rather, Luke A. Sarsfield: it reflects a cohesive synergy Luke A. Sarsfield: across our private equity, private credit, Luke A. Sarsfield: and venture capital strategies, resulting in robust and consistent year-over-year expansion. As we have executed on the strategic growth initiatives outlined at our 2024 Investor Day, we felt it appropriate and timely to adopt a new name that better informs who we are today Luke A. Sarsfield: and where we are headed in the future. Luke A. Sarsfield: For your awareness, a ridge post is a marker on higher ground, symbolizing stability, perspective, and protection. From this vantage point, P10, Inc. sees opportunities that others miss, reflecting our distinct positioning at the nexus of the middle and lower middle market, an underserved segment that presents abundant opportunities and secular tailwinds. For our employees, the new identity reflects the progress we have made integrating our strategies into one collaborative platform with a shared purpose and direction. For limited partners, it reinforces our commitment to always putting clients at the center of everything we do while delivering consistent access to differentiated strategies across a scaled global network. And for our general partners, P10, Inc. offers a world-class, complementary partnership with a robust set of capabilities across the capital stack. Luke A. Sarsfield: Next, Luke A. Sarsfield: I would like to discuss the Stellus acquisition we announced last week. Stellus is a leading direct lending platform providing senior secured loans to sponsor-backed lower middle market companies in the United States. They have approximately $3,800,000,000 in assets under management, including $2,600,000,000 in fee-paying assets under management. You have heard us talk about our organic growth strategy and where we are focused. We have discussed wanting to do transactions that extend our capabilities, where there is a shared culture and vision, and that are value additive from a shareholder perspective. In terms of asset classes, you have heard us talk about our goal of adding broader direct lending capabilities and particular interest in places where we think we can help drive transaction sourcing given our middle and lower middle market sponsor ecosystem across our platform. We think this transaction hits all those areas and is a fantastic addition to our platform. The Stellus team has invested more than $10,300,000,000 of capital across more than 375 companies over its 20-plus year history. They have grown fee-paying AUM at a 17% CAGR since 2020 and have a proven track record of launching new vehicles. They started with a publicly traded BDC, Stellus Capital Investment Corporation, and have subsequently launched multiple private funds as well as a private BDC. In materials available on our website, we show the very natural fit of Stellus' sponsor relationships with our other strategies. In particular, the profile of RCP sponsor relationships maps very well with Stellus'. The median last fund size of sponsor relationships at both is about $600,000,000. We think this has the potential to help open greater sourcing opportunities for Stellus. Luke A. Sarsfield: We have also talked about the significant benefits Luke A. Sarsfield: of the middle and lower middle market. In particular, favorable supply-demand imbalances help drive attractive risk-adjusted returns. And we see that in Stellus' profile, where their disciplined underwriting process combines with structurally lower financial leverage in the lower middle market to drive low historical default and loss rates. From a financial profile perspective, we think the transaction is compelling for our shareholders, with modest ANI per share and FRE margin accretion in the first year. Both measures do not consider revenue or cost synergies, including the potential sourcing opportunities I mentioned. We are truly thrilled to welcome Rob, Josh, Dean, Todd, and their team to the P10, Inc. family. They have built a fantastic business. We think they are a tremendous fit and that their addition to our platform will help grow our franchise in a strategic, culturally aligned, and financially accretive way. Luke A. Sarsfield: Now Luke A. Sarsfield: I want to turn to our 2025 financial performance and platform-wide accomplishments. In 2025, we continued to make meaningful progress across our strategic growth initiatives, Luke A. Sarsfield: over the course of the year, Luke A. Sarsfield: we raised and deployed a record $5,100,000,000 of organic gross new fee-paying assets under management, finishing the year at $29,400,000,000 in fee-paying AUM. We exceeded our initial annual organic fundraising guidance by over $1,000,000,000. For the full year 2025, fee-paying AUM increased by 15%. Fee-related revenues, excluding direct and secondary catch-up fees, increased by 13% and FRE margins came in a bit better than expected at 47%. This robust asset growth demonstrates strong demand for our primary, direct, and secondary funds, of which we had 24 total in the market over the course of the year, and around 20 in the market as of 12/31/2025. There is another important 2025 achievement I want to highlight. One of the topics we discussed at our Investor Day in September 2024 was the ability to leverage our cross-marketing capabilities across our global client base. Since then, we have made meaningful progress expanding our data integration capabilities across the strategies, augmenting our cross-selling efforts. We saw existing clients invest incrementally across P10, Inc. into other strategies at an accelerating pace. Over 10% of our capital raised since Investor Day were successful cross-sales. As we continue to hire high-quality fundraising professionals and strengthen the global client solutions team, we are confident in our ability to broaden our reach across all strategies and deepen our client relationships to attract even more capital from existing LPs. Luke A. Sarsfield: Further, Luke A. Sarsfield: we believe the key to continuing this consistent growth is strong fund performance, coupled with ongoing product innovation across geographies and asset classes. P10, Inc. expanded its product set in 2025 to better meet investor demand for increased exposure to private markets while preserving transparency, alignment, and downside protection. To that end, we created our first evergreen product, landed a significant SMA, and launched our first fund that is directed exclusively at European investors who want to invest in the North American middle and lower middle market. Also noteworthy in 2025 was the completion of the acquisition of Qualitas Funds this past April. Qualitas Funds is a Madrid-based private equity fund-of-funds manager, and its addition to P10, Inc. established our presence outside the U.S., which we have since augmented with the opening of our new Dubai office. As we continue to expand globally, we will look to partner with exceptional firms like Qualitas Funds to give us structural advantages in key markets. Luke A. Sarsfield: In addition, Luke A. Sarsfield: to our financial and operational successes, we have made meaningful enhancements to our governance profile and broadened the reach of our brand. In April, we appointed two new independent directors to our board. Steven Blewett, an accomplished private markets investment professional, joined the compensation committee, and Jennifer Glassman, a private markets seasoned professional and CPA, is now our audit committee chair. Further, in August, we announced our dual listing on the NYSE Texas as one of the exchange's founding members. Amanda Nethery Coussens: Finally, Luke A. Sarsfield: we continued our commitment to returning capital to shareholders in 2025. Luke A. Sarsfield: Since the beginning of 2024, Luke A. Sarsfield: we repurchased nearly 11,000,000 shares at a weighted average price of $9.69, representing over $105,000,000 in aggregate. Looking ahead, the future for P10, Inc. is very bright. During our Investor Day presentation in September 2024, we said that we intended to more than double fee-paying AUM to $50,000,000,000 by 2029, with the vast majority coming from organic growth. We are committed to executing on value-creating M&A, and we guided organic FRE margins, excluding M&A, to the mid-40s in the near to intermediate term and to closer to 50 in the out years. It is clear to us as we report 2025 results that we are well on our way to meeting or exceeding our long-term guidance. With respect to fundraising, specifically over calendar years 2026 and 2027, we expect to organically raise and deploy at least $10,000,000,000 of gross fee-paying assets under management. This target is consistent with the fundraising profile we have established since my appointment as CEO, with capital formation expected to be distributed roughly evenly Luke A. Sarsfield: across both years. Luke A. Sarsfield: Importantly, this target excludes the positive impact of Stellus and other potential acquisitions. In a moment, Amanda will provide additional detail around our financial guidance. In closing, we are off to a fast start in 2026. We have successfully executed on our rebrand, announced the strategic acquisition of Stellus, and opened our new office in Dubai, strengthening our presence in the Middle East. Another noteworthy announcement is our new collaboration with CAIS, a leading alternative investment platform for independent financial advisers. As a result, Bonaccord, our GP-stakes strategy, will join the CAIS platform, which serves over 2,000 wealth management firms and 62,000 financial advisers. This collaboration comes amid surging demand for alternative investments among financial advisers. A recent CAIS-Mercer survey revealed that nine in ten financial advisers are currently allocating to alternatives, and 88% of advisers plan to increase their allocation to alternatives over the next two years. Our CAIS relationship Luke A. Sarsfield: represents an important step in expanding Bonaccord’s footprint Luke A. Sarsfield: across the wealth management ecosystem. Amanda Nethery Coussens: Together, Luke A. Sarsfield: these milestones reflect a firm that is scaling with intention and positioning itself for durable, long-term growth. And we are doing this in what we believe is the best part of the market, the middle and lower middle market. We think of ourselves as the growth engine for America's small businesses, and we are proud of the positive impact we are having on our nation's economic growth. We believe this momentum, combined with our differentiated focus and expanding global footprint, positions P10, Inc. well for the year ahead. Luke A. Sarsfield: With that, Luke A. Sarsfield: I will turn the call over to Amanda to provide a deeper look at our financial results and guidance for the year ahead. Amanda Nethery Coussens: Thank you, Luke. At the end of the quarter, fee-paying assets under management were $29,400,000,000, a 15% increase on a year-over-year basis. In the fourth quarter, $841,000,000 in organic fundraising and capital deployment was offset by $535,000,000 in step-downs and expirations. As Luke mentioned, we expect strong fundraising from 2025 to carry into 2026 and 2027, as we are targeting $10,000,000,000 of gross organic fundraising and deployment over the next two years, excluding impact from acquisitions. In 2026, we have multiple funds in the market from each of our three core verticals: private equity, private credit, and venture capital. Step-downs and expirations for 2025 exceeded our initial expectation of 5% to 7%. As discussed in our third quarter earnings call, the increase is primarily attributable to two factors. First, there were early paydowns in our credit business, which reflects the high-quality nature of our loan portfolio and underwriting. A portion of the credit step-downs consists of recyclable capital, which is actively being redeployed. Next, a large separately managed account expired in 2025, which was replaced by a larger commitment from the same LP in 2025. Although these two factors increased our step-downs and expirations for the year, they reflect the strengths of our portfolios and demonstrate long-lasting relationships with valuable clients. Looking forward to 2026, we expect step-downs and expirations in the mid-range of 5% to 7% for the full year. AUM, which includes NAV, uncalled capital commitments, and capital committed since the NAV record date, was over $43,000,000,000 across the platform as of 12/31/2025. We continue to view fee-paying AUM as the best proxy for P10, Inc.'s current economics, while we believe AUM helps illustrate the breadth and scale of our multi-asset-class platform. FRR in the fourth quarter was $81,000,000. When excluding the effect of direct and secondary catch-up fees, FRR increased 20% from 2024. For 2025, FRR was $297,300,000. When excluding the effect of direct and secondary catch-up fees, given the outsized catch-up fees in 2024, primarily attributable to Bonaccord II’s final close, FRR increased 13% from 2024. The strong growth of our core business highlights the durable nature of our attractive revenue model. The average core fee rate was 109 basis points in the fourth quarter and 104 basis points for 2025. We anticipate the core fee rate to average 103 basis points for 2026. The core fee rate is expected to be lower than 103 basis points in the first half of 2026 and expand in the back half in line with our historical fee rate dynamic. The core fee rate expands in the back half of the year due to the seasonality of our tax credit business. In addition to revenue from our core fee rate, we expect to earn direct and secondary catch-up fee revenue in the range of $68,000,000 during 2026, with the majority of these catch-up fees in the back half of the year as our large direct and secondary products close on additional capital. In the fourth quarter, we had about 20 commingled funds in the market. Our private equity strategies raised and deployed $325,000,000, our venture capital solutions raised and deployed $178,000,000, and our private credit strategies added $338,000,000 to fee-paying assets under management. Throughout 2026, we expect to have about 20 funds in the market as well. We will continue to pursue attractive SMA relationships and expect to develop new products in addition to our commingled funds. Operating expenses in the fourth quarter were $55,200,000, a decrease compared to $62,200,000 for the prior year's fourth quarter, and in 2025 were $231,800,000, a decrease compared to $235,800,000 for 2024. Operating expenses decreased in 2025 as we had certain adjustments related to prior acquisitions that included a reversal of a reserve within compensation cost. GAAP net income in the fourth quarter was $11,000,000, an increase compared to $5,700,000 for the prior year's fourth quarter, and in 2025 was $23,000,000, an increase compared to $19,700,000 for 2024. For the fourth quarter, adjusted net income, or ANI, was $30,200,000, representing a decrease of 14% from 2024. For the quarter, fully diluted ANI per share was $0.26 compared to $0.30 in the prior year. The decrease in ANI is a result of historically high catch-up fee revenue of $19,000,000 in 2024. FRE was $39,000,000 in the fourth quarter, a decrease of 9% year over year. In the fourth quarter, FRE margin was 48%. For 2026, we anticipate FRE margins in the mid-40s for the year, but may be slightly lower than mid-40s during the first quarter of the year due to the additional investments made across our platform in 2025 and early 2026, primarily in fundraising. FRE margins are expected to grow throughout 2026 as we begin to see additional operating leverage for an overall mid-40s margin for 2026 and continual margin expansion from mid-40s to 50 over the next few years. Our board of directors approved a quarterly cash dividend of $0.0375 per share, payable on 03/20/2026 to stockholders of record as of the close of business on 02/27/2026. Cash and cash equivalents at the end of the fourth quarter were approximately $28,000,000. At the end of the quarter, we had an outstanding debt balance of $377,000,000: $321,000,000 on the term loan, and $56,000,000 drawn on the revolver. Our strong balance sheet, free cash flow, and ability to draw on the revolver position us to complete the latest acquisition and prepare ourselves for additional inorganic growth. Thank you for your time today. I will now pass the call over to the Operator to begin the Q&A session. Operator: If your question has been answered, you may remove yourself from the queue by pressing 11 again. We will now open for questions. Our first question comes from Kenneth Brooks Worthington with JPMorgan. Your line is open. The topic du jour for private markets managers is AI. Luke A. Sarsfield: Can you talk about, given your venture exposure and direct lending exposure, Kenneth Brooks Worthington: what your exposures are, and, ultimately, what are your thoughts on the AI risk to private market managers? Luke A. Sarsfield: Well, thanks, Ken. It is Luke here, and you are right. That certainly does seem to be the topic du jour. I will say a few things about it. The first is, and I will separate our portfolio in a couple ways. The first is, obviously, you mentioned the venture portfolio where we have across Kenneth Brooks Worthington: venture equity and venture debt. In that part of the portfolio, we are actually leaning in and actively investing into AI and other economic trends that we think are going to be net long-term positives for the economy, for the global economy, and ultimately for our investors. And so it will not surprise you to hear that we have meaningful exposure through our venture portfolio to AI. But the reality is that is by design. And I will tell you those investments have continued to go exceedingly well as we invest in the future economic drivers. When you look at what I would call the more regular-way parts of our portfolio that are not designed to be oriented in a specific way, we have, I would say, relatively modest exposure across our portfolio to SaaS and software and other places that there have been concerns that will be disintermediated by AI. I would say across our portfolio, generally, we have less than 10% exposure to SaaS and software. We disclosed, I think, as part of the Stellus acquisition that Stellus' exposure was less than 8%, just to put it in context. And the other thing I would just hasten to add is when you think about the SaaS and software exposure we have, these are not the large-cap names that you have been kind of reading about or have been kind of promulgated in the popular press. Ours are really business enablement, focused on advancing what I would call traditional industrial-like businesses in the middle and lower middle market. And so I think we are very comfortable with that. The last thing I would say is we engage regularly in a rigorous review of all of our core portfolio: our credit portfolio, our equity portfolio, our venture portfolio. And we feel exceedingly good about how we are positioned right now, Ken. Okay. Great. Thank you. And then maybe secondly, I wanted to ask about the private market wealth strategy build-out. Michael Cyprys: When you and I spoke, I do not know, I want to say 18 to 24 months ago, it seemed like private markets was not the priority for you, and you had focuses in other places. And yet, you have an enhanced product. Bonaccord is now working with CAIS. So maybe talk about wealth and the priorities that you are seeing there. And to what extent can the Bonaccord-CAIS relationship be expanded to other P10, Inc. managers over time? Luke A. Sarsfield: Again, great question. I would say a few things. I would say at the core, maybe I misspoke when I said we were not focused on private wealth. Recall that something like 36% of our clients are actually private wealth clients in some incarnation, whether ultra-high-net-worth individuals or otherwise groupings of ultra-high-net-worth individuals. What I think I said was we are probably not going to pursue a real aggressive feet-on-the-street approach to the private wealth channel as some of our competitors have, into places like the big wires in a comprehensive way and into places like the IBDs in a comprehensive way. But certainly, we see opportunities, given our product mix, given our portfolio, and given our historical client orientation, to take advantage of that and try to maximize that distribution and maximize our throw weight in the channels. And so you are right. We are looking at all features of our product design. As you mentioned, we did launch the evergreen product. We think that evergreen product, by the way, is going to have appeal both in private wealth channels but also in institutional channels. But we will certainly look at more alternatives around creative and innovative product design where we think there is going to be commercial uptake for it. And then I do think, to your point, one of the ways that we will probably manifest our interest and desire to grow that private wealth channel is through some sort of partnership or collaboration. And so CAIS, I think, is a great example of a collaboration with a platform that has a lot of relationships across private wealth and particularly those advisers in the private wealth channel who are more aggressively allocating to alternatives as a general matter. And so I think that is a great example of something we would do. I think over time, we would like to do more of it. We think there are other parts of our product offering that we think will have a lot of throw weight and a lot of appeal and appetite for private wealth, for both the advisers and for the end clients. And so we will want to do more of that. And there, as well, there are other potential partners or collaborators, we think, that could help us accelerate and facilitate that entrance into it. And so what I think I would say is as we approach it, we are unlikely to build a broad-based P10, Inc. distribution team solely focused on the wealth channel. That is probably beyond our ken right now. We want to get access to that wealth channel and are probably just going to do it in more creative ways and with partners along the way. Michael Cyprys: Excellent. Thank you. Operator: One moment for our next question. Our next question comes from Christoph M. Kotowski with Oppenheimer. Your line is open. Yes. Morning. Thanks for taking the question. I wonder if we could Christoph M. Kotowski: get a bit more color on Stellus. We see it like $1,400,000,000 in BDC money, and I assume that the Part I incentive fees will be in the base management fees, and that should take your blended average fee rate higher. So let me start with that. What would their blended average fee rate be? Luke A. Sarsfield: So I think what we would like to do, Chris, if it is okay, we gave some very high-level guidance as it relates to the Stellus acquisition. We talked about that it will be modestly accretive both to margin and to ANI EPS per share in the first full year. We have obviously done and engaged with them on a very robust and detailed modeling Luke A. Sarsfield: exercise. Luke A. Sarsfield: But I think what we are going to do right now is we are going to hold giving greater guidance on Stellus until we get closer to the closing of the acquisition. There is a closing timeline that we have to abide to, in terms of obviously getting the BDC boards to recommend the transaction and then having a shareholder vote. And so we will come back. Trust me. I promise. We will come back, as we get close to close, with much more robust guidance around how Stellus will impact every part of the P&L, from the fee rate on down, but we are going to do that when we get a little closer to closing. Christoph M. Kotowski: Okay. That is fine and fair. And then I was just wondering, on page 19, we see a private BDC. Is that a kind of a—can you, if you can say, how is that distributed and what is their reach into retail distribution, and does that help your product platform? Luke A. Sarsfield: I am going to turn it over to RJ, who is going to talk just very briefly around this. Again, I think at a high level, we will dive into Stellus in a much more detailed way as we get a little closer to closing, but we will give you a couple high-level thoughts. So RJ, over to you. Yeah. So the private BDC does focus on the RIA channel. They have got a distribution team working on that, growing that business. It was started with really five seed investors, and that has been the foundation, but they continue to grow it with a focus on the RIA channel. Christoph M. Kotowski: Okay. And I guess that is it for me then. Thank you. Operator: One moment for our next question. Luke A. Sarsfield: Thanks, Chris. Operator: Our next question comes from Michael Cyprys with Morgan Stanley. Your line is open. Michael Cyprys: Just wanted to ask about Stellus. I was hoping you could elaborate a bit on their sourcing funnel Luke A. Sarsfield: and origination edge, and while on the topic of 10 family versus the rest? Luke A. Sarsfield: So great question. And I think this is something that we are laser focused on. We think there is already an amazing fit between what they do and the sponsor ecosystem they get after and the sponsor ecosystem that we have the ability to access. And we think together, collectively, we can do even more together. So just a reminder: they are primarily focused in a middle and lower middle market GP sponsor ecosystem. Most of their sourcing comes through that channel, obviously very focused on high-quality first-lien type credits, but direct lending across that sponsor ecosystem. And they have built, I would say, a very highly functioning sourcing engine with many of the top-quality GPs across the U.S. middle and lower middle market. So they start from a real position of strength. Now, I think what we bring to it is the broad-based sponsor ecosystem that we are touching across a number of our strategies. Obviously, RCP, given the history, given the track record, given the lineage, but also in many other parts of the ecosystem like Hark, like Five Points, like Bonaccord, and then potentially over time internationally like Qualitas, we think we have the ability to really increase that sourcing funnel in a meaningful way. We have talked about, and I mentioned on the call, the overlap between the types and the sizes of GPs and funds that RCP has historically continued to target and how that interlaces very nicely with the areas of focus for the Stellus framework. And so we think one of the things that we can do, and we can do reasonably quickly, by leveraging the overall P10, Inc. presence in that middle and lower middle market sponsor ecosystem is to really, A, get the word out that this is now important and relevant to us. Recall it was not in the past in the same way because we did not have a broad-based direct lending strategy where we could actually put the investments. Now we do, or now we will, I should say. And so the opportunity to do that, I think we can amplify in a very meaningful way. That is what we are going to be doing over the next four months, and then, obviously, once we close the deal and otherwise, a lot of work as we think about how we really drive that, how we create great outcomes, how we leverage our throw weight, our presence, our positioning in that ecosystem to really accelerate that selling and that sourcing at Stellus. Sorry, that is a tongue twister. And I think putting that together, we do believe that together, we can do more than either one of us could do apart. We have not modeled that in. We have not factored that in, in any of the financial analysis we talked to you about. It is our hope and our expectation that we can execute on that together. Great. Thank you. And then just a follow-up question more broadly on capital management. So if you could elaborate a bit on how you are thinking about that here in terms of allocating between buybacks, debt paydown, maybe post-close, Michael Cyprys: and then more broadly on M&A? Just curious how you are thinking about the business today. Any gaps remaining? You have done a whole host of deals over the last number of years. How are you thinking about filling in anything at this point? Luke A. Sarsfield: I will turn it to Amanda to take the first part on capital allocation, then, Michael, I will come back and take the second part on the M&A opportunity set. Amanda Nethery Coussens: Thank you, Michael, for the question. Although we do intend to buy back stock to offset dilution from new issuances, we are also mindful of our debt leverage ratios and really intend to pay down debt after we close on the Stellus acquisition. Luke A. Sarsfield: And then as it relates to kind of the M&A land, I would say at a strategic level, obviously, we view this as a real advancement in terms of what we have done on the platform. But I would say that the guideposts that we laid out at Investor Day are really unchanged in terms of our areas of strategic focus. So just to go back to those, we talked about, number one, international analogs of U.S. strategies. We think the dynamics in the international lower middle and middle market are very similar to the ones here in the U.S. middle market in terms of why it is such an attractive place to be. Obviously, Qualitas was a very specific manifestation of that. But if you look across all of our strategies, we think international analogs still represent a real opportunity for us, and we will continue to build in a global fashion where we can. The second thing we did talk about is private credit. And when we talked about private credit, we identified a number of important potential focus areas for us. Direct lending was obviously at the very top of that list. But there are a lot of other really interesting and attractive areas within the private credit landscape. I would say asset-based lending is one I would particularly point to as something we think might be very relevant for our portfolio. And so again, if we could find the right partner for that, that would be very interesting to us. Luke A. Sarsfield: And then the third thing we have talked about, Luke A. Sarsfield: and did talk about at Investor Day, which would really be the pure white space, is something in the real assets ecosystem—whether that is something in the infrastructure world, something in the real estate world, either from an equity or a debt perspective. We have really nothing there, and we do get a lot of client inquiry around those spaces. And so that roadmap that we laid out at Investor Day is really unchanged, and we continue to, I would say, focus and execute in earnest against that opportunity set. And the good news is I think there are a lot of great franchises out there. I think that our value proposition is really starting to resonate. Operator: Great. Thank you so much. I am not showing any further questions at this time. I would like to turn the call back over to Luke for any further remarks. Luke A. Sarsfield: I would just like to close by thanking everybody for the thoughts, Luke A. Sarsfield: questions, and for your continued support. We are extremely pleased with the progress we have made to date. We are confident in the durability of our platform. And we are excited at the prospect of uniting under our new P10, Inc. name and brand while we remain laser-focused on executing our strategy as we enter the next phase of our growth. We look forward to updating you on our first quarter results in May. We thank you for joining us today. Operator: Thank you, ladies and gentlemen. We thank you for your participation in the call. This does conclude the presentation. You may now disconnect, and have a wonderful day.
Operator: Greetings. Welcome to Optimum Communications, Inc.'s fourth quarter and full-year 2025 results conference call. At this time, participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Note that today's conference is being recorded. At this time, I will turn the conference over to Sarah Freedman, Vice President of Investor Relations. Sarah, you may begin. Thank you. Welcome to the Optimum Communications, Inc. Q4 and full-year 2025 earnings call. We are joined today by Optimum Communications, Inc.'s Chairman and CEO, Dennis Mathew, and CFO, Marc Sirota, who together will take you through the presentation and then be available for questions. As today's presentation may contain forward-looking statements, please carefully review the section titled “Forward-Looking Statements” on slide two. I will now turn the call over to Dennis to begin. Dennis Mathew: Thank you, Sarah, and good morning, everyone. Dennis Mathew: Before we begin, I want to thank all our teammates across Optimum Communications, Inc., particularly our network and frontline teams. Their proactive preparation and disciplined response during the multiple winter storms that affected the majority of our footprint in early 2026. Our teams worked alongside local, state, and federal authorities as well as power companies to mobilize personnel, equipment, and critical infrastructure. This focus defined by our one. 2025 was a year of meaningful transformation for our business. We sharpened our focus on core priorities, strengthened execution to drive operating efficiencies, enhanced network quality and reliability, and made intentional decisions to elevate the customer experience. This foundational work was critical as competition intensified across nearly every market and promotional activity reached unprecedented levels. Against this backdrop, we took a balanced and disciplined approach to execute our objectives and remain firm in our go-to-market and base management strategies. Turning to slide three, you will see that our fourth quarter financial results reflect that focus. While total revenue declined by 2.3%, connectivity and all other revenue grew 2% year over year. Broadband subscriber results reflect both the intensity of the competitive environment and our conscious decisions to prioritize sustainable pricing and returns. We delivered our best performance on video net losses in the last several, supported by lower video churn and growing penetration of newly launched video tiers. At the same time, we moderated the pace of fiber migrations to balance near-term margins and cash flow. On mobile, we strengthened the quality of our mobile customer base, which contributed to improved mobile churn in the quarter. Looking at customer economics, broadband ARPU grew 2.8% and residential ARPU grew 0.4% year over year. These results demonstrate continued progress in product mix retention, rate actions, and pricing discipline despite market dynamics. In the fourth quarter, improved gross margins combined with cost discipline contributed to a meaningful up in adjusted EBITDA. Consistent with our guidance, adjusted EBITDA grew nearly 8% year over year to just over $900,000,000, representing our first quarter of year-over-year adjusted EBITDA growth in 16 quarters. Adjusted EBITDA margin expanded to over 41%, up 380 basis points, and gross margin reached approximately 70%, up 180 basis points year over year. Adjusted EBITDA growth reflects nearly $60,000,000 of year-over-year operating expense reductions, driven in part by continued improvements in customer experience and operational performance. Our field dispatch rate improved 19% year over year. Our seven-day customer care repeat rate reached its lowest levels ever in Q4. And we ended the year with a Net Promoter Score 11 points higher than when we started the year. We further improved efficiency through the divestment of noncore assets, including the i24 News business in December and the sale of our towers business earlier in the year. Our disciplined execution and capital management drove cash generation, resulting in free cash flow of approximately $200,000,000 for the quarter. In the fourth quarter, cash capital stepped down 28% year over year, achieving approximately 13% capital intensity, while growing our total passings footprint by 1.8% year over year for the full year. Overall, the fourth quarter reflects the progress we made throughout 2025 to improve the business, drive efficiency, and reset our foundation. With that context, let us turn to our full-year 2025 results. Slide four outlines the commitments we set early in the year and how we successfully delivered on them while remaining focused on controlling what we can control. Full-year revenue came in at approximately $8,600,000,000. Broadband ARPU grew 1.6%. Programming and direct costs, along with other operating expenses, were each $2,600,000,000. Notably, we made strategic and sometimes difficult programming decisions designed to strengthen the overall economics of the video business while remaining focused on customer needs. We completed several major programming agreements that provided customers with the content they value, increased flexibility and choice, and reinforced cost discipline, resulting in improved video churn and gross margin. Full-year 2025 adjusted EBITDA was $3,400,000,000 excluding the divested i24 News business, or $3,300,000,000 on a reported basis. Cash capital expenditures totaled roughly $1,300,000,000 and we added 177,000 new passings, slightly exceeding our target. Overall, our full-year 2025 performance reflects the deliberate trade-offs and disciplined execution across the organization during a challenging operating environment. Importantly, we entered 2026 with a simplified operating model, improved cost structure, and a clearer path to strengthening our performance. Let us now turn to slide five to review our 2026 priorities, which are centered on further simplifying how we operate to deliver greater customer-first and employee experiences. We are focused on improving our broadband trajectory, simplifying our product portfolio by offering fewer speed tiers, transparent pricing, and driving increased attachment of value-added services. This includes rolling out our refreshed mobile offer to drive deeper convergence and putting greater emphasis on our new video tiers. Mobile convergence serves as a key driver of improved broadband retention and residential ARPU. Following the investments we made in mobile in 2025, we expect that mobile along with other value-added product bundles will reduce churn and increase customer lifetime value. It is important to highlight that our simplified go-to-market strategies reflect testing and trials we started in select markets in late 2025, which showed encouraging results in December, and which we will continue to use to inform our broader 2026 strategy. Improving our broadband trajectory directly supports our second priority of maintaining financial discipline in 2026. Our approach begins with a continued focus on base management, including proactive churn reduction, targeted competitive responses in areas of elevated pressure, a customer loyalty program, and the use of price locks for certain subscriber cohorts. We will also continue to drive product margin expansion across the portfolio. Video is a good example. Industry-wide cord cutting and shifts in consumer behavior have contributed to significant video revenue decline since 2022. Despite this, our video profitability in 2025 was higher in absolute dollars than in 2022, and video gross margins were more than 750 basis points higher in the full-year 2025 compared to 2022. This performance reflects our disciplined approach to programming costs, margin management, and the introduction of flexible packages that resonate with our customers. Furthermore, we will continue to deploy advanced AI tools and automation across the organization, including in network operations, customer service, marketing, and sales. Specifically, we are increasingly using AI tools to support our frontline teams and help improve their productivity, which in turn leads to better employee and customer experience. For example, as a result of our partnership with Google, millions of customer calls are now routed through Google CCAI, which analyzes customer sentiment and agent interactions to identify opportunities for continuous improvement and best practices across our care organization. On the network side, we leverage access network automation, which ingests network telemetry and operational data, including trouble tickets, and applies AI to more precisely identify the location and root cause of a network issue. Taken together, these capabilities help us resolve problems faster and proactively, reduce recurring issues, identify opportunities for self-service, and reduce contact rate and service, which enhance efficiency and improve our overall cost structure. Finally, investments in these tools and automation combined with changing business demands allow us to continue to evolve our workforce and organizational structure. In late 2025, we expanded partnerships with leading third-party service providers to rationalize and consolidate elements of our field services and retail operations, improving accountability and driving operating efficiencies. We will continue to evaluate opportunities, both internally and with key partners, to ensure we have the right workforce structure to drive our business forward. Importantly, our approach to managing costs has not come at the expense of network performance, product quality, or customer experience. In fact, customer satisfaction scores continue to improve and our network continues to lead the market. Just last week, our Optimum Fiber network in the Tri-State once again earned multiple number one rankings from Ookla’s Speedtest for best-in-class Internet performance, outperforming every major 5G home Internet provider on speed, reliability, and consistency. These results reinforce that Optimum Fiber delivers the fastest and most reliable speeds, the lowest latency, and a best-in-class gaming experience across key markets. Finally, our third priority is investing for long-term value creation. This includes continued fiber expansion, targeted network upgrades, and ongoing investment in technology and tools that improve the customer experience, enhance performance, quality, and reliability, and drive operational efficiency. With more than 3,000,000 fiber passings, we view fiber as an important long-term value engine and are actively improving the migration process to increase customer lifetime value while improving ARPU erosion and migration costs, helping to maximize the value of our existing customer base. As these process enhancements are implemented, we expect to expand migrations in a disciplined, returns-driven manner over time. On the new build front, we have more precision than ever in how and where we build, as well as greater command of how we drive penetration to those new passings through a coordinated go-to-market strategy. We will continue to balance our build plans with long-term economics to further enhance our returns. Of note, we can offer one gigabit or higher download speeds to approximately 6% of our entire footprint. We will continue to evaluate markets to deploy mid-split upgrades on our DOCSIS 3.1 HFC network to enable multi-gig speeds and improve capacity and reliability in a highly capital-efficient manner. Regarding our capital structure, as Marc will review shortly, we completed several debt refinancings in 2025 which improved liquidity and expanded financial flexibility, giving us room to operate in 2026. In closing, I could not be prouder of the entire Optimum Communications, Inc. team for their hard work in 2025 and their unwavering commitment to each other and our customers. Despite the sustained competitive intensity, I remain confident that by simplifying how we operate, we can strengthen execution and elevate our operating performance to build a stronger business and deliver long-term shareholder value. I will now turn it over to Marc to review our performance in greater detail. Thank you, Dennis. Starting on slide six, I will review our subscriber trends. In the fourth quarter, we lost 62,000 net broadband subscribers and ended the year with 4,200,000 broadband subscribers. Net losses were primarily driven by fewer gross additions reflecting continued low household move activity, heightened price sensitivity among customers, and sustained competitive intensity. Marc Sirota: In addition, our more measured and disciplined promotional approach combined with the competitive environment contributed to higher churn year over year. Marc Sirota: As we closed out 2025, we began testing a simplified pricing and product structure with more competitive offers, and those early learnings have helped shape the 2026 broadband strategy that Dennis previewed. Our fiber customer accounts reached 716,000 at the end of Q4, representing 33% year-over-year growth. Marc Sirota: Net additions moderated in the fourth quarter with 12,000 fiber customer net adds, reflecting our intentional decision in mid-2025 to slow fiber migrations. This approach underscores our focus on executing migrations in the most value-accretive manner, minimizing ARPU erosion, and optimizing costs. Total mobile lines at the end of the fourth quarter reached 623,000 lines, representing 35% year-over-year growth. In Q4, we added 38,000 mobile lines, in line with recent trends. Our focus remains on building high-quality mobile customer relationships to reduce churn and increase penetration within our broadband base. Marc Sirota: In Q4, annualized mobile churn improved by over 700 basis points, reflecting the effectiveness of programs and initiatives we launched in 2025 to strengthen quality in the mobile value proposition. Marc Sirota: As we enter 2026, our mobile program is centered on driving high-quality sales, expanding multi-line attach rates, and deepening broadband-mobile convergence. Marc Sirota: To drive growth, strengthen retention, and expand customer lifetime value. We ended the year with 1,700,000 video subscribers, down 13% year over year. In the fourth quarter, we recorded a net loss of 49,000 video subscribers, representing our lowest quarterly video net losses in more than five years and a marked improvement compared to recent trends. This performance reflects our intentional video strategy of delivering the content customers want at a compelling value with choice and flexibility at the center of our negotiations. This proactive approach enabled the launch of three new higher-margin video tiers in 2024, which are performing well, stabilizing gross add attachment rates, and supporting our lowest video churn in more than a decade. At year-end 2025, these video tiers account for over 15% of our residential video customers. Lower video churn was driven in part by higher retention effectiveness as our teams increasingly migrate customers to these new tiers. Marc Sirota: Across broadband, mobile, and video, all results reflect deliberate trade-offs in a challenging competitive environment. While subscriber trends remain under pressure, we are taking clear actions to drive improved performance in 2026 through simplified product and pricing, a more focused go-to-market approach centered on convergence, investments in AI to improve marketing and sales channel yield, and improved customer value propositions. Next, on slide seven, I will review our quarterly financials. Marc Sirota: Total revenue of approximately $2,200,000,000 declined 2.3% year over year. Revenue pressure remains mainly concentrated in video, which declined almost 10%. News and advertising revenue declined 8%, driven by tougher political comps from the prior year. Excluding political revenue, news and advertising revenue grew 6%. Connectivity and all other revenue grew 2% year over year. This was supported by timing of rate actions within residential connectivity, mobile revenue growth of over 40% as well as business services growth of over 8% driven by LightPath revenue growth of 35%. LightPath growth was driven by nonrecurring revenues from and deliveries of services to large hyperscale customers, as well as recurring revenue growth from continued positive net installations. News and advertising growth, excluding political, was driven by continued growth in our advanced advertising agency services business. Marc Sirota: Contributing to higher national sales. Marc Sirota: Residential ARPU grew by 0.4% to $134.49, or grew by $0.54. Of the $0.54 year-over-year growth, video represented a $2.80 decline, while all other products grew by $3.40 driven by broadband ARPU expansion and selling of mobile and value-added services. Residential ARPU remains under pressure as a smaller share of customer relationships include a video product. While this continues to weigh on top line and per-customer revenue, the impact of a declining video base is increasingly being mitigated by continued product margin expansion. Broadband ARPU grew 2.8% year over year to $76.71, our highest quarterly broadband ARPU in fourteen quarters. Marc Sirota: Driven primarily by the benefits of timing of rate actions as well as disciplined rate preservation in care and retention. Continuing on slide eight, gross margin reached 69.5% and expanded by 180 basis points year over year. This reflects the continued mix shift towards higher-margin products such as broadband, and new video tiers along with a disciplined approach to programming agreements and ongoing efforts to optimize video margins. Marc Sirota: We also continue to see favorable mix shifts to our higher-speed broadband with 52% of new customers selecting one-gig or higher tiers during the quarter, bringing 43% of our broadband base to one-gig or higher speeds at year end. Marc Sirota: Adjusted EBITDA of $902,000,000 grew 7.7% year over year. Marc Sirota: Fourth quarter adjusted EBITDA margin expanded by 380 basis points year over year to 41.3%, representing our highest EBITDA margin in sixteen quarters, and surpassing the 40% margin milestone. Our fourth quarter adjusted EBITDA performance was supported by a few key drivers. In the quarter, revenue declines moderated primarily supported by rate actions and pricing discipline, LightPath revenue growth, and continued momentum in mobile. Strong gross margin performance reflected the benefits of disciplined programming and direct cost management, which helped offset some revenue pressure. And operating expenses declined year over year by almost $60,000,000. Contributing to this was a strategic workforce optimization, which represented over 6% reduction in headcount year over year. In addition, we exercised tighter cost controls across the business, including a mix shift in marketing in the quarter to rationalize customer acquisition costs. Turning to slide nine, I will walk through our network investments and capital expenditures. Marc Sirota: As shown on the left side of the slide, full-year 2025 cash capital totaled approximately $1,300,000,000, reflecting our disciplined approach to capital deployment, increased capital efficiency, and focus on prioritizing higher-return investments. For the full year, cash capital spend excluding LightPath improved by 10% year over year for an improvement of over $120,000,000. LightPath capital spending accounted for approximately $200,000,000 in full-year 2025. Marc Sirota: Total capital intensity reached less than 16% in the full-year 2025, our most efficient in the last four years. Marc Sirota: Excluding the LightPath business, capital intensity would have been approximately 14%, a 500 basis points reduction compared to 2022. On the far right, you can see how that capital translates into network expansion enhancements. In the fourth quarter, we added approximately 65,000 total new passings, bringing full-year additions to 177,000 total passings. In total fiber passings expansion of 43,000 homes in the quarter, resulting in 134,000 new fiber passings for the full year. Underscoring our continued progress in expanding our footprint primarily as fiber passings. Our approach to network investment remains balanced and disciplined. We moderated capital intensity, prioritized fiber and high-return projects, and leveraged targeted upgrades to our HFC network to support improved broadband competitiveness, protect margins, and drive long-term network value. Turning to slide 10, I will highlight the continued strength and momentum of our LightPath fiber business. LightPath continues to increase its position as a provider of AI-grade digital infrastructure and connectivity. At 2025, LightPath awarded AI-driven contract value totaled $362,000,000. This represents a 40% increase over the $110,000,000 of total contract value awarded in 2024. As shown on the right, LightPath revenue, which is consolidated in business services revenue within Optimum Communications, Inc. total revenue, has grown steadily over the past several years. LightPath revenue reached $468,000,000 in the full-year 2025, representing 13% growth year over year. This growth reflects continued demand from hyperscale customers along with strong underlying recurring enterprise revenue. Profitability continues to scale along with revenue, with LightPath adjusted EBITDA growth of 17% year over year. In addition, in February, LightPath priced an inaugural ABS transaction of approximately $1,700,000,000 which is expected to close in early March. Proceeds are primarily expected to repay existing LightPath debt. Overall, LightPath continues to serve as a differentiated growth platform within our portfolio, supported by durable revenue growth, expanding margins, and attractive returns while reinforcing the strategic value of our fiber infrastructure and addressing broader enterprise and network connectivity needs. And finally on slide 11, I will review our debt maturity profile, pro forma for recent transactions. In the fourth quarter, we closed a refinancing through which we received $2,000,000,000 of new financing from JPMorgan to voluntarily prepay our existing incremental B6 term loan in full. Subsequent to quarter end, in January, we secured approximately $1,100,000,000 of additional financing from JPMorgan to refinance our $1,000,000,000 asset-backed facility. Both transactions enhance our short-term liquidity and financial flexibility. And as previously mentioned, in February, LightPath priced an ABS transaction, which is included in our pro forma schedule subject to closing. Pro forma for these transactions, our weighted average cost of debt is 6.8%. Our weighted average life of debt is 3.3 years and 81% of our debt stack is fixed. Marc Sirota: Consolidated liquidity is approximately $1,400,000,000 and our leverage ratio is 7.3 times the last two quarters annualized adjusted EBITDA. As we have communicated, one of the company's key strategic priorities is ensuring that our capital structure supports our long-term operating goals. We believe meaningful debt reduction and reset of the balance sheet are essential to continuing our transformation, competing effectively, and investing thoughtfully to maximize long-term value for all stakeholders. In closing, 2025 was a year of execution and progress. We strengthened our foundation, improved profitability, and positioned the business to move forward with greater focus and competitiveness. Importantly, we have remained focused on the operating and financial levers within our control. Since Dennis and I joined the company nearly three years ago, our strongest broadband ARPU performance this fourth quarter represents our best adjusted EBITDA margin, our near-lowest capital intensity, and our strongest LightPath performance to date, along with a near all-time high gross margin. While the business environment remains challenging, we look to 2026 with clear and deliberate focus. We are simplifying how we operate and how we serve our customers while improving efficiency through continued disciplined cost management and execution. At the same time, we are investing across the portfolio in a way that protects cash flow and margins and creates long-term value for our shareholders. With that, we will now take questions. Thank you. Operator: We will now be conducting a question-and-answer session. Our first question is from the line of Kutgun Maral with Evercore ISI. Please proceed with your questions. Great. Good morning and thanks for taking the questions. Two, if I could. First on broadband subscribers, as always, Dennis, thank you for the color and candor. Is there anything more you can unpack as it relates to Q4 and trends into 2026? Kutgun Maral: I know that improving broadband trends is a key priority in the year, but that seems hard for any cable operator in this hypercompetitive backdrop. So do we think about the timeline and path towards an improvement as you continue to also focus on financial integrity? And then I know you have not provided, or at least that I have seen, explicit guidance for EBITDA and free cash flow. But following your execution against the 2025 outlook, I wanted to see if there is anything you would be willing to share on how we should think about these metrics in 2026. Thanks. Dennis Mathew: Thanks, Kutgun. Q4, we continued to operate in a very hypercompetitive marketplace. We continued to see just unprecedented levels of spend from a marketing perspective, very aggressive pricing and packaging, and value-adds and incentives that were being provided. That being said, we continued to operate with discipline. As I have said. Last year was a year where we continued to lay the foundation. We are on a significant transformation journey. 2023–2024, we were focused on stabilizing the company. 2025, we continued to invest to ensure we have a high-quality network, and we are continuing to win awards across the, like, from Ookla. We saw an improvement in our customer experience, which was critical. 11 improvement. And we are leaning into automation and AI which is really helping us optimize our cost structure and leaning into digital. We saw a 12% improvement there and 19% improvement on dispatch rate which allowed us to further transform the workforce. I say all this because this is critical as we think about how we can now start to, one, ensure we have command of the business. We have more command than ever as we think about reporting and analytics and ARPU erosion and managing credits and making sure that we are disciplined on acquisition pricing, and this will allow us to really start to go on the offensive in a more meaningful way from a go-to-market perspective. And so as we enter into 2026, we are continuing to evolve our go-to-market. I am excited about some of the new programs that we have launched around referrals and platforms for leasing agents and property managers, affiliate programs, but then, ultimately, we have launched some simplified pricing and packaging across all the geographies and all the channels. And we will be able to leverage the hard work of 2025 to further invest in our go-to-market strategy. And so Q1 remains hypercompetitive, and there are lots of headwinds. But we did some foundational work in 2025 that will allow us to go on the offensive more meaningfully in 2026, is what I will say. Maybe, Marc, you can comment on the financial questions. Marc Sirota: Sure, Kutgun. Not going to be providing specific 2026 guidance on this call today. As Dennis was mentioning, we believe that the operational improvements we made in 2025 certainly put us in a better position to support long-term EBITDA stability and, over time, growth. In 2025, we certainly benefited from the operational efficiencies, the OpEx efficiencies, including the org redesign, vendor rationalization, the foundation of just simplifying how we operate, using AI in a much more meaningful way. These actions really reset our cost base, strengthened our execution, just as we were navigating this unprecedented competitive environment. As we think about turning to 2026, I think the work that we did in 2025 really does allow us to invest in a targeted way into strategies that stabilize broadband trends. It is going to be some targeted investments in pricing, customer value, again, just continuing to improve the network. But we certainly will share more in our first quarter earnings call. Dennis Mathew: Understood. Kutgun Maral: Thank you both. Dennis Mathew: Thank you. Operator: Our next question is from the line of Frank Louthan with Raymond James. Please proceed with your question. Frank Louthan: Great. Thank you. Can you give us an update on the balance sheet? You have done quite a few debt refinancings and the LightPath ABS deal. So what is the net impact there? And you have a debt stack going current this year. Just give us an update on the balance sheet and how you plan to address that in the next twelve months? Thanks. Marc Sirota: Yes. I will take this, Frank. Again, pleased with the work that team has done this year. As we have communicated, one of the key company strategic priorities is ensuring that we have the right capital structure to support our long-term goals. We do still believe that meaningful debt reduction and a reset of the balance sheet are essential to continuing our transformation and really allowing us to invest thoughtfully to maximize long-term value for all of our stakeholders. We are not going to comment beyond that on the capital structure. I will just call out, proud of the LightPath team. They just priced this week their inaugural ABS, $1,700,000,000, that is expected to close here shortly, probably early March. Those proceeds will be primarily used to repay the existing LightPath debt. Beyond that, we will not comment. Frank Louthan: Alright. Great. Thank you very much. Operator: The next question is from the line of Michael Rollins with Goldman Sachs. Please proceed with your question. Hey, good morning. Thank you so much for the question. I just have two. Dennis Mathew: First, I was wondering if you could talk a little bit more about Michael Rollins: the residential broadband ARPU strength, $77. I think that this is the second highest on record. So if you could talk about that and whether you see that as a good baseline for next year, that would be helpful. And then I just have a quick follow-up. Dennis Mathew: Jump into that, Marc? Marc Sirota: Sure, Michael. Yes, really, again, proud of the team for all the hard work. Overall, total residential ARPU grew 0.4% year over year. And this is despite all of the video headwinds, nearly a $3 decline in video contribution. We overcame that with $3.50 of connectivity and other ARPU expansion, really driven by broadband. The broadband results just continue to demonstrate our continued progress on product mix. We now have 43% of our customers taking one-gig services. Our selling is over 50% selling on one gig. When our fiber customers are over 50% on the one-gig platform, it shows the continued discipline that we have in retention, our pricing strategies, and price actions. Just executing with a different level of discipline, leveraging AI at a size levels, and that is despite all of the competitive pressures. Certainly made trade-offs this quarter to focus on driving ARPU expansion and EBITDA stabilization. Came at a slight cost to subscribers, but still positive on how the team managed ARPU this year. When you think about video ARPU, that is up over 4% year over year. Mobile ARPU up 2%. So the team is really operating at all cylinders and really controlling what we control. Dennis Mathew: Great. Yes. And I will say just on ARPU, the ability to control erosion, the ability to strategically drive our acquisition pricing. We are just gaining more command across all channels and geographies that will allow us to remain disciplined going forward. Michael Rollins: Great. Wonderful. Thank you for all that color. Second, I wanted to ask about your expectations around video programming costs per subscriber. You know, really good favorability from that this quarter. You know, I can appreciate there are a lot of moving parts as we think about next year. The impact from, you know, the more skinny bundles perhaps, I know there are some comps on, like, carriage disputes. You know, there you have given some of the spin-offs like Versant and. Do you see opportunities to work down programming costs there? Just any thoughts there would be helpful. Thank you. Yes. We have been laser focused on programming and our video strategy as you have seen over the past year or so. We are going into these conversations with much more data and clarity than ever. We have a clear understanding of the value of this content relative to our customer base, and so that gives us the opportunity to have some of these hard conversations. And we are fighting for our customers to make sure that we have got flexibility in terms of Dennis Mathew: tiering and packaging, that we have the right cost basis, and we are able to ensure that ultimately our customers are at the center of these discussions, that we can deliver value and choice. And so we continue—we have, you know, ongoing programming discussions that are happening throughout the year, and that is going to be the focus: to make sure that we have very disciplined conversations so that we deliver for our customers, and we see the results we are able to produce. For example, these new e-tiers that have been very well received and are helping us drive attach during acquisition, helping us also in terms of going back to our base and talking about these new tiers that deliver incredible value for them as well to help us stabilize the base. Marc, you want to talk a little bit about the financial elements? Sure. Again, the team Marc Sirota: doing a fantastic job again, just renegotiating and resetting programming. Our costs are down in the quarter, 16% on programming costs. I think an industry-leading measure, 15% for the full year. And we know that there is pressure on revenue, so we are targeted and focused on driving our gross margin for every—interesting fact, for every dollar of video declines that we see, we offset with $1.20 of programming cost reductions. And so we are just taking a different approach. In fact, typically you see steady inflation in pricing for programmers. We are down almost 3% in the quarter on cost inflation. So we are heading in the other direction. That is really just optimizing our packaging, our constructs, getting folks, as Dennis mentioned, onto these skinnier tiers that are meeting the customer needs. So really pleased with that. It is funny, when you look back before Dennis and I started in 2022, we have certainly eroded customers and revenue tied to the video business, but in an absolute dollars basis, we actually make more money now Dennis Mathew: from the video business Marc Sirota: from where we were in 2022. So again, controlling what we control, we take a very financially disciplined approach to pricing, packaging, and strategy here and I think it is paying off. Michael Rollins: Dennis, thank you, Marc. Dennis Mathew: Thank you. Operator: The next question is from the line of Sebastiano Petti with JPMorgan. Please proceed with your questions. Hi, thank you for taking the question. I guess just housekeeping or just clarification. On the fourth quarter EBITDA, I did think, Marc, in your prepared remarks, you did say that there was some nonrecurring product Marc Sirota: revenue. Operator: That kind of hit that drove some of that Dennis Mathew: strength. Operator: Should we assume that that is zero or very low-margin contribution to the overall EBITDA in the fourth quarter? Dennis Mathew: Yeah. Marc Sirota: From the fourth quarter, again, really pleased with the revenue trajectory. As we looked at the connectivity business specifically, just as it relates to the revenue side, really where we saw some of that one-time stuff was around LightPath tied to the hyperscaler activity that we have in the business. Dennis Mathew: Now, Marc Sirota: really pleased with where LightPath is growing. As you heard, over $250,000,000 of contracts awarded in 2025, up from $100,000,000 about in 2024. We are just at the start of the cycle, I think, here as it relates to LightPath growth. So in my mind, these things will continue as we go out. I am really pleased how we are positioned in the hyperscaler market. We are well positioned for the connectivity provider to these data centers. So good about how LightPath is set up for continued growth. Dennis Mathew: Okay. And then any way to help us think about the Operator: the book-to-bill and the total contract value that has been announced to date. What is the timing or phasing as we should think about that over time? Are these like thirty-year IRUs? Any kind of help Dennis Mathew: that. Yeah. Marc Sirota: We will not get into the specifics around the individual contracts, but again, we see that there is a large opportunity still out there for us to capture with the funnel. Really pleased on over $360,000,000 of contracts booked to date. And, again, as we turn these networks on, we will start to see those revenues come in. And I would say the team is firing on all cylinders as far as construction and really getting those networks turned up. Beyond that, we will not comment on the specifics just due to confidentiality of those agreements. But really pleased on where we are positioned and really the opportunity ahead. Operator: Got it. And then lastly, on competition. I mean, is it concentrated in one specific market or one specific legacy operating footprint as you think about Suddenlink versus Fios in the Northeast perhaps? Just any kind of help about where the competitive intensity is coming from. Dennis Mathew: Thank you. Yeah. The competitive landscape continues, in line with what I have shared in the past. You know, when we look at the East, we are 70% fiber overbuilt, primarily with Verizon. You know, we have got fixed wireless at over 85% now across the East. In the West, I mentioned last time, based on the BDC data, we were 45%–46% overlap with fiber. That is now up to 50%. And almost 80% in terms of fixed wireless. And so that intensity remains, but I believe that we are really well positioned in terms of having the right products, the right pricing, the right network to be able to compete, and that is exactly what we are going to be doing in 2026. Really going and leveraging all of the hard work in 2025 to be able to invest in our ability to go to market from an acquisition perspective and make sure that we can compete for jump balls, which, by the way, are fewer than ever just given the move environment, but then also from a base management perspective and continuing to lean in the base and mitigate churn. Thank you. Yep. Operator: Our next question from the line of Craig Moffett with MoffettNathanson. Please proceed with your question. Craig Moffett: Hi, thank you. I want to stay on this topic of LightPath because it really is, obviously, a pretty dramatic set of numbers. Dennis Mathew: First of all, what portion of the growth Craig Moffett: was what you characterized as nonrecurring? And I am curious as to what makes it nonrecurring. It is not obvious that contracts—if you see future growth in significant contracts with hyperscalers and cloud providers and the like—that that would necessarily be nonrecurring. So I wonder if you could just talk a little bit more about that and what we can expect from LightPath going forward. Dennis Mathew: Certainly. I will take that. Marc Sirota: Craig, again, the LightPath business is accelerating the growth. 35% growth in the quarter, very strong results. And exciting for the full year. You see EBITDA along with that growing 17%. When you look at the core LightPath business, excluding the LightPath—the hyperscaler activity that we have going on—business grew 8% year over year. So there is still strong underlying demand for just the core business. As we enter into the hyperscaler business, maybe nonrecurring is not the right choice of words. But as we stand up these networks, the sale of those networks—we recognize that revenue as we build those projects. And so as we continue to scale and get more contracts under our belt and build these new connected pipes, we will continue to see revenue growth coming from that. So feel pretty optimistic about where we stand today with the contracts that we have awarded and the growth that will come from that. And then, more importantly, the pipeline looks like—and where we are placed in the marketplace—to win incremental contracts and continue to drive our large AI-driven data center connectivity business. And so, really pleased. We do feel that there is a nice path of growth here, continuing growth for LightPath. Operator: And outside of LightPath in the business services segment, what are you seeing outside of the enterprise and hyperscaler market? Particularly, I am thinking with small-medium business in your core footprint. Craig Moffett: What do those trends look like? Marc Sirota: Yeah. Dennis Mathew: Craig, this is Dennis. For small-medium business, we remain disciplined. The environment is competitive. And so there is a lot of focus for us in terms of moving beyond just core connectivity. We have launched a whole host of new products like our Connection Backup product, like our Secure Internet product, a relaunch of WiFi Pro, and so we believe that there is opportunity here. And we also, earlier last year, completed the launch of the fiber products on the fiber network as well. And so we see steady trends there, and we are going to continue to lean in, as we are on the residential side, to be able to move beyond just connectivity and offer a whole host of solutions so that we can drive growth in the core B2B business as well in the small and medium space. That is helpful. Thank you. Yep. Operator: Our next question is from the line of Vikash Harlalka with New Street Research. Please proceed with your question. Vikash Harlalka: Hi, thanks so much for taking my questions. Two, if I could. Frank Louthan: One, since you mentioned the slowing down of the pace of fiber migrations in 4Q, Vikash Harlalka: I was wondering if you could sort of, like, double click on that and just help us understand how you are thinking about 2026. And has your thinking around fiber changed at all for the long term? And then second, are there any further opportunities for you to take out nonprogramming cost from the business? Especially in 2026? Marc Sirota: Thanks, Vikash. Dennis Mathew: You know, on fiber, we remain very bullish on fiber. We see churn benefit. We see NPS benefit. And so we are excited. You know, our new builds at over 177,000 new passings are fiber-rich, the majority of which are fiber. On fiber migrations, as you know, this has been a transformation journey. When I first joined, there were numerous technical challenges with being able to migrate folks, and we had to spend the better part of a year solving those defects so that from a technical perspective, we were able to do that seamlessly, efficiently, and ensure all the products worked in the right way so that we were delivering the right customer experience. As we continued on that journey, now we really need to continue to refine the process so that we are doing this in the most cost efficient and maximizing customer lifetime value. You know? In full transparency, a lot of that activity was happening in our retention channel and in our care channel. We have an opportunity to really leverage our base management strategies to do that much further up the funnel so that we can maximize customer lifetime value and ARPU and ensure that we are delivering the absolute best experience. And that is why, purposely, we decided to slow down the migration process. We are continuing to drive from a gross add. We are going to take a beat and make sure we have the right strategy to be able to Marc Sirota: maximize our Dennis Mathew: CLV when doing a migration. And so expect us to pull that strategy together over the next few months and then really hit the accelerator in the second half of the year and really do that in a way that is scalable and delivers the maximum enterprise value. Again, you know, we are going to do all of these things in a very disciplined fashion. That is how we operated in 2025, and this is another area where I know that we can do this in a way that is delivering even more value to the enterprise. And so we are going to build that strategy and more to come. And then— Marc Sirota: On the cash for OpEx in 2026, I mean, just first reflecting on 2025, down nearly 9%, $60,000,000 quarter over year over year in the fourth quarter really—we talked about it going into the quarter—reflects all the optimization we have done over 2025, workforce transformation, really taking a hard look at our SAC costs and marketing and really rebalancing that. We mentioned that we expected lower consulting costs as we entered in the second half of the year, and that certainly took place. So pleased on really how we are acting with discipline around managing OpEx lower. As we think about 2026, we still think the work that we did in 2025 sets us up for a strong foundation. It is going to allow us to make strategic investments in 2026, but continue to try to optimize our workforce, leveraging AI, and really driving out noise—truck rolls, phone calls—out of the ecosystem. So we still feel like there is opportunity, and we will continue to optimize the business. Yeah. We are really pleased with the early results that Dennis Mathew: leveraging AI is delivering, but we are in the early innings. And so, as I mentioned earlier, you know, we have seen a 12% increase in digital interactions. So we are shifting from, you know, phone calls to chat and mobile and self-service, and we are still in the early innings of that. We are leveraging solutions to optimize the management of our network. And so again, early innings. We are seeing great results in terms of call and service visit reduction. You know, for the year, we were able to reduce dispatch rate by almost 20%. And there is more opportunity. And so we are leaning into AI and seeing real tangible results in terms of driving efficiency, but also elevating customer experience. And so we are excited about continuing to lean in here. Thank you. Yes. Operator: Thank you. The next question is from the line of Steven Cahall with Wells Fargo. Please proceed with your question. Dennis Mathew: Thank you. Steven Cahall: First, just wanted to drill down a little more in the ARPU trends. So as you talked about, really strong Q4 in terms of sequential growth. It sounds like gig selling is a big piece of that. Steven Cahall: You also spoke to looking at doing some targeted competitive responses, including maybe price locks in 2026. So how do we wrap all that together? Do you think you can grow ARPU in 2026 and sort of continue that strong Q4 trend? And then a big-picture question on the balance sheet. You know, on a good day, the debt is 25 times the equity. On a bad day, it is closer to 50 times. I know you have got a lot going on with your creditors to look at ways to improve the indebtedness over time. What do you think the scope is for something strategic where you can really, you know, maybe potentially chop that big debt stack down because there is just so much potential equity realization if you can do that. Thank you. Dennis Mathew: I will talk a little bit about our strategy on ARPU and, Marc, you can fill in anything I missed and then, of course, talk a little bit about the balance sheet. But from an ARPU perspective, as I mentioned, we spent, you know, 2025 really laying the foundation. So we have much more command of ARPU holistically. Quite frankly, when I joined, we had little to no visibility in terms of ARPU erosion, what channel, how it was happening. We were able to use some, you know, brute force to mitigate that some, and we have now implemented solutions and tools to be able to manage that more effectively. Had little to no command over things like rate events and promo rolls. Now we have incredible visibility into customers and customer segments so that we understand exactly what is happening, why it is happening, how much erosion occurs within our—with a promo roll, with a rate event, so that we can be much more targeted and disciplined in the way we do that. And then in terms of just being able to drive selling of products—faster, higher speeds, mobile—you know, we have not talked much about mobile, but we are really proud about the improvements that we have made. You know, we, as I mentioned earlier, we were going to, again, take a step back and focus on quality. And now we have delivered a 700 basis point improvement in churn and we have seen incredible improvement: 10% improvement in ported phone numbers, 15% improvement in selling in new devices and financing devices. And so this will allow us to really start to scale not only on acquisition, but also in the base. And so we will be able to leverage all of this foundational work to drive our go-to-market, to improve our subscriber trends, and remain very disciplined from an ARPU perspective. Marc, anything to add? Marc Sirota: I think you got it. The only thing I would just call out is, think about broadband ARPU certainly up $2 year over year, nearly 3%, very strong, again up $2 sequentially as well. It is really about the product mix that we talked about. There were timing of just the annual rate event. We did have some of that hit in the fourth quarter. Vikash Harlalka: But we are going to take a measured approach to rate and volume Marc Sirota: as we turn to 2026. We are not going to provide specific guidance on this call around ARPU trends 2026. We will do that in the first quarter call. But pleased around how we are executing and managing in a disciplined way the rate strategy. Marc Sirota: And then on just the balance sheet, we are not going to really comment beyond what we always talked about. It is a strategic priority of ours. We do feel that there is a meaningful amount of debt reduction that we do need to obtain to really continue on our journey of transformation. But nothing more to share outside of that. Operator: Thank you. At this time, we have reached the end of our question-and-answer session. I will turn the floor back to management for closing remarks. Sarah Freedman: Thank you all for joining. Please reach out to Investor Relations or Media Relations with any further questions. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
