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Operator: Good morning, and welcome to Safehold Inc.'s Fourth Quarter and Fiscal 2025 Earnings Conference Call. If you need assistance during today's call, please press 0. If you would like to ask a question, please press 1. That is 1 to ask a question. As a reminder, today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to Pearse Hoffmann, Senior Vice President of Capital Markets and Investor Relations. Please go ahead. Pearse Hoffmann: Good morning, everyone. Thank you for joining us today for Safehold Inc.'s earnings call. On the call, we have Jay Sugarman, Chairman and Chief Executive Officer; Michael Trachtenberg, President; Brett Asnas, Chief Financial Officer; and Steve Wilder, Executive Vice President, Head of Investments. This morning, we plan to walk through a presentation that details our fourth quarter and fiscal year 2025 results. The presentation can be found on our website at safeholdinc.com by clicking on the Investors link. There will be a replay of this conference call beginning at 2:00 p.m. Eastern Time today. The dial-in for the replay is (877) 481-4010 with a confirmation code of 53587. In order to accommodate all those who want to ask questions, we ask that participants limit themselves to two questions during Q&A. If you would like to ask additional questions, you may reenter the queue. Before I turn the call over to Jay, I would like to remind everyone that statements in this earnings call which are not historical facts may be forward-looking. Our actual results may differ materially from these forward-looking statements, and the risk factors that could cause these differences are detailed in our SEC reports. Safehold Inc. disclaims any intent or obligation to update these forward-looking statements except as expressly required by law. Now with that, I would like to turn it over to Chairman and CEO, Jay Sugarman. Jay? Thanks, Pearse, and thank you to all of you joining us today. While headwinds remain, Safehold Inc. made good progress on a number of fronts in the fourth quarter that we believe should have a positive impact on 2026. We were pleased to welcome Michael Trachtenberg as President, giving us new reach and firepower. To see Steve, Josefa, and the rest of our affordable housing team begin expanding our platform to new states and new sponsors. To have Brett and our capital markets team continue to solidify the balance sheet and drive down our cost of capital. These are all important parts of our goal to get our share price back to where it belongs. More consistent origination growth, more Carats visibility, and implementing share buybacks are some of the important themes this coming year that we believe have the potential to unlock value for shareholders. And we want to continue the work begun in 2025 to deliver tangible results in 2026. Our goals will be to add more ground lease volume in 2026 versus 2025, to find ways to get Carats value more readily recognized, and to begin utilizing our previously authorized share repurchase program when trading windows are open and market conditions make sense. Obviously, there are a lot of factors in the mix, but these are the three areas of focus that we have been working towards and we believe will support success in the coming year if we can deliver on them. With that, I would like to turn things over to Michael and Brett to recap the quarter and the year in more detail. Michael? Thank you, Jay, and good morning, everyone. In the short time that I have been with the company, I have seen firsthand the benefits gained for real estate owners utilizing modern ground lease capital and the competitive advantages of Safehold Inc.'s platform that have been carefully built out over the past nine years. It has been a privilege to meet with employees, customers, and investors to better understand the perspectives of our key stakeholders, and I look forward to engaging further with the investment community in the coming weeks and months. I am confident in our business model and the long-term value creation embedded in a diversified portfolio of institutional-quality ground leases, and I am excited to work closely with Jay, Brett, and the entire team to help guide Safehold Inc.'s next stage of growth. With that, let me pass it on to Brett to detail our fourth quarter and full-year results. Brett Asnas: Thank you, Michael, and good morning, everyone. Let's begin on slide two. The fourth quarter was productive for both new investments and capital markets activity. We closed on 10 transactions, including nine ground leases and one leasehold loan, for an aggregate commitment of $167,000,000. Eight of the ground leases were within the affordable housing sector in Southern California, and one ground lease was a market-rate multifamily development in Cambridge, Massachusetts. That market-rate transaction also included a leasehold loan which was valuable and efficient one-stop capital for our customer. Moving to ratings and capital. During the quarter, the company received a credit ratings upgrade from S&P to A- with a stable outlook. Safehold Inc. now has single-A ratings from all three major rating agencies, underscoring the high credit quality of our portfolio and balance sheet. This recognition was a strong result for the company and we are already seeing positive flow-through into our cost of capital. Also during the quarter, the company closed on a $400,000,000 unsecured term loan. This transaction effectively refinanced our nearest-term maturity due in 2027, increasing liquidity and replacing secured debt with new unsecured debt that is both low cost and freely prepayable over its term. The right side of the page details the quarter and full-year investment metrics. For the year, we closed 17 ground leases for $277,000,000 and four leasehold loans for $152,000,000 for an aggregate capital commitment of $429,000,000. The 17 ground leases included 12 affordable housing, four market-rate multifamily, and one hotel, all in major markets with underwritten coverage of 3.2x, GLTV of 34%, and an economic yield of 7.3%. At year-end, the total portfolio was $7,100,000,000 and UCA was estimated at $9,300,000,000, an approximately $200,000,000 increase from last quarter, which was primarily driven by external growth from new investments. GLTV was 52%, rent coverage was 3.4x. We ended the year with approximately $1,200,000,000 of liquidity which is further supported by the potential available capacity in our joint venture. Slide three provides a snapshot of our portfolio growth. In the fourth quarter, we funded a total of $60,000,000 including $44,000,000 of ground lease fundings on new originations that have a 7.3% economic yield, $11,000,000 of ground lease fundings on preexisting commitments that have a 7.4% economic yield, and $6,000,000 of leasehold loan fundings which earned interest at a rate of SOFR plus 5.01%. For the full year, we funded a total of $252,000,000 including $141,000,000 of ground lease fundings on new originations that have a 7.2% economic yield, $43,000,000 of ground lease fundings on preexisting commitments that have a 7% economic yield, and $68,000,000 of leasehold loan fundings which earned interest at a rate of SOFR plus 3.47%. At year-end, our ground lease portfolio had 164 assets, including 101 multifamily properties, and has grown 21x by both book value and estimated unrealized capital appreciation since our IPO. In total, the unrealized capital appreciation portfolio is comprised of approximately 38,000,000 square feet of institutional-quality commercial real estate, consisting of nearly 23,000 multifamily units, 12,600,000 square feet of office, over 5,000 hotel keys, and 2,000,000 square feet of life science and other property types. Continuing on slide four, let me detail our quarterly and annual earnings results. For the fourth quarter, GAAP revenue was $97,900,000. Net income was $27,900,000 and earnings per share was $0.39. The increase in quarterly GAAP earnings year over year was primarily driven by $3,500,000 net accretion on investment fundings offset by a nonrecurring $2,200,000 loss on the early extinguishment of debt. Excluding the nonrecurring loss, earnings per share for the quarter was $0.42, up 15% year over year. For the full year, GAAP revenue was $385,600,000. Net income was $114,500,000 and earnings per share was $1.59. The increase in annual GAAP earnings year over year was primarily driven by $17,200,000 net accretion from investment fundings, offset by a $5,100,000 decrease in management fee revenue from Star Holdings, and the same $2,200,000 loss on early extinguishment of debt. Excluding nonrecurring items, earnings per share for the year was $1.65, up 5% year over year. On slide five, we detail our portfolio's yields. For GAAP earnings, the portfolio currently earns a 3.8% cash yield and a 5.4% annualized yield. Annualized yield includes noncash adjustments within rent, depreciation, and amortization, which is primarily from accounting methodology on our IPO assets, but excludes all future contractual variable rent such as fair market value resets, percentage rent, or CPI-based escalators, which are all significant economic drivers. On an economic basis, the portfolio generates a 5.9% economic yield which is an IRR-based calculation that conforms with how we have underwritten these investments. This economic yield has additional upside, including periodic CPI lookbacks, which we have in 81% of our ground leases. Using the Federal Reserve's current long-term breakeven inflation rate of 2.25%, the 5.9% economic yield increases to a 6.1% inflation-adjusted yield. That 6.1% inflation-adjusted yield then increases to 7.3% after layering in an estimate for unrealized capital appreciation using Safehold Inc.'s 84% ownership interest in Carat at management's most recent estimated valuation. We believe unrealized capital appreciation in our assets to be a significant source of value for the company that remains largely unrecognized by the market today. Turning to slide six, we highlight the diversification of our portfolio by location and underlying property type. Our top 10 markets by gross book value are called out on the right, representing approximately 65% of the portfolio. We include key metrics such as rent coverage and GLTV for each of these markets, and we have additional detail at the bottom of the page by region and property type. Portfolio GLTV, which is based on annual asset appraisals from CBRE, remained flat quarter over quarter at 52%, and rent coverage on the portfolio was unchanged at 3.4x. We continue to believe that investing in well-located institutional-quality ground leases in the top 30 markets that have attractive risk-adjusted returns will benefit the company and its stakeholders over long periods of time. Lastly, on slide seven, we provide an overview of our capital structure. At year-end, we had approximately $4,900,000,000 of debt, comprised of $2,600,000,000 of unsecured debt, $1,300,000,000 of nonrecourse secured debt, $780,000,000 drawn on our unsecured revolver, and $270,000,000 of our pro rata share of debt on ground leases which we own in joint ventures. Our weighted average debt maturity is approximately 18 years, with no significant maturities due until 2029. At year-end, we had approximately $1,200,000,000 of cash and credit facility availability. We are rated A3 by Moody's, A- by S&P, and A- by Fitch, all with stable outlook. We have benefited from an active hedging strategy and remain well hedged for the short and long term. Our limited floating-rate borrowings are protected by a $500,000,000 SOFR swap locked at 3% through April 2028. We receive SOFR swap payments on a current cash basis each month. We have an additional $250,000,000 of long-term Treasury locks at a weighted average rate of 4% and current gain position of approximately $30,000,000. We recognize the value of our Treasury locks on the balance sheet but not yet on the P&L. We are levered 2.0x on a total debt-to-equity basis. The effective interest rate on permanent debt is 4.3%, and the portfolio's cash interest rate on permanent debt is 3.9%. To conclude, we saw strong production in the fourth quarter and are pleased with how the pipeline is developing for 2026, and we are well positioned to capitalize on opportunities with ample liquidity and improved debt cost of capital. And with that, let me turn it back to Jay. Jay Sugarman: Thanks, Brett. Go ahead and open it up for questions. Operator: Certainly. The floor is now open for questions. If you have any questions or comments, please press 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just a moment while we poll for any questions. Your first question is coming from Mitch Germain with Citizens Bank. Please pose your question. Your line is live. Mitch Germain: Good morning, and congrats on the quarter and the year. Mitch Germain: Jay, it sounds like you are a bit more constructive about putting capital to work here. Obviously, a lot of your origination volume has been in the multifamily sector. Any potential willingness to invest back into office at this point? Jay Sugarman: Hey, Mitch. Good morning. I am going to throw that to Michael because we have been talking a lot about the opportunity set in 2026. Michael, you want to jump in here? Michael Trachtenberg: Hey, Mitch. How are you? Okay. I think that we are certainly going to look to expand the asset classes that we are investing in. I would say more broadly that we will be very, very particular if we look at office deals, and we are more inclined to look at other food groups. Mitch Germain: Got you. Q1 is a big quarter for office valuations. Any sense, you know, do you think that the worst is behind you with regards to some of the office downside with regards to the appraisals? Michael Trachtenberg: Yes, you are right. The first quarter is a big one. We have certainly seen a strengthening in some core markets like New York. That feels pretty good. Other places are a little bit behind, but we have seen CBRE, you know, take a pretty good whack at those. So I do not know whether we are absolutely at the bottom, but, you know, they have taken a pretty good whack at the markets that are slower to recover. Mitch Germain: Great. Last one for me. Jay, you talked about getting the Carats, I think you used the word recognized. Is it just outright sale of units? Is there anything else that you potentially have up your sleeve there? Jay Sugarman: Yes, it is a great question. Obviously one we have talked a lot about. I still believe fundamentally this is a massive asset that shareholders own that is not being recognized. I think one of the biggest issues is people still perceive it as a 100-year asset. We think we can recognize that value much, much earlier. It is tangible. It is measurable. In some respects, it is Safehold Inc.'s trust fund. Jay Sugarman: And so we are going to, you know, continue to point a spotlight at it. We are going to continue to look for things that can enable people to understand that value, whether that is liquidity or sales or monetization of some sort. But yes, we think as we start to grow the underlying portfolio again, this has to be part of the equation that shareholders factor in. We think the value is so significant that it deserves an enormous amount of our attention, and it will get it. Mitch Germain: Thank you. Operator: Your next question is coming from Kenneth Lee with RBC Capital Markets. Please pose your question. Your line is live. Kenneth Lee: Hey, good morning. Thanks for taking my question. Just one follow-up on the remarks around Carat. Just want to clarify. In the past, you have mentioned that to see any progress around liquidity or any other monetizations you would be dependent upon either a pickup in market activity or investor sentiment. But I just want to check that would you still be dependent upon any kind of pickup in activity before you could do anything with the Carats? Thanks. Jay Sugarman: Yes. I do not think it is a, you know, a specific thing, but it is obviously common sense. If Carat is growing, the underlying portfolio is growing. It is easier for people to understand the potential. And, you know, the marks have been, you know, candidly, with particularly on the office side, you know, a pain point for a couple years now. We feel like that is starting to stabilize. You saw UCA actually pop up this quarter. You know, that to us was a little bit of a precondition to get a wider group of investors interested or at least to take the time to understand Carat. So it feels like that is a, you know, a tailwind. If we can put that into the mix, it just makes everything easier. Kenneth Lee: Gotcha. Very helpful there. And just one follow-up if I may. Around buybacks, mentioned for the coming year, it sounds like there could be a little bit more emphasis around buybacks. Any way you could frame out either potential levels or a payout ratio and perhaps just talk about how leverage considerations would come into play here? Thanks. Brett Asnas: Hey, Ken. It is Brett. Yes, when we think about buybacks, we obviously feel like the stock is at a discounted level. And as you pointed out just now, we are cognizant of our leverage and our targets. In terms of our policy, you know, it has not really changed. In terms of leverage, we are at around 2x, and we want to be around that level or lower. So we are, you know, looking at our funding profile, again to the pipeline that Jay and Michael have brought up. You know, we are looking at what those obligations are going forward. And, you know, just again for context for folks about leverage, every $240,000,000 that we fund takes leverage up one tenth of a turn. So it feels like there is runway there. But, again, to effectuate buybacks, we want to be able to do that in somewhat of a leverage-neutral way. So a lot of the capital recycling exercises that we have talked about in the past, you know, we are constantly evaluating and exploring those and want to make sure that any transactions that we not only endeavor on but actually, you know, move forward with, we want to make sure that it has got, you know, multiple valves that help us from a strategic standpoint as well. So again, more to update going forward, but that is certainly, as Jay pointed out in his opening remarks, one of our core objectives for the coming quarters. Kenneth Lee: Gotcha. Kenneth Lee: Very helpful there. Thanks again. Operator: Your next question is coming from Harsh Hemnani with Green Street. Please pose your question. Your line is live. Harsh Hemnani: Thank you. So maybe you highlighted that the origination volume is getting better. 2025 was already an acceleration over 2024. And what is interesting is, at least over the last year, your unfunded commitments have burned off, at least the ones that were, you know, written in a lower-rate environment. And what is unfunded today is in that, you know, 5% initial yield-type range. Given that sort of backdrop and that there is no longer a significant mismatch between what you are going to fund, the yields on those and the cost of capital, as you think through funding your 2026 origination pipeline and also the unfunded commitments that are in place today, how do you think through funding those? Brett Asnas: Yes. When we look at our unfunded commitments, you hit the nail on the head, which is a lot of the lower-yielding existing commitments have rolled off. So today, we have about $140,000,000 of ground lease unfunded commitments. On the loan side, it is about $125,000,000. And as you noted, the economic yield of those ground lease commitments are in the low sevens, so making 5%+ cash yields. On the loan side, they are around SOFR + 300. So certainly accretive to what we are achieving on the debt side, especially with credit spreads coming in. So we are constantly evaluating both the existing hedges that we have in place as well as, you know, thinking about any rate moves moving forward. But, again, the T-locks that we have in place—there is that $30,000,000 of gain that is hung up—when we enter into new debt, those could be unwound and then amortized over the life. So that will help our earnings profile and, obviously, some of the cash metrics that you have mentioned. But any new funding activity on the new-deal front, you have seen the yields that we have been able to achieve. So there is more spread or more margin than we have had in our existing book over the past couple years. So we certainly feel like we are well positioned from a funding profile of those $265,000,000 of unfunded. Again, that will be over the course of, say, the next six, seven quarters. So that will certainly take some time to deploy. But in looking at those yields versus our cost of debt capital, it feels like that margin math is in the best place it has been for a while, net of the hedges that we have in place. Our credit spreads are at all-time tights, so we are feeling pretty good about continuing to be the ability to drive down our debt cost of capital. Harsh Hemnani: Got it. That is helpful. And then maybe does that change your math at all in between—it feels like at least last year, the majority of what was funded came from incremental leverage. Does it change your calculus at all between raising more equity capital versus, you know, continuing to tap the unsecured bond market? Brett Asnas: Not here in the near term, Harsh. I mean, again, the question that came from Ken and Mitch earlier, you know, we were talking about our leverage level at the moment and what it really means in terms of funding and deployment for an uptick. We have some room here. We have runway. So, yes, we do have equity capital solutions that are not, you know, issuing shares. Right? There are hybrid solutions. There is recycling capital. There are areas in which to keep leverage neutral. But, you know, in terms of tapping the unsecured bond markets, you have seen us issue both in the public and private market. That is something we are certainly going to look to here over the coming quarters to make sure we have ample liquidity to continue to do what we are doing. We feel good about our liquidity position right now. But while credit spreads are at tights and, you know, our bond complex has more liquidity than it ever has, we want to make sure that we are being thoughtful about what that pipeline and deployment looks like versus our funding needs. Harsh Hemnani: Sounds great. Thank you. Operator: Your next question is coming from Rich Anderson with Cantor Fitzgerald. Please pose your question. Your line is live. Rich Anderson: Thanks. Good morning, everyone. Rich Anderson: Just to put a finer point on the whole buyback theme. Is it fair to say that you could be kind of killing two birds with one stone in the sense that you sell assets, get a price discovery event for the Carat, use those proceeds to buy back stock, and do it in a leverage-neutral way? Is that one sort of collection of events that, you know, we could potentially expect for 2026? Jay Sugarman: Yes. Certainly. Brett Asnas: I think that components of what you mentioned there are in the cards. We certainly would like to make a lot of that happen. Those are our goals. So again, you know, we think the stock is quite discounted, and we want to bridge that gap and create, you know, shareholder and stakeholder value. And some of those ways of recycling capital, you know, eating our own cooking, and making sure that we are also growing the book accretively, we think we could accomplish all those goals. Jay Sugarman: Eating our own cooking. I like that. Jay Sugarman: I am going to write that down. So, could you maybe, you know, other forms of equity capital, you know, perhaps more JV capital in the mix—is that something that you are entertaining? You know, you certainly have one in place, but wondering if that is something you are entertaining to again, you know, create another equity option for the company. Brett Asnas: Yes. Certainly, again, having the right partners and the right cost of capital is really important. There is a lot of insurance capital out there that wants duration, that likes, you know, predictable, compounding cash flow that is inflation-protected. I think we are one of the few places in the universe that can offer that. And if there is something that we can do with any partner that is helpful to the overall franchise and is helpful to our cost of capital, that is always in the cards, and, you know, that could be in the form of things that we have done historically, like our venture with our sovereign wealth fund partner, or it could come in the form of others, other sorts of partners. But we are, again, to your point, looking for the best cost of capital that helps us kind of, you know, leap to the next place we want to be. And right now, with where our cost of equity capital is, solutions like that are front and center in our mind. Rich Anderson: Yep. Okay. I just want to sort of get that on record. I think it is, you know, important to the longer-term story. Maybe just a couple of quick ones. Can you provide, like, a net G&A guidance number for 2026 with the step down in the fee income and, you know, sort of where our models should, you know, ultimately land when you kind of have that event in April? Brett Asnas: Yes. It is a good question, Rich. Obviously, since we did the internalization back in early 2023, that management fee from Star Holdings has continued to decline. When we look at, you know, year over year from this past year to 2026, it feels like about a $5,000,000 net increase. So we are going from, you know, low $40,000,000 net G&A, net of the management fees, in 2025 to high forties for 2026. And then, obviously, just, you know, regular-way costs and expenses that we have within that line item, you know, typical inflation, etc. So we are, you know, we are targeting high $40,000,000. Rich Anderson: Okay. And does that fee income—is that the last year? Is 2026 the last year, or is there another year still remaining, a stub year of fee income? I do not remember. Brett Asnas: There is still more fee income to go. So there is a contractual schedule of a fixed amount, and then it will eventually turn to a percentage of assets. Rich Anderson: Okay. And then finally for me, on leasehold loans, you know, are you sensing more demand? It seems like at least there is more demand for a kind of a one-stop shop solution that you described in Cambridge. And, you know, how would you describe your leasehold loan in terms of its competitiveness to the market? What is the typical term on those loans? We got the pricing, but I am just curious how you know, you fold that in with the obviously long duration of the ground leases. Thanks. Jay Sugarman: So they are typically three years in term, occasionally have a little extension option period afterwards. We really look at it as a blended ground lease plus leasehold loan. It can be an attractive cost of capital as the entire envelope to the customer. Providing that one-stop shop has been a benefit to some, and we will selectively continue to deploy it where it makes sense, where we like the asset enough to want to go to that place on as an attachment point. Rich Anderson: Do you think your pricing is market? Do you think your pricing is below market, again as you consider, like, the one-stop shop solution? Brett Asnas: To sort of encourage people as a one-stop solution, we think that our pricing is, as a blended cost of capital, below market. I think we beat the overall market from kind of zero to wherever the last dollar one attachment point. Rich Anderson: Perfect. Thank you very much. Operator: Your next question is coming from Ronald Kamdem with Morgan Stanley. Please pose your question. Your line is live. Ronald Kamdem: Hey. I just wanted to double click back on, you know, the origination activity and sort of the opportunities to expand outside of California. Right? Maybe just a little bit more color on what are the sticking points. Is it finding the right partner? Is it regulatory? Is it the different jurisdictions? Just what are the frictions you think as you sort of try to replicate the success in some of the other states on the origination side? Thanks. Steve Wilder: Yes. Hi, Ronald. So you are right. On the affordable side specifically, the volume has been concentrated in California to date. That is the largest and most active of the affordable markets in the U.S. So we are making good progress there and penetrating that market. It is going to continue to be a big part of what we do, but we are also making really good progress in other states. So we are spending some time to study the state-specific mechanics, the regulatory regimes. It does take some time to build up pipeline and to get those deals across the finish line. But at this point, we have several other transactions in other states under LOI, and we think that will start to translate into closings over the coming quarters. Ronald Kamdem: Helpful. And then I am sure you are limited on what you could say on Park Hotels, but any sort of update on timing and for resolution—when this could all be behind us? Jay Sugarman: Yes. You are right. I cannot speak to it directly, but we do have a court date in 2027. Unfortunately, it cannot go quicker. But, you know, that is the time frame we have been given. And it is going to cost us, you know, $7,000,000 to get there, which is unfortunate, but you know, at least we have something to shoot for here to get our contractual rights recognized. Ronald Kamdem: Helpful. Thanks so much. Operator: Once again, if you do have any remaining questions or comments, please press 1 on your phone at this time. Your next question is coming from Kyle Bonsi with Truist Securities. Please pose your question. Your line is live. Kyle Bonsi: Thanks. Good morning. Just following up on the Park Hotels portfolio. For the two assets that did not renew, do you expect to continue to operate, release, or sell these? And what might that timeline look like? Jay Sugarman: We have got Hilton staying in place. So that was important. Again, the litigation is really going to dictate a little bit of what we can and cannot do. So timeline still feels like final decisions are going to be dependent on this court process. It is not our long-term goal to run these assets. But I think we need to let the litigation play out before we can make the right decision on timing. Kyle Bonsi: Great. Thank you. Operator: Mr. Hoffmann, there are no additional questions in queue at this time. Pearse Hoffmann: Thanks, everyone, for joining us today. If there are additional questions, please feel free to reach out to me directly. Thank you. Operator: Thank you, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
Operator: Hello everyone. Thank you for joining us and welcome to the Waste Connections, Inc. Q4 2025 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, please press 1 again. I will now hand the call over to Ronald J. Mittelstaedt, President and CEO. Please go ahead, Ron. Ronald J. Mittelstaedt: Okay. Thank you, Operator, and good morning. I would like to welcome everyone to this conference call to discuss our fourth quarter 2025 results and our outlook for 2026. I am joined this morning by Mary Anne Whitney, our CFO, and several other members of our senior management. As noted in our earnings release, adjusted EBITDA margin expanded by 110 basis points in Q4, capping a strong year for Waste Connections, Inc. driven by price-led organic growth, solid waste, and continued operating improvements. For full year 2025, delivered an industry-leading adjusted EBITDA margin of 33%, up 100 basis points year over year excluding lower commodities. We also completed approximately $330,000,000 of acquired annualized revenue, and returned over $830,000,000 to shareholders through share repurchases and dividends, while preserving flexibility for continued growth and return of capital. Before we get into much more detail, let me turn the call over to Mary Anne for our forward-looking disclaimer and other housekeeping items. Thank you, Ron, and good morning. Operator: The discussion during today's call includes forward-looking statements Mary Anne Whitney: made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including forward-looking information within the meaning of applicable Canadian securities laws. Actual results could differ materially from those made in such forward-looking statements due to various risks and uncertainties. Factors that could cause actual results to differ are discussed both in the cautionary statement included in our February 11 earnings release and in greater detail in Waste Connections, Inc.’s filings with the U.S. Securities and Exchange Commission and the securities commissions or similar regulatory authorities in Canada. You should not place undue reliance on forward-looking statements, as there may be additional risks of which we are not presently aware or that we currently believe are immaterial that could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change after today's date. On the call, we will discuss non-GAAP measures such as adjusted EBITDA, adjusted net income attributable to Waste Connections, Inc. on both a dollar basis and per diluted share, and adjusted free cash flow. Please refer to our earnings releases for a reconciliation of such non-GAAP measures to the most comparable GAAP measures. Management uses certain non-GAAP to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate these non-GAAP measures differently. I will now turn the call back over to Ron. Ronald J. Mittelstaedt: Okay. Thank you, Mary Anne. We are extremely proud of our accomplishments in 2025, led by disciplined execution to deliver better-than-expected operating and financial results. For the third consecutive year, employee turnover and safety incident rates declined, exiting 2025 at multiyear lows. In fact, building on a well-established track record for better-than-industry-average performance, in 2025, we reached historic company record levels in safety, our most important and impactful operating value. Moreover, that momentum has continued into January, when safety-related incidents were down almost 20% year over year to another record low. Additionally, we saw multiyear improvement in employee retention, to achieve our 2025 targeted voluntary turnover level of 10%, and we are continuing to raise or, in this case, lower the bar as we see momentum for continued gains. As expected, these ongoing improvements have driven cost savings, productivity gains, and improved customer service. As we had indicated would be the case, we are realizing related reductions in operating costs throughout the P&L, most notably in labor, repairs and maintenance, and most recently, risk management. Moreover, we have seen incremental benefits from pricing retention as a result of enhanced employee retention and customer satisfaction. In fact, solid waste core pricing of 6.5% in 2025 exceeded our original expectations for the full year, further expanding an outsized price-cost spread and contributing to underlying margin expansion of 100 basis points in solid waste. This outperformance enabled us to overcome incremental pressure on reported margins related to a second consecutive year of declines in value for recycled commodities and renewable energy credits associated with landfill gas sales, as well as continued sluggishness in underlying solid waste volumes. Not only did we report our expected adjusted EBITDA margin expansion to an industry-leading 33%, but we did so in spite of recycled commodity values at multiyear lows and without contribution from operations at Chiquita Canyon Landfill, which we closed at the end of 2024. On the subject of Chiquita and the closure-related outlays, we continue to make progress on managing the elevated temperature landfill, or ETLF, event. The technical aspects of that process are moving forward largely as expected, subject to some timing differences on outlays as we have made better-than-expected progress in some areas. On the other hand, the political challenges of resolving this situation continue to exceed our updated expectations primarily because of related regulatory, permitting, legal, consulting, and other unanticipated requirements that have dragged out and inflated an already burdensome and dysfunctional process. As we have indicated previously, to address these regulatory challenges, we have sought out and we welcome the involvement of the U.S. EPA and constructive efforts to streamline processes, remove regulatory impediments, and enable a more effective and efficient response. We are encouraged by recent meetings we have had with top officials at the U.S. EPA about their further engagement at the site. U.S. EPA has indicated they are finalizing next steps to support short- and long-term solutions to assist Chiquita in further mitigating and managing the reaction and streamlining the regulatory oversight at the landfill. Moving next to acquisitions. During 2025, we closed approximately $330,000,000 in annualized revenue from 19 acquisitions, ranging from West Coast franchises to competitive markets, including integrated businesses, new market entries, and a number of tuck-ins to existing operations. Our expected 2026 rollover revenue contribution of approximately $125,000,000 reflects a few additional deals already completed this year and is expected to grow with our active pipeline. As always, we stay selective about the markets we enter and disciplined about the amounts we pay. We would consider any additional deals as upside to our full-year 2026 outlook. Our focus has been and will continue to be solid waste, and we look forward to building on a model that has consistently delivered value creation. Following multiple years of outsized acquisition activity, we remain well positioned for future growth. With leverage of 2.75x debt to EBITDA, our strong balance sheet and free cash flow generation allow for continued investment in acquisitions, along with other opportunities, including growing shareholder returns. To that end, during 2025, we increased our quarterly per share dividend by 11.1% to return a record amount to shareholders, including over $330,000,000 in dividends, and over $500,000,000 in share repurchases. We have taken an opportunistic approach to share buybacks, and intend to continue to do so. We recognize that market sentiment and capital flows may shift over time; that does not change the fundamentals of our business or the durability of our model, which makes buybacks compelling in the current environment. Additionally, we are reinvesting in the business and positioning ourselves for further growth and value creation through both sustainability-related projects and artificial intelligence, or AI, technology-driven initiatives. Looking first at sustainability. We continue to make progress developing our portfolio of renewable gas, or RNG, facilities, including five already online, with the remainder expected to be operational around year-end. We have also broken ground on an additional state-of-the-art recycling facility expected online in 2027. Looking next to AI and our multiyear rollout, which began in 2025, these investments are aimed at enhancing efficiency and boosting productivity by further digitizing and automating our operations and improving forecasting through data analytics. At the same time, we are focused on service and customer experience for improved transparency and mobile connectivity. What is exciting is that we are just getting started. We are already seeing positive outcomes as we expand the utilization of AI and data analytics across multiple platforms. For instance, we have enhanced our dynamic routing platform to further optimize asset utilization performance. Promising early indications show direct and indirect benefits beyond cost reductions ranging from improvements in safety and employee engagement to enhanced customer satisfaction and retention. We are excited to build upon these efforts as we deploy additional applications and expand our development in 2026 and 2027. I will now turn the call over to Mary Anne to review more in-depth the financial highlights of the fourth quarter, as well as provide a detailed outlook for the full year 2026. I will then wrap up before heading into Q&A. Mary Anne Whitney: Thank you, Ron. In the fourth quarter, we delivered revenue of $2,373,000,000. Acquisitions completed since the year-ago period contributed about $58,000,000 of revenue in Q4, net of divestitures, bringing full-year net acquisition contribution to $377,000,000. Q4 pricing accelerated sequentially to 6.4% and ranged from about 3.7% in our mostly exclusive market Western region to over 7% in our competitive markets. Reported volume down 2.7% was in line with prior quarters and continued to reflect the combined impact of intentional shedding, price-volume trade-off, and ongoing weakness in the more cyclically driven elements of the business. Looking at year-over-year results in the fourth quarter on a same-store basis, roll-off pulls were down 2%, and total landfill tons were up 3%. On MSW and special waste both up 4%, while construction and demolition debris, or C&D, was down 4%. For the full year, C&D tons were down 5% year over year, bringing tons down about 15% from 2023. Special waste, on the other hand, was up 7% for the full year 2025 following declines in two of the last three years. And finally, full year 2025 MSW tons were up 3%, in part as a result of our purposeful increase in internalization in the Northeast and in certain Texas markets. We are encouraged by the consistency of results in 2025 and macro indicators that suggest improving underlying dynamics in the broader economy, but have not factored in a material pickup in our expectations for 2026. Adjusted EBITDA for Q4, as reconciled in our earnings release, was up 8.7% year over year to $796,000,000 or 33.5% of revenue, up 110 basis points year over year. In Q4, we lapped the initial wind-down of operations at Chiquita Canyon Landfill, as well as the toughest year-over-year commodity comparisons, both of which had masked the strength of underlying margin expansion on a reported basis. As anticipated, the outsized benefits from operational improvements that had been contributing all year were more visible in Q4. Along those lines, we were encouraged to see benefit from risk management costs which up until Q4 had been a headwind to reported results. Looking at the full year 2025, adjusted EBITDA of $3,125,000,000 was up 7.7% year over year, with adjusted EBITDA margin of 33%, up 50 basis points. Normalizing for Chiquita and lower commodities, the adjusted EBITDA margin exceeded 33.6%, as expected. Moving next to adjusted free cash flow. Our 2025 adjusted free cash flow of $1,260,000,000 was largely in line with our expectations and reflects underlying conversion of adjusted EBITDA of approximately 50%. Strength of our free cash flow generation largely overcame higher-than-expected cash flow impacts from Chiquita, which totaled approximately $200,000,000. Capital expenditures of $1,194,000,000 were in line with our expectations, including RNG projects spend of about $100,000,000. Our RNG spend for the projects noted will be completed in 2026, and Chiquita outlays are expected to step down, setting up higher free cash flow conversion which has been factored into our 2026 outlook, which I will now review. Before I do, we would like to remind everyone once again that actual results may vary significantly based on risks and uncertainties outlined in our safe harbor statement and filings we have made with the SEC and the securities commissions or similar regulatory authorities in Canada. We encourage investors to review these factors carefully. Our outlook assumes no change in the current economic environment. Our outlook also excludes any impact from additional acquisitions that may close during the remainder of the year and expensing of transactions-related items during the period. Revenue in 2026 is estimated in the range of $9,900,000,000 to $9,950,000,000. For solid waste collection, hauling, and disposal, we expect organic growth in the range of 3.5% to 4%, driven by core pricing of 5% to 5.5%, with expected yield of approximately 4% implying volumes flat to down about half a percentage point. Acquisition revenue contribution of about $125,000,000 reflects deals closed to date. Commodity-related revenue reflects recent values, and E&P waste revenues are expected to be flattish year over year. On that basis, adjusted EBITDA in 2026, as reconciled in our earnings release, is expected in the range of $3,300,000,000 to $3,325,000,000. Adjusted EBITDA margin in the range of 33.3% to 33.4%, up 30 to 40 basis points year over year, reflects the commodity-related drag of 20 to 30 basis points. As noted, incremental acquisition activity, any improvement in the underlying economy, or increase in commodities would provide upside to our 2026 outlook. Depreciation and amortization expense in 2026 is estimated at about 13.1% of revenue, including amortization of intangibles of about $195,000,000 or $0.57 per diluted share net of taxes. Interest expense is estimated at approximately $330,000,000 and our effective tax rate for 2026 is estimated to be approximately 24.5% with some quarterly variability. Adjusted free cash flow in 2026, as reconciled in our earnings release, is expected to increase by double-digit percentages to a range of $1,400,000,000 to $1,450,000,000. CapEx estimated at $1,250,000,000 includes an aggregate of about $100,000,000 for RNG and recycling projects. And our adjusted free cash flow outlook also reflects $100,000,000 to $150,000,000 impact from closure-related outlays at Chiquita Canyon. Normalizing for both non-core impacts, 2026 adjusted free cash flow reflects conversion of approximately 50% of EBITDA or approximately $1,700,000,000. While not providing specific expectations for revenue and EBITDA by quarter, we would offer the following high-level Ronald J. Mittelstaedt: framework. Mary Anne Whitney: For solid waste, we would expect a typical seasonal cadence and related margin progression in 2026, keeping in mind the recent outsized weather events across several geographies impacting Q1. Looking specifically at Q4, we would note the toughest year-over-year Ronald J. Mittelstaedt: comparison. Mary Anne Whitney: given our outperformance in 2025. And finally, for recycled commodities, a reminder that the toughest comparison would be in the first half of the year. Ronald J. Mittelstaedt: Thank you, Mary Anne. Coming into 2025, we emphasized excellence with humility, recognizing our ongoing commitment to a proven strategy for delivering industry-leading results while acknowledging the benefits of new ideas, innovation, and technology. We are excited about our progress in 2025 and the momentum in 2026 for another year of outsized solid waste margin expansion, along with double-digit adjusted free cash flow growth. Moreover, we are positioned for upside from any pickup in the economy or commodities as well as additional acquisitions. We are excited to win from within in 2026 and are grateful for the dedication of our 25,000 employees who set us apart by putting our values into action every day. We also appreciate your time today. I will now turn this call over to the Operator to open up the lines for your questions. Operator? Operator: Thank you, Ron. We will now begin the question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, please press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Sabahat Khan with RBC Capital Markets. Your line is open. Please go ahead. Ronald J. Mittelstaedt: Great. Thanks, and good morning. Maybe just starting with, Mary Anne, the free cash flow commentary that you shared. Mary Anne Whitney: Wondering if you can just delve a little bit more into sort of the sustainability CapEx, where that is going? And then just on the Chiquita as well, it sounds like $100 to $150. If you can just talk about the cadence of that spend, and then more importantly, as we think about free cash conversion in this year into 2027, just how should we directionally expect those two incremental amounts to evolve through 2026 and more so into 2027? Thanks. Mary Anne Whitney: Sure. Well, high level, to be clear, we would expect them both to step down 2026 to 2027. So first of all, in terms of sustainability-related outlays, the $100,000,000 includes the final $75,000,000 that we have been talking about for the large slug, that dozen or so RNG facilities, which, as Ron mentioned in his remarks, almost half of which are online, the balance are expected by around year-end. So that is done there. And then the incremental $25,000,000 that we mentioned is part of our efforts longer term, as we have described, to really de-risk recycle, take advantage of the incremental technology that provides benefits as a set of de-risking, reducing our cost to third parties, and also improving the quality of the recyclables coming. So that is just, you should think of that as there is this opportunity. It is a little out slug. We are always spending a little, but it is part of the $100,000,000 this year. And, again, I would not say that repeats going forward. With respect to Chiquita Canyon outlays, as we described, some of what was the outlays in 2025 reflect getting more done than we had anticipated. So there is some of that that continues to decrease as we move through that process. And then there are other pieces that we had not expected, the pace or the type of outlays that we are seeing. And so we certainly, when you say the cadence during the year, I would not put too much premium on how quickly those outlays are, just as you know CapEx and free cash flow in general is always lumpy during the course of the year. So I would encourage you to just think about it in totality for 2026. Mary Anne Whitney: Great. Thanks for that. And then maybe just stepping back on the broader guidance. I think the commentary indicates not a lot of, you know, not a lot of aggressive assumptions at least on the macro and the commodity prices. Maybe you can just share some thoughts around sort of what you baked in terms of the macro environment. You know, we are hearing some commentary on some of the sector calls around green shoots. If you can just comment on where you see potential sources of upside, whether that is on maybe the cyclical volumes getting a little bit better, whether that is maybe another above-average year of M&A. Just what have you baked in, and where do you think upside could come from if there is for the rest of the year? Thanks. Mary Anne Whitney: Sure. So as we have said, I mean, I would say there are three key things that we have not baked in. One is any improvement in commodity values. And so you see that headwind over the course of the year, which, as I noted in terms of quarterly cadence, is strongest. So the largest headwinds are a lot like Q4 when it was 40 basis points headwind. That is how to think about the first half of the year, and then those abate just as comps get easier. So to the extent that there is any pickup in commodity values, you would see a benefit there. Next, you heard us talk about, you know, with yield of about 4% that volumes are kind of in that flat to down half a point. That is not materially different from what we have been seeing in terms of that piece of the business that is the more cyclically exposed where you have had lower roll-off and C&D tons. And so to the extent that those improve or that there is incremental improvement in special waste, which we described being up year over year, that would be incremental. And we certainly agree with the characterization that others have made about green shoots in the economy, you know, from certain macro indicators. You know, we would point to, within our business, seeing the special waste pipeline firming. I would note that Q4 is our fifth consecutive quarter of improvement. And I look at the recent trends just in January and weekly trends. I continue to see those up in the most recent weeks. Next, commercial service increases are outpacing decreases with overall net new business up. That is encouraging. And while C&D is still down over the year, we have seen the declines moderating. You look back earlier in the year in Q2, we were down about 9% year over year, and we exited the year down more like 3.5% to 4%. So no improvement overall is factored in there. And then the final piece you asked about was M&A, and I will turn it to Ron. But, of course, as is our approach, we do not bake expected M&A into our outlook. What we have provided you are deals that have already closed. Ronald J. Mittelstaedt: Yeah. And, Sabahat, I would say that, you know, when we, at the third quarter call, I think we had reported that we had closed about $250,000,000 by then, that we expected to close some $75,000,000 to $100,000,000 thereabouts. You see we closed about another $80,000,000. That brought that number to $330. In fact, today, we have closed, and last week, closed about another $20,000,000 of that. So that brings you right to that $100,000,000 that we talked about that was out there that could occur during the fourth quarter or the very beginning of the year. So that has occurred. So there is no real change to M&A. As Mary Anne said, look. You know, I know you have not followed the space forever, Sabahat, but if you go back, there is a pattern by multiple companies within the space that tend to go out and put out guidance at the beginning of the year and make all kinds of improvement assumptions in the economy and then come back around in the third quarter or the fourth and back all those off. We do not believe that is a prudent way of providing guidance. We are providing guidance with what is known today assuming it does not improve, and if it does improve, it will be upside. So we just think that is a more conservative approach. Not saying there is anything wrong with the other approach, but this is a very consistent pattern for us, and actually for others in the space taking the approach they have. Mary Anne Whitney: Great. Thanks so much for the color. Operator: Your next question comes from the line of Tami Zakaria with JPMorgan. Your line is open. Please go ahead. Mary Anne Whitney: Hi. Good morning. Thank you so much. I think your pricing is moderating versus last year as some of the cost pressures are also waning. I was curious, could you elaborate on which buckets of expenses you are seeing moderation in and you believe are sustainably trending downward for the next few years? Ronald J. Mittelstaedt: Yeah. Tami, I mean, number one, you are correct. Price is moderating, and that is a good thing. We are happy about that. Remember, we do not always focus on the ultimate amount of the dollar amount or percentage of the price increase. We try to focus on maintaining the spread of, you know, 150 to 200 basis points spread to what we believe our cost is going up. So if you look at our guidance for price, core price of that 5% to 5.5% and say that is 100 basis points down from 2025, it would indicate to you that we believe our cost is down about 100 basis points relative to 2025 on an increased basis, and it is. You know, we began 2025 with labor rates approaching 5% year over year, and we exit Q4 with labor rates up about 3.9% year over year, and trending down towards 3% to 3.5% throughout 2026. We had other costs within the P&L in 2025 that began the year probably closer to 4.5% and moved throughout the year closer to up more in that 2.5% to 3%. So it is just about the spread. We look forward to not having to put as much dollar amount or percentage rate increase on our customers. They are feeling the same effects from the economy as everyone else. But if the spread has maintained the same, or approximately the same, then that is what we focus on. Mary Anne Whitney: Understood. That is very helpful. And I think we love hearing about all the tech and AI investments you are making to improve the efficiency in your business. Any exciting initiatives you want to call out specifically that are due for implementation this year that we can look forward to? Ronald J. Mittelstaedt: Well, yes, there are. And, you know, we are actually excited about them too. Whoever thought in an old-line industrial waste company that, you know, we would understand what AI even was. But this year, we are focused heavily on two incremental initiatives of seven that we have agreed to do between 2025–2027. This year’s two are moving the company into more of a dynamic, real-time customer routing opportunity. We have very good routing today, but it is what I call static. It has no ability to read incoming data. So you run the route sort of the night before or the week before. Where we are moving to is sort of a real-time routing that takes into effect things just like I have said on another call would be like Waze for your car. It takes in road closures. It takes in traffic conditions. It takes in third-party data feeds to allow us to react real time and resequence with the utilization of AI doing the resequencing, not somebody doing it in another way. So that is one. And the second one is we are developing a dramatically more robust mobile connectivity platform and working towards trying to eliminate inbound calls to our customer service groups locally by as much as, you know, 30% to 50% over a multiyear period. You know, we take over 1,500,000 calls from customers per month right now. And our objective is to get that down somewhere between, you know, 700,000 and 1,000,000 over the next couple of years by being able to push out information mobily to customers for the five to six most common things. We know what the five to six most common things customers are asking, and it is mostly because they are not receiving that information in real time, such as, you know, I think your driver did not pick me up today because he usually picks me up between 7 and 8 a.m., and in reality, he is going to pick them up that day, but the road has been closed due to snow. And so we are able to push out. They are able to see when their driver will arrive and where their driver is on their route, much like you do with your Uber if you order an Uber today. You know where they are and how far away they are. Those kinds of things are dramatic changes in efficiency and service quality for us. So those are two things that we are working to bring online in 2026. Mary Anne Whitney: Very exciting. Thank you. Operator: Your next question comes from the line of Noah Duke Kaye with Oppenheimer & Co. Your line is open. Please go ahead. Noah Duke Kaye: Hey. Good morning. Thanks for taking the questions. You know, Ron, in years past on M&A, you have talked about potential for an out year. How do you Ronald J. Mittelstaedt: assess, based on the pipeline, the potential coming into this year? Noah Duke Kaye: And then on Ronald J. Mittelstaedt: the same subject of capital allocation, Noah Duke Kaye: you said you will be opportunistic with the buybacks, but just given where the stock price and the valuation sit today, how opportunistic are you being here to start the year? Ronald J. Mittelstaedt: Well, let us tackle the first part of that, which was your M&A question. Look. As you know, M&A can be lumpy. We have had three very strong years in a row. No reason to expect that 2026 looks any different. There is nothing that has changed in the underlying opportunity basket. Nothing has changed in our appetite to complete deals or our ability to complete deals or our financial flexibility. So, you know, I think it is very fair that you and others, we should expect, you know, another sort of out year. Now how much of an outsized relative to a normal $150,000,000 to $200,000,000 year? You know, the year needs to play out to see that. But I think, hopefully, you look back at the last three years’ track record and we are not seeing something that would make us think that this year looks different. And we certainly have the capacity, as we said in our script, to do both whatever comes along at M&A and as much buyback and, you know, return of capital as we think is prudent based on the fundamentals of our business and what is driving those opportunities in the buyback. So we do not see any limitations on any of those. As far as, you know, every now and then, you pointed out that a larger deal comes along. And, you know, we looked at several things that we did not pursue or were not successful on in 2025, and we had one of those in 2024, had one of those in 2023. I mean, certainly, there is a good chance that happens in 2026. But we do not bank on any of that or forecast any of that, because that just leads to overpaying and pushing to do something that you might not otherwise have done. So we continue to look at everything and be very active. But we are going to continue to be very disciplined in our approach to what we think is a quality asset for, you know, long-term value creation. Noah Duke Kaye: Very helpful. Noah Duke Kaye: We can table the buybacks until we see your results, I guess. I really want to get after, because I think it is just so important for a lot of investors, you know, the underlying free cash flow conversion becoming the headline free cash flow conversion. You know, to be doing 50% underlying is really impressive. So on these moving pieces, the sustainability CapEx, you know, and Chiquita. I guess with sustainability CapEx, you know, is 2026 really kind of the last big slug that you envision and we go from $100,000,000 down to, you know, almost nothing on RNG in 2027? Is that the right way to think about it? And then on Chiquita, you know, I guess just—yeah. Go ahead. I just built the last one on Chiquita is really Ronald J. Mittelstaedt: Go ahead. Ask the Chiquita, and we will answer you both. No problem. Noah Duke Kaye: Thank you for your patience. I think just to help us understand kind of your level of confidence that 2026 is really kind of the last big chunk of spend there. Maybe help us understand a little bit better how it has played out and why that might be the case and, you know, where, pending any, you know, big regulatory change, you could see this kind of winding down to in 2027. Ronald J. Mittelstaedt: Sure. Okay. Well, let us address the—you made a comment about the buyback. First off, look. We do not communicate at any time, whatever the stock price is, what our intentions are. We have, obviously, our view of underlying fundamental value that we are running at all times. And we are going to be active. That is what I can tell you. And so I think that speaks for itself. You saw what we did in the third and the fourth quarters when there was dislocation. On RNG, there is actually a two-point inflection that you need to think about here for this conversion moving back. And you are right. 50% is impressive, but I would remind we have been as high as 53–54% at one point in time. So getting back to 50% for us is actually very average of where we have been. But next year in 2027, you lose the CapEx that has been associated with this RNG, these 12 projects, and you now begin most of the full contribution of the EBITDA and free cash flow. So it is sort of a double whammy for 2027 in that vein. Noah Duke Kaye: Now Ronald J. Mittelstaedt: will there be incremental RNG or sustainability in future years? Well, certainly, there could be. But that would be for new projects that represent incremental cash flow and growth opportunities, not related to the 12 original and the three to four big recycling facilities we have talked about. That piece will be done this year. We expected the outlay for RNG to be done in 2025, but the reality is we do not control all the timing on that outlay because of the permitting and the local utility interconnect that we have to respond to. And I think you are seeing that in everybody’s RNG, that it is taking a little longer to get online than original thoughts. But we are very confident in that $100,000,000, to answer your question, being done in 2026 and then the contribution being there for 2027 in the EBITDA and cash flow. Next to Chiquita. Look. What I would tell you is this. First off, I think you and other investors need to think through this this way. First off, an ETLF is nothing new in this industry. There are 10 to 15 going on right now across the U.S. in many states. Your large public companies have between three and five each going on today, that were going on last year, that were going on the year before. Noah Duke Kaye: The difference is Ronald J. Mittelstaedt: they do not have them in California. If this had happened in 49 other states, you and no one else would have ever known about it, which is why you do not know about the other 10 to 15 occurring. They are not in California. One is by one of our large competitors, but be thankful for them it is not in Los Angeles County. Noah Duke Kaye: It is adjacent. Ronald J. Mittelstaedt: The reason the EPA is involved at our request is because they are having an extremely difficult time understanding the dysfunctionality of California’s inability to resolve its own regulations. That is the issue. Okay? And so what we know is—your question was, is 2026 the last year of outlay for Chiquita and how confident? What we are confident is this is stepping down and continues to step down, and will step down fairly meaningfully in 2026 as the year goes on because of the involvement and the streamlining of what is coming along. Will there be some in 2027? Yes. But it will be quite lower again than 2026. So we should begin to approach those approximate 50% conversion levels as we come through 2027. Okay. So we cannot sit here and tell you will it be exactly that in 2027, without knowing where we will end with things on Chiquita in 2026? No. But all those things are triangulating to that direction. Noah Duke Kaye: Ron, thanks so much for the thoughtful Ronald J. Mittelstaedt: I will turn it over. Operator: Your next question comes from the line of Jerry Revich with Wells Fargo. Your line is open. Please go ahead. Jerry Revich: Yes. Hi. Good morning, everyone. Noah Duke Kaye: Good morning, Jerry. Ron, I am wondering—hi. Ron, I am wondering if you could just give us an update on how the Northeast rail corridor buildout is going. Update us if you do not mind on your expectations on shipments over the course of this year and the densification on the collection side as well. Where do we stand on that initiative? Sure, Jerry. And I think most Ronald J. Mittelstaedt: of you, what you are referring to is where we are in our Arrowhead Landfill in Alabama and our intermodal facilities along the Eastern Seaboard in Massachusetts, Connecticut, and New Jersey, New York. Again, to remind everybody, in August 2023, when we acquired this network, it was doing about 2,300 to 2,500 tons a day through the network into the landfill. We are now doing, you know, 7,500 tons a day sort of at the peak period. We have built out incremental rail, storage, and track capacity in our New York, New Jersey intermodal facility. We have incremental track buildout that we must do at our Arrowhead Landfill, which we are in the process of. We believe as we come through 2026 we will be in the 9,000 to 9,500 tons a day into our Arrowhead Landfill. So we are basically almost—not quite—almost quadrupling what was there two and a half years ago right now. So I would tell you that I think that is going fairly well. As is our continued densification, to use your word, in the Northeast. We did multiple tuck-ins in our New York franchise market area in 2025. We acquired at the end of the year a large transfer station as well in New York in Queens. We acquired a large recycling facility in Hoboken in 2025. So we have, I would say, put a lot of effort into building sort of our leading position, certainly at least in the New York City metro area. So I would tell you overall, Jerry, that continues to be a focus and continues to be opportunity there. But we have made good headway. Mary Anne Whitney: And, Jerry, the only thing I would add to Ron’s remarks would be just to clarify that where you have seen that increase in activity at Arrowhead, as we have talked about throughout 2025, it is really from internal tons as opposed to incremental third-party tons, and we had seen that as an opportunity. So two things. You see that in our internalization rates, which I mentioned in the prepared remarks, which are now up to almost 60%. And secondly, you see it in margin contributions, and you see the outsized margin performance in 2025. Decreased third-party disposal was a component of that. And that is really the impact of Arrowhead. Jerry Revich: Okay. Super. Appreciate the update. And then can we shift gears and talk about—just to expand on the landfill gas part of the conversation? So in terms of the timing getting pushed out, obviously, everybody is working Ronald J. Mittelstaedt: through that, so that is clear. What we are seeing from some others is the initial plant ramp-up and productivity and profitability has generally been lower for a number of operations. Can you just talk about how that is going for your plants that are coming online versus initial expectations in terms of efficiency rates and profitability ramp based on what is the most recent vintage that has come online? Ronald J. Mittelstaedt: Sure. Well, Jerry, I would say that your characterization that others are experiencing are very similar to ours in many ways. Look. These things are taking a little longer to get online due to mostly permitting and startup issues. But they get there. We get them there as a company and as an industry. There is multi-months, if not up to a year, to work out and get the flow accurate and really work through the startup issues of the plant. So you probably start up at somewhere maybe in a 40% to 50% efficiency, and you work up over time to, you know, approaching 100%. You are not at 100% efficiency till, you know, well after a year plus being online and getting your flows increased and everything dialed in. So the ramp is somewhat slow. Of course, profitability is affected by both revenue values. And as you know, RINs have come off a high of, you know, $3.40ish down to, you know, a low of two and now in that $2.40ish range. So, you know, they are down a third, and that certainly has an impact depending on your structure of the RNG ownership. Jerry Revich: Facility. Ronald J. Mittelstaedt: As you know, we and most others have sort of one of three types of a structure: fully owned, to some sort of hybrid, to a royalty arrangement. And it also is affected by inputs on the cost side, such as the cost of electricity. And, of course, that has had some waxing and waning. So I would tell you that the returns, while lower than probably—and certainly when run at $3.00 and $3.25—are still very good, extremely good returns at the, you know, $2.20 to $2.50 range on a RIN value and current electricity costs. Not as great as they were at a higher commodity value, but still very attractive and well worth the investment that we are making. Mary Anne Whitney: And, Jerry, when we look at our full-year outlook, we did not assume that facilities were necessarily contributing. They may have an incremental cost during the course of the year, or that they were going through testing. And as Ron described, at these lower run rates or efficiency rates there would be upside to the extent that moves along more quickly. And then, of course, any improvement in RINs as well would be upside to our guidance. Ronald J. Mittelstaedt: Yeah. And to give you an example, Jerry, a real-life example, I mean, we have one of the largest—we have the largest facility in Canada outside of Montreal that we have owned a long time. It is very effective. We started another one. It was supposed to be online in April 2025. It came online in December 2025, and it only began running at sort of close to full capacity in the last couple of weeks. So, you know, they can take a little longer, but they definitely—the performance is still attractive. Jerry Revich: I appreciate the discussion. Thank you. Operator: Your next question comes from the line of James Joseph Schumm with TD Cowen. Your line is open. Please go ahead. James Joseph Schumm: Hey. Good morning. Thanks for taking the questions. Ronald J. Mittelstaedt: I have a multipart question on Chiquita. Last quarter, you gave daily leachate production figures and how that was dropping. Can you update us there, and is it fair to assume that leachate costs make up, I do not know, 50% to 60% of your total Chiquita spend? And then also, what is the cost per gallon for disposal there? And do you see any opportunity to lower that cost with evaporation or any other potential help from the EPA. So, James, I will give you some high-level stuff on this because a lot of this changes fluidly quite frequently. But at the peak of the reaction, we believe the peak was somewhere between June and August 2024, we were generating as much as 400,000 gallons of leachate per day. As of the end of the fourth quarter, we were generating most days between 200,000 and 225,000 gallons. So that number, as you can see, is at least from the peak, down approaching 50%. We have other things such as wellhead temperatures that are cooling. So we have every reason to believe that the statistics point to that we are on the downward slope or the backside of the curve of the slope of the reaction as it is starting to cool and wane. What the slope of that trajectory line is, obviously, it is too early to tell. But the indicators are that we are over the hump and on the other side. So that is number one. You know, the cost per gallon varies. It can be as low as about $0.50 to $0.60 to as high as $1.50 to $2.50 depending on what treatment facilities are available and what constituents they can take. Some facilities cannot take various things that are within leachate. And so you have to transport further to a more complex treatment facility. And, yes, to answer your question, I would say that the leachate treatment is not 50% to 60%, but I would characterize it more as about 40% to 45% of the cost. Certainly, the large majority. And then lastly, I would tell you that, you know, I am not sure that evaporation is necessarily going to happen. This still resides within the state of California. But it is interesting you bring that up. Had a large one of these going on in Nevada right now, there you can purchase acreage and go out and aerate this in the desert for $0.02 a gallon. So it is quite interesting how one state handles this compared to a state like California. So I doubt we will get to evaporation. But, yes, we do believe that the involvement of the EPA can lead to some streamlining of treatment facility opportunities, and that ultimately leads to a more cost-efficient process. That is great. Thanks for all that detail, Ron. And then maybe just moving to Seneca Meadows. Can you provide an update there? You know, I think you guys had said you are pretty confident that this moves forward, but I do not think we have gotten resolution on that yet. And, you know, I was just curious if that landfill were forced to close, what kind of impact would that have on your EBITDA? Well, first off, two very good questions. Two-part. Hopefully, you know, both things we are going to answer here give you some comfort in this. First off, we absolutely do believe that that expansion will go forward. That is expected to happen here over the course of the next several months. We are in the technical review piece of the expansion with the state. And generally in the state of New York and other states, the technical review is really what the design, the final design, and contours will be relative to whether it is a go or no go. The go or no go is a separate process, and that has effectively been decided in our favor. So we have a very high degree of confidence that Seneca will succeed in its expansion and go forward. Noah Duke Kaye: But Ronald J. Mittelstaedt: in order to have enough airspace to honor our commitments, we have been throttling back volumes consciously at Seneca, our choice, over the last 18 months. And we have taken that to other landfills that we own throughout our network both in New York and Pennsylvania, and some to our Arrowhead network that we mentioned earlier, intermodal. We have also had to push out some third party to do that. And so, you know, we have overcome that as well in our results. But to answer your question, I would tell you that if Seneca were to close, as you said, if that is a worst-case scenario, the impact to us is far less than what we absorbed at Chiquita closing. So without laying it, it is far less, and you have seen us overcome the impact to EBITDA, revenue, and margin of Chiquita, and this would be far less. So it would be something I am not even sure you would Noah Duke Kaye: notice. Ronald J. Mittelstaedt: Okay. That is great color, Ron. Thank you very much for that. Operator: Your next question comes from the line of Adam Bubes with Goldman Sachs. Your line is open. Please go ahead. Adam Bubes: Hi, good morning. I think the outlook implies an improvement in the rate of change of volumes 150 basis points at least on an apples-to-apples basis with how you traditionally report. And it does not sound like that embeds macro improvements. So what are some of the moving pieces driving the rate of change improvement in volumes year over year? Mary Anne Whitney: Sure. As we have talked about volumes historically, the way we have communicated it, you had what we would characterize as that price-volume trade-off, or I would argue there is a piece of mix in there and churn. Also talked about shedding, and then we talked about the underlying economy. That price-volume trade-off, you know, the way we are communicating it, is embodied in the yield calculation just the same way our peers do. And so I would say that has not moved materially, although we look forward to seeing certainly the churn element of that continue to decline as we use better tools. And we have talked about the visibility we have there with our price increases. So then, you know, I would observe that the shedding has decreased. We talked about anniversarying one of those last contracts last year in Q4, so that is behind us. So I would expect that to be more de minimis. And then as we said, we still expect that there is some from those more cyclically driven pieces of the business. That is why we said maybe that is flat to down about half a point. That is essentially what you are seeing there. And, again, that does not mean that things are getting better. It is just that we are anniversarying these low rates and the comps are easier. And as we have said, we have already seen some pickup in special waste, and we are continuing to see our pipeline, our visibility on special waste projects improve. Again, no macro pickup. That is all upside. Adam Bubes: And then, Ron, you talked about the technology initiatives, specifically the real-time routing sounds really interesting. It sounds like you are in the early innings, but to what extent is that rolled out across the fleet today? And what type of initial savings or productivity are you seeing? Ronald J. Mittelstaedt: That is not yet rolled out to the fleet today, Adam, so it would be misleading to tell you that it is, and what we think those savings will be. We have beta-tested what we have done in, you know, probably what would equate to maybe up to 5% of our locations, but not at all of the routes on those 5%. So that is a smaller test. But I do expect that we will have this rolled out fairly broadly by the third and fourth quarter of this year, and then really more fully deployed throughout 2027, but have a good understanding of the potential impact in the second half of this year at some point. Adam Bubes: Great. Thanks so much. Operator: Your next question comes from the line of Christopher Allan Murray with ATB Capital Markets. Your line is open. Please go ahead. Ronald J. Mittelstaedt: Yeah. Thanks, folks. Good morning. Christopher Allan Murray: When we start looking at at least what you are proposing to see in 2026. Maybe turning back to, you know, the margin expansion that you saw in Q4. But, Ron, I mean, you alluded to the fact that a lot of this was Ronald J. Mittelstaedt: you know, attributable to, you know, there is some price-cost spread Christopher Allan Murray: gains, but it was also kind of the underlying Ronald J. Mittelstaedt: improvement in things like turnover and risk Jerry Revich: You know, Ronald J. Mittelstaedt: thinking that that stuff is not going to change, can you just maybe kind of square the circle on why you would not think that those trends would extend a little bit more into the year, and you are kind of looking at a lower year-over-year kind of growth rate? Mary Anne Whitney: Sure. So I guess what you are referring to is that we have guided to 70 basis points at the high end of underlying margin expansion after exiting the year at, you know—which, by the way, is about what we have seen through the course of the year—and then exiting the year at over 100 basis points margin expansion. And I would say that we recognize that the trends are still in the right direction, so there is certainly continued opportunity, and we factored that into our expectations for what we would characterize as an above-average margin expansion. From that price-cost spread, driven in part, as you note, by the employee retention and safety-driven benefits. Just remember, we had talked about about 100 basis points of margin expansion coming from that improvement over a multiyear period, and we are really two years through that multiyear period, and we mentioned that the final piece, the risk, is the largest contributor in the final pieces. So it is just an acknowledgment that as those metrics continue to improve, we look forward to seeing continued opportunity. Obviously, it gets harder the further down you go with improving these numbers and hitting record lows. But we will certainly look forward to continuing to drive those savings. And, Chris, I also think in terms of pricing retention and the improvement in churn that we have already seen from our pricing tools. So I think there is opportunity, which is why we are guiding to 50 to 70 basis points of underlying margin expansion when, as you know, that number would historically or typically be 20 to 40 in February. Jerry Revich: Fair enough. Other quick one just for me. The Canadian government changed its Ronald J. Mittelstaedt: or is introducing new regulations around methane emissions for landfills. Just wondering if you guys have any thoughts on how that could impact Noah Duke Kaye: the Canadian landscape, either creating some opportunities or some costs for you, and how you think that will actually impact the industry over the next few years? Jerry Revich: Yeah. I would tell you Ronald J. Mittelstaedt: Chris, that it is probably too early for us to make any real educated response to that. But I can tell you in speaking with our Canadian leadership team—we were just in Canada this week at our Canadian region office on Monday and Tuesday—and it was not something they were concerned about, based on everything they understood at this point. Mary Anne Whitney: Okay. I will leave it there. Thanks, folks. Operator: Your next question comes from the line of John Trevor Romeo with William Blair. Your line is open. Please go ahead. Ronald J. Mittelstaedt: Good morning. Thanks a lot for taking my questions. Just a couple of quick ones for me. I think first on the E&P business, would love to know, if you could kind of talk about in the quarter, I think you had some M&A deals contributing, but maybe talk about your organic growth you saw in Q4. And then as you think about modeling E&P for 2026, I think, Mary Anne, you said maybe flattish for the year. If you could talk about what you are expecting in U.S. versus Canada, is there anything to call out on a seasonal basis or anything else on that topic? Mary Anne Whitney: Sure. So looking at Q4, I would say we outperformed in Q4. That is the seasonally weakest quarter, and what we saw was some benefits in the U.S. from some remediation work, which, you know, that is episodic or lumpy, and so that was a nice add. And we saw continued outperformance in Canada. So both of those markets, even normalizing for acquisitions, were up year over year, and that is in spite of lower rig count and lower values for crude. So I would say that the business is arguably outperforming sort of the macro environment, and I think that the concerns that have been expressed looking forward, you know, we are certainly mindful, but we have seen no indication of a slowdown. And as I said, you know, we think in terms of how the year plays out at this point, we would say flattish is the right way to think about it and let it be upside, because, again, things like remediation jobs, those do not necessarily repeat every quarter. And so that is kind of the approach to the business. But generally speaking, very pleased that, as we have said before, the thesis on the Canadian business being more production-oriented played out last year, and our expectation is it continues to play out with the steadiness, the projectability of that business, which has not shown any signs of change. John Trevor Romeo: That is great. Thank you. That is it for— Mary Anne Whitney: Sorry. You are cutting out. Ronald J. Mittelstaedt: Cutting out. We could not hear you, Trevor. John Trevor Romeo: Hello? Hi, is this— Mary Anne Whitney: No. It is not better. Ronald J. Mittelstaedt: No. It is not better. John Trevor Romeo: I apologize if you cannot hear me. I guess you missed— Operator: Your next question comes from the line of Bryan Nicholas Burgmeier with BNP. Your line is now open. Please go ahead. Bryan Nicholas Burgmeier: Hi, good morning. Thanks for taking Mary Anne Whitney: the question. Can you hear me okay? Mary Anne Whitney: Yes. Loud and clear. Bryan Nicholas Burgmeier: Okay. Jerry Revich: Oh, great. Ronald J. Mittelstaedt: Just going back to the RNG business. Sorry if I missed it. But is Bryan Nicholas Burgmeier: $100,000,000 of EBITDA still kind of the right way to think about the contribution for 2027 or run rate Ronald J. Mittelstaedt: once that is fully operational? Is that still a good number to talk to? Mary Anne Whitney: Yeah. You know, I think that is a fair way to think about it based on what we know right now, and I would just remind you that there’s, you know, almost half of the projects are online. And so the incremental contribution would be what remains after that. Bryan Nicholas Burgmeier: Sorry. So you mean half the projects are online Bryan Nicholas Burgmeier: today? Bryan Nicholas Burgmeier: And so the Ronald J. Mittelstaedt: year-over-year 2027 versus 2026 will not be $100,000,000? Is that what you are saying? Bryan Nicholas Burgmeier: Correct. Jerry Revich: Yes. Bryan Nicholas Burgmeier: Okay. Okay. Okay. Thank you. Bryan Nicholas Burgmeier: But $100,000,000 in aggregate is the right way to think about Adam Bubes: the return on that overall investment. Mary Anne Whitney: That is right. Maybe a little higher. $100,000,000–$120,000,000, something like that. Bryan Nicholas Burgmeier: Okay. Thanks. Adam Bubes: And then just lastly, I think in prior calls, you called out Florida and Texas as being kind of weak or softer end markets. Is that still the case? Are you seeing—and then kind of related to that, did you see any weather impact in the quarter just broadly around some of the cold snap and stuff like that? Ronald J. Mittelstaedt: In the fourth quarter, are you referring to, or in the quarter we are now sitting in? We really did not see any weather impact in the fourth quarter. I mean, weather was, you know, somewhat mild, but nothing to note. Of course, in the month of January, there was a fairly significant cold snap that affected our business in up to 30 states, and certainly is some impact, but nothing material by any means. Mary Anne Whitney: Yeah. And just on Q4, really was not— you are right. We have mentioned those markets on construction-driven activity. I would say those stayed about the same, and there was a little incremental weakness in the Northeast that may have been some minor weather during Q4. Ronald J. Mittelstaedt: And to your question on Texas and Florida, I think Mary Anne Whitney: you covered it. That was a construction-driven slowdown since you guys were— Bryan Nicholas Burgmeier: Yep. Yep. Adam Bubes: Thanks, guys. I appreciate it. Thank you. Bryan Nicholas Burgmeier: Thank you. Operator: Your next question comes from the line of Shlomo Rosenbaum with Stifel. Your line is now open. Please go ahead. Shlomo Rosenbaum: Hi. Thank you very much Ronald J. Mittelstaedt: for taking my questions. Shlomo Rosenbaum: Ron, I want to go back to some of the things you touched on earlier in the call about the ability to improve your operations with technology, and you are talking about routing and dynamic routing and other things. I want to ask, when you kind of sequenced some of these things that you were looking at, did you go after the biggest opportunities first? And what should we be thinking about for subsequent years of things that you are going to attack? And just, is there a way to use technology that you are seeing that maybe could squeeze more out of the assets, maybe trucks, maybe not have to have so many trucks on reserve, in terms of proactively being able to get them using technology? I am just trying to get other things that might be out there that might be able to squeeze more efficiency out of the system, both operationally and then, frankly, from a capital perspective? Jerry Revich: Yeah. Well, Ronald J. Mittelstaedt: look. When we looked at this, we identified up to 40 areas that we could potentially look at the utilization of AI in some way or another. We prioritized the seven things over a three-year period that we thought had the biggest opportunity for impact to the business positively, whether that be from an operating, a financial, customer service, etcetera, efficiency. So those are the things we attack. Last year, we worked heavily, 2025, on commercial pricing and a couple of other initiatives in AI. This year, as I said, it will be on routing and mobile customer engagement. Without question, these initiatives should and I think will lead to improved efficiency, improved margin performance, and improved asset utilization. No question. You know, dynamic real-time routing allows you to move assets with information that today you do not really have or you have only reactively, not proactively. And therefore, you have to have a little bit higher spare factors in your fleet at locations, those kinds of things. You end up with a little higher overtime because you are reactive versus proactive. So it is not one of these things that moves the dial in one area, you know, 40 or 50 basis points. It is one of these things that moves seven or eight dials 10 to 20 basis points throughout your P&L over time. And so that is what we see and what we are seeing. And, ultimately, look, it provides a better service quality, a more proactive communication with your customer, a greater efficiency for your physical and your human assets, and greater projectability in your business. Those are the things we are expecting and we are seeing. So it just makes it better for all of our, you know, our shareholders, our customers, our employees, and ultimately our shareholders. So, yeah, we are excited about it. I think it is still early innings and not prepared to put a marker out there of what does this mean. But I can tell you that these investments, the payback is very quick. Jerry Revich: The payback is months Ronald J. Mittelstaedt: to maybe a year to year and a half. So these are very solid investments for the business. Shlomo Rosenbaum: Okay. Thank you for that color. And then just more of a tactical perspective. Mary Anne, can you talk a little bit about what a change in commodities prices would do to Shlomo Rosenbaum: revenue and EBITDA in 2026 versus the baseline that you are using right now? Mary Anne Whitney: Yes. So when I look at overall what our commodities sales are of about $250,000,000, that tells you a 10% move is around $25,000,000. And so what we have factored into our outlook is a 15% decline overall year over year, which translates to meaning based on current prices as compared to last year, and that translates to that 20 to 30 basis points of margin drag, which starts off probably a multiple of that in Q1 and drops down over the course of the year. Shlomo Rosenbaum: Very helpful. Operator: Your next question comes from the line of William Grippin with Barclays. Your line is now open. Please go ahead. William Grippin: Good morning. I appreciate you squeezing me in here. Adam Bubes: Just another one here on commodity prices. I know you are not baking in a recovery into the forecast, but just curious if you could maybe elaborate a little bit on what you are seeing in Ronald J. Mittelstaedt: market today and maybe what developments you are watching that could potentially William Grippin: signal or support an improvement in commodities prices off these cyclical lows? Mary Anne Whitney: Sure. So, Will, we saw some incremental weakness early in the fourth quarter, then there was stabilization, and what we saw most recently was a little uptick in OCC, which was encouraging. The reality is, though, that was offset by incremental weakness in plastics. So I would say, overall, the basket really has not moved, which, again, that informs our thinking for how we guide. Then what we are watching for and looking forward to would really be the uptick which is driven by underlying economic activity, which ultimately drives the demand, most importantly for fiber, which, as you will recall, is the majority of the value in a ton of recycled materials. So cardboard—commerce. Demand, consumer confidence, all those things that are the engines of driving consumption, which ultimately is what drives our business and recycled commodity values. Adam Bubes: Appreciate that. And then just coming back to RNG, and obviously the EPA William Grippin: widely expected to release the 2026–2027 biofuels RVO here, hopefully in the first quarter. Anything you are watching there that Ronald J. Mittelstaedt: could cause you to maybe change your approach to RNG offtake William Grippin: or capital deployment for those projects? Mary Anne Whitney: Really, just to be clear, these are terrific projects at a whole range of outcomes for RINs. And we have talked about delayed startup or the whole project development. If it goes to a couple-year payback or four or five years versus two or three, it is still very compelling. And as we remind folks, you know, we have $6,000,000,000 sunk into our landfills. Of course, we are looking to monetize the value as that gas—the waste—breaks down and generates gas. So you should expect us to continue to opportunistically pursue these projects. And, of course, we are completing the projects we have underway, and we look forward to delivering those returns. In terms of what we are watching, we are encouraged. You know, we do not know exactly where the RVOs come out or what RIN values do, but we have recently seen some improvement in the D5 RINs, which are a good indicator for D3 because that can be a substitute. And, again, we have seen stability in RIN values in that kind of $2.40 level. And we are encouraged by what we are seeing out there. So no change in the philosophy. As you know, we have taken a portfolio approach of not having outright risk on all of the RINs through a variety of ownership structures. We will continue to evaluate those opportunities over time and continue to own the most attractive in our network. But, again, no change in the thinking. As we have said, the largest outlays are behind us, getting through 2026 for this large group of facilities. But we will continue to have the one-off facilities over time as, again, as our landfills mature and the opportunities present themselves. Ronald J. Mittelstaedt: And one other thing I would say, William, that I think, you know, we were not going to talk about this, but since you raised the question, look. We have gone out and purposely recruited one of what we believe is the top RNG experts anywhere in the industry. And this person is an executive officer of one of the finest RNG companies. We work with all of them, and we have more regard for this company than anywhere else. And they have built and operated some of our facilities. And we have been laser-focused on figuring out how to have him join us, and he starts Monday morning. And we are very, very excited about that. We are not going to release that name right now because that is not appropriate for him or his company. But that, I think, shows you our commitment to RNG and our acknowledgment that we could continue to get better there. And like any area, just like we are doing in AI and others, if you have to go out and get the talent, we are going to go out and get the best talent we can find to drive what we may not be as good in as we are in some of our core competencies. So I think we will just continue to get better as we go forward in RNG starting Monday morning. William Grippin: Great to hear that. Sounds like a nice win and a great resource. I appreciate the color. Operator: Your next question comes from the line of Konark Gupta with Scotia Capital. Your line is now open. Please go ahead. Konark Gupta: Thanks for squeezing me in. Just maybe on free cash, I wanted to understand, Mary Anne, if besides earnings growth that you expect this year and lesser outlays on RNG and Chiquita, is there anything else in terms of major swing factors embedded in guidance or any wild cards to watch for free cash? Mary Anne Whitney: No. I think, you know, when you think about the free cash flow drivers, you have got that incremental $100,000,000 in EBITDA, the decline in Chiquita. You know, we gave you the CapEx number that steps up a little bit. Cash taxes step up a little bit because they were so suppressed this year. But, no, I would say those are the major moving pieces that you have probably already observed. Konark Gupta: Okay. Thanks. And just a clarification on the margin side of things. I mean, you said 50 bps to 70 bps of underlying expansion before commodities. But are there any headwinds that are embedded in that 50 to 70 bps, like, from Chiquita maybe? Or is there any, you know, tax offset that are swinging in the other direction? Mary Anne Whitney: No. We are talking about EBITDA margin drivers. No. There are no anomalistic headwinds that are out there. As I said, you know, we have lapped some of the outsized improvements that drove even greater underlying margin expansion, and we continue to work on all the same things. So we would look forward to unlocking even more margin expansion, but think this is the right way to guide. Ronald J. Mittelstaedt: Alright. Konark, thanks for taking that question. Thank you. Operator: Your next question comes from the line of Toni Michele Kaplan with Morgan Stanley. Your line is now open. Please go ahead. Yehuda Silverman: Hey. Good morning. This is Yehuda Silverman on for Toni. Thanks for squeezing me in. Just a quick question on Jerry Revich: strategy. Yehuda Silverman: So the comments you made about how Chiquita is being affected by being in Los Angeles and California being the difference between that and other ETLF events. Does that change your strategy at all of where you might want to operate in terms of more politically friendly areas? Is that something that is already factored in, or is this just sort of a one-off situation? Ronald J. Mittelstaedt: Well, it is clear we would rather operate only in jurisdictions that have a more friendly business environment. But, you know, we are obviously in 45 states, so that bet is already decided. I certainly would not pursue owning an additional landfill in California in the next 200 years. But, other than that, no. It does not change anything. Yehuda Silverman: Great. Thank you. Mary Anne Whitney: Your next Operator: question comes from the line of Kevin Chiang with CIBC. Your line is now open. Please go ahead. Kevin Chiang: Thanks for taking my question. Maybe just here on the Eastern region. A lot of good color on what you are doing with Arrowhead. You know, you are rolling out the franchises in New York. Does that change the structural margin profile of the Eastern region? Those seem like they would be tailwinds to profitability. And then just broadly on Arrowhead, does the potential merger of Union Pacific and Norfolk Southern change how you think about the growth opportunities within Arrowhead if you are partnering with a much bigger railroad there? Mary Anne Whitney: I will start with the margin commentary regarding our Eastern region. Certainly around the edges, as I mentioned, increased internalization does help margins. But, more broadly, the Eastern region’s margins are dictated by the high transfer and disposal expenses that are just inherent in that market. So that will never change. You can improve around the edges and look for ways to optimize within that market, and you have seen us do acquisitions that help on that front in terms of optionality. But, no, I would not encourage you to think about a major step change in the margins of the Eastern region beyond that. And then, Ron, I think— Ronald J. Mittelstaedt: Yeah. What I would say, Kevin, no. I do not necessarily believe that the franchise of New York City or the franchising model of the New York City market becomes necessarily a tailwind. What I do think, however, is it becomes a much more stable, less volatile market because it is a very competitive market up till now. And so you have large swings. So I think it becomes a much more stable, projectable, investable market than it has been in the past, where, you know, you can have a swing of a collection margin that goes from 10% to, you know, 6% to 20% in a three-year period. And now I think what you have is you will have a very tight bandwidth of margin performance for the most part at very good margins, at sort of company-average type margins on an integrated basis. Mary Anne Whitney: I think Kevin had also asked about the Norfolk Southern merger. Ronald J. Mittelstaedt: Oh, yeah. And, you know, look. I do not think—I mean, I think it is too early to tell what will happen in the UP–NS merger. You know, I think we are quite a ways away from understanding whether that will happen, and if it will happen, what will be the guardrails put around that. We have a very long-term agreement with Norfolk Southern that the combined company would be honoring, so we are not concerned about it in that way. Could it open up additional opportunity because of the connectivity between those two? Well, that is certainly a possibility, but not something we have yet explored. Kevin Chiang: That is great color. Thank you very much. Operator: Your next question comes from the line of George Bancroft with Gabelli Funds. Your line is now open. Please go ahead. George Bancroft: Good morning. Congratulations on doing great work, Ron and Mary Anne. My question, maybe you could opine a little bit here, Ron, on—you talked about automation and AI, but maybe a little further down the road. Thought of, you know, self-driving. Obviously, your largest part of your cost structure is Jerry Revich: or a very large part is your George Bancroft: labor and all the driver tightness and your focus, the industry’s focus on safety. You have seen, obviously, some recent reports about the improvements in safety in self-driving. Have you ever talked to, ever thought about it, tested, done anything—maybe having either doing like a leasing—self-driving? It seems like it would be a great market for taking people off the truck and more safety. Even if the person stays on the truck and then you just have that added safety and technology there. Just want to get your thoughts on that. Ronald J. Mittelstaedt: Yeah. I mean, you know, Tony, number one, just to say that we have done anything in that arena would be misleading because we have not. Do I think it is something that could potentially occur in the waste industry? Absolutely. I think it is potentially there. As you know, there are mixed views depending on where you are and what you look at on the self-driving vehicles. It is obviously happening in some markets today. So the technology is certainly there. George Bancroft: But, you know, I will tell you, Tony, as you know, I am on the board Ronald J. Mittelstaedt: of a publicly traded airline, and I can tell you that, you know, for the last seven to eight years, you can push a jet back from the jetway to actually do the runway, take off, fly to your destination city, land, open the door, with no one in the cockpit. I am not sure anyone is getting on that plane. But there are still pilots in every day. So there is this theoretical, could this occur, and then the reality of, you know, when a car gets in an accident, that is bad. But when a garbage truck hits something, it is catastrophic. And so, you know, even if it could, I still think you would have professionals in the cab there for those reactionary scenarios that occur if something malfunctions. Exactly the reason airlines have pilots today. It is not because they cannot do it without it. It is because of the one-tenth of 1% that happens that they protect everyone from. And I think garbage truck would be the same way. But certainly something we will look at as the technology evolves. You know, we are always, as are our peers, always looking for ways to improve the safety aspect of the business, the efficiency, the customer improvement. But I think it is quite a ways out, and then, you know, we look forward to the day, if that opportunity arises, where we can improve it, but it is not there today. George Bancroft: Thanks, Ron and Mary Anne. Great job. Ronald J. Mittelstaedt: You bet. Operator: Your next question comes from the line of Tobey Sommer with Truist. Your line is now open. Please go ahead. Bryan Burgmeier: Hi. It is Henry on for Tobey. Thanks for squeezing me in. Great to hear the labor turnover numbers and where those are to start the year. Could you just give us an update on driver academies? What percentage of new driver hires do you expect to pass through those in the coming year and how much of an incremental benefit that could have on labor turnover throughout the year? Jerry Revich: Thanks. Ronald J. Mittelstaedt: Yeah. Thank you for asking that question. So when we opened our academies—one at the start of 2024 and one at the end of 2024—we felt that if we could get to approximately 35% of our driver need per year being internally developed at our academies, we would consider that a tremendous success. We achieved that number in 2025, and for 2026, we are forecasting that 60-plus percent of our driver need will go through one of our two academies. So far exceeding our expectations. Now that is a twofold function. That is because we have reduced turnover quite dramatically, so the need for new drivers is not as high. But the second and more important thing is the retention rate through our academies is almost double the retention rate of those that do not go through our academies. And we also thought that would happen, but we did not think it would be quite as good as it has been, however. So we are getting a double sort of whammy, and that is what has helped decelerate, improve turnover so quickly. Do we ever think that gets to 100%? Probably not. But if it could stay in this above-50% range per year—what we call being internally developed and trained—we would be very happy. And, as I said, we believe that number will be north of 60% this year. So, so far, that—and, you know, again, what is that yielding? We are working through getting the statistics to support this. But we believe that the drivers that go through our academies—number one, the turnover is lower. We know there is direct linkage between turnover and tenure and safety. And so we think as we look out through this year into next year, the linkage will show that those drivers we internally develop tend to have better safety performance statistics as well. So that is sort of where we are there. Jerry Revich: Great. Thanks for Bryan Burgmeier: that. That is great to hear. And then just if we could quickly circle back to core pricing cadence over the course of the year, do you expect a pretty steady step down sequentially during 2026? And how much visibility do you guys have at this point in the year on the full-year guidance of pricing? Thank you. Mary Anne Whitney: Sure. So as is typical, you should expect pricing to step down sequentially. So, obviously, if we have talked about 5% to 5.5%, you would start north of that—maybe 6%—and drop down over the course of the quarters to something less than that to average that number in the middle. And in terms of visibility, as is typical in our model, by the time we report Q1, we will have visibility on 65% or 70% of our price increases. Most of the competitive piece will be done, and then we will have known amounts for our CPI-linked markets. So pretty typical for us in terms of the visibility. You know, we are a company that stops talking about price really after April. Operator: There are no further questions at this time. I will now turn the call back to Ronald J. Mittelstaedt for closing remarks. Jerry Revich: Okay. Ronald J. Mittelstaedt: Well, if there are no further questions, on behalf of our entire management team, we appreciate your listening to and interest in the call today. Mary Anne and Joe Box are available today to answer any direct questions that we did not cover that we are allowed to answer under Regulation FD, Regulation G, and applicable securities laws in Canada. Thank you again. We look forward to seeing you at upcoming investor conferences or on our next earnings call. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Greetings. Welcome to CSP Inc.'s first quarter fiscal year 2026 conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please note this conference is being recorded. I will now turn the conference over to your host, Michael Polyviou. You may begin. Michael Polyviou: Great. Thank you. Hello, everyone, and thank you for joining us to review CSP Inc.'s initial results for the fiscal 2026 first quarter ended on 12/31/2025, as well as recent operating developments. Today, with me on the call is Victor J. Dellovo, CSP Inc.'s Chief Executive Officer, and Gary W. Levine, CSP Inc.'s Chief Financial Officer. After Victor and Gary conclude their opening remarks, we will then open the call for questions. During the Q&A session, we ask participants to limit themselves to one question and one follow-up question, then requeue if you have additional questions. Statements made by CSP Inc.'s management on today's call regarding the company's business that are not historical facts may be forward-looking statements as those identified in federal securities laws. The words may, will, expect, believe, anticipate, project, plan, intend, estimate, and continue, as well as similar expressions, are intended to identify forward-looking statements. Forward-looking statements should not be meant as a guarantee of future performance or results. The company cautions you that these statements reflect the current expectations of the company's future performance or events and are subject to several uncertainties, risks, and other influences, many of which are beyond the company's control, that may influence the accuracy of the statements and the projections upon which the statements are based. Factors that may affect the company's results include, but are not limited to, the risks and uncertainties discussed in the Risk Factors section of the annual report on Form 10-K and the quarterly report on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements are based on the information available at the time those statements are made and management's good faith belief as of the time with respect to future events. All forward-looking statements are qualified in their entirety by this cautionary statement, and CSP Inc. undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date thereof. I will now turn the call over to Victor J. Dellovo, Chief Executive Officer. Victor, please go ahead. Victor J. Dellovo: Thank you, Michael, and good morning, everyone. As expected, our first quarter product revenue compared to the prior-year period reflects tough year-over-year comparables, which obscures the progress we continue to make executing on CSP Inc.'s core growth strategies and building long-term shareholder value. In the year-ago quarter, we recorded approximately $4,500,000 in a one-time product deal that did not repeat in fiscal Q1 2026, resulting in the decline in total revenue. As I have emphasized on prior calls, our strategic focus is on expanding service revenue and growing our MRR base. In the first quarter, service revenue, driven by ongoing momentum in the technology solution and managed service practice, grew 14.6%. The strength translated into a meaningful improvement in our overall gross margins, which reached 39.3%. The higher-margin profile contributed to a $171,000 increase in gross profit versus the prior-year period. We also continue to gain traction in the market with our differentiated and award-winning AZT Protect cybersecurity solution, supported by both new customer wins and multisite expansion with existing customers. Overall, our fiscal first quarter results reinforce our confidence that fiscal 2026 is shaping up to be a growth year for CSP Inc. Our technology solution business continues to lead our progress. Our offerings increase the efficiency and effectiveness of our customers' IT investments in networking, wireless, mobility, unified communication and collaboration, data centers, and advanced technology security. And while all our TS services are performing to plan, our managed cloud and managed service practice continue to excel. We are benefiting from the ever-expanding business and organizational migration to the cloud and the increased trends for enterprise of all sizes to acquire operation support required once the migration is complete. A primary factor behind this market driver is the growing complexity of the cloud and the unique and specific needs of each enterprise. Microsoft, through its Azure offering, is considered to be the market leader in this space, and our MSP practice is a platinum partner with the company. During our last call with you in December, we mentioned the increased investments we were making in the managed service practice. We have already begun to generate returns from the investment through the signing of new customers. In Q1, we signed new MSP customers that will generate nearly six figures in monthly revenue commencing this quarter. This traction has continued into the second fiscal quarter as we look out over the remainder of the year. We believe our service segment momentum can continue. Meanwhile, based on our best-in-class services, our customer's retention rate remains extremely high, contributing to expanding our gross margins in the service segment. We also achieved meaningful traction with our AZT Protect product suite in the first quarter, delivering year-over-year revenue growth. While we are still progressing towards the full market opportunity for cybersecurity solutions, the quarter reflected several encouraging developments. We secured multiple new site customers for AZT, and through our strategic partnership and distribution, continue to expand our pipeline of prospective deployments. Despite being in the market with the AZT for just over a year, we now serve over 46 unique customers, some of whom have multisite installations on the way and additional expansion opportunities. These customers span a broad range of verticals, including steel, energy, manufacturing, water utilities, pharmaceuticals, food, and telecommunication. Importantly, many of the highest-value multisite opportunities, each with potential to develop into seven-figure relationships, remain ahead of us as customers advance through their respective procurement and deployment processes. We have already received approval— Michael Polyviou: I believe we may have lost that. Gary, are you there? Gary W. Levine: Yeah, I am here. Let us take a look. Line connected? Operator: Ladies and gentlemen, please stand by. We will get Victor back on the phone. Gary W. Levine: Yep. One moment, please. I still see his line connected. Operator: I will reconnect it again. One moment, please. Michael Polyviou: Yep. Again, please stand by. We are trying to get Victor back on the phone here. Hello? Victor? Hello? How CSP Inc. Technology Solutions professional services can transform your IT challenges into a business advantage. We offer five core areas of expertise, including network— Victor J. Dellovo: Unified communications, operation. Michael Polyviou: Data center solutions, and advanced security. Operator: Your IT infrastructure is the backbone of your business, but managing and maintaining multiple mission— Michael Polyviou: Gary, perhaps it is Victor’s phone? Operator: —security can strain your resources and get in the way of executing your core business and IT strategy. CSP Inc. Technology Solutions managed services team can customize a— Michael Polyviou: We have Victor’s line connected. Operator: Alright. Victor J. Dellovo: Hey, Michael. Where did we leave off? I did not realize we dropped. Michael Polyviou: Why do we not just pick up on—well, Victor, it is probably easier if we could pick up from the beginning. If not, we could pick up on the top of page two. Victor J. Dellovo: Okay. We will talk technology solutions business. Yeah. Sounds good. Sorry about that, everyone. Our technology solution business continues to lead our progress. Our offerings increased the efficiency and effectiveness of our customers' IT investments in networking, wireless, mobility, unified communication and collaboration, data centers, and advanced technology security. And while all our TS services are performing to plan, our managed cloud and managed service practice continue to excel. We are benefiting from the ever-expanding business in organizational migration to the cloud and the increasing trend for enterprises of all sizes to acquire operation support required once the migration is complete. A primary factor behind the market driver is the growing complex of cloud and unique and specific needs of each enterprise. Microsoft, through its Azure offering, is considered to be the market leader in this space, and our MSP practice is a platinum partner with the company. During our last call with you in December, we mentioned the increased investment we were making in a managed service practice, and we have already begun to generate returns from that investment through the signing of new customers. In Q1, we signed new MSP customers that will generate nearly six figures in monthly revenue commencing this quarter. This traction has continued into the second fiscal quarter, and we look out over the remaining of the year, and we believe our service segment momentum can continue. Meanwhile, based on our best-in-class services, our customer retention rate remains extremely high, contributing to our expanding gross margin in the service segment. We also achieved meaningful traction with our AZT Protect product suite in the first quarter, delivering year-over-year revenue growth. While we are still progressing towards the full market opportunity for our cybersecurity solution, the quarter reflects several encouraging developments. We secured multiple new site initial site customers for AZT Protect and, through our strategic partnership and distribution, continue to expand our pipeline of prospective deployments. Despite having been in the market with AZT for just over a year, we are now serving 46 unique customers, some of who have multisite installations underway and additional expansion opportunities. These customers span a broad range of verticals, including steel, energy, manufacturing, water utilities, pharmaceutical, food, and telecommunication. Importantly, many of the highest-value multisite opportunities, each with the potential to develop into seven-figure relationships, remain ahead of us as customers advance through their respective procurement and deployment process. We have already received approval to proceed at several second and third site and our team is focused on rapid execution to demonstrate the substantial value AZT Protect delivers in preventing cyberattacks that otherwise can disrupt operations for days, or even weeks. The case studies developed from our initial industry installations are helpful getting our target customers to understand how exposed they are to operational disasters and how AZT Protect uniquely acts to prevent such disaster. For some, they are learning of the risk as operational technology customers continue to lack effective cybersecurity protection at the level AZT Protect provides. Unfortunately, for many, they do not realize their exposure until it is too late, and they are exposed. We continue to believe we have a strong competitive advantage in the space and believe that the market is starting to see us as a resource. The unique procurement process and development criteria for each customer previously mentioned has resulted in various timing delays which we continue to work through. Our team is resilient and committed, and we are not letting up. We continue to believe the effort will result in sizable AZT sales for the fiscal year unfolds. In addition to expanding direct pipeline, we are advancing strategic OEM relationships, most notably with Acronis, as they work to embed AZT Protect into their platform. While these integrations require time to mature, they represent highly scalable opportunities with substantial long-term potential. We also conducted our first webinar this quarter with Acronis, which drew nearly 200 attendees and generated more than a dozen demo requests. Engagement levels were strong, reinforcing our view that this go-to-market motion will be an important contributor to our long-term growth trajectory. In summary, we are off to a solid start of the fiscal year, with particularly strong performance in our service business. We believe we remain on track to deliver steady profitable improvements throughout fiscal 2026, supported by the infrastructure investments we are put in place to enable meaningful scale. As a result, we expect to generate substantial operating leverage as revenue grows. With that, I will turn the call over to Gary to discuss our recent financial results in more detail. Gary? Gary W. Levine: Thanks, Victor. For the fiscal first quarter ended 12/31/2025, we generated $12,000,000 in revenue as compared to $15,700,000 for the year-ago fiscal first quarter. Product revenue for the 2026 fiscal first quarter was $6,700,000 compared to product revenue of $11,000,000 for the 2025 fiscal first quarter. Last year's revenue for the quarter included several one-time transactions with customers totaling approximately $4,500,000, and we did not have any product orders of that magnitude in the first quarter of this year. Service revenue for the first fiscal quarter increased 14.6% to $5,300,000 from $4,700,000 in the year-ago fiscal first quarter. Gross profit for the fiscal first quarter was $4,700,000 versus $4,600,000 during the 2025 fiscal first quarter. The solid service revenue growth and mix during the quarter drove the gross profit margin increase. Gross profit margins for the first quarter were 39.3% of sales, which was slightly more than 10% higher than the gross margin for the prior 29.1%. Research and development expenses increased 9.2%, or $858,000, compared to the same period of prior year, as we supported the customization of the AZT Protect deployments and OEM embedding development. Sales and general and administrative expense for the fiscal first quarter declined $143,000 to $4,000,000. For the year-ago first fiscal quarter, the company had increased interest income that increased 23% over the prior year on our financing deals and interest on our cash. The company recorded a tax expense of $280,000, which represented a year-to-date effective tax rate of 75.5%. The differential between the company's effective tax rate year to date and the U.S. statutory tax rate of 21% is primarily due to state income taxes, changes in the valuation allowance maintained against certain state credits, and nondeductible executive compensation. Net income for the fiscal first quarter of 2026 was $91,000 compared to $42,000 in the prior-year period. Diluted earnings per common share were $0.01 compared to $0.05 in the prior-year first quarter. As of 12/31/2025, our balance sheet remains strong with cash and cash equivalents of $24,900,000. We would also like to point out that the decrease in cash from 09/30/2025 was primarily related to several financing deals that we closed in Q1 2026, and we are to collect approximately $3,300,000 from financing payments scheduled during the next two quarters. As we noted in the press release this morning, we will be paying a dividend of $0.03 per share on March 12 to shareholders of record of February 26. With that, I will turn it over to the operator for your questions. Operator: Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. To pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question for today is from Joseph Nerges with Seagram Investment. Joseph Nerges: Hello. Good morning, guys. How are you? Gary W. Levine: Good. Good morning, Joe. How are you doing? Joseph Nerges: Okay. A quick accounting question. We keep talking about service revenue. Do we have two categories service? When you talk service revenue, are we talking managed services, are we talking services beyond managed services? So are is there two categories or just one category? Gary W. Levine: For services revenue, it is— Joseph Nerges: Do you understand my question? Of— Gary W. Levine: Yeah. Multiple items, Joe. Joseph Nerges: Okay. It is not just one. Victor J. Dellovo: Alright. So then what are we talking about for managed service for the quarter? You— Gary W. Levine: I think you said—did you say $5,300,000? Is that correct? Joseph Nerges: Correct. The managed services portion of our services revenue— Gary W. Levine: For the first quarter—well, that is the total service revenues inclusive of, you know, the TS division as well as the— Joseph Nerges: Yeah, AZT— Gary W. Levine: Okay. So— Joseph Nerges: We do not break it out, Joe. Joe, we do not break it— Gary W. Levine: Okay. You are not breaking out between TS and— Joseph Nerges: I am just trying to understand where—how much of our managed—much revenue in managed services do we have? Victor J. Dellovo: A lot. Joseph Nerges: Yeah. Victor J. Dellovo: It is a good portion of it. I do not have that number right in front, but it is the majority. Joseph Nerges: Okay. So the majority of the $5,300,000 would be the managed services portion of it. Victor J. Dellovo: Okay? Joseph Nerges: Alright. Alright. Let me get past the accounting here. Let us talk about the Acronis just for a second. I noted that from the Acronis website, they changed their—we are going to be rolled into Acronis Cyber Protect. That is going to be their product, I understand. Is that correct? In other words, when we be into—it will be into not just a Cyber Protect. It will be over all— Victor J. Dellovo: It will be on their front GUI. So, like, even when they potentially want to do a backup, if the customer chooses, they can run our product to look at all the data and all the applications, making sure there is no issues before they back up the data. Joseph Nerges: Okay. Victor J. Dellovo: So, you know, previously, they had a product called Acronis Cyber Backup. Now they changed the name to Acronis Cyber Protect. That is, as I understand, where we will be rolled into. Joseph Nerges: So we—and are we not—are we not selling Acronis Cyber Backup? Have we not sold that in our TS division? Victor J. Dellovo: We have customers that are utilizing the Acronis down there. Joseph Nerges: Have we? Victor J. Dellovo: Yeah. Joseph Nerges: Correct. So, theoretically, we can increase our AZT sales force by incorporating our sales team in Florida who sell the Acronis backup service, which would now include AZT. You understand my question there? Victor J. Dellovo: It is not really. It is a statement. Gary W. Levine: Yes. Victor J. Dellovo: And the capability of the backup service for the possibility of adding AZT to it. Gary W. Levine: Correct. Victor J. Dellovo: And since we have customers, I assume, because we have been representing— Joseph Nerges: Yeah. Victor J. Dellovo: —have customers—a number of years in our TS division. We must have a number of—just in our division that have Acronis that are utilizing the backup service. Gary W. Levine: Solely. Victor J. Dellovo: Mhmm. Joseph Nerges: Okay? So in effect, our sales team in Florida can expand the backup service to include AZT for those customers that want to have that protection. Victor J. Dellovo: Yeah. If we are doing backup for a customer—you have to understand not all would do backup for. There are a few that we do. Joseph Nerges: Well, okay. I am good. But the few we do can all utilize the AZT admin if they start to— Gary W. Levine: Yeah. If they choose to— Joseph Nerges: If they choose to spend the money. Gary W. Levine: Yes. Joseph Nerges: Yep. Okay. I will let somebody else jump in. You know, I do not want to dominate the whole thing, but I will come back and put another question in after other people have a chance to ask questions. Gary W. Levine: Okay. Thanks, Joe. Operator: Your next question is from Mike Price, a shareholder. Mike Price: Good morning. Thanks for taking my questions. With AZT being embedded in the Acronis offering, there should be some predictability. Can you give us an idea of how that translates into revenue? I mean, at some point, it would be nice to have this quantified. Victor J. Dellovo: Yeah. We have not even fully integrated. We are building the APIs. So how that rolls out, Mike, is if we ever get that out there, that we have some outlook on that, I will include it. But at this stage, it is way too early. Mike Price: And how far out do you think that might be till you give us some idea of a dollar amount? Operator: I have no idea, Mike. Victor J. Dellovo: I am not going to guess at this stage. Right now, I am concentrating on the integration finished. Mike Price: Okay. And, also, it has been five months because the blackout period that you have been able to repurchase shares. Is that in the plans? With, you know, a $100,000,000 market cap and the stock within hailing distance of the twelve-month low— Gary W. Levine: Yeah. It is always been part of that. Yeah. We have been—we have been— Victor J. Dellovo: You know, unfortunately, locked out for a— Gary W. Levine: Yeah, for a while. It will open up in the next forty-eight hours, and we will do something this— Victor J. Dellovo: We will be doing some this quarter. Mike Price: Okay. And a statement along with that, it would sure show a lot of confidence if the insiders, other than Joe Nerges, were buying shares also. Just a statement. Victor J. Dellovo: Yeah. Mike Price: Okay. Thank you. Victor J. Dellovo: Thanks, Mike. Operator: Your next question for today is from Brett Davidson, a private investor. Brett Davidson: Good morning, gentlemen. Victor J. Dellovo: Morning, Brett. Brett Davidson: Just got a few quick things. Gary, I think you were talking about the repayments on the financing, the $3,000,000. Gary W. Levine: The interest. Brett Davidson: Yeah. Are we—are we still—so we are going to collect $3,000,000. That number on the balance sheet could conceivably drop, but are we still acting in that financing role? Is it going to drop on the balance sheet? Or it is just cycling through to another customer or whatever? Victor J. Dellovo: It could. Right? It could. Yeah. It is just—every customer is a little different, but those are the ones that we have already, you know, paid out, you know, paid for the product, and now we will be collecting. Brett Davidson: So— Victor J. Dellovo: Sometimes we are taking three-year deals for the customer and, you know, the payment structure for all deals are a little different. Brett Davidson: Okay. So we are still in that business. Just one of— Victor J. Dellovo: Yeah. We are offering it to customers that are high-quality customers, and it keeps us sticky inside the organization. And it is a good use of our cash. Brett Davidson: Yeah. You got your claws in them. Victor J. Dellovo: Mhmm. Yep. Brett Davidson: So the permission on the second and third sites—I am just interested in kind of when that occurred. Are we talking about just in the first quarter? Or does that continue into the current quarter, some of those second, third sites? Victor J. Dellovo: The ones that have multisite, there is two variations. The ones that we deal with corporate and then, you know, if they have 50 locations, like we did with one of our large pharmaceuticals, they bought from the corporate level, and we pushed it out to those 40-plus. In some cases, all the budgets are separated, so we have to go to—one of the ones I mentioned was that steel company. We have to go to all 20-some-odd sites. And we already got the third site—you know, one came in last quarter. One came in this quarter. There is another one in food industry that we got the second one. Another one in another industry came in actually yesterday for the third site. So, yeah, they are—unfortunately, it would be nice if we could just deal with corporate, take one purchase order, and push it all out. In some cases, that is not the case, so we have to go to every individual site, and it gets easier after the first one because we do not have to do another POC. We just have to go get budget money from them. And as I mentioned earlier in the script, every customer's purchasing process is a little different, so we have to kind of abide on how each one does that. And sometimes, unfortunately, they are very, very slow. Things take way more time than I think it should. But we are at the mercy of the customer. Brett Davidson: Well, from the description there, it sounds like this is becoming a more regular occurrence. Starting to happen with some kind of frequency. Victor J. Dellovo: Yeah. Like, last year at this time, we had two customers. A year later, you know, I mentioned we have 40-something. So we are doing that where we seed the product at one location. We try to get someone who can evangelize the difference between us and some of the competitors out there, why they should spend money with a small company like us, and how we truly do protect the endpoint and lock it down. And if we can get someone who can evangelize internally, it makes it a lot easier for the second, third, and multiple locations that they have. So, yeah, it is getting easier, but it is not easy. Every customer is a little different, and getting to know the customers and how they do business is a lot of work. But we are getting references, and the references are helping. We are working on a deal right now. They are like, who else do you do business with locally? And we mentioned it. He is like, oh, I know that person. Let me call him. If they get thumbs up on our AZT, I do not even have to do the POC. So things like that are happening. To me, it can always be faster. But things are happening in a positive direction. Brett Davidson: Yeah. I am—it is—yeah. You know, it is exactly what I am getting at. I fully get it that, you know, it is just really tough slog, but eventually, we get to the point where multiple of these relationships start to pay dividends and, you know, one guy is talking to another guy, and—I mean, do you get any feel yet of the kind of momentum where this starts to look exponential instead of linear? Or still too early? Victor J. Dellovo: Still a little too early. We are gathering the data. It is getting a little easier to connect dots, but it is still—you know, like I said, it is only been truly a year of really, really pushing this product and kind of figuring out the messaging, and every industry is a little different. So building those—you know, like I had mentioned in the script there, that we are putting these one-pagers together that represent the industry to try to make it a little easier to understand how we can help them, and why we are a little different than the competitors, where we fit in with those competitors. Sometimes we can go alongside of those competitors. They can do the IT side of it while we do the OT side of it. And how we can join all the logs on the one interface. So those are the messages that we kind of put together over the last year to try to make it a little cleaner, clearer to the customer—everything to speed up the sales process. Brett Davidson: So it sounds like the beginning signs are there, but it just has not fully mushroomed yet. I commend you for the hard work and moving this forward, and I will try and be patient. Victor J. Dellovo: Yeah. We are moving as fast as we can. I promise you that. You should know me. You know? I am not a patient person. Brett Davidson: Okay. Alright. Well, thanks for taking my questions. Gary W. Levine: Thanks, Brett. Operator: As a reminder, if you would like to ask a question, please press 1. Next question is a follow-up question from Joseph Nerges. Your line is live. Joseph Nerges: Okay. I am back on again. Okay. Just a little clarification. You elaborated on the expansion of our marketing and managed services, and I am trying to get the numbers. I heard them once, and I think we heard them through a repeat again. Well, you said that we are adding some new customers in managed services. Did you say that you thought it would be monthly revenues going forward of $100,000? I am trying to get the numbers that you gave in the— Victor J. Dellovo: Joe, we had a—we closed some nice deals. So a little clarity. When you close an MSP deal, it takes various time to get them set up and actually start billing them. Over the last—we closed some before the end of last year, we closed some nice deals. It took us a little time to get those up and running. And as of last quarter, we are starting to bill net close to $100,000, a little less than $100,000 additional per month of net new revenue for the MSP. That is net new revenue. Joseph Nerges: That is extremely good. That is what I thought you said, and that is the total of all the customers you have added. Victor J. Dellovo: Yeah. Those are just the additional increase per month. Joseph Nerges: Alright. Well, great. Thank you. That is that clarification. I thought that is what you said, but I just want to make sure that the numbers were added up to what I was thinking of. Thanks a lot. Thanks again, guys. Michael Polyviou: Yep. No problem, Joe. Operator: We have reached the end of the question-and-answer session, and I will now turn the call over to Victor for closing remarks. Victor J. Dellovo: Thank you, everyone, for joining us today. As I mentioned at the top of today’s call, we made progress on all fronts during the first quarter and are aggressively pursuing our opportunities for the remainder of fiscal 2026, both on the services side of the business as well as AZT Protect. We look forward to reporting on our progress with you in May. In the meantime, thank you to our shareholders for their support, to our team for their dedication and effort, and we wish everyone a good remainder of the day. Goodbye for now. Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, everyone, and welcome to Crane NXT, Co. Fourth Quarter and Full Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question-and-answer session. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 11 again. Please note this conference is being recorded. Now it is my pleasure to turn the call over to the Vice President of Investor Relations, Matt Roache. Please begin. Matt Roache: Thank you, Operator, and good morning, everyone. I want to welcome you all to the fourth quarter and full year 2025 earnings call for Crane NXT, Co. Before we begin, let me remind you that the slides we will reference during this presentation can be accessed via the Investor Relations section of our website at cranenxt.com and a replay of today’s call will also be available on our website. Before we discuss our results, I encourage all participants to review the legal notice on slide two, which explains the risk of forward-looking statements and the use of non-GAAP financial measures. Additionally, we refer you to the cautionary language at the bottom of our earnings release and our Form 10-Ks and subsequent filings pertaining to forward-looking statements. During the call, we will also be using non-GAAP financial measures, which are reconciled to the comparable GAAP measures in the tables at the end of our press release and accompanying slide presentation, both of which are available on our website in the Investor Relations section. With me today are Aaron W. Saak, our President and Chief Executive Officer, and Christina Cristiano, our Senior Vice President and Chief Financial Officer. On our call this morning, we will discuss our 2025 highlights, our financial and operational performance, and our 2026 financial guidance and outlook. After our prepared remarks, we will open the call to analysts for questions. With that, I will turn the call over to Aaron. Thank you, Matt, and good morning. I appreciate everyone joining the call today. Aaron W. Saak: I would like to begin by thanking our Crane NXT, Co. team members around the world for their performance during Q4. We have an exceptional team, and I am proud of our accomplishments throughout 2025. Starting with our financial results, we had a strong end to the year, executing our strategy of accelerating organic revenue growth while maintaining strong margins and free cash flow. Sales growth was approximately 20% in the fourth quarter, and 11% for the full year. Adjusted EBITDA margin was approximately 25% in Q4 and 24% for the full year. Additionally, our strong free cash flow resulted in a conversion ratio of approximately 135% in the fourth quarter and 94% for the full year, in line with our expectations. Finally, we delivered adjusted EPS of $1.27 in the fourth quarter and $4.06 for the full year. We continue to build momentum in executing our strategy to accelerate organic growth, and I would like to highlight a few of our key achievements this year. We ended 2025 with a total of 20 new currency denomination wins specifying our micro-optics technology. This result exceeded our target range of 10 to 15 wins and is one reason why I am so positive about the long-term outlook for the currency business. Notably, the new wins include five new denominations for the nation of Fiji, which unveiled a new series of currency in December featuring micro-optics integrated into polymer substrates. With our currency team’s continued streak of wins, and organic backlog up more than 30% year over year, we are highly confident in our sales outlook for this business in 2026. Also in 2025, we successfully completed the final equipment upgrades to support the launch of the new U.S. currency series. With design and testing finalized, we are preparing for the release of the new $10 bill later this year. And we are excited, as I know many of you are, for the U.S. Treasury unveiling of the new design we think will likely be in mid-2026. In 2025, we also secured significant contracts in our Crane Authentication business across major customers, including the world’s most recognized sports leagues. As a reminder, earlier last year, we announced that we renewed our multiyear contract with the National Football League to provide physical product authentication and online brand protection services, and in Q4, we signed a multiyear agreement with Major League Baseball to provide security technology for their consumer products. We are confident that these partnerships, together with other contracts we have with some of the world’s most recognized brands, will continue to drive growth. We also continue to build upon our market-leading positions in authentication traceability technologies. In 2025, we further strengthened our leadership in global authentication through the creation of Crane Authentication, combining OPSX Security and De La Rue Authentication into one integrated business. We made significant progress executing on our synergies, including 80/20 initiatives, which will drive significant margin accretion in this business in 2026. Additionally, in the fourth quarter, we closed our initial equity investment in Antares Vision, a global leader in providing advanced detection systems and track-and-trace software, expanding our presence in higher-growth end markets, including life sciences and food and beverage. And we are on track to complete this acquisition and take the company private in mid-2026. Finally, to capitalize on increasing demand, we are investing in the future growth in our international currency business, and I will provide more details on this later in the call. In summary, throughout 2025, we continued to execute our strategy, accelerating revenue growth, building momentum in key strategic areas, and expanding our market-leading positions. We are taking meaningful steps to position the company for success, and we are in a strong position to deliver long-term shareholder value creation. So thank you again to our entire Crane NXT, Co. team for your dedication in 2025 and commitment to continued success in 2026. Now with that, let me hand the call over to Christina to review our fourth quarter and full year financial performance in detail, as well as our 2026 guidance. Matt Roache: Christina? Operator: Thank you, Aaron, and good morning, everyone. Christina Cristiano: I would also like to echo Aaron’s thanks to our associates for their continued hard work. I appreciate your contributions and your commitment to our customers and shareholders. Starting on slide four, sales were $477 million in the quarter, an increase of approximately 20% year over year, driven by acquisitions and continued strong performance in Crane Currency. Core sales increased approximately 5%, reflecting accelerating growth in SAT, partially offset by expected softness in CPI. Adjusted segment operating margin of approximately 26% declined approximately 120 basis points versus the prior year, reflecting additional costs and investments to support increased demand in international currency as well as unfavorable FX, which I will speak more about in a few moments. Adjusted free cash flow conversion was very strong at approximately 135%, underscoring our robust operating discipline, and we delivered adjusted EPS of $1.27. Moving to slide five. Full year sales were approximately $1.7 billion, an increase of approximately 11% year over year, with core sales growth of approximately 1%. Adjusted segment operating margin decreased approximately 260 basis points year over year, reflecting the expected impact of acquisitions and additional costs in international currency to deliver on increased demand. Finally, adjusted free cash flow conversion was approximately 94% for the full year and we delivered adjusted EPS of $4.06. Moving to our segments and starting with CPI on slide six. Core sales were flat compared with 2024, with double-digit growth in gaming offset by expected softness in other end markets, including vending. Adjusted operating margin improved approximately 340 basis points to approximately 32%, reflecting the impact of disciplined cost management and productivity initiatives. Finally, there was a modest increase in backlog sequentially and the book-to-bill ratio was above one. Turning to slide seven. For the full year, CPI core sales were in line with expectations, decreasing by approximately 4% year over year, reflecting the indirect impact of tariffs on demand in our vending end market, as pricing actions caused customers to delay orders. Results were also impacted by the final phase of the gaming dynamic we experienced during 2025. Through strong cost discipline and application of CVS to drive productivity, we maintained adjusted operating margin at approximately 29%. These results reflect excellent work by our CPI team. Moving to Security and Authentication Technologies on slide eight. In the fourth quarter, core sales were up approximately 11%, driven by strong performance in Crane Currency, where we achieved 11 new micro-optics denomination wins in Q4, bringing our full year total to 20 new wins. As a reminder, total sales growth of over 40% includes the acquisition of De La Rue Authentication, which closed in May. Adjusted segment operating margin decreased by 420 basis points from the prior year. Matt Roache: As shown on slide nine, Christina Cristiano: we had strong volume growth year over year, increasing our margins. However, this impact was partially offset by several items. First, we experienced unfavorable mix in our international business as compared to 2024, based on the specific shipments from our backlog to central banks. Second, we incurred additional costs to meet increased demand, including hiring and training of additional production staff, higher freight, procurement of substrates from third-party suppliers, and selected outsourcing of banknote printing. Additionally, there was an unfavorable FX impact on margin, as we experienced higher operating costs to manufacture in our international currency products in Sweden and Malta, incurring costs in Swedish krona and euro. We also made additional investments in Q4 to support anticipated future growth as we continue to execute the development of the next generation of micro-optic products with very high customer interest. Finally, the contribution from the acquisition of De La Rue and the execution of our synergies across Crane Authentication performed as expected in the quarter. Turning to slide 10, for the full year SAT delivered core sales growth of approximately 7%, driven by strength in currency, which exceeded our expectations. Crane Authentication performed as expected, with results including eight months of De La Rue Authentication in 2025. Adjusted operating margin decreased by approximately 380 basis points, driven by the expected impact of acquisitions and, as discussed earlier, the increased costs in international currency and the unfavorable impact of FX. Finally, backlog was up more than 50% year over year, which gives us high confidence in our growth outlook for SAT in 2026. Moving to our balance sheet on slide 11. We ended the year with net leverage of approximately 2.3 times. During the fourth quarter, we secured a term loan of roughly $500 million and drew approximately $130 million to fund the initial equity investment in Antares Vision. We expect to draw the remaining balance in 2026 to fund the rest of the Antares Vision transaction, which is on track to be fully completed in mid-2026. Looking ahead, we anticipate using our free cash flow to pay down our outstanding debt and end 2026 with net leverage of approximately 2.3 times. We have an excellent balance sheet, attractive fixed-rate long-term debt, and substantial liquidity. Our strong free cash flow generation enables us to invest in organic growth, pursue M&A to build on our leadership position, and maintain a competitive dividend. Continuing our commitment to a disciplined and balanced capital allocation strategy, yesterday we announced a 6% increase to our annual dividend, while preserving ample capacity to deploy capital toward acquisitions in the future that meet our financial criteria. Moving now to 2026 guidance on slide 12. I would like to highlight that this guidance only includes the interest expense associated with our initial approximately 32% investment in Antares Vision. We anticipate updating guidance in our first quarter earnings announcement after Crane NXT, Co. has a greater than 50% ownership stake in Antares Vision, at which time its results will be consolidated within Crane NXT, Co. In 2026, we expect full year sales growth of 4% to 6%. In SAT, we expect high single-digit growth, driven by high single-digit growth in U.S. currency from a favorable mix of banknote demand and low single-digit growth in international currency, even with a tough comparison to a very strong 2025. In Crane Authentication, we expect mid-single-digit core growth, including a full year contribution from the De La Rue Authentication acquisition. In CPI, we expect sales to be flat year over year, reflecting mid-single-digit growth in service, where we are expanding our offering, offset by approximately flat revenue year over year in our hardware businesses and a low single-digit decline in vending, as order softness continues following price increases to offset the impact of Chinese tariffs. Before I discuss our profit guidance, I would like to note that we have changed our profitability metric to adjusted EBITDA from adjusted operating profit. We believe adjusted EBITDA is a more meaningful measure of our operating performance, as it eliminates non-cash expenses, including depreciation, and we will be using this metric going forward. We expect adjusted segment EBITDA margin to be approximately 28%, which is approximately flat year over year. This reflects continued high profitability in CPI and the benefit of synergy realization in Crane Authentication, partially offset by actions we are taking to expand capacity for international currency. Continuing with full year guidance, we expect corporate expenses of approximately $58 million. We also expect non-operating expenses of roughly $60 million, which includes a noncontrolling interest associated with the Crane Authentication joint venture and interest expense associated with our initial stake in Antares Vision. We will update our guidance to reflect the impact from Antares Vision once we consolidate the company into Crane NXT, Co., and Aaron will be providing an update on this timing later in the presentation. Matt Roache: For the full year, we expect our tax rate to be consistent versus Christina Cristiano: 2025 at approximately 21.5%, and we expect to deliver full year adjusted EPS in the range of $4.10 to $4.40. Finally, we expect adjusted free cash flow conversion in the range of approximately 90% to 110%, recognizing that the specific timing of currency shipments can vary quarter by quarter. Turning to slide 13, I want to point out that the phasing of revenue in 2026 will be slightly higher in the second half of the year. In the first quarter, we expect to see revenue growth in the mid-teens, reflecting the impact of the acquisition of De La Rue Authentication and full operations in our U.S. currency business, which will drive 45% to 50% growth in SAT year over year. This growth will be partially offset by a mid-single-digit decline in CPI, reflecting timing of hardware shipments based on the expected customer order pattern. Adjusted EBITDA margin of approximately 19% will be flat in the first quarter year over year, reflecting the realization of acquisition synergies in Crane Authentication, partially offset by the flow-through impact of lower CPI volume, mix impact of the De La Rue acquisition, and increased currency costs to meet the higher demand. For the full year, we expect Crane NXT, Co. sales to grow in the mid-single digits in 2026, with adjusted EBITDA of approximately 25%. This reflects a continued high adjusted EBITDA margin in CPI of approximately 30% and an approximately 120 basis points improvement year over year in SAT to an adjusted EBITDA margin of approximately 25%. Now let me turn the call back to Aaron to provide further details about the actions we are taking to capture growth opportunities in international currency and an update on the Antares Vision transaction. Aaron W. Saak: Thanks, Christina. Turning to slide 14. I would like to take a few moments to discuss the investments we are making to capture organic growth opportunities in international currency. Demand continues to be very strong, with 20 new micro-optic wins in 2025 and organic backlog up over 30% year over year. This is a particularly exciting growth area for us, and we see tremendous potential for it to continue in the years ahead. Now as a reminder, we deliver value to our international currency customers through four primary offerings, as shown on the slide. These offerings include the designing of banknotes, substrate manufacturing, production of our proprietary micro-optics technology, and banknote printing. To capitalize on rising demand, we are taking a variety of actions to expand our Matt Roache: capacity. Aaron W. Saak: First, we are leveraging our CBS discipline, which we expect will continue to drive increased productivity annually from continuous improvement initiatives. Second, to supplement these productivity initiatives, we are adding resources to our design team and increasing staffing in our micro-optics and banknote printing facilities to increase capacity and move to 24/7 operations. Additionally, we are also increasing the amount of products and services we are procuring from a select group of suppliers and partners. This includes purchasing additional substrates beyond our current capacity and partnering with select government print works for banknote printing. We significantly increased these activities in Q4 and expect them to continue into 2026 to meet the growing demand. For 2026 in total, we expect additional cost of $4 million in SAT related to these actions, but reducing substantially in 2027 as our internal productivity programs are executed. Finally, we are investing in capacity expansion with new micro-optics production lines in our Nashua, New Hampshire facility and in our facility in Malta. Based on these investments in organic growth, we expect CapEx to increase to approximately 7% of currency’s revenue in 2026, even with these investments, we expect Crane NXT, Co.’s CapEx spending to continue to be in the range of 3% to 5% of sales in total. Additionally, for 2026, we expect approximately $4 million of added OpEx to support micro-optic product development, design, and these capacity expansion programs. In total, we expect adjusted EBITDA margins to improve by 120 basis points in SAT, and a more detailed bridge of the 2026 year-over-year SAT margins is provided in a slide in the appendix. In summary, we are excited about the long-term growth opportunities these actions will drive, and we will share more about those programs at our upcoming Investor Day. Moving to slide 15, I want to provide an update on the Antares Vision transaction. In Q4 2025, we completed the first step of the transaction, acquiring approximately 32% of the company from its largest shareholders. And I am happy to report that we have received approval from the Italian regulators to move forward with step two of the transaction. We will launch a mandatory public tender offer to all remaining shareholders in February. We expect this process will be completed by Q1, at which time we will own over 50% of the shares of Antares Vision and consolidate the results under Crane NXT, Co. As Christina mentioned earlier, we will provide updated 2026 guidance based on the consolidation of Antares Vision during our Q1 earnings in May. Finally, in Q2, we will start step three of the transaction to take the company private. As a reminder, Crane NXT, Co. has secured voting agreements with the largest shareholders of Antares Vision, which ensures our ability to take the company private after the completion of the mandatory tender process. We expect the take-private process will be completed in mid-2026. In closing, I want to reiterate a few key points from our call today. First, we are continuing to execute our strategy of accelerating growth while maintaining strong margins and robust free cash flow. Matt Roache: Second, Aaron W. Saak: we continue to build momentum in our strategic growth areas. Our team is ready for the launch of the U.S. new series of banknotes starting with the $10 bill in 2026. International currency’s strong performance is exceeding our expectations, and we are taking actions to drive further growth opportunities and expand our leadership in this market based on our technology. In Crane Authentication, we took actions in 2025 to accelerate the realization of synergies, and we expect to see significant margin accretion in 2026 as a result. And finally, the Antares Vision acquisition is on track, and we look forward to welcoming the entire Antares Vision team to Crane NXT, Co. in 2026. With all of these actions, I believe we are well positioned to accelerate growth in 2026 and beyond and deliver significant value creation to our shareholders. I look forward to seeing many of you at our upcoming Investor Day on February 25 in New York City, where we will share more details on our strategy, growth opportunities, and financial priorities. We will also be showcasing some of our advanced technologies and solutions during the event. So thank you again for your time this morning, and I would like to also thank our Crane NXT, Co. team members across the world for their commitment to our customers, our communities, and all of our stakeholders. And now, Operator, we are ready to take our first question. Operator: Thank you so much. Star 11 on your telephone and wait for your name to be announced. To remove yourself, press 11 again. We ask that you please keep your questions to one and one follow-up. One moment for our first question. Comes from the line of Matt J. Summerville with D.A. Davidson. Please proceed. Matt J. Summerville: Thanks. Morning. Aaron W. Saak: Good morning, Matt. Maybe just start with SAT. As I think about the margin performance in Q4, kind of sequentially, you got $30-plus million of additional revenue, $2 million less OP dollars. Matt J. Summerville: And I realize you had the investments. You called that out more in the waterfall chart. But I guess I am wondering why this business, if demand is that strong, cannot do more to test price elasticity in the market, given the nature of what you are selling and kind of the criticality, especially if this decisioning is being done through an 80/20 lens. Aaron W. Saak: Hey, thanks for that question, and good morning again. I would start by saying as you see in our prepared remarks and as you referenced the waterfall, we are really encouraged by the growth and the backlog that we have in international currency. We strongly believe and I am highly confident this is setting us up for sustainable growth. And that is why we are making these investments. Now to your point on pricing and the flow-through of that, just to remind you, Matt, most, if not all, of these contracts that we are delivering in any quarter have been put into our backlog well before. So we are executing this backlog. That is what gives us great visibility into 2026. This is not a book-and-ship business. And so with that being said, as we are looking forward here, as new contracts come into the backlog, we are very focused on ensuring we are maximizing our value and the pricing power we have with our leading technology. I feel confident that the team is doing that. Matt J. Summerville: And then as a follow-up, obviously, there are a few moving pieces. Two things. One, can you talk a little more explicitly about the EPS cadence as we move throughout the year, particularly given some of the pluses and minuses we see you referenced in the first quarter, and then you mentioned being able to see some cost recovery on these investments. If I look at and say $12 million in 2025 that you call out in waterfall, another $4 that you call out in the 2026 waterfall, that is $16. How much of that do you think can ultimately be recouped looking out to next year? Thank you. Christina Cristiano: Well, maybe I will start with that one, and then Aaron can jump in if he likes to. So just in total, we feel confident in our guidance for 2026 and the outlook that we set. And so our range of $4.10 to $4.40 reflects continued strength in currency and sales in authentication continuing at MSD, and softness in CPI driven mostly by the hardware businesses and vending, which continues to experience softness as a result of the tariff. In terms of the phasing, as we said, we will see accelerating growth throughout the year. And the results will be slightly skewed toward the second half from the first half. So specific to your question, Matt, EPS will accelerate through the first half and then level off a little bit in the back half of the year to get to that total of $4.10 to $4.40. Overall, the guidance is balanced, and we think we have taken a prudent approach, particularly with CPI, with our flat guide on sales for the full year. Aaron W. Saak: Matt, hey. I will add in too on the recovery of some of the cost or the read-through of that on a go-forward basis. I think you know, the right way to think about this is, as you have seen, we are going to increase adjusted EBITDA margins in the SAT segment by about 120 basis points in 2026. We should expect to see that kind of continued incremental improvement on a go-forward basis inside of SAT. Obviously, there is some mix there that will play, as you know, with our U.S. currency, and we will wait and see the volume distribution later in 2026. But I think that is the kind of frame I would put on it. So we are going to continue to be on this march now of increasing EBITDA margin and significant expansion in SAT on a go-forward basis. Highly confident of that. Matt J. Summerville: Got it. Thank you, guys. Operator: Thanks. Thank you. Our next question is from Mike Halloran with Baird. Please proceed. Mike Halloran: Hey, good morning, everyone. Aaron W. Saak: Good morning, Mike. Mike Halloran: Hey. Good morning. So a couple questions. Maybe you could just talk about the sequential CPI dynamics. Aaron W. Saak: What is happening in the first quarter maybe specifically and what type of recovery are you expecting? Seems a little light seasonally going into the first quarter. So Mike Halloran: you know, obviously, the gaming commentary Christina highlighted earlier, but is there any other destocking going on in the broader piece there? And how do you expect that dynamic to trend out through the year? Christina Cristiano: Hey, Mike. Thanks for that question. And I will just—it is worth repeating that CPI is expected to be flat in 2026 with a 30% EBITDA margin and continued very strong free cash flow conversion. And so if we just go through CPI overall, service will continue to grow at mid-single digits, and that will be consistent throughout the year. We expect vending to be down in the low single digits with that continued softness from tariffs, and that will improve in the second half based on the comp to 2025. If you remember, the tariff headwind that we experienced began really toward the back half of 2025. So we will get a better comp in 2026 as a result of that. Now lastly, our hardware businesses will be approximately flat for the full year, and the phasing here is more skewed to the back half of the year, and that is just based on customer order patterns. So, overall, we have high visibility into that hardware ordering pattern and feel confident in the full year guide. Q1 will be the lowest quarter, and we will see accelerating growth as the year progresses. Mike Halloran: Thank you. And then Aaron W. Saak: what is embedded in the expectations this year for the $10 bill onboarding? Is there an expectation for a second half ramp on that Mike Halloran: business specifically? And then secondarily and related, maybe could you just talk about how you are expecting the international business to Aaron W. Saak: to flow as you work through the year on the currency side? Specifically, as you are working with these outside vendors and you are ramping your own capacity, is that a constraint at all in the short term in meeting demand? And does that accelerate as you work through the year? Or because of these arrangements, are you allowed to maybe more level-load it and meet the need? Yeah. Yeah. Hey. Thanks for that, Mike. Why do I not take the U.S. question and Christina will jump in here on the international linearity Aaron W. Saak: question. We are very highly, you know, very highly confident here, Mike, that the U.S. Treasury is going to make an announcement mid-year on the Mike Halloran: $10. Aaron W. Saak: We are, ourselves, already working on the $50, and feel, you know, again, highly confident that that design will introduce sophisticated security features. And so when you think about our guide then, you know, I think we are just being prudent here on when they actually make the announcement. We look at it to be probably going into full consumer release more at the end of the year, call it Q4. And so that is what we have put in the guidance. We think that that is probably prudent for 2026. Christina Cristiano: Thank you. And just in terms Aaron W. Saak: I am sorry. We have a follow-up. I was just going to follow up on the Christina Cristiano: international phasing. As you know, we will have a very tough comp in 2026 based on the acceleration that we saw this year in Q4. So you will see that international demand accelerating in the year, but a very tough comp in the end of the year. And then just on cost, just a reminder that, you know, Q1 will have the lowest profit just based on these incremental costs, which are more heavily phased toward the first half of the year, and we will see that profitability improving as the year progresses. Aaron W. Saak: Hey, I will just add as we close out your question here, Mike. You know, with the actions we are taking both on productivity, the staffing, the capacity expansion, it is not really a limit to us. You know, we are going to see very nice growth in international currency. You know, just this Q4, which was exceptional for us, puts a pretty tough comp on the back half of next year. So, I think we are in a really good position to continue to meet the customer demand, and we see a very healthy pipeline of opportunities going forward. And that is what is also giving us a lot of confidence here for the investments and, you know, many years of sustained growth in this business. Operator: Thank you so much. Our next question is from Robert James Labick. Please go ahead. From CJS. Aaron W. Saak: Good morning, Bob. Yeah. So thanks for the incremental information on the Aaron W. Saak: kind of international currency capacity. I wanted to stick on that theme. I think Aaron W. Saak: the demand or your results for international currency growth have been stronger than expected, probably a year or two ago. And that is why you are adding this capacity, and we are talking about all this now. What are the drivers for the kind of faster growth in international currency for Crane? I guess it is question number one, how sustainable? And how does this impact your goal of 10 to 15 new micro-optics per year? Was there a pull-forward, or do you still think you can do that going forward? How are you seeing the market? Hey. Thanks, Bob, for that question. Well, when you think about what is driving this overperformance in our international currency business, it really comes down to three things. Number one is a market driver of increased counterfeiting that is Aaron W. Saak: occurring Aaron W. Saak: in the market, particularly in the emerging markets and with some of our core customers. And so that is forcing them in many ways to redesign their currency. They are always putting on higher security features, and we are simply number one. We have got the best set of security features in the market, and we are a natural net winner when that occurs. Secondly, is simply the growth in emerging economies coupled with the inflation that they are seeing. And remember, our international currency business is predominantly operating in emerging markets. Again, we are kind of a net beneficiary of that dynamic. And then finally, third is the time to redesign that most governments typically go through is accelerating. And that is a combination motivated by several factors. But in part of what is happening is one country redesigns their currency, the neighboring countries then start the process to do that. And we think the U.S. redesign process helps that as well, as new security features are going to get rolled out in the U.S. So we see all three of these—from increased counterfeiting, growth in emerging economies, and faster redesign times—as durable trends in this currency business. And it is why we see very strong, sustainable growth over the long term, and I would expect we will continue to be in that range of 10 to 15 wins, Bob, and that is the target we would put out. But I think as you saw this year, there is momentum in our business. And certainly, this year, we exceeded that target. Okay. Super. I appreciate that. And then on last call, you discussed international currency security-only, I believe, contract win with a Latin American country that you will tell us more about, I think, in the future. I guess, any update there? And are there, you know, many more security-only opportunities that you are bidding out on, or how does that play out? Hey. Thanks again for that, Bob. I will be the first to tell you I cannot wait to tell you what that country is, and we are just in a position given our contract with them that we cannot announce that. But it is a significant step forward for us, not only with the country, but with the security features that they have adopted that we think will be an exceptional reference customer for us going forward. But we are going to have to wait for that. As we move forward, remember, Christina Cristiano: our strategy inside of Crane Currency is to sell advanced security Aaron W. Saak: features. And those features are embedded in our micro-optics. They are the highest margin part of our business. And so we are out there pursuing several opportunities to sell those security features and get them into governments that may print their currency like we do here in the U.S., or print the currency for them, provided they incorporate our micro-optic features. And the pipeline here is as strong as it has ever been. And it is why we are making the investments that we have to make right now in our design capabilities and engineering capabilities to answer those tenders and win them in the future. So I feel more positive, quite frankly, Bob, than we ever thought we would feel versus, as you referenced, two years ago, based on what we see in the market. Christina Cristiano: Thank you. Operator: One moment for our next question. That comes from the line of Isaac Arthur Sellhausen with Oppenheimer. Please proceed. Isaac Arthur Sellhausen: Hi. Thank you very much. Great quarter. Aaron W. Saak: So the question would be on SAT. If we look at the fourth quarter, is there a way you could give us a breakout of maybe what the currency piece grew and maybe what the non-currency piece grew? I do not know if you have the exact number, but maybe just directionally, just trying to understand the different pieces in that segment. Thanks. Aaron W. Saak: Yeah. Sure. Sure, Isaac. If you look at it, currency was up high double digits in the fourth quarter. That was based really on the strength of international currency. And as I think you know, we have had headwinds on a comp basis with the U.S., just due to the volume in 2025. So the good news there is that, obviously, that corrects itself, and we are going to get to high single-digit growth next year on the full year for the U.S. currency. So, very strong high double-digit growth in currency. Christina Cristiano: Currency. Aaron W. Saak: Our De La Rue acquisition performed just as we planned. And we saw lower growth, call it in the legacy business, but that was really intentional because of the 80/20 work that we did and we talked about in the third quarter. I would say it performed kind of on our plan, and with the synergy activities that you see in the bridge, we actually read through some nice incremental margin simply on the execution of the synergies, which are coming in, as Christina said, ahead of our schedule. Isaac Arthur Sellhausen: Okay. Thanks. And then, as a follow-up, Michael J. Pesendorfer: on the $10 note, I know you talked a little bit about this, a lot about it. But, you know, how do we think about when it is going to reach run-rate production? And I guess when you are saying it is going to be back-end loaded, is it based on when the government announces the launch? You know, so what are kind of the goalposts we need to look at as far as what is being communicated by the government versus what is going on with your business? And I would imagine Aaron W. Saak: you might have a heads up on that because you would have to stock it preannouncement, or am I not thinking about that right? Thanks. No. You are Aaron W. Saak: you are, Isaac, good question. You are thinking about it exactly correctly. We are, you know, closely working with the Treasury on setting up the right levels of inventory ahead of the public launch. Aaron W. Saak: It does Aaron W. Saak: still depend on exactly when they decide to launch it. That is where, to the prior question, I would say we are being prudent to say we think that starts to really hit in Q4 of this year. That is what we put in our estimates and influenced our guide. Isaac Arthur Sellhausen: That is Aaron W. Saak: that is Aaron W. Saak: you know, going to get crystallized here, I would say, in the next three months, to be precise. And what I would say, Isaac, to probably the broader question that I know you are asking and others about the impact of the U.S. currency program and where it is at, that is something we are obviously going to spend a little more time and dive deeper into at our Investor Day, and provide some more insights of how we see the impact of that playing out. Operator: Thank you. Our next question comes from the line of Robert Brooks with Northland Capital Markets. Please proceed. Robert Brooks: Hey, guys, thank you for taking my question. Aaron W. Saak: First one I have got is just great to hear about the multiple professional sports leagues renewing secure authentication and security contracts. But I was curious if we could try to get a sense on the financial benefit from that. And then secondly, did those renewals see additional tech or services layered on? I am just trying to get a sense of maybe what the dollar-based net retention was of those leagues re-upping their contracts? Christina Cristiano: Hey, Robert. I will take that one. And, hey, we are super excited to continue a partnership with a flagship customer like the MLB, just like we announced with the NFL last year. These are great customers that we have long-standing relationships with. We cannot reveal much of the details, as you can imagine, about their contract. But in this case, we are providing product authentication and licensee management software, and it is a great recurring revenue stream because, as you know, once we get engaged with the customer, it is very sticky. It is a very sticky arrangement that drives future recurring revenue. So we are very excited about this, and we will continue to work with them to partner on our offerings and what more we can offer them as part of the portfolio, and just continue our relationship with them. Robert Brooks: Got it. Appreciate that color. And then could you remind us—so the 24-hour staffing for micro-optics production and the banknote printing, that is great to hear. But could you remind us, was that from, like, previously, were they just doing a 40-hour work week, or was it more like an 80-hour work week? And secondly, could you just remind us, like, when those transition to 24/7 shifts? Aaron W. Saak: Yeah. So it varied a little bit, Robert, based on each of the sites, quite frankly. You know, you could probably think of it as more of, like, 24/5 directionally. And we are in the process of ramping up to the 24/7, which we will be at here in Q1. Just a reminder, these are very highly complex and secure operations. So ramping up is not just something that happens with the flip of the switch. You know, we are hiring our direct labor. They have to go through a security clearance, as well as some fairly intense training to be operating on our micro-optics and banknote printing lines. So there is, with that, just a very natural ramp-up period to get us there. Again, expect that to be completed here as we exit Q1. And I feel very good we are on the track to that. But, you know, at that point then is why we are making the investments to add another line in Nashua and particularly excited about the expansion in Malta, which gives us more obvious capacity, creates redundancy in our operation, which is very good, and, quite frankly, puts us closer to our customers with a flag planted now in Europe for micro-optics, and very close to our emerging market customers, all of which we see as an excellent setup for sustaining the growth of this business long term. Operator: Thank you so much. And this will conclude our Q&A session for today. And I will pass it back to Aaron W. Saak, President and CEO, for closing comments. Matt Roache: Well, thank you, Operator. Aaron W. Saak: As we conclude today’s call, I again just want to thank everyone on the Crane NXT, Co. team for their strong efforts in 2025. I am excited about the direction of the company and the momentum we are building to accelerate growth. I look forward to seeing many of you at our upcoming Investor Day on February 25 in New York to tell you more about our plans for 2026 and beyond. And so until then, take care, and I hope you all have a great day. Operator: This concludes our conference. Thank you all for participating. You may now disconnect.
Operator: Hello, and welcome to Exelon Corporation's Fourth Quarter Earnings Call. My name is Gigi, and I will be your event specialist today. All lines have been placed on mute to prevent any background noise. Please note that today's webcast is being recorded. During the presentation, we will have a question-and-answer session. If you would like to view the presentation in full-screen view, click the full screen button by hovering your computer mouse cursor over the PowerPoint screen. Press the escape key on your keyboard to return to your original view. Finally, should you need technical assistance, as a best practice, we suggest you first refresh your browser. If that does not resolve the issue, please click on the help option in the upper right-hand corner of your screen for online troubleshooting. It is now my pleasure to turn today's program over to Ryan Brown, Vice President of Investor Relations. The floor is yours. Great. Thank you, Gigi. Ryan Brown: Morning, everybody. Thank you for joining us for our 2025 fourth quarter earnings call. Leading the call today are Calvin G. Butler, Exelon Corporation's President and Chief Executive Officer, and Jeanne M. Jones, Exelon Corporation's Chief Financial Officer. Other members of Exelon Corporation's senior management team are also with us today, and they will be available to answer your questions following our prepared remarks. Today's presentation, along with our earnings release and other financial information, can be found in the Investor Relations section of Exelon Corporation's website. I would also like to remind you that today's presentation and the associated earnings release materials contain forward-looking statements, which are subject to risks and uncertainties. You can find the cautionary statements on these risks on slide two of today's presentation or in our SEC filings. In addition, today's presentation includes references to adjusted operating earnings and other non-GAAP measures. Reconciliations between these measures and the nearest equivalent GAAP measures can be found in the appendix of our presentation and in our earnings release. With that, it is now my pleasure to turn the call over to Calvin G. Butler, Exelon Corporation's President and CEO. Thank you, Ryan, and congratulations on the new role, and good morning to everyone. We appreciate everyone joining us today for our fourth quarter earnings call. As we reflect on another successful year and celebrate the close of our twenty fifth anniversary, we are proud to once again deliver exceptional results for our customers, employees, and investors. Across Exelon Corporation, our companies bring more than eight hundred years of collective experience. Even with that long view, this moment stands out. The industry is changing at a speed and scale rarely seen. With that comes both great responsibility and opportunity. Calvin G. Butler: I have never been more confident that Exelon Corporation has the people, the discipline, and the platform to continue to lead the energy transformation and meet this unprecedented demand. This is underscored by our recent results. As you saw from this morning's release, we delivered another strong year. For 2025, we reported adjusted operating earnings per share of $2.77, delivering above expectations. This continues our track record of exceeding the midpoint of guidance in each year as a standalone utility. Since 2021, we have achieved a 7.4% annual earnings growth rate and 8% rate base growth in 2025, highlighting our ability to navigate changes and consistently execute. This steady performance is a direct result of a continued focus on affordability and our ability to deliver investments that directly benefit our customers, providing above-average performance at below-average rates. It was also another exceptional year operationally. Exelon Corporation continues to set the standard for the industry. Our utilities maintained top quartile reliability metrics once again, and we are ranked one, two, four, and seven amongst our peers based on 2024 benchmarking data. This level of performance is nothing new. In fact, we have delivered top quartile reliability for over a decade. It is who we are and central to our mission. But do not get me wrong. Consistency does not come easy. It is the direct result of a culture of continuous improvement, innovation, and a steadfast focus on targeted investments that maximize value for our customers. These investments not only prevent outages and deliver best-in-class service, but they directly benefit local economies, with every $1 million invested creating eight jobs or $1.6 million of economic output. I am truly humbled by the commitment and sacrifice of our employees that make this level of service possible. Recently, their dedication was on full display during Winter Storm FERN. Despite record low temperatures, our investments withstood heavy snow and icing across our territories, maintaining strong reliability with only minimal disruptions. Fewer than 1% of our customers experienced outages, even as the extreme weather impacted our regions. This reflects the tremendous work of our employees over the past decade to invest in the safety, reliability, and resiliency of our system. The performance is remarkable when accounting for the scale of the storm, as well as the demand put on the grid. FERN resulted in the PJM RTO experiencing five days in a row of peak load ranging from 135 to 140 gigawatts, reaching 97% of the all-time winter peak. Our investments, combined with our employees’ around-the-clock dedication, kept nearly 11 million electric and gas customers safe and warm when they needed us most. I would like to express my gratitude to all of our employees who have supported storm restoration efforts locally and afar. Thank you for all that you do. Over the last quarter, we also made significant progress on the regulatory front. As Jeanne will detail shortly, it has been an active few months. We have achieved several key milestones, including final settlements for the Atlantic City Electric and Delmarva Gas rate cases, reconciliation orders at ComEd and BGE, and the filing of ComEd's second multiyear grid plan. This progress is built on a foundation of hard-earned trust. We work collaboratively with stakeholders and our communities to ensure that our investments align with the specific goals and needs of the states we serve. Looking ahead, we now expect to invest $41.3 billion of capital to support our customers, with more than 70% of the plan-over-plan increase driven by transmission, where we continue to have a unique opportunity and significant momentum. Our size and scale, multistate footprint, and operational expertise position our utilities to capitalize on the growing need for transmission investments in reliability and resiliency, accelerated by the pace of new business growth. This progress is further evidenced by our success in the recent PJM reliability window results, where $1.2 billion of incremental Exelon Corporation investment was recommended, including a jointly developed solution with NextEra. This comes on the heels of other recent large-scale transmission awards including Brandon Shores, Tri County, and the MISO Tranche 2.1 project. You should expect us to be active in future windows within PJM and other ISOs, leveraging our competitive advantages where appropriate. We continue to see robust demand in our jurisdictions, with anticipated load growth exceeding 3% through 2029. This is further reinforced by our large load pipeline, which is now further supported by an increasing number of signed transmission security agreements, or TSAs. Overall, our pure transmission and distribution capital plan is unique and truly differentiated. It is highly diversified across seven regulatory jurisdictions including FERC, with no one jurisdiction greater than 30% and no single project comprising more than 3% of the plan. It is also actionable. We have line of sight to each project that comprises the $41.3 billion, with a significant pipeline of incremental projects over the next five to ten years and the size and scale to execute efficiently. With continued returns on equity in the 9% to 10% range, we expect rate base growth of approximately 8% and annualized earnings growth of 5% to 7% through 2029, with the expectation of being near the top end of that range. We will continue to fund investments in a balanced and disciplined manner that maintains a strong balance sheet. For 2026, we are initiating operating earnings guidance of $2.81 to $2.91 per share. Our continued progress is clearly demonstrated by the scorecard on slide five, where we have once again met or exceeded every goal we set at the start of the year. At Exelon Corporation, commitments made are commitments meant. Ryan Brown: That discipline and credibility Calvin G. Butler: define who we are and shape how our teams operate every day. In addition to strong operational and financial performance, we continue to lead on customer affordability, which remains a top priority. We continuously drive cost out of the business through efficiency and innovation, maintaining a track record of cost growth well below inflation. In the past year, we executed a $60 million customer relief fund to support low- and moderate-income customers facing higher supply costs. We advanced innovative TSAs that prioritize large loads while ensuring existing customers remain protected. Our award-winning energy efficiency programs continue to deliver meaningful savings. We expanded connections of distributed resources, giving customers more ways to participate and save. We are steadfast in introducing innovative tools and processes to connect customers to low-income assistance. We continue to focus on actions like these that are directly within our control in addition to delivering safe, reliable energy while keeping bills as low as possible. In the meantime, we are also actively partnering with federal, RTO, and state leaders to address high supply prices and emerging reliability risk. The supply challenge is real, but not insurmountable. We are encouraged by the growing national focus, including the recent announcement from the White House and our state governors advancing policies to incent new generation and improve affordability. As we have said before, we firmly believe it is going to require an all-of-the-above strategy that includes utility-generated, demand-side, and merchant solutions. This was further supported by the study released last week by Charles River Associates. The report is an urgent call to action, highlighting the risk of the status quo and the cost and reliability benefits of utility-generated energy. Specifically, they note that utility-generated power could have saved total PJM customers $9.6 to $20 billion in the 2028–2029 delivery year, while reducing the risk of potential future outages from energy shortages by approximately 85%. We are committed to continue to work with all stakeholders to advance policies that strengthen energy security as quickly and cost effectively as possible. Finally, I want to take a moment to reiterate why our platform and approach are best positioned for the years to come. As highlighted on slide six, our foundation is based upon a customer focus and industry-leading operations. With our size and scale, constructive regulatory frameworks, and diversified footprint and capital plan, we have a disciplined and defensive foundation that is resilient. Yet at the same time, we are well positioned to capture credible, meaningful opportunities for sustainable growth. We are excited about where we are headed. Our platform is designed to deliver an attractive risk-adjusted return and long-term value for all stakeholders. I will now turn the call to Jeanne to dive deeper into our 2025 results and share more details on our updated long-term plan. Jeanne? Thank you, Calvin, and good morning, everyone. Jeanne M. Jones: Today, I will cover our fourth quarter and full-year results, key regulatory developments, and updates to our financial disclosures, including 2026 guidance. Starting on slide seven, as Calvin noted, since becoming a standalone utility, we have continued to execute, and 2025 adds to that track record. In 2025, we delivered $2.73 per share on a GAAP basis and $2.77 per share on a non-GAAP basis for the full year, reflecting strong year-over-year growth. For the quarter, Exelon Corporation earned $0.58 on a GAAP basis Jeanne M. Jones: and $0.59 on a non-GAAP basis. Jeanne M. Jones: Full-year earnings Jeanne M. Jones: above our guidance range primarily benefited from favorable weather and storm conditions and the resolution of certain regulatory proceedings. Throughout the year, we also managed costs well across the platform, ensuring we could accommodate a range of outcomes while monitoring regulatory activity and weather in the fourth quarter. Quarter-to-date and year-to-date drivers relative to prior year can be found on appendix slides 37 and 38. Turning to slide eight, we are initiating 2026 operating earnings guidance of $2.81 to $2.91 per share. With much of our growth aligned with completed rate cases and continued strong cost management, the 2026 implied midpoint relative to the midpoint of our 2025 estimated guidance range is ahead of previous disclosures, reflecting midpoint-to-midpoint growth above 6%. Our performance in 2025 underscores our ability to deliver strong financial results amid uncertainty, all while operating at industry-leading levels and innovating to find new and creative ways to support our customers. We have executed operational efficiencies, capitalized on our growth opportunities, and identified more ways than ever to support our customers. We look forward to furthering this progress in 2026. Jeanne M. Jones: Looking ahead to the first quarter, we expect earnings Jeanne M. Jones: to be approximately 31% of the midpoint of our projected full-year earnings guidance range, which is in line with historical averages. This accounts for completed regulatory filing, anticipated revenue shaping, and O&M timing, as well as normal weather and storm conditions throughout the quarter. Turning to slide nine. We executed another busy regulatory calendar in 2025, marking significant milestones and reaching final resolution on open reconciliation and key rate cases, providing cost recovery for the next several years. Starting with Atlantic City Electric, in November, the New Jersey Board of Public Utilities approved a settlement supporting the recovery of $54 million associated with grid improvements and modernization investments in line with New Jersey's energy master plan and the Clean Energy Act at a 9.6% ROE. New rates went into effect at the end of December 2025. Also, in December, the Delaware Public Service Commission issued a final order on the Delmarva Power Gas rate case, approving a settlement that supports the $21.5 million revenue requirement and 9.6% ROE, recovering various reliability investments and LNG plant upgrades, which protect customers from price volatility during peak periods. Rates went into effect at the beginning of this year. In addition to closing out base rate case activity, we also received final orders in our open reconciliations at BGE and ComEd in December, gaining clarity on the recovery of our investments from 2023 and 2024. While we were disappointed to receive about half of the BGE reconciliation, we realigned capital accordingly. Finally, moving to our core regulatory activity for 2026, the Pepco Maryland base rate case continues to progress according to the procedural schedule with intervenor testimony filed at the end of last month. A final order is expected in August. In December, Delmarva Power filed an electric base rate case in Delaware, requesting a net revenue increase of $44.6 million to support system reliability investments, storm remediation, and storm damage costs. DPL also requested to implement a bill stabilization adjustment, which will offer customers more predictability as seasonal temperatures grow increasingly volatile. DPL expects to be able to implement interim rates in effect on July 9. Finally, on January 16, ComEd filed its multiyear grid plan in Illinois requesting an approval of an investment plan covering 2028–2031 in support of the priorities laid out in the state's CEJA and CRGA bill. A final order is expected in December, and the company expects to file its next rate filing in 2027. On slide 10, we provide updated utility CapEx and rate base outlook through 2029. We plan to invest almost $10 billion in 2026 and a total of $41.3 billion over the next four years, an increase of $3.3 billion or 9% from the prior four-year planning period. Incremental investments reflect updates to align with recently approved rate cases and jurisdictional priorities and an increase in transmission investment. Of the overall increase, approximately 70%, or $2.3 billion, is attributable to incremental transmission investments driven by the structural trends that underpin the energy transformation in our jurisdiction: increased demand for high voltage investments and capacity expansion to support large load growth, evolving generation supply, and the reliability and resiliency needs of grid customers to withstand increasingly volatile weather. Jeanne M. Jones: In fact, a majority of the additional transmission relates to continued Jeanne M. Jones: system performance and capacity expansion across our platform, supporting incremental data center load in addition to the gradual replacement of an aging network. Our plan also includes an additional year of investment of our two largest transmission projects, Brandon Shores and Tri County, going into service in 2028 through 2030, along with the early spend of the MISO Tranche 2.1 project, which goes into service in 2034. Our annualized rate base growth of 7.9% over the next four years reflects an increase from the prior year plan, with a projected addition of nearly $23 billion in rate base from 2025 to 2029. Having executed within 2% of our capital plan since 2023, we are confident we will execute this next stage of growth, driving progress towards economic and energy goals and always prioritizing our customer needs in everything that we do. Moving to slide 11, our size and scale, award-winning reliability, and expertise in owning and operating 765 kV lines uniquely position us to capitalize on additional transmission opportunities that enable us to grow our transmission rate base CAGR by over 15% from 2025 through the end of the guidance period. Coupled with our strength in execution, we now have line of sight to an additional $12 billion to $17 billion transmission opportunities over the next decade that strengthen and lengthen our plan, of which over 60% includes projects associated with our existing infrastructure, supporting continued reliability, generator deactivations, and providing additional operational flexibility and efficiency. This upside also includes an estimated $1 billion of transmission-associated high-density load projects with signed TSAs, where we now have a foundation for additional certainty in our pipeline. Agreements are presented to customers coming out of our cluster study process. We also remain optimistic about the work associated with MISO Tranche 2.1, with over $1 billion of investment in our ComEd service territory, which is now getting a cost allocation filing at FERC. Beyond these opportunities, we anticipate additional investment required to support our state public policy goals, particularly as our jurisdictions assess energy security and economic development needs. For example, achieving CEJA's goals amid growing economic development in Illinois will likely require billions in transmission investments. Finally, as we discussed in prior quarters, success in winning competitively bid projects offers additional upside. From our success in winning the Tri County project to the $1.2 billion in Exelon Corporation investment PJM has recommended in this recent window, our size, scale, and expertise position us well to pursue competitive opportunities outside of our service territories within and outside of PJM. Our ability to deploy almost $10 billion of capital annually over the next four years is only possible with a rigorous focus on cost management and delivering value through those investments, supporting customer bills at rates 19% to 20% below national averages. This focus is saving our customers approximately $580 million in O&M annually relative to what it would have been growing at a standard inflation level over the last decade. We feel confident we can continue to keep our expense growth well below inflation levels, demonstrating nearly flat expense growth from 2024 to 2026 and targeting no more than 2.5% adjusted O&M growth through 2029. As we talked about last year, our institutionalized team and a One Exelon culture are committed to delivering value. We have taken advantage of our focused operations along with our size and scale to continue to standardize and streamline our structure and operations. Driving out $580 million in annual O&M savings is no small feat, but it is something our customers and shareholders have come to expect. Exelon Corporation's unique platforms and industry best practices enable us to build upon these savings with a line of sight to additional opportunities. As investment needs grow to meet unprecedented load growth and reliability needs, our customers remain our top priority. Since 2021, Exelon Corporation's portion of the average customer bill as a percent of median income has remained relatively flat, growing only 10 basis points while maintaining top quartile reliability, which saved customers $1 billion in avoided outage costs last year alone. We have reduced annual customer interruptions by nearly 2 million since 2021 and made significant economic impact in our communities. Since 2021, we have employed 20,000 people, sustained 50,000 jobs, and have fostered nearly $60 billion in economic activity in our communities. Bringing value to our customers is foundational to what we do, and it is why we invest in the grid. That is why we have committed to keeping our O&M costs relatively flat from 2024 to 2026 and, in partnership with our jurisdictions, committed to support our customers through nation-leading programs and advocacy efforts. Conversely, the supply side of the average monthly residential bill in the Mid-Atlantic has increased up to 80% or more over the last five years. Customers are now paying more for less. Since July 2024, PJM customers have paid more than $32 billion as supply in the market declined 1.2 gigawatts. That is why we continue to be at the forefront of advocating for our customers across federal, PJM, and state levels, ensuring that every dollar our customers spend can be tied to additional value they receive. We are pleased that federal discussions proposed the extension of the PJM capacity auction collar, saving customers tens of billions of dollars through 2030. But our advocacy efforts do not stop there. We are committed to advocating for other policies, such as queue and rate design reforms that protect customers and support economic development. Our first-of-its-kind transmission security agreements filed at FERC do just that, providing a clear path to interconnection while protecting existing customers. We believe all solutions are required to support energy security and drive affordability. This includes encouraging state-procured solutions such as utility-generated power, which can bring certainty that the supply will be there, offer our states control, and ultimately benefit our customers. Turning to slide 14, with prudent O&M spending and $41.3 billion of projected capital spend driving 7.9% rate base growth, along with earning ROEs of 9% to 10%, we are projecting compounded annual earnings growth near the top end of 5% to 7% from our 2025 guidance midpoint of $2.69 per share through 2029. We continue to build momentum across our jurisdictions as we make progress on Pepco and Delmarva rate cases, the ComEd grid plan, and as BGE prepares to file later this year. We look forward to working with our stakeholders to align on the investments that benefit our customers, enable us to maintain and improve upon our operational excellence, all at a fair return. Maintaining our commitment to transparency, we have provided assumptions associated with our expected annual growth in earnings through 2029 on appendix slide 23. As you can see, we expect to deliver the out years near the top end of the 5%–7% range, allowing for flexibility of rate case timing and keeping us on track to deliver near the top end of our 5% to 7% annualized growth rate from 2025 to 2029. We also continue to project an annual dividend growth at 5% and anticipate paying out a dividend of $1.68 per share in 2026 in line with that growth. Finally, turning to slide 15, I will conclude with a review of our balance sheet and financing activity, where we have continued to de-risk and secure cost-effective capital to invest for the benefit of our customers. In December, Exelon Corporation corporate issued $1 billion in convertible debt, pulling forward over half of our planned long-term corporate debt needs for 2026. Through 2029, we expect to fund the $41.3 billion capital plan with $22 billion of internally generated cash flow, $13 billion of debt at the utilities, and $3 billion of total debt at the holding company, with the balance funded with a modest amount of equity. As a reminder, our policy is to fund incremental capital needs approximately 40% with equity. Specifically, our total equity needs of $3.4 billion over the four-year plan implies approximately $850 million of annualized equity needs, less than 2% of Exelon Corporation's annual market cap. We have already made progress on 20% of these equity needs, having priced $700 million in 2025 using forward contracts under our ATM. Our financial plan has been designed to accommodate the issuance of other fixed-income securities that receive equity credit in place of senior debt at our holding company, identifying opportunities to mitigate risk and maintaining a strong balance sheet continues to be core to our strategy. Ending 2025, our average credit metrics of 13.5% exceeded our downgrade threshold of 12% at Moody’s by 150 basis points. With our balanced funding strategy in place, target credit metrics of 14% over the planning period provide 100 to 200 basis points of financial flexibility on average over our downgrade thresholds at S&P and Moody’s throughout our guidance period. We also continue to advocate for language that incorporates all tax repairs for calculating the corporate alternative minimum tax, which is now reflected in our disclosures. As a reminder, without the implementation of tax repairs deduction, our anticipated consolidated credit metric would average over the plan closer to 13%. Supported by our history of execution, I want to close by reiterating our confidence not only in the plan we have laid out, but also in the broader opportunity we have to deliver value for our customers and our shareholders for another twenty-five years and beyond. I will now turn it back to Calvin for his closing remarks. Calvin G. Butler: Thank you, Jeanne. As we look ahead to 2026, our priorities are clear and aligned with what matters most to our customers, communities, policymakers, and investors. We have a track record of meeting our commitments, and we will continue to focus on what we do best: executing our capital plan efficiently and maintaining industry-leading operational performance to benefit our customers; driving affordability through disciplined cost management, prudent investment, and active stakeholder engagement; and pursuing growth and innovative customer solutions. We have the right people, platform, and strategy to continue delivering on these commitments. In 2026, we expect to deploy $10 billion in capital, earning a consolidated 9% to 10% operating ROE. We anticipate delivering operating earnings of $2 and 81 to $2.91 per share with the goal of being midpoint or better. Finally, we will execute a balanced funding strategy that maintains and strengthens our balance sheet. Serving approximately 11 million customers across some of the largest and most economically vital metropolitan areas in the country is a responsibility we do not take lightly. Our infrastructure is essential to the economic future of the regions we serve, and we honor that responsibility through disciplined execution, operational excellence, and a relentless focus on the people who depend on us every day. We are proud of our track record of execution. The sector continues to evolve at a breakneck pace, but Exelon Corporation remains steadfast in its priorities, consistently delivering as a proven leader. Gigi, we can now open it up for questions. Operator: Thank you. If you would like to ask a question, simply press 1-1 on your telephone keypad. Our first question comes from the line of Nicholas Campanella from Barclays. Calvin G. Butler: Good morning, Nick. Hey, Nick. Nicholas Campanella: Hey. Good morning, everyone. Thanks for the updates. Appreciate it. Always. So great to see the five to seven outlook refreshed near the upper end here. I just maybe could you comment quickly on, you know, the rate base growth is near 8%. You do have financing lag against that, you know, which maybe would be greater than 1% financing lag between equity needs and debt funding. So just what is the tailwind to the plan to kind of keep you at the high end of the 5%–7% outlook? Jeanne M. Jones: Yeah. I think I will start with, kind of, you know, what we have done, right, which is if you look back since 2021, we have had actual rate base growth of about 8% and earnings growth of 7.4%. So I think it is really just a continuation of that track record. If you look at where rate base is at the end of 2029 and you kind of assume, you know, half equity, and then you look at our earned ROEs over the last four years, I think you can get, you know, to an EPS number that then, to your point, you have to back off financing costs. But I think if you look at the equity needs, sort of assume an average, you know, debt cost. But then I think what you might be missing is the AFUDC associated with transmission capital. If you look at that and how much we are growing transmission over that period, that will get you to kind of the near top end, Nick. Nicholas Campanella: Okay. Great. Great. And then I know that you probably are assuming a range of regulatory outcomes here, but maybe you can just kind of comment on, given so much focus on Pennsylvania, how you are thinking about regulatory strategy for 2026? Whether you would file in 2026 or wait until 2027, and then any kind of considerations there for the timing of rate cases and how that can kind of impact where you are within this five to seven? Thank you. Calvin G. Butler: Yeah. No problem, Nick. I will tell you this: we are constantly in conversations with all of our stakeholders, and that goes from the governors to the regulatory bodies to talk about what makes sense for the jurisdictions and our customers. With affordability front and center in all of our jurisdictions, we lean into that first. But we also recognize that we have to maintain a reliable and resilient grid. So to your point, we are looking at what we are going to do in Pennsylvania, what we are going to do in Maryland. I think in our documents, we have already laid out that we are filing in Maryland this year, and we are considering what is the best approach to action in Pennsylvania. We will keep you updated on that, but right now, please keep in mind, everything centers on affordability and maintaining a reliable system. Jeanne M. Jones: Yeah. And to your point, Nick, the disclosure kind of accommodated a variety of scenarios. So looking at a variety of scenarios around rate case timing, we felt confident in that. You know, the 8% rate base growth, the earned ROEs, and the, you know, sort of manageable amount of equity delivers that, you know, five to seven years at top end. Nicholas Campanella: Great. And then just, you know, Calvin, if I could squeeze one more in, you talked about in your prepared remarks just supply being a real challenge and I know this RBA process is in its early innings at PJM, and we have all seen the comments from the IPPs and what they are looking for. But just maybe what are the T&Ds advocating for here, and how do you see that process shaping up? Do you expect it to still be on time for, you know, a September auction? If you could comment at all there. Calvin G. Butler: Do you want to take Jeanne M. Jones: Certainly. Good morning, Nick. Thank you for the question. We have really been focused on engaging not only at PJM, but Jeanne M. Jones: with our regulators. We were really pleased to Jeanne M. Jones: see the administration’s, to Calvin’s point, the administration’s focus on this issue. We do support the development of this reliability backstop option. We really endeavored also to bring a bit of clarity to the discourse. That is why we enlisted Charles River Associates’ support in helping us crystallize what we are dealing with. We need to focus on supply because we know it will lower customer electric costs. We know that we will also see improved reliability. To the point on costs, as Calvin mentioned, utility-generated power, which, you know, is something we are very focused on, but because if no one else is going to build, we know that supply costs are an ever-increasing portion of the customer bill. So we really have to be focused on driving more builds, and as this report Jeanne M. Jones: report Jeanne M. Jones: outlaid, Jeanne M. Jones: utility-generated power could reduce PJM customer costs by between $9.6 billion and $20 billion in the 2028–2029 delivery year. So while we are focused on supporting the RBA, we also have to, in the near term, focus on extending the price cap, getting more supply on the grid, and, as Calvin mentioned, improving reliability. Jeanne M. Jones: We know that those things will bring greater price stability Jeanne M. Jones: and ultimately help address affordability, which is an ever-growing concern in each of our jurisdictions. Nicholas Campanella: Thanks for the update. Calvin G. Butler: Hey, Nick. I know she does not need an introduction, but that was Colette Honorable. Since you are Nicholas Campanella: Alright. Calvin G. Butler: Alright. Thank you very much. Ryan Brown: You are welcome. Thank you. Operator: Thank you. Our next question comes from the line of Shahriar Pourreza from Wells Fargo. Calvin G. Butler: Good morning, Shah. Hey, Shah. Calvin. Morning, guys. Just on Colette’s Shahriar Pourreza: maybe a quick question for Colette. I mean, obviously, you know, there is a lot of affordability things out there, whether you are looking at Maryland, New Jersey, Pennsylvania, Delaware. We saw that in, obviously, Shapiro’s budget speech. There are several bills out there in Pennsylvania, Maryland, and New Jersey around resource adequacy. I guess a little bit more specifically, how are the conversations going on the legislative fronts? Like, can you strike a middle ground in a state like Pennsylvania with the IPPs around the new generation PPA structure, which is currently being proposed under the House and Senate bills, or the conversations are just too wide apart right now? Thanks. Calvin G. Butler: Hey, Shar. So this is Calvin. I will jump in first and just say, first and foremost, we understand where Governor Shapiro was coming from, because we are all frustrated with the affordability limit that is hitting all of our customers and his constituents. So at the forefront, we start from a foundation of alignment, that we all have to do something together. You notice our approach is always an all-of-the-above approach. How can we help deliver solutions that satisfy everyone? So to your direct question, is there an opportunity to have conversations and engage with IPPs? Absolutely, because we have never said we are going to do this on our own. But we do believe it must involve everyone. I think you talked about Governor Shapiro, but Governor Moore in his State of the State even talked about an all-of-the-above. It requires everyone to come together to solve this problem. We are committed to that. So when you talk about the House and Senate bills, it is always in the details. But please know that we are showing up every day in the capital and with the governor and the PSC to talk about delivering solutions. You notice from us, it is not one-and-done. It is everyone coming through, and it is an all-of-the-above approach. Colette, anything you would like to add there? Jeanne M. Jones: Thank you, Calvin. Good morning, Shar. I would add, it will, I hope, put in better context Jeanne M. Jones: why we showed up as a company the way we did around colocation issues. Colocation can be a great solution. We knew when we saw this headed our way that we needed to focus on affordability. Now you see others jumping in with us. It is great to see, and we need these discussions because this is how we will solve the problem. We have been very active, to your question, Shar, not only in Pennsylvania, on the ground there, on the ground with the governor. If you know, we joined Governor Shapiro in the filing at FERC Jeanne M. Jones: on extending the Jeanne M. Jones: podcast. We will continue to partner with him, his administration, and engage heavily in the legislature. Not only in Pennsylvania, we are having the same discussions Jeanne M. Jones: in Maryland, in Delaware, in New Jersey. Ryan Brown: And I think that, for instance, in the Jeanne M. Jones: the address by Governor Moore, you could see very clearly he has a view on what needs to happen. Jeanne M. Jones: Take a look at New Jersey with Governor Sheryl stepping in and really focusing on the solutions that need to come about in PJM. This is heartening to see, and you will continue to find us engaging in each of our jurisdictions to help solve this issue of affordability. Let me close by saying we are bringing solutions. We have been focused, if you know, on our customer relief fund that we developed last year, and then we further supplemented ahead of the winter season in anticipation of these issues. We will continue focusing on low-income discounts in our jurisdictions. We have those well underway, as well as focusing on longer-term solutions such as utility generation. So we are very active in our jurisdictions, and we will continue to be active. Thank you. Shahriar Pourreza: And is it fair to just assume that there is some level of collaboration with the generators, or is that bid-ask too wide apart? I am just trying to tease that out. Is that the right price? Jeanne M. Jones: Right? I think we are always going to be our customers’ advocate. So I think right now, what is the problem right now is our customers are paying more for less. So we have to get to the right place where there is actual new generation at the right price. If they want to build it at the right price, wonderful, right? But at the end of the day, to Colette and Calvin’s comments, the Charles River report was really helpful because it said, you know, if we had been doing this and we had the generation needed in 2028 and 2029, that costs would have been, you know, $10 to $20 billion lower. We cannot go back in time and build that generation, but we can take action now. That is what we are focused on, getting the generation built at the right price. Shahriar Pourreza: Got it. And then just last question here. Just to tease out Nick’s question around the CAGR. There is not a lot of delta between rate base growth and the EPS growth, so that sort of makes sense where you are. But I know, Jeanne, clearly from the slide this morning, there is plenty of incremental upside, whether you are looking at, you know, PJM RTEP, or MISO tranches, data center TSAs, resource adequacy. I guess, what is the correct podium to step-function change the trajectory, which has been out there for some time? Is it as simple as we need a few more quarters to execute? I guess, how do we sort of think about the upsides that are evident on these slide decks, whether, and will it be incremental to rate base growth? Will it be incremental to EPS growth? I guess, what do you need to see that step-function change to that five to seven? Thanks. Jeanne M. Jones: Yeah. No. Good question. I think, at the end, we feel like it is kind of progressing, right? So your last rate base CAGR was 7.4%. You are sitting at 7.9% now off of that 7.4%. You know, we delivered above expectations through 2025. So I think we are seeing continued progress there. I think, given the deconcentrated plan, in addition to progress, it is really executable. We, as I mentioned in my prepared remarks, have delivered within our capital within 2% since separation. You look at our rate base this year within 1%. That is no small task on $64 billion of rate base. So we feel not only is it really executable, you should feel confident in that growth, but it is continuing to ramp. We are not going to be the flashy, right? It is not going to go up double digits, but it is going up, and it is highly executable, defensible, and we are not going to give you a number that I cannot sit here and say that. So I think that is how we should think about it. Shahriar Pourreza: Okay. Yeah. That is actually a perfect answer. Thanks, guys. Appreciate it. Congrats, Calvin. Bye. Calvin G. Butler: Thank you, Shar. Appreciate you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Paul Andrew Zimbardo from Jefferies. Calvin G. Butler: Good morning, Paul. I Paul Andrew Zimbardo: Good morning, team. Calvin G. Butler: Kudos. Nicely done. Paul Andrew Zimbardo: Thank you. To Paul Andrew Zimbardo: to continue the theme a little bit from Nick and Shar, just Paul Andrew Zimbardo: almost asking an inverse. It seems like rate base growth is pretty consistent with historical, the 7.9%, and you did grow at 7.4% despite some headwinds in Illinois and elsewhere and, of course, tailwinds too. Paul Andrew Zimbardo: What Paul Andrew Zimbardo: why could you not grow at that kind of ZIP code, the same seven-and-a-half percent growth rate? Again, doing even better than the top then. Like, is it kind of the conservatism, like you are mentioning, or just getting more comfort? If you could elaborate a little bit more. Jeanne M. Jones: Sure. I mean, I think we are always going to strive to exceed expectations. But I think, again, giving you a number you can count on, I think, you know, financing costs are increasing, right? So you have to account for that. But, you know, we are investing more in transmission, and so that gives us confidence in the, you know, that we can continue with the strong earned ROEs that we have had. So I think Jeanne M. Jones: you know, I think it is Jeanne M. Jones: it is Paul Andrew Zimbardo: defensible Jeanne M. Jones: is growing. I think, you know, but you have to think about giving a number that is defensible that we can manage, but also accounts for the associated financing costs. But we are always going to strive to exceed your expectations, Paul. Calvin G. Butler: No. And you have been. So Paul Andrew Zimbardo: if you give a mouse a cookie, you always have to ask for more. Calvin G. Butler: I noticed that, Paul. Thank you. Paul Andrew Zimbardo: The last one I want to ask just on the incremental financing cost. So you definitely made a lot of progress on the balance sheet. How should we think about financing incremental capital opportunities as they come? Should we be using kind of that 40% in this roll forward or maybe a lower number? Jeanne M. Jones: No. It is the 40%. We want to maintain and, you know, keep that cushion we have worked so hard to get on the balance sheet. So what that results in is about the $3.4 billion over the four-year period. On an annual basis, it is less than 2% of market cap, manageable. As you probably saw, we have already made good progress on that. We priced $700 million of that $3.4 billion. So on an annual basis for 2026, you know, it is a small amount to do. Given our ATM and our trading activities, it is very manageable. But we are going to stick with that 40%. Calvin G. Butler: Okay. Thank you very much, team. Mhmm. You, Paul. Operator: Thank you. One moment for our next question. Our next question will be from the line of Steve Fleishman from Wolfe. Good morning, Steve. Ryan Brown: Hey. Good morning. So just maybe on the, with the move to more transmission continuing, that 9% to 10% earned ROE range Steve Fleishman: are we seeing some kind of Calvin G. Butler: movement up within that range? Helps kind of put all these pieces together? On the growth rate. Jeanne M. Jones: Yeah. I think, you know, it is a guess. Jeanne M. Jones: Yeah. Yeah. If we go back to, I think, since separation, 2022 to 2025, our average earned has been somewhere around 9.4%. To your point, as we have been turning the shift towards transmission, I think you can expect that, if not slightly better, but it is going to take some time for some of these, you know, transmission projects to close. You have some longer-dated ones, the big ones. But we are, that is the direction we are headed. Steve Fleishman: Okay. Ryan Brown: Okay. And then on the CAMT that you mentioned, just when do you expect to actually have that, like, full clarity on that? Sometime, this sounds like sometime this year? Jeanne M. Jones: Yes. Yeah. We are hopeful that we have final, final resolution here in the near term. Steve Fleishman: Okay. Calvin G. Butler: And then lastly, just tying up some loose state stuff that Steve Fleishman: are we going to get a Maryland lessons learned Ryan Brown: at some point? Calvin G. Butler: Or Steve Fleishman: yeah. Is there any chance they just say kind of we are moved on to Calvin G. Butler: No. We are Steve Fleishman: I do not know. Patience. Calvin G. Butler: Yeah. Yeah. Steve, I hear in your voice my frustration, so thank you. It is, we do believe we are going to get a lessons learned. I know the team has been talking to the commission and the new chair. We have worked with him as a former state senator. He understands the need for this. We do believe we will get a lessons learned, and I wish I could give you a timeline, but we do believe it will happen in 2026. Steve Fleishman: Okay. Ryan Brown: But you will file BGE Steve Fleishman: you know, probably before you get it? Calvin G. Butler: Yes. Yes. Yeah. Jeanne M. Jones: We are going to file in probably the first half and, you know, would love to accommodate whatever is in there. But to Calvin’s point, we have been, you know, transparent with the commission around the fact that the rates expire in 2027, and so we have to do something here. Ryan Brown: And then a last quick one. I know New Jersey is not your, of your larger states, but just Steve Fleishman: curious your take so far under the new governor. Calvin G. Butler: Absolutely. Not, to your point, not one of our largest, but it is very important. Tyler Anthony, the CEO of Pepco Holdings, has spent time with the other EDCs with Governor Schirle. Michael A. Innocenzo, our Chief Operating Officer, has spent time, and I will let Mike elaborate further on New Jersey if you would like to, Mike. Michael A. Innocenzo: I would just say, you know, it certainly got a lot of headlines during the election campaign. But if you look at the content of the executive orders, we think that they are very constructive. They are things that we can live with. I would say behind the scenes, the conversations are focused on the right areas, which is, you know, if we are really going to go after affordability, we need to bring more supply in an affordable way and an efficient way. We fully support those discussions. Calvin G. Butler: Great. Thank you. Thank you, Steve. Operator: Thank you. Thanks to all our participants for joining us today. This concludes our presentation. You may now disconnect. Have a good day.
