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Operator: Greetings, and welcome to the AMG Fourth Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Patricia Figueroa, Head of Investor Relations for Affiliated Managers Group, Inc. Thank you. You may begin. Good morning. Patricia Figueroa: Thank you for joining us today to discuss Affiliated Managers Group, Inc.'s results for the fourth quarter and full year 2025. Before we begin, I would like to remind you that during this call, we may make a number of forward-looking statements, which could differ from actual results materially, and Affiliated Managers Group, Inc. assumes no obligation to update these statements. Also, please note that nothing on this call constitutes an offer of any products, investment vehicles, or services of any Affiliated Managers Group, Inc. affiliate. A replay of today’s call will be available on the Investor Relations section of our website along with a copy of our earnings release and reconciliations of any non-GAAP financial measures, including any earnings guidance provided. In addition, we have posted an updated investor presentation to our website and encourage investors to consult our site regularly for updated information. With us today to discuss the company's results for the quarter are Jay Horgen, Chief Executive Officer; Thomas M. Wojcik, President and Chief Operating Officer; and Dava Elaine Ritchea, Chief Financial Officer. I will now turn the call over to Jay. Thanks, Patricia, and good morning, everyone. Affiliated Managers Group, Inc. delivered outstanding results in 2025. Jay Horgen: One of the strongest years in our company's history. With record annual economic earnings per share, and substantial organic growth, including record net inflows in alternative strategies, our results reflect the accelerating evolution of our business towards areas of secular demand most notably in private markets and liquid alternatives. Patricia Figueroa: Affiliated Managers Group, Inc. generated full year economic earnings per share Jay Horgen: of $26.50, an increase of 22% year over year, driven by our strong organic growth and the positive impact of our capital allocation strategy. Our affiliates generated approximately $29,000,000,000 in annual net client cash flows, the highest level since 2013, representing an organic growth rate of 4%. As evidenced by our strong earnings growth and flow profile, our business momentum is accelerating. And given our confidence in our long-term prospects, in 2025, we repurchased approximately $700,000,000 of our shares, or 11% of our shares outstanding. It was a landmark year for growth at Affiliated Managers Group, Inc. Throughout 2025, across both organic growth and new affiliate investments, Affiliated Managers Group, Inc. added approximately $97,000,000,000 alternative assets under management, representing an increase of 35% in our total alternative AUM. This increase includes $74,000,000,000 in net inflows, generated by existing affiliates managing alternative strategies, and $23,000,000,000 in additional alternative AUM from partnerships with new affiliates. As we have seen in recent years, our growing footprint in alternatives has fueled significant organic growth and accelerated earnings. With more than $1,000,000,000 in capital committed across five new investments, we deployed near record levels of capital in growth opportunities in 2025. We began the year an investment in Northbridge, a private markets manager specializing in industrial logistics, followed by a partnership with Verition, a premier multistrategy liquid alternatives firm. Next, we invested in Montefiore, a European private equity firm focused on the services sector, and then Qualitas Energy, a leading renewables-focused global infrastructure manager specializing in energy transition. And then later in the year, we announced a strategic collaboration with Brown Brothers Harriman to develop structured alternative credit products for the U.S. wealth market. In addition, we continue to invest our capital and resources in and alongside our affiliates, collaborating with our partner firms to develop new products for the U.S. wealth channel including additional innovative alternative solutions across private markets, liquid alternatives. Each of our new affiliate partnerships reflects Affiliated Managers Group, Inc.'s differentiated partnership approach, which magnifies our affiliates' long-term success through strategic engagement, while preserving their independence. Our unique investment model continues to attract outstanding independent firms seeking a strategic partner and our new investment pipeline remains strong. As further evidence, we just announced a new partnership with Highbrook, a private markets manager operating in the real estate sector that invests across the U.S. and Europe in high-growth areas including logistics, data centers, and housing. We also announced an incremental minority investment in Garda, an existing affiliate operated liquid alternatives. This incremental investment reflects the strength of our partnership and supports Garda's long-term objective of building an enduring independent firm. Garda's outstanding multidecade track record of performance and its leading position in the fast-growing area within liquid alternatives underpin our strong conviction in the firm's long-term prospects. Both investments are consistent with our strategy and are expected to be accretive to our earnings in 2026. Thomas M. Wojcik: In addition, Jay Horgen: in 2025, we collaborated with Peppertree, Convest, and MDI on strategic transactions that created value for all stakeholders and resulted in liquidity events for Affiliated Managers Group, Inc. Across these three transactions, Affiliated Managers Group, Inc. received more than $730,000,000 in pretax distributions and sale proceeds, more than 2.5 times our invested capital, and with an average IRR of more than 35%. We were pleased that Affiliated Managers Group, Inc.'s strategic engagement ultimately resulted in an excellent outcome for all stakeholders, including Affiliated Managers Group, Inc. shareholders. The significant proceeds from these liquidity events highlights the underlying value of our affiliates and enhances our flexibility to execute our growth strategy. The growth investments we have strategically and deliberately made over the last several years have played a critical role in reshaping Affiliated Managers Group, Inc.'s business profile. Today, our affiliates manage $373,000,000,000 in alternative AUM, which contributes approximately 60% of our EBITDA on a run-rate basis, including sizable contributions from two of Affiliated Managers Group, Inc.'s largest and longstanding affiliates, Pantheon and AQR. As you know, AQR continues to deliver excellent performance and capitalize on emerging secular trends, including in Tax Aware Solutions and the wealth channel, which is driving significant organic growth and an increasing EBITDA contribution to Affiliated Managers Group, Inc. on an absolute and percentage basis. Thomas M. Wojcik: In addition, Jay Horgen: Pantheon has established itself as a leading secondaries manager across private equity, private credit, and infrastructure, and also has a significant presence in the U.S. wealth channel. Beyond AQR and Pantheon, our affiliates managing alternative strategies delivered organic growth in 2025 and contributed to Affiliated Managers Group, Inc.'s strong results in the year. our capital in firms and initiatives, As we continue to execute on our strategy, investing aligned with long-term growth trends, we expect to further accelerate the evolution of our business towards a greater participation in alternatives, driving future growth, and further differentiating Affiliated Managers Group, Inc. Thomas M. Wojcik: Now stepping back Jay Horgen: over the past six years, we have fundamentally transformed Affiliated Managers Group, Inc. and built a strong foundation and business profile which we believe will benefit shareholders for years to come. During this period, our business generated more than $4,500,000,000 in capital from operations, and approximately $1,400,000,000 in after-tax proceeds from the sales of our interest in our affiliates. All of which, through our disciplined capital allocation strategy, we have reallocated to both high-conviction growth investments and meaningful return of capital to shareholders, exemplifying our commitment to long-term value creation. In doing so, over this period, we have strategically evolved our business mix towards areas of secular growth, pivoting towards alternative strategies and increasing the contribution of these strategies from roughly one-third of our EBITDA to approximately 60% today. In addition, we have grown our alternative AUM by approximately 55%, and that is net of affiliate sales, primarily driven by a combination of net client inflows from existing affiliates, and the addition of nine new affiliates operating across private markets and liquid alternatives. We also reduced our share count by more than 40%, further compounding our growth in economic earnings per share. Thomas M. Wojcik: Together, Jay Horgen: these strategic actions have resulted in exceptional shareholder returns, with Affiliated Managers Group, Inc. stock appreciating at a 23% compound annual growth rate over the past six years. Despite these transformational results, we believe we are still in the early innings of our growth story, with much more opportunity ahead. Looking forward, we will continue to press our advantages, executing the same proven strategy with the same level of discipline that brought us here. This means investing in additional high-quality affiliates in areas of secular growth while also leaning further into product innovation distribution expansion to enhance our affiliate success and drive organic growth. We expect to see ongoing growth from our existing affiliates operating in alternatives, most notably from AQR and Pantheon. With our unique partnership-centric, cash-generative, return-focused model, we are well positioned to continue delivering long-term value. As we enter 2026, Affiliated Managers Group, Inc.'s reputation, value proposition, capital flexibility have never been stronger, a powerful combination for our firm and for our shareholders. With this durable foundation and our accelerating momentum, we are very excited about what we can accomplish over the next five years. Thomas M. Wojcik: And we are confident Jay Horgen: that the best is yet to come. We look forward to delivering even greater success for our affiliates, our clients, and our shareholders. Thomas M. Wojcik: Finally, Jay Horgen: I would like to take a moment to recognize Thomas M. Wojcik for his meaningful contributions to Affiliated Managers Group, Inc. over the past seven years, and to thank him for being part of our executive team during a critical period for Affiliated Managers Group, Inc. Thomas has informed us that he is ready to take a next step in his career and will leave Affiliated Managers Group, Inc. to pursue other leadership opportunities. Thomas joined Affiliated Managers Group, Inc. in 2019, distinguishing himself as our CFO and contributing more broadly to the organization in areas such as strategy and team development over the years. Today, we have a clear and effective strategy that is being executed by an outstanding leadership team that has even greater depth and breadth we have ever had Thomas M. Wojcik: Affiliated Managers Group, Inc. Jay Horgen: With Thomas's exceptional talent and experience, I have every confidence that he will be tremendously successful in whatever role he chooses next. And with that, I will now turn the call over to Thomas. Thank you, Jay, and good morning, everyone. I would like to start by thanking the Affiliated Managers Group, Inc. team for giving me the opportunity to be part of such a great organization over the past seven years. The relationships I have had a chance to build within Affiliated Managers Group, Inc. and its broader set of constituents have made this an incredible experience, and I am grateful to have been part of a strategy and an organization that I believe in. Time has come for me to contemplate the next stage of my career and the team is in an excellent position for this transition to begin. I am highly confident that the team will continue to successfully prosecute Affiliated Managers Group, Inc.'s opportunity set ahead. 2025 was a pivotal year in Affiliated Managers Group, Inc.'s ongoing evolution, one that reflects both the strength of our strategy and the discipline with which we have executed on that strategy. We entered 2026 with significant momentum. Our alternatives business continues to scale, underpinned by strong organic growth from existing affiliates, and further enhanced by the addition of a number of new high-quality partnerships. Our presence in the U.S. wealth market continues to expand and our opportunity set to invest in growth remains robust. This year also marked a significant inflection point. Affiliated Managers Group, Inc. returned to organic growth, fueled by accelerating client demand liquid alternative strategies, and ongoing fundraising strength in private markets. In the fourth quarter, net client cash inflows of $12,000,000,000 brought full-year inflows to $29,000,000,000, representing an annualized organic growth rate of 6% for the quarter and 4% for the full year, respectively. With $23,000,000,000 in net inflows in alternatives, the fourth quarter capped a record year for flows from alternative strategies at Affiliated Managers Group, Inc. which totaled $74,000,000,000 in the year, more than offsetting $45,000,000,000 in outflows in active equities and highlighting the advantages of Affiliated Managers Group, Inc.'s business profile which is increasingly weighted toward high-growth alternative asset classes. Thomas M. Wojcik: In liquid alternatives, Jay Horgen: our affiliates' value proposition continues to resonate with clients. Affiliated Managers Group, Inc. posted another record quarter in liquid alternatives with $15,000,000,000 in net inflows. Full-year net inflows of $51,000,000,000, which represent a 36% annualized organic growth rate, were primarily driven by AQR with positive contributions from a number of affiliates including Capula, Garda, and Verition. Thomas M. Wojcik: Importantly, Jay Horgen: alongside the significant ongoing opportunity in U.S. wealth, including for solutions focused on after-tax returns, we are seeing strong demand and increasingly constructive sentiment for liquid alternatives from institutional clients. Building on this momentum, Affiliated Managers Group, Inc.'s diverse group of affiliates managing liquid alternative strategies is well positioned to deliver excellent risk-adjusted returns for clients, and continue to attract new flows over time. Thomas M. Wojcik: Our private markets affiliates Jay Horgen: raised $9,000,000,000 in the quarter, bringing full-year fundraising to $24,000,000,000, which represents an annualized organic growth rate of 18%. These inflows were mainly driven by Pantheon, as well as fundraising at Ara, Abacus, EIG, Forbion, and Montefiore. The ongoing fundraising momentum of our private markets affiliates reflects investors' conviction in their specialized investment strategies, along with their position at the forefront of secular growth trends. Looking ahead, the fee-related earnings growth and carried interest potential across our private markets affiliates represents a significant source of upside for the long-term earnings profile of our business. Thomas M. Wojcik: In equities, Jay Horgen: saw net outflows of approximately $12,000,000,000 in the quarter and $45,000,000,000 in the year, reflecting industry headwinds. Multi-asset and fixed income was flat for both the quarter and the year. We continue to have an outstanding group of differentiated long-only firms with multidecade track records which have been able to perform and deliver for clients through cycles. And notwithstanding some of the challenges in the industry, we think a lot of these businesses continue to be very well positioned to deliver for clients. Thomas M. Wojcik: As we continue to form new partnerships Jay Horgen: with growing high-quality independent firms, such as our new investment in Highbrook, and our follow-on investment in Garda this year, we are broadening our exposure to fast-growing specialty areas within alternatives and further diversifying our business. Over the past few years, we have made significant investments in our capital formation capabilities, transforming our U.S. wealth platform from one focused primarily on long-only mutual funds to a platform with a proven track record of developing Thomas M. Wojcik: launching, Jay Horgen: and distributing alternative products in the high-growth U.S. wealth market. Alternatives AUM on Affiliated Managers Group, Inc.'s U.S. wealth platform reached approximately $8,000,000,000 in 2025, with $2,200,000,000 in alternative net new flows during the year. Today, our platform has five continuously alternative solutions including Pantheon products covering each of private equity, credit secondaries, and infrastructure, giving clients direct access to a diverse range of differentiated institutional-quality investment capabilities. And we continue to work with our affiliates to bring new in-demand products to market to capitalize on the multidecade growth opportunity in alternatives in U.S. wealth. In December, we filed for the registration of the AMG BBH Asset-Backed Credit Fund, leveraging Brown Brothers Harriman's expertise in structured credit markets. Looking ahead, we expect to collaborate on a number of alternative credit products leveraging Brown Brothers Harriman's differentiated investment engine and Affiliated Managers Group, Inc.'s strengths in evergreen product development and distribution, further are expanding our alternatives offering for the U.S. wealth market and bringing additional innovative solutions to help clients achieve their long-term investment goals. Along with the growth we are generating on Affiliated Managers Group, Inc.'s U.S. wealth platform, our affiliates, especially Pantheon and AQR, continue to take advantage of tailwinds in wealth through their own product development and distribution capabilities and as a result, Affiliated Managers Group, Inc. and our affiliates are collectively among the largest sponsors alternative products for wealth markets globally. Today, global wealth AUM at Affiliated Managers Group, Inc. and affiliates now totals more than $100,000,000,000 and grew organically at more than 100% in 2025. The success that we are having in the wealth channel is resonating not only with clients and existing Affiliated Managers Group, Inc. affiliates, but also with new investment prospects, as accessing this attractive market requires scale and is difficult, if not impossible, for independent firms to do on their own given the resources required to be effective in the channel. With the ongoing growth of our existing affiliates in both liquid alternatives and private markets, our proven strategic capabilities to enhance our affiliates' long-term success, and our expanded opportunities to invest in growth, we have entered 2026 in a position of strength. I will now turn the call over to Dava to discuss our fourth quarter results and guidance. Dava Elaine Ritchea: Thank you, Thomas, and good morning, everyone. 2025 was a very exciting year for Affiliated Managers Group, Inc. We continued to successfully execute on our disciplined capital allocation strategy, and further evolved our business composition toward areas of secular growth. Together with the strength and momentum of our existing affiliates, our strategic actions and execution contributed to record economic earnings per share in 2025. We committed more than $1,000,000,000 in capital across growth investments, and returned $700,000,000 to shareholders through share repurchases. Given our strong balance sheet, significant cash generation, and the overall positive trajectory of our business, we are in an excellent position heading into 2026 to build on these results and generate further meaningful earnings growth. I will start by discussing results for the quarter, then talk about the positive impact of recent capital activity on existing business growth on our forward earnings, and conclude with a discussion of our balance sheet. In the fourth quarter, we reported adjusted EBITDA of $378,000,000, which grew 34% year over year and included $125,000,000 in net performance fee earnings. On a full-year basis, we reported adjusted EBITDA of $1,100,000,000, up 11% versus 2024, which included $161,000,000 of net performance fee earnings. Fee-related earnings, which exclude net performance fees, grew 20% year over year for the quarter, and 8% for the full year, driven by the positive impact of our investment performance, positive organic growth, and margin expansion at some of our largest affiliates. Economic earnings per share of $9.48 for the fourth quarter and $26.05 for the full year 2025 further benefited from the impact of share repurchases. Economic earnings per share grew 45% year over year in the fourth quarter, and 22% on a full-year basis. Now moving to first-quarter guidance. We expect adjusted EBITDA to be in the range of $310,000,000 to $330,000,000 based on current AUM levels, reflecting our market blend, which was up 3% quarter to date as of February 11, and including net performance fees of $40,000,000 to $60,000,000. Based on this, we expect first-quarter economic earnings per share to be between $7.98 and $8.52, assuming an adjusted weighted average share count of 27,400,000 for the quarter. Dava Elaine Ritchea: of 2025 announced new investments and affiliate sales, as well as the partial impact from our recently announced incremental investment in new investment in Highbrook. Combined, we expect these two newly announced transactions to add an incremental $20,000,000 to adjusted EBITDA on a full-year basis, a portion of which will be in Q1. Q1 fee-related earnings guidance of $270,000,000, which is our adjusted EBITDA guidance less net performance fees in the quarter, is a good starting point for purposes of modeling full-year 2026, incorporating all our capital allocation activity and organic growth in 2025, and represents 30% expected growth in quarterly fee-related earnings versus Q1 2025. As it relates to performance fees, we are starting the year from a solid point. Given our first-quarter guidance range, we expect net performance fee earnings of approximately $170,000,000 for 2026, which is consistent with our five-year average from 2021 to 2025. However, it is still early and we plan to provide an update later in the year. Overall, we continue to have significant capacity to execute on new investments beyond Garda and Highbrook that could further enhance Affiliated Managers Group, Inc.'s earnings power over time. Our capital allocation strategy together with strong organic growth in our existing business has driven growth in AUM, fee-related earnings, adjusted EBITDA, and economic earnings per share in 2025, and this momentum that we have built in our business has set the stage for meaningful growth potential in 2026 and beyond. Growth in alternatives in 2025 included substantial contributions from two of our largest affiliates, Pantheon and AQR, both of which were double-digit contributors to Affiliated Managers Group, Inc.'s earnings. Given their strong performance, ongoing innovation, and differentiated expertise, we expect a growing contribution in 2026, with AQR likely to contribute more than 20% to our earnings. Further, we continue to diversify our business through new partnerships, and we feel good about the opportunities ahead as we strategically engage with our new and existing affiliates. Finally, turning to the balance sheet and capital allocation. Our balance sheet is in a strong position given our long-dated debt, low leverage level, and access to our revolver. In August 2025, our ten-year senior $350,000,000 institutional bond matured and was repaid. In December 2025, we completed the issuance of a ten-year $425,000,000 senior note at a 5.5% coupon rate, and used the proceeds to redeem and settle conversions related to our 2037 junior convertible trust preferred securities, which were settled fully in cash in January 2026. The total cost to refinance the security was $516,000,000, which included $342,000,000 of debt and $174,000,000 of conversion premium. $174,000,000 of conversion premium effectively represents the repurchase of approximately 600,000 adjusted diluted shares at a stock price of $293. Given this occurred in Q1 of this year, you can still see these shares in our Q4 2025 average adjusted diluted shares outstanding. The share dilution associated with these securities has now been fully removed for purposes of our Q1 2026 share count guidance of 27,400,000. Together, these transactions resulted in a simplified balance sheet and removed share count dilution from our capital structure. 2025 was an active year for us in terms of capital allocation. We committed more than $1,000,000,000 to growth investments, which included new partnerships with Northbridge in Q1, Verition in Q2, and Qualitas Energy and Montefiore in Q4, plus our announced strategic collaboration with BBH Credit Partners. We repurchased $350,000,000 in shares in the fourth quarter, our largest quarterly repurchase amount in firm history, bringing full-year repurchases to approximately $700,000,000 for the second consecutive year. We received aggregate pretax proceeds of approximately $570,000,000 from the sale of our minority stakes in Peppertree, which closed in Q3, and Convest private credit business and Montrusco Bolton, both of which closed in Q4. These transactions represented positive outcomes for all stakeholders, and collectively supported our $1,700,000,000 growth capital deployment in 2025 across new investments and share repurchases. We have continued to actively allocate capital into 2026. We announced a new partnership with Highbrook and a follow-on investment in Garda. The combination of the $175,000,000 committed to new investments, which are immediately accretive to EBITDA, and the $174,000,000 conversion premium on the settlement of the trust preferred, which further reduces our share count, creates strong earnings momentum to start the year. As we have demonstrated over the years, we aim to maintain a balance of strong deployment of capital across both growth investments and return of capital to shareholders. Along these lines, we anticipate repurchasing at least $400,000,000 in shares in 2026, beyond the conversion premium on the trust preferred securities, subject to market conditions and capital allocation activity. This does not reflect our full deployment capacity and we plan to update everyone throughout the year as the quantum and pace of growth investments come into view. 2025 was a year in which every element of our growth strategy, from affiliate performance to organic growth to new affiliate investments and other growth investments, to share repurchases and effective capital management, all contributed to standout business results. And looking ahead, we are very excited to continue to build on this momentum in 2026. We have a diverse set of opportunities ahead of us, and we remain deliberate and disciplined in our approach to deploying capital. We have entered the year in a position of strength, and we are confident in our ability to continue to generate meaningful incremental value for our shareholders. We will now open for questions. Operator: Thank you. If you would like to ask a question, please press before pressing the star keys. In the interest of time, we ask that you. Our first question comes from the line of Daniel Thomas Fannon with Jefferies. Please proceed with your question. Jay Horgen: Thanks. Good morning and best of luck Thomas on your next endeavor. Daniel Thomas Fannon: Just wanted to dive a little bit deeper into the outlook for 2026. In terms of AQR. You know, they have obviously had very good growth. You talked about them being a more meaningful contributor in 2026. Hoping you could expand a bit upon the diversity of flows, some of these tax strategies. Is and how you are thinking about competition and potentially you know, the run rate and or growth outlook for know, what some of the some of these newer strategies have done and how successful they have been? Jay Horgen: Yes. Thanks, Dan, and good morning to you. Maybe I will start here and just say that the momentum in our flow profile really is coming through both in the private markets area and the liquid alternatives area, and most notably Pantheon and AQR. But beyond Pantheon and AQR, we still have positive flows in these areas so I just want to give you some context to that. There is good diversity of flows across the other firms as well. There are two standouts. Think that is what you are noting or your your specific question on AQR, I will come back to you and I will ask Dava to fill in some more details. Maybe I will just note that one of the benefits of our flow profile which is the strongest that we have had since 2013, is that the average fee rates that that they are coming in from the private markets and from the liquid alternatives is higher than our average fee rates. And those flows are coming into affiliates where they are scaling quite nicely. So we are getting the benefit of that too. Maybe now I will just say that Pantheon and AQR are our two largest and longstanding affiliates. They represent about 30% maybe a little over 30% of our AUM today and over 30% of our adjusted EBITDA. They are growing very fast. They have tailwinds because there are alternatives businesses one liquid alts, one private markets with substantial footing in the wealth channel. And so they are seeing significant growth there in U.S. wealth. And those tailwinds, they it is not it is nothing more than just continuing at this rapid pace. As we saw at the end of last year, they seem to be actually accelerating. Maybe now I will just say one more thing and it over to Dava just on AQR. What is interesting about AQR is that, as you know, are an innovator. They have innovated over so many years outstanding investment product for a multitude of clients around the world, institutional, U.S. wealth, even retail, and they continue to do that. And so I think there is a part of AQR that is is ever evolving and growing and we are seeing that real time. They have had excellent performance. They have tapped into a need in the wealth channel, which is tax aware space, but they are also raising assets globally, institutionally, and even in the mutual fund format. So we are seeing growth across the diverse group of clients that they have, both in the traditional liquid alts, but also some of their long-only products. So maybe if I if left anything any meat on the bone, I will turn it over to Dava because think there are some other details that we can give. Dava Elaine Ritchea: Sure. Maybe just to build on what Jay was speaking to. AQR really has a decades-long track record of true innovation, product differentiation, portfolio diversification, and strong performance. And they built on that in 2025. They have built a platform that is attractive both to institutional and wealth clients and have a long history of strong client service and distribution reach across these investors. As they continue to innovate, they have expanded their reach with both in institutional investors and the largest gatekeepers of U.S. wealth assets. And there has been ongoing strong demand for these products. We have continued to see flows into these products into the first quarter. AQR has been thoughtfully diversifying its distribution reach and continue to innovate on product design and solutions so there is multiple avenues for growth here. It comes to competition, again, AQR really has this history of innovation that is built on a decade-long track record. Their product offering and platform are unique within the industry, and they certainly have a first mover advantage in many of their innovative offerings. It is expected that competition will come, but few firms have the institutional, operational, and distribution platforms to match AQR. Operator: Thank you. Our next question comes from the line of Alexander Blostein with Goldman Sachs. Please proceed with your question. Alexander Blostein: Hey, good morning. And to us and Dan's comments, Thomas, best of luck to you in the next endeavor. Building on the all discussion, can we spend a couple of minutes on the private side of the equation as well? I was hoping you guys could frame the pipeline of some of the maybe larger funds that you expect to come to market from your private or liquid alternatives in 2026. And how do you think about sort of the contribution to organic growth from that part of the model? Thomas M. Wojcik: Yes, thanks. Jay Horgen: Alex, good morning to you. I might ask Thomas to do part of that as well with me and especially just on some of the new product that is coming to the market from Affiliated Managers Group, Inc. Maybe I will just start with Pantheon and and and also just talk about more broadly our approach to the other affiliates with respect to private market. So on Pantheon, as you know, they are a specialist in credit sorry, specialist in secondaries across private equity, credit, and infrastructure. So they specialize in secondaries across those three platforms. And they do have wealth products that are designed to attract individuals into those products. And so in each of those areas, they have unique wealth products. Those products, while offered in the U.S., they also have structures that allow international and non-U.S. investors to invest into those products. They have mirror structures that allow growth to come not just from the U.S. but non-U.S. So the benefit of their position, which they have now secured over the last decade, is that they are well known in the channel. They have the structures to accumulate wealth assets both in the U.S. and non-U.S. and they continue to to grow that franchise. Outside of those products, we are innovating Alexander Blostein: additional Jay Horgen: products with our affiliates. We are also selling drawdown funds into the wirehouses and RIA networks for a number of our affiliates. And so we are actively marketing private markets products for our affiliates in those channels. And so maybe Thomas, if I could just ask you to to expand just a little bit on the product side and other ideas that we have coming to market. Yes. Thanks, Jay. And, Alex and Dan, thank you both for the kind words. Maybe actually to take the last two questions and just pull them up half a level, and then I will I will get into a little bit more of the detail on product development. But if you think about liquid alternatives and private markets, they are really driving our flow profile, and that Thomas M. Wojcik: flow profile is entirely a function of our strategy. And as we start to get close to that two-thirds level of our EBITDA coming from alternatives, you know, you are really seeing a significant impact in terms of the overall growth profile. And a lot of that is coming from wealth, whether that is from our own efforts or more broadly in the wealth ecosystem. We are seeing a tremendous amount of momentum there. Of the big initiatives that we have going into 2026 and beyond is our new partnership with Brown Brothers. And we did announce late last year the registration for our first fund there, the AMG BBH Asset-Backed Credit Fund. And a part of that strategic collaboration is really to think about, you know, not just one product, but, you know, hopefully, three, four, five over the course of the next couple of years we can take the combination of the really unique investment expertise that exists across structured credit at Brown Brothers Harriman and combine that with what we are able to do on the product development side and on the distribution side and really pair that with the client demand trends that we are seeing. So I think Jay hit a lot of the highlights in terms of where we are seeing a lot of momentum in private markets. And I think our goal, at Affiliated Managers Group, Inc. and the team's goal going forward is not only to continue to prosecute those things from an existing Affiliated Managers Group, Inc. affiliate level, but also to continue to be innovative and think about new ways that we can partner with both existing and new affiliates to build new IP for the channel. Jay Horgen: Yes. And thank you, Thomas, very much for that. Thomas M. Wojcik: So I think what is interesting to also note and I think Jay Horgen: you all are tracking this, but we continue to Thomas M. Wojcik: put our own capital behind the product innovation, and what that means is we are seeding a number of these products. We have committed to seed these products Jay Horgen: and we are looking to scale these products. From our perspective, from an ROI perspective, it is one of the most valuable things that we can do here, which is to create products. Obviously, we have investments in affiliates and we have returns that we expect to make off our investments in those affiliates. But to start something new, something that was not there before where we can really scale and Thomas M. Wojcik: Brown Brothers Harriman with their structured credit and alternative credit products it is an opportunity to really scale those products. That ROI can be very high for Affiliated Managers Group, Inc. shareholders. So this is in part a capital allocation decision. It is also a Jay Horgen: magnifying our affiliates Thomas M. Wojcik: decision sorry, magnifying our affiliates' prospects. And ultimately what we are trying to do is make Jay Horgen: our independent partner-owned firms Thomas M. Wojcik: stronger, better, faster, more valuable, and I think we are doing that. Operator: Thank you. Our next question comes from the line of William Raymond Katz with TD Cowen. Please proceed with your question. Jay Horgen: Great. Thank you very much. And Thomas, best of luck for sure. William Raymond Katz: One statistic that you laid out in this call was $100,000,000,000 of global wealth management. Most of your comments seem to be focused on driving growth in the U.S. wealth management platform. But can we maybe zoom out a level or two and just maybe speak to the other $90,000,000,000 that you seem to have. You mentioned a very strong growth rate and how we should think about maybe the combined opportunity for wealth as we look ahead? That would be helpful. Thank you. Thomas M. Wojcik: Yes. So let me start by saying we are seeing significant growth in wealth. Is the case and it is primarily alternatives. We also support our long-only business in the wealth channel as well and we have seen pockets of growth there. And so we do take a holistic approach on the on our own efforts to to work with our affiliates to innovate new products. We have looked into and have already supported ETFs for a number of our long-only managers. So I did not I wanted to make sure that I said that. As it relates more broadly, we are seeing good flows, but also just increasing we are seeing interest in liquid alternatives. So beyond U.S. wealth, opportunities to grow those assets from an inflow perspective. So we and part of that I think the volatility in markets, part of it is good performance on our liquid alt side. So there opportunity to see not just U.S. wealth growth but wealth sorry, growth outside of that on the institutional side. Do not know, Dava, if you want to pick up on that. Dava Elaine Ritchea: Sure. Happy to. When we think about accessing that wealth channel, both within Affiliated Managers Group, Inc., but also at our affiliates, it is important to think about those two pieces together. Right? So, we have talked a lot what we are doing in terms of building product alongside of our affiliates within the U.S. wealth space. And that is where we have had a lot of success, particularly with Pantheon. Additionally, though, two of our largest affiliates in Pantheon and AQR additionally have access to wealth distribution, sort of through their own channels. We have helped them think through product development in some of those spaces as well and really collaborated. But when you think about the breadth of wealth access across the Affiliated Managers Group, Inc. platform, it is important to think about both what we are offering through our U.S. wealth distribution platform directly but also that of our affiliates as well. Jay Horgen: Thanks, Bill. Dava Elaine Ritchea: Thank you. Our next question comes from the line of Brian Bertram Bedell with Deutsche Bank. Operator: Please proceed with your question. Brian Bertram Bedell: Great. Thanks. Good morning. And also congrats Michael Patrick Davitt: Thomas. Great working with you at Affiliated Managers Group, Inc. and best of luck for the next endeavor. Maybe if I can squeeze in a two-parter here just related to AQR and then also performance fees. So do not know sorry if I missed the contribution from AQR in 2025. I know you said it going to be over 20% of EBITDA in 2026. Just wanted to see what that incremental pickup is. And then does that contemplate any changes in the wealth channel at any of your major distribution partners, either growing distribution partners or seeing more competition at distribution partners? And then if I can just squeeze in a longer-term one on performance fee makeup. You got the $170,000,000 for 2026 which is around your five-year average. But we think about, say, over the next three years or so, given the growth of your private markets and liquid alternatives businesses just structurally? Should we be thinking of a longer-term higher trajectory of performance fees, particularly since I think on the private affiliates that you have invested in, you get carry on the new funds that have started up as opposed the old ones. So maybe we are legging into a bigger carry stream going forward. Thomas M. Wojcik: Yes. Thanks, Brian, and good morning. Let me I am going to see if I can parse this out because and then I will come back and one of these questions. So maybe Dava, if you could address in whatever order you like the performance fee makeup and the kind of growing nature of it. And then AQR, the question on AQR concentration and in this year and last year. And then I will come back. And please feel free to comment on as well, but I will come back and just talk about strategy for the resources and growing our partnerships in wealth. Dava Elaine Ritchea: Sure. So why I try to do this a little bit in the order you asked here, Brian. So on the AQR side in 2025, we had mentioned that AQR was a double-digit contributor to EBITDA, in in 2020 and we do expect that to grow into 2026 and expect them to be north of 20% this year. That is really on the back of strong organic growth leading into what we think are really positive momentum dynamics into 2026. In terms of 2025 results for AQR, it was really best by two things. One, they had very strong positive net flows into their liquid alternative products. But two, they generated strong investment performance across their platform, leading to substantial performance fee contributions for Affiliated Managers Group, Inc. When we then think about the longer term in terms of performance fees, so I will I will shift gears a little bit and think about that. The way we tend to think about our guidance and this is what you see going into 2026 and why we are thinking about the $170,000,000 as guidance here, we think about that really as using the past five years as a good representation of a through-the-cycle number. There is certainly going to be periods of both outperformance on that and periods of underperformance on that. But if you look at the big the mix of strategies that we manage at here through our affiliates that generate performance fees, it is a diverse group across both liquid alternatives and private markets. And this leads to a more stable and predictable earning stream over time. And as AUM that is performance-fee or carry-eligible increases, we expect it to positively impact that trend line over time. And Brian, as you mentioned, since we generally do not buy in-the-ground carry when we are making new investments in private market affiliates, but rather participate in future fund carry, these do tend to be more back-ended opportunities and we expect their performance fee contribution to grow over time. It is separately important to note that as we have executed on our firmwide strategy invest in areas of secular growth and have benefited from net organic flows into alternative strategies, we have increased our AUM from strategies that typically earn a higher management fee, which you can already see impacting our year-over-year aggregate fee rate and growth in our fee-related earnings. This is shifting our mix of business towards a higher contribution from fee-related earnings. Thomas M. Wojcik: And so let me pick up now on the question on the wealth strategy and just resources and growing it. I am going to just walk through I think where we see Affiliated Managers Group, Inc. leaning into our own wealth strategy. And I will start with just product creation. So we have a group that thinks about what and receives feedback from clients in the marketplace on what products we should be creating. And then we go out to our affiliates and work with them to put those strategies into structures that are best suited for the U.S. wealth channel. Product creation, we have invested resources in and people, human capital to grow that area for Affiliated Managers Group, Inc. We also have increased our balance sheet in terms of seeding. So once we have got an idea, we will seed it. That is very helpful in going out to the market. Generally speaking, we capital starts to form after we seed generally in the early adopters in the RIA market. We have increased the number of people and resources that we have addressing that part of the market. Once we raise critical mass, we go out to the the regionals and larger RIA platforms. Again, we have increased our resources there. And then ultimately a place where Affiliated Managers Group, Inc. has always been particularly good is in the wirehouses. And so once the products graduate to a scale and size that they can get on the major we have a wholesaling sales force to grow that. So across our platform from product creation to seed Thomas M. Wojcik: to Thomas M. Wojcik: RIA channel all the way up to the wirehouses. We have added people and resources and effort. And so that our strategy. To continue to grow that. And so far, we have seen some success in doing so. Then maybe zooming way out, because I see that we are getting close to the end of our time. I do want to just say a few things about where Affiliated Managers Group, Inc. stands today. We have we have really pivoted the firm. Today, our business is being driven by alternatives, both private markets and liquid alternatives. And we expect to continue to press our advantages of supporting independent high-quality firms and helping them with their own strategy and their own success and magnifying their benefits while also preserving their independence. When you think about what happened to us in 2025, and where we are already in 2026, it is really just a culmination of our strategy. And it really is the beginning, the foundations of the next five years. And as I said in my prepared remarks, and we want to be humble about this, but we really do think that the best is yet to come for us because we now see very clearly to continue to prosecute that strategy going forward whether that is across making new investments in high-quality firms in areas of secular trends, helping those firms grow by investing in our capital formation efforts, or and where we can return capital to shareholders at attractive prices to help us compound our earnings. Those are the things that we are going to continue to do. That is our strategy and we look forward creating more value in the future. Thomas M. Wojcik: Thank you. Operator: Ladies and gentlemen, that concludes our question and answer session. We will conclude our call today. We thank you for your interest and participation. You may now disconnect your lines.
Operator: Hello, everyone, and thank you for joining the Kimco Realty Corporation fourth quarter earnings call. My name is Claire, and I will be coordinating your call today. During the presentation, you can register a question by pressing star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2 on your telephone keypad. I will now hand over to David F. Bujnicki, Senior Vice President of Investor Relations and Strategy for Kimco Realty Corporation. Please go ahead. Good morning. David F. Bujnicki: Thank you for joining Kimco Realty Corporation’s quarterly earnings call. The Kimco Realty Corporation management team participating on the call today include Conor C. Flynn, Kimco Realty Corporation’s CEO; Ross Cooper, President and Chief Investment Officer; Glenn Gary Cohen, our CFO; David Jamieson, Kimco Realty Corporation’s Chief Operating Officer; as well as other members of our executive team that are also available to answer questions during the call. As a reminder, statements made during the course of this call may be deemed forward-looking, and it is important to note that the company’s actual results could differ materially from those projected in such forward-looking statements due to a variety of risks, uncertainties, and other factors. Please refer to the company’s SEC filings that address such factors. During this presentation, management may make reference to certain non-GAAP financial measures that we believe help investors better understand Kimco Realty Corporation’s operating results. Reconciliations of these non-GAAP financial measures can be found in our quarterly supplemental financial information on the Kimco Investor Relations website. Also, in the event our call was to incur technical difficulties, we will try to resolve as quickly as possible and if the need arises, we will post additional information to our IR website. Good morning. Thanks for joining us today. We appreciate your interest in Kimco Realty Corporation. Today, I will highlight what we delivered in 2025 and how we are positioned to drive value in 2026. David Jamieson will provide additional color on our leasing activity. We will also then discuss the transaction market, and Glenn will wrap up with a review of our key financial metrics and guidance. 2025 was another banner year for Kimco Realty Corporation. We delivered NAREIT FFO per share growth of 6.7%, making us one of the only shopping center REITs to achieve over 5% FFO growth in 2024 and over 6% in 2025. We also earned a credit rating upgrade, A-, from Moody’s during the fourth quarter, reflecting our disciplined approach to the balance sheet. Kimco Realty Corporation is now one of only 13 REITs, the entire REIT industry, with multiple A-/A3 ratings from the three rating agencies. A notable milestone in our transformation into one of the lower levered REITs while still accelerating earnings growth. This is a rare accomplishment in the REIT world, and it speaks to the strength of our team, our portfolio, and our execution. Operationally, our performance was equally strong, achieving a number of record milestones, including overall portfolio occupancy of 96.4% matching our all-time high, our highest quarterly new leasing volume in more than a decade, with 1,200,000 square feet leased, a 90 basis point sequential increase in anchor occupancy, our strongest quarterly gain on record, a new all-time high in small shop occupancy, of 92.7%, a signed but not open pipeline reaching a record 390 basis points, representing $73,000,000 of future annual base rent, enhancing our portfolio quality by expanding our annual base rent from grocery-anchored centers by converting nine nongrocery sites to new grocery-anchored locations in 2025. In terms of same-site NOI growth, we delivered 3% for the full year. These achievements highlight one of Kimco Realty Corporation’s key advantages: our ability to create value through our platform, not only through capital allocation, but through consistent hands-on execution at the asset level. A great case study is the portfolio we acquired from RPT. At acquisition, the occupancy gap between RPT and Kimco Realty Corporation legacy portfolio was 120 basis points. Since then, we have increased RPT occupancy to 96.2% at the 2025 year-end, narrowing the gap to a mere 20 basis points, or approximately 30,000 additional square feet to match Kimco Realty Corporation’s occupancy level. The key driver has been small shop leasing. Our RPT small shop occupancy improved 370 basis points since the merger to 92.1%. Further, our operating momentum translated into real cash generation. We produced over $165,000,000 of free cash flow after the payment of all dividends and leasing costs in 2025, strengthening our ability to self-fund growth while supporting a well-covered and growing dividend. We also paired that performance with a disciplined capital allocation, repurchasing shares when our valuation reached a meaningful discount to net asset value. Our portfolio and balance sheet are cycle-tested and we are positioned to keep executing through any environment. As we enter 2026, we are encouraged by the continued fundamental strength of the shopping center sector. Importantly, there is almost no supply coming online, which combined with the resilient consumer, and a robust pipeline of deals driven by healthy tenant demand, gives us confidence we could push occupancy and same-site NOI higher. This is why we believe Kimco Realty Corporation offers investors a compelling opportunity: solid, robust operating fundamentals, a well-covered dividend, durable earnings growth, and one of the strongest balance sheets in the REIT sector with a very attractive valuation based on our current multiple. As Ross will touch on, our high-quality open-air retail continues to attract capital. While public REIT sentiment has been uneven, private market pricing remains constructive, and that disconnect is creating opportunity. In 2026, we are focused on closing the value gap between Kimco Realty Corporation’s public market valuation and private market price. Our strategy for 2026 is built around the following priorities. First, we intend to be proactive and aggressive in recycling capital that is both accretive and enhances the overall long-term growth profile. We plan to take individual assets and portfolios to market and sell at attractive private market cap rates, redeploying the proceeds into our highest return opportunities, including further potential share repurchases that currently offer roughly a 9% FFO yield. Recent transactions show shopping center REITs go private at cap rates in the mid-5s to low-6s range, and demand for high-quality assets like ours remains strong. Based on what we are seeing, we believe we can sell assets across our portfolio at a blended cap rate in the 5% to 6% range which compares favorably to our implied cap rate in the low- to mid-7% range, representing a clear value creation opportunity. Where appropriate, we will continue to utilize 1031 exchanges to mitigate the tax impact from these sales. To the extent gains cannot be fully deferred, it is quite possible that we may have to distribute a special dividend at year-end. Second, we are flattening our organization and modernizing our operating platform to move faster and operate more efficiently, driving higher cash flow, improving margins, and unlocking the full advantage of our scale through better coordination, clear ownership, and faster execution. At the midpoint, our plan removes $3,000,000 of G&A expense this year while still investing in our people and platform to keep raising the level of execution. Our priorities position us well for 2026. We are entering the year with strong operating momentum, the largest signed but not open pipeline in Kimco Realty Corporation’s history, providing clear visibility into future rent commitments and embedded NOI growth, and a balance sheet designed for flexibility. Our focus is on disciplined execution, and we are energized by the opportunity ahead. With the strength of our team, the quality of our portfolio, and the financial capacity to act decisively, we are confident in our ability to outperform and unlock even greater long-term value. David Jamieson? Thank you, Conor. I will start by touching on our fourth quarter leasing highlights, followed by sharing some additional perspective on 2026. In the fourth quarter, as Conor shared, we achieved a number of record leasing milestones, punctuated by 1,200,000 square feet of new leasing volume. Other notable accomplishments included the signing of 30 anchor leases, which are the most we have ever completed. We also saw the lowest volume of vacates in over six years, including only three anchor leases vacating. This performance reflects the robust and deep demand that exists with activity spanning grocery, off-price retailers, fitness, furniture, and general merchandise sectors, and also showcasing that retailers, when given the chance to relocate, are choosing to remain at well-located high-traffic, open-air centers at market rents to further support their business strategies. The impressive deal volume has helped grow the SNO pipeline to a record 390 basis points, representing $73,000,000 of annual base rent. This is an increase of $17,000,000, or 30% higher than the prior year’s level. Our construction and tenant coordination teams prioritize cash flow growth and are committed to accelerating rent commencements by working closely with retail partners and municipalities to streamline workflows and address challenges early, ensuring timely openings. This effort enabled us to recognize $31,000,000 in rent commencements during 2025, a figure that exceeded our initial budget by 15%. Our success in 2025 was also driven by new approaches to our targeted leasing strategy, which is best exemplified by the package deals. During the year, we completed 10 package deals totaling nearly 60 leases and over 20% of the total GLA for all new leases signed in 2025. The most recent example of this is in the fourth quarter package deal with Ross Dress for Less in which we signed six leases that were completed within 30 days from approval to execution. Both sides were motivated by a shared goal to efficiently expand the partnership, work collaboratively, with residual benefit that would expedite the store opening strategy for Ross while allowing us to increase our economic occupancy over time. A key initiative in 2026 is to further expand these efforts and fully optimize our advantages of scale. This includes shifting away from the regional organizational framework to a functionally aligned operating model, enabling us to drive further operating efficiencies. Most importantly, this change will not result in any incremental cost and is expected to drive additional savings over time. Nearly six weeks into 2026, we continue to see last year’s momentum carry forward, supported by steady demand and limited new supply. Our tenant credit profile is as strong as it has been in several years, and while we budget for the usual first quarter seasonal softness, we do not anticipate it will materially impact performance in 2026. In terms of our expiring annual base rent, we have resolved or have a deal on the work for 87% of the expiring ABR in 2026, which gives us confidence that a retention rate should remain around that 90% level. In addition, of the 47 naked anchor leases, which are those that are expiring without any renewal options in 2026, 98% of our budgeted assumptions are resolved with mark-to-market spreads around 30%. Importantly, most of our budgeted minimum rent for 2026 is in place with 90% already cash flowing, and another 8% driven by rent commencements from the SNO pipeline and budgeted renewals and options. All told, this leaves only 2% of the budget as speculative, which is inclusive of new leases, additional renewals, and options. Provided there is no major bankruptcy activity in early 2026, and no significant macro disruptions, we are confident in our budget and see the potential to outperform based on our historical success with the SNO deliveries and retention levels. And while we do not provide a guidance for occupancy, we are optimistic that we can drive it higher than the 2025 year-end level. The same holds true for our SNO pipeline. Given the elevated pace of leasing, we project it to grow further before beginning to compress through the end of the year and into 2027. This bodes well for the cash flow growth over the coming years. I will now turn it over to Ross. Thank you, David. I will begin with a brief recap of fourth quarter capital allocation, then turn to our 2026 expectations. The fourth quarter was active as we continued to execute on our strategy and capital plan. This was highlighted by the conversion of another structured investment with the acquisition of a common member’s interest in Shops at 82nd Street in Jackson Heights, Queens, New York. Shops at 82nd is located in an exceptionally dense infill market and is a grocery-anchored center with a strong tenant roster, including Target, Chick-fil-A, Chipotle, Starbucks, and Northwell Medical. Having initially invested preferred equity in this asset in 2021, we exercised our right of first offer/right of first refusal, which culminated in buying our partner’s interest and retaining the property in Kimco Realty Corporation’s long-term portfolio. We utilized this property to complete a 1031 exchange, deferring tax gains from the continued sale of long-term flat ground leases from the portfolio. This dovetailed well with our capital recycling strategy that we laid out last year, selling lower-growth assets at compelling private market cap rates and reinvesting into higher-growth, better-yielding investments. We made meaningful progress on that initiative during 2025. As we enter 2026, competition for open-air retail has become increasingly intense, making our ability to source acquisition opportunities from our existing JV platform and structured investment program a meaningful differentiator for Kimco Realty Corporation. This is critically important as we continue to see new entrants into this asset with investors and operators trying to find ways to position themselves to win marketed deals. This is leading to tighter return hurdles and forcing us to be more selective to achieve acceptable yields. Our strategy and having our foot in the door on deal flow allows us to avoid a crowded bidding tent and find unique opportunities where we can invest at a more favorable spread. We are excited by our ability to continue recycling capital accretively and build on the momentum that started to ramp in 2025. To that point, we have identified a disposition pipeline of $300,000,000 to $500,000,000, primarily consisting of flat ground leases, lower growth multitenant centers, and non-income producing land and entitlements. We are also further evaluating components of our multifamily program as potential opportunities to further monetize assets at low cap rates and crystallize value. We expect the blended cap rates from sales to be between 5% to 6%. Utilizing this low-cost source of capital, we anticipate acquiring a similar amount of shopping centers at cap rates roughly 100 basis points higher at the midpoint. Importantly, these acquisitions not only provide higher going-in yields, we also expect on average approximately 200 basis points of incremental compounded annual growth, creating a higher-growing portfolio that should enhance same-site NOI and FFO growth as we recycle capital over time. As we did last year, we plan to utilize 1031 exchanges and other tax strategies to help defer gains from asset sales. The other component of our investment strategy is a modest expansion of the structured investment book, with net growth of approximately $100,000,000 at the midpoint with a blended average yield around 9%. This is a capital allocation strategy that we are confident we can achieve in 2026 and, importantly, build out as a recurring strategy to enhance the composition of the portfolio while reinvesting in higher growth and quality. We are off to a great start to the year, with several dispositions already closed as well as a few structured investment deals funded in January. The pipeline is active and building, and the team is excited and motivated. Now I will pass it off to Glenn for the full year results and our 2026 financial outlook and expectations. Thanks, Ross, and good morning. As the team has shared, Kimco Realty Corporation delivered a strong finish to 2025, driven by continued cash flow growth, disciplined capital allocation, and the strength of our open-air grocery-anchored portfolio in a supply-constrained environment. Starting with the fourth quarter, funds from operations, or FFO, was $294,300,000, or $0.44 per diluted share, representing a 4.8% increase versus the prior year period. This performance was driven by higher pro rata NOI, primarily reflecting greater minimum rents. For the full year, FFO was approximately $1,200,000,000, or $1.76 per diluted share, representing a 6.7% per share increase compared to 2024, driven by the embedded growth characteristics of our portfolio, highlighted by an increase of 4.9% from pro rata NOI. We also delivered same-property NOI growth of 3% for both the quarter and the full year, supported by sustained demand for our space and consistent rent growth. Credit loss was 74 basis points for the full year, at the low end of our range, underscoring the solid tenant credit profile across the portfolio. Turning to the balance sheet. We ended the year with strong liquidity and significant financial flexibility. This is demonstrated by over $2,200,000,000 of immediate liquidity, including $213,000,000 of cash and full availability on our $2,000,000,000 unsecured revolving credit facility. We also maintained our solid balance sheet with consolidated net debt to EBITDA of 5.4 times and on a look-through basis, including pro rata JV debt and preferred stock outstanding, at 5.7 times. During the quarter, as Conor mentioned, we received an A3 unsecured debt rating from Moody’s, which places Kimco Realty Corporation in a select group of REITs with A- level ratings across the three major rating agencies. This milestone reflects the strength of our portfolio, a conservative leverage profile, consistent execution, and significant financial capacity and flexibility. We also added another option to our funding toolkit by a commercial paper program, which we expect to use opportunistically as part of our overall financing strategy. In terms of capital allocation, we repurchased 3,100,000 common shares during the fourth quarter at a weighted average price of $19.96 per share. For the full year 2025, we repurchased 6,100,000 common shares at an average price of $19.79. We view buybacks as an important lever when our valuation reflects a meaningful discount to the value of our real estate and our internal growth profile. Looking ahead, Kimco Realty Corporation enters 2026 with considerable momentum and a foundation for continued strong performance. Our 2026 outlook reflects another year of healthy earnings progression. Our initial 2026 FFO per share range is $1.80 to $1.84, representing a 2.3% to 4.5% growth over 2025. This outlook reflects our expectation for continued demand across the portfolio supported by same-property NOI growth of 2.5% to 3.5%. With respect to same-property NOI growth, we expect the first quarter to mark the low point for 2026 as we lap prior year rental income from tenants such as Joann’s, Party City, Rite Aid, and Big Lots. Importantly, we see a clear and accelerating growth profile emerging thereafter, with each successive quarter benefiting from a rising pace of rent commencement from our SNO pipeline, providing strong visibility through the balance of the year. As David Jamieson noted, our tenant credit profile is as strong as it has been in many years, and we do not expect that to change materially in 2026. That said, we believe it is prudent to begin the year with a credit loss assumption of 75 to 100 basis points, which is consistent with historic norms and aligned with our approach over the last several years. Other financial assumptions in the outlook include lease termination income between $7,000,000 to $15,000,000, noncash GAAP revenue inclusive of straight-line rent and above- and below-market rent amortization of $45,000,000 to $50,000,000, and net mortgage and financing income, which continues to be an important contributor to our earnings profile, of $45,000,000 to $55,000,000. On the expense side, we are projecting consolidated G&A between $128,000,000 to $132,000,000, reflecting ongoing cost discipline, and consolidated interest expense plus preferred dividends of $370,000,000 to $377,000,000. With respect to capital deployment, we will continue to prioritize high-return opportunities that enhance long-term growth. For 2026, we anticipate total development and redevelopment investment between $100,000,000 to $150,000,000, capitalized lease-related and maintenance spending of $275,000,000 to $300,000,000 to support strong occupancy growth and tenancy momentum, net new structured investment activity between $75,000,000 to $125,000,000 with going-in yields in the 8% to 10% range, and net neutral acquisition and disposition activity with a positive spread on reinvestment of proceeds. In terms of the balance sheet, we have over $800,000,000 of consolidated maturities at an average effective rate of approximately 2.65% in 2026. While these low coupon maturities represent a known headwind, we view them as manageable and we are confident in our ability to address them proactively and opportunistically, supported by our A- level ratings and balance sheet strength. In summary, Kimco Realty Corporation enters 2026 with confidence and a positive outlook. Our portfolio continues to generate growing cash flow supported by embedded rent commencements, ongoing occupancy upside, and robust leasing activity. Coupled with a fortified balance sheet, prudent capital allocation, and multiple levers for value creation, we believe we are well positioned to deliver another year of sustainable growth and profitability while continuing to provide an attractive dividend yield. Before we move on to Q&A, I want to recognize Paul Westbrook, Kimco Realty Corporation’s Chief Accounting Officer, who plans to retire at March. For the past 23 years, Paul has been a tremendous partner and leader; we are deeply grateful for his many years of service and contributions to the organization. At the same time, Kathleen Thayer will step into the role of Executive Vice President, Treasurer, and Chief Accounting Officer on April 1. With nearly two decades at Kimco Realty Corporation, and deep institutional and technical expertise, Kathleen’s appointment reflects the depth of our team, and makes for a seamless transition. And with that, we will open the call for questions. Operator: Thank you. To ask a question, if you change your mind, please press star followed by 2. For questions, you can rejoin the questions queue. When preparing to ask your question, we request that you ask one question, and if you have any follow-up, please ensure your device is unmuted locally. Our first question comes from Greg Michael McGinniss from Scotia, from Alexander David Goldfarb from Piper Sandler. Please go ahead. Alexander David Goldfarb: Hey. Good morning. I guess I would say I am here with Greg Michael McGinniss. But so question for you. You spoke about the potential for a special dividend depending on the level of dispositions and recycling potential. But also, Conor, you have been pretty clear that you want the company to be a top quartile earnings grower. And certainly, I would think special dividend would imply that you are losing earnings relative to investing. So can you just walk more through that and how you are balancing the desire to have Kimco Realty Corporation be a top earners grower versus the clear disconnect between where the stock is and the underlying asset value? We are happy to. It is a good question, Alex. I think when you look at where our taxable income is and where our dividend level is, you know, we need to be mindful of the fact that as we really work to close the gap between where our public valuation is currently versus where the private valuation is. We think there are multisteps we can do to do that. And one of the biggest ones is to really take assets to market, as I mentioned earlier, and really showcase the disconnect between our implied cap rate and where those assets are trading in the market today. As you probably are aware, we do not really have assets that have embedded losses, and when we look across the portfolio, most of our basis is quite low on our assets. So that will trigger a quite sizable taxable gain on any assets we sell. So we are very focused on 1031 exchanges to shield that taxable gain. We have been successful in doing that thus far. That being said, with the sizable disposition program that Ross outlined, we do want to, we thought it was important to showcase that if we are not able to shield those gains, it will trigger a special dividend. But our mission and our focus is obviously to do 1031 exchanges to shield those tax gains. Operator: Thank you. Our next question comes from Michael Goldsmith from UBS. Your line is now open. Please go ahead. Michael Goldsmith: Good morning. Thanks for taking my question. My question is on capital allocation. You clearly have no shortage of options on how you choose to allocate capital with you repurchase shares, you are acquiring assets, you have the preferred lending book, you redevelopment, redevelopment. The same time you have identified a pipeline of funding sources such as ground leases and multifamily. So I guess how should we think about what are the most accretive opportunities, you know, where is the greatest upside or accretion? And then, I guess, why not accelerate some of these actions and take advantage of taking advantage of these things. Conor C. Flynn: Sure. It is a good question, Michael. So the final point of why not accelerate it. We are accelerating it year over year. I think Ross made that point that we are taking more to market this year than we did last year. A number of items restrict in terms of how big of a program we can take to market at any given time. The ground leases need to be separately parceled and make sure that they are on a separate tax parcel so we can sell them into the triple-net or 1031 exchange market to get the best pricing. The other piece of it is, I think when you look at where our capital allocation priorities are, we still start with leasing as number one. That is really obviously where you see the best returns. We are continuing to showcase that there is accelerating demand for our product. We are taking market share as we are reaching out and using our platform as well as our relationships to really take, I would say, the majority of deals that are being done in the open market and making sure that the retailer thinks of Kimco first as really the partner of choice when they look to roll out new store opening plans. Second to that, you know, we look at the redevelopment opportunity set that we have. You know, we did grow it year over year. So we are scaling it. We continue to see that those return on cost blend to double digits. And we continue to think that is a great use of capital because, typically, not only are you getting a double-digit return on that redevelopment, but you are getting also a halo effect on the rest of the shopping center because, in essence, you are bringing something new and vibrant to an asset that has a halo effect on the residual shops that may be vacant or may have opportunity for mark to markets. Ross has outlined, obviously, the other potential growth of the structured investment book. Again, we really like that opportunity set. We think it is a nice tool in the toolbox to get our foot in the door with ROFO and ROFRs on assets we want to acquire. As we showcased in 2025, that is really the mission of that book is getting paid to wait, and those are averaging double digits. And then you look at, obviously, on the core acquisition piece, you know, that is where we are match funding accretively. Our flat ground leases that we can sell in the mid- to low-5s. Looking at the multifamily opportunity set that we have as well, which would trade in the mid- to low-5s. And grocery-anchored shopping centers with good growth, we think we can find, you know, our fair share of those with, as Ross outlined, you know, potentially with the 6 cap handle with some really strong comp annual growth. So that is really the capital allocation menu that we have and where we are prioritizing. We are coming into 2026 in really good shape. I think we have got a lot of momentum. We are very, very focused on showcasing what a compelling investment Kimco Realty Corporation is today. Ross Cooper: Yeah. I think that was a great overview. I would just quickly add, I mean, there is a bit of a push and pull to every component of the capital allocation strategy. So we really do look at, you know, our investment strategy somewhat holistically as a blend. And we feel really good about the guide and the baseline that we put out to start the year in terms of blending together the amount of acquisitions, dispositions, redevelopment, structured. And so at its core, at the end of the day, when we blend it together, we feel good about the accretion that we can obtain. Again, we are thinking about multiple different objectives through every one of these strategies: enhancing growth, both same-site and FFO, enhancing our grocery component of exposure, looking at the impact on watch list tenancy. So we are taking into consideration all of these factors, in addition to, of course, the tax considerations, which Conor identified earlier. Conor C. Flynn: And the final piece is obviously the share buyback. Ross Cooper: Opportunity. I think we have showcased in 2025 that we can make it a meaningful piece of our capital allocation strategy Conor C. Flynn: and use it opportunistically. And when Kimco Realty Corporation is selling at values that we think are extraordinarily compelling, we have the balance sheet, the free cash flow, the Ross Cooper: that could take advantage of that. We continue to focus and think 2026 is going to be a year where we will continue to focus on that opportunity. Operator: Thank you. Our next question comes from Cooper R. Clark from Wells Fargo. Ross Cooper: Great. Thanks for taking the question. On the acquisitions guidance, I know you mentioned earlier about opportunities coming from your JV and structured investments. But historically, you have also had success buying larger portfolios and integrating them into your platform. Just curious how the opportunity set looks like today in terms of larger portfolio deals rather than one-off transactions. And any considerations we should be thinking about with respect to pricing between portfolio sales and one-off deals? Sure. And that is always going to be part of our acquisition strategy. As we indicated earlier, it is a bit challenging given where our cost of capital is compared to the private markets. And with financing readily available at pretty attractive rates, it has brought in a whole host of private investors and competition. That being said, we do believe that we have thrived on some larger M&A and portfolio acquisitions in the past, and that will always be part of the playbook and the consideration. For the moment, we feel really good about, as I mentioned, some of the foot in the door that we have within the structured program and within the joint venture program. Actually, when you look at 2025, all of our acquisitions for the year were made within investments where we already had a piece and/or a right of first offer or right of first refusal. So we will continue to lean into that while we keep the door open for other larger transactions should the opportunity arise. Conor C. Flynn: Thank you. Operator: Our next question comes from Ronald Kamdem from Morgan Stanley. Your line is now open. Please go ahead. Hi, this is Caroline on for Ron. Thanks for taking the question. I was wondering if you could speak a little bit on what you are seeing in terms of tenant health so far and just how it is trending. And are there any names that we need to look out for or categories that are doing better or worse than last year? Ross Cooper: Yeah. Thanks for the question. So as I mentioned in my prepared remarks, sorry, the credit quality, I think, of our portfolio today is better than it has been in a number of years, especially coming out of COVID. A few notable Conor C. Flynn: retailers that were on the watch list previously, one of which is now off, say, is Michaels, where they have really been opportunistic in trying to restructure their capital stack. They had a Ross Cooper: great year last year, in terms of repositioning their value proposition, their customer base, leveraging their brick-and-mortar fleet to really drive sales. So we continue to see that as an Conor C. Flynn: encouraging move forward. 24 Hour Fitness obviously has their CEO from the past now come in, wanting to retake the reins and reposition that portfolio. Although our exposure is low to them, it is another good indication that Ross Cooper: retailers are really taking bold and important steps Conor C. Flynn: to reposition Ross Cooper: their value proposition to ensure that they are offering the customer what is in demand today. When you look at our the tenant strength of our existing fleet, I sort of look at Conor C. Flynn: 2026 and how much we have already resolved that I mentioned in my prepared remarks, and to get another indication when you have, you know, 47 anchor leases that are coming due with no options, and we have resolved Ross Cooper: 98% of them. Again, it is an indication either through renewals, new lease opportunities, that the demand is high, and people are continuing to see opportunities within our Conor C. Flynn: sector and, more specifically, within our portfolio, which, again, is also reflective of the retention levels that we are already seeing in 2026. Ross Cooper: So we have not seen anything Conor C. Flynn: concerning. We continue to see consumer growth being strong on the discretionary side within our sector. Within our shopping centers, retailers are really looking at Ross Cooper: 2027 now, even into 2028, to ensure that they are continuing their momentum to hit their open-to-buy mandates and make sure that they continue to grab the market share when it becomes available. Operator: Thank you. Our next question comes from Greg Michael McGinniss from Scotiabank. Michael Goldsmith: Hey. Good morning. Glenn, could you just help Conor C. Flynn: us better understand the underlying components of the same-store NOI guidance of around 3%? Especially considering the significant sign on occupied pipeline and comping versus, you know, last year’s bankruptcies. Michael Goldsmith: Sure. You know, again, Ross Cooper: we put out 2.5% to 3.5% as the range. We know, as I mentioned in my prepared remarks, that the beginning, the first quarter, is going to be the most challenging in terms of where we are based on the comp and us lapping the bankrupt tenants. But overall, we see the SNO pipeline coming online the way David Jamieson talked about, and we feel comfortable that, you know, the range is the right level, and it tied into the, you know, the entire guidance to get us to the $1.80, $1.84. But as a major Michael Goldsmith: component of it. Operator: Our next question comes from Juan Carlos Sanabria from BMO Capital. Your line is now open. Please go ahead. Michael Goldsmith: Hi. Good morning. Hoping you could talk a little bit about the realignment to a national leadership on terms of the asset management and kind of what drove that? What changes day to day in terms of leasing decisions and streamlining of those procedures? Kind of the savings as well. Seems like the G&A is coming down a bit. Ross Cooper: Sure, Juan. Yeah. Thanks for the question. It was a, as you may know, Kimco Realty Corporation for decades had operated as a regional structure where we had multiple regions overseen by regional presidents. And it served the company very well for decades. And when we look forward in terms of what we are looking to in terms of our efficiency of scale, wanting to move quickly, wanting to adapt and evolve as the market and the environment continues to change very quickly as well, we came to appreciate that if we streamlined our operating model, so replaced the regional structure with two functional teams, one for national leasing and one for asset management, Conor C. Flynn: that will ensure alignment and consistency across our platform Ross Cooper: end to end, coast to coast, and that will enable us to accelerate all the workflows that we have in process, to ensure that we are fully taking advantage of our scale Conor C. Flynn: and be able to grow with that as the market environment comes as well as Ross Cooper: able to better utilize all the technology and the investing that we are doing on that side, both from a new investment as well as just streamlining our business Michael Goldsmith: workflows. Conor C. Flynn: And so we felt it was prudent that we took that step now. We started to test it when you really take a look back in the last year, as I was mentioning these package deals. Ross Cooper: That was a good example of how we started to consolidate our efforts, streamline it, and have one accountable party go and execute. We could do this much, much quicker. The fact that we got Ross’s deals done in 30 days from approved REC to lease execution was phenomenal, and that was really Conor C. Flynn: a direct reflection of streamlining that process. On the asset management side, it is ensuring consistency and continuity across the portfolio. Tom Simmons, previously running the Ross Cooper: Southern Region as President, has a depth of experience in mixed-use activity, repositionings, redevelopments, is a great strategist. And so we will be able to expand that expertise across the entire country, Conor C. Flynn: with consistency. So we felt it was prudent at this time to take that step forward. And then as it relates to savings, Ross Cooper: we are early days on the restructuring strategy. We have obviously made the, and we intend similar to what we have done with the Weingarten integration and the RPT integration. We view this very much as a similar effort, and that we will be very thoughtful in terms of using the first several months to go through the restructuring, Conor C. Flynn: rebuild the team, identify and introduce new operating roles. With a full rollout towards the ’3. Within that exercise, we will start to identify more of the savings that will come through the organization. Will Teichman: And just to add to that, this is Will Teichman. Just to add a bit more about Ross Cooper: how we are approaching this project as a whole. Conor mentioned on our last earnings call that we have formed an Office of Innovation and Transformation to guide a lot of these operational improvement efforts for the company, and in conjunction with this operational restructuring, our Office of Innovation and Transformation is helping David and his team to quarterback and coordinate this overall planning Conor C. Flynn: process. In addition to that, in the past quarter since launching the new office, we have really been focusing in on Ross Cooper: a number of digital transformation efforts that we believe will help us to unlock additional efficiencies within the business. Conor C. Flynn: I want to just quickly touch on three of those. The first is around automation, Ross Cooper: where we are bringing together many of our early pilots around robotic process automation and agentic AI under a single governance structure that will allow us to more rapidly build the Conor C. Flynn: deploy, and drive adoption of these tools. The second is a proprietary data visualization tool that we have constructed Ross Cooper: and launched last quarter. It is allowing us to gain better visibility into market- and property-specific insights through some interactive maps and site plans and other tools that we have created. And then finally, we completed work on an internal natural language chatbot which pairs our property and lease data with the power of OpenAI’s latest GPT models and puts that into the hands of our associates. I think we are really excited overall about how things are coming together and about the opportunity to leverage a lot of these digital transformation efforts together with organizational changes to drive further efficiencies in the business. Operator: Our next question comes from Craig Mailman from Citi. Michael Goldsmith: Hey, good morning. Maybe just circle back on capital recycling here a bit. I know you guys mentioned 100 basis points of redeployment accretion here, but I am just kind of curious, that seems to be on a nominal basis. As you guys look on sort of an economic cap rate basis, which more directly impacts AFFO, like selling ground leases with zero CapEx to redeploy into high-quality shopping centers. Like, what ends up being the AFFO contribution relative to that 100 basis points as kind of the CapEx differential plays into it. Ross Cooper: Yeah. It is a good question. You know, the way that we think about it is on a number of levels. You know, as mentioned, first of all, it is the going-in spread on the cap rate that is sort of your day one. More importantly, when we are looking at the CAGR of that, you know, plus or minus 200 basis point spread, that does factor in sort of the net effective rent impact of the new deals that we are signing at elevated rents, as well as the cost of, or the capital that is being incurred, both on the CapEx and the leasing side. So we are looking at it both from an FFO and AFFO standpoint, understanding that some of the investments that we make on multitenant shopping centers compared to flat ground leases are going to have additional capital needs. But the rent increases and what we are able to achieve from a growth standpoint and a leasing spread standpoint far outweighs that. So the AFFO should continue to be positive and growing, in addition to the FFO level on its surface. Operator: Thank you. Our next question comes from Samir Upadhyay Khanal from Bank of America. Please go ahead. Conor C. Flynn: Glenn, just Michael Goldsmith: sticking to guidance maybe a little bit here. Conor C. Flynn: The term fees, at the midpoint, Michael Goldsmith: maybe expand on that. I know you had Conor C. Flynn: you are kind of assuming $11,000,000 for the year. I have gotten some questions this morning and kind of how much of this is sort of speculative versus known at this point? Anything you can talk around, that would be great. Thanks. Michael Goldsmith: Sure. You know, look. Lease terminations are just a part of the business generally. Ross Cooper: If you look at what we did last year, we had about $10,000,000 in total. Again, they are episodic. It depends on which leases you get back and what you are working on. I would say today, we have visibility into about $5,000,000 to $7,000,000 of it. But, again, it is early in the year, and, you know, it is fluid. So we baked into the full guidance range, again, the $7,000,000 to $15,000,000 range. To your point, at the midpoint, you are around $11,000,000. It is around the same level as we had last year. So it is not a driver of growth, but it is another component of just operating the business day to day. Operator: Thank you. Our next question comes from Haendel St. Juste from Mizuho. Please go ahead. Conor C. Flynn: Hi. Good morning. This is Ravi Vedi on the line for Haendel. I hope you guys are doing well. I wanted to ask about the ground lease portfolio. How large is this segment within the overall portfolio? And what is the appetite, cadence, and forecast for dispositions within this category going forward? Ross Cooper: Thank you. Yeah. So we are still right around 9% of our ABR that comes from these long-term flat ground leases. So last year, we were able to dispose just over $100,000,000, which was in line with our expectations for last year. We do intend to accelerate that pace for this year. So part of that $300,000,000 to $500,000,000 that we have outlined is, a big component of that is going to be the ground leases. We will continue to be very opportunistic about where and when we sell those assets. We are off to a good start so far this year. We have seen a really increased demand from private investors for this, in addition to the retailers themselves, I think, have gotten more active and aggressive in buying back some of their own real estate. We have a high level of conviction in our ability to hit the targets from a cap rate perspective. And that will be somewhat ratable over the course of the year. But we very much believe that we will see a number of dispositions that is substantially higher than what we achieved in ’25. I think the nice part about the program is that it is Conor C. Flynn: recurring, and we are able to backfill that pipeline going forward because Ross Cooper: when you think about Conor C. Flynn: the 9% that Ross outlined, we are actually still doing deals with Walmart, with Home Depot, with Lowe’s, with Target, across the portfolio, in similar structures where we set it up as a long-term ground lease, are separately parceling off that off. So in essence, the shopping center has many different components to it. Some are growthier pieces than others. And this is a component that we see in the market today as being one that is priced very aggressively but does not really drive Ross Cooper: any enhancement to our same-site NOI. Conor C. Flynn: And if we recycle it correctly, we think it can enhance FFO as well as same-store NOI. So it is a nice recurring program. We have got our development team working on separately parceling all of them out. Ross Cooper: We have the whole pipeline of opportunities. Conor C. Flynn: And as I mentioned earlier, the cadence is really of when they are ripe for disposition, meaning, like, we have built the right tenor in terms of length, the lease term, as well as separately parceled so that it hits the sweet spot of where the investors are looking for Ross Cooper: that credit investment. Operator: Thank you. Our next question comes from Floris van Dijkum from Ladenburg. Conor C. Flynn: Appreciate the color on your capital recycling from your ground rent. Let me ask you a question sort of following up on that. I think you have 3,700 apartment units that are entitled or, you know, essentially, you know, shovel-ready almost. What is your appetite in pursuing those yourself versus monetizing them, selling them completely versus Ross Cooper: JVing? How do you, how should we think about how those Conor C. Flynn: those units will get built and whose capital will be used for that. Ross Cooper: Yes. It is a great question, Floris, and it is another important component of the overall opportunity set. As you pointed out, we have a number of open operating and stabilized multifamily projects. We continue to have a tremendous amount of entitlement opportunity and additional land for development in the future. So with the continued sort of disparity between our public market pricing and where the private market is still valuing these really strong multifamily projects, it is another opportunity for us to consider crystallizing value, monetizing, and recycling. So within those different components, we are evaluating our existing fleet of multifamily as well as some of the future. We look at each and every opportunity on sort of a one-off basis and then identify what is the best way to monetize and/or activate that project. So even as we are considering monetization of some of the existing and future projects via the entitlements, we are also continuing to activate new projects that will be the future opportunity to continue to recycle, and so on and so forth. So we are getting closer later this year to stabilizing our Coulter Avenue, which is our Suburban Square asset. We will consider at that point in time what the best strategy is for monetization and recycling of Michael Goldsmith: capital. Ross Cooper: At the same time, we have recently broken ground up in Daly City in Westlake in California, which is sort of bringing one project online, stabilizing it, and then looking at the next. We have been, I think, very selective in how we activate these projects, some of which will continue to be long-term ground leases that are the most CapEx-light way for us to activate, as well as the joint venture structure where we have contributed our land into a joint venture with a multifamily developer where our land contribution sits in sort of a preferred equity component of the capital stack. So we are extremely focused on recycling capital, crystallizing value, and then when we are activating new projects, how do we do it in the most efficient way, whether it be the CapEx-light ground leases or in our contribution into a joint venture where we are able to generate FFO during the development stage and then figure and determine the exit strategy upon completion. Conor C. Flynn: Yeah. Floris, the only thing I would add is this is a big differentiator between Ross Cooper: Kimco Realty Corporation and our peers. Conor C. Flynn: Our focus on our strategy of First Ring Suburbs we believe is sort of the unique retail plus opportunity set that Kimco Realty Corporation brings that others do not. We entitled over 650 units just this past quarter. We have activated, as you have said, a number of projects, but the retail plus the apartments we think is really the opportunity set that differentiates Kimco Realty Corporation. Because in a way, we have a number of different ways to unlock that embedded value. And, again, that first ring suburb strategy is where we think that opportunity set is robust to unlock future value from the asset because in essence, like, the retail is underutilizing the FAR of the asset, and the parking lots that we have today, you know, driverless cars are being utilized across the country. Parking ratio requirements are coming down across the country. We believe that this strategy of unlocking value for our shareholders is really in the early innings because of the opportunity set that we see across the entire portfolio that, again, sits in these first ring suburbs where density continues to go up around us and the Kimco Realty Corporation asset, in a lot of ways, is the hole in the donut where everything has gone vertical around us and gives us the opportunity set to really add debt in the future. Operator: Our next question comes from Michael Anderson Griffin from ISI. Michael Anderson Griffin: Great. Thanks. Ross Cooper: David, I want to go back to your comments just on leasing and particularly as it relates to leased occupancy. I think you might have mentioned that you are optimistic to get that number up year over year at the end Conor C. Flynn: ’26 relative to ’25. But maybe can you give us a sense, are we almost reaching sort of structural vacancy within the portfolio at Ross Cooper: the mid-96% range? Like, could this really get into 97%, 97.5%? And I imagine that would be driven more by the small shop leasing. Do you think we could be in a world where small shop occupancy gets to 94%, 95%? Then as you kind of think about that SNO delta over the longer term, what is a good spread for that that we should think about? Yeah. Thanks for the question. So I will never say never. Obviously, the goal would love to get to 94%, 95% on the small shop side. But I tend to look at, Conor C. Flynn: you know, the history to try to forecast the future a little bit. So when I Ross Cooper: look at the overall occupancy at 96.4%, Conor C. Flynn: obviously, comprised of anchors and small shops. As you know, small shops were at a record high at 92.7%. Ross Cooper: And on anchors, though, we are just about 110 basis points off our all-time high, which actually happened in, I believe, Q4 2019, pre-COVID. And so when you think about that extra 110 basis points that is still left Conor C. Flynn: to be occupied, there is still room to run Ross Cooper: in terms of total occupancy, which is a great contributor. And tying that to SNO, that in itself could represent another, you know, $12,000,000 to $15,000,000 of value that could be contributed to SNO over time. When I think of the small shops, we continue to see momentum not only through just straight organic leasing activity, but as you have seen, we have expanded our repositioning, redevelopment activity significantly over the last couple of years. And as Conor mentioned, halo effect, you will start to see that benefit as we have already seen in terms of occupying the residual small shop space and driving rent increases for those locations. And so that is a big contributor. And as these anchor space and these repositionings start to come online, we will continue to see that forward momentum, which I think could help propel small shop occupancy. In addition to that, you know, we look at the retailer strategies, and they do vary in terms of expanding or contracting square footage. And there are a number of opportunities where we can actually expand into a small shop space and give that retailer the optimized footprint, so building them a better mousetrap within the market and just staying within our center. So that could be an opportunity as well. And then when you look at the repositioning of what we view as sort of our chronic vacancies, so we put an initiative in place just over a year ago of spaces that had not been leased in over three years. And just that renewed focus of really targeting those areas Michael Anderson Griffin: looking at Conor C. Flynn: opportunities to start repositioning those individual units have yielded great outcomes, and that has helped drive small shop activity. So I think when you roll it all together, there is definitely room to run there, and that will continue to be a Ross Cooper: contributor to the SNO in the near term and then occupancy growth over time. When we look at our normalized SNO levels way back when, it is around 180 basis points of spread in the SNO. So Conor C. Flynn: as we mentioned in our prepared remarks, you could see a further expansion, primarily because you are growing the physical occupancy as economic occupancy Ross Cooper: continues to come online through the balance of the year. If we continue to grow physical occupancy at the top side, you will see some SNO expansion, continued contribution of cash flow Conor C. Flynn: potential for the future, Michael Anderson Griffin: but as Ross Cooper: those spaces start to come online, you will start to see that compression through ’27. But that bodes well for our cash flow growth, ’27 into ’28. Operator: Thank you. Our next question comes from Richard Allen Hightower from Barclays. Your line is now open. Please go ahead. Conor C. Flynn: Obviously, covered a lot of ground Michael Goldsmith: so far, but I want to go back to maybe some action you are seeing in the private market. And I guess on some other calls, even not necessarily in retail, you know, we are hearing that new buyers are sort of coming to the market in various property types, maybe in reaction to the new tax laws and accelerated depreciation and some elements like that. So maybe dig into, if you do not mind, dig into some of the motivations you are seeing behind some of that activity, especially as cap rates, you know, potentially continue to compress from here? Just give us a sense of what that looks like. Ross Cooper: Yeah. No. It is absolutely a very compelling time to be an investor in open-air retail. I think you have heard from us and from other peers the group, the fundamentals that are approaching all-time highs in multiple different metrics. Investors, generalist investors, real estate, are taking notice. And even with cap rates continuing to compress, the financing has gotten much improved in terms of available liquidity and spreads. And so you can still see in many instances situations where there is positive leverage, which is a bit of a differentiator for retail versus some other asset classes. So we really have gone supercharged from what we were talking about 12 months ago in the retail curious to investors that are retail active. And while that makes it more competitive in the open market when we are trying to acquire assets and bidding tents are getting, you know, more and more full, it is a very healthy indication of the interest level and the fundamentals that we see in our business. And with the supply-demand dynamics not realistically going to change anytime in the near to medium term, we think that this is going to continue to be compelling for investors to put capital to work while the fundamentals are going to continue to be extremely strong for the foreseeable future. Conor C. Flynn: Great. Thank you. Operator: Thank you. Our next question comes from Caitlin Burrows from Goldman Sachs. Your line is now open. Hi, everyone. Maybe a quick question on the structured investments. I see the guidance is a net number. Can you give some more details on what visibility you have to existing investments being repaid in ’26? And then your confidence in being able to backfill those? Ross Cooper: Sure. As you saw in 2025, you know, we did a number of new deals. But we did have several very large repayments. You know, in particular, we had our largest individual relationship and our largest individual asset that achieved its business plan. Everything was successfully repaid, so it was a positive outcome for everybody involved. As we look into 2026, we do not anticipate any significant or meaningful sort of single repayments. There will always be some churn within this program. But what we have seen thus far, with closing a couple deals that we funded here in the early stages of January and a pipeline that has some additional assets and investments that are already lined up, we are very confident in our ability to go back to growth for this book in 2026 and beyond. So there will be a little bit of repayment activity throughout 2026, but on the net, as we put in our guide, we are highly confident that we will see some growth here. Operator: Thank you. Our next question comes from Wesley Golladay from Baird. I just want to go back to the 47 anchors that have the Conor C. Flynn: the large mark to market. Those are some nice spreads, but are you looking to replace any of those tenants, bring in a better tenant that drives more traffic? And does, do any of these unlock any redevelopments? Ross Cooper: Yeah. That is a great question. So when I do say it in terms of resolve, that is either continuing to renew the tenant in place or reposition the box itself for either redevelopment or a higher-quality credit tenant. So in one example, we are replacing one of the boxes with Sprouts in South Miami and repositioning the entirety of the asset. So that is a redevelopment that is underway. That is going to create significant upside for the remainder of Conor C. Flynn: small shop activity and completely transform the site, which we are extremely excited about. Ross Cooper: And then in terms of a repositioning, we took what was a watch list tenant at natural expiration and backfilled that with Total Wine, which is Conor C. Flynn: another great example, which there is huge mark-to-market opportunity there. And repositioning more complementary to what the remainder of that asset was really showcasing in terms of its direction. So we look at all of the Ross Cooper: available options, and then make sure that we are making the best, obviously, economic deal, one, but two, choosing the best quality credit that will have the greatest impact long term for the asset. Conor C. Flynn: In several of these cases, it is really transitioning, transforming the asset from what it was to what it could be going forward. Operator: Our next question comes from Michael William Mueller from JPMorgan. Please go ahead. Conor C. Flynn: Yes. Hi. Just a quick one. You are guiding to higher acquisition and disposition volumes. And while I get it that they are net neutral, Michael Goldsmith: each of the components is higher than what you have guided to recently. Conor C. Flynn: Is this more of a function of the specific near-term pipelines you are seeing today? Or is it just kind of a Michael Goldsmith: broader confidence that the transaction markets have opened up more? Yes. It is really an Ross Cooper: strategy of accretive capital recycling that we are undertaking, acknowledging that we have some components within the portfolio that are very valuable and attractive to the private markets that we are not necessarily getting credit for in our public market valuation. On top of that, you know, pun intended, what we are selling are truly anchors to the growth profile of the organization and of our portfolio. So when you think about the impact of selling off some of these long-term ground leases in the 5% cap rate range that have a CAGR of sub 1% and being able to recycle that into acquisitions that are higher year one, but also compounding at a significantly higher growth rate of, on average, 200 basis points, this is an inactive strategy that we are employing to generate additional growth and to improve the portfolio and the long-term perspective of the growth opportunity within the organization. So the market is clearly open and conducive to it. We are fortunate that we have a lot of opportunity to recycle that capital from even within the portfolio, as we mentioned from within our joint venture program, where there is going to be some recycling opportunities, as well as our structured program where we have proven the ability to exercise on these rights that we have to acquire. We closed on two of those opportunities in 2025 and are hopeful that there will be more in 2026. So we just think that the landscape really shapes up really well for the strategy that we have outlined, and that is just our baseline. And, hopefully, we can even outperform that, and anything that we do will just be incremental to that. Operator: Our next question comes from Linda Tsai from Jefferies. In terms of driving further efficiencies in the business with digital transformation, Sydney McEntee: do you expect the immediate beneficial impact to flow through soonest? Would it be in boosting the top line, reducing operating expenses, or G&A? Will Teichman: Thanks for the question. I think Ross Cooper: really, on the expense side is where we are seeing impacts initially. And I think that is consistent as you look outside the real estate industry as well with what you are seeing in other large corporates. There was a study that was published by MIT last year about the relative lack of success that many large companies are having in deploying AI, and one of the big takeaways from that was the degree to which companies are overly prioritizing top line opportunities over back-office and expense reduction opportunities. So it is not to say that there are not opportunities in both areas. Sydney McEntee: But Ross Cooper: as we look at our strategy and where we have already been able to take costs out of the business, I would say it has largely been around G&A to start with. Conor C. Flynn: To drill down on that just a little bit further, I think Ross Cooper: obviously, there is a lot of conversation around Sydney McEntee: the cost of human capital. Ross Cooper: But I think it cannot be underestimated that there are other G&A efficiencies to be taken out of the operation. So as you think about our announcement to form, for example, our Office of Innovation and Transformation, one of the areas that that team is already having a significant impact out of the gate is in reducing our need for professional services vendors, to bring those vendors in to perform software and other kind of organizational transformation work. We are also having quite a bit of success around vendor consolidation, which is part of the playbook that we have developed through our M&A transactions over the past couple of years. So those are just a couple examples of what we are seeing. We are optimistic about some of the early efforts that we are seeing around automation and agentic AI. And I think one of the things that I would just say about Kimco Realty Corporation’s approach and how it differentiates us from other companies Conor C. Flynn: is that many other companies seem today to be stuck in the pilot phase, Ross Cooper: buying off-the-shelf products and testing one-off use cases within individual functional areas. Our approach is different in that we are really building an engine to integrate technology and talent across the enterprise. Operator: Thank you. We currently have no further questions, and I would like to hand back to David F. Bujnicki for any closing remarks. David F. Bujnicki: Thanks so much. We are really excited about our opportunities set for 2026. Continue building the momentum from 2025. Thanks, everybody, who joined the call today. If you have any follow-up questions, please contact us. Thank you so much. Operator: Thank you. This now concludes today’s call. Thank you all for joining. You may now disconnect your lines.