Tuukka Hirvonen: Good afternoon, and welcome to Orion's Full Year 2025 Results Webcast and Conference Call. My name Tuukka Hirvonen, I am the Head of IR here at Orion. In a few moments, our CEO, Liisa Hurme, will present the results for the full year and Q4 last year, after which you will have the possibility to ask questions from Liisa and also from our CFO, Rene Lindell. We will be first taking questions through the conference call lines. And after that, we will turn to the webcast. So through the webcast, you have the possibility to type in your questions through the chat function of the webcast. Just before I let Liisa take over, I'd like to draw your attention to this usual disclaimer regarding future forward-looking statements. And with this short note, it's my pleasure to invite Liisa to the podium. Liisa, please. Liisa Hurme: Thank you, Tuukka, and welcome on my behalf as well. I'll start with the Q4 and with some highlights during the last 3 months of last year. It's my pleasure to say that all our business divisions had a strong quarter and performed extremely well. Also, we received EUR 180 million sales milestone from Bayer related to Nubeqa. And we were able to proceed with our clinical pipeline by initiating Phase II program with ODM-212, a molecule in our oncology pipeline. And also our partner Tenax, in the United States, initiated Phase III trial called Level 2 with levosimendan for pulmonary hypertension. And Q4 highlights, the base business during Q4 compared to the previous year grew 18.5% and 60% when we include the previously mentioned milestone. And operating profit growth was 59% and including the milestone, 254%, bringing us to 47% operating profit margin in Q4. Operating cash flow per share was slightly lower than previous year, and that's mainly due to the timing of royalty payments from Bayer. The net sales bridge is almost masked by Nubeqa and Innovative Medicines as it includes the EUR 180 million milestone. But it doesn't shadow the extremely good performance of other divisions, Branded, Generics and Animal Health. Of course, the divisions are smaller, so the growth in euros is also smaller. And this all resulted us to -- brought us to EUR 695 million during Q4. In the operating profit, we, of course, see the EUR 180 million, but a very good development on our royalties, close to EUR 50 million and also sales volumes brought us EUR 28 million. Price development, COGS and product mix put us slightly down by EUR 12 million and the effect of exchange rate on gross margin was EUR 4.1 million. And other operating costs and fixed costs were also well handled. So nothing specific there. So our Q4 Operating profit was EUR 328 million. And now I move to 2025. This was an all-time high year for Orion Pharma, both with net sales and operating profit. And I want to take the opportunity here today to thank all my colleagues all around the world in Orion Pharma for this achievement. In all business divisions, in R&D, in operations, you couldn't achieve anything like this without a very, very good collaboration in the company. So in addition to euros, we also had lots of positive development in R&D; ARANOTE approvals, both in Europe and U.S.; several new license and collaboration agreements; license agreements for early-stage technology platforms in our innovative medicines and oncology, but also acquiring and in-licensing product rights for both branded products and generics. Also MSD, our other significant partner, expanded the opevesostat development to women's cancers, which is wonderful news, both for women suffering of these cancers and taking all the possible opportunities of this molecule and mechanism of action. And Board of Directors of Orion Pharma is proposing a dividend of EUR 1.80 per share. And this is proposed to be paid in two installments. For the full year numbers, 21% growth in our base business, 22.5%, including milestone. Operating profit, EUR 58 million, if I round it to 59% growth in base business and 52%, including the milestones. And for the full year operating profit margin, this brings us to 33.4% compared to the previous year's 27%. And of course, this is mainly due to the -- or partly due to the milestone that we received. And operating cash flow was slightly better than in '24, driven by good sales performance -- mainly by sales performance as the milestone will be visible in the cash flow in this year. And now I move to the divisions. Innovative Medicines, here, the net sales is really Nubeqa, either the royalties or royalties and the product sales. And the dark part here describes the sales and royalties, where the growth was close to 38%. Of course, there, the milestone also included brings us to 152% growth. And then between the full years, the growth was 60% for the base business and 55% with the milestone. And then there is the picture that we always want to have here to remind you of the very back-end loaded character of this business due to the tiered royalties from Bayer. And we can see it extremely well here in the Q4 '25, where the royalties jump up significantly from the previous quarter. The product deliveries and product sales between the Q3 and Q4 last year remained at the similar level. Branded Products continued in Q4, the 2-digit number growth with 11% and the full year growth was close to 10%. For the respiratory portfolio, the growth comes from the budesonide-formoterol combination product. For the CNS, it comes from Stalevo or the entacapone product family for Parkinson's disease and especially retaining the rights in Japan back to Orion Pharma, but also from some new products that we've been launching in Europe. And then a significant growth of our women's health portfolio. Generics and Consumer Health really did it last year. 5.7% growth during the Q4 is above all averages in this business. and 4.6% for the full year as well. And this is a result of a lot of activities. We've done more than ever of launches in our current territories. We've had some bigger launches also this year for the products that have -- where the patents have ended, and this comes also from all of our regions. Animal Health quarter 4 was more, how would I say, calm compared to the previous quarters with only 1% growth. And this is mainly when you see this type of changes on a quarterly basis in Animal Health, it's usually the delivery timing of products to our partners. And then again, it didn't have a big effect on the yearly full year sales where the growth is close to 10%. And in a similar way to generics, the growth really comes from a broad -- here, even a broad geographic region globally, but also from a broad portfolio, both on the livestock and companion animal business. This is a nice list of our 10 biggest products. Almost all the products are growing, some even with a very healthy 2-digit numbers. Then some are more or less at par like Animal Health, Dexdomitor and Burana. Maybe it's good to note here that the Divina series, the women's health portfolio, has now climbed to be the #4. So it has actually now climbed up and passed the Animal Health sedative portfolio. And this is only a very natural order of products here to have the innovative products, Nubeqa as the first fastest-growing product and then all the 3 main products from branded side as the next ones. And then we have biggest generic products represented here. Simdax, unfortunately, of course, declining. Fareston's decline, again, is a matter of delivery timing. I think the big message in this slide is that, to my recollection, this is the first year when Innovative Medicines is our biggest division. So this is clearly a kind of a landmark event for Orion. Generics still hold almost 30% or generate 30% of our net sales and Branded Products, 17%. And the 2 other divisions, Animal Health and Fermion are significantly smaller ones. No significant news on our key clinical development pipeline. I already mentioned that we've started Phase II for the ODM-212 in 2 different indications, mesothelioma and EHE, both are rare oncology indications. We were able to start this study already in the end of the last year. And are aiming to start a study with the combination of this molecule to some current oncology treatments during the first part of this year. And also, you can see here now 2 studies for levosimendan also the level 2. And this is a very nice slide on sustainability this time about diversity. Orion has been ranked as #3 in the Nordic Business Diversity Index, which means that if you look at the numbers here on this slide, how men and women are -- what is the share of men and women on different level of the organization. You can look at the Board of Directors where almost 40% of members are women in executive team, almost 45% of the members are women. And if you look at the whole personnel in Orion Pharma, there almost 56% of the personnel are women. And there are a lot of other information here, of which we are very, very proud. One that I can mention is the accomplishment of the Code of Conduct agreements with our suppliers, which is 98%. We provided our outlook for 2026 for this year already on January 14, and it holds. So we have stated that our net sales range for this year is from EUR 1.9 billion to EUR 2.1 billion, and our operating profit range is from EUR 550 million to EUR 750 million. And here are our upcoming events, and our Annual General Meeting will be held on 24th of March. I thank you for your attention at this point, and we are ready for your questions. Tuukka Hirvonen: Thank you, Liisa. [Operator Instructions] But first, let's turn on to the conference call lines, and I'd like to hand over to the operator at this point. Operator: [Operator Instructions] The next question comes from Shan Hama from Jefferies. Shan Hama: Just two from me, please. We can take them 1 at a time. So firstly, could you just outline how you expect OpEx to develop over the course of this year as when compared to 2025, what sort of levels of SG&A and R&D are we looking at as a sort of percentage of the top line? That's my first question. Liisa Hurme: I'll give this question to Rene. Rene Lindell: Of course, we are not giving a detailed guidance on within the guidance and OpEx levels, but we have been stating that we are initiating more activities in the clinical pipeline. We have ODM-212 that entered Phase II and are planning to expand. So R&D OpEx, you can imagine that we are planning to increase during the year. And then when it comes to sales and marketing, we have also been investing more in those efforts across our countries, especially in the Branded Products division. So also there, there is some growth during '26. Shan Hama: Got it. And then just for my second question, please. Are you able to provide us with some further guidance as to your agreement with Bayer and what that looks like following Nubeqa's patent expiries? I think you previously stated low level percentage royalties after the patent expiries. But what is the low level? And will that eventually go to 0 after 2035? Liisa Hurme: I think exactly as you pointed out, it's a low-level single numbers of royalty that we can receive from Bayer after the product has become generic. And maybe did you have something else in your mind regarding that, we can confirm that here. Shan Hama: Yes. And then will it go to 0 after 2035? I think that's when the last patent expires in Europe, if I'm not mistaken. Liisa Hurme: To my recollection, in a very general way as these agreements are done, it's a region-by-region agreement. Whenever patents expire, generic competition starts in a certain region, so then the new royalty rate kicks in. Operator: The next question comes from Sami Sarkamies from Danske Bank Markets. Sami Sarkamies: I have a couple of questions. We'll also be taking this one by one. Starting from the outcome for last year, it was a great year, but you didn't actually surprise against your own expectations around mid-'25, even though Nubeqa sales actually developed very strongly during the second half of the year. So why did we land at the guidance midpoint and not above it? My point is that Nubeqa probably reached some sort of blue sky scenario during last year, but in which areas that wasn't the case. So was it related to other products not selling that well or maybe costs becoming larger than anticipated? Rene Lindell: So if you look at the net sales, we landed pretty close to our upper range of our outlook. So that clearly was on the high side, not in the midpoint. Then on the operating profit, we were quite there, close to the midpoint. However, there as well, we had a little bit more of OpEx, but again, that we kind of expected. As I said, we had R&D investments last year that increased significantly year-on-year. And especially even if you consider comparable without the write-downs in '24, you can see that actually the ongoing activities increased even more. So in a way, you could say we really executed on the plan, both in the R&D side and also on the sales and marketing side, we went exactly as planned. So I think for us, we were quite at the mark. Sami Sarkamies: Okay. And then going back to the cost outlook that was also discussed. So is it so that the R&D cost increase will be quite a bit more material this year than sales and marketing cost increase? Rene Lindell: Not necessarily. So I think in both sides, we are investing. So we'll have to see, of course, how the year goes, sales and marketing. I think it's pretty clear what we have in the budget that it will increase, R&D as well increasing. But again, as you know, it's less predictable. So that's why also there is a variety in the outlook range that includes a big part, also plays a role of the R&D expense. Liisa Hurme: And maybe to continue from that, we are really, as you said -- as Rene already said, executing our plan. We were executing our plan for '25, and we are executing our strategy, which is to invest more in R&D. And you can already see it in '25 if you compare '25 numbers to the '24, and that is expected to continue. Sami Sarkamies: Okay. And can you still open up a bit the factors that are driving sales and marketing costs increase this year? And maybe also you're planning to have a presence in the U.S. market someday. When do you think those more material sales and marketing investments will happen? Rene Lindell: I think the largest factors would be in Branded Products and obviously, Easyhaler as being the biggest product. That's where we have the most activities. So logically, driving more sales there requires also activities in that regard. The U.S.A. establishing that platform, of course, that also plays a role, but still quite small in the big picture of things. But of course, we are step-by-step also taking activities there, but it's a very small scale, but it's all part of the total. Tuukka Hirvonen: And maybe to add -- and then of course, also the Endo royalties, which we are paying. As Nubeqa grows, of course, we are paying more and more royalties to Endo, and that is shown in the sales and marketing costs. Liisa Hurme: Thank you for Tuukka to remind about that. So that really grows as the Nubeqa sales grow. Rene Lindell: So that's why it is a variable, basically, expense with Nubeqa's growth. Sami Sarkamies: And then my final question would be on capital investments. You had quite an increase last year. You're guiding for a similar level this year. Where are you investing at the moment? Rene Lindell: If I single out the largest investments, those would be in Nubeqa production, especially in the API production. And then secondly, last year, we also had in Easyhaler. But of course, we are continuing of course across all our divisions. So as we are growing, we need more capacity for the products that we are producing on our own. So in a way, it grows also in line with the business. But naturally, one of the big things is really darolutamide. Operator: The next question comes from Iiris Theman from DNB Carnegie. Iiris Theman: Thanks for your presentation. I have three questions, please. So firstly, R&D costs were higher than I expected in Q4. Did those include any one-offs, for instance, related to ODM-105? This is my first question. Liisa Hurme: Well, mainly the R&D costs, I don't recall that. Maybe, Rene, you know the details, but I don't recall if they had any one-offs for 105. But of course, the R&D cost increase is really according to strategy, according to our plans. And as we have several biologics, already chosen candidates that we will hopefully bring to clinical development, at least one this year and the next in '27. The balance or the -- how the R&D costs are actually sequenced when you develop biologics? There are a lot more costs already before the clinical development when you need to have your final product, your final pharmaceutical product and commercial batches validated before you enter your clinical studies. So I do fully understand it might be difficult to understand where do we spend the money when you still see that there are not that many projects in the clinical phase. So those are actually quite expensive in the light of earlier pipeline molecules that we've had. And of course, we've been bringing ODM-212 into clinical phase and started the Phase II study last year. And that, of course, also includes kind of one-offs and payments for CROs. So nothing to do with 105 unless Rene says otherwise. Rene Lindell: Yes. Maybe just on the dynamics of the R&D spend. Typically, end of the year, there is a bit more bills for external CROs. They tend to be back-end loaded over the years. ODM-105, yes, there were a few, I would say, single-digit millions in terms of payments that we booked basically for things that are still being done to ramp down. And yes, as you said, then also starting up the new clinical trials, there's also upfront payments that came there. But all of these -- this is going to be probably the typical one that you have some fluctuations, but the big message is in a way that from -- if you look at the full year to full year, then we expect a steady growth of R&D. Iiris Theman: Okay. And still related to R&D costs. So is it fair to assume that your costs this year will be in your historical range of about 10% to 12% of sales? Rene Lindell: I would not promise that the history is the best predictor of the future. It will really depend on how the projects move forward. So we've been many years in the 11%. But as I said, the target is to move forward further in the clinics, and that might mean also that we exceed the clinical -- or the historical ranges, but we'll have to see how the year goes. Iiris Theman: Okay. And then secondly, what was the reason behind the flat Nubeqa product sales quarter-over-quarter in Q4? Liisa Hurme: Well, there is a lot of fluctuation. Generally, of course, the deliveries have been growing as the sales been growing, but as we've stated many times, so there are differences between quarters. It's a bit of the same thing as with other products to our partners, but it's really might be a timing of delivery between one day to another and then it ends up to a different quarter or even to a different year. Iiris Theman: Okay. And then my final question is related to R&D pipeline. So what is your expected pipeline news in the next 6 to 12 months? Liisa Hurme: Well, I think the next one will be the start of the ODM-212 in combination with some current oncology drugs that are used. As I said, we hope to start those studies before the summer, during the first half of this year. And from there on, during this year, we aim to bring one biologic product in clinical stage. And then going forward to '27, there should be results. And now I'm looking at Tuukka already from one of the Nubeqa studies. So are they both readouts in '28? Tuukka Hirvonen: The ARASTEP study for the BCR is due to readout in '27, then the DASL-HiCaP is due to readout in '28. And still during this year, so in the second half of '26, our partner, Tenax, is expecting to read out the first level Phase III trial in the second half of this year. Liisa Hurme: Exactly. So this year's events is really starting the combination study with 212 level study results and also starting the biologics clinical development. Iiris Theman: And do you expect anything related opevesostat in the next 12 months? Liisa Hurme: I think that's something that you would need to ask from MSD. Operator: The next question comes from Alex Moore from Bank of America. Alexander Moore: It's Alex Moore, on for Charlie Haywood, Bank of America. Two for me on Nubeqa. On the greater than EUR 1 billion guidance on net sales, can you confirm your assumptions around expansion into early line settings on the data due in '27, '28? And then secondly, just a clarifying question on the royalty post LOE. You mentioned that the royalty rate drops to a very low rate after generic competition has started on a country-by-country basis. Can you give a bit more color on timing, i.e., does this mean the royalty rate drops on the launch of the first generic competitor in a particular market? Or is there more nuance there? Liisa Hurme: Well, I think may I repeat your first question. So did you ask whether the early-stage indications with Nubeqa are included in the EUR 1 billion? Alexander Moore: Correct. Liisa Hurme: That was your question. Yes, they are. In a similar way as anything that Bayer is saying about Nubeqa, they include all the indications or all the studies that are ongoing that they should be successful to reach what they are planning. And then your next question was regarding the royalty rate after the loss of exclusivity and how that would go. Usually, the agreements are designed so that the royalty rate drops either when the first generic enters the market or the patent is expired region by region. Tuukka Hirvonen: All right. Thank you. We have now, for the time being, exhausted all the questions from the conference call line. Then we can turn into the webcast questions. We have a few of them here. Let's start with a few one from Matti Kaurola from OP Markets. So the first one from Matti is, what kind of reasons impacted on increased R&D and especially the sales and marketing costs in Q4? Rene Lindell: I think we already discussed the R&D cost. So I think I already answered that. We will not repeat it. So sales and marketing, again, maybe repeating what also Tuukka mentioned that Endo royalties was a big part of that. And of course, the EUR 180 million milestone was one big event in Q4, which also include Endo royalties. But then the other piece just added activities that we have. We have added more sales persons across our markets where we are seeing good momentum and growth, for example, for Easyhaler. Tuukka Hirvonen: Then we'll continue with the cost side, hot topic today. This is again from Matti. What should we think about especially sales and marketing costs in '26? Are they going to have similar seasonality as in '25? Or is Q4 level as the new normal, so to say? Rene Lindell: I think there is a fluctuation between the quarters due to various factors. So I think it also kind of might be a bit risky to take 1 quarter and multiply by 4, but rather look at the total year levels as we typically do, you get a more continuous picture of how that would develop. Yes, there is always some seasonality always there, typically also Q4, even in that space can have some extra costs that are backloaded, like in R&D. So I would also look at a bit more bigger picture of how the costs develop. Tuukka Hirvonen: Thanks, Rene. Then the final one from Matti is related to Fermion. Typically, Fermion sales has been decreasing due to increased Nubeqa production. So why did the external sales of Fermion increased during Q4? Liisa Hurme: Well, this is a good and nice question because this -- let's remember that these sales, as was pointed out, are the external sales for other pharma companies. And we were clearly able to deliver before the year-end more than we've been able to do earlier. So I think this is a result of good deliveries before the year-end. Tuukka Hirvonen: Thanks, Liisa. Then move on. This question comes from Viktor Sundberg from Nordea Markets. So just wondered if you could provide any details on what you assume in the high end and in the low end of your guidance ranges to get a better feel for the risks and uncertainties going into '26? Rene Lindell: Yes. Of course, I can't give you details within the range. But I think if we talk about broadly about the range, the biggest factors, of course, for this year is Nubeqa. That is growing at the rate as we're seeing. We expect it to do very strongly this year. It grows as its share of the total business naturally. That means also the range where Nubeqa lands and the impact on Orion is increasing. We mentioned already R&D OpEx, it is also increasing, but there is uncertainty over there as well that how projects move forward, how fast and how the spend is, plus then other factors, the U.S. dollar to euro FX starts to impact more because a lot of the Nubeqa sales, of course, is in U.S.A. So that is in there as well. Plus the other divisions bring their kind of normal variations as well. So it's kind of sum of all of these. And in the end, as we've been typically stated, when we look at the midpoint, that's kind of a base case where things move according to our plans. Tuukka Hirvonen: Thank you, Rene. Now we have exhausted also the questions from the webcast, and I can hear that there are no follow-ups on the conference call line. So at this point, I'll hand over to Liisa for any closing remarks. Liisa Hurme: Thank you for your attention. And again, thank you for everybody for this excellent year 2025. We are heading towards another good year of 2026. Thank you.
Operator: Good morning, ladies and gentlemen. Welcome to Avient Corporation's webcast to discuss the company's fourth quarter and full year 2025 results. My name is Michelle, and I will be your operator for today. At this time, all participants are in listen-only mode. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Giuseppe Di Salvo, Vice President, Treasurer, and Investor Relations. Please proceed. Giuseppe Di Salvo: Thank you, and good morning, everyone, and thank you for joining us on the call today. Before we begin, we would like to remind you that statements made during this webcast may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. They are based on management's expectations and involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. We encourage you to review our most recent reports, including our 10-Ks or any applicable amendments, for a complete discussion of these factors and other risks that may affect our future results. During the discussion today, the company will use both GAAP and non-GAAP financial measures. Please refer to the presentation posted on the Investor Relations section of the Avient website where the company describes the non-GAAP measures and provides a reconciliation of historical non-GAAP financial measures to their most directly comparable GAAP financial measures. A replay of this call will be available on our website. Information to access the replay is listed in today's press release, which is available at avient.com in the Investor Relations section. Joining me on the call today is our Chairman, President, and Chief Executive Officer, Ashish K. Khandpur, and Senior Vice President and Chief Financial Officer, Jamie A. Beggs. I will now hand the call over to Ashish to begin. Thank you, Joe, and good morning, everyone. Ashish K. Khandpur: Strong execution by our teams, with favorable mix and management's tight cost control, led to 80 basis points of adjusted EBITDA margin expansion and a strong 14% adjusted EPS growth for the fourth quarter. With this result, we expanded our adjusted EBITDA margins year over year in each of the four quarters of 2025. Organic sales in Q4 were down slightly at 0.8%, and grew 1.9% as reported over the prior year due to favorable foreign exchange impact. As we had highlighted in our third quarter earnings call, we continue to see strong momentum in defense, healthcare, and telecom markets with business growing double digits in each. In addition, packaging demand improved modestly, growing sales low single digits in the fourth quarter compared to being down low single digits in the third quarter. As expected, businesses in our other markets finished down versus the prior year. Moving to the right-hand side of the slide, for the full year 2025, sales were relatively flat year over year. Favorable product mix and our productivity initiatives led to 50 basis points of adjusted EBITDA margin expansion versus 2024, helping us achieve full year record high margins of 16.7%. Adjusted EBITDA finished at $545,000,000 for 2025 with 3.5% year-over-year growth as reported. Adjusted EPS grew 6% helped by lower interest expense and favorable foreign currencies. Our team's highly disciplined cash management enabled us to generate $195,000,000 of free cash flow, enabling us to reduce our outstanding debt by $150,000,000 and end the year with a net leverage ratio of 2.6x. As you know, one of our key drivers to advance our strategy is innovation. Creating meaningful and differentiated products, especially in markets supported by secular trends, will not only help us grow faster, but also increase our profitability. Today, I would like to share some examples of recent innovations from our company. The first set of examples address the need and demand for non-PFAS products in applications currently using PFAS materials which are facing stringent regulations, especially in the United States and Europe. Our teams recently developed and commercialized GlideTech technology which enables new non-PFAS and non-silicone lubricious materials for use in catheters, particularly those used in neurological and vascular applications. Our portfolio contains formulations that are ISO 10993-5 and USP 87 compliant in standard grades. These products deliver exceptional coefficient of friction reduction, are compatible with all common sterilization methods, and processable using conventional extrusion equipment. Another example in this space is non-PFAS polymer processing aids for polyolefin film used in packaging applications for personal care products. Here, we have innovated and launched a portfolio of products in 2025 and several other customer manufacturing qualifications are in progress currently. We continue to gain more knowledge and experience in this new area working closely with our customers, and understanding the interplay between our innovative materials and their processes. The last example for today is a process innovation where we can unlock additional Dyneema fiber making capacity with tailored material properties using our existing manufacturing equipment. As you may recall, demand for our products in defense grew double digits in 2024, followed by high single digits growth in 2025. We expect this momentum to continue supported by the announced increases in defense spending over the next few years, especially in the United States and Europe. Due to the success of our innovation, we will now be able to quickly unlock meaningful new capacity from our current manufacturing lines to support the anticipated growth in our defense growth vector. In addition, we plan to deploy incremental capital over the next two years to further expand capacity and support the growth we foresee from our Dyneema-based businesses. Jamie will share more about these investments in her section. Before we get to 2026, I would like to take a moment to reflect on our performance over the last two years. As you know, in 2024, we evolved our company strategy to prioritize organic growth, to be complemented by targeted M&A where it enhances our capabilities. We also sharpened our focus on profitability to deliver both top line growth and margin expansion. 2023 to 2025 marked the first period of time in nearly twenty years where there has been no impact on financials from acquisitions or divestitures, providing clean and noise-free data to compare performance. I am happy to report that over the last two years, our strategy has gained significant traction with our prioritized growth vectors delivering substantial growth, with innovation beginning to show up in differentiated products and improved margins. Additionally, we continue to eliminate structural complexity and drive productivity to become a more agile and customer focused organization. These actions have enabled us to deliver consistent improvements across our key financial metrics for the second consecutive year despite a volatile macro backdrop. Over the last two years, we have grown adjusted earnings per share by about 20% and expanded adjusted EBITDA margins by 70 basis points, 20 basis points in 2024, and an additional 50 basis points in 2025. As a result, ROIC has improved each year and is now up 90 basis points versus 2023. Our strong free cash flow generation and disciplined capital deployment also allowed us to reduce debt, bringing net leverage down from 3.1x in 2023 to 2.6x in 2025. Importantly, we achieved these results while continuing to invest in the business, particularly in our prioritized growth vectors aligned with our strategy. As we move forward, we plan to continue advancing these value creation metrics. Ashish K. Khandpur: As we have over the past eight quarters. With increasing traction from our growth vectors and innovation pipeline, we expect to scale revenue and margin expansion with greater ease over time. Coming specifically to 2026, our premise is that the macro environment will remain volatile, impacted by trade policies, geopolitics, and moving supply chains. We are cautiously optimistic about 2026 being a better year than 2025 from a market demand perspective. This is especially true for our Color Additives and Inks, or CAI, business, which showed negative 2% organic growth in 2025. Last year, some of the biggest markets for the CAI business, namely consumer, industrial, building and construction, and transportation, saw anemic demand while packaging was relatively flat. With 2026 showing stronger than 2025 U.S. GDP growth projections, and several government initiatives in the United States like the new tax bill, focus on domestic manufacturing expansion, and the potential for easing interest rates, demand in our relevant markets is expected to improve. This would be a welcome scenario for our customers and our business, but at the same time, we are also focused on driving productivity in the organization to ensure we continue to drive our earnings and margin expansion in case market demand does not improve. We grew our Specialty Engineered Materials segment sales by 2% in 2025 excluding foreign currency impact, and we believe there are several secular macro trends in this business that will support organic sales growth again this year. Before I hand the call over to Jamie, who will provide additional color on our 2025 segment and regional performance, as well as our guidance for 2026, I would like to thank the entire Avient team for their determination and outstanding efforts to successfully deliver in 2025. I have no doubt our team is up to the task to deliver an even stronger 2026. Jamie? Jamie A. Beggs: Thank you, Ashish, and good morning, everyone. Jamie A. Beggs: I will start with the fourth-quarter performance of our Color Additives and Inks segment. Continued strength in healthcare and improving packaging demand was not enough to offset demand conditions in consumer, industrial, and building and construction, which led to a 3% decline in organic sales for the segment during the quarter. EBITDA margins declined 10 basis points as productivity initiatives helped mitigate the impact of inflation and reduced demand. Giuseppe Di Salvo: Specialty engineered Jamie A. Beggs: Materials organic sales increased 3% as strong growth in defense, healthcare, and telecommunications more than offset lower sales in energy, industrial, and building and construction end markets. Healthcare continues to deliver strong growth, supported by our innovative and specified materials for use in medical devices, equipment, and supplies. Defense grew double digits in the quarter driven by strong U.S. and European demand and supported by new innovation, including next-generation materials in our Dyneema line that we have highlighted in the past. Favorable mix and productivity contributed to 80 basis points of margin expansion, which combined with higher demand and positive FX, resulted in 10% EBITDA growth. In the fourth quarter, U.S.-Canada sales declined 1%, which is an improvement from the prior quarter's 5% year-over-year decline, as we saw positive growth in packaging. This, combined with continued underlying strength in healthcare, defense, and telecom demand, partially offset lower sales in the industrial, building and construction, and energy markets. Future policy changes and lower inflation could be positive factors that provide momentum to the region in 2026. Similar to the U.S.-Canada, EMEA also performed slightly better than the third quarter where organic sales only declined 2% on a year-over-year basis. Positive growth in the consumer end market, primarily driven by an increase in small and large appliances, along with continued momentum for defense and healthcare, helped offset weaker industrial demand. Asia grew 3%, driven by strength in packaging and telecommunications. The secular trend of high performance computing creating new opportunities for our materials has helped offset weak consumer demand, particularly in textile applications. Latin America sales declined 5%, primarily due to softer consumer demand and a difficult year-over-year comparison where the region grew 14% in the fourth quarter last year. Turning to full year 2025 results, we navigated an uncertain macro environment while delivering bottom line growth through customer focus, Jamie A. Beggs: innovation, Jamie A. Beggs: productivity, and operational discipline. Full year CAI organic sales declined 2%. Steady growth in healthcare throughout 2025 helped offset softer demand in consumer, industrial, transportation, and building and construction. Packaging remained relatively resilient, ending the year flat versus 2024. EBITDA margins expanded 50 basis points, benefiting from favorable mix and productivity tied to our plant footprint optimization, as well as initiatives to streamline the organization, allowing us to serve our customers more efficiently. SEM organic sales grew 2%, driven by defense, healthcare, and telecommunications, partially offset by subdued consumer, industrial, and energy demand. EBITDA margins declined 40 basis points, primarily reflecting planned maintenance in our Avient Protective Materials business, completed in 2025, and strategic investments in our growth vectors in this business. Turning to our 2026 outlook, our full-year guidance reflects the balance between encouraging demand trends across our portfolio and continued macro uncertainty and volatility. As Ashish mentioned in his comments, we are cautiously optimistic that some of our end markets negatively impacted in 2025 will start to improve in the coming year, including consumer, industrial, and building and construction. Favorable government policies and easing interest rates, as an example, could spur consumer and housing demand as we progress through the upcoming year. With that being said, uncertainty remains with evolving global trade, labor markets, GDP growth rates, and foreign currency fluctuations. Accordingly, we are establishing full-year guidance for adjusted EBITDA of $555,000,000 to $585,000,000, which is up 2% to 7% year over year, as well as adjusted EPS of $2.93 to $3.17, which is up 4% to 12% over the prior year. This range includes our first-quarter adjusted EPS outlook of $0.81. Productivity will again play a role in supporting earnings growth and margin expansion in 2026. We will see carryover benefits from initiatives executed in 2025, along with new actions that are now underway. In addition, we will monitor demand conditions and are prepared to enact additional actions should the demand environment not improve. Regarding free cash flow, we expect another strong year of cash generation with an anticipated range of $200,000,000 to $220,000,000 for the full year. This assumes capital expenditures of $140,000,000, which is approximately $33,000,000 more than 2025. This is driven primarily by the incremental investments to support growth in our defense business as Ashish highlighted earlier today. As we demonstrated in 2024 and 2025, we have consistently moved the key value creation metrics in the right direction, even in a tough macro environment. Our guidance for 2026 projects another year of adjusted EPS and adjusted EBITDA growth, improved return on invested capital, and a reduction in net leverage. Our strategy of catalyzing the core and building platforms of scale continues to bear fruit and create value for our shareholders. With that, we will now open the line for Q&A. Operator: Thank you. Press 11. If your question has been answered and you would like to remove yourself from the queue, please press 11 again. Our first question comes from Michael Joseph Sison with Wells Fargo. Your line is open. Michael Joseph Sison: Hey, good morning. Nice quarter and nice finish for the year. Ashish, you sort of mentioned that some of these markets will improve or could potentially improve this year. Are you seeing any sort of green shoots in some of those, the consumer, industrial, transportation, and construction areas now? And then at the midpoint of your guidance, what improvement would you need to get to hit it? Ashish K. Khandpur: Thanks, Mike, for the question. Part of the improvement that we are seeing in the U.S., especially we expect in Q1 for consumer and packaging to flip from negative to positive. Last year, packaging Q1 was pretty negative, down 10% in the U.S., and so the comps are pretty favorable, and so that is going to help us. But in general, we are seeing better conditions than we were seeing before on the packaging side. As you saw, in Q4 itself, packaging was up 1% in the United States, so that is a good sign. On the consumer side, it is still subdued, but probably getting a little bit better. Too early to say. There is a little bit of noise in the system with the Asia situation with the Chinese New Year moving overall, and we generally do not want to make too many assumptions with respect to January itself because there might be some pull-ins from February based on the Chinese New Year situation, and so we would like to see January and February together on that one. But overall, January came marginally better, I would say definitely as well as we expected, marginally better. So that gives us some optimism at this point in time, but as I said, we are not reading much into it because there might be a little bit of noise in the data from Asia. But overall, I think we are feeling that consumer and packaging should be at least turning positive in the first half of the year for sure, and for the United States, probably in first quarter. And then the other part of the question is on the guidance on midpoint. On the low end of the range, we expect that the consumer, industrial, and the building and construction markets will probably not improve. They stay as they are. In the midpoint, that assumes that there is modest growth in all of them, probably low single-digit kind of growth, and packaging also a little bit more modest growth. And then on the high end of the range is a little more robust growth, so what typically we would grow in a good year. So that is probably the range that captures our EBITDA ranges and our sales range and everything. Michael Joseph Sison: Got it. And then a quick follow-up. When you think about the last two years, you spent a lot of time on innovation, R&D, and trying to get your growth vectors to sort of get beefed up. So when you think about 2026, how much growth do you think you will generate from those initiatives? And are there any particular product lines or end markets that are going to drive that? Thank you. Ashish K. Khandpur: Yes. We have been trying to highlight some of our innovation in multiple earnings calls like these, and today again, I highlighted a few new ones that did not exist a couple of years ago. The idea is to tell the audience that we are moving ahead on this. Our intellectual property filings, for example, the last two years, we have filed 50-plus patents, which includes initial patent filings, provisional patents, as well as PCT filings, so that is 50-plus for both the years. That compares to a number of 20-odd maybe two or three years ago, so you can see how much innovation is going on. That is an indirect measure. From a financial perspective, if you take 2025, our growth vectors grew high single digits, almost closer to 10% versus closer to 5%, I would say, and the rest of the businesses actually did not grow. That gives you an idea of why we were still flat in a year that had so much low demand in most of our core markets. The big idea is that with these growth vectors, we are really now trying to build businesses of scale in markets that are supported by secular trends and growing at rates much faster than GDP, and that seems to be taking hold. So maybe that is where I will leave it. Michael Joseph Sison: Thank you. Operator: Thank you. Our next question comes from Laurence Alexander with Jefferies. Hey, guys. It is Dennis on for Laurence. Thanks for taking my question. Dennis (for Laurence Alexander): You kind of went through some end markets, maybe I missed it, but you did not mention transportation and the outlook. What are we thinking there? Is it expected to improve at all? Ashish K. Khandpur: Yes. Transportation for us, Laurence, was overall down 1% for the year. It is a little bit of a regional story. We grew in EMEA 1% versus the auto build was down 1%, and we grew in Asia 5%, which was consistent with the builds in the Asia market. In the United States, the market was down 1% for the year, but we were down 5%, and that is largely driven by the fact that we also have rail and commercial vehicles in our transportation, which were down significantly in the United States. In the auto business, we are doing fine, consistent with how the market is doing, but the rail and the commercial vehicle piece brought us down a little bit. As I look into the future, we are watching transportation carefully. There was a lot of build that happened towards the end of last year in China especially. They are calling it supply-side structural reform where because of their structural reform, they were going to put restrictions on export of EV vehicles starting January 1. So a lot of material got pushed out at the end of the year, which we benefited from, and as I said, we grew 5% in Asia. I think Q1 probably will be softer based on that, and then for the total year, flattish to low single digit is my projection. Dennis (for Laurence Alexander): You kind of talked about not doing any divestitures or acquisitions in the last two years. Thank you very much for that color. I was wondering—obviously your focus is on organic and internal growth—but what should we expect going forward? Is it that there is not a lot out there, we are focused on our business, or what are your thoughts there? Ashish K. Khandpur: One of the things that we are trying to do, Laurence, is build a few muscles of innovation and commercialization, and that has been going well for the last two years. You can see the teams getting better every day in customer focus and key account management, and then innovating from the market insight, and then understanding the value chains in these growth vectors, which some of them are quite new to us, is very important. Before we put in any acquisitions—which we think at some point we will do, probably not this year, maybe something after that when we also have a better balance sheet situation than where we are today—by that time, we expect to understand the value chains in our growth areas much better, and then M&A would probably be something to complement or augment our strategy of organic growth versus a stand-alone M&A in a brand-new area. Dennis (for Laurence Alexander): Alright. Thank you very much. Michael Joseph Sison: Thank you. Operator: Our next question comes from Frank Mitsch with Fermium Research. Your line is open. Frank Mitsch: Thank you so much, and nice end to the year. If I could just follow up on that last question, it looks like you ended the year at a better net debt to EBITDA than perhaps was considered at the beginning of the year. You offered your thoughts, Ashish, on M&A. I am curious as to what your thoughts are with respect to debt paydown versus buybacks. Ashish K. Khandpur: Thanks, Frank. One of the things that we have obviously been prioritizing is paying down the debt, as you mentioned. As I said, the next twelve months, no M&A. So most of the cash probably will still go toward paying more debt. We would like to make that situation stronger, so we expect to finish the year lower than 2.5x for sure, if not better than that. At that point, we will have more flexibility of buyback versus reduction and also looking at M&A at that point in time would make sense. But I would say that in the near term, you can expect us to keep paying the debt versus buyback. Frank Mitsch: That would be my Ashish K. Khandpur: strategy on deployment of the cash. Frank Mitsch: Okay. Understood. I appreciate the color with respect to the patent filings. I am curious if we could ask it another way in terms of a vitality index, in terms of products introduced over the last four or five years and how you track that and where that stands today. Ashish K. Khandpur: I do track that internally, Frank, but for me, that number is not as critical. I come from a company, as you know, where these vitality indices were talked about a lot. I think it is a good internal measure for us to keep tracking to see the health of the organization and whether the creativity of the organization is in play. But for me, you could have a couple of products that are big and are creating a lot of value. For us, it is more important what is creating growth. Obviously, we have to do a lot of product development for replacement because the market needs that, but as we are bringing our strategy into this growth mode through growth vectors, especially in these new areas, the focus is on net new growth creation. Our NPVI, or new product vitality index, is pretty healthy. It is tracked internally, but I do not intend to speak about it. The difference is that most of that NPVI has been based on replacement products versus products that create new growth, and I am trying to flip that around and say we need products that customers need for replacement on an ongoing basis—which is a very important part of our core business—but we now need to also create products which are going to create brand-new growth for this company. That is what some of the products I keep highlighting in some of our slides represent. These products did not exist a couple of years ago, and they are creating brand-new growth for us. Frank Mitsch: That is very helpful. I am looking forward to any other metrics that you might be able to catch that transformation from replacement versus new growth down the line so we get a better handle on it. Thank you so much. Operator: Thanks, Frank. Our next question comes from Aleksey Yefremov with KeyBanc Capital Markets. Your line is open. Brian (for Aleksey Yefremov): Thanks, and good morning. This is Brian on for Alexi. Brian (for Aleksey Yefremov): I just wanted to go back. I think you talked about some more productivity gains and maybe some cost cuts. I think there is some carryover from 2025, but you also mentioned some new actions. Can you help us understand, in terms of dollar-wise, how much is embedded in the guide for this year? How much is carryover from 2025, and how much are these new actions? What exactly are these actions that you are taking? Jamie A. Beggs: Hi, Brian. Thanks for the question. Our productivity initiatives really center around four to five major programs. That includes sourcing savings, taking a look at our footprint and optimizing it, Lean Six Sigma program, as well as simplifying our structure. We accomplished a little over $40,000,000 of that productivity from last year. We expect about half of that to basically continue on into 2026 based on when those were initiated. As we take a look at guidance for the full year for 2026, it really is a lever that we will continue to evaluate depending on demand. We are a big believer that we need to invest in the underlying growth of the business, and so you want to be a little bit cautious about cutting too deep on certain things. As we look at how demand evolves, we will assess those productivity initiatives. As we said in the commentary earlier today, we are taking a harder look at how demand will end up playing out. Our net inflation for the year is around $30,000,000, so that is a baseline. There could be more depending on how the year evolves. Brian (for Aleksey Yefremov): Okay. Great. That is very helpful. Then I just wanted to ask in terms of the regional performance—Asia obviously stands out; it is the only region that grew organically in the fourth quarter. I just want to understand what is driving that. Is that largely the exposure you have on the semi front in packaging? Or is it something else? Thanks. Ashish K. Khandpur: Asia in Q4 has been a good story because Q3 Asia was negative 1% for us, and in Q4, we flipped it positive to plus 3%, and that is largely coming from GCA, which also flipped from minus 1% to plus 4.5%. If you look into GCA, both packaging and telecom went in the right direction. I just visited our Asia team in January. I was there, and I was very pleasantly surprised to see how much market share they are gaining in a market that is not growing, especially in the food and beverage area. That brought us to slightly positive in packaging in GCA, which helped a lot because packaging is the biggest market there. It is about 33% of Asia, of GCA. Then the other part is that in high performance computing, which Jamie mentioned in her remarks, we have been growing quite well in that secular trend, and materials that are used in semiconductor chip packaging and wafer packaging have been growing at double digits for us, which were also the case in Q4, which really helped Asia as well. Those were the two main reasons. Operator: Our next question comes from Kristen Owen with Oppenheimer & Co. Your line is open. Kristen Owen: Good morning. Thank you so much for the question. I wanted to pick up the thread, Jamie, on EBITDA expansion. You have done a really nice job of continuing to grow that margin in a tough environment. But as we look back to, say, 2024 Investor Day, you had this target out there of 20% EBITDA. If we were to revisit that target against the work that you have done on productivity since those targets were laid out, how do you think about the buckets of opportunity that you have to move further towards that 20% EBITDA margin target? Jamie A. Beggs: Thanks for the question, Kristen. When we laid out in the Investor Day, we were sitting around a little over 16% EBITDA margins. Our goal is to get above 20% EBITDA margins. How we looked at how that would evolve over time would be about half of it related to operating leverage, another quarter related to moving up the value chain in terms of mix, and then another quarter from productivity. Obviously, the last couple of years have been more focused on the mix dynamic and the productivity dynamic. In fact, if you take a look at the 50 basis points of expansion that we accomplished in 2025, there was not any operating leverage, as you can see our organic sales were basically flat for the year, but we did have quite a bit of price/mix and productivity. I would say about half and half between those two. As we look forward and we look at the opportunity to continue to expand margin, price/mix will continue to be a lever. We are very focused on productivity, especially in, I would say, a low demand environment. I think you are going to see a pretty big uplift once the market starts to stabilize in some of our core markets such as consumer and building and construction and industrial. I think that would really boost that up. As I look forward to 2026, the majority of it at this juncture we are counting on the expansion coming from those two other areas. Kristen Owen: That is super helpful. Maybe to double click on that macro piece, what catalyzes color here? You have talked about some of the big macro pieces, but is there anything from a portfolio standpoint—things like maybe the PFAS replacement products—that we should be thinking about driving that market outgrowth in color going forward? Ashish K. Khandpur: Kristen, the big opportunities for color are in the area of functional additives, and PFAS is one example of that. The same things can be extended to certain kinds of flame retardants and can also be extended into foaming agents, which are used in building and construction materials. Functional additives are close to a half-billion-dollar business for us, so it is sizable in color. It is not insignificant. If we can grow that fast, based on attaching to some of these secular trends and our growth vectors, we feel that we have a good story. That is what we are pursuing. Kristen Owen: Great. If you do not mind, if I could sneak one more in, just double click on the investment. Are you currently demand constrained in that, and what is driving the additional CapEx? That is my last question. Thank you. Ashish K. Khandpur: We are not demand constrained, and we are driving as much as we can. This business is lumpy and sometimes shifts in quarters, as we have highlighted several times before. Defense has grown double digits, 14% in 2024 and 8% in 2025. We again expect a strong year from this business, continue to see strength there, and actually are making capacity investments. Innovation for debottlenecking the capacity is underway, as we highlighted today in one of the examples. We are then making some more CapEx investments that Jamie mentioned for $33,000,000 which will bring additional capacity in 2028. This business takes a while because it is very process intensive and needs a lot of equipment, so it does take time. When we look into the future, we still see this business growing quite well over the next several years, and so we are making investment decisions now so that we are ready when the capacity continues to grow. Operator: Thank you. Our next question comes from Michael Joseph Harrison with Seaport Research Partners. Your line is open. Michael Joseph Harrison: Hi. Good morning. Congrats on a nice finish to the year. I was hoping to ask another question on the Dyneema process that you talked about and some of the changes you are making there. Can you give some more color on what exactly you are changing? You categorized it as a debottlenecking, but it also sounds like you have added some additional capabilities to really tailor some of those products to specific customer requirements or specific applications. Beyond that, are you able to share how much additional capacity you are going to be able to get as a result of that change? Also, what does that mean for the margin performance of that Dyneema business, just from the debottlenecking and changes that you are making to process near term? Ashish K. Khandpur: There are many questions there, Mike, and I will start by saying that I cannot disclose anything about the process. It is a trade secret because in process innovation, it is very hard to file and then police patents, so we keep it as a trade secret. That is pretty standard, and that is what we have done here as well. All I can tell you is that these fibers are made at a certain tenacity, which gives strength to the fiber, and that tenacity value is achieved—the slower you spin the fiber, the more crystallization can happen to the fiber, which can give it higher tenacity, and so on and so forth. Typically, when you make high-performance fibers, you are slowing down your speed of the equipment significantly if you want to increase tenacity. I think our teams have figured out ways to not slow it down and continue to ramp it up at a fast rate. That is as much as I can tell on the process side. It is a slight modification of the equipment but also a process modification, and the team has worked on it diligently for more than a year to get us here. It is significant. It does give us enough capacity to buy time till 2028 when our new capacity would be needed. We were not expecting defense to grow like it has been growing. We were thinking more like mid-single-digits growth, and it has been growing double digits or high single digits. So this debottlenecking is really helping us get there without compromising and not being able to serve our customers on time, while in the meantime, we are making these new investments so that we are ready when we run out of capacity. Michael Joseph Harrison: Alright. That is helpful. On the healthcare business, just curious: a number of these GLP-1 drugs appear to be shifting from a weekly injection with an injector pen that I think you are involved with to either a monthly injection or even an oral dosage. Can you talk a little bit about your drug delivery product line within healthcare and whether you expect to see any impact from the evolution of how those GLP-1 drugs are administered? Ashish K. Khandpur: Drug delivery for us is a couple of things. What you mentioned on GLP-1 biopens is one part of it. The other part is remote devices which are used for delivering drugs and glucose monitoring and so on and so forth. That is also part of healthcare. From a GLP perspective, it is too early for us to say. We believe, and our customers believe, that there is market for both oral and injection pens at this point in time. The injectors are also being utilized for other applications, not just for weight reduction, and the market overall growth is expanding and is continuing to be robust. That is the signal we get from our customers, and so we are going with that premise at this point in time. Both in drug delivery devices, remote monitoring devices, as well as injector pen kind of devices, we seem to be doing quite well and expect that to continue at least for 2026. Michael Joseph Harrison: Alright. Thanks very much. Frank Mitsch: Thank you. Operator: Thank you. Our next question comes from David Begleiter with Deutsche Bank. Emily Fusco (for David Begleiter): Hi. This is Emily Fusco on for Dave Begleiter. What are your expectations for pricing in CAI and Specialty for 2026? Jamie A. Beggs: So, Emily, when we think about pricing, we are obviously always doing value pricing. We take a look at both price and mix as we move forward. As we mentioned for 2025, we have had a lot of success in healthcare and in defense. That has driven a lot of our price/mix dynamic in 2025. We expect that to continue as we think about 2026. Other pricing initiatives that people think about include what is going on with raw materials. We have proven through at least the five or six years that I have been here that raw materials can enable us to capture some margin expansion. We are always on top of it in terms of making sure that margin is not destructed based on where materials are. In our bridges, as I mentioned with Kristen's comment, we do expect some margin expansion in 2026 based on price/mix, and that really is a function of where we are selling our product, not because there are specific pricing initiatives going on other than our normal monitoring of where raw materials are and making sure that we are value pricing our products as they are created and differentiated from what else is in the market. Emily Fusco (for David Begleiter): Perfect. Thank you. Operator: Thank you. Our next question comes from Ghansham Panjabi with Robert W. Baird. Your line is open. Ghansham Panjabi: Ashish, just going back to the fourth quarter, as it relates to the strategic growth vectors you have outlined in the past, how did that portion of the portfolio grow on a core sales basis in the fourth quarter relative to where you came in on a consolidated basis, which was roughly down 1%? Giuseppe Di Salvo: Sorry. Growth vector growth versus the rest of portfolio. Ashish K. Khandpur: In fourth quarter specifically? Ghansham Panjabi: Yeah. Or you can speak to us for the year. Ashish K. Khandpur: For the year, maybe it is better for me to talk about the year versus quarter because these growth vectors are launched in different parts of the year, so it can be unfavorable. As I mentioned, growth vectors grew high single digits for us, and high single digits for growth vectors versus less than 1% or low single-digit kind of decline in the rest of the business. Ghansham Panjabi: Okay. Then as it relates to core sales for the following year, for 2026, did you break that up by segment? Ashish K. Khandpur: Not sure if I heard that. Jamie A. Beggs: No. We did not provide any specific guidance based on segments. We did provide a full-year range on EBITDA as well as EPS. We gave a little bit of color between the segments in terms of some of the end markets and where we are seeing strengths and weaknesses. Maybe just to reiterate, from an SEM perspective as well as a Color perspective, we expect things like healthcare to continue to perform well. SEM also has exposure to defense. That is also something that we continue to take a look at. We are looking to see how the evolution really comes about for consumer, industrial, and building and construction, which will be a key driver for the Color segment. Ashish K. Khandpur: Very good. Thank you. Giuseppe Di Salvo: Thank you. Operator: We have time for one last question, and that question comes from Vincent Andrews with Morgan Stanley. Turner Wills Hinrichs (for Vincent Andrews): Hi. This is Turner Hinrichs on for Vincent. I was just wondering if you could provide a little bit more regional color on what your 2026 guide considers for growth by region, particularly in Europe and Asia, considering you talked a lot about growth drivers in the U.S. economy so far? Jamie A. Beggs: Turner, we did not give any specific guidance by region, just like the question that Ghansham asked based on segments. We were talking more about end markets. There is a lot of geopolitical uncertainty, trade tariffs, and other things going on as it impacts the U.S. in particular, and those are the things that we are watching closely, as well as whether or not the Fed will decrease rates and at what pace they will actually do that. You mentioned Europe and Asia specifically. As you can see from what happened in 2025 in Europe, we ended it down 1%. At this juncture, we are expecting similar levels until we see some type of potential recovery. The Asia dynamic, as Ashish mentioned during the commentary, includes some really nice tailwinds in our packaging space and our telecommunications space. We expect with the underlying GDP there, although maybe slightly lower than what has been previously, it is still a growth part of the world. I would expect to continue to see growth in that area. Ashish K. Khandpur: Great. Thanks for the color. Operator: Thank you. This concludes the question and answer session. You may now disconnect. Everyone, have a great day.
