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Operator: Good morning, everyone, and welcome to the Bruker Corporation Fourth Quarter 2025 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I would like to turn the floor over to Joe Kostka, Director of Investor Relations. Please go ahead. Good morning. I would like to welcome everyone to Bruker Corporation's Fourth Quarter 2025 Earnings Conference Call. My name is Joe Kostka, and I am the Director of Bruker Investor Relations. Joining me on today's call are Frank Laukien, our President and CEO, and Gerald Herman, our EVP and CFO. In addition to the earnings release we issued earlier today, during today's conference call, we will be referencing a slide presentation that can be downloaded from the Events and Presentations section of Bruker’s Investor Relations website. During today's call, we will be highlighting non-GAAP financial information. Reconciliations of our non-GAAP to GAAP financial measures are included in our earnings release and are posted on our website at ir.bruker.com. Before we begin, I would like to reference Bruker's Safe Harbor statement, which is shown on Slide 2 of the presentation. During this conference call, we will or may make forward-looking statements regarding future events and the financial and operational performance of the company that involve risks and uncertainties, including those related to our recent acquisitions, geopolitical risks, market demand, tariffs, currency exchange rates, competitive dynamics, or supply chains. The company's actual results may differ materially from such statements. Factors that may cause such differences include, but are not limited to, those discussed in today's earnings release and in our Form 10-Ks for the period ending 12/31/2024, as updated by our other SEC filings, which are available on our website and on the SEC's website. Also, please note that the following information is based on current business conditions and our outlook as of today, 02/12/2026. We do not intend to update our forward-looking statements based on new information, future events, or for other reasons, except as may be required by law, prior to the release of our first quarter 2026 financial results expected in early May 2026. You should not rely on these forward-looking statements as necessarily representing our views or outlook as of any date after today. We will begin today's call with Frank providing an overview of our business progress. Gerald will then cover the financials for the fourth quarter and full year of 2025 in more detail and share our full year 2026 financial outlook. I will now turn the call over to Frank Laukien. Thank you, Joe. Good morning, everyone, and thank you for joining us on today’s fourth quarter 2025 earnings call. At the conclusion of a difficult year 2025 with headwinds from academic funding, tariffs, and currencies, we are pleased that in the fourth quarter, we delivered revenues ahead of our expectations. BSI, or Bruker Scientific Instruments, book-to-bill in the fourth quarter was again over 1.0x, providing more confidence that we are past the trough in demand seen in 2025. We also saw strong free cash flow in Q4, over $200 million, after admittedly weaker cash flow earlier in 2025. The year 2025 was the first full year of ownership for the three large strategic acquisitions that we completed in the ’24. Both ELITech and Chemspeed delivered robust mid- to high-single-digit percentage organic revenue growth year over year, while NanoString was approximately flat due to pressure on U.S. academic funding in fiscal year 2025. Encouragingly, spatial biology, including NanoString, orders were up in the double-digit percentages organically in 2025 year over year. Our innovation engine continued to shine in 2025, with outstanding and very competitive product launches at the AGBT, AACR, and ASMS conferences last year. Many of these recent launches have seen strong initial demand, which we expect to drive revenue growth in fiscal year 2026 and beyond. Looking to 2026, we expect continued improvements in our markets to drive demand for our differentiated post-genomic discovery, translational, and diagnostic solutions. We start the year with solid BSI segment backlog of over months of revenue, and good bookings momentum resulting from two consecutive quarters with BSI book-to-bill greater than 1. In 2026, the NIH budget passed Congress with an increase in funding year over year, and barriers to grant overhead cuts and multiyear grant funding. But for now, there is still some lingering uncertainty in the U.S. academic and government market. The second-half improvement in 2025 in biopharma and industrial research order trends and robust semi metrology orders in Q4 position these end markets for improved revenue performance in 2026. Finally, BEST, which was a headwind to our overall revenue growth in 2025, should turn into a tailwind in 2026, having booked major multiyear agreements worth more than half $1 billion over multiple years. Accordingly, we are establishing our fiscal year 2026 guidance for reported revenue growth of 4% to 5%, with 1% to 2% organic revenue growth for the full year and an approximate 1.5% revenue growth contribution from M&A. This all implies constant exchange rate revenue growth of 2.5% to 3.5% year over year in fiscal year 2026. As we explained in our press release, we still expect a mid-single-digit organic revenue decline in Q1 2026 primarily due to the strong Q1 2025 year-over-year comparison. After our first quarter this year, we now expect to resume organic revenue growth in the second quarter and for the remainder of the year. We remain very committed to rapid non-GAAP operating profit margin expansion, and we aim for 250 to 300 bps operating profit margin improvement in 2026, including a 50 bps currency headwind. This implies, in principle, 300 to 350 bps of expected organic operating margin expansion, driven by our major cost-saving initiatives, which we now expect to exceed the upper end of our previously stated range of $100 million to $120 million. Finally, in fiscal year 2026, we expect non-GAAP EPS growth of 15% to 17%, including a strong 8% or approximately $0.15 expected currency headwind, which, again, implies 23% to 25% constant exchange rate non-GAAP EPS growth compared to 2025. Turning to current results now on Slide 4. In Q4 2025, Bruker delivered stronger revenues than expected and above the preliminary range we provided at JPM in early January. Bruker’s fourth quarter 2025 reported revenues of $977.2 million were approximately flat year over year, including a currency tailwind of 4.1%, a growth contribution from M&A of 0.8%, and an organic decline of 5.1%. Organic declines in BSI and at BEST, net of intercompany eliminations, were also both at 5.1% in the quarter. In the fourth quarter, our non-GAAP operating margin was 15.7%, down 240 bps year over year, as lower revenue volume, additional tariff costs, and currency headwinds were only partially mitigated in Q4 by our earlier cost and pricing actions. Fourth quarter 2025 non-GAAP diluted EPS was $0.59, down from $0.76 in 2024. Gerald will discuss the drivers for margins and EPS later in more detail. As I said earlier, fourth quarter BSI book-to-bill was again meaningfully greater than 1.0, and our fourth quarter free cash flow was good at $207 million. Moving on to our 2025 full-year performance on Slide 5. Fiscal year 2025 reported revenues increased by 2.1% to $3.44 billion. On an organic basis, revenues declined 3.7% year over year, consisting of a 3.5% organic decline in Scientific Instruments, and a 5.4% organic decline at BEST, as always net of intercompany eliminations. Acquisitions added 3.5% to revenue growth, and there was a 2.3% currency revenue tailwind for the year. Our 2025 non-GAAP gross and operating margin and GAAP and non-GAAP EPS performance are all summarized on Slide 5. Margins and EPS were down year over year as a result of dilution from our strategic acquisitions that closed in 2024, volume deleverage, and strong currency and tariff headwinds. Please turn to Slides 6 and 7, where we highlight the 2025 constant exchange rate performance of our three Scientific Instruments groups and of our BEST segment year over year. In 2025, BioSpin Group revenue was $879 million and declined in the mid-single-digit percentage. Solid revenue growth in Chemspeed lab automation was more than offset by the declines in NMR instrumentation. Biopharma revenues were weak, resulting from soft bookings in 2025. In 2025, we had revenue from a 1.2 gigahertz NMR in the UK, our second gigahertz-class NMR of 2025, compared to four gigahertz NMRs in 2024. The two fewer gigahertz systems resulted in a roughly $20 million revenue headwind for 2025 revenues. We are expecting just one gigahertz NMR system in revenue in 2026, as present gigahertz-class NMR funding activity is healthy but would likely not yet come in as revenue in 2026, but may well refill our gigahertz NMR pipeline for 2027 and beyond. For 2025, the CALID Group had revenue of $1.2 billion and constant exchange rate growth in the high-single-digit percentage, with growth in microbiology and infection diagnostics driven by ELITech Molecular Diagnostics, as well as by our Optics division driven by our applied markets and security detection growth. This was partially offset by softness in mass spectrometry, as strong orders for the recently launched timsOMX and timsMETABO mass spectrometers are expected to start to convert into revenue mostly in 2026. On Slide 7, Bruker Nano 2025 revenues were $1.1 billion, a decline in the low-single-digit percentage, as solid growth in spatial biology driven by NanoString and robust biopharma growth was more than offset by declines in academia and industrial markets. Semiconductor metrology revenues were flat for the year, with a strong semi order book in 2025, which is expected to drive stronger semi performance in 2026. Finally, 2025 BEST revenues declined in the mid-single-digit percentage, net of intercompany eliminations, due to soft superconducting demand for clinical MRI systems. However, we received major multiyear orders at the end of the fourth quarter of 2025 and at the very beginning of 2026 for superconducting wire from large MRI manufacturers totaling more than $500 million. This is over multiple years. Also, our research instruments business, which is part of BEST, received more than $40 million in orders for enabling technology for the Extreme Light Infrastructure, something that we had a press release on previously, and this also is expected to go into revenue mostly late in 2026. Moving to Slide 8 now. We highlight our Project Accelerate 3.0 portfolio expansion strategy, and we talked about that a little bit at the J.P. Morgan conference. We remain very focused on our leadership and expanding our leadership in post-genomic disease research and drug discovery tools, primarily proteomics and multi-omics, and, of course, a core focus also on spatial biology. We continue to expand and focus on novel and differentiated diagnostics opportunities, with novel microbiology and infectious disease molecular diagnostics opportunities. I will highlight that our ELITech Molecular Diagnostics business had very strong placements in fiscal year 2025, which bodes well for fiscal year 2026 revenue growth. In microbiology, we are entering the rapid AST market with the Wave platform, hoping to get FDA clearance for the first claim this year in 2026. In molecular diagnostics, we intend to expand into second-generation affordable syndromic panels on our Genius systems. Finally, a very important trajectory for us is that our proteomic and spatial biology translational research tools increasingly are expected to enter laboratory developed tests, or LDT, markets here in the U.S. and elsewhere in CLIA laboratories. We are excited about our next-gen automated and digitized self-driving lab, something that we just announced on Monday at the SLAS conference here in Boston. As I have mentioned earlier, our security, defense, and airport detection business, something that was lingering for a number of years but where we have differentiated capabilities, is growing nicely at this point, particularly in Europe and overseas. Finally, we continue to benefit from the AI boom indirectly in that our semiconductor metrology tools for new nodes and advanced packaging have seen solid order growth and particularly strong order growth in the fourth quarter. With that, let me conclude on Slide 9, where we give you our annual update on our revenue mix for the BSI segment, which, as you know, is 93% of our revenue. We are pleased that step by step, our aftermarket component revenue is increasing. A year ago in 2024, it was 35%. Now it is at 38%, and, in fact, that part was growing organically also in 2025. Our end-market growth is as you would expect now that more than 60% of our revenue is coming from the Project Accelerate 3.0 focus areas and with particularly good growth that we are expecting also in terms of orders and revenue from biopharma, diagnostics, and semiconductor metrology. Finally, by geography, as you all know, U.S. biopharma and industrial growth looked stronger, certainly in orders, in the second half of the year. U.S. academic and government is still weak and had been weak throughout 2025 except for the first quarter. The rest of APAC has been very resilient and strong, and China, which used to be 16% to 17% of our revenue, has continued to decline, although we saw some nice order growth in Q4. It is now just under 14% of our revenue. In summary, 2025 was indeed a challenging year for Bruker. We faced multiple unexpected significant headwinds, and we responded by continuing to innovate, launching novel and differentiated high-value solutions. We have also focused on cost efficiencies, taking very significant costs out in order to take a large step in 2026 towards greater than 20% operating margins in the next few years. In the medium term, beyond 2026, we expect our organic growth profile to return to a CAGR that is 200 to 300 bps above the LSG&Dx market growth rate, and we will continue to focus on continued major margin expansion steps in 2027 and 2028 as well, while driving continued double-digit non-GAAP EPS growth. We believe that our transformed portfolio is now poised to achieve EBITDA margins greater than 25% over time. With that, let me turn the call over to Gerald, our CFO. Thank you, Frank, and thanks, everyone, for joining us today. Before I get into the details of our financial performance I wanted to provide a high-level view of how the fourth quarter played out versus our expectations at the time of our last earnings call. We are pleased that revenue for the quarter came in about $20 million above our expectations. However, despite the top-line outperformance, our non-GAAP operating margin of 15.7% came in below our expectations by about 100 basis points. This was driven by headwinds of approximately 50 basis points from unfavorable mix, 30 basis points from delayed tariff offsets, and about 20 basis points from a stronger foreign exchange headwind relative to our prior guidance. Our guide for fiscal year 2026 reflects an improved mix profile, as well as pricing and supply chain actions more fully mitigating the tariff impact going forward. Now some further details on Bruker’s fourth quarter and full year 2025 financial performance starting on Slide 11. In Q4 2025, Bruker’s reported revenue decreased 0.2% to $977.2 million, which reflects an organic revenue decline of 5.1% year over year. Acquisitions contributed 0.8% to our top line, while foreign exchange was a 4.1% tailwind. Both our BSI and BEST segments had organic revenue declines of 5.1% in Q4 2025, with organic revenue declines across all groups. BSI fourth quarter 2025 instruments revenue declined in the mid- to high-single digits, while aftermarket revenue saw growth in the low-single-digit range year over year. As Frank mentioned, for the full year of 2025, aftermarket revenue now represents 38% of BSI revenues, up from 35% in 2024. Geographically and on an organic basis in Q4 2025, our Americas revenue declined in the low-teens percentage, European revenue declined in the high-single-digits percentage, and Asia-Pacific revenue grew in the high-single-digits percentage, including double-digit growth in China, all year over year. For our EMEA region, Q4 2025 revenue was up high-single-digits percentage year over year. Non-GAAP gross margin decreased 310 basis points in Q4 2025 to 49.4%. Factors impacting our gross margin in Q4 2025 are essentially similar to those impacting the operating margin in the quarter. In Q4 2025, we posted a non-GAAP operating margin of 15.7%, down 240 basis points compared to Q4 2024. This decline was driven by a combined 490 basis points decline from lower volume, unfavorable mix, tariffs, and strong currency headwinds. These headwinds, which are described in more detail on the slide, were partially offset by a 250 basis point benefit on a non-GAAP basis, as we realized approximately $25 million of cost savings in the quarter from our fiscal year 2025 cost-saving initiatives. The fourth quarter 2025 tax rate was 29.9% compared to 32.5% in 2024, with the decrease driven primarily by discrete items in the fourth quarter 2025. On a GAAP basis, we reported diluted EPS of $0.10 versus $0.09 in Q4 2024. Weighted average diluted shares outstanding in the fourth quarter 2025 were 171.7 million, an increase of 19.7 million shares, or 13%, compared to Q4 2024, reflecting the accounting for the mandatory convertible preferred stock offering we completed in September 2025. Turning now to Slide 12. We had an excellent cash generation quarter in Q4 2025, with approximately $230 million of operating cash flow generated in the quarter, actually the highest in our history. We delivered over $100 million in improved working capital performance in Q4 2025, with CapEx investments at $22.6 million, which drove free cash flow of $207.3 million in Q4 2025, up about $54 million over Q4 2024. We finished 2025 with cash, cash equivalents, and short-term investments of approximately $300 million. During the fourth quarter, we used cash to fund selected Project Accelerate 3.0 investments, capital expenditures, and continued our delevering actions with a debt repayment of approximately $145 million in the quarter. We ended fiscal year 2025 with a leverage ratio of approximately 3.1. Slide 13 shows our non-GAAP P&L results for the full year of 2025. Revenue was up 2.1% to $3.44 billion, including an organic revenue decline of 3.7%. Acquisitions added 3.5% to our top line, resulting in constant exchange rate revenue to be roughly flat year over year. Foreign exchange was a 2.3% tailwind to revenue growth in fiscal year 2025. Fiscal year 2025 non-GAAP operating margin was 12.6%, down 280 basis points year over year. This decrease reflects net headwinds from M&A of approximately 65 basis points, tariffs of approximately 65 basis points, foreign exchange 70 basis points, as well as the impact from lower estimated volume impact of approximately 80 basis points, which includes the partial benefits from our pricing and cost reductions. The remainder of the non-GAAP P&L results for the full year of 2025 are summarized on Slide 13, with the drivers as explained earlier and on the slide. Turning now to Slide 15. We entered the year with a healthy backlog of approximately seven months and solid order momentum after two consecutive quarters of BSI book-to-bill above 1.0. We are initiating guidance for fiscal year 2026 as follows: reported revenue of $3.57 billion to $3.60 billion, representing reported growth of 4% to 5% compared to fiscal year 2025; organic revenue growth of 1% to 2% year over year; plus acquisitions contributing 1.5%; plus an estimated currency tailwind of 1.5%, all contributing to reported revenue growth. For operating margins in fiscal year 2026, we expect organic non-GAAP operating margin expansion of 300 to 350 basis points in the year, offset by approximately 50 basis points of currency headwind, resulting in a net non-GAAP operating margin expansion of 250 to 300 basis points compared to the 12.6% posted in fiscal year 2025. We expect to take a major step up in operating margin performance in fiscal year 2026, with much of this margin improvement driven by our previously announced $120 million cost actions taken in fiscal year 2025, which we now expect to exceed. With markets signaling further recovery, and our new products and solutions gaining traction, we expect to take another meaningful step up in operating margins in fiscal year 2027 and beyond. On the bottom line, we are guiding to non-GAAP EPS in fiscal year 2026 in a range of $2.10 to $2.15, or non-GAAP EPS growth of 15% to 17% compared to fiscal year 2025. Using current foreign exchange rates, we are estimating a currency headwind of approximately 8% to fiscal year 2026 EPS, implying non-GAAP CER EPS growth of 23% to 25% year over year. Other guidance assumptions are listed on the slide. Our fiscal year 2026 ranges have been updated for foreign currency rates as of 12/31/2025. Finally, a bit of color on Q1 2026. We have a strong year-over-year comparison, as we delivered mid-single-digit BSI organic revenue growth in Q1 2025, and margins and EPS in Q1 2025 were not yet impacted by U.S. import tariffs or academic and government funding disruptions. Therefore, we anticipate first quarter 2026 organic revenue to be down in the mid-single-digit percentage and operating margin and EPS to be down meaningfully compared to Q1 2025. We then expect operating margins and EPS stepping up each quarter thereafter throughout the rest of 2026. To wrap up, we are encouraged by the order momentum we now see in many of our end markets. This, combined with some stability in the U.S. academic funding environment, gives us confidence that we are positioned to return to organic revenue growth in 2026, and we plan robust operating margin expansion and non-GAAP EPS growth in fiscal year 2026 and beyond. With that, I would like to turn the call over to Joe. Thank you very much. Thank you, Gerald. We will now open for questions. As a reminder, to allow everyone time for questions, we ask that you limit yourself to one question and one follow-up. Operator? Operator: Ladies and gentlemen, at this time, we will begin the question-and-answer session. To ask a question, you may press star and then one on your touch-tone telephones. If you are using a speakerphone, we ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. At this time, we will pause momentarily to assemble the roster. Our first question today comes from Puneet Souda from Leerink Partners. Please go ahead with your question. Puneet Souda: Yeah, hi, guys. Thanks for the questions here. Frank, the margin question has been a frequent one and obviously a focus in the quarter. Could you talk about, just given the Q4 margins, you came in below, you are expecting a number of cost initiatives to push margins higher in 2026. Maybe just tell us where are those cost initiatives focused, how much reduction, how should we think about that beyond that $120 million that you have talked about? And also, for Gerald, if you could talk about the op margin cadence, just given the significant ramp you have throughout the year, and anything you can provide on your comment around the meaningful Q1 op margin impact? Frank Laukien: Okay. Puneet, I will start. Good morning. So as Gerald had explained, of the 100 bps lower margin than what we had expected in Q4 2025, the way we look at it is that the 50 bps from unfavorable mix is not likely to repeat itself. Those were idiosyncratic factors in Q4. Thirty bps from the late tariffs offset, I think, we will offset that successfully in 2026. And the 20 bps of stronger currency headwind is here to stay for now. And, in fact, as you will have seen from our guidance by now, both on the operating margin expansion in 2026 as well as on the EPS growth, we have acknowledged significant headwinds from currency. Accordingly, and that leads to the second part of your questions, we have gone even stronger or even further on the cost initiatives. We now expect these to yield on an annualized basis closer to $140 million or even higher than that. Not all these additional cost reductions will be effective in Q1 or Q2, but certainly by Q3, that should be all effective and then become annualized. So we have been pushing that by an additional 10% to 15%. And that is about the right amount. We do not want to underinvest in our opportunities, but we also, of course, are very committed to this 250 to 300 bps of operating margin expansion and the double-digit, in this case, reported 15% to 17% reported EPS growth, which is all-in, including currency headwinds, which are strong, and including, obviously, also some of the dilution we had from the mandatory convert. So hopefully that addressed your questions. I think you had something for Gerald on cadence. Gerald N. Herman: Yeah. Hi, Puneet. It is Gerald. I will just comment generally. As I mentioned in my prepared remarks, we had a quite strong Q1 2025. You may recall while we sort of hit the mid-single-digits range of total Bruker organic growth, at the BSI level, it was actually mid-single digits and quite substantial. We do not expect to hit that in the first quarter of 2026, especially on our organic performance. So we are expecting a softer Q1, and we expect to pick up the pace pretty dramatically starting in Q2, Q3, and stronger again, finishing again in the fourth quarter. The step-up in operating margin growth is quite significant, largely due to what Frank was just describing. Some of what we do have in Q4 2025, about $25 million of cost savings that are reflected mostly in the OpEx category. You will see that again in the other quarters as we move forward. But some of our European-based cost actions will take effect more in the first quarter and in the second, so you will start to see a more significant ramp starting in Q2 and thereafter, Q3 and Q4. We can talk more about the details, but fundamentally, that is the direction. Frank Laukien: Okay. That is super helpful. Thanks for that. Just a Puneet Souda: quick follow-up. Frank, the new and competitive renewal awards are coming in lower, maybe it is due to the NIH mainly, and maybe it is due to the political challenges that we have in getting those grants out and whatnot. But NIH is supposed to be 1% better this year versus last year. So just any feedback on the academic and government customers in your interactions so far in first quarter would appreciate any context there. Thank you. Frank Laukien: Yeah. I mean, nobody is talking about a strong tailwind yet, but the absence of the strong headwind from last year feels a little bit better for U.S. academic and government. U.S. academic and government orders in Q4 were still quite weak. But I think that is bottoming out later than the trough in biopharma and industrial research demand, where we probably saw the trough midyear of last year. So there is still that. That is why everybody, including us in particular, is still cautious on growth rates this year. One to 2% organic growth rate is not a snapback to our typical growth rates. So we are still cautious on that. But I am, obviously compared to a really tough year 2025, encouraged that things are likely going to get better. But I think until academia gets more confidence, and with an NIH budget that is flat or up plus 1% and with prohibitions against overhead cuts and multiyear grants, if this will pass, and I think there is a reasonable chance of that. Similarly, also encouraging on NSF and other science budgets, by the way—NASA, DOE, you name it. So I am encouraged with that, but I think it may not help us with orders all that much till the second half. Operator: Got it. Okay. Thank you. Thank you. Our next question comes from Michael Ryskin from Bank of America. Please go ahead with your question. Michael Ryskin: Hey, thanks for the question, guys. I want to dig into the margin a little bit. In terms of the 2026 versus Q4, I think you talked about Q4 coming in a little bit lighter, and you shifting some of those. I guess asking it qualitatively, you pointed to the higher end of the range. What gives you confidence in your ability to take that, given that you were not able to execute on all the margin cost outs in the fourth quarter? Just confidence on ability to execute that. I have got a follow-up. Thanks. Frank Laukien: Well, we have taken out the high end of the $100 million to $120 million in cost already, and we are in the process of taking out additional cost which will become fully effective by midyear. So that is why we have a lot of confidence in that. And then some of the other margin idiosyncrasies—some of that has to do with pricing, supply chain. When we increase pricing, and until we then get an order, and until that order turns into revenue, that can, in many cases, be three or four quarters. So the effect of all these things is that steps that we did take and have taken, or continue to take, on the supply chain have a longer lead time, and we noticed that in Q4. But they really are happening, and they have happened. So that gives us a lot of confidence in next year. And, as I said, we had some unfavorable mix in Q4. We do not think that will repeat itself. Michael Ryskin: Okay. I appreciate that. And then for the follow-up, I want to talk about your comments you made about revenue pacing through the year. I think you pointed to down mid-single in the first quarter, but you expect revenues to be positive starting in Q2. Just clarify, how much of that is the comps from prior year? I know Q1 2025 was surprisingly good. I think we did not see the hit from the end-market slowdown and from the NIH concern till later in the year. So how much of that is the prior year comps versus underlying assumptions on any end-market improvement this year or just how your order book visibility factors into that? Just the confidence between that Q1 jumping. Gerald N. Herman: Yeah. It is both. Frank Laukien: Yeah. You are right. It is both. I mean, I cannot really disentangle that quantitatively, but qualitatively both, as your question already implies, play a role. So yes, the comps get easier and, in some cases, a lot easier in Q2. Q2 2025 was not good for us, so the comps do get easier even through the remainder of the year. So with easier comps and with gradually improving order momentum in many of the segments—even if not all of them—even China bookings were better in Q4. Applied semi was very strong. Biopharma was very solid in bookings in Q3 and Q4 of last year. Industrial research, which was very slow in orders in Q2 as everybody was trying to figure out what is the new geopolitical and tariff landscape—as that has now stabilized for the time being, I think these markets have all picked up. Really, the outlier is still U.S. academic and government, but at least even there, from what I see—reading more than tea leaves, reading NIH budgets—I think it may begin to benefit us in the second half in bookings. That, however, may then mean that it could be a Q4 or mostly 2027 effect in revenue, which is why we think longer term we return to our 200 to 300 bps above market organic revenue CAGR, but not yet this year. But even this—you do the math pretty easily. With a mid-single-digit decline in Q1, obviously, the organic growth rates for the remainder of the year, the remaining three quarters, are better than the full-year growth rate, obviously. That is easy math for you and for us. But even at that level, they are not fully back at our long-term growth rates. We hope to achieve those in 2027 and beyond. I hope that helps. Michael Ryskin: No. That is super helpful. Much appreciated. Thanks. Frank Laukien: Of course. Operator: Our next question comes from Tycho Peterson from Jefferies. Please go ahead with your question. Tycho W. Peterson: Hey, thanks. Frank, maybe just can we do a quick walk on the assumptions for some of the other end markets? I appreciate you have hit on academic already, but what are you assuming for biopharma this year? What are you assuming for semi? Anything in microbiology that could be a headwind—we have heard about that from some of your peers. So maybe just give us a walk on some of the end markets. Gerald N. Herman: Hi, Tycho. It is Gerald. I will just talk generally about the end markets assumed in the guide. For biopharma, we are not assuming significant snapback. We are assuming low-single-digits organic growth. Our semi business, which was relatively flat on a revenue level for 2025, we are expecting to be in the low-single-digits in growth. Clinical a little bit stronger for us from our microbiology-based business. And academic and government research largely driven by continued softness for the first quarter or so. We are expecting to be sort of flat or low-single-digits down. Industrial flat and applied about the same. So, generally speaking, we are not expecting a significant snapback in any of our end markets. We think strength coming from biopharma and certainly semi in 2026. Frank Laukien: Okay. And I would add, maybe one fine point. Molecular diagnostics, which is, of course, part of infectious disease diagnostics—we are expecting very good growth there this year, because we had about 30% more placements of these Genius platforms last year in 2025 than what we had planned. So that was excellent. That tends to then bring in pull-through in the following year. So I think diagnostics and biopharma and semi will be the highlights for the year 2026, and others are recovering and stabilizing. And U.S. academic and government perhaps turning in our revenues and P&L not really much of a corner until Q4, perhaps even into next year, but with improving trends and less headwinds. Sorry. Tycho W. Peterson: And then, Gerald, I know we had a number of questions on margins. Can you comment on gross margins for this year? Are you expecting gross margin expansion? Gerald N. Herman: Yeah, we are. I mean, as you already heard, in the fourth quarter, we were somewhat below our expectations on the gross margin level, and that was partly driven by the mix issues, the tariff, and, of course, the foreign exchange pieces I highlighted earlier. We are not going to be able to do too much further on the foreign exchange piece, but on the mix, our view is that this is going to improve, and certainly from the tariff side, as you heard from Frank, we are expecting to recover that and mitigate any tariffs going forward. Frank Laukien: I think it is fair to say that of our operating profit margin expansion, about half of it comes from gross margin expansion. Gerald N. Herman: And, of course, our OpEx. Frank Laukien: Right. But it is about half-half this year 2026 and probably beyond that as well. Tycho W. Peterson: Okay. And then, Frank, on the M&A contributions, you flagged proteomics and spatial entering LDT and CLIA. Can you maybe just elaborate a little bit more on how you think about that opportunity? Frank Laukien: Sorry. Those were not M&A contributions. Those were our higher growth and higher margin opportunities, which we bundle under the now further evolved Project Accelerate. Much of that or some of that was M&A, but it was prior M&A that we have now owned for one or two years in these areas. Tycho W. Peterson: Okay. Thank you. Frank Laukien: Alright. Operator: Thank you. Our next question comes from Subhalaxmi T. Nambi from Guggenheim. Please go ahead with your question. Subhalaxmi T. Nambi: What are your expectations this year for book-to-bill and backlog to hover at? Will it be noisy with some end-market rebound? Just how should we be thinking about trend of customer spending interest in 2026? Frank Laukien: Yeah. We expect continued gradual improvement. While we do not specifically forecast backlog or book-to-bill, we believe that the book-to-bill trends over the last two quarters, which in BSI were above 1.0, will continue into this year, also aided by easier comps, at least again in Q2 through Q4. We may use a little bit of our still-high backlog this year, but we are not modeling anything that becomes all normalized to perhaps the five-and-a-half months level that we think would be a normal level for the way BSI is configured now. Subhalaxmi T. Nambi: Thank you for that. And then you mentioned some new products in microbiology and diagnostics. Exiting 2026, what do these businesses look like, from a product roadmap perspective and a revenue growth perspective? Thank you. Frank Laukien: Exiting 2026. Okay. Yeah. So in microbiology, I assume that we will have the first rapid AST gram-negative positive blood culture claim approved by the FDA this year, 2026, hopefully before midyear, and that we will be in clinical trials for additional claims on that rapid AST platform. So that will be a nice build-up over the next couple of years as more and more content is becoming available on that Wave platform. Of course, there is a lot of content coming out on our existing Genius platforms, both in Europe, and then we are also doing a first assay going into clinical trials for entering the U.S. market with these Genius platforms. Again, that will not move the needle in 2026. It will include still some investment, obviously, in OpEx investments in 2026, but that will begin to mostly help us then for further growth in 2027, 2028, and beyond. Subhalaxmi T. Nambi: The diagnostics business. Frank Laukien: Yeah. Well, the Genius is the diagnostics business. Syndromic panels will begin to roll out and get through regulatory approvals in Europe in late 2026 and 2027. So they will begin to affect our larger installed base in Europe first—Europe and Latin America, a few other countries actually. Then there will be a series of affordable syndromic panels coming out through and making it through the regulatory process, IVDR in this case, in 2027 and 2028. So that is just a flywheel. You add something every year. It does not make a big difference in one year, but the cumulative effect over time is just very nice, as we have seen with molecular diagnostics. Even in 2025, that was a very nice growth market, mid- to high-single-digit growth market for us. Subhalaxmi T. Nambi: Perfect. Thank you so much. Operator: Our next question comes from Douglas Schenkel from Wolfe Research. Please go ahead with your question. Douglas Schenkel: Good morning, guys. Thank you for taking my question. So regarding first quarter organic revenue growth guidance, your description of the difficult comparison is accurate. However, there are two or three discrete items that seem like those should render the number a bit better. What I am thinking about are, first, the recovery of at least part of the $40 million in semiconductor-related revenue that you previously told us had slipped out of Q4 and you expected to recapture largely in Q1 but over the course of the first half. The second is the impact of pricing, which you started to get more aggressive with last May, and it takes time for that to come through quarter by quarter. But it seems like at this point, that should be more meaningful. And then, I guess the third I would point to is you did talk about an NMR placement slipping out of Q4, and maybe that gets recaptured in Q1. So when I think about those things, that does not seem consistent with mid-single-digit organic declines in Q1 even with the comp. Can you help us out? Gerald N. Herman: Yes, Doug, it is Gerald. With respect to the Q1 story, I think it is important to understand that some of our organic performance in Q1 2025 was pretty significant in terms of both mix and the actual operating profit performance. We had strong order performance in semi, in particular, in Q4 2025, and very strong bookings performance in that quarter. So we think that the timing of our existing orders that are principally driven by what happened in H1 2025 will not significantly improve our ability to execute on orders in the first quarter. So that becomes a headwind in its own right, but it is just the timing of our orders and the lead time required in order for those to execute into revenue. I would say, secondly, with respect to the semi orders that got pushed out, I think our commentary has been pretty consistent about hitting 2026. Not all of that is going to impact in Q1. I think we are expecting to see some improvement in Q2 from those, but not all of it hits in Q1 2026. And then on the NMR side, we do not have any specific NMR pushouts. I mean, we had some challenges in BioSpin for sure from a mix perspective. We saw some of that in the fourth quarter. Frank Laukien: But the 1.2 did not get delayed. It was in April—UK 1.2 gigahertz. Maybe, Doug, I mean, you know us really well. You know a lot of the moving pieces. Obviously, as we have said, mid-single digits—that is quite a range. But we just wanted to highlight that our revenue almost certainly will still be down, and I think mid-single digits, which is a bit of a range, we realize that, is not just prudent and conservative. I think that is the right number of outcomes for Q1. It puts a little bit into perspective the greater optimism that we have in resuming organic growth, and not only at the 1% to 2% level, but more meaningfully in the subsequent three quarters of this year. Douglas Schenkel: Okay. Alright. Thank you, guys. Frank Laukien: Thank you. Operator: Our next question comes from Luke England Sergott from Barclays. Jake: Hey, this is Jake on for Luke. Thanks for the question. I wanted to dig more in on China and that double-digit growth. Your mix there has historically leaned towards industrials, but with your build-out on the pharma portfolio, and this part of the market picking up there, what does your end-market mix in China look like now, and how should we think about it going forward? Frank Laukien: Yep. After a bit of a lull there when the CRO business went away—and then indeed we had very little on that—now China has recovered on the CRO side, and China is becoming a drug discovery and development biopharma powerhouse in its own right. So that is beginning to become noticeable. And academic spending there—there was decent academic spending and bookings in Q4, better than the year before. Whether some of that was stimulus or not is now not so clear. People cannot really say this is stimulus, this is other academic funding. It has become more nebulous and diffused. But it was healthier. So we did not know what expectations to have for China in Q4, but it ended up being one of the better performers in terms of bookings. And also, at the end of the year, we had some revenues there. Jake: Great. Thanks for that. Frank Laukien: Hard to read any trends into that. Clearly, the biopharma piece in China is growing—no questions about that. Of course, some of that is growing also in India and also the rest of APAC. From Korea to Taiwan to Japan, they all have improving biopharma trends for our particular tools. And, of course, there is a lot of semiconductor metrology in APAC outside of China—obviously Korea, but also Japan. So we are benefiting from that, mostly on the order side, which bodes well for gradual step-ups in 2026. Gerald N. Herman: I would just add that our guide for 2026 related to China is not strong. We are assuming that the basic revenue performance is largely flat, which is not a snapback from where it was several years ago. So we are not assuming strong growth in China in our current guide position. Jake: Great. Thank you. Operator: Next question comes from Daniel Gregory Brennan from TD Cowen. Daniel Gregory Brennan: Great, thank you. Thanks for the questions. Maybe the first one would just be on U.S. academic and government, Frank and Gerald. I know you made some comments already. Did you guys say what the instrument growth or trend was for you from that customer base in 2025 and what is assumed in 2026? And I think, Frank, you mentioned multiyear funding was capped. I am just wondering, is that multiyear funding no longer a headwind, or just how do we think about that for 2026? Frank Laukien: Yeah, good question. On the multiyear funding, quite honestly, I am not so sure. I am a little confused by that as well. I know that all plays itself out. Even if it is multiyear funding, it is more funding into the system, and some of that funding is a little bit fungible in some of these big academic research or disease research centers. If they get more funding in one area, it alleviates pressures elsewhere to transfer budgets, it makes more available. So even the multiyear grants are not bad for us even if they do not always immediately and directly fund another NMR or mass spec or microscope. For the first part of your question, bookings in academic and government in the U.S. for the year were down in the high teens. So not the worst outcome, but not a great outcome. That is clearly a significant headwind. We also felt it in revenues. But bookings were down significantly—in quarters, it was down more than 20% for the year. Daniel Gregory Brennan: And I think you said earlier, Frank, the outlook is expected flat in 2026. Is that right? Gerald N. Herman: This is for all of that stuff. Frank Laukien: Yeah. So this was not a U.S.-specific comment. But, as you know, China and Japan and Europe, the academic and government almost everywhere else was much better than in the U.S. Some were strong. Some were just solid. So that was a comment for all of that kind of stuff, not a U.S.-specific comment. I do not know that we broke that out. Therefore, you would still expect U.S. academic and government to be down organically in revenue for the year 2026. Daniel Gregory Brennan: Got it. And if I can ask one more just on semis, just so the guide is flat for semis. I know that business had been growing double digits. You were very positive on the AI connection. Can you just elaborate a little bit, just to be sure? Gerald N. Herman: Yeah, just to be clear. So with respect to full-year 2025 revenue performance, semi was flat. For full-year 2026 in our guide, we are expecting actually to be up in the low-single-digits range. And that is what we are currently thinking. By the way, just to clarify, even on the academic and government side, we are not expecting a significant growth level either in the U.S. or globally in our guide. Daniel Gregory Brennan: Right. Okay. Thank you very much. Operator: Our next question comes from Brandon Couillard from Wells Fargo. Brandon Couillard: Question. Frank, just directionally, which of the three BSI segments do you expect to lead in terms of revenue growth this year? And just one clarification on the ultra-high-field NMR systems. I think you said one install expected in 2026. You used to carry a pretty large backlog there. Do you expect to go back to, say, three or four installations in 2027 and 2028? Is that just a timing thing or something like that? Thanks. Frank Laukien: Thank you, Brandon. You were asking about the groups, right? Brandon Couillard: Yes. Frank Laukien: So we think the weakest growth in the groups this year in 2026 will be in BioSpin, whereas B-Nano and CALID and BEST are expected to grow organically, comparable—they will all three grow—but BioSpin, because of the longer-term bookings and also because of, for instance, no ultra-high field or maybe only one in revenue in 2026, BioSpin is going to be the laggard this year in revenue growth, and not normalize till 2027. Indeed, to your second part of your question, Brandon, there is some good activity, but trying to find funding, building consortia, etc. So I do not know that we will go back to four a year, but I think we will hopefully be able to go back to two or three a year in revenue by 2027 and beyond. That is our expectation. So 2026 will be a bit of a lull, which goes hand in hand, but it is not the only reason that BioSpin will be the growth laggard in 2026 for us. Brandon Couillard: Great. And then, Gerald, what do you have penciled in for net and other expense for 2026? And the cash flow was a bright spot in the fourth quarter. How do we think about free cash flow conversion this year? Thanks. Gerald N. Herman: Yeah. Just on the last point, we are quite pleased with how the fourth quarter came in as far as working capital conversion and our actual cash flow. For the quarter, free cash flow came in about $207 million. So quite pleased about that. As you already know, we have had a lot of effort related to inventory actions and happy to see that it is resulting in something positive. We could talk further about that. When you look at the interest expense line, we are thinking somewhere around the $35 million to $40 million range for interest expense. And then we have some offsets on that other income line. We can talk about more of this offline, but there are some nets that get you to, I think, a better performance on the other income line—net interest/other income line—for us in 2026. Operator: And with that, ladies and gentlemen, we will be ending today’s question-and-answer session. I would like to turn the floor back over to Joe Kostka for closing comments. Gerald N. Herman: Thank you for joining us today. Bruker’s leadership team looks forward to meeting with you at an event or speaking with you directly during the first quarter. Feel free to reach out to me to arrange any follow-up. Have a good day. Operator: Ladies and gentlemen, with that, we will conclude today’s conference call.
