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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.
Operator: Good morning, and welcome to the TransUnion 2025 Fourth Quarter Earnings Conference Call. [Operator Instructions] Please also note that this event is being recorded today. I would now like to turn the conference over to Greg Bardi, Vice President of Investor Relations. Please go ahead. Gregory Bardi: Good morning, and thank you for attending today. Joining me on the call are Chris Cartwright, President and Chief Executive Officer; and Todd Cello, Executive Vice President and Chief Financial Officer. We posted our earnings release and slides to accompany this call on the TransUnion Investor Relations website this morning, and they can also be found in the current report on Form 8-K that we filed this morning. Our earnings release and the accompanying slides include various schedules, which contain more detailed information about revenue, operating expenses and other items as well as certain non-GAAP disclosures and financial measures along with their corresponding reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures. Today's call will be recorded and a replay will be available on our website. We also will be making statements during this call that are forward-looking. These statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from those described in the forward-looking statements because of factors discussed in today's earnings release and the comments made during this conference call and in our most recent Form 10-K, Forms 10-Q and other reports and filings with the SEC. We do not undertake any duty to update any forward-looking statements. With that, let me turn it over to Chris. Christopher Cartwright: Thank you, Greg, and good morning, and welcome, everybody, to the call. Kind of excited to share our fourth quarter results with you today. We had a really good quarter, as you can see, and it was a great capstone to another strong year of growth and profitability at TransUnion. So I'm going to start focusing on the fourth quarter results themselves and also provide an overview of our 2025 accomplishments. And then we'll get into the 2026 guide and our strategic priorities. And then I'll pass it over to Todd, who's going to give you the full financial details on Q4, as well as providing the first quarter guide and the full year 2026 guide. So 2025, we finished very strongly again, exceeding revenue, adjusted EBITDA and adjusted diluted EPS in the fourth quarter. In total, revenues increased 12% organically and the U.S. market grew 16%, and both of these are some of our strongest underlying performance since 2021. We grew adjusted diluted EPS by 10% in the quarter, actually in the mid-teens, 14% if you exclude the impact from the tax rate reset this year. And with robust business fundamentals and strengthening cash flow, free cash flow, we continue to emphasize shareholder-centric capital deployment, particularly at the current valuation level. So we repurchased roughly $150 million of shares in the quarter for a total of $300 million over 2025. And of course, we retain ample capacity under our recently increased $1 billion repurchase authorization. And we also raised our quarterly dividend by 9% to $0.125 a share. Now the fourth quarter results demonstrate continued execution against our growth strategy across our solutions, our market verticals and our geographies. Within the U.S., Financial Services grew 19%, 11% excluding mortgage. Mortgage, consumer lending and auto were all double-digit growers. Across all lending types, we outpaced volume growth through new business wins across our solutions suite. Emerging Verticals accelerated from 7% in the third quarter to 16% growth in the fourth, with insurance, media, tenant and employment screening, tech, retail and e-commerce all growing double digits. And across U.S. markets, our core B2B solutions families grew double digits. Marketing and fraud grew 15% and 14%, respectively. Now this is our best quarter of growth for both of these since the Neustar acquisition. Our results reflect the power of our streamlined product suites, the accelerated pace of innovation, and our improved go-to-market activities. Our innovative solutions are really resonating with our customers, and they're driving new levels of growth for TransUnion. So internationally, we grew 2% on an organic constant currency basis. Canada and the U.K., our 2 most established markets, they both grew double digits, and they continue to outperform their overall market significantly. Our emerging markets continue to navigate some moderating economic conditions and some credit volume -- moderating credit volume conditions. India declined 4%, below expectations in what we're viewing as a reset year for unsecured lending and for credit card originations in the Indian market. Now we believe that we are experiencing a bottoming of unsecured lending and card volumes in 2025 and probably early into '26 as well, but we expect a slow and steady improvement in volumes over the course of 2026, supported by using capital restrictions and now with the U.S.-India trade agreement, a lot less uncertainty. We anticipate mid-single-digit growth in India in '26, and a return to double-digit growth thereafter. And again, India is an immense growth opportunity for us, driven by their favorable economic and demographic trends and our unique market position and the coming deployment of all of our global products and IP into this marketplace. Todd is going to provide a more comprehensive review of India in our fourth quarter results shortly. So 2025 marked a milestone year for TransUnion. We delivered strong financial results. We accelerated the pace of our innovation, and we executed very well on our business transformation. So in 2025, we delivered our second straight year of high single-digit revenue growth and double-digit adjusted diluted EPS growth or mid-teens excluding the impact of the tax rate reset. We also expanded adjusted EBITDA margin by 50 basis points in the year, excluding the impact of FICO mortgage royalties. And this underscores the underlying operating leverage in our business. We significantly outperformed the high end of our initial guidance in February by $183 million on revenue and $56 million on adjusted EBITDA and $0.22 per share adjusted diluted EPS. Our strong earnings and free cash flow enabled a thoughtful and accretive capital deployment throughout the year. We returned in total $390 million to shareholders through buybacks and dividends. We completed the acquisition of Monevo, our new credit offers engine, and we announced our agreement to acquire majority ownership of Trans Union de Mexico. Now moving to our solutions. Our complementary and scalable solutions have really powered diversified revenue growth that is very durable. We now generate roughly half of our U.S. markets revenue outside of core credit. And in international, we generated over 1/4 of our revenue from noncredit solutions, but with expansive opportunity as we deploy fraud marketing and consumer solutions in our countries around the world. Slide 7 provides the 25-year breakdown by solution family. This is our second year of providing this breakdown, and we simplified the reporting around 4 strategic solutions areas of credit, fraud, marketing and consumer. Our communications products, which include Trusted Call Solutions, are now largely reported within our fraud mitigation solutions. We also allocated our market-specific solutions, including our investigator tools to these main solution families. On '25, we drove accelerated innovation and growth across solutions. We launched over 30 major enhancements and new products, by far the largest cohort ever, and we have a significant pipeline and long-term revenue growth potential. In addition to driving strong new business, these solutions and enhanced go-to-market supported record retention rates and record new sales in U.S. markets. So to highlight our growth drivers in each solution family. So Credit Solutions grew 13%, driven by U.S. nonmortgage volumes, consistent pricing, sales acceleration in FactorTrust and TruIQ analytics. Marketing solutions accelerated from flat growth in '24 to 7% organic growth in '25, enabled by our tech replatforming, an integrated and simplified solution suite as we've gone from over 90 products down to 30 and, of course, a strengthened leadership team. So we drove robust bookings in identity, increased sales and usage of our audiences and strong retention in our measurement solutions, setting up marketing solutions for another strong year in '26. Fraud solutions grew 8%. Trusted Call Solutions or TCS, led the way, growing by $40 million or over 30% year-over-year to $160 million. We expect TCS revenue to exceed $200 million in 2026, and our recently announced tuck-in acquisition of the mobile division of RealNetworks is expected to close in the first half of the year and only adds to this potential growth. The acquisition augments our TCS voice channel capabilities with highly complementary messaging solutions to fight fraud and improve customer engagements. So our fraud and other products are poised for accelerating growth with strong demand from our new AI-powered fraud models for synthetic fraud detection and credit washing. Finally, consumer solutions grew 6%, excluding the large breach win in 2024. Our indirect channel grew well and direct-to-consumer freemium offerings continues to add users at a healthy pace. We also continue to see strong growth and demand for our consumer solutions across international markets. Our ambitious business transformation enabled us to accelerate our pace of innovation and growth. Through several years of investment in execution, we have built a truly scalable global technology and operating platform. In '25, we strengthened our global operating model with key talent additions and process improvements. So first, we added several new solutions and operations leaders throughout the year. Most recently, Francesca Noli, who previously led Capital One's CreditWise product has joined us as the Head of Consumer Solutions. We also standardized our global product management best practices to better align our resources, streamline decisions and enable a faster pace of product development and introductions. We significantly advanced our tech modernization in '25. We migrated over 100 U.S. credit customers to OneTru by year-end, proving the platform's ability to deliver the most complex and sophisticated use cases. We augmented our underlying OneTru capabilities, including integrating additional identity data such as our public records to strengthen our industry-leading coverage and density. We also implemented agentic AI across core processes such as data onboarding, identity resolution, analytics and delivery. And globally, we deployed key TruIQ analytic capabilities into the Indian, Canadian and U.K. markets. So these achievements reflect the results of our disciplined multiyear investment. The fourth quarter marked the completion of our transformation investment program on schedule, on budget, and we're going to realize the full target savings in 2026. So in '26, we expect to deliver another year of strong financials. We anticipate growing 8% to 9% organically in constant currency for revenues, 7% to 8% adjusted EBITDA growth, and 8% to 10% adjusted diluted EPS growth. The high end of our guidance implies a third consecutive year of at least high single-digit revenue growth and double-digit adjusted EPS growth. And our guidance assumes continued healthy operating leverage with 70 basis points of adjusted EBITDA margin expansion when excluding the FICO mortgage royalty payments. So our initial guidance maintains our prudently conservative approach. We expect modest U.S. lending growth similar to recent quarters and a gradual recovery in our international markets. Now assuming a continuation of these current trends, we would again expect to deliver toward the high end of our range. Our strategic focus on '26 is to build on our momentum and to drive innovation-led and scalable growth. The priority is really turbocharging our innovation. We expect that the pace of major product enhancements and introductions will accelerate further in '26. Across our portfolio, we are launching new AI-powered solutions to boost product predictiveness and capture more value within a customer's workflow. In credit, we're embedding role-based AI agents in TruIQ analytics for faster data exploration and easier accessibility. In fraud, advanced machine learning and AI already power our newest models and will support rapid development of customized models for clients at scale. In marketing, we're enhancing our robust identity data with AI models to create advanced consumer behavioral models. And in our international markets, we continue to deploy our fastest-growing U.S. solutions, including TruIQ analytics and Trusted Call Solutions into target local markets. We believe our broader solution suite will enable continued outperformance in mature markets like Canada and the U.K., and adds to our growth potential across our attractive emerging markets. Our solutions portfolio is the strongest it's ever been, and it's only gaining momentum. And to ensure commercial momentum, we continue to sharpen our go-to-market approach and have added specialized sellers capable of selling our newest solutions. So we're unlocking the full potential of our global technology and operating platform to fuel these innovations and growth. We're on track to complete U.S. credit migrations onto OneTru by midyear. And further, we plan to migrate credit and analytic capabilities for Canada, the U.K. and the Philippines onto OneTru over the course of '26. From an operating standpoint, we remain focused on continuous improvement, standardization and automation. Scaling our technology and operating platform, we also anticipate ongoing cost savings that will boost margins and support future growth investments. And finally, I wanted to finish with a few thoughts on AI, given the recent noise in the information services and software space. So AI raises concerns about commoditization, especially for information services companies that manage more readily accessible and unregulated data. However, I believe that TransUnion's data assets are protected from this risk because they're broadly sourced, they're proprietary, they're highly regulated, and they're continuously enhanced by [indiscernible] from providing services across our networks. And this creates a significant entry barrier. Now with our market-leading identity resolution, we integrate all of this data to enable advanced analytics and deliver great predictions of credit and fraud risk to clients as well as marketing effectiveness. This helps our clients make smart decisions about their resource allocation. Also, AI can accelerate our growth by increasing the data consumption by our clients to improve their AI-enabled models, but also by substantially automating our internal analytic processes. And I'll remind you that today, our most AI-enabled clients also consume the most data. So we think we're in an advantageous position. We have a ton of domain-specific data and a position in our customer workflows that's going to allow us to drive substantial value and be enabled by AI rather than [ erode it. ] So if I can double-click a bit. I'd start with our credit solutions and remind you that these are broadly sourced proprietary data. In the U.S. alone, at any point in time, we have 12,000 to 14,000 active lenders furnishing data. This represents individual contracts and individual ongoing supervision for each one of these data contributors. Additionally, they can only contribute the data to authorized reporting agencies, and we can only use it for very specific and highly regulated purposes. Before we provide this information to a customer, we have to research them. They go through an elaborate credentialing process. They can only use the data for specific uses. We have to monitor their usage of the information on an ongoing basis. Credit information is deeply important to consumers, each year the bureaus handle millions of consumer inquiries and thousands of regulatory inquiries. And unfortunately, credit reporting is also one -- receives like the highest volume of litigation from consumers of any industry in the U.S. So obviously, the combination of the broad sourcing networks, the proprietary and highly regulated nature and all of the challenges around selling this information and supporting its usage in the market create quite a barrier to entry. Our fraud and marketing solutions also leverage fast contributory networks of data and an industry-leading data craft. Most of this information is proprietary and sourced from industry consortiums. For instance, our fraud models use data from our device consortium alongside with anomalies that we did [indiscernible] and in credit files or from our public records business. This device consortium represents hundreds of corporations around the world and has engaged with over 14 billion devices over the last 15 years. In marketing, our measurement solutions capture information on consumer interactions with ads across hundreds of leading e-commerce entities. And this includes the walled garden, streaming platforms, most of the prominent publishers out there. And these entities provide us with this data because we represent multibillions of dollars of brand spending from their consumers, rather from their customers. And they're looking to us for independent and entrusted measures of advertising effectiveness. And so our marketing identity solutions, they take in all of this data input, plus they gather additional information from our clients' range of internal systems and they bring it all together to assess, to provide insights into the effectiveness of a client's marketing initiatives and just assess the probability that a prospect is going to convert within the marketing funnel. So we're also actively leveraging AI internally, and we're seeing some enormous benefits, driving software development productivity, speed of product development, improving our customer experience and the consumer experience and operations, and just allowing us to do a lot more with less. AI is enhancing each phase of our analytic data insight process within OneTru, empowering our newest products. So net-net, I think AI is going to be a revenue and profit growth enabler for TransUnion. And I'll remind you that our most AI-enabled customers consume more data than our traditional customers and adopt our newer solutions more quickly. So increasingly, TransUnion can capture value with AI agents by performing the work that's done upstream, either by internal client teams or encroaching on automation in workflow solutions that rest upon our data and analytics. So I'm sure we'll get some questions on this in the Q&A. I look forward to that. But now I'm going to hand it over to Todd for more depth on the financials. Todd Cello: Thanks, Chris, and let me add my welcome to everyone. As Chris mentioned, we exceeded guidance in the fourth quarter, led by U.S. financial services and emerging verticals. Consolidated revenue increased 13% on a reported and 12% on an organic constant currency basis. The Monevo acquisition added 0.5% to growth. The foreign currency impact was immaterial. Mortgage contributed 3 points to growth. Adjusted EBITDA increased 10%. Adjusted EBITDA margin was 35.6%, in line with our expectations as we made targeted investments in the quarter behind strong revenue growth. Adjusted diluted earnings per share was $1.07, $0.05 ahead of the high end of our guidance and an increase of 10%. In the fourth quarter, we incurred $25 million of onetime charges related to our transformation program, $6 million for operating model optimization and $19 million for technology transformation. The fourth quarter marked our last quarter of onetime charges related to our transformation program. Looking at segment financial performance for the fourth quarter, U.S. markets revenue grew 16% on an organic constant currency basis versus the prior year. Adjusted EBITDA margin was 37.9%. Financial Services revenue grew 19% or 11% excluding mortgage. The environment remains positive. Lenders have sufficient capital, credit performance is strong and consumers continue to show resilience due to low unemployment and rising wages. We continue to outperform underlying volumes on the strength of our broad-based solution suite. Credit card and banking rose 3%, with healthy lending volumes and good demand for our alternative data, fraud and marketing solutions. Consumer lending rose 21% as fintechs and personal lenders continue to expand activity. Delinquency trends remain stable even with the pickup in activity and fintech funding remains strong. FactorTrust finished the year well and grew nearly 20% for the year. Auto grew 12%, driven by volume growth, pricing and new wins. Mortgage revenue grew 37% against inquiries up 4% due to third-party scores pricing and non tri-bureau revenue. Mortgage represented 13% of TransUnion's 2025 revenue. Emerging Verticals accelerated to 16% growth, up from 7% in the third quarter with strength across our verticals. Even excluding some onetime project revenue, underlying growth was still over 10%. Insurance again grew double digits. Tech, retail and e-commerce, media, and tenant and employment also accelerated to double-digit growth. Communications grew mid-single digits and public sector grew modestly. Insurance delivered its first $100 million revenue quarter, a testament to strong execution and our unique position as the clear leading bureau serving the insurance space. Double-digit growth in insurance was supported by consumer shopping and healthy credit-based marketing activity as insurers benefit from improved rate adequacy. We continue to execute a broad-based growth playbook with strong sales across core credit, driving history, marketing and Trusted Call Solutions. Turning to Consumer Interactive. Revenue grew 8% on an organic constant currency basis driven by strength in the indirect channel and breach remediation wins. For my comments about International, all revenue growth comparisons will be in organic constant currency terms. For the total segment, revenue grew 2%. Adjusted EBITDA margin was 43.1% as we controlled expenses for moderating revenue growth. Looking at the specifics for each region. Our U.K. business grew 10%, a second straight quarter of double-digit growth. We benefited from healthy volumes from our largest