Operator: Hello, and welcome to Albemarle Corporation's Q4 2025 Earnings Call. I will now hand over to Meredith H. Bandy, Vice President of Investor Relations and Sustainability. Thank you, and welcome, everyone, to Albemarle Corporation's Fourth Quarter 2025 Earnings Conference Call. Our earnings were released after market closed yesterday and you will find the press release and earnings presentation posted to our website under the investors section at albemarle.com. Joining me on the call today are Jerry Kent Masters, Chief Executive Officer, and Neal R. Sheorey, Chief Financial Officer. Mark Mummert, Chief Operations Officer, and Eric Norris, Chief Commercial Officer, are also available for Q&A. As a reminder, some of the statements made during this call, including our outlook, guidance, expected company performance, and strategic initiatives may constitute forward-looking statements. Please note the cautionary language around forward-looking statements contained in our press release and earnings presentation. That same language also applies to this call. Please also note that some of our comments today refer to non-GAAP financial measures. Reconciliations can be found in our earnings materials. I will now turn the call over to Jerry Kent Masters. Jerry Kent Masters: Thank you, Meredith. For the fourth quarter, we reported net sales of $1,400,000,000, up 16% year over year with double-digit volume growth. We also delivered adjusted EBITDA of $269,000,000, up 7% year over year, reflecting strong growth in energy storage and significant cost and productivity improvements. Turning to the full year. We achieved net sales of $5,100,000,000 and adjusted EBITDA of $1,100,000,000. As expected, these results were at or above our previous outlook considerations. Significant cost and productivity improvements, volume growth, and sales channel mix contributed meaningfully to our full year performance. We are providing an update to our lithium demand outlook to incorporate stronger lithium demand growth for stationary storage. As a result, our estimated range for global 2030 lithium demand is up 10% versus our previous forecast. That brings me to our new full year 2026 outlook. We are using the same methodology as we have the past two years, providing outlook ranges for various lithium market price scenarios. This year, those ranges reflect both our operational improvements and higher lithium pricing. We are also targeting additional cost and productivity improvements of $100 to $150,000,000 and stable capital spending in 2026. As a result, we see the potential for meaningful positive free cash flow at current lithium pricing. Since 2024, we have successfully executed actions to reduce cost and capital intensity, generate cash, and enhance financial flexibility. In 2025, we achieved approximately $450,000,000 in run-rate cost and productivity improvements and reduced CapEx spend by 65% year over year. In January 2026, we closed the sale of our stake in the Eurecat joint venture. We now expect to close the sale of a majority stake of Ketjen to KPS Capital Partners in the first quarter, slightly ahead of our initial schedule. Together, these transactions are expected to generate approximately $660,000,000 in pretax proceeds, improving financial flexibility, streamlining our operations, and enhancing focus on our core businesses. As we turn to Slide 5, yesterday, we announced the difficult but necessary decision to idle operations at our Kemerton lithium hydroxide plant to improve financials and preserve optionality. Unfortunately, recent lithium price improvements alone are not enough to offset the challenges facing Western hard rock lithium conversion operations. This action is expected to be accretive to adjusted EBITDA beginning in the second quarter with no impact to sales volumes. Our investments in top-tier mining resources at Greenbushes and Wodgina and our exploration interest in Western Australia remain important components of Albemarle Corporation's strategy and are not impacted by the decision to idle operations at Kemerton. I will now turn the call over to Neal R. Sheorey to discuss recent results and outlook. I will then cover recent market trends and growth before we open the call for Q&A. Neal R. Sheorey: Thank you, Kent, and good morning, everyone. I will begin with our financial results for the fourth quarter as presented on Slide 6. Net sales for the quarter of $1,400,000,000 increased from the prior year, primarily driven by higher volumes across all segments, particularly Energy Storage and Ketjen, which grew 17% and 13%, respectively. Adjusted EBITDA for the fourth quarter was $269,000,000, up 7% versus the prior year. This improvement was driven by higher lithium market pricing and increased Ketjen sales volumes. Our adjusted EBITDA margin decreased by approximately 150 basis points compared to last year, driven by less favorable FX and lower Specialties margins, partially offset by higher margins in Energy Storage and Ketjen. We reported a net loss of $3.87 per diluted share. Excluding charges, the largest of which included tax-related items and a noncash impairment related to the expected Ketjen transaction, our adjusted diluted loss per share was $0.53. Moving on to Slide 7 and the factors influencing our year-over-year adjusted EBITDA performance. We reported sales volume growth across all segments and higher pricing for Energy Storage. Equity income, net of foreign exchange impacts, decreased year over year due to the Greenbushes inventory lag. Turning to other segments. Ketjen delivered solid year-over-year adjusted EBITDA growth of 39% due primarily to higher sales volumes. Specialties EBITDA decreased slightly due to margin compression, notably in our lithium specialties business where prices began to adjust lower from previous peak pricing. The corporate adjusted EBITDA change primarily reflects unfavorable foreign exchange hedging impacts, largely driven by the strengthening of the Australian dollar and Chinese yuan. Turning to Slide 8. We are introducing our outlook considerations for 2026. As usual, we provide ranges of outcomes for our Energy Storage business as well as the enterprise, based on recently observed lithium market pricing. This year, we have updated our ranges to be inclusive of recent pricing trends. We have defined our scenarios using the following three observed market price cases: full-year 2025 average market pricing of about $10 per kilogram lithium carbonate equivalent, or LCE; January 2026 average pricing of about $20 per kilogram LCE; and the 2021 to 2025 five-year average price of about $30 per kilogram LCE. Within each scenario, we have provided ranges based on expected volume and product mix. All three scenarios assume flat market pricing across the year, in conjunction with Energy Storage's current book of business, of which we expect about 40% of lithium salts volume to be sold through our long-term agreements. Production volumes are expected to increase year over year due to growth from CGP3 and Salar yield improvement, offset by inventory drawdowns, which increased sales in 2025. As a result, we anticipate that Energy Storage sales volumes will be roughly flat year over year. In addition to the metrics we have shown historically, this year, we have included our expected average realized price for consolidated salts and spodumene sales for each scenario. This realized price is simply our net sales range divided by our sales volume expectation. Particularly in the $20 and $30 scenarios, you will notice a difference between market price and our average realized price. This is primarily due to product mix. For example, spodumene sales, which are growing, dilute our average realized price on an LCE basis. These scenarios also clearly demonstrate the impact of the cost and productivity improvements we made over the course of 2025 and remain focused on going forward. As illustrated in the $10 scenario, if lithium market pricing were flat from 2025 to 2026, we expect our Energy Storage adjusted EBITDA margin to improve from the 25% margin achieved in 2025. Turning to Slide 9. We provide Albemarle Corporation's company roll-up for each Energy Storage market price scenario. This outlook assumes the Ketjen transaction closes in Q1 2026, which, all else being equal, reduces full-year net sales and EBITDA versus the prior year. Here, once again, you will see that for the $10 scenario, we expect to deliver a slight improvement to our overall adjusted EBITDA margin due to improved Energy Storage margins and our focus on cost and productivity. As Kent mentioned, we achieved $450,000,000 of cost and productivity savings in 2025, a significant portion of which was delivered in the year as you see in our metrics. Going forward, a small portion of this savings run rate will carry over into 2026. This benefit is reflected in our scenarios. And of course, we also have significant upside potential as market pricing improves with total company margins lifting to the low 40% and mid-50% range for the $20 and $30 scenarios, respectively. Turning to Slide 10 for commentary by segment, starting with Ketjen. In January, we closed the sale of our stake in the Eurecat joint venture. We expect to close the sale of a controlling stake in Ketjen in the first quarter. Together, these actions are projected to bring in about $660,000,000 in pretax proceeds, and we expect minimal tax leakage on the transactions. As we have said before, we intend to utilize the proceeds for deleveraging and other corporate purposes. Operationally, Ketjen closed the year with a strong fourth quarter. Net sales were up 14% year over year and adjusted EBITDA grew 39%, driven by CFT shipment timing and higher FCC volumes. Full-year results also reflected year-over-year improvements, including adjusted EBITDA up 15%. I am pleased to highlight that 2025 represented the third consecutive year of adjusted EBITDA improvements at Ketjen as part of our multiyear turnaround plan for the business. Looking ahead, once the transaction closes, earnings for our remaining share of the refining catalyst business will be classified as equity income. Our share of the refining catalyst business and the retained PCS business will both be reported in Corporate. We expect the contribution from these businesses to be relatively immaterial to equity income and adjusted EBITDA going forward. Moving to Slide 11 for an overview of the Specialties business results. In the fourth quarter, net sales increased 5% year over year. Adjusted EBITDA declined 6% primarily due to margin compression in our lithium specialties business where we began to see pricing move lower following previous peak conditions. For the first quarter, we expect lower sequential sales and EBITDA due to a temporary production interruption at our JBC joint venture in Jordan following a major flooding event, which resulted in an estimated $10 to $15,000,000 in lost revenue. The site is now back to full operating rates. Looking ahead to 2026, we are introducing full-year outlook considerations for the Specialties business, including net sales of $1,200,000,000 to $1,400,000,000, adjusted EBITDA of $170,000,000 to $230,000,000, and EBITDA margins in the mid-teens. Bromine Specialties volumes are expected to be flat to slightly down, reflecting the early-year disruption at JBC. Adjusted EBITDA is expected to fall year over year due to product mix impacts driven by soft demand from the oil and gas and elastomers markets and lower pricing in lithium specialties. Moving to Energy Storage on Slide 12. Full-year volumes reached 235,000 tons LCE, up 14% year over year, exceeding the high end of our outlook of 10% growth. This was driven by record integrated production, strong spodumene sales, and inventory reductions. Q4 net sales increased 23% year over year. Adjusted EBITDA was up 25%, supported by higher lithium pricing and ongoing cost and productivity improvements. While we expect first-quarter volumes to be lower sequentially due to typical seasonality during the Lunar New Year, we expect both net sales and EBITDA to increase year over year, assuming current pricing persists for the remainder of the quarter. As Kent mentioned, idling Kemerton Train 1 will have no impact on volumes. We expect to meet customer demand for lithium hydroxide via our other conversion plants or tolling. The Kemerton action will benefit adjusted EBITDA beginning in Q2. Regarding sales channel mix, we expect approximately 40% of our 2026 salts volumes to be sold under our long-term agreements. Turning to Slide 13 and some new disclosure we will provide going forward. This table documents quarterly metrics for the Energy Storage business including average lithium market price observed, our net sales, our sales volumes, and our average realized price, which is defined simply as our net sales divided by our consolidated salts and spodumene sales volumes on an LCE basis. Going forward, this table will be included in the appendix of our earnings deck for easy reference. As you review this data, I will again remind you of the impact of spodumene sales in our mix, which dilutes our average realized price on an LCE basis. Slide 14 highlights our success in turning earnings into cash. We ended 2025 with an EBITDA to operating cash conversion of 117%, driven by our actions to manage working capital and receipt of a customer prepayment in January. Even after adjusting for the one-time benefits, we still estimate our underlying 2025 cash conversion to be at or above the top end of our long-term range of 60% to 70%. Additionally, we generated significant positive free cash flow of nearly $700,000,000 due to our solid cash conversion and our right-sized capital expenditures, which declined 65% year over year. Looking ahead to our cash generation and conversion in 2026, we are focused on our underlying cash improvements, but want to note select headwinds to our cash metrics in the year, including recognizing $88,000,000 in deferred revenue related to the customer prepayment we entered in 2025, which will benefit EBITDA but not contribute cash, and approximately $100,000,000 in cash costs related to idling Kemerton Train 1 and placing it in care and maintenance. Of course, pricing has a large impact on our ability to generate cash, and we expect measurably positive full-year free cash flow potential if current lithium pricing persists. I will now turn the call back over to Kent to detail our updated lithium demand forecast, capital allocation priorities, and our growth outlook. Eric Norris: Thanks, Neal. Jerry Kent Masters: Slide 15 shows our global lithium demand expectations. We are seeing a diversification of lithium end markets with stationary storage becoming an increasingly significant demand driver for lithium, in addition to strong electric vehicle demand growth, most notably in Asia and Europe. 2025 global lithium demand was 1,600,000 tons, up more than 30% year over year and in line with the midpoint of our previous forecast range. 2025 lithium demand growth outpaced supply growth, leading to tighter inventories and increased pricing by year-end. Now we are introducing 2026 global lithium demand expectations of 1.8 to 2,200,000 tons, up 15% to 40% year over year, driven by stationary storage and electric vehicle demand growth. We are also increasing our 2030 global lithium demand outlook to 2.8 to 3,600,000 tons, up about 10% from our previous range. This increase is driven by higher expected demand from stationary storage. Turning to Slide 16, let's take a closer look at each of these end markets starting with EVs. We continue to see EV demand growth globally in line with our expectations, with sales up 21% year over year with the highest growth in Europe up 34%. European EV demand was driven by continued policy support for electrification, which we expect to continue to drive similar growth in 2026. As expected, U.S. EV demand slowed in the fourth quarter following the removal of the 30D consumer tax credits. However, the U.S. is also the smallest of the regional market with just 10% of global EV sales. China remains the largest EV market with 60% of global EV sales and growth continues on trend as EV penetration reached approximately 50% during 2025. Slide 17 expands on the fast-growing stationary storage demand trends, up more than 80% in 2025 with strong growth across all geographies. China represented 40% of ESS shipments in 2025, growing 60% year over year with demand driven by policy support and strong economics for stationary storage projects. North America saw a 90% increase in shipments in 2025 to support grid stability as energy demand rises, in part due to increased demand from data centers and AI. European shipments more than doubled in 2025 to support renewables as an alternative to energy imports. Stationary storage demand continues to diversify globally. Demand outside of the three major regions represented more than 20% of stationary storage shipments and grew 120% year over year. This growth is due to strong demand across Southeast Asia, the Middle East, and Australia driven by policy support, the need for energy resilience, and growing international battery supply chains. Turning to Slide 18, thanks to our own disciplined cost and capital actions, as well as improving underlying markets, we closed the year with $1,600,000,000 in cash. In addition, in the first quarter, we expect to receive approximately $660,000,000 in combined proceeds from the recently closed Eurecat transaction and the soon-to-close Ketjen transaction. We repaid our €440,000,000 eurobond in November and are committed to maintaining our investment-grade credit profile. We continue to evaluate additional opportunities to delever, return capital to shareholders through our quarterly cash dividends, and make disciplined organic growth investments. Now turning to Slide 19. We reset the baseline for lower sustaining capital through capital efficiency, project selectivity, and scoping. Our 2026 sustaining capital is essentially flat year over year after assuming the sale of Ketjen in the first quarter. We are confident we will be able to maintain these lower levels of spend while also prioritizing health, safety, and environmental, continuity, and productivity projects. Cost reductions, portfolio simplification, and capital discipline also allow for targeted growth spending on our world-class resources, including investments in early-stage development at the Salar de Atacama and Kings Mountain. We are committed to being disciplined in our approach to value-enhancing growth while preserving optionality and solidifying our competitive position. As we look ahead on Slide 20, we are on track to deliver a five-year CAGR of 15% for Energy Storage sales volumes with minimal additional investment. This includes a 25% CAGR over the past four years, with growth expected to moderate as large projects complete ramp-up. Over the next two years, several projects provide growth with minimal incremental capital spending going forward. At the Greenbushes spodumene mine in Australia, the JV is currently ramping the CGP3 expansion which adds about 35,000 tons per year to our capacity on an LCE basis. We also see multiple opportunities to continue productivity initiatives at the Salar de Atacama based on results of the Salar yield improvement project. Finally, at Wodgina, the JV is currently operating about two to two and a half trains on average, and could potentially operate three full trains as ore availability continues to improve. We will also continue to evaluate longer-term growth opportunities to leverage our global footprint of world-class resources. Turning to Slide 21. Albemarle Corporation has a strong and differentiated competitive position, led by our growing lithium and long-lived bromine resources. The figures shown on the slide summarize the changes made to our mineral resources inclusive of mineral reserves as part of our annual SK 1300 report included in our 10-K filing. Our bromine resources decreased slightly year over year. At JBC, this was due primarily to updated modeling and sampling. Our JBC operations continue to produce some of the lowest cost bromine in the world, with significant long-term expansion options. Magnolia resources are down slightly due to reduced pumping rates. Albemarle Corporation benefits from large, low-cost bromine resources with resource lives in the multi-decade or even multi-century range. Our lithium mineral resources were up 10% year over year led by improvement at Greenbushes. At Greenbushes, we increased our reserves and resources due to mine design improvements and the inclusion of underground resource. At the Salar de Atacama, resource growth was mainly attributed to expanded hydrogeological drilling activities. We anticipate further enhancements in reserves and resources at this site. The DLE pilot plant has been fully commissioned and is now operational, yielding promising data for scale-up purposes. Additionally, by next year, the Salar yield improvement project is expected to have enough operating history to support upgraded mineral resource and reserves estimates. At Wodgina, our updated NPV materially increased, driven primarily by yield improvements. Kings Mountain just completed a successful drilling campaign with potential for updated resource next year. On Slide 22, I will summarize the actions we have taken to enhance our position and maintain our competitive edge to capitalize on the growth trends I have discussed. In terms of optimizing our conversion network, as I mentioned, we delivered strong full-year 2025 Energy Storage volume growth and record production, and we made the important decision to idle Kemerton. Looking ahead, we will continue to maximize the value of our resources and adjust product mix through conversion and tolling networks. We continue to improve cost and efficiency in 2025 with greater than 100% adjusted EBITDA to operating cash flow conversion. We are targeting an additional $100,000,000 to $150,000,000 in cost and productivity improvements in 2026 from a combination of projects across manufacturing, supply chain, and corporate. We see further opportunities for cost and productivity improvements as we simplify our processes and continue to embed technology and AI across our organization. As a reminder, we are targeting flat CapEx as compared to 2025, with a focus on disciplined investment that enhance our optionality and provide fast Eric Norris: returns. Jerry Kent Masters: And finally, we will continue to enhance our flexibility, building on the Ketjen asset sales in 2025 and strong free cash flow achieved during the year. Importantly, the actions we have taken and continue to take to optimize our portfolio, reduce cost, improve capital efficiency, and enhance financial flexibility are all geared towards preserving long-term growth optionality and supporting our strong competitive position. In summary, on Slide 23, Albemarle Corporation delivered strong fourth quarter and full-year 2025 results thanks to the actions we have taken to optimize our asset portfolio, reduce cost, and strengthen our financial flexibility. Looking ahead for 2026, these efforts are expected to continue to drive year-over-year margin improvement independent of price changes. Our durable competitive strengths, including our assets, expertise, and innovation, combined with the long-term secular growth opportunities around energy resilience, position us well for sustainable growth and value creation over the long term. We have the team and discipline to execute well and realize that potential. With that, I will turn it over to the operator to take your questions. Operator: We will now open for questions. As a reminder, that is star five to raise your hand. Also, bear in mind, this Q&A is limited to one question and one follow-up per person. First question is from David L. Begleiter with Deutsche Bank. Your line is now open. Neal R. Sheorey: Thank you. Good morning. And first, thank you for the additional disclosure, very helpful. Kent, on your lithium volumes, they will be flat this year in 2026. David L. Begleiter: How should we think about volume growth beyond 2027 in the 2027, 2028, 2029 timeframe? Thank you. Jerry Kent Masters: Yeah. Thanks. So I would say that we probably grew a little faster than we anticipated. It is kind of why we are running into a flat spot this year. That and I think the headwinds from pulling inventories down, so we were able to sell those last year and not this year. And we still have growth opportunities at Greenbushes, at Wodgina, and then we have longer-term growth from Kings Mountain and then the Salar de Atacama. So I think we will continue on a growth profile. We pulled back on our capital spending. So it is not as prolific as it once was. But I think we still continue that growth profile after 2027 and we will have to start investing once we see how the market looks for that. But we have opportunities. We have the fundamentals for it, the resources that we have. And the technology basis we have for that. It is just a matter of executing against that. David L. Begleiter: Understood. And just on Kemerton, Kent, how much higher cost is that asset than your Chinese conversion assets? And what lithium price would you need to see to restart Kemerton? Thank you. Jerry Kent Masters: Yeah. So in the Kemerton, I think you made it. We have idled the asset, not a shutdown. It is idled. So we keep it in a position where we can restart it if we get into those conditions. But the cost structure between China and, say, Western supply, but particularly Western Australia, it is across the industry. It is across areas like reagents, tailings disposal is a big difference. There is a big industry in China that kind of works through tailings, and we do not have that in the West. We have made progress in Australia with government support around taking those costs down, but it is still significantly different. Labor is higher, power. So there is a gap there between China and the West and Australia. It is probably $4 or $5, something like that. And that is going to have to be addressed if you are going to build out a Western supply chain. We either need differentiated prices to cover those costs from the West, and we have not been able to get that support so far. Operator: Next question will come from Jeffrey Zekauskas with JPMorgan. Jeffrey Zekauskas: Thanks very much. Can you comment on how much Chinese lithium capacity you think was closed down from about the 2025 today, because of various actions? And do you think that the Chinese government or steps the Chinese government took were key to that capacity coming offline. Jerry Kent Masters: So, if I can let Eric get into some of the specifics around maybe the mines or the capacity that comes around it. But I think there is, I mean, the Chinese government has been paying attention to this. I think it has had something to do with that. It is not all driven there. So you have had some capacity come on. We have also been surprised to the upside on demand. Particularly the fixed storage applications have been much stronger. So it is where supply did not grow as much as we had anticipated. It is still growing, but it is not as much as we had anticipated. And demand grew more than we thought. So that is where it is getting tighter. I think the Chinese government looking at environmental regulations and some of the permitting, they are getting a little bit tighter on it, and it has had, I would say, some influence. Eric? Eric Norris: Yeah. So Jeff, we would say that just a bit of an update. There are about seven petalite mines that continue to operate even while they await permits. So it is not that the petalite capacity in China has completely disappeared. There is still a good amount that is online. The one large facility you may have heard about is owned and operated by CATL that is still offline. In total, we think about 30,000 to 50,000 tons of capacity came off in 2025. We would expect that that is possible to come back on at some point in the coming year. In fact, effectively, we have modeled that. So to your question about the regulatory environment, there is an increased oversight on waste tailings generation and general environmental operating conditions in China. It is probably too early to say how that will play out. Safe to say if implemented, it would affect all operators and the cost position of all operators because it hits all elements of how to manage, handle, and dispose of mine tailings and environmental waste. Jeffrey Zekauskas: Great. Thank you for that. And then I guess on Slide 27, you have your forecast of Specialties adjusted EBITDA for 2026 which you put in a range of $170,000,000 to $230,000,000 versus 2025. What is behind that decrease? Eric Norris: So just to clarify, Jeff, this is Eric again. Your question is what is behind the decrease in Specialties year-on-year earnings? Eric Norris: Yes. For 2026. Eric Norris: Indeed. Okay. A couple of things that are there. Well, number one, as Kent described in the call, we are not getting much of a lift from demand growth year on year. It is not a helpful tailwind. Just to clarify that, the issues there are that in certain markets, as process chemical industries, oil and gas, elastomers, that is a part of your coverage universe. You know that that is an industry that is not particularly healthy. And that is impacting our demand growth in those areas. Now there are some offsets, pharma, semiconductors. Those are performing well. I think the big driver is lithium prices. Lithium specialties prices in particular. This is a business that does not contract or move like Energy Storage. It is not very commoditized. It is specialty, but it does echo the price curve of LCE over time. And we were successful in the past years of getting long-term contracts based upon very high price at that time, and those have now come off. And we saw a step down of that a little bit in the fourth quarter, and Neal mentioned that in his comments, and we are going to see more of that to come this year. Obviously, now that has turned but it is too early for the turn in LCE prices to affect a subsequent series of contracts. We will just have to wait and see. Operator: Your next question will come from Joshua Spector with UBS. Joshua Spector: Hi. Good morning. I wanted to ask on just your approach on how you are thinking about investing in this cycle. You guys did a lot of work over the last couple of years to get free cash flow to where it was last year. So how long do prices need to stay at the $20 per kilogram plus level before you think about starting spending? Or are you going to harvest cash for longer than what you might have in a prior cycle just given what we have learned here? Eric Norris: Yep. So we are Jerry Kent Masters: We probably will be a bit more conservative than you have seen us be in the past around that. But we do have projects. I mean, we have been mindful as we have cut capital, taken out some of the big pieces. We have tried to get our sustaining capital in a place where we think we can hold it, and we are investing in our assets, not overinvesting, but also looking for incremental projects, smaller capital, quick returns. You have heard us talk about that all in the past and over the down cycle, particularly focused on that. And then the growth programs are more incremental. Like we said before, you can see us ramping up CGP3, Greenbushes, for example. At Wodgina, we have got a third train there that when we get to better ore, we can operate that without significant capital. And then we can build. Salar de Atacama, the Salar yield project, is still ramping, but it is going very well and it is generating good data. So we think that is going to really help our efficiencies and recoveries as we go forward. So we have the opportunity to make smaller investments and still get some growth. The bigger ones are to come, Kings Mountain, some other projects, DLE, for example, in the Salar that would give us additional volumes are bigger investments. Those are on things like that. They are not right in front of us, so we will have the opportunity to see how the market responds before we make commitments. Joshua Spector: Okay. Thanks. So just quickly on, I mean, you talked about the $100,000,000 shutdown cost. Can you just go through other pieces? I guess, how quickly is the payback on that cost? And then are there any ongoing basically cost to keep the capacity idle? Jerry Kent Masters: So there are ongoing costs to keep it in a ready state, so to speak, idled. And they are not dramatic, but they are significant cost, and it is something we can do for a period of time. We do not want to, we cannot keep it here forever. But we can keep it here long enough to see if we can bring it back. The market changes and really the change we are looking for is probably a bifurcation where Western prices are different than prices in China. That is really what we are looking for and to see that that is sustainable over time to cover those costs. And the payback on that, I am not going to say exactly what the savings is around that, but it is a reasonable payback. Operator: Your next question will come from John Ezekiel Roberts with Mizuho. Thank you. Could you talk about the differences between China and ex-China lithium market pricing? I know you do not want to discuss your own contracts, but what is the market doing ex-China? Jerry Kent Masters: Well, I will make a broad comment. Eric, you can jump on that if you want. But there is not a big difference. For the most part, everyone wants the China price. There are some circumstances where you can get a little bit of a differentiation, but for the most part and the way it has been for the last several years, it is more or less the same price. There are some incentives in the U.S. where some of that will flow through to lithium from resources outside of China, or material outside of China, but it does not characterize the whole market, I would say. Eric Norris: John, this is Eric just adding. Structurally, you would know that in the past, when China has been a big producer of lithium, the general difference has been the 13% VAT. So price has been about 13% higher outside versus in. That is just a structural difference. I think, however, what Kent is alluding to is important. The market is dynamic, and it is changing. The growth and maturity of the GFEX futures exchange is increasingly becoming the benchmark. Given that it is traded every day, there is great transparency to that number, and one can see it very clearly. And outside of China, people have tended, even our contract relationships, to rely on PRAs, price reporting agencies. And with the dynamic change of what is going on with the GFEX, the challenge is are the PRAs keeping up with that rate of change. So I think there are some structural differences, my first point. Second point is there may be some inefficiencies because of that dynamic with the GFEX going on. John Ezekiel Roberts: And then I think you said you modeled CATL's capacity coming back this year. Could you share when you modeled that back online? Eric Norris: I think we have probably taken an assumption that it is metered in slowly. Again, John, we are talking about 30,000 to 50,000 tons. You look at the scheme of what is the demand growth, supply-demand balance, and where inventory levels are, I do not think it is going to make that much of a difference. Operator: Next question will come from Laurence Alexander with Jefferies. Good morning. Laurence Alexander: First of all, can you discuss whether there is any material difference in contract structures developing between stationary storage and automotive in terms of their degree of emphasis on reliability of supply or consistency of quality control or product formulation. Jerry Kent Masters: Yeah. So for us, the material goes through the same supply chain. So we are selling it into the same supply chain that we do for automotive and we do for fixed storage. Probably the biggest difference is, by definition, all the fixed storage is carbonate. And then hydroxide tends to go to the West, so those tend to be where our long-term contracts are. Carbonate tends to be more on the spot market and the China price. So that is the biggest difference, but it is really driven by the product mix that goes into fixed storage versus there is a combination for the EV market, and it is pretty much all carbonate and LFP for fixed storage. Eric Norris: Yeah. And just a couple of characteristics to add that make it important to maybe get at the root of your question, Laurence. For one, fixed storage is largely carbonate. That is largely LFP, and that is almost entirely China. And carbonate has a pretty harmonized spec. It is closer to being like a classic commodity than hydroxide. Hydroxide has a lot more requirements that the automotive producers put on it for the life of battery and the safety they are looking to get. And as a result, given the challenges of making consistent grade hydroxide, there is much more of a variation across producers. There is a more detailed qualification process there. Some of it is the user, some of it is the chemistry, I guess, is the point. And then Laurence Alexander: just on the, in terms of how you think about the lessons learned about balance sheet management against strategic imperatives or longer term. How are you thinking about the development of solid state as a solution in the battery market? And the potential competitive threats from sodium-ion batteries? Jerry Kent Masters: Yeah. So, ends of the spectrum there. On solid state, it is still lithium, and the driver will be EVs. So the lithium intensity for solid state goes up a little bit, so it gives us a kicker, but it is really driven by the EV penetration and that growth in that. So that seems, from our standpoint, it is a positive. It is going to grow that a little bit, but we are going to, again, we have got time because we do not see it becoming mass market immediately. So we have time to understand, allow the market to mature. We are early, probably earlier than we had anticipated from lithium. We think we have just been through the still immature second cycle since the advent of EVs. So that is from a commodity cycle perspective. So we are still watching that and learning and making sure we understand that. On fixed storage and sodium-ion, we think it is going to be relevant. It will be a technical player in the market, but it still has to develop technically, and it has to scale. So it is not impacting us, we do not think, much this year, in our forecast as we kind of build out the forecast. I think we built early on 10% sodium-ion in fixed storage and that growing to 15% maybe toward the end of the decade. Eric Norris: Just again, to add some context, I think it is important. One, as Kent said, solid state, a good news story. A solid-state battery has 2x the amount of lithium in it that a cell would for a lithium-ion battery. There is some different tech involved. There is a different supply chain involved, so it is going to take a while. Similarly, sodium is going to take a while as well, and that is obviously a drawback, and it is part of the reason we have such a variation in our ESS forecast in the deck that we presented, because there are some things that have to happen. Sodium-ion has to get more energy-dense to be cost competitive with LFP. At the range of prices we shared in these scenarios, LFP is always more cost competitive today than is a sodium-ion battery. So there has to be innovation. We expect innovation to happen. The second is scale, as Kent said. And then the third is it will be limited because in the end, it will never have the volumetric energy density that lithium would, whether that is lithium iron phosphate or lithium metal. So it is limited in storage spaces to where space is not an issue. Eric Norris: Think a cornfield versus New York City. New York City is not going to work so well. Cornfield will work out in Iowa. And then, obviously, EVs has the same limitation. Volumetric energy density is critical for EVs. We see very limited penetration there. So it is different ends of the spectrum, as Kent said, those are all the drivers. Operator: Our next question will come from Vincent Stephen Andrews with Morgan Stanley. Vincent Stephen Andrews: Just thinking through sort of shipments versus consumption. Early in the cycle, there tends to be a reload that helps prices move higher. And ESS obviously is a big driver, and some of the data would show that ESS shipments are moving kind of at 2x the level of ESS installations, which, to a certain extent, makes sense. It is a very growing part of the market. So as it grows, inventory needs to grow in between. But how do you assess sort of where customer inventory levels are and where customer behavior is as prices have gone up and then maybe come off the bottom as you think about what actual demand or consumption is going to be in 2026. Jerry Kent Masters: So, look, there are a couple different supply chains you have to think through. But, I mean, across the board, we think inventories are at a pretty low level. Particularly from a lithium side that is sitting in batteries everywhere. The inventory levels are pretty low. Now we are in the Lunar New Year period, and as we come out of that, that is where we will get information to see exactly what the demand is going to look like this year, but everything seems to be pointing in the right direction. And we see installations on fixed storage kind of continuing the trend and keeping up. We follow that versus what goes in. So the batteries are probably where we ship is probably six months ahead of where it gets shipped to the installation, six months to a year before an installation happens. And we see that reasonably balanced. So it looks pretty real from our standpoint. Vincent Stephen Andrews: That is very helpful. Neal, could I ask you to fill us in on some of the other cash flow statement items on working capital. Just thinking through, you have got higher prices, your inventory is at low levels. But what should the makings of AP, AR, inventories look like in 2026 just given what is happening from a price perspective, both for your revenue and your spodumene cost? Neal R. Sheorey: Yeah. Hi there, Vincent. Thanks for that question. So maybe I will not go through every line of working capital, but I will say, first of all, on inventory, obviously, we saw very strong demand at the end of the year of last year, and we capitalized on that and were able to bring down our inventories a little bit. As you can expect in 2026, our production levels are up. Some of that will go towards restocking our inventories and making sure that we have the right amount of inventory to supply the demand. But in a rising price environment, you do bring up a good point that in a rising price environment, working capital could be a short-term cash flow headwind. The way we think about it is, generally speaking for the company, our working capital balance sits at about 25% of sales. That is usually a pretty good rule of thumb. So maybe that is helpful as you think about, in a rising price environment, how to model the working capital piece. Operator: Next question will come from Joel Jackson with BMO Capital Markets. Joel Jackson: Hi. I just want to follow up on Slide, I think it is 8. So you talk about your sensitivities and your margins. And if you look at Q1, you are talking to $20,000 per ton is about the spot. Right? You said that is what January price is. So should you be delivering mid-50s EBITDA margin in Energy Storage in Q1? Jerry Kent Masters: So you have to consider the lag on the way our contracts work. So we will get the benefit of the current market price on the spot business we do, but our contract volumes all kind of have about a couple of months lag, usually three months lag that works through. So we have to have the opportunity for that to work through our P&L. Otherwise, once we get that, that should be the case. Joel Jackson: Okay. Just following up on that then. So you should have been, if spot price is exactly where it is, just a bad question. And also, just clarifying, Kent, you should be achieving mid-50s EBITDA margin in Energy Storage in Q2. You talk about $4 to $5 a kilo of conversion cost now in Kemerton. Were you talking about that is your absolute cost you see that conversion cost for in Kemerton or Western Australia? Are you saying that $4 to $5 a kilo was how much higher the costs are in Kemerton versus China? Just a two-part second question, I think. Jerry Kent Masters: Yeah. So it was not a Kemerton answer. It was a general broader answer, and it was, like, a $4 to $5 difference between China, adder, I would say. To be clear. Operator: Your next question will come from Kevin McCarthy with Vertical Research Partners. Kevin McCarthy: Kent, I would welcome your latest thoughts on potential to acquire lithium capacity versus build it. It seems to me you have delevered the balance sheet quite a bit. You have got more cash coming in from Ketjen. We are talking about price recovery and positive revisions to ESS demand. So if we zoom out the lens and just think about where you are financially and where we are fundamentally in the cycle, might we see more inorganic growth from Albemarle Corporation in the years to come? Jerry Kent Masters: Yeah. So we would be talking down the road if you are thinking from that perspective because we still have, one, we want to make sure we have got really good footing, understand where the market is going as we go forward, because price has moved up. We just want to make sure that that consolidates, so to speak. And we also have pretty good opportunities within the portfolio for, I would say, incremental growth. It is lower capital than building greenfield facilities. And it is mostly around resources. And then it is incremental capacity at our conversion facilities, whether that is La Negra or in our conversion facilities in China, and then we also have tolling opportunities as well. So I think we have got good organic growth opportunities, but we will look at acquisitions as they come up, but that is not our focus. And we would have to see the right opportunities for that. The right fit at the right price, we would look at it, but that is not really our focus at this point in the cycle. Kevin McCarthy: Thank you very much. Colin Rusch: Rather than acquiring new assets, looking at optimizing your cost of capital on the balance sheet. You are really in a fundamentally different place from a balance sheet perspective, and I am curious about some of the instruments that you have, if there is real opportunities to streamline things. Operator: Your next question will come from Colin William Rusch with Oppenheimer. Yeah. I wanted to just follow up on the cash question. Neal R. Sheorey: Yeah. Hi there, Colin. Thanks for that question. This is Neal. So, yeah, I think one of the key things that we are focused on is making sure that we have the right kind of headroom to navigate through the cycle, and you saw in our capital allocation slide today that in addition to making sure that we meet our dividends, we are also focused on ensuring that we have a strong balance sheet, which is opportunities. So we are going to continue to look at that. If you are looking at other parts of the cap structure, look, the best thing I would say is we evaluate where is the best economic place for us to delever and strengthen our financial profile. And I think our comments today really highlight where we see the best opportunities. I really think the best opportunities are in the deleveraging space. But we do look at all of our options, and certainly, with our cash position where it is today, that is kind of our first and foremost priority right now. Colin William Rusch: Okay. Super helpful. And then, for Eric, I am really curious about customer behavior here. I mean, getting a deposit is a pretty big signal to the market about where folks see overall supply-demand balance on a multiyear basis. As you look at EV versus stationary storage and increasingly robotics end customers, can you talk a little bit about the different behavior and concerns around regional nuances, tariffs, and security of supply chains between those three buckets of customers. Eric Norris: Sure. Happy to, Colin. And it is a very dynamic time to be sure, and I think so much has happened so fast. It is going to be hard to draw hard conclusions right now at this moment. I would say that when it comes to the EV market, it depends on who you are talking to. If you have someone whose market is largely the United States, it is a very different picture than someone whose view is Europe or China. When it comes to grid storage, unanimously, that is an area of interest. Remember, though, that at some levels, it is the same customer to us, depending where we are in the supply chain. Obviously, we do have some contracts with OEMs. The balance of our contracts are with battery producers. We do a lot of spot business with cathode producers. So we see the whole supply chain through different eyes, and the further up you go, the more bullish you get because they are less focused on any specific end market. We have seen a lot of customer dialogues come forward with the rise in prices, but it is way too early to say where that is going to go. I mean, at this point, again, depending on who you are talking to, they have a very different view of their needs. And so we are just going to have to see how that plays out over the longer term in terms of our contracts. But right now, it is just too early to call. Operator: Thank you. That is all the time we have for questions. I will now pass it back to Jerry Kent Masters for closing remarks. Jerry Kent Masters: Thank you, operator. In closing, I want to thank you all for your continued support and trust in Albemarle Corporation. Our strong results this quarter, improved outlook for 2026, and ongoing focus on operational excellence position us well for the future. With our world-class resources, strong track record of cost and productivity improvements, leading process chemistry, and commitment to customer success, we are confident in our ability to create lasting value for our shareholders and seize opportunities ahead. We appreciate your partnership and look forward to connecting at our upcoming events. Stay safe, and take care. Thank you. Eric Norris: This concludes Operator: today's conference call. Thank you for your participation. You may now disconnect.
Operator: Greetings, and welcome to the Cognex Corporation Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone requires operator assistance during the conference, a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Greer Aviv, Head of Investor Relations. Thank you. You may begin. Thank you, operator. Good morning, everyone, and thank you for joining us. Our earnings release was published yesterday after market close and our Annual Report on Form 10-K for 2025 was filed this morning. The earnings materials are available on our Investor Relations website. I am joined here today by Matt Moschner, our CEO, and Dennis Fehr, our CFO. In addition to our usual operational update, we will provide a strategic update highlighting the completed strategic portfolio review, our ongoing operating model transformation, and an update to our financial framework. After prepared remarks, we will open the lines for Q&A. Both our published materials and the call today will reference non-GAAP measures. You can find a reconciliation of certain items from GAAP to non-GAAP in our press release and earnings presentation. Today’s earnings materials will contain forward-looking statements, including statements regarding our expectations. Our actual results may differ from our projections due to the risks and uncertainties that are described in our SEC filings, including our most recent Form 10-K. With that, I will turn the call over to Matt. Thanks, Greer. Good morning, everyone, and thank you for joining us today. Matt Moschner: 2025 marked a return to profitable growth for Cognex. With constant currency revenue growth of 8% year over year, and adjusted EPS growth of 38%. We built momentum throughout the year advancing our strategic objectives while staying focused on long term value creation. Logistics continued to deliver steady growth. Along with strong year end spending across many of our factor automation end markets. Let us start with an update on our strategy. Turning to page four of our earnings presentation. We made great progress in 2025 against each of our three primary strategic objectives. First, we remain committed to leading in AI for industrial machine vision. With nearly a decade of experience in this area, we are building cutting-edge tools that unlock new applications and dramatically simplify the user experience. With our talent and proven track record of delivering breakthrough technology, we are uniquely positioned to win in the AI era. During 2025, we introduced several transformative capabilities that strengthen our AI technology leadership. In January, we introduced the DataMan 290, helping us win share in the competitive ID factor automation market with new AI-enabled auto-setup and advanced code filtering. In March, we launched our In-Sight 8,900, which brings the power of embedded AI to OEM customers. In June, we announced OneVision, bringing deep learning and edge learning together on a single cloud platform and creating new models deployable to embedded systems at the edge. And in October, we introduced SLX, our new solutions experience product line that brings our latest AI vision tools to logistics customers. These product launches strengthen our position within a $3.2 billion of our $7 billion served market, using cutting-edge AI capabilities to deliver greater value for customers and, in the process, gain market share. Second, we remain focused on delivering the best customer experience in our industry. Our commitment spans the full customer life cycle, from initial engagement through post-sales support. Examples of investments in this area include new AI-powered chat assistance on our website, which can answer questions faster, centralizing customer support materials to enable self-service, standardizing the user interface design across more of our vision products, and offering enhanced 24/7 technical support. Third, we aim to double our customer base within five years. We expect to achieve this by continuing to advance our Salesforce transformation, alongside investments in improved lead generation tools, such as a new cognex.com website, which I will discuss in more detail momentarily. This multipronged approach is already yielding strong results as we acquired approximately 9,000 new customer accounts in 2025, three times the rate of new accounts added in 2024. This momentum provides a strong foundation for achieving our five-year target. A key element of our go-to-market and customer service transformation is the launch of our new cognex.com website, which went live in late January. More than a refresh, it fully reimagines how we deliver on our promise of advanced machine vision made easy. This newly designed site is packed with our latest product information, links to technical support, new setup videos, hundreds of knowledge articles which engage customers more deeply at all stages of their journey with Cognex. It also has more advanced, automated tools that allow us to convert customer engagement on the site to high-quality leads for our sales engineers. Now let us turn to Page five. In the fourth quarter, we completed a comprehensive review of our portfolio and have started the process of exiting product lines that generate approximately $22 million of no-growth or low-margin revenue. This includes the divestment of a Japan-focused trading business that was acquired with Moritex, and discontinuing our mobile SDK, Edge Intelligence, and other noncore product lines. We are also taking further actions to drive improvements in our operating model, and in partnership with external consultants, have identified an additional $35 million to $40 million in annualized cost reductions by year-end 2026. As part of this process, we completed a holistic review of our entire cost structure. We remain focused on increasing productivity in key areas such as sales and marketing using new digital tools, software development using AI-assisted code generation, and automating back-office processes while leveraging global value locations for scale and cost advantage. These changes help to simplify our organizational structure and empower Cognoids to do their best work with less overhead. These steps will allow us to sharpen our focus on the core business to support growth, with further expanding margins. Dennis will provide more detail on what this means for our financial framework. Turning to page six, our ongoing Salesforce transformation is a great example of how we are upgrading the operating model of Cognex. The previous emerging customer initiative emphasized adding headcount and deploying easy-to-use products through a stand-alone sales organization. In contrast, our current Salesforce transformation prioritizes making our existing sellers more productive with better CRM tools, a streamlined product portfolio, and a much simpler organizational structure. This transformation began January, when we integrated our sales activities into one organization with three distinct selling styles. We have launched new marketing tools to enhance top-of-funnel lead generation and new management practices which improve lead-to-opportunity conversion rates. Our comprehensive product ecosystem makes learning Cognex products easier and shortens the sales cycle overall. And finally, we are collaborating more intentionally with a global network of systems integrators, machine builders, and service partners to find and fulfill new business more effectively. When year-in, we are seeing both customer growth and sales productivity accelerate, which is very encouraging. More broadly, the announced portfolio optimization and operating model transformation are key drivers of further margin expansion. Taken together, these efforts enable growth and create durable operating leverage across the P&L, which Dennis will now discuss. Greer Aviv: Dennis? Matt Moschner: Thanks, Matt. Dennis Fehr: Let me start with walking through the adjusted EBITDA margin progression in 2025 before I discuss where we go from here. Turning to page seven of the earnings presentation. The margin progression from 2024 to 2025. We ended 2025 with an adjusted EBITDA margin of 20.7%, excluding the onetime benefit from the commercial partnership. We achieved our first milestone, reaching greater than 20%, a full year ahead of plan, driven by focused execution and strong cost discipline. As we shared at Investor Day last June, our largest lever for driving bottom-line profitability is OpEx efficiency, which is where I want to begin. Over the past year, we have been laser focused on driving organizational efficiencies throughout Cognex. We achieved $33 million of gross cost reduction, which was partially offset by $11 million of incentive comp dollars, $4 million of FX headwinds, and $10 million of wage adjustments, resulting in a net reduction of $8 million. Regarding COGS productivity and pricing, we saw 2024 pricing headwinds, especially in China, are fully reflected in the 2025 P&L and are partially offset by favorable volume change. Organic mix was favorable for the year. However, we do not anticipate the full extent of this favorability to recur in 2026. Taken together, we are pleased with the progress made this year on adjusted EBITDA margin expansion. And as Matt mentioned, we will execute additional initiatives in 2026 as we work toward our next milestone. Moving to page eight. Building on the actions already completed, we are setting our next milestone at a 25% adjusted EBITDA margin, targeted on a run-rate basis by the 2026. The path to 25% is anchored in three key levers. First, OpEx efficiency. We expect to realize an additional $35 million to $40 million of identified net cost reductions, excluding FX, in 2026. Second, organic mix. The announced portfolio optimization will improve mix and partially offset the nonrecurring favorability seen in 2025. And third, COGS productivity and pricing. With 2024 pricing headwinds fully reflected in the P&L, and ending 2025 as pricing stability, we are well positioned to turn pricing into a tailwind. Turning to Page nine. Considering our strong momentum of margin expansion, we are updating the financial framework we introduced at our Investor Day. We are raising our through-cycle adjusted EBITDA margin range to 25% to 31% from the prior 20% to 30%. Our through-cycle revenue CAGR remains 13% to 14% and we continue to expect greater than 100% free cash flow conversion. This updated financial framework reflects our Greer Aviv: execution. Dennis Fehr: And durability of the margin expansion we are driving. As we further progress on our margin expansion journey, we will continue to evaluate our margin ambitions and will update this framework accordingly. Let us turn to the operational update with our financial results. I will begin with a review of our fourth quarter results followed by an update on our performance for the full year. Starting with the financial highlights of the fourth quarter, Page 11 details our performance on three key financial metrics. One, adjusted EBITDA margin was 22.7%, representing an increase of 420 basis points year over year, the sixth consecutive quarter of year-over-year expansion. Matt Moschner: Two, Dennis Fehr: adjusted EPS increased 35% year over year, the sixth consecutive quarter of year-over-year double-digit EPS growth. And three, our trailing twelve-month free cash flow conversion rate reached 138%, meeting our target of greater than 100% for the fifth consecutive quarter. Our disciplined focus on cost management and profitable growth ensured that this quarter’s strong revenue performance translated into meaningful EPS growth and robust free cash flow. Turning to the income statement on page 12. Revenue increased 10% year over year and 9% on a constant currency basis. Looking at the geographic revenue trends on a year-over-year constant currency basis, Americas revenue expanded 11%, led by strong end-of-year demand in packaging and continued growth in logistics. Europe grew 13%, driven by strength in packaging. Greater China revenue increased 7%, driven by growth in consumer electronics and semiconductor. Other Asia revenue was flat in the quarter, as growth from the consumer electronics supply chain shift was offset by semiconductor, against a very strong comparable. Staying on Page 12. Adjusted operating expenses increased 5% year over year and 2% on a constant currency basis, reflecting ongoing cost discipline offset by incentive compensation headwinds in the quarter. Looking forward, as we continue to drive cost efficiencies across the organization and incentive compensation already reset in 2025, we are confident to achieve the OpEx reductions discussed earlier and continue strong margin expansion in 2026. Driven by revenue growth and favorable mix, adjusted EBITDA margin reached 22.7%, well above the upper end of our guidance range. GAAP diluted earnings per share were $0.19, up 18% from a year ago. Adjusted diluted EPS was $0.27, representing 35% year-over-year growth. This strong EPS performance was driven by robust revenue growth, disciplined cost management, and a lower diluted share count compared to last year. In the fourth quarter, we recognized a $5 million gain on the sale of a property on our Natick campus that previously served as our training center. We are consolidating ongoing sales training into existing space at that campus, which allows us to further rationalize our real estate footprint. In addition, we recorded a $30 million E&O charge following a reserve update aligned with our strategy to focus on select products. Both items are excluded from our non-GAAP results. Next, I will cover our full-year 2025 results, both as reported and excluding the onetime benefit from the commercial partnership. Starting with the as-reported results on Page 13. 2025 revenue of $994 million increased 9% year over year and 8% on a constant currency basis. Adjusted EBITDA margin of 21.5% expanded 440 basis points, and adjusted EPS increased 38% year over year to $1.02. Turning to page 14. I will now cover the underlying business performance, excluding the onetime benefit of the commercial partnership. Revenue of $982 million increased 7% year over year as reported and on a constant currency basis, marking the first year with substantial organic growth since 2021. Adjusted EBITDA margin of 20.7% expanded 360 basis points driven by revenue growth and disciplined cost management, marking the first year of margin expansion since 2021. Adjusted EPS increased 31% year over year to $0.97, reflecting the strong operating leverage on the business. We generated $237 million of free cash flow in 2025, the highest since 2021 and up 77% year over year. Trailing twelve months free cash flow conversion was 138%, comfortably above our greater than 100% target. We continue to drive working capital efficiencies in 2025, with our cash conversion cycle improving 57 days year over year and 116 days from the 2023 peak. Turning to capital allocation. We returned $206 million to shareholders in 2025, including $151 million of share repurchase. As of December 31, we had approximately $150 million remaining on our current share repurchase authorization. Yesterday, our board approved an increase of $500 million to the existing authorization. We intend to continue to be opportunistic with buybacks. Longer term, we remain committed to capital returns as a core pillar of the disciplined capital allocation framework we outlined last June. We ended the year with $642 million in net cash and investments, providing flexibility to pursue accretive growth opportunities while continuing to return excess capital to shareholders. Now Matt will discuss our vertical market performance for the year. Matt, Matt Moschner: Thanks, Dennis. Let us review current trends across our key end markets as shown on Page 15. Please note that my discussion on 2025 end market performance excludes the onetime benefit from the commercial partnership. Although the macroeconomic backdrop remains uneven and geopolitical uncertainty persists, in 2025, we saw momentum in consumer electronics, logistics, and packaging. Automotive remained soft. Starting with logistics. 2025 was another very strong year, with double-digit revenue growth led by large e-commerce customers. We are driving strong adoption of our standardized machine vision tunnel, and layering new vision applications on top of code reading, increasing the ROI for customers. Looking ahead to 2026, after two years of outsized growth we expect more moderate growth in the mid- to high-single-digit range. Longer term, we believe logistics can be our fastest growing vertical with growth in the mid-teens through cycle. Next, let us talk about packaging. Packaging delivered solid high single-digit revenue growth in 2025. As a large underpenetrated and less cyclical market it remains a priority. Our Salesforce transformation and AI-enabled product ecosystem position us to capture incremental opportunities and deepen penetration. For 2026, we expect mid- to high-single-digit growth as we bring more machine vision into packaging. Turning to consumer electronics. Revenue grew double digits in 2025 as the market emerged from a prolonged down cycle. We see continued upside from ongoing supply chain shifts, new device form factors, and a consumer refresh cycle. For 2026, we expect high single- to double-digit growth driven by a continuation of these trends. Next is automotive. The automotive market remained challenging in 2025, with revenue down high single digits, in line with our expectations. Looking at the sequential development, we believe the market has reached a bottom and expect 2026 to be flat to low single-digit growth. Longer term, we see attractive opportunities for additional penetration as customers prioritize improving vehicle quality and reducing operating costs. Finally, in semiconductor, 2025 revenue grew mid single digits ahead of our expectations. For 2026, we expect back-half weighted growth with full-year expansion in the mid single- to double-digit range, supported by the AI-driven investment cycle and reinforcing our confidence in this market. Our deep relationships with leading semiconductor equipment manufacturers position us well for continued growth. Let me pass the call back to Dennis to discuss our outlook. Dennis Fehr: Dennis? Thanks, Matt. Moving to page 16. I will now review our financial guidance for the first quarter. In Q1, we expect revenue to be between $235 million and $255 million, representing growth of approximately 13% at the midpoint against a weak comp. Adjusted EBITDA margin is expected to be between 19%–22%, with the midpoint representing an increase of 370 basis points year over year. As discussed previously, please note that Q1 2025 OpEx benefited from FX and stock-based comp tailwinds that will not repeat this year. Adjusted earnings per share are expected to be between $0.22 and $0.26, with the midpoint of this range representing 50% year-over-year growth. In summary, 2025 marks a year of substantial turnaround, with our top line growing organically and our margins expanding, both for the first time since 2021. We exited 2025 with strong momentum across most of our end markets, and that strength has continued into 2026. As a short-cycle business, we have limited visibility and we therefore remain focused on our priorities, including continued disciplined cost management, a streamlined portfolio, and transforming our operating model. These actions position us to drive profitable growth, maximize free cash flow, and allocate capital with rigor to create long-term shareholder value. By the numbers, we are targeting a 25% adjusted EBITDA margin run rate exiting 2026 and at least 20% adjusted EPS growth, underscoring our ambition to significantly expand bottom-line profitability. Now Matt and I are ready for your questions. Operator, please go ahead. Operator: Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We do ask that you please limit yourself to one question and one follow-up. Again, that is star 1 to register a question at this time. First question is going to be from Joseph Craig Giordano of TD Cowen. Please go ahead. Dennis Fehr: Good morning. This is Michael on for Joe. Hi, Michael. Good morning. Matt Moschner: Thank you. Thank you for taking my question. Just a two-parter here. So just Unknown Analyst: wanted to dive a bit deeper on the $22 million revenue divestments. Could you just frame out the timing of when this should be expected? And, you know, how is that, you know, if that is included in the guide, as well. And then just have a quick follow-up to that. Dennis Fehr: Yep. No. Happy to do that. So maybe first, focusing, like, key takeaway on here. Right? It is really all about focusing on noncore or getting out noncore product lines, which do not have growth or low growth, and which have low margins. So in that regard, it is really focusing on improving the revenue mix and helping in that regard to offset some of the onetime favorability we have seen in 2025. Majority of that revenue which we are exiting is related to that Japan-focused trading business which we acquired along with Moritex. We are currently expecting to close that transaction by the end of the or within the second quarter. So that means you would start to see that in the second half of this year. Keep in mind that exiting that revenue will change a bit the mix of the end market. Right? So the majority of that revenue would come out of the packaging vertical. And a smaller portion would come out of the logistics vertical. So in that regard, keep in mind when you model to reduce these two verticals, whereas the growth expectations Matt stated or the initial view on these growth expectations in these vertical markets basically would remain unchanged, on that lower base. Unknown Analyst: Great. That is helpful. And just a quick follow-up to that. Can you just give us a better understanding how the company determines what is considered core versus noncore. For instance, like, things like Edge Intelligence were a highlight of the Investor Day a couple years ago. So just would love to better understand the framing behind these priorities. Thank you. Matt Moschner: Yeah. Thanks, Michael. Yeah. This is Matt. This is a process that we started almost a year ago as we really thought about where do we have advantage. Right? We start with, you know, where do we have core IP, core skill, you know, a deeper understanding of a certain application area is really the foundation of what we would define as core. And then, you know, we look at other, you know, financial metrics that Dennis mentioned, really, what is the size of that market? What is the growth potential? What is the relative profit pool? Profitability, and our ability to capture those profits. You put those things together, and you put them really in the context of each other, as part of a portfolio of Dennis Fehr: activities, Matt Moschner: and, you know, I think what you quickly see are those that, you know, a, we have maybe a stronger right to win, and then, b, perhaps a weaker financial trajectory. So that is how we did it, right? We have a pretty clear framework as to how we do that. And I think you are seeing in the results of that work from last year in these results. Operator: Thank you. The next question is coming from Joe Ritchie of Goldman Sachs. Please go ahead. Dennis Fehr: Good morning. Hey. Good morning. So Matt Moschner: yes, so my first question is on the cost reduction program for 2026. Dennis, maybe as you kind of think through the bridge for EBITDA margin expansion for the year, what are kind of the offsets we should be thinking about for 2026 to this cost reduction plan? Or and then also, how do you see that progressing as the year goes along? Dennis Fehr: Yeah. No. Absolutely, Joe. So, right, I mean, we mentioned at the Investor Day last year that the largest lever is OpEx efficiency. And I think we really followed through on that in 2025 as we outlined in the walk for 2025, and then that enabled us at the end to hit the greater than 20% adjusted EBITDA milestone a full year ahead of Joe Ritchie: time. Dennis Fehr: Now looking at 26, clearly, it is, again, the largest lever which we have. And then coming to your question, basically, what would be offsetting effects? It is on the mix side. Right? So I mentioned in the prepared remarks that we saw favorable, call it, onetime effects in mix in 2025. You are partially reducing that headwind with the portfolio optimization, which we do, but it is not fully offsetting that. So really the headwind which we see is on the mix side. And then we would see perhaps, as we mentioned as well, some favorability from pricing, but I would say that it is probably really a smaller piece of the equation. Really think big picture about 26. It is more OpEx efficiency partially offset by mix. Matt Moschner: Got it. That is helpful, Dennis. And then, Matt, just a question for you. Look. It seems like you are getting a lot of traction on your customer growth initiative. And it sounds like lead generation is certainly improving. Can you just maybe double-click on what has changed over the last six to twelve months? And then as we move forward, you know, seems like you are seeing a lot of that opportunity on the packaging side of the business. Would you expect that to maybe broaden across your other end markets as well? Yeah, Joe. Happy to. Yeah. No. For sure, we are seeing great momentum in our ability to acquire new customers. I would maybe take a step back. In these earnings, we really wanted to showcase the work we have been doing on our Salesforce transformation. And I really cannot overstate how significant of a transformation that is to our go-to-market. There are really four pillars, as we highlighted on the slides, which is it is a brand new organization. Right? What we had was more of a fragmented structure where we have combined and standardized how we structure our teams around the world. That has been huge in terms of driving productivity, segmentation of activities, and cross-selling. The second is process, right? We have made huge investments over the last many years in business systems to really kind of digitize Cognex. We are seeing those pay off, as we are able to arm our sales team with better data, better leads, better prospecting tools, better lead conversion metrics. So process is key, and we are, again, standardizing those with things like dashboards and things you would expect. Product. Right? We have been working hard on our product portfolio and we use this word ecosystem. And I want to encourage us all to think of that as not lip service. Right? That is really a deliberate effort to drive consistency in the user experience of our products. That helps us train our sales team. That helps us sell the full portfolio with fewer people and less complexity. That is paying off. The fourth is partners. Right? We have really doubled down on how we work with and collaborate with the world’s leading systems integrators, OEMs, and service partners. And you put those four things together, org, process, product, and partners, on one hand, dramatically different from where we were, let us say, even two years ago with emerging customers, but you have to get really all of those four right, and I think we are. We have a great leadership team in our sales organization right now. Karl Gerst came out of products and is now leading global sales as of a year ago, and he is really moving fast with an ambitious agenda and has a great team behind him. And I think you are seeing those results, you know, one year later. And, you know, quite frankly, we saw those even a bit earlier last fall, and the results are an acceleration of our customer acquisition. But it is also our ability to be much more flexible to your question on packaging, how we direct our sales activities as we see opportunities across the end markets. Right? If we continue to see weakness in one and we see strength in others, we have tremendous flexibility now, maybe more so than we did in the past, to redirect our sales activities towards those high growth areas and then actually the data to be able to show that it is working. So it is a longer answer to your question. I really cannot overstate the impact of our Salesforce transformation and the leadership that we have in place at the top of that organization. That is great. Thank you very much. Operator: Thank you. The next question is coming from Jamie Cook of Truist Securities. Please go ahead. Hi, good morning. I guess two questions. One, just on the organic top-line assumptions for 2026. Dennis, if you could provide any color, it looks like we should expect sort of mid- to high-single-digit growth organically. But I guess, the bigger question within that is with some of the success that you are seeing on the Salesforce transformation, you talked about adding 9,000 customers in 2025 versus ’20 versus 3,000. I do not remember when that was. But just are we starting to factor in more market outgrowth, and should we do that 2026 given some of the successes? And then I guess my second question just back on the portfolio optimization and the announcements you have made this quarter, I mean, where are you in this process? Is this, like, the first inning of the ballgame and there is more to come? Or we feel like we have, you know, fully identified sort of the noncore low growth product lines? Thank you. Dennis Fehr: Yes. Thanks, Jamie. Let me start with your first question. So maybe first, let me clarify, right? We are not providing a full-year guidance. I think what we try, in the sense, in the spirit of providing transparency to the investor community, we try to provide a view from today’s angle based on data which we have available. Right? So we talked on the last earnings call about, like, hey, what are PMI data suggesting? And it certainly continues looking both at data which we are seeing in our business as well as macro factors. So in that regard, I would say we are certainly encouraged by what we have been seeing towards the end of the year 2025 where we saw that strong year-end demand. And some of that turned into revenue in the first quarter in 2026 and helps with basically that growth in the first quarter against the weak comp. So and at the same time, we also saw some PMI uptick happening just in January. So these are certainly encouraging data points. But at the same time, clearly, I want to say, these are not yet a trend. Right? So in that regard, we keep mindful about what we see and that we certainly would want to see certain more data points to either update our view to perhaps the high single digits, and in that regard, I would say kind of that mid-single to a high-single-digit range is kind of what we would say from today’s perspective. But, again, we are a short-cycle business. Things can change fast. So we want to provide kind of a continuous update on what we see, but it is by no means a full-year guide. Matt Moschner: Yeah. No. I would, Jamie, if you allow me to take the second one, which is where are we, particularly as it relates to the portfolio optimization. I would say these things do not happen overnight. We really have been working on this since almost a year ago, even well before the CEO transition, where we put teams in place to really look hard at the portfolio and I think we took a very thoughtful and rigorous approach to that. And you are seeing the fruits of that work. And so in that vein, I would say we are very much sort of at the end of that cycle of analysis. And I think you are seeing the announcements of those ideas. So yes, as it relates to the portfolio analysis. That said, I think as a products-oriented company, there is always work to do in making sure that your portfolio is fit for purpose and that it lets you run the company efficiently. There probably is more work we have to do just generally speaking on cleaning up things like SKUs that really do not need to exist and eliminating complexity in other areas. I consider that more just work to be done and less of sort of a strategic thing that we did. And so you might see the effects of that trickle out through the rest of the year. But as it relates to the portfolio optimization, I think what we are announcing today is towards the end of that process. Jamie Cook: Great. Thank you. Operator: The next question is coming from Andrew Edouard Buscaglia of BNP Paribas. Hi. Good morning, guys. This is Brooke on for Andrew. Was wondering if you could go a little bit deeper into the end markets. You mentioned momentum in logistics and consumer electronics. For CE, what is kind of driving the demand there? I know you mentioned a refresh cycle. Maybe some form factor on your devices. And for logistics, momentum, is that currently more greenfield or brownfield? If you could just give a little bit more detail into what you have been seeing in the conversations you have been having. Matt Moschner: Yeah. Sure. Hey, Brooke. Thanks for joining us. Yeah. I will go deeper on CE and logistics. For sure. Consumer electronics, as we really started to highlight at the tail end of last year, I think we are seeing encouraging growth trends and really more broad-based and that is certainly exciting. And I think consumer electronics as an industry plays very much to our strengths in technology. These are very demanding applications that require precision and the highest levels of quality given that many of these devices are quite expensive and have high price points in the market. And so we see a lot of those customers, both end users, the product owners, as well as the systems integrators, really favor Cognex. But there are many underlying trends that are supporting that growth. Certainly, the shifts in the supply chain, outside of the traditional manufacturing locations of China to Greater Asia, ASEAN, India, even other parts of the world. And given the global company that we are, I think we remain a strong partner to enable those geographic shifts as they happen. New vision capabilities, we brought to market some pretty transformational AI tools last year, specifically designed for consumer electronics. I think we are seeing those play out nicely. Consumer demand. Right? Consumer demand is very strong for these sorts of devices currently. A lot of that is driven by some of the new AI features that are being brought to consumer devices that are very exciting and driving maybe a refresh cycle that we have not seen for many years. And then last but certainly not least, you know, we are seeing new form factors. Again, particularly as consumers want to interact with the latest AI software tools, we are seeing technology providers really experiment with different form factors, whether it be foldable phones, glasses, pendants. And so, you know, these are devices that get made in the millions, the hundreds of millions, with extreme precision and high quality. And that is just such a good place for Cognex vision to play. So that is consumer. I think on logistics, again, very exciting market for us. We are capping our eighth quarter of double-digit growth, which is, I think, a testament to our commercial efforts and our sales team that sells into this market, but obviously, our technology. As you would expect, we are starting to get into territory of tougher comps. And in all of our markets, we kind of expect growth to moderate after such a long stretch of outsized growth, and we are seeing that. But I will tell you, I remain optimistic about logistics. We have great relationships. We have a great team in place. We have great technology. And there are just huge white spaces that I think we are starting to tap into, particularly with product like the SLX as we start to dive deeper into the vision for logistics, which is really enabled by AI. And so you put those things together, and I think this year, we are suggesting it might be a bit of a lower growth year on logistics. I think it is still early to see how that plays out. But long term, I think we feel very, very strongly and excited about the logistics market overall. Hopefully, that answers your question, Brooke. Andrew Edouard Buscaglia: Yeah. Thank you. That was super helpful. And then just to follow-up, just an update going into 2026 on your capital allocation priorities. Your free cash flow has been very strong. Is there any update on M&A or acquisition targets? Dennis Fehr: I, yeah. See, in general, the capital allocation priorities remain unchanged versus what we presented at Investor Day. Certainly, we are very pleased with the strong cash flow generation which we had, especially in 2025, 77% up. What is really driven on the one side by driving bottom-line profitability, at the same time also by optimizing the working capital. Now looking forward, I would say probably right where we are, where we want to be on working capital. Right? So cash conversion cycle somewhere in that 150 to 155 days, really where we feel like it is a really good point for us as Cognex. So in that regard, probably we will see a bit less of contribution to the free cash flow from working capital Andrew Edouard Buscaglia: capital Dennis Fehr: optimization. And then at the same time, we think we can definitely still achieve the greater than 100% free cash flow conversion rate within 2026. So in that regard, still looking forward to a strong year of cash conversion, but more rooted in margin expansion than in working capital reduction. And, yeah, clearly, similar capital allocation priorities than previously communicated. Andrew Edouard Buscaglia: Okay. Thanks for the update. Operator: Thank you. The next question is coming from Ken Newman of KeyBanc Capital Markets. Ken Newman: Congrats. Matt Moschner: On the solid execution this quarter. Ken Newman: Hey, thanks, Scott. First, Matt Moschner: hey, thanks. Maybe first question for you guys. Dennis, it does not seem like you guys are seeing any impact from higher memory costs but I just wanted to clarify if there is any cost increases that are embedded within the guide. And maybe just if you could remind us Unknown Analyst: the percent of COGS memory intensity. Matt Moschner: Yeah. Thanks, Ken. We do not disclose specifics around memory pricing, but I would say we do not expect any material impact from increased pricing tied to those supply chain issues. I would say we are pretty good at managing this. We really put teams in place many years ago when we saw a tightening of the supply chains on the tail end of COVID. We had some supply chain issues ourselves that have really forced us to double down and take many steps into our supply chain. And I think our ability to manage disruptions like this is really very strong, I would say world class. We have great relationships with our suppliers and we keep very close to what they are seeing in the market. And so I would not say that we are seeing increased memory prices affecting our business. We are seeing them. And I would say, not going to really give what percentage of memory is our bill of material, but I would say it is not an overly significant portion. And I would not say that we have experienced really any material procurement issues today. So we will keep an eye on it. But at this point, I think we feel comfortable that we have the tools to manage it and that it is already reflected adequately in our forward guidance. Unknown Analyst: Got it. Thanks, Matt. That is very helpful. Matt Moschner: And then for my follow-up here, just wanted to clarify. Is there any way to help us think about the cadence of how we should expect to realize that $35 to $40 million of cost benefits? Is that just an equal-weighted type of benefit through the year, or does some of that hit a little heavier in the first half? Dennis Fehr: Yeah. No. Fully understand the question. So clearly, we are focusing on executing a good majority of that in the 2026. So that means we would start to see some of these effects show up more towards Q3 of this year, and then perhaps a smaller portion towards the end of this year. In that regard, yeah, start to look for effects in the third quarter. And in general, I think as mentioned before, that really would set us then up for this adjusted EBITDA run rate of 25%. And maybe let me elaborate a little bit more on that one. So first, it is very clearly its run rate as we exit 2026. It is not a full-year number. Right? So in that regard, it is probably pretty much what we have been saying before about how we think about margin expansion in 2026. I think, really, the message we want to give is that there is durability and that we have confidence in the margin expansion and that this will continue and can continue, also into 2027. In that regard, take that comment mostly about, like, 2027 can have another increase or another year of margin expansion and that we are not done in 2026. Ken Newman: Great. Thanks. Operator: Thank you. Our next question is coming from Tommy Moll of Stephens. Please go ahead. Dennis Fehr: Good morning and thank you for taking my questions. Tommy Moll: Hi, Tommy. Hey, Tommy. Dennis Fehr: Automotive looks like it is going to move from red to green in 2026, which is nice to see. What context can you give us there in particular by geography, maybe starting with North America? Just the latest and greatest on the demand side and the conversations you are having. Thank you. Matt Moschner: Yeah. Sure. As you mentioned, Tommy, as we have said before, you know, it is very much a geographic story. And that story tells differently in each area. So you ask about the U.S. and the Americas. What I would say is I would characterize it as an area where we are seeing relatively more activity and strength. Right? We are having good discussions with all the major OEMs. You would have seen them really try to cleanse their P&Ls of previous investments in the EV, and I think that is giving them flexibility to really think about the next iteration of powertrains. And those next generations are both perhaps a different powertrain, but also certainly a more connected car. And so, yeah, we are having those discussions with them, and there is quite a bit of activity that we are seeing start to come back in the U.S. Maybe, if you do not mind, I will move on to Europe and Asia. In Europe, for sure, it is where we see the greatest level of weakness and where the recovery seems to be slower. In Europe, just to build on some of my prior comments, we are shifting our sales activity to other verticals in Europe so that we can compensate for that weakness. But nonetheless, that is where it is. And in Asia, it is a bit mixed. I would say it is very much OEM dependent, whether you are talking about the Japanese OEMs, the Korean OEMs, the Chinese OEMs. And so we are staying close to all of them. And I would say both their investment levels, their powertrain choices, you know, are different. So we are trying to keep Asia as a bit more mixed, and hopefully, we can provide some more clarity as the year goes on. Hopefully, that is helpful, Tommy. Tommy Moll: Yes. Thank you, Matt. Dennis Fehr: Dennis, I wanted to ask about the raised through-cycle EBITDA margin expectation. Tommy Moll: Several Dennis Fehr: percentage points, if I just look at the midpoint from your Unknown Analyst: Investor Day versus the update you provided us today. If Dennis Fehr: we think about the bridging items there, is it as simple as Tommy Moll: you gave us three bullets under transforming the operating model that Dennis Fehr: net to the $35 to $40 million annualized. Is that the bridge? Or are there other operational changes that you have made to give confidence in that raised Unknown Analyst: through-cycle expectation? Dennis Fehr: I mean, yeah, I think the bridge is really what we showed at Investor Day, so we are not really changing compared to what we said at Investor Day. Our strongest lever is the OpEx efficiency. And, right, we provided a target value for each of these buckets, and we are striving to achieve those. I think really what has had us change to Investor Day is that we reached our first mile. Right? And I think as a company, as a leadership team, we are quite encouraged that we achieved our first milestone a full year ahead of time, and that basically kind of drove us now to say, like, let us take a look at the next milestone. So in that regard, nothing changed in the bridge in the way how we want to get there. It is really all about having hit the first milestone, and let us look at the second milestone. And the key levers to achieve the second milestone is really the cost optimization which we have announced combined with the portfolio optimization as well. Yeah. And, Tommy, I would just say, Matt Moschner: you know, anytime you think about being more efficient, reducing costs, it is easy to say, oh, you are just taking capacity out. And there were elements of that, right, where maybe we would have invested in capacity a little too far ahead of growth. But the other two areas that you have to look is portfolio. We are doing that. You are seeing those as artifacts in today’s earnings. But the biggest and the hardest is changing the operating model. And I think if you just read the newspaper, there are just so many opportunities to be more efficient, be more productive. And that is really, I would say, where we go next and where you start to see more outsized benefits on efficiency over the longer term, right, where you can be more productive and automate more and do things more efficiently. And I think as an AI-first organization, I think we are embracing, I would say, a lot of the state of the art that is happening, not just in how you engineer products and do software development, but how do you interact with customers and how do you generate leads and how do you provide excellent tech support in more efficient ways. And so I think on that end, when it comes to operating model efficiency, we are probably earlier in our journey. And so you put those three things together and I think we have a lot of conviction at least the ’26 numbers that we are just, rest assured that we are not settling. We are continuing to think about the longer term and how we would be a more productive, efficient organization. Tommy Moll: Thank you both. I will turn it back. Thanks, Tom. Operator: Our next question is coming from Piyush Avasthy of Citi. Piyush Avasthy: Good morning, guys. Dennis Fehr: Congrats on the great quarter. Piyush Avasthy: Thanks. Just following up on the, you know, last question, like, Dennis Fehr: you know, the AI-assisted coding for software development, like, you know, I know, like, at your Investor Day, you kind of had talked about R&D being, like, going to, like, low teens as a percentage of sales from, like, close to mid-teens that you reported in ’25. But seems you are, like, this integration can really help you reduce the timeline to lower the R&D. Is that true or we should not get that too excited yet? Matt Moschner: If you just let me give you, bear with me, I am going to give you a longer run at answer. You know, Cognex, you know, we take pride in our customers expect from us market-leading technology and capability, and we will continue to deliver that. And, you know, our ability to move the market and invent is very much driven by our investment in our world-class engineering organization. And so, you know, I do not want anyone to misconstrue the comments that I am about to make as us retreating from that objective, because I think we really want to be the gold standard and push the market forward to be the best in the emerging technologies that we know can help industrial machine vision. But for sure, you know, there are just so many ways to be more efficient and more productive when it comes to technical design. And that is not just software. I would say it is also hardware, and we are pushing on both. But we are years into using these tools, particularly as you mentioned on the software AI-assisted coding angle, and as we all see from the headlines and recent news announcements, those tools just keep getting better. We have an organization and a culture that embraces change and particularly as it relates to advanced AI, I would say. And so, yeah, we are, and we are doing it, I think, in the right way. Piyush Avasthy: Because Matt Moschner: we need to make sure that when we ship products, they have the utmost quality and security. And so there is a fine line you have to balance on all these things. But I think we are fully utilizing. I think it is still early days in terms of what the full potential is, and it is not just about software. I think it is really full stack. How we design and how we do more with the same or maybe slightly less heading into the future. Piyush Avasthy: Got it. Very helpful. And this is, like, following up on, like, Jamie’s question. Like, your 2026 view, again, you guys said, like, mid-single-digit to high-single-digit range. But if I look at your Q1 2026 top-line guidance, you are kind of suggesting 13% top-line growth. So are there any larger projects or one-timers in Q1 that is helping growth in the quarter? And do you expect the growth to decelerate as we move through the year, or is it just the limited visibility and you guys are being a little bit more prudent? Yeah. No. I understand the question, Piyush. I think two things. On the one side, Q1 is still driven by some of the year-end spending we saw in 2025. That means just like revenue comes into the first quarter instead of being recognized in the fourth quarter. And then I really want to say that keep in mind that Q1 2025 was a weak quarter where we saw at that time a lot of logistics demand being pulled forward into Q4 2024. In that regard, that is a bit like this mix that this time we see kind of a reverse of shifting from quarter to quarter. Right? So last year, it was moved from Q1 into Q4, and this time, we see moves from Q4 into Q1. And that makes this 13% probably look a little bit larger than what it is. So in that regard, not expect things like, hey, there is a deceleration of things, but clearly, there is kind of this underlying timing effect, which kind of Piyush Avasthy: maybe Dennis Fehr: may make it look like that. But in general, we will have our typical seasonality with Q2 and Q3 driven by consumer electronics, so stronger quarters there. Then certainly, we cannot say how we think about Q4 this year, whether we would see a similar effect on year-end spending like in Q1 2025. That is just much too early to talk about that. So in that regard, it comes back to what I said before. We certainly are encouraged by that spending, by seeing the PMI coming up. But let us see more data. Let us see more data points. Let us see more trends. And at the same time, we will control what we can control, and that is our cost basis and our portfolio. And going hard after these topics, and that gives us the confidence in our margin expansion. Appreciate all the color, guys. Good luck. Piyush Avasthy: Thanks, guys. Thanks. Operator: Thank you. The next question is coming from Guy Drummond Hardwick of Barclays. Please go ahead. Matt Moschner: Hi, good morning and congratulations on the Unknown Analyst: on the great results. Matt Moschner: Looking at your outlook, your initial outlook slide for 2026, looks like on a weighted average basis, Guy Drummond Hardwick: your end market growth is sort of Jairam Nathan: mid- to high-single digits. First off, is that fair? And I apologize because I joined the call late, but the $22 million of divestments, is any of that reflected in the Q1 guidance? And how should we be treating that as excluding as net of organic growth for this year? Or like a business divestment? Dennis Fehr: Yeah. So a few thoughts here, Guy. So first, yeah, probably like that mid-single to high-single-digit is a fair statement on an initial view. I said earlier in the call, again, we are a short-cycle business, all driven about what we see today. That view could change. PMIs could change. Data could change. Business trajectory could change. So it is not a guide. It is just a view of what we see from today’s perspective. And then towards the question of the revenue exit. So there is some divestment included in there in regards to the Japan-focused trading business, which we think will can close in the second quarter of this year. And then think about how to apply some of these growth rates. A very simplistic statement is take the 2025 revenue numbers, subtract the $22 million of exiting business and apply the growth factors on top of it. That is maybe the very simple statement. You may do a little bit timing adjustments there, but that is kind of how we thought about it when we put out that slide. Guy Drummond Hardwick: Thank you. Operator: Thank you. Excuse me. The next question is coming from Jairam Nathan of Daiwa. Please go ahead. Jairam Nathan: Hi, thanks for squeezing me in here. So Kevin Samuel Wilson: Matt, Cognex is, you know, has all this I think, done a good job in entering markets ahead of everyone else, like logistics. And it looks like, so I am just trying to understand what opportunities could you have with physical AI. There seems to be a lot of focus on sensing, and vision is a key part of that. Things like AMRs, humanoid robots. So I am just wondering if there is, do you see any opportunities in terms of physical AI? Matt Moschner: Sure. Yeah. We are probably the oldest physical AI company in the world. We have been, yeah, we have been giving robots eyes, the ability to perceive the world around them, for about 44 years. And that gives us a lot of strength. We know those applications really well, but your question is really more about adjacencies in new markets. Yes, as an organization, we have a very good way of looking at those things, evaluating them, and understanding if we have a strong right to win in them. We like the five verticals, the market verticals we participate in, and we see tremendous growth to continue to expand in those verticals. I think we are not the share leader in every geography, market vertical, or product segment. We aim to be. And so that is our top priority, is winning the core. But as it relates to new markets, you know, we are looking at, you know, what is the future of automation in these massive data centers that are going to be built out over the next several years. You know, there is a resurgence in investment in defense in particular, in aerospace, particularly in parts of the world like Europe, as those industrial bases come back to life. And these are highly engineered parts that require the highest levels of quality and precision. And so, you know, we are certainly looking at potentially aerospace and defense as a market that could come back to life in a way it has not been in many years. And then certainly robotics, like you mentioned it. And we have been serving the robotics market for decades, I would say. Maybe not in the way that, you know, we are seeing today with humanoids, but much more as it relates to high-speed in-line manufacturing. We have done that in consumer electronics. We have done it in logistics. We have done it in automotive. And you can expect us to continue to invest in how we can be a better provider of vision for the world’s robots. And so, an area where we are thinking about investing in, I would say less so with the angle of humanoids. In full disclosure, we do not see that as such a strong place for us and such a little too far from home in terms of in-line, but many, many other areas for industrial robotics that could use vision, visual perception, and where we see ourselves as really having a great win. Kevin Samuel Wilson: Thanks. And as a follow-up, and then it is just on the trading business with Moritex. Typically, businesses are low gross margin businesses. Should we could we see a bump from gross margins in the second half with that divestment. Yeah. You are right. That Dennis Fehr: typically trading business are less attractive on gross margin side, and we saw that in general that Moritex had lower gross margins. So in that regard, that certainly will help a bit on the gross margin side into the second half. Kevin Samuel Wilson: Okay. Great. Thank you. Operator: Thank you. I would like to turn the floor back over to Mr. Moschner for closing comments. Matt Moschner: Excellent. Well, thank you for joining us this morning and for your continued support of Cognex. We look forward to updating you on our progress in the first quarter. Operator: Ladies and gentlemen, this concludes today’s event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.