Operator: Good morning, ladies and gentlemen, and welcome to Vontier Corporation's fourth quarter 2025 earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star followed by zero for the operator. This call is being recorded on Thursday, 02/12/2026, and a replay will be made available shortly after. I would now like to turn the conference over to Ryan Edelman, Vontier Corporation’s Vice President of Investor Relations. Please go ahead. Ryan Edelman: Thank you. Good morning, everyone, and thank you for joining us on the call this morning to discuss our fourth quarter results. With me today are Mark Morelli, our President and Chief Executive Officer, and Anshooman Aga, our Senior Vice President and Chief Financial Officer. You can find both our press release as well as our slide presentation that we will refer to during today's call on the Investor Relations section of our website at investors.vontier.com. Please note that during today's call, we will present certain non-GAAP financial matters. We will also make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to risks and uncertainties. Actual results might differ materially from any forward-looking statements that we make today, and we do not assume any obligation to update them. Information regarding these factors that may cause actual results to differ materially from these forward-looking statements is available on our website and in our SEC filings. With that, please turn to Slide 3, and I will turn the call over to Mark. Thanks, Ryan. Good morning, everyone, and thank you for joining us. Let’s get started with a quick walk through of the key takeaways from the quarter and the year and why I am confident we are entering 2026 on firm footing. The headline here is that we finished the year strong, strengthened our foundation, and built meaningful momentum across the portfolio, led by high single digit growth in both our mobility tech and environmental and fueling segments, underpinned by robust demand in our convenience retail end market. We delivered 5% core growth in Q4. For the full year, organic sales grew nearly 4%, and EPS finished up 11%. Strong cash generation is one of the hallmarks of performance at Vontier, and in 2025, we generated over $460 million in adjusted free cash flow, which equated to about 15% of our annual sales. Q4 adjusted EPS was at the high end of our guide, despite the impact of a one-time inventory reserve adjustment related to the Invenco acquisition, and by higher health care costs at corporate. Underlying operational performance was in line with our expectations. 2025 was a year of strategic repositioning and strong execution. I am proud of the discipline our teams demonstrated in what turned out to be a dynamic macro environment. We are now more focused and better aligned around our connected mobility strategy, which fundamentally enables profitable growth and underpins innovation across Vontier. We are consistently demonstrating the power of having a synergistic portfolio, unmatched domain expertise, and global scale. We made significant progress on simplifying our organization. These actions unlock growth, enable us to be easier to do business with, and allow further efficiency across the organization. This next phase of simplifying our business will result in $15 million of incremental in-year cost savings and Anshooman will share more details on timing and phasing in his prepared remarks. We maintained a focus on innovation in 2025, deploying multiple new solutions and creating more durable competitive advantages. We are deploying unique value propositions that leverage integrated solutions and capitalize on strong secular tailwinds, including digitalization and the energy expansion. We are entering 2026 with good momentum, a stronger portfolio, and a healthy balance sheet. We are well positioned to deliver on our financial commitments and expect more benefits from our simplification efforts to drop through to the bottom line. As Anshooman will share with you, our guidance for 3% core growth and attractive operating margin expansion of 80 basis points at the midpoint is in line with the framework we shared with you in October. I am confident in our ability to execute and to continue building sustainable above-market growth. Let’s turn to Slide 4 for a quick walk through some of the high-level growth drivers by segment. Let’s start with EFS. Fueling has been a dependable growth engine over the last two years, growing at roughly 6% organic CAGR. Market growth has been broad-based with increased new site builds, retrofit activity, and equipment replacement all driving investment. We see sustained high levels of capital investment for both above-ground and below-ground fueling equipment, particularly in North America. A recent industry report from NACS shows that while the U.S. convenience store count remained relatively flat year over year, the number of fueling sites grew approximately 1%. An important takeaway from this is the larger national and regional chains with whom we have majority share positions are growing at faster-than-average rates. Environmental sales finished the year with growth in the low teens supported by strong upgrade activity for our connected automatic tank gauges and incremental share gains in submersible pumps with our new four horsepower offering. Both of these are a result of traction in new product development. For 2026, we expect growth to be in line with our longer-term targets of low to mid single digits, despite the tougher compares, especially in the first half. Mobility tech, and Invenco in particular, was another standout. Invenco closed the year with a revenue base of nearly $650 million, up 22% organically versus the prior year. This reflects strong demand for our innovative payment technologies, including those that leverage our NFX microservices architecture, the rollout of new products, and disciplined execution on a healthy order pipeline. Our new product introductions—FlexPay 6, Vehicle Identification System, and the NFX Payment Server—all contributed meaningfully to our growth last year. We have also been expanding our integrated offerings, and in Q4, we rounded out our unified payment solution by launching an indoor payment terminal that shares software across all devices. I will unpack Unified Payment in a moment because it is a strategic priority for us. The convenience retail end market is growing at a mid single digit CAGR, which is being fueled by strategic investments in food service and technology. Store formats are evolving to meet changing consumer needs and increase competition, and, as a result, are becoming more complex and costly to run. Our innovative portfolio positions us well to continue delivering above-market growth in this end market over the medium and longer term. DRB’s growth accelerated in Q4 driven primarily by improved pipeline conversion from ramping our new Patheon software. DRB inflected positive in the second half, and grew high single digits in Q4 almost entirely due to Patheon adoption. Customers who have upgraded are seeing growth in memberships, declines in churn, and mid-teens revenue growth on average. Repair Solutions gained momentum as we got traction with growth initiatives. Sales grew sequentially in Q4 in what historically has been our slowest quarter. Our initiatives drove low double digit growth for our diagnostic scan tools in Q4. On Slide 5, as I mentioned, I want to spend a minute on unified payment because it ties a number of themes together and will be a key enabler of the value-creation flywheel for our customers. We shared this with some of you at our investor event last fall. Over the last decade, payment complexity has increased rapidly—more devices, tighter security requirements, and a growing need to integrate payment across fuel dispensers, car washes, in-store point-of-sale, and EV chargers. The biggest pain point customers face is payment certification. It consumes significant amounts of their OpEx budget and scarce engineering resources. Certification costs can range from hundreds of thousands to millions of dollars annually, and those costs only rise as new offerings are added. Our unified payment solution addresses that head on by delivering an integrated solution, including outdoor payment terminals for multiple devices, the NFX electronic payment server that links terminals and payment processors, and the indoor payment terminals we launched in Q4 that share the same software as our outdoor devices. In other words, customers can cover every transaction on their sites with a single common platform. That common software architecture materially reduces certification costs, speeds feature deployment, and delivers a seamless consumer experience. Additionally, it enables our customers to drive revenue growth through offerings like media and loyalty. Perhaps most critical for Vontier, all of these opportunities pull through additional equipment and recurring revenues. We recently entered into an agreement for a full unified payment solution with a global c-store customer, one with whom we built a strong technology partnership, and their early feedback has been positive. With that, I will turn the call over to Anshooman to walk you through the quarter’s financial details and take you through our outlook. Thanks, Mark, and good morning, everyone. I would like to start off with a summary of our consolidated results for the fourth quarter on Slide 6. Total sales were $809 million with core growth of 5%, reflecting disciplined operational performance and continued resilience across our end markets. Adjusted EPS was at the high end of our guide at $0.86, up 8% year over year. Adjusted operating profit margin was 21.3% on one-time costs related to an Invenco inventory adjustment and higher health care claims. Underlying margin performance was in line with our expectations. In Q4, we delivered record free cash flow. On a full-year basis, this was 98% adjusted free cash flow conversion, representing an attractive 15% of sales and underscoring the strength of our cash generation model. Turning to our segment results, beginning on Slide 7. Environmental and Fueling Solutions delivered a strong finish to the year, with above-market growth demonstrating our strong share position with large national and regional operators. Total dispenser sales increased high single digits in the quarter. Environmental solutions grew double digits supported by ongoing upgrade activity and share gains related to new products. Fourth quarter segment margins expanded 90 basis points, the result of strong volume leverage and ongoing productivity actions. For the full year, EFS delivered 6% core growth, on top of 6% growth in the prior year, with dispensers growing mid single digits and environmental up low double digits. Full-year operating margin expanded 40 basis points, ending the year over 29%. Moving to Mobility Technologies on Slide 8. Core sales increased 8.5% for the quarter, with relatively broad-based growth across all business lines. At Invenco, we continue to execute on a new product development roadmap, with Q4 sales up 9% following six quarters of double-digit growth—a testament to our team and proof of the strategic value our suite of solutions is driving for our customers. DRB continued its growth trajectory, building on the momentum we began to see in Q3, and ended the fourth quarter up high single digits. Although down high single digits for the full year, DRB’s recent return to growth and the order momentum we are seeing positions us well for 2026. Overall segment margins declined 220 basis points for the quarter, mainly impacted by the one-time inventory adjustment at Invenco. Finally, turning to Repair Solutions on Slide 9. Sales increased sequentially as the growth initiatives helped offset macro pressures on technician spending. Distributor sell-through off the truck inflected positive for the first time all year in Q4, and high-ticket items like tool storage and diagnostics returned to growth. Fourth quarter sales declined 2%, with lower volumes pressuring margins. Turning to the balance sheet on Slide 10. As I mentioned earlier, we had another strong year of free cash flow generation, which provides meaningful flexibility as we execute on our 2026 priorities. In the quarter, we deployed an additional $125 million towards share repurchases, bringing total buybacks for the year to $300 million, equating to over 5% of our shares outstanding. Given the valuation disconnect relative to our long-term fundamentals, we continue to view buybacks as a compelling use of capital. We ended the year with nearly $500 million in cash on the balance sheet and closed the year with a net leverage ratio of 2.3 times, down from 2.6 times at the start of the year. Regarding our upcoming $500 million bond maturity, we intend to use cash on hand to repay $200 million and plan to enter into a $300 million, 364-day term loan agreement for the remaining balance. We believe this option meets our current financing needs, minimizes the interest headwind, and gives us flexibility to address future maturities. Turning to our outlook assumptions for the full year 2026 and Q1 on Slide 11. Our full-year guidance is consistent with the framework we provided you on our Q3 call. We expect sales in the range of $3.1 to $3.15 billion. At the midpoint, this assumes core growth of about 3% supported by low to mid single digit growth within Environmental and Fueling Solutions, mid single digit growth at Mobility Technologies, and flattish growth at Repair Solutions. We expect adjusted operating profit margins to expand 80 basis points at the midpoint, reflecting strong incrementals. As Mark disclosed at the start of the call, we expect to generate an additional $15 million of new savings. These are a result of our simplification efforts along with improved efficiency and velocity of product development with adoption of AI tools. A majority of the necessary actions are being implemented in Q1 with a modest ramp into the second half. Adjusted EPS is expected to be in the range of $3.35 to $3.50, representing high single digit growth year over year. This assumes share repurchases of less than $50 million for the year and does not include any additional capital deployment benefits. Adjusted free cash flow conversion is expected to be about 95%, which would equate to roughly 15% of sales for the year. Looking at our guide for Q1, we expect sales in the range of $730 to $740 million with core growth of about 1% at the midpoint. Margins will be relatively flat to start the year, reflecting year-over-year timing differences in R&D and other operating expenses, as well as less favorable mix. EPS will be in the range of $0.78 to $0.81, in line with our normal seasonality. With respect to the shape of the year, we would expect first-half sales at just over 48% of the full year, and EPS approaching 47%, both in line with our normal historical seasonality. I would also note that the year-over-year organic growth rates will look better in the second half, which embeds the first-half compare issues at EFS and Mobility Tech, and the timing of shipments of projects and backlog, which favor Q3 and Q4. This is the same view we shared with you on our last call. As always, we have included other modeling assumptions on the right-hand side of this slide. Just to highlight a couple of those, we do have some divestiture impacts to consider on the top line and the higher interest expense we noted last quarter, with step-ups beginning in Q2. With that, I will pass the call back to Mark for his closing comments. Mark Morelli: Thanks, Anshooman. We finished the year strong with meaningful progress strengthening our foundation and advancing our connected mobility strategy. That progress reflects disciplined execution across the organization. I could not be more proud of what we have been able to accomplish in the last twelve months. I am extremely grateful to our employees for their continued hard work and dedication. I am genuinely excited about the setup for 2026 and the way Team Vontier is engaged to create value for all our stakeholders. Looking ahead on Slide 13, I remain confident in the fundamentals we have built and the outlook for the year ahead. We have strong leadership positions in attractive and resilient end markets that offer significant opportunities. We have the right strategy in place to capitalize on the key secular trends shaping our industries, and we are executing that strategy thoughtfully and with purpose. Innovation has become another hallmark of Vontier, and our focus on product vitality is translating into stronger offerings, deeper customer engagement, and measurable commercial momentum. Combined with a culture centered around VBS, we have a solid runway ahead on our 80/20 journey, and we have a very visible path to expanding margins. Our business generates strong free cash flow, consistently in the mid-teens on a percent of sales basis, which gives us flexibility to continue driving above-market growth and returning capital to shareholders. We will continue to apply the same discipline to capital deployment that has served us well over the past several years. With that, operator, please open the line for questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. To ask a question, please press the star key followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. As a reminder, one question and one follow-up only, please. Thank you. One moment, please, for our first question. Our first question is coming from Andy Kaplowitz of Citigroup. Please go ahead. Andy Kaplowitz: Good morning, everyone. Morning, Andy. Mark and Anshooman, could you give us more color on what is going on in Mobility Tech? I think, Anshooman, you thought Mobility’s growth might be flattish in Q4 2025 and it came in at 8.5%. I think you were concerned regarding the timing of projects and when you could deliver hardware. Did that pull forward at all into Q4? And then you obviously have an expected back-end-loaded guide in Mobility. Can you remind us the level of visibility you have and maybe give us a little more color on the Invenco reserve and what happened there. Mark Morelli: Yeah. Good morning, Andy. I will start off, and I will turn it over to Anshooman. Look, I think the really good news on Mobility Tech is our innovation-driven growth is really bleeding through. I think when you look at the FlexPay 6 offering combined with the NFX—that is a version of the unified payment—and, you know, the good news is that we have had better uptake on that. You know, it is a product line that requires some level of not only certification but piloting with our customers, and the ramps are a little bit hard to predict, but I think the backdrop here, the momentum here, is pretty clear. And, you know, I think the real issue then is when you look at the outlook into the year, what do we see? I think you know that we have a first-half bit of a compare issue, but we see overall really strong growth coming from our Mobility Tech product lines, including the turnaround with DRB that is feeding into that and more visibility there. So overall, we are pretty happy with what we see. Anshooman? Anshooman Aga: Yeah. Andy, thanks for the question. From a linearity perspective, for 2026, linearity is in line with what we have typically had. Q1 is, at the midpoint of our guide, above 23.5% of our total sales for the year. The second half weighted was a little bit front-end loaded. The sales—the other thing, we do have some larger wins both in indoor payments, which is part of our unified payment offering, and also the Vehicle Identification System, another winner there, which—the project takes some time for going through the customer certification, as Mark mentioned. So that revenue ramps up in the second half of the year. So we feel pretty comfortable with our guide the way it is. Mobility Tech still growing mid single digits on really a strong growth in 2024 and 2025. Related to the inventory reserve, we did have an inventory reserve of $4 million at Invenco. This is for legacy inventory prior to acquisition. Now, keep in mind, back at the time of acquisition, supply chains were disruptive. Companies were keeping higher inventory levels, and then as we bought the business, we have spent quite a bit of time and effort on innovation and bringing in new versions of the product which, as you can see from our Q4 results, there is a very strong uptake in the market for this new version. And as a result, we wrote off some inventory that we had on hand from pre-acquisition time. Got it. And maybe a similar question for EFS. I mean, grew strongly in Q4 against tough comps. So maybe you can comment on the longevity and strength of the retail fueling cycle this time around because I think, Mark, as you said, channel checks seem good. I think I remember a slide maybe in the original launch or investor day where historically retail fueling does tend to clip along the mid single digits. So why cannot it continue to do that? Mark Morelli: Yeah. A lot of confidence in that. You know, we are at the NACS leadership summit this week, and so I am hearing directly from C-suite officers of our convenience store customers. And as you may know, we have about two-thirds share with the largest regional and national and international players. When you really look at the backdrop, in some of my prepared remarks, you know, I also spoke about this. And the color that I am getting directly from our customers this week—there is no question that they are advancing their footprints. Many times when you ask folks about their buildout plans, they are looking three years out on average. Some are even looking longer than that because of the sort of the footprint buildouts, real estate transactions. You know, building a new store does not take that long, but, you know, doing all the permitting, setting all that up, and they are very planful. And, you know, really cash-flow positive. They are not seeing anything in the economy right now. So that is about two-thirds of our business is really associated with that very constructive backdrop. So I think we are pretty bullish on what we are seeing. The new technologies that we are offering really help them solve high-value problems. As they build out their infrastructure, also as they do M&A and they combine with each other, it is a more complex backdrop for them to be able to manage. They are looking at new solutions such as loyalty and media to be able to drive more revenue, and they are seeing some really successful endeavors there. So yeah, we are very excited on the backdrop and what we see in our position in the market with number one, number two, of our strong brands, and we are doing it in a more unified concerted way that really helps them solve some high-value problems. So yep, we see continuation of this. Andy Kaplowitz: Appreciate all the color. Anshooman Aga: Thank you. Our next question is coming from Julian Mitchell of Barclays. Please go ahead. Julian Mitchell: Hi. Good morning. So, you know, I heard you on the sort of the phasing of the year, but maybe flesh out a little bit more, I guess, in that first quarter 1 point of organic growth, how are we thinking about the various segments? Because you had a very strong fourth quarter. Was there any kind of pull-forwards you could flesh out? Or is it just something around comps? Maybe help us understand the Q1 core growth across the segments, please. Anshooman Aga: Yes, Julian. Good morning, and thanks for the questions. So just from a segment perspective, we expect our EFS segment to continue to grow, probably in the low single digit growth range. Mobility Technologies will be flattish. That is really off the very strong compare in that business. And then Repair Solutions, again, we expect it to be relatively flat. Q1, as we said in the prepared remarks, the turnaround continues in that business with stabilization. Sales off the truck were up for the first time in Q4, so we are starting to feel incrementally better about the business, and we expect Q1 to be relatively flat year on year. Julian Mitchell: Thanks very much. And then on the operating margins, flat on year in first quarter, up 80 points for the year. When we think about kind of what is changing as we go through the year, I suppose there is some volume leverage that builds. It also sounds like that $15 million savings number is sort of year on year a bigger weighting in the back half. Just maybe help us understand kind of how drivers of that improved margin year on year split between those two. And then price/cost, anything changing there first half versus second half because there are tariffs anniversary. Anshooman Aga: Yeah. I got it. So it is some of the things you mentioned, Julian, but I will start off by saying Q1 margin last year were the highest for the whole year. We were at 21.7% in Q1 last year, which was about 40 to 60 basis points higher than all the other three quarters. So it was the highest margin quarter, and typically our typical seasonality—through volume leverage, Q4 is usually the highest margin quarter for us. We will get volume leverage as the business continues to perform better. Incrementals are relatively good in the business. But also, a lot of the $15 million in-year savings, a lot of those are in flight right now. So the savings start ramping in Q2, but really fully ramp in the back half of the year, Q3, Q4. So definitely, that will add to it also. Julian Mitchell: Got it. And price/cost, is that pretty steady through the year? Anshooman Aga: Yeah. Price/cost is pretty steady through the year. We ended 2025 a little over 1%. For 2026, again, I think we will be somewhere around 1.3% average price increase. You know, tariffs hopefully are behind us from a lumpiness perspective, and we can go to our normal cadence of price increases. Great. Thank you. Thank you. Operator: Our next question is coming from Nigel Coe of Wolfe Research. Please go ahead. Nigel Coe: Thanks. Good morning, everyone. Okay. So yes, another question on phasing. So I am assuming the first half/second half sort of implies, I think, flattish core in 2Q. Very similar EPS to 1Q. Just want to make sure that is the case. And then you have got a much, much tougher comp in the second quarter given the pull-forward. So I just want to make sure you are confident that flat core is about the right number. Anshooman Aga: Yeah. We feel pretty good given the visibility we have in the business around our framework that we provided, with half one being a little over 48% of our total sales, EPS being a little under 47% of our total year. It is in line with our typical seasonality. Also, you know, how our businesses are shaping up, how backlog is shaping up, how orders came in in January, all gives us confidence in the framework we have provided. Nigel Coe: Okay. Good. And then the Patheon sort of penetration. Just remind us where we are with that. It seems like there is some really good momentum there. And then I am just wondering, you know, the car wash business seems to be maybe an industry that might benefit from the—or rather the tax incentives out there, you know, could incentivize some investment. I just wonder if you have seen any return to activity in the tunnels. Mark Morelli: Yeah. The Patheon software, I think, is a real success for us. You know, it is a product we have been working on for a bit, trying to bring it to market in the right way. And I think what we are seeing now are real proof points that it helps the folks that are the larger operators in the market. How do they run a better car wash? How do they also attract consumers to their site? It is also—they have very high labor turnover, and the ability for them for ease of use and training of employees and managing a network of car washes is certainly a real selling feature here. You know, the way we are getting traction in the market and the turnaround in DRB, which you see real momentum building in the second half of this past year, is not off new tunnel builds. New tunnels have not been coming to market. As you know, the business overall was really impacted by higher interest rates where folks were building out tunnels at a very rapid rate, and then it slowed down. As we project into this year, I think we have a view that tunnel builds is probably going to be flat year over year. And with that assumption, we will definitely make progress on Patheon because it, you know, it takes a while for folks to get into that new software. And so we have got a pipeline, we have got really good pilots out there. And the great news is they have proof points of that system working with other blue-chip customers in the space. So I think we will continue to see momentum there. If we get any benefit from tax benefits, both on the car wash side or in Matco, or how that drops through, I think is a little bit of a question mark on how that will play through. I think we are all watching that to see if that will have some impact, but that is not included in our guide. Anshooman Aga: Okay. And, Nigel, I will add that Patheon is pretty early in its upgrade cycle. We have had some early adopters and larger customers that have deployed it, but we still have a pretty big install base of our legacy solution, SiteWatch, out there. So there are a lot of good opportunities to continue to sell Patheon in the marketplace. Also, the revenue on Patheon is higher than our legacy solution given higher capabilities and advantages it provides to our customers. Great. Thank you. Operator: Thank you. Our next question is from Katie Fleischer of KeyBanc Capital Markets. Please go ahead. Katie Fleischer: Hey. Good morning, guys. Just to go back to the one-time adjustment in Invenco. Is there a way for us to think about what margins would have looked like this past quarter without the impacts of that adjustment? Anshooman Aga: Yes. Inventory adjustment was $4 million, so that is about a 130 basis point impact to Invenco’s margins for the fourth quarter. So underlying margins would have been down slightly still year on year. Now Q4 last year at Mobility Tech was a pretty tough compare from a margin perspective, and we did have some mix also that we called out between the different product lines in that business. But underlying margins for Mobility Tech would have been around 20% for Q4. Okay. Great. Katie Fleischer: And then on Repair, how conservative do you feel like the outlook is for flattish growth in 2026? I know it is still really early to call on collections in that business, but just given some of the improving trends that you are seeing there and some potential help from the macro environment, what is the upside to that growth outlook? Mark Morelli: Yeah. Katie, thanks for the question on Repair. Look, the good news is definitely seeing some traction. The areas that make the most amount of sense given the K-shaped economy that has been playing out is for repair technicians to be more productive. I think we all recognize that the backdrop on the repair market is pretty healthy. You know, you have got a car park now that is almost thirteen years old. I mean, that is kind of ridiculous to see how many older cars are actually on the road, and that is really good for the sweet spot of repair. And vehicle miles traveled are up. You know, overall, it is a pretty good environment for repair. I think the problem we all recognize is that folks might be holding back from some of those repairs, as well as the technicians are part of the working class that is also under pressure. And so if they can be more productive on the job site, then they are going to be willing to spend money in two areas that we have definitely made progress on are in the diagnostic area, where we have not sold to our potential on diagnostics. We have got a really good lineup and really good price points on the diagnostic line, and it is a very capable multi-tiered product line. And we are being a lot more effective with training and selling that, and you saw that happen in Q4. We think there are legs to that. And then we have actually done really well on these productivity carts, where you are able to organize your tools, bring them right into the job site, right into the work that is being done, and the technician can be a lot more productive there. And so those are the two general categories we are seeing the uplift occur in. And I think when you look at that going into the year, you know, it is a little bit hard to predict what is going to happen. You know, I think we do not really know what is going on with the consumer this year. It is a little bit hard to predict how tax breaks might affect that. And so I think from what we see right now, I think it is a prudent guide. Katie Fleischer: Alright. Thanks, Mark. That is really helpful. Operator: As a reminder, should you have a question, please press star followed by one. Our next question is from David Emerson Ridley-Lane of Bank of America. Please go ahead. David Emerson Ridley-Lane: This is David Ridley-Lane on for Andrew. Just two quick questions and then a longer one. So just housekeeping. What was book-to-bill in the quarter? And then also, just to confirm, it sounds like Matco Expo timing is again in 2026? Anshooman Aga: Yes. So our orders were up low single digits on the back of a pretty strong Q4 last year. So the book-to-bill was just under one for the year. Timing is for Matco Expo, yes. The sales will come in Q2. It is actually at the very tail end of Q1, so the last three to four days of Q1 saw the sales. The bookings will start coming in in Q1, but the actual sales, to my recollection, are probably in Q2. Yeah. Mark Morelli: And, David, we hope not to change that. I think it was very painful for investors to kind of follow the changing of the timing from Q1 to Q2. So, you know, we promise you we are not going to flip-flop back and forth on the Matco timing. The reason why we did push to Q2 is that our franchisees, distributors, are really fond of better weather. Sometimes they bring their families on vacation there, and they were looking at a little bit better weather to do that. And it was something we really did a bit of hand-wringing on. But we think it is more customer-friendly, distributor-friendly, and so that is why we changed it, but we promise not to change it again. David Emerson Ridley-Lane: Got it. Understood. We all like better weather. And then maybe I am not understanding some of the dynamics here for gas stations, but I know that merchant acquirers will sometimes give these payment terminals—the in-store payment terminals—away as part of a multiyear agreement. So like First Data will give you a Clover terminal. Elavon, etcetera. I get why you need to have the full suite of payments and hardware. But is the right way to think about this kind of like a below-average hardware product that allows you to win the above-average-margin recurring revenue and sort of offer the full suite? How would you kind of size that up? Anshooman Aga: No. These are not below average. We do—definitely the hardware that we are providing with FlexPay 6, both outside on the dispenser but also inside the store, are good-margin products. You know, usually, when a payment processor gives away hardware for free, their swipe fee or the transaction fee that they are charging the merchant is a lot higher because they have to make up the money. Most of our larger customers and even the smaller ones take benefit of industry—the NACS Association has agreements with merchant processors. So usually, they take advantage of lower rates, so they are not getting the hardware for free. And then, you know, really, when you start thinking about the connectivity between the different payment terminals on-site, whether it is inside the store, outside the store, on the car wash, on an EV charger, and really as you start bridging that to functionality like order at the pump, when you start bridging it to functionality like loyalty, media, having that common payment device is extremely important, and that was what Mark was covering in the prepared remarks around unified payment. Layer that in with NFX, and customers like Shell where we have deployed this are seeing significant advantage with managing the complexity of payment regulation, and other customers for which speed is very important are seeing improvement in speed of the transactions and increasing the throughput from that perspective. So significant advantages to our unified payment solution. Mark Morelli: Now one of the areas that, you know, we are hearing also at the event that we are at this week is clearly the complexity of managing their assets, and these are very successful storefronts that are going in at sometimes these customers at a pretty fast clip. And it is how do you manage your costs going forward. So whether somebody might get a free piece of hardware here or there, that is not predominantly what they are interested in. They are interested in the cost of that infrastructure and what that costs them, the complexity by which it is being managed, the ability for a microservices software platform to also be modular in a way where that can enable loyalty. Loyalty is a big deal if they can engage with that, if they can engage through media, bring people inside the stores. Now, there are big uplifts that can happen from that. And then they are also predominantly really interested in the lifecycle cost. These folks hang on to these pieces of equipment for long periods of time, and they look at the lifecycle cost management capability. It is not typically first cost that wins in the market segment that we are mostly focused on. It is really the lifecycle cost that wins. I think when you look at our offerings, we have real competitive advantages here. David Emerson Ridley-Lane: Got it. And if I could squeeze just one more in. Can you—you know, as part of your simplification plan, you are decreasing the number of dispenser variants, the SKUs. Can you buy a GVR fueling dispenser in the United States without Invenco hardware? Mark Morelli: Can you repeat it again? Maybe I can understand the question? David Emerson Ridley-Lane: I know you are decreasing the variants of fueling dispensers as part of your simplification efforts. And I am just wondering, for U.S. gas stations, is there a with-Invenco option and a without-Invenco option? Or is Invenco now just there in the base? Mark Morelli: Well, Invenco is the name that we use for that technology suite and the payment kits. And I think it is a differentiating solution that we offer as part of this unified payment, and that is what customers get with that unified payment offering. So it is really part of the suite that we offer. Anshooman Aga: But we sell dispensers with payments. There is no option in the U.S. to buy a dispenser without our payments. Katie Fleischer: Got it. David Emerson Ridley-Lane: Thank you very much. Operator: There are no further questions at this time. I would now like to turn the call back over to Mark Morelli for his closing remarks. Mark Morelli: Yeah. Thank you. Thanks again for joining us on the call today. We are entering 2026 with some really clear strong momentum, and we have a solid path to above-market growth and attractive margin expansion in front of us. And I am confident our teams will continue to execute along that path. We appreciate your continued interest in Vontier and look forward to engaging with many of you over the next several weeks. Have a great day. Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning, and thank you for standing by. Welcome to Birkenstock Holding plc's first quarter fiscal 2026 earnings conference call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If you would like to ask a question, please press star-1 to raise your hand. The company allocated 45 minutes in total to this conference call. I would like to remind everyone that this conference call is being recorded. I now turn the call over to Megan W. Kulick, Director of Investor Relations. Megan W. Kulick: Hello, and thank you everyone for joining us today. On the call are Oliver Reichert, Director of Birkenstock Holding plc and Chief Executive Officer of Birkenstock Group, and Ivica Krolo, Chief Financial Officer of Birkenstock Group. Alexander Hoff, VP of Global Finance, will join us for Q&A. As a reminder, we preannounced certain first quarter results in conjunction with our Capital Markets Day on January 28. On this occasion, we took a deep dive into our business model and our growth strategy for the next three years combined with a Q&A session, which covered a wide variety of topics. For those of you who were not able to attend our Capital Markets Day or follow via live stream, the presentation materials and replay are available on our investor relations website at birkenstock-holding.com. Today, we are reporting the financial results for our fiscal first quarter ended 12/31/2025. You may find the press release and a supplemental presentation connected to today's discussion on our investor relations website at birkenstock-holding.com. Results have also been filed on Form 6-K with the SEC. We would like to remind you that some of the information provided during this call is forward-looking and accordingly is subject to the safe harbor provisions of federal securities laws. These statements are subject to various risks, uncertainties, and assumptions which could cause our actual results to differ materially from these statements. These risks, uncertainties, and assumptions are detailed in this morning's press release as well as in our filings with the SEC, which can be found on our website. We undertake no obligation to revise or update any forward-looking statements or information except as required by law. We will reference certain non-IFRS financial information. We use non-IFRS measures as we believe they represent the operational performance and underlying results of our business more accurately. The presentation of this non-IFRS financial information is not intended to be considered by itself or as a substitute for financial information prepared and presented in accordance with IFRS. Reconciliations of non-IFRS measures to IFRS measures can be found in this morning's press release and in our SEC filings. I will now turn the call over to Oliver. Oliver Reichert: Good morning, everybody. It was great seeing you in New York two weeks ago. Just to recap some key points from the day. We believe we are a one-of-a-kind purpose-driven brand with a huge runway ahead. Our unique business model is designed to deliver resilience, with sustained long-term top line growth, industry-leading margins, and strong free cash flow. Over the next three years, we expect to continue to deliver 13% to 15% top line growth in constant currency, and 30% plus EBITDA margins in an environment that has substantially changed since our IPO. Why are we so confident in our growth potential? Our total addressable market includes every Homo sapiens sapiens. That provides a very long runway for global growth. The three-year growth algo of 13% to 15% in constant currency reflects our commitment to manage the business with discipline by geography, channel, and product. By being vertically integrated, we are capacity constrained by design. So to grow our business profitably, we are committed to maximize profitability per pair while protecting brand equity. The Americas, our largest segment, continues to grow double digit. Even in our most developed market, the U.S., we sell only 45,000 to 50,000 pairs per million people, or roughly 5% penetration. So there is still substantial room for more growth. As you know, our margins in the U.S. face headwinds from additional tariffs and the weaker dollar. However, our resilient business model allows us to steer growth between geographies to optimize margins under this new reality. In EMEA, our highest margin segment, markets like Germany, Denmark, and Austria have reached penetration levels similar to the U.S. and still generate double digit growth. But we are underpenetrated in other markets like France, Spain, UK, and the GCC. So we see even stronger growth potential in these countries and very high margins. Finally, the largest opportunity for long-term growth remains in APAC countries such as China, Japan, South Korea, and India, where we are highly underpenetrated but realize strong margins and some of our highest ASPs. We will steer APAC growth at double the pace of the other segments over the next three years. This means we will double our APAC revenue by 2028. For the foreseeable future, we expect B2B growth will continue to outpace B2C growth, but we are working to balance channel growth and strengthen our DTC business. B2B growth is driven by the trend towards in-person shopping. We are investing in our own retail to capture more of this in-person demand and promote newness. In online, which accounted for 80% of our revenue last year, we are not sitting on our hands. We are transforming our capabilities to convert more of the live to our e-com business value of the brand fan. We do this all within the context of our vertically integrated supply chain and manufacturing capabilities. Our supply chain will deliver the unit growth required to achieve our three-year targets. Now on the quarterly results. We delivered again a strong quarter with revenues of €402 million, up 11% on a reported basis and 18% in constant currency, well above our 13% to 15% full-year guidance. We saw strong demand and brand momentum during the important holiday shopping season. As expected, our B2B business outperformed DTC during the quarter. B2B was up 24% in constant currency while DTC was up 12%. As you know, over 90% of the B2B growth comes from within existing doors. We tightly manage our distribution as relative scarcity and channel health remain top priorities for us. We will never compromise on our pull model. The ultimate truth for the brand health is sell-through at full price, and that remains very high, over 90%. We continue to deliver as promised in our white space opportunities. In APAC, we grew revenues 37% in constant currency, more than double the pace of growth of the Americas and EMEA. In owned retail, we added nine new stores, ending the quarter with 106 stores. We are well on the way to deliver the 40 stores we promised for this fiscal year. This will allow us to capture more in-person shopping demand, younger shoppers within our own DTC business. It also allows us to showcase the full range of our collection, newness, and special editions not available in B2B. The closed-toe share of revenue reached close to 60% of revenue during the first quarter, which is seasonally the highest quarter for our closed-toe business. We saw very strong sales in clogs, including the Boston, a category-defining hero silhouette celebrating its 50th birthday this year. We also saw strength in other clog silhouettes such as Naples and the Luthrie. We are successfully developing the brand beyond sandals, making it a true four-season brand. I will now turn it over to Ivica to discuss our financial results and outlook in more detail. Thanks, Oliver. I am happy to share with you details of Birkenstock Holding plc’s Ivica Krolo: performance for fiscal 2026. We exceeded our targets even in the face of a significant headwind from FX on our reported numbers. We generated first quarter revenues of €402 million, growth of 18% in constant currency. Reported revenue growth was 11%, due to the historically strong depreciation of the U.S. dollar and Asian currencies compared to 2025. This caused a 670 basis point headwind to revenue growth in the quarter. We saw strong growth across all segments in the quarter. The Americas segment was up 14% in constant currency, EMEA was up 17%, and APAC up 37% in constant currency. By channel for the quarter, B2B was up 24% in constant currency on the back of strong holiday demand at our key partners, and D2C sustained double digit growth, up 12% in constant currency. Gross profit margin for the first quarter was 55.7%, down 460 basis points year over year. Adjusted gross profit margin, including the reversal of distributor markup associated with the acquisition of our Australian distribution partner, was 57.4%, down 290 basis points. As we discussed at the CMD, adjusted gross profit margin excluding 220 basis points of pressure from FX and 130 basis points of pressure from incremental U.S. tariffs was up 60 basis points year over year. Selling and distribution expenses were €126 million in the first quarter, representing 31.2% of revenue. This was down 150 basis points from the prior year, mainly due to a higher B2B share year over year. Adjusted general and administration expenses were €29 million, or 7.2% of revenue in the quarter, up 50 basis points versus prior year. Adjusted EBITDA in the first quarter of €106 million was up 4% year over year. Adjusted EBITDA margin of 26.5% was down 170 basis points year over year. Excluding FX and tariff impacts, adjusted EBITDA margin was up 190 basis points to 30.1%. Adjusted net profit of €49 million in the first quarter was up 47% year over year. Adjusted EPS for Q1 was €0.27, up 50% from €0.18 a year ago, driven by strong operational performance, lower interest expenses, €10 million of income from the change in valuation of the embedded derivative, a lower effective tax rate, and lower share count following the €200 million share repurchase we executed in May 2025. As is usual in the first quarter, we used €28 million in operating cash compared to a use of €12 million in Q1 2025. This is due to working capital seasonality and income taxes paid of €48 million. We ended the quarter with cash and cash equivalents of €229 million. Our inventory-to-sales ratio was 39% in the quarter, flat with a year ago. Our DSO for the quarter were a healthy 20, up from 15 a year ago, primarily due to the higher B2B mix. During the quarter, we spent approximately €38 million in CapEx adding to our production capacity in Aruka, Görlitz and Pasewalk, and continuing our investments in retail and IT. This also included the €18 million purchase price of the Wittichenau facility announced last year. Our net leverage was 1.7 times as of 12/31/2025, up from 1.5 times at 09/30/2025 due to a normal cash seasonality. Turning to our outlook for fiscal 2026. We expect second quarter revenue growth in constant currency within our annual guidance of 13% to 15%. We will experience significant headwinds from FX and tariffs in the second quarter. Regarding FX, we will see an especially strong headwind in the second quarter. As a reminder, 2025 represented the strongest quarter for the U.S. dollar with an average euro to dollar exchange rate of 1.05 prior to Liberation Day. At today's euro/U.S. dollar exchange rate, we expect approximately 700 basis points of headwind to revenue growth in the second quarter. The margin impact to gross profit and adjusted EBITDA from FX will be 200 to 250 basis points in the second quarter. As a reminder, nearly all of our COGS are in euro and the majority of SG&A as well. As such, the absolute euro impact of movements in FX to revenue flows through by about 90% to gross profit and about two-thirds to adjusted EBITDA. Regarding tariffs, we expect similar margin pressure as we saw in Q1, or roughly 100 to 150 basis points. At our Capital Markets Day, we reiterated our guidance for 2026 for constant currency revenue growth of 13% to 15%. While we clearly came in ahead of that at 18% in the first quarter, I remind you that the first quarter is our smallest quarter in terms of revenue, so it just does not carry the weight that the remaining three quarters have on the annual growth rate. The FX headwind should be about 350 basis points for the full year, resulting in revenue growth of 10% to 12% to €2.30 to €2.35 billion. This assumes an average euro to U.S. dollar exchange rate of 1.07. We expect adjusted gross margin of 57% to 57.5% in fiscal 2026, inclusive of the 100 basis points pressure from FX and 100 basis points from incremental U.S. tariffs. We expect adjusted EBITDA of at least €700 million for the year, implying an adjusted EBITDA margin of 30% to 30.5% inclusive of the pressure from FX and tariffs totaling 200 basis points. Excluding the impact of these external factors, forecasted adjusted EBITDA margin would be 32% to 32.5%. Our expected tax rate should be in the range of 26% to 28%. Adjusted EPS is expected to be €1.90 to €2.05 including approximately €0.20 to €0.50 of pressure from FX. This is not including the impact of any additional share repurchases. We intend to repurchase shares for total consideration of €200 million during fiscal 2026 subject to market conditions. CapEx should be in the range of €110 to €130 million. Net leverage target for the end of fiscal 2026 of 1.3 to 1.4 times excluding the impact of additional share repurchases. With that, I will turn it back to Oliver to close. Oliver Reichert: Thanks, Ivica. We are confident in our business model and its resilience. Demand for our beloved brand remains strong. The runway for growth is huge. At the midpoint of our growth target, we expect to add €1 billion to our top line by fiscal 2028. We will do this while maintaining 30% plus adjusted EBITDA given our ability to steer the business between channels and geographies. I will now ask the operator to open the call for questions. Thank you. Operator: We will now begin the question and answer session. Please limit yourself to one question only. If you would like to ask a question, please press star-1 to raise your hand. To withdraw your question, press star-1 again. Please stand by while we compile the Q&A roster. Your first question comes from the line of Matthew Robert Boss with JPMorgan. Your line is now open. Please, Matthew, go ahead. Matthew Robert Boss: Great. Thanks. So, Oliver, could you break down the drivers supporting your confidence in durable demand momentum for the brand globally? Maybe if you could touch on current sell-through rates, full price demand indications from wholesale partners, and new customer acquisition? And then near term, have you seen any change in brand momentum so far in the second quarter? Oliver Reichert: Hi, Matthew. Thanks for your question. As we shared in New York, we see a very long runway for growth for the brand. It is below 5%. So we continue to grow there and in other territories double digits, and all this with a 90% plus full price realization across all channels. I think that is really something to mention because that is Matthew Robert Boss: And Oliver Reichert: really outstanding. Our order book for '26 and the and the and the next years remains very strong. We strictly allocate our partners to maintain scarcity and fulfilling roughly 70% to 80% of the wholesale demand. So 20% to 30% are unfulfilled out there. And we have seen no pushback from partners on any price increases or any kind of adjustments we did so far. You asked about the customer acquisition. I would say the new customer acquisition comes primarily from our B2B channels where partners benefit most from the strength of our brand and use us to drive traffic to their stores. You know the attraction, especially to Gen Z in this channel, is very, very Megan W. Kulick: strong. Oliver Reichert: Within our own D2C, the strongest indicator of new customer growth is our membership program, which is up over 20% year over year. You all have seen the queuing in front of our own retail stores, but we only have 106 at the moment. So our own retail is definitely in the future a very, very important pillar to talk about brand heat on top of that. But asking about second quarter, you know, cannot deliver any outlook here. We see the momentum continue in line with our guidance of 13% to 15% revenue growth in constant currency. So I think we are good on track. Matthew Robert Boss: Great color. Best of luck. Operator: Your next question comes from the line of Simeon Siegel with Guggenheim. Your line is now open. Please go ahead. Matthew Robert Boss: Thanks. Hey. Good morning, everyone, or good afternoon. Nice to see you recently. So just, Oliver, recognizing you guys are in this enviable position where you do supply less than demand, how are you deciding where to allocate your inventory across channels and geographies just to optimize the brand strength reaching new customers, and then, where your EBITDA dollars per pair come in? And then, Ivica, just recognizing tariffs and inflation, what were inventory up in units rather than in dollars? Thanks, guys. Oliver Reichert: Hey, Simeon. It is Oliver. Thank you for your question. As you know, we will see our product in the most profitable channels and regions to make sure our brand is well balanced in terms of revenue unit needs, or unit consumption, and the maximum resilience. Just to be clear, channel drives the margin. Geography is less relevant. So it is not really a shift from geography to other geographies. It is really, like, very detailed, very precise shifting from this channel in this geography to another channel in another geography. So and that is what we are doing mindfully. And I think the second part of the question will be answered by Ivica. Megan W. Kulick: Can you repeat the question, Simeon? We did not quite hear it. Matthew Robert Boss: I just looked at your balance sheet inventory in dollars. Curious if you could tell us what is up in units. Over here. Ivica Krolo: Hey, Simeon. It is Ivica speaking. So we are not disclosing that in detail as we have not disclosed that in the past, and we are not intending to do that in future as well. Matthew Robert Boss: Okay. Sounds good, guys. Best of luck for the year ahead. Operator: Your next question comes from the line of Anna Andreeva with Piper Sandler. Line is now open. Please go ahead. Anna Andreeva: Great. Thank you so much for taking our question, and it is nice to see you guys the other week. So your first quarter growth came in at 18% in constant currency. That is nicely ahead of the 13% to 15% guide for the year. Can you talk about where is that slowdown for the rest of the year coming from? And are you just being conservative? Just some more color on that would be great. And just as a follow-up to Ivica, can you help us with seasonal progression of how we should think about margins across the quarters for the rest of the year, just considering the outlook for FX, the tariff timing, capacity absorption and some other items? Thank you so much, guys. Ivica Krolo: Hey, Anna. Thank you for your question. It is Ivica. Yes, the 18% constant currency growth in Q1 2026 is indeed well above the 13% to 15% guidance for the year. In general, we are always conservative this early in the year. There is a lot ahead of us in fiscal 2026, and the second half is naturally more difficult to predict as you know, given the heavier mix of D2C, which is why we remain conservative. So while we are off to a great start and demand remains strong, as Oliver already mentioned, we think it is just prudent to stick with the current guidance for the year. And as a reminder, Q1 is our smallest quarter for the year. Last year, it was only 17% of the annual revenue, so it just does not carry the same weight for the remainder of the year. And with regards to your second question on the seasonal progression and margin development, so as you know, we do not guide in detail on a quarter basis. However, we pointed out a couple of points and important factors. So on top line first, FX impact will be the heaviest in Q1 and Q2. Q1 headwind was 670 basis points. Q2 at current FX even around 700 basis points. So the margin impact to gross profit and adjusted EBITDA from FX will be 200 to 250 basis points in Q2. Incremental tariff impact will have more pronounced impacts in Q1 to Q3, but less so in Q4 2026 given that the tariffs began to hit us in Q4 2025 where we already showed a 100 basis points impact for that quarter. For Q2 2026, expect a similar margin pressure as we saw in Q1, so roughly 100 to 150 basis points. Finally, with regards to absorption, we will be completing the absorption, especially with regards to our Pasewalk facility by Q3 2026. As you know, Q2 is an important quarter for our B2B business with significant shipments to our partners for the spring/summer season. The mix in Q2 is more heavily weighted to B2B, so expect the usual seasonal decline in gross margin and increased EBITDA margin compared to Q1, but all within the context of our full-year margin guidance. Operator: Your next question comes from the line of Michael Binetti with Evercore ISI. Your line is now open. Please go ahead. Michael Binetti: Hey. Thanks for all the information here, guys. I just wanted to ask a little bit on maybe on the OpEx or the SG&A. I think the guidance for the rest of the year flattens out from some nice leverage in the first quarter a little bit. Maybe you could just talk about why there is I am curious if we are going to be going through the rest of the year with double digit growth, what is there a chance to find some more leverage on SG&A? Or how should we think about SG&A at a double digit growth pace even if it slows from first quarter? And then I also just wanted to ask as we head into the spring and summer, Oliver, maybe just a quick thought on some of the products that are the ones that the retailers are the most excited about, maybe something that we can Google or watch your social media trends? What are the big products that we are going to see for the summertime here as we get into the main season? Thanks. Ivica Krolo: Hey, Michael. Thank you for your question. Ivica speaking. I will take the first part, with regards your question on margin improvement and SG&A. So as you know, the tariff and FX drag is very real for us and impacting our margin by 200 basis points for fiscal 2026. Without that pressure, EBITDA margin would have been up nicely year over year, and this is also what we pointed out at our Capital Markets Day, that we are getting operationally better. Could that be more? Yes, always. But we need to balance expanding margin with reinvesting that margin upside back into the business to support sustainable revenue growth. And this is particularly in our D2C business, which brings lower margin but higher absolute profitability per pair. But our D2C business is still 80% online, which has little operating leverage given the high variable cost structure. So we are accelerating our store growth to drive more retail as part of our D2C mix, which should allow for some four-wall operating leverage over time. We are accelerating our investments in manufacturing, retail, in e-com, and logistics, and that will constrain EBITDA margin expansion in the near term. And referring to what Oliver has said earlier, in a constrained situation, which we are in and which we are in by design, we are steering the business and allocating products in a way to optimize margin, mindfully and gradually, that this will pay off over time. With regards to your question on product and spring/summer, handing back to Oliver. Oliver Reichert: Hi, Michael. It is Oliver. What we see globally, especially in our own retail spaces and also in the order book of our big wholesale doors we are delivering, they are looking for much more elevated styles in both ways, in closed toe and in open toe sandal. What we see is a very strong momentum in open toe in elevated styles, you know, and in every price segment. So from, you know, big buck EVA up to Naples Wrap, which is a closed-toe silhouette. Open toe Florida in a very elevated execution. The Gizeh is coming back, so the thong sandal. So it is going, as always, in the same direction. They go into more expensive price groups, more elevated executions. That is super interesting for our partners, and it is super interesting for our own retail stores. That is a big trend we see also coming from APAC, where our Paris office is delivering open toe silhouettes north of $250 in the APAC region. This is already 30% to 40% of our own retail. So this is a very strong momentum in this high price level and these more elevated styles. Michael Binetti: Okay. Thanks a lot. Appreciate it. Operator: Next question comes from the line of Paul Lawrence Lejuez with Citi. Please go ahead. Anna Andreeva: Hi. It is Tracy Kogan filling in for Paul. Was hoping we could touch on the balance sheet and your uses of cash. With the stock trading where it is, I was wondering if you were thinking about being more in the open market with your €200 million buyback rather than waiting for private equity. And then wondering if you could talk about your willingness or the insiders' willingness to buy stock at current levels. Ivica Krolo: Hey, Tracy. Thank you for your question. It is Ivica. Anna Andreeva: I Ivica Krolo: 100% agree. The stock is too cheap. It does not reflect the fundamental value of the underlying business. Not at all. As you know, we announced our intention to repurchase €200 million in shares in fiscal 2026, so we will be executing this subject to market conditions. If you remember, last year we executed a repurchase in May in conjunction with a secondary offering, given the limited free float already in the market. A similar structure for this buyback is an option. But so are open market repurchases as well. Then covering the second part of your question with regards to insider buying. Well, we have been in a blackout period for most of the year. Our standard blackout period runs from two weeks before the end of our fiscal quarter to the day after we report that quarter. So in the case of Q1, the blackout started on December 15, ends tomorrow. Additionally, we have had transaction-related blackouts due to the Wittichenau acquisition and the Australia distributor acquisition. Finally, we get blacked out around any secondary transaction, potentially by Catterton, or altogether, that has not left any window in the year I have been in at Birkenstock. And I assure you it is not the lack of desire to buy shares at this price. Anna Andreeva: Thank you. Good luck. Operator: Next question comes from the line of Laurent Andre Vasilescu with BNP Paribas. Your line is now open. Please go ahead. Laurent Andre Vasilescu: Good morning. Thank you very much for taking my question. Ivica Krolo: Oliver, Ivica, I want to ask about your own stores, which are becoming increasingly important into your DTC business. I think, Oliver, you mentioned that last year, e-commerce was 80% of the mix, 20% stores. Do some rough math about, with regards to revenue per store? Can you provide us some store profitability metrics? What is your same-store sales growth? And how are the new doors performing? And how long are they taking to ramp up to full profitability? Thank you very much. Ivica Krolo: Hello. Thank you for your question. It is Ivica again, and you are 100% correct. Our own retail is becoming increasingly more important by design. We want to create more high-quality touch points with the brand, capture more of the in-person demand within our own retail channel, and balance D2C better between online and in-store. Generally, this channel also allows us to showcase the full range of our offering, including exclusive styles that you will not see in the B2B channels. As you know, our store fleet is still small and young. Only 106 stores by Q1 globally, around 60 of those have opened in the past two and a half years. As a result, we see a significant variation within the base, so the averages are skewed and not a particularly useful predictive tool. And, also, be reminded, there is no store that looks like the other, so the conception of the stores is very diverse all over the globe. But a few metrics we can share to help you think about the potential of this channel. In fiscal 2025, retail share of D2C revenue was up about 400 basis points year over year, and this is something we saw similar in Q1 2026. Retail is our fastest growing segment. In the quarter, it was up over 50% year over year in constant currency. Same-store sales growth was high single digits in Q1 2026, and this is also very similar to what we saw in fiscal 2025. So we see consistent and very stable demand patterns in our own retail. And finally, CapEx per store is typically in the range of €400,000 to €800,000, and we expect the store to return that cash within 12 to 18 months. So we are applying our very disciplined approach while expanding D2C further and accelerating it. Again, as the fleet grows and matures, the averages will become more meaningful and useful in forecasting, but for now, there is too much variation to make it a very useful tool for you. Laurent Andre Vasilescu: Thank you very much for the detailed response. Much appreciated. Operator: Your next question comes from the line of Peter Clement McGoldrick with Stifel. Your line is now open. Please go ahead. Peter Clement McGoldrick: Full-price brand representation is really standing out here across the footwear environment. So as we look through fiscal 2026, can you share some embedded demand elasticity metrics in the revenue outlook and then talk about the factors supporting your confidence that higher prices will continue to resonate as they have in the past? Oliver Reichert: Thank you for your question, Peter. It is Oliver. As you know, we are in the middle of 2026. So first quarter is over. We are in the second quarter. The pricing is already set and transmitted. So there is no surprise. As I said, we have a very strong order book. I think the ultimate or the strongest proof point is the 90% plus full-price selling across all our channels. And again, we take a very mindful approach to pricing. Covering the full range of products and the wide range of our assortment and the newness that we create even within certain silhouettes allows us to make precise adjustments on an item-by-item base. And this is like, you know, it is not just a single thing on a very well-performing product. It is a broad and very, hard to say democratic base, but it is a way moving forward in terms of pricing. And over the years, I mean, we have been nearly constantly increasing our pricing year over year, season by season, but always mindful and always in a very close connection with the outside realities. So prices are targeted by product group, price levels in general, and by region. So in some areas, you know, in a global pricing architecture, you have adjustments that are regional-driven or channel-driven. In other parts of the world, they might be a bit different. But in global, it is in the pricing architecture embedded, and that is the most important thing to prevent gray market and all this ugliness. So in total, as I said before, we are seeing customers moving up in terms of price points to more elevated styles and not downwards. So this goes fully aligned with our procedure to move on. And as you know, roughly, you know, it is always like a mid-single-digit price increase we are taking, and that is a very good measurement to move on at least for us. Peter Clement McGoldrick: Thank you very much. Operator: Your next question comes from the line of Edouard Aubin with Morgan Stanley. Your line is now open. Please go ahead. Thank you for taking my question. So Edouard Aubin: Oliver, at the CMD, you indicated, right, that you expect to grow volume about 10% per annum over the next three years, which obviously is close to doubling or an acceleration versus, you know, pre-IPO. Sorry to come back on the wholesale and so on, but, and I know you provided over the years qualitative comments, but can you share with us, we do not need the exact figure, but the rough end of the number of doors and the number of the accounts in the U.S. and Europe kind of since IPO, how it has trended? And then related to that, you know, if you could give us a rough breakdown or at least some indication of, you know, your distribution maybe just in the U.S. by channel between, let us say, you know, department store, mass merchant, family channels, whatever, that would be helpful to understand your wholesale strategy. Thank you so much. Ivica Krolo: Hi, Edouard. It is Ivica speaking. Covering the second part of your question first. With regards to U.S. and channels specifically. So what we see, and this is a trend that we have observed now for more than a year, and also that has accelerated with back to school, is that the demand is going to physical in-person shopping, and this naturally favors our B2B channel. We have 15 stores in the U.S., so very small footprint to cover that in-person demand. And we see strong sell-throughs in the U.S. with our top 10 strategic partners. So sell-throughs are above 30%, and this growth is broad-based. So it includes department stores. It includes sports specialty. And this is the largest driver of the growth that we see here in the U.S. and specifically the B2B channel. Megan W. Kulick: And just to follow up real quick on the question. So during the Capital Markets Day, we did talk about the number of B2B doors in both EMEA and Americas. Americas is about 10,000 currently, and EMEA is about 9,000. That is total. So I think we also cited within the U.S. about 600 doors of potential and in EMEA around 1,400 that we have identified as being potential new doors. Again, those are going to be highly targeted to some of our expansionary categories like youth and sports specialty. Edouard Aubin: Got it. But how does this number of doors today compare to, you know, the numbers of doors at the time of the IPO? Sorry. Megan W. Kulick: We said that it has been about 90% to 95% of the growth has come from existing doors, so it has been low single digit door growth overall since the IPO. Edouard Aubin: Okay. Thank you. Operator: Your next question comes from the line of Lorraine Hutchinson with Bank of America. Your line is now open. Please go ahead. Lorraine Hutchinson: Thank you. Good morning. Just following up on that point, as your customer base shifts more toward the newly acquired Gen Z customers, is there any deeper pruning you need to do, adding and subtracting, to make sure your B2B partner portfolio can successfully target this cohort? Oliver Reichert: This is Oliver. Thank you for your question, Lorraine. I do not know if I really understood your question right. The thing at the moment that fascinates Gen Z is that they are burning for the Boston silhouette, which is a silhouette that is 50 years old this year. So we do not really have, you know, a specific product units for this target group. I think they are attracted by the heritage, the purpose of the brand, and this unique easy-on and easy-off. That is the biggest argument for them. And for some of these Gen Z customers, this is the first pair of Fußbett they ever tried. And as we know, we will build a long-term relationship with these customers, and they come back. In average, they end up having four, seven, eleven pairs. So this is just the beginning of the journey and the touchpoint with the brand for these people. And we try to continue to be in contact with them and make them other wearing occasions or usage occasions for the Fußbett. Megan W. Kulick: And just real quickly follow-up on that. You know, David, unfortunately, we did not have all the regional leaders here today to take Q&A, but I can answer real quickly on behalf of David. You know, our view is from a Gen Z standpoint and the youth standpoint, we are in a lot of the right doors. We are in some of the youth specialties, sporting goods stores where a lot of these shop. Our goal is obviously to harvest more of them online. We think we are in the right doors from a B2B standpoint, and we are seeing the breadth and depth of our offering within those stores expanding as the demand from Gen Z grows. We are going to wrap it up there. I know we only allocated 45 minutes to today’s call. We will be back to the full length.
