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Operator: Good afternoon, ladies and gentlemen, and welcome to the TELA Bio, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, participants are in listen-only mode. A question-and-answer session will follow the prepared remarks. As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Louisa Smith from Investor Relations. Louisa Smith: Thank you, Jonathan, and good afternoon, everyone. Earlier today, TELA Bio, Inc. released financial results for the fourth quarter and full year ended 12/31/2025. A copy of the press release is available on the company's website. Joining me on today's call are Antony Koblish, Chief Executive Officer, Jeffrey Blizard, President, Roberto E. Cuca, Chief Operating Officer and Chief Financial Officer, and Jim Hagen, Senior Vice President of Strategic Operations and Marketing. Before we begin, I would like to remind you that during this conference call, the company may make projections and forward-looking statements regarding future events. We encourage you to review the company's past and future filings with the SEC, including, without limitation, the company's annual reports on Form 10-K and quarterly reports on Form 10-Q, which identify the specific risk factors that may cause actual results or events to differ materially from those described in these forward-looking statements. These factors may include, without limitation, statements regarding product development, pipeline opportunities, sales and marketing strategies, and the impact of various additional risk factors as identified in our regulatory filings. With that, I would now like to turn the call over to Antony. Antony Koblish: Thank you, Louisa, and good afternoon. Thank you for joining TELA Bio, Inc.'s fourth quarter and full year 2025 earnings call. For today's call, I will open with a summary of what we accomplished in 2025 and thoughts on our forward-looking strategy. Jeff will then walk through the foundational changes implemented in the commercial organization and how we anticipate they will impact our future performance. Roberto will review our financials, and then we will open it up for Q&A. 2025, and the third and fourth quarters in particular, were periods of meaningful strategic change across the entire organization. Following Jeffrey Blizard’s appointment as President in June, we undertook and executed a significant rebuild of TELA Bio, Inc.'s commercial foundation while maintaining commitment to improve our operating discipline and continuing to advance our pipeline strategies. We made meaningful changes to drive 16% full-year growth and achieved record fourth quarter revenues. The ability to maintain that momentum while executing such fundamental change in the organization is a testament to the caliber of our team, and the value proposition of the OviTex product portfolio. We enter 2026 with the largest, most effective field team in the company's history, and the commercial strategy designed to drive durable, predictable growth. Demand for our products remains strong, and the opportunity in hernia repair and plastic reconstructive surgery has not diminished. The foundational changes we undertook in 2025 were aimed at ensuring we have the commercial infrastructure to consistently and effectively capture that demand. Revenue growth in 2025 was fueled by strong performance in our European business, further adoption of our IHR, LPR, and LiquiFix product lines, and the continued contribution of our tenured reps in the U.S. The strategic investment we have made in high-caliber candidates with the right profile has been an underlying tenet of the commercial rebuild. A meaningful portion of our approximately 90-person sales force is still early in their tenure, 40% of the reps having joined TELA Bio, Inc. in the last six months. This has not been a function of rep turnover, but rather an investment in commercial expansion, and in recruiting talent with the right profile for the sales model we are building. We already see the newest reps meaningfully outperform their predecessors in the early stages of their onboarding, and we are encouraged by their promise to execute our commercial strategy more effectively. In the fourth quarter, we accelerated efforts to bolster our U.S. commercial team by advancing recruitment to meet our sales headcount target and by putting the infrastructure in place to support those new hires. That included investing in training, rolling out new sales enablement tools, launching a new U.S. sales leadership structure, and redesigning the 2026 compensation plan to align with our growth strategy and expectations. Heading into 2026, we are focused on two strategic growth priorities. First and most importantly, we are committed to sustaining the momentum we achieved in 2025 and achieving further U.S. and European sales growth through improved talent, processes, and commercial leadership. Jeff and his team have made incredible progress so far, and this will continue to improve as the new commercial organization matures and tenured sales reps begin to hit their stride. Again, I will let Jeff provide further detail on the specifics, but I am confident in the new commercial foundation we have laid. And second, we have been and will remain hyper-focused on offering the best soft tissue reconstruction product portfolio on the market. Product innovation is at the core of TELA Bio, Inc.'s identity, and we anticipate announcing additional product launches throughout the year to drive greater share gains in the expansive U.S. market. Demand for our innovative solutions is there, and I believe we have built a commercial infrastructure supported by an expanding portfolio that can consistently capture that demand. To that end, we were pleased to announce the promotion of Dr. Howard Lang to Chief Medical Officer effective March 1. Howard joined TELA Bio, Inc. nearly two years ago and has been integral in how we engage the surgical community. With over 30 years in plastic and reconstructive surgery, he understands this market from the inside out: the procedures, the unmet needs, and what surgeons are looking for. As TELA Bio, Inc.'s CMO, he will drive surgeon awareness, support clinical education, and help generate, disseminate, and translate the growing body of data behind OviTex into a broader market understanding and acceptance. On the European side, our teams are stable, tenured, and delivering above plan. The competitive market in Europe differs from the U.S. with pricing and bundling dynamics, and we are encouraged to see rapid adoption of OviTex in the U.K. and The Netherlands. We are winning share based on patient preference and the efficacy of our products in these markets, not because of pricing discounts or volume requirements set by hospital administrators. Moving forward, we have a purposeful investment plan to expand our presence within Continental Europe and see it as a meaningful contributor to growth in the coming years. Overall, Q4 results reflected a commercial organization in transition; we remain proud of all this team has accomplished and will continue to accomplish. We executed a major commercial upgrade in the back half of 2025 while simultaneously achieving several other milestones for the company. In that six-month period, we launched OviTex LTR, a new addition to our portfolio that offers durable support during healing and provides surgeons with a tissue-based alternative to synthetic mesh. We enrolled the first patients in our hiatal hernia trial ECHO, which will strengthen our clinical evidence base and deepen our access to alternative surgeon call points for a primarily robotically performed procedure. We reinforced and upsized our debt facility to strengthen our balance sheet for the road ahead. And finally, we upgraded our board of directors with new expertise. In summary, 2025 was a year of deliberate foundational change that required discipline and conviction. That is behind us, and we enter 2026 with our eyes toward the future. With that, I would now like to turn the call over to Jeff for a more in-depth review of our commercial strategy and restructuring. Jeffrey Blizard: Thanks, Tony. As Tony laid out, I do not want to lose sight of the fact that amid transformational reorganization, we grew revenue by 16% and delivered our third straight quarter of sequential growth. We exceeded $80 million in total sales for the full year 2025, all while maintaining operating discipline and improving our operating leverage. The changes that we undertook since coming on board last June could create a significant disruption in productivity and growth in any organization. That did not happen here. It speaks volumes to the commitment of the entire TELA Bio, Inc. team and the dedication to the patients and customers we serve. I would like to take some time to provide a detailed review of the specific changes in our commercial organization that Tony referred to. I will also highlight the progress we made year to date because of these changes and how they set us up for meaningful inflection moving forward. Number one, we upgraded and redesigned the U.S. commercial leadership team. By implementing a new sales general manager structure, we brought decision-making closer to the customer and empowered teams to respond to customer needs in real time. Two, concurrently, we addressed silos within the commercial organization that had been slowing cross-team collaboration. We strengthened our sales leadership bench by upgrading five key senior roles. These changes were implemented to increase accountability in the field, improve coordination across our hernia and PRS segments, and drive more consistent execution across our commercial footprint. Three, we have rolled out formal promotion pathways within the commercial organization, creating vertical career mobility that rewards our top performers and incentivizes meaningful contribution within the organization. Four, we redesigned the sales talent profile in the U.S. and accelerated our hiring. We hit our 76 territory manager target back in the third quarter. And as of today, we have 88 quota-carrying territory managers in the U.S. with one additional hire imminent and five open positions that we are actively sourcing. This means we will not require any further incremental hiring for the remainder of the year. The team that we need to hit our 2026 targets is largely in place. Tony touched on how we evaluate our field teams by distinct cohorts, and how we assess their performance by tenure and productivity ramps. Roughly 40% of the U.S. field team has joined us in the last two quarters. They are in the early phases of their ramp up, and we expect that they will contribute incrementally each quarter of this year as they build out account relationships and gain clinical familiarity. An additional cohort, those who have been with us between six and eighteen months, have gained meaningful traction and the vast majority have reached a productivity inflection point. They are actively building account relationships while improving clinical acumen. We expect their contribution to ramp meaningfully each quarter. And finally, we have maintained a very solid base of tenured reps who, on average, deliver over $1 million per year, and consistently meet or exceed targets on a monthly, quarterly, and annual basis. This cohort accounts for approximately 35% of our current rep count. Five, as part of the redefinition of our sales talent profile, we have shifted our approach to recruitment. We have been very successful not only in our ability to retain top performers, but in our ability to attract and hire strong candidates. We increased our investment and focus on sales training with a goal of reducing time between hiring and commercial effectiveness. The candidates we are bringing in demonstrate stronger performance and higher scores on all evaluation criteria versus any prior cohort. The profile we are recruiting combines high intellect, perseverance, the ability to build deep and lasting relationships, and develop strong clinical acumen over time. This is a change from our previous recruiting strategy, which placed greater emphasis on years of soft tissue sales experience. The caliber of our newest reps is beyond anything that TELA Bio, Inc. has ever seen, becoming a destination now for candidates who fit a clear profile for success in the commercial model that we are building. Naturally, as we place less emphasis on prior soft tissue experience, there is a ramp-up period while new hires come up to speed through our clinical education programs. What we are seeing, however, is that with our investment in sales training, this new profile of rep gains clinical proficiency quickly. And once they do, their drive and hustle translate into a higher level of contribution than prior cohorts. While we are still expecting most new hires to reach full productivity within six to nine months, we believe their impact at maturity will be greater. Six, we have developed and rolled out a new sales enablement that draws on better market insights to help our sales leaders and reps better prioritize and target their activity. Seven, we have designed and implemented a new 2026 compensation program that incentivizes deeper penetration at target accounts. This represents a change in our geographic coverage, where we are now matching rep density with high-volume institutions to cultivate multiple users per site. Instead of a wide and shallow approach, we are going deeper to generate sustainable recurring revenue opportunities. Our new comp plan is now explicitly aligned around that strategy. Additionally, this philosophy expands beyond the comp plan itself. It also minimizes the geographical areas that reps need to cover, maximizing efficiency and supporting better operating expense optimization. As part of this renewed approach, we are also ensuring meaningful executive presence in the field. Tony was calling on strategic accounts as recently as last week, and others and I are doing the same. It is a signal in the organization and to our customers about where our priorities lie: building deeper, more meaningful physician relationships. Eight, we have adjusted our sales and marketing focus to center on the mechanism of action of OviTex and the science that fundamentally differentiates our portfolio. Surgeons have embraced our data and the long-term patient outcomes it demonstrates. The source material, OviTex, and the way it integrates within the body differentiates us from any Gen 1 biologics, synthetics, or biosynthetics, and it is foundational to why surgeons adopt OviTex. We also increased our sales and marketing focus on LiquiFix. With great support from our partners at AMS, LiquiFix is not only a better fixation solution, we have seen it open doors with hernia surgeons who may not yet be familiar with OviTex. And finally, number nine, we instilled spending discipline within the organization, which has allowed us to fund more customer education and training events. This helps us meet customers where they are in their adoption life cycle while simultaneously improving operating margins. So how does this all come together with respect to driving revenues? For the full year 2026, with each of the three cohorts performing as expected, we are confident that we will grow revenue over 2025 by at least 8%. And for the first quarter, much of which is already completed, we expect that we will deliver revenue of approximately $18.5 million. The breadth of change that we executed in six months was significant, and we recognize what it takes to sustain this level of momentum going forward. Our goal is to have everything in place by the end of Q1, so that 2026 reflects the full benefit. We are well on pace, and as of today, all significant material changes have been implemented across the entire organization. We set our revenue guidance to account for some of the inherent variability that may arise given the scope, scale, and speed of changes I have just laid out. We believe that, particularly in the second half of this year, the annualization of our commercial restructuring and the ramp of our newest cohort, combined with the pipeline and clinical investments, position us to be able to deliver achievable, sustainable results moving forward. I will now turn the call over to Roberto for further details on the fourth quarter and full year financial results. Roberto E. Cuca: Thank you, Jeff. Revenue for the fourth quarter of 2025 increased 18% year over year to $20.9 million and grew 16% for the full year to $80.3 million, with revenue from OviTex growing 12% and OviTex PRS growing 20% for the year. The growth was primarily due to the addition of new customers, growth in international sales, and the U.S. launch of larger PRS units. Growth was partially offset by a mix shift in our hernia product line as we saw an increased share of smaller-sized IHR units. OviTex unit sales grew 20% for the quarter and 22% for the year, while PRS unit sales grew 12% for the quarter and for the year. LiquiFix revenue more than tripled over 2024, reflecting early commercial traction as we expand adoption alongside our core OviTex portfolio. European sales accounted for 15% of total revenue, or $12.1 million, in 2025, a 17% increase from $10.3 million in 2024, reflecting the traction we are seeing in key markets and our continued investment in expanding access globally. Gross margin was 66% for the fourth quarter and 68% for the full year, compared with 64% and 67% for the prior-year periods, respectively. The improvement was driven by lower excess and obsolete inventory expense as a percentage of revenue. Sales and marketing expenses were $14.5 million in the fourth quarter and $63.2 million for the full year, compared to $14.0 million and $64.6 million for the prior-year periods, respectively. This was mainly due to commissions rising with stronger revenue in both periods, offset by lower compensation, severance, consulting, and travel costs for the year. General and administrative expenses were $3.8 million for the fourth quarter and $15.7 million for the full year compared with $3.6 million and $14.7 million for the prior-year periods, respectively. R&D expenses for the fourth quarter were $2.1 million and for the full year were $9.2 million compared to $2.0 million and $8.8 million for the prior-year periods. Loss from operations was $6.6 million in the fourth quarter of 2025 and $33.8 million for the full year, compared to $8.4 million and $34.1 million in the prior-year periods. Net loss was $9.0 million in the fourth quarter and $38.8 million for the full year compared to $9.2 million and $37.8 million in the prior-year periods. We ended 2025 with $50.8 million in cash and cash equivalents, having further strengthened our financial flexibility by refinancing our debt facility and raising incremental equity capital. As Jeff described earlier, for 2026, we anticipate revenue growth of at least 8% over 2025 and Q1 2026 revenue of approximately $18.5 million. We expect that operating loss and net loss will continue to decline for both the year and over the quarters of the year, although there is likely to be some step up from the just-past fourth quarter to the first quarter, particularly in light of the revenue progression that we typically see over this period. With that, I will hand the call back to Antony for closing remarks. Antony Koblish: Thank you, Roberto. As we have done in prior quarters, I would like to end with a patient story to ground us in the impact of our mission. A 57-year-old patient actively being treated for chemo required treatment for hernia repair in the intercostal region. The surgical team, concerned about where the hernia was located because it was near chest tubes, decided that OviTex Core, with the four layers being thin enough, unlike a traditional biologic, would provide less seroma and was the best choice because of Core's resorption profile and its optimal size. The patient underwent an underlay procedure. The surgeon said that the patient is doing great and is extremely pleased to have OviTex Core available for this very sick patient. The surgeon commented, in quotes, “We believe that OviTex is the only product that can be used in conjunction with the use of chemotherapy due to the way it rapidly incorporates, its porous nature, and its functional remodeling of healthy tissue.” This is another great example of how OviTex can be used in the most complex of cases with excellent outcomes. Before we open the line for questions, I want to take a moment to recognize the entire team. In the back half of 2025, this organization undertook a fundamental rebuild of our commercial structure while continuing to grow revenue, serve customers, and maintain operating discipline. To sustain momentum through the transition of this magnitude reflects the quality of the team and the strength of the products. The changes we made in 2025 were difficult but necessary, and we enter 2026 with the strongest commercial team the company has ever had. I look forward to what is ahead for TELA Bio, Inc. Jonathan, please open the line for questions. Operator: Certainly. We will now open for questions. Our first question for today comes from the line of Caitlin Roberts from Canaccord Genuity. Your question, please. Caitlin Roberts: Hi. Thanks so much for taking the questions. Sure. I guess starting off with the fiscal year top-line guidance for at least 8%, just a little bit more color on why it was below what you noted on the Q3 call. And if you could provide some cadence to that guidance for the year, that would be great. Antony Koblish: Yes. I will start it off, and then I will turn it over to Roberto. So our thought here is, given the change that we have implemented—wholesale change across almost every dimension—that we thought it would be prudent to set the guidance where we did. There are so many new reps and new moving parts that are in place right now. We want to give ourselves the best chance to do a great job this year. And given that our territory manager breakeven point remains about six months to nine months, and we have hired so many new reps, we are scaling into and cascading into the year. We just think there are a lot of variables, and we wanted to make sure that we are giving ourselves plenty of room to allow these reps to mature and drive. We really like the contribution from the 40% new reps so far. It looks like they have stepped up quite a bit as a percent contribution over Q4, but we want to make sure that we are giving ourselves that time and flexibility. There are some other factors that we have in place that give us confidence to do a good job this year. And that is the fact that, for the first time in the company's history, we are right on the mark with the number of reps we wanted to hire and at the right time. In the past, we have been stuck between 63 and 68 reps. I feel like that was where we were stuck no matter where our target is. But this new commercial leadership team has done a great job of getting those folks in place. We have a product that we think is powerful that is going to launch April 1 fully. It has been in limited release. It is our long-term resorbable OviTex product, which should give us a great matchup with the leading biosynthetic out there, Phasix. And I do think that is going to be mostly additive to the portfolio along with some cannibalization from our permanent portfolio. I think one of the foundational drivers that we can rely on going forward is European performance. This has been very consistent, and I do think that they are going to allow themselves to grow consistently over time, and we very much look forward to adding PRS to their portfolio for sales, hopefully by the end of this year or early next year. One of the big factors that we have here, Caitlin, in this guidance set is contract conversion. Our salesforce has been very focused on getting contracts in place, and we have not done as well at executing into those agreements. So we are going to shift that focus toward contract execution. And we do know that there is a high degree of contracting complexity, which does affect timing, which is another factor of safety as to why we built the guidance the way we did. Contract implementation varies from hospital to hospital. Even if you have a GPO contract in place, we are learning that every day. And the way contracts are written in the U.S. further complicates things with market share and cross-product portfolio bundling and rebate structures. So there is some complexity there. We want to make sure that we give ourselves the time to execute into the contract footprint that we already have in place. Hopefully that gives you a flavor of what we are trying to do here. On a bigger picture, we have a lot of factors of safety built in and a lot of potential upside, but we want to be prudent. Roberto E. Cuca: Let me just add two things, Caitlin. You asked about cadence for the year. We do expect the cadence for the year to be similar to that in prior, undisrupted years, where you see a step up from the first to the second quarter, a smaller step up from the second to the third, and then a bigger step up again from the third to the fourth quarters. The step up from the second to the third being smaller is driven primarily by the summer holidays. And we expect to see that pattern slightly amplified by the addition of all the sales reps that have come in over the course of the end of the fourth quarter and through the first quarter, who begin becoming productive in about six months. So we do still see that the most recent cohorts of sales reps hit breakeven just under six months, and then what Jeff and Jim call breakout between six and nine months, so they become more than just breakeven positive. Antony Koblish: And all of these factors, Caitlin, also add to the frustrations that everybody has had, including us in the past, about our forecasting accuracy. So we want to make sure—again, the word is prudent—that as we are going through all of this, we feel very confident that we will come out the other side with a much more forecastable business. But until we get there, we think it is best to be prudent. Caitlin Roberts: Understood. And maybe just one more from me. I think, Tony, you touched on the contracting. How many IDNs or GPOs have you transferred to really recategorize OviTex? You talked about that the last couple of quarters. What are your expectations to continue doing that this year? Jim Hagen: Hey, Caitlin. It is Jim. I will take that one. I think as Tony just said, our contracting focus—while we continue to drive a focus on the RTM category, especially into site-level agreements—the team did a really nice job in 2025 of getting many of those agreements signed. 2026 is an execution year. We have to translate that, move it through the hospital processes. Where we have a lot of surgeon advocacy, we have to work it through the admin process and translate that signature now into patients and revenue. Antony Koblish: I think, as new opportunities present themselves, such as Vizient—that has been delayed—we are certainly going to go for that, but we have more than enough footprint that we have to start executing on, as Jim said, before we just continue to drive agreements. We will continue to do both, but we have to focus on execution within the agreements we have. Caitlin Roberts: Understood. Thanks so much. Operator: Thank you. And as a reminder, ladies and gentlemen, if you do have a question, please press star-one on your telephone keypad. Our next question comes from the line of Frank Takkinen from Lake Street Capital Markets. Frank Takkinen: Great. Thank you for taking the questions. I wanted to follow up on the Q1 guidance a little more. Obviously, I heard all the comments about the changes you have made with the commercial organization and the disruption that has caused. But I was just curious if there was anything else specific to call out with Q1. I know typically the seasonality is kind of up a few percent or down a few percent in some instances, depending on the year, but just the double-digit down quarter over quarter. Curious if there is anything beyond the Salesforce comments you have made going on here. Antony Koblish: I will start, Frank. I think my whole monologue on prudence for the year is transferable to Q1 as well. We have one dynamic that has added to the general slow start that you see in hernia and plastic and reconstruction, which is typical in January and February. Part of what Jeff and Jim have done is the territories have been restructured to be smaller, to go deeper, which means there has been some splitting of territories. And what we are encouraging is salesforce efficiency, which will help from time spent selling to T&E expense. We are going to concentrate density of reps in smaller areas, preferably adjacent to high population areas that are already successful with us. That means we may abandon a little bit of the hinterlands and the smaller hospitals that are out in the perimeter. Not fully abandon, but de-emphasize a little bit. So that is going to cause a little bit of loss as we go through these shifts of splitting territories and creating more efficient density in the network. We wanted to make sure that we gave ourselves some room to work through that, which should mostly be taken care of through the end of the first quarter, and we should start to see some signals that we are coming out of that transition phase in Q2. Does that make sense, Frank? That is in addition, I think. Jeffrey Blizard: Yep. That is perfect. I appreciate that. And then I just want to add one more point onto Tony and the word disruption. It is something we have avoided here. We did not call this a reorganization. Really, the focus has been on restructuring—right people in right roles—and making sure that we can have a focus on these key customers in key cities and also those academic programs that are hubs in key cities. What we found, in not only the challenges in January that most companies were faced with, was over a thousand square miles of geography in the U.S. was impacted by that blizzard, and we saw a number of elective procedures be impacted by that. So we have heard that from other programs and other companies that have had similar situations. Frank Takkinen: Yep. That is helpful. And then as we think about exiting this period where we are maybe returning to a steady-state growth rate, how do you view the steady-state growth profile of TELA Bio, Inc. over a longer period of time? Antony Koblish: I think the markets that we serve are kind of mid-single digits. We have been above market-rate growth since inception. And I think we anticipate that we will be able to significantly outgrow the market. The other interesting thing, as you look at the data that we are presenting here, is that our units for both PRS and hernia are high. Our growth rate on hernia units I think is 20% or 22%—22%, right? So that is a very good sign for the long haul, given that that is the bulk of the procedures. Making inroads into those smaller-piece procedures is super important. It does have an impact with mix shift and top-line revenue, but that should straighten out as well. We certainly believe that once we get to steady state, we should be back into the double-digit growth or beyond. This is a way for us to give ourselves the time to clear the decks. We have never done a change that is so comprehensive that it affects territory planning and compensation plans to drive that. This is so comprehensive; we are just giving ourselves the room to get back to that double-digit-plus growth. I think we have a great shot at getting there in the second half of this year, hopefully. Frank Takkinen: Got it. That is helpful. Then if I could just squeeze one more in. As it relates to your point on unit growth, that has been really solid, obviously, and in both product categories. What is your latest thought on how we should think about when ASPs in hernia could start to flatten out and stabilize? Antony Koblish: That is a good question. I was looking at that before the call to prepare. One of the metrics I look at is what type of hernia procedures we are doing. I think for the longest time, we were about a 70% ventral company, and that is shifting. I think we always had about 10% to 15% of inguinal. But right now, I am just thumbing through it. I will go by memory, and Jim can correct me if I am wrong. But I think we are at about 50% of our business right now as ventral, and 25% of our business is inguinal. Fourteen percent is hiatal. So we were really a 10% to 14% company on both inguinal and hiatal in the past, before this shift of getting more involved in the fat part of the bell curve of hernia procedures. But now we are already down to 50% from 70% on ventral, and we are up from 10% to 12% inguinal up to 25%. So it is hard for me to say where that balance goes. There are almost a million inguinal done a year. So we are going to keep mining that until we hit some kind of a steady state. It is going to have to do with the mix between inguinal and ventrals. Jim Hagen: The comment I would say on this one, Frank, is not just the type of hernia, but the modality of the procedure. As we see procedures moving away from open into laparoscopic and robotic procedures, we are well positioned. That is also why you see our LPR portfolio outpacing much of our growth, along with IHR. I do think surgeons are voting with their preferences, using us more where procedures are going, which is laparoscopic and robotic for us. So that ASP shift, to Tony’s point, is going to continue. We are going to continue to see more of our volume moving to those lower pieces, with an ASP that is a bit lower than we historically had been with the large open. But as I think Roberto will continue to remind everyone, that does not impact gross margins. Antony Koblish: Just to put a little finer point on it, Frank, what we are seeing is the start of robotic surgery making more and more inroads into the open complex cases. And so we are there, ready to serve those cases beautifully with our LPR product. And certainly, our inguinal product is robot compatible as well. So we are well positioned for how the hernia market is evolving. How long that takes is hard to say. But I do think the future is going to be higher unit growth volume, more procedures, but smaller pieces, and I think you are going to start to see our 1s, 2s, and Core start to give way to inguinal and LPR, and hopefully, in the future, LiquiFix being the main unit drivers going forward. We will certainly get all the opens that we can with our older portfolio. And one more thing to add—I am sorry, a little stream of consciousness here—but the long-term resorbable hernia product has zero permanent polymer in it. And a lot of these old-time surgeons do have an allergy to putting anything permanent. Our product works beautifully in these cases, and many, many surgeons do use it. But there is a category of surgeon that wants nothing permanent. So our long-term resorbable product, I think, has a shot at opening up some of those more difficult complex trauma, complex abdominal wall cases down the line in the future, but that remains to be seen. I think the global trend is toward robotic for everything and smaller pieces, which favors our LPR product portfolio. Frank Takkinen: Got it. Very helpful. I appreciate the color. Thanks, guys. Jeffrey Blizard: Thanks, Frank. Operator: Thank you. And our next question comes from the line of Michael Sarcone from Jefferies. Your question, please. Michael Sarcone: Good afternoon, and thanks for taking the question. Just a follow-up on one of the first questions—and not to belabor this—but when you provided that kind of ~15% directional outlook in mid-November, you mentioned there was some built-in cushion in there. Just trying to get a better sense for what changed, understanding you are trying to be even more prudent and you want to de-risk the guide. But did anything else change over the last three months around expected rep productivity ramp or anything like that? Just trying to get a bridge from the 15% to the 8%. Jeffrey Blizard: I like both of those points. I would say one of the biggest things is really the tenure Jeff and I had in role. We started in June. We had that call in the fall. We were in the midst of the change. I think what we have learned since then is it was a sizable change. There were multiple things we put on the field organization at the same time, while we concurrently were hiring rapidly into the organization. So I would say our assumptions changed from when we had the Q3 call to now just appreciating the change curve it takes to move an organization through all of that is a bit longer and more complex, I think, than when we originally planned it out. It is not saying it is not going well. It is actually going very well. But to Tony’s prudence point, we are going to give ourselves some more time to work through that change curve, get new reps up to speed and up to efficiency where we need them, and get our legacy team in the U.S. through that change curve of new leadership, new comp plan, and new territory alignments, so everyone is then hitting full stride in the second half of the year. Michael Sarcone: Got it. That is very helpful. Thank you. And then maybe just one on the new kind of account targeting strategy. You talked about deeper penetration in existing accounts. Can you talk to us about some of the methods you plan to use to broaden out that penetration of the existing account? Jeffrey Blizard: Sure. It is Jeff. So the problem statement that we analyzed over the last few months was too many reps were dependent on one surgeon in one location. And for us too, we talk about terms like stickiness to our business. In order to do that, especially in larger programs that have anywhere from three to seven, sometimes even nine, general surgeons or multiple plastic surgeons per site, we could not rely on just one user. With the way that the comp program was set up and the goals and objectives in 2025, the need for our territory managers to be spread far and thin was so that we could gain distribution, and they could work their comp program to the best of their ability. We realized that was a limiting factor. That meant product was in hospitals without patients being covered, and that meant users were identified without another person on staff that had bought into the product with a proposal that this was a better device or product than the ones they were using. Having this as a focus point allows us to do better in servicing, teaching, and training programs how to handle the product, being present and being bedside so that patients can receive optimal outcomes. And then the compensation plan was built around that specifically. Smaller geographies, as opposed to what we had—reps that were driving in the car three to five, sometimes even six hours in the great state of Texas—that found themselves racing across the state to deliver product or be present for that one physician and that one program. We know that this density rule will work, as well as having in many of those large cities, as I mentioned earlier, an academic hub where now we can put people in to help support our fellows and our residents that are being trained in this next generation of surgeons. Jim Hagen: Michael, the only thing I will add to that in terms of how we are doing this is leveraging the full portfolio. As we just talked about on Frank’s conversation, we grew historically through large open procedures with 1F and 2F. As we think about building depth within a hospital, we are talking about more users within that specific site. LiquiFix is an example. It gives us a new opportunity to engage a surgeon who may not fully believe in OviTex but wants an alternate fixation technique. That is a new in for us. Driving IHR and LPR lets us go after those surgeons who are more proficient on the robot or focusing on the robot. So our portfolio allows us to engage with more users within a specific hospital, and that is what we are asking our field team to do: leverage the full bag, drive more users per site—one of the key metrics we are going to measure them on this year. That creates a stickiness for us. That is what allows us to go after the higher-ceiling accounts and drive a deeper share within those accounts, which for us, to Tony’s point, enables a more predictable top-line revenue. That is part of that formula. Jeffrey Blizard: And I will just put a fine point on the end of Jim's comment. If you are wide and shallow and you have one surgeon four hours away who is using your product, it is pretty easy to dislodge that surgeon from his usage habits and patterns when you are not fully present and you have competitive reps looking to lever you out with contracting and rebates. We have to get five and six users in a smaller geography. That is really what we are setting ourselves up to do. You become much harder to knock down. Michael Sarcone: Great. Thank you. Operator: Thank you. And our next question comes from the line of Matthew O’Brien from Piper Sandler. Your question, please. Matthew O’Brien: Good afternoon. Thanks for taking the questions. I do not know, Roberto, or if somebody else can maybe talk a little bit about the impact of weather in Q1 because the number is so low versus what we were kind of expecting. And I get it is Q1 and everything, and you are still going through this transition. But it is just so low that it then requires you to start putting up some numbers, especially in the back half of the year, that we have seen out of the companies. It requires a lot of faith that you can be able to do that. So maybe just talk about those two components there: the weather impact in Q1 and what you are seeing that gives you confidence and should give confidence that the back-end-loaded guide is achievable? And then I do have a follow-up. Jim Hagen: Matthew, it is Jim. I will take the first half of that. I would say it is two variables external to us in Q1. We are trying not to focus on external variables, but they are real sometimes. One, feedback from our field team is just volumes in January were low. I think there was just a market lull coming out of the holidays, with insurance premiums resetting. That was a real impact. And as Jeff talked about, the impact of the storms on the East Coast with major population density did shuffle some elective procedures. Some were lost—cases were not happening. Some others got deferred out past Q1. We do not have firm guidance for you on what percentage impact that had to us. What we are trying to focus on is more of what our controllables were in Q1, which is really where we spent that time on hiring, getting new people into the organization, getting them trained up and going, along with what we just talked about, which is that mix shift from shifting accounts from lower-ceiling accounts and lower-density areas to higher-ceiling accounts and more populous areas. I would say that probably had the more material impact—those are the things we can control—for the performance from Q4 to Q1. That is where our focus is. Antony Koblish: And, Matt, we have snapped back quite well after fourth quarters. I think it was 2024 Q4; we had a little bit of a raid on our salesforce, and we snapped back very effectively in Q1 of 2025. We have enough factors of safety built in with the new product launches, having a fully staffed salesforce at 90 reps or a little over 90 reps in the next couple of weeks here. We have never been at that scale, and we have never been fully to our hiring plan this early in the game. That is by design. The talent of the reps, getting them through that six-month bed-in period where they get productive—there are a lot of factors that are going to help us and give us tailwind in the second half of the year. Roberto E. Cuca: And with regard to the back half versus first half and confidence with regard to that, we have always grown quarter to quarter across the year. We have built our quotas and expectations for our existing reps, our tenured reps, and for new reps based on that sort of growth. So even if we had not added the number of reps we did in the first quarter, we would expect to see growth across the year that would have led to that step up from the first half to the second half. That will be amplified by the addition of these new reps who are going to hit breakeven in about six months and then start breaking through and becoming meaningfully productive in that second half. You have to remember, 40% of our salesforce has been onboarded for less than six months. Antony Koblish: And these are high-quality reps that we have hired, and we are going through the process now of getting them embedded and up and running. Matthew O’Brien: Okay. I appreciate that. Then a follow-up is—and I am just trying to square all the different numbers here between the LiquiFix and the OUS growth—and the quarter was actually really good. When I start to carry that forward, I start to get some softer OviTex numbers for the full year versus what you have been doing. I am not sure that makes a lot of sense just given the sales expansion. And yet I know you want to be conservative. It just leads you to the conclusion that there is something else going on that is not quite squared away yet. So I do not know if there is a way you can walk us through what you are expecting—OviTex versus PRS versus other revenue and OUS. But just help me understand how the different product lines are going to play out here in 2026. Roberto E. Cuca: Thanks. I will start, and I will let Jeff and Jim jump in, and Tony. One thing to remember is that Europe is purely OviTex sales—purely hernia sales. So as we get solid growth from Europe, that is all going to be dropping to the hernia bottom line. We do expect to see PRS sales grow over the course of the year, in part from the launch of larger pieces and potentially new technologies. So it is not that we see either one of those softening up. And we expect to see LiquiFix continue to grow strongly, although it is going from a much smaller base, so it will have a smaller revenue-line impact. I will let Jeff and Jim add anything to that. Jeffrey Blizard: I think we are blessed with AMS’ focus on us as a partner. They have made a huge investment in their clinical team to help us with product evaluations and trials. They have matched us. As fast as we are trying to get our organization set, so have they. I would say that, with this focus we have—and we teased a little bit about it in the last quarter earnings—that we are headed toward an academic program that is brand new to us in 2026. So having the right leader, who we have at MRSA Conrad, focused on that, and having a partner with AMS that drives that product adoption in the general surgery residency and fellowship as well as plastics, that is all, again, new. Jim Hagen: And then considering what the back half of this year looks like for new product launches, as well as not necessarily any more organizational disruption—that came earlier from you guys—but more as nuance changes, always adapting and changing with the business so that when we identify needs, we solve for it. Jeffrey Blizard: Matt, I think what you are saying is you are looking at all the potential growth drivers, and it does not make sense that our OviTex business would grow less. So I am just going to sum it up and just stick with the word prudent. Give us a chance to metabolize these territory changes, the new reps, the new products, all of it. Prudence. Matthew O’Brien: Understood. Thank you. Jeffrey Blizard: I do not see the hernia or PRS business collapsing in any way. Operator: Thank you. This does conclude the question-and-answer session of today's program. I would like to hand the program back to Antony Koblish for any further remarks. Antony Koblish: Thank you, Jonathan. Thank you. The changes we made were thorough. I hope you got a sense of that. We have never cleared the decks to this level. In the past, the changes have been a little from this place, a little from that piece—incremental—because we were striving to go wide and make numbers. We are taking a step back from that to recast this in absolutely the right way across every dimension, whether it is comp, focus, population density, rep density, everything. I think we have it set up correctly for the long haul. There is going to be much less disruption from this point forward. We have it locked in the way we want it now, the way Jeff and Jim want it. Now we just have to operate the machinery in the right way. We really appreciate your interest. Stay patient, and we look forward to what is ahead. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Welcome to the Braze, Inc. fiscal fourth quarter 2026 earnings conference call. My name is Leila, and I will be your operator for today's call. After the speakers' presentation, we will conduct a question-and-answer session. I will now turn the call over to Christopher Ferris, Vice President of Braze, Inc. Investor Relations. Christopher Ferris: Thank you, operator. Good afternoon, and thank you for joining us today to review Braze, Inc.'s results for the fiscal fourth quarter 2026. I am joined by our Co-Founder and Chief Executive Officer, William Magnuson, and our Chief Financial Officer, Isabelle Winkles. We announced our results in a press release issued after the market closed today. Please refer to the Investor Relations section of our website at investors.braze.com for more information and a supplemental presentation related to today's earnings announcement. During this call, we will make statements related to our business that are forward-looking under federal securities laws and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements regarding our financial outlook for the first quarter and the fiscal year ended January 31, 2027, the anticipated benefits from and product advancements due to the combination of Braze, Inc. and ongoing developments in Braze AI technology, our expectations concerning new customer verticals, our anticipated customer behaviors, including vendor consolidation and replacement trends and their impact on Braze, Inc., our potential market opportunity and our ability to effectively execute on such opportunity, the execution and anticipated benefits of our share repurchase program, and our long-term financial targets and goals, including our expectations regarding our profitability framework. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations and reflect our views only as of today. We assume no obligation to update any such forward-looking statements. For a discussion of material risks and uncertainties that could affect our actual results, please refer to the risks identified in today's press release and our SEC filings, both available on the Investor Relations section of our website. I would also like to remind you that today's call will include certain non-GAAP financial measures used by management to evaluate our ongoing operations and to aid investors in further understanding the company's fiscal fourth quarter 2026 performance in addition to the impact these items have on the financial results. Please refer to the reconciliations of our non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with U.S. GAAP included in our earnings release under the Investor Relations section of our website. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the financial measures of financial performance in accordance with U.S. GAAP. I will now turn the call over to William. William Magnuson: Thank you, Chris, and good afternoon, everyone. Today, we reported outstanding fourth quarter results that further validate our product leadership, go-to-market approach, and financial strategy. In Q4, we generated $205,000,000 of revenue, up 28% year over year and 8% from the prior quarter. Organic revenue growth accelerated year over year for the third straight quarter while we continued to drive operating efficiency in our business. Trailing twelve-month dollar-based net retention showed strength as well, inflecting positively during the quarter to reach 109%. Two milestones underscore this momentum in our business. During the quarter, we surpassed $1,000,000,000 in remaining performance obligations as customers increasingly commit to Braze, Inc. for their long-term customer engagement needs. And early in fiscal 2027, we passed $800,000,000 in annual recurring revenue, demonstrating continued strong demand for the high ROI delivered by our platform. We are incredibly proud of these achievements, and I thank our team across the world for their tireless efforts over the past year. For the full fiscal year 2026, we delivered 24% year-over-year revenue growth and $28,000,000 of non-GAAP operating income, with operating margins expanding nearly 400 basis points over the prior year. This performance demonstrates our ability to deliver on our profitability framework even while accelerating our investments in Braze AI and completing the successful transformation of last summer's acquisition of OfferFit into the rapidly growing Braze Decisioning Studio. We also realized $42,000,000 of non-GAAP net income in FY 2026, up from $18,000,000 last year, and generated $58,000,000 of free cash flow, providing us with the financial flexibility to invest thoughtfully in shaping the future of customer engagement. Our financial strength has also enabled Braze, Inc. to initiate its first share repurchase program, a milestone that reflects our high conviction in our long-term growth opportunity. Isabelle will provide more details on this program later in the call. Our business momentum accelerated in the fourth quarter as brands look to transform their businesses with AI and further leverage their ongoing investment in first-party data and direct-to-consumer relationships. Q4 bookings rose over 50% year over year, as we established a new high watermark for average sales price and saw particular strength in the enterprise. Net customer additions increased by 81 sequentially, up 14% year over year. $500,000-plus customers increased by 30 sequentially, up 35% year over year. Additionally, million-dollar-plus customers rose 28% year over year, up from 18% year-over-year growth in Q4 of last year. Large deal velocity was also impressive as we signed 29 deals of $500,000 this quarter, including 7 $1,000,000-plus deals and an expansion that increased our eight-figure customer count to four. Notable new business wins and existing customer expansions include Dis-Chem, GoodNotes, ID.me, King, Life360, Mytheresa, Power Us, realestate.co.nz, Shell Mobility and Convenience, and ThriftBooks, along with many others. While new logo wins were strong, upsells also showed strength, as existing customers expanded across channels, adopted new Braze AI capabilities, and deepened their integrations with the Braze Data Platform. This expansion of our land-and-expand strategy to include growth in data integrations and AI workloads is a testament to both Braze, Inc.'s composable design and our position as mission-critical infrastructure for our diverse and demanding global customer base. Competitive takeaways from the legacy marketing clouds in the fourth quarter continue to validate the market's preference for Braze, Inc.'s AI-driven omnichannel approach to deliver on modern customer engagement use cases at scale. This quarter, brands across diverse industries and geographies migrated from legacy platforms to Braze, Inc., including a global heritage footwear brand, a global genealogy company, a leading American cybersecurity company, an American department store chain, an American financial solutions company, a European travel insurance provider, a European national lottery, a luxury hotel group based in APAC, and a large Latin American bank. Looking ahead, we are well positioned to capitalize on the momentum we have been building over the past several quarters. Our go-to-market motion under the leadership of Chief Revenue Officer, Ed McDonald, who joined in late Q2, is operating at a high level, delivering a meaningful improvement in sales productivity. Pipeline generation was also strong in the fourth quarter, indicating robust market demand for our AI-driven solutions, particularly in the enterprise. The field of customer engagement is moving faster now than it has in years, and Braze, Inc. continues to be perfectly positioned to turn AI disruption into opportunity. By driving platform innovation in tandem with the evolving craft of engagement, Braze, Inc. has been actively redefining the front door to marketing technology for most of the last decade. This innovative leadership continues to drive share gain in the enterprise and it is why both our customer community and broader partner ecosystem continue to compound with ambition and optimism. Our competitive position rests on four foundational strengths that position us to capitalize on AI-driven disruption. First, the Braze Data Platform and customer engagement stack serve as critical infrastructure for our customers, delivering secure and reliable performance at massive scale. Unlike applications that manage workflows and tasks that are ultimately executed by humans, Braze, Inc. has always been a platform wielded by small teams of builders to directly execute massive, complex workloads. During calendar year 2025 alone, we powered 4.5 trillion messages and Canvas actions, processed over 25,000,000,000,000 data points, executed 3,100,000,000,000 AI decisioning inferences, and made 8,700,000,000,000 updates to our user profile system of record. This execution capability provides brands with confidence to deploy business-critical programs for entire global audiences, confidence that no point solution can match. Second, our vertically integrated data and decisioning architecture allows for capabilities that no one else can replicate. The Braze Data Platform feeds real-time context into control planes like Canvas and Decisioning Studio, then serves as a substrate for agentic AI execution. This tight integration between data infrastructure and AI decisioning combined with the most comprehensive set of marketing, conversational, and product channels on the market delivers differentiated outcomes rooted in real customer data, not just generic LLM outputs. Third, our composable AI architecture is compounding the value of our deep infrastructure and comprehensive platform. At our Forge customer conference in September, we announced the upcoming betas for both Braze AI Operator and the Agent Console to be available in Q1 and Q2. Last month, we beat those delivery timelines by months and launched both Operator and Agent Console into general availability. Leveraging the flexibility of composable data and the power of composable intelligence, these products have been able to quickly spread their wings and capability because they wield the differentiated power, performance, and scale that Braze, Inc. has delivered for years. The excitement from customers and partners around both launches has been palpable. Agent Console is seeing rapid uptake across a wide array of use cases, and Braze AI Operator is accelerating and evolving for thousands of Braze dashboard users every week, automating campaign, Canvas, and agent creation, deepening quality assurance checks, and uncovering data insights through simple conversational prompts. Operator is first trained with Braze, Inc.'s documentation, use case libraries, and source code and then enhanced by a comprehensive knowledge of each customer's data models, brand strategy, and integration details, enabling each Braze user's Operator to answer difficult questions and execute complex tasks as it navigates the dashboard in front of their eyes. Operator also integrates with Snowflake's Cortex to drive analytics insights that feed back into campaign strategies, and its skills continue to advance rapidly, including the recently trained capability to build directly inside the Agent Console. While eager beta testers of the Agent Console repeatedly asked us for more templates, we leaped over their request for faster horses and instead delivered a powerful prompt-to-agent capability that turned simple inspiration into sophisticated agents, each specifically configured according to a customer's Braze integration and existing marketing programs. These agents are already being deployed to enhance customer journeys in Canvas and to drive data enrichment workloads in the Braze Data Platform's Catalog feature. And all of this works in tandem with Braze AI Decisioning Studio, which harnesses modern reinforcement learning to achieve maximum performance in the most important parts of the user journey. Just as we delivered the most comprehensive solution for cross-channel marketing in the age of deterministic automation, we are building Braze AI to combine the flexibility of a composable architecture with the power of frontier AI across multiple fields of research to deliver a comprehensive solution for AI-driven customer engagement. Fourth, we believe Braze, Inc. occupies a unique position in the software landscape as a rare hybrid of a revenue-driving engine and mission-critical operational capability. Whether it is the urgency of responding to an evolving emergency, the pressure of publishing a message that will be read by hundreds of millions of people, or the criticality of executing deeply optimized marketing programs that drive a business's most important quarterly results, brands trust Braze, Inc. with their most important workloads because we provide the agility, observability, and reliability that business-critical infrastructure demands. In an environment where companies must maximize every dollar of uplift, this proven ability to deliver measurable ROI at scale makes Braze, Inc. an essential and highly optimized component of the modern enterprise stack, not a discretionary tool. We look ahead, Braze, Inc. will continue to invest with focus to remain at the frontier of consumer and technological change, turning disruption into opportunity as our customers transform their jobs, their businesses, and the experiences that they deliver to consumers. We are rapidly advancing our platform and enhancing our global customer community to scale agentic use cases across marketing programs, customer conversations, product experiences, and data workloads, enabling brands to turn context into connection and achieve in the AI era what they have been striving for all along: stronger business performance built on durable customer relationships. I will wrap my remarks by emphasizing what a great position we are in as we enter our next phase of growth in fiscal 2027 and beyond. Thank you for your interest and support. I will now turn the call over to Isabelle. Isabelle Winkles: Thank you, William. And thank you, everyone, for joining us today. We reported an outstanding fourth quarter with revenue increasing 28% year over year to $105,200,000, driven by a combination of existing customer contract expansions, renewals, and new business. Braze AI Decisioning Studio, formerly known as OfferFit, contributed $5,700,000 of revenue in the quarter. This implies an organic revenue growth rate of 24.3% year over year. We are excited to see continued strength from our core business as organic revenue growth accelerated for the third sequential quarter, and we realized robust bookings and strong demand signals for Decisioning Studio and our other AI products. As William mentioned, in February, Agent Console transitioned to general availability, and we are pleased to report immediate and persistent consumption of our Flexible Credits in its first month of release. In Q4, our total customer count increased 14% year over year to 2,609 customers as of January 31, up 313 from the same period last year and up 81 from the prior quarter. Our total number of large customers, which we define as those spending at least $500,000 annually, grew 35% year over year to 333, and as of January 31, contributed 64% to our total ARR. This compares to a 62% contribution as of the same quarter last year. As a reminder, a customer is counted when their service date is effective, not when a contract is signed. As such, some new logos won in the fourth quarter will appear in our customer count in 2027. Measured across all customers, dollar-based net retention was 109%, up from 108% in the third quarter of this year. Dollar-based net retention for our large customers was 110%, in line with the third quarter of this year. Expansion was again broadly distributed across industries and geographic regions. Revenue outside the U.S. contributed 45% to our total revenue in the fourth quarter, consistent with the prior quarter of this year and the prior year quarter. In the fourth quarter, our total remaining performance obligations were just over $1,000,000,000, up 30% year over year and up 16% sequentially. Current RPO was $642,000,000, up 27% year over year and up 12% sequentially. The strong year-over-year growth in RPO and CRPO was driven by four factors: strong Q4 bookings, healthy Q4 renewals, a large quarter for available renewal dollars, and a small increase in overall duration of contracts. Non-GAAP gross profit in the quarter was $138,000,000, representing a non-GAAP gross margin of 67.2%. This compares to a non-GAAP gross profit of $112,000,000 and non-GAAP gross margin of 69.9% in the fourth quarter of last year. The decrease in year-over-year margin percentage was driven primarily by higher premium messaging volumes and hosting costs, partially offset by improved efficiencies in personnel costs. Non-GAAP sales and marketing expenses were $70,000,000 or 34% of revenue compared to $60,000,000 or 37% in the prior year quarter. While the dollar increase reflects our year-over-year investment in headcount costs to support our ongoing growth and global expansion, the improved efficiency reflects our disciplined approach to investment as we continue to scale and expand our go-to-market organization. Non-GAAP R&D expense was $29,000,000 or 14% of revenue compared to $23,000,000 or 14% of revenue in the prior year quarter. The dollar increase was primarily driven by increased headcount costs to support the expansion of our existing offerings as well as to develop new products and features to drive growth. Our R&D expenditures reflect our intentional yet disciplined technology investment and are in line with our long-term