Operator: Good morning. Thank you for standing by. Welcome to Sylvamo Corporation’s fourth quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, you will have an opportunity to ask questions. To ask a question, please press star followed by the number 1 on your telephone keypad. To withdraw a question, press star 1 again. As a reminder, your conference is being recorded. I will now turn the call over to Hans Bjorkman, Vice President, Investor Relations. Hans, the floor is yours. Thanks, Kate. Hans Bjorkman: Good morning, and thank you for joining our fourth quarter and full year 2025 earnings call. Our speakers this morning are John Sims, Chief Executive Officer, and Donald Devlin, Senior Vice President and Chief Financial Officer. Slides two and three contain important information, including certain legal disclaimers. For example, during the call, we will make forward-looking statements that are subject to risks and uncertainties. We will also present certain non-U.S. GAAP financial information. Reconciliations of those figures to U.S. GAAP financial measures are available in the appendix. Our website also contains copies of the earnings release as well as today’s presentation. With that, I would like to turn the call over to John. Thank you, Hans, and good morning, everyone. John Sims: I am glad that you are joining our call. You referenced them on slide four. Before we begin discussing full year and quarterly results, I want to start by sharing with you my vision for Sylvamo Corporation, a vision that is fully embraced by our board and our leadership team. My vision is Sylvamo Corporation will be legendary. Yes, legendary. To be legendary is to defy expectations, create lasting value, and inspire others. And what will we be legendary for? We will be legendary for the way we relentlessly Hans Bjorkman: pursue John Sims: and achieve world-class excellence in all that we do. This will create substantial and lasting value for our employees, customers, and shareholders and will enable us to be the employer, supplier, and investment of choice. Let us move to slide five. We will strive to achieve world-class standards in the areas that define our success. These are safety and well-being. We will foster a resilient safety and well-being culture in which serious injuries are eliminated and every team member returns home safe every day. Employee engagement. We will be admired for cultivating a workplace where employees feel valued, empowered, and inspired. Inspirational leaders at every level of Sylvamo Corporation will unite their teams around our vision and amplify each individual employee’s talent by listening to them and engaging them to drive continuous improvement. We are passionate about making paper that educates, connects, and enriches lives, and we will set high standards to achieve world-class performance together. Customer centricity. We will set a new standard for customer experience and loyalty, striving to be truly outstanding. Our commitment is to deliver superior value and service to our customers, earning their trust and loyalty. This is critical to our strategy. Operational excellence. We will achieve best-in-class levels of efficiency, reliability, and performance in our mills and supply chain, ensuring that our operations consistently deliver to the highest standard. Cost leadership. We will attain industry-leading cost effectiveness through disciplined management and continuous improvement, strengthening our competitive position and ensuring sustainable results. Finally, sustainability. We will operate responsibly, protecting and enhancing forests, uplifting communities, and improving our planet’s future through sustainable practices. Let us go to slide six. As Sylvamo Corporation’s CEO, my commitment to you is to allocate capital wisely and to focus on long-term value creation. I will communicate transparently, providing context, rationale, and honest assessment of our decisions and performance while making disciplined data-driven decisions that position the company for sustainable success and strengthen Sylvamo Corporation for decades to come. We seek to attract and retain high-quality long-term shareowners who share our vision for disciplined capital allocation and sustainable value creation. In 2024, following extensive dialogue with our long-term shareowners, we discontinued providing full-year adjusted EBITDA and free cash flow guidance. That decision reflected our belief that long-term value creation is best supported by disciplined capital allocation rather than focusing on short-term earnings targets. After careful consideration, we decided to discontinue providing quarterly adjusted EBITDA outlook. We believe this change further aligns our external communications with how we manage the business and our goal to attract and retain high-quality long-term shareholders who share our vision of long-term value creation. And, Pauline, this decision does not represent a reduction in transparency. As you will see, we will provide a lot of detail throughout this call. We also will continue to provide selected financial metrics, as outlined on slide 25 in the appendix. Now let us discuss the full-year results. Turning to slide seven, you can see that in 2025, we generated 12% return on capital as we executed our strategy during challenging industry conditions. We maintained a very strong financial position and balance sheet, achieving a net debt to adjusted EBITDA of 1.6 times. We earned $448,000,000 in adjusted EBITDA, generated $44,000,000 in free cash flow, and returned $155,000,000 in cash to shareholders. We reinvested $224,000,000 across our manufacturing network and our Brazil forest lands to strengthen our low-cost position. We also accelerated development of high-return capital investment. We are committed to being the investment of choice and believe we can generate significant shareholder returns in the future by executing our strategy. Slide eight highlights our 2025 full-year key financial metrics. Our adjusted EBITDA was $448,000,000 with a 13% margin. We generated $44,000,000 of free cash flow, and our adjusted operating earnings were $3.54 per share. Operator: Let us move to slide nine. John Sims: Our fourth quarter highlights include commercial success, with our uncoated freesheet sales volume increasing quarter over quarter by 9%. Our operational teams also executed well and our paper machines’ productivity continued to improve. We took advantage of a planned maintenance outage at our Eastover mill to begin the upgrades to our paper machine project and significantly advance the work on our woodyard project. Let us move to the next slide. Slide 10 shows our fourth quarter key financial metrics. In the fourth quarter, we earned adjusted EBITDA of $125,000,000 with a margin of 14%, and free cash flow was $38,000,000. We generated adjusted operating earnings of $1.08 per share. I will now turn the call over to Donald Devlin to review our performance in more detail. Thank you, John, and good morning, everyone. Donald Devlin: Slide 11 contains our fourth quarter earnings bridge John Sims: versus the third quarter. Donald Devlin: In the fourth quarter, we earned $125,000,000 of adjusted EBITDA compared to $151,000,000 in the prior quarter. Pricing/mix was unfavorable by $21,000,000, primarily due to mix across the regions, as well as lower paper prices in Europe and some of our Brazilian export markets. Volume increased by $18,000,000, largely due to Latin America and North America. Operations and other costs were unfavorable by $4,000,000, primarily due to seasonally higher costs in Europe. Planned maintenance outage costs were unfavorable by $17,000,000 as we executed an outage at our Eastover mill after having no planned outages in the prior quarter. John Sims: Input and transportation costs were slightly unfavorable by $2,000,000. Let us move to slide 12. Donald Devlin: The overall European industry supply and demand environment continues to be challenging. However, market conditions have started to show signs of improvement, as pulp prices began to rebound in the fourth quarter and the improvement continues into the first quarter. Our European cut-size paper prices exited 2025 €100 per ton below where we exited the year in 2024. We communicated paper price increases to our customers and expect the realization to begin in the second quarter. Wood costs in southern Sweden are starting to ease, although there is typically a three- to six-month lag before we see relief in our operations. In Latin America, demand is moving from the seasonally strongest fourth quarter to the seasonally weakest first quarter. This is also negatively impacting our geographic mix in the first quarter. We communicated paper price increases to our customers in Brazil and have started to see realization in January. We also communicated paper price increases to our export customers across other Latin American countries as well as the Middle East and Africa region, and are starting to see some realization in those regions in February. Turning to North America, industry operating rates are improving. After peaking in June, imports into North America have declined significantly throughout 2025. We communicated paper price increases to our customers and expect the realization to begin in the second quarter. John Sims: 2026 will be a transition year for North America as we work through short-term capacity constraints Donald Devlin: with the Riverdale supply agreement exits and the execution of the Eastover investments. The next few slides will provide the details and context for how this will impact this year’s financial results. Slide 13 shows our capital spending outlook, which is expected to be $245,000,000 in 2026 as we execute the majority of the $145,000,000 investments at our Eastover mill. We expect 2027 to return to prior levels as we wind down these strategic Eastover investments, and we are prioritizing strategic projects with the fastest payback so that 2027 and beyond reflects lower costs, higher efficiency, and stronger cash conversion potential. Let us go to slide 14. To provide an update on our Eastover investments, these high-return strategic projects will add 60,000 tons of uncoated freesheet, reduce costs, and improve our mix and efficiency. The paper machine optimization project is on schedule, with the bulk of the work to be completed in the fourth quarter during a 45-day planned maintenance outage. This outage is about 30 days longer than a typical maintenance outage. A brand-new state-of-the-art sheeter will replace an existing cut-size sheeter. It is also on schedule and will be installed at the same time as the paper machine optimization work. The woodyard modernization project is on track, and we will be ramping up a hardwood operation in the second quarter. We are planning to start up the softwood operation in 2027. Again, we are investing in high-return projects like these to generate future earnings and cash flows. On slide 15, let me walk you through how we see the North American sales volume bridging from 2025 to 2026. First, we expect to receive about 100,000 tons from Riverdale this year, which is 160,000 tons less than 2025. Second, the extended planned maintenance outage at Eastover will result in 30,000 fewer tons this year. To narrow this gap, we will be sourcing about 80,000 tons from our European operations. This will have a negative adjusted EBITDA impact to our European business of about $20,000,000 due to tariffs and freight costs. We expect to gain another 35,000 tons productivity year over year. We will also bring some additional external volume into our system to ensure we continue to serve our customers during this transition. The net difference is around 55,000 tons of lower sales volume in North America. John Sims: With the majority occurring in the first quarter as we use our capacity to build inventory. Donald Devlin: As a result, we will have an approximate $20,000,000 negative adjusted EBITDA impact in North America in the first quarter due to lower sales volume. On top of these items, we will have some additional impacts, which I will provide more detail on in the next slide, 16. We have a clear plan to meet our most valuable customer needs during this transition. We are building inventory ahead of the extended Eastover outage in the fourth quarter, importing from our European operations, and we will use external conversions to supplement our internal sheeting capacity. We will then draw down inventory as we move through the second half of the year, as the Riverdale supply agreement winds down John Sims: and the strategic investments at Eastover are implemented in the fourth quarter. Donald Devlin: In 2026, we will expect a negative $45,000,000 adjusted EBITDA impact in North America from the combined sourcing mix, external conversion, freight impacts, and one-time outage costs. Working capital timing over the course of the year nets to a negative $25,000,000 overall. It is related to inventory build and drawdown throughout the year and the settlement of our payable to International Paper for the Riverdale tons we buy. Let us go to slide 17 to pull all of this together. So here is a summary of the year-over-year adjusted EBITDA cash impacts that we expect to incur John Sims: over the course of 2026. Donald Devlin: North America adjusted EBITDA impacts will total approximately $65,000,000 across these three items: $20,000,000 from lower sales volume of 55,000 tons, $20,000,000 from external sourcing, John Sims: conversion costs, and freight, Donald Devlin: and $25,000,000 from Eastover one-time outage costs. John Sims: Not related to this transition, but we also expect Donald Devlin: a $10,000,000 charge in the first quarter from International Paper due to unusually high energy costs resulting from the recent cold weather that impacted the Riverdale mill. Europe adjusted EBITDA impacts will total approximately $20,000,000 due to U.S. tariffs and freight on the 80,000 tons we will be shipping to the U.S. From a free cash flow standpoint, in addition to the flow-through of these adjusted EBITDA impacts, we should expect a negative $25,000,000 impact related to working capital. In summary, 2026 is a transition year for North America, and the $85,000,000 of one-time costs will largely not repeat in 2027. John Sims: You will also not have the one-time $10,000,000 charge Donald Devlin: from Riverdale for the cold weather impacts that I mentioned. We are doing all of this in order to serve our valuable customers and be able to ramp up the Eastover volumes in 2027. After we gain the additional 60,000 tons of paper machine optimization project and 30,000 tons from the non-repeat of the extended outage, we will benefit from the additional tons from Eastover, the efficiency and flexibility and lower cost of the new sheeter, as well as low cost from Eastover. On slide 18, John Sims: this illustrates our planned maintenance outage schedule for the full year Donald Devlin: by region and by quarter. Unlike last year, when we had major planned maintenance outages in both mills in Europe, this year we only have a major outage at the Nymölla mill and it is in the fourth quarter. 2026 is also different than in the past few years where we had more than 80% of the total annual planned maintenance outage cost in the first half. This year, we have more than 50% of the total cost in the fourth quarter, as we complete the Eastover investment. John Sims: Strive to create long-term shareholder value by executing our strategy and delivering on our investment thesis. Donald Devlin: Keeping a strong financial position is the cornerstone of our capital allocation framework. This allows us to reinvest in our business, to strengthen our competitive advantages through the cycle and increase future earnings and cash flow. John Sims: Since becoming an independent company just over four years ago, Donald Devlin: we have earned $2,500,000,000 in adjusted EBITDA. We invested over $800,000,000 to strengthen our business, generated over $960,000,000 in free cash flow, John Sims: reduced debt by more than $675,000,000, and returned over a half $1,000,000,000 of cash to shareowners. Donald Devlin: I will now turn the call back to John on slide 20. John Sims: Thank you, Don. Our flagship growth strategy remains unchanged. We will invest in low-risk, high-return projects to strengthen our uncoated freesheet capabilities and grow earnings and cash flow. This strategy is underpinned by three fundamental beliefs. The world will continue to rely on uncoated freesheet to communicate and entertain for years to come. Our North American and Latin American operations offer returns on smart investments in our assets and business processes that are well above cost of capital. Our competitive advantages—low-cost assets, iconic brands, strong customer relationships, global footprint, and talented teams—position us successfully to deliver on our strategy. Our capital allocation philosophy also remains unchanged. We will deploy every dollar with the goal of improving our competitive position and delivering the best possible shareowner returns every time. We will continue to maintain a strong balance sheet, reinvest in our business with discipline to strengthen operations and customer experience, and return cash to shareowners. Let us go to slide 21. As I stated in my CEO letter to shareowners a few weeks ago, 2025 and 2026 will be low points in our free cash flow generation as we weather the cyclical industry downturns, particularly in Europe, and complete investments at our Eastover mill. We are focused on our long-term value creation, which will generate strong and sustainable results by diligently executing our flagship growth strategy, adhering to our disciplined capital allocation principles, becoming more customer centric, institutionalizing lean management principles, and digitally transforming our business operations. As industry conditions turn, our capital spending normalizes, and benefits from our investments begin to materialize, we have the potential to generate annually greater than $300,000,000 of free cash flow and greater than 15% returns on invested capital. I will conclude on slide 22. We seek to attract and retain high-quality long-term shareholders who share our vision for disciplined capital allocation and sustainable value creation. We look forward to deepening our dialogue at Investor Day later this year, where we will share more details on our strategy, capital allocation priorities, and progress towards achieving our vision. I will now turn it over to Hans. Thank you, John, and thanks, Don. Hans Bjorkman: Alright, Kate. We are ready to take questions. Operator: If you would like to ask a question, please press star then the number 1 on your telephone keypad. To withdraw a question, press star 1 again. Thank you. Our first question is from Daniel Harriman with Sidoti. Your line is open. Daniel Harriman: Hey, guys. Good morning. Thank you so much for taking my questions. I will start with two regarding operations in Europe, and then I will get back into the queue. But first, you called out wood costs in Sweden, John Sims: then I was hoping you could update us on your efforts to improve mix and win new customers in the region. I believe you called out a few of those items on the third quarter call. And then similarly, with cut-size pricing down in the region versus the prior year, when we think about potential margin improvement in Europe, in fiscal 2026 and into 2027, how dependent is that improvement on price realization versus some of the internal levers you can pull? John Sims: Hey, Daniel. Thanks for your question. It is John Sims. In terms of the efforts around improving mix, one key driver to that was an investment we made at the Säffle mill, which was successfully started up and implemented in the last part of the fourth quarter. And I can tell you that what that does is it drives us, allows us to produce and sell more roll business into the converting markets versus commodity cut-size out of the Säffle mill. And I can tell you that our order books are full in terms of that segment, and so we are executing well against our plan to improve the mix at our Säffle mill. In terms of pricing, it has been a very tough market in Europe. It has been a long, probably one of the longest downturns that we have seen. Margins are very compressed. We have been significantly working to reduce costs at all our facilities, focusing on fixed costs at our Säffle mill and improving operational performance at our Nymölla mill. We exceeded our targets last year. We are going well with that. We have got additional plans. However, we do need the market to improve, and we are seeing that. So we talked about it. Pulp prices are going up in Europe. We have announced price increases to our customers in Europe as well as the export markets that we serve out of Europe. Those prices will be—we will start to realize that, though, in the second quarter. We will not see that in the first quarter, and that is going to be important to the margin improvement in Europe. We need to have prices go up. Current margins just are not sustainable at the current level. Daniel Harriman: Great. Thanks so much, John. Operator: Our next question is from George Staphos with Bank of America. John Sims: Hi. Donald Devlin: Thanks for taking my question. Good morning, everybody. Appreciate the details. My two questions, and I will go back in queue, are a little bit longer term to start. George Staphos: John, we appreciate the review of your vision. Donald Devlin: And your shareholder letter. There is a lot of focus on capital allocation and returns and in some ways, defending what the company has been doing. John Sims: And that is all well and good. Just if you could tell us, have you been getting more investor questions on that topic in the last Donald Devlin: couple of quarters that prompted the discussion from you on your capital allocation? What is your discussion with investors, to the extent that you can comment, regarding that topic? Second point, as you think about Europe, John Sims: how do you see Nymölla fitting? It is easy to get Donald Devlin: down on a business at the trough. Right? And your George Staphos: charge Donald Devlin: as leaders is to see and look longer term. And we get that. How does Nymölla fit? Säffle looks like it is doing great. Nymölla probably has been a bit disappointing. How do you see that fitting along the long-term picture for Sylvamo Corporation? Thank you. John Sims: Yeah. Good morning, George, and thanks for those questions. I think when it comes to the capital allocation question that you are asking, it is really the questions that we have gotten from investors. We have not gotten many questions. We have gotten a lot of support in terms of alignment and agreement with our capital allocation priorities. I think one of the things that I have been focusing on as the new CEO is to reassure with investors what is going to change and what is not going to change going forward. And one of the things that we are stressing is we are not changing our strategy. We are going to be focused on our uncoated freesheet, nor will we be changing our capital allocation strategy. The priorities will be maintaining a strong balance sheet, reinvesting back in the business where it makes sense that we can generate high returns, and then returning cash to shareowners. And so just reaffirming that. I mean, I will take an opportunity. What is going to change, I think, is really we are going to transform the business. We are going to go through a lean transformation. Why? Because we want to focus on becoming much more customer centric with that, and we want to be able to drive continuous improvement, accelerate it, and reduce our cost, meeting customer needs while eliminating all waste. So we are going to be going through that transformation, if you will. We are going to be leading that off in Latin America, and then we will be driving that across all the businesses. Your next question, George, is around Nymölla and how that fits. You know, Europe has always been a bet on the future in terms of business. The market has been very difficult. We talked about it. The down cycle has been longer and deeper than what we expected. The other thing with Nymölla is the wood cost, which has made it much more challenging. The wood cost increased significantly more than what we expected going in there. That is turning, finally. We are starting to see some reductions in the wood cost, which Don mentioned. Now, it takes about three to six months for us to start to see that, and we will start to get the impact of that more toward the second quarter of the year. But as we look at Nymölla’s fit for us George Staphos: is John Sims: has always been a good fit for us because, number one, it is solely focused on uncoated freesheet. The cost position is good if the wood cost can get back down to where it needs to be, not where it is at right now. So the other thing is the mix for Nymölla Donald Devlin: is very attractive because it John Sims: serves both the cut-size as well as the printing communication. So it has the capability to serve both of those markets, which was a good fit and also very synergistic for us. But as we said, you know, as I said, we are evaluating everything we can do in terms of around Europe to improve our performance there. We talked about that, I think, on the last call. We believe we have the right strategies for both facilities. George Staphos: We believe that we have made a management change there. John Sims: We have got the right leadership. We have got very talented teams. We have got a really good focus on trying to improve those businesses. We are looking at all options, if you will, as we try to focus on improving our businesses in Europe. Donald Devlin: Hey, John. Just a quickie, and I will turn it over. Related to wood cost, I would not expect it would be the case, but is there any sense to maybe looking at purchased pulp John Sims: and taking the, you know, the Donald Devlin: the pulp line offline per period? Or not? Thanks. I will turn it over. John Sims: Yeah, George. I mean, yes, we are looking at all options, whether that makes sense or not. And does it currently? We are still evaluating that. Donald Devlin: Okay. Interesting. Alright. Thank you. Operator: Before going to the next question, again, if you would like to ask questions, please press star then the number 1 on your telephone keypad. To withdraw a question, press star 1 again. Our next question is for Matthew McKellar with RBC Capital Markets. Your line is open. Matthew McKellar: Good morning. Thanks for taking my questions. I would like to just follow up on George’s last question about fiber costs. Kind of a related question. I think Lenzing wants to scale up production at the TreeToTextile facility at Nymölla. Will that have any direct or indirect impacts to your operations and cost there? Any kind of read-through to fiber costs kind of over the longer term? Appreciate some perspective there. Donald Devlin: Thank you. Yeah. Matthew, thank you. This is Don. So Hans Bjorkman: that will not have an impact on our fiber cost there for Nymölla. That project. John Sims: Great. That is straightforward. Thank you. Matthew McKellar: And just shifting over to the shareowners’ letter and some of the messages today, John, you are talking about lean management, digital transformation. Could you help us get a sense of the size of the opportunity you are thinking about here either in terms of profits or capital efficiency, and how that interacts with the digital—what kind of investments are John Sims: required to advance to the state you envision, Matthew McKellar: I think there is a comment that you are kicking off some of these initiatives in Latin America. Are you able to help us understand why that region is where you are focused first? Thanks. John Sims: Yeah. No. First, when it comes to the lean transformation, it is really driving an employee-driven continuous improvement. And we want to double in terms of the improvement that we have been getting across our facilities in terms of cost but also in terms of satisfying our customers’ needs. And, really, part of our strategy and key to our strategy is increasing customer loyalty in all our regions. And we need to become more flexible to meet our customers’ needs. We need to reduce lead times. We need to increase our perfect order in terms of delivering to them. And so, yes, it is hard to quantify right now in terms of absolute dollars what we believe and expect, but the expectation is high. We are raising the bar in terms of our improvement initiatives. And we believe that Lean principles will be a key driver of that. And, you know, I just had a discussion with the Latin America team about them leading this effort for us and why we are starting with Latin America as leading, and because we think they will have the greatest success. We will have the greatest success in launching this with them. Why do we do that? Because we believe that if you look at the past performance of our Latin American team, a lot of it has been driven by using the Lean tools, if you will, and where we want to get in terms of world-class performance in our operations and servicing our customers. They have been there. We want them to get there again, and they can pave the way for Sylvamo Corporation. Great. Thanks for that detail. Matthew McKellar: And then last one for me, I will turn it over. I am a bit surprised to see you paused share repurchase in the quarter. Apologies if I missed something in your opening remarks. Is there anything keeping you out of the market? I think you mentioned some interaction with a significant shareholder. Please correct me if I have captured that incorrectly. Or is that maybe in recognition of just a heavier CapEx year in 2026? Thanks. Donald Devlin: Yes, Matthew, good question. So when we think about capital allocation, we also have to consider the cash flows that we expect. And so as we look into John Sims: 2026, the plans we have, the capital intensity plus the inventory build that I discussed earlier and the cash required for that. We thought it was prudent not to make share repurchases in the quarter. Donald Devlin: And John Sims: Okay. Think about what Donald Devlin: Okay. Yeah. Matthew, when you think about what we did in the year, between dividends and share repurchases, it was $155,000,000 in 2025. So it was George Staphos: 350% of our free cash flow for the year. So we felt like we were sufficient in the year Donald Devlin: and, thinking forward, we are prudently managing cash. John Sims: Thanks very much. I will turn it back. Operator: Before going to the next question, if you would like to ask questions, please press star then the number 1 on your telephone keypad. To withdraw a question, press star 1 again. Thank you. Our next question is from George Staphos with Bank of America. Your line is open. John Sims: Thanks for taking my follow-ons. Donald Devlin: I will ask three questions and turn it over. So John Sims: John, Don, the $10,000,000 additional George Staphos: I assume that is in addition to the $85,000,000 net negative from the footprint realignment, if you will, Donald Devlin: for 2026. So in reality, it is a—I realize it goes away, but it is a $95,000,000 negative. Would that be correct? George Staphos: Number one. Number two, John Sims: companies do Donald Devlin: analyst days, investor days, when they have something to share that is above and beyond what you have talked about over the course of quarters. And, you know, actually, credit to you, you have done a lot over the last couple of quarters. You talked about your vision, talked about your capital allocation, talked about the projects that are coming. So what are you hoping to convey that has not already been conveyed in your last couple of quarters in an analyst day that will come up in 2026? Lastly, John Sims: we appreciate the detail on the effect of outages on Riverdale, Donald Devlin: on Eastover, etcetera, and the impact that is having on costs and also on working capital, George Staphos: yet Donald Devlin: I am curious why you think John Sims: providing guidance, even quarterly guidance, Donald Devlin: encourages more of a short-term nature? George Staphos: You know, speaking for Donald Devlin: analysts, investors on this call, we ultimately come up with our own forecast. We appreciate the detail. We would like to know what is in the assumptions. And I am just curious why you view George Staphos: providing no guidance Donald Devlin: as a benefit to longer-term investors and analysts as opposed to providing the guidance. Thank you. Good luck in the quarter. So, John, I will take the—George, thank you for the questions. I will take John Sims: the first one. Donald Devlin: There on the $10,000,000. So, yeah, that was related to Riverdale and it is in addition to the $85,000,000. John Sims: So you are correct. It is $95,000,000. Donald Devlin: And it is one-time cold weather. The gas prices spiked and, you know, so you are basically thinking peak prices and with very short-term notice. John Sims: So that was our portion of Donald Devlin: the cost associated with Riverdale, and it would be a non-repeat. And relative to Investor Day, I will start, and then John, of course, add in. As you think about Investor Day and what we want to share, if you think about John’s vision and our road back to $300,000,000 in cash flow and 15% return on invested capital, we are going to share the path to get there. Right? We will share the things that we are going to do, you know, across our business for lean, the things we are going to do digital John Sims: and the things we are going to do for customers to drive value Daniel Harriman: in operations. And I think that is above and beyond, especially considering where we are today. John, would you add? Yeah. John Sims: Just to add to that, you know, we really have not had an Investor Day since we spun from International Paper, which is a long time ago now. But we felt, with the transition to me as the new CEO, it is very appropriate to be able to come out and have meetings with investors where we can talk about, as Don said, what is our strategy. I think it is pretty clear. We said we have not changed it, but now how do we execute by region, and what are these initiatives that we are just talking about in terms of lean, digital transformation, and other efforts that we believe support and execute our strategy to grow earnings and cash flow. So that is the reason we are going to do that. And then, you know, finally, back to your question around dropping the quarterly guidance. I think it really still goes back to why we even dropped the full-year guidance. We are going to continue to provide a lot of detail like we did even in this call. But we believe that we manage the business on a long-term basis. That is how we focus, not on a quarterly basis. Of course, we are measuring and following our results daily in terms of how we are tracking against our longer-term plans, but our belief is that this aligns more with what we are seeking, which is quality long-term shareholders who share our vision for long-term value creation. Donald Devlin: Hey, John. I take the answers, and ultimately, you know, it is up to you to run the company as you and the board see fit. But running a company on a long-term basis and providing guidance, frankly, are two separate George Staphos: topics. Donald Devlin: And, you know, again, respectfully, George Staphos: you should trust that the investor and analyst take your assumptions and your guidance, and then we come up with our own forecast. So I do not think one means you run the company any Daniel Harriman: differently than you would have otherwise. For what it is worth. But we appreciate the time. We appreciate the detail. Just want to make that comment. And we will let you go. Good luck in the quarter. John Sims: Appreciate your comment. Thank you, George. Operator: I will now turn the call back over to Hans Bjorkman for closing comments. Hans Bjorkman: Alright, John. A lot we covered. I will give you one more shot to close up and wrap up the day. John Sims: Thank you. And I thank again everybody for joining this call. I think 2026 is going to be an exciting year for us. We will be executing our most significant investment in our Eastover mill that will drive a lot of value in the years to come. We are also beginning our lean transformation, focusing on exceeding our customers’ expectations and driving improvement across our operations, as well as making significant progress on our digital transformation. As I said, we are focused on long-term value creation and will generate strong and sustainable results by diligently executing our flagship growth strategy and adhering to disciplined capital allocation principles. As industry conditions turn, and they are, our capital spending normalizes and the benefits from our investments begin to materialize. We have the potential to generate annually greater than $300,000,000 of free cash flow and greater than 15% return on invested Daniel Harriman: capital. John Sims: Thank you again for joining the call. Hans Bjorkman: Thanks, everybody. We appreciate your interest, and we look forward to the continued dialogues over coming weeks and months. Have a great day. Operator: Once again, we would like to thank you for participating in Sylvamo Corporation’s fourth quarter 2025 earnings call. You may now disconnect.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the US Foods Holding Corp. Q4 '25 Earnings Call. [Operator Instructions]. I would now like to turn the call over to Michael Neese, Senior Vice President, Investor Relations. Michael, please go ahead. Michael Neese: Thank you, Tiffany. Good morning, everyone and welcome to US Foods Fourth Quarter and Full Year Fiscal 2025 Earnings Call. On today's call, we have Dave Flitman, our CEO; and Dirk Locascio, our CFO. We will take your questions after our prepared remarks conclude. Please limit yourself to one question and one follow-up. Our earnings release issued earlier this morning and today's presentation can be found on the Investor Relations page of our website at ir.usfoods.com. During today's call, and unless otherwise stated, we're comparing our fourth quarter and full year 2025 results for the same period in fiscal year 2024. In addition to historical information, certain statements made during today's call are considered forward-looking statements. Please review the risk factors in our Form 10-K for a detailed discussion of the potential factors that could cause our actual results to differ materially from those anticipated in forward-looking statements. Lastly, during today's call, we will refer to certain non-GAAP financial measures. All reconciliations to the most comparable GAAP financial measures are included in the schedules on our earnings press release as well as in the appendices to the presentation slides posted on our website. We are not providing reconciliations to forward-looking non-GAAP financial measures. Thank you. I'd like to turn the call over to Dave. David Flitman: Thanks, Mike. Good morning, everyone, and thank you for joining us. Let's turn to today's agenda. I'll start by providing highlights from 2025, including our team's strong execution during the first year of our 2025 to 2027 long-range plan. I'll then hand it over to Dirk to review our fourth quarter and full year financial results and provide our fiscal 2026 guidance. Starting on Slide 3. Our 2025 earnings exceeded the long-range plan we outlined at our June 2024 Investor Day. We delivered these strong results despite a softer macro environment by continuing to focus on controlling the controllables, something that we have been doing well for the past several years. These include capturing incremental market share across our target customer types, and executing our operational excellence and productivity initiatives. For the year, we grew adjusted EBITDA 11% to a record of more than $1.9 billion and expanded EBITDA margin by 30 basis points. At the same time, we delivered record adjusted earnings per share of $3.98. Our adjusted EPS growth of 26% led the industry and was more than twice our double-digit adjusted EBITDA growth rate. Now that we are 1/3 of the way through our long-range plan, I remain highly confident that we'll reach our 2027 goals. Highlights of our 2025 results driven by the continued progress of our operational excellence and margin initiatives include: delivering share gains across independent restaurants, health care and hospitality, our 3 target customer types; growing adjusted gross profit dollars 190 basis points faster than adjusted operating expenses; driving more than $150 million in cost of goods savings; expanding adjusted EBITDA margin by 30 basis points to a record 4.9%; extending our technology leadership position through new embedded AI capabilities; and executing our capital allocation strategy by repurchasing approximately $930 million of our shares and completing 2 small tuck-in acquisitions for more than $130 million. In short, 2025 was a strong start to our new long-range plan. Through the extraordinary dedication and focus of our 30,000 associates, we continue to execute our strategy, serve our customers well, capture profitable market share and strengthen margins. The momentum we carried into 2026 is a testament to their tireless efforts to deliver excellence to our customers. Let's turn to broader industry trends. Chain restaurant foot traffic as published by Black Box, was down 2.8% for the fourth quarter and decelerated 230 basis points from the third quarter. Our chain business was down approximately 3.4%. Headwinds from the government shutdown, winter storms in December and a challenged lower income and younger demographic affected industry demand. We were not immune to these events as they impacted the volume acceleration we were seeing coming out of the third quarter. While these headwinds created short-term pressure, we remain confident in continuing to grow the top line and capture profitable market share in what remains a highly fragmented industry. Despite fourth quarter foot traffic being the slowest of the year, we grew independent restaurant case volume 4.1% and which accelerated from the third quarter and resulted in our 19th consecutive quarter of share gains. In the fourth quarter, we delivered our strongest net new independent account growth of the year, increasing approximately 4.7% over the prior year. This marks our best performance since the second quarter of 2023. Healthcare and Hospitality, which together comprised more than 25% of our sales, grew 2.9% and 3.1%, respectively, in the fourth quarter. We continue to gain share in both customer types. And in fact, we just posted our 21st consecutive quarter of share gains in health care. Our 2026 case growth was strong in January until the widespread storms and weather-related closures at the end of the month and beginning of February. Although the weather meaningfully impacted the industry's case volume, we were encouraged by our start to the year and are optimistic volume will recover as the weather moderates. Turning to Slide 4. Let's review some of the key achievements our team delivered under our 4 strategic pillars in 2025. Our first pillar is culture. The safety of our associates is and always will be paramount. Our injury and accident frequency rates improved 16% from the prior year on top of our 20% improvement in 2024. I'm very proud of our team for these results, but we will not rest until we reach our goal of 0 injuries and accidents. Supporting our commitment to safety is the continued rollout of the center ride powered industrial equipment across our distribution centers. We are more than 60% through this deployment and expect to fully complete the rollout by the end of this year, dramatically reducing the potential for one of our most serious injury types. Finally, we also donated more than $12.5 million to hunger relief, culinary education and disaster relief efforts last year. This contribution included more than 5 million pounds of food and supply donations, the equivalent of approximately 4 million meals. Turning to our service pillar. We are striving to differentiate our customer service platform and provide a best-in-class delivery experience. We made strong progress with our operations quality composite, which measures our ability to deliver products to our customers without errors with performance improving by 15% for the full year. These results reflect our ongoing commitment to improving our customer service experience, and we expect further improvement in 2026. We remain excited about our ability to improve routing efficiency through our enterprise routing initiatives, including market-led routing and Descartes. In 2025, we completed the deployment of Descartes across our distribution network and achieved an approximately 2% improvement in cases per mile across our broad line deliveries compared to the prior year. And while we are pleased with this early success, more opportunities remain to further increase our routing productivity. Also in 2025, we made significant advancements in our MOXe platform, including additional AI capabilities. One example is the launch of our new AI-driven ordering feature, which enables customers and sellers to upload photos, PDFs and even handwritten notes directly into MOXe and seamlessly translate them into an order, saving them both time and effort. Now let's turn to our growth pillar. In 2025, net sales grew 4.1% to $39.4 billion through continued market share gains. Our go-to-market strategy and consistent addition of new seller headcount, which was up nearly 7% in 2025, remain at the core of our growth plan. Pronto, our small truck delivery service continues to expand and is now live in 46 markets with plans to launch in 10 to 15 additional markets in 2026. We also see excellent traction from Pronto next day, formerly known as Pronto Penetration, which we introduced in mid-2024. This service is already live in 24 markets and we expect to add approximately 10 markets in 2026. Last year, Pronto generated over $1 billion in sales, underscoring its importance as a long-term growth driver. Additionally, we remain focused on enhancing our center of plate protein and fresh produce offerings. Several years ago, we upgraded our assortment and focus on quality in these key product categories. Last year, we grew our fresh produce and center of plate categories with independent restaurants, approximately 150 basis points faster than the industry and nearly 400 basis points faster over the past 2 years. Moving now to our sales compensation change. As we discussed last quarter, we are transitioning to a 100% variable compensation structure for our local sales force which we believe will be an additional long-term growth driver and enable higher earnings potential for our sellers. For context, currently, a seller enters our company at a 100% base salary. From there, we execute a click down process at a pace specific to each individual that moves them to a 50-50 fixed and variable mix over time. Moving forward, we will transition our sellers to our new 100% variable commission plan following a similar individualized click-down process. We believe that managing this transition well is more important than getting everyone to full commission by a date certain. As a result, while we plan to launch the new compensation plan in the middle of this year, it may take us 2 to 3 years to get the majority of our sales force to the 100% variable commission structure. We strongly believe this thoughtful transition plan will enable us to effectively and fully support each of our sellers through this important change. We are currently piloting the plan in several areas across the company and feedback thus far has been very positive. And recently, through our sales leadership academy, we have trained all of our frontline sales leaders on the design and execution of the new compensation structure. Our sales leaders have given us great feedback and are excited for the launch of our new plan. Finally, we are highly confident the new compensation structure will drive stronger alignment to our business objectives and unleash our world-class sales force to help us further accelerate long-term growth. Finally, let's move to our profit pillar. Our strong execution and margin initiatives resulted in adjusted EBITDA margin expanding by 30 basis points to a record 4.9%. We continue to drive gross profit gains and offset a portion of operating expense inflation with supply chain and other productivity improvements. I'd like to highlight 4 key drivers of our industry-leading margin expansion. We continue to make progress on cost of goods through our strategic vendor management efforts, realizing more than $150 million in savings last year. Our execution and our win-win collaboration with suppliers are delivering more than we expected. We now believe we can deliver at least $300 million of cost of goods savings over our 3-year plan, compared to our original $260 million goal laid out at our 2024 Investor Day. We also remain focused on growing our private label brands where our full year penetration was up approximately 90 basis points to nearly 54% with our core independent restaurant customers. Private label growth remains a significant opportunity for U.S. Foods as we have ample room to drive penetration higher. Our enhanced inventory management process to eliminate waste resulted in an approximately $40 million gross profit benefit up from our prior $35 million estimate. We believe there is more to do in this area and expect to generate additional savings in 2026. Furthermore, we achieved approximately $45 million in indirect cost savings in 2025. This is another area where our initiatives are delivering greater benefits than we had originally anticipated. Based on the progress we've seen we now expect to generate over $100 million in indirect savings by 2027. Finally, for 2025. We accelerated our overall operating expense productivity gains as we make progress to our -- towards our 3% to 5% annual improvement goal. We remain committed to building a foundation that not only drives efficiency today but also positions us for sustained growth and value creation in the years ahead. Turning to Slide 5. As you can see, we are consistently driving sales growth, expanding margins and delivering double-digit earnings growth. When combined with our capital allocation framework, we are compounding that earnings growth to an industry-leading adjusted EPS growth of more than 20%. We have been and will continue to be prudent stewards of capital, consistently increasing our return on invested capital year after year which also underscores our commitment to creating long-term shareholder value. We remain confident in the earnings power of our operating model, and we believe we are well positioned to compound results for years to come, driving sustainable growth and reinforcing the strength, diversification and resilience of our business model. Before I hand it over to Dirk, I'd like to recognize our inventory adjustments team led by Jason Hall, our Senior Vice President of Transportation and Logistics. Jason led a cross-functional team that worked together to develop a strategy and implement solutions to reduce waste and improve our inventory health. As I alluded to earlier, this team, along with our field teams and our distribution centers across the country delivered more than $40 million in gross profit benefit in 2025. In addition to driving stronger profitability across the business, this team's efforts resulted in better in-stock performance, quality and freshness for our customers to support sales growth. Thank you, Jason and team for your commitment to delivering excellence through this important company-wide initiative. Let me now turn the call over to Dirk to discuss our fourth quarter results and our 2026 guidance. Dirk Locascio: Thank you, Dave, and good morning, everyone. Our fourth quarter performance capped off a solid 2025, underscoring the strength and resilience of our business model, profitable growth engine and disciplined capital allocation framework. Starting on Slide 7 in our financial results. Fourth quarter net sales increased 3.3% to $9.8 billion, driven by total case volume growth of 0.8% and food cost inflation and mix impact of 2.5%. Excluding the Freshway divestiture, total case growth was 1.2%. Our independent restaurant volume continues to accelerate and grew 4.1%, including 40 basis points from acquisitions. Healthcare grew 2.9% and hospitality grew 3.1%. Our chain restaurant volume was down 3.4%, primarily driven by slower industry traffic as well as the strategic exit we discussed in the second quarter, largely offset by new business wins. Broadly speaking, our chain volume was in line with the industry. Moving to our financial performance. We again delivered strong earnings growth and margin expansion, driven by continued operating leverage gains. Fourth quarter adjusted EBITDA grew 11% from the prior year to $490 million, driven by continued volume growth with our target customer types, increased gross profit and operating expense productivity. Adjusted gross profit dollars grew 250 basis points faster than adjusted operating expenses. As a result, adjusted EBITDA margin expanded 35 basis points to 5%. Finally, adjusted diluted EPS increased 24% to $1.04, demonstrating our continued ability to grow adjusted EPS significantly faster than adjusted EBITDA. We expect this trend to continue as we deploy our robust and growing cash flow towards share repurchases, which I will talk more about shortly. When we step back and look at the full year, our performance was strong. We grew adjusted EBITDA by 11% to more than $1.9 billion, expanded adjusted EBITDA margin by 30 basis points to 4.9% and increased adjusted diluted EPS by 26% to $3.98, all while navigating a difficult macro environment. Turning to Slide 8. We continue to drive significant gains in operating leverage, and we again grew adjusted gross profit per case faster than adjusted operating expenses per case. In the fourth quarter, adjusted gross profit per case increased by $0.23 or 2.9% compared to the prior year. We continue to gain leverage through improved cost of goods savings, reduced waste through better inventory management, and increased private label penetration. These focus areas led to success in 2025, and we expect further improvement in these areas for 2026. Adjusted operating expenses per case increased $0.02 or 0.3%. We continue to successfully mitigate a portion of operating cost inflation through disciplined cost management and initiatives focused on driving productivity gains. These include routing enhancements, greater process standardization in our operations and increased savings through indirect spend procurement. As a result, fourth quarter adjusted EBITDA per case increased by $0.22 to $2.34. Our fourth quarter and full year results demonstrate our ability to drive strong leverage through the P&L. For the full year, we grew adjusted gross profit per case, 180 basis points faster than adjusted OpEx per case, which is above the 100 to 150 basis point annual target that we highlighted as part of our long-range plan. In 2025, our adjusted EBITDA per case increased nearly 10%. Importantly, since 2019, we have increased our adjusted EBITDA per case by $0.65 or approximately 40% through continuous improvement across gross profit and operating expenses. Turning to Slide 9. Our robust and growing cash flow, coupled with our strong balance sheet enables us the financial flexibility to deliver on our capital allocation priorities. In 2025, we generated nearly $1.4 billion in operating cash flow and deployed that capital to fund strong investments in our business, execute share buybacks and pursue accretive tuck-in M&A. As Dave mentioned earlier, we are on track to deliver our 2025 to 2027 financial targets, including generating more than $4 billion of cumulative operating cash flow over that period. Over the past year, we invested $410 million in cash CapEx to support our business and enable organic growth, including enhancing our capacity and strengthening our technology leadership. Additionally, share repurchases and tuck-in M&A remain important components of our capital allocation strategy to drive shareholder value creation. In 2025, we repurchased 11.9 million shares for $934 million and completed 2 tuck-in acquisitions for $131 million. We have approximately $1.1 billion remaining under share repurchase authorizations. Since 2022, we have repurchased 36.1 million shares for $2.2 billion. Finally, we ended the year at 2.7x net leverage well within our 2x to 3x target range and our leverage profile is the strongest within our industry. I'm also pleased to report another positive development related to our credit rating. Our corporate credit rating was recently upgraded 1 notch by Moody's to Ba1 based on our continued solid operating performance and credit metric improvement. Moving on to Slide 10 and our guidance and modeling assumptions. Our fiscal year 2026 includes a 53rd week, which is expected to add approximately 1% to total case growth and adjusted EBITDA growth. This assumption is included in the fiscal year 2026 guidance we are providing today. We expect to grow total company net sales by 4% to 6% compared to the prior year driven by total case growth of 2.5% to 4.5%. We are projecting independent case growth of 4% to 7% for the full year. We expect a lower inflationary environment than we had for much of 2025 with sales inflation mix impact of approximately 1.5%. We expect to grow adjusted EBITDA 9% to 13% and adjusted diluted EPS 18% to 24%. The midpoint of our outlook for the full year assumes the macro environment remains largely unchanged. Now let's look at our first quarter outlook. Due to the severe and widespread weather-related issues that impacted the industry in January and February, many of our customers and our distribution centers in impacted areas, experienced closures and other disruptions, particularly in the Southeast, which is our largest region. We have already had approximately 35% more distribution center closure days in 2026 than all of Q1 of last year, which negatively impacts our volume and cost. As a result, we expect first quarter adjusted EBITDA will be upper single-digit growth over the prior year. We fully expect we will achieve our 2026 full year guidance despite the weather-related disruptions we experienced in January and February. Last year, we started with weather-related slower EBITDA growth in Q1 yet we ultimately delivered our full year adjusted EBITDA and EPS targets through strong execution in the remaining quarters, even against a softer macro backdrop. I remain confident in our ability to deliver solid top line performance and double-digit adjusted EBITDA growth. This isn't new for us. Over the past 4 years, we have consistently delivered strong profitable growth while significantly improving our return on invested capital. While consumer sentiment remains cautious, we are optimistic about 2026. We operate in a resilient industry and continue to run our proven playbook. We are executing our strategy to enhance the customer experience, drive profitable volume growth, improve supply chain productivity and return capital to shareholders, which enables our continued ability to compound double-digit earnings growth. In closing, I'm encouraged by our financial performance and the progress we've made completing the first year of our long-range plan. I'll now pass the back to Dave for his closing remarks. David Flitman: Thanks, Dirk. At its core, our story is one of growth, operational excellence and execution with a long runway of top and bottom line growth ahead of us. We will continue to run our proven playbook, execute our strategy with discipline, and deploy capital in ways that maximize value creation. As we enter 2026, I have strong conviction that we will deliver the remaining 2 years of our long-range plan and hit our financial targets. And we also believe we are positioning ourselves to deliver sustained growth well beyond 2027. Before we move into Q&A, I'd like to draw your attention to Slide 11, which highlights what truly differentiates US Foods from our competition. Our differentiated value proposition and meaningful scale across the 3 most profitable customer types in the industry, independent restaurants, health care and hospitality, an industry-leading digital ecosystem embedded with AI-powered features that enhances customer engagement, drives efficiency and strengthens loyalty. Substantial opportunities ahead to drive sustained profitable growth as we are in the early innings of our operational excellence journey. And finally, industry-leading adjusted EPS growth supporting our confidence in remaining a double-digit earnings compounder through 2027 and beyond. With that, Tiffany, please open up the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Edward Kelly with Wells Fargo. Edward Kelly: Congratulations on a good quarter and a choppy backdrop. Dave, I wanted to ask you, I mean, things have been all over the place between shutdown and weather certainly seems like Q1 was choppy to date. Could you just maybe, I guess, one, provide a little bit more color on quarter-to-date volumes and kind of what you're seeing? And then if you could parse out sort of like weeks without weather and give us maybe your thoughts on what the underlying momentum of the business. And I'm hoping that you can tie all of this to your outlook for 4% to 7% independent case growth for the year because obviously, that's an acceleration. David Flitman: Sure. Start off with a great question here. I appreciate it. But as I answer that, let me go back to the fourth quarter because I was very encouraged with the momentum that we saw. As you recall in my prior remarks about the momentum coming out of Q3 until we hit the government shutdown and the weather and choppiness there in December. We had a lot of good momentum there. The great news is we rebounded from that in the early part of January. Actually, the first several weeks were very strong, actually stronger than our exit from Q4 and then we hit the choppiness. The really good news is since we've gotten past the weather, we're right back to where we were in early January. So the rebound has been -- it's taken a little bit just with the cold weather and all the ice and snow. But I'm just really encouraged by the underlying momentum. I'd point out also, Ed, that the fourth quarter was our strongest organic independent case growth in 2 years. And as we've been talking about for a while, the bellwether of our growth to come is that net new independent account generation, which was the strongest in the fourth quarter, again, at Q3. It was the strongest also since the second quarter of 2023. So I give all the credit to our teams, they're focused on execution in driving our capability into the marketplace. So I'm really encouraged ex weather. None of us can control that, it ebbs and flows, but we're controlling the things we can control, and we will continue to do that in 2026. Edward Kelly: Great. And then maybe just a follow-up on the inflation guidance. I mean, obviously, we're seeing this inflation, maybe you could talk a little bit more about your expectations there, sort of key drivers. And I'm just curious -- on the surface, it seems like it would make it a little bit harder to grow gross profit per case, but that was always in the details. And I'm curious as how you think about that? And then have you needed to make any adjustments on the self-help side of the story in that backdrop? Or is the impact you really just kind of minimal. Dirk Locascio: Ed, it's overall, as we've said many times, you're not going to hear us talk about that as a key driver, our self-help initiatives are the large lion's share of our drivers of gross profits pretty much every quarter. So like the rest of the industry, disinflation had a bit of a negative impact in the fourth quarter. But again, we still put up strong results. I think the -- we are still seeing inflation year-over-year so far in the year. And it's going to be one where you're going to continue to see anything more of an impact on the top line and the bottom line, and we'll manage our way through it just as we have. Operator: Your next question comes from the line of John Heinbockel with Guggenheim. John Heinbockel: So Dave, 7% sales force expansion, what do you -- which is a big number for you, high end of your range. Maybe to talk about when you think about the maturation of that? Is that a key factor '26 local case growth, maybe tail end of the year, right? So is there a cadence that's later in the year? Is the sales force productivity from that 7% a key factor? And then maybe the last part of that would be, when you think about improving net account growth, how much opportunity do you think is still left in lost accounts, right? Because it just strikes me that that's still low double digit and that could be better. David Flitman: Yes, I appreciate the question. To the first part of it, that 7% included some of the internal transfers that we talked about last quarter. So if you back that out, we were right in the middle of our range in that 4% to 5% range in terms of external hires. So we executed exactly what we've been doing. To your point, I believe that the productivity of those sellers, particularly with the number that we've had internally shifted over, will ramp up and have a meaningful impact here in the back half of '26. Not to mention the consistent sales force hiring we've done over the last 3 years. I think you're starting to see that pay off. Every quarter last year, we accelerated organic independent case growth. We continue to accelerate net new. And I expect our growth will continue to accelerate as we go forward here. The second part of your question, sure, we run all parts of NOP. We look at all that. We've talked a lot about the penetration pressure that we've seen, just given the foot traffic lost is an opportunity. I will tell you that loss is fairly stable to improving. It hasn't increased at all. And the opportunity remains here to get that a bit lower. But again, given the pressure in the industry, our focus has really been on this net new, which is at the heart of our growth acceleration, and we're going to keep the team focused there. John Heinbockel: And maybe as a follow-up, right, you did phenomenally well on OpEx per case in the fourth quarter, right? But there's still an opportunity for Descartes to make a bigger impact in [ Yuma ] next year. So kind of what drove that in the fourth quarter? And I don't know how sustainable that is in your mind? Dirk Locascio: Yes. Well, we had -- we talked about a lot of the initiatives there in the prepared remarks that are getting traction. And so it's really more of the same. To your point, Aron, UMAs, we continue to implement that. We're about 80% implemented across the company now in our key markets. We'll finish the Humos rollout here by the middle of this year. And again, that's the template for consistency and roles and job functions in our operations, and it's had a meaningful impact. On Descartes specifically, we commented on a 2% increase in cases per mile. We think there's at least that much opportunity again now that we've got that fully deployed across the company going forward. So we're expecting continued and ongoing benefit from that rollout. David Flitman: And John, just as we talked about last quarter when OpEx was a little higher, you have shifts from year-to-year that can happen from quarters. So any order you can be higher or lower on cost. And really, I would think about -- if you look at all of 2025, we were up $0.10, $0.11. So you saw really come to fruition where we offset a portion of our cost inflation with the productivity things that Dave's talked about. Operator: Your next question comes from the line of Lauren Silberman with Deutsche Bank. Lauren Silberman: And congrats on the quarter. Dave, you talked that strong net new business -- of course, you talked about strong net new business growth this quarter, which is accelerating. Is the net new business primarily driven by your headcount growth or your existing salespeople expanding their book of business? And then are you seeing any change in the competitive environment? Are things getting more promotional? David Flitman: Yes, Lauren, I would say that it's coming from both. Our existing sales force being increasingly productive as well as -- and that's why I mentioned our consistency in hiring sellers over the past 3 years. That productivity continues to ramp up across all of our cohorts. And so this is our model, right, a mid-single-digit headcount increase year after year, continuing to do route splits effectively as they make sense, seeding new sellers with business. They build from that. The sales reps that you take that business from, you pay them for that business for a while as well to encourage them to make sure those transitions are smooth and then they go build a new book of business. And so that's the model, and it's working quite well for us. And I expect that to continue. To your second question around promotional activity, get ebbs and flows, Lauren, I would say the promotional activity we've seen, and I think there's been some talked about publicly here recently has been particularly at the QSR level and all that and some in chains. But I don't see that that's changed a lot here from the last quarter. I think we had -- saw similar effects, but I wouldn't see it increasing from here. We'll see what happens with foot traffic, but that promotional activity ebbs and flows. It's always there. I wouldn't point to anything significant right now. Lauren Silberman: Okay. And then just a follow-up on the sales comp change. I believe you mentioned it could take 2 to 3 years to transition everyone to the new structure it sounds a little bit more gradual than I think you were originally communicating. Is that a fair takeaway? And any sort of feedback or attrition that you may be seeing? Anything else that you could share. David Flitman: Yes. So actually, it's not a change. And what I'm trying to do here because I know there were a lot of questions about it when we first began to talk about it was just provide more clarity. And so the reason I commented specifically about how we bring people into the company today at 100% base is -- it takes a long time to get the majority of your sellers to the 50-50 commission today. It's very dynamic, as you would expect. We're always bringing new sellers in. We've always got retirements and all that. It's going to be the same thing going forward. It is no change in our plan. It's just the reality of how we operate the business, and I wanted to provide some clarity on that. So getting to 100% commission could take a couple of years for the majority of our sellers. That's fine. That's situation normal. It's the same game we've been playing for a long time. And then I'm very encouraged with the way the rollout is going, the feedback that we've gotten, particularly as I commented, with our sales leaders who we've had in here over the past several weeks. There's a lot of buzz and a lot of excitement. But I guess I would say I'm most encouraged looking at our turnover. Actually, since we started -- first started talking about this, all of our experienced cohorts, and we have different experience cohorts in different buckets. They've all improved since we've started to talk about this. So that's a very encouraging sign. And we'll continue to watch that closely and again, be very, very thoughtful about how we transition each individual here over time. Operator: Your next question comes from the line of Kelly Bania with BMO. Kelly Bania: Congrats on strong year. I wanted to also dive into the outlook for the case growth for this year, the 2.5% to 4.5%, maybe just with a little deeper dive in the customer types and then the cadence. Are those all similar ranges that you outlined kind of as part of your algorithm. Just kind of curious what you're assuming maybe within change, if you're assuming that gets back to flat or slightly positive. And any comments with new business wins in health care and hospitality. And then also within the independent cases of particular, should we expect that to kind of ramp throughout the year because the comparisons are also tougher as you pointed out, they've kind of really improved throughout this entire year. So just wondering if you had any comments on those points. David Flitman: Yes. So let me start with the IND guidance. That 4% to 7%, Dirk talked about the 1% of the 53rd week adds that takes it to 3 to 6. You add 200 basis points of that. That's right on the algorithm that we talked about at Investor Day when the foot traffic gets to what the basis was for that, which, as you recall, is about 2%. We haven't smelled 2% since we put that algorithm out there, it's been relatively flat to down. So it's right in the heart of what we committed to do. The total case growth takes into account health care and hospitality. And let me just talk about those for a second. We're very encouraged by -- when we talked last quarter about the $100 million of onboarding in both of those target customer types. We expect to have all of that fully onboarded by the end of the first quarter here. And I would also tell you that the pipelines for both of those have never been stronger. So I would expect more through the course of time. And then to the last part of your question around independent case growth, sure, the comps get a bit more challenging, but we're not deterred by that. We've got a lot of really good momentum. Our sales force has never been more focused. Our leadership knows what we need to achieve. And I give our team a lot of credit for the momentum that we've built thus far. And I would expect you would continue to see us ramp up our growth rate. That's the plan. Kelly Bania: That's very helpful. If I can just follow up on one more with the comp model change. It sounds like it's launching midway through the year. And so assuming maybe no real impact this year. Maybe correct me if that's wrong, but just wondering if you could talk generally about the kind of magnitude of unlock that you think that this could drive case growth over time over the next couple of years? David Flitman: Yes. It's hard to quantify it. But I really believe, as I said in my prepared remarks, this is going to really unleash our sales force through the course of time. I think this is the last major unlock. We've got all the process stuff right. We've got the organic growth going. We've got our head count plan consistent mid-single-digit headcount additions. This is the last piece that's been missing. And as I've talked about before, I'm contemplating this since the day I got here. I feel like with the strength we -- underlying strength we've built in the business over the last 3 years, this is exactly the right time to launch this plan going forward, and I'm really excited about what it's going to mean over time. Operator: Your next question comes from the line of Jacob Aiken-Phillips with Melius Research. Jacob Aiken-Phillips: So on the common transition, I'm curious how we should think about seller productivity throughout the 3-year multiyear transition. Would you expect it to dip a little bit towards the beginning and then heightened afterwards? Or should it be more neutral in the acquiring over time? David Flitman: Yes. Good question, Jacob. I think it will be the latter more than the former. And the reason for that is -- and that's why I emphasized it earlier, these are very individualized tailored conversations. When you make a change like this, you're going to have some people out of the gate that do better and some people that are more challenged. And that's the piece that we're working through with each individual. And that's why we're taking a very thoughtful and deliberate approach on these pilots. There's a lot -- when you got a sales force of over 3,000 people, you want to do this well and you want to have those individual conversations and make sure you're making the right decision. So I would not expect us to step back. I would expect us to be neutral to going forward with this as we implement it. Jacob Aiken-Phillips: Got it. And then separately, as you continue to layer in AI capabilities in MOXe and across your platform, should we think about that mainly as a cost productivity tool? Or do you see revenue and wallet share upside as well? David Flitman: Yes. Good question. I think it's both. And we've talked about since we implemented MOXe over 3 years ago that we've seen the customers that use MOXe buy more from us on average and they stick with us longer. So there is growth upside to it as well. An important part of it is ease of doing business with us, kind of taking the friction out of the relationship with our customers, which we've gotten very good traction with and importantly, also improving the sales force productivity because of things that the customer can now do self-serve in a very effective way within MOXe takes that burden off of our sales force and frees up time for them to go talk about our brands, find the next customer, drive further penetration within those customers, and that's where we want to see our sellers spending their time. And so it's really both within MOXe. Operator: Your next question comes from the line of Alex Slagle with Jefferies. Alexander Slagle: All right. And great work in 2025. The share gains, the execution, I mean, seemingly everything has been so strong across so many initiatives, but is there anywhere that's not where you want it to be, where execution is just not ramping like you hoped and maybe as an underappreciated opportunities that you want to highlight? David Flitman: Well, I'm glad our team is making it look easy because it's anything but this is hard work, and it takes consistency and focus. And simplification in the journey, and that's what we've done here. We've got a very focused team. I put our leadership team up against anybody anywhere in terms of knowing what we need to get done and ability to execute it. I'm one of these guys that's never satisfied in anything. And this theme of continuous improvement is real within our company and our organization. And so I just continue to see so much opportunity across the P&L for us to strengthen what we've got going on. We talk about all the good things that we have in the company, but there's plenty of opportunity to improve in areas that we've talked about this morning and in plenty of other areas of the company. In a company of 30,000 people and 75 distribution centers and $40 billion in revenue, there's a lot that needs worked on every single day. And that's why I'm so bullish on this continuous improvement journey and our ability to hit our targets. Everywhere I look, there's more opportunity for us to get better. Alexander Slagle: That's great. And on the CapEx increase for '26, how much of that is Pronto versus other initiatives that you're looking to do? David Flitman: It is a combination. So Pronto is a meaningful portion of that. And then the rest just comes from building spend, maintenance spends just across the board. And if you think of it just as our business continues to get bigger and we continue to invest in capability and capacity that's driving it. But overall, you see we still expect to have very strong EPS growth. So making sure that we're leveraging our investments into things that are paying off. Operator: Your next question comes from the line of Jeffrey Bernstein with Barclays. Jeffrey Bernstein: Great. My first question is just on the M&A environment. I know you did a tuck-in with Shakes in the fourth quarter, and I think 2 transactions for the year. Both are relatively small compared to your business. I'm just wondering how you think about the opportunity for more sizable M&A in this challenged macro maybe any thoughts on what you've seen around availability or receptivity from potential targets or where multiples are versus historical? Just wondering where you think the greatest opportunity are to enhance the U.S. food platform that you could potentially consider pursuing? David Flitman: Thanks for the question, Jeff. I'll tag team this one with Dirk and I'll take the first part of your question. First of all, and just take you back to our strategy. Our strategy has been and will continue to be targeting tuck-in M&A. I love our footprint. We've got density in all the major MSAs across the country. And as you look back over the ones that we've acquired over the past 3 years, they've all been helping us with local market density in this tuck-in area. Putting a distribution center in the part of the market that either we haven't had a location in or that is growing faster than where we have our footprint. And it helps us get more productive, take miles out of our distribution network. And obviously, there's a lot of synergy around those. And that's our plan. It has been and it will continue to be going forward. Because given the fragmented nature of the industry, that's where the opportunity is. And thankfully, we don't need to do anything of scale. We just don't. Obviously, if something comes along that makes sense, we'll take a look at it, but it's not our day-to-day focus in M&A. Dirk? Dirk Locascio: And just our team continues to do outreach work on building the pipeline. And as many times and we've talked about it -- sometimes it takes many years of dialogue and engagement before things come to fruition. So that's -- again, that's why we continue to like the toggle that we can do between M&A and share repurchase, so that when that M&A comes to fruition with our strong cash flow, we can move ahead on it. And if not, we'll continue to buy shares back. As far as the multiples, we've not seen that be an inhibitor. People always want to get paid fairly for their business. But that's continued to be, I'd say, rational. Jeffrey Bernstein: Got it. And just one clarification. I think you mentioned in the press release and even on the call, I think you were talking specifically to EPS beyond '27 I think the reference was to sustain double-digit growth. I know currently, the EPS algo is for 20%. I'm just wondering whether you view that language similar to the 20% or maybe that's just a reminder that over time, 20% it's more realistic to think of double digits, but trying to just compare that to kind of the 10% EBITDA growth. So kind of how you think about things as we look past this current algo relative EBITDA versus EPS? David Flitman: Yes, I appreciate the question, Jeff. We'll talk about beyond 2027 when we get there. But our message here is quite clear. We are and we expect to be a double-digit earnings compounder for a very, very long time in the company. We're not messaging anything about something coming down or something going up. We've been doing this for a while, and we expect to continue to do it given the strength of our model and our focus on execution here. That's it. Operator: Your next question comes from the line of Jake Bartlett with Truist Securities. Jake Bartlett: My first question was on the macro outlook. You mentioned that you expect a similar macro environment than '25, but there's also been a decently strong start to the year, aside from the weather, some tailwinds from tax refunds, for instance. I guess I'm asking about your confidence on '26 and maybe whether you think that there should be some potential upside from kind of that base level. David Flitman: Yes. I just want to make one comment here. We've been operating in a very soft macro for the most part of my tenure here, and we've been executing extremely well. And we expect in a flat macro that we will continue to execute well and deliver results that are consistent with what you've come to expect out of U.S. Foods. Any tailwinds that come would be upside to that. And I'll let Dirk put it in a little more context for you. Dirk Locascio: Yes. Just as we said in the materials and the comments, so our -- we can provide a range like we always do, and the center point of that range really assumes status quo. So to the extent the environment is better from refunds, stimulus or anything like that, then that would benefit us as it does the industry, in addition to, of course, the end consumer. But in the meantime, we still even down the middle, expect to accelerate case growth and really coming from our own ability to drive share gains, as Dave pointed out. Jake Bartlett: Got it. And then my follow-up question was on the margin drivers in '26. Forgive me if I missed it, but I'm wondering if you can quantify some of those drivers, like the vendor management, there's $150 million to go between '26, and '27, how much you expect in '26 inventory management, indirect cost. If you can quantify those like you did in '25, that would be helpful. David Flitman: Well, in some of those we continue to expect meaningful growth. So we're not going to specifically lay out the components and the pieces. But hopefully, what you see is what we've generated and what we've called out just in those few examples of what we expect to there's not a clip, so to speak. So we expect to make more progress in '26 and then further in '27. But quarter after quarter, hopefully, you continue to glean from our commentary is when we talk about this portfolio initiative initiatives that continues to mature, advance some of them that come on, come off. That is how we're managing the business, and that's part of how continuous improvement works and driving that through gross profit through productivity. And so each of those will continue to generate significant value. But when you think about continuing to improve EBITDA margin, you see that concreteness that is there from specific things that we're doing and we've provided that level of transparency that is really unprecedented in the industry as far as where values are coming from. And we think that's important. So you and investors build that confidence that US Foods will continue to build upon. We've done in the last 4-plus years. Operator: Your next question comes from the line of Mark Carden with UBS. Mark Carden: So to start another one of the compensation shift. Just now that the news has been out there for a few quarters, have you seen any shifts in your ability to attract the kinds of salespeople you'd like to get from an experience standpoint. So by that, do you see a higher proportion of more seasoned salespeople perhaps peaking at the time before? Just any change in composition from the pool? David Flitman: Yes, Mark, I would say it's still early. We haven't had a lot of shift in that at this point. And recall that we don't typically hire competitive reps for the majority of our sellers. That's a minority of who we sell. I expect over time that will continue to be the minority of who we hire. But we do expect to be able to attract some experience over time. But really no shift. I think it's early days yet. But again, I would just underscore, we do not have trouble attracting new sellers to the company, continue to bring new ones in, have new cohorts every month. Mark Carden: Got it. Makes sense. It's helpful. And then on the OpEx front, there have been some recent labor contract announcements in the industry that included some meaningful bumps in compensation. Just how are you thinking about labor's impacting your OpEx per case in the year ahead? And then would you expect incremental productivity gains to be able to fully offset any pressure? Dirk Locascio: Sure. Mark, it's -- I'd say what we've seen is not that dissimilar to what we've seen over the last 3 or 4 years. In any given year, we have a number of contracts to come up. And we we reach agreements and levels of increases. In a number of cases, they're catching up with increases we've given other groups in prior years. So I don't expect it to be any meaningful change to what we've seen from an OpEx trajectory. And we still feel highly confident in our ability to grow GP dollars to 100 to 150 basis points faster than OpEx dollars. Operator: Your next question comes from the line of Karen Holthouse with Citi. Karen Holthouse: Congratulations on the quarter and the year. Just on the restaurant side, I feel like we're talking a lot about GLP-1s these days. Is there anything filtering up from the field in terms of what customers are concerned about, what they're asking for from an innovation standpoint and how that might play into your Scoop kind of strategy for the year? David Flitman: Yes. I think we haven't seen significant shifts. I think to the extent that that GLP-1 transition or it impacts healthier choices for customers and ultimately, our customers. It will play very well to our portfolio. And again, over 1/3 of what we sell is center of plate or produce. Actually, it's slightly more than that. And so we feel like we're well positioned. We can bring in whatever products we need. I think some of the early things that we've seen from customers is helped with menu design. There are things looking at portion sizes, healthier options and all that, I think, plays to our strengths. So while the impact remains to be seen fully in the industry, I don't expect a significant impact outside our realm of capabilities to deliver whatever our customers need. Karen Holthouse: And on the guidance for 4% to 7% independent case growth, if we think about what kind of pushes to the lower or higher end of that range, is that really more dependent on weather macro kind of the industry? Or are there things on more of the internal or self-help side, you could see pushing yourself towards one end or the other? David Flitman: Well, we'll continue to push the self-help consistently. I think as Dirk said, the midpoint of that, you would expect the macro to remain fairly consistent with what we saw coming out of 2025. any downside in foot traffic would probably pull us to the lower end and any upside on some of the things that we had in an earlier question could potentially push us higher. But I think down the middle is what we're planning for as we get into the year. Operator: Your next question comes from the line of Peter Saleh with BTIG. Peter Saleh: Great. Just one more question on the sales force compensation. Just curious if as we go through the year and you start to transition, is there any impact to the financials, any lumpiness as we do this? Any seasonality that we should be aware of in the model? Dirk Locascio: Peter. At this point, nothing of significance as we get further in the year, if there's any anomalies to call out, we'll do that. But really, it will be one sort of as we go, probably in the future years and you get more and more people on the plan. You may see some subtle moves quarter-to-quarter just based on the volume, but nothing of significance. Peter Saleh: Great. And then just -- I think you highlighted a couple of incremental cost savings that you guys have found on cost of goods and indirect costs. Can you just provide a little bit more color on where those are coming from? Do you think this is the top end of those cost cuts? Or do you think there could be more to come in the future? David Flitman: Well, I'll start with, we're very pleased with each of those examples. And in the cases, these -- the teams are really able to get more out of the initiatives than we had originally contemplated. And so what's exciting is it spans gross profit, various elements of OpEx. And it is healthy ways to improve GP, healthy ways to improve OpEx and so those are things that, as we go in, the teams are continuing to push for those opportunities, and they're sustainable, and they're part of that continuous improvement that Dave mentioned earlier. So for each of those, the top end, I mean, you're never going to hear me 1 year in and say that's the most we can do. And Dave talked about our lack of satisfaction is we want to recognize the good work the teams have done. But internally, we're doing what you would want us to do is continuing to identify where we can in a healthy way, continue to get more out of our different initiatives. So we're highly encouraged and again, that all adds to the confidence that we have in our ability to deliver this year in our long-range plan. Operator: Your next question comes from the line of Danilo Gargiulo with Bernstein. Unknown Analyst: Great. And once again, congratulations on a very strong quarter and year so far. I wanted to follow up on a question that was asked earlier regarding the guidance, but I want to take a slightly an and specific, I want to ask among what is it within your control what do you have to believe for you to hit the high end of your EBITDA guidance? And conversely, what you may need to believe for you to go to the low end of your guidance? David Flitman: It really comes down to just -- so there's the macro pieces that we've talked about. And then within ours, there's always the range of execution effectiveness. And that is that really is the primary variable. And no different than we've talked about the last few years. That is the part we would rather have the control over because we can influence that. And in each of those cases, we're going to continue to work on, again, the most that we can in a healthy way out of our initiatives, but we are confident in our ability to deliver the guidance that we've outlined. Unknown Analyst: Okay. And then earlier, you mentioned that the comp changes to your sales force is the last major unlock to drive case growth. So are we to assume lower case growth once the comp changes lapses? Or are you contemplating other major opportunities in the pipeline that will help you sustain very healthy case growth going forward? Dirk Locascio: Thanks all. not expecting anything to slow down. We think this will unleash our sales force to its fullest over the course of time. And both Dirk and I have expressed a lot of confidence here in our ability to drive both the top line and double-digit earnings for a long time to come in this company. And our sales force is strong. We believe this comp plan fully aligned to business objectives will unlock them to drive further growth. And make a lot more money individually in the process. And that's what we want to have happen here. Operator: Your next question comes from the line of Rahul Kro with JPMorgan. Rahul Krotthapalli: Question is on Pronto. In 46 markets now, and about half of them on proton next payer penetration. Can you share what kind of lift in independent case volumes and specifically wallet share increase are you seeing in existing customers or even when you onboard new customers in the markets with Pronto and extend penetration? Dirk Locascio: Sure, Rahul. So we haven't shared specific numbers, but we do see a meaningful uplift in those in both the the legacy Pronto and the Pronto next day. We look very closely in those markets to make sure that we're not seeing cannibalization of our broadline business. And we've seen meaningful typically it's double-digit levels of uplift on customers that are in there. And the great thing about that, just like on the Pronto legacy is when we first launched a Pronto Next Day market, it typically has 1 or 2 trucks. And so that's -- again, that's why we expect and believe that Pronto will continue to be a meaningful growth driver for US Foods for a lot of years. Rahul Krotthapalli: That's helpful. One follow-up. On the AI tools, in the context of sales force training and deployment, can you share some opportunities or challenges when you're onboarding new sales force or even like training the existing sales force, given the broad set of productivity enhancing tools you have talked about? And do you see a future where given this is a relationship business that maybe the number of clients like your sales force can handle, can double or like even like take a significant step-up from where we are today, given all the tools at disposal? Dirk Locascio: Yes. Well, with the second part of your question here, absolutely. And we're already seeing that in terms of productivity. That free freeing up of time for our sellers with the digital capabilities and the embedded AI helps with is real, and we're starting to see that. I mean we started a couple of years ago talking about automated order guides and taking something that took 3 to 4 hours for a seller to prepare down to 15 minutes. They're doing something with that freed up time and it's going to see more customers or spending more time with existing customers and trying to drive penetration. And we have a very thoughtful and deliberate sales onboarding process that includes a lot of face-to-face training over a long period of time. But as you think about areas where AI could help in that in the future, after the initial training things like product training and all of that could be an area of opportunity for AI, and we may or may not be already thinking about and doing some of that. So I believe the AI opportunities here are limitless with our digital technology, and we're continuing to explore ways to both drive productivity and help us accelerate our sales force productivity. Operator: Your next question comes from the line of Margaret Ma Binge talk with Wolfe Research. Unknown Analyst: I just wanted to ask, it seems like you guys are seeing some acceleration in private label penetration. As we look ahead into '26, can you give a little bit of color on the specific levers that you guys have to continue to push that penetration higher? David Flitman: Great question. We've been at this for a very long time in private label, and it adds a lot of value for our customer. Recall those products are cheaper, the manufacturer brands, importantly, they're designed with great quality in mind. We've been doing this for a very long time and are also more profitable for the company, which means our sales force gets comped higher when they sell that. So we feel like we've got the incentives right, that's obviously designed into our new sales compensation plan. What gives me confidence, and we talked about being at 54% penetrated with independent restaurants. And I keep saying this, and we talk about this a lot, that there really is no near-term ceiling. Here's a new data point. 25% of our independent restaurant customers have greater than 70% penetration with our brands. That's the key data point that gives me confidence to say that there's a lot more upside to come. And so our sales force has their arms around this. They're excited about our brands. Our innovation team brings out high-quality brands a couple of times a year here and puts new powder in the hands of our sales force to get in front of our customers with. So we've got a great machine built around our private label brands that's been accelerating penetration since I've been here, and we expect that will continue. Operator: That concludes our question-and-answer session. I will now turn the call back over to Chief Executive Officer, Dave Flitman, for closing remarks. David Flitman: Thanks a lot, Tiffany. We appreciate everybody's time this morning. Our team is focused. We're executing well, and we expect everything to continue that you've come to appreciate about US Foods. Thanks for your time. Have a great week. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Manulife Financial Corporation Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Mr. Hung Ko, Global Head of Treasury and Investor Relations. Please go ahead. Hung Ko: Thank you. Welcome to Manulife's earnings conference call to discuss our fourth quarter and full year 2025 financial and operating results. Our earnings materials, including the webcast slide for today's call are available in the Investor Relations section of our website at manulife.com. Before we start, please refer to Slide 2 for a caution on forward-looking statements and Slide 41 for a note on non-GAAP and other financial measures used in this presentation. Please note that certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from what is stated. Turning to Slide 4. We'll begin today's presentation with Phil Witherington, our President and Chief Executive Officer, who will provide highlights of our full year 2025 results and the progress made towards our new and elevated strategic priorities. Following Phil, Colin Simpson, our Chief Financial Officer, will discuss the company's financial reporting results in more detail. After the prepared remarks, we move to the live Q&A portion of the call. With that, I'd like to turn the call over to Phil. Philip Witherington: Thanks, Hung, and thank you, everyone, for joining us today. 2025 was a defining year for Manulife. We delivered strong financial results, announced our refreshed enterprise strategy to shape Manulife's next chapter of growth and are laser-focused on executing against our vision through targeted strategic investments. While macroeconomic and geopolitical uncertainty remains, we're confident that the diversified nature of our business positions us well to navigate the current environment and capitalize on the opportunities ahead. So let's start with our 2025 financial results, which we announced yesterday. We delivered strong top line results with new business CSM growth exceeding 20% in each insurance segment, contributing to a double-digit growth in our CSM balance and supporting our future earnings potential. Despite experiencing net outflows in the second half of 2025, Global WAM continues to deliver strong margins and core earnings growth. The strong results in Global WAM, combined with the double-digit earnings growth in Asia contributed to our record core earnings this year. Together with the benefit of continued share buybacks, we delivered 8% core EPS growth. We also continue to generate attractive returns with core ROE expanding 30 basis points from the prior year, and we're tracking well towards our 2027 target of 18% plus. Moving to our balance sheet. We generated $6.4 billion of remittances this year and returned nearly $5.5 billion of capital to shareholders. Our LICAT ratio of 136% and leverage ratio of 23.9% provides significant financial flexibility. And I'm pleased to share that we announced a 10% increase in our quarterly common share dividend. In addition, we have received OSFI approval for a new NCIB program, which will allow us to repurchase up to 42 million shares or approximately 2.5% of issued and outstanding common shares, highlighting our continued commitment to returning capital to shareholders. We plan to commence buybacks under this new program in late February, subject to approval by Toronto Stock Exchange. Moving on to Slide 7. In November, we introduced our refreshed enterprise strategy, which builds on our strength is growth focused and is anchored in our ambition to be the #1 choice for customers. There is tremendous enthusiasm across the company as we execute on our new and elevated strategic priorities, which provide logical continuity as we progress in our new chapter with refreshed ambition. As a result, we've already made meaningful progress in 2025. Starting with our winning team and culture. Our world-class talent is one of our greatest strengths, and this year marked our sixth consecutive year of top quartile employee engagement. I'm encouraged by the energy and commitment of our colleagues around the world who've embraced our ambition to be the #1 choice for customers. Together, we will continue to bring focused execution and innovation to the work ahead. And as we drive high-quality sustainable growth, we will maintain a balanced, diversified business model. This year, we've made strategic investments both organically and inorganically to further strengthen our portfolio. We acquired Comvest Credit Partners, announced a joint venture to enter the India life insurance market and entered into an agreement to acquire Schroders Indonesia, with the latter two subject to regulatory approval. We also became the first international life insurer to establish an office in the Dubai International Financial Center dedicated to advising on and arranging life insurance solutions for high net worth customers. And we've expanded our customer solutions, including a new indexed universal life offering in the U.S., while in Canada, we launched a simplified specialized lending suite of products in Manulife Bank. As Colin will highlight, the benefit of a diversified portfolio was evident in our fourth quarter results, and I expect our diversification to serve as well amidst rising global uncertainty. On to Slide 8 and our focus on being the most trusted partner in health, wealth and financial well-being. We took meaningful steps to further empower our customers this year, including a significant milestone in our ambition to be the health partner of choice in Asia. Through a strategic collaboration in Hong Kong with Bupa International, we will offer greater choice and sustainable healthcare solutions that empower individuals and communities to this healthier and more fulfilling lives. In Canada, we became the first insurer to offer access to GRAIL's Galleri multi-cancer early detection test, supporting earlier detection and longevity for our customers. And in the U.S., we're providing additional resources and offerings to eligible U.S. customers to proactively manage their health and wellness. These actions deliver measurable benefits for customers while generating value for Manulife, and we're proud to be a leader in this space. We also continued to invest to make it easier for customers to buy and advisers to sell our solutions. We renewed our bancassurance partnership with Chinabank in the Philippines, extending the exclusive partnership to 2039. In Singapore, we leveraged our digital capabilities to enhance our Manulife iFUNDS platform through using a single platform and leveraging AI-powered analytics, advisers can deliver more personalized and insightful financial guidance. And in the U.S., we expanded our wholesaling team to accelerate our penetration into the high net worth and mass affluent markets. By expanding our reach and scaling our digital and AI capabilities, we can more effectively reach our customers and enhance their experience. Finally, over to Slide 9. Becoming an AI-powered organization is core to delivering on our ambitions and while we've been an early adopter of AI and built the underlying infrastructure necessary to support our vision, it's very important that we sustain our leadership position. We're investing with discipline and a clear focus on areas where AI can be deployed at scale and further improve our efficiency, enhance our customer and colleague experiences and support sustainable growth. In 2025, we ranked 1st among global life insurers for AI maturity by evident, and achieved 30% of the $1 billion plus of AI enterprise value generation by 2027. To drive measurable outcomes, we're concentrating on core focus areas where AI can make the greatest difference for Manulife, and we're already deploying initiatives across businesses and geographies to continue to drive value. Across the organization, we're deploying virtual assistance that create efficiencies while equipping employees and advisers with deeper insights, more personalized outreach and instant product guidance, strengthening the quality and consistency of customer interactions. In underwriting, AI is accelerating decision-making by automating data analysis, enabling faster and more accurate assessments while maintaining strong risk discipline. And we're prioritizing AI solutions that remove manual transactions, driving measurable improvements in efficiency and operational outcomes. Within distribution, AI is enhancing client engagement through tailored sales support, leading to improved sales close ratios and outcomes. We're strengthening our internal productivity by equipping our global technology teams with modern engineering tools, helping us build better solutions and faster. And we're also exploring how AI can help close the advice-access gap and support more meaningful ongoing investor engagement at scale. Moving forward, we're progressing towards a proprietary Agentic AI platform that will make it easier to manage and coordinate AI tools across the company, allowing us to scale AI even faster and more consistently, while ensuring a robust governance process. Overall, these are high-impact areas that reduce friction, support long-term growth and will enable us to deliver on our 2027 and medium-term targets. In closing, I am thrilled with the progress we've made in 2025. We've delivered strong financial results and are already making meaningful strides against our refreshed strategy. As we begin 2026, we're executing from a position of strength with clear momentum and confidence in our ability to achieve our 2027 targets while generating high-quality, sustainable growth for all our stakeholders for the long term. With that, I'll hand it over to Colin to discuss our results in more detail. Colin? Colin Simpson: Thanks, Phil, and good morning, everyone. 