Operator: Good morning, and welcome to the Iridium Communications Inc. Fourth Quarter 2025 Earnings Conference Call. All participants will be in. After today's presentation, to withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Kenneth Levy, Vice President of Investor Relations. Please go ahead. Kenneth Levy: Thanks, Cindy. Good morning, and welcome to Iridium Communications Inc.'s Fourth Quarter 2025 earnings call. Joining me on today's call are our CEO, Matthew Desch and our CFO, Vincent J. O'Neill. Today's call will begin with a discussion of our fourth quarter results followed by Q&A. I trust you have had the opportunity to review this morning's earnings release, which is available on the Investor Relations section of Iridium Communications Inc.'s website. Before I turn things over to Matthew Desch, I would like to caution all participants that our call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical fact and include statements about our future expectations, plans, and prospects. Such forward-looking statements are based upon our current beliefs and expectations, and are subject to risks which could cause actual results to differ from forward-looking statements. Such risks are more fully discussed in our filings with the Securities and Exchange Commission; our remarks today should be considered in light of such risks. Any forward-looking statements represent our views only as of today, and while we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views or expectations change. During the call, we will also be referring to certain non-GAAP financial measures including operational EBITDA, pro forma free cash flow, free cash flow yield, and free cash flow conversion. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. Please refer to today's earnings release and the Investor Relations section of our website for further explanation of these non-GAAP financial measures as well as a reconciliation to the most directly comparable GAAP measures. With that, let me turn things over to Matthew Desch. Thanks, Ken. As you saw in our press release this morning, we achieved our 2025 guidance. Service revenue came in on target, and we grew OIBDA 5% for the full year. In addition, pro forma free cash flow was almost $300,000,000. Our business remains robust, and we feel confident in our ability to continue generating Matthew Desch: significant free cash flow as we transform our business and add new services. Free cash flow continues to differentiate us from others in the satellite industry. It is allowing us to invest in finding ways to grow our capabilities while also making good on our commitment to return capital to shareholders through a growing dividend. Our market leadership and growth are largely due to our highly reliable services, our valuable L-band spectrum, and the extensive and growing ecosystem of technology and distribution partners who count on our network for their many unique applications. In the third quarter, I shared my thoughts on the changes taking place in the satellite sector and how recent spectrum deals are likely to hasten the pace of more global direct-to-cell services. These new consumer connections may eventually encroach on traditional MSS services. This will take time, but providers will likely be ready with service even if not truly global over the next few years. These developments have spotlighted the importance and scarcity of L- and S-band spectrum, which is widely recognized as the optimal spectrum for connecting to mobile consumer devices of all types. We know this firsthand because over the last 25 years, we have developed a strong mobile business connecting over 2,500,000 subscribers with more than 500 business partners in their applications. In 2026, we will add more partners, new services, and additional ways of connecting them. Demand for our solutions remains strong, especially among enterprise and government customers. Further, the pipeline of new partners looking to integrate Iridium Communications Inc.'s IoT, PNT, and safety services continues to expand. We added about 40 new partners in 2025; engagement with them remains robust as we move into 2026. Customers continue to seek out the highest quality and most efficient connections for their mobile needs and our brand remains the gold standard for delivering these. As we look forward, we are investing to further differentiate our offerings and have made strong progress over the eighteen months on new technology platforms that we can leverage to enter new markets and expand our business. This year, Iridium Communications Inc. will introduce a number of new services and products that we believe represent more than $200,000,000 worth of revenue opportunity by the end of the decade. Among these, new Iridium Certus GMDSS companion terminals in maritime that better complement K-band broadband terminals, a new ASIC for Iridium PNT, which we expect to reduce costs and time-to-market for expanding assured position, navigation and timing solutions, and Iridium NTN Direct, which will bring our global narrowband IoT capabilities to standards-based terrestrial devices. We will also be introducing an exciting new IoT device soon to our portfolio that sets new standards for size, cost, and flexibility for our customers and gives our partner base a powerful new platform to build on for the future. All of these are the result of strong collaboration with new and long-time partners and exemplify the enduring utility of our global network. Even as we execute on these new products to drive growth, it is clear that our spectrum, in and of itself, has great value. In light of industry developments in recent months and the excitement around the prospects of D2D, MSS spectrum, especially clean, globally coordinated spectrum, has increased in value. We will continuously consider our spectrum assets with a view of maximizing shareholder value. Therefore, we will not rule out future business alliances that leverage our unique spectrum real estate particularly if they offer incremental value to shareholders. Valuations in the satellite industry are increasingly being driven by future narratives rather than by current operating results. As we focus on new growth areas, we recognize the need to broaden, and in some respects, more clearly articulate our growth narrative. So I want to elaborate on some of the business themes we are pursuing as we believe we are well positioned with the right partners and network resources to have great impact. For competitive reasons, our discussion of some of these themes will be at high level for now. But I hope this commentary will give you an idea of where we are heading. In no particular order, there are four key areas that Iridium Communications Inc. is pursuing to expand our addressable markets and drive faster growth for our company. These include narrowband IoT expansion, building on our unique PNT lead, greater national security work with the U.S. government, and disrupting the status quo in the aviation industry. Let me speak to each of these. Kenneth Levy: First, Matthew Desch: there is no question that Iridium Communications Inc. is already the undisputed leader in satellite IoT. We have the largest customer and partner base in the industry, and the broadest array of solutions. In 2026, we will be introducing the first truly global standards-based service with Iridium NTN Direct. Development is progressing well, and we are processing end-to-end message over our network as we ready the service for commercial availability. We are experiencing strong demand from MNOs to include Iridium Communications Inc. in their roaming plans, and we believe the industry is excited to utilize our new offering. While we expect competing IoT services to eventually be available from other satellite providers, Iridium Communications Inc. will be able to maintain our leadership and see our subscriber count grow as the market for standards-based solutions expands and D2D satellite connectivity becomes more common to connect assets and people around the world. Our industrial-grade reliability, efficiency, and partner base are key differentiators of our service offering, and these should continue to expand as demand for IoT grows in future. One key area we are particularly excited about and think Iridium Communications Inc. is positioned to lead is in the autonomy sector. Delivery and service UAVs, USVs, and other autonomous systems enabled by AI and remote beyond-line-of-sight operations are on track to become mainstream applications. This emerging industry segment aligns well with Iridium Communications Inc.'s capabilities and deep customer relationships. Another opportunity we see for long-term growth is our satellite-based assured PNT, which is an outgrowth from our acquisition of Satelles in 2024. Kenneth Levy: ENT, Matthew Desch: services are a multibillion dollar market and expected to generate at least $100,000,000 in annual revenue for Iridium Communications Inc. by the end of the decade. We have successfully introduced the service in Europe and Asia to address the growing threat of spoofing and jamming in areas of geopolitical conflict. There is a compelling opportunity in navigation systems where Iridium PNT can provide a more assured connection for maritime vessels, autonomous systems, and for protecting aviation. We are seeing a lot of traction from civil and commercial organizations that seek to fortify their GPS-dependent systems, which are vulnerable to attacks. These organizations often run high-value mission-critical applications like those employed by capital markets, communication networks, data centers, energy grids, and other critical infrastructure. Iridium Communications Inc.'s PNT signal is a thousand times stronger than GPS and can penetrate buildings to provide an accurate in-building time source to protect vulnerable hardware and applications. We have already cultivated a number of large customer relationships and expect adoption of Iridium PNT will expand with the introduction of our new ASIC this year, for which requests to participate in our beta program far exceeded our expectations. With this chip, we believe we are at least five years ahead of any other viable global PNT solution. And this hardware will lower integration costs and help to standardize our solution in industry. Ultimately, though, we are working towards our PNT services being directly embedded in smartphone, and other consumer device processors, expanding the impact of our service far beyond our current expectations. We now believe that our PNT service can also function as a unique platform to enhance cybersecurity and fortify data networks. We are currently developing a unique quantum-safe cybersecurity service using our PNT signal that can improve identity management and provide authentication for high-value transactions, tapping into the $20,000,000,000 identity verification industry and creating potentially significant new revenue stream for Iridium Communications Inc. Even capturing a small portion of this growing market would be meaningful to a company of our size. The third theme for investment and growth is national security. As government programs shift from internally developed proprietary solutions to leverage a broader array of commercial solutions, we see an attractive opportunity for Iridium Communications Inc. to increase the value we offer the U.S. government particularly as it invests in new space capabilities. For more than two decades, we have collaborated with the U.S. government to set the standard for network reliability and interoperability and directly empower service members around the globe. We believe Iridium Communications Inc.'s constellation and experience presents opportunities to deepen our relationship with the USG. We have secured more than $1,000,000,000 of awards over the last five years, including building and operating the ground systems for the Space Development Agency's new network as part of the government's future space architecture. Through this, Iridium Communications Inc. has shown its ability to successfully manage mission-critical programs and deliver innovative commercial solutions in support of the government's national security priorities. You probably also saw the announcement last month that confirms Iridium Communications Inc.'s involvement with the Missile Defense Agency's Shield contract most of you know as Golden Dome. Being selected for this initiative is a powerful validation that Iridium Communications Inc. continues to serve as a trusted, mission-critical service provider in the national security space. We are excited to support this important long-term initiative and are already executing on elements of this program. Between the U.S. government's numerous satellite service contracts, and its new Golden Dome initiative, the addressable market within the national security space represents a multibillion dollar opportunity. We are excited about the attractive opportunities we see for Iridium Communications Inc. to grow its involvement and business with the U.S. government. A fourth growth theme for us will be expanding our share of the aviation cockpit data communication market. Iridium Communications Inc. touches aviation in a number of ways today through our involvement in cockpit safety communications by providing controller-to-pilot data links and other cockpit communications on over 60,000 aircraft around the world, our work in the evolving standards for uncrewed aerial systems that will be a big market in the coming years, and our involvement in satellite ADS-B navigation and surveillance services through Aireon, our joint venture with a number of air navigation service providers, known as ANSPs. We believe we can build on these platforms to expand our footprint in the aviation safety market, particularly as it evolves from sending safety and operational data over ground-based VHF towers with satellite as a backup, to sending all data more cost effectively and efficiently over satellite. With the expanding aircraft fleet and the airlines' expanding needs for real-time information from those fleets, we believe we can offer a compelling value proposition using our network today and then expand in the future with space-based VHF in a follow-on network. Our long-term relationship with Aireon is a key piece of that strategy. They are a growth engine for us into the future, especially as they continue to expand their air traffic surveillance services to more ANSPs and market their unique and powerful dataset to more industry data applications. Together with some additional investment, we think our work with Aireon could serve a billion-dollar-plus addressable market leveraging our unique fully global network. So Iridium Communications Inc. continues to occupy a strong and defensible position in the satellite industry. Our competitive advantage comes from focusing on specialized products and services for which high reliability remains a key point of differentiation. The growth themes I shared with you today represent incredible opportunities for our company, and I look forward to updating as we invest in, execute, and capitalize on each in the months ahead. We strongly believe the initiatives we are pursuing along with our core businesses will enable us to drive incremental growth and cash flow generation well into the future and unlock value for our shareholders. As Vincent J. O'Neill will explain, we will continue our growth trajectory in 2026 albeit at a slower pace than in the past, as we position ourselves for additional revenue growth and long-term value creation. At the same time, we will continue to generate meaningful cash flows to invest, delever, and return capital to shareholders through a growing dividend. Through it all, we will not lose sight of the needs of our customers or the rapidly changing marketplace that we are uniquely well positioned to serve. With that, I will now turn the call over to Vincent J. O'Neill to discuss our quarterly results and outlook. Vince? Thanks, Matt. Good morning, everyone. With my remarks today, I would like to recap Vincent J. O'Neill: Iridium Communications Inc.'s full-year results for 2025 and provide color on trends we saw in the fourth quarter, some of which continue into the new year. I will also walk through the 2026 outlook we released this morning and review Iridium Communications Inc.'s liquidity and capital positions. Service revenue growth was in line with our recent guide, finishing up 3% in 2025. Full-year operational EBITDA came in within our guidance range at $495,300,000, up 5% year over year. OIBDA was impacted by a $3,000,000 inventory charge taken in the fourth quarter. Our conversion of OIBDA to cash flow remained strong at 60%, resulting in pro forma free cash flow of $296,000,000 in 2025. In the fourth quarter, total revenue was $212,900,000. This reflected year-over-year growth in service revenue offset by lower subscriber equipment sales during the quarter. Operational EBITDA was $115,300,000 in the quarter. Within our commercial business, service revenue was up 3% from a year earlier. Contributing to this growth was a 4% rise in voice and data revenue, which benefited from the price increase that commenced over the summer. Commercial IoT revenue grew 11% in the fourth quarter. While Matt noted that Iridium Communications Inc. added several new partners in 2025, we also certified more than 30 new IoT products during the year. The combination of new business relationships and new IoT applications coming to market is expected to broaden our sales funnel in the years ahead, and will allow Iridium Communications Inc. satellite technology to reach a growing number of industries and end users. In broadband, we reported revenue of $12,200,000 in the quarter. This 9% decline from the prior year period continued to reflect the increasing prevalence of Iridium Communications Inc.'s use in lower-priced companion plans. While the pace of migration from primary to backup is slowing, this trend will continue to create an ARPU headwind in 2026. For the full year, broadband revenue was down 10%, which was largely in line with our expectations. In all, commercial subscribers grew 4% in the fourth quarter. Hosted payloads and other data services was $13,400,000 for the quarter, up 13% from the year-ago period. As I previewed on our third quarter call, a delay in PNT deployment by an existing customer weighed on Q4 growth. Apart from this contract delay, we have continued to see strong inbound interest in Iridium Communications Inc.'s assured PNT services and continue to see momentum for this business to deliver $100,000,000 in annual service revenue by the end of the decade. Within our government business, revenue rose to $27,600,000 in the fourth quarter reflecting the final step-up in our EMSS contracts with the U.S. Government. As I noted earlier, revenue from subscriber equipment, which tends to be episodic in nature, came in at $17,000,000 in the fourth quarter. While this was down year over year, this reflects our ongoing outlook for normalized equipment sales of $80,000,000 to $90,000,000 on an annual basis. Engineering and support revenue continues to be strong at $37,100,000. We achieved some significant milestones in 2025 related to our work with the SDA, and our pipeline with the USG remains strong as we look ahead into 2026. Before moving to our 2026 outlook, I want to highlight a change we have made in the new year related to our management incentive compensation. We have decided starting in 2026, Iridium Communications Inc. will pay annual incentive compensation fully in cash, rather than our prior practice of using part cash and part equity. The impact of this change reduces equity issuance by approximately one percentage point on a recurring go-forward basis, and aligns more closely with our shareholders' interests. This does affect the calculation of OIBDA, and makes year-over-year comparisons difficult until they normalize in 2027. While the change will have no impact on GAAP financials, it will have a negative impact of $17,000,000 on 2026 OIBDA as compared to 2025. So for our 2026 outlook, we are guiding service revenue growth to be flat to up 2% for the year. Absent the change to incentive compensation I noted, 2026 OIBDA would have grown to a range of $497,000,000 to $507,000,000. In light of our change to incentive compensation, we expect 2026 OIBDA in a range between $480,000,000 and $490,000,000. Other items pertinent to our outlook include our forecast for commercial voice and data to grow in 2026 as a result of tailwinds provided by targeted price actions we implemented back in July. For the full year, we expect voice and data to be a low single-digit grower. In IoT, we are excited about a number of new products being released this year that continue to support our position as the premier satellite IoT provider. Over the last two years, we have operated under a fixed-price contract with a large IoT partner. With the renewal of that contract, as well as continued subscriber growth in our other areas, overall, we expect mid single-digit growth in IoT this year. More broadly, we are encouraged by the addition of many new IoT partners to our ecosystem over the last twelve months, including many focused on Iridium NTN Direct. With our new standards-based offering set to launch in the second half of the year, we remain optimistic about NTN and the access to new industry sectors it will deliver over time, supporting IoT growth overall as we address new markets. Within broadband, we continue to forecast ARPU pressure as primary-to-companion conversion continues and maritime customers select lower cost backup plans. Matthew Desch: However, Vincent J. O'Neill: the availability of new Iridium Certus GMDSS safety terminals this year will help to mitigate some of this pressure, especially with these new terminals now being introduced in the APAC region. We believe this service provides us with a market opportunity to replace legacy Inmarsat C terminals and will serve as a long-term mitigant to revenue pressure. Accordingly, while we anticipate a decline in broadband revenue this year, we expect it to moderate from 2025's rate. PNT will, again, be a meaningful source of growth to hosted payload and other data services over time. As I mentioned earlier, we are supporting the implementation of a PNT program for a large customer. While the timing of this deployment is not entirely within our control, we feel good about the customer's ability to make strong progress in 2026 and begin leveraging Iridium Communications Inc.'s PNT solutions. With the frequency of jamming and spoofing Kenneth Levy: We are modeling a Vincent J. O'Neill: and $10,500,000 of EMSS revenue this year. This outlook includes our expectations that the government will exercise their six-month option to extend the EMSS contract at current rates through March 2027. Supporting our discussions of a favorable contract renewal, was the U.S. Space Force's award of a five-year ground contract which we announced at the end of the year and runs through 2030 to enhance security services and support ongoing EMSS capabilities. We expect that revenue from equipment sales will largely be in line with 2025, even as the mix shifts somewhat from handsets to IoT products. In engineering and support, we expect revenue will continue to grow reflecting our strong pipeline of business activities and expanding relationship with the U.S. Government. As Matt mentioned, growth on national security initiatives particularly as they continue to evolve their services to commercial operators, and build Golden Dome. On the expense side of the equation, we will continue to support robust new product and service development. R&D and depreciation expense should both remain in line with 2025's level. You will note that SG&A declined significantly in 2025, in large part due to decreases in equity compensation costs that we do not expect to recur in 2026. Accordingly, we expect to return to more normalized equity level in 2026, which will cause SG&A to be higher at a double-digit rate. We expect capital expenditures will be consistent with 2025 as we support the rollout of NTN and investment in the new initiatives Matt referenced. Based on forward curve projections, interest expense is expected to be down year over year. I would also note the expiration of our $1,000,000,000 interest hedge instrument at the November. It is our intention to have a new instrument in place before the termination of the existing hedge. As we noted in October, Iridium Communications Inc. expects to pay cash tax of less than $10,000,000 this year and next. The improvement relates to tax legislation passed in 2025. We anticipate being a taxpayer at the full rate in 2029. Finally, on leverage, we closed 2025 with net leverage at 3.4 times OIBDA and continue to expect to delever from here to about three times by year end. Our long-term goal is to delever below two times, which we believe will naturally occur as we continue to grow our EBITDA and generate cash. I hope this additional color is helpful in allowing you to track our progress this year. Moving on to our balance sheet. As of December 2025, Iridium Communications Inc. had cash and cash equivalents balance of approximately $96,500,000. Iridium Communications Inc. repaid all borrowings under its revolving facility in the fourth quarter, and had no outstanding borrowings under the $100,000,000 revolving facility as of December 2025. In 2025, Iridium Communications Inc. paid a total of $62,900,000 through quarterly dividend payments to shareholders and ended the year with a dividend yield of 3.3%. Looking to 2026, we expect our board to again approve an increase in the dividend. Prior year increases have averaged 5% annually since the board declared Iridium Communications Inc.'s first dividend in 2023. Continued growth in Iridium Communications Inc.'s dividend reflects management's confidence in the company's business opportunities and prospects for continued strong free cash flow. We remain committed to an active and growing dividend program as it augments long-term shareholder returns. With the pause in our share repurchase program, Iridium Communications Inc. did not repurchase any shares during the fourth quarter. However, for full-year 2025, we retired approximately 6,800,000 shares of common stock at an average price of $27.07. Capital expenditures in the fourth quarter were $33,500,000. For the full year, CapEx was $100,300,000 inclusive of $4,600,000 in capitalized interest. We expect 2026 capital investment levels to be similar to 2025 especially as we continue with the rollout of our NTN services. Turning to our pro forma free cash flow. If we use the midpoint of our 2026 OIBDA guidance and back off $82,000,000 in net interest pro forma for our current debt structure, approximately $90,000,000 in CapEx for this year, $6,000,000 in cash taxes, and adjust for $11,000,000 in working capital, inclusive of the appropriate hosted payload adjustment, we are projecting pro forma free cash flow of $318,000,000 for 2026. These metrics would represent a conversion rate of our EBITDA to free cash flow of 66% in 2026 and a yield of about 16%. This continues to support our outlook for free cash flow generation of $1,500,000,000 to $1,800,000,000 through 2030. We continue to believe that pro forma free cash flow is a good measure of our business strength. A more detailed description of each element of these calculations along with the reconciliation to GAAP measures, is available in a supplemental presentation under Events on our Investor Relations website. Iridium Communications Inc. continues to occupy a unique position in the satellite market. We have great assets, a valuable spectrum position, and a growing ecosystem of partners which will continue to support strong free cash flow and expand our business reach beyond traditional revenue streams. As Matt noted, we believe that Iridium Communications Inc.'s differentiation is not just a function of our actionable, real-time services, and true global coverage, but also reflects the quality of our L-band spectrum and the growing opportunities that our partner ecosystem continues to deliver. With that, I would like to turn the call over to the operator for Q&A. Operator: We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, at this time, we will pause momentarily to assemble our roster. The first question comes from Brent Penter of Raymond James. Go ahead please. Kenneth Levy: I appreciate all the detail there. First, on the decision to make incentive compensation entirely in cash, can you just give us a little bit more detail on that? Us through that decision why you made the change. You mentioned Brent Penter: believe it is in the best interest of shareholders. And is this something that you expect to be pretty permanent, or is it temporary? Matthew Desch: Look. Every company really pays their incentive, you know, yearly bonus in cash. I would say we decided do not know how many years ago. Five, six years ago. Five, six years ago. That at the time, we wanted, you know, to more broadly kind of align employees with shareholders. And so we would, we would do a mix of cash and stock for yearly bonuses, but that really was not standard at the time. And now with our stock price the way it is and the use of equity really by putting that much equity into the bonus, it just did not make sense. So, you know, we were going to do it eventually, decided to do it now. I know it looks unusual, a little bit, so the year-over-year comparisons, you know, as you as you described 2025 to 2026 numbers, it looks like somehow we are not growing as a result of that, but it is just a a better use of, yeah, of our resources essentially, I think. Yeah. Vincent J. O'Neill: And I would add to that, Brent, to Matt's point. You know, we think it aligns, you know, more closely with shareholder interest, especially as we, you know, just recently paused the buyback program. You know, I did note in my remarks that in terms of equity issuance, you know, it relates close to a percentage point of equity. So I think it is meaningful for shareholders. Then the other part of it, to Matt's point, is, you know, we think it aligns our our employee base as well with more industry norms. But I would also highlight while it changes our EBITDA, it does not have an impact on GAAP financial. So it is it is purely a a movement between GAAP and OIBDA. Brent Penter: Okay. Matthew Desch: Okay. Got it. And then you mentioned Brent Penter: $200,000,000 of revenue by 2030 from these four growth areas. And so if I am understanding correctly, $100,000,000 of that, you still expect to come from PNT, I think would suggest a $100,000,000 from those other three areas NTN and IoT, national security, and aviation. Yep. Matthew Desch: I you you me. I did not say $200,000,000 was the four. I mentioned that when I was talking about the new growth products that we are introducing this year. So we have, you know, we have, that is from Iridium NTN Direct, a new ASIC, a new IoT module. Those are just ongoing business-as-usual kind of stuff that I just wanted to give a number that sort of reflects our ongoing business and the investments we are making in R&D. Before we even talk about the growth themes, which could include additional investment, maybe acquisitions, maybe other areas here. And Brent Penter: our our growth areas, there is a little bit of overlap in those two areas, but I just want to Matthew Desch: to kinda put a number on even what we are doing today. So I am sorry if that was misconstrued or misunderstood there. It I do have, you know, I did want to really pull out these four major growth themes because I really do think, you know, we are it is really about rewriting our narrative, if you will, and it is important to kinda understand what those areas are that we think we have, you know, areas that we can differentiate versus others. You know, more than stem the tide of any kind of competitive pressures and and get back to even higher levels of growth than than the current areas of investment we are in that are still delivering a lot of revenue. Operator: Okay. Brent Penter: Appreciate the clarification. So then you think about those those four growth areas, how do you rank order them in in terms of the opportunity? And what role could could M&A play in those areas? You mentioned, you know, what what opportunities are out there? Terms of M&A? Matthew Desch: Yeah. I mean, I am I am very careful about not, you know, pointing to to specific areas for M&A. You know, those four areas kind of vary in terms of timing and impact. You know, we are seeing a lot of potential right now in government national security missions because of Golden Dome and those kind of activities. Probably not a big M&A kinda area. It is areas where our expertise, our network, and other things can play. Brent Penter: PNT could be, especially as we get into new areas. Matthew Desch: Around identity management and some other areas we are seeing as a platform. IoT possibly, you know, could be an area of investment, though we have an awful lot going right now in terms of internal areas. In the device area and in terms of the service area in terms of, cellular management, there is there is possibilities of partnerships, if not acquisition. And then aviation safety, I would say, is the maybe the highest potential opportunity there. That is an area where we can provide a lot more services to airlines and ANSPs than we are doing today. I mentioned there is a big potential kind of ability to disrupt that market, we think. And certainly, our relationship with Aireon is a big piece of that. Kenneth Levy: Okay. Great. And then Brent Penter: on business alliances, maybe related to spectrum, it sounds like. Could you go more into what those could look like, what kind of partners those could involve, and how any sort of alliance might work in conjunction with your current businesses that obviously operate on that spectrum? Matthew Desch: Well, I mean, obviously, you know, in my comments, I made it pretty clear that the mobile satellite services spectrum, that I have historically never really talked about our spectrum position because, you know, we were using it for internal services. You know, that environment has changed a lot in the last six months. Kenneth Levy: You know, Vincent J. O'Neill: given Matthew Desch: given the investment that at least Starlink has made in spectrum, you know, we have seen an increase in lots of industry people talking to each other as they position themselves for this direct-to-cell or direct-to-device market. And we are seeing that activity. We are seeing opportunities. People who value our, you know, our existing business, our partners, our, you know, our cash flow, etcetera, but also value our unique L-band spectrum position. So I do not know that I can go into any more detail other than there is just a lot of discussions and and could go in a lot of different directions, potentially. But I think it is noteworthy that, you know, sort of the industry is is abuzz with discussion right now. Operator: Yep. Kenneth Levy: Okay. Brent Penter: Thanks, guys. Kenneth Levy: Thanks. See you then. Operator: The next question comes from Xin Yu of Deutsche Bank. Go ahead please. Brent Penter: Hey, good morning. Thank you for taking our questions. Kenneth Levy: I wanted to take a step back. I know you mentioned just now there is quite a bit going in the industry, quite a quite a lot of buzz. One of those topics Vincent J. O'Neill: recently has been space data centers. And I assume you are you do not Edison Yu: intend to try to play necessarily a direct role in that, but just curious what are your views on kind of the viability of this kind of endeavor, the impact of the industry, and if you may play some sort of ancillary role in that. Matthew Desch: Yeah. It is a hot, hot area right now. Discussion mainly because because of Starlink's announcements and some others who, you know, kind of it looks like a problem that can be solved in space. Solar powers and power in general of data centers is a big issue. There are massive technical challenges to overcome. You know? Data centers are complicated areas. Very difficult to protect assets in space. It looks like a, I mean, I am maybe been I have not been in the space industry forever, but I have been in long enough to that that is a really, really long-term opportunity at best. And I wonder if the all the discussion is not for other reasons than maybe maybe just because that is years away from being able to be successfully Brent Penter: you know, driven. Matthew Desch: Anyway, I could jump on that bandwagon to try to, you know, hitch our wagon to that for a valuation. But we are a really pragmatic company that focus on really delivering results and cash and growth. So I would rather kinda stick to the themes that I am currently around than to somehow address that one directly. Edison Yu: Understood. Understood. Want to come back to to D2D. Can you just remind us what are sort of the next big milestones to look for, whether it is from operational deployment perspective, or from, you know, is it something we need to wait on on one of the partners? Just just setting up kind of this year or maybe next year, what to look out for. Matthew Desch: Yeah. Well, obviously, we are in we are in the steps of introducing the product this year. You know, we are in testing. We are starting to have actually partners come in and experience it or, or be able to demonstrate it from space so they can see how well it performs in their applications and how it is going to look. You could see more chipset suppliers, you know, jumping on our bandwagon to enable our services in their chips. You could see more mobile network operators align with it, readying themselves to introduce it to their customers, you know, Kenneth Levy: we Matthew Desch: you know, I think that is going to be primary kind of drivers right now throughout the year. Obviously, this is more of a 2027, 2028 kind of thing in terms of revenues, but we are still excited about, you know, the potential it brings. Edison Yu: And if I could just sneak in, Vince, maybe one thing on that. Financials. Can you give us any more maybe numbers, percentage points on on sort of the PNT contribution expected for for this year? Vincent J. O'Neill: Yeah. We, well, for for 2026, we we have built in a view of PNT, Edison, that is that is incorporated in our flat to 2% growth. You know, as I noted in in in my remarks, we do think that if that there may be potential upside to to the guide there. We just think it is premature to include it in the outlook at this point. Kenneth Levy: Great. Thank you. That is an area we are trying to Matthew Desch: we are trying to be appropriate about. You know, the pipeline is growing. The opportunities are potentially quite large, but when they hit, as you can tell, we expected, we expected one to hit in fourth quarter that did not, and and it is kinda moving into this year. And and so think it is appropriate where we are we are at right now in terms of that, and we will just express the the upside of it there when when it happens. Edison Yu: Great. Thank you. Thanks, Ed. Operator: The next question comes from Colin Michael Canfield of Cantor. Go ahead please. Edison Yu: Hey, thank you for the question. Brent Penter: So maybe going back to the interested parties question, Edison Yu: Matt, if you could just kind of talk about kind of the blend of people that you are talking to and how that is changed over the last six months. Colin Michael Canfield: I think one of the headlines that we kind of seen over the last few quarters of earnings, is the, let us say, private evaluations and private efforts. Kenneth Levy: And Colin Michael Canfield: probably an accelerated element of angst from the folks who are not scaling. Right? Think of the headline of, like, OpenAI shopping Stoke Space over over winter break and this is where the concept of Blue, you know, trying to, I guess, redo Kuiper or put more Kuiper satellites or kind of, you know, go around it. So essentially, it is like increased angst, increased evaluation, and obviously a lot of different mix of people. So so maybe just talking through kind of how you characterize the blend of interested parties over the last six months and how that is changed. Matthew Desch: Well, I do not want to go into specifics of about who. I think you know, those of us in the industry know the kind of people. The the excitement seems to be around, you know, supply and service direct-to-device on a more global basis. You know, that started a couple years ago on, you know, using terrestrial spectrum regionally. Did not really think that that would move the needle. It has not really, so far. But when when Starlink bought EchoStar's assets and and looked into buying MSS spectrum, you know, the interest was on in terms of if they are going to be a global player. AST really does not have global spectrum today. They they aligned with Legato, you know, to try to at least get North American. But, their their assets are regional otherwise. And then, you know, there there are speculation about others being involved in this. I know Equitas, the Viasat Ventures, sort of long-term, and nobody knows when that would happen. And that looks like more of a spectrum sort of condo, you know, situation. I do not know how serious that is. I mean, that is available to someone like us maybe down the road according to them, but that is many years away, and I do not think relevant. So there is not much other spectrum available. Obviously, a lot of people have speculated about Globalstar and where they might go and to whom. Once you get past them, there is not many other people with L- and S-band spectrum. Vincent J. O'Neill: So Matthew Desch: I think you can kind of read between the lines about that and and that might be and who might be interested. Colin Michael Canfield: Got it. Got it. No. I appreciate the color. And then as we turn to kind of the, I guess, I was thinking like the catalyst path. Right? Like, the the the clear view of the management team is that the equity is undervalued. Given the the change in the stock-based comp and while the pausing of the repo, right, the dividends and kind of signaling that you expect SG&A to pick up this year on the basis of stock rerating higher. And so I guess the concept construct that we think of is what are the milestones or what are the key catalysts split between services as well as the government side of things, and and how do you expect those to kinda shape through the year? Matthew Desch: Yeah. Look, think I think we have expressed this is a year of transition for us. You know, it is obviously, we have had a 25-year history of a little higher growth than this. I do not really think it is all about competition because we are seeing some of that around the edges. That is a longer-term thing we are planning for. And and I think we are appropriately positioning ourselves for right now, but I think the valuation that we will attract is what people believe about our long-term potential. Obviously, the initial sort of rerating of us was around a gut reaction that we could not compete against Starlink, long-term and that that was going to come into traditional areas and that we were going to be a company in decline. I think we have proven we are not that. We are actually still growing. Grew last year. We will grow this year. And think we will grow faster in the coming years. There will be we are expecting, you know, some headwinds maybe to increase over time, but we believe that we have the assets, the direction, the vision to be able to not Brent Penter: just Matthew Desch: overcome those headwinds, but actually grow again at a higher rate than we are today. So I think that is the bet. I think your your notes as you evaluate it, I think, you know, you can pick apart the fourth quarter or, you know, your expectations about what we said, what what you expected in the year, but it is really more about do you believe that Iridium Communications Inc. is a is a bet for the future? And we think we are. We have overcome far worse in our history, and I think we have the assets and the ability to do that. That is, I think, our key message. Edison Yu: Got it. Colin Michael Canfield: I appreciate the color, Matt. Thank you. Operator: The next question comes from Timothy Kelly Horan of Oppenheimer. Go ahead please. Colin Michael Canfield: Hi, guys. Thanks a lot. Just a couple of clarifications. So Vincent J. O'Neill: your reported stock comp number should be down Colin Michael Canfield: kind of in line with the SG&A increasing just to check that. And can you give us what the PNT revenue was in 2025 at this point? Vincent J. O'Neill: So I would say, quickly on the the stock comp, Tim, on your question there. That is right. You would see you will see a roughly corresponding reduction in the stock comp and and it will show up in the reconciliation as we go through the year versus what you see in our EBITDA. Because as I said, it is effectively neutral to GAAP. And then on PNT, that shows up in hosted payload and other, but we do not we do not break that out. Matthew Desch: Yeah. We do still plan, Tim, to do that, you know, someday in the future. It just is not big enough yet. And it may it may get there this year. We will see. But, you know, I think that is something we will we will we will be looking to do so we can track the $100,000,000 projection a little bit easily. We are just trying to get a sense. So it is still less than $10,000,000. I mean, Colin Michael Canfield: trying to see incrementally, the $100,000,000 would be, you know, pretty important. Matthew Desch: Yeah. No. It is it is it is more than that. But again, we are not breaking it out specifically. Colin Michael Canfield: Got it. And I guess just on PNT, it seems like the opportunity is massive there and the need is to break like, right now. I mean, are especially with direct-to-device communications capabilities, are you starting to deploy on drones as I guess in specifically in war zones? I mean, would seem to be a perfect solution as opposed to have fiber running all over the land everywhere. But yeah. Are you are you deploying on, you know, currently in war zones? Matthew Desch: Yeah. I mean, we we do know that we have been deployed in Kenneth Levy: UAVs, and and that is a Matthew Desch: an area where jamming and spoofing is a real problem. I think that could be a big growth area for us in the future. I think, you know, we we do see that this ASIC coming this year, I think, will really expand our opportunity. Great. It is really about how many device there is really a lot of solutions that have been produced, but we are still seeing, you know, people deploy 50 or 100. And we are looking for the thousands and tens of thousands, you know, kind of growth that would really, really drive. And, you know, that could happen this year, could happen next year. We definitely see the pipeline and the potential for it, in that regard. Colin Michael Canfield: And will the new ASIC have enough bandwidth to navigate the drones, you, you know, in some form or or another, not just PNT. I mean, you know, can they use thermal imaging or Brent Penter: imaging to help navigate? Would that be enough bandwidth? Matthew Desch: So the the chip is really not about bandwidth. It is about picking up very powerfully Edison Yu: a Matthew Desch: a location signal that can be relied upon and trusted versus maybe a GPS or Galileo or other kind of GNSS which might still be in there. But we would easily be overwhelmed by, you know, by interference and and jamming. So it is it is really it is really not about doing communication. It is really more about providing an assured or alternate PNT signal to to the application and doing it really with very low power, with very low real estate, with very low cost. And then as I said, we are starting to have discussions with people about integrating really the software in that chip even into other processors that may be in consumer devices or other applications, maybe even in phones some days. So that you can get a pretty accurate position inside buildings where GPS does not operate and you would not have maybe other kind of augmentation signals. Or you could get something to protect that signal in in important applications. Brent Penter: And is but it it Colin Michael Canfield: I mean, how hard would it be to block your signal or spoof it? Like, the technology is obviously there to do it, but how much harder is it than Operator: GPS? Matthew Desch: Well, any signal can be jammed, but you would have to have a giant power source very close by. You know? And it makes it so it is more difficult. No. Nothing is completely protectable. You could you could block out every communication, you know, with enough power, but you need large trucks, you know, of stuff close by. And that that is not, you know, we are we are looking to protect against Colin Michael Canfield: Yeah. Vincent J. O'Neill: We say it is a thousand times more difficult, basically, to to spoof the k. Colin Michael Canfield: Very helpful. And then the spectrum, I mean, Brent Penter: is there a way do do you think it is easier for one to share it with another company, for one company to control all of it to increase the utilization? And I guess, Colin Michael Canfield: you know, the key question on the spectrum is, you know, what is the utilization now versus what it what it could be? Either through a partnership or, let us say, a combined entity? Matthew Desch: Yeah. I mean, there is a lot of different approaches there. And and would be interested in the ones that had most value to shareholders. So that is about all I could say. Edison Yu: Got it. Thanks, guys. Matthew Desch: Okay. Thanks, Tim. Operator: The next question comes from Hamed Khorsand of BWS. Go ahead please. Vincent J. O'Neill: Hi. Good morning. Could you just elaborate on the Edison Yu: IoT Kenneth Levy: partner you resigned the contract with and provide any details that you can? Matthew Desch: Well, I think we have been talking over the last couple quarters about the part of the unusual nature and sort of the of our IoT results in 2025 were due to a large IoT customer of, and the fact that that they are changing approach with their customers kind of led to a lot of churn in subscribers, etcetera. That was a multiyear contract. We we renewed that contract. There was growth in that contract, and that is reflected in our results Kenneth Levy: year. Matthew Desch: So I think that is Edison Yu: I think that is at least Matthew Desch: tied together what we said in the past with with where we are now. Kenneth Levy: Okay. And then as far as the terminal goes, you were talking about the terminals Brent Penter: had Vincent J. O'Neill: declined in the equipment sales. Greg Mesniaeff: When does that pick up? And is that more to do with IoT sales, or is that going to be terminals actually going into ships and airplanes that picks up in sales? Matthew Desch: I am not exactly sure what you were referring to. I think maybe actually, from an equipment perspective, you know, we we see unit growth. There is a lot of mix changes. Our our equipment overall is kinda consistent year over year right now in terms of expectations for this year versus last year. You we might have been referring to some comments we made about maritime terminals where we are actually expecting a number of new products this year that makes us even more competitive in the companion ability with Ka and Ku-band. That has been an area where, as you can see, broadband has been declining a little bit for us. It has been a headwind. We think that that is going to mitigate here pretty soon because of all the the solutions we have and the opportunity ahead. You know, because Inmarsat, their Inmarsat C is coming end of life. A lot of ship owners have to change those terminals out. We really have the best solution that serves more needs, more globally than anything. And with all these products in the market, we think that that that will provide an impetus for, you know, for getting kinda growth in terminals there again. So maybe that is what you were referring to. Greg Mesniaeff: Okay. Thank you for the clarity. Operator: The next question comes from Christopher David Quilty of Quilty Space. Go ahead, Edison Yu: Thanks. Brent Penter: Matt, it is been years since they have reported the numbers publicly, but do you have any idea how many Inmarsat C terminals might be out there? Matthew Desch: It is over 100,000. Yeah. Yeah. But it is it is it is quite a, yeah, we we it is quite a few. We we estimate, Chris, 130,000 to 140,000. That is Greg Mesniaeff: that is our calc. Brent Penter: Number. Switching gears, the discussion today about the alt PNT Greg Mesniaeff: chip, that is the same chip that you originally unveiled, like, back in October, or is this a a new iteration Vincent J. O'Neill: already? Matthew Desch: No. No. No. That is the chip we are talking about. I think a lot of people, unveiled it, it goes commercial here in, I think, three months or so. We have got a big beta program with with partners that is oversubscribed right now. We had too many people even asking us for it right now, so we are excited about the potential for it, but it is the same one we are talking about. Brent Penter: Gotcha. And what does is there Greg Mesniaeff: you know, does that flow into equipment revenue? Or is that designed as as sort of a Brent Penter: fee type business? How how do we look at the revenue on the chipset side? And then Greg Mesniaeff: how that actually drives the service revenue? Matthew Desch: Yeah. Yeah. It it does. It eventually will be equipment. You know, these chips do not cost a lot, but, you know, but you could have Greg Mesniaeff: I said, Matthew Desch: tens or hundreds or thousands of them down the road, you know, as as we get into more and more consumer-like devices. So but it is not really about the revenue. It is it is what it enables. It is the applications that that could go into. And then that would enable PNT service revenues, which I think we have talked in the past. We are pricing in many different ways on the commercial side. In some ways, we bundled that together multiyear service, with every device perhaps. If someone made a consumer device, wanted to offer it and be able to say it will operate for five or ten years. We could offer something that would not even require a monthly service subscription, for example. Or we could do things as monthly. And and in some cases, are already doing things with monthly service subscription. So that can be offered a lot of ways. It is more about the ASIC enabling applications and service revenue. Kenneth Levy: Gotcha. And what Greg Mesniaeff: how long does it take for your end customers to integrate that chipset Edison Yu: you know, into devices? Is that, like, Brent Penter: you know, a full product cycle which could take, you know, a year or two, or is it something that could be more easily dropped in? Greg Mesniaeff: And do you have any customers? I know, like, in the past, you were working with ADTRAN Vincent J. O'Neill: on the telecom side. Greg Mesniaeff: Know, do you have any partners that are already looking to design in? Matthew Desch: No. As I said, the beta program, we have a whole bunch of people who are designing in their their products. So they are they have prototypes now. They have initial runs. They are working to put it in. It would not be, I do not think, multiple years, but it certainly is months if not, you know, up to a year in some cases. I could see the first products coming out using that maybe late later this year, but they are probably more 2027 kinda activities. But yeah. I mean, it is not that hard to integrate. It is really a very small device. Does not take up much real estate or power. And has a very defined input and output that can be quickly put into sort of software and utilized with with applications. So it is it is not a big integration. Brent Penter: And the, identity management Greg Mesniaeff: capability, I think it is something you have talked about in the past of, you know, kinda geo locating the satellite with an IP address and and their elements of security. Edison Yu: What what sort of kicked up the new activity there Kenneth Levy: Is it, you know, just simply you have had enough time with Satelles under the hood to build that out? Or are there other compelling reasons why you are promoting that service now? Matthew Desch: Well, you know, the ASIC was a was an impetus to it. You know? A lot of the applications we saw could, if they required, you know, to trust the location, maybe the fact that you could implement this into a smartphone or into a dongle, into a USB key, into something quite small, implemented into a laptop or tablet or something. That was not able to happen before. But we saw a lot of the applications around identity management needing some sort of way for the user, somebody making a wire transfer, somebody proving that they are, that the router is in a certain location and that the data passing through it can be trusted, was something that required, you know, something really low cost to be embedded in it quickly and easily. So I think that was the impetus. And yes, we have had enough time with this to realize that this is this is a potentially really big area. And for which this is a very unique service that would not be able to be offered by others. Would be an area of differentiate for us. And as we are able to exploit it, and our revenue growth is, you know, part of our part of our narrative for the future. So why we are talking about it now. Greg Mesniaeff: Gotcha. And final Brent Penter: finally, on the, I mean, Greg Mesniaeff: increased focus on aviation. I know last year, you had a bunch of terminals that were coming to market. Brent Penter: Can you kinda give us an update on on where you Greg Mesniaeff: sit there competitively? And is there anything that can can sort of accelerate the Vincent J. O'Neill: you know, the upgrade replacement cycle? I do not think there is an equivalent of a an Inmarsat C Edison Yu: end-of-life date in in aviation, but but perhaps Kenneth Levy: Yeah. So Matthew Desch: I alluded to it and you would probably have to we have to go into a little bit more detail about exactly how we think that market could play out. But yeah, we are right now in flight testing, so we have a number of aircraft. There needs to be a certain number of hours with those new Certus and, you know, that is happening now. It was going to take months, quite a few months to do that. But now the avionic suppliers who who have built those solutions can start talking to the Boeings and Airbuses about getting those installed, certainly in 2027 and 2028 into into a lot of vehicles. How to accelerate that? Well, if we could provide more data, more more data through those terminals at lesser expense, we could maybe take traffic back from the terrestrial network. There is a number of things we have ideas to do. I alluded those two in the growth area. We think that we are only getting a very small part of a much bigger market, and we think that we could go after a a bigger part of the market. But I will I will leave that for now. I do not want to get too much, more detail into that because, well, just for competitive reasons. Kenneth Levy: Hear more. Guys. Greg Mesniaeff: Thanks, Chris. Thanks, Chris. Operator: The next question comes from Walter Paul Piecyk of LightShed. Go ahead please. Matthew Desch: Thanks. Hey, Vince. The PNT order dropped out of Q4, should that Walter Paul Piecyk: fall into Q1? Or are you still working out to try and get that thing closed? Vincent J. O'Neill: We are still working through that. Well, our our expectation is that at some point in 2026, but timing still remains still remains up in the air. Walter Paul Piecyk: Is that is that generally going to be a pretty lumpy line from quarter to quarter as this thing progresses? I know you are optimistic about it overall, but is there just going to be a lot of variability quarter to quarter? Vincent J. O'Neill: I think you should I think you should expect to see some of that while as we as we go forward here over the next twelve to eighteen months. Especially as we are building out the business. Obviously, we will get to a point of scale where that will be smoother, but but it probably it probably will be lumpy on a quarter-to-quarter basis as we go forward. Matthew Desch: And it is hard to estimate, Walt. I mean, it is especially when you get, you know, larger opportunities in the pipeline, you know, that I hope it is lumpy positive, but, you know, I would rather not project things out as a sure things until we have an idea where they are going to hit. Walter Paul Piecyk: Is will there be an element of deferred revenue on these things if they are lumpy? Meaning that, you know well, you know what deferred revenue is. So Matthew Desch: Yeah. I mean, it could be multiyear opportunities, a lot of these, you know. So we will we will build a backlog, it says, along with Walter Paul Piecyk: No. No. I did not mean deferred revenue in terms of, like, a multiyear contract. I mean, like, Walter Paul Piecyk: you know, you you take you take the you take payment up front, and then you book the revenue with noncash from an accounting standpoint. Vincent J. O'Neill: There might there might be an element of that, Walt, but at this point, I would not expect much. Matthew Desch: I mean, some of the opportunities we are seeing, as I said, if we if we if we sell something into a consumer device, then we give it a ten-year life cycle, and we take all the cash up front or just roll it into the basic purchase. Yeah. Well, Walter Paul Piecyk: Yeah. We would Matthew Desch: you know, do that over time in terms of accounting. Greg Mesniaeff: Yeah. Walter Paul Piecyk: Got it. And then there is a lot of a lot of discussion of spectrum on here. I mean, some of the things that were mentioned were were transactions for spectrum that is not in use and is is obviously a lot deeper, 40 megahertz in the case of Legato and 50 megahertz in the case of of EchoStar. I guess the way I will ask the question is this way. I mean, I know you push it. I know that the longevity of your existing constellation has been much longer, and it it just you can squeeze out as much cash out of that as possible. But at some point, if I am remembering correctly, you do have to start to spend on a new constellation. So at what point do you get to the, you know, you have to make a decision one way or another, monetize or start to invest in that constellation. And then secondly, I mean, these other things, again, unencumbered. Cannot just sell spectrum if you have existing users on it. Right? So and how do you communicate that to your customers now that you basically have this conference call that your competitors can use to say, Hey. Iridium Communications Inc. is looking to potentially have a strategic transaction with their spectrum. Are you sure you want to buy services on them, you know, that that are being utilized for your services right now? Matthew Desch: Well, I mean, they they may be interested in future services that would be provided with that spectrum and and would evolve to the those those new services. You know, we have a very flexible system that can move people around within the spectrum and can make make available a certain amount for other applications. Would not have to do all of it. But the same situation could you you you just described could be said to Viasat right now, which is announced along with Space 42 that they plan to build a network to put spectrum into it to do other services. So if you were existing Viasat or Space 42 customer, you would say, I guess, they are going to build a network that will utilize spectrum for other applications. I think we can do both. You know, we have nine megahertz of spectrum. It is valuable. It is global. It is coordinated all over the world, and there can be opportunities to do multiple things with that. Yeah. Okay. So I covered that for you, Walt. Okay. Anybody else? No. Sorry. Sorry. I was on mute. Sorry about that. There we go. Walter Paul Piecyk: Yeah. No. That was good. But wait. So when does the the new constellation spend start? Is there any type of estimate on Kenneth Levy: Yeah. I mean, it it Matthew Desch: if we are building a spec a a constellation ourselves, we do not need to even start it till 2031. Maybe we would put a little bit of money in 2031 and 2032. I would I would say the spending would ramp up to the 2034–2035 time frame. We necessarily probably need it until the latter half of the decade if all I am doing is existing services, you know, and, you know, these new themes that that I am talking about here, all those things could could be certainly