non-GAAP R&D percent of revenue targets of 13% to 15%. Non-GAAP G&A expense was $25,000,000 or 12% of revenue, compared to $21,000,000 or 13% of revenue in the prior year quarter. The improved efficiency reflects increasing scale across public company expenses and the benefit of leveraging strategic locations for headcount expansion. Non-GAAP operating income was $15,000,000 or 7% of revenue compared to a non-GAAP operating income of $8,000,000 or 5% of revenue in the prior year quarter. Non-GAAP net income attributable to Braze, Inc. shareholders in the quarter was $11,000,000 or $0.10 per share, compared to $12,000,000 or $0.12 per share in the prior year quarter. Non-GAAP net income was negatively impacted by a $5,000,000 purchase accounting adjustment related to the deferred tax liability from OfferFit, the reinforcement learning engine company acquired in June. Excluding this one-time adjustment, non-GAAP net income and earnings per share were $16,000,000 and $0.15, respectively. Now turning to the balance sheet and cash flow statement. We ended the quarter with approximately $416,000,000 in cash, cash equivalents, restricted cash, and marketable securities. Cash provided by operations during the quarter was $19,000,000 compared to cash provided by operations of $17,000,000 in the prior year quarter. Including the cash impact of capitalized costs, free cash flow in the quarter was $14,000,000 compared to $15,000,000 in the prior year quarter, and as we have noted in the past, we expect our free cash flow to continue to fluctuate from quarter to quarter given the timing of customer and vendor payments. Before turning to guidance, I would like to take a moment to highlight the Board's $100,000,000 share repurchase authorization. This authorization reflects our confidence in our fundamentals, outlook, and disciplined approach to capital allocation. We believe the share repurchase represents an efficient and meaningful way to drive shareholder value. As we noted in our earnings release today, the repurchase program includes a $50,000,000 accelerated share repurchase transaction with respect to our stock, which we plan to enter into before the end of the first quarter. In addition, our guidance for share count and EPS includes only the estimated impact of the $50,000,000 ASR. For the first quarter of 2027, we expect revenue to be in the range of $204,500,000 to $205,500,000, which represents a year-over-year growth rate of approximately 26% at the midpoint. As a reminder, our first quarter contains three fewer days compared to the other three quarters of the year, which each contain 92 days. First quarter non-GAAP operating income is expected to be in the range of $10,000,000 to $11,000,000. At the midpoint, this implies a non-GAAP operating margin of approximately 5%. First quarter non-GAAP net income is expected to be $11,000,000 to $12,000,000 and first quarter non-GAAP net income per share in the range of $0.10 to $0.11 based on approximately 112,000,000 weighted-average diluted shares outstanding during the period. For the full fiscal year 2027, we expect total revenue to be in the range of $884,000,000 to $889,000,000, which represents a year-over-year growth rate of approximately 20% at the midpoint. Fiscal year 2027 non-GAAP operating income is expected to be in the range of $69,000,000 to $73,000,000. At the midpoint, this implies a non-GAAP operating margin of 8%, a more than 400 basis point improvement versus fiscal year 2026. Non-GAAP net income for the same period is expected to be in the range of $69,000,000 to $73,000,000 and net income per share is expected to be $0.61 to $0.65 per share based on a full-year weighted-average diluted share count of approximately 113,000,000 shares. It is an exciting time at Braze, Inc. We remain committed to delivering industry-leading customer engagement solutions powered by AI as we continue executing against our long-term financial targets. And with that, we will now open the call for questions. Operator, please begin the Q&A. Operator: We will now begin Q&A. For today's session, we will be utilizing the raise hand feature. If you would like to ask a question, simply click on the raise hand button at the bottom of your screen. Once you have been called on, please unmute yourself and begin to ask your question. Please limit to one question and one follow-up before jumping back in the queue. Thank you. We will now pause a moment to assemble the queue. Our first question will come from Ryan MacWilliams with Wells Fargo. You may now unmute and ask your question. Ryan MacWilliams: Hey. Thanks for taking the question. For William, great to see three straight quarters of organic revenue reacceleration in the business. I know last year has benefited from some go-to-market changes along with moving past COVID-era customer renewals. But how do you feel about the underlying growth trajectory of Braze, Inc. from here? Has it improved more sustainably? And I know it is early, but how do you envision AI layering in to support growth trends? William Magnuson: Yes. Absolutely. Thanks, Ryan. It has been a great back half of the year heading into Q4. I think that the biggest difference in Q4 was also the differentiation of our AI roadmap, especially coming out of our Forge conference in September. It is clear that customers can see where we are going. They can see how our longstanding advantages are being made more and more capable with further investments in Braze AI. That helped with both win rates and deal velocity in Q4, as a lot of the competitor FUD just did not hold water against both our offering and our pace of new product delivery. We are also seeing stronger momentum with the partner ecosystem, including across both the global agency groups and the more focused regional players that are growing super fast through partnership with us. And our global sales leaders are moving with high velocity. And so I think that when we look at it all coming together, you have a robust product roadmap that is moving at pace. There is really exciting AI innovation that is not only bringing new capability, but it is also making our existing capability more accessible and more leverageable by our customer base. And we are out in front with that R&D advantage also being combined with a pricing model that has always been consumption based with a global go-to-market organization that operates in all the world's major markets. And a global customer community that has always been the world's most ambitious and creative marketers who have been on the leading edge of rapidly building with Braze, Inc. from the beginning. And so I think that this is just a great moment for all of our existing scale, performance, and innovation advantages to come together, and we are excited for this year. Ryan MacWilliams: Really appreciate the color there. And then for Isabelle, it seems like the initial full-year revenue guide is slightly stronger than past years. I would love to hear if there is any change to guidance philosophy here, and what were some of the key points that helped you build up to the full-year guide? Isabelle Winkles: Yes. Thanks for the question. So first of all, no change in the guidance philosophy. Really excited about the momentum that we saw in the business coming into Q4, coming out of Q4 in particular, as William mentioned, across a number of different dimensions. We are seeing more two-year contracts. We are seeing larger in-quarter contract sizes. Upsells continue to be really strong. There is real excitement around our AI capabilities, as William mentioned. Ongoing strength in the enterprise, ongoing strength in the Americas, which has been something we have been working on. And so there is just a lot of momentum across a number of different dimensions. I think as we mentioned, bringing Ed on in the middle of last year, he has been furthering our efforts across a number of different things that we have already put into motion. And it has been really great to see some of that success across verticalization. So, really excited for that, and you are seeing that in our guide. We are really comfortable with how we have guided for the year. Operator: Our next question will come from Scott Berg with Needham. Scott Berg: Hi, everyone. Really nice quarter, and my apologies, dialing in from an airport in case there is background noise. But first question I wanted to ask was off of a channel check or customer conversation, I guess, that we had during the quarter. We got to speak with one of your largest customers, and they noted to us that they had an internal project that spanned 18 months and over $10,000,000 in cost to try to actually replace their entire Braze, Inc. deployment at this well-known brand. But they killed the project because they were only able to achieve about a third of your functionality even after an 18-month time frame. I guess, William, as you think about a customer in this situation that might want to try to custom code their own platform with one of the generative AI, LLM models, what is most difficult to replace at the end of the day that makes a customer's approach to probably not feasible? William Magnuson: Yes. I touched on this in the prepared remarks, but I think that the meat of this answer lies in the combined requirement of, one, a tightly integrated high-performance infrastructure that encapsulates both the context and the intelligence layers; and, two, the comprehensiveness required to handle both the vastness of the modern enterprise data landscape on the ingestion side and then the complexity of customer journeys on the output or the interaction side. Within Braze, Inc., the Braze Data Platform is the dedicated context layer and Canvas provides the control plane. They work together to engineer the context that the Agent Console and other Braze AI capabilities harness to drive higher-performing personalization and orchestration decisions. For B2C audiences, which, of course, is where we primarily work, this has to happen at massive scale, and performance needs to be able to drive real-time interaction across an ever-growing set of channels and direct-to-consumer product interfaces. Over a third of Braze, Inc. customers use us for five or more channels. More than half of them use us for four or more. And amongst our $500,000-plus customers, more than 90% use our SDK. Over 80% use Currents to export the data that Braze, Inc. generates. And already 50% are now using Cloud Data Ingestion, which is our reverse ETL product that connects directly to cloud data warehouses like Snowflake, Databricks, and Google BigQuery. You overlay that with privacy, security, and regulatory concerns that are related to first-party data and communication consent. Then you add the operational demands that I also mentioned in the prepared remarks of things like demanding marketing schedules, the urgency of capitalizing on cultural moments or managing through emergencies. And then finally, just consider how much investment is already going into building these direct-to-consumer audiences and first-party datasets in the first place. The combined customer acquisition costs and the product investments for major consumer brands, consider the amount that that represents. That is the investment that is already made. Then customer engagement is a multiplier on that investment, and that means that even small basis points matter when it comes to performance. In finance, you understand the importance of having an edge in data, especially when it is driving decisions on large positions. I think sophisticated customer engagement is that same edge on a brand's customer acquisition investment. And we see time and again that settling for good enough just to save a little bit of money on the software line item is really throwing away enterprise value optimization. And so I know that is multifaceted, but I think that what you see in that anecdote that you shared is that there is a combination of the need for vertical integration, for reliability, for performance, and for comprehensiveness. And then you need to interface that with privacy, security, regulatory complexity, and the need for this to be operated in real time, and doing so with an external environment and complicated businesses and complicated consumer journeys. All that complexity needs to be managed. And that requires, I think, a professional focus on building the tooling and the platforms that address this problem. Scott Berg: Excellent answer. Well understood. Thank you. And then I guess from a follow-up perspective, I have been at the ShopTalk conference yesterday and today, and all have a big presence here, obviously. But there is a significant amount of brand momentum with new universal commerce protocol in a couple of different areas. I know you all had released your SDK for ChatGPT last fall to take advantage of some of the apps they were embedding in their platform. But as your customers use more of this UCP to capture transactions on these new channels and platforms, how do you all benefit? How do you capture some of that first-party data within that workflow or process? William Magnuson: Yes. So I think two things. One is that Braze, Inc. will always invest in every new consumer interface that helps us understand the customer and the customer journey better—any source of first-party data. And we will also invest in areas where we can communicate with customers and where we can help drive better personalization for the product experiences that are delivered to them. And, no matter what happens with consumer devices or app stores, the most valuable customers to a brand are going to continue to be those that they have a direct relationship with. Braze, Inc.'s bread and butter and focus has always been about helping brands expand and strengthen those audiences that they can access through direct-to-consumer interfaces, or other messaging channels that have low marginal cost that are dictated based off of user consent and the right to communicate with them, instead of needing to pay to acquire the right to put a message in front of their eyes over and over again, which of course is a great way to acquire customers, but cannot be how you run a business over the long term. And also managing the first-party data that contextualizes them and then orchestrating the product and messaging interactions that enrich those relationships over time. And so I think we are always on top of new innovations and developments and new direct-to-consumer interfaces of all kinds. We are always interested in how they can help us learn about customers better, communicate with them in new ways. And, of course, the more complex that landscape gets, the stronger the answer that I provided to your first question is. Because it means that there is even more complexity for where the data comes from. There is even more complexity for where the interactions are. And as I mentioned in response to Ryan, I think that when we look at agentic workflows, they are also characterized by moving even faster. And that is a place where our focus on performance that we have always historically had is going to be even more important competitively. Operator: Your next question will come from Raimo Lenschow with Barclays. Raimo Lenschow: Hey. Thank you. Can you hear me okay? Operator: Yes. We can hear you great. Raimo Lenschow: Okay. Perfect. Thank you. Can I start with DBNR? It got better to 109. You talked about it the last few quarters that it is a lagging indicator that kind of takes some time to improve, but it is really nice to see the improvement now. Can you talk a little bit about the journey we should expect from here? That is my first question. Second question is with Ed joining in Q2, normally, big changes to go-to-market happen more at the beginning of a new year. Is there anything we should be aware of as we go into this year in terms of changes that we should expect there? Thank you, and congrats from me as well. Isabelle Winkles: Yes. So on the DBNR, one thing that I had been providing is at least a directional view on the in-quarter organic number. And so over the last couple quarters, we had talked about it being a little bit below 107 and then a little above 107 and then continuing to kind of trend up from there. What I can say here is that the in-quarter organic is above where we are reporting. So I think the direction of travel here, we are very comfortable with what we are seeing. We are really excited about the momentum in the business that is driving this. And so it is a lagging indicator but I think we are comfortable that some of the troughing that we have experienced over the last couple quarters—we have talked about being through the belly of the beast—and we are, in fact, through the belly of the beast. So hopefully, that is some helpful color, though we do not specifically guide on the metric. And then with regards to Ed, look, I think in my last set of answers to questions here, I was indicating that Ed has been driving forward a number of initiatives that we had already put into motion. And so not a lot of massive changes. He is trying to be more effective and efficient about bringing on the new headcount and being rapid in the right areas, being disciplined about where that is being deployed, building out internal capabilities to help our sales team be more enabled and move more quickly. And he—you know, I think we said in the beginning, not only has he seen the movie, but he has seen the remake, and we are definitely seeing the impacts of that, and leveraging his relationships across the potential hires and prospects here. So nothing material that we need to call out, and he is moving things forward in a way that we feel really happy about. Operator: Your next question will come from Parker Lane with Stifel. Parker Lane: Hey, guys, thanks. Isabelle, maybe one for you on gross margins. If you look at premium messaging channel growth, you look at some of these new products you have and your comments about the immediate consumption of credits you see from Agent Console, what is the impact to the predictability of gross margins that you are seeing in the business? And what is the right way to think about not only the near-term picture, but sort of the mid-range picture for gross margins as well? Isabelle Winkles: Yes. So, look, we have talked about the evolution of the premium and how that mixes in. And just keep in mind that, really over the last couple of years, the only new channels that we have introduced are, in fact, these premium channels. So now we are introducing, certainly with the advent of Agent Console and some of the other features here, things that mix in with a slightly better margin. That said, it is starting off of a small base, and so it is going to take some time for all of that to kind of work itself in. And certainly, the premium messaging is still in demand by our customers. And so I do not think there is so much of an issue necessarily with predictability because we continue to look at that on a fairly detailed basis. But, certainly, we have got eyes on the direction of travel. And really, I think what is important is the 8% operating income margin that we feel really comfortable with for the year, and we are going to continue to manage to that. Parker Lane: Got it. Thanks. And, William, one for you. You talked earlier about AI not just helping in the form of new product, but making your existing capabilities more approachable and accessible. I was wondering if you could provide a concrete example or two of what you are seeing there. And where do you expect that to translate into business results? Is that better win rate, better utilization, less churn, all of the above? William Magnuson: Yes. So I think that when you look at the history of Braze, Inc., we more often are held back by making sure that our customer base can really flex into the full power and sophistication that Braze, Inc. has to offer. And one of the things that is most exciting to me about the Braze AI potential right now is that we are both making Braze, Inc. smarter and more powerful, and we are making it easier and faster to use. And so as we redefine that new front door to marketing technology again, the door is both easier to open and when you get to the other side, there is a lot more excitement and value generation there. And we are already seeing this in the Agent Console. I mentioned an example in the prepared remarks where we had a lot of customers who were working on building new agents within the beta test and were asking for more templates, more ideas, etc. And we actually went through and we had already been working on prompt-to-campaign, prompt-to-email generation, prompt-to-Canvas, where people can actually vibe-code their Canvases directly from the Braze Operator. And not only is it providing you advice, it is literally grabbing control of the dashboard and you watch it happen in front of your eyes. And so you are both having the Operator act for you, but you are also learning how to use it at the same time as you watch it. And that allows for marketers to then immediately go in and check things, tweak them, refine them, etc. I think as a platform that is used for publishing at massive scale or where there is a professional skill set of high consequence, when you are running marketing programs that you are relying on to hit your quarterly numbers or that need to go out to a 100,000,000 people around the globe in response to a critical emergency or to take full advantage of an evolving cultural moment or what have you, these are all places where you need to combine both rapid usability with high confidence. And being able to see the Operator building more confidence for people, speeding up their own workflows, and providing that inspiration with our existing feature set is incredible. Then when we go over to the Agent Console, where people are getting used to prompting, but there is still a lot to do there, and building a good agent does have a skill set around it. There is still some work that you need to do around the outputs from the agent and helping make sure that there is consistency and that you are getting the right context in the context window. And we have built incredible capability in Agent Console to manage that. Even more exciting is that Operator is helping write and inspire those agents for people. And so it is just driving faster adoption. It is driving higher levels of ability for people to be able to use new features that they maybe had not looked at before. And helping really build stronger confidence for them to use a system like Braze, Inc. that has always been a small number of builders and a small number of marketers wielding it at massive scale. And that has a stress and a pressure and a consequentialism to it that having that Operator assistant there with you really helps increase confidence and we think is going to drive a lot more usage. Operator: Your next question will come from Brett Huff with Stephens. Brett Huff: Good afternoon, and congrats on seeing in the financials stuff that I know you all have been working on kind of in the background for a long time. So nice to see that. Two questions. One big picture—I think this is for you, William. As you are hearing—as your conversations with folks you are selling to on AI, our checks tell us that data heterogeneity, lack of AI talent, governance issues are all roadblocks. At the same time, companies seem to want quick-hit ROI things that are happening in order to justify continued spend. How are you—how are those conversations going with Braze, Inc.? I think your point—more features, easier to get to—but is there some anecdotes there that give us a little bit of meat on the bone on that that we might be able to sort of get our head around? William Magnuson: Well, I think, first of all, every software investment decision being made right now, you have to have confidence that the company that you are spending the time to integrate with, to enable your teams on, and to build with and commit to has their arms around taking advantage of AI innovation. And so I think that is table stakes for everyone even if you, as a team, do not have confidence that you are going to be able to use it all on day zero, or maybe the incremental budget to drive new use cases is not there yet. There is simply no one that is making a switch in a software vendor right now without having the confidence that it is the right vendor for them to bet on as they move into this future being transformed by AI. And that is why, if you go back to my answer to Ryan's first question and talking about the strength in Q4, so much of that just came out of the confidence in the roadmap and the confidence in the beta test. We were able to show live demos of Operator and Agent Console. Now, obviously, they are out there in general availability, so it is even more palpable for everyone. And I think that a lot of the things that you just said are true. There is a lot of sources of anxiety around there. A lot of this is still dynamic. It is changing really fast. But at the end of the day, we already see Agent Console driving stronger performance in ongoing campaigns. These are not brand-new experimental use cases. The same customer journeys are actually just being executed on with higher performance. It is driving real revenue, real performance uplift. It is doing so in an environment that is easy to test and experiment and scale with. I mentioned Canvas as an important control plane. I think when you look at the difficulty of deploying AI in a lot of enterprises, a lot of it has to do with context engineering. It has to do with observability and governance and that control plane. And when you look at Braze, Inc., the Braze Data Platform is providing that context engineering. Canvas is providing that control plane. We have Decisioning Studio as another angle of being able to bring in agentic decision making over deep data science, when that reinforcement learning approach is the right AI technique to apply depending on where you are in the customer journey. And we have this full spectrum of the right solution and the right approach for the complex problem space of customer engagement, and we can help guide customers to that. And the vast majority of it is relying on the combination of a reliable, high-performance, stable, and secure infrastructure that Braze, Inc. has always maintained as a competitive advantage in our space. And now we are multiplying the value of that with our investments in Braze AI. Brett Huff: That is super helpful. Thanks for the insight. And, Isabelle, we are hearing more and more about verticalization, and we also got an update on the gross margin—sort of maybe we are going to get some tailwinds on that given the new AI products. Can you talk a little bit about long-term—any change in long-term sort of puts and takes on the gross margin pressures? And then should we think about any step change for verticalization spending, or is that just a matter of course? Isabelle Winkles: Yes. So I think on verticalization, I would just consider that kind of a matter of ordinary course. We are going to continue to expand slowly but methodically, just deepening our focus on some of the verticals. We already started this over the last couple of years, and I would just continue to expect that to expand. And then from a gross margin perspective, yes, look, we have been talking about the impact of some of the premium messaging. And then I did indicate that in my response to one of the last questions that some of these new products—and Agent Console—do mix in with a better-than-company-average margin. But it is obviously starting off from low and so will take a bit of time for that to kind of mix in more meaningfully. And so what we are really focused on is the operating income down to the bottom line, and we feel really good about that 8%. Operator: In the interest of time, please limit to one question. Our next question will come from Arjun Bhatia with William Blair. Arjun Bhatia: Perfect. Thank you, guys. William, maybe can we touch on—it seems like Agent Console is obviously getting a lot of traction, and I am just curious if you can kind of put that into perspective of when that might help monetization, which types of customers do you think will adopt that first? And then in the broader scheme of things, we are hearing a lot about obviously third-party agent proliferation. So I am curious how that mixes in with Agent Console and if you have any views on what access third-party agents would have to Braze, Inc. or not have to Braze, Inc., and the data that you store for your customers. William Magnuson: Yes. So I will just hit those topics one by one. So regarding Agent Console and pacing of adoption and revenue, as I shared in the prepared remarks, both Agent Console and Operator went into general availability months ahead of schedule, and we are already seeing great uptake on both. After just a few weeks, more than two-thirds of our customers are now actively using Operator, and we are watching Agent Console adoption grow week over week. But I think we are going to have a lot more to share about both of those at City x City London, which is our second-largest event of the year, just one month from now on April 23 at Olympia, London. And we are also lining up the entire company and our ecosystem to help push adoption. Agent Console is already showing material results for its beta testers and early adopters, and we are excited for it to spread rapidly across the customer base. But also remind you and everyone else quickly that Agent Console consumes Flexible Credits. So it is consumption-based pricing, but the revenue is recognized the same way that it is for messaging volumes, which is to say that it is ratably over the length of the contract. So we expect usage of Agent Console to be supportive of early renewals and upsells, but keep in mind that the consumption of credits does not lead to immediate revenue recognition in our contracting model. We do have the benefit that we have been shifting to the Flexible Credits model over the last few years, and the customers who have adopted the new credits plan—which has basically been the default for all renewals and new business over the course of the last couple of years, so it is already the majority of our customer base—already have credits that are ready to be used for Agent Console. We do have a portion of our customer base that is still on older pricing that we are working hard to move into this new world so that they can also rapidly adopt Agent Console. And that is something that we will be focused on throughout the year. With respect to looking at other tools, I think Braze, Inc. has always been built for composability and built for change. The combination of our composable architecture, our high-performance infrastructure, and our Flex APIs are not just a strong foundation that we use to build our own innovation. I think they are also really well suited for marketer workflows that are both transforming and inflecting through the use of other AI tools. We have always been architected to be composable, to be ecosystem-neutral, and to integrate with other best-of-breed tools across the modern marketing stack. And that is both for plugging in to enhance things like orchestration and predictive analytics decision making as well as personalization. It is also for evolving new channels, new use cases, new AI capabilities, etc. A few other things. I think we are also seeing that performance in the context layer is more important than ever with agent-to-consumer interactions. Agents move fast and they are tireless, and we think that that is a perfect match for the performance and reliability advantage that Braze, Inc. has always maintained over competing and homegrown products. And, as I mentioned earlier, we have always been a platform where leading-edge marketers with a builder mindset can deploy and optimize sophisticated strategies. And so I think what we are doing with Operator and Agent Console is simultaneously putting more power in their hands and making it easier to use. There are also big advantages to a tool like Operator being inside the Braze, Inc. dashboard information environment, having access to our internal use case libraries, the skills that we have built, the customer's dashboard information architecture, so that it can adapt recommendations and run the dashboard for them with knowledge of their specific Braze, Inc. integration. We actually had a really great anecdote on Braze Operator that was shared by a customer recently: they were working through a difficult challenge with Liquid that they had spent over an hour on using one of the big chat AI products, and Operator solved the problem for them in a minute because Operator had full knowledge of the way that Braze, Inc. uses Liquid, where it was in the dashboard, and the information architecture. And so I think being able to adapt both the context and the semantic layer and be able to train the Operator with the skills and the knowledge of the dashboard architecture is going to provide differentiation. But we have always been composable, built for change, and extensible. And so we are also already seeing a lot of customers that are using the Braze MCP Server and using our powerful and flexible APIs in order to innovate their own workflows outside of the ecosystem, and we embrace both of those through our composability. Operator: Your next question will come from Taylor McGinnis with UBS. Taylor McGinnis: Yeah. Hi. Thanks for taking my question. William, so I think there is a view out there that customer engagement and marketing is more workflow-heavy and lacking data moats that could make it more vulnerable to AI. You talked a lot about the context layer and what Braze, Inc. is doing there. But could you just maybe unpack that for us? What proprietary data moats does Braze, Inc. have, and does that give you an edge in creating some of the AI solutions you talked about, like Decisioning Studio and Agent Console? William Magnuson: Yes. So let me answer that on two dimensions. First, talking about context engineering with respect to Agent Console. And then second, talking about when I talk about us having a full spectrum of AI technologies and how we can compose them together to drive more innovation in the future. So first on the context engineering point, I think context engineering, of course, requires comprehensive rapid access to data. I think that underscores the criticality of the Braze Data Platform. And we were very happy to share some of the scale numbers on the Braze Data Platform recently—over 25,000,000,000,000 data points processed last year, and widespread adoption of the multitude of integration options that we have. And I think that is the beginning of the story because context engineering requires not just access to huge amounts of data quickly, but also deliberate design. And not just because of the cost and performance considerations of large context windows, but also because of the deliberate management of the attention of agents, which is a relatively new concept. We generally tend to think about data as just storage costs and latency and throughput. This idea of attention is really important as well because you can actually have context windows rot. And unless you can keep the agents focused, you start to see outcomes go down and the quality go down. And it sounds great to be able to dump a 200-page PDF brand book and every historical campaign result and every raw data point that you have ever seen about a user into a large context window and hope for the best, but that is not only slow and expensive. It also leads to lower-quality outcomes and higher volatility that creates both brand risk and lower performance. And so by taking the environment that we built in Braze AI with the Braze Data Platform, with Canvas and Agent Console, they are designed to solve that problem for customers. It lets them and their Braze AI Operator rapidly build, test, and scale new agent ideas that they have with tremendous promise to improve consumer experience, enhance their own bottom lines, and do so in a way where the context is being managed and governed in a way that is privacy- and regulatory-compliant, and it is being engineered in a way that it is managing the attention of the agents and it is doing so in a way that keeps performance, quality, and consistency top of mind. And so I think that whole problem space has a lot of additional complexity in it. We are working really hard to solve that for customers, and that is what is going to be able to drive both defensibility and rapid adoption. And then, going from there over to Decisioning, you have heard me speak about the full spectrum of AI technologies that Braze, Inc. is investing in. And I think that this is another advantage of both our R&D scale and the composable high-performance infrastructure that we are built on top of. When we look at Decisioning, there is another paradigm rising that relies on agentic intelligence overseeing deep data science that relies on reinforcement learning. And for those that maybe have not looked at Decisioning Studio closely in the past, this approach is similar to what personalizes your Instagram feed and injects ads into it. And it is the best way to enable the decisioning system to rapidly learn from past interactions across the rest of your customer base. You cannot just take, “Here are the last 10,000,000 push notifications that I sent, and how everyone responded to them and everything about them,” and jam it all into a context window and expect an LLM to be able to keep its attention in the right place and make sense of that. But by using decisioning and reinforcement learning around that, you are actually able to find those hidden points of resonance between the content and the engagement strategy and the individual customers and be able to drive that interaction. And that is also a field that is rapidly advancing. I have talked about how today it is best deployed to optimize the most valuable transition points in the customer journey, like when a free-trial streaming subscriber is upgrading to premium or when an on-demand or a banking customer adopts a new service or an add-on product that makes them more valuable and secure at the same time. So you want to bring that kind of heavyweight data science approach into those problems exactly because they are your most valuable and they are where you want to have the best performance uplift. But over time, we plan to continue to use decisioning science combined with agentic reasoning to increase the applicability of both approaches across more and more of the small moments in a customer journey as well so that customers can continue to harness these different approaches to AI and combine them together to get the best outcomes for consumers and for their businesses. And so, when we look broadly across the space, I think there is so much opportunity for additional value to be created out of depth. And, if you go back to the question from earlier about why it is hard to build Braze, Inc. and where that incremental value comes from, and think about the leverage that you get out of the investment made in building first-party audiences, combining together these optimizations and being able to compound them over time and to be deliberate about it is exactly how you drive additional bottom line. It is how you drive higher loyalty in your customer relationship and it is how you get competitive edge in these ruthless consumer markets. And so, we just believe that the brands that win these markets are going to be the ones that are arming themselves with the most sophisticated tooling and the strongest context engineering, not just trying to throw a whole bunch of data into a context window with a frontier model and hoping for the best. Operator: Your next question will come from Brian Peterson with Raymond James. Brian Peterson: Congrats, guys. Thanks for letting me take the question here. So, given the really good bookings this quarter, I am curious, has that changed your thoughts on sales hiring as you enter fiscal year 2027? And, Isabelle, if you could unpack some of the individual margin drivers by OpEx line and gross margin as we think about ramping into that 8% number for fiscal year 2027? Thanks, guys. Isabelle Winkles: Yes. So, just in terms of hiring—and we talked about this as we were closing out, getting into the end of the year last year—as we have seen rep productivity continue to improve through last year, we already put into our plan that we were going to hire incremental sales capacity. So that is underway and has been underway and continues to work productively. So definitely excited about that. And then as we think about kind of the pathway here to the 8%, look, I mean, the place where it is going to come out of mostly is, in fact, sales and marketing. We continue to expect to get efficiencies of scale there. And then G&A, as we continue to lean on some of these strategic locations, that is going to be helpful as well. R&D, we have said, is already kind of just operating where we expect it to. So we are really excited about the continued scale we are going to continue to get out of the sales and marketing piece. Operator: Your next question will come from David Hynes with Canaccord. David Hynes: Hey, guys, congrats on the nice quarter and the strong guide for fiscal 2027. Isabelle, I am going to pull on that bookings thread as well. When you talk about a 50% year-over-year increase in bookings, obviously, the timing of renewal cohorts can impact that math. I normally would not ask a bookings question, but since you shared the metric, I will a little bit. Any way to help us think about net new ACV growth? Is that growing faster than run-rate revenue growth? I am just trying to get a handle on the magnitude of the strength you saw in the quarter. Isabelle Winkles: Yes. I mean, look, I think both from renewal cohorts that then kind of added to through upsells as well as kind of the net new business, I think both were really strong. So I think overall, the momentum in the business in Q4 definitely kind of accelerated within the quarter. The renewals that we saw were very, very strong. And as we continue to work on the down-sell pressure that we had been seeing in years past, I think it is a combination of all of those things mixing together. Obviously, that strength in Q4 was certainly a part of the storyline going into this year and what helped us with the guide and our confidence in the outlook. Operator: Your next question will come from Nick Altmann with BTIG. Nick Altmann: Awesome. Thank you. Isabelle, can you just talk about what drove the strength in revenue this quarter? And just how much of the outperformance from Decisioning Studio is in subscription revenue versus professional services? Thanks. Isabelle Winkles: Yes. I mean, they mix in a little bit more with a little bit more professional services, but the reality is the proportion of professional services writ large across the company—the mix shift is not changing dramatically. And so we really sell professional services in order to sell more software. And as the bookings strength continues to be strong, there is some element of implementation and onboarding that is mixing into that. Obviously, we are also trying to bring in more partners to bring that in. So I would not read too much into the distribution between the two. The reality is that we truly sell professional services in order to sell more software. Operator: Your next question will come from Matthew Bensley with Cantor Fitzgerald. Matthew Bensley: Great. Thanks for taking the question. Maybe touching on the question about build-it-yourself earlier from a different angle. Are you guys using some of these AI coding tools internally to keep your advantage from a technical perspective and just evolve just as quickly as anybody else can? How is that, I guess, impacting the rapid adoption of some of this functionality? And, if anything, how does it impact your cost structure? William Magnuson: Yes. So I think that when we look at Braze, Inc.'s R&D overall, my major takeaway is just how excited I am that we have got in place a cadre of long-tenured leaders that have a ton of experience navigating through disruption. We were born in the disruption of smartphones. We have been in probably one of the most competitive software categories our whole existence. We have got a team that knows how to navigate disruption and knows how to win together, including both of our technical co-founders still here, both of the OfferFit co-founders still here, and a bunch of long-tenured R&D leaders that are driving ahead innovation pace and urgency, combined with experience of navigating disruption and really understanding our deep global customer community. And so, with respect to the adoption of agentic coding, you see it in the results: we released the Operator and the Agent Console months ahead of schedule. That was due to a combination of a strong beta test but also because of the velocity increases that we are seeing. Braze, Inc. engineering is also at all-time highs in pull requests per engineer per week and lines of code per week. But just like AI slop is not producing value for differentiated investment analysis, the volume of code is not the whole story there. The craft of building and scaling valuable software applications for professional workflows and enterprise workloads that are also transforming themselves is going to remain incredibly valuable—one that we are really excited to apply to customer engagement at scale. And I think that we are right in the throes of this, having fun with it. We are moving at pace, and we are really excited about what this means for our entire software category to go through another reinvention. A team that was born exactly because of the opportunity that came out of the disruption of mobile gets to see our product space transform again, find new opportunity. We get to do it this time with a global customer community, with a global go-to-market organization, with a lot more experience, but we are moving faster than ever. So it is just really exciting all around. Operator: Your next question will come from Brian Schwartz with Oppenheimer. Brian Schwartz: Thanks for taking my question and congrats on a strong finish to the year. William, I wanted to ask you a question again on the moat with AI. Maybe I would ask you the question in the form of the origin of the data model. So if you think about the outputs that are coming in your AI products and the decision engine, is it possible to think about what percentage of those—of the AI output—is coming from signals that are being trained on data specific and proprietary to Braze, Inc. versus those third-party foundation models in the market? Thanks. William Magnuson: Yes. So when you look at, for instance, everything going on in Decisioning Studio, those are reinforcement learning models that are proprietary to Braze, Inc. They are trained with our customers' data. The data is being fed through the Braze Data Platform. When you look at Agent Console, that is a combination of context engineering that is being done by Braze, Inc. that I spoke about earlier, but of course it is relying on the foundational models to be able to provide the broad-based reasoning and personalization capability. That is a big part of the distinction that I made earlier as well because there is no one size fits all. And while there is a lot of work that the foundational models can do and a lot of great opportunity for them to be able to do things like personalization once you already have a recommendation algorithm that has narrowed down the choices and you want to write an email that is maybe comparing the top choices for someone so that they can compare and contrast and you can drive up the conversion window, we have also found that being able to combine reinforcement learning with the intelligence that is in the foundational models is actually the best approach to not only get the highest performance, but to be able to improve it over time. I am sure you have seen in your own experimentation with LLMs that being able to continue to understand what is driving their performance and improve it over time is more of an art than a science. The explainability and observability within them and the attribution of what data really drives better outcomes for them is still a very hard, unsolved problem. Within Decisioning and within the reinforcement learning engine, we are able to actually see what data is moving the needle, and what can be thrown out, what can be optimized, and then go and search for more signals that are along the lines of the ones that are really driving better uplift, etc. So I think that is why we think that the right approach here is multifaceted. It is multifaceted both from a data source perspective, which is why you see the investment and the scale and the composability in the design of the Braze Data Platform, and then also one where you need to be using multiple approaches to assemble context and utilize your own bespoke training alongside, of course, the formidable intelligence that exists in the frontier models. Operator: Your next question will come from Sitikantha Panigrahi with Mizuho. Sitikantha Panigrahi: Thanks for taking my question. It is good to see some of this AI momentum. I want to ask specifically on OfferFit. It has been a year almost since acquisition. What kind of discussion you are having with your installed base? What kind of traction are you seeing cross-selling to the installed base? And then specifically, on the margin side, I know there are some plans there to improve it. What kind of progress are you making on improving margin for OfferFit? Isabelle Winkles: Yes. So I think just on the installed base, that is the primary area where the sales and the upsells are happening—is, in fact, within our installed base. There is a lot of momentum. The pipeline is strong. There is a lot of interest. And then on the margin front, yes, look. There is a growth element here where, as we bring on the necessary staff to enable the implementations and onboardings for customers buying it, we have to handle that expense. And that does mix into margins as well. But we are very focused on that, and we have been continuing to work on the product. And we are also working on expanding product tiers to include products that are a little bit more self-service, and those will also mix in with higher margins as well. So a number of things in flight to continue to work on that. But we are just excited overall for the momentum with our existing customers and how it is shaping up. Operator: There are no more questions at this time. I will now turn the call over to William for closing remarks. William Magnuson: I want to thank everybody for joining us today. As I mentioned, we are excited for City x City London in about a month, and then we will see you after Q1.
Operator: Good day, everyone, and welcome to MaxCyte, Inc.’s fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question-and-answer session. To participate, you will then hear a message advising your hand is raised. To withdraw your question, simply press star 11 again. Please note, this conference is being recorded. I will now turn the call over to Erik Abdo with Investor Relations. Please proceed. Erik Abdo: Good afternoon, everyone. Thank you for participating in today’s conference call. Joining me on the call from MaxCyte, Inc., we have Maher Masoud, President and Chief Executive Officer; Douglas J. Swirsky, Chief Financial Officer; and Sean Menargas, Senior Director of Business Development. Earlier today, MaxCyte, Inc. released financial results for the fourth quarter and full year ended 12/31/2025. A copy of the press release is available on the company’s website. Before we begin, I need to read the following statement. Statements or comments made during this call may be forward-looking statements within the meaning of federal securities laws. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance, are forward-looking statements. Actual results may differ materially from those expressed or implied in any forward-looking statements due to a variety of factors, which are discussed in detail in our SEC filings. Except as required by applicable law, the company has no obligation to publicly update any forward-looking statements whether because of new information, future events, or otherwise. I will now turn the call over to Maher Masoud. Maher Masoud: Thank you, Erik. Good afternoon, everyone. Thank you for joining MaxCyte, Inc.’s fourth quarter and full year 2025 earnings call. 2025 presented a challenging operating environment. It was also a year of meaningful progress for MaxCyte, Inc. We continue to sign new Strategic Platform Licenses, SPLs as we call them, and support customers in advancing drugs to the clinic. We acquired SecurDx, and successfully integrated the business into MaxCyte, Inc. We made meaningful changes to right-size spending and strategically improved our operations. And most recently, we launched a new product, the ExPERT DTX, that will allow us to work with developers earlier in research and development discovery. Let me start by reviewing our financial results. Consistent with the preliminary financials we announced in January, MaxCyte, Inc. reported $33 million of total revenue for the full year, which included $29.6 million of core revenue and $3.4 million of SPL program-related revenue. We grew our instrument installed base to 857, up from 760 at the end of 2024. Douglas will discuss fourth quarter and full year performance in greater detail. MaxCyte, Inc.’s results were within the range of expectations that we had updated you with in August. As previously discussed, the business was impacted by program consolidation and rationalization across some of our SPL customers, which included a 15% decline in purchases and leases from our largest customer reorganizing manufacturing and managing inventory. Now let me give you a little more detail on the launch of our new ExPERT DTX, which I mentioned earlier, and I am very excited to discuss. Even as we faced headwinds in 2025, our focus remained on innovation and leading the market with groundbreaking platforms. In February, we announced the launch of ExPERT DTX, a modular 96‑well electroporation platform designed for research and drug discovery applications. We are very excited about what this product represents for MaxCyte, Inc. The DTX enables labs to transfect primary cells and cell lines across up to 96 samples in a single three‑minute run, with consistent well‑to‑well performance that effectively eliminates transfection as an experimental variable. It is one of the most cost-effective 96‑well electroporation solutions on the market, with detachable eight‑well strips that can be processed with unique parameters, giving researchers the flexibility to test different cell and cargo combinations in parallel while reducing waste. The software is also differentiated. DTX Designer allows users to design experiments remotely and upload workflows when the system is available, maximizing instrument pipeline. That is a real practical advantage for labs running multiple back-to-back experiments. What makes the DTX strategically important is its full compatibility with the rest of the ExPERT platform. A researcher can optimize a process on the DTX in discovery and transfer it directly to MaxCyte, Inc.’s larger scale electroporation, the ATx, STx, or GTx, for scale-up into cGMP-compliant manufacturing without reoptimization. That is a powerful value proposition, which allows us to engage with customers at the very earliest stage of the workflow and provide a seamless path from discovery through to the clinic and commercialization, all on a single platform, which is the epitome of a therapeutic platform. We built this product around our customers’ needs, and we believe it will be additive to both instrument and Processing Assemblies, PAs, revenue in 2026 and beyond, as well as allow us to grow our SPL customers. We have built years of electroporation know-how and expertise into DTX, and I am confident we launched a product that will allow researchers to seamlessly progress from discovery to the clinic onto our GMP ExPERT platform. Turning to our guidance. As we enter 2026, the challenges that impacted growth in 2025 will have an impact on 2026. For our 2026 guidance, we expect total revenue to be in the range of $30 million to $32 million, consisting of $25 million to $27 million of core revenue, and $5 million of SPL program-related revenue. Given the timing of purchases and leases, we expect Q1 to be our lightest quarter for core revenue with a back half–weighted year. Included in our guidance is the impact of a recent notice received from an SPL customer terminating their license for reasons unrelated to our platform’s performance, along with approximately $4 million in core revenue headwind from select SPL customers, which began to impact our revenue in 2025, which I will provide further detail. We continue to believe that the headwinds facing our business are a result of the conservation of capital by biotechs in the cell therapy space, rationalization of customer programs in ex vivo cell therapy, and inventory management at our largest customer, which we expect to stabilize in 2026 and grow from that new base. There has been no fundamental change in the demand for our technology and the differentiation of our technology competitively. While these short-term headwinds influenced our revenues last year and the first half of this year, we are more excited than ever about our SPL programs and the business model, which is seeing multiple programs progressing deep into the clinic and much closer to potential commercialization. As I mentioned, embedded within the core revenue guidance, we expect revenue from SPL customers, including our largest customer, to be a $4 million headwind relative to 2025. This is about half from processing assemblies, and half from leases, a result of two factors. First, our largest customer reorganized our supply chain in 2025, impacting inventory management of PAs. Additionally, in 2025, due to manufacturing site reorganization, there was a reduction in leases midyear, so the full-year lease revenue for this customer has a difficult comparison to last year. Following in-depth conversations with this customer, we expect both PAs and leases will stabilize during 2026. Second, other SPL customers rationalized programs in 2025. On a net basis, we lost six SPL clinical programs during the year. The annualized revenue from the discontinued programs, including leases and PAs, will not recur in 2026, reflecting the headwind mentioned earlier. Twelve clinical programs we currently support are across 11 SPL partners, highlighting continued investment on the lead asset. This rationalization is part of our business model as we expect a certain number of biotech programs to discontinue. But we are consistently signing new SPLs and supporting later-stage clinical programs, which will eventually be commercialized utilizing our platform. In the last 24 months, we signed 10 new SPLs, and are now supporting more later-stage programs than ever. Also embedded within our core revenue guidance, we expect revenue growth for our non-SPL customers, which is inclusive of growth from SecurDx. With regards to SPL program-related revenue, as I shared, we are guiding to $5 million in 2026. Note, we received a seven-figure milestone payment from a clinical customer that began dosing patients in a pivotal study in the first quarter. The balance of the SPL program-related revenue guidance includes approximately $2 million of expected royalty revenue from our commercial-stage customer as the therapy ramps throughout the year. Despite these near-term headwinds, we are very encouraged by the medium-term opportunity, with five clinical programs to enter pivotal studies over the next 18 months and potentially receive commercial approval in 2027 or 2028. As I mentioned, one of these five programs began dosing patients in its pivotal study in 2026, triggering the milestone payment I referenced earlier. These programs include zuma‑cell from CRISPR Therapeutics, for B‑cell malignancies; Wu‑CAR‑T‑007 from WuXi‑GENE, for hematologic malignancies; Asia‑cell from Imugene for hematologic malignancies; and two programs from undisclosed SPL partners. I believe up to four of these programs will be pivotal by the end of the year. Outside the wave-two programs I just covered, there are another seven active clinical programs in earlier stages of development that continue to pursue FDA approval beyond 2028, and can represent meaningful core revenue and SPL program-related revenue for MaxCyte, Inc. over time. Across these programs, the total milestone opportunity exceeds $110 million. Today, we have received over $30 million in total milestone payments from our SPL customers, highlighting the strength of our portfolio-based, program-driven business model. We have 31 SPL agreements, including four new SPLs in 2025. Eleven SPL customers we work with have current clinical and commercial programs, while another eight are active in preclinical development, most of which we believe will become clinical SPL customers. However, 12 of the SPL agreements are with biotechs that are no longer active, having exited ex vivo or ceased operations. The 12 that are no longer active are part of our business model, as we do not expect every SPL we sign to result in a commercial program. There is meaningful revenue opportunity from newer SPL customers advancing toward entering the clinic. As I mentioned earlier, despite significant consolidation in 2025, SPL customers continue to advance assets on our platform, including up to six programs in late-stage preclinical development expected to enter the clinic within the next six to 18 months. This reflects continued expansion of our SPL portfolio beyond our current later-stage programs. Today, we support one commercial therapy, CASGEVY, and we remain very encouraged by the opportunity for the drug to continue to scale, with both Vertex and CRISPR recently reiterating CASGEVY’s multibillion-dollar potential. During Vertex’s most recent earnings call, it reported $116 million in CASGEVY revenue for 2025, including $54 million in the fourth quarter. Vertex noted that 147 patients with sickle cell disease or transfusion-dependent beta thalassemia globally had their first cell collections in 2025, and 64 patients received CASGEVY infusions, with 30 of those occurring in the fourth quarter. The momentum in patient collections is notable, and Vertex has indicated they expect a meaningful CASGEVY ramp in 2026 versus 2025. Despite the possibility of short-term quarter-to-quarter variability as the drug scales, we are optimistic about where this therapy is headed and truly believe in its transformative potential for patients around the world. To wrap up on the SPL portfolio, while any individual program carries risk, the multiple shots on goal we have across the same indications and across many different indications give us a high probability of generating meaningful core revenue with regulatory milestones and commercial revenues over time. We are now seeing the growth in commercial royalties starting to materialize in our revenue. This reflects the strength of our innovative business model, and we expect this trend to continue in the coming years as additional therapies are commercialized by our SPL customers. That conviction is what drives the decisions we make about how to operate this business. Moving to SecurDx, I believe 2026 is the year where the SecurDx opportunity starts to become more visible. We spent 2025 integrating the business, building the commercial pipeline, and working with early customers. The regulatory environment continues to evolve in our favor. Off-target risk assessment is becoming increasingly important to the FDA and other global regulatory agencies when reviewing gene-edited therapy. Our three assays—screening, nomination, and confirmation—serve both ex vivo and in vivo developers, which means SecurDx’s addressable market extends well beyond our legacy electroporation customer base. We acquired a relatively new start-up with an emerging and leading technology. Despite 2025 coming in lower than expectations, we expect year-over-year growth for SecurDx assay services and licenses in 2026. I remain very optimistic about SecurDx’s commercial potential and expect it to be a growing contributor to revenue in the years ahead. I want to underscore that we are entering 2026 with a fundamentally different cost structure than in prior years. While we are still investing at a rate that allows us to launch new products like ExPERT DTX, we have reduced annual cash burn by over $16 million and have put MaxCyte, Inc. on a dramatically different spending trajectory than what was planned in the prior operating model. This is the direct result of the restructuring and cost-efficiency actions we took in 2025. We do not expect to meaningfully grow our operating expenses from here, and we see a clear path to reducing cash burn further as revenue growth returns. We have a strong and healthy balance sheet, which allows us flexibility in capital allocation and investment decisions. Finally, as previously announced, Parmeet Ahuja will be joining MaxCyte, Inc. as Chief Financial Officer, succeeding Douglas J. Swirsky effective March 30. Parmeet brings more than two decades of finance leadership experience at Agilent Technologies, a global life sciences tools company. Over his career there, he held a number of senior roles spanning financial planning and analysis, operational finance, internal audit, and enterprise financial services. In particular, he led FP&A for Agilent’s global operations and supply chain organization and earlier headed controls, audit, and SOX, working directly with the board’s audit committee on risk and controls. Parmeet also most recently led Agilent’s investor relations function, giving him direct experience communicating with the investment community. We are excited about the breadth of his operational finance and governance experience as we continue to scale the company and strengthen our financial infrastructure. I want to thank Doug for his contributions to MaxCyte, Inc., and will now turn the call over to Doug to discuss