Niina Ala-Luopa: Hello, and welcome to Vaisala's Fourth Quarter and Full Year 2025 Audiocast and Results Call. I am Niina Ala-Luopa from Vaisala's Investor Relations. And today in this call with me are President and CEO, Kai Oistamo; CFO, Heli Lindfors; and Chair of the Board, Ville Voipio. We have today published our financial statement release, and Kai will first go through the results, and then we have time for questions. Kai Öistämö: Thank you, Niina, and welcome for everybody from my side as well. So as the headline says, strong performance in 2025 and on a highlight in the fourth quarter really being the orders received improving and -- if we look at the actual, what happened in the year in the quarter, maybe I'll start with kind of just if we were to teleport ourselves into beginning of 2025, just to remind you what kind of a year we were kind of thinking that we would face and what was the reality. So we had a plan as a company to grow on the renewable energy on the back of kind of many years of good success, building on that, and the outlook, albeit a little bit more muted growth on renewable energy investments, but nevertheless, continuing the growth. Then U.S. elections have happened, but the speculations on trade wars, import duties, things of that nature on the scenarios, but not the most likely ones still in early January. And then there was really, I think, not really much of a speculation, which is hard to have the speculation on how volatile the currency exchange rates became during the year. And what a roller coaster ride in 2025. First thing is what happened was the renewable energy market for us really plummeted quite a bit, creating a big hole from a get-go in the year, remembering that this had been one of the growth drivers for the company and a very profitable one as well. So that kind of went away from the beginning of the year. We've quantified about EUR 20 million or even a little bit over EUR 20 million as a hole that it created from a get-go. Then in, during the year, the -- with twists and turns getting to 15% import duties between U.S. and Europe. And then in the second half of the year, U.S. -- actually, the euro appreciating vis-a-vis not only U.S. dollar, but many other currencies, Chinese yuan, Australian dollar, Canadian dollar and so on and so on. So it's clearly a broader event than just the import duties between kind of 2 continents or 2 countries. And in this environment, I think we can be, as a company, very proud of how we performed. We were able to continue on our growth journey. If I look at in kind of our long term -- first reminding that our strategic goal was growing the net sales by average 7% over long term. And we were clearly above that if we -- as we should be measuring that in constant currencies, 7.4% year-on-year growth rate during 2025. We were able to mitigate the import duties on Industrial Measurement side, that meant increasing prices the day after where the import duties were clear with no visible impact on the demand. And on the Weather side, actually pre-shipping into U.S., avoiding the tariffs and giving us time to negotiate as the business on that side is based on longer-term contracts and especially public side. So it takes time to negotiate, but happy to report that we've been able to actually during -- like during that time that we bought for the second half, we've been able to actually come to terms and agree with the customers that we are going to be -- are now able to pass also in Weather side, the import duties to our customers. And then thirdly, the fluctuation on the currencies, the strong appreciation of dollar during -- of euro during the second half of the year, obviously, then created headwind, which is a lead into when we look at the fourth quarter in this environment where we were kind of during the quarter in $1.18, $1.16 range in terms of a euro-dollar ratio comparing to the year before where we were $1.02. That gives you kind of a flavor of what kind of a headwind one would face. And despite that, essentially a flat net sales year-on-year. And that obviously kind of creating challenges on some parts of the businesses even more than other ones. Xweather being very highly dollar-based. We are talking about clearly over 60% of the sales in USD, obviously creating even more headwinds than in some other parts of the business. That being said, also the -- then when we look at the order intake in fourth quarter, that's really a positive highlight, I think, in the fourth quarter. The order book increased 10% in terms of constant currencies, really driven by Industrial Measurements, but also in Weather and Environment, clearly improving to the level the year before, marking kind of a significant change when we go look at sequentially first quarter, second quarter and third quarter, really kind of like changing, kind of significant change in that trend. When looking forward, the market uncertainties continue. I think that's one thing that is kind of for sure as an expectation for this year. What are exactly the uncertainties, what are exactly the things that we are going to face? Nobody knows. But I am actually convinced when we're going to have this year from now -- this call a year from now, and we do also -- again, the kind of the exercise of teleporting ourselves back to this date, we will find ourselves how many changes and what kind of rapid changes in the marketplace have happened. In all this, based on the good strong performance in 2025, the Board of Directors also yesterday or today decided to propose EUR 0.86 as the dividend for AGM to decide. Now before going into like specific numbers and more details in the performance itself, maybe good to look at kind of more of a kind of a strategy perspective, highlights on the 2025. It really is about technology leadership. It's about climate action. I think we can be very proud of Xweather and subscription sales growing 50% year-on-year. We can be very proud of actually meeting and exceeding our long-term growth target as a company. But on top of that, maybe a couple of other things that you might not be as familiar with. The work that we have been doing very systematically in the company to improve the health and safety to the level that I am super proud on where we are today, the TRIR being 1.15. Some of you might not know what exactly that means. It means that we are kind of the top of the range industrial company in terms of health and safety. We really have been able to create this to be a safe working place where everybody gets home safe -- comes safe to work and gets home safe as it should be. And this is something that we, as a company, we as employees of the company, we are very, very happy, and we continue on this journey. Then another recognition on our sustainable growth journey this time by Time. And then we continued on our strategy execution, continuous improvement and flow of new products and services in all parts of the business. We continue to invest also into our operations, which is a key part of our success formula. And clear milestone on this was the completion of the automated logistics center here in Finland and taking into full use, now giving us benefits going forward on multiple different levels. Then into the financials. And starting with overall as a company. As said, orders received improved in fourth quarter, driven by very good performance in Industrial Measurements and a clear improvement on Weather side. Orders received increased by 5% year-on-year in reported currencies and 10% in constant currencies, bringing the order book to EUR 185.8 million. That puts us below what the level was at the beginning of last year or end of December 31 of 2024. But at the same time, it puts us clearly above what the order book was at the same time in year 2023. And the year 2024, as you know, was not a bad one for Vaisala. And I think this order book level gives us a good comfort at least on the starting of the year on both sides of the business. Net sales in fourth quarter slightly decreased. And if you look at constant currencies being flat. And this you have to remember again, the 2024 being exceptionally strong fourth quarter. So the comparable was quite strong on what we compare ourselves to. Gross margin, slight decline. And here, I would kind of pick up 2 things. When we say that we compensated fully the import duties, the way the math works on that, that means in terms of a relative profitability in terms of gross margin, there's about 1 percentage point, a little bit over 1 percentage point headwind caused by that. And then also, as I said, we had an extremely difficult year on the renewable energy side. And when we compare to previous year, that was kind of a clear creative business in terms of our profitability for the company turning into a more of a -- much more of a drag to the profitability. And no news is good news in cash conversion. So as we have been showing as a track record for many years now, cash conversion continued to be strong. Looking at the Industrial Measurement side, I've said multiple times, the record high orders received and net sales in 2025, I think, is something that we can be super proud of. We look at the year as such, orders received increasing by 13% year-on-year and especially in the constant currencies, 21% at we really can be proud about it and it feels very good. And this growth was driven by Americas despite all the talk about the trade wars and everything else, continued our success in the U.S., especially. And net sales increasing by 1% in terms of reported currencies, but 7% in constant currencies, which I think really reflects our real underlying performance. And there, obviously, the headwinds caused by the depreciation of not only U.S. dollar, but also Chinese yuan and other -- several other currencies impact, obviously, the reported orders received and net sales as discussed already earlier. Gross margin stayed on the same level despite the headwind, as I said, from mitigating the import duties. And then on EBITDA side, a slight decline. And this was really driven by on the OpEx side, one-offs and some investments into sales and marketing and commercial excellence and a couple of maybe words on that. So when I say investments in sales, that means in the digital channel and building the digital channel capabilities, which we are going to be benefiting in the coming years. And then also kind of a clear investment into commercial excellence, which we are running as a program in Industrial Measurement, which we also expect to be improving the performance even further in the coming years. Then on the Weather and Environment side, highlight of the year, I think, is really how the year developed and especially in the fourth quarter, the orders received on the previous year level and really the increased demand coming from meteorology and aviation segments. And maybe some of you have been somewhat worried about the volatility and the changes of the demand in meteorology and aviation segments. I think this is a good reminder how cyclical. And it changes between the quarters and between the years. But the market itself, when looking at it as we will talk about it in grand scheme of things, is a strong -- continues to be a good market. Order book somewhat below the level -- clearly below the level of end of the previous year. But at the same time, as I said for the entire company, similar story actually also for Weather and Environment. If we compare the order book that we start this year with actually is on a good level compared to what we ended in 2023 or kind of what we started 2024 with. Then gross margin, headwinds there, clearly lower, and this is back to what I now said multiple times, the significant decline on the high-margin renewable energy business, clearly visible on the gross margin. Obviously, the exchange rate impacts and then the impact also from the U.S. tariffs as discussed previously. Despite all that, EBITDA -- the headwinds and the challenges that we faced in the year, the EBITDA level stay in a good level of close to 15% EBITDA. Looking at the cash flow, I said, strong cash flow continued, and we actually increased the cash flow from operating activities over EUR 10 million compared to the previous year and mainly really as a good work on improving the net working capital by the company, yielding the cash conversion to 1.1. So I understand that there was a break in the Internet connection, and I assume we are back. So just as a summary for 2025, not sure where you dropped off, so I'll start at the top of the slide. So a reminder that net sales grew in line with our long-term targets. We grew over 7% in constant currencies. And if I kind of pick a couple of highlights on this slide, the subscription sales were up by 50%, boosted by the acquisitions that we did at the very end of the previous year on WeatherDesk and Speedwell Climate now being fully integrated and bringing when you exclude the WeatherDesk and Speedwell Climate on constant currencies, the organic growth well in double digit. On gross margin, a slight decline due to several headwinds exchange rates impacts, the proportional impacts of the U.S. tariffs, as I discussed earlier, and then the strong decline in the high-margin renewable energy business. EBITDA being roughly on the same level as year before and the earnings per share slightly below the year before. The financial position for the company remains strong. Again, no news is good news. And when we were preparing these slides, we should for the next quarter, maybe count how many quarters we have had the same heading. And I am super proud to have the same heading on this slide. It gives us kind of very, very solid ground, obviously, and it's a testament on low leverage on the balance sheet and the asset-light business model that we have as a company, strong cash flow generation that we have as a company. And now with the automated logistics center completed, that obviously kind of takes -- kind of gives us another leverage going forward as well. Moving on to the market and business outlook. The market outlook for -- as we see it for 2026. We see growth in industrial, in life science, in power markets -- power and the markets for Xweather subscription sales. And then stable market outlook for meteorology and aviation as well as for renewable energy. And on the renewable energy, obviously, now stable on a clearly lower level where we started a year, 1.5 years ago. And what does it look then in terms of business outlook for this year, we estimate that our full year net sales will be in the range between EUR 600 million to EUR 630 million and our operating result in terms of an EBITDA will be in the range of between EUR 95 million to EUR 110 million. With that, I'll conclude the prepared remarks and happy to answer any questions that you may have. Operator: [Operator Instructions] The next question comes from Nikko Ruokangas from SEB. Nikko Ruokangas: This is Nikko Ruokangas from SEB. Sorry, there was some technical error in the line, so I lost or didn't hear anything for a couple of minutes. So I'm sorry if I am repeating something. But I have 3 questions, and I'll start with order intake for the Industrial Measurements. So you showed very strong 21% FX adjusted order intake growth in Industrial Measurements, and you, for example, mentioned there data center orders and so on. So were there something extraordinarily strong in this quarter? Or does that kind of describe or reflect the current strong trends overall in Industrial Measurements? Kai Öistämö: So the only thing I think that is maybe a little bit more pronounced this year than last year and certainly the year before has been the kind of longer-term orders from Chinese companies. You may recall, if you have followed us a little bit longer that we have had for a long time a year-end early in the year orders, kind of full year orders, blanket orders from our customers in -- especially in China. They became almost absent in 2022, 2023 when there was a -- 2023, 2024 when there was more of an uncertainty in the market driven by uncertainty in economic development in China. So I think it is a very positive news that at least the confidence of our customers seems to be there in a higher level than in the previous years. But that's only a portion of this. And a big part of it is release, as we said in the release as well that in release driven by the demand of our products and remembering that we are, as we have been saying, well-situated vis-a-vis the megatrends. There's lots of growth industries that we serve that are sizable for us, be it life sciences, be it data centers, as you said, Nikko, be it semiconductor and the power are good examples, just mentioning a few. Nikko Ruokangas: Okay. I understand. So that you would have had also significant FX adjusted growth even without those orders? Kai Öistämö: Correct. Nikko Ruokangas: Good. Then my second one is on the order or potential order from Indonesia. So you mentioned in the report that the Indonesian Airport order will be included in orders if the client receives financing in H1. So can you open that situation a bit more so does it mean that if they don't receive the financing, so you will lose this order totally? And then are you kind of including that order in your guidance assumptions? Kai Öistämö: Yes. So a couple of things on that. So good question. Thank you, Nikko. So it is not included in our order book or the guidance, so it's -- as we don't do anything, which are this kind of orders, bigger orders, especially from emerging markets where timings of such orders is extremely difficult to predict even in the year. So that's one. Then the, why the wording was as it was. The background is that, as you know, it's been for a while announced publicly where it actually was done by our customer who wanted to publish it even before we had the final commercial agreement done. And this is -- the Indonesian order is one of these MICD projects where it's based on public financing. And the public financing rules are when these kind of projects are done, the public financing vehicles are guaranteed for a period of time and then needs to be for good governance, a backstop on when they kind of expire. And when they expire, then obviously, then you would have to kind of restart the kind of building the financing package if that kind of a case were to happen. So that's what the wording is reflecting. The customer from -- kind of the customer feedback is that they absolutely want this to happen. Now sometimes these kind of things have quite a bit of red tape in both timing -- reflects back to my comment on the timing itself. So again, the predictability is hard. Nikko Ruokangas: Yes, totally understand. My last question on U.S.A. and the public client side. So have you now seen kind of a stabilization there in demand? And did you have any impact from the U.S. government shutdown in Q4? Kai Öistämö: Good question. Thank you. So very happy to actually give you color on this. So we now have verbal insight on, for example, the budget for National Weather Service, and it seems to be on a good level. The cuts really in the end did not materially occur in the end in National Weather Service, in some other agencies much more so. And the budget is, like I said, on a good level. And on the -- regarding the fourth quarter government shutdown, in the end it actually did not affect our sales. We were able to cope with it. Operator: The next question comes from Waltteri Rossi from Danske Bank. Waltteri Rossi: It's Waltteri Rossi from Danske Bank. A few questions. Maybe first, I'll ask about the semiconductor segment that you say is also driving the growth currently in the Industrial Measurements. So could you open a bit how Vaisala products are used in the semiconductor segment? Kai Öistämö: So we sell -- so first of all, let's define what semiconductor. When I say semiconductor, what it means for us. It actually is we are present from different types of memory processes to commodity silicon to really the leading edge compute nodes in terms of fabs, in terms of manufacturing equipment and so on. So we sell to the semiconductor environment via multiple different ways. So our equipment may be sold sometimes directly into the fab itself, sometimes through an OEM that is creating the environment in the fab, sometimes to the equipment that are actually used in the production of the different types of silicon products. And we are present in all around the world. So it's much broader kind of a coverage when typically when talked about semiconductor. Waltteri Rossi: All right. Then about the metrology and aviation segments, which you expect to be stable going into '26. Does that mean 0 growth? Or could it be a small positive number still? Kai Öistämö: When we have said stable and we've said stable for the long term as well, stable -- if I take a little bit longer-term view averaging things out, it's inflation-corrected stable. It's not a market that is declining in real terms. It's actually stable in real terms. Now then how does they behave between -- kind of as you saw last year, between different quarters and so on, the nature of that business is somewhat volatile. I'll give you a little bit more color on. For example, we just talked about with Nikko, the Indonesian order is a great example. It's a sizable order that would even impact the entire market size when it happens. But predicting which quarter it comes is super hard. Waltteri Rossi: Good addition. Still few questions about Xweather. So first, what is driving the growth in that business? You expect it to grow this year, but any indication here, could it mean double digits or more like 5%? Kai Öistämö: Our ambition is to continue to grow double digit this -- the business itself. That being said, when I say double digit, I can really talk about in constant currencies in -- given the currency exchange rate, speed of the currency exchange rate changes and the fluctuation that -- especially in this business where the exposure to non-euro currencies is larger than anywhere else that we have. The impact also is the biggest on euro reported numbers. Waltteri Rossi: Yes. Great. And can you say anything about what's driving the growth here? Where are you potentially getting new customers and so on. Kai Öistämö: Yes, yes. So we are strong on several customer segments. So finance and insurance, renewable energy and transport. And we see kind of both more usage from existing customers and then clearly a potential in getting more customers. So we see that there's a kind of opportunity to go grow both ways that it's kind of more usage, more -- and wider usage for existing customers as well as then kind of getting new customers. And then obviously, we are looking at the adjacencies at the same time, that's kind of a further growth initiative. Waltteri Rossi: Great. And lastly, on the Xweather profitability, as we know, the profitability should improve once you lower the investments in the growth. So kind of 2 questions. What are you actually investing in right now at the business that is still keeping the profitability down? And what is your kind of ambition level on the profitability during this strategy period for Xweather? Kai Öistämö: So first comment is that the profitability improved significantly last year. And so the direction is -- we're super happy with the direction on the profitability. And then where are we investing today? It really is about growth. So it's sales and marketing. Like think about this as a recurring software subscription business. And there, the investment into -- like it's relatively easy to kind of measure the impact of sales and marketing impact, both to new leads, qualified leads into then conversions from qualified leads into sales. So the, really, the focus is driving growth and therefore, the focus on the investment side is increasing the reach of sales and marketing. Waltteri Rossi: And about the kind of your target level on the profitability during the kind of... Kai Öistämö: We have not said any concrete target level on Xweather during the service period. But I'll just repeat what I said earlier that super happy on the development that we had last year. Operator: The next question comes from Joonas Ilvonen from Evli. Joonas Ilvonen: It's Joonas from Eli. Your Industrial Measurements product sales were -- grew only 1% year-on-year. So I think that was -- that seemed like relatively low. So was that only like a timing issue? Kai Öistämö: Less of a timing issue. So you are talking about the fourth quarter, I assume. Joonas Ilvonen: Yes, yes, yes. Kai Öistämö: That's more of a -- think about it the kind of significant headwind in terms of the currency exchange rates. So that's kind of the biggest impact on it. Joonas Ilvonen: So on constant currency terms, how much would have these product sales then grown? Kai Öistämö: Let me get back. Net sales growth fourth quarter on 7%, on year, that's the year -- annual number and then quarterly number, it's between timing, as you said. Joonas Ilvonen: But nothing really special happening there. Kai Öistämö: No, no, no. Joonas Ilvonen: I guess we can just assume that basically the volumes are growing at around 5% to 7% or so. Niina Ala-Luopa: And we don't -- we report the constant currencies, the net sales growth, only the total net sales in Industrial Measurements, but not on products or service sales level. Heli Lindfors: But they are fairly the same. So you can apply the same percentage gap to the kind of the below items roughly. Niina Ala-Luopa: Correct. Joonas Ilvonen: All right. That's clear. And then Weather and Environment on the cost side, so you've implemented these cost adjustments, and I think they were already quite well visible in the Q4 figures. So do the Q4 figures already like fully reflect all these cost adjustments that you have recently made? Or can we expect even more to be visible in 2026? Kai Öistämö: We already announced cost savings that to a very large extent, they are visible in the fourth quarter already. So they were done in the third quarter, in the third quarter, and they are a very large extent already visible there. Heli Lindfors: Yes, mostly done. as we recorded also the one-off cost already in Q3, so. Joonas Ilvonen: Okay. That's clear. And then could you remind us of the gross margin outlook for Industrial Measurements and to Weather and Environment for 2026? Kai Öistämö: I can't remind you because we don't give it. Joonas Ilvonen: Okay. Okay. But can you like describe some of the drivers that might -- I mean, impacted this year? What might change in that respect? Kai Öistämö: Sure, sure. Yes. So obviously, if you look at -- from a gross margin side, similar impacts, obviously, on -- as in a typical year. But if I take weather side first, the project sales, like if you look at the individual quarters, how was the extent of the project sales versus product sales that has a big impact on gross margin on an individual quarter and sometimes even in a year to some extent, at least. And then last year, we had a significant headwind from the renewable energy into the gross margin as well in Weather Environment. And as we are fixing that business, obviously we can't kind of completely fix it since it's now inherently on a lower level than it was kind of in 2024. We kind of -- we are working on that side. And then, of course, the creative thing in gross margin in Weather Environment is ex-weather where the bigger that gets to be and that clearly has a kind of a creative -- like very creative gross margin in the Weather Environment numbers. And then on BIM side, there it's like -- again, if I look at the quarterly side, some fluctuations between quarters based on product mixes that happen to be sold in a quarter, that's less so when you look at on an annual level. And then it continues to scale like we have been in the past. As the business continues to grow, that should be bringing leverage, not only on the profitability but also on the gross margin side. Joonas Ilvonen: Okay. And finally, could you remind us of the geographic sales, I mean the big picture. So [ IN ] should grow this year quite a lot, and it's mostly driven by the U.S. and Europe, but like the big picture, are there any -- anything to highlight from a geographic... Kai Öistämö: U.S., like if I look at overall, actually last year U.S. grew more than any other Americas, as we say, but it really is U.S. grew much more than other regions. And kind of reflected also the industrial activity and the growth of industrial activity in the U.S. I think that the -- overall, when you look at the geographic mix, it reflects the -- often the industrial activity and investments into industrial activity in different geographies. And I would expect that the U.S. continues to be probably ahead of Europe. I think that's a safe bet. And then a positive dynamic in China, short term at least, but we will see, we will see. Important events, for example, like the Trump-Xi meeting now in April, we'll see how that impacts on in the U.S.-China relationships and maybe positive, maybe negative. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Niina Ala-Luopa: Thank you, everyone, for joining the call. Thank you, Kai, for the presentation. And next in our financial calendar, we have the Annual General Meeting on March 24 and then the first quarter results sharing on April 24. But now, thank you very much, and have a pleasant week.
Operator: Ladies and gentlemen, thank you for standing by and welcome to the Commerce.com, Inc. Fourth Quarter and Fiscal Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, Tyler Duncan, Senior Vice President, Finance and Investor Relations. You may begin. Tyler Duncan: Good morning, and welcome to Commerce.com, Inc.'s Fourth Quarter and Fiscal Year 2025 Earnings Call. We will be discussing the results announced in our press release issued before today's market open. With me are Commerce.com, Inc.'s Chief Executive Officer, Travis Hess; Chief Financial Officer, and Chief Operating Officer, Daniel Lentz. Today's call will contain certain forward-looking statements, made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning financial and business trends, as well as our expected future business and financial performance, financial condition, and our guidance for both the 2026 quarter and the full year 2026. These statements can be identified by words such as expect, anticipate, intend, plan, believe, seek, committed, will, or similar words. These statements reflect our views as of today only, should not be relied upon as representing our views at any subsequent date, and we do not undertake any duty to update these statements. Forward-looking statements, by their nature, address matters that are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of the material risks and other important factors that could affect our actual results, please refer to the risks and other disclosures contained in our filings with the Securities and Exchange Commission. During the call, we will also discuss certain non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, as well as how we define these metrics and other metrics, is included in our earnings press release, which has been furnished to the SEC and is also available on our website at investors.commerce.com. With that, let me turn the call over to Travis. Thanks, Tyler. 2025 was an important year for Commerce.com, Inc. A year in which we achieved meaningful operational improvements and laid the foundation for sustainable growth. We delivered revenue of $342,000,000, up approximately 3% year over year, and non-GAAP operating income finished at $28,000,000 with strong improvements to cash generation. We also delivered our highest sequential improvement in subscription ARR in over a year and a half, in Q4. Over the past twelve months, we have executed on a long-term strategy focused on three priorities: simplifying the business, realigning investment around our highest value initiatives, and building the infrastructure to scale as AI and agentic commerce reshapes how merchants engage with buyers. We have improved efficiency, reinvested savings in product innovation, and increased profitability and cash flow, allowing us to operate with greater leverage and speed. We also reintroduced ourselves to the market under a unified brand, Commerce.com, Inc., which reflects how we now operate as a connected platform across storefronts, product data, experience, and payments. Travis Hess: Importantly, 2025 was not just about internal alignment. It was about accelerating our pace of innovation and driving sustainable growth. We continue to see strong momentum in B2B, with B2B-oriented customers representing the majority of our new platform ARR over the past three quarters. Subscription ARR from customers using BigCommerce B2B Edition grew nearly 20% in 2025 and delivered the highest retention rates across our product portfolio. During Q4, we added several new industrial, manufacturing, and distribution customers including Build It Right, a leading distributor of specialized drilling equipment; Premier Water Tanks, a water truck manufacturer; Hawk Research Labs, a provider of high-performance refinishing coating systems; and KH Industries, a manufacturer of electrical and AV components. These wins, together with the continued performance of our existing customer base, underscore both the durability of B2B demand and the stickiness of our differentiated B2B capabilities. We are also seeing continued momentum with leading consumer brands. H&M, The RealReal, and Petco have adopted Feedonomics's data optimization platform to enhance product visibility and performance across digital channels, alongside Grainger, one of the largest industrial distributors in North America. On the BigCommerce platform, we added European apparel brand Lascana, and successfully renewed our long-standing relationship with luxury department store, Harvey Nichols, reinforcing our ability to support complex, global retail use cases across both new and existing customers. In parallel, we advanced our product innovation and product-led growth agenda with the late Q3 launch of Surface, our self-service version of Feedonomics. Surface enables BigCommerce merchants to enrich and syndicate their product catalog across Google Shopping, Meta, and soon, additional agentic advertising and marketplace channels. The early results are compelling. In Q4, merchants using Surface saw an average 24 points higher GMV growth compared to nonusers, a strong early proof point that better data leads to better discovery and conversion. Notably, that material difference in GMV growth was from only the advertising channels built into the initial release. We plan to quickly roll out additional advertising, marketplace, and agentic channels within Surface in the coming months to drive broader adoption and value to our merchants, while also driving monetization growth within our customer base. We also expanded partnerships with OpenAI, Microsoft Copilot, Google Gemini, and Perplexity to position Commerce.com, Inc. as an AI-ready infrastructure layer. These integrations are built to help our merchants bolster visibility and conversion in next-gen shopping and discovery flows with no added integration work or technical lift on their side. Notably, Commerce.com, Inc. is one of only two commerce platforms featured in Google's announcements of its new universal commerce protocol, further reinforcing our strategic alignment with leading AI and discovery platforms. We partnered with PayPal to introduce BigCommerce Payments, which remains on track to launch around 2026. We expect that this new solution will give small and midsized merchants a fast, integrated way to activate payments, simplify onboarding, and drive higher monetization of GMV. We have now completed many key elements to our transformation. We have integrated our products and brought them under a unified brand. We have the leadership team in place to drive growth. We have realized material efficiencies in our operations to fuel reinvestment in our products. And in 2026, we are increasing R&D investment by nearly 30%, focusing on four clear priorities that will drive growth. First, we are delivering AI capabilities directly into our core commerce platform for both B2B and B2C customers, while extending Feedonomics as the data enrichment and infrastructure layer for agentic commerce. This drives optimized product discovery and shopping experiences across branded storefronts, as well as advertising, marketplace, and agentic channels, accelerating time to value and retention across our installed base. Second, we are expanding Feedonomics Surface into more channels for our BigCommerce merchants, which we believe is a powerful driver of both customer outcomes and monetization. Third, we are rolling out BigCommerce Payments starting with the integration of our PayPal-powered solution to simplify onboarding for merchants and improve monetization of GMV. And fourth, we are expanding MakeSwift, first as a modern visual editor and page builder for our BigCommerce customers, and then launching a standalone version that extends our reach to third-party content and commerce ecosystems. These represent just a sample of what we plan to bring to market this year. These initiatives are designed to increase platform usage, improve attach rates across BigCommerce, Feedonomics, and MakeSwift, and unlock new monetization via payments, data, and bundling. And we are doing this in a commerce environment that is rapidly fragmenting across AI services. Buyers are increasingly starting their journey in AI interfaces, not on a brand site. Our role is to make sure our merchants are discoverable, trustworthy, and transactable wherever that journey begins or ends. To better reflect this evolution, we are introducing two new key metrics. First, gross merchandise volume, otherwise known as GMV, which is a clear measure of the scale of our platform. Our platform delivered GMV of nearly $32,000,000,000 in 2025, and with consistent double-digit growth over the last several years. Second, net revenue retention, otherwise known as NRR, which reflects our ability to grow within our customer base across product lines and services across our entire business, not just a subset of customers or products. Daniel will elaborate on these metrics in more detail shortly, but I would like to offer my perspective on their importance and what they reflect about our business. Commerce.com, Inc. operates one of the largest in-bases and GMV footprints in ecommerce, with GMV growing 12% in 2025 and 11% in 2024. GMV growth and NRR at a total business level provide a clearer picture of our scale, health, and the growth opportunity ahead. Driving improvement in both metrics is a top priority for us in 2026. The opportunities ahead across AI-driven discovery and checkout, first-party payments, and product data infrastructure are significant and expanding. While I am pleased with the strong foundation we have built through improvements to efficiency, profitability, and product innovation in 2025, we have not yet delivered on the full growth potential of this business for our shareholders. That changes in 2026, as we shift from foundation building to execution and monetization. With that, I will turn it over to Daniel. Thanks, Travis. Commerce.com, Inc. serves tens of thousands of merchants globally and facilitates nearly $32,000,000,000 in annual GMV across B2C and B2B customers on the BigCommerce platform. Feedonomics remains central to our data strategy, powering discovery, performance, and monetization across both traditional and AI-driven channels. Q4 revenue was $89,500,000, up 3% year over year. We expanded full-year non-GAAP operating margin by 230 basis points versus 2024 and 990 basis points versus 2023, underscoring efficiency gains and organizational simplification. We ended the year with $359,000,000 in ARR and continued strengthening our underlying business fundamentals. Operating cash flow was $3,000,000 and $27,000,000 in Q4 and 2025, respectively, which reflects more disciplined operating controls and improved working capital management. We closed the year with $143,000,000 in cash, cash equivalents, and marketable securities with no material debt maturities until 2030, providing flexibility to reinvest in our products to accelerate growth. We reduced our net debt position from $33,000,000 in 2024 to $11,000,000 in 2025, a decrease of nearly 67% year over year. For the three months ended 12/31/2025, we had approximately 81,400,000 common shares outstanding and 82,000,000 fully diluted shares outstanding. As Travis mentioned previously, we are adjusting certain metrics disclosures to better reflect business performance and incorporate investor feedback. Enterprise ARR ended the year at $287,000,000. Enterprise customer count was 6,648, up 897 accounts sequentially. And enterprise account ARPA, or average revenue per account, was $43,200, down 8% sequentially. The increase in customer count and decrease in ARPA was partially driven by a Q4 go-to-market program to upgrade select customer accounts from our Essentials plans to Enterprise plans. While we were encouraged by the progress and healthy engagement and retention across our enterprise accounts last quarter, we believe that driving dollarized expansion across the entire business and customers of all sizes is a better indicator of underlying performance than the growth of a select subset of customers alone. Beginning this quarter, we are retiring enterprise ARR and related metrics because expansion is increasingly driven by product cross-sell, data services, payments, and bundled capabilities that cut across legacy plan definition. In place of those disclosures, we will begin sharing quarterly two new metrics that better capture our scale and monetization efficiency. First, starting this quarter, we are now sharing total GMV, which reached nearly $32,000,000,000 in 2025, and grew 11% and 12% in 2024 and 2025, respectively. We have a significant opportunity to better scale ARR growth at a similar rate to GMV. Daniel Lentz: The gap between GMV growth and our top-line growth reflects several factors, primarily our strong growth in B2B, where credit card transactions represent a smaller percent of the payments mix and yield lower revenue share than B2C. To be clear, do not expect ARR to grow in lockstep with GMV, but we do expect the gap to narrow over time as we drive higher payments monetization mix, product cross-sell, and new product-led monetization models. Second, we will now share company-wide net revenue retention to provide greater visibility into expansion trends across our entire business. NRR was 95.2% in Q4, up from 95% in Q4 2024. Driving improvement in this metric is central to our company strategy and underpins many of our investment priorities, specifically improving time to value for our customers, cross-product adoption, and retention through tighter integration of Feedonomics, payments, and storefront capabilities. The areas that most directly influence expansion and churn. We believe this shift in reporting aligns more closely with how we are building and operating the business and provides clearer transparency and comparability for our investors. Now let me walk through guidance. For Q1 2026, we expect revenue between $82,500,000 and $83,500,000 and we expect non-GAAP operating income between $9,300,000 and $10,300,000. For the full year 2026, we expect revenue between $347,500,000 and $369,500,000 and non-GAAP operating income between $34,000,000 and $53,000,000. This outlook represents 2% to 8% full-year growth with non-GAAP operating margins of 10% to 14% at the revenue guidance midpoint. Our guidance exceeds current Street consensus both on revenue and profitability, reflecting the progress we have made in 2025. Importantly, after giving effect to anticipated operational restructuring payments, we anticipate cash and cash equivalents to exceed total long-term debt by mid-2026. And we expect to deliver GAAP profitability for the full year 2026, the first time in Commerce.com, Inc.'s history. This milestone is a direct result of disciplined execution, an expanding product model, and meaningful operational leverage. On a Rule of 40 basis, our non-GAAP guidance implies a combined growth plus margin performance of approximately 11% to 22% depending on how we execute within our ranges. Let me close with a few reasons we believe Commerce.com, Inc. is positioned to deliver long-term value. We operate at nearly $360,000,000 in ARR, with gross margins approaching 80%. We are generating meaningful profit and cash flow and expect to continue to do so this year with non-GAAP operating income 57% higher year over year at the midpoint. We facilitate nearly $32,000,000,000 in annual GMV with consistent double-digit growth. This business has yet to reach its full potential. We see meaningful opportunities to drive faster growth while maintaining the discipline that has delivered substantial improvements to profitability over the last two to three years. This is a structurally stronger business than it was a year ago. Our focus is squarely on execution, driving stronger growth, and sustainable margin expansion. With that, operator, let's open it up for questions. Operator: We will now begin the question and answer session. If you are using a speakerphone, please pick up your handsets before pressing the keys. If at any time your question has been addressed, at this time, we will pause momentarily to assemble our roster. The first question comes from Raimo Lenschow from Barclays. Please go ahead. Karnikatou Raju: Hi, this is Karnikatou Raju on for Raimo. Thanks for taking the question. Travis Hess: I wanted to talk about what you are seeing in the agentic commerce landscape as we have seen the PayPal and Stripe agentic commerce integrations, and as that evolves, where do you see the biggest opportunity for your platform and how do you expect to capture that over the near and the long term? Thank you. Thanks for the question. It is a good one. Listen, we are seeing lots of momentum, as others in the market have as well. Obviously, aligning with the major players. Certainly, Stripe and PayPal are two massive partners and valuable partners to us. We have aligned to their standards and schemas. We are doing the same across the answer engines, all of which have their own intricacies. We have been pretty public about where we are with several of them. We are in a position that have mapped to schemas across all the answer engines. Ultimately, a lot of these things are gated, particularly as it relates to checkout. So as an example, Perplexity, we have demoed agentic checkout and have been live on that surface for some time now. In the case of OpenAI, we have mapped to their schema, but, again, that is gated currently by OpenAI. They are not openly accepting merchants, so we are at the mercy of their thresholds and their internal tables for sequencing. Same for Google. We are mapped to their schema. We are in testing right now to get BigCommerce merchants on there. But, UCP only works with data and checkout and checkout is also gated. That is going on a case-by-case basis. We are in a good position to take advantage of that, and we will be testing with Google over the next quarter. Karnikatou Raju: Perfect. Thank you, guys. Travis Hess: You bet. Operator: The next question comes from the line of Ken Wong from Oppenheimer. Please go ahead. Ken Wong: Great. Thanks for taking my question. Travis Hess: Ken, it was good to see that GMV has grown 12%. It does show that you guys are driving some sustainability there. Yet when I do the math, it looks like take rate perhaps kind of inched down a little bit. As you talk about moving from foundation to monetization, how should we kind of anticipate what happens to take rate? Maybe talk about the partnership with PayPal, your own payment product. What is the path going forward there? Yeah, Ken. Great question. I will take the first part of it then turn it to Daniel for a minute. Monetization is going to come from a couple different capacities. One, obviously, we are shipping more products and really focusing on the existing install base to monetize that as laid out in some of the opening remarks by Daniel. Part of that is BigCommerce Payments. Obviously, I think this is a dramatically different approach than where the company was a year ago, where we really did not talk about this at any capacity. We have taken a more opinionated approach. We will continue to see that evolve over time as would be expected to monetize. We are also looking at ways to better monetize the B2B install base, as Daniel also laid out. By definition, it has a slightly different nuance to it, which is reflected in those numbers. But I would expect monetization to come really twofold: growth from existing customers through the shipment of new products, whether that is product-led growth or enhancements or new AI SKUs, certainly, as well as obviously monetizing payment. I will turn it over to Daniel as it relates to take rates and things like that. Yeah, Ken, I think it is a great question because I think it gets at why we felt it made a lot of sense to introduce the new metrics that we introduced. I think by and large, I would say our platform is larger than probably what it was known to be within the market. I think it is also growing faster, as you mentioned on the GMV metric, than probably what was broadly known. What I do not think was as well known and what we really wanted to create some transparency around is some of the why behind the things that we are doing here within the company. Take rate is not where it can be, and part of that is because of the fact B2B customers just do fewer credit card transactions, so we make less payments rev share. But beyond that, we also have an opportunity to better retain and expand the base, and you see that in the NRR number, which is not where it needs to be, but we wanted to be transparent about where it is. I do not think the metrics should be surprising relative to previous NRR disclosures that we made. I think it is pretty consistent with that. But what it really shows is an interesting story of opportunity within the business where it is a large, growing, and stable platform. We just have not had enough focus and success in having our growth rates track along with the growth rate of the underlying GMV on the platform. That gets into why we are taking a different point of view on how we are approaching payments. Daniel Lentz: We are starting with kind of a white-labeled version with PayPal as our first partner, which we think is great. But that is not the end of where that is going. And when you look at a lot of the product launches and initiatives that we have coming, they have embedded new monetization models that lead to better NRR and expansion of our existing base, which is also lower customer acquisition cost, which can allow the business to not only grow faster, but grow more profitably in the process. And so we just thought it was really important to add transparency around that really because we think it reflects the opportunity that has Travis and me so excited. We have a lot of work to do. I think that is evident in the numbers as well. But there are a lot of really good opportunities underneath that that we are excited about. Ken Wong: Understood. Very helpful. And, Daniel, second, just on the guidance range for fiscal 2026, the $20,000,000-plus revenue range, much larger than the $8,000,000 range you guys started off with in 2025. I would argue there is probably more uncertainty going into 2025 versus the foundation you guys have laid for 2026. Can you help me understand what is being considered in the guidance that would create such a large delta? Daniel Lentz: Yeah. Great question. And I expected this question, actually. So let me kind of go on either end of the range. So if you look at where we are from a Q1 guide, it looks a little conservative. That is just because we took a little bit of conservatism exiting the holiday GMV that we saw in the period, which was a little bit lower than where we thought it was going to be, which you see in the Q4 results, which was not a real big deal. But we kind of carried that into a little bit of conservatism in Q1 and carrying that forward in case we start to see just some sort of macro issues. There has just been a lot of uncertainty, I would say, in the labor market tech in particular. So the low end of the range kind of reflects that. But the reason we have such a higher dispersion than normal is because we also see a lot more upside this year than where we have been in years past because we have so much innovation that we have on the roadmap that is coming this year. Now, take payments as an example. We are not going to be having gross accounting. It is going to be net. We are expecting to see strong incremental growth on that over time. But that is one of probably five or six different things that are coming that have us optimistic about where the year can go. We still need to deliver on them. We think the midpoint fairly reflects where we see the business at this time, but we thought it was important for investors to understand kind of the range of outcomes and what we see in the business. We have a lot more going on right now at the beginning of the year from an innovation and what we are trying to ship than what we have had at any other time in the seven years that I have been here. We have to deliver on those things, and we felt that having a broader range than we have in the past accurately reflects that. Ken Wong: Okay. Perfect. Appreciate the insights, Daniel. Operator: We now have a question from the line of David E. Hynes from Canaccord. Please go ahead. David E. Hynes: Hey. Thank you, guys. Daniel, I will start with you, and then one for Travis after. So sorry on the numbers. Absent the program to upgrade select customers from Essentials to Enterprise, what was core Enterprise ARR growth in the quarter? It was slightly up apart from that. But that was a big driver on why we saw that move that we saw. It was aligned to a little better probably than where we were in prior quarters. We did not make that change because we were trying to kind of be unclear about what is going on in the underlying. We just feel overall it was better to kind of pivot the focus to where, frankly, Travis and I are running the business, which is looking at how we are monetizing underlying GMV, and if you look all and particularly, David, what we launched on Surface, the self-service version of Feedonomics as an example, that is primarily focused on smaller customers, not our larger customers. And so as we have been talking over the last several quarters that our focus is on dollarized expansion, not particular count of a subset of customers. While it is important, it is an indicator, but not the most important one and not how we were running the business anyway. And so we felt it was important to make this pivot. David E. Hynes: Yep. And just a clarification on the metrics going forward. Understand we are not going to talk about Enterprise ARR anymore. Are you not talking about ARR at all? No. Okay. Let me this. We are going to continue to disclose ARR every single quarter. There is no change to that. We are also going to continue to talk about subscription ARR, which is simply the difference between total ARR and the last twelve months of partner and services revenue, so no change there. All we are going to be doing, I would say, is additive, which is we are going to start disclosing GMV on a quarterly basis beginning next quarter. So you will be able to see the quarter over quarter prior year going forward. We are also going to be sharing total NRR on a total business level every single quarter, which that number kind of definitionally is a rolling prior twelve-month metric. And so it is going to make it very easy for investors to see how we are doing in terms of total platform growth and stability on the GMV side, how are our initiatives making progress or not, depending on how results go, in driving better monetization and realizing the opportunity to better track overall top-line ARR growth underneath it. The only thing that we are going to be doing is taking away enterprise-specific metrics. But if anything, I actually think this adds better transparency to what is going on under the hood. To be really clear, that is the intent. David E. Hynes: Yep. Okay. Very clear. And then the follow-up for Travis. So it sounds like Shopify's agentic plan, which you talked about yesterday, is directly competitive with Feedonomics. Right? I mean, they talked about using that for non-Shopify customers kind of in the same way that you talked about. Is that right? And if so, can you kind of go a little deeper on what positions Commerce.com, Inc. and Feedonomics to win versus what Shopify is doing. Travis Hess: Yeah. There is some overlap there, but I would say by definition first of all, it is a completely different cohort of where those products historically serve. I would say with Feedonomics, it serves primarily what I would define as enterprise. You are talking about the largest brand of manufacturing and retailers in the world. We do have a large subset of those clients that actually run on Shopify for platform but use Feedonomics. That is for a reason, and it is not because it costs less. It is because they cannot get the value out of the data enrichment from what Shopify does or how they do it that they get from Feedonomics. Because, again, that product data is enriched bespokely for the surfaces by which they show up on, the syndication of which will eventually become commoditized. I mean, all these protocols will become open. They will become standardized so that agents can interact with them. So there is no value proposition in the syndication. The value proposition is in the data enrichment and orchestration. And it is not just orchestration of the data. It is also the orchestration of, say, inventory availability. So as people get into contextualized conversations, and you are looking for something that you need for next weekend, that contextualized input has to marry against what inventory is available, just like Google Ads do today as far as what is available close to you by a particular time frame. So it is doing a lot of things behind the scenes that, by definition, is different. It is agnostic to platform. So we accept the fact that there are a lot of merchants that are happy with the current platform or incapable of moving current platforms, but still have a material need to show up relatively and valuably across services their customers want to meet them. Our responsibility is to enrich and syndicate that agnostically and at scale. That is the biggest difference. We are not trying to monetize this through a checkout. We are trying to drive merchant value to the extent that also overlaps with BigCommerce. And to Daniel's point earlier, the self-service version of Feedonomics, which has been one of the things we had not done yet here, having bought Feedonomics, is having a self-service version to make it available for smaller merchants. That is what we are most excited about. That will overlap probably the most with what Shopify is doing, and the overlap is really we are offering it for a similar cohort on our platform that they are offering on their platform. I am not saying one is better than the other. It is just by definition native to the platform itself, and we have just been done running rolling that out over the last four if that is helpful. Yep. David E. Hynes: Yep. Super helpful. Thank you, guys. Travis Hess: You bet. Operator: The next question comes from the line of Madison Taylor Schrage from KeyBanc. My first one is just on the payments offering. Could you walk us through the cadence of PSR contributions throughout 2026? And I guess, could you walk us through how that would also touch margins? Thanks. Daniel Lentz: Yeah. So we are on track to launch BigCommerce Payments roughly around Q1. That is the plan today. We are also going to be making some changes to kind of underlying pricing and packaging on our plans around the same time to correspond with the integration of BigCommerce Payments into our core offerings. Daniel Lentz: One of the reasons we are excited to partner with PayPal is we have such a huge installed base of existing customers that are already using PayPal, which makes it far easier for us to shift as many existing customers into BigCommerce Payments after launch and then start incrementally growing it over time. We are going to have, I would say, a two-pronged effort. One is to get as many new merchants that are signing up to go into that solution, which is going to be primarily focused at the outset on small business and mid-market customers, I would say. There will be more features we will launch more across the back half of the year that I think will make it more relevant for large corporate and enterprise customers. But wave one is we want to get as many new customers into that as possible, but we are also going to have a lot of ways that we are going to look at other customers within our base and see where we get them to switch into that, where it makes sense and it does not conflict with existing arrangements, obviously, with other partners where we have wonderful relationships with a number of payment partners, including Stripe and Adyen and others, and we have no intention of disrupting that. So I think from a margin perspective, we do expect it to be additive across the year. It takes the place of other existing agreements with PayPal, so it is not all 100% greenfield on top of where we already were. Which we baked in the guidance and factored that into the range. But we see this really, Madison, I think is important. This is the start of how we are thinking about the strategy here. This is a very demonstrable pivot from how we have thought about this in the past. We think it is very possible and good to be both open and opinionated. In the past, from a fintech point of view or a payments point of view, it has been very much saying, look, you can use whoever you want. We will continue to allow customers to have wide choice in who they want to use on the payment side. But we would like to be able to bring more focus to a smaller number of partners and include the branded solution so that we can have better technical integrations and better results for customers by focusing on perhaps a smaller number of partners going forward. And then over time, might we expand this further and start investigating whether we want to take further steps towards the PSP or things like that? Those are certainly things we are still evaluating. It just felt it was prudent as the first step. Let us start with this, see how we can drive adoption on this, get margin improvement over time, and then expand this further as we go to better link up our overall growth rate to GMV growth rate on the platform, which, as we said, has been really strong and stable for several years. Madison Taylor Schrage: Understood. And then I guess my second question kind of piggybacks off of that. But as you guys become more penetrated on the B2B side of things, and that is lower credit card penetration, how does that kind of impact what the take rates would be going forward? Daniel Lentz: I think you see that and why our take rates, to the question we got earlier, if you just derive total ARR into GMV, it went down slightly over the course of the last quarter. A lot of that is B2B mix, and it is the issue that you described. Some of that is somewhat inevitable. I mean, I think what we are really looking at is to say, okay, we have a lot of really unique competitive differentiation in B2B. And we want to encourage merchants to have all great services in all of the different ways that they need their customers to be paying them, whether ACH, going through POs and invoicing, or credit card transactions. What we are going to do is narrow the aperture of the number of partners that we are really focused on within B2B so that we can have better solutions offerings for customers that have expanded payments opportunities and monetization opportunities for us over time as well. It is always going to look a little different than the B2C side of things because of the credit card mix, but we still think there is a lot of opportunity to incrementally improve monetization of B2B even if on an apples-to-apples basis, it is intrinsically always going to be a little different than B2C. There are a lot of ways that we still see that we can improve that and create upside there even within the B2B cohort. Operator: As a reminder, if you have a question, please press star then 1. Unknown Speaker: The next question? Operator: Comes from the line of Koji Ikeda from Bank of America. Please go ahead. Koji Ikeda: Yeah. Hey. Thanks, guys. Good morning. I wanted to ask about the NRR metric being 95. Being sub-100 raises a lot of questions on growth durability. So how should we be thinking about the core drivers to expand this metric in the near term, and what sort of NRR assumptions are baked into the 2026 guide? Daniel Lentz: This is Daniel. I will take that one. So that number for the total business is 95. I do not believe it should be surprising when the metric for enterprise accounts in that prior disclosure was around 100, and I had said it was kind of in 99 to 100 range. I think we finished last year, I think, at 98. So the fact that at a total business level, we are 300 basis points lower than that, I do not think really should be surprising. The core to the question is, obviously, we do not consider that number acceptable, and it is nowhere near best in class and where it needs to be. I think it reflects the fact that we have not had the focus that we need on delighting and expanding our existing customers. And if you look at why we made the changes that we made from a restructuring basis in the announcement that we made last quarter, it is because, one, we can run the business a lot more efficiently than where we had before. This is not a pivot or a change. We are running the same plan that we have been talking about for the last year. We can just do it with less capital in the go-to-market side in particular, which is what is enabling us to redeploy dollars into R&D in investments that are directly focused on what we are doing on the NRR side of things. And I think that the fact that we are able to increase our capital investment in R&D in 2026 nearly 30% while having a midpoint guide that is nearly 60% higher profit growth year over year, I think shows how much wins we have seen within the business and how we are operating. That creates efficiency to free up capital to reinvest. You look at just the initiatives that Travis mentioned in his prepared remarks in particular, I would argue almost every single one of them is focused on getting NRR to the number where it should be. Launching Surface, great. We have 24 points higher GMV growth for customers that are using it than were not, and that was only with two advertising channels built in the initial release. That drives better retention, and it is a new monetization path that did not exist before. Launching MakeSwift as our new page builder, which is going to happen roughly in the next quarter or so, same thing. That has new monetization models built in. And a lot of the places where we are directing dollars is on core product performance to delight our customers to help improve retention and expansion. Travis Hess: Yeah. And I think foundationally, Koji, over the last year, year and a half, we have laid the foundation to be able to actually execute on this. I know it has not been sexy. We are super excited in a lot of the changes that we have made, certainly, but they were intentional, and intentional to get to this point. It is still, to Daniel's point, we have got a lot of work to do. That is certainly not mission accomplished by any stretch, but we actually have the foundation in place to go take advantage of this. I think that is reflected in the guide and certainly will be measured in ongoing capacity on efficacy against this. But we think net revenue retention is the ultimate metric of the business and where we are. And giving that transparency to the Street, we think, is helpful and less confusing than guiding on a particular type of plan that might be misconstrued, which is where we were in the past around Enterprise. One last point, Koji, I would make. Just to your specific question at the end, essentially, what is baked into the guide. Baked into the guide is incremental improvements across the year, but not so dramatic an improvement that it is something that is unrealistic and we feel like we can achieve within the twelve-month period. I think if you just look at the pace of new account additions and growth over the course of the two years or so, it has been pretty stable. We want to see that inch up incrementally. But we have a lot of levers to pull to improve this, and we do not need to see some dramatic improvements that is unrealistic in order to get to the numbers that we have included in our guidance. We need to get better, but we think that it is certainly achievable. Got it. No. Thank you. Maybe a question for either of you. Travis, in your prepared remarks, you talked about Commerce.com, Inc. becoming successful in the AI-ready infrastructure layer for B2B and B2C commerce strategies. Like, if you guys are successful with that, what would it mean for customer buying patterns of the three big products, BigCommerce, Feedonomics, and MakeSwift? Does that change the algorithm at all? Travis Hess: I think it is well, it is going to organically change just because those three products would be more easily available certainly to the install base, which was the intention, I think. I have said this publicly a couple times now. We have not focused enough on the existing customer install base, quite frankly. We were not in a situation to be able to do because these other products were not installed, and there was a lot of duplicity in both cost and just distraction and overall roadmap, unintentional duplicative. Duplicative. Sorry. Duplicative. It is early in the morning. Anyway, we were not in a position to take advantage of that. So that is part of the thesis here was integrating those products and making it available. To your point, there is also a slightly different wedge strategy now as well. Feedonomics being agnostic, we have talked about going on from a distribution perspective in other ecosystems. We now have creative new ways to access business outside our own four walls at the same time in a land-and-expand motion, which is also something. We did not have the systems. We did not have the infrastructure. We did not have the motion to be able to do that. So I think that will impact it. AI is obviously accelerating all of those things, so it is allowing us to go at a much faster, more efficient pace, which is allowing us to do more with less. That is probably the biggest impact as far as cadence and things are concerned. So if you had asked us two years ago, we thought we had accomplished this in the time frame. Without AI, I do not think that would be possible. So I think the speed by which we will deliver product and are delivering product, the speed by which we are enabling our sales folks and go-to-market teams, and the speed by which we are actually able to take things to market and drive efficacy is obviously radically improved. Koji Ikeda: Thanks so much, guys. Operator: We now have a question from the line of Josh Baer from Morgan Stanley. Please go ahead. Josh Baer: Great. Thank you for the question. I wanted to follow up on the 2026 guidance range question, which you answered from a growth perspective. On the margin side, the range for operating income also wide. I guess the question is really like, how should growth and revenue coincide with margins? Is there a framework? Is it a scenario where the upside on revenue is payments, net rev recognition that drops to the bottom line and drives the higher margins, or is it a scenario where the slower growth, you lean into profitability? Daniel Lentz: That is a great question, Josh. This is Daniel. I will take that one. I would say just the way that Travis and I are operating this approach in the year, growth is paramount. That is the focus. We are confident. I think we have demonstrated this over the course of the last several years. We run a disciplined business. We run a disciplined P&L. We need to be growing faster. I am very confident as we grow, we are going to deliver strong margins as we go through. And I think the fact that we delivered such a materially higher guidance than probably where the Street expected us to be for 2026 while reinvesting in growth shows that priority. If we end up on the high side of the range, obviously, that is going to throw off extra profit that would take us to the higher part of the range. Daniel Lentz: But if we are landing in the high side of where we talked about on the revenue guide, Travis and I are going to look for opportunities to reinvest that further into growth. We are going to do it in ways that we think are prudent. We are not going to throw money after high cost of acquisition, low ROI things. We need to get materially better in sales and marketing efficiency. That is one of the reasons we made some of the redeployments and changes that we have made because we see that in the numbers the same way that our investors have over the course of the last year or two. But where we have opportunities to reinvest if we are coming in on the high side of the revenue range, we are going to do that because we want to plow more back into growth as we get momentum going further. Josh Baer: Okay. Makes sense. So if we come in at the high end on revenue, we will see more investment because the return is there. And if we are at the low end on revenue, that is going to be a negative for the margins coming at the lower end. Let me just clarify. Daniel Lentz: If we come in on the lower side of the revenue guidance range, we are going to tighten the belt where we can to make sure that we deliver within the range that we provided on profit. Right? If we end up on the high side of the revenue range, we run an 80% gross margin business. A lot of that is going to flow to the bottom line, and we are not going to reinvest every single dollar. A lot of what we would put in, we would probably put into additional capital in R&D. You have got normal capitalized software rules and things like that that we would need to go through. So it would end up generating additional profit. So probably high side of revenue range is high side of profit range, even with reinvestment. We are going to do it in a way that we think is really, really prudent. We are not just throwing money around everywhere. I think we have shown really clearly that is not how we run the business. Josh Baer: Exactly. Okay. That is super helpful. And then on the disclosures, one follow-up. With the removal of the enterprise-related metrics, is there a customer count disclosure now going forward, and just really wondering how you think it is best that we track an important element of the business around net new customers, market share, and go-to-market initiatives and progress. Thanks. Daniel Lentz: Yeah. We are not going to have a specific customer count metric going forward. It is something that we will speak to so investors kind of understand where it is. We think one of the best ways to understand how we are doing on a market share basis is how are we doing on GMV growth. And I think for a long time, we got questions from a lot of investors specifically about that because that is also how they were trying to understand overall market share growth. But because our customer count metric that we were disclosing was a subset metric anyway, it did not represent the breadth of the counts of customers on the platform to begin with. I mean, we are talking we have 6,000 accounts that happen to buy our Enterprise plans of tens of thousands of customers that are running on the platform. We look at B2B by count. We think we are probably one of the biggest B2B platforms in the world. And that is at a subset. But I think the most important thing is are those customers being retained and expanding? That is reflected in NRR. There is some goodness there in some of the underlying parts, but we need to get a lot better. But if you look, importantly, at the overall GMV metric, the scale of this business and the health of the growth and what we see in the underlying platform is good. We need to do a better job orienting the business to drive monetization of that growth down to our shareholders, and that is where we are focused and where we have been focused for the last year. We just did not think that the metrics that we had were really providing a good enough why to connect the dots between where we were applying capital and where we see growth opportunity to drive monetization in the business. Josh Baer: Got it. Thanks, Daniel. Operator: The next question comes from the line of Brian Christopher Peterson from Raymond James. Please go ahead. Brian Christopher Peterson: So, Travis, maybe for me to start, I wanted to get your perspective on how agentic commerce may be impacting replatforming opportunities. On one hand, I could see it driving a lot of innovation and people looking at new approaches to this, but I also could see it maybe slowing purchasing decisions. Any perspective on what you are seeing from the impact of agentic, if at all? Travis Hess: Yeah, Brian. Great question. Certainly in 2025, it impacts it on the B2C side, most notably, and I would say the back half of the year. Obviously, we were disappointed in what we delivered in the back half of the year. I think we expected more there. I think the good news is we have got great product-market fit for agentic. We are obviously in the midst of a lot of positive things there, but the downside is the collateral damage is you have got brands and retailers where traffic has dropped off. Obviously, and that has become the importance as opposed to replatforming. It has not killed it. We certainly have a healthy pipeline. But I do not think it has been helpful in speeding up replatforms, particularly upmarket on B2C. I would expect it to change a little bit, but I think what is also happening through agentic is it is spawning new commercial models where you are seeing components of different aspects, like our agentic checkout product as an example is an easy use case of an existing Feedonomics client where we are enriching and syndicating that catalog, either directly or through financial partners like PayPal, where, again, that checkout may happen on our rails with our cart and our order orchestration capabilities within Feedonomics into somebody else's order management system. You are going to see more and more of those sorts of things. So different commercial models, different components and things and mixing coming together. I think our North Star in all of this is to remain agnostic to what is best for our merchants. If we are providing all of that infrastructure, fantastic. That makes the most sense. If we are providing a portion of it, and that makes the most sense. I think in the example earlier, I think Ken asked the question around Feedonomics. One of the biggest differentiators for us on the Feedonomics side and how it differentiates in market are the control mechanisms within that product. Larger brands, enterprise branded manufacturers, and retailers need those controls, and they also need the agnosticism because if they are going through an agentic checkout regardless of infrastructure, they want to make sure that that aligns with their back-office systems, meaning their point of sale and other channels by which people may transact. So if I buy something agentically, through, say, ChatGPT and I want to return that product in store, that needs to have interconnectivity there. If that technology is not agnostic and they are forced to use different rails, that sync is off and it creates a bad customer experience and increased cost for the merchant. So I know these are weird use cases that nobody thinks about because shopping just happens to the customer. But these are very complicated, nuanced, expensive mistakes in the back end, and that is where you are seeing a lot of hesitation from the more enterprise-oriented branded manufacturers and retailers. They know how complicated this is. They know how hard it is, and they know how expensive it is to go create friction in those buying experiences. When they do this, they want to make sure they do it right and they adjust accordingly. We are allowing them to do that through some of our components and some of our capabilities. And that is what is probably slowing up more of the replatforming than anything else, certainly upmarket, if that is helpful. Brian Christopher Peterson: No. That is great color. Daniel, maybe one for you. I appreciate all the new disclosures. But any perspective that you can give us on how the split of GMV growth in 2025 looked on B2B versus B2C? Thanks, guys. Daniel Lentz: Yeah. I would say, I mean, we called out last year customers using B2B Edition. ARR from those customers grew almost 20%. GMV was similar. B2B is a disproportionate grower. It is a share of GMV, which is why you see some of the kind of derived slight decline in net take rates when you look at ARR as a percentage of total GMV. Again, it is a high-class problem. B2B is growing really, really well. It is differentiated. It is doing great in market. It is kind of fun to be able to look to our product leaders and say, look, we have got to get monetization up. You are doing a great job driving growth in the platform. We need to close the gap between monetization between B2B and B2C. Some of that spread is inevitable. It just is, but there are a lot of opportunities for us to improve that. Operator: This concludes our question and answer session. I would like to turn the conference back over to Travis Hess, CEO, for any closing remarks. Travis Hess: Thank you. I want to thank everyone for attending. We are excited to execute against our strategy laid out and look forward to discussing further with you all next quarter. Thanks very much. Operator: The conference has now concluded. Thank you for attending today's presentation. 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, and a member of our team will be happy to help. Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help. Welcome to the fourth quarter and full year 2025 financial results conference call and webcast for Zoetis Inc. Hosting the call today is Steven Frank, Vice President of Investor Relations for Zoetis Inc. Operator: Presentation materials and additional financial tables are currently posted on the Investor Relations section of zoetis.com. The presentation slides can be managed by you, the viewer, and will not be forwarded automatically. In addition, a replay of this call will be available two hours after the conclusion of this call via dial-in or on the Investor Relations section of zoetis.com. At this time, all participants have been placed in a listen-only mode. If you would like to ask a question at that time, please press 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing 2. In the interest of time, we ask that you limit yourself to one question, and then queue up again with any follow-ups. Your line will be muted when you complete your question. When posing your question, please pick up your handset to allow optimal sound quality. It is now my pleasure to turn the floor over to Steven Frank. Steven Frank: I am joined today by Kristin Peck, Chief Executive Officer, and Wetteny Joseph, our Chief Financial Officer. Before we begin, I will remind you that the slides presented on this call are available on the Investor Relations section of our website, and that our remarks today will include forward-looking statements, and that actual results could differ materially from those projections. For a list and description of certain factors that could cause results to differ, I refer you to the forward-looking statements in today's press release, our SEC filings, including but not limited to, our annual report on Form 10-K, and our reports on Form 10-Q. Our remarks today will also include references to certain financial measures which were not prepared in accordance with generally accepted accounting principles, or U.S. GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable U.S. GAAP measures is included in the financial tables that accompany our earnings press release, and the company's 8-K filing dated today, Thursday, 02/12/2026. We also cite operational results, which exclude the impact of foreign exchange. With that, I will turn the call over to Kristin. Kristin Peck: Thank you, Steven, and good morning, everyone. Welcome to our fourth quarter and full year 2025 earnings call. For the full year, on an organic, operational basis, we delivered 6% revenue growth and 7% growth in adjusted net income, in line with expectations. International markets were again a key contributor delivering 8% organic operational revenue growth, while the U.S. delivered 4% organic operational growth, reinforcing the value of our global footprint. By species, livestock delivered 8% organic operational revenue growth, benefiting from a more focused portfolio following the MFA divestiture. Companion Animal grew 5% operationally, reflecting the strength of our diverse, durable portfolio. In 2025, we executed with discipline and delivered growth across the portfolio against the backdrop of a dynamic operating environment shaped by macroeconomic and competitive pressures. Importantly, our execution further strengthened the foundation for what is next, from advancing long-acting approvals and a robust pipeline that extends our growth runway to strategic actions that sustain growth through competition, to sharpening focus in livestock post-MFA, and strengthening our commercial and medical capabilities globally. Before highlighting our performance drivers for the year, I just want to share what we have seen in the U.S. since our third quarter call, as these dynamics show up across the portfolio. In the veterinary channel, we continue to see some economic pressure on Gen Z and millennial pet owners, which has contributed to a decline in therapeutic visits and doses. At the same time, emergency and urgent care continue to show strength, which reinforces our view this is not a decline in underlying demand for care, but rather greater price sensitivity and tighter household budgets when it comes to the cost of routine care. We are beginning to see clinics react to this environment by taking a more measured approach to the overall cost of care for pet owners. We are also operating in a more competitive landscape, including elevated promotional launch activity, which historically has not been sustainable. Kristin Peck: In response, we are taking targeted actions to offset these pressures by optimizing our channel mix, increasing reach and frequency with veterinarians, while reinforcing our scientific leadership through expanded medical education. But stepping back, these near-term dynamics are unfolding within a broader U.S. macro environment that we believe will gradually improve as we move through 2026, and some of our veterinary partners are even beginning to reengage in acquisitions and de novo clinic development. The continued expansion of retail-based clinics, stand-alone hospitals, and urgent and specialty care centers reflects evolving pet ownership dynamics and the emergence of new operating models across the industry. These trends underscore a market that is adjusting and evolving, even as pressures persist. And despite these near-term headwinds in the U.S., Zoetis Inc. continued to lead across key brands. Our portfolio continues to be differentiated by the pace and scale of our innovation. With more than 185 geographic expansions and life cycle innovations in 2025, we expanded access to proven therapies, addressed additional unmet medical needs, and strengthened our foundation for future growth as the operating environment evolves. Turning to our performance drivers. Our Simparica franchise grew 12% operationally for the year, with double-digit performance in both the U.S. and international markets. Trio continued to be a key driver, growing 13% operationally. In the U.S., sales surpassed $1 billion with continued gains at initiation and the highest puppy share in the clinic. Globally, Trio maintained its position as the number one selling canine brand, reinforcing its position as the standard of care for broad spectrum coverage in the fastest growing parasiticide segment. That performance also reflects the strength of our omnichannel strategy. Helping us navigate headwinds in the clinic by ensuring our products are available wherever customers want them, we continue to grow with double-digit contributions from retail and home delivery, supporting improved compliance and positioning us well as customers weigh convenience, access, and value across channels. Parasiticides remain the largest category in companion animal health, and despite an increasingly competitive market, the Simparica franchise gained share globally in 2025. Our key dermatology franchise grew 6% operationally for the year, with strong international contributions reflecting the durability of the category we built. The breadth and differentiation of our portfolio continues to support veterinarian choice, pet owner compliance, and consistent patient outcomes. While the category is competitive, and expected to remain so, we are executing with focus through direct-to-consumer investment, Apoquel chewable conversion, and targeted outreach to OTC users. That dynamic is especially evident internationally, where continued category expansion and rising awareness are driving adoption and reinforcing long-term franchise confidence. With a large untreated population globally, and a clear preference for proven, trusted therapies, we are competing from a position of strength, built on portfolio diversity and scale. Innovation is central to our strategy, and as we discussed during our innovation webcast, our near-term pipeline is positioned to provide significant growth catalysts and opportunities to drive value. Turning to OA pain, the franchise declined 3% operationally for the year, and we remain committed to returning it to growth. We continue to see strength in the feline opportunity with Solensia growing 7% operationally. Last year's market approvals of Portela will expand our portfolio in 2026, enhancing our long-term ability to address OA pain in CAPB across different patient needs. While Librela declined 6% operationally, we continue to advance our multipronged strategy anchored in education, ensuring veterinarians and pet owners clearly understand the benefit-risk profile. We are seeing signs that our strategy is working, supported by stabilizing monthly overall sales trends and veterinarian and pet owner satisfaction. We remain confident in the long-term strength of Librela, grounded in a significant unmet need, the meaningful impact it is having for dogs and the veterinarians who treat them, and the introduction of Lanivia, which will further expand our ability to support OA pain management across the stages of disease and patient profiles. As we advance our OA pain franchise, we continue to engage in ongoing dialogue with regulators around the world to closely monitor and evaluate adverse events, support the safe and effective use of the product, and ensure prescribing information remains up to date. Companion Animal Diagnostics delivered broad-based 13% operational revenue growth for the year, even with ongoing pressure on clinic visits. This is another example of why portfolio balance matters, particularly in a dynamic operating environment. It also reinforces the success of our innovation strategy, including AI-enabled capabilities. In 2025, we expanded our diagnostics portfolio with the launch of Vetscan Optocell, bringing faster, simpler in-clinic hematology to veterinary practices, and AI is broadening the VetScan Imagyst menu, each contributing to strong platform performance for the year. Similarly, we broadened our laboratory footprint across the U.K. and Ireland with the acquisition of Veterinary Pathology Group in November. We expect this momentum to continue alongside the anticipated launch of our next-generation chemistry innovation in 2026. Our Diagnostics business strengthens the portfolio today and expands the opportunity over time, as we pioneer new diagnosis-driven therapeutic areas. Turning to livestock, we delivered 8% organic operational revenue growth for the year, with especially strong double-digit contribution internationally. Growth was broad-based across species and geographies, with momentum in key cattle and swine markets driven by consistent demand and solid execution throughout the year. Poultry contributed double-digit growth driven by focused post-MFA execution, strength in biologics, key account penetration, and geographic expansion of ProcerTa. Aquaculture also delivered especially strong growth, driven by continued moritella demand, underscoring the importance of disease prevention and the benefits of scale in a high-stakes production environment, as fish remain one of the fastest-growing sources of protein globally. In 2025, our R&D leadership delivered important conditional approval for HPAI, and New World screwworm, reinforcing our ability to address critical challenges facing producers. We continue to believe the long-term fundamentals in livestock are strong. Globally, protein consumption continues to grow alongside GDP and rising income, while in the U.S., surging GLP-1 use and updated nutritional guidance are expected to drive demand for meat and dairy. That shift reinforces the connection between the accessibility, affordability, and safety of the food on our plate and animal health, underscoring the importance of the industry's ongoing shift from treating disease to preventing it altogether. These dynamics play to the strength of our portfolio, and we expect continued momentum. Looking ahead to 2026, we are guiding to a range of 3% to 5% organic operational revenue growth and expect 3% to 6% organic operational growth in adjusted net income. This outlook reflects our confidence in our ability to execute across the portfolio while navigating macroeconomic and competitive pressure, which we expect to moderate as the year progresses. The essential and resilient nature of animal health, together with secular trends such as an aging pet population and meaningful unmet need, provide a durable foundation for growth. In closing, 2025 was a year of meaningful progress across our portfolio and pipeline, with important innovations delivered to customers and continued advancement of a focused strategy. We have been deliberate about where to invest, how to compete, and how to scale innovation in ways that are designed to endure across cycles. Today, Zoetis Inc. has the industry's most diverse portfolio and a robust pipeline, with 12 potential blockbusters in development, which for us are products with at least $100 million in annual revenue, including innovations that are pioneering entirely new categories of care. Guided by our purpose and our commitment to addressing unmet medical needs, we are not only advancing science, but helping shape the future of animal health. As the operating environment continues to evolve, Zoetis Inc. is competing from a position of strength, grounded in a differentiated science-to-scale model, trusted brands, global scale, and deep, long-standing customer relationships. In 2026 and beyond, as we build on the capabilities we have put in place, our focus remains on disciplined execution and building on them to drive durable, long-term growth and value creation. And before turning it over, I want to extend my deepest thanks to our purpose-driven colleagues around the world for their unwavering commitment to customers. With that, I will pass it over to Wetteny before taking your questions. Wetteny Joseph: Thank you, Kristin. Our disciplined execution and ongoing investments in innovation have strengthened our foundation for sustained growth, despite the dynamic operating environment and the ongoing macroeconomic and competitive pressures Kristin discussed. Wetteny Joseph: We delivered solid performance across our diverse portfolio. Wetteny Joseph: I will now walk you through our financial results for the quarter and full year. Our full year results reflect our ability to grow even in an increasingly competitive environment through the diversity of our portfolio, strength of our commercial relationships, and the value our products provide to our customers. Wetteny Joseph: For the year, we reported global revenue of $9,500,000,000, growing 2% on a reported basis and 6% on an organic operational basis, with 4% coming from price and 2% from volume. Despite facing a challenging economic environment, we ultimately finished at the high end of our November guidance range. Adjusted net income grew 6% on a reported basis, and 7% on an organic operational basis to $2,800,000,000. Turning to our franchises, global revenue growth was driven by our Companion Animal portfolio, which grew 5% operationally in 2025. Leading the way, our Simparica franchise reported $1,500,000,000 in revenue on the year, growing 12% operationally. In parasiticides, Simparica Trio remains the number one selling canine parasiticide globally. The triple combination space continues to expand, converting share from older therapies with ample room for market expansion. Our key dermatology portfolio grew 6% on an operational basis, to $1,700,000,000 in revenue. We continue to drive growth and extend the market in the face of competition through execution, adjusting our distribution strategy, driving the benefit of our differentiated offerings to win new patients. Partially offsetting the growth in Companion Animal, our OA pain monoclonal antibodies declined 3% operationally for the year, to $568,000,000 in revenue. Our OA pain products alone have eclipsed the revenue of the entire OA space prior to their launch, reflecting broader adoption and expansion of the category. We are also very pleased with the strong performance from our Companion Animal Diagnostics business, which grew 13% on an operational basis globally. For the year, we delivered growth ahead of the broader diagnostics market and saw strong adoption and growth across our portfolio, driven by Imagyst, and our newly launched Optocell Analyzer. In addition to this innovation-led growth Kristin mentioned, we continue to expand our reference laboratory footprint and expect these to be strong building blocks from which we can continue to grow. Our Livestock portfolio had another strong year, with $2,800,000,000 in revenue, or 8% organic operational growth, driven by broad-based growth across geographies and species as well as price and volume. Moving to our segment performance for the year. Our U.S. segment posted $5,100,000,000 in revenue, flat on a reported basis, while growing 4% on an organic operational basis. Growth was balanced across both U.S. Companion Animal and Livestock on an organic operational basis. Our U.S. Companion Animal portfolio grew 4%, driven by performance of our Simparica franchise and our key dermatology franchise. Our Simparica franchise posted $1,100,000,000 in sales, growing 10%. As Kristin mentioned, Simparica Trio became our first brand to exceed $1,000,000,000 in annual sales in the U.S. Key Dermatology posted 4% growth on the year, and $1,100,000,000 of revenue. While the highly promotional environment and slower periodic visits in the back half of the year were a headwind to new patient starts, we are pleased with the strong growth from our omnichannel strategy, particularly home delivery and revenue growth. These channels drive existing patient compliance, and we expect they will continue to drive growth as we maintain a leading position in canine dermatology. Our OA pain products saw a decline of 12% in the U.S. on $238,000,000 in annual sales. Librela posted $169,000,000 in revenue, a decline of 16% versus 2024. As Kristin noted, vet and pet owner satisfaction with Librela remains high, and we saw sales trends stabilize as we moved through the fourth quarter. Solensia declined 2% to $69,000,000 in revenue. Our U.S. Companion Animal Diagnostics business grew 14% on the year. We are pleased with our diagnostics growth in the U.S. and expect additional innovation to drive share expansion in the future. Our U.S. Livestock business closed out a solid year with 4% organic operational growth. Growth was driven primarily by our vaccine portfolio, as the sales force is focused on prevention following the MFA divestiture. We continue to see low cattle herd sizes, which, while limiting the number of animals to treat, does promote favorable producer economics and a higher standard of care due to the value of each animal. Now onto our International segment, which grew 4% on a reported basis, and 8% on an organic operational basis for the year. International Companion Animal grew 7% operationally during the year, driven by our Simparica and key dermatology franchises, as well as our OA mAbs. The Simparica franchise grew 17% operationally, posting $409,000,000 in sales, with double-digit growth across both Simparica Trio and Simparica. Simparica Trio grew 28% operationally to $183,000,000 in revenue, driven by an increasing standard of care in many international markets. Wetteny Joseph: Simparica grew 10% operationally to $225,000,000 in sales, with high levels of adoption in markets with lower standard of care, or where heartworm prevalence is low. We have seen minimal impact from recent competitive launches internationally. Key Dermatology posted revenue of $608,000,000 for the year, growing 10% operationally. We saw solid contributions from both Apoquel and CYTOPOINT. Internationally, we are now facing two oral JAK competitors. We are driving market expansion with our differentiated offerings by increasing compliance and maximizing the lifetime value of the patient for both Zoetis Inc. and veterinary practices. Ultimately, we see new entrants competing for shelf space alongside our established portfolio. Strategically, we remain focused on driving conversion to Apoquel, as well as CYTOPOINT, as we win through differentiation. Internationally, our OA mAbs grew 5% operationally, on $330,000,000 in combined revenue. Librela sales were $254,000,000, growing 2% operationally. Solensia sales were $76,000,000, growing 17% operationally. We are excited for the launch of our long-acting oral pain products, Lanivia and Portela, in certain international markets later this year, which will continue to expand the $1,000,000,000-plus OA market through increased convenience and compliance. Our International Companion Animal Diagnostics business grew 11% operationally on the year. Our International Livestock portfolio grew 10% on an organic operational basis to $1,900,000,000 in sales for the year. This growth was enough to completely offset the revenue impact of the MFA divestiture, and we saw growth across both price and volume in all major species. Cattle was a primary driver of our international livestock performance, driven by good market momentum across our major cattle markets. Poultry performance was driven by growth in vaccines, especially in emerging markets, aided by salesforce focus and execution following our MFA divestiture. Our fish portfolio continues to drive growth from high demand for Moritella vaccine. Wetteny Joseph: Moving on to our Q4 results, we posted $2,400,000,000 in revenue in the quarter, growing 3% on a reported basis and 4% on an organic operational basis, with 3% driven by price, 1% from volume. Adjusted net income of $648,000,000 grew 3% on a reported basis and 4% on an organic operational basis. Our Companion Animal portfolio grew 1% operationally, posting $1,600,000,000 in revenue. Growth in Companion Animal came primarily from our Simparica franchise, which contributed $333,000,000, growing 3% operationally, our ProHeart franchise, which grew 16% operationally, and our key dermatology franchise, which posted $426,000,000 in revenue, growing 1% operationally. This growth was partially offset by declines in our OA pain franchise, which declined 11% operationally to $137,000,000 in the quarter. Our global Companion Animal Diagnostics portfolio grew 10% operationally in Q4. Our Livestock portfolio contributed $756,000,000 in global revenue, growing 9% on an organic operational basis. U.S. revenue was flat in the quarter, with growth across both U.S. and International in all species, as well as price and volume. Now let us move on to our segment results for the quarter, with Companion Animal declining 1%, and Livestock growing 3% on an organic operational basis. Our U.S. Companion Animal decline was driven primarily by headwinds from our OA mAb franchises, which declined 25% in the quarter on $53,000,000 in combined revenue, but we do expect these headwinds to continue into 2026. The impact on our growth should moderate as we move through the year. Librela posted $36,000,000 in revenue for the quarter, declining 32%. We are continuing to execute on our multipronged strategy and remain confident that our OA pain portfolio will return to growth. Solensia declined 7% on $17,000,000 in revenue. Solensia, like many injectable products, has had headwinds from soft clinic visits, but market share remains stable. The OA pain franchise decline was partially offset by growth in our parasiticide portfolio, specifically ProHeart, and our Simparica franchise, as well as our key dermatology portfolio. Sales of our ProHeart franchise have seen solid growth due to increased usage in clinics that prioritize the maximum heartworm compliance offered by our long-acting injectable product. We continue to see growth in Simparica Trio, which grew 1% in the quarter on $225,000,000 in sales, as well as growth in the triple combination segment. Our U.S. key dermatology franchise grew 1% in the quarter to $272,000,000 in revenue for the reasons we discussed earlier. We posted organic operational growth in U.S. Livestock of 3% in the quarter, with $234,000,000 in revenue. Growth in our poultry vaccines was the primary driver of growth. We also saw contributions from cattle, which benefited from favorable supply of Septiject, as well as growth in vaccines. Moving to our International segment, for the quarter, revenue grew 8% on a reported basis and 7% on an organic operational basis, posting $1,100,000,000 in revenue. Our International revenue in the fourth quarter was positively impacted by certain operational changes made in connection with our expected fiscal year alignment for our subsidiaries outside the United States. These operational changes resulted in the acceleration of the timing of sales into the reported 2025, leading to an approximate 2.5% to 3.5% increase in sales for the International segment in the quarter, a trend that we do not expect to recur at the end of fiscal 2026. Our International Companion Animal business grew 4% operationally, while Livestock grew 12% on an organic operational basis. International Companion Animal growth was driven by Simparica, dermatology, and OA pain franchises. Our sales of our Simparica franchise were $90,000,000 internationally, growing 6% operationally. Simparica Trio grew 34% operationally to $41,000,000 in sales, driven by increased adoption in Australia and geographic expansion. Simparica declined 9% operationally, on $49,000,000 in sales, largely due to softer macroeconomic conditions in Brazil, our largest international market for Simparica. Our key dermatology franchise grew 2% operationally, posting $155,000,000 in revenue. Growth was driven by Apoquel chewable and CYTOPOINT, which remain differentiated. While we have seen some impact on Apoquel share due to competition, switch from CYTOPOINT and Apoquel chewable has been limited. We continue to drive expansion in the overall market to higher compliance and new patient adoption driven by direct-to-consumer investments, and expect additional insurance to further increase awareness of dermatological treatment options. Our OA pain mAbs grew 2% operationally in international markets to $84,000,000 in revenue. International Librela sales were $64,000,000, down 2% operationally in the quarter. Performance continues to be mixed, with weaker performance in English-speaking markets being partially offset by the rest of the international market. Solensia grew 15% operationally, on $21,000,000 in sales. International Livestock grew 12% on an organic operational basis in the quarter, with broad-based growth across all of our core species. Growth was driven by the Brazilian cattle market, as exports remain high, as well as favorable supply on certain products. Fish continued to post strong growth, driven by the performance of vaccines in both Chile and Norway. And our poultry business continues to post strong growth on key account penetration, driven by field force focus on vaccines following the MFA divestiture. Before we move down the P&L, I wanted to highlight an important initiative that underscores our ongoing commitment to evolving our business for long-term success. To support our strategy, and drive greater speed, productivity, and insight, we are advancing our multiyear, multiphase initiative to transition our ERP system. This initiative leverages our existing strengths, further modernizing the way we operate day to day and enhancing our ability to capture and report insights on our global business. As part of this effort, we are expecting to eliminate the one-month reporting lag of our subsidiaries operating outside the United States, aligning our fiscal year with calendar year 2026 on a global basis. When we adopt the expected fiscal year alignment, we will retroactively apply this new accounting principle to prior financial statement periods, enabling a clear comparison of our financial results to historical operations. In anticipation of this potential change, we have made certain related operational changes as highlighted in our International segment results. These changes resulted in the acceleration of the timing of sales into our reported fourth quarter 2025. Starting in early 2026, we also shifted the timing of annual price increases in certain international subsidiaries so both the price increase and the related customer buying activity will occur within the same calendar year. Additionally, the processing of certain customer orders from December 2025 was delayed to calendar year 2026. With that in mind, let us move on to the P&L. Full year adjusted gross margin of 71.9% expanded 120 basis points on a reported basis. Foreign exchange had a favorable impact of 80 basis points. Excluding FX, we saw higher margins due to the favorable impact of our MFA divestiture as well as benefits from price. These benefits were partially offset by higher manufacturing costs in the first half of the year related to inventory valued at prior-year standards. Adjusted operating expenses increased by 2% operationally, reflecting cost discipline as we navigate the challenging macroeconomic environment. Adjusted net income grew 4% operationally, and 7% on an organic operational basis. Adjusted diluted EPS grew 6% operationally for the year and 10% on an organic operational basis. Lastly, I would like to touch on capital allocation. During the year, we continued to deploy capital in a disciplined manner, balancing ongoing investments in the business with returning capital to shareholders. In December, we completed a convertible bond offering which supported a $1,750,000,000 common stock buyback while maintaining a strong balance sheet and capacity for future investments. In total, we returned more than $3,200,000,000 to shareholders through share buybacks in 2025, and an additional $800,000,000 in dividends, consistent with our long-term approach to capital deployment. Turning to guidance. For 2026, we are guiding to organic operational revenue growth of 3% to 5% and organic operational growth in adjusted net income of 3% to 6%. Our 2026 guidance reflects foreign exchange rates as of late January. On a reported basis, this translates to expected revenue of $9,825,000,000 to $10,025,000,000 with contributions from both price and volume. I will now provide some of the operating assumptions in our guidance range. We expect Companion Animal business to remain a key growth driver in 2026, supported by a differentiated portfolio even as competition in parasiticide and canine dermatology intensifies—dynamics that are reflected in the guidance range. While our outlook includes contributions from long-acting OA products in markets where we have approvals, it does not assume revenues for products or geographies where approvals have not yet been granted. We also expect robust contributions to growth from our Livestock portfolio, aided by global increases in protein demand and favorable producer economics. We exited 2025 with strong momentum across all of our livestock species. We expect continued field force focus and disciplined execution to fuel mid-single-digit organic operational growth in 2026. Now moving on to the rest of the P&L. Adjusted cost of sales as a percentage of revenue is expected to be approximately 28%. Adjusted SG&A expenses for the year are expected to be between $2,430,000,000 and $2,490,000,000. Adjusted R&D expenses for 2026 are expected to be between $715,000,000 and $725,000,000. Adjusted interest expense and other income deductions are expected to be approximately $200,000,000. Our adjusted effective tax rate for 2026 is expected to be approximately 20.5%. Adjusted net income is expected to be in the range of $2,975,000,000 to $3,025,000,000, representing growth of 3% to 6% on an organic operational basis. Wetteny Joseph: Lastly, we expect the adjusted diluted EPS to be in the range of $7.00 to $7.10, and reported diluted EPS to be in the range of $6.65 to $6.75. We estimate that the share repurchases funded by our recent convertible bond offering will have an impact of roughly $0.22 on EPS for 2026. This is reflected in our guidance. Wetteny Joseph: In closing, 2025 was a year that showcased the resiliency and durability of our diversified portfolio, as we delivered solid performance despite varying market conditions and competitive pressures. Our continued investments in innovation, coupled with the breadth of our portfolio and disciplined execution, have laid a strong foundation for the future. Looking ahead to 2026, we remain confident in our ability to build on this momentum, leveraging our differentiated brands, expanding global reach, and our unwavering commitment to both operational excellence and long-term value creation. As we advance our multiphase ERP system transition, we are setting the stage for greater speed, productivity, and insight across the business. Wetteny Joseph: We are excited for the opportunities that lie ahead and believe we are well positioned for continued success. I will now hand it back over to the operator for your questions. Operator? Operator: Thank you. Operator: If you would like to ask a question, press 1 on your keypad. To leave the queue at any time, press 2. A reminder, please limit yourself to one question and then queue up again with any follow-ups. Operator: Our first question is coming from Michael Leonidovich Ryskin with Bank of America. Your line is open. Please go ahead. Michael Leonidovich Ryskin: Great. Thanks for the question. Appreciate it. I want to ask sort of explicitly on competition for 2026 and what you are factoring in. Just maybe you could, at a high level, frame the level of conservatism you have put in on some of the key brands as more competitors enter the market. I mean, for example, in key derm, you flagged 6% growth for the year, but it was, I think, only 1% in the fourth quarter. So it seems like things are moderating a little bit. Just sort of how that affected your thinking on the framing of next year's numbers. And then maybe related to that, just I will squeeze in my follow-up now. Would love to hear your comments on price versus volume next year, your ability to take price. I do not know if it would be on apples-to-apples based on it. You talked about maybe some changes to the timing of price. But, anyway, if you could frame that, that would be helpful. Thank you. Sure, Mike. I will be happy to take it. Look. Your first part of the question is, how do we see competition going into 2026? And remind you, in 2025, we expected certain launches to take place, and there are certain launch-related promotions that we have seen in this space. We expected those to occur, and so we knew the back half was going to decelerate based on that point, and we have seen that perhaps a bit more. The macro in the U.S. is what I would say contributed to that. To your point, derm landed with 6% growth on the year with deceleration that, again, at the back end, closer to 1% in the fourth quarter, again, which we anticipate. We always take into consideration various factors in terms of within the range of guidance that we give. We believe it is certainly prudent in terms of how we positioned it. We do take various scenarios into consideration, including when we expect competition to launch and the level of aggressive promotions that they will do within that window. And those are factored here, certainly when we think about in the derm space, another JAK competitor launching potentially in the U.S., as well as in terms of IL-31 in that sense as well. So all those are factors into our thinking here that we put into the guidance. On price, we have said we would return to our normal range, which is 2% to 3%, which is what you can assume in this guidance with the balance, of course, being volume. So at the low end of the range, you would have potentially two to three points on price there, so less volume. And then on the higher end of the range, you start to see more balance. Operator: Thank you. Our next question comes from Erin Wilson Wright with Morgan Stanley. Please go ahead. Erin Wilson Wright: Great. Thanks for taking my question. So the 3% to 5% operational guidance, does that incorporate what U.S. Companion Animal operational growth is? And what are you seeing playing out? And you talked a little bit about this on the derm category. Outside of the aggressive promotions from Merck, how is Apoquel matching up to new mAb and others in terms of efficacy? And then, you know, one more housekeeping one here is there was a significant benefit in the pull-forward or the one month lag in terms of that fixing in the quarter on the international side. What does that mean for 2026 revenue on a reported and operational basis? And can you remind us how you are defining organic operational growth here, and how many months of international does 2026 include versus 2025? Thanks. Wetteny Joseph: Sure, Erin. I will try to get each of the subcomponents here, and if I miss anything, certainly, we will get that clarified here. On the guidance in terms of 3% to 5%, again, we do take into consideration what we see in the market currently and how we expect those to transpire over the coming year. And keep in mind, we do have the broadest and deepest portfolio, most innovative portfolio in the space, and leadership positions across all of the key areas. And so as we look to navigate and execute through the year, these are positions that are very solid that we have, that we take into consideration. Of course, we do take a look at what the macro conditions look like. I would say this. Really, what is important here, when you think about animal health, it remains extremely resilient. So as we look at the macro in the U.S., and we see some pressure on the consumer, at the same time, they are spending on animal health. As Kristin mentioned in the prepared commentary, in the fourth quarter, we saw about 6% growth in clinic revenue. Now, of course, that is a bit slanted towards more of the emergency care as well as price. That is having some impact on volume and visits. Certainly, the consumers continue to prioritize and spend in animal health. So I think that gives us a strong foundation as we look ahead. On the one-month lag in terms of what that means to 2026, we have taken those into consideration. Of course, there are a number of shifts that are involved as we make this change that we are contemplating for 2026. Individual shifts across customers, across countries, and so forth. So we have factored those into what we have given you here. And the basis for our guidance is exactly as it has always been, which is the International segments are on a lag because we have not implemented the fiscal year alignment yet. That will be taking place in Q1 2026. OOG definition is something we thought we would have a basis or metric that is very consistent for analysts and investors to be able to gauge us on. And so what we are doing here is sustaining that metric versus bringing it in and out intermittently. And so that metric is effectively excluding FX, and then any significant acquisitions that would be, on an annualized basis, 1% or more—or divestitures for that matter—1% or more of the prior year revenue. And so if it is 1% or more of the prior year revenue on an annualized basis, we will adjust it out. Otherwise, it stays in, and that is a very consistent way we plan to continue to report out. Operator: Thank you. Our next question comes from Christopher Thomas Schott with JPMorgan. Please go ahead. Chris Schott, your line is open. Please go ahead. Christopher Thomas Schott: Sorry. I do not know what is going on there. Just two questions for me. I guess, first on Trio, we have seen a bit lower growth these past two quarters. And then second, could you just help unpack the cadence a bit more for 2026? I just want to come back to the accounting dynamics that we are dealing with here. Just so I am clear, I think you mentioned some delayed revenue recognition from 4Q into 2026. Just how big is that deferral? Just want to make sure I caught the comments. Is that deferred revenue part of the 3% to 5% organic, or is that kind of being normalized in the way you are calculating? Wetteny Joseph: Thank you. Yeah. Sure. I will start with Trio. Look. Again, Trio is the leading product in the U.S., has now eclipsed a billion dollars in revenue in the U.S. alone. There continues to be significant room to expand that space as we have talked about many times. If you look at patient share, triple combinations are now about 50%. It has grown from about 30% two years ago, and certainly, there is more room to expand there. And, again, we have a very strong first-mover advantage in that regard. So as we think about 2026 and we think about our drivers of growth, certainly within our key franchises, we expect the Simparica franchise to lead the way into this 3% to 5% growth that we have provided here. In terms of the commentary on the various shifts that we have talked about, and the operational changes that have caused some either acceleration or delayed processing, those, of course, are factored into our guidance here, again, on the same basis as we have always reported, with the one-month lag, and we will be factoring the lag as we look ahead once we have implemented it in the first quarter. Operator: Thank you. Our next question comes from Brandon Vazquez with William Blair. Brandon Vazquez: Hey, everyone. Thanks for taking the question. I will ask two upfront here. Steven Frank: Wetteny, maybe for you, I just want to spend a second on making sure we have all of this clarified because the sequentials of the year feel like they are going to be a little bit tricky. Wetteny Joseph: Given the financial accounting and then season—or not seasonality—but competition and year-over-year comps. Steven Frank: And if I look at the street right now, sales growth expectations through the year are kind of within a one-point band, but that maybe does not feel right. So, like, I do not know if you can give commentary around full-year 3% to 5% operational. Should first half be towards the low end of that, not below it? Wetteny Joseph: Second half, go above it as some of this stuff normalizes. Steven Frank: And then maybe just a macro kind of question as well. Like, is the commentary I am hearing from you guys that the pet owner's financial situation is getting worse, or is it that the vet clinics raised price too much and we need to pull back on pricing increases. Thanks for the questions. Wetteny Joseph: Yeah. Sure, Brandon. I will cover the first part, I think Kristin will chime in from there. In terms of what the rhythm of the year may look like, I would point you to a few considerations here. And so, clearly, if you look at how 2025 executed, you would have seen a very strong execution performance, I would say, just based on where the macro condition started to shift. We are halfway through the year. So I would say take that into consideration. We will be lapping some of those as we get through 2026. In other words, a little bit tougher comps there. Similarly, if you look at the OA pain, particularly if you look at Librela in the U.S., you started to see some of those impacts tail end of the second quarter going into the second half of the year. Again, not only are the various items that we are executing on there starting to take shape, and we see that in the position, but it still means on a year-over-year basis, the comps remain strong for us in the first half on that. The last point I will make is we have seen, as we anticipated, competitors launch products. And when they are in this launch window, they tend to be a bit more aggressive around promotions to drive shelf space. And some of those will be lapping through the year, and others will start in the year. And so given the delay we have seen in terms of a JAKi competitor launching in the U.S., that would shift into further the year, and therefore, the window that they would potentially be more aggressive might extend a little bit more. So, hopefully, that is helpful in terms of how you might think about sequentially thinking through 2026. And with that, I will pass. Kristin Peck: Yeah. And, Brandon, to follow up on your other question just more broadly about the pet owner dynamics, as we mentioned in Q3 and as I mentioned in my remarks about Q4, we did continue to see some deceleration, you know, from the pet owner perspective in traffic in both therapeutic and wellness. I think if you look at the overall demand—and I think it is important—the demand has stayed high. I think there was really just pricing at the vet clinic taken a lot over the last three years, and I think the view from the pet owners is it was a little much. I think, really, the veterinarians have seen this. They are very focused on providing better value to pet owners. And pet owners still have demand. If you look at, you know, when their dog gets sick, they are bringing them in. So I continue to think the demand is there, and we are excited to see a lot of new, innovative operating models to meet different consumers where they are, and we think this will continue to drive growth. I also think, you know, you look especially at the large corporates, they are focused on providing special programs for pet owners to encourage them to bring them in, which is going to help, you know, recover some of that. So as we look at the year, as we move forward through the year, we do see an improvement overall in the pet owner macro situation, and that is certainly what we are expecting. Operator: Thank you. Our next question comes from David Michael Westenberg with Piper Sandler. Please go ahead. David Michael Westenberg: Hi. Thanks for taking the question. So I am going to just get some clarification on the price increases. I think you are calling two to three price increases. Last year, I think the bulk of the revenue did come from, in fact, price increases, not as much volume. So can you talk about some of the changes you can make in terms of pricing and strategy to maybe bundle with clinics or anything to kind of drive volume versus what you have seen in prior years? And then secondly, just around how you are implementing prices. I mean, in the years past, it has really been raising prices on innovation and kind of keeping the in-line portfolio the same. Is there kind of changes this year relative to previous years in terms of that dynamic? And I get there are competitive reasons, so you are not going to get into each individual product, but, you know, at a high level. Thank you. Wetteny Joseph: Sure. Look. I would start maybe where you ended on the question, which is, by and large, we do not see significant shifts in our approach to pricing. Our pricing has always been and remains an element that we take into consideration product by product, market by market, and the value, the clinical value, we bring both to vets and pet owners through those products. And so we do not make a blanket statement around, here is the pricing we intend to get. We run that through, again, that approach, and that remains very much consistent. In terms of, look, we certainly are leveraging our strengths. We have a very broad portfolio, products that are incredibly important to veterinarians as they care for animals across the world, not just in the U.S., and we leverage those certainly within the confines of what is allowed in certain markets. So in the U.S., for example, we are able to leverage across portfolio to drive volumes and so forth with customers. And we do so. In other markets, those parameters may be different, and therefore, we navigate based on what is legally allowed in those markets. But certainly, that is a strength of ours and will continue to be as we innovate, and you have seen the strength of our pipeline. And so that is something we will continue to leverage. Operator: Thank you. Our next question comes from Jonathan David Block with Stifel. Please go ahead. Jonathan David Block: I will ask two. I will kind of break them up. And, Wetteny, I know others have tried, but honestly, just from my emails, it is still a bit unclear. So do 2026 revenues benefit from this accounting change, or call it the adjustment change as it reads in the PR? We get the benefit from 4Q. You called it out. It seems like it lands at $30,000,000. But, again, specific to 2026 due to the adjustment, is there an extra, call it, month of international sales that go into 2026 as you normalize it, call it for the calendar. Let me pause there because I think that is really important, and then I will ask just a tighter follow-up. Sure, Jon. And good morning to you as well. Look. Here is what I would help with framing here. First, Wetteny Joseph: there is not an extra month we would contemplate. Again, we have not implemented fiscal year alignment. I want to make sure that is very clear. The work to do so and the recast of our financials, which we plan to produce on a recast basis so that you and our investors can have comparable periods to compare as we start to report with our first quarter. And that work is ongoing, and we have not completed the process yet. And so it is not in effect. What it is, we would anticipate that there would not be an extra month. It will be a twelve-month year both for U.S. and International segments, though that year would then start January to December, versus starting December to November. And so that is the first point I want to make very clear. Now we did talk about certain shifts that have occurred that have either benefited 2025 or potentially delayed processing into 2026 that could have an increase in 2026. However, we will not be measuring because, again, once we implement the change, we will factor that as well as the results of the first quarter and other dynamics around the business to share with you and our investors. Kristin Peck: Yeah. And just to give you a sense, when we provide recast financials, we will look at prior periods in the new calendar year or fiscally year-aligned perspective, so you can continue to compare. But there is definitely never going to be a year that is thirteen months. It will be twelve months. There is that one month of international shift, but you will be able to see it in the recast financials. Operator: Thank you. Our next question comes from Glen Santangelo with Barclays. Please go ahead. Glen Santangelo: Yes, thanks for taking my question. So, Kristin, not to belabor the point, but just to sort of follow up on that point you just made. When we look at cadence of the four quarters for 2026, is it fair to say that the first quarter will have the strongest growth, or you are saying no because it will be comparable versus restated numbers in 1Q 2025? Wetteny Joseph: Yeah. Look. I will take this. Because, you know, we do not guide by quarter. Our guidance for the year is between 3% to 5% on the top line and 3% to 6% on the bottom line. Certainly, we are executing across markets. We are delivering for customers, etc. That is our focus. When we report our first quarter 2026, we will be recasting, and, obviously, you will know what the results are for that quarter. But, again, our guidance is on a full-year basis, not a quarter. We have tried to be helpful in terms of the puts and takes around timing of when we saw some of the macro shifts in the U.S., and some of the competitive launches, when they occurred, and how those might affect our growth rates as we work through 2026. We will give guidance on that particular quarter. Operator: Thank you. Our next question comes from Andrea Alfonso with UBS. Please go ahead. Andrea Alfonso: I guess, sorry to just belabor this point again regarding the 3% to 5% operational growth that you expect for 2026. So it sounded a little bit like you discussed certain shifts that were delayed that could increase in 2026. So I guess, is there some sort of clarity on what that figure might be, and does that sort of delay negate kind of the $30,000,000-plus that you saw in 4Q 2025 such that it is sort of a neutral impact? And then, you know, in addition to that, within that 3% to 5% growth, you know, the U.S. was flat on an organic operational basis in 4Q. Should we expect that to be the case as well within that 3% to 5%? Wetteny Joseph: Sure. Look. In terms of the 3% to 5% operational growth, that is our expectations for 2026 on the same basis that we have always reported, and, certainly, that factors the baseline, which is 2025, and the performance throughout the year inclusive of the fourth quarter. Now put into context here, the amount we are talking about for 2025 is effectively 30 basis points to 40 basis points of the total company for 2025. This is not a significant amount that would swing the range of growth that we are projecting for 2026 in any material way, is what I would say. And, again, we will provide a like-for-like basis, recast the financials when we implement the fiscal year alignment, and, hopefully, that will be very clear for everyone. In terms of what the U.S. performance may be, again, we do not guide by segment. But certainly we have seen the macro, and Kristin and I have already discussed some of the elements that we see there. Going into next year, we do have some comps that, in some respects, are easier in the back half of the year versus the first half and so forth. So we take those into consideration. However, given our portfolio and the strength of that, our leadership position, we certainly will continue to execute commercially in ways to maximize those and drive our growth, not only in the U.S., but across the very diverse business we have here at Zoetis Inc. Operator: Thank you. Our next question comes from Christopher Hue LoBianco with TD Securities. Please go ahead. Christopher Hue LoBianco: Hey, guys. Thanks for taking my question. Could you just give us an update on where you are in the approval process for Lanivia with the FDA? Thanks. Kristin Peck: Sure. Happy to take that. Yes. We are very excited right now to be launching in the first half for Lanivia in the EU and Canada. And we do expect approval of Lanivia in the U.S. in 2027. So, we are really busy right now getting the early experience trial ready for the EU and Canada. I am excited to bring those learnings as we launch the product after we get its approval in the U.S. in 2027. Operator: Thank you. And our next question comes from Daniel Christopher Clark with Leerink Partners. Please go ahead. Great. Thank you. Good morning. Daniel Christopher Clark: Two for me. One, just wanted to ask about your assumptions for the derm market in 2026 and if you are thinking that that is going to grow and maybe just how you are thinking about the high and low ends of guide based on that. And then secondarily, more of a clarification than anything. Can you just remind us when your key patent on Simparica and Apoquel, when those are through? Thank you. Daniel Christopher Clark: Sure. In terms of derm assumptions, Wetteny Joseph: here, we are expecting our acute franchises, obviously, to lead the way for us in 2026. We are expecting mid- to high-single-digit growth contribution here. Within that, of course, we do not guide by product category or specific franchise, but we do expect derm to contribute to growth on the year, though Simparica franchise will be the leading driver for us within those. And we have produced dates around our products in terms of when patents expire. So, for example, with Apoquel, we are out to the 2032 time frame on that in terms of when our patent expires on that. I would refer you to our public filings for more specifics. Operator: Thank you. Our next question comes from Navann Ty Dietschi with BNP Paribas. Hi. Thanks for including me. On the 3% to 5% guidance, would you say that 2026 is an air pocket before a higher contribution of innovation in 2027? Navann Ty Dietschi: And maybe just one on the parasiticides. If you could discuss the performance of Simparica Trio in the U.S., as well as ProHeart, whether it is driven by blood, ecto, quantum. Thank you. Wetteny Joseph: Sure. Look. Your audio cut out a little bit, but I think I got the gist of your question. Certainly, you have seen the company deliver on average 8% top-line growth the last five or six years, which is closer to 9%. We believe the guidance we are giving today, taking into consideration certain elements including competitive launches, which we fully expect to be very aggressive to get position in terms of penetration in clinic so that they can then start to drive more DTC to drive their growth longer term. In the past, we have seen those to be short-lived, again, with the objective of getting products on shelf. And those, including the macro conditions we have talked about, factor into what we are putting in here. Certainly, we are very excited about not only the remaining extension opportunities we see within the products we have on market today that are in leadership positions, we are very excited about the pipeline. And, yes, some of the bigger areas that we have in our pipeline will start to contribute as we look out into the 2027, 2028 time frame. But we are very focused on executing in 2026 as we always are, and you will see that both in terms of how we drive those commercially with our existing products all the way through the P&L. And you see the guidance we have issued of leverage through the P&L as we continue to drive disciplined execution there as well. On your point around Trio performance and ProHeart contributions, if any, coming from Merck's product Interceptor Plus Quantum, the last part of that, I would say, no. We do not see any meaningful contributions here. We see really consistent growth and performance from ProHeart throughout the year, and it is from existing clinics that value long-term heartworm prevention, and those are just using more. And what I would say is over the last four quarters, three out of the four have double-digit growth, and we do not see that tied to the Merck product in any significant way. Trio itself had a great year. Certainly, you saw global at 13% on the year in Trio, and 5% is what the growth was in the fourth quarter. The U.S., similar to derm, due to the macro conditions that we have talked about, saw lower growth net, closer to 1% on the quarter. Again, I will not repeat the comments around what is contributing to that, but certainly, Trio is the clear leader in parasiticides in the U.S. and the clear leader in terms of triple combinations. Our puppy share is higher than our overall share in adult dog share, which is a very good indicator in terms of how we will be driving this going forward. Operator: Thank you. And our next question comes from Christopher Hue LoBianco with TD Securities. Please go ahead. Christopher Hue LoBianco: Oh, thank you for fitting us in. What initial feedback are you hearing from vet KOLs on the safety profiles of Lanivia and Portela? And second, what is your level of confidence that 2026 will be the year of maximum competitive pressure for Trio and key derm? Kristin Peck: Okay. I think I heard your question was, what are we hearing from KOLs with regards to Portela. So as I mentioned earlier, we have not launched Lanivia and Portela yet, so it is not yet in the market. We do have the approval currently in Canada and the EU, and we are preparing to start early experience, which would be with the specialists and the KOLs that we spoke about. So we will be excited to share that once that product is out there, but we are just in the preparation of that launch. So there is no feedback there. Wetteny, do you want to take the second part of the question? Wetteny Joseph: Yeah. It was, again, a little bit difficult to hear specifically, but I got the gist. It is really in terms of competitive pressure. And what we have seen so far is we have not seen any significant impact from competitive pressure here. We have seen very limited impact from competitors. As we look at Trio and the triple combination space, as I said just a moment ago, there is significantly more room to expand in terms of triple combinations, where we are having a strong first-mover advantage and very high level of satisfaction. So we intend to continue to really leverage our strength there to lead the way in terms of expansion of this very attractive space. Kristin Peck: Okay. As always, I want to thank everyone for their time today and your continued interest in Zoetis Inc. I am really proud of the progress we made in 2025, and we are energized by the opportunity ahead. We remain focused on disciplined execution, growing our existing portfolio, and stewarding a deep and differentiated pipeline, and translating innovation into meaningful outcomes for our customers and value for our shareholders. That focus, combined with the essential and resilient nature of animal health, gives us confidence we can continue to demonstrate why Zoetis Inc. is an indispensable partner for customers around the world. We look forward to keeping you updated on our progress. Thanks for joining us today. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. Operator: You may now disconnect.
Operator: Hello. Good day, and welcome to Diebold Nixdorf, Incorporated’s Fourth Quarter and Full Year 2025 Earnings Call. My name is Ellie, and I will be coordinating today's call. Following our speakers’ remarks, there will be a question-and-answer session. In order to ask a question, please press star followed by one on your telephone keypad. Thank you. I would now like to turn the call over to our host, Maynard Um, Vice President of Investor Relations. Maynard, please go ahead. Maynard Um: Hello, and welcome to our fourth quarter and full year 2025 earnings call. To accompany our prepared remarks, we posted our slide presentation to the Investor Relations section of our website. Before we start, I will remind all participants that you will hear forward-looking statements during this call. These statements reflect the expectations and beliefs of our management team at the time of the call, but they are subject to risks that could cause actual results to differ materially from these statements. You can find additional information on these factors in the company’s periodic and annual filings with the SEC. Participants should be mindful that subsequent events may render this information to be out of date. We will also discuss certain non-GAAP financial measures on today’s call. As noted on Slide 3, a reconciliation between GAAP and non-GAAP financial can be found in the supplemental schedules of the presentation. With that, I will turn the call over to Octavio, who will begin on Slide 4. Good morning, and thank you for joining us. 2025 marked the defining year for Diebold Nixdorf, Incorporated. We strengthened our foundation, delivered on our commitments, and most importantly, demonstrated that we are now operating a sustainable free cash flow generator with a significantly more stable and predictable financial profile. We grew revenue, expanded adjusted EBITDA to $485,000,000, and more than doubled free cash flow to a record $239,000,000. These results reflect the disciplined execution, the strength of our lean operating model, and a portfolio increasingly aligned to long-term automation trends in banking and retail. Today, the conversation will center on the durability of our operating model, our ability to generate strong and consistent cash flow, and the opportunities we have to deploy that capital in ways that drive long-term shareholder value. What matters most to us and what our results clearly demonstrate is that we are delivering on what we said we would do, quarter after quarter. This consistency is increasing predictability in our model and strengthening confidence in our long-term outlook. Our core businesses remain strong, and our growth initiatives are gaining traction. In banking, we are expanding our role beyond the ATM to orchestrate the broader branch and transaction ecosystem through expanded service offerings, software-enabled automation, cash management solutions, and innovative hardware. Helping financial institutions operate more efficiently while improving the consumer experience. In retail, momentum continues to build, with three consecutive quarters of revenue growth as we expand in North America, win new logos, and scale AI-driven solutions that help customers reduce shrink, increase throughput at checkout, and operate more intelligently. We also delivered a record fifth consecutive quarter of positive free cash flow. Importantly, we also received two credit rating upgrades this year, independent validation that our operating model and financial model continues to improve. With net leverage around one times, and free cash flow growing, returning capital to shareholders will remain a core part of our value creation framework. Today, we are a stronger and more predictable company, with multiple ways to win and create value. We are entering the year with momentum, a fortress balance sheet, and a clear focus on delivering another year of profitable growth and cash generation. With that, let me walk you through our key takeaways for the year. Please move to Slide 5. Slide 5 reflects the consistent execution and financial progress we delivered throughout 2025, reinforcing the strength of our operating model. We delivered strong year-over-year improvement across our key financial metrics, meeting and in several areas, exceeding the commitments we established at the beginning of the year. Order entry grew 17% year over year, supported by healthy demand across both banking and retail, and demonstrating the continued relevance of our solutions as customers prioritize automation, efficiency, and innovation. Revenue performance reflects disciplined execution across the portfolio. In banking, the core ATM business remains stable, while our strategic growth initiatives gained traction. In retail, the core businesses in Europe recovered and strengthened as the year progressed, with accelerating momentum in the U.S. behind our SmartVision AI solution. We recently completed a pilot with one of the world’s largest retailers in the U.S., and are now transitioning into multiple live store implementations, an important step towards scaling the opportunities. Adjusted EBITDA grew to $485,000,000, reaching the higher end of our guidance, with margins expanding 60 basis points. This improvement reflects the structural benefits of our lean operating model, continued cost discipline, and operating leverage as we simplify the business and scale more efficiently. Free cash flow was a standout in 2025. We generated a record $239,000,000, more than doubling prior year’s cash flow and representing approximately 49% conversion, well above our original outlook and approaching our 2026 target of greater than 50%. We expect this momentum to continue. Stronger working capital, lower interest expense, and higher profitability demonstrate the growing cash generating capability of our models, and enhance the financial flexibility to invest in growth while returning capital to shareholders. Adjusted earnings per share reached $5.59 for fiscal year 2025. We more than doubled EPS year over year even excluding certain noncash, nonoperational favorable tax benefits. One year into our three-year plan, the financial algorithm we outlined is taking hold, and we are executing as committed. That consistency is strengthening confidence in our outlook and reflects an operating model with multiple ways to win and create value. Slide 6 highlights the growth engines that are strengthening the durability of our revenue and expanding our long-term opportunity across banking, retail, and service. We are gaining traction in the areas that matter the most: automation, software and service recurring revenue, all of which support higher quality growth over time. In banking, our role continues to expand beyond the ATM as financial institutions modernize their branches and optimize cash and transaction ecosystem. By automating manual processes, reducing cash-in-transit visits, improving staffing efficiency, our solutions deliver measurable operational value for our customers while positioning us to capture a larger share of their technology spend. During the year, our branch automation solutions built momentum with large multiyear wins in Europe and a key new multimillion dollar win in North America, reinforcing the relevance of our strategy across major markets. We also expanded the DN Series portfolio with the introduction of the DN Series 300 and 350. Combined with our VCP 7 software that enables interoperability across devices, are helping customers increase availability, lower operating costs, and simplify branch operation. Fit for purpose continues to gain traction across both high capacity and our smaller energy efficient configuration. Notably, we received certification from one of the largest public banks in India, positioning us to compete in all public bank tenders and opening the door to one of the fastest growing ATM markets globally. Octavio Marquez: In retail, Octavio Marquez: we are encouraged by the momentum we are seeing, particularly in North America where we secured nine new logos, including a win with one of our top targeted grocery accounts. The strategy that established our leadership position in Europe centered around openness and modularity is now gaining traction in North America and significantly expanding our addressable market. Our SmartVision AI solution continues to differentiate our portfolio and generate strong customer interest. At the NRF show, we engaged with more than 800 customers, partners, prospects, reinforcing the growing relevance of AI-driven capabilities and smarter store operation, as retailers focus on shrink reduction, checkout throughput. In services, our focus remains on being the most trusted service provider in the industry. We continue to optimize our service and repair centers globally, improving turnaround times, driving greater consistency and quality, which led to higher uptime for our customers. This, coupled with the completed North America rollout of our enhanced field service technician software, resulted in our best SLA performance of the year. With this, we are strengthening customer loyalty, supporting product pull-through, increasing the lifetime value of our installed base, further enhancing the recurring nature of our revenue. In operations, teams have fully embraced Lean, bringing in new ideas to reshape legacy paradigms of our how and where work gets done. Our local-for-local sourcing and manufacturing strategies are strategic advantages for our company and have allowed us to navigate market challenges like tariffs in 2025 and provide a strong foundation as we enter the new year. By leveraging common platforms and components across our ATM and branch automation portfolio, we are driving greater efficiency, scale, and simplified operations for our customers. Across the company, working capital improvements drove great results. Days inventory outstanding and days sales outstanding again improved year over year. Tom will share details on the significant improvements in a moment. While we remain disciplined in our expectations, the traction we are seeing across the growth engines increases our confidence in the power of our model as we move into 2026. All these advancements position the company to deliver more predictable performance while expanding our long-term growth runway. Now let us turn to Slide 7. Slide 7 highlights how Lean is becoming a structural advantage for us as we systematically lower our cost base, improve working capital, and continue to expand margins. What began as a manufacturing initiative has now scaled across supply chain, services, and business operation, embedding continuous improvement into how we operate and creating a more robust and scalable enterprise. Across global manufacturing, the implementation of our dynamic Kanban system spanning more than 400 high-use items has driven an approximately 30% sustained reduction in inventory while eliminating expedite and improving part availability. These actions are releasing working capital, strengthening cash conversion, and enhancing operational predictability. In our shared business services organization, cross-functional teams from 11 countries standardized order processing and accelerating invoice cycles, reducing processing time by 17% and improving collection efficiency. Just as importantly, these improvements are repeatable and are now being scaled across additional geographies. This is how we approach Lean: identifying structural efficiencies, institutionalizing them, and then extending those benefits across the enterprise. Our progress has also been recognized externally including being named by Newsweek as one of America’s Most Responsible Companies, reflecting the strength of our supply chain, ethical standards, and community engagement. It proves that operational excellence and responsible business practices can advance together. As Lean continues to expand across the organization, we see meaningful opportunity to unlock further efficiencies, strengthen margins, and improve cash flow. Importantly, many of the financial improvements Tom will discuss next are being enabled by these structural efficiencies. Lean is not a onetime initiative. It is a core capability that is reshaping how we operate. With that, I will turn it over to Tom to walk through our financial results. Thank you, Octavio. 2025 was an exceptionally strong year of performance for us. We grew revenue, expanded margins, and more than doubled free cash flow and adjusted EPS. These results reinforce that we have multiple ways to win and demonstrate our strong operational execution across the enterprise. Q4 revenue was $1,100,000,000, up 12% year over year and 17% sequentially, driven by growth in both product and service. In banking, high-capacity fit-for-purpose ATMs and strong performance in Europe drove results. In retail, strong point-of-sale and self-checkout performance globally drove revenue increases. Total gross margin expanded to 27.1%, up 320 basis points year over year and 90 basis points sequentially, reflecting favorable product and geographic mix. Product margins were 28.2%, up 80 basis points sequentially. Service margins increased to 26.2%, up 80 basis points sequentially. For the full year 2025, total company gross margin was 26.4%, up 110 basis points year over year. Margin expansion was driven by products, where gross margin increased to 27.4%, up 300 basis points year over year. Strength in product margins allowed us to accelerate investments in our service infrastructure, consolidating our repair and service centers, the deployment of our field service software, and additional field technicians. As a result of these investments, service margins finished the year at 25.6%. We delivered strong Q4 operating profit of $129,000,000, up 81% year over year and 48% sequentially, driven by higher revenues and continued margin benefits from our mix and our lean operating model. Operating margin expanded 440 basis points year over year to 11.6% in the quarter. Operating expense was relatively flat year over year on higher revenues. We continue executing against our plans to reduce SG&A, and we have made solid progress on the over 200 action items that are part of our cost reduction program. For the full year 2025, operating expense was up 3.7% driven by higher labor and benefit expenses partially offset by our savings initiatives. Exiting 2026, we expect annualized run rate operating expense savings of up to $50,000,000, of which we expect to realize up to half of these savings in 2026, resulting in a reduction of approximately 1% to 2% of operating expense. Lean methodology and disciplined execution are driving our strong improvements in our results. Continuing on to Slide 9. We delivered record Q4 adjusted EBITDA, record full year adjusted EPS, and generated record full year free cash flow. Q4 adjusted EBITDA reached $164,000,000, up 46% year over year with 350 basis points of margin expansion. Sequentially, we delivered 35% growth and drove an additional 200 basis points of margin improvement, bringing EBITDA margins to 14.9%. Adjusted EPS for Q4 was $3.02 and for the full year 2025 was $5.59. This includes $1.08 of noncash nonoperational favorable items, including a tax valuation allowance release in the amount of $0.57 in Q4, and as we previously disclosed, a benefit of $0.51 recognized in Q3 due to lowering of the statutory rate in Germany. Excluding these items, 2025 EPS was $4.51. In 2025, we returned $128,000,000 to shareholders through repurchases representing 2,300,000 shares, or approximately 6% of the company, at an average share price of $55.47, representing a discount of more than 25% versus where our shares trade. Free cash flow in Q4 was $196,000,000, up 5% year over year, or approximately $10,000,000. For the full year 2025, we generated $239,000,000 of free cash flow, more than doubling 2024’s result of $109,000,000 and setting a new annual company record. Strong Q4 performance year over year was driven by lower interest expense following our late 2024 refinancing, continued progress in streamlining service contract collections, and additional working capital initiatives. Year over year, days inventory outstanding improved by nine days, and days sales outstanding improved by four days, and we continue to see further opportunities ahead in both. As I have shared with our teams internally, there is no finish line in our continuous improvement journey, only more opportunity. Moving to Slide 10. Banking delivered strong product and service revenue growth, with revenue up 11% year over year in Q4 and up 1.2% for the full year. Banking product revenue in Q4 grew 20% year over year, driven by strong ATM recycler adoption across our major markets. Banking services revenue grew 5% year over year in Q4, primarily driven by higher revenue contributions from Europe. Banking gross margin expanded 410 basis points year over year in Q4 and 160 basis points for the full year driven by strong product margins, allowing us to strategically accelerate the investment in services. As a result of these investments, service margins ended the year at around 25%. We are encouraged by customer feedback on these service investments, including engagements with large financial institutions, record net promoter scores, and our strongest SLA performance of the year. Together, these indicators reinforce our confidence in improving banking service margins this year and over the long term. Turning to Slide 11. We had a strong end to the year in retail, achieving our third consecutive quarter of sequential revenue growth. Q4 retail revenue increased 12% year over year to over $300,000,000, and retail revenue for the full year grew 2.1%. Retail product revenue grew 16% year over year in Q4, supported by strength across point of sale and self-checkout in major markets. For the full year, retail product revenue increased 5.4% driven by strong global point of sale unit growth and higher self-checkout shipments in North America. In retail service, revenue increased 8% year over year in Q4 driven by core service and higher installation work. For the full year, retail services revenue was comparable to prior year, due in part to certain large customers that experienced external cyber-related disruptions that reduced our ability to provide service to them. We have now resumed full service for those customers. Turning to profitability, strong demand and higher volumes drove overall retail gross margin expansion of 80 basis points year over year in Q4. For the full year, overall retail gross margins declined 20 basis points. This decrease is tied to the service disruptions I just mentioned. Looking ahead, retail is entering 2026 with strength. We are securing high-quality new business wins including multiple new logos in the U.S. grocery and QSR segments, in addition to growing our core European business. Overall, retail is positioned to continue growing revenue and gross profit dollars on a year-over-year basis. This will be driven by the acceleration of our growth initiatives in North America, continued new logo wins, sustained momentum in Europe, and the scaling of our differentiated AI-driven solutions. Turning to Slide 12. Our 2026 guidance reflects our increasing confidence in our operating model and the momentum we are carrying into the year. We are establishing our 2026 guidance for revenue, adjusted EBITDA, and free cash flow, all of which are higher than the original targets we shared at our 2025 Investor Day. For revenue, we are establishing a range of $3.86 to $3.94 billion. We expect the quarterly cadence for revenue to be consistent with 2025 based on each quarter’s share of the full year revenue. This outlook is supported by our $733,000,000 of product backlog and the significant reduction in product delivery lead times. Additionally, our January order entry is very strong, which gives us clear line of sight to our first half revenue. We expect total gross margin in 2026 to increase by another 25 to 50 basis points year over year. Thomas S. Timko: As we ramp up hiring in the U.S., in anticipation of converting strong service pipeline and further improving our SLAs. From Q2 onward, we expect sequential year-over-year improvement as scale increases and these investments begin to deliver returns. For adjusted EBITDA, we project a range of $510,000,000 to $535,000,000, representing growth of approximately 8% at the midpoint. Turning to free cash flow. We forecast free cash flow in the range of $255,000,000 to $270,000,000, representing roughly 10% growth at the midpoint, supported by continued working capital improvements and disciplined capital allocation. Once again, we expect to generate positive free cash flow in every quarter of the year. Starting this year, we are introducing guidance for adjusted earnings per share. For 2026, expect adjusted EPS to be in the range of $5.25 to $5.75, assuming an effective tax rate in the range of 35% to 40%. At the midpoint, this guidance reflects approximately 22% year-over-year growth on a comparable basis when excluding certain noncash, nonoperational tax benefits in 2025 that we previously mentioned. I would also like to point out that our free cash flow per share is significantly higher than our EPS as a result of stronger cash generation than earnings alone suggest. Overall, our 2026 outlook reflects the strong foundation built in 2025, the durability of our operating model that we have put in place, and the strength we are carrying forward. Turning to Slide 13. We ended 2025 in an exceptionally strong financial position with more than $700,000,000 of liquidity, including $416,000,000 in cash and short-term investments and an undrawn $310,000,000 revolver, with a net debt leverage ratio at 1.1 times. Our balance sheet strength is a reflection of disciplined execution throughout the year. 2025 was also a standout year for capital returns. We completed our initial $100,000,000 share repurchase program in just over eight months and announced a new $200,000,000 authorization in the fourth quarter. Through year end, we repurchased $128,000,000 of our common shares, representing approximately 6% of the company’s total shares outstanding at an average share price that is 25% below where our shares are trading, which we believe is an excellent return on our investment. We are targeting the completion of the $200,000,000 program in a similar time frame. Our balance sheet strength and consistent free cash flow generation were recognized externally as well. In Q4, Moody’s upgraded our credit rating to B1 from B2, our second credit rating upgrade of 2025, underscoring the meaningful progress we have made. Looking ahead, our capital allocation strategy remains consistent and firmly aligned with shareholder value creation. Since the beginning of 2025, we have delivered substantial shareholder value through strong execution and consistent capital returns, with our stock appreciating more than 65%. Given our performance and outlook, we believe that repurchasing our shares at today’s valuation still represents one of the most compelling opportunities to continue to drive long-term shareholder value. We continue to believe that our stock is undervalued and our ability to generate free cash flow is underappreciated. In 2025, we returned over 50% of our free cash flow to shareholders, despite having only begun our repurchase program in March 2025. Going forward, we expect to increase our returns to shareholders as a percent of free cash flow, supported by our balance sheet strength and our target of $800,000,000 of cumulative free cash flow from 2025 through 2027. We are committed to prioritizing returns to shareholders through share repurchases while also maintaining the flexibility to pursue small strategic tuck-in acquisitions that strengthen our long-term growth profile. With that, I will turn it back to Octavio for closing remarks. Thank you, Tom. As we look to 2026, what is increasingly clear is the continued strengthening of our operating and financial foundation. We have built a strong, strategically aligned portfolio that balances strong core businesses in banking and retail with scalable growth platforms, positioning us to deliver sustained performance and long-term value. We are a company with a high-quality business model, fueled by a culture of continuous improvement, delivering consistent performance, generating substantial free cash flow, and embedding structural efficiency across the enterprise. I want to recognize our employees, customers, and partners whose execution and trust made these results possible. The progress we are reporting today reflects the strength of our teams and the depth and support of our partnerships around the globe. We are entering 2026 with momentum and confidence in our ability to continue strengthening the business. And with that, operator, please open the call for questions. Thank you. We will now open the floor for question-and-answer session. Operator: If you would like to ask a question, please press star followed by one on your telephone keypad. That is star followed by one on your telephone keypad. Our first question comes from the line of Matt J. Summerville of D.A. Davidson. Your line is now open. Matt J. Summerville: Hi. Thanks. So maybe just start with the kind of the first half, second half cadence a little bit. But more importantly, maybe if you can dig into some of the pluses and minuses we need to be thinking about with respect to Q1 in particular and maybe kind of frame up, realize you might not want to give specific quarterly guidance, but kind of frame up how we should be thinking about the first quarter. Look, so we are starting the year with $730,000,000 in product backlog. Plus the month of January was a very strong order entry month for us as well. So we have really strong visibility into the first half revenues. We have guided our revenue cadence to be approximately 45% in the first half and 55% in the second half, very similar to 2025. So on a quarterly basis, we expect our revenues to flow very similar to 2025, with Q1 being approximately 22% of our total revenue for the year. For adjusted EBITDA, we guided to an approximate split of 40% first half and 61%, second half, which, again, is very similar to 2025. And in Q1 specifically, which I think addressed your question here, we expect adjusted EBITDA margins to be very comparable to 2025, albeit on higher revenue. And is that reflective of the incremental sort of step up in services investments? And is there any way you can maybe quantify the level of organic investment you made in the net service organization in 2025 and what is on tap for 2026? And then I have one more follow-up. Yeah. Sure. So as we talked about last quarter, our investments in service is really comprised of the field service software rollout in North America. That is primarily behind us right now, and now we are on to the rest of the world. So, you know, the cost of doing North America versus the rest will be slightly down. Then we are also in the process of hiring additional field technicians to continue improving our Net Promoter Scores and SLAs. And as we mentioned on a call, you know, we have seen traction in that space. So we are very hopeful that that will lead to new wins. And most of the consolidation of our spares and service facilities is behind us as well. You know? Having said that, however, in Q1, that investment will continue. So what you will see in service margins is a slight decrease into Q1 as we wrap up those investments. And then starting in Q2, we expect sequential year-over-year improvement, you know, as the scale increases and these improvements begin to deliver returns. So stepping back for service margins, where we ended the year and looking forward to next year, we are expecting to grow them up to 50 basis points. And from a product margin, you know, perspective as well, coming off a really good year being able to grow those, you know, 300 basis points, we expect to be able to maintain that. And look, obviously, we live by the lean culture, you know, and seeing another 25 basis points of improvement there would not be unexpected either. Thank you. And then maybe just another quick one. Can you contextualize the retail logo wins in the U.S. a bit? You know, was that POS driven, software driven, SCO driven? And, you know, how we should be thinking about, realizing this off a low base, but how we should be thinking about kind of the go-forward CAGR for U.S. retail? And when does that become a more consequential piece of the portfolio for you? Yeah. Hi, Matt. So we had, you know, nine new logos. I would split them between, you know, two very important ones in the grocery space, you know, a very important one that I would say in the pharmacy space, and then multiple wins in the QSR space where our products continue to really define the standard on what, you know, quick-serve restaurants are looking for. So I would say that we have a very solid pipeline, you know, some of these wins, if you recall, at the beginning of the year, we said we were targeting 40 very specific accounts. On the grocery side, you know, one our largest win came from one of those targeted accounts, and it came, you know, and we are now rolling out our AI software across still a limited number of their stores. But this is just to prove the case now in the real world. As I have explained before, these rollouts start with a POC, then some DART stores, and then rolling it out into real stores. So we are at that stage. So we are excited about that. So AI has played a very important role. I think what has been surprising in the U.S. is that many accounts outside our 40 targeted accounts have come to us. So some of the wins that we had this year, also in the grocery space, came out of point of sale, which, again, proves that the idea of modularity and having a better product does help. And, again, during the NRF show, we had over 800 client meetings and prospect meetings. So we feel very good about the pipeline. We see our retail business, again, you know, remember, a $1,000,000,000 business, the majority of it is still in Europe. But we see the U.S. business growing double digits, you know, for the foreseeable future, and we are very excited about that. I think importantly, Matt, the retail business in Europe also significantly, as you can see from the numbers from Q1 to Q2 to Q3 to Q4. And, again, that is important to us as that trend we will continue with important wins in self checkout, yeah, and the AI-driven platforms. Maynard Um: Thanks, Octavio. Next question comes from the line of Justin Ian Ages of CJS Securities. Your line is now open. Justin Ian Ages: Hi. Morning all. Hi, Justin. Nice improvement, obviously, in free cash flow. And you mentioned, you know, days sales, days inventory, you know, nine days and four days of improvement. Just wondering if you could give us a little insight into how much improvement do you see left in those. Eventually, you know, you are going to, there is going to be a lower limit. So I just wanted to try to triangulate that. Yeah. So, look, this year, DSO, as you mentioned, down four days. You know, DSO for us ended the year at 50. And, you know, if you keep in mind that each day of DSO represents about, you know, $10 or so million-ish of free cash flow, we think that there is an opportunity for additional days there. You know, we are thinking four to five is kind of what our thought process is as we enter next year. You know? And being able to deliver DSO like we did in Q4 was a result of a lot of hard work. You know, we really ran multiple Kaizens throughout the year to improve our service collections, the down payments relating to our service collections in Q4. So that really helped and manifested itself, you know, in our results. So very proud of the team for being able to execute that kind of delivery. And then DIO, right, the way we calculate it is based on a blend of our product and services. So down, you know, seven seven days year over year thereabouts. You know, each day represents about seven. And we think that there is multiple opportunities and days there as we continue to roll Lean out. And our lead times have decreased pretty significantly as well, so we are turning faster. Think about where we were just, you know, a year or two ago at 120 plus. Now we are more somewhere in the range of 70 to 80 days pretty consistently. And really, really benefiting from our local-to-local manufacturing strategy and helping deploy that. So you think about Germany and Paderborn and Canton in the U.S., and Manaus in Brazil, and then our partner in India. You know, that strategy has really worked well in terms of delivering and unlocking value for us. Very helpful. Thank you. And then switching to capital allocation. I know you mentioned it in your notes. Just wondering, you know, as we try to balance share repurchases and tuck-ins and then the $950,000,000 note. Do you think you will look at that note in the fourth quarter if it makes sense to take that out? And when you mentioned tuck-ins, is there a list of companies that you, you know, have your eye on that you are following that you are not ready to make an investment there yet because you see more value in repurchasing shares? Just trying to, you know, weigh the different capital allocation priorities you have. Yeah. Look. We are remaining very consistent to the capital framework that we rolled out a little bit over a year ago. Share repurchases, you know, like I said on the call just now, we still view that as the best return on investment at where our stock is. We believe it is undervalued, and, you know, the ability to generate free cash flow at this company, we feel still remains underappreciated. So the stock buyback will be the priority for us. This year, we returned, I think, just about 53% of our free cash flow to shareholders, and keep in mind, we did not really begin our share repurchase program until March. And we were able to wrap that up pretty quickly. And then as you know, we doubled the size of it. So we are going to continue on a similar, albeit maybe slightly accelerated, time frame with the $200,000,000 program, but maintaining that flexibility to be able to do some tuck-ins. And, yes, we have developed a pipeline across multiple categories. But right now, I would say we are primarily focused on some service opportunities, as we see the ability to continue to consolidate in that space. And that obviously is one of our core strengths. And, you know, we define M&A acquisition as something that has got to be almost immediately accretive and a relatively low multiple for us. And we think that there is ample opportunities there to strengthen our growth portfolio. Very helpful. Thank you for taking the question. Maynard Um: Yeah. Thank you, Justin. And if you would like to ask a question, please press star followed by one on your telephone keypad. That is star followed by one on your telephone keypad. Your next question comes from the line of Matt J. Summerville of D.A. Davidson. Your line is now open. Yeah. Matt J. Summerville: Just to follow up, Octavio, I typically ask you to do this. Can you maybe do a regional kind of walk around the world in terms of what you are seeing from a demand standpoint on the ATM side of the business? And then if you can speak in maybe a little bit more detail, it was called out several times, about the strength in particular you saw in order activity thus far in 2026? Octavio Marquez: Sure, Matt. So I will talk a little bit about ATM. So North America continues to, you know, to be very strong for us. So very positive momentum. Our initial branch automation wins are very significant. So this idea of a closed-end cash ecosystem, the ATM, the teller cash recycler, the automation software controlling both devices, really, really gaining traction and interest from customers. So we see that as a very, very positive catalyst. You know, add to that that every bank has now firmly decided that recycling is the way to go. So we continue to see that traction and those investments that we have made in continuing to improve our recycling capabilities will continue to pay dividends in the future. So North America, we feel very, very, very good about it. In the prior comment around, you know, the tuck-in acquisitions, think about also in North America as we expand our service footprint into the branch. That is an area that we are really looking into it. How do we create a stronger service experience, not just for ATMs, but for the branch. That is our main focus in North America and Europe. How do we move beyond the ATM into the branch ecosystem? So this resonates very well with customers. I would say staying in the Americas, Latin America, you know, which traditionally had been one of the highest growth markets in the world, had a, I would say, a slower year in 2025, as you know, there is a little bit of lumpiness. That is where some big projects that Octavio Marquez: get delayed or move forward. But, you know, after Q1, we see very very positive momentum in Latin America, and that will be also a catalyst for growth next Octavio Marquez: year. Octavio Marquez: Europe, I would say, throughout the year, very positive momentum. We had very strong wins in Germany, particularly in the savings and credit union space, that have now re, you know, are still in the process of refreshing technology. And as you know, those thousands of small customers, yet not one of them is very big, but excited about that. Ten, five ATMs in each, but now fully in refresh cycle. So we are very. Same in France, big market where a lot of consolidation is happening in ATM networks, but we have been fortunate enough to capture the majority of those wins. So we are very excited about Europe. We have a strong team there that is looking for, you know, how do we accelerate and how do they keep moving into the branch ecosystem. And lastly, I would say Asia Pacific, Middle East, you know, probably one of the things I am the most excited right now. You know? Great performance from the team last year. So very, very proud of them. Significant wins across the Middle East, significant wins in different markets in Asia. I think the fit-for-purpose strategy where we have the high-capacity recyclers that are really proved to be a great year for them and, you know, some key markets for us, continues to gain traction. And in India, very importantly, we are now certified to participate in all government and all public government bids. As you know, these are thousands of devices in each bid, which we were not really allowed to participate as we needed to have a certain amount of fit-for-purpose devices in the market, which we have since achieved. I am very excited about ATMs for next year. I think we see steady demand. And more importantly, in our core markets, the U.S. and Europe, we do see the strategy of expanding beyond the ATM and into the branch really proving to be a key differentiator for us. Matt J. Summerville: You. That is helpful. And then, Tom, just so I kind of have it straight, when do you anticipate completing the remaining $172,000,000 of share repo? Thomas S. Timko: I would say in a similar time frame when we completed the $100,000,000, and then we would expect to be able to go back to the Board, get another program authorized and, you know, potentially larger as well. Matt J. Summerville: Understood. Thank you. Thomas S. Timko: Sure. Maynard Um: We will take our final from the line of Antoine Legault of Wedbush Securities. Your line is now open. Antoine Legault: Good morning, and thank you for the questions. Up on the banking front, I mean, clearly, a higher mix of recyclers is having a meaningful impact on your banking margins. Could you give us a sense of kind of the opportunity remaining ahead in terms of continuing to grow that mix of recyclers? Like, how underpenetrated are those products or those machines, you know, especially as customers refresh and upgrade their ATM? And then I have a follow-up. Yeah. So, Anton, I would encourage you Octavio Marquez: to think of this as a continuous cycle. So we have been shipping, you know, roughly 60 to 70,000 machines every year for the past couple years. We do not expect that to materially change anytime soon. I think that the penetration is still, you know, every year, we get a little bit better. So, you know, I think that that will continue to improve. Keep in mind, though, that we are also now ramping up our fit for purpose in other parts in Asia, which tend to have a little bit lower margin profile. But, you know, as Tom said, we expect that even with that small change in margins in Asia, that we will be more than able to offset that and keep the margins at the high level that we have them right now. And to Lean, continue looking for those opportunities to continue expanding margins Octavio Marquez: you know, every year. Matt J. Summerville: Thank you. And Antoine Legault: and then my last one is, assuming we look at your EPS guidance range for 2026, can you provide some puts and takes as to what might drive your results towards Matt J. Summerville: either the upper or lower end of that range? You know, overall, what are some of the factors Antoine Legault: or parameters that went into your guidance this year? And how should we think about Thomas S. Timko: Yeah. So if you think about, you know, when we talk to where we ended the year at about $5.59, and we had those two noncash, nonoperational items, right? So if you were to back those out, you get to a number that is probably closer to $4.51. I think one of the drivers next year will be our continuation of our share buyback program. And then obviously sort of the post-tax operating profit will drive that as well. So it is really a combination of both of those items. Right? And when you look at the EBITDA guide, you know, being up from the midpoint 8%, you know, we are continuing to leverage our operating model and grow EBITDA twice the rate of revenues. And free cash flow Thomas S. Timko: very successful Thomas S. Timko: fourth quarter and overall year, and we expect to be able to sort of continue that same trend into next year. Maynard Um: At this time, we do not have further questions. I would now like to turn the call back to Maynard for his closing remark. Octavio Marquez: Thanks, everyone, for joining today’s call and your interest in Diebold Nixdorf, Incorporated. If you have any follow-up questions post the call, please feel free to reach out to the Investor Relations team. Thanks again, and have a great day. Maynard Um: Thank you for attending today’s call. You may now disconnect.