2025 was a fantastic year for Manulife as we delivered another year of strong financial and operational performance. Let me take a moment to walk you through the quarter's results before we open the line for Q&A. Let's begin with our top line results on Slide 11. We generated strong growth in new business CSM, reflecting more favorable business mix and margin improvements. This marked our sixth consecutive quarter in which new business CSM growth exceeded 20%, a testament to the strength of our balanced and globally diverse business profile. APE sales for the quarter were largely in line with the prior year. Global WAM saw net outflows of $9.5 billion, reflecting several large retirement plan redemptions in the U.S. and to a lesser extent, in Canada as well as net outflows in our North American retail business. This was partially offset by strong institutional flows, including contributions from CQS and Comvest. The redemptions in our U.S. retirement business reflects seasonally higher planned redemptions and higher participant withdrawals as market strength has given rise to higher customer balances. Our retail business saw continued pressure in North American intermediary and Canada Wealth. Though I'd highlight our U.S. retail business performed well relative to peers in what was a challenging quarter for active fund managers in the industry. Moving on to Slide 12. I'd like to highlight some of the key earnings drivers comparing them to the same period last year. We continued to see strong growth in our insurance businesses in Asia and Canada, driving a higher insurance service results. We generated positive overall insurance experience this quarter, including a release of P&C provisions from prior year events as well as strong gains in Canada. Though positive, total insurance experience was less favorable than the prior year, largely reflecting unfavorable U.S. life claims experience. Our investment results decreased a modest 5%, mainly driven by lower investment spreads. In the bottom half of the table, you will see that Global WAM reported solid pretax core earnings growth of 8% this quarter, supported by strong AUMA growth and margin expansion but this was partially offset by the transition to eMPF in Hong Kong. Turning to Slide 13. Core EPS increased 9% from the prior year quarter as we continue to grow core earnings and actively buy back shares. We reported $1.5 billion of net income this quarter, which reflects unfavorable market experience, largely driven by a charge of $232 million in our ALDA portfolio, primarily due to lower-than-expected returns from infrastructure, private equity and real estate. We also reported a $162 million loss from hedge accounting and effectiveness, primarily due to swap spread widening in Canada and, to a lesser extent, derivatives without hedge accounting. Moving to the segment results. We'll start with Asia on Slide 14. APE sales decreased by a modest 3% from the prior year as double-digit growth in Japan and Asia Other was more than offset by lower sales in Hong Kong. While we expected some moderation in Hong Kong given a strong prior year comparative, we also saw anticipated pressure in the broker channel in the fourth quarter as distributors transitioned to new regulations. Even so, we remain confident in the outlook, supported by the strength of our proprietary distribution channels. Despite softer volume, Asia's new business CSM and new business value delivered strong double-digit growth on the back of a more favorable business mix. As such, NBV margin expanded by 5.5 percentage points from the prior year to 41.2%. These top line results demonstrate both the strength and diversity of our business in Asia. In fact, when you look at our full year new business CSM growth, we saw greater than 20% growth in multiple markets, including Hong Kong, Japan, Mainland China and Singapore. Asia core earnings in the quarter were even stronger, increasing 24% year-over-year as we benefited from continued business growth and the net favorable impact of the basis change last quarter. Over to Global WAM on Slide 15. We maintained our growth momentum in Global WAM, delivering a solid 7% year-over-year increase in core earnings. This was supported by higher average AUMA, the addition of Comvest Credit Partners and sustained expense discipline. This was partially offset by lower earnings as a result of our transition to the new eMPF platform in Hong Kong in November. Net outflows were elevated this quarter, reaching $9.5 billion, as I noted earlier. Our gross flows this quarter, up 15% from the prior year to $50 billion continued to be strong, supported by growth across each business line. And our core EBITDA margin expanded 60 basis points from the prior year to 29.2%, strong results given the eMPF transition. Next, let's head over to Canada on Slide 16, where we delivered solid growth in new business metrics and core earnings. APE sales and new business value increased by 2% and 4%, respectively, from the prior year, reflecting strong growth in individual insurance and annuity sales, partially offset by lower large case sales in group insurance. New business CSM maintained strong momentum and continued to deliver double-digit year-over-year growth, supported by higher sales volumes in individual insurance. Core earnings increased by 6% year-over-year, driven in part by favorable insurance experience in individual insurance, higher investment spreads and business growth in group insurance. These tailwinds were partially offset by less favorable insurance experience in group insurance. Lastly, our U.S. segment results on Slide 17. In the U.S., we saw continued broad-based demand for our suite of products, resulting in a 9% increase in APE sales versus the prior year quarter. Together with product mix changes, we saw very strong growth in new business CSM of 34%. Core earnings decreased 22% year-on-year, primarily due to lower investment spreads and unfavorable life insurance claims experience, compared with favorable experience in the prior year. Moving on to cash generation and capital allocation on Slide 18. In 2025, we generated remittances of $6.4 billion, exceeding our $6 billion expectation, positioning us firmly to meet our cumulative 2027 target of $22 billion plus. Over the past 3 years, remittances have averaged over 85% of our core earnings. And while this has been positively impacted by in-force reinsurance activities and favorable market movements, we continue to expect 60% to 70% of core earnings to materialize as cash remittances on a go-forward basis, a testament to our capital-efficient and cash-generative businesses. As Phil mentioned earlier, we will initiate a new share buyback program in late February 2026 to repurchase up to 2.5% of our outstanding common shares. In addition, our Board has approved a 10% increase in our quarterly common share dividend. Together, these actions reflect our continued commitment to shareholder value creation. Let's now move to our balance sheet on Slide 19. We grew our adjusted book value per share by 6% from the prior year to $38.27 even after returning significant capital to shareholders as well as the impact of a strengthening Canadian dollar that reduced the growth rate by 3%. We ended the year with a strong LICAT ratio of 136%, which was $24 billion above the supervisory target ratio. Our financial leverage ratio of 23.9% remained well below our medium-term target of 25%. These robust metrics underpin the strength and resilience of our capital position and balance sheet. Moving to Slide 20, which summarizes how we are progressing toward our targets. Our 2025 results reflect disciplined execution and momentum across the business, with meaningful progress towards achieving our Investor Day core ROE remittances and efficiency targets. You can see the 3-year progress of our core ROE expansion in the appendix of the presentation. While our core EPS growth was slightly below our target due in part to headwinds in our U.S. segment this year, we achieved or are tracking well towards the remainder of our targets. And by executing our refreshed strategy, I'm confident in our ability to achieve our 2027 and medium-term targets going forward. This concludes our prepared remarks. Before we move to the Q&A session, I would like to remind each participant to adhere to a limit of two questions, including follow-ups and to requeue if they have additional questions. Operator, we will now open the call to questions. Operator: [Operator Instructions] Our first question comes from John Aiken from Jefferies. John Aiken: Thank you. Sorry about that. Colin, one clarification in terms of your commentary on the Hong Kong sales, down because of the broker pressure and regulatory changes. Is this a step function? Or can we see the sales levels maybe back further -- sorry, back up to a run rate level in 2026? Steven Finch: John, it's Steven Finch here. So for Hong Kong sales, maybe I'll take a step back first. For the full year, we're very happy with the Hong Kong performance. We saw strong sales for the full year up 21%, NBV up 31%, NBCSM up 21% and strong core earnings up 26%. So really good results. What we're seeing in the quarter is, as Colin mentioned in his opening, both a tough year-over-year comparative. We had very strong results in Q4 prior year. But isolated to softness that we're seeing in the broker channel and in particular, the MCV broker channel. The distributors there, they're adjusting to some regulatory changes. And this is not unusual from what we see in different markets in Asia with regulatory changes coming in, some adjustment period and then a resumption of growth. We benefit from a diversified distribution strategy in Asia, and we saw a continued growth in Q4 in both our agency and banca channel. So as we look to the future, we're confident the underlying customer demand is still there. The fundamentals are strong. So we expect that the brokers will adjust, and we'll see sales increase over time. Philip Witherington: And John, this is Phil. Just if I could add one thing. Consistently on this call in recent years, I've said that we have appetite for the broker channel, but we can see quarters where there will be variability in volume, particularly if there are changes in the regulatory environment, which we have seen over the past 6 months and because of competitive factors in the competitive environment. The environment is competitive in the broker channel. I think the really important point is that our core channels of agency as well as bank delivered strong growth in the fourth quarter, as Steve said. Operator: Our next question comes from Tom MacKinnon from BMO. Tom MacKinnon: Yes. Just a follow-up with respect to that and then one other question. If I look at the NBV margin, it's in Hong Kong, it's 52.4% in fourth quarter '25 and 39.7% in the fourth quarter of '24. So substantially increased. Is this due to mix, is the agency and the banca channel certainly more profitable than the broker channel? And if so, why focus more on the -- on that MCV broker channel if the others are -- provide better like new business value and better CSM -- new business CSM growth and better NBV margin? Steven Finch: Yes. Thanks, Tom. It's Steve. You noted an important point there. We saw the margin in Hong Kong NBV margin year-over-year increased over 12%. And it is a mix. We saw the -- with the MCV broker sales dropping, that is a lower margin channel certainly. We see it as attractive. We regularly adjust our overall focus on volume versus margin and optimize there. But the core of our business continues to be domestic agency where we've got strong margins and continue to have strong growth. So we're happy with that mix overall. We did see also a product mix shift. We've been emphasizing and meeting the customer needs around health and protection, and we saw an increase in our health and protection sales, which also contributed to the margin expansion. Tom MacKinnon: All right. And a question perhaps for Paul. I mean, we're just into the Comvest close here, but I think you've noted an impact from eMPF in terms of what it would be post tax to GWAM earnings. What about Comvest? I know you've talked about overall accretion, but I mean you used a lot of cash to make this acquisition. How should we be looking at the GWAM segment going forward in light of the incremental earnings from Comvest? Paul Lorentz: Yes. Thanks, Tom. It's Paul here. So just in terms of outlook, as you mentioned, we're quite pleased with -- maybe I'll start with the eMPF, just in terms of the rationale or change there, we're about halfway -- even though we've converted, I would say about half of the impact that we provided guidance is reflected in the current quarter, and that's still an accurate guidance going forward. As it relates to Comvest, we don't disclose the metrics separately at this point. But what I would say is, it was a positive contributor to marginally because it closed late in the year to gross flows, net flows and core earnings. And it is tracking in line with what we had expected early. We're quite excited about it in terms of what we're seeing in terms of customer demand. The category itself is expected to double. And just to give you a little bit of a proof point of why we're so optimistic. We look at CQS, which closed a number of years -- 1.5 years ago, which is alternative credit. Our AUM was up 40% since deal close and it's driving a lot of positive top line, and we expect to see similar excitement around the Comvest product suite just because of the demand. So it's early, but we're quite optimistic and quite happy with how it's proceeding so far. Tom MacKinnon: And if I could just squeeze one quick one in here. The 2.5% NCIB, you got a pretty good track record, I think it's over 3% you purchased in 2025. Colin, is there anything you can say about what your intentions would be with respect to this NCIB, given that you've generally historically purchased the bulk of these NCIBs? Philip Witherington: Well, thanks for the question, Tom. Let me jump in on that one. It's Phil. You're right. Our last NCIB program was 3%, and we completed that in full. This year, we've announced 2.5%. And it's hard to predict the future. But where we stand now, our intention is to complete the program in full. And if anything changes there, I'm happy to update on future calls. From our perspective, our capital deployment strategy is balanced and NCIB remains an appropriate use of capital. But at this level, 2.5%, it's not something that constrains our ability to invest organically in our businesses, which is really important in the context of the refreshed strategy that we laid out 3 months ago. Operator: Our next question comes from Doug Young from Desjardins Capital Markets. Doug Young: Maybe just going to the U.S. division. It feels like -- and correct me if I'm wrong, that we've had unfavorable mortality experience for three to four quarters or for sure, unfavorable claims experience or experience in general for about three to four quarters in a row. I'm just hoping you can unpack what you're seeing this quarter. I think it's mortality. Is there a particular product line? We had heard a little bit more about competition on the mortality side in the U.S. market. So just trying to kind of gauge kind of what you're seeing and what to expect going forward. Brooks Tingle: Doug, it's Brooks Tingle. Thanks for the question. And I guess I'd start with a quick reminder that we operate at the very high end of the market in the U.S., quite large policies. Now that's a very attractive segment of the market, and you see that reflected in our new business value metrics. It does result in some variability quarter-to-quarter and even year-to-year from a mortality perspective. And you'll recall that Q2 of '25 represented a particularly unusual level of variability. But we're pleased that Q3 showed significant normalization improvement from there. In Q4, still further improvement from there. And I'd actually characterize where we finished Q4 is within sort of a normal range of variability. And I'll probably leave it at that. Doug Young: So you're not seeing a particular trend here that would in the end result in some form of actuarial reserve increase that's required for these businesses? I guess that's where I'm trying to go. Stephanie Fadous: It's Stephanie here. I think Brooks covered it well. What we saw this quarter is sequentially improved claims experience, and I really view this as normal variability due to slightly elevated severity. And we'll see variability from time to time given where we are in the large case business. I don't view this as a trend. In fact, same quarter last year, we had -- and for the full year of 2024, we saw claims gains through P&L in this business. Doug Young: Okay. And then second question, maybe for Colin or for Phil. I guess my question is, can you achieve an 18% plus core ROE target by 2027 with the level of excess capital that you have and you're under levered as well? Or do those things need to kind of normalize? And I assume you're going to say yes. But maybe if you can map out how you get 16.5% to 18% plus in the next 2 years? Just to give a sense of what those drivers could be? And then maybe if you can kind of tie in, like why not be more aggressive on the NCIB given the amount of capital or cash that you're generating and the amount of excess capital you currently sit on? Philip Witherington: So Doug, this is Phil. I will hand over to Colin, but I do want to say, yes, we do remain confident that we can get to the 18% plus core ROE target, and there are various reasons underpinning that, but I'll let Colin walk through it. Colin Simpson: Yes. Doug, I think the important point to note is we've mapped out a number of scenarios to get us to the 18%. We're confident that we're going to get there. We were at 18.1% last quarter, 17.1% this quarter. So the trajectory is good. We live in a fluid environment, and we will use share buybacks not as the primary driver to get to the 18% ROE, but as a lever to pull in order for us to get there. You mentioned excess capital being a drag on our ability to grow ROE. That's certainly the case. We have got around about $10 billion above our upper operating limit, but that becomes a competitive strength in either difficult times or in a whole range of scenarios. So we're in no hurry to deplete what is a very favorable capital position. Operator: Our next question comes from Gabriel Dechaine from National Bank Financial. Gabriel Dechaine: Actually, just a follow-up on that mortality issue in the U.S. So you're confident this isn't some trend. I guess one way to confirm your view more or less is, is there any impact from what's happening in this business mortality wise on your appetite for LTC dispositions? Because that business would be as a hedge to higher mortality. Philip Witherington: We're here, Gabriel. We just -- I think it's probably best for Brooks to take a start on that, and maybe Naveed will comment from an LTC perspective. Brooks Tingle: Yes. I would just say that certainly, we don't view this as a long-term trend. We look at it very carefully. There's variability for sure. If you look at our Q4 results from a core earnings impact, you see a little bit more -- it looks a little bit like an outsized impact, because we actually had a gain in the prior Q4, which again reflects that variability. But if you look at, sort of, post-COVID, the range of tailwind and headwind from mortality in the Life segment in U.S. it's been within a reasonably tight range, and the Q4 result was in that range. So we're pleased to see it normalizing, though there'll always be some amount of variability. Again, I would point to that, while there is that variability associated with operating at the high end of the market, the value metrics are very strong. You saw that last year, and we're very confident about our ability to continue to grow that business. Naveed Irshad: It's Naveed here. I would just add that given that we don't feel the mortality is a sort of long-term trend. It's not really affecting how we're thinking about LTC transactions. As you know, we've done two significant transactions with different counterparties at or near book value, which provides sort of external validation of our assumptions in LTC. And we're continuing to focus on evaluating opportunistic transactions that drive shareholder value, that won't go away. Gabriel Dechaine: Okay. And I guess just to continue down that path with regards to legacy book dispositions, a, quickly, is the mortality issue tied to a legacy block. But the real question is, when I look at the transactions that you've announced in the past and how you've neutralized the earnings per share impact from the disposition is buying back stock. Is that dynamic much more challenging now, i.e., makes dispositions a lot more difficult to do and make them EPS neutral? Because it's a different discussion when you stock at 2x book versus just over 1x when the first deal was announced a couple of years back. Or I guess, are you committed to making dispositions earnings per share neutral? Brooks Tingle: So Gabriel, thanks. It's Brooks. I'll turn to Naveed on the broader question of legacy dispositions or not. But I will say on the claims, we've seen really Q2 of '25 and a little bit beyond it's not anything notable as it relates to a particular block. Incidents, the number of claims is actually favorable. It's really, again, because we write these large policies, a confluence in a quarter of a small number of large cases that drove that result. So there -- it's not early duration business. This is generally business written 20-plus years ago. So nothing really abnormal there, just works out to a variability quarter-to-quarter, year-to-year. Naveed Irshad: Yes. I would just add that -- on our legacy businesses, I feel really good about how we're managing them organically. You've seen our success in obtaining premium rate increases on LTC, that's contractually allowed. We've continually beat our assumptions on that. We're investing significant amounts on fraud waste and abuse. That said, we have -- we connect regularly with the market in terms of opportunistic transactions. There is interest in the market, and we continue to follow up with them. And I don't think we're constrained with respect to what we can do there. Colin Simpson: Yes. I think, Gabe, just to pile on there. You talked about the book value multiple in the shares. I mean, that is not a constraint for us to grow our earnings per share. We'll look at each deal on an individual basis and then make any according capital allocation decision based on that deal on its own merit. So I don't -- I wouldn't read anything into how the current share price is affecting our ability to do future deals. Operator: Our next question comes from Mike Ward from UBS. Michael Ward: I was curious about the Japan business actually. One of your global kind of peers has run into a little bit of a hiccup in terms of just distribution in Japan. So I'm just wondering what you see in this kind of high net worth market for insurance and wealth products in Japan? And if you see any disruption or anything changing there in terms of the market structure? Steven Finch: Yes. Thanks, Mike. It's Steve here. Yes, I'm well aware of what's been reported by one of our peers in Japan, and it's not directly applicable to Manulife. One thing I'd point out is, we're very experienced in running a multichannel distribution model in many countries in Asia, including Japan. And over time, we've built and continue to build strong controls and compliance programs. Whenever there are isolated issues, we address them very swiftly. And then to your point around the Japan market, what we're seeing is some strong success in the Japan market. You see from our numbers double-digit growth this year. We've been executing on a strategy to capitalize on customer needs. And so those needs are driven by interest rates that are structurally higher than they have been in the past, an aging society with a long longevity, so a big need for retirement planning. We've expanded the product portfolio to meet more of these customer needs, in terms of unit-linked product, whole life product. And that's been driving our success, and we're optimistic as we look forward in Japan. Michael Ward: Right. My other questions were answered. Operator: The next question comes from Paul Holden from CIBC. Paul Holden: I want to ask a couple of follow-up questions related to topics that have already been discussed. So first one is around Asia sales and I guess, Hong Kong, particularly, you gave us a number of different measures or metrics to follow. And I think we've all been conditioned to follow APE sales because of IFRS 4 accounting. But now maybe there's an argument that, that shouldn't be the number one metric to follow, maybe it should be new CSM growth because that's what's really going to drive future earnings. So point is like, to agree with that if you were to focus on one metric, that should be the most important one. And then second part of the question, like does that influence or to what degree does that influence? How you think about sales mix? Steven Finch: Yes. Thanks, Paul. It's Steve here. And you hit on an important point. I mean, the way we think about this, under IFRS 17, when we see sales variability, it does not translate into core earnings variability as the CSM amortizes into income. So we are focused on generating the most value for shareholders. NBV and NBCSM, we report both. They're both a good indicator of the value that we're generating for different reasons. So we focus on both of those. And we drive maximum dollar magnitude with an important guiding light of the company's medium-term ROE target of 18% plus. So we optimize for dollar of value while meeting that -- meeting or exceeding that hurdle rate, and that's what we're looking to optimize. Paul Holden: Okay. So if I measure this quarter on that basis, then it was a really good result for Asia sales. Yes. Steven Finch: As Colin noted, NBV up for the segment of 10% and NBCSM up 19%, helping drive year-over-year CSM was up organically 11% total 19% and a little over USD 2 billion. Paul Holden: Yes. Okay. Okay. Good. And then my second question, again, a follow-up to prior discussions is on the U.S. core insurance experience. So the questions were a little bit more focused on the short term. But when I think about the U.S. segment over the long term, negative experience or unfavorable experience as kind of being the issue or concern for investors for a long period of time for different reasons. So given the refreshed strategy and the renewed focus on wanting to grow the U.S., I think it would be helpful to give people more comfort around the experience there and how you're growing. So I don't know if there's any actions you can take to kind of get that experience to more neutral or positive? Or again, how you're thinking about that? Because I think addressing that issue, again, would give people a lot more comfort around this renewed growth emphasis on U.S. So just thoughts, comments there. Philip Witherington: Paul, this is Phil. It's an excellent question, and thank you for asking it. In our strategy refresh, one of the things that we emphasized was the importance of having a diversified portfolio. And when I think about that, of course, diversification is a risk mitigant. But in particular, for the U.S., there are many things that the U.S. business, John Hancock, contributes to Manulife that we value a great deal, including the earnings generation, including the capital generation and the stability of our capital generation. And one of the things that we changed as part of the strategy refresh is actually having a clearer appetite to invest in that business so that we can sustain for the long term earnings and capital generation. Now when we're talking about investing in the business, it's not about going back to where we've been before. It's actually growing in product lines that we have demonstrated tremendous value and success in recent years. And the drivers of adverse experience that you've referenced are quite different lines of business. The short-term matter that we've discussed on this call of some mortality variability, we do believe that short-term variability. But I think it will be helpful to hear from Brooks some of the specific initiatives that we're taking in the U.S. and build that confidence that they're profitable, they're sustainable and from a risk perspective within appetite. Brooks, over to you. Brooks Tingle: Yes, sure. Thanks, Phil, and thanks, Paul. Just quickly on policyholder experience. We -- you look at it and certainly over a very long period of time, yes, whether it's mortality, persistency or LTC experience lots of attention there. But we've taken a whole range of options with respect to the U.S. segment to optimize shareholder value. And that's really resulted in, I think, a winnowing of a lot of that policyholder experience variability. LTC experience in Q4 was benign. The life claims experience, as I've said, was really represented a particularly unusual level of variability in Q2, now normalizing. So we actually feel quite a bit better about policyholder experience in the U.S. But to pick up on Phil's point, feel really great about our ability to contribute to strong and profitable growth for Manulife via our new business franchise in the U.S. And I won't go on too long about this, but I think everyone knows we've got a strong brand. We have an innovative and broad product suite. We have top relationships with independent distribution. And I'd point out, a couple of the fastest-growing segments in the U.S. economy are the so-called wellness economy and longevity economy. And we remain the only carrier in the U.S. that offers such services to their policyholders, early cancer screening, things like that. Very strong consumer appeal. And you see that reflected in our new business value metrics for last year, similar to the discussion you had with Steve. Our APE was up nicely last year, 24% for the full year, but new business CSM up 42%. So a lots of other initiatives, in the interest of time, I won't get into backing a quite ambitious growth plan for the U.S. and we feel very good about the risk and expected policyholder experience profile of that business we're putting on the books. Operator: Our next question comes from Darko Mihelic from RBC Capital Markets. Darko Mihelic: I just had a modeling question, maybe looking for a range here. I'm actually want to switching gears here and look to Canada for a moment. When I look at 2024 in Canada, you had a 43% increase in group sales. This year, it's down 24%. So when I think about 2025, you had 12% growth in your expected earnings on the short-term business. And now that we've had a very big decline in sales, I wonder if you can give me an idea of what we could expect with respect to that important line item. I don't think we should think about a decline, but maybe you can give me a sort of a range or some sort of an outlook on expected earnings and short-term business for 2026. Naveed Irshad: Darko, it's Naveed here. So what you saw in 2024 was a very large case that we sold, a jumbo case. So as you know, in this business, there's normal large-case variability. So you have small- and medium-sized cases that generally have a consistent trend year-over-year, then you get these large cases that jump around year-over-year. What we look at, in addition to sales, is our persistency and our sort of overall in-force premium, and that continues a good trajectory. And so I think you can -- our recent sort of trends on P/E profits is something that should continue going forward. Darko Mihelic: Okay. But at a similar pace? Or should we at least expect a slowdown in the pace? Naveed Irshad: Yes, at a similar pace because again, our persistency remains very strong. Operator: Our next question comes from Mario Mendonca from TD Securities. Mario Mendonca: There have been a lot of healthy discussions there on the liability side of the balance sheet. Could we flip over to the asset side. There's growing concern among investors around private equity, private debt, and that obviously draws my attention to Manulife's large private placement debt, the $52 -- almost $52 billion. You talk about how credit experience has evolved in that asset category and what proportion of that would you sort of you would label as higher risk or sort of topical areas in that specific line, that $51.8 billion of private placement? Trevor Kreel: Mario, it's Trevor. Thanks for the question. So as you noted, there's -- there are a wide range of definitions as to what you include in private credit, in private debt and private placements. We have, for example, successfully participated in the investment-grade private placement market for many years. We like the diversification, the spreads, the covenants that you get relative to public markets. Just breaking down the $52 million that you mentioned, our investment-grade portfolio is around $45 billion and our below investment-grade private credit portfolio, which, to your point, I would consider to be higher risk. That's around $4 billion, $4.5 billion. It's about 1% of our general account assets. It is focused on middle market loans to private equity-sponsored companies, but it's also quite diverse by issuer sector and sponsors. So there's no real concentrations there. And we do manage underwriting rate most of those assets in-house. And as I suggested, I would see this as being at the lower end of the risk spectrum and about 90% of those assets are actually priced by an external vendor each quarter, and we've also executed multiple third-party sales from that portfolio, which I think also validates the asset valuations. To your point about performance, I think our investment grade private placement portfolio has actually done the same or better than our public portfolio. So we have no concerns with that part of the portfolio. And on the private credit portfolio, performance has also been strong even with COVID and relatively recent rate increases, and our credit experience is still comfortably within our underwriting loss assumption. So really quite happy with both parts of the strategy. Mario Mendonca: Okay. And then looking down a little bit on that portfolio composition, the private equity, the $18 billion there. Can you talk about the ALDA related charges this quarter and the extent to which private equity played a role or any other segment played a role? Trevor Kreel: Sure. Thanks for the follow-up. So yes, in terms of ALDA performance this quarter, as I think we disclosed, the ALDA returns did improve. Both real estate and private equity were actually better than Q3. The area that was actually worse was infrastructure, which over the long term has actually been very strong for us. Private equity, it did underperform, but to your point, it is a large portfolio. And so we would expect to see some variability from quarter-to-quarter. Obviously, given some of the broader economic and geopolitical uncertainty, there's going to be a little bit of noise there. But at the same time, I think strong public markets, the likelihood of short-term rate declines as well as, I think, improving M&A and IPO activity on the middle market private equity section of the market, I think as -- I think all of those make us cautiously optimistic of an improvement in 2026. Mario Mendonca: So I'll be quick here. So if you buy the notion that sponsors are going to be active as in returning capital to investors IPOing, all the things you referred to. Is that supportive of ALDA performance like the private equity performance? Or how would you describe that? Philip Witherington: I think it would be positive. I'd be looking forward to more of the IPO and M&A activity. I think it will improve liquidity. It will improve price discovery. And I think it will improve go-forward returns. Operator: Our next question is a follow-up from Darko Mihelic from RBC Capital Markets. Darko Mihelic: I just wanted to follow up on the ALDA question there. Slightly different angle, though. I am curious on how you're capable of growing the ALDA portfolio but not having the sensitivity to ALDA go up. And in fact, the insensitivity is going down. So if I just look at it, it's up $7.5 billion over the last 2 years. But your sensitivity is actually down a little bit. So what is it that you're doing there? What am I missing in the sort of market calculation? Trevor Kreel: Darko, it's Trevor. Thanks for the question. So it's actually not that complicated. So we do have on the balance sheet, I think, $62 billion, $63 billion of ALDA in total. But it backs a different group of liabilities, some of which are guaranteed, which is shareholder risk and some of which is participating or adjustable, which is policyholder risk. So basically, we expect the ALDA backing the guaranteed liabilities to be flat and slowly decline as those liabilities age. And if we do more reinsurance transactions. At the same time, the ALDA backing the adjustable and participating liabilities where investment experience is passed back to the policyholders will grow as those businesses grow. So basically, what you're seeing is that the overall ALDA portfolio that you see on the balance sheet may continue to grow, but not the income exposure for shareholders. And that's why you're seeing it slowly decline. Darko Mihelic: Okay. I figured it was something like that, but that's great. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Hung Ko for any closing remarks. Hung Ko: Thank you, operator. We will be available after the call if there are any follow-up questions. Have a good day, everyone. Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Good morning, and welcome to the Howmet Aerospace Fourth Quarter and Full Year 2025 Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Paul Luther, Vice President of Investor Relations. Please go ahead. Paul Luther: Thank you, Gary. Good morning, and welcome to the Howmet Aerospace Fourth Quarter and Full Year 2025 Results Conference Call. I'm joined by John Plant, Executive Chairman and Chief Executive Officer; and Patrick Winterlich, Executive Vice President and Chief Financial Officer. After comments by John and Patrick, we will have a question-and-answer session. I would like to remind you that today's discussion will contain forward-looking statements relating to future events and expectations. You can find factors that could cause the company's actual results to differ materially from these projections listed in today's presentation and earnings press release and in our most recent SEC filings. In today's presentation, references to EBITDA, operating income and EPS, mean adjusted EBITDA, excluding special items, adjusted operating income, excluding special items and adjusted EPS, excluding special items. These measures are among the non-GAAP financial measures that we've included in our discussion. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release and in the appendix in today's presentation. In addition, unless otherwise stated, all comparisons are on a year-over-year basis. With that, I'd like to turn the call over to John. John Plant: Thank you, PT. Good morning, and welcome to Howmet's Q4 and Full Year 2025 Earnings Call. Let's start with the highlights on Slide #4. Q4 was an extremely solid quarter. Revenue of $2.17 billion was up 15%. Full year revenue was up 11%, and hence, the final quarter saw an acceleration of growth. EBITDA was $653 million, up 29%. Our operating income was $580 million, an increase of 34%. Full year EBITDA of $2.42 billion was an increase of 26%. Free cash flow after record capital spend of $453 million was $1.43 billion, which is more than $100 million above the guidance and a 93% conversion of net income. . Over the last 6 years, aggregate net income conversion to free cash flow has been 95%. Earnings per share were $1.05, an increase of 42% in the quarter over 2024, resulting in a 40% increase for the year. Capital deployment in the quarter included $200 million of share buybacks, $50 million of dividends, $55 million for preferred share redemption and a further $125 million for debt reduction. The closing cash balance was $743 million, allowing for further share buybacks in January and February with $150 million completed quarter-to-date. I'll stop at this point and let Patrick provide commentary by end markets and by segment. Patrick Winterlich: Thank you, John. Good morning, everyone. Please move to Slide 5. Another solid quarter for Howmet's with end markets continuing to be healthy. We are well positioned for the future and continue to invest for growth. Revenue was up 15% in the fourth quarter and up 11% for the full year. Commercial aerospace growth remained strong throughout 2025, with revenue up 13% in the fourth quarter and up 12% for the full year. Commercial aerospace growth is driven by accelerating demand for engine spares and a record backlog for new, more fuel-efficient aircraft with reduced carbon emissions. Commercial aerospace engine spares were up 44% for the full year, driven by both legacy and next-generation engines. Defense aerospace growth continued to be robust at 20% in the fourth quarter. For the full year, Defense aerospace was up 21%, driven by engine spares, which increased 32% as well as new F-35 aircraft builds. Commercial transportation revenue was up 4% in the fourth quarter. However, it was down 5% for the full year, including the pass-through of higher aluminum costs and tariffs. On a volume basis, wheels was down 10% in the fourth quarter and down 13% for the full year. We continue to outperform the market with Howmet's premium products. As mentioned on the Q3 earnings call, we have combined the oil and gas and IGT markets into a single market we are calling gas turbines. The definition of oil and gas versus mid- to small IGT has become blurred since many turbines now have an increasing end use for data centers. We have provided historical gas turbine revenue in the appendix on Page 19. Gas turbine growth has been very strong with revenue up 32% in the fourth quarter and up 25% for the full year. Gas turbine growth is driven by the increased demand for electricity generation, especially from natural gas for data centers. Within Howmet's markets, we had robust spares growth. The combination of commercial aerospace, defense aerospace and gas turbine spares was up 33% for the full year to $1.7 billion. Spares revenue accelerated throughout 2025 and now represents 21% of total revenue versus 17% in 2024 and 11% before and 11% in 2019. In summary, 2025 continued strong performance in commercial aerospace, defense aerospace and gas turbines. Moving to Slide 6 and starting with the P&L. I will focus my comments on full year performance. Full year 2025 revenue, EBITDA, EBITDA margin and earnings per share were all records. On a year-over-year basis, revenue was up 11% and EBITDA outpaced revenue growth being up 26%, while absorbing approximately 1,500 net new employees predominantly in the Engine segment. EBITDA margin increased 350 basis points to 29.3% with a fourth quarter exit rate of 30.1%. Incremental flow-through of revenue to EBITDA was excellent at approximately 60% year-over-year. Earnings per share was $3.77, which was up a healthy 40% year-over-year. Now let's cover the balance sheet and cash flow. The balance sheet continues to strengthen. Free cash flow for the year was a record at $1.43 billion. Free cash flow conversion of net income was 93% as we continue to deliver on our long-term target of 90%. The year-end cash balance was a healthy $743 million. Debt was reduced by $265 million in 2025. We paid off the remaining $140 million of our U.S. dollar long-term due in November 2026 at par. We also paid off our $625 million 2027 notes with newly issued $500 million notes due 2032 and $125 million of cash on hand. The interest rate for the 2032 notes is 4.55%. The combined debt actions for the year will reduce the annualized interest expense by approximately $22 million. In the fourth quarter of 2025, we redeemed all of the outstanding shares of our preferred stock for $55 million, simplifying Howmet's capital structure. Net debt to trailing EBITDA continued to improve, ending the year at a record low of 1x. All long-term debt is unsecured and at fixed rates. Howmet is rated 3 notches into investment grade by all of our rating agencies, reflecting our strong balance sheet, improved financial leverage and robust cash generation. Liquidity remains strong with a healthy cash balance, plus a $1 billion revolver complemented by the flexibility of a $1 billion commercial paper program, neither of which were utilized in 2025. Turning to capital deployment. CapEx was a record $453 million, up approximately $130 million year-over-year as we continue to invest for growth. About70% of CapEx was in our Engines business as we continue to invest for market expansions in commercial aerospace and gas turbines. Investments are backed by customer contracts. In 2025, we deployed approximately $1.2 billion of cash to common stock repurchases, redemption of preferred stock, debt paydown and quarterly dividends. For the year, we repurchased $700 million of common stock at an average price of approximately $161 per share, retiring approximately 4.4 million shares. Q4 was the 19th consecutive quarter of common stock repurchases. The average diluted share count improved to a fourth quarter exit rate of 404 million shares. Moreover, so far in 2026, we have repurchased an additional $150 million of common stock at an average price of approximately $215 per share. As of today, the remaining authorization from the Board of Directors for share repurchases is approximately $1.35 billion. Finally, we continue to be confident in the strong future free cash flow. For the year, we paid $181 million in dividends, which was an increase of 69% year-over-year from $0.26 per share in 2024 to $0.44 per share in 2025. Now let's move to Slide 7 to cover the segment results from the fourth quarter. The Engine Products team delivered another record quarter for revenue, EBITDA and EBITDA margin. Quarterly revenue increased 20% to $1.16 billion, commercial aerospace was up 17%, and defense aerospace was up 18%. The gas turbine market was up 32%. Demand continues to be strong across all our engine markets with strong engine spares volume. EBITDA outpaced revenue growth with an increase of 31% to $396 million EBITDA margin increased 290 basis points to 34%, while absorbing approximately 320 net new employees in the quarter. For the full year, revenue was up 16% to $4.3 billion. EBITDA was up 25% to $1.44 billion, and EBITDA margin was 33.3% which was up approximately 250 basis points. All of these were records for the Engine Products segment. Moreover, the Engine Products segment added approximately 1,440 net new employees which has a near-term margin drag, but it positions us well for the future. Please move to Slide 8. Fastening Systems had another strong quarter. Quarterly revenue increased 13% to $454 million. Commercial aerospace was up 20%. Other markets were up 14% on renewables demand Defense Aerospace was up 7% and commercial transportation, which represents approximately 10% of fasteners revenue was down 16%. EBITDA continues to outpace revenue growth with an increase of 25% to $139 million despite the sluggish recovery of wide-body aircraft builds along with weakness in commercial transportation. EBITDA margin increased a healthy 290 basis points to 30.6% as the team has continued to expand margins through commercial and operational performance. For the full year, revenue was up 11% to $1.75 billion. EBITDA was up 31% to $530 million and EBITDA margin was 30.4%, which was up approximately 460 basis points. The fasteners team delivered solid year-over-year revenue and EBITDA growth, while maintaining a relatively flat headcount. Moving to Slide 9. Engineered Structures performance continues to improve. Quarterly revenue increased 4% to $287 million. Commercial aerospace was down 6% due to product rationalization and was essentially flat with the previous 3 quarters of 2025. Defense aerospace was up 37%, primarily driven by the end of destocking on the F-35 program. Segment EBITDA outpaced revenue growth with an increase of 24% to $63 million. EBITDA margin increased 350 basis points to 22% and as we continue to optimize the structures manufacturing footprint and rationalize the product mix to maximize profitability. For the full year, revenue was up 8% to $1.15 billion. EBITDA was up 46% to $243 million, and EBITDA margin was 21.2%. EBITDA margin was up approximately 560 basis points as the team continues to make significant progress. Finally, Slide 10. Forged Wheels quarterly revenue was up 9% as a 10% decrease in volumes was largely offset by higher aluminum costs, tariff pass-through and favorable foreign currency impacts. EBITDA was strong at $79 million, an increase of 20% despite the challenging market. EBITDA margin increased 270 basis points to 29.9%. The unfavorable margin impact of lower volumes and higher pass-through was more than offset by flexing costs, a strong product mix driven by premium products and favorable foreign currency. For the full year, revenue was down 1% to $1.04 billion. EBITDA was up 3% to $296 million. EBITDA margin was a strong 28.5% and in a challenging market and was up 130 basis points year-over-year. The wheels team has continued to expand margins despite market metal cost and tariff uncertainty. Lastly, before turning it back to John, I want to highlight a couple of items. Firstly, in mid-2024, we established a 2025 dividend policy to pay cash dividends on the company's common stock at a rate of 15% plus or minus 5% of adjusted net income. Cash dividends were approximately $181 million or 12% of adjusted net income in 2025. Looking forward, we envisage that the dollar value of dividend distributions in 2026 will be higher than in 2025. Secondly, in the fourth quarter of 2025, we completed the annuitization of the U.K. pension plan, resulting in a $128 million reduction to Howmet's gross pension obligations. No new pension contributions were required in 2025 to complete the transaction. A third-party carrier will now pay and administer future annuity payments for this plan. Now let me turn the call back to John. John Plant: Thank you, Patrick, and let's move to Slide 11. Let me turn to the outlook for the company and I'll provide summary comments before providing more detail for each market segment. The vast majority of the markets we serve, including commercial aerospace, defense, and land-based gas turbines are in a growth phase. The commercial truck wheel segment is stable at a low level and should begin to show signs of growth towards the latter half of 2026. Firstly, commercial aerospace is buoyed by increased air travel, both domestic and international. The highest growth is seen in Asia Pacific, notably China, but also in North America and in Europe. Freight traffic also continues to grow. Passenger demand combined with the recent multiyear underbuild of commercial aircraft have together led to a record OEM backlog stretching into the next decade. New aircraft builds, including narrow-body, wide-body and freighters are planned to grow at all aircraft manufacturers. I'll provide expected build rates later in the call. . In addition to these robust newbuilds, spares continue to be elevated by the expanding size and growing age of the current fleet of aircraft. This is further enhanced by durability issues found in some modern engines essentially due to higher operating pressures and temperatures, which are required to achieve increased fuel efficiency. Air pollution in certain parts of the world further contribute to the problem. Defense markets, especially fixed wing aircraft are also buoyant. The largest platform, the F-35 continues to be steady for OE builds, again, with a very large new build backlog while spares also continued to grow due to the size of the fleet. In fact, for our Engine Products segment in 2025, the F-35 spares demand exceeded the OE demand for the aggregate value of spare parts provided. The F-15 and F-16 programs are also seeing new builds with reasonable quantities. Howmet see a strong further demand from other parts of the defense and space industry also, namely tank turbines, missiles, rocket motors, [indiscernible] and also spare rocket parts. The gas turbine business is entering its largest growth phase in years, while oil and gas demand seem to be steady. The demand for electricity generation, especially from natural gas for data centers is extremely high. If we aggregate both large gas turbines and small- to medium-sized gas turbines, we expect that our base business of approximately $1 billion should double in revenue to $2 billion over the next 3 to 5 years and even more growth is envisaged beyond that, especially for mini grids. Howmet is well positioned in this segment by the supply of turbine blades, where we are the largest manufacturer of gas turbine blades in the world, covering our key customers of GE Vernova, Siemens Power, Mitsubishi Heavy and [ Saldo, Solar and Baker Hughes ], plus parts for aero derivative engines produced by GE Aviation. We have recently completed new contracts with 4 of these 7 customers while negotiations continue with the other 3. Additionally, the build-out of the turbine fleet over the next 5 years, and she has a healthy and growing spares market for years to come. Turning now to commercial truck wheels. We weathered the volume downturn in 2025, especially in the second half, share growth and penetration versus steel wheels helped. For the year, commercial transportation revenue is down 5% despite material and tariff recovery covering part of the volume downdraft. The market appears to be stabilizing, and we now believe that Q1 will be the quarterly low point. Given the new 2027 emissions regulations remain in place, we anticipate that this will begin to help demand in the second half of 2026 and then we should see the inventory multiplier effect still take effect as the truck builds increase. I'd like to mention the commercial aircraft build rate assumptions upon which our guidance is based. Albeit we will match aircraft build rates, whatever they eventually turn out to be. For Boeing, the 737 assumption, is 40 aircraft per month based on a rate of 42 as a daily average coming to the month without vacations. And the 787 is 7 a month rising to 8 a month by the fourth quarter. For Airbus, the A320 assumed to be 60 a month, while the A350 is at 6 per month. Q1 2026 guide numbers are revenue of $2.235 billion, plus or minus $10 million; EBITDA of $685 million, plus or minus $5 million and EPS of $1.10, plus or minus $0.01. You'll note that our Q1 revenue is an increase of 15% year-on-year above the average for 2025. We remain positive on the growth for 2026 while noting the dependency on aircraft builds. For 2026, the numbers provided exclude the acquisition of CAM. Revenue of $9.1 billion, plus or minus $100 million, EBITDA of $2.76 billion, plus or minus $50 million, earnings per share of $4.45, plus or minus $0.01 and finally, free cash flow of $1.6 billion, plus or minus $50 million. The EBITDA incremental for the year, is it guided to be approximately in the early [ 40% ]. I would now like to turn to portfolio commentary. In the first -- sorry, in the last few months, we've been very busy. We've signed and closed on the purchase of our fastener business in Wisconsin, [ Puna Inc ]. We believe that this acquisition enhances our product offering and opens up new markets for Howmet to explore, especially in the longer length and wider diameter parts in the fasteners market. The impact of this acquisition on Howmet's earnings is not material. However, it provides a very good platform for future growth. The more significant acquisition has come in the Aerospace fastener and fittings business, for which we have agreed to pay $1.8 billion. Upon deal closure, the earnings per share effect in the balance of 2025 will not be of a material effect. And hence, the guide is kept clean until the date of closing is known post the regulatory processes. These actions strengthen Howmet's portfolio of businesses going into 2027. The theme has been and will continue to be to play to our strengths and allocate capital decisively to businesses that are growing and showed the strongest returns on capital and cash generation. We're excited about the future given these portfolio improvements as well as the growing commercial aerospace and gas turbine businesses. Further growth updates concerning the gas turbine business will be provided as we've progressed throughout the year. I'll now start and turn the meeting over to questions. Thank you. Operator: [Operator Instructions] The first question is from Doug Harned with Bernstein. Douglas Harned: John, I'd like to understand sort of how your thinking has evolved when you look ahead over the next 5 years with engine products. Clearly, things have changed. And can you contrast your expectations for the relative growth across commercial, aero, defense, gas turbines as you think about planning, investments and so forth. And then related to this, you just reached a record EBITDA margin of 34%. In [ branding ] products. Are you near a ceiling with this? And what's enabling you to get to these higher margins? John Plant: Okay. So as you say by thinking has evolved. I guess, thinking always evolves with the passage of time and the circumstances change. I mean, I think the constant throughout this start off with commercial aerospace, where I've been convinced that growth will be robust and continuing. As you know, sometimes over the last 2 or 3 years or maybe 4 years, it hasn't been quite as good as we had envisaged, and that's principally due to the difficulties in final assembly of aircraft and also engines. But the trajectory has been positive and the future continues to look really good. And so when I consider the backlog the commercial aircraft that are there. I think it is quite extraordinary. And I think the word extraordinary is appropriate. And that applies to both narrow-body aircraft and wide-body aircraft. Since if you were to order a new aircraft today, you're really looking at delivery beyond 2030. If build rates were not to increase that it would be possibly almost towards the end of the 2030 decade. And so there's a very strong requirement for builds to increase. And so I think that backlog number gives great comfort in the investments that we've made. And you've seen our capital expenditure developed very notably over the last few years. And we've talked previously about building out another complete manufacturing plant and extending say, 1.5 manufacturing plants in it for our commercial aerospace business. So that's been very significant, and that's on top of the new engine plant that we built in 2020 coming on stream at that time, we started COVID there's been a tremendous investment for the commercial aerospace market. At the same time, we've seen very solid demand for defense and I think the surprise there has not been the solidity of the F-35 more so the fact that the other legacy aircraft have also seen significant new orders. But the F-35 is the flagship program that we have. But now when we look out, there's a significant emerging segments of missiles for us, where we are seeing very significant demand increases and just at the moment, we're also spending a lot of engineering efforts to try and ensure that we have position on engines for drones and for the larger cruise missiles. And so again, we see defense as a continuing good sector for us and which we're backing with investment dollars in a significant way. I think the biggest change to my thinking has been for the gas turbine market. And historically, if you've gone back by 7 years, I said this was a more cyclical business. It has shown periods of rapid growth and rapid decline and it was one where I was quite leary about making investments in that segment. And then I think things began to change with, I'll say, more consistency of product management by our customers so far less new product introductions and therefore, more buildable repeatable product. And then the emergence of demand, which seem to be a long ongoing need to support the renewable industries where the base level of capability and fast response. But you didn't really stop there and now I'll say, the emphasis is probably a little bit less on renewables and more on fossil fuels. And certainly, when you look at it, if coal-fired power stations are not being retired then the tremendous demand that's there can only really -- realistically be filled by the natural gas market. And so when you look at it with the demand projections for data centers and that was without the advent of AI, it caused me to think about willingness to invest. And so we did tick up capital deployments in new equipment in 2024 and then more again in 2025. And you saw the capital expenditure for the year very, very significantly above that, which we envisaged at the beginning of the year, you could go back to our guide a year before. And now we're looking at 2026, where it's going to be a higher number again. And we've picked the midpoint of about $470 million but I could envisage it rising above that. But at the same time, we're really trying and ensuring that we have that consistency of free cash flow conversion of the 90%. And so 2025 was a year where there was not a lot of new output from the capital expenditures that we had put into the ground I think it's more a question of yield improvement to allow for the average of a 25% growth in that area. And we had been, I'll say, quite successful and probably exceeded our expectations of the improvements we could make. And as you know, in previous calls, I've talked about building a new plant in Japan, which has been done. Building a new plant in Europe, which has been done and then placing new capital into those 2 new manufacturing plants plus the existing one in the U.S. And so a lot of that capital will come on stream towards the back end of 2026 and into 2027. But it hasn't really stopped there. And in dialogue with our customers more recently, we are seeing again, further demand patterns evolve where additional investments are required. And so right now, if I were to call it, I envisage that 2027, we'll see an even higher capital number if all of the -- all of our discussions come home. And I quoted in my prepared remarks about 4 out of 7 customers that was the -- both a very large gas to [ via ] customers and the, I'll say, small and midsized. But if I just confine it to the large gas turbines for the utilities, but now some of them being sold directly to data centers where it's a gigawatt of energy output is required. Then we've now completed 3 out of 4 I will say, outcomes or discussions with those customers and have reached agreements whereby we would seek to invest more for the future while ensuring, again, that we have healthy returns for Howmet shareholders. So I think that really covers how -- I think that is involved in our thinking, both through commercial aerospace, defense, supplementary areas and further market opportunity in defense maybe be collaborative combat aircraft as well and their engine requirements and now in the gas turbine market. So it's a particularly exciting time. And as you know, we always back the areas investment in the company, which earn higher returns. I hope that covers it, Doug. Douglas Harned: Well, and just on margins, the 34%, which was unusually high. John Plant: Well, I think it's a good margin. As you know, I never I'm willing to consider what margins are for the future because I find it always a very difficult topic to cover. As you know, we don't seek to take them down at the same time, predicting increases is not something that I've ever been willing to do and because so many factors come into play regarding that. I mean, at the moment, I see, for example, I have to take on additional cost, not only of the new manufacturing plants, but also I think that we're going to sort of recruit another net 1,500 people plus in 2026 into our Engine segment. And so on all of those people would require training and et cetera, et cetera. So there's a lot going on and I'm also very clear that if we were to hit all that marks then again, the output that we need to achieve won't come from just the new capital load, we've got to try to attain further yield improvements, which then requires us to have effective labor and also bringing together all of the -- I'll say, the flow that we have and trying to get more repeatable product through our manufacturing facilities. And I think the opportunity, which I see in the midterm is that we will be able to move for more batch production in the gas turbine area, it's more of a flow style production which, again, towards the end of the decade, should begin to, say, further give us impetus on yields and therefore, margin. But it's way too early to predict that, Doug. Operator: the next question is from Seth Seifman with JPMorgan. Unknown Analyst: This is Alex on for Seth today. Maybe one kind of more specific to the guide for this year. Based on the guide for Q1, the midpoint of the rest of the guide for 2026 kind of implies minimal improvement in revenue, adjusted EBITDA and adjusted EPS. Now wondering if you could kind of walk us through the puts and takes there and why that is? And also on the margin, the full year guide kind of implies that the margin is going to decline 30 bps for the full year from the 30.6% in Q1. Wondering how much of that might be related to maybe some start-up friction related to the engine capacity additions you're expecting to come online this year? Or if there's maybe some other things we should account for there? John Plant: Let's say, the most important thing to note is that we do have an extraordinary amount going on in the company. We are deploying capital for new equipment at an extraordinary rate. We're building -- we're extending 5 new manufacturing plants. And one thing I haven't commented on is that we actually purchased another manufacturing plant. So let's call it a brownfield in February of this year essentially aimed at the gas turbine market because we've literally run out of square footage. And so I mean, all the capacitization that we've been considering. And then as you have heard, we're taking on 2 acquisitions, 1 of which we've closed, 1 of which we expect to close during the year. So between building out of capital equipment, building out of new sites, recruitment of labor and also the acquisitions we've talked about. That's an enormous amount going on and it's always a struggle to believe you'll be successful on every single one of them and et cetera, et cetera. So I mean, for me, 30 basis points of margin is not really significant. I'd look at the incrementals, and I'll say it's like, I think, 43% in Q1 and maybe, I think, 41% for the year. So again, pretty close. And we've got to make sure that all of those new manufacturing facilities come on stream, build products while taking on labor. And there's always the possibility of us not hitting everything in quite the way we do it, and therefore, I think the caution is always the best way. And we take, as you've heard we say in the past I guide seriously. So I think predicting 30.3% EBITDA margins for the year is pretty good at this point. And if we manage everything really well, and maybe it will be better. But at this point, I think we've given you the best shot of what we think is a balanced view of everything that's going on. Operator: The next question is from Robert Stallard with Vertical Research. Robert Stallard: John, I just wanted to follow up on your comments on the ITT investment. Do you think the ROIC on all this spending is going to be similar to what you've achieved in commercial and aerospace in the past? John Plant: I think, first of all, if you go back and review what I've said publicly is that there essentially is no difference between the margin that we have on gas turbines and put in our commercial aerospace or defense space. And so it's all the order of magnitude. If you look at the embedded return on capital, again, at a very similar nature. Of course, the more, I'll say, brand-new virgin capital, you deploy [ Catacas ] a bit of a drag on those returns. And at the moment, it's difficult to plan out all of the blends that might be going on since we haven't bottomed yet what the final capital deployment will be in the gas turbine sector. As I said, we've completed 3 out of 4 of the major large gas turbine customers or across the whole of the gas turbine segment 4 out of 7. So there's still a lot to consider. And each one of our customers are also looking themselves whether they can achieve an output increase across all of the, I'll say, their own builds plus other, I'll say, component suppliers. So all of those discussions are continuing and therefore, the final capital build and exactly the timing of it will, it's going to be deployed, it's difficult to know. But the direction of what I've tried to indicate, we know it's like we spent maybe 300 -- I can't remember the number there, $350 million plus or minus or $340 million in '24, $450 million in '25, we're saying 470 midpoints with a plus or minus 20%. But if you ask me to give a gut feel, obviously, more like a plus at the side at this point? And '27, again, it's not fully baked by any means, but I envisage at the moment to be at least the amount that we have in 2026 or possibly higher as we complete all of these things. And then just trying to say, bring it all to earth as we plan all these things out. And again, make sure that we can afford as you envelope of cash generation we've talked about. So just specifically being on ROIC, it's also of a similar order of magnitude today but the blends of what's new capital versus the existing base, that can change as we move through the next 2 or 3 years. Operator: The next question is from John Godyn with Citi. John Godyn: Cash generation has been strong, financial leverage at record lows, like you mentioned. I just wanted to talk about capital deployment a bit. How you're thinking about M&A versus buybacks. And with M&A, we saw the consolidated aerospace manufacturing deal, which was a bit larger. I'm just kind of curious how you're thinking about the landscape for larger M&A and growth opportunities that could unlock. John Plant: First of all, we've been -- could you bold on providing returns to our shareholders essentially passing back all of the cash flow that we have achieved whether it's been share repurchase, dividend, I see debt reduction in the same category, while ensuring that we have always invested enough to be able to basically drive the organic growth of the company forward. And you've seen consistently growth in the double-digit area for several years and also indicating another double-digit growth for this year. And if we're successful on all of the capital expenditure this year than I envisioned '27 were also going to be healthy. So I mean, so first priority, John is always the deployment of capital to enable the growth opportunities that we have, say, come to fruition. Then clearly, measure the, I'll say, share buyback and also while taking into account the opportunity for M&A and where the leverage of the balance sheet is. And so if you think about CAM, $1.8 billion is significant. But at the same time, where we think about the leverage is we're below our long-run target average, let's call it, 1.5% or less than that. And so CAM doesn't really stretch us, and we envisage being able to continue to buy back shares as well. So it's not a -- currently, it's not a choice 1 or the other. We're able to -- I'll say, at this point, do it all. We're investing in the business at record levels, so $450 million, trending to $500 million. We're deploying share buyback in a significant way and probably going to end up with a larger buyback in 2026 that we had in 2025. We are deploying capital into CAM of about $1.8 billion. And if I give you dimensions for the [ Butner ] acquisition, it's in that $120 million to $150 million range of capital let's say, about $60 million of revenue. So at the moment, if you think about it and also be kicking up dividend as well, even though the dividend yield is not the highest because we're growing so rapidly. I mean we are managing at this point to do it all. So I don't see why we have to fundamentally say we're going to do one or the other. And so we shall keep doing whether other M&A opportunities come up, but again, be very disciplined. And you've seen in the 2 we've done very much down in the middle of the fairway. It's in segments that we know well, segments that have earned the right to grow, segments that are producing very healthy absolute margins. And so an increased CapEx for fasteners, absolutely. Willingness to deploy for an acquisition, absolutely. And it's not stopping us also buying back shares as an elevated rate above the previous years. Operator: The next question is from Scott Deuschle with Deutsche Bank. Scott Deuschle: John, given the demand for gas turbines and the unique value that Howmet creates in that market, do you see a future scenario where your gas turbine revenue at interim products could ultimately be larger than the commercial jet engine revenue? John Plant: That takes me too far out there. I don't think so because I think our commercial aerospace and our defense aerospace business is also growing rapidly, has grown. And I don't see that at this point in time. So I guess the short answer would be no. I think the most notable thing though, that it's going on, it's not just for us, the growth in absolute volume and I think I've talked about it in the past, but maybe not sufficiently. There's also a product mix change going on at the same time, whereby some of the technologists that was previously deployed in aerospace are also now being deployed in the gas turbine business probably even more so in the small to mid-range gas turbines, but also now in the large gas turbine area, when that is providing air flow passages through the turbine blades and therefore, requiring us to call the core tools to be able to provide those air passage ways. And that, again, produces for us a content increase. So we're looking at the -- both the absolute requirement to build more tunnels plus also the evolving landscape over the next few years, I'll say, more complex type of turbine blades, which again plays to our strength and capabilities. So it's all good, but I'm not yet ready for the premise that it could exceed. I mean, I don't know where we're going to be, say in 2030 or beyond its -- there's a lot of things going to happen yet to get this current obviously, requirements built out. But you do see the need for electricity increasing at a rapid pace, really for not just the next 3 years but well beyond maybe for the next decade and beyond. Operator: The next question is from Sheila Kahyaoglu with Jefferies. Sheila Kahyaoglu: And John, it does seem like you are doing it all. You are in the process of closing CAM and you just did the [ Bruner ] acquisition, marks more M&A than you've done in the past. Maybe if you could just give us greater depth in terms of the market that opens up, the product offering and how you're thinking about maybe the returns as you think about either building or buying in terms of these investments? John Plant: Yes. I think the -- so I start with the CAM acquisition. For us, it takes us into the fittings and couplings area of, I'd say, the wider fastener market and that helps us to build out those segments in a more significant way and bring another very powerful force to market with the, I'll say, the backing and the ability to deploy capital behind it. And so that's particularly exciting for us and also, I think it's also exciting for our customers because I think they need and they see the opportunity for Howmet to provide further support in those segments of the market. . I mean at fasteners, of course, it's good, it's interesting, and we appreciate all of it. But I think the main thrust would be in those other adjacent segments that we can build out. So that would give you a bit of a theme on CAM. In terms of Bruno, what we saw so far, if I take just bolts as an example, we've been in the market producing I'll say, the smaller range of bolts, which a threaded bolts in particular, plus obviously nuts, but I'm really concentrated in this discussion on bolts. But we've never really had the ability or the size of capital to manage long lengths of bolts nor diameters in excess of an inch diameter. And so [ Bruner ] offers us a ready-made solution for that. And when we think about the markets that we don't serve, both in aerospace and in parts of industrial, where if we had got that product offering, then we would be more significant in the market and therefore, again, help our growth rate. And that's what [ Bruner] brings to us. And so if we were to try to build out that capability ourselves, particularly in the commercial aerospace segment, by the time you've engineered it or how you've deployed the capital you've got the certifications whereas now we have already made profitable in the base business which we can now seek certification of into certain aerospace applications and also to the wider market. So again, it's where I think the application of the heft of how [ met ] and our commercial position and the ability to deploy capital and make further investments is really going to see a benefit for us and for our customers where we're bringing a powerful new product capability to the market. And so that's the essence of the [ Brewer ] acquisition. Operator: The next question is Myles Walton with Wolfe Research. Unknown Analyst: You have [ Louis Fed ] on for Myles. John Plant: Good morning. Unknown Analyst: John, I was hoping you could provide some additional color on how spares performed in the fourth quarter and the full year 2025 between commercial and then defense, I guess IGT. And what are your thoughts for 2026? John Plant: Yes. So in aggregate, our spares business grew over 30%, probably getting close to 33% for the year. And so again, a very healthy growth rate for us. Against the mark, where I think I said that we saw spares moving towards 20% over '25 and '26 in terms of the total revenue of Howmet. In actual fact, we exceeded that. We were at 21% for the 2025 year. So again, the overall growth rate helped us get to that level and hopefully, that we don't stop at 21%. Inside that 21% is that it's about 40% of our engines business. And to give you one other bit of color inside our overall, let's say, 32%, 33% growth last year. Commercial aero was early 40%. And so healthy growth. And we see that growth continuing into 2026. I haven't called out a specific number yet. But having achieved the 21%, then hopefully, we don't regress from that. And hopefully, it continues to be a larger portion of the Howmet overall revenue picture. Operator: The next question is from Peter Arment with Baird. Peter Arment: Patrick. John, regarding like engine margins in general, like automation has been a big part of kind of a beneficiary for you. Can you maybe give us a little more color on like kind of where you are in the automation journey and for engines and are there other opportunities in the business that you seek for automation? John Plant: We spent quite a bit of money over, I'd say, '23, '24 in automation. And that's obviously been very beneficial for us and has help us or need for additional employees, there you can see we've been hiring at a significant rate. We've made sure that all of the new capital we deployed as a high level of automation. So when we showcase our new manufacturing plant in Whitehall next month, you'll see something that I talked about in one of the previous calls about digital thread and to track manufacturing to an extraordinary degree and also allow us to bring I'll say, machine learning and AI to a degree across that plant. And so I'm very hopeful. But I also know that first, for capital has been so high, and it's not just can we deploy the cash, but it's also where we can. It's also the engineering bandwidth, which has been totally absorbed by I'll say, the new markets that we've been developing for and customer requirements. And so it's taken a bit of a back seat in '25 and '26 and so the moment our choice has been will match the market and achieve that. And that's far more important for us to just to say, maintain and grow our market share and meet customer demand, and we have the opportunity in maybe it's '27 or probably more like '28, '29 to go back and also make some of the processes that we did not do while we're doing all of this, even though all the new stuff we're doing is highly automated. Operator: This concludes the question-and-answer session, and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.
Emma Nordgren: Welcome to the presentation of Swedencare's year-end report, led by our CEO, Hakan Lagerberg; and CFO, Jenny Graflind. And we are pleased to have North America's CCO, Brian Nugent, joining us with the presentation during today's webinar. And as usual, we will have a Q&A after the presentation. [Operator Instructions]. Over to you, Jenny and Hakan. Hakan Lagerberg: Thank you very much, Emma, Hakan Lagerberg here and Jenny in a snowy Malmö. Yes, Q4 2025, a disappointing end of the year when it comes to profitability. And I'm very displeased with myself for not being able to predict this. There were lots of uncertainties coming in at the very end, but I apologize, and we are doing everything we can to improve our internal processes and forecasting. Double-digit growth, happy with that, 11%. But of course, I expected a bit higher also when it comes to the organic growth. But overall, we're happy as long as it's double digit. The lower profitability, mainly caused by one-offs, but of course, we have gone through everything in detail and lots of follow-ups and action plans with the group companies that underdelivered, lots of focus on profitability going into 2026, and we should never have a quarter like this going forward. We have also made some organizational improvements end of last year and beginning of this year, and I will be happy to present those later on in coming quarterly reports. We presented our new long-term financial targets. I will come back to that later in the presentation. The Board has proposed a dividend of SEK 0.28 per share, an increase compared to last year, and we will also come back to that in the financial -- with the financial targets. But summarizing the end of the quarter when it comes to sales, of course, not all gloom. We're very happy that NaturVet really has taken off, 33% growth in the quarter, albeit the quarter last year, Q4 was a weak quarter for NaturVet. But overall, we have 15% on a yearly basis for NaturVet. And as many of you know, the first half year was slow dependent on the rebranding. So we're happy that we were tracking at really high growth numbers for NaturVet. ProDen PlaqueOff continues to grow high double digits, 17% organic growth, 29% year-on-year, a bit lower in Q4, and that was mainly caused by, as many of you know also, the bit lumpiness in the international sales. So some larger international orders came in are delivering now in Q1. But overall, we are very happy with 17% growth also for the quarter. Looking at the different channels, it's online continued to grow a lot. Pet retail also solid, including the Big Box retailers there. And also when we look at our branded products in the vet channel grew, but a soft quarter for contract manufacturing, especially for liquid dermatology, and I'm coming back to that later on. Some explanations of the profitability hit in Q4 that was more of a one-off. Higher marketing costs on Amazon related to transition of NaturVet and Brand Protection will still have some impact in this first half year, but basically getting better month by month. One important thing is that we have started to implement the transparency program for the major NaturVet SKUs here in Q1, and that will have a big impact on that. And Brian Nugent will later on describe that more in detail. We had an ERP implementation in NaturVet. The cost interruptions that affected gross margin and volumes. No impact going forward. We are very happy with the ERP system as is right now. It started functioning really well end of Q4 and no issues now in Q1. So we're happy with the transition. But of course, the implementation caused more problems and took longer time than we expected. Marketing spend to support the Big Box partners. Of course, we knew that was coming. And -- and we have continued, let's say, implementing marketing spend, and we have seen results in increased sales, as you saw, but there was not enough, let's say, control of the actual marketing spend. And going forward, we will definitely have better control on the spending in 2026. Also, as you see on the picture here, we're very happy with the actual display campaign that we have launched in Walmart over 2,000 stores. We are in the ordinary shelves in 1,400 stores, expanded to 600 more. now in January. So we're happy with that. We're not happy with the outcome of the actual cost for the campaign, not a big hit for the quarter. But still, there were some unexpected costs for delivering and setting that up. But all in all, happy with the outcome. I will come back to that. Also, one of our Pet retail-focused brands, Vet Worthy, also have been launching second half year of '25. And the outcome we're happy with, but not the actual cost for it. So going forward, definitely, spend will be aligned with sales growth going forward. Also, we ended up with some higher inventory write-offs than for the other quarters. And we -- like in '24, we had a very average write-off, nothing exceptional, and that is also what we expect going forward into 2026. Jenny, over to you. Jenny Graflind: Yes. Some financial highlights. So revenue for the quarter amounted to SEK 682 million. So for the quarter, it was a 3% growth, which 11% was organic. We had a negative 12% of currency impact for the quarter and 4% was acquired growth. The large currency impact is coming from the stronger krone against the USD, which is the largest currency for the group. However, both the euro and the pound has also weakened quarter-by-quarter in '25. The acquired growth came from Summit, which we acquired in April. So for the full year '25, the net revenue amounted to SEK 2.7 billion. This is compared to SEK 2.5 billion last year. So we had an organic growth of 9% for the full year. The operational gross margin is at 56.8%. There are 2 main reasons for the lower margin. Hakan mentioned a little bit of it. There was, first of all, additional write-offs this quarter compared to other quarters when it comes to inventory. This partly is due to discontinued product lines or products, for example, human products that we don't focus so much on anymore. There was some acquired inventory that we had to write off and then a well issue with one of the brands, which will -- we'll be focusing much more on NaturVet by Swedencare in 2026. The second reason is this low-margin display campaign that you just saw the picture of Walmart. So these 2 together, these 2 reasons had an impact of about 1.5 percentage points. So otherwise, we would have been slightly above 58%, which is the level that we have been at for the last, I would say, 2 years. The external cost is increasing, as we have mentioned before, with the growth of Amazon, there's costs which are directly linked to the sales. However, in addition, this quarter, there was also the significant marketing initiatives in connection with the Big Box launch. And there's also additional marketing costs linked to Black Week, which occurs in Q4. Personal cost is stable, in line with the percentage of sales for the full year 2025. So as a result, the operational EBITDA amounts to SEK 109 million for the quarter. This is a decrease of 25% compared to Q4 last year and a margin of 15.9%. For the full year 2025, operating EBITDA is SEK 511 million and a margin of 19%. Cash and our net debt to EBITDA. Our net debt to EBITDA is at 2.9% at year-end or 2.9% at year-end. This is an increase both compared to a year ago due to the acquisition that we made in Q2 this year, and it's also an increase compared to Q3 due to the fact that we had a lower EBITDA this quarter. Our cash conversion was at 41% for the quarter. There was only very minor changes to the working capital in the quarter. However, we have made larger tax payments this quarter, which is impacting this operating cash flow. During the quarter, we have repaid SEK 65 million on our external long-term debt loans. And for the full year, we have repaid SEK 233 million. With the cash pool structure that we have in place, it's complete in the U.S., and we also have a good progress in Europe. We are able to operate with a lower cash level. So we have been able to reduce this by SEK 83 million during the year. So instead of this cash -- having a large operating cash, we can now use it to decrease our debt level, which is, of course, resulting in lower financing costs. Our CapEx is below 2% of net sales, both for the quarter and for the full year. Rolling 4 quarters. As you can see, the revenue for the rolling 12 months is increasing. However, both the operating EBITDA and the EBITDA has decreased due to this weaker profitability that we have in Q4. In 2025, the majority of the difference between the reporting EBITDA and operational EBITDA is the fair market adjustment that we have made with acquired inventory for Summit. That amounts to SEK 48 million for the year. Product and brand split. These graphs are not -- so the graphs and the amounts are not adjusted for acquisition or currency. However, as you can see, we have added a line below the graphs for organic growth because it's more of a fair comparison as everything has basically a large negative currency impact this year. So if we look to the left, you can see that there's a double-digit growth in nutraceuticals, partly due to the good private label sales. We also have good growth in Dental, 23% organic, mainly ProDen PlaqueOff, but there is also good improvements in both the toothpaste and the dental wipes. We get a decline in topicals. This is mainly linked to the decrease that we have in contract manufacturing business. Hakan will come back to that. In pharma, that has the largest increase in growth, which is due to the acquisition of Summit, but it has a decline in organic growth due to the delayed pharma projects. If you look on the right to the brand split, there's the same thing here. Graph is not currency adjusted, but the organic is -- the organic one is, of course, currency adjusted. So NaturVet, PlaqueOff and, NaturVet and Riley's are the fastest-growing brands in this group for the quarter, all has about 50% organic growth. Contract manufacturing has decreased due to the weaker vet channel and delayed pharma projects. Note, however, that the internal revenue in our manufacturing facility has increased with about 15% for the quarter. So when we move and we increase production in-house, this supports the other segments, but it affects the Production segment's organic growth negative because it's eliminated on a group level. Private label has also had good growth this quarter with larger orders at the end of the year. And the reason why other has strong growth, but low organic is that the growth is coming from Summit. Now over to Lagerberg. Hakan Lagerberg: Yes. Looking at the different segments. Net sales for North America, SEK 410 million, 7% growth, not currency adjusted and organic 22%. So the strongest quarter for the year by far. And on a yearly average -- a yearly number, it's 12% growth for North America. So we are very happy that North America has started to bounce back at very high growth numbers. Predominantly, online and Pet retail business -- Big Box retailers are the drivers. As we mentioned before, NaturVet, ProDen PlaqueOff and Riley's all had very strong quarters. The NaturVet big display campaign that we did send out in Q4 and had the cost and the sales didn't affect Q4, but we have seen an immediate impact on the out-the-door sales at Walmart. So almost doubling sales in store from first week of January and the trend continues in Q4 or in February. So we're very happy with that and also, of course, have made lots of influencers and social media campaigns about this that we are available in even more Walmart stores. Vet Worthy, as I mentioned, now present in plus 500 retail stores and also, I think, 6 or 7 distributors nationwide. So lots of focus on that as well, not as costly when it comes to marketing, but still more focused on moms and pop stores, and we saw a gap in the market for a new brand or a relaunch of that brand. Private label, as Jenny said, a strong quarter and really focused on that as well, evenly out our, let's say, manufacturing capabilities and -- going forward, we do have both concluded some new deals and also in negotiations. So we see private label as an important part of our product offering, and we do see it's an advantage when discussing branded products in -- with bigger retailers and Big Box retailers. Treats, interesting and keep on growing. It's actually some of the products that we don't manufacture ourselves. So we have had some supply issues that could have been an even stronger quarter. So we are looking into widening our supply for these kind of organic treats. Europe has had a strong year overall and also Q4 was double digit, 10% and on an average for the year, 14%. I expect going forward that Europe will continue to grow fast and actually a bit more than the 10%. But we're very happy with as long as it's double digit, as you know. Overall, all of the group companies in U.K., where we have NaturVet, we have Swedencare U.K. focusing nowadays more on online sales, but also they have joint projects together for the Pet retail side, has been performing really, really well. We have kept on building out the Amazon team. The Amazon team in U.K. is responsible for all marketing and sales in the rest of EU as well. But as some of you perhaps remember, we have satellites out in Europe. We think it's very important to have a local presence. So we have 1 or 2 based in different European countries responsible for sales and marketing on social media and Amazon, and it has turned out as really good, and we will continue to look at different markets there. Italy had a very strong profitability, like always, basically, single-digit growth, basically growing at -- like the market, but the comps from last year was the strongest quarter last year. So happy with that, even though it wasn't double digit. And looking at -- and here in the European sales, we also add our international export sales for mainly ProDen PlaqueOff. As I said previously, a bit weaker quarter, but some big orders came in late and will be shipped out in January and has been shipped out in January and will go out this quarter. Yes. And then looking at production, SEK 112 million in sales. and the organic growth was minus 16%. And it's still a cautious vet market for contract manufacturer. We do see some lowering in prebooked orders and also pushing some orders. So we are working together with our major customers there. See an improvement later this year, not already in Q1, but Q2 definitely picking up. So hopefully, we have been at the lowest market for that. But as Jenny said, we are also focusing a lot on internal projects, new launches there and have agreed with some new customers for new product lines. I will present that in the next slide. Also something that was the flavor of 2025, some delays in pharma projects, very annoying, but happy to say that we've now kicked off 2026 really well and expect all the quarters in the sector to be a stronger quarter than last year. So we're very happy with that. And that's one of the entities where we made some organizational changes to better respond to the customer demand and from our internal, let's say, project planning. So looking forward to 2026 when it comes to pharma development and manufacturing. On that topic, we have now in Q1 signed 2 new material projects. One of them is the ophthalmic facility that we presented that we were investing in. That is on track, completed in Q1, Q2. First customer now signed if we had an had, let's say, understanding and an agreement for development, but now we also have signed for the tech transfer and the manufacturing that will start in end of Q2, hopefully, or early Q3. So that's a big milestone for us. And when we have started the manufacturing for this first project, we do have other customers in line and discussing this. This seems to be a lack of, let's say, capacity on this when it comes to the pharma side. Also increase of internal revenue of 15% eliminated on group level, like Jenny said, and it's also relating to the growth we've had in our branded sales, but also preparing for 2026. Looking at next quarter, Vetio U.K., Ireland and North, all bounced back with increase of external customers. And as I said, when it comes to the liquids, still a bit challenging, but looking a lot better from Q2. And we are trying to push some of that -- those projects into Q1, working hard on that. Lots of product launches when it comes to 2026. I won't go through all of these, but I want to highlight Calmaiia (sic) [ Calmalia ] from Innovet. As many of you know, it's -- Innovet is our, let's say, most R&D-focused organization, lots of IP and lots of clinicals in every launch there. So we have a new and innovative patented combination of Trytofan (sic) [ Tryptophan ] and PEA Ultra Micronized and have had really, really good clinicals on that. So we are eagerly awaiting the launch for that. And then also, I would like to highlight the stretch for a completely new and improved K2C product line. That's a legacy line with plus 15 different SKUs and has always been a strong seller, both from a branded perspective, but also when it comes to private label solutions. And we have now been working in almost 2 years to improve that and adding a special ceramide solution called CeraGuard, also with excellent clinicals, expanding the reach and the effectiveness of the product. And we have just started to launch it with lots of interest from the market and have basically signed all of the major customers to revamp their private label solutions to this offering. So that will have a big impact for us in 2026. Our new financial targets that we presented, we're adding another target. So we have annual double-digit organic growth going forward. And also, we have said that we will establish an operative EBITDA margin above 26% midterm. And what midterm means is during 2028. We see these new financial targets as a 5-year plan from '26. Dividend, 40% of net profit adjusted for nonoperating costs. And we will take into account, of course, consolidation and investment needs, liquidity and financial position. And speaking about our dividends since our first pay 2021, historically, we have increased it annually between 5% and 25%. This year's proposal of SEK 0.28 is 13% of the net profit adjusted for nonoperating costs. Net debt to EBITDA being under 2, the long-term target with flexibility for acquisitions. And we do have room for utilizing our credit lines up to around 3.5. So -- going forward, we will continue as we have. We have continued to amortize. So that will be one factor to getting the net debt down, of course. But also, like Jenny said, this quarter where we went up from 2.7 to 2.9 was -- even though we did amortize SEK 65 million was due to the lower EBITDA. And what we see going forward is, of course, the increased EBITDA together with amortizations, we will be working towards 2.0. We are not stressed, but you should expect that we continue to get the net debt down. Structural key growth drivers for the coming years. Yes, for looking at Swedencare as a group, we've been very active when it comes to M&A up until 2022. Going forward, it is a bit more challenging for us to find interesting M&A targets. We do like to add unique companies and product lines to the group like we did with Summit Vet earlier 2025. But going forward, M&A will not be as important for our growth driver as it has been. So what we see in the coming years is definitely our Pharma division is expected to be one of the fastest-growing product groups, supported by a strong pipeline and good visibility from contracted projects. And it's basically that the manufacturing grows a lot. We -- a couple of years ago, we were basically only doing development work with a very, very minor manufacturing capabilities. Now we have built that out, and we continue to do that. And we see that it is a very good add-on to the -- of course, to our growth. The Big Box retailers, big channel opportunity, the same size as traditional Pet retail and we will continue to work on that. We have just started, and it's a long-term project. So we see lots of opportunities there. Amazon will continue. D2C, what we call D2C is when we sell direct to the consumer, not through the platforms. As you know, we are heavy on platforms collaborations, Amazon, Chewy, the Zooplus in Europe. We do investigate and see the D2C as a very interesting part as well, not only to increase sales, but also to get more direct contact with end consumers. Product portfolio and innovation, of course, product portfolio expansion is one of the key elements for Swedencare is that we take innovative good products that we sell under one brand and expand that to other brands. And then, of course, continue to come out with new products in a fast way like we always have. Then finally, pricing opportunities. We do see that selective pricing initiatives remain available, supported by strong brands and limited historical price increases. And also, I would like to say that comparing products, we do have, I would say, on average, we do have high-quality products, mostly priced at a bit lower level than comparable competitors. So we do see opportunities for us there. And yes, over to Brian. Brian Nugent: Good morning. I'm Brian Nugent, Chief Commercial Officer for Swedencare North America, and I have oversight of our North American veterinary and online operations. Today, we'll be discussing Swedencare North America's online division, Pet MD. Swedencare's online mission statement, while seemingly wordy, can be simply summarized by saying we will meet pet parents where it's convenient for them. Our North American online division is Pet MD. Acquired by Swedencare in 2021, Pet MD was founded by Ed Holden, who continues to manage both Pet MD, the company as well as the online sales of other Swedencare owned brands. Pet MD is coming off year-over-year online growth of 20%. It's important to note that the original Pet MD team is still intact and continue to utilize its proprietary systems and in-house algorithms created to assess advertising and ad resource allocation, respectively. This consistency is important for maximum optimization. Pet MD primarily sells through leading online players like Chewy and Amazon and to a lesser extent, D2C and other e-tailers. We also handle all the creative for Pet MD and other Swedencare online brands in-house. This includes photos, videos and all creative enhanced brand content. Our primary focus is to leverage Swedencare owned brands and support the products that we manufacture within Swedencare, which, of course, gives us the highest margin opportunity. We'll now run through the top Swedencare brands Pet MD handles. The main brand, of course, is Pet MD, which we acquired in 2021, as I said, and continues to grow year-over-year. The Pet MD brand acts as the train tracks for Swedencare's other online brands. That is we utilize all the Pet MD systems that we built to manage our other Swedencare brands. Pet MD is mature, has great recognition, and it's important to note that this brand also has only been available online. It's never been sold in the retail outlet. We are, however, exploring options related to this in the near future. The next brand is ProDen PlaqueOff, Swedencare's core and flagship product. PlaqueOff is the premium oral health care product for pets and it's a high-margin operator. Because of the uniqueness and high margin of PlaqueOff, great focus is paid on this brand. PlaqueOff grew 30% online year-over-year, and we expect it will continue with additional focus and support. Riley's is Swedencare's entry into the premium treat category. We acquired Riley's in 2024 and for good reason as premium treats are a really interesting category to us because they have high reorder and subscribe and save rates. The average premium treat buyer is purchasing 16x a year. That high frequency drives strong customer lifetime value and extreme brand loyalty. Riley's also grew online 30% year-over-year. Rx Vitamins is unique in that its original -- its origin is in a veterinary brand that's sold in over 5,000 hospitals. It has unique evidence-based science formulations, which pet owners are very loyal to. Often, these pet owners want to reorder online. And as our simplified mission states noted, we will meet the pet parents wherever they would like to meet, in this case, online. VetClassics is a science-based line as well, and it was a brand that was acquired through the Garmon NaturVet acquisition. Pet MD handles the online sales of VetClassics, and it has a range of unique delivery forms consisting of powders, tablets and soft chews. Like Rx Vitamins, it is primarily sold through veterinary hospitals as it was originally developed by a veterinarian. And finally, NaturVet. It's Swedencare's premium retail brand. It's currently sold in PetSmart, PETCO, Walmart, Tractor Supply as well as other national retailers, as Hakan previously said. The NaturVet range was previously sold on Amazon and Chewy via a third-party relationship. Pet MD completed the takeover of Amazon sales in April of 2025. Full margins are now being fully recognized following the sell-through of the acquired inventory. But that's not to say we haven't had our challenges with NaturVet. While we were able to learn lessons from when we took over ProDen PlaqueOff, NaturVet provided some unexpected issues. Some of these issues we have sorted through and some we are still sorting through. An example is the rebranding of old labels versus new labels. When you're rebranding an Amazon listing, it's a very tedious process, and you want to ensure that you keep your reviews and your ratings as a lot of things can go wrong during the changeover process. We're happy to report that this process is now 98% complete. Another challenge is rogue sellers or third parties that purchase the product via distribution and attempt to sell on Amazon platform without conforming to MAP pricing. As of January, we have adjusted for 2026 MAP pricing increases and of course, going back to third parties, we are just now implementing an Amazon anti-counterfeit program called transparency, which Hakan mentioned previously. We are now in the middle of getting this program launched on the majority of NaturVet products, and this will ensure that there will be no third parties or counterfeit sellers of NaturVet products on the Amazon platform. Pet MD's continued initiatives to market and to grow the Swedencare brands online with a focus on launching internally manufactured products under existing brands via line extensions. Also to continue to be selective and acquire brand assets when opportunities arise. Once acquired, we can quickly plug those acquired assets into the Pet MD model in order to scale growth. It's the plug-and-play model similar to what was achieved with Riley's. And finally, we're going to continue the optimization of advertising efficiency, aiming to scale online brand sales while efficiently monitoring ad spend. And with that, I'll turn it back to Hakan and Jenny. Thanks for your time. Emma Nordgren: Thank you, Brian. And by that, we are open for questions. And your first one comes from [ Johan ]. Unknown Analyst: A few ones from my side. First off, if we continue on the topic of NaturVet's Amazon account. So what happened during Q4 specifically? You took over the account earlier this year and sort of what went wrong specifically in Q4 that hurt your margins so badly? And if possible, could you quantify the loss in -- both in terms of revenue and margins in the quarter? Hakan Lagerberg: I can start and then you can Jenney and Brian, if you have anything. It's mainly related to, like Brian said, the rogue sellers coming in. And when we establish programs launch or promoting the trademark, the actual brand, then we take the costs for that and expect to get the top line sales for all of those marketing initiatives. Amazon has different programs. You have a certain percentage that you pay when you sell a product, and that's fine. But since we are owning the brand, we're owning the product line, we make investments and programs and then all of a sudden, someone comes in and lowers the price and get the so-called buy box. And if we want to get the buy box back, then we need to lower our prices and then you're in a, let's say, spiraling down project. So it's been very tedious and tough and a lot tougher in Q4 than the previous quarters for different reasons. It could be that some distributors were selling products out to rogue sellers that didn't do that during Q2 and Q3. And yes, otherwise. But to quantify -- I don't want to quantify it, but it has had a substantial impact on our profitability. I would like to say that. I don't know if you have anything to add, Brian. Brian Nugent: No, as Hakan said it. I think that we bottomed on that. And as I said, we're just now in the process of setting up the transparency program, which will help eliminate third parties from being able to do that in the future. Unknown Analyst: Okay. Got it. Got it. And so 98% of the products are relabeled. So the only sort of issue, so to speak, should be the rouge sellers going forward, right? Do you have any sort of time line on the transparency program? And again, what kind of margin drag do you expect from the coming quarters? Hakan Lagerberg: Yes, the program as such as it works is that when we have launched a transparency code on a product, special SKU, then the same products that are in the Amazon warehouses, they are allowed to be sold out, but they are not allowed to be shipped any new ones in. And we don't have full access of the volumes. We -- for some, we can see the volumes. But I would expect that the programs will have come into full force in Q2, not in Q1, but we will see improvements in Q1. Unknown Analyst: Okay. Cool. Got it. And on the NaturVet, the Big Box Walmart launch, you stated that sales almost doubled in January, which, of course, is impressive, but says very little to us outsiders as we don't know from what base. So to give some depth to that statement, what kind of sales contribution from Walmart thus far are we talking about? Hakan Lagerberg: I mean second half year of '25, we sold a bit over SEK 3 million, SEK 3.5 million, I think. roughly to Amazon. And to calculate how much they have sold, we don't have that exact number. So -- but half year, plus SEK 3 million of sales for second half year for Swedencare to Walmart. Unknown Analyst: Got it. Cool. And the second -- or third question actually is on the gross margin. So you quantified the impact from low-margin display campaigns and inventory to roughly 1.5 percentage points in the quarter. The latter, of course, you stated it was nonrecurring, but how will the sort of negative mix effect from the display campaigns impact your gross margins in Q2 and Q1? Jenny Graflind: How the display campaign is going to impact in Q1? It's not going to impact in Q1. It's done. Hakan Lagerberg: So that was only product relating to Q4 sales that... Jenny Graflind: Yes. Hakan Lagerberg: … the full contribution margin from Q1. Jenny Graflind: Yes. It was just a specific campaign. It was just more expensive to both produce and to ship those -- the nice picture that we showed you. Unknown Analyst: Okay. Got it. So all else being equal, then we should see gross margins in 2026 recovering to the sort of adjusted gross margin level that we saw in 2025? Jenny Graflind: Yes. Unknown Analyst: Got it. And continuing another question for you, Jenny, perhaps. Any chance that you could break down the external cost increase in the quarter? How much of external costs in the quarter were related to marketing, for example? Jenny Graflind: No, no. But I mean, the majority of the increase is linked to marketing. It's both linked to this Amazon marketing, as I was mentioning, for example, the Black Week, for example, it would have more -- it's more expensive to market on Amazon in Q4. And then it's this additional marketing initiatives with Big Box. Unknown Analyst: Okay. So how should one think about your marketing spend coming quarters then? Jenny Graflind: Well, the marketing spend, we're not going to have this one-off campaign in Q1. However, marketing spend to Big Box is going to continue to increase. However, we are expecting the volume to be more matched. We didn't have the volume. We didn't have the revenue to match the campaigns. However, marketing is going to continue. Unknown Analyst: Okay. Got it. And then a final one, if I may. So Production segment sales fell by 16% in Q4, partly due to contract manufacturing, but also postponement of pharma projects into 2026. Focusing on pharma here specifically, you sounded very optimistic on the conference call. And of course, you've stated that this is a key top line and margin driver in 2026. But given that we saw another postponement here in Q4, what makes you confident that 2026 will be different? Hakan Lagerberg: It is that we have already started a couple of big projects in Q1, and they will continue in Q2. And as I said, the ophthalmic project that we have -- that we are in the process of getting all set there, we also have signed a contract with a customer that is in, let's say, in hurry. They want us to start manufacturing as soon as we can. So we're working really hard on that. So there are no external factors that could change those facts. Unknown Analyst: Okay. Got it. And on sort of the timing of those projects, the ones that started in Q1, what sort of -- what time frames are we talking here before we can see a contribution to sales? Hakan Lagerberg: In the pharma for Vetio North, you will see a strong performance already in Q1 compared to last year when it comes to sales, definitely. Unknown Analyst: Got it. Lovely. If I may, one final just clarification on your targets. You stated during the call that the targets are for midterm, which implies 5 years. But you then said that in the same sentence that you expect to reach your margin target by 2028. So just to clarify... Hakan Lagerberg: What I meant with midterm, midterm of the 5 years. Unknown Analyst: Okay. So the 2028 doesn't -- it's a 2030 target? Hakan Lagerberg: No. I expect – Jenny Graflind: It's a 5-year plan. Hakan Lagerberg: It's a 5-year plan. But from 2028, I expect us to be on that target. Emma Nordgren: Your next question comes from [ Adrian ]. Unknown Analyst: And a few questions from me as well, please. Just want to begin here with 2026. It looks like a strong year when it comes to the growth rate with everything going on here. But I guess the recent deviation here, at least in recent history has been in terms of margins, right? You can explain that a lot of these margins are kind of one-off-ish. But how can you -- how -- like what should we expect for the cost or when it comes to the margin looking into 2026? Like how confident can you be that you don't meet any other short-term marketing campaigns that you have to do? How can we have confidence in basically the cost remaining low here? Hakan Lagerberg: I mean it's -- this -- as I explained a couple of these, it's been -- some of these launch campaigns, of course, has been needed to do, and we did that in Q4. We don't have the same launches first half next year. We -- as Jenny said, we will continue to market and collaborate with our customers. But it will be in line with the sales in a much better way than we did -- were able to do in Q4. And it's a combination of the actual projects. It's a combination of, as I said, we made some organizational changes, better control. And some of this, like you said, it was campaigns that we needed to do for the agreements that we did -- that we have with our customers. But those launch campaigns are done for '25. We don't foresee them in '26, first half year at least, then it dependent on if we sign any new major customers, then we have learned the lesson how we handle this quarter. And I would like to add also that there -- I mean, it was a quarter that, as I said, I'm very disappointed how we handled it when it comes to the cost structure, and it won't be repeated. We are going through everything, and we have lots of cost initiatives when it comes to projects and increased profitability. So the team is really motivated and we are on it a lot better than we did. We definitely failed in Q4. And now we have to rebuild the trust. And the way to rebuild that trust is that we show a couple of quarters with improved margins and improved EBITDA, of course. Unknown Analyst: Yes. Right. Exactly. So kind of a follow-up question here. Like what visibility do you have for the marketing budget throughout the entire year? Do you know already today what the marketing budget will be throughout 2026? Or can there be unexpected marketing investments during a short-term time frame? Hakan Lagerberg: The only unexpected, I would say, is if sales grow even faster than we anticipated in our budgets, then, of course, the marketing spend will increase, but it will be in line with profitability. So we will grow with keeping the targeted profitability what we have set for this year. Unknown Analyst: Perfect. And another question here. You mentioned that you doubled sales here in January, right? And I can I assume that some of this is driven at least by this low gross margin display campaign. You explained that you took the cost in Q4 and that the gross margin going ahead should be good. But when this campaign runs out, I expect you should see some difficult comps from that maybe on a sequential basis. Could you give us any color on sort of the normal sort of Walmart's release here, excluding the onetime display thing [indiscernible] performing? Hakan Lagerberg: Yes, displays campaigns are important, of course, because when looking at retailers in the U.S., you put up products, most of the retailer does. They put up products under therapy area. So Joint product is lumped together with all of the different brands, then you have dental products, all of the different brands, et cetera. The problem when launching a new brand into a retailer is, of course, to get the customers to see your product. And of course, displays campaign, like you saw on the picture, is extremely important to -- and we are very happy and it's not an easy thing to get an agreement with Walmart for such a big display. So it's a big display, but on a different part of -- in the stores, showing all of the products that we have in the ordinary assortment, all of those products are in the display. So like you said, it's -- we do it because we want to really enlighten the customers that we are present at Walmart buy our product there. So if they take a product from the display campaign, next time when they come back 2 months later, the display is not there, but then they will find exactly the same product in the ordinary shelves. So that's the whole reasoning by these display campaigns. Then coming back to what Jenny said, next time we will make a display campaign, it won't have such a big impact on the gross margin. We will make it smarter and better next time. Unknown Analyst: Fair enough. Another question here on the inventory write-offs. They were kind of bigger than expected, I suppose. Could you confirm that these are nonrecurring? And kind of what happened there that made them such a deviation from your expectations? Jenny Graflind: Well, there's always going to be some level of write-offs every year and every quarter. It's just that this year, about 50% of the inventory write-off came in Q4. There was a couple of product lines. There was a couple of acquired inventory that we have to write off. So it was just a higher level this quarter than we normally have in Q4. Hakan Lagerberg: And that became visible very late in the quarter. Jenny Graflind: Yes. Unknown Analyst: You mean 50% of the year inventory write-off? Jenny Graflind: Yes. Unknown Analyst: Right. Okay. Last question, if that's fine. So going back to the midterm operational EBITDA margin here of some 26% -- you mentioned the time line here, but could we have some color on kind of the contribution? Like where do we expect the margin to come from? Is this really driven by the Production segment, which is margin accretive or the gross margin? Or how should we think about it? Hakan Lagerberg: No, I would say that coming back to normal margins from our biggest brand, NaturVet, that has had a big impact for us in 2025. So just by coming back to ordinary margins of what we expect for NaturVet, that's the biggest driver, I would say, short term, the coming 2 years. And then, of course, getting our Amazon sales in line with the expected profitability. That's -- since online sales is now well over SEK 100 million I mean, there was '25, and it will grow even more in '26. Of course, every percentage, we improve profitability when it comes to our online sales, primarily on Amazon has a huge impact. But then we have our, let's say, smaller entities, including pharma, where we have significantly higher margin compared to, let's say, group average. That is, of course, very accretive to our overall profitability increase when we can -- when we manage to grow those, let's say, smaller entities into higher growth targets -- numbers, sorry. Emma Nordgren: And your next question comes from Adela. Adela Dashian: Adela from Jefferies. I guess I'm also going to stay on this track trying to figure out what exactly happened in Q4. I'm assuming that you had some sort of marketing budget set ahead of the year, ahead of the quarter. So was this just -- I mean, how was this not flagged on a group level earlier? And is this an individual team that was in charge of this and it just was sideways and what, I guess, reporting, what type of measures are you now implementing so that this never happens again? Hakan Lagerberg: Yes. I mean it's a couple of, let's say, things affecting. Like Brian explained, the problem for us that hit the -- it is -- you could call it marketing, but when selling on Amazon, when we get a higher cost there, we can't just shut it up because it's our brand. If we shut down, let's say, the branded marketing for our products, then competing brands will take those sales. So we can't really shut that down. And that's -- or we can, but then we will lose sales on -- both on the short term, but also definitely on the longer term. So even though you have a budget and linked to the metrics when it comes to Amazon sales, it is very tough when getting hit with all of these rouge sellers. So that's harder to, let's say, forecast and foresee. When it comes to the launch campaigns linked to the Big Box retailers, it's definitely that that there was a lack in control in the organization on the actual spend linked to the sales orders and all of that. So we have -- we took immediate effect with some organizational changes. And then we have also implemented and following up a lot closer when it comes to spend. So I'm confident going forward that we now have the organization that is not only focused on, let's say, sales and marketing, but very much linked to the actual profitability of the brand. So -- but coming back to that, we need to show it, and that's what we intend to do going forward. Adela Dashian: Hakan, but just to clarify then, so there has been changes to the organization and the team has been replaced? Hakan Lagerberg: Yes, not the whole team, but there has been changes, yes, and improvements. Adela Dashian: Okay. All right. There's already been a lot of questions answered. So I'll just stop there. Emma Nordgren: Our last question comes from [ Christian ]. Unknown Analyst: I'm not sure if I captured if you mentioned the amount of one-off items in Q4. So would it be possible to disclose the underlying operational EBITDA margin in Q4, excluding these one-off items? Jenny Graflind: No. No, we're not going to do that. We're not going to adjust for it because part of it is operational. So no, and for example, like I said, even though the marketing spend has been high, yes, we have mentioned in the gross margin, how much the display campaign affect the gross margin and the inventory as well. However, the marketing on the Big Box, it will continue. It's just that we are expecting more sales connected to it. So it's not like a one-off marketing spend on Big Box. It will continue. Unknown Analyst: Okay. Great. And you also mentioned that the ERP implementation caused disruptions that affected the gross margin and volumes. Could you quantify the impact on Q4 sales? Jenny Graflind: Again, it's difficult to quantify when you have disruptions and you have things that takes a little bit longer time. But of course, if we did not have this ERP change in Q4, we probably would have got out a lot of more orders in the beginning of October, which would have expected to have reorders from those kind of customers already in Q4. So now we didn't get those because there was delays due to the implementation of the ERP. A lot of people are busy with it, and there's a learning curve, et cetera. But it's not going to be quantified. Emma Nordgren: It seems like Adela have one more question. Adela Dashian: Just a follow-up on marketing spend. You mentioned, Hakan earlier that the only reason marketing spend could be significantly higher again in '26 is if you have higher volumes, higher than what you're expecting. Could you just, I guess, explain that reasoning? Like if you already are seeing good growth, good numbers, then why do you need to spend more on marketing? Hakan Lagerberg: No. What I meant -- I don't mean more in percentage of the sales. I mean in actual dollars or kroner it will be higher. Jenny Graflind: It could be linked to, for example, if we get another new retailers, et cetera, as well. Emma Nordgren: Thank you. That concludes our Q&A session. So back to you guys for any closing comments. Hakan Lagerberg: Thank you so much. I just want to close out with underlining our, let's say, disappointment with the quarter when it comes to profitability. And rest assured that you all know that the Board and many lots in the organizations are important shareholders of Swedencare, and we're very focused on shareholder value and creating that. So we are disappointed, but are actively working very hard and looking over everything, and we will try to come back and be -- and surprise the market this year. So we stay tuned, and I thank you for your support. And as I want to underline once again, we are very focused in improving profitability going forward. Emma Nordgren: Thank you very much. Hakan Lagerberg: Thank you. Bye. Jenny Graflind: Bye. Brian Nugent: Bye.