our financial results. Doug? Douglas J. Swirsky: Thank you, Maher. Total revenue for the full year was $33 million compared to $38.6 million in 2024, representing a 15% decline. Total revenue in Q4 2025 was $7.3 million compared to $8.7 million in Q4 2024, representing a 16% decline. The decline in total revenue was driven by decreases in both core revenue and SPL program-related revenue. In Q4 2025, we reported core revenue of $6.8 million compared to $8.6 million in the comparable prior-year quarter, representing a decrease of 22%. Within core revenue, instrument revenue was $1.8 million compared to $1.6 million in Q4 2024. License revenue was $2.0 million compared to $2.6 million in Q4 2024. And PA revenue was $2.3 million compared to $4.2 million in Q4 2024. For the full year 2025, we reported core revenue of $29.6 million compared to $32.5 million in 2024, representing a decrease of 9%. Within core revenue, instrument revenue was $6.8 million compared to $7.1 million in 2024. License revenue was $8.9 million compared to $10.3 million in 2024. And PA revenue was $11.9 million compared to $14.0 million in 2024. These declines were partially offset by $0.8 million of assay service revenue from the acquisition of SecurDx and a modest increase in other service revenue. Total revenue for SecurDx was $1.1 million in 2025, including assay services and licenses. Of note, 47% of our core business revenue was derived from SPL customers in 2025, which compares to 55% in 2024. The year-over-year decrease reflects the impact of program exits and reduced purchasing activity from our large commercial-stage partner. SPL program-related revenue was $0.5 million in Q4 2025 compared to $0.1 million in Q4 2024. For the full year, SPL program-related revenue was $3.4 million as compared to $6.1 million in 2024. As it relates to SPL program-related revenue for 2025, $2.3 million was from milestone payments, and $1.2 million was from royalties. Moving down the P&L, gross margin was 78% in Q4 2025 compared to 74% in Q4 2024. Excluding inventory provisions and SPL program-related revenue, non-GAAP adjusted gross margin was 78% in Q4 2025, compared to non-GAAP adjusted gross margin of 84% in Q4 2024. Total operating expenses for Q4 2025 were $9.0 million compared to $19.3 million in Q4 2024. Part of these savings is attributable to the cost initiatives we took in 2025, which began to materialize in 2025. Excluding a non-cash goodwill impairment of $3.6 million in the fourth quarter, operating expenses decreased more substantially from the prior-year quarter. The overall decrease in operating expenses was primarily driven by the restructuring and cost-efficiency actions we took in 2025. We ended 2025 with combined total cash, cash equivalents, and investments of $155.6 million and no debt. Our very strong balance sheet positions us well moving forward, providing us with flexibility to continue to invest strategically for our business, customers, and shareholders. Finally, we anticipate at least $136 million in cash, cash equivalents, and investments at the end of 2026. This represents a significant reduction in cash burn from prior years, a result of the restructuring and cost-efficiency actions we took in 2025. Let me close my remarks by saying it has been a privilege to serve as MaxCyte, Inc.’s CFO. I know that the company is in good hands with Maher and the rest of the team, including Parmeet. I will now turn the call back over to Maher. Maher Masoud: Thank you, Doug. It has been a pleasure working with you as our CFO as well. I want to thank everyone at MaxCyte, Inc. for their hard work and dedication in 2025. I look forward to executing on our plan in 2026. With that, I will now turn the call back over to the operator for the Q&A. Operator? Operator: Thank you so much. And as a reminder, to ask a question, simply press 11 to get in the queue and wait for your name to be announced. To withdraw yourself, press 11 again. One moment for our first question. Our first question comes from the line of Dan Arias with Stifel. Please proceed. Dan Arias: Hi, guys. Thanks for the questions. Maher, I have to say I really do not like the trajectory of the business right now. Pretty much all the commentary coming out of life sciences companies points to biopharma getting better this year and not worse. Our data points and others seem to suggest the same. When you look at the industry data that is out there on the emerging modality space, cell therapy trial activity seems to be increasing pretty significantly. Trial totals are way up. And so I appreciate the idea that there is some hangover from a tough ’25. But why is the core business expected to decline more this year than it did last year? Are you losing share somewhere? Because if not, then it really suggests that there is something else going on that we do not fully understand. And then ultimately, the question becomes, how do you grow this business again? Maher Masoud: Thank you for that, Dan. Look, I appreciate the question and the head-scratcher. The headwinds we are facing are $4 million, and it comes down to it is not a deterioration of our business in any way. It is not changing the fundamentals of our business in any way. We have about a $4 million headwind that we face from the customers that we lost last year. That is affecting our revenues this year, and most of it in the first half of the year. So that comes, as I mentioned, pretty much half and half. Half from the leases that we lost from those SPL customers that will not recur this year, and the other half really is from processing assemblies, a lot of it being from our largest customer that went through management and inventory management of their current PAs that they have in stock, where they are drawing down from those PAs. And on top of that, from midyear, we lost some licenses for that largest customer where they reoptimized their manufacturing footprint to go from a few manufacturing sites to a little bit less than that. And that has affected our revenues for 2026. This is not a case of capital spending in the market that is affecting us. I think we saw that more so in early 2025. That is not the case here. I really believe that this is just short-term headwinds. And in terms of where we see the rest of the year and going into 2027 and 2028, then look, if you take a step back, I believe we are going to be supporting roughly four pivotal-stage programs this year, and then five in the next 12 months. We have another seven behind it as well coming in right now that potentially can become pivotal as a second wave there. That bodes extremely well for 2027 and 2028. We also have the launch of the ExPERT DTX, as I mentioned. We are seeing a lot of good traction. We launched it less than a month ago. We are seeing a lot of good traction with customers and potential customers. We believe it will be a growth driver for us in the second half and in future years. In addition to that, we are seeing the ramp of CASGEVY. As I mentioned, we expect it to ramp throughout the year. That is the only commercial product we are supporting now, but we expect many others, especially because right now, as I mentioned, we are supporting more later-stage programs than ever before, Dan. So this bodes very well for us going to the end of the year, in 2027 and 2028. We are continuing to sign new SPLs. We feel confident we continue to sign new SPLs. I feel very good about this, Dan. Dan Arias: Does the outlook for core revenues assume that the industry demand dynamic improves over the course of the year? Or would that be upside to what you have baked in today? In other words, is your 4Q outlook at the industry level similar to what you have today, excluding the individual customer dynamic that you referenced there? Maher Masoud: That would be upside to what we have right now. So this is not a case where we are waiting for industry to come back for us to meet our core revenue guidance. That will all be upside from here, Dan. I feel very good where we are. I mean, the current guidance with the current situation we are in right now, if there is further industry demand, that is upside from where we are guiding to this year. Dan Arias: Okay. Thank you. Maher Masoud: Thank you, Dan. Operator: Thank you. Our next question comes from the line of Matt Hewitt with Craig-Hallum Capital Group. Please proceed. Matt Hewitt: Good afternoon. And, Doug, it has been a pleasure working with you and best of luck in your future endeavors. Maybe first up, could you talk—I realize you just launched it last month—but given that this was built, the DTX that is, was built with the customer in mind, I assume that you had been working with them or at least they had maybe trialed it or kicked the tires a little bit. What does that pipeline look like, and how quickly do you think you could see that start to trickle into the revenues? Maher Masoud: We see it trickling into revenues in the second half. Anytime we launch a new product, we need about a quarter or two quarters to really build up the pipeline for that product. That is true of any product you launch. But it is already in the hands of multiple beta users. It has been in the hands of multiple beta users. When we launched this product, we did it the right way. We actually listened to our customer needs. We went through the typical NPI process where we understand the user criteria, the customer criteria, the application criteria, and we built it with that in mind. So we see the trickling starting in the second half, but we are also seeing right now some DTXs being sold in the first quarter before it is even over. So it is obviously starting to make traction there as well, Matt. But we see significant traction happening in the second half and then in future years as well. I feel very good where it is. It really is a platform that allows us to go from discovery all the way to cGMP with the same protocols. That is a true therapeutic platform that none of our competition has. Matt Hewitt: Got it. And then maybe just a reminder, given that you have four partners that could be going into pivotal studies this year, how do you account for or how do you factor that into your guidance? What kind of a haircut do you take on the potential for those milestones? Thank you. Maher Masoud: We already received one milestone, a seven-figure milestone, in Q1 this year. You can haircut it by saying there might be at least one more, but we anticipate four more. One other customer is currently in pivotal, about to dose patients, that will result in another milestone as well. So at the very least, looking at two of those four, with potential for four this year. It is more of a timing issue. If the remaining two do not come in this year, that is just because those milestones happen in the first quarter or very early part of next year. But that is how you would haircut it. The very least will be two of those four, but potential for four this year. Matt Hewitt: Got it. Understood. Thank you. Maher Masoud: Absolutely. Thank you, Matt. Operator: Thank you. One moment for our next question. That comes from Matt Larew with William Blair. Please proceed. Jacob: Hi. This is Jacob on for Matt. Thanks for taking the questions here. I just want to touch on the SPL cadence. I do not know if you mentioned on the call, but typically, you guide to three to five per year, and you typically have signed or at least announced one by the end of the first quarter. I think the last signing was in October 2025, and biotech funding trends and the whole market environment have really been improving since then. So just curious on your visibility and confidence into the cadence of SPL signings throughout 2026 and maybe what you are expecting for this year and in perpetuity. Maher Masoud: We have guided to three to five in the past. That is a number where, on average, that is something we sign in any given year. We feel good about signing at least three this year as well, and that three-to-five frames with some years where we have more than that and some years less than that. We foresee that we will sign the first one—I have Sean Menargas here with me and will put pressure on him—in the very early part of the second half of the year, possibly even before that. But I feel very good where we are. We are still the only company that can assign these licenses, and there is a good reason for it. What we provide is a differentiator. What we provide is really a platform that allows companies to go into clinical and commercial and scale and have a therapeutic that has the best chance of going through clinical development. We have done it with CASGEVY. We have signed 31 of these agreements. We signed four last year. I feel very good this year. We will continue to sign more, and do the same in the foreseeable future. And the DTX also adds to that. As I mentioned earlier, the DTX begins to seed that aspect of future SPL partners and customers for us. So I feel very good where we are. The timing of Q1, having not signed one, is just a matter of timing of when we are working with our customers in the research process, not in any way indicative of a reason why we have not signed one, if that makes sense. I am going to turn it over to Sean. Is there anything that you have to add in terms of where you see the signing? I am putting pressure on you here, but do you feel comfortable with this year as well? Sean Menargas: Thanks, Maher, and thanks for the question, Jacob. I do strongly believe it becomes a timing aspect as well. Just to frame your preference, our research customers turn into our SPL customers from there, and these can take 12 to 18 months depending on their development stage, so it becomes a timing aspect as well. But in the last 24 months, we have signed 10 SPL partners. Almost all of them are in the clinic or at least approaching the clinic from there, so looking to continue to add through this year. Jacob: Got it. Thanks. And I did just want to quickly go back to the launch of the DTX platform. You have covered it in pretty good detail so far. It sounds like feedback, traction, early contributions have all been really good. But is there any way you could quantify what you are expecting in the back half, or is it more just kind of a slow trickle and really expect material contributions in 2027? Maher Masoud: It is too early in the process. It has been a month since we launched it, and it will probably be more than a trickle in the second half. That is where you begin to see meaningful revenues in the second half and a lot more so in 2027. I will update throughout the year. Again, we are seeing very good traction at the beta sites. We are seeing good traction even outside the U.S. We have seen sales in Asia‑Pac as well. It is something that we truly believe differentiates us from any other platform. There are similar 96‑well discovery platforms out there, but none that can optimize the cGMP system like this one can, and none that can do it on a well‑to‑well basis with the same consistency, and really none that can do it where we have built into this our 20‑plus years of electroporation know‑how into this platform to make it streamlined for customers. So I feel very, very good about this, Jacob. Very good. Jacob: Great to hear. Thanks, guys. Maher Masoud: Absolutely. Operator: Thank you. Our next question comes from Mark Massaro with BTIG. Please proceed. Vivian: Yes. This is Vivian on for Mark. Thanks for taking the questions. I just had two clean-ups on the 2026 guide. Just what is baked in as far as SecurDx contribution? And then I also think you have called out royalty contribution for the first time in the guide. So could you speak to your level of visibility and confidence in that, given it is from a partner therapy? Thanks. Maher Masoud: On SecurDx, we do not break it out in the guidance, other than the fact we see material growth year over year for SecurDx in 2026 versus 2025. Significant growth there from what we had last year. Obviously, last year’s revenue for SecurDx was a bit disappointing, but it was part of our integration. We bought an early start-up. We are still integrating it, and we are still ensuring that we are building up the processes there, really building up the platform there. So we see meaningful growth this year, and that is part of our guide. In terms of royalties, we finally broke out the royalty revenue. I mentioned earlier, we expect approximately $2 million of revenue from commercial royalty, and that will ramp up throughout the year as that product ramps itself. We feel fairly good about that. That is based on forecasts we have seen with that product from public forecasts as well as what we are seeing so far early this quarter. But we expect that ramp to happen over the year. We will continue from here on out to guide for milestones and royalty on a separate line as well. Vivian: Okay. Perfect. And then I just had one follow-up, kind of higher level. I think you have previously mentioned the dynamic that customers are opting for in vivo therapies over ex vivo. So could you discuss how you are seeing an opportunity for more complex edits longer term and maybe over what time frame would you expect that customer appetite to transition to ex vivo edits? Maher Masoud: We have been seeing the complexity of editing increase over the years. This is no longer the single‑base CAR‑T therapy. We are now seeing edits of five, six edits. I see what you are getting at regarding in vivo versus ex vivo. We are still a huge believer in the actual cell therapy space. In fact, we are seeing that start to return as well. We have had some headwinds there, but if you look at our programs, we have allogeneic programs, we have autologous programs, all progressing. The SPLs that we are signing right now are cell therapy programs, some of which are even coming back where at one point they were not in the clinic and now they are coming back to the clinic. I am a huge believer in the cell therapy space. I think as these therapies become far more complex, as we are seeing, it lends itself to cell therapy, especially cell therapy electroporation. You can control the safety, you control the dose, and the science is catching up. Our platforms are built for that. That is exactly what it is. So we are seeing that come back. That is what makes me feel very good about going into the second half of the year. It makes me feel even better about 2027 and 2028. That complexity lends itself to our business, and it lends itself to what we have built over the last decade. And we are seeing that traction start to come back to cell therapy. Vivian: Okay. Perfect. Thanks for taking the questions. Maher Masoud: Excellent. Operator: Thank you. Our next question is from Matt Etoge with Stephens. Please proceed. Matt Etoge: Hey, good afternoon. Thanks for taking my questions. Maybe to follow up on Dan and Jacob’s questions. We have seen funding pick up in the space in general. So I just want to get your sense of what you are hearing from customers in terms of the macro environment, what you are seeing in terms of demand. How should we think about the recent funding backdrop flowing through potential demand throughout FY ’26? Maher Masoud: Great question. As I mentioned, this is not so much anymore a demand issue or customer funding issue. This is about the headwinds we saw, and that is what affected us in Q1. This is more of a second‑half‑weighted guide that we are giving in that core revenue of $25 million to $27 million. We are sitting here right now about one week away from quarter end. This is not official guidance, but looking at where we are on the core, we see that upticking into Q2 and then being more second‑half weighted. I feel comfortable that $6 million on the core is appropriate for Q1, and none of that is contingent upon an upside in capital spending or customer demand. That is just where we sit right now. I feel extremely good where we are at the guide. I feel good where we are in Q1. This is a case of just building back a new base from the SPL customers that we lost in 2025. We found a new base here. Our largest customer is optimizing the processing assemblies, and they are drawing down from the inventory they have. We found a new base there. I feel very good about the year as it transpires. I appreciate it. I will leave it there for now. Thank you. Operator: Thank you. And as a reminder, if you have a question, please press 11 to get in the queue. We have a question from Chad Wiatrowski with TD Cowen. Please proceed. Chad Wiatrowski: Congrats, Doug. Look forward to seeing what your plans are going forward. Just one on the DTX. You have mentioned a few orders already flowing through here in the first quarter. When you are thinking about those couple of orders, but also the bolus more in the second half, are those mostly existing customers enjoying the convenience of that? Or is this something that enables more newer customers? And how do you expect that mix to play out through the year? Maher Masoud: Great question. The current customers are going to be the easiest ones to convert over because they are going to enjoy the aspects of it. Those are the ones we are approaching. But this is a mix of both. It is not just for current customers; it is also for new customers. Because this is a 96‑well discovery platform that can now allow you to transfect primary cells, this can be used for early discovery for the in vivo space as well. So this is, in essence, a platform we have never had before, which we are targeting for our current customers now, but we are prospecting for future customers as well. We are seeing that in the early placements. Actually, one of those early placements is a new customer. It is not a current customer. So it is a mix of both, but we are being very smart about it and ensuring that we work with our current customers because that is also where you learn about some of the things you may have to make improvements on any time you launch a product. I have said it earlier: innovations are hard. We are going to continue to innovate this product. We are going to continue to launch new products in the coming years. This is one of many to come. Operator: Thank you. This concludes our Q&A session. I will now pass it back to Maher Masoud for closing remarks. Maher Masoud: Thank you, operator, and thank you, everyone, for joining us on today’s call. I feel very good about 2026, just as good as, if not better than, the future years and what we are building here. I look forward to talking to all of you in the next three months on our next earnings call. Operator: This concludes our conference. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Absci Corporation fourth quarter and full year 2025 business update conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, we will open for questions. To ask a question during the session, you will need to press 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today’s call is being recorded. I would now like to hand it over to our first speaker, Alex Khan, Corporate Vice President, Investor Relations. Please go ahead. Alex Khan: Thank you. Earlier today, Absci Corporation released financial and operating results for the quarter and full year ended December 31, 2025. If you have not received this news release or if you would like to be added to the company’s distribution list, please send an email to investors@absci.com. An archived webcast of this call will be available for replay on Absci Corporation’s Investor Relations website at investors.absci.com for at least 90 days after this call. Joining me today are Sean McClain, Absci Corporation’s Founder and CEO; Zach Jonasson, Chief Financial Officer and Chief Business Officer; and Ronti Somerotne, Absci Corporation’s new Chief Medical Officer. Before we begin, I would like to remind you that management will make statements during the call that are forward-looking within the meaning of the federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to differ materially from those anticipated and you should not place undue reliance on forward-looking statements. These include statements regarding the development and clinical progress of ABS-201, anticipated clinical trial design, enrollment, and timelines; expected clinical data and their timing; anticipated characteristics and product profile of ABS-201 as a drug product; our target product profile and attributes; the potential for an expedited development pathway, including the possibility of advancing directly from Phase 1/2a into Phase 3; our planned engagement with the FDA regarding development strategy; and potential market opportunity and commercial prospects for ABS-201. Certain statements may also include projections regarding potential market opportunity. These estimates are based on various assumptions, including potential regulatory approval, the final approved label, and the evolving competitive landscape, any of which could cause our actual addressable market to differ materially from these projections. In addition, certain research findings discussed today reflect participant responses to a hypothetical product profile and do not represent clinical results for ABS-201. Additional information regarding these risks, uncertainties, and factors that could cause results to differ appears in the section titled “Forward-Looking Statements” in the press release and on our website issued today, and in the documents and reports filed by Absci Corporation from time to time with the Securities and Exchange Commission. Except as required by law, Absci Corporation disclaims any intention or obligation to update or revise any financial or product pipeline projections or other forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast, March 24, 2026. With that, I will turn the call over to Sean. Sean McClain: Thanks, Alex. Good afternoon, everyone. Thank you for joining us for our fourth quarter business update call. We had a strong fourth quarter. ABS-201 is in the clinic, and we have dosed our first three SAD cohorts in our Phase 1/2a headline trial with favorable emerging safety data. We expanded into endometriosis as a second multibillion-dollar indication, and we published what we believe is the first demonstration of de novo, full-length antibody design to zero prior epitopes. I will walk you through each of these today. Also on the call today is Dr. Ronti Somerotne, our new Chief Medical Officer. Ronti spent nearly two decades in clinical development across multiple therapeutic areas at Amgen, BioMarin, and most recently Vertex, where he served as SVP of Clinical Development and Translational Medicine. At Vertex, he was instrumental in the development of Gernabix, the first NaV1.8 inhibitor approved for acute pain, leading it from late-stage development through FDA approval. That registrational experience is exactly what we need as ABS-201 advances toward proof of concept and, if successful, into registrational trials. He will walk you through the clinical development program in detail shortly. I also want to acknowledge Andreas Boesch who retires this month. Andreas built our drug creation organization from the ground up, integrated our AI design capabilities with our wet lab platform, and recruited the leadership team that will carry that work forward. He will continue as co-chair of our scientific advisory board. Andreas has been more than a colleague to me. He has been a trusted partner and a friend. Our development operations are in excellent hands on the foundation he built. Our KOL advisory networks for both AGA and endometriosis continue to expand. You heard from Professors Paz Sinclair and Dr. Goldberg at our December seminar, and we have now assembled a dedicated endometriosis advisory board of esteemed experts that is actively shaping our Phase 2 trial design and endpoint selection. In December, we hosted a seminar on ABS-201 for AGA. We trained the Absci Corporation team and several of our KOL advisers. A full replay is available on our website. Durable hair regrowth remains a significant unmet need in AGA, with current approved therapies showing meaningful limitations in long-term efficacy for patients. ABS-201 was designed with the aim to change that. During the seminar, we presented human ex vivo data demonstrating the prolactin mechanism in androgenetic alopecia. Working with Professor Paz using translational human ex vivo scalp models, we showed that ABS-201 stimulates hair growth by regenerating the stem cell niche. Inhibition of prolactin receptor signaling correlates with prolongation of anagen and restoration of growth signaling, preservation and expansion of the stem cell niche, and potential for follicular reconversion from vellus to terminal hair follicles. Importantly, ABS-201 showed growth-promoting effects without exogenous prolactin, meaning it effectively neutralizes locally produced intrafollicular prolactin signaling. The clinical implication is significant. We believe ABS-201’s mechanism is not limited to patients with elevated systemic prolactin but that it can engage the target in anyone who has active local prolactin receptor signaling. ABS-201 was engineered with an extended half-life designed to support infrequent dosing. In preclinical studies, it demonstrated a three- to four-fold longer half-life than the competitor antibody. We believe this profile may enable a convenient dosing regimen of just two to three administrations for durable, multiyear hair regrowth. Looking at our clinical timeline, we anticipate sharing preliminary safety, tolerability, and PK data for our ongoing headline trial in the first half of this year. That will be followed by an interim 13-week proof-of-concept data readout, including exploratory efficacy endpoints, in the second half. Full 26-week proof-of-concept data will come in early 2027. Ronti will discuss the trial progress in more detail shortly. As a reminder, we intend to use safety, tolerability, and PK from the ongoing ABS-201 study to support initiation of the Phase 2 clinical trial in endometriosis in Q4 this year. The engagement we have had with endometriosis patient advocacy groups and KOLs has reinforced our conviction. This condition has been underserved for decades, and patients need better options. Endometriosis is estimated to affect approximately 10% of women of reproductive age worldwide. There is currently no FDA-approved disease-modifying therapy. Current medical and surgical management strategies have significant limitations. ABS-201 targets a non–sex hormone pathway distinct from existing hormonal therapies. Our preclinical data, combined with positive Phase 2 results from a competitor anti–prolactin receptor antibody validating the mechanism in humans, support the potential to modify disease progression, address both pain and lesion growth, and offer a differentiated safety profile. Beyond ABS-201, our other programs—ABS-101, ABS-301, and ABS-501—continue to progress. Each of these we see as better suited for a partner, and we remain engaged in discussions with multiple strategic parties. This allows us to focus our resources on ABS-201 and invest in additional early-stage programs. Our strategy is to go after underexplored targets in large markets where unmet need is significant and competition is low. That is where the platform creates the most differentiation and where we see the highest return on our R&D investment. To put a number on it, we have advanced our first two programs from AI design to IND in approximately two years at roughly $15 million investment per program, compared to an industry standard of four to six years and $50 million or more. Earlier this year, we published details on OriginOne, our generative AI platform for de novo antibody design, integrated with our lab-in-the-loop validation. OriginOne designs full-length antibodies against zero prior epitopes—targets with no reported complex structure. It generates lead candidates by screening fewer than 100 designs per target, with atomically accurate predictive structures and confirmed functional activity. But the value of the platform is measured by the assets we create. We are expanding our pipeline and expect to advance additional programs. We will provide updates as those programs mature. With that, I will turn it over to Ronti to walk you through the ABS-201 clinical program. Ronti? Ronti Somerotne: Thanks, Sean. Good afternoon, everyone. It is great to be here. My name is Ronti Somerotne, and I am thrilled to be joining the Absci Corporation team as Chief Medical Officer. I am a cardiologist and internist by training, and I have had the opportunity to work at great organizations such as BioMarin and Amgen, and most recently Vertex Pharmaceuticals, where I served as Senior Vice President of Clinical Development and Translational Medicine. I have been fortunate enough to lead clinical development of groundbreaking therapies during my career, including Gernabix at Vertex, the first NaV1.8 inhibitor approved for moderate to severe acute pain. I am excited to join Absci Corporation at such an important time as we continue on our journey to use our integrated AI and wet lab platform to create new and differentiated medicines to improve the lives of patients in need. In the near term, I am excited to be advancing our ABS-201 program for both AGA and endometriosis through the clinic. Both of these programs could represent significant advances compared to available therapies. I have been involved with multiple complex clinical trials spanning pain, cardiovascular disease, nephrology, and other diverse disease areas, and I am impressed by the Absci Corporation team’s rigorous approach to the ABS-201 clinical trial designs. I believe Absci Corporation has built a differentiated platform and, as a drug developer, I am enthusiastic about the opportunity to contribute to the advancement of our pipeline, including ABS-201, at this stage of the company’s growth. We are advancing the clinical development of ABS-201 for two indications with significant unmet medical need: androgenetic alopecia and endometriosis. Our ongoing Phase 1/2a headline trial is a randomized, double-blind, placebo-controlled study efficiently serving both as a first-in-human study of ABS-201 while also providing preliminary proof-of-concept data in AGA. The AGA POC component is incorporated into the multiple ascending dose part of the trial. The primary endpoints are safety and tolerability, while secondary endpoints include PK, PD, immunogenicity, target area hair count, target area hair width, and target area darkening and pigmentation. We will also collect patient-reported outcomes data. The trial is enrolling up to 227 healthy volunteers with or without AGA. The single ascending dose (SAD) portion of the trial is testing four intravenous dose groups for safety, tolerability, PK, and PD. The SAD portion of the trial will be followed by three subcutaneous multiple ascending dose (MAD) groups in healthy volunteers with androgenetic alopecia. While the MAD portion of the study also looks at safety, tolerability, and PK/PD, we have powered the MAD portion to demonstrate proof of concept in AGA. We plan to share 13-week interim proof-of-concept data in the second half of this year, followed by 26-week data in early 2027. With the 13-week data, we hope to demonstrate directionally positive hair growth compared to baseline, which would translate to even more robust growth at the 26-week readout and beyond. These results will be consistent with our understanding of the mechanism of action and supported by a naturally occurring nonhuman primate model for AGA. Furthermore, we have ongoing engagement with the FDA regarding an efficient clinical development strategy that could support expedited clinical development, with the potential of advancing directly from Phase 1/2a into Phase 3 registrational trials. Today, we are pleased to share that we have successfully dosed the first three cohorts in the SAD portion of our ongoing Phase 1/2a headline trial. To date, ABS-201 has been well tolerated with favorable emerging safety data. Additionally, emerging PK data support the current dosing regimen in the headline trial as we have modeled. We are on track to dose SAD cohort four as well as the first MAD cohort. For endometriosis, we plan to use data from the Phase 1/2a headline trial to provide safety, tolerability, and PK assessments that will support Phase 2 clinical development beginning in Q4. We anticipate an interim proof-of-concept readout from this trial in 2027. With that, I will pass it over to Zach to discuss our strategy, partnerships, and outlook, and to provide an update on our financials. Zach? Zach Jonasson: Thanks, Ronti. Our strategic priority is executing the clinical development of ABS-201 in both AGA and endometriosis, given the significant potential return on investment these programs offer. In particular, our lead program in AGA represents a unique opportunity. We believe this program has the potential for streamlined clinical development and a potentially significant commercial opportunity in the cash-pay market, if the program is successfully advanced through development. As Ronti discussed, we are currently executing an efficient Phase 1/2a trial design to position us for registrational studies that could enable a potential FDA approval in the 2030 timeframe. We expect the registrational trials to enroll rapidly and to cost significantly less than typical registrational trials for other large indications. Our market research, some of which was shared during the ABS-201 KOL seminar in December, supports the commercial potential of ABS-201 as a new premium category of AGA therapy. Results from the survey we commissioned, which included 610 participants experiencing AGA, support our belief that there is a meaningful demand for a product with the ABS-201 anticipated minimum target product profile. The TPP evaluated in the survey assumed a level of hair regrowth comparable to that reported in the literature for high-dose oral minoxidil, but with a potential durability of two to three years. The hypothetical profile also contemplated a six-month dosing regimen consisting of approximately three subcutaneous administrations, as compared to currently available oral or topical treatments that require daily or twice-daily administration. Key highlights from the consumer survey include 87% of men and 69% of women surveyed indicating they would be extremely likely or very likely to ask a healthcare professional about ABS-201 if it were available on the market today. Moreover, these figures increased to 92% and 89%, respectively, for men and women who are currently using oral standard of care, for example, oral minoxidil. And over two-thirds of men and women who are currently using another hair loss product said that they would be extremely or very likely to try ABS-201 as first line if it were available. These results, together with data from our survey of key opinion leaders, are supportive of potentially significant adoption of ABS-201 among AGA consumers, if the product is successfully developed and approved. Based on our market research, we estimate a potential total addressable AGA population for ABS-201 in the United States of approximately 15 to 18 million consumers. Assuming a two- to three-year treatment durability, the total potential annual treatable patient volume could range between 5 to 9 million consumers per year. Our survey data suggest this segment of the AGA population would be interested in purchasing a product with ABS-201’s anticipated profile at a premium price relative to the current standard-of-care treatment. Accordingly, based on all of our market research, we believe the total addressable market for ABS-201 in the United States could be substantial, with some estimates exceeding $25 billion on an annual basis. While we believe our estimates are reasonable and based on available data, actual market size and ABS-201’s ability to capture any portion of said market will depend on numerous factors, including clinical trial outcomes, regulatory approval, pricing, and competition. This program may offer additional commercial upside as the headline clinical trial is also designed to explore whether ABS-201 can achieve other aesthetic outcomes such as restoration of hair pigmentation. If such outcomes are demonstrated in clinical studies and supported by regulatory approval, they could open up additional significant markets beyond AGA. If ABS-201 is approved, we believe we will be well positioned for commercialization in the United States. Existing go-to-market channels and provider networks appear to be suited for a premium product with the anticipated ABS-201 target product profile. Approximately 80% of consumers seek hair treatments from dermatologists, med spas, and plastic surgeons, which together offer over 30,000 potential retail locations across the United States. We have begun establishing relationships with these practitioner market channels, and looking ahead, we aim to continue to create awareness among this practitioner community and, when appropriate, to establish direct patient engagement. As ABS-201 moves forward toward major potential value inflection points, we plan to continue progressing our internal preclinical programs as well as our partnered programs. In all, we remain highly focused and committed to diligently allocating our capital and resources to programs that offer the greatest potential return on investment. Turning now to our financials. Revenue in the fourth quarter was $700,000 as we continue to progress our partnered programs. Research and development expenses were $25.3 million for the three months ended December 31, 2025, as compared to $18.4 million for the prior-year period. This increase was primarily driven by advancement of Absci Corporation’s internal programs, including direct costs associated with external preclinical and clinical development of ABS-101 and ABS-201. Selling, general, and administrative expenses were $8.6 million for the three months ended December 31, 2025, as compared to $8.8 million for the prior-year period. Additionally, we recorded a $5.1 million gain on the settlement of the company’s contingent consideration during 2025. This resulted in net proceeds of $8.7 million of unrestricted cash. Cash, cash equivalents, and marketable securities as of December 31, 2025 were $144.3 million, as compared to $152.5 million as of September 30, 2025. We believe our existing cash, cash equivalents, and marketable securities will be sufficient to fund our operations into 2028. We remain focused on opportunities to generate additional nondilutive cash inflows that could come from early-stage asset transactions associated with our wholly owned internal programs and/or new platform collaborations with large pharma. Our current balance sheet supports our execution of key upcoming catalysts, including potential proof-of-concept readouts for both AGA and endometriosis. We are also well positioned to continue progressing our early-stage pipeline and to advance new partnership discussions in line with our business strategy. With that, I will now turn it back to Sean. Sean McClain: Thanks, Zach. 2025 was a defining year for Absci Corporation. We dosed our first patient with ABS-201, expanded into a second multibillion-dollar indication, and published what we believe is the first demonstration of de novo antibody design to zero prior epitopes. In 2026, we expect to deliver on our catalysts: preliminary safety and PK data for ABS-201 in the first half, interim 13-week proof-of-concept hair regrowth data in the second half, and initiation of our Phase 2 endometriosis trial in Q4, subject to data and regulatory review. Full 26-week proof-of-concept data for ABS-201 in AGA will follow in early 2027. We have clinical momentum, the balance sheet to reach proof of concept in both indications, and the team to execute. Thank you for your continued support. Operator, let us open the call for questions. Operator: Thank you. As a reminder, to ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. Please stand by while we complete the Q&A roster. One moment for our first question. Our first question will come from the line of Vamil Divan from Guggenheim Partners. Your line is open. Vamil Divan: Great. Thanks. Thanks so much for taking the question. So I guess obviously a lot of focus on 201 and a common question we have been getting from investors is just what we should be looking for, what you are looking for in terms of target product profile, especially from an efficacy perspective. Obviously, there are not a lot of great options out there for others that are in development. I realize it is still a little bit early, but just if you can give a better sense of what you are hoping to see from an efficacy perspective. We obviously have the minoxidil options that are out there. We have competitors in development. Just where do you hope to see this land given that it will be an injectable? It sounds like it may be more of a premium-priced product. What are you hoping to see from an efficacy perspective? Thank you so much. Sean McClain: Thank you, Vamil. It is a great question, and what we are looking to achieve—and I will have Zach go into more details on this from our consumer quant study—but talking to physicians as well as patients, we believe that if we achieve a durable treatment as well as being able to achieve at or above minoxidil efficacy, we will definitely have a very attractive TPP. And, Zach, please feel free to walk through more of the details on that, given the consumer quant study we had just completed. Zach Jonasson: Thanks, Sean. And, Vamil, I would just note that the TPP that ABS-201 embodies, or we think will embody, is really a new category therapy that we hope will deliver not only efficacy but durable efficacy and convenient administration. So, to Sean’s point, if the effect size in terms of terminal area hair count—and the growth in terminal area hair count—is consistent with high-dose oral minoxidil, so 35 to 40 hairs per square centimeter, we think that is a home-run product. And that is supported by the research we have done with consumers and KOLs. We think there is a significant product even below that threshold. But I think at that threshold, it is a very significant product we would characterize as a home-run product. And keep in mind, that is additive with the other features of the profile, which would include durability and that convenient dosing of just a few injections. Vamil Divan: Okay. Thanks. And one other one—oh, sorry. Sean McClain: Go ahead. Vamil Divan: I was just going to also mention that, you know, if you look at the stump-tail macaque data, it was well above that. So we do even have room to run on this. I think as Zach said, this is a home-run product, but from what we are seeing from the stump-tail macaque and even ex vivo data, you know, it could be well above that as well for an upside scenario. Okay. Thank you. And then one other one, just a follow-up, is on the safety side. So I think the words you use are “favorable emerging safety profile.” So I do not know what you can elaborate at this point. What have you seen from the cohorts that have gone through the SAD portion? Thank you. Ronti Somerotne: Yes, absolutely. Thanks. So it is early in the trial, but at this point, there is no evidence of any on-target or off-target safety signal based on our review of the safety data accumulated to date. It is encouraging so far. Operator: Thank you. One moment for our next question. Our next question will come from the line of Brendan Smith from TD Cowen. Your line is open. Brendan Smith: Great. Thanks for taking the questions, guys. Maybe just another one quick on 201. I guess, kind of given other pivotal studies in the space and maybe even in your conversations with FDA to date, maybe first, is it fair to expect that six-month primary endpoint you are using in the MAD is the same duration of follow-up you would expect for a registrational study? And then separately, just on the drug creation partnership, I think you flagged at least one new one with big pharma this year. Can you maybe just tell us, even qualitatively, how those conversations are going? We get asked all the time, like, kind of given all the money pharma is spending internally on AI, what are they still coming to Absci Corporation for, and how should we really think about them leveraging the platform within the confines of those deals? Thanks. Sean McClain: Thanks. Ronti, do you want to answer that first one, and then Zach can take the second one? Ronti Somerotne: Yes. So we have not yet engaged FDA on the design of our Phase 3 program. We are going to. One of the reasons we are excited about the 13-week interim readout is that it is going to give us a much better idea of what the Phase 3 program will look like. But certainly, other companies are developing a six-month pivotal endpoint with another six months of long-term safety data follow-up. So there are some predicates in the field. But we are going to look forward to our 13-week interim and give you more details on that once we see the data. Zach Jonasson: Thanks. And I can comment on the partnership discussion. We continue to have productive discussions with pharma regarding platform partnerships. I do think it is important to note that we are focused on doing the right deal, not doing a deal, and so we are currently actively negotiating and looking at deal structures that could work for us. And I would comment as well, we have a healthy pipeline of internal programs that are being developed today. We have not yet announced several of those. But we will be looking to initiate partnering discussions around those programs later in this year. Brendan Smith: Got it. Thanks, guys. Operator: One moment for our next question. Our next question comes from the line of Brian Chang from JPMorgan. Your line is open. Brian Chang: Hey, guys. Thanks for taking our question this afternoon. Sean, I think you said in your prepared remarks, you said 101, 301, and 501 continued to progress. Each of these you see better suited for partner. Just to clarify, are all of them now on the table for partnerships, or do you think that you will want to develop 301 or 501 a bit more internally? Thanks. Sean McClain: Thank you. That is a great question, Brian. Just given our focus in particular in I&I, given ABS-201, we believe us developing oncology does not make sense, and so with 301 and 501 being in oncology, we think that this is much better suited for a partner. We do have an earlier-stage pipeline that is developing where we should be nominating DCs this year that have not been announced that are in I&I, and these, you know, we could potentially take forward ourselves assuming that the cash balance sheet is there, and then we also have the optionality to partner those as well. So we have definitely been hard at work building up that I&I pipeline. Brian Chang: Got it. And maybe just one quick one on safety. I know you touched on this a little bit already. Just is the profile that you are seeing in terms of safety consistent with what you have seen in nonhuman primates, and are you seeing any particular impact of interest? Just curious if you can give us a little bit more color on how we should think about the TEAE profile. Ronti Somerotne: Yes. We have looked at the TEAEs. There is really nothing that would point to any sort of mechanism-related safety signal or off-target mechanism-related safety signal. We are looking very closely at labs, and, you know, other than onesie-twosie things, there is no pattern of anything at this point. But, again, I have to caveat that it is early in the study without a ton of people exposed. Sean McClain: I will also say, given the encouraging profile, it definitely lines up really nicely with what you see from other studies—HMI-115—hitting a similar target as well as a few other assets that have been developed in oncology. You can see safety signals there for this particular pathway, and then you also have loss-of-function mutations in the prolactin receptor, and these individuals were perfectly healthy, just did not have the ability to lactate. So I would say from what we have seen in other studies as well as these loss-of-function mutations, it tracks very nicely to what we are seeing in our own study. And as Ronti said, it is early days, but very encouraging. Brian Chang: Great. Well, thank you so much for your time. Operator: Thank you. One moment for our next question. Next question will come from the line of Kripa Devarakonda from Truist Securities. Your line is open. Kripa Devarakonda: Hi. This is Alex on for Kripa. Congrats on all the progress. We had a question on 201 as well. Some of the investors that we talked to express caution about the ability for a molecule to get into the hair follicle to inhibit the prolactin receptor. Can you talk about the data that supports the ability for the molecule to engage the target, or if there is any reason to believe otherwise based on your perspective? Thanks. Sean McClain: Yes. So you are definitely not going to have the penetration you would have in—or the biodistribution, I should say—in other organs. But there is definitely ample blood flow going into the follicle, and again, you saw the data with the stump-tail macaques. You saw the data as well with the mice. And so, based on that, we have no reason to believe you would not be able to get an antibody into the follicle. And the way we modeled the receptor occupancy was using a known biodistribution coefficient for the scalp and hair follicle, which is much lower than other tissues. Ronti, I do not know if you have anything else you want to add on that point. Ronti Somerotne: No. Thanks, Sean. I think the animal data are very encouraging, suggesting that there is adequate tissue penetration with other antibodies and even in 201 and work. Kripa Devarakonda: Great. Thanks, everyone. Operator: Thank you. One moment for our next question. Next question will come from the line of Debanjana Chatterjee from JonesTrading. Your line is open. Debanjana Chatterjee: Hi. Thanks for taking my question. So, we have seen some recent updates for AGA candidates, including clascoterone, and also oral extended-release minoxidil is gaining traction. So how, like, you know, could you remind us how you envision an anti-PRLR antibody to be used relative to such agents assuming that they are approved? And also, do these new developments or agents shift the bar for success that you have in mind, particularly in terms of expected target area hair count improvement? Sean McClain: It is a great question. First off, I think the success that, you know, Veradermics and others are having is really great. I think, at first, it shows that there is a huge unmet medical need for androgenetic alopecia and, you know, it affects over 80 million Americans. And there is treatment that is needed. And we see what we are doing as very synergistic. I think even with oral minoxidil, you know, patients still are not—some patients are not seeing the full hair regrowth that they would like to see. Additionally, with a lot of these medications, you have to take it once or twice daily. And if you have the potential to, you know, take two to three doses over six months and then have durable hair regrowth after that, we see that being very attractive, assuming that you can reach the efficacy of oral minoxidil. And so that is really where we see this as being a premium product, really being able to rejuvenate the hair follicle and get that durable hair regrowth. This is a brand-new novel mechanism. You know, oral minoxidil, finasteride, they have been around for a long time. And the biology that we have seen here, it does appear that prolactin is kind of furthest upstream, really driving the hair loss. And you can see that in the ex vivo studies we have done. And so, overall, we think that this is a potential paradigm-shifting asset within AGA. But, again, we are really excited that other companies such as Veradermics are having the success that they are having because it does shed a light on how important this space is. Zach Jonasson: I will add to what Sean said, too. We saw that in our survey. We saw a very high level of interest in the target product profile for ABS-201 across the board for men and women. But when we segment out participants who have AGA who are currently using minoxidil—oral minoxidil—the interest level goes up even higher. So we saw 92% of men, 89% of women, who are currently using oral minoxidil said they would be highly inclined to go seek out the product—so extremely or very likely to go to a healthcare professional to obtain ABS-201—if it were on the market today. I think what you are seeing there are a couple things. One is the attractiveness of the TPP and the convenience, and patients wanting something that is durable and convenient. And then also some dissatisfaction with standard of care, in particular oral minoxidil, because you really have to take that once a day or, in some cases, twice a day to see the efficacy. And then, as Sean pointed out, the efficacy can be very variable across patients. Some patients do not see much. Some patients will see pretty decent efficacy. And then finally, there are some side effects with oral minoxidil as well, which some patients experience, including unwanted hair growth and a shedding cycle that may happen when you first go on the drug. So I think if you roll it all together, the TPP here really resonates with the AGA community because it sort of checks off the boxes of being durable and very convenient to administer—you can imagine a “set it and forget it” sort of solution. And we do believe long term, there will be a significant number of patients who probably use both products. Debanjana Chatterjee: Okay. Thank you. Operator: Thank you. One moment for our next question. Our next question will come from the line of Gil Blum from Needham. Your line is open. Gil Blum: Good afternoon, and thanks for taking our questions. Maybe a bit of a math question. You said three cohorts were dosed. Should we assume this is about 24 patients at this point? Ronti Somerotne: Yes, I have to look at the actual math, but I do not think that is too far off. Sean McClain: It is a rough ballpark there, Gil. Gil Blum: Okay, that is fair. I do have a question specifically for Dr. Ronti. Can you discuss some of the expected challenges in developing a drug for endometriosis, especially when assessing involvement of pain measures? It seems like you have the right experience here. Ronti Somerotne: Yes. It is interesting because these are really pain studies, and pain studies require a lot of thought in how you select your sites, how the patients are selected, and how the placebo effects are mitigated. And so, I have learned a lot over the last three years working in pain. And I do not know if this has been previously appreciated in endometriosis studies, but these are the things that I think about, because in addition to treating the underlying biology, which we hope that ABS-201 will certainly do, we have to think about the end in mind, and at the end, these are numerical rating scores. So we have to be extremely thoughtful in how we write the protocol, select our sites, and then oversee the conduct of the trial. Gil Blum: Alright. Maybe a last one for Zach. How should we think about resource allocation between AGA and endometriosis? Zach Jonasson: Thanks for the question, Gil. I think both opportunities are very significant. I think we talked about the unmet medical needs in endometriosis and really not much competition there. We also think a similar view applies to AGA, where this would be a completely new category of therapy. So when we think about resource allocation, these are both programs where we think the potential ROI is very significant. And then the other thing that these programs allow us to do is take advantage of a streamlined development path. So, as Ronti noted, we will be using this Phase 1/2a trial that is ongoing today for AGA. We will use the SAD portion of that as safety to support initiating a Phase 2 trial in endometriosis later this year. So we are leveraging the current trial to support moving into proof-of-concept studies in endo very rapidly. And I think one other comment I will just make on the AGA trials is we are really excited there because those trials recruit very rapidly. When we think ahead to registrational studies, we think about trials that can recruit very rapidly and that will be significantly less in terms of invested capital to execute than you would see for other traditional indications that would be for large market opportunities. But I think you look at these two together and, when we look at these programs internally, we obviously have other things we can pursue, but these really stand out as unique opportunities. So we are really excited to pursue them. Gil Blum: Alright. Excellent. Thanks for taking our question. Operator: Thank you. One moment for our next question. Our next question comes from the line of Sean Lammen from Morgan Stanley. Your line is open. Sean Lammen: Good morning, Sean and team. Hope everyone is well, and congrats on all the progress. I have a question back on the platform, and we do get a lot of inbound on potential AI “crowding,” if you like to call it that. But in the March deck, you emphasized OriginOne and the zero prior epitope design as key differentiators. Based on some of your 2025 interactions with potential partners, where do you see the strongest external validation relative to other AI-enabled discovery companies? And where is skepticism still the most common? Sean McClain: Yes. So I would say first off, pharma has very much embraced AI. I mean, I think it is progressing faster than we have anticipated in some regards and then not as quickly in others. But overall, I would say pharma’s appetite on this—and whether it is partnering or building out internally—is very strong. And I think the validation that we have been able to show in the preprint and the extensive validations toward the zero prior epitopes, I think, has been some of the most rigorous work that has been published to date. And I will note that a lot of these models are not being disclosed, whether it is within this industry or the LLMs. And, you know, we disclosed the methods and how we went about doing it. And we are now applying this to our internal pipeline to really be able to create differentiated assets. And I think with the emergence of agentic AI, really being able to start to have this fully autonomous workflow where you can have an agent help you look at targets, help you identify the epitope, and then that feeds directly into the de novo model and then helps you design the killer experiment and rapidly develop assets that quickly and rapidly test hypotheses. And so I would say that we are very excited about the future and where things are at. And, yes, it has been an exciting start of the year. Zach Jonasson: Thank you, Sean. And to stay at the comments, when we look at the value of doing a platform deal versus doing an asset deal, the value on an asset deal is significantly higher, and you can risk-adjust that and it is still a multiple. And so I think what we are really excited about is leveraging the OriginOne models, which we have been working on for the past year, to develop pipeline assets that we could either take forward or we could partner. And we have a number of those that Sean mentioned that we are bringing towards DC this year that could become excellent candidates for partnering activity. Sean Lammen: Right. Thank you both. Operator: Thank you. And one moment for our next question. Our next question will come from the line of Charles Wallace from H.C. Wainwright. Your line is open. Charles Wallace: Hi. Thanks for taking my question. This is Charles on for RK. So a question on 201 and kind of distinguishing between how internally you are thinking about the market opportunity for the two different indications. You mentioned earlier that both indications probably would be favorable, but maybe to dig a little more. You mentioned you provided a peak sales of more than $4.5 billion in endometriosis for 9 million patients. And then for AGA, I think you are targeting 5 to 9 million patients per year. So I am just curious, should we assume that the endometriosis opportunity is going to be the larger opportunity because it is a therapeutic? Or is that maybe not the right assumption? Sean McClain: Both of these indications are very large indications. One in ten women are estimated to have endometriosis worldwide. That is a very large population, most likely underdiagnosed due to poor standard of care and poor diagnostics in the space. And then, obviously, AGA is a massive opportunity—huge patient population as well, 80 million Americans in the U.S. And so, again, we see these as both very large opportunities. I think, at the end of the day, AGA is likely a larger opportunity. But at the end of the day, these are both very exciting opportunities from just a market size perspective. Charles Wallace: Okay. Great. And maybe just a follow-up. So given that, you know, endometriosis would be more of a therapeutic payer market, while AGA would be a cosmetic kind of self-pay market, how do you anticipate pricing would be once—if both came to market? Would it be similar or different? Zach Jonasson: Yes. So we cannot disclose what we think the actual price point will be. We would not announce those until day of launch. But I can tell you in our own internal analysis, we think the pricing for both of them—and given that endometriosis will also be predicted to have insurance coverage—we do not think there will be an arbitrage opportunity there. And so we think we are in a good position to leverage the development efficiencies of pursuing both indications with ABS-201. Charles Wallace: Great. Thanks for taking my questions. Sean McClain: And maybe before we close out the call today, I just wanted to share one exciting piece. I will actually have Ronti share that to close out the earnings call today. Ronti, over to you. Ronti Somerotne: Thanks, Sean. As we said, the SAD/MAD study is going well. We are on track, and in fact, we hope to dose our first MAD portion participants towards the end of the week. So we are very pleased with the progress. Operator: Thank you. With that, thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Everyone, have a great day.