Operator: Hello, ladies and gentlemen. Welcome to Himax Technologies, Inc. Fourth Quarter and Fiscal Year 2025 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I will now turn the conference over to Karen Tiao, Head of IR/PR at Himax. Ms. Tiao, please go ahead. Everyone. Karen Tiao: My name is Karen Tiao, Head of IR/PR at Himax. Joining me today are Jordan Wu, President and Chief Executive Officer, and Jessica Pan, Chief Financial Officer. After the company's prepared comments, we have allocated time for questions in the Q&A section. If you have not yet received a copy of today's results release, please email hx_ir@himax.com.tw or himx@mzgroup.us, or download a copy from the Himax website. Before we begin the formal remarks, I would like to remind everyone that some of the statements in this conference call, including statements regarding expected future financial results and industry growth, are forward-looking statements. They involve a number of risks and uncertainties Karen Tiao: only Karen Tiao: for those described in this conference call. A list of risk factors can be found in the company's latest SEC filings, Form 20-F, in the section entitled “Risk Factors,” as may be amended Karen Tiao: Except for Karen Tiao: the company's full year 2024 financials, which were provided in the company's 20-F and filed with the SEC on 04/02/2025. The financial information included in this conference call is unaudited and consolidated and prepared in accordance with IFRS accounting. Such financial information is generated internally and has not been subjected to the same review and scrutiny, including internal auditing procedures and external audits by independent auditors, through which we subject our annual compiled consolidated financial statements, and may vary materially from the audited consolidated financial information for the same period. Karen Tiao: On today's call, Karen Tiao: I will first review Himax’s consolidated financial performance for the fourth quarter and full year 2025, followed by our first quarter 2026 outlook. Jordan will then give an update on the status of our business, after which we will take questions. You can submit your questions online through the webcast or by phone. We will review our financials on an IFRS basis. We are pleased to report that our Q4 profit was at the high end of the projected range issued on 11/06/2025, while sales and gross margin were both in line with the guidance. Fourth quarter revenue registered $203,100,000, representing a sequential increase of 2%, better than our flat quarter-over-quarter guidance. Gross margin was 30.4%, in line with our guidance of flat to slightly up from 30.2% in the previous quarter. Q4 profit per diluted ADS was $0.036, at the high end of the guidance range of $0.02 to $0.04. Revenue from large display driver came in at $21,700,000, representing an increase of 14.2% from the previous quarter, outperforming our guidance range of a single-digit increase sequentially. This was primarily due to the rush order for both the TV and notebook IC legacy products from panel makers. Karen Tiao: Customers’ restocking of Karen Tiao: TV and monitor IC products, along with new notebook TDDI projects entering mass production during the quarter, contributed to the sequential increase. Large panel driver IC accounted for 10.7% of total revenue for the quarter compared to 9.5% last quarter and 10.5% a year ago. Revenue from the small and medium-sized display driver segment totaled $139,100,000, reflecting a slight decline of 1.3% sequentially. Q4 automotive driver sales, including both the traditional DDIC and TDDI, increased approximately 10% quarter over quarter, largely driven by widespread adoption of our market-leading within TCP technology among major customers across all continents. Despite softness in the global automotive market, our automotive driver IC sales for the full year 2025 grew single digit year over year, outpacing the broader market. Meanwhile, revenues for both smartphone and tablet IC segments declined quarter over quarter, as customers pulled forward purchases in prior quarters. Karen Tiao: Let's Karen Tiao: small and medium-sized display driver IC segment accounted for 68.5% of total sales for the quarter compared to 67.8% in the previous quarter and 70.3% a year ago. Q4 non-driver sales reached $42,300,000, a 7.9% increase from the previous quarter, primarily attributable to increased ASIC TCON shipments to a leading projector customer, along with robust TCON demand for automotive application. TCON, Himax continued to hold on to its undisputed leadership position with a dominant market share in automotive TCON. Karen Tiao: TCON business Karen Tiao: accounted for over 10% of total sales, with notable contributions from automotive TCON. Also during the quarter, our automotive OLED on-cell touch IC entered mass production with a leading brand, marking another milestone and strengthening the foundation for future growth. Non-driver products accounted for 20.8% of total revenue, as compared to 19.7% in the previous quarter and 19.2% a year ago. Fourth quarter operating expenses were $54,900,000, a decrease of 9.6% from the previous quarter but an increase of 11.6% compared to the same period last year. The sequential decrease was mainly attributed to a reduction in the annual employee bonuses and the depreciation of the NT dollar against the US dollar, partially offset by an increase in payroll expenses. As part of our standard company practice, annual cash and RSU bonuses are granted at the end of September each year, leading to higher IFRS operating expenses in Q3 than in other quarters. The year-over-year increase was primarily driven by the increase in tape-out expenses. Salary expenses and appreciation of the NT dollar against the US dollar were also behind the year-over-year increase. Amid the ongoing macroeconomic challenges, we continue to emphasize strict budget and expense controls. Karen Tiao: Fourth quarter operating profit, Karen Tiao: was $6,800,000, representing an operating margin of 3.4% compared to negative 0.3% in the previous quarter and 9.7% for the same period last year. The sequential increase was the result of the increased revenue and higher gross margin as well as the lower operating expenses. The year-over-year decline reflected the lower sales and gross margin, coupled with higher operating expenses. Q4 after-tax profit was $6,300,000, or $0.036 per diluted ADS, compared to $1,100,000 or $0.006 per diluted ADS last quarter and down from $24,600,000 or $0.14 in the same period last year. Now let us quickly review the financial performance for the full year 2025. 2025 was a challenging year for the global economy, shaped by tariffs and geopolitical uncertainty, and the customers generally maintained a conservative and late order strategy with a lean inventory level. While consumer electronics demand remains soft, automotive and AI-related applications where Himax has strong exposure proved resilient. Despite disciplined expense control, Karen Tiao: our full year 2025 operating expenses increased by 1.1% as we successfully invested in select non-display Karen Tiao: IC areas with compelling long-term growth potential, some of which are poised to ramp meaningfully starting in 2027. Karen Tiao: Refreshed market conditions Karen Tiao: our 2025 full year revenue totaled $832,200,000, a decline of 8.2% compared to 2024. Karen Tiao: Revenue from large Karen Tiao: panel display driver IC totaled $90,700,000 in 2025, a decrease of 28% year over year and representing 10.9% of total sales as compared to 13.9% in 2024. Small and medium-sized driver sales totaled $575,100,000, reflecting a decrease of 8% year over year and accounting for 69.1% of our total revenue, as compared to 59% in 2024. Non-driver product sales totaled $156,400,000, an increase of 7% year over year and representing 20% of our total versus 17.1% a year ago. Karen Tiao: Gross margin Karen Tiao: in 2025 was 30.6%, slightly up from 30.5% in 2024. Operating expenses in 2025 were $210,200,000, a slight increase of 1.1% from 2024, primarily due to the increase in tape-out and salary expenses as well as the appreciation of the NT dollar against the US dollar in 2025, partially offset by the lower employee bonus compensation compared to last year. 2025 operating income was $44,100,000, or 5.3% of sales, as compared to $68,200,000, or 7.5% of sales in 2024. Our net profit for 2025 was $43,900,000, or $0.25 per diluted ADS, a decline from $79,800,000 or $0.46 per diluted ADS in 2024. Turning to the balance sheet. We had $286,200,000 of cash, cash equivalents, and other financial assets as of 12/31/2025. This compared to $224,600,000 at the same time last year, and $278,200,000 a quarter ago. Q4 operating cash inflow was $15,800,000 compared to an inflow of $6,700,000 in the prior quarter. We had $28,500,000 in long-term unsecured loan, with $6,000,000 representing the current portion at the end of 2025. Our year-end inventory was $152,700,000, an increase from $137,400,000 last quarter, but lower than $158,700,000 a year ago. Accounts receivable at the end of December 2025 was $200,900,000, little change from last quarter, but down from $236,068,000 a year ago. DSO was 88 days at the quarter end as compared to 87 days last quarter and 96 days a year ago. Karen Tiao: Fourth quarter capital expenditure Karen Tiao: was $4,000,000 versus $6,300,000 last quarter and $3,200,000 a year ago. Fourth quarter CapEx was mainly for R&D related equipment for our IC design business. Total capital expenditure for 2025 was $20,100,000 as compared to $13,100,000 in 2024. The increase was primarily due to the construction in progress for the new preschool near our China headquarters built for employee children, with completion expected by 2026. As of 12/31/2025, Himax had 174,400,000 ADS outstanding, little change from last quarter, and on a fully diluted basis. Karen Tiao: The Karen Tiao: total number of ADS outstanding for the Karen Tiao: Now turning to our first quarter 2026 guidance. Karen Tiao: We expect Q1 revenues to decline 2% to 6% sequentially. Gross margin is expected to be flat to slightly down, depending on product mix. Q1 profit attributable to the shareholder is estimated to be in the range of $0.02 to $0.04 per fully diluted ADS. I will now turn the call over to Jordan Wu to discuss our Q1 2026 outlook. Jordan, the floor is yours. Jordan Wu: Thank you, Karen. Overall, market conditions remain under pressure from ongoing macroeconomic uncertainty. Recent shocks, price increases in memory further weighed on the market sentiment for electronic products. However, compared with consumer products, the automotive segment, which accounts for over half of Himax's total sales, is more immune to memory price fluctuations. That said, our visibility for the whole year outlook of the automotive sector remains limited amid the backdrop of uncertain government policy and consumer sentiment. However, we expect the first quarter to be the trough of the year with sales rebounding in the second quarter and business momentum continuing to improve into the second half, supported by lean customer inventory levels and new projects for automotive customers scheduled to enter mass production later in the year. In addition, continued growth in our non-driver IC businesses, particularly TCON and the WiseEye AI, should provide incremental support. In the automotive display IC business, we remain optimistic about our long-term business outlook. Jordan Wu: Back Jordan Wu: by our leading new technology offerings and strong design win pipeline. In DDIC and TDDI, we have already secured hundreds of design wins, commanding 40% market share in automotive DDIC Jordan Wu: and over half Jordan Wu: in the global TDDI market, and a substantial lead over competitors. Concurrently, Himax has also established strong technology leadership in all emerging automotive display areas, including automotive TCON with advanced local dimming functionality, LTDI for large size automotive displays, advanced TCON solutions for advanced head-up displays, automotive OLED panels, and micro-LED technology. Jordan Wu: The growing number of customers Jordan Wu: are accelerating the adoption of these advanced display technologies in new vehicle models, driving new growth momentum for Himax's automotive display IC business in the years ahead. The automotive market still offers significant asset potential driven by rapid innovation and ongoing advancements. Jordan Wu: In Jordan Wu: smart cabin, this refers to more visible, vivid, intuitive, immersive displays such as head-up display, curved display, large size SUV or windshield, micro-LED for both interior and exterior of the vehicle. Jordan Wu: And Jordan Wu: despite the economic uncertainty, beyond our main business of display IC solutions, we continue to expand into areas such as ultra-low-power AI for endpoint devices, front video cross-cycle display, and waveguide for AR glasses, and WLO for co-packaged optics. All these technologies are seeing exciting ideas. Jordan Wu: Driven Jordan Wu: by the recent Jordan Wu: breakout Jordan Wu: of AI. As adoption continues to broaden, some of these technologies have already begun translating into real-world applications, with more expected to follow suit in the near future. We expect these initiatives to become new meaningful growth drivers, while also improving our product mix and overall profitability. Some of these advanced technological capabilities were showcased through multiple live demonstrations at CES earlier this year. First, on ultra-low-power AI, we are differentiated in the market, offering total solutions that integrate in-house AI processor, CMOS image sensor, and algorithm, helping customers streamline development and accelerate time to market. Himax's industry-leading WiseEye AI features industry-leading ultra-low-power design with power consumption at just single-digit milliwatt levels, combined with the compact form factor, on-device AI inference, and 24/7 always-on image and voice sensing. WiseEye is empowering battery-powered endpoint devices across a wide range of new AI applications. Jordan Wu: For use cases requiring Jordan Wu: real-time voice and vision sensing, WiseEye also serves as an ideal perceptual front end for large tandem with LLMs to enhance the device’s ability to perceive and understand real-world context and deliver more intelligent responses and low-latency human-machine interaction. This is reflected in applications such as kiosk buttons for AI PCs and environmental awareness and sensing in smart glasses. Jordan Wu: At CES this year, Jordan Wu: Himax showcased a broad portfolio of WiseEye-powered endpoint applications, including smart home, security and surveillance, automotive, smart city, access control, AI PC, and smart glasses. One notable example in the field of security applications is the newly introduced WiseGuard solution, a significant technological innovation for next-generation security applications. WiseGuard features Jordan Wu: high Jordan Wu: accuracy AI sensing even in low-luminance Jordan Wu: device. Jordan Wu: Proactive key events Jordan Wu: capture, all while consuming nearly milliwatt-level power, thereby extending battery life for end devices. I will elaborate on this later. All these demonstrations reinforce WiseEye's growing relevance across multiple end markets. After many years of R&D and promotion, we see very strong growth Jordan Wu: although WiseEye business, Jordan Wu: starting from this year. Jordan Wu: Turning to smart glasses, Jordan Wu: one of our prime strategic focus areas, we are uniquely positioned as one of the few companies with both microdisplay and low-power AI capabilities, both critical for the success of AR glasses. With the advancement of AI, the smart glasses market is undergoing a strong resurgence, creating significant new opportunities for WiseEye AI and LCoS micro Jordan Wu: displays. Smart glasses Jordan Wu: developers can leverage Jordan Wu: WiseEye’s ultra-low-power AI capabilities Jordan Wu: to enhance device interactivity, supporting both outward-facing environmental awareness and object recognition as well as inward-facing Jordan Wu: ID authentication. It allows smart glasses to simultaneously Jordan Wu: understand user intent and external surroundings, delivering a more natural and seamless human-machine interaction experience. The microdisplay, Himax's latest proprietary front-illuminated LCoS display, achieves an optimal balance among size, weight, power consumption, resolution, and cost, while meeting the stringent optical performance requirements of next-generation see-through AR smart glasses. Jordan Wu: Solution is Jordan Wu: a four-color microdisplay, which can be configured for a high-brightness, low-power, green-only mode, and switched back, upon command from the central processor, seamlessly covering both indoor and outdoor instances. Jordan Wu: Himax is working closely with multiple waveguide partners across China, Europe, Israel, Jordan Wu: Japan, Taiwan, and the US on the integration into complete display systems for AR glasses, with several joint achievements demonstrated at CES. Jordan Wu: Before turning to our segment outlook, I would like to highlight our progress Jordan Wu: in CPO. Himax continues to make solid progress in collaboration with our strategic partner, ForeSee. Our main goal for 2026 is to Jordan Wu: complete Jordan Wu: mass production readiness with just small quantity shipment for the year. In addition, we are actively advancing multiple future generations of high-speed optical technologies and advanced CPO architectures. Jordan Wu: These efforts Jordan Wu: are Jordan Wu: focused on high Jordan Wu: fiber channel density and more sophisticated optical designs to support the increasingly demanding requirements. Jordan Wu: Specifically, Jordan Wu: in collaboration with a leading global customer and partner, Himax and ForeSee are finalizing the manufacturing process of a state-of-the-art design supporting 6.4T transmission bandwidth. Jordan Wu: We Jordan Wu: expect strong Jordan Wu: positioning for the AI data center market with the biggest volume potential while demanding the highest transmission bandwidth. Jordan Wu: Recently, ForeSee successfully completed an equity rights issue Jordan Wu: of NT$3,160,000,000 to fund equipment purchases and prepare for CPO mass production. Jordan Wu: Himax Jordan Wu: participated in the share subscription, demonstrating our continuous support for our partner and further strengthening the collaboration between the two companies. Jordan Wu: Himax expects Jordan Wu: CPO to become an important contributor to both revenue and profitability over the next few years. Jordan Wu: With that, I will now begin with an update on the large panel driver IC business. Jordan Wu: In Q1, large display driver IC sales are expected to increase single digit sequentially, mainly driven by continued replenishment of TV IC products from Chinese panel customers, carrying over from Q4 last year. Looking ahead, our focus in the notebook market is on premium models Jordan Wu: featuring Jordan Wu: OLED displays and touch functionality. Jordan Wu: This trend is Jordan Wu: being reinforced by recent rising memory prices, which have put pressure on lower-end notebook models and further accelerated the shift towards higher-end devices. Himax offers a full spectrum of IC solutions for both LCD and OLED notebooks, including DDIC, TCON, touch controllers, and TDDI. Jordan Wu: This broad product coverage allows us to address diverse panel architectures Jordan Wu: and system designs while increasing our content per device. During the first quarter, we began mass production of our touch IC for OLED notebooks with a leading notebook vendor, marking a milestone for another key application for our OLED on-cell touch technology beyond automotive. Jordan Wu: By leveraging proven touch integration capabilities, Jordan Wu: from automotive applications and extending them into consumer electronics, we are creating new growth opportunities in premium Jordan Wu: OLED, Jordan Wu: IT devices. Jordan Wu: TCON solutions are a key pillar of our notebook display IC portfolio, playing a critical role in image enhancement and system-level integration, strengthening our ability to provide customers with a comprehensive one-stop solution. Jordan Wu: We continue to expand our notebook TCON portfolio to address diverse customer design requirements and cost considerations. Our solutions Jordan Wu: support Jordan Wu: a wide range of panel resolutions, refresh rates, and gaming-oriented applications, while delivering high value-added features with a strong focus on power efficiency, which is becoming increasingly important Jordan Wu: for Jordan Wu: thin and light notebooks. Jordan Wu: Turning to the Jordan Wu: small and medium-sized display driver IC business. Jordan Wu: In Q1, small and medium-sized display driver IC business Jordan Wu: is expected to decline single digit from last quarter. Jordan Wu: Q1 automotive driver IC sales, including TDDI Jordan Wu: and traditional DDIC, Jordan Wu: are set to decline Jordan Wu: quarter over quarter, following two consecutive quarters of order replenishment. Jordan Wu: This decrease also reflects typical seasonal softness related to the Lunar New Year holidays, along with the tapering effect Jordan Wu: of automotive subsidy programs Jordan Wu: in major markets such as China and the EU. That said, our long-term competitive position remains solid, Jordan Wu: supported Jordan Wu: by hundreds of design wins already secured across TDDI, DDIC, TCON, and an expanding OLED portfolio. In addition, our diversified foundry footprint enables supplier feasibility and allows us to better navigate shifts in customer demand. We continue to lead the global automotive display market with a 40% share in DDIC, over half in TDDI, and even higher market share in normal dimming Jordan Wu: TCON. Himax also continues to lead Jordan Wu: in automotive display IC innovation by pioneering solutions across a wide range of panel types while addressing diverse design needs and cost considerations. For example, in ultra-large touch displays, we introduced the industry's first LTDI solution back in 2023, Jordan Wu: which Jordan Wu: has already been mass produced in several vehicle models. Design activity continues to expand across continents, and after several years of sustained effort, we expect meaningful revenue contributions starting this year. For smaller displays with form factor and budget constraints, Jordan Wu: we provide Jordan Wu: single-chip solutions that combine TDDI and local dimming TCON, an attractive choice for customers as it can significantly reduce cost Jordan Wu: and improve Jordan Wu: power efficiency. Jordan Wu: Looking ahead, Jordan Wu: OLED panel adoption in automotive displays is expected to accelerate, creating an opportunity for Himax to further strengthen our leadership in the automotive display market. Our ASIC OLED driver and TCON solutions have already been mass production for a few years, and we now offer new standardized products to support broader and more scalable deployment. At the same time, we continue to collaborate with leading panel makers for new custom ASICs to meet diverse customer requirements. Jordan Wu: Together, these efforts position Himax to capture Jordan Wu: increasing semiconductor content as premium automotive display technologies evolve from LCD to OLED. Jordan Wu: Complementing our OLED portfolio, Jordan Wu: for automotive applications, we are also a leader in advanced OLED touch ICs, featuring industry-leading signal-to-noise ratio performance Jordan Wu: that ensures Jordan Wu: reliable operation even under challenging conditions, such as gloves or moist finger use. Jordan Wu: Our OLED touch ICs Jordan Wu: entered mass production in 2024 and continue to see a growing design pipeline globally, many of which are scheduled to enter mass production in the coming quarters. Jordan Wu: Moving to smartphone IC sales, we expect Q1 smartphone Jordan Wu: revenue, covering both LCD and OLED products, Jordan Wu: to increase quarter over quarter, testing OLED solutions with mass production with a leading panel maker for leading smartphone brands' mainstream models. Jordan Wu: For tablet ICs, joint sales, Jordan Wu: are also expected to grow sequentially, Jordan Wu: driven by Jordan Wu: the commencement of IC shipments for customers’ new premium OLED tablet. Moving forward, we are advancing new technologies that enable value-added features such as active stylus, ultra-slim bezel design, higher frame rate, and power-saving architectures, positioning Himax to capture more semiconductor content in next-generation premium tablets, which reinforces our competitive edge. Jordan Wu: I would like to now turn to our non-driver IC business updates, Jordan Wu: where we expect Q1 revenue to decrease single digit Jordan Wu: sequentially. For the update on our TCON business, Jordan Wu: we anticipate Q1 TCON sales to decline by a single digit quarter over quarter, Jordan Wu: primarily due to the absence Jordan Wu: of ASIC TCON shipments to a leading projector customer that occurred in the prior quarter. The sequential decline also reflects a moderation in automotive TCON shipments following several quarters of solid growth, which we view as normal seasonality rather than a change in underlying demand. For the full year 2025, our automotive TCON sales still grew approximately 50% year over year, backed by hundreds of secured design wins. This momentum provides a strong foundation for subsequent growth. TCON for monitor, Jordan Wu: notebook, Jordan Wu: and TV products Jordan Wu: is expected to increase sequentially, primarily as a result of customers Jordan Wu: replenishing Jordan Wu: inventory for high-end products. Meanwhile, head-up displays, or HUD, are poised to become a central element of next generation Jordan Wu: smart cockpit, Jordan Wu: a trend clearly highlighted at CES where numerous panel makers and automakers, with our IC solutions, showcased their latest trendy and innovative HUD concepts. HUD for automotive is rapidly evolving from simple text and symbols to high brightness, high contrast, AI-enriched visuals integrated into automotive displays. This shift is driving demand for sophisticated TCON solutions in the area where Himax is in a leadership position in automotive display TCON solutions. Jordan Wu: To address this trend, Jordan Wu: we introduced a multifunctional Jordan Wu: TCON featuring Jordan Wu: the industry’s first full-area selectable local dimming capability, combined with Himax’s Jordan Wu: marquee Jordan Wu: on-screen display technologies, offering the flexibility to meet diverse design and cost requirements while simplifying overall system integration. This new TCON continues to deliver exceptional contrast performance, effectively eliminating the so-called postcard effect in SUVs. Jordan Wu: The common issue caused by light leakage Jordan Wu: in conventional TFT-LCD panels. Jordan Wu: Our industry-leading OSD function Jordan Wu: is also integrated, ensuring that critical safety information remains visible Jordan Wu: even Jordan Wu: when the main system is powered down, thereby enhancing overall driving safety. Jordan Wu: The new type TCON solution Jordan Wu: supports a broad range of HUD architectures, including windshield HUD, augmented reality HUD, and panoramic Jordan Wu: HUD. Multiple customer projects are already underway Jordan Wu: with tier-1s, panel makers, and projector players, reflecting strong market recognition of our vast HUD technology. HUD TCON technology product. Switching gears to the WiseEye product line, a cutting-edge ultra-low-power AI sensing turnkey solution targeting Jordan Wu: endpoint Jordan Wu: device markets. Jordan Wu: As AI advances Jordan Wu: at an unprecedented pace, WiseEye stands out Jordan Wu: with context-aware on-device AI inference Jordan Wu: that combines Jordan Wu: industry-leading power efficiency, consuming only a few milliwatts, Jordan Wu: with a compact form factor and robust industrial-grade security, Jordan Wu: and pretrained low-code/no-code AI algorithms, enabling easy deployment across a broad spectrum of applications. This powerful combination unlocks advanced AI capabilities in endpoint devices that were once limited by power and size constraints. This is driving innovative new product concepts across a broad range of applications Jordan Wu: from notebooks, surveillance, Jordan Wu: and access control to smart home, smart retail, and more recently, smart glasses, which the industry widely expects to become the next breakout market. Jordan Wu: Starting with notebooks, Jordan Wu: WiseEye human presence detection is seeing expanding adoption among leading global brands, Jordan Wu: driven by its ultra-low power consumption, instant Jordan Wu: responsiveness, and privacy-centric Jordan Wu: design. Jordan Wu: We are aligned with the industry's move towards always-aware AI-driven PCs. Jordan Wu: Building on this foundation, Jordan Wu: additional feature enhancements are being developed to address more complex real-world scenarios while preserving exceptional power efficiency and improving user convenience. One example is gesture recognition that emulates C4 inputs, enabling users to scroll pages without touching the keyboard. Jordan Wu: Another advanced feature currently under development Jordan Wu: for next-generation laptops is a voice-activated keyword spotting function. Jordan Wu: Here, Jordan Wu: WiseEye acts as an ultra-low-power front end that continuously monitors Jordan Wu: audio and performs Jordan Wu: wake word detection, activating the main CPU only when the designated trigger phrase is recognized. Jordan Wu: This advanced feature Jordan Wu: enables continuous audio monitoring even in noisy environments while maintaining minimal impact on overall system power consumption. Jordan Wu: In the surveillance domain, at the recent CES, we introduced our latest Jordan Wu: WiseGuard endpoint AI solutions, highlighting the versatile deployment of WiseEye AI in security applications. Jordan Wu: WiseGuard is a turnkey solution Jordan Wu: capable of accurately detecting and tracking multiple individuals, including their presence, location, and movement. Its proactive and continuous sensing capability enables security systems to anticipate and capture important events in advance, Jordan Wu: providing more forward-looking protection than traditional reactive security solutions. WiseGuard performs always-on sensing and AI processing at single-digit milliwatt Jordan Wu: levels, enabling up to five years of battery life and reliable low-maintenance operation in compact battery-powered devices. At the same time, detection at distances Jordan Wu: of up to 10 meters and under extreme low-light environments. Immediately after its debut, WiseGuard has attracted strong market interest, driven by its competitive advantages for scalable smart home and security systems. Jordan Wu: Meanwhile, from a module perspective, Jordan Wu: WiseEye technology is seeing expanding adoption across a wide range of domains, Jordan Wu: including leading brands’ upcoming smart home applications and various surveillance applications. Notably, our PalmVein module has had a strong design pipeline covering smart access, workforce management, smart door locks, and more recently, computer monitor and automotive applications. In the domain of AR and AI glasses, WiseEye delivers fast responsiveness for a wide range of AI functions while maintaining exceptional power efficiency. It enables intelligent context-aware vision sensing in next-generation wearables and smart glasses through both outward- and inward-facing capabilities. Our sensing supports environmental awareness, object recognition, and spatial mapping. For inward sensing, it enables iris authentication and tracks eye movements, gaze direction, and pupil dynamics for natural, intuitive human-machine interaction. WiseEye is gaining strong traction in smart glasses with a growing number of design-in engagements underway among global tech leaders, solution-type providers, and smart device specialists. Certain advanced smart glasses are poised to enter mass production later this year. For WiseEye in the smart glasses market, that concludes my report Jordan Wu: for this quarter. Thank you for your interest in Himax. We appreciate you joining today's call and are now ready to take questions. Yes. Thank you, Jordan. And ladies and gentlemen, we will now open for questions. If you would like to ask a question, please press the star key and number one on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it is your turn to speak, you may press the star key and number two to cancel the question. In addition to submitting questions via phone, you may also submit your question through the webcast system, where the checkbox is available on the right-hand side of the screen. Thank you. To ask a question, you may press the star key and number one on your telephone keypad or submit your questions through the webcast system. Thank you. If you would like to ask a question, please press the star key and number one on your telephone keypad. Thank you. Operator: Now, we will have our first question. Operator: Thank you for the question from Morgan Stanley. Go ahead, please. Karen Tiao: Yeah. Thank you, Jordan and Karen, for taking my question, and congrats on the great results. Yeah. So my first question is on first quarter gross margin. May I know why the margin would be flat to down quarter over quarter? And in first quarter, is it because of product mix or are we seeing elevated pressure coming from like the increasing material cost and also the offset cost. Thank you. And I have a follow-up. Operator: Thank you, Tiffany. Jordan Wu: Actually, we are only guiding for a flat to slight decline only, so Jordan Wu: we are not seeing material change Jordan Wu: from the Jordan Wu: gross margin of last quarter. Jordan Wu: And the difference is really the product mix Jordan Wu: change. Jordan Wu: We are seeing, proportion-wise, slightly less auto shipment in Q1 compared to last quarter. Jordan Wu: And you pointed out about the material price increase, which is obviously a factor, and it has been a factor for, like, Jordan Wu: a pretty long time, as we all know. As we know, gold prices have been increasing over the years, and now on top of that, we are seeing foundry capacity tightening and ASPs appear to be rising. Jordan Wu: And Jordan Wu: for that reason, we, I mean, with our foundry vendors, we are in discussion with them Jordan Wu: on how to get our Jordan Wu: delivery support, while in the meantime hoping for a Jordan Wu: manageable price increase. Jordan Wu: From that. And at the same time, we are also Jordan Wu: in active discussion with our customers Jordan Wu: about the possibility for a product price increase to reflect our cost. So both are ongoing. We do not have any conclusion yet, but I think Jordan Wu: you know, Jordan Wu: so far this is all pretty recent, and so far, we are seeing our customers Jordan Wu: all kind of recognize the fact that, as we all know, memory demand Jordan Wu: squeezes out the Jordan Wu: supply of other types of ICs, and therefore demand appears to be rising for other kinds of non-memory IC products because our supply is being squeezed, and prices are rising. So again, we are in discussion with both our customer side and vendor side. That does not really quite, that is not really quite a factor for our Q1 gross margin guidance. If anything, I think that is going to become a factor starting from Q2 and onward. Well, thank you for your question. Karen Tiao: Alright. Very clear. Thank you. So my second question would be regarding CPO. Could you give us more details or maybe some guidance for the CPO revenue in maybe 2026 and 2027? As I think investors are very excited about the momentum and progress in this area. Thank you. Operator: Thank you. Actually, we are also online getting a few questions regarding CPO. So I will try to kind of address them together. Again, we said that in last quarter's earnings call, and I am going to repeat that now: the main goal of 2026 for us and also for our partner, ForeSee, is to complete the validation Jordan Wu: of both our Gen 1 and Gen 2 products with Jordan Wu: partners. So with the validation being the target, the revenue contribution will be limited for 2026 because we will be talking about sample shipments Jordan Wu: only. Notably, while I am commenting on 2027, Jordan Wu: in close collaboration with Jordan Wu: our Jordan Wu: anchor customer and partner, we are close Jordan Wu: to finalizing the Gen 2 product, which targets Jordan Wu: production readiness, Jordan Wu: targeting bandwidth of greater than 6.4T. For this Gen 2 product, we can potentially see meaningful top and bottom line contribution starting from 2027, even before the official MP gets started. Jordan Wu: The reason why I emphasize this is because Jordan Wu: when and how this CPO product will start mass production is really a call Jordan Wu: which can only be made by the customer. We do not really know. And a reminder that it is actually a complex and lengthy ecosystem Jordan Wu: run by our customer. Right? So Jordan Wu: it is not a matter of when we are proven to be ready, Jordan Wu: the customer can just click a button and then go into full-volume production. It is not going to happen that way. So we do not Jordan Wu: have full visibility on exactly when and how the mass production ramp will take place. Our Jordan Wu: current view is that Jordan Wu: it is likely to be 2027 or 2028. We do not know. However, even before the official ramp, official MP—let’s say it is 2027 or 2028—because prior to the official MP, there will be further sample shipments for various purposes, with a certain quantity, which will be greater than 2026. So even before the official MP gets started, just from pre-MP shipments, based on internal count, the contribution can be already pretty meaningful for Himax in terms of our total revenue and also for our total profit. Right? So I guess that addresses your issue about 2027. And again, I want to emphasize, Jordan Wu: this Jordan Wu: product targeting 6.4–6.5T bandwidth spec Jordan Wu: is Jordan Wu: done in close collaboration with our anchor customer and partner. It is not that we are closing our doors and trying to think of a product and push it to the customer. No. From the beginning to now, it has been a joint development Jordan Wu: by our direct customer, direct partner ForeSee, and Jordan Wu: Himax, and the so-called 6.4T transmission product spec targets the AI data center market with the biggest volume potential while demanding the highest transmission bandwidth—meaning you are talking about the GPU market, Jordan Wu: which Jordan Wu: requires a very high Jordan Wu: transmission rate. Jordan Wu: So I guess that, Tiffany, Jordan Wu: kind of addresses your question directly. And also, people ask about Jordan Wu: what is the volume potential or revenue potential Jordan Wu: when it starts MP. For this, I will kind of repeat what I mentioned earlier Jordan Wu: in our earlier Jordan Wu: session: even in what I call early stage of mass production—meaning far from reaching full penetration, full deployment, and so on and so forth—in early stage mass production, Jordan Wu: for Himax, Jordan Wu: we will be talking about hundreds of millions of dollars of sales. So it is going to be very, very significant, based on what the customer is telling us, based on how we price it, and based on our internal calculation. And I am still holding the same view now. The good news is we do have existing WLO capacity to support and manage a pretty big volume of production for that kind of scale—hundreds of millions of dollars of annual sales. Okay. So I guess that kind of summarizes my answer for all questions related to CPO right now. Operator: Thank you. Thank you. Jordan Wu: If you would like to ask a question, you may press the star key and number one on your telephone keypad. Thank you. Operator: I do have a question Jordan Wu: from online inquiry: Our OLED sales is going to be huge in 2026. Is price at a price premium versus conventional panels? Actually, as we said in our prepared remarks, we started, for smartphone, shipping in mass production volume Jordan Wu: actually a bit in last quarter and certainly this quarter. Jordan Wu: But the sales contribution from the smartphone OLED for Himax, Jordan Wu: and if you combine the smartphone OLED for Himax together with IT and automotive all this together, Jordan Wu: our Jordan Wu: expected sales contribution for 2026 is still less than 10% of our total sales. So I would say probably high single digits of contribution. Jordan Wu: To the Jordan Wu: ramp age, the real ramp age is going to be 2027. Jordan Wu: In a minute, I will get back to your question about margin. For Himax, Jordan Wu: the OLED products gross margin for smartphone is actually lower than our corporate average. So to be honest, we are not very, very keen. I mean, we recognize the fact that our peers are already ahead of us and probably shipping bigger volume than us. So it is already a very competitive market with low margin across the board. That is for smartphone. However, I would say something very different for automotive OLED and IT OLED. The ICs in these two areas are our focus area right now, and they both enjoy much better gross margin compared to our traditional LCD products. Also, on a per-panel basis, the IC content is materially higher Jordan Wu: than LCD products. So I would probably describe our status separately for auto and IT. First on auto, we are in strategic partnership with top-tier Korean and Chinese panel makers, and this is a market which is now being Jordan Wu: led by the very best, and we are the Jordan Wu: prime IC partner for both Korean panel makers Jordan Wu: and, I would say, Jordan Wu: Chinese leaders. We expect to see breakout demand from 2027, mainly because it is actually now the Korean makers leading the charge in terms of aggressively promoting the OLED market, which up to now has been, bottom line, has suffered from two main factors. One is cost, and the other one is reliability. Through many years of effort across the ecosystem, the reliability has improved. So it is an issue of yesterday, no longer an issue. So the real issue is now cost. But Korean makers, they have a lot of legacy OLED capacity which can only do rigid displays. So they are taking advantage of those capacities which are fully depreciated, running with very good efficiency and so on and so forth, to Jordan Wu: price their products aggressively, Jordan Wu: to the extent that the OLED prices for automotive products in certain specs are already approaching the levels of LCD products already. And certainly, OLED enjoys better quality and lighter weight and so on—a few very good benefits. So when you start to see prices approaching those of LCD, Jordan Wu: we are in the middle of very, very busy design activities with our panel makers and Jordan Wu: tier-ones Jordan Wu: at the moment, with a lot of design win projects going on, many of which are slated for mass production in 2027. So this year, while we do ship some volumes, we think, hopefully, 2027 volume will be much, much bigger than this year. For this, we offer our standard products including driver IC and timing controller to both leading panel customers for both TCON, timing controller, and driver IC. On top of that, we also offer discrete touch IC, where we are now leading the pack in performance compared to their old vendors. So we are winning a lot of new design projects right now for our touch controller, with mass production already taking place with a few Jordan Wu: leading Jordan Wu: international and Chinese names. So that is for Karen Tiao: automotive. Jordan Wu: For IT, slightly different story, but very similar timing—2027 is likely to be the breakout year. Now for IT, you need larger panel sizes. So you do require a Gen 8.5 or 8.6 to be mass producing IT products effectively. Korean panel makers led the charge a couple of years ago. They have completed their 8.5 Gen production line. But Chinese are catching up. Jordan Wu: So Jordan Wu: across the board, quite a few Chinese panel makers are starting mass production for their Gen 8.6 lines, all targeting IT products, mainly tablet and notebook. And, likewise, we are going through very, very busy design stages at a few such customers. The story here is that when you have new Gen 8.6 OLED lines coming into production around the same time—2027—it is likely to bring price pressure, and that certainly, for market demand from notebook makers, is good news. And, again, Jordan Wu: you know, Jordan Wu: OLED panels enjoy lighter weight, better contrast, better brightness, and good power consumption—benefits we all know. The major issue stopping OLED panels from high penetration is cost. The fact that quite a few Chinese Gen 8.6 lines are coming online starting 2027 is likely to trigger the demand. So, again, we are going through design stages right now. Any other question? Yes. Okay then. Thank you, Jordan. And we do not have further questions at the moment. We thank you for all your questions, and I will pass the call back to Jordan. Thank you. Thank you. As a final note, Karen Tiao, our Head of IR/PR, will maintain investor marketing activity and continue to attend investor conferences. We will announce the details as they come about. Thank you, and have a nice day. Yes. Thank you. And ladies and gentlemen, this concludes Fourth Quarter 2025 Earnings Conference. You may now disconnect. Thank you again. Goodbye.