banking and fintech customers as well as new wins across verticals. Canada grew 13%. Broad-based growth was driven by fintech wins and customer expansion, innovation-led gains in financial services and growth across Consumer Indirect, insurance and auto. 2025 was our third straight year of double-digit growth in Canada, reflecting our proven global growth playbook. Latin America declined 3% due to softer economic and lending conditions. Colombia grew low single digits despite political uncertainty that weighed on activity. Our other Latin America countries declined modestly impacted by uncertainty linked to recent trade and immigration policies. Our smaller Brazilian business also declined. Asia Pacific declined 11%. The Philippines grew low single digits, but Hong Kong faced soft volumes and continued to lap onetime consulting revenue from the prior year. In both Latin America and Asia Pacific, we expect similar growth rates and dynamics in the first quarter of 2026, with improving performance as the year progresses. Finally, Africa increased 3% with good growth across banking, insurance and fintech. Turning to India. Revenue declined 4% in the quarter and grew 2% for the year. Here are our expectations. As a reminder, in 2024, we experienced strong but decelerating growth throughout the year, and the Reserve Bank of India took proactive actions to support financial stability and slow lending by tightening regulations and targeting lower loan-to-deposit ratios industry-wide. In 2025, India experienced stable GDP growth and inflation, and the RBI steadily eased some of the lending restrictions. With that said, unsecured personal loans and credit cards, which drive our volume and revenue remained sluggish due to capital constraints and lender conservatism. Overall, consumer loan growth in the year predominantly came from secured products like gold loans, where credit pull penetration is not significant. Unsecured personal loan and card lenders prioritize existing customers and higher notional loans as opposed to new to credit opportunities, which also impacted credit polls. This dynamic weighed on growth, particularly after U.S. tariff announcements dampened commercial lending to export-oriented sectors. Despite volume challenges throughout 2025, we continue to drive solid sales throughout the year of our innovative credit and direct-to-consumer solutions. For 2026, we expect mid-single-digit growth with high single-digit declines in the first quarter, followed by improvement over the course of the year. Our guidance assumes a tempered recovery in the unsecured personal loan and credit card markets. Economic conditions are favorable and the recently announced trade deal between the U.S. and India reduces some uncertainty. That said, lenders remain cautious, and we will monitor conditions closely. We believe our accelerating pace of product innovation also supports improved growth in 2026 with several new consumer and small business credit scores, additional TruIQ analytics tools, and an expanded direct-to-consumer offering. Longer term, India remains a unique opportunity for TransUnion, and we believe a healthy double-digit growth compounder. We are the market leader in the world's fastest-growing market. In addition to highly favorable demographic trends with 850 million consumers under 35 years old, rapid digitization plays into our strength in fraud and marketing. We plan to expand our offerings in India with our leading global IP, including marketing solutions, True IQ and trusted call solutions. Secular trends combined with significant vertical and solution, whitespace present multiple avenues for growth across our Indian business. Turning to the balance sheet. We ended the quarter with $5.1 billion of debt and $854 million of cash. Our leverage ratio at quarter end declined to 2.6x as we continue to push toward our long-term target of under 2.5x. Our strengthening free cash flow and ongoing delevering positioned us to return capital returns to shareholders. We repurchased $150 million in shares in the fourth quarter, bringing the total for 2025 to roughly $300 million. We view valuation as attractive at current levels and plan to continue being active in the repurchase market over the course of 2026. We also raised our quarterly dividend from $0.115 to $0.125 per share, underscoring our commitment to growing our dividend alongside earnings growth. We expect to complete our acquisition of a majority ownership of Trans Union de Mexico in the first half of 2026. We are excited to expand our global reach and bring our expertise and solution to Mexican consumers and businesses. Based on current exchange rates, we expect the purchase price to be approximately USD 660 million. We plan to fund the acquisition with cash on hand and debt. Ahead of the acquisition in February, we upsized the capacity on our revolving credit facility to $1 billion. Before turning to guidance, I want to provide final comments on our completed transformation investment program. In late 2023, we announced this program to optimize our operating model and modernize our technology capabilities. In addition to driving structural cost savings, the program was a clear enabler of our current innovation and growth momentum. We met all financial commitments for the program, completing it on time, and within our $355 million to $375 million budget. Additionally, CapEx was roughly 8% of revenue in 2024 and 7% of revenues in 2025, better than expected as we manage capital investment throughout the period. The program delivered $200 million in free cash flow savings, inclusive of roughly $130 million of operating expense savings and a reduction in capital intensity to approximately 6% of revenue starting in 2026. In 2026, there will be no onetime spend related to this investment program. We expect free cash flow generation as a percentage of adjusted net income to be 90% or greater in 2026 and going forward. Turning to guidance. We have maintained a prudently conservative approach. We assume modest U.S. lending volume growth and a tempered recovery in our international emerging markets. If conditions and business momentum continue, we expect to deliver results towards the high end of our guidance range. Additionally, our acquisition of Trans Union de New Mexico, which we anticipate being modestly accretive in its first year upon closing is not included in guidance. Throughout the year, we plan to provide transparency on the impact of FICO mortgage royalty increases, which increased our reported revenue this year but have no profit impact. That brings us to our outlook for the first quarter. FX impact is expected to be a 1 point benefit to both revenue and adjusted EBITDA. At this point, we assume minimal impact from acquisitions. Revenue is guided to be between $1.195 billion and $1.205 billion, 8% to 9% on an organic constant currency basis or 5% to 6% excluding the impact from FICO mortgage royalties. We anticipate total mortgage revenue growing roughly 35% in the quarter compared to a modest increase in inquiries. We anticipate adjusted EBITDA to be between $414 million and $420 million, up 4% to 6%. This implies an adjusted EBITDA margin of 34.6% to 34.9%, down 140 to 160 basis points. However, excluding the 110 basis point margin drag from FICO mortgage royalties, we expect our margins to be down modestly in the first quarter. We expect our adjusted diluted earnings per share to be between $1.08 and $1.10, up 2% to 5%. Turning to the full year. We anticipate FX and acquisitions to be immaterial to revenue and adjusted EBITDA. Revenue is guided to be between $4.946 billion and $4.981 billion, 8% to 9% on an organic constant currency basis or 5% to 6% excluding the impact from FICO mortgage royalties. Specific to our segment organic constant currency assumptions, we anticipate U.S. markets to be up high single digit or mid-single digit excluding mortgage. Within U.S. markets, we expect another strong year from our B2B solutions and verticals and a transition year from Consumer Interactive as we lap breach wins and ramp the monetization of our freemium channel. We are guiding Financial Services to be up mid-teens or high single digit excluding mortgage, Emerging Verticals to be up mid-single digit and Consumer Interactive to decline low single digit. We anticipate international growing mid-single digit. Turning back to the total company outlook. We expect adjusted EBITDA to be between $1.756 billion and $1.777 billion, up 7% to 8%. That would result in an adjusted EBITDA margin of 35.5% to 35.7%, down 30 to 50 basis points. However, excluding the impact of FICO mortgage royalties, we expect to expand adjusted EBITDA margins by 70 basis points at the high end of guidance, driven by flow-through on revenue growth as well as the remaining savings from our transformation program. We anticipate adjusted diluted earnings per share to be $4.63 to $4.71, up 8% to 10%. Our adjusted diluted earnings per share guidance assumes no benefit from our acquisition in Mexico nor other capital allocation actions. For other guidance items, we expect depreciation and amortization to be approximately $600 million or $310 million excluding step-up amortization from our 2012 change in control and subsequent acquisitions. Additionally, we expect net interest expense to be about $220 million. The adjusted tax rate to be approximately 26%, and capital expenditures to be about 6% of revenue. Before handing it back to Chris, I want to provide our perspective on the mortgage market and how our assumptions inform 2026 guidance. Given the growing -- given the number of moving pieces, I want to provide our high-level view on industry structure and dynamics. First, credit data is a foundation to safe underwriting mortgage in all lending categories. Any score or analytic depends on credit bureau's data stewardship. We differentiate our data from peers as the only bureau with 30 months of trended data plus alternative data sets like rental and utility trade lines. Second, our pricing actions preserve the profitability of our mortgage vertical while prioritizing lower costs for consumers and promoting lender choice. In 2026, we are offering VantageScore at $4, a 60% discount to a FICO score. We are also keeping the price of our credit data plus VantageScore flat in 2026 at $15. Our pricing approach [ influence ] TransUnion's profitability from potential changes in third-party score delivery models. Finally, VantageScore adoption represents incremental profit and margin opportunity for TransUnion. We have had very constructive discussions about VantageScore 4.0 and expect customers to test and validate throughout 2026. That brings me to our underlying U.S. mortgage guidance for 2026. We anticipate generating $425 million of mortgage revenue excluding FICO royalties, up roughly 6%. This expectation is driven by core data pricing as well as new wins in TruIQ and Trusted Call Solutions. Inclusive of FICO royalties, we expect $750 million of reported mortgage revenue, up 28%. A few underlying assumptions to this guidance. We expect mid-single-digit inquiry declines based on the extrapolation of current origination trends. Given the presently low level of mortgage activity, any additional reduction in interest rates represents upside to our guidance. We assume no shift to the FICO direct licensing program in the year, informed by current observations and customer feedback. No customer has shifted to this program to date. Again, absolute profitability is similar regardless of whether TransUnion or the reseller calculates the score. Finally, any VantageScore adoption represents profit and margin upside to our guidance. Timing and pace of adoption will be dependent on key milestones, such as the FHFA publishing its loan level price adjustment matrix for the GSEs. Given that FICO mortgage royalties impact revenue but not profit, we believe the best way to judge underlying performance is to exclude these revenues from our metrics. In 2024 and 2025, we grew high single digits even when excluding FICO mortgage royalties and expect to deliver 6% growth based on the high end of 2026 guidance. Excluding no-margin FICO royalties also uncovers the underlying operating leverage of the business over the last several years. Based on the high end of guidance, we expect to deliver 38.2% margins with 70 basis points of expansion in 2026 or 240 basis points of expansion since 2023. This underlying operating leverage across the 3 years is again driven by strong revenue growth and the benefits of our transformation cost savings. Finally, the secular trends in mortgage remain the same, and any recovery in mortgage activity represents upside to our financial results. There are now almost 10 million mortgages with rates above 6%, creating a significant refilable population if average rates fall below 6%. Every 10% increase in volumes would add over $40 million of adjusted EBITDA and $0.16 to earnings. A full recovery to 2019 levels equates to close to $1 in earnings or over 20% upside to our earnings base. This upside is in addition to the significant opportunity from VantageScore adoption. I'll now turn the call back to Chris for closing remarks. Christopher Cartwright: Well, thank you, Todd. So to summarize, we finished 2025 with a great fourth quarter, growing our revenues by 12% organically and surpassing guidance. Assuming business conditions remain stable, we expect another strong year in '26. We're guiding for 8% to 9% organic constant currency revenue growth and 8% to 10% adjusted diluted EPS growth. Our '25 results and our '26 guide reflect the benefits of our multiyear strategic transformation. We remain focused on leveraging this transformation to drive innovation-led and durable growth. So we plan to share more details around our strategic momentum and our future growth prospects at our Investor Day coming up on March 10 in New York City. We've got a robust schedule planned with opportunities to hear from our senior leaders and to see demos of our newest products. And we plan to spotlight our AI-enabled OneTru platform, our reinvigorated innovation engine and how our robust product portfolio is driving growth across our verticals and geographies. We'll also provide an updated financial growth framework. Our strategy emphasizes driving industry-leading organic growth, enhancing our earnings and our cash flows and strengthening return of capital and shareholder-friendly capital deployment. So I hope you can all join us. Please reach out to Greg and the IR team for more details. And with that, back to you, Greg. Gregory Bardi: That concludes our prepared remarks. For the Q&A, we ask that you each ask only one question so that we can include more participants. Operator, we can begin the Q&A. Operator: [Operator Instructions] At this time we will take our first question, which will come from Jeff Meuler with Baird. Jeffrey Meuler: My question is on the U.S. emerging vertical guidance. It's good, but you just put up really strong growth, even excluding, I think, one timers, you said it was double digit. It's broad-based. And I would think that there would be building benefits from the product replatforming and capabilities, consolidation along with the tech transformation. So just any specific call-outs on the U.S. emerging verticals outlook beyond just the general prudent conservatism? Christopher Cartwright: Yes, Jeff, and thank you. Yes, it was a great quarter, wrapping up another really strong year of top line organic growth. And emerging was certainly a big part of the story. We're happy to get into the guidance and the approach. Probably a good way to start the call, given some of the chatter early on here. But as you know, we're starting the year, and typically, we guide a bit on the prudently conservative side to set us up for beats and raises over the course of the year. That's been the approach over the past 2 years, and we've been outperforming consistently over the last 8 quarters. I think it's very much the same posture in '26. So I do understand your question on emerging. Let's just have Todd take us through a quick comparison of the '25 guide versus the actual achievement and then how we're setting up in '26. Todd Cello: Okay. Thank you, Chris, and Jeff, thank you for the question. It's a good place for us to start this morning. I think it's important just to ground us and everybody in what we feel is a very strong guide starting off 2026. And I would start with, at this point in the year, this is a guide that we have a high degree of confidence in being able to achieve. And if you were to look back to last year at this time, we were guiding our organic constant currency revenue growth at 4.5% to 6%, and we ended up growing 9%. And if you look at the guide that we put out for 2026, we're contemplating 8% to 9% growth. So a continuation of 2025, again, a high degree of confidence. And as we typically do, we would orient you more towards the high end of that guidance just based on the assumption that conditions that we're seeing, if they stay the same, we should be about at that level. And if you look at our results, ex FICO compared to the guidance and specifically FICO mortgage, last year, we were guiding 2.5% to 4%, and we ended up at 8% growth. And this year, we're guiding 5% to 6% growth. So you saw a significant outperformance in products and services that TransUnion is delivering into the market and adding a significant amount of value. Specific to your question on Emerging Verticals, last year, we were guiding mid-single digits, and we ended up posting an 8% growth for 2025. And right now, we're starting at mid-single digits. And again, it's just back to that, what we have high confidence in and conviction in being able to achieve at this point in the year. So we feel that it's a healthy guide at this point. But again, we oriented towards more of the high and we see upside as the year goes on. And just from a profitability perspective, I know you're asking about revenue, but I want to round this out. Last year, we were guiding adjusted EBITDA growth at 3% to 6%. We ended up growing 10%. And right now, we're guiding 7% to 8%. And similarly, adjusted diluted EPS last year, 1% to 4%. That 4% was burdened by a change in our tax rate due to some Pillar 2 impact as well as FX at the time. We ended up delivering double digits for 2025, which was an outstanding result for TransUnion, and it's the second year in a row of double-digit EPS growth. And what you could see for 2026 is we're guiding 8% to 10%. So we're already at the high end where we're orienting investors towards that high at 10% double digit. So if we achieve that, that would be 3 straight years, which we feel is indicative of the earnings power that we have created at TransUnion. Christopher Cartwright: Yes. And so good detail. I mean we've leaned in more for the total guide this year as you can see. And we would expect to hit the high end and hopefully outperform that as well. On the emerging side, it's great that we have got that part of the business growing high single digits. I would expect that we can continue to do that despite a lower initial guide over the course of the year. It's really important to point out the strength that marketing solutions and fraud are showing both for full year '25, where both were, again, at the high single-digit level. And then we exited low double digits in the fourth quarter. Now we're not going to extrapolate from the fourth quarter in our '26 guide. That's a bit too aggressive. But again, you should think of the Emerging Verticals as a high single-digit compounder now, and that's half of the revenues in the U.S., which is 80% of our total business. And you can also expect that, that is being driven by marketing and fraud now, which are now positioned post Neustar asset integration on the OneTru platform to compound mid-single digits to low double digits, which is what we told investors we would achieve when we acquired Neustar back in early 2022. Operator: And the next question will come from Toni Kaplan with Morgan Stanley. Toni Kaplan: Chris, you talked a lot about AI, which was very helpful. And I was hoping you could talk even more about within marketing and fraud, you talked about this already, but just maybe nail down your differentiation versus competitors and maybe more about the data assets in those areas, specifically where the data is coming from and why competitors can't get the data. All of that would be super helpful. Christopher Cartwright: Okay. Thanks, Toni. Well, with the first component of value in our digital marketing suite is our identity data asset and our identity resolution capabilities. And all of our data has been consolidated on the OneTru platform on a common identity spine or graph. We have several different views of that. One is the individual, of course, one is the devices and one is the geo location. And now that we've achieved that, and that was a delivery over the course of '25, we consistently hear from customers that we have the best identity information in the market, period. And every effective marketing campaign starts with clean data in a clean sense of where you can access these customers digitally. So one, I would emphasize that unless you are operating a credit bureau, fraud contributory networks, a marketing measurement platform, and you own all the public records in the U.S. plus, you're going to struggle to have the identity data that we have, plus again, we're hovering in from thousands of sources, individually contracted, a whole degree of other information that augments the identity graph. In fact at Investor Day, we're going to drill into this even more deeply. That's the first point, I would say. And that's proprietary and that's differentiated. On the audience side, it's a variety of behavioral, demographic, [ psychographic ] and some real-time consumer intent data that's flowing in. That data, less differentiated, but also not a large percentage of our growth or profit, but very complementary to identity. And what we find is if you win identity, they then leverage from that to audience purchasing. And then from that, it moves into activation where we have invested a lot to extend the number of connections we have with publishers and platforms throughout the digital ecosystem so we can more directly activate. And then when you get to measurement, in order to measure the effectiveness of advertisements and influencing prospects within the marketing funnel, you have to negotiate and program integrations into hundreds and hundreds of different points within the digital ecosystem. Some will be massive walled