employed all the way until that time, if not beyond. Walter Paul Piecyk: Got it. So so so bottom line is, think it is something that can be discussed now without any without impact to existing customers and be part of someone, whether it is jointly, separately, your own, a constellation that is planned over the next couple of years. Without disruption to your existing customers. Operator: Yes. Perfect. Thank you. Edison Yu: Our next Operator: question comes from Greg Mesniaeff of Kingswood Capital Partners. Go ahead please. Vincent J. O'Neill: Thank you. Good morning. Just a very quick question on PNT. Greg Mesniaeff: As you position it market-wise with your customers, are you finding that most of the customers are augmenting GPS, or is it the GNSS customers that are deciding to augment, you know, particularly the Galileo ones? Matthew Desch: So commercial customers can get timing, free timing from a number of GNSS sources. It is the customers who are worried about those signals being degraded because they are so faint, if you will, and can easily be overwhelmed. And their applications are so important or in some cases, are inside buildings and it is to get a timing source to, you know, for their digital source. But most of them are critical infrastructure, protecting critical infrastructure, and utilizing it alongside other GNSS sources. Greg Mesniaeff: Well, I guess if I rephrase the question, is GNSS more robust than GPS? Walter Paul Piecyk: And Matthew Desch: quite a customer. GNSS is the generic term for all the different types of, you know, whether it be Galileo. GPS is is sort of the North American version. BeiDou, blocking on. Sorry. Those are all GNSS systems. And so when I use the term GNSS, I am just generically saying they could protect any of those. Greg Mesniaeff: Got it. Okay. Alright. So, there is really no distinction that GPS is Walter Paul Piecyk: you know, less robust than some of the other ones you mentioned? Matthew Desch: No. They are they are all use very, very same kind of power structure to send information from far away, you know, MEO kind of satellites to devices on the ground that have to kinda pick these multiple signals out. And it works very well until it does not, you know, until it is overwhelmed. Greg Mesniaeff: Sure. Sure. Thank you. Got it. Yeah. Thanks. Operator: The next question comes from Louie DiPalma of William Blair. Go ahead please. Edison Yu: Matt, Vincent, and Ken, good morning. Greg Mesniaeff: Hey, Louie. Hey, Louie. For the Brent Penter: the new the PNT chip that is in development, what is the next milestone that investors should be watching for? Greg Mesniaeff: Well, I mean, it is Matthew Desch: it is prototypes are available. It is in Walter Paul Piecyk: larger Matthew Desch: you know, we are we are going to make it commercially available, I think it is June or July. I think it is the right time frame. I do not know about milestones there. I think the real would be our partners or customers who announced that they are implementing products on that. And the applications and the successes they are having deploying that. I think those are the milestones. And I will get those good to hear those announcements this year and certainly next. Walter Paul Piecyk: Sounds good. And related to Brent Penter: Tim Horan and Walter's questions, for your Edison Yu: NTN Direct service, what is the maximum amount of your nine megahertz of spectrum that you could use for NTN Direct given how Brent Penter: you use your spectrum for your existing network currently. Matthew Desch: Yeah. I mean, NTN Direct is a narrowband service that uses 100 kilohertz, 200 kilohertz, you know, at most. So it could be positioned within our network any any place. Mean, Walter Paul Piecyk: over time, Matthew Desch: you know, we can evolve that service to be able to use utilize all our spectrum if that was the only spectrum we have, but it is so incredibly efficient the way it operates. You know? We can operate millions of customers even with a single or dual channel. So I do not know that that is really, I think a lot of the direction in the future is really about about 5G New Radio. You know, that is really what other people are looking to deploy that uses 3 to 5 megahertz channels. We are not going to implement that service. We are going to augment that service, and the only way, you know, that would kinda happen within our spectrum was in an alliance or or partnership. Operator: Let us say, you know how Brent Penter: like, Iridium Communications Inc., you obviously provide, you know, safety services for maritime. As it relates to GMDSS and the aviation sector. Colin Michael Canfield: Could Brent Penter: those types of services shift to to NTN Direct or would those services need to stay on like, the existing network? Matthew Desch: Well, look. It takes a long, long time for either of those services to be applied and approved. It took us ten years to get GMDSS through the bodies. And even when we moved to GMDSS over, was an extensive time to do that. So I am not sure what the value would be to move them to NTN. And if if anyone tried to do that, it would take years to do it. So I I know it would not prove create any advantages for us to do it necessarily to put it on our Iridium NTN Direct. Because that is not really what the service say, for example, on a ship protecting L- Ka-band networks is doing. So but, I mean, theoretically, but it is not practical and it would take many, many years to do. Brent Penter: Yeah. That was my question in terms of, like, of the nine, like, megahertz of spectrum since Edison Yu: certain services would seem to need the existing network then like, some portion of those megahertz could not shift. Operator: Right? Brent Penter: Or at least in the near term? Matthew Desch: We are we really do not use much of our spectrum for GMDSS. I mean, it is used as a backup and it is used in in emergencies. It is required to be on the ship, and there are other functions of sort of IoT functions that that those terminals can do, but they are extremely efficient. As is our IoT services and other, you know, actually, the service that takes the most spectrum is is our original broadband connections when service. And that is the area that we are seeing evolve to Starlink and other, terminals, and we have had a little headwind associated with that. But it has actually been good in terms of spectrum utilization and makes the rest of our spectrum more flexible. Brent Penter: That makes sense. So it seems that like, nearly all of the nine megahertz could be used for NTN Direct Matthew Desch: Could be, theoretically. No. From a long-term perspective, yeah. Greg Mesniaeff: Awesome. Thanks. Thanks, everyone. And congrats on the development of the the new PNT chip. Thanks. Thanks, Louie. Operator: The next question comes from Justin M. Lang of Morgan Stanley. Go ahead please. Greg Mesniaeff: Hi. Thanks for taking the questions here. Matt, just want to pick back up on your MDA Shield comments earlier. I was curious if you could just touch on how you think the Golden Dome opportunity matures Walter Paul Piecyk: over this year for you. I mean, do you expect contracts to materialize in in in 2026 here that could present upside to the guide, or is this more of a 2027 and beyond opportunity for you? Matthew Desch: It is probably more of a 2027 and beyond. Though there there could be engineering service revenue upside this year. Mean, that is one of the things we are certainly see. There are RFQs, if you will, and other areas in which we think our expertise could be applied to both directly to kind of Golden Dome Shield kind of announcements and things around it. That relate to the government and their their use of our expertise and even connecting into our existing network. So I am being a little bit obtuse about that because we do not want to point, you know, exactly where, we think there is, but, you know, when we look at really the opportunities that are addressable to us, it is in the billions of dollars. We are only expecting to get a fraction of that. But it would, we think it could be meaningful in terms of growth to us. Edison Yu: Okay. Great. That is helpful. And then Justin M. Lang: maybe, Vince, one for you. Just going back to the the PNT contribution this year. And I appreciate it is a longer-term opportunity, so that could be sort of lumpy in the near term. But for 2026, maybe I will ask it another way. I mean, is it fair to assume that the growth in the PNT business outpaces overall portfolio growth this year? Vincent J. O'Neill: That is probably that is probably a fair assumption, Justin, at this point. Yeah. I Justin M. Lang: Okay. Yeah. Okay. Perfect. Thanks. Operator: Our final question comes from Caleb Henry of Quilty Space. Go ahead please. Edison Yu: Hi, guys. Just one question for me, and it is on the Shield IDIQ. I think there is something like 151 companies that were awarded Greg Mesniaeff: access to the IDIQ. If you could share some about what makes Iridium Communications Inc. well positioned to bring in kind of where you see that as an opportunity knowing that not all hundred or fifty-one of those are probably going to get an award or at least a a meaningful one. Matthew Desch: Yeah. That is right. I mean, we announced that we were part of it. You noticed we did not we did not play that up or anything because it is all up to how much business is is won. Maybe some others have have been a bit more aggressive about, you know, announcing, you know, the potential for it for themselves. But no, I think, look, our experience, you know, we have have a long history of delivering high-quality service to the government. We have almost been considered MILNET, if you will, or whatever you want to call the latest version of it. I guess it is called the Space Data Network in the latest term. We have been kinda connected in that front, providing a unique service for more than 25 years. And and that is respected and understood. In fact, have 130,000 endpoints out there around the world that could connect into, be relevant to, to a Golden Dome or other kinds of related networks that relate to, you know, national security. You know, we are looking at a number of things right now where other networks being built as well that may or may not even be part of Shield are things that we think we could address and provide value. And, you know, really, the the work we were doing with SDA has been highly regarded. I think others have come to us and said, based upon what we are doing building out the ground infrastructure, the operation centers, the operation software, the actually manning and flying satellites. The success we are having here, maybe we could be working on some other networks that the government has. Both that are directly related or ancillary to Shield. So, anyway, I know that is a a broad statement. I wish I could get into more details about sort of the opportunities and pipeline we are specifically looking at, but I I do not, I think that is kinda premature right now. Brent Penter: No. That is useful. Thanks. Edison Yu: Okay. Thanks, Caleb. Operator: This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. Matthew Desch: Yeah. I appreciate you hanging in this long. I appreciate all the interest and questions. Clearly, we are writing a new story here, in some ways, so I hope my comments about, you know, the avenues of growth we see kind of are are helpful to you, and we will certainly talk a lot more about those in the future. So look forward to continuing our dialogue with with the industry. So thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Baxter International Inc. Fourth Quarter 2025 Earnings Conference Call. Your lines will remain in a listen-only mode until the question and answer segment of today's call. At that time, if you have a question, you will need to press the star then one keys on your touch tone phone. If anyone should require assistance during the conference, please press star then 0 on your touch tone phone. As a reminder, this call is being recorded by Baxter International Inc. and is copyrighted material. It cannot be recorded or rebroadcast without Baxter International Inc.’s permission. If you have any objections, please disconnect at this time. I would now like to turn the call over to Kevin Moran, Vice President, Investor Relations at Baxter International Inc. Kevin Moran, you may begin. Good morning. Welcome. Today, we will discuss Baxter International Inc.’s fourth quarter results Kevin Moran: along with our financial outlook for the full year 2026. This morning, a press release was issued with our preliminary earnings results and updated outlook. The press release and investor presentation are available on the Investors section of the Baxter International Inc. website. Joining me today are Andrew Hider, President and Chief Executive Officer, and Joel Grade, Executive Vice President and Chief Financial Officer. During the call, we will be making forward-looking statements, including comments regarding our financial outlook for the full year 2026 and anticipated timing and impact of our deleveraging efforts, the amount and timing of charges related to operating model and cost structure actions, the anticipated impact of various regulatory and operational matters including ones related to our infusion pump platform, and to clinical practice changes following Hurricane Helene, and commentary regarding the global macroeconomic environment including tariffs and proposed mitigating actions. Forward-looking statements involve risks and uncertainties which could cause our actual results to differ materially from our current expectations. Please refer to today's press release, the forward-looking statements slide at the beginning of our investor presentation, and our SEC filings for more detail. In addition, please note that on today's call, all our comments will be on a non-GAAP basis, unless they are specifically called out as GAAP. Non-GAAP financial measures are used to help investors understand Baxter International Inc.’s ongoing business performance. GAAP to non-GAAP reconciliations can be found in the schedules attached to our press release and our investor presentation. On the call, we will reference operational growth, which excludes the impact of foreign exchange, MSA revenues from Vantiv, and the previously announced exit of IV Solutions from China. We will also reference organic growth which excludes the impact of foreign exchange, MSA revenues from Vantiv, and any impact from future business acquisitions or divestitures. We plan to utilize the organic growth measure going forward. Finally, as a reminder, continuing operations excludes Baxter International Inc.’s Kidney Care business which is now reported as discontinued operations. With that, I would like to turn the call over to Andrew. Thank you, Kevin. And good morning, everyone. Andrew Hider: Fourth quarter 2025 global sales from continuing operations totaled $3,000,000,000 and increased 8% on a reported basis and 3% on an operational basis. Total company adjusted earnings from continuing operations were $0.44 per diluted share. Kevin Moran: While the top line exceeded our expectations. Andrew Hider: Adjusted EPS fell short. Joel will get into greater detail on the results, but there were a few areas that differed from our expectations we provided in October. On top line, we saw a more modest net impact from Novum IQ large volume pump customer returns, which was favorable to results. While responses have varied, in general, customers are waiting for additional clarity on the nature and timing of the additional corrections that we will look to deploy. Margins were pressured by both an unfavorable mix of sales Joel Grade: as well as some nonrecurring items, including inventory adjustments. And finally, we saw a higher tax rate. The results in the quarter are disappointing and underscore the work ahead to improve performance and execute more consistently. I stepped into this role in August with confidence in the potential of the business given the central role Baxter International Inc. plays in health care, but also with a practical sense of the hurdles before us. As I have continued to visit our sites and engage directly with the team and customers, I have deepened my understanding of both the challenges and opportunities facing Baxter International Inc. We are in the early stages of a turnaround and have more work to do to deliver strategically, operationally, and commercially, and recognize that it will take time to implement real long-term solutions. That said, there is a strong thesis where we can take this business, and we saw some examples of this in the quarter’s results. For example, the Advanced Surgery business capped off a great year with a strong quarter, growing 11% with contributions both across the portfolio and around the globe. And the HealthCare Systems and Technologies segment had another quarter of consistent performance, including a contribution from the recently launched Connect 360 Monitor in the Front Line Care division. We are also preparing for the launch of the recently announced Dynamo series stretcher, the latest innovation in our portfolio of smart beds, services, and connected care solutions. Innovation will be a critical element to our success, and we recognize the importance of bringing new innovation into the market. Accordingly, you should expect a heightened focus going forward and continued investment in R&D at or above historical levels. As I said during our last earnings call and reiterated last month, I am focused on three main priorities. These are stabilizing the areas of the business that require increased focus, strengthening our balance sheet, and driving a culture of continuous improvement and efficiency. We are moving with focus and urgency on each of these, and our teams are driving relentlessly to improve execution and performance across the enterprise. It is with this in mind that we have decided to hold off on our Investor Day. Let me share a few updates on our priorities and the actions we have taken. Stabilize: just a few weeks ago, we internally announced a new operating model that is designed to simplify our organization, accelerate innovation, and improve performance. Most significantly, we are delayering levels of leadership, including removing the segment management layer, and embedding critical functional roles directly in each of our businesses. This will allow each leader to have full P&L responsibility for their business with fully aligned commercial, R&D, manufacturing, medical, and targeted functional support and, importantly, full accountability to the results. These changes are significant and are designed to reduce complexity, eliminate barriers for decision making, bring us closer to our customers, and help us to improve our S&D ratio. We have also taken actions within our IV Solutions business to rightsize the support footprint to align to the lower demand environment which we believe is a new baseline in the market. In Pharmaceuticals, in addition to market demand softness, supply and backorder challenges have impacted revenue and driven unfavorable product mix. Specific initiatives to address these are in progress; however, it will take some time to bear fruit. Overall, across the enterprise, we are taking actions to further strengthen our focus on quality and improving on-time delivery. Balance sheet: our two customer value creators. We continue to focus on improving our cash generation and leverage. In line with our expectations, free cash flow generation exceeded $450,000,000 in the and continuous improvement. As a reminder, operational efficiency is at the center of what we are driving. As you know, a key element of this is our Baxter Growth and Performance System, Baxter GPS, which we rolled out in October to ensure continuous improvement, enterprise efficiency, and a growth and performance mindset are integrated into our day-to-day work. We recently held our first annual President’s Kaizen, where I was impressed by the resolve each of our leaders demonstrated in driving change for the better with a focus on 10 events that will drive cross-business impact. With focused week-long sprints, teams tackle critical opportunities aligned to our eight value creators. The work underway is helping us reduce complexity, better anticipate customer needs, accelerate innovation, commercialize faster, and deliver value sooner. We are focused on improving every aspect of our operations, and we will be consistently measuring our performance to deliver just that. Importantly, this is not a one-off event. It is how we are building a continuous improvement culture where everyone is empowered to make things better every day. Before I turn it over to Joel, I just wanted to reiterate the key steps we are taking. We have streamlined the organization for greater accountability. We have launched GPS to drive continuous improvement. And we have tightened our focus on innovation to better meet customer needs, all to drive improved performance and long-term shareholder value creation. Now I will turn it over to Joel. Joel, over to you. Thanks, Andrew, and good morning, everyone. Fourth quarter 2025 global sales from continuing operations totaled $3,000,000,000 and increased 8% on a reported basis and 3% on an operational basis. Performance in the quarter reflects growth across all segments. On the bottom line, total company adjusted earnings from continuing operations were $0.44 per share. Results in the quarter reflect unfavorable product and geographic mix, some nonrecurring items including inventory adjustments, and a higher tax rate partially offset by the positive impact from pricing in select segments. Now I will walk through our results by reportable segment. Commentary regarding sales growth in 2025 will be on an operational basis. Sales in our Medical Products and Therapies segment, or MPT, were $1,400,000,000 and increased 4% in the quarter. Performance in the quarter reflects growth in Infusion Therapies and Technologies, or ITT, as well as continued strength in Advanced Surgery. Within MPT, fourth quarter sales from our ITT division totaled $1,100,000,000 and grew 1%. Performance in the quarter was driven by growth in IV Solutions, which benefited from a favorable comparison with the prior year period, partially offset by lower infusion pump sales due to the previously discussed shipment and installation hold of Novum LVP. Within IV Solutions, underlying U.S. demand remained below historical levels. As previously discussed, fluid conservation practices embedded with clinical practice changes in the market following Hurricane Helene remain. Kevin Moran: And Joel Grade: continue to weigh on volumes. In infusion systems, results in the quarter reflected the net impact of lost sales due to the ongoing shipment and installation hold of the Novum LVP, customer returns, and transitions to Spectrum. Relative to our prior guidance, this net impact was more modest in the quarter. While customer responses have varied, in general, many are understandably waiting for additional clarity on the nature and timing of additional corrections that we will look to deploy and of the release of the ship and installation hold. Sales of Advanced Surgery totaled $328,000,000 and grew an impressive 11%. Results in the quarter reflect continued solid demand for our portfolio of hemostats and sealants, strong commercial execution across regions, and steady procedure volumes. MPT’s adjusted operating margin totaled 15.4% for the quarter, decreasing 110 basis points over the prior year period, and reflects increased manufacturing and supply costs, unfavorable product mix, inventory adjustments, and higher costs related to tariffs. These factors were partially offset by positive pricing in the quarter. Kidney Care TSA income positively contributed as well. In HealthCare Systems and Technologies, or HST, sales in the quarter totaled $827,000,000, increasing 4%. Within HST, sales of our Care and Connectivity Solutions, or CCS, division were $537,000,000 and grew 4% globally. Performance in the quarter was driven by double-digit growth in our Surgical Solutions business and continued momentum across our Patient Support Systems portfolio. Total U.S. capital orders for CCS increased nearly 30% compared to the prior year, driven by broad-based strength across Patient Support Systems, Care Communications, and Surgical Solutions, and our order book remains strong. To date, we have not observed a slowdown in U.S. hospital capital spending. However, given the broader macroeconomic uncertainty, we continue to closely monitor the situation. Front Line Care sales in the quarter were $290,000,000 and increased 3%. Performance in the quarter reflects increased demand in cardiology and patient monitoring portfolios, which includes our recent launch of Connect 360. HST adjusted operating margin totaled 15.2% for the quarter, decreasing 330 basis points compared to the prior year. These results reflect unfavorable product and geographic mix. Kevin Moran: Increased corporate allocation expenses, Joel Grade: and higher costs related to tariffs. Kevin Moran: TSA income partially offset Joel Grade: these increased expenses. Moving on to our Pharmaceuticals segment. Sales in the quarter totaled $668,000,000, increasing 2%. Within Pharmaceuticals, sales of our Injectables and Anesthesia division were $352,000,000 and declined 9%. Performance in the quarter reflects a decline in our injectables portfolio, driven by a difficult comparison to the prior year period as well as softness in certain premixed products, largely consistent with the dynamics discussed last quarter related to IV infusion protocols and increased use of IV push in select hospital settings. Our Anesthesia portfolio declined high single digits, reflecting softer demand for select inhaled anesthesia products. Drug Compounding grew 18% and reflects continued strong demand for our services outside the U.S. Pharmaceuticals adjusted operating margin totaled 5.8% for the quarter. These results reflect increased manufacturing and supply costs, an unfavorable product mix, price erosion, inventory adjustments, and increased corporate allocation expenses following the sale of Kidney Care. These expenses were partially offset by Kidney Care TSA income. Finally, Other sales, representing sales not allocated to a segment and primarily including sales of products and services provided directly through certain manufacturing facilities, were $7,000,000 in the quarter. MSA revenue from Vantiv totaled $84,000,000. As a reminder, these sales are included in our reported growth; however, they are not reflected in our operational growth for the quarter. Before moving on to the rest of the P&L, an important reminder on our continuing operations reporting: Following the sale of our Kidney Care business, certain corporate costs that did not convey with the business are now allocated across our segments in both cost of goods sold and SG&A, along with income from the TSA, which is currently recognized within Other Operating Income. In addition, as previously discussed, we reclassified certain functional expenses from SG&A to cost of goods sold beginning earlier this year. These costs support manufacturing and are now treated as indirect expenses subject to inventory capitalization and recognized in cost of sales when sold. Fourth quarter adjusted gross margins from continuing operations were 35.5%, a decrease of 900 basis points compared to the prior year. Fourth quarter adjusted SG&A from continuing operations totaled $637,000,000, or 21.4% as a percentage of sales, a decrease of 330 basis points from the prior year period. Results reflect disciplined expense management and the benefit from the reclassification of certain functional costs. Adjusted R&D spending from continuing operations in the quarter totaled $116,000,000, or 3.9% as a percentage of sales, which came in lower than our expectations. This reflects the reclassification of certain product support and sustaining activities into cost of sales, and therefore does not reflect our anticipated level of R&D spend going forward. TSA income and other reimbursements totaled $50,000,000 in the quarter and came in line with our expectations. As previously discussed, the associated expenses related to this income are reflected in other lines of the P&L, including cost of goods sold and SG&A. Altogether, these factors resulted in an adjusted operating margin of 11.8% on a continuing operations basis, a decrease of 340 basis points compared to the prior year period. Results reflect unfavorable product mix and nonrecurring items, including inventory adjustments, partially offset by positive pricing in select segments and the benefits of TSA income. Net interest expense from continuing operations totaled $58,000,000 in the quarter, a decrease of $32,000,000 versus the prior year period, reflecting lower interest expense following the paydown of existing debt with proceeds from the Vantiv sale. Adjusted other nonoperating income totaled $15,000,000, driven primarily by amortization of pension benefits compared to the prior period. The continuing operations adjusted tax rate for the quarter was 27.2%, driven primarily by mix of earnings across jurisdictions. In total, adjusted earnings from continuing operations were $0.44 per share for the quarter. Before turning to our 2026 outlook, I want to comment on cash flow and liquidity. Fourth quarter free cash flow was $456,000,000, bringing full-year free cash flow to $438,000,000. Performance in the quarter reflects improved cash flow generation and seasonality, including progress across select areas of working capital as well as continued focus on execution as we close out the year. We continue to focus on strengthening cash flow generation and maintaining discipline around working capital, foundational elements of our financial strategy. Improving the balance sheet continues to be a key area of emphasis, and we intend to deploy cash towards reducing leverage in line with our capital allocation framework. Now our outlook for the full year 2026, including some key assumptions underpinning the guidance. For full year 2026, we expect total sales growth to be flat to 1% growth on a reported basis. This reflects current foreign exchange rates, which are expected to contribute approximately 100 basis points to top line growth for the year. In addition, Andrew Hider: reported sales are expected to include Joel Grade: a headwind of approximately $25,000,000 from MSA revenues from Vantiv. This represents approximately 30 basis points of impact on reported growth. Excluding the impact of foreign exchange and MSA revenues, we expect organic sales growth of approximately flat in 2026. As it relates to the segments, in MPT, we expect full-year organic sales to be flat to slightly up. This reflects the continued uncertainty around the Novum situation, including the potential impact from various customer responses. It also reflects the assumption that the ship and installation hold will remain in place for the full year. And as previously discussed, Robert Justin Marcus: we believe that the market is at a new baseline in our IV Solutions business. In HST, we expect full-year organic sales to grow low single digits. This reflects expected contributions from both the Care and Connectivity Solutions and Front Line Care divisions. Andrew Hider: In Pharmaceuticals, Robert Justin Marcus: we expect full-year organic sales to be approximately flat. This reflects continued pressure in injectables and anesthesia related to softer market demand, supply challenges, and ongoing IV push utilization trends that have been discussed in prior quarters. Turning to our outlook for other P&L line items. Beginning with tariffs, we estimate the full-year impact to range $130,000,000 to $140,000,000. We expect full-year adjusted operating margin from continuing operations to range between 13% to 14%. This primarily reflects lower gross margins driven by unfavorable product mix, including the impact of lower manufacturing volumes and reduced contribution from pricing. These pressures are expected to be partially offset by improvements in SG&A, including the recent restructuring actions. We expect our nonoperating expenses, which include net interest expense and other income and expense, to total between $280,000,000 to $300,000,000. This reflects higher interest expense from the recently completed debt mutual transactions and lower contribution from other income. On a continuing operations basis, we anticipate a full-year tax rate to range between 18.5% to 19.5%. We expect our diluted share count to average approximately 518,000,000 shares for the year. Based on all these factors, we now anticipate full-year adjusted earnings on a continuing operations basis of $1.85 to $2.05 per diluted share. While we will not be providing quarterly guidance, I want to offer some perspectives on the expected cadence in results over the course of the year. Andrew Hider: Overall, Robert Justin Marcus: we expect the first quarter to be the most challenging, with improving performance thereafter. Specifically, the ITT division has an unfavorable year-over-year comparison in Q1 due to the onetime distributor build in the prior year. Additionally, ITT results in the first half are expected to reflect absorption headwinds from the rollout of higher cost inventory produced in 2025. We also expect to see a second half benefit from the recently taken actions to rightsize our cost structure. Joel Grade: Therefore, Robert Justin Marcus: we expect ITT performance to improve throughout the year assuming relatively stable demand. Within HST, new product launches are expected to contribute stronger growth in the second half of the year compared to the first half, including Connect 360 and Dynamo. Joel Grade: In Pharmaceuticals, Robert Justin Marcus: we expect the previously mentioned headwinds to continue in the first half of the year. As we move into the back half of the year, we anticipate a more favorable comparison and improved performance. Finally, as a reminder, the first half of the prior year saw benefit to operating margins related to the timing of certain functional costs being reclassified into cost of goods sold. Collectively, these factors support our expectation that organic sales growth, operating margin, and adjusted earnings per share will be back half weighted. With respect to free cash flow, similar to 2025, we expect it to be back half weighted due to our normal seasonality, expected gains in earnings, as well as recent cost structure actions. With that, we will now open up the call for Q&A. Operator: Thank you. We will now begin the question and answer session. If you have a question, please press the star then one keys on your touch tone phone. If you wish to remove yourself from the queue, again, star then one. If you are using a speakerphone, please lift the handset to ask your question. So that we may be respectful of everyone's time, please limit your comments to one question with one follow-up question if necessary. We appreciate everyone's patience and would like to provide as many of you as possible the opportunity to ask a question. We will pause for a moment while the list is being compiled. I would like to remind participants that this call is being recorded, and a digital replay will be available on the Baxter International Inc. website for 60 days at www.baxter.com. Our first question comes from David Harrison Roman of Goldman Sachs. Your question, please. David Harrison Roman: I wanted to start on one strategic question that had one financial follow-up. Maybe firstly for you, Andrew. As you just think about the number of moving parts you are trying to navigate here, strategic review, catching up on innovation, deleveraging. What are you doing to ensure sustainability of the business as it relates to the competitive dynamic? And how are you gaining sufficient visibility to drive the forecasting process? Joel Grade: Yeah. So good morning, David. Let me start by just walking. Part of my standard work as a CEO is to visit customers on an ongoing basis. And I will tell you that the message is loud and clear that we are essential to not only supporting but to enabling their ability to bring a high level of patient care. We are an essential and trusted brand through that. As a reminder, we touch over 350,000,000 patients per year. All that said, we need to get better, and we are not satisfied with our current performance. And you have heard me consistently talk about not only near term, and to walk through, it starts with stabilizing the business. And I have outlined that in my prepared remarks. To get more specific, we are driving the accountability at the lowest levels in the organization. Additionally, about strengthening our balance sheet, and lastly, our focus on continuous and really enabling that such that we focus on the customer and streamline the organization to be able to execute at the pace we expect. We are early in our journey, but we are making progress. Now Operator: to date, Joel Grade: we have aligned around streamlining the organization. We have launched GPS. And we have heightened our focus on innovation. And back to listening to our customers and launching products, it starts with our Connect 360 that I talked about. And then additionally, we launched earlier in the year or talked about launching earlier in the year the Dynamo Stretcher platform. So while we are making progress, we have a lot more work to do. Robert Justin Marcus: Yeah, David. And it is Joel. I will take the forecasting piece of this thing. And clearly, improving our forecasting accuracy is a major priority, and we are attacking that in a very structured way through Baxter GPS. And I certainly understand and appreciate the frustration and the volatility of our historical results. We have and will continue to be transparent about the challenges we are facing and the actions we are taking to address those challenges as well as, obviously, the assumptions underpinning the guidance. But GPS gives us a more disciplined operating rhythm, clear accountability, and a lot more continued visibility that drives our performance. So as you have heard us talk about focusing on demand planning, we also focus really around our cross-functional alignment to our commercial teams, our operational teams, our finance teams, and just building more rigorous daily and weekly operating mechanisms that really surface issues earlier and allow us to course-correct more quickly. So the goal is designed to reduce volatility, improve the predictability of our results over time, and, as Andrew likes to say, drive a really consistent S&D ratios in our organization. So we know we have work to do, and we are attacking it head on. David Harrison Roman: And then maybe just as a follow-up here. Can you just remind us on where you are and the progress you are making on reducing the G&A and support costs that today are getting reimbursed by Vantiv via the TSA? And how we should think about the runoff of the TSA over the course of the year and into next year, and your retained cost? Can that be a one-for-one offset? And maybe just help us think through the nature of the operating dynamics there. Robert Justin Marcus: Yeah. Sure. So a couple of things there. Number one, for 2025, one of the things we have said is that we had, including cost takeout and TSA income, about a 40 basis point remaining impact on the year, and we are on track for that. And so I think that has been successful that way. We continue to make good progress on our cost takeout, and you have heard Andrew talk about streamlining the operating model. That is a continued workstream on this. We have continued to streamline our operations to meet demand. We have talked about that as well from a buying perspective. And then again, this work is done in relation to our stranded costs as well. So our TSAs do start to tail off some in 2026. Obviously, they really go into 2027. As we have said, we are committed to eliminating our stranded costs by 2027, and we remain on track to do that. So I again feel good about that progress, and, again, a lot of this work you are hearing us talk about today is targeting that goal. So hopefully that helps. David Harrison Roman: Yes. Thank you for taking the question. Operator: Robbie Marcus of JPMorgan is on the line with a question. Please state your question. Robbie Marcus: Yeah, great. Thanks for taking the questions, and good morning. Two for me. Joel, maybe just to follow up on David’s question, especially as the TSAs roll off, and I know it is early here, but do you think you will be able to grow earnings next year as the TSAs roll off where you sit today? Robert Justin Marcus: Just to be really quick. Next year, do you mean 2027 or 2026? Robbie Marcus: 2027. Robert Justin Marcus: 2027. We are certainly not forecasting or issuing guidance on that today. Do I anticipate growth? Yes. But as we have talked about, Robbie, the TSA typically are 24 months. Our deal was closed on 01/31/2025, so the majority, I will say, of the TSAs fall off in 2027. And, again, we do expect to continue to work through that in the year and, again, finish that off by 2027. But, again, we are not going to give guidance on growth at this point. Robbie Marcus: Great. Maybe a follow-up question. The gross margins obviously came in well below where the Street was and operating margin as well. I was hoping you could just bridge us from the fourth quarter 2025 to the 2026 guide, how much shifted from below gross cost of goods into cost of goods, and if you could also help put a finer point on first quarter so we could get a better sense of cadence through the year. Thanks. Robert Justin Marcus: Sure. Maybe I will start again. We have not provided specific numerical guidance, but I would certainly reiterate that I anticipate Q1 is going to be our most challenging quarter. There are a number of reasons for that, Robbie. Number one, I would call it normal seasonality. Obviously, Q4 tends to be a lot larger quarter than Q1, so our margin pass-through, again, there is some typical detriment there. Now there is also a prior year comparison, remember, at ITT, and while that is not a sequential driver, it does mess a little bit with seasonality we talked about because our comparison in Q1 year over year with the onetime distributor build in 2025 is a little bit unique. At the time we sized that, it was about 150 basis points to total company sales, so call that a $40,000,000 to $50,000,000 impact, and that will be a headwind in year-to-year growth in Q1. There is also continued uncertainty on Novum returns. One of the things we talked about in the last quarter was an uncertainty around customer behavior. That uncertainty still exists to a degree, and it really carries into this year. And so our customers are in a bit of a wait-and-see mode still, and therefore, as we referenced last quarter, Joel Grade: there is an ongoing risk for customer responses there. Robert Justin Marcus: With that, this is all top line, but Drug Compounding in Q4 grew 18%. Probably not necessarily sustainable from that number, so obviously expecting that to be lower in Q1. And then from a margin perspective, again, I already referenced some of the lower volume. There are also what I will call absorption headwinds. In 2025, we had some of these higher manufacturing costs, and that ended up in our inventory capitalization. That is then rolling out as we sell those products, obviously in the first half of the year really, but also certainly in Q1. And so that is something of a headwind to margins. We have not given specific guidance around the number on that. And then the other thing is we continue to expect bottle margins to remain pressured due to softness in Injectables and Anesthesia, and then really just the overall mix of the business. Finally, from an EPS perspective, Robbie, the incremental interest expense kicks in in Q1, and so that is certainly something to expect there. Hopefully, that helps with guidance there. Robbie Marcus: Very much. Thanks a lot. Operator: Vijay Muniyappa Kumar of Evercore ISI is on the line with a question. Please state your question. Vijay Muniyappa Kumar: Hey, guys. Thank you for taking my question. Robert Justin Marcus: Andrew, maybe my first one for you is you mentioned customers are awaiting how you resolve Novum, right? But your guidance assumes Novum ship hold remains in place for the full year. Have you communicated this to customers? What have you told customers? I understand the guidance assumption, but I am curious, are customers willing to wait for a year for Novum to resolve? Joel Grade: Yeah. Good morning, Vijay. Let me walk this through a little bit here. First and foremost, customers can and are continuing to use the device according to existing instructions and mitigating actions. We have continued to make progress on our Novum solution and the correction. We are staying close, and as we go through testing, as we go through really identifying the longer-term solution set, we will update. As a reminder, we have a strong pump portfolio. We have our Spectrum LVP that we utilize through this transition, and I even walked through earlier in the year we have launched Spectrum with the IQx platform, and it enables us to really not only work with our customers but to have a total pump portfolio with Spectrum being our LVP and Novum being our syringe, and Novum being a newer product set that we have launched in the recent history. And so while we are going through our Novum updates, we have a strong platform that we can bring to market. And as a reminder, we are also launching early Q2 PureVu on the IQx platform, and PureVu is designed to really support our customers and their ability to identify and work on fluid processing. So we are continuing to innovate, continuing to build on, and given our pump platform, we are in a position to support our customers through this. Robert Justin Marcus: Understood. And maybe my second one for you, Andrew. You mentioned the operating model change. Curious on what has changed from prior model. How is this model better? And what is the impact to or implication of free cash flow? You mentioned P&L responsibility. Is free cash flow going to improve from fiscal 2025? Joel Grade: Yeah. I will take the first part, and then I will let Joel walk through a little bit around that, the cash process. Just a few weeks ago, we internally announced the new operating model, and it is designed around simplifying our organization, accelerating innovation, and improving performance. We are putting the accountability at the lower levels in the organization. Most significantly, we are delayering at the top level, removing the segment management, and embedding critical functional roles directly into the business. This allows us to further eliminate the barriers for decision making, and it is streamlining to listening to our customers and ultimately helping us improve our S&D ratio and execute on a more consistent basis. This approach is really moving down that decentralizing and streamlining the organization with black-and-white accountability. Robert Justin Marcus: Yeah, Vijay. And then I will take, again, the cash piece of this. Certainly, as you have heard Andrew talk about regularly and myself as well, improving our balance sheet and cash generation continues to be a top priority for the company. We do expect in 2026 that free cash flow will improve versus 2025, driven primarily by stronger working capital performance and, as well, obviously we do not expect to repeat some of the onetime hits that happened in 2025, specifically the expenses for the hurricane. From a free cash flow perspective, similar to 2025, we do expect it to be somewhat back half related. That includes a charge in Q1 related to recent operating model and cost structure actions, as well as some of the seasonality that we typically show. We also do expect, as we have talked about from a P&L standpoint, our earnings tend to be skewed towards the second half of the year due to some of the structural impacts that have been recognized and we expect to recognize in H2, again, as well as some of the impacts from the manufacturing side of our business in terms of adjusting to better volumes. We feel confident in that. Why? Because some of the impacts are driven by actions that are in flight. The structural cost work is in flight. The work around adjusting our manufacturing operations for better impact, one of the volume, is in flight. The biggest year-over-year drivers I mentioned are really around working capital, inventory management, improved receivable collection processes, and tighter control of our payables process, including commercial terms. GPS is playing a role in this as well, giving us more consistent operating rhythms, better visibility to reduce volatility, and overall strengthening our cash conversion. We do expect cash flow to continue moving in the right direction as we execute through 2026. We saw some of that already in 2025. Joel Grade: Thank you. Operator: Lawrence H. Biegelsen of Wells Fargo is on the line with a question. Please state your question. Robert Justin Marcus: Good morning. Thanks for taking the question. Two for me. One on the gross margin, one on Pharma. Lawrence H. Biegelsen: Joel, could you please give us a little bit more color on the Q4 gross margin? How much of the year-over-year decline was due to tariffs, mix, reclassifications, and the onetime items you called out? And how much lower do you expect the gross margin to be in 2026 versus 2025? I assume it is more than the decline we see in the operating margin guidance. I had one follow-up. Robert Justin Marcus: Yes. Thanks, Larry. Appreciate the question. From a gross margin and overall operating margin standpoint, certainly, a few factors played into this. An unfavorable mix of sales, so with business mix, geographic mix, product mix, that certainly was a key element. We also had, as was referred to earlier, some higher manufacturing and supply costs for a couple different reasons. One, some of the challenges we had aligning our labor to volumes, but also some of the impacts that Andrew mentioned related to some of the challenges that we have seen in Pharma. Those factored into this as well. The nonrecurring items, I would classify that as around $40,000,000 of impact that were related to gross and operating margins in the quarter. Those are things to contemplate as part of that. I would say that is really the main driver there. Again, about $40,000,000 of that is nonrecurring. Lawrence H. Biegelsen: In 2026 versus 2025? Gross margin, I did not hear that. Yeah. I know. But we have not given Robert Justin Marcus: specific guidance on that. I would say, a little bit to the commentary I had as it relates to the Q4 to Q1, there are some of these impacts that we expect to continue into 2026. I think about it a little bit as an H1/H2 split. In other words, this is going to continue to improve over the second half of the year, but there are really two factors I would say in H1 to consider. One is mathematical, and one is more actions driving outcomes. The mathematical piece: we do have some normal seasonality in our company between H1 and H2 from a pure volume perspective. We would expect that to continue. Our cadence reflects a more challenging first half with improvement in the second half. ITT absorption headwinds: in the first half, we had higher cost inventory that we capitalized, and we saw benefits there. That is going to roll into the first half of this year, so that is essentially a headwind in 2026. Those are the mathematical pieces, as well as tariffs. Remember, we had tariffs in the first half of last year. Then, related to the actions driving outcomes: the structural cost takeout that we have talked about, the impact of that is in play. We are confident in the work that we are doing, but the outcomes are primarily going to be impacted in the second half of the year. In terms of aligning our manufacturing labor with our volumes and our production cost, again, that impact will start to show itself in the second half of the year because we are still taking the hit, if you will, from the capitalized higher-cost inventory as we sell those products in the first half of the year. Lawrence H. Biegelsen: That is helpful. And, Andrew, thanks for giving us the P&Ls by sector. Pharma has an operating margin of 9%. It was even lower in Q4. My guess is Compounding, which is your fastest growing business, does not make a lot of money. What are you doing to improve the margins in this business? And why does it make sense to keep a low-margin business like Compounding that seems to hurt your mix every quarter? Thanks. Joel Grade: Yeah. I will walk through the fundamentals of Pharma and really outline. Overall, we like the fundamentals of this business. A couple items: we have also taken this part of the organization and combined it with our ITT business. The reason being is it is synergistic with that organization, with common customers and common call points, and there is an opportunity to improve the business. We have, and we are continuing to take actions to do so. Additionally, there have been some areas that have been in our control where we have been challenged, and through GPS and through driving accountability at the lowest levels, we have taken critical actions to improve. One is around operational execution. Not to get into too much specifics, but we saw one of our facilities really hindered by the ability to drive output. We took an action team around this. They have already improved, they are continuing to improve, and we are going to see that performance improve through the first half of the year. More importantly, it is around how do we not get back into this situation, how do we build this and have this being performance. The role GPS plays in that is around identification and critical action. The second piece within our control is we had a supplier challenge. To be quite candid, it was an area that we identified. We are working through it. It is going to take us a good portion of the year to get through this, and we are identifying how we have alternatives to continue to support the product. We are continuing to ship. That said, we are looking to identify the long-term solutions. To answer your question head on, we like the fundamentals of the business. We have some work to do here, and we need to continue to align around the value creation we have for our customers. Robert Justin Marcus: And, Larry, two other things I would add. Number one, some of the margin challenges that you saw in Q4, as Andrew said, start to improve over the second part of the year, but we still anticipate that being an impact in Q1. Second, as it relates to the Compounding business, yes, certainly that mix impact is the margin impact as well in terms of the relative level of growth in Compounding to our Injectables and Anesthesia. One thing about that is it is our fastest cash cycle in the business, so that is a benefit from that particular business. Joel Grade: Alright. Thank you. Operator: Travis Lee Steed of Bank of America is on line with a question. Please state your question. David Harrison Roman: Joel, just trying still a little confused on what to put in the model for Q1 and to understand the slope of the recovery in 2026. Is revenue going to be down low single digits, down mid single digits? Are gross margins, op margins flat, down sequentially? Lawrence H. Biegelsen: What percent of earnings should fall in Q1 versus the second half of the year? Just any more details on how to model Q1? Robert Justin Marcus: Yeah. Thanks for the question. We have not specifically given numerical guidance on the quarters. I would continue to reiterate the key elements impacting Q1. There is a volume and seasonality impact. There is continued uncertainty around our Novum customer behavior and Novum LVP returns. There are likely continued challenges from a Pharma perspective as it relates to overall margin. The headwinds from an absorption standpoint: we capitalized into our inventory costs some of the higher costs that we experienced in 2025. As we head into 2026, those are going into our cost, and as we sell those products, those are essentially selling higher priced inventory as we head into the first quarter and H1 in general. Those are the main issues driving that. On the EPS level, interest expense is kicking in. Those are the main key drivers as to why our first half, and specifically first quarter, remains particularly challenging. Lawrence H. Biegelsen: Okay. David Harrison Roman: We will hopefully get more offline. Two little nitpicky questions. One, just curious if you are assuming share gains or share losses in infusion pumps this year. And OUS Care and Connectivity Solutions was up $50,000,000 sequentially. Was there anything onetime in that line item? Joel Grade: Yeah. I will start with the first question. We have good opportunities as we go into the year. As a reminder, Spectrum is a workhorse in the space. Not only is it a workhorse, we continue to innovate on the platform, and now that it speaks with Novum syringe, we are continuing to be confident in our ability to bring high value to the market we serve. Robert Justin Marcus: Can you repeat the second part of your question? I am sorry. David Harrison Roman: Yeah. International Care and Connectivity Solutions was up Lawrence H. Biegelsen: $50,000,000 sequentially. David Harrison Roman: I did not know if there was anything onetime in there. It looked like a big growth rate Lawrence H. Biegelsen: in the international business. Robert Justin Marcus: I would just say, in general, that business has been performing well. I do not know that there is anything onetime. In the overall CCS business, we have a strong order book. We have talked about that. We have had some competitive wins from a customer standpoint, and capital spend in general remains strong across our geographies. I do not know if there is anything unusual onetime there. That business continues to be strong, and they continue to improve outside the U.S., which was somewhat of a headwind last year. Joel Grade: Okay. Thank you. Operator: Danielle Antalffy of UBS is on the line with a question. Please state your question. Hey. Good morning, guys. Thank you so much for taking the question. Danielle Antalffy: Andrew, I appreciate it has not been terribly long, but I am just curious, looking at the Baxter International Inc. portfolio in its totality, how you feel about the state of the portfolio today, appreciating you are not going to be doing M&A anytime soon. But, a) where you see the most exciting opportunities with the current portfolio that might be underappreciated by investors, and b) where you think there is opportunity to ramp up the product portfolio. Thanks so much. Joel Grade: You bet. If I miss something, Danielle, certainly feel free to jump in. I will take this as you outlined. Baxter International Inc. is fundamental to the health care system. As I mentioned earlier in the call, it is a trusted partner. We have market leadership across multiple product categories. We have a resilient portfolio and deep customer relationships that really give us a competitive advantage. As we go forward, innovation will be a critical element to our success. As we look at innovation as an enabler, it is extremely important as we bring new innovation to the market, not only from listening to our customers and identifying the pain points to solution, but also staying in front of our total portfolio of product set. There is an opportunity to not only improve our performance, but GPS becomes the foundational operating system for how we really drive disciplines, not only operating rhythm but also clear accountability and clear enablement to listen to our customers, streamline our ability to bring strong capability to the market, and have real-time visibility to bring innovation to solve issues and challenges that our customers face. We like the fundamentals of where we sit, and there are certainly areas we need to continue to challenge on. There are some areas internationally that we are looking at. We do have smaller exits that we are looking at in 2026 as we look at our total portfolio. As far as areas where we are pleased with our performance, in many of our businesses, but more specifically, how we bring our solution from our Advanced Surgery business and the capability we have in that space and how customers look to Baxter International Inc. to support and have high value when they are treating and working with patients. We have many of those. MPT is areas we are looking at as well as HST and as well as Pharma. More to come. If I could characterize how we think about innovation for the future, it is a base hit discussion, not walk-off grand slam. It is about that constant drive to launch products and solutions that really enable our customers to bring a higher level of care at a more efficient pace. Last, capital allocation is a critical element. We talk as directly on capital allocation as we do around our market strategy, and I have outlined it starts with delevering our balance sheet, and we have taken critical actions around that. When we look at the other levers, reinvesting in the business, and I walked through, we are going to be at or above on our innovation reinvestment, expecting new product launches, expecting areas to drive R&D, not just sustainment. But also as we get into the future, as we delever, identifying targets that can add high value from an M&A perspective. We have a strong funnel, but we need to delever first. Hopefully, I answered your question. Danielle Antalffy: Yeah. Very helpful. Thanks, Andrew. Joel Grade: Appreciate it. Operator: We have time for one more question. Joanne Wuensch of Citi on the line with a question. Please state your question. Joanne Wuensch: Good morning, and thank you for squeezing me in. I am just curious, when you went to put guidance together for 2026, what was your philosophy of how to deliver it so you can deliver on the guidance? Thank you. Robert Justin Marcus: Thanks, Joanne. I will take a stab at that. I always view guidance as prudent and reflective of the best and most current information we have available. We think about these things as trying to continue to be very transparent about the challenges we are facing. This is certainly apparent in our Q4 results, but also about the actions we are taking to address those issues. We try to talk about the things that are market conditions, but also things that are in our control to deal with. All that falls in the underlying assumptions underpinning the guide. As we pull that together and think about the key factors in the year that are happening, we talked about the fact that there is a key Novum assumption that was in there. We have talked about our IV Solutions that we rebased that. We have talked about some of the challenges in our Injectables and our Anesthesia, some of the product mix impacts, the manufacturing volumes that we had to adjust to, and in 2026 there is going to be a reduced contribution from pricing, as well as the EPS impact. Joanne, I would say when we pull that all together, that is where our guidance sits. I certainly understand the frustration with some of our volatility. It matters to us a ton for our S&D ratio to be in a place where we say here is what we say, then here is what we do relative to our guidance. Hopefully, that helps. Is there anything you would add to that? Joel Grade: I would just say, I will echo, it is a view of the market. It is our prudent view of how we operate. I just want to reiterate, GPS will become who we are and how we operate. Kevin Moran: Operate. Joel Grade: It will allow and enable us to go very deep in the organization and drive accountability. It is part of our journey around the continuous improvement model and how we need to continue to improve our S&D ratio. It is an area that we will continue to update as we go throughout the year. Joanne Wuensch: Thank you. Operator: At this time, I will now hand the call back over to Andrew for some final closing comments. Joel Grade: Thanks, Operator. In closing, we are not where we want to be, but we are confronting our challenges head on and taking deliberate steps each day to better position Baxter International Inc. for the long term. I am energized by the opportunities ahead, driven by the essential role Baxter International Inc. plays in patient care, and our mission-driven team that is committed to drive stronger and more consistent performance over a long period of time. Thank you very much. Stay safe, and goodbye for now. Operator: Ladies and gentlemen, this concludes today’s conference call with Baxter International Inc. Thank you for participating.