Operator: Good day, and thank you for standing by. Welcome to the ECARX Holdings, Inc. Q4 and Full Year 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Julian Tiltman. Please go ahead. Thank you, operator. Good morning, and welcome to ECARX Holdings, Inc.'s fourth quarter and full year 2025 earnings conference call. Joining me today from ECARX Holdings, Inc. are Chairman and Chief Executive Officer, Ziyu Shen; Chief Operating Officer, Peter W. Cirino; and Chief Financial Officer, Phil Zhou. Following their prepared remarks, they will all be available to answer your questions. Before we start, I would like to refer to our forward-looking statements at the bottom of our earnings press release, which also applies to this call. Further information on specific risk factors that could cause actual results to differ materially can be found in our filings with the SEC. In addition, this call will include discussions of certain non-GAAP financial measures. Reconciliations of the non-GAAP to the GAAP financial measures can be found at the bottom of our earnings release. With that, I would like to hand the call over to Rene Du. Please go ahead. Rene Du: Thank you, Julian. Hello, everyone, and thank you for joining us today. ECARX Holdings, Inc. is transforming vehicles into seamlessly integrated information, communication, and transportation devices. To realize this vision of becoming a leading AI technology provider in the automotive industry, we must proactively navigate today's dynamic regulatory and market environment, ensuring we remain compliant and maintain growth while pushing the boundaries of automotive intelligence globally. By diversifying both our geographic revenue base and our solution portfolio, we are building ECARX Holdings, Inc. into a robust, compliant, and most important, a truly global business. The fourth quarter was a critical inflection point and marks the start of our next phase of sustainable profitable growth. We delivered net income of $2,800,000, adjusted EBITDA of $22,000,000, and operating income of $7,000,000, marking our second consecutive quarter of positive results as revenue hit a historical high of $305,000,000, up 13% year over year. Gross profit was $64,000,000, up 11% year over year, with a gross margin of 21%. These results are a direct reflection of the execution of our lean operating strategy, which continues to deliver a resilient recovery in gross margin, enhance R&D efficiency, and optimize operating expenses despite the several challenges posed by patent policy in the global semiconductor supply chain. We remain firmly on track to sustain this strong and profitable momentum into 2026. Our momentum is being fueled by two distinct engines that are allowing us to unlock growth opportunities from existing and new partnerships. First, our computing platforms continue to drive strong sales growth for best-selling models, allowing us to deepen the penetration rate of our solutions across our partner vehicle lineups and anchor the stability of our core business. Notably, shipments of our Antora series reached the 1,000,000 unit milestone in 2025, underscoring the platform's market leadership. With the concentration of Antora shipments increasing within our total shipments, our vertical integration capability allows us to capture greater value and structurally enhance our long-term profitable growth trajectory. Secondly, our globalization strategy continues to amplify our unique value proposition as a core technology partner worldwide, demonstrating the global repeatability and scalability of our solutions to potential and existing partners. Our deepened partnership with Volkswagen Group in Latin America is a key milestone in this journey, demonstrating how the Antora platform is setting a global standard for intelligent cockpits and driving our international expansion. This agreement utilizes our platform to meet diverse market needs, with the high-performance Antora 1000 for online brands that integrates our Cloudpeak software stack and Google Automotive Services, and the effective Antora 500 for entry-level segments. This highlights how our core technology, already proven in the popular launch of Geely Galaxy EX5 and Volvo EX30, can seamlessly scale across diverse brands and international markets. This flexibility showcases how we effectively integrate to address the evolving needs of leading automakers on a global scale. Looking ahead to 2026 and beyond, we are fully prepared for this next phase of growth. Our future strategic priorities as we progress will focus on three key pillars. First, we will continue to drive our globalization strategy and develop broader global strategic partnerships, continuing to leverage our cutting-edge, cost-effective solutions. These existing partnerships are a blueprint to demonstrate the capability and scalability of our physical AI architecture, and they will allow us to further strengthen partnerships with significant commercial value and drive an increase in overseas revenues. We are on the path to transforming our business into even more of a truly global technology leader, where we have set targets to meaningfully increase our share of total revenue from international markets by the end of the decade. Second, we will continue to invest in our long R&D roadmap and development of next-generation computing platforms, intelligent driving solutions like Skyline Pro to drive high-performance AI computing power, and in-vehicle AI large models. By driving the industry transition from feature-centric to intelligence-centric experiences, we will maintain our leadership position and propel our business toward high-value software and AI services not only for automotive applications, but also adjacent sectors like robotics. Third, we will continue to strengthen our lean operating strategy and strategic execution to sustain profitability. Our transition to an automotive AI technology provider allows for greater platform modularity, which drives R&D efficiency and sustained profitability. Our target for 2026 is to continue to generate meaningful annual revenue growth and to maintain positive operating income throughout 2026. Moreover, we raised nearly $200,000,000 in recent months from partners including Geely and ATW Partners, a powerful endorsement of our global growth strategy, technology leadership, and proven ability to capitalize on accelerating demand. This additional capital will support the build-out of our R&D and engineering hub in Germany and infrastructure across key growth markets in South America and Southeast Asia, providing us with R&D delivery and supply chain capabilities to fuel our global expansion. With a strong finish to 2025, a growing suite of innovative solutions, and the first two quarters of profitable growth, we are confident in our ability to capture the opportunities ahead as the automotive industry continues its transformation. I will now pass the call over to Peter W. Cirino, who will go through the operating results of the quarter in more detail. Peter W. Cirino: Thank you, Ziyu. Good morning, everyone. In the fourth quarter, we made strong progress executing our strategic priorities. As we continue our global expansion, deepen key partnerships, and execute on our R&D roadmap, our ability to execute on complex global programs is becoming a defining competitive advantage. During the quarter, we continued to intentionally increase shipment volumes to meet accelerating market demand, shipping approximately 910,000 units. This brings the cumulative total number of vehicles equipped with ECARX Holdings, Inc. technology to approximately 11,000,000 units, up 36% from last year and a direct reflection of the increasing recognition our reliable and cutting-edge solutions are receiving globally. Today, we proudly serve 18 OEMs across 28 brands worldwide. Our global expansion remains a core focus. In Q4, we made significant progress. Our partnership with Volkswagen Group continues to progress smoothly. Both sample development and delivery continue to consistently meet all targets and exceed expectations, opening the door for deeper collaboration. We are excited about the opportunities that will come from our growing European pipeline. Our ability to strategically execute these programs demonstrates our world-class engineering delivery and project management capabilities on a global scale. This expertise provides a solid foundation to capitalize on future large-scale revenue opportunities across EMEA, the Americas, and the emerging markets. As we execute on these priorities, our global capabilities are gaining greater visibility and exposure, helping us build a robust overseas business development pipeline that is growing substantially. This expansion directly supports the long-term goals Ziyu mentioned earlier, with our target to generate 50% of our total revenue from overseas markets by 2030. Our technology continues to power some of the most exciting, increasingly popular new vehicles in the market. During the quarter, the Pikes computing platform and Cloudpeak cross-domain software stack powered the next-generation AI cockpit experience for the Geely Galaxy M9, showcasing our core strengths in developing solutions from the ground up and enabling the delivery of in-vehicle AI agents at scale. As this model gained significant traction among customers, global automakers can increasingly see how our solutions can drive sales with their differentiated experience. This solution was replicated in the Lynk & Co 07 and 08 EM-P, further expanding its global visibility and adoption. Additionally, the highly sought-after Geely EX5 also launched in the UK during the quarter, with the AI-enhanced Antora 1000 and Cloudpeak solutions integrated, marking the start of the large-scale deliveries of these solutions in core European markets and another milestone in our global expansion. Crucially, the Antora platform has obtained key safety and privacy certifications for the European market entry, providing us with the foundation to drive deployments across Europe and engage with automakers in the region. Our solutions are increasingly being adopted by global automakers across different markets, validating their competitiveness, seamless adaptability, and reliability. They are compatible with Flyme Auto and Google Automotive Services, and will help accelerate AI-driven intelligent in-vehicle experiences across multiple vehicle segments and markets worldwide. This sustained demand has allowed us to maintain a leading market share with over 11,000,000 units installed as of December 31, 2025. Innovation remains at the core of our strategy and forms the basis of our full-stack technological leadership. At CES last month, we demonstrated the strategic versatility of our portfolio, showcasing solutions for scalable UI, agentic and agent-to-agent AI, high-end computing intelligent cockpits, and next-generation fusions of cockpits and assisted driving and parking that accelerate and address the evolving needs of global automakers. Ziyu Shen: A key highlight Peter W. Cirino: was a working demo of our Cloudpeak software stack running side by side on two different computing platforms, powered by the latest generations of SiEngine and Qualcomm chips. Through seamless integrations with Google Automotive Services, these solutions provide automakers with the flexibility to select their optimal hardware foundation while ensuring a consistent experience. Our technological leadership now unifies critical domains into a seamless, high-value competitive advantage that spans across the entire value chain, from hardware such as chips and computing platforms, to software, including operating systems and AI services. This vertical integration allows us to provide automakers with high-value, cost-effective turnkey solutions that can be rapidly integrated across models and geographies, and significantly reduce time to market. Our leadership is supported by a resilient strategic supply chain that acts as a critical competitive barrier. Along with our Fuyang intelligent manufacturing facility, our global partnerships with Samsung and Monolithic Power leverage our combined global R&D capabilities to establish an intelligent industrial ecosystem focused on system integration and platform adoption. Together, they not only secure our supply chain, they accelerate our ability to capitalize on opportunities in the automotive and embodied intelligence sectors. Finally, we continue to aggressively push our global compliance platform to enable our transformation into a truly international business. We are rapidly operationalizing our Singapore headquarters, which will be coming online soon and will act as our central hub for global IP, R&D, and treasury activities. Currently, we are working to obtain the relevant regulatory certifications in the US to engage with US automakers and further expand our addressable market. These steps will ensure we can serve our partners in any market, backed by a delivery system that already is verified by leading automakers around the globe. With that, I will now turn the call over to Phil Zhou, who will review our financial results and provide guidance as we look forward to both the first quarter and full year 2026. Phil Zhou: Thank you, Peter. And hello, everyone. The 2025 represents a strategic inflection point in our company's evolution. Through disciplined execution and focused innovation, we have successfully navigated complex macroeconomic headwinds to deliver our second consecutive quarter of positive operating income and EBITDA, a powerful testament to the resilience of our business model and our clear path towards long-term profitability. Top-line revenue for the fourth quarter reached an all-time high of $305,000,000, representing 13% year over year growth and exceeding both our guidance and market expectations. This resilient growth, achieved despite persistent macroeconomic headwinds, was primarily driven by strong customer demand for our core computing platforms. This strong finish to 2025 enabled us to achieve the double-digit annual revenue growth target we set for 2025, with full-year revenue reaching $848,000,000, a 10% increase over 2024. Breaking this down further, sales of goods revenue reached $270,000,000, a remarkable 27% year over year increase. The impact of our in-house development strategy is clearly visible, with shipments of our Antora, MONADO, and Pikes series increasing by 62% year over year during the quarter. These advanced platforms contributed 74% of the total sales of goods revenue, demonstrating our technological differentiation. In our services business, revenue reached $33,000,000, while software license revenue stood at $2,000,000. Both areas reflect strategic project timing considerations rather than underlying demand challenges. Now turning to our profitability metrics. Despite facing a global supply shortage for hardware and components, particularly in storage, and significant cost pressures, we delivered an impressive margin performance. Gross profit increased about 11% year over year to $64,000,000. Gross margin was 21% for the quarter. This performance demonstrates our strong operational resilience and disciplined cost management. Our lean operating strategy continues to yield significant efficiency gains. Operating expenses decreased by 19% to $57,000,000 for the quarter. For the full year, operating expenses fell 24% to $216,000,000. Most importantly, we achieved these efficiencies while simultaneously driving global expansion and exceeding critical R&D milestones. Our operational performance speaks to a fundamental transformation. Operating income reached $7,000,000 during the quarter, a 155% improvement year over year. Adjusted EBITDA was $22,000,000 during the quarter, a significant increase from $10,000,000 in Q4 last year. Beyond the numbers, these results underscore the tangible outcome of our strategic transformation into a technology-driven, globally competitive organization. Turning to the balance sheet, we took several significant steps to fortify our capital position, providing us with the flexibility to execute our global expansion and drive our R&D roadmap. In recent weeks, we successfully signed a convertible bond financing agreement of up to $150,000,000 with ATW Partners and raised $456,000,000 from our strategic partner Geely. This is a powerful endorsement of our global growth strategy, leadership, and long-term growth prospects. Starting this quarter, to enhance transparency and to provide better visibility, we are initiating a formal guidance framework that aligns our financial disclosures with the global nature of our expanding business. For full year 2026, we expect to drive total revenue in the range of $1,000,000,000 to $1,100,000,000, representing a year over year increase of 20% to 30%. Furthermore, we are committed to maintaining positive operating income throughout 2026, underscoring the impact of our lean operating strategy. For 2026, we anticipate seasonal fluctuations typical of our industry. Consistent with historical patterns, the first quarter represents a softer period for automotive consumption following the fourth quarter peak. However, it is important to contextualize this seasonality with our full-year outlook. Our full-year order pipeline remains robust and aligns with our growth targets. We have implemented proactive cost management strategies to mitigate margin pressure. The underlying demand drivers for our core automotive technologies continue to strengthen. Most importantly, despite a typical first quarter seasonality, we maintain full confidence in our ability to navigate these near-term dynamics and achieve our full-year revenue and profitability targets. In closing, our 2025 performance represents more than just strong financial results. It demonstrates the successful execution of our strategic transformation. Our progress is a testament to our team's tireless focus on operational excellence and technological innovation. By consistently meeting each milestone, they have been critical in building a sustainable foundation that makes our long-term growth trajectory possible. With that said, I would like to take the opportunity now to thank the investment community. As I will conclude my time at ECARX Holdings, Inc. with this release, I am confident that the company will continue to strive to ever higher heights, and I look forward to following its progress as I venture to new opportunities. That concludes our remarks today. I would now like to hand the call back to the operator to begin a Q&A session. Operator: Thank you. If you would like to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile the Q&A roster. Thank you. We will now take our first question. This is from the line of Wei Huang from Deutsche Bank. Please go ahead. Wei Huang: Hello. Thank you for taking my question and congratulations on the strong set of results. My first question is regarding your analytics guidance. Can you give us a bit more color on your ASP and margin outlook for the year? It seems like generally so far, auto demand has been impacted by the weakening of the government-supported policies. What would you offer for the rest of the year? Thank you. Phil Zhou: Hey, Mr. Huang. This is Phil. I am happy to address your question. So yes, for the guidance for the full year 2026, we expect to drive the total revenue in a range of $1,000,000,000 to $1,100,000,000, and this is representing a year over year increase of 20% or 30% under the macroeconomic headwind you just mentioned. And yes, in Q1, it is true that the overall automotive market is impacted by policy, as you mentioned just now, and the end user Wei Huang: demand shrinking. Yes. Some reports Phil Zhou: show that estimation of 20% decrease or even worse of auto wholesale in Q1 year over year. And part of the reason is also Wei Huang: triggered by electronic component cost inflation. Phil Zhou: Especially in memory side. But, you know, we have good momentum. We delivered a very strong Q4 2025 and full year, and we will move our momentum into 2026. And we have all kinds of actions in place to mitigate Wei Huang: the potential challenges and risks. Phil Zhou: And Q1 is a low season, but we have full confidence to deliver a solid Wei Huang: full year 2026. Thank you. A bit of a follow-up on that. You also mentioned the rising memory costs, which is expected to further increase going into 2026. Can you comment a bit on the impact on margins for the year? Phil Zhou: Yeah. Sure. And as you can read from our financial reports, 2025 we delivered a pretty good margin performance. Especially in Q4, we are able to maintain or even improve our hardware Wei Huang: gross margin Phil Zhou: consistent. And that is due to our strong execution in cost optimization, you know, VA/VE strategy execution. Wei Huang: And then moving to 2026, Phil Zhou: along with the industry-wide cost inflation, we still need to execute pretty well in terms of cost management. And we will collaborate closely with our customer on the industry-wide cost inflation as well. And on the pricing strategy, we will also drive a very reasonable pricing capex to offset, to mitigate the challenge as well. In terms of total gross margin outlook for 2026, I would say a range Wei Huang: about 15% to 18%. Phil Zhou: And that is the latest calculated number after our internal guidance. Wei Huang: Thank you. That is very clear. And my last question is can you provide us another update on your latest progress with foreign OEMs? These older ones? Thank you. Peter W. Cirino: Yeah. Hi, Wei. This is Peter W. Cirino. Let me address that question. So as Ziyu mentioned in his comments, ECARX Holdings, Inc. is positioning ourselves as a global physical AI provider, a technology provider to the automotive industry. So, early in 2025, we announced our first major global win with a European OEM with VW to support business in Latin America. In the fourth quarter, we extended our partnership with Volkswagen Group and announced another win to take the Antora platform across additional vehicle lines in Volkswagen Latin America, including our collaboration with Google. Currently, as we look across the market in Europe, we have a broad level of significant opportunities that are emerging from our engagement with our European partners. And we certainly hope that as we move into next year, this pipeline will pay us very well, and we will see additional wins that we hopefully can discuss and will contribute to our revenue profile in the future. So I would say our global expansion is going quite well, and we have these two very significant and tangible wins for the Volkswagen Group. Wei Huang: Thank you. There are no more questions. Congratulations again on the great set of results. Thank you. And that does conclude today's conference call. Operator: Thank you all for participating, and you may now disconnect. Speakers, please stand by.
Operator: Good morning, and welcome to the Restaurant Brands International Inc. Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. All callers will be limited to one question, and please note this event is being recorded. I would now like to turn the conference over to Kendall Peck, RBI's Head of Investor Relations. Please go ahead. Kendall Peck: Thank you, operator. Good morning, everyone, and welcome to Restaurant Brands International Inc.'s earnings call for the year and quarter ended 12/31/2025. Joining me on the call today are Restaurant Brands International Inc.'s Executive Chairman, Patrick Doyle, CEO, Josh Kobza, and CFO, Sami A. Siddiqui. Following remarks from Josh, Sami, and Patrick, we will open the call to questions. Today's discussion may include forward-looking statements, which are subject to risks detailed in the press release issued this morning and in our SEC filings. We will also reference non-GAAP financial measures, reconciliations of which can be found in the press release and trending schedules available on our website. Please note that franchisee profitability referenced on this call is based on unaudited self-reported franchisee data. As a reminder, organic adjusted operating income growth excludes results from the Restaurant Holdings segment. In addition, on 02/14/2025, we acquired substantially all the remaining equity interest in Burger King China from our joint venture partner. Burger King China was classified as held for sale and reported as discontinued operations in our financial statements for 2025. That said, BK China KPIs continue to be included in our international segment KPIs. A breakdown of BK China's KPIs and its impact on our 2024 financial statements can be found in the trending schedules available on our website. For calendar planning purposes, our preliminary Q1 earnings call is scheduled for the morning of May 6, 2026. I will now turn the call over to Josh. Josh Kobza: Kendall. Good morning, everyone, and thank you for joining us today. Josh Kobza: As I began my fourth year as CEO, I want to start with a brief reflection on what worked well in 2025. When we stay focused on the basics, make the right long-term investments, results tend to follow. And this year was another example of that. Our brands delivered solid results, reinforcing the strength of our portfolio and the impact of our continued focus on delivering quality, service, and convenience to guests. This year, we also took decisive action to position us well for the next phase of growth. In China, we temporarily took control of our Burger King business, built a strong local leadership team, elevated marketing, optimized the restaurant portfolio, and strengthened operations, driving three consecutive quarters of positive same-store sales. Importantly, we attracted an engaged local partner, CPE, and established a strong foundation for long-term growth. At Popeyes, we took important steps to refocus the leadership team and begin returning the brand to the level of performance we know it is capable of delivering. And at Burger King in the US, we continue to invest in operations, marketing, and modern image, while also beginning our refranchising efforts two years ahead of schedule. Over the past few weeks, Tom and I spent time in the field together, road tripping from DC to Philadelphia, visiting restaurants, sitting in on Royal Roundtables, and checking in on remodeled SIZZLEs. These restaurants are a great example of getting all of the basics right. Operations are dialed in, teams are energized, managers are focused and engaged. As a result, these stores are delivering annualized average restaurant sales of nearly $3,000,000, a clear tangible illustration of what strong execution looks like in practice. That same focus on the fundamentals was evident across the business in 2025. For the full year, we delivered comparable sales growth of 2.4%, net restaurant growth of 2.9%, and system-wide sales growth of 5.3%. We translated those top line results into organic adjusted operating income growth of 8.3% and nominal adjusted EPS growth of over 10%. It is now our third consecutive year of delivering roughly 8% organic adjusted operating income growth, a level of consistency that remains differentiated within the industry. I am proud of how our teams and our franchisees showed up. Our three largest businesses, Tim Hortons, International, and Burger King, all outperformed their respective categories this year. Tim Hortons Canada and International have now each delivered 19 consecutive quarters of positive comparable sales. And Burger King US made visible progress executing Reclaim the Flame. While 2025 represented a low point for our consolidated net restaurant growth, we believe we have turned the corner and are excited to reaccelerate growth in 2026. Stepping back, this year reinforced the resilience of our model and the progress we have made strengthening our brands. We delivered solid top line growth and on-algorithm adjusted operating income growth amid a tougher consumer backdrop, strengthened the quality and durability of our earnings, and exited the year ready to build on that momentum in 2026. Lastly, I would like to provide a quick reminder of our upcoming Investor Day on February 26. This year marks the midpoint of our long-term growth algorithm, and our Investor Day will serve as a check-in on our progress and an opportunity to address some of the biggest questions we get about the business. Tom will provide an update on Reclaim the Flame, and I will spend time discussing our path to 5% plus net restaurant growth. Sami will walk through our plans to return to a 99% franchise business model and discuss capital allocation. And you will hear from Patrick and our brand presidents with additional time for Q&A. As a result, today's call will largely focus on our quarter and year-end results, and we will address most of our forward-looking plans at Investor Day. We look forward to seeing you there. With that, let us turn to our segment highlights, starting with Tim Hortons, which represents roughly 42% of our operating profit. 2025 was another year that underscored the strength and durability of Tim Hortons. We started the year amid macro uncertainty and weaker consumer sentiment in Canada, yet Tim’s delivered solid performance by staying focused on executing against the basics, delivering great experiences for our guests. That consistency carried through the fourth quarter, with comparable sales in Canada growing 2.8%, outperforming the broader Canadian QSR industry by nearly two points. Brand health continues to be a key advantage, with Tim’s leading in affordability, trust, and relevance with guests. That connection to the communities we serve was evident during our Holiday Smile Cookie campaign, which raised approximately C$13,000,000 across Canada and the US for local charities and our Tims Foundation Camps. During the quarter, we kept a disciplined balance between innovation and core offerings. Breakfast food sales grew 3.5%, supported by innovation like our 100% Canadian freshly cracked scrambled eggs, alongside strength in our core such as our Farmer’s Wrap. Baked goods grew 2% driven by seasonal offerings like the Biscoff Boston Cream doughnut and croissant. In the PM daypart, main foods grew modestly, supported by our holiday meal offering. PM remains an important long-term opportunity for the brand. We continue to refine the menu, value platforms, and execution to drive growth. Q4 beverage sales grew 3.2% year-over-year, with strong guest response to seasonal offerings like our Biscoff and brown sugar beverages. Cold beverages remain a standout, growing 8.6% despite colder than usual temperatures in December, reaching nearly 27% of total beverage sales in Q4, the highest fourth quarter mix on record. This growth was largely driven by our iced espresso-based beverages platform, including iced chai lattes and protein lattes. We also began rolling out our new espresso machine to support improved quality and consistency for this growing category. Tim’s ongoing industry outperformance would not be possible without Axel and his team’s constant focus on delivering a great guest experience. Speed of service improved across dayparts in 2025, and guest satisfaction reached record levels, including in the PM. Digital engagement also continued to build, with digital ordering and payments reaching all-time highs in Q4 and kiosk expanding to over 800 restaurants. We are excited to give guests even more reasons to engage with Tim’s and accelerate loyalty adoption through the launch of our partnership with Canadian Tire later this year. On development, Tim Hortons returned to net restaurant growth in Canada for the first time since 2021. As expected, growth this year was measured and targeted, capacity-constrained markets, and urban densification focused on suburban developments. This represents a positive step forward for the system; with a strong pipeline, we are confident in our ability to accelerate development again in 2026. Josh Kobza: Meanwhile, in the US, Tim’s delivered its Josh Kobza: highest level of new restaurant openings in the past decade, reflecting continued progress in both existing and new markets like Florida and Virginia. Lastly, I would like to touch on franchisee profitability in 2025. In Canada, Tim Hortons delivered solid top line sales performance, which helped offset headwinds from tariffs and increased operating commodity costs, including coffee. While cost pressures impacted P&Ls, average four-wall EBITDA grew resilient at approximately C$295,000, underscoring the strength of the Tim Hortons business and the durability of its franchisee economics. Overall, the fourth quarter capped another year of steady performance for Tim Hortons, supported by strong brand fundamentals, delicious menu innovation, and consistent execution. That foundation positions the business well as we move into 2026. Turning now to International, which drives about 27% of our operating profit. 2025 was a standout year for this business. Across a diverse set of markets, our teams and franchisees executed a balanced operational and marketing playbook that led to another year of double-digit system-wide sales growth. While International is often viewed as a unit growth story, it is worth highlighting that this segment has also delivered strong comps and double-digit system-wide sales growth for years, with a mid-single-digit average royalty rate that flows efficiently to AOI. For the full year, comparable sales grew 4.9%, including 6.1% in the fourth quarter, and net restaurant growth was 4.9%, driving system-wide sales growth of nearly 11%. Performance was strong across several of our largest markets, reflecting the quality of our brands and the effectiveness of our local strategies. In France, Burger King delivered another strong quarter, led by the DuoMystère Box, where guests receive a surprise duo for €5, and our Stranger Things activation. In Australia, the launch of Jacked Up Sodas, which is Hungry Jack’s take on dirty sodas, helped drive record beverage incidents. And in Brazil, our King em Dobro platform continued to resonate by delivering compelling core value. Q4 was also an important quarter for Burger King China, with comparable sales growing 9.2%, driven by improvements in restaurant fundamentals, growth in delivery, and refreshed marketing. Most importantly, during the quarter, we announced a joint venture with CPE, an experienced Chinese investment firm with a proven track record of scaling consumer brands in China, under which CPE would take majority ownership of the business. The transaction closed on January 30, and CPE injected $350,000,000 of primary capital to fund growth. Together, we share an ambition to roughly double Burger King China’s restaurant footprint to at least 2,500 units by 2030. I could not be more excited to welcome CPE to the RBI family. I am looking forward to sharing more about their vision for Burger King in China at our upcoming Investor Day. We also made progress at Popeyes China, opening 55 net new restaurants in 2025, as we continue to build brand awareness. With a clear path to accelerate development in 2026, we remain focused on scaling this business thoughtfully and look forward to eventually getting it into the hands of a long-term local operator. Reflecting on 2025, International stands out as one of our strongest growth engines, a clear competitive advantage. We have now built five $1,000,000,000 businesses in Burger King Spain, Germany, Australia, Brazil, and the UK, along with a $2,000,000,000 business in Burger King France. We are also seeing consistent success in markets just outside our top 10 that we do not always highlight, like Burger King Japan, where we have beaten the industry for eleven straight quarters, delivering 22% same-store sales in 2025 on top of 19% same-store sales in 2024, and adding 84 net new restaurants this year. Or Popeyes Turkey, which more than doubled its store count in the last four years, ending 2025 with nearly 500 restaurants. In addition, we are scaling newer markets like Popeyes in the UK or Tim Hortons in Mexico, where we crossed $201,100,000,000 in system-wide sales respectively, as brand awareness and market adoption continue to build. While these markets are diverse, they are winning by executing the same fundamentals: locally relevant marketing, disciplined development, and consistent operations, all managed by strong local operators. These fundamentals give me confidence that International is well positioned to deliver durable growth in 2026 and beyond. Turning now to Burger King, which represents roughly 18% of our operating profit. US comparable sales grew 1.6% for the full year, including 2.6% in the fourth quarter. We have now outperformed the burger QSR industry in nine out of the last 12 quarters, demonstrating how Reclaim the Flame is strengthening the brand and its relative value proposition for guests. Marketing and menu innovation played an important role during the quarter. In December, we launched the SpongeBob SquarePants menu, featuring the Krabby Whopper, an iconic square yellow bun alongside Cheesy Bacon Tots, a Strawberry Shortcake Pie, and a Frozen Pineapple Float. The activation drove strong guest engagement and brought families back into our restaurants, with Kids Meals reaching their highest incidence level in the last ten years. It is an exciting proof point as we think about the potential of our family business. Importantly, we were able to retain traffic after the promotion ended, with new SpongeBob guests coming back to Burger King in January. This innovation was supported by our consistent value platform, $5 Duos and $7 Trios, which remained on the menu all year. Duos and Trios continue to perform well by offering guests choice, price certainty, and consistency. In a year when there was significant noise across the industry around value, this dependable platform allowed us to focus our marketing behind Whopper-led innovation and family partnerships that attracted new guests to the brand. Looking ahead, we will continue executing this balanced strategy. But that sales momentum only translates into sustained traffic when it is supported by solid operations. Throughout the year, the team remained focused on improving execution. Tom and his team are completing their fourth annual Royal Roundtables, bringing together every restaurant manager in the country to sharpen operational focus across the system. We see the impact of consistent operations, speed, and service quality reflected clearly in the performance of our A operators, who outperformed the system average profitability by nearly $50,000 in 2025. In addition to improving operations, we remain dedicated to modernizing the asset base, and ended 2025 at 58% modern image, up from 51% in 2024. While we previously discussed reaching 85% modern image in 2028, the current cost environment is influencing the pace of remodel activity, and as a result, will take a bit longer to reach that level. This does not change our strategy or the role of remodels in Reclaim the Flame. Remodels continue to deliver compelling uplifts and the teams are in control, reinforcing our confidence in the program. We will continue to make steady progress alongside our franchisees. We also continue to modernize Carrols, completing roughly 60 remodels in 2025, including 54 SIZZLEs. Comparable sales grew by 2.4% in Q4, slightly behind the rest of the system as Carrols restaurants were more heavily impacted by weather given their geographic concentration in the Northeast. Finally, franchisee profitability was about $185,000 in 2025, down from about $205,000 in 2024. This was driven primarily by beef costs, which Sami will discuss shortly. While 2025 was a step back, we are well ahead of where we were just a few years ago. Fundamentals continue to strengthen, and we are confident profitability will expand as beef costs normalize. Overall, I am encouraged by the progress Tom and team made in 2025. Burger King executed compelling marketing, offered consistent value, improved operations, and continued to make progress on modern image, helping the brand once again outperform the burger QSR industry and reinforcing my confidence in the brand's trajectory as macro pressures ease. I am excited for you to hear from Tom directly on February 26 about how we plan to further elevate the brand moving forward. Now turning to Popeyes, where net restaurant growth of 1.6% was more than offset by comparable sales down 3.2% for the year, resulting in system-wide sales growth of negative 0.7%. As a result of softer sales this year, franchise profitability declined to roughly $235,000, which remains a healthy level, but one we are focused on improving. Our performance this year reinforces a clear reality. While the chicken category remains competitive, Popeyes’ biggest opportunity is improving restaurant-level execution and reengaging with our core guests. We know Popeyes is capable of much more, and we are taking decisive action to put the brand back on the right path while supporting our franchisees to deliver stronger results at the restaurant level. In November, we announced that Peter Perdue, former COO of Burger King in the US, would step into the role of President of Popeyes US and Canada. Peter has a clear mandate to raise operational consistency, and he is moving quickly, resetting his leadership team and engaging with our franchisees. At its core, the chicken business is a service business, and winning requires consistent speed, accuracy, and reliability in every restaurant every day. To support that, we are expanding field engagement and providing targeted support to our lowest-performing restaurants. We have increased our field operations team by approximately 75%, launching in-restaurant coaching visits and hosting our first-ever Restaurant General Manager Experience rallies across the US this spring. Alongside operations, we are also sharpening our core product focus, prioritizing offerings that define Popeyes and resonate with both new and legacy guests, including our incredible hand-battered and fried bone-in chicken, tenders, and sandwich. I am excited for Peter to share more detail at our upcoming Investor Day. In the meantime, I want to reiterate my confidence in the underlying strength of the Popeyes brand. We have a great group of engaged franchisees, a relatively modern asset base, solid unit economics, and some of the best chicken in the industry. With disciplined execution and sustained focus, I am very confident Popeyes will return to the level of performance it is capable of delivering. Finally, Firehouse Subs had a solid year, with comparable sales of 1.1%, including 2.1% in the fourth quarter, and net restaurant growth of 7.7%, driving 8% system-wide sales growth. As a result of this growth, franchisee profitability grew to over $100,000. Importantly, Mike and the team opened 104 net new restaurants across the US and Canada and accelerated net restaurant growth from approximately 6% in 2024 to 8% in 2025, led by Canada. In fact, Firehouse is one of the fastest growing QSRs in Canada in 2025. I am excited about the growing momentum of this brand, and I am looking forward to even more success in 2026. I will now turn the call over to Sami. Sami A. Siddiqui: Thanks, Josh, and good morning, everyone. 2025 was a year of execution-driven performance which translated into solid top line results, 8% organic AOI growth, and double-digit adjusted EPS growth, with performance improving as we went through the year. We also took important steps to simplify the business and strengthen our foundation for future growth, announcing a new partner for Burger King China, beginning refranchising the Burger King US ahead of schedule, and maintaining disciplined investment behind the initiatives that matter most Sami A. Siddiqui: for long-term value creation. As we exit 2025, the fundamentals of our business are stronger, our portfolio is more focused, and we have improved visibility into earnings and cash flow growth, all of which give me confidence in our ability to build on this momentum in 2026. Today, I will focus on our full year 2025 financial results and I will touch on a few modeling-related items for 2026. As Josh mentioned, the bulk of our forward-looking commentary will be reserved for our Investor Day on February 26. Now on to our results, beginning with our financials. For the full year, we delivered comparable sales growth of 2.4%, net restaurant growth of 2.9%, and system-wide sales growth of 5.3%. We translated that to organic AOI growth of 8.3% and nominal adjusted EPS growth of 10.7%. Compared to our long-term algorithm, comparable sales came in modestly below target, though we continue to outperform the industry. Meanwhile, net restaurant growth of 2.9% was roughly in line with our full year guidance. Importantly, we believe 2025 represents a low point for NRG, and from here, we expect to ramp back towards 5% unit growth by the end of our algorithm period. In 2026, we expect to see modestly positive NRG from Burger King China following our portfolio cleanup and the transition of the business to our new local partner, CPE. For reference, returning Burger King China to neutral NRG would imply a positive impact of 70 basis points on our consolidated 2025 unit growth. We look forward to providing more color on our future development outlook during our Investor Day. We continue to translate system-wide sales growth into even stronger earnings growth, delivering our third consecutive year of roughly 8% organic AOI growth. There were some specific puts and takes in 2025 that I will walk you through now, all of which we have discussed on our prior calls. Operator: First, Sami A. Siddiqui: we lapped over the roughly $60,000,000 BK Reclaim the Flame ad fund contribution. In 2025, those expenses moved over to the P&Ls of our franchisees and our company restaurants, which was a tailwind to our organic AOI growth. Second, moving the other direction, we did not recognize revenue from Burger King China in 2025 as we recorded results from the business in discontinued operations. As a result, the International segment saw a $37,000,000 revenue headwind in 2025. Of course, we expect these results to phase back into our P&L prospectively, which I will touch on shortly. Third, segment G&A stepped down by $38,000,000 year-over-year in 2025. This reduction was primarily driven by lower stock-based compensation and headcount efficiencies identified during the first half of the year, in addition to continued cost discipline. We believe our business is at a healthy level of G&A which will grow modestly with inflation over time. Operator: And last, Sami A. Siddiqui: net bad debt expense totaled $21,000,000, modestly lower than $24,000,000 in 2024. Together, these factors enabled us to translate 5.3% system-wide sales growth to organic AOI growth of 8.3%. Now turning to EPS. For the full year, adjusted EPS grew 10.7% to $3.69 per share. EPS growth was driven by our AOI growth, as well as a $43,000,000 year-over-year decrease in adjusted net interest expense, reflecting the benefits of our 2024 refinancing activities and our cross-currency swaps. Our adjusted effective tax rate was 18.6% in line with our guidance and our expectations for 2026. Now turning to cash flow and capital allocation. We generated nearly $1,600,000,000 of free cash flow this year, including the impact of $365,000,000 of CapEx and cash inducements and a $138,000,000 cash benefit from our swaps and hedges. We also returned $1,100,000,000 of capital to shareholders year through our dividend. In 2026, we are increasing our dividend target Operator: To refranchise 50 to 100 Burger King restaurants in 2025 and I am pleased to say we slightly exceeded that guidance. Now before shifting to 2026 financial guidance, I would like to touch on two additional modeling items: Burger King China and beef costs. As a reminder, throughout 2025, Burger King China was classified as held for sale, its results were reported under discontinued operations and excluded from our International segment P&L. Following the close of our joint venture transaction with CPE, royalties from Burger King China are once again being recognized in our International segment P&L. For reference, in 2024, we recognized $32,000,000 in royalty revenues from Burger King China at a full royalty rate. In 2026, the royalty rate will begin a couple points below our standard 5% rate for traditional Burger King International locations and will ramp to 5% over time. Next, I would like to discuss beef costs. Burger King US saw approximately 7% commodity inflation in 2025, largely due to beef, which increased over 20% for the full year. This drove the year-over-year decrease in average four-wall profitability which would have been roughly flat year-over-year if beef prices stayed around where they were in 2024. As previously discussed, we believe these pressures are cyclical as the increase is largely tied to US herd rebuilding coupled with tariff impacts and upstream labor shortages. Importantly, the key to reaccelerating franchisee profitability growth will come from driving strong top line results, and we continue to work closely with our franchisees to drive improvement in areas that are under our control. Now finally, I would like to discuss our 2026 financial guidance. Most importantly, in 2026, we are committed to delivering a fourth consecutive year of on-algorithm 8% AOI growth. This is supported by a strong top line and continued flow-through to earnings. A couple points to note. First, we expect segment G&A, excluding Restaurant Holdings, of about $600,000,000 to $620,000,000, representing modest inflation relative to $594,000,000 in 2025. Second, we expect net adjusted interest expense to stay at approximately flat year-over-year in the $500,000,000 to $520,000,000 range, based on a mid-3% SOFR rate which flows through to approximately 15% of our debt. Third, we expect 2026 CapEx and cash inducements, including capital expenditures, tenant inducements, and incentives, to be around $400,000,000 compared to $365,000,000 in 2025. This increase is primarily driven by higher CapEx associated with Tim Hortons development and renovation as well as acceleration in Carrols remodels. Fourth, we expect Tim Hortons supply chain margins to be roughly in line with 2025 levels. From a seasonal perspective, we expect Q1 margin to be the softest of the year, more or less in line with 2025. And last, there are a couple things to keep in mind for Restaurant Holdings, which, as a reminder, is not included in our AOI algorithm guidance. BK Carrols restaurant-level margins will continue to be impacted by commodity inflation, primarily related to elevated beef costs. For 2025, BK Carrols full-year restaurant-level margin was 11.1%, and we expect similar full-year margins in 2026. For 2026, we expect total RH AOI of roughly $10 to $20,000,000, with favorability in beef costs bringing us towards the higher end of that range. The expected year-over-year decline in RH AOI reflects the impact of Carrols restaurant refranchising and incremental investments in our International start-up businesses, Popeyes China and Firehouse Brazil, that we expect to continue until we transition ownership to new local partners. To wrap up, stepping back, 2025 demonstrated the strength and resilience of our business model and the benefits of the strategic investments we have been making over the past several years. We spent much of the year talking about how our business was at peak complexity, and I am pleased to say that we are entering 2026 with a simpler, more focused portfolio and visibility into future earnings. That positions us well as we move into the next phase of growth and work to deliver another year of 8% organic AOI growth in 2026. With that, I will turn it over to Patrick. Patrick Doyle: Thanks, Sami. 2025 was my third full year at Restaurant Brands International Inc., and I would like to take a step back and talk about what this year taught us about the health of our business and the progress we have made strengthening it. 2025 was a demanding year for restaurant operators. The consumer was under pressure. Costs were elevated. And macro and geopolitical uncertainty weighed on confidence across many of our markets. Taken together, it was the kind of environment that served as a pretty good test of the fundamentals of a restaurant business. And in that context, our performance demonstrated that the underlying fundamentals of our portfolio are not only resilient, but improving, with our brands continuing to strengthen their competitive positions despite a challenging backdrop. Of course, the most important metric we look at is franchisee profitability. While profitability was down in parts of the system in 2025, a closer look tells an important story about the strength of our portfolio. At Tim Hortons, despite elevated coffee costs and tariff-related headwinds that weighed on consumer confidence in the first half of the year, average four-wall EBITDA held at around C$295,000. While we are always striving to drive growth in franchisee profitability, we believe this is a healthy outcome given the context and reflects the consistency of Tim Hortons’ business, strength of its restaurant owners, and benefits from its continued outperformance versus the broader QSR industry over the course of the year. And while we do not report franchisee profitability at International given its scale and structure, it is fair to say that with mid-single-digit comparable sales growth and net restaurant growth of 7%, excluding BK China, our International franchisees are doing quite well overall and continue to see attractive economics. At Burger King, we faced a meaningful headwind this year from over 20% inflation in beef, our largest commodity, which caused franchisee profitability to step back year-over-year. But what is important to me is what did not happen. Even in an environment with a lot of value noise, we did not need to rely on deep discounting to drive top line results. The core business continued to improve, and the system showed far more resilience than it would have four years ago before Tom and the team launched Reclaim the Flame. The investments we and our franchisees have made in operations, marketing, and modern image have fundamentally strengthened the system, and that showed up clearly this year. There is absolutely still work to do. But relative to much of the burger QSR category, I think it is fair to say that our franchisees are feeling pretty good about where they stand and our ability to grow from here. We have also been disciplined about growth and capital. In a year like this, the wrong response is to push development or investment faster than the economics support. Instead, we have prioritized protecting franchisee balance sheets, pacing remodels thoughtfully, and placing restaurants in the hands of operators who can execute at a high level. Simplifying the business and moving toward a more purely franchise model are part of that same mindset. At Popeyes, we also saw a step back in unit economics year-over-year, and this is a different situation. We have been very upfront that sales are not where they should be, and you saw us make leadership changes in 2025 and earlier this year as a result. I am confident that the steps we are taking, particularly the renewed focus on operations, consistency, and brand standards, will translate into better performance over time. Average profitability of roughly $235,000 is not where the system can or should be, but Popeyes has a strong franchisee base, and there is real engagement and momentum around the changes Peter and the team are leading. And lastly, at Firehouse, we saw average profitability grow to $100,000, reflecting the steady progress Mike and the team are making despite some lingering category headwinds. Given Firehouse’s lower cost inline build model, that level of profitability supports attractive paybacks on new openings and positions the brand well to continue accelerating unit growth. I mentioned earlier that a year like this can serve as a real test of a restaurant business. And when I look at how we performed, I think our overall grade is pretty strong. We outperformed the industry across our three largest businesses, including by two points at Tim’s Canada and three points at Burger King US. Tim Hortons Canada and International each extended their multiyear streaks of positive quarterly comparable sales. And our teams delivered over 8% organic operating income growth and double-digit EPS growth for shareholders. That marks the third year in a row of roughly 8% organic adjusted operating income growth. That is the type of consistency we want to continue to deliver moving forward. This combination of industry outperformance, margin discipline, and earnings growth does not happen by accident. It reflects improving fundamentals, strong execution, and real partnership across the system. I am proud of what our teams and franchisees delivered this year, and I feel good about the progress we have made strengthening this business for the long term. With that, I will turn it over to the operator for questions. Thank you. As a reminder, if you would like to ask a question on today’s call, please press star then one. And our first question will come from Danilo Gargiulo from AllianceBernstein. Kendall Peck: Danilo, please go ahead. Your line is open. Great. Thank you. What is very encouraging is to see solid sales momentum in US and Canada in the quarter despite the tough backdrops we are describing. I am wondering if you can maybe talk about how you are thinking about the comparable sales evolution and trajectory in 2026. Which anchor points may provide upside gains for Tim Hortons and Burger King? And specifically to Tim Hortons, you seem to have achieved great results with the beverages, with the PM skewls growing a little bit more modestly. So what is the next evolution to drive greater PM expansion? Thank you. Josh Kobza: Morning, Danilo. Thanks for the question. You know, I think in terms of the same-store sales, I agree it was a very good year and I think a positive Q4. And I think that sets us up well as we step into 2026. I think importantly because the reason that we were achieving those same-store sales is we are delivering on the fundamentals across all of the businesses. So I think that is a great setup, and you know, I think our expectation is for a similar consumer environment in 2026 to 2025, and we will keep focusing on building on those basics. You know, the one thing I would call out for in 2026 that I am sure anybody in Toronto or New York is aware of is that it has been a bit of a tough weather environment so far in 2026. So I think that is important to flag. You know, that should normalize as we get out of the next couple of months, and we look forward to building back another great year. In terms of the Tim’s same-store sales, you know, I think you characterized it well. I think we made a ton of progress across cold beverages. It was a big highlight throughout the year. And as I mentioned in the prepared remarks, even in Q4, which is not traditionally the strongest time of the year for cold beverages, we had our highest incidence ever, which tells you we are really building a better portfolio of offerings, and we are building new habits with our guests. So that is something we are very mindful of, and I think you will see us bring even more exciting innovation. I think you will see that cold bev mix keep ticking higher as we move through the year. In terms of PM foods, I do think we have made good progress there. We have expanded the portfolio and introduced some really great offerings. And we are going to build on that in 2026. We have got a whole calendar planned out of initiatives that build upon what we did in 2025, but I think brings some exciting additional innovations that will help us to build that habit with PM food. And I think we have always viewed our efforts to move into the PM as a long-term initiative, something that will take a lot of years. That is a big new front to open up for a concept that historically was really focused in the morning in that kind of 6 AM to 10 AM time window. So that kind of shift, it will take a number of years to build those habits, to build those product portfolios. I think we are well on the way to doing that. We are making good progress, not just on the product portfolio, but also on operations and making sure that we are delivering the same great experience through lunch and in the afternoon that we deliver in that morning daypart. Axel and the team have been really focused on that. I think that as much as the product innovations are going to be critical to making Tim’s a destination for folks in the PM, I think we are going to make some more progress on that in 2026 and also in the years beyond. Thanks. The next question comes from Brian Bittner from Oppenheimer. Brian, please go ahead. Your line is open. Kendall Peck: Thanks. Good morning and congratulations on Josh Kobza: a strong 2025. The important International segment really seems to be hitting on all cylinders recently, over 6% comps in the fourth quarter in the face of much stiffer comparisons. Kendall Peck: Burger King and Popeyes seem to be the standouts in the International segment, and I know this segment covers a lot of geographies, and you touched Josh Kobza: on a few in your prepared remarks. But generally speaking, can you just unpack for us how much of this momentum internationally is being driven by a healthier backdrop that you are operating in versus perhaps share gains that you are taking or what you are doing from a bottom-up perspective at Burger King and Popeyes? Thanks, Brian. I think it is a bit of all of the above. You know, I will walk through a few pieces. I think the backdrop has been decent in a lot of our markets, especially the European and Asia Pacific markets. And I think our brands benefit from a few different structural tailwinds in those markets broadly. You know, we have talked about it a lot, but there is a lot of structural growth in those markets. As you have more folks moving into the workforce, you have more folks getting into the middle class, you have more formalization of the restaurant segment. A lot of those markets, especially in places like India, where we are very early in what I think will be a long road of growth, decades to come. So I think you have got a really supportive structural market. And within that, our brands are also well positioned. You know, we have got modern assets. We are new in those markets. The brands are more aspirational. We are highly digitally enabled, and we have really great operations that are Josh Kobza: consistently driving Josh Kobza: same-store sales, and as you mentioned, I think same-store sales that have exceeded many of our competitors in a lot of those markets. You know, if you look across the regions, I would tell you EMEA in particular has shown consistent strength across a lot of our biggest markets. So that has been a consistent tailwind for us. And then in Asia Pacific, things have really gotten a lot better the last year or so. You know, obviously, we have talked a lot about China where we went from negative same-store sales to meaningful positive same-store sales. So that was a very intentional set of steps we took that moved a big market there. But I also mentioned, you know, markets like Japan that are not historically huge growth markets for folks. You know, we are doing double-digit comps on top of double-digit comps and growing the restaurant base there. So we have got a lot of markets in Asia Pacific that are really performing well over the last year or so. I think our team has been doing a really nice job out there, and some of that has allowed us to outperform the competition. Patrick, I would add just one other thing to kind of highlight. In calendar year 2023, our system sales for Popeyes outside of the US were $927,000,000. Last year, they were $1,700,000,000. We did a half billion in the fourth quarter, so we are already at a run rate of $2,000,000,000. It is a stunningly great business outside of the US, and really excited about what we are going to be able to get done with the Popeyes brand. And I will just add a couple more things on some of these International markets that are doing well. You know, I think if you go see our business in a place like France, it is really fantastic. We have wonderful locations, beautiful new assets, highly digital. The product quality is great. Alexis Simon and the team are truly passionate about the product quality. I think that is why we have driven tremendous growth there. And I can go to the other side of the world and go to Japan and I will tell you, if you are in Tokyo, I think you will have one of the best Whoppers you are going to eat anywhere in the world. And so these markets are really doing a great job at the fundamentals. And that translates to a great business model as well, which is driving growth. So lots of good reasons that International business is doing well. Josh Kobza: The next question comes from David Palmer with Evercore ISI. David, please go ahead. Your line is open. Josh Kobza: Great. Thanks, guys. I wanted just to follow up on Brian’s question about sort of walking around the world here. And, you know, I think a lot of us really know the US market in terms of the fast food consumer and the fast food market trends here. In the US, we know them less well in Canada, less well in Europe. It feels like Europe in general, and I am really focusing on this developed market side of things in this question, it feels like Europe is remarkably strong when it comes to fast food, particularly when you contrast it with some of the CPG commentary that we get in consumer staples world in regards to the European consumer. And then you pro looks like you are gaining share in a lot of these markets. So maybe just kind of Josh Kobza: sort of summarize, contrast, Josh Kobza: what you are seeing in the US. It feels like Canada is maybe a little weaker, maybe more like the US. And just how you think about the setups for key markets and help us get comfortable with that the strength can continue in markets like Europe. Josh Kobza: Thanks. Josh Kobza: Dave, thanks for the question. So I will maybe comment on both the EMEA markets and particularly Western Europe and a little bit on Canada as well. So if you look across the big Western European markets, so places like France, Spain, Germany, Great Britain, you know, every one of those markets was positive, low to mid-single digits. So we had a lot of consistency of positive performance across those markets, and I think that is what you see in the results. We also within EMEA, I mentioned this about Popeyes having a fantastic year in Turkey. Burger King in Turkey also was a standout performer, so a lot of unit growth and tremendous same-store sales growth. So we had a really good year across the board in Turkey. So I think it is that consistency across all of the biggest markets within EMEA. You know, they almost across the board had a positive year and quarter. That is driving the results that you see. And then if you go to Canada, you know, I think with around 3% same-store sales in the quarter, that is a pretty good result, I think, for a pretty developed business in a mature market. And I think importantly, within those results, we saw positive sales growth across all dayparts and all categories of the menu. So it was pretty broad-based, and I think that illustrates a pretty healthy business across the board. Josh Kobza: Next question comes from Dennis Geiger at UBS. Dennis, please go ahead. Your line is open. Great. Thanks, guys. I wanted to ask a little bit more about BK US given Sami A. Siddiqui: the continued industry outperformance in the quarter and your execution against plans despite the difficult environment. Anything more at a high level to talk about as it relates to opportunities for growth and share gains in ’26? And perhaps any thoughts you can share on franchisee sentiment right now and if that has got any implications for your confidence in the Carrols restaurant refranchising trajectory that you are thinking about? Thank you. Josh Kobza: Morning, Dennis. You know, I would tell you I am really proud of the work that Tom, Nico, Joel, the whole BK US team are doing. You know, it has been three or four years of working on the fundamentals, improving operations. We have come so far, improving the franchisee base, remodeling restaurants. You know, they have been doing all the basics, and I think for us, it was really interesting to watch what we did with SpongeBob in the fourth quarter. And, you know, I think that Joel and the marketing team did such a nice job on all of the elements of that, the IP, the products that they developed, the packaging, and then we executed it well at the restaurant. And I think, really, it was great work. But it delivered great results because of all the underlying work that we have done in the business. And it really told us that I think we are ready to take this business to the next level and really elevate the brand based on the work that we have done and the fundamentals. And I mentioned it in the prepared remarks, but we saw both a lot of new folks coming into the restaurants and then we saw them come back. And that tells me they had a good experience. And they really enjoyed what they saw. They were surprised by the Burger King that they found, the changes that we have made. And I think that is what we are so excited about as we go into ’26 is we think we have got the fundamentals to a place where we can now get really on our front foot and go bring a lot of new folks back in the restaurant. People who love Whoppers, bring families back. I think it really opens up the doors for us. And, you know, I think our franchisees feel that. They have seen that improve, they have seen those improved fundamentals. They have seen us doing a nice job on the marketing side. I think they are pretty excited about the direction that we are planning to go in the coming year. Sami, do you want to touch on the refranchising? Yeah. I can take that. Good morning, Dennis. And actually, you know, similar to what Josh was touching on, I think you see that excitement in the calendar and innovation. You see that translate into excitement around refranchising. When we first spoke about the Carrols transaction, we talked about refranchising really beginning in earnest in years three through seven. We started actually refranchising much ahead of schedule in year one. We said we would do about 50 to 100 refranchised restaurants in the first year. And we exceeded that. We actually did a little bit over 100. So I think that reflects a lot of the interest and excitement from local owner-operators in the Burger King brand. You know, to step back, and we have talked about this a lot on previous calls, the most critical thing is that we get the restaurants into the right hands, the hands of local owner-operators who are going to be aligned to driving great guest experiences. And we are seeing that in all of our conversations, and we look forward to actually accelerating that number here in 2026. Patrick Doyle: I will actually add one thing, which is, you know, the partnership with the franchisees is working because they know that we are focused on their success. We have been doing that now for a number of years, and they are seeing that what we have said we are going to do, we have done. And, you know, the remodels are generating a good lift in sales for them as we have been talking about for a couple of years. But we still have a lot more to do, which will continue to drive sales as we get more done. The service improvements that they are driving in their restaurants are giving guests a better experience, which means we are seeing things like Josh talked about. We do SpongeBob, and not only does that increase sales, but we see increased retention of those customers who have tried us because of it, because they had a good experience driven by our operators, driven by our franchisees and in our Carrols restaurants. You know, you see our improved marketing working and the focus that we are putting in there. So, you know, I can look at the glass half full, which is the things we have been doing are what have been driving the results that we are seeing in BK. And I can look at the glass half empty, which is we have still got so much more to do, and we know exactly what we need to do and what we are going to be doing over the course of the next couple of years. And that is what gives me confidence that we are going to continue to generate good growth and hopefully outperform the category and all of that being done with just consistent value that our customers can count on. We do not have to play around with a bunch of price points. We know what works, and we are doing that consistently. And their ability to count on that is a real value for our guests. Josh Kobza: The next question comes from John William Ivankoe from JPMorgan. John, please go ahead. Your line is open. Josh Kobza: Hi. Thank you. The question is on Popeyes US. And if I were to go back in history, you launched an incredible sandwich line in August ’19. I had to use the Internet to check that. In 2019, fried chicken is a great category. I mean, there are so many different people that want to be in the category and, quite frankly, have been successful in the category. And yet, you know, your results have really slowed down in the past couple of years, including some, you know, fairly low numbers in the fourth quarter of ’25. So I really want to go a couple places. So what do we kind of learn from the experience in the last couple of years, for example? What could you have done differently? In other words, what will you do differently to allow success? And then, really, I guess, maybe the bigger part of the question is, you know, a large franchisee declared bankruptcy in the Popeyes system. And, you know, looking at the comps, looking at that franchisee, are we kind of at the point at this point where we should stop thinking about new unit expansion and perhaps should even consider contraction until we get the franchise system and just the brand and the operating platform in the right place where it can materially grow again? Because I am sure me, like many others, had unit growth expectations for that brand ’26, ’27, ’28 for the Popeyes US business. Thank you, and hopefully, you absorb that question. Sami A. Siddiqui: Thanks, John. I will try to get through as much of that as I can, and feel free to add, Josh. It is a big topic to address regardless. So Patrick Doyle: for sure. Josh Kobza: So just to start off, I agree with you. I think the chicken category is amazing. It is a great category to be in, and I think we have a wonderful brand, both for the US and around the world. That said, as you pointed out, we have had weaker performance than we would like over the last few quarters. And that is why you saw us make a change in leadership. And I think Peter is exactly the right person for what we need to do. And I am super confident in both what he is already starting to do and where he wants to take the brand. I think if I would break down the learnings into two simple buckets that shape where we are going to be focused: one is making more progress on the consistency of operations. You know, the leading players in the chicken category on average have very good operations. And we need to make more progress on that front. Peter’s background is in operations, and that is exactly where he knows how to make progress. So I am very confident in what we are going to do there. And then I think on the marketing and product side, you know, we spent more time in categories that were a bit more non-core over the last year, year and a half. And I think we are going to bring that focus back to the core. We are going to bring it back to the things that made Popeyes great, you know, our hand-battered and fried bone-in chicken, our tenders, and our sandwich. So we are going to narrow the focus a little bit that I think is going to help us to bring back our core customers and to execute at a much higher level. So, you know, you will hear more from Peter directly here at our Investor Day on Feb 26. I encourage you to kind of hear from him directly because I think it is very compelling. But I would give you that outline of overall where he will generally be focused. In terms of your question on the franchisee situation, obviously, we did have a filing from one of the large franchisees. I would tell you that the rest of the franchisee system across the US is actually in a quite good place. Leverage levels are in a healthy place even though EBITDA stepped back a little bit. So I do not think that is at all representative of the rest of the system. As a result of that, while NRG has stepped back already, I think we will continue to see growth in the Popeyes US business over the next couple of years. You know, just one last stepping back, John, and you kind of pointed out at the beginning. In terms of stepping back and looking at the history, you know, we acquired this business about nine years ago. It has been a tremendous run. It has had a little bit of some ups and downs along the way, but it has really been great both in the US and around the world. If I actually go back to when we got involved in the business in 2016, what created that opportunity was a bit of a wobble in the business at that time. And, you know, that created an opportunity to acquire a brand in one of the most attractive, if not the most attractive segments in the entire world. And after that point in time, we managed to produce an incredible nine years of growth. I think we have tripled or quadrupled that business. And I hope we will do that again now under Peter’s leadership. Very helpful. Good job. Kendall Peck: Thanks, John. Josh Kobza: The next question comes from Brian Mullen from Piper Sandler. Please go ahead. Your line is open. Josh Kobza: Thank you. Just a question on Tim’s in Canada. I wanted to ask about Patrick Doyle: speed of service. I believe that has been a tailwind for some time now. I am just wondering if you still see opportunity Josh Kobza: to continue to improve from here. And then separately, can you just talk about the loyalty program, your efforts to continue to grow membership in that program, which we know is important. It correlates with higher visitation and spend. Thanks. Morning, Brian. I will take both parts of that question. So on speed of service, we have mentioned, I think, repeatedly over the last few quarters or years, we have made good progress there. I think Axel and Naira and the team are doing a very nice job. We are awfully fast in the morning. You know, the cars just fly through that drive-thru, sometimes every 20 seconds, which is remarkable. So it is pretty impressive that we continue to make progress there, and we will continue to seek to do so. There are a couple things that we are doing there that help. One of the big ones is actually the remodels. So I think we mentioned we have been ramping up the pace of remodels. And one of the big things that we do in those remodels is we rework the back of house in a way that accommodates some of the new things that have come in the restaurants—think about cold beverages—and allow us to enhance the speed of service in the morning. The other prong I would say there that is really important is our speed of service in the PM. And that is where historically we have not been as fast as the AM side of the business. And I think that will be a place where we can make maybe even more progress than we can in the AM over the next couple of years. In terms of the loyalty program, you know, we have made a lot of progress. We have got that up to about a third of the business. And we will continue to push adoption through everything from some of the events that we put out there, the things like Roll Up The Rim where we drive more digital engagement. But there is a new direction we are going with that as well, which I mentioned in my prepared remarks, which is partnerships. And we announced recently that we are going to do a loyalty partnership with Canadian Tire. We think it is a really obvious and very logical partnership for the brand. Two of the most iconic retailers in Canada coming together to tie together their loyalty programs. We think that brings even another compelling reason for Tim Hortons guests to become part of our loyalty program. And we will see how that goes. We are quite excited for it, but it opens a lot of doors to further places we could take that loyalty program to cause an even higher percentage of our guests to engage directly through our digital channels with us in the future. Brian, I will just add a couple stats here on the loyalty program, just because they are really incredible stats. What we are seeing is about 33% of sales came from loyalty members in 2025, which is incredibly strong. 7,000,007 active members. And our active members are spending more than 50% sort of post-joining versus pre-joining, and they visit more often than nonmembers. So a lot of good things to highlight in the program. And Josh brought up strategic partnerships that we think will further drive that business. And we also think that member-only offers through the app and the loyalty program are also going to help drive more penetration. So we are really pleased about the future of the loyalty program, and I think it is just the beginning. Josh Kobza: Next question comes from Andrew Michael Charles at TD Cowen. Andrew, please go ahead. Your line is open. Josh Kobza: Okay, great. You talked about your confidence in achieving 8% AOI growth in 2026, and I know you are saving the forward-looking commentary for the Investor Day. The release reiterated a 3% plus system same-store sales as part of the long-term algo. Wondering about your confidence this level can be achieved in ’26 and what you described as similar consumer backdrop domestically as ’25. Maybe said differently, is your belief in 8% AOI growth in ’26 contingent on reaching 3% same-store sales? Andrew, I will take that question. And Josh, feel free to chime in here. I think, look, first off, we are very pleased to have delivered three consecutive years of roughly 8% AOI growth and are excited, I think, to work again towards that target in 2026. Typically, kind of as we think about budgeting for the year and our targets for the year, we do target around that 3% same-store sales level, which is kind of consistent with our algorithm. I think as we think about that 3% comp and the unit growth kind of building towards system-wide sales, obviously the unit growth was a little bit lighter in 2025, though I think that still sets up a strong backdrop for system-wide sales. You know, rough math, if you are assuming around a 3% comp and just the math of it of around that unit growth from 2.9% unit growth from 2025, it equates to a top line of around 6% system-wide sales. Then I think there are a couple other puts and takes that kind of bridge to that 8% AOI growth. I think we have done a really good job on the G&A side. We have done a fantastic job in terms of adding discipline and really setting a new baseline for the business at $594,000,000 of G&A in 2025. We expect that to grow slower than the top line, so you will see operating leverage through the P&L from that. And then you will also see the Burger King China royalties come into the P&L in ’26, you know, at a couple points lower than our standard rate, but still kind of coming back into the P&L. When you take all of that together, I think that gives us confidence around the 8% organic AOI growth for a fourth consecutive year. Josh Kobza: The next question comes from Christine Cho with Goldman Sachs. Christine, please go ahead. Your line is open. Sami A. Siddiqui: Thank you so much. I really appreciated the color on beef Christine Cho: prices as well as the impact on franchisee profitability at Burger King. And you have mentioned that you expect improvement as these costs normalize. But beyond that, are there any organic cost and margin opportunities you have identified across the P&L that could help strengthen the four-wall economics as we look into 2026? Thank you. Josh Kobza: Hey. Morning, Christine. I can take that question. I think, look, you know, the beauty of being a multi-branded organization and having the size and scale we have all over the world is we are able to share best practices between all of our partners around the world and ultimately drive franchisee profitability. And there is a variety of things that we are working on when you think about from procurement and our global procurement scale, to thinking about digital contracts, to thinking about operational efficiencies. We like to share those best practices across our brands and ultimately that is kind of what helps drive franchisee profitability, be it at Burger King US or Tim’s in Canada. I would say particularly on the beef prices, obviously, we have seen beef prices be at record highs over the last year or so. And any of those levels have sustained. This is very regular and kind of normal in the market, and I think if you look at the beef market over many decades, the herd rebuilding cycles are a very common sort of pattern in this industry. We anticipate there will be relief at some point, though I think likely if there is relief on that side of things, it is likely closer to the second half of the year on beef in particular. So, but look, I think stepping back, as you think about franchisee profitability, it was down year-on-year for the Burger King system. Though I think we see, you know, when you normalize for those beef prices, actually roughly flat to even slightly positive year-on-year when you kind of incorporate the step to the ad fund contribution as well. The only other thing I would add, Sami, is, you know, the best possible way for us to grow the franchise profitability of Burger King is through growing sales in a profitable manner. I think that that is what is front and center with Tom and the franchisees is how do we do a great job growing the AUVs of this business in a profitable way. And I think the stuff that we are focused on, things like making the Whopper as amazing as it can be and bringing families back into the restaurant with awesome IP partners, those are great in that they bring more guests into the restaurant, they drive more sales. And it is very profitable traffic for the franchisees. So I think the sales, you know, we are always looking at cost opportunities, but I think the sales part is just as or more important. Josh Kobza: Our final question today comes from Brian James Harbour at Morgan Stanley. Brian, please go ahead. Your line is open. Patrick Doyle: Yes, thanks. Good morning, guys. Josh Kobza: I am curious where Patrick Doyle: new unit paybacks are. I guess I will focus my question on North America for sort of the unit growth brands. Do you think those are where they should be? How do you think it compares to some peer concepts? Or what else do you think you need to drive those besides obviously driving AUVs like you just mentioned? Sami A. Siddiqui: Yeah. Brian, I can take that one, and Josh can jump in as appropriate. I think as we think about, obviously, new unit paybacks are very tied to the franchisee profitability metrics that we disclose. And, you know, when we think about new unit paybacks, I think it is also important to think about who is developing. And so really critical across all of our brands is that we are developing with strong operators, A operators. And if you actually look at A operator, you know, we typically are disclosing averages, but the A operator profitability is typically much higher than that. So when we are looking at new unit paybacks and the investment case for building units, particularly in the home market, you see actually pretty compelling paybacks across the A operators. I would say some of the most compelling, if you kind of tick through the brands, certainly continue to be at Tim Hortons in Canada. You know, at around $300,000 in four-wall profitability, and, you know, often with us with the corporate contribution on real estate. When you think about the paybacks the franchisees typically are looking at, you know, investing in FF&E equipment packages, and with us sitting on the head lease, that typically creates very strong payback on the order of, like, three years in Canada. When you kind of come to the US, and I will tick through—actually what was nice to see is the fastest growing US brand being Firehouse. When you think about the Firehouse payback, you know, that is a totally different development model. It is an inline development model. It is very scalable, and the increases in profitability combined with some of the great work that Mike and the team are doing. That is also leading to around three-ish year paybacks on new, three to three and a half year paybacks on new Firehouse units. And so, you know, the two faster growing in our home markets are very strong payback. You know, at Burger King, as we have talked about extensively now, we have a little bit of work to do on the profitability side. Josh said it best when the best thing we can do is drive sales and drive top line to improve those ROIs. But we do still have a lot of our franchisees who are developing—those A operators. They are seeing compelling returns with their higher average profitability. I would say the same thing on Popeyes as well. You know, our A operator profitability at Popeyes is still close to $300,000 of four walls. So when you think about payback, they are still quite strong. Josh Kobza: I will now hand the call back to Josh for any closing comments. Josh Kobza: Great. Well, thank you everyone for joining us today, and importantly, thank you very much to our teams all around the world and our franchisees for a great year in 2025. We look forward to seeing many of you on the call here in Miami in two weeks, and wish you all a great day. Thank you very much. Josh Kobza: This concludes today’s call. Thank you very much for your attendance. You may now disconnect your lines.