Operator: Good day, and thank you for standing by. Welcome to the Gemini's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Ryan Todd, Head of Investor Relations. Please go ahead. Ryan Todd: Thanks, operator, and thank you, everyone, for joining this morning for Gemini's Fourth Quarter and Full Year 2025 Earnings Call. My name is Ryan Todd, Head of Investor Relations at Gemini. Joining me on the call today are Gemini's founders, Cameron and Tyler Winklevoss; and Interim CFO, Danijela Stojanovic. Yesterday, we released our fourth quarter and full year 2025 financial results. During today's call, we may make forward-looking statements, which may vary materially from actual results and are based on management's current expectations, forecasts and assumptions. Information concerning the risks, uncertainties and other factors that could cause these results to differ is included in our SEC filings. Our discussion today will also include certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the shareholder letter on our Investor Relations website and on the SEC's website. Non-GAAP financial measures should be considered in addition to, not as a substitute for GAAP measures. We'll start today's call with prepared remarks and then take questions. And with that, let me turn the call over to our founders, Cameron and Tyler. Cameron Winklevoss: Thanks, Ryan. Cameron here. 2025 was a remarkable year for Gemini. We crossed the threshold into the public markets and became a public company on September 12 after being a private company for over a decade. On that day, the price of Bitcoin was $115,000. Since then, Bitcoin has traveled down to $60,000 and then back up to around $70,000 where it hovers today. A reminder that one of the biggest challenges for crypto builders and investors is its cyclical nature. And a reminder that in order to move beyond these cycles, you need to build beyond them. We started as a Bitcoin company. We became a crypto company. We are now becoming a markets company. If Gemini's first decade was building a bridge to the future of money, today, we are building a bridge to the future of money in markets via a super app. Our first foray into people's daily financial lives beyond buy, sell and store crypto began with the Gemini credit card, which delivered strong growth last year. In 2025, card sign-ups grew nearly 15x and credit card revenue reached $33.1 million, up 185% year-over-year. Many of these Gemini credit card customers engage with Gemini multiple times a day to earn crypto rewards when they spend with the Gemini credit card. December marked a new era for Gemini with the launch of Gemini Predictions. We believe prediction markets will be as big or bigger than today's capital markets. They offer a profound and boundless opportunity to leverage the wisdom of the crowds and the power of markets to provide unique insights into the future. Our investment in securing a designated contract market DCM license from the CFTC to launch our own prediction marketplace positions us as an early mover on this new and exciting frontier. We have been building and operating regulated marketplace infrastructure for over a decade: sequencers, matching engines, order books, real-time settlement, post-trade reporting, custody infrastructure and more. This is a big part of what we do best. Our prediction markets are new instruments running on infrastructure we already know how to build and operate. As a result, we chose not to partner with a third party or license someone else's technology and instead build it ourselves. And in doing so, this also means we have chosen to invest in developing the unique operational capabilities for creating and resolving thousands of contracts on a daily basis, a new and fascinating challenge with growing complexity as we expect the cardinality of these markets to continue to explode over time. In short, we built Gemini predictions from the ground up because we want to own and operate our prediction markets end-to-end for the long term. We believe in the power of markets. Bitcoin is a store of value that is a product of market forces. The best economies are market-based. Markets are truth over the long term, and we believe that we are just figuring out how to apply them to the world around us. From politics to economic indicators, business, tech, culture and sports, prediction markets are forecasting the future more accurately and more quickly than traditional posters, experts and the media. This is a profound change in the world's source of truth and an equally profound solution to the loss of trust in our institutions and resulting epistemological crisis. The printing press created the fourth estate or the public press. The Internet created the fifth estate or decentralized public press. Prediction markets are creating the sixth estate. Decentralized information, combined with the integrity and accountability of markets [indiscernible] in the game. Like money, markets are an innovation and technology that continue to evolve thousands of years after they were first invented. From the birth of the bond markets in the Italian city states in the 12th century to the launch of the first stock market in Amsterdam in the 17th century to electronic trading replacing the open outcry of humans in trading pits on Wall Street in the 21st century, markets continue to grow and develop. Just when you thought the money experiment had reached its terminal steady state, Bitcoin emerged. Just when you thought markets were done maturing, prediction markets caught fire. Gemini was founded to help build and shape a new era of money. Today, we have a similar opportunity to help build and shape a new era of markets. Unfolding in parallel is the meteoric ascent of AI. Once these strains of technology, money, markets and AI converge, we believe they will supercharge each other in dramatic and novel ways that generate new economic activity that we are uniquely positioned to be at the center of and help build and shape to. This caldron of Promethean fire could make progress in these fields up to this point appear rather quaint. We have long felt that it is only a matter of time before we have more machines as customers than humans. Machines can't open a bank account, but they can easily plug into protocols and use crypto to become rational economic actors. Humans may have built crypto, but crypto is not so much money for humans as it is money for machines. We're just starting to see this take shape. Here's one example. For the first decade, we had 3 API protocols: REST, WebSockets and FIX. We're now adding a fourth, Model Context Protocol, or MCP, an open-source API interface designed specifically for AI agents like large language models or LLMs. While we believe AI is going to change the composition of our customer base, it's already changing the composition of our workforce and how we work. Up until recently, the impact of software engineers could differ by an order of magnitude or 10x. Great engineers would have 10x more impact than good engineers. AI has completely changed the game, expanding this paradigm by another order of magnitude at a minimum, making a 10xer, now a 100xer. Critically, we are seeing that this step change holds true for every engineer who adopts AI in their workflows. And it also holds true for non-engineering work as well. Doing more with less has never been more true or possible, and we believe this trend line is only just beginning. Notably, the force multiplier effect of AI for Gemini and our workforce is quite new. It wasn't until the end of last year that AI agents for coding and software development had a splitting of the atom moment. While different pockets of our technology organization have been experimenting with AI and their workflows for a while, AI was not core to them. For example, late last summer, when we were in the middle of our IPO roadshow, AI was used in only 8% of the code being written and shipped to production. In December, however, the future arrived. Models hit an inflection point and in combination with the internal tools we built for [indiscernible] management, AI is now too powerful not to use at Gemini. Today, AI is used in more than 40% of our production code changes, and we expect that number to climb close to 100% in the not-too-distant future. Not using AI at Gemini will soon be the equivalent of showing up to work with a type writer instead of a laptop. As a result, we have reduced the size of our workforce by roughly 30% since the start of 2026. We believe that a smaller organization leveraging the right tools isn't just more efficient, it's actually faster. Gemini started in America in 2015. Since then, we expanded our areas of operation to more than 60 countries. These foreign markets proved hard to win in for various reasons, and we found ourselves stretched thin with a level of organizational and operational complexity that drove our cost structure up and slowed us down. And we didn't have the demand in these regions to justify them. The reality is that America has the world's greatest capital markets and America has always been where it's at for Gemini. Furthermore, we are encouraged by the stated goals of the current SEC and CFTC and their efforts thus far to make the super app possible in America and usher in a new golden age of markets. So we decided it was time for us to focus and double down on America. This will allow us to build more meaningful and powerful relationships with new and existing customers. To that end, in addition to reducing the size of our workforce, we have reduced the areas in which we operate by exiting the U.K., EU and Australian markets. We expect this will help reduce our total expenses in line with our headcount reduction and meaningfully accelerate our path to profitability even in the backdrop of the current crypto market, simplify, consolidate, then accelerate. We love being a public company, perhaps a somewhat surprising statement when looking at the performance of our share price over the past 6 months since we've been public. But rather than being dispirited, we are motivated. And while it's never fun to see your stock drop, we love the feedback loop. It forces us to confront what is working and what is not working, and it makes us sharper. It's challenging, but absolutely the right challenge. We view this feedback loop as one of the greatest benefits of being a public company as growers losing a race provided invaluable feedback on the changes you needed to make in order to win. The path to the Olympics is paved in lost races and the invaluable learning that comes from them. So we welcome the feedback and love the challenge. 2025 marked the end of Gemini 1.0 and 2026 marks the beginning of Gemini 2.0. This starts with our shift into becoming a markets company with Gemini predictions and using the same infrastructure to power our perpetual futures contracts once these contracts are allowed in the U.S. And it continues with our plan to launch U.S. equities as the next phase of our platform, giving our customers access to the largest, most liquid markets in the world. Altogether, we have developed the foundation and building blocks for a super app, where users will be able to fulfill their existing and future financial needs all in one place, amazing awaits. Danijela Stojanovic: Thank you, Cameron and Tyler, and great to speak with everyone. Before I turn to the numbers, I'll briefly note that I stepped into the interim CFO role earlier this year after serving as Gemini's Chief Accounting Officer since May of 2025. I've been closely involved in the company's financial reporting, the IPO process and the prior 2 quarters as a public company. The broader finance organization remains fully in place, and there has been no disruption to our financial reporting or operational execution. I will begin with a few key takeaways from the quarter before walking through the results in more detail. First, revenue grew sequentially despite a materially weaker crypto trading environment in Q4. Second, the business continued to diversify meaningfully. Services revenue more than doubled year-over-year and now represent over 1/3 of our revenue. And third, the restructuring actions we announced earlier this year repositioned the company with a significantly lower cost base going into 2026. Now turning to the results. Net revenue for the fourth quarter was $56.4 million, up 13% from $49.8 million in Q3. This growth occurred despite a more challenging market backdrop. The biggest driver of that change was volatility in the crypto market. Bitcoin fell nearly 47% from its October high, and that environment put real pressure on trading volumes and transaction fees. The credit card business kept growing through it, which helped offset some of that, but Q4 was a harder macro quarter than Q3. I'll walk through the key components. Transaction revenue was $26.7 million, up slightly from $26.3 million in Q3 on spot volumes of $11.5 billion compared to $16.4 billion in Q3. Retail volumes came in at $1.6 billion and institutional at $9.9 billion. As a reminder, we earn fees from both retail and institutional customers with rates varying by order type, instant orders at the top of the range and active trader orders lower. While volumes declined, transaction revenue proved relatively resilient. This reflects improvements in fee economics across both retail and institutional trading as well as a mix shift in retail trading towards higher fee order types. Services revenue for the quarter was $26.5 million, up 33% sequentially from $19.9 million in Q3. This category continues to grow quickly and represents one of the most important structural shifts in our business. A few things worth calling out here. Credit card revenue was $16 million, up 87% from Q3's $8.5 million. We added nearly 30,000 new card sign-ups in the quarter compared to 64,000 in Q3, and receivable balances grew to $219.8 million. Staking revenue was $5.1 million, down 13% from Q3's $5.9 million, largely reflecting lower crypto asset prices during the quarter. However, we continue to see adoption of staking across the platform, including through auto staking features integrated with the credit card rewards program. Q4 was our first full quarter with Card Auto staking rewards live, which came alongside the Solana card launch in October. That feature is a great example of natural multiproduct engagement in providing customers a way to stake organically. They pick a stakable reward. It gets staked automatically on every card transaction and their staking customer without any extra steps. Staking balances at quarter end were approximately $509 million. Staking fee rate adjustment we made in Q3 also ran through a full quarter for the first time. Let me turn to expenses. Total operating expenses for Q4 were $171.7 million, essentially flat compared to Q3. Compensation and headcount expenses declined to $72.3 million from $82.5 million in Q3, reflecting lower stock-based compensation expense. Stock-based comp in Q4 was $36 million. Headcount at quarter end was 650 compared to 677 in Q3. Importantly, the roughly 30% workforce reduction that occurred in early 2026 is not yet reflected in those numbers. That impact starts flowing through in Q1 of 2026 with the full run rate savings expected to be reflected by Q3 and beyond. As of March 1, total headcount was approximately 445. Sales and marketing was $39 million, up from Q3's $32.9 million, reflecting the continued growth and momentum of the credit card portfolio and increased cardholder spending, which drove higher crypto rewards during the fourth quarter. As we've said consistently, we treat marketing as a variable line and calibrate it to what we are seeing in acquisition performance and growth opportunities. For the full year, sales and marketing was $97.1 million or $52.5 million, excluding credit card rewards and promotions, which remained in line with the $45 million to $60 million range we previously guided to. Transaction processing expenses were $7.3 million, down from Q3's $8.6 million, reflecting lower trading volumes during the quarter. Transaction losses were $6 million, down from Q3's $7.7 million. This includes a provision for credit losses on the card of $2.8 million, which remained broadly consistent with the prior quarter. Overall, credit quality across the card portfolio continues to remain stable as the book scales. Technology and infrastructure was $22.3 million, up from Q3's $20.3 million, mainly reflecting higher cloud infrastructure and software licensing costs as the platform scaled. General and administrative was $24.9 million, up from Q3's $19.3 million, driven mainly by higher professional services and ongoing public company operating costs. Full year tech and G&A came in at $154.6 million, in line with our guidance range. Now turning briefly on to full year metrics. We served approximately 601,000 MTUs as of December 31, up 17% year-over-year, reflecting continued growth in engagement as users adopt additional products across the platform. Full year net revenue was $174 million compared to $141 million in 2024, up 24% year-over-year. Transaction revenue for the year was $98 million, while services and interest revenue reached $76 million, representing a significant and growing portion of our overall revenue base. This shift towards services is a key structural change, reducing dependence on trading activity. Services and interest revenue came in ahead of the $60 million to $70 million range we provided at our third quarter earnings call. This was driven primarily by stronger-than-expected card flows with more than 116,000 new card sign-ups during the year in response to card addition launches such as the XRP card. We saw growth across several other services categories. Custodial fee revenue increased 25% year-over-year, driven by higher average crypto assets under custody. We also recognized approximately $4.8 million of advisory revenue related to services provided to a strategic customer as well as $1.2 million from new on-chain offerings, including integrations and token listing services. As we continue expanding the platform, we see increasing opportunities to drive monetization across multiple services as users engage with additional products beyond trading. Total operating expenses for the full year were $525 million versus $308 million in 2024. The year-over-year increase was driven largely by 3 main things: first, stock-based compensation tied to the IPO, including the Q3 bonus accrual that settled in equity; second, the significant marketing investments we made after going public to drive card growth; and third, continued spend in technology, compliance and public company infrastructure costs. These investments were deliberate and the restructuring actions we announced are designed to reset the company's cost structure going forward. Full year adjusted EBITDA was a loss of $258 million, which is inclusive of $33.4 million of net realized and unrealized losses. On a GAAP basis, full year net loss was $582.8 million. It is important to note that a substantial portion of the net loss relates to noncash items. These include $178.5 million of fair value losses on our prior related party instruments and mark-to-market adjustments on crypto assets as well as $85 million of stock-based compensation expense associated with the equity awards issued in connection with our IPO. We believe that adjusted EBITDA is a useful way to look at the underlying performance of the business. That said, our adjusted EBITDA result is not where we want it to be, and we've made decisions since year-end that are designed to change that. Now briefly on the balance sheet. We ended the year with approximately $252 million in cash and cash equivalents. The largest cash outflow in the quarter was the $117 million repayment of the Galaxy loan, which was completed in Q4 and removed that obligation from our balance sheet. As a result, we enter 2026 with a simpler balance sheet and lower debt levels. Following the restructuring actions announced earlier this year, we expect our normalized operating cash losses to decline meaningfully. Going forward, our focus is on continuing to narrow the gap to profitability through disciplined cost management and growth in higher-margin services revenue. The card warehouse facility had $154.4 million outstanding at year-end against $188 million in pledged receivables, supporting capacity of $250 million. As the receivables book grows, we'll execute additional funding capacity to support expected growth. On restructuring costs, the $11 million in pretax charges associated with the Gemini 2.0 plan will land almost entirely in Q1 of 2026 and are expected to be cash charges. They cover the U.K., EU and Australia wind down and the headcount reductions. Timing on some of the international pieces will depend on local consultation requirements, but we expect the full plan to be substantially complete by midyear. We expect these actions to simplify the organization and reduce our operating cost base going forward. Before I turn to the full year outlook, let me share what we are seeing so far in Q1 2026. Through February, trading volume was approximately $5.3 billion, down from Q4 levels as broader trading activity has continued to soften. On the card, payment volume has exceeded $330 million with over 150,000 open card accounts. And on predictions, approximately 15,000 users have traded since launch across more than 12,000 listed contracts. Total monthly transacting users across the platform were approximately 606,000. As always, we urge caution in extrapolating partial quarter activity. With that context, let me turn to how we're thinking about fiscal year 2026. At this time, we are not providing total operating expense guidance for the year. With the restructured cost base still taking shape and the macro environment that is difficult to forecast, we think the more useful approach is to frame the key expense categories individually. The restructuring actions we implemented earlier this year began flowing through the cost structure in Q2. Since year-end, we have reduced headcount by approximately 30% from peak levels. Because 2025 compensation reflected the full year at pre-restructuring staffing levels, the year-over-year decline is more moderate than the underlying headcount reductions. We expect compensation, excluding stock-based comp and restructuring charges to decline 15% to 20% relative to 2025. Stock-based compensation is expected to total $100 million to $115 million in 2026. 2025 included only 2 quarters of stock-based compensation at post-IPO levels following our September listing. The full year figure is higher in absolute terms, but the quarterly run rate is stabilizing as the IPO-related grant cycle normalizes. Technology and G&A is expected to range from $155 million to $190 million. The lower end reflects the post-restructuring normalized base. The width of the range reflects the variable costs that scale with card and trading activity, and we plan to narrow this range as we gain visibility through the year. Marketing expenses, excluding rewards and promotions, are expected at 10% to 15% of revenue, depending on market conditions and the opportunities we see in our highest returning acquisition channels. On the revenue side, our credit card product remains the principal engine for acquisition and growth. Predictions are still early, but with more than 15,000 users since December, we see early traction as encouraging, and it is central to where we are taking the company. While 2025 was the most expensive year in the company's history, given our IPO, the card investments and international expansion, the actions we've taken since then are designed to ensure that 2026 looks very different financially. Overall, we believe that the organization we enter 2026 with is leaner, more focused and positioned to drive improved operating leverage as we continue to scale our business. Together, we expect these dynamics to result in an improvement in adjusted EBITDA in 2026 as we operate with a more disciplined cost structure and a more diversified revenue base. To summarize, 2025 was a year of significant transformation for Gemini. We went public, scaled our credit card program, expanded and diversified revenue through services, launched prediction markets and took decisive steps to reset our cost structure. We enter 2026 with a simpler organization, a lower expense base and a more durable business model. We see the core story of Gemini today as straightforward. The business is becoming less dependent on crypto trading volumes and increasingly driven by recurring and diversified platform revenue. And with that, we will now turn to questions. Thanks, everyone. Ryan Todd: [Operator Instructions] Our first question comes from James Yaro at Goldman Sachs, who asks, could you update us on the drivers of the recent executive departures and how this fits into your new strategy? Cameron Winklevoss: Thanks for this question. So this summer was a different world. And when we IPO-ed in September, the price of Bitcoin was about $115,000 per coin. Of course, the markets dropped significantly from that point in time. But in addition, our ability to build a super app in America with predictions, there's now a path forward for that. And with the inflection point of AI, we have determined that we can move faster as a smaller, flatter AI-enabled organization that is still, of course, very much founder-led. So we think that we have the right team and the right organizational structure for today and tomorrow. Ryan Todd: Our next question comes from Matt Coad at Truist, who asks, you continue to see traction growing your user base despite the rough crypto market backdrop. What do you believe is driving this user growth? And how do you plan to cross-sell prediction markets into this large and growing user base? Danijela Stojanovic: Thanks for the question. I think I can start here and then maybe kick it off to Cameron or Tyler to speak a little bit more on predictions. So we're very pleased by the continued growth we see in our user base, particularly given the broader market backdrop. I think one of the key drivers here is we're continuing to see meaningful user acquisition through our credit card program and just alongside broader engagement driven by new products that we're introducing and diversifying our revenue base, such as predictions. So we'll hand it over to see if Cameron or Tyler want to touch on predictions a little bit more. Cameron Winklevoss: So Gemini started -- when we started in 2015, we were a Bitcoin company. And people came to us and they could buy, sell and store Bitcoin. Over time, we became a crypto company, and we added additional money words like stake, where users could stake their assets with us. And then we added the Gemini credit card, and that's become an active part of people's financial lives who want to earn crypto back every time they swipe. And we're going to continue to add things to our product where users have reasons to do more with us over time. And eventually, like a number of these activities will continue to be independent of crypto cycles. And I think that we're excited to see the engagement with prediction markets, our credit card and other things that we're going to bring to the Gemini app so that people don't have a reason to go elsewhere. Ryan Todd: The next question comes from Adam Frisch at Evercore, who asks, can you help us frame the path to sustain positive stand-alone card economics, specifically the relative contributions from rewards optimization, lower acquisition costs, provision and credit normalization and cheaper broader funding capacity? Danijela Stojanovic: I can take this one. Thanks for the question, Adam. So we're really encouraged by the progress that we made in Q4, reaching near breakeven on the card. The card business has scaled really quickly, and we believe it has a clear path to profitability as the portfolio matures. There's a few primary levers that we think of. So first, on the revenue side, we're seeing strong growth driven by interchange as spend increases. And then also important to note, interest income is still under earning relative to the size of the receivables space. So as the portfolio seasons and matures, interest income becomes a meaningful tailwind. And then on the cost side, we have several levers really. So rewards are the largest expense today, but these were intentional and front-loaded to drive adoption and really establish the credit card, and it worked. We went from roughly 30,000 open accounts at the start of '25 to now over 150,000 as of March 1. And when you think about it, the Bitcoin card has only been out for about 9 months, XRP for about 5 months. So we're just getting started with this program. And rewards are really fully within our control, and we expect to optimize those over time. And to add to that, we've also really been pleased with the organic sign-up direction on a smaller spend base. We're still averaging well north of 100 sign-ups a day, which is more than double where we were a year ago. And then we're also seeing improvements in bank fees as we scale, which will reflect better underlying economics. And then from a credit perspective, the performance is trending in the right direction. We see loss rates stabilizing and also continuing to improve as the book matures. And then finally, on funding. So while funding costs are now coming into the model, we expect those to become more efficient as the portfolio grows and also as financing options expand. The expansion of the funding facility is really an important step. And longer term, we see opportunities to lower the cost of capital and diversify funding sources as the portfolio grows. So putting it all together, we're already near breakeven on a pre-provision basis and the path to sustained profitability is driven really by a combination of portfolio seasoning, cost optimization and scale-driven efficiencies. So we don't need one single lever to do all the work. It's really incremental improvements across each of these areas that we believe will drive the card business into consistent profitability. Ryan Todd: The next question comes from Michael Cyprys at Morgan Stanley. 15,000 users have used Prediction Markets through the end of February. How has that translated to revenue? Where do you see the growth potential from there? How do you compete versus peers that have a higher number of active users? Cameron Winklevoss: Thanks for this question, Michael. So we will provide an update on revenue in the near future, but it's very early at this point. But we are very encouraged with the fact that 15,000 customers have already engaged with this marketplace, which is brand new, and we did not have even a quarter ago. So we're very excited that our users are engaging with the product. We continue to grow that number on a daily basis and add many new contracts to the offering. I think crypto is a great example. I think we started with monthly contracts. We are now down -- moved down to weekly, daily, hourly, 15-minute and just offering all these different types of intervals and ways for people to hedge and trade around the price of crypto, and we're just getting started. So we're very encouraged. I think that looking at the market as a whole, it's also very early for this market, and we see the pie only growing from here. And we think we're one of the few people who are building the full end-to-end marketplace for predictions. And we're excited that our customers -- it's resonating with them. Tyler Winklevoss: Great. And just to add on to that, we've been building technology trading systems in marketplaces for well over a decade. So this is -- this is -- these are the kind of things that we know how to do very well. We have a website, we have a mobile app. We have API interfaces. And we've been doing market surveillance. We know how to onboard customers, KYC them and build great trading and marketplace experiences. So this is very much an extension of the over a decade of experience and expertise that we've developed over the years. Ryan Todd: The next question comes from John Todaro at Needham. John Todaro: How are you thinking about capital raising and liquidity if we assume crypto volumes remain lower than 2025 levels through 2026 and 2027? Danijela Stojanovic: Thanks for the question, John. So we really appreciate it. And we're planning the business with a conservative set of assumptions, which include a scenario where volumes remain below '25 levels through '26 and '27 as well. And from a liquidity standpoint, we've taken really meaningful steps to reduce our cost base and improve cash efficiency. And really, we're focused on scaling a more durable recurring revenue streams that are less dependent on trading volumes. So our main focus is to execute on our operating plan with that discipline in mind. But with that said, we're always evaluating opportunities to strengthen our balance sheet and support sustainable growth. And if there are opportunities for this on attractive terms, we would consider them. But we're, first and foremost, focused on demonstrating the operating improvements and letting the results really create the conditions for any future transaction or capital raise. But the key point is that we aim to build a model that can sustain itself across cycles and not one that depends on near-term recovery in volumes. Cameron Winklevoss: Yes. So look, as founders, we've been building Gemini for over a decade. We don't just have our skin in the game. We have our entire bodies in the game. We're deeply committed to Gemini and the mission and very excited to continue building it and as we expand the mission into the super app. And I think one of the things that we've talked about is that, that really helps us break free of the crypto cycles and give customers things that they can do throughout their daily financial lives, whether it's using a credit card or trading predictions. We're hoping to launch U.S. equities as well, investing in U.S. capital markets and really building out a more durable story of revenue and engagement that moves beyond simply buy, sell, store or say, crypto, which is obviously very core to the business, but we want to build on that and give our customers more reasons to use Gemini. And we're seeing the beginnings of that. And I think we're really excited to keep doing that. So even if crypto prices do remain depressed for some prolonged period of time, we will be building other products that continue to drive engagement and growth of our business. Ryan Todd: The next question comes from Pete Christiansen at Citi. What is Gemini's OpEx discipline going forward? And has management put in place guardrails that helps ensure eventual profitability at the EBITDA level? Danijela Stojanovic: Thanks for the question, Pete. So OpEx discipline is a core focus for us coming out of the restructuring. We've reset the business to a lower fixed cost base, and we put clear guardrails in place around any incremental spend. So that includes being very selective on headcount growth and tying it directly to revenue or strategic priorities and also continue to manage marketing as a variable lever really based on ROI and market conditions. And so that's a real lever that we can dial up or down depending on market conditions and requiring clear payback threshold for any new investments. And just as importantly, we've become much more focused as an organization, so prioritizing a smaller set of high-impact initiatives and exiting or scaling back areas that just didn't meet our return thresholds. And that really allows us to concentrate our resources and our capital where we have the strongest product market fit and demand. So we believe that the organization is now structured to drive really operating leverage as volumes and engagement recovers. And what's important to add is we don't need to meaningfully re-expand the cost base to achieve our growth target. A lot of the growth from here really comes from just better monetization of our existing user base and also just leveraging the infrastructure that we've already built. So I'd say the right way to think about this is we have a relatively stable OpEx base coming out of the restructuring with modest or highly targeted investments layered on top rather than us returning to a broad-based spending. And if 2025 was the year of investment, I'd say 2026 is really the year of focus and discipline. Ryan Todd: The final question comes from Dan Dolev at Mizuho. Given the regulatory and competitive landscape in crypto and prediction markets, what are the biggest external risks you're managing against in 2026? And what would you point to as your most underappreciated competitive advantage? Cameron Winklevoss: Thanks for the question, Dan. So I think one of the things that we want to talk about is the fact that, obviously, there's a lot of effort to pass a crypto market structure bill. And I think what is very encouraging to see is the SEC and the CFTC in parallel are doing great work to bring about the super app era independent of a bill. And so while we are hopeful that a good bill will ultimately get passed, there is a lot of great work going on at both agencies to create a path for super apps in the event that a bill does not pass for whatever reason. So we believe like the future for crypto in America has never been brighter. And I think that sort of there is a lot of great work being done that we're excited about. I think the second point that I'd like to make is that we are one of the, I think, the few end-to-end prediction marketplaces that also has a crypto marketplace within the same organization. And so we believe there's a lot of synergies for people who want to trade, for example, a Bitcoin event contract, but also be able to trade spot Bitcoin within the same place and hopefully eventually perpetual futures down the road in U.S. equities. And so I think that being an end-to-end marketplace for both predictions and spot as opposed to plugging into another marketplace, we believe that's an advantage for us going forward. Ryan Todd: At this time, there are no more questions. Thank you all for listening, and we'll talk to you soon. Operator: That concludes today's conference call. You may now disconnect.
Operator: Good afternoon, and welcome to the Spectral AI Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Devin Sullivan, Managing Director of the Equity Group. Please go ahead. Devin Sullivan: Thank you, Gary. Good afternoon, everyone, and thank you for joining us today for Spectral AI's 2025 Fourth Quarter and Full Year Financial Results Conference Call. Our speakers for today will be Vincent Capone, the company's Chief Executive Officer; and Thomas Speith, our Corporate Controller. Before we begin, I'd like to remind everyone that during this call, certain statements made are forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, including statements regarding the company's strategy, plans, objectives, initiatives and financial outlook. When used in this call, the words estimates, projected, expects, anticipates, forecasts, plans, intends, believes, seeks, may, will, should, future, propose and variations of these words or similar expressions or the negative versions of such words or expressions are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the company's control that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. As such, listeners are cautioned not to place undue reliance on any forward-looking statements. Investors should carefully consider the foregoing factors and the other risks and uncertainties described in the Risk Factors section of the company's filings with the SEC, including the registration statement and other documents filed by the company. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. With that, I'd now like to turn the call over to Vincent Capone, Spectral AI's Chief Executive Officer. Vince, please go ahead. Vincent Capone: Thanks, Devin, and thank you all for joining us today. We issued our earnings release this afternoon, which contains additional details of our operating results. We will also file our 10-K with the SEC later this evening. Today, I will focus my remarks on our year-end review and corporate developments, and our Controller, Tom Spieth, will take us through our key financial metrics. We will then open the conference call up for questions. 2025 was a pivotal year for Spectral AI, in which we made great progress along a number of fronts in support of achieving our primary goal of commercializing the DeepView system for the burn indication. The DeepView system is a diagnostic tool that empowers medical personnel to make quick data-driven decisions regarding whether a burn wound will heal on its own or if it requires significant medical intervention. This currently unmet clinical need is dramatically magnified in the event of a mass casualty burn incident, where the ability to triage burned patients rapidly and properly would be crucial in allocating valuable resources and managing the surgical burden. Our DeepView system is designed to assist the U.S. government in preparing for any such mass casualty event. As many of you may be aware, a hallmark event for our company was the June 2025 submission of our de novo application to the FDA. This submission was the culmination of years of work by our talented, hard-working and dedicated team. Following our submission and as anticipated, we received an additional information notification letter from the FDA, which we timely and completely responded to just earlier this month. We are maintaining an active dialogue with the FDA, and its feedback has been consistent with our expectations. We are hopeful for a positive response from the FDA before the end of the second quarter of this year. Now to give a review of the 2025 year. In March 2025, we completed our burn validation study. This 15-month study represented one of the largest burn trials ever conducted in the United States with data obtained from 164 adult and pediatric patients across 15 burn centers and emergency departments in the United States. In this study, the DeepView system significantly outperformed the clinical judgment of burn physicians. Following our anticipated FDA clearance, we will initiate an outcome study to measure the real-world impact of the DeepView system within the hospital setting. This study will focus on the benefits across patients' journeys and clinician workflows. The results of the burn validation study were submitted as part of our de novo application to the FDA. More broadly, the use of our DeepView system in these burn centers and emergency departments raised awareness of the technology among a larger set of likely users of the device if approval from the FDA is ultimately obtained. By way of scale, in the United States, there are approximately 125 burn centers, 700 trauma centers and 5,400 federal and community hospitals with emergency rooms where the burn patients are most likely to present upon injury. Let me next turn to a discussion regarding our BARDA contract. We have had a long-term significant and strong partnership with the Biomedical Advanced Research and Development Authority since 2013. Its support has been instrumental in our product development to date and most notably related to the Project BioShield contract that we signed in September of 2023 with a value of up to $150 million, $55 million of which were awarded at that time as part of the contract's base phase. This BARDA funding has supported product development as well as funding extensive U.S.-based studies to validate our DeepView technology and our AI algorithm in emergency departments, trauma and burn centers. Last week, as we announced, BARDA reaffirmed its commitment to the development of the DeepView system by awarding Spectral AI $31.7 million of advanced funding to accelerate and support additional feature aspects of our innovative AI-driven diagnostic device. In connection with this award, we have also committed to provide an additional $9.7 million to the total overall development costs associated with these advancements. The acceleration of the second phase of our BARDA contract will enable us to expedite further development of the DeepView system, most notably with our total body surface area measurement tool and our EHR integration. Our contract with BARDA upon an FDA approval of our device also includes a provision that will allow BARDA to subsidize an initial sale and distribution of up to 30 DeepView systems in burn centers in key regions across the United States. This contract also allows a further subsidy by BARDA for an additional 140 DeepView systems in burn centers and trauma Level 1 emergency departments across the United States. Internationally, the DeepView systems that we have placed in the United Kingdom have generated positive user feedback. As previously shared, we have obtained UKCA authorization for the burn indication in 2024. In 2026, following a positive FDA determination of our de novo submission, we will be updating our UKCA authorization to include the improved DeepView system as we have submitted it to the FDA. Thereafter, we anticipate initial sales in the U.K., Australia or the Gulf Cooperation Council nations to begin in late 2026 following such UKCA expanded authorization. While there will be a transition phase following our anticipated FDA approval, we will begin commercial activities in earnest in 2026 with our existing manufacturing relationships and expanding our sales team to facilitate the first commercial sales in our company's history. We believe we have a clear strategy to drive rapid market adoption, both inside and outside of our BARDA relationship. I would also like at this time to share some additional information about our handheld device, which we continue to develop as part of our Department of Defense contract through the contracting consortium called MTEC. In late 2025, we signed a no-cost extension of our current Phase II contract to extend it through June 30, 2026. Consistent with our current contract requirement, we anticipate delivering a fully functioning prototype of our handheld device by the end of the second quarter of 2026. After such time, we will also determine if there are any additional scope items that we can complete as part of that contract before the end of the third quarter of 2026. Phase II of the MTEC contract is scheduled to be reviewed and awarded by the end of the fourth quarter of 2026, and we are hopeful that we will be asked to bid on such work. We also anticipate leveraging any approvals at the FDA for our cart-based DeepView system as a predicate to our handheld device. At such time, we will look to obtain a 510(k) approval of our handheld device after receiving approvals for the cart-based DeepView system, currently under review by the FDA. Before turning things over to Tom, I am happy to say that we entered 2026 in the strongest liquidity and financial position in our recent history, and certainly during my tenure with our company. Our cash position of more than $15 million at year-end tripled from December 31, 2024, and we have aligned our operating expense profile with our strategic priorities. This allows us to pursue our growth objectives, both preapproval and hopefully, post approval from a position of strength and with a sufficient cash runway. While I have participated on numerous calls in the past, I also want to recognize that this is my first call as the company's Chief Executive Officer; I want to thank the Board for their continued confidence in me as well as the amazing team of people I am fortunate to work with every day. They are driving our success. I am grateful to lead Spectral to bigger and better things. With that said, I'll now turn over the conference call to Tom for a review of our financial results. Thomas Spieth: Thanks, Vince. As Vince noted, we had a strong year and believe that we have the financial performance in place to continue our R&D efforts and evolve into commercial business. Beginning with the fourth quarter. Research and development revenue for Q4 2025 was $3.8 million, compared to $7.6 million, reflecting the anticipated reduction in research direct labor, clinical trial and other reimbursed study costs relative to 2024, as the company moved closer to completion of the base phase under our contract with BARDA, we call the BARDA PBS contract. Gross margin for Q4 2025 was 39.8% compared to 44.0%, due primarily to a lower percentage of reimbursed direct labor as a component of overall revenue from the BARDA PBS contract. General and administrative expenses in Q4 2025 were $4.0 million, down from $4.5 million in Q4 of 2024, and reflecting lower spend on third-party accounting and legal providers. Net income for Q4 2025 was $0.6 million, or $0.02 per diluted share compared to a net loss of $7.7 million, or a negative $0.41 per diluted share in the fourth quarter of 2024. Net income in Q4 2025 included a $4 million gain in the fair value of the company's warrant liability as compared to a net loss of $5.4 million. Now we turn to the full year. Research and development revenue decreased to $19.7 million from $29.6 million reflecting the anticipated overall reduction in the company's reimbursed costs associated with the BARDA PBS contract during 2025, following the company's submission of its de novo application to the FDA. Gross margin was stable at 45.4%, compared to 44.9%, reflecting a consistent mix of direct labor as a percentage of the total work performed on the BARDA PBS contract from the prior year. G&A declined to $17.5 million from $19.9 million, reflecting a continued focus on operating efficiencies at the company. Our net loss for the year was $7.6 million, or a negative $0.29 per diluted share compared to a net loss of $15.3 million, or a negative $0.85 per diluted share, primarily due to the change in the fair value of the company's warrant liability, reduced borrowing related costs of $1.5 million, net of amortization of debt discount and improved operating efficiencies. As of December 31, 2025, we had approximately 30.7 million shares outstanding. With respect to our financial condition, as of December 31, 2025, cash improved to $15.4 million from $5.2 million in December 31, 2024, reflecting previously announced debt and equity financings completed during the year as well as warrant and stock option exercises. Total debt was $8.5 million. I will now turn the call back to Vince. Vincent Capone: Thanks, Tom. Before turning things over for questions, I would like to address our 2026 outlook. For 2026, we are forecasting revenue of approximately $18.5 million, which includes the effect of the new BARDA funding. This guidance does not include any significant contributions from the sale of the DeepView system. With that, I will open up the floor to any questions. Operator: [Operator Instructions] Our first question is from Ryan Zimmerman with BTIG. Ryan Zimmerman: And let me just start by saying congrats on the BARDA funding, and Vince for new role. Maybe as we think about your transition into a commercial organization, this year, Vince, you could talk to us a little bit about kind of how you're thinking about preparing for commercialization, what you need to do to get the organization ready to be a commercial organization and so forth. And then I have a few follow-ups. Vincent Capone: Sure. Good to hear from you, Ryan. So I mean, there's a few things that we're working on in preparation for what we believe will be hopefully, FDA approval. Some of that is, we've already started our search for a new Chief Commercial Officer. We have also engaged Deloitte Consulting to help us with our strategic plan for commercialization moving forward, both in the U.S. and overseas. That is already underway. We continue to have plans in place to expand our sales team. I'd like to do that in concert with the hiring of a new Chief Commercial Officer and that should get us in a position where we're ready to see sales inside and outside of BARDA in late 2026. Ryan Zimmerman: And just to be clear, let's assume that the approval comes on time, the 30 systems that are distributed to burn centers around the U.S. How do you think about the commercial activity that is generated from that? Because if you're not necessarily selling those systems, maybe because, again, BARDA is distributing them. Just how do you think about kind of what that does to the business model? Or how should investors think about that over time? Vincent Capone: We're -- well, so ultimately, each health system will make its own determination on really how they want to treat the device, if we can install it into their facilities, right? Whether it's purchase or lease, it's a different -- it's different from us. It's a different revenue recognition from a company perspective, but we foresee an opportunity for us to be in place with each center that we can place a device at. Hopefully, with a 3-year contract for both improvements in the software, the software licensing, and then the delivery of the device maintenance. So you package that whole thing together. Again, it's going to depend on the health system on how we, as a company, treat that revenue stream, but we think that we're well positioned to see. I don't see that adding a lot to our revenue number for 2026, but that will be obviously significant in 2027. And clearly much so -- much more so in 2028, where you have the layer on of the different -- of all the different levels of installations. Ryan Zimmerman: Okay. And then with this new BARDA contract, which was great to see, we didn't expect -- we certainly did not expect this kind of guidance, which is great, again, very positive to see for 2026. What kind of things are you going to be working on with this additional money from BARDA to enhance DeepView that allows, like I imagine you have to be speeding up some things, maybe pulling forward some opportunities just given the development revenue that you're getting now as part of this contract. And so what does that do for DeepView for sitting here a year from now looking at some of the capabilities and some of the investments you've made over 2026? Vincent Capone: Yes, I love that question. We have so many things that we see as kind of line of sight. We're going to be doing a label expansion. I think that's probably going to be one of the first things you see where we're going to pick up different areas of the body. We'll look to do a label of expansion. We're going to do further work on our TBSA, total body surface area, offering to make it better for the doctors, better for the physician assistants, better for the nurses. That is a process that we've worked on significantly to get it to this point, and it's part of our FDA submission. But the next iteration of that is going to be much better, and the next iteration after that, if there is one, will be even better. So add that into improved EHR integration, I mean, at a minimum, we're also working on things that are -- we've heard from other users. We're going to improve the battery. We're going to improve some of the user interfaces. This refinement, I think, is going to make our device even that much more valuable in a burn center. Operator: The next question is from Carl Byrnes with Northland Capital Markets. Carl Byrnes: Congratulations again on the BARDA advance, particularly prior to DeepView's approval here, and also Vince your promotion in your new role, congrats there. But with respect to the 31.7 BARDA advance, I'm wondering if you can kind of tell us a bit how you expect that to hit in '26 and '27. And the same with respect to the $63 million remaining on the contract or thereabouts in terms of filling Clin2, Clin3, and Clin4, I would call them obligations, but the buckets there over fiscal '26, '27 and '28. I know that's a lot. But any sort of visibility you can give would be awesome. Vincent Capone: Well, I think we're clearly pleased that BARDA was able to accelerate the second phase of the contract for us in advance of FDA approval. They've been a valued and frankly, a very supportive partner for us. This does a number of things for us. It's going to open up the opportunity for us to really begin in -- if we can gain FDA approval to really begin to start manufacturing devices with the new de novo system in place, really start in earnest with hospital systems for the placement of these devices, and that's part of the contract acceleration. I can't get into too many weeds on the terms of the contract as to what it will do in 2028, but we have economic outcome studies that we plan on doing. We have an expanded label work that we're going to do internally for expanding our label on what the indication is for, there's outcome studies that we were going to start in earnest sooner rather than later. All of this is great for us as an acceleration and providing us with getting to the part where we can provide better patient outcomes to burn patients and providing a better alternative so that we can help the health care system be in a position to really treat these patients in a more timely and more efficient manner. Operator: The next question is from Ram Selvaraju with H.C. Wainwright. Raghuram Selvaraju: Just 3 quick ones. Firstly, can you just remind us of the time frame within which you anticipate the entirety of the BARDA funds to ultimately be disbursed? Secondly, I was wondering how you're looking to approach the fine-tuning or revising of revenue guidance as and when the DeepView system achieves FDA licensure. And then lastly, with respect to the potential optimization of DeepView's value outside of the United States. I was wondering if you could perhaps say a few words on that. Vincent Capone: Sure. Happy to do so. Three pretty broad questions, but let's kind of walk through that. The BARDA contract in and of itself, I believe, extends until 2030. But if you take a look at the acceleration that really runs mostly through 2028. So that contract is going to help us with revenue earlier rather than later. And that's the time line for the entire BARDA contract. Ultimately, as things progress, that time line may be moved up, but that's the terms of the BARDA contract in and of itself, but you're going to see an acceleration through 2028. Refining and revising our forecast on revenue. As I said to Ryan, some of this is dependent upon health systems, and how they want to treat the actual deployment of the device. However, they treat it is going to really impact our revenue recognition. But for us, the installation to burn centers is obviously a pivotal event even if it -- even if the revenue is recognized, say, over a 36-month period. But you layer that on with the software licensing piece that is going to benefit them as we make improvements you're going to see that kind of stacking of installations in '27 and 2028 as we move along the continuum of installations, both in burn centers and EDs and Level 1 trauma centers. And that's within and without BARDA. And I'd like to make that point pretty clear. I mean we look to commercialize this in the United States with BARDA's assistance, but not solely exclusively through BARDA's assistance. And that's the same thing with respect to our U.K., our GCC, and our Australian international sale opportunities, we're going to modify our UKCA authorization to expand it to what is in the current DeepView system that's under de novo review with the FDA. And at that point, then we will pivot and look to deploy those devices overseas. And that revenue model may be different, as those health systems and some of them are nationalized, and how they wish to treat the sale of the DeepView systems abroad. Again, I put little stock in those numbers for 2026, they may be larger, but you'll see more of that as a larger component of revenue clearly in 2027 and in 2028. Operator: The next question is from John Vandermosten with Zacks. John Vandermosten: Vince, what does the training force look like? And how will you go about training the trainers for this? Because I assume you're going to have a group go out and get everybody up to speed on how to use them when you do the implementations. Vincent Capone: John, good to hear from you. We have a group of a fairly decent staff of BMEs currently in place here. And we're going to expand there. We have that in the budget for 2026 on expanding both our sales reps, and our biomedical engineers here at Spectral. And it's going to be kind of -- it's going to be in concert with both the BMEs, and our sales force to make sure we get out there and train many of these centers when they take the device, how to use it. The device -- and I know you've seen it, but I'm just going to say it for others that haven't, it's intuitive. And so we have a Q4 to make sure that the image capture is the right distance. And we're working on a number of different additional features to it to make it even more user-friendly. So yes, we're going to need to expand our training force. We plan on that. We plan on expanding our sales force. I'm just excited about where the company ended in 2025. Our cash number is significant. I think, we're in the best financial position we've ever been in, especially during my tenure here, which is now into my fifth year. And so I'm excited with what we have and where we're going, and we'll marry our training force to meet the expansion of where we're going. John Vandermosten: And do you have a number in mind in terms of how many individuals that might be for to train? Vincent Capone: I don't. I mean I have an estimate in my head. We're talking we're talking -- we're not talking hundreds. We're talking a much smaller number than that. But I'm pleased that we're working in concert with Deloitte Consulting to make sure that we have the right path forward. John Vandermosten: Okay. And how much time after clearance do you think you'll need to place the first units? Vincent Capone: John, I wish I had a crystal ball, right? All I know is it's going to take us a little while to manufacture the devices. But my hope, and as we've said this before, my hope is that we place devices in late 2026 and you'll see a significant pivot in 2027. John Vandermosten: And last question is just on looking forward in terms of the allocation of R&D spend. I know you've got snapshot. There are some indications outside of burn. And then also, you've talked about the future evolution of the DeepView cart. And then perhaps, I guess, development of AI technology or just the AI ML side of things, how do you see that breaking down going over the next year, 2027, perhaps and beyond in terms of that R&D spend. Vincent Capone: Well, I will tell you that we're definitely going to do a label expansion with head, hands and feet. I mean that's definitely going to be there. We've looked at a different -- a number of different opportunities for us. A number are being presented to us from third parties. I think the lowest hanging fruit will be the label expansion, the work on that. There may be another indication, whether it is critical limb ischemia and things related to that, whether it's amputations, or whether we partner with, maybe a wound bed - a wound company to check biofilm markers or wound bed preparedness we continue to see that as a near-term additional indication. But look, we're excited on where we ended up 2025. We're excited about BARDA's commitment to us with an additional 30 -- almost $32 million. We're excited to bring this to the burn community, and then expanding thereafter. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Vince Capone for any closing remarks. Vincent Capone: Gary, thanks. In closing, I would like to again thank our investors for their continued support of our company. I'm excited to deliver on our commitment to develop and commercialize our DeepView system, which we believe will significantly improve patient outcomes. With our strong cash position and continued advances in our product development, I am pleased with where we are to date and where we are going in the near future. Thank you all for your attendance and interest in our company. Have a good evening. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Welcome to Intrusion Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. [Operator Instructions] Please note this conference call is being recorded. An audio replay of the conference call will be available on the company's website within a few hours after this call. I would now like to turn the call over to Josh Carroll with Investor Relations. Josh Carroll: Thank you, and welcome. Joining me today are Tony Scott, President and Chief Executive Officer; and Kimberly Pinson, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website. Before I turn the call over to Tony, I'd like to remind everyone that the statements made during this conference call related to the company's expected future performance, future business prospects, future events or plans may include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Please refer to our SEC filings for more information on the specific risk factors that could cause our actual results to differ materially from the projections described in today's conference call. Any forward-looking statements that we make on this call are based upon information that we believe as of today, and we undertake no obligation to update these statements as a result of new information or future events. In addition to U.S. GAAP reporting, we report certain financial measures that do not conform to generally accepted accounting principles. During the call, we may use non-GAAP measures if we believe it is useful to investors, or if we believe it will help investors better understand our performance or business trends. With that, let me now turn the call over to Tony for a few opening remarks. Anthony Scott: Well, thank you, Josh, and good afternoon, and thank you all for joining us today. Fiscal year 2025 was a year that had an unexpected beginning and an unexpected ending along with a number of significant product milestones along the way. At the beginning of the year, we improved our balance sheet by fully eliminating our then outstanding debt and Series A preferred stock. At midyear, we rolled out production of our critical infrastructure solution to help safeguard essential assets like water, power and telecom facilities. In the third and fourth quarter, we expanded our access to our Shield Cloud solution by making 2 variations of the product available on the AWS marketplace. And towards the end of the year, we announced our partnership with PortNexus to provide secure network protection for their MyFlare safety technology, which is being deployed at schools in several states. In conjunction with PortNexus, we also launched the P.O.S.S.E program, which will give sheriffs and other law enforcement agencies critical network protection for their public safety networks. And our pilot experience with the P.O.S.S.E program is encouraging with a high adoption rate so far. And finally, we ended the year with an unexpected delay in the extension of the earlier mentioned critical infrastructure contract with the Department of War. And I'll start my detailed remarks with some more insight about this unexpected end-of-year development. Kim will provide more details on the overall numbers shortly, but our fourth quarter revenues decreased by 12%, compared to the prior year period as a result of the delayed timing of an expected contract extension for our critical infrastructure technology. But for this delay, we had expected to show quarter-on-quarter increases in revenue, and greater year-over-year increase in revenue overall. Now to be clear, the cost of providing the services for this critical infrastructure solution are included in our operating expenses, but the expected revenue is not and will show up in later periods when the contract is extended. The timing of this contract extension was and remains affected by the operational and administrative constraints associated with the U.S. government shutdown, which limited agencies' ability to initiate and process contract actions during that period. And the situation is further impacted by the events related to the war in Iran unfolding currently. This delay in funding reflects a broader trend, affecting companies with U.S. government contracts, particularly those operating within the defense sector. And while we're disappointed by this delay, we do believe that we will be able to recognize this revenue during the first half of 2026 once procurement activity normalizes, and we are continuing to support and enhance the solution that we have provided, and we look for further expansion of this solution in other regions in 2026. We're proud of our partnership with the U.S. Department of War and the critical role we play in protecting national security through our advanced cyber capabilities. We continue to view the critical infrastructure solution that we have rolled out with the Department of War as one of the key drivers of future growth, especially as cyber threats become more frequent and more sophisticated. To convert this opportunity into future growth, we've recently taken targeted steps to enhance our sales efforts and go-to-market strategy, and I'll discuss these initiatives in more detail shortly, but they are specifically designed to expand our customer base across the private sector as well as federal state and local government markets. Turning now to some fourth quarter developments. During the quarter, we announced the launch of our Shield Cloud offering on the AWS marketplace, expanding the opportunity for customers to access our Shield technology. Additionally, we've launched our Shield Cloud offering on Microsoft's Azure platform and it's now live. With availability across both leading cloud marketplaces, we've meaningfully expanded our sales reach, which will help enhance our customer pipeline and drive future revenue growth. On top of this customer access expansion effort, we've also continued to strategically invest in R&D to help provide enhanced offerings to our customers. This is evident by the recent launch of Shield Stratus, a cloud-native packet filtering solution that inspects every connection and blocks known threats immediately without the complexity or re-architecture required by traditional firewalls. Shield Stratus integrates seamlessly with AWS gateway load balancer and is a great addition to our Shield ecosystem. Now on to some of the more recent developments during the first few months of 2026. As you may recall, we began a partnership with PortNexus in 2025, who chose to embed our Shield endpoint solution into their MyFlare solution that helps provide enhanced security for education and law enforcement customer endpoints. In February, we expanded our partnership with PortNexus by launching the P.O.S.S.E program that utilizes our Shield On-Premise technology to help protect law enforcement from cyber threats. The program achieved high levels of adoption during the initial pilot. And in the pilot program, Intrusion Shield technology identified and stopped dozens of active threats. The program is now scaling across Texas, Missouri, Oklahoma and Iowa through our partnership with PortNexus. And this partnership provides distribution access to hundreds of sheriffs' departments, schools and government facilities, so an exciting development, and we look forward to working closely with PortNexus to help expand this program and increase the adoption of our technology. We also recently took steps to expand our business development efforts with the hiring of Valencia Reaves as our Public Sector Vice President of Sales; and Patrick Duggan is our Director of Channel Sales & Partnerships. These 2 additions to our team will help strengthen our U.S. business development efforts across the government sector and our channel partners. Now briefly on to our financials for the quarter and the year. Total revenues for 2025 were $7.1 million, up 23% year-over-year. This top line growth was largely driven by the contract expansion with the U.S. Department of War that I touched on earlier. Fourth quarter revenue was $1.5 million, a decrease of [ 25% ] sequentially, which was the result of the delay in the incremental funding of the Department of War contract that I previously referred to. Our operating expenses also saw a slight increase during both the quarter and the year. This increase in our expense reflects deliberate strategic investments to strengthen our business and position us to achieve our goal of creating sustainable growth and long-term profitability as well as the costs associated with the critical infrastructure deployment and operation I mentioned before. We've made meaningful progress against our goals, and we believe we're on track to breakeven operations. And finally, before I turn the call over to Kim, I'd like to wrap up by addressing some of the recent AI trends that we're seeing in the cybersecurity space. As I'm sure many of you are aware, the recent emergence of cloud code security has caused a bit of a shakeup in the cybersecurity space as some fear of this tool will change the industry by eliminating defects in software. However, I do not view this development as a threat to cybersecurity companies such as Intrusion, but more as a promising tailwind for the industry. While improved code quality is more than welcome, it's only one aspect of the landscape of cybersecurity vulnerabilities. And in fact, the rapid adoption of AI has materially increased cybersecurity risk as it has significantly reduced the cost, the technical expertise and the time required to develop and execute highly sophisticated and scalable attacks. As a result, this is only going to increase the need for cybersecurity solutions, such as the ones that we provide to our customers that help catch these malicious actors before they can cause harm. With that, I'd like to turn the call over to Kim for a more detailed review of our fourth quarter and full year financial results. Kim? Kimberly Pinson: Thanks, Tony, and good afternoon, everyone. Fourth quarter results totaled $1.5 million in revenue, a decrease of 25%, compared to the prior quarter, and 12% when compared to the prior year period, as noted earlier on the call. This was due to the delayed incremental funding of a major U.S. government contract. The timing of this award was affected by funding and procurement constraints associated with the U.S. government shutdown and continuing resolution, which affected agency's ability to approve and initiate new contract actions during the period. We believe the delay in this contract award is primarily timing related and anticipate that a substantial portion of the delayed revenue associated with this contract will be recognized in future periods. Consulting revenues totaled $1.1 million in the fourth quarter, compared to $1.5 million in the prior quarter and $1.3 million in the prior year quarter. Shield revenues totaled $0.4 million in the fourth quarter, compared to $0.5 million in the prior quarter and $0.3 million in the fourth quarter of 2024. We anticipate that the sale of our OT Defender solution and other departments of the U.S. government as well as commercially will contribute to future growth. Additionally, during 2025, we partnered with PortNexus to integrate our Shield technology into its MyFlare Alert School Safety solution. Although sales to PortNexus did not materially impact 2025 revenues, the expanded pipeline for this offering is expected to support future Shield revenue growth. Fourth quarter gross profit margin was 74%, which was slightly down from the prior year period. For the full year, gross profit margin was 76%, down approximately 93 basis points versus 2024. Operating expenses in the fourth quarter of 2025 totaled $4 million, an increase of $0.3 million sequentially, and $0.8 million year-over-year. The fourth quarter increase both sequentially and compared to prior year was primarily driven by higher sales and marketing expenses reflecting increased participation in trade shows and expanded brand awareness and product marketing programs. For the full year, operating expenses totaled $14.5 million, an increase of $1.7 million, compared to 2024. In addition to the increased sales and marketing expense, the full year increase primarily related to onetime savings realized in 2024 from the negotiation or cancellation of existing contracts, which contributed $0.5 million in savings in 2024. Increased share-based compensation of $0.8 million from equity grants made in the first quarter of 2025 and cost of living and merit increases of $0.3 million. Net loss for the fourth quarter of 2025 was $2.8 million or $0.14 per share, compared to a net loss of $2 million for the fourth quarter of 2024. The increased fourth quarter net loss is the result of the reduction in revenues resulting from the delay in the incremental funding of government contract and increased operating expense. Net loss for the full year was $9.1 million or $0.46 per share, a $1.3 million increase from the prior year. Turning to the balance sheet. From a liquidity perspective, on December 31, 2025, we had cash and cash equivalents of $3.6 million. Looking ahead, we plan to seek a small debt financing in the near term to help further support our growth initiatives. We have already begun to have some initial discussions, and we'll provide an additional update on the debt financing during our first quarter earnings call. With that, I'd like to turn the call back over to Tony for a few closing comments. Tony? Anthony Scott: Thank you, Kim. 2025 was a year of meaningful progress for Intrusion from a product development standpoint and was marked by several key improvements, including new products. And while this progress was encouraging, we're not satisfied, and we realize that we have some significant work ahead of us. As we look to the remainder of '26, we will be doubling down on our sales efforts to expand our customer base to further improve our top line growth. We're confident that we have both the right people and the products in place that will help us achieve our goal of creating sustainable growth and long-term profitability. And before I wrap up, I want to extend my gratitude to our employees. The progress we've made this past year is a direct reflection of their dedication and hard work. And to our shareholders, we deeply appreciate your patience and steadfast support throughout this journey. And with that, I'll now turn the call over to the operator for Q&A. Operator: [Operator Instructions] Your first question is coming from Scott Buck from H.C. Wainwright. Scott Buck: Tony, I'm curious, can you provide a little more granularity on the unit economics of the P.O.S.S.E program? Like what is the average contract value for a typical sheriffs' department deployment? And what do the sales cycles look like with your partnership with PortNexus? Anthony Scott: Sure. Well, the device that they select will depend a lot on the network bandwidth that they need at the sheriffs' department. So those could range from a few thousand dollars up to tens of thousands of dollars depending on the size and bandwidth requirements of the particular sheriff. In the case of the pilots, we use some of our lower-end appliances. So it's a few thousand dollars in terms of unit pricing on those. But what I'm encouraged by is when we -- as we've experienced everywhere else, once we show the network traffic that's getting through the traditional firewalls and other technologies they have in place and also show the outbound traffic that should be blocked -- that's not currently being blocked, it makes the sale pretty quickly. So we're seeing a high adoption rate and we're going to expand into these other states, as I mentioned on the call. And the way it works is we loan them a unit, it goes in for a week to 10 days. We do a report and show them the traffic that we see and would have blocked if we've been in place, and they love it. So we're doubling down on that. We're increasing the number of POC units, and we'll see where it takes us. So that's kind of the way it works. Scott Buck: That's very helpful. And then I wanted to clarify something in your prepared remarks. Did you say that had you not had the delay from the government contract during the quarter that we would have seen sequential revenue growth from the third quarter? Anthony Scott: Yes. Yes. That is correct -- that is correct. Yes, we were expecting to report growth, both for the quarter and -- quarter-on-quarter and year-on-year above and beyond what we reported on the year-on-year. Scott Buck: So it's safe to assume that contract delay cost you at least $0.5 million in the quarter? Anthony Scott: Yes. Scott Buck: Yes. Perfect. And then, Kim, I wanted to ask about sales and marketing expense. I think it's the highest quarterly level of spend, maybe ever. Is this the new run rate? Or given some of the comments during the call, could we expect further investment in sales in 2026? Kimberly Pinson: We will continue to invest in sales and marketing. What we saw in the first quarter approximates the run rate, but we will see some increases from here. Anthony Scott: Scott, I'd also add, we're looking for cost efficiencies elsewhere. So it's important for us now to improve that sales and marketing muscle, and we'll look for other efficiencies elsewhere as we buttress up that capability. Scott Buck: Okay. So we may not see as material an increase in total operating expense because some of those dollars will... Anthony Scott: Could be offset... Scott Buck: Could come from other buckets? Anthony Scott: Yes. exactly. Operator: Your next question is coming from Ed Woo from Ascendiant Capital. Edward Woo: Did I hear you right that you said for the delayed contract that some of your expenses have already flown through the P&L already... Anthony Scott: That's correct. We've taken all the expenses associated with that. We just are not able to recognize the revenue at this point. Edward Woo: Okay. And then... Anthony Scott: I'm sorry? What that means is when the revenue does come, it will show up in a subsequent quarter, but the expense will already have been recognized. Edward Woo: Okay. So that would be a 100% margin when it comes through? Anthony Scott: Pretty nearly, yes. Edward Woo: Okay. And then are you seeing any -- what about the sales cycle pipeline for commercial customers? Have you seen any delays, any lengthening of sales cycle? Any concerns that you're hearing from Chief Information Officers out there? Anthony Scott: Beyond the government sector, no real change. I think the one concern that we hear all the time is that the dwell time for threats is getting shorter and shorter and shorter, which means you have to react faster than ever, once some suspicious activity is noted. And I think that bodes well for Intrusion's technology because we don't rely on the presence of malware or other known signatures, we're heavily focused on reputation, which means that we can stop things in real time versus waiting for something bad to happen and then have to react to it and then remediate and so on. So we're currently having some discussions with MSSPs and so on who are attracted to that kind of capability because it helps get out in front of these attacks versus waiting for an attack to actually happen. Operator: Your next question is coming from Howard Brous from Wellington Shield. Howard Brous: A couple of questions. Tony, critical infrastructure customers that you have, can you give us a general sense of what kind of customer it is? And is he happy with the work? Is this basically expandable for that particular customer? Anthony Scott: Yes. So this solution is protecting critical water infrastructure in the Asia-Pac region, and the customer is very happy with the solution. It's working as designed, and we continue to support it. And I think there's tremendous opportunities for this to expand beyond the region where it is now. We're doing one island right now in Asia-Pac. But as you know, there's a lot of islands that the Department of War has interest in, in that particular region. And so I think the revenue opportunity that comes from this is multiplied by the number of islands that still need this kind of protection. And that's not to mention the domestic facilities as well, which fall under Homeland Security jurisdiction generally. And with our new sales capability that I mentioned on the call, we're targeting those places as well. And we've got great customer reference from this initial deployment. So we're pretty excited about the revenue opportunity in '26 and going forward. There's a lot of this critical infrastructure around, whether it's water or telecom or electrical grid kinds of things, and our solution is tailorable to each of those environments. Howard Brous: So let me digress for a moment and talk about schools children. You install this in a school, and my understanding it's in every school room, every classroom and can be activated by a teacher if there is a potential event happening, where somebody is coming into the school with a weapon. Is that fair comment? Anthony Scott: Correct. Yes, that's the PortNexus solution that we're partners with. Yes. Howard Brous: Right. So you've got thousands of school districts throughout the country, why isn't everyone adopting this? It protects our children. There's nothing more important than that. How are you going about marketing this? Anthony Scott: Well, with PortNexus, we're attending events, where school administrators look for technology. We're also marketing, as we mentioned, to the sheriffs' department because -- or whoever the local law enforcement agency is that's associated with a particular school district because it takes the combination of them to really adopt the solution. The good news is it's very inexpensive. I've mentioned a couple of people. It's the kind of thing that, in many cases, the local PTA could fund even if the school couldn't afford to do it. But you're right. I think once you see the demo of this capability and the situational awareness that it brings to the law enforcement of people within seconds of an event occurring, it's a why wouldn't we want to have this kind of thing. And so we're really looking forward to 2026 to expand this greatly across lots of markets in the U.S. Howard Brous: And how your reception so far has been? Anthony Scott: It's been outstanding, yes. Again, once you see it, you go, dah, why would I ever want to be without this kind of thing. And parenthetically, I'll say it could apply to other public venues as well. It doesn't necessarily only get marketed to schools. But any place where people gather and there's a potential for disruptions, whether it's active shooters or fire or any other kind of an event that might be disruptive, it's really important for law enforcement to get situational awareness as quickly as possible. And this PortNexus solution allows for multiple perspectives to get that situational awareness as well as alerting the authorities very quickly when an event happens. It shaves minutes off of that critical first few minutes when you have a potential to avert disaster. And I don't know anybody who's ever seen it that doesn't think that's a good idea so... Howard Brous: Anything to protect our children is a very good idea. Can you talk about... Anthony Scott: You got it. Howard Brous: No doubt about that. Talk about the kind of cost? Is it per student, per classroom, per school? Anthony Scott: It's per classroom. The PortNexus solution would go into the classroom in the case of a school and attached to or become part of the smart whiteboard that's in the classroom and then school resource officers and teachers and anybody else that should be registered -- gets registered to that location. And then in the event of an incident, the panic button gets pushed, a text goes to all the preregistered cell phones. It turns the cell phone into lights up the camera and the microphone and the GPS signal and all of that gets fed to the law enforcement authorities along with video from the fixed cameras that usually are already installed in the school. So when an event happens, the law enforcement authorities have great situational awareness and location information from multiple perspectives, it's invaluable. And we license to PortNexus the network protection aspect of it. So the revenue we get comes from the number of classrooms and then the number of schools within the school district. Howard Brous: And the margins on this are high margins... Anthony Scott: So for us, it's very high, yes, because we don't actually have to go do any install or anything. We just license our software, PortNexus' team is responsible for the installs and first-level support and so on. So it's almost pure profit for us. Howard Brous: This is a big deal. Anything to protect our children, that's a good thing. Anthony Scott: You got it. Operator: Your next question comes from James Green. Unknown Analyst: My question concerns the potential emerging technologies and the ability for your technology to interface with those things. And I'm specifically thinking about as we move forward into a day in an era, where we have humanoid robots and we have autonomous cars, we have an imminent threat, where if they're compromised they can be an immediate danger if someone compromises it. Anthony Scott: Hello. I think we may have lost you, or I couldn't hear the rest of your question. Hello, can anyone hear me? Operator: Apologies. James Green's line has disconnected. Anthony Scott: Okay. Well, I think the question was -- I'll try to answer as best I can. Yes, there's more and more software, more and more autonomous things, whether it's robots or everything in your house, the emergence of AI and everything, I think widens the aperture for cybersecurity risk significantly. And our fundamental belief is that if you're not monitoring the network that all of these things need to operate on, if you're not monitoring it in real time packet-by-packet in multiple places in your network, you're likely to miss important things that would allow you to avert a disaster. And that's what Intrusion Shield does. We look at every packet in near real time and we make a decision about whether that packet is likely good or likely bad or unknown in some cases, and we make a decision. And I have used the analogy, it's like having continuous blood monitoring in your body. Most people get their blood drawn once a year when they go to physical exam, but some bad condition might have existed for almost a year, and you wouldn't know it until you get your blood drawn and get it tested. In our case, we're doing the equivalent of looking at every single drop of blood in the body all the time, every time it moves through the body, and that allows us to very quickly detect when there's something untoward going on. And so I think that type of protection is what's going to be more and more and more important as things move forward, specifically with AI and more and more software in our lives. The threat landscape just got a whole lot bigger and needs to be monitored and managed. Operator: And James Green, your line is connected and live. Unknown Analyst: Sorry, I accidentally got the line disconnected, so I missed the beginning of what you said. But since I missed the beginning, my question was, based off those emerging technologies, et cetera, is the current form factor or technology that you all utilize? Is it easily interfaced with those potential technologies? Or is there some minor alteration necessary to be able to utilize them in that? Anthony Scott: Yes. We -- yes, so the answer to that is we can attach to the network in any form that it occurs, whether it's wired or wireless or in the cloud or in a data center or in a home for that matter. And the important thing, as I was saying in my earlier answer is to be really safe, you need to be monitoring the network each and every packet all the time and monitoring from multiple places in your network to be assured that everything that is going on in the network is desirable and necessary even in some cases. So yes, we're very flexible in that regard. And we have put the R&D effort into making sure we can handle increasingly large bandwidth as that becomes a necessity. So I think we're well prepared for the future in that regard. Unknown Analyst: Okay. And 1 other question, which is since we have all these scenarios where people are going to have local agentic things running on their own potentially private networks walking back off a cloud, the speculation that companies might be trying to have all their things working within their own system, is there a way in which the technology deals with the agentic element even internally? Anthony Scott: Yes. I think to the degree that all of these agentic tools will use the network that allows us to monitor what that activity is. And I think you're going to see in 2026, I've made this prediction a number of times, you're going to see some pretty big accidents caused by unrestrained AI, where people lose something that got out of control somehow, whether it's privacy violation or whether it's a violation of releasing intellectual property in an unwarranted way. Who knows what it could be. But I think it's easily predictable that that's going to happen in '26. And for us, the only safeguard against that kind of thing is continuous real-time network monitoring, so that the nanosecond something bad happens that you can stop it and shut off its activities. So we think we're in a good spot as all of these things come to fruition. Unknown Analyst: So like within a local network, if there's agentic misbehavior, it can be controlled from being able to infect ones outside connected potentially? Anthony Scott: Yes. Yes. One of the characteristics of malware already today, even without AI, is what's known as a call home, an infected device inside the network makes a call home to a command-and-control server externally and looks for instructions in some cases or just reports its presence in the network, where it finds itself resident and then often waits for instruction on what to do next, launch a phishing campaign or launch some sort of other kind of attack. And Intrusion technology is particularly good at stopping those call homes that would otherwise be very dangerous. Now I'll say what we don't do is we don't go fix the device that had the problem. We just point you to it and say, this device over here has apparently got a problem. It's generating call homes to undesirable place. But most managed service providers and managed service security providers and institutions already have the tools to do remediation. What they lack is the early detection of that activity, and that's where Intrusion comes in. Operator: [Operator Instructions] Your next question is coming from Jerry Yanowitz [indiscernible] Unknown Analyst: Tony, last quarter, you opened your comments by saying you're pleased to report that during the third quarter, we continue our path towards achieving our goal of creating sustainable growth and long-term profitability. Today, you opened by saying you're on the path to breakeven operations. My question is, in what quarter do you expect to have those breakeven operations? Anthony Scott: Well, can you tell me when we're going to have another government shutdown or CR... Unknown Analyst: Assuming no government shutdown and no CR, what quarter would you expect to have breakeven operations? Anthony Scott: I would -- well, it depends on new contracts that we signed. As I mentioned, we think this critical infrastructure solutions got pretty big legs. Our first contract for that was a $3 million roughly annual contract, and it wouldn't take too many more of those to get us to that goal. So it's all dependent on timing in '26 of when we would get those. But we think we're in a good position to land more of those in '26 than we did in '25 and whether it's 2 or 3 or whatever. Unknown Analyst: Would you be extremely disappointed if you weren't breakeven in the third quarter of this year? Anthony Scott: Yes is the answer. I was disappointed that we weren't breakeven right now, to be honest with you. We thought we were on a path to get there more quickly than we have been, and that's life. And there's probably some mistakes that we made that we, in retrospect, would do differently. But I think -- I still think we're on the right path, and I'm pretty optimistic that '26 is our year. Unknown Analyst: All right. So by the third quarter, we should expect to see that as shareholders? Anthony Scott: I would hope so, yes. And I'm a shareholder, so... Unknown Analyst: You have skin in the game, so I appreciate it. Anthony Scott: Yes. Operator: Thank you. At this time, there are no other questions in the queue. I'll turn the call back over to our host, Mr. Tony Scott, for any closing remarks. Anthony Scott: Well, as I said before, I just want to thank everybody for your interest in Intrusion. As I said at the beginning, it was a year that was unexpected in many respects. And I look forward to the progress that we can make in '26 with a little more stability and a little more predictability coming our way. We've made, I think, all the right investments in our tech. We've begun the strategic investments in our sales and marketing capability that, frankly, we've lacked over the last couple of years. If I had to look back, I probably was a little too slow in building up that muscle. But I'm very pleased with the team that we have now, and they're showing remarkable ability to get us into places that -- and talk to people that we hadn't been talking to over the last couple of years. So that gives me hope. These are experienced sales and marketing people, and it's just a pleasure to work with them and see the progress every single day. So I'm appreciative of everyone's patience. I know it's been a long grueling road. But I remain optimistic and excited about what we can do together in '26. So appreciate everybody's time today, and I look forward to speaking with you at the next earnings call or maybe some announcements even before then. Thanks. Operator: Thank you. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.