Operator: Good day, and thank you for standing by. Welcome to the West Pharmaceutical Services, 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 11 on your telephone. You will then hear an automated message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host for today, John Sweeney, Vice President of Investor Relations. Please go ahead. Good morning, and welcome to West Fourth Quarter and Full Year 2025 Earnings Conference Call, which is being webcast live. John P. Sweeney: With me today on the call are West's CEO, Eric M. Green, and CFO, Robert McMahon. Earlier today, we issued our fourth quarter and full year financial results. A copy of the press release along with today's slide presentation containing supplemental information for your reference has been posted in the Investors section of the company website located at investor.westpharma.com. Later today, a replay of the webcast will also be available in the Investors section of our website. On the call, we will review our financial results and provide an update to our business and outlook for FY 2026. Statements made by management on the call and the accompanying presentation contain forward-looking statements within the meaning of U.S. Federal Securities Law. These statements are based on our belief and assumptions, current expectations, estimates, and forecasts. The company's future results are influenced by many beyond the control of the company. Actual results could differ materially from past results as well as those expressed or implied in any forward-looking statements made here. Please refer to today's press release as well as other disclosures made by the company such as our 10-K and 10-Q regarding the risks to which the company is subject. During the call, management will make reference to non-GAAP financial measures, including organic sales growth, adjusted operating profit, adjusted operating profit margin, free cash flow, and adjusted diluted EPS. Limitations and reconciliations of non-GAAP financial measures to the most comparable financial results prepared in conformity to GAAP are provided in this morning's earnings release and today's slide presentation. I will now turn the call over to our CEO, Eric M. Green. Eric? Thank you, John, and good morning, everyone, for joining us today. I am pleased to report we delivered another solid quarter, with fourth quarter revenues, adjusted EPS, and cash flow coming in above our expectations. Eric M. Green: Before I get into the details of the quarter, I would like to take a moment to reflect on what we accomplished in 2025. We returned to growth and had many notable achievements. Our performance in the year underscores the effectiveness of our growth strategy and our team's relentless focus on execution to deliver for our customers, and we enter 2026 with momentum. Our company surpassed the $3,000,000,000 mark in net sales, achieving year-over-year organic growth of over 4%. We also expanded operating margins, delivered 8% adjusted earnings per share growth, and grew our free cash flow by 70%. Our growth was fueled by increasing demand for high value product components as we continue to meet the evolving market and customer needs. Our growth in that business is driven by three key drivers: the rise of biologics and biosimilars, the increase in global regulatory requirements, such as Annex 1, which continue to drive HPP conversion, and the expanding GLP-1 market. These are long-term secular growth drivers that we believe West is uniquely positioned to capitalize on. We continue to address needs of our customers through scientific support and innovation. A recent example is the launch of the West Synchrony prefillable syringe system. Synchrony marks a significant shift in drug delivery solutions by offering a fully verified platform from a single supplier. Designed specifically for biologics, this system sets a new standard in drug delivery by accelerating syringe selection through its comprehensive performance and regulatory data packages. In early 2025, we announced our intention to conduct a comprehensive evaluation of the SmartDose 3.5 mL business. After our portfolio review, we announced last month the sale of the business, which aligns with our ongoing commitment to our customer development pipeline and patient-centric approach for large, on-body delivery devices to drive durable and profitable growth. We expect to close this transaction midyear. For our Contract Manufacturing segment, we continue to scale up operations in Dublin for drug handling, and I am pleased to announce that just earlier this month, we commenced commercial production on this program. This remains an exciting and long-term growth opportunity for the Contract Manufacturing business. Finally, we have strengthened our executive leadership team in 2025, with five out of the 10 members having joined in the last twelve months. This seasoned leadership team is already making meaningful contributions to our organization. With that, I would like to turn to the fourth quarter performance. Revenues of $850,000,000 exceeded our expectations and were up 7.5% reported and up 3.3% on an organic basis. Adjusted operating margins in the quarter were 21.4% and adjusted EPS of $2.04 was up 12% compared to prior year. Free cash flow in the fourth quarter was $175,000,000, more than double the prior-year level. Let us take a closer review of each of the business segments. First, HVP components in our Proprietary Product segment represent 48% of our company's total net sales and continue to be the primary driver of revenue growth and profitability. This business grew over 15% in the fourth quarter and was up 9% for the full year of 2025. HVP components have been tracking on a strong recovery throughout the year to align to the market demand. This business is a key differentiator for us because of our quality, scale, and technology. Once customers are specced into our products and reference our drug master file, there is a dependency there that makes it highly unlikely that customers will change partners. Growth was led by strong GLP-1 performance and continued recovery in our non-GLP-1 business. We continue to see increasing demand in this business and continue to ramp capacity. Bob will talk about our outlook in more detail, but we are expecting 2026 will have a more broad-based growth profile driven by our non-GLP-1 HVP components growing high single digit to low double digits. Moving to HVP delivery devices, which represent 14% of our sales. As expected, fourth quarter revenues declined compared to prior year, driven by the incentive payment we received in the prior-year quarter. However, performance was better than we expected as we saw strong growth in parts of our portfolio. Standard products, which represent 20% of our business, declined 1% on an organic basis during the fourth quarter. Standard products are an important funnel as we convert standard products to HVP components over time, which provides incremental value to our customers and generates incremental revenue and margin expansion for us. Lastly, Contract Manufacturing revenues increased 1.9% organically in Q4. As I mentioned, we commenced commercialization of our drug handling business at our Dublin facility, and we expect this to ramp up throughout 2026. Our drug handling business is more profitable and less capital intensive than the legacy Contract Manufacturing business. Moving into 2026, we have robust momentum as we are well positioned to advance our strategies supported by growth drivers of biologics, Annex 1, and GLP-1s. In biologics, inclusive of biosimilars, we continue to have great success partnering with our customers early in the pipeline, resulting in a strong participation rate of greater than 90%, which is a key indicator for future HVP components revenue growth for this market. For Annex 1, we are well positioned to support our global customers' contamination control strategy and container closure integrity requirements outlined in the European regulations that were adopted in 2023. For West, this is a multiyear opportunity of currently 6,000,000,000 West components to be upgraded that support on-market injectable medicines. I am pleased with the progress to date with over 700 Annex 1 projects initiated, over half of which have been completed and now generating revenues. This represents less than 15% of the 6,000,000,000 components. We completed 65 projects in 2025. With 325 Annex 1-related projects currently underway, and more in the pipeline, we anticipate these projects will drive additional revenue growth in 2026 and beyond. Now let me spend some time on oral GLP-1s and injectable formats. GLP-1s will continue to support our growth in 2026. As many of you are aware, oral GLP-1s have entered the market, and I want to share our view on their potential impact on the overall market. To provide context, I would encourage you to listen to publicly available remarks from the two leading companies that are producing GLP-1s and their expectation that orals will expand, not substitute, injectables in the marketplace. Both companies have noted that eight of ten patients using oral GLP-1s are new to the market, suggesting that orals will not cannibalize the injectables market, and that several new injectables are about to launch. We expect growth from GLP-1 elastomers in 2026 and beyond for the following reasons. First and foremost, the adoption of GLP-1s is still in the early stages with penetration of potential patient population in the low single digits by many estimates. Market access is continuing to expand, driving volume. The available clinical evidence continues to show meaningful advantages for injectables. Historically, oral formulations show higher rates of GI adverse events and treatment discontinuations than injectables. With regard to auto-injectors and multidose pens, we believe that there will be multiple injectable formats based on customer preference. We expect any mix shift will happen over multiple years given the installed capacity and investments that our customers have already made. The upcoming launch of injectable GLP-1 generics in Canada, China, India, and Brazil represents incremental business for us. In addition, there is an exciting clinical pipeline of GLP-1 molecules in development for obesity, diabetes, and other metabolic conditions. Many of these GLP-1s are similar to what is currently on the market today. There are also newer combination molecules which potentially offer increased efficacy, improved tolerability, or therapeutic benefits for adjacent comorbidities. Finally, there are a number of exciting new GLP-1 molecules serving indications other than obesity and diabetes that are projected to come on the market over the next several years. These include NASH, sleep apnea, chronic kidney disease, heart failure, pediatric obesity, and cardiovascular risk reduction. With five of these six indications being treated exclusively by injectables, these indications represent potential multibillion-dollar therapeutic classes. As a result, we continue to believe that both injectables and oral formats will continue to grow. Let me turn to our operations. With our strong reputation for quality, scale, and operational excellence, we are poised to capture growth from these three key drivers as we leverage our global manufacturing network. We are actively hiring and training employees who are installing and operating new equipment to optimize our European facilities and respond to strong customer demand. We utilize tech transfers to help our customers balance production across the network, enabling West to drive future growth. We entered 2026 with momentum and are starting the year with guidance of 5% to 7% organic revenue growth and 10% EPS at the midpoint of the range. I will now turn the call over to Bob to discuss the financials and guidance in more detail. Bob? Thanks, Eric, and good morning, everyone. In my remarks this morning, I will provide some additional details on Q4 revenue, take you through the income statement and some other key financial metrics. I will then cover our full year 2026 and first quarter guidance in more detail. As Eric mentioned, we exceeded our expectations in the fourth quarter, with revenues of $850,000,000. Q4 revenue increased 7.5% on a reported basis and grew 3.3% organically. As we mentioned last call, 2024 included a $25,000,000 nonrecurring incentive fee which reduced our organic growth in the quarter by 360 basis points, so a very good result to end the year. Now a few more details on what drove our growth in the quarter. Our HVP components business was a standout, delivering $390,000,000 in revenue and growing 15.1% organically. This was driven by robust growth in GLP-1s, HVP upgrades including Annex 1, and overall continued improving performance in biologic revenues. The business outside GLP-1s continues to recover nicely, growing mid single digits in the quarter while demand outstripped our supply. As Eric mentioned, we continue to ramp capacity and expect stronger growth in 2026. In HVP delivery devices, revenues were $110,000,000 in the quarter and up $11,000,000 on a sequential basis. The quarter was down 18.1% year-on-year organically, driven by the incentive fee in the prior year. Excluding the incentive fee, revenues would have been up slightly in the quarter. In standard products, revenues of $162,000,000 were down 1.7% on an organic basis, partially driven by Annex 1-related conversion to HVP components. Lastly, our Contract Manufacturing segment delivered $143,000,000 in revenue, growing 1.9% on an organic basis. Segment performance in the quarter was driven by an increase in sales of self-injection devices for obesity and diabetes, partially offset by a decrease in sales of health care diagnostic devices. In the quarter, our Contract Manufacturing segment revenue and profit performance was negatively impacted by a temporary production disruption due to a burst water main at our Arizona facility. The facility is back up and running, and we expect Contract Manufacturing to return to mid to high teens profitability in Q1. Now let us take a closer look at the rest of the P&L. Overall gross margin was 37.8% in the quarter, up 130 basis points year over year. This strong result was due to the positive mix impact of HVP components growth and better-than-expected performance on our HVP delivery device business outside of SmartDose. This proof point demonstrates the earnings power of our business strategy as we continue to upgrade customers to our high value products. Adjusted operating margins of 21.4% were down 30 basis points compared to the prior year as we increased investment in R&D, and had higher incentive compensation year on year. Below the line, net interest income was in line with our expectations, our tax rate came in at 18.9% for the quarter, slightly better than expected, and we had 72,700,000 diluted shares outstanding in the quarter. Adding it all up, Q4 adjusted earnings per share were $2.04, up 12.1% versus last year and $0.20 above the midpoint of our guidance we gave on the last earnings call. Before moving into 2026 guidance, I did want to highlight our cash flow performance. In the quarter, we delivered operating cash flow of $251,000,000 and our full-year operating cash flow was $755,000,000, up 15.5% compared to the prior year. This is a very strong result and a testament to the West team. We are also continuing to drive increased efficiency in our capital spending. Capital expenditures for the year of $286,000,000 are down $91,000,000 year on year, and we expect another step down in 2026 to a range of $250,000,000 to $275,000,000 as we move back to the construct of spending 6% to 8% of sales in CapEx. The combination of strong operating cash flow and the lower CapEx drove free cash flow to $469,000,000 for the year, up 70% year on year. We ended the year with $791,000,000 in cash on our balance sheet. In summary, we had a very solid fourth quarter that exceeded our expectations and we are entering 2026 with momentum. Now let me talk about our initial guidance for 2026. Before getting into the numbers, I want to highlight a few important factors that help frame our thinking in setting our guidance. John P. Sweeney: First, we anticipate Eric M. Green: the injectable market to continue to improve throughout 2026 driven by the underlying trends I talked about earlier. In addition, we have assumed the tariff landscape will remain at the current levels globally and we have effectively covered that impact. We are assuming that we will close the SmartDose transaction midyear. To help you with your models, we generated $55,000,000 in SmartDose sales in 2025, and we have adjusted our full year 2026 expected organic revenue growth to account for these revenues. That said, Robert McMahon: our end markets remain dynamic and we could see a range of outcomes, so we are being prudent with our forecasting to start the year. Now let us get into our full-year guidance. For the year, we anticipate revenue to be in the range of $3,215,000,000 to $3,275,000,000. Reported growth is 4.6% to 6.5%, and with FX and the SmartDose adjustment roughly offsetting to get to our organic growth range of 5% to 7% for the year. From a segment perspective, we expect HVP components to be the primary driver of our revenue growth. We expect this segment to grow high single digit to low double digit organically for the year, accounting for just over five points of total company growth at the midpoint of our guidance. Given the focus on GLP-1 elastomers, we thought it would be helpful to provide some additional details on how we established our initial guidance framework. First, we expect the non-GLP-1 HVP components to drive the majority of growth, accounting for four of the five points of growth. This is driven by continued recovery in the biologics market where we have a very strong position, Annex 1 HPP upgrades, which we expect to deliver growth in line with 2025, ramping capacity, and price. We continue to expect GLP-1s to grow in 2026 albeit at a slower pace than in 2025. To get to our midpoint, we would expect GLP-1s to grow roughly 10% year on year to deliver that one point of growth. To put this in context, this represents a greater than 30% oral GLP-1 penetration by 2030, which is more aggressive than our current expectation. To frame the low end of our guidance, GLP-1s would need to be flat in 2026, which we view as unlikely for all the reasons Eric talked about. It is important to note, this would free up some capacity, which would be absorbed by our non-GLP-1 business, so the impact to overall growth would not be a full point reduction. To help round out the rest of the Proprietary business, we expect mid single digit growth in HVP delivery devices after accounting for the SmartDose divestiture and Standard Products to be roughly flat for the year. We also expect Contract Manufacturing to be flat for the year as drug handling revenues of $20,000,000 and other program growth will help offset the CGM contract that we exit starting in July. We expect to expand margins over 100 basis points with margins increasing over the course of the year, driven by HVP components and the SmartDose divestiture. Adjusted earnings per share is forecast to be between $7.85 to $8.20, representing double-digit growth at the midpoint. Lastly, a few below-the-line items to help you with your models. We are assuming roughly $10,000,000 in net interest income, a 20.25% tax rate for the full year, and 72,700,000 diluted shares outstanding for the full year. Moving on to our first quarter 2026 guidance. We expect first quarter revenue in the range of $770,000,000 to $790,000,000. This is a reported increase of 10% to 13% and an organic increase of 5% to 7%. We expect first quarter adjusted diluted earnings per share in the range of $1.65 to $1.70, up 13% to 16% year on year. We exited 2025 in a good place, and we are seeing positive momentum to start the year, driven by our key growth drivers, and we are optimistic about the future. I will now turn the call over to Eric for some closing comments. Eric? Eric M. Green: Thank you, Bob. To summarize, the solid financial performance reported today continues to affirm that our growth strategy is working as we build our momentum in 2026. We have a strong business which delivers unique value to our customers. We remain laser focused on our critical growth drivers. For the long term, the macro trends support West growth as a global market leader in the injectable medicine space. Finally, I want to thank our West team members for their commitment and hard work that allowed us to achieve these strong results. Operator, we are ready to take questions. Thank you. Operator: As a reminder, in order to accommodate all participants in the queue, please standby while we compile the Q&A roster. First question coming from the line of Michael Leonidovich Ryskin with Bank of America. Your line is now open. John P. Sweeney: Great. Thanks for the question. Appreciate all the color you guys Eric M. Green: gave on GLP-1. That was really helpful in terms of framing it both for Q4 and 2026. But I want to dig into it a little bit more. You ended the year on a good note. You have had sort of really steady dollar ramp John P. Sweeney: throughout the year. Eric M. Green: in Proprietary Products. Just no real deceleration. Looking at what you talked about in terms of 10% at the midpoint of the guide for 2026, 10% growth, that seems relatively conservative given recent trends. I am just wondering, has anything changed in your conversations in recent months with your major GLP-1 customer, especially in Proprietary Product? Is there any change in demand or tone as the orals have launched and ramped? Or just anything else you could say in terms of level of conservatism you have embedded in that? Because we could see some Robert McMahon: pretty decent upside there. If I could squeeze in a follow-up right away, sorry. But just in the prepared remarks, you touched on Hey, Michael. Yes. Look. Let me jump right in. Thanks for the question. I am glad you brought that up. You are spot on. We have not seen any changes in our customer behavior. What I would characterize that as is a very conservative start to our initial guidance. We continue to believe that the oral penetration by 2030 is going to be 30%. In order for us to achieve 10%, it would have to be greater than that, which we do not view as a likely scenario. What we are trying to show is that the strength in the business is more than just GLP-1s and that we can get to our guidance with a lower-than-expected GLP-1 number and feel good about the continued momentum that we see not only in GLP-1s, but the rest of the business. Michael Leonidovich Ryskin: Awesome. Thanks. Can I squeeze in a quick follow-up, sorry, on the free cash flow? You touched on operating cash flow and free cash flow in the press release a number of times. You had strong free cash in the quarter. You have a solid cash balance. You also have the proceeds from the SmartDose sale coming midyear, I think, $120,000,000 to $130,000,000. Your CapEx is moderating. Are you hinting at something that historically we have not really seen West do a ton of, M&A, but I am just wondering, are you thinking about share buybacks, maybe doing a little bit of inorganic, just what are you thinking there? Operator: Thanks. Eric M. Green: Yeah. Michael, good morning. This is Eric. Thanks for the question. We think about the opportunity and our capital deployment. Our first priority, just to be clear, does not take our eye off the organic growth. We will continue to invest in the business disproportionately towards our high value product components. With that said, if there are technologies that would be of interest that we could bolt on to our existing portfolio, particularly around how we can accelerate our HVP components business while enhancing, we think about the further differentiation of our product offering to our customers, that may be of interest. It would have to be accretive. That would be the focus in that area. Bob, do you want to cover the question just on the Robert McMahon: piece regarding returning cash to shareholders? That is something that we are actively discussing. I view that as upside to our plan. It is one of the beauties of this business that we have got a tremendous cash flow business here, and I will just leave it at that. Operator: Thank you. And as a reminder, please limit yourself to only one question. Our next question coming from the line of Daniel Markowitz with Evercore. Your line is now open. Robert McMahon: Hey, guys. Thanks for taking my question. On the high value components ex-GLP-1s in Q4, it is nice to see mid single digits. That number keeps moving in the right direction. But you mentioned that demand outstripped supply. Eric M. Green: Would you be able to give some color on what the delta was, how much the demand outstripped supply, and when you are expecting to bring on the incremental capacity Robert McMahon: capacity. Eric M. Green: to service that demand? Eric M. Green: Yeah, Daniel. Let me touch on the capacity and also the demand that we are seeing build in our HVP components business outside of GLP-1. We have commented previously that we had some constraints with our operations in Europe in 2025, that we were expanding capacity, both labor and equipment. That has continued, and the demand continues to outpace our supply. As you think about the end of 2025 going into 2026, we feel really good about the order book. We feel really good about the demand that we are seeing from our biologic customers, in particular the work that we are doing in Annex 1. So the areas outside of GLP-1 continue to ramp up compared to what we saw in 2025. Robert McMahon: Yeah. And, Daniel, just to add on to what Eric is saying, we are not going to give you the details of what that gap is, other than to say our capacity, if I looked at what Q4 was versus Q1, it grew substantially in our European operations, but demand is growing faster. We are continuing to add capacity beyond what our expectations were, I would say, this time last year. That is a good sign. John P. Sweeney: And a final point for you there, Daniel. If you noticed in our prepared remarks, we said high value product components excluding GLP-1s are going to grow high single to low double digits in 2026. That is part of the acceleration there. Operator: Thank you. Our next question coming from the line of Justin D. Bowers with Deutsche Bank. Your line is now open. Michael Leonidovich Ryskin: Thank you, and good morning, everyone. John, you just answered a question that I was going to get clarity on, but Eric, I did want to talk about some of the new GLP-1 molecules that you John P. Sweeney: talk that you Michael Leonidovich Ryskin: are seeing in the pipeline and then some of the newer diabetes GLP-1s as well. Are those molecules, the basic question is, are they speccing in on a different type of HVP component, i.e., like a NovaPure or a FluroTec or just a different configuration of some of the legacy programs? Is it similar ASP from what you are seeing in the broader portfolio? Eric M. Green: Yeah, Justin, it depends on what part of the portfolio. There is consistency of new molecules being developed that would use similar elastomeric HVP components that we currently supply for the GLP-1 space. We also see new combination molecules that would require some barrier coating that would move it towards FluroTec, the proprietary technology that we have with our partner, Daikyo, and also NovaPure. It is a mix. As we see the pipeline evolve, particularly in that space, there will be more different combinations that will be used. Just to remind ourselves that it is not just one format. We see vial, we see prefilled syringes and cartridges, and we are in a very good position to support all modalities. A step further, when we look at the other parts of the portfolio in the pipeline, outside of GLP-1s, it is very exciting. As I mentioned in the call, the win rate in biologics and biosimilars is consistent with what we have always seen. What I am encouraged about is it is broader geographies for West, and we are able to respond accordingly. That is why it is important, as Bob highlighted, that the capacity expansion, although it is larger than it was in the early part of 2025, we still need to expand capacity to keep up with what is currently in hand and in the pipeline. Robert McMahon: Yeah. And just, Justin, to add to what Eric is saying, if you think about the future fast forward, I think it is fair to assume that the pricing today for the future will either be equal to what it is today or higher, given that positive mix. Thank you. Operator: Our next question coming from the line of Paul Richard Knight with KeyBanc. Your line is now open. Robert McMahon: Hi, congratulations on the quarter, Eric, Bob, and John. The Grand Rapids and the Dublin sites, where are they in kind of ramp-up stage? Are they at Paul Richard Knight: 10% utilization, 40%? Can you give us some color on that? Eric M. Green: Yeah, Paul. Good morning. I would characterize those two sites differently. Grand Rapids, Michigan, is a little more mature in their ramp-up, so their OEE is closer to what we would say is peak volumes. In 2026, while there is still some room for improvement in further output, we are really pleased with the progress and what they are able to deliver for our customer. In Dublin, it is really two different areas. One, we are still in the ramp-up phase of auto-injectors and multidose pens. As I mentioned in my prepared remarks, we just commenced commercial drug handling operations, which will ramp up throughout 2026 and well into 2027. We are excited on both fronts, and it is going to be a ramp-up phase on aggregate over the next twelve, eighteen, twenty-four months. Robert McMahon: Yeah. And, Paul, just to add to what Eric was saying for the latter piece that he was just talking about with the drug handling, we talked about it being a $20,000,000 opportunity in 2026. That is going to ramp throughout the course of the year, so the second half will be larger than the first half. It is going to be even bigger in 2027. That certainly is not the annual opportunity for that program. It is significantly larger than that, and we are really excited about that going forward. Operator: Thank you. And our next question coming from the line of David Windley with Jefferies. Your line is now open. Eric M. Green: Hi. Thanks for taking my questions. Third question. You, I think, exceeded our margin and maybe the Street's margin expectations in Proprietary Products pretty nicely. It sounds like, or looks like, utilization, you know, may be mixed, but utilization is probably also improving. You have commented on capacity a little bit already. I want to understand how your tech transfer activity and the rebalancing of capacity is progressing in the context of some comments that you have already made about demand outstripping supply and comments about needing to add capacity. I want to understand that more comprehensively about whether demand is outstripping everywhere or if you still have imbalance of demand is essentially where I am trying to get to. Thank you. Eric M. Green: Yeah, Dave. Good morning. I will focus on the HVP components because that is what is driving the mix shift from a margin expansion perspective. You have seen this historically for West: when we start driving HVP components close to that double digits, the mix shift effect on margins is quite pronounced, and we will continue to see that. Our expectation is to still have a mix shift effect moving forward as we continue to drive. As I mentioned earlier, biologics, Annex 1, and even GLP-1s offer that mix shift effect for us. Our capacity expansion has been heavily focused in Europe, which we are alleviating as we speak, but we are also ensuring that we are ahead of the curve in our U.S. HVP components operations because we are seeing demand increase, frankly, in all HVP plants across the globe, which, as you know, we have five of them. We will continue to invest. Fortunately, at this point in time, a lot of the investments are more around labor versus extensive capital around facilities. Then we will drop in new equipment and extend the lines when necessary. We are very well positioned, but we need to get ahead of the curve. As Bob has mentioned earlier, the demand is outstripping supply right now, which we need to get caught up. Robert McMahon: Yeah. I think it is fair to say, David, that we are looking at tech transfers throughout the course of 2026. They will help alleviate some of that imbalance. We have been on that journey already, and Eric mentioned that in his prepared remarks. It is a combination of both. We feel like we are in a better position than where we were a year ago, and in a year, we are going to be in a better position than we are right now. Operator: Thank you. Our next question coming from the line of Patrick Bernard Donnelly with Citi. Your line is now open. John P. Sweeney: Hey, guys. Thank you for taking the questions. Bob, maybe for you on the margins. It sounds like over 100 bps Robert McMahon: expansion in 2026, which is nice to see. John P. Sweeney: Can you talk about the drivers there, the mix piece? Then maybe on the multidose, Robert McMahon: helpful, Eric, to hear you talk about that gradual shift. What does that mean on the economic side? Maybe just the confidence that that is a gradual shift, maybe given your experience in Europe or whatever else you might be able to point to? Thank you, guys. Yes. Hey, Patrick, thanks for the question. I will take the first one and then I will hand it over to Eric to talk a little bit about some of the economics. Yes, if we talk about the expansion, your math is, as usual, spot on. We are delivering over 100 basis points of margin expansion, or expect to, in 2026. A large piece of that is really a result of a couple of things. One is that continued demand within the high value products components, which is driving better utilization within the plants, which is helping with our absorption, but then also the mix shift. I would say it is a good combination of both of those. In addition, we continue to generate positive price. But I would say it is the first two, and then really one of the focuses that we had over the last couple of years is around the conversion through Annex 1 and the regulatory requirements. We see that as a continual multiyear journey, as Eric mentioned earlier. We have a long runway, in our belief, to upgrade some of the Standard components to those HVP components, which will also help with the margin. We see some of that in here as part of that positive mix. It is really both. Then we are continuing to leverage our OpEx as well, below the gross margin line, to get to some of that, but most of it will be in gross margin. You want to talk about the Eric M. Green: Thanks, Bob. Patrick, in regards to multidose and auto-injectors, particularly in the GLP-1 space, to frame it up quickly, there are three different ways we look at it from the elastomer point of view. One is we do support vials with the stoppers. For the auto-injectors, there is a component but also a plunger that we provide. In the pen system, you look at a plunger and also a line seal on the cartridge. I would say the plungers are not equal between the two. It is correct that multidose pens are approximately four doses per one single-use auto-injector. There are two factors to look at when you ask about timing. You are right to say that we have good lens on this part of the market because our Contract Manufacturing business is working with our customers in this space to do mass-scale manufacturing of auto-injectors and multidose pens. There is a higher dependency on multidose pens in Europe than in the United States, where the U.S. is more single dose. These are significant installed capacities that our customers invest in into our facilities, and these are long-term commitments. It takes multiple years to get up to ramp. As Paul asked earlier how we are ramping in Grand Rapids and Dublin, these are multiyear journeys to get to peak volumes. We see this as installed capacity investments of our customers. We do not see this as a quick shift if that would occur. Secondly, it is the market acceptance and patient acceptance. They are very different experiences. Those are the two factors that we see, but we see a multiyear journey, particularly with the lens we have with Contract Manufacturing and the investment order patterns we see with our elastomer business to support it on the primary containment. Robert McMahon: Yeah. Patrick, the only other thing that I would add is if we think about the future, many of the things that Eric was talking about in terms of multiple indications and new molecules are on single dose in the U.S. as well. That also speaks to the consistency and stickiness of the auto-injector as we see it looking forward. Operator: Thank you. Our next question coming from the line of Matthew Richard Larew with William Blair. Your line is now open. Hi, good morning. Eric M. Green: Eric, for years, we had talked about the device opportunity as something West was excited to participate in and would be potentially growth and margin accretive. Then, of course, last year, with the SmartDose saga, I think that narrative got derailed a little bit. Now announcing Synchrony, I know you announced it at CPHI and launched it commercially last month. Eric M. Green: Maybe give us an update on where you are excited about the device opportunity going forward, if you still see that as a big potential opportunity for West, and whether the portfolio of products you have today is the right one to attack that market or if there is more either product development or inorganic growth opportunities that might help supplement the capabilities you have today. Eric M. Green: Yeah, Matt. It is a multipronged approach when you look at our Proprietary business, particularly around our elastomers. First priority is to continue to look at line extensions and new formulations that are adopted in the marketplace for our customers. As you think about the new molecules in the pipeline, they are more complex, and therefore, we have to continue to innovate with new formulas around elastomers. That is our primary focus when we think about R&D investments. The second area that you touched on is the launch of West Synchrony prefillable syringe, and this is truly unique in the marketplace. This stems from the elastomer business. This is where our customers have been looking at how West can support them on full characterization to provide all the data packs that allow them to file with the FDA and simplify, because as everyone knows, these prefilled syringes have to be approved with the drug molecule as a combination device, not as individual components. We are taking that work from our customers and providing the complete solution with this offering that we have with Synchrony. It is very close to our elastomer business. The economics are very attractive. What I would articulate is that it is a long-term journey. It is really pipeline. I will say that I am very pleased with the team's recent launch. It occurred a few weeks ago in Italy as an official launch, and we already have orders, so I am pleased with the initial progress. It will take time like any other new launch we have, like NovaPure and other elastomer components. I would look at this as an extension of our HVP spectrum that we have articulated and showed graphically of how we are moving up that curve for our customers. I would disassociate that with the drug delivery devices that we have in the other unit like SmartDose 3.5. Very different economics, very different growth profiles. I am excited about where we are, but it is a long-term journey. Operator: Our next question coming from the line of Daniel Louis Leonard with UBS. Your line is now open. Eric M. Green: Thank you very much. I could just use some help Robert McMahon: clarifying the growth assumptions for HVP in 2026 and how they compare to 2025. You mentioned that the GLP-1 growth will be 10% at the midpoint. Robert McMahon: What was that growth number in 2025? Then the non-GLP-1 HVP is high single to low double for 2026. What was that comparable number in 2025? I just want to know what kind of a ramp upside in non-GLP-1 and Unknown Analyst: what kind of conservatism in GLP-1 that we are all assuming here. Robert McMahon: Yeah. It is a good question. I will give you ranges. We are not going to get into the specifics, but GLP-1s for the full year grew in the range of 50%. If you looked at the non-GLP-1s, it was roughly flat, with mid single digit growth in the second half of the year. We are expecting acceleration on the majority of that business, the non-GLP-1 business, into 2026 at that high single to low double digit growth. Operator: Thank you. And our next question coming from the line of Brendan Smith with Cowen. Your line is now open. Eric M. Green: Great. Thanks for taking the questions, guys. Actually, I wanted to ask a bit more about the Annex 1 cycle upgrade that you referenced. You noted, I think, that what has been completed is about 15% of the total opportunity Robert McMahon: and in the deck, you mentioned that West has met its 2025 goals. Wondering if you could maybe speak any more granularly to West 2026 goals in this area, and what Eric M. Green: really drives some of your visibility into those assumptions over the coming year, just given that I am guessing some of those decisions are ultimately coming from the partners? Thanks. Eric M. Green: Yeah. Great, Brendan. Great question. Thank you. If you look at Annex 1, we see this as a multiyear journey. When I talk about the 6 billion components, just put that in perspective. In Proprietary, we do about 36 billion components a year. This is a subset of the total company, of which, when you think about the HVP, it is roughly about 1 billion of that. The delta of 35, 36—I mean, I am sorry, 25 to 26 billion—is what we call Standard, and a subset is 6 billion. Just to put it in context of what portion of the business from a unit volume perspective that we are speaking to. So far to date, less than 15% of that has now been commercialized. A lot of the projects that rolled off, we mentioned 65 in Q4, start being commercialized throughout 2026 and beyond. The customers change their ordering from the previous product that they would procure from West to the new product, which is now an HVP product going forward. Those revenues will start building in 2026. To summarize, we believe the continuation of about 200 basis points going into 2026 will be driven by Annex 1, and we believe that is sustainable based on the pipeline. There will be products rolling off into commercial and new products being added, and that is what we saw throughout 2025. We expect the same in 2026. Operator: Our next question coming from the line of Thomas DeBourcy with Nippon Research. Your line is now open. Robert McMahon: Hi. Thanks for taking the question. Michael Leonidovich Ryskin: Just wanted to touch on Contract Manufacturing and Robert McMahon: I guess, refilling the demand pipeline for the second half. I think you mentioned relatively flat growth for Contract Manufacturing, which reflects Michael Leonidovich Ryskin: I guess, refilling that demand. I wanted to see the opportunities you are seeing there, Robert McMahon: and then just also on reshoring of U.S. customers, whether that is an incremental opportunity or you just support them depending on where they want to manufacture their product? Michael Leonidovich Ryskin: Thanks. Eric M. Green: Yeah. I will start with the second portion first on the onshoring. It is interesting because those conversations are ongoing. In 2025, when there is announcement of new investments, we are already at the table having conversations about how we can support them on the supply chain. There could be incremental volume coming from our customers to these investments, or it could be a shift in their manufacturing strategy. The fortunate part about West is that we have the assets that are able to support them, whether it is in Europe, the United States, or even in Asia when you think about our HVP manufacturing plants. Therefore, we will continue to add capacity to support them, but we do currently have volume in these sites. Any additional capacity would be more around labor and equipment versus new facilities. On the Contract Manufacturing side, looking at the business that is exiting 2026, that space will be our intent to have it reutilized by new customers as we move into the later part of 2026. It will take time to ramp up to install the new capacity, new equipment from our customers, but we are in several discussions right now and we will communicate once we have everything finalized. We feel good about where we are, to be able to utilize that asset to support other customers and other products, while other investments will ramp up, particularly around the other Dublin site and also Grand Rapids, Michigan. Operator: Our next question in the queue coming from the line of Douglas Anthony Schenkel with Wolfe Research. Your line is now open. Michael Leonidovich Ryskin: Hang on. Thank you for Eric M. Green: taking my question. You did a really nice job in your prepared remarks talking about the outlook for GLP-1s and the impact of orals on your business. Michael Leonidovich Ryskin: If we keep those Eric M. Green: comments in mind and, ostensibly, your efforts to be conservative as you talked about inputs in 2026 guidance and then also the longer-term framework for GLP-1s, I am wondering if we can get at maybe a midterm outlook. Is it fair to say you are comfortable with your GLP-1 framework, combined with the recovery you are seeing in non-GLP-1 HVP, which, of course, includes the impact of Annex 1? Are you comfortable saying, as built, even in a conservative scenario for GLP-1s, that your revenue can grow at least mid to high single digits over the next several years? Robert McMahon: Thank you. Yes. Hey, Doug. Thanks for the question. The short answer is yes. Operator: Thank you. We have a follow-up question from Daniel Markowitz with Evercore. Your line is now open. Michael Leonidovich Ryskin: Hey, guys. Thanks for letting me rejoin the queue and ask another one. I am curious, just framing the Annex 1 opportunity ahead. It seems like there are reasons to be excited and potential for accelerating benefit to the business. Can you talk about what you are hearing in customer conversations that suggest it could be a greater area of focus for customers going forward? Eric M. Green: Yeah. You are absolutely correct. Engaging with our customers, there are certain events that occur. This comes up particularly within the supply chain when they are having contamination control issues during the audits and inspection by the regulatory bodies. Particularly in Europe, but also with the FDA, these are becoming more front and center with our customers to prevent any potential delays or stock-outs of drug molecules, or 483s or warning letters. These conversations are becoming more active for us. The fortunate part is we have the resources. We have the regulatory and quality organizations in place that really support our customers to make those decisions and then provide a final solution with the products, such as our washing technology, Envision technology, even through sterilization. When we think about what we offer our customers, this is a great opportunity. Yes, we are heavily engaged with our customers. They are making a decision: can they actually handle that process internally? Most of the time, what we are seeing is no. Let us have West take care of the expectations that meet the regulatory requirements and the quality requirements. We believe this is a long-term opportunity and it has multiyear impact for us, and it fits really well with our HVP component strategy. Robert McMahon: Hey, Dan. Just to add to what Eric was saying, a couple of things. We sized that opportunity at 6,000,000,000 units. There is a potential that that could be even more as we think about things like reshoring. If you are reshoring something that is already specced in in Europe into the U.S., that is an opportunity to automatically upgrade. What we are hearing from customers is that in order for them to simplify their supply chains, they do not want to have multiple components that have different specs across their network. As the regulatory scrutiny continues to grow outside of Europe, there is a desire to standardize across this. Not only do we see the opportunities that Eric was talking about, there is a potential that it could even be bigger over time with some of these other dynamics that are in play across the industry. Operator: Thank you. And ladies and gentlemen, that is all the time we have for our question and answer session today. This does conclude today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Good morning and welcome to Agios Pharmaceuticals, Inc. Fourth Quarter and Full Year 2025 Conference Call. At this time, participants are in a listen-only mode. There will be a question and answer session at the end. Please be advised that this call is being recorded at Agios Pharmaceuticals, Inc.'s request. I would now like to turn the call over to Morgan Sanford, Head of Investor Relations at Agios Pharmaceuticals, Inc. Please go ahead. Morgan Sanford: Thank you, operator. Good morning, everyone. Thank you for joining us to discuss Agios Pharmaceuticals, Inc. Fourth Quarter and full year 2025 financial results and business highlights. You can access the slides for today's call by going to the Investors section of our website agios.com. Please note, we will be making certain forward-looking statements today. Actual events and results could differ materially from those expressed or implied by any forward-looking statements because of various risks, uncertainties, and other factors, including those set forth in our most recent filings with the SEC and any other future filings that we may make with the SEC. On the call with me today from Agios Pharmaceuticals, Inc. are Brian Goff, Chief Executive Officer; Cecilia Jones, Chief Financial Officer; Tsveta Milanova, Chief Commercial Officer; and Dr. Sarah Gheuens, Chief Medical Officer and Head of Research and Development. Following prepared remarks, we will open the call for questions. With that, I am pleased to turn the call over to Brian. Thanks, Morgan. Good morning, everyone, and thank you for joining us on today's call. Next slide, please. Just last month, we outlined our 2026 strategic priorities, which are focused on delivering long-term shareholder value. First, we are focused on executing a high-impact launch of Afesmi for the treatment of thalassemia in the U.S. Operator: Second, Brian Goff: We see meaningful opportunity to expand our PK activation franchise into additional high-value indications including sickle cell disease, and lower-risk myelodysplastic syndrome, with key catalysts this year for both opportunities. Third, through the advancement of our early-stage pipeline with AG-236 and AG-181, we have the potential to unlock future value in hematologic and other rare diseases. And finally, we remain committed to long-term sustainability, supported by disciplined capital allocation and continued operational efficiency. Building on those priorities, the next slide marks key pipeline catalysts in 2026 across multiple high-value indication opportunities. The Afesmi launch in thalassemia is underway in the U.S., and we look forward to the potential to expand our PK activation franchise into sickle cell disease and lower-risk MDS. These milestones and continued progress in our early-stage pipeline position the portfolio for growth and long-term value creation. Next slide, please. We exited 2025 with solid momentum across the business, commercial execution, pipeline progress, and continued focus on financial discipline, which together provide a strong foundation to deliver on our 2026 strategic priorities. Starting with commercial performance, Pyrukynd delivered $20 million in net revenue in the fourth quarter, bringing full year 2025 revenue to $54 million reflecting robust year-on-year growth. In the fourth quarter, we reported top-line data from the RISE UP Phase III trial and will meet with the FDA this quarter as anticipated for our pre-sNDA meeting to determine the regulatory path forward. Importantly, just before the end of the year, we received FDA approval for Afesmi in the U.S. Thalassemia launch is underway. Finally, we recently completed enrollment in the Phase II sickle cell disease trial of tebipivat with top-line results expected in the second half of this year. Importantly, we continue to operate from a position of strength, ending the year with approximately $1,200,000,000 in cash, providing flexibility to maximize the Afesmi thalassemia U.S. launch, pursue the path forward for mitapivat in sickle cell disease, and continue to advance our pipeline programs. Please move to the next slide, and I will turn the call over to Cecilia to provide additional details on our 2025 fourth quarter and full year performance as well as our 2026 outlook. Morgan Sanford: Thank you, Brian. Next slide, please. Our fourth quarter and full year 2025 financial results Cecilia Jones: Be found in the press release issued earlier this morning and additional details can be found in our 10-K which will be filed later today. Fourth quarter worldwide Pyrukynd revenue was $20,000,000, an increase of 86% compared to 2024, and a sequential increase of 55% compared to $13,000,000 in 2025. In the U.S., fourth quarter revenues of $16,000,000 were driven by continued commercial focus in PK deficiency ahead of FDA approval for Afesmi, an additional ordering week in the fourth quarter, and favorable gross-to-net adjustments. In 2026, we expect U.S. PK deficiency revenue to be in the range of $45,000,000 to $50,000,000. Outside of the U.S., revenue of $4,000,000 in the fourth quarter primarily reflects inventory stocking ahead of demand driven by PK deficiency patients in Europe transitioning from our global managed access program where Pyrukynd was provided free of charge to commercial supply. We anticipate a sequential decline in U.S. revenues into 2026. Cost of sales for the fourth quarter was $1,900,000. R&D expenses were $88,100,000, an increase of $5,300,000 compared to 2024, associated with the advancement of our earlier-stage pipeline program. SG&A expenses were $51,600,000 in the fourth quarter and roughly flat year-on-year. We ended the fourth quarter with cash, cash equivalents, and marketable securities of approximately $1,200,000,000. As a reminder, in future quarters, we will report mitapivat revenue as a whole, breaking out U.S. and ex-U.S. performance. Next slide, please. We remain committed to financial discipline as we work toward our goal of becoming a sustainable rare disease company. We anticipate operating expenses in 2026 to be roughly flat with 2025. This guidance assumes investment to maximize launch of Afesmi in thalassemia in the U.S., gated investment for sickle cell disease, and operating model refinement. Importantly, we see a clear path to profitability through our existing commercial presence in thalassemia and PK deficiency. Please advance to the next slide, and I will turn the call over to Tsveta to share commercial highlights for the quarter. Thank you, Cecilia. Next slide, please. As Cecilia noted, in the fourth quarter, Pyrukynd delivered $16,000,000 in net revenue in the U.S., up 50% year-over-year, driven by continued demand in PK deficiency, an additional ordering week in the quarter Brian Goff: And Morgan Sanford: Certain gross-to-net adjustments Cecilia Jones: Fourth quarter ex-U.S. was roughly $4,000,000 which primarily reflects supply ahead of demand pull-through as PK deficiency patients in Europe transition onto commercial supply. We expect this ordering to moderate in coming quarters. As expected, we continue to see quarterly variability driven by ordering patterns, Morgan Sanford: Inventory dynamics and gross-to-net adjustments. Cecilia Jones: Fourth quarter performance underscores the strength of our commercial model and the foundation we are building for future growth. Starting with the recent U.S. approval of Afesmi for the treatment of anemia in adults with alpha- and beta-thalassemia, regardless of transfusion burden. Operator: Please move to the next slide. Cecilia Jones: I am pleased to share that as planned, the final implementation of the Afesmi REMS was completed in late January to align with the approved FDA label. Operator: And Cecilia Jones: Have already begun dispensing products. As of January 30, we have seen 44 prescriptions written by a REMS-certified physician in the U.S. Operator: Which reflects strong early recognition Cecilia Jones: Of Afesmi’s clinical value and excellent execution by our field team. Morgan Sanford: Is especially encouraging is the healthy breadth Cecilia Jones: Of early prescribers at this stage of the launch, with strong geographic distribution and, as expected, predominance of community physicians as early prescribers. We are also seeing in these early days of launch emergence of the patient profile we anticipated, largely transfusion-dependent patients along with a group of highly engaged non–transfusion-dependent patients. These early signals speak not only to our launch readiness, but importantly to our deep understanding of this patient community and their unmet needs. Please move to the next slide. Morgan Sanford: We are very encouraged by the early market Cecilia Jones: Response to Afesmi. Physicians consistently view its profile as addressing meaningful gaps in the current treatment landscape for thalassemia. Importantly, this aligns with what we heard ahead of FDA approval. Operator: We are not seeing the REMS as a barrier to prescribing, Cecilia Jones: With early experience suggesting the certification process has been straightforward. We have also seen strong engagement with our patient support program. Initial experience indicates that patients do not view the REMS as burdensome given the potential for meaningful clinical benefit, including reduction in transfusion burden and improvement in fatigue. Taken together, this early feedback reinforces both the significant unmet need in thalassemia and the value proposition of Afesmi. It also reflects the strength of our prelaunch planning. On the next slide, I will take a few moments to discuss how we anticipate this demand will convert into treatment initiation and ultimately revenues in the first few quarters of launch. There are three key steps in the Afesmi REMS certification process. One of those steps, pharmacy education, is already completed as we use a single specialty pharmacy to dispense prescriptions and coordinate on delivery. Additionally, physicians are required to be educated and certified on the Afesmi REMS. In parallel, once a prescription has been written, patients need to receive insurance authorization and complete a baseline liver test prior to initiating treatment. Our comprehensive patient support service, MyAgios, has a strong track record assisting patients with the insurance