Operator: Good day, and welcome to the Fourth Quarter and Full Year 2025 Zebra Technologies Corporation Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Michael Steele, Vice President of Investor Relations. Please go ahead. Good morning, and welcome to Zebra Technologies Corporation’s fourth quarter earnings conference call. Michael Steele: This presentation is being simulcast on our website at investors.zebra.com and will be archived there for at least one year. Our forward-looking statements are based on current expectations and assumptions, and are subject to risks and uncertainties. Actual results could differ materially and we refer you to the factors discussed in our SEC filings. During this call, we will reference non-GAAP financial measures as we describe our business performance, with reconciliations shown at the end of this slide presentation and in our earnings press release. Throughout this presentation, unless otherwise indicated, our references to sales performance are year-on-year at constant currency and exclude results from recently acquired businesses for twelve months. This presentation will include prepared remarks from William J. Burns, our Chief Executive Officer, and Nathan Andrew Winters, our Chief Financial Officer. Bill will begin with a discussion of our fourth quarter and full year results. Nathan will then provide additional detail and discuss our outlook. Bill will conclude with progress on advancing our strategic priorities. Bill and Nathan will take your questions following the prepared remarks. Now let's turn to slide four as I hand it over to Bill. Thank you, Mike. William J. Burns: Good morning, and thank you for joining us. We delivered fourth quarter results above our outlook driven by our team's strong execution and positive demand trends. Before discussing the quarter, I would like to briefly reflect on the progress we have made over the past year on our vision to advance intelligent operations. In 2025, we expanded our connected frontline portfolio and customer base through the Elo Touch acquisition and expanded our 3D machine vision capabilities with the Fotoneo acquisition. We advanced our market leadership with the introduction of our AI solutions for the frontline and sharpened our focus on automation by exiting our robotics business to prioritize areas where we see better growth opportunities including RFID, machine vision, and AI-powered solutions. Operationally, we delivered solid growth, generating strong free cash flow, and deepened customer and partner relationships. For the fourth quarter, we realized sales of nearly $1,500,000,000, a 10.6% increase, or 2.5% on an organic basis, from the prior year, an adjusted EBITDA margin of 22.1%, and non-GAAP diluted earnings per share of $4.33, which was 8% higher than the prior year. We drove strong results in our Asia Pacific and Latin America regions with EMEA returning to growth. Our healthcare, manufacturing, and retail and e-commerce end markets grew while transportation and logistics cycled strong compares in North America. Elo performed well in the quarter and we are pleased with the early progress on driving synergies. We realized solid earnings growth by fully mitigating existing tariffs and driving operating expense leverage through productivity initiatives while continuing to invest in our market leading solutions portfolio. For the full year, we achieved greater than 6% sales growth in line with our long-term expectations and 17% non-GAAP diluted earnings per share growth. We also generated more than $800,000,000 of free cash flow and closed on accretive acquisitions. Overall, our team executed well while navigating an uncertain environment. Our strong financial position enabled us to return significant value to shareholders with more than $300,000,000 of repurchases in Q4 and nearly $600,000,000 for the full year. Given our progress, our Board of Directors has expanded our authorization by $1,000,000,000. We will continue to execute on our disciplined and balanced capital allocation strategy prioritizing investments in our business that elevate our portfolio of solutions, while consistently returning capital to our shareholders. We are well positioned as we enter 2026 and excited about the opportunities ahead. I will now turn the call over to Nathan to review our Q4 financial results and 2026 outlook. Nathan Andrew Winters: Thank you, Bill. Let's start with the P&L on slide six. In Q4, total company sales increased 10.6% or 2.5% on an organic basis with growth across most categories. Our Connected Frontline segment grew 3.6% led by mobile computing, and our Asset Visibility and Automation segment grew 1.3% led by printing and supplies. We realized solid performance across our regions. William J. Burns: Asia Pacific sales increased 13% led by Japan and India, Nathan Andrew Winters: sales increased 8% in Latin America with double-digit growth in Mexico, William J. Burns: in EMEA, sales increased 4% with solid growth in Northern Europe and Germany. And in North America, sales declined 1%, as we cycled large order activity in the prior year partly offset by solid run-rate demand. Adjusted gross margin declined 50 basis points to 48.2% primarily due to lower services and software margins. Nathan Andrew Winters: We fully mitigated current tariffs earlier than expected thanks to our team's successful efforts including supply chain moves, product portfolio rationalization, and price execution. William J. Burns: Adjusted operating expense leverage improved by 60 basis points. Nathan Andrew Winters: This resulted in fourth quarter adjusted EBITDA margin of 22.1%, William J. Burns: non-GAAP diluted earnings per share were $4.33, an 8% year-over-year increase, Nathan Andrew Winters: and above the high end of our outlook. William J. Burns: In Q4, we recognized $76,000,000 of restructuring charges relating to the exit of our robotics business and productivity initiatives. Turning now to the balance sheet and cash flow on slide seven. For the full year, we generated free cash flow of $831,000,000, or a conversion rate of 102%. At year-end, we held $125,000,000 of cash with a modest debt leverage ratio of 2 and $1,200,000,000 of credit capacity. Nathan Andrew Winters: We have been deploying capital consistent with our allocation priorities. For the full year, we repurchased $587,000,000 of stock William J. Burns: and acquired Elo, Nathan Andrew Winters: and Fotoneo with cash on hand and our existing credit facility. William J. Burns: We continue to maintain excellent financial flexibility Nathan Andrew Winters: for investment in the business and return of capital to shareholders. As Bill noted, our Board authorized an additional $1,000,000,000 of share repurchase providing a total of $1,100,000,000 after the $100,000,000 repurchase through early February. William J. Burns: This action underscores the confidence in Zebra Technologies Corporation’s prospects for continued growth and value creation. Let's now turn to our outlook. Nathan Andrew Winters: We entered 2026 with a solid backlog and pipeline that supports our first quarter sales growth guidance range William J. Burns: of 11% to 15%, Nathan Andrew Winters: including approximately 10 points of contribution from business acquisitions and favorable FX. Our first quarter adjusted EBITDA margin William J. Burns: is expected to be between 21%–22%, and non-GAAP diluted earnings per share Nathan Andrew Winters: are expected to be in the range of $4.05 and $4.35. For the full year, William J. Burns: we expect sales growth to be 9%–13%, Nathan Andrew Winters: which reflects a strong pipeline of opportunities, William J. Burns: machine vision returning to growth, continued momentum in RFID, along with manufacturing, and a seven-point favorable Nathan Andrew Winters: impact from acquisitions and FX. William J. Burns: Our full year adjusted EBITDA margin is expected to be approximately 22% and non-GAAP diluted earnings per share are expected to be between $17.70 and $18.30. We are currently facing industry-wide price increases for memory components beginning in Q2. Our full year guide reflects us fully mitigating this approximately two-point headwind and driving profitable growth in 2026 through multiple initiatives, including collaborating closely with our vendors to manage supply, targeted price increases, net savings from the robotics business exit, Nathan Andrew Winters: targeted actions to drive productivity, as well as FX favorability. William J. Burns: Free cash flow for the year is expected to be at least $900,000,000 which reflects free cash flow conversion of approximately 100%. We are continuing to optimize our working capital levels balanced with our supply chain resilience objectives. Nathan Andrew Winters: Please reference additional modeling assumptions on slide eight. With that, I will turn the call back to Bill. Thank you, Nathan. As we turn to slide 10, William J. Burns: Zebra Technologies Corporation remains well positioned to benefit from secular trends to digitize and automate workflows with our innovative portfolio of solutions including purpose-built hardware, software, and services. We deliver intelligent operations by digitally connecting people, assets, and data to assist our customers Nathan Andrew Winters: with business-critical decisions William J. Burns: that drive meaningful outcomes. A $35,000,000,000 served market represents a significant growth opportunity. Zebra Technologies Corporation’s complementary and synergistic segments position us well to capitalize on this opportunity. The Connected Frontline provides the digital touch points necessary to improve efficiency, collaboration, and the customer experience. Our solutions include enterprise mobile computing, Nathan Andrew Winters: interactive displays, William J. Burns: frontline software, and AI agents. Asset Visibility and Automation gives assets a digital voice to automate environments with technology that scales through printing solutions, advanced data capture, RFID, and machine vision. Turning to slide 11. Zebra Technologies Corporation solutions enable our customers across a broad range of end markets to drive productivity and efficiency and improve the experience of their customers, shoppers, and patients. We are accelerating our investments in RFID, machine vision, and AI, further sharpening our strategic focus. Zebra Technologies Corporation is investing in RFID solutions that advance our leadership and support emerging use cases. Our next generation mobile computers embed RFID reading capabilities to prepare our customers for the increased penetration of RFID tags across the supply chain. A North America telecommunications company recently selected our new RFID-enabled mobile computers for their retail locations, replacing consumer devices. Our solution enables this customer to improve inventory accuracy and reduce shrink, as well as lowering IT support costs over the product life cycle. We are excited about the momentum we are seeing in RFID adoption and our pipeline of opportunities. We are driving new opportunities in machine vision by investing in go-to-market initiatives for deeper engagement with our customers. There are many mainstream workflows that benefit from the proven return on investment from our solutions. Nathan Andrew Winters: For example, William J. Burns: a large European parcel delivery company has selected Zebra Technologies Corporation’s machine vision platform to drive productivity gains by identifying and sorting parcels, eliminating bottlenecks along conveyance systems. We have a strong pipeline of machine vision opportunities and expect to return to growth in 2026. Now turning to slide 12. At the National Retail Federation trade show in January, our team, along with valued customers and partners, demonstrated how our innovative portfolio advances the AI-powered modern store through engaged associates, optimized inventory, and an elevated customer experience. Nathan Andrew Winters: These outcomes are achieved William J. Burns: through improved real-time inventory management, omnichannel execution, and technology-empowered workers and shoppers. Nathan Andrew Winters: The addition of the Elo Touch business William J. Burns: enhances the modern store experience as our combined capabilities along with AI enable us to offer additional ways to digitize operations across multiple touch points. Together with Elo, we will deliver higher customer satisfaction and complete solutions through the intersection of frontline mobility, self-service, and digital media. This value proposition extends well beyond retail, including quick-serve restaurants, hospitality, healthcare, and other industrial markets. For example, a high growth multinational fast-food restaurant recently selected Elo's self-serve kiosk at its U.S. locations to increase order size, Nathan Andrew Winters: enable faster fulfillment, William J. Burns: and improve order accuracy. Looking ahead, we have an opportunity to expand our business across their entire point of service platform Nathan Andrew Winters: and also supply their international locations. Turning to slide 13. William J. Burns: Our industry leadership puts us in a unique position to be a supplier of choice of AI solutions for the frontline of business. Our Connected Frontline and Asset Visibility and Automation segments play a critical role in enabling AI for business operations. As AI transforms the frontline of business, asset visibility becomes essential, providing a digital voice to physical assets to identify, locate, and understand condition. This real-time data provides critical insights allowing AI models to better understand the physical world which is fundamental to transforming frontline workflows across industries. Our connected frontline solutions unify a mobile workforce which, combined with our SaaS offerings, deliver the output from AI models to frontline workers providing the right information to the right person at the right time. Nathan Andrew Winters: Global solutions will be capable of seeing, William J. Burns: hearing, and understanding the environment while interacting with frontline workers in a conversational or vision-based way. We continue to invest in our AI solutions with our recently launched Frontline AI Suite, comprised of three components. AI Enablers are foundational to our offering, consisting of tools and APIs that empower partners and customers to build enhanced applications for mobile devices. Our AI Blueprints combine enablers into purpose-built templates that streamline multistep workflows. These blueprints integrate computer vision, Nathan Andrew Winters: voice recognition, and sensor data William J. Burns: to automate critical workflows such as proof of delivery, material receiving, and shelf merchandising. Zebra Companion includes agents we design and manage addressing key responsibilities including operating procedures, product knowledge, and sales enablement. Our Frontline AI Suite is a clear differentiator in the industry and enables us to meet a range of customer requirements. Our partners and customers can choose to build their own fully customized application using Enablers, elect to adopt Blueprints to more quickly address their evolving business needs, or deploy our fully functional Zebra Companion. AI Enablers are a value add to Zebra Technologies Corporation’s mobile computers, while AI Blueprints and Zebra Companion are software and service offerings with paid pilots already underway and scaled deployments expected this year. We are pleased that two prominent retail customers demonstrated the value of our Frontline AI Suite at the NRF trade show, and we look forward to building on our momentum to further elevate Zebra Technologies Corporation as the leading solutions provider Nathan Andrew Winters: for the frontline of business. William J. Burns: I will conclude on slide 14, which highlights end market trends driving our long-term growth opportunities across our end markets. These include several broad-based themes including labor and resource constraints, track-and-trace requirements, increased consumer expectations, and advancements in artificial intelligence. Nathan Andrew Winters: Our customers rely on our solutions William J. Burns: to advance their business-critical workflows and we are uniquely positioned to address the need for intelligent operations with our market-leading portfolio. I will now hand it back to Mike. Michael Steele: Thanks, Bill. We will now open the call to Q&A. We ask that you limit yourself to one question and one follow-up to give everyone a chance to participate. Operator: We will now begin the question and answer session. If you are using a speakerphone, to withdraw your question, Operator: Our first question today comes from Thomas Allen Moll of Stephens. Please go ahead. Good morning and thanks for taking my questions. Good morning, Tommy. Good morning, Tommy. First one for you on memory. Nathan Andrew Winters: Nathan, I think I heard you say that beginning in Q2, you anticipate a two-point headwind that you can fully offset. So maybe we can just unpack that a little bit. Two-point, I presume you are just referencing a two percentage point hit to William J. Burns: gross margin Nathan Andrew Winters: and William J. Burns: maybe you can give us some context how that progresses from Q2 and beyond? Or Nathan Andrew Winters: maybe you can quantify for us some of the William J. Burns: initiatives that you have in flight to try to offset that headwind? Thank you. Yes, for sure. Nathan Andrew Winters: No. It is correct. What we said in the statement is about two-point gross margin headwind on a gross basis, but obviously, the memory chip demand and price expectations have escalated quite a bit since the beginning of the year. But we are pursuing multiple mitigation strategies, different than what we have done before, whether this was with tariffs or semiconductors. So we recently announced price increases globally over the past week. They will be effective in March. Practically working with our suppliers around spot buys, co-planning around the demand trends as well as looking for alternative memory sources. And then a lot of work from our product teams on transitioning to some higher density memory. So, again, quite a few active work streams in process. And if you look at the impact for 2026, I mean, this is based on indicative pricing from our suppliers and where they see that going here over the next several quarters. The impact really begins in Q2 just based on the timing of those price increases, as well as what we have in inventory going into the year. But we fully expect to mitigate that within the year, and that is embedded in our guidance. About a half of that or a point is offset with just other offsets we have, whether that is the exit of the robotics business, some tailwinds from some of the lower tariff rates, as well as the actions the team has taken to mitigate the tariff exposure, as well as some of the favorability in FX. And then the other half coming through as we realize the pricing benefits into Q2 and through the second half of the year, as well as all the other mitigating actions the teams are currently working. So again, our teams have done a really great job at securing supply to meet the demand we have within the guidance. So a lot of work. It is obviously dynamic, but I think, again, we feel good about where we are at with the work streams and working closely with our supply base. Thank you. And I want to follow up on the repurchase Nathan Andrew Winters: update you provided today. It sounds like you have already done William J. Burns: $100,000,000 through Nathan Andrew Winters: the year-to-date period. And so my question is with the new authorization and William J. Burns: assuming your stock is at similar levels, is there any reason why you would not Nathan Andrew Winters: or, excuse me, why you would slow down the recent level of repurchase? Nathan Andrew Winters: No. If you look at, I mean, if you just take a step back, ending the year from a debt leverage around 2x, we feel great about the overall capital structure, strong cash position, balance sheet is in good shape. So, as we said, we repurchased $300,000,000 of share repurchases in the fourth quarter. We have repurchased $100,000,000 year to date leading into the call. So right now, we are targeting to do share repurchase around 50% of our full year free cash flow of $900,000,000. That will be primarily here in the first half of the year. So, again, we continue to plan to be aggressive in the market here over the next several months, and this still provides ample flexibility as we enter the back half of the year based on our cash profile for the year. Operator: The next question comes from Guy Drummond Hardwick of Barclays. Operator: Hi, good morning. Guy Drummond Hardwick: Bill, I think it has been a couple of years since you have referenced the pipeline. So I guess that is very positive. So is visibility improving? But just more specifically in the near term, it appears the midpoint of your Q1 revenue guidance suggests revenues are above Q4, which is much better than seasonality. Any particular reasons for that? Is that Elo? Is it because of the pull forward from Q4 to Q3 makes an easier comparative? What other sort of issues are there? And is FX a big change sequentially? William J. Burns: Yeah. I would say that the strong finish to the year certainly is playing into this. As we exceeded our outlook, 2025 we drove solid growth, 6% growth and then 17% EPS growth, greater than $800,000,000 of free cash flow in what was an uncertain environment through the year. Elo added two points of sales growth to the year leading to 8% growth for the full year, really advancing our offerings in the Connected Frontline segment, and then also our capabilities across engaging customers in a digital way certainly in that segment. So enhanced our modern store offering as well. We see that, as we enter 2026, there is momentum. Right? We see reacceleration of growth coming out of fourth quarter, led by manufacturing, our machine vision pipeline, momentum in RFID are all positives as we enter the year. We are seeing our customers continue to talk about investments in technology as we spent a lot of time with them at the National Retail show. Really, we are focused on higher growth opportunities across the portfolio and to drive productivity with the business, as Nate talked about, kind of offsetting memory. So I think overall, we feel good as we enter the year and that the momentum is there to Nathan Andrew Winters: drive profitable growth in 2026. Nathan Andrew Winters: And then, Guy, I think, if you look at the Q1 guidance, as you mentioned, in line or roughly flat from where we were in Q4. I think a couple of things in play. One, if you just look back over the last couple years, linearity has been anything but typical. So I think it is hard to say what has been typical linearity if you look back just at what has happened over the past couple years. Nathan Andrew Winters: But also, Nathan Andrew Winters: we did not see, as we said in our guidance for the fourth quarter, kind of a surge in year-end spends. So we did not see the same type of cyclical improvement from Q3 to Q4. And then Elo plays a small part, just not quite the same seasonality, more linear throughout the year. So I think all three of those play a factor, along with, as Bill mentioned, the demand environment, all play a factor in why Q1 is going to be in line with Q4 in the top line. Guy Drummond Hardwick: Sorry. Just on the memory issue, do you have much visibility to the back end of the year in terms of what could be the annualized impact as we kind of exit Nathan Andrew Winters: Yes. I mean, we have, I mean, really, the Guy Drummond Hardwick: the year? Based on your discussions with your suppliers? Nathan Andrew Winters: pricing we have gotten now is kind of through the middle of the year. So I think that is, you know, and obviously, that is what we have incorporated into the guide as well as some assumptions around just how that may play out in the back half. I think the way to think about it now would be you take the two points, really pull that over the second, third, and fourth quarter, and then annualize that run rate on an annual basis. So it is not that much different from what we are seeing here in our 2026 guide. Operator: Our next question comes from Joseph Craig Giordano of TD Cowen. Please go ahead. Operator: Hey, guys. Operator: Good morning. Thanks for taking my questions here. Can you talk about, like, I mean, it is a fairly wide-ish, it is kind of a wide organic growth guide for the year. So maybe you could talk to scenarios and what your visibility looks like and how you are, you know, what would be required from a Nathan Andrew Winters: from, like, a market standpoint to get to that higher end? And how, like, de-risked is the low end. Yeah. Maybe just, you know, start with the full year guide. 11% at the midpoint, 22% EBITDA margin, and double-digit EPS growth. So again, I think we feel good about the overall profile for the year. And as Bill mentioned, I think the underlying theme of that is entering the year with a strong pipeline, the momentum across different parts of our business, whether that is RFID, manufacturing, machine vision. And I think if you take a step back, we believe the guide provides a balanced view of the environment where we sit here today, including still some macro uncertainty out there, the memory component challenges, with the opportunities that we see in the market. So if you look at the 11% midpoint, about four points of that is driven by underlying demand. Elo provides five and a half points of the growth, and FX is a point and a half there. And I think visibility is pretty typical for what we see at this time of the year. So I think the range is really bound around the midpoint. It is more how we think about it in terms of circular around the midpoint. Obviously, the macro conditions, timing of deals, play a factor in kind of the balance between the low and high end of the range. But I think we are based on everything we have today. Joseph Craig Giordano: And just a follow-up. Can you talk about price just like bigger picture? Has the William J. Burns: has the way customers think about price of these types of electronics, like, structurally changed and maybe permanently changed? Like, is it, I mean, how much of your, how much of your revenue base now is almost like just pure pass through of weird things that have happened, right? Whether it is Joseph Craig Giordano: whether it is tariffs or memory or etcetera. Is it just, like, William J. Burns: more acceptable behavior now and customers kind of can accept that price is not just going to keep going down into perpetuity for, like, existing products? Nathan Andrew Winters: Yeah, Joe. I would say that Joseph Craig Giordano: you know, the things like tariffs and memory and others have, William J. Burns: you know, allowed us to raise price where, you know, along with Joseph Craig Giordano: with our competitors as well. I think you are just seeing this across the industry that it is William J. Burns: not possible to absorb the cost of tariff or memory and we have to raise price. And I think that, look, our customers are price sensitive. We have competitors in the market. Our largest customers get our best pricing. That is just the way it works, and we continue to work with them to make sure they are seeing the value. We are adding a lot of technology to our devices, not just, you know, we are raising price because we have to on memory and tariff and others, but also, they are getting a lot of value. Right? We have added RFID to all our next generation mobile devices. We are increasing memory and Joseph Craig Giordano: processing speeds, working with, William J. Burns: you know, our partners in Qualcomm and Google on the OS to make sure that they can support AI models on the device. So they are seeing value in things like mobile computing. We are doing the same across the entire portfolio, adding Joseph Craig Giordano: AI capabilities, capabilities to machine vision, continuing to enhance capabilities around scanning, William J. Burns: printing to that portfolio. So, you know, our print portfolio, we are adding RFID. There is a lot of value as well that our customers are getting from our solution. William J. Burns: Certainly, there is price sensitivity and competition, and that all matters. But look, we do not have a choice but to raise price when memory and tariffs and others are so significant. But I think our customers understand that. They are seeing that across not just our segment, but many others. Nathan Andrew Winters: Yeah. And, Joe, I think if you just look back at last year, even with the price increase we did in April, it still represented a little over half a point of the full year organic growth. So still the vast majority of the growth last year was driven by underlying demand. So it clearly plays a part, but that underlying demand is still what is going to ultimately drive the top line. Operator: The next question comes from Robert W. Mason of Baird. Operator: Please go ahead. Yes. Good morning. Operator: Maybe just an extension of that last question. I mean, as you think about the way you have laid out the guidance for the first quarter and how you are thinking about the balance of the year and when pricing goes into effect. Are you giving any consideration to customers trying to get in front, you know, moving projects, pulling those forward, you know, trying to get ahead of some of the price increases or just, you know, uncertainty around memory in general? Nathan Andrew Winters: Yeah, Rob. So I think two points. On the first quarter, we are not expecting any type of pull-forward activity, or that is not incorporated into the guidance. I mean, we just announced the price increase this past week. So, obviously, what we were seeing in the pipeline of opportunities was unaffected by the price announcement here just over the past week. And just how we implement that through our distribution channel, with our partners, in terms of honoring prior pricing that we have or updating the full backlog or what is sitting with our distributors. As we have done these price increases in the past, we really have not seen a huge pull-in of demand just based on how we administer that through our channel, as well as honoring some of the PCs, price concessions we have with certain customers on deals. And then I think the other one, just as you look at the incremental price increase we announced this week, that is not been incorporated into the guide. Similar to how we thought about last year. We want to monitor the impact. We just announced it, so, obviously, that is being absorbed through the channel. So I think, as we sit here today, we thought it was the right move to say, what is really what we are seeing from the underlying demand today? And then we will update that as we go through the year in terms of how we see that as either incremental revenue or any type of trade-off with underlying demand. William J. Burns: Yeah. I would say that maybe just to add, Rob, that, you know, talking to our partners at our channel partner conferences, we have been through North America and Asia Pacific already, and you know, the message they are sending to customers is, you know, let us talk about these major projects early. Let us get those orders in. William J. Burns: Not the idea of to save on pricing or others, but more just to make sure we have supply for them ultimately. And I think that is the message they are sending. So I do not see people buying early because of it. I think it is just a reality of what is happening across memory. But I think it allows our partners to have the conversation early with early visibility William J. Burns: to especially larger opportunities with our customers to make sure that they understand that, you know, the more visibility we have to demand on specific product they are looking to utilize, then we can go meet that demand with the memory we have. Operator: Makes sense. And then, Bill, you mentioned this Operator: return to growth in machine vision. I think historically, we are aware of where you had some maybe over-index into certain verticals. Are those the verticals that you are expecting Joseph Craig Giordano: to see recovery in? Or do you have some new ones that you are looking to drive that return to growth? Yeah. We see that machine vision is really an integral part of the Asset Visibility and Automation segment for us. And I think that William J. Burns: when we look at machine vision, we saw sequential growth in fourth quarter. So we feel good about that. We have seen some new wins both in, you know, as you know, the machine vision market, there are two sides of that. One is T&L. So we have seen some large Joseph Craig Giordano: transportation and logistics wins, and the other is inside William J. Burns: manufacturing. So we have seen at the high end of our portfolio some Joseph Craig Giordano: you know, automobile manufacturing wins that are coming back a bit. So I think manufacturing William J. Burns: in general on the machine vision side Joseph Craig Giordano: recovering, in addition to T&L, is William J. Burns: a good sign. Joseph Craig Giordano: We expect sequential growth to continue through first half, but solid growth for the full year. I think the pipeline is, you know, we have been working hard to diversify the pipeline of customers, but William J. Burns: everything across inspection, you know, dock door, pack bench, scan tunnel, optical character recognition, to a broad breadth of Joseph Craig Giordano: opportunities that the team is working on. I would say as we are looking to diversify, William J. Burns: the business, as you said, into new vertical markets. I think our value proposition is strong. We have got, Joseph Craig Giordano: you know, we focus around ease of use, the unified software platform that we have brought across the portfolio. We have invested in go-to-market. We have changed out some leadership in the business. Acquired Fotoneo to have another offering at the high end of the market. William J. Burns: So I think, you know, Joseph Craig Giordano: we feel good the market is recovering overall in machine vision as manufacturing recovers and T&L spends again in that environment. Joseph Craig Giordano: So Joseph Craig Giordano: we see, you know, solid growth, quite honestly, into 2026. So, you know, overall, I would say we feel good. Operator: Our next question comes from Keith Michael Housum of Northcoast Research. Please go ahead. Good morning, guys. Appreciate the opportunity. Sorry to harp on the memory issue a little bit more, but I appreciate, Nathan, the visibility through the first half of the year. But we are hearing more and more concerns along the industry that perhaps product shortages and limitations to sales in the second half of the year. Can you talk about any confidence you have that in regards to the price, Nathan Andrew Winters: you are going to have the availability there of the products? Operator: Yeah. Of course. Nathan Andrew Winters: Look, I think the team, as I mentioned earlier, the team has done a great job working with suppliers. Bill mentioned, I mean, part of this message through the channel with our partners is getting the visibility on those projects to what SKU, what product do you want, and getting that visibility early. It allows us to then shape demand. So it is really around, you know, a bit of can we get the product, as much as get the right memory for the right product that we need and making sure that those precious components are going to the right product families as we build out the pipeline. So that is where the team is really focused now, shaping demand, working with our customers around the particular SKUs they are looking for around projects maybe a bit earlier than normal, so that as we build the build plan, work back through our supply chain, we are getting the right memory through the pipeline. And then the other thing the team is working actively is moving to the higher density memory, with a lot of that capacity planned to come online in the middle of the year. So part of that is also shifting to the newer memory, which, again, we expect for that supply to increase as we go to the back half of the year. William J. Burns: I think, Keith, maybe I will just add really quick. Just strong supplier relationships is critical to this and that we know coming out of COVID, that is critical for our business. And we have worked really hard to make sure that we have got the right relationships in place with our suppliers and they are, quite honestly, guiding us through this, as Nate said. You know, months ago we had the conversation around moving to new memory that would be more readily available, and we have got early samples of that. We are working with William J. Burns: our other suppliers to go test that and make sure that we are ready. So we are doing everything our suppliers are asking us to go do to get the most access to memory we can. And those relationships really matter ultimately. We are working closely with them. And as Nate said, William J. Burns: on the other side of it, on the partner or customer side, to say, look, we do not want to build product and put memory in it that we do not need for customer demand. So we want to make sure we have got the right SKU, the right product, William J. Burns: the right timing around it, William J. Burns: and the analysis we have done so far is that we are going to mitigate the pricing, and we are going to have the supply we need. There is always some risk in that, but we feel good about where we stand today. The team has done a lot of work on this. Operator: Okay. Great. In terms of that memory, Operator: is it primarily the mobile computers that are at risk here? Or is it also point of sale of the Elo or the printers? Is that experiencing some of the same issues or is it really concentrated with mobile devices? Nathan Andrew Winters: Concentrated to mobile devices. Elo and the POS and kiosk business has, you know, similar, but it is predominantly in those two portfolios. But, again, the teams there are working closely together. Our supply chains are William J. Burns: you know, tied on exactly what we are doing from Operator: a pricing perspective, but also a supply perspective and leveraging William J. Burns: the strengths of both of our, you know, both Elo and William J. Burns: core Zebra to make sure we have got William J. Burns: supply across both. Operator: The next question comes from Andrew Edouard Buscaglia from BNP Paribas. Please go ahead. Operator: Hey, good morning, everyone. Good morning, Andrew. Nathan Andrew Winters: I just wanted to get William J. Burns: a sense of these kind of customer conversations you are having in terms of what they are thinking for 2026. Joseph Craig Giordano: It sounds like, I mean, you have a, it sounds like you have a healthy backlog and your Q1 guidance implies some, William J. Burns: you know, improving spending. But what are the customers saying in terms of the biggest, you know, impetus to spend here? Is it, like, in the past, you talked about clarity around tariffs. Is it, are they taking advantage of accelerating depreciation? And is there an upgrade cycle, maybe they just have not bought in so many years, and they have got to move forward this year. I would say that the, you know, William J. Burns: customer conversations are really around the idea that they are continuing to invest in their business, you know, and that is across all verticals. We have spent, you know, even though it is early in the year, a lot of time with customers, as I mentioned, at National Retail show, but, you know, our largest T&L customers, because T&L is so critical to retail also, were at that show. We have got Nathan Andrew Winters: you know, our healthcare show coming up in HIMSS over the next, you know, x number of weeks. So William J. Burns: we are preparing for that. So across all verticals, our customers are really talking about continuing to invest in their business and technology. I would say that William J. Burns: you know, we enter the year with a solid backlog and really a pipeline. We have got momentum, as Nate talked about, around Nathan Andrew Winters: you know, our core business overall, William J. Burns: you know, including scanning, printing, William J. Burns: mobile computing, but also, you know, manufacturing, you know, seeing more strengths in that, which has been a focus area for us. EMEA returning to growth. I would say that the demand remains strong for Elo, so we are certainly excited about that acquisition. You know, I think that the breadth and depth of our solutions portfolio, Operator: including the addition of Elo and William J. Burns: the new opportunities around our AI suite and the idea that customers are thinking about how they are deploying AI at the frontline of business overall. Those conversations continue, and I think that, you know, customers are really focused on how do they serve their customers better and get better experiences, whether that is omnichannel or it is self-service or point of sale. They are talking about driving efficiencies within their business. How do I use our solutions to go do that across RFID, machine vision, and others. And I think it is how do you increase inventory visibility, which is still challenging across our customer base, and that is everything from, you know, printing to scanning to our mobile devices. So I think that, you know, we are confident in delivering solid growth in 2026. And our customers seem to be really focused on continuing to deploy technology across their business. And I would say, kind of playing their game. Right? They have got a plan. They are executing on it. And there has been really no talk about kind of anyone holding back or others. It has all been kind of positive about, you know, what are their plans for 2026 and what are the opportunities we have to work closely together. Operator: Yeah. Joseph Craig Giordano: Yeah. Sort of on that note, you know, a lot of people, like, looking at things like the AI effect, and certainly, your customers are trying to find ways to leverage it and, you know, reduce cost and, you know, improve productivity. I am wondering, you know, years ago, you had this Windows-based device that was shifting to Android, which prompted a big upgrade cycle. I am wondering, do you sense, like, these new AI products you are talking about, you have been talking about them for a while, could have a similar effect in terms of prompting new spending or an upgrade cycle here. William J. Burns: Yeah. I would say that, you know, if you look at the portfolio overall in relation to AI, that, you know, we are uniquely positioned to where, you know, Zebra Technologies Corporation can position itself really to be the leading AI solutions provider for the frontline. And I say that in a couple of ways. One is that the Asset Visibility and Automation segment gives a digital voice to assets, to inventory, that is necessary to feed AI models if you are going to leverage those at the frontline of business. You have to give everything a digital voice and have visibility to be able to Joseph Craig Giordano: to leverage the AI model. William J. Burns: The second thing is you need something to deliver the output of the AI models, what needs to be done. You need to be able to connect that information to workers. And the way you do that is through mobile devices and our SaaS offerings like communication, collaboration, task management combined together take the output of the model and allow a worker to drive a behavior or do something: put inventory on the shelf, move something from backroom to front of room, pick up a pallet and move it to the next location, that drives ultimately the outcome in your business. That gets you to be more effective and more efficient. So it plays a critical role across our whole portfolio. Specific to mobile computing, the idea of, Joseph Craig Giordano: you know, our latest mobile devices certainly will support William J. Burns: memory, processing power, and others, and the software to support AI models on the device or in the cloud. And we are seeing, you know, customers move to those devices as their next generation devices, as they are beginning to refresh. So, yes, we are seeing that clearly AI will drive, you know, the upgrade of those devices ultimately. You know, higher ASPs on those devices with higher memory, and also will have an opportunity for us across the idea of Enablers and Blueprints and Companion we talked about to be able to drive AI software revenue for ourselves as well. Our next question comes from Piyush Avasthy of Citi. Operator: Please go ahead. Operator: Good morning, guys, and thanks for taking my questions. Nathan Andrew Winters: Good morning. Good morning. Piyush Avasthy: I think you mentioned the decline in gross margins due to lower service and software margins. Can we double click on software margin performance, like anything you want to call out? Is it just the investments that you guys are making that are pressuring the margins? And when we can expect that to reverse? And anything on the receptivity of the software offering that you are coming out with, like, how the customers are kind of, you know, buying or procuring those, that would be helpful. Nathan Andrew Winters: Yeah. For sure. I think if you look at the real driver within the service and software margin impact, it is primarily, and obviously it represents the vast majority of the revenue, in the service portfolio and the just higher repair costs that we have seen over the past couple of quarters. Now, the good thing is the overall margin rate improved in the fourth quarter from where we were in Q3. But this is really due to the age of the installed base, and we are starting to see that play out in terms of driving the overall number of repairs. We expect to see that level out here as we go through the year and see the overall margin for the services and software to be flat, kind of look at it year on year throughout 2026. Specific to software, you know, the two real areas the teams are working on: one is a lot of energy and efforts going over the last couple years in unifying the platform, bringing together the architecture to ultimately lower the overall support cost that will improve margins as we go really into the back half of this year and into next, as some of that effort is starting to come to a closure in terms of transitioning customers to the unified platform. And then, like anything, then it is about scaling on that in terms of as revenue grows, getting the scale to drive gross margins further. So those are the two aspects. If you look at that line, it is really driven by service, but within software, a lot of work over the past couple years around the platform and unifying the platform, and we are getting close to the end of that activity, which then gives us some runway to improve margin as we move forward. Piyush Avasthy: Gotcha. Helpful. And Americas was soft in Q4, and I understand that there were some really tough comps. Can you elaborate on the underlying demand environment and trends you are seeing in the region? And as you think of your 2026 guidance, based on conversations with your customers, how do you think Americas is contributing to your 2026 guidance? William J. Burns: Yeah. I think that I would say that overall, you know, we saw relative strength in fourth quarter in North America around small and midsized business. But as we talked about, cycling larger large order activity in T&L and retail in the fourth quarter. So I think we feel good about the pipeline of opportunities that is healthy in the business. I think it really is just cycling a compare. We did not see as many large deals, very large deals, in fourth quarter as, you know, we have seen in past years. Nate talked about that a little bit in the seasonality idea. So William J. Burns: that is really what it is about. We feel William J. Burns: we feel across North America that all vertical markets, product areas, we see no real challenges there other than a tough compare in fourth quarter. If you talk about the other regions, I would say return to growth in EMEA, really driven by strength in North and Central Europe. I would say double-digit growth we saw, you know, so strong growth in mobile computing, print, RFID, so broad-based. And we are seeing opportunities in Europe around retail with personal shopper refresh opportunities in new. So where the North America market is really Nathan Andrew Winters: more William J. Burns: self-service checkout and kiosk, where, you know, Elo plays, the European market is a combination of that as well as self-scan, which is a large opportunity for us both in new customers and refresh opportunities. So those continue to move forward in EMEA. Asia Pacific saw strong growth, 13%. Nathan Andrew Winters: Growth across most of the region. William J. Burns: Japan and India certainly were bright spots. Those are areas where we have been investing. Certainly, the amount of manufacturing investment happening in India. We changed our go-to-market model in Japan several years ago, continue to win opportunities in Japan. Latin America, strong growth in Latin America, broad-based. I would say, you know, Brazil and Mexico outperformed with large retail deployments, but broad-based growth across Latin America. So we are not concerned at all about North America. Really, it is just truly cycling a compare. And we feel good about broad-based growth across the regions and product areas as we enter 2026. The next question comes from James Andrew Ricchiuti of Needham and Company. Please go ahead. Michael Steele: Thanks. I know it is early. I am wondering what kind of assumptions are you baking in for the large project business this year. What kind of visibility do you have? It sounds like just based on what you are hearing and the concerns around memory that maybe these discussions are happening earlier. William J. Burns: I would say that, you know, given the installed base, right, certainly, Zebra Technologies Corporation’s installed base overall, these very large orders are really tied to refresh cycles and activity across our customer base. And that remains an attractive opportunity for us overall. We are assuming the same, you know, a similar level of refresh activity in 2026 that we saw in 2025. And I would say remember every customer's refresh cycle is different, right? It is really driven by things like supporting new applications, driving, you know, higher processing power or memory or new features like we just talked around on AI or new features like, you know, RFID being embedded in the devices. It is driven by, you know, obsolescence of OS or the security life cycle, it is driven by technology transitions, but everyone is on a different cycle. And I would say that, you know, when customers refresh, the opportunity for us is not just the refresh cycle, but they typically buy more devices because they are extending their use cases and putting devices more in the hands of more associates overall across all industries. When we look at things like retail, the refresh cycle has really normalized over the last several years and we are seeing some retailers spread their purchases over a longer time horizon. From a T&L customer perspective, I would say they refresh at a slower pace than retail, which is typically four to five years, driven by really the fact that the devices have higher durability and are using fewer applications than we see in retail. William J. Burns: But as you said, those discussions are, William J. Burns: you know, with large T&L customers are progressing. We are talking to them earlier about these refreshes, and the pipeline continues to grow for multiyear deployments that, you know, likely begin in 2027. So in 2026, we would see, you know, about the same level as we saw in 2025, but this is clearly an opportunity out there for us. And William J. Burns: we would see that, you know, as these conversations continue to progress, and progress earlier with challenges, things like memory, we get more and more visibility to time frame from our customers. Michael Steele: And you Operator: mentioned RFID several times. What kind of growth rate are you assuming in the RFID business this year? And are you seeing more of the activity coming from the emerging areas like food or Nathan Andrew Winters: the traditional areas logistics and Operator: retail. Nathan Andrew Winters: Yeah, we see 2026 high double-digit growth continuing in RFID. We had William J. Burns: a strong year over the last several years including 2025 and we see that continuing. The opportunities have really been broad-based all the way across the supply chain from retail to transportation and logistics to manufacturing, now opportunities in government. We are seeing, you know, clearly the move from retail apparel. We saw it move to broader merchandise inside retail. You mentioned fresh food inside grocery as a new opportunity in things like bakery and around the outside edge of the store, higher margin perishable items. We are seeing that opportunity there. Parcel within T&L remains a large opportunity. Quick-serve restaurants, you know, we think of automation always as, you know, but quick-serve restaurants are moving from pen and paper to RFID. You know, we are seeing healthcare and just broader track and trace across the supply chain. So I think that we are seeing broad-based growth. We have got number one share in fixed and handheld readers, we continue to have strength in our, we are the leaders in RFID printers, you know, across our labels business, we are seeing strength. So I think it is broad-based. I think we are continuing to see the adoption. It is why we are adding RFID capabilities to the majority of our new mobile computing devices is that customers continue to want to adopt RFID within their environment. So really broad-based and not driven by just one industry or segment, but, you know, across all the vertical markets we serve. The next question comes from Bradley Thomas Hewitt of Wolfe Research. Operator: Please go ahead. Operator: Good morning, guys. Thanks for fitting me in there. Nathan Andrew Winters: Good morning, Brad. So curious how you see channel inventories as they stand today and Bradley Thomas Hewitt: does the guide embed any meaningful changes in channel inventory levels as you progress through the year? Nathan Andrew Winters: Right. No. We have seen channel, as we exit, we are in good shape. Pretty similar to what we saw at the end of last year, so no meaningful change. You definitely see variability quarter to quarter, just, you know, whether that is timing of deployments on their end, prepping for year-end, etcetera. So quarter to quarter, you see some variability, but I think as we look at the full year picture, no major changes in terms of days on hand, you know, measuring it on days on hand. So how much are they carrying on a daily basis? And we do not expect a material change in that as we go through the year. Operator: Okay. Bradley Thomas Hewitt: That is helpful. And now that the tariff situation seems to have stabilized a little bit overall, have you guys seen any change in customer willingness to go ahead with projects versus three months ago? And to what degree is any macro-driven change in customer sentiment baked into your 2026 outlook? Thank you. Nathan Andrew Winters: I would say that, you know, customers were William J. Burns: on the retail side, you know, a bit concerned overall about just the secondary effect of tariffs as they have, you know, had to push that through, you know, on their inventory to their customers ultimately. But I think that we are really beyond that. That is all kind of flowed through their supply chains. And they have had to raise price in the places that they have. So I would say that, you know, again, these conversations with customers today, there has not been concerns of tariffs raised. There are always, you know, challenges. There may be future challenges around trade, but we do not see those as of today. The bigger challenge we talked about multiple times in the call is probably memory that we have, you know, we are going to mitigate in the year. So I think that, you know, I think tariffs have not factored into a lot of conversations with customers at this point. This concludes our question and answer session. I would like to turn the conference back over to Mr. Burns for any closing remarks. Nathan Andrew Winters: I would like to thank our employees and Michael Steele: for delivering solid 2025 results. We certainly William J. Burns: as we look ahead, are focused on advancing our portfolio of solutions and driving profitable growth across our business. Thank you, everyone. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Anterix third quarter fiscal 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press *11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Natasha Vecchiarelli. Ma'am? Please go ahead. Natasha Vecchiarelli: Thank you, operator, and good morning, everyone. I am Natasha Vecchiarelli, Vice President of Investor Relations and Corporate Communications, and I welcome you to our fiscal 2026 third quarter investor update call. Joining me today are Scott Lang, our President and CEO; Elena Marquez, CFO; Chris Guttman-McCabe, Chief Regulatory and Communications Officer; and Heather Martin, Chief Marketing Officer. Before we begin, please note that our discussion may include forward-looking statements regarding our outlook, operations, and expected performance. We do not undertake any obligation to update these statements. Additionally, these statements are based on current assumptions and are subject to risks and uncertainties. For a detailed discussion, we encourage you to review our SEC filings which are available on our website. With that, I will now turn the call over to Scott Lang. Thank you, Natasha. And good morning, everyone. Scott Lang: Thank you for joining us. Let me start with this. We are not the same company we were a year ago. We have executed a complete and total refresh of the critical components of this company. We significantly reduced operating expenses while at the same time strengthening our balance sheet. We successfully launched the Anterix Accelerator program. We introduced new products to remove barriers to deployment and also create the opportunity for annual recurring revenue. We have put in place the senior leadership team to execute on the opportunity in front of us. And our recent brand refresh, just unveiled last week at DISTRIBUTECH, reflects this evolution, clearly signaling who we are today and where we are headed. As a result of our efforts, our 900 MHz broadband spectrum is increasingly viewed not as optional, but as foundational. This is evident in how utilities are planning their networks. In one active deployment, Evergy is supporting roughly 4,500 connected devices today, and that is growing significantly each year with a future line of sight to over 1,000,000 connected devices. This is a real-world example of the scale that utilities are deploying to connect and secure their most critical infrastructure assets. Evergy is not alone. We are hearing and seeing the same plans from each one of our existing customers. For example, in our booth at DISTRIBUTECH, San Diego Gas & Electric spoke to the scale and meaningful operational impact that our collaboration has delivered, validating the credibility, momentum, and trust behind the Anterix platform. CPS, our newest customer, had more than 20 members of their team in our booth witnessing this collaboration firsthand and reinforcing their excitement to get started. And with our foundational 900 MHz spectrum now poised to cover more than 93% of the counties in the great state of Texas, one thing is clear. Anterix is the trusted partner for utility private wireless. With eight flagship customers that represent $400,000,000 in contract value, we are the market leader. We remain in active negotiations with a wide range of utilities, from those serving hundreds of thousands of customers and moving at a faster pace to some of the largest utilities in the country serving millions of customers, where the scale and complexity naturally lengthen decision cycles. We look forward to sharing more on these deals with you soon. During our last earnings call, we announced two important products that we launched to address friction points and challenges as utilities move from spectrum decision to an actual deployment. Every utility that I have spoken with is excited about what these products can do for their company and are learning more. With our success, our spectrum still to monetize, and our new solutions, we are making it easier for utilities to move from network design to real deployments, speeding up time to value. To lead this effort, we recently appointed Ross Sparrow as our first Chief Product Officer. Ross is already making an impact, working closely with customers and our ecosystem partners to ensure our product roadmap is grounded in real-world operational needs, while increasing the value delivered per megahertz. Equally significant, we are encouraged by the FCC's plan to consider a Report and Order on February 18 that would enable broadband deployment across the full 10 MHz of the 900 MHz band. We appreciate the leadership shown by the FCC and Chairman Carr in advancing policies that recognize the role of private wireless broadband in supporting critical infrastructure and long-term grid modernization. Taken together, these milestones reflect a company that has done the foundational work and is now moving with total focus and intent. Our strategy is clear. Execution is accelerating. And our confidence has never been higher. We are uniquely positioned to deliver durable, long-term value for our customers, our shareholders, and the entire utility ecosystem. I will now turn the call over to Elena Marquez to discuss our financial performance. Thanks, Scott. Elena Marquez: Under Scott's leadership, we are poised for success from a financial standpoint. We have reduced our operating expense run rate by 20%, accelerated the delivery of 900 MHz broadband spectrum to customers, which resulted in the highest number of licenses we have delivered in a single year, positioning us for our first year ever of positive GAAP net income. On the commercial front, our CPS Energy agreement is a $13,000,000 contract and represents the first commitment under the Anterix Accelerator program. This agreement includes favorable cash timing, with 50% payable upfront and the remaining 50% payable at the end of our fiscal 2027. Importantly, this agreement provides a potential path towards top-line revenue as both parties have committed to negotiate a master agreement for additional products and services. More broadly, our financial position reflects the underlying strength of our spectrum asset and the valuable opportunities it supports. As we expand our offerings to address a broader set of utility use cases and develop additional recurring revenue streams, we continue to believe there is a substantial disconnect between our enterprise value and the significant opportunity that is in front of us. Over the past year, we have become a leaner, more disciplined organization with a sharper focus on execution, capital efficiency, and long-term value creation. Our balance sheet remains strong, with approximately $30,000,000 in cash as of December 31. We have zero debt and over $80,000,000 to be collected during the fourth quarter, including a $6,500,000 initial payment from CPS Energy. We now raise our projected cash proceeds for the current fiscal year to $120,000,000 from the $100,000,000 we previously guided on. Our lean OpEx structure and disciplined spend approach provides flexibility, allowing us to take strategic steps towards creating long-term value for our shareholders and customers. With that, I will turn it back to Scott. Scott Lang: Thank you, Elena. To close, let me be clear. Anterix is no longer just building the foundation. We are scaling a movement. We have the strategy, the team, the momentum, and we are making meaningful, decisive strides every day. The foundation for private wireless is firmly established. Regulatory alignment is advancing, and our engagement with the nation's leading utilities has never been stronger. We are aggressively advancing active commercial to expand our footprint. We are executing on a product roadmap that delivers more value to our customers than ever before. And we are maintaining the rigorous financial discipline that ensures our long-term strength. We are focused. We are disciplined. And we are ready. Thank you for your continued support. Operator, we will now open the line for questions. Operator: Thank you. Press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. One moment for our first question. Operator: Our first question comes from the line of George Sutton with Craig-Hallum Capital Group. Your line is open. Please go ahead. George Frederick Sutton: Scott, to your point of foundational versus optional for your spectrum, I wondered if you could, coming off of NARUC that just occurred, give us a sense of what the Public Utility Commissioners are saying. We are hearing increasing pressure on utilities to modernize their grid given the demands and/or the data center demand that is out there? You know, you mentioned Silver Spring Networks. I wondered if you could discuss because that really became a network effect story, a run-the-table kind of thing. Can you give us a sense of where you think 900 MHz fits relative to that network effect concept. I have a thousand questions, but I will limit it to just one more if I could. The products that you are building out, I certainly—I got a sense talking to a number of the partners that the opportunities from the product side are actually fairly significant relative to the size of your licenses. Could you just talk about what the product opportunities may end up resulting in from a revenue opportunity. Scott Lang: Hey, George. Good to hear from you again. Yes. In fact, I was at NARUC. I had the opportunity to meet with a few commissioners and specifically talk with them about connectivity, about the importance of connectivity, and how they are navigating all of the challenges they are seeing across the industry with large investments being asked for and affordability. It is on their mind. And in fact, one of the commissioners I spoke with is a commissioner that was familiar with this whole movement of connecting devices and the importance of it for utilities going all the way back to my first company, Silver Spring Networks, when we touched so many homes and businesses across the entire United States. And so this came up, and this was part of the conversation. And it was on their mind, and we enjoyed—I enjoyed—these conversations and connecting with some of these commissioners. They get it. They see this as important. They see this as a way to keep customers informed, safe, secure, enabling utilities to be responsive when the power is out. And the risk of not having that kind of connectivity, the risk of not having that kind of responsiveness and securing the grid is a great risk. Our message resonates with that audience as well, which I touched on a little bit of the regulation support where I am not just only referring to the FCC support, but across the board because our message resonates. We are proven, therefore eliminating this—you know, utilities often do not like to be first. Well, the next utility is not first anymore. The risk aspect of it is easier for regulators to say, wow. You have eight customers out there. You saw it yourself, George, in our booth, of the testimonies that are being had and how it is making an impact and lighting up their grid and allowing them to be more responsive to outages and collect and connect their critical infrastructure. So commissioners are seeing that same message. Our economics are very strong. The nature of how we have proven this technology and validated by some of the most leading utilities in the nation is strong. And so I think it was—I was pleased compared to one year ago right when I first started, there was not this level of conversation about private broadband wireless. And part of that is that now we are seeing utilities with real success stories talking about it, which you witnessed yourself at DISTRIBUTECH. And that is permeating across every aspect of this industry, our customers, our partners, and now on the regulation side. I thank you for that, George. I love the question. There are a lot of flashbacks I get to that journey that we took with Silver Spring Networks. And, you know, sharing with the team some of the recollections I had and having had been working with Ross Perot for so many years before I started Silver Spring Networks, and he always said he saw so many companies get to where the table was set, ready to go sweep the table and just sweep the opportunities, and they do not think big enough and strategic enough. And at Silver Spring, we did have that kind of network effect where we won one on each side of the country and then literally swept the table across the entire nation as utilities started to stand up, talk about it, advocate our brand, what we were doing. We made it easy for them to have successful deployments. What we have here at Anterix is a table that is set that we did not have 20 years ago when we started Silver Spring. We did not have eight customers that were advocating for us. We did not have a multibillion dollar pipeline of opportunities. We did not have cash and a balance sheet the way we have cash and the balance sheet now. We had a handful of engineers, did not have the strength and the depth of an experienced leadership team at the table. And we yet have that now. And we have the tools and we have the opportunity right here in front of us to think big and really be that change agent that utilities are asking us to be. And so it is—not exactly the same, I like where we are. In fact, I told the team last night, I love where we are at right now. I just absolutely love it. And where we are today versus anything I have seen, and I put it up against any company that you can start the race with, the tools and what we have to work with clearly puts us in a strong lead, and we plan to keep it. It is another great question, George. You know, there is probably close to $8 for every dollar that is spent on us that have historically flown around us versus through us. And that is something that, with the appointment of a chief product officer, we are changing. These two products that we launched, just to give you an idea, are—there is one particular utility that we are in deep discussions with that are interested in both products. And it is a significant increase—I do not want to give percentages yet, but I will say it is a significant increase of just the wireless spectrum alone. There is not a lot of risk. They deliver strong margins, and they are long term, and they are recurring, and they are sticky. All the things that you would love to have that underpins a strong recurring business that is being built as a result of the asset that we have and the success of selling that asset. So it is really—it is a very synergistic kind of opportunity of products that we are getting pulled into naturally by existing customers and they are being built as a result of what we are selling and what we have as an asset. And the reason that is important is one of the other things that—lessons learned and leadership lessons learned—is you do not want to go just chasing everything that moves in order to, you know, try to grab revenue here and grab revenue there because it takes the team away from maniacal singular focus on what we are here to do. And these products are naturally connected to everything Anterix has done and the preparations we have made and what I have called before the superpowers in this company of wireless spectrum leadership. And so I like the products. That gives you a little bit of an idea, hopefully, of the kind of dollars that are there and available. And I guess I will just dismount off of this question with a final comment. And that is, you know, when I use Evergy as an example and I threw out San Diego as an example, and frankly, we could talk about every one of our current customers of what they are doing. For them, they told me in live conversations, this will help them move faster. They are frustrated that sometimes they do not have the skills and the focus internally to stand these networks up once they make the purchases of spectrum. So the tower access and the SIM management piece of that are first stop whenever the spectrum gets purchased. And for them, it reduces complexity. It is good for them. They like it. We make the contracting easy. And it is not a lot of risk, margins. And it is really immediately profitable, generating some nice recurring. But it does not stop there. It also is what we have noticed is helping the prospects that have been at the table that we have been in discussions with, that they now know what the second and third step is once they make a spectrum decision. Versus saying, okay. Now I have got to figure out the next many steps in this long journey to having millions of devices connected. We make it easier for them. We make it a safer place that they can step onto, not just because of the testimonials and the support they are getting from our large customer base now, but we can make it easy for them to get started to actually getting real results of—you know, reducing that time to value is very important to them, and therefore, very important to us. George Frederick Sutton: Perfect. Thank you for the thoughts. Scott Lang: Okay. Thank you, George. Operator: Thank you. And as a reminder, if you would like to ask a question, please press *11. Our next question will come from the line of Mike Crawford with B. Riley Securities. Your line is open. Please go ahead. Mike Crawford: Thank you. I am just thinking about what steps you will be taking if we get, as anticipated, this favorable Report and Order for five-by-five next week. And I know in some markets, like, I do not know, maybe Washington, D.C., you might already have close to 10 MHz of spectrum in the band, but in others, you may have to pay the 600 MHz auction clean prices to get enough spectrum to enable such a solution. But can you just provide some color on where you have concentrations of spectrum and/or not across the U.S.? Scott Lang: I am going to take the first part of that, and then I am going to ask Chris to jump in on the second part of that. The first part of that is yes, we are cautiously optimistic. We are excited about the February 18 in part because we have tried to be responsible of how we have been signaling the progress that we have been making on this for the last several quarters. And we always want to be able to be in a place to underpromise and overdeliver. And so we continue to be enthusiastic, and we are excited about the 18th. And once the 18th happens, we will be sharing in short order and with our investors and our analysts and the broader community of what that means and how we will plan to go forward now that we have 10 MHz. So until that happens, we are not going to make a lot of projections on it at this time. But soon after the 18th, when that is completed, we will be able to talk about it in some level of detail. And I am going to ask Chris to touch on the second part of that question. Chris Guttman-McCabe: Yes. Thanks, Scott. And good morning, Mike. So I think obviously you are spot on in terms of, you know, painting a picture that the mark-to-market, the reality of clearing an incumbent is different. You know, the beauty of our product offering, and to be quite honest, it is fueled by the beauty of our balance sheet, is that we can take our utility customers where they are. Where they are from a spectrum need perspective, where they are from a capital allocation perspective. You have seen it in our contracts. We deliver counties when they want it. We deliver it in a timeframe that matches their access to capital, and we will apply that to the five-by-five approach. So we will—you know, Scott has given us the ability, our balance sheet has given us the ability to be flexible in our product offering. That will continue with five-by-five. And, you know, the reality is the incumbents and the clearing and the unjust enrichment payments, they all become a portion, you know, a part of our basis, and that helps to inform our price point. And that will continue as we move—you know, again, do not want to get too far out over our skis, but we will, as Scott said, come back and have a broader discussion about that after the 18th. Mike Crawford: Okay. Thank you very much. Scott Lang: Okay. Thanks, Mike. Operator: Thank you. And I would like to hand the conference back over to Scott Lang for closing remarks. Scott Lang: Okay. And I would like to say again, thank you all for joining. If you hear a level of excitement, it is because there is a lot of excitement. We love where we are at right now. The opportunity to see the energy and the engagement—at one point, when we had our customers speaking in the booth, we were probably four or five deep in a 180-degree half circle all the way around the booth of current prospects, future customers, future prospects, existing customers, partners. Partners actually wanted to get the microphone and talk about their products and how Anterix has been a good partner. This week at NARUC, being able to talk with commissioners, but also some of our biggest customers were there, saying, wow. You guys have been such a great partner. We love your technology. It is doing these things for us. And I said, hey. Will you go—we need your engagement. We need you to tell those stories with us. Count us in. Anytime, any place, we want to make sure everybody understands what we are trying to get done. And so we like where we are a lot. We are building a great company. We have the table set to do something that is very significant, with an OpEx structure that is being very well managed. And I am looking at Elena that she manages every single dollar. It is in the best long-term interest of our shareholders and our customers and our company of what we are trying to build. And I think we have really got a really great team around the table as well to go execute this. And that is what we are singularly focused on, and we look forward to sharing results as we go forward and being in touch on the events over the next couple of weeks. And thank you again for everyone, and have a terrific rest of your day. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good morning, and welcome, everyone, to the PHINIA Inc. Fourth Quarter 2025 Earnings Call. Today’s conference is being recorded. After the speakers’ remarks, there will be a question-and-answer session. To ask a question, please press 1 on your telephone keypad. If you would like to withdraw your question, press 1 again. At this time, I would like to turn the conference over to Kellen Ferris, Vice President of Investor Relations. Please go ahead. Kellen Ferris: Thank you, and good morning, everyone. We appreciate you joining us. Our conference call materials were issued this morning and are available on PHINIA Inc.’s Investor Relations website, including a slide deck we will be referencing in our remarks. We are also broadcasting this call via webcast. Joining us today are Brady Ericson, CEO, and Chris Gropp, CFO. During this call, we will make forward-looking statements which are based on management’s current expectations and are subject to risks and uncertainties. Actual results may differ materially from these statements due to a variety of factors, including those described in our SEC filings. We caution listeners not to place undue reliance upon any such forward-looking statements. I will now turn the call over to Brady Ericson. Brady Ericson: Thank you, Kellen, and thank you to everyone for joining us this morning. I will start with some overall comments on the fourth quarter and full year, discuss financials at a high level, and then provide some thoughts on our outlook for 2026. Chris will then provide additional details on our fourth quarter 2025 full year financials and discuss our 2026 financial outlook. We will then open the call for questions. We delivered a solid finish to 2025, with full year results in line with our expectations despite a dynamic and often uncertain macro and industry environment. What stands out to me as I look back on the year is the resilience of our business. Our diversification across regions, customers, end markets, and products continues to serve us well, with no single end market and region that defines PHINIA Inc. Our balance allows us to perform consistently even as conditions shift around us. Before we get started on numbers, you will notice some changes as we recast some numbers between the Fuel Systems and Aftermarket segments. As we have been driving operational efficiencies, a significant portion of the original equipment service, or OES, sales will now be distributed from the Fuel Systems segment and not the Aftermarket segment. We have also further enhanced our end market breakdown and have separated out our off-highway, industrial, and other sales, which includes construction and agricultural machinery, vocational vehicles, marine, industrial applications, power generation, aerospace and defense, and all other. Finally, we have also updated our calculation method for free cash flow conversion to be more in line with industry standards. There is no change in expectations around the strong cash generation of the business. Now let us jump into the fourth quarter results on Slide 4. For the third consecutive quarter, we delivered year-over-year growth in both the Aftermarket and Fuel Systems segments. Total net sales in the quarter were $889 million, up 6.7% from the same period of the prior year. Excluding FX impacts and the contribution of SEM, revenue was up 2.3%. We reported adjusted EBITDA of $116 million for the quarter, up $6 million and a margin of 13%. Total segment adjusted operating income was $112 million and a 12.6% margin. The Fuel Systems segment delivered a strong quarter with sales of $560 million, up 7.9% and adjusted operating margin of 10.7%. The Aftermarket segment had sales of $329 million, up 4.8% with adjusted operating margin of 15.8%. Adjusted earnings per diluted share, excluding non-operating items, was $1.18 for the quarter compared with $0.71 in the same period of the prior year. Our balance sheet remains solid with cash and cash equivalents of $359 million, and $859 million of total liquidity. We have reduced our debt by $24 million and our net leverage ratio came down from 1.4x to 1.3x, all while returning $40 million to shareholders via dividends and share repurchases. The fourth quarter performance underscores the durability and resilience of our business amid a complex and uncertain operating landscape. It reflects the advantages of being a diversified industrial company by serving a broad mix of regions, customers, end markets, and products. Moving to Slide 5. We continue to win new business across our core and adjacent markets. Throughout the year, this included multiple wins in light vehicle, commercial vehicle, off-highway, industrial, aerospace, and alternative fuel applications. A few key Fuel Systems segment wins in the fourth quarter included securing our third aerospace and defense contract for a post-combustion fuel valve, highlighting our proven capabilities and strengthening our position in the sector; key contract extensions with global commercial vehicle OEMs, reaffirming the strength and longevity of our strategic partnerships; and a new business win in India with a leading OEM for port fuel injectors used with compressed natural gas, underscoring our dedication to lower-carbon mobility and commitment to alternative fuels. Now to Slide 6. The Aftermarket segment remained a steady and resilient contributor throughout the year. Demand continued to be supported by an aging global vehicle fleet and expanding portfolio. Our strong brands and service continue to resonate with customers and distributors. We are winning both new business and expanding relationships with existing customers. Importantly, these wins were across diverse geographies, further strengthening our position in the PHINIA Inc. aftermarket. We also continue to accelerate the pace of expanding our offerings and coverage by adding approximately 5,800 new SKUs across our portfolio. Slide 7 highlights the diversification of our business across regions, customers, and end markets. This is supported by manufacturing facilities close to our customers in all key regions. We also benefit from the flexibility to redeploy manufacturing and human capital across these opportunities. As noted earlier, we provided additional end market granularity by splitting out CV and other into medium- and heavy-duty on-highway CV, and off-highway, industrial, and other. This shows the progress we have made in expanding our presence in this end market as it now represents 6% of our sales. Moving next to capital allocation on Slide 8. We remain disciplined and balanced in our approach to capital allocation while remaining opportunistic about M&A. Since the spin, we have repurchased 9,800,000 shares which is roughly 21% of our original share count. In total, since the spin we returned over $500 million to shareholders via share repurchases and dividends. We accomplished all this while maintaining net leverage below our target level, sustaining robust liquidity, closing on an opportunistic acquisition, and supporting the organic growth needs of the business. We also announced a few weeks ago an 11% increase in our dividend and a $150 million increase in our share repurchase program. Needless to say, our capital allocation decisions will always be based on how we can maximize long-term shareholder value. Moving to Slide 9. We had some significant milestones in 2025: completing our first acquisition, receiving our aerospace quality certification along with our first program launch, and delivering strong financial performance in a volatile market. Also of note, 2025 is the first full year without the impact of PSAs and contract manufacturing with our former parent. Investors have been rewarded with a total shareholder return, which includes share price appreciation and dividends, over the two-year period of 2024–2025, of 140%. Looking forward to 2026, we expect our journey to continue on the path we set from the beginning: differentiating via product leadership, focusing on markets that will support our goal of sustainable growth, maintaining our financial discipline, and remaining focused on delivering long-term value for our shareholders. Finally, I want to thank our team for their outstanding execution through fiscal 2025. Their hard work and dedication enabled us to successfully navigate dynamic market conditions while driving meaningful growth and operational improvements. I will now turn the call over to Chris Gropp to discuss our financial results in more detail and introduce our 2026 financial outlook. Chris? Chris Gropp: Thanks, Brady, and thanks to all of you for joining us this morning. As a reminder, reconciliations of all non-GAAP financial measures that I will discuss can be found in today’s press release and in the presentation, both of which are on our website. Chris Gropp: Our fourth quarter and full year results met our expectations even as we navigated a range of challenges, from tariffs and macroeconomic instability to geopolitical tension and a shifting policy landscape. Despite these headwinds, we grew our top line and delivered a solid bottom line. Chris Gropp: In addition, as Brady mentioned, we made meaningful progress on the priorities we set at the start of the year: strengthening our core businesses, entering new markets, and positioning PHINIA Inc. for long-term profitable growth. Fourth quarter financial results were solid and include a full-quarter contribution from SEM. The external environment has not changed dramatically from the prior quarters; however, we saw some strength in Asia and the Americas, partially offset by lower sales in Europe within Fuel Systems. Aftermarket sales were also higher, primarily driven by aftermarket pricing and tariff recoveries, offset slightly by lower commercial vehicle sales in the Americas. Let me now bridge our revenue and adjusted EBITDA for the fourth quarter which you can find on pages 11 and 12 in the presentation. Specifically during the quarter, we generated $889 million in net sales, an increase of 6.7% versus a year ago. Compared to Q4 2024, our top line benefited from favorable foreign exchange tailwinds of $25 million as the dollar weakened mainly against the British pound and euro. Revenue in the quarter also rose on tariff recovery of $15 million. Overall, volume and mix contributed $8 million as we saw strength in sales in Asia and the U.S., with higher LPD sales, partially offset by lower sales in Europe. SEM contributed $12 million in the quarter. Excluding the FX impact and the SEM contribution, sales were up 2.3% in the quarter. Moving next to the bridge on Slide 12. Adjusted EBITDA was $116 million in the quarter, with a margin of 13%, representing a year-over-year increase of $6 million and a 20 basis point decline in margin. Corporate and other costs, primarily R&D savings, were a $6 million tailwind. Net tariff recoveries, supplier savings, and other overhead cost savings measures combined were another $5 million. These benefits were partially offset by unfavorable product mix in Asia and the Americas. Overall results were healthy. The margin percentages were diluted as a result of FX, inclusion of SEM, and negative mix. Let me now bridge our adjusted revenue and adjusted EBITDA for the full year, which you can find on pages 13 and 14 in the presentation. Once again, starting with adjusted sales, where the drivers were similar to the fourth quarter. Total revenue was approximately $3.5 billion, an increase of 3%, excluding the final contract manufacturing sales from our former parent in 2024. FX was a tailwind of $45 million as the dollar weakened mainly against the British pound and euro. Adjusted sales also benefited from tariff recovery of $38 million. Volumes of base business were flat for the year, but boosted with the inclusion of $20 million in sales from SEM. Excluding the FX benefit and contribution from SEM, revenue was up 1.1% for the year. Moving next to the bridge on Slide 14. Adjusted EBITDA was $478 million, flat year over year, with a margin of 13.7%, representing a 40 basis point decline in margin. Supplier savings and other cost-saving measures of $26 million were offset by unfavorable product mix, a slight increase in employee costs, and net tariff pass-through. Margin was negatively impacted by the dilutive impact of both tariff and FX, each of which resulted in an approximately 20 basis point decline in margin. Moving next to discussion of the individual segments’ full year performance. Note that in 2025, we made a strategic decision to shift a significant portion of our OE service business previously reported in the Aftermarket segment to the Fuel Systems segment. This change is a result of creating a streamlined process for the sales structure and distribution of these sales, thereby reducing the related administrative burden. Our reporting segment disclosures have been updated accordingly, including recast of prior periods in all our reported financials. Moving next to Fuel Systems on page 15. You can see that revenue for the full year increased 3.3% with a 40 basis point increase in adjusted operating margin. Segment revenue was impacted materially by changes in FX of $33 million, the addition of SEM of $20 million, and tariff recoveries of $13 million. Full year segment AOI of $244 million is an increase of $16 million with solid supplier savings, partially offset by negative volume and mix. Compared to 2024, our Aftermarket segment sales were up 2.7% for the full year, primarily due to customer tariff recovery and favorable FX. Aftermarket segment margins of 15.2% were down 30 basis points, primarily due to the dilutive impact of tariff recoveries. Moving on to a discussion of our balance sheet and cash flow. We continue to effectively execute our disciplined capital strategy, successfully balancing significant cash return to shareholders with strategic M&A and other investments. Cash and cash equivalents were $359 million while available capacity under our credit facilities remained at approximately $500 million for a resulting liquidity of $859 million. Cash flow from operations was $312 million for the year, and adjusted free cash flow came in above guide at $212 million, enabling us to continue returns of capital to our shareholders through regular dividends and buybacks. Share repurchases represented a primary use of capital totaling $30 million in Q4 and $200 million for the full year. We paid $10 million in dividends in Q4, bringing full year dividend payments to shareholders to $42 million. We remain confident in our ability to generate strong free cash flow to support our future capital allocation priorities. This is evidenced by the strong performance of the business in 2025, enabling dividends back to shareholders, share repurchases, a small bolt-on M&A transaction completed solely with cash, and the settlement of $24 million in debt. We made meaningful progress on lowering our tax rate in 2025, moving from a full-year adjusted effective tax rate of 41.5% in 2024 to 32.5% in 2025. Cash taxes paid also reduced to $61 million in 2025 from $94 million in 2024. Although it should be noted that there were one-off reductions in 2025 cash taxes paid. Without these one-off items, we would have expected a cash tax outlay in the approximately $75 million to $85 million range. While we expect improved trends to continue in the coming years, rate of improvement and rate of change is not linear for either ETR or cash taxes paid, and, therefore, we expect rates and cash outlays to change at differing levels each year as various structuring projects are enacted. Before moving to Slides 17 and 18 for a discussion of our 2026 outlook, I also want to take a moment and thank and congratulate all our employees for delivering great 2025 results. Despite any market turmoil or chaos that ensues, our teams understand how to calmly assess situations and react appropriately. Let me briefly discuss the drivers behind our outlook for 2026. Industry volumes are expected to be flat to slightly down globally, inclusive of battery electric vehicle sales. We expect to offset these market changes through continued share gains in Aftermarket and increased gasoline direct injection products, off-highway, industrial, and other end markets. Taking these factors into account and at the midpoint of our net sales outlook of $3.5 to $3.7 billion, we would expect an increase in sales in the mid-single-digit range, inclusive of FX. Excluding expected FX, our growth is projected to be in the low-single-digit range. We are therefore guiding adjusted EBITDA to be $485 million to $525 million with an EBITDA margin of 13.7% to 14.3%. We believe the business is well positioned to continue generating meaningful cash flow, and our 2026 outlook for adjusted free cash flow is, therefore, $200 million to $240 million. The adjusted effective tax rate should be in the 30% to 34% range. Overall, we expect to deliver strong results in 2026, as we continue to drive operational efficiencies and search for new areas of growth for both segments. Note that our outlook does not include any possible impact related to future policy changes by any government, which could affect our operations or technical centers. This includes additional tariffs, tax, or any other policy that could inflate or deflate revenue or affect our cost base. Fiscal year 2025 was marked by complexity and resilience—a tale of navigating global headwinds while making strategic progress. We are entering the next chapter of growth and look forward to continued success in fiscal 2026 and beyond as we continue our focus on revenue growth, product innovation and new markets, business wins, disciplined capital allocation, and delivering shareholder value. We want to thank all of you for joining us on the call today. Operator, please open the lines for questions. Operator: If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. We will take our first question from Bobby Brooks at Northland. Hey, good morning, guys. Thank you for taking my question. Bobby Brooks: The first one I had just on guidance—Chris, you gave a great breakdown of the guidance, and I was just curious, that Slide 17, when you are talking about mid to upper single digits for commercial vehicle for Europe, right? Is that the industry overall, or is that what you are expecting to see? Chris Gropp: That is the industry overall. I think down below, you will see kind of what our expectation is. I mean, we have seen, I think it is part of the from the October S&P kind of update. And, again, we saw that commercial vehicle kind of ended last year in Europe relatively stable. And we are also seeing some positive signs from our customers in that region as well. Bobby Brooks: Thank you for clearing that up for me. And just sticking with the guidance, turning to adjusted EBITDA margins. I would have thought if revenues would grow 6% that you would see a bit more margin expansion. So I just wanted to maybe double click in here what might be sort of the hurdles preventing more robust margin expansion with better growth? Chris Gropp: Well, we are showing margin expansion of 20% incremental, which for us is a good rate to go through. And it is actually higher than that if you take out some of the FX and the tariff. We are assuming that we are also going to grow on tariffs and FX, which are basically hollowed out. There is not going to be a big increase in the tariffs if they stay stable from last year. But there is a, you know, a reasonable amount of FX in there. But 20% is really a good number, we feel. Bobby Brooks: Got it. I guess I was not looking at it like that. And it was really exciting to hear you guys won your third aerospace and defense supply contract. And I was just curious to hear, is this with the same customer from the first two, or is this a new customer? Chris Gropp: Same customer. But there is momentum in other areas as well. Bobby Brooks: Got it. And maybe just the last one is, so I know you started production on the first A&D supply contract in the fourth quarter, right? And is not that second project slated to start beginning now in the first quarter? And any insights on when that third supply contract might start to kick off? Chris Gropp: Start until, I think it is July 2027. Bobby Brooks: Got it. Alright. Thank you, guys. Congrats on the great quarter. I will turn it to queue. Chris Gropp: Yep. Thanks. Thank you. Operator: We will move next to Joseph Spak at UBS. Joseph Spak: Thanks. Good morning, everyone. Chris, just want to make sure I have it right, because I was doing some of the same math on incrementals, and I think there might be some factors that are, you know, sort of weighing that a little bit down. So it sounds like in your revenue guidance, you are assuming about two points from FX. Anything there—can you give sort of further breakdown, like what the contribution from tariffs or if there are any recoveries or other pass-throughs in that revenue guidance? Chris Gropp: I mean, we are assuming on tariffs that we will come out even. So that is why it is a bit dilutive on the tariffs. There is not a lot more tariffs. Remember, we had three quarters of tariffs. We are just assuming the carry forwards that you would have additional tariffs in the first that were there last year. So that is additional. But, yeah, overall, we just assume that our tariffs are going to be breakeven, which does not give you a lot of room for growth on margins. Joseph Spak: Yeah. I mean, so the tariffs are, what, the $10 million to $15 million range, I think, the one extra quarter at no margin. FX is helping. Chris Gropp: It adds revenue. And most of that is coming in the first quarter because, again, remember the dollar started weakening at the end of the first quarter last year. A lot of that was coming into the first quarter. So that FX is not great conversion? Joseph Spak: Yeah. So it is basically at margin. So, again, if you take a look at the total number, if you go mid, you know, the 2025 to the midpoint of 2026, you are looking at, what, $130-some million of revenue and $27 million of EBITDA, you know, which is a 20% conversion with those additional headwinds of no conversion on a quarter to a third of it. Operator: Okay. Joseph Spak: Yeah. That is alright. So we can start back into what margins would have been otherwise. I guess just on another point, I am curious if, you know, if anything is rebating here as well. Like, we have obviously been seeing metal and other input prices move higher, and they have been a little bit volatile of late. Can you just remind us again of the most important inputs and just contractually how that flows through your financials? Yeah. I mean, we have got mostly, it is copper. Copper and aluminum are probably going to be the two, as well as some stainless steels. But, again, material content, you know, of our overall revenue is not a significant percentage. Chris Gropp: Yeah, because we are buying nicely already-finished components that have it built in. And where we do have any kind of commodity, we get pass-through. It is not perfect because it is usually an adjustment at the end of the quarter to go either positive or negative overall. But there is nothing meaningful in our guide from commodity pass-throughs or commodity impacts. Operator: We will go next to Jake Scholl at BNP Paribas. Jake Scholl: Guys, can I ask about the quarter? Within that, you know, appreciate you guys breaking out the 6% industrial mix. Within that, are there any particularly rapidly growing areas—anything you guys really want to call out in there that should be a growth driver over the next few years? Brady Ericson: Yeah. I mean, I think we have seen it in some of the press releases or in our earnings calls as far as the new business. I think you will see a lot of marine applications, some off-highway, some gensets in there, ag and construction. So I think it is obviously aerospace and defense. And so it is all been growing really good for us, and we have had a nice uptake in customers there. Order of magnitude, I think we will give some more color on the details and those markets at the Investor Day later on in a couple weeks or two. Jake Scholl: That is great. And then, you know, you guys finished the year hopefully within your leverage range. You are generating strong free cash this year. How should we think about your capital allocation priorities? Are there any areas where you are looking to build out your portfolio through M&A? Or do you expect to, you know, keep deploying most of that towards buybacks? And then just quickly, can you quantify where you expect the transaction costs within the free cash to adjusted free cash bridge to fall out? Thank you. Brady Ericson: I think I will hit the first question—capital allocation. Right? I mean, as we kind of told you, we are always going to sit down every quarter and kind of take a look at where we are on cash and where some M&A is and where our share price is, and try to make decisions that we think are in the best interest to maximize shareholder value. And so, obviously, with share price appreciation and our multiple going up, it may make M&A look better. But, again, we are not going to force ourselves to do M&A. You know, we still think that, you know, our business is made up of—and the diversity of our business makes us look very much like a diversified industrial, and we kind of know where some of those comps are. So we still think that share repurchases are still going to be part of our cap allocation policies, which is why the board also came out and increased our share repurchase program to give us some additional flexibility there, and continue to be opportunistic. We like our business. We like the portfolio of our products right now. And we like the trajectory that we have. So, you know, we upped our dividend as well, 11%, because our share count keeps coming down. And so we will continue to make those decisions to maximize shareholder value. Now on the cash conversion, I think it was your question there. Can you reframe that one again, Jake? Because I did not even type— Chris Gropp: I think both of us got a little confused. Jake Scholl: A quick question on the transaction costs to bridge from, like, you know, traditional free cash to adjusted free cash? Chris Gropp: Oh, I mean, we are just going from doing it from net income, which we felt was a little bit odd and squirrely, and moving it to adjusted EBITDA. Jake Scholl: Why did it go from net to adjusted cash flow? To adjust—We say adjusted cash flow. It is net. Yeah. Like, credit—Is that your question? Operator: Yes. Thanks, Jake. So, like, on Slide 25, in the adjusted free cash bridge, there is the separation-related transaction costs. And that is the only difference between what you guys report as adjusted free cash, but some things. But, you know, what is true, like, kind of traditional free cash flow number? I am just trying to bridge that. Separation. Chris Gropp: Are you asking what the separation costs are? I mean, that still relates back to the original spin transaction. And those go down. There is still a little bit of noise coming out of that from the settlement with BorgWarner and the finalization of some of the old transactions as we clear out some of the old statutory things. So those are the numbers that are there, and you can see it on page 25 in the bridge. Brady Ericson: I think those will continue to come down. Chris Gropp: That will come down. Yeah. I think it will, as we get through that. Jake Scholl: Thanks, guys. Operator: We will take our next question from Bobby Brooks at Northland. Bobby Brooks: I guess, you know, kind of broad question, but a lot of good things happening in the business. You guys are doing a great job expanding outside of just being an auto supplier. You have got your Investor Day coming up in two weeks. You know, just kind of wanted to give you the floor to what might be the focuses of the Investor Day and maybe just any hints of what is to come. Thank you. Brady Ericson: Sure. I think one of the things we are obviously going to do is we are going to go through a lot of our technology and the products and services that we think differentiate us and give us strong relationships with our customers that makes us a good partner for them. From our products to our services and support and software and calibration, we will take you through that. We will go through and deep dive each of these end markets that we have now highlighted and kind of share with you some of the applications and technologies and the market opportunities that we see in each of those markets. And, finally, we will kind of give an outlook on where we think we are going to be in 2030 and beyond as we continue to shift our business more and more towards, you know, commercial vehicle and off-highway and service applications and how that is going to further support our growth beyond 2030. And so we will have some nice displays there as well as some of our unique manufacturing and proprietary processes that we have in our manufacturing facility that also helps put some walls up around our business and protects us from kind of individual players out there. So we think it will be a nice deep dive. And in some ways, it is going to be, you know, more of the same. We are going to continue to be financially disciplined. We are going to continue to lead with product leadership. And we are going to continue to allocate capital in the most efficient way possible. And so it is just a continuation of the journey for us. Bobby Brooks: Great to hear. Really looking forward to it. I will turn it to you. Operator: We will move next to Drew Estes at Banyan Capital Management. Drew Estes: Hey there. Good morning. So my question is about 2026 volume assumptions. We are seeing what seems to be a refocus on ICE and hybrid vehicles among OEMs, especially in the U.S. And you are still assuming light vehicle volumes to decline low single digits in the Americas. And I am just curious, what would it take for light vehicle volumes to turn positive in the Americas for you all? Thank you. Brady Ericson: Okay. This is the market numbers. It is kind of the latest and greatest is that North America, the Americas, is going to be relatively flat to down a little bit—not a whole lot, I mean, from the number standpoint. And that includes, you know, EV or battery electric vehicles in that number. And so we do still see some battery electric vehicle penetration kind of flat to maybe a little bit of growth. But for us, we have got a good market. We continue to see market share gains in GDI. Penetration rates increasing. Again, the GDI goes across both hybrid and plug-in hybrid applications that have combustion engine in them. So that is a good thing for us. You know? So for us, in general, the market may be flat to down, but we continue to see good penetration rates for our business. As we kind of highlighted there on Slide 17, the overall global internal combustion, which includes hybrids and just standard combustion vehicles, you know, is going to be flat to down next year for us. But we are still showing growth. And that is because of our continued market share gains. And so we are outgrowing the market by maybe, you know, 400 basis points, 500 basis points, you know, on a year-over-year basis based on our market. And that, I think, is a testament to our technology and a lot of new business wins that we have been announcing over the last few years. So, you know, from our perspective, you know, the down 1% or 2% is kind of noise. And we will continue with our market share gains. We will continue to see growth. Drew Estes: Okay. Thank you. And just a quick follow-up on that. You know, a lot of your competitors had de-emphasized, you know, their GDI platforms and anything ICE-related. Are you seeing any change in their behavior? Maybe a refocusing on some of those programs, or have they not really changed anything? Brady Ericson: No. Not really. I mean, there are still, you know, there are just two other major players out there other than us. We continue to gain share. I think the smaller players have already kind of started to wind down things. So there is not a huge change there. Drew Estes: I think you will continue to see— Brady Ericson: —ours first to market with a 500 bar type system. We are doing a lot with alternative fuels, both natural gas, E100s, that I think puts us in a strong position. And we continue to launch, you know, more hybrid applications with GDI as well. So, again, what we benefit from is that, you know, we are truly focused. It is our key market for our company. Where some of our competitors, it is just a small percentage of a very big company. And they are allocating their capital, and they are focusing on a lot of different things. So I think there are benefits for us being a little bit smaller and more focused and dedicated to this space. Operator: Okay. Thank you. And that concludes our Q&A session. I would like to turn the conference back over to Brady Ericson for closing remarks. Brady Ericson: Great. Thank you. We really feel we delivered a solid finish to the year. 2025 results were in line with our expectations, reflecting the resilience of our diversified portfolio. The progress we made during the year underscores the strength of our strategy and successful execution, and has us well positioned in the coming year. With our strong foundation in place, we are excited about the opportunities ahead and remain confident in our long-term growth outlook and our ability to create long-term value for our shareholders. And as mentioned earlier, we are going to be hosting our Investor Day on February 25 at the NYSE. Please go to our Investor page to sign up to join us either in person or via livestream. So, again, thank you everyone for joining us this morning. Have a great day. Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Greetings, and welcome to the Euronet Worldwide, Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star-11 on your telephone. If your question has been answered and you would like to remove yourself from the queue, simply press star-11 again. As a reminder, today's program is being recorded. And now it is my pleasure to introduce your host for today's program, Adam J. Godderz, General Counsel for Euronet Worldwide, Inc. Thank you, Mr. Godderz. You may begin. Adam J. Godderz: Thank you, and good morning, everyone, and welcome to Euronet Worldwide, Inc.'s fourth quarter and full-year 2025 earnings conference call. On the call today, we have Michael J. Brown, our Chairman and CEO, as well as Rick L. Weller, our CFO. Before we begin, I need to call your attention to the forward-looking statements disclaimer on the second slide of the PowerPoint presentation we will be making today. Statements made on this call that concern Euronet Worldwide, Inc. or its management's intentions, expectations, or predictions of further performance are forward-looking statements. Euronet Worldwide, Inc.'s actual results may vary materially from those anticipated in these forward-looking statements as a result of a number of factors that are listed on the second slide of our presentation. In addition, the PowerPoint presentation includes a reconciliation of non-GAAP measures we will be using during the call to their most comparable GAAP measures. I will now turn it over to our Chairman and CEO, Michael J. Brown. Thank you, and good morning, everyone, and thank you for joining us today. Our fourth quarter 2025 results reflect one of the more challenging operating environments that we have faced in some time. Immigration policy uncertainty and economic stress, especially amongst lower-income consumers, weighed on growth across all three segments with the most pronounced impact on Money Transfer and epay. That said, despite the external headwinds that pressured the quarter, we remain excited about growth initiatives underway across all our segments that will drive business momentum through 2026. We will discuss these items in detail throughout this call. Further, we remain confident in our competitive position, particularly in Money Transfer where underlying trends continue to outperform broader market Operator: dynamics. Michael J. Brown: I would be remiss not to highlight the resiliency of our EFT segment, which delivered solid growth and once again demonstrated its role as a stabilizing earnings engine. This business continues to evolve beyond its historical reliance on ATM ownership with an increasing focus on payment infrastructure and merchant acquiring. Stepping back and looking at full-year results, despite a difficult operating backdrop, I am proud to say that we delivered another year of double-digit EPS growth consistent with our history as a publicly held company. Looking ahead to 2026, we expect to continue that performance with adjusted EPS growth in the 10% to 15% range. Based on our track record and the investments we have made, we are now confident in our ability to deliver another year of double-digit earnings growth. Next slide, please. In periods of uncertainty, I believe that history does matter, and this chart on slide five shows our ability to consistently deliver top-line growth year over year. Euronet Worldwide, Inc. has more than three decades of experience in dealing with various economic cycles. We have navigated the economic downturn in 2008 and 2009, demonetization in India, the economic instability in Greece, one of our largest EFT markets, and, of course, we navigated COVID, just to name a few. In each of these periods, the diversity and durability of our earnings, our conservative balance sheet management, share repurchases, and thoughtful investment in growth initiatives allowed us not only to withstand the pressure, but to emerge stronger, more agile, and with greater market share. You will see these themes emerge as Rick and I talk you through the details of the quarter. In short, we do not view near-term uncertainty as a reason to adjust our long-term strategy. Instead, we rely on the same principles that have granted our success for decades: disciplined execution, evolution of our business model, thoughtful capital allocation, and a focus on building assets that compound value over time. Our 2025 execution shows how we put these principles into action. We generated $4.8 billion in adjusted earnings, which allowed us to return approximately $388 million in capital to shareholders in the form of share repurchases, which excludes the shares repurchased to offset the shares issued for the CoreCard acquisition. During the year, we also acquired Kyodai in our Money Transfer segment and we announced the acquisition of Credia Bank's merchant acquiring business. We expect both of these acquisitions to drive multiyear growth. Next slide, please. As I continue my comments on slide six, you can see a quick recap of some of our key accomplishments for 2025. We continue to invest in growth opportunities across all three segments, particularly in areas where we were accelerating our digital strategy. In addition to the acquisitions I previously mentioned, we signed a REN deal with one of the top three U.S. banks. We added Commonwealth Bank of Australia along with Citi to our Dandelion portfolio. We continue to expand distribution into digital wallets in epay. Not only will these deals contribute to our growth, names like these demonstrate that our products are being recognized as market leaders and drive value. The flywheel is definitely turning and gaining momentum. So while we have experienced some pressure from immigration and the economy, we have continued to keep our eye on execution of all our growth initiatives as we enter 2026. Next slide, please. With that perspective in mind, I want to step back and remind everyone how we think about Euronet Worldwide, Inc. at a higher level as illustrated on slide number seven. As we have discussed in prior calls, our business is built around two core revenue pillars: payment and transaction processing, and cross-border and foreign exchange. What is important is that these two pillars support a huge number of use cases across the globe that we can serve through our technologies and global network, and they also work together to combine payments, cross-border movement, and FX resulting in revenue generation which is meaningfully higher per dollar moved than the broad global payments industry. Despite global challenges like the ones I mentioned earlier, the bottom line is that people and businesses will continue to make payments. They will send money, move funds across borders. Our focus is on ensuring that Euronet Worldwide, Inc. remains well positioned to serve those needs wherever, whenever, and however they may arise. Now let us go on to slide number eight and we will talk about how we furthered this strategy in each of the segments, and, of course, I will start with EFT. I am on slide number eight now. During 2025, EFT continued to deliver consistent growth, earnings stability, and cash generation which was largely the result of the diversity of our products, geographies, and payment channels in the segment. During the fourth quarter and on the heels of another year of exceptional growth in our merchant acquiring business, where adjusted EBITDA grew 32%, we acquired Credia merchant acquiring business. This partnership with Credia Bank, which is the fifth-largest bank in Greece, adds to the diversity of products and services in the EFT segment, additional mix shift to our digital strategy, and is a perfect example of the breadth of services EFT can offer a partner largely due to our REN platform and its flexible, modern digital payments processing capability. This agreement will add another 20,000 merchants to our acquiring portfolio, or nearly a 10% increase, as we provide the banking infrastructure for financial services to Credia including credit, debit, and prepaid card issuing. We will also manage the outsourcing for the branch and off-branch ATMs and provide Credia customers with access to our leading ATM network. Before I wrap up, I would like to briefly touch on our recent acquisition of CoreCard, which we completed in October. This acquisition aligns well with our objective to expand into high-growth fintech areas such as credit card issuance and processing. We view CoreCard as a strong addition to our payments processing pillar, and we are encouraged by the early momentum into new markets along with its ability to serve a more diversified client base. Since the acquisition, we have seen an expansion in processing relationships across several new programs, including the recently launched and well-publicized Bilt 2.0 credit card focused on renters and homeowners that allow you to earn points on housing payment, and the Coinbase OneCard, which offers rewards paid in Bitcoin. These are just a few of the potential new customers that we are targeting with this innovative platform. As previously stated, our near-term focus is on integrating CoreCard into our product offering for international markets. Over time, this integration will enable a more and more comprehensive end-to-end client offering combining seamless credit card processing with our existing payment capability. Needless to say, at this point, we are pleased with the early customer response. I would like to pause here to specifically highlight one important point. Our EFT business is evolving from a model historically centered on ATM ownership to one increasingly focused on payments infrastructure. While ATMs remain an important and cash-generative component of EFT, partnerships like Credia and acquisitions like CoreCard accelerate our capabilities in modern issuing and processing allowing us to scale software-driven services that support digital transactions and real-time payment flows across our global network. Now let us go on to slide number nine and we will talk about epay. As I mentioned, epay's results were impacted by global macroeconomic pressures. However, despite these challenges, the underlying core epay business continued to perform well in a difficult environment. Throughout the year, we expanded and diversified epay's distribution footprint across both physical and digital channels. This included growth in our merchant payments processing business, the expansion of our digital content and gaming partnership, and the launch of our own open-loop product in a new market. The fourth quarter, we delivered strong performance in our gaming-related branded payments business which makes up 37% of our total branded payments margin. According to industry reports, the global video game market was approximately $290 billion in 2025 and is expected to grow at a 13% CAGR through 2031. We have strategically positioned our branded payment distribution to benefit from these strong growth trends in markets around the world. We also expanded our digital content distribution with Revolut to India and New Zealand as part of their loyalty program. We are now in 20 countries with Revolut and looking to expand further. Revolut is one of the fastest-growing fintechs out there which further demonstrates our global reach, good execution of our digital channel growth strategy, and customer demand for the epay products. Additionally, we broadened our partnership with Lidl Supermarkets adding digital branded payments in two markets, Italy and France. Finally, we continue to leverage our relationship with the merchants that distribute e-content to offer payment processing. This has allowed epay to grow its merchant payment processing revenue by 21% for the full year. As we move forward, we will continue to evaluate the business to ensure that epay operates at optimal levels while staying focused on our core strategic initiatives to drive growth across the segment. Now let us move on to slide number 10 and we will talk about Money Transfer. Operator: Slide 10. Michael J. Brown: As I mentioned in my opening comments, the Money Transfer segment faced headwinds, particularly in the second half of the year driven by macroeconomic uncertainty and the changes in U.S. immigration policy. While these external factors certainly impacted our business, they have impacted everyone in the industry. It has been tough for everyone, yet we continue to find ways to gain market share. Since we have acquired Ria, we have outpaced market growth. Despite the disruption in remittances, we have continued to expand our world-class network, to add more digital touch points, to operate in new send and receive markets, and to add world-class partners to our Dandelion network. To ensure the continuity and stability of our operations, our management team focused on what is within our control and in 02/2025, anticipating a softer environment, we proactively initiated a comprehensive results-based review of the Money Transfer business with an external management consulting partner. The goal was to improve our digital sales focus, together with the efficiency, scalability, and operating leverage of the segment. That work resulted in a set of structural actions designed to strengthen the business over time. Rick will walk you through the financial implications of those actions, but from my perspective, this was about fortifying and optimizing how the business focuses on digital customers and operates through AI and process automation. Because this work began well in advance, we are better positioned now and expect these proactive steps to support performance in the coming quarters and beyond. In parallel with the optimization effort, we continue to invest in key areas that will position Money Transfer for future growth. During the fourth quarter, we signed an agreement with WorldFirst, a U.K.