Operator: Hello, and thank you for standing by. Welcome to AAR Corp. Third Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to Chris Tillett, Vice President, Investor Relations. You may begin. Chris Tillett: Good afternoon, everyone, and welcome to AAR's Fiscal Year 2026 Third Quarter Earnings Conference Call. We're joined today by John Holmes, Chairman, President and Chief Executive Officer; and Dylan Wolin, Chief Financial Officer. Presentation we are sharing today as part of this webcast can be found under the Investor Relations section on our corporate website. Comments made during the call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly, these statements are no guarantee of future performance. These risks and uncertainties are discussed in the company's earnings release and the Risk Factors section of the company's annual report on Form 10-K for the fiscal year ended May 31, 2025. In providing the forward-looking statements, the company assumes no obligation to provide updates to reflect future circumstances or anticipated or unanticipated events. Certain non-GAAP financial information will be discussed during the call today. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are set forth in the company's earnings release and slides. At this time, I would like to turn the call over to John Holmes. John Holmes: Great. Thank you, Chris, and welcome, everyone, to our third quarter fiscal year 2026 earnings conference call. I'll begin with key messages for the quarter on Slide 3. First, this was another outstanding quarter for AAR. Our focused business model is driving growth that is delivering durable results in both commercial and government end markets as evidenced by our third quarter performance. . Second, we continued our momentum in the quarter and delivered 25% growth in total sales, 31% growth in adjusted operating income and 26% growth in both adjusted EBITDA and adjusted earnings per share for the period. We saw growth across each of our parts, repair and software platform activities in the quarter. Total sales increase included 14% organic adjusted sales growth led by 36% organic growth in our new parts distribution activity. Third, we are continuing to execute across key initiatives advancing our strategic priorities. For example, in Repair & Engineering, the integration of HAECO Americas is ahead of schedule, and our hanger expansions are on track with Oklahoma City now complete, and I am expected to be operational later this summer. In parts supply, ADI is performing above expectations, and we continue to drive outsized growth in our new parts distribution activities. Also, our Trax software platform continues to gain momentum by growing its base of recurring revenue with new and existing customers. Finally, we are carefully managing our balance sheet for their strategic flexibility as we maintain our disciplined approach to capital allocation. We ended the third quarter with net leverage within our target range, supported by our strong operating cash flow in the period. Before I go to Slide 4, I would like to welcome Dylan Wolin back to AAR as the company's new Chief Financial Officer. Dylan was with the company from 2017 to 2024, it was instrumental in developing the strategy we are executing today. I would also like to thank Sarah Flan again for doing an outstanding job as our interim CFO over the last few months. I'm proud to be part of such a strong team. I also want to talk for a moment about the current environment. We are closely monitoring the events in the Middle East that have been in constant contact with our customers. And many of our customers have said publicly, Fundamental demand for air travel remains wrong with bookings at record levels even since the start of the conflict. While some customers may make modest capacity adjustments, at this time, we are not anticipating any meaningful impact to their maintenance schedules or need for parts. They continue to tell us they are preparing for a busy summer travel season, and we are planning accordingly. What's more, AAR is competitively positioned as an independent value-added aftermarket solution provider, which makes us a compelling solution for our customers as they look to reduce spending when fuel costs rise. Additionally, one of the benefits of AAR portfolio is our exposure to government and defense end markets. Over the decade, this balance between government and commercial markets has been a real advantage. On that note, the government side of our business is benefiting from a general need for increased operational readiness in the U.S. military. Our government customers today comprise roughly 30% of our sales and represented across all segments. AAR has a long history of working on some of the most critical aircraft for the U.S. military, including the C-17, the P-8, the C-40, the F-16 and the C-130, and it was programs like these that helped drive 19% increase in government sales this quarter and contributed to the strength of our results. Now on to Slide 4. We achieved 36% organic growth in new parts distribution driven by our 2-way exclusive distribution model. Volume and government distribution have been increasing steadily over the last year, and this quarter represented a 55% organic increase over this period last year. Also in Parts Supply, our acquisition of ADI outpaced expectations for the second quarter in a row, and ADI's adjusted margins were accretive to the company in the quarter. In repair and engineering, our Oklahama City facility completed its hangar capacity expansion in the quarter and began aircraft inductions in early March. We expect first revenues from these maintenance lines in our fourth quarter. Our component MRO business saw key wins from major U.S. and international carriers for expanded scopes of work, and this is a testament to our strategy to utilize our whole portfolio to drive more business to the higher-margin component MRO activity. Our HAECO Americas integration is progressing ahead of schedule, and we expect the full integration process to be complete in the earlier part of the 12- to 18-month window we provided previously. We also expect our acquisition of Aircraft Reconfig Technologies, or ART, to close in the fourth quarter. In our software activities, Trax had another record quarter as a result of growth with the addition of new customers as well as existing customer upgrades. Trax's agreement with Delta continues to ramp, already Trax has been deployed to more than 2,000 users across Delta, and we expect this to increase to more than 6,000 users in the coming months. Our Expeditionary Services business was recently awarded $450 million in a multiyear government contract to provide specialized talents to forward deployed military units as a result of increased operational tempo overseas. We are pleased with our results this quarter and the growth that we saw across the company. And I would now like to turn the call over to Dylan to go through the financial results in more detail. Dylan Wolin: Thanks, John. Looking at Slide 5. Total sales in the quarter grew 25% year-over-year, including 14% organic adjusted sales growth to $845 million. We drove revenue growth in each of our parts supply, Repair & Engineering and Integrated Solutions segments. Sales to commercial customers were up 27%, while sales to government customers were up 19% over the same period last year. For the quarter, 73% of our sales were to commercial customers and the remaining 27% were to government customers. Adjusted EBITDA in the quarter increased 26% year-over-year to $102.1 million and adjusted EBITDA margin increased to 12.1% from 12.0% a year ago. Adjusted operating income was up 31% to $86.2 million and adjusted operating income margin improved 50 basis points to 10.2%. The margin improvement in the quarter was driven by part supply and integrated solutions, including tracks and government programs, despite the expected short-term impact on margins from our recently acquired HAECO Americas business, at which we are in the process of rightsizing the revenue base, adjusting the cost structure and deploying our proprietary processes. Excluding HAECO Americas, adjusted EBITDA margin in the quarter would have been 70 basis points higher or 12.8%. This was the most critical integration quarter for HAECO Americas, and we expect sequential margin improvement going forward as we move through the remainder of the integration process. Finally, I'll mention that we recorded a gain in the quarter due to the accounting for our HAECO Americas acquisition, resulting in a bargain purchase. The gain reflects the excess of the fair value of the assets acquired over the purchase price and is excluded from our adjusted results. Adjusted diluted EPS was up 26% year-over-year to $1.25 per share, driven by our strong operational performance. Turning to parts supply on Slide 6. Total part supply sales grew 45% from the same period last year to $392.5 million. We had yet another quarter of above market growth in new parts distribution, which grew 62% in total and 36% organically, excluding the impact of our ADI acquisition. Sales to commercial customers were up 36% and sales to government customers were up 86%, driven by 55% organic growth in government distribution sales. Third quarter adjusted EBITDA of $59 million, was up 59% and adjusted EBITDA margin grew 130 basis points to 14.9%. Adjusted operating income rose 56% to $53.6 million, and adjusted operating margin increased 100 basis points to 13.7%. Higher margins in the period were driven by both the performance of the existing business and the addition of ADI. Now on Slide 7, for Repair & Engineering. Total sales increased 23% to $265 million. Sales growth was driven by the existing hanger operations, growth in our component repair shops as we continue to add new capabilities and customers and the year-over-year impact of the HAECO Americas acquisition. As I mentioned earlier and consistent with the outlook we described in last quarter's call, margins were negatively impacted in the quarter as we take actions at the recently acquired HAECO Americas operation to rightsize the revenue base, adjust the cost structure and improve processes. Segment margins were also impacted by the transition of work out of our Indianapolis facility, which we are in the process of exiting. Specifically, adjusted EBITDA margin decreased 190 basis points to 11.0% and adjusted operating margin decreased 150 basis points to 9.6%. We expect our revenue shaping, cost structure and process improvement actions to be completed towards the earlier end of the 12 to 18-month post-closing time line that we articulated previously, and for the quarter that we just ended to be the low point in terms of margin impact. Accordingly, we expect in the third quarter of fiscal 2027, our actions will result in the same quality and efficiency levels as we have achieved in our other airframe MRO facilities. And for Repair & Engineering margins to return to pre-acquisition levels. We expect the transition out of the Indianapolis facility, which is our highest cost site to continue into the fourth quarter of our fiscal 2027 and to realize further margin improvement once that is complete. Looking at Integrated Solutions on Slide 8. Sales increased 3% year-on-year to $167.8 million, driven by Trax and government programs. Third quarter adjusted EBITDA of $19 million was up 18%, and adjusted EBITDA margin grew 150 basis points to 11.4%. Adjusted operating income of $15.5 million was 25% higher with adjusted operating margin increasing from 7.6% to 9.2%. Improved margins were driven by mix shifts towards higher-margin contracts within government programs as well as by growth and higher margins at track. Turning to the balance sheet on Slide 9. We had a strong cash flow quarter, generating $75 million in cash from operating activities. Net large decreased to 2.17x net debt to adjusted EBITDA, comfortably within our target range of 2.0x to 2.5x. With that, I'll turn the call back over to John. John Holmes: Thank you, Dylan. Turning now to Slide 10 for an update on our outlook for the remainder of the fiscal year. For Q4, we are expecting total adjusted sales growth of 19% to 21%. Organic adjusted sales growth for Q4 is expected to be between 6% and 8% as we lap what was a very strong Q4 last year. This excludes the debenture of landing gear as well as the impact of fiscal 2026 acquisitions. We expect Q4 operating margin of 10.2% to 10.5%. Our outlook for Q4 has improved from what was implied in our guidance last quarter, given the ongoing strength we see across our markets. As a result, our full year expectation is for total sales growth of approximately 19% and for organic sales growth of approximately 12%, which is up from our prior outlook. . Finally, on Slide 11, I'm excited to share that AAR will be hosting an Investor Day on May 12 in New York City. AAR has been driving strategic transformation over the last several years, and we have a more focused, complete range of aftermarket solutions in parts repair and a software platform that worked together to drive growth. As the last several quarters have shown, this strategy has yielded results. At our event in May, we plan to share our strategic vision of how we will continue to cement our position as the independent leader in aviation aftermarket through our repositioned portfolio, focused strategy and differentiated culture. We hope to see many of you there. Before we open it up for questions, I'd like to thank our talented team members around the world as they drive excellence in quality, safety and service and the work we do for our customers. I'd also like to extend a thank you to our customers and shareholders for their ongoing support of the AAR. With that, we'll turn it over to the operator for questions. Operator: [Operator Instructions] Our first question comes from the line of Michael Ciarmoli with Truist. Michael Ciarmoli: I guess, John, just on the topic everybody is asking about with oil prices kind of what we're seeing with some of the carriers trimming capacity. I mean historically, you've been in this business long enough. I mean, is there some sort of proxy you could give us how long do we need to see elevated fuel or once we start seeing some of these capacity cuts by the airlines, will that -- if it will at all translate into your business and fully realizing nobody is parking planes yet. They're just maybe trimming some routes. But any color you could give us there from a historical context? John Holmes: Yes. I would say that the #1 thing is -- and I appreciate the question. The #1 thing is that fundamental demand for air travel remains very strong. That's what you're hearing from all of our major customers. And obviously, we're hearing that from them every time we talk. And they've continued to see record bookings even after the conflict started. I would say, just to your point, what you're seeing now are modest capacity adjustments and they're not impacting any airlines individual fleets. . And so adjustments like that are not going to have any meaningful impact on the demand for Parts or Maintenance. So at this point, we feel very good. All the customers are talking to us about strong bookings and being prepared for a very busy summer, and they're making those plans with an assumption that fuel prices are going to remain elevated through that period of time, which we view as encouraging because they're factoring that in, yet their demand signals to us are still very strong. Michael Ciarmoli: Okay. Okay. That's helpful. And then maybe just on the more positive side, I mean, you guys continue to do really, really well on distribution that organic 36% on new parts, can you maybe just disaggregate that for us a bit? I mean, what was kind of new wins? What was same sale -- same-store sales, maybe pricing? I mean, just really strong growth. I mean you guys are doing a great job there. John Holmes: Yes, we're very proud of the continued growth we see in distribution, and our model there is clearly resonating. To your question, about 2/3 of the growth was same-store sales, so continued growth from contracts that have been in place for some time. And the remaining 1/3 was mostly new contract wins a little bit of price across all of them, but the majority of the growth, about 2/3 of the growth came from growth from existing contracts. Michael Ciarmoli: Got it. Is it -- the name jump out. Was it engine-related, airframe-related avionics, any -- or strength across the board that you're seeing? John Holmes: Great, across the board. But again, I would highlight the continued growth in Defense distribution. We've got a great offering there, and that was 55% organic in the quarter. And that though, we've been seeing a build. That wasn't a one-off. We've been seeing a build in growth in defense sales to the government. And certainly, our offering is resonating, and it reflects this administration's clear prioritization of sustainment and readiness. . Operator: Our next question comes from the line of Sheila Kahyaoglu with Jefferies. Sheila Kahyaoglu: Maybe to follow up on Mike's question. As you think about your new parts distribution business in Repair & Engineering, I know we're only seeing modest capacity cuts. How do you think about how quickly behavior has changed historically and what your visibility looks like in each? John Holmes: Yes. I mean we've got solid visibility currently through the quarter and the guidance we just provided, and I would extend that to the summer as well because that's what everybody is planning for right now. We've been in constant contact with the customers, -- we have not seen any material change in demand for maintenance lines or component repair. And you would have to see, I would say, a much more significant changes to their fleet plans for that to have any meaningful impact on our results. The other thing I would say is that if I think about this moment that we're in relative to historical mods, AAR is in a much different position in the marketplace. And I would say that we've been so focused on delivering superior service and quality to our customers that we feel pretty confident that they would deprioritize other vendors before they did anything with us. Sheila Kahyaoglu: Got it. And maybe if I could ask another one, really great execution this quarter. You held margins flat sequentially and are guiding to an improvement in Q4 given -- even with the HAECO dilution that's ongoing. So maybe can you give us some flavor into the sources of the outperformance? You called out ADI and HAECO outpacing expectations. Anything else notable? John Holmes: Those would be the big ones. ADI, the second quarter there of outperformance. HAECO, it's a lot of work. It's a lot of work to complete that integration. As we mentioned, this was the most critical quarter and we've been able to move some of our timetables up. So happy to say if we're going to be at the earlier window. I would also highlight this was a really strong quarter for Trax. Great momentum from a sales and margin perspective with Trax. And that's something we've been focused on growing, as you know. . Operator: Our next question comes from the line of Ken Herbert with RBC Capital Markets. Kenneth Herbert: Maybe first, If we look at your commercial aftermarket, John, the commercial business broadly, how much of that business would you characterize as book and shift for short cycle versus more sort of backlog driven? And I know, obviously, a lot of the heavy MRO piece of the business is now much more backlog-driven than maybe it was previously. But is there a way you would frame up that maybe that way to look at your business? John Holmes: Yes. As you pointed out, heavy maintenance is definitely backlog-driven. Much of the distribution business is backlog driven. Those are, I would say, the 2 -- and obviously Trax with us in its own category, but those would be the 2 long-cycle elements of the business. component repair tends to be a bit more short cycle. And also -- and obviously, USM is a shorter-cycle business. But the majority of the revenue now in commercial between distribution and heavy maintenance is longer cycle. Kenneth Herbert: Okay. Helpful. And obviously, really nice cash generation in the quarter. Can you give any commentary on what we should expect fourth quarter, which typically seasonally is very strong from a cash generation standpoint? And maybe any highlights either for you or Dylan on specifically some of the -- what we saw in the third quarter in terms of the strength? John Holmes: Great. Yes. No, we were really pleased with the cash flow results and customers paid us on time. So we're appreciative of that. And as it relates to the outlook for the rest of the year, we are planning to be cash flow positive in Q4 and again -- and cash flow positive for the whole year. . Operator: Our next question comes from the line of Scott Mikus with Melius Research. Scott Mikus: Quick question. I know it's still early in the war in Iran. How long does this potentially have to drag on before it starts maybe impacting your ability to source any of the parts you need in your part supply business? And then in contrast, could the worst stimulate demand for your component repair business if airlines are seeking to reduce maintenance costs to offset the higher fuel costs? John Holmes: Yes, great question. I wouldn't expect at this point that the war or the conflict at any length of time would impact the supply of material. I mean, unless you're talking about USM specifically and certainly, if for any reason, you see more aircraft retirements and subsequent teardowns, how that would result in more supply for that material. But in terms of the war or the conflict stimulating demand, Yes, I mean it could stimulate demand in a number of ways, obviously, on the defense side, and we're highlighting a few of those in the results. But then also, I mean, we are in many ways, a lower cost alternative to OEMs and other providers. We have seen this in prior cycles where we're able to win business as an alternative to OEMs with airlines what to reduce their costs. Scott Mikus: Okay. Got it. And then I wanted to follow up, the organic growth guide in the fourth quarter implies a deceleration but you should be getting some revenue contribution from the OKC capacity expansion. So is that kind of just some conservatism baked into the guidance? Or is there any pull forward into this quarter from a top line perspective? John Holmes: Yes. No pull forward into this quarter. Really, the impact you're seeing in Q4 is just lapping a really tough comp from last year. We had a really strong quarter in Q4 last year in a number of ways. And the guide there is reflective of that. But the guide is improved from what we implied with the Q3 guidance we gave last quarter. Operator: Next question comes from the line of Noah Levitz with William Blair. Noah Levitz: Yes. To start off, you gave a lot of good color on Trax and the implementation. But kind of drilling in on that, you mentioned that Delta, that the partnership with them has been deployed to 2,000 users and you expect 6,000 in the coming months. I'm curious like the 6,000 like the ninth inning? Or are you still early innings in the Delta deployment? And then following off of that, can you give a little bit more color on the time line for track establishing kind of that part Smartplace aspect of the business? John Holmes: Yes. Great set of questions. So I'm glad you asked about the Delta implementation. So kind of two ways to think about the Delta implementation. It's the whole thing will take approximately 3 years, and we're coming up on 1 year into that, and there's 3 modules. The first module is, I would say, basic functionality deployed across a large user base. So we've got basic functionality up and running. . And were deployed roughly 1/3 of the way across the user base of Delta. So that -- once all those 6,000 users have this first module in hand and working, that completes the first phase. The next 2 phases, Phase II and III, we'll be focused on deploying additional functionality to that large user base. And that is still -- and that's where the material ramp-up in the activity and the revenue delta will occur. And so that will start a few months from now and ramp through over the following, call it, 6 or 7 quarters. And then as it relates to the parts marketplace, something we are still very focused on and we do expect to go live on that and launch it yet this calendar year. Noah Levitz: Awesome. And then just 1 follow-up. The defense business is, I mean, more or less killing it, the 55% organic growth and government distribution is really impressive. In the slide deck, you do mention that higher-margin government work was a positive contributor. I think more so in the Integrated Solutions segment, is that something that you're expecting to continue as more or less like a new norm? Or was that more like a positive benefit this quarter that was somewhat unexpected. How should we think about specifically government margins on an improving basis going forward? John Holmes: Yes. You are referring to the margin improvement in the government portion of integrated solution government programs specifically. And that reflects sort of a mix shift towards higher-margin programs within government programs, and we do expect the benefit of that mix shift to continue going forward. Operator: Our next question comes from the line of Michael Leshock with KeyBanc Capital Markets. Michael Leshock: I wanted to follow up on the HAECO question, just given that that's progressing ahead of schedule. I know there was a cost element to the synergies there, but could you talk about how that integration is progressing in terms of cost-outs or operational efficiencies or just overall utilization, is there any way to bucket the primary drivers of that integration going ahead of schedule? . John Holmes: Yes. So just to describe it in a little bit more detail. We've got to rightsize the business in a couple of different ways. They had -- it was a much larger business in terms of revenue than how we intend to run it. because that revenue was not profitable. So we are continuing to close up those aircraft that we no longer be customers with us and ship them off. That work is getting done. At the same time, we're also making difficult decisions around the size of the workforce because we want to size the workforce to the new revenue base that we have. Those changes have been made. And when we say this was the most critical quarter. The changes to the size of the workforce to align with the new revenue base, all of those changes have been made. So that's in place. The last 2 major pieces are moving the work out of our Indianapolis facility and moving that into other AAR facilities, majority of which will go to HAECO and the GreenVille site and the happening now. And that's happening now. So that's the next significant phase. In the final phase that will be complete after all of that, but it's all going on in parallel is the implementation of our systems. We are certainly taking our rigor and our expertise in deploying it on the floor today. But ultimately, the paperless system that we've developed and utilized most of our AAR hinders, we want that fully deployed inside of the HAECO facilities as well. So that would be the very last piece to complete. But again, all of that at this point is pacing ahead of schedule. And it's a really heavy lift. You got a lot of moving parts there, but very proud of the way the team is executing. And also really happy with the way the HAECO team has embraced the culture that we're promoting. It's been a really good fit. Michael Leshock: Great. And then within Integrated Solutions, just given the recurring revenue nature of the Trax business as well as the new customer integration and ongoing upgrade cycle, should we expect growth there to be fairly linear going forward within the segment? Or is there anything that could drive lumpiness ahead? John Holmes: Overall, Linear, you do get lumpiness every now and then because of the way we book new implementations just based on the software and milestone accounting. So that does create some lumpiness in the results there. But the recurring revenue, which is the base of the business that we're most focused on growing that we expect to be linear. And again, we've doubled the size of track since we bought it. They were a $25 million business when we closed that pacing north of $50 million now. And based on the customer updates, their upgrades as well as new customers that we've captured we see a path to doubling that again from $50 million to $100 million. Operator: Thank you. Ladies and gentlemen, at this time, I would like to turn the call back over to John for closing remarks. John Holmes: Great. Thank you very much, and thank you for joining us today. We continue to execute with a high degree of discipline, and we are energized by the opportunities in front of us and really appreciate the support and interest in AAR. . Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good afternoon. My name is Kevin, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Paysign Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. The comments on today's call regarding Paysign's financial results will be on a GAAP basis unless otherwise noted. Paysign's earnings release was disseminated to the SEC earlier today and can be found on the Investor Relations section of our website, paysign.com, which includes reconciliations of non-GAAP measures to GAAP reported amounts. Additionally, as set forth in more detail in our earnings release, I'd like to remind everyone that today's call will include forward-looking statements regarding Paysign's future performance. Actual performance could differ materially from these forward-looking statements. Information about the factors that could affect future performance is summarized at the end of Paysign's earnings release and in our recent SEC filings. Lastly, a replay of this call will be available until June 24, 2026. Please see Paysign's Fourth Quarter and Full Year 2025 Earnings Call announcement for details on how to access the replay. It's now my pleasure to turn the call over to Mr. Mark Newcomer, President and CEO. Please go ahead. Mark Newcomer: Thank you, Kevin. Good afternoon, everyone, and thank you for joining us today for Paysign's Year-end 2025 Earnings Call. I'm Mark Newcomer, President and Chief Executive Officer. Joining me today is Jeff Baker, our Chief Financial Officer. Also on the call are Matt Turner, our President of Patient Affordability; and Matt Lanford, our Chief Payments Officer, both of whom will be available for Q&A following our prepared remarks. Earlier today, we announced our fourth quarter and full year financial results for 2025, which demonstrated continued strength and exceptional growth across all key metrics. For the full year, revenue increased 40.5% to $82 million. Net income increased 98% to $7.6 million and adjusted EBITDA increased 107% to $19.9 million. Importantly, operating margins increased 723 basis points, providing clear evidence that we've reached a key inflection point where future revenue growth should drive increasing operating leverage and profitability. We continue to deliver strong growth in our patient affordability business. Annual revenue grew 168% year-over-year, reaching $33.9 million compared to $12.7 million in 2024 and claims processed increased by approximately 79%. For those newer to our story, our patient affordability platform helps pharmaceutical companies ensure patients can access high-cost medications by administering co-pay assistance programs. In 2025, our platform helped deliver nearly $1 billion in financial assistance to patients, supporting access to high-cost therapies for more than 840,000 individuals. At the same time, we help manufacturers better control how those dollars are spent, which is one of the key value propositions we provide. A key differentiator of our platform is our dynamic business rules technology, which helps pharmaceutical manufacturers avoid unnecessary costs associated with co-pay maximizer programs. In 2025 alone, this solution saved our clients over $325 million. And this year, we have already saved our clients almost $150 million. That level of savings represents a meaningful economic benefit for our customers and highlights the value of our platform. We added 55 programs during the year, bringing total active programs to 131 across more than 70 patient affordability clients. A mix of transition programs and new launches contributed to both immediate and long-term revenue growth. Our programs span both retail and specialty pharmacy as well as in-office administered and infused products. Oncology and other cancer treatment products remain a significant portion of our program base and biologics represent approximately 50% of claim volume across the platform. We continue to see strong expansion within our existing client relationships. For example, following the onboarding of one of the nation's largest pharmaceutical manufacturers in 2024, those programs scaled successfully throughout 2025. and we added 4 additional programs from that same manufacturer during the year. This type of expansion within large pharmaceutical clients highlights both the scalability of our platform and the durability of demand. Paysign now has active programs with 6 of the top 10 U.S. pharmaceutical manufacturers ranked by revenue. Next month, we attend the Asembia Specialty Pharmacy Summit here in Las Vegas. As in prior years, we are seeing strong interest from potential clients evaluating our solutions, and we enter the conference with a robust pipeline. Over the past several months, we've had conversations with shareholders, analysts and prospective investors to help them better understand the patient affordability business and the broader industry landscape in which we operate. Increasingly, those discussions have touched on legislative, regulatory and policy-related topics. So I thought it would be helpful to ask Matt Turner, our President of Patient Affordability, to provide some additional context. Matthew Turner: Thank you, Mark. Before addressing some of the questions we've been hearing from investors and analysts about potential headwinds to our business, I want to briefly give an overview of how our patient affordability business fits within the broader health care ecosystem. Our platform is focused on helping pharmaceutical manufacturers support patient access to high-cost branded therapies, primarily within the commercially insured patient population. These are typically branded medications where out-of-pocket cost can be significant and where co-pay assistance programs are essential to ensuring patients can begin and stay on therapy. At the same time, our platform helps manufacturers better manage how those assistance dollars are deployed, particularly in an environment where payer dynamics can introduce inefficiencies into the system. That combination of improving access while also driving economic value is what underpins the demand for our solutions. With that context, I'll address a few areas we've been asked about. First, on the expansion of the direct-to-consumer, also known as DTC and cash pay models, these programs have existed in various forms for over a decade and are not new. They were built primarily for products with little or no commercial insurance coverage. That is a very different segment from where we operate today. For the types of high-cost branded therapies on our platform, where list prices can be tens of thousands of dollars, which represents approximately 90% of the drugs in our platform, cash pay and discount alternatives are simply not a viable solution for most patients. Commercial insurance, combined with manufacturer co-pay assistance remains the most effective model for patients. As a result, we view DTC expansion as a complementary solution in certain cases, but not a meaningful substitute for our core business. Second, regarding pharmacy discount programs such as GoodRx, TrumpRx, Cost Plus or similar offerings. These products have existed for more than 20 years and serve an important role in reducing cost for lower-priced generic medications or for those patients without insurance. They are not designed for nor do they compete with branded specialty medications where commercial insurance and co-pay programs are the standard of care. Our business is squarely focused on that branded drug segment and the more than 850 specialty drugs. So these programs are simply not relevant to what we do. Third, and perhaps most important, given the current policy environment on legislative and regulatory considerations, most of the activity around co-pay accumulator and maximizer programs have taken place at the state level. And despite ongoing discussions and congressional committees, there has been no meaningful federal action to date nor do we expect any in the foreseeable future. The key reason is simply structural as a large portion of commercially insured Americans are covered under employer-sponsored health plans governed by ERISA, which limits the impact of state-level regulations. We do not see that as changing. As a result, these programs continue to operate despite changes in state laws. Importantly, demand for our dynamic business rule solutions, which helps manufacturers navigate maximizer programs continues to grow. As Mark said, this year, we have already saved our clients almost $150 million that would otherwise have been absorbed by those programs. So stepping back, we continue to monitor the competitive and regulatory landscape closely. But based on what we see today, we do not view these dynamics as a material threat to our business. If anything, they continue to reinforce the need for solutions like ours, which is reflected in the continued growth of our business and pipeline. Our differentiated dynamic business rules capability is a driving tangible ROI for our pharma customers while we enhance affordability for hundreds of thousands of consumers. Back to you, Mark. Mark Newcomer: Thank you, Matt. Turning to our plasma donor compensation business. In 2025, plasma compensation contributed $45.6 million in revenue, representing a 4% increase over 2024's $43.9 million. We believe the business will continue to exhibit revenue growth driven primarily by center filling excess capacity rather than new center openings. That said, we do expect a modest number of new center openings in 2026, maintaining our market share of just under 50%. We exited 2025 with 595 centers, an increase of 115 centers over the previous year, and we continue to engage the remaining plasma collection companies who are currently not our customers. We believe our expanded suite of donor management and engagement tools we acquired last year creates additional opportunities to grow our footprint in this space. As we await FDA 510(k) review of our donor management system, also known as a BECS or blood establishment computer system, we are actively working to integrate the BECS with a number of plasmapheresis device and strengthen our relationship with those manufacturers to make installations and transitions to our solution as seamless as possible. This integration is included in our latest filing with the FDA. Our broader suite of solutions continue to receive positive feedback from blood and plasma collection organizations across the United States, Europe and Asia, and we are highly encouraged by the long-term growth potential of this business. 2025 marked a meaningful step forward as our patient affordability business scaled and became a central driver of growth and profitability, while our plasma business continued to provide a stable foundation. We believe we are still in the early stages of our patient affordability opportunity and enter 2026 with strong momentum in which to build upon. With that, I'll turn it over to Jeff for additional details on our quarterly and full year-end financial results. Jeffery Baker: Thank you, Mark. Good afternoon, everyone. As Mark highlighted, the fourth quarter and full year results reflect both strong growth in our patient affordability business and the early benefits of operating leverage across the platform. For 2025, total revenues increased 40.5% to $82 million. Pharma industry revenue increased 167.8% to $33.9 million, driven by the addition of 55 net patient affordability programs launched during the past 12 months and a corresponding increase in monthly management fees, setup fees, claim processing fees and other billable services such as dynamic business rules and customer service contact center support. Process claims increased over 79%. This growth reflects continued expansion of our platform and increasing demand for solutions that improve patient access while helping manufacturers better manage their co-pay assistance spend. Plasma revenue increased 4% to $45.6 million, primarily due to the addition of 115 net plasma centers adding during the past 12 months, offset by a decline in average plasma donations per center as plasma inventory levels were elevated throughout much of 2025. This led to a reduction in our average monthly revenue per center as compared to the same period in the prior year. We exited the year with 595 centers versus 480 centers at the end of 2024. Other revenue increased by $671,000 or 36.2%, primarily due to the growth in usage in the number of cardholders of our payroll, retail and corporate incentive programs. More importantly, we are beginning to see the benefits of operating leverage across the business. Total operating expenses were $41.4 million, an increase of 32.6%, well below the revenue growth we experienced, which, coupled with our improved gross profit margin to 59.4% versus 55.1% drove our operating margins to 9% versus 1.7% in the prior year. We have reached an important inflection point where our fixed costs can support meaningful scalability without commensurate increased expenses. So we expect further improvements in these metrics throughout 2026. This is consistent with what Mark described earlier as patient affordability becomes a larger part of our business, we expect to see continued improvement in margins and operating leverage. Here are a few other important details to point out for the fourth quarter and full year results. For the fourth quarter, our earnings before taxes increased to $2.5 million versus $1.2 million the same period last year. Fourth quarter net income was impacted by a higher effective tax rate of 45.4%, which reduced earnings per share by $0.02 per fully diluted share versus the prior period. The fourth quarter adjusted EBITDA, which is a non-GAAP measure that adds back stock compensation to EBITDA was $5.4 million or $0.09 per diluted share versus $2.9 million or $0.05 per diluted share for the same period last year. The fully diluted share count for the quarters used in calculating the per share amounts was $61.6 million and $55.5 million, respectively. We exited the year with $21.1 million in cash, almost double from the prior year. This excludes any impact to pass-through receivables and payables we periodically have related to our pharma patient affordability business. We also continue to have zero bank debt, funding operations and our Gamma acquisition through operating cash flow. Turning to our outlook for 2026. We expect revenue of $106.5 million to $110.5 million, representing 30% to 35% year-over-year growth, with plasma and pharma contributing equally and other revenue contributing $2.5 million. Considering the seasonality in both our main health care businesses, we expect plasma revenue to be the lowest in the first quarter with tax refunds going out and ramp up throughout the remainder of the year, while we expect pharma revenues to be the highest in the first quarter and decline throughout the remaining of the year as patient affordability claims ramp down. This outlook reflects continued momentum in our patient affordability business, which we expect to remain the primary driver of growth. Gross profit margins are expected to be between 60% to 62%, reflecting increased revenue contribution from our pharma patient affordability business. Operating expenses are expected to increase 20% over 2025 as we continue to make investments in people and technology. Of this amount, depreciation and amortization expense is expected to be between $9.5 million and $10 million, while stock-based compensation is expected to be approximately $5.5 million. Given our large unrestricted and restricted cash balances and the current interest rate environment, we expect to generate interest income of approximately $3.1 million. Our full year tax rate is estimated to be between 22.5% and 25%. Net income is estimated to nearly double over 2025, reaching a range of $13 million to $16 million or $0.21 to $0.26 per diluted share and adjusted EBITDA to be in the range of $30 million to $33 million or $0.49 to $0.53 per diluted share. The number of fully diluted shares for the year is estimated to be 62.3 million. For the first quarter of 2026, we expect revenue of $27 million to $27.5 million, representing a 45.2% to 47.8% growth over first quarter 2025 and expect to have 137 active patient affordability programs and 589 plasma centers exiting the quarter. Margins are expected to expand across the income statement versus the same period last year, equating to an operating margin between 20% to 22%, net margin between 17% to 19% and adjusted EBITDA margin between 34.5% to 36.5%. Fully diluted earnings per share is estimated to be $0.07 to $0.08, while adjusted EBITDA per share is estimated to be $0.15 to $0.16. Overall, our outlook reflects continued strong growth driven primarily by our patient affordability business, along with further margin expansion as we scale. With that, I would like to turn the call back over to Kevin for questions and answers. Operator: [Operator Instructions] Our first question is coming from Jacob Stephan from Lake Street Capital Markets. Jacob Stephan: Congrats on a really nice quarter here. I appreciate all the color on the pharma industry. One thing I kind of wanted to touch on a little bit. So we're kind of hearing some pharma services providers that the drug manufacturers have actually been kind of less active recently with regards to new initiatives. I'm wondering if you're seeing any difference in behavior with your pharma manufacturers over the last few months here. Matthew Turner: No. I mean, this is Matt Turner. I would argue that it's just the opposite. If you were at JPMorgan and listening to the conversations there, nobody is slowing down anything. We were sitting there listening to Dave Ricks, the CEO of Lilly, and he was talking about the billions of dollars they're pumping into AI and the fact of doing a deal every 9 days. And almost all the presentations there really pointed to not a slowdown by any means. Everybody's pipelines are really strong right now. Almost every manufacturer has some form of a weight loss or GLP-1 type product in line. FDA calendar for PDUFA this year looks really good. So no, I mean, I don't really see a slowdown. I would say that the push for innovation is growing overall. And I think that's obviously what we've been trying to provide for the last 7 years as we built out this vertical really is the innovation side of things. So no, I don't see a slowdown from our perspective at all, especially not in the patient affordability business. Jacob Stephan: Okay. And maybe -- I mean, you did kind of touch on the GLP-1 opportunity. I'm wondering what that looks like for you guys? Do you have any current GLP-1s on the platform? And how are you thinking about attacking that market going forward? Matthew Turner: Yes. So that's -- we don't have any of the 2 larger GLP-1s that are for weight loss nor do we have the diabetes products. Those are largely retail plays, and we're certainly making a push. We've been making a push in that area. Those drugs have been in market now for a little bit. If you look at those products as well, they're very much -- they're much more of a DTC product than they are a traditional co-pay type product. It's not to say the co-pay offers aren't out there, they are. But it represents a very small subset of that actual volume is going through co-pay. So there's not a ton of upside on a GLP-1 product used for weight loss. There would be if you're looking at the diabetes side. We have one client that has the GLP-1 product. I think [indiscernible] that's coming to market. I think we're in an excellent position to win that business as we do have a very good portion of their retail as well as almost all of their specialty products. So I think we're in a very good spot to pick up a GLP-1 in the next 12 to 18 months. And I think that's as much as I can really say there. I don't -- we don't have any commitment saying that it's ours or anything and plus we don't know what the volume is going to look like there. But yes, we're certainly trying to make inroads to get access to more of those programs. Jacob Stephan: Got it. And then maybe just last one for me. Jeff, you made an interesting comment about fixed cost potentially kind of plateauing, minimal additions kind of needed. I'm wondering, from just looking at the math, that looks like around a $22 million to $23 million quarterly kind of cost basis. I'm wondering if you could kind of give me some more color on that. Jeffery Baker: Yes. So the comment really on the -- when we talk about fixed cost is like the base cost of what our business has been in 2025. So we looked at our OpEx of $41 million. The incremental costs that we have to add going forward as the business grows is certainly a lot less than what it has been historically. If you look at 2024, we were pushing -- SG&A growth was pretty much tracking with revenue growth. 