authorization process for PK deficiency, which we expect to continue with thalassemia. Once these three components are completed, the pharmacy is authorized to dispense the prescription. Patients will then complete monthly liver tests for the first six months and as clinically indicated thereafter. Initially, we expect the time from first prescription to treatment initiation to be on average 10 to 12 weeks. As physicians are onboarded and access expands, we see opportunity to shorten this timeline as launch progresses. Operator: Turning to the next slide. Cecilia Jones: The thalassemia opportunity presents a major potential growth inflection for Agios Pharmaceuticals, Inc. Today, we have received approval of mitapivat for thalassemia in two regions, marketed as Afesmi in the U.S. and Operator: Pyrukynd in Saudi Arabia. Cecilia Jones: Our capital-efficient global commercial model enables us to focus our investments on the U.S., which presents the most significant revenue opportunity. Outside of the U.S., we have executed commercialization and distribution agreements with Avanzanite Bioscience in Europe and NewBridge Pharmaceuticals in the GCC. Given access dynamics, we currently distribute Pyrukynd in Saudi Arabia on a patient-by-patient basis, with potential to expand access following national procurement agreement. In Europe and UAE, regulatory Morgan Sanford: Reviews remain underway. Cecilia Jones: We anticipate a potential EC decision in the coming months following the positive CHMP opinion received Morgan Sanford: In October 2025. Cecilia Jones: Across these regions, we see real potential to expand access and deliver meaningful growth as we scale the launch globally. Please move to the next slide. And with that, Morgan Sanford: I will hand the call over to Sarah to cover key R&D highlights from the Cecilia Jones: Quarter. Thank you, Sarah. Next slide, please. Since we reported third quarter results, we have continued to make progress advancing our robust rare disease pipeline. We received the FDA approval of Afesmi for alpha- and beta-thalassemia regardless of transfusion burden on December 23. Morgan Sanford: And as you heard from Tsveta, the U.S. launch is underway with strong reception from Cecilia Jones: Physicians. Following the RISE UP Phase III top-line data of mitapivat in sickle cell disease, we will have our pre-sNDA meeting this quarter to inform the regulatory path forward. We continue to advance our more potent PK activator, tebipivat, in two Phase II trials and anticipate results in lower-risk MDS in the first half of this year and in sickle cell disease in the second half. We continue to advance our early-stage Morgan Sanford: Pipeline to important decision points this year and are on track to initiate a Phase 1b proof-of-mechanism trial of AG-181, our phenylalanine hydroxylase stabilizer, in PKU patients in the coming months and report top-line data from the Phase I healthy volunteer Cecilia Jones: Study of AG-236, our siRNA targeting TMPRSS6 for polycythemia vera, in the first half. Please move to the next slide. Turning to tebipivat, we look forward to understanding more about the potential role of this more potent PK activator in low-risk MDS and sickle cell disease this year. We remain on track in low-risk MDS where top-line data from the Phase IIb trial are expected in the first half of this year. This study will provide important insights into dose optimization as well as the potential role of tebipivat in different patient subgroups, including low- and high-transfusion burden patients as well as potential applications in later lines of treatment. In sickle cell disease, enrollment in the Phase Morgan Sanford: II trial is now complete, an important milestone that reflects the growing Cecilia Jones: Enthusiasm for PK activation following the RISE UP Phase III results of mitapivat in this debilitating and deadly disease. Morgan Sanford: This 12-week double-blind trial is designed to further explore tebipivat’s Cecilia Jones: Potential to deliver meaningful improvements in hemoglobin, Morgan Sanford: As well as broader markers of hemolysis. In turn, we see potential for higher hemoglobin response building on the Cecilia Jones: Strength of the data established with mitapivat. Together, these programs underscore the potential for tebipivat to expand our leadership in hematology and address multiple high-value populations where unmet need remains significant. We have an exciting year ahead of us, and we look forward to updating you on our pipeline progress throughout the year. With that, please move to the next slide, and I will hand the call back to Brian for closing remarks. Brian Goff: Thank you, Sarah. Next slide. In closing, we have another pivotal catalyst-rich year ahead of us. In line with our 2026 strategic priorities, we are focused on executing a high-value Afesmi U.S. launch in thalassemia. In sickle cell disease, we are preparing for our pre-sNDA meeting for mitapivat this quarter, an important step towards defining our regulatory path. We also expect Phase II top-line data for tebipivat in sickle cell disease later this year, which will give us deeper insight into the potential of higher potency PK activation in this population. In lower-risk MDS, Phase IIb top-line data for tebipivat remain on track for 2026 and will be a key readout as we assess its ability to drive transfusion independence and broader improvements in anemia. We also anticipate Phase I top-line data for AG-236 in polycythemia vera and Phase Ib proof-of-mechanism data for AG-181 in PKU, two important early-stage programs that expand our reach across hematologic and other rare diseases. Please move to the next slide. As we look beyond 2026, our opportunity set continues to expand. The combined global market potential across our current pipeline indications is $10,000,000,000 reflecting both the breadth of unmet need and potential to deliver transformative medicines to patients. Beginning in 2026, we are focused on delivering a high-impact U.S. launch of Afesmi in thalassemia, which we believe has the potential to establish a strong foundation for our leadership more broadly in rare hematology. Our combination of near-term catalysts, disciplined investment, and a maturing pipeline creates a clear pathway to deliver long-term value. Agios Pharmaceuticals, Inc. is well positioned for the next chapter of growth while advancing the next wave of innovation across our rare disease portfolio. Before we move into Q&A, I would like to acknowledge the dedication of our employees whose unwavering focus and commitment continue to make a meaningful difference for patients with rare disease. With that, I would like to open the call for questions. Operator, please open the line. Operator: Thank you. To be announced. To withdraw your question, please press 11 again. And our first question comes from Gregory Renza with Truist. Your line is open. Great. Thanks. Good morning, Brian and team. Congrats on the quarter and, of course, another eventful year. Maybe two questions from us on Afesmi and then on sickle cell. First, just on the Afesmi launch, we appreciate all the color you are sharing early and getting patients engaged and prescriptions written. Just on that translation perhaps, on the prescription updates that we are seeing, how do you see that not only translating to treatment initiation but also to revenue recognition, maybe not asking for guidance on early quarters, but any color you can provide on the first quarter and even subsequent early days of the launch with respect to how it holsters to revenue? And then I have a follow-up. Thanks. Brian Goff: Yeah. Thanks, Greg. Very happy to talk about the launch. And before Tsveta gets going here, I just want to say I am really proud of the way the team has executed. It is early days, but Tsveta is excited to finally have a chance to begin talking about the Afesmi launch. Cecilia Jones: Absolutely. Definitely excited. And Greg, as I mentioned in my prepared remarks, we are really encouraged by the early demand that we are seeing with Afesmi. As you mentioned, we reported that we had 44 prescriptions from REMS-certified physicians up to January 30, which is the first five weeks of the launch, and that is fantastic to see. With regards to your questions, what we expect is to see in the initial quarters prescriptions and demand Morgan Sanford: To grow ahead of revenues. And the main reason for that is that it takes about 10 to 12 weeks for us to convert Cecilia Jones: Prescriptions to treatment initiation and ultimately revenues. So, we anticipate, in Q1, the majority of the prescriptions to turn into treatment initiation. And as the year progresses, Morgan Sanford: We will expect to see revenues and demand start tracking more Cecilia Jones: Closely? Morgan Sanford: We get a lot of questions about potential analogs. So when I think about another product which also has a liver REMS, that is Truseltiq, so that is a good analog Operator: For you to look at of how the actual revenue Sarah Gheuens: Trajectory throughout the first year of the launch actually evolved. It is a very different disease, of course, but from a shape of the curve of the revenue, I think it is a good one to look at. Gregory Renza: Great. Thank you. That is very helpful. And maybe just moving on to sickle cell and tebipivat. And of course, not to overlook the MDS readout in the first half, but with enrollment complete in the Phase II in sickle cell and Sarah, the color that you have provided, maybe if I may just ask a bit about how you are pegging expectations for what you want to see to get excited about the Phase II data in sickle cell coming later this year. You had spoken about the potency and the higher hemoglobin response potential. Any color that would help to get you excited and how that kind of fits into the larger portfolio relative to mitapivat and the larger sickle cell space even. Thanks so much and congrats again, guys. Brian Goff: Thanks, Greg. Thanks, yes, thanks for the question, Greg. So the Sarah Gheuens: Phase II tebipivat trial that we have just indeed announced full enrollment is a dose-finding trial. So we are looking indeed to explore the doses. We are looking at the hemoglobin. Morgan Sanford: It is a standalone Phase II trial, so VOCs are included as Cecilia Jones: Safety assessments, which is different than how the Phase Sarah Gheuens: II/III seamless operational design was for RISE UP. But, obviously, we are now in a position that we can leverage data across the PK activation franchise, basically. And we are able to use the RISE UP data to also model what we anticipate a hemoglobin response can lead to for clinical benefit. So we are very excited about the trial. We think actually the fact that we can announce the enrollment completion also reflects the excitement of the community. You know, the RISE UP data announcement really led to a faster enrollment in the tebipivat Phase II trial, so we are very excited about that. Thank you. Operator: Our next question comes from Samantha Semanko with Citi. Your line is open. Morgan Sanford: Hi, good morning, and thanks very much for taking the questions, and congratulations on all the commercial progress. Cecilia Jones: Just one follow-up on Afesmi. I am wondering if you could speak to a bit of the cadence of scripts that have come in since approval. And particularly, are you seeing an increase Emily Bodnar: In the scripts written since January 30 after the REMS has become fully operational? And then just a second question. I am wondering if you could speak to the potential outcomes from the planned sNDA meeting with FDA on the sickle cell disease. What are the outcomes that could come out of that meeting? Thanks very much. Brian Goff: Thanks, Sam. So we are going to stick with the 44 that we have so far for Afesmi, but I think Tsveta could continue to provide color on the early days of the launch. And so I will have Tsveta start on that and then Sarah can speak to the pre-sNDA meeting. Sarah Gheuens: Absolutely, Sam. And a reminder, we started basically engaging and educating physicians and generating demand as soon as the product was approved. So within the first five weeks of the launch, we have been educating physicians on the value proposition of Afesmi and the REMS itself. So, we are very encouraged with what we see in terms of demand in these early stages of the launch. A lot of the things that are happening, and I am really, really pleased with the execution of the team, are happening as we expected. So we are seeing prescriptions coming from the transfusion-dependent patients and the very engaged symptomatic non–transfusion-dependent patients who have frequent interactions with the health care system, which is fantastic. And we see a very healthy dynamics of the launch in terms of the physicians. We see prescriptions coming from across the country. And a lot of them are in the community setting where the majority of the patients are treated, and I am really pleased with the progress that the team is making. Brian Goff: Great. And then, Sarah, the pre-sNDA meeting and Sam's question about the potential outcomes. Cecilia Jones: Yes. Thanks, Sam. So we have guided to the Morgan Sanford: Pre-sNDA meeting in the first quarter of this year. The goal for that meeting is, of course, to gain insights in the regulatory pathways that we can use for mitapivat. As stated, we are, of course, going in with a data package that we would like to present for Sarah Gheuens: Full approval based on the data that was generated in RISE UP with the strong anti-hemolytic profile that is now Morgan Sanford: Confirming again the anti-hemolytic profile of mitapivat now in a third hemolytic anemia, with additional strong clinical benefit observed in those hemoglobin responders. Sarah Gheuens: And, once we have that meeting, we Morgan Sanford: Are planning to give an update Sarah Gheuens: Once we have the meeting minutes to you guys. Emily Bodnar: Great. Thanks very much. Operator: Thank you. And our next question comes from Alec Stranahan with Bank of America. Your line is open. Brian Goff: Great to see the continued progress for both the commercial and the clinical stage portfolios. Two questions from us. I guess, first, is sort of the main bottleneck informing that 10 to 12 week prescription to treatment initiation? Is it getting the patient in for their baseline liver test or maybe something else and how do you anticipate this shortening over the course of this year? And then second, for tebipivat in MDS, what does good look like on transfusion independence in this lower-risk population? And I guess given what you learned from the Phase IIa do you expect you could see activity at the 10 mg dose based on Eric Schmidt: Of the emerging PK data, or is this maybe more likely at the 15 and the 20 mg doses? Thank you. Brian Goff: Thanks, Alec. So we are going to follow the same sequence here. Tsveta gets to talk about the Afesmi launch and then Sarah, thankfully we have a robust pipeline, so she can discuss the MDS trial with tebipivat. Absolutely. So the 10 to 12 weeks is driven by Sarah Gheuens: Two things. The first aspect is the insurance authorization, which is very standard for any specialty rare disease drug. That is not unique to Afesmi. And most of the patients would need to go to prior authorization, which can take on average a month. And for some patients, it happens faster. For some patients, it takes longer, but that is one of the main drivers. The second aspect is the requirement for a liver test ahead of the treatment initiation. So when we combine both of these factors, we anticipate the conversion from prescription to treatment initiation to be on average 10 to 12 weeks. As I said, we will see patients falling on either end of that time frame. And over time, we will, of course, look to shorten the time from prescription to treatment initiation on both fronts. We have an excellent market access team that will be engaging with payers. So as some of the payers actually put the product on formulary, that can be an opportunity for us to move faster through some of the prior authorizations, and supporting patients as well as we will be learning throughout the launch and identify areas to support to have efficiency in their liver testing initially as well. Brian Goff: Great. And, Sarah, for tebipivat and MDS, just some of the you know, what are we expecting and then the different dosing Cecilia Jones: Yeah. Thanks, Alec. And so to your point, we indeed are testing higher doses than the dose that we tested in the Phase IIa. So we have a 10 milligram, a 15 milligram, and a 20 milligram dose. So, indeed, we are looking Sarah Gheuens: To explore the doses here in this Phase II to see which dose would be best. And then in addition, we are, because it is a heterogeneous Morgan Sanford: Patient population, this trial will also allow us to further define patient populations. So we have low and high transfusion burden, plus additional lines of therapy that have been used. So it will really give us a lot of insights on where this drug can play a role. Obviously, it is an oral therapy, which Sarah Gheuens: Of course, can be very meaningful for a patient population like this because if patients would have treatment response, it allows them to be really untethered from the clinic. Brian Goff: Yeah. It is going to be an exciting year for tebipivat in 2026. We have two catalysts, as we noted. We have the MDS Phase IIb trial in the first half of the year, and then as we have already discussed, for sickle cell disease, the second half of this year, we look forward to that Phase II result. Eric Schmidt: Great. Thanks for the color, and congrats on the continued progress, guys. Brian Goff: Thank you. Operator: Thank you. And our next question will come from Marc Frahm with TD Cowen. Your line is open. Gregory Renza: Questions. Maybe to start on Afesmi with the REMS-certified physicians. Just Brian Goff: Can you maybe talk about kind of where that is from a quantitative perspective, Marc Alan Frahm: Within these first few months? And kind of what do you think that trajectory looks like in terms of number and breadth of certified physicians over the next quarter or two as that part of the ramp really happens? And then I will have a follow-up on the pipeline. Brian Goff: Okay. So I can start. Yeah. When it comes Sarah Gheuens: To the REMS, for in this initial stage of the launch, I am really pleased with what we are seeing, and things are happening exactly as we anticipated. Physicians do not see the REMS as a barrier to prescribing and the patients that we have engaged with they basically do not see it as burdensome given the strong value proposition of Afesmi and their willingness to consider and initiate therapy. What is happening with the REMS? Initially, a lot of the bigger academic centers and KOLs are getting certified. And when it comes to the community physicians, actual certification happens almost simultaneous with the first prescription. And we will see in a way the certification and REMS progressing simultaneously over time. But as I said, REMS has not been a reason for not to prescribe. It is the opposite. When physicians have patients that they want to initiate, they are more than willing to complete the REMS, which can actually take one visit. It is a very quick process. Marc Alan Frahm: Okay. Thanks. That is helpful. And then maybe just following up on Sarah's comments about the pre-sNDA meeting and that the package is really aimed for supporting full approval. I think at other times, you have also mentioned possibilities of an outcome of accelerated approval. Is that still something you think is a reasonable outcome, or are you more confident in a full approval than maybe you have been as you have gotten a little deeper into the data and conversations? And then assuming accelerated is on the table, what is your latest thoughts on kind of what a confirmatory trial might look like under that scenario? Emily Bodnar: Yeah. So thanks, Marc. So for us, the data package Sarah Gheuens: Really the benefit-risk profile generated in RISE confirms a strong anti-hemolytic profile, as I mentioned. And we really see those clinically meaningful changes in the hemoglobin responders. So our view is that benefit-risk here is seen in this trial, and it is a supplemental NDA. Now as you also know, at ASH recently, the FDA highlighted that hemoglobin can be a surrogate endpoint for sickle cell disease. So either one of those pathways for us allows us to discuss the data, and have that meaningful conversation with the agency. Under any of those circumstances, then there is always the normal filing procedure that one would have to go through. But we are very, very excited about the data as it stands. Then in regards to your question on confirmatory trials, obviously, we have several options Cecilia Jones: That we can discuss in which Sarah Gheuens: Some of these options have endpoints that have been used before. Some of them are novel endpoints as well. So we are ready to discuss, as needed. Cecilia Jones: K. Thank you. Operator: Thank you. And our next question will come from Eric Schmidt with Cantor. Your line is open. Brian Goff: Hey, guys. Sorry for any background noise, but Cecilia mentioned a direct path or clear path to profitability. I was hoping you get a little bit more detail on thinking around the breakeven point of revenue needed to hit that and maybe timelines to profitability. And then were there any sales at all in the GCC countries in Q4? Thank you. Cecilia Jones: So we have thanks, Eric. We gave the guidance on profitability with PKD and thalassemia regarding Sarah Gheuens: Of the path forward for sickle cell? Anovacar base case there. We have not given a specific timing of when that will happen. We believe Cecilia Jones: You know, thalassemia is a meaningful opportunity. We are excited about the initial stages of the launch. We also have, as you mentioned, ex-U.S. Sarah Gheuens: Being part of that opportunity as well. And then part of that profitability path also requires us to proactively manage our Cecilia Jones: OpEx as we navigate the multiple catalysts on the horizon. But we also have other earlier programs. So we have not given specific timing Sarah Gheuens: On that Cecilia Jones: My god. Second time. GCC? And then for GCC, what we have seen, the ex-U.S. revenue we saw in Q4 is mostly driven by Sarah Gheuens: Europe, and that is in anticipation of demand. So that is why we guided to Cecilia Jones: An expected decrease, Q4 to Q1. GCC, as a reminder, today is on an equivalent of a named-patient, case-by-case. So you see some consistency quarter-over-quarter until we get to the point where we have more broad access negotiated over the next 12 to 18 months or so. Brian Goff: Yeah. And, Eric, I will just add. We are pleased with the partner we have in place in GCC with NewBridge. Tsveta and I spent some time in Saudi Arabia late last year and really got a kind of a street-level sense about how the team is doing, the enthusiasm from clinicians, as well as even at the Ministry of Health level, and you know, that is going to take some time to build traction, but I think in the early days, feel quite good about the opportunity. Thank you. You bet. Operator: And our next question comes from Emily Bodnar with H.C. Wainwright. Your line is open. Cecilia Jones: Hi. Good morning. Thanks for taking questions, and congrats on all the progress. I guess for the first one, can you give some Morgan Sanford: Color on the type of physicians who are initially prescribing Afesmi? And whether they are mainly physicians who have used Pyrukynd in the past or you are getting physicians who are more new to drug? And then on sickle cell disease, assuming you achieve alignment with the FDA, are you expecting potential approval in 2026? And can you maybe discuss some of the launch preps that you are planning to do this year ahead of approval? Thanks. Brian Goff: Thanks, Emily. Tsveta, you want to start with Afesmi and the types of physicians in the early days? Sarah Gheuens: Absolutely. As I said, a lot of the early launch dynamics are playing as expected. The team did a fantastic job ahead of the launch profiling and prioritizing accounts, and the initial prescriptions are actually coming from the physicians we anticipated to see prescribing. As I mentioned, Emily, they are primarily the community heme-oncs, where majority of the patients are, and these are physicians we have engaged with previously. We do not see that much overlap between PK deficiency and thalassemia, and that is because PK deficiency is an ultra-rare disease. So there are very few physicians who have experience with Pyrukynd in PK deficiency. And as I said, I am very pleased with the start of the launch. It is a very healthy breadth of prescribing that we see across the country. Different physicians are engaged and really trying the product in the patients that they would think will benefit the most initially. Brian Goff: Great. And, Sarah, for sickle cell disease and potential timing. Yes. So, Emily, we have not guided Cecilia Jones: To potential approval dates Sarah Gheuens: Yet. We are now the first guidance we have given in process is our pre-sNDA meeting anticipated Q1. And then, in regards to the launch prep, I will ask Cecilia to comment. Cecilia Jones: Yeah. So as a reminder, we did not, very similar to how we did thalassemia, we did not build for sickle cell until we saw the data. Sarah Gheuens: That is what we refer to when we talk about the gated sickle cell investments. We will look into that timeline and understand the path to start building investment there accordingly. Thank you. Operator: And our next question will come from Salveen Jaswal Richter with Goldman Sachs. Your line is open. Lydia Erdman: Good morning. This is Lydia on for Salveen. Thanks so much for taking our questions and congrats on the update. Is there any additional color you can provide on the split between the transfusion and non–transfusion-dependent patients amongst these 44 scripts that have been written? And then given scripts will be the key metric to watch, do you anticipate third-party services like IQVIA to accurately capture these scripts? Thanks so much. Yep. So the initial prescriptions, as I said, very much as we anticipated, come from a combination of transfusion-dependent patients Sarah Gheuens: Obviously, a large proportion is transfusion-dependent patients. And very engaged symptomatic non–transfusion-dependent patients who are in active interaction with the health care system. So when you think about the evolution over time, as anticipated, I think we will see initially more transfusion-dependent patients, but the scale-up of the launch will come from the non–transfusion-dependent patients later on. When you think about IQVIA, we have a single specialty pharmacy that distributes the product. So IQVIA will not be the right source for you to look at. It is just the information will not be available. And this is the reason that we are looking to provide you initially with prescriptions and revenue, as well as we gave you the guidance on PK deficiency so you can see where the growth of thalassemia will be coming throughout the year. So much. Operator: Thank you. And our next question will come from Tessa Thomas Romero with JPMorgan. Your line is open. Lydia Erdman: Hey, guys. Thanks so much for taking our questions this morning. So first one is just on Sarah Gheuens: Afesmi. Just can you just quickly touch on initial payer dynamics over the first couple of quarters here and Lydia Erdman: Remind us of payer mix. Just want to make sure that we are thinking about potential free drug the right way. And then second question, a bit of a housekeeping question here. If you are indeed approved in sickle cell disease, how does your SG&A line change, just trying to think through what you might need to successfully launch a drug in sickle cell from an expense perspective. Cecilia Jones: Thanks so much. Brian Goff: Okay. Thanks, Tessa. And, Tsveta can start on payer aspects, and maybe we could also just remind our gross-to-net assumptions too. Think we Sarah Gheuens: Yep. Would be good. Answering Tessa, I will start here. So the payer mix in thalassemia is similar to PK deficiency with majority of the patients being under the commercial payer bucket. Very similar to PK deficiency and any other drug initially, the actual market access and payer authorization route will happen through medical exceptions because payers would take time, about six months, six to nine months, to actually start putting the product on formulary. We have a very experienced market access team that is very familiar with how to navigate the medical exceptions process. And so far, in these early stages of the launch, I must say, as expected, we have not seen any payer hurdles at all. I think the value proposition of Afesmi speaks for itself, and the team is doing a great job in terms of those interactions. Brian asked to comment on the gross-to-net assumptions. Given that we do not expect that to be a managed category, very similar payer mix to PK deficiency, our gross-to-net assumptions for thalassemia are similar to PK deficiency, 10% to 20%. And then on the SG&A question, Tessa, as we think about it, Cecilia Jones: We are going to update and manage our spend based on the regulatory discussions and the timing. But if you want to think about it, Sarah Gheuens: We have an infrastructure that we have paid for PKD and thalassemia that we would Cecilia Jones: Leverage, but the scale of sickle is much bigger. So we will have to scale up those functions that we built, but we have a really nice foundation to build from. Thank you. Operator: Thank you. Thank you. And our last question will come from Hiro Nagayumi with RBC Capital Markets. Your line is open. Morgan Sanford: Oh, great. Hi, team. This is Shelby on for Luca, and thanks for taking the question. Could you remind us what is the rationale for dosing higher in lower-risk MDS Sarah Gheuens: Versus the Phase II for sickle cell disease? Morgan Sanford: And then maybe one more. Now that we have the label and REMS program for thalassemia, do you expect any read-through to sickle cell, and has it changed any internal expectations on the commercial opportunity there? Lydia Erdman: Any color is much appreciated. Thanks. Brian Goff: Yeah. I think, well, so we could start with MDS and the rationale for all three of the doses being higher than what we tested in the IIa. And then we will talk a little bit about REMS and sickle. Yes. So for the rationale of higher doses, we originally had a Morgan Sanford: Phase IIa with the five milligram dose based on modeling from the healthy volunteer trials, but we learned in that trial that MDS patients metabolize the drug faster, and so we pushed the dose higher in the Phase IIb to do further dose exploration, versus sickle cell disease patients who are exactly the same as healthy volunteers. So that is why we have those differences between those two indications. Brian Goff: And then, Sarah, you could start on the sickle cell question about REMS and read-through, and Tsveta can certainly comment on how we see it commercially. Sarah Gheuens: Yes. So as you know, in the sickle cell disease program, we did not have the same observations as we had in thalassemia. So Morgan Sanford: It is much more like the pyruvate kinase deficiency program where we do not have a REMS, as you know, versus thalassemia where we do have a REMS. So all of this actually does give us optionality. So our going-in position based on the data observed is that that would not be needed, and we would propose something more like the pyruvate kinase deficiency path. Now a read-through, if it would turn out to be a REMS, I will hand that one over Sarah Gheuens: To Tsveta. Absolutely. Obviously, sickle cell disease is a devastating disease with high morbidity and mortality. No treatment options. So we see a meaningful commercial opportunity assuming we have a label in the U.S. And the team will be ready to execute on it. We are ready, and executing successfully on the REMS for thalassemia gives us a very solid foundation to continue to execute if we were to have something similar in sickle cell disease as well. Brian Goff: Yeah. And I will just take a moment to say. So Tsveta's team has continued to navigate through PKD as a launch, which is ultra-rare and certainly not the easiest of launches that began back in 2022. And now we have Afesmi and off to, you know, really good start in the first month of January. So I feel very confident the team in any scenario will be very well prepared. So I think that is our last question. Lydia Erdman: Yes. Sarah Gheuens: Okay. Then Brian Goff: I will go ahead and close it down. First, I just want to thank everyone for joining us this morning. It is an exciting time for Agios Pharmaceuticals, Inc. As you heard throughout the call, we are entering 2026 with quite strong momentum and really pleased that we are already seeing strong initial progress with the Afesmi launch in the U.S. We have meaningful clinical and regulatory catalysts ahead, as we have talked about, and we will continue to operate with financial discipline. These near-term drivers combined with our advancing pipeline position Agios Pharmaceuticals, Inc. to deliver sustained growth and long-term value, and we very much appreciate your continued engagement and look forward to updating you on our progress throughout the year. Thanks a lot. Operator: Thank you. This does conclude today's conference call. Thank you for participating and you may now disconnect.
Tuukka Hirvonen: Good afternoon, and welcome to Orion's Full Year 2025 Results Webcast and Conference Call. My name Tuukka Hirvonen, I am the Head of IR here at Orion. In a few moments, our CEO, Liisa Hurme, will present the results for the full year and Q4 last year, after which you will have the possibility to ask questions from Liisa and also from our CFO, Rene Lindell. We will be first taking questions through the conference call lines. And after that, we will turn to the webcast. So through the webcast, you have the possibility to type in your questions through the chat function of the webcast. Just before I let Liisa take over, I'd like to draw your attention to this usual disclaimer regarding future forward-looking statements. And with this short note, it's my pleasure to invite Liisa to the podium. Liisa, please. Liisa Hurme: Thank you, Tuukka, and welcome on my behalf as well. I'll start with the Q4 and with some highlights during the last 3 months of last year. It's my pleasure to say that all our business divisions had a strong quarter and performed extremely well. Also, we received EUR 180 million sales milestone from Bayer related to Nubeqa. And we were able to proceed with our clinical pipeline by initiating Phase II program with ODM-212, a molecule in our oncology pipeline. And also our partner Tenax, in the United States, initiated Phase III trial called Level 2 with levosimendan for pulmonary hypertension. And Q4 highlights, the base business during Q4 compared to the previous year grew 18.5% and 60% when we include the previously mentioned milestone. And operating profit growth was 59% and including the milestone, 254%, bringing us to 47% operating profit margin in Q4. Operating cash flow per share was slightly lower than previous year, and that's mainly due to the timing of royalty payments from Bayer. The net sales bridge is almost masked by Nubeqa and Innovative Medicines as it includes the EUR 180 million milestone. But it doesn't shadow the extremely good performance of other divisions, Branded, Generics and Animal Health. Of course, the divisions are smaller, so the growth in euros is also smaller. And this all resulted us to -- brought us to EUR 695 million during Q4. In the operating profit, we, of course, see the EUR 180 million, but a very good development on our royalties, close to EUR 50 million and also sales volumes brought us EUR 28 million. Price development, COGS and product mix put us slightly down by EUR 12 million and the effect of exchange rate on gross margin was EUR 4.1 million. And other operating costs and fixed costs were also well handled. So nothing specific there. So our Q4 Operating profit was EUR 328 million. And now I move to 2025. This was an all-time high year for Orion Pharma, both with net sales and operating profit. And I want to take the opportunity here today to thank all my colleagues all around the world in Orion Pharma for this achievement. In all business divisions, in R&D, in operations, you couldn't achieve anything like this without a very, very good collaboration in the company. So in addition to euros, we also had lots of positive development in R&D; ARANOTE approvals, both in Europe and U.S.; several new license and collaboration agreements; license agreements for early-stage technology platforms in our innovative medicines and oncology, but also acquiring and in-licensing product rights for both branded products and generics. Also MSD, our other significant partner, expanded the opevesostat development to women's cancers, which is wonderful news, both for women suffering of these cancers and taking all the possible opportunities of this molecule and mechanism of action. And Board of Directors of Orion Pharma is proposing a dividend of EUR 1.80 per share. And this is proposed to be paid in two installments. For the full year numbers, 21% growth in our base business, 22.5%, including milestone. Operating profit, EUR 58 million, if I round it to 59% growth in base business and 52%, including the milestones. And for the full year operating profit margin, this brings us to 33.4% compared to the previous year's 27%. And of course, this is mainly due to the -- or partly due to the milestone that we received. And operating cash flow was slightly better than in '24, driven by good sales performance -- mainly by sales performance as the milestone will be visible in the cash flow in this year. And now I move to the divisions. Innovative Medicines, here, the net sales is really Nubeqa, either the royalties or royalties and the product sales. And the dark part here describes the sales and royalties, where the growth was close to 38%. Of course, there, the milestone also included brings us to 152% growth. And then between the full years, the growth was 60% for the base business and 55% with the milestone. And then there is the picture that we always want to have here to remind you of the very back-end loaded character of this business due to the tiered royalties from Bayer. And we can see it extremely well here in the Q4 '25, where the royalties jump up significantly from the previous quarter. The product deliveries and product sales between the Q3 and Q4 last year remained at the similar level. Branded Products continued in Q4, the 2-digit number growth with 11% and the full year growth was close to 10%. For the respiratory portfolio, the growth comes from the budesonide-formoterol combination product. For the CNS, it comes from Stalevo or the entacapone product family for Parkinson's disease and especially retaining the rights in Japan back to Orion Pharma, but also from some new products that we've been launching in Europe. And then a significant growth of our women's health portfolio. Generics and Consumer Health really did it last year. 5.7% growth during the Q4 is above all averages in this business. and 4.6% for the full year as well. And this is a result of a lot of activities. We've done more than ever of launches in our current territories. We've had some bigger launches also this year for the products that have -- where the patents have ended, and this comes also from all of our regions. Animal Health quarter 4 was more, how would I say, calm compared to the previous quarters with only 1% growth. And this is mainly when you see this type of changes on a quarterly basis in Animal Health, it's usually the delivery timing of products to our partners. And then again, it didn't have a big effect on the yearly full year sales where the growth is close to 10%. And in a similar way to generics, the growth really comes from a broad -- here, even a broad geographic region globally, but also from a broad portfolio, both on the livestock and companion animal business. This is a nice list of our 10 biggest products. Almost all the products are growing, some even with a very healthy 2-digit numbers. Then some are more or less at par like Animal Health, Dexdomitor and Burana. Maybe it's good to note here that the Divina series, the women's health portfolio, has now climbed to be the #4. So it has actually now climbed up and passed the Animal Health sedative portfolio. And this is only a very natural order of products here to have the innovative products, Nubeqa as the first fastest-growing product and then all the 3 main products from branded side as the next ones. And then we have biggest generic products represented here. Simdax, unfortunately, of course, declining. Fareston's decline, again, is a matter of delivery timing. I think the big message in this slide is that, to my recollection, this is the first year when Innovative Medicines is our biggest division. So this is clearly a kind of a landmark event for Orion. Generics still hold almost 30% or generate 30% of our net sales and Branded Products, 17%. And the 2 other divisions, Animal Health and Fermion are significantly smaller ones. No significant news on our key clinical development pipeline. I already mentioned that we've started Phase II for the ODM-212 in 2 different indications, mesothelioma and EHE, both are rare oncology indications. We were able to start this study already in the end of the last year. And are aiming to start a study with the combination of this molecule to some current oncology treatments during the first part of this year. And also, you can see here now 2 studies for levosimendan also the level 2. And this is a very nice slide on sustainability this time about diversity. Orion has been ranked as #3 in the Nordic Business Diversity Index, which means that if you look at the numbers here on this slide, how men and women are -- what is the share of men and women on different level of the organization. You can look at the Board of Directors where almost 40% of members are women in executive team, almost 45% of the members are women. And if you look at the whole personnel in Orion Pharma, there almost 56% of the personnel are women. And there are a lot of other information here, of which we are very, very proud. One that I can mention is the accomplishment of the Code of Conduct agreements with our suppliers, which is 98%. We provided our outlook for 2026 for this year already on January 14, and it holds. So we have stated that our net sales range for this year is from EUR 1.9 billion to EUR 2.1 billion, and our operating profit range is from EUR 550 million to EUR 750 million. And here are our upcoming events, and our Annual General Meeting will be held on 24th of March. I thank you for your attention at this point, and we are ready for your questions. Tuukka Hirvonen: Thank you, Liisa. [Operator Instructions] But first, let's turn on to the conference call lines, and I'd like to hand over to the operator at this point. Operator: [Operator Instructions] The next question comes from Shan Hama from Jefferies. Shan Hama: Just two from me, please. We can take them 1 at a time. So firstly, could you just outline how you expect OpEx to develop over the course of this year as when compared to 2025, what sort of levels of SG&A and R&D are we looking at as a sort of percentage of the top line? That's my first question. Liisa Hurme: I'll give this question to Rene. Rene Lindell: Of course, we are not giving a detailed guidance on within the guidance and OpEx levels, but we have been stating that we are initiating more activities in the clinical pipeline. We have ODM-212 that entered Phase II and are planning to expand. So R&D OpEx, you can imagine that we are planning to increase during the year. And then when it comes to sales and marketing, we have also been investing more in those efforts across our countries, especially in the Branded Products division. So also there, there is some growth during '26. Shan Hama: Got it. And then just for my second question, please. Are you able to provide us with some further guidance as to your agreement with Bayer and what that looks like following Nubeqa's patent expiries? I think you previously stated low level percentage royalties after the patent expiries. But what is the low level? And will that eventually go to 0 after 2035? Liisa Hurme: I think exactly as you pointed out, it's a low-level single numbers of royalty that we can receive from Bayer after the product has become generic. And maybe did you have something else in your mind regarding that, we can confirm that here. Shan Hama: Yes. And then will it go to 0 after 2035? I think that's when the last patent expires in Europe, if I'm not mistaken. Liisa Hurme: To my recollection, in a very general way as these agreements are done, it's a region-by-region agreement. Whenever patents expire, generic competition starts in a certain region, so then the new royalty rate kicks in. Operator: The next question comes from Sami Sarkamies from Danske Bank Markets. Sami Sarkamies: I have a couple of questions. We'll also be taking this one by one. Starting from the outcome for last year, it was a great year, but you didn't actually surprise against your own expectations around mid-'25, even though Nubeqa sales actually developed very strongly during the second half of the year. So why did we land at the guidance midpoint and not above it? My point is that Nubeqa probably reached some sort of blue sky scenario during last year, but in which areas that wasn't the case. So was it related to other products not selling that well or maybe costs becoming larger than anticipated? Rene Lindell: So if you look at the net sales, we landed pretty close to our upper range of our outlook. So that clearly was on the high side, not in the midpoint. Then on the operating profit, we were quite there, close to the midpoint. However, there as well, we had a little bit more of OpEx, but again, that we kind of expected. As I said, we had R&D investments last year that increased significantly year-on-year. And especially even if you consider comparable without the write-downs in '24, you can see that actually the ongoing activities increased even more. So in a way, you could say we really executed on the plan, both in the R&D side and also on the sales and marketing side, we went exactly as planned. So I think for us, we were quite at the mark. Sami Sarkamies: Okay. And then going back to the cost outlook that was also discussed. So is it so that the R&D cost increase will be quite a bit more material this year than sales and marketing cost increase? Rene Lindell: Not necessarily. So I think in both sides, we are investing. So we'll have to see, of course, how the year goes, sales and marketing. I think it's pretty clear what we have in the budget that it will increase, R&D as well increasing. But again, as you know, it's less predictable. So that's why also there is a variety in the outlook range that includes a big part, also plays a role of the R&D expense. Liisa Hurme: And maybe to continue from that, we are really, as you said -- as Rene already said, executing our plan. We were executing our plan for '25, and we are executing our strategy, which is to invest more in R&D. And you can already see it in '25 if you compare '25 numbers to the '24, and that is expected to continue. Sami Sarkamies: Okay. And can you still open up a bit the factors that are driving sales and marketing costs increase this year? And maybe also you're planning to have a presence in the U.S. market someday. When do you think those more material sales and marketing investments will happen? Rene Lindell: I think the largest factors would be in Branded Products and obviously, Easyhaler as being the biggest product. That's where we have the most activities. So logically, driving more sales there requires also activities in that regard. The U.S.A. establishing that platform, of course, that also plays a role, but still quite small in the big picture of things. But of course, we are step-by-step also taking activities there, but it's a very small scale, but it's all part of the total. Tuukka Hirvonen: And maybe to add -- and then of course, also the Endo royalties, which we are paying. As Nubeqa grows, of course, we are paying more and more royalties to Endo, and that is shown in the sales and marketing costs. Liisa Hurme: Thank you for Tuukka to remind about that. So that really grows as the Nubeqa sales grow. Rene Lindell: So that's why it is a variable, basically, expense with Nubeqa's growth. Sami Sarkamies: And then my final question would be on capital investments. You had quite an increase last year. You're guiding for a similar level this year. Where are you investing at the moment? Rene Lindell: If I single out the largest investments, those would be in Nubeqa production, especially in the API production. And then secondly, last year, we also had in Easyhaler. But of course, we are continuing of course across all our divisions. So as we are growing, we need more capacity for the products that we are producing on our own. So in a way, it grows also in line with the business. But naturally, one of the big things is really darolutamide. Operator: The next question comes from Iiris Theman from DNB Carnegie. Iiris Theman: Thanks for your presentation. I have three questions, please. So firstly, R&D costs were higher than I expected in Q4. Did those include any one-offs, for instance, related to ODM-105? This is my first question. Liisa Hurme: Well, mainly the R&D costs, I don't recall that. Maybe, Rene, you know the details, but I don't recall if they had any one-offs for 105. But of course, the R&D cost increase is really according to strategy, according to our plans. And as we have several biologics, already chosen candidates that we will hopefully bring to clinical development, at least one this year and the next in '27. The balance or the -- how the R&D costs are actually sequenced when you develop biologics? There are a lot more costs already before the clinical development when you need to have your final product, your final pharmaceutical product and commercial batches validated before you enter your clinical studies. So I do fully understand it might be difficult to understand where do we spend the money when you still see that there are not that many projects in the clinical phase. So those are actually quite expensive in the light of earlier pipeline molecules that we've had. And of course, we've been bringing ODM-212 into clinical phase and started the Phase II study last year. And that, of course, also includes kind of one-offs and payments for CROs. So nothing to do with 105 unless Rene says otherwise. Rene Lindell: Yes. Maybe just on the dynamics of the R&D spend. Typically, end of the year, there is a bit more bills for external CROs. They tend to be back-end loaded over the years. ODM-105, yes, there were a few, I would say, single-digit millions in terms of payments that we booked basically for things that are still being done to ramp down. And yes, as you said, then also starting up the new clinical trials, there's also upfront payments that came there. But all of these -- this is going to be probably the typical one that you have some fluctuations, but the big message is in a way that from -- if you look at the full year to full year, then we expect a steady growth of R&D. Iiris Theman: Okay. And still related to R&D costs. So is it fair to assume that your costs this year will be in your historical range of about 10% to 12% of sales? Rene Lindell: I would not promise that the history is the best predictor of the future. It will really depend on how the projects move forward. So we've been many years in the 11%. But as I said, the target is to move forward further in the clinics, and that might mean also that we exceed the clinical -- or the historical ranges, but we'll have to see how the year goes. Iiris Theman: Okay. And then secondly, what was the reason behind the flat Nubeqa product sales quarter-over-quarter in Q4? Liisa Hurme: Well, there is a lot of fluctuation. Generally, of course, the deliveries have been growing as the sales been growing, but as we've stated many times, so there are differences between quarters. It's a bit of the same thing as with other products to our partners, but it's really might be a timing of delivery between one day to another and then it ends up to a different quarter or even to a different year. Iiris Theman: Okay. And then my final question is related to R&D pipeline. So what is your expected pipeline news in the next 6 to 12 months? Liisa Hurme: Well, I think the next one will be the start of the ODM-212 in combination with some current oncology drugs that are used. As I said, we hope to start those studies before the summer, during the first half of this year. And from there on, during this year, we aim to bring one biologic product in clinical stage. And then going forward to '27, there should be results. And now I'm looking at Tuukka already from one of the Nubeqa studies. So are they both readouts in '28? Tuukka Hirvonen: The ARASTEP study for the BCR is due to readout in '27, then the DASL-HiCaP is due to readout in '28. And still during this year, so in the second half of '26, our partner, Tenax, is expecting to read out the first level Phase III trial in the second half of this year. Liisa Hurme: Exactly. So this year's events is really starting the combination study with 212 level study results and also starting the biologics clinical development. Iiris Theman: And do you expect anything related opevesostat in the next 12 months? Liisa Hurme: I think that's something that you would need to ask from MSD. Operator: The next question comes from Alex Moore from Bank of America. Alexander Moore: It's Alex Moore, on for Charlie Haywood, Bank of America. Two for me on Nubeqa. On the greater than EUR 1 billion guidance on net sales, can you confirm your assumptions around expansion into early line settings on the data due in '27, '28? And then secondly, just a clarifying question on the royalty post LOE. You mentioned that the royalty rate drops to a very low rate after generic competition has started on a country-by-country basis. Can you give a bit more color on timing, i.e., does this mean the royalty rate drops on the launch of the first generic competitor in a particular market? Or is there more nuance there? Liisa Hurme: Well, I think may I repeat your first question. So did you ask whether the early-stage indications with Nubeqa are included in the EUR 1 billion? Alexander Moore: Correct. Liisa Hurme: That was your question. Yes, they are. In a similar way as anything that Bayer is saying about Nubeqa, they include all the indications or all the studies that are ongoing that they should be successful to reach what they are planning. And then your next question was regarding the royalty rate after the loss of exclusivity and how that would go. Usually, the agreements are designed so that the royalty rate drops either when the first generic enters the market or the patent is expired region by region. Tuukka Hirvonen: All right. Thank you. We have now, for the time being, exhausted all the questions from the conference call line. Then we can turn into the webcast questions. We have a few of them here. Let's start with a few one from Matti Kaurola from OP Markets. So the first one from Matti is, what kind of reasons impacted on increased R&D and especially the sales and marketing costs in Q4? Rene Lindell: I think we already discussed the R&D cost. So I think I already answered that. We will not repeat it. So sales and marketing, again, maybe repeating what also Tuukka mentioned that Endo royalties was a big part of that. And of course, the EUR 180 million milestone was one big event in Q4, which also include Endo royalties. But then the other piece just added activities that we have. We have added more sales persons across our markets where we are seeing good momentum and growth, for example, for Easyhaler. Tuukka Hirvonen: Then we'll continue with the cost side, hot topic today. This is again from Matti. What should we think about especially sales and marketing costs in '26? Are they going to have similar seasonality as in '25? Or is Q4 level as the new normal, so to say? Rene Lindell: I think there is a fluctuation between the quarters due to various factors. So I think it also kind of might be a bit risky to take 1 quarter and multiply by 4, but rather look at the total year levels as we typically do, you get a more continuous picture of how that would develop. Yes, there is always some seasonality always there, typically also Q4, even in that space can have some extra costs that are backloaded, like in R&D. So I would also look at a bit more bigger picture of how the costs develop. Tuukka Hirvonen: Thanks, Rene. Then the final one from Matti is related to Fermion. Typically, Fermion sales has been decreasing due to increased Nubeqa production. So why did the external sales of Fermion increased during Q4? Liisa Hurme: Well, this is a good and nice question because this -- let's remember that these sales, as was pointed out, are the external sales for other pharma companies. And we were clearly able to deliver before the year-end more than we've been able to do earlier. So I think this is a result of good deliveries before the year-end. Tuukka Hirvonen: Thanks, Liisa. Then move on. This question comes from Viktor Sundberg from Nordea Markets. So just wondered if you could provide any details on what you assume in the high end and in the low end of your guidance ranges to get a better feel for the risks and uncertainties going into '26? Rene Lindell: Yes. Of course, I can't give you details within the range. But I think if we talk about broadly about the range, the biggest factors, of course, for this year is Nubeqa. That is growing at the rate as we're seeing. We expect it to do very strongly this year. It grows as its share of the total business naturally. That means also the range where Nubeqa lands and the impact on Orion is increasing. We mentioned already R&D OpEx, it is also increasing, but there is uncertainty over there as well that how projects move forward, how fast and how the spend is, plus then other factors, the U.S. dollar to euro FX starts to impact more because a lot of the Nubeqa sales, of course, is in U.S.A. So that is in there as well. Plus the other divisions bring their kind of normal variations as well. So it's kind of sum of all of these. And in the end, as we've been typically stated, when we look at the midpoint, that's kind of a base case where things move according to our plans. Tuukka Hirvonen: Thank you, Rene. Now we have exhausted also the questions from the webcast, and I can hear that there are no follow-ups on the conference call line. So at this point, I'll hand over to Liisa for any closing remarks. Liisa Hurme: Thank you for your attention. And again, thank you for everybody for this excellent year 2025. We are heading towards another good year of 2026. Thank you.