-based fintech that is owned and operated by Ant Financial. WorldFirst will join Citi, Standard Chartered, HSBC, and others in leveraging our Dandelion network to offer best-in-class real-time cross-border payment flows to their customers. We also closed the year with strong performance in our Ria digital channel. In the fourth quarter, we expanded our digital reach with the launch of the Ria app in Greece, Romania, and the Czech Republic, which are exciting new markets that will support our ongoing digital growth. In the fourth quarter, our global digital channel delivered 31% transaction growth and 33% revenue growth including 33% new customer acquisitions in December alone. We also continue to expand our global distribution network by launching business operations in Colombia and Panama under our own licenses. These new markets are part of our geo-expansion efforts that will allow us to continue to expand our global TAM. We look forward to building strong inbound and outbound businesses in both countries. Finally, we continue to work closely with Fireblocks and our internal teams to launch our stablecoin strategy. This initiative, which we announced last quarter, will support use cases around the globe. So while we work through some market-driven challenges in 2025, we remain confident that our optimized operating model combined with our leading global network, which now reaches 4.1 billion bank accounts, 3.7 billion wallets, and 4.0 billion cards across 200 countries, will continue to support our ability to outgrow the market in 2026 and beyond. I will stop there, and I will turn it over to Rick L. Weller, who will walk you through the financial results for the quarter in more detail. Yes. Thanks, Mike, and good morning, everyone. I will begin my Operator: comments on Slide 12, which shows our fourth quarter and year-over-year Rick L. Weller: results on an as-reported basis. Most of the majority major currencies we operate in strengthened compared to the dollar. To normalize the impact of the currency fluctuations, we have presented our results adjusted for currency on the next slide, on slide 13. As Mike mentioned, adjusted EPS for the fourth quarter was $2.39 reflecting another quarter of double-digit year-over-year earnings growth, even as parts of the business faced pressure. With that context, I will start with the fourth quarter results and then move to the full-year performance. On a constant-currency basis in the fourth quarter, consolidated revenue increased 1% year over year, adjusted operating income declined 6%, and adjusted EBITDA was consistent with the prior year, reflecting macroeconomic and immigration-related pressures in Money Transfer and epay, partially offset by strong performance in EFT, where we delivered double-digit growth in both operating and adjusted operating income and EBITDA. EFT produced another strong quarter with revenue growing 8%, adjusted operating income increasing 12%, and adjusted EBITDA growing 13%. Money Merchant Services in the Greek business performed exceptionally well, delivering another strong quarter with adjusted EBITDA up 32% year over year on robust transaction volumes and continued merchant expansion. Results in the quarter also benefited from continued expansion in Morocco, Egypt, and the Philippines as we deployed additional ATMs, broadened service offerings, and deepened relationships with banks and fintech partners. In epay, revenue declined approximately 2% while adjusted operating income decreased 7% and adjusted EBITDA declined 8% reflecting product mix shifts, continued investment in proprietary offerings, and macroeconomic pressures. Promotional activity in our B2B channel was lighter year over year, while our core digital content and payment processing businesses remain stable. Money Transfer revenue declined 1% year over year with adjusted operating income down 6% and adjusted EBITDA down 5%. I want to put these headwinds in proper context. The declines we experienced in certain remittance corridors were driven primarily by macroeconomic conditions and immigration-related dynamics affecting senders, with more pressure in the United States and more specifically, Mexico. Financial pressure remains concentrated among low-income households which represents the majority of remittance customers. According to the Federal Reserve's most recent Survey of Household Economics and Decisionmaking, inflation and prices remain the top financial challenge facing U.S. customers, and a significant share of lower-income households report difficulty covering monthly expenses and absorbing unexpected costs. What that typically means in practice is not a sharp reduction in support for families abroad, but rather fewer transactions. When budgets are strained by essentials such as rent, food, fuel, and utilities, senders continue to remit but with less flexibility between paychecks. That shows up first in frequency rather than ticket size. While we saw pressure in transactions, average amount sent increased by 7% to 8% year over year in the fourth quarter. According to the Central Bank of Mexico, remittances into Mexico declined approximately 2% in the fourth quarter of 2025, following eight months of decline ranging from about 2% to 16% compared to the prior year, and were down roughly 5% for the full year. Our Money Transfer results tracked the industry in the fourth quarter, reflecting the same macroeconomic and immigration-related pressures facing U.S. senders. However, while the broader market contracted on a full-year basis, our business delivered a modest increase in remittance volumes for 2025. In our view, that outperformance reflects continued share gains driven by our expanding digital footprint, corridor diversification, and strong partner network demonstrating the durability of our platform even in a softer demand environment. Consistent with our discussions over the past few quarters, we are very focused on extending our digital strategy in each Operator: segment. Rick L. Weller: More specifically, in the Money Transfer segment, where we have consistently produced 30% growth rates in Ria Digital, and signed Dandelion agreements with leading financial and fintech institutions. To continue our focus on digital growth, about a year ago, we initiated a process to carefully look at what we could do to drive yet more focus on Money Transfer digital initiatives. This effort is expected to produce approximately $40 million in annual run-rate benefit, a portion of which will drop to the bottom line. In that regard, as you saw in our earnings announcement, we recorded a charge of $20 million related to driving the extension of our wholesale SME and consumer digital products, enhancing the end-to-end customer experience, and deploying targeted marketing investments to accelerate digital customer acquisition and engagement. The net benefit of this investment will meaningfully contribute to an expansion in the Money Transfer segment's operating margins by approximately 50 to 75 basis points in 2026. Moreover, we will continue to critically evaluate the opportunities to accelerate our Money Transfer digital revenue growth which will likely require additional investment. We expect that the net benefit of these investments will drive additional growth as well as contribute to an expansion of our operating margins. This focused approach to accelerate our digital product opportunities to operate and scale the business to fully leverage the company's strong capabilities, extensive global infrastructure, deep banking relationships, and regulatory expertise is all designed to translate our advantages into scaled sustainable growth in digital money transfer. We will share additional details regarding these initiatives in our upcoming quarters. Finally, despite the macroeconomic and immigration-related pressures impacting the fourth quarter, as Mike mentioned, we remain very confident in the underlying earnings power of this business. The momentum we see across EFT, early wins from CoreCard, and the structural cost actions we have taken across the business, including the ongoing optimization project in Money Transfer, give us increasing confidence going into 2026. As Mike mentioned earlier, based on our current operating trajectory and pipeline of growth initiatives, we anticipate adjusted earnings per share growth of 10% to 15% in 2026 with multiple levers to drive performance as volumes normalize and investments scale. I am on slide 14 now. Turning to the full year, we delivered revenue of $4.2 billion, adjusted operating income of $550 million, adjusted EBITDA of $743 million, and adjusted earnings per share of $9.61. Essentially, the difference between the fourth quarter and the full year was from the increasing pressure in the second half of the year due to macroeconomic conditions and immigration-related policy decisions across several markets. Despite these headwinds, the diversification of our portfolio, disciplined expense management, and share repurchases we executed during the year enabled us to deliver another year-over-year double-digit earnings growth. I would also highlight that consolidated operating margins expanded by approximately 30 basis points versus the prior year, and we expect that margin trajectory to continue into 2026. As Mike mentioned earlier, adjusted EPS of $9.61 represented another year of double-digit growth, consistent with our long-term track record. Let us now turn to slide 17 for a few brief comments on the balance sheet. Slide 17 presents a summary of our balance sheet compared to the prior quarter. As you can see, we ended the quarter with $1.0 billion in unrestricted cash and debt of $2.0 billion. The decrease in cash is largely due to stock repurchases and debt repayments, partially offset by cash generated from operations. From a capital allocation standpoint, Operator: our Rick L. Weller: our priorities remain consistent: maintaining a leverage profile aligned with an investment-grade rating, investing in growth opportunities tied to our digital initiatives, and returning excess capital to shareholders through disciplined share repurchases. In 2025, we repurchased $388 million of our shares, which represents essentially all of our adjusted earnings returned to shareholders through share Operator: buybacks. Rick L. Weller: This $388 million does not include the 2.6 million shares repurchased and then reissued for the CoreCard acquisition. We believe this balanced approach—managing our balance sheet while actively deploying capital for growth and shareholder returns—is central to our long-term value creation strategy. With this, I will turn it over to Mike to wrap up the quarter. Michael J. Brown: Thanks, Rick. Growing this business has never been easy. Over thirty years, we have regularly been met with certain macroeconomic, regulatory, and geopolitical challenges. Rick L. Weller: Even though in the second half of the year, we faced stronger macro Michael J. Brown: issues, we are not discouraged. We have entered the year with a lot of motivation and confidence. We will continue to focus on the areas that we can control including executing on the growth of digital across all three segments, continuing to grow merchant processing in both EFT and epay, enhancing our banking infrastructure products and services with REN and Operator: CoreCard. Michael J. Brown: Adding more branded payment products across more markets with epay, signing more partners and increasing transactions through our Dandelion network, expanding our digital money transfer presence, optimizing the business in all three segments, and generating free cash flow and deploying our capital where it makes most sense, whether to deliver growth through acquisitions or repurchasing shares. This strategy has served us well, highlighted by our ability to deliver our fifth consecutive year of double-digit adjusted EPS growth in a difficult environment. I am confident we can continue to deliver 10% to 15% earnings growth in 2026. With that, we would be happy to take questions. Operator, will you please assist? Operator: Certainly. And our first question for today comes from the line of Michael John Grondahl from Northland. Your question please. Michael John Grondahl: Hey, guys. Wanted to ask a little bit Michael J. Brown: you know, you have called out some macro issues at the lower end and immigration. Are you seeing the light at the end of the tunnel on any of those 3Q and 4Q at 1% constant currency growth, and did things pick up by the end of the year? Are they picking up in January at all? Just just kind of curious what you are seeing there kind of real time. Michael J. Brown: Well, I would say it is first of all, whatever happens in January does not necessarily reflect the rest of the year. We do see some positive trends in January, but I would not hang my hat on. We have to kind of see what happens. It is still a very difficult environment out there. We have got a very anti-immigrant administration here, which slows down my Money Transfer business. And so I would say we are cautiously optimistic, but I would be careful, you know, jumping to conclusions. Rick L. Weller: Yeah. I would add to that, Mike, you know, just a little bit of data. And, again, as Mike says, you know, I do not think you want to jump to, you know, any kind of quick conclusion here. But if we take a look at the transfers to Mexico as reported by the Bank of Mexico, we saw declines as sharp as 16%. Now this was back more in the summertime period. Okay? And those have consistently decreased. Those drops have kind of, they have had a bit of a sawtooth pattern to them, but let us say they have consistently decreased where actually in December, there was an increase year over year. Michael J. Brown: So, Rick L. Weller: you kind of see the momentum moving a bit more north here, and, you know, that you kind of take a look at that. You know that families are, you know, families in Mexico are dependent on the monies being sent back home for their daily needs. And so, you know, maybe there is something in that kind of underlying improving trend. But as Mike says, you know, let us not overthink it at this point. It is positive, I think. And, you know, we think that we are well positioned to take advantage of that because we have continued to grow and expand our network. We continue to put more emphasis in our digital business. And so from that standpoint, our operational execution is doing good. And if we really do see this, you know, kind of northerly movement out of what you are seeing in Mexico is reflective of a broader environment, you know, maybe that, you know, is more positive than you think. But at least those indicators, you know, and I will look more specifically to this Mexico stuff. You know, they look like they are moving in the right direction. Michael John Grondahl: Got it. And then secondly, it sounds like the Money Transfer review started a while ago. One, maybe what triggered that and then two, any thoughts on doing something similar in EFT or epay? Michael J. Brown: So, yeah, we started this about a about this time last year, maybe a little before. Gustavo Andre Gala: So, yeah, we have been thinking about it and kind of what triggered it. You have got to remember, Ria is an exceptional case of success. When we bought Ria, you know, eighteen years ago, it was, you know, it was doing $200 million in revenue and now doing $2 billion. You know? So we have grown a whole lot over the last decade. It has been, you know, we moved up to be from a very tiny player to the second-largest money transfer house in the world. And with that, we realized, you know, we need to take a hard look at how we are organized, what we are doing, to make sure that our organization matches the size of the opportunity and our customer base. So that is why we did it. It was not, I mean, you know, we were not doing it out of desperation. It was more like, boy, we have really grown. Let us make sure we are not leaving any money on the table. And Michael John Grondahl: you Gustavo Andre Gala: as we as Rick said and I Gustavo Andre Gala: and I said, we are really focusing on the digital aspect of Money Transfer, and you can see with the 30-plus percent growth rate that we have had for several years now, we want to continue to grow that digital business. Michael John Grondahl: Got it. And then, I guess, just any thoughts on a similar review at at Michael J. Brown: EFT? Gustavo Andre Gala: We are always doing that. We may do something like that in the others or we may self-review, but I would say that the growth in EFT has not been quite as quick over the last couple of decades as maybe Money Transfer, so that is why we wanted to make sure. And the focus there, of course, is moving our bricks and mortar to more digital. Michael John Grondahl: Got it. Okay. Hey. Thanks, guys. Operator: Thank you. And our next question comes from the line of Cristopher David Kennedy from William Blair. Your question please. Michael J. Brown: Yes. Good morning. Thanks for taking the questions. Can you give us a little bit more details on the merchant processing business Michael John Grondahl: understand it is split between epay and the EFT segment. Michael J. Brown: Yeah. But any more color on the growth of that and the opportunities going forward? Gustavo Andre Gala: Well, we are getting pretty much blown away by that growth is the kind of the bottom line. We probably do about 20% of that volume coming out of epay and the other 80% out of EFT. As you can see by those numbers in both of them, and the epay merchant acquiring business grew over 20%. Our merchant acquiring business in Greece and elsewhere that was run out of EFT has grown over 30%. Michael J. Brown: So Gustavo Andre Gala: you know, this is a big one for us. And it is now gotten to the point where the combined EBITDA of both of those endeavors is in the kind of $90-ish million. So it is not only growing fast, but it has size. So we are really excited about that. Cristopher David Kennedy: Great. Thanks for that. And then just a quick modeling question. Can you talk about free cash flow in 2025 and the prospects for 2026? Thank you. Gustavo Andre Gala: I will let Rick do that one. Well, as Michael J. Brown: you know, Mike said, we essentially generated about $400 million of Rick L. Weller: free cash earnings there. And so, you know, now that obviously was offset with things like share repurchases, did a couple little acquisition pieces there. We would expect 2026 to be, statistically, no different than our earnings improvement. Right? We expect our earnings to be going up 10% to 15%. That should be, we should see a similar kind of rhythm in our free cash flow. Now, you know, then, as Mike said, we will be thoughtful on how we then deploy that Cristopher David Kennedy: free cash flow, Rick L. Weller: our first objective would be to support and develop our internally developed products. And Mike mentioned a couple of those in his comments there. We are going to continue to have very strong focus on our digital initiatives across all three segments. You know, we have talked a lot about Money Transfer, but we have got initiatives going in all three segments, whether it is acquiring or it is gaming or it is Money Transfer. I mean, they are in every part of the business. And so to that end, you know, we will continue to look for opportunities on the acquisition side that would be helpful to promoting and extending those digital growth strategies. So, yeah, net-net, I would expect that that number will improve consistent with our EPS outlook for 2026. Michael J. Brown: Great. Thanks for taking the questions. Operator: Thank you. And our next question comes from the line of Peter James Heckmann from D.A. Davidson. Your question please. Gustavo Andre Gala: Hey. Good morning. Thanks for Michael J. Brown: the time. I had a few follow-ups. In terms of CoreCard, can you give us the approximate revenue contribution for the partial quarter in the fourth quarter? Rick L. Weller: Yeah. Yeah. It was, you know, in the ballpark of $10 million to $12 million. Operator: Okay. And that is helpful. And then just in terms of the Michael J. Brown: the pending Credia, merchant acquiring acquisition, can you give us maybe some brackets around potential purchase price and total revenue? Rick L. Weller: We, I would not put anything out there on the, I mean, we have not disclosed those kind of numbers. The purchase price was relatively small. And it really will be, and it will only, you know, happen once we migrate the parts of the business into our platforms. But, Gustavo Andre Gala: it is within the Peter James Heckmann: more like towards the last half of the year. Gustavo Andre Gala: Yeah. Rick L. Weller: It is in the few of millions of dollars rather than hundreds of millions of dollars. So, yeah, it is quite low on the few of millions of dollars scale. Operator: Okay. That Michael J. Brown: that is helpful. And certainly, that acquisition would lead us to believe that you just mentioned that the merchant acquiring business is generating strong growth, organically off the base of the Piraeus deal. Operator: Now you are adding in this tuck-in Michael J. Brown: Are there opportunities for other tuck-ins to continue? Gustavo Andre Gala: We are looking for them, Pete. And, you know, we have been looking for them since we purchased them three years ago, since we purchased the merchant acquiring business from Piraeus. So we are looking. When we find a good one, we will slip it in. But there is no guarantee to what you can find and what it will be priced at. You know? So but, I mean, all our growth up to this point, which probably has a compounded return of 30% over the last three or so years, has all been organic. So it is nice to be able to have a little inorganic tuck-in that we can also use some of our additional products on that they did not have themselves to help them grow faster. Rick L. Weller: And, you know, Pete, I would add to it. If we do see some across each of our businesses as opportunities. It is good to see that it appears that sellers are coming to their senses on valuation. I mean, the whole payments industry is being hit extremely hard in terms of valuation, and that is starting to kind of sink in with sellers out there. And I would also tell you kind of in terms of some of the things that we have seen, and I would even say on this Credia thing, is the economics we will get out of the deal will be as good or better than share repurchases. Operator: Right. So that will give you, you know, some perspective in terms of Rick L. Weller: the efficiency of the acquisition versus even using it for share repurchases. We will have as good or better economics than share repurchases. Michael J. Brown: Alright. Great to hear. I will get back in the queue. Appreciate it. Operator: Thank you. And our next question comes from the line of Rayna Kumar from Oppenheimer. Your question please. Rayna Kumar: Good morning, Mike and Rick. I just want to go back to CoreCard for a second. Could you talk about what your expectations are for CoreCard in 2026? And now that JPMorgan is going to be the issuer for Apple Card, is there a prospect for you to retain that Apple Card relationship? Gustavo Andre Gala: I, well, we will just say that we do not know that answer for sure, Rayna. But based upon JPMorgan's history of wanting to do things in their own shop, I would say long term, that would be doubtful. You know? I am not saying it is impossible. They may decide that because the CoreCard platform has a plethora of services and features that they do not have in their current platform, it might, they might find that it is better to use our platform for a while until they make those transitions. Or maybe they will not. But we, when we did the business model, we said this is a good buy if we can keep them through the end of their contract, which is 2027. And it may go further. Rayna Kumar: That makes sense. And anything you can say on just, like, the contribution of CoreCard in 2026? What you are estimating? Rick L. Weller: Well, you can see what they had in their publicly reported Operator: information. Michael J. Brown: You know, we will do Rick L. Weller: we will do that good or better. Yeah. And, you know, so we are not putting a specific number out there for CoreCard. But as Mike said, we are already seeing the wins show up on the ledger. And the one, yeah. I mean, the value that CoreCard brings to the table is they have got a great platform. They have got a great group of people that know this industry inside and out. Got a great reference customer that is better than anybody else you could probably have out there, and in Apple. Now you put that together with us that has global distribution. Just like we did with Money Transfer. When we bought Money Transfer, it was highly focused on the United States. We are now around the world with that business. Same thing with epay. When we got epay, it was focused on the U.K. We have got epay now around the world. That is the same kind of customer reaction that we are seeing on the CoreCard product. It is the leading quality product in the market. And now we are exposing it to the rest of the world. So we are excited on seeing what the customer reaction is. But I would say you can see what their publicly reported numbers are. Gustavo Andre Gala: We will do that that good or better. Rick L. Weller: And you can bet that we are driving it to be a heck of a lot better. But let us not, I do not want to overhype the expectation. Gustavo Andre Gala: But I will say, even though Rick is telling me not to overhype, the number of interested parties that have come out of the woodwork since this announcement has been phenomenal. So what we have got to do is move those interested parties to closure and then we will be cooking. Rayna Kumar: Okay. That is exciting, and I appreciate that. And then just, you know, one more if I can sneak it in. Just, like, any thoughts on, like, segment EBITDA contribution for 2026? Like, how we should think of the different growth rates by segment. And I, like, I know a competitor recently announced an exclusive relationship with Kroger's. Is there any impact there to your business? Thank you. Rick L. Weller: Well, first of all, the Kroger impact to us will be marginal at best. And, yeah. So it unfortunately was not a great success in that regard. So nothing there to speak of. As it relates to, you know, the growth rates in that by segment, I think we will kind of hold off on that. We have given you guidance for the EPS. You can kind of look at the, you know, what we have had historically as growth rates across those businesses. You know, what I would probably say, without putting numbers out there, you know, we would expect the growth rates out of EFT and Money Transfer to lead the way, with epay, you know, in a lesser growth kind of a profile as we see it right now. Although I know that, you know, Kevin is looking at a number of exciting products that, you know, hold out some opportunity. But, yeah, we will hold off on putting specific numbers out there by segment. If you remember, a couple of years ago, we went through an approach of using an earnings guidance for the bottom line. Because essentially what we were seeing, we were seeing is a dozen different numbers out there that if you meet, if you exceed one and you missed any one of the others, you know, you really get penalized for it. And so we are trying to get the investors to focus on the strength of our total business and really reward us for, again, this is the fifth year in a row with double-digit earnings growth. I looked at the Fortune 500 stuff the other day. And the expectations for the full year are something like about 12% growth. When you say, alright. Well, if that is what is out of the S&P 500, if that is out of the S&P 500, we did 12%, why are we not getting the same kind of trading? Okay? If you took the four or five leading valuation guys out of those numbers, their numbers were 9% in growth year over year. Yet we have produced again, Mike said, the fifth year in a row Gustavo Andre Gala: of double-digit Rick L. Weller: earnings growth, and we expect the same thing next year. So we have got a business that has great consistency. Michael J. Brown: Great continuity, Rick L. Weller: we have great diversification because we are not dependent upon any one market. You know, just look at Mexico, for example. If all of our business was going to Mexico, our results would not be anywhere to what they are now. They would be down significantly. But we are diversified in that we are not dependent upon Mexico. We would love to see better numbers come out of that market, but we have a great diversified business. And so we really try to, you know, want to try to get people to focus on the consistency and the reliability of double-digit earnings growth. And our earnings are durable. Gustavo Andre Gala: I mean, they have been here for a long time and they continue to be so. Rayna Kumar: Thank you for the color. Operator: Thank you. And our next question comes from the line of Daniel Krebs from Wolfe Research. Your question please. Rick L. Weller: Hi, thank you. This is Daniel Krebs on for Darrin. I would love if you could discuss the recent Operator: DXC Hogan partnership Daniel Krebs: you know, how you may think that can improve distribution of the issuer processing products and Daniel Krebs: maybe where those efforts are being targeted by client or region. Thank you. Did you say Hogan partnership? DXC. Gustavo Andre Gala: The DXC partnership. Daniel Krebs: I am sorry. I am unfamiliar with what that is. Okay. No worries. We can take that one offline. Yeah. Maybe switching back to Credia Bank then. I know we are not giving a lot of specifics on the revenue. It sounds kind of smaller than Piraeus. But if you could just compare and contrast the business relative to Piraeus when you got it, are we talking about a similar margin profile and growth profile as we look at combining those two? Gustavo Andre Gala: Well, we hope so. So they have got about 10% of our base of, you know, our number of merchants. So that gives you an idea of kind of its size. The one thing that has helped us grow that business, where we have gone from about 18% market share in Greece to about 24% market share over the last three and a half years, and that is in a highly competitive market. We have grown that market share because we have a really good product set. And we do more than just merchant acquiring. We do DCC at these things. We do tax refund. We have various credit kinds of deals going on with our merchants. So we continue to grow that business really quick. Really quickly. And I would expect that if we could add 20,000 more merchants, they should fall right there in lockstep with it. So we are pretty excited. Plus, we are not stopping. We mentioned too that we did, what, 7,000 plus merchants organically in the fourth quarter. So we are going to keep working organically, not just inorganically. Daniel Krebs: Right. Thank you. Operator: Thank you. And our next question comes from the line of Vasundhara Govil from KBW. Your question please. Vasundhara Govil: I guess just first one on the EPS guide of 10% to 15%. Maybe you could give us some color on sort of what the underlying macro assumptions are at the low end versus the high end, just given we are seeing some pressure there? Gustavo Andre Gala: I do not think we have a high end and low end assumption. We have our forecast Gustavo Andre Gala: that falls in that range. There is a lot of things that can happen positive and negative in a year or so, and we have been able to deliver that for the last five years. So we feel pretty comfortable with that range. I would like to beat it like we did year before last, like we did in 2024, but we are just going to put that out there to give people a little bit of a yardstick of where we think we are going to land. Rayna Kumar: Great. Thank you. And then, Mike, Vasundhara Govil: you talked about sort of diversifying EFT revenue mix away from the ATM business. You have obviously made a bunch of acquisitions to make that happen. Can you remind us what that mix looks like today? And sort of if you look out two to three years, what do you envision that mix could be? And then similarly on the margin profile, I am guessing it will be accretive to the margin profile, but any color on how we can see that evolve over time? Rick L. Weller: Yeah. Yeah. Can you repeat that for me? Gustavo Andre Gala: There is that quite the EFT revenue mix Vasundhara Govil: you guys have been making acquisitions, and you are talking about that mix, or diversifying away from the ATM business? So just looking for some color on what that mix could look like two to three years from now, just given that you are buying non-ATM businesses and some of them are going at a faster pace, and then also, like, what that means for margins over time. Gustavo Andre Gala: Well, Vasu, there is also another nuance here because you say diversifying away from the ATM business. What that assumes is that all we do is, you are kind of, we are probably referring to our owned ATM business. What we found is because of our scale and the size and our reach, we do a lot of banking infrastructure deals where we are being contracted by the bank to do their ATMs or provide them ATM services. So unlike our traditional tourist-focused ATMs where if a tourist does not walk up to the ATM, you do not make money. If he uses less cash this year than last year, you make less money. These are infrastructure deals. These are long-term contracts with banks. And so what we are finding now is you have kind of got to break out when you look at ATMs, you cannot, like, throw them all in one bucket because some of them, it really does not matter how much people are going to spend with cash. We are going to get paid the same or more. So and as far as what percentage, I will let Rick try to take a shot at that. But I just want to kind of educate people. Everybody wants to say, this is all ATMs. It is not all ATMs. Rick L. Weller: And, you know, we have shown you some charts and graphs before that show that the ATM business is slightly less than 20% of our consolidation there. And we have even put out a slide that said, you know, when you look out several years, you know, that number is anticipated maybe to be something like, you know, 13, 14, you know, kind of in that ballpark. Right? So we continue to see the mix shift to where we will not get rid of the ATM business. But we are not, as Mike said, we are not focused on it being a growth engine. We are seeing more of the growth come out of our digital strategy being either infrastructure support for banks or acquiring or like CoreCard where, again, which falls into that infrastructure piece. So that will continue to become a bigger and bigger part of it. And then as it relates to the margins, I would expect that we would see an improving margin structure. Today, in our EFT business, we have an operating margin that is just north of 20%-ish kind of percent. Okay? And if you kind of take a look at the acquiring business, it generally is going to be in a 25%-ish kind of ZIP code, the better. Okay? Michael J. Brown: You look at the, Rick L. Weller: the infrastructure or, like, the issuing business, it is going to be more in the 40% to 50% kind of range. And so we would anticipate seeing that mix will shift down for the ATM portion of it. And that will have better margins out of the EFT segment over time. Daniel Krebs: And I think, with Gustavo Andre Gala: yeah. Yeah. But it is nice to talk to you. And with everybody else, I noticed we are at the top of the hour, so we are going to close ourselves off. Appreciate your interest and look forward to talking to you in the future. Thank you very much. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Electric Power Company, Inc. Fourth Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Darcy Reese, Vice President, Investor Relations. Please go ahead. Good morning, and welcome to American Electric Power Company, Inc.’s fourth quarter 2025 earnings call. A live webcast of this teleconference and slide presentation are on our website under the Events and Presentations section. Joining me today are William J. Fehrman, Chairman, President, and Chief Executive Officer, and Trevor Ian Mihalik, Executive Vice President and Chief Financial Officer. In addition, we have other members of our management team in the room to answer questions if needed, including Kate Sturgess, Senior Vice President, Controller, and Chief Accounting Officer. We will be making forward-looking statements during the call. Darcy Reese: Actual results may differ materially from those projected in any forward-looking statement we make today. Factors that could cause our actual results to differ materially are discussed in the company's most recent SEC filings. Please refer to the presentation slides that accompany this call for a reconciliation to GAAP measures. We will take your questions following opening remarks. I will now hand the call over to Bill. Thank you, Darcy, and good morning, and welcome to American Electric Power Company, Inc.’s William J. Fehrman: fourth quarter 2025 earnings call. I am happy to be here with all of you. We are operating in a period of incredible transformation across our industry, marked by accelerating electrification, rapidly expanding AI-driven and industrial demand, and rising expectations for reliable and affordable energy solutions. These trends only accelerated in 2025 and continued in 2026. As we look to the future, AEP stands out among its peers as one of the fastest-growing high-quality, pure play electric utilities strategically positioned in multiple high-growth regions. Let's begin on slides four and five of today's presentation. AEP is rooted deep in innovation, and we are ready to meet unprecedented customer demand across our impressive 11-state regulated service territory and beyond, resulting in significant infrastructure investment which continues to drive our strong financial performance now and into the future. We are operating in an environment and time when scale matters more than ever, and we continue to leverage our size to mitigate supply chain risk and focus on having the resources necessary to meet this massive system demand and investment opportunity. Notably, we are deepening our engagement with customers, regulators, policymakers, and suppliers to align our long-term goals and achieve favorable outcomes. For example, we have key relationships with major gas turbine manufacturers securing over 10 gigawatts of capacity and have entered into a long-term strategic partnership with Quanta Services to strengthen and accelerate capabilities for 765 kV transmission infrastructure buildout. Simply put, the AEP team has made significant progress in 2025. And as we look ahead, we have built a robust plan with a clear focus on operational excellence and accountability supported by the strength and experience of our winning team. I am very excited to share our progress with you today. Turning to slide seven and eight, I would like to first walk through our 2025 financial performance and share our outlook, then speak to our recent key accomplishments and continued focus on customer satisfaction and affordability. I will then hand things over to Trevor for a more detailed summary of our financial results and the growth trajectory of our business. Now on to our financial results. I am proud of the dedication and accomplishments of the entire team over the past year. AEP has a long history of consistently delivering or exceeding our earnings guidance and 2025 was no exception. We achieved fourth quarter 2025 operating earnings of $1.19 per share, bringing our full-year 2025 operating earnings to $5.97 per share, which is above the top end of our guidance range. In October, we also increased our quarterly dividend to $0.95 per share, demonstrating our ability to deliver competitive and sustainable shareholder returns. In fact, total shareholder return for 2025 was 29%, one of the highest in the industry. AEP’s execution-driven performance in 2025 has established a solid foundation from which we are reaffirming our 2026 full-year operating earnings guidance range of $6.15 to $6.45 per share. With the remarkable load expansion we are experiencing today, we are also reaffirming our premium long-term earnings growth rate of 7% to 9% for 2026 to 2030 with an expected 9% CAGR. We have a large but conservative $72 billion five-year capital plan yielding a 10% rate base CAGR that continues to present incremental upside and is supported by a strong balance sheet. In short, we finished the year with positive momentum, and we are only just getting started. Later in the call, Trevor will walk through our fourth quarter performance and provide additional details about our financial growth outlook. As we have discussed, we are in the midst of a generational load growth phenomenon throughout our diversified service territory, especially in Texas, Ohio, Indiana, and Oklahoma. We now have 56 gigawatts of firm incremental contracted load additions, doubling the 28 gigawatts we reported just last fall. These gigawatts are not speculative as they are all backed by signed customer agreements. However, meeting this demand must be done responsibly. It is critically important that costs associated with these large loads are allocated fairly and the right investments are made for the long-term success of our grid. AEP continues to work with federal and state leaders to quickly adopt reforms to streamline the connection of new energy resources to serve large loads and drive smart solutions to protect residential customers from extra costs. This builds on our progress over the last several years. We laid the groundwork two years ago when we secured commission approvals for data center tariffs in Ohio and large load tariff modifications in Indiana, Kentucky, and West Virginia. We now have pending tariff filings in Michigan, Oklahoma, Texas, and Virginia. A summary of these tariff filings can be found on slide nine of our presentation. This methodology is designed to help protect our existing customers from bearing the costs of grid improvements required to meet data centers’ energy demands. While this is good progress, additional measures must be taken to ensure that the infrastructure required to serve large loads is paid for by the customers who drive those needs. Beyond these efforts, we are also building on AEP’s history of innovation. We continue to explore generation solutions for the benefit of customers during this period of massive demand. We have previously talked about AEP’s ongoing efforts to develop small modular reactors, or SMRs, in our service territory. We announced that we are participating in the early site permit process for two potential SMR locations, in Indiana and Virginia, and we will, of course, only move forward with the appropriate returns and risk mitigating structures. Additionally, last month, we announced plans to purchase $2.65 billion of fuel cells that will be part of a generation facility expected to be located near Cheyenne, Wyoming. The facility includes a 20-year offtake arrangement with a high-quality investment-grade third-party customer. Transmission will be equally important for affordability and to ensure new generation is quickly and reliably connected to serve large loads. Our unmatched scale on the transmission side continues to be a defining advantage for AEP. As outlined further on slide 10, we own and operate nearly 90% of the 765 kV infrastructure in the United States. With the largest electric transmission system in the country, AEP is exceptionally well positioned as the utility partner of choice for customers who need consistent large load power. As a matter of fact, AEP was recently recommended for approval or awarded new 765 kV projects in PJM, SPP, and MISO, expanding our footprint even further. New transmission projects and our planned fuel cell facility in Wyoming reinforce AEP’s growth trajectory, representing opportunities that include approximately $5 billion to $8 billion of confirmed or endorsed incremental generation and transmission projects. This is additive to our current $72 billion five-year capital plan just announced last October. Let me now touch on the progress we are making on the legislative and regulatory fronts for the benefit of our customers and communities. We remain focused on reducing the gap between our authorized versus actual ROE. In 2025, we achieved an earned ROE on the regulated business of 9.1%, up 30 basis points from two years ago with detailed plans to continue the improvement. Our successful approach of listening closely to state leaders, and aligning with their needs has resulted in the passage of improved legislation and the achievement of positive balanced regulatory outcomes that benefit both our customers and investors. Our continued execution is evident through several recent milestones all detailed in the appendix of today’s presentation, including broader regulatory accomplishments achieved in 2025. I would like to highlight a few of these key milestones. Legislation that reduces regulatory lag was approved in Ohio, Oklahoma, and Texas. I&M achieved approval on a generation resources filing enabling targeted resource additions through an efficient streamlined process. Base rate cases in Arkansas, Kentucky, and Ohio were approved or settled with additional new base rate cases recently filed in Oklahoma and Texas. Kentucky Power’s investment in our Mitchell plant was approved, extending interest in its energy and capacity beyond 2028. And in West Virginia, we continue to work with leaders at all levels of the state on fair financial returns as the state’s energy strategy aims to attract more capital investment and triple electricity generation to 50 gigawatts by 2050. While there is no statutory timeline for the commission to rule on the reconsideration filing made last September, we expect the decision soon. Affordability is at the heart of our regulatory approach, and as summarized on slide 11, we are taking decisive action to keep customer bills as economic as possible. We are building on efforts to support incremental load growth with innovative rate design while also mitigating residential rate impacts through our focus on O&M efficiency and effective financing mechanisms such as securitization. As we invest in this electric infrastructure growth cycle, and assign the appropriate cost to new large loads, we remain focused on protecting residential customers from increased cost. To finish up, we are seeing rapid change in our industry as well as increased need and demand from our customers and communities. We have a clear strategy, a strong financial foundation, and a team that knows how to deliver, all coming together to help us capitalize on the unprecedented opportunities ahead for the grid. I am dedicated to AEP’s vision of improving customers’ lives with reliable, affordable power. I am also committed to leading AEP for many more years to come. I look forward to working with our incredible team. We will continue to execute at an unmatched pace of play on behalf of our stakeholders to drive growth, serve our customers, and create value for our investors. I will now turn the call over to Trevor, who will walk us through fourth quarter financial performance and provide more details surrounding our growth. Thanks, Bill, and good morning, everyone. As you have heard, AEP delivered an exceptional year of performance in 2025. Our year-to-date results exceeded expectations, supported by industry-leading load growth fundamentals, constructive regulatory and legislative developments, and disciplined execution of our robust plan with affordability front and center. I am pleased to walk through our progress today. I will start with the key earnings drivers behind our 2025 performance, and build on Bill’s comments regarding load growth. From there, I will provide additional context around our $72 billion base capital plan. I will then highlight the incremental projects that have been identified beyond the base plan. And finally, I will close with remarks reinforcing our continued commitment to our operational and financial strength that positions us to deliver long-term value for our customers and investors. Please turn to slide thirteen and fourteen of the presentation. Our 2025 full-year operating earnings was $5.97 per share, exceeding the high end of our guidance range of $5.75 to $5.95. This strong performance in our regulated segments was due to constructive rate case outcomes across many of our jurisdictions, steady progress on our transmission investment program, and the continued momentum in the load growth across our service territory, which I will speak more about shortly. These positive drivers were partially offset by additional spending on system reliability improvements, higher depreciation from our growing capital base, and interest expense. We also continue to see meaningful performance in our Generation & Marketing segment, driven by favorable energy margins and the benefits we realized from contract optimization within the portfolio. Turning to Corporate and Other, the year-over-year variance was largely due to a $0.06 per share tax benefit recognized in 2024 from updated state tax apportionment. As Bill noted earlier, our 2025 performance continues to give us confidence in our financial plan, and we are reaffirming our 2026 guidance and our long-term earnings growth outlook through 2030. As we turn to sales trends on slide 15, you will note that 2025 was a transformative year for AEP. Our total system sales exceeded 200 million megawatt-hours for the first time in AEP history. This milestone highlights the historic load growth we are seeing on our system, with what we anticipate will be even more incredible opportunity ahead of us. Retail sales grew 7.5% in 2025 compared to 2024, driven by significant commercial and industrial sales growth of nearly 10%, primarily from data centers in Indiana, Texas, and Ohio, as well as industrial sales in Texas. Comparatively, residential sales grew approximately 3% in 2025 across our footprint, mostly attributable to I&M and SWEPCO. Keep in mind that our revenues are supported by these rising sales growth trends and further strengthened by minimum demand charges included in our large load customer agreements. So while total retail sales rose 7.5% in 2025, corresponding revenue was up 8.3%. Turning to slide 16 and the future. We have previously discussed our forecast of 28 gigawatts of incremental contracted load growth by 2030. Today, we increased and doubled that outlook by 28 gigawatts to 56 gigawatts of incremental load. This step up reflects our continued success in converting projects from our planning queue into binding financial commitments. The increase to 56 gigawatts over our prior disclosure is driven by growth in ERCOT, PJM, and SPP. In PJM, contracted load increased by 4 gigawatts driven largely by activity in Ohio. This growth continues to be reinforced by data center development and, importantly, about 90% of the incremental PJM load is supported by executed take-or-pay electric service agreements, or ESAs. We are also seeing positive momentum in the region in Oklahoma, where contracted load has grown by 1 gigawatt driven primarily by a commitment with a large aluminum smelting customer. Together, PJM and SPP account for the 5 gigawatts increase in our contracted load outlook. Let me turn to ERCOT because the Texas story remains a central part of our long-term growth outlook. As a transmission and distribution utility, AEP Texas does not directly bill retail customers in ERCOT. We secure contracted load through letters of agreement, or LOAs. Under these agreements, customers must secure land, complete and pay for interconnection studies, provide detailed load forecasts, and importantly, fund all of the construction costs. This structure ensures that only viable and financially backed projects advance into AEP’s forecast, supporting greater confidence in our long-term load additions. Within AEP’s 56 gigawatts of identified incremental load, AEP Texas has signed LOAs for 36 gigawatts with large industrial customers, well-capitalized hyperscalers, and mega-size data center developers. This is a significant increase of 23 gigawatts since October, and all of these new loads meet Senate Bill 6 criteria outlined on slide 17. As implementation of this legislation progresses in Texas, we anticipate improved clarity and certainty around the timing of when additional loads will connect in ERCOT. As such, AEP is well positioned to build the transmission and distribution infrastructure that Texas needs, and investment timing will be influenced by resource availability to support growing system load. We will continue to update our load forecast throughout the year as we support and benefit from the rapid economic growth in Texas. Please turn to slide 18. I want to take a moment to ground us in the foundation of our capital plan and the opportunities ahead. We built our forecast using relatively conservative assumptions which gives us a lot of confidence in our ability to deliver and creates opportunity for upside as conditions evolve. For example, our $72 billion five-year capital plan is based on the 28 gigawatt incremental demand outlook we shared last fall. As we continue to see new opportunities materialize across our service territory, the capital plan will continue to expand. Just since the third quarter call, we have seen upside of approximately $5 billion to $8 billion of confirmed or endorsed generation and transmission projects in the period of 2026 through 2030 that are in addition to the base capital plan. I would like to emphasize that any capital related to the incremental load outlook, which has increased by an additional 28 gigawatts, is additive to our $72 billion plan and is not part of the $5 billion to $8 billion of capital upside. As I have articulated on prior earnings calls, we want to have a cadence of updating the capital plan annually in the third quarter. This timing allows us to run the full plan through our modeling process and provide a view of the associated financing needs. That said, given the size and rapid growth of the incremental opportunity, we felt it was important to highlight some investments that have come into the five-year window. We will provide additional clarity on these opportunities, formally update our capital plan, Trevor Ian Mihalik: and address the associated financing William J. Fehrman: as we have a greater line of sight. We have a plan that is supported by tangible upside and is designed with affordability considerations for our existing customers. We are confident in our ability to advance this critical work of building a resilient, modern grid that will help power the economic growth in our service territory, including the rapidly expanding AI-driven and industrial demand. Now moving to slide 19. I want to highlight the key takeaways that reflect the steady progress we are making in both operational and financial execution and reiterate some of the themes you heard today. First, today, you heard that our positive results in 2025 give us strong confidence in the financial commitments we have laid out. We delivered performance that exceeded our 2025 operating earnings guidance, which supports our conviction in reaffirming the 2026 guidance range and the long-term earnings growth rate. Second, you heard that we have increased our load forecast to 56 gigawatts of additional contracted Trevor Ian Mihalik: load William J. Fehrman: by 2030, all backed by signed customer financial agreements. Trevor Ian Mihalik: This is real committed load, much of which is under take-or-pay large load tariff agreements and positions us to advance the critical infrastructure customers and communities will rely on for decades to come. Third, you heard that our capital plan remains relatively conservative with approximately $5 billion to $8 billion of confirmed or endorsed projects incremental to the $72 billion base capital plan. And continued acceleration of load growth could also support further expansion. Fourth, you heard that we remain committed to maintaining a healthy balance sheet. This is endorsed by our FFO to debt target of 14% to 15%, and we currently exceeded this target with S&P at 15.2% as of year-end. Comparatively, our Moody’s FFO to debt is just under 14%, underscoring our commitment to balance sheet strength. Our diverse high-growth footprint also provides the flexibility to deploy capital efficiently in direct support of customer needs, regulatory priorities, and long-term shareholder value. This disciplined approach ensures we can prioritize high impact projects and maintain financial strength as we execute at scale. Finally, you heard that along with large-scale infrastructure investment execution, we continue to work closely with our stakeholders to advance regulatory strategies to keep customer affordability top of mind. This includes our data center and large load tariff filings and our focus on O&M efficiency. Taken as a whole, these actions reinforce a balanced approach that supports affordability while advancing critical investments needed to meet the growing customer demand. I am excited by the momentum we have built over the last year, and I am confident in the discipline we are bringing to our execution. We are delivering on our robust plan guided by a high-quality, seasoned leadership team that has come together to leverage AEP’s size and capabilities, resulting in strong operational and financial performance. With unmatched infrastructure assets and deep expertise, I believe AEP is exceptionally well positioned to build the critical infrastructure our country needs to support unprecedented growth. I am extremely proud to be part of an organization with this much opportunity. We really appreciate you taking the time to listen to our prepared remarks. I am now going to ask the operator to open the line so that we can take your questions. Thank you. Operator: At this time, I would like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad. Your first question comes from Shar Pourreza with Wells Fargo. William J. Fehrman: Hey, guys, good morning. Morning, sir. Shar Pourreza: Good morning, Bill. So just quickly, I mean, obviously, you guys have doubled your signed contract load since the last update. You are seeing very healthy demand from large load customers, especially in Texas. Can you just maybe give us a small inkling, even kind of directionally, on what this could mean to the CAGR? I mean, could this put upward pressure on the current 9% or when you look to roll forward, especially as you continue to sign additional ESAs? So I guess could the CAGR be a 3Q update in addition to CapEx and funding? Thanks. Trevor Ian Mihalik: Shar, it is Trevor. I appreciate the question. Yeah. Look. I think the good news here is the $72 billion five-year capital plan does not include this incremental load growth of 28 gigawatts. And we really tried to articulate that we think the $72 billion is somewhat conservative, and that is why we did want to come out with this incremental $5 billion to $8 billion that we have line of sight to. I do think what we will do is on the first quarter call, when we have a little bit of greater line of sight around the five to eight, we will come out with some more definitive ideas around how we are going to finance it and what that ultimately means to the growth rate. But the bigger question that you are asking on the 28 gig, that probably will be more around the third quarter call as we formally put forward our revised capital plan and run it through our internal processes. However, if we see some big chunks like we have with this five to eight that are meaningful, we may address those on the second quarter call as well. But I would say keep an eye out on the formal process. We really are trying to stick to the cadence of doing this once a year. But with this much load growth that we are seeing, I think it was really important for us to come out and at least give the street some line of sight into what this really means for us. Good news also, though, is with this 28 gigs, that gets us up to the 56, we still have 180 gigs plus in the queue, in various stages of development. And so even while we upsized the interconnection queue up to 56, we did not lower the 180 gigs, just because we are seeing that much growth on the system. And so I think, you know, what that really means is you will see a greater line of sight beyond 2030 as we continue to deploy capital into the next decade or past this decade into the next decade. But, again, I would say let’s see what we can pull together by the first quarter call and then ultimately what the formal process generates on the third quarter call. Shar Pourreza: Got it. Yeah. I know it is pretty amazing growth. I mean, just I know, Trevor, I know and Bill, the ESAs have been sort of under sort of a bit of a microscope with investors. I mean, I guess, talk a little bit about the protections and the level of confidence there. And the reason why I ask is, you know, we have at least seen one data center pull out of a project due to local pushback, and that was despite having sort of a signed ESA in place. Just maybe talk about the level of confidence there because it has obviously been on the microscope with investors. Thanks. Trevor Ian Mihalik: Yeah. And this is Trevor again, Shar. So from that perspective, again, what gives us a great deal of confidence is that 180 gigs that are backing any of those firm ESAs that are in the load right now. But we do actually a pretty good job of really distilling down those loads on our system to ensure that they are backed by financially secure and very committed counterparties. And then, as you know, the ESAs have a take-or-pay component, and the large load tariffs that we have pioneered lock those counterparties in place to ensure that the dollars that are spent are not going to be Shar Pourreza: detrimental Trevor Ian Mihalik: to our existing customers. So, we feel very, very good about where we are under the ESAs and even the LOAs in Texas. You know, given how SB 6 is really trying to ferret out and ensure that only those loads that are very committed are advancing. And that is where we are at, and that is why we feel good about coming out with this 28 gigs incremental on top of the 28 that were there. And so from our perspective, we feel very, very secure in the 56. William J. Fehrman: And then, Shar, I will add that with our service territory predominantly being more on the rural side, we are actually having very good success with our local communities and the desire to host this type of economic development. Obviously, we have a few here and there that we need to do more work with. But the thing I love about AEP’s footprint is the diversity of the assets that we have and the locations that we have and the desire across many of those locations to get this economic development built and built as quickly as we can. And so in addition to what Trevor had with regards to the contractual side of this, I love how our teams are attacking the need to build those community relations and working with our individual states and really working to deliver what they want. Shar Pourreza: Got it. Big congrats to both of you. I mean, the turnaround has been nothing short of amazing. Thanks, guys. Trevor Ian Mihalik: Yeah. Thanks, Shar. Operator: Your next question comes from Steven Isaac Fleishman with Wolfe Research. Trevor Ian Mihalik: Hey. Good morning. William J. Fehrman: Morning, Steve. Steven Isaac Fleishman: Hey. Hey, Bill. William J. Fehrman: Trevor. So just on the Trevor Ian Mihalik: on the LOA, is there any more kind of color that you can provide on, I know that people are making significant commitments, but I guess in the scale of the value of making sure you are kind of in the kind of SB 6 queue, what the, you know, how much risk there might be that these are just, like, options being put on the table and, you know, Steven Isaac Fleishman: it is worth putting a decent amount of money William J. Fehrman: for an option as opposed to really Trevor Ian Mihalik: a committed project. I do not know if that makes sense as a question, but just wanted to get a sense of, like, the scale of Steven Isaac Fleishman: commitment relative to the scale of these projects. William J. Fehrman: Yeah, Steve. Trevor Ian Mihalik: Again, we try to articulate just our confidence in all of this in the prepared remarks. But, again, what we are seeing is a big chunk of what is coming in in ERCOT is around the data center load, which is a lot of hyperscalers and data center developers. You know, more than 50% of that load is now hyperscaler load. And so these are counterparties that are significantly committed to their place in the queue and putting dollars at risk. And so we feel very good about that. And then, again, with the amount of capacity in the backlog that is not even in the 56, if anyone were to walk away or just have, like you say, a financial holding position, we feel we could backfill that very, very quickly. So all of that gives us a great deal of confidence in these LOAs in Texas. Okay. That makes sense. And then maybe just on the transmission project, is there any more info you can share on each one and the rough investment William J. Fehrman: related to those. Yeah. Let me say this. Generally, projects. Trevor Ian Mihalik: Right. Roughly, there is, I will call it, almost $5 billion associated with those projects. It is about $2.7 billion of transmission projects in SPP, about $1.5 billion in PJM, and about a half billion in MISO. That all adds up to kind of the $4.7 billion, or close to $5 billion, of transmission projects that have either been awarded or kind of assigned to us. And then you layer on top of that the $2.7 billion associated with the Bloom fuel cells that we announced under the 8-K, and that gets you to roughly $7.4 billion of the breakout of the five to eight that we talked about. Again, I would say the three transmission opportunities of that $4.7 billion, we feel very, very good about. And largely, most of that, I think it is only the MISO piece that does not fall within the window through 2030. It is, I think, 2031 is when it would go in service. But everything else would be in the five-year window 2026 to 2030. William J. Fehrman: And, Steve, I would add that with our transmission business, the huge advantage we have, of course, is that we operate 90% of the 765 system in this country and are by far the leader in that voltage level. And with our exceptional partnership we have with Quanta, we are the preferred provider of these projects. And so again, as Trevor laid out, I am very excited about our future in this area and our ability to win these projects and deliver on them, particularly with our push to acquire the components that we need well ahead of time. And our size matters in this area because we are out ensuring that we have the equipment that we need, we have the contractor that we need, we have the capabilities that we need to deliver on these projects. And so I really love where we sit from a competitive position. Steven Isaac Fleishman: Great. Thank you. That makes a ton of sense. Thank you. Trevor Ian Mihalik: Thanks, Steve. Operator: Your next question comes from Julien Patrick Dumoulin-Smith with Jefferies. Hey. Good morning, team. Trevor, Bill. Nice to chat with you guys. Appreciate it. William J. Fehrman: Hey, Julien. Good morning. Julien Patrick Dumoulin-Smith: Hey. Good morning. Hey, guys. Just following up maybe in the same vein here with Steve. You know, how do you think about, you know, this contracted generation business in as much as Bloom seems a little step away from the core rate base opportunity? Again, obviously, PJM’s reevaluating its own construct here. They have got backstopping they are considering. How do you all think about the prospects for contracted generation to effectively backstop and serve some of this 56 that you guys are talking about here, you know, in terms of whether that is PJM or more in Wyoming? How do you think about that almost as an adjacent business segment, whether that is scaling up with Bloom beyond this commitment or whether that is something adjacent in a more traditional gas context. William J. Fehrman: Yeah. Thanks for that question. And for us, it is really about serving our customers and arriving at solutions for them to get them connected as quickly as we possibly can. And in many of these cases, where the grid connect could be out for a couple of years, we have been able to offer to them the capabilities of bringing the data centers online significantly faster through deals like the Bloom Energy deal and perhaps the deployment of batteries and some other opportunities. And so I see this as a significant customer service that we are providing to them to support what they ultimately want to do and need to meet their business requirements. So I am very excited about where we sit on this. I like the deals that we have done with Bloom. It is clearly a proven technology that can be deployed relatively quickly. And so I see it as very complementary to the rest of our business and we will continue to provide those services to the customers as they need it. Trevor Ian Mihalik: And, Julien, let me just also add one thing on this is as we have said in the 8-K, this is a long-term agreement with a very creditworthy counterparty. And so from our perspective, that long-term contracted cash flow off of a material asset like this is very, very important for us Julien Patrick Dumoulin-Smith: And Trevor Ian Mihalik: to me, it is very similar to a regulated return because here you have a very, very high-quality counterparty signing a 20-year PPA agreement. And ultimately, you do not have to go in for a rate case every so often on this, and it is very, very positive for us. Julien Patrick Dumoulin-Smith: Yeah. No. Indeed. And then with respect to PJM, any comments on that front? As how you think about tackling it? And that could be an Ohio-specific thought process as you think about engaging this year and future years. Or frankly directly with PJM. Again, to the same vein as serving your customers, right, under this contracted generation effort. William J. Fehrman: We are deeply engaged in PJM as well as SPP and MISO. Obviously, the secret sauce on all of this is figuring out methodologies to speed up connecting generation to load. We are fully in support of the administration’s work on trying to solve this issue in PJM and to find ways to accelerate that process. And so our teams are working directly with a variety of stakeholders on all of this, and I am hopeful that we will find paths forward that will allow for this to be expedited. The thing for us is we are super prepared for this. We have the equipment we need. We have the contractors we need. And so once we get through the processes at the RTO, the beauty of that is it falls back on us to execute, and I am absolutely confident in our team that we will execute once we can start digging the holes. Julien Patrick Dumoulin-Smith: Awesome, guys. I will leave it there. Thank you very much. William J. Fehrman: Thanks, Julien. Operator: Your next question comes from Michael Lonigan with Barclays. Julien Patrick Dumoulin-Smith: Hi, good morning. Thanks for taking my question. So your 2026 William J. Fehrman: morning. Julien Patrick Dumoulin-Smith: Your 2026 EPS guidance that you initiated on the third quarter call reaffirmed today. In the third quarter, you included 4 gigawatts of incremental contracted load which was raised to 7 gigawatts today, but you reaffirmed that 2026 EPS guidance. Would you say you expect to be towards the high end of that EPS guidance this year? Julien Patrick Dumoulin-Smith: Now? Trevor Ian Mihalik: Yes, Michael, this is Trevor. What I would say is we really give a range for a reason. It is still very early in the year right now. We do see some opportunity for incremental CapEx, but that most likely would not manifest itself in the next several months here. So I would say we still are very, very confident with the $6.15 to the $6.45 range that we put out and with the midpoint being $6.30. And as we have said in 2025, we worked to guide to the upper end of the range, and then we exceeded the high end of the range. We certainly are a management team that focuses on execution and putting out things that we can deliver on. Julien Patrick Dumoulin-Smith: But Trevor Ian Mihalik: I am very much of the mindset, I want to underpromise and overdeliver. And so we see a lot of opportunity coming together. But at this point, we are going to just continue to affirm our range. And if something else comes forward on future calls, we would certainly address it at that time. Steven Isaac Fleishman: Thank you. And then William J. Fehrman: you know, you have continued to talk about steady earned ROE improvements over the course of your plan. And I know driven by Trevor Ian Mihalik: you know, legislative enhancements Julien Patrick Dumoulin-Smith: you know, to the recent rate case settlements in Ohio, Kentucky, Trevor Ian Mihalik: Arkansas support Julien Patrick Dumoulin-Smith: that trajectory, and I know you also recently filed in Oklahoma and SWEPCO Texas. William J. Fehrman: Do we expect more recent rate case filings across the board given all the robust capital opportunity from the Trevor Ian Mihalik: the load and the five to eight you identified, William J. Fehrman: if so, when Trevor Ian Mihalik: you know, what jurisdictions should we expect you to file in next? Yeah. So, Michael, you have asked a few questions in there. So let me start with the ROEs and the earned ROEs and how we ended up in 2025 at the 9.2. Again, feeling very good about that, and the projection over the five-year period is to get us to the 9.5. And so we feel like there is a good path, and it is not just speculative items that we are putting in with assumed benefits to rate cases. There are some definitive things that have transpired like, you know, the UTM in Texas, SB 998 in Oklahoma, and certainly the forward-facing test year in Ohio. All will help us get to where we think we will come out on the 9.5 by the end of the five-year plan. So we feel very good about that. And, again, how we executed in the current period. With regards to incremental filed rate cases, we certainly look at the appropriate times, whether it is the required filing periods or when you can go in and ask for incremental capital that would benefit the customers. Those all get put through the normal regulatory process internally. Again, we feel good about where we are from the regulatory standpoint and ensuring that we are getting constructive outcomes that not only benefit our customers but also add value to our shareholders. William J. Fehrman: Yeah. Let me add into there that our philosophy here is no plugs, no, basically, things that get added into our plan that we do not have a clear line of sight to execute against. And so when we put these numbers out, we have absolute detailed, disciplined plans that we will execute against and measure ourselves against to get there. And so while others might just put numbers out there, we will not allow that. There has to be something behind it, and that is essentially the standard that Trevor and I have as we push the organization forward. Julien Patrick Dumoulin-Smith: Great. Thanks for taking my question. William J. Fehrman: Yep. Thank you. Thanks, Michael. Operator: Your next question comes from David Keith Arcaro with Morgan Stanley. William J. Fehrman: Good morning. David Keith Arcaro: Let us see. Looking at the 36 gigawatts here that you have got in ERCOT, I was just wondering, are there physical constraints in the grid to consider with all that load coming on by 2030, or labor constraints? I guess, what needs to be done from a transmission investment perspective to actually make sure that it can all come on? William J. Fehrman: Yeah. Really good question, and that goes right to the heart of the thing I believe in most, which is execution around this organization. And as our teams are looking at the requirements to deliver these projects for our customers, we are getting well ahead of the equipment supply and the contracting supply that we need to ensure that we are able to deliver on these projects. Now we know the demand on this is real. The timing will depend on the SB 6 implementation, and some of these could potentially move around. But we are making sure we have the capabilities and resources in place to deliver on these in accordance with what our customers are demanding. And that is fundamental to our business. So I feel very comfortable with where we are at in that regard. We will obviously continue to adjust as the SB 6 implementation moves in and out. But I can guarantee you our team is all over this. David Keith Arcaro: Got it. That is helpful. Thanks. David Keith Arcaro: And obviously, a big inflection, big step change upward here in the ERCOT activity that you are seeing. I was wondering also on the 180 gigawatt overall queue that you have of load, is that also heavily weighted toward ERCOT? Or how is that split where you are seeing the incremental progress on the margin across your service territories? Trevor Ian Mihalik: Yes. Generally, David, what you are seeing is in that roughly 180 gigs, call it roughly about 70 gigs is in David Keith Arcaro: ERCOT. Trevor Ian Mihalik: And then you have got about 20, 25 gigawatts in AEP Ohio, and then about 30 gigawatts in PSO and another 30 gigawatts in APCo, and then 16 in I&M. So you can see it spread around very well around the core states that we have talked about around our growth. And those four states around the growth tend to be Texas, Oklahoma, Ohio, and Indiana. David Keith Arcaro: Got it. Super helpful. Thanks so much. William J. Fehrman: Yeah. Thanks so much. Operator: Our next question comes from Carly S. Davenport with Goldman Sachs. Maybe just to follow up on a few of the questions earlier on the ERCOT growth. Just as you have seen that materialize over the last couple of years, are there any historical data points or rules of thumb you can share just Darcy Reese: about the conversion from LOA to finalized customers taking power? Just trying to get a sense of that conversion rate and any potential risk around the headline there, recognizing you still have the strong backlog to backfill? Carly S. Davenport: Yeah. Carly, I would say Trevor Ian Mihalik: the thing that I would look at for AEP is we have some pretty big large loads associated with some of the data centers that a significant amount of capital is being deployed. As you know, for example, Stargate is in Abilene, and that is squarely in our service territory. So I would say it is not really a rule of thumb I would go by, but really look at more the quality of the counterparties that are stepping forward, making the financial commitments, and signing up for this load. And, again, we feel very, very good about that 36 gigs Carly S. Davenport: in Trevor Ian Mihalik: in Texas that have signed LOAs. And then as I just said to David, you know, almost another 70 gigs behind that. So 100 gigawatts just in Texas alone with really strong hyperscalers and these mega data centers that are coming into our service territory. And then the other thing that I think I would really point out as well is there is a large industrial load in Texas when you think about around the Port of Corpus Christi. There is a large amount of LNG activity there that draws heavily on the load. So that is another 5.1 gigawatts of industrial load that we are seeing in our service territory in Texas. So it is a good dispersion across data centers and industrials as well. Operator: That is helpful. Thank you. And then maybe you just, you had continued strength in the G&M business in ’25. I think earnings came in a bit above your initial expectations there. Darcy Reese: Could you talk a little bit about what you think contributed to that and then just how you would expect those trends to evolve in 2026 and then sort of over the course of the plan? Trevor Ian Mihalik: Yeah. Absolutely. I will let Kate take that question. Operator: Hi, Carly. Good morning. So in G&M in the fourth quarter, it is really two drivers. We had strong performance with margins in our retail business. Darcy Reese: And then in our wholesale business, a number of contracts Kate Sturgess: moved in and out of contracts, so, you know, contract optimization in that business. We do expect some of that to continue into next year. You saw when we released our guidance at EEI, we would still expect that same level of performance for G&M for next year. William J. Fehrman: Yep. Thanks, Carly. Operator: Great. Thank you so much for the time. Your next question comes from Sophie Karp with KeyBanc. Kate Sturgess: A lot of my questions have been answered, Maria. Sophie Karp: I just wanted to have you guys talk a little bit about the potential permitting reform that is brewing in the U.S., I guess, on the federal level. And what kind of opportunities might that unlock in the near and medium term for you? William J. Fehrman: Oh, sure. Thank you for the question on permitting reform. We are deeply engaged with our Senate partners and working towards a solution on permitting reform. I, in fact, was in D.C. yesterday and was visiting with a number of the leadership folks and reinforcing the need for this to really accelerate infrastructure development in this country. Aidan Kelly: Who knows if William J. Fehrman: it will get traction and if it will go, particularly in a manner that would be super helpful to us. But our team is very much engaged with the appropriate parties on this topic, and we have been communicating directly with Secretary Wright at Department of Energy, Secretary Burgum in the Interior, and they understand that something in this area would unleash even more investment faster. So, hopefully, we will get there, but in this environment, it is hard to say. Sophie Karp: Got it. Okay. Thank you. William J. Fehrman: Thank you. Trevor Ian Mihalik: Thanks, Sophie. Thanks. Operator: Your final question comes from Anthony Credel with Mizuho. Just hopefully two quick questions. Steven Isaac Fleishman: One is, I guess last month ERCOT came out with a new batch study, maybe on how large loads connect. Is that really factor into the hookups or your forecast of ERCOT load. William J. Fehrman: So we are deeply engaged on the batch study. We have put in our information and I would say that for us, it is positive. We do not see a significant hindrance in this area, but, again, like any process, we will make sure we are on top of it, and we are pushing it through to make sure we get the right outcomes that we need to support this level of investment. Aidan Kelly: Great. And then I think I am going to Julien Patrick Dumoulin-Smith: add on to Steven Isaac Fleishman: question earlier. You guys talked about maybe supply chain and labor. I am just wondering when you look at the size of 56 gigs, like, I do not doubt that AEP is going to execute and get Julien Patrick Dumoulin-Smith: everything built. But will the generation be there? Like, I worry that you guys are going to clearly execute on it, but then, you know, when you just think of the load of New York City, the hottest day is 13 gig, and Steven Isaac Fleishman: you just look at the magnitude that has been added, just in three months, will the generation be there for the load? William J. Fehrman: Yeah. That is a really, really good question, and that we have obviously been very focused on this. And for our T&D companies, the RTOs are really responsible for the generation, and I would say both PJM and ERCOT have taken very important steps to address the large load generation needs, particularly through PJM’s reliability backstop auction process and then ERCOT’s Senate Bill 6. Clearly, we support efforts to accelerate new generation development, and we also fully support modernization of the transmission and interconnection so that we can get customers connected to load faster and get the new resources built much more quickly and at a lower cost. So as those right reforms come together, we are ready to work with our stakeholders to try and move it along even faster. We really need to work on streamlining how new comes online because we know it is critical for reliability, sort of amid this rapid load growth. But at the end of all this, the one thing I would also say is keep in mind that all this must focus on proper cost allocation. And so our residential customers should not be asked to absorb the higher bills just because the demand is increasing, and in our case, we are making sure that these large load customers bear the cost of any new infrastructure required to serve them. So obviously, generation is going to be critical. We are deeply involved in it. For our load within our own VIUs, we believe we have sufficient resources to meet our current growth projections. We are very focused on working with our commissions to ensure that they understand the priorities, and we are making sure that they support us. We have communicated to them that we have secured over 10 gigawatts of gas-fired generation in the plan. So we are confident on the vertically integrated utility side that we have got the right generation strategy there to serve the loads that are coming on. So, overall, that is clearly a big focus for us. But we are going to stay deeply engaged and work very hard to ensure we have what we need when the load shows up. Steven Isaac Fleishman: Great. Thanks so much for taking my questions. Trevor Ian Mihalik: Thank you, Anthony. Thanks so much, Anthony. Operator: There are no further questions at this time. I will now turn the call back over to Bill for any closing remarks. William J. Fehrman: Well, I would like to thank all of you for participating on our earnings call this morning, and we really appreciate everybody who joined with us. I would like to close with just a couple of summary remarks. As you can tell, super exciting times continue here at AEP, and we are very well prepared for 2026 and beyond. We are driving the business very hard. We are driving it forward with our plan to deliver results on behalf of our customers and our communities and our investors and other stakeholders. We are participating in a very meaningful way to capture this growth, and I am extremely proud of the entire AEP team and all the strong support we received from our Board of Directors. If there are any follow-up items, please reach out to our IR team with your questions, and we look forward to seeing many of you at the upcoming IR conferences and meetings. This concludes our call, and, again, thank you for your interest in AEP. Operator: Ladies and gentlemen, this call will be available for replay for seven days. To access the replay, please dial +1 807-702-2030 or +1 609-800-9909, and enter conference ID 6984853. That concludes today’s call. Thank you all for joining. You may now disconnect.
Operator: My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to Independence Realty Trust, Inc. Q4 and Full Year 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. We do request for today's session that you please limit to one question and one follow-up. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star then one again. I would now like to turn the conference over to Stephanie Krewson-Kelly, Head of Investor Relations. You may begin. Good morning, and thank you for joining us to review Independence Realty Trust, Inc. fourth quarter and full year 2025 financial results. On the call with me today are Scott Schaeffer, Chief Executive Officer; James J. Sebra, President and Chief Financial Officer; Janice Richards, Executive Vice President of Operations; and Jason Lynch, Senior Vice President of Investments. Today's call is being recorded and webcast through the Investors section of our website at irtliving.com, and a replay will be available shortly after this call ends. Stephanie Krewson-Kelly: Before we begin our prepared remarks, I will remind everyone we may make forward-looking statements based on current expectations and beliefs as to future events and financial performance. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially. Such statements are made in good faith pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and Independence Realty Trust, Inc. does not undertake to update them except as may be required by law. Please refer to Independence Realty Trust, Inc.'s press release, supplemental information, and filings with the SEC for further information about these risks. A copy of Independence Realty Trust, Inc.'s earnings press release and supplemental information is attached to Independence Realty Trust, Inc.'s current report on Form 8-K that is available in the Investors section of our website. They contain reconciliations of non-GAAP financial measures referenced on this call to the most direct comparable GAAP financial measure. With that, it is my pleasure to turn the call over to Scott Schaeffer. Thanks, Stephanie, and thank you all for joining us this morning. 2025 was a solid year for Independence Realty Trust, Inc. Scott Schaeffer: During another year of challenging market fundamentals, we delivered same-store NOI growth that exceeded our initial guidance. We also adopted new technologies that will drive operating efficiencies and cost savings for years to come. Some of the most impactful initiatives included implementing our AI leasing agent to support the time and talents of our property teams, fine-tuning how we manage bad debt, and reducing the turn time on our value-add renovations to an average of just 25 days. We also successfully rolled out our Wi-Fi initiative and will be expanding it to 63 communities covering 19,000 units as part of our 2026 plan. On the capital front, last year, we sold two older communities and redeployed the proceeds into three newer communities with higher rental rates and lower CapEx profiles. We profitably exited two joint ventures, and invested into new joint ventures. Lastly, we purchased 1,900,000 of our shares, taking advantage of market dislocation. Because of these and other initiatives, our company is stronger than ever and ready to capitalize on the growth opportunities ahead. So before I say anything else, I want to thank the entire Independence Realty Trust, Inc. team for last year's extraordinary efforts and successes. Regarding capital allocation, we continue to view investments in our value-add program as our best use of capital. In 2025, we renovated 2,003 units, achieving an average unlevered return on investment of 15.3%. In 2026, we expect to renovate between 4,500 units at ROIs that are consistent with our historical results and have added six new communities to the value-add program. We expect market fundamentals to continue to improve across our portfolio of well-located communities in desirable submarkets. In 2026, CoStar forecasts inventory will increase by 2.1% across our markets, weighted by our NOI exposure. This increase is significantly lower than the 3.7% increase in 2025, the 5.9% increase in 2024, and the 3.2% long-term average prior to 2024. Drivers of apartment demand in our markets remain solid. Job growth, population growth, and household formation rates within our markets are expected to outpace the national average for 2026. For example, according to CoStar, job growth across our markets is forecasted to average 60 basis points, double the national average of 30 basis points. Our major markets like Atlanta, Dallas, Indianapolis, and Raleigh are forecasted to achieve 50 to 80 basis points of job growth. This shows that people will continue migrating to our markets for employment opportunities and a better quality of life. As evidenced in the 2025 U-Haul Growth Index, nearly 70% of our NOI is generated from communities located in seven of the ten highest in-migration states. And the high cost of homeownership will continue to support apartment fundamentals. Against this backdrop of improving supply and demand, we see the majority of our markets recovering this year. With that, I will now turn the call over to James J. Sebra. James J. Sebra: Thank you, Scott, and good morning, everyone. Core FFO per share during the fourth quarter and the full year of 2025 was $0.32 and $1.17, respectively, in line with our guidance. Same-store NOI grew 1.8% in the quarter, driven by a 2% increase in same-store revenue and a 2.4% increase in operating expenses over the prior year. For the year, same-store NOI increased 2.4% based on 1.7% growth in revenues and a 50 basis point increase in operating expenses. We are pleased with our performance this year amidst a difficult environment and ultimately delivering better same-store NOI growth than we originally anticipated. As compared to the prior year period, fourth quarter same-store revenue growth was led by a 124 basis point improvement in bad debt over 2024, a 60 basis point increase in average effective monthly rents, and partially offset by a 10 basis point decrease in average occupancy. The year-over-year increase in fourth quarter same-store operating expense was due to higher repairs and maintenance related to a greater volume of turns, timing of certain projects, and increased contract services related primarily to ancillary services offered to residents that were offset by other income. These cost increases were mitigated by overall lower real estate taxes and insurance costs. For the full year, 2025 same-store revenue growth was led by an 80 basis point increase in average effective monthly rents, a 30 basis point increase in average occupancy, and a 70 basis point improvement in bad debt year over year. Same-store operating expenses in 2025 were modestly higher than in 2024 due to higher advertising and contract service costs largely offset by lower insurance and real estate taxes. Sequential point-to-point occupancy during the fourth quarter in our same-store portfolio was stable at 95.6%. Our strategy of having higher year-end occupancy is supporting the solid start to 2026 leasing, which I will address momentarily. Rental rate growth in the quarter was in line with our expectations. New lease trade-outs in the seasonally slower fourth quarter were negative 3.7%, 20 basis points lower sequentially from the third quarter. Renewal rates increased 30 basis points to 2.9% in the quarter and resident retention increased another 100 basis points to 61.4%. Regarding leasing so far in 2026, asking rents in our same-store portfolio have increased 73 basis points since December 31, and new lease trade-outs remain consistent with the fourth quarter. Renewal lease trade-outs in January were 20 basis points higher than in Q4. We are making good progress on our February and March renewals and expect to achieve approximately 3.5% trade-outs for those months. This leasing activity to date is in line with the trajectory of our 1.7% blended effective rental rate growth assumed in our 2026 full year guidance, which I will discuss momentarily. Regarding transactions, during the quarter, we sold the 356-unit community that we had held for sale in Louisville for $15,000,000, reflecting an economic cap rate of 5.2%. Also during the quarter, we entered into a new joint venture in Indianapolis to develop a 318-unit community that is slated for completion during 2027. Subsequent to the quarter, we purchased a 140-unit community in Columbus for $30,000,000, which represented an economic cap rate of 5.6%. The community is located two miles from existing Independence Realty Trust, Inc. communities. We also acquired our JV partner's 10% interest in the Tisdale at Lakeline Station in Austin, Texas, and began consolidating this $115,000,000 asset on our balance sheet. The property is fully developed and currently in lease-up. We have been busy on the capital markets front as well. During the quarter, we allocated $30,000,000 to buy back 1,900,000 of our common shares at an average price of $16 per share. Additionally, we entered into a new $350,000,000 four-year unsecured term loan and used the proceeds to repay our $200,000,000 term loan and mortgages that mature later this year. Our balance sheet remains flexible with strong liquidity. As of December 31, our net debt to adjusted EBITDA ratio was 5.7x, and we intend to continue improving this ratio to the mid to low 5x. Adjusting our full-year stats for the term loan activity I just discussed, we have zero debt maturities between now and 2028. Turning to our outlook for 2026, our markets are in various stages of recovery driven by receding supply pressures and demand fueled by job growth, continued population, and migration into our markets. In this improving leasing environment, we expect to drive NOI growth by capturing recovery market rents and maintaining our focus on operating efficiencies to keep costs low, while providing a well-maintained, safe environment for our residents and their families. We are establishing full-year EPS guidance of between $0.21 and $0.28 per share and core FFO guidance in the range of $1.12 to $1.16 per share. The bridge from our $1.17 starting point of core FFO in 2025 to the $1.14 midpoint of our 2026 guidance includes the following components: a $0.01 increase from same-store NOI growth and a $0.01 increase in non-same-store NOI growth. These two are offset by $0.01 from lower preferred income from our joint ventures during the year, $0.03 of higher interest expense caused primarily by lower levels of capitalized interest, incremental interest expense from recent acquisitions, and the expiration of our 2026 SOFR swap, and $0.01 associated with higher corporate costs reflective of inflationary pressures and increased training and development costs for our community teams. Our 2026 guidance assumes same-store NOI increases 80 basis points at the midpoint driven by 1.7% same-store revenue growth and a 5.1% increase in controllable operating expenses, and a 50 basis point increase in noncontrollable operating expenses, resulting in overall a 3.4% increase in total same-store operating expenses for the year. The midpoint of our same-store rental revenue growth of 1.7% is based on the following assumptions: average occupancy of 95.5%, an average increase of 20 basis points from 2025; bad debt of 90 basis points of revenue, which is approximately 20 basis points lower than 2025; a 5.4% increase in other income, primarily comprised of the incremental revenue from our Wi-Fi program of $5,500,000, which is expected to commence in July 2026; and lastly, a blended effective rent growth of 1.7%. Operator: Our blended rental rate growth assumption James J. Sebra: is comprised of new lease trade-outs of negative 75 basis points and a renewal trade-out of 3.25%, along with a resident retention rate of 60%. As part of our rental rate expectation, we are expecting that market rents will increase approximately 1.5% to 2%. Operating expenses are expected to grow 3.4% at the midpoint, driven by a 5.1% increase in controllable operating expenses and a 50 basis point increase in property tax and insurance expense. The 5.1% increase in controllable operating expenses includes $1,900,000 of Wi-Fi contract costs in our contract services line item. Excluding the Wi-Fi costs, our controllable expenses are increasing 3.5%. The 50 basis point increase in noncontrollable costs is comprised of a 2.6% increase in real estate taxes and an 11.5% decrease in property insurance costs. Our non-same-store portfolio to start 2026 consists of eight communities aggregating 2,541 units. Two of these communities are currently held for sale and are expected to be sold by midyear. The remaining six communities include two communities that are in lease-up: our legacy development deal in Bloomfield, Colorado, and our most recent JV acquisition in Austin, Texas. Both of these deals are leasing up, albeit at a slower pace than anticipated and with larger concessions than we previously modeled. We expect both these communities will reach their targeted NOI just later than expected, as rent growth will come once the communities hit a stabilized occupancy. Overall, for 2026, the midpoint of our guidance assumes non-same-store NOI of between $25,000,000 to $26,000,000. G&A and property management expense guidance for the full year is $56,000,000, reflecting standard inflationary growth and incremental costs associated with expanded training and development of our community teams. We forecast an $8,000,000 increase in interest expense driven primarily by $3,000,000 of higher interest expenses associated with our net acquisitions last year and our two acquisitions earlier this year, $3,900,000 of lower expected capitalized interest on development projects, and $1,000,000 associated with hedges burning off. Scott, back to you. Scott Schaeffer: Thanks, Jim. The outlook for 2026 is meaningfully better than 2025. Some headwinds remain in a few markets where supply is still being absorbed, but in all cases, market fundamentals are improving. Demand in our submarkets continues to be driven by population and job growth that exceed the national average. People continue to migrate to the Sun Belt and Midwest for jobs and quality of life. And the lower cost of renting favors apartment demand. We will maintain our focus on operational stability and efficiency to maximize the flow of revenue growth to the bottom line, and we will remain nimble and disciplined in allocating capital to the highest and best uses to create value for shareholders. We thank you for joining us today. Operator, you can now open the call for questions. Operator: At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We do request for today's session that you please limit to one question and one follow-up. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Austin Todd Wurschmidt with KeyBanc Capital Markets. Your line is now open. Please go ahead. James J. Sebra: Hey. Good morning, guys. Jim, just curious how the new lease rate growth assumption, 75 basis point decrease this year, does that fully incorporate that you capture the 1% to 2% market rent growth? And then can you break out how that 75 basis points is comprised for the first half of the year and then the back half of the year? Yeah. Great question. Thank you for, Austin, obviously, the insight. The 75 basis points of new lease obviously starts negative in January, like I kind of mentioned, very consistent with fourth quarter, and continues to get better throughout the year. The new lease growth that we have got baked into guidance for the first half of the year is down about 2.25%. And then the second half of the year, it is up roughly 75 basis points, such that for the year, new lease growth is about—sorry—negative 75 basis points for the year. And that does assume that you capture—I do not know the exact, I cannot remember the exact percentage—but a vast majority of that market rent growth. That is helpful. And then just on the non-same-store pool, I mean, can you talk a little bit about how that stacks up, I guess, versus the same-store pool? It sounds like you have a little bit of slower growth there from some of the drag on the lease-up. But is there any conservatism in that figure based on what you have experienced more recently? And just trying to think about, you know, kind of the brackets on upside downside risk for that pool of assets. Stephanie Krewson-Kelly: Thanks. James J. Sebra: Yes. Great question. I will break it into two components. Janice Richards: Obviously, the same-store properties that we bought last—I'm sorry—the non-same-store that we bought last year are very much performing kind of in line with our expectations. The two deals that are in development are behind where we want them to be from a lease perspective and from, obviously, as I mentioned, a little bit higher concessionary environment. They are both—the guidance numbers assume some conservatism in the buildup of that NOI throughout the year. Specifically, the deal we bought in Austin—the JV we took over in Austin—our expectation is that we will probably end up selling that asset maybe later this year and really begin to kind of cut off some of that drag. But, again, for guidance purposes, it is assumed that we own it for the full year. Stephanie Krewson-Kelly: Understood. James J. Sebra: For the time. Operator: Your next question comes from the line of James Colin Feldman with Wells Fargo. Please go ahead. James J. Sebra: Great. Thanks for taking the question and good morning. Can you talk about the impact of concessions burning off and what you think that will do to help your rent growth projections? And if you could provide any more color on just your confidence in going from the minus two and a quarter to the plus 75, that would be helpful too. Janice Richards: Yeah. No. Great. I will start with the last one. The new lease trend is obviously very much a function of just asking rent trends throughout the year and then, obviously, the expiring rents in each month. As I mentioned in the prepared remarks, our asking rents in January are up 75 basis points from where they were at December 31. As I mentioned earlier, the market rent growth assumption is about 1.5%. We are halfway there. And, obviously, the year has to continue to play out. But we are quite excited to see the strength in the asking rent growth so far this year. When you look at where the asking rents are today versus the expiring rents out month by month throughout the year, you pretty much hit that kind of breakeven point June/July time frame, you turn positive on new lease trade-outs in the back half of the year. From a concession standpoint, we do assume lower concessions in the back half of the year. I do not have the exact improvement at my fingertips, so I will get back to you on that one. But I think, ultimately, it does produce better comps for us in terms of the ability to grow that rental rate, specifically on renewals in the back half of the year. But I just want to be clear. There has been some conservatism baked into what those renewals are just because we want to make sure we had James Colin Feldman: Okay. And then I guess just turning to the markets, James J. Sebra: I think you said most of your markets will be in recovery this year. Can you just talk about some that are the standouts on both the best markets that are kind of surprising you to the upside and where you think the drags will be? And then maybe focus specifically on the Midwest markets where you have unique exposure. Stephanie Krewson-Kelly: Absolutely. So the Midwest—Columbus, Indiana, Kentucky—delivered consistent performance throughout 2025. Operator: Anticipate this to continue in 2026, and all signs and starting point indicate that. And all throughout 2026. Stephanie Krewson-Kelly: Consistent performance, yeah. Operator: Some of our emerging markets, as we would say, is Atlanta showing strong fundamentals Stephanie Krewson-Kelly: delivering a 100 basis points improvement in occupancy and 490 basis point expansion in blended growth from January 2025 to December 2025. James Colin Feldman: So we are positioned to continue this growth Stephanie Krewson-Kelly: and momentum in 2026. Operator: Nashville has maintained stable occupancy through 2025. It created the ability to have pricing power in the second half of the year. Delivered a 280 basis point expansion in blended growth from January 2025 to December 2025. Dallas occupancy remained stable as well through 2025, providing consistent foundation. Stephanie Krewson-Kelly: Blended rent growth is showing momentum. As alluded to, we are excited about the asking rent momentum we are seeing through the start of 2026. So there are clear signs that the market inflection is on its way, and we are anticipating the comparison in the second half of 2026. Operator: Raleigh blended rent growth momentum is building here. Net absorption is projected to be positive in 2026. Stephanie Krewson-Kelly: And so we anticipate seeing that inflection point in 2026 as well. Some of the markets that are weaker are Operator: Memphis. Memphis is facing a slower macro growth environment in 2026, with jobs and population. However, we are going to remain focused on protecting that occupancy while we wait for gradual improvement in the fundamentals Stephanie Krewson-Kelly: and fundamentals start to recover. Operator: New supply is elevated in Denver and in our submarkets. Lease-ups are taking a little longer to stabilize, as we mentioned with Flatiron. And concessions are remaining above normalized levels. Stephanie Krewson-Kelly: We believe primarily this is due to timing of delivery—sorry. Our focus in 2026 is disciplined occupancy management as the market works through the supply, and we position ourselves for 2027. James Colin Feldman: Okay. Great. Thanks for all that color. Janice Richards: Yeah. Jamie, just a quick follow-up. Obviously, the market performance and the new lease performance go, obviously, hand in hand. But when you look at 2024 to 2025 and our thinking about 2026 guidance, there is acceleration in new lease trade-outs in eight of our ten top markets, just to put a finer point on how excited we are about what we see coming and the acceleration of asking rents and the burn-off of—or I should say where the expiring rents are relative to those asking rents. James Colin Feldman: Alright. Thank you. Your next question comes from the line of Eric Jon Wolfe with Citi. Operator: Please go ahead. James J. Sebra: Hi. Thanks. You mentioned that market rent growth was up 75 basis points in January from December. Is that a relatively normal increase from December? Just trying to put it into context with what you normally see at this time of year and maybe what you have Janice Richards: seen over the last couple of months? Eric Jon Wolfe: So Janice Richards: it is probably a little bit faster pace than what we would normally see in the seasonally slower period of January. It is slower, though, than what we saw in January last year. So it gives us confidence that we are back to—while it is a little bit faster pace, it is not as fast or as extreme as it was in January last year. So it gives us confidence that the asking rent growth could firm up in this area. Eric Jon Wolfe: Got it. And then could you talk about how you set your bad debt guidance? Maybe how it trended fourth quarter, where you ended the year, and what you are expecting in 2026 relative to 2025. Janice Richards: Yeah. Great question. For the year of last year, we ended at 110 basis points of revenue. The fourth quarter alone ended at 72 basis points of revenue. For purposes of setting guidance for 2026, we assumed 90 basis points of revenue, starting a little higher in the first quarter—so call it somewhere in the 100 basis point range—and then stepping down to the 80–70 basis point range in 2026. Eric Jon Wolfe: Got it. Eric Jon Wolfe: Thank you. Operator: Next question comes from the line of Bradley Barrett Heffern with RBC Capital Markets. Please go ahead. Eric Jon Wolfe: Yeah. Hey. Good morning, everyone. This is a follow-on to the last question. You said last January had stronger growth than this January did. Obviously, last year, that proved to be kind of a head fake. So I guess what gives you confidence that we are not in a similar situation this time? Janice Richards: Yeah. Well, the asking rent growth in early January of last year was probably three times as high as it is today. We also see just a little more stability around the demand picture. We do not see the ebb and flow that we saw in January and February last year. Eric Jon Wolfe: Okay. Got it. Then you have a couple of assets designated for sale. Do you have a likely use of those proceeds at this point? Janice Richards: We do not have a use of proceeds. We obviously assumed in guidance that they are sold in the middle of the year. And we will use the capital to either acquire something else, delever, or buy back stock. Eric Jon Wolfe: Okay. Thanks. Operator: Your next question comes from the line of Ami Probandt with UBS. Please go ahead. Thanks. I was hoping that you could break down the blended spread forecast into a Sun Belt and Midwest buckets. And then if you could comment on what impact value-add has on the blends, that would be great. Thank you. Janice Richards: Value-add impact on the blends, I will start with that one first. We have a bunch of properties in the value-add program. They do get a nice premium over comps. It is supporting the blend by roughly 70 basis points on the individual units, but for the overall blends, about 20 to 30 basis points of support. In terms of the blended rental rate growth trajectory throughout the year, we expect it to be about 1% in the first half of the year, about 2.5% in the second half of the year. In terms of looking at the individual market growth between the Sun Belt markets, the Midwest markets, and Denver, we expect negative overall blended rent growth in Denver throughout the year simply because, as I mentioned, the overall supply pressures and what it is expected to do on new lease growth. In terms of the Midwest, we expect the blends for the full year to be right around 2.5% to 3%, really supporting it. And then the Sun Belt, you are just under 2%. Operator: Thanks for that. And then how does the lower supply environment impact your decisions around capital allocation for redevelopment? And do you typically see higher returns on redevelopment in the lower supply environment? James J. Sebra: Yes. Of course. Because the Scott Schaeffer: redeveloped units are competing directly with the newer product. With less newer product, we will have better pricing power on our renovated units. Operator: Are you able to provide any context how much higher the returns could be? Scott Schaeffer: Well, last year, the return on investment was about 15.3%. And in years prior to all of this supply hitting, we were in the high teens, 18%–19%, and then in a couple of years, even north of 20%. Stephanie Krewson-Kelly: Correct. Operator: Great. Thank you. Your next question comes from the line of Omotayo Tejumade Okusanya with Bank. Please go ahead. Stephanie Krewson-Kelly: Yes. Good morning, everyone. Was wondering if you could talk James J. Sebra: was wondering if you could talk a little bit about the same-store OpEx guide for 2026. Omotayo Tejumade Okusanya: I think, again, the controllable expenses—you did talk a little bit about the Wi-Fi program having some impact on it. But even ex the Wi-Fi, still about 3.5%, which is kind of higher than where you trended recently. So just kind of curious what else is trending up within those controllable expenses? Janice Richards: Yeah. No. Great question. I think if you look at the rest of the controllable expenses, the increases are primarily heavier increases that I would say above inflationary, primarily in payroll and utilities. They are the other drivers. But, again, even as I mentioned in the prepared remarks, if you remove the cost of the Wi-Fi program, your controllable expenses are only growing about 3.5%. But it is really the payroll and the utilities pushing up a little bit. Omotayo Tejumade Okusanya: And then payroll is because you are hiring more people or you are paying to compete with the market? Just kind of curious what is happening there. Janice Richards: So it is a variety of things. It is primarily inflationary increases for the team members. It is also increased incentive compensation to drive results. Those are the key drivers. There is also a little bit of—there were some benefits in healthcare savings in 2025 that are not expected to repeat in 2026. But I think the overall increase in payroll is in the 6% to 7% range, which is almost entirely driven by some of that savings on benefit programs in 2025. Omotayo Tejumade Okusanya: Okay. That is helpful. And then development spend and guidance as well. I mean, you only have one development project left. It is pretty much almost complete. You are already in lease-up mode on that project. I think you were still forecasting a meaningful amount of development spend in 2026. I am kind of curious what that pertains to. Janice Richards: We were not forecasting development spend in 2026. But you are right. We did have one final on-balance-sheet development called Flatirons. That one was completed, and all of that development spend has been incurred. So there is not really an expected increased development spend this year. We obviously continue to expect to spend redevelopment money on value-add programs, but not development money. Stephanie Krewson-Kelly: Gotcha. Okay. That is helpful. Omotayo Tejumade Okusanya: And then, sticking with the redevs, for the 2026 guidance, again, good to see the amount of units that are going to probably be up versus 2025, but curious what kind of yields are being assumed, again, just given some of the yield pressure that we have seen in this past year or so. Janice Richards: So I apologize. We will have to make this your last question so we can get to some other analysts. But, ultimately, on the redev, we did about 2,000 units in 2025. We are planning to do somewhere in the 2,000 to 2,500 units in 2026. The ROIs that we assumed on the six new properties that we are adding to the redevelopment program were very consistent with historical trends of that 15%–16%. As Scott mentioned earlier, as the market cycles come back and the supply pressures wane, we should be able to see more pricing power in our redevelopment program and, therefore, be able to compete more directly with some of the Class A stuff and even generate higher returns. Omotayo Tejumade Okusanya: Thank you. Stephanie Krewson-Kelly: Thanks. Your next question comes from the line of John Kim Operator: with BMO Capital Markets. Please go ahead. Janice Richards: Thank you. Just James J. Sebra: going to your Flatiron development, it is expected to be a drag this year as you lease up the asset and you are expensing the interest. John Kim: But where do you see occupancy stabilizing in terms of timing? Then maybe if you could just comment on why it has taken longer to lease up the asset. Sure. I will Janice Richards: the occupancy forecast—the guidance assumes that we hit occupancy at about 90% in the month of June. That is about a quarter behind expectations and certainly not fully stabilized yet, but at 90%, we would want to see 93%–95%. But I think the other component of just the drag on earnings is lower actual rents we are signing and having higher concessions. Janice, if you want to add anything, feel free. Operator: I think we are seeing the submarket as a whole in Broomfield. Stephanie Krewson-Kelly: Obviously, there has been an onslaught of supply in that market that kind of all Operator: came Stephanie Krewson-Kelly: to fruition at the same time. And so we are really just working through that fundamental. We are seeing high conversion of the leads that are coming through the door. Tours are strong. And so with that Operator: continued momentum, we see that we are going to hit that stabilized marker. John Kim: And then just going back to your blended guidance, you are expecting, I guess, a pickup in the second half of the year. And that goes against what you have experienced the last few years where blended rents have kind of peaked in the first half. I understand there are the easier comps and concessions, but what other assumptions do you have in terms of the dynamics and getting that improvement later in this year? Janice Richards: I think it is primarily obviously better comps in the back half of the year. Just like I mentioned before, a little bit lower concessionary expectations. We also think, generally speaking, the market rent growth is going to be better in the second half of the year simply because supply pressures are less, and then all the lease-up deliveries that have happened should be leased up by then, really further enhancing the opportunity for pricing power. James Colin Feldman: Okay. Thank you. Operator: Your next question comes from the line of John Pawlowski with Green Street. Please go ahead. Eric Jon Wolfe: Thanks. Good morning. Jim, it would be helpful to hear what kind of balance between fixed and floating rate debt you are going to target in the next James J. Sebra: about two to three years. Do you have a significant amount of swaps or collars expiring, as well as just the duration of debt with maturities in 2028–2029? Would love to hear your strategy in the next couple of years. Janice Richards: Great question. Obviously, we just did this $350,000,000 bank term loan—we thank all of our banking partners for participating in that. The expectation we had this year was that when all the debt that was returning this year, we would be hitting the investment grade market, which is why we got the rating a few years ago. Obviously, the investment grade costs are much more expensive today than where a floating-rate environment is, and we actually are okay being a little more floating rate in today's environment than trying to fix everything. We want to be able to enjoy some of that expected—either where SOFR is today relative to Treasuries or a potentially declining SOFR curve over the next few months and quarters, again, depending on what the Fed decides to do. For the 2028 maturities, our goal is to be in the investment grade market for some or all of those expirations. When we hit it and how fast we hit it or how sizable the individual bond issuance is will depend. But the goal is to—many of those maturities are going to start happening in 2028—are mortgages. That will improve the unencumbered pool and potentially allow us to further enhance our rating profile and maybe even secure a better rating. Eric Jon Wolfe: Okay. That helps. James J. Sebra: So we should assume, I think— John Pawlowski: maybe you already took this swap out or it rolled—but James J. Sebra: about $250,000,000 in swaps maturing this year. We should expect you guys just roll to floating rate debt. Janice Richards: So there are two swaps maturing this year. There is one that is maturing in March 2026. That was a one-year swap we put in place last year simply because of where we saw the interest rate curve for one year and wanting to protect our interest expense during 2025 versus where we saw maybe the interest curve may not be as steep. The actual cuts were not going to happen as planned, and we thankfully won on that swap from a cash flow perspective. We are not anticipating redoing that swap. We are going to stay floating. And we will enjoy about a 30 basis point improvement on the underlying SOFR from the 3.9% that we were swapped at to the 3.6% that SOFR is today. For the June swap that is maturing of $150,000,000, we have already put a forward-starting swap in place. That swap that is maturing is 2.2%, and we have put a new swap in place that is swapping at 3.25% SOFR. Eric Jon Wolfe: Okay. Janice Richards: Thanks for all the color. We are not, at this point, anticipating putting any other swaps in place. That being said, we are watching the interest rate markets like a hawk, and we will continue to protect as best we can the interest rate expense going forward. Eric Jon Wolfe: Okay. Thanks. Operator: Your last question comes from the line of Mason Guell with Baird. Please go ahead. John Kim: Hey. Good morning, everyone. James J. Sebra: For your Mustang joint venture property in Dallas, is the call option period open? What are your thoughts on exercising the call, and what is the forward NOI yield? So, yes, the call option is open. When we look at where that property would trade today, or be valued today, it is still at a cap rate that is not our best use of capital to buy it. So I would anticipate that property being sold this year because we can use that capital in better ways, again, as Jim said, through deleveraging and/or buying back our shares. Janice Richards: Better ways relative to owning that asset. James J. Sebra: To owning that asset. Correct. John Kim: Great. And then, kind of following on that, you have repurchased Michael Gorman: some shares in the quarter. Kind of talk about your thought process for doing so? Janice Richards: Sure. Obviously, like a lot of our peers, there is a fundamental disconnect between implied cap rates and market cap rates. We looked at that as a good opportunity to take capital or earnings from non-EBITDA generating sources and use that capital to buy back stock. If you sell an asset, you lose the EBITDA and the earnings. We are very much focused on the long term. Ever since our start, we have always said we are going to be patient and disciplined, and we are going to continue to be that way. That being said, we did have a lot of capital that came in last year from the sale of one of our joint venture assets as well as the embedded gain that existed in the forward contracts. We took those proceeds and used that to buy back stock in a positive and accretive way for shareholders. Great. Thank you. Operator: There are no questions at this time. I would now like to turn the call back over to Scott Schaeffer, CEO, for closing remarks. James J. Sebra: Well, thank you all for joining us this morning. I just want to reiterate how excited we are about 2026 and the forward trajectory that we see for our portfolio. Thanks for joining us, and we look forward to speaking with you next quarter. Operator: Ladies and gentlemen, that does conclude our conference call for today. Thank you all for joining, and you may now disconnect. Everyone, have a great day.