Operator: Good day, and thank you for standing by. Welcome to the Fifth Year Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in 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 a hinge phrase. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would like to hand the conference over to your first speaker today, John Ragazino, external investor relations for Bitdeer Technologies Group. Please go ahead. Yujia Zhai: Thank you, Operator, and good morning, everyone. Welcome to Bitdeer Technologies Group Fourth Quarter 2025 Earnings Conference Call. Joining me today are Jihan Wu, Chief Executive Officer; Matt Kong, Chief Business Officer; and Haris Basit, Chief Strategy Officer. Haris will provide a high-level overview of Bitdeer Technologies Group's fourth quarter 2025 results and discuss the company's strategy, provide a detailed business update, and review the financial results for the quarter. Jihan, Matt, and Haris will be available for questions after the formal remarks. To accompany today's call, we have provided a supplemental investor presentation available on Bitdeer Technologies Group’s investor relations website under Webcasts and Presentations. Before management begins their formal remarks, I would like to remind everyone that during today's call, we may make certain forward-looking statements. These statements are based on management's current expectations and are subject to risks and uncertainties, which may cause actual results to differ materially. For a more complete discussion on forward-looking statements and the risks and uncertainties related to Bitdeer Technologies Group's business, please refer to the company's filings with the SEC. In addition to discussing results calculated in accordance with International Financial Reporting Standards, or IFRS, we will also reference certain non-IFRS financial measures such as adjusted EBITDA and adjusted profit and loss. For more detailed information on our non-IFRS financial measures, please refer to our earnings release published earlier today, which can be found on Bitdeer Technologies Group’s IR website. With that, I will now turn the call over to Haris. Thank you, John, and good day, everyone. Haris Basit: It is great to be with you today. The 2025 marked a defining period of execution and strategic progress for Bitdeer Technologies Group. Achieved critical milestones across our three strategic pillars, and position the company for sustained growth as a vertically integrated Bitcoin and AI infrastructure company. I will start with a brief overview of our financial performance for the quarter. Fourth quarter total revenue reached $225,000,000, up 226% year over year and 33% sequentially. Gross profit totaled $10,600,000, adjusted EBITDA was $31,200,000 for the quarter. While both metrics declined sequentially, the results primarily reflect a combination of lower average Bitcoin pricing, modestly higher electricity costs, substantially higher depreciation expense due to the rapid expansion of our self-mining capacity, and further investment in new talent to support our growing AI HPC initiatives. I will discuss these factors in greater detail later in the call. Let me begin with a brief review of our power and infrastructure portfolio. We continue to make meaningful progress during the quarter, advancing a global portfolio of sites that we believe are well suited to support both large-scale Bitcoin mining and next-generation AI and HPC workloads. Across regions, our focus remains on developing power-rich, capital-efficient infrastructure that provides flexibility, speed to market, and long-term strategic optionality. From an energy infrastructure perspective, execution during the quarter remained on track. At the January, we had over 1.66 gigawatts of capacity online, and a total global power pipeline of three gigawatts. We believe this represents one of the most attractive and AI-suitable power portfolios in the industry and provides us with a vast opportunity as the demand for such capacity continues to grow. Over the past several months, have seen a significant shift in market dynamics around AI data center development. Demand for large-scale colocation capacity has increased substantially and we have responded by refining our approach to better align with this opportunity. Therefore, we are currently prioritizing colocation services provided to Norway and the United States that are suitable for large-scale AI HPC deployments. Let me walk through a few sites and where we stand with our development plans. First, Teadle, Norway, represents our most near-term colocation opportunity. This 225-megawatt facility was originally constructed to Tier III data center specifications, which puts us in a favorable position for conversion to AI workloads. We estimate the retrofit will require much less incremental capital expenditure to add uninterruptible power supply systems, backup batteries, and generation, as well as some additional cooling capacity compared to industry benchmarks for greenfield Tier III data center development, which typically run in the $8,000,000 to $12,000,000 per megawatt range. The site benefits from hydropower with attractive economics; independent 100-megawatt transformers provide redundancy. We are currently in lease discussions with multiple counterparties and expect to be in a position to announce a signed lease agreement for Teadle as soon as possible in 2026, although the exact timing is very difficult to predict. This site should be capable of supporting initial test GPU deployment late 2026 and first production GPUs expected in early 2027. Second, our 570-megawatt site in Clarington represents one of the larger AI data center development opportunities in the United States. Have made progress on two fronts here. First, the local utility has accelerated our interconnection timeline. Second, we are currently in discussion with multiple prospective tenants. These are well recognizable companies in the space, and the discussions are progressing. While litigation has recently been filed that could potentially delay development at this location, believe that we have meritorious claims and a strong defense and will pursue an expedient solution. Given the scale of this site, even a partial or first phase lease would represent a significant milestone for Bitdeer Technologies Group and would provide substantial contracted revenue while derisking our development capital. Third, at Rockdale, we are pursuing a strategy that allows us to maintain our current Bitcoin mining operations while developing new HPC capacity. We are evaluating the acquisition of adjacent land to our existing facility we could potentially construct a purpose-built HPC data center. This approach would minimize disruption during data center development to our 563-megawatt mining operation, which continues to generate revenue. The greenfield HPC build would be designed from the ground up for AI workloads. The Rockdale site benefits from its location in the ERCOT market, provides operational flexibility. We are currently talking with prospective colocation tenants for this site. The dual-track approach, maintaining Bitcoin mining while developing HPC capacity, reflects our commitment to both businesses and our ability to optimize our power portfolio across use cases. While we are prioritizing colocation for our larger sites, continue to see opportunity in GPU-as-a-service for targeted markets. We are expanding our cloud platform in Malaysia by 10 to 15 megawatts, building on the success we have had in Singapore serving customers in biomedical, robotics, and gaming sectors who need fully managed orchestrated infrastructure. In the United States, we are planning to add 10 megawatts of GPU capacity in Washington state and are evaluating a partial conversion of our Knoxville site from Bitcoin mining to GPU cloud. I want to be clear that the scale of our long-term US GPU-as-a-service expansion is predicated on signing customer contracts. Do not anticipate deploying large speculative capacity. Expect all major GPU deployments will be backed by committed revenue from enterprise customers who are seeking meaningful capacity with comprehensive managed services. This disciplined approach ensures we are deploying capital we have revenue certainty. A key element of our strategy is how we are approaching data center development. We have built an internal development team with experience in very large data center construction and we are augmenting that team through strategic hires, working with experienced EPC contractors and general contractors on a fee basis rather than through joint venture arrangements. This gives us greater control over timelines and specifications, and importantly, it allows us to retain more of the economic value these assets generate. As we look ahead, the growth will continue to be anchored by our three strategic pillars, between mining, ASIC development, and HPC AI. Together, these represent a vertically integrated, highly defensible platform that leverages our deep technology expertise, proprietary chip design capabilities, and extensive global power portfolio. The supply-demand imbalance for AI compute continues to widen, and we expect this shortage to persist well into 2027. Time to power is a critical variable, and we believe Bitdeer Technologies Group is exceptionally well positioned to serve customers seeking both near-term and midterm capacity. On the Bitcoin mining side, the rapid expansion of our self-mining platform continues. We exited the year with more than 55 exahash per second of self-mining hash rate, and in the month of January alone, we brought another eight exahash per second online, exiting the month of January at over 63 exahash per second. This firmly establishes Bitdeer Technologies Group as one of the largest publicly listed Bitcoin miners by total hash rate under management. Supported by the disciplined rollout of our SealMiner fleet, accelerated deployment of SealMiner rigs has driven material improvements in fleet-wide efficiency. The SealMiner A2 and A3 being actively deployed in our self-mining business operate at approximately 15 to 16.5 joules per terahash and 12.5 to 14 joules per terahash respectively, and represent industry-leading power efficiency. As these next-generation rigs replace legacy third-party equipment, our blended fleet efficiency continues to improve, with our overall fleet-wide efficiency currently standing at 17.5 joules per terahash as of 01/31/2026. As SealMiner penetration increases throughout 2026, we expect our overall fleet-wide efficiency to continue to improve, enhancing our mining margins. Looking ahead, our self-mining operations are not plateauing. Our investments in chip design are delivering tangible results. During the quarter, we commenced mass production of the SealMiner A3 series. Initial shipments began in November, and we have deployed a total of 8.7 exahash of our SealMiner A3 to date. As we continue to retire older-generation third-party rigs, we expect the A3 series to continue to meaningfully contribute to our fleet efficiency improvements and growth throughout 2026. On the R&D front, our CLO4-1 chip was completed back in September. The CLO4-1 represents a meaningful step forward in efficiency and positions Bitdeer Technologies Group to maintain technological leadership as the industry continues its relentless drive towards lower power consumption per unit of hash rate. Mass production of mining rigs based on the CLO4-1 chip will begin in Q1 2026. CLO4-2 chip design remains under development at our US-based design center. Additionally, we have successfully taped out a new Litecoin chip, SEAL-DL1, designed for Doge and Litecoin mining. The initial test results of SEAL-DL1 have exceeded comparable rigs in both energy efficiency and hash rate. On the recent market conditions, the CLDL1 generates higher fiat-based returns per megawatt than our SealMiner A2. Preparation for USA SealMiner manufacturing remains in progress. This initiative is a core component of our vertically integrated strategy and aligns with both operational resilience objectives and evolving trade and supply chain dynamics. Now let me walk through our detailed financial results for the quarter. Before I begin, I would like to remind everyone that all figures I refer to today are in US dollars. Fourth quarter consolidated revenue was $224,800,000, up 225.8% year over year and up 32.5% sequentially. The year-over-year growth and sequential growth in revenue was primarily driven by significantly higher self-mining hash rate as a result of continued CLMiner deployment, as well as contributions from SealMiner sales, offset in part by slightly lower Bitcoin prices for the quarter. Self-mining revenue was $168,600,000, compared to $41,500,000 in Q4 2024 and $130,900,000 in Q3 2025, representing year-over-year growth of 306% and a sequential growth of 28.7%. Continued growth from Q3 2025 levels reflects a significant increase in average operating hash rate and associated Bitcoin production during the quarter, offset in part by 13% lower average Bitcoin prices quarter on quarter. SealMiner sales revenue was $23,400,000, up 105.4% over the $11,400,000 reported in Q3 2025. Total gross profit for the quarter was $10,600,000, reflecting a gross margin of 4.7%, versus 7.4% in Q4 2024 and $40,800,000 or 24.1% in Q3 2025. Significant decline in gross margin reflects the combined impact of several drivers during the quarter. First, obviously, we experienced 13% lower Bitcoin prices during the quarter along with the gradual increase of the global hash rate. Second, on the cost side, experienced an approximately 5% increase in average electricity costs per unit during the quarter when compared to Q3 2025, mainly due to the seasonal winter pricing dynamics at Norway sites. Third, the growth in our self-mining hash rate comes with a concurrent noncash depreciation expense associated with this fleet of new miners. Additionally, during the quarter, we changed our methodology for calculating depreciation expense to reflect a more conservative approach. Now depreciate rigs using a three-year straight-line method versus our prior assumption of a five-year depreciable life for hardware. Total operating expenses for the quarter were $66,300,000 compared to $42,500,000 in Q4 2024 and $60,500,000 in Q3 2025. The sequential increase in operating expenses was primarily driven by the following factors compared to Q3. We added more headcount to support both mining site operations and our AI infrastructure expansion, incurred additional holiday season compensation, along with an increase in year-end general corporate activities. These expenditures reflect the operational requirements of our growing infrastructure footprint and the resources necessary to execute on our strategic initiatives. Other operating expenses for the quarter was $43,800,000 compared to $3,700,000 in Q4 2024 and other operating income of $26,500,000 in Q3 2025. This was largely attributable to the fair value change of Bitcoins pledged for the Bitcoin-collateralized loan since Q3 2025. Other net gain for the quarter was $208,900,000 compared to other net loss of $4 and $79,800,000 in Q4 2024 and $238,500,000 in Q3 2025. This was largely attributable to noncash fair value change of derivative liabilities related to the convertible senior notes issued in November 2024, June 2025, and November 2025. Adjusted net loss was $82,600,000 versus $37,400,000 in Q4 2024 and $36,300,000 in Q3 2025. The increase in loss was primarily due to higher energy and depreciation costs, higher operating and interest expense, partially offset by the year-over-year higher revenue. Adjusted EBITDA was $31,200,000, versus negative $4,300,000 in Q4 2024 and positive $39,600,000 in Q3 2025. The sequential decline was primarily driven by higher energy costs and higher operating expenses attributed to salaries and wages for recent additions to our headcount, as well as a number of elevated costs associated with year-end holiday allowance and year-end general corporate activities. To provide a better sense of our G&A expense on a run-rate basis, our Q4 2025 results reflect approximately $3,000,000 of salary, wage, and benefits expense which will largely be recurring, as well as another $6,000,000 to $7,000,000 in consulting, legal, and travel expenses which can vary significantly from quarter to quarter. Net cash used for operating activities was $599,500,000, primarily driven by SealMiner supply chain and manufacturing costs, electricity costs from the mining business, general corporate overhead, and interest expense. Net cash generated from investing activities was $97,900,000, which includes $50,700,000 of capital expenditures relating to data center infrastructure construction, GPU equipment procurement, and tariffs and freight for mining rigs delivered to the data centers, and $150,600,000 of proceeds from the disposal of cryptocurrencies. Net cash generated from financing activities for the quarter $454,500,000, which resulted primarily from $388,500,000 of proceeds from the issuance of convertible senior notes, $168,000,000 in borrowings from a related party, and $141,500,000 of proceeds from shares sold under our ATM and ELOC program, free offset by $171,100,000 of repayments of borrowings. For the full calendar year 2025, capital expenditures for the continued build out of our global power and data center infrastructure totaled $176,000,000. Looking to full year 2026, we anticipate total infrastructure spend in the range of $180,000,000 to $200,000,000 for crypto mining data center construction. Please note that this guidance covers power and crypto mining data center infrastructure only and does not include CapEx for SealMiners and GPU. AI cloud and colocation capital expenditures are also not included. Turning to our balance sheet and financial position. We exited the year with $149,400,000 in cash and cash equivalents, $83,100,000 in cryptocurrencies, held at cost less impairment, $135,600,000 in cryptocurrency receivables held at fair market value, and $1,000,000,000 in borrowings excluding derivative liabilities. Derivative liabilities were $501,100,000, relate to the November 2024, June 2025, and November 2025 convertible senior notes. This represents $171,400,000 reduction compared to the prior quarter, reflecting a noncash fair value adjustment driven by the change in our stock price and settlement for partial principal of November 2024 convertible senior notes. As I mentioned earlier, this does not impact our liquidity or operations. Regarding our outstanding ATM and ELOC facility, we received approximately $143,600,000 in gross proceeds during the quarter. Approximately 6,700,000 additional shares issued. We have exercised disciplined capital allocation throughout the year using the ATM and ELOC opportunistically to support our growth initiative while minimizing dilution. As a final note to our financial update, we wish to note that starting in Q1 2026, we will begin to use GAAP instead of IFRS as our accounting standard. In summary, we are proud of our team's execution this quarter and throughout 2025. I want to express my deep pride what our team has accomplished this year. Established Bitdeer Technologies Group as one of the world's largest publicly listed Bitcoin mining operators by total hash rate under management. Our leadership position in self-mining and our proprietary SealMiner technology provide multiple paths to value creation that few, if any, competitors can match. Our pipeline of developed and contracted power capacity gives us a meaningful competitive edge in serving a variety of customers. The colocation opportunity ahead of us is immense, we are pursuing it proactively. We enter 2026 with strong operational momentum, a differentiated asset base, and a team that has proven its ability to execute at scale. Excited about what lies ahead and remain committed to delivering long-term value for our shareholders. Thank you, Operator. Please open the call for questions. Operator: Thank you. We will now open for questions. As a reminder, to ask a question, you will need to press *11 and wait for your name to be announced. To withdraw your question, please press *11 again. Our first question comes from the line of Nick Giles of B. Securities. Your line is now open. Nick Giles: Yes. Thank you so much, Operator. Good morning, everyone. Haris, really appreciate the comprehensive update, especially on the colocation side. And my first question was just, and I am sure you are speaking to a range of customers, and you know, at this point of negotiations or discussions, what is really the main items that are being discussed? Is it down to price, duration, timing? There is still a lot of work ongoing around design. Just any additional color on where you stand in the process. Haris Basit: It is different with different potential counterparties, and we are all of those things that you mentioned are being discussed, maybe not with the same counterparty, but you know, I hesitate to say too much about these discussions. They are sensitive, and you know, very active at this time. So you know, we feel pretty confident that we are going to get colocation deals done in the near future. Predicting that time frame is going to be hard. And, you know, the discussions are pretty intense with several counterparties. Nick Giles: No. Understood. That is helpful, and just my second question was, we think about financing, you made some important comments there on having a larger share of the economics. But should we be expecting in terms of debt cost of capital and what kind of credit enhancements are you looking at, if any? Haris Basit: Cost of capital for these projects, for the colocation projects, will be very much determined by the counterparties and exact terms of the deal. So I think that that is hard to predict right now until we, you know, announce which of these deals are done with which counterparties. Was that responsive to your question? I am not sure if that is what you were. Nick Giles: Asking. Haris Basit: I mean, that is an important part of any deal. And, you know, it is because it does determine the cost of development to a large extent. And so we are, you know, we are looking at many different approaches here. It is a very important part of getting the deal done right. So it is something that we are focusing on as well. I cannot really say which ones are better or worse. It depends a lot on the counterparty, and it depends on, you know, there is a number of ways to do this. Most of them have been already done in the Marketplace. And know, I do not think you will see anything too dramatically different from those when we announce. Nick Giles: Got it. Understood. Well, again, I appreciate the update, and continue. Best of luck. Jihan Wu: Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Mike Colonnese of H.C. Wainwright & Co. Your line is now open. Mike Colonnese: Today. First one for me on the infrastructure piece. It sounds like you are pretty far along in negotiations for a potential colo deal at the Teadle site. Curious what type of customers you are in discussions with specifically at that campus. And, Haris, if I heard correctly, it sounds like the full retrofit for the 225 megs could be completed by the end of this year. There a PUE you guys are assuming that number? I know it is built with Tier III standards in mind, but any additional color would be helpful there. Haris Basit: Yeah. That is correct. We do expect completion of that Teadle Norway site in at the end of this year and then installation of production GPUs at the beginning of next year. And the PUE at that site is actually very low, which is one of the biggest advantages of that site. It is, you know, it is 100% hydropower. It is a nice cold climate. And there is chilled water available from a nearby lake. So the PUE there, for estimation purposes, is around 1.1. It is dramatically better than most locations. Mike Colonnese: Got it. And then, the typical customer profile for that site specific, I know you are in discussions with the range of customers across the portfolio. I would be just curious with that international facility, the type of customers you are looking at. Haris Basit: Yeah. I mean, there is some difference, but, you know, there is still a lot of overlap with the customers there versus customers in the United States. So but, you know, I really do not want to say too much about who we are talking to and the exact nature of those deals. They are fairly sensitive negotiations at this point. Understood. Understood. And then as it relates to the Bitcoin mining business, you guys are one of the few public miners that continue to rapidly expand your self-mining capacity. How should we think about growth in this business in 2026? Particularly as you look to pursue these AI infrastructure deals across parts of the portfolio? Haris Basit: So one thing to say is that we are long-term believers in Bitcoin. And, of course, Bitcoin is in a little bit of a down cycle right now. But long term, we believe in Bitcoin. And we will continue to invest in our Bitcoin mining capacity. We have not given any projections for what the total hash rate for our company might be by the end of this year or in any future quarter yet. We are still evaluating that and we may project that at a later time. But at this time, we do not have any projections to share publicly for future growth of our hash rate. Mike Colonnese: Got it. Thanks for the color, Haris, and best of luck with these opportunities. Operator: Thank you, Mike. Thank you. One moment for our next question. Our next question comes from the line of Kevin Cassidy of Rosenblatt Securities. Your line is now open. Kevin Cassidy: Yes. Thanks for taking my question. And congratulations on all this capacity you have activated. But maybe along those lines that was asked before, with the lower Bitcoin prices, is there a price where you slow your mining activity because costs are higher versus what the hash price would be? Haris Basit: I am sure there is such a price, so we just have not reached it yet. So you know, our efficiency of our fleet keeps improving. And, so it also, you know, as price goes down, it be the entire fleet. Some parts of the fleet, you know, because of the efficiency and because of the energy price at that location, can continue to operate for quite some, you know, in quite some even further decrease beyond here. And then you will, some of the older machines that have been around for several years, those could be turned off first. Right? In fact, just in our normal upgrade cycle, we will be replacing those. So there is, you know, we have not reached that point now, and I do not anticipate that we will. But, you know, of course, there is such a price. It is just much lower than what we are at now. Kevin Cassidy: Okay. Great. That is good information. I guess as you keep lowering your costs, then you can handle lower Bitcoin prices. But just as another topic, is the GPU-as-a-service, is there a good market for the, say, N minus one GPU clusters rather than spending money on the very leading edge of GPUs? Is there still a need for GPU-as-a-service for the older GPUs? Haris Basit: Yes. There is. We are, though, however, typically pursuing the latest and greatest GPUs. But I mean, we still get demand for, you know, even our oldest H100s that we have in Singapore. Kevin Cassidy: Okay. Great. Thanks. Operator: Thank you. One moment for our next question. Our next question comes from the line of Darren Aftahi of ROTH. Your line is now open. Darren Aftahi: Yes, good morning. Good evening. Thanks for taking my questions. Haris, could you dive a little bit more into sort of the scale and scope of the hires you have made for digital infrastructure towards the end of the year that you spoke to, and then kind of the cadence of continued investment in maybe Q1 and into 2026? I guess, at what point do you feel like you have an adequate team to kind of attack this opportunity? Haris Basit: Yeah. I mean, we are very pleased with some of our recent hires. We have hired people with direct expertise in AI, in cloud services. And a lot of those folks have been in the United States, but also in Asia. The team is, you know, the number of people dedicated to this has grown dramatically. I do not think I have an exact number. But we continue to hire. I do not think we have reached, you know, a place where we think we have enough folks yet. But we are still looking for people, especially on the side of the engineering part of building data centers with still open racks there. So no. I expect that we will continue to hire throughout the year. And a lot of those folks will be in the United States. But, you know, we have also done significant AI hiring in Asia. Darren Aftahi: Got it. And then same question on the Rockdale site is sort of twofold. In terms of land acquisition for that, kind of where are you, and what is the timeline on process? And then I know Oncor is supposed to put another substation in, and I think you guys have spoken to additional capacity there. I think it is in the 100-some plus megawatts. But in light of kind of the seesaw that is going on with ERCOT and decision on batching, just kind of curious about your thoughts about prospects of Rockdale actually growing as a site. Thanks. Haris Basit: The recent, you know, information around ERCOT and power allocation in that region, we do not believe that applies to the growth at Rockdale. So the 179, up to 179 megawatts that we anticipate we could add there, should not be affected by that. And I say it that way because, of course, we do not know what the exact regulations will be. They are just still under discussion. So we do expect that we will get most of that, if not all of that additional capacity. The land acquisition there is moving forward. You know, it is not done until it is done, but we are, we are, yeah. I am not sure how to characterize where we are in that process, but, you know, we are actively pursuing it. And we expect that we will finish it. But until we do, it is hard to say exactly when that is going to happen. Great. Appreciate the insights. Thanks. Operator: Thank you. One moment for our next question. Next question comes from the line of Greg Lewis of BTIG. Your line is now open. Greg Lewis: Hey. Thank you, and good morning. Good open. Hey, I guess first, I mean, on published numbers, I guess you guys are the bitcoin miner of the listed companies by XFASH. So congrats on that. I did want to talk a little bit about the GPU business. You noted about potential expanse. You should a mouthful. The potential expansion in Malaysia. Know, just kind of curious, is that infrastructure that we are building, are we leasing? And then just kind of how should we think about, you know, the rollout of that, I guess, I think you mentioned 15 megawatts in Malaysia for the GPUs. Haris Basit: Yeah. That is infrastructure that we are leasing. I welcome Matt or Jihan to add to that. They want. But what was the second part of your question? How should we think about the rollout of bringing those 15 megawatts online and generating revenue from that? I mean, we have proactively purchased some, I think, the GB200 NVL72 and installed it just recently there. So that is in place right now. In terms of additional machines there, do not think we have made any announcements at present. So that is actually. Greg Lewis: Okay. But it is, but it sounds like it sounds like we could start seeing revenue maybe in the second quarter, and then maybe that scales up sequentially for a couple of quarters? Haris Basit: Yeah. I think, John and Matt are closer to that than I am. So I do not know if, is that a, is that a correct statement that you have? Jihan Wu: I think we will be able to deploy GPUs into those infrastructures at the fourth quarter or third quarter of this year. It depends on when that infrastructure will be ready. We will no tests. It will be ready around June. But, and maybe there will be one or two month delays. So I sent 2024 can be more conservative estimation. Greg Lewis: Okay. Super helpful. Alright. Hey, everybody. Thanks for the time, and have a great day. Jihan Wu: Thank you, Greg. Operator: Thank you. One moment for our next question. Our next question comes from the line of John Todaro of Needham. Your line is now open. John Todaro: Hey, great. Thanks for taking my question and the all the extra hash, bro. I guess, can we just get a bit more color on Clarrington? Like, do you need litigation results before signing an HPC customer there? You view that differently. Maybe any guardrails on timeline there? And then I have a follow-up on the mining piece. Haris Basit: So because it is litigation, we have to be sort of, you know, more careful in what we say here. You know, our attorneys feel very strongly that we have a very good case here, and the litigation has little merit, and we will, you know, prevail here. And on the business side, we are, you know, exploring alternative that can mitigate the impact of the litigation. I do not really want to say a lot more than that. You know, as we said in our scripted remarks, we do anticipate that there will be, you know, some potential delay. But, you know, we are still confident in the site overall. But it is early days, and we, you know, we are looking at some significant alternatives. Jihan Wu: Yeah. I think the alternative, alternative here, we have multiple alternative options. Creating alternative options is to solve those problems. I believe it is very critical solving those problems. And at a company level, Clarrington, Rockdale, and our lower chin size, we would be able to have lots of alternatives. Other than Carrington. This is the company level. And under the Clariton level, we believe we have several solutions. So I do not think that we are really caught at this kind of litigation. John Todaro: Okay. Understood. Thank you for that. And then on the that latest tape out for the Dogecoin and Litecoin mining, do you anticipate mining some of these other assets? Alongside Bitcoin? And maybe I was looking at some of the margin profile. It looks like there is still some margin there. But maybe the opportunity in those as well. Jihan Wu: Well, I think 99% or 98% will still be Bitcoin mining. This autochrome mining operations cannot really be scalable very much due to the market cap. So we count into a very small size operations. But on those, on those capacity, we deploy those manual rates yield out of from those capacity will be significantly improved. So I think it is worth the effort to add some, add some. And then, by the way, this is our first b commanding chip and the manual machines that are designed and manufactured totally depends on our Singapore and the Malaysia office. And the Malaysia operation as well. Malaysia operation, we started to build since last year or earlier. I think that this product, it also means that our supply chain center in Malaysia has been quite mature. So Malaysia and Vietnam, we will have two supply chain center. For companies. Think it is very strategic and important for the resilience of our business in the future. Haris Basit: Understood. That is helpful. Thank you, gentlemen. Appreciate it. Thanks, John. Operator: Thank you. One moment for our next question. Our next question comes from the line of Brett Knoblauch of Cantor Fitzgerald. Your line is now open. Brett Knoblauch: Hi, guys. Thank you for taking my question. Maybe now that we are several weeks into the year, I am curious if you have any insights into what wafer allocation is going to look like this year compared to last year? And on the back of that, with Bitcoin price coming down, network cash staying resilient, hash price going to kind of near all-time lows, does that, you know, more incentivize you guys to use manufacturing capacity for, call it, internal use rather than sell external? Or how should we kind of look at the split between what you guys manufacture for yourselves Versus sell this year? Thank you. Jihan Wu: We cannot tell the exact number or situation with the different allocation, but we have a really good relationships. And even though the we all know that the demand for AI business is huge, several times. Then take them to rehab, but we will get some co coda from additional capacity. And the hash price drops to historically due now recently. And it became very difficult for sending the money works with profit. But we have our own capacities or electricity cost is one of the lowest on the market. And our CapEx, so perhaps combined together, we are the lowest on the market. So our self money definitely became kind of very defensive, very safe strategy for our companies to make sure that even though in this kind of environment, our Bitcoin mining operations will be profitable. So self deployment will be a very important strategy in 2006, especially in the kind of a very bearish marketplace. I think our market share for the Bitcoin mining output will continue to grow. Into something. Haris Basit: Perfect. Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Mike Grondahl of Northland. Your line is now open. Mike Grondahl: Hey, thank you. Hey, Haris, I just wanted to ask, on the November call, there was a significant emphasis on, you know, GPU rental, and that is what Bitdeer Technologies Group wanted to do. And now it seems like you are adjusting that a little bit on some of the larger sites, you know, colocation. Can you just talk about pivot away or why you are seemingly deemphasizing GPU rental at some of those large sites? Haris Basit: Maybe, Jihan, do you want to do that answer first, and then I can chime in if there is still. Jihan Wu: Yes. I as an on the very live site, colocation is kind of very natural and good choice for a company. And for GPU rental, we have a smaller size Washington State and Tennessee State. We can absolutely handle that ourselves. And maybe a larger capacitors for a lot of interest is besides, like, 10 megawatts or 50 megawatts. They want the nitrocytes anyway, and the nitrocytes in before company better to have some coefficient deal. Haris Basit: Do you have another question, Mike? Mike Grondahl: No. So hey. Just so I understand, you have just sort of the larger sites, you will go colocation. The smaller ones, you go GPU rental. I guess that was kinda my takeaway. Is that fair? Haris Basit: Yes. That is correct. Got it. Operator: Okay. Thank you. Thank you. One moment for our next question. Our next question comes from the line Steven Glagola of KBW. Your line is now open. Steven Glagola: Hey, thanks for the question. I have two. First for Haris. I would like to clarify whether Bitdeer Technologies Group’s US AI cloud expansion and potential expansion in Washington and Tennessee is dependent on securing multiyear reserve capacity agreements? And if so, one of those commitments would primarily be for bare metal deployments. That is one. And then second, for Jihan and Matt, you know, it would be helpful to hear your perspective on why USA cloud expansion is strategically attractive at this stage. You know, how do you think about sort of long-term competitive advantages in AI cloud as you broaden beyond your current Asia-centric footprint? Thank you. Haris Basit: So the first part, our expansion of GPU in the United States is dependent on, you know, signing contracts, at least any significant large-scale expansion is. You know, we can speculatively do small expansion in the United States. But as we said in the statement, anything significant would be backed by contracts. Jihan Wu: And we have our own data centers. I think that is very important advantage right now in the US market. Means that under the end of this year, we will be able to deploy the H300 and about rubings with our own data centers. In the United States right now is the center of AI innovation globally. The demand in US market is so much stronger than any other market. And also the US customers also just one. Capacity on US soil. So we have this kind of capacity in US. And we are going to build it, and then we can build it. We will finish it. I think this will be the most important advantage on the market right now. Operator: Thank you. Thank you. I am showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good morning, and welcome to IPG Photonics Corporation Fourth Quarter 2025 Conference Call. Today's call is being recorded and webcast. At this time, I'd like to turn the call over to your host, Eugene Fedotoff, IPG Photonics Corporation Senior Director, Investor Relations, for introductions. Please go ahead with your conference. Thank you, and good morning, everyone. With me today is IPG Photonics Corporation CEO Mark Gitin, and Senior Vice President and CFO, Timothy P.V. Mammen. On today's call, Mark will provide a summary of our fourth quarter and full-year results as well as the overall demand environment, and then walk you through the progress we are making on our long-term strategy. After that, he will turn it over to Tim to provide financial details. Let me remind you that statements made on this call that discuss our expectations or prediction of the future are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause the company's actual results to differ materially from those projected in such forward-looking statements. These risks and uncertainties are detailed in our Form 10-K for the period ended 12/31/2025 and our reports on file with the Securities and Exchange Commission. Any forward-looking statements made on this call are the company's expectations or predictions as of today, 02/12/2026 only, and the company assumes no obligation to publicly release any updates or revisions to any such statements. During this call, we will be referencing certain non-GAAP measures. For more information on how we define these non-GAAP measures, reconciliation to the most directly comparable GAAP measures as well as additional details on our reported results, please refer to the earnings press release, earnings call presentation, and the financial data workbook posted on our Investor Relations website. We will also post these prepared remarks on our website after this call. With that, I will now turn the call over to Mark. Mark Gitin: Thanks, Eugene, and good morning, everybody. Fourth quarter revenue came in above our expectations, increasing 17% year over year and 9% sequentially. Revenue growth was driven by further stabilization in industrial demand, new opportunities, and a disciplined focus on our growth initiatives. This focus led to strong results in medical and advanced applications this quarter. Materials processing revenue was up 6% sequentially and 17% year over year, driven by stable general industrial demand and increased demand in battery and additive manufacturing applications. Sequentially, welding revenue was stable while demand for cutting applications increased. Cleaning was another strong performer, and we are starting to see increased revenue synergies with the Clean Laser acquisition. Medical sales had a solid finish to 2025, increasing sequentially and year over year as new products gained traction. We also saw strong sequential and year over year growth in semiconductor applications, which drove higher revenue in advanced applications. Turning to full-year results, revenue grew 3%, our first full-year revenue growth since 2021. Materials processing sales were flat with lower cutting sales being fully offset by growth in other materials processing applications including cleaning and additive manufacturing. Our welding revenue was flat as lower demand in the general and traditional automotive markets was offset by higher demand in battery manufacturing. In particular, we saw a strong increase in sales of our welding products in Asia as battery investments rebounded in China. Demand is shifting from electric vehicles to stationary storage, which is a positive shift for IPG Photonics Corporation as stationary storage batteries often require more sophisticated welding process. In addition, we are beginning to see increased demand for our solutions and process expertise in battery manufacturing for consumer and medical devices. In 2025, we made meaningful progress expanding our business beyond materials processing applications. The portion of our business outside of materials processing accounted for approximately 14% of our total revenue and contributed strongly to our growth this year with micromachining, medical, and advanced applications all increasing by double digits. Turning to medical, sales grew by 21% to a new record level in 2025 as we benefited from a new customer win that became a major contributor to our revenue growth. In the past year, we also received FDA clearance for our next-generation urology system with our proprietary StoneSense and advanced modulation technologies. These solutions enable the surgeon to differentiate between kidney stones and soft tissue, improving precision and control during procedures. We started shipping this product in the fourth quarter. Our solutions are delivering clinically meaningful outcomes, and we continue to make advances with our innovation roadmap, with additional new product introductions planned in 2026. We also see the opportunity to continue growing medical sales through share gain and new product innovation coupled with an ability to increase recurring revenue through the sales of consumable delivery fibers. In 2025, we took an important step forward in directed energy by rolling out our first complete standalone system for defense applications. We developed, tested, and introduced Crossbow, a scalable and cost-effective laser defense system that can neutralize the threat of smaller group one and group two drones. In support of this initiative, we have established IPG Defense to drive product development and customer engagement, and we have recently opened a new office and manufacturing facility in Huntsville, Alabama. Overall, 2025 was a positive year for IPG Photonics Corporation, affirming that our strategic approach is working. We are seeing sales growth increasingly driven by high-value applications where differentiation and technical capability are critical to addressing complex customer challenges. Looking ahead to 2026, strong bookings in Q4 resulted in book-to-bill firmly above one on strong revenue, signaling improving market conditions and strengthening customer demand. While we are encouraged by these trends, we remain cautiously optimistic as we recognize that macroeconomic uncertainty persists. We continue to make progress with our growth strategy, with notable improvements across medical, micromachining, and advanced applications, which have been key investment priorities for the company. We expect this momentum to continue into 2026. The progress that we are reporting today reflects disciplined execution, a sharper focus, and a stronger alignment with our growth priorities. Over the past two years, we have strategically positioned the company to capitalize on the growth opportunities we see before us. The organization is evolving towards a team-led operating model that aims to preserve our entrepreneurial spirit while instilling the discipline and operating rigor required to scale effectively. We have made tremendous progress streamlining operations, strengthening decision-making, and accelerating product development, and these efforts have translated into better performance and a greater consistency across the business. While there is still more work to be done, I am encouraged by our progress and confident in our ability to make further advances in pursuit of growth objectives. We view our growth opportunities across two primary categories. First, we are strengthening our position in core industrial applications. Second, we are penetrating new nonindustrial applications in markets where laser-based solutions offer clear cost benefits and superior outcomes relative to incumbent approaches. Together, these areas allow us to expand existing laser use cases, create new laser applications, and extend our reach into new high-growth applications such as medical, micromachining, and directed energy. These are exciting opportunities with great potential to significantly expand our addressable market and support long-term growth. Within industrial applications, we are growing through new business and accelerating the adoption of lasers in large markets, displacing incumbent technology. By combining our laser technology with deep applications expertise, we are helping customers address complex challenges where precision and efficiency matter most. This requires the innovation to offer superior and differentiated products as well as the commercial acumen to provide outstanding customer service. We are also moving up the value chain by integrating our fiber lasers into differentiated systems and subsystems. This world-class laser applications capability enables us to address our customers' most challenging problems and deepen our long-term partnerships by expanding the value we deliver beyond the laser itself. A good example of this approach is cleaning, where we have successfully converted applications from chemicals and abrasives to laser-based solutions. The Clean Laser acquisition, which completed its full year with us in 02/2025, has helped our growth in this area by providing safe, effective, and environmentally friendly solutions that are truly differentiated from incumbent technologies. Our integration of Clean Laser went very well with actual performance exceeding our expectations. We have also generated revenue synergies by leveraging our scale to reach large customers, and we continue to identify new opportunities for our comprehensive laser cleaning solutions. Beyond industrial solutions, we are building on the success we achieved in 2025 discussed earlier in the call. Growth in these areas requires differentiated capabilities and applications expertise to address customer challenges, leveraging our laser technology and deep materials knowledge to create solutions that deliver results with precision and accuracy. Innovation remains a core focus for IPG Photonics Corporation with continued emphasis on product performance, lowering cost of ownership, and delivering the service and application support that customers value. This strength is gaining increased recognition from both our customers and the broader photonics community. In that context, I am pleased to share that IPG Photonics Corporation received a prestigious Prism Award in the lasers category for our new 8-kilowatt single-mode laser at the awards ceremony held last month during the 2026 SPIE Photonics West exhibition in San Francisco. Often referred to as the Oscars of Photonics, the SPIE Prism Awards recognize innovative optics and photonics products that bring transformative technologies to market, with the winners selected by an international panel of academic, government, and industry experts. This honor further reinforces IPG Photonics Corporation's position as a global leader in fiber laser innovation and single-mode technology. Throughout the exhibition, thought leaders from IPG Photonics Corporation presented on multiple laser technologies and industry topics. One such presentation highlighted a major technological milestone in the ultraviolet spectrum with a successful demonstration of a compact 148-nanometer vacuum ultraviolet BUV laser source based on our proprietary crystal materials technology. This breakthrough has the potential to enable new opportunities in nuclear clocks, quantum computing, metrology, and other advanced applications. In summary, the team delivered solid performance in 2025, driving growth while meeting the needs of our customers. We have made significant progress on our strategic objectives and entered 2026 focused on continued growth through innovation and disciplined execution. With that, I will now turn the call over to Tim. Thank you, Mark, and good morning, everyone. Timothy P.V. Mammen: My comments will generally follow the earnings call presentation which is available on our Investor Relations website. I will start with revenue trends by application on slide four. Revenue from materials processing increased 17% year over year in the quarter, driven by higher sales in welding, marking, cleaning, and additive manufacturing applications, partially offset by lower sales in micromachining, which was impacted by the timing of customer orders. Cutting revenue was slightly lower year over year but improved sequentially and was generally in line with the stable revenue we have seen over the last four quarters. Revenue from applications other than materials processing increased by 15%, driven by higher sales in medical and advanced applications. Sales of our emerging growth products increased sequentially and year over year and accounted for 54% of total sales on higher revenue in the quarter, up from 52% in the prior quarter and matching our record high achieved in the second quarter. Moving to the revenue performance by region on slide five. Sales in North America increased by 21% sequentially and 23% year over year, driven by higher revenue in cutting, cleaning, medical, and advanced applications. Sales in Europe increased 8% sequentially and 7% year over year, driven by higher revenue in additive manufacturing as well as cleaning, which saw strong growth resulting from the acquisition of Clean Laser. This growth was partially offset by decreased sales in cutting and welding applications. Revenue in Asia continued to improve and increased 5% sequentially and 19% year over year, driven by higher welding sales in China due to strong demand and new business in battery applications. Revenue in Japan was relatively stable year over year but improved sequentially. Moving to the financial performance review on slide six. Revenue was above our expectations at $274 million, up 9% sequentially and 17% on a year over year basis. Foreign currency increased revenue by approximately $6 million, or 2% this quarter compared to the same period in the prior year. We saw very strong customer order activity at the end of the year and were able to respond quickly and ship in the quarter to satisfy this increased demand. GAAP gross margin was 36.1%, and adjusted gross margin was 37.6%. Excluding accelerated depreciation on a long-lived asset and amortization expense, adjusted gross margin came in at the midpoint of our guidance range, but below what we would normally expect at this level of revenue primarily due to planned inventory management that drove lower absorption of fixed costs. You may recall that third quarter gross margin benefited from higher fixed-cost absorption as we increased inventory. The impact of tariffs remained a headwind, reducing gross margin by 200 basis points year over year, which was 50 basis points higher than our expectations due to the timing of recognizing tariff expenses. We continue to work on ways to offset their impact, including cost reductions and pricing initiatives. The tariff impact will likely persist in 2026 or be at a slightly moderated level. Year over year, the decrease in gross margin was driven by higher product costs and tariffs, partially offset by lower inventory provisions. Excluding approximately $4 million in one-time costs, operating expenses remained stable on a sequential basis but increased on a year over year basis due to investments we are making to support our strategy and strengthen our organization. GAAP operating income was $3 million, and our adjusted EBITDA was $41 million for the fourth quarter, above the top end of our guidance. GAAP net income was $13 million, or $0.31 per diluted share. Adjusted net income was $20 million, with earnings per diluted share of $0.46. Moving to a summary of our balance sheet and cash flow on slide seven. We ended the quarter with $839 million in cash, cash equivalents, and short-term investments, $77 million in long-term investments, and no debt. During the fourth quarter, we spent $18 million on capital expenditures and $4 million on repurchasing IPG Photonics Corporation shares, supporting our balanced capital allocation framework of investing in growth and returning cash to shareholders. As expected, our cash flow from operations improved significantly in the second half of the year, driving positive free cash flow in the fourth quarter. Our 2025 capital expenditures came in well below our initial expectations due to the timing of expenditures for our major fiber manufacturing facility investment in Germany, which moved approximately $50 million into 2026. As a result, we now expect CapEx to be $90 million to $100 million this year. Excluding the amount delayed into 2026, underlying CapEx is about 5% of revenue, and we expect to maintain this level going forward. While maintaining a strong balance sheet, we have continued returning capital to shareholders with our ongoing stock repurchases. We repurchased shares for a total of over $4 million in the fourth quarter and $53 million in 2025. We have returned over $1 billion to shareholders via share repurchases in the last four years. To enable us to continue with our balanced capital allocation strategy, the board has authorized a new $100 million share repurchase program, and we plan to continue repurchasing shares opportunistically. Moving to our outlook on slide eight. Orders remain strong with book-to-bill above one. However, it should be noted that some of the bookings we received in the fourth quarter include medical and systems orders that are scheduled to ship beyond the first quarter. For the first quarter of 2026, we expect revenue of $235 million to $265 million with some typical seasonality impacting revenue. We expect adjusted gross margin between 37% and 39%, including a potential impact from tariffs of about 150 basis points. We estimate operating expenses in the range of $90 million to $92 million in the first quarter and anticipate that these expenses will increase moderately during the year as we see opportunities to further accelerate our key growth initiatives. For the first quarter, we expect to deliver adjusted earnings per diluted share in the range of $0.10 to $0.40 with approximately 42.5 million diluted common shares outstanding. Our adjusted EBITDA is expected to be between $25 million and $40 million. In summary, we are pleased to report such strong sales in the fourth quarter. Although margin improvement deviated from the expected trend due to under-absorption of fixed costs and the impact of tariffs, product margin remained stable, and we continue to believe that we have significant operating leverage in our model. We continue to invest for the future, and our strong balance sheet positions us well to navigate a dynamic operating environment. I will now turn the call back over to Mark. Mark Gitin: Thanks, Tim. In closing, we are pleased with the progress we made in 2025, encouraged by the early results of our strategic initiatives as well as the scale of the longer-term opportunity ahead. We remain confident in our ability to generate robust revenue growth with our differentiated solutions, which have continued to drive demand even in a subdued industrial environment. As general industrial activity recovers, this puts us in a good position to outgrow the market. Our market leadership, deep applications expertise, and ability to deliver complete solutions enable us to accelerate laser adoption, supplant incumbent technologies, and expand our addressable market. Growth initiatives in medical, micromachining, and defense are already showing meaningful progress in driving incremental growth. While we are cautiously optimistic about the demand environment in 2026, we are continuing to transform the company to create long-term value for our customers and shareholders. With that, we will be happy to take your questions. Thank you. At this time, we will be conducting a question-and-answer session. If you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to lift your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Ruben Roy with Stifel. Your line is now live. Thank you. Hi, Mark and Tim. Mark, thanks, and nice to see, by the way, the return to growth on a full-year basis. So great to see the hard work paying off here. Mark, thanks for the overview on the strategic update, and your kind of comments just now on sort of how to think about, you know, longer how you are thinking about the strategy. I guess, first question, since we are entering a new fiscal year and I am looking at some of the segment detail, if we look at cutting, for instance, we are down below 20% of revenue now. And I am wondering, when you look at some of these sort of core markets, relative to your areas of investment, how are you thinking about where cutting is? Do you think that we are stable at the current level, or you think there could be some further downside there that might offset some of the new growth businesses? And I guess the point of the question, longer term is if we could start to think about, you know, targets for growth for the areas that you are investing in from a, I do not know, two, three-year perspective, you know, sort of how you are thinking about the TAM opportunity and longer-term growth? Mark Gitin: Ruben, nice to hear from you. So let me start with your questions about cutting. So first of all, if you look at our revenue now for the last several quarters, cutting has been quite stable. Actually, it has been pointing up in the last quarter. We have core OEMs. Those core OEMs, their inventories have now stabilized, and they see the benefit that we bring not only in the laser. Remember that we brought out our RI integrated platform last year, higher power, smaller form factor, lower cost. That has really helped in that market as well. So we have seen that piece stabilize, and then that has allowed us to also see growth in the other parts of the industrial market, and so that is still pointing up for us. The industrial, we are continuing to invest in those core markets, cutting as well as, if you look at areas like additive manufacturing, welding, those are core markets for us as well that are growing. And then you asked about the other areas that we are making investments. We have talked about core investments in medical and micromachining, areas like directed energy. Those are addressing new TAM for us that is several billion dollars. And what we have said to date is that we expect to see growth in that area of hundreds of millions of dollars over the next several years. Ruben Roy: Yes. That is helpful. And I guess if I could just follow up on that point. Mark, given the directed energy investment in the facility in Huntsville, has anything changed in terms of, I mean, you have gotten acceptance, and it is great to see the system solution Crossbow out there. How would you assess that opportunity from here? Are you getting more interest now that you are out in the marketplace? It sounds like you would be given the investment in Huntsville. But any update on sort of how you are thinking about that market, if that has changed your view on that market over the last, you know, few months. Thank you. Mark Gitin: Absolutely. So thanks very much, Ruben. So let me just review for a moment that Crossbow is a product for us. It is a full system with all the pieces that can stand on its own, for both military and civilian type applications. You have seen the recent issues at airports especially. The system itself, again, we have been targeting the group one and group two, the smaller class drones. We brought the product out in the fall. So this was released first at the DSEI show in London and then followed on at the AUSA show in Washington, DC. And actually, we had it at the Singapore Airshow just about a week or so ago. We have had very, very good customer interest in that area because of the key differentiation that we bring. Again, this is based upon our single-mode, high-power lasers that we make in volume for industrial applications, along with the surrounding photonics components that we make in volume and systems. So we can really do this at scale. So this offers the customer really disruptive cost, volume, quality, and, you know, it is a commercial product with a part number. So this is getting very good interest, and we are, you know, we have great customer lists now, and we are working to convert that interest into orders. Ruben Roy: That is great. Thank you. Just a quick follow-up. Thanks for that, Mark. Quick follow-up for Tim then to finish off here. Tim, on the margin commentary, and I get the leverage, excited about the leverage, but you have got the tariff impact. It sounds like that is going to persist through the year. Is there a way to think about sort of revenue levels that would be required to absorb the fixed cost to get back to the sort of longer-term targets on the margin side? So let us say, lower end of that target, 45%? Timothy P.V. Mammen: Yeah. I think I would, I will let, on this Q4 results, right, we called out that the under-absorption really impacted gross margin by 150 basis points. So if you take the 37.5% that we reported, you add back the 150 to 200 basis points, you are actually close to 40% at that point on $270-odd million of revenue. That is with the 200 basis-point tariff headwind overall. Our guidance estimates that the tariff headwind will be more moderate in Q1 at about 150 basis points, so more in line with what we had in Q2 or Q3. And so, revenue improving beyond this level should continue to drive improvement in that absorption and get gross margins above the 40% level. It is clearly a target that we have got out there and want to do that. We are also looking at how to optimize operations even at more moderate revenue levels. Right? There is a little bit of a task that that takes, but we want to really drive some more operating efficiency even below $300 million during the course of this year, and I hope we will report progress on that. I think the other benefits that are still not coming through fully are that we have got product cost reductions still ongoing. So Mark mentioned the RI, the rack unit, the rack unit for the cutting market. We are going to start rolling out the higher-power diodes across a much broader swath of the product line, and that should help with the cost reduction initiatives on the products and drive improved product gross margin. There are other cost reduction initiatives as well around the BOM that we are working on too. And then you have got some, you know, pricing initiatives too where you are trying to offset some of the tariff impacts. So, overall, I think we are making good progress even though gross margin was a little bit light for the revenue level we reported in Q4. But we are pretty confident about the direction that we can take at the moment on this. Ruben Roy: Right. Ruben Roy: Very helpful. Thank you. Operator: Our next question comes from James Ricchiuti with Needham & Company. Your line is now live. Hi, thank you. So good morning. Just given the early traction with Crossbow, I am wondering any plans to step up investment in directed energy applications, particularly with the facility that you have now, or possibly extend the Crossbow product offering? Mark Gitin: Hey, Jim. Thanks for the question. So what I can tell you is that what we have launched to date is what we call the Crossbow Mini. So that is a 3-kilowatt-based system for, you know, kind of the shorter range. Again, this is for group one and group two drones. We do have a roadmap that will increase the power level of that. We have talked about 6- to 8-kilowatt kind of product also on our roadmap. We are not heading towards the, you know, megawatt-type systems. We are not doing government contracting. This is really about a commercial product that we can deliver in volume, really targeting the smaller class drones. We are excited about it. James Ricchiuti: Got it. And, Mark, maybe sticking with the new product focus, what are your expectations around the new medical product in 2026? Mark Gitin: Yeah. No. Thanks for that question. So just to review medical, you know, we have developed a new roadmap for that. It is one of the key areas that we are investing in. We talked about the product that we got FDA clearance on in Q3 and then launched in Q4. So this was a new product in urology that has what we call StoneSense as part of it, so we can tell the difference between stone and soft tissue. That was the first of the roadmap. And I just want to remind you also that we also in the last year picked up a new major customer. So that combination, expect to give us growth into 2026. And I will say also that in 2026 we will be launching additional products in that roadmap. And that roadmap continues on for the next couple of years. And what we have said is that over the next year we expect the business to double or triple. James Ricchiuti: And just one quick final question for me. You sound like you are encouraged by what you are seeing with Clean Laser. I am just wondering if there is a maybe a greater appetite on pursuing other inorganic opportunities and, just given the strength of the balance sheet, and if so, maybe what areas might be of interest? Mark Gitin: Yeah. No. Happy to talk about that, Jim. So, you know, first, let me just talk about it in terms of capital allocation. So as I look at capital allocation, first and foremost for us is investing in our organic growth, as we have a fantastic set of roadmaps and technologies that we are pursuing there. And next, from an M&A standpoint, it is really around tuck-in acquisitions, and Clean Laser was a great example, where we can augment adjacent markets and get to some areas faster. And Clean Laser, just to dig into that for a moment, that has gone really well for the company, and it is integrated very well, and we have very good combined roadmaps going forward, and it did better than our targets initially. So, again, just to say the areas that we are looking at—and we are actively looking at M&A opportunities—again, in the tuck-in size, we have talked about it as being in the revenue range of $50 million to $200 million in revenue, and again, areas that can really allow us to accelerate in some of the markets we are going after, technologies, those areas. So really, that kind of tuck-in type. James Ricchiuti: Got it. Thank you, and congratulations on the quarter. Timothy P.V. Mammen: Thanks. Operator: One moment please while we poll for questions. Our next question comes from Scott Graham with Seaport Research Partners. Your line is now live. Hey, good morning and congratulations on the quarter and outlook. I wanted to maybe understand welding, the improvements in welding sales a little bit more. You mentioned battery, and I am just wondering, is that all storage, or is there some EV in there as well? And then what other drivers did welding benefit from this quarter? Mark Gitin: Yes. Thanks very much, Scott. So, yeah, welding has been an important area for us, and, you know, batteries you pointed out are drivers for that area. EV is one of them, and just from a driver standpoint, electric vehicles have seen 20% year-over-year growth, and also then stationary storage, as you mentioned, is an accelerating area as well. That has seen growth of about 50% year over year. So those are the base drivers. We have very differentiated technology that applies to the whole area of batteries. We have specialized lasers plus the monitoring of the beam and the weld monitoring that is in situ combined with beam delivery and the process. So it is very important to that battery area, and it is important both in EV, the higher end of EV, and stationary storage. It especially becomes important as you have higher currents and thicker busbars. Our technology is even more important there. And I should say battery for us goes beyond those as well. We also have important areas in consumer batteries as well as specialized areas like medical batteries. And it encompasses the areas that I told you, including areas like foil cutting and specialized welding, cleaning. All of those are key areas for us that apply to the battery process. Scott Graham: Great. Thanks a lot for that. And then the other question was simply around Huntsville. Could you kind of tell us a little bit more about that? Will it only be for, you know, the directed energy, or is there an opportunity to add some other product manufacturing there? Mark Gitin: Yeah. Thanks, Scott. So just to point out, it is a small site in Huntsville. Huntsville is a very important area for a couple of reasons. One, because of the personnel available in that area, but also it is an area that has cleared airspace, so we can do the testing there. So that is an important piece of that. First and foremost, it is around the R&D and small-scale production for the directed energy, but it also gives us a footprint in that region to apply some of our industrial technologies to that growing region as well, as Huntsville area is a growing area for industrial for some of the military and defense arena. Operator: Thank you. Our next question comes from Rodney McMullen with Northcoast Research. Your line is now live. Rodney McMullen: Hey, guys. Thanks for taking the question. I am on today for Keith Housum. I was just wondering if you could maybe provide some updates on the competitive environment, especially in Asia. I am wondering if you are seeing any pricing pressures start to seep out of cutting and into more advanced applications? Thanks. Mark Gitin: Yeah. Thanks for the question. So in Asia, really in China, cutting is a very small part of our business. It is in a couple-percent kind of range. The biggest areas that we are operating in that area are areas where we are highly differentiated. So, you know, we have talked about the battery area, additive manufacturing, some of the micromachining areas. So those are areas where we have key differentiation, and so our pricing is able to hold up in those areas. Rodney McMullen: Understood. And then just a quick follow-up to Scott's question. As you are seeing a shift more from EVs to stationary storage, is that margin accretive? I mean, do you guys see higher volumes of those devices just because, you know, these storage devices are larger? Just any color you could provide there would be great. Thanks. Mark Gitin: Yeah. So the way I would look at it is we are applying our technology across that area. The battery factories are making batteries for EV and for stationary storage. The stationary storage ones tend to be on the higher end because capacities are higher, currents are higher. But they are similar to the higher end of EVs. Our technology is applied really across that area. And again, it is that differentiation that we provide with the combination of the very specific laser beam type plus the monitoring of actually being able to see in situ if the weld is good or not combined with the beam delivery and the process as well. That provides something that is highly differentiated. And it is important because it means that they can see quality control. They can tell whether you are over-penetrated or under-penetrated in the welds, and that has to do with quality, reliability, as well as safety. So all of those pieces point to how we have a key place in that area, and as you mentioned, that higher end, it is even more important because the higher currents have thicker bus bars in the batteries, and that is true in the stationary storage as well as the higher end of EV. And that is an even bigger driver towards our solutions. Rodney McMullen: Got it. Understood. I will turn it back. Thanks, guys. Operator: Our next question comes from James Ricchiuti with Needham & Company. Your line is now live. James Ricchiuti: Tim, I was wondering if you can give us any additional color on the bookings that you saw by region. Any variability? It sounds like the overall order activity was pretty healthy. Timothy P.V. Mammen: Yeah. It was pretty broad-based. I mean, having come in with kind of a number you would expect it to be. North America was very good on the back of medical and systems orders, so it was really good to see that pick up on the system side. Europe actually performed a bit better. I would say it is still a little bit of a weaker region, but we actually had a very good set of orders there. There were also some good systems orders, particularly on the cleaning division with Clean Laser. There was actually a big order that came in from a major customer that we may not have won had Clean Laser not been part of IPG Photonics Corporation. So that was a very important part of some of the synergies that are being realized out of that acquisition. And then Asia was strong—Japan, China, Korea had a good quarter. So it was pretty broad-based, Jim. I would say Europe is just a little bit, it is starting to show some improvement, but it is a little bit weaker than some of the other areas still. I think that is reflected even in the PMI data where it has improved but is still a little bit behind North America, China, and Japan. James Ricchiuti: Got it. And, Mark, you mentioned, at least in the presentation, you highlighted demand related to semiconductor. Remind us of your exposure there. How are you thinking about the growth there in 2026 just given the investment that we are hearing about across the semiconductor sector. Mark Gitin: Yeah, thanks, Jim. So the places that we play there, it is really in the lithography, metrology, and inspection part of the segment. And we have new products that we have been developing that are now aligning well with roadmaps in those areas, and we have really focused on improving not only performance but quality in that area. And that has really helped with our engagements there. It is a relatively small area for us today, but it is an area where we have very good engagements. And it really shows the differentiation that we have in these core technologies across the company that allow us to insert in those roadmaps. Because as you know, those roadmaps, you need the combination of very, very good and high-performance technology at the front edge, but you also have to have the quality and the ability to produce these things in volume where every unit has to be the same. So it is a very good mark for us to see that growing. Operator: Thank you. As a reminder, if you would like to ask a question, please press 1 on your telephone keypad. One moment please while we poll for questions. Our next question comes from Scott Graham with Seaport Research Partners. Please proceed with your question. Yes, hi. Thanks for taking my follow-up here. I was wondering, you talk freely about micromachining and additive manufacturing. Can you just maybe remind us what is in those areas, what the applications or the end markets are, or both, to just provide a little more clarity there? Thank you. Mark Gitin: Sure. Let me start with additive, Scott. Additive manufacturing, just to remind you, that is sintering of powdered metal. So the laser actually creates, where a printer would create a dot or a line, here you create what is called a voxel. So it is a volume element that is created, and then you build up the part. And so that is important for a number of reasons. You can actually produce things that cannot be machined with traditional methods. So that is important. And some of the materials are also important. And I have to say that this is an area where we are highly differentiated. We have a key piece of that market because the lasers have to be single-mode, they have to have very high performance, and they have to have low noise, and they have to have very high reliability. And these are all pieces that are important there. And we work together with these companies on the roadmaps, and we have key next-generation products that also allow them to go significantly faster. And so from a market side, these are actually covering now, it is an area that has been growing, and it is covering areas that go from aerospace all the way to consumer-type devices where they are able to make parts, again, that would be very hard to machine. And they are making parts in a wide range of materials from titanium to things like copper. So our lasers play across each of those. And again, the market drivers are relatively broad, and we have seen that area growing, and we have had good growth in that area throughout 2025, and again, indicators are good now. And then you asked about micromachining. When we talk about micromachining, that is really talking about very precision cutting, drilling, material removal. That plays a lot into areas like microelectronics where being able to make small changes in the materials are important, in displays, in things like multilayer circuits being able to interconnect from layer to layer. These are areas that are important—areas like solar cells where you need to make interconnection from layer to layer or machine away small windows that improve the performance of the cells. So think about, you know, very small, on the micron level, holes or ablation removal, cutting, very micro welding. Those are all areas that we would classify in the range of micromachining. Scott Graham: Thanks very much. Operator: We have reached the end of the question and answer session. At this time, I would like to turn the call back over to Eugene Fedotoff for closing comments. Eugene Fedotoff: Thank you for joining us this morning and your continued interest in IPG Photonics Corporation. We will be participating in several investor events this quarter and are looking forward to speaking with you again soon. Have a great day, everyone. Operator: This concludes today's conference. Operator: You may disconnect your lines at this time, and we thank you for your participation.