gardens that we all know about. Others will be streamers and prominent publishing sites, et cetera, et cetera. All of those contributions, which can come at an individual consumer level or a cohort level to protect privacy have to get integrated and interpreted and normalized and then aggregated for subsequent analysis. So there's a lot of proprietary information. There's a lot of proprietary integrations, a lot of data science and a lot of analytics to get coherent answers as to whether advertising is working and who you should prioritize for the next round of ads. Similar dynamics in fraud. I mean we have hundreds and hundreds of customers around the world who run our fraud mitigation software on their computers. We see every device that connects to it. We can relate many of those devices back to individuals. We understand if there's any questionable behavior that these devices engage in. That helps us form a reputation. We're analyzing the geo locations from which they connect and the IP addresses to see if there are anomalies there. And then we're aggregating the behavior of these devices and comparing it to patterns of good and bad device behavior from a fraud perspective. All of this are proprietary integrations, individual sales, ongoing relationship maintenance that leads again to proprietary network effect enabled data flowing into these assets. So again, there's a lot of proprietary information in the fraud and marketing world, it's difficult to access, too. You just don't get it by crawling the web or licensing a book library from a publisher. Operator: And the next question will come from Andrew Steinerman with JPMorgan. Andrew Steinerman: I'm looking at Slide 23, the $750 million of U.S. mortgage revenues for '26 being up 28%, which, of course, includes the FICO reps. Does that 28% figure make any assumption about market shift from FICO to Vantage? And also, are there any assumptions in your '26 guide in terms of VantageScore adoption benefiting TransUnion today, meaning in '26? Todd Cello: Andrew, I'll take that question. So right now, in our guidance, what we are assuming is status quo. We are assuming that there is no shift to the FICO direct program based on customer feedback that we've had at this point in time. And we also are assuming that there is no VantageScore adoption as well. So needless to say, in both of those situations, if that were to happen, if we were to see a migration to the FICO direct program that would enable our profit margin to increase, similar with VantageScore as well, too. So there's just nothing but upside. So we've taken a conservative posture with both of these assumptions to start the year. Just that there's just so many unknowns at this point in time. But the net of it is, if we do get either to move, you'll see higher profit margin. Christopher Cartwright: Yes. We just thought it was a cleaner and clearer way to present our numbers for '26 because different of our competitors could have different assumptions around share movement and conversion and the like. So this is clear, and it's clean. But just to reinforce what Todd said, if the direct license program does get traction over the course of the year, that may erode some of our revenue, but it won't erode any of our profits. In fact, our profitability will increase because we don't have a margin on FICO royalties within mortgage. And then once these LLPA matrices are published by the FHFA, we would expect that we're going to start selling Vantage scores that will be additive to revenue and highly accretive to profitability. And look, the whole industry is waiting impatiently for those things to come out because there's a heck of a lot of interest amongst lenders. And we're working with lenders currently, providing them with free scores and supporting analytics so they can do their backfile estimates and performance conversions and get ready for share movement. Operator: The next question will come from Faiza Alwy with Deutsche Bank. Faiza Alwy: I wanted to ask about consumer lending. It was interesting to see that growth rate accelerate, and I know you talked about a prudent die, but I'm curious if you can talk about the trends that you're seeing there? Is it just better market performance? You touched on some of the fintech activity. But just curious to hear a little bit more about that and what you're embedding for the guide and your confidence there. Christopher Cartwright: Sure. So happy to talk about consumer, probably should zoom out a bit and just talk about the health of the marketplace. Again, I would reinforce what you heard the banks say that the macro conditions are still solid and stable. We've got good GDP growth. We have low levels of unemployment. Obviously, job creation is not as robust as we would like, but perhaps a little bit better than was assumed. Real wage gains, we're still eating out gains there, which is good for the consumer. And the consumer leverage ratios are still acceptable. They're still within range. Although if you're on the lower end of the economic spectrum, you're under stress. That's unfortunately been the story, at least over the past decade that I've been here. The banks are all reporting good earnings. They're optimistic about loan growth. Their delinquencies are low or within a manageable range certainly, which is a positive. And a lot of the banks and a lot of economists are forecasting a stronger second half to the year, which is great, right? Because over the course of '24 and '25, you've seen how fast we can grow revenue in this business and the flow-through to profits and what are just kind of stable but still somewhat muted economic conditions. We are forecasting those conditions over the course of '26. We think that's sensible and conservative to start the year at. But if we do have any improvement, we're going to have material, we're going to have nice upside to the guidance that we're giving. And again, I would point out, our organic revenue growth rate is strong. It's been at the top of the industry in '24 and '25. We're guiding at the top of the industry in '26. We would point you to the high end of our guidance, and we're going to work really hard to outperform that. Todd Cello: Yes. And Chris, I would just add, when we talk about consumer lending, I think it's important to call out that we've had some really good success, both with FactorTrust in that space, and that grew 20% for us. And that is a really good indicator of what we've done with the OneTru platform, and that was the first product that we went and replatformed. That's embedded in the numbers. So it's a good proof point on where we're headed with OneTru. And hand in hand with that, also TruIQ was a winner in the consumer lending space for us as well, too. So I think our data analytics and the capabilities that we'll bring to our customers, a lot of good momentum in the consumer lending space in those 2 areas. Christopher Cartwright: Yes. And I guess just to finish up on consumer lending. We expect continued strength in that area. All the players have been able to resupply their balance sheets. We think there's still a good environment for loan consolidation and conversion of revolving card balances and the like. I think over the past, say, 4 or 5 years, because of the experience in '22 and '23, where consumer lending was hard hit, there's been an assumption that it's a more volatile space than it actually is. Consumer lending has always been an important part of the U.S. lending landscape. It's far more robust and [ growthful ] and I think you've seen that over the past couple of years, and we expect more strength this year. Operator: The next question will come from Andrew Nicholas with William Blair. Andrew Nicholas: I was hoping to ask on the margin trajectory this year. I know that there's some difficulty. You provided a lot of information on what margins look like ex FICO. But it does look like it's modestly down year-over-year in the first quarter before improving as the year progresses. Can you just kind of flesh that out a little bit further, what impacts or informs expansion as the year progresses or accelerating expansion as the year progresses ex FICO? Todd Cello: Andrew, and thanks for the question. So let's dig into this. So in the first quarter, our high guidance, we are calling for a margin of 34.9%, which would be down 140 basis points. We think it's probably best to look at our margin, though, excluding the FICO mortgage royalty. At that level, we're at 37.5%, which would be down 30 basis points. When you compare that to the full year guide. Full year, we're guiding 35.7%, which at the top, all in with the FICO mortgage royalties. So we'd be down 30 basis points. Really, where your question is at is an ex FICO, we're going to grow our margins 70 basis points to 38.2%. So several factors here. The first one, the first quarter of any year for TransUnion is our seasonally lowest revenue amount in dollar terms. So needless to say that if you don't have higher revenue, you don't have that flow through in dollars down to profit. So that's the first thing of why Q1 is the way it is. Second, if you look at the growth rates that we've provided in the guide relative Q1 and then relative to what we would -- you'd imply for Q2 through Q4, and then we're at the high, that growth rate ex the FICO mortgage is relatively stable each quarter throughout the year. So meaning we're not necessarily assuming that there's a significant increase in the revenue growth rate. So there's a stability in that growth rate. So then where this then leads to then is in the margin expansion that we're expecting, a lot of that's going to happen in the second half of 2026. And as a reminder, in 2025 in the second half, we were opportunistic with our performance and making onetime investments back into the business to continue to solidify the really strong advances that we made with our technology and our product teams of augmenting sellers to continue the really good momentum that we have on the top line. So we're going to lap some of those onetimes. We won't have them in '26, so that will provide a benefit. And from a compensation perspective, in the second half of 2025, we did have higher incentive compensation accruals. We're at this point in time right now we've reset those accruals back at target, right? So that provides a natural upside for us with the margin in the second half. Christopher Cartwright: Yes. And so look, in the [ big, ] over the past couple of years, some investors have asked whether our business still has the same degree of operating leverage that we enjoyed previously. And it's because we've been growing high single digit, and you haven't seen the top line margin flow through. As we explained, it was being masked by the FICO price increases that have been quite considerable over the period. Now that we're breaking this out, you can see that margins have expanded by 240 bps over the past several years, which is terrific. And so you can see the operating leverage is still here. And again, we are now also supporting marketing and fraud and analytics product line that has lower margins at this point than does core credit, and we're also investing heavily in the business. So I hope from this, investors are reassured that we still have tremendous operating leverage, and you're going to see that in our profits and our EPS as we continue to compound the top line high single digits. Operator: The next question will come from Manav Patnaik with Barclays. Manav Patnaik: Just one question from this AI debate that's out there, and that's more tied to your selling model. Like how seat count tied or enterprise tied is your business? Just touching on the angle that everyone's worried or believes that because of AI, every industry will have materially less headcount, more efficient, et cetera. So just trying to appreciate how you think that could impact your business. Christopher Cartwright: Yes. Well, Manav, as you know, we are a highly recurring transactional business at the core with a material chunk of subscription that's not tied to seat count necessarily more to utilization or ranges that factor under the annual subscription that we would charge a client. So I don't think there's going to be a model disruption because of anything on the AI side. I do think, to the latter part of your point, we're going to apply AI and are applying AI to drive productivity internally. You're going to see a dramatic productivity increase in our software developers. That's not really going to translate into fewer developers because we have so many innovation opportunities that a 30% or 50% increase, I'm going to put the work on product and revenue growth. But in our analytics organization, there's going to be a massive productivity improvement. We're launching a new product, a new analytics platform that's all AI-enabled. We call it the [ Analytics Orchestrator. ] You'll see that at the upcoming Investor Day, and that's going to enable orders of magnitude improvement in the speed with which we can create models and insights across the credit risk marketing and fraud value chains within our clients. The point of this is that more and more of our analysts will be forward deployed in the clients. There will be more of a consulting and consultative selling and an enablement aspect to how we engage in the market because now we have 3 strong product lines with highly interrelated workflows that we've pulled together on this common platform, and we want to show clients how they can become a lot more productive by consolidating their work on this platform. And the best people to show them that are in the analytics organization. So I mean I think that's how the go-to-market model is going to evolve in the coming years. Operator: And our next question will come from Ashish Sabadra with RBC Capital Markets. Ashish Sabadra: I just wanted to drill down on the international side. You provided a lot of good color on India, but I was just wondering if you can also talk about Canada and U.K. or other countries as well. Christopher Cartwright: Yes, for sure. Well, look, obviously, the international division in total didn't grow as fast as we have become accustomed to. The business is in the mature markets. Canada and the U.K. are doing exceptionally well. They're growing well above the market, and we're confident that we're taking share in both markets. And look, it's because we have strong management teams. We've incorporated a lot of our new products into those markets in both Canada and the U.K., the TruIQ analytics platform has been localized for their use. And I just feel like we get great value propositions and an opportunity to grow above market for quite a bit of time. We've had macroeconomic -- kind of macro-driven softness in India, and in Latin America to a degree as well. Focusing on India. I mean, look, India has been [ buffeted ] by some macro forces over the past couple of years. We've talked about the RBI intervention in the unsecured lending market to calm that down. We've also seen lenders reviewing the profitability of their card portfolios and also pulling back a little bit there. The tariffs of 50% that were imposed in the fourth quarter really jolted the market. A big part of the Indian economy are small- to medium-sized businesses that are export oriented. The U.S. market was important. Those tariffs kind of froze exports. And the banks looked at that and said, "Hey, this sector of the market is less lendable, we have to be cautious here, too, right?" Now we think the fourth quarter in India and the first quarter of '26 are going to represent a bottoming out from a volume perspective, kind of a financial lending retrenchment, if you will. And then we're going to start resuming our growth. We're forecasting mid-single digits for the year. Clearly, over time, India has far better growth potential than that. Demographics are great. The economy is still growing almost 7%, inflation is manageable. There's a lot of goodness. And I do think that the broad outline of the deal that the U.S. and India have announced is going to be helpful to bringing some stability back to that market. So we're bullish on India longer term. We are bringing our fraud marketing and analytics products into India. This year, those are going to be entirely new vectors of growth. And so we're looking forward to just getting in there and continuing to drive growth in a very fundamental way, and we're confident that over time, the macro is going to heal itself and be supportive of growth. Operator: And our next question will come from Jason Haas with Wells Fargo. Jason Haas: When we think about the annual guidance, excluding FICO, the 5% to 6% organic growth and the 50 to 70 bps of EBITDA margin expansion, is that a fair framework for thinking about how the business should grow longer term? Are there still costs or anything weighing on the business in 2026? Christopher Cartwright: Yes. So look, as Todd was detailing earlier, net of FICO in '26, it's 5% to 6% organic guide. And look, as we have reminded the market, we start off with a prudently conservative guide at the beginning of the year, and we steer you guys more towards the high end, which would be 6%. And for the past 2 years, we've been able to beat and raise. And so I would just say, think about those factors in your own deliberations. But as I've said in prior calls, I think this is a business that can now organically compound in the high single digits, perhaps more annualized. And in fact, we did in '24 and '25 ex FICO, right? So organic revenue growth was 8% in '25 ex FICO, similar in '24. So we're proving that we can grow at that level. We have exited our period of incremental investment and add-backs. We're not adding anything back. We don't need to. That is going to -- it has helped our cash flow tremendously. We're very confident in a low 90% cash flow conversion in '26. I want to reiterate that for all of you on the call this morning. And then look, in terms of just operational efficiencies and flow through EPS. As we continue to grow at this level, particularly ex FICO, you're going to see really good flow-through to profits and you should expect double-digit growth, perhaps even mid-teens compounding in EPS. That's not the official guide, but that speaks more toward what we've delivered in '24 and '25 into the potential of this business. And remember, our tech transformation is different, right? We have built a global platform to run credit marketing and fraud businesses with this integrated analytic layer on one single platform. We're converting the U.S. to it. We're also going to convert Canada, the U.K. and the Philippines over the course of the year. That gives us a way to continually take cost out of the business, right? And so that's another initiative that's going to improve the profitability of the business. Now with those profits, we can invest more in product innovation, in larger and more consultative selling and also in improving margins for the business overall. So I think that's an often overlooked or certainly underappreciated dynamic that we've created in our business. But you can look for us to leverage that in the coming years. Operator: And our last question will come from Kelsey Zhu with Autonomous. Kelsey Zhu: Could you talk a little bit more about your assumptions behind the mid-single-digit declines and mortgage increase guidance for 2026? And how the trigger leads or legislation affect total volume growth there? As well as if you're seeing any competitive pressure from Equifax credit file that also includes the work number indicator? Christopher Cartwright: Sure. Right. So a good topic to talk about. First, I would say that triggers will not have any negative impact at TransUnion. We've been out of the mortgage triggers business for quite a while now. Other players in the space, we'll have to address that. With regard to any share movement because of bundling credit and some incoming information off the work number. Look, you can look at our mortgage results. We're still doing very well overall, relatively speaking. We've seen no share movement because of -- we had no share movement in the prequalification space. We are aware of 1 large customer that moved between our 2 competitors. We look at that as really a case of price discounting. That trade happened at a 25% discount to the prevailing prices. So I'm not sure I would attribute it to any market innovation. Now in terms, Todd, of the setup for mortgage and the assumptions for the year, maybe some color on that? Todd Cello: Yes, sure. So the volume assumptions in the first quarter, we're expecting to be up modestly. But for the full year, it's going to be down mid-single digits. So obviously, what that says is that Q1 is our easiest comparable because we saw volumes modestly improve throughout 2025. And then again, looking at mortgage outside of the FICO mortgage score, our mortgage business is still expected to grow 6% on a year-over-year basis, and that has to do with some of our own pricing but also driving innovation through. Christopher Cartwright: Yes. And so perhaps, when we wrap, I'll just emphasize to everybody, Fourth quarter was a great exit to a great year. 12% cumulative growth is awesome, 6% and [ 16% ] in the U.S., we're super encouraged by. Macro factors buffeted us a bit in our emerging markets, which pulled down international. But as we've shown, that's a consistent high single-digit, low double-digit grower over time. I would expect that we can resume that pace in the coming year or so. But there's still a lot of incremental revenue and profit fall through to come because of the transformation that we've achieved. In every country that we convert to the OneTru platform, that country will be able to bring to market the best of our credit, best credit analytics, in addition to marketing and fraud and our new analytics platform. We now have 4 market-leading horses pulling our wagon, so to speak. I think that's going to be additive to our growth rate and profit fall through. So we're excited. We're excited with where this business is at and what we can deliver for investors and we're ready to get at it. Gregory Bardi: All right, Chris. I think that's a good place to end. Thanks for all your questions today, and have a great rest of your day. Thanks. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Good morning. My name is Bailey, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Granite Construction Incorporated 2025 Fourth Quarter Conference Call. This call is being recorded. Operator: All lines have been placed on mute to prevent any background noise. Operator: After the speakers' remarks, there will be a question and answer period. Participants today, it is now my pleasure to turn the floor over to Vice President of Investor Relations, Michael W. Barker. Michael W. Barker: Good morning, and thank you for joining us. I am pleased to be here today with President and Chief Executive Officer, Kyle T. Larkin, and Executive Vice President and Chief Financial Officer, Staci M. Woolsey. Please note that today's earnings presentation will be available on the Events and Presentations page of our Investor Relations website. We begin today with a brief discussion regarding forward-looking statements and non-GAAP measures. Some of the discussion today may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are estimates reflecting the current expectations and best judgment of senior management regarding future events, occurrences, opportunities, targets, growth, demand, strategic plans, circumstances, activities, performance, shareholder value, outcomes, outlook, guidance, objectives, committed and awarded projects or CAP, and results. Actual results may differ materially from statements made today. Please refer to Granite Construction Incorporated’s most recent 10-Ks and 10-Q filings for a more complete description of risk factors that could affect these forward-looking statements. The company assumes no obligation to update forward-looking statements, except as required by law. Certain non-GAAP measures may be discussed during today's call, from time to time by the company's executives. These include, but are not limited to, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, and cash gross profit. The required disclosures regarding our non-GAAP measures are included as part of our earnings press releases and in company presentations, which are available on our website graniteconstruction.com, under Investor Relations. Now I would like to turn the call over to Kyle T. Larkin. Good morning. Before we turn to the segment discussions, I would like to discuss the progress we have been making to deliver on our strategic priorities. In 2025, we continue to focus on bidding and building the right work, investing in our materials business, and expanding our geographic footprint through targeted M&A. Our strategy to drive consistent, predictable financial performance across the company is working. We remain highly selective in the work we pursue, emphasizing best value and high-quality bid-build opportunities in our home markets where we believe we can earn an appropriate return for the risk we assume in constructing these projects. This disciplined approach, combined with a strong funding environment, underpinned our efforts to build a strong project portfolio even as we grew our CAP to a record $7,000,000,000 at year end 2025, the highest in our history. Since 2020, our teams across the company have focused on pursuing the projects where we can leverage our home market advantages and consistently deliver higher margin work. This strategy enabled us to drive significant improvement in profitability from 8.8% Construction segment gross profit margin in 2020 to 15.7% in 2025, all while demonstrating the ability to organically grow the top line across our footprint. As I look at the landscape of the construction business entering 2026, I believe there are still significant public and private opportunities Kyle T. Larkin: to capture work in our home markets, even as we maintain discipline and work to continually drive excellence in execution in the bid room and every day on our job sites. During 2025, we also continue to invest in our Materials business, both through acquisitions and CapEx. We have now completed the second year following our internal reorganization where we restructured our businesses to place Materials leaders over our Materials business. This change has allowed these teams to direct our strategy across the segment as we work to unlock value through market-based pricing and through application of efficiencies across the segment. Over the last several years, we have focused our CapEx spend on the Materials segment to improve plant performance, acquire additional aggregate reserves, and expand our footprint. We have improved Materials segment cash gross profit from 19% in 2023 to 26% in 2025. The return on our investments has been exceptional. The team has many more initiatives in process, including partnering with our Construction teams to drive more tons to our plants by leveraging our vertical integration, and we expect to spend another $50,000,000 in strategic CapEx in the Materials business in 2026 to continue the strong momentum we built. In 2025, we completed three acquisitions, both expanding and strengthening our Southeast platform with the Warren Paving acquisition and strengthening the home markets in California and Nevada with the acquisitions of Pappage Construction and CinderLite. These margin-accretive acquisitions in strong, growing markets are representative of the acquisitions I expect to continue to complete in 2026. We expect acquisitions will continue to be a major component of our growth that should enhance the performance of the business in existing home markets and expand our footprint to new geographies. We expect to drive further gains and deliver significant shareholder value as we continue to execute on our strategic plan. We will continue to build a larger, higher-quality project portfolio even as we invest in and grow our vertically integrated model. These efforts position Granite Construction Incorporated for continued organic growth, margin expansion, and strong cash generation. We believe we are on track to achieve our 2027 financial targets supported by favorable market conditions, robust infrastructure funding, and consistent execution across the business. Turning now to the Construction segment. First, I want to say how excited I am about the performance of our Construction teams across the company. Their execution throughout the year was outstanding and a key driver of our strong finish to 2025. We entered the fourth quarter with record CAP, and despite some delays on certain projects and wet weather at the end of the quarter, year-over-year revenue growth accelerated as expected. We continue to see sustained market strength and a healthy bidding environment across our footprint, with California and Nevada leading the way. With several significant awards in the quarter, CAP increased sequentially by $632,000,000, ending the year with $7,000,000,000, a new record. In California, the newly proposed California budget for the 2026 to 2027 fiscal year represents a significant increase in the key capital outlay projects and local assistance components for the transportation funding for the original 2025 to 2026 budget, which itself was increased significantly in the latest January forecast update. Stable and protected funding for transportation infrastructure in California continues to grow despite concerns about overall deficits. The strength of state transportation budgets is broad, and we see many meaningful opportunities across our regions to continue to grow CAP in 2026 and throughout the year. Best value work continues to grow as a percentage of our portfolio, ending the quarter at 48% of CAP. Michael W. Barker: As we discussed in past quarters, Kyle T. Larkin: best value procurement plays to Granite Construction Incorporated’s home market strengths. These projects tend to be awarded to teams with strong qualifications. The process is designed to promote risk mitigation during design and reward collaboration, thereby enabling us to better manage construction risk, reduce disputes, and deliver high-quality, complex projects more efficiently. Best value construction remains a key driver of our sustainable margin expansion strategy. This growth in best value work has been a core contributor to our de-risked project portfolio and has allowed us to achieve consistent, predictable increases in our Construction margins over the past several years, and we expect that trend to continue as more states adopt these procurement methods. The high-quality CAP portfolio we have built helped deliver the gross profit margin increase that we expected in 2025. We expect continued gross profit improvement in 2026 consistent with our 2027 financial targets. Overall performance in this segment has improved meaningfully, and with record-level, higher-quality CAP and favorable market conditions, we expect continued revenue growth and Construction margin expansion in 2026 in line with our long-term financial targets. Moving to the Materials segment, 2025 was a transformational year for our Materials business. We delivered both organic top-line and bottom-line growth, and we significantly expanded our addressable market through acquisitions, most notably through the acquisition of Warren Paving, which significantly expands our reserves and resources in the Southeast. This was our first full quarter including Warren Paving, and we see numerous opportunities as we continue to integrate it into our Southeast platform. We expect to continue growing this platform organically as we work to expand its distribution network, improve logistics efficiency, and leverage Warren’s marine and river-based transportation capabilities. Expansion opportunities include potentially adding additional aggregate yards and acquiring strategic assets to enhance both scale and margin profile of the platform. With the addition of Warren, along with the acquisitions of CinderLite and Pappage Construction, our aggregate reserves and resources increased 34% year over year to 2,100,000,000 tons, more than doubling Granite Construction Incorporated’s reserves in the last five years. This growth in long-life reserves provides a strong foundation for sustained margin expansion in the Materials segment. We expect the growth of our Materials business to continue throughout 2026 and in the years to follow, supported by strong market conditions, our proven vertically integrated operational model, and our ongoing commitment to disciplined investment. Now I will turn it over to Staci M. Woolsey to review our financial performance for the quarter. Staci M. Woolsey: Thanks, Kyle. Operator: 2025 was a tremendous year of growth with year-over-year increases in a number of areas. Revenue increased 10% to $4,400,000,000. Gross profit increased 24% to $711,000,000. Adjusted net income increased 29% to $276,000,000. Adjusted EBITDA increased 31% to $527,000,000, and operating cash flow increased 3% to $469,000,000. Our teams have done a great job executing and positioning Granite Construction Incorporated for continued organic growth, margin expansion, and cash generation in 2026 and beyond. Now let us discuss our results for the quarter. In the Construction segment, revenue increased $119,000,000, or 14% year over year, to $940,000,000. Throughout the year, CAP gradually increased and we expected revenue conversion to accelerate in the second half of the year. In the fourth quarter, we saw this dynamic with organic revenue growth of 7% year over year as projects ramped up. In addition, our newly acquired companies, Warren Paving and Pappage Construction, contributed $59,000,000 in Construction segment revenue. The significant increase in revenue drove a $15,000,000 improvement in Construction segment gross profit to $143,000,000, with segment gross profit margin of 15%. The improvement in our portfolio mix continues to translate into higher margins, and we expect further expansion in 2026 consistent with our 2027 financial targets. In the Materials segment, revenue increased $69,000,000 year over year to $225,000,000, with gross profit up to $25,000,000. The increase in Materials revenue was primarily due to the acquired businesses. Cash gross profit for the quarter increased $10,000,000 year over year to $47,000,000, or 21% of revenue, despite wet weather conditions in certain geographies. For the full year, cash gross profit margin improved 490 basis points year over year to 26%. For the year, volumes for both aggregate and asphalt and aggregate cash gross profit per ton increased significantly, primarily due to the addition of Warren Paving in August 2025. Adjusted EBITDA for the full year grew $125,000,000 to $527,000,000, or an adjusted EBITDA margin of 11.9% compared to 10% in 2024. Turning to cash flow. We had another outstanding quarter of cash generation and ended the year with operating cash flow of $469,000,000, or 10.6% of annual revenue. Our disciplined focus on profitability and working capital efficiency is producing consistent, high-quality cash flow that we are reinvesting to drive long-term value. Our 2025 operating cash flow benefited from the collection of a long outstanding contract retention balance and receipt of payment for several disputed claims in 2025. Excluding these non-recurring cash collections, in 2025, our operating cash flow as a percent of revenue was in line with our original target of 9%. With our expected profitability improvement in 2026 and sustained working capital management, our 2026 target for operating cash flow margin is 10% of revenue. In 2025, we executed on our capital allocation priorities with CapEx of $138,000,000, acquisitions of $778,000,000, and dividends of $23,000,000. We also repurchased 300,000 shares under our Board-approved share repurchase program to offset dilution from our stock-based compensation. We ended the year with $650,000,000 in cash and marketable securities, debt of $1,300,000,000, and $583,000,000 in availability under our revolving credit facility. Going into 2026, our cash generation and strong balance sheet position us well to continue investing organically and through acquisitions while maintaining financial flexibility. We have a robust pipeline of acquisition opportunities that may either bolt on to an existing home market or further expand our geographic footprint. While we are selective in our pursuits, we expect to achieve our goal of completing several strategic acquisitions in 2026. Now let us turn to our 2026 guidance. We expect revenue to grow to a range of $4,900,000,000 to $5,100,000,000. This reflects our record CAP balance and the strong macro environment and places organic growth at the high end of our 2027 target CAGR of 6% to 8%. This range includes a full year of the acquisitions completed in 2025. As we grow, driving efficiency to manage SG&A continues to be a top priority. We expect our SG&A to be in a range of 8.5% to 9% of revenue, inclusive of an estimated $48,000,000 in stock-based compensation expense. We expect our adjusted EBITDA margin to be in the range of 12% to 13% of revenue. With our high-quality CAP portfolio, strong market, and high-performing Materials business, we expect continued adjusted EBITDA margin expansion in line with our 2027 financial target of 12.5% to 14.5% of revenue. Finally, we expect to invest in our business through CapEx in the range of $140,000,000 to $160,000,000. Similar to 2025, this range contemplates approximately $50,000,000 in strategic Materials investments to expand reserves as well as investments in additional automation projects as we work to grow the Materials business. Now I will turn it back over to Kyle. Kyle T. Larkin: Thanks, Staci. I will close with the following points. I have strong confidence in the future of Granite Construction Incorporated. I believe Granite Construction Incorporated is in position to capitalize on the numerous opportunities in both of our segments as we work towards sustainable, long-term value creation, and as we focus on growing revenue and driving margin and cash flow expansion. The strong public construction market is fueling our CAP growth. We have the bidding opportunities ahead of us to enhance portfolio quality and support disciplined CAP expansion in 2026. In addition, while CAP growth has been concentrated in the public market, I believe our private markets, such as rail and commercial site development, remain robust and represent attractive incremental growth avenues for our Construction segment. In the Materials business, we have made outstanding strides over the last two years, and I believe that will continue in 2026. With the addition of Warren Paving, Pappage Construction, and CinderLite for the full year, I expect meaningful increases in revenue and profit in this segment in 2026. I believe we are on track for our 2027 financial targets for adjusted EBITDA margin and operating cash flow margin, with 2026 being another important step in demonstrating consistent performance against our long-term targets. Finally, as we are integrating the acquisitions of 2025, I expect to add several more acquisitions in 2026 that will further strengthen our competitive position and support our ability to achieve our 2027 financial targets. We are evaluating bolt-ons in our existing markets and expansion opportunities in new markets as we continue to strengthen our position as America's infrastructure company. Operator, I will now turn it back to you for questions. Operator: We will now begin the question and answer session. Please pick up your handset before pressing the keys. Our first question comes from Brent Edward Thielman with D.A. Davidson. Please go ahead. Brent Edward Thielman: Great. Hey, thanks. Good morning. Michael W. Barker: Hey, Kyle. Some of your peers have offered some comments just in terms of thoughts on federal Kyle T. Larkin: legislation. Obviously, IIJA expiring here in September, maybe your latest thoughts on, Brent Edward Thielman: what you are hearing, when we can get maybe more detail on what is coming? Maybe you would start there. Michael W. Barker: Yeah. Good morning, Brent. Kyle T. Larkin: So I think as we spoke before on previous calls, the IIJA expires, I think everybody knows now, in September. And all the funds we expect to be allocated out. Now the spend to date is right around 50%. That is as of November, so there is still a really nice runway of spending to go. So that will last, luckily, for a few more years. I think what we hear really from industry today is that there is still bipartisan support. There is still a huge focus on coming up with another investment mechanism. And I think the really good news is the investment amount is significantly higher, at least that is what is in discussions today, than what is in the IIJA. So it is all positive. In terms of timing of when we might hear, I think we are going to start getting maybe some updates, I would say, around March, April if they can get a draft bill put in place for the Transportation and Infrastructure Committee to review. So I think that is kind of the next step in terms of when we get the next update. Brent Edward Thielman: Got it. Appreciate that, Kyle. And I guess my follow-up, Kyle, just in terms of you have got a great sort of book of business here that seems to continue to build or looks like it will continue to build. Can you talk about some of the direct federal opportunities that are out there that you have spoken about before? What does that pipeline look like? Are you optimistic that there could be some meaningful things that could get picked up there this year? Michael W. Barker: What do you mean federal Kyle T. Larkin: Are you talking a few more around the border infrastructure, Brent, or just kind of the federal program in general? Brent Edward Thielman: Yes. I mean, I guess, infrastructure or anything beyond that, directly related to federal government contracting. I think we have spoken about some large things before there. Michael W. Barker: Right. So we do have quite a bit of work with the federal Kyle T. Larkin: government in Guam, and that work continues to be going very well. We believe we will continue to pick up work in Guam as part of that program. With regards to the border, there is a huge border infrastructure program that is probably just in about $40,000,000,000, and there are around 11 contractors or so pursuing that work, and we are one of them. And we actually have one contract today in southeastern Texas that is just under $200,000,000. We started that work last November. So there is a huge program and opportunity in front of us. One of the things that changed is the government's looking to get that work out and awarded, we believe, midyear. So sometime around June, July, and to help with that, these contracts are getting larger than what we originally contemplated. So the risk profile is changing a little bit on those to one that is just giving us reason to be more disciplined in our pursuits and ensuring that we can not only just win the work, but be successful in delivering it for ourselves and for our clients. So we will see. What I can tell you is we do not have any additional border infrastructure work in the guidance that we provided you today. Brent Edward Thielman: Okay. Thank you. I will pass it on. Michael W. Barker: Thank you. Operator: Our next question comes from Steven Ramsey with Thompson Research Group. Please go ahead. Steven Ramsey: Hi. Good morning, everyone. Operator: I wanted to think high level that you are tracking to your 2027 targets. Did you expect CAP to be at this level when you laid those targets out, or would you say those targets were predicated on a CAP level that was lower or higher than this, Steven Ramsey: I guess I am trying to get a sense of how CAP-dependent those targets are. Kyle T. Larkin: Yeah. I do not know if we necessarily came out and said, here is what our CAP needs to be in order to hit those 2027 targets simply because it is a balance of bid-build and best value. And obviously, the burn rates on those two are very different, one being a lot shorter burn of a couple years, and the best value could be up to about a five-year burn. In the CAP today, it is back to about 50/50 between those two, which we think is very healthy. So that gives us a lot of confidence not just in our ability to hit our numbers from an organic growth rate of around 8% in 2026, but it should allow us to continue to have that growth rate into 2027. So I think the best way to answer is we feel really good about the CAP. The $7,000,000,000 is a really high-quality CAP. The margin profile within our CAP continues to improve, and that is going to also get to those 2027 targets. So I think our CAP is right on track to where we want to be. Steven Ramsey: Okay. That is helpful. Operator: And then wanted to think about the CapEx, the strategic CapEx of $50,000,000 geared towards the Materials segment? Steven Ramsey: Can you Operator: talk a bit about how much of that is in the legacy Western markets? How much of that is the Steven Ramsey: recently acquired Warren assets? And Operator: maybe to tag along with that, Steven Ramsey: how the Warren integration is going and how that is shaping up for growth in both sales and profits within the Southeast business? Michael W. Barker: Hey, Steven. I will start if Operator: talk a little bit about the strategic Materials CapEx of $50,000,000. That is more heavily weighted towards the legacy business and expanding reserves and doing automation projects. Michael W. Barker: There. Operator: And also in our acquisitions from a couple of years ago with Raymond Roberts and the stone and gravel, and doing some investment there. So but really more heavily weighted towards the legacy Granite business. And then as we think about the Warren integration, they have performed really well so far this year in the five months that we have had them on board, and we are really excited about that and feel good about that going forward. And then the opportunity that is going to present to continue to expand in the overall health Kyle T. Larkin: Yeah. Maybe I will add a little bit to the integration. We made an investment, so we have dedicated resources, our integration team today, to help with these acquisitions and Warren Paving is off to a strong start similar to Pappage Construction and CinderLite. So all three of our acquisitions last year are performing very well, if anything, outperforming where we thought they were going to be. Again, we are excited about the teams that came with those companies, the leadership that came with those companies, and the markets that they are in continue to be healthy and growing. So we really look forward to having them in our full year of business this year in 2026. Operator: Great. That is great color. Thank you. Kyle T. Larkin: Thank you. Operator: Our next question comes from Kevin Gainey with Thompson Davis. Please go ahead. Operator: Good morning, Kyle and Staci. Great quarter, guys. Maybe if you wanted Kevin Gainey: to dive into the project Adam Bubes: bidding opportunities and more so maybe by vertical, I am just kind of interested in what you guys are seeing out there for mining, rail, maybe renewables, water? Adam Bubes: Sure, you know Kyle T. Larkin: in general, the market is strong. It has been strong. It remains strong. You think over the last six months, we did more work, we captured more work with slightly higher margin. So that is kind of the high-level really good news and obviously driving a very strong CAP for us. The public market with the IIJA is still a big, big part of our business, around 85% or more today. And so I think that is more a reflection of a really strong IIJA and public funding. We see mining continue to be strong, whether it is our involvement on the process water side or actually just doing work for the miners on site development side of things. Rail is an opportunity. We continue to see intermodal opportunities in our future, and hopefully, we will continue to capture some of those that could maybe shift things back a little bit more weighted towards private than public as an overall company. Renewables stay strong. We are seeing solar projects continue to come out, and we continue to pursue them. And I think we are going to continue to grow that part of our segment in Construction in the next year or two. So I think all in all, we feel really good about the market. You know, we do not participate a whole lot in the residential market. But the markets that we are in on the private side outside of that continue to be really strong. I would say we are starting to look a little bit harder at some of the data center work. We do do data center projects up in the Pacific Northwest and Nevada today. We are pursuing some projects outside of those markets down into Texas and even in Ohio. So there are some new opportunities for us that we can capture in the future here. Operator: And then as we sit here and we Adam Bubes: think about the $7,000,000,000 CAP, do you guys have any concerns operationally or from maybe whether it is labor, equipment, or anything like that that could cause you an issue in executing on a project pipeline? Michael W. Barker: Not at all. Yeah. That $7,000,000,000 of CAP, again, half Kyle T. Larkin: of that is best value, half of it is bid-build. So the progression and burns can vary a little bit. Historically, we have been as high as, if you look at bringing up our contract backlog in any given year, close to 50% of our CAP. This year is going to be closer to just over 40% Michael W. Barker: of our CAP. So we do not have any ESG concerns at all in that regard. Adam Bubes: That sounds good. And then maybe just one more just on the EBITDA guidance for margins. What would it take to be able to get to the high end of that range? And maybe if you could talk about the low end as well. Kyle T. Larkin: Well, in any given year there are a few factors. Obviously, we talked before about weather. Q1, Q4 weather can always be an opportunity or it can be a hindrance for us. So far in Q1, it has been okay. There were some big weather issues Michael W. Barker: in the Southeast, as we all know, earlier this year, Kyle T. Larkin: we do not think that is going to impact our ability to hit our guidance. We will have to see how the rest of this quarter shakes out as well as Q4. We still have to win and actually bid and build some of the work that we are going to need this year to hit our revenue numbers. So it is always a risk in the first half of the year of actually capturing that work and getting started on that work. And then execution, that is an opportunity for us and a risk as well. We have to perform. But I think today, our operational excellence is at a really high level and a very different business than what we were several years ago. And I see execution as more of an opportunity today than a risk. We tend to outperform our projects more than we underperform today. And then there are some unknown unknowns, and we will have to see if any of those show up. But I feel as though the things that we control, we are in really good shape, and it should be a really nice year for us. Adam Bubes: That sounds good. I appreciate all the color. I will turn it over. Kyle T. Larkin: Thank you. Michael W. Barker: Thank you. Operator: Our next question comes from Michael Stephan Dudas with Vertical Research Partners. Please go ahead. Michael Stephan Dudas: Yes. Good morning, Staci, Mike, Kyle, Michael W. Barker: Good morning. Kyle, best value Michael Stephan Dudas: practice backlog getting close to 50%, very helpful. And you mentioned in your prepared remarks, other states are engaging in those types of contracts. Maybe you could share a little bit more how much of a percentage of your backlog could that type of contract be, Kyle T. Larkin: And given how it is Michael Stephan Dudas: allocated and let throughout the process, Michael W. Barker: because of the building, is that going to Michael Stephan Dudas: provide some more project or award opportunities or revenue opportunities Adam Bubes: a little longer in the cycle Kyle T. Larkin: given that Michael Stephan Dudas: it has been built up so high and that could give some more visibility to later this year into next year and beyond because of Michael W. Barker: how Michael Stephan Dudas: big and how large that part of the backlog will grow. Kyle T. Larkin: Yeah. So maybe you are breaking up a little bit. Let me see if I think I can answer the question based on what I Michael W. Barker: think I Kyle T. Larkin: you said there, Mike. But if I get it wrong, let me know. You know, the question has come up before around what is the right balance between best value and bid-build. Michael W. Barker: And Kyle T. Larkin: you know, I do not think we necessarily know the answer to it. I think we like what we have today, is that 50/50 feels pretty good. And to your point, as more states pass legislation to allow CM/GC or CMAR or progressive design-build, we could see that increase. I think that is okay. It allows us to do some more complex Adam Bubes: larger contracts in a de-risked manner, and we tend to perform very well on those. So Kyle T. Larkin: I think that if that progression happens, that would be a good thing for us. I think that is the future of contracting, to be more collaborative, to be partners with our clients, and it really fits us well as we have a home market strategy. So we like to know the customers that we are working for and having the resources to ensure that we could deliver these projects for them the way that we both would expect us to. So if it does increase, I think that is a good thing. I think another good thing about our CAP being about 50% best value is it gives us some insight into the future. And so we know that we are going to progress through a portion of that work this year. But it gives us confidence as we start working towards those 2027 numbers and beyond. So I think we feel really good about our CAP today, and we will have to see what happens in terms of this best value over time. Michael Stephan Dudas: Yes. That is perfect. Thank you for that answer, Kyle. And my follow-up is on the Materials side. Since your reorganization of the business, certainly the pricing and volumes have been quite good, organic and your acquisitions. How do you feel you are relative to pricing two years later with this change relative to the market? Is there still upside relative to market in certain regions? And what are you anticipating or budgeting for aggregate and asphalt pricing generally Kyle T. Larkin: 2026? Yeah. I would say in 2026, we will start with the pricing first, mid-single-digit price improvements on the aggregate side and low single digit on the asphalt. You know, every market is different. We look at every project, every market uniquely and discreetly. And so I think that there are still opportunities. I think our team consistently looks at that. And one of the things we did with the reorg a couple years ago is we bring some of that sales strategy and feedback loop up to a higher level. And so we can look at things a little bit more broadly and ensure that we are looking at things with maybe a little bit less emotion. And so I think there is still work to be done. I think that our team has done a fantastic job. I am impressed with what they have done. They have obviously unlocked a tremendous amount of value in our Materials business, but I think there is still some more to do. In the 2027 targets, we have talked about another 3% or better cash gross profit over the next two years. So we expect to continue to see that this year. That is contributing to our EBITDA margin expansion this year. And so I think we are right on track with all that. Michael Stephan Dudas: And just quick follow-up on your costs. What about your cost, what you are budgeting in the Materials business on a percentage basis relative to the Kyle T. Larkin: pricing you are sharing? We have done a really, really nice job in legacy business keeping costs under control. I think that is one of the real highlights that our team has. Costs year over year have actually been flat in the last two years. So I think the automation efforts we put in place, standardization of our Materials playbook, I think all that is paying off for us as well. Obviously, there are some cost inputs, some of the variable costs that would go up with inflation. But all in all, last year, mix-adjusted, I think we ended up close to about 8%. Michael W. Barker: Excellent. That is 8% net pricing Kyle T. Larkin: increase. Michael W. Barker: And net Michael Stephan Dudas: 8% price increase overall. I appreciate it. Thanks, Kyle. Kyle T. Larkin: Yeah. Thank you. Operator: Our final question comes from Adam Bubes with Goldman Sachs. Please go ahead. Adam Bubes: Hi, good morning. Can you help us think through the 2026 versus 2025 margin outlook? I think the guide is just over 50 basis points of margin expansion at the midpoint. How much of that margin expansion is coming from price versus better execution versus I know you have some favorable M&A rollover, and then what are some of the offsets? I think you had a favorable claim last year. Looks like maybe slightly outsized equipment sales this year that you could be lapping. Just trying to think through the puts and takes. Michael W. Barker: Yeah. Yeah. I think, Adam, Kyle T. Larkin: I think the easiest way to look at it is we have been talking about a 1% Construction margin improvement over the next two years and split really between 2026 and 2027. So it was around 50 basis points improvement in our Construction margins. Materials, we have been talking about at 3% over the next two years, so about a percent and a half each year. So on a weighted average basis, that is around 20 basis points. You put the two together, that is around 70 basis points improvement between Construction and Materials. As Staci mentioned in her remarks, there is about a 50 basis points improvement on SG&A. So it is about a 120 basis points improvement in margin. But then you have to net out the things you talked about. So we had some claim recoveries. We had a little bit larger gain on sale. And so that nets out to about a 50 basis points improvement, if that answers that question. I think the other thing to think about is to get to the midpoint of our 2027 EBITDA margin guidance. It is about a 100 basis points improvement from here. So we are right on track with where we thought we would be this year and right on track getting to that midpoint of our EBITDA margin in 2027. Adam Bubes: Terrific. And then can you just talk about, it sounds like the M&A pipeline is still pretty robust. What is the range of outcomes that you are contemplating for M&A in 2026? And can you just talk about how you view M&A in context of leverage as well, if there are larger opportunities out there. Would you feel comfortable moving above the leverage target of 2.5, or nothing of size that would really move the needle in the medium term on that front? Kyle T. Larkin: Well, I mentioned previously, all three of the recent transactions have gone very well. It gives us a lot of confidence as we move forward and look to do more deals. We have invested in our corporate development team, which has been great. So we can really vet through a whole lot of opportunities that come our way. We can also self-source a lot of our deals. So I do expect, and we expect, to get several things done this year. I think from a leverage perspective, we are still targeting that 2.5 times net debt. If there was something larger that came out, we would probably go up from there with a plan to obviously come back down. But I think that that leverage target kind of still holds. And, yeah, we are busy. I think our team is busy. I hope that we come back sometime in Q2 and provide you with some sort of update there. Adam Bubes: Great. Thanks so much. Michael W. Barker: Yep. Operator: This concludes our question and answer session. I would like to turn the conference back over to Kyle T. Larkin for any closing remarks. Kyle T. Larkin: Okay. Well, thank you for joining the call today. As always, we want to thank our teams for everything they did to make 2025 such a success. Most importantly, we would like to thank our teams for making 2025 our safest year yet. We are an industry leader in safety, and we expect to get even better in 2026. Thank you for joining the call and your interest in Granite Construction Incorporated. We look forward to speaking with you all soon. Operator: The conference has now concluded. Operator: Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning. My name is Paul, and I will be your conference facilitator. At this time, I would like to welcome everyone to Granite Point Mortgage Trust Inc. Fourth Quarter and Full Year 2025 Financial Results Conference Call. At this time, all participants will be in a listen-only mode. After the speakers' remarks, there will be a question and answer session. Please note today’s call is being recorded. I would now like to turn the call over to Chris Petta, with Investor Relations for Granite Point Mortgage Trust Inc. Please go ahead. Thank you and good morning everyone. Chris Petta: Thank you for joining our call to discuss Granite Point Mortgage Trust Inc.’s fourth quarter and full year 2025 Financial Results. With me on the call this morning are Jack Taylor, our President and Chief Executive Officer; Steve Alpart, our Chief Investment Officer and Co-Head of Originations; Blake Johnson, our Chief Financial Officer; Peter Morale, our Chief Development Officer and Co-Head of Originations; and Ethan Leibowitz, our Chief Operating Officer. After my introductory comments, Jack will provide a brief recap of conditions and review our current business activities. Steve will discuss our portfolio and Blake will highlight key items from our financial results. Press release, financial tables, and earnings supplemental associated with today’s call were filed yesterday with the SEC and are available in the Investor Relations section of our website. We expect to file our Form 10-Ks in the coming weeks. I would like to remind you that remarks made by management during this call and the supporting slides may include forward-looking statements, which are uncertain and outside of the company’s control. Forward-looking statements reflect our views regarding future events and are subject to uncertainties that could cause actual results to differ materially from expectations. Please see our filings with the SEC for a discussion of some of the risks that could affect results. We do not undertake any obligation to update any forward-looking statements. We also refer to certain non-GAAP measures on this call. This information is not intended to be considered in isolation or a substitute for the financial information presented in accordance with GAAP. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in our earnings release and slides, which are available on our website. I will now turn the call over to Jack. Jack Taylor: Thank you, Chris, and good morning, everyone. Jack Taylor: We would like to welcome you and thank you for joining us for Granite Point Mortgage Trust Inc.’s fourth quarter and full year 2025 earnings call. 2025 was a constructive year for the commercial real estate industry. Chris Petta: The year began with strong momentum Jack Taylor: after pausing briefly in the spring due to macro uncertainty, quickly resumed with heightened deal activity and spread compression throughout the balance of the year. During the fourth quarter, we saw greater capital availability for a broader array of properties, including certain office properties, as well as improving fundamentals across many markets and most property types. Lending volume has expanded and also extended to a wider range of property types and markets. This greater liquidity in the market has benefited the CMBS market and strengthened CLO issuance. Larger commercial banks have become more active, notably for warehouse financing, and regional banks are beginning to return to the market as well. Against this backdrop of available capital in the market, there continues to be a shortfall of actionable deals, which is one of the key factors contributing to the spread tightening we have been seeing over the last several quarters. For Granite Point, with the long-awaited market improvement, 2025 was an impactful year, as we achieved some of our key objectives. These included five loan resolutions, seven full loan repayments, and one REO property sale, as well as a reduction in our cost of debt. The market momentum experienced in 2025 has continued into early 2026, and sets the stage for this year to be potentially a stronger year for the industry, with forecasted growth in transaction activity across property types, increased liquidity from traditional lenders, a robust securitization market, and an increasingly constructive backdrop for asset resolution activity. In 2026, continue to make progress reducing our higher-cost debt and moving along our asset resolutions, which will continue to help reduce the risk within our portfolio and improve our net interest spread. This month, we repaid a substantial amount of additional higher-cost debt, resulting in a reduction in the cost of our repurchase facilities by roughly 60 basis points and an estimated annual savings of $0.10 per share. With respect to our two REO assets, we are investing capital where we believe it will maximize our outcome and then we will seek to exit and extract capital. Post quarter end, we also have received two full loan repayments of $174,000,000 combined. Turning to originations, as we said last quarter, we expect to begin to regrow our portfolio this year, and to start that process in 2026. The exact timing and volume of originations will be driven by the pace of loan repayments and asset resolutions, as well as market conditions and idiosyncratic factors. While the timing and volume is uncertain, reallocating capital in our portfolio and recycling into new originations remains one of our highest priorities. I would now like to turn the call over to Steve to discuss our portfolio activities in more detail. Thank you, Jack. Steve Alpart: And thank you all for joining our fourth quarter and full year earnings call. We ended the year with $1,800,000,000 in total loan portfolio commitments, inclusive of $1,700,000,000 in outstanding principal balance and about $77,000,000 of future fundings, which accounts for only about 4% of total commitments. Operator: Our loan portfolio remains diversified across regions, Steve Alpart: and property types, and includes 43 investments with an average UPB of about $39,000,000 and a weighted average stabilized LTV of 65% at origination. As of December 31, our portfolio weighted average risk rating increased slightly to 2.9 from 2.8 at September 30. The realized loan portfolio yield for the fourth quarter was 6.7%, which, excluding nonaccrual loans, would have been 8% or 1.3% higher. We had an active year of loan repayments totaling about $469,000,000 during 2025. During the year, funded about $51,000,000 on existing loan commitments and other investments. During the fourth quarter, we had $45,000,000 of loan repayments and partial paydowns, including a full repayment of a $33,000,000 loan secured by a multifamily asset located in North Carolina. We had about $15,000,000 of future fundings and other investments, resulting in a net loan portfolio reduction of about $30,000,000 for the fourth quarter. Post quarter end, we have received two full loan repayments of $174,000,000. We will now provide some color on the risk-rated five loans. At December 31, we had