Operator: Good morning, and welcome to the Getty Realty Corp. fourth quarter 2025 earnings call. This call is being recorded. After the presentation, there will be an opportunity to ask questions. Prior to starting the call, Joshua Dicker, Executive Vice President, General Counsel, and Secretary of the company, will read a Safe Harbor statement and provide information about the non-GAAP financial measures. Please go ahead, Mr. Dicker. Thank you, operator. I would like to Joshua Dicker: Thank you all for joining us for Getty Realty Corp.’s fourth quarter and year-end earnings conference call. Yesterday afternoon, the company released financial and operating results for the quarter and year ended December 31, 2025. The Form 8-Ks and earnings release are available in the Investor section of our website at gettyrealty.com. Certain statements made during this call are not based on historical information and may constitute forward-looking statements. These statements reflect management's current expectations and beliefs and are subject to trends, events, and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Examples of forward-looking statements include our 2026 guidance and may include statements made by management, including those regarding the company's future operations, future financial performance, or investment plans and opportunities. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. I refer you to the company's Annual Report on Form 10-K for the year ended December 31, 2024, as well as any subsequent filings made with the SEC for a more detailed discussion of the risks and other factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. You should not place undue reliance on forward-looking statements, which reflect our view only as of today. The company undertakes no duty to update any forward-looking statements that may be made during this call. Also, please refer to our earnings release for a discussion of our use of non-GAAP financial measures, including our definition of adjusted funds from operations, or AFFO, and our reconciliation of those measures to net earnings. With that, let me turn the call over to Christopher Constant, our Chief Executive Officer. Thank you, Josh. Good morning, everyone, and welcome to our earnings call for the fourth quarter and year-end 2025. Joining us on the call today are Mark O’Lear, our Chief Investment Officer and Chief Operating Officer, Brian Dickman, our Chief Financial Officer, and RJ Ryan, our Senior Vice President of Acquisitions. As previously announced, RJ will succeed Mark as Chief Investment Officer upon Mark's retirement at the end of this month. I will lead off today's call by providing highlights of Getty Realty Corp.’s 2025 financial performance and investment activity. Mark and RJ will then discuss our portfolio and investments in greater detail, and Brian will provide additional information regarding our earnings, balance sheet, and 2026 AFFO per share guidance. I am pleased to report that the combination of stable rental income from our in-place portfolio and strong yields from acquisitions produced strong rent and earnings growth for the fourth quarter and full year 2025. Getty's annualized base rent grew by nearly 12% in 2025, while AFFO per share was up 5% for the fourth quarter and 3.8% for the full year, which was the high end of our increased earnings guidance. Our in-place portfolio continues to provide a solid foundation for our business with essentially full occupancy and rent collections and stable rent coverage. Our tenants continue to benefit from consumer trends that drive performance at convenience and automotive retail properties, namely demand for convenience, speed, and do-it-for-me services, and their businesses have proven resilient as they have historically. Turning to our growth initiatives, for the year, we invested approximately $270,000,000 at an initial cash yield of 7.9%. I would like to highlight a few accomplishments for the year, which demonstrate the effective execution of our strategy to accretively grow and further diversify our portfolio. First, the $100,000,000 sale-leaseback we closed in October for a 12-property convenience store portfolio in Houston, Texas. These assets are leased to Now and Forever, a growing regional convenience store chain with a dominant market position in densely populated Houston submarkets. Over the last five years, we have acquired more than 60 properties generating nearly $25,000,000 of ABR in Texas, which is now our largest state exposure, including more than 25 properties generating over $14,000,000 of ABR in Houston, which is now our second-largest market after New York City. Second, we made a significant commitment to the collision repair sector when we agreed to provide up to $82.5 million of development funding for the construction of 11 new-to-industry collision centers for a top-three operator in the sector. We expect a number of these sites to open in 2026 and look forward to building on our momentum in this subsector of automotive service. We also completed our first travel center investments with existing and new tenants who have expanded their store networks by building or acquiring large-format C-stores and travel centers. We view investing in travel centers as a natural extension of our buy box, and in 2025, we acquired four travel centers for $47,100,000. Operator: Additional 2025 highlights include Christopher Constant: A record year of investments for drive-thru quick-service restaurants, where deliberate resource allocation and targeted sourcing efforts resulted in Getty investing nearly $40,000,000 across 28 properties, representing approximately 15% of our investment activity for the year. We also continue to allocate capital to dense and growing markets. During the year, more than 75% of our 2025 investment activity was in top 100 markets around the U.S., and we increased exposure to a number of attractive metro areas, including Atlanta, Dallas, Houston, Las Vegas, Memphis, and San Antonio. We also demonstrated the consistency of our relationship-based sale-leaseback acquisition strategy during the year by directly negotiating transactions with tenants that drove more than 90% of our closed transactions in 2025, which helped us add 13 new tenants to our portfolio during the year. Finally, our ability to maintain a healthy investment pipeline, which currently consists of approximately $100,000,000 of investments under contract, most of which we expect to fund by 2026. Sticking with our pipeline, including our opportunities that are in various stages of underwriting and negotiating, our investment team continues to do an excellent job sourcing investment opportunities that fit our well-defined strategy, meet our stringent underwriting criteria, and generate consistent earnings growth. Our collective ability to execute period after period regardless of market conditions is a testament to the platform and culture we have established at Getty Realty Corp. As we think about 2026 and beyond, we continue to be excited about our strategy, the sectors we invest in, our people, and the platform we have built. We believe we are on a path to accelerate our growth trajectory as we expand our relationships, extend our underwriting to new opportunities, and further refine our processes with the help of data-driven analysis to enhance our investment decisions. I would like to close with some comments on our upcoming management transition. As previously announced, Mark O’Lear is retiring in February. During his time at Getty Realty Corp., Mark broadened our investable universe, redefined our underwriting approach, and created a redevelopment program that has seen us complete more than 30 value-add projects. I want to congratulate Mark on a successful 40-year career and thank you for being my partner for the past decade plus at Getty Realty Corp. We will miss having him here on a daily basis. I am equally excited to announce that RJ Ryan, our current SVP of Acquisitions, will be promoted to the position of Chief Investment Officer. RJ has been with Getty Realty Corp. for nearly a decade, has led our acquisitions team since 2018, and is ready to take on additional leadership responsibilities as our CIO. I hope you all enjoy getting to know RJ better as he plays a more visible role with the investor community. With that, I will turn the call over to Mark. Thank you, Chris. I appreciate the kind words and would like to thank everyone at Getty Realty Corp. It has been an honor to lead the company's real estate efforts for the past decade. RJ is more than ready for his new role, and I am confident that Getty Realty Corp. will be successful at continuing to execute its growth plans. Turning back to the business, at year-end, our lease portfolio included 1,169 net leased properties and two active redevelopment sites. Excluding the active redevelopments, occupancy was 99.7%, and our weighted average lease term was 9.9 years. Our portfolio spans 44 states plus Washington, DC, with 61% of our annualized base rent coming from top 50 MSAs and 77% coming from top 100 MSAs. We have performance insight into 95% of our ABR through site-level financial reporting or financials derived from public reporting companies. Our rents for properties where we receive site-level reporting continue to be well covered with a trailing twelve-month rent coverage ratio of 2.5x. Turning to our investment activities, I will let RJ take you through our results. Thanks, Mark. Good morning, everyone. For the year, we underwrote a record $6,800,000,000 of potential investments. Consistent with our objective to diversify our portfolio within our target sectors, 54% of our underwriting was focused on non-convenience store properties including auto service centers, primarily collision centers and oil change locations, drive-thru quick-service restaurants, and express tunnel car washes. We had a strong fourth quarter in which we invested $135,400,000 across 26 properties at an initial cash yield of 7.9%. The weighted average lease term on acquired assets for the quarter was 15 years. Highlights of this quarter's investments include the acquisition of the 12-property $100,000,000 sale-leaseback we completed with Now and Forever in October, two additional convenience stores for $18,700,000, which included a travel center and a New York City property that we previously leased, six auto service centers for $9,900,000, of which $1,400,000 was previously funded, two express tunnel car wash properties for $10,900,000, of which $7,400,000 was previously funded. We also advanced incremental development funding in the amount of $3,600,000 for the construction of new-to-industry collision centers, oil change locations, and drive-thru QSRs. These assets are either already owned by the company and are under construction or will be acquired via sale-leaseback transactions at the end of the projects’ respective construction periods. For the year, Getty Realty Corp. invested $268,800,000, which included the acquisition of 73 properties for $278,300,000, of which $23,100,000 was previously funded, and incremental development funding of $13,600,000. The weighted average initial yield on our investments was 7.9% for the year, and the weighted average lease term for the acquired assets was 15.8 years. Subsequent to year-end, we invested an additional $8,700,000 for the acquisition or development of four drive-thru QSRs and four auto service centers. Beyond our disclosed pipeline of approximately $100,000,000 of investments under contract, the majority of which we expect to fund in 2026 at initial cash yields in the high 7% area, we continue to source actionable opportunities across our investable universe. These are all properties that will be added into our portfolio and accretive to earnings as we look to further scale and diversify our business. Thank you, RJ. As my final prepared remarks, I am pleased to say that as a result of our investment activity over the last several years, Getty Realty Corp. currently has the most diversified portfolio in terms of tenants, sectors, and geographies in the company's history. Since the onset of our current investment strategy, which emphasizes both growth and diversification, we have added 49 new tenants to our portfolio and diversified our annual rent streams, with nearly 30% of our annual base rent now derived from non-convenience and gas properties. With that, I turn the call over to Brian. Thanks, Mark. RJ, good morning, everybody. Brian Dickman: Yesterday, we reported AFFO per share of $0.63 for Q4 2025, an increase of 5% over Q4 2024. FFO and net income for the quarter were $0.64 and $0.45 per share, respectively. For the full year 2025, AFFO per share was $2.43, an increase of 3.8% compared to the full year 2024. FFO and net income for 2025 were $2.34 and $1.35 per share, respectively. A more detailed description of our quarterly and annual results can be found in our earnings release. Our corporate profile contains additional information regarding Getty Realty Corp.’s earnings and dividend per share growth over the last several years. Starting with some color on G&A expenses, management focuses on the ratio of G&A excluding stock-based compensation and nonrecurring retirement costs to cash rental and interest income. That ratio was 9.5% for the full year 2025, a 10 basis point improvement over 2024. Both the year and fourth quarter included elevated legal and professional fees, both transaction-related and other, that we generally consider nonrecurring. Absent those charges, we would have achieved a more significant reduction in this ratio. In 2026, we expect G&A growth to be less than 2% and for our G&A ratio to fall below 9% as we focus on controlling expenses and continuing to scale the company. Moving to the balance sheet and liquidity, as of December 31, net debt to EBITDA was 5.1x, or 4.8x including unsettled forward equity, both metrics well within our target leverage range of 4.5x to 5.5x. Fixed charge coverage for the period was 3.8x. During the fourth quarter, as previously announced, we closed on $250,000,000 of new unsecured notes. Those notes funded in January, and we used the proceeds to repay borrowings under our $450,000,000 revolving credit facility. Pro forma for the notes transaction, we have $1,000,000,000 of senior unsecured notes outstanding with a weighted average interest rate of 4.5% and a weighted average maturity of 6.2 years, as well as full borrowing capacity under our revolver. We have no debt maturities until 2028. Turning to equity capital markets, during the fourth quarter, we settled approximately 2,100,000 shares of common stock for net proceeds of approximately $59,100,000 and entered into a new forward sale agreement to sell approximately 400,000 shares for anticipated gross proceeds of approximately $12,700,000. As of December 31, we had approximately 2,100,000 shares of common stock subject to outstanding forward sale agreements which, upon settlement, are anticipated to raise gross proceeds of approximately $62,600,000. We continue to be in a strong capital position and, pro forma for the notes transaction, have more than $500,000,000 of total liquidity including unsettled forward equity, availability on our revolver, and cash on the balance sheet. We have sufficient capital to fund our committed investment pipeline plus incremental investment activity as we look forward to 2026. With respect to guidance, we are reaffirming the AFFO per share range of $2.48 to $2.50 that we introduced earlier this year. As a reminder, our guidance reflects the current run rate from our in-place portfolio with certain expense and credit loss variability and does not include prospective investment or capital activities. We think this approach remains appropriate for our business, but note that historically, over the last five years, we have averaged more than $200,000,000 of annual investments and added approximately 250 basis points of AFFO per share growth beyond the midpoint of our initial guidance range. Pages 8 and 10 of our corporate profile highlight our earnings results and investment activity over the last several years, and page 22 illustrates the difference between our actual results and our initial guidance since 2021. We look forward to updating the market on the positive impact that our investment program has on our earnings as we move through the year. With that, I will ask the operator to open the call for questions. Operator: Thank you. We will now conduct a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 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. Once again, that is 1 at this time. One moment while we poll for the first question. The first question comes from Upal Rana with KeyBanc Capital Markets. Please proceed. Upal Rana: Great. Could you provide a little more detail on the $100,000,000 investment pipeline you mentioned in the release? Any types of assets or any timing there on funding that you can provide? Brian Dickman: Yeah. Hey, Upal. It is Brian. Happy to do so. About 80% of that, if you are looking at property types, about 80% of that is auto service, both collision centers and oil change locations, followed by C-store, drive-thrus, and car wash in that order, making up the remaining 20%. And then from a transaction type perspective, about 80% of that is development funding. That is sort of the long end of that deployment range that we put out, and the balance is regular acquisitions that are more in the, you know, call it 60-day, you know, 60–90 day type time frame from a closing perspective. Upal Rana: Okay. Great. That was helpful. And given the improved share price and cost of capital relative to last year, do you think you can do more investment volume this year relative to last year? Brian Dickman: Well, I will just say that I think we are off to a great start. Right? Obviously, it is a couple of weeks into the year to have $100,000,000 under contract. Christopher Constant: We are really enthused by the pipeline we have. Behind that, that is in various stages of negotiation and underwriting. I think we are already north of 25% of our last year's underwriting volume sitting here today in early February. Certainly, the improved cost of capital is helpful. We are looking at investments and looking at our available opportunities in the capital markets. So I think I would say we are off to a great start. We are optimistic. Brian Dickman: And I think the team has done a great job all around in bringing great opportunities in for us to evaluate, and we look forward to adding a lot of that to our company as we move through the year. Upal Rana: Okay. Great. Thank you. Operator: The next question comes from Mitch Germain with Citizens. Please proceed. Mitch Germain: Thank you. Just the cadence of that $100,000,000, the way to think about it, it is mostly going to hit a little bit each quarter. Is that the way to think about it? Brian Dickman: Mitch, it is Brian. That is what I was just alluding to. Again, think you have, call it, 20% of that that is regular acquisitions that are, call it, average 60 days, so kind of 30–90 days. That is the front end of that deployment range, kind of the three-month area. Development funding gets deployed over time. We expect the majority of that to be deployed over the next twelve months. The cadence is really dictated more by the tenants, their development schedules, when they submit for reimbursement. But assume that that gets deployed throughout the year, which should give you a little bit more visibility. But candidly, we do not always have that until the reimbursement requests start coming in. And then I would just add, maybe to reiterate or reemphasize what Chris said, that is simply what we have under contract. There is a fairly sizable pipeline behind that. As we have seen in past years, there are deals that from a public disclosure standpoint never make it into our pipeline, so to speak. Now and Forever was a great example. When initially reported, that deal was not under contract, and it closed before we reported the next quarter. So I say that just to highlight again that that is what is under contract today. That is the timing that we are looking at with respect to deployment for the $100,000,000, but there is quite a bit of deal activity behind that, certainly some of which we would expect to hit this year as well. Mitch Germain: Great. And then to that point, obviously, Chris mentioned how about 25% of that, I will call it $7,000,000,000 you underwrote last year, has already been kind of under consideration. I am curious, Chris, what do you think is driving that increased emphasis to potentially sell here? Brian Dickman: Yeah. Hey. It is Mark. Mitch Germain: Hi, Mark. Brian Dickman: A lot of things right now. The team continues to do a great job sourcing opportunities both with new Mitch Germain: Potential tenants and managing Brian Dickman: With our existing tenant base. We continue to talk about diversity across all the asset classes that we trade in. So we introduced a bigger buy box Christopher Constant: A few years ago, and we are seeing the momentum and the results of that. Mitch Germain: You know, the ability for us to both transact at the different ranges of Christopher Constant: The cap rates that are out there in the market Mitch Germain: You know, allow us to source opportunities. Christopher Constant: You know, we are sensing, Chris used the word, an optimistic tone around the market. The buyer pool seems more active coming out of the year. Brian Dickman: I am sorry. The seller pool seems more active coming out of the year. So it is a combination of a lot of things. So it is just more Christopher Constant: More of the same around the efforts to develop business across all our asset classes and across the geographies and with routine tenants. You know, routine business with our existing tenants, I would say. Brian Dickman: So Mitch Germain: Great. Last one for me. Arco priced an IPO last night. Should we think about this as a potential credit-enhancing event? Operator: Yeah. You know, so Brian Dickman: In conversations with them, and I think one of their primary motivations was allowing investors to see both pieces of their business independently, the retail assets and the wholesale business. Christopher Constant: Yep. The use of proceeds, as stated, was to pay down debt. So as a landlord, we certainly appreciate that. I do think that is a credit enhancement. Brian Dickman: Gives folks more visibility into the various pieces of their business. What I have said before, I will just say again. Arco has been a tenant of ours for almost twenty years at this point. Mitch Germain: You know? Christopher Constant: Fantastic operator. Brian Dickman: He has got a defined strategy that he is working through. We have got five leases with him that we can see site-level Christopher Constant: Information on, and we are comfortable with Brian Dickman: How all those leases are performing. So Christopher Constant: I am thrilled for Ari that he got his deal done, and certainly, I think from an investment standpoint, or if you are focused on maybe the fuel side or on the retail side, it does give you the ability to see those businesses and how each one operates independently. Mitch Germain: Great. Good luck in 2026. And, Mark, wishing you the best. Brian Dickman: Thank you. Operator: The next question comes from Michael Gorman with Bank of America. Michael Gorman: Thank you. Good morning. Operator: Brian, just following up on your comments on the exclusion of Michael Gorman: Prospective investment activity in the initial guide, I wanted to clarify if the current guide includes the $8,700,000 of additional acquisitions subsequent to quarter-end. And then how much of that $100,000,000 pipeline is in the current initial guidance? Brian Dickman: Yes. Go ahead, Michael. The $8,700,000 is in there. So it is a point-in-time run rate, usually at the day of the release or the day before. So that is in there. And then by definition or by approach as it currently stands, none of the $100,000,000 would be in that guidance number. Michael Gorman: Thank you. And then maybe for Chris, as you kind of balance the portfolio with maintaining your niche and expertise, what do you think now with 30% of ABR from non-convenience and gas is the right balance, or are you looking to increase from there? Brian Dickman: Well, what I would say is, Mark mentioned that now 30% of our rent comes from Christopher Constant: Non-convenience and gas asset classes, and that is basically over the last six years at this point, or five and a half years. During that time period, we have made significant investments in the C-store sector, including Now and Forever, and there were some larger deals that we did in 2024 in the sector. So we still like all the— I think what you are seeing, though, is on balance, the underwriting has gone from maybe $4,000,000,000 to almost $7,000,000,000 as we develop relationships in these other verticals, which do take some time, given how we like to transact with portfolio sale-leasebacks. Brian Dickman: You are starting to see the strategy really take off. Christopher Constant: You know, whether it is the QSR work we did this year, we have done a lot in the car wash business. So we do not have defined limits or category limits within those asset classes, but I think you can expect to see the business become more diverse just naturally as we develop relationships, have more resources focused on Brian Dickman: Not only C-store, but some of the other verticals. Michael Gorman: So I think we are really happy with how the business has Christopher Constant: Expanded and become more diversified and gotten larger, but there are no hard targets in any asset class to answer your question specifically. Michael Gorman: Thank you. Operator: The next question comes from Michael Goldsmith with UBS. Please proceed. Michael Goldsmith: Yes. Justin on for Michael. Thanks for taking the question. Maybe just two quick ones for me. We have seen other net lease REITs increase exposure to C-stores. Do you expect your cap rates of 7.9% to hold firm Christopher Constant: And then secondly, Getty sold seven properties in 4Q. Can you provide some color as to why these were candidates to be disposed of? Thanks. Yeah. I will take the first one, which is the competitive landscape. And we have been in the sector for a long time in the C-store. Brian Dickman: The other REITs that you are referring to that are investing in C-stores have either been buying them for a long time, and we have been competing against them, Michael Goldsmith: And continuing to Brian Dickman: Add attractive properties to our balance sheet, or they are newer Christopher Constant: Entrants, and the sector itself has grown. So I feel very comfortable about the way Getty Realty Corp. transacts and our ability to source and close investments at accretive spreads for us. Brian Dickman: The competition is not a new dynamic in this asset class. Christopher Constant: Whether it is just the way people are referring to C-stores or just talking about it on their phone calls. I do not want to comment too much on that. Do you want to take the disposals? Michael Goldsmith: The disposals? Brian Dickman: Yeah. Well, Brad, do you want to take the disposals? Michael Goldsmith: I would just say quickly on the disposals, as Brian said, it was seven properties. You know, we are always evaluating the portfolio for different opportunities. Three or four of those actually went back to existing tenants. That happens periodically where we will sell assets to a tenant. Sometimes, it is a CapEx dynamic in terms of who wants to ultimately invest in those properties. In this case, it is a very small portfolio, but it was a very low, like, low-single-digit cap rate. Just the way that operator valued the portfolio, it was opportunistic for us. And then the others were just, you know, an asset here and there that for, you know, tactical reasons or otherwise, we just thought it made sense to dispose of. So no, I would not say there are any universal trends or anything that drove it. Just an opportunistic deal and a couple of tactical dispositions. Michael Goldsmith: Great. Thank you. Michael Goldsmith: Thank you. Operator: At this time, there are no further questions in queue. I would like to turn the call back to management for closing Brian Dickman: Excellent. Thank you, operator, and Mitch Germain: Thank you all for joining us for our fourth quarter Brian Dickman: Year-end 2025 call. We look forward to getting back on with everybody in April when we report the 2026. Operator: Thank you, 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 great day.
Operator: Greetings. Welcome to Rollins, Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I would now like to turn the conference over to Lyndsey Burton, Vice President of Investor Relations. Thank you. You may begin. Thank you. In addition to the earnings release that we issued Lyndsey Burton: The company has also prepared a supporting slide presentation. The earnings release and presentation are available on our website at www.rollins.com. We have included certain non-GAAP financial measures as part of our discussion this morning. The non-GAAP reconciliations are available in the appendix of today's presentation as well as in our earnings release. The company's earnings release discusses the business outlook and contains certain forward-looking statements. These particular forward-looking statements and all other statements that will be made on this call, excluding historical facts, are subject to a number of risks and uncertainties. Actual results may differ materially from any statement we make today. Please refer to yesterday's press release and the company's SEC filings, including the Risk Factors section of our Form 10-Ks for the year ended 12/31/2025, which will be filed later today. On the line with me today and speaking are Jerry Gahlhoff, President and Chief Executive Officer, and Kenneth Krause, Executive Vice President and Chief Financial Officer. Management will make some opening remarks, and then we will open the line for your questions. Jerry, would you like to begin? Thank you, Lyndsey. Good morning, everyone. Jerry Gahlhoff: Fiscal 2025 was another solid year for Rollins. Jerry Gahlhoff: As we achieved a milestone of $3,800,000,000 in revenue. As Ken will detail, we delivered double-digit revenue, earnings, and cash flow growth but we did have a tougher finish to the year in the fourth quarter. Early winter weather caused demand to soften especially in the Midwest and Northeast, which impacted one-time and certain seasonal projects across all three business lines. Revenue from one-time business in the quarter declined by almost 3% compared to year-to-date growth through the first nine months of the year, of 4%. Erratic weather patterns hindered demand for one-time projects and at times made it difficult for us to service the demand that did come through. Organic growth in the recurring portion of our business and ancillary services, which represent over 80% of total revenue, was above 7% for both the quarter and the year. Our underlying markets remain healthy, customer retention rates are strong, and we are confident that nothing has fundamentally changed with respect to our end consumer. Lower volumes in the quarter did hamper profitability which can happen in shoulder seasons, particularly when weather gets choppy. It is important that we maintain healthy staffing levels ahead of peak season so that we are not hiring, training, and onboarding a large number of new teammates at the same time seasonal demand ramps up. We have learned that extreme ramp-ups in hiring drive teammate turnover rates higher and that will not yield the optimal experience for our customers. This can impact productivity in the short term as it did in the fourth quarter. But it is the right decision for the business long term, as it sets us up to capitalize on peak season demand that is right around the corner. Moving on to some highlights. This year, we prioritized getting better as we become bigger, and made a number of investments throughout our business to support our teammates and enhance our customer experience. In support of our efforts around the Rollins Way, we are making significant investments to support the future growth of our company and establish consistent leadership behaviors across the enterprise. Our talent and development team has designed a program called the CoLab for all people managers. Servant leadership is the foundation of these sessions, which are designed to help leaders enhance skills for personal development, team development, and business growth. Our efforts here are intended to create a culture of cross-brand collaboration and cross-functional talent where teammates can seamlessly transfer between brands, divisions, our home office, and field operations. This will further enhance career opportunities for our teammates and create a robust pipeline of future leaders who can not only sustain our growth, but also help us reach our full potential. Operationally, we remain committed to hiring and developing top talent. The hiring environment was healthy in 2025, as we put significant energy into onboarding the right people, in both support functions and the customer-facing side of our business. We are proud of the tenure and experience of our team, as well as their engagement level and commitment to both our company and our customers. While overall teammate retention has been consistently healthy, we have made encouraging progress in improving retention of our newer teammates, specifically those who are with us for one year or less. While there is still work to be done here, we saw teammate retention in this category improve by approximately 8% in 2025 and it has improved nearly 18% since 2023 thanks to our ongoing efforts. In 2025, we closed the acquisition of Sela, and completed 26 additional tuck-in deals. The performance of Sela has continued to exceed our expectations and integration has progressed very smoothly, thanks to the efforts of our collective teams. We have a robust M&A pipeline with a number of opportunities that we are actively evaluating to drive additional growth. As we look ahead to 2026, we are encouraged by the opportunities that are in front of us across all aspects of our business. We remain committed to providing our customers with the best customer experience, and investing meaningfully in our team to drive growth both organically as well as through disciplined acquisitions. We are pleased with where our business stands today and what lies ahead of us in 2026. And I want to thank each of our 22,000 plus teammates around the world for their efforts and contribution to our success in 2025. I will now turn the call over to Kenneth. Thanks, Jerry, and good morning, everyone. Our results for the quarter and the year reflect continued solid execution by the Rollins team. Let me begin with a few highlights for 2025. First, we delivered robust revenue growth of 11% for the year, with strong growth across each of our service offerings. Organic growth was 6.9% for the year, while acquisitions continued to be a meaningful part of our growth profile. Second, despite making significant growth investments, adjusted EBITDA grew by 10.8% to $854,000,000. And finally, we delivered operating cash flow of $678,000,000 and free cash flow of $650,000,000, up 11.6% and 12.1%, respectively, versus last year. Cash flow was negatively impacted by an out-of-period tax payment of $22,000,000 associated with the disaster relief measures that allowed us to defer our payment in the fourth quarter of last year to the first half of this year. Excluding this, free cash flow growth was approximately 20% for the year. Our strong cash flow performance enabled us to execute a balanced capital allocation strategy, deploying over $880,000,000 of capital in 2025 with a focus on investing for growth, while returning cash to shareholders through our growing dividend and share repurchase. Turning to our fourth quarter performance. Revenue in the fourth quarter was up 9.7% and organic growth was 5.7% versus last year. In the fourth quarter, residential revenue increased 9.7%, commercial pest control increased 8.7%, and termite and ancillary was up 11.9%. Organic growth was 5.7% in the quarter across all services. Organic growth was 4.4% in residential, 6.4% in commercial, and 7.6% in the termite and ancillary area. Growth across each category was negatively impacted by softer one-time revenues. Unpacking organic growth further, it is important to look at the recurring and related ancillary service area versus our one-time business. Recurring revenue and ancillary services, which represent over 80% of our business, grew at over 7% organically. The remaining part of the portfolio, primarily one-time work, declined almost 3% in Q4 after growing 4% through the first nine months of the year. This business has more recently grown at approximately 1% to 2% annually. Weather was erratic in the quarter and had an impact here. Demand for one-time services and the ability to service this related demand was particularly subdued in November and December due to early winter weather in the Eastern Half of the United States, where we have significant location density. We see the slower growth in one-time as transitory, while the stability of growth in our recurring and ancillary areas gives us confidence in our outlook, which continues to be anchored to 7% to 8% organic growth. Gross margin was 51% in the quarter, a decrease of 30 basis points. Looking at our four major buckets of service costs: people, fleet, materials and supplies, and insurance and claims, fleet expenses were higher as a percentage of revenue primarily due to timing of vehicle gains compared to last year. This represented 80 basis points of headwind in the quarter. Deleverage from people costs was driven by lower volume in the quarter. These pressures were partially offset by improvement in margins associated with insurance and claims as well as materials and supplies. SG&A costs as a percentage of revenue increased by 50 basis points versus last year. We continue to be bullish on our markets and related position and are making investments in our business that will enable long-term value creation despite the lower volumes we realized in the quarter associated with the one-time business. This had a negative impact on SG&A as a percentage of revenue in the quarter. Fourth quarter GAAP operating income was $160,000,000, up 6.3% year over year. Adjusted operating income was $167,000,000, up 8.1% versus last year. Quarterly EBITDA was $194,000,000 and EBITDA margin was 21.2%. The effective tax rate was 24.7% for the quarter versus 27.3% last year and 24.9% for the full year period versus 26% in 2024. The 2025 rate was lower primarily due to the great work our tax team has done to continue to improve our effective tax rate. Quarterly GAAP net income was $116,000,000 or $0.24 per share. For the fourth quarter, we had non-GAAP pretax adjustments associated with acquisition-related and other items totaling approximately $6,000,000 of pretax expense in the quarter. Considering these adjustments, adjusted net income for the fourth quarter was $121,000,000 or $0.25 per share, increasing just under 9% from the same period a year ago. Turning to cash flow and the balance sheet, operating cash flow decreased 12.4% in the quarter to $165,000,000. As a reminder, cash flow in Q4 2024 benefited from a disaster relief measure granted to those with operations impacted by Hurricane Helene that allowed us to defer an estimated $22,000,000 tax payment, which was paid here in 2025. Free cash flow conversion, the percent of income that was converted into free cash flow, was 137% for the quarter. We generated $159,000,000 of free cash flow on $116,000,000 of earnings. We made acquisitions totaling $21,000,000 and we paid $88,000,000 in dividends in the fourth quarter. Dividend payments increased 11% from the prior year and are at a healthy and very sustainable rate. Including the recent increase announced in Q4, we have raised our regular dividend by more than 80% since 2022. Additionally, we have invested approximately $200,000,000 in share repurchases in the quarter, affirming our long-term view on the value of our company. Our leverage ratio stands at 0.9 times. Our balance sheet remains very healthy and positions us well to continue to execute our balanced approach to capital allocation: reinvesting in the business, growing our dividend as earnings and cash flow compound, and pursuing share repurchases opportunistically. Throughout our history, we have managed this business through an investment grade lens, and we will continue to do so in the future. We are committed to maintaining a strong investment grade rating with leverage well under two times. We are encouraged as we look to 2026 and are focused on delivering another year of double-digit revenue, earnings, and cash flow growth. We continue to expect organic growth in the range of 7% to 8%, with additional growth from M&A of at least 2% to 3%. While we may see weather impacts on the business from time to time, we remain committed to our long-term growth outlook. Additionally, we are focused on improving our incremental margin profile while investing in growth opportunities. We anticipate that cash flow will continue to convert at a rate that is above 100% again in 2026. With that, I will turn the call back over to Jerry. Thank you, Ken. We are happy to take any questions at this time. Operator: Thank you. We will now open for questions. Our first question is from Timothy Michael Mulrooney with William Blair. Please proceed. Good morning. Jerry Gahlhoff: Good morning, Tim. Timothy Michael Mulrooney: Thanks for all the detail around the one-time sales and the recurring base of business. It is all very helpful to understand how the underlying business is performing. But I am curious if you could expand a little bit more on that 7% growth that you are seeing in the recurring and ancillary business. Like, you know, how do you get comfortable that that level of growth is heading into 2026? Like, can you provide any details on retention rate or net gains or customer wins? You know, any of these underlying metrics that might help shed some additional light for us? Jerry Gahlhoff: Tim, this is Jerry. I will walk you through a few of the main points on my mind and maybe Ken can add a little color to it. There is I think there is a lot of data points that we have that give us that comfort, if you will, about the future. In the fourth quarter, we looked at our price increase data and we monitor that throughout the year and we look at what the consumer health is like. For example, we have really super low impact of things like percentages of rollbacks and things along those lines. That gives us a great deal of confidence that our consumer is still healthy. It also indicates to us that we affirm our plan to continue to move forward with our pricing initiatives that we have laid out for ourselves to continue to use price as a lever as we move into 2026. So we are very comfortable there. If you look at the customer retention side, it is very stable and we have also had some areas that have improved. And looking specifically, Orkin, for example, at the net gain of the customers they carried in at what they had at the end of the year compared to the beginning of the year, they had the best performance in growing their customer base that they had since the COVID era. So that first year of COVID was everyone at home and signing up for services and they saw that big net gain there. And this is the best year since then. We look at things and monitor things like our close rates on customers calling in, and that also tells you a little bit about the health of the consumer, you know, the health of our pricing programs, things like that. We look at the leads and our closure rates, the closure rates, it is up. It is not down. So we are also seeing, for example, on ancillary business, our customers are not overly price sensitive. And we have financing options that give them the ability to get the much needed work that they need done, to give them peace of mind and allow them to pay over time. So we see all those. Those are the things that we look at every single day. And it just gives us a lot of comfort. That is why I said what I said fairly emphatically in my opening remarks is that there is nothing fundamental about our business that has changed. We are going to keep doing what we do, and trying to deliver the best service that we possibly can for our continuing growing customer base. Because that is the most important part of our business is the recurring piece and that is where we want to spend our marketing dollars, is creating recurring base and that is how we want to continue to invest in our business. And just to add on to what Jerry had mentioned there, another couple of points. If you look at the recurring organic business, without ancillary, right, if you actually look at it even and unpack it even further, you actually saw 10 basis points more of growth in Q4 versus Q3. And so you are actually seeing that business hold in. If anything, it strengthened a little bit between Q3 and Q4. The ancillary business still growing strong, high teens, mid-teens double-digit. That business normally grows in that 20% range. When you cannot get people on the roof safely and you cannot get them out into the worksite, you will feel the pain and you will feel the impact there. But that business, again, growing at mid to high teens, very healthy, that is the big ticket. That is the nine shots on goal that I have talked about quite frequently with investors. Is that we have all these opportunities and we continue to see good demand there. So I think those two things give us a sense that the business is holding in there, especially that recurring revenue, which is 75% of our business, strengthening by ten or so basis points between Q3 and Q4. And I think too, Ken, you think about 2024 was our best 2024. We were having to lap that in some little more challenging conditions. And we knew starting the year that it was going to be a tougher comparable for us year over year and certainly was a little bit of a headwind for us the last couple of months of the year. Timothy Michael Mulrooney: Yes. Tough comps, definitely. That is definitely another aspect of this whole thing. So that is all great color. Thank you. And I think I am more comfortable with the fact that the underlying business is fine. This is all weather related. Can you dive into this weather disruption by segment? Like, was it more on the, I am thinking about it more like hey, it would be on the resi and termite side more, but your resi business actually held in better than what I was expecting given the comp situation. But then I look at the commercial side, and I saw Ecolab’s fourth quarter results. Their commercial pest business was fine in the fourth quarter. It does not seem like they saw that disruption that you saw. So I am just trying to reconcile all that. Can you talk a little bit about impact by segments from that weather? Kenneth Krause: Yes. I will take that and then Jerry will add on to that as well. But I think just starting with commercial. And looking at the commercial business, commercial recurring business grew at 7.3%. And so again, we continue to see good demand there. The challenge was again one-time business even in the commercial setting, which is roughly 15% of that business. And so you certainly saw the one-time impact on the commercial. You saw it in the residential. I mean our residential recurring business is holding in there and is strong and we feel good about it. But the one-time business, the wildlife business and things like that, certainly felt the impact of the slower, the challenging weather patterns. And then on the termite, you are spot on. The termite, the pretreat, that sort of work you saw some weakness. The recurring, the base in the recurring business, continues to do very well. It continues to be a very healthy growth pace for us. But some of the pretreat one-time termite you saw a little bit of weakness. And so I think when you frame it, we feel good about, again, all of the businesses in the recurring businesses coming through. Feel like the fact that we could not get out, we could not service, we could not get that work done, that is what caused the most significant impact on our revenue growth in the quarter. And Tim, in looking at the commercial side in particular, it was the commodity fumigation business that on the tail end of the year had, that is the one that is all one-time work. And year over year, we had a comp there that was more challenging for us. And so again, while our recurring base in commercial continues to grow, the one-time in the isn’t the one-time necessarily selling to our existing customer base on programs and services. It was driven very heavily through commodity fumigation. And then when you look at the residential side, a lot of that is wildlife and some of the seasonal pests that we did not have as long of a window of time to get at some of those seasonal pests that take the fall pests, box elder bugs and stink bugs and these kinds of things that are seasonal things that come up that we kind of rely on and get those one-time calls to go take care of them or general pests just seeking indoor shelter. That season was just a little shorter. And it was really more in the East, Eastern Seaboard, parts of the Midwest. We did not see as strong of a trend in that out West and California and some of those other markets that remained very strong. So again, that just tells us that the underlying business is still pretty strong. It was there, but we were just impacted by this choppiness. Timothy Michael Mulrooney: Understood. Commodity fume, I had not even considered that, that fully explains it on the commercial side as well. So thank you for all the color, guys. This is very helpful. Jerry Gahlhoff: Great. Operator: Thank you. Our next question is from Manav Patnaik with Barclays. Please proceed. Yes, I was hoping you could just put some numbers by segment as well, how you gave us the plus 4% year to date and then down 3% for fourth quarter. Manav Patnaik: Just by segment as well? And also, what is the margin profile of this one-time business just to consider that as well? Kenneth Krause: Yes, that is a great question, Manav. And thank you for asking that. The margin profile on this one-time business is oftentimes better than the margin on our recurring business. Because we are pricing that business assuming that it is not coming back. And so you are going to a customer knowing you are going one time, you might get $200, $300, $400 for a service. The cost is not necessarily that different than it would be on a recurring service that you might be getting $150 or $200 for, for example. So you see a much better margin profile on the one-time business. That has an impact on the overall results. And I think it is, again, it is only 15% of the business, so I do not want to overstate how much of an impact that had on margins, but it certainly is margin accretive to our overall business. And I would say there is some impact in every category. I think the residential side was probably hurt a little bit more, especially in things like wildlife and rodent work and things along those lines. And ancillary and termite side, some of that softness we are able to get back because that just creates a workload maybe we could not get to and we sell it and still have some backlog that we carry into January, we carry it into January, things along those lines on some of that kind of work. But some of it, you just never really make up, you are not going to make it up. Manav Patnaik: Got it. And then just, you know, just so we are not surprised in the next quarter as well. I mean, your full-year guide is 7% to 8% but just you talked about spillover into January. Just thoughts on what 1Q might look like relative to the rest of the year? Kenneth Krause: Yes, it is always hard to, it is such a short-cycle business, which can change on a dime. But what I would say is we still are firmly anchored in a 7% to 8% organic growth for the year. I would not be surprised if it is a little bit slower to start the year. Manav Patnaik: Because January we had more branches Kenneth Krause: Closed in January than we did a year ago. Because of some of the weather that we endured. But I do firmly believe the business still is going to be, for the year, at that 7% to 8% pace of growth. Manav Patnaik: Okay. Thank you. Operator: Our next question is from Ashish Sabadra with RBC Capital Markets. Please proceed. Hi, thanks for taking my question. Ashish Sabadra: Maybe just a question on the margins. Are there any puts and takes to be cognizant of as you think about incremental margins in 2026? Those margins of 25% to 30% are still below the midterm targets. How should we think about the tailwinds not just in 2026 but going forward to drive it closer to the midterm targets? Thanks. Kenneth Krause: Yes. Thanks for the question, Ashish. When I look at the overall margin profile, I think about 2026, I will take you through a few thoughts. One, pricing remains very healthy. The 3% to 4% pricing is very realistic to expect. That is what we are introducing across the portfolio, just like we had here in the past couple of years. Second, two thirds of our cost of services is our people cost. Ashish Sabadra: And we are really doing a lot better job at onboarding and training and Kenneth Krause: Keeping those new hires with us. That turnover in new hire is really expensive. And we are seeing improvements there. That will be a tailwind for us as we go into 2026. Third, fleet cost. Second, another large item on cost of services. When we think about fleet in the 2025 financials, Ashish Sabadra: Was about a $17,000,000 headwind. Six of that was in Q4 alone. Kenneth Krause: Associated with the sale of leased vehicles. That should not be as much of a concern for 2026 as it was in 2025. And so when I think about the gross margin, I think there is a lot of reasons to be optimistic in our ability to lift margins and improve margins in 2026. And then when I go down the P&L and I look at SG&A and back office and all the work there, there continues to be great opportunities there. We are launching a company-wide systems implementation around our financial processes in 2026. We will start to see some benefits of that as we go throughout the year and into next year. So we remain very optimistic and confident in our ability to deliver that 25% to 30% margin profile. Ashish Sabadra: That is great color. And then maybe just on the competitive environment, a question that we get quite often is have you seen any change from a competitive perspective? Obviously, the strength in recurring revenue seems to suggest that things are trending really well. But any color on that front will be helpful. Thank you. Jerry Gahlhoff: We, this is Jerry. We have not seen or heard too much in that arena. We are very internally focused and we have lots of great competitors and new ones that pop up all the time. That keeps us on our toes and we wake up every day ready to fight another daily battle in competitive space. It is a competitive industry and there are just so many out there and it can be local, it can be regional. And so I would not characterize anything that we have seen really throughout 2025 as having any significant shift in the competitive environment, right? I mean, we continue to invest in the business in Q4. You saw that. And it is not that we are out allocating large amounts of capital to the digital side, but we continue to put more feet on the street. We continue to fund our door knocking areas, which are our fastest growing areas. And so we continue to be bullish about our position in our overall markets. Ashish Sabadra: That is great. Got it. Thank you. Kenneth Krause: Thanks. Operator: Our next question is from Greg Parrish with Morgan Stanley. Please proceed. Greg Parrish: Hey, good morning. Thanks for taking our, good morning. I just wanted to double click on 1Q and apologies for that. But just given many of us have been snowed in here for a few weeks, Kenneth Krause: I know you said slower start, but maybe will the weather impact be kind of similar to what you saw in fourth quarter? Will it be worse? I know. It is like Greg Parrish: A similar pace to fourth quarter. Is that a Kenneth Krause: Decent way to think about 1Q? I guess, any further color I think would be helpful for us. Our weather forecaster cannot get the forecast tomorrow right. And we do not play, we do not, we try not to manage our business around that. It is our job to get our work done and continue to move forward and do everything we can despite that. And what I can assure you is that our team is going to work really hard despite whatever those headwinds are to get through that. It is really hard to say because just as we saw, you look at November, December, and some of the areas we mentioned earlier where you had two weeks where it just got frigid cold and then next thing you know, Thanksgiving you are wearing shorts. And it is just, these things just surprise us and that same thing can happen here. It could be really bad for a longer, we could have a two-week spell in late February or a late start to spring. So we cannot predict today or tomorrow. So I think it is really hard for us to think about those impacts. What I can tell you though is that our team is engaged and we are going to do our darnedest to fight through that. Okay. That is helpful. Yeah. Yeah. Greg Parrish: I appreciate it. Had to try. Maybe just for my follow-up, maybe talk about some of the ancillary opportunities. I know you have a lot of shots on goal, a lot of things you are excited about. Maybe in 2026, what are you most excited about in terms of Kenneth Krause: Gaining traction or Greg Parrish: Maybe picking up a little bit versus the prior year? Operator: Thanks. Kenneth Krause: I think when you look at that business, what I consistently say, Greg, is that we have got a number of opportunities. We are not necessarily excited about just one opportunity. We have got so many different opportunities that we will avail ourselves to with our customer base. Greg Parrish: And Kenneth Krause: It continues to be a very low penetration rate. Greg Parrish: You know, we estimate that less than Kenneth Krause: 3% or 4% of our customers are using those ancillary services. And quite frankly, it is predominantly all in our Orkin brand. It is not in our specialty brands. So we are doing a lot of work to really get out, as Jerry indicated in his prepared commentary and commentary, improve collaboration across the brand portfolio to enable us to see some improvements in this area with some of our specialty brands. Really important area of growth for us, growing, you know, for the year, growing at 20%. Greg Parrish: Really exciting. And it is a good area to continue to invest in because we are seeing great, great results Kenneth Krause: Coming out of that area. There is just so much upside. The runway is so long to continue to drive that. And much when we talked about the Rollins Way and collaboration between our brands, the opportunities that we have also, we have some brands, say like HomeTeam, that do not do certain other services. And how do we leverage our other brands and then passing certain types of ancillary business that maybe they do not do, but somebody else does, over to their sister companies. There is so much for that and we are getting more and more mature in that space, using both with technology and really just bringing people together so that we are one big family all working together, taking care of each other. So that part is, we are watching that come together and come to life, is what excites me the most. Great. That is helpful color. Thank you. Operator: Our next question is from Tomohiko Sano with JPMorgan. Please proceed. Tomohiko Sano: Good morning, everyone. Kenneth Krause: Good morning. Operator: Thank you for taking my questions. Could you give us more colors on Sela’s revenue and EPS contribution in Q4? And if you could give us some more color on pipeline for M&A in 2026, it would be great. Thank you. Kenneth Krause: Certainly. Thanks for the question, Tomo. Sela is performing exceptionally well. Just like Fox did two years ago. Sela contributed upwards of $16,000,000 in the quarter of revenue. I think year to date, we bought it in April, and year to date, it has contributed $55,000,000. We have actually seen $0.02 of non-GAAP or adjusted EPS accretion. That is really difficult to do in the first nine months of owning an asset, especially with the cost of financing where it is. Albeit, our team is doing an exceptional job with our commercial paper program and bond market. So with that said, Sela continues to perform well. Really good to have that group of teammates as part of our organization. Kenneth Krause: I am really excited about what we can do in that area going into 2026. Operator: Thank you. And any colors on M&A pipeline in 2026 to get to 2% to 3% please? Thank you. Kenneth Krause: Certainly. Yes, thanks for that question. I missed that. But the M&A continues to be very healthy. We firmly believe at this point that 2% to 3% is very realistic and reasonable to expect. We are carrying over a point or so, slightly above that, of growth from M&A. And we have got a very full pipeline that we are continuing to evaluate. We have invested, over the last three years, we have invested almost $900,000,000 in acquisitions and bringing new teammates and new brands into the portfolio. We expect to continue to invest in 2026 and add 2% to 3% of revenue growth from acquisitions again in 2026. Tomohiko Sano: Thank you very much. Thank you. Operator: Our next question is from Joshua K. Chan with UBS. Please proceed. Joshua K. Chan: Hi, good morning, Jerry and Ken. I guess maybe on the quarter, you mentioned that most of the weather effects were in the eastern side of the U.S. So is it true that the West and the South are basically the non-impacted regions grew at a Joshua K. Chan: Similar rate as Q3, just some ways that maybe kind of ballpark or ringfence the weather issues, I guess. Kenneth Krause: Yes. They absolutely did. So they had strong performance in the fourth quarter, generally speaking. And again, that is what gives us some of that reassurance. Now some of that Texas, Northern, South Central area, going up into Tennessee certainly got a little more impact in January. But in the fourth quarter, those areas performed to plan. They just could not exceed plan enough to offset some of the challenges that we had in other parts of the country. Joshua K. Chan: Yes, that makes sense. And then on the Q1 kind of comment, I know that, you know, freezes are typically not the greatest thing and there seems to be more freezes in this Q1 than normal, I guess. So is that a potential concern when it comes to spring selling season? Like, how are you thinking about that? Kenneth Krause: When we have the ice storms, the sleet and things like that, that is what shuts down branches. And when you cannot safely drive on the roads, you cannot safely access homes. And so we had some of that in January. And all things considered, we continue to fight through that. And so, yes, we have to prepare for that. And a lot of that is operational. Operationally, hey, when the sun is shining and the weather is good, we have to be as productive as we can possibly be because you do not know what is going to happen two days from now, right? So how do we front-end load our work? How do we make hay when we can make hay? And sometimes that requires us working weekends and things along those lines, but we have to do our best to get ahead of that and prepare and plan in order to perform as best as we possibly can in the first quarter. When you look back and you think about it, weather is always going to be a factor. It is just part of the business. Sometimes, it is more of a factor than others. But when the recurring revenue continues to perform and our ancillary business, our additional work with existing customers, continues to grow and we are able to grow those businesses north of 7%, we feel really good about our position. We feel really good about our ability to continue to grow earnings at double-digit pace and cash flow also at a double-digit pace. We certainly endured a January with weather but that is one month out of three. We still have a couple of months left in the first quarter and so we are not giving up yet on the first quarter. We have a lot of reasons to be optimistic because I think the team is highly engaged and focused on delivering exceptional results again here in 2026. Joshua K. Chan: Great. That is good color and thank you both. Yep. See you, Joshua. Operator: Our next question is from Jason Haas with Wells Fargo. Please proceed. Jason Haas: Hey, good morning and thanks for taking my questions. Curious if you could talk about how digital leads have been trending? And if you plan to make any changes to your marketing strategy? Thank you. Jerry Gahlhoff: We make changes to our marketing strategy every day, every Jason Haas: Week. Jerry Gahlhoff: Digital leads, we are still constantly fighting increases in the price of that, the cost of generating digital leads, and we have to reallocate and adjust those plans all the time. We do not necessarily or responsibly go spend into the market just to get leads. We have a budget. Having that budget forces you to manage within it and allocate resources to drive the best results we can to drive new recurring customers into our portfolio of brands. So, that continues to be the focus. Digital is a channel. It is not our only channel. We have brands that acquire customers lots of different ways. So we are not overly reliant on that. I love that about our business. But that has been a challenging, evolving, for I guess as long as we have been in digital, except it is just changing even faster these days. And I think our team does a really good job adjusting to that. I think the broad diversification of the brand portfolio is certainly a competitive advantage. As I had mentioned earlier, the door knocking business, Sela, but also Fox, you go back to Fox in 2023, that business is growing exceptionally well. And so our ability to pivot and maneuver and change, to be agile as market conditions change, is certainly advantageous for us and helping us continue to deliver some solid financial results. Jason Haas: Got it. Thank you. Makes sense. And then as a follow-up, are you able to talk about when you get one-time business, Jason Haas: How often does that translate into a recurring relationship with a customer? Jason Haas: Is that like a source of new customers and you are able to build that recurring relationship from those one-time calls? Jerry Gahlhoff: Sometimes. Certainly that happens. What you do not want to do is sell somebody who really wants a one-time service and is not fully committed to recurring services, sell them a recurring service because it usually results in somebody that is not happy. What we do find, this is really true, we have done the research on this over the years, particularly at Orkin, we have a lot of what we call recurring one-time customers. These are customers that come back to us year after year. They get one or two services a year and they are willing to pay more for those one or two services a year, but they do not want to get, say, four to six services. It is just not their model. But yet they trust Orkin, they trust the brand, they know they got results, they come back. So we know there is certainly a portion there. But we also have a balance of not providing something to someone that they do not really want. That just sets the relationship up for failure. Jason Haas: Got it. Very helpful. That makes sense. Jason Haas: Thank you. Operator: Our next question is from Peter Jacob Keith with Piper Sandler. Please proceed. Peter Jacob Keith: Hey, thanks. Good morning, everyone. I wanted to just dig into the incremental EBITDA margin which was below 20% and make sure I understand it. So I guess the weaker sales came in, but is it that you were still hiring and training and investing in those people costs? And then Peter Jacob Keith: If that is right, just how does that inform your thinking around budgeting and Peter Jacob Keith: Those costs in Q1, with also some potential for sales weakness? Kenneth Krause: Yes, certainly. We continue to invest. Markets continue to be very healthy. Recurring business continues to come in. New customers continue to come in, Peter. And so we continue to see really good demand for our services. Peter Jacob Keith: When I Kenneth Krause: Impact the margin in Q4, certainly, the volume had an impact. When you look at that volume, call it $12,000,000 to $15,000,000 of additional volume, probably $7,000,000 to $8,000,000 of additional profitability from an incremental perspective, as that business is a little bit more profitable than our other business. And then the other thing that I called out, which should help us here as we go into 2026, is the fleet cost and the gain on vehicle sales. We had a headwind of, I believe, $6,000,000 in Q4 associated with this. That was roughly 80 basis points of headwind. So I think those two items are certainly impacting, they impacted the Q4 results. I certainly expect fleet to improve. And I also expect that one-time business to improve as we move throughout 2026. And I would not say we are still hiring a lot in the fourth quarter. What I would say is we have more people that we brought on earlier in the year, have carried through the year. Have them Peter Jacob Keith: Trained, experienced, Kenneth Krause: And as long as they are performing, they are going to stay through those, call them the late fall and winter months, so long as the performance is good. And so more than anything, we just have more people on staff that we brought in earlier. Now those people having gone through a season as we get into February, March, April, as we turn the corner and get into season, these people are put in a much better position, much better experience to be able to serve our customers quite optimally. Peter Jacob Keith: Okay. That is very good feedback. Thank you for that. Peter Jacob Keith: And then I wanted to circle back on one of the comments about what you are most excited about for 2026 and driving that cross-collaboration amongst your brands. There is also potential for maybe a CRM database upgrade. And I am wondering just on the IT front, are there any that need to be made or any sort of structural changes to the CRM infrastructure to help drive that collaboration? Kenneth Krause: We are evaluating that. We have had a lot of recent meetings about that and those are really ongoing discussions. More than anything, we are really talking about the use of AI because most of these CRMs are heavily driven on just the customer database. So how do we use AI to link all these systems together and orchestrate them irrespective of exactly which CRM they are on. So we are having those conversations now and making some decisions around particularly how we invest in AI to help us do that. More so than just strictly making, we will have some brands and some places that may need some CRM changes to help us make this work. But that is on our radar screen. It is still, we are still probably in the first inning of those discussions. Kenneth Krause: Yes. When you look at Kenneth Krause: When you look at the capital needs, we do not see a major change in capital outlay with respect to CapEx in 2026. We are making investments. I mean, I commented earlier around our enterprise-wide financial systems that we are putting in place to help enable improvements. That is going to take some investment, but not anything I do not believe that will be noticeable and disrupt our cash flow profile. And there is nothing that is an overhaul of anything. It is more of what do we layer on top to enable and get systems talking to each other better. Right? How do we streamline it? How do we continue to modernize all the things that we are doing and improve the tools that our teammates are using to improve the collaboration across brands. Okay. Very good. Thanks so much. Operator: Our next question is from George Tong with Goldman Sachs. Please proceed. George Tong: Hi, thanks. Good morning. You mentioned that you expect 1Q one-time revenue performance to be similar to 4Q. George Tong: You talk about what you expect for one-time revenues for the rest of the year? And how that will be supportive of your overall 7% to 8% organic revenue growth outlook? Kenneth Krause: Yes. We have not put a number out there in terms of what we expect in Q1 with one-time revenue. The business is, what I did say in my prepared comments is it is growing at, if you go back over time, 1% to 2%. It might have a quarter where it jumps up 2% to 3%, then you have a quarter like Q4 where it was declining 2% to 3% or so. And so the business does jump around a little bit. It is 15% or so of our business. But I think if we get, when I think about the growth algorithm, if I can get seven plus percent, 7.5% of growth from recurring and ancillary and I can get 1% to 2% from this other business, George Tong: It is very acceptable. And it allows us and enables us Kenneth Krause: To grow our overall portfolio organic growth at the 7% to 8% and allows us to get that double-digit earnings growth to come through the model. So that is kind of how I view it. That is how I look at it, and that is what I would hope to continue to deliver. George Tong: Got it. That is helpful. And then related to that, are there certain indicators or metrics that you can use to track how one-time revenue performance is performing? Any leading indicators or KPIs can give you confidence or visibility into performance in the coming quarters? Operator: That is a good question. I think the one thing Kenneth Krause: That as we look at it, again, it is such a small business, like it is not a major business. It does not move with economic cycles. So it is hard to pull a macro factor and say, hey, when this does this, if industrial production does this, we do this. That is just not the case. We are not tied to purchase managers. We are not tied to industrial production. It is very much one-off business. But when you look at weather patterns, you look at the average temperature. I mean, when you look at the Northeast, you look at the Midwest, in November and December, the weather was much colder than it was a year ago. And it is quite frankly that simple. If you cannot get out on the road, if you cannot get safely on a building to a house, we are not going to send our people out. And so that certainly has an impact on the business. But again, it is such a small business in terms of overall portfolio size that it is hard to tie that to any macro factor. George Tong: I look, I think about over the years, Ken, Jerry Gahlhoff: Over the last fifteen years since bedbugs have had their resurgence in the U.S., there have been years when bedbugs suddenly shoot back up. Right. And it is all over the news and you know, people bring them home from hotels and it is a lot more. Then all of a sudden, there could be a year where it is soft and instead something else is there. So all those types of various pests that cause that one-time business to come and go have been in our business over decades, and it will continue to be that way. And when one thing kind of goes away, another issue arises or some invasive pest comes. So it is really hard to predict. Right? And we do not use it. We do not use that measure to determine how healthy our business is. Yes. That ebbs and it flows. It is just extra business that comes in. And so our measure and our metric for determining how healthy our business is is our revenue from recurring contracts and recurring arrangements with customers, and then the nine shots on goal, the ancillary business. I mean, that is what the business I believe is valued upon, and that is how we measure the health of our business. Very helpful. Thank you. Thank you. Our next question is from Brian Christopher McNamara with Operator: Canaccord Genuity. Please proceed. Brian Christopher McNamara: Hey, good morning, guys. Thanks for taking the question. So I am curious about the new tech Brian Christopher McNamara: Retention. You guys have mentioned that. You outlined that in New York in early December. Operator: And Brian Christopher McNamara: You mentioned newer teammate retention improved, I think, 8% in the prepared remarks. So I am assuming that is first-year techs. Does that mean you had to hire 8% fewer new techs? Or what does that 8% specifically measure? And then, yes, I think you mentioned it in December, you had mentioned a kind of a $5,000,000 to $10,000,000 in savings number expected for the year. I am curious where that landed and what is embedded in your 2026 expectation there? Thank you. Kenneth Krause: Yes. The last number I saw was approaching us hiring, having to hire, about 600 fewer people year over year as a result of our improvements that we made in retention. And that certainly has an impact on payroll margin, helped us the first, especially the first nine months of the year, which is more the time when you are actually hiring. We still have room to go there to continue to improve that and our team has done a really good job sort of blueprinting the first-year journey of our people so that we know if we can keep you here for a year, we can have you fall in love with this business and you will stay an awful lot longer. So our team has really put forth some plans and kind of a model for us to follow that first year. We, January, we had our leadership meeting with all our region managers. We had 250 people in the room and this was part of our breakouts and part of our teachings that we did to ensure that we are driving these best practices down through our business because this continues to be such an opportunity for upside to, it is not only to improve our retention, we know this will be a direct correlation to help us improve our customer retention in the end. I mean, when we look at it, you know, 600 people, $10,000 to $15,000 of onboarding cost is between $5,000,000 and $10,000,000 of savings. And we hire a lot of people every year, and we lose way too many. And 600 is just a small fraction of those people. And we are focused on this because we feel like this is tens of millions of dollars of opportunity. And it also is an opportunity to help influence growth. Because what we know is turnover in technicians is tied to turnover in customers. And so if we can do a better job at onboarding and keeping people, we are going to do a better job of keeping customers. Brian Christopher McNamara: Helpful. Thank you. Brian Christopher McNamara: Thank you. Operator: We have reached the end of our question and answer session. I would like to turn the conference back over to management for closing remarks. Jerry Gahlhoff: Thank you, everyone, for joining us today. We appreciate your interest in our company, and we look forward to speaking with you on our first quarter earnings call in just a few months. Operator: Thank you. That will conclude today’s conference. You may disconnect your lines at this time and thank you for your participation.