2025, really strong improvements there. In 2026, we think there's even more operating leverage to win out of that business. So when you look at it, we're going to do a good job trying to control our costs. We're only looking for SG&A to grow 20%. And when you peel the onion back, keep in mind, some of that growth is related to the acquisition we did in March. It wasn't even in for a full year in 2025. So you have a full year of amortization in 2026. And then you have some stock comp increase about $1.5 million year-over-year. So take those 2, if you -- however you want to look at that and adjust it out or whatever, but our controllable SG&A is really looking very leverageable. Operator: Our next question today is coming from Gary Prestopino from Barrington Research. Gary Prestopino: I couldn't write down fast enough. Did you say you were going to exit Q1 with about 137 pharma programs? Jeffery Baker: Yes, that's correct. Gary Prestopino: And then -- and what did you say for the plasma? Was it 589? Jeffery Baker: 589. Yes, we had -- in the first quarter, we had 5 centers get sold to a competitor. So they left us and then 1 center closed. So there are 6 -- those are the 6 centers. Gary Prestopino: Okay. Okay. That's fine. And then just getting back to when you were talking about like the GLP-1s versus your high-cost branded pharmaceuticals. Is there any difference in the revenue per claim process there if you're doing basically kind of lack of a better word, it's not really a specialty drug, like, say, a cancer and oncology drug? Matthew Turner: Yes. So I mean each claim type, right, is going to have different potential transactional fees that will attach to it. If you look at the specialty -- and I would say that overall, if you just look at a base, say, pharmacy claim or medical claim, it doesn't really matter if it's specialty or pharmacy, we're going to make on that claim processing fee, we're going to make about the same. But when you look at the bolt-ons that can happen in the specialty space, they compound pretty quickly. A dynamic business rule claim is worth far more to us. than just the singular co-pay claim. So while the volume around retail products like GLP-1s or any of the cardiovascular drugs, if you go back historically and look at like Crestor, Lipitor, Plavix, Modern Day Brilinta. Sure, there's a lot of volume there, but your chance to make -- to kind of add on the additional functionality that can generate larger revenue is just not there on the retail side, which is one of the reasons we highly target the specialty space because we can make far more money on 1,000 DBR claims than we can on, say, 20,000 retail claims. So profit potential and even bottom line margin is far superior in the specialty space. That being said, we are working to bring on more retail brands so that we have a very weighted and comprehensive portfolio of products. Operator: Our next question is coming from Jon Hickman from Ladenburg Thalmann. Our next question is coming from Peter Heckmann from D.A. Davidson. Peter Heckmann: I had a follow-up, Jeff, on -- in terms of thinking about the guidance for 2026, you talked about equal contribution from plasma and pharma. I assume you're talking about from a dollar of revenue perspective. And if so, that still represents a pretty significant acceleration on the plasma side. I didn't hear in your prepared comments why that might be. And so if you could provide a little bit of additional color in terms of whether that's an increase in revenue per center or anticipation of a big addition of net centers for the year. Jeffery Baker: Yes. So -- the revenue comment -- the comment on the [ Equal ] business was revenue, both from the plasma and the patient affordability or pharma side. The one of the main drivers in the plasma, if you recall, we had 132 centers in June and July. So we're going to have those uncomped until that time, so midyear. So you're going to see the growth of plasma with those numbers for the first half of the year be much stronger than the second half of the year, obviously. My expectations haven't changed with plasma is that in a normalized year, it's about a 5% grower, and it's a very good cash cow, and we manage the business accordingly. Mark Newcomer: And let me give a little more color on the plasma revenue growth. The increase in collection efficiencies associated with the latest hardware upgrades effectively gives the average plasma center approximately 10% greater capacity. So a good way to look at that would be for every 10 centers, a collector can now get 11 centers worth of capacity, which is reducing the demand for new center openings. So that just -- it gives them the ability to collect more. Peter Heckmann: I see. That's helpful. Okay. And then just going back to the Nuvec system. Any feedback so far from the FDA or any thoughts in terms of the potential time line there for the completion of the review? Mark Newcomer: Yes. I mean it's currently under review. We expect to hear back from them within the next 60 days. And that's kind of about as much as I'll go into at this point. But so far, everything is very positive. We've gone into our substantive review with them. Operator: Our next question is coming from Jon Hickman from Ladenburg Thalmann. Jon Hickman: Could you give us some sense of where you are on the pharma side with your kind of part of the market? What's the TAM here? And where -- like are you in the second inning, third inning of growth here? Or can you elaborate? Matthew Turner: Yes. So we -- this is Matt. We always hesitate to give the TAM because it's very difficult for us to give a TAM for something that you can't -- you just -- there's no way to exactly tell the dollars are wrapped up in marketing amounts and everything else and nobody discloses exactly how much money they're paying these vendors. So we estimate the TAM is somewhere between $500 million to $850 million at any given time. We think with some of the offerings that we have, specifically the dynamic business rules that we are pushing that TAM higher as we're able to generate revenue from some of these unique offerings that we're bringing to the table. Also, as we continue to build this out and add more features, add more products, we think the TAM can expand even further upwards to $1 billion. Asking about kind of what inning we're in, I think we're in the first inning. There's still a lot of growth potential here. We don't see anything slowing down when it comes to new program acquisition. And if you look at the growth that we're doing year-over-year and not just from a dollar perspective, right, just from also throwing in the number of programs that we're adding in. Last year, it was 1 every 6-point-something days we were putting a new program up. And hopefully, this year, we have similar metrics as far as the number of programs that we're pulling in. But it's -- we're nowhere near the middle of this at all. We're very much in the beginning. And I think we'll continue to see very strong growth out of this vertical for many years to come. Jon Hickman: So a follow-up. So are you inviting competition here? Are people starting to pay attention to what you're doing? Mark Newcomer: There's always really been competition. Matthew Turner: I mean -- yes. Mark Newcomer: I mean we've come into the market and really gone up against the competition. And by bringing new functionality, new features to the market, that's part of the reason why we're winning the business. Matthew Turner: Yes. This was a very stale business that had become almost commoditized. It was treated like just picking something off of the shelf. And that made it very easy for some manufacturers. And of course, they enjoyed that when things like maximizers and accumulators weren't an actual threat to their bottom line. And as that has emerged as a bigger threat, the need for innovation was there. Unfortunately, kind of the legacy dinosaurs in the industry just never reacted. So yes, there's some new players popping up. It just -- that happens every time there's an industry that's ripe for disruption. I would say the good thing for us is we were ahead of that, and we also helped to cause a lot of the disruption. If you look at how we have sold into this industry, we have -- we've really shaken a lot of things up and forced manufacturers to rethink how co-pay programs should function as a whole, how they should pay for them. The open book pricing that we brought to the table where we're not making shading money that we can't tell people how we're getting paid, like that really was a disruptor to this marketplace. And if you kind of look at our -- the catapult that we had for growth, you go back to, I think it was 2023 when we -- in June, July, when we put out a webinar around pricing transparency and a lot of things in that area. That was really part of the lift off for us because we did show the industry there's a better way to do this. You can still make money, you can still have everything that you need. Just we can do it in a way that we're not robbing you blind behind your back, which is what a lot of other competitors were doing. Jeffery Baker: And another thing, Jon, when we look at our competitive advantage, certainly, that's one very important one. Another one is -- and we take it for granted as a payments company, but our competitors don't have the same say, insight into -- for their pharma customers' programs like we do. I mean we give our customers a web portal. They come in, they can see bank balances. They can see transaction data. They see a lot of information that we're able to provide them so they could figure out if their program is successful or not. And we take that as for granted as it's kind of table stakes as a payments company, but there -- our other competitors don't have that because they're not payments companies. And then the last thing is the dynamic business rules. I can't stress enough the fact that with 97% efficacy on first fill that's completely agnostic to the consumer that is getting their drug that we're able to identify whether that transaction is related to a Maximizer program or not. That's huge. It's unheard of and nobody else in the market has that technology. Jon Hickman: Okay. One more question. So Matt, what are you most worried about here on this side of the business? Matthew Turner: That's a tough one. I don't know that right now, we really have a lot of worries. We -- it's pretty positive on our side. If you look at what we've built out, I would say, going back 3 years, it was a lot around personnel and how would we scale this inside with people. It was about finding talent at that point that we could bring in and that could help the organization grow. And we spent the last few years really doing that. We invested a lot of time and energy in bringing the right people in creating a pathway for people that were really good to be able to grow inside the organization. And now that we have that in place, as you look at over the 55 programs that we brought in last year, we didn't have a growth issue when it came to dealing with people. We had already actually built the systems around that. So we were able to just drag people in, drop them into the right place. We have established training curriculums now. It's become a much easier lift for us. So I would say I don't really have any fears at the moment. It's all positive for us right now. And we look forward to the continued growth that we have. We're looking forward to expanding on the partnerships that we currently have. Jon Hickman: Nice results. Matthew Turner: Thank you. Operator: Our next question is coming from Gary Prestopino of Barrington Research. Gary Prestopino: Yes. I just have a follow-up. Did you give -- Mark, did you give any indication of your pipeline on the patient affordability side? I mean, at times, you have said that you feel pretty confident you're going to exit the year at x amount of programs. Could you maybe just comment on that? Matthew Turner: This is Matt. So I don't know that we've ever given that guidance this early in the year. And I'll also kind of point back to our selling cycle is for most of our opportunities is in the 90-day area. We know what the pipeline looks like right now for a number of opportunities. I think we would probably comment on that as we got a little more further down the year, exited the Asembia conference, things like that. That's really where we kind of start to narrow down what we think the pipeline will look like between now and the end of the year. Plus it gives us a chance to do a better evaluation of the FDA PDUFA calendar and what opportunities out of that, we believe are truly winnable for us. So yes, I don't think we can give a number of programs this early in the year. But hopefully, we can do that in the next quarter if everything lines up right. Gary Prestopino: All right. And you guys are doing really well. And obviously, the stock market has been a miniature disaster in the last couple of months here. Doesn't look like, obviously, the fundamentals of the business are reflected in the stock price. And I'm just wondering, as you go around and talk to investors, is it that they don't understand what's going on with your company? Is there, say, a fear that artificial intelligence is going to serve maybe your ability with your dynamic business rules? What can you pinpoint as to what is some of the hesitation among investors to grasp the story? Jeffery Baker: Yes, Gary. So when we talk to investors, everybody obviously understands the plasma business. It's kind of like retail same-store sales type stuff. And I think the biggest -- the market has been in a show-me state sort of stake with the operating leverage from the patient affordability business. Now there's a lot of noise out there always with direct-to-consumer. If you remember back when Donald Trump was going to solve all the pricing issues, he had his own Donald Trump pharmacy and he had his direct-to-consumer initiative. And quite frankly, I mean, they announced that I think there were 30 drugs or something whatever. We had 2 of them on there. And the pricing on the direct-to-consumer side for -- and again, those are cash paying customers was cheaper if you had insurance than if you paid directly to the consumer. So -- and keep in mind, there's roughly 160 million people out there on private insurance. That's what these co-pay programs are for. It's not for the cash paying customers. So I think there has -- I think people don't necessarily understand co-pay. I know for a fact, they don't understand co-pay. And we're going to work really hard in 2026 to tighten that message to make sure people understand that there is a copay -- the co-pay really exists. There's a market for co-pay. We have a better mousetrap that nobody else has, and it's showing up in the numbers. And now this year in 2025, you definitely saw the operating leverage possible. I mean our operating margin goes from 1.7% to 9%, and that's not insignificant. And then based on the guidance that I've given, we expect that to go up substantially in 2026 and beyond. So we -- I can't control the stock price or the investor community or whatever, but I think the numbers speak for themselves and eventually, the market is efficient over the long term. Matthew Turner: And one thing I'll add to, if you look at the other competitors that we have in the marketplace. If you go and look at Cencora, you look at McKesson, they both own co-pay offerings, right? But it's such a small part of their balance sheet that it never gets brought up in an earnings call. So we're really the first public company that's out here talking about this to where analysts are trying to absorb this information because for us, it's not a rounding error for McKesson, for Cencora, this represents a de minimis part of their overall portfolio. So I think it's also given the Street a chance to catch up to see this as a new offering in the market. And hopefully, they'll get behind this, and we'll have more people understand it. I think the private equity market understands this well. There's a number of private equity funds that have purchased assets like this privately. If you were to go look at the private markets, there's a lot of M&A activity happening in this space, not just the co-pay space, but patient services as a whole. It's constantly changing. So we had a chance to go down to the Cantor, HCIT conference and meet with a bunch of people and just listen to what they had to say. And it's -- there's a lot of activity in this space. It's just not in the public market. So I think that's part of the headwind for us, too, is explaining that and having people understand that this is -- there's a bigger amount of money at play here than what it just seems like on our side. Gary Prestopino: What about from the standpoint of your competitive advantages, those dynamic business rules? Is there a feeling out there? And I guess this is a stupid AI question, could AI somehow usurp what you're doing in the market? Matthew Turner: So I mean, I kind of -- I joke with clients when we talk on the phone that AI can do anything that you can dream of. I just don't know when it's going to be able to do it. I mean AI -- we don't view AI as a threat. We're working internally to build out our own AI-based systems to help us make our algorithm stronger so that we spot maximizers and accumulators easier. I think the other part of that to say is that just because they change what they're doing one time doesn't mean that we won't be right there changing it to find it. And not to go into a ton of detail, but once I have one patient, and I know that patient is impacted by a maximizer, I can -- it doesn't matter what the plan does. I can back into that patient because I know they were a maximizer patient yesterday. They're probably a maximizer patient today. So we don't think that's really a threat to our business model. We see AI on our side is actually a positive, and we're going to be implementing more of that on the patient affordability side to help us have a stronger, more robust product across our vertical. Operator: We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments. Mark Newcomer: Thank you, Kevin. In closing, we delivered strong results in 2025. We remain confident in our long-term strategy. I want to thank you all for joining us today, and we look forward to speaking with you again in Q1. Operator: Thank you. That does conclude today's teleconference 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 the Transgene 2025 Annual Results and Prospective for 2026 Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Lucie Larguier. Please go ahead. Lucie Larguier: Well, thank you, Nadia, and hello, everyone. So I'm Lucie, Chief Financial Officer at Transgene, and I'm with Dr. Alessandro Riva, our Chairman and CEO today. We will review the progress over 2025 and answer any questions you may have. Before I turn the call over to Alessandro, I'd like to remind everyone that today's discussion contains forward-looking statements which are subject to multiple risks and uncertainties. [Operator Instructions] With this, I now turn the call over to Alessandro. Alessandro Riva: Thanks, Lucie, and good morning, good evening, good afternoon, everyone. So 2025 has been a year of meaningful clinical progress for Transgene. As you all know, we advanced our individualized neoantigen therapeutic vaccine, INTV, TG4050, supported by compelling clinical and translational data in head and neck cancer that reinforce our confidence in its potential to prevent relapse in patients. I would say that there were 3 crucial moments this year that confirm our conviction that the myvac platform can bring benefit to patients. First of all, our Phase I data being presented already at ASCO in the same section as 2 Phase III trials in head and neck cancer. Second, the immunogenicity data that we present at the SITC conference in November in the United States of America; and third, the completion of EUR 105 million fundraising that provides financial visibility until the first quarter 2028 to support our priority programs. With these 3 major achievement, Transgene is on track to continue building the scientific and operational capability to execute our strategy. Now on Slide 5. TG4050, the first INTV based on our myvac platform is currently being evaluated in international randomized Phase I/II clinical trial in the adjuvant treatment of HPV-negative head and neck squamous cell carcinoma, a setting with significant unmet medical need as more than 30% of patients relapse after 3 years despite the recent advances in the innovation with checkpoint inhibitors. At ASCO, we presented Phase I data showing that all patients with HPV-negative cancer who received TG4050 after surgery and the standard chemo radiotherapy remained disease-free after at least 2 years of follow-up. Importantly, the trial met all endpoints for both safety and feasibility. This 100% disease-free survival rate compared with 3 relapses observed in the control arm provides the first clinical evidence supporting TG4050 potential to prevent cancer recurrence in early head and neck cancer patients. In November, at the Society for Immunotherapy of Cancer Annual Meeting, we presented a compelling translational data that further strengthened the clinical proof of principle for TG4050. In particular, the data showed that TG4050 induced neoantigen-specific T cell responses in 73% of evaluable patients. Importantly, these responses were durable, persisting 24 months after the start of treatment and showed cytotoxic and effector phenotype markers up to 1 year after the end of treatment. Together, these findings demonstrated that TG4050 can generate potent and long-lasting immune responses capable of targeting and eliminating tumor cells contributing to the prevention of relapses. In January 2026, a comprehensive analysis of the Phase I clinical and translational data was published on the preprint platform of [ Med Archive ] and is currently under review by peer-review journal. I'm on Slide 6 now. Let me now turn on the ongoing Phase II part of the Phase I/II trial. The randomized Phase II part of the trial is in the same setting as the Phase I. All patients are close to being randomized, and this will be a key operational milestone for the program. The primary endpoint on the Phase I/II study is 2-year disease-free survival that is very well recognized by the health authorities being an important and critical milestone, and we expect this efficacy readout once all patients reached 2 years of follow-up from randomization. In second half 2026, we also expect to share the first immunogenicity data from patients from the Phase II cohort of the Phase I/II study. For the Phase I part of the study, we plan to report 3-year follow-up data on disease-free survival in second, third quarter 2026, followed by 4-year follow-up in second, third quarter 2027. Beyond head and neck cancer, we are working to broaden the spectrum of opportunity for myvac across additional solid tumor types where significant unmet medical needs remain. The platform, as you know, is designed to generate individualized neoantigen therapeutic vaccine tailored to each patient's tumor mutational profile. As mentioned, we are currently in the start-up phase of the new Phase I trial in a second not yet disclosed indication in early treatment setting, and our goal is to initiate this trial in 2026. We are actively optimizing our manufacturing process, improving turnaround time and preparing for increased production volumes. Importantly, part of the proceed is dedicated to advancing industrial and regulatory readiness, including the alignment with the FDA and the EMEA requirements as we move toward late-stage development. Now turning on Slide 7, BT-001, which is our intratumor administered oncolytic virus developed with our partner, BioInvent. At ESMO 2025, we presented a poster data evaluating BT-001 in combination with pembrolizumab in patients with advanced refractory tumors. This data shows positive abscopal and sustained antitumor activity in both injected and non-injected lesions. The immune-mediated tumor shrinkage observed is consistent with our mechanistic hypothesis. BT-001 in combination with pembrolizumab can convert cold tumors into immunologically active hot tumors. This data supports further development of BT-001 and you should be hearing from us about this development in the next couple of months. Now I would like to turn over to Lucie for the financial update. Lucie? Lucie Larguier: Thank you, Alessandro. So if we look at our financial position and what happened in 2025, we can definitely say that the most significant financial event of the year was the successful fundraising in December 2025 and through which we raised approximately EUR 105 million. And together with the conversion of EUR 39 million debt with TSGH into equity, Transgene strengthened its balance sheet, reduced its financial liabilities. The company is now virtually debt-free, and we are now ready to move and fund it until early 2028. If we look at our cash burn over last year, it was approximately EUR 38.2 million. So it reflects the investment in our Phase II trial, the fact that we manufacture and enroll patients into this Phase II in head and neck cancer. So I think that -- and I'm convinced that with the budget that we have, the money that we have, we have funded to deliver on key milestones, which include the development of 4050, the myvac platform, the planned Phase I trial in the second indication and also the work on manufacturing and process optimization, preparing late-stage development. So Alessandro, if you want to comment on outlook. Alessandro Riva: Yes. Thank you, Lucie. As we look ahead, our priorities as you know, are very clear. We remain focused on TG4050, our first INTV vaccine from the myvac platform. We intent being to continue to establish Transgene as a key player in the INTV field that is growing across the community, and it attracts a lot of interest. With the progress we have made so far and with the finance sources that Lucie just mentioned, we believe that we have what do we need to execute on the next phase of development. So overall, when we look at the next 24 months that are covered by our recent fundraising, we see a clear path of execution, multiple meaningful milestones and the financial visibility, as mentioned to support them throughout early 2028. Before opening the Q&A, let me also mention that we'll be participating in investor access events in Paris on April 9 and to the Life Science Conference in Amsterdam on April 16. And we would, of course, be very pleased to meet with those of you who may be attending. With that, the team and I will be happy to take your questions. Operator, please up to you. Operator: [Operator Instructions] And now we're going to take our first question. And it comes from the line of Chiara Montironi from Van Lanschot Kempen. Chiara Montironi: I actually have a couple. So the first one, how should we be looking at the 3 years DFS data that are approaching in Q2, Q3, given that the primary endpoint and the benchmark are 2 years? What do you expect to see here? And what will be a good result? And the second question is on the immunogenicity Phase II data in H2 '26? At which follow-up will be those data, we'll be able to see the induction of the immune response also to understand that these immune responses are durable? Alessandro Riva: Thank you, Chiara. So first question is on 3-year disease-free survival data. First of all, we plan to send an abstract for the ESMO conference in Q3 2026. And what we should expect, of course, we don't know because we have not analyzed the data. I mean the base case scenario is, of course, that we continue to see that the 2 curves stay separated throughout the additional follow-up. So that's the base case scenario. The best case scenario, which is which is not good for patients that have been randomized to the observation is to serve more relapses in the arm that did not receive the TG4050. And therefore, this scenario will show a larger magnitude of the separation of 2 curves. And that's what -- and of course, there is a worst-case scenario that is that we start to observe relapses in TG4050. So -- but in the base case scenario, in best case scenario, this is going to be quite good for the program and of course, for patients. Then in terms of the immunogenicity data of the Phase II study, we expect to start having the first set of data by the end of 2026. And of course, we will start to analyze the patients that were randomized first, right? So therefore, we expect that those patients have at least 1 year kind of follow-up with the potential to show durability over 1 year in the Phase II study. And of course, this will be important to start also to strengthen the data that we have presented earlier in 2025 with the Phase I. Hopefully, this is clear. Operator: And the question comes line of Dominic Rose from Intron Health. Dominic Rose: It's Dominic here. I've got a couple as well. My first question is, how do you think the GMP manufacturing reconfiguration will change the ability to get a deal done towards the end of the year? So how impactful is that versus getting new data? And my second question is what, if anything, do you hope to learn this year from the Moderna data readouts? Alessandro Riva: Okay. So the first question is around the GMP manufacturing. So as you know, it is important to continue to optimize manufacturing for an individualized antigen therapeutic company like Transgene. So we plan to have full GMP manufacturing by 2027, Q3 2027. And of course, having a full GMP manufacturing is an important value creation for myvac program and, of course, we strengthened the [indiscernible] from pharmaceutical companies for the simple reason that having a GMP manufacturing allow us or the potential partner to move forward to a potential pivotal trial. So that's the reason why we are investing significantly on the GMP. Again, it is critical to succeed in the individualized neoantigen therapeutic vaccine. And then the second question was around Moderna data. I mean, I guess you're referring to the Phase II that they've already published, but also the potential Phase III in adjuvant setting melanoma. So first of all, I mean, the long-term follow-up data set that they have published just recently, I would say, confirm what they've already published a few years ago in terms of the efficacy of their INTV in adjuvant setting melanoma. And of course, they clearly say that they will disclose the Phase III data always in adjuvant melanoma by the end of the year, beginning of 2027. And of course, for the INTV community, the Phase III data will be quite important because if the data is positive, the data will continue to derisk the INTV approach. And of course, if the data is negative, then as you know, Transgene has a different technology with a different vector. And we think that we will have to wait our data set in head and neck, specifically the randomized Phase II study before making any conclusion because, again, our technology is different from Moderna one. But of course, for patients for the field, we hope that the melanoma data, Phase III is going to be positive, right? So -- but of course, we have to wait. So -- and from a bio and tech point of view, right? So as you know, they are doing some changes in their leadership and they have recently also announced that they plan to close their Phase II trial in the [indiscernible] cancer because the competitive landscape has changed significantly. And therefore, what they said, of course, they do some reprioritization and now they are staying focused on pancreatic cancer and colon cancer, and we don't know the data, the studies are still ongoing. And again, of course, we hope for all it will be there for all the studies that are in the INTV field in early setting because, again, all the data points will help to continue to derisk the field and, of course, for biotech companies to continue to accelerate the development. Lucie Larguier: So we have received a few questions on the chat. So I'll take and read [indiscernible] question, [indiscernible] from Biomed Impact. So the question is regarding the new indication, TG4070 program as shown on the website, could you give us more information, solid tumors as far as I understand, will the population of patients be homogenic or will you address several types of solid tumors, single or multiple injections? Alessandro Riva: So this is going to be one indication. It's not a basket protocol. It's going to be randomized Phase I study in a new indication that, I would say, very similar to what we did in head and neck, same type of methodology, but in another indication, where the medical need is quite significant. And the indication will be very different from head and neck from a biological standpoint and also in terms of the potential of being immunogenic tumor. And I cannot disclose exactly what we are going to plan. So we are in the kind of waiting for the regulatory feedback on the final protocol. And as soon as we have, of course, the approval from the agencies, we're going to disclose the indication and the time lines associated to. We're very confident that this study can start this year. Lucie Larguier: So we had a question from [ Jamie Land ], but I think with [indiscernible] from all investment, I think we've answered it given the current landscape. I also have a question from Martial Descoutures, ODDO BHF, which is, as you expand myvac platform, thanks to the additional tumor types, how do you see the long-term value? Could we think that you will look for partners in the future? Or could we think that you will continue alone for the long term? On TG4050, what level of efficacy could you consider as clinically relevant in the Phase II? Alessandro Riva: So let's start from the last question perhaps. So everything that is similar to what we have observed in the randomized Phase I makes a lot of sense for patients. And you know what we have disclosed and the disease-free survival curve. So having a flat curve without any relapses by itself is very important for early setting head and neck cancer patients. So we hope that we are going -- as I said also answering the question from Chiara, we hope to see the same kind of shape of the curve, the same type of separation and of course, the same durability of the plateau that we are observing in the Phase I study. So in terms of the long-term strategy for Transgene related to myvac, so I would say that, first of all, our priority is to continue to create value for patients. So -- and of course, by doing that to stay very open on potential opportunities in terms of having a kind of constructive dialogue with the scientific community with the pharmaceutical companies. And we think that, of course, as we generate more data in terms of Phase II, in terms of optimization of the manufacturing, in terms of showing that we are able to do a second indication with a manufacturing process that is even better than what we have used in the Phase I and the Phase II study. So all this kind of value creation activities and catalysts will help significantly to attract the interest of pharmaceutical companies. So the objective that we have is ultimately to bring the organization to a kind of starting block for launching a potential pivotal trial. And we hope that if we demonstrate that in the next 24 months, we can generate interest from potential partners and working them together to launch a potential Phase III trial. So value creation first dialogue in parallel with the industry and third potential collaboration to continue to accelerate our program. Lucie Larguier: Okay. We have a quick few follow-up questions from [indiscernible] from [ All Invest ]. So any update on the media conference where you plan to report Phase I data, particularly the 3-year survival. Should we assume it's ASCO? Should we expect Phase II patient randomization to be completed during Q2 2026? And finally, how should we think about the timing for initiating a Phase I trial in a new indication this year? Alessandro Riva: So I mean the 3 years survival data for the Phase I study of TG4050 will be potentially that's our plan presented at ESMO. And of course, this requires that ESMO accept our abstract. So we plan to submit it and then we'll keep you posted whether this is accepted and ultimately disclosed and presented at the ESMO meeting. So that's your first question. So the second question related to the randomized Phase II trial. So I mean, the randomization will -- I mean, will be completed certainly by Q2, right? So that's our plan, right? So -- and of course, we will obviously sign an announcement as soon as we have this milestone completed, but we are kind of optimistic that really we are close to the final recruitment. And then the third question, there was another one. Lucie Larguier: How should we think about the timing for initiating a Phase I trial? Alessandro Riva: Yes. As we mentioned, it's going to be in 2026. As soon as we have the formal approval from the health authorities, we're going to move forward. Lucie Larguier: And I think that we have at least -- I don't have additional questions, a few wins. Thank you very much, everyone, for your questions. Alessandro Riva: Thank you for the questions. So just to close, I mean we think that 2025 was a year of strong progress for Transgene. As I mentioned, we continue our journey to continue to establish Transgene as a key player in this field of individualized neoantigen therapeutic vaccine that can be potentially transformative for patients and can, as you have seen, can go beyond one single indication. Looking ahead, we are confident in our strategy in the transformative potential of the myvac platform. And with the financial visibility until early 2028 and a clear path to clinical readouts, so we are very well positioned to deliver meaningful value for patients and shareholders alike. We are grateful for your, of course, continued support and looking forward to keep you updated on our progress. With this, I would like to conclude today's call. Have a great rest of the day and talk to you soon. Operator, please? Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Operator: Good morning, ladies and gentlemen, and welcome to the Aimia Inc. Fourth Quarter 2025 Results Conference Call. [Operator Instructions]. Also note that this call is being recorded on March 24, 2026. I would now like to turn the conference over to Joe Racanelli. Please go ahead, sir. Joseph Racanelli: Thank you, operator, and good morning, everyone. Joining me on today's call are our Executive Chairman, Rhys Summerton, and Aimia's President and CFO, Steven Leonard. Before we begin, I want to make sure that everybody is aware that we issued our financial results for the fourth quarter earlier this morning. All of our materials, including the news release, MD&A and financial statements are available from our website and SEDAR+. We will be using a presentation today. And for those listening to our discussion by phone, a copy of that presentation is available from the IR section of our website. Some of the statements made on today's call may constitute forward-looking information, and future results may differ materially from what we discuss. Please refer to the risks and uncertainties that may affect our future performance referenced in our presentation as well as in our MD&A. In addition, we will be making note of GAAP and non-GAAP financial measures. Reconciliation is provided in the appendix of the presentation. And following today's presentation, please reach out to us if you have any outstanding questions or require any clarification of what we discuss today. With that, I'd like to turn the call over now to Rhys. Please go ahead, Rhys. Rhys Summerton: Yes. Thanks, Joe, and good morning, everyone. I think the transformation of Aimia into a useful permanent capital vehicle continues into the fourth quarter. We made progress against our 3-step strategy most notably for a permanent capital vehicle, what's important is that we continue to grow the cash position, and we generated a very strong EBITDA results in our core businesses. And overall, we achieved the guidance for the year. We continued with the momentum into the new year by entering into a definitive agreement that will result in the divestiture of our special chemicals core holding. The pending completion of the Bozzetto sale and the net proceeds it will generate will put us firmly on track towards our goal of enhancing shareholder value through making accretive investments in undervalued companies. In light of the developments in the Middle East and the timing of the Bozzetto transaction, the planned new investments could not have been more fortuitous. I'll expand on our progress against our strategy as well as our near-term priorities later in the presentation. But for now, I'll hand over to Steve to review the financial results in detail. Steven Leonard: Thank you, Rhys. I'd like to begin my remarks with an overview of our consolidated results. As you'll note from Slide 7, our results in the fourth quarter of '25 were marked by mixed performance when compared to last year. But when you take into account the backdrop of heightened geopolitical and economic uncertainty, it becomes clear that we delivered strong results in Q4. By case in point, our gross profit, cash flow from operations and adjusted EBITDA in Q4 '25 were at or slightly below results from last year. I would draw everyone's attention to a couple of items. First, our consolidated revenues were down in Q4 '25 due to lower volumes and pricing pressures in both core businesses, which I will provide more color in a few minutes. Gross profit margins held due to improvements in mix, resulting in adjusted EBITDA down $0.6 million for the quarter. Second, included in the increase in SG&A costs in Q4 '25 was driven by a combination of factors. These included $2.9 million of costs related to the Bozzetto transaction and $1.2 million related to a litigation settlement agreement with a former company executive claim launched in 2020. Excluding these one-off amounts, SG&A expenses declined on a year-over-year basis. And finally, our net loss for Q4 '25 included a noncash goodwill impairment charge of $14 million at Cortland. Turning to the performance of our core holdings, starting with Bozzetto on Slide 8. In Q4 '25, Bozzetto generated $84.2 million of revenue, a decrease of 1.9% when compared to last year. On a constant currency basis, Bozzetto's revenue was down 9.8%. The year-over-year variance was due to lower volumes sold by Bozzetto but Bozzetto's Textile and Water Solutions sectors. Two contributing factors were lower Textile Solutions sales into Bangladesh due to political instability in the country and Chinese competitors driving lower pricing in Water Solutions in markets where Bozzetto serves. Weaker results for Bozzetto's Textile and Water Solutions were partially offset by improved pricing and product mix experience from the dispersion solutions sector, where Bozzetto-focused on growing sales of agrochemical and plasterboard solutions. Q4 '25 Bozzetto generated adjusted EBITDA of $15 million, which represented a margin of 17.8% in the same period last year, Bozzetto generated adjusted EBITDA of $13.4 million and a margin of 15.6%. While year-over-year comparisons of Bozzetto results are favorable, quarter-over-quarter comparisons better illustrate some of the macroeconomic headwinds that Bozzetto faced over the past year. Turning to Cortland on Slide 9. Cortland generated $34.3 million of revenue in Q4 '25, down 17% from last year. Although Cortland results in Q4 '25 were impacted by unfavorable market conditions, including the effects of U.S. tariffs on global trade, particularly in marine and shipping rope sales. I should point out that Cortland's revenue in the comparative period last year was boosted by strong project sales in North America within the offshore energy sector that did not reoccur this year. On a constant currency basis, Cortland's revenue declined by $7 million or 16.9%. The decline in Cortland's top line numbers, coupled with an increase in SG&A costs, resulted in a decrease in adjusted EBITDA to $4.1 million. The $1 million in SG&A costs was driven by a combination of factors, including increased compensation and benefits expense related to Cortland's efforts to grow its sales force and strengthen customer relationships in key markets. This increase was partially offset by lower selling expenses due to reduced sales volumes. Subsequent to quarter end, Cortland made a management change and appointed Wolfgang Wandl as CEO. Given the increased focus on growing sales and operational excellence, we are optimistic Wolfgang will lead Cortland to its full potential. We ended the year with $109 million in cash, up from $106 million at the end of Q3. Slide 10 shows a waterfall of cash movements in the fourth quarter. Key drivers to the increase in liquidity included $19.4 million of cash flow from operations and an $8.8 million tax refund from Revenu Québec related to a tax audit of a former subsidiary. Cash flows in the fourth quarter included $6.9 million of interest payments against our 9.75% senior notes, $3.6 million of common share buybacks, including tax. $7.9 million of principal and interest payments on Bozzetto's credit facilities and $5 million of capital expenditures. Turning to Slide 11. Looking at our liquidity more closely, it shows a breakdown of our cash position by segment at the end of December. I'd like to make clear that our liquidity in the coming months will be impacted by the proceeds from the Bozzetto divestiture, which we expect at the end of Q2 of this year. We expect the net proceeds in the range of $265 million to $271 million. We anticipate our liquidity will be offset by the redemption of the senior notes and if all the notes are redeemed, that would be $142.6 million. Over the next 12 months, our cash requirements will include $7 million of operating expenses at the holdco level. Slide 12 shows our results for 2025 tracked against the guidance we provided a year ago. We had forecasted that Bozzetto and Cortland would generate between $88 million and $95 million of adjusted EBITDA on a combined basis. Their combined results, which totaled $85.6 million were broadly in line with our expectations for the year. At the holdco level, we forecasted cost to be $9 million for 2025. As a result of cost-cutting initiatives we implemented over the past year, including reduced audit and professional fees, lower insurance costs and decreased director fees, we did better than our target for the year. Holdco costs for 2025 were $7.7 million. We remain committed to reducing holdco cost to or below 1.5% of NAV. I should point out that in light of the planned sale of Bozzetto, we are not providing guidance for 2026. Key development subsequent to quarter end was our announcement of the signing of the definitive agreement to divest Bozzetto. While we have discussed some of the details previously, I think it would be helpful to review the salient aspects of the transaction and provide an update on the recent developments. As summarized on Slide 14, the sale of Bozzetto will generate proceeds in the range of $265 million to $271 million. We anticipate the transaction closing in Q2 as we await final regulatory approvals. As we have disclosed previously, we expect the use of the net proceeds towards making investments in undervalued companies with an ultimate goal of acquiring controlling interest in these investments. In addition, we will be reducing our debt by making an offer for our senior notes -- senior notes to be redeemed at principal value plus accrued interest. With more than $500 million of capital tax carryforwards at December 31, we do not anticipate paying any taxes on the gain from this transaction. Slide 15 illustrates the cash waterfall on the main transaction components. Although the Bozzetto transaction is dominated in euros, we have presented it in Canadian dollars, our reporting currency. As you can see, Bozzetto was valued at an enterprise value of $411 million. Taking into consideration Bozzetto's net debt, the value of minority interest and transaction costs, the sale of Bozzetto will generate net proceeds in the range of $265 million to $271 million. Amounts presented in the waterfall are subject to closing adjustments on net debt, working capital and currency rates. I should also note that we entered into a hedging strategy in February to mitigate the impact of major foreign currency volatility. We have hedged approximately 50% of the net euro proceeds into Canadian dollars, which essentially represents the par value of the senior notes if they were all redeemed after the divestiture closes. Slide 16 presents our cash position on a pro forma basis, taking into account the impacts associated with the Bozzetto divestiture on our liquidity as at December 31. As a reminder, our cash position at year-end was $109.2 million. This pro forma walk takes the estimated net proceeds from the Bozzetto sale, less $50 million of cash held by Bozzetto at December 31, and the use of $143 million towards the redemption of our senior notes, if all our shareholder -- all our noteholders accepted the offer. Once these items are taken into account, we derive $185 million of cash on a pro forma basis as of December 31. As noted earlier, this total is subject to the final closing adjustments. That concludes my prepared remarks. I would like to turn the call back over to Rhys to review Aimia's near-term priorities and outlook. Rhys Summerton: Good. Thanks, Steve. So Slide 18, I think it is -- we're going to just look ahead in the near-term activities. So we anticipate the Bozzetto transaction will close in Q2. There's the customary closing conditions and regulatory approvals, which Steve alluded to. And then within 30 days of closing, we will make an offer to purchase all the senior notes. The purchase offer is a requirement of our indenture agreement, which is triggered by the sale of Bozzetto. The offer to noteholders will be made at par value of the notes plus any accrued interest. And that value at 31 December 2025 was $142.6 million. The holders will retain the option to continue to hold the notes until maturity in January 2030. So there will be a decision that noteholders will have to make. In tandem with the offer to redeem the senior notes will begin to deploy the net proceeds towards the exciting part of Aimia's future, which is making investments in companies that we find that we believe would be undervalued and would be consistent with our strategy. So we've already identified a number of target companies. We won't share obviously any of the details with you, but I think we'll give a broad sketch or outline of that. So the companies we're looking at, we'll definitely have to get control of them. We'll look for things that have got strong dependable cash flows. They have balance sheets which are not just strong, but they are essentially net cash position balance sheets. And they'll be undervalued on a relative basis with a strong valuation or asset underpinned to them. So just to highlight on Slide 19, the impact of the early redemption of the senior notes -- these notes, they bear interest at 9.75% coupon and they consume $13.9 million of cash annually, and that cash comes from the holdco right at the center. Early redemption will result in cumulative cash savings to maturity in January 2030 of approximately $56 million if all of them are redeemed. It's worth remembering that we generated a gain of $53.8 million and annual cash savings of a further $5 million when we completed our substantial issuer bid last year when we exchanged our preferred shares at a discount to the face value of the senior notes. So with that out of the way, Slide 20 talks about the progress against our 3-step strategy. So remember those 3 steps reduce the holdco costs reduce the share price discount that it trades at and deploy the capital effectively. It's been less than a year since we introduced this strategy. On the holdco cost side, we reduced holdco cost to $7.7 million in 2025, surpassing our target, which was $9 million. So we did better there. And Steve and the team did a good job in reducing that number. And to put it into context, we're down from $12 million in 2024. On the share buybacks, we continued with our share buybacks. We've spent more than 3.6 million worth of shares in our NCIB in the fourth quarter at an average price of $2.80 per share. And more significantly, the sale of Bozzetto puts us on the cusp of being able to deploy the capital effectively executing on the final part of our strategy and the most important part, which will create value. We are excited about the path ahead, clearly. Once the Bozzetto divestiture closes, we'll have a strong cash position importantly, depending on the success of the redemption of the notes, we'll have no debt at the center. And the underlying companies will have net cash as well and we have more than $1 billion of tax losses -- tax loss carryforwards to utilize. So we are very aligned, both as a Board, as the executives of the company and the shareholders to take Aimia forward. As sanguine as we are about our prospects, I want to remind everyone that this process will take some time. So we've been at it for less than a year. The turnaround is gaining a lot of momentum. The team is executing very well, and we are very well placed to start executing on the next part of our strategy. Slide 21 talks about the progress in the NCIB. This, you can see, takes us all the way to the 28th of February 2026. So after year-end. We've continued to buy back shares from the start of the strategy. We've reduced the share count by over 10%. And we will continue with this until our current NCIB approval runs out in June, and then we will look to reinstate that at the next AGM. Going on to our summary and outlook slide. As you have heard, the fourth quarter was marked by progress against our 3-step strategy. We had solid financial results, even though there's been geopolitical uncertainty around the world. Our focus in the coming months will be to sustain the momentum that Aimia has. In particular, our priorities in the near term will center on closing the Bozzetto transaction, which we said will be in the second quarter, redeeming the outstanding senior notes and then starting the process to invest in new undervalued companies that meet the criteria that we specified earlier. We also have worked on secondary listings of Aimia. We have a listing now on the JSE, and we look to add one more additional listing of Aimia in another market. And this is all part of our strategy, which will become clear in the time ahead of how we plan to invest in undervalued companies. Finally, I want to point out that AGM materials will be mailed to investors in the coming weeks in advance of the shareholder meeting. This year's meeting will be held in Toronto on May 13. And I hope to meet as many of you in person as possible. I'm hoping that we can double the attendance from last year. Thank you for your time today, and we'll open the call to questions. Joseph Racanelli: Go ahead, operator, if you wouldn't mind pooling listeners for questions. Operator: [Operator Instructions]. Joseph Racanelli: Sorry, operator. Before we begin, Rhys, we did receive some questions, and I just want to ask those for you and Steve. And you talked about potentially monetizing some assets. Can you clarify which ones that you're considering? Rhys Summerton: Well, the balance sheet is now fairly transparent and the investments are easy to understand. So we have a few remaining smaller assets which we are going to look be in the process of monetizing. And those are some investments which we will redeem bringing in some of the cash into the center. We also have an investment in China which we don't believe is ready to be sold yet. But it is trending in the right direction. Performance has improved materially over the last year, and we think in the future, there will be an opportunity to exit that. But at this point, we are happy holders of that turnaround. Joseph Racanelli: Okay. Can you clarify a little bit in terms of your tax loss carryforwards? How would you utilize them with some of your planned investments? Do you need to acquire controlling stakes to utilize them? Steven Leonard: In each jurisdiction, there's particular parameters around utilizing the tax losses, the biggest parameter is change in control. So obviously, we're -- we have that top in mind as we make our -- as we deploy our investments and make our decisions going forward. I want to point out though, we were able to utilize our capital losses on the sale of the Bozzetto transaction. That's just another example of our ability to mitigate tax costs. Joseph Racanelli: And Rhys question for you, in particular, does Milkwood plan on adding or increasing its position in the company? Rhys Summerton: Yes, I don't think we'll make an answer about that now. We have a substantial investment already. I have material investment as well personally. And we'll have to see what happens in the next few days. But we increase our holding or our percentage of Aimia virtually every day because there's a share buyback going on and obviously, we're not sellers. But we'll see what happens with the market and where Aimia trades relative to its book value. Joseph Racanelli: Great. Operator, can you open the line to the person in queue, please? Operator: Certainly. First question from the phone is from Rob Byde at Zeus Capital. Robin Byde: Two from me, please. Firstly, on Cortland and EBITDA margins. You discussed in the statement, higher SG&A costs related to investments in sales and customer relationships. Are those investments now complete? And would you expect all other things being equal, the EBITDA margins in this division would now recover? And then secondly, just to press you a little bit more on acquisition strategy and targets. I know you can't give any precise details, but can you perhaps say anything on geographies and perhaps verticals? Rhys Summerton: Thanks, I'll give the question to you. The first one to Steve, and I'll take the second one. Steven Leonard: Yes. So in the quarter, in the fourth quarter, we had a little bit of -- as we highlighted some unusual items in the period on SG&A. But we decided in '25 to invest in our sales team in our getting to markets and establishing presence in different markets. So that has had a bit of a downward impact on EBITDA margins in '25. That work is done. We don't expect to be growing the sales force anymore. And we're starting to see some of the work that's been done behind that. coming through for '26. So we're expecting better margins in '26. Rhys Summerton: Thanks, Steve. The second question, some geographic indication of where we might make acquisitions. We look for value anywhere in the world. And at the moment, we've said it many times that the U.K., we think offers the best risk reward of any place that we look at. So the opportunities to deploy some of the capital in the short term, I think would make sense if valuations stayed where they are today in the U.K. That's where we see tremendous value. Balance sheets are not only strong, there's opportunities with companies with net cash on the balance sheet. There's good management teams. You don't overpay for management through SBC, which you get in the U.S. So we think it's a really good place to hunt for acquisitions. We also know the market very well. But that's kind of stage 1. Stage 2 as we get bigger and the investments work out, we would need to then look at Canada and the U.S. to utilize those tax losses. So to give you sort of a road map, we would say stage 1, look at things that have exposure to really the cheapest valuations with the best management and highest quality companies and stage 2, hopefully, the U.S. market sees some normality and valuations correct. And we'll be very well placed to start executing on our acquisition strategy in the U.S. and in Canada. Robin Byde: Well, that's great. Thanks very much. Operator: [Operator Instructions]. At this time, Mr. Racanelli, it appears we have no other questions registered. Please proceed. Joseph Racanelli: Great. Thank you again, everyone, for joining us. As mentioned, there are a couple of things to take note of, our upcoming AGM in May. And as well, if there are any additional questions as you review our material, please reach out to us. We'd be happy to answer any questions that you may have. Thank you again. Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.