four such loans with a total UPB of about $249,000,000. At quarter end, we downgraded a $53,000,000 loan collateralized by a 284-unit multifamily property in the Atlanta MSA from a risk rating of four to a rating of five. While we have seen a pickup in occupancy at the property, the local market remains soft and we are not seeing the return of the pricing power we had expected. We are reviewing resolution alternatives, which may include a property sale. We are monitoring the situation closely and expect to have more to share over the coming quarters. We discussed last quarter that we had a partial resolution on the Chicago loan with the sale of the upper floor office space to a developer for a residential conversion. After the sale, the remaining collateral securing the $76,000,000 loan is the retail space. The story is now cleaner and simpler, and we are continuing to work cooperatively with the borrower towards the ultimate resolution, which we expect will occur via a property sale in the nearer term. For the $27,000,000 Tempe hotel and retail loan, we are reviewing resolution alternatives there as well, which could involve a sale of the property. Regarding the $93,000,000 Minneapolis office loan, as previously disclosed, we anticipate a longer resolution timeline given the persistent local market challenges. Resolving these remaining five-rated loans remains a top priority. Turning to the REO assets, we continue to have positive leasing successes at the suburban Boston property, and remain actively engaged with our partner and the local jurisdiction and other third parties on several value-enhancing repositioning opportunities. We continue to invest capital into this property to maximize the outcome. The Miami Beach office property is a Class A asset located in a strong market. We are having positive leasing discussions with a variety of existing and new tenants, will prudently invest in the property, and continue to review resolution alternatives, which include the potential sale. As we shared in prior quarters, our plan for 2026 is to remain focused on loan and REO resolutions. We expect our portfolio balance will trend lower in the near term until we start our origination efforts in 2026 to take advantage of attractive investment opportunities and begin to regrow our portfolio. I will now turn the call over to Blake to discuss our financial results. Blake Johnson: Thank you, Steve. Good morning, everyone, and thank you for joining us today. Turning to our financial results. For the fourth quarter, we reported a GAAP net loss attributable to common stockholders of $27,400,000, or negative $0.58 per basic common share, which includes a provision for credit losses Jack Taylor: of $14,400,000, or negative $0.30 per basic common share Steve Alpart: and an impairment loss Blake Johnson: in the Miami Beach OREO asset of $6,800,000, or negative $0.14 per basic common share. Distributable loss for the quarter was $2,700,000, or negative $0.06 per basic common share. Our book value at December 31 was $7.29 per common share, a decline of $0.65 per share from Q3, largely from the provision for credit losses Jack Taylor: and impairment loss on REO. Blake Johnson: Our aggregate CECL reserve at December 31 was about $148,000,000, as compared to $134,000,000 last quarter. The roughly $15,000,000 increase in our CECL reserve was mainly due to an increase in our specific reserve on our collateral-dependent loans Jack Taylor: and worsening macroeconomic forecast in our CECL model relative to the prior quarter. Blake Johnson: Approximately 70% of our total allowance was allocated to individually assessed loans. As of quarter end, we had about $249,000,000 of principal balance on four loans with specific CECL reserves of around $105,000,000, representing 42% of the unpaid principal balance. Steve Alpart: We believe we are appropriately reserved Blake Johnson: and further resolutions should meaningfully reduce our total CECL reserve balance. Turning to liquidity and capitalization, we ended the quarter with about $66,000,000 of unrestricted cash. Our total leverage increased slightly relative to the prior quarter from 1.9 times to 2.0 times. As of a few days ago, carried about $55,000,000 in cash. Steve Alpart: Our funding mix remains well diversified and stable, and we continue to have very constructive relationships with our financing counterparties. We expect to expand our financing capacity once we return to originating new loans. Blake Johnson: I will now ask the operator to open the line for questions. Operator: Thank you. We will now be conducting a question and answer session. Thank you. Our first question is from Douglas Harter with UBS. Marissa Lobo: Good morning. It is actually Marissa Lobo on for Doug today. Thanks for taking my questions. On origination, how are you thinking about the economics of new origination versus returning capital to shareholders, given the large discount to book value that you trade at? Blake Johnson: Good morning, Marissa. This is Blake. Thank you for the question today. When we look at our portfolio and the discount to book, one of our main objectives over the years to continue resolving our loans and actually working on decreasing our leverage until we start originating again. We do plan on returning to originations later in the year, and that is our focus for 2026. Marissa Lobo: Okay. And on the CECL reserve build, how are you viewing the current reserve position and the likelihood for further reserve build? How are current macroeconomic assumptions factoring into that? Blake Johnson: A very good question. Thank you. Yes. So as of year end, we go through our CECL process as in every quarter end. And when we went through the process, we update the generator for the latest and greatest economic forecast in our truck model. So that includes change in assumptions, and the biggest driver for this quarter was a decrease in the CRE price index. Jack Taylor: These forecasts can change going forward, so the general reserve could change. But as of right now, that is the most recent assumption as far as what our general should be. Blake Johnson: Moving to the actual specific reserve, that is based on our collateral-dependent loans. So as of quarter end, we had four collateral-dependent loans. In each quarter end, we assess the fair value of the underlying collateral is. Jack Taylor: So absent any changes in collateral itself, Steve Alpart: we do believe we are appropriately reserved for on those loans. Marissa Lobo: Okay. Thank you. Appreciate the answers. Operator: Our next question is from Jade Rahmani with KBW. Thank you very much. Blake Johnson: Do you have any views as to where book value per share may trough Steve Alpart: in this cycle? Operator: It is down quite sharply year over year and quarter over quarter. Jade Joseph Rahmani: Which clearly based on today’s stock performance, is a surprise. So can you just comment as to, you know, what your expectations are for the risk of future losses going forward? Jack Taylor: Well, I will address that first and then turn it over to Steve to talk about credit migration. Blake Johnson: We Jack Taylor: We believe that there is a risk that there will be upgrades and downgrades and future losses may be part of that. Right? We do not—we have best that risk in our book today and that is embedded in the reserves. That we reserves. With respect to credit migration, maybe, Steve, you would speak to that. But I have been very clear over the quarters. I do not believe it is over in terms of workouts, delinquencies for the whole industry, and not for us. And there have been some prizes to us. We expect to have some upgrades and some downgrades. Steve? Steve Alpart: Is that everything you were gonna—You know, it is—Hey, Jay. Good morning. It is Steve. I think Jack and Blake covered it pretty well. I mean, I would just say that we feel that the majority of the portfolio is performing well. We are working through these remaining loan resolutions, which are not entirely, but heavily in the office sector, and the impact of the rate hike that we went through. We are pleased with the progress we have had to date. We had a lot of resolutions in 2024. We had five more in 2025. We are in process on a couple more right now. We just talked about the Chicago deal where we had the partial resolution of the office, and we are working on a full resolution, which involves the retail, which we think can get done in the near term. We did have two new fives during the quarter. So there is always a possibility that there could be more of that. But we also hope to have more resolutions, some upgrades, and we are happy to see that we are in a constructive environment, as far as capital, certainly debt, also, increasingly equity. And we think that will be helpful on further repayments and resolutions. Jade Joseph Rahmani: And just overall, when you look at the portfolio, clearly, portfolio has a legacy vintage prior to the Fed rate hikes. So nearly every single loan in the portfolio is gonna have probably some cost of capital issue when it is up for maturity. But then looking beyond that, multifamily was an area of downgrade this quarter, which was so much surprising. So can you comment on the vintage and the multifamily property type and what your expectations are there? Steve Alpart: Sure. I think there are two related questions in there. So we are working through these loans, including these kind of older vintage loans. We have pretty good visibility, I would say, on about a quarter of these loans, in terms of a near-term payoff where there is a process underway and we are expecting a loan repayment. I would say there is another, I call it 40% or so if I had to kind of take an estimate, where there is an upcoming maturity. We have communicated to the borrower that we expect an exit this year by the maturity date. And there may be a refi or a recraft or a refi or a recap or sale process that is underway or expected. And we certainly cannot say that all those will get done, but we have, you know, some visibility on those that we think that there is a process that there is an exit out of. And then there is another, you know, call it about a third or so, where there are a couple of 2027 and 2028 maturities. And then I would throw in the Minneapolis office deal that are a little bit further out. So we are—I would say we are kind of chipping away at it. And some have near-term visibility, some we are expecting and pushing on, and then a few will be, you know, kind of 2027 and 2028. Then as far as your question on multifamily, multifamily in our portfolio, we feel pretty good about. We did have the credit migration on the Atlanta deal, and we have talked about certain markets that we are looking at. We have kind of flagged in the past Atlanta. So, would say that one for us has been a bit of an exception. So—and that one has some unique factors that we can we can talk about. But I think the overall trend line that we are seeing, including in the Sun Belt, is that I think the recovery that we were all expecting has been a little bit more sluggish, and you see that in the read-through on some of the public multifamily REITs. The spring leasing season last year was a little slower than expected. But the supply picture overall is improving. There has not been a lot of pricing power for landlords. But, you know, when we sit back and look at macro supply and demand, it feels like, you know, over the second half of this year and kind of going forward, we feel like the trend line in multifamily is fairly positive. And there is obviously a lot of liquidity in the asset class. The sentiment coming out of the NMHC this year was very positive. So overall, on multifamily overall and in our book, we feel pretty good about it medium to longer term. Jack Taylor: Thank you. Thank you, Jay. Operator: Our next question is from Christopher Muller with Citizens Capital. Blake Johnson: Hey guys, thanks for taking the questions. So I guess starting on the portfolio, it has been shrinking as you guys have been focused on asset management. But sounds like new originations starting up is still the expectation for later this year. Operator: So I guess the question is, you guys have a ballpark of where the portfolio size could trough and maybe kind of playing into that a little bit is, what does scheduled maturities look like in the first half of this year in addition to what you guys already disclosed? Steve Alpart: Hey, Chris, it is Steve. Just high level, on the first part of your question, look, just given Blake Johnson: the Steve Alpart: near-term focus on repayments and resolutions, we do expect the portfolio to tick down through mid-2026 and then begin to restabilize and regrow in the latter part of the year. Ultimately, that will depend on the timing of repayments and resolutions relative to new originations, but it will get a little lower over the next few quarters and then begin to regroup. Regrow. Operator: Got it. And any visibility you guys have on Christopher Muller: scheduled maturities that may play into that? Steve Alpart: Yeah. I mean, a part of that is what I just mentioned to Jay that we have—we do have visibility on certain loans that are coming up on maturity. As we kind of look out—I am kind of looking out into 2026 overall. Some of these will just pay off in the normal course. A couple will extend out of bright. Has happened on some loans recently. Then to the extent—then we have other loans that I mentioned are not up for maturity yet, but they are up—know, kind of clawed—you know, third, fourth quarter. And, you know, we are in a—of that, we are having conversations with a number of borrowers that we have done previous extensions on, where they have done everything right, where they put new money in. And we are looking to get the portfolio turned. So we are having clear communications with borrowers about our expectations and if they cannot do it via a refi, do it via an equity recap, it via a sale. So that has been kind of the playbook. Look, case by case, we have extended out loans in win-win mod situations, but we feel like that was the playbook that allowed couple of years, and we are trying to move past that and get to just turning the portfolio. Christopher Muller: Got it. And then just a quick clarifying one. Did I hear you guys correctly that there were two new five-rated loans in the quarter? I see the Georgia multifamily in the deck but, what was the other one if I heard that right? Steve Alpart: There is one—there is one new five-rated loan. Christopher Muller: Got it. So I just misunderstood. Thanks for taking the questions today. Steve Alpart: It is the Georgia multifamily, correct. Thank you, Chris. Operator: Our next question is from Gabe Hoggi with Raymond James. Hey, good morning, guys. Thanks for taking the question. Christopher Muller: I may have missed this before, but can you tell us what the two sectors were and any details around the repayments you received year to date in one thus far this year in 2026? Jack Taylor: Well, hey, Steve. Maybe I can just lead in on that for a moment and I would say it is a retail, a multifamily and importantly want out relating to an earlier Blake Johnson: question, Jack Taylor: These were vintage loans. COVID period and the higher interest rate period and paid off at par. Christopher Muller: Thank you. Operator: Thank you. There are no further questions at this time. I would like to hand the floor back over to Jack Taylor for any closing comments. Jack Taylor: Yes. I just wanted to elaborate on something that was said earlier, which is the portfolio will shrink as we said, but I think we have many tools to regrow the portfolio. Through our loan repayments and resolutions, releasing capital—our REO, which will extract capital. We will be repaying our higher-cost debt and then rebuilding with an originations team that has been intact from when we were originating at $1,500,000,000 to $2,000,000,000. We have a lot of tools to re-leverage our balance sheet internally through the assets as they move from lower-level assets, the vintage loans that are being carried at lower leverage, to the new loans that we add Jade Joseph Rahmani: And Jack Taylor: that we also—excuse me—move into CLOs and the like and source capital as we have done in the past successfully to bring our lower leverage of 1.7 closer back to our target leverage. And to start repairing our earnings. Thank you for your time. And I just want to welcome—I would say thank you, everybody, for joining us for the call. And hope to speaking to you next Steve Alpart: further Jack Taylor: positive resolution. Operator: This concludes today’s conference call. We thank you again for your participation. You may now disconnect your lines.
Operator: Greetings, and welcome to the Lincoln Electric 2025 Fourth Quarter Financial Results Conference Call. All lines have been placed on mute and this call is being recorded. It is my pleasure to introduce your host, Amanda Butler, Vice President of Investor Relations and Communications. Thank you. You may begin. Thank you, Colby, and good morning, everyone. Welcome to Lincoln Electric's Amanda H. Butler: fourth quarter 2025 conference call where we will be covering our fourth quarter and full year 2025 financial results, as well as our new 2030 targets. We released our financial results earlier today, and you can find our release and this call slide presentation at lincolnelectric.com in the Investor Relations section. And joining me on the call today is Steven B. Hedlund, Chairman and Chief Executive, as well as Gabriel Bruno, our Chief Financial Officer. And following our prepared remarks, we are happy to take your questions. But before we start our discussion, please note certain statements made during this call may be forward-looking and actual results may differ materially from our expectations due to a number of risk factors and uncertainties, which are provided in our press release and in our SEC filings on Forms 10-Ks and 10-Q. In addition, we discussed financial measures that do not conform to U.S. GAAP. A reconciliation of non-GAAP measures to the most comparable GAAP measure is found in the financial tables in our earnings release, which again is available in the Investor Relations section of our website at lincolnelectric.com. I will now turn the call over to Steven B. Hedlund. Steve? Steven B. Hedlund: Thank you, Amanda. Good morning, everyone. Turning to slide three, I am proud to report record 2025 performance. Despite challenged end markets, our sales increased 6% to a record $4,200,000,000 from acquisitions and price. We maintained last year's record adjusted operating income margin, increased adjusted EPS to a record $9.87, and generated strong cash flows from operations. This resulted in record cash returns to shareholders. Disciplined cost management and the agility of our supply chain team mitigated unprecedented levels of inflation, finishing the year at our neutral price-cost target. In addition, our savings programs generated an incremental $31,000,000 of permanent savings. These achievements, combined with solid commercial and operational execution, culminated in top quartile ROIC and total shareholder return performance versus our peers. On behalf of the board and leadership team, I would like to thank our global team for delivering these superb results. Their commitment, focus, and agility continue to position the company to outperform in the years to come. Turning to slide four to cover demand trends in the fourth quarter. Organic sales grew 2.5% from price which was largely offset by weaker volume performance. As discussed on earlier calls, we faced a challenging prior year comparison in our automation portfolio which magnified volume declines. Excluding automation, organic sales would have increased approximately 8%. The growth reflects price contributions in consumable and equipment, as well as relatively steady volume performance in our welding consumables in Americas and international welding. 