Operator: Greetings, and welcome to STAG Industrial, Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Xiarhos, Vice President, Investor Relations. Thank you, sir. You may begin. Thank you. Steve Xiarhos: Welcome to STAG Industrial, Inc.'s conference call covering the fourth quarter 2025 results. In addition to the press release distributed yesterday, we have posted an unaudited quarterly supplemental information presentation on the company's website at stagindustrial.com under the Investor Relations section. On today's call, the company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties, and may cause actual results to differ from those discussed today. Examples of forward-looking statements include forecasts for FFO, same-store NOI, G&A, acquisition and disposition volumes, retention rates and other guidance, leasing prospects, rent collections, industry and economic trends, and other matters. We encourage all listeners to review the more detailed discussion related to these forward-looking statements contained in the company's filings with the SEC and the definitions and reconciliations of non-GAAP measures contained in the supplemental information package available on the company's website. As a reminder, forward-looking statements represent management's estimates as of today. STAG Industrial, Inc. assumes no obligation to update any forward-looking statements. On today's call, you will hear from William R. Crooker, our Chief Executive Officer, and Matts S. Pinard, our Chief Financial Officer. Also here with us today are Michael Christopher Chase, our Chief Investment Officer, and Steven Kimball, our Chief Operating Officer. They are available to answer questions specific to their areas of focus. I will now turn the call over to William R. Crooker. Thank you, Steve. Good morning, everybody, and welcome to the fourth quarter earnings call for STAG Industrial, Inc. We are pleased to have you join us and look forward to discussing the fourth quarter and full-year 2025 results. We will also provide our initial 2026 guidance. As I look back on 2025, it was arguably one of our more successful years. Operator: We outperformed almost all of our budgeted metrics, including occupancy, Steve Xiarhos: credit loss, leasing spreads, same-store cash NOI, development starts, and core FFO. We grew same-store cash NOI by 4.3% and grew core FFO per share by 6.3%. This growth was supported by an improved industrial supply backdrop with deliveries down almost 35% versus 2024. Most of the markets we operate in remain healthy from both a supply and demand standpoint, with positive rent growth across almost all of our markets. While many business leaders remain optimistic, we are seeing increased tenant activity across our markets. Economic growth has begun to improve, and meaningful investment has followed. William R. Crooker: We expect 180,000,000 square feet of deliveries or less this year, much of which will be driven by build-to-suit transactions. We anticipate that net absorption will improve in 2026, contributing to another year of positive rent growth across our markets. We expect national vacancy rates to peak in the first half of this year with an inflection point in the back half of 2026. 2025 was a high watermark for leasing volume at STAG. We expect 2026 to follow suit driven by a record amount of square footage expiring in a calendar year for our company. I am pleased to report that we have addressed 69% of the operating portfolio square feet we expect to lease in 2026. We project cash leasing spreads of 18% to 20% for 2026. This leasing success is a testament to the quality of our portfolio and a welcome sign of tenant engagement and commitment to their space. Q4 was the most active transaction quarter of 2025. This was due in part to less macro volatility which brought sellers to the market in the second half of the year. Acquisition volume for the fourth quarter totaled $285,900,000. This consisted of seven buildings, with cash, straight-line cap rates of 6.47%, respectively. These buildings are 97% leased to strong credits with weighted average rental escalators of 3.5%. Subsequent to quarter end, we acquired one building for $80,600,000 with a 6.1% cash cap rate. This is a Class A building leased to a strong credit for twelve years. In terms of our development platform, we have 3,500,000 square feet of development activity or recent completions across 14 buildings as of the end of Q4. 59% of 3,500,000 square feet are completed developments. These completed developments are 73% leased as of December 31. In the fourth quarter, we commenced a new development that was identified within our existing portfolio by our operations team. The 186,000 square foot project is located southwest of Kansas City in Lenexa, Kansas. The project has an estimated delivery date of Q1 2027. The building will have the flexibility to demise into suites of 60,000 square feet or less in a market with healthy fundamentals. We are projecting a cash yield of 7.2% on this project. Subsequent to quarter end, we executed a 78,000 square foot lease in one of our Charlotte development projects to a manufacturing and assembly company. The building is now 39% leased. We initially underwrote fully stabilizing the building in the first quarter 2027. Before I turn it over to Matts, I am pleased to say that after year end, we raised our dividend 4%, which is the largest raise we have had since 2014. This raise is a result of many years of reducing our payout ratio and retaining as much free cash flow as possible. In addition to raising our dividend, we have modified the dividend payment cadence from monthly to quarterly going forward. With that, I will turn it over to Matts who will cover our remaining results and guidance for 2026. Steve Xiarhos: Thank you, Bill, and good morning, everyone. William R. Crooker: Core FFO per share was $0.66 for the quarter, Steve Xiarhos: and $2.55 for the year, representing an increase of 6.3% as compared to 2024. Included in core FFO for the quarter are two one-time items that contributed approximately Matts S. Pinard: $0.10 to core FFO per share. During the quarter, we commenced 31 leases totaling 3,000,000 square feet which generate cash and straight-line leasing spreads of 16.3% and 27.4%, respectively. This leasing activity included five fixed-rate renewal options totaling 882,000 square feet, most of any quarter in 2025. Excluding these five fixed-rate leases, fourth quarter cash leasing spreads would have been 20%, an increase of 570 basis points. For the year, we achieved cash and straight-line leasing spreads of 24% and 38.2%, respectively. Same-store cash NOI growth was 5.4% for the quarter, and 4.3% for the year. We incurred 22 basis points of cash credit loss in 2025. Retention was 75.8% for the quarter and 77.2% for the year. As mentioned by Bill, we have accomplished 69% of the square feet we currently expect to lease in 2026, achieving 20% cash leasing spreads. Moving to capital market activity, on December 8, the company settled $157,400,000 of proceeds related to forward ATM sales that occurred throughout 2025. Net debt to annualized run-rate adjusted EBITDA was 5.0x at year end with liquidity of $750,000,000. 2026 guidance can be found on Page 20 of our supplemental package, which is available in the Investor Relations section of our website. Same-store cash NOI growth is expected to range between 2.75% and 3.25%. The components of our same-store cash NOI guidance include the following: retention to range between 70% and 80%; cash leasing spreads of 18% to 20%; average same-store occupancy for 2026 is expected to be between 96% and 97%. In consistent with previous years, 50 basis points of credit loss is included in our initial cash same-store guidance. Acquisition volume guidance is a range of $350,000,000 to $650,000,000 with a cash capitalization rate between 6.25% and 6.75%. Acquisition timing will be more heavily weighted to the back end of the year. Disposition volume guidance is between $100,000,000 and $200,000,000. G&A is expected to be between $53,000,000 and $56,000,000. Finally, the increase in interest expense from our recent refinancing of our $300,000,000 term loan will be a $0.03 headwind to core FFO per share growth in 2026. Incorporating these components, we are initiating a core FFO per share range between $2.60 and $2.64 per share. I will now turn it back over to Bill. Thank you, Matts. William R. Crooker: And thank you to our team for their continued hard work and outperformance of our 2025 goals. We are excited about the opportunities that are in front of us here at STAG Industrial, Inc., and we look forward to building off this momentum in 2026. We will now turn it back to the operator for questions. Operator: Thank you. We will now be conducting a question and answer session. 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 your handset before pressing the star key. We ask that analysts limit themselves to one question and a follow-up so that other analysts have an opportunity to do so as well. One moment, please, while we poll for questions. Our first question comes from Craig Allen Mailman with Citi. Please proceed with your question. William R. Crooker: Just kind of curious on the leasing front. Craig Allen Mailman: You know, I know, Bill, you said you guys are not expecting vacancy nationally to peak until middle of the year. But just from commentary from peers and brokers, it feels like the leasing environment and velocity is picking up. So I am just kind of curious as you guys kind of contemplate the 100 basis points of occupancy decline, which I understand you guys have 20,000,000 square feet rolling. And so 25% of that nonrenewals is a fairly large amount. But I am just kind of curious how you guys thought about the pace of backfill activity in guidance and kind of what could be the upside to that if the momentum that we are seeing coming out of 2025 holds and is sustainable and maybe even ticks up a bit. William R. Crooker: Yeah. Thanks, Craig. And we had a really successful year 2025 with leasing and exceeded, as I mentioned, you know, most, if not all, of our budgeted metrics, including our leasing volume. If, you know, William R. Crooker: certainly, if that continues, you know, we could at least backfill product earlier in the year, and that would be upside. And the way we look at it and prepare our budgets, and we entered the year in 2026 at close to 98% occupancy rate. And so when you have 20,000,000 square feet rolling at our historical retentions, you have got a fair number of square feet that is going vacant. In our budgets and contemplated, you know, a nine to twelve month lease-up period for those assets. There is a number of examples where we outperformed that in 2025. For, you know, just one example. For example, we leased an asset in Savannah, Georgia. In 2025, it went vacant in the first quarter. We anticipated releasing that in 2026. We found a tenant, released that asset with no downtime. That was in a market that at that time had 10% vacancy rates. So some other options for the tenants ultimately decided to go with our building. And that is something when we budget, we are going to budget that, I think, prudently to lease up nine to twelve months, but our outcome was zero downtime. There are several other examples I could give you on that that happened in 2025. Those scenarios could pan out in 2026, but the way we budget, we try to be prudent, and we certainly do not budget zero downtime for our assets. But those things happen some years and certainly happened a lot in 2025, and we hope it continues in 2026. And then and just going back to our view on the overall industrial market, I mean, it is still pretty strong. Right? I mean, we have to chew through some of this supply. We think that happens, you know, peaks, you know, midway through 2026, and it starts to really improve as you move through the back half of 2026 and into 2027. So overall, really happy with the way 2025 played out. Really happy with the results. You are coming into the year with some really high occupancy. Some great trends. We hope it continues as we move through 2026, but we try to be, you know, prudent when we budget for 2026. Craig Allen Mailman: That is helpful. Then just on the acquisition front, you know, you guys came out of the gates with the $81,000,000, but you know, Matts had mentioned it is more heavily weighted to the back end. Could you just talk a little bit more about what you have visibility on today and kind of anticipated timing versus what is speculative in the guidance for acquisitions? William R. Crooker: Yeah. I mean, right now, all we have disclosed is the $81,000,000. We typically do not disclose any LOI acquisitions or on a contract acquisitions. You know, things do fall out of LOI. They do fall out of contract. We have been underwriting more deals, you know, frankly, this first quarter than we did last first quarter. The momentum from Q4 has continued into the first quarter. A typical transaction year, though, is usually slower in the first quarter, and then it starts to build as you move through the year. So we do expect first quarter to be slower, but we are underwriting more transactions now than we did in the first quarter of 2025. Our pipeline is strong. It stands at $3,600,000,000. Michael can certainly dive into the details of that if you would like. But overall, the transaction market is really healthy. We are seeing some portfolios come to the market. There just seems to be pretty healthy. There is, you can call it, pent-up seller demand that came to the market at the back half of 2025, and that has continued as we moved into 2026. Craig Allen Mailman: Great. Thank you. William R. Crooker: Thanks, Craig. Operator: Our next question comes from Michael Griffin with Evercore ISI. Please proceed with your question. Steve Xiarhos: Great, thanks. Bill, I appreciated the comments in Matts S. Pinard: prepared remarks around sort of increased tenant activity. I was wondering if you could unpack that a little bit. Are these customers, potential tenants you have been monitoring that are looking around for a deal? Or are they really, I guess, you know, closer to signing on the dotted line? And have you seen Steve Xiarhos: maybe more newer prospects come into the market that might have been holding off last year? William R. Crooker: Yeah. That is a good question. Interesting question. I mean, beginning of last year, certainly, after, you know, quote, unquote, Liberation Day, there were tenants hanging around the hoop looking into space, but it did not feel like real demand. This tenant activity is real demand. We are seeing tenants make decisions, lease space. We obviously had a lot of successes in 2025. Let us say the demand is pretty broad-based. We are seeing it from 3PL, seeing it from food and beverage. I would say something that is a little newer, a little more nuanced is seeing a fair bit of demand from data center tenants. So those are tenants that are either supplying generators to data centers or even some light manufacturing of data centers, storing other things for data centers, say data center developments. We looked at our portfolio. We have got 3,000,000 square feet leased to data center tenants for these are five-plus-year leases to good credits. In addition, we have got some prospects at some of our buildings for data center demand. So that is a newer demand. But with respect to overall tenant demand, it feels William R. Crooker: it feels real. William R. Crooker: It does not feel like they are just kicking tires. These are tenants that need space and are looking for space. You know, I think the caveat to all that is there is some supply that we need to chew through. So these tenants have options. Our portfolio, and I say this a lot, is we buy buildings, we add buildings to our portfolio, we make sure those buildings fit the submarkets that they operate in and fit them well. And because of that, we have historically and continue to maintain occupancy levels well above market occupancy levels. We expect that to continue. You know, we have been fortunate in 2025 to win deals when there were other options that tenants could have gone to, but we proved to be a very good landlord. And we proved to have very good product in our respective submarkets. So, we hope that continues, and just need to get through some of the supply, but the demand out there is real. And we expect absorption to increase as we move through the year. Great. That is certainly some helpful context. And then maybe just going back to Blaine Heck: sort of the outlook for supply, maybe to unpack that a little bit more. I mean, look, it seems like if trends are improving into 2026, if you expect vacancies to decline in the back half of the year, if others in the industry are seeing this as well, I guess, is there a worry that we could see a ramp back up in supply if the fundamental picture continues to improve? Or are there more governors or barriers to entry, whether it is elevated development costs that might preclude an overbuilding problem that we have had a couple of years ago. Yeah. I mean, I think the developers in industrial are generally William R. Crooker: prudent. We had a little bit of excess supply there, but I think really, the story there was just a falloff in demand. Right? So I think the supply was William R. Crooker: was Steve Xiarhos: okay. It was just that the William R. Crooker: falloff in demand. And as that picks back up and you start to look at your crystal ball and underwrite more market rent growth, more developments pencil out. Right? But I think those developments, if you have got a piece of land and you need a permit and entitle it and then build it, you are looking well into 2027 before any of these things come online. Right? So there is a window here where it is going to flip. And when it starts to flip, I think it is going to flip pretty quickly in the landlord's favor here. So with respect to new supply coming online and being a concern, I am not concerned about it. Our team is not concerned about it. And if that supply comes back on, it is going to come back on, I think, prudently, and I think middle to late 2027 or even later than that. Blaine Heck: Great. That is it for me. Thanks for the time. Thanks. Matts S. Pinard: Thank you. Operator: Our next question comes from Nicholas Patrick Thillman with Baird. Please proceed with your question. Blaine Heck: Good morning. Bill, just want to make sure you invest around talking turns after Sunday, but we can move out to some other things. Just overall on I understand there is a new organic growth story with STAG. And you had mentioned in our prior conversations looking to maybe even improve on that growth rate by potentially looking to do some more Matts S. Pinard: strategic exits of the individual markets that might cause some Blaine Heck: near-term dilution but would enhance the longer-term growth rate. I guess, has there been any changes in that conversation or any recent developments on the thought process there? And Matts S. Pinard: is any of that baked into some of the disposition guidance that is included in 2026? William R. Crooker: Yeah. I would say there is not a material shift to what we have been on the past Steve Xiarhos: five years. Right? There is William R. Crooker: every year, there are some non-core assets we dispose of, and every year, there are some opportunistic dispositions. Generally, we have a sense of the non-core dispositions to start the year. We do not really have a sense of the opportunistic because oftentimes, those are reverse inquiries that come in. And we had two of those in 2025. Two assets, one was in the first quarter, one was in the fourth quarter where there were assets that went vacant and we loved the leasing prospects. And we were planning on holding those assets and leasing them up, and we sold both those assets at what a market Matts S. Pinard: rate would be, market cap rate would be, market rent would be. William R. Crooker: Those were sold at a 4.9% cap rate. So just great execution from the team, but users wanted the space and did not want to lease it. So, great execution. So we anticipate having some, hopefully having some of those this year. But right now, the plan is what is in our guide is just some non-core dispositions. But nothing in excess of past years. I think, reflecting back on our conversation, Nick, that is just when you look at the map of STAG's portfolio, there might be one asset in a market. And if we do not feel like we can grow into that market over time, that is an asset that we will opportunistically dispose just to be a little bit more efficient on the operating side. But that is on the margin and not really that impactful to the numbers. Matts S. Pinard: Very helpful. And then maybe just appetite to hold land on the balance sheet for development opportunities, understanding that that is a growing part of the business and most of your development opportunities have been with JV partners. Blaine Heck: But just appetite on growing the land bank. William R. Crooker: Yeah. Certainly not part of our 2026 plan, but something that is part of our long-term development plan. We are going to step our way into that. Right now, we have got a fair amount of developments. I am very happy with how the development initiative has progressed. The results we are seeing, it is great to see that at least get signed in our Concord development. There are some good opportunities that we are looking at now with some other potential leasing on the development side. And with respect to newer development opportunities, hopefully, there are some things we can announce in the near future on that. And then, when you start to think about the longer-term view of markets, the land is not in our plan, as I mentioned. Holding land right now is not in our plan for 2026, but we are looking, it is early days, we are looking into some phased developments that may be an opportunity for us to Matts S. Pinard: you know, have a William R. Crooker: call it, quasi land position. But we are looking at a lot of those things as we grow this platform. Blaine Heck: Very helpful. Thank you. William R. Crooker: Thank you. Operator: Our next question comes from Blaine Heck with Wells Fargo. Please proceed with your question. Blaine Heck: Hey, thanks. Good morning. Can you just talk about how you are thinking about your overall cost of capital today and the spread between your cost of debt, or maybe more importantly cost of equity, and your required returns on investment? Matts S. Pinard: Yeah. Good morning, Blaine. This is Matts. So cost of debt is pretty easy. You know, if we were to go to the private placement market where we historically have been an issuer, spread there anywhere between 140 and 150 basis points over. If we would go to the public bond market, which we have been evaluating and have discussed on these calls, after our inaugural issuance, we would likely, we have been polled, receive a 25 to 30 basis point pricing benefit. So if we think about today in the market in which we are currently operating, it is, call it, 5.5% to 5.75% depending on tenor. Cost of equity, you can do that many different ways. From an implied cap rate base using one of our sell-side analysts' rubrics, you know, we are in the low 6s. But what is important is we are retaining, and Bill mentioned this in his remarks, we are retaining north of $100,000,000 of cash flows after dividend as well. So it is a different way to kind of go through the funding for 2026. If you look at the net acquisitions of $350,000,000, and that is obviously gross acquisitions less dispositions, factor in the $100,000,000-plus of retained earnings, we have the ability to operate this business plan without accessing the equity capital markets. Our leverage would be right in the midpoint of our range. Right now, we are at 5.0x levered. We operate this business plan for 2026 at the midpoint, so we would be at 5.25x leverage. Blaine Heck: Great. That is helpful color, Matts. Second question, you guys commented on the fixed-rate renewals weighing on spreads during the fourth quarter. Can you just tell us what percentage of your leases have those fixed-rate renewals incorporated in their terms, and whether there are any chunky ones that we should be aware of in the coming quarters. William R. Crooker: Yeah. It is single Blaine Heck: digits. William R. Crooker: Usually, we do not even call that out, Blaine. We just called it out in the fourth quarter because it looked like spreads were moderating in Q4, but it was really due to that. So every year, there is a few fixed renewal options, a handful, and they are just spread out throughout the year. So it is just part of our leasing plan. But because it was concentrated in the fourth quarter, it is why we called it out. So it is single digits and they are laddered. But the good thing is as you get through these, you work these off. It is not like they are unlimited fixed renewal options. Generally, there is one. And then you get through it, and then you are just pushing out the mark-to-market opportunity. Steve Xiarhos: Got it. Thanks, Bill. William R. Crooker: Thanks. Operator: Our next question comes from Vince Tibone with Green Street. Please proceed with your question. William R. Crooker: I was Blaine Heck: we think about potential development starts in 2026? And kind of what is your appetite to start new spec projects this year? Is it dependent on leasing current Eric Martin Borden: projects or just on a deal-by-deal basis? Curious how you are thinking about that and the amount that is maybe reasonable this year. William R. Crooker: Yeah. Hey, Vince. I mean, given where our development Matts S. Pinard: portfolio sits today, we are William R. Crooker: very eager to start some new spec projects. Right? Especially given our outlook for the industrial market in 2026 and into 2027. Right? It is just Steve Xiarhos: and we view it as a great time to start some projects. So William R. Crooker: for us, it is just whether we can source some more. We think we can. You know, this year, we are a little over $100,000,000 of kind of new projects sourced. Steve Xiarhos: You know, I think that is our William R. Crooker: that is what we have planned for this year. Hopefully, we can exceed that. Now that is not going to come in day one. Right? It is going to come in throughout the year. Steve Xiarhos: But William R. Crooker: it is something that is, Steve Xiarhos: it is an initiative that William R. Crooker: you know, I feel strongly that we continue to build on. The team feels strongly we can continue to build on it. And we think it is Steve Xiarhos: you know, it is something that we will be able to build on. William R. Crooker: But with respect to starting a new spec project today, very happy to do that, assuming the returns pencil up. Eric Martin Borden: No. Makes sense. Helpful color. And maybe just switching gears, could you talk a little bit broadly about the concession environment in your markets, like particularly free rent? Do you feel that free rent levels or TIs have really stabilized across the market among private players with some more vacancy potentially? Some of your peers have called that out as a headwind. The near-term growth does not look like that is an issue for your same-store guide. Just love to hear color on free rent trends and concessions in your market. Operator: Yeah. And we think they are very stable. William R. Crooker: They have been stable, really, since the beginning of 2025. But there are instances in markets, in our markets, where you will have a private landlord, I do not see it really with the public peers, but you have a private landlord that has been sitting on an asset and just saying, you know what? I am going to buy this deal. And I am going to give them whatever they need, and I am going to give them a bunch of free rent and Steve Xiarhos: but that is not market. Right? I mean, if you have got five buildings that are William R. Crooker: competing against one another and one is willing to just Blaine Heck: you know, William R. Crooker: give a ton of free rent and concessions, the other four are not. So generally, what we are seeing in a market that has vacancy rates five to 10%, you are seeing a half a month of free rent per year right now, but that has been stable since 2025. With respect to TIs, we have not seen a material change in TIs. What you do see sometimes is a tenant wanting additional dock doors. If there is not, you know, maybe LED lighting, generally, our buildings have that. But if there is not something like that, where it is more of a building upgrade, they may ask for that. And in those situations, you are seeing landlords in the market, and we would be willing to do it too, to put that capital in the building. But I do not view that as much a TI. It is like putting capital in your building, making your building more marketable and thankfully, more valuable. Much different than a tenant-specific TI. So I have not seen a big uptick in tenant-specific TI packages, which is what we really view as concessions. Matts S. Pinard: Great. Thank you. Steve Xiarhos: Thank you. Craig Allen Mailman: Our next Operator: question comes from Michael William Mueller with JPMorgan. Please proceed with your question. William R. Crooker: Yes. Hi. Just a quick one. What is baked into your 2026 guide for development leasing? Sorry. I missed that, Mike. What was that again? Matts S. Pinard: Yeah. Sorry. What is Craig Allen Mailman: baked into your 2026 guide for developing? Steve Kimball: Yeah. Hey, Mike. It is Steve Kimball here. We have guided for 907,000 square feet of leasing. Matts S. Pinard: And one of those is a build-to-suit that is in those numbers. Blaine Heck: We and Bill mentioned the Steve Kimball: Charlotte lease that was done after the quarter. Blaine Heck: So we would have Steve Kimball: after those two, we would be left with 530 square feet of leasing or about a half million square feet of leasing that we have projected to do in 2026. Operator: Got it. Thanks. Steve Kimball: Welcome. William R. Crooker: Thanks, Mike. Operator: Our next question comes from Brendan Lynch with Barclays. Please proceed with your question. William R. Crooker: Great. Thanks for taking my questions. Blaine Heck: Bill, maybe you could just walk through your markets and Steve Xiarhos: and highlight which ones are particularly strong right now and which ones are lagging. William R. Crooker: Yes. So we are seeing some really good demand in the Midwest markets. I mean, Craig Allen Mailman: similar to the last couple of quarters, William R. Crooker: Minneapolis remains strong. Chicago, Milwaukee. But what we have seen really in the past, I would say, four months is an increase in demand in some of the big bulk Midwest distribution markets, Indianapolis being one of them. And Louisville is really strong. Matts S. Pinard: Columbus has strengthened with a lot of bulk distribution William R. Crooker: leases getting done there. Matts S. Pinard: Southeast William R. Crooker: has been pretty strong. I would say on the other side of it where we are seeing a little bit more weakness, Matts S. Pinard: it is some of the Southeast port markets, frankly. It is Jacksonville, Savannah, William R. Crooker: Charleston, seeing some weakness there. Steve Xiarhos: And then but then when you think about William R. Crooker: continuing down, you go around to Texas, Houston is really strong. Dallas is really strong. So overall, some good fundamentals, but seeing some weakness in those Southeast port markets. Blaine Heck: Okay. Great. Thanks. That is helpful. Steve Xiarhos: And I believe you have suggested in the past that Blaine Heck: market rent growth would be kind of 0% to 2% throughout 2026. With that context in mind, in those markets that are particularly strong, how much are we seeing those stronger markets deviate from that 0% to 2% average? William R. Crooker: Yeah. I do not have all the numbers right in front of me, but I would say generally, it is a pretty tight band. Because you still have some vacancy in those markets. So you are getting a couple, 3% market rent growth in some of those stronger markets. But, like, for example, in Indy or Columbus, that has really strengthened lately, I do not think you are seeing a 3% rent growth there. Steve Xiarhos: But in Minneapolis and Milwaukee and William R. Crooker: Chicago, you might be seeing it there. And then on the other side, it is closer to that 0% to 1%. Steve Xiarhos: Okay. So the demand that you are seeing is roughly Blaine Heck: it is mostly coming through as absorption Steve Xiarhos: rather than Matts S. Pinard: pushing rents more aggressively. William R. Crooker: Yeah. I think what you are seeing, you are going to see the rent growth really start to accelerate as you move into 2027. Matts S. Pinard: Okay. Great. Thanks for the help. I think that is William R. Crooker: dynamic is, I think, why you are seeing some, and what we are seeing, I think others are too, is Matts S. Pinard: there are larger William R. Crooker: more sophisticated tenants coming to us well in advance to try to renew their leases. Try to get ahead of some of the market rent growth that Blaine Heck: is likely to come. Craig Allen Mailman: Okay. Matts S. Pinard: Thank you. Operator: Helpful. Thank you. Our next question comes from John Kim with BMO Capital Markets. Please proceed with your question. Thank you. You have had a healthy Matts S. Pinard: leasing activity recently. I am wondering if you could provide Blaine Heck: the leasing executed or signed during the quarter. And in particular, Matts S. Pinard: the volume versus the 3,500,000 square foot average that you had last year? And the lease spreads compared to your 18% to 20% guidance? William R. Crooker: There is a lot there, John. I do not have the executed leases in front of me, but with respect to what we are budgeting for this year, I think we are budgeting almost 18,000,000 square feet of leasing for 2026. It will be our largest Matts S. Pinard: absolute square William R. Crooker: footage of leasing for the year. So you look at our leasing spreads of 18% to 20%, from recollection, we see these leases getting signed. We get notified of everything. There is nothing that I see that is a big deviation one way or the other with respect to those spreads. You might see something a little bit lower because the lease is a little closer to market or something a little bit higher because the lease was a little bit below market. But it is not like we are seeing a trend one way or the other. And rent bumps are holding up, and we are signing rent bumps in the 3% to 3.5% Steve Xiarhos: range. Craig Allen Mailman: But just following up on that, I mean, if you expect 18,000,000 square feet of leasing, that is Jason Belcher: almost 30% more than what you did last year, yet you are expecting occupancy to go down. So is this a lot of early renewals? Or I am just trying to marry the lease activity versus the occupancy guidance. William R. Crooker: Yeah. It is because we had so much square feet rolling. That is the biggest factor. Right? So we had initially a little over 20,000,000 square feet rolling. And so when you have that and you have got your, call it, 75% retention rate, and these leases roll throughout the year. So we budget typically a nine to twelve month lease-up time for these. So if they roll halfway through the year, and it is a nonrenewal, just the absolute square footage is a little higher, but we are budgeting that that lease is going to be released in 2027. Right? So our occupancy guide is average. Matts S. Pinard: So William R. Crooker: that is what is impacting it, especially, you know, another example, if you have a nonrenewal happening March 31, Matts S. Pinard: and that is going to be William R. Crooker: vacant for nine months of the year. Right? Because we are budgeting that to lease up in 2027. Now, maybe there are some examples where we lease up earlier. We certainly had several of those examples in 2025. I gave one earlier on this call. But our budget is that that will lease up in 2027. So it really is a factor of having a large amount of square feet rolling in 2026, offset by high occupancy coming into 2026. So if our occupancy was lower, there is more opportunity to backfill some of that nonrenewal. And it was just an interesting dynamic that happened in 2026. Jason Belcher: But overall by your renewal. Operator: I William R. Crooker: high occupancy numbers, good leasing spreads. Really great year in 2025. Some great tailwinds with respect to development. We are seeing some good acquisition activity. I mean, I was just thrilled with how 2025 went and 2026, other than some of this occupancy loss, is shaping up to be, I am really happy with the projections that we are putting out. Jason Belcher: And a similar renewal rate than what you have achieved in prior years. Yeah. Right. William R. Crooker: Exactly. It is not like renewals are down. I think our midpoint of renewal guidance is 75%. Jason Belcher: Right. Okay. Thank you. William R. Crooker: Thanks. Operator: Our next question comes from Richard Anderson with Cantor Fitzgerald. Please proceed with your question. Blaine Heck: Thanks. Good morning. So just looking back, start of the year last year, your same-store guidance was 3.5% to 4%. You usually beat that, at 4.3%. You are starting this year at 3%. Not to belabor the 20,000,000 square feet rolling in 2026 and the 75% retention. But if you beat that retention, obviously, that is the main driver to beating your 3% same-store guidance, I assume, and you can answer that. Let me just finish the thought. Do you have a line of sight into some clarity that 25% is not going to renew, or is that just kind of going off of your history? Do you already have a sense of that vacancy Matts S. Pinard: level? Steve Xiarhos: Just curious if you can respond to that. Yeah. William R. Crooker: Yeah. So I will answer the second question first. We have line of sight for a lot of our lease expirations in the first half of the year. So there are certainly lease expirations in the back half of the year that we are saying, Steve Xiarhos: hey. These three are going to renew, and this one is going to vacate. Right? William R. Crooker: That is how we build up a budget. Right? The back half of the year, we are not certain with what is going to happen, but our team is close to our tenants. We have a sense. Craig Allen Mailman: We are usually William R. Crooker: within 5% of our retention guidance every year. But some of it is speculative. And with respect to outperformance or potential outperformance on same store, it is not just retention. Retention is a factor, right, if that goes up to 80% or 83%, that will help same store because you are not incurring any downtime on that additional 5% to 8%. But, really, we have lease-up projections where the new leasing is really heavily weighted to the back half of the year. So I think we have got about 3,000,000 budgeted for new leasing, most of which is expected to occur in the back half of the year. So if that leasing occurred sooner, that would be a benefit to same-store NOI. The other factor to same-store NOI, really, the components are leasing spreads, we have pretty good insight to that, and bumps in leases, we have got pretty good insight to that. But the last factor is credit loss. Right? We are budgeting 50 basis points of credit loss this year in our same-store pool. Last year, we budgeted 75, and we achieved, well, I do not know if achieved is the right word, we realized 20 basis points. So there is an incremental 30 basis points that we are budgeting for 2026. No new tenants on the watch list. It is more of a broad-based budget. It is not like we have allocated that specifically to one tenant like we did last year with some of our credit loss budgets. So, that is the other factor that could move same store one way or the other. Blaine Heck: K. Great. Great color. You mentioned early in the call deliveries down 35% versus 2024. Steve Xiarhos: And I think you mentioned 180,000,000 square feet Blaine Heck: 2026 deliveries. What would that equate to in terms of a draft downward versus 2025? And where do you think this all settles next year in terms of deliveries? Because, in response to an earlier question, perhaps there will be a reignited development activity, you know, maybe. We will see. But I am just curious, what is the cadence of things to 2027 as you see it right now from a delivery standpoint? William R. Crooker: Yeah. I will let Steve jump in on this one to kick it off. Yeah. So appreciate the question. We are looking at new deliveries in 2025 Steve Xiarhos: of about 225,000,000 square feet. Blaine Heck: Obviously, well down from previous years. William R. Crooker: When you go forward to 2026, as you mentioned or mark, Steven Kimball: we are looking at about 180,000,000 square feet. We think of a stabilized market, more 200,000,000 to 300,000,000 square feet of deliveries. So deliveries are going to be well below the average at the 180,000,000, and I think they start to pick back up in 2027 to some of the questions that came earlier in the call about is there going to be a little more activity around the development world and a little more interest in going spec? And I think that is probably the case. So we probably move back up into the 200,000,000 to 200,000,000-plus square feet in 2027. But I do not think there will be a big increase to the numbers that we saw a few years ago. Jason Belcher: And then the build-to-suit component of that is, like, William R. Crooker: 40% this year? Yeah. It is moved up, you know, from Steven Kimball: 30% to the 40%, but that is not abnormal. Right? Steve Xiarhos: Right. Jason Belcher: Okay. Blaine Heck: And last for me, and this is something I am trying to will to happen, but you mentioned the 78,000 square foot manufacturing-oriented lease in the first quarter. Steven Kimball: Can you sort of Eric Martin Borden: describe that, Blaine Heck: you know, is that a supplier? Is that a real manufacturing? Is there any kind of power issues, you know, just generally? I mean, we talk a lot about your markets and being a beneficiary of onshoring and so on. Steven Kimball: You get this question a lot, I am sure, but I am just wondering if there is any glimmer of manufacturing happening in your markets to a greater degree and how that might play a role longer term for STAG? Thanks. Yeah. I will let Steve answer it. And nice job William R. Crooker: sneaking in that third question. Jason Belcher: There, Rich. It is late in the call. I figured I am the last one. Steven Kimball: You are not the last one. I wanted to really appreciate the question. We do have a balance of demand, particularly in our development markets, where we have a balance between distribution and manufacturing, and we saw that in Nashville where half our building leased up to distribution, the other half to manufacturing. And that has boded well for the development pipeline. The lease we talked about for 78,000 square feet in the Charlotte market that we just inked, that is, they have a larger facility that is in the submarket. And that manufacturing is growing. And it is more around automotive, but specialty automotive and government uses. And so, yes, it is manufacturing related. We are seeing it grow in that market, and we are seeing it elsewhere. William R. Crooker: And I just want to characterize the manufacturing. It is really just light manufacturing. Yes. Steven Kimball: This, yeah, so that is a good point. So a lot of what we are seeing is the heavy manufacturing is doing well. These are relief valves in some cases where they need to either store raw materials or do some light assembly that is tertiary, you know, a part of their core business. William R. Crooker: Yeah. When we develop buildings, I mean, we develop buildings, and these ones in particular, these are developed as warehouse distribution buildings, but can also have some additional power that can be a solution for some of these ancillary manufacturing tenants. Steven Kimball: Perfect. Thanks very much. Jason Belcher: Thank you. Operator: Our next question is from Michael Albert Carroll with RBC Capital Markets. Please proceed with your question. Blaine Heck: Yes, thanks. Bill, I wanted to turn back to some of your comments on the acquisition market. I think throughout the call, did I hear you correctly that you are seeing more deals come across your desk right now? And if so, what is driving that increased activity? Are there more sellers coming back to the market? Or is that STAG doing something differently going forward? William R. Crooker: No. It is really sellers. And we saw that in the back half of 2025. You know, everything just came to a halt at the beginning of the year last year. Really from April to July. We saw a lot of sellers come back to the market in the back half of 2025. That was one of the reasons why we had such a successful acquisition quarter in Q4 2025. And those sellers are still in the market. And we are seeing a lot more portfolios start to come to market, even whispers of portfolios coming to market. We are just evaluating more transactions. So really, nothing that we are doing, just more opportunities that are in the market today. Blaine Heck: And then how competitive are these deals? I mean, I guess, who are you competing with, and has that changed? And, I mean, just looking at your acquisition cap rate guidance, I mean, 2026 is really in line with 2025. So are those cap rates kind of holding steady where they were last year? William R. Crooker: Yeah. I mean, depending on the product, you could see some cap rates compress. You know, for us, when we look at deals, one of the first things we have is, does this building fit the submarket it operates in? Right? And it checks that box and Craig Allen Mailman: so we need to make sure these deals William R. Crooker: are accretive to our portfolio and to earnings. And for us, our cap rate guidance is a little bit of a function of our cost of capital. So we bid to where we can buy deals accretively and if we do not get a deal, we are okay with that. So a little bit when you think about market color, yeah, we are seeing a little bit of cap rate compression. We are certainly seeing portfolio premiums are out there. But I would say, probably, similar to 2025 pricing, maybe slightly lower with respect to market. But because we operate in the CBRE Tier 1 markets, there are a lot of opportunities, and we can cast a pretty wide net. So we are looking at so many opportunities and we are able to pick off the ones that Steven Kimball: fit the submarkets well, but are also accretive to our portfolio. Jason Belcher: K. Great. Appreciate it. Thanks, Mike. Operator: We have reached the end of our question and answer session, which means that there are no further questions at this time. I would now like to turn the floor back over to William R. Crooker for closing comments. William R. Crooker: Yes. Thanks, everybody, again for joining the call and asking the questions. We look forward to another great year. Certainly really proud of the results we put forth in 2025. And we will see you all soon at the upcoming conferences. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, everyone. My name is Abigail, and I will be your conference operator today. At this time, I would like to welcome you to the Ameren Corporation fourth quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, if you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. At this time, I would like to turn the call over to Andrew Kirk, Senior Director of Investor Relations and Corporate Modeling. Andrew Kirk: Thank you, and good morning. On the call with me today are Martin J. Lyons, our Chairman, President, Chief Executive Officer, and Michael L. Moehn, our Executive Vice President and Chief Financial Officer. As well as other members of the Ameren Corporation management team, including Michael Moehn, Group President of Ameren Utilities. This call contains time sensitive data that is accurate only as of the date of today's live broadcast and redistribution of this broadcast is prohibited. We have posted a presentation on the amereninvestors.com homepage that will be referenced by our speakers. As noted on page two of the presentation, comments made during this conference call may contain statements about future expectations, plans, projections, financial performance, similar matters, which are commonly referred to as forward looking statements. Please refer to the forward looking statements section in the news release we issued yesterday as well as our SEC filings for more information about the various factors that could cause results to differ materially from those anticipated. I will now turn the call over to Martin J. Lyons. Thanks, Andrew. Morning, everyone, and thank you for joining us. Martin J. Lyons: Beginning on page four, here we highlight some of the key updates we will cover today. We will walk through our 2025 financial results, recap key accomplishments, and discuss how we are well positioned for 2026 and the years ahead. Specifically, we delivered 2025 adjusted earnings of $5.03 per share which represents 8.6% growth over adjusted 2024 results. And we affirmed our 2026 earnings per share guidance range of $5.25 to $5.45. I am also pleased to report that this week, we signed 2.2 gigawatts of large load electric service agreements in Missouri. We continue to take meaningful steps towards supporting significant economic development opportunities emerging across our service territory while also continuing to provide strong value for all our customers and our communities. Andrew Kirk: I am proud Martin J. Lyons: not only the strong operational and financial results we delivered as an Ameren team, but also our strategic plans and accomplishments, that we expect will lead to competitive long term returns for our shareholders in the years ahead. Today, we issued 6% to 8% earnings per share growth guidance for the period 2026 to 2030, and we continue to expect year over year results near the upper end of that range. Turning now to page five. As always, at the center of everything we do, is creating value for the 2,500,000 electric and 900,000 natural gas customers, that we have the privilege to serve. Our three pillar strategy investing in rate regulated infrastructure, advocating for constructive regulatory and legislative frameworks, and optimizing our business, continue to guide our work for customers, communities, and shareholders. This year, the Ameren team accomplished all of the key strategic objectives we outlined a year ago. Shown on page six. This included investment of more than $4,000,000,000 in electric, natural gas, and transmission infrastructure, we installed nearly 26,000 electric distribution poles, 283 miles of upgraded transmission and distribution lines, and underground cable, 750 smart switches, and 31 new or upgraded substations. We also made significant progress on the development of new generation resources. On the regulatory front, we received constructive orders in both Missouri and Illinois electric and natural gas rate reviews. And legislatively, the enactment of Missouri Senate Bill 4 provides support for economic development, and investment in reliable energy for years to come. To further advance economic development and ongoing reliability, we updated our Ameren Missouri preferred resource plan last February and immediately began executing on the accelerated components. Speaking of economic development, 2025, we worked with stakeholders across Missouri and Illinois to support more than 70 projects that are expected to bring an estimated $3,600,000,000 of capital investment and approximately 3,700 jobs to our service territory from new or expanding businesses. Fueling regional economic growth for years to come. These businesses represent the diverse set of industries operating across our states. Including health care, manufacturing, distribution, warehousing, alternative energy, and food production. We also work closely with stakeholders to design and obtain approval of a new rates structure for large load customers to support fair cost allocation reliable service as customer energy needs evolve. I am proud of our team's performance in 2025. Collectively, we focused on safely providing a electric and gas service to our customers battling through challenging weather events, building more reliable and resilient infrastructure, and maintaining disciplined cost management. As a result of strong execution of the company's strategy, and solid operating performance, we delivered 2025 adjusted earnings of $5.03 per share. Up 8.6% from 2024 adjusted earnings of $4.63 per share. Turning to page seven. Here, we highlight the value we deliver for our customers and communities. In 2025, severe weather events tested our system. As we experienced approximately 30% more storms than average over the past ten years. The severe storms and tornadoes as well as extreme temperatures experienced in our territory, highlighted the value of our investments which are designed to bolster reliability and resiliency, and the value of our team members. Who braved these challenging conditions to safely restore service when our customers needed us most. In the face of this elevated storm activity, our system and teams performed exceptionally well. Reliability and resiliency remained strong. Benchmarking in the first quartile for safety performance and second quartile for safety performance. In 2025, our investments to strengthen the grid prevented more than 56,000,000 minutes of potential customer outages across Missouri and Illinois. More than double the prevented outage minutes from last year. Investments to strengthen the reliability of our system, are also the foundation for economic growth and strong customer satisfaction. Notably, a recent economic impact study shows our operations in Missouri and Illinois generate more than $20,000,000,000 in annual economic activity, in addition to other benefits to the communities where we live and work. At the same time, we continue improving the day to day experience for customers. By leveraging technology and streamlining service processes, we have given customers more control and transparency with regard to energy use in billing, and a quicker path to assistance, reducing our average call handle time by 21% and total call volume by 12% since 2023. These improvements are resonating with customers. Who have rated their satisfaction at approximately 4.6 out of five stars, on average after interacting with us across all our service channels. Including call center, website transactions, and field service. Moving to page eight, we recognize that our critical infrastructure projects represent significant investments. Which is why we prioritize the projects that are most beneficial for customers and maintain a sharp focus on keeping rates as low as possible. Through disciplined cost management, we have been able to keep our Ameren supplied residential rates in Missouri and Illinois on average below both national and Midwest averages. Importantly, percentage of the average customer's income spent on electricity has remained stable, generally tracking the rate of inflation over the last decade even as we have made substantial investments in critical infrastructure. Ameren invests hundreds of millions of dollars each year to support our customers and communities through energy efficiency programs, demand response initiatives, and substantial energy assistance funding. In addition to funding Ameren developed programs, we also partner with a wide range of organizations to connect customers with available federal, state, and local assistance. Turning to page nine. Disciplined execution of our strategy, has delivered strong and consistent results over time. Weather normalized adjusted earnings per share have risen at an approximate 7.4% compound annual growth rate since we divested our merchant business in 2013 while annual dividends per share have increased 78% through 2025. This performance has resulted in a total shareholder return of greater than 300% over the same period significantly outperforming utility index averages. As we look ahead, we believe execution of that same strategy putting customers and community value at the center, will continue to drive strong returns. Moving to page 10, we turn our focus to our 2026 key strategic objectives, which continue to be focused on resource adequacy, reliability, affordability, and supporting local economic growth. This year, we plan to invest approximately $5,500,000,000 in electric, natural gas, and transmission infrastructure to bolster the safety, security, reliability, and responsiveness of the energy grid. As we execute our generation plan over the coming years, we will continue to file CCN requests for new generation resources. And we expect to file our triennial Missouri Integrated Resource Plan by late September which will outline updated generation plans for the next twenty years. Further, last month, we filed the required Ameren Illinois integrated grid plan detailing electric investments needed for 2028 through 2031 and we are seeking ICC approval of the plan by the end of this year. We continue to evaluate regionally beneficial transmission investment opportunities in MISO. We submitted bids for two Tranche 2.1 competitive projects last month and are evaluating two other bidding opportunities. As always, while we work to accomplish the key highlighted on this page, we remain focused on operating as efficiently and effectively as possible. With a goal to hold O&M growth below the rate of inflation, and as low as prudently possible over our five year plan. We have a number of initiatives underway to continuously improve and optimize our performance. On page 11, we outline how the execution of our strategy is expected to drive strong total shareholder return over the next five years. Today, we are rolling forward our five year investment plan and as you can see, we expect to grow our rate base at a 10.6% compound annual rate from 2025 through 2030. This strong expected rate base growth will be driven by $31,800,000,000 of planned infrastructure investment, a 21% increase in our five year capital plan compared to the plan laid out last February. With the increase primarily due to robust expected generation investment needed to serve anticipated load growth and support system reliability. We continue to expect 2026 earnings to be in a range of $5.25 per share to $5.45 per share. The midpoint of this range represents 8.1% earnings per share growth compared to our original 2025 earnings guidance midpoint. Building on our proven strategy, and track record of strong earnings growth, we continue to expect to deliver 6% to 8% compound annual earnings per share growth from 2026 through 2030, using the midpoint of our 2026 guidance of $5.35 per share as the base. More specifically, we expect consistent earnings growth near the upper end of this range in 2027 through 2030. In addition, last week, Ameren's board of directors approved a quarterly dividend increase of 5.6%. Equating to an annualized dividend rate of $3 per share. This represents our thirteenth consecutive year of increasing our dividend. We continue to expect dividend growth in line with our long term EPS growth guidance and we expect our dividend payout ratio which today is approximately 56%, to be maintained within a range of 50% to 60%. Combined, our earnings and dividend growth expectations support our strong long term total shareholder return proposition. On page 12, we provide an update on the Ameren Missouri large load rate structure, which the Missouri PSC approved last November. This rate structure is in accordance with Missouri state law which requires data centers to pay for cost to connect them to our system and for them to pay their share of ongoing cost of service. Under the large load rate structure, customers requesting 75 megawatts or more will pay a base rate which at this time is approximately 6.2¢ per kilowatt hour, and agree to additional terms and conditions under an ESA. The additional terms will include a service commitment of twelve years after ramp, a minimum demand charge of 80% of contracted capacity, termination provisions, and collateral requirements all designed to protect existing customers. In addition, new customer programs will allow qualifying customers to elect to advance their clean energy goals by supporting the carbon free energy resource of their choice through incremental payments which would be used to help offset cost of service for other customers. Turning to page 13, I will provide an update on the large load data center opportunities in our service territory. In the coming years, these projects are expected to bring in jobs, tax revenues, and investment and to drive long term economic growth. Just this week, Ameren Missouri executed ESAs with large load customers that cumulatively represent 2.2 gigawatts of new demand to be served in the future. Executing these ESAs is an important milestone. Of course, there are a number of other project milestones still to be achieved, including the customer project announcements, groundbreaking, and construction. Still, these agreements are an exciting development. Our five year financial plan laid out today assumes 6.2% compound annual sales growth from 2026 through 2030, which includes a base assumption of 1.2 gigawatts of new load growth by 2030, consistent with our preferred resource plan and is depicted by the blue line on the chart on the right hand side of this page. The 2.2 gigawatts of executed ESAs represent upside to our sales and earnings forecast. Developers continue to evaluate Missouri and Illinois for additional future large load projects. In Missouri, this pipeline includes projects with transmission interconnection construction agreements, representing a total of 3.4 gigawatts of potential new demand inclusive of projects associated with the executed ESAs. And in Downstate Illinois, this pipeline includes projects construction agreements representing a total of 850 megawatts of new demand. We have now received approximately $46,000,000 in nonrefundable payments from developers in Missouri and Illinois to cover the cost of transmission upgrades related to these construction agreements. These payments reflect developers' confidence in and commitment to their projects. Turning to page 14 for an update on our generation build out. The integrated resource plan filed last February called for development of 5.3 gigawatts of new generation resources between 2025 and 2030, we have made strong progress on development of these resources over the last year, nearly 2.7 gigawatts of new generation in progress. In December, we placed Vandalia Energy Center, a 50 megawatt solar facility in service. And the Bowling Green and Split Rail Solar Energy Centers, totaling 350 megawatts began final testing in January. Further, as part of strengthening our existing fleet, dual fuel conversion work is expected to be completed by the end of the year at our Audrain Energy Center to add 700 megawatts of capacity on the coldest winter days when gas is otherwise unavailable. We continue to advance our new natural gas generation projects as well. Yesterday, the Missouri PSC approved the certificate of convenience and necessity for the 800 megawatt Big Hollow Natural Gas Energy Center and accompanying 400 megawatt battery storage facility both scheduled to be in service in 2028. Proactive strategic supply chain work for all of our plan generation resources continues. We have procured long lead time components such as turbines and transformers for our planned near term energy centers and we have executed gas supply contracts and awarded labor contracts for both simple cycle natural gas facilities. We continue to actively plan for the construction of a 2.1 gigawatt combined cycle facility included in our IRP having secured production slots for the three necessary turbines. We anticipate filing our CCN request with the commission later this year for this combined cycle facility, which we expect to be placed in service in 2031. These efforts keep us on track to maintain a balanced energy mix to meet growing demand affordably and reliably. Targeting approximately 70% generation from on demand resources and 30% from intermittent resources by 2040. Moving now to page 15 for a transmission update. As we look ahead, there is a significant transmission investment needed to support new large load customers as well as energy resources to supply this new demand reliably. In addition, we remain focused on executing our assigned tranche one and 2.1 long range transmission projects and developing strong proposals for tranche 2.1 competitive projects. In January, we submitted joint bids for two Illinois projects and we expect MISO to select the developers for the projects this summer. Bids for two additional MISO projects are due mid 2026 and we are evaluating those opportunities. Recall that we do not include competitive projects in our capital plan or ten year pipeline, until projects are awarded. Now turning to page 16, for an update on investment opportunities in our service territory over the next decade. Our pipeline continues to grow. Standing today at more than $70,000,000,000. These investments will strengthen the safety, reliability, and resiliency of the energy grid powering the quality of life for families and businesses and supporting thousands of jobs, driving economic growth across our communities. Moving to page 17 to sum up our value proposition. We are confident that the execution of our strategy in 2026 and beyond will continue to deliver superior value to our customers and shareholders. Solid operating performance and prudent infrastructure investment along with a strong balance sheet and strong credit ratings, supports safe cost efficient, and reliable service for our customers. Robust infrastructure investment is needed in each of our business segments to ensure safe, reliable service and to meet the demands associated with exciting economic development opportunities. These infrastructure investments are anticipated to drive compound annual rate base growth, of 10.6% which along with sales growth provides the foundation for our 6% to 8% compound annual earnings growth expectation. Continuing our long track record of delivering strong earnings growth, coupled with an attractive and growing dividend, will result in a compelling total return story for those seeking a high quality utility investment opportunity. I am confident in our team's ability to effectively execute our investment plans and other elements of our strategy across all four of our business segments. Again, you all for joining us today. I would now like to welcome our recently appointed Chief Financial Officer, Michael L. Moehn. Michael L. Moehn: Thanks, Marty. I am glad to be here with you today. I will begin on page 19 of our presentation with our 2025 earnings results. Yesterday, we reported 2025 adjusted earnings of $5.03 per share. Compared to earnings of $4.63 per share in 2024. Our 2025 adjusted earnings exclude certain tax benefits at three of our business segments: Ameren Transmission, Ameren Illinois Natural Gas, and Ameren Illinois Electric Distribution. These tax benefits were recorded in response to IRS guidance issued to another taxpayer and associated regulatory orders issued by FERC and the Illinois Commerce Commission regarding treatment of net operating loss carry forwards. Pursuant to this guidance and these orders, we decreased income tax expense by a total of $86,000,000 in 2025 resulting in a $0.32 per share benefit. On page 20, we summarize key drivers impacting adjusted earnings at each segment. As Marty outlined, we achieved strong earnings growth supported by strategic infrastructure investments, and robust retail sales at Ameren Missouri. Weather normalized sales at Missouri grew 1% overall with 0.5% and 1.5% growth for our residential and commercial class respectively. We also experienced favorable weather across our service territory. At the same time, we funded incremental and maintenance activities in Missouri to improve grid and energy center reliability for the benefits of our customers. Of course, disciplined cost management remains core to our way of doing business. Process improvements across both states help us start jobs sooner and complete work faster, delivering tangible benefits for customers. For instance, in the past two years, we achieved $20,000,000 in recurring O&M savings from energy delivery process improvements including enhanced fieldwork scheduling that were implemented has improved productivity by about 25%. Looking ahead, continued efforts to simplify and standardize processes are expected to drive efficiency, improve customer experience, and help keep rates low as possible. With that, let us move to page 21 for a brief update on the constructive orders in both of our Illinois rate reviews in late 2025. In November, the Illinois Commerce Commission approved a $79,000,000 annual base rate increase at our natural gas distribution segment which reflected a higher return on equity of 9.6% and a 50% equity ratio. New rates were effective in December. In December, the ICC also approved a $48,000,000 reconciliation adjustment to the 2024 revenue requirement that was approved as part of the multiyear rate plan with new rates effective January 2026. This annual adjustment aligns customer rates with actual costs. Both orders were largely consistent with the administrative law judge's recommendations. Finally, in January, Ameren Illinois filed its required multiyear grid plan for 2028 through 2031 with the ICC, which outlines continued infrastructure investments needed for reliable, safe energy in Downstate Illinois. We would expect an order from the ICC on the proposed grid plan later this year. Turning to page 22. We look to our company wide capital plan for the next five years. As Marty highlighted, we see robust investment opportunities ahead. The plan we are releasing today calls for $31,800,000,000 in capital expenditures from 2026 through 2030, an increase of more than 20% compared to our investment plan issued last year. The increase in our capital plan primarily reflects the roll forward of our plan from 2029 to 2030 and the firming up of cost estimates and project timing. The investments themselves primarily reflect critical upgrades to strengthen and maintain an aging grid across all jurisdictions, significant new generation investments at Ameren Missouri, and expanded transmission capabilities to support resource adequacy, across the region. We expect this investment to drive 10.6% compound annual rate base growth. Which is outlined by business segment, on this page. For more detail on the electric investment underlying our capital plan, you may reference the Ameren Missouri Smart Energy Plan just filed with the Missouri PSC, as well as the multiyear grid plan filed recently with the Illinois Commerce Commission. Turning to page 23. Here, we outline the expected funding sources for investments noted on the prior page. Our balance sheet is strong, and we remain committed to funding our investment plan in a way that supports strong investment grade ratings, and long term financial strength. Our primary source of funding will continue to be cash from operations, which we expect to increase as sales grow and rates are updated. Remaining funding needs will be financed in a balanced manner consistent with our past practices. We expect to issue approximately $4,000,000,000 of equity from 2026 through 2030. We will fulfill our 2026 equity needs with $100,000,000 of forward sales agreement that we expect to settle near the end of the year. We expect above average equity issuance in 2027 and 2028 aligned with the timing of our new generation investments. The amount and timing of our equity needs will ultimately be a function of the timing of cash flows, including cash flows from data center sales. Timing and amount of which we expect to have further clarity on over the course of this year. A portion of our equity needs could be satisfied through issuance of hybrid debt securities at the parent company, which receive 50% equity credit from Moody's and S&P. We expect to continue to issue long term debt to fund the remaining cash requirements, to fund maturing obligations, and a portion of the $5,500,000,000 of planned investment. We expect debt issuances totaling approximately $2,850,000,000 in 2026. Expected timing of these issuances is shown on this page. Moving to page 24 of our presentation for our 2026 earnings guidance. Today, we are affirming our 2026 diluted earnings per share guidance range of $5.25 per share to $5.45 per share, midpoint of which represents approximately 8.1% growth compared to the midpoint of our 2025 original EPS guidance range. The earnings drivers are summarized on this page and remain largely consistent with those discussed on our third quarter earnings call. Through disciplined cost management, we will target limiting consolidated O&M expenses to less than the rate of inflation over the five year plan. Finally, turning to page 25. I am encouraged by the opportunities we have at Ameren to make lasting impact in our communities and shape the energy future for our customers. This is an exciting time in the industry, one that I could never have fully imagined when I started my career over thirty years ago. We remain confident in and excited about our long term strategy. One that we believe will continue to consistently deliver for shareholders. Our investment positions us to strengthen reliability, for all customers and attract and support economic growth in our communities. And our disciplined cost management and strong customer growth pipeline position us to do so while keeping customer rates low as possible. We expect that our strong earnings per share growth paired with our attractive dividend will provide a compelling total shareholder return that will compare favorably to the growth of our peers. That concludes our prepared remarks. We will now open for questions. Operator: We will now move to our question and answer session. If you have joined via the webinar, please use the raise hand icon, which can be found on the bottom of your webinar application. When you are called on, please unmute your line and ask your question. We will now pause a moment to assemble the queue. Our first question comes from Julien Dumoulin-Smith with Jefferies. Hey. Good morning. Can you guys hear me okay? Martin J. Lyons: Yes, Julien. Good morning. Hey. Love that it works. Excellent. Hey. Well, look. Julien Dumoulin-Smith: Nicely done all around. I have to hand it to you guys. Just a couple questions real quickly. First off, on the 2.2 gigs of executed ESAs, any caveats on why not to include it here? I mean, obviously it is relatively recent. And then separately, can you talk a little bit about the commentary about being at the upper end of the six to eight? Just how does that reconcile with the 2.2? How do you think about, for instance, CapEx reconciling with that and how that would position you here? I will leave it there. Martin J. Lyons: Yes. That is fine, Julien. I will try to, this is Marty. Obviously, I will try to answer those, those questions. Yes. Look. We are off to an exciting start to 2026, February in particular. You know, it has been this month that we have been able to sign these 2.2 gigawatts of ESAs. And as we talked about on the call as well, just this week, the Public Service Commission in Missouri approved our Big Hollow 800 megawatt simple cycle gas plant as well as some battery energy storage of 400 megawatts. And it is been an exciting month and a great start to the year. You know, as we think about our guidance and the sales growth looking ahead, as you know, what has been baked into our guidance over the past year has really been about 1.2 gigawatts of new demand by 2030. And as we talked about in our IRP last year, up to about a gig and a half by 2032. But for purposes of guidance, that 1.2 gigawatts by 2030 is certainly relevant. That, of course, was sort of the baseline that was in our preferred resource plan that we filed with the commission this past year and is shown on page 13 of the slide deck we posted today. But importantly, that 1.2 gigs, was in the guidance we provided, that 6% to 8%. And as we guided last year and we continue to guide, we really expect to be able to deliver near the upper end of that range over the five year period. So as you look at this 2.2 gigawatts of ESAs, that certainly represents upside to the sales growth that has been embedded in that 6% to 8% guidance. And in our assertion, we expect to deliver near the upper end of that range. So it does represent upside. Now as you mentioned, we just got these ESAs signed here in February, and there is a lot of milestones ahead with respect to the development of those data centers associated with those ESAs. You know, things like actual customer announcements, project announcements, groundbreakings, the construction of those data centers. So, again, I would say that the ESAs that we signed and the two point gigawatts, certainly gives us greater confidence with respect to our ability to deliver over this time period towards that upper end of that 6% to 8%. And I would say, depending upon the ramp rates, gives us the potential to even achieve above that. So we are very excited about it. It has been a great start to the year. Hopefully, that answers your questions. Julien Dumoulin-Smith: Absolutely. Thank you very much. I appreciate that. And then just if I can quickly follow up, you made reference here to hybrid securities real quickly. How do you think about that as being part of the plan? I mean, clearly, is. Do you think about that strategically here? And is that accretive to the plan when you talk about being near the upper end of six to eight? Is that an incremental source of latitude here just to come back to what is in versus out of the plan? Martin J. Lyons: Yes. I think as you think about utilization of these securities versus straight equity, it might be slightly accretive in the short term. I think over time, we would have to evaluate whether it is or is not from that standpoint. Obviously, there is the interest cost associated with those securities. So it may be more of a neutral, over time, but something that we are going to evaluate as we think about the financing plans we have ahead. Obviously, one of the things that we have really utilized over time are these ATM issuances to fulfill our equity needs. I think we will continue to lean on that heavily, that kind of approach as we think about our financing plans. But always want to keep our options open. Julien Dumoulin-Smith: Awesome, guys. Alright. I will leave it there. Thank you so much. Michael L. Moehn: Our next Operator: question comes from the line of Shahriar Pourreza with Wells Fargo. Please unmute your line and ask your question. Andrew Kirk: Good morning. It is actually Andrew Kadavy on for Shar. Thanks taking my questions. Julien Dumoulin-Smith: Morning, Andrew. With your rate base CAGR at Andrew Kirk: 10.6% and your EPS CAGR at 6%–8%, there is a healthy amount of lag. How much of that is financing versus how much is structural? And how much can you narrow the lag in time and put upward pressure on the 6%–8%? Martin J. Lyons: I am just trying to follow you. So maybe repeat that question for us. Yes. So there is a Julien Dumoulin-Smith: a little bit of lag between your rate base growth and your earnings growth, and I just want to know how that breaks down between financing and maybe other structural issues. And then is there Andrew Kirk: there a way to narrow that lag? Martin J. Lyons: Yes. No. I have got you. Look. I think if you look at our rate base growth, about 10.6%, and you think about the amount of equity that we plan to issue, and think about the dilution from that, that is the primary difference between the 10.6% rate base CAGR and where we plan to deliver from an EPS perspective, which, as I just said a moment ago, is consistently towards the upper end of that 6% to 8% range. I think the other thing to think about over this time period is as these sales come better into focus, from the hyperscalers that we are working with in these ESAs, that too can help to reduce any differential that we have between allowed ROEs and earned ROEs that also can help from an earnings perspective. So those are some of the big drivers that come to mind. And then I would just say, we are obviously a fully rate regulated business. And as you well know, there can be lag as you think about over time during the periods between rate reviews. And so those are just some of the things to think about in terms of the earnings growth, the earned ROEs, etcetera. Andrew Kirk: Thank you. Very helpful. Switching gears a little. We have seen some data center developers cancel projects despite having signed ESAs in place in other states. Carly S. Davenport: Are there any concerns on your end about the potential for cancellations with your ESAs? And could you give us a little color on when the large load take or pay provisions in the ESA became binding for the customer? Martin J. Lyons: Yes. All really good questions. First of all, with respect to these ESAs, the counterparties and the terms of these, and the ramp rates are all highly confidential. So cannot get into any of that. I would not say that we have any concerns with respect to these ESAs or the projects coming to fruition. That said, I mentioned there is significant milestones ahead in terms of project announcements, the groundbreaking, the construction. So certainly recognize those uncertainties as we look ahead. But, again, our 6% to 8% EPS growth guidance, our expectation of delivering near the upper end, again, was really based on about 1.2 gigawatts of sales growth between now and 2030. ESAs we have signed represents upside. And I think that speaks to the conservatism that we have in our overall guidance range. Given again some of the uncertainties ahead. But we certainly do not have any concerns as we sit here today. Yes. I did. This is Michael. I agree with I agree with everything that Marty is saying. I think beyond that, there are a number of provisions, obviously, in the tariff itself and the ESA that are protective to customers. In terms of termination provisions, minimum monthly payments, Julien Dumoulin-Smith: security, Martin J. Lyons: requirements, etcetera. So a number of links have gone numbers have gone to great lengths here to make sure that we are protecting customers at the end of the day as well in case that would happen. Yes. Those are great points, Michael. And, while we cannot speak to the specifics of individual ESAs, you can see some of that outlined on slide 12 that, as Michael mentioned, are all part of our large load tariff design. Carly S. Davenport: Thanks. I will leave it there. Operator: Our next question comes from the line of Diana Niles with JPMorgan. You may now unmute your line and ask your question. Hey. Good morning. Thank you so much for taking my questions today. Michael L. Moehn: Hey. So how do you Martin J. Lyons: Good to have you. Operator: Thanks. So looking at your infrastructure investment pipeline, are there timing considerations? To some of the future opportunities there? Thinking about how much might fall within the five year plan period or how much visibility you have beyond 2030? Martin J. Lyons: Yes. Are you really getting to the CapEx and how we see that playing out? At a high level, we talked about over the ten year plan, really about $70,000,000,000 of investment opportunities, and we laid that out in our slide. And then, during the five year period, expecting $31,800,000,000 of infrastructure investments. And largely being driven by generation investments in Missouri. As we think about transitioning our fleet over time. But that may not be specifically answering your question if you want to dive a little deeper. Operator: Yes. I guess sort of asking there, like, maybe how to think about the cusp between like, the five year plan of 2030 and beyond. Like, we are seeing continued smooth investment there, or are you thinking about filling more opportunities in? Martin J. Lyons: Yes. I think look. We try to smooth things out over time. I think it is something that is certainly good for customers as you think about bringing those investments into rate base over time. And making a stable investment profile overall. At times, it will be a bit lumpy, though. As we especially as you think about some of the infrastructure investments we have with respect to generation resources, they can certainly be more significant investments and create some lumpiness in the investment profile. And so, a couple things we have got coming up. As you can see in our slides, we have got some significant investments in simple cycle gas fired generation that are coming into service in 2027 and 2028. If you look at our integrated resource plan, we have a pretty significant combined cycle facility, 2,100 megawatts that we plan to bring into service in the 2031 time frame. So there is certainly some lumpiness there. The other thing I would say just to watch for did not emphasize it necessarily on this call, but did highlight it, which is that later this year, we do expect to make our triennial integrated resource plan filing in Missouri. And in that plan, we will certainly be looking at any opportunities to accelerate generation investments. Specifically maybe looking at things like batteries, perhaps renewables. But as you move into that 2030 to 2040 time frame, also looking at the need and potential additional investments in dispatchable generation facilities. I do not want to front run that process. It is a comprehensive update. We will look comprehensively at sales, generation options, costs. We will get stakeholder input. And, but, again, that will be a meaningful filing we will have later this year. The other thing I would maybe point you to is, today, we also, in Missouri, announced our updated Smart Energy Plan. If you look into the details of that filing you can kinda see some of the year by year investments, that are planned in Missouri. Similarly, if you look over in Illinois, Michael L. Moehn: earlier this year, we made our updated grid plan grid investment plan filing. There too, you can see some of the planned investments on a year by year basis. So those are a couple of resources you can look to that are out there publicly. Operator: Great. Thank you very much. Our next question comes from the line of William Appicelli with UBS. You may now unmute your line and ask your question. Martin J. Lyons: Yes. Hi. Good morning. Carly S. Davenport: Morning, Bill. Andrew Kirk: Just a couple of quick Michael L. Moehn: On the theme of affordability, can you just maybe outline Brian J. Russo: how you guys view this updated plan in terms of customer bill impact? I guess, particularly in Missouri. And whether or not the benefit of the ESAs would help to defray some of that impact? Martin J. Lyons: Yes, Bill. Affordability is certainly a key concern of ours on an ongoing basis across Michael L. Moehn: both of our jurisdictions in Missouri and Illinois. And, as you know, really focusing on disciplined cost control, has been a focus, a long time focus of this company. In fact, as you look back even over the past five years, I think our O&M CAGR was something like 2.8% at the same time that consumer prices went up about 4.6%. So we have got a history of really looking to continuous improvement at the company to really take costs out to produce productivity enhancements and optimize. But that work is never done. Certainly, there is always the benefit of new technologies, new ways of doing things. And, we are continuing to keep a sharp focus on continuous improvement and process improvement. We call them transformation activities internally. We have got a number of efforts going on right now that, again, we expect to be able to continue to bend that cost curve. And as we said on the call, really look to keep O&M costs as low as prudently possible and really deliver under that rate of inflation. And I say prudently because there are times we are going to want to invest back in the system. We have done that with things like tree trimming, investments in our power plants, things that really keep our resources reliable and produce good reliability for our customers. So we are going to keep a good focus on all of those things. As we think about this incremental sales opportunity we have, a key focus of Senate Bill 4 in Missouri last year was really to require that at the end of the day, we design a tariff that really is focused on making sure that these new data centers are paying for the cost to connect them to the system. And paying their fair share for the cost to serve them. Really providing reasonable assurance that there is no burden being borne by the rest of our customers. So that was a focus of the legislature. And certainly a focus of the Missouri commission as they approved the tariff that we will be utilizing to serve these customers. It was a focus of ours as we went through the negotiation of the ESAs that we announced earlier today, and I think it will be a continuing focus as we go through our rate review proceedings in the future. But again, the goal is for them to pay their fair share, the cost of providing them service, and at a minimum, to not have a burden fall on the rest of our customers. And we are certainly hopeful that over time, as these sales increase, that there would actually be benefits for the remainder of our customers. So again, affordability has been and will continue to be a big focus for us. Brian J. Russo: Okay. That is very helpful. And then just a point of clarification. The 3.4 gigawatts of construction agreements, I guess, that is inclusive of the 2.2 ESAs, right? So does that imply that there is about 1.2 gigawatts of sort of advanced negotiations around additional large load customers? Michael L. Moehn: You know, some are advanced, some are not. I would just say that, that is you are correct, by the way. The 3.4 is inclusive of the 2.2. And they are in various stages of development. Brian J. Russo: Okay. And then just to an earlier question about rolling in the benefits of the ESAs. Is that something you would look to do on a future quarterly call, or would that need to wait until, you know, sort of your next full reset, you know, maybe on Q3? Martin J. Lyons: Yes. Look. I think we will monitor over time. You know? Michael L. Moehn: I mentioned some of the milestones ahead with respect to the development of these data centers and getting clarity in terms of a sales forecast. I also mentioned other drivers that might be out there. For example, we have an update to the integrated resource plan later this year in Missouri. I think there will be a number of things that will come into greater focus over the course of the year. I would not rule out an update as part of a quarterly conference call. Obviously, things are moving at a faster pace than they historically and we will need to think about being more nimble as well in terms of the guidance we provide. Brian J. Russo: Alright. Great. Thanks very much. Michael L. Moehn: Our next Operator: comes from Carly S. Davenport with Goldman Sachs. Please unmute your line and ask your question. Good morning. Thanks for taking the questions. Carly S. Davenport: Maybe one just on Missouri. I know we are still pretty early in the legislative session there, but I think there have been some bills introduced, around data centers and other. So just curious if you have any early thoughts on potential impact there or if there is any other legislation that you have been watching. Michael L. Moehn: Hey, Carly. It is Michael. Yes. There are a number of bills floating around. There are a couple of bills related to solar. We continue to engage with stakeholders, sponsors around that. It is early innings. I think people are open to discussion. Again, with all resources, there is always certain concerns. My sense is that we can find a path forward on this. Maybe related to some solar setbacks or some changes in local taxing authority, but look, solar is an important resource, combined with Brian J. Russo: everything else that we are doing from a natural gas and nuclear or coal perspective. Michael L. Moehn: As we just indicated, Marty just went through eloquently, we need all of this generation. So we engage with the stakeholders around this, and, hopefully, we can land in a good spot. Beyond that, not a lot of, you know, we had some success, obviously, last year with Senate Bill 4. The focus really has been on the implementation of that Senate bill. There were a number of provisions in there around future test years for water and gas utilities. Those rulemakings are active and we are participating in that process. That is important. We get that right. I think that could be a framework for us going forward on the electric side. And beyond that, we will just continue to evaluate the session. Carly S. Davenport: Got it. Great. Thank you for that. And then just a question as you think about the financing path. Any sense how much of the equity you could look to satisfy with the hybrids? And then outside of that, is the ATM still the sort of preferred method of issuance? Michael L. Moehn: Hey. Good morning, Carly. Thanks for the question or Sophie. Carly. I am sorry. Thanks for the question. As we said in the plan, we have not specified what amounts we are going to be using. But the plan, if you think back at the $4,000,000,000 over the five years, it is on average $800,000,000 a year. Remember, 2026 was completed with a forward sales agreement. We have had success with ATMs over the year. And we will continue to leverage that throughout the plan. Hybrids are part of the solution, and we will continue to make determination as we progress throughout the year. Carly S. Davenport: Great. Thank you so much for the color. Operator: Our last question comes from Sophie Karp with KeyBanc. Please unmute your line and ask your question. Hi. Good morning. Thank you for taking my questions. Michael L. Moehn: So Sophie Karp: Hi, Sophie. Was hi. I was wondering how you guys William Appicelli: see your role in, I guess, educating the communities, particularly in Missouri, on the benefits of having the data center under the special tariff and whether it is actually any benefits to them. Because what we see is a lot of pushback on it, because of the media coverage that data centers receive and all of communities without maybe that there might be a benefit to them begin to oppose these developments. So my question is, do you see yourself having a role in actively educating these communities to prevent those outcomes? Michael L. Moehn: Well, I think we have a role specifically with respect to clarifying the impacts on reliability, affordability of energy services. And so I think with respect to the broader benefits to the community in terms of jobs, economic development, impacts on other aspects. I think, again, it would be up to really the data centers developers, the hyperscalers, to provide clarity with respect to broader impacts of their operations. We think it is, again, important for us to be there and be engaged and to be able to speak to the legislation that has been put in place, the terms and conditions of our tariffs, the ESAs that we are signing, also important, the generation resources that we have available, the generation resources that we are building. And the fact that we do believe we can serve these additional customers reliably. And as I said earlier in my remarks, provide service to them in a way that they will be paying for the cost to connect them to the system, and they will be paying for the cost to serve them. And the reasonable assurance that can be provided to the rest of our customers that they will not be negatively impacted by the service provided to these customers. And so I do think we have a role in speaking to that. William Appicelli: Alright. Thank you. And then maybe on Illinois a little. Do you, I guess Illinois has been kind of not on the forefront of your investment plan lately. Can you talk a little bit about the regulatory climate in that state? How it has been evolving? And is there a potential for upside from the multiyear grid plan or some other pending regulatory proceedings? In Illinois. Michael L. Moehn: Yes. So, yes. Look. Illinois does remain, obviously, an important part of our business. And, I would say, we do continue to invest significantly in Illinois. As you see in our five year plan about $3,600,000,000 in electric distribution, we have got $1,900,000,000 going into Illinois natural gas. And they are growing at somewhat of a slower growth rate than we are seeing with respect to our transmission operations and Missouri but continues to be a significant place for investment. And I think if you look at the regulatory environment over there, I would tell you, I feel like it is stabilizing, and, in some cases, improving. If you look at this past year end and you can see some of this on slide, I think, 21 that we provided, but the commission approved the reconciliation for our last multiyear rate plan. In December. In November, we got an order in our gas case that we had pending. And, what you saw there is both an increase in average rate base going from $2,850,000,000 to $3.2, and you saw an ROE move from 9.44 up to 9.6. And so, I think, it is a place that I know there were concerns over the past couple years, and I am not saying those concerns have completely dissipated in the investment community. But I think we have seen a stabilization, I would say, constructiveness with respect to the recent decisions. We have got this multiyear grid plan filing that is out there. We just made that in January. In that filing, we look to listen to feedback we have gotten from commissioners and other stakeholders in the past. We look to really support the investments that we are making there. We think they are the right investments to make for our customers. And we will look to engage with stakeholders over the course of this year and expect an ICC decision in December. Hey, Sophie. It is Michael. Yes. I agree with everything that Marty said there. But, in addition to that, I think the other thing that came out of this recent legislation, this surge of legislation that was filed, this construct of an IRP. The state of Illinois. I think that it really is a very good constructive step forward to give a clear picture of the resource adequacy issues, in both PJM and MISO. Hopefully, within a framework to begin to deal with this from a long term reliability. So we look forward to engaging in that. And think it does continue to add to Marty's comments around the stability of the state. Sophie Karp: Great. Thank you. Appreciate the comments. Operator: There are no more questions at this time. I would now like to turn the call over to Martin J. Lyons for closing remarks. Michael L. Moehn: Well, again, thank you all for joining us today. I think you can tell we are off to an exciting start here in 2026 as a company. I want to once again thank the entire Ameren team, for all of their hard work serving our customers, serving our communities, and delivering the results that we have been able to deliver. And with that, for all of you that joined us today, please be safe, and we look forward to seeing many of you as we get out on the road in the months ahead. Michael L. Moehn: Thank you.