Operator: Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the Lincoln National Corporation fourth quarter 2025 earnings 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 at that time, simply press star then the number 1 on your telephone keypad. And if you would like to withdraw that question, press star 1 again. Thank you. I would now like to turn the conference over to John Mutheng, Head of Investor Relations. John, please go ahead. John Mutheng: Good morning, everyone, and welcome to our fourth quarter earnings call. We appreciate your interest in Lincoln National Corporation. Our quarterly earnings press release, earnings supplement, and statistical supplement can all be found on the Investor Relations page of our website, investors.lfg.com. These documents include reconciliations of the non-GAAP measures used on today's call including adjusted income from operations and adjusted income from operations available to common stockholders, adjusted operating income to their most comparable GAAP measures. Before we begin, I want to remind you that any statements made during today's call regarding expectations, future actions, trends in our businesses, prospective services or products, future performance or financial results, including those relating to deposits, expenses, income from operations, free cash flow or free cash flow conversion ratios, share repurchases, liquidity and capital resources, as well as any statements regarding our 2026 and medium term outlook and future strategic initiatives are forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from our current expectations. These risks and uncertainties include those described in the cautionary statement disclosures in our earnings release issued earlier this morning as well as those detailed in our 2024 Annual Report on Form 10-K, most recent quarterly reports on Form 10-Q, and from time to time in our other filings with the SEC. These forward-looking statements are made only as of today, and we undertake no obligation to correct or update any of them to reflect events or circumstances that occur after today. Presenting this morning are Ellen G. Cooper, Chairman, President, and CEO, and Christopher Michael Neczypor, Chief Financial Officer. After their prepared remarks, we will address your questions. I will now turn the call over to Ellen G. Cooper. Ellen? Ellen G. Cooper: Thank you, John, and good morning, everyone. Thank you for joining our call today. Our fourth quarter performance was strong, with adjusted operating income increasing 31% year over year and our full year adjusted operating income increasing to its highest level in four years, underscoring the progress we have made as we advance our strategy with discipline and focus across Lincoln National Corporation. This was also our sixth consecutive quarter of year over year adjusted operating earnings growth with solid performance across the business aligned with our objective of further diversifying our mix. These results were supported by the continued advancement of our strategic realignment, operational execution, and a more resilient capital foundation. Before I walk through the quarter's highlights, I want to step back and reflect on what we have accomplished since we began this journey at the 2023. Over the course of the past several years, we remained focused on executing against the strategic priorities we laid out to evolve the direction of the company with a focus on increasing our risk-adjusted return on capital, reducing the volatility of our results, and growing our franchise. The fundamental principles of foundational capital, a more efficient operating model, and our efforts to drive profitable growth are coming through in our results with clear evidence of building broad-based momentum balanced against a strategic awareness of where more work needs to be done. With that context, I will briefly frame our progress against the three priorities that continue to guide our strategy. Following several years of strengthening the balance sheet, our capital foundation remains durable and resilient. Capital levels remain well above our established buffer, and our leverage ratio has meaningfully improved. With this foundation firmly in place, we remain focused on continuing to improve returns on capital and to manage capital with greater flexibility over time. We also made meaningful headway in optimizing our operating model, creating a more efficient and scalable organization. We have sustained expense discipline, combining prior firm-wide actions with continued targeted initiatives this year. And we see additional targeted opportunities ahead while continuing to invest strategically to support our long-term priorities. We are also making operational enhancements, streamlining processes to support employee productivity and efficiency, enhancing digital and automated capabilities to better serve our customers, and evolving our distribution strategy to strengthen our go-to-market approach. Our investment strategy has been further refined, expanding our asset sourcing capabilities and leveraging our external partnerships to enhance ongoing risk-adjusted yield. The role of our Bermuda affiliate expanded over the year and we will continue to leverage it to enhance capital efficiency in support of our broader strategy. Collectively, these actions build upon the more stable foundation we have established, reinforcing more efficiency and sustainability of performance. Lastly, over the course of the year, we advanced profitable growth across the enterprise with clear progress across each business. Some businesses are further along in their strategic realignment and their performance reflects that while others are at earlier stages. Across the company, our emphasis is on products and segments with higher risk-adjusted margins, more stable cash flows, and greater capital efficiency to strengthen the resilience of the business over time. The cumulative impact of these actions is translating into stronger core capital generation for the company, which in turn supports capital deployment that sharpens our competitive advantages, reinforces our strategic moat, and supports long-term free cash flow generation. Results may not be linear, markets can be volatile, and the economic backdrop could change, but we remain steadfast in our commitment to deliver results that drive long-term value. Our momentum continues to build, our progress is increasingly evident, we remain focused on the path ahead. Let me turn to our businesses where I will walk through our results and how we are positioning each to continue building on our progress in the years to come. Starting first with annuities. We are a leader in this market, offering a broad set of products across RILA, fixed, and variable annuities both with and without living benefits, enabling us to meet customers across different needs and market environments. Our deep, longstanding distribution relationships and consultative approach continue to broaden our reach and strengthen our position. Over the past two years, we have built important infrastructure to support this business including our Bermuda affiliate, expanded investment platform, and enhanced product features. These capabilities support our go-to-market strategy and position our annuities business for sustained success in an evolving market. In 2025, we delivered strong annuity sales with total volumes up 25%. Approximately two-thirds of those sales came from spread-based products consistent with our strategy to evolve toward a more balanced and less market-sensitive mix over time. Full year RILA sales increased 35% in 2025 reflecting our differentiated product features that continue to resonate with customers. Fixed annuity sales increased 11% underpinned by the capabilities we have built to support a consistent presence. Full year variable annuity sales increased 27% year over year, as our product offerings coupled with the favorable market environment supported sales growth in variable annuity, with and without guaranteed living benefits. 2025 sales volumes in part reflected a strong market environment and customer demand. In 2026, we remain focused on balancing profitability, capital efficiency, and lower market sensitivity over time, prioritizing profitable growth over top-line sales growth. I will speak to each of our annuity product segments to provide additional context. For variable annuities, we expect 2026 volumes to be intentionally lower and more closely aligned with pre-2025 levels as part of our effort to reduce exposure to market sensitivity over time. In fixed annuities, we are now retaining 100% of sales following the exit of the external flow reinsurance treaty. Looking ahead, sales levels will continue to reflect market dynamics as we advance our profitable growth priorities and we expect our fixed annuity account values to increase relative to 2025. Within the fixed annuity category, we see attractive growth opportunities in fixed indexed annuities where differentiated crediting rate strategies and product features support our return objectives and allow us to compete beyond price. In RILA, customer demand continues to expand alongside increasingly competitive dynamics. Our approach remains anchored in disciplined target return thresholds and differentiated product features, factors that directly inform where we choose to compete. As a result, and a deliberate focus on more profitable segments of this market, sales levels may remain broadly consistent with the past two to three years as we see greater longer-term growth opportunity in fixed annuities relative to RILA. Importantly, our position as a leading annuity provider with a diversified set of chronic capabilities supported by a broad distribution footprint gives us the flexibility to reallocate capital efficiently toward the opportunity set offering the most attractive returns as market dynamics evolve. We also remain focused on broadening our distribution partnerships across the annuity market, aligned with a disciplined focus on segments that support higher risk-adjusted returns on capital and profitable growth. At the same time, we are expanding our product offerings and continuing to build digital tools and capabilities that enhance the value we deliver to our partners, particularly in areas where we see the strongest opportunities and can compete beyond price. Taken together, these dynamics underscore a disciplined framework for allocating capital across the annuity platform toward higher risk-adjusted return opportunities supported by product breadth, distribution strength, and prudent capital deployment. Turning to life. We continue to make meaningful progress repositioning the business over the course of the year. Our efforts have been focused on improving the performance of the in-force block and pivoting the new business franchise toward accumulation and protection products with more balanced risk profiles that support stable cash flows. At the same time, we have advanced the modernization of our infrastructure to get closer to the point of sale and further optimized our distribution footprint. The strength of our distribution platform has enabled us to deepen relationships with key partners and expand our reach into markets where we see attractive growth opportunities. These actions are supporting both improved financial outcomes and stronger sales momentum. For the full year, excluding the impact of our annual assumption review, earnings improved meaningfully. Sales for the year were up approximately 50% versus the prior year. Full year core life sales, which exclude executive benefits, increased 4% compared to the prior full year. It is worth noting that fourth quarter's core life sales included some larger cases, which can vary from period to period. We expect core life sales to grow in 2026 but from a baseline more in line with the earlier quarters of 2025, as we continue to prioritize profitable growth for the business. Executive benefits had a record year with sales of $265 million up from $59 million in 2024, reflecting the foundational investments we have made in this business centered around product capabilities, distribution relationships, and our service model. While large case activity will naturally vary, we are encouraged by the trajectory we are building in this segment and expect to have a consistent presence in this market going forward. From a franchise perspective, we continue to strengthen the new business momentum across our targeted product lines. Execution against our strategy remains focused on repositioning sales towards solutions with more favorable risk characteristics, improving the financial professional experience through digital tools and operational excellence, and expanding distribution reach through targeted product launches. Together, these efforts are reinforcing the trajectory of the life business and supporting a more consistent contribution over time. Overall, we are pleased with the progress we made in life this year, and where this business is positioned heading into 2026. In Group Protection, we continue to execute effectively against a targeted strategy to deliver value across three distinct market segments: local, regional, and national, with an emphasis on the fastest growing markets, local markets, and supplemental health. Group delivered another outstanding year with strong earnings and premium growth and full year sales largely in line with the prior year. Full year earnings, excluding the impact of our annual assumption review, increased 16% year over year. Full year premium growth of nearly 7% was broad-based, with growth across all products and segments driven by strong sales and persistency along with disciplined pricing. Full year sales, as mentioned previously, were roughly in line with last year's results with growth in local and regional markets, supplemental health sales increasing over 40%, further diversifying the book. Overall, this strong performance reflects deliberate choices in how we are tailoring products and services by segment, supported by continued investment in the capabilities and infrastructure that support our customers to manage their benefits more effectively. As we look to 2026, we expect to build on this momentum as we continue to diversify the business with growth increasingly driven by strong persistency and disciplined premium growth. With that context, I will walk through how this translates across our local, regional, and national segments. In local markets, where we see the strongest margin profile, we are focused on accelerating growth by delivering bundled solutions that emphasize ease of doing business, leveraging our focused local distribution footprint. In regional markets, we are reinforcing stronger strategic broker partnerships and expanding our technology integrations and digital capabilities to better support employers and their benefit decisions. In national accounts, where clients demand robust capabilities, we are tailoring products and services enabled by our integrated technology and streamlined processes, leveraging both our market-leading leave management expertise and deep broker relationships. And across all of our segments, supplemental health remains a key priority. Across each segment, the focus remains on disciplined execution and serving customers while supporting sustainable growth over time. Overall, the fundamentals of this business remain strong, and Group is well positioned as we move forward. Turning to Retirement Plan Services. For the full year, earnings were relatively steady with modest pressure reflecting ongoing headwinds, including participant outflows. At the same time, we continue to see strong sales and total deposits, underscoring that our value proposition is resonating with customers and that our focus on participant outcomes is gaining traction. As we begin the next phase of our realignment work, our focus is on sharpening where and how we compete. We see opportunity to build on our strengths in the more profitable parts of the market, including leveraging our distribution footprint and supporting growth in higher margin areas such as the small market segment. Looking ahead, our priorities are centered on improving the earnings profile of the business over time by expanding revenue sources within the existing customer base, broadening products and services where customer demand is strongest, and taking targeted actions to improve operating efficiency. We also see opportunity to further optimize the investment strategy to support our stable value offerings. While this work will take time, the momentum we are seeing with customers reinforces our confidence in the strategic direction and our ability to steadily improve the quality and durability of earnings in this business over time. Stepping back, we are pleased with the progress we have made. Today's results demonstrate disciplined execution as we continue to shape the enterprise, strengthen the earnings profile, and improve the durability of the business. At the same time, we recognize there is more work ahead. We are operating from a position of strength, which gives us the flexibility to invest where we see the greatest opportunities while remaining disciplined in how we deploy capital across the enterprise. As we enter 2026, we do so with clarity on our priorities, momentum in our results, and confidence in what we are building. We remain focused on delivering against our objectives and continuing to build long-term shareholder value over time. I will now turn the call over to Christopher Michael Neczypor to discuss our fourth quarter and full year results and our outlook. Chris? Christopher Michael Neczypor: Thank you, Ellen, and good morning, everyone. Christopher Michael Neczypor: Our fourth quarter results represent another quarter of strong execution and meaningful progress on our strategic priorities, delivering adjusted operating income growth for the sixth consecutive quarter. Christopher Michael Neczypor: For the full year, 2025 marks our third consecutive year of growth with each of our businesses contributing to a result that reinforces the broader momentum we have built across the enterprise. Alongside solid earnings, we continued our emphasis on free cash flow generation and capital efficiency, reinforcing Lincoln National Corporation's ability to deliver attractive risk-adjusted returns and positioning the company for sustained long-term success. This morning, I will focus on three areas. First, I will review our fourth quarter and full year results including our segment level financial performance. Second, I will provide an update on our investment portfolio. And third, I will offer an update on our capital position and our outlook. Let's begin with a recap of the quarter. This morning, we reported fourth quarter adjusted operating income available to common stockholders of $434 million, or $2.21 per diluted share. There were no significant items in the quarter. Our alternative investments portfolio delivered an annualized return of nearly 12% for the quarter, or $124 million. On an after-tax basis, this was approximately $16 million above our target, or $0.08 per diluted share. Excluding the impacts of significant items in each year, full year 2025 adjusted income from operations available to common shareholders was over $1.5 billion, a 23% improvement compared to 2024. This result reflects strong execution across our businesses with year over year earnings growth driven by favorable underwriting experience in Life and Group Protection, continued spread expansion, and the benefit of higher equity markets. Turning to net income for the quarter. We reported net income available to common stockholders of $745 million, or $3.80 per diluted share. The difference between GAAP net income and adjusted operating income was driven primarily by the positive movement in market risk benefits amid slightly favorable interest rates and modestly higher equity markets. Our hedge program continues to perform in line with expectations. Now turning to our segment results, starting with Group Protection. Delivered another strong quarter, capping a record year. Fourth quarter operating income was $109 million, up from $107 million in the prior year quarter, and the margin was 7.9%. Modest improvement in earnings year over year was driven by the disability loss ratio, improving to 73.6% from 75% in 2024. Improvement reflected favorable new claim severity partially offset by lower recoveries and smaller average resolution amounts. As discussed last quarter, we typically experience seasonal pressure in our disability loss ratio from the third to fourth quarter, and that did materialize within expectations. However, the favorable severity in our new and in-force claims more than offset the seasonal headwinds, ultimately resulting in a decreasing sequential loss ratio. Partially offsetting the improved disability result was a normalization in our group life loss ratio. The fourth quarter life loss ratio of 67.9% was higher than the record low 64.7% we delivered a year ago, though it remains favorable compared to historical experience and reflects the continued benefit of our disciplined pricing actions. Touching briefly on the full year, excluding the impact of our annual assumption review, Group delivered operating earnings of $493 million, up 16% from $426 million in 2024, and the margin improved to 9% from 8.3%. The improvement was broad-based, driven by premium growth of 7%, continued favorability in both life and disability experience, and meaningful growth in our supplemental health business. As we look to 2026, we expect to sustain the momentum we have built. Two years ago, we outlined an objective of achieving an 8% margin by the end of 2026. We have now achieved that target in each of the last two years, and our goal remains to continue operating at 8% or above. External factors may create some variability from quarter to quarter, but the fundamentals of this business are strong. We expect continued earnings growth supported by disciplined execution of our strategy including pricing discipline on new business and renewals and diversification into higher margin market segments and products. Overall, Group's 2025 results continue to reflect the strong progress in our strategy to expand this business into a larger and more profitable part of our enterprise. Now turning to annuities. Annuities delivered operating income of $311 million for the quarter. Normalizing for approximately $8 million of favorable payout annuity mortality experience, underlying earnings were approximately $303 million, broadly in line with the prior year quarter. The result reflects higher spread income and higher average account balances, partially offset by continued traditional variable annuity outflows and higher expenses associated with retaining 100% of our fixed annuity flows following the exiting of our external flow reinsurance agreement in September. The sequential expense impact of full retention was roughly $5 million in the quarter. Ending account balances net of reinsurance reached a record $175 billion, up 7% from the prior year quarter with growth across all products. Turning to spreads, spread income continued to grow, spread-based products now representing 30% of total annuity account balances net of reinsurance, up from 27% a year ago. RILA account balances increased 15% over the prior year quarter, representing 22% of total account balances net of reinsurance. Fixed annuity account balances increased 20% year over year, reflecting the first full quarter of retaining 100% of our fixed annuity sales. From a net flows perspective, net outflows improved year over year as net flows into spread-based products exceeded $1 billion for the quarter. Variable annuity net outflows continued at a pace consistent with recent quarters, with higher equity markets contributing to higher account balances available for withdrawal. On a full year basis, annuities delivered operating earnings of approximately $1.2 billion, modestly higher than the prior year, driven primarily by higher average account balances. This result came despite the ongoing shift in business mix towards spread-based products, which carry a lower ROA but more stable earnings over time than traditional variable annuities. Continued shift towards spread-based products, combined with the full retention of our fixed annuity, Christopher Michael Neczypor: economics Christopher Michael Neczypor: builds the in-force base that will support durable earnings and free cash flow generation over time. As we look to 2026, in the first quarter, we expect sequential pressure on earnings due to two fewer fee days and the resetting of favorable mortality experience from this quarter. Additionally, as part of our annual review of allocations, beginning in 2026, we will reallocate net interest income earned on collateral posted in connection with our index credit hedging strategies from annuities operating income to nonoperating income. As our RILA business has grown, so have the associated collateral balances, making the related net interest income more meaningful. Moving this income to nonoperating income provides a cleaner view of underlying annuities operating performance. While this item can be variable over time given the nature of the underlying collateral balances, as a frame of reference, had this reallocation been in place during 2025, it would have shifted $50 million of annuities operating income to nonoperating income on an annual basis. Importantly, this is an allocation refinement. There is no change to underlying economics or free cash flow. Overall, the underlying trajectory of the business remains sound, and we remain confident in our ability to deliver stable, attractive returns over the long term. Retirement Plan Services reported operating income of $46 million for the quarter, up from $43 million in the prior year quarter. The improvement was driven by favorable equity markets and spread expansion, partially offset by pressure from outflows over the past twelve months and higher expenses. Account balances benefited from equity market performance, with average balances increasing nearly 9% year over year to $124 billion. Base spreads were 110 basis points, up from 101 basis points in the prior year quarter. The expansion reflects the benefit of deploying new money at rates above the existing portfolio yield. Net outflows totaled approximately $1 billion for the quarter, primarily driven by participant withdrawals and pressured by known planned terminations, the majority of which were not meeting our profitability targets. We remain focused on retaining profitable business and maintaining pricing discipline on both new and recurring business. Turning to full year results. Retirement Plan Services delivered operating earnings of $163 million, flat compared to the prior year. While outflows earlier in the year created headwinds, these were largely offset by favorable equity markets and spread expansion. As we look to 2026, we expect net flows to remain negative as we continue to prioritize profitability over retention of business that does not meet our return targets. We see opportunity to improve returns through targeted expense efficiency actions and investment portfolio optimization. We remain confident in our ability to deliver sustainable earnings growth in this business over time. Christopher Michael Neczypor: We Christopher Michael Neczypor: Lastly, turning to Life Insurance. Life delivered operating earnings of $77 million for the quarter, a meaningful improvement compared to an operating loss of $15 million in the prior year quarter. The improvement was broad-based, driven by improved mortality, higher alternative investment returns, and the execution of our captive consolidation. Mortality results for the quarter were in line with our expectations. You may recall that 2024 was pressured by elevated mortality driven by an outsized impact from severity in our universal life block. We saw that dynamic normalize this quarter, which was the primary driver of the year over year improvement. Turning to expenses. Despite stronger sales and higher variable compensation in the quarter, the actions we have taken over the course of the year allowed us to hold expenses flat year over year. Maintaining expense discipline remains critical to supporting earnings improvement in this business. Touching briefly on the full year, excluding the impact of our annual assumption review, Life delivered operating earnings of $146 million compared to an operating loss of $71 million in the prior year, an improvement of over $200 million. The improvement was driven primarily by favorable mortality compared to unfavorable mortality in 2024, higher alternative investment returns, and the expense discipline we have maintained throughout the year. These results reflect the ongoing progress we have made in stabilizing and improving the trajectory of this business. As we look to 2026, we expect continued progress. As a reminder, the first quarter is typically our lowest earnings quarter for Life, reflecting unfavorable mortality seasonality and a step down from the higher fee income we earned in the fourth quarter. You will see these seasonal patterns outlined in our earnings supplement. Beyond those near-term dynamics, we are focused on rebuilding sales momentum with an emphasis on products that generate more stable cash flows and attractive risk-adjusted returns. And we will continue to optimize the free cash flow profile of this business by remaining disciplined on expenses, optimizing the investment portfolio, and the potential for external risk transfer. We are confident in the trajectory of this business, as we continue working towards positive underlying free cash flow. Turning now to expenses. As we signaled last quarter, fourth quarter G&A expenses increased both sequentially and year over year. The sequential increase was primarily driven by higher variable compensation reflecting the strong sales volumes we achieved during the quarter. On a year over year basis, the increase also reflects continued investments in our businesses, including in annuities where we are now fully retaining our fixed annuity flows, and in Group Protection, where we continue to execute on our technology roadmap including modernizing our claims platform. Looking ahead, expense discipline remains a strategic priority across the organization. We have made meaningful progress over the past two years, and we see continued opportunity to drive efficiencies as we advance our transformation. This includes ongoing focus on organizational simplification, leveraging technology to improve productivity, and ensuring our expense base is appropriately sized to support our strategic objectives. We are committed to maintaining a disciplined approach to expenses, balancing the investments needed to drive growth with a relentless focus on operational Christopher Michael Neczypor: efficiency. Christopher Michael Neczypor: This will remain a critical area of focus in 2026 and beyond. Turning to investments, our investment portfolio delivered solid results in the fourth quarter reflecting disciplined management and continued execution of our strategic asset allocation initiatives. Portfolio credit quality remains strong with 97% of investments rated investment grade and below investment grade exposure near historic lows. Overall credit performance for the full year was solid. New money was invested at a yield of 5.3% for the quarter, approximately 65 basis points above the portfolio yield. For the full year, new money yields averaged 5.7%, approximately 110 basis points above the portfolio yield. Alternative investments generated a return of 3% for the quarter, or 12% annualized, above our target of 10%. For the full year, alternative returns of approximately 10% were in line with our annual return target. We continue to make progress on our general account optimization efforts, executing on new money strategies across a variety of asset classes to support our spread-based growth initiatives. These efforts remain an important component of our broader strategy to enhance investment returns and support product competitiveness. Before turning to the outlook, I wanted to highlight three capital actions that occurred in the fourth quarter. First, we completed the consolidation of several life insurance captive entities. This simplifies our legal entity structure, reduces reserve financing costs, and supports improved free cash flow within the Life business. Second, we received a $75 million dividend from Alpine, our Bermuda-based affiliated reinsurance entity, demonstrating its strong capitalization and profitability. We expect Alpine's contribution to grow as we expand its role across additional products. Third, holding company liquidity ended the year at approximately $1.1 billion, which includes $400 million of prefunding for our senior notes maturing in December 2026. Net of prefunding, holding company liquidity is approximately $655 million, above our historical $400 to $500 million operating range. With the debt maturity later this year, the preferred securities becoming redeemable in 2027, and as we move closer to increasing capital return to shareholders, this increased liquidity provides the financial flexibility to act on multiple fronts over the next few years, reflecting the progress we have made in strengthening cash flow to the holding company and positioning us well to execute on the capital priorities ahead. Lastly, I would like to provide an update on our financial outlook. We began this journey in 2023 with a focus on fortifying the balance sheet, transforming the company to one with a more balanced mix of earnings, and profitably growing. Over the past few years, we have made considerable progress on these efforts, building momentum that positions us well against the goals we set out at the end of 2023. We have provided a number of updates in the outlook section of the investor supplement released this morning that helped to frame the progress we have made as well as some goals over the medium term, which we defined in the supplement as potential ranges over the next two years. Stepping back, what is clear is that our business mix is evolving, with Group Protection now approximately 25% of business unit earnings, up from 18% in 2023. Spread-based annuity account balances net of reinsurance are now 30%, up from 25% in 2023. And our Life business is showing considerable momentum in pivoting their franchise to a product set with more stable cash flows and increased risk sharing. Additionally, as you can see on slide 14, we are ahead of schedule on delivering on our financial commitments. From a balance sheet perspective, we restored capital to levels above our 400% target, built a 20% risk buffer on top of that target, and ended last year well in excess of that buffer. With that growth in capital, our leverage ratio has declined 500 basis points since 2023 and is now back at our long-term target, providing greater financial flexibility and capital support for the future. At the same time that we have been pivoting our mix and strengthening our balance sheet, we have been growing both our earnings base as well as our ability to convert those earnings into free cash flow. In 2023, our adjusted operating income was $908 million, and we converted 35% of those earnings into free cash flow. Last year, our adjusted operating income grew to over $1.5 billion, or 69% higher than in 2023. Importantly, at the same time as our earnings base was growing, so was our ability to convert those earnings into free cash flow, with a 2025 conversion ratio of 45%, 10 points higher than 2023. So over the last few years, we have made progress on shifting our mix to more capital efficient and less volatile businesses. We have rebuilt our capital to levels well in excess of our targets, and we have grown both our earnings base and, importantly, our ability to convert those earnings into free cash flow. As we think about the next few years, we would expect the momentum to continue. As we leverage our foundation to profitably grow our franchise, maximize value, and increase free cash flow. We have a number of levers available to support us on this journey, as shown on slide 15. For example, we will continue to focus on our operating model, with targeted actions on expense efficiency, and continued optimization of our investment strategies. We will also continue to evaluate potential for external and affiliate reinsurance transactions with a diligent focus on reducing risk and generating economic value. And lastly, we will continue to strategically grow in products and businesses where we can achieve attractive risk-adjusted returns while shifting our capital allocation should market or competitive dynamics change. When we look out over the next two years, the culmination of these efforts should translate into continued growth in capital generation and free cash flow, which should in turn lead to higher dividends from the operating companies to the holding company as shown on slide 18. As this excess capital builds at the holding company, we would eventually then be in a position to increase capital return to shareholders. We continue to see a clear path of opportunity ahead. With a leverageable foundation in place, an increasingly optimized operating model, and disciplined strategic capital allocation, we are positioning Lincoln National Corporation for durable value creation in the years ahead. We thank everyone for listening. I will now turn it back to the operator. Operator: Thank you. We will now open for questions. Again, press 1. We do ask that you limit yourself to one question and one follow-up. For any additional questions, please requeue. And your first question comes from the line of Joel Hurwitz with Dowling and Partners. Please go ahead. Christopher Michael Neczypor: Hey, good morning. So, Chris, first, wanted to touch on capital return. Joel Hurwitz: If I look at your medium-term guidance, it is for $400 to $600 million plus of capital return to shareholders. Just given the dividend should be around $350 million this year, is that implying at least $50 million of buybacks in 2026? I want to make sure I am thinking about that correctly. Christopher Michael Neczypor: Hey. Good morning, Joel. So thanks for the question. What I would say is when you look at the way that we have presented the information in the outlook, we are really talking about a potential range over the next two years. And so, if you think about our capital deployment priorities, the first priority has not changed. And, frankly, we are going to continue to hold buffer capital in our operating entities, and we will continue to invest incremental free cash flow that we generate where we see opportunities. That said, our free cash flow continues to improve. You can see that we have moved more of the free cash flow that we generated this year to the holding company. That is a good sign. It is something you would expect. But the point is the first priority will continue to be to maintain an excess within our operating companies and invest where we see attractive returns. The second priority continues also to be the same, which is we are preparing for the optimal way to deal with the preferred when it is redeemable next year. As you move more capital to the holding company, that gives you more optionality. At the same time with our leverage ratio back to where it is, we have got some more flexibility in how we think about it. So we are still working through what the optimal way to handle the preferred will be. I would imagine we would continue to study that over the course of this year. And then when you think about the fact that even on top of that, you have built the excess capital and the buffer in LNL and Alpine and so forth. We are moving more capital to the holding company as we deal with the preferred, we will still be in a position where we are generating significant free cash flow and excess capital. And our priority would then be to increase the capital return to shareholders. So we are not going to give you a 2026 versus 2027, but the good news is all of the signs that would support increasing capital return to shareholders continue to move in the right direction. Joel Hurwitz: Got it. Joel Hurwitz: That is helpful. I guess just sticking on capital, if I take the remittances in that medium-term outlook less the holding company expenses, that implies like $800 to $900 million of excess cash. If I just take that versus the capital return, is it sort of largely for the to manage the preferreds and the calls next year? Is there any other potential uses of that capital at the holding company? Christopher Michael Neczypor: No. I think that is right. If you are, at its simplest form, assuming that you are moving all of the excess capital that you are generating in the year up to the holding company, that would be the difference between those two items, your remittances and your expenses at the HoldCo, which you could think about as your debt interest, your preferred coupon plus or minus any NII you might earn. But the sum of those two, you should think about under those constraints as being your free cash flow. And then as we build cash and think about deploying it for the preferred in 2027, the other usage of it would be increasing capital return to shareholders. Joel Hurwitz: Awesome. Thank you. Operator: Your next question comes from the line of Thomas Gallagher with Evercore ISI. Please go ahead. Thomas Gallagher: Good morning. Yes, appreciate slide 18. I think that clarifies a lot in terms of where the cash flow is going in terms of the components. So, Chris, is the best way to think about this, I heard what you are saying about the prefs, and that makes a lot of sense over the next few years. But if the $1.2 billion of sub remittances is a number that is probably going to grow somewhat, and then assuming you either refinance or pay down the prefs, then we would be looking at a lower HoldCo interest expense bogey heading into, call it, 2028–2029. So we are looking at, when I think about where this is going, and I am not asking for specific numbers, I want to make sure I am understanding conceptually where this is going. You probably have something better than $1.25 billion coming in for remittances, and you will have a lower HoldCo bogey, assuming your interest expenses go down. And then we could be talking about something north of a billion dollars of the amount that is available annually for shareholders unless there is some other component to it that I am missing. Does that all line up or are there other pieces here to consider? Christopher Michael Neczypor: Tom, if you are looking for 2028 and 2029 guidance, I will have to get back to you. But that being said, yes, I mean, if you think about the fact that you redeem, and whether you redeem with all capital or you refinance a piece of it, etcetera, etcetera, that will be a 2027 event, which exactly to your point, there is a $90 million coupon associated with that. So then starting in 2028, your holding company net expense would come down. I would expect over time, as we continue to execute on all the things we have been talking about, really thinking about the longer term, after the two-year sort of range that we give here, you would expect remittances to grow. But we are focused right now on 2026 and 2027, but I think the way conceptually you are thinking about over the long term are the right drivers. Thomas Gallagher: Okay. Thanks for that. And then my follow-up, I guess just a question on this redefinition of NII. I heard what you said about the hedging. What kind of prompted that change? Is it just that RILA is becoming larger and it is like a materiality issue and you looked at the way peers are treating this? And I presume also, since you are redefining earnings a bit lower, on an apples-to-apples basis, that would, at the margin, make your cash flow conversion better, all things equal. Christopher Michael Neczypor: So on that last point, yes, but I think that is just definitional. Right? I mean, we are focused on the absolute dollars of free cash flow. When you are comparing it to the GAAP number, yes, that would have a slight positive to it, but that is just, call it, optics. I think at the end of the day, every year we look at allocations. There is another component which we show in the back where you look at your operating expenses and depending on how some of the drivers move, there is corporate overhead allocations and things like that where the allocated expenses to the businesses might move around. But that will net to zero from an operating income perspective. On this specific issue, yes, that is exactly right. As RILA has grown over time, there is a component. The majority of the investment income and or expense related to the collateral is in nonoperating, and there was a piece of it that we had looked at that was more specific when we went through how to think about 2026. And as we have committed to, we are trying to be transparent and give all of the clarity as it relates to how we think about the operating income. And this was just a natural part of that. But you do this every year, you look at the different pieces. What I would tell you is it was not a big driver year over year as it relates to growth for 2025. So I think the annuities growth number was not significantly impacted. But as you look out over the longer term and you think about some of the things that we have talked about wanting to do around giving more explicit spread margin information for annuities, we want to be able to provide the cleanest view possible as it relates to NII and interest credit and so forth. Thomas Gallagher: Gotcha. Thank you. Operator: Your next question comes from the line of Wes Carmichael with Wells Fargo. Please go ahead. Wesley Collin Carmichael: Good morning. My first question was on the Life Insurance business. Chris, I think you mentioned some captive consolidation and reducing reserve financing costs. Just wondering if you could talk a little bit more about those actions you have taken, if there is more to do there and the impact on earnings and free cash flow. Christopher Michael Neczypor: Sure. Good morning, Wes. So we alluded to this last year. But if you step back, the bigger picture comment here is we have been doing a lot over the past couple of years to improve free cash flow profile of the legacy Life block. And so we have taken out, we did the Fortitude transaction, and we have alluded to a number of other projects that we are looking at with the idea of being, on an internal perspective on an organic basis, we do think that there is a lot we can do to improve the profile there. The captive consolidation was one of those projects. We completed it in the fourth quarter of this year. And essentially what it is is historically you have a number of legacy life captives and they can be product specific, you might have some term captives, you might have some GUL captives and so forth. And so we have seen this across the industry, but as you think about consolidating those captives, there is a financial benefit given the high financing fees relative to the years-ago contracts that were signed. So by consolidating and restructuring the way those captives work, you are able to save on the finance piece of it. As specifically for GAAP in fourth quarter, it was about a $10 million benefit to Life. So if you think about 2026, you should get, call it, another $25 to $30 million in improvement to the Life GAAP earnings. And then I would tell you that on a free cash flow perspective, it will be an incremental benefit on top of that $40 million, call it, GAAP run rate, given the fact that you do have some capital optimization when you combine some of those blocks. So I hope that helps. It is in line with the sort of bigger picture projects we have talked about. And as it relates to going forward, we think that there is more that we can do. Ellen G. Cooper: And, Wes, just to add, in addition to all of the in-force actions that Chris just mentioned, I also want to reiterate some of the comments that we made earlier around all that we have done to completely revamp the new business franchise so that as we think about the ongoing trajectory of the Life business over time, we also firmly believe that we will continue to see profitable growth there. So just as a reminder, across the products, we have significantly revamped as we have shifted into, for example, accumulation and more limited guarantee products. And you really start to see that coming through if you look year over year, for example, at our IUL and also at our accumulation VUL from a sales perspective. We have talked quite a bit about executive benefits. That is another example. And part of that success is also really leveraging our distribution. So we have talked about getting closer to the point of sale. We are targeting new channels there such as the producer group and the agency channel. And then additionally, as we think about this business going forward, we have also done a lot as it relates to technology, automation, supporting our producers around e-delivery, pre and post sales, etcetera. So we are excited about what we see. We have made significant improvements to the in-force, and we also see some bright spots over time as it relates to Life new business going forward. Wesley Collin Carmichael: Thank you. That is all very helpful. My second question, I guess, was just about dynamics in the annuities market. It sounded like, Ellen, from your comments that RILA maybe is becoming more competitive and maybe pushing you towards fixed and indexed annuities a bit more. So just curious what you are seeing there and maybe the outlook for 2026. Ellen G. Cooper: Absolutely. So I am going to step back for a moment, and I will talk about all three segments. So first of all, as you know, we are a leader in the annuity market. We have got a broad product portfolio. We are across all the major segments. And we very much leverage the overall product portfolio and our distribution. So some of what we have been talking about, it is a couple of things. Number one is that we have been focused on lowering our market sensitivity over time. And I will get to the VA point in a moment. And at the same time, we are focused on balancing profitability, capital, and capital efficiency, and really growth as well and really thinking about those three components. So what we have seen, and you see this coming through in our sales, and I have to say that our sales in 2025 were strong. We were very happy with the overall volumes. We were very happy with the returns across each of the product segments, and we also are continuing to just evaluate market dynamics as we go forward as well. So specifically in RILA, as you know, we were one of the earlier entrants into the RILA product. We have now significant experience overall in RILA. About eighteen months ago, we revamped and refreshed our product. It was very much needed. And you have seen increasing sales there over time. The addressable market has grown, but the competitive landscape has also grown, and we see that increasingly growing as it relates to its competitive nature. For us, given our strong overall annuity platform, part of what we are focused on there, and we talked about the fact that we can expect in 2026 to see sales growth that would be in line with what we have seen over the last, call it, two to three years. What we are doing is we are really leaning into places where we have differentiated product, whether it is features, whether it is unique crediting features as well. And then additionally, along our distribution platform, which is so broad, we also have some places where we have select channels where VA is a good fit. For a moment, on some of the comments that we made around VA. So our product in particular is differentiated there. And so these are ways that we are competing beyond price, really focused again on this idea of balancing profitability, growth, and overall capital efficiency. And I will just make a mention on mix shift, and part of that is that we have continued to experience strong outflows so that the higher sales that we saw this year did not deviate from our goal of diversifying the mix. But in addition, some of the new product features that we launched about a year ago really supported some of the sales momentum that we saw in 2025. And then, of course, we saw this higher demand. So as we look to 2026, we are going to expect to see that growth moderate, as I mentioned, so that our sales will look more similar to pre-2025 levels. And then the last point that I will make is as it relates to fixed annuity. Fixed annuity is the one place where we really believe that we have runway to continue to grow. Leverage everything that we have talked about: Bermuda, investment strategy, expanding our overall opportunity there as we continue to have unique sourcing, and also expanding both our product capabilities and also distribution as well. Operator: Your next question comes from the line of Suneet Kamath with Jefferies. Please go ahead. Suneet Kamath: Great. Thanks. I wanted to go back to slide 18. If I look at the medium-term subsidiary remittances, if I take the midpoint, it is a pretty big jump from the $845 million you did in 2025. And I know that the range is over a two-year period, but can you unpack what would lead to close to a 50% jump, if I am thinking about it right? Christopher Michael Neczypor: Yeah. I think the central premise there, and by the way, good morning, Suneet. I think the central premise there is for the past, call it, three years, as we have grown our free cash flow, we have maintained the vast majority of it in the operating entities. Right? And so for all the reasons we have talked about, but going forward the expectation is, A, that the underlying free cash flow is growing, we have shown the ability to do that. We have talked about the levers that will continue to drive that. But also, with where we are from a capitalization perspective, LNL and Alpine and so forth, we would expect us to move that to the holding company. So I think that it is somewhat of a, we have done what we said we were going to do in terms of building back capital at the opcos, we are maintaining a buffer. You can see from the RBC slide upfront that we ended the year at 439%, and by the way, that excludes the remaining Bain proceeds that are earmarked for deployment next year. So you could just think about the fact that as we have been generating incremental free cash flow, you are seeing it come through from an RBC perspective and there is a similar dynamic in Alpine. So going forward, as the free cash flow continues to be robust, you would expect us to move that to the holding company. Suneet Kamath: Okay. That makes sense. And I guess, I do not want you to get too specific on it. But as we think about this $1.2 to $1.3 billion, does that have any of the levers in it that you guys have talked about in terms of reinsurance or anything like that? Or is it more sort of normal course and should we expect there to be a big difference between 2027 and 2026? Suneet Kamath: Thanks. Christopher Michael Neczypor: So I think on the first question, what I would say is all the things that we have been doing over the past couple of years to increase free cash flow, and we have talked about the big buckets there, dealing with the legacy Life block, optimizing the operating model, being more thoughtful around capital allocation, they have been big drivers and the vast majority of them should continue to be drivers to the growth in free cash flow over the medium term. We will continue to look at our operating model and optimize the strategic asset allocation. We will continue to look at expenses. We think there is more we can do with Bermuda. From a capital allocation perspective, as we talked about, that is both at a business unit level. If you think about how much Group has grown, as well as inside the business unit. So think about the repositioning in Life. So those dynamics should continue to be tailwinds to free cash flow. What we are not including, Suneet, to your specific question, are any other sort of big external things that we have done in the past. And so, to the degree that we, for example, look at another external risk transfer deal, that would not be what is implied in the remittances. So it is the natural evolution of the things that we have talked about. We continue to see runway to obviously both grow earnings, but then more importantly, the ability to convert those earnings into free cash flow. And then if we were to do something else, that would be sort of incremental to these numbers. Suneet Kamath: Okay. Thanks. Operator: And that concludes our question and answer session. I will now turn it back over to John Mutheng for closing comments. John Mutheng: Thank you for joining us this morning. We are happy to discuss any follow-up questions you have. Please email us at investorrelations@lfg.com. Operator: Ladies and gentlemen, this does conclude today's call. Thank you for joining and you may now disconnect.