Operator: Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the LXP Industrial Trust Fourth Quarter 2025 Earnings Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, thank you. I would now like to turn the call over to Heather Gentry, Investor Relations. Please go ahead. Heather Gentry: Thank you, operator. Welcome to LXP Industrial Trust Fourth Quarter 2025 Earnings Conference Call and Webcast. The earnings release was distributed this morning. Both the release and quarterly supplemental are available on our website at www.lxp.com in the Investors section and will be furnished to the SEC on a Form 8-K. Certain statements made during this conference call regarding future events and expected results may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. LXP Industrial Trust believes that these statements are based on reasonable assumptions. However, certain factors and risks, including those included in today's earnings press release, and those described in reports that LXP Industrial Trust files with the SEC from time to time, could cause LXP Industrial Trust’s actual results to differ materially from those expressed or implied by such statements. Except as required by law, LXP Industrial Trust does not undertake a duty to update any forward-looking statements. In the earnings press release and quarterly supplemental disclosure package, LXP Industrial Trust has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure. Any references in these documents to adjusted company FFO refer to adjusted company funds from operations available to all equity holders and unitholders on a fully diluted basis. Operating performance measures of an individual investment are not intended to be viewed as presenting a numerical measure of LXP Industrial Trust’s historical or future financial performance, financial position, or cash flow. On today's call, T. Wilson Eglin, Chairman and CEO, and Nathan Brunner, CFO, will provide a recent business update and commentary on fourth quarter results. Brendan Mullinix, CIO, and James Dudley, Executive Vice President and Director of Asset Management, will be available for the Q&A portion of this call. I will now turn the call over to T. Wilson Eglin. Thank you. T. Wilson Eglin: Thank you, Heather. Good morning, everyone. Our fourth quarter marked the conclusion of a successful year, driven by meaningful achievements in leasing, healthy occupancy gains, strategic property sales, and continued progress strengthening our balance sheet. We delivered on our key operating objectives in 2025, notably reducing leverage from 5.9 times to 4.9 times net debt to adjusted EBITDA and increasing occupancy 350 basis points to 97.1%. Additionally, we leased nearly 5,000,000 square feet in 2025 with attractive mark-to-market outcomes of approximately 28% on a cash basis, excluding fixed rate renewals. We were encouraged to see market fundamentals continue to improve during fourth quarter, with our target markets driving over 66% of the overall U.S. net absorption of about 54,000,000 square feet. Larger users made up the bulk of the demand, favoring facilities exceeding 500,000 square feet that built within the last five years. Several of our target markets, including Phoenix, Indianapolis, Dallas–Fort Worth, and Houston, led this demand. Reflective of an improving leasing market, in the fourth quarter, we leased over 2,000,000 square feet at attractive base and cash-based rental increases of approximately 27% and 23%, respectively, excluding fixed rate renewals. We have also made good progress on our 2026 expirations. To date, we have addressed roughly 3,000,000 square feet, or 41% of our total 2026 rollover, achieving an average cash rental increase of approximately 28%, excluding two fixed rate renewals. On the sales front, we exited five non-target markets in 2025 and continue to prioritize investing in our 12 target markets, which currently account for 87% of our gross book value. Total disposition volume for the year was $389,000,000, including $116,000,000 from non-target market sales in the fourth quarter, with an average cash capitalization rate of 5.7% on stabilized assets sold during 2025. This volume included the sale of our Indianapolis and Ocala development properties to a user buyer in September at an implied capitalization rate of approximately 5% and a 20% premium to our cost basis. The capital generated from asset sales was primarily deployed to strengthen our balance sheet by reducing high coupon debt. Additionally, we acquired one property for a 1031 exchange requirement in September and repurchased approximately 277,000 shares at an average price of $49.47 in December 2025 and January 2026. At year end, we held approximately $170,000,000 in cash on our balance sheet. While cash balances are currently weighing on earnings, we believe liquidity is valuable as we head into a period we can create significant value in our land bank. Strengthening our balance sheet was one of our primary objectives in 2025. We successfully accomplished this goal and entered 2026 in a strong financial position. Our capital allocation priorities will now primarily focus on disciplined investment and external growth opportunities, mainly in our land bank, and executing opportunistic share repurchases, provided they do not impact the balance sheet progress we made in 2025. Acquisition activity is expected to be limited to 1031 exchanges, which may happen from time to time as we exit non-target markets. Through our development program, we have developed 15 facilities since 2019 at a 7.1% weighted average stabilized yield on first-generation leases and generated sale proceeds of $91,000,000 in excess of our cost basis. At year end, our development program was 98% leased or sold. We have continued to closely monitor market fundamentals where we own development land, evaluating both build-to-suit and speculative development opportunities. In the West Valley of Phoenix, where we own a 315-acre land site, we have observed an acceleration in leasing activity for facilities over 1,000,000 square feet. Eighteen months ago, there were ten 1,000,000-square-foot buildings available in the West Valley. Since then, eight of these buildings have leased or sold to users, and the remaining two are in advanced stages of negotiations. Consequently, there will be no 1,000,000-square-foot facilities available in the West Valley, and nothing is currently under construction. In addition, construction costs are roughly $20 per square foot lower than they were at the market peak on a 1,000,000-square-foot spec project. With this favorable backdrop, we will be breaking ground on our Phoenix land site. Project completion is anticipated for 2027, with an estimated budget of $120,000,000 and a stabilized cash yield within a range of 7% to 7.5%. In summary, we successfully executed our core strategic initiatives in 2025, including enhancing our balance sheet, addressing vacancy at our three big box development properties, increasing portfolio occupancy, and achieving attractive leasing outcomes. In 2026, our priorities will center on strategic capital deployment, specifically pursuing disciplined growth opportunities, making opportunistic share repurchases, leasing our remaining vacancies, and generating robust mark-to-market outcomes. Our high-quality portfolio, consisting primarily of Class A assets in the Sun Belt and Lower Midwest, is well positioned to benefit from improving market fundamentals and the positive momentum associated with advanced manufacturing investments. I will now turn the call over to Nathan, who will provide a more detailed overview of our financials, leasing activities, and balance sheet. Thanks, Will. Nathan Brunner: Adjusted company FFO in the fourth quarter was $0.79 per diluted common share, or approximately $47,000,000. For the full year, we produced adjusted company FFO of $3.15 per diluted common share, or $187,000,000. This morning, we announced our 2026 adjusted company FFO guidance range of $3.22 to $3.37 per common share, which represents 4.6% growth at the midpoint. This guidance assumes the proceeds from the properties sold in the fourth quarter will be redeployed into the development project in Phoenix, although these asset sales and capital redeployment are a drag to 2026 FFO, that will be a source of earnings growth in future years. Our guidance does not assume any other dispositions or investment activity. Our portfolio occupancy increased to 97.1% at year end, compared to 93.6% at year end 2024, primarily reflecting the successful outcomes for the three big box development properties in 2025. Turning to the same-store portfolio, full-year same-store NOI growth was 2.9% and flat in the fourth quarter when compared to the same time periods in 2024. Consistent with our commentary on our last earnings call, our fourth quarter same-store NOI growth reflects lower occupancy in the same-store portfolio of 97.3% as of year end 2025 versus 99.5% in 2024. We are estimating 2026 same-store NOI growth to be within a range of 1.5% to 2.5%. At the midpoint of 2%, the components of same-store growth include a positive contribution of 3.25% from contractual rental escalators and lease renewals, offset by a 1.25% impact associated with lower occupancy and higher rent concessions in the form of free rent. Our 2026 guidance range assumes average occupancy in the same-store pool of 96% to 97% versus average occupancy for this same pool of properties of just over 97% in 2025. The low end of our adjusted company FFO and same-store guidance assumes $500,000 of credit loss. G&A was approximately $11,000,000 in the quarter, with full-year 2025 G&A of $40,000,000 within our expected range. We expect 2026 G&A to be within a range of $39,000,000 to $41,000,000, broadly in line with 2025. Turning to leasing, our current mark-to-market on leases expiring through 2030 and second-generation vacancy is compelling, with in-place rents approximately 16% below market based on brokers’ estimates. As a reminder, this mark-to-market metric is inclusive of fixed rate renewals. With respect to 2025 expirations, during the fourth quarter, we secured a new ten-year lease with 3.5% annual rental bumps at our 380,000-square-foot facility in the Indianapolis market. The lease expired in July, but the previous tenant held over through the end of September. The new lease yielded a 34% increase in rent over the prior rent. The positive contribution of this new lease to same-store NOI growth will be recognized beginning in 2026, reflecting concessions associated with the ten-year lease term. At year end, the tenant at a 160,000-square-foot facility in Phoenix moved out. This is a modern building with highway frontage, and we expect the releasing of the building to produce a 40% to 50% rental increase. Moving on to 2026 expirations, we signed two leases during the quarter, including our 650,000-square-foot facility in Cleveland and 769,000-square-foot facility in St. Louis. Both were subject to fixed rate renewals with 2.5% and 1.5% annual escalators, respectively. The extension of these leases is positive for occupancy and uninterrupted cash flow, particularly given the absence of leasing concessions. Additionally, we renewed our 194,000-square-foot facility in Cincinnati and a 70,000-square-foot facility in the Greenville–Spartanburg market, generating cash rent spreads of approximately 15% to 7%, respectively. For 2026, we have two known move-outs, including 121,000 square feet at our multi-tenant facility in Greenville–Spartanburg that expired at the January and a 230,000-square-foot facility in Tampa scheduled to expire this month. The Tampa facility is in an infill location within the sought-after Sable Business Park. There are no other properties of this size available in the market currently. Given the older vintage of the facility, we will be undertaking some renovations, including the addition of rail capabilities, which we expect to result in a rent increase of 10% to 20% over the existing rent. We have assumed in our same-store growth guidance that this property remains vacant for 2026. Our 600,000 square feet of redevelopment projects in Orlando and Richmond are progressing well. Completion of the Richmond project is expected in the second quarter, while Orlando is now slated for the third quarter. Both properties are anticipated to produce yields on cost in the low teens. Our balance sheet is in terrific shape, with net debt to adjusted EBITDA at 4.9 times at year end. Reflecting this strength, S&P Global Ratings revised LXP Industrial Trust’s outlook to positive in the fourth quarter. Over the course of the year, we repaid approximately $220,000,000 of debt, which included $140,000,000 of our 6.75% senior notes due 2028 pursuant to a cash tender offer in the fourth quarter. Subsequent to quarter end, we recast our $600,000,000 revolving credit facility and $250,000,000 term loan, extending the initial maturities to January 2030 and January 2029, respectively. The new debt facilities extend our debt maturity profile and reduce interest costs, further advancing the progress we made on the balance sheet in 2025. With that, I will turn the call back over to Will. T. Wilson Eglin: Thanks, Nathan. In closing, we are pleased with the success we had in 2025 and are focused on building on our momentum in 2026. While it has been several years since we have seen attractive development opportunities that make sense for LXP Industrial Trust, we are excited to capitalize on improving market dynamics by pursuing disciplined external growth opportunities. At the same time, we remain focused on leasing and producing favorable mark-to-market outcomes that drive enhanced value for shareholders. With that, I will turn the call back over to the operator. Operator: At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. T. Wilson Eglin: Your first question— Operator: —comes from the line of Jim Kummert with Evercore ISI. Please go ahead. T. Wilson Eglin: Hi. Good morning. Thank you. Real interesting on your planned development here in Phoenix, Dreams and Olive. I am just curious, obviously it sounds like the market has definitely improved. Do you have sort of a quiet list of prospects that you are talking to already? I mean, this is a big project. It is a large project. You have not done—you know, the supply–demand equation there is really favorable for us, as is the lower construction cost. So it would not be surprising to me if there was interest in the facility before it is finished. And there are prospects hunting for that size space now, and there really are not any choices. So we think it is an extremely good setup for us and almost the best one that I have seen, candidly. Interesting. And you are using about 65 acres if I interpret your presentation materials. So you just kind of left it— Brendan Mullinix: Net 240, so there could be more in the future? Nathan Brunner: Of development. Yes. Yes. Thank you. Operator: Your next question— Nathan Brunner: —comes from the line of— Operator: —Todd Thomas with KeyBanc Capital Markets. Please go ahead. T. Wilson Eglin: Hi. Thanks. Good morning. Maybe for Nathan, I just wanted to ask about the full-year same-store NOI growth that— Todd Thomas: —2.9%—you know, was unchanged in the quarter. For the full year, though, it came in a touch below your prior forecast, 3% to 3.5%, which was revised lower last quarter from 3% to 4%. I am just curious, in terms of the trends later in the year, what drove that miss versus your budget, if you could talk about that a little bit? Nathan Brunner: Yeah. Thanks, Todd. So, actually, our year-end same-store occupancy of 97.3% is actually within the range of expectations that the 3% to 3.5% range was set on. The difference between the final result of the 2.9% and the low end of guidance of 3% was about $200,000. That variance was primarily driven by marginally higher property expense leakage across about half a dozen properties. Some of them—two or three of them—are vacant properties where we are carrying the full OpEx burden, and two or three of them are leased properties that have property expense caps in the leases where we had some unbudgeted expenses that ultimately went through the caps. Todd Thomas: Okay. Helpful. Is that expense leakage— you did not mention that when you talked about the same-store forecast for 2026. Is that expected to continue to weigh on 2026 to some extent? And then you did mention that concessions are acting as a little bit of an offset to the base rent and escalators in 2026. Are concessions a little bit greater than previously anticipated, and can you maybe speak to the environment for concessions more broadly? Nathan Brunner: Sure. I will take the first piece, and I will hand it to James to talk about concessions and the environment. On the first piece, we certainly updated our budgeting for the property expenses that we experienced in Q4 and reflected that in the forecast of the guidance we put out this morning. T. Wilson Eglin: So on the concession piece, I would just say that the market is changing pretty rapidly. And if you look at what happened in anything that was done in kind of the first half of last year and early into the third quarter, there are some pretty high-level concessions just because— Nathan Brunner: —the supply–demand outlook was a little bit softer than it is now. James Dudley: Over the last six months, we have had a massive amount of space get taken down. We have had vacancy rates in most of our markets start to either flatten and in many cases start to decline. So I do think the concessions will continue to be a part of the story, but I do think we are in an environment where some of the concessions that were given twelve months ago will start to recede and soften a bit, and we will get into a situation that is a little bit more landlord favorable. Todd Thomas: Okay. That is helpful. And then I just lastly wanted to ask about transaction activity and capital allocation a little bit. It sounds like acquisitions going forward will be driven by dispositions. And I just wanted to get your thoughts on what that might look like and the potential to exit more non-target markets in 2026, and maybe you can sort of speak to how that activity might stack up versus additional stock buybacks? T. Wilson Eglin: Sure. Well, as you can see, we have been methodically working our way through that portfolio of assets outside of our 12 target markets and taking our time and being sure that we are maximizing value and managing those proceeds to enhance shareholder value. So often, there is an asset management project involved as a gating item before maximizing value. And I would say there are a couple of $100,000,000 assets in that portfolio where there are negotiations underway that could lead to a very good outcome. So none of that is in our guidance, but it could create some great outcomes that would give us some capital to redeploy as the year progresses. James Dudley: We have to be careful about— T. Wilson Eglin: —managing tax gain as we do that. Yeah. But we are in a good position of liquidity to begin with. So, you know, buyback has been appealing after we addressed the need to bring our leverage down. But in terms of new development, we think the shareholder value is more interesting from that perspective than buyback at this moment, but there has been room for some buyback activity. Nathan Brunner: Okay. Todd Thomas: Thank you. Operator: Your next question comes from the line of Vince Tibone with Green Street. Please go ahead. T. Wilson Eglin: Hi. Good morning. I wanted to— James Dudley: —follow up a bit more on the cash same-store NOI guide. I believe you said, Nathan, it is going to be about 3.25% contribution from both contractual bumps and spreads. And I believe contractual bumps are just south of 3%, so it does not seem like spreads are going to be much of a contributor. So maybe you can just talk about—you know, I am guessing fixed rate renewals are going to drag that figure down, excited from, you know, like 28% spreads on, you know, 2026 rollovers you already mentioned. But how can we think about spreads with the fixed rate renewals or contribution to spreads in 2026? Because it seems to be pretty minimal given the data point I just cited. Nathan Brunner: Yeah, Vince, I will go first and just—I was trying to clarify the 3.25%, and then I will hand it to James to talk about the 2026 spreads. But the 3.25% positive contribution is contractual rent escalators, which you are right are about 2.8% on average across the portfolio— James Dudley: —and the second component is just the renewal rent spreads. So that is the positive contribution. And then— Nathan Brunner: —the 1.25% we talked about in prepared remarks reflects the low—offset by the drag from vacancy. So it actually captures some of the rent spread activity around new leases. So it is a little bit of a bucketing as to whether it goes in the first category or the second category, but that first category is just the renewals. And then, James, do you know the 2026— James Dudley: Yeah. I can. So, yeah, we had two really large fixed rate renewal options that did go, which put a pretty good drag on it. So we have got the, you know, 28% cash 2025, which included quite a bit of the 2026 that was done. And if you kind of put those back in, it is about a 14.5% mark to market. So that kind of shows you the delta between the two when you include the fixed rate renewal options. The good news is we are pretty much through those at this point for 2026. We have two small ones at the end of the year we expect to renew, but we have gotten past those now. So, hopefully, we will start to see some higher mark-to-market numbers, holding with more ability to fully mark those rents to market. James Dudley: No. That is really helpful color. And then just curious how you thought about the average— Brendan Mullinix: —occupancy guide in terms of retention you are assuming for some of the larger expirations in the back half of the year? But also, just if you could touch on some of the activity on some of the vacancies that you have had for a bit longer that I think, you know, when we spoke in NAREIT, you were having some activity on. So just curious kind of how you are budgeting those, and if you just talk broadly or quickly on some of the activity, some of the existing vacancy in the portfolio. James Dudley: Sure. For retention, we are feeling pretty good about it at this point. We have already chopped a lot of that wood and gotten through the big potential vacancies with renewals. I mean, two of them were the fixed rate renewal options that I just mentioned. So we feel pretty good about our retention numbers for the balance of 2026. And then looking to 2027, we feel like we are going to have a nice retention there as well. We have got a number of big leases rolling, but we feel like we will retain those tenants and should be back to more of a typical LXP clip at that high retention rate, with 2025 kind of being an anomaly. On the vacancy side, we continue to have activity across our vacancies. It is just—it continues to be a real challenge to get deals done. Lots of RFP traffic, lots of tenant tours, lots of interest, and it is really just getting them across the finish line. I think that we will make some good progress this year on the vacancy that we have. And as a reminder, there is a really good opportunity there to mark those rents up in the mid-30s if we can get those deals done. Brendan Mullinix: Great. Thank you. James Dudley: Thanks, Vince. Operator: Your next question comes from the line of Nikita Bailey with JPMorgan. Please go ahead. Nathan Brunner: Hey. Good morning, guys. Any comments—I know you just did a bigger spec development, but anything on the build-to-suit front? Some of the companies in the net lease space seemingly, they are increasingly getting to the industrial BTS deals. Does that pose more competition for you guys down the line? And I do not know if that is something that you would consider, given this large expected spec that you have going on right now. T. Wilson Eglin: Yeah. Sure. Why do I not take that? This is Brendan. Brendan Mullinix: Yeah. I think the build-to-suit space remains interesting to us, and the supply dynamic is making it look more encouraging, particularly in our land bank. So— James Dudley: —you know, there may be more competition from some of those other players. But since we do have a land bank— Brendan Mullinix: —that puts us in a more favorable position than many of those guys looking to finance build-to-suit. So the dynamic you see is, as supply comes out of the market of existing spec-built space, we remove that competition. So we have been pretty actively responding to build-to-suit over the last couple of years, in fact, in our land bank. But in many cases, some of those deals did not make, but the ones that did proceed, we were competing against existing supply. That factor I think is encouraging for us, and we have been responding. And, in particular, in Columbus, which has tightened significantly, and in Phoenix, we have been responding to build-to-suit inquiries as well. So we will look at— James Dudley: —both as those fundamentals— Brendan Mullinix: —have improved. We will consider spec, but we absolutely will continue responding to build-to-suit. Nathan Brunner: Was it an option to do a build-to-suit maybe for the site in Phoenix and maybe wait a little bit longer? I mean, was there any urgency to do a spec deal versus doing a build-to-suit maybe at some point down the line if you were able to get someone locked up? Brendan Mullinix: Well, as we looked at it, the supply dynamics—the lack of competing supply—made that very compelling. And then the other piece of it is that we are strategically taking advantage of what I think will probably turn out to be— James Dudley: —a particularly attractive construction— Brendan Mullinix: —pricing window here before competing supply starts starting. So it is really twofold. It is not just supply–demand, but it is also very tied to construction pricing. And the combination of that was very compelling for us to start on a spec basis. James Dudley: Like Will said, I would not be surprised if we could— Brendan Mullinix: —potentially have an early conversion, and maybe it turns into sort of a spec-to-suit. Nathan Brunner: But— James Dudley: —both options continue to look good there, and we will continue to respond to build-to-suit— Nathan Brunner: —at that site. Brendan Mullinix: And to get back to Jim’s comment on this initial site earlier, actually, this is going to be approximately 75 acres. We have planned a little over 5,000,000 square feet at our site in Phoenix. So there is a lot of runway beyond the building that we are starting. Nathan Brunner: Got it. Can I ask a more modeling question? What is your bad debt assumption for 2026 that you guys have in guidance, and how does that compare to 2025? Nathan Brunner: Nikita, we continue to have a very good track record on credit loss. We did not have any credit loss in 2025. In the guidance, we included $500,000 in the low end only. We looked at some distress that is happening in certain sectors and, as a matter of prudence and of bringing ourselves in line with some of the peers, we just have to bake a little bit of credit loss in the low end of it. Todd Thomas: Alright. Thanks, guys. Operator: Again, if you would like to ask a question, press star then the number one on your telephone keypad. I will now turn the call back over to T. Wilson Eglin for closing remarks. T. Wilson Eglin: We appreciate everyone joining our call this morning, and we look forward to updating you on our progress over the balance of the year. Thanks again for joining us today. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Greetings. Welcome to the Materion Corporation Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press. Please note this conference is being recorded. I will now turn the conference over to your host, Kyle Kelleher, Director of Investor Relations and Corporate FP&A. You may begin. Kyle Kelleher: Good morning. Kyle Kelleher: Thank you for joining us on our Fourth Quarter 2025 earnings conference call. This is Kyle Kelleher, Director, Investor Relations and Corporate FP&A. Before we begin our remarks this morning, I would like to point out that we have posted materials on the company’s website that we will reference as part of today’s review of the quarterly and full year results. You can also access the materials through the download feature on the earnings call webcast link. With me today is Jugal K. Vijayvargiya, President and Chief Executive Officer and Shelly M. Chadwick, Vice President and Chief Financial Officer. Our format for today’s conference call is as follows. Jugal will provide opening comments on the quarter and full year. Following Jugal, Shelly will review the detailed financial results in addition to discussing expectations for 2026. We will then open up the call for questions. Let me remind investors that any forward-looking statements made in the presentation, including those in the outlook section and during the question and answer portion are based on current expectations. The company’s actual performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors. Those factors are listed in the earnings press release we issued this morning. Additionally, comments regarding earnings before interest, taxes, depreciation, depletion, and amortization, net income and earnings per share reflect the adjusted GAAP numbers shown in Attachments 4 through 8 in this morning’s press release. The adjustments are made in the prior year period for comparative purposes and remove special items, noncash charges, and certain discrete income tax adjustments. Kyle Kelleher: And now I will turn over the call to Jugal for his comments. Jugal K. Vijayvargiya: Thanks, Kyle. Jugal K. Vijayvargiya: Good morning, everyone. Jugal K. Vijayvargiya: It is great to be with you today to discuss our fourth quarter and full year 2025 results and to provide an overview of our growth expectations for 2026. Our fourth quarter sales were impacted by a quality event with our largest customer. Excluding this event, we delivered very strong financial results led by outperformance on both top and bottom line, in our Electronic Materials and Precision Optics businesses. Jugal K. Vijayvargiya: This performance, combined with new business growth, Jugal K. Vijayvargiya: and the momentum we are seeing across our markets, Jugal K. Vijayvargiya: and in our order rates, Jugal K. Vijayvargiya: are entering 2026 with confidence. Let me first address the quality event. In Q4, our large Precision Clad Strip customer alerted us to a performance issue with our material during their production process. Our team responded swiftly and decisively, collaborating closely with the customer to identify the root cause. To thoroughly assess and address the situation, we temporarily idled our two Precision Clad Strip facilities allowing us time to implement corrective actions. We conducted a comprehensive evaluation of the issue scope, made targeted modifications to our processes and procedures, and introduced enhanced quality control measures designed to minimize the risk of any future occurrences. Both facilities came back online toward the end of the quarter and are ramping production, supported by additional resources and oversight. We are determined to deliver quality product to our customer and not impact 2026 planned volumes. The foundation of our company is built upon the strong partnerships we have cultivated with our customers by consistently providing high-quality, critical materials to help solve their most complex technical challenges. We take our role as a trusted partner and supplier very seriously. Moving beyond this issue, I am excited to share that we delivered 7% year-on-year organic growth in the fourth quarter, excluding Precision Clad Strip. Our outgrowth initiatives, coupled with strong end market dynamics are contributing to this level of growth and building our order backlog to continue the trajectory into 2026. Electronic Materials experienced its strongest sales quarter in nearly three years, with a 20% increase in VA, driven by accelerating growth in the semiconductor market. This growth is fueled by the rapid expansion of AI technologies, and the rising need for high performance computing and data storage solutions. EBITDA was up an impressive 50% with 470 basis points of margin expansion, as the power of the work our team has done to streamline and strengthen that business is magnified by increasing volumes and a strong mix. Precision Optics continued its transformation journey, delivering a 26% increase in sales, marking the third consecutive quarter of top line improvement. The business is tracking ahead of plan, led by new business wins in semiconductor, space, defense, and automotive. This level of growth combined with an improved cost structure, and operational efficiencies, allow the business to reach nearly 16% EBITDA margin. Performance Materials sales were impacted by the Clad Strip quality event. The business delivered strong margins on a lower sales base, while focusing their energies on getting Clad back online and building a strong pipeline of new business for 2026. Reflecting on 2025, I am extremely proud of the significant progress we made while navigating some turbulent times particularly in the first half, with the uncertainty around tariffs, and the related impact to our China business. Let me highlight some significant accomplishments that will directly contribute to 2026 performance. Our Electronic Materials business delivered record results with nearly 23% EBITDA margins, up 300 basis points year on year. The transformation of Precision Optics achieved 7% year-on-year sales growth, reaching nearly 10% EBITDA margins up almost 800 basis points. And our Performance Materials business reached 25% plus EBITDA margins for the third consecutive year. Jugal K. Vijayvargiya: Our specialized Jugal K. Vijayvargiya: comprehensive materials portfolio resulted in new business wins which combined with improved market dynamics have led to a 7% year-on-year increase in backlog. More importantly, backlog in the second half of the year improved 12% versus first half. We have seen a significant uptick in order rates, led by our semiconductor business, up 6% year on year, 14% excluding China. And we completed acquisition of Conasol’s semiconductor manufacturing footprint in Korea, which will position us to deliver local to the leading semiconductor manufacturer. Our focus on growing in the new energy market in support of accelerating energy needs resulted in more than doubling sales year on year. For this market, we signed a multiyear supply agreement with Commonwealth Fusion Systems, a leading developer of fusion energy solutions. We surpassed $100,000,000 in defense sales for the second consecutive year, and have delivered 10% yearly growth since 2020. New business bookings reached nearly $140,000,000, highest ever, with another $35,000,000 booked so far this year. And we have approximately a $200,000,000 pipeline of new business RFQs. These demand levels are aligned with the record levels of global defense spending while the U.S. and allied nations are prioritizing replenishment and modernization. In support of our accelerating growth in the defense market, we secured a $65,000,000 investment from a major U.S. defense prime to expand our beryllium capacity. This investment will not only enhance our capacity, it strengthens our strategic partnership with this customer, setting the stage for long-term growth in defense. While we will support meaningful near-term growth with our existing capacity, the new investment will enable us to support continued double-digit growth in the out years. Looking ahead to 2026, we expect to deliver approximately 15% earnings growth on a strong top line sales growth. New business wins and continued market recovery will further expand our order book, particularly in markets like defense, semiconductor, energy, and space. We anticipate continued progress toward our mid-term EBITDA margin target of 23%, supported by top line growth, ongoing operational improvements, disciplined cost management, and the benefits of our portfolio transformation. Free cash flow generation is expected to strengthen as we optimize working capital, make thoughtful investments, and realize higher levels of profitability. The transformation of Precision Optics will advance further, unlocking additional growth and margin expansion opportunities. Electronic Materials will continue to benefit from the proliferation of AI and data center demand, driving sustained outgrowth. In Performance Materials, we expect marked operational improvements and top line growth led by the defense, energy, and space end markets. We remain focused on delivering value for our customers, and shareholders through innovation, operational excellence, and strategic investments. I want to thank our global team for their dedication, hard work, and unwavering focus on execution. Their commitment to innovation, quality, and customer service is the foundation of our company. I also want to thank our customers and shareholders for their continued trust and support. With that, turn the call over to Shelly to review the financial details. Shelly M. Chadwick: Thanks, Jugal, and good morning, everyone. During my comments, I will reference the slides posted on our website this morning starting on Slide 13. In the fourth quarter, value-added sales, which exclude the impact of pass-through precious metal costs, were $253,900,000, up 7% organically from the prior year excluding Precision Clad Strip. All in, value-added sales were down 14%. This decrease is largely attributed to the quality event we experienced during the quarter that limited sales to our largest customer. Electronic Materials experienced 20% growth led by strength in semiconductor, and Precision Optics was up 26% driven by overall market improvement and new business wins. When looking at earnings per share, we delivered quarterly adjusted earnings of $1.053, up 9% sequentially. Moving to Slide 14, adjusted EBITDA was $57,000,000 or 22.5% of value-added sales in the quarter, down 7% year over year but up 170 basis points from a margin perspective. The decrease was attributable to the Clad Strip volume decline, partially offset by higher volume, strong price/mix, and improved performance in Electronic Materials and Precision Optics. Moving to Slide 15, let me review fourth quarter performance by business segment. Starting with Performance Materials, value-added sales of $132,400,000 in the quarter, down 32% year over year. This decrease was driven primarily by lower Precision Clad Strip sales, partially offset by strength in energy, and telecom and data center. Adjusted EBITDA was $35,800,000 or 27% of value-added sales, down 33% compared to the prior year. This decrease was driven by the lower Clad Strip volume, partially offset by strong price/mix. Looking out to 2026, we expect to see strong top line growth led by space, defense, and energy initiatives. We also expect improved operational performance as we continue to execute on a number of initiatives aimed at increasing uptime and yields across our facilities. Next, turning to Electronic Materials on Slide 16. Value-added sales were $94,100,000, up 20% from the prior year and up 18% sequentially. EM delivered 8% organic growth for the year with sales increasing sequentially each quarter, driven by the strengthening semiconductor market. The top line growth, strong mix, and an improved cost structure delivered $22,000,000 in adjusted EBITDA or 23.4% with nearly 500 basis points improvement year over year. Looking ahead to 2026, we anticipate another year of strong top line growth fueled by the semiconductor market strength and contributions from new business initiatives alongside continued strong margin performance. Turning to the Precision Optics segment on Slide 17, value-added sales were $27,400,000, up 26% compared to the prior year. This year-over-year increase was driven largely by new business wins and growth across several end markets, marking the strongest quarter since 2022, and the third consecutive quarter of top line growth. EBITDA excluding special items was $4,300,000 or 15.7% of value-added sales in the quarter, with significant year-over-year margin expansion. The increase was driven by higher volume, favorable price/mix, improved performance, and the impact of structural cost adjustments. This marks the fourth consecutive quarter of improved bottom line results and the second straight quarter of double-digit margin performance. Looking out to 2026, we expect both the top and bottom line to continue to grow as new business initiatives advance and the transformation continues to unfold. Now let me recap the full year results on Slide 18. Value-added sales were approximately $1,050,000,000, up 4% organically, excluding Precision Clad Strip, driven by strength in semiconductor, energy, and telecom and data center. All-in value-added sales saw a 4% decrease organic from prior year, as a result of the lower Precision Clad Strip volume. This was a meaningful year-on-year headwind. Many parts of the business saw strong growth, with Electronic Materials up 8% organically, and Precision Optics up 7% for the year. Despite the slight decline in VA sales, we delivered our fifth consecutive year of higher adjusted EBITDA margins at 20.7% of value-added sales, which was up 50 basis points from 2025. We are very pleased to have delivered our second straight year of 20 plus percent adjusted margins for the full year. And we are making good progress towards our new 23% midterm objective. Adjusted EBITDA was $217,000,000, down 2% from the prior year driven by the lower Precision Clad Strip volume, partially offset by higher volume across the rest of the company, favorable price/mix, and strong operational performance in Electronic Materials and Precision Optics. Adjusted earnings per share was $5.44 for the year, up 2% as compared to the prior year. Lower interest expense and the benefit of tax initiatives contributed to the uptick. Moving now to cash, debt, and liquidity on Slide 19. We ended the quarter with a net debt position of approximately $445,000,000 and $224,000,000 of available capacity on the company’s existing credit facility with leverage slightly below the midpoint of our target range at 2.1 times. The Clad Strip quality event impacted our cash flow performance in the quarter, as inventory and cash receipts related to this business came to a temporary halt. Lastly, let me transition to Slide 20 and address the full year outlook for the company. As we move into 2026, expect to continue the momentum we built in 2025, to deliver strong organic top line growth and higher earnings, while continuing to make progress towards our midterm EBITDA margin target of 23%. We also expect a marked improvement in free cash flow performance with higher cash earnings, improved working capital, and thoughtful capital investments. The first quarter will be a slower start to the year, normal seasonality and the ramping of Clad Strip production that comes along with some additional costs we are incurring to ensure a smooth and efficient restart. For the year, we expect to deliver earnings in the range of $6 to $6.50 adjusted earnings per share, an increase of 15% from prior year at the midpoint. This concludes our prepared remarks. We will now open the line for questions. Operator: Thank you. At this time, we will be conducting a question and answer session. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. And the first question today is coming from Michael Joseph Harrison from Seaport Research. Mike, your line is live. Hi. Good morning. Congrats on, Michael Joseph Harrison: nice finish to the year and and sounds like some nice momentum into next year. Jugal K. Vijayvargiya: I wanted to start Michael Joseph Harrison: with a couple of questions just on the Precision Clad Strip situation. I guess, first, any any additional detail you can provide on on the quality issues that occurred and and, I guess, some of the actions that were required to address that and what that means for the business going forward. And then second, can you talk about, that that key customer PMI and maybe what you have heard from them about their expectations for FDA or other approvals for their device and what that could mean for growth expectations in PCS for next year? Jugal K. Vijayvargiya: Yeah. Mike, let me start with the first one, which is, the quality event. Give a little bit more color on it. In our production process, in one of the steps, we had a control failure. We were not able to detect the control failure through our quality system that we have. So the nonconformity that was produced as a result of that reached the customer. The customer actually discovered it in their manufacturing process. And in working, of course, closely with the customer, that is where we halted the production. We went through, and we thoroughly looked at the situation, investigated, determined the root cause, we implemented fixes for the root cause. But more importantly, we implemented a very much robust, revised quality system across the entire plant that I think makes us a much stronger company and a much stronger supplier to our customer. And that is important. We want to make sure that we are producing good product for them and supply for them. So we feel good with where we are at now. We certainly did not have the necessary means in the system to be able to catch the nonconformity that happened earlier. So we are actively, working with them, ramping, production here in the first quarter. The customers actually visited our facility. They have looked through the changes that we have made. We have got the right, I would say, quality leadership and quality resources at the facility. And in general, additional resources to make sure that the changes that we have made are being are being worked and doing the right things for producing good quality product for our customer. So that is that is the issue that occurred. We feel good about, I think, the changes we made, and I would say where the, where the product is going. We are fully prepared to support them, as they go through, their ’26 volumes. We expect our ’26 volumes to be better than ’25. Of course, we are going to go through a ramp here in Q1. But then higher production in Q2 and beyond to ensure that we can support them in the right way. As for the other items that you mentioned, like, for example, the FDA approval, I mean, they are working through it. We do not have any other new information that we can communicate with you. I am sure, you know, if whenever it is that they reach that, you know, they will share that with us. And then we will see what the impact may be to our delivery, you know, that they want. So I I think, you know, this is a is certainly a situation that occurred in Q4 that we dealt with, but I feel good with where we are coming out, and I feel good with the the quality systems that we have placed and, and making us a stronger supplier to this customer. Michael Joseph Harrison: All right. Very helpful. And then my my second question is on the Electronic Materials business. Obviously, nice to see some recovery happening in value-added sales. I was a little bit surprised to see that sequentially, value-added sales were up about $15,000,000, but it it does not really seem like sequentially that contributed to much EBITDA growth. So I am just curious, why did not we see better leverage on the strong sequential top line growth in Electronic Materials? And maybe if you could take it a step further and talk a little bit about how we should think about margin performance in Electronic Materials in a growth environment in 2026? Jugal K. Vijayvargiya: Yeah. Jugal K. Vijayvargiya: So first of all, let me just talk about the top line growth. I mean, we are very excited with where things are at. You know, we have talked about our product portfolio. So let me just talk a little bit about that. Right? We have a very good diverse portfolio that cuts across pretty much all parts of semiconductor. Whether it is logic, memory, power, communications, data storage. I think we are seeing the power of that. We are seeing the fact that our sales growth that you mentioned sequentially, highest in nearly three years, it is really cutting across all those areas. So as the proliferation of AI is happening, high performance computing is coming in place, data storage is increasing, high performance memory is increasing. I think it is giving us a good backdrop to be able to say that not only do we have a good Q4 increase, sequential increase that you are mentioning, which is nearly the best quarter in the last three years, but it also speaks to the incoming order rate that we have which is up, sizable, you know, on a year-over-year basis and kind of I would say, how we feel about, ’26. We expect that ’26 will continue to improve, and we are looking forward to be able to capitalize on that improvement. So I think from a top line perspective, we are feeling we are feeling very good. I think from a margin perspective, we have to keep in mind that this business, along with our other businesses, there are significant mix factors that go into play from a quarter-to-quarter standpoint. Right? So we look at a margin profile from a more of an on a on a larger sort of sample size, you could say, sort of sort of longer time frame. So, you know, more like a two, three, four quarters on a full year basis. Up 300 basis points on a year-over-year basis. We had some onetime items in Q3. We have some mix issues in Q4. So when you put that together, we do not have the same level of, let us say, percent performance in Q4. But we feel really good about the overall improvement that this business has made through the cost actions, the operational efficiency actions, and we expect those to carry through into ’26 as well. So I think, yeah, with where I see EM in total, I feel good about how we finished the year. And I feel good about, I think, where this business is going to go in terms of the top line, in terms of bottom line. Continued progress. I think from where we were in in ’25. Michael Joseph Harrison: All right. Thank you for that. My last question is is just on kind of where we stand on beryllium capacity. I know you called out the $65,000,000 investment from a defense prime. Sounds like that additional capacity is going to be coming on ’27. But there is a lot of talk out there about building up strategic mineral reserves in the United States. I am curious, do you expect beryllium to be among the minerals that the government would want to add to that reserve and what does that mean for potential further investments that might be needed in capacity? What does that mean for supply and demand of beryllium and maybe some of the products that you have within the Performance Materials segment. Jugal K. Vijayvargiya: Yeah. So let me, number of different topics. Right, on beryllium there. Let me just first start with the strategic reserve part of it and and just say that I am not able to talk about that in in any level of detail. We work very with the government in a number of different areas. And we have been doing that for for, obviously, a number of years. And and and there is a, you know, longstanding relationship that we have in in ways the mining CapEx, I would say it is just a a normal part of a what we are seeing. Right? We indicated that we have had 10% plus CAGR of the business over the last five, six years. We have crossed in the defense side, over $100,000,000 for for the second, consecutive year. We have got new defense orders, $140,000,000. We have got a long pipeline. Of course, beryllium is not only used in defense, but it is a it is a good part of our business. And so as we move forward, we would expect that we are using more beryllium to be able to support some of the growth not only in only in defense, but we have talked about energy. Right? Energy is a big part, and we are looking at beryllium applications in energy. We are looking at applications in other parts of our markets as well. So that that is definitely a a a, I would say, general business growth is is a contributing factor to, you know, our mining CapEx. Thank you. And just wanted also just some Operator: clarification, if you could, on the first quarter in terms of what you are anticipating from an earnings perspective maybe relative to last year? And then just a second part in terms of the modeling for the year. I wanted to confirm, you said you expected the sort of the China semi sales to be relatively stable? Thanks. Shelly M. Chadwick: Yes, I will take that one. Hi, Phil. So the first quarter, as I mentioned in my remarks, will start off a little slow. That typically happens for us. Part of that is some normal seasonality. Defense and semi tend to be softer in Q1. We are also going to have the additional cost around the ramp. So as Jugal talked about, all of the resources and changes that we have put in place we are being extra careful during this ramp period and are going to bear some additional costs to make sure that this is a flawless execution. So going to see a little bit of a lower Q1. Still a step up from last year, probably roughly 10% higher than last year is what we are thinking right now. And then we will have sequential step ups in earnings all year. Jugal K. Vijayvargiya: Yeah. Let and and let me talk about China and and semiconductor. I think, you know, so we have highlighted this over the last year or so in particular that that we saw a decrease in our sales in China just based on all the the geopolitical issues, tariff issues, etcetera. We do not anticipate and we are not assuming a further decrease from ’25 to ’26 in our China business. At the same time, we have highlighted that we are very much focused on making sure we are growing our business globally. You know, China is one component, and we do not want to let that be a determining factor for where our growth rates are. And so I am very excited about where the semiconductor business is, the growth rates that we are seeing. I indicated, I think, in our remarks that, excluding China, our order rates for semiconductor are up 14% on a year-over-year basis, so ’24 to ’25. And, we continue to see good order rates, and we anticipate good order rates, you know, as we as we go forward. With our new business activities, we have talked about, for example, atomic layer deposition or ALD products. And at the same time, with existing business that is seeing, really good growth in areas like data storage and high performance computing, high performance memory, all being driven through many of the things that are going on through AI. So, you know, certainly, China is an important market for us, and we are very much focused on it. But we are not letting that market sort of drive what we think our growth rates are going to be. We we are really, really focused on making sure we are driving global growth across all of our businesses. Operator: Thanks so much. Shelly M. Chadwick: Thanks, Phil. Thanks. Operator: The next question will be from Daniel Joseph Moore from CJS Securities. Operator: Dan, your line is live. Operator: Hi. This is Will on for Dan. Hi, Will. In industrial, are are you seeing any green shoots or signs of recovery entering 2026? Or is it more of the same? Jugal K. Vijayvargiya: Yeah. So, you know, in in industrial, we have a couple of, things that we typically talk about. One is we have a beryllium nickel spring business, which is something that has seen recovery. It was at a low point in the ’24 time frame. Saw good recovery in in ’25, and we expect to see continued, recovery going into ’26. So that part of the business, we expect it to be good. I would say the rest of industrial is is at this stage, our expectation is about, you know, GDP type of a a a growth. Nothing nothing too exciting, but but I think our overall industrial business I expect it to move forward, based on, particularly, based on our beryllium nickel spring business. Operator: Thank you. That is helpful. And you have given a lot of great color on the momentum in defense. Can you talk about energy and space and the momentum in each of those end markets as we head into 2026? Jugal K. Vijayvargiya: Yeah. I mean, energy has been an exciting market for us. You know, especially over the last last year or so. We have been a strong player in what I call more of the traditional energy, oil and gas area, but we have really focused a lot over the last two, three years on developing partnerships of that area into more of the new energy space. You are all aware of the partnership that we announced with, with Kairos on on new energy solutions. Last year, we announced a partnership with Commonwealth Fusion Systems again on new energy solutions. I think this area is quite exciting for us. We all know from a market standpoint that the demand for energy is increasing almost sort of at a exponential rate. And we want to make sure that we are working with all the leading players and and providing materials for them and enabling them so that they can they can participate in that. Our new energy business was the order rate was up 50% or over 50%. Our new energy business, I should say, doubled more than doubled on a year-over-year basis. So we are very excited about where I think overall energy market can go for us in the next three to five years. On space, we have had very good success on a number of different programs, on the space side. We have one large customer, but we have been working very diligently on gaining other customers. Certainly, those customers are smaller customers. We have also been working very diligently on making sure that more of our products are are being sold at the large customer, but also at the more emerging customers. So, we are expecting to see continued improvement in our in our space market over the next over the next three to five years as well. Operator: Thank you. Operator: Thank you. And once again, it will be star one if you wish to ask a question on today’s call. The next question will be from David Silver from Freedom Capital. David Silver: Okay. Hi. Good morning. Thank you. Morning, David. Yeah. So I admit I I have a bit of a scatter of questions. But the the first question would would generally be, you know, just David Silver: checking on potential bottlenecks that might prevent you from achieving, you know, your targeted growth in 2026? So for instance, in Electronic Materials, you know, you have made recent in both, you know, Newton and, Milwaukee. And, you know, if if growth was to continue at the the recent trend rate, 20% or so, I mean, is are you comfortable with the idea that you will not be running into bottlenecks during 2026 from, you know, is the capacity you have in place, the the spare capacity sufficient, you know, to handle, you know, expected demand. And then just along with those lines, you know, you did purchase the facility in Korea about middle of last year. So has that unit been completed? And is that currently contributing, or will that be a contributing, asset in 2026. I will I will kinda stop there for now. Thank thank you. But just kinda how do you feel about your spare capacity or your ability to meet, you know, based on your order book, what looks to be, you know, a meaningful surge in new orders or or demand. David Silver: Yeah. Jugal K. Vijayvargiya: David, I I would say in general, I think we are well positioned to be able to support our customers’ needs in in in all of our facilities for, look. Shelly M. Chadwick: Materials. We Jugal K. Vijayvargiya: are seeing good order rates, across a number of different areas. And the investments that we have made, the operational improvements that we have made over the last few years, I think, position us well to be able to support to to be able to support their needs. We are continuing to, of course, look at other, ways that we increase our capacity. One of the ones that you just mentioned is is an acquisition that we made in the the middle of, you know, in the middle of last year, where we, acquired a facility in in Korea. We are in the process of of getting that qualified. We expect the the qualification of that to be back half of this year. And I would say, really, any meaningful sales would be into next year and maybe some sample and and qualification sales, you know, can be can be at at the end of end of this year. But but I I expect we are going to be able to support our customers at the at the levels at the the level that they are looking for. David Silver: Okay. Great. And I apologize if I missed this, but just a clarification. I think one of Mike’s, questions earlier regarded the status of the next stage of Precision Clad Strip for your key customer there. It did you discuss the timeline or your latest thoughts about when that customer might be, you know, requiring production from that that new Precision Clad Strip capacity? Jugal K. Vijayvargiya: Yeah. I we we did not specifically discuss a timeline along that. But what I can tell you is that we are very much focused on making sure that we are ramping up for in our facility this quarter. Getting the facilities back up in a way that is producing good quality product and delivering to our customers. And we are we are positioned to support them on a year-over-year volume improvement, which we will do. And certainly, if they have more need due to, you know, U.S. approval or other, needs, we are we are prepared to to support them in that way, in that way as well. David Silver: Okay. And David Silver: unusual topic for me, but I did want to ask about your working capital needs. David Silver: So David Silver: if I have this right, I mean, 2025 was the fifth consecutive year where, you know, if you look at the cash flow statement where the change in assets and liabilities was a a net use of capital and fairly significant one in most years. I was just wondering, I mean, certainly, you are in a growth mode, so some of that is, you know, self-explanatory. But is there anything unusual along those lines that we should think about? In other words, is working capital growing in line with kind of the growth in your business? Or is it, you know, is there a buildup due to, you know, you have some certain parts of your business are especially working capital intensive or maybe, you know, in the back half of 2025, have you purposely been building, you know, working capital to meet what you anticipate to be kind of, you know, stronger demand in 2026? Shelly M. Chadwick: Yes. So let me start on that one. So you are correct. With the growth trajectory that we have been in and the new pieces of business that we have been on, there have been step ups especially in inventory. You know, when we bring on an acquisition, like, the HCS Electronic Materials, when we, you know, ramped the business for Clad Strip, those took pretty big step ups with the inventory. Certainly, we look to manage that efficiently and get the turns in line, but, you know, it does create an increase. So sort of a onetime step up. When I think about, you know, other new business that we have brought on, the beryllium business, as you know, is vertically integrated. So when beryllium grows, that inventory cycle is pretty long. So that does require a bit more inventory. But we do identify this as an area of opportunity. Number one, you know, there was an issue. The the quality issue did impact working capital at the end of the year. As I mentioned in my comments, inventory did not move. The receipts did not come in. So that was really a temporary pause that caused us to be high at the end of the year. And even from that, we have got a number of working capital initiatives to manage inventory specifically, but also AR and AP to keep looking to bring that number down as a percent of sales and both and in days, to to keep it more efficient and generate cash. David Silver: Okay. And then thank you for that. And and I yeah, I should have accounted for, you know, the fourth quarter issues in Precision Clad Strip. Just just one more question. And this has to do with metals or your your procurement needs or or maybe some contract terms. But, you know, whether it is precious metals or other critical materials, I mean, the pricing and and in certain cases, availability issues have been, you know, topics, you know, across the industries that you serve. I am just wondering. I this is purely speculative. I do not know. But are any of your contracts, you know, contingent David Silver: on David Silver: metals prices not topping a a certain amount. In other words, is any of your business at risk because of, you know, where copper or gold or silver or other critical materials that you require, you know, are, you know, currently priced? I mean, availability, I guess, is a separate issue. But but, you you know, is there any kind of risk or uncertainty to your order book, you know, based on the the procurement prices of the critical materials that your customer’s products utilize? Jugal K. Vijayvargiya: Yeah. I would say in general, the answer is no. We do not have those types of contracts, with our customer. I think, you know, we have a very good transparency with our customers on what our materials prices are and how we handle that with them. Certainly, if there is materials that a customer is using and those materials are now much more costly than perhaps other materials that may be available out there, the customer can consider substitution. But that substitution requires a requalification, you know, developing a solution that actually works for them, and then requalification, which in most cases is is unlikely because these things can be temporary in nature. So I would say in general, that is really not a a a topic for us that that, you know, that we look at. David Silver: Okay. Great. I appreciate all the color. Thanks very much. Shelly M. Chadwick: Thanks, David. Operator: Thank you. And the next question is coming from David Joseph Storms from Stonegate. Dave, your line is live. David Joseph Storms: Morning. For taking my questions. This is Shelly M. Chadwick: Morning, John. Jugal K. Vijayvargiya: Thanks. I just wanted to ask a David Joseph Storms: quick one on David Joseph Storms: the energy end market. I was hoping to clarify. The new contribution from the CFS shipment, it was mentioned in the David Joseph Storms: slides that that is an initial shipment. Just trying to think about, can we is that David Joseph Storms: a nonrecurring shipment, or is this kind of the new normal David Joseph Storms: for energy given the the start up of that contract? Jugal K. Vijayvargiya: Yeah. We we announced, you know, last year that we had signed an agreement with them. And then as part of that agreement, we had received an initial contract that goes over a couple of years. And as part of that, we made the first shipment, into Q4, and we will continue to do that, this year. And what happens, I would say, really beyond that, we will continue to work with them on what their needs are and and support appropriately. David Joseph Storms: Understood. Very helpful. Thank you. David Joseph Storms: And then also, just thinking about your order book and backlog, David Joseph Storms: with the new $65,000,000 defense contract having about a two year burn rate, this is maybe just a little bit longer than your traditional burn rate that you have mentioned in your 10-Qs of about eighteen months. Are you seeing that be maybe the new normal for your backlog burn rate, or is this maybe more of a onetime, you know, thing? Jugal K. Vijayvargiya: Yeah. Let me let me just talk first about the $65,000,000 investment. That is actually an investment into increasing our capacity for being able to produce beryllium and beryllium-related products. So that is a capital project. And that will be done over this year and next year. So approximately about a 24-month time frame is when we will get that implemented and and and and put that in place. What we have indicated is that that will give us more capacity to produce product and certainly whatever, then we are able to supply to our customers in the out years with that, that will happen. The orders and the and the and the new orders that we are talking about, which is, you know, $140,000,000 of orders that we have talked about, that we booked, the the $35,000,000 that we booked already this year. Those can be within the quarter delivery. They can be within the year delivery. In some cases, they actually go a little bit into the into the following year, you know, maybe maybe over a six-quarter, you know, time frame or something. So that is a I am sure the eighteen, you know, months or something that that that you may be referring to is is that. Those those that come in. If we get new orders, because of the increased capacity in beryllium, you know, those will be negotiated over let us say, the rest of this year. And because those will go into effect, you know, then in the in the ’28, and sort of year ’28 and beyond beyond time frame. David Joseph Storms: Understood. Thank you for that clarification, and good luck in 2026. Shelly M. Chadwick: Thank you. Thanks, Dave. Operator: Thank you. There were no other questions at this time. I would now like to hand the call back to Kyle Kelleher for closing remarks. Kyle Kelleher: Thank you. This concludes our Fourth Quarter 2025 earnings call. Record playback of this call will be available on the company’s website, materion.com. I would like to thank you for participating on this call and your interest in Materion Corporation. I have you available for any follow-up questions. My number is (216) 383-4931. Thank you again. Operator: Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, and welcome to the Kelly Services, Inc. Fourth Quarter and Full Year Conference Call. All parties will be on listen-only until the question-and-answer portion of the presentation. Today’s call is being recorded at the request of Kelly Services, Inc. If anyone has any objections, you may disconnect at this time. I would now like to turn the meeting over to your host, Scott Thomas, Kelly’s Head of Investor Relations. Please go ahead. Good morning. Scott Thomas: And welcome to Kelly’s Fourth Quarter and Full Year Conference Call. With me today are Kelly’s Chief Executive Officer, Chris Layden, and our Chief Financial Officer, Troy Anderson. Before we begin, I will remind you that the comments made during today’s call, including the Q&A session, may include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments. We do not assume any obligation to update the statements made on this call. Please refer to our SEC filings for a description of the risks that could influence the company’s actual future performance. In addition, we will discuss certain data on a reported and on an adjusted basis. Discussions of items on an adjusted basis are non-GAAP financials designed to give insight into certain trends in our operations. For more information regarding non-GAAP measures and other required disclosures, please refer to our earnings press release, presentation, and, once filed, 10-Ks, all of which can be accessed through our Investor Relations website at ir.kellyservices.com. With that, I will turn the call over to Chris. Thank you, Scott, and good morning, everyone. Before I discuss Kelly’s performance in the fourth quarter, I would like to reflect on the recent developments that mark an important moment on the company’s journey. On January 30, we announced that Kelly had entered an agreement with Hunt Companies related to its purchase of the controlling stake of our Class B common stock. In conversations with Hunt, it is clear they see many of the same opportunities I saw Chris Layden: as I considered joining the company as CEO. An iconic brand to build upon, a strong balance sheet with consistent free cash flow, a clear pathway to accelerate growth, and significant value to be unlocked. I welcome their support as we pursue these opportunities and realize Kelly’s full potential. As part of the agreement, our board has been reconstituted and four new board members have been appointed. Our new directors bring extensive experience which positions them to be strong contributors to the board as we drive progress on Kelly’s strategic journey. I look forward to engaging with them and continuing to work with the entire board to create lasting value for all of our stakeholders. Now let us review the highlights from our performance in the fourth quarter. Starting first with the broader macroeconomic environment, the dynamics that shaped our results through the third quarter persisted in the fourth quarter. Employers continue to take a cautious approach to hiring amid a mixed labor market. At the same time, we capitalized on positive trends in each segment which were reflected in our performance in the quarter. Kelly delivered revenue at the top end of our expectations as we doubled down on our commitment to stabilize the company’s performance and enhance how we are going to market as one Kelly enterprise. We achieved continued year-over-year growth in Education, driven by solid demand for K-12 and therapy specialties. In SET, we delivered top-line growth on a year-over-year basis in our telecom specialty and sequential revenue stability in Life Sciences. In ETM, we achieved stable sequential revenue performance in our staffing, MSP, and BPO specialties, excluding Contact Center Solutions. Across the enterprise, we continue to align resources with demand and maintain a disciplined approach to expense management. These results also reflect our deliberate shift towards customer centricity. My time in the field with our customers and talent has reinforced how this approach unlocks value for employers and for Kelly. Recently, I visited with the CEO of a consumer technology company that is designing and building some of the world’s most advanced audio solutions. I had the opportunity to see firsthand how Kelly has helped evolve their workforce as they scaled advanced manufacturing capacity in the U.S. to meet growing demand. When our relationship began eight years ago, they produced 10,000 units a year. Today, that number has grown to 4,000,000, with our team supporting key workstreams from R&D to final production and distribution. As they have invested in advanced robotics and capital equipment, our workforce has evolved alongside them, learning new skills, adapting to new processes, and helping them scale production in the U.S. As more manufacturers ramp up domestic capital investments and reshore operations, Kelly is well positioned to capitalize, leveraging our differentiated solutions, a customer-centric delivery model, and market leadership in North America. Parallel to these efforts, we reached a significant milestone in our technology modernization initiative that will power our growth well into the future. In December, our acquisitions in SET successfully completed the cutover from their legacy technology stack to the modernized platform Kelly acquired through our acquisition of MRP. This marks the first of a multiphase strategy to move our enterprise from a fragmented and outdated mix of front, middle, and back office technologies to a unified best-in-class platform. With our SET acquisitions fully operational within the platform, the business is now benefiting from deeper data and insights, AI and automation at scale, and enhanced productivity. These benefits will extend across SET and the enterprise as we execute on our phased approach, with the majority of Kelly’s businesses and functions slated to be operational within the platform in 2027. With our technology modernization gaining momentum, we also accelerated the integration of AI across the enterprise. In the fourth quarter, we launched a proprietary internal AI platform, Grace Boost, to every employee at Kelly. This is the latest iteration of Grace, a standalone GenAI tool which we initially deployed nearly two years ago to simplify sales and recruiting workflows. With Boost, we have taken its capabilities a step further, including directly integrating AI into the applications our people use every day. This integration eliminates swivel chair that limited adoption while improving its ability to learn users’ workflows, provide contextual assistance, and ultimately enhance productivity. As we continue to double down on customer centricity, we are also leveraging AI to enhance the customer and talent experience directly. During the quarter, we deployed a tailored AI recruiting solution enabling us to rapidly staff with a large multinational manufacturing customer a key assembly line. The AI agent calls, screens, and answers questions from applicants, helping our recruiters hone in on top candidates and accelerate the hiring process. And the results have exceeded our expectations. Talent feedback has been overwhelmingly positive, customer satisfaction has improved meaningfully, and we are meeting their needs faster and at a lower cost. The solution is highly configurable and scalable, and we are pursuing opportunities to deploy it to additional customers. These examples reflect Kelly’s focus on practical applications that put AI directly in the hands of our employees and our customers to solve real business challenges, leveraging the combined power of people and technology to deliver results with clear alignment to our strategy. We are also aligning our leadership team to accelerate growth. Yesterday, we announced the appointment of Pat McCall as Kelly’s Chief Growth Officer. Pat brings 30 years of sales and operations experience and a proven track record accelerating profitable growth and leading global staffing and IT services firms. In this newly created role, he will help bring to bear the full strength of Kelly’s portfolio, working across the enterprise to strengthen large enterprise account management and expand new customer acquisition. We are pleased to welcome him to the team and we look forward to his contributions towards Kelly’s growth strategy. Additionally, we announced in the fourth quarter the initiation of a comprehensive search for the next President of SET. Kelly has engaged a nationally recognized firm to conduct a search for a proven leader with significant experience enhancing go-to-market strategies, capitalizing on opportunities created by AI, and driving profitable growth. I am excited about the caliber of candidates we are speaking to and I look forward to sharing an update soon when our process concludes. The positive momentum we generated in the fourth quarter has set Kelly on the right path entering 2026. As we carry forward this momentum, we remain confident in our strategy, underpinned by a strong balance sheet, healthy cash generation, and a balanced approach to capital allocation. In a moment, I will share more on our priorities for the year. Scott Thomas: First, Chris Layden: I will turn it over to Troy to provide more details on the results in the quarter for the full year. Thank you, Chris, and good morning, everybody. For the fiscal year, revenue totaled $4,250,000,000, which was down 1.9% overall and roughly flat excluding acquisitions and discrete impacts from reduced demand from the federal government and three top customers, which we have discussed in prior quarters. Scott Thomas: For the 2025, Troy Anderson: revenue totaled $1,100,000,000, a decrease of 11.9% versus Q4 of last year, or down 3.9% on an underlying basis excluding the discrete impacts. As a reminder and brief update regarding these impacts, federal government demand largely stabilized in Q3, with a modest sequential decline in Q4 mainly due to seasonality. For the three top customers, one stabilized at the current reduced demand levels beginning in Q3, one fully ran off in August, and the largest one remains one of our top customers and saw continued demand reductions throughout Q4 and could see some further reduction in 2026. At the segment level, Education grew 1.3%, reflecting continued fill rate improvement. SET’s underlying revenue declined 5.4% in the quarter and was modestly better than our expectations, and reflects demand pressure within information technology and other key specialties, partially offset by growth in telecom. Underlying ETM also declined 5.4% and was modestly better than our expectations, with varying levels of declines across the primary specialty areas. On an absolute basis, underlying ETM revenue has been relatively consistent across the quarters throughout 2025. Scott Thomas: For Q4 revenue by service type, Troy Anderson: staffing services reflects modest growth in our Education business Scott Thomas: and pressure from government, Troy Anderson: large customer and macro environment impacts in SET and ETM. Our outcome-based offerings, excluding Contact Center Solutions, were down year over year, reflecting timing of project demand and new business within SET and ETM. Talent Solutions was down year over year, reflecting a mix of performance across the individual specialties. Scott Thomas: Perm fees represented approximately 1% of revenue, Troy Anderson: which was consistent with the prior year. Reported gross profit was $197,000,000, down 18.4% versus the prior year quarter, reflecting the lower revenue performance along with increased employee-related costs and business mix changes in the quarter. The employee-related costs were driven primarily by healthcare and workers’ compensation claims expense as well as certain impacts related to the large customer runoffs. The gross profit rate was 18.8%, a decrease of 150 basis points compared to the prior year quarter. Education’s GP rate held flat at 14.2%, while SET at 24.2% declined 130 basis points and ETM at 18.1% declined 220 basis points. Scott Thomas: We made significant progress improving our and A expense profile in the quarter, Troy Anderson: with reported SG&A expenses of $198,500,000, a decrease of 8.7%. On an adjusted basis, SG&A expenses decreased 11.1% year over year, reflecting the momentum we are gaining on structural and volume-related cost optimization efforts. Expenses decreased across all the segments, as we continue to drive durable and sustainable efficiencies in our operating model through technology enhancements and process efficiencies, including leveraging AI. Reduced incentive compensation expenses also contributed to the decline in the quarter. Existing initiatives like the continued realignment within the ETM segment and integration of MRP and other acquisitions within SET are progressing well and will drive increased go-to-market and cost efficiencies going forward. In connection with our various efforts, we recognized $9,800,000 of charges in the quarter, Scott Thomas: These included costs associated with improving technology and process Troy Anderson: processes across the enterprise, as well as severance expenses and executive transition costs. We expect to incur certain of these expenses through 2026 as we make continued progress and expand upon our various optimization efforts, including our technology modernization initiative. As a result of the overall business performance and a $127,900,000 increase to the tax valuation allowance, our reported loss per share was $3.69 for the quarter. On an adjusted basis, we delivered earnings per share of $0.16 compared to $0.79 in the prior year, with the decline over the prior year primarily due to lower profitability and discrete tax items. Scott Thomas: For the full year, Troy Anderson: the reported loss per share was $7.24, including $7.61 of noncash negative impacts from goodwill impairments and tax valuation allowance. Full year adjusted earnings per share was $1.26 Scott Thomas: Adjusted EBITDA was 21,000,000 with an adjusted EBITDA margin of 2%. Troy Anderson: Which was down 170 basis points versus the prior year quarter, and below our expectations. The revenue and gross profit declines I previously noted drove the decrease versus the prior year, while incremental GP rate pressure drove the shortfall versus expectations. Education margin expanded by 30 basis points year over year, driven by the revenue growth and expense optimization efforts. ETM and SET saw margin pressure due to the elevated revenue and gross profit declines, despite substantial SG&A reductions. Scott Thomas: Moving to the balance sheet and cash flow. Troy Anderson: We generated strong operating cash flow this year, with $122,600,000 through the fourth quarter, up significantly versus the prior year. Total available liquidity as of the end of the quarter was $288,000,000, comprising $33,000,000 in cash and $255,000,000 on our credit facilities, leaving us ample capital allocation flexibility. Total borrowings of $102,000,000 decreased $16,000,000 versus the prior quarter and $137,000,000 versus the prior year-end. Our debt to EBITDA leverage ratio was less than one at the end of the fiscal year. In addition to the debt repayment during the quarter, we completed $10,000,000 of Class A share repurchases, leaving us with $30,000,000 remaining on the current Class A share repurchase authorization. We also maintained our quarterly dividend of $0.075 per share. Total capital deployed across these three areas was $30,000,000 in the quarter and $158,000,000 for the fiscal year. These actions reflect our confidence in Kelly’s strategy and cash flow generation, and our commitment to opportunistically deploying capital in pursuit of attractive returns for shareholders. Scott Thomas: As we look ahead to 2026, Troy Anderson: we are assuming no material change in the macroeconomic or industry dynamics. Scott Thomas: Consistent with what we discussed last quarter, Troy Anderson: during 2026, we will still be experiencing the larger year-over-year effects of the discrete impacts from the federal government and the three large ETM customers, with some residual impact into the third and fourth quarters. Given that, we expect Q1 to look very similar to Q4, Scott Thomas: with revenue declining between 11–13% year over year, Troy Anderson: or an underlying decline of 3% to 5% excluding discrete impacts. Scott Thomas: And adjusted EBITDA margin of approximately 1.5%, Troy Anderson: which steps down from Q4 primarily due to payroll tax resets. Scott Thomas: As we progress through the year, Troy Anderson: assuming no new material impacts, we expect to see relative improvement in our year-over-year performance each successive quarter for both revenue and adjusted EBITDA margin. That should translate to modest revenue growth in the second half of the year and a roughly mid-single-digit decline on a full year basis. For adjusted EBITDA margin, we expect to see measurable year-over-year margin expansion in the second half of the year and a modest increase on a full year basis. We are excited about the momentum we are building and the many opportunities that lie ahead in 2026. I am grateful to all of the Kelly team members for their unwavering commitment and resilience as we position the company for growth and enhanced profitability over the long term. I will now turn the call back to Chris for his closing remarks. Thank you, Troy. The path to improved year-over-year performance becomes clear as we move through 2026 and the discrete impacts we have discussed begin to anniversary. The actions we are taking today are designed to ensure we capitalize on that inflection. Let me share more about our priorities for 2026 which build on the strategic pillars we discussed Scott Thomas: last quarter. Chris Layden: First and foremost is growth. Our focus on growth is reflected in the formation of a growth office, which under Pat’s experienced leadership will work across our businesses to enhance how we go to market as one Kelly enterprise. And having identified organic growth drivers in each business, we have a clear path to improve top-line performance as we progress through the year. In Education, our pipeline of net new K-12 staffing opportunities remains strong. We are well positioned to continue to gain share in this growing market as more schools seek to improve fill rates with our industry-leading offering. In districts where we already have strong relationships, we are driving penetration of our higher-margin pediatric therapy services to meet growing demand. In SET, we are sharpening our focus on high-growth areas, including data centers, AI, and cybersecurity, where our scale and expertise are uniquely suited to meet customers’ evolving needs. We are also continuing to capitalize on the shift towards higher-margin statement-of-work and consulting engagements. As an example, in Life Sciences, where Kelly is already the second-largest staffing provider in the U.S., we are capturing growth in the clinical trials market through our differentiated Functional Service Provider solution, or FSP. Our outsourcing model provides sponsors with specialized, scalable expertise to more efficiently manage specific functions in clinical trials, from data management and biostatistics to pharmacovigilance. With new deals coming online, including a multiyear contract with a global pharmaceutical company, we expect FSP will continue to be an important contributor to Kelly’s top and bottom line going forward. Scott Thomas: In an ETM, Chris Layden: we have several MSP and enterprise staffing wins slated to go live in the first quarter. This includes a new MSP program with a global financial services firm, one of the largest MSP deals Kelly has ever won. Our scale and capabilities, which contributed to this win, are reflected in our recent recognition by HRO Today as the number one global provider of total workforce solutions, encompassing MSP, RPO, and staffing. As we build on this momentum and enhance how we go to market as an enterprise, I expect our new business pipeline to continue to grow and our conversion of these opportunities to accelerate. Let me talk next about our second strategic priority, efficiency. We will continue to align resources with demand while reengineering our cost base to drive further structural efficiencies and enhance profitability. Our SG&A trajectory reflects the momentum we are building, and our technology modernization initiative is central to this effort. And our enterprise AI strategy reflects a targeted approach to unlocking productivity and growth across the business. And finally, culture. Culture remains fundamental to how we will achieve our growth and efficiency ambitions, with an emphasis on customer centricity, visibility, and accountability. We will continue making it easier to do business with Kelly, spending time in the field to better understand the needs of our customers and talent, and holding ourselves to the highest standard of execution across every part of the business. As we enter 2026, the investments we have made in our portfolio, our technology, and our people have positioned us to emerge stronger on the other side. There is much work to be done, but I am confident in our plan, our team, and our ability to execute. I want to thank our shareholders for their support and trust at this important moment on Kelly’s journey. I also want to express my gratitude to the Kelly team for their perseverance and resilience as we closed last year. The fourth quarter was a sprint, and we ran through the tape. Now it is time to carry our momentum forward and deliver on the promise of 2026. I look forward to working alongside our team to realize our collective ambition and create long-term value for our stakeholders. Operator, you can now open the call to questions. Operator: Star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press. Our first question will be coming from Joseph Gomes of Noble Capital. Your line is open, Joe. Joseph Gomes: Good morning. Thanks for taking the questions. Chris Layden: Good morning, Joe. Good morning, Joe. Chris, I appreciate your comments on Hunt and then Scott Thomas: trying to dig a little deeper here and see maybe you could provide a little more insight. You know, we have gone from a Chris Layden: a passive Scott Thomas: owner of control of Kelly to an active shareholder here. Chris Layden: And you know, trying to get a better handle on what Hunt is bringing to the table. Do they have expertise in the staffing business? Scott Thomas: You know, maybe you can talk some more about that. And then what does this mean for the A shareholders? You know, if we look here Chris Layden: you know, the B shares Scott Thomas: have risen in price where they have now diverged fairly significant Chris Layden: from A. And, you know, historically, they have pretty much traded in Scott Thomas: tandem. I mean, obviously, there have been periods where they have diverged, but Chris Layden: it is just trying to get a better handle of what all this Scott Thomas: can mean here for the A shareholders and what they could Chris Layden: see here going forward. Thank you. Yeah, Joe. Great question, and thank you for it. We are really excited to welcome the Hunt team and, as you heard in my prepared remarks and what we shared even last week, you know, Hunt Companies continue to express their support of our team and the focus that we have in accelerating growth. They saw a lot of the same opportunities that I have highlighted over my first five months and the opportunity to unlock a lot more value here at Kelly. Now we continue to maintain a market-leading position across this diversified portfolio, the deep client that continue to allow us to support global employers as their needs evolve. And we know that the Hunt team is committed to that. We are not expecting any or anticipating any changes to our business, our client relationships, our strategic initiatives. And we remain committed to continue to create lasting value for our shareholders and we look forward to working with our new directors on that. There really is an opportunity for value for all shareholders, and interests are aligned in that regard. Now specifically, maybe to the second half of your question on just some of the protections that were secured. The agreement that we have with the Hunt Companies does include some governance protections, and those governance protections, we think, really align to all shareholders and give us a benefit for our Class A and our Class B going forward, where we know there is a tremendous opportunity to unlock value. Joseph Gomes: Great for that. Appreciate it. And on the SET business, you know, the underlying revenue Chris Layden: trends have worsened the last three quarters. Troy R. Anderson: And maybe you could speak a little bit more to that. And, you know, what do we see here in that business that could change those trends here? Chris Layden: Yeah. No. As you indicated and other 5.4% in the quarter, but this was modestly better than our expectations. The decline reflects some continued demand pressure in the technology space, but we also saw that offset with really nice growth out of our telecom segment. As we indicated, Life Sciences, our Science segment where we are number two, continues to show a lot of positive momentum. Large pharma companies leveraging our Functional Service Provider offering, which leads the market. And we expect to continue to see a demand for customers needing a more flexible outcome-based solution in the Science space. And in IT, right, that is our largest segment. We continue to see some headwinds from AI-driven productivity increases, reducing some demand for roles like programmers or areas like quality assurance. But we are also seeing an increase and an uptick in roles directly related to the development and deployment of AI solutions. We expect that pipeline to continue to grow as well. And as we go throughout the year, continue to see sequential quarter-on-quarter improvement. Troy, anything else you want to add? Sure. Yeah. Thanks, Chris, and Joe, for the question. The underlying has actually been—we did have a little bit of an uptick here, two points or so relative to what we saw in the last two quarters. We were in the low threes in Q2 and Q3 and around four in Q1. And similar to some comments we had offered last quarter, you know, last year in the fourth quarter, we grew 4% organically overall. And a lot of that growth was in, at the time, the P&I segment, but SET held pretty firm as well, and we did not see some of the normal seasonality we would see there, where it does trend down a little bit in the fourth quarter given how, you know, they are professional roles, and so you tend to see some holidays and the like. So I think it is really more a function of a compare with SET and ETM as well versus anything really changing in the business per se. Troy R. Anderson: K. Great. Thanks for that. Thanks for taking the questions. I will get back in queue. Chris Layden: Thank you. And our next Operator: question will be coming from Kartik Mehta of Northcoast Research. Your line is open. Kartik Mehta: Hey, good morning, Chris. I think you addressed a little bit of this Scott Thomas: question in the previous answer you gave, but I am interested, you know, so much talk about AI and the impact it is having on many companies. And you have talked about using AI at Kelly. I am wondering if you kind of sit back and look, do you think the net impact of AI has been positive, negative, or neutral Kartik Mehta: for Kelly as far as demand for services, Scott Thomas: compared to maybe what you have been able to do from AI from an efficiency and cost perspective? Chris Layden: Hi, Kartik. Yeah. No. Absolutely. We remain confident that AI presents a net positive opportunity for Kelly. Employers continue to be increasingly focused on leveraging the power of AI to drive productivity improvements and accelerate growth. You know, the AI-enabled recruiting solution I discussed in our prepared remarks is just one demonstration of the way that we are bringing that to market and differentiating. You know, our unique solutions also continue to provide employers, particularly big employers, global employers, with the flexibility and the scalability that they need to bridge their workforces into a more AI-enabled workforce. And in that way, it unlocks really the power of people and technology, and we think will unlock a lot of value for Kelly. Scott Thomas: And then, Chris, as you kind of look at the trends for 2026, especially on the permanent hiring or the fee business, I would be curious as to kind of what you are seeing in terms of demand from your customers and if that is giving you any kind of look forward into what 2026 could bring? Chris Layden: Yeah. It is a good question, and we are really not seeing a significant change. It continues to be stable in that regard. Perm represents about 1% total GP, and we continue to see stability there. Scott Thomas: Perfect. Thank you very much. I really appreciate it. Chris Layden: Thanks, Kartik. Yep. Thanks, Kartik. Operator: Thank you. And our next question will be coming from Kevin Steinke of Barrington Research Associates. Your line is open, Kevin. Chris Layden: Thanks. I just want to Kevin Steinke: start out by Chris Layden: exploring kind of the margin trend here in the fourth quarter and as you move into 2026, specifically to the fourth quarter, where adjusted EBITDA margin came in relative to your expectations. I think you mentioned incremental gross margin pressure. Was that the primary reason for the variance versus expectations? And can you just dig a little bit more into the drivers of that? I know you called out the higher employee-related costs and also business mix, but maybe a little bit more detail on how those Kevin Steinke: affected the margin relative to your expectations. Chris Layden: Yeah. That sounds good. I will talk a little bit about the EBITDA margin performance, and I will have Troy provide a little bit of color on the discrete impact on the GP side with some of the healthcare-related costs. You know, as you know and as we have talked about, our strategy continues to be centered around driving profitable growth. And EBITDA margin expansion has been and is going to continue to be an important part of that. Our EBITDA margin expansion in the fourth quarter and on a full-year basis fell short of our expectations. Troy talked in his prepared remarks. I know we talked over the last couple of quarters about some of the discrete customer impacts. But with this in mind, we continue, as we have shown, our focus on aligning expenses with demand is a real lever for us. And this is reflected in the SG&A and cost management reductions you saw both in the third quarter and the fourth quarter, and we will continue to be very focused there. We also recognize the need to address longer-term opportunities to reengineer our cost base, shifting our business mix to higher-margin markets, solutions, and offerings, and that is a big part of our growth story. And I would say, just as I turn it over to Troy to talk a little bit about the discrete GP impacts, some of this margin and the incremental expansion that we have talked about, it will play out as we move and anniversary some of those discrete impacts the first half of the year, where we are going to see margin expansion in 2026 with a modest increase on a full-year basis. But I will have Troy give you a little bit more color on the GP impact. Yeah. Thanks. Good coverage there, Chris. And, Kevin, yeah, certainly, the 150 basis point decline on the GP rate was incremental to what we expected. And you see the largest portion of that hitting ETM, both at the GP level and at the EBITDA level, and a little bit on SET as well. And we had some of this in Q3 also around the employee-related costs. We just had escalations and some changes as we pivot from ’25 to ’26 that drove some outsized utilization against the healthcare coverage. And then workers’ comp is largely driven by healthcare costs, especially older claims that are still open. And so, periodically, we do have adjustments to those based Kevin Steinke: upon Troy Anderson: the third-party estimates around those. So it is just a combination of factors as we came into the back part of the year here that put pressure on those two items that we expect will reset as we get into ’26. And we put some processes in place to have better visibility and better management there as we go forward. Okay. That is helpful. Yeah. Thank you for all the color there. And, you know, when we look ahead to 2026 here, just wanted to Scott Thomas: explore a little bit more, you know, the outlook you discussed in terms of Kevin Steinke: successive Scott Thomas: improvement in quarterly performance as you move throughout 2026 on both Chris Layden: I guess, revenue and adjusted EBITDA margin. I guess obviously comparisons get easier as you move throughout the year. But can you talk about the other factors that you expect to drive that progressive improvement, say, in terms of Kevin Steinke: organic growth drivers, business mix, etc.? Troy Anderson: Yeah. Sure. So I will take that, and Chris, certainly add any color as I go through it. But just, you know, Q4 to Q1, not a whole lot going to change in the business, still about an eight-point impact on those discrete items. The margin profile will not change dramatically. We will have the payroll tax reset, which is common across all the companies. And so that puts some incremental pressure on Q1 margins. But as we work through the year, the various growth—Pat coming on board, some of the things that Chris has talked about as far as our organic growth drivers, opportunities we have to bring full Kelly to our customers and to the market, along with the work we are doing from a technology modernization perspective and the benefits we expect to continue realizing there through ’26 and ’27, along with just other efficiency and optimization initiatives that we have planned throughout the year. That should all be accumulating as we go through the year, in addition to the easier comps, as you indicated, as we get into the back half of the year. But net, returning to growth on an organic basis, again assuming no new major material impacts, assuming no major change in the macro environment, returning to organic growth and measurable margin expansion in the back half of the year. And, look, if we get some positive tailwinds out of the economy, we would expect to take our fair share of that as well. Kevin Steinke: Great. Thank you. I just wanted to follow up there. Scott Thomas: You mentioned again bringing on a Chief Growth Officer and Chris Layden: you know, maybe you can just delve a little bit more into the Scott Thomas: opportunities Kevin Steinke: you see Chris Layden: by bringing on that role and, you know, what sort of initiatives you can execute relative to maybe, you know, what the company had left on the table before? Yeah. Exactly. You know, growth, as you have heard me say, is the single most important value-creation lever at this stage of our journey. We are excited to welcome Pat. In this new role, a newly created role, and he is going to have a clear mandate and that is really to bring the full strength of Kelly’s portfolio to the market. And we have to go win more market share with our large customers in particular. We have to build a much more unified, client-centric go-to-market model, reduce some of the access points as you have heard us talk about, and he is going to help us drive organic growth. We know how much opportunity there is, particularly with these large customers, to do more with them. We have really an unmatched product portfolio now and product mix, and we have to make sure we are bringing that to all of our customers, both in the traditional ways where we do staffing, but also in more outcome-based and solution work. And so it will be focused also on driving acquisition of new customers, driving pipeline acceleration across the enterprise, and we are excited to bring him into the leadership team starting this Monday. Kevin Steinke: Great. Great. Lastly, I just wanted to ask about—Chris, you talked about in your prepared remarks a real-world example of an internal AI recruiting solution you built out Chris Layden: I think, for one particular customer, and I think you talked about looking to deploy that more broadly. What would that mean for Kelly from an efficiency and cost-efficiency perspective? Kevin Steinke: And Chris Layden: do you think that is something that could be meaningful in terms of, you know, the number of recruiters you employ or any other metrics that it could help on your Kevin Steinke: journey to continue improving margins? Chris Layden: Well, you know, we really see a lot of customer impact. And what I will start with is really to say that we believe that we can really deliver AI at scale, helping us provide deeper data and insights, AI and automation at scale. And some of that productivity is really a little borne out in the EBITDA margin expansion as you see us growing throughout the year, and particularly in the second half of the year as we have the benefits of the program that I mentioned before, the impact of products like Grace Boost that are now deployed across all of our customer base and our employee base. And finally, you know, our industry-leading talent management platform, Kelly Helix, continues to lead the market, helping customers with deep workforce insights around their workforce mix, integrating AI-based chatbot to drive faster workflows and workforce decision-making. We really see that continuing to drive increased productivity and efficiency for us. And, again, we are showing some of that in the step-up you will see throughout the year. Kevin Steinke: Okay. Thanks for the comments. Appreciate it. I will turn it back over. Thanks, Kevin. Thanks, Kevin. Operator: And I would now like to turn the conference back to Chris Layden for closing remarks. Chris Layden: Great. Well, thank you all. We look forward to seeing you next quarter. Operator: And this concludes today’s program. Thank you for participating. You may now disconnect.