Operator: Good morning, and welcome to the Iron Mountain Incorporated Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Press star then zero on your telephone keypad for assistance. After today's presentation, there will be an opportunity to ask questions. We will limit an analyst to one question, and you can rejoin the queue. Please note that this event is being recorded. I would now like to turn the conference over to Mark Rupe, Senior Vice President of Investor Relations. Please go ahead. Thanks, Chloe. Mark Rupe: Good morning, everyone, and welcome to our Fourth Quarter 2025 earnings conference call. Joining us today are William L. Meaney, our President and Chief Executive Officer, and Barry A. Hytinen, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will open the lines for Q&A. Today's call will include forward-looking statements, which are subject to risks and uncertainties. For a discussion of the major risk factors that could cause our actual results to differ from these statements, please refer to today's earnings materials, including the Safe Harbor language on Slide 2 of the earnings presentation, and our annual and quarterly reports on Forms 10-K and 10-Q. Each of these items, as well as reconciliations of non-GAAP financial measures referenced during this call, can be found on our Investor Relations website at investors.ironmountain.com. With that, I will turn the call over to William L. Meaney. Thank you, Mark, and thank you all for joining us today to discuss our fourth quarter and full year results. We are pleased to report another record performance in the fourth quarter above our expectations, delivering all-time highs and 17% year-over-year growth for revenue, adjusted EBITDA, and AFFO. Organic revenue increased 14% in the quarter driven by broad-based strength and record results across our portfolio. Full year revenue increased 12% to $6.9 billion reflecting our team's steadfast commitment to delivering innovative solutions for our customers, and the strong returns we are generating from our growth investments across the business. Let me share some of the highlights from this record year and the momentum this provides underwriting our expectations to sustain industry-leading revenue and earnings growth into 2026 and beyond. We continue to capitalize on robust data center industry demand. Data center revenue increased 30% in 2025 including 39% in the fourth quarter. We expect the data center market will remain very strong in the coming years as hyperscalers build out inference and cloud capacity. With 43 megawatts leased in the fourth quarter, we enter 2026 with strong momentum in leasing and have great assets in prime markets. Our confidence in sustaining strong data center growth is supported by our current backlog, which we expect to drive more than 25% revenue growth in 2026. And on top of this, we expect another year of 20% plus growth in 2027. Moreover, we anticipate a year where we lease over 100 megawatts in 2026, further adding to our backlog. This confidence is driven by the conversations we are having with our customers around our land bank, which includes 400 megawatts of available capacity that is expected to energize over the next 24 months, half of which is expected to energize in the next 18 months. And we are driving substantial growth in our asset lifecycle management business. ALM revenue increased 63% in total in 2025 including 40% on an organic basis. And we ended the year on a high note with 56% organic growth in the fourth quarter driven in part by higher component remarketing revenue. In 2025, we increased the number of Fortune 1,000 customers utilizing our ALM services to 360. This is up from 270 in the prior year. And importantly, we have significant room to grow within these existing customers. Looking ahead, we are focused on capitalizing on the large opportunities in the ALM market, and we expect this to be a multibillion dollar business for Iron Mountain Incorporated in the future. Furthermore, we are off to a strong start in 2026 benefiting from recent commercial wins, increased customer penetration, and higher component remarketing revenue. And our digital solutions business continues to build momentum. We achieved an all-time high for digital revenue in 2025 eclipsing $500 million driven by another year of double-digit growth. We are seeing solid demand for traditional projects and are winning new contracts across industry verticals for DXP, our AI-powered digital solutions platform. The number of DXP deals secured in the fourth quarter was an all-time high and were at an average deal value more than double the prior year. The outlook is equally as promising as the DXP pipeline continues to grow. In 2026, we expect to maintain strong digital growth supported by our new project wins and growth in our underlying recurring business, which is now more than 40% of our digital revenue. Collectively, these three growth businesses of data center, ALM, and digital grew more than 30% in 2025 to nearly $2.0 billion in revenue. They accounted for two-thirds of our growth, or eight percentage points of growth on a consolidated basis. This growth portfolio provides an important tailwind in supporting our plan for double-digit top and bottom line growth well into the future, which will only build as the growth portfolio continues to become a larger mix of the overall enterprise. I also want to highlight the strength and importance of our highly recurring legacy physical storage business. This high-margin, nearly $5.0 billion business serves as a strong foundation for Iron Mountain Incorporated. It drives substantial cash flow and funds growth investments across the business. It is also central to our cross-selling opportunity as this is where we originally built our more than 240,000 customer relationships, including 950 of the 1,000 largest global companies. In 2025, the physical storage business achieved record revenue growing at a mid-single digit rate, consistent with our long-term expectations. This year's performance marked our 37th consecutive year of organic storage rental revenue growth. And looking ahead, we remain totally committed to growing this business through our innovation around how we help our customers get more value from the information we store on their behalf as well as our revenue management strategy. This continues to prove a winning strategy by yielding consistent volume growth coupled with an increase in our value-add driven by our approach to this important service line. We have great confidence in delivering on this in 2026 and we have already set into motion many of our key initiatives. In addition to our growth achievements, we also executed very well operationally. We drove expanded profitability across the portfolio with adjusted EBITDA increasing 15% and margin improving 90 basis points at the enterprise level as compared to last year. So as you can see, I am very proud of our team's performance in 2025. And we are entering 2026, our 75th anniversary, with incredibly strong momentum. And yet, despite all of our recent success, what is even more compelling is that we are still in the early phases of our longer-term growth journey. We are just still scratching the surface of the $170 billion total addressable market for our services. We look forward to 2026 being another record year for Iron Mountain Incorporated, and this is supported by our guidance outlook. Now let me share some recent commercial wins that illustrate the strength of our synergistic business model and support our conviction in sustaining double-digit growth. In North America, a Fortune 500 healthcare company selected Iron Mountain Incorporated to expand our longstanding partnership for records management and ALM as well as deliver a comprehensive suite of information governance solutions. Our longstanding relationship, proven track record, global footprint, deep compliance expertise, and ability to deliver meaningful value to the customer were key factors in securing the deal. In Europe, we secured a multiyear agreement with a major UK government department to provide records management solutions. Iron Mountain Incorporated was selected based on the strength of our established relationship, proven reliability, deep understanding of regulatory requirements, and ability to drive measurable operational efficiency for the customer. I would also like to highlight a very important win in our media and archival services business. A leading global media and entertainment company and partner of ours for more than 15 years engaged us to securely store and preserve more than 1,600 high-value media assets across multiple geographies. Iron Mountain Incorporated’s unmatched global reach, technical expertise, and proven track record in managing complex media archives were key advantages in winning this large and competitively bid deal. In our digital solutions business, a leading Asia financial services company with more than 1,000 locations selected Iron Mountain Incorporated to support its digital modernization efforts through a multiyear agreement building on an existing 10-year records management relationship. This transformative software-only deal launches in four key markets with plans to expand across 16 additional markets, replacing the customer's legacy enterprise data management platform with DXP. The solution incorporates DXP's AI capabilities to extract metadata from over 500 million images and digital files to improve the quality and accuracy of the customer's database as well as provide secure digital storage and advanced backup services. Our leading AI technology that allows our customers to treat unstructured data in a structured manner, robust security standards, deep regulatory expertise, and ability to deliver a scalable solution aligned with the customer's strategic priorities were instrumental in securing this award and displacing incumbent providers. And as it relates to our work with the Department of the Treasury, we continue to execute under this new agreement. We expect 2026 will be a ramp-up year. We have already established ourselves as the leading partner to the Treasury for these services. As the department manages through the complexity of this significant project, we have included $45 million of revenue related to this program in our 2026 outlook. Now let me turn to our data center business. Our strong partnerships with many of the largest hyperscalers drove new leasing in the fourth quarter, and they remain actively interested in all of our key data center developments. At our Northern Virginia campus, we won a 15-year contract for 28 megawatts of capacity from a major hyperscaler supporting the continued expansion of its cloud platform. In addition, as we discussed in November, an existing hyperscale customer leased our entire 36-megawatt Chicago site as part of a 10-year contract, transferring and expanding the customer's previous lease in London. Also this quarter, another major hyperscaler leased 2 megawatts in our Phoenix campus as well as 600 kilowatts in our Madrid campus. Turning to our asset lifecycle management business, in the U.S., a large financial institution selected Iron Mountain Incorporated to provide secure IT asset disposition services for end-of-life network equipment and telephones across over 2,000 branch locations. The deal represents a cross-sell, building on our longstanding partnership for records management and digital solutions. Our established track record of providing customer value along with our reputation for security, compliance, and ability to operate at scale across the U.S. were important factors in winning this business. Successful cross-selling was also key to winning a deal with a Fortune 100 healthcare technology company to manage the secure recovery, audit, and compliant disposition of more than 11,000 employee devices. Our unique capability to rapidly deploy comprehensive end-to-end ITAD logistics while mitigating operational risk and compliance exposure were determining factors in the customer's decision. We are optimistic that this newly expanded relationship will deliver significantly more opportunities in the future. And a global IT infrastructure services provider has engaged Iron Mountain Incorporated to support data center decommissioning and asset remarketing initiatives for more than 30,000 deployed IT assets across North America. This multiyear deal builds on our established records management and digital solutions relationship. Our ability to deliver scalable, compliant, and cost-effective solutions was a key differentiator in displacing incumbent providers. In conclusion, I want to thank my fellow Mountaineers across the world for their continued dedication in serving our customers. Our Mountaineers’ best-in-class stewardship of our more than 240,000 customers continues to be a key factor in our success. As you heard today, we are delivering exceptional results, have incredibly strong momentum across the business, and remain in the early phases of executing against our tremendous long-term growth opportunity. With that, I will turn the call over to Barry A. Hytinen. Thanks, Bill, and thank you all for joining us to discuss our results. As you have heard this morning, we delivered exceptional performance across the business in 2025 and entered 2026 with strong momentum. In terms of the fourth quarter, we achieved record quarterly results across all key financial metrics. Revenue of $1.84 billion was up $262 million year-on-year. This was well ahead of the projection we provided on our last call, driven by strength across our business and particularly in our ALM business. As compared to last year, revenue increased 17% on a reported basis, 15% on a constant currency basis, and 14% on an organic growth basis in the quarter. Total storage revenue was $1.0 billion, up $119 million, or 13% year-on-year. Total service revenue was $782 million, up $143 million, or 22% from last year. With the strong services growth, gross margin in the quarter was modestly down from last year, entirely the result of mix. As we have talked about before, our services revenue has lower gross margins, and services increased in penetration by 200 basis points as compared to last year. I will also note that our services gross margin expanded over 100 basis points year-over-year and was up 350 basis points from the third quarter. This is an excellent accomplishment and resulted from strong execution by our operations team. And from an expense perspective, we achieved great operating leverage, delivering our lowest SG&A expense ratio in many, many years. Adjusted EBITDA of $705 million expanded $100 million, or 17% year-on-year. This was $15 million ahead of the projection we provided on our last call, driven by higher revenue and operational efficiency across the business. Adjusted EBITDA margin was 38.3%, which is the highest level we have ever reported for this metric so far. And as you will see in our guidance, we are projecting further EBITDA margin expansion in 2026. AFFO was $430 million, up $62 million. This represented an increase of 17% as compared to last year. And AFFO on a per share basis was $1.44, up 16% to last year, and was $0.05 ahead of the projection we gave on our last call. Now let me summarize briefly the full year, which marked our fifth consecutive year of record results across all key financial metrics. Stepping back, when compared to our initial outlook for the year, we exceeded the high end of our guidance for revenue and adjusted EBITDA by approximately $100 million and $50 million, respectively. Revenue of $6.9 billion increased 12% on both a reported and constant currency basis. Adjusted EBITDA increased 15% year-on-year to $2.57 billion, an increase of $338 million. AFFO increased over 15% to $1.54 billion, or $5.17 on a per share basis. Now turning to segment performance. In our Global RIM business in the fourth quarter, we achieved record quarterly revenue of $1.37 billion, an increase of $115 million. Reported growth was 9%, including organic growth of 7% year-on-year. Storage revenue growth increased 7% on a reported basis and 5% on an organic basis. We were very pleased with our core physical performance, which, as you know, includes our box and consumer storage businesses. It was up 8% year-on-year and up quarter-over-quarter. Now I will call out that you will see that our total RIM storage revenue was down very slightly from the third quarter. This was attributable to two items. The U.S. dollar was stronger quarter-over-quarter, and secondly, we recognized lower data management revenue following a particularly strong performance in the third quarter. Global RIM service revenue grew 12% with organic growth of 10% in the quarter. This strong growth was driven primarily by our digital business and core records management services. Turning to the Treasury contract that Bill mentioned, we recognized $6 million of revenue in the fourth quarter, modestly ahead of the expectation we shared on our last earnings call. For 2026, we are using a conservative outlook as we are in the first year of this multiyear contract and have included $45 million of revenue in our guidance. Looking out to 2027 and beyond, we expect to generate in excess of $100 million in revenue annually. Global RIM adjusted EBITDA increased $43 million to $622 million, yielding an adjusted EBITDA margin of 45.3%. Turning to our Global Data Center business, we achieved revenue of $237 million in the fourth quarter, an increase of $67 million, or 39% year-on-year, driven by lease commencements and positive pricing trends. In the fourth quarter, we signed 43 megawatts of new leases, commenced 41 megawatts of leases, and we renewed 176 leases totaling 4 megawatts. Pricing remains strong with renewal pricing spreads of 9% and 12% on a cash and GAAP basis, respectively. Fourth quarter data center adjusted EBITDA was $122 million, up $34 million year-on-year, resulting in an adjusted EBITDA margin of 51.5%. For 2026, we expect more than $1.0 billion in data center revenue, which represents an increase of more than 25% year-on-year together with segment EBITDA margin up year-on-year in every quarter. Turning to Asset Lifecycle Management. Total ALM revenue was $190 million, an increase of $78 million, or 70% year-over-year. This exceeded the projection we provided on our last call by $30 million, driven equally by hyperscale and enterprise businesses. On an organic basis, our team grew revenue $64 million, or 56% growth. This was achieved through broad strength across the ALM business. Within enterprise, we continue to win new logos and increase penetration with our existing customers. Our recent acquisitions of Premier Surplus and ACT Logistics are performing well, contributing $14 million to revenue in the quarter. And from a profitability perspective, we are pleased with the team's execution in driving continued improvement, expanding margins. For 2026, we expect $850 million in ALM revenue, which represents about 35% year-on-year growth, together with expanding margins. Turning to capital allocation. We remain focused on growing our dividend and investing in high-return opportunities that drive double-digit growth while maintaining a strong balance sheet. Our Board of Directors declared our quarterly dividend of $0.864 per share to be paid in early April. Now as a reminder, this is 10% higher than the comparable quarterly dividend last year. Our commitment is to continue growing our dividend, building on four consecutive years of increases, while we maintain a target payout ratio in the low 60s as a percentage of AFFO per share. In terms of capital investments, we invested $525 million of growth CapEx and $43 million of recurring CapEx in the fourth quarter. For 2026, we are planning for capital expenditures to be slightly down from last year with $2.0 billion in growth capital and $150 million in recurring CapEx. Now as investors know, our data center strategy is focused on pre-leasing before commencing meaningful construction. Turning to the balance sheet. With strong EBITDA performance, we ended the quarter with net lease-adjusted leverage of 4.9x, slightly better than our expectation. This represents our lowest leverage level achieved since prior to the company's REIT conversion in 2014. For 2026, we expect to end the year at similar levels to year-end 2025. Barry A. Hytinen: And now turning to our outlook for the full year 2026. As you have heard from us today, we are very pleased with the momentum we built in the business and have line of sight to another year of double-digit growth. For 2026, we expect total revenue to be within the range of $7.625 to $7.775 billion, which represents year-on-year growth of 12% at the midpoint. On an organic constant currency basis, this represents growth of 10%. We expect adjusted EBITDA to be within the range of $2.875 to $2.925 billion, which represents year-on-year growth of 13% at the midpoint. We expect AFFO to be within the range of $1.705 to $1.735 billion, which represents year-on-year growth of 12% at the midpoint. And we expect AFFO per share to be $5.69 to $5.79. This represents year-on-year growth of 11% at the midpoint. I want to provide a couple of points for modeling. We expect FX to be a benefit to full-year revenue by approximately $75 million and last year's acquisitions to contribute revenue of approximately $45 million. And turning to the first quarter, we expect revenue of approximately $1.855 billion, an increase of 16% to last year. On an organic constant currency basis, excluding FX and last year's acquisitions, this equates to 12% growth to last year. Adjusted EBITDA of approximately $685 million, an increase of 8% to last year. We expect AFFO of approximately $425 million. On like-for-like FX rates used to establish these targets, our 2026 guidance for revenue and adjusted EBITDA is approximately $8.1 billion and $3.0 billion, respectively. This represents five-year CAGRs in excess of 12% for revenue and 13% for EBITDA. With the large and highly fragmented markets we address, together with only 5% of our customers currently buying from more than one of our business units, we expect to grow revenue at a double-digit rate for the foreseeable future. I would like to express my thanks to our entire team for their focus and dedication to serving our customers and their commitment to Iron Mountain Incorporated. And with that, Operator, would you please open the line for Q&A? Operator: Thank you. We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. We will limit analysts to one question. You can rejoin the queue. At this time, we will pause momentarily to assemble our roster. The first question today comes from Eric Thomas Luebchow with Wells Fargo. Please go ahead. William L. Meaney: Great. I appreciate the question. Good morning, Eric. Can we maybe touch a little bit on the data center pipeline? Obviously, it is encouraging to hear you talk about a 100 megawatt plus opportunity ahead of you. Maybe you could talk about some of the markets where you are tracking larger deals and your degree of confidence in some of the activity and leasing conversations you have had. It would be great to hear about that. Thank you. Good morning, Eric, and thanks for the question. The first point is we feel like we are going into the year with very strong momentum based on the over 40 megawatts of leasing we did in the fourth quarter. And you can imagine leasing 40 megawatts in the fourth quarter if you are having a number of conversations about a number of sites with your key customers. The sites are not surprising. If you look at the 400 megawatts that we have energizing over the next two years, the sites that are attracting a lot of interest are continued Northern Virginia because we still have some capacity that will be coming online there. Richmond, we have over 225 megawatts of capacity coming online before 2027. Madrid obviously is a hot market in Europe. Our London campus, where we did that swap where a customer wanted to swap out of London for going in and taking all of Chicago, we put that back on the market, and, of course, that is very attractive both to hyperscalers but also the retail market. In London the retail market is extremely strong and obviously has very high yields. So we have a number of conversations both around retail and wholesale there. And then India. The Indian market is getting more and more momentum, and we have a lot of capacity coming online again there in the next two years. So across the board, the conversations really started picking up in the fourth quarter, which you could see in the leasing activity we did in the fourth quarter. We feel really good that we have 400 megawatts being energized in the next 24 months. And we see a lot of the folks that were focused on large language models in the last year are now going back to making sure they have enough for their cloud buildout and inference. Operator: The next question comes from Tobey O'Brien Sommer with Truist. Please go ahead. Thank you. William L. Meaney: I would like to ask you a question about ALM. Can you give us some more color about the momentum you are seeing in that business for organic growth this year and then the opportunity for you to really maybe broaden your footprint through acquisitions as this turns into a truly global business? Yes, thanks for the question, Tobey. Let me start off in terms of the conversations we are having with the customers and the cross-selling capability, and then Barry can give you a little bit more color in terms of how that is showing up in the financials. If you notice in the Fortune 1,000, effectively 950, we are really pleased with the number of logos that we added this year. It is over a 20% increase in the number of logos. The thing that is important here, we are well in excess of over 300 of our largest customers that are now buying our services. But even with those we are just scratching the surface. We are really growing the business among the largest, most complex, most regulated companies in the world in two dimensions. One is we are now building and displacing their previous suppliers in many cases, and there is more growth just within those customers. And we are continuing to build momentum in the customers that we are not serving in ALM but that we already are serving in other business lines. So the momentum and the growth both in terms of expanding in existing customers, as well as adding new logos, is continuing to build. Barry A. Hytinen: Yes, Tobey, I will just add that, first of all, we feel great about the ALM business. We are operating in a very large fragmented market and we are clearly driving growth. If you look at this year, the $850 million of revenue that we just guided to, that includes just about $20 million of acquisition contribution, and as you work through your math, you would find that our enterprise business we are forecasting to be upwards of 20% organic growth, with the balance being in our hyperscale business where, as we talked about before, that tends to be more of a current market trend as it relates to the dynamics of hyperscale decommissioning in this forecast. There is a tremendous amount of opportunity for us in ALM, both in hyperscale and in enterprise. Thank you. Operator: The next question comes from George Tong with Goldman Sachs. Please go ahead. George Tong: Hi. Thanks. Good morning. In your ALM business, revenue grew 56% organically in the fourth quarter. Can you talk about how much of that growth came from volumes versus pricing, and what you are assuming for pricing contributions in your 2026 ALM outlook? Barry A. Hytinen: Yes, George, I will take that one. If you recall, in December I was speaking at an investor conference. I mentioned that memory pricing in particular, and I think that is what you are specifically speaking about because that is where the industry has seen some pricing trends, that pricing in memory was running $15 million plus ahead of what we had provided for our fourth quarter guidance at that point in December. And we did a little bit better than that, probably $15 million to $20 million versus our original guide for the fourth quarter on pricing related to memory. As you know, hyperscale represents generally about 40% of our ALM business. It was a little bit higher than that in the fourth quarter, but for the full year it was at 40%. And memory tends to be between 40%–50% of the revenue, and we were at the higher end of that percentage in light of where pricing has been. Pricing has continued to be strong here in the early part of the year. With our current forecast, we are continuing to use current conditions as it relates to pricing and volume going forward. The other thing I will give you is that, in total, you heard us right, 56% plus organic growth in the quarter. Our enterprise business was very strong as well. So it was a very balanced mix across the business. The outperformance, as I mentioned in the prepared remarks, was equally split between hyperscale and enterprise. So we are feeling quite good about where we are. Operator: The next question comes from Shlomo H. Rosenbaum with Stifel. Please go ahead. Daniel: Hi. This is Daniel on for Shlomo. Could you just dive a little bit deeper into the gross margin trends in the services business? You mentioned some of the puts and takes of why that was, but maybe just provide a little more detail if you could. Thank you. Barry A. Hytinen: Okay, Daniel. Thanks for that one. As I talked about before, our total gross margin is naturally affected by mix because our storage business is a higher gross margin, as investors know, and our services margin is lower. The important thing to note about our services gross margin in the quarter is it was up over 100 basis points and, on a sequential basis, up 350. Our services margins are improving across the company. Our services margins within Global RIM improved year-on-year meaningfully. They improved meaningfully within ALM. Data center does not have a lot of services, but it was also very strong. Our teams are executing quite well, and that is a function of both strong execution, operating leverage, and a little bit of pricing on the services lines as well. We think that trend can continue with respect to our services gross margin. While our gross margin on storage, I mentioned in the prepared remarks, was down slightly, that was all due to mix because even within the Global RIM business, the storage gross margin was up year-on-year. As data center becomes a larger portion of our business, it has a slightly dilutive gross margin to our storage average, but it is very accretive to EBITDA margin for the total company. We were very pleased with the margin performance across the company, both within storage and services. Thanks, Daniel. Operator: The next question comes from Jonathan Atkin with RBC Capital Markets. Please go ahead. Jonathan Atkin: Yes. I wonder if you could maybe just talk about the M&A landscape as it pertains to both ALM as well as data centers. Thanks. William L. Meaney: I will start, Jonathan, thanks for the question, and Barry may want to add something. On the data center side, we do not really see ourselves active in the M&A market for data centers. We have done some. We did the IO Data Centers acquisition. We did the EvoSwitch acquisition in the U.S. We did EvoSwitch in Europe, and we did the Web Werks acquisition in India. But all those were brownfield acquisitions. It was when we were in the early days entering geographies and it was really buying a platform, and platform not just in terms of an asset with capacity to lease but also a team that understood those markets. I would not expect us to be a big acquirer of data center assets. We feel pretty good about the teams that we have. We feel pretty good about the platforms we have in those geographies. With 400 megawatts coming ready to be energized over the next 24 months, we feel really good about being able to grow that business on a purely organic basis. On the ALM side, we continue to see that as an attractive market. We are already in 40 markets. Some of those markets we use partners as a way of actually understanding the opportunity to do further acquisition to build out our footprint. We operate in 61 countries, and one of the big differentiators when we are winning new business or adding ALM services to an existing logo, like the 90 additional customers we picked up this year in the Fortune 1,000, is our global footprint. We want to be able to service our customers in all 61 countries around the globe and a big part of that is our M&A. Barry, you may want to comment further. Barry A. Hytinen: Yes, Jonathan. First and foremost, the business is growing on an organic basis tremendously and we have a long runway as we continue to penetrate our client base and as we land at clients, win new logos, and expand. On M&A in particular, our corporate development team and our ALM teams are consistently and constantly looking at opportunities. As one of the largest players, if not the undisputed largest player in the space, we generally get a chance to see any asset that might have a willingness to sell. We do not tend to predict when we might make a next acquisition in light of the dynamics of how M&A works. In this market, we kind of see mid- to high-single digits as a multiple of EBITDA, and with our ability to synergize those down, that quickly gets to below 5x. It is a very positive way for us to continue to grow and supplement the organic growth that the team is delivering. Thanks, Jonathan. Operator: The next question comes from Andrew Steinerman with JPMorgan. Please go ahead. Andrew Steinerman: As we are building out our 2026 cash flow waterfall as we do every year, could you tell us if there are any meaningful restructuring charges to consider for 2026? And then also you noted that CapEx is down year-over-year. Maybe a little more color on that and refresh us how that splits between growth and maintenance CapEx and any other callouts that would be helpful in your cash flow assumptions for 2026? Barry A. Hytinen: Okay. Sure thing, Andrew. Thank you for that. On restructuring charges, let me be very clear about this. We will not have any Matterhorn restructuring. We have no restructuring charges in our plan at all. Our Matterhorn plan for restructuring ended last year, and so that cash flow generates a considerable amount of incremental capacity for investment with less debt required. Of the approximately $2.0 billion in growth CapEx we guided, we are in the vicinity of $1.8 billion that will be data centers specifically, if not more. When I mentioned that it would be slightly down and I also alluded to the fact that we are very focused on pre-leasing, the situation is such that we have provided in our guidance for our ability to commence construction on assets in excess of the level of what our guidance is. Specifically, I would imagine we would not necessarily spend this level unless we were actually pre-leasing more than we just projected. We said we would do at least 100, if not more, megawatts. We are very focused on pre-leasing, and this allocation for capital deployment more than accommodates that level. As it relates to any other tidbits on cash flow, for AFFO purposes, from a cash interest standpoint, I would be planning for somewhere in the vicinity of $905 million for the full year. That is taking the fourth quarter run rate—we had $227 million on that line—annualizing that and then adding some incremental for borrowings in the fourth quarter as well as borrowings across the year, and you get right to that number. Cash taxes, I am assuming will be up probably in the vicinity of $20 million year-on-year. That may be conservative, but in light of the phenomenal growth we are seeing in services, particularly in ALM, I thought it was prudent to plan for a little bit more. In both of those cases, they work into our AFFO guidance such that I feel very confident in the way we guided for AFFO, Andrew. Thank you. Operator: The next question comes from Brendan James Lynch with Barclays. Please go ahead. Brendan James Lynch: I wanted to follow up on RIM organic constant currency storage growth of about 5.2%. I think, Barry, you mentioned that there was some impact from lower data management revenue and maybe some consumer storage effects. Could you unpack that a little bit more and maybe tell us what is factored into your expectation for 2026? Barry A. Hytinen: Okay. I will start with the first part. The consumer business was right in line with what we expected, Brendan, just to mention that first and foremost. So that was not a factor in the quarter. What was a factor in the quarter on a sequential basis was, first of all, the dollar was stronger, so that cut into our growth rate some if you look at third quarter versus fourth quarter. Data management had a particularly strong comp in the third quarter. That business tends to be fairly steady, but it can oscillate quarter to quarter some, and you have seen that over many quarters of disclosure. When you look at our total RIM storage results, it is the combination of physical business, the box consumer business, as well as data management. Most times when investors are talking to me about our physical business, they are talking about our traditional box business. That business is very healthy. Our total physical business was up 8% year-on-year. It was up in excess of about 1% on a sequential basis despite FX. Volumes have continued to trend very well. As it relates to what we are forecasting, we are expecting it to be in that same mid-single digit rate that we have expected for some time. A couple other tidbits: all of the revenue management actions that we anticipated taking are now fully in the marketplace. Everything went essentially in January. From a timing perspective, that will help the first quarter a little bit—it is a little bit earlier than last year's revenue management—and that will play out over the first half as it relates to year-on-year. We are very much expecting another year of modest growth in terms of organic physical volume. Thank you. Operator: The next question comes from Nathan Crossett with BNP. Please go ahead. Hey, good morning. Barry A. Hytinen: I think you might have said it in the prepared remarks, but can you just go over again how much you are expecting from the Department of the Treasury contract this year, and how that ramps over time? And then also, I do not think you give SG&A guidance. Is there anything you can share on that for us in 2026? Thank you. William L. Meaney: Morning, Nathan. I will start with the Department of the Treasury, and Barry, you can chime in if you want to add more color. We expect this year for it to be at least $45 million as the Department of the Treasury starts ramping up, because they are in a process of outsourcing from doing everything in-house to outsourcing. We feel really good about that number and that number will build. As Barry said, we expect it to next year be around $100 million, which would be more consistent with the annual run rate that we would expect from that contract and the feedback we are getting from the Department of the Treasury. We are getting very positive feedback on our ability to execute on their behalf. We already have a FedRAMP certification at Moderate, but we are also in the final approvals for FedRAMP High, and we are the only vendor at that stage in terms of FedRAMP certification. The FedRAMP certification is an important certification when you are providing services to the federal government in terms of your SaaS platform. This is based on our InSight SaaS platform, which is a part of our DXP platform. We feel really good both in terms of our technology clearing these important hurdles to serve the federal government as well as the feedback we are getting from the customer. As we always expected, 2026 will be a bit of a ramp as they are beginning their outsourcing curve. These things do not generally just flip a switch. It takes a little bit of time to move people across. Barry A. Hytinen: Nathan, I will add just a couple of points on Treasury and then come to your other question. We positioned ourselves in a very prudent way as it relates to this contract in our guidance. In the fourth quarter, we delivered about $6 million of revenue. In the first quarter, I would expect that to ramp up some. From a halves standpoint, I would expect the $45 million to be generally split evenly. That $45 million level is purely being conservative and prudent based on the ramp-up and how they outsource. We fully expect the business to be generating in excess of $100 million in 2027 and beyond, and it may be well beyond $100 million as we continue to demonstrate our capabilities to the government. We continue to work with various federal agencies about additional opportunities to support government efficiency. We feel very good about what we are doing with our digital solutions. On your second question, from an SG&A standpoint, at the midpoint we are forecasting 40 basis points of additional EBITDA margin expansion. That will be benefited by SG&A leverage. Our teams across the company are working to continue to transform the business. We are adopting AI tools to improve efficiency, get more operating leverage, and we are in the very early stages of that. There is a multiyear opportunity to drive SG&A leverage and operating leverage across the company, and I look forward to reporting that to you over the next few years. Thank you. Operator: This concludes our question and answer session in the Iron Mountain Incorporated Fourth Quarter 2025 earnings conference call. Thank you for attending today's call. You may now disconnect. You have been removed from the call. Barry A. Hytinen: Goodbye.
Operator: Good morning, everyone, and welcome to the Bruker Corporation Fourth Quarter 2025 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I would like to turn the floor over to Joe Kostka, Director of Investor Relations. Please go ahead. Good morning. I would like to welcome everyone to Bruker Corporation's Fourth Quarter 2025 Earnings Conference Call. My name is Joe Kostka, and I am the Director of Bruker Investor Relations. Joining me on today's call are Frank Laukien, our President and CEO, and Gerald Herman, our EVP and CFO. In addition to the earnings release we issued earlier today, during today's conference call, we will be referencing a slide presentation that can be downloaded from the Events and Presentations section of Bruker’s Investor Relations website. During today's call, we will be highlighting non-GAAP financial information. Reconciliations of our non-GAAP to GAAP financial measures are included in our earnings release and are posted on our website at ir.bruker.com. Before we begin, I would like to reference Bruker's Safe Harbor statement, which is shown on Slide 2 of the presentation. During this conference call, we will or may make forward-looking statements regarding future events and the financial and operational performance of the company that involve risks and uncertainties, including those related to our recent acquisitions, geopolitical risks, market demand, tariffs, currency exchange rates, competitive dynamics, or supply chains. The company's actual results may differ materially from such statements. Factors that may cause such differences include, but are not limited to, those discussed in today's earnings release and in our Form 10-Ks for the period ending 12/31/2024, as updated by our other SEC filings, which are available on our website and on the SEC's website. Also, please note that the following information is based on current business conditions and our outlook as of today, 02/12/2026. We do not intend to update our forward-looking statements based on new information, future events, or for other reasons, except as may be required by law, prior to the release of our first quarter 2026 financial results expected in early May 2026. You should not rely on these forward-looking statements as necessarily representing our views or outlook as of any date after today. We will begin today's call with Frank providing an overview of our business progress. Gerald will then cover the financials for the fourth quarter and full year of 2025 in more detail and share our full year 2026 financial outlook. I will now turn the call over to Frank Laukien. Thank you, Joe. Good morning, everyone, and thank you for joining us on today’s fourth quarter 2025 earnings call. At the conclusion of a difficult year 2025 with headwinds from academic funding, tariffs, and currencies, we are pleased that in the fourth quarter, we delivered revenues ahead of our expectations. BSI, or Bruker Scientific Instruments, book-to-bill in the fourth quarter was again over 1.0x, providing more confidence that we are past the trough in demand seen in 2025. We also saw strong free cash flow in Q4, over $200 million, after admittedly weaker cash flow earlier in 2025. The year 2025 was the first full year of ownership for the three large strategic acquisitions that we completed in the ’24. Both ELITech and Chemspeed delivered robust mid- to high-single-digit percentage organic revenue growth year over year, while NanoString was approximately flat due to pressure on U.S. academic funding in fiscal year 2025. Encouragingly, spatial biology, including NanoString, orders were up in the double-digit percentages organically in 2025 year over year. Our innovation engine continued to shine in 2025, with outstanding and very competitive product launches at the AGBT, AACR, and ASMS conferences last year. Many of these recent launches have seen strong initial demand, which we expect to drive revenue growth in fiscal year 2026 and beyond. Looking to 2026, we expect continued improvements in our markets to drive demand for our differentiated post-genomic discovery, translational, and diagnostic solutions. We start the year with solid BSI segment backlog of over months of revenue, and good bookings momentum resulting from two consecutive quarters with BSI book-to-bill greater than 1. In 2026, the NIH budget passed Congress with an increase in funding year over year, and barriers to grant overhead cuts and multiyear grant funding. But for now, there is still some lingering uncertainty in the U.S. academic and government market. The second-half improvement in 2025 in biopharma and industrial research order trends and robust semi metrology orders in Q4 position these end markets for improved revenue performance in 2026. Finally, BEST, which was a headwind to our overall revenue growth in 2025, should turn into a tailwind in 2026, having booked major multiyear agreements worth more than half $1 billion over multiple years. Accordingly, we are establishing our fiscal year 2026 guidance for reported revenue growth of 4% to 5%, with 1% to 2% organic revenue growth for the full year and an approximate 1.5% revenue growth contribution from M&A. This all implies constant exchange rate revenue growth of 2.5% to 3.5% year over year in fiscal year 2026. As we explained in our press release, we still expect a mid-single-digit organic revenue decline in Q1 2026 primarily due to the strong Q1 2025 year-over-year comparison. After our first quarter this year, we now expect to resume organic revenue growth in the second quarter and for the remainder of the year. We remain very committed to rapid non-GAAP operating profit margin expansion, and we aim for 250 to 300 bps operating profit margin improvement in 2026, including a 50 bps currency headwind. This implies, in principle, 300 to 350 bps of expected organic operating margin expansion, driven by our major cost-saving initiatives, which we now expect to exceed the upper end of our previously stated range of $100 million to $120 million. Finally, in fiscal year 2026, we expect non-GAAP EPS growth of 15% to 17%, including a strong 8% or approximately $0.15 expected currency headwind, which, again, implies 23% to 25% constant exchange rate non-GAAP EPS growth compared to 2025. Turning to current results now on Slide 4. In Q4 2025, Bruker delivered stronger revenues than expected and above the preliminary range we provided at JPM in early January. Bruker’s fourth quarter 2025 reported revenues of $977.2 million were approximately flat year over year, including a currency tailwind of 4.1%, a growth contribution from M&A of 0.8%, and an organic decline of 5.1%. Organic declines in BSI and at BEST, net of intercompany eliminations, were also both at 5.1% in the quarter. In the fourth quarter, our non-GAAP operating margin was 15.7%, down 240 bps year over year, as lower revenue volume, additional tariff costs, and currency headwinds were only partially mitigated in Q4 by our earlier cost and pricing actions. Fourth quarter 2025 non-GAAP diluted EPS was $0.59, down from $0.76 in 2024. Gerald will discuss the drivers for margins and EPS later in more detail. As I said earlier, fourth quarter BSI book-to-bill was again meaningfully greater than 1.0, and our fourth quarter free cash flow was good at $207 million. Moving on to our 2025 full-year performance on Slide 5. Fiscal year 2025 reported revenues increased by 2.1% to $3.44 billion. On an organic basis, revenues declined 3.7% year over year, consisting of a 3.5% organic decline in Scientific Instruments, and a 5.4% organic decline at BEST, as always net of intercompany eliminations. Acquisitions added 3.5% to revenue growth, and there was a 2.3% currency revenue tailwind for the year. Our 2025 non-GAAP gross and operating margin and GAAP and non-GAAP EPS performance are all summarized on Slide 5. Margins and EPS were down year over year as a result of dilution from our strategic acquisitions that closed in 2024, volume deleverage, and strong currency and tariff headwinds. Please turn to Slides 6 and 7, where we highlight the 2025 constant exchange rate performance of our three Scientific Instruments groups and of our BEST segment year over year. In 2025, BioSpin Group revenue was $879 million and declined in the mid-single-digit percentage. Solid revenue growth in Chemspeed lab automation was more than offset by the declines in NMR instrumentation. Biopharma revenues were weak, resulting from soft bookings in 2025. In 2025, we had revenue from a 1.2 gigahertz NMR in the UK, our second gigahertz-class NMR of 2025, compared to four gigahertz NMRs in 2024. The two fewer gigahertz systems resulted in a roughly $20 million revenue headwind for 2025 revenues. We are expecting just one gigahertz NMR system in revenue in 2026, as present gigahertz-class NMR funding activity is healthy but would likely not yet come in as revenue in 2026, but may well refill our gigahertz NMR pipeline for 2027 and beyond. For 2025, the CALID Group had revenue of $1.2 billion and constant exchange rate growth in the high-single-digit percentage, with growth in microbiology and infection diagnostics driven by ELITech Molecular Diagnostics, as well as by our Optics division driven by our applied markets and security detection growth. This was partially offset by softness in mass spectrometry, as strong orders for the recently launched timsOMX and timsMETABO mass spectrometers are expected to start to convert into revenue mostly in 2026. On Slide 7, Bruker Nano 2025 revenues were $1.1 billion, a decline in the low-single-digit percentage, as solid growth in spatial biology driven by NanoString and robust biopharma growth was more than offset by declines in academia and industrial markets. Semiconductor metrology revenues were flat for the year, with a strong semi order book in 2025, which is expected to drive stronger semi performance in 2026. Finally, 2025 BEST revenues declined in the mid-single-digit percentage, net of intercompany eliminations, due to soft superconducting demand for clinical MRI systems. However, we received major multiyear orders at the end of the fourth quarter of 2025 and at the very beginning of 2026 for superconducting wire from large MRI manufacturers totaling more than $500 million. This is over multiple years. Also, our research instruments business, which is part of BEST, received more than $40 million in orders for enabling technology for the Extreme Light Infrastructure, something that we had a press release on previously, and this also is expected to go into revenue mostly late in 2026. Moving to Slide 8 now. We highlight our Project Accelerate 3.0 portfolio expansion strategy, and we talked about that a little bit at the J.P. Morgan conference. We remain very focused on our leadership and expanding our leadership in post-genomic disease research and drug discovery tools, primarily proteomics and multi-omics, and, of course, a core focus also on spatial biology. We continue to expand and focus on novel and differentiated diagnostics opportunities, with novel microbiology and infectious disease molecular diagnostics opportunities. I will highlight that our ELITech Molecular Diagnostics business had very strong placements in fiscal year 2025, which bodes well for fiscal year 2026 revenue growth. In microbiology, we are entering the rapid AST market with the Wave platform, hoping to get FDA clearance for the first claim this year in 2026. In molecular diagnostics, we intend to expand into second-generation affordable syndromic panels on our Genius systems. Finally, a very important trajectory for us is that our proteomic and spatial biology translational research tools increasingly are expected to enter laboratory developed tests, or LDT, markets here in the U.S. and elsewhere in CLIA laboratories. We are excited about our next-gen automated and digitized self-driving lab, something that we just announced on Monday at the SLAS conference here in Boston. As I have mentioned earlier, our security, defense, and airport detection business, something that was lingering for a number of years but where we have differentiated capabilities, is growing nicely at this point, particularly in Europe and overseas. Finally, we continue to benefit from the AI boom indirectly in that our semiconductor metrology tools for new nodes and advanced packaging have seen solid order growth and particularly strong order growth in the fourth quarter. With that, let me conclude on Slide 9, where we give you our annual update on our revenue mix for the BSI segment, which, as you know, is 93% of our revenue. We are pleased that step by step, our aftermarket component revenue is increasing. A year ago in 2024, it was 35%. Now it is at 38%, and, in fact, that part was growing organically also in 2025. Our end-market growth is as you would expect now that more than 60% of our revenue is coming from the Project Accelerate 3.0 focus areas and with particularly good growth that we are expecting also in terms of orders and revenue from biopharma, diagnostics, and semiconductor metrology. Finally, by geography, as you all know, U.S. biopharma and industrial growth looked stronger, certainly in orders, in the second half of the year. U.S. academic and government is still weak and had been weak throughout 2025 except for the first quarter. The rest of APAC has been very resilient and strong, and China, which used to be 16% to 17% of our revenue, has continued to decline, although we saw some nice order growth in Q4. It is now just under 14% of our revenue. In summary, 2025 was indeed a challenging year for Bruker. We faced multiple unexpected significant headwinds, and we responded by continuing to innovate, launching novel and differentiated high-value solutions. We have also focused on cost efficiencies, taking very significant costs out in order to take a large step in 2026 towards greater than 20% operating margins in the next few years. In the medium term, beyond 2026, we expect our organic growth profile to return to a CAGR that is 200 to 300 bps above the LSG&Dx market growth rate, and we will continue to focus on continued major margin expansion steps in 2027 and 2028 as well, while driving continued double-digit non-GAAP EPS growth. We believe that our transformed portfolio is now poised to achieve EBITDA margins greater than 25% over time. With that, let me turn the call over to Gerald, our CFO. Thank you, Frank, and thanks, everyone, for joining us today. Before I get into the details of our financial performance I wanted to provide a high-level view of how the fourth quarter played out versus our expectations at the time of our last earnings call. We are pleased that revenue for the quarter came in about $20 million above our expectations. However, despite the top-line outperformance, our non-GAAP operating margin of 15.7% came in below our expectations by about 100 basis points. This was driven by headwinds of approximately 50 basis points from unfavorable mix, 30 basis points from delayed tariff offsets, and about 20 basis points from a stronger foreign exchange headwind relative to our prior guidance. Our guide for fiscal year 2026 reflects an improved mix profile, as well as pricing and supply chain actions more fully mitigating the tariff impact going forward. Now some further details on Bruker’s fourth quarter and full year 2025 financial performance starting on Slide 11. In Q4 2025, Bruker’s reported revenue decreased 0.2% to $977.2 million, which reflects an organic revenue decline of 5.1% year over year. Acquisitions contributed 0.8% to our top line, while foreign exchange was a 4.1% tailwind. Both our BSI and BEST segments had organic revenue declines of 5.1% in Q4 2025, with organic revenue declines across all groups. BSI fourth quarter 2025 instruments revenue declined in the mid- to high-single digits, while aftermarket revenue saw growth in the low-single-digit range year over year. As Frank mentioned, for the full year of 2025, aftermarket revenue now represents 38% of BSI revenues, up from 35% in 2024. Geographically and on an organic basis in Q4 2025, our Americas revenue declined in the low-teens percentage, European revenue declined in the high-single-digits percentage, and Asia-Pacific revenue grew in the high-single-digits percentage, including double-digit growth in China, all year over year. For our EMEA region, Q4 2025 revenue was up high-single-digits percentage year over year. Non-GAAP gross margin decreased 310 basis points in Q4 2025 to 49.4%. Factors impacting our gross margin in Q4 2025 are essentially similar to those impacting the operating margin in the quarter. In Q4 2025, we posted a non-GAAP operating margin of 15.7%, down 240 basis points compared to Q4 2024. This decline was driven by a combined 490 basis points decline from lower volume, unfavorable mix, tariffs, and strong currency headwinds. These headwinds, which are described in more detail on the slide, were partially offset by a 250 basis point benefit on a non-GAAP basis, as we realized approximately $25 million of cost savings in the quarter from our fiscal year 2025 cost-saving initiatives. The fourth quarter 2025 tax rate was 29.9% compared to 32.5% in 2024, with the decrease driven primarily by discrete items in the fourth quarter 2025. On a GAAP basis, we reported diluted EPS of $0.10 versus $0.09 in Q4 2024. Weighted average diluted shares outstanding in the fourth quarter 2025 were 171.7 million, an increase of 19.7 million shares, or 13%, compared to Q4 2024, reflecting the accounting for the mandatory convertible preferred stock offering we completed in September 2025. Turning now to Slide 12. We had an excellent cash generation quarter in Q4 2025, with approximately $230 million of operating cash flow generated in the quarter, actually the highest in our history. We delivered over $100 million in improved working capital performance in Q4 2025, with CapEx investments at $22.6 million, which drove free cash flow of $207.3 million in Q4 2025, up about $54 million over Q4 2024. We finished 2025 with cash, cash equivalents, and short-term investments of approximately $300 million. During the fourth quarter, we used cash to fund selected Project Accelerate 3.0 investments, capital expenditures, and continued our delevering actions with a debt repayment of approximately $145 million in the quarter. We ended fiscal year 2025 with a leverage ratio of approximately 3.1. Slide 13 shows our non-GAAP P&L results for the full year of 2025. Revenue was up 2.1% to $3.44 billion, including an organic revenue decline of 3.7%. Acquisitions added 3.5% to our top line, resulting in constant exchange rate revenue to be roughly flat year over year. Foreign exchange was a 2.3% tailwind to revenue growth in fiscal year 2025. Fiscal year 2025 non-GAAP operating margin was 12.6%, down 280 basis points year over year. This decrease reflects net headwinds from M&A of approximately 65 basis points, tariffs of approximately 65 basis points, foreign exchange 70 basis points, as well as the impact from lower estimated volume impact of approximately 80 basis points, which includes the partial benefits from our pricing and cost reductions. The remainder of the non-GAAP P&L results for the full year of 2025 are summarized on Slide 13, with the drivers as explained earlier and on the slide. Turning now to Slide 15. We entered the year with a healthy backlog of approximately seven months and solid order momentum after two consecutive quarters of BSI book-to-bill above 1.0. We are initiating guidance for fiscal year 2026 as follows: reported revenue of $3.57 billion to $3.60 billion, representing reported growth of 4% to 5% compared to fiscal year 2025; organic revenue growth of 1% to 2% year over year; plus acquisitions contributing 1.5%; plus an estimated currency tailwind of 1.5%, all contributing to reported revenue growth. For operating margins in fiscal year 2026, we expect organic non-GAAP operating margin expansion of 300 to 350 basis points in the year, offset by approximately 50 basis points of currency headwind, resulting in a net non-GAAP operating margin expansion of 250 to 300 basis points compared to the 12.6% posted in fiscal year 2025. We expect to take a major step up in operating margin performance in fiscal year 2026, with much of this margin improvement driven by our previously announced $120 million cost actions taken in fiscal year 2025, which we now expect to exceed. With markets signaling further recovery, and our new products and solutions gaining traction, we expect to take another meaningful step up in operating margins in fiscal year 2027 and beyond. On the bottom line, we are guiding to non-GAAP EPS in fiscal year 2026 in a range of $2.10 to $2.15, or non-GAAP EPS growth of 15% to 17% compared to fiscal year 2025. Using current foreign exchange rates, we are estimating a currency headwind of approximately 8% to fiscal year 2026 EPS, implying non-GAAP CER EPS growth of 23% to 25% year over year. Other guidance assumptions are listed on the slide. Our fiscal year 2026 ranges have been updated for foreign currency rates as of 12/31/2025. Finally, a bit of color on Q1 2026. We have a strong year-over-year comparison, as we delivered mid-single-digit BSI organic revenue growth in Q1 2025, and margins and EPS in Q1 2025 were not yet impacted by U.S. import tariffs or academic and government funding disruptions. Therefore, we anticipate first quarter 2026 organic revenue to be down in the mid-single-digit percentage and operating margin and EPS to be down meaningfully compared to Q1 2025. We then expect operating margins and EPS stepping up each quarter thereafter throughout the rest of 2026. To wrap up, we are encouraged by the order momentum we now see in many of our end markets. This, combined with some stability in the U.S. academic funding environment, gives us confidence that we are positioned to return to organic revenue growth in 2026, and we plan robust operating margin expansion and non-GAAP EPS growth in fiscal year 2026 and beyond. With that, I would like to turn the call over to Joe. Thank you very much. Thank you, Gerald. We will now open for questions. As a reminder, to allow everyone time for questions, we ask that you limit yourself to one question and one follow-up. Operator? Operator: Ladies and gentlemen, at this time, we will begin the question-and-answer session. To ask a question, you may press star and then one on your touch-tone telephones. If you are using a speakerphone, we ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. At this time, we will pause momentarily to assemble the roster. Our first question today comes from Puneet Souda from Leerink Partners. Please go ahead with your question. Puneet Souda: Yeah, hi, guys. Thanks for the questions here. Frank, the margin question has been a frequent one and obviously a focus in the quarter. Could you talk about, just given the Q4 margins, you came in below, you are expecting a number of cost initiatives to push margins higher in 2026. Maybe just tell us where are those cost initiatives focused, how much reduction, how should we think about that beyond that $120 million that you have talked about? And also, for Gerald, if you could talk about the op margin cadence, just given the significant ramp you have throughout the year, and anything you can provide on your comment around the meaningful Q1 op margin impact? Frank Laukien: Okay. Puneet, I will start. Good morning. So as Gerald had explained, of the 100 bps lower margin than what we had expected in Q4 2025, the way we look at it is that the 50 bps from unfavorable mix is not likely to repeat itself. Those were idiosyncratic factors in Q4. Thirty bps from the late tariffs offset, I think, we will offset that successfully in 2026. And the 20 bps of stronger currency headwind is here to stay for now. And, in fact, as you will have seen from our guidance by now, both on the operating margin expansion in 2026 as well as on the EPS growth, we have acknowledged significant headwinds from currency. Accordingly, and that leads to the second part of your questions, we have gone even stronger or even further on the cost initiatives. We now expect these to yield on an annualized basis closer to $140 million or even higher than that. Not all these additional cost reductions will be effective in Q1 or Q2, but certainly by Q3, that should be all effective and then become annualized. So we have been pushing that by an additional 10% to 15%. And that is about the right amount. We do not want to underinvest in our opportunities, but we also, of course, are very committed to this 250 to 300 bps of operating margin expansion and the double-digit, in this case, reported 15% to 17% reported EPS growth, which is all-in, including currency headwinds, which are strong, and including, obviously, also some of the dilution we had from the mandatory convert. So hopefully that addressed your questions. I think you had something for Gerald on cadence. Gerald N. Herman: Yeah. Hi, Puneet. It is Gerald. I will just comment generally. As I mentioned in my prepared remarks, we had a quite strong Q1 2025. You may recall while we sort of hit the mid-single-digits range of total Bruker organic growth, at the BSI level, it was actually mid-single digits and quite substantial. We do not expect to hit that in the first quarter of 2026, especially on our organic performance. So we are expecting a softer Q1, and we expect to pick up the pace pretty dramatically starting in Q2, Q3, and stronger again, finishing again in the fourth quarter. The step-up in operating margin growth is quite significant, largely due to what Frank was just describing. Some of what we do have in Q4 2025, about $25 million of cost savings that are reflected mostly in the OpEx category. You will see that again in the other quarters as we move forward. But some of our European-based cost actions will take effect more in the first quarter and in the second, so you will start to see a more significant ramp starting in Q2 and thereafter, Q3 and Q4. We can talk more about the details, but fundamentally, that is the direction. Frank Laukien: Okay. That is super helpful. Thanks for that. Just a Puneet Souda: quick follow-up. Frank, the new and competitive renewal awards are coming in lower, maybe it is due to the NIH mainly, and maybe it is due to the political challenges that we have in getting those grants out and whatnot. But NIH is supposed to be 1% better this year versus last year. So just any feedback on the academic and government customers in your interactions so far in first quarter would appreciate any context there. Thank you. Frank Laukien: Yeah. I mean, nobody is talking about a strong tailwind yet, but the absence of the strong headwind from last year feels a little bit better for U.S. academic and government. U.S. academic and government orders in Q4 were still quite weak. But I think that is bottoming out later than the trough in biopharma and industrial research demand, where we probably saw the trough midyear of last year. So there is still that. That is why everybody, including us in particular, is still cautious on growth rates this year. One to 2% organic growth rate is not a snapback to our typical growth rates. So we are still cautious on that. But I am, obviously compared to a really tough year 2025, encouraged that things are likely going to get better. But I think until academia gets more confidence, and with an NIH budget that is flat or up plus 1% and with prohibitions against overhead cuts and multiyear grants, if this will pass, and I think there is a reasonable chance of that. Similarly, also encouraging on NSF and other science budgets, by the way—NASA, DOE, you name it. So I am encouraged with that, but I think it may not help us with orders all that much till the second half. Operator: Got it. Okay. Thank you. Thank you. Our next question comes from Michael Ryskin from Bank of America. Please go ahead with your question. Michael Ryskin: Hey, thanks for the question, guys. I want to dig into the margin a little bit. In terms of the 2026 versus Q4, I think you talked about Q4 coming in a little bit lighter, and you shifting some of those. I guess asking it qualitatively, you pointed to the higher end of the range. What gives you confidence in your ability to take that, given that you were not able to execute on all the margin cost outs in the fourth quarter? Just confidence on ability to execute that. I have got a follow-up. Thanks. Frank Laukien: Well, we have taken out the high end of the $100 million to $120 million in cost already, and we are in the process of taking out additional cost which will become fully effective by midyear. So that is why we have a lot of confidence in that. And then some of the other margin idiosyncrasies—some of that has to do with pricing, supply chain. When we increase pricing, and until we then get an order, and until that order turns into revenue, that can, in many cases, be three or four quarters. So the effect of all these things is that steps that we did take and have taken, or continue to take, on the supply chain have a longer lead time, and we noticed that in Q4. But they really are happening, and they have happened. So that gives us a lot of confidence in next year. And, as I said, we had some unfavorable mix in Q4. We do not think that will repeat itself. Michael Ryskin: Okay. I appreciate that. And then for the follow-up, I want to talk about your comments you made about revenue pacing through the year. I think you pointed to down mid-single in the first quarter, but you expect revenues to be positive starting in Q2. Just clarify, how much of that is the comps from prior year? I know Q1 2025 was surprisingly good. I think we did not see the hit from the end-market slowdown and from the NIH concern till later in the year. So how much of that is the prior year comps versus underlying assumptions on any end-market improvement this year or just how your order book visibility factors into that? Just the confidence between that Q1 jumping. Gerald N. Herman: Yeah. It is both. Frank Laukien: Yeah. You are right. It is both. I mean, I cannot really disentangle that quantitatively, but qualitatively both, as your question already implies, play a role. So yes, the comps get easier and, in some cases, a lot easier in Q2. Q2 2025 was not good for us, so the comps do get easier even through the remainder of the year. So with easier comps and with gradually improving order momentum in many of the segments—even if not all of them—even China bookings were better in Q4. Applied semi was very strong. Biopharma was very solid in bookings in Q3 and Q4 of last year. Industrial research, which was very slow in orders in Q2 as everybody was trying to figure out what is the new geopolitical and tariff landscape—as that has now stabilized for the time being, I think these markets have all picked up. Really, the outlier is still U.S. academic and government, but at least even there, from what I see—reading more than tea leaves, reading NIH budgets—I think it may begin to benefit us in the second half in bookings. That, however, may then mean that it could be a Q4 or mostly 2027 effect in revenue, which is why we think longer term we return to our 200 to 300 bps above market organic revenue CAGR, but not yet this year. But even this—you do the math pretty easily. With a mid-single-digit decline in Q1, obviously, the organic growth rates for the remainder of the year, the remaining three quarters, are better than the full-year growth rate, obviously. That is easy math for you and for us. But even at that level, they are not fully back at our long-term growth rates. We hope to achieve those in 2027 and beyond. I hope that helps. Michael Ryskin: No. That is super helpful. Much appreciated. Thanks. Frank Laukien: Of course. Operator: Our next question comes from Tycho Peterson from Jefferies. Please go ahead with your question. Tycho W. Peterson: Hey, thanks. Frank, maybe just can we do a quick walk on the assumptions for some of the other end markets? I appreciate you have hit on academic already, but what are you assuming for biopharma this year? What are you assuming for semi? Anything in microbiology that could be a headwind—we have heard about that from some of your peers. So maybe just give us a walk on some of the end markets. Gerald N. Herman: Hi, Tycho. It is Gerald. I will just talk generally about the end markets assumed in the guide. For biopharma, we are not assuming significant snapback. We are assuming low-single-digits organic growth. Our semi business, which was relatively flat on a revenue level for 2025, we are expecting to be in the low-single-digits in growth. Clinical a little bit stronger for us from our microbiology-based business. And academic and government research largely driven by continued softness for the first quarter or so. We are expecting to be sort of flat or low-single-digits down. Industrial flat and applied about the same. So, generally speaking, we are not expecting a significant snapback in any of our end markets. We think strength coming from biopharma and certainly semi in 2026. Frank Laukien: Okay. And I would add, maybe one fine point. Molecular diagnostics, which is, of course, part of infectious disease diagnostics—we are expecting very good growth there this year, because we had about 30% more placements of these Genius platforms last year in 2025 than what we had planned. So that was excellent. That tends to then bring in pull-through in the following year. So I think diagnostics and biopharma and semi will be the highlights for the year 2026, and others are recovering and stabilizing. And U.S. academic and government perhaps turning in our revenues and P&L not really much of a corner until Q4, perhaps even into next year, but with improving trends and less headwinds. Sorry. Tycho W. Peterson: And then, Gerald, I know we had a number of questions on margins. Can you comment on gross margins for this year? Are you expecting gross margin expansion? Gerald N. Herman: Yeah, we are. I mean, as you already heard, in the fourth quarter, we were somewhat below our expectations on the gross margin level, and that was partly driven by the mix issues, the tariff, and, of course, the foreign exchange pieces I highlighted earlier. We are not going to be able to do too much further on the foreign exchange piece, but on the mix, our view is that this is going to improve, and certainly from the tariff side, as you heard from Frank, we are expecting to recover that and mitigate any tariffs going forward. Frank Laukien: I think it is fair to say that of our operating profit margin expansion, about half of it comes from gross margin expansion. Gerald N. Herman: And, of course, our OpEx. Frank Laukien: Right. But it is about half-half this year 2026 and probably beyond that as well. Tycho W. Peterson: Okay. And then, Frank, on the M&A contributions, you flagged proteomics and spatial entering LDT and CLIA. Can you maybe just elaborate a little bit more on how you think about that opportunity? Frank Laukien: Sorry. Those were not M&A contributions. Those were our higher growth and higher margin opportunities, which we bundle under the now further evolved Project Accelerate. Much of that or some of that was M&A, but it was prior M&A that we have now owned for one or two years in these areas. Tycho W. Peterson: Okay. Thank you. Frank Laukien: Alright. Operator: Thank you. Our next question comes from Subhalaxmi T. Nambi from Guggenheim. Please go ahead with your question. Subhalaxmi T. Nambi: What are your expectations this year for book-to-bill and backlog to hover at? Will it be noisy with some end-market rebound? Just how should we be thinking about trend of customer spending interest in 2026? Frank Laukien: Yeah. We expect continued gradual improvement. While we do not specifically forecast backlog or book-to-bill, we believe that the book-to-bill trends over the last two quarters, which in BSI were above 1.0, will continue into this year, also aided by easier comps, at least again in Q2 through Q4. We may use a little bit of our still-high backlog this year, but we are not modeling anything that becomes all normalized to perhaps the five-and-a-half months level that we think would be a normal level for the way BSI is configured now. Subhalaxmi T. Nambi: Thank you for that. And then you mentioned some new products in microbiology and diagnostics. Exiting 2026, what do these businesses look like, from a product roadmap perspective and a revenue growth perspective? Thank you. Frank Laukien: Exiting 2026. Okay. Yeah. So in microbiology, I assume that we will have the first rapid AST gram-negative positive blood culture claim approved by the FDA this year, 2026, hopefully before midyear, and that we will be in clinical trials for additional claims on that rapid AST platform. So that will be a nice build-up over the next couple of years as more and more content is becoming available on that Wave platform. Of course, there is a lot of content coming out on our existing Genius platforms, both in Europe, and then we are also doing a first assay going into clinical trials for entering the U.S. market with these Genius platforms. Again, that will not move the needle in 2026. It will include still some investment, obviously, in OpEx investments in 2026, but that will begin to mostly help us then for further growth in 2027, 2028, and beyond. Subhalaxmi T. Nambi: The diagnostics business. Frank Laukien: Yeah. Well, the Genius is the diagnostics business. Syndromic panels will begin to roll out and get through regulatory approvals in Europe in late 2026 and 2027. So they will begin to affect our larger installed base in Europe first—Europe and Latin America, a few other countries actually. Then there will be a series of affordable syndromic panels coming out through and making it through the regulatory process, IVDR in this case, in 2027 and 2028. So that is just a flywheel. You add something every year. It does not make a big difference in one year, but the cumulative effect over time is just very nice, as we have seen with molecular diagnostics. Even in 2025, that was a very nice growth market, mid- to high-single-digit growth market for us. Subhalaxmi T. Nambi: Perfect. Thank you so much. Operator: Our next question comes from Douglas Schenkel from Wolfe Research. Please go ahead with your question. Douglas Schenkel: Good morning, guys. Thank you for taking my question. So regarding first quarter organic revenue growth guidance, your description of the difficult comparison is accurate. However, there are two or three discrete items that seem like those should render the number a bit better. What I am thinking about are, first, the recovery of at least part of the $40 million in semiconductor-related revenue that you previously told us had slipped out of Q4 and you expected to recapture largely in Q1 but over the course of the first half. The second is the impact of pricing, which you started to get more aggressive with last May, and it takes time for that to come through quarter by quarter. But it seems like at this point, that should be more meaningful. And then, I guess the third I would point to is you did talk about an NMR placement slipping out of Q4, and maybe that gets recaptured in Q1. So when I think about those things, that does not seem consistent with mid-single-digit organic declines in Q1 even with the comp. Can you help us out? Gerald N. Herman: Yes, Doug, it is Gerald. With respect to the Q1 story, I think it is important to understand that some of our organic performance in Q1 2025 was pretty significant in terms of both mix and the actual operating profit performance. We had strong order performance in semi, in particular, in Q4 2025, and very strong bookings performance in that quarter. So we think that the timing of our existing orders that are principally driven by what happened in H1 2025 will not significantly improve our ability to execute on orders in the first quarter. So that becomes a headwind in its own right, but it is just the timing of our orders and the lead time required in order for those to execute into revenue. I would say, secondly, with respect to the semi orders that got pushed out, I think our commentary has been pretty consistent about hitting 2026. Not all of that is going to impact in Q1. I think we are expecting to see some improvement in Q2 from those, but not all of it hits in Q1 2026. And then on the NMR side, we do not have any specific NMR pushouts. I mean, we had some challenges in BioSpin for sure from a mix perspective. We saw some of that in the fourth quarter. Frank Laukien: But the 1.2 did not get delayed. It was in April—UK 1.2 gigahertz. Maybe, Doug, I mean, you know us really well. You know a lot of the moving pieces. Obviously, as we have said, mid-single digits—that is quite a range. But we just wanted to highlight that our revenue almost certainly will still be down, and I think mid-single digits, which is a bit of a range, we realize that, is not just prudent and conservative. I think that is the right number of outcomes for Q1. It puts a little bit into perspective the greater optimism that we have in resuming organic growth, and not only at the 1% to 2% level, but more meaningfully in the subsequent three quarters of this year. Douglas Schenkel: Okay. Alright. Thank you, guys. Frank Laukien: Thank you. Operator: Our next question comes from Luke England Sergott from Barclays. Jake: Hey, this is Jake on for Luke. Thanks for the question. I wanted to dig more in on China and that double-digit growth. Your mix there has historically leaned towards industrials, but with your build-out on the pharma portfolio, and this part of the market picking up there, what does your end-market mix in China look like now, and how should we think about it going forward? Frank Laukien: Yep. After a bit of a lull there when the CRO business went away—and then indeed we had very little on that—now China has recovered on the CRO side, and China is becoming a drug discovery and development biopharma powerhouse in its own right. So that is beginning to become noticeable. And academic spending there—there was decent academic spending and bookings in Q4, better than the year before. Whether some of that was stimulus or not is now not so clear. People cannot really say this is stimulus, this is other academic funding. It has become more nebulous and diffused. But it was healthier. So we did not know what expectations to have for China in Q4, but it ended up being one of the better performers in terms of bookings. And also, at the end of the year, we had some revenues there. Jake: Great. Thanks for that. Frank Laukien: Hard to read any trends into that. Clearly, the biopharma piece in China is growing—no questions about that. Of course, some of that is growing also in India and also the rest of APAC. From Korea to Taiwan to Japan, they all have improving biopharma trends for our particular tools. And, of course, there is a lot of semiconductor metrology in APAC outside of China—obviously Korea, but also Japan. So we are benefiting from that, mostly on the order side, which bodes well for gradual step-ups in 2026. Gerald N. Herman: I would just add that our guide for 2026 related to China is not strong. We are assuming that the basic revenue performance is largely flat, which is not a snapback from where it was several years ago. So we are not assuming strong growth in China in our current guide position. Jake: Great. Thank you. Operator: Next question comes from Daniel Gregory Brennan from TD Cowen. Daniel Gregory Brennan: Great, thank you. Thanks for the questions. Maybe the first one would just be on U.S. academic and government, Frank and Gerald. I know you made some comments already. Did you guys say what the instrument growth or trend was for you from that customer base in 2025 and what is assumed in 2026? And I think, Frank, you mentioned multiyear funding was capped. I am just wondering, is that multiyear funding no longer a headwind, or just how do we think about that for 2026? Frank Laukien: Yeah, good question. On the multiyear funding, quite honestly, I am not so sure. I am a little confused by that as well. I know that all plays itself out. Even if it is multiyear funding, it is more funding into the system, and some of that funding is a little bit fungible in some of these big academic research or disease research centers. If they get more funding in one area, it alleviates pressures elsewhere to transfer budgets, it makes more available. So even the multiyear grants are not bad for us even if they do not always immediately and directly fund another NMR or mass spec or microscope. For the first part of your question, bookings in academic and government in the U.S. for the year were down in the high teens. So not the worst outcome, but not a great outcome. That is clearly a significant headwind. We also felt it in revenues. But bookings were down significantly—in quarters, it was down more than 20% for the year. Daniel Gregory Brennan: And I think you said earlier, Frank, the outlook is expected flat in 2026. Is that right? Gerald N. Herman: This is for all of that stuff. Frank Laukien: Yeah. So this was not a U.S.-specific comment. But, as you know, China and Japan and Europe, the academic and government almost everywhere else was much better than in the U.S. Some were strong. Some were just solid. So that was a comment for all of that kind of stuff, not a U.S.-specific comment. I do not know that we broke that out. Therefore, you would still expect U.S. academic and government to be down organically in revenue for the year 2026. Daniel Gregory Brennan: Got it. And if I can ask one more just on semis, just so the guide is flat for semis. I know that business had been growing double digits. You were very positive on the AI connection. Can you just elaborate a little bit, just to be sure? Gerald N. Herman: Yeah, just to be clear. So with respect to full-year 2025 revenue performance, semi was flat. For full-year 2026 in our guide, we are expecting actually to be up in the low-single-digits range. And that is what we are currently thinking. By the way, just to clarify, even on the academic and government side, we are not expecting a significant growth level either in the U.S. or globally in our guide. Daniel Gregory Brennan: Right. Okay. Thank you very much. Operator: Our next question comes from Brandon Couillard from Wells Fargo. Brandon Couillard: Question. Frank, just directionally, which of the three BSI segments do you expect to lead in terms of revenue growth this year? And just one clarification on the ultra-high-field NMR systems. I think you said one install expected in 2026. You used to carry a pretty large backlog there. Do you expect to go back to, say, three or four installations in 2027 and 2028? Is that just a timing thing or something like that? Thanks. Frank Laukien: Thank you, Brandon. You were asking about the groups, right? Brandon Couillard: Yes. Frank Laukien: So we think the weakest growth in the groups this year in 2026 will be in BioSpin, whereas B-Nano and CALID and BEST are expected to grow organically, comparable—they will all three grow—but BioSpin, because of the longer-term bookings and also because of, for instance, no ultra-high field or maybe only one in revenue in 2026, BioSpin is going to be the laggard this year in revenue growth, and not normalize till 2027. Indeed, to your second part of your question, Brandon, there is some good activity, but trying to find funding, building consortia, etc. So I do not know that we will go back to four a year, but I think we will hopefully be able to go back to two or three a year in revenue by 2027 and beyond. That is our expectation. So 2026 will be a bit of a lull, which goes hand in hand, but it is not the only reason that BioSpin will be the growth laggard in 2026 for us. Brandon Couillard: Great. And then, Gerald, what do you have penciled in for net and other expense for 2026? And the cash flow was a bright spot in the fourth quarter. How do we think about free cash flow conversion this year? Thanks. Gerald N. Herman: Yeah. Just on the last point, we are quite pleased with how the fourth quarter came in as far as working capital conversion and our actual cash flow. For the quarter, free cash flow came in about $207 million. So quite pleased about that. As you already know, we have had a lot of effort related to inventory actions and happy to see that it is resulting in something positive. We could talk further about that. When you look at the interest expense line, we are thinking somewhere around the $35 million to $40 million range for interest expense. And then we have some offsets on that other income line. We can talk about more of this offline, but there are some nets that get you to, I think, a better performance on the other income line—net interest/other income line—for us in 2026. Operator: And with that, ladies and gentlemen, we will be ending today’s question-and-answer session. I would like to turn the floor back over to Joe Kostka for closing comments. Gerald N. Herman: Thank you for joining us today. Bruker’s leadership team looks forward to meeting with you at an event or speaking with you directly during the first quarter. Feel free to reach out to me to arrange any follow-up. Have a good day. Operator: Ladies and gentlemen, with that, we will conclude today’s conference call.