Operator: Good day, and welcome to the Crocs, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Erinn Murphy, Senior Vice President, Investor Relations and Strategic Finance for Crocs, Inc. Please go ahead. Erinn Murphy: Good morning, and thank you for joining us to discuss Crocs, Inc. Fourth Quarter and Full Year 2025 Results. With me today are Andrew Rees, Chief Executive Officer, and Patraic Reagan, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions, which we ask that you limit to one per caller. Before we begin, I would like to remind you that some of the information provided on this call is forward-looking and, accordingly, is subject to the Safe Harbor provisions of the federal securities laws. These statements involve known and unknown risks, uncertainties, and other factors, which may cause our actual results, performance, or achievements to differ materially. Please refer to our Annual Report on Form 10-Ks filed with the SEC for more information on these risks and uncertainties. Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. At this time, I will turn the call over to Andrew Rees, Crocs, Inc. Chief Executive Officer. Andrew Rees: Thank you, Erinn, and good morning, everyone. Thank you for joining us today. 2025 ended on a strong note, as we reported a better than expected holiday season fueled by new products and authentic consumer connections. Our powerful value creation model drove strong free cash flow, which we returned to shareholders in the form of repurchases and debt pay down. We continue to invest thoughtfully and strategically behind our brands in support of building an even stronger foundation to fuel long-term profitable growth. For the full year of 2025, we delivered revenue of over $4,000,000,000 with approximately $3,300,000,000 from the Crocs brand, and $715,000,000 from HeyDude. Crocs brand grew for the eighth consecutive year. International revenues, comprising almost half of our Crocs brand sales, grew double digits. Direct-to-consumer was over half of our enterprise revenue and grew faster than our wholesale business. Strong free cash flow generation of $659,000,000 enabled us to pay down $128,000,000 in debt and buy back approximately 6,500,000 shares for $577,000,000, representing approximately 10% of our shares outstanding. Before going further into 2025 highlights, I would like to start by taking a moment to reflect on a milestone we recently achieved. Earlier this week, on February 8, we surpassed the 20-year mark as a public company. Since our IPO, we have established ourselves as a world leader in innovative casual footwear for all. In addition to creating one of the greatest and most recognizable icons of our time, the Classic Clog, we have built a powerful and defensible business model that is increasingly diversified across brands, products, channels, and geographies with distribution in over 85 countries. We have emerged as a disruptor in social and digital marketing and commerce while building strong communities of loyal brand fans. In the last 20 years, we have relentlessly served our consumers, selling approximately 1,500,000,000 pairs of shoes while delivering 14% sales growth on a compound annual growth basis. Our high margins and cash flow generation give us great flexibility to continue to invest in and grow our business, while returning a considerable amount of cash to shareholders. Since our IPO, Crocs shares have generated a total shareholder return in excess of 700%, almost two times that of the S&P 500 over the same period. While I am exceptionally proud of these accomplishments and the way we have consistently show up for our consumers, I am even more energized for what I believe lies ahead for our company. We will continue to build on our promise of creating a more comfortable world for all through driving innovative casual footwear and personalization at scale across our two uniquely positioned consumer beloved brands. Our diversified revenue streams today are powerful and we have already built multibillion-dollar-plus revenue pillars. In fact, our digital, international, and non-clog product categories each represent a revenue stream in excess of 1,500,000,000, which we see as compelling drivers for future growth. We will attack the next 20 years with ambition, decisiveness, and agility, and stay on the offense by leveraging our product innovation engine, our social disruptive marketing, and multichannel distribution. Now turning to the Crocs brand. We had a strong holiday season with positive consumer response to our new product introductions. International grew double digits and sales in North America outperformed our expectations. While improving the trajectory of North America remains our top priority in 2026, we are making good progress against our five strategic pillars for the Crocs brand. First, we are driving brand relevance globally as the clog market share leader. During the year, clogs represented 74% of our mix with sales up slightly to last year led by strong consumer response to our diversified clog franchises. We scaled existing franchises like our sports inspired Echo by introducing newness such as the Echo 2.0. We also introduced the Baya platform height style for her to great success internationally. We have seen strong early reads in our DTC channels for our crafted clog, which will add a wide variety of upper materializations that we plan to scale in 2026. We are excited about the short and long-term prospects for this new franchise. During the fourth quarter, our lined business was particularly robust in both North America and international, fueled by strong consumer response to newness, including the Unforgettable clog. In North America, we are carefully managing our Classic franchise, focusing on maintaining tight inventory control and driving further segmentation across our key partners. Internationally, the Classic Clog grew nicely in 2025. Second, we are making strong inroads in scaling our product pillars outside of clogs through new category expansion. Sandals had a very good year and represented 13% of our mix, closing in on the $450,000,000 mark. Sales growth was robust in North America where we not only took market share, but also took advantage of an extended selling season beyond the traditional spring-summer period. In 2025, our style sandals led the way, fueled by strong full price selling of our Brooklyn, Getaway, and Miami franchises. While sandal awareness is roughly half that of clogs, we saw an encouraging mid-single-digit increase in sandal awareness during 2025 versus 2024. Looking forward into 2026, we believe continued newness in our existing franchises along with the introduction of our new Saturday franchise, an updated, personalizable two-strap sandal, underscores an opportunity to gain further market share in this category. Jibbitz, our unique vehicle for self-expression, represented 8% of sales. Within Jibbitz, we have seen continued growth of our elevated charms. Beyond Jibbitz, we have expanded what personalization looks like and introduced a collection of bags, bag charms, and accessories. Third, we are fueling consumer engagement through disruptive social and digital marketing. In 2025, we launched many high-impact partnerships. Examples included our multiyear NFL partnership, which continues to scale successfully, the launch of Stranger Things, which promptly sold out, and the cult classic Twilight collaboration that is currently selling for three times the MSRP across the resale marketplaces. In January, we announced an extremely exciting multiyear global partnership with LEGO, bringing together two icons of self-expression and originality. Last month, we teased our disruptive LEGO brick clog at Paris Fashion Week and next week this clog will be available to consumers. We have a robust pipeline of new product launches together with LEGO that will be centered around footwear, and of course Jibbitz. Rounding out January, we debuted our new omnichannel global brand campaign, Wonderfully Unordinary. Fourth, we will continue to create compelling consumer experiences in all our channels. In 2025, we leaned into our first mover advantage in social commerce, which is a powerful channel to reach consumers and also increasingly a commerce engine. We remain the number one footwear brand on TikTok Shop in the U.S., and we anticipate significant future growth in social selling including on this platform. In 2025, we launched seven new markets globally with TikTok Shop and have more on our roadmap for 2026. Finally, we are continuing to gain market share across the world in our international markets. During 2025, international grew 11% on top of 19% the prior year. Broad-based strength was led by our direct-to-consumer channel, which grew 23%. In China, our second largest market, we grew 30% on top of 64% last year and the country now represents approximately 8% of sales. During the fourth quarter, we had a successful Double 11 shopping festival fueled by strong acceleration of our lined clog offerings. We believe we have significant future growth opportunity internationally. Our average market share in China, India, Japan, Germany, and France represented approximately one third of the market share we have in our established markets. We ended the year with approximately 2,600 Crocs mono-branded stores and kiosks. In 2026, we plan to continue expanding our footprint internationally and see an opportunity to open between 200 and 250 doors both in our Tier 1 markets and within distributor markets around the world. Now turning to HeyDude. We prioritized our efforts in 2025 around stabilizing the brand in North America and a renewed focus on our core consumer. While we are doing the work to return the brand to growth, we are encouraged by the progress we have made in 2025. Let me share more about what gives me conviction in our strategic plan. First, we are building a community laser focused on our core consumer. Our HeyDude Country campaign plays into our brand’s affinities including music, travel, and pre and post sports, while appealing to our laid back no fuss consumer. We are also building our community through social platforms. In 2025, HeyDude was the number two footwear brand on TikTok Shop. We are encouraged that our brand awareness ended the year at 39%, a healthy nine percentage point gain from one year ago. We have also seen an uptick in brand purchase intent amongst our core male consumer. Second, our product direction is clear. We are building the core and thoughtfully adding more. We are strengthening our leadership within the slip-on category led by our icons, Wally and Wendy. In January, we launched our stretch jersey across all channels, following a successful test during the holiday quarter. This product that we fondly referred to as a t-shirt for your feet is already appealing to both him and her. Stretch Sox is continuing to perform well in its second year with favorable consumer and retailer response. As we look into the spring, we will scale our sandals across various price points and expand our successful A2O program that caters to a broad range of outdoor activities important to our target consumer. We also see an opportunity to significantly grow our already successful work program as we bring comfort and safety to hardworking Americans. Third, we are focused on stabilizing the North American marketplace. In 2025, we took two decisive actions: one, accelerated returns and markdown allowances to our retailers to improve inventory health while elevating our brand presentation at wholesale; and two, we pulled back on unproductive performance marketing. While these two actions constrained our revenue growth by approximately $45,000,000 in 2025, they have been effective in cleaning up the channel and establishing a more profitable foundation for future growth. The fourth quarter was the tenth consecutive quarter of positive ASP growth year on year supported by channel and product mix. In conclusion, we are focused on driving the next chapter of our growth story. We believe we have compelling strategies to grow both of our brands driven by a clear consumer focus, innovative product, marketing, and our multichannel global go-to-market capabilities. I am incredibly confident in our talented team’s abilities to continue to execute against these strategies. I will now turn the call over to Patraic. Patraic Reagan: Thank you, Andrew, and good morning, everyone. During 2025, we made significant progress against several strategic initiatives that I am confident will lay the groundwork for sustainable long-term growth. Looking back, we took several decisive actions to build upon our already strong foundation. These actions included: one, recalibrating our promotional activity in Crocs brand DTC channels; two, managing sell-in across wholesale for the Crocs brand; for HeyDude, three, reducing unproductive performance marketing spend; and four, accelerating wholesale cleanup actions. In addition, we effectively executed our $50,000,000 cost savings program and actioned $100,000,000 of additional cost savings for 2026 as we previously communicated. Now, let us dig into our results. For the full year, enterprise revenue of just over $4,000,000,000 was down approximately 2% to prior year. Crocs brand revenue of $3,300,000,000 was up 1% to prior year driven by DTC up 3%, partially offset by wholesale, which was down 1%. Growth was driven by units up 2% to prior year to a total of 129,000,000 pairs sold, while brand ASPs were roughly flat to prior year. North America was down 7% to prior year at $1,700,000,000. This was tied to both the decision to pull back on promotional activity in our DTC channels earlier in the year as well as carefully managing our sell-in to the North American market. For North America, DTC and wholesale were 41% and 59% respectively, as we work to better manage channel sell-in. To reiterate Andrew’s comments, expansion in international markets is one of our key strategic pillars, and we are pleased to report another year of double-digit growth. Revenue was up 11% versus prior year to $1,600,000,000 led by DTC up 23% and wholesale up 5%. We gained market share in China, which grew revenues by 30% to last year with balanced growth across partner, comparable store sales, digital, and new store openings. Importantly, we also saw another year of double-digit growth in Western Europe while Japan returned to growth. Turning to HeyDude, during the year we took aggressive actions to stabilize the brand in North America. As such, revenue was $715,000,000, down 14% from prior year. DTC revenues were up 3% supported by strength in digital marketplaces and the addition of 23 new retail stores, offset in part by the impact of lower performance marketing spend. Wholesale revenues were down 27% as we accelerated our cleanup actions and more aggressively managed sell-in. For the year, ASPs were up 4% to just under $32 while unit volume was 22,000,000 pairs, down 17% to prior year. Now, switching to the fourth quarter, we delivered enterprise revenue of approximately $958,000,000, down 4% to prior year and a three percentage point improvement from the third quarter. This performance was fueled by both brands, particularly during the holiday season in North America. Crocs brand revenue of $768,000,000 was up slightly on a reported basis, led by 11% international revenue growth supported by strength in China, Japan, Western Europe, and India. The HeyDude brand delivered revenue of $189,000,000, which was down 18% to prior year. For HeyDude, DTC was roughly flat to prior year and wholesale was down 42% in part driven by the planned cleanup actions we took in the quarter. I will now move to adjusted gross margin. For the year, enterprise adjusted gross margin was 58.3%, down 50 basis points from last year. This was primarily driven by a 130 basis point tariff headwind. The overall decrease in gross margin was offset in part by lower negotiated sourcing costs. Crocs brand adjusted gross margin was 61.3%, down 30 basis points from prior year, while HeyDude brand gross margin was 44.8%, down 290 basis points. Moving to fourth quarter, enterprise adjusted gross margin of 54.7% was down 320 basis points to prior year driven by a 300 basis point tariff headwind. Crocs brand adjusted gross margin was 57.8% and HeyDude branded adjusted gross margin was 39.7%. For the year, adjusted SG&A dollars increased 7% to prior year, largely tied to 2024 investments in talent, marketing, and DTC which anniversaried into 2025. In the fourth quarter, SG&A dollars were down to prior year, reflecting the benefits of our $50,000,000 cost savings program. Full year adjusted operating margin of 22.3% was down 330 basis points from prior year. In the fourth quarter, adjusted operating margin of 16.8% was down 340 basis points from prior year, excluding approximately $14,000,000 of specific discrete costs primarily associated with a recent reduction in force. Full year adjusted diluted earnings per share of $12.51 decreased 5% to prior year and our non-GAAP effective tax rate was 17%. Now turning to a discussion of the balance sheet and cash flow. We ended the year in a strong liquidity position with $130,000,000 cash and cash equivalents and over $900,000,000 of borrowing capacity on our revolver. Our inventory balance as of December 31 was $369,000,000, an increase of 4% versus prior year on a dollar basis, including the impact of higher tariffs and product mix. It is important to note that inventory units were down high single digits to prior year, reflecting our actions to manage inventory flow into the marketplace. Enterprise inventory turns were above our goal of four on an annualized basis, reflecting the continued competitive strength of our business model. In 2025, we generated free cash flow of $659,000,000 which enabled us to repurchase 6,500,000 shares for a total of $577,000,000, ending the year with $747,000,000 remaining on our existing share repurchase authorization. We also repaid $128,000,000 of debt, which puts us at the low end of our net leverage target range of 1.0x to 1.5x. Specifically in the fourth quarter, we repurchased 2,200,000 shares of our common stock for a total of $180,000,000 at an average cost of approximately $84 per share. Before turning to guidance, I wanted to provide an update on our cost savings initiatives for 2026. As we previously communicated, we have identified $100,000,000 of cost savings, which include organizational simplification, deliberately reducing spend in non-critical areas, and further optimizing and modernizing our supply chain. We expect these savings to be relatively balanced between our cost of goods sold and SG&A. Now moving on to our full year 2026 outlook. For the full year, we expect enterprise revenue growth to be in the range of up slightly to down 1% on a reported basis, assuming currency rates as of February 9. As you think about the shape of the year, I want to remind you all that the accelerated strategic actions we took in 2025 were largely second half weighted and as such will continue to have an outsized impact on the first half of the year. Said another way, we expect our year-over-year enterprise revenue growth on a reported basis in the second half to outpace the first half. For the Crocs brand, we expect revenue on a reported basis to be flat to up 2% led by approximately 10% international growth, offset by declines in North America as we anniversary the strategic actions we took in 2025. We anticipate the year-over-year revenue rate in North America to improve slightly from 2025 run rate, as our guidance anticipates that the DTC channel outperforms the wholesale channel. For HeyDude, we expect revenue on a reported basis to be down approximately 7% to 9%. We expect the HeyDude brand to return to growth in 2026 as we anniversary the impact from the strategic actions we took that started in 2025, primarily in the second half. DTC is expected to outperform the wholesale channel and improve throughout the year. We expect adjusted gross margin for the year to be up slightly to prior year despite an anticipated approximately 80 basis points of incremental tariff pressure for the full year. Based on current tariff rates and sourcing mix, we now see an unmitigated tariff headwind of approximately $80,000,000 on an annualized basis, which is down from our previously provided figure of $90,000,000. We believe our diversified sourcing mix and nimble supply chain position us well as we enter 2026. Adjusted SG&A dollars are anticipated to be roughly flat to prior year as we recognize the benefits of our previously announced cost savings programs, offset by investment in the direct-to-consumer channel. Taken together, we expect adjusted operating margin to expand modestly from the 22.3% level in 2025. This excludes approximately $25,000,000 of specific discrete costs related to the implementation of our cost savings initiatives. We expect the underlying non-GAAP effective tax rate, which approximates cash taxes paid, to be 18% and the GAAP effective tax rate to be 23%. We expect our adjusted diluted earnings per share to be in the range of $12.88 to $13.35. Consistent with our previous guidance philosophy, this range reflects future debt repayment but does not assume the impact from potential future share repurchases. We are committed to maintaining net leverage in the range of 1.0x to 1.5x while deploying excess cash flow towards opportunistically buying back shares. For the year, we are planning capital expenditures to be in the range of $70,000,000 to $80,000,000. Now moving on to Q1. For the first quarter, we expect revenues to be down 3.5% to 5.5% at currency rates as of February 9. Crocs brand revenues are expected to be down low single digits. We expect growth to be led by international with the quarterly growth rate modestly below our full year run rate. For HeyDude, we expect revenue to be in the range of down 15% to 18%. Given the dynamics I spoke to earlier, the percentage decline for HeyDude’s first half revenue is anticipated to be similar for the first quarter. Adjusted operating margin is expected to be approximately 21.5%. In the first quarter, we anticipate adjusted gross margin to be flat despite the continued impact of incremental tariffs. Given the visibility we have today, our Q1 incremental tariff headwind is estimated to be approximately 100 basis points, while the Q2 headwind is expected to be closer to 200 basis points. Adjusted diluted earnings per share is planned in the range of $2.67 to $2.77. Before we move to the question and answer portion of our call, I wanted to close by reiterating our confidence heading into 2026. We are already seeing positive signs as we continue to execute on the fundamental strategic pillars for both Crocs and HeyDude. In summary, we are doing what we have said we will do. We are managing our brands for the long term. As Andrew mentioned, while we have accomplished much in the first 20 years as a public company, we are even more excited about what the future holds. At this time, Andrew and I are happy to take your questions. Operator? Operator: We will now open for questions. Our first question comes from Jonathan Robert Komp with Baird. Please go ahead. Jonathan Robert Komp: Hi, good morning. Thank you. I am hoping you might unpack the North America Crocs outlook a bit here. Could you share a little bit more drivers for the first quarter? And as you think about the shape of the year, is there potential to get back towards growth later in the year? And any visibility you have there would be great. Thank you. Andrew Rees: Thanks, Jonathan. I will let Patraic give you shaping for the year, and then I will give you strategic rationale. Patraic Reagan: Yes. So, Jonathan, as you heard in prepared remarks, we feel that for North America we will see run rate improvement as we move throughout the year. But for the full year, what we are really thinking is slight improvement from what we saw in 2025. Just as a reminder, what we did in the second half of last year was really beginning to take some strategic actions so that we would improve our outlook as we got into 2026. And with that, what you will see in first half is you are continuing to lap those unanniversaried actions, and then as we get into the back half of 2026, we will start to see some slight improvement as we go through the year. Andrew Rees: And I think what I would add to that, Jonathan, is it is a very clear priority for us to return the Crocs brand to growth in North America. As an element of context, I would also remind everybody that the Crocs brand in 2026 will actually be bigger internationally than it is in the U.S., and we are very confident in about a 10% growth rate for our international business. What we think is going to return Crocs North America to growth is really three strategic pillars. Number one is clog iterations and innovation. We are managing the inventory of the Classic Clog carefully in the marketplace. We pulled back on discounting, particularly on the Classic Clog on our digital channels, which is creating some of the headwind. We are introducing a significant number of new innovative products into the marketplace that are clog based. Our crafted clog, we are introducing the Crocband, and we are also introducing a 2.0 version of our very successful Echo franchise later in the year. In addition, diversification, so growth of sandals and growth outside of clogs, including slippers and personalization. We took market share in sandals last year. We are very confident we are going to continue to take market share in 2026 in sandals. And then the last thing is really disruptive social and digital selling. We continue to outperform and be the number one and two footwear brand on TikTok Shop, and we are very confident that our digital prowess and our ability to ignite these innovative channels and reach the consumers extremely effectively will allow us to continue to lead. So that is what we are doing to address it, and we have given you what I describe as a very prudent guidance for this year. Jonathan Robert Komp: That is great. Very helpful. Thank you. Andrew Rees: Thanks, Jonathan. The next question comes from Adrienne Eugenia Yih-Tennant with Barclays. Please go ahead. Adrienne Eugenia Yih-Tennant: Great. Thank you very much. It really is nice to see the improvement in holiday and then the expansion for this year. Andrew, I was wondering if you can help just to follow on your comments from the last question. Can you help contextualize the amount of newness that you are bringing to market this year, both Crocs and at HeyDude? We saw a lot of it at FNPL, so that was very promising, but just kind of contextualizing that with regard to how much newness you have brought to the market in the past couple of years and how this year is quite differentiated. And then kind of just following on that, I have to ask about AI-specific investments. How much of your CapEx are you allocating to tech investments to support AI? And do you have any benefit of that kind of playing into the guidance this year? Thank you very much. Andrew Rees: So let me try and add a little color to the newness point, and then I will hit on AI. From a newness perspective, I did add in my response to Jonathan a fair amount of context there, but I think there are probably two critical pillars for Crocs in terms of newness. They are the diversification of our clog franchise, so adding those other clog pillars. We are particularly excited about the crafted, because it adds a materialized upper to our clog, which we think broadens the wearing occasion. I would add the clog category continues to grow around the world. We can see it being a very on-trend silhouette and a strong growth category, and we are by far the market share leader in that category, so we can exploit that growth on a global basis. Then from a sandal perspective, I think there are two aspects there. One is our core style franchises, so Getaway, Miami, and Brooklyn will continue to grow and scale, and we have added patterns within those franchises. We have added colors, and we have broadened those franchises, and we think they have global growth trajectory. But we are also introducing—and we are quite excited about some of the early reads—a very compelling two-strap. We have got early reads on that in EMEA and here in North America, and we are quite excited about that. Two-strap is a very popular sandal silhouette, and we think that is a nice growth opportunity which we add into our sandal mix. From a HeyDude perspective, again, a lot of newness there. We introduced already this year stretch jersey, which we kind of talk about as a t-shirt for your feet. Very soft, very flexible, very lightweight, and super comfortable. It is a bit of a lower price point than our Stretch Sox as well, so it is an entry level option for consumers. We are excited about the runway of that product or that franchise within HeyDude. We are also building on sandals for HeyDude. Our work program is working really well for HeyDude. There is a lot of newness, and I think what you are trying to get at—is it more than last year—yes, it is definitely more than last year, and we are very confident. From an AI perspective, it is not really CapEx as much. We are experimenting with a whole host of AI applications, whether they be on the front end in terms of marketing, in terms of product development, in terms of product creation. We are also looking at efficiency opportunities more in the supply chain and the back end of the business. A lot of it, frankly, is SG&A investment. It is investment in people. It is investment in talent. It is investment in key capabilities and leveraging other people’s CapEx investments. I do not think we are ready to declare breakthroughs based on AI yet, but I think we are leaning in and to a high degree, and when we see breakthroughs, we will be happy to let you know about them. Patraic Reagan: And Adrienne, just to put a bow on this one, one of the reasons that we are going after the $100,000,000 in cost savings that we have been talking about now for a couple of quarters is to give us flexibility as we identify what Andrew mentioned earlier in terms of all the experimentation we are doing in the space. We are not embedding anything from an upside standpoint into the P&L for the year for AI initiatives, but we are actively in the space. Adrienne Eugenia Yih-Tennant: Fantastic. We love to see the trends moving in your direction. Good luck. Andrew Rees: The next question comes from Rick Patel with Raymond James. Please go ahead. Thank you. Good morning, everyone. Rick Patel: Question on Crocs guidance for North America in 2026. Can you talk about the assumptions underpinning the new guide as we think about pricing versus units? Any color on pricing in particular and any changes that have been made and any on the horizon? And also, if pulling back on promotions are a factor in continued ASP improvements and driving a slight improvement in margin for the year. Andrew Rees: I think Patraic gave you pretty clear color to the North American Crocs guidance. I think your specific question is really about pricing. I would say no, there are no significant price changes implied in the North American guidance. We have taken select price increases on select products, probably more internationally than North America, and we have taken some price increases on select products within HeyDude. But I would say price is not a material driver of our intended 2026 performance. In terms of promo pullback, the other piece that you highlighted, the key thing there is just the anniversarying of the strategic decisions that we made mid last year. Those will anniversary through 2026 and will represent some drag to our sales trajectory during that period, which we have embedded in the guidance we provided. Thanks very much. Andrew Rees: The next question comes from Tom Nikic with Needham. Please go ahead. Tom Nikic: Hey, thanks very much for taking my question. So I just wanted to clarify something on the gross margins. I think you said flat in Q1 with a 100 basis point tariff headwind. Can you just kind of clarify what the offsets are in Q1? And I think you said a bigger tariff headwind in Q2. Given that Q1 is flat, should we assume Q2 down then getting better in the back half? Thanks. Andrew Rees: Yes. Patraic Reagan: So it is a great question and obviously a lot going on in the space. First, let me start off by saying we are guiding up slightly on the full year, and that is as a result of all the hard work that we are doing within supply chain to really build out efficiencies as it relates to not just tariffs, but continuing our focus on being as efficient as we can in the space. As you heard Andrew mention, price is not a big component within what we are planning to do this year in terms of margin expansion. It is all really centered around the work that is going on. With that as a backdrop, as it relates to the first quarter in your question and why I say that, you heard us talk about really needing to think about it as a bit Q4 to Q1 to Q2. We saw slightly higher than expected tariffs in Q4. The fact of the matter is this is a challenge to predict from a flow standpoint, and so we saw a little bit higher than expected in Q4 as we flowed inventory through. We have actually seen a little bit lower than we expected 90 days ago as it relates to Q1, and so we wanted to be transparent with you all in terms of the 100 basis point headwind that we are seeing. That is actually below what we were thinking just 90 days ago. And then Q2, we think, is closer to what real run rate is as it relates to tariffs, and so that is roughly up about 200 basis points of headwind. Then as we get through Q1, Q2 with that nuance, we start to get into the second half and then all of this is in the base, as long as there are no changes from a tariff policy standpoint. Everything is in the base, and then we get to a much more normalized run rate. Hopefully, that gives you a little bit more context around the challenge that we have in this space. Tom Nikic: Very helpful. Thanks very much, and best of luck this year. Andrew Rees: The next question goes to Aubrey Leland Tianello with BNP Paribas. Please go ahead. Aubrey Leland Tianello: Hey, good morning. Thanks for taking the questions. I wanted to ask on the cost savings program. Last quarter, you mentioned it was too early to say how much of the $100,000,000 will drop through the bottom line. I would love to know if there are any updates on how you are thinking about flow through and what is included in the guide? Thanks. Patraic Reagan: Yes. A great question. As you heard a little bit earlier, one is we are just continually focusing on being as efficient as we can. Part of that is that we are building these cost savings initiatives into our plan so that we are able to fuel investment. We spoke a little bit earlier about what we are doing with AI. We are doing these programs to both be able to capitalize on some of those opportunities and, frankly, that we may catch an edge on that we do not have visibility to just yet. So we are reserving a little bit of flexibility into what we are doing, as well as flowing dollars to the bottom line. Where we are right now, we are planning SG&A flattish to the year as you have seen. Certainly, some of the programs that we have put in place around org efficiency, around spend efficiency, are cutting through from that standpoint. As you see our gross margin guide, some of the cost efficiency work that we are doing there is helping to offset some of the headwinds that we talked about from tariffs, etc., and we are flowing that into our gross margin outlook. All of that is embedded into the guide for the year, and we will continue to work through this as we make our way through 2026. We feel great about where the work is today. Andrew Rees: Great. The next question comes from Peter McGoldrick with Stifel. Please go ahead. Peter McGoldrick: Yes, thanks for taking my question. As we think about the double digit international Crocs brand outlook, can you help us think about the regional brand development? You shared some nice commentary on China growing from an 8% base. I am curious to know about the other regions as well and countries as we think of the 2026 embedded outlook? Thank you. Patraic Reagan: Great. Thank you, Peter. Andrew Rees: So let me just give you some details, but also put it all in context. During 2025, we grew international 11% on top of 19% prior year, so it has been a sustained double-digit growth driver for us. For China, you already highlighted that you captured that, but we grew 30% in 2025, and we continue to be confident that we can grow across all of our channels in China. It is a tricky market in China right now, but clearly our brand is resonating and we have the ability to continue to grow. Other markets where we have seen strong growth and we expect to see strong growth in 2026 are Japan, which returned to growth in 2025. We have been putting considerable time and effort in Japan over the last couple of years. It is a big footwear market, large population, highly affluent population, so we are excited to see that return to growth, and we think we are on the right trajectory there. Western Europe is also performing well—UK, France, and Germany in particular—again, double-digit growth in 2025, and we are confident about continued performance there into 2026. India is also important to us. We have been focusing on and making some strategic investments in India in terms of setting us up for future sustained growth, and we are excited about the prospects for India in 2026, but also for the medium to long term. Peter McGoldrick: Very good. Thank you. Andrew Rees: Thank you. The next question comes from Brooke Siler Roach with Goldman Sachs. Please go ahead. Brooke Siler Roach: Good morning and thank you for taking our question. Andrew, I wanted to dive a bit deeper on the North America wholesale channel. How are conversations trending regarding shelf space preservation and order books for the year? And how do you view the health of the consumer in that channel amidst a competitive environment? Thank you. Patraic Reagan: Let me take that in reverse order. Andrew Rees: The health of the consumer, our view is they remain bifurcated. The higher end consumer has plenty of disposable income and is shopping. The lower end consumer is still a bit tentative, and we think that likely continues through 2026. There has been plenty of talk about rebates and things like that. That has not been a significant factor for us historically, and we will see what happens. The market remains super competitive. If I took both of our brands from a shelf space perspective, we have been fairly clear we are working hard to make sure that both of our brands have the right inventory in the right retailers and that we are well positioned relative to our future consumer demand. We are working hard from a Crocs perspective to make sure that our Classic key core franchise is appropriately positioned, but also getting new product into the marketplace. We talk about diversifying the clog franchise. We feel good about where we are from a Crocs perspective, but that does represent a drag to sell-in as we have articulated in our guidance. For HeyDude, we worked really hard and spent quite a lot of money in the back half of last year to right-size inventories, and we think we are there. We look at sell-out relative to our inventories on hand, and they are at parity at this point. We are excited to be at that point and be able to strategically rebuild the business from a wholesale perspective for HeyDude. The other thing I would say as an overlay, it is all about newness. When we introduce new products that resonate with consumers, we can see really nice trajectory in terms of sell-out and sell-in. The consumer is definitely receptive to newness, and that is the important driver of success in this business. Brooke Siler Roach: Great. Thanks so much. Andrew Rees: Thank you. The next question comes from Anna A. Andreeva with Piper Sandler. Please go ahead. Anna A. Andreeva: Great. Thank you so much for taking our questions and congrats. Nice results. Just wanted to follow up on the actions at HeyDude between the wholesale cleanup and the performance marketing change. Andrew, I think you just said the cleanup actions are fully behind us. Can you talk about if you are adding more partners in wholesale to the brand at this stage, and just what are those conversations looking like? And just as a follow-up on Crocs, if you think about the adjacent categories, I think you said with sandals penetration was similar at 13%, which I think implies mid-single-digit growth category, and you called out strength in the U.S. Can you talk about how international performed, and how do you think about that penetration over time? Andrew Rees: A lot of questions there, Anna. Let me try and hit some of them and double click on the important ones. I think we have talked about the HeyDude cleanup, so I think you have got that. The derivative question there was, are we adding more partners? I would say we are not really adding significant more partners for HeyDude, but we do think there is significant growth in key partners. That will come through more shoes on shelf and more shoes in more stores, but we have to earn our way back to that growth pathway, and we are very focused on that. Your second piece was around sandals. Thirteen percent overall share for sandals grew nicely in North America last year. We are confident in growth next year. We took market share. Our growth was significantly above the market for North America. I would say growth in sandals internationally was slower than North America last year, but we have strong aspirations for sandal growth internationally in 2026. Part of that was by design. We were very much focused in some of our key developing markets on really penetrating the market with the Classic Clog and landing our icon. When you have relatively small footprints in some of these key markets, you have to be strategic about what you put on the shelf, but we do think there is a nice sandal growth available to us in key markets like India and Southeast Asia, where we are confident about future trajectory 2026 and beyond. Patraic Reagan: Then, Anna, just want to jump back to HeyDude for a moment. Number one is, as you saw in the prepared remarks, we are calling HeyDude to return to growth in the second half of this year. That goes back to all of the strategic actions that we took in the back half of 2025, which will then start to bear fruit in terms of where we are going with the brand. We feel very confident about the trajectory there. The other component is in terms of cleanup, cleanup is continuing to make progress, and everything that we are looking at from a KPI standpoint related to inventory, inventory on hand, sell-out rate, or sell-in rate is all moving in the right direction. We feel like a little bit more than six months into the efforts, what we are seeing looks very positive, and we are focused on where we are going. We also know that we have to finish the play. Part of finishing that play is the work that remains to be done in the first half of the year. Anna A. Andreeva: Alright. Thank you so much. Terrific. Best of luck. Andrew Rees: The next question comes from Jim Duffy with Stephens. Please go ahead. Good morning. Thanks for the question. Can you talk about the performance of HeyDude stores and what the store opening plan is for 2026? Patraic Reagan: I would say we are pleased with the performance of our HeyDude stores. As you know, the majority of stores, in fact almost all the stores open, are really outlet stores. We think that is a pretty unique opportunity to do multiple jobs for the brand—keep our inventories clean and fresh, as well as benefit from strong traffic in the outlet malls to drive commercial success. We are pleased with the stores. We opened 23 stores last year with an actual total 75 at year end. Our opening rate in 2026 would probably be a little bit less than that, but we think our stores do a really nice job in terms of generating strong commercial outcomes as well as broadening consumers’ perspective about the brand. Andrew Rees: Great. And then international wholesale looks like it was up about low single digits in constant currency over the last three quarters. Anything to highlight as to why that channel has slowed, and then what kind of opportunity do you see for international wholesale going forward? Patraic Reagan: As we highlighted, the growth in international was driven by DTC, and that is really two components. One is our digital prowess, which extends across the globe, and also store openings. If you look at the number of stores we have and store openings on an international basis, that is where we have focused our store openings. As we look at a lot of international wholesale, the vast majority of those sales go into our distributors. I do not think there is any real story about why it slowed, but we are confident in future international wholesale growth. Andrew Rees: Great. Thanks and best of luck. The next question comes from Mitch Kummetz with Seaport Research. Mitch Kummetz: Yes. Thanks for taking my questions. First question, I just wanted to drill down a little bit more on the path of HeyDude returning to growth in the back half. How much of that is just lapping the $45,000,000 cleanup that took place in the back half of 2025 versus other factors? And I am curious if you can speak to what you are seeing in terms of the fall order book from a wholesale perspective. Patraic Reagan: Yes, Mitch, great question. As we mentioned earlier, it has been some great progress that we have made in terms of HeyDude, and we continue to feel really bullish about where the brand is going. As it relates to the $45,000,000 in the second half of 2025, we felt it was important to quantify as best we could the actions that we took and what resulted in coming out of the marketplace. As we think about now, we have been doing the hard work at cleaning up inventory. We are doing the hard work of looking at our consumer base. As a note, our awareness for the brand has improved nine percentage points from 30% to 39% just in the last six months or so. We feel like we are gaining a lot of traction as it relates to consumer and product newness. As you think about the second half, part of that obviously will be lapping what we took out, but we are also excited about what we see in terms of product newness coming and continuing to sell in from a greater breadth standpoint on the products that we introduced in the back half of last year and into the first half of this year. Mitch Kummetz: And can you say if you have got a positive fall order book? Andrew Rees: We do not comment on our order book, Mitch. We have not done that for many years now. Mitch Kummetz: Alright. That is fair. And then a second question, just on the SG&A, thinking about the shape of the year, I know that you said dollars flat year over year. Do you expect that to be kind of consistent across the quarters, or would you expect the dollar spending to mirror the sales growth per quarter? Patraic Reagan: As we think about the shape of SG&A through the year, obviously we have cyclicality in our business as it relates to quarters. As we go through from an SG&A standpoint, we see that ebb and flow as a percentage of sales. From an SG&A perspective, Q1 will be up slightly as we kick off the year, and as we work our way through, we will start to see more traction from the programs that we are putting in, in addition to—I just want to stress again—the $100,000,000 that we have targeted and identified. In our process of delivering it, yes, through the lens of dropping some to the bottom line, we are focused on giving ourselves investment flexibility as we make our way through the year. When you think about the complexion of 2025 to 2026, we are repivoting both brands, and we are reserving the flexibility to deploy some of those savings back into the P&L to accelerate Crocs brand, HeyDude, and some of the other areas that we are experimenting from an investment standpoint. I mentioned AI earlier, but there are a bunch of others. That is a little bit more color in terms of how we are thinking about things. Mitch Kummetz: Okay. Andrew Rees: That is helpful. Thanks, and good luck. We have time for one more question. The final question goes to Jonathan Robert Komp with Baird. Please go ahead. Jonathan Robert Komp: Hi, thanks for sneaking me in one more. Any more color as we think about first half and back half progression from an operating profit standpoint? It looks like Q1 and implied the first half down year over year for operating profit. Second half looks like it could be implied up double digits. Any more color as we think about the shape and anything that would be helpful for modeling? Thank you. Patraic Reagan: Jonathan, I think you are hitting it. If you think about the construction of the year, similar to 2025, there is a big first half, second half story. Second half of last year, we have talked quite a bit about the actions that we took that impacted second half of last year. We are rounding that out in the first half of 2026, and you will see some headwinds from a revenue standpoint. If you think about that trajectory of 2025 into 2026, how you are thinking about the year from an EBIT standpoint is how we are thinking about it as well. There is a first half, second half story. Jonathan Robert Komp: Okay. Thanks again. Operator: This concludes our question and answer session. I would like to turn the conference back over to Andrew Rees for any closing remarks. Andrew Rees: Yes. I just want to say thank you very much for joining us today. I appreciate everybody’s interest in our company and their thoughtful questions. Thank you very much, and have a great day. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
Niina Ala-Luopa: Hello, and welcome to Vaisala's Fourth Quarter and Full Year 2025 Audiocast and Results Call. I am Niina Ala-Luopa from Vaisala's Investor Relations. And today in this call with me are President and CEO, Kai Oistamo; CFO, Heli Lindfors; and Chair of the Board, Ville Voipio. We have today published our financial statement release, and Kai will first go through the results, and then we have time for questions. Kai Öistämö: Thank you, Niina, and welcome for everybody from my side as well. So as the headline says, strong performance in 2025 and on a highlight in the fourth quarter really being the orders received improving and -- if we look at the actual, what happened in the year in the quarter, maybe I'll start with kind of just if we were to teleport ourselves into beginning of 2025, just to remind you what kind of a year we were kind of thinking that we would face and what was the reality. So we had a plan as a company to grow on the renewable energy on the back of kind of many years of good success, building on that, and the outlook, albeit a little bit more muted growth on renewable energy investments, but nevertheless, continuing the growth. Then U.S. elections have happened, but the speculations on trade wars, import duties, things of that nature on the scenarios, but not the most likely ones still in early January. And then there was really, I think, not really much of a speculation, which is hard to have the speculation on how volatile the currency exchange rates became during the year. And what a roller coaster ride in 2025. First thing is what happened was the renewable energy market for us really plummeted quite a bit, creating a big hole from a get-go in the year, remembering that this had been one of the growth drivers for the company and a very profitable one as well. So that kind of went away from the beginning of the year. We've quantified about EUR 20 million or even a little bit over EUR 20 million as a hole that it created from a get-go. Then in, during the year, the -- with twists and turns getting to 15% import duties between U.S. and Europe. And then in the second half of the year, U.S. -- actually, the euro appreciating vis-a-vis not only U.S. dollar, but many other currencies, Chinese yuan, Australian dollar, Canadian dollar and so on and so on. So it's clearly a broader event than just the import duties between kind of 2 continents or 2 countries. And in this environment, I think we can be, as a company, very proud of how we performed. We were able to continue on our growth journey. If I look at in kind of our long term -- first reminding that our strategic goal was growing the net sales by average 7% over long term. And we were clearly above that if we -- as we should be measuring that in constant currencies, 7.4% year-on-year growth rate during 2025. We were able to mitigate the import duties on Industrial Measurement side, that meant increasing prices the day after where the import duties were clear with no visible impact on the demand. And on the Weather side, actually pre-shipping into U.S., avoiding the tariffs and giving us time to negotiate as the business on that side is based on longer-term contracts and especially public side. So it takes time to negotiate, but happy to report that we've been able to actually during -- like during that time that we bought for the second half, we've been able to actually come to terms and agree with the customers that we are going to be -- are now able to pass also in Weather side, the import duties to our customers. And then thirdly, the fluctuation on the currencies, the strong appreciation of dollar during -- of euro during the second half of the year, obviously, then created headwind, which is a lead into when we look at the fourth quarter in this environment where we were kind of during the quarter in $1.18, $1.16 range in terms of a euro-dollar ratio comparing to the year before where we were $1.02. That gives you kind of a flavor of what kind of a headwind one would face. And despite that, essentially a flat net sales year-on-year. And that obviously kind of creating challenges on some parts of the businesses even more than other ones. Xweather being very highly dollar-based. We are talking about clearly over 60% of the sales in USD, obviously creating even more headwinds than in some other parts of the business. That being said, also the -- then when we look at the order intake in fourth quarter, that's really a positive highlight, I think, in the fourth quarter. The order book increased 10% in terms of constant currencies, really driven by Industrial Measurements, but also in Weather and Environment, clearly improving to the level the year before, marking kind of a significant change when we go look at sequentially first quarter, second quarter and third quarter, really kind of like changing, kind of significant change in that trend. When looking forward, the market uncertainties continue. I think that's one thing that is kind of for sure as an expectation for this year. What are exactly the uncertainties, what are exactly the things that we are going to face? Nobody knows. But I am actually convinced when we're going to have this year from now -- this call a year from now, and we do also -- again, the kind of the exercise of teleporting ourselves back to this date, we will find ourselves how many changes and what kind of rapid changes in the marketplace have happened. In all this, based on the good strong performance in 2025, the Board of Directors also yesterday or today decided to propose EUR 0.86 as the dividend for AGM to decide. Now before going into like specific numbers and more details in the performance itself, maybe good to look at kind of more of a kind of a strategy perspective, highlights on the 2025. It really is about technology leadership. It's about climate action. I think we can be very proud of Xweather and subscription sales growing 50% year-on-year. We can be very proud of actually meeting and exceeding our long-term growth target as a company. But on top of that, maybe a couple of other things that you might not be as familiar with. The work that we have been doing very systematically in the company to improve the health and safety to the level that I am super proud on where we are today, the TRIR being 1.15. Some of you might not know what exactly that means. It means that we are kind of the top of the range industrial company in terms of health and safety. We really have been able to create this to be a safe working place where everybody gets home safe -- comes safe to work and gets home safe as it should be. And this is something that we, as a company, we as employees of the company, we are very, very happy, and we continue on this journey. Then another recognition on our sustainable growth journey this time by Time. And then we continued on our strategy execution, continuous improvement and flow of new products and services in all parts of the business. We continue to invest also into our operations, which is a key part of our success formula. And clear milestone on this was the completion of the automated logistics center here in Finland and taking into full use, now giving us benefits going forward on multiple different levels. Then into the financials. And starting with overall as a company. As said, orders received improved in fourth quarter, driven by very good performance in Industrial Measurements and a clear improvement on Weather side. Orders received increased by 5% year-on-year in reported currencies and 10% in constant currencies, bringing the order book to EUR 185.8 million. That puts us below what the level was at the beginning of last year or end of December 31 of 2024. But at the same time, it puts us clearly above what the order book was at the same time in year 2023. And the year 2024, as you know, was not a bad one for Vaisala. And I think this order book level gives us a good comfort at least on the starting of the year on both sides of the business. Net sales in fourth quarter slightly decreased. And if you look at constant currencies being flat. And this you have to remember again, the 2024 being exceptionally strong fourth quarter. So the comparable was quite strong on what we compare ourselves to. Gross margin, slight decline. And here, I would kind of pick up 2 things. When we say that we compensated fully the import duties, the way the math works on that, that means in terms of a relative profitability in terms of gross margin, there's about 1 percentage point, a little bit over 1 percentage point headwind caused by that. And then also, as I said, we had an extremely difficult year on the renewable energy side. And when we compare to previous year, that was kind of a clear creative business in terms of our profitability for the company turning into a more of a -- much more of a drag to the profitability. And no news is good news in cash conversion. So as we have been showing as a track record for many years now, cash conversion continued to be strong. Looking at the Industrial Measurement side, I've said multiple times, the record high orders received and net sales in 2025, I think, is something that we can be super proud of. We look at the year as such, orders received increasing by 13% year-on-year and especially in the constant currencies, 21% at we really can be proud about it and it feels very good. And this growth was driven by Americas despite all the talk about the trade wars and everything else, continued our success in the U.S., especially. And net sales increasing by 1% in terms of reported currencies, but 7% in constant currencies, which I think really reflects our real underlying performance. And there, obviously, the headwinds caused by the depreciation of not only U.S. dollar, but also Chinese yuan and other -- several other currencies impact, obviously, the reported orders received and net sales as discussed already earlier. Gross margin stayed on the same level despite the headwind, as I said, from mitigating the import duties. And then on EBITDA side, a slight decline. And this was really driven by on the OpEx side, one-offs and some investments into sales and marketing and commercial excellence and a couple of maybe words on that. So when I say investments in sales, that means in the digital channel and building the digital channel capabilities, which we are going to be benefiting in the coming years. And then also kind of a clear investment into commercial excellence, which we are running as a program in Industrial Measurement, which we also expect to be improving the performance even further in the coming years. Then on the Weather and Environment side, highlight of the year, I think, is really how the year developed and especially in the fourth quarter, the orders received on the previous year level and really the increased demand coming from meteorology and aviation segments. And maybe some of you have been somewhat worried about the volatility and the changes of the demand in meteorology and aviation segments. I think this is a good reminder how cyclical. And it changes between the quarters and between the years. But the market itself, when looking at it as we will talk about it in grand scheme of things, is a strong -- continues to be a good market. Order book somewhat below the level -- clearly below the level of end of the previous year. But at the same time, as I said for the entire company, similar story actually also for Weather and Environment. If we compare the order book that we start this year with actually is on a good level compared to what we ended in 2023 or kind of what we started 2024 with. Then gross margin, headwinds there, clearly lower, and this is back to what I now said multiple times, the significant decline on the high-margin renewable energy business, clearly visible on the gross margin. Obviously, the exchange rate impacts and then the impact also from the U.S. tariffs as discussed previously. Despite all that, EBITDA -- the headwinds and the challenges that we faced in the year, the EBITDA level stay in a good level of close to 15% EBITDA. Looking at the cash flow, I said, strong cash flow continued, and we actually increased the cash flow from operating activities over EUR 10 million compared to the previous year and mainly really as a good work on improving the net working capital by the company, yielding the cash conversion to 1.1. So I understand that there was a break in the Internet connection, and I assume we are back. So just as a summary for 2025, not sure where you dropped off, so I'll start at the top of the slide. So a reminder that net sales grew in line with our long-term targets. We grew over 7% in constant currencies. And if I kind of pick a couple of highlights on this slide, the subscription sales were up by 50%, boosted by the acquisitions that we did at the very end of the previous year on WeatherDesk and Speedwell Climate now being fully integrated and bringing when you exclude the WeatherDesk and Speedwell Climate on constant currencies, the organic growth well in double digit. On gross margin, a slight decline due to several headwinds exchange rates impacts, the proportional impacts of the U.S. tariffs, as I discussed earlier, and then the strong decline in the high-margin renewable energy business. EBITDA being roughly on the same level as year before and the earnings per share slightly below the year before. The financial position for the company remains strong. Again, no news is good news. And when we were preparing these slides, we should for the next quarter, maybe count how many quarters we have had the same heading. And I am super proud to have the same heading on this slide. It gives us kind of very, very solid ground, obviously, and it's a testament on low leverage on the balance sheet and the asset-light business model that we have as a company, strong cash flow generation that we have as a company. And now with the automated logistics center completed, that obviously kind of takes -- kind of gives us another leverage going forward as well. Moving on to the market and business outlook. The market outlook for -- as we see it for 2026. We see growth in industrial, in life science, in power markets -- power and the markets for Xweather subscription sales. And then stable market outlook for meteorology and aviation as well as for renewable energy. And on the renewable energy, obviously, now stable on a clearly lower level where we started a year, 1.5 years ago. And what does it look then in terms of business outlook for this year, we estimate that our full year net sales will be in the range between EUR 600 million to EUR 630 million and our operating result in terms of an EBITDA will be in the range of between EUR 95 million to EUR 110 million. With that, I'll conclude the prepared remarks and happy to answer any questions that you may have. Operator: [Operator Instructions] The next question comes from Nikko Ruokangas from SEB. Nikko Ruokangas: This is Nikko Ruokangas from SEB. Sorry, there was some technical error in the line, so I lost or didn't hear anything for a couple of minutes. So I'm sorry if I am repeating something. But I have 3 questions, and I'll start with order intake for the Industrial Measurements. So you showed very strong 21% FX adjusted order intake growth in Industrial Measurements, and you, for example, mentioned there data center orders and so on. So were there something extraordinarily strong in this quarter? Or does that kind of describe or reflect the current strong trends overall in Industrial Measurements? Kai Öistämö: So the only thing I think that is maybe a little bit more pronounced this year than last year and certainly the year before has been the kind of longer-term orders from Chinese companies. You may recall, if you have followed us a little bit longer that we have had for a long time a year-end early in the year orders, kind of full year orders, blanket orders from our customers in -- especially in China. They became almost absent in 2022, 2023 when there was a -- 2023, 2024 when there was more of an uncertainty in the market driven by uncertainty in economic development in China. So I think it is a very positive news that at least the confidence of our customers seems to be there in a higher level than in the previous years. But that's only a portion of this. And a big part of it is release, as we said in the release as well that in release driven by the demand of our products and remembering that we are, as we have been saying, well-situated vis-a-vis the megatrends. There's lots of growth industries that we serve that are sizable for us, be it life sciences, be it data centers, as you said, Nikko, be it semiconductor and the power are good examples, just mentioning a few. Nikko Ruokangas: Okay. I understand. So that you would have had also significant FX adjusted growth even without those orders? Kai Öistämö: Correct. Nikko Ruokangas: Good. Then my second one is on the order or potential order from Indonesia. So you mentioned in the report that the Indonesian Airport order will be included in orders if the client receives financing in H1. So can you open that situation a bit more so does it mean that if they don't receive the financing, so you will lose this order totally? And then are you kind of including that order in your guidance assumptions? Kai Öistämö: Yes. So a couple of things on that. So good question. Thank you, Nikko. So it is not included in our order book or the guidance, so it's -- as we don't do anything, which are this kind of orders, bigger orders, especially from emerging markets where timings of such orders is extremely difficult to predict even in the year. So that's one. Then the, why the wording was as it was. The background is that, as you know, it's been for a while announced publicly where it actually was done by our customer who wanted to publish it even before we had the final commercial agreement done. And this is -- the Indonesian order is one of these MICD projects where it's based on public financing. And the public financing rules are when these kind of projects are done, the public financing vehicles are guaranteed for a period of time and then needs to be for good governance, a backstop on when they kind of expire. And when they expire, then obviously, then you would have to kind of restart the kind of building the financing package if that kind of a case were to happen. So that's what the wording is reflecting. The customer from -- kind of the customer feedback is that they absolutely want this to happen. Now sometimes these kind of things have quite a bit of red tape in both timing -- reflects back to my comment on the timing itself. So again, the predictability is hard. Nikko Ruokangas: Yes, totally understand. My last question on U.S.A. and the public client side. So have you now seen kind of a stabilization there in demand? And did you have any impact from the U.S. government shutdown in Q4? Kai Öistämö: Good question. Thank you. So very happy to actually give you color on this. So we now have verbal insight on, for example, the budget for National Weather Service, and it seems to be on a good level. The cuts really in the end did not materially occur in the end in National Weather Service, in some other agencies much more so. And the budget is, like I said, on a good level. And on the -- regarding the fourth quarter government shutdown, in the end it actually did not affect our sales. We were able to cope with it. Operator: The next question comes from Waltteri Rossi from Danske Bank. Waltteri Rossi: It's Waltteri Rossi from Danske Bank. A few questions. Maybe first, I'll ask about the semiconductor segment that you say is also driving the growth currently in the Industrial Measurements. So could you open a bit how Vaisala products are used in the semiconductor segment? Kai Öistämö: So we sell -- so first of all, let's define what semiconductor. When I say semiconductor, what it means for us. It actually is we are present from different types of memory processes to commodity silicon to really the leading edge compute nodes in terms of fabs, in terms of manufacturing equipment and so on. So we sell to the semiconductor environment via multiple different ways. So our equipment may be sold sometimes directly into the fab itself, sometimes through an OEM that is creating the environment in the fab, sometimes to the equipment that are actually used in the production of the different types of silicon products. And we are present in all around the world. So it's much broader kind of a coverage when typically when talked about semiconductor. Waltteri Rossi: All right. Then about the metrology and aviation segments, which you expect to be stable going into '26. Does that mean 0 growth? Or could it be a small positive number still? Kai Öistämö: When we have said stable and we've said stable for the long term as well, stable -- if I take a little bit longer-term view averaging things out, it's inflation-corrected stable. It's not a market that is declining in real terms. It's actually stable in real terms. Now then how does they behave between -- kind of as you saw last year, between different quarters and so on, the nature of that business is somewhat volatile. I'll give you a little bit more color on. For example, we just talked about with Nikko, the Indonesian order is a great example. It's a sizable order that would even impact the entire market size when it happens. But predicting which quarter it comes is super hard. Waltteri Rossi: Good addition. Still few questions about Xweather. So first, what is driving the growth in that business? You expect it to grow this year, but any indication here, could it mean double digits or more like 5%? Kai Öistämö: Our ambition is to continue to grow double digit this -- the business itself. That being said, when I say double digit, I can really talk about in constant currencies in -- given the currency exchange rate, speed of the currency exchange rate changes and the fluctuation that -- especially in this business where the exposure to non-euro currencies is larger than anywhere else that we have. The impact also is the biggest on euro reported numbers. Waltteri Rossi: Yes. Great. And can you say anything about what's driving the growth here? Where are you potentially getting new customers and so on. Kai Öistämö: Yes, yes. So we are strong on several customer segments. So finance and insurance, renewable energy and transport. And we see kind of both more usage from existing customers and then clearly a potential in getting more customers. So we see that there's a kind of opportunity to go grow both ways that it's kind of more usage, more -- and wider usage for existing customers as well as then kind of getting new customers. And then obviously, we are looking at the adjacencies at the same time, that's kind of a further growth initiative. Waltteri Rossi: Great. And lastly, on the Xweather profitability, as we know, the profitability should improve once you lower the investments in the growth. So kind of 2 questions. What are you actually investing in right now at the business that is still keeping the profitability down? And what is your kind of ambition level on the profitability during this strategy period for Xweather? Kai Öistämö: So first comment is that the profitability improved significantly last year. And so the direction is -- we're super happy with the direction on the profitability. And then where are we investing today? It really is about growth. So it's sales and marketing. Like think about this as a recurring software subscription business. And there, the investment into -- like it's relatively easy to kind of measure the impact of sales and marketing impact, both to new leads, qualified leads into then conversions from qualified leads into sales. So the, really, the focus is driving growth and therefore, the focus on the investment side is increasing the reach of sales and marketing. Waltteri Rossi: And about the kind of your target level on the profitability during the kind of... Kai Öistämö: We have not said any concrete target level on Xweather during the service period. But I'll just repeat what I said earlier that super happy on the development that we had last year. Operator: The next question comes from Joonas Ilvonen from Evli. Joonas Ilvonen: It's Joonas from Eli. Your Industrial Measurements product sales were -- grew only 1% year-on-year. So I think that was -- that seemed like relatively low. So was that only like a timing issue? Kai Öistämö: Less of a timing issue. So you are talking about the fourth quarter, I assume. Joonas Ilvonen: Yes, yes, yes. Kai Öistämö: That's more of a -- think about it the kind of significant headwind in terms of the currency exchange rates. So that's kind of the biggest impact on it. Joonas Ilvonen: So on constant currency terms, how much would have these product sales then grown? Kai Öistämö: Let me get back. Net sales growth fourth quarter on 7%, on year, that's the year -- annual number and then quarterly number, it's between timing, as you said. Joonas Ilvonen: But nothing really special happening there. Kai Öistämö: No, no, no. Joonas Ilvonen: I guess we can just assume that basically the volumes are growing at around 5% to 7% or so. Niina Ala-Luopa: And we don't -- we report the constant currencies, the net sales growth, only the total net sales in Industrial Measurements, but not on products or service sales level. Heli Lindfors: But they are fairly the same. So you can apply the same percentage gap to the kind of the below items roughly. Niina Ala-Luopa: Correct. Joonas Ilvonen: All right. That's clear. And then Weather and Environment on the cost side, so you've implemented these cost adjustments, and I think they were already quite well visible in the Q4 figures. So do the Q4 figures already like fully reflect all these cost adjustments that you have recently made? Or can we expect even more to be visible in 2026? Kai Öistämö: We already announced cost savings that to a very large extent, they are visible in the fourth quarter already. So they were done in the third quarter, in the third quarter, and they are a very large extent already visible there. Heli Lindfors: Yes, mostly done. as we recorded also the one-off cost already in Q3, so. Joonas Ilvonen: Okay. That's clear. And then could you remind us of the gross margin outlook for Industrial Measurements and to Weather and Environment for 2026? Kai Öistämö: I can't remind you because we don't give it. Joonas Ilvonen: Okay. Okay. But can you like describe some of the drivers that might -- I mean, impacted this year? What might change in that respect? Kai Öistämö: Sure, sure. Yes. So obviously, if you look at -- from a gross margin side, similar impacts, obviously, on -- as in a typical year. But if I take weather side first, the project sales, like if you look at the individual quarters, how was the extent of the project sales versus product sales that has a big impact on gross margin on an individual quarter and sometimes even in a year to some extent, at least. And then last year, we had a significant headwind from the renewable energy into the gross margin as well in Weather Environment. And as we are fixing that business, obviously we can't kind of completely fix it since it's now inherently on a lower level than it was kind of in 2024. We kind of -- we are working on that side. And then, of course, the creative thing in gross margin in Weather Environment is ex-weather where the bigger that gets to be and that clearly has a kind of a creative -- like very creative gross margin in the Weather Environment numbers. And then on BIM side, there it's like -- again, if I look at the quarterly side, some fluctuations between quarters based on product mixes that happen to be sold in a quarter, that's less so when you look at on an annual level. And then it continues to scale like we have been in the past. As the business continues to grow, that should be bringing leverage, not only on the profitability but also on the gross margin side. Joonas Ilvonen: Okay. And finally, could you remind us of the geographic sales, I mean the big picture. So [ IN ] should grow this year quite a lot, and it's mostly driven by the U.S. and Europe, but like the big picture, are there any -- anything to highlight from a geographic... Kai Öistämö: U.S., like if I look at overall, actually last year U.S. grew more than any other Americas, as we say, but it really is U.S. grew much more than other regions. And kind of reflected also the industrial activity and the growth of industrial activity in the U.S. I think that the -- overall, when you look at the geographic mix, it reflects the -- often the industrial activity and investments into industrial activity in different geographies. And I would expect that the U.S. continues to be probably ahead of Europe. I think that's a safe bet. And then a positive dynamic in China, short term at least, but we will see, we will see. Important events, for example, like the Trump-Xi meeting now in April, we'll see how that impacts on in the U.S.-China relationships and maybe positive, maybe negative. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Niina Ala-Luopa: Thank you, everyone, for joining the call. Thank you, Kai, for the presentation. And next in our financial calendar, we have the Annual General Meeting on March 24 and then the first quarter results sharing on April 24. But now, thank you very much, and have a pleasant week.
Operator: 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.