Operator: Ladies and gentlemen, hello, and welcome to today's Tyler Technologies, Inc. Fourth Quarter 2025 Conference Call. Your host for today's call is H. Lynn Moore, President and CEO of Tyler Technologies, Inc. Later, we will conduct a question and answer session, and instructions will follow at that time. In order to address your questions and stay within the allotted time, please limit yourself to one question per person. You may get back into the queue for a follow-up. As a reminder, this conference is being recorded today, February 12, 2026. I would like to turn the call over to Hala Elsherbini, Tyler's Senior Director of Investor Relations. Please go ahead. Hala Elsherbini: Thank you, Abby. Operator: And welcome to our call. With me today is H. Lynn Moore, our president and chief executive officer and Brian K. Miller, our chief financial officer. After I gave the safe harbor statement, Lynn will have some initial comments on our quarter, and then Brian will review the details of our results and our annual guidance for 2026. Lynn will end with some additional comments, and then we'll take your questions. During this call, management may make statements that provide information other than historical information and may include projections concerning the company's future prospects, revenues, expenses, and profits. Such statements are considered forward looking statements under the safe harbor provision of Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties, which should cause actual results to differ materially from these projections. We would refer you to our Form 10-K and other SEC filings for more information on those risks. Also in our earnings release, we have included non-GAAP measures that we believe facilitate understanding of our results and comparisons with peers in the software industry. A reconciliation of GAAP to non-GAAP measures is provided in our earnings release. We have also posted on the Investor Relations section of our website under the financials tab, a scheduling and supplemental information including information about our quarterly recurring revenue and booking. On the events and presentations tab, we posted an earnings summary slide deck to supplement our prepared remarks. Please note that all gross comparisons we make on the call today will relate to the corresponding period of last year unless we specify otherwise. Lynn? Hala Elsherbini: Thanks, Hala. Operator: Our fourth quarter results provided a solid finish to 2025. H. Lynn Moore: A year that demonstrated the resilience of our business and end markets. Throughout 2025, we demonstrated what decades of disciplined execution look like. Navigating shifting macro sentiment while advancing our strategic priorities and delivering on key performance metrics. Recurring revenue growth and free cash flow are two key metrics both surpassed expectations in the fourth quarter. Recurring revenues grew 11%, led by SaaS revenue growth of just over 20% and transaction-based revenue growth of 12%. Free cash flow was a fourth quarter record up nearly 10% with our free cash flow margin expanding to an exceptional 41%. Public sector market fundamentals and the demand environment remain strong. Generally healthy budgets are supporting an active pipeline, and RFP and sales demo activity remain at elevated levels. As agencies prioritize modernization of aging mission critical systems essential to their digital transformation, workforce optimization, and efficiency initiatives. Our sales organization delivered solid execution in the fourth quarter, as total SaaS bookings grew 9.6%. In particular, we saw strong momentum from flips of on-premises clients to the cloud, both the number and the value of flips signed during the quarter represented new quarterly highs. Annual contract value from flips signed this quarter rose 64.5% over last year and 54.8% sequentially. We are well positioned to capitalize on the significant opportunities ahead, supported by a proven business model and clear competitive advantages. Our four key growth pillars guide our execution. Completing our cloud transition, leveraging our large client base, growing our transactions business, expanding into new markets. Our transaction-based business continues to be a significant growth driver, and I want to highlight the progress we made during 2025. We consolidated our payments operations across Tyler under our new industry proven leader, Ryan O'Connor, executing a unified payment strategy that positions us to capture greater value and drive operational efficiencies. We are focused on value-added transaction services that are deeply embedded in our solutions across multiple use cases. Like utility billing, municipal courts, licensing and permitting, property taxes, and parks and recreation. This full end-to-end integration provides significant value for our clients by streamlining operations and improving citizen experiences while also creating a differentiated competitive position for Tyler. Now I'd like to highlight a few fourth quarter wins that illustrate progress against our growth objectives with a broader list of key deals included in our quarterly earnings deck. We expanded our relationship with one of our major state enterprise clients, signing contracts for digital motor vehicle titling, which will be transaction funded and SaaS contracts for a statewide cashiering solution well as our recreation dynamics and data and insight solutions. In Alabama, signed SaaS contracts for our enterprise ERP solution with two of the state's largest school districts. The Jefferson County Schools and the Huntsville City Schools. We also signed a SaaS agreement for our enterprise jail solution with Riverside County, California. An existing court software client. I mentioned earlier it was one of our biggest quarters ever for flips. Contracts signed in Q4 for flips of on-premises clients included LA County, California, flipping their enterprise permitting licensing system while also adding our fire prevention mobile sys solution in the cloud as well as payments. Enterprise public safety flips with the cities of White Plains, New York and Beverly Hills, California, our first public safety flip in California. Two of the six largest counties in Texas, Travis County and Collin County, signed a contract to flip their enterprise justice solutions. Contra Costa County, California also is flipping their enterprise justice solution while adding traffic court, including payments, to their portfolio of Tyler solutions. And enterprise ERP flips with Marin County, California and Madison, Wisconsin. We also continue to see sales success in transactions, with key wins and an active pipeline of opportunities that reinforce the strength of our unified payment strategy. Key fourth quarter wins included a payments contract with Multnomah County, Oregon, an existing appraisal and tax software client, We also signed a contract with the State of Maryland Administrative Office of the Courts, an existing enterprise justice software client for payments and disbursements. Finally, our state sales team is building early momentum, opening new doors and advancing strategic statewide opportunities. Through strong internal alignment and collaboration, we signed a statewide contract this quarter with the New Mexico Department of Corrections, for our inmate services financial suite warehouse management administration suite. Now I'd like Brian to provide more detail on the results for the quarter and our annual guidance for 2026. Thanks, Lynn. Total revenues for the quarter were $575,200,000 up 6.3%. During the quarter, we recorded a one-time noncash loss reserve related to a contract dispute with a state government client. In early 2022, we received a notice termination for convenience under a software license contract with that client. Upon receipt of the termination notice, we ceased performing services and sought payment as contractually owed fees in connection with the termination for convenience. This type of dispute is very unusual for us, and we have disclosed its existence in our financial statements since 2022. Since then, we have attempted to resolve the dispute and filed a lawsuit to enforce our rights and remedies under the contract. Although we believe our products and services were delivered in accordance with the terms of our contract and that we are entitled to payment in connection with the termination for convenience, at this time, the matter remains unresolved. While we are continuing to pursue our claims, we have no remaining balance sheet exposure. The reserve resulted in the reversal in the fourth quarter of approximately $8,800,000 of license revenues and $900,000 of professional services revenues. There is no impact on recurring revenues or cash. Excluding the impact of this reserve, revenue growth in the quarter would have been 8.1%, our operating margin would be 120 basis points higher, and EPS would be $0.17 higher. Subscriptions revenue continued to exhibit strength and increased 16.1%. Within subscription, SaaS revenues grew 20.2% and eclipsed $200,000,000 in a quarter for the first time. As we've discussed previously, there's often a lag of one to several quarters from the signing of a new SaaS dealer flip to the start of revenue recognition. Because of this as well as the timing of SaaS renewals and related price increases, SaaS revenue growth and SaaS bookings both year over year and sequentially may fluctuate from quarter to quarter. Transaction revenues grew 12.1% to $1,967,000,000 driven by higher transaction volumes for both new and existing clients, increased adoption and deployment of new transaction-based services, and higher revenues from third-party payment processing partners. As previously discussed, revenues under the Texas payments contract ended in Q4. Actual revenues from the contract in the fourth quarter were approximately $3,000,000 which is almost $4,000,000 less than we anticipated going into the quarter. Total bookings in Q4 were solid at $601,000,000 essentially flat with last year's fourth quarter against a very difficult comparison. For the full year, total bookings grew 1.4%. Total SaaS bookings, including new SaaS deals, flips of on-premises clients, expansions, and renewals, grew 9.6% year over year. As we've discussed previously, last year's fourth quarter bookings included an unusually high number of large deals including a $25,000,000 eight-year agreement with the State of Maine, as well as some pull forward of deals because of deadlines for the commitment of federal ARPA funds. Bookings growth this quarter was driven by strength in flips, expansions and renewals, coupled with solid new client activity. Total SaaS bookings for the full year grew 4%. Annual contract value from flips signed this quarter was $28,100,000 up 64.5% over last year and up 54.8% sequentially from Q3. Our total annualized recurring revenue was approximately $2,060,000,000 up 10.9%. Our non-GAAP operating margin was 24.1%, down 30 basis points from last year. For the full year, our non-GAAP operating margin was 26%, up 150 basis points from last year, reflecting a continued positive shift in revenue mix towards higher margin SaaS and transaction revenues and efficiency gains across our cloud operations. Cash flows from operations and free cash flow were both robust and reached new highs for a fourth quarter at $243,900,000 and $236,900,000 respectively. For the full year, free cash flow was $620,800,000 with a free cash flow margin of 26.6%. We ended the quarter with cash and investments of approximately $1,160,000,000 and $600,000,000 of convertible debt outstanding, which we expect to repay when it matures in March. Our annual guidance for 2026 is as follows. We expect total revenues will be between $2,500,000,000 and $2,550,000,000. The midpoint of our guidance implies growth of approximately 8.3%. We expect GAAP diluted EPS will be between $8.30 and $8.61 and may vary significantly due to the impact of discrete tax items on the GAAP effective tax rate. We expect non-GAAP diluted EPS will be between $12.40 and $12.65. Our estimated non-GAAP tax rate for 2026 is expected to be 23% up a half percent from 2025. We expect our free cash flow margin will be between 26%–28%. We expect research and development expense will be in the range $242,000,000 to $247,000,000. Other details of our guidance are included in our earnings release and in the Q4 earnings deck posted on our website. I'd like to add some additional color around our revenue guidance. We're pleased that our SaaS and transaction revenues are growing in line with or ahead of our 2030 objectives, and that lower margin revenues like services and hardware are growing at a slower rate. Subscription revenues in total are expected to grow between 12% and 15%. Within subscription, SaaS revenues are expected to grow between 20.5% and 22.5%. Transaction revenues are expected to grow between 5%–7%. As we've discussed for some time, our payments contract with State of Texas ended in 2025. Transaction revenues from that contract totaled approximately $36,000,000 in 2025. Excluding the impact of the Texas contract, our expected transaction revenue growth in 2026 would be between 10%–12%. And our expected total revenue growth would be between 9%–11%. Maintenance revenues are expected to decline 5% to 7%. Professional services revenues are expected to grow 3% to 5%. License revenues are expected to grow 15% to 17%. Excluding the impact of the contract loss reserve recorded in 2025, license revenues would be expected to decline 30% to 32%. Hardware and other revenues are expected to decline 17% to 19%, as 2025 included revenues associated with deliveries of hardware under two large contracts for our student transportation and enforcement mobile solutions. Also note that our guidance does not include the impact of any potential acquisitions in 2026 including the recently announced pending acquisition of For The Record. While we expect that transaction to close late in the first quarter, it is subject to regulatory approval and the timing is therefore uncertain. Now I'd like to call the turn the call back to Lynn. Operator: Thanks, Brian. H. Lynn Moore: I'm pleased with our fourth quarter performance. Closing year of solid performance that exceeded our expectations. I remain confident in our ability to deliver sustained growth through our unique competitive strengths that position us to lead our clients' digital transformation through enhanced cloud capabilities, an elevated client experience at every touch point, and the next wave of AI modernization. I'd like to provide a few brief updates on AI. As we discussed during our third quarter call, there's a lot of noise in the market. But in the public sector, technology alone does not win. For more than 25 years, Tyler has guided clients through successive ways of transformation and our approach remains the same. Deep domain expertise, trusted client partnerships, and disciplined execution. We are seeing that approach translate into real adoption. Over the past year, the Tyler resident AI assistant has gone live in six states: Alabama, Hawaii, Indiana, Mississippi, Nebraska, and South Carolina. Strengthening our broader resident engagement portfolio and making digital government more accessible and responsive. Indiana continues to be a strong proof point with approximately 17,000 residents using the assistant each month, generating nearly 50,000 questions directed to government services. That level of sustained usage helps agencies manage a high volume of routine questions through self-service reducing the need for manual responses and freeing staff time higher value work. We also saw continued commercial momentum with our AI-enabled solutions in Q4. Highlights included contracts for priority-based budgeting with the Alabama Department of Corrections, and the City of Plano, Texas. We also signed a contract with Fairfax County, Virginia for our AI resident assistant solution, our first resident assistant win at the county level. On the product side, we are transitioning agentic AI concept to disciplined deployment. We will initiate early access with select customers in Q1, integrating agentic capabilities directly into our enterprise permitting and licensing and supervision platforms. By embedding AI into the operational workflows that drive daily decision making, we expect to unlock significant efficiency service improvements. Following validated performance with early adopters, we plan a phased expansion through 2026 and beyond. Importantly, building this road map together with clients. Our enterprise ERP AI client advisory board held its initial meeting last month, reinforcing feedback we have also heard in forums like last year's Tyler Connect, our Courts and Justice Executive Forum, and our State Connected Forum. Clients do not want bolt-on tools that add complexity. They want practical AI that is deeply integrated into the systems they already run, governed appropriately, and that solve real world problems in a dependable trusted way. That is exactly where Tyler's deep domain expertise, trusted partnership, and disciplined execution differentiates us. And why we believe no one is better positioned to deliver it. As we grow free cash flow, we remain highly focused on our disciplined capital allocation and being responsible stewards of Tyler's capital to drive long term shareholder value. We continue to balance investments across multiple areas by making targeted investments in product development and R&D with particular focus on improving cloud operations, and scaling AI solutions that demonstrate clear ROI for clients. We are also building enhanced feature sets that advance product differentiation, and reinforce our market leadership while maintaining disciplined spend that drives both innovation and internal efficiency. During 2025, we completed four strategic acquisitions that deepen our capabilities and expand our addressable market. We recently signed a definitive agreement to acquire For The Record. A digital court recording pioneer with over 30 years of experience as a trusted category innovator. We've had a minority investment in For The Record since 2015, a natural extension and significant addition to our courts and justice portfolio. For The Record elevates agencies with advanced platform including AI-powered, multilingual transcription technology that perfectly complements our own courtroom technologies. Solving a critical need for a court reporting industry that faces growing challenges. Its proprietary cloud-enabled software is specifically designed for the complexities of today's courtrooms and will help create a seamless courtroom ecosystem expanding efficiencies for judges, clerks, and attorneys. By bridging the data courtrooms generate every day, with the digital case file, and accelerating tasks that data can inform through AI, these solutions offer a new category of judicial intelligence to our offerings. We look forward to welcoming the team after closing and to working together to drive our shared mission of improving access to justice through transformative technology and deliver a truly comprehensive solutions that benefits the industry. Last week, we announced our board's authorization of a new share repurchase program of up to $1,000,000,000, replacing our previous repurchase authorization. This announcement underscores our confidence in the trajectory of our business and reflects our view that Tyler shares represent an attractive value at current levels. Our reliable cash flow generation and extremely strong balance sheet enable us to opportunistically return capital to shareholders while continuing to invest for sustained growth. Each year, we become foundationally stronger and better positioned to on our long term growth strategy and we remain on target to achieve our 2030 goals. We look forward to updating our progress toward our 2030 objectives, and providing additional insight into our purpose built AI strategy and broader strategic initiatives during our upcoming investor day scheduled for June 9 in Frisco, Texas. We hope to see you there. Now we'd like to open up the lines for Q&A. Operator: Thank you. We will now open for questions. If you would like to ask a question, please press 1 on your touch tone phone. If you're using a speaker phone, please pick up your handset and then press 1. If you would like to withdraw your question, simply press 1 a second time. As a reminder, please limit your question to one question so that we may stay within the allotted time. And we'll pause momentarily to assemble our roster. And our first question comes from the line of Matthew David VanVliet with Cantor. Your line is open. Matthew David VanVliet: Hey, good morning. Thank you for taking the questions. I guess kind of a multi part question on SaaS flips I guess how should we think about the level this quarter on a go forward basis? Is this kind of a new baseline given the success you've had and the ability to help do those flips quickly and efficiently for customers. Then second part with that, how should we think about any upcoming renewal cohorts Any anything to call out from a a sizer quantity there that might influence a greater success on the flip side? And and how tight has that been so far? Thank you. Yeah, Matt. On the first part, we we don't guide to a flip number. We have said that we expect flips to continue to grow. From the level they're at now. They certainly can vary from quarter to quarter. We've said that we still expect the peak, especially with respect to large clients, to be in the 2027 through 2029 time frame. But but I guess it would be accurate to say that that this is the base that we expect to to continue to grow from. Don't think there's anything particular to call out around renewal cohorts. We obviously have very high renewal rates. The timing of renewals varies across the year. We are having continued success, and Lynn mentioned a couple of those flips that had add on components to them, so we are having continued success with selling additional products and services to existing clients as they flip to the cloud, and we expect, continue to expand that opportunity. Alright. Great. Thank you. Operator: And our next question comes from the line of Joshua Christopher Reilly with Needham. Your line is open. Joshua Christopher Reilly: All right, great. Thanks for taking my question. As we think about the ACV from new SaaS deals, can you remind us the comp issues for Q4? It seems like that was a good number adjusting for the large deal activity a year ago. And I know you don't guide to it, but, should we expect growth off that $53,000,000 figure that you did in 2025 and 2026. Thank you. Yeah. We don't guide the specific bookings numbers, but we do expect bookings to grow SaaS bookings to grow in 2026. And when we've given some commentary on the market conditions that support that expectation and Q4 was a really good solid sales number. Last year's fourth quarter, as a reminder, had a number of large deals, especially deals that were multimillion dollar SaaS deals. Biggest was a $25,000,000 eight year deal with the State of Maine for resident engagement portal. We had an $11,000,000 deal with Kenosha, Wisconsin for ERP. And three other deals that were over $4,000,000. Also, those deals last year had a longer duration. This year, the average duration of the SaaS of the new SaaS deals was closer to our our sort of standard at 2.3 years. Last year, it was 3.7 years. So there was a duration component to last year's bookings as well as just an unusually large number or high number of large deals. This year, the the mix of deals, the number of large deals was I'd say, more normal. I'd say too, Josh. The the individual factors that still go into a client's decision to flip still exist. But I do think one of the factors one of things I talk about, whether it's flips or other things around Tyler, is momentum builds builds momentum. And the more success that clients see their neighbors and peers having, helps to helps with that decision. But there there's still sometimes, you know, budget concern budget issues or technology issues or version issues that we we're still dealing with. But, clearly, the more success we have, it will it will continue to build and create more success in the future. Thank you. And our next question comes from the line of Terry Tillman with Truist. Operator: Your line is open. Terrell Frederick Tillman: Good morning, Lynn, Brian and Hala. Thanks for taking my question. It's a two part question. I saw in one of the slides on some of the deal activity, it was a the state sales team in New Mexico did a corrections deal. I know you all have been working on building out some of the kind of state focused sales teams more, to get more out of the the opportunities you have there. So maybe if we could, double click into that And the second part of the question, somewhat unrelated is, when we look at the SaaS revenue, you gave the guide for '26. Is there any way to think about sequencing each quarter? I mean, could there be quarters where it's sub-twenty, some quarters where it's well above 20? Just anything more you could share on kind of the flow. Yeah. Sure, Terry. I'll I'll start. Brian, I'll let you take the second one. Yeah. Our state sales team this was an initiative we really started a little over a year ago. It's taken some time to sort of build out and we're still in the early stages of it. But we're pretty excited with the results that we've seen so far. The collaboration across Tyler, the ability for that state sales team to leverage their relationships, to get Tyler products in through those those connections. Know, it's one of the reasons we we acquired NIC to begin with. That deal in New Mexico a deal that doesn't happen without that state sales team. And it's collaboration across them and a couple of other divisions. We don't often talk about we don't really actually don't often. We don't talk about awards. We only talk But the state sales team also had really good, sales success in Q4. about bookings. But generally speaking, the success that that sales team had really encouraging, particularly with some larger deals over $1,000,000 in ARR. Q4, Some of that take time to ramp up, some that can expand over time. But we're we're excited about where it is, but but we're early innings with that. And but it it's something that's I think that we're gonna continue to leverage over the the upcoming years. And, yeah, the midpoint of our guidance for SaaS growth is 21.5%. I I don't think there's anything in particular that stands out with respect to any single quarter being varying a lot, from that 20 plus percent to range. It it can vary with timing of that lag from when we sign something to when the revenues actually hit. As well as the timing of flips. But generally, I think growth would be expected to be fairly consistent across the year. Great. Thanks. Operator: Our next question comes from the line of Alexei Gogolev with JPMorgan. Alexei Gogolev: Hello, everyone. Can you talk a bit more about partnerships that you have with various AI players, the management and traffic quarter. Maybe you can elaborate on the recent evolution of those partnerships. So with the the partners we use in conjunction with our AI development activities, we do work with Anthropic and AWS and with and OpenAI. We have active relationships with with all of those major players connection with the development work we're doing to bring AI into our products. Operator: And our next question comes from the line of Ken Wong with Oppenheimer. Ken Wong: Fantastic. Thanks for taking my question. You know, you guys called out the the tough comps through most of '25 due to the ARPA pull forward. As you guys look to '26, is how comfortable are you that you know, that that ARPA dynamic was was kind of limited to just that twelve month time frame. Any potential that there's some deals in the pipeline that came out of '26 and beyond? Okay. Yeah. I don't you know, it's it's obviously early in '26. Think what I would say generally when I look at the market, and the leading indicators, the market looks really healthy right now. Our win rates continue to be strong. We talked earlier last year, particularly in the first half of the year, where there was a little bit lighter bookings. And at the time, we were saying there really wasn't a change in the market. There were just more of a delay. We talked about an ARPA hangover. We also talked for whatever reason, some decisions just weren't being made. When you step back and you look at these leading indicators, for example, our public administration group, 2025 saw the the highest number of RFPs that we've seen in five years. Now RFPs take a long time to work their way through, to work through an award, to work through a contract, to work through revenue, but that's a pretty good leading indicator. Our sales, like I mentioned earlier, we don't like to talk about awards. But sales activity in in in sequentially throughout 2025. And into 2025. We mentioned some things going off the state sales team. So and and also really, really strong sales. At public admin group. Our justice group tends to be a little bit lumpier. Public safety has got a lot of momentum. So what we're seeing in the market is is a good healthy demand. We're not seeing anything at this point of delays on on deals. And it gives us confidence in the plan that we put out. Fantastic. Thank you for the color. Operator: And our next question comes from the line of Michael James Turrin with Wells Fargo Securities. Your line is open. Michael James Turrin: Hey, great. Thanks. Appreciate you taking the question. I wanted to just go back to the SaaS revenue line there. Given the initial guidance looks for a bit of a reacceleration in the coming years. So Brian, I wanted to just understand Brian K. Miller: the context of that a bit better. You've mentioned flips. How big a factor are those? And how much visibility do you have into that line given current bookings trends into the coming year? Brian K. Miller: Yeah. And I think at the end of Q3, when we Kirk Materne: gave our sort of initial look into 2026 SaaS revenues and talked at that point about a a confidence that that growth would be above 20%. And and now our our actual guidance is in that 20.5% to 22.5% range. We talked about the the factors that that build up to that revenue growth. The majority of that I think, in around 13% of the growth comes from or 13% growth comes from things that are already booked at the end of the year. And some of those are things that that we signed even going back into the 2024. So the whether it's, the the revenues from those deals actually starting, the or those that we had a partial year of revenues for in 2025 now having a full year of revenues in 2026. So a sizable portion of that growth comes from things that are already in hand. And as we've talked about, Brian K. Miller: bookings, Kirk Materne: grew sequentially, SaaS bookings throughout the year. And so that, we have a high degree of confidence, and there's still some movement around the timing, but those would be, pretty well in hand. Brian K. Miller: About Kirk Materne: 3% to 4% will come from flips, We have a pretty good view of those flips based on either things that are already in the works with clients or conversations we're having with clients around the timing of those flips. So fairly good confidence around the flip number. And then the balance comes from a much smaller part actually comes from new bookings that, are in our pipeline that we'll sign in 2026 and have partial year revenues from So I'd I'd say our visibility is similar to what we've had in prior years. But with the majority of that coming from things that are already booked we have pretty high confidence around that growth. H. Lynn Moore: Yeah, Michael. I mean, we take a bottoms up approach, as as Brian said, and know, you take your existing run rate. You've got the uplift from that. You got full full value run rate. We had some flips last year that pushed that were in our plan that we're expecting to happen this year. And then, obviously, new clients will contribute somewhat this year and then more meaningfully in '27. Thanks very much. Operator: And our next question comes from the line of Saket Kalia with Barclays. Saket Kalia: Okay, great. Hey, guys, thanks for taking my question here. Brian K. Miller: Brian, I I actually thought the duration point that you made on SaaS bookings Saket Kalia: was was really important, and and I think that was a new disclosure. Or maybe just emphasize more And and the reason why I say that is a lot of us look at SaaS bookings, which to your point, were up 4%. For for for '25. But but think by my calculations, duration actually went down by by nearly 40%. Brian K. Miller: And so maybe the question is, is there a way that you think about the annualized value of SaaS bookings S. Kirk Materne: Because I think the view is is that 20% I mean, we just heard it in prior questions. The view is that 20% SaaS revenue growth is gonna be tough to do given mid single digit bookings growth but it feels like duration is a significant headwind. So can you just talk through that dynamic a little bit? Brian K. Miller: Yeah. I mean, in in terms of total SaaS bookings, the duration in especially in the last two quarters of this year, was a significant headwind given not only just the number of large deals, but the number of deals that had sort of longer than our our our standard term. We we generally lead with three years on new SaaS deals, and we've had some some of those in last year, especially the Maine deal, the largest deal had an eight year term to it. So, that has been a factor. In the total SaaS growth. In Q4, actually, if you look at the annual contract value, from new deals and flips, that grew 12% year over year. H. Lynn Moore: And Brian K. Miller: so when you take out the duration factor, the growth was higher than the total SaaS growth. So so you're correct in your observation, and, we would expect that that duration sort of normalizes more towards that that three year standard. But, but it is a it it does mask a bit of the the strength and the last quarter's bookings. S. Kirk Materne: Very helpful. Thank you. Operator: And our next question comes from the line of Aleksandr J. Zukin with Wolfe Research. Your line is open. Aleksandr J. Zukin: Yes. Hey, guys. Thanks for taking the question. I guess maybe Kirk Materne: two for me. The first one, around maybe just bookings growth expectations, on an annualized basis. For fiscal 2026, as you kind of sit here today, just give us a sense for you know, the the mentioned the buying environment improving, but are you seeing any accelerating sales cycles driven by you know, either increased want for AI adoption or increased, fear around other factors driving a faster time, to to to SaaS conversion. And to the extent that you know, again, we're not used to the SaaS revenue guidance yet relative to the many years prior being moved up, this quickly. How should we think about the the the linearity and seasonality of of the SaaS business? And is this a metric you would expect to kind of S. Kirk Materne: you know, H. Lynn Moore: update higher every quarter? Or as we move closer Brian K. Miller: through the year. It it kinda should we rein in our expectations on that front? H. Lynn Moore: On Brian K. Miller: well, we we don't guide to a bookings number for next year. We other than the statement, we said we expect SaaS bookings to grow in '26 over 2025 And as we talked about the market conditions, the activity in RFPs, The that strengthen our pipeline all all give us confidence around that. Think we expect the growth to be fairly consistent across the year. And that does each quarter, there's really solid sequential growth in SaaS. Revenues. And know, other than that, I don't think there's a there's much more to add. H. Lynn Moore: I don't know. You know, we'll we'll modify, Brian K. Miller: you know, guidance throughout the year as we always do, based on conditions. But the other thing I as we pointed out in the prepared remarks, the FTR acquisition is not included in our current guidance. We'll revise our guidance after that closes and the timing of that is uncertain, although we expect that to be towards the end of the first quarter, but it is subject to regulatory approval. So that as well as any other potential acquisitions are not included in that guidance H. Lynn Moore: number. And so, Alex, we Got it. I mean, not a surprise, but we obviously have internal sales numbers, internal bookings numbers, not just for '26, but actually multiyear. The further out you get, the the harder it is. But we have all that internally that we that we drive towards. But, again, we don't publish that. Like we don't we don't pub generally publish awards. As as your question around an accelerated sales cycle, I I don't think we're seeing anything that's either slowing cycles down or accelerating them at this point. I would say, that respect, it's it's more of a back to normal. Whereas earlier last year, that might not have been the case. But I think sitting here today, it's it's it's kinda business as usual in that regard. Yeah. I think in the current year, we're not seeing any Brian K. Miller: meaningful impact of AI either driving accelerated growth or H. Lynn Moore: or Brian K. Miller: slowing growth public sector. Certainly has a high interest in AI, but typically are not the first adopters. So we think more of the impact on sales comes further down the road. Got it. And then maybe just one on the the free cash flow. And capital allocation. On free cash flow, just maybe H. Lynn Moore: contextualize the free cash flow margin guide. I think there's still a cash tailwind from no incremental cash tax payments. Tied to the R and D impact that you lapped. But what's driving the starting guide? Brian K. Miller: Is there is that conservatism? And then on capital allocation, you know, look. The the buyback is one of the biggest you've ever done. Certainly, in the last few years. Is that also a statement in any way around you know, tempering, M and A enthusiasm? Or kinda how do you how are you looking to balance that going forward? H. Lynn Moore: You wanna start with the first one? Yeah. I'll start with the the free cash flow. Brian K. Miller: We certainly expect free cash flow in absolute dollars to grow. We expect the margin to expand as well. So the the the range of free cash flow growth is, from a margin perspective, is point higher than the range last year. There are a lot of different puts and takes around it, growth in earnings or the primary driver of that. So that's the primary starting point. Cash taxes, there's some movement around that. I think we expect state taxes and some of the federal tax benefits to from a cash perspective to be a little lower than we had previously anticipated. The cash tax is a little bit higher, I guess, is the way I I should say it. But, generally, the the earnings growth is the biggest driver there. H. Lynn Moore: And and how it's on capital allocation, buyback, I would say, one of the things I'm actually most excited about right now is our balance sheet. Our balance sheet and free cash flow are the it's the strongest point they've ever been that I've been at Tyler. And that that leads to two things. Clearly, it leads to, M&A opportunities, which we're we're closing on a deal that I think we announced the purchase price was worth of $200,000,000. At the same time, announcing a a significant share repurchase authorization. We closed four deals last year. That that gets me excited. You know, we our 2030 goal is to get to a billion in free cash cash flow. And when you think about the free cash flow we're gonna generate over the next four to five years and the opportunity that creates Tyler, our unique leadership position, to invest in the things that we're doing whether it's additional AI or or product R&D or it's through M&A that's bringing, new competitive stuff in or the share repurchase. It it puts us in a really good position, particularly in a market right now where there's noise. There's noise in the software market, and and I view that as an opportunity it's an opportunity for us to to continue to show our strength, It's it's an opportunity to to continue to differentiate us from a lot of our our competitors, including some that have been, PE owned and others that might have paid really high and then have and may have some high debt, and maybe wondering what's happened to the multiple multiples right now. So it gets us a really a really good spot on the share repurchase specifically. Yes. It's the largest that we've sort of ever authorized in terms of dollars. But I think it's it's warranted given our balance sheet. Our our outlook, not just this year, but really looking out three, four, five years, and currently where the stock sits, it's something that I think you'll see us, take advantage of. Operator: And our next question comes from the line of Charles S. Strauzer with CJS Securities. Your line is open. Charles S. Strauzer: Hi, good morning. Brian K. Miller: Picking up Kirk Materne: on the capital allocation question that was just answered. It When when you look at the M&A opportunities that are out there that maybe a quarter or two ago weren't there because of the because the the valuations have basically contracted Charles S. Strauzer: severely. Brian K. Miller: You know, are you seeing potential opportunities there that maybe more intriguing in the near term versus buybacks? H. Lynn Moore: I would say, in a general sense, yes, Charlie. I've had that discussions specific discussion with some of the executive team. There's been no question not just in the last year, but going back five, six, seven years, there have been deals that we've looked at where the valuations were just getting sort of, I think, ridiculous. And and it would be my sense that people have to re adjust. This is a little different than you know, about three, four years ago when we went through a a rotation of capital out of software. When we're in a period of high interest rates and and and higher inflation. We didn't really see valuations change. And I think I think this this environment should lead to that. The other difference is four years ago, our balance sheet wasn't in the position it was. So those are the things that get me excited about the future. We're gonna continue to look at M&A just because we have a real good visibility on on multi multiyear free cash flow. We're not be reckless. We're gonna continue our disciplined approach. We're gonna look for the right deals at the right time. But, yes, it's something that, again, makes me excited about about the future, and and I'm really glad we're in the position we're in today, given where the market is and given where where sit externally. Operator: And our next question comes from the line of Mark William Schappel with BTIG. Your line is open. Mark William Schappel: Hey. Thank you for taking the question. Brian K. Miller: Brian, I just wanna double click on the SaaS net new ARR growth of 12%. Here in Q4, which I think is great on a very tough comp. Mark William Schappel: Would love to get some color on where you thought that would have been when you gave the preliminary guide last quarter for 20% SaaS revenue growth in 2026 And maybe just how much of your incremental confidence is being driven between the new bookings you're seeing from new SaaS deals versus conversions? Yeah. I mean, Brian K. Miller: we've set a lot of the strength in the bookings. Come not just from conversions, and a really solid pipeline of sort of new name deals, but also around renewals and expansions with existing customers. So a lot of add on sales to existing customers, some of those coinciding with a flip of an on prem customers. And good growth around renewals and pricing on those renewals. So I'd say fourth quarter bookings that inform our guidance for this year We're we're pretty much in line with what we expected when we gave that early look at 2026 growth. We even said back at the beginning of the year in '25, when bookings were a bit slow, that we expected to see strong growth sequentially through the year, and we did, in fact, see that So the underlying market conditions continue to to support that. And I'd say, generally, the the order played out as we expected. Mark William Schappel: And our next Operator: question comes from the line of Clarke Jeffries with Piper Sandler. Your line is open. Clarke Jeffries: I wanted to confirm, if the Texas contract kind of rolled off mid quarter or at the end of the quarter And and just generally, within the guide for transaction revenue next year, what are your rough expectations for merchant fees? Thank you. S. Kirk Materne: Yeah. Texas didn't just end. It's Brian K. Miller: in a single, you know, in on a cliff. It wound down throughout the year really starting early in the year. As some of the services, migrated away. And, originally, the contract was, Charles S. Strauzer: to it's by terms ended in August, Brian K. Miller: We extended that as the the new provider wasn't fully ready to take over all of the services. And so there was, some uncertainty throughout the second half of the year about what the revenues would be. At the end of Q3, we expected that Texas revenues for the full year would be around $40,000,000 and that for the fourth quarter, they ended up being about almost $4,000,000 below that expectation. We ended up with revenues from Texas being around $36,000,000 that it was a very low margin contract, so it didn't have H. Lynn Moore: as meaningful an impact on on, on Brian K. Miller: operating margin, but it did part of our shortfall in revenues in Q4 was related to that contract producing a little bit less revenues than we expected for the year. Merchant fees for the full year will be up more of a I I don't think we've guided to emergency number, but we do expect those to grow. As we've talked about, most of the growth in our payments business is in the gross model. So we're continuing to expand the sale of payment services to embed it with our software, those are generally provided under a gross model. We've also mentioned that we continue to expand services and grow volumes under our existing arrangements. And our tending to move away from some of the third party arrangements that have been on a net model. So more of our payments business will be on gross model and that will drive more growth in merchant merchant fees. H. Lynn Moore: My apologies. Go ahead. Thank you very much. That's it. Operator: And our next question comes from the line of Andrew Sherman with TD Cowen. Your line is open. Andrew Sherman: Lynn, given the state Brian K. Miller: of investor concerns on AI disruption to software these days, it'd be great if you could talk about your barriers to entry, why it would be hard to create your apps and and platform with AI. Thanks. H. Lynn Moore: Yeah. That's a good question, Andrew. At the end of the day, Andrew Sherman: AI H. Lynn Moore: is only as good as the data it's on and the and the access it's got. And the data resides, you know, through our systems It's we have the unique domain expertise regarding workflows. And I think we're just our our relationships with our clients and our trusted relationships, you know, they're turning to us to be their AI partner. We've outlined a number of our AI initiatives. Things that we're doing currently. We've we've embedded AI into, all our flagship products. Doing things like automating, repetitive workflows and things that consume a lot of time that that create measurable savings for the clients. We're we're doing things with both with R&D and and through M&A. And you know, we have examples like AP automation, report writing assistant, geo These are all things that are deeply embedded with our with our, systems of record. That others don't have that access to. And, again, the the trust that our clients have think, is also a significant barrier. We're gonna detail, a little bit more of of sort of how Tyler looks, you know, in the in a cloud living world, utilizing AI at our Investor Day. And you will you will see our strategy, unfold a little bit more there. Sometimes I'm a little hesitant to talk too much about, specific strategic things. Just for competitive reasons, but we will be providing a little more higher higher level at that Investor Day. Operator: And our next question comes from the line of Jonathan Frank Ho with William Blair. Your line is open. Jonathan Frank Ho: Hi, good morning. I wanted to maybe dig in a little bit more embedding transaction capabilities into your products can you give us a sense of where we are in terms of penetrating your large base of installed customers And with this broader rollout of payments capabilities, how do we think about the cadence of adoption over time? Thank you. H. Lynn Moore: Yeah. I think, Jonathan, it's it's gonna depend on the product, and it's gonna depend on on what we're doing with the product. For example, disbursements, AP automation that I just mentioned, is really in its early stages and and doesn't have much penetration. When you look at different product lines, you know, utility our utility billing client base is gonna have a different penetration than maybe our ERP base. Jonathan Frank Ho: And so it's it kinda varies by product, and it varies by H. Lynn Moore: what we're trying to do with that with that product. We continue to introduce new products and continue to embed more things with our products. So I I think right now, it's kinda hard to give a a broad brush look at it, other than to say, the opportunity still is extremely meaningful to us. Operator: And our next question comes from the line of Unknown Analyst with Goldman Sachs. Your line is open. Unknown Analyst: Great. Thanks so much for taking the question. R&D expense, I think the guide a bit higher than our expectations. You mentioned products and AI on the call, but maybe any more detail on specific areas driving that and then how we should think about what peak R&D intensity looks like for this business over the medium Thanks. Yes. R&D as a percentage of revenue is is will be about 8.8 per approximately eight to 9% of of revenue. Up from about 5.5% in 2024. There's or that was the change in 2025. It rose. As we've talked about, we have an ongoing sort of migration of some development expense that is currently reported in our cost of sales. And as we continue to move our business model more towards cloud and more of our development taking place around cloud native products that development expense is moving from cost of sales to R&D. And there's about $20,000,000 of that in in 2026, in the guide. The remainder of the growth is really around investments across Tyler, some of which is AI. Significant amount is AI. We haven't broken out our actual how much of our our increases AI, but there is a growing investment in AI as well as investments across product innovation, widely across Tyler. So I think we we expect to settle in more around the percentage of revenue that we'll see in 2026. As closer to sort of a long term level of R&D investment. Operator: Our next question comes from the line of S. Kirk Materne with Evercore ISI. Your line is open. S. Kirk Materne: Yes. Thanks. Maybe just two quick ones. H. Lynn Moore: Lynn, you mentioned you had your ERP AI S. Kirk Materne: sort of grouped together. I was curious, what are your customers' H. Lynn Moore: asking for or thinking about in terms of monetization? S. Kirk Materne: Around AI? Or or or how do they wanna see AI sort of delivered to them in terms of H. Lynn Moore: you know, how they pay for it? There's obviously a lot of discussion about seats versus consumption. We'd love to hear the feedback you guys have gotten so far, realizing it's early. And then, Brian, I think last quarter, you gave us a little bit of a buildup on SaaS growth. You might have said it earlier, but I think it was something like 12% was coming from booked. You know, there's some coming from, you know, soon to be booked and then some Brian K. Miller: flips. I was wondering if you still have that sort of breakdown S. Kirk Materne: for the updated guidance. Thanks. H. Lynn Moore: Yeah, Kirk. I think I think our clients are looking for efficiencies and ROI. We we will we don't currently plan to don't have current plans to do seat based AI pricing. It's it's more on a a SaaS type model. So what they're looking for is really is is driving that ROI. And those are the discussions we're having. How do we make their lives better? How do we free up those resources? And they're willing to pay for those. Brian K. Miller: Yeah. And and Kurt, on the deconstructed SaaS growth, about 13% of impact of of the you say using 21.5%, midpoint of our our guidance, about 13% comes from prior bookings, some of which would be '24 bookings and '25 bookings. About 5% comes from bookings in 2026. That includes new logos, cross sell, and upsell, and a lot of that is sales back into the existing customer base. Most of those things would be in our pipeline somewhere today, and about 3% comes from flips. Operator: And our next question comes from the line of Peter Heckmann with D. A. Davidson. Your line is open. Peter Heckmann: Hey. Good morning. Long call. Just had a quick question here. Brian K. Miller: In terms of the, amount of acquired revenue in your guidance from the four deals closed last year, is that is it up $14,000,000 $15,000,000 for the full year, a a good assumption? And then in terms of For The Record, you know, for annualized revenue, should we think about something close to maybe $45,000,000 or $50,000,000? Yeah. That would be, the ballpark, for For The Record. Somewhere in that range, we'll we we will update our guidance for the year to incorporate that once that closes. And, yeah, you're in the in the ballpark. It would be somewhere, you know, a little north of $10,000,000 for the revenues from the businesses we acquired during 2025. H. Lynn Moore: I I would caution you too. I agree. We're we're not in a position today to to make any sort of guidance on For The Record, whatever ballpark. That we're talking about. Keep in mind that For The Record has been going through a a a transformative set SaaS cloud shift. Brian K. Miller: With their product offering. H. Lynn Moore: And so that will be ongoing. And so whatever ballpark we have, it'll be a mix of of SaaS and and and and less less profitable type revenue, but that will continue to grow and and and replace just like a a cloud transition that we went through. Operator: And our next question comes from the line of Parker Lane with Stifel. Your line is open. Unknown Analyst: Hi, this is Matthew Kickert on for Parker. Thanks for taking my question. You mentioned S. Kirk Materne: 10% to 12% underlying growth for the payments and transaction segment next year. Brian K. Miller: Is that something you view as a run rate H. Lynn Moore: coming out of 2026? And just more broadly, what S. Kirk Materne: would be some of the levers for midterm growth? On that segment? Thank you. Yeah. That that range is Brian K. Miller: is exactly in line with, I think, that 10% to 13% we talked about as our sort of midterm growth rate for transaction business going back to our 2023 Investor Day. So that that is the right in the range that that we expect to be kind of the run rate going forward. That's driven by our our strategy of expanding the transaction business within our existing software customer base by integrating or by selling integrated payments to those software customers, both new customers and existing customers. It's higher volume, driving driving greater adoption of online services. And driving higher volumes. Through the existing customer base. Longer term, there'll be, more and more contribution from adding disbursements to the portfolio. And then we do have instances where we're providing software products to clients but getting paid under a transaction-based arrangement. So rather than that showing up in SaaS bookings and SaaS revenues, it's showing in transaction revenues. One of the deals Lynn called out this quarter a deal for motor vehicle digital motor vehicle titling solution for one of our state enterprise customers is under that kind of arrangement. So that also contributes to the low double digit SaaS growth or transaction growth. Operator: And our next question comes from the line of Keith Michael Housum with Northcoast Research. Your line is open. Keith Michael Housum: Good morning, guys. Just trying to unpack those bookings numbers a little bit. I know we've been talking about the SaaS bookings primarily, but if I look at your services and other bookings year over year, it's down about 22%. You know, down significantly in the fourth quarter. Can you perhaps just unpack why that is for the year over year decline? How to think about that going forward? Brian K. Miller: Sure. Probably the biggest factor there is the contract reserve, the $10,000,000 contract reserve we took in Q4. Impacted bookings. So it created, basically, negative license revenues. Most of that was reversal of license revenues so that also effectively comes out of bookings. That's the biggest factor there, and that was, I think, $8,800,000 of licenses and a little less than around a million of of professional services. In general, professional services, which we have talked about for a long time, is being very low margin or negative margin business for us, While we have a number of initiatives to improve our efficiency and profitability around the pro services business We also don't want to grow that segment of our business at the same rate the rest of our business grows. So we're having success in delivering software more efficiently with fewer services. Really Charles S. Strauzer: actively, Brian K. Miller: trying to limit the amount of custom development work we do that falls in professional services. So part of that is by design that we don't want to grow services at low margins at the same rate, similar to hardware. So you know, that positive change in the revenue mix is reflected in lower bookings in those categories. So really focused on the higher growth in the more valuable revenue lines in SaaS and transactions. Operator: And that concludes our question and answer session. I will now turn the call back over to H. Lynn Moore for closing remarks. H. Lynn Moore: Thanks, Abby, and thanks, everybody, for joining us today. If you have any further questions, please please feel free to contact Brian K. Miller and myself. Thanks again, and have a great day. Operator: And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance, please standby; your meeting is about to begin. Operator: Good morning, ladies and gentlemen, and welcome to Essential Properties Realty Trust, Inc. Fourth Quarter 2025 Earnings Conference Call. This conference call is being recorded and a replay of the call will be available three hours after the completion of the call for the next two weeks. The dial-in details for the replay can be found in yesterday's press release. Additionally, there will be an audio webcast available on Essential Properties Realty Trust, Inc.’s website at www.essentialproperties.com, an archive of which will be available for 90 days. On the call with us this morning are Peter M. Mavoides, President and Chief Executive Officer; Robert W. Salisbury, Chief Financial Officer; R. Max Jenkins, Chief Operating Officer; A. Joseph Peil, Chief Investment Officer; and Cheryl Call, Director of Financial Planning and Data Analytics. It is now my pleasure to turn the conference over to Cheryl Call. Please go ahead, ma'am. Cheryl Call: Thank you, operator. Good morning, everyone, and thank you for joining us today for Essential Properties Realty Trust, Inc. fourth quarter 2025 earnings conference call. During this conference call, we will make statements that may be considered forward-looking statements under federal securities laws. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we may not believe revisions to those forward-looking statements to reflect changes after the statements were made. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's filings with the SEC and in yesterday's earnings press release. In our earnings release last night, for the quarter, we reported GAAP net income of $68,300,000 and AFFO of $99,700,000. With that, I will turn the call over to Peter M. Mavoides. Peter M. Mavoides: Thanks, Cheryl, and thank you to everyone joining us today for your interest in Essential Properties Realty Trust, Inc. The fourth quarter capped off another year of solid performance by the team that delivered compelling earnings growth and solid returns for shareholders. It has been ten years since we started this company, and I am extremely proud of the team that we have developed, the dominant position that we have established as a real estate capital provider to middle market operators that are growing in our targeted industries, and most importantly, the returns that we have delivered for shareholders, and over 200% total shareholder returns since our IPO in 2018. In the fourth quarter, we continued to execute our differentiated investment strategy, sourcing 85% of our $296,000,000 of investments through existing relationships while continuing to add new operator relationships to our platform. This robust investment volume was generated with disciplined pricing, including an average initial cash yield of 7.7% and a compelling GAAP yield of 9.1%. This large spread to our cost of capital is a key driver of our earnings growth. Our portfolio once again demonstrated resilient tenant credit trends with same-store rent growth of 1.6%, strong rent coverage of 3.6 times, and an improvement in our watch list. With better-than-budgeted credit trends, and a large investment pipeline with cap rates consistent with past quarters, we have increased our 2026 AFFO per share guidance range to $1.99 to $2.04, which implies a growth rate of about 7% at the midpoint and 8% at the high end. Our year-to-date closed investments and our current pipeline are supportive of our previously communicated investment guidance of $1,000,000,000 to $1,400,000,000. While we continue to expect modest cap rate compression in the back half of 2026, competition appears to be stabilizing based upon our current visibility. Regarding our capital position, we started the year with pro forma leverage of 3.8 times and liquidity of $1,400,000,000, providing ample runway to fund our investment pipeline. Turning to the portfolio, we ended the quarter with investments in 2,300 properties that were leased to over 400 tenants. Our weighted average lease term continued to be approximately fourteen years for the nineteenth consecutive quarter, with just 5.2% of annual base rent expiring over the next five years. With that, I will turn the call over to A. Joseph Peil, our Chief Investment Officer, who will provide an update on our portfolio and asset management activities. AJ? A. Joseph Peil: Thanks, Pete. Overall, our portfolio credit trends remain healthy. With same-store rent growth in the fourth quarter of 1.6%, consistent with last quarter, and occupancy of 99.7% with only six vacant properties. Portfolio rent coverage remains robust at 3.6 times, reflecting durable cash flow generation across our asset base. Additionally, our credit watch list declined from last quarter to under 1%, and the tenants within our watch list remain current on all obligations. Realized credit events in the quarter were limited, with just one notable tenant issue in the home furnishing industry. American Signature represented about 20 basis points of our ABR as of September 30 across two sites. We expect our recovery to be within the normal range of outcomes, having fully anticipated this situation and incorporated it into our guidance range provided last quarter. A. Joseph Peil: On dispositions, during the fourth quarter, we sold 19 properties for $48,100,000 in net proceeds at a 0.9% weighted average cash yield. Disposition activity increased as we opportunistically capitalized on elevated buyer demand created by the reinstatement of bonus depreciation tax benefits for car wash properties, resulting in a continued reduction in our exposure to this industry to 13.7%. Over the near term, we expect our disposition activity to normalize and align with our trailing eight-quarter average, driven by opportunistic asset sales and ongoing portfolio management activity. Tenant concentration continues to decline with our top 10 tenants only 16.5% of ABR, and our top 20 representing only 27.1% of ABR at quarter end, which is industry leading. Tenant diversity is an important risk mitigation tool and a direct benefit from our focus on middle market operators. With that, I will turn the call over to R. Max Jenkins, our Chief Operating Officer, who will provide an update on our investment activities and the current market dynamics. R. Max Jenkins: Thanks, AJ. R. Max Jenkins: On the investment side, during the fourth quarter, we invested $296,000,000 at a weighted average cash yield of 7.7%. Our capital deployment was broad-based across most of our top industries with no notable departures from our investment strategy. During the fourth quarter, our investments had a weighted average initial lease term of nineteen point four years and a weighted average annual rent escalation of 2%, generating a strong average GAAP yield of 9.1%. Our investments this quarter had a weighted average unit-level rent coverage of 4.7 times, reflecting a conservative rent level and healthy unit profitability for our operators. R. Max Jenkins: We closed 34 transactions comprising 58 properties, of which 100% were sale-leasebacks. The average investment per property was $4,600,000 this quarter, consistent with our historical range, with our deal activity characterized by granular freestanding properties, one of the core elements of our strategy. R. Max Jenkins: Looking ahead, our investment pipeline remains strong. R. Max Jenkins: Supported by record subsequent-quarter investment activity of over $200,000,000. The cap rate environment remains stable today with our pricing and our pipeline in the high 7% range, which represents a compelling spread to our cost of capital and is consistent with our updated guidance range. With that, I would like to turn the call over to Robert W. Salisbury, our new Chief Financial Officer, who will take you through the financials for the fourth quarter. Robert W. Salisbury: Thanks, Max. Before I begin my prepared remarks, I would like to thank the Board of Directors for the exciting opportunity to lead the company's finance group alongside my partner, the company's Chief Accounting Officer, Tim Earnshaw. Robert W. Salisbury: As Pete mentioned earlier, our well-established platform is in a great position to deliver shareholder value, with the largest net investment spread in the industry today. Robert W. Salisbury: And half of our value creation comes from optimizing our cost of capital, Robert W. Salisbury: which is something my team has been and will continue to be laser-focused on over the coming years, in service to our focus on shareholder value creation over the long term. Turning to the fourth quarter results, our AFFO per share totaled $0.49, representing an increase of 9% versus 2024. This performance was consistent with the high end of our expectations, as reflected in our previous guidance range. Total G&A in the quarter was $8,400,000, representing a sequential decline due to a one-time compensation reversal related to an executive departure. Notably, this one-time benefit to net income of $2,400,000 is reversed out of our core FFO, AFFO, and cash G&A as a non-core item. For the year 2025, cash G&A was $28,800,000, which ended near the low end of our guidance range and represents just 5.1% of total revenue, down from 5.4% in 2024. We declared a cash dividend of $0.31 in the fourth quarter, which represents an AFFO payout ratio of 63%. Our retained free cash flow after dividends continues to build, reaching nearly $40,000,000 in the fourth quarter, representing a substantial source of internally generated capital to support our future growth. Turning to our balance sheet, our income-producing gross assets increased to over $7,000,000,000 at quarter end. The increasing scale and diversity of our portfolio continues to build, enhancing our credit profile. We, on the capital markets front, remained active on our ATM program in the quarter, completing the sale of approximately $170,000,000 of equity, all on a forward basis. We settled $359,000,000 of forward equity in the fourth quarter, with a portion of the proceeds utilized to repay our revolving credit facility balance. Our balance of unsettled forward equity totaled $332,000,000 at quarter end. We expect to utilize these funds in the near term to support our investment program and retain balance sheet flexibility by keeping capacity available on our revolver. Our pro forma net debt to annualized adjusted EBITDAre remained low at 3.8 times at quarter end. We remain committed to maintaining a well-capitalized and conservative balance sheet, low leverage, and significant liquidity to continue to fuel our external growth. Robert W. Salisbury: Lastly, Robert W. Salisbury: as we noted earlier, we have increased our 2026 AFFO per share guidance to a new range of $1.99 to $2.04, reflecting a growth rate of approximately 7% at the midpoint and 8% at the high end. With that, I will turn the call back over to Peter M. Mavoides. Peter M. Mavoides: Thanks, Rob. Congratulations on your promotion to CFO. I have appreciated your partnership over the last two and a half years, and we are all grateful for your leadership in the finance group and across the broader organization. In summary, we are happy with the fourth quarter and full-year results. The portfolio is performing well, the investment market remains compelling, and the capital markets continue to be supportive. Operator, please open the call for questions. Operator: Thank you, Mr. Mavoides. Ladies and gentlemen, at this time, if you do have any questions, please press 1 at this time. If you find your question has been addressed, you may remove yourself from the queue by pressing 2. Once again, that is 1 for questions. We will go first this morning to Michael Goldsmith of UBS. Michael, please go ahead. Michael Goldsmith: Good morning. Thanks a lot for taking my questions. Rob, you took the guidance range slightly higher at the bottom end. So can you just walk through what has changed over the month or so since you or since the third quarter, I guess, since you put out your initial guidance and how that has impacted the outlook for this year? Robert W. Salisbury: Hey, good morning, Michael. Thanks for the question. So as we have talked about in prior years, it is still really early in the year to do a whole lot of changes with our guidance range, just given we still have ten and a half months to go. That being said, as we updated all of our numbers and reviewed our portfolio credit trends, everything had been coming in a lot better on the portfolio credit side relative to our initial guidance back in October. We tend to be pretty conservative when we build that initial range. And so as a result, we are just feeling a lot better about the health of the portfolio. I think you saw some of the stats in the fourth quarter. Same-store rent growth of 1.6%. Credit watch list is down sequentially. So it was really in recognition of that. You saw the subsequent events that we have, a lot of acquisitions that we closed in the early part of this year, but it is still early in the year. And it felt appropriate to take the bottom end of the prior range off the table just given where portfolio credit is, but we will see how the rest of the year develops in terms of the pipeline and deployment. Michael Goldsmith: Thanks for that. And just quickly, you know, the initial remarks mentioned that the expected competition or you are seeing competition stabilize. So does that what is the impact of that? Do you see cap rates stabilizing from here? Or and then, like, I guess, also, does that mean that you would be willing to you know, I guess with a stabilizing cap rates or less competition, could also go with the safer tenant base. And so just trying to understand, like, what are the implications of that stabilizing competition comment made at the opening of the call. Yeah. And, Michael, this is Pete. I would say I certainly reject your premise that we are going with a safer tenant base. We feel pretty good comfort in our tenant base and the guys we are investing and the risk-adjusted returns we are getting, and we think the durability of the portfolio certainly has proven that out. But you are right. I think the stabilization in competition has really resulted in you know, a slower decrease in cap rate than we have anticipated. You know, certainly, we model some conservatism into our future cap rates, particularly as the ten-year comes in and capital markets stabilize. And, you know, as we indicated on the call, we are seeing cap Robert W. Salisbury: rates Peter M. Mavoides: kinda stable, which is great for us. And, you know, I think that is certainly gonna help drive earnings, but it is not gonna change the way we invest or how we think about risk. Thank you very much. Good luck in '20 Thanks, Michael. Operator: Thank you. We go next now to Greg Michael McGinniss at Deutsche Bank. Greg Michael McGinniss: Hey. This is, Greg McGinnis at Scotiabank. Peter M. Mavoides: Still. For the it is Greg Michael McGinniss: sorry. You have had a busy beginning to the year. Operator: Should we not be reading anything into that? Is that holdovers from Q4 that fell into the early part of this year? Mean, you know, at this trend, you are well over one and a half billion for the year and above the guidance range. I know you are telling us not to necessarily read too much into that, but this is a pretty strong start so far. So just kinda curious what the driver was to date on some of those transactions. Yeah. And, I think if we saw something different in our investment expectations, we would have bumped the guidance range and to Rob's comment earlier, certainly early in the year. Peter M. Mavoides: You know, the fourth quarter was kind of a little light relative to our trailing average, and so there is certainly some deal slippage that you would see. And so, you know, we feel great. We feel good that have a good start to the year. But, you know, a lot of year left to play. I think more encouraging driving, you know, earnings is just the stabilization and the cap rate Robert W. Salisbury: And just to dig into that a little bit more, are you seeing that is Operator: stabilization in cap in cap rate across all the industries that you tend to invest in? Or are there certain certain industries that are deviating from that norm? And on top of that, is there anything that you are kind of particularly looking to increase acquisitions in from an industry perspective? Peter M. Mavoides: Yes, I think it is stabilization across the entire industry set that we invest in. Obviously, there is a range of cap rates across our industry from a low of seven to a high of, call it, eight and a half depending on the specific industry. But there is good stabilization there. And I think that speaks to the broader capital markets. In terms of our targeted growth, you know, we are really following our relationships, which mirror our portfolio. You know, with 85% plus relationship business, we are gonna go where our relationships take us and where our reliability as a counterparty is rewarded. So I would not expect a material shift in the portfolio composition as we think about, you know, 2026. Great. Thank you. Thanks, Greg. Operator: Thank you. We go next now to Caitlin Burrows at Goldman Sachs. Caitlin Burrows: Hi. Good morning, everyone. I guess maybe just on portfolio credit Caitlin Burrows: the prepared remarks mentioned that you guys are feeling good on that topic right now. You also mentioned American Signature was the only credit event in 4Q. Could you give us any detail on how that played out versus your expectation and what that can kinda tell us about your process and your visibility? Peter M. Mavoides: Yeah. You know, I would start by that is still playing out. And you know, I think it certainly will come in within our expectations as we tend to be conservative. But, AJ, you want to tackle that? A. Joseph Peil: Yeah. Hey, Caitlin. As Peter mentioned, that bankruptcy happened late in Q4. And so we are early in the process of marketing the asset. I do believe, based on what we are seeing in the marketplace, that it is gonna be a normal outcome for us and recovery should be well within the range which we historically have disclosed. I would not expect that asset to be on our balance sheet. Robert W. Salisbury: It is vacant. A. Joseph Peil: For too long. Caitlin Burrows: Okay. Got it. And then, Rob, you mentioned how Essential Properties Realty Trust, Inc. generates, I think it was $40,000,000 of free cash flow now. So how do you think about or balance retaining more cash versus increasing the dividend? Would you expect dividend to grow in line with AFFO per share from here or more or less? Robert W. Salisbury: Yeah. Thanks, Caitlin. So as you point out, the retained free cash flow is certainly a great source of internally generated capital for our very accretive investment program. I think it is gonna be a Board decision as to where the dividend goes over time. But, from a broad standpoint, you know, it is certainly a balance between delivering current return to shareholders and retaining that capital. I think a reasonable expectation would be that our dividend payout ratio probably does not go down from here at 63%. And, you know, we seek to have a good balance between those two things and, as you know, having followed the REIT space for a long time, dividends are an important part of total shareholder return; we certainly recognize that. So I would expect the dividend to grow, but do not have a lot of guidance for you at this point. Caitlin Burrows: Thanks. Peter M. Mavoides: Thanks, Caitlin. Operator: Thank you. We will go next now to Jana Galan at Bank of America. Jana Galan: Thank you. Good morning. You know, just good to hear about that you are seeing this cap rate stabilization and just wanted to ask about your comment where you are saying you may see modest cap rate compression in the back half of the year. And then also curious on if there is anything else within the kind of sale-leasebacks you are discussing with your relationships in terms of term or escalators or other type of changes? Peter M. Mavoides: Yeah. I think, you know, we have been expecting a normalization in the capital markets, you know, a slight decline in the ten-year and an increase in competition to drive cap rates down. We have been expecting that for quite some time now, and, you know, as we sit today, we just really have not experienced it in a material way, which is great, but we continue to have some conservatism around those factors as we think about the business plan going forward. And as we said, that, you know, shades from a high sevens to a mid sevens sort of cap rate than our expectations. But, you know, obviously, where the market goes and the cap markets in the ten-year will ultimately drive that. You know, competition drives cap rate. It also drives the other terms that you refer to, Jana, like term and escalations. These are all sensitive terms to tenants, and they are also a key part of our economics, and you can see those kinda ebb and flow over time. I would expect, you know, some compression in our weighted average escalations. You know, certainly, you know, when we were seeing 2.2%, 2.3%, that is, you Peter M. Mavoides: know, kinda Peter M. Mavoides: pretty high relative to historical averages. And, you know, with the historical average kinda being 1.6%-ish. So we are seeing some downward pressure there, but again, nothing material. Thank you. A. Joseph Peil: Thank you. Operator: We will go next now to Eric Martin Borden at BMO Capital Markets. Eric Martin Borden: Pete, I just want to go back to your comments around the stabilization and competition. And in your view, what factors are driving the stabilization? And what would need to change for competitive intensity to increase from here. Peter M. Mavoides: You know, I think it is really driven by the access to debt capital, which is, you know, gonna be driven by cost of that capital and availability of that capital. And, ultimately, you know, that is pricing. You know, these are long-dated assets that people tend to finance in the ABS market. And so I think a large driver of that is gonna be the ten-year Treasury rate. So as we have said on prior calls, higher for longer on the ten-year is probably a better scenario for us. And certainly, you know, 4.2, 4.3, you know, 4.1 is helping. I think if you saw, you know, mid to high threes on the ten-year, you know, we would see a material amount of increase in competition. All that said, you know, we very much go to market with an investment strategy deliberately designed to avoid competition by doing granular deals, follow-on transactions with relationships, leaning into sale-leasebacks to deliver capital to operators that have a capital need. And so I think, you know, hopefully, we have built a moat around that competition by transacting in a differentiated, value-added way, and we will continue to focus on that. Eric Martin Borden: Thank you. And one for Rob. Congrats, by the way. How should we be thinking about the cadence of forward equity issuance this year as you manage that cushion between the unsettled shares and acquisitions? And then with the remaining $322,000,000 of unsettled equity, is there any near-term expiration or settlement constraints that we should be aware of? Robert W. Salisbury: Thank you. Thanks for the comments, Eric. Yeah, we do not have anything in the very near term from an expiration standpoint. So that is probably not going to be a consideration. From a funding standpoint, we tend to make an assumption that we fund equity first and then do debt later. However, as we sit here today with 3.8 times leverage at the end of the year and a ton of liquidity, I think as we have mentioned on prior calls, having just reentered the unsecured bond market over this past summer, we are very much focused on the unsecured bond market. That pricing today is pretty attractive relative to the high seven cap rate that Max mentioned in prepared remarks on the pipeline right now. So, you know, in the 5.3% to 5.5% territory for cost of debt, really big spread. So, you know, we will certainly be spending some time focusing on the unsecured bonds over the course of this year. And then from an equity standpoint, with the leverage capacity that we have right now, we really could go through the entire year without issuing any more equity and hit the midpoint of our acquisition targets. And that is a combination of just starting the year at a low point, but then we also have, you know, as we mentioned in the prepared remarks, over $150,000,000 retained free cash flow after dividends. We tend to do about $100,000,000 a year of dispositions. And, you know, we have lots of forward equity as well. So, from a liquidity and a leverage standpoint, we are in a really good spot. And from a modeling standpoint, you know, we would assume that that gets settled in the near term just as a conservative point, but we will see how everything plays out. Operator: Thank you. We will go next now to Smedes Rose at Citi. Thanks. It is Nick Joseph here with Smedes. Maybe just following up on that, Rob. Obviously, balance Nick Joseph: in a really good position, robust acquisition pipeline and volume thus far in the first quarter. Have you issued any ATM equity or forward ATM equity year to date? Robert W. Salisbury: Yeah. We did a little bit earlier in the year. I do not think it is part of our disclosure package, but there are a few days before we go into the black period. So it tends to never really be a huge amount in a particular quarter, but it was about $10,000,000 that we did at the beginning of the year. So extended the runway a little bit, but again, as we sit here today with such a low leverage point, we did not feel like we needed a whole lot. Nick Joseph: Got it. Thanks. And then just on rent coverage, obviously, it was flat, flat sequentially, well covered at 3.6 times. But the sub-one and sub-one-and-a-half buckets moved up a bit. What drove that? What moved into those buckets? Peter M. Mavoides: AJ, what do you got on that? Yeah. So it is a A. Joseph Peil: a good question. On the sub-one bucket, it really is within the range of over the previous four quarters where we have been as low as 2.7% and as high as 3.9%. So there are a few tenants that are always kinda migrating in and out of that category. More on the one to one-and-a-half bucket. Over the last few years, you have noted that we have done a lot of development deals. And as those deals come online and are entered into, oftentimes added to a master lease, it creates some noise around that coverage. So we had a couple of tenants where we had assets come online, pulled the coverage out of the 1.5 to 2 bucket into the 1 to 1.5. But I think what you will see over the coming quarters is they ramp and stabilize, and we revert back to our historical norm where that cohort tends to kinda range between 7% to 11%. So it is more of a timing issue. What I would say, to add to that, is it is a data point. But what you would really see if the credit was starting to erode is our watch list would be increasing. And, actually, quarter over quarter, it decreased by about 35 basis points. And to refresh you, the watch list is the intersection of shadow-rated B-minus and less than 1.5 times unit-level coverage. So that one to one-and-a-half bucket certainly increased. But it tends to be more of a timing issue when assets are coming online out of development than anything else. Nick Joseph: Thanks, AJ. Operator: Thank you. We will go next now to Richard Allen Hightower with Barclays. Richard Allen Hightower: Good morning, guys. Peter M. Mavoides: So I want to go, I guess, back to the transaction environment. I am just curious, you know, as we have kind of seen some hiccups in the broader private credit market kind of, you know, in different pockets, you know, does that help or hurt your business? Does it create opportunities that did not previously exist? Does it reduce, you know, sort of sponsor-backed deal flow in any way? How do we figure that out? Robert W. Salisbury: For your business? Peter M. Mavoides: Yeah. We really have not seen an impact over the last couple of years with the kind of advent and proliferation of private credit. I would say those borrowers tend to be of a size and a scale that are a little larger than we are focusing on and not generally in our industries. You know, certainly, you know, we are real estate investors and we are senior and, you know, our leases are in front of unsecured debt. But it really has not driven incremental investment opportunities. And, you know, to the extent that it dries up, I do not think it is gonna change our investment market. A. Joseph Peil: Okay. That is helpful. And then Peter M. Mavoides: you made a point to point out that you did dispose of a little more of your car wash exposure last quarter, and I would probably expect that to continue again based on some of the tax law particulars that kicked in on Jan 1. So where do you see that exposure ticking down to over time? What is sort of a longer-term target there? Yeah. I would not create the expectation that it is going down materially. You know, we have always operated with a soft ceiling of 15% for any one industry. Car wash has been a great industry from a risk-adjusted return for us perspective. So I would not expect it to, you know, we are not driving that down to 10%. And, you know, to the extent that we find compelling risk-adjusted opportunities in that sector, we can continue to grow it. So, you know, we will just have to see what the market brings. A. Joseph Peil: Got it. Thank you. Richard Allen Hightower: We will go over Operator: we will go next now to Haendel St. Juste with Mizuho. Hi there. Good morning. This is Ravi Vaidya on the line for A. Joseph Peil: Haendel. Hope you guys are doing well. Can you please describe the impact of the One Build Beautiful bill on the single-tenant transaction market? How do you think that is gonna impact broader industry pricing and volumes? And how are you guys seeing it within the sandbox that you are operating in going forward? Peter M. Mavoides: Did Haendel write that question for you? A. Joseph Peil: No. I wrote it. I sent it to him. Peter M. Mavoides: Come on. He approved it. Listen, you know, the bonus depreciation that I mentioned earlier has certainly had an impact. You know, I do not think that bill really is gonna have a material impact on our business or the way we operate. And so I really do not see anything material coming out of that that will impact us. Richard Allen Hightower: Is it creating A. Joseph Peil: maybe more liquidity in transaction markets? Are there buyers that are looking to take advantage of maybe bonus depreciation or anything like that that is leading to moves in cap rates? Peter M. Mavoides: Not materially. I mean, as AJ mentioned in his remarks, we were able to sell some car washes to tax-motivated buyers at the margin. But that is, you know, it is really at the margin and not a driver of our industry. A. Joseph Peil: Got it. Thank you. Operator: Thank you. We will go next now to William John Kilichowski at Wells Fargo. William John Kilichowski: Thank you. Good morning. Richard Allen Hightower: I would like to start by saying that Cheryl did a great job with the opening remarks A. Joseph Peil: and, Rob, congrats on the new role. Richard Allen Hightower: My first one is for you, Pete. You know, we have talked about the competitive landscape a lot on this call, but I guess I am curious. Who are the entrants that maybe you thought you would be seeing that you are not seeing Operator: right now? Richard Allen Hightower: You know, it is Caitlin Burrows: I would start, I do not want to name specifics Peter M. Mavoides: you know, because we just do not know. You see platforms stand up. You see, you know, capital commitments to those platforms, whether it is, you know, Apollo, TPG, Angelo Gordon, Black— you go down the list of big asset managers and you are just conservative about their ability around your assumptions of driving your business and their ability to, you know, take business away from you. And, you know, we fight hard to win deals. We fight hard to add value to our counterparties such that they choose to do business with us. And, you know, we are very protective of our relationships. So, you know, there is a bunch of new platforms out there. You saw Starwood motor platform. And, you know, it is just broad-based. Got it. And then my second one is just A. Joseph Peil: given the current macro environment, how is that affecting the way you are underwriting or influencing sectors you might be pivoting more towards or away from? Richard Allen Hightower: Yeah. Peter M. Mavoides: You know, as I mentioned earlier, with 85% repeat business, our relationships really drive our opportunity set. And, you know, we started this platform, you know, ten years ago. We had a very focused service- and experience-based sale-leaseback A. Joseph Peil: middle market model. Peter M. Mavoides: And we are really sticking to that. And, you know, current trends in the market really have not shifted that materially one way or the other. A. Joseph Peil: Very helpful. Thank you. Peter M. Mavoides: Thank you, John. Operator: We will go next now to Ryan Caviola with Green Street Advisors. Ryan Caviola: Thank you. Good morning, everyone. It looks like the average investment per unit was record high for this quarter. I know you mentioned still close to historical norms, but could you share any details there? Or is that simply a function of acquisition mix? Or is there a slight appetite to purchase larger asset classes going forward? What led to that? Peter M. Mavoides: Yeah. It is really gonna be transaction mix and industry mix. You know, some of our sectors like early childhood education, our industrial outdoor storage sites and service sites tend to have a higher price point than, you know, our QSR sites or casual dining sites. And so it is not a material move, and it really is not indicative of our change in our underwriting or our risk appetite for larger assets. Robert W. Salisbury: It is more just industry mix in that quarter. Ryan Caviola: Got it. Appreciate it. And then just a quick one. Could you remind us of the tenant credit assumptions included in the 2026 guide and just any, you know, color on Operator: if there is industries specific in there or if it is broad-based. And anything you can share on the tenant credit. Thanks. Peter M. Mavoides: Yeah. So we do not guide to tenant credit losses. You know, we guide to AFFO growth and investments. I would say we take a very sharp pencil to our credit assumptions, really looking at specific situations and properties where we may have a credit event that results in a loss in ABR. And that tends to be around our historical average and our norm. And then we make a generic assumption for unknown events that may come at us. And we run a range of scenarios Robert W. Salisbury: of the credit laws that support our guidance. So, you know, with a historical credit loss of 30 basis points, you can probably assume we are a little more conservative than that. But Peter M. Mavoides: there is a wide range of scenarios in underlying guidance. Ryan Caviola: Great. Appreciate the color. Peter M. Mavoides: Thank you. Operator: We will go next now to Jay Kornreich with Cantor Fitzgerald. Jay Kornreich: I guess just following up on your comments, A. Joseph Peil: sticking to your relationships, which make up 85% of business. Jay Kornreich: How do you assess kind of that balance between growing with current partners and forming new ones? Really, the point is, does the 85% provide enough runway for Operator: investments and earnings growth for multiple years into the future that do not need to rely on new relationships? Peter M. Mavoides: No. Listen. As I said in the past, we like to kinda be seventy-five/twenty-five, ideally, and we spend a lot of effort and make a lot of investments to source and build new relationships that we can grow with over time. Because we certainly see relationships grow out of us as they get bigger and establish, you know, access to more alternative forms of capital. It is a balance. And, you know, I think we have done a good job of balancing that and have an ample pipeline of opportunities. And I think we have demonstrated, you know, great ability to continue to source and deploy capital. Jay Kornreich: Okay. And I guess just following up on that, you know, the strong sourcing and ample opportunities. You also referenced some deal slippage in the fourth quarter. So I guess just wondering about the overall investment pipeline outlook. If your cost of capital were to improve throughout the year, Operator: do you feel like there is ample opportunity to expand the investment volume? Or is it a little bit more constrained as the outlook may have— Peter M. Mavoides: As we always say, you know, the opportunity set is not what is driving our investment volume; our desire to create compelling growth for shareholders is what drives it, and what we believe to be compelling is, you know, our current guidance both in terms of AFFO per share, with growth of, you know, call it 6% to 8% supported by investments of, you know, conservative investments of, you know, $1,000,000,000 to $1,400,000,000. And which is, you know, frankly, at the midpoint down from what we did last year. So, the opportunity set is not a constraint of ours. You know, really our appetite and our desire to create stable growth over a prolonged period of time is what is driving that. A. Joseph Peil: Understood. Okay. Thanks very much. Robert W. Salisbury: Thank you. Operator: We will go next now to Daniel Edward Guglielmo with Capital One Securities. Daniel Edward Guglielmo: Hi, everyone. Thank you for taking my questions. I know based on our conversation at REITworld that you all are focused on same-store metrics for your tenants. Have there been any diverging trends in kind of same-store between tenant types or any changes that you have noticed this year versus last Peter M. Mavoides: Yeah. Well, same-store ABR and same-store rent is really driven by the contracts and the leases that we have. And, you know, that can vary from, you know, low of 1.5% to a high of 2.3%, and that really more depends upon what we negotiate going into those deals and when we negotiated those deals than anything on an industry-specific basis. In terms of, you know, same-store improvement in sales and margin and EBITDA, you know, that is something we track across all our industries and all our tenants. And there, you know, there is a lot of ebbs and flows within each sector and each specific operator. I would say most of those ebbs and flows are idiosyncratic around the operator and less around the industry. But there is nothing really I would call out materially changing in that Daniel Edward Guglielmo: Okay. Great. Appreciate that color. And then I would, as I would make— Peter M. Mavoides: I would make a point on that and, you know, you know, with public comps in most of our industries, whether it be Mister Car Wash in car wash or the restaurant operators or KinderCare in childcare, you know, investors can look at those public comps and get a general read-through about what is going on in the overall industries that we invest in. And, you know, there tends to be a very strong correlation between those public comps and their performance and what is going on in our portfolio. Daniel Edward Guglielmo: Great. Yeah. That is very helpful. And then as a follow-up from one earlier, thinking about the size of the company with the kind of mid to high single-digit growth Peter M. Mavoides: each year? Daniel Edward Guglielmo: Is there a certain size down the road where it gets harder to source the right deals at kind of the volumes needed? And when you think about that, how far out is that? Peter M. Mavoides: Yeah. I would not put a number on that. I think we have, you know, five to ten years of solid performance and opportunity in front of us to continue to grow our relationships and our investable universe and our portfolio and generate that sort of growth. You know, as you get bigger, you gotta do more and, you know, I think we continue to invest in the team and the infrastructure to do that. I think this company has great runway, without really too much concern around that. A. Joseph Peil: Particularly, Peter M. Mavoides: because, as we have done, you know, not growing too fast. Right? And then, you know, growing moderately at a very measured pace over a long period of time has been our ambition, and I think we have great runway in front of us. Daniel Edward Guglielmo: Appreciate that. Thank you. Operator: We will go next now to John James Massocca at B. Riley Securities. John James Massocca: Good morning. We talked about it a little bit last quarter, but you added again the kind of the other industrial bucket, but it seems like the assets had a bit of a different kind of rent and footage profile per property. Just kind of curious maybe what those were in terms of acquisitions during the quarter. And I guess, with a couple of subsequent quarters of strong investment in that particular industry sector, what do you think is driving John James Massocca: that as a growth vehicle in the current market? Peter M. Mavoides: Yeah. You know, we just see good opportunities in the industrial outdoor storage space. Those assets tend to be granular, tend to have a large land component, and John James Massocca: you know, that the Peter M. Mavoides: rent per square foot in that space varies wildly depending upon the amount of building prorated over the size of the land. And so, you know, a 10-acre lot with a 20,000 square foot building is a whole lot different than a five-acre lot with a 20,000 square foot building. And so we see good opportunities there with middle market operators and, you know, it is not growing at an outsized pace. And we will continue to invest there. And we certainly like that space. John James Massocca: But the assets that were kind of acquired in the quarter, were those kind of industrial outdoor storage John James Massocca: type of properties? Yes, sir. John James Massocca: Okay. And then, you know, John James Massocca: may have mentioned before, so apologies. But given John James Massocca: the size of the subsequent John James Massocca: quarter investment volume and maybe kind of characterization of that being a little bit of, you know, transactions that maybe slipped from a 4Q closing, what was kind of the rough timing on that as we are thinking about modeling? Was it a little bit front-end loaded in the year, or was it kinda spread out over the quarter to date? Peter M. Mavoides: January 21, John. I need an hour, Pete. I am just kidding, Rob. You got a response to that? I— Robert W. Salisbury: you know, we are a month and almost a month and a half into the year. I would just assume that January is probably a reasonable ballpark estimate. John James Massocca: Okay. Robert W. Salisbury: I appreciate that. John James Massocca: That is it for me. Thank you. Peter M. Mavoides: Thank you, John. Robert W. Salisbury: Thank you. Enjoy your— Operator: We are, Mr. Mavoides. I will turn it back to you, sir, for any closing comments. Peter M. Mavoides: Great. Well, thank you all. We look forward to seeing you all. I know Citi's conference is right around the corner. And we will have a very active calendar down there. And stay warm. Talk to you soon. Operator: Thank you, ladies and gentlemen. Again, that will conclude the Essential Properties Realty Trust, Inc. fourth quarter earnings conference call. Again, thanks so much for joining us, everyone. We wish you all a great day. Goodbye.
Operator: Greetings. Welcome to Primerica, Inc.'s fourth quarter 2025 earnings webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference is being recorded. At this time, I will turn the conference over to Nicole Russell, Head of Investor Relations. Thank you, Nicole. You may begin. Nicole Russell: Thank you, Operator. Good morning, everyone. Welcome to Primerica, Inc.'s fourth quarter earnings call. A copy of our earnings press release issued last night, along with other materials relevant to today's call, are posted on the Investor Relations section of our website. Joining our call today are our Chief Executive Officer, Glenn Williams, and our Chief Financial Officer, Tracy Tan. Our comments this morning may contain forward-looking statements in accordance with the safe harbor provisions of the Securities Litigation Reform Act. We assume no obligation to update these statements to reflect new information and refer you to our most recent Form 10-K filing, as may be modified by subsequent Forms 10-Q, for a list of risks and uncertainties that could cause actual results to materially differ from those expressed or implied. We also reference certain non-GAAP measures, which we believe provide additional insight into the company's financial results. Reconciliations of non-GAAP measures to their respective GAAP numbers are included in our earnings press release. I will now turn the call over to Glenn. Glenn Williams: Thank you, Nicole, and thanks, everyone, for joining us this morning. 2025 proved to be another record year for Primerica, Inc., evidenced by solid earnings growth and strong cash flows that reflected the strength, stability, and balance of our business model. Our sales force also set records in several areas, including $968 billion in total in-force protection for our clients, and a new high watermark as client asset values reached $129 billion. Stockholders were rewarded with 79% capital return through a combination of share repurchases and dividend payments along with a 200 basis point increase in ROAE. Highlights of our financial results included a 16% increase in fourth quarter adjusted net operating income and a 22% increase in diluted adjusted operating income per share. On a full-year basis, adjusted net operating income increased 10% to $751 million while diluted adjusted operating income per share of $22.92 increased 16%. Glenn Williams: Let's take a look at distribution results. Both recruiting and licensing activity were down compared to 2024 and on a full-year basis. These results reflected the uncertainty associated with the 2025 economic environment as well as challenging comparisons to 2024's record-setting activity. We ended the year with 151,524 life-licensed reps, largely unchanged from the prior year-end level. Included in this group were 25,620 representatives who hold a securities license enabling them to assist clients with their long-term savings and retirement goals. As we start 2026, we see our business opportunity continuing to resonate with new recruits, particularly its appeal for supplementing household income. We expect full-year growth in both recruiting and licensing, which should translate into approximately 1% growth in our life sales force in 2026. Glenn Williams: Turning next to production. Sales results were mixed in 2025 with headwinds from higher cost-of-living pressures adversely impacting demand for term life insurance coverage while investment and savings product sales continued to set new records. Starting with Term Life, we issued 76,143 new policies during the fourth quarter, providing $26 billion of new term life protection for our clients. On a full-year basis, the number of new policies issued declined 10% compared to the prior year record levels, while estimated annualized issued term life premiums, which include coverage additions as well as newly issued policies, declined 7% compared to the twelve months ending 12/31/2024. We believe it is useful to look at annualized issued premiums to get a more complete understanding of the financial impact of our Term Life business. Glenn Williams: As we look at 2026, we believe cost-of-living pressures have started to ease as wage growth begins to outpace inflation. We see small but consistent monthly improvements in the primary household budget index data. Our sales force is well positioned to help middle-income families who could benefit from U.S. tax relief as well as moderating inflation and real wage gains in both the U.S. and Canada. We continue to support our representatives with targeted sales training to enable them to better assist clients in prioritizing financial needs, and we believe these efforts will result in productivity improvements over time. Until we see clear evidence that these trends are materializing, we are maintaining a conservative outlook for full-year policy growth during 2026 in the 2% to 3% range. Glenn Williams: Turning next to ISP results. Performance remains very strong, reflecting the importance of the financial education provided by our investment-licensed representatives helping clients stay focused on long-term goals and saving for the future. During the fourth quarter, investment and savings product sales of $4.1 billion grew 24% compared to 2024. Results for the full year were just as strong with total sales of $14.9 billion, up 24% on a year-over-year basis. ISP growth continued to be driven by strong demand across all major product lines. This momentum is supported in part by favorable demographic trends as clients approaching retirement seek annuity solutions that provide income stability and protection, as well as by increased interest in the broader range of investment options now available on our managed account platform. We also see greater engagement from our sales force as representatives recognize the opportunity in this product line and the benefits of diversifying their business. Client asset values ended the year at $129 billion, up 15% compared to 12/31/2024, on solid annual net inflows of $1.7 billion and sustained momentum in the equity market throughout most of the year. Looking ahead, we believe favorable demographic trends will remain supportive for several years. We also recognize that this business is sensitive to equity market conditions and that uncertainty remains elevated. Preliminary January results reflected continued growth. We remain mindful of a possible market downturn and maintain a conservative approach to our full-year sales projection. We currently expect sales growth of around 5% to 7% during 2026. Glenn Williams: Finally, we remain well positioned to help middle-income families obtain a new mortgage or refinance, consolidate consumer debt. In the U.S., we ended the year with nearly 3,500 licensed representatives who closed more than $500 million in mortgage loan volume in 2025, a 26% increase compared to full-year 2024. We also bring refinancing opportunities and new mortgages to our Canadian clients with a mortgage referral program that saw more than 18% growth in volume on a year-over-year basis. As we approach our fiftieth anniversary next year, we are already laying the groundwork for our 2027 convention, which we expect to be our largest event ever. We kicked off 2026 with a senior leadership meeting that included over 1,000 participants. We used this forum to reinforce our long-term vision, including the importance of building a balanced business by going across all major product lines while also strengthening recruiting and licensing to expand our distribution footprint. All our efforts in 2026 will be focused on accelerating momentum. We are optimistic about the opportunities ahead. With that, I will hand it over to Tracy for the financial results. Tracy Tan: Thank you, Glenn, and good morning, everyone. Overall, we delivered very strong financial performance in 2025, outperforming on all major fronts including record adjusted operating revenues of $3.3 billion, up 8%, record net operating income of $751 million, up 10%, and record earnings per share of $22.92, up 16% compared to full-year 2024 results. This performance reflects the benefit and balance of all of our fee-based businesses and our Term Life business, which exhibits financial characteristics similar to a fee business. They also demonstrate our capital efficiency and consistent execution. The strength of our model was also evident in a 200 basis point increase in our return on adjusted equity to 33.1% this year, led by accelerating growth in the investment and savings product segment. Tracy Tan: The ISP segment has performed exceptionally well with pre-tax operating income growing at a compound annual rate of 21% over the last two years, and we continue to see meaningful opportunities ahead driven by retirement savings needs. The financial results in ISP are entirely fee-based, with sales commissions and advisory fees driving revenue growth. In the Term Life segment, a substantial portion of revenues continue to be driven by recurring premium on a large in-force block of life insurance policies. When combined with our use of reinsurance to substantially eliminate mortality risk, the income profile of this segment drives sustainable earnings performance, resulting in a stable business with characteristics similar to those of a fee-based model. Tracy Tan: Adjusted direct premiums continued to drive Term Life revenue growth to a total of $457 million in the fourth quarter. Pre-tax income for the quarter was $147 million, up 5% compared to the prior-year period, driven by the impact of a remeasurement gain in the current period compared to a remeasurement loss in the prior period. Keep in mind that even with a 15% decline in the number of issued policies during the fourth quarter, both direct premiums and ADP still grew in the period, reflecting the stability of our in-force block and the benefit of a substantial portion of revenue being generated by recurring premium payments. Tracy Tan: Turning to our key financial ratios, the benefits and claims ratio for the quarter was 57.8% compared to 58.6% in the prior period. Benefits and claims in the current-year period included a $5 million remeasurement gain, reflecting a combination of favorable mortality experience and lower persistency. Lapse rates remained elevated relative to our long-term reserve assumptions, although stable on a year-over-year basis. We believe that persistency will gradually normalize as middle-income families adjust to current economic pressures, and we will continue to monitor our assumptions as policyholder experience continues to evolve. The DAC amortization and insurance commissions remained stable at 12.2%, while the insurance expense ratio at 8.5% was up modestly compared to 8% in the prior-year period, primarily due to expense timing and ramp-up on technology investment at the end of the year. Finally, the Term Life operating margin for the quarter was stable at 21.5% compared to 21.3% in the prior period. Tracy Tan: Looking ahead to 2026, we believe the fundamentals of our business remain strong. We expect adjusted direct premiums to grow approximately 4% as the benefit of the coinsurance agreement continues to fade. Key financial ratios should remain stable with the benefit and claims ratio at around 58% and the DAC amortization and insurance commissions ratio at around 12% to 13%. We expect full-year operating margin to be around 21% with some possible seasonal variation between quarters. Tracy Tan: Turning to the investment and savings product segment, our fastest growing segment and an increasingly meaningful contributor to consolidated results. To put this in perspective, ISP represented 32% of consolidated operating revenues in 2022, now increasing to 38% of revenues in 2025. Focusing on fourth quarter results, operating revenues were $340 million, up 19% compared to the prior-year period. Pre-tax income increased 23% to $101 million. Sustained equity market appreciation continued to support strong sales activity and pushed client asset values higher. Sales-based revenues increased 21%, slightly outpacing the 17% increase in commissionable sales, primarily driven by strong demand for variable annuity. Asset-based revenues were up 21% year over year compared to a 14% increase in average client asset values, reflecting a favorable mix shift towards product that generated higher recurring fee-based revenues. We continued to experience higher demand for U.S. managed accounts due to the increased appeal of these products and Canadian mutual funds sold under the principal distributor model, which was introduced a few years ago. Commission expenses for both sales- and asset-based products increased relatively in line with revenues. The continued growth of our fee-based ISP business has accelerated the company's overall growth profile with recurring commissions and investment advisory fees driving strong returns on invested capital. Tracy Tan: In the Corporate and Other Distributed Product segment, we recorded a pre-tax adjusted operating loss of $300,000 during the quarter compared to a loss of $1 million in the prior-year period. The largest factor contributing to the year-over-year change was higher net investment income from growth in the portfolio, partially offset by higher operating expenses. Finally, consolidated insurance and other operating expenses were $163 million during the quarter, up 7% year over year. The growth in expenses was driven by a combination of higher variable growth-related costs in the ISP segment and the ramp-up in technology investments at year end. We expect full-year 2026 consolidated expenses to grow around 7% to 8%. The first quarter expenses on a dollar basis are expected to come in a little higher than other quarters due to annual equity compensation vesting and towards the lower end of the first-year guidance percentage range. Tracy Tan: Our invested asset portfolio has a duration of 5.2 years. The portfolio remains well diversified with an average quality of A. The average rate on the new investment purchases in our life companies was 4.92% for the quarter with an average credit rating of A+. The net unrealized loss in our portfolio has modestly improved, ending December with a net unrealized loss of about $113 million. We believe that the remaining unrealized loss is a function of interest rates and not due to underlying credit concerns, and we have the intent and ability to hold these investments until maturity. Tracy Tan: We continue to generate strong excess cash, driven by superior growth of our fee-based ISP business and the steady premium contribution from our large in-force block of insurance policies. Our holding company ended the quarter with $521 million in cash and invested assets. Primerica Life’s estimated RBC ratio was 455%. In 2025, we returned approximately 79% of net operating income through a combination of share repurchases and dividend payments, a level that is typically well above life and health insurance peers, underscoring our capital-light and disciplined approach to capital deployment. In closing, we are in a strong financial position. In both good and bad economic times, Primerica, Inc. has been able to deliver solid earnings, strong cash conversion, and superior return on equity. With that, Operator, please open the line for questions. Operator: Thank you. We will now open for questions. The first question comes from the line of Joel Robert Hurwitz with Dowling & Partners. Please proceed with your questions. Nicole Russell: Good morning, Joel. Joel Robert Hurwitz: Hey, good morning, Glenn. How are you? Glenn Williams: Doing great. Good. I wanted to start on your term sales outlook, the 2% to 3% growth for 2026. Just want to understand what is driving that because it would suggest pretty strong growth off of the sales levels that we have seen in 2025. Glenn Williams: Yes. And Joel, I think you will see that emerge over the years, that increasing momentum is what we are anticipating as the year goes by. We do believe that we saw some unusual circumstances in 2025 with a lot of economic and policy uncertainty, as well as the continued cost-of-living pressures. I think some of that uncertainty, I do not know whether it is clarifying or not, but it is probably being accepted if nothing else. And we do believe there is a little good news on the purchasing power front in middle-income families as we are seeing in our own household budget index that I referenced in my prepared remarks. We saw it up consistently last year 10 to 12 months. In midyear, it crossed over the 100% mark, which is the baseline to determine that purchasing power is now outstripping the cost of living in those kind of narrow contexts that we use for middle-income families. So that is a good leading indicator, we believe. As I said, we want to see that work its way through the system, and that may take some time. But overall, I do think that middle-income families are going to have just a little more flexibility in their budgets. We are working hard to get out and be the good news bearers of that to make sure middle-income families see that and, before that money is put to use, or just not recognized, put it to use toward protecting families and investing for the future. So we do think the conditions are a little different in 2026 externally in the environment and we are working hard to play into those advantages. So we do think we will see some increasing momentum as the year goes by. Joel Robert Hurwitz: Got it. That is helpful. And then I guess just sticking to sales. It is, term has been a little challenged in the back half. ISP continues to be very, very strong. I guess any theory on your part on why there are the diverging trends in the two businesses? Is it change in the targeted consumer for both? Is it shifting more towards retirement? Just any thoughts on why you are seeing those trends in the two businesses? Glenn Williams: Yes. I would say that within our middle-income market, there are segments of the market that react differently to the conditions. Our investment business is helped. There is a tailwind from money in motion being moved from retirement accounts, as Tracy mentioned in her remarks, particularly to annuities that have income guarantees as we all age and get closer to retirement. So you have got one segment of the market that is kind of looking at their month-to-month budget. They are the buyers of term insurance for the first time and often those that are beginning to invest systematically. And then you have a separate segment that is moving money to a more appropriate place that they have accumulated over their lifetimes. And so you get two different sets of behaviors. Unfortunately, that is what I love about our business model because they often complement each other. And when one is weak, the other is very strong. And that is exactly what we are seeing now. So, it is not both being driven by people investing $25 to $100 a month or buying insurance with $25 to $100 a month. The investment segment is being driven more by the big dollars in motion right now. And that has a different set of stresses and is more driven by the demographics, I think the good work that we have done in preparing with our product sets and training, expansion of our sales force, also the market returns, the strong market returns are clearly a tailwind for us. Operator: Got it. Joel Robert Hurwitz: Thank you. Glenn Williams: Absolutely. Thank you. Operator: Our next question is from the line of Wilma Burdis with Raymond James. Please proceed with your question. Glenn Williams: Thanks for joining us, Wilma. Wilma Burdis: Yes, thank you for having me. Could you talk a little bit about the potential impact of AI on your business model, given this is a hot topic in the markets right now, especially as it regards to salespeople? Thanks. Glenn Williams: Certainly. It certainly is the hot topic and of course we are monitoring that as we see the discussions going on and are well aware of it. We see AI as an opportunity for improvement of our business. We do think we can increase efficiencies and reshape workflows both in our home office processing as well as in our sales process, and make the sales process more intuitive for the reps and the clients. So there are a lot of opportunities to use. In fact, we already have AI in play in a number of areas. For example, in licensing, we have got AI-powered training tools, personalized study paths to help us improve pass rates. We have got employee productivity tools. We have got AI language tools to help in translation to our various market segments that speak different languages. So we are clearly seeing benefits from that and have plans to use it to improve our financial needs analysis and our quoting system as well as our client app. So we are very positive on the impact of AI. Glenn Williams: The negativity that we have seen in recent days or weeks is a question of can AI replace our business model of what we do or the other business models that are being negatively impacted? And I think it is interesting because in looking at the discussion that I see, the term insurance, I think, the insurance side, it is seen to be a more simple product, and easier to understand, which is true. And often, someone comes to the conclusion that it is easy pickings for AI to take that out because that is the simpler type of life insurance product. But it is not necessarily a simpler sales process. There is still the evaluation of a client's family’s need, the personalization of the solution, most of all, the motivation to act. And we see that as our clear advantage. It is an advantage with current models. I think it will continue to be an advantage as AI becomes more prominent. Because we have the advantage of the relationship with clients. Remember that most of our reps are dealing with clients that had a preexisting relationship. The empathy that those reps have as well as the common life experience and ultimately the motivation. And we do not see that as a threat of AI anytime in the near future. So we think we can benefit from it, but we think we are insulated from the downside. The uniqueness of our relationship business probably gives us an edge in the marketplace that maybe others might not have. So we do not feel threatened by it, but we are looking for the opportunities we can create around it. Wilma Burdis: Great. Thank you. Could you dig in a little bit more on some of the distractions that you are seeing in the middle market? Is it equity market volatility? Changing political, even more financial? And can you just talk about are you seeing some of these letting up near term? Just maybe give us a little bit more color. Glenn Williams: Well, as I said, if you look at the two extremes of the middle market that we serve, you have got those with extremely tight budgets. And we do believe that we are seeing a little more economic breathing room in those budgets. And that is the main distraction is, we go into homes and help people find money within their budget to reprioritize and repurpose because almost nobody has had extra money in their budget over the last three or four years in the middle market. So we have to help them reprioritize and move, let go of less important purchases in order to prioritize protecting their family and investing for the future. And we are starting to see some of that cost-of-living pressure ease as wages outstrip the increasing cost of living. That increases their purchasing power. But also some of the other distractions, the uncertainty of everything from tariffs to other governmental policies and economic policies, I think people are starting to get a little more, I do not know, comfortable, but at least used to them. And they are not frozen in their tracks quite as much. And so that is what we are anticipating may give us a little running room on the term side of the business. Glenn Williams: On the investment side, we have been in a strong market for a long time. So we are a little hesitant just to project that market returns are going to continue at the rates they have in the past throughout the year. So we are stepping back a little bit, just to accommodate any kind of market correction that might occur. But as far as the demand for the product other than that, we see that demand continuing. We think we have got the right products in the right place at the right time for the money in motion and the movement. And I would say that the industry is experiencing, we are not unique, the industry is experiencing similar trends. So I think we have got some running room on the ISP side unless the market returns change radically during the year. Wilma Burdis: Thank you. Operator: Thank you. Our next question is from the line of Daniel Basch Bergman with TD Cowen. Please proceed with your question. Daniel Basch Bergman: Good morning. Just maybe following up on the Term Life sales. I think last quarter you mentioned a number of initiatives such as product changes, faster underwriting and issuance, and more salesforce training with the aim of offsetting some of those external pressures in improving the term sales. Just hoping for an update on how those initiatives are progressing and any updated thoughts on maybe how soon we might expect them to have an impact on the sales trajectory? Glenn Williams: Yes, I think all of that, Dan, is tied to the previous discussion. It is a little bit different sales approach when budgets are extremely tight. And what we try to do is change our messaging and our training to help our representatives understand how to navigate that with families. Probably a little different flavor now as we see and anticipate that the purchasing power of middle-income families will improve, we are trying to play into that. We are trying to be an early arrival and be the first to let families know that we see this coming overall, not happening to every family, obviously, but families ought to be looking at their budgets. They will be looking at their incomes and seeing if a little breathing room is emerging at around tax time. We only anticipate that there will probably be some larger tax refunds than people anticipated. What we want to do is equip our reps to have that discussion