Operator: Good morning. My name is Ludi, and I will be your conference operator today. At this time, I would like to welcome everyone to the Karyopharm Therapeutics Inc. fourth quarter and full year 2025 financial results conference call. There will be a question and answer session to follow. Please be advised that this call is being recorded at the company's request. I would now like to turn the call over to Brendan Strong, Senior Vice President, Investor Relations. Please go ahead. Good morning. Brendan Strong: And thank you all for joining us on today's conference call to discuss Karyopharm Therapeutics Inc.'s fourth quarter and full year 2025 financial results and recent company progress. We issued a press release this morning detailing our financial results for the fourth quarter and full year 2025. This release, along with a slide presentation that we will reference during our call today, are available on our website. For today's call, as seen on Slide two, I am joined by Richard Paulson, Reshma Rangwala, Sohanya Cheng and Lori Macomber who will provide an update on our results for the fourth quarter and full year 2025 and discuss recent clinical developments. Before we begin our formal comments, I will remind you that various remarks we will make today constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995 as outlined on Slide three. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent Form 10-Q or 10-Ks on file with the SEC, and in other filings that we may make with the SEC in the future. Any forward-looking statements represent our views as of today only. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. Therefore, you should not rely on these forward-looking statements as representing our views as of any later date. I will now turn the call over to Richard Paulson. Please turn to Slide five. Thank you, Brendan, and good morning, everyone. Thank you for joining us today. Here in 2026, Karyopharm Therapeutics Inc. is in a defining phase marked by important late-stage clinical milestones, continued disciplined execution, and the opportunity to meaningfully expand the impact and scale of our oncology franchise. Today, selinexor has an established durable, commercial foundation of multiple myeloma within a highly competitive treatment landscape. That business continues to support the company and provide important experience as we advance into new treatment areas. Looking ahead, we see the most significant near-term driver of value in myelofibrosis, with endometrial cancer representing a subsequent opportunity to further expand the franchise. In myelofibrosis, we remain on track to share top-line data from our Phase III SENTRY trial in March. SENTRY was designed to address a clear unmet need by evaluating selinexor as part of a combination approach in a setting where treatment options remain limited. Over time and through clinical experience, we have meaningfully optimized how selinexor is used, including dose refinement and proactive supportive care, resulting in a more manageable and predictable tolerability profile. As we approach this important data readout, our organization is energized and well positioned to deliver on this opportunity. In endometrial cancer, we remain on track to report top-line data from our Phase III EXPORT EC042 trial in mid-2026. This biomarker-driven program targets a defined patient population with limited effective treatment options and represents an important opportunity to expand the long-term commercial profile of the franchise beyond hematological malignancies. From a financial perspective, we continue to manage the business with discipline. As previously disclosed, our cash runway extends into the second quarter, which aligns with key near-term clinical milestones. We have been deliberate in how we sequence spend across the portfolio and we are actively evaluating a range of financing and strategic options to maintain flexibility and align capital decisions with value creation. With that context, I would like to first turn the call over to Reshma Rangwala, our Chief Medical Officer, who will provide a detailed update on our clinical programs and upcoming milestones. Following Reshma, Sohanya Cheng, our Chief Commercial Officer, will discuss how we are preparing from a commercial and go-to-market perspective. Then Lori Macomber, our Chief Financial Officer, will review our financial results and discuss our financial guidance for 2026. After those updates, we will return for additional discussion and Q&A. Operator: Reshma? Reshma Rangwala: Thank you, Richard. I am incredibly excited by the near-term opportunity to read out two Phase III trials that could establish new standards of care in two areas of high unmet need. Start with myelofibrosis where we will have data next month. As seen on Slide eight, I would like to emphasize substantial need for new treatment options for patients with myelofibrosis. JAK inhibitors are the only approved therapies, and while they may decrease burden and lead to very modest spleen reduction, relevant JAK inhibitors including ruxolitinib, the standard of care in frontline myelofibrosis, do not target all of the relevant pathways implicated in myelofibrosis, including NF kappa beta, p53, and fibrosis-inducing pathways. As a result, frontline treatment with monotherapy JAK inhibitors do not adequately address the relevant drivers of pathogenesis in myelofibrosis. On Slide nine, our confidence in selinexor’s potential in myelofibrosis is based upon a substantial body of preclinical, nonclinical, translational, and clinical efficacy as well as safety datasets. These data suggest XPO1 inhibition is a key mechanism that may facilitate potential synergy with ruxolitinib and other drugs relevant in myelofibrosis. This multi-targeted approach enables treatment of the underlying mechanisms that lead to myelofibrosis and we believe may lead to meaningful efficacy across the key treatment drivers as well as the generally safe and manageable side effect profile. As seen on Slide 10, while JAK inhibitors directly inhibit the JAK-STAT pathways, multiple other pathways downstream of JAK-STATs support malignant clone proliferation and survival, bone marrow fibrosis, cytokine storms, and proliferation of abnormal megakaryocytes. These pathways include NF kappa beta, PI3 kinase, AKT mTOR, and TGF beta. A multifaceted approach with dual XPO1 and JAK inhibition simultaneously target upstream and downstream effectors of the JAK-STAT pathway, enabling apoptosis or cell death of the malignant clones. Let us now focus on the key treatment drivers in myelofibrosis, as seen on Slide 11. Spleen reduction, symptom improvement, and lower rates of grade 3+ anemia. First, spleen volume reduction. Note that only approximately one third of patients achieve a spleen volume reduction of greater than 35% with ruxolitinib alone. In contrast, our Phase I data suggests that the combination could more than double the SVR35 rate at 79%. Second is symptom improvement. Data from this trial also showed an average 18.5 improvement in absolute TSS at week 24 relative to baseline, which suggests that combination could provide a meaningful improvement over the 11 to 14 points achieved by patients on ruxolitinib as observed in the Phase III II and TRANSFORM-1 trials. Keep in mind that our 18.5 improvement excludes fatigue, whereas the numbers from the other trials include fatigue. So in reality, the difference could be even greater. Third is lower rates of grade 3+ anemia. The data that we presented in June at EHA from our Phase II, 35 monotherapy trial showed lower rates of all grade and grade 3+ anemia for the selinexor arm as compared to physician’s choice, in myelofibrosis patients previously treated with JAK inhibitor therapies. Our initial blinded safety data from the first 61 patients enrolled in SENTRY also suggests lower rates of grade 3+ anemia when selinexor is combined with ruxolitinib compared to historical ruxolitinib data. Meaningful improvement of these treatment drivers require disease modification or elimination of the underlying mechanisms leading to development of an enlarged spleen, constitutional symptoms, and worsening cytopenias. Data observed from selinexor monotherapy studies in a pretreated myelofibrosis population, as well as our Phase I combination data in JAK inhibitor naïve myelofibrosis, suggests meaningful reductions in key cytokines critical to myelofibrosis pathogenesis, symptom development, and anemia, as well as improvements in bone marrow fibrosis, increased mutational burden. Improvement in these markers of disease monster alone and in combination may lead to improvement in the key hallmarks of the disease including enlarged spleen, cytopenias, and symptoms. Turning to Slide 12, we are eagerly awaiting the readout from our Phase III SENTRY trial next month. Everything within our control to optimize SENTRY for success. As we have previously discussed, we believe that we have, including focusing on the relevant symptom domains and the analysis of PFS can be most accurately evaluated in a randomized trial analyzing TSS by estimating in approximately 350 patients approximately 22.5 which could be the highest baseline TSS observed in a frontline myelofibrosis Phase III trial. Depending on the outcome of our data in myelofibrosis, we also have a significant opportunity to expand into other myeloproliferative neoplasms as outlined on Slide 13. This includes the potential to expand into polycythemia vera and essential thrombocythemia with eltenexor, our leading next-generation XPO1 inhibitor. Let us now turn our attention to endometrial cancer on Slide 15. Reshma Rangwala: In the Phase III EXPORT EC042 trial, the number of PFS events observed to date are consistent with our projections giving us confidence in our ability to share top-line data in mid-2026. In light of the near-term proximity of these data, I wanted to go back and remind everyone about the treatment landscape, our data from our last trial, and recap our current trial design. Our Phase III trial is recruiting patients with p53 wild-type endometrial cancer. Given that checkpoint inhibitors are entrenched in the treatment landscape for patients with dMMR tumors, the trial has been updated to first evaluate the primary endpoint of PFS in patients with p53 wild-type pMMR tumors or p53 wild-type dMMR tumors but medically ineligible to receive a checkpoint inhibitor. If positive, PFS will then be evaluated in all with p53 wild-type tumors. As discussed previously, the long-term follow-up data from our Phase III SIENDO trial indicated that women in the exploratory subgroup with p53 wild-type endometrial cancer and pMMR tumors, roughly half of all patients, experienced a progression-free survival with selinexor as a maintenance therapy following chemotherapy, which exceeds the overall survival that inhibitors have demonstrated in the same population. Let us review some of our long-term follow-up data from our last Phase III trial in endometrial cancer. Slide 16 shows a very encouraging signal in the p53 wild-type subgroup with a hazard ratio of 0.44, and a median PFS benefit of 28.4 months largely due to the early separation of the curves. These data have only strengthened with time and suggest a similar trend may be observed in our ongoing Phase III trial. These results were even more impressive in the subgroup of patients with p53 wild-type pMMR tumors, as shown on Slide 17, the long-term follow-up data from this prespecified exploratory subgroup showed a hazard ratio of 0.36 and a median PFS benefit of 39.5 months. Similar to the broader 18 shows the safety profile at the time of the long-term follow-up, which is something that we will expect to improve when we report data from our ongoing Phase III trial. As you look at these data, keep in mind that SIENDO was evaluating 80 mg of selinexor once weekly. And while antiemetics were used at time, the mandated use of dual antiemetics during the first two cycles of therapy was not part of the clinical trial protocol. This is a key difference when you think about the design of our current Phase III, where we are using a lower dose of selinexor at 60 mg once weekly, and dual antiemetics are mandated during the first two cycles of therapy. That takes us to Slide 19, which contains the trial design of our Phase III EXPORT EC042 trial where selinexor 60 mg is being evaluated as a maintenance therapy in patients with p53 wild-type endometrial cancer. The primary endpoint for the trial is progression-free survival as assessed by the investigator. As I mentioned earlier, event accrual is consistent with our projections, and we remain on track to share top-line data in mid-2026. I am incredibly excited by the opportunity presented by both of these Phase III trials to establish new standards of care in two areas of high unmet need. I will now turn the call to Sohanya. Thank you, Reshma. As shown on Slide 21, our commercial organization executed well in 2025 within the highly competitive multiple myeloma market. XPOVIO net product revenue grew to $32.1 million in the 2025 and $114.9 million for full year 2025. We expect to continue to deliver revenue growth this year and are guiding towards $115 million to $130 million of XPOVIO net product revenue in 2026. Demand for XPOVIO was consistent year over year in 2025 with the community setting continuing to drive approximately 60% of total U.S. sales. XPOVIO continues to be positioned in both the community and academic settings as a flexible therapy with a differentiated mechanism of action oral convenient option. Additionally, given the emergence of new T-cell engaging therapies, and our growing body of evidence around the role of selinexor in potentially preserving the T-cell environment, XPOVIO continues to be utilized in the peri T-cell engaging therapy setting. Let us turn to Slide 23. As we work to expand beyond multiple myeloma, let us now focus on myelofibrosis, where selinexor has the potential to play a very different role where the patient populations, competitive dynamics, the dose of selinexor, and potential impact on patients are fundamentally different. This is why our commercial opportunity in myelofibrosis is so much greater. Taking a closer look at dosing and patient population differences between the two diseases, it is important to recognize that the side effect profile often associated with XPOVIO stems largely from its use at higher doses in multiple myeloma following our initial approval. Those historical concerns accurately reflect how selinexor is expected to be used at a lower dose with dual antiemetics in frontline myelofibrosis if approved. The other fundamental difference between the two diseases is the unmet need and competitive landscape. In myelofibrosis, the only treatment options that patients currently have are JAK inhibitors, with ruxolitinib monotherapy being the standard of care for the past 15 years and only about one third of patients that receive ruxolitinib volume reduction of 35% or more with two thirds of patients not adequately responding. As Reshma outlined, our data highlights offer opportunity to meaningfully improve patient outcomes by increasing the proportion of patients that achieve rapid, deep, and durable spleen volume reduction, as well as symptom improvement and lower rates of grade 3+ anemia while also potentially modifying the underlying disease. Slide 24 provides an overview of our opportunity to be the new market leader with the first ever frontline combination therapy as we combine with the current market leader to offer better outcomes for patients. As you look at the overall prevalent market there are 20,000 patients living with myelofibrosis in the U.S., which represents a multibillion dollar marketplace, with approximately 6,000 newly diagnosed patients each year. Our commercial efforts will focus on the approximately 4,000 newly diagnosed patients with intermediate to high risk myelofibrosis that have a platelet count above 100,000. Based on the market research that we have conducted, 75% of physicians expressed intent in treating patients with a combination therapy. For duration, we are assuming that we can improve upon the 13-month real-world duration of treatment for ruxolitinib. Taking all of this into account, we believe that our peak revenue opportunity may approach $1 billion annually in the U.S. alone. Turning to Slide 25. We have the capabilities in sales, market access, marketing, and medical affairs to support a launch in myelofibrosis. The team that we have assembled has deep experience in hematological oncology and rare disease launches. This group plus the robust teams that support them will allow us to launch rapidly. Our current sales organization has deep relationships and experience with accounts that will be key to our launch. As outlined on Slide 26, 70% of myelofibrosis patients are treated in the community setting. The majority of these patients are treated at five large community networks, such as U.S. Oncology and Florida Cancer Specialists, and approximately 200 other large community accounts. Academic institutions represent the other 30% of patients and more than 70% of these patients are treated at the top 50 academic institutions. Importantly, a majority of the top 50 academic institutions are participating in SENTRY and/or SENTRY-2. So the clinical care teams that work with myelofibrosis patients in these institutions are already very familiar with selinexor plus ruxolitinib for frontline myelofibrosis patients. As we focus on the concentrated group of accounts outlined on this slide, we believe this will allow us to launch rapidly. Turning now to Slide 27. We are energized by the opportunity to reshape frontline myelofibrosis treatment by pairing selinexor with the current standard of care. Today, two thirds of patients still fail to reach SVR35 on ruxolitinib, an unmistakable unmet need. Our selinexor–ruxolitinib combination is a convenient all-oral regimen. Our teams are already engaging the key accounts, positioning us for a fast, efficient launch. Just as importantly, selinexor fits seamlessly into existing workflows. No new testing. No operational hurdles. No disruption to how patients receive care. That simplicity makes adoption far easier. With positive data and regulatory approval we will be ready to drive rapid meaningful uptake and deliver a therapy with the potential to change the trajectory for patients. Now I will turn the call over to Lori. Good morning, everyone, and thank you, Sohanya. Turning to our financials on Slide 29. Total revenue for the 2025 was $34.1 million, an increase of 11.8% compared to the 2024. For the year, total revenue was $146.1 million, a slight increase from 2024. U.S. XPOVIO net product revenue for the 2025 was $32.1 million, an increase of 9.6% compared to the 2024. For the year, U.S. XPOVIO net product revenue was $114.9 million, an increase of 1.9% from 2024. Gross-to-net provisions for XPOVIO were 26.9% in the fourth quarter and 31.2% for the calendar year 2025. License and other revenue was $2.0 million in the fourth quarter and $31.2 million for the full year 2025. Keep in mind, our full year revenue included $15.0 million of R&D reimbursement from Menarini, and 2025 was the last year we will receive this reimbursement. Remaining $16.2 million in 2025 was related to royalties, or milestones earned from our international partners including Menarini. Turning to expenses. We remain disciplined in managing operating expenses and allocating capital to our pipeline. This focus continues to translate into solid quarterly and full year financial performance. Research and development expenses for the 2025 were $27.7 million, a decrease of 17% from the 2024. For the full year, research and development expenses were $125.6 million, a decrease of 12% from 2024. These decreases were driven largely by lower personnel following previously implemented cost reduction initiatives and focused clinical trial expenses as we prioritize capital allocation to our Phase III myelofibrosis and endometrial cancer programs. Selling, general, and administrative expenses were $22.8 million for the quarter, a decrease of 16% compared to the 2024. For the full year, SG&A expenses were $105.2 million, a decrease of 9% from 2024. These decreases primarily reflected the continued benefits of our cost reduction initiatives. Lori Macomber: Taken together, our law firm operations improved by approximately 43% in the 2025 compared to the 2024. And improved 24% in the full year 2025 compared to 2024. Interest expense was $12.6 million in the fourth quarter and $45.8 million for the full year. Both amounts were an increase from the comparable periods in 2024 reflecting higher outstanding debt, and higher interest rates as part of our refinancing in October. Other expense was $10.0 million in the 2025, compared to $10.1 million of other income in the 2024. For the full year, other income was $0.2 million compared to $28.4 million of income in the full year 2024. This nonoperational item is primarily driven by reoccurring noncash fair value remeasurements of embedded derivatives and liability-classified common stock warrants related to the refinancing transactions completed in the 2024 and the 2025. This, combined with the $62.4 million loss on the extinguishment of debt in 2025 compared to the $44.7 million gain on the extinguishment of debt in 2024, were the primary contributors to the higher net loss and lower earnings per share in 2025 versus 2024. Importantly, both items are noncash and nonoperational in nature. As a result, we reported a net loss of $102.2 million, or $5.71 per share on a GAAP basis in the 2025, and a net loss of $196.0 million, or $17.93 per diluted share for the full year 2025. More than half of the full year loss was driven by below-the-line items including the loss on extinguishment of debt, and interest expense, which are largely noncash in nature. Excluding these items, our underlying operating performance continues to demonstrate meaningful improvement. Finally, we ended the year with $64.1 million in cash, cash equivalents, restricted cash and investments compared to $109.1 million as of December 31, 2024. Based on our current operating plans, our guidance for the full year 2026 is as follows: total revenue of $130 million to $150 million consisting of U.S. XPOVIO net product revenue and license, royalty, and milestone revenue expected to be earned from our partners, primarily Menarini and Antengene. U.S. XPOVIO net product revenue to be in the range of $115 million to $130 million. R&D and SG&A expenses to be in the range of $230 million to $245 million. We expect our existing liquidity including the revenue we expect to generate from XPOVIO net product sales, as well as revenue generated from our license agreements, will enable us to fund our current operating plans into the second quarter of this year. I will now turn the call back to Richard for some final thoughts. Thank you, Reshma, and Lori. As we have discussed today, Karyopharm Therapeutics Inc. is well positioned as we approach pivotal data that will inform the next phase of the company. We have a durable commercial foundation of multiple myeloma, and we are approaching pivotal data from our late-stage clinical programs that have the potential to significantly expand the role and impact of our oncology franchise, beginning with myelofibrosis in March, and extending into endometrial cancer in the middle of this year. We have continued to refine how our programs are developed and executed, applying clinical experience, optimizing how our therapies are used, and ensuring our Phase III programs reflect what we believe is the right balance of efficacy and tolerability for the settings we are targeting. From a capital perspective, we remain disciplined and deliberate. We are managing the business with a clear focus on near-term value-creating milestones, while maintaining flexibility and optionality as we consider financing and longer-term strategy. Ultimately, our priorities are straightforward. Execute well, generate high-quality data and allow these results to define the next phase of the company. We believe this approach best serves patients, investigators and shareholders alike. We will now open the call for questions. Operator? Operator: Thank you. And ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press the star followed by the number one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, you may press star followed by the number two. And we kindly ask you to please limit yourself to one question and one follow-up. With that, our first question comes from the line of Colleen Margaret Kusy with Baird. Please go ahead. Colleen Margaret Kusy: Great. Good morning. Thanks for taking our questions, and congrats on all the progress. Very excited for the upcoming data we will see next month. Maybe we can start there. Obviously, the 60 mg data has yeah. That we have seen so far is invest in class. I think as a lot of people are doing a little bit more work ahead of the readout, there have been some questions coming up from investors on just on the 40 mg dose and data we have seen there. So maybe just can we start there? Just any notable difference in exposure? Anything else you think is driving that difference in activity that you have seen for the 40 mg versus the 60 mg in the Phase I? Richard Paulson: Yes. Thanks, Colleen. I think, obviously, our dose is focused on the 60 milligrams and looking at our Phase III trial. But I will let Reshma maybe just talk to that broadly, but I think people should be very focused on the data. Efficacy, safety, and tolerability we have with the 60 milligram in combination with rux. Reshma Rangwala: Yeah. Thank you, Colleen and Richard. So it goes back to our Phase I data in which we evaluated both the 60 mg as well as 40 mg. When you look at the efficacy and safety, there is a clear benefit risk in favor of the 60 milligram cohort as compared to the 40, largely due to the fact that efficacy, both from an SVR as well as TSS, was maximized in the 60 milligram group as compared to the 40 milligram group. Now, when you look at the safety, though, you do not see as stark of a difference. Numerically, yes. Both the heme and non-hemes are slightly higher with the 60 milligram as compared to 40, but you do not see that substantial dose response as compared to, again, what I described in the efficacy. So in total, again, when you look at the efficacy and safety data, it really is in favor of that 60 milligram group. Then layer in the pharmacokinetic data and, therefore, exposures are higher with that 60 milligram group as compared to the 40. So really, the totality of the data from the clinical efficacy, safety, ClinPharm, and then, of course, we have got multitude of preclinical data, translational PD markers that really suggest that 60 milligrams is the right dose in myelofibrosis. Hence, the reason that we have taken that forward in our Phase III. And then, obviously, you are the first potential combination in frontline MF, which is a exciting opportunity. Novartis, a potential competitor potentially just kind of announced some new plans moving forward in MF. Just kind of curious your thoughts on the read through there. Would think, obviously, follows your strategy of enrolling highly symptomatic patients but just curious your thoughts on the read through there. Richard Paulson: Yeah. Thanks, Colleen. Yeah. I think you highlighted it. It really it does talk to the importance of having the right patient population in the trial, which I think we have delivered very well. And overall, really, the continued investment in myelofibrosis space really talks about the unmet need and the significant value that that is seen in myelofibrosis market. So you know, I think as we look at it, you know, regarding the EU and Novartis has indicated they may be moving forward and filing there. That may indicate that the EU regulatory agencies are more focused on 35 and potentially showing you know, more regulatory flexibility, less focus on symptoms. But you know, given our top-line readout data is going to happen in March, we would look to be filing rapidly with our data, obviously engaging in both the U.S. and globally. And so I think this really gives us the opportunity to establish ourselves pending positive data as a standard of care in myelofibrosis, you know, given the fact that Novartis has indicated that they would run another trial for the U.S. And that trial would not read out for a number of years and gives us a significant amount of time to establish ourselves well and become the standard of care in frontline myelofibrosis. Colleen Margaret Kusy: Awesome. And then one more quick one if I can. Just, if you could the comments a little bit about the strategy for eltenexor and other MPNs if MF is positive? Just strategy would look like there and and what the IP is. Could you remind us for eltenexor versus onixor? Reshma Rangwala: Yeah. I will take the first question, and then I will pass over the IP to Richard. But yes, eltenexor is a second-generation XPO1 inhibitor. So just like selinexor, it too is going to inhibit XPO1. It has a couple of differentiating properties, lower IC50s as well as lower penetration through the blood-brain barrier. That has opportunities to lower the dose, potentially dose more frequently, also have a better safety profile, profile. Eltenexor has already been evaluated in a Phase III trial, so we do have some, you know, very encouraging preliminary data, albeit in other tumors outside of the MPNs. I think where we look at the next opportunity is to go beyond MF. Right? We know that MF is just one of multiple MPNs. We have got some really interesting preclinical data that also suggests that XPO1 may be relevant in other MPNs, including PV as well as and so that, I think, would be our next opportunity. Is to expand again beyond MF and start to look at some of these other more chronic diseases like the ones that I just mentioned. Richard Paulson: Yeah. And from a patent perspective, obviously, it is early days yet with regards to our overall strategy there. But you know, right now, with eltenexor, the patent, it goes into mid-2034. But as a reminder, we have not yet yet applied for any patent term extension or patent term adjustment which would extend it, you know, into 2039. So lots of opportunity for us as we continue to move forward and develop in that in that space. Colleen Margaret Kusy: Great. Thanks so much for taking our questions. Six here for the data next month. Richard Paulson: Thanks, Colleen. Operator: Thank you. And the next question comes from the line of Yichun Qian with Cantor. Please go ahead. Yichun Qian: Hi, folks. Appreciate the updates here. Greatest progress in timelines remain intact. Just had a question with regards to the blinded safety data. And just given that you have been able to provide baseline characteristics on a blinded basis with the trial now fully enrolled, curious if there has been an opportunity to kind of refresh that look and if there has been any kind of material change there with regards to discontinuation rates or other AEs like the nausea and anemia and thrombocytopenia. Reshma Rangwala: Hey, Yoni. Thanks for the question. So, no, we have not updated anything beyond what we have publicly disclosed in the past. So, you know, what we have said in the past is, you know, the baseline demographic is disclosed in the ASH abstract, included approximately 320 patients, was very consistent with our expectations for population to be enrolled in a frontline myelofibrosis. With that said, though, we did have an opportunity to update the TSS in approximately 350 patients. Again, you know, something that I have commented before in the past. And that TSS evolution, that baseline TSS evolution without fatigue is, again, really nice. Approximately 22.5 potentially could be the highest baseline TSS, which is something that we were actively striving for. In terms of the blinded safety data, no, we have not done a refresh. We are looking forward to the data next month where we can definitively look at the data across the two arms. Those two, I think, are very encouraging and potentially suggest that patients treated with a combination could have lower grade 3+ anemia. This is, again, based upon extrapolations relative to historical ruxolitinib data, as well as very manageable non-heme toxicities including the GI toxicities, nausea, as well as elaborate there. What is kind of the general. Yichun Qian: Protocol? And if there is any kind of high level view that you can provide with regards to rux dosing and and how in line it is with the label. Reshma Rangwala: Absolutely. So the SELE dose can be reduced. So it can go from 60 to 40 to 20, and then, yes, you know, of course, if the AEs persist, it can be discontinued. Those dose modification guidelines are well specified within the protocol. The ruxolitinib dose modifications are really based upon the country’s local label, right, which by and large are very consistent with the U.S. USPI. So the starting dose is going to be based upon the patient’s baseline platelet count, and then any kind of dose modifications, including reductions, interruptions, and even discontinuations, again, should be followed per the U.S. So we are very strict about that in our protocol. Now given the fact that this is a combination therapy, what we suggest to our investigators is to modify based upon what I call the flavor of the AEs. So if a patient first experiences a hematologic toxicity, for example, anemia, thrombocytopenia, very well described for ruxolitinib, we guide them to modify the ruxolitinib dose first, again, per the U.S. If they experience a non-heme toxicity, then we suggest that they modify selinexor dose. So we try to keep it very easy for the investigator just based upon the kind of AE that the patient experiences. Yichun Qian: Got it. Okay. And one one last quick one. Just with regards to SENTRY-2, could you comment there a little bit on kind of the strategic thought there and kind of utility of that data and what you are hoping to show and how that might tie in with future label extensions within MF? Richard Paulson: Yeah. I can talk to that. Yeah. Mean, overall, obviously, enabling trial is our Phase III frontline combination with ruxolitinib. But really importantly, when we look at the overall efficacy and I think the activity of selinexor, we have seen in a number of our trials really strong monotherapy data. And also, we do know that it is important to be able to expand beyond ruxolitinib in the future. Potentially with selinexor to really play a foundational role across myelofibrosis first and potentially across other MPNs. So our Phase II is really one where we are letting patients start at the platelets greater than 50,000. The 50,000 and above is we just modified the protocol. And within that, it is starting with selinexor as a treatment monotherapy. And then you have the opportunity for patients to be able to add on other JAK inhibitors depending on the need, so they may not need to. But if they do need to, they can add on their JAK inhibitors. And we do know that selinexor is a drug that is able to be partnered with many other drugs. So I think, you know, pending positive data with our Phase III frontline combination with rux, our view would be, you know, to read out the Phase II data, and look at that as an opportunity to really expand from a guideline perspective and enable physicians much more flexibility and the opportunity to establish, you know, selinexor in combination with multiple JAK inhibitors and/or selinexor to be able to treat patients potentially as a monotherapy. But, again, that is an opportunity to expand in the future. An area that I think we are quite excited about and is moving forward well. Anything you would add on to that, Reshma? Reshma Rangwala: No. Nothing. That is great. Yichun Qian: Perfect. Alright, guys. Really appreciate the updates, and best of luck here in the near in near term. Brendan Strong: Thanks, Yoni. Operator: And the next question comes from the line of Brian Corey Abrahams with RBC Capital Markets. Please go ahead. Brian Corey Abrahams: Hey. Good morning. Thanks for taking my question, and look forward to an exciting next couple of months. You reported the Phase III baseline characteristics at the ASH conference in an abstract. And it looks like if you look at the risk status, if you look at spleen volume, the baselines the baselines the patient population looks somewhat milder than what was in the Phase I/II. And then while the I think you pointed out that the TSS score is actually substantially higher, there is a pretty wide range, including patients going down to scores as low as two. So can you maybe talk about what some of those similarities but also differences might mean with regards to, you know, the potential to show as why the delta in the in the Phase III? Reshma Rangwala: Thanks. Sure. Thanks, Brian. You are correct, right? Sort of like if you compare the patient populations in the Phase III, Phase I, I would agree. It is a little bit milder. I think the other aspect that is different is even the baseline hemoglobin. Right? So it was approximately 10 grams. Median was 10 grams in the Phase I. It is approximately 11 grams in the Phase III. So I think by and large, right, yes, this potentially could be a less sick patient population. You know, with that said, though, I do not think it is going to have any impact on the efficacy. Right? And I say that because even when we look at the subgroups, from our Phase I from an SVR perspective, there really is a very nice consistency, including across all of the dips. From INT-1 all the way up until high risk. And even by hemoglobin. So I think it really suggests that there can be meaningful benefit across all of the different subsets of patient populations to, of course, people that are going to have far more difficult to treat disease versus those that are have a little bit more mild disease. Brian Corey Abrahams: No. That is really helpful. Thanks. And then do you have any sort of updated feedback from either KOLs or from regulators on that is maybe shaped your view on what might be a reasonable threshold for symptomatic improvement just in the in the case that you show statistically significant spleen reductions, but do not quite show, get to statistical significance on symptoms. What would be the bar to still potentially proceed with the filing, assuming there are not any safety surprises or anything like that? Reshma Rangwala: Sure. You know, so our goal is to really show statistical significance for both SVR as well as absolute TSS. Right? You know, those are the bars that are included in our statistical analysis plan as well as discussed with the FDA. We think that profile again statistically significant improvement both for the SVR, TSS, in the context of a very manageable safety profile, is really the ideal profile for a new combination therapy, the only combination therapy that would be available for these patients with MF. Even take it one step further, when we talk to our KOLs, right, they do emphasize that SVR is going to be their primary treatment driver, largely because there are, you know, multiple datasets, multiple meta-analyses, that really suggest that the deeper, the more rapid, the more durable the SVR that can be achieved, the more that it may correlate with long term. They are very focused on that spleen volume reduction, and while they say, yes, symptoms are important, you are really, for them, they just want to see some kind of benefit. Benefit above and beyond ruxolitinib. So, again, I think even if you have that outcome in which SVR is positive, TSS is numerically improved, that is a profile that they would be very happy with and clearly would even advocate for the NCCN guidelines to adopt. So you know, I think that is very encouraging from their and a very important voice, right, in the MF space. From a regulatory perspective, they have never commented. Right? They have never commented on what that minimum delta would be. I think, again, I think statistical significance is what we are, you know, striving to achieve here. Got it. That is super helpful. And then maybe one more if I could squeeze it in. Brian Corey Abrahams: Could you just remind us on the regularity of, I guess, DSMB or interim safety looks here and whether or not you would expect that would pick up on any imbalances in the transformation. Thanks. Reshma Rangwala: Yes. So the DSMB does evaluate the data on a regular basis, approximately every four to six months. It is something that we do across all of our clinical trials. And, yeah, they would. You know, they get the totality of the safety data from all AEs, grade 3, 4, SAEs, and, of course, transformations as well. So far, they have not, you know, mentioned anything. And as I mentioned previously, even with the futility analysis, they did suggest that this study continues without modification. Brendan Strong: Thanks again. Richard Paulson: Thank you, Brian. Operator: And the next question comes from the line of Maury Raycroft with Jefferies. Please go ahead. Maury Raycroft: Hi, good morning. Thanks for taking my questions. Maybe as a follow-up to one of the earlier ones, for the 61 patients in the futility analysis group in SENTRY, what can you say about dose reductions you saw for selinexor and/or ruxolitinib? And even though you have been clear that we should not rely too much on extrapolating based on these patients, can you contextualize how the dose reductions compared to your Phase I? And how the rux dose reductions could compare to other myelofibrosis Phase III studies. Reshma Rangwala: Sure. Great question, Maury. I have not commented on the dose reduction from the first 61 patients, specifically for the ruxolitinib, largely because, you know, as you know, the starting dose is going to be very variable again based upon the patient’s baseline platelet count. Extrapolating, you know, the rux dose intensity and the dose reductions in the context of a blinded safety data where that starting dose is very variable, again, can be very challenging. And so, again, it is not meaningful output at this time. You know, let us just wait until the top-line data. With that said, though, we have mentioned that the selinexor dose intensities, whether selinexor or placebo, does look really good. Amongst the 61 patients, the mean relative dose intensity was greater than 95%. Maury Raycroft: Got it. Okay. That is helpful. And maybe just two quick clarification questions. For the first 61 patients, is there anything more you could say about where those patients were recruited from, which regions they came from? Reshma Rangwala: Sure. They were globally. So they were they were going to they are globally recruited. Primarily North America as well as EU. And probably a few more. I do not have the exact numbers, will say, but I anticipate more patients coming from North America just because those were the first sites activated. But, yeah, just assume that this is going to be a population largely recruited, again, within Europe as well as North America. Maury Raycroft: Got it. Okay. And for knowing that the date is going to be in March is really helpful. Just wondering if you are saying whether it is going to be earlier or later in March. Richard Paulson: No. We think guiding to March is pretty strong. So we feel very good about that and continue to progress well, and then we will read the data out in March. Maury Raycroft: Got it. Okay. Thanks for taking my questions. Richard Paulson: Thanks, Maury. Operator: And your next question comes from the line of Wei Ji Chang with Leerink Partners. Please go ahead. Just one. Hi, guys. Thanks for taking my question. Wei Ji Chang: What are the key reasons for confidence in hitting on the TSF endpoint of the SENTRY study? Thank you. Reshma Rangwala: Sure, Jonathan. Great. Great question. I think there are multiple different aspects that give us confidence. So you know, I go back to, you know, the studies the Phase I study’s original secondary endpoint was TSS-50. Right? When we have the opportunity to look at TSS-50 amongst that ITT, numbers were quite strong at approximately 59%, relative to historical ruxolitinib data that have read out, you know, sort of in the mid-40s. So a really nice improvement there. We then looked at absolute TSS, or the observed mean change at week 24 relative to baseline. These are going to be the actual values, not estimated, which is what is going to be coming from the Phase III. Those numbers too, very strong with an 18.5 improvement. The size get it from the Phase I population, which was naïve treated with the combination, or even from our monotherapy study in which we evaluated selinexor as a monotherapy in that previously treated population, you really see very meaningful and rapid reductions in those substantially better than what is again been described for ruxolitinib where the improvement was only 11 to 14 points. So from a clinical perspective, you really have evidence of meaningful TSS improvement from both TSS-50 as well as absolute TSS. Now, the other part that really should be taken into consideration is cytokine levels as early as week four. So the fact that you see that cytokine decrease again explains why you also see that associated clinical benefit. So I think, like, really, those are going to be the key reasons why I have that confidence. I think the other aspects that we cannot lose sight on is the FDA gave us the to change out the endpoint, right, from TSS-50, which we know is very crude measurement of symptom benefit, to a much more sensitive methodology in absolute TSS, which is, again, going to look at that mean change over time. And then the last part that I will just emphasize is that we are looking at TSS without fatigue, and the reason we are doing that is again, there is precedence with evaluating without fatigue. It was established by both ruxolitinib as well as fedratinib, but we also know that fatigue, it is just a very, very difficult domain to meaningfully evaluate. So I think again, being able to incorporate absolute TSS without fatigue as the key measure of improving symptoms is really a significant opportunity to be able to show that significant improvement relative to ruxolone. Richard Paulson: And then, Jonathan, I will just close that because I think as Reshma talked to, we feel very good about that. And then as we have said, feel very pleased with the patient population we have enrolled. It is consistent with the population we had planned, and as we set our targets to ensure we had, you know, a meaningful baseline TSS, we have delivered on that with the TSS scores, you know, appear to be higher than MANIFEST and substantially higher than TRANSFORM, which, again, is what we intended to do. So I think we have set up the trial as well as we could and are extremely excited about reading this out next month in March. Wei Ji Chang: Understood. Thank you. Richard Paulson: Thanks, Jonathan. Operator: And we have no further questions at this time. I would like to turn it back to Richard Paulson for closing remarks. Richard Paulson: Thank you, operator, and thank you, everyone, again for your time and your continued interest in Karyopharm Therapeutics Inc. As you just heard, we are extremely excited to be reading out our top-line Phase III data in the frontline myelofibrosis with selinexor in combination with rux. And we look forward to engaging with you in March as we read that out. You for joining us today. Operator: Thank you. Ladies and gentlemen, this concludes today’s conference call. Thank you all for joining. You may now disconnect.
Operator: At this time, I would like to welcome everyone to the International Flavors & Fragrances Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. All participants will be in a listen-only mode until the formal question and answer portion of the call. To ask a question at that time, if you would like to remove your name from the queue, please press 2. Participants will be announced by their name and company. In order to give all participants an opportunity to ask their questions, we request a limit of one question per person. I would now like to introduce Michael Bender, Head of Investor Relations. You may begin. Thank you. Michael Bender: Good morning, good afternoon, and good evening, everyone. Welcome to International Flavors & Fragrances Inc.'s Fourth Quarter and Full Year 2025 Conference Call. Yesterday afternoon, we issued a press release announcing our financial results. A copy of the release can be found on our IR website at ir.iff.com. Please note that this call is being recorded live, and will be available for replay. During the call, we will be making forward-looking statements about the company's performance and business outlook. These statements are based on how we see things today, and contain elements of uncertainty. For additional information concerning the factors that can cause actual results to differ materially, please refer to our cautionary statement risk factors contained in our 10-Ks and press release, both of which can be found on our website. Today's presentation will include non-GAAP financial measures which exclude items that we believe affect comparability. A reconciliation of these non-GAAP financial measures to their respective GAAP measures is set forth in the press release. Also, please note that all sales and EBITDA growth numbers that we will be speaking to on the call are on a comparable currency-neutral basis unless otherwise noted. With me on the call today is our CEO, Jon Erik Fyrwald, and our CFO, Michael Deveau. We will begin with prepared remarks and then take questions at the end. With that, I would now like to turn the call over to Jon Erik Fyrwald. Thanks, Mike, and hello, everyone. Thanks for joining us today. International Flavors & Fragrances Inc.'s fourth quarter and full year 2025 results reflect a continued focus on disciplined execution and improvements across the business to further strengthen our position in the market. I will start today's call by briefly summarizing the progress we continue to make in executing our strategic priorities, followed by a few highlights of how this translated to our 2025 financial results. I will then turn the call over to Michael Deveau, who will provide more details on fourth quarter segment performance and our outlook for 2026. Turning to Slide 6. In 2025, our team focused on strengthening our ability to drive profitable growth while also strengthening our balance sheet. We continue to reinvest in a disciplined way across our high-value core businesses, increasing R&D, commercial capability, and manufacturing capacity, investments that will pay off for years to come. And we did this while we delivered the full-year financial commitments we set out for 2025. And while there is a lot more to do, I am proud of how our global team continues to strengthen our ability to serve our customers with leading innovations and deliver productivity even in a challenging, volatile economic environment. Our strengthened balance sheet reflects our more disciplined capital allocation strategy, with our net debt to credit-adjusted EBITDA down to 2.6. Our increased investments in innovation and commercial capabilities and CapEx and productivity initiatives are delivering today and making us stronger for the future. We have also taken strategic action to sharpen our portfolio so we can focus on high-value, innovation-driven businesses. To recap, we completed the divestitures of Pharma Solutions, nitrocellulose, and René Laurent businesses and also announced an agreement to sell our soy crush concentrates and lecithin businesses to Bunge, which we expect to happen by April. Most recently, we officially launched the sale process for our Food Ingredients business. As we communicated in August, we began exploring strategic options for our Food Ingredients business as part of our portfolio optimization. And following several months of extensive preparation by our team, we formally launched a disciplined and competitive sale process and, as of two weeks ago, are officially in the market. And I am very pleased with the progress we have made and believe this is the right next step for both the Food Ingredients business and for our Taste, Scent, Health, and Bioscience divisions. We are very encouraged by the depth and quality of interest from strategic and financial sponsors and are confident in our ability to execute this process thoughtfully and in the best interest of our shareholders. We will provide additional updates as appropriate. We are confident that the strength of our people, strategy, and execution positions us to deliver on our priorities for 2026 and beyond. We have the right leadership team in place, an engaged and supportive board, and an incredibly talented team of International Flavors & Fragrances Inc. colleagues. Now while macroeconomic uncertainty will continue to persist through 2026, I am pleased how we are entering the year and have strong conviction in our ability to achieve consistent, profitable growth and create long-term value for our shareholders. Turning to Slide 7. We achieved solid sales growth in 2025 against this Jon Erik Fyrwald: strong 6% year-ago comparable in a tough macroeconomic environment. Over the last two years, we delivered average sales growth of 4%. Our 2025 performance was led by Taste, which grew sales by 4% and grew EBITDA by 10%. In Health and Biosciences, sales improved 3% and the team delivered a 7% increase in EBITDA. Scent sales grew 3% against a strong year-ago comparison of 12% and increased EBITDA by 2%. The double-digit sales growth in Fine Fragrance was partially offset by negative growth in Fragrance Ingredients, where we saw double-digit declines in the commodity ingredients sales. In Food Ingredients, the team has done a great job continuing to drive margin improvement. And while sales were down, partly due to soft demand and partly due to the strategic exit of low margin business, we achieved 10% EBITDA growth and 150 basis points of EBITDA margin expansion. And on a consolidated basis, our overall profitability improved in 2025 as we delivered 7% EBITDA growth with 100 basis points of margin expansion through volume and productivity gains as well as favorable net pricing. Now with that, I will pass the call over to Michael to offer a closer look at this quarter's consolidated results. Michael? Michael Bender: Thank you, Erik, and thanks, everyone, for joining. In the fourth quarter, International Flavors & Fragrances Inc. generated revenue of nearly $2,600,000,000 with growth in nearly all divisions. Performance was led by mid-single-digit growth in Health and Biosciences and Scent as well as low-single-digit growth in Taste. Jon Erik Fyrwald: Our sales grew 1% for the quarter, Michael Bender: against the 6% year-ago comparable, and were up approximately 4% on a two-year average basis. EBITDA totaled $437,000,000 for the fourth quarter, a 7% increase, primarily Jon Erik Fyrwald: driven by volume growth and our ongoing productivity initiatives. Our EBITDA margin also increased by 90 basis points to 16.9%. On Slide 9, I will provide a closer look at our performance by Michael Bender: business segment. In Taste, sales increased 2% to $588,000,000 with growth in all regions, including high-single-digit growth in North America driven by new wins. The segment also recorded a very strong quarter of profitability Jon Erik Fyrwald: with EBITDA of $94,000,000, a 17% increase. Michael Bender: Profitability gains driven primarily by favorable net pricing and cost discipline. Food Ingredients sales of $802,000,000 were down 4% as softness in Protein Solutions and Emulsifiers and Sweeteners offset growth in Systems and Inclusions. Michael Deveau: It is worth noting that a part of our top-line decline in the fourth quarter and on a full-year basis for Food Ingredients was driven by a proactive exit of low margin business as well as lost sales due to sanctions in Russia in Emulsifiers. Profitability for Food Ingredients declined 11% in the quarter to $82,000,000 stemming from the volume declines and unfavorable net pricing. Our Health and Biosciences segment achieved sales of $589,000,000, an increase of 5% with growth across nearly all businesses. The standouts in the quarter were Food Biosciences and Animal Nutrition, both growing double digits. Home and Personal Care also continued to be strong, increasing high single digits. As we shared last quarter, Health, while improved sequentially from Q3, was down low single digits. Under new leadership, the team has started to execute their improvement plan. We continue to believe trends will improve over the course of 2026. From a profitability standpoint, Health and Biosciences delivered EBITDA of $155,000,000 in the fourth quarter, an increase of 20% due to volume growth and productivity gains. Lastly, our Scent segment delivered sales of $610,000,000 representing 4% growth. Performance in the fourth quarter was driven by continued strength in Fine Fragrance, which increased 10%, and mid-single-digit growth in Consumer Fragrance. Fragrance Ingredients remained under pressure due to continued market softness and price competition on the commodity portion of our portfolio. EBITDA for this segment increased 1% to $106,000,000 as benefits from volume growth and productivity gains were partially offset by unfavorable net pricing specifically in Fragrance Ingredients. Turning to Slide 10, cash flow from operations totaled $850,000,000 for the full year, and CapEx totaled $594,000,000, or approximately 5.5% of sales. Our free cash flow position for the full year totaled $256,000,000. Included in this number is approximately $300,000,000 of Reg G-related charges primarily driven by our divestiture activities, which accelerated in the second half of the year due to the potential sale of Food Ingredients. Working capital also represented an outflow of approximately $166,000,000, reflecting higher inventory levels in strategic areas along with changes in accounts receivable and accounts payable. We made meaningful progress improving inventory in the second half of the year, and as we look ahead, disciplined execution across all elements of working capital will be a key priority for us in 2026. Year to date, we returned $409,000,000 to our shareholders through dividends, and an additional $38,000,000 through share repurchases, as we started our repurchase program in the fourth quarter. As a reminder, at minimum, we expect to offset annual share dilution of approximately $80,000,000 to $100,000,000 per year. Our cash and cash equivalents finished at $590,000,000 and our gross debt at the end of the year was approximately $6,000,000,000, which is a decrease of nearly $3,000,000,000 compared to 2024. Our trailing twelve-month credit-adjusted EBITDA totaled $2,100,000,000. Our net debt to credit-adjusted EBITDA ended 2025 at 2.6 times, improving from 3.8 times at 2024. Before turning to our outlook for 2026, I would like to briefly reiterate a point Erik made earlier on Food Ingredients. We believe pursuing a sale for the Food Ingredients business remains the right path forward. With our capital structure now strengthened, and improving operational performance, and margin expansion ahead for Food Ingredients, we are under no pressure to sell. The business has a strong operating plan. We are confident we can continue to create value whether a transaction occurs or not. This potential sale is about capturing full value for our shareholders, doing what is right for both Food Ingredients and our broader portfolio. Throughout the process, we remain focused on long-term shareholder value, and taking actions that make the most strategic sense. Now on Slide 11, I would like to share our outlook for 2026. We believe we are well positioned for the year ahead and we are cautiously optimistic that we can deliver growth, margin improvement, and cash flow generation this year. As we navigate the volatile geopolitical landscape and uncertain market conditions, the strength of our pipeline and the benefits of our reinvestment efforts give us confidence moving forward. We believe our outlook reflects the balanced consideration of both current market conditions and the potential for unforeseen opportunities and challenges throughout the year, hence the ranges we are providing. Coming off a solid year we had in 2025, we expect to continue to drive financial performance across the company. For the full year 2026, we expect sales to be in the range of $10,500,000,000 to $10,800,000,000, representing comparable currency-neutral growth of 1% to 4%. We believe Taste, Health and Biosciences, and Scent will continue to drive our top-line growth supported by new wins and our innovation pipeline. We expect that growth will primarily be driven by year-over-year improvements in volume. From a profitability standpoint, we expect to deliver full-year 2026 EBITDA between $2,050,000,000 and $2,150,000,000, representing comparable currency-neutral growth of 3% to 8%. It is important to note that we will also continue to selectively reinvest in the business while maintaining a disciplined focus on near-term profitability. We expect our productivity and efficiency gains will fully fund our ability to reinvest in innovation and commercial capabilities across our highest-value businesses. We believe these investments will continue to enhance performance, strengthen our competitive position, and deliver attractive returns over time. For the full year, we expect FX will have approximately one percentage point positive impact to sales and a negligible impact on EBITDA. From a calendarization perspective, our year-over-year comparisons are strongest in the first half, particularly in Q1, where we have certain favorable one-time items from last year, including the contribution of divested businesses. As a result, we expect sales and EBITDA will be more muted in the first quarter of 2026. More specifically, we expect modest EBITDA growth in the first quarter versus our like-for-like first quarter 2025 base of approximately $55,000,000 adjusting for divestitures. As we move through the year, comparisons will ease, and we expect performance to improve supported by our pipeline and ongoing productivity actions. We expect that this will drive improved leverage across the P&L and year-over-year growth should progressively improve each quarter. As I said earlier, operating cash flow will be a key priority for 2026. We expect overall cash generation will improve year over year excluding Reg G and one-time costs, which will most likely be higher than 2025, as we pursue a potential sale of Food Ingredients. Teams across the businesses are driving working capital improvements across inventory, payables, and receivables, and when combined with profitability growth and lower incentive compensation payouts, we should see a meaningful cash flow improvement versus 2025. CapEx is expected to be around 6% of sales and will be carefully managed, focused on highest-return opportunities, including capacity expansion, network optimization, and innovation to support long-term growth. To further embed disciplined cash management, we have introduced an incentive compensation metric for 2026 tied to operating cash flow conversion, defined as EBITDA minus CapEx minus the change in net working capital. We are also evaluating additional cash flow metrics for our long-term incentive program to strengthen alignment on cash flow generation, particularly for 2027. With that, I would now like to turn the call back over to Erik. Jon Erik Fyrwald: Thanks, Michael. As we look ahead to 2026, I see considerable opportunities for us to continue strengthening International Flavors & Fragrances Inc. with even more competitive, innovative, and customer-focused businesses amid a continued challenging macro environment. Innovation is the key driver for us in 2026. Our investments in enzyme capacity, naturals, health, and new molecules powered by our biotechnology and AI capabilities will increase our ability to compete and win with our customers across key business segments. We also remain focused on enhancing our competitiveness in our Health business by strengthening commercial execution through the steps we discussed before. In Fragrance Ingredients, we continue to shift our portfolio toward higher growth and higher value-added specialties by leveraging R&D, naturals, chemistry, and biotech for new molecule and delivery system development. At the same time, we are committed to continuing to drive significant productivity, furthering our digital transformation, and advancing our AI-enabled operational excellence to fund reinvestment and improve margins. And we will drive cash flow as a priority over the next eighteen months and are committed to a very large reduction in below-the-line or Reg G costs over that time period. Michael Deveau: Lastly, we will continue the sale process for Food Ingredients Jon Erik Fyrwald: and we will ensure the right outcome for this terrific business and be able to achieve our end goal of having three high-value and growth innovation-driven businesses with Taste Operator: Scent, Jon Erik Fyrwald: and Health and Biosciences powered by nature and biotechnology. To close, I want to reiterate that the International Flavors & Fragrances Inc. businesses are strong and performing well. We are doing exactly what we said we would do, and we have a clear path forward that aligns and motivates our people to continuously improve our service to customers and deliver for International Flavors & Fragrances Inc. The progress we have made in strengthening the foundation of our business, balance sheet, and innovation and commercial pipelines is significant and motivates us to do even more. And while I am very proud of what our team has accomplished, there is more we will do as we will be laser focused in 2026 on driving profitable growth, cash flow improvement, and maximizing value creation over time. We are investing for the future, and we have a great team to execute for today. Michael Deveau: Thank you, Jon Erik Fyrwald: we will now open the line for questions. Michael Deveau: Thank you. Operator: If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove your name from the queue, please press 2. Again, to ask a question, please press 1. We do ask that you please limit yourself to asking only one question. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. And the first question will go to the line of Kristen Owen with Oppenheimer. Kristen, your line is open. Hi. Good morning. Thank you for the question. So I wanted to ask about your assumptions around price and volume in 2026. And we are hearing from a lot of the CPGs this shift migrates toward a greater emphasis on volume. I am just trying to think about how that might upstream to you all. And just as a related question, can you remind us the incremental margin on volume versus price? Thank you. Michael Deveau: Yes. Thank you, Kristen, for that question. I will take it. Jon Erik Fyrwald: First of all, our expected growth for 2026 is volume driven. Michael Bender: And as you mentioned, CPG companies shift Jon Erik Fyrwald: shifting emphasis to more volume growth, that is a good thing for International Flavors & Fragrances Inc. and the industry as a whole. So we like seeing that trend as you mentioned. And then finally, incremental margins are roughly 30% to 35% on volumes depending on the business segment. Operator: Thank you, Kristen. Our next question will go to the line of Nicola Tang with BNP Paribas. Nicola, your line is open. Hi, everyone. I am sticking with a question on top line. I was wondering if you could provide some color on your assumptions behind the top and bottom end of your 1% to 4% currency-neutral sales outlook. Do you expect all of your divisions to grow within that range? And also, I noted in Q4 that currency-neutral sales came in better than expected in the three core divisions. And I was wondering if we should read this as a signal of improving underlying market trends or whether there were specific drivers to be aware of, I do not know, new wins or timing of orders? Unknown Analyst: Or anything like that? Michael Deveau: Thanks. I will take this one. Nicola, thank you for the question. As I think about 2026, I think we would say we are cautiously optimistic going forward, really driven by a strong pipeline, the reinvestment we made over the last eighteen months. In addition, as Erik just said, a good thing for us as well, we are hearing customers talk more about volumes for 2026, which is positive. So when you think about our 1% to 4% guidance range, it assumes essentially the current market conditions that we see today and as we exited the fourth quarter. For us to achieve the higher end, or the 4% range, I think we would need to see volumes at the end market improve more broadly, kind of return to what I would say is more normalized levels in terms of market growth. And the opposite is probably true on the lower end of the guidance range, or the 1%. To your point on Q4 2025, it was marginally better than we expected from a top-line perspective with good improvements in Taste, Scent, and H&B. This was primarily driven by new wins, which is a positive signal. But it is only one quarter. So as I think about, again, 2026 overall, we do believe that the three businesses will grow in 2026 within the sales guidance range. To a lesser extent overall, but we also do expect Food Ingredients will also grow, maybe just a little bit. Fortunately, we have a very diverse business with balanced region, category, and customer exposure. And that gives us our confidence that we are resilient and that we believe we can grow as we go into 2026. Operator: Thank you, Nicola. Our next question will go to the line of Patrick Cunningham with Citigroup. Michael Bender: Patrick, your line is open. Hi. Good morning. Thank you. In Food Ingredients, could you comment on any early interest in the sale? Were there any inbounds prior to the formal process? And then any details on timing and deployment of proceeds would be greatly appreciated as well. Jon Erik Fyrwald: Sure. Thank you for the question, Patrick. Michael Deveau: As I said on our last call, we Jon Erik Fyrwald: did have early interest from both strategics and private equity firms, and all of those firms continue to show strong interest. And then two weeks ago, we officially launched the sale process and have had additional firms express interest. So I am very optimistic about the process. But as Michael said, Michael Deveau: the Food Ingredients business is performing well, had double-digit Jon Erik Fyrwald: EBITDA growth last year. We continue to see solid earnings growth for this year, so we will only sell the business if it creates value, but I am very optimistic we can make it happen. Now as for proceeds, we will use them to buy back shares to offset as much dilution as possible and we will pay down debt to stay about where we are on debt to EBITDA ratio, ensuring that we stay below the 3.0 target. Operator: Thank you, Patrick. Our next question will go to the line of John Roberts with Mizuho. John, your line is open. Jon Erik Fyrwald: Thank you. Price was down in the Scent segment. Higher-price fragrance outperformed, Fine Fragrance outperformed Consumer Fragrance. You are shifting the Scent Ingredients towards higher-priced products. So I would have thought mix alone would have improved price. What is going on with price there? Michael Deveau: No. Thanks, John. You are correct that the Fine Fragrance business is our highest-margin business, so that was a positive contribution to mix overall. Pricing, actually, in the quarter was flat year over year, and so really, the margin pressure came on the input cost side where, as you know, there is a bit of a lag in terms of overall price. This was primarily related to some of the index pricing agreements that we have, and so similar to previous years, as we move forward, we expect to fully recover this over time. One of your points on just the Fragrance Ingredients business overall, that shift from more commodity to more captive or proprietary ingredients, we started that migration, but it will take some time. And so as we go through 2026, we will make continuous progress. But I do want to just level set to make sure something that will be a theme as we go through 2026 and as we get through the second half, when we will start to see some stuff come online overall. But it is a process that will take somewhat of all of 2026 to make that migration overall. Operator: Thank you, John. Our next question will go to the line of Kevin McCarthy with Vertical Research Partners. Kevin, your line is open. Michael Bender: Yes. Jon Erik Fyrwald: Thank you very much, and good morning. I thought your Health and Biosciences business Michael Bender: finished on a somewhat stronger note. Can you elaborate on what drove the margin uplift there of 160 basis points year over year as the Health business Jon Erik Fyrwald: starting to stabilize and come back at all, and maybe you could comment on the margin outlook for 2026 in that segment, what kind of benefits you might see from volume growth and productivity? Jon Erik Fyrwald: Sure. Thanks for the question, Kevin. First of all, our Health and Biosciences did deliver strong fourth quarter performance. And that was due to both strong volume growth and productivity that enhanced the margins. What I would say is the team is very focused on strengthening our commercial and innovation capabilities and pipelines and delivering those pipelines. And I am very proud of the progress that they are making. More to do, but making progress. As Michael mentioned in the Michael Deveau: beginning comments, Michael Bender: the Health business still has some Jon Erik Fyrwald: decline, less decline than in the third quarter in the fourth quarter. We see that business flattening out in the first half of this year and then starting to grow in the second half of this year. So outside of the Health business, very robust growth. The Health business is starting to turn, and we expect to see positive results from that by the second half. Operator: Thank you, Kevin. Our next question goes to the line of Josh Spector with UBS. Josh, your line is open. Josh Spector: Yeah. Hi. Good morning. I wanted to ask on free cash flow. I think previously, you thought for 2025 you would do a little bit less than $500,000,000. That came in a couple $100,000,000 short. You talked about some investments in inventory. So can you talk about why you did that? Is that structural? Then how do you think free cash flow evolves into 2026? Michael Deveau: Thanks, Josh. Great question. Yes. We expected the free cash flow to be modestly lower than $500,000,000 for the full year. Essentially, the difference of where we ended versus our commentary in the second and third quarter really relate to three things. One, we did see a little bit of an increase in what I would say one-time Reg G-related cost. As we start to move forward with the Food Ingredients potential sale, we have actually seen some step-up in costs associated with that potential transaction. Number two, exactly what you said, working capital came in a bit higher than we expected. Part of this is driven by inventory. Now while the team had a really good effort and progress in terms of where we were in the first half of the year to the second half improving inventory, we are being strategic on some elements where we are taking advantage of supply and potential pricing to making sure we keep adequate inventory that as we grow our business into 2026, we are in the best possible position. And so that was a little bit of a build. But in addition to that, we also had some payables that are really just timing issues. I think as we go through 2026, we will see that come back. Now overall with respect to AP, as I explained in our prepared remarks, cash flow improvement for us in 2026 is a key priority. And while we do expect the Reg G cost will remain high, we are being very disciplined in terms of cash management now. Point I made earlier in my prepared remarks, we even added the compensation metric in there to drive this. So for 2026, I do expect to see a meaningful improvement driven by profitability growth, working capital, lower interest expense, and a lower payout relative to what we had in 2025 with respect to incentive comp overall. And so that meaningful progress will occur. I am going to refrain on giving a specific target at this point, only because I want to get a little bit more clarity on the Food Ingredients potential sale. I think once we have the visibility there, we will come back and we will give more formal guidance on a cash flow number. But I will tell you that what I can confidently say is that we are doing everything we can in our power to making sure we drive cash flow performance in 2026. Jon Erik Fyrwald: Yeah. Let me just add quickly that I am not as proud about the management of inventories. In the first half of the year, we let inventories get higher than we had targeted. Michael had us put a lot of emphasis in the fourth quarter on driving down inventories, which is never a good thing to do quickly at the end of the year. But we did it, and we have put in, Michael has driven with the business unit presidents a much better disciplined process to ensure that we manage inventories well throughout 2026 and for the future. Operator: Thank you, Erik, and thank you, Josh, for your question. The next question will go to the line of David L. Begleiter with Deutsche Bank. David, your line is open. Michael Bender: Thank you. Good morning. Jon Erik Fyrwald: Erik, just on the R&D effort, where do you stand on this journey to reinvigorate the R&D pipeline Josh Spector: and your innovation efforts? And are there any metrics that you are tracking that Jon Erik Fyrwald: you can share with us on this progress? Thank you. Thanks for the question, David, and it gets right to the heart of the key strategy of the company, which is to drive innovation. So as you remember, we invested about $100,000,000 in 2025 into our innovation capabilities and high-growth, high-margin categories across the company. And we have made a lot of progress across Scent, Health and Bioscience, and Taste innovation pipelines. And as I also mentioned earlier, we will start to see the benefits of that in 2026 and more into 2027. And I think we are really pleased with the progress that we are making. I think our customers are very pleased with it. I just came back from ACI, the American Cleaning Institute, where we engaged with many of our large CPG company customers and it was really great to have those engagements and hear about the progress that our teams are making. And it was also a very big honor to get awards from two of the largest CPG companies for our innovation together with them. I think that bodes well for the future. So making good progress, David, and you will see it come to more fruition in terms of real results starting in the second half of this year and then much more into 2027. Thanks. Operator: Thank you, David. Our next question goes to the line of Ghansham Panjabi with Baird. Ghansham, your line is open. Michael Bender: Yeah. Thanks, Operator. Good morning, everybody. Just going back to the Taste segment for the fourth quarter and the performance in North America specifically, I think you called out high-single-digit growth. Can you just give us a bit more color as to what drove that? And then was that the component that drove margins to the degree that it did just from favorable mix specific to North America? Thank you. Michael Deveau: Thanks, Ghansham. This team is doing a really good job overall in terms of their overall performance. Looking at it from a regional perspective, all regions in Q4 grew. Contributions from both volume and price. When we look at the drivers of growth, really what stood out is North America. That is really driven by new wins. So the team has been really, really focused on making sure they grow their pipeline and increase their win rate, and what you are starting to see materialize was some of the success that they had on some of those launches overall. In addition, Latin America was strong. And then when I balance it out, I think about EMEA and Greater Asia. They grew to a little bit of a lesser extent. And so when I think about the margin performance, the largest contributor was really productivity. And so when you actually look across COGS and SG&A, the team did an excellent job of really trying to drive that cost management and making sure we are driving productivity within the system of their business. So that was a big, big success to the overall performance and profitability. In addition, they also did have some positive contribution from favorable net price to input cost. And so when you shape this up between volume growth, plus good productivity, and some favorability with respect to price to input cost, it shaped up to a really nice quarter from a profitability perspective overall. Operator: Thank you, Ghansham. Our next question will go to the line of Lisa De Neve with Morgan Stanley. Lisa, your line is open. Hi. Thank you for taking my question. I had a question on what is International Flavors & Fragrances Inc.'s view on the GLP-1 theme where we have seen a little bit of a resurgence of the theme post the oral dosage approvals. Can you share about what you believe the GLP-1 uptake will mean for International Flavors & Fragrances Inc. solutions demand? And then more broadly, following on from that, across all your divisions, what would you consider to be the key market trends that will drive your growth over the coming years? Thank you. Jon Erik Fyrwald: Thank you for the question, Lisa, and being on the board of Eli Lilly, I have a front row seat to the GLP-1 dynamic. And I am very proud of how our International Flavors & Fragrances Inc. team has responded to this both challenge and opportunity. What I would say is we are creating it into an opportunity. We have had an alliance across our business units putting together how our products can help our customers develop great products for GLP-1 consumers, and we have put together an innovation seminar that was very well received and have many projects with customers around products for GLP-1 users. And as you can see in our Taste and our Food Biosciences performance, they are both growing very nicely, and some of that is due to the GLP-1 Michael Deveau: dynamic, and I will give you an example. Jon Erik Fyrwald: We have a large business today in yogurts. Michael Bender: We have Jon Erik Fyrwald: developed some new yogurt technology both in biosciences and in flavors. Michael Deveau: And Jon Erik Fyrwald: by taking advantage of that, we have been able to grow nicely in the yogurt category, helping our customers grow nicely and address the desire for GLP-1 patients to have really great-tasting foods that are good for them. But it has also gone beyond that in the protein dynamic. And the ability for us to flavor products with high protein and help with the biosciences to enable those products has also been a positive. And then when you talk about ultra-processed foods or reformulation generally, reformulation, when customers reformulate, that is also a good thing for us. So yes, there will be some challenges with reduced caloric intake for a section of the population. We are leaning into it with innovation to make sure that it is not an overall negative for us, that it is a neutral or a positive. Michael Deveau: Thank you, Lisa. Operator: Our next question goes to the line of Fulvio Cazzol with Berenberg. Fulvio, your line is open. Michael Bender: Thank you, and thank you for taking my questions. Fulvio Cazzol: My question is on the cost inflation outlook for 2026. I was just wondering if you can give us a bit of a summary of what you expect both on the input costs, any tariff-related cost inflation, wage inflation, and how you expect to mitigate that. Thank you. Michael Deveau: Thanks, Fulvio. For 2026, we do expect some modest input cost inflation for our divisions. This really includes raw material and costs, which includes the impact of tariffs, plus logistics, energy, and packaging costs. More broadly, as a very high-level macro statement, we are seeing inflation across all those key elements. The team today is collaborating with customers to mitigate this. And in the end, we will recover it through reformulation, productivity, and pricing over time as we go forward. And so when we think about our guidance for 2026, taking a step back, our 1% to 4% is really all driven by volume. We do expect pricing to be slightly down, which is primarily related to the commodity portion of our Fragrance Ingredients, which I mentioned earlier on a different question, and some residual carryover pricing impact in Food Ingredients specifically. But the team is really focused on making sure as we think about our business going forward, we are working with customers so that where there are inflationary pressures, we do offset that from a direct cost perspective. More generally, there is a general increase in terms of overall working costs—so merit increases, inflation. Now we have done a very good job at looking to productivity to make sure that we are fully offsetting that as part of our plan. So that is embedded in our gross productivity plan to make that a net number more favorable as we progress through the year. Operator: Thank you, Fulvio. Our next question will go to the line of Laurence Alexander with Jefferies. Laurence, your line is open. Michael Deveau: Good morning. Just want to circle back to the Laurence Alexander: the outlook, the lower end of the outlook Fulvio Cazzol: range, Laurence Alexander: what are you assuming for destocking risk this year compared to the last couple of years? And then I guess related to that, it looks as if the range is not yet seeing much benefit from the shift in mix and innovation capabilities and sales force reinvigoration. Do you think you should see the bottom end of the range start materially improving? Jon Erik Fyrwald: Thanks for the question, Laurence. Of course, the 1% to 4% Michael Deveau: does include Food Ingredients. Jon Erik Fyrwald: And while we expect Food Ingredients to return to positive growth on top line this year, Michael Deveau: it will be modest. And as Michael mentioned, it is still a tough Jon Erik Fyrwald: macroeconomic environment, especially in the first half with difficult comparisons. But we expect the second half to be better as our innovation further kicks in and builds to 2027. And hopefully, market dynamics improve. What I would say is we cannot predict geopolitics and market dynamics at the end of the year. So any potential destocking at a reasonable level to the end of the year is built into our guidance, and we expect to achieve somewhere in the range of 1% to 4%. Of course, we are driving for as best as we can, but that is the range that we are confident we can deliver. Operator: Thank you, Laurence. Our next question will go to the line of Salvator Tiano with Bank of America. Salvator, your line is open. Jon Erik Fyrwald: Thank you very much. Laurence Alexander: You know, Fulvio Cazzol: you mentioned a lot of things about, you know, essentially Harris Fine: product inflation being offset by productivity and etcetera. And generally mitigating a lot of the headwinds that you may face, say, on the cost side, I am just wondering, though, when we look at 2025 on your incremental margin, you have 2% organic growth and 7% like-for-like EBITDA growth. This year, the guidance is calling for quite high organic growth, and the range is not—you know, the midpoint of EBITDA growth is much lower, say 5% to 6%. So based on all this, what is actually driving lower incremental margins this year versus 2025? Laurence Alexander: Sal, great question. Erik, I will take this one. Michael Deveau: Yeah. This is, again, real specific on just the incremental margins. As we think about the guidance range, take a step back. I always think that the quality of this business is that as you grow your business, you do have nice leverage within the P&L. And so when I think about falling from sales to EBITDA, it is usually around two times. So if I grow 4, I can get 8 in terms of leverage within my P&L. Obviously, the higher we grow—we start moving towards the 4, 3, 4, or 5 range over time—that is when we will see the best leverage within the P&L overall. When you are at the lower end of that, then it becomes a game of how do we actually continue to drive productivity to making sure we are supplementing some of the lack of what I would say is volume fixed cost absorption overall. And so as we think about the range for next year, the 1% to 4%, obviously, if we are at the lower end of that range, really we need to think about stepping up the productivity even more so, making sure we get that leverage to fit within the portfolio, and we do have opportunities to do that. Then as we get to the higher end of the range, then I think we have a little bit more flexibility. What is built into the guidance range, very candidly, are two things. One, it is a bit of reinvestment we are funding through productivity overall, which normally some of that productivity could help support and drive bottom line. But we are being conscious, and we are being smart about how we want to continue to reinvest in the business as we make the migration towards 2026 and then into 2027. So that is a little bit of what I would say is the offset when you think about the flow-through from the incremental margin piece. It is really the volume growth that is critical. Productivity is driving and supporting depending on if you are at the lower end of the range or at the upper end of the range. And then the third point is really around how do we take a step back and make sure the reinvestment is balanced to how our performance is overall. So those are the three levers that we are managing. Harris Fine: For 2025. Michael Deveau: And then the one thing I would just add to that is that one of the reasons for our Jon Erik Fyrwald: heavy focus on innovation is that as that innovation pipeline comes through, we do expect margin benefits from that. So that is a really important part of it as well. Michael Deveau: Thank you, Salvator. Operator: Our next question comes to the line of Lauren Rae Lieberman with Barclays. Lauren, your line is open. Lauren Rae Lieberman: Great. Thanks. Hi, everyone. Thanks so much. I wanted to talk a little bit about reformulation opportunities in particular and just what you are seeing in the marketplace in terms of customer demand specifically around reformulation to be more ingredient-profile, health and wellness concerns, etcetera. And then also, how equipped your portfolio is today to meet those demands should they be there, and then how much that is also fitting into your innovation and R&D plan. Thanks. Michael Deveau: Thanks for the question, Lauren. First of all, we are seeing continued Jon Erik Fyrwald: reformulation happening, but it has not picked up as much as some people have talked about—the importance of ultra-processed foods and some of the dynamics that you are hearing about. But as it does, or if it does, I think that is all positive upside to what we have been talking about. Because every time Josh Spector: customers reformulate, Jon Erik Fyrwald: whether it is for lower sugar, lower salt, lower fat, cleaner label, Michael Bender: whatever it is, Jon Erik Fyrwald: that is the opportunity for International Flavors & Fragrances Inc. So we welcome that and hope to see it increase from here. But as of now, it is out there. It is happening. We are working with customers to create healthier products, great-tasting products, more sustainable products. I think you will see some really sustainable products coming out with some of the CPG companies we have been working with—outside of food, but also in food. So I think there is still a dynamic everywhere of wanting more innovation to bring consumers what they want, whether it is great-tasting food or laundry products that clean the clothes really well with room temperature water and less water and less plastic and many of the dynamics that you hear about out there Michael Bender: that Michael Deveau: consumers Jon Erik Fyrwald: desire, and CPG companies are trying to drive innovation to meet those desires to profitably grow their business. We are there to help. Harris Fine: Thank you, Lauren. Operator: Our next question will go to the line of Michael Sison with Wells Fargo. Michael Deveau: Mike, your line is open. Josh Spector: Hey. Good morning, guys. I guess with the sale of Food Ingredients pending, how do you pivot the company to more of a growth mode? Historically, International Flavors & Fragrances Inc. has slightly underperformed to F&F peers, but if you think about the portfolio going forward, Health and Biosciences and Scent and Taste, how do you get that growth rate to match the peer group or maybe even outperform the peer group? Jon Erik Fyrwald: Thanks for the question, Mike. Harris Fine: Very excited about the future of International Flavors & Fragrances Inc. Jon Erik Fyrwald: I think as we finalize our portfolio optimization and focus all of our efforts on Scent, Taste, and Health and Biosciences—very R&D heavy, very Harris Fine: innovation Michael Deveau: heavy. Michael Bender: Really attractive businesses. Jon Erik Fyrwald: That have a major impact on consumer goods whether it is food or others—home and personal care, etcetera—and represent a small part of the cost but a big part of the superiority. And so as we focus all of our energy on that and have finished the work on portfolio optimization, I think we will go from strong to stronger. Michael Deveau: And I am absolutely convinced that Jon Erik Fyrwald: we have got the right team in place, that they are strengthening our capabilities. You can see it in our performance. We are doing what we say we are doing. We see the commercial pipelines increasing. We see the innovation pipelines increasing. We see the quality of the projects with our customers improving. And that is why we are very confident in the future. And also, the other element here that is really exciting is we have got a very healthy Health and Biosciences business with really strong capabilities in biotechnology. That is important for all the segments that we play in Health and Biosciences. It is also starting to impact beneficially technology in our Scent business and our Taste business. So I will just give you a couple of quick examples. In 2025, we launched EnviroCAPS. It is a biodegradable encapsulation technology for our Scent business. It is commercial now. Several very big customers have been using it and say that it is working extremely well, and they are very pleased with it, and that is growing. We have other Scent technologies that are using biotechnology that are now in the pipeline and are coming. We have a number of Taste products that we have developed with our biotechnology capabilities. And more in the pipeline. I will give you one example of one that is commercialized now. It is called Super Carrot, where you take the residue of carrot production and you ferment it with our enzymes, and you create an umami flavor that is healthy and replaces umami flavorings with something that food companies and consumers really like. And so we will see more of that. So I just fundamentally believe as we get to be a focused, high-value, R&D, innovation-driven company with a stable portfolio that we are investing in, you will see us accelerate our growth. Operator: Thank you, Mike. Our next question will go to the line of Jeffrey John Zekauskas with JPMorgan. Jeff, your line is open. Jon Erik Fyrwald: Thanks very much. Your Food Ingredients Michael Bender: EBITDA and operating income Jon Erik Fyrwald: dropped off pretty sharply in the fourth quarter. And I think you said that the price trends are negative. So Michael Bender: given a slow volume growth environment, is it the case that operating income and EBITDA for that business next year is Jon Erik Fyrwald: higher or lower? And can you speak generally to the tax basis of that asset? Michael Deveau: So I will start, and then Michael can add Jon Erik Fyrwald: the tax basis. The fourth quarter was not a great quarter for our Food Ingredients business. They did not deliver what they expected to deliver. There are a number of reasons for that. All I can say is the first quarter looks like it is off to a solid start. Andy and his team, Andy Muller and his team, are highly confident that they can get back to top-line growth—although it will be low single digit, it will be top-line growth—and continue significant earnings growth. They have got the projects to do that. There is a lot of excitement with some launches that they have made recently and some exciting areas. So what I would say there is that the fourth quarter was not what we expected, was not what they expected. But the full year was still very solid with, although it was negative revenue growth, double-digit EBITDA growth. And we expect to get back to positive revenue growth and continued strong EBITDA growth in 2026. Operator: Thank you, Jeff. Our last question will go to the line of Chris Parkin—oh, go ahead. Laurence Alexander: Sorry, Megan. Michael Deveau: Just, I think, Jeff, you had a question on the tax base if we had a potential deal for Food Ingredients. And we are still, obviously, working through that process. So we have got to kind of see where we are landing, where we are heading from that perspective. Fortunately, we are in a good position with respect to tax attributes that could be leveraged to minimize some of the tax leakage that we have now. And so the team is fully focused on making sure the net cash number maximizes its value for shareholders. And so that is what the team is focused on overall. But more to come as we progress from here. Operator: Thank you. Our last question will go to the line of Christopher S. Parkinson with Wolfe Research. Chris, your line is open. Michael Bender: Great. Thank you so much. Just circling back as a corollary to a couple Josh Spector: questions on the H&B segment. You clearly had solid results across volumes in the Biosciences segment as well as a better margin. When we take a step back and look at some of the Health and probiotics, I think you are alluding to it before. Last year, we were talking a lot about, obviously, market share, investments in the business that were necessary overall for the intermediate to long term. Is it safe to say that you are still investing in that business? And then you already mentioned the half-on-half trends, which I appreciate. But can you just talk about how much we should think about spending in that business in the context of the productivity gains you are gaining? And then also, if you still believe you are going to gain share in the second half of 2026, 2027, 2028. So any updates there in terms of moving parts would be particularly helpful. Thank you. Jon Erik Fyrwald: Sure. Thanks for the question, Chris. First of all, overall, Health and Biosciences business is doing very well. Leticia Goncalves has been in the job almost a year now, and she and the team have a great team with a great strategy and are executing it well. Health is the only area that has not delivered strong growth in 2025. Interestingly, outside of North America, growth was solid. It was inside North America where the challenges were. There are a number of reasons for it. But what I can tell you is Leticia has brought in new leadership. The team is strong. We believe in the business. We have got great capability. We have got a very attractive pipeline coming that I believe, with the capability that we now have, will start to deliver growth again in 2027. But I firmly believe in this business. I just think it is a really important thing for the world, and we have got the capability to succeed. We took our eye off the ball for a while in North America. We have got our eye back on the ball, and you will see the results come. Like everywhere where we have seen challenges, we get the right leadership in place, the right teamwork, the right support, and we get it on the right track, and that is going to happen in Health as well. Michael Deveau: Thank you, Chris. Operator: That will conclude our question and answer session. I will now turn it back over to you, Erik, for closing remarks. Jon Erik Fyrwald: Well, thank you all for joining today's call. We are working hard to unleash the great potential of this company. As we have talked a lot about, we have done a lot of portfolio optimization following the Frutarom and the DuPont Nutrition and Biosciences deal. We are getting closer to exactly where we want to be. I think we will make really good progress on that in 2026. And then we will still deliver strong results in 2026, I believe, firmly. But we will be very, very well set up for 2027 and beyond as we move through this finalization of the portfolio optimization and really drive the innovation aggressively across Scent, Taste, and Health and Biosciences. We have got a terrific team. We have got a clear direction, and we are going to make it happen. Thank you. Operator: That concludes today's call. Thank you for your participation, and enjoy the rest of your day.