Operator: Good morning, ladies and gentlemen, and welcome to Vontier Corporation's fourth quarter 2025 earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star followed by zero for the operator. This call is being recorded on Thursday, 02/12/2026, and a replay will be made available shortly after. I would now like to turn the conference over to Ryan Edelman, Vontier Corporation’s Vice President of Investor Relations. Please go ahead. Ryan Edelman: Thank you. Good morning, everyone, and thank you for joining us on the call this morning to discuss our fourth quarter results. With me today are Mark Morelli, our President and Chief Executive Officer, and Anshooman Aga, our Senior Vice President and Chief Financial Officer. You can find both our press release as well as our slide presentation that we will refer to during today's call on the Investor Relations section of our website at investors.vontier.com. Please note that during today's call, we will present certain non-GAAP financial matters. We will also make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to risks and uncertainties. Actual results might differ materially from any forward-looking statements that we make today, and we do not assume any obligation to update them. Information regarding these factors that may cause actual results to differ materially from these forward-looking statements is available on our website and in our SEC filings. With that, please turn to Slide 3, and I will turn the call over to Mark. Thanks, Ryan. Good morning, everyone, and thank you for joining us. Let’s get started with a quick walk through of the key takeaways from the quarter and the year and why I am confident we are entering 2026 on firm footing. The headline here is that we finished the year strong, strengthened our foundation, and built meaningful momentum across the portfolio, led by high single digit growth in both our mobility tech and environmental and fueling segments, underpinned by robust demand in our convenience retail end market. We delivered 5% core growth in Q4. For the full year, organic sales grew nearly 4%, and EPS finished up 11%. Strong cash generation is one of the hallmarks of performance at Vontier, and in 2025, we generated over $460 million in adjusted free cash flow, which equated to about 15% of our annual sales. Q4 adjusted EPS was at the high end of our guide, despite the impact of a one-time inventory reserve adjustment related to the Invenco acquisition, and by higher health care costs at corporate. Underlying operational performance was in line with our expectations. 2025 was a year of strategic repositioning and strong execution. I am proud of the discipline our teams demonstrated in what turned out to be a dynamic macro environment. We are now more focused and better aligned around our connected mobility strategy, which fundamentally enables profitable growth and underpins innovation across Vontier. We are consistently demonstrating the power of having a synergistic portfolio, unmatched domain expertise, and global scale. We made significant progress on simplifying our organization. These actions unlock growth, enable us to be easier to do business with, and allow further efficiency across the organization. This next phase of simplifying our business will result in $15 million of incremental in-year cost savings and Anshooman will share more details on timing and phasing in his prepared remarks. We maintained a focus on innovation in 2025, deploying multiple new solutions and creating more durable competitive advantages. We are deploying unique value propositions that leverage integrated solutions and capitalize on strong secular tailwinds, including digitalization and the energy expansion. We are entering 2026 with good momentum, a stronger portfolio, and a healthy balance sheet. We are well positioned to deliver on our financial commitments and expect more benefits from our simplification efforts to drop through to the bottom line. As Anshooman will share with you, our guidance for 3% core growth and attractive operating margin expansion of 80 basis points at the midpoint is in line with the framework we shared with you in October. I am confident in our ability to execute and to continue building sustainable above-market growth. Let’s turn to Slide 4 for a quick walk through some of the high-level growth drivers by segment. Let’s start with EFS. Fueling has been a dependable growth engine over the last two years, growing at roughly 6% organic CAGR. Market growth has been broad-based with increased new site builds, retrofit activity, and equipment replacement all driving investment. We see sustained high levels of capital investment for both above-ground and below-ground fueling equipment, particularly in North America. A recent industry report from NACS shows that while the U.S. convenience store count remained relatively flat year over year, the number of fueling sites grew approximately 1%. An important takeaway from this is the larger national and regional chains with whom we have majority share positions are growing at faster-than-average rates. Environmental sales finished the year with growth in the low teens supported by strong upgrade activity for our connected automatic tank gauges and incremental share gains in submersible pumps with our new four horsepower offering. Both of these are a result of traction in new product development. For 2026, we expect growth to be in line with our longer-term targets of low to mid single digits, despite the tougher compares, especially in the first half. Mobility tech, and Invenco in particular, was another standout. Invenco closed the year with a revenue base of nearly $650 million, up 22% organically versus the prior year. This reflects strong demand for our innovative payment technologies, including those that leverage our NFX microservices architecture, the rollout of new products, and disciplined execution on a healthy order pipeline. Our new product introductions—FlexPay 6, Vehicle Identification System, and the NFX Payment Server—all contributed meaningfully to our growth last year. We have also been expanding our integrated offerings, and in Q4, we rounded out our unified payment solution by launching an indoor payment terminal that shares software across all devices. I will unpack Unified Payment in a moment because it is a strategic priority for us. The convenience retail end market is growing at a mid single digit CAGR, which is being fueled by strategic investments in food service and technology. Store formats are evolving to meet changing consumer needs and increase competition, and, as a result, are becoming more complex and costly to run. Our innovative portfolio positions us well to continue delivering above-market growth in this end market over the medium and longer term. DRB’s growth accelerated in Q4 driven primarily by improved pipeline conversion from ramping our new Patheon software. DRB inflected positive in the second half, and grew high single digits in Q4 almost entirely due to Patheon adoption. Customers who have upgraded are seeing growth in memberships, declines in churn, and mid-teens revenue growth on average. Repair Solutions gained momentum as we got traction with growth initiatives. Sales grew sequentially in Q4 in what historically has been our slowest quarter. Our initiatives drove low double digit growth for our diagnostic scan tools in Q4. On Slide 5, as I mentioned, I want to spend a minute on unified payment because it ties a number of themes together and will be a key enabler of the value-creation flywheel for our customers. We shared this with some of you at our investor event last fall. Over the last decade, payment complexity has increased rapidly—more devices, tighter security requirements, and a growing need to integrate payment across fuel dispensers, car washes, in-store point-of-sale, and EV chargers. The biggest pain point customers face is payment certification. It consumes significant amounts of their OpEx budget and scarce engineering resources. Certification costs can range from hundreds of thousands to millions of dollars annually, and those costs only rise as new offerings are added. Our unified payment solution addresses that head on by delivering an integrated solution, including outdoor payment terminals for multiple devices, the NFX electronic payment server that links terminals and payment processors, and the indoor payment terminals we launched in Q4 that share the same software as our outdoor devices. In other words, customers can cover every transaction on their sites with a single common platform. That common software architecture materially reduces certification costs, speeds feature deployment, and delivers a seamless consumer experience. Additionally, it enables our customers to drive revenue growth through offerings like media and loyalty. Perhaps most critical for Vontier, all of these opportunities pull through additional equipment and recurring revenues. We recently entered into an agreement for a full unified payment solution with a global c-store customer, one with whom we built a strong technology partnership, and their early feedback has been positive. With that, I will turn the call over to Anshooman to walk you through the quarter’s financial details and take you through our outlook. Thanks, Mark, and good morning, everyone. I would like to start off with a summary of our consolidated results for the fourth quarter on Slide 6. Total sales were $809 million with core growth of 5%, reflecting disciplined operational performance and continued resilience across our end markets. Adjusted EPS was at the high end of our guide at $0.86, up 8% year over year. Adjusted operating profit margin was 21.3% on one-time costs related to an Invenco inventory adjustment and higher health care claims. Underlying margin performance was in line with our expectations. In Q4, we delivered record free cash flow. On a full-year basis, this was 98% adjusted free cash flow conversion, representing an attractive 15% of sales and underscoring the strength of our cash generation model. Turning to our segment results, beginning on Slide 7. Environmental and Fueling Solutions delivered a strong finish to the year, with above-market growth demonstrating our strong share position with large national and regional operators. Total dispenser sales increased high single digits in the quarter. Environmental solutions grew double digits supported by ongoing upgrade activity and share gains related to new products. Fourth quarter segment margins expanded 90 basis points, the result of strong volume leverage and ongoing productivity actions. For the full year, EFS delivered 6% core growth, on top of 6% growth in the prior year, with dispensers growing mid single digits and environmental up low double digits. Full-year operating margin expanded 40 basis points, ending the year over 29%. Moving to Mobility Technologies on Slide 8. Core sales increased 8.5% for the quarter, with relatively broad-based growth across all business lines. At Invenco, we continue to execute on a new product development roadmap, with Q4 sales up 9% following six quarters of double-digit growth—a testament to our team and proof of the strategic value our suite of solutions is driving for our customers. DRB continued its growth trajectory, building on the momentum we began to see in Q3, and ended the fourth quarter up high single digits. Although down high single digits for the full year, DRB’s recent return to growth and the order momentum we are seeing positions us well for 2026. Overall segment margins declined 220 basis points for the quarter, mainly impacted by the one-time inventory adjustment at Invenco. Finally, turning to Repair Solutions on Slide 9. Sales increased sequentially as the growth initiatives helped offset macro pressures on technician spending. Distributor sell-through off the truck inflected positive for the first time all year in Q4, and high-ticket items like tool storage and diagnostics returned to growth. Fourth quarter sales declined 2%, with lower volumes pressuring margins. Turning to the balance sheet on Slide 10. As I mentioned earlier, we had another strong year of free cash flow generation, which provides meaningful flexibility as we execute on our 2026 priorities. In the quarter, we deployed an additional $125 million towards share repurchases, bringing total buybacks for the year to $300 million, equating to over 5% of our shares outstanding. Given the valuation disconnect relative to our long-term fundamentals, we continue to view buybacks as a compelling use of capital. We ended the year with nearly $500 million in cash on the balance sheet and closed the year with a net leverage ratio of 2.3 times, down from 2.6 times at the start of the year. Regarding our upcoming $500 million bond maturity, we intend to use cash on hand to repay $200 million and plan to enter into a $300 million, 364-day term loan agreement for the remaining balance. We believe this option meets our current financing needs, minimizes the interest headwind, and gives us flexibility to address future maturities. Turning to our outlook assumptions for the full year 2026 and Q1 on Slide 11. Our full-year guidance is consistent with the framework we provided you on our Q3 call. We expect sales in the range of $3.1 to $3.15 billion. At the midpoint, this assumes core growth of about 3% supported by low to mid single digit growth within Environmental and Fueling Solutions, mid single digit growth at Mobility Technologies, and flattish growth at Repair Solutions. We expect adjusted operating profit margins to expand 80 basis points at the midpoint, reflecting strong incrementals. As Mark disclosed at the start of the call, we expect to generate an additional $15 million of new savings. These are a result of our simplification efforts along with improved efficiency and velocity of product development with adoption of AI tools. A majority of the necessary actions are being implemented in Q1 with a modest ramp into the second half. Adjusted EPS is expected to be in the range of $3.35 to $3.50, representing high single digit growth year over year. This assumes share repurchases of less than $50 million for the year and does not include any additional capital deployment benefits. Adjusted free cash flow conversion is expected to be about 95%, which would equate to roughly 15% of sales for the year. Looking at our guide for Q1, we expect sales in the range of $730 to $740 million with core growth of about 1% at the midpoint. Margins will be relatively flat to start the year, reflecting year-over-year timing differences in R&D and other operating expenses, as well as less favorable mix. EPS will be in the range of $0.78 to $0.81, in line with our normal seasonality. With respect to the shape of the year, we would expect first-half sales at just over 48% of the full year, and EPS approaching 47%, both in line with our normal historical seasonality. I would also note that the year-over-year organic growth rates will look better in the second half, which embeds the first-half compare issues at EFS and Mobility Tech, and the timing of shipments of projects and backlog, which favor Q3 and Q4. This is the same view we shared with you on our last call. As always, we have included other modeling assumptions on the right-hand side of this slide. Just to highlight a couple of those, we do have some divestiture impacts to consider on the top line and the higher interest expense we noted last quarter, with step-ups beginning in Q2. With that, I will pass the call back to Mark for his closing comments. Mark Morelli: Thanks, Anshooman. We finished the year strong with meaningful progress strengthening our foundation and advancing our connected mobility strategy. That progress reflects disciplined execution across the organization. I could not be more proud of what we have been able to accomplish in the last twelve months. I am extremely grateful to our employees for their continued hard work and dedication. I am genuinely excited about the setup for 2026 and the way Team Vontier is engaged to create value for all our stakeholders. Looking ahead on Slide 13, I remain confident in the fundamentals we have built and the outlook for the year ahead. We have strong leadership positions in attractive and resilient end markets that offer significant opportunities. We have the right strategy in place to capitalize on the key secular trends shaping our industries, and we are executing that strategy thoughtfully and with purpose. Innovation has become another hallmark of Vontier, and our focus on product vitality is translating into stronger offerings, deeper customer engagement, and measurable commercial momentum. Combined with a culture centered around VBS, we have a solid runway ahead on our 80/20 journey, and we have a very visible path to expanding margins. Our business generates strong free cash flow, consistently in the mid-teens on a percent of sales basis, which gives us flexibility to continue driving above-market growth and returning capital to shareholders. We will continue to apply the same discipline to capital deployment that has served us well over the past several years. With that, operator, please open the line for questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. To ask a question, please press the star key followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. As a reminder, one question and one follow-up only, please. Thank you. One moment, please, for our first question. Our first question is coming from Andy Kaplowitz of Citigroup. Please go ahead. Andy Kaplowitz: Good morning, everyone. Morning, Andy. Mark and Anshooman, could you give us more color on what is going on in Mobility Tech? I think, Anshooman, you thought Mobility’s growth might be flattish in Q4 2025 and it came in at 8.5%. I think you were concerned regarding the timing of projects and when you could deliver hardware. Did that pull forward at all into Q4? And then you obviously have an expected back-end-loaded guide in Mobility. Can you remind us the level of visibility you have and maybe give us a little more color on the Invenco reserve and what happened there. Mark Morelli: Yeah. Good morning, Andy. I will start off, and I will turn it over to Anshooman. Look, I think the really good news on Mobility Tech is our innovation-driven growth is really bleeding through. I think when you look at the FlexPay 6 offering combined with the NFX—that is a version of the unified payment—and, you know, the good news is that we have had better uptake on that. You know, it is a product line that requires some level of not only certification but piloting with our customers, and the ramps are a little bit hard to predict, but I think the backdrop here, the momentum here, is pretty clear. And, you know, I think the real issue then is when you look at the outlook into the year, what do we see? I think you know that we have a first-half bit of a compare issue, but we see overall really strong growth coming from our Mobility Tech product lines, including the turnaround with DRB that is feeding into that and more visibility there. So overall, we are pretty happy with what we see. Anshooman? Anshooman Aga: Yeah. Andy, thanks for the question. From a linearity perspective, for 2026, linearity is in line with what we have typically had. Q1 is, at the midpoint of our guide, above 23.5% of our total sales for the year. The second half weighted was a little bit front-end loaded. The sales—the other thing, we do have some larger wins both in indoor payments, which is part of our unified payment offering, and also the Vehicle Identification System, another winner there, which—the project takes some time for going through the customer certification, as Mark mentioned. So that revenue ramps up in the second half of the year. So we feel pretty comfortable with our guide the way it is. Mobility Tech still growing mid single digits on really a strong growth in 2024 and 2025. Related to the inventory reserve, we did have an inventory reserve of $4 million at Invenco. This is for legacy inventory prior to acquisition. Now, keep in mind, back at the time of acquisition, supply chains were disruptive. Companies were keeping higher inventory levels, and then as we bought the business, we have spent quite a bit of time and effort on innovation and bringing in new versions of the product which, as you can see from our Q4 results, there is a very strong uptake in the market for this new version. And as a result, we wrote off some inventory that we had on hand from pre-acquisition time. Got it. And maybe a similar question for EFS. I mean, grew strongly in Q4 against tough comps. So maybe you can comment on the longevity and strength of the retail fueling cycle this time around because I think, Mark, as you said, channel checks seem good. I think I remember a slide maybe in the original launch or investor day where historically retail fueling does tend to clip along the mid single digits. So why cannot it continue to do that? Mark Morelli: Yeah. A lot of confidence in that. You know, we are at the NACS leadership summit this week, and so I am hearing directly from C-suite officers of our convenience store customers. And as you may know, we have about two-thirds share with the largest regional and national and international players. When you really look at the backdrop, in some of my prepared remarks, you know, I also spoke about this. And the color that I am getting directly from our customers this week—there is no question that they are advancing their footprints. Many times when you ask folks about their buildout plans, they are looking three years out on average. Some are even looking longer than that because of the sort of the footprint buildouts, real estate transactions. You know, building a new store does not take that long, but, you know, doing all the permitting, setting all that up, and they are very planful. And, you know, really cash-flow positive. They are not seeing anything in the economy right now. So that is about two-thirds of our business is really associated with that very constructive backdrop. So I think we are pretty bullish on what we are seeing. The new technologies that we are offering really help them solve high-value problems. As they build out their infrastructure, also as they do M&A and they combine with each other, it is a more complex backdrop for them to be able to manage. They are looking at new solutions such as loyalty and media to be able to drive more revenue, and they are seeing some really successful endeavors there. So yeah, we are very excited on the backdrop and what we see in our position in the market with number one, number two, of our strong brands, and we are doing it in a more unified concerted way that really helps them solve some high-value problems. So yep, we see continuation of this. Andy Kaplowitz: Appreciate all the color. Anshooman Aga: Thank you. Our next question is coming from Julian Mitchell of Barclays. Please go ahead. Julian Mitchell: Hi. Good morning. So, you know, I heard you on the sort of the phasing of the year, but maybe flesh out a little bit more, I guess, in that first quarter 1 point of organic growth, how are we thinking about the various segments? Because you had a very strong fourth quarter. Was there any kind of pull-forwards you could flesh out? Or is it just something around comps? Maybe help us understand the Q1 core growth across the segments, please. Anshooman Aga: Yes, Julian. Good morning, and thanks for the questions. So just from a segment perspective, we expect our EFS segment to continue to grow, probably in the low single digit growth range. Mobility Technologies will be flattish. That is really off the very strong compare in that business. And then Repair Solutions, again, we expect it to be relatively flat. Q1, as we said in the prepared remarks, the turnaround continues in that business with stabilization. Sales off the truck were up for the first time in Q4, so we are starting to feel incrementally better about the business, and we expect Q1 to be relatively flat year on year. Julian Mitchell: Thanks very much. And then on the operating margins, flat on year in first quarter, up 80 points for the year. When we think about kind of what is changing as we go through the year, I suppose there is some volume leverage that builds. It also sounds like that $15 million savings number is sort of year on year a bigger weighting in the back half. Just maybe help us understand kind of how drivers of that improved margin year on year split between those two. And then price/cost, anything changing there first half versus second half because there are tariffs anniversary. Anshooman Aga: Yeah. I got it. So it is some of the things you mentioned, Julian, but I will start off by saying Q1 margin last year were the highest for the whole year. We were at 21.7% in Q1 last year, which was about 40 to 60 basis points higher than all the other three quarters. So it was the highest margin quarter, and typically our typical seasonality—through volume leverage, Q4 is usually the highest margin quarter for us. We will get volume leverage as the business continues to perform better. Incrementals are relatively good in the business. But also, a lot of the $15 million in-year savings, a lot of those are in flight right now. So the savings start ramping in Q2, but really fully ramp in the back half of the year, Q3, Q4. So definitely, that will add to it also. Julian Mitchell: Got it. And price/cost, is that pretty steady through the year? Anshooman Aga: Yeah. Price/cost is pretty steady through the year. We ended 2025 a little over 1%. For 2026, again, I think we will be somewhere around 1.3% average price increase. You know, tariffs hopefully are behind us from a lumpiness perspective, and we can go to our normal cadence of price increases. Great. Thank you. Thank you. Operator: Our next question is coming from Nigel Coe of Wolfe Research. Please go ahead. Nigel Coe: Thanks. Good morning, everyone. Okay. So yes, another question on phasing. So I am assuming the first half/second half sort of implies, I think, flattish core in 2Q. Very similar EPS to 1Q. Just want to make sure that is the case. And then you have got a much, much tougher comp in the second quarter given the pull-forward. So I just want to make sure you are confident that flat core is about the right number. Anshooman Aga: Yeah. We feel pretty good given the visibility we have in the business around our framework that we provided, with half one being a little over 48% of our total sales, EPS being a little under 47% of our total year. It is in line with our typical seasonality. Also, you know, how our businesses are shaping up, how backlog is shaping up, how orders came in in January, all gives us confidence in the framework we have provided. Nigel Coe: Okay. Good. And then the Patheon sort of penetration. Just remind us where we are with that. It seems like there is some really good momentum there. And then I am just wondering, you know, the car wash business seems to be maybe an industry that might benefit from the—or rather the tax incentives out there, you know, could incentivize some investment. I just wonder if you have seen any return to activity in the tunnels. Mark Morelli: Yeah. The Patheon software, I think, is a real success for us. You know, it is a product we have been working on for a bit, trying to bring it to market in the right way. And I think what we are seeing now are real proof points that it helps the folks that are the larger operators in the market. How do they run a better car wash? How do they also attract consumers to their site? It is also—they have very high labor turnover, and the ability for them for ease of use and training of employees and managing a network of car washes is certainly a real selling feature here. You know, the way we are getting traction in the market and the turnaround in DRB, which you see real momentum building in the second half of this past year, is not off new tunnel builds. New tunnels have not been coming to market. As you know, the business overall was really impacted by higher interest rates where folks were building out tunnels at a very rapid rate, and then it slowed down. As we project into this year, I think we have a view that tunnel builds is probably going to be flat year over year. And with that assumption, we will definitely make progress on Patheon because it, you know, it takes a while for folks to get into that new software. And so we have got a pipeline, we have got really good pilots out there. And the great news is they have proof points of that system working with other blue-chip customers in the space. So I think we will continue to see momentum there. If we get any benefit from tax benefits, both on the car wash side or in Matco, or how that drops through, I think is a little bit of a question mark on how that will play through. I think we are all watching that to see if that will have some impact, but that is not included in our guide. Anshooman Aga: Okay. And, Nigel, I will add that Patheon is pretty early in its upgrade cycle. We have had some early adopters and larger customers that have deployed it, but we still have a pretty big install base of our legacy solution, SiteWatch, out there. So there are a lot of good opportunities to continue to sell Patheon in the marketplace. Also, the revenue on Patheon is higher than our legacy solution given higher capabilities and advantages it provides to our customers. Great. Thank you. Operator: Thank you. Our next question is from Katie Fleischer of KeyBanc Capital Markets. Please go ahead. Katie Fleischer: Hey. Good morning, guys. Just to go back to the one-time adjustment in Invenco. Is there a way for us to think about what margins would have looked like this past quarter without the impacts of that adjustment? Anshooman Aga: Yes. Inventory adjustment was $4 million, so that is about a 130 basis point impact to Invenco’s margins for the fourth quarter. So underlying margins would have been down slightly still year on year. Now Q4 last year at Mobility Tech was a pretty tough compare from a margin perspective, and we did have some mix also that we called out between the different product lines in that business. But underlying margins for Mobility Tech would have been around 20% for Q4. Okay. Great. Katie Fleischer: And then on Repair, how conservative do you feel like the outlook is for flattish growth in 2026? I know it is still really early to call on collections in that business, but just given some of the improving trends that you are seeing there and some potential help from the macro environment, what is the upside to that growth outlook? Mark Morelli: Yeah. Katie, thanks for the question on Repair. Look, the good news is definitely seeing some traction. The areas that make the most amount of sense given the K-shaped economy that has been playing out is for repair technicians to be more productive. I think we all recognize that the backdrop on the repair market is pretty healthy. You know, you have got a car park now that is almost thirteen years old. I mean, that is kind of ridiculous to see how many older cars are actually on the road, and that is really good for the sweet spot of repair. And vehicle miles traveled are up. You know, overall, it is a pretty good environment for repair. I think the problem we all recognize is that folks might be holding back from some of those repairs, as well as the technicians are part of the working class that is also under pressure. And so if they can be more productive on the job site, then they are going to be willing to spend money in two areas that we have definitely made progress on are in the diagnostic area, where we have not sold to our potential on diagnostics. We have got a really good lineup and really good price points on the diagnostic line, and it is a very capable multi-tiered product line. And we are being a lot more effective with training and selling that, and you saw that happen in Q4. We think there are legs to that. And then we have actually done really well on these productivity carts, where you are able to organize your tools, bring them right into the job site, right into the work that is being done, and the technician can be a lot more productive there. And so those are the two general categories we are seeing the uplift occur in. And I think when you look at that going into the year, you know, it is a little bit hard to predict what is going to happen. You know, I think we do not really know what is going on with the consumer this year. It is a little bit hard to predict how tax breaks might affect that. And so I think from what we see right now, I think it is a prudent guide. Katie Fleischer: Alright. Thanks, Mark. That is really helpful. Operator: As a reminder, should you have a question, please press star followed by one. Our next question is from David Emerson Ridley-Lane of Bank of America. Please go ahead. David Emerson Ridley-Lane: This is David Ridley-Lane on for Andrew. Just two quick questions and then a longer one. So just housekeeping. What was book-to-bill in the quarter? And then also, just to confirm, it sounds like Matco Expo timing is again in 2026? Anshooman Aga: Yes. So our orders were up low single digits on the back of a pretty strong Q4 last year. So the book-to-bill was just under one for the year. Timing is for Matco Expo, yes. The sales will come in Q2. It is actually at the very tail end of Q1, so the last three to four days of Q1 saw the sales. The bookings will start coming in in Q1, but the actual sales, to my recollection, are probably in Q2. Yeah. Mark Morelli: And, David, we hope not to change that. I think it was very painful for investors to kind of follow the changing of the timing from Q1 to Q2. So, you know, we promise you we are not going to flip-flop back and forth on the Matco timing. The reason why we did push to Q2 is that our franchisees, distributors, are really fond of better weather. Sometimes they bring their families on vacation there, and they were looking at a little bit better weather to do that. And it was something we really did a bit of hand-wringing on. But we think it is more customer-friendly, distributor-friendly, and so that is why we changed it, but we promise not to change it again. David Emerson Ridley-Lane: Got it. Understood. We all like better weather. And then maybe I am not understanding some of the dynamics here for gas stations, but I know that merchant acquirers will sometimes give these payment terminals—the in-store payment terminals—away as part of a multiyear agreement. So like First Data will give you a Clover terminal. Elavon, etcetera. I get why you need to have the full suite of payments and hardware. But is the right way to think about this kind of like a below-average hardware product that allows you to win the above-average-margin recurring revenue and sort of offer the full suite? How would you kind of size that up? Anshooman Aga: No. These are not below average. We do—definitely the hardware that we are providing with FlexPay 6, both outside on the dispenser but also inside the store, are good-margin products. You know, usually, when a payment processor gives away hardware for free, their swipe fee or the transaction fee that they are charging the merchant is a lot higher because they have to make up the money. Most of our larger customers and even the smaller ones take benefit of industry—the NACS Association has agreements with merchant processors. So usually, they take advantage of lower rates, so they are not getting the hardware for free. And then, you know, really, when you start thinking about the connectivity between the different payment terminals on-site, whether it is inside the store, outside the store, on the car wash, on an EV charger, and really as you start bridging that to functionality like order at the pump, when you start bridging it to functionality like loyalty, media, having that common payment device is extremely important, and that was what Mark was covering in the prepared remarks around unified payment. Layer that in with NFX, and customers like Shell where we have deployed this are seeing significant advantage with managing the complexity of payment regulation, and other customers for which speed is very important are seeing improvement in speed of the transactions and increasing the throughput from that perspective. So significant advantages to our unified payment solution. Mark Morelli: Now one of the areas that, you know, we are hearing also at the event that we are at this week is clearly the complexity of managing their assets, and these are very successful storefronts that are going in at sometimes these customers at a pretty fast clip. And it is how do you manage your costs going forward. So whether somebody might get a free piece of hardware here or there, that is not predominantly what they are interested in. They are interested in the cost of that infrastructure and what that costs them, the complexity by which it is being managed, the ability for a microservices software platform to also be modular in a way where that can enable loyalty. Loyalty is a big deal if they can engage with that, if they can engage through media, bring people inside the stores. Now, there are big uplifts that can happen from that. And then they are also predominantly really interested in the lifecycle cost. These folks hang on to these pieces of equipment for long periods of time, and they look at the lifecycle cost management capability. It is not typically first cost that wins in the market segment that we are mostly focused on. It is really the lifecycle cost that wins. I think when you look at our offerings, we have real competitive advantages here. David Emerson Ridley-Lane: Got it. And if I could squeeze just one more in. Can you—you know, as part of your simplification plan, you are decreasing the number of dispenser variants, the SKUs. Can you buy a GVR fueling dispenser in the United States without Invenco hardware? Mark Morelli: Can you repeat it again? Maybe I can understand the question? David Emerson Ridley-Lane: I know you are decreasing the variants of fueling dispensers as part of your simplification efforts. And I am just wondering, for U.S. gas stations, is there a with-Invenco option and a without-Invenco option? Or is Invenco now just there in the base? Mark Morelli: Well, Invenco is the name that we use for that technology suite and the payment kits. And I think it is a differentiating solution that we offer as part of this unified payment, and that is what customers get with that unified payment offering. So it is really part of the suite that we offer. Anshooman Aga: But we sell dispensers with payments. There is no option in the U.S. to buy a dispenser without our payments. Katie Fleischer: Got it. David Emerson Ridley-Lane: Thank you very much. Operator: There are no further questions at this time. I would now like to turn the call back over to Mark Morelli for his closing remarks. Mark Morelli: Yeah. Thank you. Thanks again for joining us on the call today. We are entering 2026 with some really clear strong momentum, and we have a solid path to above-market growth and attractive margin expansion in front of us. And I am confident our teams will continue to execute along that path. We appreciate your continued interest in Vontier and look forward to engaging with many of you over the next several weeks. Have a great day. Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning, and thank you for standing by. Welcome to Birkenstock Holding plc's first quarter fiscal 2026 earnings conference call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If you would like to ask a question, please press star-1 to raise your hand. The company allocated 45 minutes in total to this conference call. I would like to remind everyone that this conference call is being recorded. I now turn the call over to Megan W. Kulick, Director of Investor Relations. Megan W. Kulick: Hello, and thank you everyone for joining us today. On the call are Oliver Reichert, Director of Birkenstock Holding plc and Chief Executive Officer of Birkenstock Group, and Ivica Krolo, Chief Financial Officer of Birkenstock Group. Alexander Hoff, VP of Global Finance, will join us for Q&A. As a reminder, we preannounced certain first quarter results in conjunction with our Capital Markets Day on January 28. On this occasion, we took a deep dive into our business model and our growth strategy for the next three years combined with a Q&A session, which covered a wide variety of topics. For those of you who were not able to attend our Capital Markets Day or follow via live stream, the presentation materials and replay are available on our investor relations website at birkenstock-holding.com. Today, we are reporting the financial results for our fiscal first quarter ended 12/31/2025. You may find the press release and a supplemental presentation connected to today's discussion on our investor relations website at birkenstock-holding.com. Results have also been filed on Form 6-K with the SEC. We would like to remind you that some of the information provided during this call is forward-looking and accordingly is subject to the safe harbor provisions of federal securities laws. These statements are subject to various risks, uncertainties, and assumptions which could cause our actual results to differ materially from these statements. These risks, uncertainties, and assumptions are detailed in this morning's press release as well as in our filings with the SEC, which can be found on our website. We undertake no obligation to revise or update any forward-looking statements or information except as required by law. We will reference certain non-IFRS financial information. We use non-IFRS measures as we believe they represent the operational performance and underlying results of our business more accurately. The presentation of this non-IFRS financial information is not intended to be considered by itself or as a substitute for financial information prepared and presented in accordance with IFRS. Reconciliations of non-IFRS measures to IFRS measures can be found in this morning's press release and in our SEC filings. I will now turn the call over to Oliver. Oliver Reichert: Good morning, everybody. It was great seeing you in New York two weeks ago. Just to recap some key points from the day. We believe we are a one-of-a-kind purpose-driven brand with a huge runway ahead. Our unique business model is designed to deliver resilience, with sustained long-term top line growth, industry-leading margins, and strong free cash flow. Over the next three years, we expect to continue to deliver 13% to 15% top line growth in constant currency, and 30% plus EBITDA margins in an environment that has substantially changed since our IPO. Why are we so confident in our growth potential? Our total addressable market includes every Homo sapiens sapiens. That provides a very long runway for global growth. The three-year growth algo of 13% to 15% in constant currency reflects our commitment to manage the business with discipline by geography, channel, and product. By being vertically integrated, we are capacity constrained by design. So to grow our business profitably, we are committed to maximize profitability per pair while protecting brand equity. The Americas, our largest segment, continues to grow double digit. Even in our most developed market, the U.S., we sell only 45,000 to 50,000 pairs per million people, or roughly 5% penetration. So there is still substantial room for more growth. As you know, our margins in the U.S. face headwinds from additional tariffs and the weaker dollar. However, our resilient business model allows us to steer growth between geographies to optimize margins under this new reality. In EMEA, our highest margin segment, markets like Germany, Denmark, and Austria have reached penetration levels similar to the U.S. and still generate double digit growth. But we are underpenetrated in other markets like France, Spain, UK, and the GCC. So we see even stronger growth potential in these countries and very high margins. Finally, the largest opportunity for long-term growth remains in APAC countries such as China, Japan, South Korea, and India, where we are highly underpenetrated but realize strong margins and some of our highest ASPs. We will steer APAC growth at double the pace of the other segments over the next three years. This means we will double our APAC revenue by 2028. For the foreseeable future, we expect B2B growth will continue to outpace B2C growth, but we are working to balance channel growth and strengthen our DTC business. B2B growth is driven by the trend towards in-person shopping. We are investing in our own retail to capture more of this in-person demand and promote newness. In online, which accounted for 80% of our revenue last year, we are not sitting on our hands. We are transforming our capabilities to convert more of the live to our e-com business value of the brand fan. We do this all within the context of our vertically integrated supply chain and manufacturing capabilities. Our supply chain will deliver the unit growth required to achieve our three-year targets. Now on the quarterly results. We delivered again a strong quarter with revenues of €402 million, up 11% on a reported basis and 18% in constant currency, well above our 13% to 15% full-year guidance. We saw strong demand and brand momentum during the important holiday shopping season. As expected, our B2B business outperformed DTC during the quarter. B2B was up 24% in constant currency while DTC was up 12%. As you know, over 90% of the B2B growth comes from within existing doors. We tightly manage our distribution as relative scarcity and channel health remain top priorities for us. We will never compromise on our pull model. The ultimate truth for the brand health is sell-through at full price, and that remains very high, over 90%. We continue to deliver as promised in our white space opportunities. In APAC, we grew revenues 37% in constant currency, more than double the pace of growth of the Americas and EMEA. In owned retail, we added nine new stores, ending the quarter with 106 stores. We are well on the way to deliver the 40 stores we promised for this fiscal year. This will allow us to capture more in-person shopping demand, younger shoppers within our own DTC business. It also allows us to showcase the full range of our collection, newness, and special editions not available in B2B. The closed-toe share of revenue reached close to 60% of revenue during the first quarter, which is seasonally the highest quarter for our closed-toe business. We saw very strong sales in clogs, including the Boston, a category-defining hero silhouette celebrating its 50th birthday this year. We also saw strength in other clog silhouettes such as Naples and the Luthrie. We are successfully developing the brand beyond sandals, making it a true four-season brand. I will now turn it over to Ivica to discuss our financial results and outlook in more detail. Thanks, Oliver. I am happy to share with you details of Birkenstock Holding plc’s Ivica Krolo: performance for fiscal 2026. We exceeded our targets even in the face of a significant headwind from FX on our reported numbers. We generated first quarter revenues of €402 million, growth of 18% in constant currency. Reported revenue growth was 11%, due to the historically strong depreciation of the U.S. dollar and Asian currencies compared to 2025. This caused a 670 basis point headwind to revenue growth in the quarter. We saw strong growth across all segments in the quarter. The Americas segment was up 14% in constant currency, EMEA was up 17%, and APAC up 37% in constant currency. By channel for the quarter, B2B was up 24% in constant currency on the back of strong holiday demand at our key partners, and D2C sustained double digit growth, up 12% in constant currency. Gross profit margin for the first quarter was 55.7%, down 460 basis points year over year. Adjusted gross profit margin, including the reversal of distributor markup associated with the acquisition of our Australian distribution partner, was 57.4%, down 290 basis points. As we discussed at the CMD, adjusted gross profit margin excluding 220 basis points of pressure from FX and 130 basis points of pressure from incremental U.S. tariffs was up 60 basis points year over year. Selling and distribution expenses were €126 million in the first quarter, representing 31.2% of revenue. This was down 150 basis points from the prior year, mainly due to a higher B2B share year over year. Adjusted general and administration expenses were €29 million, or 7.2% of revenue in the quarter, up 50 basis points versus prior year. Adjusted EBITDA in the first quarter of €106 million was up 4% year over year. Adjusted EBITDA margin of 26.5% was down 170 basis points year over year. Excluding FX and tariff impacts, adjusted EBITDA margin was up 190 basis points to 30.1%. Adjusted net profit of €49 million in the first quarter was up 47% year over year. Adjusted EPS for Q1 was €0.27, up 50% from €0.18 a year ago, driven by strong operational performance, lower interest expenses, €10 million of income from the change in valuation of the embedded derivative, a lower effective tax rate, and lower share count following the €200 million share repurchase we executed in May 2025. As is usual in the first quarter, we used €28 million in operating cash compared to a use of €12 million in Q1 2025. This is due to working capital seasonality and income taxes paid of €48 million. We ended the quarter with cash and cash equivalents of €229 million. Our inventory-to-sales ratio was 39% in the quarter, flat with a year ago. Our DSO for the quarter were a healthy 20, up from 15 a year ago, primarily due to the higher B2B mix. During the quarter, we spent approximately €38 million in CapEx adding to our production capacity in Aruka, Görlitz and Pasewalk, and continuing our investments in retail and IT. This also included the €18 million purchase price of the Wittichenau facility announced last year. Our net leverage was 1.7 times as of 12/31/2025, up from 1.5 times at 09/30/2025 due to a normal cash seasonality. Turning to our outlook for fiscal 2026. We expect second quarter revenue growth in constant currency within our annual guidance of 13% to 15%. We will experience significant headwinds from FX and tariffs in the second quarter. Regarding FX, we will see an especially strong headwind in the second quarter. As a reminder, 2025 represented the strongest quarter for the U.S. dollar with an average euro to dollar exchange rate of 1.05 prior to Liberation Day. At today's euro/U.S. dollar exchange rate, we expect approximately 700 basis points of headwind to revenue growth in the second quarter. The margin impact to gross profit and adjusted EBITDA from FX will be 200 to 250 basis points in the second quarter. As a reminder, nearly all of our COGS are in euro and the majority of SG&A as well. As such, the absolute euro impact of movements in FX to revenue flows through by about 90% to gross profit and about two-thirds to adjusted EBITDA. Regarding tariffs, we expect similar margin pressure as we saw in Q1, or roughly 100 to 150 basis points. At our Capital Markets Day, we reiterated our guidance for 2026 for constant currency revenue growth of 13% to 15%. While we clearly came in ahead of that at 18% in the first quarter, I remind you that the first quarter is our smallest quarter in terms of revenue, so it just does not carry the weight that the remaining three quarters have on the annual growth rate. The FX headwind should be about 350 basis points for the full year, resulting in revenue growth of 10% to 12% to €2.30 to €2.35 billion. This assumes an average euro to U.S. dollar exchange rate of 1.07. We expect adjusted gross margin of 57% to 57.5% in fiscal 2026, inclusive of the 100 basis points pressure from FX and 100 basis points from incremental U.S. tariffs. We expect adjusted EBITDA of at least €700 million for the year, implying an adjusted EBITDA margin of 30% to 30.5% inclusive of the pressure from FX and tariffs totaling 200 basis points. Excluding the impact of these external factors, forecasted adjusted EBITDA margin would be 32% to 32.5%. Our expected tax rate should be in the range of 26% to 28%. Adjusted EPS is expected to be €1.90 to €2.05 including approximately €0.20 to €0.50 of pressure from FX. This is not including the impact of any additional share repurchases. We intend to repurchase shares for total consideration of €200 million during fiscal 2026 subject to market conditions. CapEx should be in the range of €110 to €130 million. Net leverage target for the end of fiscal 2026 of 1.3 to 1.4 times excluding the impact of additional share repurchases. With that, I will turn it back to Oliver to close. Oliver Reichert: Thanks, Ivica. We are confident in our business model and its resilience. Demand for our beloved brand remains strong. The runway for growth is huge. At the midpoint of our growth target, we expect to add €1 billion to our top line by fiscal 2028. We will do this while maintaining 30% plus adjusted EBITDA given our ability to steer the business between channels and geographies. I will now ask the operator to open the call for questions. Thank you. Operator: We will now begin the question and answer session. Please limit yourself to one question only. If you would like to ask a question, please press star-1 to raise your hand. To withdraw your question, press star-1 again. Please stand by while we compile the Q&A roster. Your first question comes from the line of Matthew Robert Boss with JPMorgan. Your line is now open. Please, Matthew, go ahead. Matthew Robert Boss: Great. Thanks. So, Oliver, could you break down the drivers supporting your confidence in durable demand momentum for the brand globally? Maybe if you could touch on current sell-through rates, full price demand indications from wholesale partners, and new customer acquisition? And then near term, have you seen any change in brand momentum so far in the second quarter? Oliver Reichert: Hi, Matthew. Thanks for your question. As we shared in New York, we see a very long runway for growth for the brand. It is below 5%. So we continue to grow there and in other territories double digits, and all this with a 90% plus full price realization across all channels. I think that is really something to mention because that is Matthew Robert Boss: And Oliver Reichert: really outstanding. Our order book for '26 and the and the and the next years remains very strong. We strictly allocate our partners to maintain scarcity and fulfilling roughly 70% to 80% of the wholesale demand. So 20% to 30% are unfulfilled out there. And we have seen no pushback from partners on any price increases or any kind of adjustments we did so far. You asked about the customer acquisition. I would say the new customer acquisition comes primarily from our B2B channels where partners benefit most from the strength of our brand and use us to drive traffic to their stores. You know the attraction, especially to Gen Z in this channel, is very, very Megan W. Kulick: strong. Oliver Reichert: Within our own D2C, the strongest indicator of new customer growth is our membership program, which is up over 20% year over year. You all have seen the queuing in front of our own retail stores, but we only have 106 at the moment. So our own retail is definitely in the future a very, very important pillar to talk about brand heat on top of that. But asking about second quarter, you know, cannot deliver any outlook here. We see the momentum continue in line with our guidance of 13% to 15% revenue growth in constant currency. So I think we are good on track. Matthew Robert Boss: Great color. Best of luck. Operator: Your next question comes from the line of Simeon Siegel with Guggenheim. Your line is now open. Please go ahead. Matthew Robert Boss: Thanks. Hey. Good morning, everyone, or good afternoon. Nice to see you recently. So just, Oliver, recognizing you guys are in this enviable position where you do supply less than demand, how are you deciding where to allocate your inventory across channels and geographies just to optimize the brand strength reaching new customers, and then, where your EBITDA dollars per pair come in? And then, Ivica, just recognizing tariffs and inflation, what were inventory up in units rather than in dollars? Thanks, guys. Oliver Reichert: Hey, Simeon. It is Oliver. Thank you for your question. As you know, we will see our product in the most profitable channels and regions to make sure our brand is well balanced in terms of revenue unit needs, or unit consumption, and the maximum resilience. Just to be clear, channel drives the margin. Geography is less relevant. So it is not really a shift from geography to other geographies. It is really, like, very detailed, very precise shifting from this channel in this geography to another channel in another geography. So and that is what we are doing mindfully. And I think the second part of the question will be answered by Ivica. Megan W. Kulick: Can you repeat the question, Simeon? We did not quite hear it. Matthew Robert Boss: I just looked at your balance sheet inventory in dollars. Curious if you could tell us what is up in units. Over here. Ivica Krolo: Hey, Simeon. It is Ivica speaking. So we are not disclosing that in detail as we have not disclosed that in the past, and we are not intending to do that in future as well. Matthew Robert Boss: Okay. Sounds good, guys. Best of luck for the year ahead. Operator: Your next question comes from the line of Anna Andreeva with Piper Sandler. Line is now open. Please go ahead. Anna Andreeva: Great. Thank you so much for taking our question, and it is nice to see you guys the other week. So your first quarter growth came in at 18% in constant currency. That is nicely ahead of the 13% to 15% guide for the year. Can you talk about where is that slowdown for the rest of the year coming from? And are you just being conservative? Just some more color on that would be great. And just as a follow-up to Ivica, can you help us with seasonal progression of how we should think about margins across the quarters for the rest of the year, just considering the outlook for FX, the tariff timing, capacity absorption and some other items? Thank you so much, guys. Ivica Krolo: Hey, Anna. Thank you for your question. It is Ivica. Yes, the 18% constant currency growth in Q1 2026 is indeed well above the 13% to 15% guidance for the year. In general, we are always conservative this early in the year. There is a lot ahead of us in fiscal 2026, and the second half is naturally more difficult to predict as you know, given the heavier mix of D2C, which is why we remain conservative. So while we are off to a great start and demand remains strong, as Oliver already mentioned, we think it is just prudent to stick with the current guidance for the year. And as a reminder, Q1 is our smallest quarter for the year. Last year, it was only 17% of the annual revenue, so it just does not carry the same weight for the remainder of the year. And with regards to your second question on the seasonal progression and margin development, so as you know, we do not guide in detail on a quarter basis. However, we pointed out a couple of points and important factors. So on top line first, FX impact will be the heaviest in Q1 and Q2. Q1 headwind was 670 basis points. Q2 at current FX even around 700 basis points. So the margin impact to gross profit and adjusted EBITDA from FX will be 200 to 250 basis points in Q2. Incremental tariff impact will have more pronounced impacts in Q1 to Q3, but less so in Q4 2026 given that the tariffs began to hit us in Q4 2025 where we already showed a 100 basis points impact for that quarter. For Q2 2026, expect a similar margin pressure as we saw in Q1, so roughly 100 to 150 basis points. Finally, with regards to absorption, we will be completing the absorption, especially with regards to our Pasewalk facility by Q3 2026. As you know, Q2 is an important quarter for our B2B business with significant shipments to our partners for the spring/summer season. The mix in Q2 is more heavily weighted to B2B, so expect the usual seasonal decline in gross margin and increased EBITDA margin compared to Q1, but all within the context of our full-year margin guidance. Operator: Your next question comes from the line of Michael Binetti with Evercore ISI. Your line is now open. Please go ahead. Michael Binetti: Hey. Thanks for all the information here, guys. I just wanted to ask a little bit on maybe on the OpEx or the SG&A. I think the guidance for the rest of the year flattens out from some nice leverage in the first quarter a little bit. Maybe you could just talk about why there is I am curious if we are going to be going through the rest of the year with double digit growth, what is there a chance to find some more leverage on SG&A? Or how should we think about SG&A at a double digit growth pace even if it slows from first quarter? And then I also just wanted to ask as we head into the spring and summer, Oliver, maybe just a quick thought on some of the products that are the ones that the retailers are the most excited about, maybe something that we can Google or watch your social media trends? What are the big products that we are going to see for the summertime here as we get into the main season? Thanks. Ivica Krolo: Hey, Michael. Thank you for your question. Ivica speaking. I will take the first part, with regards your question on margin improvement and SG&A. So as you know, the tariff and FX drag is very real for us and impacting our margin by 200 basis points for fiscal 2026. Without that pressure, EBITDA margin would have been up nicely year over year, and this is also what we pointed out at our Capital Markets Day, that we are getting operationally better. Could that be more? Yes, always. But we need to balance expanding margin with reinvesting that margin upside back into the business to support sustainable revenue growth. And this is particularly in our D2C business, which brings lower margin but higher absolute profitability per pair. But our D2C business is still 80% online, which has little operating leverage given the high variable cost structure. So we are accelerating our store growth to drive more retail as part of our D2C mix, which should allow for some four-wall operating leverage over time. We are accelerating our investments in manufacturing, retail, in e-com, and logistics, and that will constrain EBITDA margin expansion in the near term. And referring to what Oliver has said earlier, in a constrained situation, which we are in and which we are in by design, we are steering the business and allocating products in a way to optimize margin, mindfully and gradually, that this will pay off over time. With regards to your question on product and spring/summer, handing back to Oliver. Oliver Reichert: Hi, Michael. It is Oliver. What we see globally, especially in our own retail spaces and also in the order book of our big wholesale doors we are delivering, they are looking for much more elevated styles in both ways, in closed toe and in open toe sandal. What we see is a very strong momentum in open toe in elevated styles, you know, and in every price segment. So from, you know, big buck EVA up to Naples Wrap, which is a closed-toe silhouette. Open toe Florida in a very elevated execution. The Gizeh is coming back, so the thong sandal. So it is going, as always, in the same direction. They go into more expensive price groups, more elevated executions. That is super interesting for our partners, and it is super interesting for our own retail stores. That is a big trend we see also coming from APAC, where our Paris office is delivering open toe silhouettes north of $250 in the APAC region. This is already 30% to 40% of our own retail. So this is a very strong momentum in this high price level and these more elevated styles. Michael Binetti: Okay. Thanks a lot. Appreciate it. Operator: Next question comes from the line of Paul Lawrence Lejuez with Citi. Please go ahead. Anna Andreeva: Hi. It is Tracy Kogan filling in for Paul. Was hoping we could touch on the balance sheet and your uses of cash. With the stock trading where it is, I was wondering if you were thinking about being more in the open market with your €200 million buyback rather than waiting for private equity. And then wondering if you could talk about your willingness or the insiders' willingness to buy stock at current levels. Ivica Krolo: Hey, Tracy. Thank you for your question. It is Ivica. Anna Andreeva: I Ivica Krolo: 100% agree. The stock is too cheap. It does not reflect the fundamental value of the underlying business. Not at all. As you know, we announced our intention to repurchase €200 million in shares in fiscal 2026, so we will be executing this subject to market conditions. If you remember, last year we executed a repurchase in May in conjunction with a secondary offering, given the limited free float already in the market. A similar structure for this buyback is an option. But so are open market repurchases as well. Then covering the second part of your question with regards to insider buying. Well, we have been in a blackout period for most of the year. Our standard blackout period runs from two weeks before the end of our fiscal quarter to the day after we report that quarter. So in the case of Q1, the blackout started on December 15, ends tomorrow. Additionally, we have had transaction-related blackouts due to the Wittichenau acquisition and the Australia distributor acquisition. Finally, we get blacked out around any secondary transaction, potentially by Catterton, or altogether, that has not left any window in the year I have been in at Birkenstock. And I assure you it is not the lack of desire to buy shares at this price. Anna Andreeva: Thank you. Good luck. Operator: Next question comes from the line of Laurent Andre Vasilescu with BNP Paribas. Your line is now open. Please go ahead. Laurent Andre Vasilescu: Good morning. Thank you very much for taking my question. Ivica Krolo: Oliver, Ivica, I want to ask about your own stores, which are becoming increasingly important into your DTC business. I think, Oliver, you mentioned that last year, e-commerce was 80% of the mix, 20% stores. Do some rough math about, with regards to revenue per store? Can you provide us some store profitability metrics? What is your same-store sales growth? And how are the new doors performing? And how long are they taking to ramp up to full profitability? Thank you very much. Ivica Krolo: Hello. Thank you for your question. It is Ivica again, and you are 100% correct. Our own retail is becoming increasingly more important by design. We want to create more high-quality touch points with the brand, capture more of the in-person demand within our own retail channel, and balance D2C better between online and in-store. Generally, this channel also allows us to showcase the full range of our offering, including exclusive styles that you will not see in the B2B channels. As you know, our store fleet is still small and young. Only 106 stores by Q1 globally, around 60 of those have opened in the past two and a half years. As a result, we see a significant variation within the base, so the averages are skewed and not a particularly useful predictive tool. And, also, be reminded, there is no store that looks like the other, so the conception of the stores is very diverse all over the globe. But a few metrics we can share to help you think about the potential of this channel. In fiscal 2025, retail share of D2C revenue was up about 400 basis points year over year, and this is something we saw similar in Q1 2026. Retail is our fastest growing segment. In the quarter, it was up over 50% year over year in constant currency. Same-store sales growth was high single digits in Q1 2026, and this is also very similar to what we saw in fiscal 2025. So we see consistent and very stable demand patterns in our own retail. And finally, CapEx per store is typically in the range of €400,000 to €800,000, and we expect the store to return that cash within 12 to 18 months. So we are applying our very disciplined approach while expanding D2C further and accelerating it. Again, as the fleet grows and matures, the averages will become more meaningful and useful in forecasting, but for now, there is too much variation to make it a very useful tool for you. Laurent Andre Vasilescu: Thank you very much for the detailed response. Much appreciated. Operator: Your next question comes from the line of Peter Clement McGoldrick with Stifel. Your line is now open. Please go ahead. Peter Clement McGoldrick: Full-price brand representation is really standing out here across the footwear environment. So as we look through fiscal 2026, can you share some embedded demand elasticity metrics in the revenue outlook and then talk about the factors supporting your confidence that higher prices will continue to resonate as they have in the past? Oliver Reichert: Thank you for your question, Peter. It is Oliver. As you know, we are in the middle of 2026. So first quarter is over. We are in the second quarter. The pricing is already set and transmitted. So there is no surprise. As I said, we have a very strong order book. I think the ultimate or the strongest proof point is the 90% plus full-price selling across all our channels. And again, we take a very mindful approach to pricing. Covering the full range of products and the wide range of our assortment and the newness that we create even within certain silhouettes allows us to make precise adjustments on an item-by-item base. And this is like, you know, it is not just a single thing on a very well-performing product. It is a broad and very, hard to say democratic base, but it is a way moving forward in terms of pricing. And over the years, I mean, we have been nearly constantly increasing our pricing year over year, season by season, but always mindful and always in a very close connection with the outside realities. So prices are targeted by product group, price levels in general, and by region. So in some areas, you know, in a global pricing architecture, you have adjustments that are regional-driven or channel-driven. In other parts of the world, they might be a bit different. But in global, it is in the pricing architecture embedded, and that is the most important thing to prevent gray market and all this ugliness. So in total, as I said before, we are seeing customers moving up in terms of price points to more elevated styles and not downwards. So this goes fully aligned with our procedure to move on. And as you know, roughly, you know, it is always like a mid-single-digit price increase we are taking, and that is a very good measurement to move on at least for us. Peter Clement McGoldrick: Thank you very much. Operator: Your next question comes from the line of Edouard Aubin with Morgan Stanley. Your line is now open. Please go ahead. Thank you for taking my question. So Edouard Aubin: Oliver, at the CMD, you indicated, right, that you expect to grow volume about 10% per annum over the next three years, which obviously is close to doubling or an acceleration versus, you know, pre-IPO. Sorry to come back on the wholesale and so on, but, and I know you provided over the years qualitative comments, but can you share with us, we do not need the exact figure, but the rough end of the number of doors and the number of the accounts in the U.S. and Europe kind of since IPO, how it has trended? And then related to that, you know, if you could give us a rough breakdown or at least some indication of, you know, your distribution maybe just in the U.S. by channel between, let us say, you know, department store, mass merchant, family channels, whatever, that would be helpful to understand your wholesale strategy. Thank you so much. Ivica Krolo: Hi, Edouard. It is Ivica speaking. Covering the second part of your question first. With regards to U.S. and channels specifically. So what we see, and this is a trend that we have observed now for more than a year, and also that has accelerated with back to school, is that the demand is going to physical in-person shopping, and this naturally favors our B2B channel. We have 15 stores in the U.S., so very small footprint to cover that in-person demand. And we see strong sell-throughs in the U.S. with our top 10 strategic partners. So sell-throughs are above 30%, and this growth is broad-based. So it includes department stores. It includes sports specialty. And this is the largest driver of the growth that we see here in the U.S. and specifically the B2B channel. Megan W. Kulick: And just to follow up real quick on the question. So during the Capital Markets Day, we did talk about the number of B2B doors in both EMEA and Americas. Americas is about 10,000 currently, and EMEA is about 9,000. That is total. So I think we also cited within the U.S. about 600 doors of potential and in EMEA around 1,400 that we have identified as being potential new doors. Again, those are going to be highly targeted to some of our expansionary categories like youth and sports specialty. Edouard Aubin: Got it. But how does this number of doors today compare to, you know, the numbers of doors at the time of the IPO? Sorry. Megan W. Kulick: We said that it has been about 90% to 95% of the growth has come from existing doors, so it has been low single digit door growth overall since the IPO. Edouard Aubin: Okay. Thank you. Operator: Your next question comes from the line of Lorraine Hutchinson with Bank of America. Your line is now open. Please go ahead. Lorraine Hutchinson: Thank you. Good morning. Just following up on that point, as your customer base shifts more toward the newly acquired Gen Z customers, is there any deeper pruning you need to do, adding and subtracting, to make sure your B2B partner portfolio can successfully target this cohort? Oliver Reichert: This is Oliver. Thank you for your question, Lorraine. I do not know if I really understood your question right. The thing at the moment that fascinates Gen Z is that they are burning for the Boston silhouette, which is a silhouette that is 50 years old this year. So we do not really have, you know, a specific product units for this target group. I think they are attracted by the heritage, the purpose of the brand, and this unique easy-on and easy-off. That is the biggest argument for them. And for some of these Gen Z customers, this is the first pair of Fußbett they ever tried. And as we know, we will build a long-term relationship with these customers, and they come back. In average, they end up having four, seven, eleven pairs. So this is just the beginning of the journey and the touchpoint with the brand for these people. And we try to continue to be in contact with them and make them other wearing occasions or usage occasions for the Fußbett. Megan W. Kulick: And just real quickly follow-up on that. You know, David, unfortunately, we did not have all the regional leaders here today to take Q&A, but I can answer real quickly on behalf of David. You know, our view is from a Gen Z standpoint and the youth standpoint, we are in a lot of the right doors. We are in some of the youth specialties, sporting goods stores where a lot of these shop. Our goal is obviously to harvest more of them online. We think we are in the right doors from a B2B standpoint, and we are seeing the breadth and depth of our offering within those stores expanding as the demand from Gen Z grows. We are going to wrap it up there. I know we only allocated 45 minutes to today’s call. We will be back to the full length.