with families so that that money just does not flow through their budget almost unnoticed, which can happen in anybody's budget. And so now we are talking with our reps and challenging them to be out early, be having this discussion. Do not wait on a client to call and say, hey, I suddenly see room in my budget. Can you come help me? They may never see it. And so we need to be proactive and get out to them. It is very early. And so how to measure the impact of that is still too early to tell. But we are anticipating that will be a positive during the year. So that is a change. And as we message to our reps and train them around this, and message to our clients, we are trying to take all that in consideration. Daniel Basch Bergman: Got it. That is very helpful. And then just on the salesforce, I think growth was flat last year following a period of elevated growth in the past couple of years. I think you guided to 1% growth in 2026 in the prepared remarks. Just any more color on how confident you are in the ability to grow the sales force from the current base, about 150,000 agents? And do you still expect a higher level of growth beyond this year and over time? And as we think about those drivers, do you feel that improved recruiting, the licensing rate, or retention, which of those would be the biggest potential opportunity? Glenn Williams: Yes, we do believe overall, Dan, that there is a much larger market out there that we are addressing. And that means that there is no limit that we can see in sight on our opportunity. So we always get the question because our sales force is so large, and a larger sales force is a little hard to grow percentage-wise. We have been asked, can we grow any larger since we crossed 100,000? And we continue to believe that we can. Now, some years are going to be more positive than others, as we have seen, according to what the conditions around us are. But we believe there is a demand for our opportunity. It is certainly very successful. Our existing reps were more successful last year than they have ever been before. And the financial rewards from the opportunity we offer are very attractive both on a part-time basis to offset the expenses of families. It is a great part-time opportunity, but it is also a great career. We have got a tremendous track record on both fronts. So we think we can continue to grow. Glenn Williams: Obviously, the bigger we get, the more lift that takes. We replace the attrition first. Our attrition rates are very stable. We do not see that those have changed very much, although they do tend to fluctuate a little bit year for year based on previous year's licenses. Normally licenses in the U.S. renew every two years. So we will be renewing this year the 2024 record, seven growth in the sales force in 2024 is coming through as life renewals in 2026. And so that just means we will have to give extra effort to that because it is a larger number. We do not really anticipate the nonrenewal percentage of total sales force to change radically. But we see it, we are aware of it, and we are dealing with it. So, we do think that our opportunity is attractive. We think that we can get that message out there and demonstrate track record. We think that the lack or the more certainty, I do not think things are certain, but I think they are more certain this year in the marketplace as far as economic and governmental policy, less disruption, all of that probably helps us. We think we will get back on the growth track this year. Daniel Basch Bergman: Got it. That is super helpful. Thank you. Operator: Certainly. Our next question is from the line of Jack Matten with BMO Capital Markets. Please proceed with your question. Glenn Williams: Hello, Jack. Jack Matten: Hey, good morning. Just one more on the Term Life and the growth outlook. The cost-of-living pressure is starting to ease. Are you seeing that play out so far this year in any of your sales or recruiting growth metrics? Or is it really more that just the kind of the leading macro indicators are getting better that gives you more confidence in the outlook for this year? Glenn Williams: Yes, it is very early, Jack. Our January results, which were still tough comparisons because we had extraordinary momentum only during the calendar year of 2024, but it was really through January 2025 before we started to see real headwinds slow our momentum down in both distribution building of our sales force and the term business. But we had a strong January, an encouraging January, and I think it is very early, but we do believe there is an opportunity to play into this. And again, we were conservative in our projections because we do not know exactly how long it takes to be able to get some traction around it. So we are being conservative in our approach, but we do believe it is real and we do believe there is opportunity here we can take advantage of. Jack Matten: Got it. That is helpful. Thanks. And then maybe follow-up on the Term Life margin outlook. I think, Tracy, you mentioned 21% as the guide for this year. I think it is a little bit below Primerica, Inc. has been running over the past few years. So just hoping you could unpack some of the moving pieces there. Is there anything around mortality trend assumption that you are seeing, maybe that the DAC and insurance commission run rate expected is a bit higher? I guess just wondering about the moving pieces in the margin outlook there. Tracy Tan: Yeah. Good morning, Jack. So when I look at the Term Life business, I see that it is very stable. When you look at the margin, one thing I will definitely point out is as we see the benefits and claims ratio. The first thing I will point out is that that ratio is overall stable. The one item to consider is that as the insured attained age increases, obviously the reserve aligned with it would typically go a little bit higher. But the net investment income is there to offset some of that time value of money, and our investment income is in another segment. So when you put it back into where the benefit ratio would be, the benefit ratio is actually pretty much stable, no change at all. So that is one thing to just think about is the fact that we do not marry the investment income against the benefit reserve that typically otherwise when combined is really a very stable piece. Tracy Tan: In terms of the DAC, that is to a degree a function of the growth as well. For example, the commission last year, as Glenn has talked about earlier, we had a little bit slower growth on the recruiting, for example. So fourth quarter, our commission dollars that were not put into DAC was very light in fourth quarter. So when you start to see some growth going on, you are going to have a little bit more commissions going in, is one of the things to think about. And then that also is a function of how fast ADP grows. And the faster the ADP growth, the higher the DAC ratio. So some of those are some of the detailed elements to it, but overall, if you put in the net investment income back, it is still relatively stable. And a very sustainable piece of growth because most of the premium is really recurring. So even when we did not have a whole lot of policy growth in the fourth quarter, we still see the ADP growing at a reasonable rate. Hope that helps. Jack Matten: It does. Thank you. Operator: Our next question is from the line of Mark Douglas Hughes with Truist Securities. Please proceed with your questions. Mark Douglas Hughes: Good morning. Glenn Williams: Hello, Glenn. Mark Douglas Hughes: Glenn, any way to judge that substitution effect you have been talking about, some of these shifting demographics between the two groups, people getting ready for retirement, putting money in their ISP accounts? I think you have talked in the past about how the reps kind of go where the opportunity is. And so there is a natural kind of internal shift in addition to those maybe demographic trends. Any sense of what the magnitude of that might be? Again, just people spending their time on ISP rather than Term Life. Glenn Williams: Yes. It is pretty hard to measure, Mark. I think you are right. I think what has momentum, what is succeeding, is attractive, and you see people shifting their attention that direction. And because of the unique dynamic in our business where, as I mentioned before, one of those major segments is often strong when the other is weak, it keeps business diversified. It keeps people looking at both sides. And so we are going through a period right now where obviously the ISP is so strong, it is very attractive. But at the same time, I do not think that is unhealthy. I actually think it is healthy because it smooths out the ups and downs of our overall business, for the company as well as for our representatives. So we are seeing a lot of interest in our ISP business. That gives us some tailwinds. Although that licensing process is much different than life and much more difficult than life, we are seeing more people stepping up to get their license. We are seeing more productivity of those with licenses. You would expect that with that kind of success. Glenn Williams: At the same time, that is a more experienced group of our sales force. And so you really enter the investment business generally after a few years with us, and then as you age and your peer group gets closer to retirement, you tend to service more of them and over time move that direction. But still, we are attracting a tremendous number of young entrepreneurs of the future to our business, and they really drive the other side of our business too, generally a little bit younger, as well as earlier in their evolution as a financial family on their journey. Those that are younger and establishing families, generally, money is a little bit tighter. So they are more likely on the protection side. So it is a very natural movement. It is something we have seen over our fifty years of service as well. We do always remind our sales force that the business that you are not focusing on right now is still an important business, and that is part of the opportunity we have to, when the pendulum swings back toward life insurance, is to pick up some momentum there, which we think it will over time. But giving you specifics of a certain set of numbers how the trend works is a little difficult because of the diversity and age of our sales force. Mark Douglas Hughes: Understood. And Tracy, I am sorry if I missed this, but could you just give an expense outlook for the full year? Tracy Tan: Yes. Good morning, Mark. Our expense outlook for the full year is about 7% to 8% on a full-year basis. And then first quarter typically on a dollar basis is a little bit higher than other quarters because of the compensation vesting of incentive. But on a percentage basis it is still on the lower end of that full-year guidance. Now on the expense side, one thing I will point out is because of our strong capital position and how much we expect our growth potential is during the long run, we are making proactive organic investments. Those investments, some are highlighted by Glenn already on sales training. We are actually already actively deploying very modern technology to enhance a lot of the areas, and we also are further investing in our technology so that we can really help support the productivity for our home office to handle the growth. Think about how much we have grown in securities business. We basically doubled that business in two to three years and the volume has exploded. So we continue to invest in our infrastructure, our ability to handle our clients with the best service levels, and also investing in our support for our clients’ policy handling, claims handling, their transactions on the securities side. We expanded our security product to more than 50-some new products on managed accounts and we obviously moved to a new platform a few years ago. So all of those are investments we are making. So for 2026, we continue to make those investments so that we can support that tremendous growth. We continue to expect securities over the long run and then our growth in term, which we do think when we turn 50 there will be even more momentum that we would be expecting. So we are investing in our business. That drives some of that expense growth. Mark Douglas Hughes: Appreciate that. Thank you. Operator: The next question is from the line of Suneet Kamath with Jefferies. Please proceed with your question. Glenn Williams: Good morning, Suneet. Suneet Kamath: Hey, good morning, Glenn. Good morning, Tracy. Glenn, I wanted to first ask about your money-in-motion comment, which I happen to agree with. But I think there are two things that could become headwinds for what you are describing, and so I just want to pick your brain on them. The first is that a lot of 401(k) companies are now rolling out wealth management businesses to presumably offer to clients the same solutions that your folks do. Then second, and this is probably more of a longer-term risk in my view, but if we do get a lot more usage of in-plan guarantees, you know, automatically in the 401(k) plans, is that something that could negatively impact your sales outlook? Glenn Williams: Thanks, Suneet. That is a great question. I do think that every company in this space is looking at how to take advantage of the opportunities that are emerging. And that flight to guarantees or that movement to guarantees—I am not sure it is flight—as people age is an obvious one. And I do think the 401(k) providers are going to try to do what they can to preserve their business. But the other side of that, again, it is a little bit the AI question. The advantage that we have is that we have deep relationships with our clients, personalized service, often at the kitchen table or across the desk in the Primerica, Inc. office, face to face. And what we see is that is a more powerful lever than the 401(k) provider sending an email and saying, if you have got questions, or even calling and saying we now have wealth management. There is just not that natural relationship there. And so the relationship and the personalized service and the motivation that one human provides to another is really our advantage. And I do not think that changes with 401(k) providers trying to step into that gap. Because that is what they are doing. They are seeing why the money is moving out of 401(k)s, and it is because people want a broader wealth management view or there are guarantees they can get elsewhere that are not in-plan. And so they are going to try to stand in that gap. But I do not think that is going to make a huge negative impact. It will be part of a series of headwinds and tailwinds that we will manage. I think the way we overcome is with our relationships, personalized advice. It has served us well and it continues to overcome all those innovations we see in the marketplace. So we think we can compete on that front and overcome that should it arise. Suneet Kamath: Okay. That is helpful. And then the second one, maybe going the other way, is we are hearing from the annuity writers that there is a lot more competition. And I would think if that continues to develop, it would presumably put the ball more in the court of the distributors, like yourselves. And so I am just wondering, is that an opportunity for you if there is more competition? Do commissions typically change? And could that benefit your financial results at ISP? Glenn Williams: Yeah, I do agree that the competition makes for better product sets. And as we have said before, we keep a fairly narrow shelf of a handful of providers. We do not try to have a distribution relationship with every provider out there. But as innovations are created by companies that we do not represent, they are often adopted by companies that we do represent because we believe we represent the best of the best. And they have done an excellent job at improving their products over the recent years. So I think, absolutely, as that becomes an even bigger part of the overall wealth management business, then companies are going to continue to step up and provide a better product. Usually, we see that in terms of better value for the consumer. Compensation often does not change radically. There is a pretty tight band of compensation among products, a lot of supervision and regulation around that. So I do not think that you are going to see an annuity company suddenly come out with significantly higher compensation that is going to attract everybody over there. I think what they will do is pass those improvements through on client value, and clients will get better guarantees, better flexibility in the products, and so forth. That is where I would expect to see it. Suneet Kamath: Okay. That makes sense. Thanks, Glenn. Glenn Williams: Certainly. Operator: The next questions are from the line of John Bakewell Barnidge with Piper Sandler. Please proceed with your question. Nicole Russell: Good morning, John. John Bakewell Barnidge: Good morning. Thanks for the opportunity. You talked about cost-of-living pressures improving, which is fantastic to see. And then I think you talked about encouragement with January's performance. I know there are some tough comparables. But was the growth rate in January greater than the 2026 guidance assumes across ISP and Term Life? Glenn Williams: Yes. I do not think we are ready to put that out until we get to our quarterly assessment because there are a lot of ways of measuring that. And so it was an encouraging January. And we continue to see momentum, particularly in the ISP business, continue to be strong. But I think we will give you the detail around that at the first quarter report. Thank you. John Bakewell Barnidge: And then maybe on free cash flow conversion—and I know you put out the $4.75—but earnings have been emerging quite strong in the last several quarters. There is some dislocation in the stock. Do you ever opportunistically consider increasing the level of free cash flow conversion during those times? Thank you. Tracy Tan: Yes. Good morning, John. I think on the cash conversion front, we have very consistent performance in terms of converting our cash in a pretty narrow band, and historically we have converted in the recent past around 80%. And so we typically, obviously, make decisions looking at multiple years out. Obviously, the Board is going to be actively involved in any decision to make any changes, but we are confident, John, that we provide superior, on the high end of the conversion and return, when we look at in the peer group. So I think we are going to focus on continued strong, consistent performance. Obviously, any change with the Board's involvement. Operator: Thank you. The next question is a follow-up from the line of Joel Robert Hurwitz with Dowling & Partners. Please proceed with your question. Joel Robert Hurwitz: Hey, thanks for taking the follow-up. Tracy, sort of following up on John's capital. Last quarter, you talked about having plans to draw down excess capital from the life subs. It looked like that may have occurred in the quarter. Can you just elaborate on what you did there? And I guess the expected uses of that capital, right? I think you said your HoldCo liquidity is now over $500 million as of year end. Tracy Tan: Yes, good morning, Joel. Yes, you are absolutely right. We have been actively managing our cash conversion. So for 2025, we had certainly a good amount of planning and activity. We were giving an indication in the third quarter release that we may be stepping up on the conversion from the life side of the companies, and we were able to arrange a loan between our PLIC, our key U.S. life company, with the HoldCo. So we were able to have some excess conversion coming out that helped the HoldCo cash amount, and as I mentioned, we continue to step up our return to our stockholders, and we stepped up our buyback from $4.50 to $4.75, and that is certainly a need to continue to support that. And then we also increased our dividend by 15% on the dividend payout that is coming out that we just announced. So all of those are part of the reason, and more importantly, we are also going to continue for our organic growth as we have mentioned just previously earlier. So all of this management is to make sure that we have a high conversion and contribution to our continued confidence in our business and organic investment for the long-term growth. Joel Robert Hurwitz: Okay, thank you. Operator: Thank you. This now concludes our question-and-answer session and will also conclude today's conference. Thank you for your participation. You may disconnect, and have a wonderful day.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to this morning's Belden Inc. Reports Fourth Quarter 2025 Results. Just a reminder, this call is being recorded. At this time, you are in a listen-only mode. Later, we will conduct a question and answer session. If you would like to ask a question, please press 1 on your touch tone phone. I would now like to turn the call over to Aaron Reddington. Please go ahead, sir. Good morning, everyone. Aaron Reddington: And thank you for joining us for Belden Inc.'s fourth quarter and full year 2025 earnings conference call. With me today are Belden Inc.'s President and CEO, Ashish Chand, and Executive Vice President and CFO, Jeremy Parks. Ashish will provide a strategic overview of our business and then Jeremy will provide a detailed review of our financial and operating results followed by Q&A. We issued our earnings release earlier this morning, and have prepared a slide presentation that we will reference on this call. The press release, presentation, and transcript of these prepared remarks are currently available online at investor.belden.com. Turning to Slide 2. I would like to remind everyone that today's call will include forward-looking statements which are subject to risks and uncertainties as detailed in our press release and most recent Form 10-Ks. We will also reference certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in the appendix to our presentation and on our website. I will now turn the call over to our President and CEO, Ashish Chand. Ashish Chand: Thank you, Aaron. And good morning, everyone. We appreciate you joining us. Let us begin with Slide 4, which highlights our key accomplishments and messages for the fourth quarter and full year. My comments today will refer to adjusted results. We are very pleased to report an outstanding close to 2025, with both our fourth quarter and full year results exceeding expectations and setting new records. For the fourth quarter, we delivered record revenue of $720,000,000 which exceeded the high end of our guidance range. Our adjusted EPS came in at a record $2.08, also surpassing the high end of our guidance. The strong finish capped off a truly exceptional year. For the full year 2025, we achieved record revenue of approximately $2,700,000,000, up 10% year over year, and record adjusted EPS of $7.54, a 19% increase year over year. These results were driven by continued solutions growth and strong execution across our business. Our order momentum was also robust, with record full year orders. For the fourth quarter, orders were up 12% year over year and 5% quarter over quarter. Healthy free cash flow generation continued, enabling disciplined capital deployment. For the year, we generated $219,000,000 in free cash flow and we repurchased 1,700,000 shares for $195,000,000, further reducing our share count. These record results underscore the success of our strategy and as we look ahead, we will capitalize on market opportunities to ensure this momentum continues. A key indicator of our strategic progress is the accelerating adoption of our solutions offerings. For the full year 2025, solutions wins as a percentage of total revenue crossed 15%. This represents a meaningful increase from where we stood just a year ago and was a major driver of our success this year. This growing contribution from our solutions portfolio reinforces our confidence in our ability to continue to grow earnings and strengthens our conviction in achieving our 2028 solutions target which we set on our last Investor Day. To further accelerate our solutions transformation, enhance the customer focus, and unlock even greater future value, we are undertaking a significant strategic evolution at Belden Inc. Effective 01/01/2026, Belden Inc. transitioned from a legacy business segment structure to a unified functional operating model that applies across the entire enterprise, from executive leadership to our functional teams. This fundamental shift organizes us around core functions, rather than separate businesses, to better align resources and accountability with our continued solutions transformation. As IT and OT increasingly converge, realigning our organizational structure enables us to sell and deliver converged solutions more efficiently and consistently. Ultimately, this new model empowers us to leverage our full product portfolio for customers, speed decision making, clarify accountability, and simplify the delivery of customer-centric integrated solutions. This is not our first step in this direction. Over the past few years, we have consistently worked to break down internal silos to improve our solutions capabilities, including the successful combination of the sales teams in 2025. The current operating realignment is the next natural evolution of that journey, further enhancing our ability to deliver integrated solutions. This strategic realignment is the right move for our business, positioning Belden Inc. to maximize long-term growth and deliver on our financial targets. For a review of our executive leadership team under the new functional structure, please refer to page 15 of today's materials. Now to illustrate the power of this unified approach, and the benefits of IT/OT convergence, please turn to Slide 5. We highlight our evolving customer engagement model through our work with a major U.S. grocery store chain. This customer operates a complex network encompassing everything from the retail stores and gas stations to the warehouse distribution centers and manufacturing facilities. Historically, Belden Inc. for this customer was primarily a supplier of cabling products for their IT network. However, as we proactively worked to break down internal silos, our solutions team has been able to significantly expand this relationship. Our deepened engagement now includes OT products servicing their manufacturing processes and fiber solutions connecting their fuel stations. This evolution from a component supplier to a more comprehensive solutions partner is precisely what a solutions-first strategy is designed to achieve. This is where our functional operating model and integrated business structure proves so critical. In the past, this customer might have encountered multiple Belden Inc. sales teams creating a fragmented experience. Now our integrated teams are empowered to bring in our full product portfolio to address the most pressing challenges, providing a seamless, single point of contact. This not only enhances the customer's experience, but also allows us to solve for their most complex IT/OT challenges more effectively. This example powerfully demonstrates how our organizational realignment directly translates into greater value for our customers and underscores its critical importance to Belden Inc.'s future success. With that strategic context, I will now briefly highlight another key solutions win for the quarter. Please turn to Slide 6 for another compelling example of a solutions-first approach, highlighting our work with a major urban transit system. The strategic challenge this customer faced was significant: maintaining reliable, real-time, high-definition video feeds from trains moving at high speeds, all while navigating complex wireless environments prone to interference. They also required unified control and management across both operational and security networks. These are the kinds of complex, mission-critical problems that demand more than just products. They demand integrated solutions. In our solutions portfolio, Wi-Fi products play a critical role, enabling high performance and reliable connectivity essential for IT/OT convergence across various industries. Belden Inc. stepped in with an advanced integrated solution. We leveraged the latest Wi-Fi technology and roaming capabilities to ensure seamless connectivity. Further, we provided a proprietary centralized management system to unify all disparate data sources. What truly set Belden Inc. apart and secured this win were our superior roaming capabilities, which delivered flawless surveillance feeds even in the most challenging environments. Complementing this, our holistic, unified management platform simplified the entire operational landscape, significantly reducing complexity and maintenance demands. This outcome is a testament to our strategy. We have positioned Belden Inc. as an end-to-end strategic partner delivering critical value by enhancing passenger safety, security, and operational efficiency. This provided simplified, more cost-effective management of their complex infrastructure, demonstrating the power of advanced IT/OT converged solutions. I will now request Jeremy to provide additional insight into our financial performance. Jeremy Parks: Thank you, Ashish. My comments today will cover our fourth quarter and full year results, a review of our segments, the balance sheet and cash flow, and finally our outlook. As a reminder, I will be referencing adjusted results today. Now please turn to Slide 8 for our fourth quarter performance. As Ashish noted, our solid execution this quarter drove consistent top-line growth which translated into record performance for the business. Revenue for the quarter was $720,000,000, up 8% year over year and ahead of expectations set forth in prior guidance. Revenue was up 5% organically on a year-over-year basis, with Automation Solutions up 10% and Smart Infrastructure Solutions flat. Orders continued to perform well across the business, up 12% year over year and 5% sequentially. EBITDA was $122,000,000, up 7% year over year. Net income for the quarter was $83,000,000, up 5% from $79,000,000 in the prior-year quarter. And lastly, EPS was a record $2.08, up 8% from $1.92 and ahead of expectations set forth in prior guidance. Now please turn to Slide 9 for our full year performance. For the full year, we achieved record revenue of approximately $2,700,000,000, up 10% compared to last year. Revenue was up 6% organically, driven by Automation Solutions with organic growth of 11% and Smart Infrastructure Solutions with organic growth of 1%. EBITDA was $459,000,000, up 12% from $411,000,000 last year. Gross profit margins were 38.5%, a 40 basis point improvement versus the prior year. And EBITDA margins were 16.9%, a 20 basis point improvement versus prior year. As we discussed throughout the year, we proactively managed pricing in 2025 to offset the impact of copper inflation and tariffs and protect our overall profitability and earnings per share. Despite a full recovery of these incremental costs, the pass-through actions resulted in some dilution to reported margin percentages and somewhat obscured our strong underlying operating performance. Excluding the impact of these pass-throughs, gross profit margins improved 160 basis points and EBITDA margins improved 80 basis points year over year driven by our growing solutions mix. Additionally, again excluding the impact of pass-throughs, incremental EBITDA margins were approximately 28%, in line with our long-term targets. Net income was $303,000,000, up 15% from $263,000,000 last year. And lastly, EPS was a record $7.54, up 19% from $6.36 last year. Before reviewing our historical segment performance, I want to touch on the organizational realignment that Ashish discussed earlier. Turning to Slide 10, you will see that effective in 2026, we will transition to a single consolidated reportable segment. This reporting change is a direct outcome of our new functional operating model and leadership structure designed to accelerate our solutions strategy and enhance our customer focus. For modeling purposes, the reporting change has no impact on our historical consolidated financial results. And going forward, while we will no longer report separate segments, we will continue to provide valuable insights and commentary on our performance across our market-level categories and key verticals. We are confident the strategic realignment is the right move for our business, and it reinforces our ability to deliver on the long-term financial targets we outlined at our last Investor Day. So with that context on our future segment reporting structure, let us turn to Slide 11 for a review of our segment performance for the full year 2025. Our Automation Solutions segment delivered another solid year, demonstrating continued recovery and steady execution. Revenue reached nearly $1,500,000,000, a 14% improvement compared to the prior year, with EBITDA increasing 16%. Margins improved by 50 basis points to 21% reflecting our effective management of the pass-throughs of tariffs and copper. Order trends also remained robust, with orders up 16% compared to the prior year. This strong order activity drove the segment's 11% organic growth, with positive contributions in all regions. This broad-based momentum extended into our core verticals which all grew for the year, including double-digit growth in discrete manufacturing and energy. Revenue for Smart Infrastructure Solutions topped $1,200,000,000, a 7% improvement compared to the prior year with EBITDA increasing 6%. Margins decreased by 10 basis points to 12.1% reflecting headwinds from the pass-throughs of tariffs and copper. Within our markets, smart buildings grew 5% organically for the year driven by strength in our key growth verticals as we continue to advance our solutions offerings. Broadband experienced a softer back half of the year due to a temporary moderation in MSO capital deployments. However, we anticipate stabilization and a rebound in 2026 driven by the adoption of new fiber products and the acceleration of DOCSIS deployments among our major MSO customers. Please turn to Slide 12 for our balance sheet and cash flow highlights. Our balance sheet remains a source of significant strength and flexibility, enabling our disciplined capital allocation strategy. Our cash and cash equivalents balance at the end of the year was $390,000,000 compared to $370,000,000 in the prior year. Our financial leverage stood at a reasonable 1.9 times net debt to EBITDA, consistent with our expectations. We target approximately 1.5 times net leverage over the long term, though this may fluctuate as we pursue strategic opportunities aligned with our capital allocation priorities. For the trailing twelve months, our free cash flow was $219,000,000. For the full year, we repurchased 1,700,000 shares, or $195,000,000, further reducing our share count which is now more than 11% lower than it was in 2021. At the end of the year, we had $145,000,000 remaining on our existing repurchase authorization. Our capital allocation priorities remain unchanged: investing internally in opportunities to advance organic growth, pursuing disciplined M&A, and returning capital to shareholders through buybacks. While the current financial market environment is dynamic, we continue to evaluate M&A opportunities with rigor and remain committed to deploying capital in ways that create long-term value. Early this year, we completed a successful debt refinancing by issuing €450,000,000 of 4.25% senior subordinated notes due in 2033. This transaction allowed us to redeem all of our 2027 notes, effectively extending our overall debt maturity profile. Our debt remains entirely fixed with an average rate of approximately 3.9%. Please turn to Slide 13 for our first quarter 2026 outlook. Following a strong 2025, we are well positioned for the long term, leveraging secular trends like digitization and IT/OT convergence. While there is ongoing market uncertainty, our growing solutions adoption and resilient operating model enable us to effectively manage near-term variability. Our first quarter guidance reflects these dynamics and our typical seasonality as we remain focused on our solutions transformation and long-term value creation. Assuming the continuation of current market conditions, revenues for the first quarter of 2026 are expected to be between $675,000,000 and $690,000,000. Adjusted EPS is expected to be between $1.65 and $1.75. That concludes my prepared remarks. I would now like to turn the call back to Ashish. Ashish Chand: Thank you, Jeremy. Now please turn to Slide 14. To summarize, 2025 was truly a milestone year for Belden Inc. A record fourth quarter and full year performance clearly reflect the strength and resilience of our business and the accelerating progress of our solutions transformation. We delivered outstanding results in a dynamic environment marked by consistent order activity, record earnings, and healthy cash generation. Our performance is not an anomaly. It directly reflects our strategy's success in delivering tangible results. From 2019 through 2025, we achieved a revenue CAGR of 5% and an adjusted EPS CAGR of 12%, demonstrating powerful and consistent value creation over multiple years. The strong track record, coupled with the fact that solutions wins as a percentage of total revenue crossed 15% for the year, provides clear evidence that a solutions-first strategy is resonating in the marketplace and driving our financial success. Our progress builds a powerful foundation as we continue to execute our strategic evolution. The transition to a unified functional operating model is the right move for our business. It is designed to further accelerate a solutions-first strategy, enhance the customer focus, and unlock even greater future value by aligning our entire enterprise to deliver integrated solutions more efficiently and consistently. We remain incredibly confident in our long-term trajectory. The fundamental secular trends driving our business—digitization, IT/OT convergence, and the increasing demand for data-driven efficiency—are intact and building momentum. Belden Inc. is exceptionally well positioned to capitalize on these trends. Our solutions transformation is already expanding our addressable market and driving consistent growth and margin expansion. Through disciplined execution and thoughtful capital allocation, we are committed to ensuring we create lasting value for our shareholders. Before I conclude, I want to extend my sincere gratitude to the entire Belden Inc. team. Your dedication, hard work, and commitment to our solutions transformation have been instrumental in achieving these record results and positioning us for continued success. Thank you all for joining us today. We appreciate your continued interest in Belden Inc. That concludes our prepared remarks. Operator, please open the call for questions. Operator: Thank you. If you are dialed in via the telephone and would like to ask a question, please press 1. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press 1 to ask a question. The first question is going to come from Mark Trevor Delaney from Goldman Sachs. We will pause for just a moment to allow everyone the opportunity to signal for questions. Mark Trevor Delaney: And what Belden Inc. has seen with demand trends. You already talked about how orders grew both sequentially and year on year in the fourth quarter, but can you share more on your view on demand trends by end market and what you are seeing so far in 2026? Ashish Chand: Yeah. Sure. So good morning, Mark. First of all, if I look at the total solutions pipeline, that has grown by 26% at the '25 compared to the '24. Right? So that itself is a pretty good indicator at an aggregate level. Obviously, there is a lot on demand we are seeing on the automation side, especially true in energy, discrete as well as process. And then we have seen a fair amount of demand in hospitality, which is more of an integrated IT/OT opportunity for us. These are all typically in the double-digit growth areas, these markets. We saw a little less robust growth in broadband, but we did see fiber, you know, growing and the demand for fiber growing there. So really strong, you know, some of the fundamental verticals that you would expect—energy, discrete, process, hospitality—are doing really well for us. Overall, you know, one quarter growth in our funnel for solutions, so we feel pretty good. Mark Trevor Delaney: It is very helpful. My second question was about supply chain. And from a few dimensions, I guess, for one, does Belden Inc. think it can procure enough metals and also enough semiconductors in particular? And then two, as you think about what you are seeing in supply chain with the rising input costs, the company did well to offset the dollar pressure in the fourth quarter. Do you think you can continue to offset the input cost inflation as you think about this year? Thanks. Ashish Chand: Yeah. No. I think, Mark, that is a very important question at this point. I think we are well positioned. The way we have, you know, looked at manufacturing as a whole and supply chain is we have de-risked it quite a bit by going more regional. Obviously, we are still dependent on certain commodities and certain electronic components with certain regions. But we have taken certain actions. For example, we are doing more surface mount now than we did before. So we have kind of, you know, we have removed some of the points of consolidation in that supply chain so that we have more direct control over that. And then, of course, you know, with copper, from our side that is a global commodity. You will see a higher mix on both fiber and wireless. I think that was anyway happening as part of technologies, but it is getting accelerated. But at this point in time, just given how we are placed and, you know, how copper is not that large portion of our COGS, we feel pretty good about being able to pass on because of the value we offer beyond the commodity. And you know, we have had discussions with some of our customers and our partners about how this scenario might change, and we have not heard anything that causes us concern right now. So yeah. So much like we did in Q4, we remain confident that we will protect our dollar margins by being able to pass on. Mark Trevor Delaney: Thank you. I will pass it on. Operator: And our next question is going to come from William Stein from Truist Securities. William Stein: Great. Thanks for taking my questions. Aside from the rebound in MSO spending that you highlighted in the broadband business, are there any other clues that we should pay attention to when we are contemplating modeling 2026 beyond Q1 that could drive above or below typical seasonality? Ashish Chand: So there is a temporary, let us say, slowdown in certain architectural upgrades in that market that, you know, we dealt with in Q3 and Q4. That we know now has been largely resolved because there were some interoperability issues that those, you know, their engineering teams are working through. So we expect that to start ramping up. Second, there was an overall inventory overhang that, you know, just even beyond that architectural changes in DOCSIS that were true in that market, which I think have all been, you know, they have all bled out. And then, of course, there is the BEAD dynamic. We know for sure that BEAD money will flow in 2026. So I think there are kind of two more neutral and one more positive trend that, you know, is there. But the other thing to keep in mind is our fiber content as a percentage of total broadband revenue has gone from 40% at the '24 to 50% at the '25. Right? Fiber is growing and there is an increasing demand for both fiber connectivity and cabling in that market. And we have launched some new products that are fairly differentiated that are protected with IP and that allow us to take share, both in that market. So I think there are the three kind of more macro items, and then there is one Belden Inc.-specific fiber growth dynamic. And all of these should help us model the growth. William Stein: Thank you for that. I was hoping to hear an extension of that into any other end markets or the other segment that might clue us in. Because I think you said this recovery, I would expect in MSO to drive some above seasonal performance. But what about in the rest of the business as we go through the year? Ashish Chand: So just to clarify, Will, are you talking about the broadband portion of the business or product? William Stein: No. No. I am talking about the whole, the whole thing because I think you gave us the comment on broadband. So I was hoping that you might extend that to the rest of the entire business. Ashish Chand: Okay. No. I am sorry. I misunderstood your question. William Stein: It is all good. So I think first of all, you know, automation, very, very positive performance in 2025, you know, with 14% growth, 11% organic. We saw double-digit growth even in Germany, the DACH region, and China. And very strong expansion in verticals like discrete manufacturing and energy. So, you know, so I think those will continue. We see more and more engagement around physical AI, and this is especially happening in warehousing and smart manufacturing environments, especially in the U.S. And just as a reminder, right, we enable very closed-loop physical AI systems in collaboration with companies like Accenture, NVIDIA, etcetera, where we combine vision, digital twins, real-time data orchestration. We have a deterministic secure architecture that is based on a time-sensitive networking protocol that delivers very low latency synchronized connectivity. So these are all being appreciated. We saw very strong interest in those discussions. A number of pilots have commenced. So if I look at just the vertical, you know, let us say the fact that certain verticals are very robust and that we have this additional layer of IT/OT convergence including physical AI, we feel pretty good about the demand environment in that space. Interestingly, our smart buildings business has done extremely well once we started offering these IT/OT converged solutions. So here is an interesting statistic. Our growth verticals in smart buildings—which are essentially around hospitality, health care, education, data centers—are now one third of our total smart buildings revenue. Commercial real estate has become 10%. And at some point, it used to be the flip of that. Right? So there has been a very marked interest in these converged solutions. So we are obviously doing better in smart buildings environments where it is not plain vanilla office space, but it is more demanding, you know, health care, hospitality kind of or warehouse kind of environments. So I think these verticals are the ones that will drive growth. I think the U.S. continues to be the leading market in terms of geographical expansion, but obviously, it is good that China and Germany have also recovered. We see continued growth in infrastructure in India, especially for energy and mass transit rail. So, yeah, those are the growth areas we are excited about. William Stein: If I can have one follow-up, I was hoping to ask about the organizational realignment you referred to in the press release and in the prepared remarks. Should we anticipate that having any effect on the P&L in terms of either reduced costs overall because of the, I guess, simplification that I would imagine you would get? Or any restructuring costs that we should prepare for? Ashish Chand: So to me, you know, to be fair, Will, when we planned this realignment, one of our goals was not necessarily cost reduction. It was more aligned around the solutions-first strategy and also, if you notice, we have created a role around digital and operations leadership, which essentially means that we want to drive IT/OT convergence within Belden Inc. much the same way we are enabling it for many of our customers. So, you know, I expect the benefits of this first and foremost to be around us becoming more customer-centric. And then, you know, really pooling resources to build functional strength, whether it is in technology development or commercial skills, etcetera. Having said that, obviously, this is going to lead to efficiency. For example, when we combine all the disparate R&D centers across the world under common leadership, right? Or when we bring more commercial resources together. So, yeah, we will see more efficiency. We will see more leverage on those costs. We feel that we will continue to reinvest some of those efficiency savings. So the goal really is not to, you know, model some kind of restructuring saving at this point. Operator: Thank you. And our next question is going to come from Steven Bryant Fox with Fox Advisors. Steven Bryant Fox: Hi. Good morning. I guess, first, I had a big picture question. You highlighted how some of the inflation in materials is impacting your business, which is very helpful. And I was just curious, there are inflation considerations across a lot of bill of materials, and there seems to be some better demand for '26. How concerned are you about just projects being negatively impacted, whether it is just the absolute level of spending dollars available or timing of projects based on what is going on in supply chain as you think out for the full year? And then I had a follow-up. Jeremy Parks: Hey, Steve. Good morning. So in terms of end demand or inflation impacting end demand, I cannot say that we have seen any evidence of that up to this point. Obviously, copper has been particularly volatile. The price of copper has been everywhere from $4 to $6 just over the past maybe four or five months. So there has been a lot of volatility. We have been dealing with it. Customers are still placing orders. So I think that is positive. We would not expect it to have any material impact on demand. But like Ashish said, we are also concentrated on fiber and wireless and other technologies because we can sell all of those as part of our solution. So I do not think it is a major concern. We will keep passing it on in terms of price, and we do not expect it to have a major impact on end demand. Steven Bryant Fox: Got it. And then just— Ashish Chand: Yeah. Sorry. Just one point. Right? Keep in mind that inflation is what is actually driving a lot of customers to look at automation. And so if anything, you know, when I look at our sales pipeline, I see a lot of cases where even customers who were not, you know, initially identified as, let us say, priority markets or priority customers for higher-end automation have now entered that pipeline, and they are coming in talking about autonomous systems and more convergence. So I think it is actually a bit of a tailwind, frankly, unless, you know, there is something crazy going on with commodities, which, you know, we cannot control. Steven Bryant Fox: Right. No. That is good food for thought. And then just from a cash flow standpoint, Jeremy, like you mentioned, the price of copper is pretty volatile. How do we think about your free cash flows for the year? Like, is there a working capital impact that comes and goes depending on prices, etcetera? Anything we should keep in mind there? Thanks very much. Jeremy Parks: Yeah. I would not expect it to have a material impact on our cash flows. As long as we are successful recovering through price. But it does impact inventory. So if you look at our inventories from 2024 to 2025, a significant portion of the inventory growth is just copper getting repriced. And the way it works is, obviously, we are buying copper. We have got a couple months of inventory of copper at any given point in time. And that gives us a few months to raise prices. So there is always maybe a slight lag between when we raise prices and when we realize higher input costs. It does not impact the P&L typically, but you are right. There is maybe a small impact on working capital. But I do not think at this point it is significant enough to really impact our view on free cash flow for the full year. Steven Bryant Fox: Understood. Thank you very much. Ashish Chand: Sure. Operator: And our next question is going to come from David Neil Williams at Benchmark. David Neil Williams: Hey, good morning, and thanks for letting me ask a few questions here. I guess, maybe first, just kind of thinking about the transition to the solutions approach. You have talked about it being about 15% of the business. But thinking about the leverage there, how do you think about the pace of growth in that solutions mix as we think about that maybe through the next twelve to twenty-four months? Ashish Chand: Yeah. So we had, you know, articulated this longer-term goal of being at least to 20% by 2028. I think we are well on our way to, you know, achieving that goal, even surpassing that goal. The reality is that the 15% that we have achieved right now has involved, you know, a little bit of brute force because we were not organized internally exactly, you know, to service customers on a unified basis. I think with this realignment in the orgs and operating model, we are now fully aligned, and the biggest benefit we now have is that we can scale. So if you think about that 15% base that we have right now, there is a fair amount of bespoke one-off, you know, solutions designs that we have done. And we have not necessarily been able to either get both the IT/OT converged portion of the opportunity or kind of repeat and scale the reference architecture once it has been established. And that is what we are changing now. So, you know, obviously, you should expect acceleration in that solutions mix. And we should expect leverage on our fixed cost because we have already built the architecture and now we are going to take it out to more customers. So it is not like we had not found, you know, as we mentioned on the call, we had already started the journey a few years ago. We combined our go-to-market teams, and we combined certain other supporting teams. But we made progress in that direction, and I think this is very definitive now. And it is clear across the organization to all our customers that we are accountable to them for one combined answer. David Neil Williams: Very good. Thank you. And then maybe just on the physical AI, that is certainly an area that has gained a lot of attention more recently. Just kind of curious what you are hearing in terms of customers and maybe the activity going on from their perspective in terms of physical AI and that transition. Thanks. Ashish Chand: Yeah. So, you know, at the very, very basic level, how customers are looking at these solutions is that they integrate cameras, edge computing, AI platforms, you know, industrial Ethernet, enable some real-time perception, simulation and action, real-time root cause analysis. And they are very interesting for both brownfield and greenfield situations. You know, we have a number of active discussions going on in both categories, especially in factories and warehouses. So a lot of interest. I think the kind of sobering moment for customers comes when they realize that they have not built the foundation to get to physical AI. So in our mind, you know, we think of four steps required where the ultimate fourth step is autonomy. So you have to start with digitization—you know, everything is connected and is digital. You then have to go to harmonization, where all these connected systems are able to communicate with each other seamlessly using the same protocol—the same language, so to speak. Then there is convergence, where these systems that are more on the operating side and are speaking with each other can also speak with historical data and connect to databases on the IT side, and, you know, that is a two-way bidirectional process. And then you get to autonomy, where you can actually have this real-time, you know, perception and actuation. So a number of customers come to us now and say, I want an autonomous system in my manufacturing plant or my warehouse. And then we have to guide them through that journey. And I would say, you know, that journey typically can take between twelve to eighteen months depending on the existing digital maturity of that customer. But a number of those journeys have started. Actually, I would say, we have had more interest than even I expected at this stage. And part of that is driven by just the environment around, you know, bringing back manufacturing, using more automation, dealing with the shortage of labor, etcetera. So I think it is in a very good place. But it is not a market that is going to give results next quarter. And I think we are invested in this for the long term. And our customers clearly have understood that they have to go through these steps. Operator: Thank you. And our next question is going to come from Robert Gregor Jamieson from Vertical Research Partners. Rob, can you hear us? You may have your mute function on. Robert Gregor Jamieson: Sorry about that. I was on mute. Morning, all. Just wanted to get a quick update on the data center gray area opportunity and pilot that you mentioned a couple of quarters ago—some of the power and cooling capabilities. Just given it is to help automate. You know, we saw huge orders from, you know, a liquid cooling provider earlier this week. I am just curious, you know, how conversations are going with maybe some of the other hyperscalers, how that pilot has gone, and then just any kind of color around sizing or how big you all see that opportunity growing over time? Ashish Chand: Yeah. So we see that, you know, integrated white space/gray space opportunity for data centers, especially for the AI data centers, as a very significant opportunity. It is one of our top growth areas. In fact, we have, you know—we have kind of expanded that team literally by 2–3x over the last couple of quarters. Right? So there is that much demand. The approach we are taking really is to cover both IT and OT. And, you know, this obviously includes the critical module of cooling systems that we have previously highlighted. So, you know, that pilot actually went very well. It is now expanded into a larger commercial relationship where they want us to do the same thing for multiple data centers. And those negotiations are underway right now. And they are really, you know, heading in the right direction, very positive. And then since then, we have worked with about, let us say, half a dozen more large accounts. Some of them are more in the early piloting stage. But some of them have said, you know, you can replicate what you have done in that other case. And we did, you know, actually orders and revenue in Q4. They were not as big as that first case we talked about. But the pipeline is certainly, you know, two to four times larger. So more to come here, Rob, but very, very positive engagements underway. Again, these discussions, because they go across, they straddle IT and OT, they take a little longer, you know, because you are really addressing certain foundational aspects of their infrastructure. But I would expect some, you know, positive news in 2026, and we will certainly share that with you. Robert Gregor Jamieson: That is great. Very helpful update. And it makes a lot of sense with everything that you discussed today with the, you know, simplified reporting structure. And just on the 1Q guide, just one housekeeping item. And sorry if I missed this. I have bounced around between calls this morning. What is embedded in there for FX on your top-line guide there, just given some of the dollar weakness that, you know, we saw in early January, probably around the time you guys had already finished your guidance and planning. So just curious what is embedded in there for FX at the moment? Jeremy Parks: Yeah. Let me grab that for you, Rob. So FX should be actually a benefit for us year over year of, call it, roughly 2% of revenue. Robert Gregor Jamieson: Okay. That is great. Thanks so much. Jeremy Parks: Sure. Operator: And our next question is going to come from Christopher M. Dankert from Loop Capital Markets. Christopher M. Dankert: I guess with the updated reporting structure here, I think that makes a lot of sense given the solutions approach being very holistic on its face. The one maybe sticking point, I guess, I do not generally think of broadband as being kind of a part of that solution sale. Maybe can you enlighten us? Is there more solutions opportunity inside of broadband? Is that operated more separately? Just any kind of color you can give us on that structure would be helpful. Ashish Chand: Oh, no, Chris, because that is a very astute observation, and I think you are right. So first of all, we are committed to this functional organization, and even broadband is set up functionally. So within broadband, that is a functional organization. But we have indeed, you know, kept broadband a little separate because they service OEM customers that are different to the more solutions-oriented, project-oriented customers we have for the rest of Belden Inc. Having said that, products and technologies in broadband are available to our solutions teams to take to all their customers. So for example, we talked about this with this large grocery chain win that we had recently, and we talked about it in today's call. That contains a few different products out of broadband which are IP-protected fiber products that are pretty unique. And similarly, we have talked in the past about a warehousing win, an automation win—we talked about that two or three quarters ago. That contained, you know, some content from broadband fiber. So the way to think about it is broadband continues to operate fairly independently within that functional organization. They continue to focus on their core customers, which are especially in the MSO space. But broadband technologies are available to our different vertical teams to take to their customers, and this is becoming especially true in hospitality and health care, but a little bit also in warehousing and logistics. Christopher M. Dankert: Got it. That is extremely helpful. Thank you for that. And then on the solutions sales, obviously, this is going to help accelerate that pathway. But I am curious before everything kind of gets a little bit combined here, can you give us the percent of solution sales by Automation Solutions versus Smart Buildings kind of as we are heading into this transition? Because I know we have been seeing extremely strong success on industrial, a little bit tougher conversion on the smart buildings. Can you just kind of give us some split there? Ashish Chand: Yeah. So we are in kind of the low twenties right now in automation. That is up, you know, percentage of solutions in their revenue. It has become mid single digits for smart buildings. So that is actually impressive given that, you know, they were literally zero at the beginning of 2025. So they have really ramped up, and a lot of that has come out of hospitality, health care, and then taking some of the smart buildings offerings into combined verticals. And then, obviously, you know, we do not really think of broadband—we do not measure broadband solutions percentage. So 20% plus for automation, mid single digit for smart buildings. Christopher M. Dankert: Got it. Thank you so much for the color there. And I guess if I could just sneak one last one in here. It sounds like there is a very nice opportunity pipeline on the data center front. But as we look at it today, it is a fairly small portion of the business. We are talking about less than 5% of sales. And please correct me if I am wrong there. Ashish Chand: Yeah. No. It is small. And, you know, part of that has been our own doing, so to speak. Right? Which is why I made a remark about the fact we had to grow the team two to three times. So we may have allocated fewer resources to data centers, let us say, pre-'25 than we should have. Part of it was because, you know, the hyperscalers tend to be more cyclical. There is a little bit of margin pressure there. It is only '25 that we figured out this more integrated white space/gray space opportunity. And we actually were able to build, you know, an architecture and pilot it that made sense. So I expect that percentage to grow quite a bit. But you are right. We are starting off a smaller base because we did not invest in it in the past. Christopher M. Dankert: Got it. Well, super helpful. And, you know, again, thanks, and good luck into 2026 here. Ashish Chand: Thank you. Operator: There are no further questions at this time. I will now pass it back over to Aaron Reddington. Please go ahead. Aaron Reddington: Thank you, operator, and thank you everyone for joining today's call. If you have any questions, please contact the IR team here at Belden Inc. Our email address is investor.relations@belden.com. Thank you very much. Operator: Thank you, ladies and gentlemen. This concludes our call for today. You may now disconnect from the call, and thank you for participating.
Operator: Greetings, and welcome to the Genesis Energy, L.P. Fourth Quarter 2025 Earnings Conference Call and Webcast. At this time, participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to your host, Dwayne R. Morley, Vice President, Investor Relations. Please go ahead, Dwayne. Good morning, and welcome to the 2025 fourth quarter conference call for Genesis Energy, L.P. Dwayne R. Morley: Genesis Energy, L.P. has three business segments. The offshore pipeline transportation segment is engaged in providing the critical infrastructure to move oil produced from the long life of world class reservoirs in the deepwater Gulf of Mexico to onshore refining centers. The marine transportation segment is engaged in the maritime transportation of primarily refined petroleum products. The onshore transportation and services segment is engaged in the transportation, handling, blending, storage, and supply of energy products, including crude oil and refined products, primarily around refining centers, as well as the processing of sour gas streams to remove sulfur at refining operations. Genesis Energy, L.P.’s operations are primarily located in the Gulf Coast states and the Gulf of Mexico. During this conference call, management may be making forward-looking statements within the meanings of the Securities Act of 1933 and the Securities Exchange Act of 1934. The law provides safe harbor protection to encourage companies to provide forward-looking information. Genesis Energy, L.P. intends to avail itself of those safe harbor provisions and directs you to its most recently filed and future filings with the Securities and Exchange Commission. We also encourage you to visit our website at genesisenergy.com, where a copy of the press release we issued this morning is located. The press release also presents a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures. At this time, I would like to introduce Grant E. Sims, CEO of Genesis Energy, L.P., who will be joined by Kristen Jesulaitis, Chief Financial Officer, and Chief Legal Officer Ryan Sims, President and Chief Commercial Officer, and Louis Niccol, Chief Accounting Officer. I will now turn the call over to Grant. Grant E. Sims: Thanks, Dwayne, and good morning to everyone. Thanks for listening to the call. As noted in our earnings release this morning, our fourth quarter results came in slightly ahead of our internal expectations, as our offshore pipeline transportation segment saw strong growth driven by steady base volumes, a full quarter of volumes from Shenandoah well above its minimum volume commitment, along with continued ramping volumes from Salamanca. Our marine transportation segment returned to a more normalized level of operating performance as our refinery customers increased runs of heavy crude oil which drove higher volumes in their intermediate black oil available for transport. In addition, the transitory market conditions and supply pressures that impacted our Bluewater fleet last quarter now appear to be behind us. Grant E. Sims: All of which should provide for a constructive outlook for our marine segments as we look ahead. The strategic actions we took in 2025 combined with the strong operating performance from our underlying businesses, new offshore volumes enabled us to exit the year with effectively zero outstanding under our $800,000,000 senior secured revolving credit facility at the end of the year after giving effect to cash on hand. With ample liquidity, and an increasingly clear line of sight ahead of us, the Board made the decision to increase our quarterly common unit distribution to $0.18 per unit, representing a 9.1% increase year over year. Furthermore, just last week, we opportunistically purchased an additional $25,000,000 of our corporate preferred units in a privately negotiated transaction. Taken together, these actions demonstrate our disciplined approach to capital allocation. As we look ahead to 2026, assuming our other businesses perform as expected, the Genesis Energy, L.P. story at this point is largely a deepwater Gulf of Mexico growth story. Grant E. Sims: Based on our ongoing discussions with our offshore producer customers, and the conversations we have with them during their year-end budgeting cycle, we have been provided with lots of information including expected production volumes for 2026 and beyond, along with current and future expected drilling schedules. We were also notified of certain planned and routine turnarounds they have scheduled for 2026, a couple of which will take place at production facilities where we handle the hydrocarbon molecules more than once and that is going to be more financially impactful. While we benefited from no significant turnarounds in 2025, these are absolutely normal and customary and in some cases unfortunately, they can last upwards for 30 to 45 days each. These are their plans. And as I believe everyone can appreciate, we ultimately do not control our customers' operations, nor the precise timing of them drilling, completing, and bringing new high impact wells online. We fully understand the plans and schedules of offshore change. Deepwater drillship schedules change, weather throughout the year changes. Planned turnarounds can be delayed, or extended for a variety of reasons outside our control. What is important though is that despite all of this, and a heavier than normal marine dry docking schedule, which we will go into more detail in 2026, we still reasonably expect to deliver sequential growth in adjusted EBITDA of plus or minus 15% to 20% over our normalized 2025 adjusted EBITDA of $500,000,000 to $510,000,000. We obviously hope to exceed the top end of that range in 2026. And quite frankly, we could easily make a case for such an outcome. To the extent our actual results differ in any significant way, we would simply view that as more of a timing issue with ultimate cash flows just sliding to the right rather than any fundamental degradation in the long-term cash flows expected from the fields contracted to access our offshore infrastructure. Even if certain offshore activity slips to the right, 2027 should be meaningfully stronger than 2026. Based upon our producer customers' current development plans that we have seen, and as a result, the opportunities available to us in 2026 become even more compelling in 2027 and beyond. With that, I will go into a little more detail on each of our business segments. As noted in our earnings release, our offshore pipeline transportation segment delivered another quarter of strong sequential growth, with both segment margin and total volumes increasing across our CHOPS and Poseidon pipelines, rising approximately 19% and 16% respectively versus the third quarter, marking the third consecutive quarter of sequential improvement. In fact, from the first quarter of 2025, segment margin increased by roughly 57% with total volumes across both systems growing approximately 28%. These results were driven by steady volumes from our legacy fields, strong contributions from Shenandoah, and the continued ramp up in volumes from Salamanca. During the quarter, volumes from the Shenandoah FPU remained steady as the facility continued to operate at or near its 100,000 barrel per day target rate from four Phase One wells. At Salamanca, volumes continued to ramp from its first three wells, and we remain encouraged by both reservoir performance and the remaining development plans. An additional well at Salamanca is scheduled for completion in the second quarter with the potential for a fifth well as early as the fourth quarter. Together, these wells are expected to result in total production of 50,000 to 60,000 barrels per day from the Salamanca production facility. Looking ahead, we expect the Monument development, a two-well subsea tieback to Shenandoah, to be completed and flowing through our facilities by late this year, certainly early 2027. Following Monument, a fifth well at Shenandoah is scheduled to be drilled, which could increase total throughput across Shenandoah FPU to as much as 120 KBD with potential upside of an additional 10,000 to 20,000 barrels per day in early 2027. In addition to the five development wells between Salamanca and Shenandoah, we are aware of at least eight additional development or subsea tieback wells at legacy production facilities served exclusively by our pipeline infrastructure that are planned to be drilled over the next 12 to 15 months. Taken together, this activity underscores that producers in the Gulf of Mexico continue to prioritize long-cycle, high-return deepwater developments. We remain actively engaged in commercial discussions around future tieback and development opportunities that could access our offshore systems as projects are sanctioned. Given the competitive economics and long planning cycles associated with these developments, we do not expect near-term commodity price volatility to materially impact offshore development activity in the Gulf. As we look beyond 2026, we would be remiss not to highlight the results of BOEM's most recent lease sale Big Beautiful Gulf One, or BBG-1, which was held on 12/10/2025. The outcome of this sale further reinforces our view, and that of the broader upstream industry, that there remains strong long-term interest in the Central Gulf of Mexico. BBG-1 generated over $300,000,000 in high bids for 181 tracks covering approximately 1,000,000 acres in federal waters, with roughly 65% of the acreage located in the Central Gulf of Mexico. When combined with Lease Sales 259 and 261, which took place in March 2023 respectively, more than 4,400,000 acres have been leased in federal Gulf waters over the past three years, approximately 2,400,000 acres or 53% of the total of which are located in the Central Gulf where our offshore pipeline infrastructure is located and has existing capacity. The breadth of current development activity, the scale of recent lease sales, and the long-cycle nature of deepwater investment all underscore our conviction that the Gulf of Mexico remains a world-class basin with decades and decades of existing inventory. We believe Genesis Energy, L.P. is uniquely positioned as the only truly independent third-party provider of crude oil pipeline logistics in the region, offering producers flow assurance and downstream market optionality along the Gulf Coast. Our differentiated asset footprint, deep customer relationships, and decades of existing and future inventory ahead position us for continued growth and decades and decades of opportunity in this world-class basin. Grant E. Sims: Our marine transportation segment returned to a more normalized level of operating performance during the quarter. Market conditions across both our brown water and blue water fleets stabilized as refinery runs of heavy crudes increased and broader equipment utilization improved. Demand for our inland or brown water fleet recovered as Gulf Coast refiners responded to the widening of light-to-heavy differentials and increased runs of heavy crude oil, which allowed the supply of intermediate black oil needing to be transported to return to more normalized levels. Looking ahead, we remain optimistic that our marine transportation segment could benefit over time from additional volumes produced in the Gulf of Mexico and incremental crude imports into the Gulf Coast, including volumes from Canada, the resumption of exports from Kirkuk, Iraq, and the potential for additional volumes from Venezuela should they all materialize. At a minimum, all of these additional heavy or medium sour volumes showing up on the Gulf Coast should cause heavy-to-sour differentials to continue to widen, providing refiners the incentive to process increasing volumes of heavier crudes. To the extent these additional heavy volumes come to fruition, this should result in additional intermediate refined products volumes that need to be kept heated and moved from one refinery location to another, which should drive demand for our inland heater barges, providing a constructive backdrop for increasing rates as we move through the year and into next year. Recent commentary from Gulf Coast refiners would reaffirm they are in fact starting to see additional heavy sour discounts as additional volumes arrive on the Gulf Coast. To quote from Valero's recent earnings call, looking at differentials not only with Venezuela, but we have had several beneficial factors that have occurred to kind of help move this market weak. After last year with discounts fairly tight, most of these market moves are making differentials increasingly favorable for refiners, with high complexity refiners such as ours pushing to maximize heavy crude processing in the system going forward with better differentials. Meanwhile, conditions in our Bluewater fleet have normalized as incremental capacity that migrated from the West Coast to the Gulf Coast and Mid-Atlantic trade lanes has largely been absorbed by the market. As we noted in our earnings release, 2026 is expected to be a higher maintenance year for our Bluewater fleet with four of our nine offshore vessels scheduled to undergo regulatory dry dockings in the first half of the year. These planned shipyard periods will temporarily reduce vessel availability and may mute the near-term benefit of any improvement in day rates. Importantly, however, we expect these vessels to reenter the market against a more constructive backdrop and be well positioned to recontract at day rates that are consistent with or modestly above their current levels when they exit the shipyard. In addition, the American Phoenix remains under contract through early 2027. Based upon prevailing market rates for comparable assets, we would expect the American Phoenix to recontract at a higher day rate than our current charter when that contract expires. Overall, we remain confident in the long-term fundamentals of the marine transportation sector. With effectively zero net new supply of our classes of Jones Act vessels, and the high cost and long lead times required to construct new equipment, the market remains structurally tight. As demand continues to improve across both our brown and blue water fleets, we expect our marine transportation segment to deliver stable to modestly growing contributions in the years ahead. Grant E. Sims: Our onshore transportation and services segment performed in line with our expectations during the quarter. Throughput volumes continued to increase across both our Texas and Raceland terminals and pipelines as new offshore volumes ramped and moved onshore through our system. Our legacy refinery services business also delivered results largely consistent with our expectations. As we have mentioned in the past, our refinery services business has faced certain structural headwinds over the past several years. Specifically, we have been supply constrained in part because refineries moved to run more light sweet crudes as a result of the shale revolution over the last 10 to 15 years. As shale production is peaking, and/or the gas-to-oil ratios are increasing from the shale plays, and as the heavy sours we mentioned above are returning to the Gulf Coast, we believe we should have the opportunity to make more NaHS, sodium hydrosulfide, at several of our existing facilities in future periods. We, generally speaking, can sell every ton we make, and we look forward to restoring some of our supply flexibilities. As our financial performance continues to strengthen over the coming years, and we generate increasing amounts of free cash flow, we will continue to reduce debt in absolute terms, redeem our high-cost corporate preferred securities, and thoughtfully evaluate future increases in our quarterly distribution to common unitholders over time. Importantly, we will pursue these objectives while maintaining the flexibility to evaluate future organic and inorganic opportunities as they may arise. Finally, I would like to say that the management team and the Board of Directors remain steadfast in our commitment to building long-term value for all of our stakeholders, regardless of where you are in the capital structure. We believe the decisions we are making reflect this commitment and our confidence in Genesis Energy, L.P. moving forward. I would once again like to recognize our entire workforce for their individual efforts and, importantly, unwavering commitment to safe and responsible operation. I am extremely proud to be associated with each and every one of you. I will now turn the call over to the operator for questions. Operator: Thank you. We will now be conducting a question and answer session. Our first question today is coming from Michael Jacob Blum from Wells Fargo. Your line is now live. Michael Jacob Blum: Thanks. Good morning. Grant E. Sims: Good morning, Michael. So I wanted to start with the guidance for 2026. If I simplistically just annualize Q4 2025 EBITDA and compare that to the midpoint of the 2026 guidance, there is a delta there of, call it, $35,000,000 to $40,000,000. So I am wondering if you can just give us a rough ballpark for how much of an EBITDA deduct you are assuming for typical hurricane disruptions, and then the higher-than-typical marine maintenance? Because if I just remove those, you know, and do not even assume volume growth, which the offshore, which I am sure you will have. Just wanted to get a sense of like where the low end of guidance could come. Thanks. Yes. No, I mean, it is a good question. And as we basically try to explain, we think that we are being conservative, especially based upon some of the things that we have been told by our producing customers. But again, yes, we are assuming 10 days’ worth of anticipated downtime for, in essence, treating the third quarter as an 82-day quarter instead of a 92-day quarter for our offshore business. We probably net expect $5,000,000 to $10,000,000 on the segment margin line, if you will, from the heavy dry docking schedule on the marine side. So I think that as I said in the commentary that I just gave that we fully expect and we can make a case that we can comfortably exceed it, but we are the only reason that we are not pulling out a larger number, the primary reason is basically just taking into account that things can happen beyond our control, and try to emphasize to make sure that everybody understands that it is really just a timing of recognition of the future cash flows out of the Gulf of Mexico and has nothing to do with structural issues or subsurface issues. So hopefully it will turn out to be a conservative range that we throw out. Michael Jacob Blum: Great. Appreciate that. And then on capital allocation, really have like a two-part question. First, can you just remind us where you would like to take the leverage ratio and what timeframe you think you will get there? And then as it relates to distribution growth, how do we think about the cadence of increases going forward? Is this something you will be evaluating once a year every fourth quarter? And will the growth in EBITDA, is that a good proxy for how we should think about growth in distribution? Grant E. Sims: Well, I mean, again, on a bank-calculated basis, I think at 12/31 it was 5.12. So as we continue to use our increasing amounts of free cash flow to pay down debt in absolute terms at the same time that we are seeing increases in our calculated LTM EBITDA, I think that in essence debt ratios are going to improve because we are paying down the numerator while at the same time the denominator is increasing. So our long-term target has always been in the neighborhood of four and, again, we have a pretty clear line of sight on it. Michael Jacob Blum: And assuming that Grant E. Sims: everything holds up and the producers do, you know, the quicker they do things the quicker that we will hit those targets. But it is pretty obvious that we can get there. So depending upon, you know, that performance dictates the time schedule under which we get there. Relative to distribution growth, it is something that the Board discusses every quarter. There is no hard and fast program that in essence we can talk about at this point. But I do think that it is clear that the Board is committed, as is the management team, to kind of an all-of-the-above approach. As you, as we said, we were also successful in negotiating a redemption of another tranche, on a negotiated basis, of the outstanding corporate preferred. So, we will evaluate it on a quarterly basis and let the market know how things are going at that point in time. So Operator: Thank you. Next question today is coming from Wade Anthony Suki from Capital One. Your line is now live. Wade Anthony Suki: Thank you, operator, and good morning, everyone. Appreciate you all taking my questions. Just wanted to, it is a question I have probably asked of you guys before, but, you know, repetition is always a good teacher. But wondering if you might be able to sort of revisit how you think about potential opportunities to pick up, let us say, the remaining interests in some of these offshore systems that you have, you know, how that might fit with your longer-term priorities and, of course, appreciate any insight you might have there or, you know, how the counterparties might be looking at it. But, yeah, to the extent you can sort of clarify or revisit that for us, that would be great. Thank you. Well, you know, again, we are not going to comment in one form or another, as you would expect, on the potential for M&A activity or other things. I mean, obviously, you can understand from our enthusiasm that we very much like our existing position. To the extent that, from an ownership position, it would be possible to increase that exposure, that is something that we would be very comfortable with. But as I want to point out, and you mentioned repetition is a good thing, that repetition, we have substantial existing capacity on our two major pipelines, 64% owned and operated Poseidon Pipeline and 64% owned and operated CHOPS Pipeline. And so we are in a very comfortable position and arguably an enviable position that depending upon developments in the right place that we could have substantial increases and see substantial increases in segment margin and basically flowing to the bottom line in terms of incremental EBITDA without spending any capital. So it is a good runway of continued opportunities in the Central Gulf that we think that we have positioned ourselves for. No question. I appreciate that color. Just to switch gears a little bit. I think I know the answer here, but obviously some M&A among a customer or maybe two customers. Just wondering if you could sort of speak to impact expectations. I would expect some maybe acceleration potential, but any kind of longer-term impact you might see from that would be great. Thanks again. Can you repeat it? I am sorry. I did not quite fully understand the question. I apologize. No. I was asking about some of the consolidation we have seen among your customers in the Gulf. Oh. And I think there is soon to be one more possibly. So just wondering what the implication would be for you all longer-term. I imagine positive acceleration and whatnot, but love to hear your thoughts on that. Yeah. No. It is a very good question and I think that, you know, a transaction just closed yesterday, was basically Harbor Energy out of the UK closed on the acquisition of LLOG. LLOG is obviously an extremely important customer of ours. To the best of my knowledge, we actually move 70% of LLOG’s operated production through our pipelines, with most of those coming through our Sygna lateral and then downstream transportation, which is downstream transportation on our 64% owned Poseidon line. It is in the public domain, as Harbor said, that it is their intent to double that production from the asset base that they are acquiring in the LLOG acquisition, to double that between now and 2028. So that is a positive read-through on things. So if anything, we view that as an extreme positive of a significantly large public company acquiring a private company and with the full intent of doubling its production over the next two years, a very good outcome for us especially given our existing relationship with LLOG. Perfect. Thanks so much. Appreciate it. Thank you. Operator: Thank you. Next question today is coming from Elvira Scotto from RBC Capital Markets. Your line is now live. Hey, good morning, everyone. I just wanted to go back to the guidance. And can you maybe provide a little more detail around what specifically are you embedding in off Shenandoah? Then you also mentioned kind of the development of eight additional tieback wells planned at legacy facilities? Like is any of that in your 15% to 20% guidance? I will stop there, then I have some follow ups. Grant E. Sims: Yeah. Grant E. Sims: Yeah. I mean, basically, Elvira, again, yes, based upon what we have been able to ascertain in terms of talking to our producer customers that we are extremely comfortable that we will meet or achieve the 15% to 20% off of the baseline that we talked about. So, and again, we are trying to set expectations to under promise and over deliver on a prospective basis, and to make sure that, to reemphasize, that to the extent that there is any failure to achieve overperformance it really is just a timing issue and not an underlying ultimate value consideration. So that is the approach that we are taking as opposed to formal guidance, it is more of an informal guidance that we could easily construct a case, as I said in the prepared remarks, based upon what we know to significantly exceed that range that we just, we threw out there. Elvira Scotto: Okay, great. And then just going back to the dry docking, I think you said the expectation there is $5,000,000 to $10,000,000 kind of impact to margin. Is there an impact to maintenance CapEx on that? Grant E. Sims: Yes. I think we made reference to it in the earnings release itself. But because of that, yes, we would expect this to be a heavier maintenance capital year than we experienced in 2025. Elvira Scotto: Is there any quantification of the impact that you can provide? Grant E. Sims: I think, generally speaking, that if you looked at a $15,000,000 to $20,000,000 increase that would be within the ballpark. Elvira Scotto: Okay, great. And then just one last question for me. So you mentioned how the refineries are increasing runs of heavier crude and importing more Venezuelan crude. What do you think, how much incremental inland barge utilization could this drive this year? Grant E. Sims: Well, utilization has remained fairly high, which is the necessary condition before rates start going up. So as we anticipate, whether or not we gave a specific example of Valero, but P66 and others have also mentioned it, that as we see more and more of heavies run, whether or not it is Venezuela or incremental Gulf of Mexico medium sours or other imports, Canadian and other things, that total black oil pool or the total supply of intermediate refined products, which we were specifically designed to meet, will go up. And so in an already, in essence, close to 100% if not practically 100% utilization world, we anticipate being able to move prices up, day rates up, as we progress through this year and on into next. Elvira Scotto: Great. Elvira Scotto: Thank you very much. Operator: Thank you. We have reached the end of our question and answer session. I would like to turn the floor over to Grant for any further closing comments. Grant E. Sims: Well, as always, appreciate everybody listening in, and we look forward to delivering more good news as we progress through 2026. So thank you very much. Operator: Thank you. That does conclude today’s teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Operator: Good day, and thank you for standing by. Welcome to Ipsen's Conference Call and Webcast on full year 2025 results. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Loew, Ipsen's CEO. Please go ahead. David Loew: Thank you, operator, and hello, everyone. I'm delighted to welcome you to our presentation this afternoon, which can also be found on ipsen.com. I want to use the time we have together to focus on the progress Ipsen delivered in 2025 and on the future opportunities and platforms for growth. Please turn to Slide 2. Please take note of our forward-looking statements, which outline the routine risks and uncertainties contained within this presentation. Also, all of my comments on growth will be based on constant exchange rates. Please turn to Slide 3. I'm going to take you through the presentation of our latest business update followed by our CFO, Aymeric Le Chatelier, who will take you through the financials. And finally, I will provide an R&D update. At the end of the presentation, we will open the Q&A session. Let's begin by looking at today's highlights. Please turn to Slide 4. Turn to Slide 5. Today's headlines illustrates how we are continuing to deliver strong and sustainable growth. In 2025, total sales grew double digits by 10.9% and performance driven mostly by the strong performance of our portfolio, excluding Somatuline, which grew by 14.2% over the year. Regarding margin, we delivered a core operating margin of 35.2% of total sales. Turning to regulatory highlights. This year was marked by the EMA regulatory submission of tovorafenib for pediatric low-grade glioma in the first quarter. EU approval of Cabometyx in neuroendocrine tumors in July and importantly, by the announcement of the first data for our first-in-class differentiated long-acting molecule IPN10200 in September. Looking ahead, 2026 promises to be another exciting year for our pipeline with 5 key milestones, which includes 3 pivotal readouts in addition to the highly anticipated full data presentation of the Phase II data for IPN10200 in first aesthetics indication Glabellar lines at an upcoming medical meeting. Lastly, we are expecting another year of double-digit sales growth for 2026, supported by accelerated performance across the entire portfolio and the better outlook for Somatuline given the production challenges faced by generic competition. Aymeric will provide more details in his section. Please turn to Slide 6. Our full year sales delivered a solid 10.9% growth and 7.5% in Q4 fueled by all 3 therapeutic areas with an improvement of performance for neuroscience and rare disease this year compared to last year. The portfolio, excluding Somatuline, grew at 14.2% this year and by 19.6% in Q4. Oncology performed well with sales growth of 4.1% but were down in the last quarter due to a decline in Somatuline sales versus a very high baseline in 2024. Rare disease performed very well with sales doubling this year. Neuroscience with Dysport continued to deliver high single-digit growth. I'll now turn to oncology for more detail. Please turn to Slide 7. Starting with Somatuline, sales were up by 4.3% for the full year. Both Europe and the U.S. continue to benefit from shortages of generic lanreotide, and we saw a strong performance in Rest of World. As we have previously communicated, we are aware of recent updates on the potential challenges with regards to the manufacturing and availability of generic lanreotide in several markets, and this is factored in our guidance. Cabometyx sales were up by 5.1% with solid performance in Europe, driven by renal cell carcinoma growth and boosted by the neuroendocrine tumor launch despite increased competition in rest of world. Decapeptyl sales were up by 2.7% as we experienced volume growth in Europe and China despite continued competition and some pricing pressure in some countries. Onivyde sales grew by 6.2%, with expansion of use in the U.S. driven by the first-line metastatic pancreatic ductal adenocarcinoma indication. We expect sales to continue to grow modestly, but acknowledge that we are now unlikely to reach EUR 500 million in peak sales. Now let's turn to rare disease. Let's go to Slide 8. On rare disease, Bylvay continues to perform well with annual sales of EUR 180 million, growing by 36.3%. Growth was driven by both PFIC and Alagille syndrome indications in the U.S. Additionally, we saw a strong double-digit growth in both Europe and in Rest of World. Q4 sales growth was impacted by ongoing competitive challenges in the PFIC indication and we expect to see the positive effect of the new pediatric field force we put recently in place in the coming months in the U.S. Iqirvo continues to track very well with annual sales of EUR 184 million, with growth coming from all regions. Let me go into a bit more detail on the next slide. Please turn to Slide 9. As you can see, we have demonstrated strong quarter-on-quarter growth since the launch just over 1.5 years ago. In the U.S., we have seen a significant number of Ocaliva patients switching to Iqirvo, on top of a growing PPAR market. We believe that the new data published at AASLD this year has further strengthened Iqirvo's profile as a drug with both long-term efficacy and safety, including improvements in pruritus, fatigue and fibrosis. In Europe, we are continuing the launch across many countries. We're also very pleased with how well the launches are progressing, capturing new patients and contributing to expand the market. Moving to neuroscience, please turn to Slide 10. Dysport delivered another year of solid performance with sales growth of 9.7% for the full year. In aesthetics, sales grew by 13.7%, driven by continued strong sales in most territories, including the U.S. and rest of the world and by strong performance from our partner, Galderma, who continued to gain market share in key countries and a solid growth in our Ipsen territories. On the therapeutic side, Dysport grew by 4.2%, driven by strong growth in the U.S. and Europe. Reported sales were, however, down in rest of world impacted by adverse phasing of orders in Brazil. That concludes the review of sales. I'll now hand over to Aymeric, who will provide you more details on our full year financials. Please turn to Slide 11. Aymeric Le Chatelier: Thank you, David, and hello to everybody. I will now take you through more details of our 2025 financial performance and our guidance for 2026. Please turn to Slide 12. We delivered another set of strong financial results this year across sales, profitability and cash flow. First, our total sales, which exceeded EUR 3.6 billion, grew by 10.9% at constant exchange rate. Our core operating income grew by 16.7% to EUR 1.3 billion, in line with our free cash flow increasing by 29% to reach EUR 1 billion. Given the strong performance and our solid balance sheet with no debt, we had EUR 3.2 billion of firepower available for external innovation. Let's take now a closer look at those financials in the next slide. Please turn to Slide 13. Starting with the P&L to core operating income. I would like to highlight that we implemented this year a slight reclassification of our distribution expenses. These costs have been moved from SG&A to cost of sales and therefore now impact our gross margin. This change brings our reporting in line with common practices of most of our industry peers. You have all the details in the appendix of that presentation. Now if we look at the figures, the growth in total sales of 10.9% at constant exchange rate translated into 8.1% at current rates, given the adverse currency movements. Gross margin increased by 2.1 points driven by the earlier level of other revenue by EUR 80 million, mainly due to commercial and regulatory milestone received from ex U.S. partner for Onivyde and some other products and the growth in royalties received primarily from Dysport partner. SG&A costs increased by only 6.9%, with a ratio to sales at 31.6% improving by 0.3 points, reflecting an increased investment to support the launches, especially Iqirvo and Bylvay and the impact of our ongoing efficiency program. R&D costs increased by 9.8% to reach 20.5% of total sales, driven mainly by increased investment to support the development, mainly in neuroscience and early-stage oncology assets. As a consequence, our core operating income increased by 16.7% with a core operating margin standing at 35.2%, increasing by 2.6 points. Please turn to Slide 14. Turning to IFRS consolidated net profit. This year, we recognized impairment losses for about EUR 350 million before tax mainly driven by, first, Tazverik for which we no longer expect to achieve the EUR 500 million peak sales given the recent competitive developments. Secondly, by fidrisertiband following the negative readout in December 2025 of the pivotal Phase II trial and thirdly, by the discontinuation of some of our early-stage assets. Despite this impairment, IFRS operating income and consolidated net profit increased by 26% and 28%, respectively. Please turn to Slide 15. Finally, on cash flow. We continue to generate strong free cash flow this year and maintain a solid balance sheet with a cash position of more than EUR 500 million at the end of December. Free cash flow increased by 29% to EUR 1 billion, driven by EBITDA growth, sound management of capital expenditures and working capital. Net investments included the acquisition of ImCheck Therapeutic for about EUR 350 million and some regulatory and commercial milestones. As a consequence, with a net cash position of exactly EUR 560 million at the end of December and based on the maximum of 2x net debt-to-EBITDA we had an available firepower of EUR 3.2 billion for external innovation at the end of 2025. Let's now move to 2026 guidance. Please turn to Slide 16. For this year, we anticipate another year of double-digit sales growth with a high level of profitability. For total sales, we expect growth of more than 13% at constant exchange rates. This year, we also anticipate adverse impact of around 2% from currency based on the January exchange rate. This guidance on sales is assuming an accelerated sales growth of the portfolio, excluding Somatuline. This will be driven by Iqirvo, Bylvay, Dysport but also Cabometyx as well as the continued growth from Somatuline. Given the recent challenges with regard to the manufacturing and availability of generic lanreotide, we assume limited generic supply in 2026 with a potential entrant only in the second half of this year. On profitability now, we anticipate a core operating margin greater than 35% of total sales. We will continue to leverage our top line growth with moderate increase in SG&A and R&D ratio to stay around 20% of sales. However, currency rates and a lower level of other revenue will have an adverse impact on our margin in 2026. Regarding our midterm outlook, we are highly confident to exceed our total sales average growth of at least 7% per year for the period '23 to '27 and our 2027 core operating margin greater than 32% given the higher-than-expected Somatuline sales due to continued generic loyalty challenges and the stronger performance of our broader portfolio across our 3 therapeutic areas. With that, I will now hand over to David. Please turn to Slide 17. David Loew: Thank you, Aymeric. I will now provide an update on our R&D efforts. Please turn to Slide 18. We have another exciting year for our pipeline. We have seen strong expansion in oncology with 4 active Phase I programs evaluating promising new modalities in solid tumors and the addition of IPN60340 formally known as ICT01, which came through the acquisition of ImCheck. In rare disease, following the positive Phase II trial, we have opened a Phase III program evaluating elafibranor in primary sclerosing cholangitis, which I will share more on in a moment. In neuroscience, our broad programs continue to advance across both Dysport and our long-acting molecule IPN10200 with new Phase III programs expected to open in H1. Please turn to Slide 19. In oncology, a growing focus of our pipeline is on precisely modulating the immune system through multiple synergistic routes. I would like to highlight a couple of new molecules entering Phase I. Our antibody drug conjugates, IPN60300 targets a novel tumor antigen known to be expressed on multiple solid tumor types, and we are pleased to confirm first patients have been dosed in this trial. We also have our T-cell activator IPN01203, a potential first-in-class asset that selectively activates V beta 6 T cells through TCR and IL-15 R pathways. Please turn to Slide 20. Moving to rare disease and primary sclerosing cholangitis or PSC, an area with no approved treatment options and the majority of patients requiring a liver transplant. Following the promising Phase II data, we are excited to announce a Phase III study, elascope, which will be the only global study in PSC looking at the long-term clinical outcomes as primary objective. Elascope will evaluate the efficacy and safety of elafibranor 120 milligrams versus placebo in patients with PSC based on time to first occurrence of clinical outcome events and multiple secondary endpoints. Please turn to Slide 21. Turning to neuroscience following the announcement of our Phase II first proof of concept in Glabellar lines in September '25. We are on track to open 2 global Phase III trials for IPN10200 in Glabellar lines. Both trials will evaluate the efficacy and safety of IPN10200 at week 4 and 24 with key secondary endpoints, including patient satisfaction scores and onset of action. Please turn to Slide 22. We remain diligent in our external innovation efforts and announced strong additions to the oncology pipeline as we closed '25. We are delighted that the lead program IPN60340 from our acquisition of ImCheck Therapeutics was awarded U.S. FDA Breakthrough Therapy designation in January, recognizing investigational therapies with evidence of a substantial clinical improvement. A global licensing with Simcere Zaiming outside of Greater China brings another antibody drug conjugate into our pipeline, which is expected to enter Phase I soon. Finally, reinforcing the strength of our ongoing partnership, we added further 2 research programs with IRICoR, evaluating MAPK-related inhibition. Please turn to Slide 23. As you can see, we have several milestones to look forward to over the coming years. Firstly, we await the EU regulatory decision for tovorafenib in the first half. In the second half, we see many Phase III unblindings for Bylvay in biliary atresia, Iqirvo for PBC patients with an ALP of between 1 and 1.67 and Dysport in migraine and also for the Phase II data for IPN10200 in forehead lines and lateral cancer lines. Then as we look to next year, we have more proof-of-concept readouts for our long-acting neuromodulator, IPN10200 in the therapeutic indication as well as Phase III unblinding for Tazverik and tovorafenib. With that, please turn to Slide 24. We continue on our strong momentum and remain firmly on track to achieve our ambitions. I'd like to leave you with 2 key messages. First, we delivered strong '25 results with double-digit sales and profit growth fueled by the performance of our existing portfolio and launches. This consistent growth reflects our focus on execution and our ability to deliver across both commercial and medical fronts. We will further strengthen our R&D investments and grow our internal pipeline while investing to support our current and future commercial launches. Secondly, the outlook to 2026 is strong with double-digit sales growth guidance, multiple regulatory and clinical milestones to come and significant firepower to pursue external innovation. We look forward to another year of accelerated growth as we continue on our transformation. Turn to Slide 25. This concludes our presentation, and we will now take your questions. Operator, over to you. Operator: [Operator Instructions] We will now take our first question from the line of Charles Pitman King from Barclays. Charles Pitman: Charles King from Barclays. Two questions from me, please. Firstly, just on your guidance, I think it's quite noteworthy that your guidance in FY '26 is significantly ahead of that midterm growth outlook. So firstly, just is it fair to say your guidance philosophy is less conservative this year? And given the double-digit growth in FY '25 and guided to '26, just wondering kind of why you're not looking to readdress and raise that midterm target into '27? Then just secondly, on the kind of aesthetics neurotox business, can you just confirm -- in the press release, you talked about product mix dynamics seen in the U.S. given this is a single product, I'm just wondering kind of what these are, if you could provide a little bit more clarity. And then beyond that, I know you're unlikely to comment, but just if you're able to give us any further thoughts on the potential partnership discussions you're having with Ipsen 10200 within the aesthetics indication, that would be great. David Loew: Okay. Thank you, Charles. I will let Aymeric answer on your guidance question. Aymeric Le Chatelier: Yes. So thanks for the questions, and maybe I will clarify. I think that our guidance is today our best estimates regarding first Somatuline on one side. for which we are still expecting potentially some generics to be able to be on the market in the second half of the year. So I will say we are pretty balanced. And I think we have also a great ambition to continue a very strong growth of the portfolio ex Somatuline, where we expect to be able to accelerate the growth, and we deliver 14% growth this year. Regarding the midterm target, as you remember, the midterm target was to exceed 7% annual growth and to exceed 32% margin by 2027. So I think the message today is very clear that we are highly confident we're going to do better than this number, but this is still going to be exceeding. And I don't think we want to provide 2 guidance for 2 consequential year. So we are clearly highly confident to 2027. I will provide a guidance for 2027 when it's going to be time in a year time. On the product mix, maybe I can just answer the product mix and let you answer. So I think the product mix is more related to the product and sample of Dysport in aesthetic as you know, we're providing our partner with both products and sample and the economics are slightly different. That explains what we qualify as a product mix in our communication. David Loew: Then on your third question on our long-acting neurotoxin. As you know, in January 26, the arbitral tribunal of the International Chamber of Commerce issued a final decision in favor of Ipsen dismissing the claims brought by Galderma in connection with Ipsen's termination of the R&D agreement. And so the Tribunal confirmed also Ipsen's full rights to its clinical stage toxin programs in the aesthetics field, including therefore, the IPN10200 that you were alluding to. So basically, we continue to assess all options and we can't give you more information at this point, but we're going to come back as soon as we have made progress on this. Operator: We will now take the next question from the line of Xian Deng from UBS. Xian Deng: It's Xian from UBS. Two questions, please. So both on Iqirvo. So just wondering, the first question -- the first question is just wondering, Iqirvo previously you guided for EUR 500 million peak sales. And -- but of course, now the drug is doing really, really well. So I was just wondering, would you say now your peak sale guidance there is very conservative? And if you could maybe give us some color on what assumptions did you have when you set the guidance and what has changed since then? So that's the first question. And the second one is also on Iqirvo. Actually, just wondering about the patent or exclusivity situation. So my understanding is that the compound patent has already expired in the U.S. right now is protected by offer exclusivity on PBC. So just wondering, given now you are also running -- you already started the Phase III in PSC. So just wondering how should we think about the exclusivity/patent protection on this one, please? Sorry, just can I just quickly clarify -- did I hear that right? You mentioned on Somatuline you are expecting potential generics to come back in second half this year. So is that conservative as well? Have I heard that right? David Loew: Okay. Thank you, Xian. So on Iqirvo, the EUR 500 million peak sales guidance. So yes, we are very pleased with the performance, I have to say. We are going to observe how this goes. And especially also we have the ELSPIRE trial, which is going to read out in the mid of this year. And then subsequently, once we have seen that, we're going to look at potentially looking at changing the guidance if required. For now, we say it's above EUR 500 million. But I have to say we're extremely pleased with what we are seeing and with the performance that we have in the U.S. and ex U.S., yes. On your -- on the exclusivity question, we have orphan drug protection until '31. There are additional patents, which exist as well. Just to help you also on PSC on that question because PSC, and I think you're alluding to this, might report shortly before that date of the '31 that you have given. You need to keep in mind that, first, we have gotten orphan drug designation for PSC so there is a separate protection for PSC. It's a different dose. It's 120 milligrams, not 80. So that's already very different. There will be a different tablet as well. It's a different packaging, et cetera. So we think this is going to confirm quite good protection, and this is why we have given a go to that trial besides being excited about the data, obviously. And then on your third question regarding Somatuline, H2, it's hard always to exactly know what's happening with these generic companies. What I can say is that we have said that in the past, and I think it becomes very obvious, it's a very difficult product to produce because the gel is very viscous. It shouldn't be too viscous. It shouldn't be too liquid. So it's hard to produce. You have also seen that there have been FDA 483s and [indiscernible] on some of our competitors. So I think -- for the moment, it is reasonable to say that we're anticipating generics entering in H2. Operator: We will now take the next question from the line of Simon Baker from Rothschild & Co Redburn. Simon Baker: Three, if I may, please. Just going back to Somatuline. You've indicated that at best, there will be some generics later in this year. But I'm looking at this from a slightly different perspective, where does this leave you in terms of long-term contracting with your customers? Because it's all fine and dandy to have a generic available at a significant discount. But if the manufacturer can't deliver and can't manufacture it, it's rather academic for the customer and creates a lot of inconvenience. So does this really open up the possibility for tying in your customers into long-term contracting where you alone in the market can guarantee quality and supply. Any thoughts on that would be very helpful. And then just a couple of quick ones. You gave us the patient incidents of PSC in the state. I just wondered if you could give us a little bit more detail on and point us on how big you think this opportunity is. Some have suggested this is a $1 billion opportunity. And as you say, there are no existing treatments. So any thoughts there would be helpful. And then finally, on Iqirvo, if you could just give us an update on the sort of commercial dynamics share of voice in that category because your competitor there is rather preoccupied with launching another product in another category. I just wanted to see if you -- if there's been any change to marketing intensity by competitors in that space. David Loew: Thank you, Simon. On Somatuline, we, of course, do contracting with several of the customers, especially in the U.S., of course, that's a current practice, I would say. And this has, in the past, already helped to mitigate somewhat the penetration of the generics. So I would say we have done this already before, and you have seen the effect of it. So it all comes down, I would say, can they actually deliver or not and in what kind of quantities. On your second question, to give you a feeling on PSC. PSC is about the same market opportunity as PBC. And why do I say this? In PBC, it's a second-line indication that we and Gilead are having currently and so we are talking roughly 30,000 patients in the above 1.67 and about 20,000 in the below 1.67. And then in PSC, you have 40,000 patients, prevalent patients. And so that means that today, all these prevalent patients, they have no solution in PSC and we're actually going to be first line contrary to PBC where we are a second line. So basically, that explains why the market opportunity is about equal as the whole PBC pool. So for us, quite an exciting opportunity, I would say. And then on your third question, the dynamic share of voice. So for the moment, we don't see a change on Gilead's presence. They are heavily present, I would say, so as we are, right? So I think we performed very well, and we are very pleased with the performance that we are seeing. Operator: We will now take the next question from the line of Richard Vosser from JPMorgan. Richard Vosser: A few, please. Just returning to Somatuline. I wonder if you could just talk about price and volume thoughts in '26. Clearly, lack of generics means potentially you could raise price. So if you could talk about that and how that might impact also on '27. And for '27 on Somatuline, you talked about exceeding the margins. Just -- any thoughts to the extent of generic competition of Somatuline you might be thinking in '27 would also be helpful. Second question, just on Iqirvo as well. Just thinking about the growth, which has been stellar, what bolus do you think you've got from Ocaliva and how that might feed into growth expectations for the second half of '26. And then finally, on business development M&A, you've highlighted the EUR 3.2 billion firepower. And I think previously, you've highlighted thinking about strengthening the oncology business. But maybe you could give us an idea of latest thoughts around business development and what you're looking for and how that might impact R&D spend going forward. David Loew: Yes. Thank you, Richard. So on Somatuline price volume, I'll let Aymeric answer. Aymeric Le Chatelier: Yes. So Richard, on Somatuline, I'm not going to be able to provide you all the detail of our assumption. But clearly, the lack of competition will allow you to -- will allow us to regain volume both in Europe and in the U.S. I think that's the trend on top of a very dynamic market that we see for NET, where it's still a market that is growing in the 4% to 5% per year with very strong position for lanreotide. On the price side, I think there are opportunities, probably more in the U.S., and David was talking about on the prior questions regarding the contracting. As you know, there is significant rebate which have been negotiating in the U.S. We have also passed a price increase at the beginning of the year. Ex U.S., I will say the situation is more complicated. In many countries, it's probably difficult to change the pricing, and there may be some markets where we have tenders, and we are still assessing that opportunity. The second part of your question was regarding the margin in 2027. So as I said, I'm not going to provide a guidance for 2027. As you know, we are very confident to exceed the outlook. Now the shape of 2027 will depend at what pace the generics are going to be able to make it, how many generics are going to be able to make it, if any, in the second half of this year and in 2027 and that could have an impact on the level of profitability. But we are very confident that in any case, we will be exceeding to some extent, the 32% target that we gave. David Loew: Then on your third question regarding Iqirvo growth and the bolus of Ocaliva. So what you have seen in terms of sales acceleration from September to December, is really the delta in terms of the acceleration came from the Ocaliva switches. We think the Ocaliva switches are mostly done. So we are on a higher level and that higher level should carry forward, of course, into 2026 because we are seeing still new patients, which are new to second line coming on to Iqirvo. So we're very pleased with that. And this is why we are very confident on Iqirvo and we observe a very strong dynamic. On mergers and acquisitions. So as you pointed out, we have a bit more than EUR 3.2 billion of firepower. We intend to use this if we see the right opportunities. As I stated before, at JPMorgan, we are looking at oncology late-stage opportunities that we want to bring on board. And then, of course, in our guidance, as you remember, we already include the preclinical and early clinical in that guidance and in the margin. So you will also see us use part of this firepower for some of the earlier deals. Operator: We will now take the next question from the line of Victor Floch from BNP Paribas. Victor Floch: Victor from BNP Paribas. A couple of questions on IPN10200. So I mean, I think it's fair to say that the optimal target profile for that one differs quite a lot between aesthetics and therapeutic use and notably when it comes to duration of action. So now that you have the full Phase II data in hand, I was just wondering whether you can discuss whether IPN10200 delivered an optimal profile, keeping its commercial potential impact in both opportunities. And then I understand that you don't really want to discuss your option, but I mean just to understand what would be like the tipping point when it comes to either go with a partner or either go with yourself? Is it just about like economics and whether that you want to protect at least the kind of economics you have on Dysport with that one? And finally, on M&A, I was just wondering whether you can discuss whether you would be open to potentially stretch your firepower in your balance sheet beyond 2x EBITDA, if the right opportunity arise. David Loew: Perhaps, Victor, on your first question, can you just clarify why you are saying that the optimal target profile will be different. That's not something that we would subscribe to. Victor Floch: Okay. I mean I think it's -- I mean what do we understand in the past that for aesthetics use, I mean physicians were pretty happy with the 6 months duration of dosing, even though at the same time for therapeutic use, I think we're all looking for the longer duration as possible. So maybe you don't agree with that, but so I was just wondering whether you could discuss the target profile you've seen with the IPN10200. David Loew: Yes. First, I would like to bring this back to data, right? When you look at none or mild in aesthetics at 6 months. Most of the bond As have actually shown that you can go and look at the labels of these different drugs, most of them are between 20% and 30%. And so here, what we have said is we have seen a majority of patients achieving none or mild. And so that data is going to be presented. So in that sense, why many companies are saying, well, some patients are satisfied or they see still some effects and et cetera, I would just bring this back to the endpoints of none or mild because that's usually what is being measured in the clinical trials. So in that sense, with that statement, I think the profile that we want to see in aesthetics and therapeutics is actually the same. You want to see a very rapid onset of action. You want to see a good 1 month efficacy and you want to see a prolonged duration. This is important, not just in aesthetics, but also in therapeutics, obviously, for example, in spasticity, migraine or cervical dystonia, where it can also help alleviate the health care system utilization because patients need to get less often to the doctor. So I don't know if that answers your question. Victor Floch: Definitely. David Loew: Then on your second, as I said, we are looking at all options. We are not going to comment on this right now. And then on your third question on the use of our firepower, I'll let Aymeric comment on the stretching the firepower. Aymeric Le Chatelier: Yes. So Victor, just to clarify, we are today operating clearly on the maximum debt of 2x EBITDA, which is fully in line with our investment-grade rating. This gives us a EUR 3.2 billion firepower on top of our very strong free cash flow, EUR 1 billion this year with a very ambitious guidance that we have this EUR 1 billion should even increase 2026. So we don't see any reason for using more than the 2x EBITDA. Having said that, the Board has always said that we consider if there were to be a unique opportunity and ability to slightly stretch that, but this is not today our priority. Operator: We will now take the next question from the line of Lucy Codrington from Jefferies. Lucy-Emma Codrington-Bartlett: Just I was wondering if you could go into a bit more detail in terms of your expectations that Dysport this year, both in terms of aesthetics and therapeutics. And with that, any potential impact that you might expect as the Relfydess launches continue. And then any update on what the aesthetics environment is like in the U.S. and other markets at the moment? And secondly, on Somatuline when you talked about the guide, you said growth. So I know you're -- it's somewhat dependent on the entry of generics, but should we be expecting growth on the numbers reported in 2025? Or still some decline? And then second -- finally, any milestones that we should be factoring in for this year? David Loew: Thank you, Lucy. On Dysport, we are expecting good high single-digit growth in both markets, aesthetics and therapeutics. We do not anticipate any impact from Relfydess because that's a -- it's a different market. There is a market segment, which is open for liquids. I would say the majority of the market is on great constitution because many of the physicians actually like to dilute to their liking. We have seen this with the Alluzience launch as well. So we don't really foresee any cannibalization. It's quite the contrary. I think both are going to drive growth. Then on aesthetics in the U.S. The market has slowed down a little bit, but our partner, Galderma is performing very, very well, gaining market share. So we are very pleased with that performance. On Somatuline, yes, we do anticipate growth versus 2025 because of what Aymeric just said before is you have -- of course, the volume gain of the generics not being there, but you also have some potential pricing upside. So there is this kind of double effect, if you want, versus the baseline of '25. And then I wasn't quite sure I understood your milestone question. Aymeric Le Chatelier: I think I get the question on milestone. I think this is related to our other revenue which, as I said during the presentation, have increased significantly in 2025. Our other revenue are made of both royalties that we received from partners and some milestones -- some of the milestones are nonrecurring. That's why we were indicating that our margin in 2026 is going to be slightly impacted by a slightly lower level of milestones and other level of other revenue, while we still continue to have a strong dynamic on the royalty side which is directly linked to the high single-digit expected growth for Dysport with our partner. David Loew: Thank you, Lucy. I think we have no more questions. So this wraps up our 2025 conference. Thank you for your attendance. Back to you, operator. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.