Operator: Good morning, and welcome to the NetSol Technologies, Inc. Second Quarter and Six Months Ended December 31, 2025 Earnings Conference Call. On the call today are Founder and Chief Executive Officer of NetSol Technologies, Inc., Najeeb Ghauri, Co-Founder and President, Naeem Ghauri, Chief Financial Officer, Sadar Abubakar, and Senior Vice President, Legal and Corporate Affairs, General Counsel, and Corporate Secretary, Patti McGlasson. I will now hand the call over to Patti, who will provide the necessary disclaimers regarding forward-looking statements made during today's call. Patti, please go ahead. Good morning, everyone, and thank you for joining us today. After we review the company's business highlights and financial results for the second quarter and six months ending December 31, 2025, we will open the call for questions. Before we begin, I would like to remind you that our remarks today may include forward-looking statements within the meaning of the federal securities laws, including the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect management's current expectations and are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied. We encourage you to review the cautionary statements and risk factors contained in NetSol Technologies, Inc.’s press release issued earlier today, as well as in our filings with the Securities and Exchange Commission, including our most recent Form 10-Ks and quarterly reports on Form 10-Q. I would also like to note that today's discussion will include certain non-GAAP financial measures. A reconciliation of these measures to their most direct comparable GAAP figures can be found in the press release issued earlier today. Lastly, please remember that this call is being recorded and will be available for replay on our website at netsoltech.com and through a link included in today's press release. At this time, all participants are in listen-only mode. Following their prepared remarks, we will open the call for a Q&A session. I will now hand the call over to our Founder and CEO, Najeeb Ghauri. Najeeb? Najeeb Ghauri: Thank you, Patti. Good morning, everyone, and thank you for joining NetSol Technologies, Inc.’s call to review our results for the second quarter and six months ended December 31, 2025. We delivered a strong 2026. Total net revenues increased 21% year over year to $18,500,000, driven by higher services revenues and growth in our recurring subscription and support revenues. Services revenue grew 41% primarily from new implementations from major customers. As these implementations move through go-live and expansion phases, we believe they can support recurring subscription and support revenues over time. I am pleased with a strong balance sheet. Our current ratio of 2.3 reflects strong liquidity, giving us substantial flexibility for growth initiatives. I would like to highlight the strategic progress we made during the quarter across product innovation, customer momentum, and leadership. Firstly, on product and innovation, we launched our loan origination platform, our Check, our AI-enabled credit decisioning engine. Check is designed to modernize Operator: credit Najeeb Ghauri: underwriting by combining deep reasoning, intelligent automation, and agentic workflows to support faster, smarter, and more consistent credit decisions. It is an important extension of our Transcend platform and reflects our focus on building high-margin products that expand long-term revenue opportunities. Second, on customer momentum. We strengthened a key relationship with a $50,000,000 four-year contract extension with a tier-one global auto captive and longstanding partner. This extension reinforces customer trust, provides meaningful revenue visibility, and validates the scalability of our platform. In addition, Transcend Retail continued to gain traction in the U.S. market, with new dealer groups and franchised dealerships signing on during the quarter. Demand for digital automotive retail solutions remains strong, and these wins support our strategy to expand recurring revenue while increasing our footprint in a high-potential growth market. Finally, we continue to strengthen our leadership team to support our next phase of growth. During the quarter, we appointed Sadar Abubakar as Chief Financial Officer, with Roger Almond transitioning to serve as Chief Accounting Officer. Together they bring deep financial expertise and will help maintain strong governance, discipline, and transparency as we continue to scale globally. Overall, these milestones reflect solid execution across innovation, customer expansion, and leadership. We remain focused on sustainable growth, deepening customer partnerships, and advancing our position as a trusted technology partner helping OEMs, dealerships, and financial institutions sell, finance, lease, Operator: and manage Najeeb Ghauri: assets end to end. Looking ahead, our pipeline, multiyear contracts, and recurring revenue base provide visibility into near and long-term performance. We remain focused on disciplined execution and continued progress on growth and profitability. I will now turn the call over to our President, Naeem Ghauri, who will share an update on NetSol Technologies, Inc.’s journey and latest developments with AI and how we are leveraging this transformative technology in both our products and across our operations. Operator: Naeem, Najeeb. Naeem Ghauri: And good morning, everyone. I would like to share a brief update on our AI strategy and progress. Over the past year, our focus has been to embed AI into the Transcend platform and our internal operations horizontally, not as a stand-alone feature, but as workflow capabilities that drive measurable outcomes for our customers. We have built a shared AI layer with reusable components and governance built in, so we can deploy AI consistently across products while maintaining reliability, auditability, and human oversight. Our teams work closely with customers to integrate AI into real-world workloads, so we can adapt general models into domain-specific capabilities tied to ROI and operational Operator: impact. Naeem Ghauri: AI at NetSol Technologies, Inc. is now integrated into our product development lifecycle, supported by dedicated teams, shared tooling, and an integrated roadmap that helps us scale AI in a repeatable way, with evaluation and monitoring designed in from the start. A good example, as Najeeb mentioned, Operator: is Check. Naeem Ghauri: Our AI-enabled credit decisioning capability within our loan origination product. It combines reasoning, automation, and agentic workflows to help underwriting teams move faster with greater precision while keeping humans in the loop. In parallel, we are applying AI internally, horizontally, to streamline delivery and improve productivity. We are also exploring value-based pricing approaches for select AI-enabled capabilities. Overall, we believe this strengthens differentiation, supports operating leverage, and positions us to scale AI value responsibly across our business. With that, I will turn the call over to our CFO, Sadar Abubakar, to review the financial results. Abu? Thanks. Thank you, Naeem, and good morning, everyone. I will begin with our financial results for 2026, followed by results for the six months ended December 31, 2025. For 2026, total net revenues increased 21.1% to $18,800,000 compared with $15,500,000 in the prior-year period, driven primarily by higher services revenues and higher subscription and support revenues. On a constant currency basis, total net revenues were also $18,800,000. Subscription and support revenues increased approximately 5.1% to $9,100,000 compared with $8,600,000 in the prior-year period. On a constant currency basis, subscription and support revenues were $9,200,000. Service revenues increased 40.9% to $9,600,000 compared with $6,800,000 in the prior-year period. Total service revenues on a constant currency basis were $9,600,000. Gross profit was $9,000,000, or 48% of net revenues. On a constant currency basis, gross profit was $9,000,000, or 47.8% of net revenues. Cost of sales was $9,800,000, or 52% of net revenues, compared with $8,600,000, or 55.5% of net revenues in 2025. On a constant currency basis, cost of sales was $9,800,000, or 52.2% of net revenues. The increase primarily reflected increased salaries and travel costs, even though the margin has improved. Income from operations was $1,300,000 compared with a loss from operations of $500,000 in 2025. On a constant currency basis, income from operations was $1,300,000. Operator: Dollars. Foreign currency movements contributed a gain Sadar Abubakar: of $50,000 in the quarter, compared with a $700,000 loss for the prior-year period. Moving to non-GAAP, EBITDA for the quarter was $1,700,000 compared with a loss of $800,000 in 2025. Eric Wagner: Overall, the quarter reflected strong top-line growth driven by implementation activity, along with continued subscription and support performance. We also delivered meaningful profitability improvement versus the prior year, supported by gross margin expansion and improved operating leverage. Turning now to the six months ended December 31, 2025, total net revenues were $33,800,000 compared with $30,100,000 in the prior-year period. On a constant currency basis, total net revenues were $33,500,000. Recurring subscription and support revenues increased 7.2% to $18,000,000 compared with $16,800,000 in the prior-year period. On a constant currency basis, recurring subscription and support revenues were $17,900,000. Service revenues increased 17.9% to $15,600,000 compared with $13,200,000 in the prior-year period. On a constant currency basis, services revenues were $15,500,000. Gross profit was $14,900,000, or 44.2% of net revenues, compared with $13,500,000, or 44.8% of net revenues in the prior-year period. On a constant currency basis, gross profit was $14,600,000, or 43.5% of net revenues. Cost of sales was $18,900,000, or 55.8% of net revenues, compared with $16,700,000, or 55.3% of net revenues in the prior-year period. On a constant currency basis, cost of sales was $18,900,000, or 56.5% of net revenues. GAAP net loss attributable to NetSol Technologies, Inc. for the six months totaled $2,100,000, or $0.18 per diluted share, compared with a GAAP net loss of $1,100,000, or $0.09 per diluted share in the prior-year period. On a constant currency basis, GAAP net loss attributable to NetSol Technologies, Inc. was $2,500,000, or $0.21 per diluted share. Non-GAAP EBITDA for the six months ended December 31, 2025, was a loss of $100,000 compared with a non-GAAP EBITDA loss of $500,000 for the prior-year period. Turning to the balance sheet, cash and cash equivalents were $18,100,000 at December 31, 2025, compared with $17,400,000 at June 30, 2025. Working capital was $26,400,000 compared with $26,600,000, and NetSol Technologies, Inc. stockholders' equity was $35,900,000, or $3.04 per share. For 2026, we delivered continued revenue growth across both recurring and services businesses while maintaining a solid balance sheet and liquidity position. I will now hand over the call back to Najeeb. Najeeb Ghauri: Thank you, Abubakar. Looking ahead, we remain confident in our ability to capitalize on opportunities across our markets. We will continue investing in our product portfolio, including AI-enabled capabilities across the Transcend platform, while expanding our global footprint and enhancing our solutions to meet evolving client needs. Our focus on long-term customer relationships, supported by a strong pipeline of recurring and services engagements, positions us well for continued progress. With that context, we have increased our full-year fiscal 2026 revenue growth guidance to nearly $73,000,000 or better, supported by our current pipeline and continued investment in go-to-market initiatives and our unified AI-enabled Transcend platform. While macroeconomic and currency dynamics remain a consideration, our diversified business model, execution discipline, and resilient customer base provide a solid foundation for the remainder of the fiscal year. Overall, our first-half performance reinforces our view that NetSol Technologies, Inc. is well positioned to achieve our full-year objectives and continue creating value for our customers and shareholders. With that, operator, please open the line for question and answer. Thank you. We will now be conducting a question and answer Operator: session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Todd Felte with Stonex Group. Please proceed with your question. Najeeb Ghauri: Hey, congratulations on a great quarter. I think the $18,800,000 may be an all-time record for quarterly revenues, so Todd Felte: that is great to see. I wanted to ask about your margins. You had some recent hires and some travel expenses. But as those new hires get up to speed, do you expect continued margin improvement, and where do you think your margins will stabilize? Najeeb Ghauri: Thank you, Todd. Absolutely. We are anticipating improving margins in the coming quarters and the next fiscal year. As you said rightly, we are continuously investing in our growth strategy. It means travel, new employees, building new platforms, and so forth. So I think the gross margin will improve, absolutely. And I think I can have your name, and Naeem will jump in to add further. Yeah. I will just add a little bit more color. So, essentially, the new hirings are primarily in the AI teams at heart, and we see that continuing for a period. We are also incurring some expense on cross training. What we have is a very aggressive plan to cross train our existing workforce. Eric Wagner: Across horizontally in every department from HR to Najeeb Ghauri: software engineering and testing, accounting, and admin. So, literally, we are touching every single business segment. So, internally, we are very, very confident that within the next six months, we will have a major transformation, phase one, completed. We will go on to more advanced training as we go forward in the rest of the calendar year. That will help? Operator: Yep. Yeah. If I could just add that Todd Felte: yeah. While I have you, I was also wanting to ask about the noncontrolling interest and how that is computed. I know that took a big chunk out of our earnings per share this quarter. Najeeb Ghauri: You want to answer about just talking about the Pakistan subsidiary, right? Minorities Todd Felte: just yeah. Najeeb Ghauri: Yeah. Yeah. Sure. So if I could, Todd, just go back to your previous question Eric Wagner: first, and then we will come back to this one, just to add some color. So to take on what Najeeb and Naeem said, we will continue to invest in the right areas that will propel our future growth. But margin improvement, both at a gross and at a net level, is going to be important for our profitability story and our journey going forward. You probably will see just very quickly that our GP percentage of revenues this quarter versus the preceding quarter was up 48% as compared to 44.5%. Cost of sales was down. Similarly, this quarter is 55.5% compared to the equivalent quarter of 52%. And then EBITDA, which is an important metric, of course, clocked at about a 9% margin compared to a loss in the equivalent quarter last period. I think what gives me confidence, Todd, in addition to that, is that our liquidity position is solid. The current ratio, but also our debt to equity, gives us an opportunity to continue to invest in exciting growth markets. And I think we are at the intersection of both software, financial services, and mobility. Now, coming to your second question on minority interest, noncontrolling. If I understood that question, you were saying how is that computed? That is correct. Just mention that again. Yeah. Yeah. Yeah. Just how is it computed? I know that there was a nice Todd Felte: profit for the Pakistani subsidiary. I saw you took a $715,000 loss on that noncontrolling interest. Eric Wagner: Yeah. We follow the standard definitions applied in GAAP for noncontrolling interest. So the Pakistani subsidiary is owned majority, but there is a 30% minority interest, and we follow the standard definitions as per calculation for GAAP. Roger, if you want to add to that, you can feel free to add if I have missed anything. Todd Felte: No. I think you have that correct. So, Todd, if you look at our Pakistani entity there, we own Roger Almond: almost 70%. Thirty percent is held by noncontrolling interests. So as they have, you know, recorded a very nice profit for the quarter, or for the six months, then 30% of their profit would then get allocated to the noncontrolling interest piece. Based on the consolidation, all of their revenues would be included up in our revenues and costs into our costs, etc. And then the noncontrolling interest is then calculated down at one number in the bottom. So that is, and we follow the GAAP process as Abu had mentioned. Todd Felte: Okay. That is helpful. So, basically, the better that the subsidiary does, it will add to your revenues, but if it is really profitable, you know, a third of that will have to be written off in the noncontrolling interest Roger Almond: Correct. Eric Wagner: So, Todd, yes. So as a subsidiary and not an affiliate, we will consolidate all revenues and costs, but from the profit share, you are right. Any earnings are split on a 70/30 basis between the parent and minority interests. Todd Felte: Okay. That is helpful. And then finally, to allude to your comments about the strong financial position the company is in. As a shareholder, we see the stock still, you know, trading just barely above book value. Have you thought about allocating some of that $18,000,000 in cash, you know, a small amount to either a stock buyback or maybe a small dividend? Roger Almond: I think, Todd, thank you for—go ahead. Go ahead. Sorry. Najeeb Ghauri: Todd, thank you for asking the question. We did that a couple of years ago, and we are always open to the same approach. But as soon as we can decide within the board, we will get back to you accordingly. Roger Almond: Yeah. I mean, we would definitely like to see some of the ops. Operator: Yeah. Najeeb Ghauri: But, Todd, I want to thank you especially for taking time to visit us a few months ago. It shows your commitment and belief in our company. So thank you very much for your long-term view. Todd Felte: Yeah. It was great to visit you, and I will jump back in the queue. Thank you so much. Najeeb Ghauri: Thanks, Todd. Operator: As a reminder, if you would like to ask a question, press 1 on your telephone keypad. One moment, please, while we re-poll for any additional questions. We have no further questions at this time. Mr. Ghauri, I would like to turn the floor back over to you for closing comments. Najeeb Ghauri: Thank you for joining today’s call. Sorry. Todd, do you want to come back? Yeah. Todd wanted to come back. He is going back in the queue. Is he in the queue, Alberto? Operator: Todd, if you want to hit star one again. Najeeb Ghauri: No. I think it is okay. It is fine. Okay. Yep. Operator: Well, thank you for us back today. No. I am sorry. He did jump back in. Najeeb Ghauri: Let me get—okay. Todd, your line is live. Todd Felte: Okay. I am good with that. Again, congratulations on a great quarter, and I look forward to future success. Najeeb Ghauri: And do come back again to Encino, California, Todd. Thank you for joining us today and for your ongoing interest in NetSol Technologies, Inc. We look forward to updating you on our continued progress in the coming quarters. Have a nice day. Roger Almond: Ladies and gentlemen, this does conclude today’s Operator: teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day. Najeeb Ghauri: Thank you, operator.
Operator: Good morning, and welcome to the Fourth Quarter and Fiscal Year 2025 Pilgrim's Pride Corporation Earnings Conference Call and Webcast. All participants will be in listen-only mode. Please note that the slides referenced during today's call are available for download from the Investors section of the company's website at www.pilgrims.com. After today's presentation, there will be an opportunity to ask questions. I would now like to turn the conference call over to Andrew Rojeski, Head of Strategy, Investor Relations and Sustainability for Pilgrim's Pride Corporation. Good morning and thank you for joining us today as we review our operating financial results for the fourth quarter and fiscal year ended 12/28/2025. Yesterday afternoon, we issued a press release providing an overview of our financial performance for the quarter and the year including a reconciliation of any non-GAAP measures we may discuss. A copy of the release is available on our website at ir.pilgrims.com along with slides for reference. These items have also been filed as Form 8-Ks and are available online at sec.gov. Fabio Sandri, President and Chief Executive Officer, and Matthew R. Galvanoni, Chief Financial Officer, present on today's call. Before we begin our prepared remarks, I would like to remind everyone of our Safe Harbor disclaimer. Today's call may contain certain forward-looking statements that represent our outlook and current expectations as of the day of this release. Other additional factors not anticipated by management may cause actual results to differ materially from those projected in these forward-looking statements. Further information concerning these factors has been provided in yesterday's press release, our Form 10-Ks and our regular filings with the SEC. I would now like to turn the call over to Fabio Sandri. Thank you, Andrew. Good morning, everyone, and thank you for joining us today. Fabio Sandri: So for the fiscal year 2025, we established new financial milestones, as net revenues reached $18,500,000,000 and adjusted EBITDA rose to $2,300,000,000. Our adjusted EBITDA margin was 12.3%. In the U.S., consistent execution of our strategies, along with strong chicken demand, bolstered our demand. Demand from our key customers grew significantly over the category average for the year. Our brand building accelerated as the combined retail sales of Just BARE across fresh and prepared reached $1,000,000,000, further diversifying our portfolio and resonating with consumers. Operational excellence efforts improved efficiencies in processing and live operations in Big Bird, mitigating commodity cutout volatility throughout the year. Given these efforts, the U.S. grew both in top line and bottom line. Europe completed several projects to enhance the efficiency of its manufacturing footprint, consolidated back-office support and optimized mix and innovation. Key customer partnerships strengthened as sales and volume both increased compared to last year. Our portfolio of key brands continued to grow, further diversifying our portfolio. Based on these efforts, margins and overall adjusted EBITDA continued to improve. Mexico grew sales through increased sales volumes of branded offerings across fresh and prepared, and growth with key customers despite commodity pricing volatility. Equally important, we initiated a series of investments in both fresh and prepared to drive profitable growth while reducing the volatility of our business. For 2025, we reported net revenues of BRL4.5 billion. We have adjusted EBITDA of BRL450 million and our adjusted EBITDA margin was 9.2%. Our Q4 results reflect the robust nature of our strategies to drive strong margins during changing market conditions. In the U.S., Fresh increased market share through continued focus on quality, service and innovation. Our fresh business improved efficiencies both in plant and live operations. Prepared foods continued to drive category-leading growth across retail and foodservice, further diversifying our portfolio. Investments to grow our presence in key customers, increase capacity value-added and enhance operational efficiency continue to progress as planned. In Europe, we increased overall adjusted EBITDA compared to the same quarter prior year. Our fresh operations drove the majority of the gains through improved productivity and enhanced mix. Key customer demand was stable, while our portfolio of key brands continued to grow. Mexico faced difficult circumstances given increased imports of animal-based proteins and unbalanced fundamentals in the live market. Our diversified efforts continue to gain traction as branded fresh and prepared offerings both rose compared to last year. Turning to supply, the USDA indicated that ready-to-cook production for the U.S. rose 2.1% year over year in 2025, driven by increased headcount, improved live performance and higher average live weights. Eggs were higher than 2024, giving a more productive layer flock and record hatchery utilization. Hatchability improved sequentially in Q4, with seasonality and a younger flock, but is still below the five-year average. Chick placements were higher throughout the entire quarter compared to last year. After peaking in Q3, live weights declined and ended the fourth quarter consistent with prior year levels. Looking forward, USDA reports a 1.9% year over year decline in the layer flock in January 2026, alongside the 3.1% drop in pullet placements compared to 2024. Given these factors, along with other considerations, the most recent USDA estimates suggest moderate production growth of 1% in 2026 compared to last year. As for overall protein availability, USDA projects growth of 1.5% in 2026, with challenges in the beef production partially compensated by higher beef imports. From a demand standpoint, consumer sentiment remains low given continued economic uncertainty. Inflation for food at home and away from home continues to impact consumers' available income. Nonetheless, chicken's affordability was exceptionally appealing across channels and categories. In retail, consumers continue to stretch their budgets through more frequent trips with smaller basket sizes. Within the channel, the meat department continues to lead performance as it remains a key priority for consumers. Chicken experienced volume growth across all cuts versus prior quarter. Boneless skinless breast prices decreased 1% compared to last quarter, while prices of other proteins rose, especially ground beef that is setting new all-time highs. As a matter of fact, when compared to two years ago, prices of boneless at retail were reduced by 1.7% while prices of ground beef have increased 22%. As a result, record pricing spreads emerged further strengthening demand for chicken. Similar to boneless breast, dark meat from boneless thighs also continued to experience significant growth. Deli increased slightly versus last year as velocity more than offset changes in mix distribution and pricing. Consumers also look for convenience, and in the frozen chicken category, we saw significant growth with continued strength in velocity. In foodservice, rising costs associated with dining out continued to pressure overall restaurant traffic, particularly in the full-service formats. However, growth in QSRs and non-commercial channels compensated for these declines, supported by operators' continued strategic focus on chicken through value offerings, limited time promotions and menu innovation. Chicken-centric QSRs are leveraging the protein's affordability to drive traffic and engagement, outperforming the broader dining sector. Within foodservice, boneless dark meat volumes are growing at double-digit rates across all segments. Wings are gaining momentum and tenders continue to deliver steady consistent growth. In exports, industry volumes accelerated during Q4. Within Pilgrim's demand was primarily driven from Southeast Asia and Mexico. Pricing remained high relative to historical levels and continues to be elevated in 2026. While trade disruptions have impacted certain markets given the HPAI outbreak, the overall effect has been relatively muted on both pricing and volumes as most U.S. trading partners quickly limit restrictions to either the county or specific zones. As a result, trade simply shifts from other locations outside the impacted area during the restriction period. Moving forward, we expect exports to remain strong and well diversified across markets. Turning to feed inputs, corn moved marginally higher in Q4 compared to previous quarter. However, prices moderated in January as the U.S. corn realized new records in harvest area, yield and total supply. While record demand currently exists, corn ending stocks are still expected to increase to 2,200,000,000, creating the highest stock-to-use ratio since 2019. Soybeans and soybean meal rallied in Q4 given the resumption of U.S. soybean sales to China, strong domestic interest and export demand for soybean meal. Potential upside appears limited given favorable weather in South America for soybean production and a relatively slow pace of U.S. soybean exports. Since shipments are below average, the USDA anticipates ending stocks will rise by 3,000,000 bushels, up 7% versus prior year. Global soybean stocks and processing capacity are also expected to increase, generating ample supplies of meal. Global wheat stocks continue to be well supplied and production increased by 41 metric tons versus prior year. Every major producer experienced above-average crops, reducing the risk of physical disruption in shipments. Additional tailwind may emerge from increased wheat acreage planted in the UK. Fabio Sandri: Within the U.S., our diversified fresh portfolio increased volume compared to the same period last year as consumers continue to seek affordability offerings for their meal occasions across retail and foodservice. Our higher attribute differentiated offerings in case-ready accelerated its marketplace presence. Volumes to key customers increased nearly two times the category. Sales and profitability rose compared to last year from sustained growth. Small bird also realized similar success, as volumes to QSR remain robust despite its low market for bone-in chicken and whole birds. Given continued market shift to boneless cuts, extensive key customer partnerships and growth aspirations, we will evaluate and adjust our portfolio to match demand accordingly. In Big Bird, commodity cutout values fell nearly 20% compared to last year. Nonetheless, the business was able to improve its efficiencies in live operations and in production. Equally important, we further leveraged our position as the leading supplier of NAE meat to support our robust growth of value-added offerings. To that end, Big Bird will continue to increase supplies to our internal prepared foods, reducing volatility and enhancing margins for our portfolio. During the quarter and the beginning of 2026, our team also undertook a variety of projects to strengthen our key customer partnerships and enhance operational excellence, including investments within Big Bird to increase our portioning capacity and differentiated cuts. Through these efforts, our team managed through planned downtime and adjusted production across locations accordingly to ensure sufficient availability, maintain quality and uphold service levels. Prepared foods sales grew 18% compared to the same period last year, given branded growth across retail and foodservice. Just BARE momentum continues to accelerate market share in retail; it rose nearly 300 basis points compared to the same period last year. Equally important, it has the highest velocity of any brand within frozen chicken. Further growth opportunities exist through increased distribution. Our innovation and approach to both flavors under the Pilgrim's brand also continues to receive accolades, as People’s Food Awards recognized our Cheesy Jalapeño Nugget line as a category winner. In foodservice, we continue to build our presence, giving continued growth with national accounts and schools. Investment in the new prepared facility in Georgia to meet demand for our fully cooked offerings remains on schedule. Turning to Europe, consumer sentiment continues to be relatively subdued. Nonetheless, we improved our profitability and maintained stable demand compared to the same period last year, given consistent execution of our strategies. Within retail, chill meals and fresh offerings were among the fastest growing categories. As such, our chicken business drove profitable growth, led by our differentiated Pro 3 offerings at select customers. Our added value business remains steady. Bareo’s pork experienced challenges from excess supply and animal health issues emerging in Spain, triggering export restrictions in the EU. Despite these challenges, our team maintained volume and increased profitability compared to last year. Our diversification efforts through key brands continue to progress, as overall sales and volumes rose compared to last year. Operator: UK. Fabio Sandri: Fridge increased share yet again given the effectiveness of recent changes to pricing and packaging. The momentum for the Rollover continues to accelerate from additional distribution with new customers. The Richmond brand was challenged by low-cost private label offerings, but recent investments in promotional and innovation activity have been beneficial in resuming our growth trajectory. We continue to develop our innovation pipeline in close collaboration with our key customers. To that end, we have created a variety of new platforms in chill meals, focused on diet health and ethnic offerings. To date, market acceptance has been promising given incremental distribution awards and consumer interest. In foodservice, visits fell at QSRs given concern regarding affordability. As a result, our volumes were impacted, especially during the late half of Q4. To reverse this trend, several of our QSR customers reignited promotional activity during 2026. In Mexico, challenging market circumstances arose in Q4 given increased imports of animal-based protein. As a result, the short-term supply of meat and poultry in Mexico increased to levels not previously experienced. These conditions were further amplified by weakened market fundamentals in the live commodity market, as improved growing conditions increased supply. Nonetheless, we continue to drive our strategies, growing volume in retail, QSR and foodservice channels compared to last year. We also increased volumes by double digit in our fresh branded portfolio versus 2024. Just BARE continues to be extremely well received as sales have grown more than two times compared to last year. Similarly, prepared sales volumes increased by 8% versus last year, led by key customers in foodservice and QSR. Based on these efforts, we continue to diversify our portfolio and reduce the volatility for our business. Despite these short-term challenges, we continue to have growth ambitions in Mexico given its long-term growth potential, status as a net importer of animal protein and effectiveness of our strategies. Our growth plans will further mitigate the volatility of our portfolio resulting in a higher, more resilient earnings profile. We have already begun implementation of our plans. In fresh, our efforts to build domestic supply, create national distribution capabilities and diversify our geographical presence remain on schedule, with growth in the South Region in Veracruz and in the Peninsula Region in Mérida. In prepared, we are doubling our capacity of fully cooked products through the expansion of our facility in Porvenir. We anticipate our increased capacity coming online during the second quarter, further enabling growth for the second half of the year. Our growth intentions in Mexico are not isolated, and overall prospects for chicken remain strong globally given relative affordability, emerging trends and consumer preferences and healthy attributes. As such, our growth investments previously announced in the U.S. can further capitalize on these trends, reinforce our strategies and strengthen our competitive advantage. Given this environment, our portfolio will also continue to evolve. To support key customer growth in fresh, we are converting one of our commodity Big Bird plants to a case-ready plant. We expect this conversion to become operational during 2026. To support the expansion of prepared foods, we will install equipment upgrades and modify our plant layouts in Big Bird, leveraging our internal supply of differentiated NAE portion raw materials. Regardless of these investments, we fully expect to remain consistent in our quality and service levels, given our extensive network of facilities and overall supply chain capabilities. More importantly, we will have fortified our key customer partnerships and improved operational efficiencies, which will reduce volatility, enhance margins and drive profitable growth. In sustainability, our journey continues. We have made significant headway in the reduction of our carbon-based direct and indirect emission intensity used for processing compared to last year. External agencies continue to recognize progress in environmental and social matters as our scores improved compared to last year. Improvements in team member development continue to be exceptionally well received as over 2,300 team members or their dependents have signed up for our Better Futures program, of which 780 have begun their selected academic pathway. With that, I would like to ask our CFO, Matthew R. Galvanoni, to discuss our financial results. Thank you, Fabio. Good morning, everyone. Matthew R. Galvanoni: For 2025, net revenues were $4,520,000,000 versus $4,370,000,000 a year ago, with adjusted EBITDA of $415,100,000 and a margin of 9.2% compared to $525,700,000 and a 12% margin in Q4 last year. For fiscal year 2025, net revenues were $18,500,000,000 versus $17,900,000,000 in fiscal 2024, growth of 3.5%, while increasing adjusted EBITDA by 2.5% from $2,210,000,000 in fiscal 2024 to $2,270,000,000 this year—back-to-back years with adjusted EBITDA margins greater than 12%. Adjusted EBITDA in the U.S. Q4 came in at $174,200,000 with adjusted EBITDA margins at 10.6%. Our U.S. business continued its momentum in the quarter in fresh retail and with QSR key customers, driving above-category growth in these categories. Big Bird achieved further operational improvements; however, we faced year-over-year commodity market pricing headwinds negatively impacting profitability. Our prepared foods business continued its momentum of branded product sales growth with both retail and foodservice customers, driving year-over-year profitability improvement in the quarter. For the fiscal year, U.S. net revenues were $11,000,000,000 versus $10,600,000,000 in fiscal 2024, with adjusted EBITDA of $1,630,000,000 and a 14.8% margin compared to $1,560,000,000 and a 14.7% margin last year. The U.S. business maintained its margin profile through increasing sales volumes and delivering operational efficiency. In Europe, adjusted EBITDA in Q4 was $131,400,000 versus $117,100,000 in 2024, a 12.2% increase. For the full year, Europe's adjusted EBITDA improved 11.4% to $453,100,000 in 2025, from $406,900,000 in 2024. Europe drove improved profitability with growth in poultry sales and through the impacts of the series of operating efficiencies implemented over the last few years. Our European business’s streamlined organizational structure and focus on innovative offerings has positioned it to partner more efficiently with our key customers in the region. We recognized approximately $31,000,000 of restructuring charges during the year, down from $93,000,000 in 2024. While we continue to pursue efficiency measures, we anticipate the majority of these programs are behind us. Mexico made $9,500,000 in adjusted EBITDA in Q4, compared to $36,900,000 last year. When considering the full year, Mexico made $186,700,000 in adjusted EBITDA or an 8.8% margin, falling short of last year's 11.8% margin. Mexico experienced lower market pricing in the fourth quarter driven by higher availability of imported animal-based protein. Although we did record $77,000,000 in litigation-related settlement charges, our GAAP SG&A expenses in the fourth quarter were lower than last year, primarily due to a decrease in legal settlement expenses and cost efficiencies realized in Europe. For the full year, SG&A expenses were flat to last year, with slightly lower legal settlement costs being offset by higher brand marketing investment. Net interest expense for the year was $110,000,000. Currently, we forecast our 2026 net interest expense to be between $115,000,000 and $125,000,000. Our full year 2025 effective tax rate was 27.9%. We recorded a discrete tax item in the fourth quarter related to a catch-up for U.S. state unitary taxes, which will not reoccur next year. As such, for 2026, we anticipate our effective tax rate to approximate 25%. We have a strong balance sheet and will continue to emphasize cash flows from operating activities, management of working capital and disciplined investment in high-return projects. As of the end of the year, our net debt totaled approximately $2,450,000,000 with a leverage ratio of less than 1.1 times our last twelve months adjusted EBITDA. Our liquidity position remains very strong. At the end of the fiscal year, we had over $1,800,000,000 in total cash and available credit. We have no short-term immediate cash requirements with our bonds maturing between 2031 and 2034 and our U.S. credit facilities not expiring until 2028. We finished the year spending $711,000,000 of CapEx. Included in our 2025 capital spending were the growth projects in Mexico, the Big Bird plant conversion to support a key retail customer, early progress in our new prepared foods facility in Walker County, Georgia to support our Just BARE brand growth plan and other projects that Fabio previously mentioned. The Big Bird plant conversion and the Mexican projects are on track to be completed by April. Currently, we forecast 2026 CapEx spending to be between $900,000,000 and $950,000,000 as we progress through these and the other projects to support prepared foods growth previously noted by Fabio. As mentioned in the past, our sustaining capital spend approximates $400,000,000 per year. We will continue to follow our disciplined approach to capital allocations as we look to profitably grow the company. We will continue to align investment priorities with our overall strategies: portfolio diversification, focus on key customers, operational excellence and commitment to team member health and safety. Operator, this concludes our prepared remarks. Please open the call for questions. Operator: We will now open for questions. In the interest of allowing equal access, your first question today comes from Benjamin M. Theurer with Barclays. Please go ahead. Benjamin M. Theurer: Yes, good morning and thanks for taking my question, Fabio and Matt. Two quick ones. So number one, maybe just on the current growing conditions and you have laid it out in your prepared remarks. What are the cutout levels and pricing compared to historic levels and particularly versus the last two years? So as we look into the first quarter and with hatchability coming down, how much of that would you say is related to just the genetic issue coming back up? Or is it more of the weather-related, just given the cold weather we had over the last couple of weeks, even in areas where chickens are grown? So just about the market dynamics right now and how we should think about the supply side for Q1. Yes. Thank you, Ben. Good morning. Fabio Sandri: Yes, when I look at the supply—and we always start with the breeding flock—and when you see the size of the breeding flock, we are with a total number that is down 1.9% year over year. So we have fewer breeders. But I think in terms of age, they are younger, which will generate more eggs and help on the hatchability. But nonetheless, it is a smaller number. Given that input and some other factors like the weather and the seasonality, I think USDA is projecting the growth of supply in chicken for the Q1 at only 1.2%. In total for the year, there will be only 1%. I think the hatchability issue is part of this breed that we have, and there are a lot of questions about breed. And I think the important thing for us is that we look at the overall profitability of the bird, not only one trait or another. So when we look at the profitability of the bird, we look at, of course, hatchability, but we look at conversions and we look at yields. And as of today, this bird, despite having hatchability that is below the five-year or below previous years, still has the better yield and the better performance in terms of feed conversion than other birds. So I do not expect any significant changes in the breed. Of course, there are always new breeds coming online, but it takes time for the new breeds to roll out. Okay, perfect. And then my second question just around capital allocation. Obviously CapEx—you have mentioned the $900,000,000 to $950,000,000—that is a good $200,000,000 increase versus last year and kind of brings us to the $0.5 billion investment for the year versus sustaining. So as you kind of laid the land in terms of these projects, the Big Bird conversion, things in Mexico, prepared foods, what else is in the pipeline? I know you have made some announcements in Mexico a couple of weeks ago. So just help us understand framing that CapEx for now and also how much of that CapEx carries then potentially into 2027 as you roll out more projects, just to think about the path of CapEx beyond 2026? Fabio Sandri: Oh, great point. And I think we are always looking for the trends in the market and how we can support our key customers, and we can improve our portfolio. So in that regard, we are always looking to grow our prepared foods, and I think we mentioned how outstanding we have results, especially because of the Just BARE brand. So we are building that new facility in Georgia, and that will take investments that started last year; it is going to take 2026 and will roll out to 2027. In Mexico, as we mentioned, we are also diversifying our geography. We are growing in regions where we are not in. Typically, in Mexico, we are in the Northern Region and in the Central Region. We were not present in the South Region and in the Peninsula, and we are increasing our investments in those two regions. And that is smaller and it is every year as we want to grow steady in those regions. So we will have some investments in 2027. On the conversion to increase our support to a key customer, it is going to be all done during this year. And the changes on the internal supply of meat from our Big Bird to our prepared foods will be all done this year. I think the only thing that we can have for 2027, as we mentioned, we are seeing this trend of change of bone-in small birds to more boneless—I think we all discussed about the sandwich wars many quarters ago, I have been discussing that—and we are seeing that trend. We may convert one small bird plant to a more deboning plant rather than a bone-in plant. Operator: Okay. Perfect. Thanks, Fabio. And your next question comes from Peter Thomas Galbo with Bank of America. Please go ahead. Matthew R. Galvanoni: Hey, Fabio. Good morning. And Matt, thanks for taking the question. Fabio, maybe just to pick up on Ben's question on the—I guess, the rally we have seen to start January in commodity prices. Just trying to think about the—and I know it is a hard crystal ball—but the sustainability of that given some of it is the tailwinds to category and other competing proteins being lower versus kind of the storm impact and maybe that is having an upward pressure on prices. Just how do you think about maybe the sustainability of some of the price move we have seen into what is going to be historically and even seasonally a stronger period. Fabio Sandri: Yes. Thank you, Peter, and good morning. We are seeing several trends supporting the demand for chicken. Starting with overall, we are seeing these macroeconomic indicators that show that the consumers have been watching their spending closely and have growing concerns about the inflation. So as the inflation in food away from home is outpacing the food at home, consumers are looking for ways to save and they are moving to retail. So when we go to the retail, we see that they have more frequent trips and lower baskets. And chicken demand has increased overall because, as we mentioned on the prepared remarks, compared to last quarter, prices in retail for boneless breast have gone down 1%, while we see all the other competing protein prices going up. I think that created, as we mentioned, the highest spread on record. If you look at the prices of chicken compared to the prices of beef, we have a spread of close to $2 per pound. And that is increasing the demand for chicken in retail. When you go to the foodservice, despite this lower food traffic, I think the foodservice operators are trying to attract consumers with promotional activity. I just mentioned the sandwich wars, and we are seeing the menu penetration of chicken going up in the foodservice. So we saw also a growth in the foodservice in the range of 2% to 3%. So I do not think that we are going to see a change in those big trends during 2026. And as I mentioned in terms of supply, USDA, because of the size of the breeding flock and the state where we are in terms of hatchability and the high utilization on the hatcheries, we are seeing the supply growing only 1%. So I think that the trends are very positive, especially for the grilling season. Operator: Great. Peter Thomas Galbo: Okay. Thanks for that. And Matt, maybe just a couple of cleanups. If you could help us, I think you gave the interest, tax and CapEx, but maybe anything on D&A for the year and then how you are just thinking about the SG&A levels, which continue to be pretty impressive—how we might think about that for '26. Thanks very much, guys. Matthew R. Galvanoni: Yes, no problem, Peter. Yes, good morning. So from a D&A perspective—depreciation and amortization—we are looking to track to about $520,000,000 for the year for 2026. 2025 was about $460,000,000. And then SG&A, what I would tell you is kind of think about it, sort of $140,000,000 a quarter. I think that will help get you guys pretty close, maybe just a little north of that for the full year using that $140,000,000 a quarter. Peter Thomas Galbo: Awesome. Thanks, guys. Operator: And your next question today comes from Andrew Strelzik with BMO Capital Markets. Please go ahead. Matthew R. Galvanoni: Hi, good morning. This is Ben covering for Andrew. So I will start with Mexico. Just if you could dig a little deeper on what happened there during the quarter, and then we are wondering maybe what happens moving forward in 2026. Is the supply-demand situation cleaned up there or should we expect some lingering pressure? Just trying to understand the potential cadence there. Thanks. Matt Galvanoni: Yeah. Sure. Good morning. And as we have been— Fabio Sandri: Saying, Mexico can be very volatile quarter over quarter. But on the year, we have always seen growth and very positive results there. In Q4, I think we had a series of events. Q4 typically is a good quarter for Mexico, but during this quarter, we saw some shifts in the exports market, and Mexico was the most attractive market for especially breast meat from Brazil and other locations. And we saw a significant increase in the exports to Mexico on the breast meat. We also saw a significant increase in pork exports to Mexico, which increased a lot the supply of meat. That impacted more the North Region. At the same time, in the Central Region, that includes Mexico City, we saw the growing conditions very favorable for chicken. And after a strong first semester, we saw the supply of chicken increasing in that region. So we had the two regions affected by different aspects. So we saw this increase in supply in the center impact the live market prices. And because of that, we saw the weaker Q4 than anticipated. That is why we are creating the portfolio there, creating—and we are talking about growing to different regions. So growing in the South Region, in Veracruz, and growing in the Peninsula because these areas are more insulated from the North and from the Central microdynamics. On the lingering effects, I think we are seeing now the market more into the normal seasonal patterns. We are seeing a slowdown in the growing conditions in the center. And we always mention that there are small players. When the profitability is very high in that region, they come to the market, and when the profitability starts going down, they exit that market, and we are seeing that. So we are seeing a more stable supply and demand. And in the North, as well, we are seeing that all the freezers are completely full in the North Region. So I do not think that there will be any more increase in the exports to that region. So we see the volatility in Mexico and that is why we are evolving to be a more resilient earnings— Matthew R. Galvanoni: Got it. Thank you for that color. That is very helpful. And then my last question will be about the EU, UK business. Matthew R. Galvanoni: Very strong performance during the fourth quarter there. Matthew R. Galvanoni: Over well over 6% operating margin. Matthew R. Galvanoni: Was that—how much of that was seasonally driven, I guess, is the first part of the question. And then you pointed out in the 10-K, in particular, strength in domestic demand for fresh products. So if you could kind of tie that into the volume strength and profitability strength in the EU and UK and just thinking about starting 2026—I mean, if it was not seasonally driven in the fourth quarter, would we expect 6% plus margin to sustain there? So that is my last question. Thanks. Fabio Sandri: Yeah. Thank you. Yeah, there is always seasonality in the UK, especially in the pork operation. But what we are seeing in Europe—and it is no different than other places of the earth—is the strength of the chicken business. So we are seeing the affordability, the availability and also our strategies, and we are resonating with the key customers and consumers with the differentiated offerings. So we are seeing a strengthening in the chicken business in the region. But I think there is seasonality in Q4. It is typically stronger in Europe than other quarters. I think we will see significant improvements quarter over quarter within this seasonality. So I think we will have a better quarter in Q1 than we had the same year ago in Q1. Although we are seeing some weakness in QSR that started during Q4 because of, again, the prices of especially beef, our business in the region on the QSRs was a little bit impacted on the traffic. But we are seeing some promotional activity on those QSRs. We expect an improvement during this Q1. Matthew R. Galvanoni: Thank you. Operator: And your next question comes from Pooran Sharma with Stephens. Please go ahead. Hey, this is Adam on for Pooran. Thanks very much for the question. Fabio Sandri: So obviously— Matthew R. Galvanoni: The beef environment continues to be a tailwind for chicken. In our eyes, there are two big moving pieces there. One, Mexican cattle imports and two, the pace of heifer retention. Just wanted to get your opinion on how those two factors on the two extremes—slow versus aggressive heifer retention and the resumption or lack of cattle imports—could impact chicken demand and therefore broiler margins? Thanks. Fabio Sandri: Yeah. I think when we look at the retail—and I mentioned that we saw the spreads at the highest number ever—and I think this is something that has been growing over time. And I think 2025 and 2026 have been exacerbated by the effects that you just mentioned on the price of the live animals here in the U.S. and some capacity reductions in the beef industry. I think it is very difficult to look at the sensitivity on how much that delta needs to be to trigger trade-downs, but I think what we are seeing is that the consumer is really impacted in the inflation, especially on the food away from home. And we are seeing all this demand for chicken in retail. And I think it is the same in the foodservice, as I mentioned. It is a matter of availability because when you look at the USDA for 2026 for the production of beef going down, it would depend a lot more on the imports and what type of cuts will come from these imports from South America and other regions. So we do not expect the prices of beef to reduce significantly during 2026, as you mentioned, because of the retention that has started. So I think that could be something that we will see in 2027. But I think overall, we are seeing a very strong demand for chicken both in retail and foodservice. Pooran Sharma: Thank you. That is helpful. And my follow-up, I was wondering—I think you touched on it briefly in your prepared remarks—but if you could just give a brief state of the union of the disease pressure you are seeing like in Spain. I know we have seen somewhere between a hundred to a hundred and fifty positive cases of ASF in Spain. But anything else you can add there would be great. Fabio Sandri: Yeah, of course. Our European business has been impacted before because of that. I think what we are seeing is the ASF in Spain. Spain is one of the largest producers in the world of pork. And because of the ASF, they have been banned from exporting to China. Because those exports do not go to China, they end up in the European region, typically in the UK. And that is generating a lot of supply, especially in the sausage business. And that is creating some impact in our business because our Richmond brand—it is a well-established brand in the UK—when it is competing with this external meat and all this private-label sausage, it ends up impacting prices. And that is why we mentioned that the Richmond brand was facing some challenges during Q4, but we expect some promotional activity, and the resilience of that brand is amazing. We have been growing year over year. We expect that impact to reduce. Now how long that is going to continue in Spain, and how that is going to impact long term the UK, I do not think that is something that we can foresee. But I do not believe that it is going to be a long-term impact as we are seeing the herd being reduced throughout Europe. Pooran Sharma: Okay, great. Thank you very much. Operator: And your next question comes from Leah Jordan with Goldman Sachs. Please go ahead. Matt Galvanoni: Thank you. Good morning. Wanted to go back to your comments about foodservice in the U.S. You talked about the consumer shifting to retail, which is a headwind for the channel, but you continue to grow nicely. So if you could provide more detail on the demand you are seeing there. Any nuance between QSR versus others? And how much can new business wins continue to offset any broader industry slowdown there? Or how do you think about lapping the strength that you have had over the past year in innovation and LTOs? Fabio Sandri: Yeah. Thank you, Leah. When—again, like I mentioned—the foodservice traffic is a challenge and has been challenged over the last year, and the foodservice operators are looking for promotional activity to drive traffic. When you drill down into the segments, what we are seeing is a slowdown in the full-service restaurants compensated by increases in the non-commercial, especially hospitality, schools, and growth in the national accounts. When you look at the promotional activity, even the non-chicken QSRs are doing a lot of promotions with chicken. And we saw the increase in the overall industry close to 3%. So we do not expect that to change during 2026 for the factors that we already mentioned on the availability of lean beef on the burgers, and the availability of other proteins and the affordability and versatility of chicken. Leah Jordan: Okay, great. Thank you. And then just for my second question, just wanted to ask about Just BARE a little bit more. You have shown some nice acceleration across prepared foods overall, but Just BARE has been really strong for you with the share gains that it has had. I know we are still waiting on that new plant to open. But how do you think about growth for that brand over the coming year, considering distribution and velocity? And then ultimately, longer term, do you think about continuing to increase brand awareness or household penetration there? Fabio Sandri: Thank you. It is a great point. And I think the brand awareness is still not at the levels of national expansion that we expected, but we are seeing that Just BARE is the number one in terms of velocity where we are. I think that is very important for the retailers. As we are discussing with our key customers on the distribution side, if you have Just BARE in your shelves, you can see that the shelf is turning faster than with any other segment. I think it is innovation which is going to play for us to continue to grow. I think we have a very strong core. Products we can innovate and stretch that brand to some other, different—being chopped and formed—because it is a whole muscle today, but there are a lot of opportunities in chopped and formed. And the Just BARE brand promise is exactly what the consumer is looking for today, which is a clean label, no additions of antibiotics or any other items that the consumer is looking at today at the labels and comparing. And that is why that is resonating so well with the consumer. So it is gains in distribution, because we are still not very national. We went from 1% to 13% market share in a matter of five years, but still have a lot of distribution to gain. And the velocity will continue because of how that brand and the brand promise is resonating with our consumers. Leah Jordan: Great. Thank you. Operator: And your next question comes from Thomas Henry with Heather Lynn Jones Research. Please go ahead. Matt Galvanoni: Good morning, guys. Thank you for taking the question. On Europe, could you elaborate on any trends besides the seasonality driving that strong volume performance? And any expectations of these continuing into '26? Thank you. Fabio Sandri: Yeah, I think it is a normal seasonality. We see the end of the year, a lot of promotional activity in terms of hams and bacon and other cuts. But as a long-term trend, what we are seeing throughout the year is the growth of chicken. That is more important than the seasonality. I think the consumer is facing the same challenges in Europe that they are facing in the United States on the inflation. And when you look at the breakdown of the growth in total grocery, grocery is growing 4%, but chicken is growing 8% to 10%. So there is the seasonal effects, and we saw some growth in the fresh pork, close to 5% this quarter. But the long-term trend is more growth in the chicken side. And of course, with the innovations that we are doing, the partnership that we are doing in Europe on the meals, are also creating some new lines that are generating great results. The meals are a very affordable way for a family to have their needs. So I think it is something that we are investing together with key customers on differentiating, creating better experiences for our end consumer and differentiating in terms of the ethnicity for the consumers. Operator: And your next question comes from Guilherme Palhares with Santander. Please go ahead. Matt Galvanoni: Good morning, everyone. Thank you for taking my questions. Just two quick ones. First is, where do you see today the capacity of grandparents of shipping in the U.S.? And the second one, if you could talk a bit about the new trade permit of the EU towards the Brazilian chicken, and whether this could have any impact on the business there? Fabio Sandri: Thank you. Yes, thank you. On the grandparents, the information we have is the USDA information. When we talk about the size of the breeding flock, it includes the grandparents. And when we look at the number, it is down 1.9%. And that includes the processors and includes the grandparents. So I do not see any—or we do not have any—information about significant increase in the grandparents’ size. On the impact of the Mercosur agreement, or the UK-Europe and Brazil, what we are seeing is the normal continuation of a long-term export from Brazil, which is one of the largest chicken exporters, to Europe. I think Brazil typically exports breast meat, and that breast meat goes to the foodservice. When you look at the UK consumer, they give great value to the provenance, and our chicken business and our pork business in Europe are mainly on the retail side because we are local producers. Because the standards of producing in the UK, both chicken and pork, are higher than everywhere else in the world, the consumer pays a premium and they have this important trait of provenance. So when we look at the impacts of these agreements, more on the foodservice area, we have a strong foodservice there that can benefit from cheaper raw material—being from Thailand, being from Poland or being from Brazil. I think it is a good tailwind for our foodservice production in the UK. But it does not have a big impact on the retail side. Thank you, Fabio. Operator: And your next question comes from Priya Joy Ohri-Gupta with Barclays. Please go ahead. Hi, good morning. Thank you for taking the question. Leah Jordan: Matt, for the last two years, the operating cash flow before looking at changes in working capital has been pretty consistent around $1,600,000,000 or so. Is there any reason that we should think about '26 looking different from that? And then secondly, just as we think about the working capital piece, what are some of the trends that we should keep in mind as to whether that will be a positive or negative to the cash from operations? Thanks. Matthew R. Galvanoni: Thanks, Priya. Good talking to you. Generally, I do not see a major change relative to your first question. Of course, we are increasing our CapEx spend intentions here for 2026 versus 2025 by, call it, almost $200,000,000. So that, of course, will come into play. But relative to working capital, I think when you look back to 2024, we had a lot of tailwinds for us with the large grain cost decrease in 2024 versus 2023. Of course, things flattened out more in 2025. We really saw there in the inventory side more purposeful increases in finished goods because we were able to procure some cheaper breast meat at opportune times, which increased some of our inventory levels. AR—some of that headwind was really more just higher sales pricing. So overall, I would say I do not see the repeat on the negative side on the inventory that we saw in 2025. Of course, we will have to watch and see what grain does, but kind of where grain sits today, we feel it should be more flattish. And then we will just watch and monitor AR. Hopefully, that helps. Priya Joy Ohri-Gupta: Yes, that is really helpful. And then just one follow-up on the CapEx piece. There is a headline just talking about $1,300,000,000 in investments in Mexico through 2030. So as we think going forward—and I know you gave us a little bit of context into '27—but how should we think about that $1,300,000,000 specifically related to Mexico over '26 to '30, if you could give us some directional sense? Fabio Sandri: Yeah. Thank you. I think that is a long-term vision that we have, just like I mentioned, to grow in regions where we are not and grow our prepared foods. So that includes significant growth in the South Region and in the Mérida region, as well as the duplication of our prepared foods facilities. And in that investment is included also some investments done by growers to support that growth. So it is not totally from us, but it is because of our projects, and that will help close the gap in Mexico. Mexico is a big importer of meat, and we believe that with our growth in Mexico, we can reduce the need of the imports by 35%, which helps a lot in the food security for the region. Priya Joy Ohri-Gupta: That is helpful. Thank you. Operator: This concludes the question and answer session. I would like to turn the conference back over to Fabio Sandri for any closing remarks. Fabio Sandri: Yes. Thank you, everyone, for attending today's call. Throughout 2025, we accelerated our performance through a leadership mindset, living our values and driving our methods. Given our teamwork, we delivered yet another strong year. 2026 started with several weather events that impacted many regions where we operate, and I would like to thank our team members and extend my deepest appreciation for their efforts every day and their dedication to our company and our community. Moving forward, we must continue to drive our efforts with an unwavering focus on team member safety and well-being, product quality and sustainability. When combined with our strategy and approach, we can achieve our vision to be the best and most respected company in our industry, creating an opportunity for a better future for our team members and their families. Equally important, we initiated the next chapter in our growth journey through investments across all regions. Based on these efforts, we can further drive profitable growth, reduce volatility and enhance margins throughout our entire portfolio. To that end, I look forward to strengthening our legacy in 2026 and beyond. Thank you all. Operator: The conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day and welcome to the TriNet Group, Inc. Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Please note, this event is being recorded. Now I would like to turn the conference over to Alex Bauer, Head of Investor Relations. Please go ahead. Thank you, Operator. Good morning. My name is Alex Bauer, TriNet Group, Inc.'s Head of Investor Relations. Alex Bauer: Thank you for joining us, and welcome to TriNet Group, Inc.'s fourth quarter conference call and webcast. I am joined today by our President and CEO, Michael Quinn Simonds, and our CFO, Kelly Lee Tuminelli. Before we begin, I would like to preview this morning's call. First, I will pass the call to Michael for his comments regarding our fourth quarter and full year performance. Kelly will then review our Q4 and full year financial performance in greater detail and conclude with our 2026 financial guidance and outlook. Please note that today's discussion will include our 2026 full year financial outlook. Our midterm outlook, and other statements that are not historical in nature, are predictive in nature, or depend upon or refer to future events or conditions, such as our expectations, estimates, predictions, strategies, beliefs, or other statements that might be considered forward-looking. These forward-looking statements are based on management's current expectations and assumptions and are inherently subject to risks, uncertainties, and changes in circumstances that are difficult to predict and that may cause actual results to differ materially from statements being made today or in the future. Except as may be required by law, we do not undertake to update any of these statements in light of new information or future events. We encourage you to review our most recent public filings with the SEC, including our 10-Ks and 10-Q filings, for a more detailed discussion of the risks, uncertainties, and changes in circumstances that may affect our future results or the market price of our stock. In addition, our discussion today will include non-GAAP financial measures, including our forward-looking guidance for adjusted EBITDA margin and adjusted net income per diluted share. For reconciliations of our non-GAAP financial measures to our GAAP financial results, please see our earnings release, 10-Q filings, or 10-K filings, which are available on our website or through the SEC website. With that, I will turn the call over to Michael. Michael? Michael Quinn Simonds: Thank you, Alex, and thank you all for joining us this morning. 2025 was a challenging year across the SMB landscape, marked by elevated medical cost inflation and muted hiring activity. Against that backdrop, I am proud of how the TriNet Group, Inc. team stayed focused on our clients and executed with discipline against our strategy. As a result of that execution, we delivered solid financial performance. We finished the year at the top end of our earnings guidance and generated 16% growth in free cash flow. We significantly improved the quality of our pricing processes, successfully completing a comprehensive health fee renewal across our customer base, strengthening our risk position heading into 2026. And we made meaningful progress against our most important initiatives: improving client service, strengthening our go-to-market execution, and driving greater operational discipline. We are making progress on what we control, repositioning TriNet Group, Inc. for durable, long-term growth, and staying focused on our clients, and in an environment like this—health care inflation at levels not seen in more than two decades, and the slowest hiring market since 2020—our clients need us more than ever. The ASO and PEO model typically delivers a mid to high teens ROI to SMBs, by leveraging our scale and technology to lower HR and benefits expense. However, beyond cost, we help our clients manage risk while acting as a trusted adviser in a time of change, something an increasingly big number of our clients are dealing with today. For example, we worked with one technology client—a sector dealing with significant disruption—to help restructure their 160-person organization. We helped them reduce costs by more than 20%, flatten the management structure, prioritize critical skills, and implement a compensation framework aligned with their long-term objectives. This is the positive impact TriNet Group, Inc. can have on an SMB. And while we cannot control external headwinds, we are gaining momentum, adding new capabilities designed to bring in more clients and serve them longer. Michael Quinn Simonds: The growth-focused investments we made in 2025 are beginning to take hold. Sales were up nicely in January, and we expect momentum to continue through 2026. Our broker channel is a long-term build but off to a strong start. We entered 2026 with four national partners and expect to add more over time. We have improved our quoting, service, technology, and incentive alignment with our key partners. Health brokers contributed disproportionately to both our January sales growth and to our pipeline for the coming months. Second, we invested meaningfully in our sales organization in 2025 with a focus on maturing and retaining senior sales talent. We are coming into 2026 with double-digit growth in tenured reps—those with greater than four years of experience. One senior rep is more productive than four first-year reps, and as a group, they are critical for effective collaboration with successful brokers in each local market. To build a sustainable rep pipeline, we launched the Ascend program in 2025, bringing recent graduates into an immersive trainee experience in Atlanta. We are pleased with the results and excited about the first cohort entering the market aligned with the fall selling season. These new reps combined with the growth in tenured reps will result in nearly a 20% expansion in selling capacity later this year. Looking even further out, last week, we announced the expansion of Ascend to six regional hubs. This program is helping us attract motivated talent, embed our culture early, and build long-term sales capacity. We are also seeing how this influx of AI-native talent is accelerating adoption of AI across our sales processes. While it does not happen overnight, we are excited about the sustainable way our salesforce is being built. Third, we are simplifying our PEO health plan offering through benefit bundles. We are increasingly presenting prospects with streamlined geographic and risk-adjusted bundles. Early feedback has been positive, and we expect momentum to build as the year progresses. Finally, ASO is now a core growth driver in 2026. After discontinuing our SaaS-only HRIS platform at the start of 2025, conversion rates to ASO exceeded expectations. We ended the year with more than 39,000 ASO users at an average of approximately $50, roughly three times our SaaS-only offering, and stronger-than-expected new sales. Having a successful ASO offering in our portfolio gives our reps and brokers more opportunities to grow their businesses when PEO may not be a fit. Michael Quinn Simonds: Of course, another major lever for client growth is driving improved retention. For us to return to our targeted insurance cost ratio in the current medical cost inflationary environment required a significant repricing effort. For 2025, our ICR was 90.8%, slightly better than the midpoint of our guidance with year-over-year improvement in the fourth quarter. We addressed a cohort that had been significantly underpriced in 2023 and early 2024. And while the repricing resulted in an increase to client attrition, I am pleased to report that January renewals represented the final major true-up for this cohort. Remaining clients have now cycled through two renewals and are trending toward expected ICR levels in 2026. Looking ahead, barring a significant uptick in health care trend beyond already elevated levels, health fee pricing pressure will moderate. To give you some sense for this, in looking at our April 1 renewals, the percentage of clients receiving health fee increases above 30% declined by more than half versus January 1 renewals. This is a significant move closer to a normalized distribution. With these catch-up renewals behind us, retention will increasingly be driven by strong capabilities and service quality, and here we are making great progress. In 2025, TriNet Group, Inc. achieved an all-time high net promoter score. While encouraged by this progress, our ambition is higher. In the coming weeks, we will launch TriNet Assistant, an AI-powered HR tool that enables customers to receive accurate, immediate answers across a broad range of HR topics. Built on more than thirty years of curated expertise, this represents a meaningful advancement, importantly, in how we deliver value. The assistant will be expanding and improving rapidly post launch. The foundational work has been laid with the right security and compliance layers in place. Over the coming quarters, we believe TriNet Assistant will become an indispensable tool for customers. Beyond AI, we are enhancing the client experience through strategic integrations. We plan to announce new capabilities in international employment, contractor management, IT provisioning and security, and leave of absence, significantly expanding the value provided via the TriNet platform. Michael Quinn Simonds: In summary, we have built real momentum with our people, partnerships, and our platform investments. It is important to note that we are making these investments while remaining disciplined on expenses. We are exiting 2025 with expenses down 7% year over year, and expect further improvement in 2026. We laid out our medium-term strategy a year ago with a base case that called for modest improvement in the macro environment over time. We have not seen any improvement to date, resulting in pressure to our revenue expectations even as we have progressed to plan on margin improvement. Our guidance for 2026, based on our own data and benchmarked externally, does not assume any improvement on health care cost trend or hiring. Instead, we will stay focused on getting better, doing the things we can control: go-to-market execution, improved value to clients, disciplined pricing, and prudent expense management. We have made difficult decisions in response to a challenging macro environment—choices that are making us a stronger, more disciplined, more client-focused company. A company that will generate good outcomes in 2026 with building momentum. And with that, I would like to ask our new Chief Financial Officer, Kelly Lee Tuminelli, to share more details on the quarter and the outlook for 2026. Kelly is a little over two months on the job and has already made a positive impact while coming rapidly up to speed. Welcome, Kelly. Thank you, Michael. Kelly Lee Tuminelli: Our fourth quarter and full year financial performance reflected the difficult macro business environment we faced throughout 2025. Over the last two years, the U.S. economy has experienced high medical cost inflation and low job growth, and TriNet Group, Inc. could not escape the impact of these factors. Entering 2025, we committed to reprice our health fees so pricing reflected the current cost environment and TriNet Group, Inc. would return to its long-term targeted insurance cost ratio range. We took these pricing actions to address a cohort that had been significantly underpriced. Although we were measured in our health fee repricing, spreading it over multiple cycles, it still required trend-plus increases to our customers, and the impact on new sales and retention was considerable. In the face of this challenging backdrop, TriNet Group, Inc. stayed focused and disciplined in execution and delivered bottom-line financial results at the top end of our full year guidance along with strong cash flow growth on a year-over-year basis. As we look ahead to 2026, we expect the challenging SMB macro business environment to persist, new sales growth throughout 2026, and retention to improve as the year progresses. To lay out my comments, I am going to first recap Q4 and 2025, provide the rationale for our 2026 guidance, and conclude with initial thoughts on TriNet Group, Inc. two and a half months in. With that, let us dive into our 2025 financial performance and 2026 outlook in greater detail. Kelly Lee Tuminelli: Total revenues declined 2% year over year in the fourth quarter, and for the full year, total revenues declined 1% in line with our full year guidance. Total revenues in the year benefited from insurance and professional service revenue pricing. Those gains were offset by declining WSE volumes. We finished the year with approximately 320,000 total WSEs, down 10% year over year. As a reminder, total WSEs include platform users, or those users who are accessing our platform, as well as co-employed WSEs, or those users receiving the full benefit of our PEO services. We ended the year with 294,000 co-employed WSEs, down 11%. Retention dropped to roughly 80%, down five points year over year, with pricing cited most often as the reason for leaving TriNet Group, Inc. Our final outsized repricing for renewals was delivered on January 1. As we exit January, we expect our retention to improve. Regarding customer hiring, in the fourth quarter, CIE growth was in line with our forecast, and for 2025, we finished with a CIE rate in the low single digits, well below our historical average for the second consecutive year. Across our verticals, and specifically within our technology, professional services, and main street verticals, we once again saw weakness in CIE. In this macro environment, SMBs remain reluctant to grow their teams. Interestingly, in our book, gross layoffs have also declined. Hiring just has not returned. Kelly Lee Tuminelli: Professional services revenue in the fourth quarter declined 7%. For the year, professional services revenue declined 6%, landing above the midpoint of our guidance range. Professional services revenue performance for the full year was driven by a mix of factors, including, first, the impact of declining co-employed WSEs, partially offset by pricing that was in line with our expectations in the low single digits. Second, very strong growth in our ASO business, which is an exciting opportunity for TriNet Group, Inc. Third, the discontinuation of HRIS that offset our ASO growth, resulting in a net $7 million headwind. This was better than our projections, as conversion rates from HRIS to ASO were higher than expected, and more HRIS users stayed on the platform longer. Finally, we discontinued a technology fee which represented a $22 million headwind. Interest revenue in the fourth quarter was $14 million, down $1 million, a decline of 7% versus prior year, reflecting recent interest rate cuts. For the full year, interest revenue was $67 million, up 5% year over year, benefiting from the unexpected timing and size of certain tax refunds, coupled with higher-than-forecast interest rates. Kelly Lee Tuminelli: Turning to insurance, insurance services revenues declined 1% in the fourth quarter. Insurance services revenue for 2025 was flat when compared with 2024. For the year, insurance services revenue per average co-employed WSE grew 9% as we passed through average health fee increases of over 9%. Insurance costs in the fourth quarter declined by 2% year over year, impacted mostly by lower volumes. For the year, total insurance costs grew 1% as medical cost inflation outpaced the decline in WSEs. Our fourth quarter insurance cost ratio came in at 94%, a 0.6 point year-over-year improvement, and we finished 2025 with an approximately 90.8% ICR, in line with our full year guidance. In the fourth quarter, operating expenses, which exclude insurance costs and interest expense, declined 16% year over year, and for the full year, declined 7%. Operating expenses benefited from our talent optimization and automation efforts. For the fourth quarter, we had a $0.10 GAAP loss per share, and we finished the year with GAAP earnings per diluted share of $3.20. Our adjusted earnings per diluted share was $0.46 in the quarter, and totaled $4.73 for the year, at the top end of our full year guidance range. Kelly Lee Tuminelli: Despite our challenges in 2025, TriNet Group, Inc. is a durable, strong, cash-generative business. During the quarter, we generated $57 million in adjusted EBITDA and for the year, $425 million, which represented an adjusted EBITDA margin in 2025 of 8.5% within our full year guidance range. In the fourth quarter, we generated $61 million in net cash provided by operating activities and $43 million in free cash flow. For the year, we generated $303 million in net cash provided by operating activities, and $234 million in free cash flow, which represented 16% year-over-year growth. Free cash flow benefited from improvements in working capital. Our 2025 free cash flow conversion was 55%, a significant improvement when compared to our 2024 ratio of 41%, and moved us closer to our medium-term target range of 60% to 65% free cash flow conversion. Over the course of the year, we leveraged that cash generation to fund dividends, purchase shares, and reduce our outstanding debt. We paid a $0.275 dividend during the fourth quarter, and paid $1.075 per share in dividends in 2025. During Q4, we repurchased approximately 1,000,000 shares for $61 million. For the year, we repurchased approximately 2,800,000 shares for $182 million. In total, during 2025, we returned $235 million to shareholders across share repurchases and dividends. In addition to the capital return to shareholders, we paid off the remaining $90 million balance of our revolving credit facility and exited 2025 with a debt to adjusted EBITDA ratio of 2.1 times, just above our targeted 1.5 to 2.0 times range. Kelly Lee Tuminelli: Turning now to our 2026 outlook. Our guidance reflects a range of broadly held forecasts on key variables such as CIE growth and medical cost trends. We also assume economic conditions remain consistent with 2025, and the quarterly cadence of our financial performance should mirror that of 2025. For 2026, we expect total revenues to be in the range of $4.75 billion to $4.90 billion. Revenues are impacted by our lower beginning WSE base. We expect elevated attrition in Q1 due to our January renewal, the last catch-up renewal. In 2025, we ended the year with approximately 80% retention. Attrition accumulated through 2025 was driven by increasing health fees. In 2026, we expect retention to improve slightly overall. However, based on the schedule of our renewals, including our last catch-up renewal on January 1, we expect to see elevated attrition and a bigger drop in Q1 when compared to last year. With moderating health fee increases starting with our April 1 renewal, we expect improving attrition as we go through the year. Early indications from our April 1 renewal are supportive of this assumption. We expect new sales growth to positively impact volumes in 2026 as our investments in go-to-market begin to pay off and insurance pricing stabilizes in line with cost trends. The early indications from Q1 indicate that we are on track, and we are optimistic that new sales will improve year over year as we move sequentially through 2026. Kelly Lee Tuminelli: On CIE, the midpoint of our guidance assumes growth in the low single digits, similar to our 2025 experience, given persistent weakness in the SMB macro business environment. On interest income, we expect a $25 million to $30 million headwind when compared to 2025. We expect interest income to be impacted by lower interest rates in 2026 versus 2025, and by lower cash balances due to the declining amounts of certain tax refunds. The timing of the distribution of those refunds also remains uncertain. For professional services revenue, we are forecasting a range of approximately $625 million to $645 million. Here are a few drivers that are important to understand. First, our lower WSE forecast. We assume a modest single-digit price increase which will partially offset these WSE declines. Second, we expect ASO services growth of double digits. A portion of the ASO growth is being fueled by a migration from our legacy SaaS HRIS business which we expect will continue declining, posing a $10 million to $15 million headwind and offsetting the growth in ASO. Finally, there was a change in reporting methodology for state tax-related revenue we record in one state, which will represent a headwind of about a point of PSR. This change is specific to a single state. In 2026, we are tightening our ICR guidance range by 50 basis points reflecting our stronger actuarial capabilities and more stable cost trends. Underpinning our ICR guidance is our expectation for medical cost growth between high single and low double-digit rates, very similar to our 2025 experience. Pharmaceutical cost inflation remains a headwind, with growth rates expected to be in the low double digits, as GLP-1 usage continues, specialty drug utilization remains high, and cancer treatments remain elevated. Our combined insurance cost ratio is expected to be in the range of 90.75% to 89.25%. The high end signals some improvement towards our target from 2025 with health cost trends still elevated, stabilization, and the low end reflects further medical and pharma cost trend increases. As a reminder, our historical quarterly ICR performance sees our Q1 performance on average two points better than our target, and our Q4 performance two points worse. Kelly Lee Tuminelli: In 2026, we expect a reduction in reported operating expenses in the mid-single digits. I want to make one thing especially clear. Even while we drive further year-over-year decreases in operating expenses, we plan to reinvest a portion of the savings in our value creation initiative. For 2026, our adjusted EBITDA margin is forecasted in the range of 7.5% to 8.7%. We are forecasting stable adjusted EBITDA margins despite the decline in revenue due to lower ICR and OpEx discipline. GAAP earnings per diluted share are expected to be in the range of $2.15 to $3.05 and adjusted earnings per diluted share in the range of $3.70 to $4.70. Our capital return priorities remain unchanged. As we generate cash throughout the year, we will continue to deliver to our shareholders by making targeted investments in our value creation initiatives to drive profitable growth, using our cash flows to evaluate tuck-in acquisitions, fund dividends and share repurchases, while maintaining an appropriate liquidity buffer in line with our financial policy. The Board has authorized an increase in our share repurchase program, bringing the total available for repurchase to $400 million. Kelly Lee Tuminelli: Finally, I want to comment briefly on the multiple medium-term financial scenarios that the company provided a year ago. Since then, the SMB macro business environment has shown little improvement. Our CIE remains below normal levels, and medical cost trends remain high. The extent to which this weakness persists will determine how we perform vis-à-vis those financial scenarios. I will finish with a few thoughts on TriNet Group, Inc., after two and a half months as CFO. First, I am impressed with the TriNet Group, Inc. team. My colleagues at TriNet Group, Inc. are committed to putting our SMB customers at the center of everything they do. They believe in TriNet Group, Inc. and are working hard to bring our medium-term strategy to fruition, which will benefit all of our stakeholders. Second, I believe in the large untapped market opportunity. Between elevated medical cost inflation and divergent regulatory regimes across the federal government, states, and municipalities, there is a huge opportunity for TriNet Group, Inc. services. Third, capturing that market opportunity requires more work. TriNet Group, Inc. has a clear set of priorities for improving the customer experience, expanding our distribution footprint through channels and sales capacity growth, innovating and adapting our product to emerging technologies and customer needs, and executing this in a financially disciplined manner. Our results in 2025 demonstrate our financial discipline, in both the significant progress we have made in managing our insurance cost ratio and our OpEx. Stepping into this company as CFO, I believe in our future growth opportunities, and I know that our sales, retention, and business momentum will be improving through 2026 as we execute with focus and urgency. With that, I will pass the call to the Operator for Q&A. Operator? 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. And this morning's first question comes from Jared Marshall Levine with TD Cowen. Thank you. To start here, Kelly, can you discuss your guidance philosophy, including how it might differ versus your predecessor here, just given it is your first earnings and initial fiscal year guide here? Kelly Lee Tuminelli: Yes. Thank you for the question, Jared. You know, the way I think about our guidance philosophy is based on a few drivers. So let me go through it. The first is, obviously, we have to look at what is happening in the business in 2025 and how is the momentum in that business changing as we go through the year and how we exit the year, right? Because that is obviously what sets us up partly for 2026. And if you look at the results we printed, Jared, I would say to you, certainly, we have had WSE declines as we have articulated. However, if you look at the progress we have made as we have gone through the year on ICR, that is an important data point, in fact, that we have considered as we have gone into 2026. The second thing I would say is the OpEx discipline that we have shown all year is definitely something that also we are continuing to make progress on, and we can talk about the various drivers of that later on in the call, but that is also something that is informing us about guidance. And then, most importantly, there are the drivers of our revenue as we exit 2025 and go into 2026. Definitely, we have talked about the different components that are driving our revenue momentum. As we go into 2026, Jared, there is the last significant repricing that we have done in January that certainly has an impact on attrition early on in the year, therefore WSE as we roll through the year. The second, and we are pleased with our ASO growth, that will continue to show momentum. The thing that we are absolutely focusing on with urgency is around executing all of my priorities, right, whether it be go-to-market execution, whether it be retention, focus on NPS, and continuing to show pricing discipline that we have shown in 2025. So if I summarize it all, I would say the way I am thinking about the setup for guidance is around how we exit the year in terms of things we control. Second is, what are we actually doing from a perspective on our various priorities and investments, again on the controllable side. And then, of course, we have been relatively transparent with you in our guidance assumptions on exogenous factors between CIE and medical trends that candidly are informing the bookends of our guidance. So that is exogenous. We are going to continue to monitor that very carefully, but that is something that is absolutely informing our range of guidance. Jared Marshall Levine: Great. And then, Michael, in terms of bookings expectations for 2026, I did hear you call out you expect to grow capacity at some point in the year, I think around 20%. Is that a reasonable expectation for how bookings should grow for 2026 in terms of what you are targeting? Or is there any kind of puts and takes with productivity impacts to also be mindful of? Just any color there would be helpful. Michael Quinn Simonds: Yes. Good morning, Jared. Appreciate the question. We did see sales improving on a year-over-year basis as we were kind of coming through that variance, the gap for the prior year, closing as we went through 2025. And it was very encouraging to see a very good January and uptick over the prior year. That is certainly our outlook. Like Kelly said, I think on the things we control, and I would say the two that really are going to drive volume growth are new sales and retention. And we do feel like our line of sight is to growing momentum on both of those fronts. So having stronger than we have experienced in recent years retention of our senior folks—you know, we have talked about a fourth-year rep generating four first-year reps’ worth of production—and pairing those up with our Ascend graduates that are coming in, that bodes very well for us. So the exact percent growth is going to be a factor. There are going to be a lot of factors that play into that, but the direction of travel is a positive one, having already started to post some growth in 2026. Jared Marshall Levine: Great. Thank you. Michael Quinn Simonds: Thanks, Jared. Operator: Thank you. And the next question comes from Ross Cole with Needham and Company LLC. Hi, thank you for taking my question. I will be asking on behalf of Kyle David Peterson. I was wondering if you can talk a little bit more about insurance pricing and the impact of attrition in new sales. Michael Quinn Simonds: Hey, good morning, Ross. Happy to help there. So we came into 2025 knowing that we had a pretty sizable need to move health fee pricing up. And I think it is important—there are really sort of two factors there. The first, of course, is what is happening in the broader industry and health care cost trend being quite elevated. So we needed to price forward for those expected cost increases. The second, as we talked about, a pretty sizable cohort of business acquired in the 2023, early 2024 time period and knowing that we had priced that business too low and needed to catch up on that front. So those clients needed both the catch-up and the trend pricing on top of that. As we took a measured approach but worked it through in 2025, and as Kelly said, through the January 1 renewal here in 2026, we are encouraged that the health fee component in the ICR overall showed some improvement in the fourth quarter. The guidance that we put out for next year, the midpoint shows some additional improvement there. That pricing, having completed the catch-up as we look to April 1, it is more encouraging that we are sort of done with the second part, and we can focus really on just pricing for what we think the aggregate increase that the whole market is feeling. So as we communicated with clients before April 1 increases—our next big cohort that comes online—we are encouraged by the receptiveness there and the competitiveness there. We are encouraged by the retention projection we have on that April 1. Kind of much more closer to a normalized distribution of the percent increase in health fees across our WSE base. And, again, barring any sort of unusual occurrence where the already elevated macro jumps, it feels like we are in for a sort of more in-line set of outcomes and therefore improving retention through the year. Kelly Lee Tuminelli: Hey. Thank you. Ross Cole: Then, also, in terms of CIE, could you talk a little bit more about what you are seeing in terms of hiring trends? Kelly Lee Tuminelli: Yes. When it comes to CIE, what we are seeing, interestingly, is at least in our book of business, hiring continues to remain suppressed. What we are also seeing is terminations and layoffs are relatively stable. So it is those kinds of factors that are informing our CIE assumptions embedded in our guidance for 2026. It is sort of in line, low single digits, in line with what we saw in 2025. Ross Cole: Great. Thank you. Thank you. Operator: Thank you. And the next question comes from Andrew Owen Nicholas with William Blair. Hi, good morning. Thanks for taking my questions. The first line of questioning here is just on retention. I think you said from 85% to 80% this year, but I think you also mentioned that quite a bit of that was tied to the price increases. I guess, I am curious, first, were the other typical reasons for attrition relatively consistent year over year? And second, is there any way to think about retention outside of kind of that mispriced cohort from 2023 and 2024? Just curious if you are seeing moderation outside of that cohort that we might be able to attribute to industry-wide churn. Michael Quinn Simonds: Yes. Thanks. Good morning, Andrew. Yes. Exactly. I think you have got it. If you look at the attrition that we experience, you can kind of look at it on two dimensions and sort of triangulate it. One, look at the percent health fee increases that a client is seeing. When you get to some of the outsized increases that are necessary for that cohort, that is absolutely where we saw a higher percent attrition coming through. Second thing we use to get smart on reasons for termination is the offboarding survey work that we do. And we look at all those different reasons that you would expect, and health fee—sort of pretty dramatic increase in health fee—as a driver for the termination, and again correlating back to where that fee increase was more outsized. To your specific question, when you look at things like the value delivered through the platform and the service quality, we have actually, through the year, seen a very heartening and consistent decline in those “for term” reasons. And I think that correlates to survey work that we do on Net Promoter Score and being at an all-time high last year. So I actually think once you get through this catch-up component, keeping up with trend—that is absolutely a challenge, but that is a challenge that everyone in the market is experiencing right now. And it feels like again, as we look to April 1 and we look to the rest of the year, health fee will certainly be a big part of the conversation, but increasingly, the overall value proposition is coming to the fore. With the investments that we are making there and the momentum we build around service delivery, I think that the team is executing at a pace that we have not seen in a while. That is very encouraging for us. Andrew Owen Nicholas: In terms of how the back half of the year looks from a retention point of view? Kelly Lee Tuminelli: Yes. If I add one comment to what Michael just said, if we think about the drivers of attrition, it is, again, something that we monitor actually fairly granularly—what are the different reasons? You know, certainly, price was a very key factor over the last few quarters. We are already seeing encouraging signs of a significant reduction in price being quoted as the reason for dissatisfaction as we look into Q2, etcetera. And we already have some early visibility into that. So then it really comes down to the other usual factors that drive attrition, right? It is between their own business conditions, etcetera, which, as you know, are not a surprise given the macroeconomic uncertainties that persist, especially for SMBs. So I would say to you, if I think about price alone relative to all of the other factors, yes, in the surveys we do, it is showing improvement. Andrew Owen Nicholas: That is helpful. Thank you. And then for my follow-up, I wanted to ask on the ASO services growth that you mentioned—I think double-digit expectation in growth for 2026. Can you speak to the sources of that growth? How much of that is HRIS or SaaS-only clients transitioning there versus existing clients maybe upgrading into it, or, I should say, as they get larger, moving to an ASO versus a brand-new client coming into the model via the ASO channel? Thank you. Michael Quinn Simonds: Yes. So the big driver of the growth in 2025 was the conversion of that SaaS-only business. And as you always do, you have to set some set of assumptions that you put into your financial plan, and ultimately your guidance, and we were surprised to the upside on the rate of conversion into the ASO. And I think that sort of underpins the strategy here, which is really good technology with really good people providing service on top of it. As we look into 2026, we largely will have completed, very early in the year, the exit of the SaaS business. And so the growth that comes in ASO as we work through the year is going to be, obviously, good solid retention, but the growth will come from new sales. And so seeing a good strong fourth quarter from sales, we like our pipeline here in the first quarter. It is still a relatively small contributor to the aggregate picture here for us, but over time, we see this as a really good additional arrow in the quiver and a growth driver. It gives our reps a place to pivot to when the PEO may not be a perfect fit. And also, as we build out relationships in the brokerage channel, there are more chances and a broader set of opportunities to build those relationships and open that channel up as well. Andrew Owen Nicholas: Thank you. Michael Quinn Simonds: Thanks, Andrew. Operator: Thank you. And the next question comes from Tobey Sommer with Truist. Tyler Barashaw: Good morning. This is Tyler Barashaw on for Tobey. Could you discuss the assumptions that get you to the high end or the low end of your insurance ratio guidance? Kelly Lee Tuminelli: Yes. So if we think about the insurance ratios itself, first thing to note is we showed improvement in that ratio as we rolled through Q4. As we noted in our prepared remarks, our Q4 ICR, in particular, actually was more favorable on a year-over-year basis compared to 2024. As we think about how that informs 2026, we have essentially, at our midpoint of guidance, assumed a continuation of those trends, and to be crystal clear, that is testament to the capabilities that we have developed internally from an actuarial and from just a knowledge-based perspective about our book of business and about our plan. We are in a much different place today than we were in early 2025. What that means is, on the medical side, we are talking about high single-digit inflation; on the pharmaceutical side, we are talking about low double-digit inflation, and that is informed by really greater utilization of specialty and cancer-type drugs that we are seeing in our book. In terms of the range, number one, we have tightened the range, right? So again, that reflects the growing grasp and control we have on ICR, and we have tightened the range relative to what we had at the start of 2025 by 50 basis points. Where we land on that range is really dependent on how, candidly, medical trends do. If you think about the more favorable end of the range, that would assume better trends, if you will, from an inflation perspective. And if you think about the more unfavorable end of the range, it would assume that there is a degradation. Tyler Barashaw: Super helpful. Thank you. And then on WSE growth in the quarter, can you discuss how it played out on a month-to-month basis? Were any months better or worse than others? Was it consistent throughout the quarter? Kelly Lee Tuminelli: Yes. That is not something we give you more color on from a month-to-month basis. What I would generally say is, if you think about the WSEs, you would typically expect to see early in the year, in first quarter, generally more of a decline in WSEs, typically as they would offboard. But other than that, we do not really—and then, you know, we ramp back up as we go through the year. But beyond that, we do not give you any month-to-month color. Michael Quinn Simonds: And what I would add is, as we kind of took a step back and looked at the whole year, like Kelly was saying, we sort of look at the trajectory of our business from the forecasting for the plan and for guidance for 2026. It moved; it oscillated a little bit around that low single-digit number, but we did not see a discernible trend either month to month or quarter to quarter that would suggest it would be a better pick—either more favorable or less favorable—as we went into 2026. Operator: Thank you. Kelly Lee Tuminelli: Thank you. Operator: Thank you. And once again, please press— Operator: And the next question comes from Andrew Polkovitz with JPMorgan. Andrew Polkovitz: Morning, and Kelly, welcome to the earnings call. My first question, I wanted to ask about pricing. So obviously, you are done with the catch-up period post January 1. So I wanted to ask, if you look ahead and put the April cohort, how does your pricing look relative to your peers? Are there still peers that are catching up to effectively doing both parts of the reprice, the cost trend plus catch-up, or would you characterize the pricing environment as more in line with how you are approaching it? Michael Quinn Simonds: Good morning, Andrew. I think you are exactly right. So we come through that catch-up period. It is very good to have that largely behind us for those cohorts, which, to your point, I do not want to go too far and—the reality is, health care trend remains quite elevated, which is a challenge for our clients, and it is a challenge for us, and it is a challenge for the whole market. I do feel as though the investments that we have made in our insurance services group, the processes we put in place, have put us in a spot where the application of that sort of elevated set of trends to our quarterly pricing process has us moving pretty quick relative to the rest of the market. And I think you saw that in the impact on some of our volumes, but also the stabilization here in Q4 and improvement in the ICR. I think it is a reasonable thing to say, as we look forward to April 1, I feel confident we are very much in line with the market. And to the extent there are players that have a little bit more catch-up work still to do, then I would position us favorably. Andrew Polkovitz: Okay. Great. Very clear. And just for my follow-up question, I wanted to know if you could sort of characterize the drivers of the sales improvement you are expecting to see in 2026 between broker channel and improving rep tenure and then, of course, the Ascend program. Michael Quinn Simonds: Sure. Absolutely. So they are all big contributors, some a little bit more in the immediate term, some a little bit more in the longer term. But I would say the brokerage channel is a little bit of a longer burn. We got onto that pretty early, even in late 2024 and through 2025, and we are really starting to see the fruit of those investments. So in terms of the impact in January and in our pipeline for first quarter, that is kind of an outsized contributor to our growth. And, to be honest with you, I think we are just kind of getting started in terms of how deep we can go with the key partners that we have identified and then also find a few more key partners that are well aligned to the kinds of clients and the long-term relationships we are trying to build. I think there is nothing like keeping a really good, experienced rep motivated. I think the things we have rolled into the market this year—the new set of integrations that expand our capabilities, TriNet Assistant—we are putting more things in the bag here for our senior folks. They are sticking with us here, and that is a big driver. The Ascend program, the last one you mentioned, that is actually going to be a nice contributor in the championship selling season this year, but that will be the longer-term investment for us, and we would see that growing—certainly a contributor here in 2026, but more so in 2027 and years beyond. Andrew Polkovitz: Thank you, and congrats again on the results. Michael Quinn Simonds: Thank you. Appreciate it. Operator: Thank you. And the next question comes from David Michael Grossman with Stifel. Good morning. Thank you. So I wanted to just go back to the WSE dynamic. I think I understand the algebra around the deceleration in 2025 as a result of the repricing of the book, and since we have another kind of retention-below-normalized-retention dynamic in the first quarter, I guess I am just curious—I know you do not want to guide to WSEs for the year—but I am just trying to understand the magnitude of the debit that we face in the first quarter and how that impacts the year. So, for example, if CIE stays relatively constant, which is, I think, the assumption in your guidance, are we going to have the same issue in 2026 going into 2027, or are the go-to-market changes and improvements and efforts that you are making sufficient so that we would not face the same dynamic in 2027 as we are facing in 2026? Just algebraically, of course, looking at the retention dynamic around the repricing. Michael Quinn Simonds: David, yes. Thanks for the question. I just think it is really important to start with the retention dynamic and the work that we need to do to both catch up on a couple of those cohorts and then also price forward for trend. And you know this, David, really well, but we are not talking about just a little bit higher than normal, but, like, the last couple of decades—this level of sustained health care cost inflation is pretty unique. So there is real work to be done there. It absolutely has impacted retention. We have signaled that we are completing that with January 1, but I am glad you asked the question. We are not trying to signal that there was an outsized attrition event on January 1 relative to what we experienced in 2025. It is just that we had a bit more work to do to get all the way through. Then we focus on what we can control around growing new sales—the go-to-market pieces, experiencing growth in January, having a positive outlook here for the first quarter, having a lot of things coming online that give us more optimism about the back half of the year—that is certainly going to be a contributor. I do think the retention for April 1 is going to be better. I do think that, barring a big change in the macro, the health care pricing that we will be putting out will be absent the catch-up component and very in line with the market. All those things are really positive. So with a low and, I think, prudent CIE assumption, like you were saying, that gives us growing confidence that we are slowing the decline of the WSEs and working our way back toward growth. So I think what is really important, David, is working our way back to growth in a sustainable fashion. You know, putting things in place that we can go back to again and again and again, and investing in keeping our reps, growing new reps that are embedded in our culture, differentiating how we do benefits, driving that NPS. I think these are things that are going to serve us well beyond 2026. David Michael Grossman: Right. So just kind of to wrap it all together, Michael, if the macro environment does not improve, is it reasonable to assume that we will not have that rollover issue in WSEs in 2027 versus 2026? Michael Quinn Simonds: Yes. There is so much ground to cover between now and then that it is probably not a question to say exactly what is going to happen, but our confidence is really quite high that the trend in general is going to be an improving one as we go through 2026. David Michael Grossman: Got it. Alright, guys. Thanks very much. Good luck. Kelly Lee Tuminelli: Thanks, David. Operator: Thank you. Operator: This concludes our question and answer session. I would like to return the conference to Michael Quinn Simonds for any closing comments. Michael Quinn Simonds: Thanks, Keith. Appreciate it. I appreciate everyone taking the time to join us this morning. Hopefully, Kelly and I have given you a good sense for the strong, decisive actions we are taking to improve the areas that we control. I think the growing momentum we have got on this front. So Alex and Kelly and I will look forward to connecting with many of you in the coming weeks and months as we are out on the road. With that, Keith, this concludes this morning's call. Operator: Thank you. As mentioned, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.