2025 was a challenging year for automation due to lower capital spending and project Amanda H. Butler: deferrals. Steven B. Hedlund: Automation sales were $240,000,000 in the quarter, 11% decline versus a record prior year. And on a full year basis, we achieved $870,000,000 which is a mid single digit percent decline. We are encouraged by strong order rates and a solid back in our automation business in the fourth quarter. This is expected to drive growth in 2026. Due to seasonality and the timing of revenue recognition, we expect first quarter sales to be steady with prior year levels and then pivot to growth starting in the second quarter. This follows the typical seasonality cadence of a 40-60% split between the first and second half of the year. Looking at end markets in the quarter, three of our five sectors grew with an acceleration in December. Notably in Americas Welding. And excluding automation due to its challenging prior year comparison, all five end markets were flat to up. This momentum combined with a return to more normalized customer productive production activity, OEM announcements of higher capital spending plans for 2026, and the manufacturing PMI pivoting to growth in January are all encouraging signs that we may be in the stages of an industrial recovery. A few highlights to note are the continued outperformance in energy, which is due to strong project activity in both Americas and Asia Pacific. General industries achieved double digit growth in Americas, but was impacted by lower HVAC activity in the quarter. We are seeing HVAC demand start to normalize in January. And our nonresi structural steel sector was flat globally, but up mid teens percent in Americas on strength in both North and South America from a range of projects. The two challenged sectors were automotive and heavy industries, and both were impacted by automation's prior year comparison. Transportation, excluding automation, grew at a mid to high single digit percent rate largely from consumable demand for vehicle production. Heavy Industries organic sales excluding automation was higher year over year as construction and ag sector production activity continued to improve resulting in solid consumable volume growth. So we are well positioned with strong backlog levels and broadening pockets growth in Americas and Asia Pacific to drive growth in the year ahead. Now I'll pass the call to Gabriel Bruno to cover fourth quarter financials in more detail. Thank you, Steve. Moving to slide five, our fourth quarter sales increased 5.5% to $1,079,000,000 from 8.9 higher price, 1.9% favorable foreign exchange translation, a 1.1% benefit from acquisitions. These increases were partially offset by 6.4% lower volumes. Gross profit dollars increased approximately 1% to $374,000,000, and gross profit margin compressed 140 basis points to 34.7%. A $3,000,000 benefit from our savings actions as well as diligent cost management and operational initiatives was offset by lower volumes and a $3,000,000 LIFO charge in the quarter. SG&A expense decreased approximately $3,000,000 versus the prior year from the benefit of $5,000,000 of permanent savings and lower employee costs, which were partially offset by unfavorable foreign exchange translation and higher discretionary spending. SG&A expense as a percent of sales declined 130 basis points to 17%. Reported operating income increased 4% to $184,000,000. Excluding special items primarily related to acquisitions as well as rationalization and asset impairment charges, adjusted operating income increased 4% to $194,000,000. Our adjusted operating income margin declined 20 basis points to 18%, reflecting a 15% incremental margin. We reported an effective tax rate of 21.2% which is five ten basis points higher versus prior year. Gabriel Bruno: Our effective tax rate reflected an approximate $3,000,000 special item tax expense from the election of provisions for the One Big Beautiful Bill Act. This election also reduced tax payments by approximately $25,000,000 in the quarter which we expect to realize again in 2026. Excluding special items, our effective tax rate was 19.8%, which was 300 basis points higher versus the prior year's adjusted effective tax rate which benefited from a favorable mix of earnings and the timing of discrete items. We reported fourth quarter diluted earnings per share of $2.45. On an adjusted basis, earnings per share increased 3% to $2.65. Our earnings per share results include a $0.07 benefit from share repurchases and a $0.01 favorable impact from foreign exchange translation. Moving to our reportable segments on slide six. Americas Welding sales increased approximately 4% driven by 10.4% higher price and 60 basis points of favorable foreign exchange translation. Volumes declined approximately 7% primarily from the automation portfolio which had a challenging prior year comparison. While automation order rates accelerated in the fourth quarter, and the segment has a strong backlog entering into 2026, revenue recognition is not expected to begin to ramp until the second quarter. The price increase reflects prior actions taken to address rising input costs. We anticipate price levels to hold sequentially in the first quarter prior to substantially anniversarying in the second quarter. We will continue to monitor trade policy decisions and take appropriate actions as needed. Americas Welding segment's fourth quarter adjusted EBIT increased 7% to $141,000,000. The adjusted EBIT margin increased 90 basis points to 20% primarily due to effective cost management, favorable mix, and $5,000,000 in permanent savings. We expect Americas Welding to continue to operate in the mid 18 to mid 19% EBIT margin range in 2026. Moving to slide seven, the 7% as a 5% benefit from our alloy steel acquisition, a 5% favorable foreign exchange translation and 50 basis points of price were partially offset by 4% lower volumes. Volume compression reflected the continued challenges in European industrial demand trends, which were partially offset by pockets of growth in Asia Pacific and in the Middle East. Adjusted EBIT decreased approximately 4% to $31,000,000. Margin compressed 100 basis points to 11.8% as the benefits of our alloy steel acquisition, effective cost management and a $3,000,000 of permanent savings were offset by the impact of lower volumes. We expect International Welding's margin performance to be in the mid 11 to mid 12% margin range in 2026. Moving to the Harris Products Group on slide eight. Fourth quarter sales increased 11% driven by 18% higher price and 170 basis points of favorable foreign exchange translation. As expected, volumes compressed 9% due to the decline in HVAC sector production activity in the quarter. Price continued to increase on metal costs and price actions taken to mitigate rising input costs. Adjusted EBIT increased 8% to $23,000,000 as margin declined 30 basis points on lower volumes and mix. The Harris segment is expected to operate in the 18 to 19% margin range in 2026. Moving to slide nine. We generated solid cash flows from operations in the quarter, aided by lower tax payments. Average operating working capital rose 100 basis points versus the comparable prior year period to 17.9%, primarily due to higher inventory levels and reflects top quartile performance compared to peers. Moving to slide 10. We continue to execute on our balanced capital allocation strategy, with high quartile returns. In quarter, we invested $44,000,000 in growth reflecting an acceleration in CapEx investments and $94,000,000 to shareholders. We generated an adjusted return on invested capital of 21.3%. Moving to slide 11 to discuss our operating assumptions for 2026. While conditions remain dynamic in many of our regions from ongoing trade negotiations and geopolitics, we are encouraged by recent OEM commentary on capital spending plans and growing infrastructure project commitments. This gives us cautious optimism that we may be in the early stages of an industrial sector recovery that would translate to broader demand momentum in our business in the second half of the year. While domestic distribution channel demand and consumer volumes have remained resilient, demand for our equipment and automation portfolios has been choppy. We will be looking for consumable volumes to inflect to consistent growth which is typically followed by an acceleration in capital spending after one to two quarters. Once we see those drivers, we are confident that our channel mix, diversified end markets, and portfolio solutions positions us well to capitalize on accelerating growth. Our full year 2026 operating framework assumes the sales growth rate in the mid single digit percent range with organic sales split fifty-fifty between volume and the 2025 price actions that carry over to 2026. We expect volume growth rates to improve starting in the second quarter and through year end. Price is expected to be strongest in the first quarter especially in the Americas Welding segment before largely anniversarying last year's price actions in the second quarter. Our price assumption does not include dynamic metal price adjustments in our Harris Products Group segment due to the volatility of metal markets. Our 2025 alloy steel acquisition is expected to provide an approximate seven basis point contribution to sales. These assumptions support our first quarter sales estimate that is similar to fourth quarter sales results. We will continue to pursue a neutral price-cost posture and expect a mid 20% incremental operating income margin from volume growth and enterprise initiatives, which will result in a modest improvement in our operating margin for the full year. In the first quarter, we expect a seasonal sequential increase of approximately $10,000,000 in incentive costs as we reset incentive targets and issue long-term incentives. This will impact margins and cash flow performance as we start the year. For the full year, we are confident in strong cash flow generation supports our capital allocation strategy and helps compound earnings performance through the cycle. We will continue to maintain an elevated level of capital spending with a target range of $110 to $130,000,000 as we invest across a range of safety, growth, and productivity-oriented projects to drive long-term value. Our expected tax rate and interest expense are generally in line with last year, at a low to mid 20% rate and in the range of $50 to $55,000,000 respectively. And now I'll pass the call back to Steve to cover our RISE strategy new 2030 targets. Thank you, Gabe. Turning to slide 13. Our next strategy builds upon the success of our Higher Standard strategy, which concluded in 2025. Steven B. Hedlund: And despite a volatile five year period that no one could have predicted, Gabriel Bruno: we are proud to have advanced the business and achieved most of our strategic targets. Reaffirming our strong say-do reputation and our commitment to deliver on our goals. This is a testament to our incredible global team, the agility of our operations, and the tremendous support of our and shareholders. So on behalf of the leadership team and the board of directors, thank you for your support. Steven B. Hedlund: Turning to slide 14, each reportable segment may Gabriel Bruno: progress during the Higher Standard strategy. Steven B. Hedlund: Most notably in profit contribution without the benefit of significant operating leverage. Gabriel Bruno: Diligent cost management, savings programs, and operational improvements were all drivers to segment improvement. Steven B. Hedlund: Key highlights are the doubling of our automation sales and EBIT margin over the five years Gabriel Bruno: the outperformance of Harris Products Group's margins, Steven B. Hedlund: and the groundwork we laid in leveraging the scale and scope of our enterprise to drive higher returns. Gabriel Bruno: The persistent drive for continuous improvement has delivered superior returns for our shareholders as highlighted on slide 15. With a 122% total shareholder return rate, which is over double proxy peers in the last strategy cycle. Turning to slide 16. For 130 years, we have consistently operated with a value framework Steven B. Hedlund: that balances being people focused with growth, continuous improvement, and financial discipline. Gabriel Bruno: Our unwillingness to trade off one element for another is what sets us apart and is foundational to our culture and success. It has also delivered superior returns for our shareholders. What has evolved over time is how the work gets done in each of these areas. This is driven by changes in technologies, processes, and organizational structures. Steven B. Hedlund: In the next five years, we will further evolve how we operate Gabriel Bruno: under a new strategy named RISE. This next phase of our development is focused on Steven B. Hedlund: structurally aligning the global organization to drive even greater efficiency and agility in our operations. Gabriel Bruno: Further differentiating our technologies and solutions Steven B. Hedlund: exposing the business to broader growth opportunities, Gabriel Bruno: and generating value for our employees, customers, and shareholders. Let's walk through the key themes of RISE on slide 17. The R stands for reimagining how work gets done over the next five years. Steven B. Hedlund: We will be completing the transition from regionally led businesses to center-led functions that will drive higher levels of efficiency Gabriel Bruno: across one standard enterprise. I stands for innovating to differentiate. We are challenging our R&D, product management, and M&A teams to further differentiate our portfolio to accelerate wins. Steven B. Hedlund: Whether that is through internal development Gabriel Bruno: external partnerships, or techquisitions, we see great opportunities to expand our market impact Steven B. Hedlund: by amplifying the value we bring to customers' operations. Enrotech is an excellent example of a recent techquisition. Gabriel Bruno: Technology is being integrated into our first autonomous automation solution that uses vision and AI to weld with precision while adjusting the variables just like a human welder would. We believe this, among other innovations, will redefine productivity expectations for Steven B. Hedlund: customers in the years ahead. S stands for serve. Today, customers tell us that our service outperforms industry peers but we know that we can do better. We have identified opportunities to improve supply and service levels across the business which can be a growth driver for us in the next five years. And finally, we will be investing to elevate our team. We are renowned for our industry-leading technical sales reps, engineers, application experts, automation specialists, and a strong operating and supply chain organization. But we want to achieve best-in-class engagement with our employees. New development programs combined with more proactive career planning will help ensure our team is engaged, upskilled, and that we are attracting and retaining industry-leading talent to help us grow. Looking at the 2030 financial targets starting on slide 18, we are maintaining a high single digit to low double digit percent sales growth rate framework. Our growth stack consists of organic sales increasing in a mid single digit percent rate. We are well positioned to benefit from cyclical growth in key growth drivers. Our customers need partners that can offer the expertise and the solutions to address the shortage of skilled welders that support greater safety and productivity in their operations, enable reshoring and capacity expansions, and deliver the right engineered solutions for electrification and infrastructure investments whether for energy, AI data centers, or for civil infrastructure projects. We also have a long-standing position servicing defense contractors predominantly in the maritime industrial base, and have added some exposure to aerospace through recent acquisitions. So favorable macro trends coupled with innovation, a targeted expansion of our TAM where we can add value, share gains, and 300 to 400 basis points of sales growth from acquisitions, are all catalysts that give us attractive growth opportunities to leverage. During the next five years, we expect higher contribution from growth at an average high 20% incremental operating income margin. This compares with a mid 20% rate in our prior cycle. Turning to slide 19. We expect varying rates of organic sales growth across our reportable segments, reflecting regional dynamics and segment strategies. Americas Welding will lead with a mid to high single digit percent organic growth rate. Strong regional positioning will allow the team to capitalize on cyclical and secular trends. In addition, the majority of our automation portfolio is in region, and we continue to expect automation's organic sales growth at twice the rate of the core business. In international, we are pursuing a two-pronged approach to growth. We will be pursuing accelerated growth in portions of the Middle East and Asia Pacific which have high levels of project activity and where we can invest to expand our reach. In core industrial Europe, we are assuming a low growth given macro trends, but we will monitor European industrial trends to ensure we are aligned with customer needs and can capitalize on any growth opportunities which could offer upside to our model. We are expecting a mid single digit percent growth rate in Harris Products Group from ongoing HVAC sector growth, a strategic expansion of fabricated solutions for targeted industrial applications, and expectations for an improvement in residential and retail channel trends. While operating leverage from volume growth is important to our strategy, enterprise initiatives are also a driver of higher incremental margin performance. On slide 20, we highlight four keys enterprise initiatives that are being implemented in conjunction with local continuous improvement projects and our safety and environmental initiatives, which are highlighted in the appendix. Together, we expect all of these initiatives to drive approximately one third of the improvement in our higher incremental operating income margin performance through the strategy cycle. Our first key initiative is our shift from a more regional structure to a global enterprise of center-led functions. This allows us to align our work on standardized tools, datasets, and establish highly efficient core processes. It will also enable us to leverage our scale and reduce complexity in our structure. In addition, standardization supports increased digitization, automation, and the use of AI bots to drive supply chain and administrative efficiency. Second, we will continue to invest in factory automation and modernize our production platform to improve safety, productivity, sustainability, and lower conversion costs in our operations. Third, we have piloted what we call our spotlight process over the last couple of years in our Harris business. And we will be deploying this process more broadly across the enterprise. We have demonstrated that modest adjustments to our operating posture can result in improved service for customers helping us gain market share while also generating internal efficiencies and productivity. And finally, we regularly shape our footprint to ensure utilization, quality, and service are aligned with any shifts in demand. During the Higher Standard strategy, we generated approximately $60,000,000 in permanent savings from optimization projects. While the opportunity list is shorter, we will continue our disciplined approach which will contribute to margin performance. And now I'll pass the call to Gabe to cover margin targets, cash flow, and capital allocation. Gabriel Bruno: Turning to slide 21. As Steve mentioned, we expect a step up in our incremental margins on average operating income to high 20% range. This is about two thirds from volume leverage and one third from enterprise initiatives. This will increase our average operating income margin to 19% across the cycle which is a 300 basis point improvement compared to the percent average in our last strategy. This is a step up from our typical 200 basis point improvement that we have historically achieved cycle to cycle. Amanda H. Butler: Our new framework targets a peak consolidated operating income margin Gabriel Bruno: of 20 plus percent. By segment, all segment target EBIT margin ranges have increased from their 2025 levels based on their growth plans, enterprise initiatives, and segment specific action plans. In addition, we are targeting a mid teens percent EBIT margin contribution from our acquisitions, and our automation portfolio, which is largely in the Americas Welding segment. Moving to slide 22, we have improved our working capital performance over time to top decile levels. While our ratio increased in the last few years as we have strategically increased inventory during supply chain challenges, we continue to operate at top decile levels versus peers. As we execute our RISE strategy, we will continue to optimize working capital and target a 16% to 17% ratio to sales over the next five years. Cash flows from operations have also improved over each cycle with improved margin and working capital performance. We expect to generate over $3,700,000,000 in cash flows from operations at a 100% cash conversion ratio through 2030. This will allow us to continue to fund growth and return excess cash to shareholders through the cycle. Turning to slide 23 in our capital allocation strategy. We have followed a balanced capital allocation strategy which you can see on the right side of the slide with approximately 48% invested in growth, and 52% returned to shareholders over the last cycle. We will be maintaining this balanced approach moving forward. Our growth investments include internal CapEx and R&D initiatives as well as acquisitions. Internal investments yield our highest returns and we target M&A returns in the mid teens percent by year three. We will also continue to return capital to shareholders. We expect to return approximately 30% of net income to shareholders through the dividend. And as a dividend aristocrat with 30 years of consecutive annual dividend increase, we remain committed to our dividend program. In addition, we will continue to repurchase shares to prevent dilution at approximately $75,000,000 a year and will then opportunistically buy back shares using excess strategic cash. Our capital allocation strategy allows us to effectively fund growth and generate superior returns for our shareholders through the cycle. To summarize our 2030 financial targets on slide 24, we are targeting growth that will position sales above $6,000,000,000 in 2030. Profit margins will expand at high 20% incremental operating income margin, which would generate an average operating income margin that is 300 basis points higher than the last cycle's average. We are expecting a peak 20 plus percent operating income margin in this cycle. Earnings per share is expected to grow at a mid teens percent CAGR reflecting improved performance and capital deployment. Cash flow from operations is expected to expand to over $3,700,000,000 which will fund growth and shareholder returns while allowing us to maintain a solid balance sheet profile. This strategy is expected to maintain top quartile ROIC performance and elevate Lincoln Electric to consistently higher levels of performance as we continue to shape the company for another 130 years of success. And now we will pass the call to the operator to take questions. Operator: Ladies and gentlemen, at this time, we will be conducting a question and answer. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw your question, simply press star one again. To ensure that everyone has an opportunity to participate, we ask that you ask one question and one follow-up question, and then return to the queue. We will pause just for a moment to compile the roster. Your first question comes from the line of Angel Castillo with Morgan Stanley. Your line is open. Hi, good morning. Thanks for taking my question. I wanted to start a little bit more on the longer term dynamic, particularly on the high 20s incremental margins. You laid out some very compelling factors as we think about, I think, 20 with how you can continue to kind of drive toward those higher incrementals. Could you talk a little bit more about the timeline of how we should think about these levers being achieved? Is this all starting out to drive the business in 2026? Or should we think about some of those investments in areas like automation or levers really starting to show through more, you know, over a longer period of time. Then related to that, just how should we think about the push and pull of the role of M&A and innovation in driving faster kind of differentiated growth? But the potential kind of dilutive nature of that versus your portfolio and whether that is kind of essentially factored in and how we should think about that within the incremental margins? Steven B. Hedlund: Yeah. Great question, Angel. So as you noted, when we talk about the improvement in our incremental margins, we pointed to a part of that being driven by volume growth and leverage on the volume growth, part of that being driven by the enterprise initiative. So let me talk to the enterprise initiatives. We have a variety of initiatives in flight in various stages of maturation. I think the transformation of our finance function is probably the furthest along and Gabe, the team have done a great job there leveraging shared service and process bots and the like to make that function much more efficient. I would say next behind that is probably and then HR. And then if you look at things like purchasing and R&D, you know, much earlier in their maturation cycle. So I think I would expect to start to see benefits from the enterprise initiatives flowing in fairly steadily over the course of the five year period as each of those functional initiatives, you know, reaches their full potential. So it is not a big bang that all happens at the end of the strategy period. It is also not going to be very quick to get all the benefit at the front end. So I would model it as being fairly smooth over the course of the five years. Gabriel Bruno: Angel, just to add your comment in terms of M&A and the impact on incrementals, you know, we have incorporated all that into our model. And when you look at our targets, as you point to an ROIC, I mean, we are at 18 to 20%. So we do not want to limit our ability to grow by driving target ROI above where we are currently at. I want to introduce acquisitions there in that mid teens type of returns by year three, and that kind of fits nicely for us. You have seen that historically, that is how we have performed. And we expect to continue to execute on that kind of dynamic. Operator: That is very helpful. Thank you. And then maybe just on the more near term side, wanted to talk about your guide for net sales of mid single digits. Apologies if I missed this, but did you break down exactly, I guess, what your expectation is for organic growth within that? And related to that, could you just maybe provide a little bit more color on the specific kind of order trends? You mentioned accelerating orders in automation, but just curious what you are seeing in quarter to date in January, February for the rest of the business in terms of orders and kind of the cadence for organic growth there? Gabriel Bruno: Yes. So Angel, so when you think about the organic assumptions that we provide, you know, mid single digit type of growth split, fifty fifty between price volume. What we have assumed for pricing, it reflects all of the 2025 pricing actions that we have placed into our business responsive to the acceleration of input costs. And we will see that largely in the first quarter and then begin to anniversary largely in the second quarter. So we have confidence that based on the strength of orders and backlog, particularly in our automation business, that we will see a pivot to growth beginning in the second quarter. So as the year progresses, we expect to see less pricing, see that more in the first half of the year, and more volume in the back half of the year. And the confidence level we see because of order levels and back and automation really drives that volume assumption. As we have mentioned, the consumables business has held steady from a volumes perspective. So that is good posture to be in when you think about the production levels across the end markets we serve. But we do want to see more consistency in order patterns from a capital investment perspective. So the volume assumptions are anchored on what we have seen to date, particularly in our automation business. Steven B. Hedlund: And Angel, just to add some further color to that. What we saw in the fourth quarter in automation was that we won some very large project orders, which we were very pleased to capture that business and to see some of the large end users start to release capital. What we have not seen yet is the more small to mid sized fabricator in the general industry segment really start to deploy capital, whether that is automation or for our standard welding equipment. We are encouraged that the consumable, which is the shortest cycle portion of our business and typically is a good bellwether for where the industry is headed, has held stable. And we are hopeful that as the PMI continues to inflect and as business confidence improves, we will see the consumable volume start to grow and that will then translate typically with a one to two quarter lag to more capital spending on standard automation, standard equipment. Operator: Very helpful. Thank you. Amanda H. Butler: Mhmm. Operator: Your next question comes from the line of Nathan Hardie Jones with Stifel. Your line is open. Good morning, everyone. Steven B. Hedlund: Good morning, Nate. Operator: I guess I will do first question on the automation business. You talked last quarter about being more confident in that in the order progression on that. You sound more confident again today talking about, you know, having a better backlog. I think you said the automation business was $840,000,000 in 2025. Can you talk about the expectations for that in 2026? Maybe size the increase in orders in '25. I understand the lag. Gabriel Bruno: And so we will see that start to ramp up in the second quarter. Just any more color you can give us around that would be great. Thanks. Yeah, Nathan. So as we said, our sales levels for our automation business were $870,000,000 in 2025, and that reflected mid single digit decline. The order of magnitude in how we are seeing volumes, is large driven by the automation business, is to essentially recover a lot of that organic softness we saw in 2025. So think about a mid single digit type of growth trajectory potentially in automation based on what we have seen in order levels in our backlog. And our confidence will continue to increase as we see less choppiness in the order patterns. And as Steve mentioned, Amanda H. Butler: some really strong good orders. We would to see more activity on the short Gabriel Bruno: cycle type of business. Operator: Excellent. Thanks for that. I guess my second question is around some of the center-led functions that you talked about. Just changing the org structure, I guess, and operational structure of the business a little bit. Can you talk about some of those functions? You know, what the benefits are that you are going to get from centralizing those things. Are you targeting Asia and Middle East? Does that require a more centrally led business? I think, generally, you need to have kind of local content there, especially in the Middle East to their investments you need to make there. I will leave it there. Thanks. Steven B. Hedlund: Yeah. Sure, Nate. I think it is important to note that we use the term center-led, not centralized. And the objective of this approach is to try to get the benefits of our scale and scope by having highly standardized, simplified, and automated processes for running the business. And unfortunately, given how we have evolved the business over the number of last decades, we tend to run our core business processes just slightly different everywhere. So the way we do demand forecasting, order entry, supply chain planning, just slightly unique in every different part of the company, and that frustrates our ability to try to use process automation, you know, chat bots, shared services, things like that to get much more efficient at running those processes. So it is a lot of work around, you know, standard old-fashioned business process redesign to enable us to take advantage of those opportunities while still trying to retain the local agility. So we have teams that are based in Europe, for example, that are doing, you know, demand forecasting and supply planning. We want them to be able to the best automated tools, but still be very responsive to the local market. So we are trying to get the best of both worlds between a pure regionally autonomous and a pure centralized approach. Operator: Your next question comes from the line of Mircea Dobre with Baird. Your line is open. Thank you. Good morning. And I will start with a near term question, and then a longer term follow-up. So from a near term perspective, if I understand your comment correctly, in terms of pricing for 2026, you are not baking in any of the metal inflation that is coming through in Harris, and the pricing that is reflected in the guidance is just carryover from 2025. So I guess the question is this, clearly, there is metal cost inflation in Harris. Is that flowing through the P&L? How should we think about the impact that that pricing element has on EBIT dollars, margin, however you want to frame it, Gabe? And bigger picture as we think about 2026 pricing, is there an argument to make that, you know, you will need to put through a 2026 price increase generally speaking, not just carryover from 2025. Gabriel Bruno: So, Mig, I will answer the last part of your question first, is we will take pricing actions as conditions require. Our price-cost strategy is to be neutral. Currently, we go and come into this new year, we have held steady on pricing actions largely, but we will be responsive to how we see any dynamics in the markets. In terms of Harris, you know, we have a mechanical adder that is built into our pricing methodology. You have seen what is happened with silver and copper, for example. And it obviously has an impact on the brazing side of our business. And so we do not feel that is going to have a significant impact on margins because that is all incorporated into our adder and our movement and adjustments on pricing. But it has been pretty volatile. So we cannot and want to try to outline what silver or copper markets will do, but we do have a pricing mechanism, as you know, that is more mechanical in nature. Operator: But the impact on EBIT or on operating income from the price, does that carry any contribution to your EBIT or not? Gabriel Bruno: Yes. It is not dilutive to the overall Harris margin. Operator: Okay. Thank you for that. And then the longer term question is on, obviously, the RISE strategy. You sound very bullish, constructive on the growth opportunity in automation, and I guess maybe all of us would agree on that. But at least for now, the reality is that this portion of the business is dilutive from a margin standpoint. So in your targets, you are obviously aware of that, and you are capturing it. But I guess my question is, how do you think about the opportunity for truly driving higher margin in this business? Because if you are offering something that is differentiated to your customers, and value added, presumably, there is opportunity to price accordingly. And as you think about M&A, you know, you talk about techquisitions. I guess that is a new term that I learned today. Presumably, that is geared towards the automation component of the business. Is there a way for you to do the kind of M&A that would actually be accretive to margin rather than dilutive to margin as I guess, a previous question assumed they would? Thank you. Steven B. Hedlund: Yeah. Mig, great question. I will give you, you know, a basic framework as to how to think about it, and then let Gabe fill in some details for you. You are right. The automation business is dilutive to the overall portfolio at the moment. And it has been particularly challenged over the last eighteen months by the environment we have been in that has caused customers to be very cautious on capital spending. We still really like the automation portfolio. We think it is a great fit for us strategically. We see that the world is only going to demand more and more automation going forward. So where the endpoint target for the margin structure of the business will remain to be seen, but the first step is to get it to be non-dilutive. Once we get it to be non-dilutive, then we can talk about how high is high from an accretive standpoint. But the journey right now is get the business back to where it was supposed to be prior to all this disruption. Regarding technology, you are absolutely right. I mean, to the degree that we can provide capability that do not exist in the world that are differentiated from what other vendors can supply and that solve a real customer pain point, you know, we expect to get paid for that. And so we look at the techquisitions of things like Enrotech that bring in an ability, help us create something that is new to the world, you know, we are going to expect to get paid for that and portion of the business for sure should be accretive. Gabriel Bruno: Yeah. So, Mig, just to add a couple of points, just keep in mind, historically what we have done in the last two years, as you know, have been pressured by the capital investment cycle, but we started off 2025 at about a $400,000,000 level of business, and we increased our business to $940 or so million in 2023 or so. When we achieved low teens type of profile and our target is, as you heard in my comments, is to be mid teens. So that is our objective. We were not that far away when we were talking about the $900 or so million of business at a target of $1,000,000,000. So we did have pressure in the last couple of years on capital investment, but we are confident that we can achieve that mid teens type of profile. And that is what is incorporated into our 2030 model. Operator: I appreciate it. Thank you. Gabriel Bruno: Mhmm. Operator: Your next question comes from the line of Robert Stephen Barger with KeyBanc Capital Markets. Your line is open. Thanks. Good morning. Gabriel Bruno: Good morning, Amanda H. Butler: Morning. Operator: You referenced some large product project orders you won in April. Is that primarily automotive, or are you seeing some opening up in other industries? And just more broadly, does it feel like inbound calls are starting to accelerate or is this sales work that you did last year, which is now starting to monetize? Steven B. Hedlund: Yeah. So the large projects we won in the fourth quarter were primarily automotive. And I think part of that is driven by just the nature of their business and the need to have product refresh on a defined cycle. What we are really looking for is, you know, greater willingness across the portfolio of customers to invest capital on the business. So whether that is heavy fab, structural steel, general fab, there is still a fair amount of caution out there. The funnel of opportunities has probably never been better. The challenge just becomes converting those high probability opportunities that we feel fairly confident we are going to eventually win. Can we get them over the finish line sooner rather than later? And again, that really is a customer confidence driven discussion less so than, you know, are they satisfied with our solution or us as a supplier? I do not think that is the issue. It is just are they ready, willing, and able to finally pull the trigger on releasing the capital. Got it. Operator: And the automation strategy has, you know, obviously increased your OEM exposure and cyclicality. And you have done a great job managing margin through what has been a tough environment for the last four or six quarters. But is there a thought to balancing exposure to more products and services that show less volatility through cycles, or is that increased volatility just the price you pay for the direction you want to take the company? Steven B. Hedlund: Yeah. I think about it, Steve, more as where are there problems that are pain points for that we can solve and get paid for solving? The recent acquisition we did in alloy steel is really all around providing solutions for abrasion and wear in a mining application. So if you are mining stuff with an excavator, the excavator's parts are going to wear and you need some way of either replacing or refurbishing those. That is a great business for us that we picked up. Very excited about that. Look to continue to grow and expand that business. We look at automation opportunities the same way. How that then affects our overall cyclicality is something we will deal with as long as we believe over the course of a cycle, we can get fairly compensated for the value we are creating. Operator: Understood. Thanks. Your next question comes from the line of Chris Dankert with Loop Capital Markets. Your line is open. Steven B. Hedlund: Hey, morning. Thanks for taking the questions. Operator: I guess just to circle back, fully appreciate, you know, we do not want to get into, you know, handicapping silver and steel and copper prices in the guide here. But I guess, given the level of volatility, we are halfway through the first quarter. Can you give us just a sense for what that metals impact would be on 1Q as of today, not obviously for the full year, but just for the first quarter? Gabriel Bruno: So because I do not want to get that specific, you know, as you are tracking silver, I mean, we saw a point for silver topped at $110 a troy ounce and dropped back to the eighties and that. So as you are looking at the mix of our business, we have got about 40% of our business tied into HVAC, which is tied into brazing consumables. So we do expect an escalation in average pricing but it has been choppy. But overall, it has been on an increasing level of trend when you look at it year over year. You could just use that as a framework from year over year perspective. But it can move as you know. Steven B. Hedlund: Yeah. Yeah. Thank you for the color there. Operator: I guess to circle back on a bigger picture thinking about international, any sense for kind of the planning around margin expansion there? I guess, how much of that kind of 2025 to 2030 improvement is based on just volume recovery versus, say, you know, cost actions or efficiency gains or mix? Just any way to kind of size those two components of the margin expansion in international? Steven B. Hedlund: Yeah, Chris. I will give you some color and then let Gabe fill in details. When we think about the international business, we really want to focus our efforts and our future investments in places that have good macroeconomic conditions where we have a good value proposition and where we feel like we can win and profitably grow the business. So we are looking at, you know, portions of the international portfolio, particularly in Middle East, Africa, parts of Asia. Core Europe really is the open question mark. You know, it has been a long tough slog in Europe, due to the macroeconomic conditions there. You know, there is some talk about increased defense spending. We will see whether that actually comes through to fruition. But our targets over the five year period for international really are not predicated on there being a significant recovery in Europe. Operator: Hey, Chris. Just to add that is very helpful. Gabriel Bruno: Yeah. Broader comment in terms of when you say volume, demand levels in general. When you look at the organic sales growth rates that we have shared by segment, we do not incorporate a significant level pricing. Historical pricing will be between 100, 200 basis points. And that is kind of what we assume broadly. So our assumptions are largely driven by expansion in our foot acceleration in demand, for example, as we talked about automation. Steve mentioned the strength we would expect into Asia, Middle East, and international. So they outlined and we have shared in terms of growth strategies is anchored on real increase in presence throughout the markets, not on pricing. Pricing will be modest. Operator: That is really helpful context, fellows. Thank you. Gabriel Bruno: Mhmm. Operator: Our last question comes from Walter Scott Liptak with Seaport Research Partners. Your line is open. Steven B. Hedlund: Hi. Thanks. Operator: Yeah. I wanted to just circle back on that January question. Steven B. Hedlund: And, you know, you guys mentioned the reference to PMI a couple times in January. I did not it was not clear to me. Did you guys see a pop in January with some of your general industrial either consumables, or equipment? Operator: Yeah. And and Steven B. Hedlund: what we would lag the any improvement in the PMI. So we are encouraged by the published number, and as we said before, our volume has been steady, but we have not seen an inflection in consumable volume. Gabriel Bruno: So that is pretty key, Walt. Right? As we are seeing studying this, in the consumable volume level business. That ties into production levels and really want to see an escalation in capital investment. Operator: Okay. Great. And then maybe, you know, sort of a high level one. Steven B. Hedlund: I wonder if there is a difference with the way that you guys went after the 2030 RISE targets versus the way that the 2025 Higher Standards were put in place. Like, the business has been evolving. You know, you have some factory consolidation in those impressive profit margin targets. You have got some impressive organic growth targets. Is there something that is kind of structurally changed Operator: I wonder if you just talk to, you know, the, you know, how Lincoln's evolved. Steven B. Hedlund: Yeah. Well, great question. We really think about the RISE strategy is a continuation and evolution of the Higher Standard and really trying to build upon the momentum and the progress that we have created over the last five years. And again, what has been a fairly interesting, shall we say, you know, market environment with a lot of headwinds and a lot of disruption from COVID, a few hot wars around the world, a global trade war, fairly unpredictable, you know, trade policy emanating at the U.S. So we are hoping that, you know, we may see a somewhat of a return to normalcy in the outside world, but that and it is when we say we are cautiously optimistic about the future, the caution is really around the external environment. Our optimism is driven by what the team has been able to accomplish over the last five years, and the opportunities that we know are in front of us that we see every day and that we are committed to addressing and making the business even stronger going forward. So, I do not see it as a radical departure from the Higher Standard strategy. Okay. Great. Thank you. Operator: This concludes our question and answer session. I would like to turn the call back to Gabriel Bruno for closing remarks. Gabriel Bruno: I would like to thank everyone for joining us on the call today and for your continued interest in Lincoln Electric Holdings, Inc. We look forward to discussing our RISE strategy and the progression of our initiatives as we advance to our 2030 targets in the future. Thank you very much. Operator: This concludes today's conference call. You may now disconnect.