Operator: Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vertical Aerospace Full Year 2025 Business and Strategy Update Call. [Operator Instructions] I would now like to turn the call over to Samuel Emden, Head of Investor Affairs. Please go ahead. Samuel Emden: Good morning. I'm delighted to welcome you to Vertical Aerospace's Full Year Business and Strategy Update Call. Before we get started, I'd like to remind you that during today's call, we'll be making forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially. Any forward-looking statements we make are based on assumptions as of today. We undertake no obligation to update these statements as a result of new information or future events. We've posted an accompanying slide deck to our Investor Relations website at investor.vertical-aerospace.com, which contains detailed information on forward-looking statements. For a more complete discussion about these risks and uncertainties, we have filed our 2025 annual report with the SEC earlier today. Please now let me hand over to our Chairman, Domhnal Slattery. Domhnal Slattery: Good morning, and thank you, Samuel, and thank you all for joining us this morning. So over the past several weeks, we've had the privilege of hosting a series of Valo showcase events here in the U.K. and London, New York, Miami and most recently in Atlanta. These events brought together our airline partners, our investors, regulators, our suppliers and the broader advanced air mobility ecosystem. And what has stood out most was the energy and the enthusiasm around the opportunity ahead. And before getting in today's earnings call, we wanted to give you a taste of it. [Presentation] Domhnal Slattery: So at each step, the message was consistent. The market is ready for safe, quiet, zero emissions urban air mobility. And the response to our aircraft, Valo has just been extraordinary. This is a product that is redefining the eVTOL market globally. Now before we dive into the detailed content of today's call, let me take a step back just to address some key top-of-mind issues. First, on our flight test progress. I'm delighted that our Chief Engineer, David King, will go into this in further detail later. But to sum it up, we are in the final innings of completing full pilot transition under the regulatory oversight of the CAA. We are close to being complete with the 5 profiles and expect to have this finalized soon. On capital, as Stuart will speak to later in this call, cash is critical through certification. And despite annual spend being a fraction of our peers, we will need to continue to raise capital. We are exploring all of the options that are available to us right now across the capital markets, strategics and with government support. And we will execute that when it is the right moment for the business. Stuart will take you through the detail of that later. Today, our call will be broken into 4 sections to address some of the key issues and questions we hear from our stakeholders. First, we'll talk you through the aircraft. We'll talk you through Valo, the size, the modularity and safety that makes Valo the industry Valo the industry-leading electric eVTOL. Following that, our Chief Engineer, David King, will walk you through our pilot transition flight test progress, and he will provide a detailed breakdown of where we are today and the remaining elements to be completed. Then our CEO, Stuart Simpson, will do a deep dive on our battery technology. And we believe this technology underpins both Valo and our hybrid aircraft and gives Vertical Aerospace a differentiated power platform. Finally, we will discuss our current financial snapshot and our plans for capital raising. So first, Valo. The excitement around Valo is not just about the promise of the category, it's about the product itself. Unquestionably, Valo is the highest quality eVTOL aircraft in development globally today. It combines the safety architecture of a modern commercial aircraft with the performance and efficiency required for real-world commercial airline operations. Our design philosophy has always been clear: build an aircraft that meets the standards of the best airlines in the world today. We have developed Valo together and working in collaboration with our customers for well over 5 years. And that is why it has some key differentiators other eVTOLs in the market simply do not have and cannot have because of their designs. Why Valo has a seat next to the pilot for training, separation between the pilot and the passengers and why we have, without doubt, the roomiest cabin and the largest luggage bay. And critically, the aircraft sizing to accommodate 4, then 5 and then 6 passengers. This is the first truly upgradable aircraft, improving economics for our operators. With our largest cabin and the modular architecture, Valo is without doubt the perfect fit for multiple applications across the emergency, medical services, cargo and beyond. And we plan to be the leader in the hybrid electric defense space. And we look forward to deepening our discussions already underway with militaries around the world but particularly here in Europe in the run-up to the Farnborough Air Show later this year in July. As we've spoken about several times, we are deliberately a pure-play OEM, relying and collaborating on Tier 1 aerospace partnerships who allocate the best talent in the world, the absolute best resources and IP to the development and the certification of our aircraft. And we have now contracted the vast majority of those partners. And we look forward to bringing the final partners on board later this year as we progress towards critical design review this summer. And with that, I'm delighted to hand over to David King, our Chief Engineer. David? David King: Good morning, all, and thank you, Domhnal. Let's talk about flight testing. We've been flight testing a full-scale piloted prototype of Valo for 20 months now. In November, we began piloted transition. The phase where the aircraft moves between hovering over a spot as needed for vertical takeoff and landing and wing-borne flight, Valo's cruise condition. This flight testing is progressing steadily under disciplined U.K. CAA oversight. And here's a short video to give you a flavor. [Presentation] David King: We are nearing completion of the transition flight test phase, and the data we are collecting each flight is directly informing certification of our final commercial design. By doing the disciplined engineering and regulatory work upfront in close collaboration with the CAA, we reduced certification risk and avoid redesign later. As Simon Davis, our Chief Test Pilot, explained in the video, we've approached full transition incrementally from both ends, validating performance and building an evidence base before moving to the next test point. We've accelerated from a hopper, tilting the propellers forward from vertical orientation of 90 degrees. We've decelerated from wing-borne flight, tilting the propellers from horizontal. We are methodically and incrementally closing the gap, studying the wealth of valuable data at each step while working side-by-side with our certification authority. For example, we recently took advantage of a break in the U.K. weather to complete a piloted profile with a conventional runway takeoff, a deceleration from wing-borne cruise condition, a controlled deployment of the stowed rear props, 40 degrees of upward prop tilt while slowing down towards thrustborn and then accelerating back to wingborne and restowing the rear crops before landing. This test demonstrated smooth transitions with optimized software with the propellers deploying and reparking exactly as designed. By working closely with the CAA upfront, we now have a clear, well-defined, tried and tested path to certification. The standards, the criteria and the means of compliance are published, approved and have been dry run on the prototype program. This upfront work puts us on track to certify Valo to globally portable airliner safety standards. Then after certification comes entry into service. So I want to briefly touch on initiatives to accelerate deployment of an eVTOL operational ecosystem across the globe, including the eVTOL, Integration Pilot Program known as eIPP, recently announced in the United States. We applaud the eIPP program as a means to accelerate the introduction of eVTOL into United States National Airspace. As a non-U.S. eVTOL manufacturer, we were not eligible to participate directly in the United States eIPP program. However, we are participating in similarly focused European initiatives to advance the introduction of eVTOL in Europe. In the U.K. and in the European Union, flight demonstrations are planned and supported by government-backed programs, including the U.K. government's Future Flight Challenge and in due course, SESAR in Europe. These are taxpayer-supported initiatives designed to develop infrastructure, air traffic management technologies and operational procedures for optimized eVTOL operations. These programs will also build public and stakeholder confidence through structured and visible demonstrations. In the U.K., we've been a long-standing participant in the Future Flight Challenge, a GBP 150 million government-backed program focused on demonstrating operational readiness and accelerating safe integration of eVTOL technologies. Through this program, we're supporting funded flight demonstrations, including upcoming flights at Skyports Vista VertiPort and related work to demonstrate the feasibility of eVTOL operations between Oxford and Cambridge. By combining learnings from eIPP in the United States and similar European initiatives, we expect to see accelerated deployment of a safe and effective eVTOL ecosystem across the globe. At Vertical, we are laser-focused on executing to our clear pathway from prototype to preproduction to certification and then to full-scale production. Our final prototype aircraft # 3 has completed its commissioning tests and last week was the first time we had both of our prototype aircraft running at the same time. By the middle of this year, we will complete critical design review for Valo, the gate which freezes design and enables full throttle on building 7 preproduction aircraft to be conformed to type design and used for certification credit. And now I'll hand the microphone to our CEO, Stuart Simpson. Stuart Simpson: Thanks, David. It's great to hear about Valo and our testing progress. We heard Domhnal speak earlier on what makes Valo a differentiated eVTOL aircraft. But let me touch on Vertical's true secret sauce, which is our battery technology. While our core strategy is to operate as an OEM, utilizing partnerships across Tier 1 aerospace suppliers to minimize certification risk, the battery system is our core in-house technology and a key value driver for the business. We source cells and then manufacture the batteries at our world-class facilities. As cell technology evolves, our battery packs will provide increased payload and range to our customers. Vertical's proprietary battery system will support both the electric Valo eVTOL and our hybrid aircraft. The testing we have done to date confirms our current batteries capabilities to deliver power such that at launch, the Valo will be able to provide lift for 1 pilot, 4 passengers and 70 pounds of luggage per person. We are already testing the next generation of batteries that will further improve payload range, ensuring this aircraft will only get better over time. And as announced last week, our battery pilot production line is now operational. In fact, I had the pleasure of undertaking many of the process steps yesterday. In addition, we are expanding our battery manufacturing capability and capacity through the development of a new 30,000 square feet vertical energy center adjacent to our existing facilities. This new facility will open later this year. And in July, just before the Farnborough Air Show, we will be hosting an Investor Day at the Vertical Energy Center to allow our shareholders, prospective investors and analysts to see the progress we are making. More details to come, and we look forward to seeing many of you there. Here is where the true value proposition comes in, our Battery-as-a-Service business line. We expect batteries to be replaced approximately one time per year over the circa 20-year operational life of the aircraft. What this means is a long-term, predictable, high-margin revenue stream. As we have said before, we anticipate margin for this to be circa 40% Note that our published Flight Path 2030 figures don't include wide-ranging second life opportunities for our batteries. Given European aerospace standards, once the battery degrades below a particular level, circa 93%, the battery will be removed from the Valo but will be perfect for other applications. Our lightweight and high-power batteries have multiple second life opportunities, including CTOL aircraft, surface transport, marine and storage. This drives significant additional revenue and margin opportunities for Vertical. We have had multiple inbound requests from third parties wishing to understand our technology and see if and how it is for sale above and beyond us using it in the Valo and our hybrid aircraft. As mentioned in our prior earnings calls, we have shifted from dream to reality. And as David mentioned, laser-focused on execution. As seen in 2025, we completed almost 100% of our stated milestones, the final one being transition, which will be closed out imminently. We have made a tremendous start to 2026 across product, customers and ecosystem. We kicked off the Valo roadshow in key U.S. hubs, signed a critical supplier partnership with Evolito for the development and supply of EPUs for the Valo and made strides on further integration and partnerships in artificial intelligence. We launched new customer partnerships with the Kingdom of Saudi Arabia, Heli Air Monaco, JetSetGo and launched customer networks in and around London, New York, Miami and Atlanta. Now looking ahead to the balance of 2026. We categorized our operational goals into 3 buckets: aircraft, industrialization and commercialization. I'd just like to draw your attention to a couple of things. First, we'll be flying at Farnborough Air Show, and we look forward to seeing many of you there. Second, this year, we will open 2 new manufacturing facilities. Third, we will complete the CDR for Valo, locking in the final 25% of suppliers. And finally, we will begin assembly of the first preproduction Valo. This next slide shows that through fiscal year 2025, our spend was in line with our guidance of $110 million to $125 million. As stated, this is a fraction of what our main competitors spent but our progress, particularly in full-scale piloted and regulated test flight remains industry-leading. Our cash and cash equivalent position was $93 million as at the 31st of December 2025. As of today, our short-term liquidity is estimated at approximately $85 million, comprising cash on hand and anticipated near-term receipts. Our ATM facility, which was put in place in September 2025, has a remaining capacity of approximately $78 million. Over the next 12 months, we anticipate spending circa $190 million to $200 million as we ramp up our manufacturing footprint and move into the assembly of the first Valo. With that, I'll hand back to Domhnal for closing remarks. Domhnal Slattery: Thank you, Stuart, and thank you, David. We would like everyone on this call to walk away with just 3 key messages. First, our approach to flight testing is intentional, it's disciplined and certification focused. We are deliberately expanding the flight test envelope systematically to extract maximum value to derisk the ultimate Valo certification program. Secondly, we have optionality when it comes to capital raising, and we will execute when it is the right time for the business and our shareholders. And three, as Stuart illuminated, our battery technology is a key differentiator in our business model. With its high power and lightweight, use cases support our eVTOL and hybrid aircraft, along with multiple other applications in adjacent industries that we intend to pursue. So with that, we will hand over to Samuel to open up the line for questions. Thank you, Samuel. Samuel Emden: Yes, we asked our social media community for some questions. I'm just going to kick off the Q&A with one of them. So the question was, with EU delegation and British government representation at the Valo event in London, is there a credible likelihood of meaningful state financial support from the U.K. Domhnal Slattery: Stuart, maybe you could take that one, please. Stuart Simpson: Thank you. It's a good question. We have had tremendous support from the U.K. government. If you look at it over the prior years, this is up to around $100 million, and it shows the U.K.'s commitment to aerospace. And it's why we're based here in the U.K. in the heart of the European aerospace industry. Now the government knows we've had approaches from several other European countries as we move from the R&D phase to the industrialization phase of doing a business. We have had incoming requests for us to relocate to several European countries in many U.S. states. However, we remain committed to being anchored in the U.K. and are working closely with government to find a way to make sure that happens. Samuel Emden: Great. Thank you. And over to you, operator. Operator: [Operator Instructions] Your first question comes from Edison Yu with Deutsche Bank. Xin Yu: First, I just want to check in on your comment you said about the pilot to full transition. You said it's very, very soon. Are there any regulatory hurdles that you're waiting for? I know weather has been an issue at times. Perhaps just elaborate on what's left to do. David King: Yes. Thanks, Edison. This is David. Thanks so much for the question. The short answer is the S curve. So if you were to -- and this is normal for envelope expansion. If you were to plot up test pass on the Y-axis versus time on the X-axis, this type of testing, you typically see a curve that looks like an S-leaning to the right in that it's the last few tests that have this tail end with this low slope, and that's where we are right now. So over the last couple of months, we did have a difficult winter, as you said, Records were broke in Bristol. I think there were 22 straight days without any sun and 45 straight days with rain. So we did have some weather difficulties. But with the spring time now, we're starting to see the forecast starting on Thursday to start to get a little bit better. So yes, we just have these last few tests to pass. And as we go through it, what we have done, and we tried to highlight this in the messaging is that we are doing these tests side-by side with the certification authority, the U.K. CAA. We are using our approved design organization, our DOA procedures, which are the same procedures we're going to use for certification to conduct the flight testing. So just to give you an example, as we conduct a test, we take the thousands of data points and then we compare it against our predictions that come from physics-based models. Where we see a slight deviation, we flagged that and we said, hey, we need to understand what that is before we move on. And when we have to go update and tweak our performance predictions in our models, then we go back to our airworthiness data package and update the appropriate sections to ensure that we still comply with the full airworthiness with this modification to the models before we move on to the next point. So it's using a certification process on the prototype, which is dry-running it to reduce the risk of certification later. Xin Yu: Understood. Appreciate the color. Separate topic on the strategic but from my understanding, there's been discussions going on. Any update on when we could maybe get something? And is the -- should we think about the full transition that I just asked about as a precursor for some type of strategic to come in? Domhnal Slattery: Edison, it's Domhnal. So the conversations that we are having with strategics are ongoing, and they've been ongoing now for a number of months. I'll refer back to our last earnings call. I think it's clear that the successful transition is a catalyst to moving to deepening those conversations into something tangible occurring, okay? So the focus right now from the entire organization is to complete that transition successfully and as quickly as possible from where we stand today. And the reality is it's taken us longer than we anticipated. On our last earnings call, I specifically said it's weeks, not months. Well, actually, as I was thinking about it this morning, it's months, not weeks. But we are very, very close at this juncture. Xin Yu: Understood. And just lastly for me, on the hybrid military side, I know you sort of alluded to some things earlier. Is that something that could happen as we get closer to Farnborough where you maybe announce some efforts or some programs? That's obviously a very hot topic or hot area given what's going on in the world. So curious your thoughts there. Domhnal Slattery: Yes. So maybe I'll bring in David just to give you some flavor from VERTICON, and we can supplement that. David? David King: Yes, yes. Thanks. Just to give you the perspective that I heard from the Vertical lift community at the Vertical Aviation International Trade Show in Atlanta 1.5 weeks ago, where people looked at the Valo and the differentiators resonated and one of those was the size of the aircraft and the ability to upgrade it to a hybrid configuration without changing the airframe, essentially just taking the spacious baggage bay and inserting a turbo generator system, and we are demonstrating that on our prototype aircraft #3. So the feedback that I heard was with the size of Valo and the versatility, what we were forecasting for the defense market we're not forecasting high enough is what I was hearing from the people. And as you mentioned, with the geopolitical situation as it is today, there are different opportunities. One that was talked about was distributed contested logistics where they said, if you look at the defense opportunities that are coming, they're based on vertical takeoff and landing in a configuration that can be turned into an autonomous platform quickly. And that's part of the value proposition of Valo and the Honeywell flight control system is it's one small step from fully autonomous and then to be able to have the room and the payload and the capacity in the baggage bay for the logistics to be able to turn it into that mission and open up a large set of demand. Domhnal Slattery: And maybe just to supplement that, Edison, we believe we are the only eVTOL manufacturer in the world that can basically create a hybrid from the current airframe, as David touched on. But from a time frame perspective, we'll have that aircraft certified in 2029. Our competitors are multiple years behind in that regard. Now in terms of commercializing that and actually generating sales, we're now dedicating a significant amount of internal resources to defense sales. And I hope during the course of this year, maybe as soon as the Farnborough Air Show, we'll be able to share some progress in that regard. But unquestionably, we've got the best product. We now need to make sure we can sell it. Operator: Your next question comes from Amit Dayal with H.C. Wainwright. Amit Dayal: So with respect to the timing for the fully -- the piloted transition flight, should we expect timing on that to be sort of mid-2026 or maybe later in the second half of 2026? Stuart Simpson: Thank you for the question. As David alluded to, we're really down to the very last little bit of this. Now we don't want to commit to a timing because, as David said, each time we put the aircraft in the air, we learn a little bit more. But with the weather improving, we actually flew yesterday, which was fantastic. We got some more learnings, nothing hindered us. We have literally a handful of flights to do to accomplish full transition as we sit here today. Now the timing of that very difficult to commit to because, as David said, we have the weather to contend with. We have new learnings. So it's something we anticipate over the coming weeks, I would say. Hopefully, that gives you a bit of color commentary. Amit Dayal: No, that's understandable. Just wanted to see if there was sort of a concrete time line to that but I can take that offline. The other question was the battery efforts, the $190 million to $200 million spend for the next 12 months, does that include your battery needs as well? Stuart Simpson: Yes, absolutely. The $190 million to $200 million is a rolling 12 months from end of March. It covers everything we need to do to remain on track with FlightPath 2030, delivering our new battery facility and new aircraft manufacturing facility, the conversion of Aircraft 3 into a hybrid and the build of the first Valo. So that financial number I mentioned covers all of the things we said we'd be doing in '26. Amit Dayal: Got it. And then just last one, the strategic investor you are sort of quoting and the other financial options that you are sort of looking at, how urgent are these needs given where the balance sheet is? Or are you comfortable at least for the remainder of 2026 to execute according to plan? Stuart Simpson: We're pretty comfortable as we sit here today. We've got line of sight to circa $150 million, $160 million as we sit here today. We're in constant discussions amongst a range of options for financing, and we'll execute as and when the time is right for the company. So we don't feel under pressure to do it. We'll do it as and when it's right for the company and the current shareholders. Operator: Your next question comes from Louie DiPalma with William Blair. Louie Dipalma: Stuart, Domhnal, and David congrats on the development of Valo and the demonstrations in London, New York City and Miami. For my first question, I was wondering, following these demonstrations and your test thus far, how do you feel that your Valo aircraft stacks up with peers in the market? Is the main difference between vertical and peers the balance sheet right now? Domhnal Slattery: Yes. Louie, great to hear from you. So I mean, we fundamentally believe, I mean, fundamentally that we've got the best product in terms of the size, shape and scale and its capabilities. We've believed that for a very long time. We've now shown the physical embodiment of that to our stakeholders, particularly in the United States over the last couple of months. So people have sat in the aircraft. People have seen the quantum of baggage that the aircraft actually takes. They've seen the cockpit and the segregation, which provides a very safe environment for the pilot. And so people are now getting really convinced that Valo as designed is the category killer in this space. It is not a minimum viable product that we believe some of our other competitors are developing. So our balance sheet, we think we've got the best product. We also think we've got the best supply chain collaboration globally, particularly with some of the major partners we have like Honeywell, Aciturri. But finally, we've got the best customer base. And at the end of the day, it's the customer base determines the success or failure of an aircraft. And if you look at our customers, they're globally diversified, Tier 1 airlines, many of them, and all of them are fully engaged in the constant development of the aircraft. And today, we're actually speaking from our battery facility here in the U.K., where I've just been brought through some of the unique proprietary battery systems that we've developed. We've basically collaborated on almost everything else with the aircraft because we think almost everything else is going to get commoditized. The battery, as Stuart said, is the special sauce. And our team is the best in the world in the development of our battery technology. So it's no surprise that we're convinced that we've got the best product but all of our stakeholders are telling us that now. Operator: Your next question comes from Austin Moeller with Canaccord Genuity. Austin Moeller: So just my first question here. Can you talk a little bit about the R&D and CapEx plans over the next 12 months that fits into the $195 million in cash you expect to burn? Like how many aircraft do you expect to build as part of that? Stuart Simpson: Austin, thanks for the question. Thanks for the continued support. The $190 million to $200 million is a rolling 12 months from the end of March. As I mentioned earlier, it covers everything we have laid out in FlightPath 2030 and today that we are going to achieve over the coming 12 months. So that is the public flight displays of the current prototype. It is the conversion of one of those into a hybrid. It is the expansion of the battery center where we are today, as Domhnal mentioned, it's the build of our aircraft manufacturing facility. And really importantly, it is the start of the build of the first Valo. So everything we said we'd be doing over this 12 months, that is funded within that $190 million to $200 million. Austin Moeller: Okay. And then is there an active program of record or the equivalent in the U.K. Ministry of Defense right now to procure a hybrid eVTOL aircraft? And are there other similar programs in the works with some of the allied NATO militaries? Stuart Simpson: So we've had multiple conversations across many different defense customers and defense partners in Europe and the U.S. There is no official program of record that we're attached to. However, we're in deep discussions with the U.K. government about this hybrid product. As David alluded to from his feedback from VERTICON, we are totally unique in this space in that we will be certifying a hybrid product in 2029 in an airframe that is sized and capable and perfectly usable by the military now. We do not have to go and redesign and defer this. So that is generating significant interest across the whole world for our product. We anticipate being able to close out something in that space over the coming months, the rest of this year because we definitively have the best product for the military. As Domhnal said, it's been widely recognized now we've showcased Valo, and that reads right across into the hybrid space as well. And David also touched importantly on autonomy. We are perfectly placed to jump quickly into autonomy because of our deep strategic partnership with Honeywell. So we are the first choice for military. Austin Moeller: Okay. And just my last question. Have you narrowed down any of the -- on the market or available hybrid powertrains to like 1 or 2 options yet? Stuart Simpson: We have. Actually, we've got a short list. I don't think we've announced who we are going with yet but we've had wide-ranging discussions. And interestingly, everyone wants to work with us because they've seen we have an airframe that is going to be highly, highly successful. So we have had inbounds for us for people that are absolutely desperate to be our partners on this because we are leading the way in the military and dual use space. Domhnal Slattery: Yes. And in that regard, Austin, we have European and U.S. alternatives from Tier 1 suppliers who are -- have gone from being, I would say, mildly interested in Vertical and our hybrid to being intensely focused because they can see the applicability. And to David's point, they also can see the absolute scale of the market opportunity, which I believe right now, we are currently underestimating. And we're going to have to take a good look at the scale of that defense opportunity globally, not just in Europe, but globally to ensure that our internal forecasts are really accurately reflecting the depth of that market opportunity, which is getting literally deeper by the month and quarter, given the scale of the budgets particularly in Europe that the European governments are allocating to defense. Operator: Your next question comes from Chris Pierce with Needham. Christopher Pierce: I was hoping to go a little bit deeper on the transition delays. Maybe delays harsh word. But either way, I'd just love to hear sort of if we think about a pie or 100%, however you want to bucket it, like what's within your control and what's been that you haven't been able to control from November until now. And in the U.S., we have like flight aware, we can sort of track and see flights that people are kind of flying, have there been weeks where you haven't been able to fly and that significantly pushed things out? Or I guess, kind of just let us know sort of what's -- kind of what's been going on in Cotswold? Stuart Simpson: Let me just -- I'll give you a little bit of color commentary, then I'll hand to David. You said were the weeks, we couldn't fly. I mean there were months, we couldn't -- it rained for 46 days in a row, as David said. We need a permit to fly every time we put the aircraft in the air, and we can't do it when it's raining. So there were 46 days in a row we could not fly just to orientate you. It isn't all in our control. Now David, if you want to give maybe a little bit more technical color. Domhnal Slattery: Well, certainly around the pie chart, David, I mean, how close are we? I mean, if you were to give a sense in a pie chart basis. David King: Yes. And so in terms of the number of tests that we have to do, it's less than 10% in a pie chart. It's in the tail end of the S-curve. So we're on that tail end of the S-curve. And as Stuart said, if you were then to create another pie chart that said, okay, what were the sources of not flying when you initially planned to fly, the biggest one was weather. And it was a really rough January and February. But on top of that, we also are doing envelope expansion testing. And as we do envelope expansion testing, each test point brings a database of data that gets compared with our predictions. So the wind conditions, we have a tight tolerance as well because we don't want to have that noise associated with the atmospheric disturbance. So in terms of the weather, the clouds, the wind conditions, that was the first one. And then the second one was as we conduct the test, and as we find that we have to make some adjustments to our predictive models to update our database, then we update the database and go through our full design organization procedures to get that new airworthiness document approved side-by-side with the CAA before we go to the next test. Domhnal Slattery: And maybe, Chris, just to bring that a little bit more to life because the environment that we're here in Europe is different to the United States. We are testing under a regulatory oversight. In the United States, it's an experimental -- the regulatory oversight effectively means that every time we fly, we have to receive a permit to fly, which means we sit with the CAA, we walk them through the learnings from the previous flight, any observations, any amendments, any changes. And that process is because it's the safest in the world, it is sequential. And unfortunately, it's slow. But slow is good because it means it's intentional and it ensures that we're flying in the safest manner possible. We all wish this was faster, but we're very comfortable about where we stand. And to David's pie chart picture there, we're into the last 10%. Christopher Pierce: Can you sort of help us with how slow is slow on those 2 sort of buckets that you just talked about, you fly, you compare the data, you have to tweak versus what you saw versus what you expected and then you need to take that to the CAA and then get approval to fly the next time. Are we talking days, weeks? Like what is the time frame between when you fly and when you're ready to fly the next time? And what's in your control and out of your control as far as that goes as well? Domhnal Slattery: Yes. It depends on the issue. We've had some issues that we get resolved in days. We've had a couple of issues over the last few months. They've taken several weeks actually. The good news in that scenario is we weren't able to fly anyway because of the weather. That's just the nature of the regulatory framework that we find ourselves in. It is the nature of 10 to the minus 9. But when we get through it, we will have the safest, commercially safest aircraft in the world. So the pain will be worth the gain. Stuart Simpson: Chris, just to give a final little comment on that. When we've taken learnings and made little tweaks, the joy of this is this aircraft we're flying now directly reads over to the Valo. So if you look at a top-down view of the Valo and the prototype, the rotors are the same size, the wing is of the same size and shape, the rears are almost exactly the same. So a lot of this stuff where we've had a few days delay or weeks delay, for example, this is stuff that we don't have to revisit because it goes directly into the Valo design. So we may have lost a little bit of time here, but we've actually derisked certification. This is one of the key things you've got to remember here. This derisks certification. Every single time we go back to CAA, we sit with them, with their experts, with our experts, we agree a way forward, and that is baked in knowledge learning and technical results and technical solutions that will be baked into the Valo. So it actually accelerates the whole program, which is why [ we are ] extremely confident. Christopher Pierce: Okay. I appreciate the details. And then just one other one. You guided to a 12-month cash burn of $200 million or $195 million. Is there any reason to think the next 12 months prior to that will be meaningfully different from that? As you ramp, like if I'm looking at Slide 17, you've got the 7 certification aircraft you're going to build. Like as we think about burn going forward before you have entry into service and revenue, how should we think about burn beyond the next 12 months, just... Stuart Simpson: Yes. We've actually put that out, I think FlightPath 2030. We've talked about the cash certification. It might be a little bit up on the $200 million, but it's in that ballpark. That's the way to think about it. Operator: Your next question comes from David Zazula with Barclays. David Zazula: First question is with respect to the selection of Evolito the EPU supplier. How has that been received by CAA and EASA? And I guess, do you perceive any risk with respect to certification with them relative to kind of the prior established Tier 1 supplier you had on the EPU side? Stuart Simpson: So actually, we didn't have an established Tier 1 supplier for certification. We're very proud to have been working with MAGicALL on that. But Evolito, we believe from a certification perspective, they're already up and running. They already have a DOA in place. They're working on a POA. They're highly, highly respected and it's proven, proven technology. So this is something from a certification perspective and support from regulatory bodies, we're very positive about. And David, if there's anything you want to add? David King: No. I mean it's a great question. And there are a couple of attributes of Evolito that are really a good fit for Valo. The first is, as Stuart said, is they have excellent certification processes in place, and they've really leaned forward on that. And they're not too far away, right? They're near Vista. And as we mentioned earlier, that Vista near Oxford is in the Oxford Cambridge Arc, which is one of the prime use cases for eVTOL in the United Kingdom. And so being here in the United Kingdom, it gives us advantage to work together on the U.K. CAA certification, and we have very complementary certification processes in place. David Zazula: Super helpful. I mean maybe can you frame how do you think they'll fit into the broader supplier strategy? How you think the supplier coordination is going to go? And I guess, broadly, how the suppliers will support your ability to ramp up production over the next couple of years? Stuart Simpson: David, thanks. We have been working with most of our supply chain for many, many years. They're deeply embedded in our process. Our whole Flightpath 2030 and certification date of 2028 has been done hand-in-hand with our supply chain. So they are there, ready, willing, committed. And as David alluded to, our CDR, a critical design review, where we'll have done the full design envelope of every single component. We're around 75% to 80% through that. Every single complex, long-term, difficult high-value component we've done. So EPUs, batteries, avionics, flight control systems, the airframe is locked in already, and they are there, ready and willing to make a certification aircraft in 2028. Operator: And there are no further questions at this time. I'll now turn the call back over to CEO, Stuart Simpson, for closing remarks. Stuart Simpson: I'd just like to thank everyone for listening into this call and all of the analysts for the questions. Really, really appreciate it. We are on the cusp of great things at Vertical. David and Domhnal said, we genuinely believe we have the industry-defining aircraft. The feedback we've had from everyone in this space has been outstanding, way above and beyond what we were expecting. We are going to bring the Valo to life. We will start building it at the end of this year, we'll be flying early next year. It's going to be an amazing 12 months. So thank you very much. Operator: This concludes today's conference. Thank you for participating. You may now disconnect.
Operator: Greetings. Welcome to Xiaomi's 2025 Annual Results Announcement Investor Conference Call and Audio Webcast. Today's conference will be recorded. If you have any questions or objections you may disconnect at this time. [Operator Instructions] Now we will have Mr. Xu Ran, General Manager of Group Investor Relations and Capital Markets Department to start. Ran Xu: Welcome, everyone. Welcome to the investor conference call and audio webcast for the company's 2025 annual results. Before we start the call, we would like to remind you that this call may include forward-looking statements, which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions comes from a variety of sources outside of Xiaomi. This presentation also contains some unaudited non-IFRS financial measures, which should be considered in addition to, but not as a substitute for the company's financials prepared in accordance with IFRS. We have William Lu, Partner and President of Xiaomi Corporation; and Mr. Alain Lam, Vice President and CFO of the Corporation to talk to us. Mr. Lu will share recent strategic and business update. Thereafter, Mr. Lam will review the company's financial performance of 2025. And then after that, we will have the Q&A. Mr. Lu, please. Weibing Lu: Good evening. Thank you very much for coming to the 2025 full year call. Now this evening, I'll be talking about 3 points. First of all, review our main achievements in 2025. Second, share of breakthroughs in hard-core tech, in particular, in AI and embodied intelligence. And thirdly, we'll look ahead for the strategic direction focus in 2026. First of all, in 2025, some of our outstanding achievements. Well, in the year, our Xiaomi Group maintained high growth with both annual revenue and net profit reaching all-time highs. Total group revenue reached RMB 457.3 billion, surpassing the RMB 400 billion mark for the first time, up 25% year-on-year. Adjusted net profit reached RMB 39.2 billion, up 44% year-on-year. By segment, first of all, Smartphones. According to Omdia, in 2025, our global smartphone shipments ranked top 3. Market share was 13.3%, remaining global top 3 for 22 consecutive quarters. In Latin America and Southeast Asia, shipment ranking rose to second. In Europe and Africa, third. According to third-party data in Mainland China, our smartphone sales ranking rose to second. On premium models. In 2025, premium models in Mainland China accounted for 27.1% of total smartphone sales, up 3.8 percentage points. In RMB 6,000 to RMB 10,000 price bracket, our market share rose by 2.3 percentage year-on-year. We solidified our high-end base domestically and are making continuous breakthroughs in the RMB 6,000 to RMB 8,000 ultra-high-end market. By end of February 2026, we launched our first Leitzphone for global markets, priced at EUR 1,999, a new milestone in our overseas premium strategy. We'll continue achieving top-tier pricing in mature international markets and elevate our premium overseas sales to new heights. For IoT business in 2025, revenue surpassed RMB 120 billion for the first time, reaching RMB 123.2 billion and 18.3% year-on-year growth, hitting all-time high both domestically and internationally. For the home appliances revenue, it reached 23% plus growth with record shipments. Wearables ranked first globally, TWS earphones ranked second. Tablet shipments grew 25.2% year-on-year, ranked fifth. Our AI glasses released in June '25 ranked third globally and first in China. We continue to drive full category premiumization at home and abroad with overseas high-end products, achieving stellar performance. On premium strategy, in '25, our tech home appliances entered the European market already covering Spain, France, Germany, Italy and more. For autos, Xiaomi Auto delivered 410,000 units in 2025, far exceeding the 300,000 units target set at the year's start. February 13, '26, cumulative deliveries surpassed 600,000, and we are fully committed to delivering 550,000 units. In March 19, we officially launched a new generation SU7. It features major upgrades inside and out, including across the electric powertrain chassis, electronics architecture, et cetera. Within 34 minutes of launch, locked orders for SU7 exceeded 15,000, surpassing 30,000 orders after 3 days. For this year's MWC, we also showcased our Vision GT concept car, not just a concept car, this is Xiaomi Auto's latest exploration of design innovation built on hardcore technology. We are the first Chinese brand invited to participate, and it represents recognition by the world's top simulation driving platforms. For China's auto industry, it shows that in terms of design and innovation, Chinese automakers can already compete on par with the world's best. For hardcore tech, in '25, our R&D investment exceeded RMB 33 billion. For '26 we plan to invest over RMB 40 billion with more than RMB 16 billion for AI, embodied intelligence and other innovation fields. These investments build our solid product capability defenses. And for AI in 2025, we achieved breakthrough progress. For AI, it is an era of truly useful AI, undergoing historical leap from usable to truly useful, a paradigm shift from single tasks to complex tasks processing, from passive to active planning, from tool attributes to ecosystem attributes, and for us with rich terminal products and use cases across smartphones, cars, home appliances, IoT, real data value of AI far surpass the single category companies. Two, our foundation large models enter the leading global open-source tier. In March of the year, we released 3 models, Xiaomi MiMo-V2-Pro, MiMo-V2-Omni and MiMo-V2-TTS, completing our technical foundation for the Agent Era. MiMo-V2-Pro surpasses 1 trillion parameters, supporting 1 million token context windows and ranking 8th globally in Artificial Analysis Large Model Intelligence Index, fifth by global brand. During closed beta and public launch, these models rank first in weekly calls and held first place for many days on OpenRouter, single days as much as double in second place. And we will keep upgrading our foundation models as we move towards general intelligence. Three, we are poised to lead AI in the physical world, deep integration of AI in the physical world as the next frontier. We control over 1 billion hardware access points for its ecosystem. In March '26, our phone AI Agent, Xiaomi miclaw entered limited testing. We're the first OEM to attempt deploying [ launch ] Lobster on phone terminals, exploring the delivery of true AI phone and ecosystem to users. For auto, the new SU7 is equipped with our XLA Cognitive Large Model, achieving mall parking, navigation, complex scene understanding and voice control, improving both driving and experience. For SU7 Ultra, it's equipped with super shell AI, a smart cockpit and advanced AI. For the home in November '25, we launched our Miloco smart home solution, giving smart homes eyes and brains and hands and feet for the first time, a pioneering real world application of Xiaomi MiMo, laying a new vision for next-generation smart homes. Fourthly, for our AI is now Xiaomi core innovation engine in '25 with our tech-forward, about 2/3 of the winning projects used AI, reimagining work across fundamental materials, chipsets and OS, intelligent driving, tech home appliances and more, backed by China's strong AI industry. The coming decade belongs to China. And also Xiaomi is well positioned in person, car, home ecosystem. We'll invest RMB 60 billion in AI over the next 3 years. And in this era, we are confident that we'll place a new trade for Chinese AI. For embodied robotics, it is the ultimate integration platform for AI chips, OS and manufacturing capabilities, a high barrier field. In 2026, we launched a haptic-driven precision grasping, fine-tuning model, core tech for robotic dexterous hands. Shortly after, we open-source a Xiaomi Robotics VLA large model, Xiaomi-Robotics-0, achieving several new SOTA results. In March, Xiaomi embodied robot began internship in our car factory, achieving 90.2% deal size site simultaneous installation success for self-tapping nut workstations, meeting production line cycle times as quick as 76 seconds with 3 hours of auto operation. These are just starts. Over the next 5 years, we believe large numbers of embodied robots will work in Xiaomi's factories. And robots will break brown boundary between virtual and physical worlds. But there are challenges such as cost increase, et cetera. In the short term, there may be some pressure on our business. But on the other side, we will be steadfast in our strategy so that we will continue to have breakthroughs in AI, chips, OS and embodied intelligence. We are committed to scaling our global business model and advancing Chinese tech worldwide. This person, vehicle, home ecosystem is not just a product combination, but the platform for understanding users' full scenario data. We'll firmly seize the opportunities of AI era, and we are filled with endless possibilities and imagination. Alain Lam: Well, thank you, President Lu. As shared by Mr. Lu, in 2025, we have achieved historical leap. Our total revenue reached a record high of RMB 457.3 billion, setting a company best. This year, we achieved a year-on-year increase of 25%. Revenue in the fourth quarter is a new single quarter record. Overall, gross profit margin was 22.3%, up 1.3% year-on-year, historical high also. The second half of 2025 was more challenging for the first. For the full year, our smartphone times AIoT segment revenue was RMB 351.2 billion, up 5.4% year-on-year, which is also a new annual high. The smartphone times AIoT segment gross profit margin also reached a record 21.7%, up 0.5% year-on-year. For smartphones, for the year, revenue was -- sorry, RMB 186.4 billion, accounting for 40.8% of total revenue. In '25, our global shipments reached 165 million units. Our high-end strategy had significant results of continued product strength enhancement. Third-party data shows that in 2025, our high-end smartphone sales in the Mainland of China accounted for 27.1% of our total smartphone sales, up 3.8% year-on-year. In that, RMB 4,000 to RMB 6,000 price segment, our market share reached 17.3%, up 0.5% year-on-year. For RMB 6,000 to RMB 10,000 segment, our market share was 4.5%, nearly doubling year-on-year. According to third party in 2025, our global smartphone shipment volume ranked top 3 with market share 13.3%, maintaining a top 3 position globally for 5 consecutive years. In 58 countries and regions, our smartphone shipments ranked top 3. And in 70 countries and regions, we ranked top 5. Despite rising memory prices in 2025, our smartphone gross margin remained relatively healthy at 10.9% for the year. For IoT, for this year, our revenue and gross margin both performed remarkably. 2025 revenue from IoT grew rapidly by 18.3% year-on-year to RMB 123.2 billion, a new record. And both for domestic and international sales, it was at all-time highs, thanks to product structure optimization and improved product strength. For gross profit margin of IoT, it was a record high of 23.1%, up 2.8% year-on-year. By category, large smart home appliances performed exceptionally well with revenue up 23.1% year-on-year, a record high. Our wearable devices maintained rapid growth and an industry-leading position. Our wearable band ranked first in global shipments and TWS earphones ranked second. Tablet products continue to grow fast, ranking fifth globally with shipments up 25.2% year-on-year. Internet services. We continue to expand our user base. In December '25, our global MAU reached 750 million, up 7.4% year-on-year. Of these, Mainland China MAU reached 190 million, up 10.1% year-on-year. In 2025, our Internet service revenue hit a record RMB 37.4 billion, up 9.7% year-on-year. And of this, just in the fourth quarter 2025 alone, Internet service revenue reached RMB 9.9 billion. Throughout 2025, our Internet gross margin remained relatively stable at 76.5%. Advertising continued to drive Internet business growth with annual revenue of RMB 28.5 billion, a record high. Overseas Internet service revenue grew by 15.2% to a record RMB 12.6 billion, accounting for 33.8% of total Internet service revenue. Next, on EVs. Our EV and AI and innovation business segment, annual revenue for the segment reached RMB 106.1 billion, surpassing RMB 100 billion in less than 2 years, up over 200% year-on-year, accounting for 23.2% of the group's total revenue. Of this, Smart EV sales revenue was RMB 103.3 billion, with other related revenue at RMB 2.8 billion. For the year, gross profit margin for Smart EV and AI, innovation business segment was 24.3%, up 5.8% year-on-year. In 2025, the segment achieved positive annual operating profit for the first time, recording an operating profit of RMB 0.9 billion. We delivered a total of 411,082 new vehicles in 2025. In the fourth quarter alone, 145,115 new vehicles were delivered, a single quarter record high. The average post-tax unit price for the year was RMB 251,171, up 7% year-on-year. Next, over the past 5 years, our cumulative R&D expenditure was RMB 105.5 billion, up 37.8%. '25 alone, R&D expenditure was RMB 33.1 billion, up year-on-year, and we estimate starting from 2026, our cumulative R&D expenditure over the next 5 years will exceed $200 billion. For net profit in '25, the group's adjusted net profit was RMB 39.2 billion, a record high and up 43.8% year-on-year. For CapEx for '25, our CapEx reached RMB 18.2 billion, up 73% year-on-year. And of this, Smart EV and AI innovation accounted for 66% and over. We continue to enhance our shareholder value and we actively repurchased shares on the open market. In '25, our share repurchase was approximately HKD 6.3 billion. Since early '26, our share repurchase totaled about HKD 4.7 billion. In January '26, we announced an automatic share repurchase plan for a cap, with a cap of HKD 2.5 billion, demonstrating our confidence in our company's long-term future. We actively practice sustainable development. In low carbon initiatives in 2025, our group purchased more than 40 million-kilowatt hours of green electricity, over 10x of last year. In '25, our [ PV ] electricity usage in our auto plant exceeded 13 million-kilowatt hours, reducing carbon emissions by nearly 10,000 tonnes annually. On ESG ratings in '25 for CDP Climate Change and Water Security Survey, Xiaomi received a management level B score. Also, in March '26, we achieved our best-ever score of 81 in EcoVadis gold medal, marking another recognition of our ESG efforts. We will continue to follow a robust and enterprising operating strategy and look forward to an even greater achievement for 2026. Thank you so much. This ends my report for this evening. Next, we can have the Q&A session. Operator: [Operator Instructions] Morgan Stanley. Andy Meng: Greetings both. First of all, congratulations for 2025, revenue and profits have reached new record highs. I have two questions, one on memory. We see that memory prices have been rising significantly. Investors, what's most concerned about this for the segment of smartphones. And we noticed that there are already some smartphone selling price hikes in order to offset this memory prices hike. But your smartphone sets are still the same in terms of pricing. So perhaps in supply chain management and in inventory, you are better than your competitors so that in this challenging situation, you exceed your competitors in performance. Perhaps Mr. Lu can explain to us for your new thoughts concerning smartphones and what are your responses to this year's challenges? Weibing Lu: Right. For memory, yes, for each quarter, you have always been caring and concerning about this. And in different occasions, I have also talked about my views on this. In the past, I have said that this is a period that we are going through, and we have to look at 2027. And there may be high price hikes and we have done our work in this regard. But on the other hand, my own feeling is that the cycle of hikes may be longer than I had expected. First of all, there is the AI-led demand. And also for memory, the cost hikes magnitude, I think, is going to be higher and much higher than I had expected. My expectation in the industry was already forward, but I think it's going to be even higher in terms of price hikes for this. So it is longer cycles and the price hikes is going to be higher than I had expected. So for all the consumer items, it is going to impact greatly, not only for smartphones, which we are more concerned about. But for some categories, for some smaller capacity, categories with smaller memories, units, there is a situation where there is a cut in supply even. So this is an actual situation that's facing us in reality. The impact of that, we have a calculation which is very simple, and that is we look at the memory and it's part of the product. The more it is as a part of this product category, the more it will be impacted but less -- of course, it will be less impacted. And in our categories, smartphones, tablets, notebooks, they are more in terms of proportion. But on the other hand, there are some, for example, high-end smartphones. Relatively speaking, it is less for memory part. So for a company, if the products will have more memory as a part of their product then, of course, the impact will be higher, less will be less impact. So this is a very simplistic way of calculation I'm looking at it. In the past 2 weeks, looking at the memory price hikes, we already see some competitors raising their mid-priced smartphone prices. And I fully understand that. I think for annual smartphone manufacturer, if they do not unload to the consumer, it is very difficult to sustain this kind of price hikes. But I think it is inevitable for this. And for Xiaomi, our pressure is very, very large indeed. But as I say, we will try our very best to digest this to protect the consumer. And when we can do this no more, we will have to hike our smartphones prices, and we hope that our consumers and our customers will understand this. Yes, we are slower in price hikes, but it doesn't mean that we are immune from it. There are some competitive advantages for Xiaomi, which I can tell you. So for example, in home appliances, the category, for this category, it will be less impact. For smart cars, EVs, it would be higher because the memory part of that is higher. But on the other hand, compared to the proportion in smartphones, it will be lower. So with our variety of product segments, this is how I see it. And through this, I hope we will be able to better resolve this problem. For smartphones, tablets and notebooks, we are a company -- we are globally leading and also in EVs as well in the past few years. And for the memory suppliers around the world, we have built a very good relationship, mutual trust, and we have long-term supply contracts. So at this point, I do not feel that we have any risk of nonsupply or stopping of supply. So this is our competitive advantage compared to our competitors. The third point is that in my previous expectation, I was more pessimistic about memory price hikes. And therefore, I have been making more aggressive preparations. So in that case, our inventory sufficiency was higher. But overall speaking, for our terminal products cost, it is highly impactful. So this short-term pressure is definitely in existence, it is there. Andy Meng: Mr. Lu, this is very clear. My second question is about our vehicles. For the new generation of Xiaomi vehicles, there had been a successful announcement. And in the investor interaction, I noticed that some investors feel that we -- that Xiaomi doesn't -- no longer talk about or announce the data, but only for the unit data, well, and this is more negative. But for Xiaomi, what is the sale? I think it's going to be stable and it will be positive, and this is how I see it. Can you talk about these 2 investors' point of view? Unknown Executive: Andy, let me just answer that question. Well, for the announcement of sales from the users side, we see some phenomena. The first phenomenon is that for the first 3 days of sales, we already have achieved significant sales, 34 minutes, 150 locked-in sales. And after 3 days, it was over 30,000 units sales, and we have lived up to our commitment. And that is for the delivery starting from the fourth day of launch, we have already started delivery because we have already made preparations for the manufacturing of cars. And also, with some of the problems of the previous batch, they had to wait for a long time and before we could deliver to our users, those who have locked in their purchases. So we have absorbed our experience, and we had a new iteration. Well, as you have mentioned, why do we only disclose our locked-in contracts. We think that this is more fair. So it is not about preordering or big ordering. It is locked orders. Locked orders are solid, and that is the buyers are going to take delivery of these vehicles. And this governs our manufacturing cycle as well. So we think that's locked contracts or purchase is a fairer way of looking at it, and that is why we made the change. And in the industry, I'm sure people have their different practices, but this is what we maintain is the right way. So this is the first point. And also using this particular opportunity for our -- concerning the locked in contracts, let me share some information. So for the first point, it is that a lot of investors have asked about the locked orders. Buyers, are they from our previous buyers or new buyers or most of them we know are new buyers. For the locked orders, they come from new buyers. So it is not the original owners who are changing to -- changing from -- [ 2 Euro ] cars. For iPhone, about 50%, it is first generation. And for 60% of the new buyers, they are iPhone users. So for our locked contracts, the progress is faster than our first-generation users. So compared to the previous numbers, these locked orders are bigger. And also, you are very complementary of our allocation. About 60% of them are using the paid choice, the paid options. So compared to the previous generation, we think that the penetration is better. For example, female buyers, iPhone users penetration and also choosing different options of colors, for example, all these have been performing better in penetration than the last generation, the previous generation. Thank you for your question. Operator: Timothy Zhao from Goldman next. Timothy Zhao: I have 2 questions concerning AI. First of all, concerning in the past 2 years, there are some models and including the foundation models. So for AI capabilities in the ecosystem, what is our capability? And also for miclaw and also for the IoT, how is miclaw positioning? And how do we see it done with IoT? And how is miclaw going to be significant? And also, I would like to know how we consider AI in its users and also developers and internal to Xiaomi and its commercialization? In LLM, what are some KPI considerations for your team? You once said that in the next 3 years, there's going to be a RMB 60 billion expenditure? And how is this on OpEx and CapEx, the allocation, please? Unknown Executive: For 2023, we have used a lot of energy to consider our AI strategy going forward. So we have faced it. First of all, the infrastructure for AI, algorithm, et cetera. And out of the infrastructure, we had an exponential growth in terms of its application. And last year, we had already said that '26 was an explosive use of AI era. So from virtual, AI has moved into the physical world. And this is true to my earlier prediction. And with this prediction coming true, we will be developing our AI/LLM. We started investing in '24 and in 2025 in [ MiMo ] LLM or large language models, we have made a lot of progress. And we have been very clear last year in saying that this year, '26 will be the year of explosive use of AI. And last year, we were more considering about agents, AI agents. So in individual terminal, how can AI have a bigger usage so that people are able to do things that they were not able to use before. With OpenClaw, it's allowed us to very quickly roll out miclaw in testing. So at present, from the responses of our testing, it is very, very positive. And going forward, there is a huge market, and that is AI going to the physical world. So it will be in driving, in robots, in humanoids, et cetera. So in this area, Xiaomi has already made the deployment. And at the end, I think it will have to serve our entire ecosystem of Xiaomi. So this is a direction. This is a large direction, and we will continue to strategically follow that. And also, you mentioned miclaw. And for miclaw, this AI agent of Xiaomi, this is our own developed and it is an agent and it is going to test our modeling capability and also our limitation, and also, it's going to test how we are able to deeply integrate and also our data capability. And at Xiaomi, we will do our own integration with our own data from our users. So we will also be using cloud-based data. And also there will have to be certain integration into the system and also safety, we will be good in protecting safety. So for Xiaomi miclaw, it is going to be the prototype for the future AI agent. Now this is still early on. We do not have some specific commercialization model. And I don't have any KPI for the team yet because only when it is mature will the team has a certain KPIs. So as for the RMB 60 billion that you talked about, yes, my colleague will answer that question. Unknown Executive: That's right. For the [ RMB 16 billion ] and 3 years -- RMB 60 billion, it is -- it includes R&D and also CapEx. But of course, in R&D, it also includes the distribution from previous year's R&D. So it is our present period R&D and also our previous R&D and also CapEx. So there will be 3 parts. If you look at the 2026 [ RMB 16 billion ], most of it is R&D expenses, the present period. So it's a 70% present period R&D. So if it is CapEx plus the previous years, it would be the rest. So the next 3 years, every year, our CapEx will have some previous CapEx, which had been detained into this year. So it may be lower than the 70%. So it is for this period as well as a portion from the previous year's CapEx or amortization from previous year's CapEx. Operator: China Capital, Wen Hanjing next. Hanjing Wen: I have 2 questions. First question concerning our IoT business. We see 2025 IoT performance have been very, very good from revenue and also in progress and advancement. So for this year, there are 2 concern points. They are positive. And for home appliances, new highs reached. But some investors are concerned that with the domestic situation, what do you say the economy ramping down a bit? How do you see this? And also, what about IoT going overseas? What is the planning? And secondly, for vehicles in 2025, overall, for EVs, it is already profitable. And also for future planning for the entire year, how do you see profits for the entire year for vehicles? Weibing Lu: I'll be talking about IoT, and then Alain will answer the other question. For IoT for this business, because we have a number of different categories. I'll be talking about China market and overseas markets. For China market, I think there is an opportunity, and that is premiumization of IoT. For IoT business for us, even though it is very large scale, but our ASP is low. Last year, we had major progress made, but it is still far from our goal. Our watches, our, for example, our hairdryer, et cetera, I think still the average price is relatively low. So in R&D, with our investment in that, I think this year, we are going high end. I think there will be a lot, a lot of positive progress. So I think this is a huge opportunity. So for major home appliances, for our washing machines, our fridge, and it is 4 points. And for aircons, it is 10 points. So for ESG, I think there is still room for pricing. And for our IoT business, overall, last year, it is already at a very high level of AIoT as we will continue to do so. As for overseas business, I think there is a huge space for development because our market has always been the -- in China. If going to the North American market, it's going to be 3x of our original market size. And it's -- so that is to see it's going to be 6x if we reach our potential. It's going to be 6x or at least a few times our domestic China market. So there is a lot of empty room for us to fill in terms of overseas markets. We will send people. We will send our products. And with our IoT development, there had been a lot of overseas and information and testing, and there is huge room for overseas growth and development. So for our high ASP products, this is a high area of growth potential. So this is our overseas plan. Last year, it was 4.5 shops and it's going to grow to 10 or 10,000 shops. And I was in London in Xiaomi Home, I was able to observe that most of the products were high-end product selling. So you think that actually, our categories are very full in range, and these overseas markets, for example, in the U.K., they are selling at high end. So I think there is huge room for development in the overseas market. For the vehicle question, last year in 2025, we have delivered over 410,000 units, far exceeding the 300,000 unit target we set at the year start. So at the year start for this will be 550,000 units for this year's delivery target for 2026. So '26 compared to '25, there is growth. But for the overall situation in '26, there is pressure. So for our expectations, et cetera, we are still very confident that we'll be able to reach our target. As for our target profit. You would know for this category, it is AI and new business segment. So that would include our AI investment and also new development areas. So you cannot just look at the segment as just an auto segment. It includes other new businesses in this segment. But at present, the new businesses are still in the investment stage. As I've mentioned, in AI, for example, this year, we will continue to increase our investment in AI, including in robots. Robotics, we'll increase our investment there as well. So you have to look at 2 areas. One, auto in this segment. And secondly, AI plus new business investment. So for this particular segment, last year, it performed very well. For this year, as auto growth and also in other areas, the kind of fruit that we're going to pick from them, the results, this is going to be an encouraging segment. Operator: Kyna Wong, Citibank. Hiu King Wong: Can you hear me fine? Unknown Executive: Yes. We can. Hiu King Wong: I have 2 questions. First of all, I would like to know for the Middle Eastern situation recently, I don't know whether for the overseas business, including IoT, handsets, has it impacted you? Are there certain logistics and also cost of raw materials had presented issues to you? And also another question concerning your gross profit margin. For this year, for handsets or smartphones, is there a principle, let's say, under what kind of profit level will you be keeping it or making certain choices for adjusting the price. So for smartphone handsets to protect your profit margin, gross profit margin? And also for vehicles, there may be some pressure, as you have mentioned before. And how do you think this will be making your performance better than your competitors? Are there certain safeguards for profits and also AI, IoT because premiumization is a strategy of yours, you did say that for this kind of premiumization. What is your plan for AIoT, please? Unknown Executive: First of all, for Middle Eastern conflict, it's nothing that we want to see, certainly. I hope that there will be a solution for it because it's going to impact industries and economy around the world, it's going to impact big way. As for Xiaomi business, the Middle Eastern overall situation, for revenue from that part, it is not so much -- it is only in the single digits as a contribution to our profit. So in terms of the market from the Middle East, it's a small proportion of our overall at Xiaomi. So it is controllable from that regard. But at the same time, we also see that the oil situation from the Middle East, we already see some pellets, plastic pellets, and the raw materials is influenced or impacted. But overall speaking, it is still controllable. So that's for your first question. Second question, concerning cars, IoT and also smartphone handsets, the gross margin and what is our pricing strategy, well, for this, I would say, first of all, for memory, for memory components, we are to quantify that. I would say in the past, for a quarter, for example, we expect it to be at a certain high price, but actually, it's going to be at an even higher price, rising even higher. So we are very -- it's very hard for us to quantify that even for a small increase, it may because it is such a big part of the product, it will be impacting the cost of the product a lot. So it is very difficult to foretell early on, like what we had been able to do before. But for smartphones for this category, I think given our size and also our market share, it is very important for us. So if you say whether there's a principle, it would be that we hope. We try our best to make some balances. So my consideration is that we want to maintain our market position. That is very important to us because for smartphones, there are very few listed companies in this category. So I'm not being able to get a lot of accurate data from the industry competitors. But from my years of experience, I know the following. For example, in vehicles, the absolute number as a part of the overall car price, it is less in terms of its impact, but not as big as a smartphone part. For IoT, it is even -- it is also even lower in terms of memory, internal memory price impact. So different categories will have different impact. What is big impact would be smartphone, notebook and also tablets, less so for smart cars, less so for vehicles that is, and even less so for IoT. Operator: Next question, Citic, Xinchi. Xinchi Yin: I have 2 questions. First of all, on AI business. Miclaw has been introduced. And I was fortunate to have joined the launch. That was excellent. Can you give us more guidance? And that is at what point of maturity would you in big model or miclaw to commercialize them? And how would that be like in revenue? That's the first question. As for the second question for this year for chip, for example, do you think that you can have some progress to update us? Unknown Executive: For miclaw, I have already talked a lot about it, and I'm sure as a user, you will have felt this product, and you were there at the launch, and it's given us a lot of nice surprises, but it's a new product. And we still have a lot of -- there's a lot of room for improvement. And I, myself, also have gotten a lot of responses, so we have to improve on it. But I think the iterations will be very fast, and it will be a new version in a few days. So it's going to be -- it's going to have high speed iterations. For Xiaomi overall speaking, for AI, it's still going to be contributed to our users. For the commercialization of AI, I would say, at this point, it is still too early. Even though our large model, efficiency is high, our token commercialization, for instance. But from absolute numbers, it may be a little bit high. So at this point today, I would say commercialization is too early to talk about for us. And also, we already see our XLA model, XLA model. This is the XLA model, which is a cognitive large model. And SU7 is equipped with it from -- at present internally from our testing, it is very, very good in performance. So for these 2 models of cars, I am a user. And I personally would use -- if I use them, and if I have any questions in terms of use, I will put these cases to the team. And I personally experience these auto driving functions. It will be going forward step by step. And also our auto driving, whether the models or chips, we already have some deployments. So integration terminal to terminal, and when we have this ready, it's going to give a lot of new experience to our users. I don't know whether you've been driving our cars. Yes, watch out for its progress as we integrate more and more of our models into them for automotive. Operator: Because of time, this will be the last question from Zoe Xu of UBS. Zoe Xu: A lot of questions have already been asked by others. I have 2 questions to ask concerning new business investment and also IoT. For new business, with the models iterations faster, and you said that there will be more investment into AI. So for expenditure on new business, is chips side will be adjusted? Or do we see that there will be new chips introduced? Second question on IoT. Just now it's been mentioned for tablet and notebooks, there will be some cost impact. So will there be something like smartphones pricing strategy and that is to emphasize the experience for users, please? Unknown Executive: Well, for this year, we have increased a lot of R&D expenses. But for chip, it is a long-term strategic capability of ours. I have already said that this is a platform capability chip because it's going to provide capability for a lot of profit -- product types and product categories. So even though in AI, we have increased our investment, but we have not slackened our investment in chips. Actually, some of the chips, many of the chips. They are part of our big AI strategy. So we will definitely be steadfast with it. As for PC and tablets, we will follow more or less the same strategy as for smartphones. But please also notice that for the notebook that we have just launched, the Xiaomi NoteBook, after 4 years of development, it is selling very well. And it is the demand is even higher than we had expected. When we launched this NoteBook, we already knew that the memory part will be increasing in price. But on the other hand, the response has been so encouraging because of the product strength is good, even though it is more expensive, the users will be able to adopt it and they'll accept it. So I think product innovation, technological capability, these are important, even though memory is hiking in prices. But still, we will have ways to make our products attractive. In 2022, through our efforts, I think our company and our management team will still be able to deliver good performance for everyone. Operator: Thank you. We end the meeting here. Thank you very much for your participation. Thank you for your support for the company, Xiaomi. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good day, and thank you for standing by. Welcome to Tongcheng Travel 2025 Fourth Quarter and Annual Results Announcement Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Ms. Kylie Yeung, Investor Relations Director of the company. Please go ahead, ma'am. Kylie Yeung: Thank you. Good morning, and good evening, everyone. Welcome to Tongcheng Travel's 2025 Fourth Quarter and Annual Results Conference Call. I'm Kylie Yeung, Investor Relations Director of the company. Joining us today on the conference call are our Executive Director and CEO, Mr. Hope Ma; our CFO, Mr. Julian Fan; our Chief Capital Officer and President of Wander Hotels and Resorts, Ms. Joyce Li. For today's call, our management team will provide a review of the company's performance in the fourth quarter and full year 2025. Hope will brief us on the company's strategies. Joyce will discuss our business and operational highlights, and then Julian will address the details of financial performance accordingly. We'll take your questions during the Q&A section that follows. As always, our presentation contains forward-looking statements. Such statements are based on management's current expectations and current market operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, which may cause the company's actual results, performance or achievements to differ from those in the forward-looking statements. This presentation also contains some unaudited non-IFRS financial measures. They should be considered in addition to, but not as a substitute for measures of the company's financial performance prepared in accordance with IFRS. For a detailed discussion of non-IFRS measures, please refer to our disclosure documents in the IR section of our website. Now let me introduce our CEO, Hope. Hope will be presenting in Mandarin, and our colleague will provide the English translation afterwards. Hope, please go ahead. Heping Ma: [Interpreted] In 2025, China's travel industry and the company entered a new phase of high-quality development. Over the past year, we witnessed resilient travel demand with increasingly diversified trends as immersive and experiential consumption continues to gain popularity. Amid this backdrop, we deeply dive into user needs and comprehensively optimize our travel products and user experiences. As a result, both our user base and ARPU demonstrated robust growth in 2025 with APU reaching a record high. The robust business growth reflected the ongoing enhancement of our service quality and the expanding influence of our brand. The year 2025 was a year of challenges and opportunities for us. In response to consumers' diversified and personalized needs, we continuously enriched our product offerings, facing growing expectations for premium services. We consistently improved our service quality. Amidst AI-driven technological revolution, we proactively embraced new frontier technologies with an open attitude. All these showcased our strong organizational agility and exceptional execution capabilities, further reaffirming our commitment to our user-centric mission of make travel easier and more joyful. The Chinese government sees travel as a vital pillar of national economic development. The latest 15th 5-year plan has explicitly stated the commitment to expanding the supplies of high-quality travel products and to enhancing travel service standards with the goal of establishing China as a premier travel destination from the pilot implementation of autumn and winter vacations in certain regions to the longest spring festival holiday on record. These expanding holiday arrangements underscore significant governmental support for the travel industry. In terms of demand, travel has become an essential part of people's pursuit of a better life with seasonal themes such as spring flower viewing, summer retreats, all foliage tours and winter snow activities continuously gaining popularity. In the coming year, we will remain focused on domestic market and deep dive into user needs, aiming to further solidify our leading position in the mass market. Simultaneously, we will make intensified efforts to capture growth opportunities in the outbound travel market to propel our global expansion strategy. On the operational front, we will continue to implement technological innovation and product upgrades centered on user experience while enriching membership privileges and deepening user engagement. In 2021, we tapped into the hotel management business. After several years of rapid expansion, it has now gained meaningful scale. The integration of Wanda Hotels and Resorts in 2025 marked a pivotal milestone in the development of our hotel management business. This strategic move strengthened our brand portfolio and ecosystem while substantially elevating our competitiveness and market influence. By consistently executing our strategy and leveraging our strong Internet DNA, we are well positioned to accelerate the segment expansion in 2026, laying a robust foundation for our long-term sustainable growth. Amidst the rapid advancement of AI technology, we are devoted to expanding the application of AI in our business process, further optimizing operational efficiency and enhancing user experience. Building on our user-centric value proposition, market acumen and superior execution capabilities, we are confident that we will continue broadening our competitive moat in the travel industry. Moving forward, we will continue to export our technologies and expertise to empower our partners and support the broader industry ecosystem while strengthening our commitment to corporate social responsibility to foster sustainable industry growth and create greater value for all stakeholders. Next, I will hand over the call to Joyce. She will share with you our business and operational highlights of the fourth quarter and the full year of 2025. Joyce, please go ahead. Joyce Li: Thank you, Hope. 2025 was a pivotal year of growth and achievement for our company. Beyond the steady expansion of our domestic business, our outbound travel and hotel management businesses made remarkable progress, contributing meaningfully to the overall growth momentum of the company. During the past year, we acutely grasped users' evolving preferences and precisely captured emerging demand. This enabled us to once again deliver solid growth across all business segments, highlighting our excellence in strategic execution, operational efficiency and organizational agility. Throughout the year, our accommodation business sustained robust growth momentum and achieved a record high in room nights sold. In early 2025, we identified a notable shift in users' preference towards high-quality hotels. In response to the changes, we strategically reallocated operational resources to meet this evolving demand, resulting in an approximately 5 percentage point year-over-year increase in the proportion of high-quality hotels sold on our platform. In the meantime, we prioritized enhancing user experience. We not only offer the best value for money products and services, but also provided faster and more responsive support to user requests to further strengthen our presence in the mass market. As for our international business, we continue to enhance our product capabilities by deepening partnerships with third-party providers as well as expanding our product and service offering. In addition, we leveraged our domestic user base to drive cross-sell initiatives and execute the precision marketing campaigns targeting high potential users. All these efforts collectively led to nearly 30% growth in our international room nights sold in 2025. In terms of our transportation business, it continuously demonstrated strong resilience throughout the year. Over the past year, we placed a strong emphasis on improving both user experience and engagement. At the core of the efforts is our Algorithm-driven Huixing system, which leverages advanced algorithm capabilities to provide users with viable and accessible travel solutions by utilizing a comprehensive range of transportation options. The intelligent system significantly enhances the overall travel experience for users. In the fourth quarter, we launched skiing-themed marketing campaigns and rolled out various benefits to skiing enthusiasts so as to reinforce our positioning as an experience-driven platform and further engage our user base. On the international front, we focused on improving operational efficiency by implementing a more disciplined subsidy policy and expanding our VAS offerings. As a result, we achieved a balanced growth in both volume and revenue throughout the year with volume growth of nearly 25% for 2025. As mentioned at the beginning of the speech, 2025 marked a milestone year for our hotel management business with significant progress achieved. This year, we successfully completed the acquisition of Wanda Hotels and Resorts, a company that possesses a renowned portfolio of upper upscale and luxury hotel brands with strong market presence in China. In addition to its hotel management expertise, the company is the only hotel management firm in China with proven specialization in operating scale resorts. This unique capability can help us strengthen supply chain resources in the travel industry, thereby enhancing our influence and competitiveness. Furthermore, Wanda Hotels and Resorts operates its own in-house design institute which is recognized as one of the leading hospitality design teams in China and has received numerous prestigious international awards. The team possesses strong capabilities in designing and managing large-scale hotels as well as convention and exhibition centers. Its design solutions serve not only its own properties, but also high-end hospitality projects across the industry. Following the acquisition, the Wanda Hotels and Resorts team underwent a seamless integration process, resulting in a significant boost to its vitality and optimized organizational capacity and refined strategic direction. This strategic integration has improved our brand portfolio, strengthened our market presence and accelerated the sustainable growth of our hotel management business. Regarding our eLong hotel technology platform, we remain focused on expanding our geographical footprint while prioritizing quality growth throughout the year. The platform also offers technology-enabled hotel management solutions featuring a proprietary property management system, a smart marketing solution, [indiscernible] and service robots for automated in-room delivery. By the end of December, our total number of hotels in operation exceeded 3,000 with more than 1,800 in the pipeline. Looking ahead, we are committed to further expanding our asset-light hotel management business through network expansion and ecosystem enablement. This strategic approach will position us to achieve leadership in China's hotel industry and establish a second growth engine for the company. Traffic operation has been the foundation of our success, leveraging the Weixin Mini program, we have effectively reached a broad user base across China, in particular, those in lower-tier cities. Over the past year, the Weixin ecosystem continued to serve as a critical traffic channel, where we focused on enhancing operational efficiency. At the same time, our stand-alone app, a key driver of new user acquisition, demonstrated strong growth momentum over the past 4 quarters. To attract younger demographics, we rolled out a series of innovative products and engaging marketing campaigns to enhance user mind share and solidify our positioning as an experience-oriented travel platform. As such, the average DAUs of our stand-alone app posted more than 30% growth year-over-year in 2025. Additionally, social media has played an increasingly vital role in engaging users, particularly those younger audiences. During the year, we stepped up our efforts in social media platforms to connect with younger travelers and broadened our user reach through effective and targeted user engagement. We have accumulated the most extensive user base in China's OTA industry. For the 12 months ended December 2025, our annual paying users climbed to 253 million, representing a year-over-year growth of 6%. In addition, the accumulated number of passengers served on our platform over the past 12 months continued to expand and reached 2,034 million with an annual purchase frequency exceeding 8x per user. Moreover, our annual ARPU for the year further rose to RMB 76.8, reflecting a year-over-year growth of 5.5%. Besides our MPU also maintained a growth trajectory throughout the year and increased by 6% year-over-year to 46 million for 2025. As an innovation-driven company, we fully embrace new technologies such as Gen AI to transform our business. In December, we rolled out collaboration with Yuanbao, enabling users to access to our travel booking services via the Weixin Mini program by searching travel itineraries on Yuanbao app. In mid-March last year, we introduced our AI-powered travel planner, DeepTrip, which integrates the supply chain capabilities and market insights of our platform with the resuming capabilities of DeepSeek. Over the past few quarters, we have continuously refined its functionality, incorporating social features to enhance its shareability among users. In the fourth quarter, we embedded a map tool to give users a clearer visual representation of their travel destinations. By the end of December, approximately 6.8 million users in total have utilized DeepTrip. Additionally, we extended its application to some business scenarios by integrating DeepTrip into air ticketing service. We aim to address users' prebooking inquiries as well as helping them find competitive ticket prices, which not only improved operational efficiency, but also enhanced overall user experience. In customer service, AI now covers around 80% of user inquiries, demonstrating its important role in streamlining operations and enhancing user experience. Over the past year, we have consistently advanced the integration of AI in every phase of the customer service process, which not only reduced the workload of customer service staff, but also improved overall operational efficiency. Furthermore, we have made continuous advancements in AI capabilities to enhance its precision in identifying user requests and delivering timeless, contextually relevant and human-like responses. By leveraging AI-driven solutions, we aim to further optimize customer interaction, reduce response time and maintain seamless user support as we continue to grow. In pursuit of global excellence in ESG practices, we have achieved milestones in improving our ESG performance over the past few years. Notably, in 2025, our MSCI ESG rating was elevated to the top AAA level, surpassing 95% of global industry players. In addition, we were included in the S&P Global Sustainability Yearbook China for the third consecutive year, and we were also honored with the Industry Mover Award for our remarkable progress in driving sustainable development within our sector. All these achievements have not only demonstrated our leadership in ESG performance among global peers, but also reflected our resilience and excellence in corporate sustainability in the face of market uncertainties, evolving policy landscape and dynamic social development, we remain dedicated to further strengthening our ESG practices and contributing to a more sustainable future. I'll stop here and give the call to our CFO, Julian. He will share with you the detailed financials in the fourth quarter and for the year of 2025. Julian, it's your turn. Lei Fan: Thank you, Joyce. Good evening, everyone. Over the past quarter, China's travel industry showcased remarkable resilience driven by rising demand for immersive and experiential travel experiences across both traditional holiday hotspots and newly emerging destinations. Leveraging our profound understanding of evolving traveler preferences, we delivered another quarter of robust performance, capping off a highly productive year. In the fourth quarter of 2025, we achieved healthy growth in both top and bottom line. We reported net revenue of RMB 4.8 billion, representing a 14.2% year-over-year increase from the same period of 2024. We executed targeted marketing campaigns to strategically prepare for the 2026 Chinese New Year, while upholding rigorous cost discipline to ensure financial prudence. During the fourth quarter, our adjusted net profit rose to RMB 779.8 million, reflecting an 18.1% year-over-year growth. The increase was principally fueled by the enhanced economies of scale and the optimized operations of our OTA business. Our core OTA business revenue registered a 17.5% year-over-year increase to RMB 4.1 billion during the fourth quarter of 2025. Our accommodation reservation business achieved RMB 1.3 billion in revenue for the fourth quarter of 2025, representing a 15.4% increase from the same period in 2024. The revenue increase was primarily driven by growth in hotel room nights sold, coupled with a modest rise in ADR. In our domestic accommodation business, we proactively explored diverse accommodation scenarios to capture emerging growth opportunities, including themed offerings tailored to specific demand such as winter vacation and exam season space. For our outbound accommodation business, we strengthened cooperation with third-party partners to expand product offerings as well as our destination footprint catering to growing user demand. In the fourth quarter, our ADR once again achieved year-over-year growth, benefiting from growing consumer demand for high-quality hotels and our proactive adjustment to user subsidy strategies, supported by precise and disciplined marketing strategies. Our net take rate remained stable year-over-year. Our transportation ticketing revenue for the fourth quarter reached RMB 1.8 billion, marking a 6.5% year-over-year increase compared with the same period of 2024. During the past quarter, we heightened our focus on improving user experience. We actively expanded travel supply chain and enriched VAS offerings to deliver a broader range of mobility options and ensure seamless travel experience for users. As for our international air ticketing business, it achieved balanced growth in both volume and revenue, which aligns with our long-term strategy. In the fourth quarter, our international air ticketing revenue increased to more than 7% of our total transportation ticketing revenue. Our other business segment maintained stellar growth momentum with revenue reaching RMB 916.7 million in the fourth quarter, representing a growth of 53% year-over-year. This growth was mainly propelled by outstanding performance of our hotel management business and the consolidation of Wanda Hotels and Resorts. Our tourism business achieved a revenue of RMB 777.5 million, which was largely flat year-over-year. mainly due to our proactive reduction in prepurchased business as well as softer demand for Southeast Asia and Japan. In terms of profitability, our gross profit increased by 18.5% year-over-year to RMB 3.2 billion for the fourth quarter of 2025. The operating profit margin of our core OTA business remained flat year-over-year for the fourth quarter of 2025, while the operating profit margin of our tourism business has been affected by the one-off goodwill impairment. Our adjusted EBITDA increased by 28.6% and reached RMB 1.3 billion in the fourth quarter of 2025. Adjusted net profit grew by 18.1% to RMB 779.8 million in the fourth quarter of 2025. Adjusted basic EPS for the fourth quarter of 2025 was RMB 0.33 with a 17.9% year-over-year increase compared to the same period in 2024. Service development and administrative expenses in the fourth quarter of 2025 increased by 6.8% from the same period of 2024. Excluding share-based compensation charges, service development and administrative expenses in total accounted for 18.1% of revenue in the fourth quarter compared with 18.6% of revenue in the same period of 2024. Selling and marketing expenses in the fourth quarter of 2025 increased by 22.7% from the same period of 2024, excluding share-based compensation charges. Selling and marketing expenses accounted for 32.4% of revenue in the fourth quarter compared with 30.2% of revenue in the same period of 2024. Now let's move to our results for financial year 2025. Our net revenue in 2025 achieved RMB 19.4 billion, representing an 11.9% year-over-year increase. The core OTA revenue achieved RMB 16.5 billion, representing a 16% year-over-year increase. Our accommodation reservation revenue was RMB 5.5 billion in 2025, representing a 16.8% year-over-year increase. Our transportation ticketing revenue reached RMB 7.9 billion, representing a 9.6% year-over-year increase. Other business revenue for 2025 achieved RMB 3.1 billion, representing a 34.4% year-over-year increase. Our tourism revenue for 2025 reached RMB 2.9 billion, representing a 6.9% year-over-year decrease. In terms of profitability, our gross profit in 2025 increased by 15.7% year-over-year to RMB 12.9 billion. Adjusted EBITDA for 2025 improved by 26.9% year-over-year to RMB 5.1 billion. Meanwhile, adjusted net profit for 2025 increased by 22.2% year-over-year to RMB 3.4 billion. Adjusted basic EPS for 2025 was RMB 1.45 with a 20.8% year-over-year increase. As of December 31, 2025, the balance of cash and cash equivalents, restricted cash and short-term investments was RMB 12.3 billion. We highly appreciate our shareholders' consistent support and are committed to delivering sustainable capital returns. Our Board of Directors has proposed a final cash dividend of HKD 0.25 per share, marking a 38.9% increase from last year. This reflects our commitment to enhance capital returns to shareholders. Over the past year, China's travel industry has demonstrated increasingly prominent trends towards diversification and personalization as consumers place growing emphasis on emotional value and unique experience-driven travel opportunities. Notably, the 2026 Spring Festival represented the longest holiday period on record. During the 9-day holiday, consumers divided their holidays into multiple shorter trips such as homecoming visits and vacation travel. Incremental demand from multiple trips during the festival has driven robust growth in our business volume. In addition, the pilot implementation of spring and autumn vacations initially launched in Zhejiang and Sichuan has been expanded to include more regions such as Jiangsu and Anhui. We believe this initiative will help stimulate travel consumption and provide additional momentum to the growth of the tourism industry. Such supportive government policy, combined with sustained strength in user demand, fuels our optimism about the upward trajectory of China's travel industry in the coming year. Moving forward, we will remain focused on our core OTA business, providing users with diverse domestic and international travel products while sparing no effort to enhance user experience. As we continue to improve operational efficiency in domestic OTA operations, we will actively expand our outbound business to bolster our global brand presence. Additionally, our hotel management business will enter a new phase of high-quality growth, building a solid foundation for the company's long-term sustainable development. Concurrently, we will continue to adopt technological innovations as well as deepening the integration of AI technology with our supply chain capabilities, striving to better meet user needs. Last but not least, we will strengthen our corporate social responsibility to support the healthy development of the travel industry and to create greater value for our stakeholders. With that, operator, we are ready to take questions now. Thank you. Operator: [Operator Instructions] We will now take our first question from the line of [ Xi Wei Liu ] from Citi. Unknown Analyst: Xi Wei From Citi. Congratulations to the company on a solid operating performance. I have 2 questions. The first about outbound travel. There have been many flight cancellations between China and Japan recently. How has this impacted your outbound business? Could you share the regional breakdown of your outbound markets? And what are your 2026 targets for outbound revenue growth and profitability? The second about large model and AI strategy. The company has actually rolled out some partnerships with large models so far. In the long run, as AI model portals become more important, how will the company position itself? Joyce Li: Thank you, Xi Wei for the question. The first one is in terms of outbound travel. We did observe a decline in Japan-bound travel volume given the current circumstance. However, the overall impact on our business has been limited as outbound travel accounts for only around 5% to 6% of our total transportation and accommodation revenue. And at the same time, outbound travel demand remains resilient, and we have been seeing users shift to alternative destinations rather than cancel their travel plans. During the Chinese New Year holiday, shop to middle-haul destinations within a 5-hour flight regions such as South Korea, Singapore, Malaysia, Hong Kong and Macau remain among the most popular choices, while demand for Thailand also shown signs of gradual recovery. In addition, demand for long-haul travel increased year-over-year with European destinations such as Italy and Spain seeing particular strong growth. We have been actively adjusting our product offerings and marketing focus to capture this demand shift. Overall, given the relatively small contribution of our outbound travel to our core OTA business and the substitution effect across destinations, we do not expect a material impact on our overall performance. And looking ahead to 2026, our priority remains to further improve the quality of growth by enhancing pricing discipline, optimizing marketing efficiency and strengthening cross-selling from air tickets to accommodation and other travel products. At the same time, we will continue to deepen partnerships with global suppliers to improve service capabilities and user experience. Overall, we expect the international business to continue expanding in scale and become an increasingly meaningful contributor to our revenue. Over the next 2 to 3 years, growing business volume and expanding the user base will remain the key priorities while maintaining a strong focus on improving growth quality and profitability. We expect the revenue contribution from the outbound segment to increase to around 10% to 15% with increasing operating leverage over time. And in terms of the AI cooperation, our AI strategy focused on enhancing both user experience and operational efficiency as we continue to evolve from a traditional OTA toward a more intelligent travel platform. We see AI as a core capability that helps us better understand user needs, improving decision-making and optimize service delivery across the entire travel journey. At the same time, AI-driven efficiency improvements are significantly enhancing staff productivity and optimize our cost structure, which we believe will be an important driver of margin improvement over time. On the user side, we have integrated our proprietary travel-specific AI with advanced large language models to develop DeepTrip, which supports itinerary planning, travel inspiration and personalized product recommendations. By combining AI capabilities with our real-time supply and transaction ecosystem, DeepTrip provides a practical and actionable solution and enables a seamless end-to-end booking experience. We will continue to iterate its functionalities to better support users across different travel scenarios. And as a positioning of us, I think that we have been started exploring the partnership with large AI platforms and large model ecosystems. For example, we enabled traffic [ redirection ] from Yuanbao to our mini programs and apps. So our strategy is to actively participate in the emerging AI ecosystem by positioning our platform as a trusted travel service partner with deep market insights and a strong understanding of user behaviors. Leveraging our long-term accumulation of transaction data and operational experience, we are able to provide users with more accurate recommendations and practical bookable travel solutions on our AI platforms. Users who enter through AI platforms complete their bookings within our mini programs or apps and the related user and transaction data remain within our ecosystem. This allows us to maintain direct user relationships, accumulate valuable behavior insights and continuously optimize our product services and personalized recommendations. It also enables us to strengthen user engagement and lifetime value, which remains a key competitive advantage for our OTA platform. Going forward, we will continue to monitor development of the AI ecosystem and expand partnerships where it makes strategic sense, while maintaining our focus on strengthening our product service offerings, operational capabilities and user experience. Operator: We will now take our next question from Wei Xiong of UBS. Wei Xiong: First, I want to get your thoughts on regulations because recently, an OTA peer has been under antitrust investigation. So how should we think about the implications to the OTA sector? Do you foresee any impact on OTA's business model or lead to any change in the competitive landscape? Lei Fan: Thank you, Wei Xiong, -- please go on. Wei Xiong: Yes. Sure. So second question is on the hotel management business, which is set to become our second growth engine. So I wonder, could management elaborate your strategic focus and planning for this year? And what are the key operational goals and financial metrics that we look to achieve in 2026 and in the medium term as well? Lei Fan: Okay. Thank you for the question, Xiong, Wei. In terms of the investigations, as you mentioned, we closely monitor regulatory developments recently. At this stage, we have not observed any material changes that would impact our day-to-day operations. Tongcheng has always operated with a strong focus on compliance and fair cooperation with our partners. We believe a well-regulated market environment is beneficial to the long-term healthy development for the company and also for the industry. We will continue to adapt our business practices as required to ensure full compliance in the company. Overall, we remain focused on executing our strategy and delivering sustainable growth and profitability improvement. In terms of the hotel management plan, I think Joyce will have her words. Joyce Li: Thank you, Xiong, Wei. Actually, following the completion of the Wanda Hotels and Resorts acquisition, the integration has progressed smoothly and is better than our expectations. We have achieved rapid organizational alignment, revitalized organization and teams and further refined the strategic direction of the business. Overall, the post-acquisition integration has been very successful. On the synergy front, we are beginning to see encouraging early results. The addition of the Wanda's upscale and luxury brands has enhanced our overall brand portfolio and strengthened our positioning in the middle to high-end segment of our hotel management business. At the same time, the integration has enabled better resource sharing across business development, operations and membership, which is gradually improving operational efficiency. It also further reinforced Tongcheng's presence within the accommodation supply chain. From the other perspective, Tongcheng also empowers Wanda Hotels and Resorts through our technology capabilities. By providing standardized system tools and digital solutions, we help improve internal operational efficiency while reducing research and development efforts and lowering system maintenance and third-party service costs. From a financial perspective, the acquisition has already delivered a positive contribution at the operational level as Wanda Hotels and Resorts is an established hotel management company with a solid operating track record. The consolidation has enhanced our revenue scale, optimized the business mix and strengthened the earnings visibility of the segment. As we move forward, our development strategy will remain disciplined with a focus on balancing scale expansion with operational efficiency and healthy returns, ensuring sustainable and high-quality growth of the business segment. With continued expansion of scale and improving operational efficiency, together with the contribution from Wanda Hotels and Resorts, we expect the hotel management segment to maintain strong revenue growth with a further improvement in profitability from 2026 onwards. Thank you. Operator: We will now take our next question from the line of Brian Gong of Citi. Brian Gong: Two questions here. First is, how do you -- how is the travel consumption trend for the industry in the first quarter considering recovery on hotel ADR. Do we still expect teens level on room nights growth this year? Second question is that recently, [indiscernible] has been under government's investigation. Do you think this will impact their cooperation with us and their stakeholding on us? [indiscernible] is adjusting their hotel business to comply with government's requirement. How will this impact the industry and us? Lei Fan: Okay. Thank you for the questions, Brian. In terms of the first quarter's performance and also the industry outlook, actually, during the Chinese New Year holiday, as we mentioned in the prepared remarks, the China travel market continued to demonstrate very solid demand. According to the Ministry of Transport, national passengers throughput during the 9-day Chinese New Year holiday reached a throughput record 8.2% year-over-year growth during the holiday with decent growth for both long-haul and short-haul travel. Our passenger throughput of railway and airline increased by around 10% and 7% year-over-year, respectively. Meanwhile, according to the industry statistics, overall hotel ADR increased during the Chinese New Year holiday among all segments. With demand for family reunions concentrated in the pre-holiday period, we observed a pickup in passenger throughput during the latter part of the Chinese New Year holiday this year. In response, we promptly adjusted our operational resources, strengthened supply coordinations with our partners and enhance the targeted marketing efforts to capture the rebound in travel demand and improve conversion efficiency in the latter part of Chinese New Year holiday. So as a result, we continue to outperform the industry in the first quarter and also during the 9-day Chinese New Year holiday with especially strong momentum in our accommodation business. Average daily room nights sold increased by 30%. Specifically, room night growth for 3-star and above hotels significantly outpaced that of lower-tier properties. This reflects our ability to respond effectively to changing user preferences as more travelers place greater emphasis on higher quality accommodation experiences. As a result, our hotel ADR in quarter 1 maintained a positive trend during the period and once again exceeded the industry average. For transportation business, we continue to focus on improving monetization, while average daily air ticket volume was broadly in line with the overall market. And also for the room nights growth in the full year of 2026, actually, I cannot provide a very clear numbers here because of the short booking window. But as we mentioned, looking into 2026, we continue to view the long-term fundamentals of China's travel market positively. Consumer preferences are increasingly shifting towards experiential-oriented spending with growing interest in event-driven and themed travel such as concerts, exhibitions and outdoor activities. At the same time, travel is becoming more integrated into everyday lifestyle, supporting more frequent and diversified travel demand. In addition, supportive policy measures aimed at expanding domestic consumptions and promoting high-quality tourism development provide a favorable backdrop for the whole industry. And also for the second question about the investigation, actually, we don't monitor any change on the cooperation with Trip and also, we don't monitor any change of the shareholder structures or potential change of the shareholder structures. So currently, as I mentioned in previous question, we're just focusing on our own execution and long-term competitiveness improvement. So actually, our strategy remains very consistent, focusing on enhancing our user value, improve the ARPU, strengthening our product and service capabilities and deepening cooperation with our suppliers through a mutual beneficial approach. And also, at the same time, we will continue to take a disciplined and prudent approach while monitoring the industry regulatory development. Thank you for the question. Operator: We will now take our next question from Yang Liu of Morgan Stanley. Yang Liu: I have 2 questions. The first one is also related with AI. Could management elaborate more about the DeepTrip's contribution to the business, especially on the business -- overall business volume and also cross-selling side? And my second question is regarding the marketing intensity this year, given the geopolitical risk in both China and Japan and also Middle East this year, will management adjust the outbound business marketing intensity? Yes, that is my second question. Joyce Li: Thank you. The first question is concerning our DeepTrip. As I mentioned, DeepTrip is our AI-driven travel planner that use the reasoning power of DeepSeek and our platform supply chain advantages to create personalized travel itineraries. Since launch, DeepTrip has served about 7 million users with orders placed through the platform steadily increasing over the past few months. Over the past quarters, we continue to enhance DeepTrip with the goal of strengthening user awareness and building long-term trust. We have been continuously upgrading its user-facing capabilities to support more comprehensive travel planning. Key enhancements include the integration of trend transfer data to enable seamless multimodal itineraries. The addition of social sharing features to improve engagement as introduction of a map tool in the fourth quarter to provide a more intuitive visualization of travel plans. In addition, DeepTrip has been embedded into our air-ticketing service to help users address pre-booking inquiries and identify more competitive fare options, delivering a more seamless booking experience. Beyond user-facing applications, we have also extended DeepTrip into different business scenarios to improve operational efficiency. We integrated customer service agent capabilities into DeepTrip to respond to customer inquiries directly within DeepTrip and guide users to human support when needed. For corporate clients, we piloted a travel booking suggesting tool customized according to travel profiles, business travel policies and past bookings. In the future, DeepTrip will continue to serve as a platform for understanding and addressing users' comprehensive travel needs across diverse scenarios. We will further leveraging our AI capabilities across various business segments to provide valuable solutions to users, thereby strengthening our competitive advantages. Additionally, we have begun the cooperation with [indiscernible] to acquire more traffic. We're also actively exploring potential collaborations with our AI agent platform to further broaden our reach and engagement opportunities. We remain committed to leading AI innovation, continuously increasing the investments in this area and delivering cutting-edge user-focused features to elevate our user travel experience. And in terms of the current circumstance in terms of outbound business, we have seen considerable growth potential in the outbound tourism market. As the travel habits evolve, more travelers are eager to explore the international destinations. The number of outbound tourists is still significantly lower than the domestic travelers, revealing a substantial opportunities for expansion in this area. At present, we believe that there are only a limited number of Chinese OTA players have the capabilities and resources to actively drive outbound business. This situation place us in a favorable positioning facing relatively low competitive pressure and allowing us to fully capitalize on the growth potential of the market. Again, our strategy and confidence are anchored in the long-term growth prospects of China's outbound industry and our competitive advantages. While we remain agile in our short-term tactics in response to the market conditions, I think our business momentum remains unaffected. Thank you. Operator: In the interest of time, we will take our last question from Thomas Chong of Jefferies. Thomas Chong: Congratulations on a solid set of results. My first question is about our future growth driver and the take rate trend for accommodation and transportation. And my second question is relating to margin. How should we think about the 2026 margin trend as well as the margin driver in the future? Lei Fan: Thanks for the question, Thomas. For growth, actually, the company's focus remains on achieving a high-quality growth in 2026 by balancing scale expansion with operating efficiency improvement, while continuously enhancing our user value and ARPU. So in the first quarter and also the second quarter, we will prioritize healthy and sustainable growth across our core OTA segments, supported by improved operational efficiency and more refined resource allocation. At the same time, we will continue to strengthen our competitiveness positioning and capture growth opportunity to future expand our market presence. Within the core OTA business, we anticipate that the accommodation business will grow faster than transportation business through the whole year. For accommodation business, we believe that the growth will be driven by volume expansion and ADR improvement, as we mentioned a lot of times. Our volume is expected to continue outpacing the market growth, while our ADR will benefit from the ongoing upgrade in hotel star mix driven by shifts in user preference. So we think it's enough to support a very nicely growth for accommodation business by these 2 reasons. So this year, in terms of the take rate of the accommodation, we expect that the take rate may be stable year-over-year at 2025. For transportation business, volume growth will be in line with the market and still one of the reasons of the revenue growth for transportation. While our take rate improvement driven by cross-sell and VAS will continue to contribute to the revenue growth of the transportation segment. Also, we expect the hyper growth for other revenue, mainly due to Wanda consolidation since the middle of October last year and the hyper growth of our original hotel management and PMS business and also our Black Whale business, the membership business. In terms of the profitability, as we promised, the margin improvement is one of the very important strategic priorities for the company. For the reasons, one, for our core OTA business, the improvement in operational efficiency will continue to be an important driver of profitability over time. In particular, we are leveraging AI technologies to enhance both customer service automation and R&D efficiency, which help improve staff profitability and overall operating efficiencies. For the development of our hotel management business, including eLong Hotel Technology platform and Wanda Hotels and Resorts, we will continue to support its high-quality expansion with a near-term focus on scaling the business, while the return profile is expected to improve progressively as the business matures. For our international business, we will maintain a very prudent approach as we continue to build the foundation for future growth and cultivate the company's next growth engine over the coming years. Last, in terms of the marketing investments, our marketing dollars may fluctuate slightly depending on market opportunity. For example, in quarter 4 last year and quarter 1 this year, we identified strong early booking demand for the 9-day Chinese New Year holiday period and therefore, increased our marketing investments to capture early demand and gain market share. At the same time, we will continue to strengthen ROI management across different marketing channels. So overall, we will continue to balance growth opportunities with disciplined cost management while focusing on improving operational efficiency across the business and improve our margins. Thank you. Operator: That's the end of the question-and-answer session. Thank you very much for all your questions. I'd now like to turn the conference back to Ms. Kylie Yeung, for closing comments. Kylie Yeung: Thank you. We are closing the call now. If you wish to check out our presentation and other financial information, please visit the IR section of our company website. Thank you, and see you next quarter. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.
Operator: Welcome to the Sanara MedTech Fourth Quarter and Full Year 2025 Earnings Conference Call. Please note that this conference call is being recorded, and a replay will be available on the Investor Relations page of the company's website shortly. The company issued its earnings release earlier today. Before we begin, I would like to remind everyone that certain statements on today's call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For more information about the risks and uncertainties involving forward-looking statements and factors that could cause actual results to differ materially from those projected or implied by forward-looking statements, please see the risk factors set forth in the company's most recent annual report on Form 10-K. This call will also include references to certain non-GAAP financial measures. Reconciliations of those non-GAAP measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings release available on the Investor Relations section of our website. Today's call will include remarks from Seth Yon, President and Chief Executive Officer; and Elizabeth Taylor, Chief Financial Officer. I would now like to turn the call over to Mr. Yon. Please go ahead, sir. Seth Yon: Thanks, operator, and welcome, everyone, to our fourth quarter and full year 2025 earnings call. Let me outline the agenda for today's call. I'll begin by reviewing several key financial accomplishments for the full year 2025. I'll then discuss our fourth quarter net revenue performance as well as our commercial execution across the three key initiatives, our commercial strategy. After this, I'll provide an update on a few other select areas of operational progress in the quarter. Elizabeth will cover our fourth quarter financial results in further detail and review our full year net revenue guidance for 2026, which we reaffirmed in our earnings release today. I'll then conclude our remarks with some thoughts on our positioning as we enter 2026, our strategic priorities for the year and our outlook before we open the call for questions. With that said, let's get started. Looking back at our financial performance for the full year 2025, I'd like to highlight several key accomplishments to demonstrate the significant progress we've made as an organization. First, we exceeded $100 million of net revenue for the first time in our company's history. Specifically, we generated $103.1 million of net revenue for the full year 2025, representing growth of 19% year-over-year. Importantly, we accomplished this impressive performance while maintaining the size of our field sales team with 40 representatives at the end of 2025. Our field sales headcount at the end of 2025 was essentially unchanged compared to the end of 2024, 2023 and 2022. Our performance demonstrates the strength of our hybrid commercial model, which includes both field sales reps and a growing network of independent distributor partners. Together, they raise awareness of our products and educate prospective surgeon customers on their benefits and clinical applications. Second, we drove significant improvements in our profitability profile on a year-over-year basis. Specifically, we expanded our gross margins by approximately 200 basis points to 93% for the full year 2025 and demonstrated notable operating leverage. We ultimately achieved a $1.5 million or 80% reduction in net loss from continuing operations and a $7.9 million or 86% improvement in adjusted EBITDA, resulting in $17 million for the full year 2025. Third, this performance, coupled with improvements in our working capital management, ultimately enabled us to generate $6.8 million of cash provided by operations for the full year 2025. This compares to $24,000 of cash used in operations for the full year 2024. In short, our financial results in 2025 reflect the fundamental strength of our surgical business and support our recent strategic decision to focus our resources and capabilities on the surgical market. Turning to an overview of our fourth quarter net revenue performance. Our team delivered solid commercial execution in the fourth quarter, generating net revenue of $27.5 million, representing growth of 5% year-over-year. Our net revenue growth was largely driven by sales of soft tissue products with modest contributions from sales of our bone fusion products as well. As a reminder, our net revenue in the fourth quarter 2024 benefited from approximately $1.8 million of BIASURGE sales due to the industry disruption caused by Hurricane Helene. Excluding the $1.8 million of BIASURGE sales related to this dynamic, our net revenue in the fourth quarter of 2025 increased 13% year-over-year. Importantly, our fourth quarter net revenue performance came in at the high end of both the preliminary range that we provided in our press release on January 23, 2026, as well as the expectations we shared on our third quarter's earnings call in November 2025. With these results as our backdrop, I'll now share on our commercial execution. In 2025, our team continued to drive momentum across the three key initiatives of our commercial strategy, which represents important drivers of our growth. As a reminder, these three initiatives are: one, strengthening our relationships with independent distributors; two, selling into new health care facilities; and three, expanding the existing health care facilities we serve. I'll now share updates on our progress across each of these initiatives, beginning with our relationship development with independent distributors. In 2025, we significantly grew our network of distributor partners. Specifically, we ended 2025 with over 450 contracted distributors compared to over 350 at the end of 2024. Given the significant progress we've made in expanding the size of our distributor network, our team has also focused increasingly on optimizing our distributor relationships. We are doing this by onboarding newly contracted distributors, training their sales representatives and partnering with them to educate prospective surgeon customers about the clinical benefits of our products. Our partnership approach to engaging and working with our distributor remains our core component of our commercial philosophy. We believe it's one of the items that differentiates Sanara in the market and provides important advantages for our organization going forward. Turning to our second commercial initiative, adding new facility customers. We continue to leverage our network of distributor partners to begin selling into new health care facilities where our products have been contracted or approved. I'm pleased to report that we achieved our stated target, which we initially provided on our first quarter earnings call in May 2025 of selling into over 1,450 health care facilities by the end of 2025. This compares to over 1,300 facilities in 2024. We continue to see significant runway to add new health care facility customers to our base over the coming years as our products were contracted or approved for sale in over 4,000 facilities at year-end. With respect to the third initiative I mentioned, penetrating our existing facility customers, we continue to drive adoption of our products by adding new surgeon users within the health care facilities we currently serve. In both the fourth quarter and full year 2025, we realized strong year-over-year growth in the size of our surgeon customer base. We continue to add new surgeon users ranging across a variety of specialties, including our traditional focus of spine and orthopedics as well as general, plastic and vascular surgery. Despite our progress in 2025, our surgeon penetration within the over 1,450 health care facilities we serve remains relatively low. With that in mind, we believe that the opportunity to go deeper within these existing facilities remains perhaps our largest untapped opportunity for future growth. In summary, our progress across each of the key commercial initiatives leaves us well positioned as we enter 2026 with multiple levers to drive continued growth in the surgical market. In addition to our commercial execution, the broader Sanara team made significant progress during the fourth quarter with respect to multiple areas of our strategy. I'd like to take a minute to highlight several important operational accomplishments. During the quarter, we continued to wind down the operations of Tissue Health Plus or the THP segment following our decision to cease operations, which we discussed in detail on our third quarter 2025 earnings call. I'm pleased to report that the THP wind-down process was substantially complete at the end of 2025, consistent with our previously stated expectations. From a financial perspective, total cash use related to THP over the second half of 2025 was $5.3 million, below the $5.5 million to $6.5 million range we shared on our second quarter earnings call in August 2025. As a reminder, the operations of THP, which were previously reported as the THP segment are classified as discontinued operations for the three months and full years ending December 31, 2025, and 2024. And importantly, we continue to anticipate no material cash spend related to THP going forward. With this in mind, we are entering into 2026 as a leaner, pure-play surgical company focused on continuing to bring innovative products to the operating room setting. In the fourth quarter, we also continued to support the future growth of our BIASURGE product by expanding into health care facility approvals. Most notably, we secured an innovative technology contract from Vizient. For those unfamiliar, Vizient is the largest group purchasing organization in the U.S. with an extensive client base of health care facility customers. Through Vizient's innovative technology program, Vizient works with councils led by hospital experts from its client base. These councils are tasked with evaluating products and assessing their potential to bring innovation to health care delivery. Following evaluation, our BIASURGE product was awarded an Innovative Technology contract as it was deemed to offer unique qualities and a potential benefit over other products available in the market today. As a reminder, BIASURGE is a no-rinse irrigation solution that enables surgeons to cleanse wound bed more efficiently than with saline alone. It also provides broad-spectrum antimicrobial effectiveness, helping to reduce the risk of surgical site infections. Beginning January 1, 2026, BIASURGE is now available to Vizient's network of health care facility customers. We believe this contract provides approximately 1,800 health care facilities with access to BIASURGE at contracted pricing and prenegotiated terms. All in all, it represents a significant opportunity to further expand BIASURGE customer base in 2026 in the coming years. In addition to these efforts, we continue to support our surgical product portfolio by expanding and enhancing our body of clinical evidence. Our products were featured in multiple peer-reviewed studies published during the first quarter. I'll take a moment to highlight two of them. A comparative peer-reviewed in vitro study featuring BIASURGE was published in the Journal of Arthroplasty. It evaluated the effectiveness of 9 commercially available irrigation solutions, including BIASURGE. Specifically, it assessed their ability to prevent the formation of biofilm on orthopedic implant materials by two common types of bacteria that are notorious for causing severe antibiotic-resistant infections in surgical wounds. The researchers also evaluated the cytotoxicity of each irrigation solution to ensure the patient's safety. In this study, BIASURGE exhibited high antimicrobial efficacy and low cytotoxicity. It is identified as one of the two irrigation solutions that were most effective in preventing biofilm formation among the 9 products tested. Our ALLOCYTE Plus product was also featured in a long-term clinical study published in the Journal of Spine and Neurosurgery. This study evaluated the outcomes of lumbar spinal fusion that used ALLOCYTE Plus as a stand-alone graft substitute. Ten patients were followed for 24 to 36 months, demonstrated successful solid bone healing within 6 months of receiving the operation. No adverse events, including complication, graft failures or revision surgeries were reported during the follow-up period. Importantly, these patients also demonstrated sustained improvements in both neurological and clinical outcomes as well. The study's findings support our position that ALLOCYTE Plus provides a safe, biologically active alternative to using traditional autogenous iliac crest bone grafts, which tend to be associated with the complications in donor site morbidity. Our R&D team also remains focused on expanding our IP portfolio to protect and advance our existing products. As a reminder, in 2024, we submitted 11 provisional patent applications covering innovations in proprietary antimicrobial and hydrolyzed collagen technologies, including novel formulations, treatment applications and key component advancements. Over the course of 2025, our team converted these 11 provisional patent applications into nonprovisional filings, a major step forward in the progress towards securing approval while also submitting the corresponding U.S. and PCT applications for international protection. In addition to this progress, we submitted an additional three provisional patent applications that protect specific components and compositional aspects of our CellerateRX Surgical product. We look forward to continuing to expand the breadth of IP protection as well as our future product development efforts related to our surgical products. Lastly, we continue to make progress in our efforts to expand our portfolio through our partnership with Biomimetic Innovations, or BMI, with the goal of bringing OsStic to the U.S. commercial market. As a reminder, during the first 9 months of 2025, BMI achieved all of the key product development, clinical, regulatory and medical education milestones outlined under our agreement. Based on our continued progress in the fourth quarter of 2025 and the initial months of 2026, I'm pleased to report that we remain on track to introduce the OsStic synthetic injectable bone bio-adhesive to the U.S. market in the first quarter of 2027. Given its status as an FDA-designated breakthrough device, we believe OsStic will be the first synthetic injectable bone bio-adhesive available in the U.S. once it receives regulatory approval. In preclinical mechanical testing, OsStic demonstrated bonding to bone that was 40x stronger than traditional calcium phosphate bone cement. We expect OsStic to represent a new anchor product for our bone fusion portfolio and look forward to bringing this innovative technology to support the more than 100,000 periarticular fractures that occur in the U.S. each year. In summary, 2025 was a significant transition year for Sanara MedTech. Perhaps most notably, Sanara transitioned to new leadership in both CEO and CFO roles to guide the next phase of our growth and development as an organization. As a company, we navigated the strategic realignment of our business to focus solely on the opportunities in the surgical market going forward. And in tandem, our team successfully executed our strategy in the surgical market, driving significant commercial, financial and operational progress across all major fronts. Our progress this past year is a credit to the remarkable team of individuals who work at Sanara MedTech. It also reflects our team's commitment to advancing the treatment of surgical wounds for the benefit of all the constituents in the health care industry, including patients, surgeons and health care systems. With that said, I'll turn it over to Elizabeth to cover our fourth quarter 2025 financial results in greater detail and review our full year net revenue guidance for 2026. Elizabeth Taylor: Thanks, Seth. I will begin by reiterating that the operations of THP, which were previously reported as the THP segment, have been classified as discontinued operations for the three months and full years ended December 31, 2025 and 2024. As such, unless noted otherwise, all commentary that follows is on a continuing operations basis. In our earnings press release issued today, we have included tables detailing our historical results of operations on a continuing operations basis in 2025, 2024 and 2023, which aligns with our reporting going forward. Given that Seth covered our net revenue results for the quarter, I'll begin with gross profit. All percentage changes referenced throughout my remarks compare to the prior year period, unless otherwise specified. Fourth quarter gross profit increased $1.6 million or 7% to $25.7 million. Fourth quarter gross margin increased approximately 175 basis points to 93% of net revenue, driven primarily by sales of soft tissue repair products and lower manufacturing costs related to CellerateRx Surgical. Fourth quarter operating expenses increased $2.8 million or 13% to $24.6 million. The change in operating expenses was driven by a noncash impairment charge of $1.8 million in the fourth quarter of 2025, which was related to a write-down of certain IP assets in connection with our strategic shift to focus on products in the surgical market and a $1.2 million increase in research and development expenses, which was primarily due to product enhancement initiatives associated with our soft tissue repair products. Operating income for the fourth quarter was $1.1 million compared to $2.3 million last year. Excluding the aforementioned $1.8 million noncash impairment charge in the fourth quarter of 2025, our operating income increased $0.6 million or 28% to $2.9 million. Other expense for the fourth quarter was $2.2 million compared to $1.3 million last year. The increase in other expense was primarily due to higher interest expense and fees related to our CRG term loan as well as higher share of losses from equity method investments. Net loss from continuing operations for the fourth quarter was $1.1 million or $0.13 per diluted share compared to net income from continuing operations of $0.9 million or $0.10 per diluted share last year. Adjusted EBITDA for the fourth quarter of 2025 was $4.7 million compared to $4.1 million last year. Turning to the balance sheet. As of December 31, 2025, we had $16.6 million of cash and $46 million of long-term debt. This compares to $15.9 million of cash and $30.7 million of long-term debt as of December 31, 2024. For the full year 2025, we were pleased to generate $6.8 million of cash provided by operating activities compared to $24,000 of cash used in operating activities in the full year 2024. The increase in cash from operating activities was driven in part by the reduction in net loss from continuing operations and improvements in working capital efficiency compared to the prior year. Importantly, we estimate that $6.8 million of cash generated from operating activities in the full year 2025 was inclusive of approximately $9 million of cash used in operating activities related to THP. As Seth mentioned, we continue to anticipate no material cash spend related to THP going forward. Turning to our net revenue guidance for the full year 2026, which we introduced via press release in January and reaffirmed in our earnings release today, we continue to expect full year 2026 net revenue to range from $116 million to $121 million, representing growth of approximately 13% to 17% compared to net revenue of $103.1 million for the full year 2025. Lastly, we would like to share a few additional considerations for modeling purposes. With respect to operating expenses, as Seth will discuss further, in connection with our enhanced focus as an organization on the surgical market, we are investing in our field sales team and R&D initiatives to lay the foundation for strong, sustainable growth in 2026 and the coming years. With $16.6 million of cash at December 31, 2025, combined with our expected cash flows from operations, we are comfortable with our balance sheet liquidity in 2026. From a modeling perspective, as a reminder, we typically pay employee commissions and annual bonuses in the first quarter of our fiscal year, requiring a higher outlay of cash. Lastly, given the proximity to the end of the first quarter and for avoidance of doubt, we would like to provide additional transparency regarding our expectations for the first quarter net revenue results. Specifically, we expect net revenue of approximately $26.7 million to $27.2 million for the first quarter of 2026, representing growth of approximately 14% to 16% year-over-year. With that, I will now turn it back to Seth for closing remarks. Seth Yon: Thanks, Elizabeth. Sanara MedTech is providing full year net revenue guidance in 2026 for the first time in our company's history. The decision to introduce net revenue guidance was made as a part of our commitment to provide increased transparency regarding our anticipated future performance. It reflects the significant scale we have achieved as a company in recent years as well as the evolution and development of our organization across multiple fronts. As Elizabeth mentioned, we are reaffirming our full year net revenue guidance today, which reflects growth of 13% to 17% in 2026. We look forward to delivering growth within this range and providing updates on our progress throughout the year. Before opening the call for questions, I'd like to share some closing thoughts on our positioning and strategic priorities as we enter 2026. In short, we like how we're positioned heading into this year. We are entering 2026 as a focused pure-play surgical company dedicated exclusively to the operating room setting with three anchor products, two currently in the market, CellerateRx Surgical and BIASURGE and one in our pipeline, OsStic. Our anchor products possess differentiated capabilities that enable them to satisfy clear clinical needs in the treatment of surgical wounds. They are not subject to reimbursement risk, and they collectively address a multibillion-dollar annual opportunity in the surgical market. To effectively capitalize on this opportunity, we've developed an effective time-tested commercial team, model and strategy that has enabled us to achieve significant commercial scale and momentum. And based on our historically strong margin profile and balance sheet condition as of December 31, 2025, we believe we have the resources necessary to achieve our primary strategic and financial objectives this year through focused execution and disciplined capital allocation. In terms of our strategic priorities for 2026, we are focused on the following three items: First, continuing to penetrate the surgical wound market by executing our commercial strategy with our existing products. Specifically, we remain focused on driving further progress in developing our distributor network, expanding our facility customer base and adding new surgeon users within the facilities we currently serve. These three initiatives have been the foundation of our commercial success in recent years, and we see substantial runway for continued growth across each of them as we move through 2026 and beyond. Second, pursuing targeted investments in our business to support our growth in 2026 and future years. Stepping back, given Sanara's broader scope of focus in prior years, the company historically pursued investments in opportunities outside of our core business in the surgical market. Going forward, we are committed to pursuing a focused approach as a pure-play surgical company. With that commitment, we are intent on supporting our surgical product portfolio and commercial distribution network with investments that will protect and enhance our position in the surgical market and prove to be truly impactful over time. Specifically, we are investing in our surgical field sales team and R&D initiatives to lay the foundation for strong, sustainable growth. With respect to our field sales team, as I mentioned earlier, the size of our team has remained essentially consistent for multiple years with roughly 40 sales representatives. During the first quarter of 2026, we are making targeted investments to expand our sales rep coverage in key territories across the U.S. We are currently focused on onboarding and training, and we expect these new reps to become increasingly productive as they develop over the balance of 2026. With respect to our R&D initiatives, we will continue our efforts to expand the portfolio of clinical evidence supporting our anchor products while bolstering our IP protection. In addition, we are investing in several longer-term product development initiatives with a focus on pursuing enhancements to strengthening our existing surgical portfolio and address the evolving needs of our customers. These investments are designed to deepen our competitive moat and ensure that we maintain our position as a leader in bringing innovative surgical products to the market. Lastly, we are focused on bringing OsStic to market through our strategic partnership with BMI and preparing for U.S. commercialization in the first quarter of 2027. We believe OsStic represents a significant opportunity to expand our presence in the bone fusion market and provide surgeons with a truly differentiated solution for periarticular fracture repair. In conclusion, we are committed to focused execution and targeted capital allocation across these three strategic priorities in 2026. We believe our successful execution on these items will position us for strong, sustainable growth this year as well as cash generation and profitability in the years to come. I'd like to close by thanking the entire Sanara MedTech team for their exceptional work in 2025. I'd also like to thank our shareholders and customers for their continued support and to those on today's call for their interest in Sanara MedTech. With that, operator, you may now open the call for questions. Operator: [Operator Instructions] your first question for today is from Yi Chen with H.C. Wainwright. Eduardo Martinez-Montes: This is Eduardo on for Yi. Congrats on all the progress in the year. I had a question on BIASURGE, following the Vizient contract effective January 1, how much of your growth in 2026 do you think is attributable to this new volume of GPO versus organic growth in existing accounts? And do you anticipate any other of these deals to materialize in 2026? Seth Yon: This is Seth. So I'll answer that question. First of all, the Vizient contract was a really significant thing for us to accomplish and to get on to that contract. To our knowledge, we're the only [ wash ] to have done that. It will still take a little bit of time to go out and educate at the facility level. And so we haven't given guidance specific to a product in past, just talking more about soft tissue repair, which BIASURGE would fall to. So our team is working daily inside those 1,800 accounts to continue to get access into those accounts and bring that technology to life. It was a major step forward for us as we think back to a soft launch in that product just a couple of years ago. You're doing that at a pretty slow pace, right? You have to do that one facility at a time. And now to have on contract 1,800-plus facilities, we think that gives us great runway to perform in 2026, but truly well beyond that as well. Eduardo Martinez-Montes: Got it. And then if I could ask another one on CellerateRX growth. So with this new study and cost effectiveness, do you see any opportunity for -- what do you think the impact on growth and maybe reimbursement in terms of cost effectiveness? And do you expect any other studies for CellerateRX to come out during this next year that could also bolster? Seth Yon: Yes. Well, first of all, we believe strongly in clinical evidence, specific to our anchor products, CellerateRX, BIASURGE and then soon to be OsStic as well once that commercializes. So we'll continue to put energy against that from all those different fronts, both scientifically, clinically and then economically. We feel really confident in that economic study that came out. We think that facilities will see great value in that as well to showcase a product that, again, is a supply cost inside the DRG. So I think it's really important to understand for everybody on this call, we don't have reimbursement risk with that product and won't into the future. That, again, is a supply cost. So I think it only strengthens our relationships inside the hospital with the clinical evidence that we have specific to Cellerate and now the economic evidence to come alongside of that is really significant. So we think it has an impact for our numbers going forward as a result of all of that research that's been done. Operator: We are currently seeing no remaining questions at this time. That does conclude our conference for today. Thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to Tongcheng Travel 2025 Fourth Quarter and Annual Results Announcement Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Ms. Kylie Yeung, Investor Relations Director of the company. Please go ahead, ma'am. Kylie Yeung: Thank you. Good morning, and good evening, everyone. Welcome to Tongcheng Travel's 2025 Fourth Quarter and Annual Results Conference Call. I'm Kylie Yeung, Investor Relations Director of the company. Joining us today on the conference call are our Executive Director and CEO, Mr. Hope Ma; our CFO, Mr. Julian Fan; our Chief Capital Officer and President of Wander Hotels and Resorts, Ms. Joyce Li. For today's call, our management team will provide a review of the company's performance in the fourth quarter and full year 2025. Hope will brief us on the company's strategies. Joyce will discuss our business and operational highlights, and then Julian will address the details of financial performance accordingly. We'll take your questions during the Q&A section that follows. As always, our presentation contains forward-looking statements. Such statements are based on management's current expectations and current market operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, which may cause the company's actual results, performance or achievements to differ from those in the forward-looking statements. This presentation also contains some unaudited non-IFRS financial measures. They should be considered in addition to, but not as a substitute for measures of the company's financial performance prepared in accordance with IFRS. For a detailed discussion of non-IFRS measures, please refer to our disclosure documents in the IR section of our website. Now let me introduce our CEO, Hope. Hope will be presenting in Mandarin, and our colleague will provide the English translation afterwards. Hope, please go ahead. Heping Ma: [Interpreted] In 2025, China's travel industry and the company entered a new phase of high-quality development. Over the past year, we witnessed resilient travel demand with increasingly diversified trends as immersive and experiential consumption continues to gain popularity. Amid this backdrop, we deeply dive into user needs and comprehensively optimize our travel products and user experiences. As a result, both our user base and ARPU demonstrated robust growth in 2025 with APU reaching a record high. The robust business growth reflected the ongoing enhancement of our service quality and the expanding influence of our brand. The year 2025 was a year of challenges and opportunities for us. In response to consumers' diversified and personalized needs, we continuously enriched our product offerings, facing growing expectations for premium services. We consistently improved our service quality. Amidst AI-driven technological revolution, we proactively embraced new frontier technologies with an open attitude. All these showcased our strong organizational agility and exceptional execution capabilities, further reaffirming our commitment to our user-centric mission of make travel easier and more joyful. The Chinese government sees travel as a vital pillar of national economic development. The latest 15th 5-year plan has explicitly stated the commitment to expanding the supplies of high-quality travel products and to enhancing travel service standards with the goal of establishing China as a premier travel destination from the pilot implementation of autumn and winter vacations in certain regions to the longest spring festival holiday on record. These expanding holiday arrangements underscore significant governmental support for the travel industry. In terms of demand, travel has become an essential part of people's pursuit of a better life with seasonal themes such as spring flower viewing, summer retreats, all foliage tours and winter snow activities continuously gaining popularity. In the coming year, we will remain focused on domestic market and deep dive into user needs, aiming to further solidify our leading position in the mass market. Simultaneously, we will make intensified efforts to capture growth opportunities in the outbound travel market to propel our global expansion strategy. On the operational front, we will continue to implement technological innovation and product upgrades centered on user experience while enriching membership privileges and deepening user engagement. In 2021, we tapped into the hotel management business. After several years of rapid expansion, it has now gained meaningful scale. The integration of Wanda Hotels and Resorts in 2025 marked a pivotal milestone in the development of our hotel management business. This strategic move strengthened our brand portfolio and ecosystem while substantially elevating our competitiveness and market influence. By consistently executing our strategy and leveraging our strong Internet DNA, we are well positioned to accelerate the segment expansion in 2026, laying a robust foundation for our long-term sustainable growth. Amidst the rapid advancement of AI technology, we are devoted to expanding the application of AI in our business process, further optimizing operational efficiency and enhancing user experience. Building on our user-centric value proposition, market acumen and superior execution capabilities, we are confident that we will continue broadening our competitive moat in the travel industry. Moving forward, we will continue to export our technologies and expertise to empower our partners and support the broader industry ecosystem while strengthening our commitment to corporate social responsibility to foster sustainable industry growth and create greater value for all stakeholders. Next, I will hand over the call to Joyce. She will share with you our business and operational highlights of the fourth quarter and the full year of 2025. Joyce, please go ahead. Joyce Li: Thank you, Hope. 2025 was a pivotal year of growth and achievement for our company. Beyond the steady expansion of our domestic business, our outbound travel and hotel management businesses made remarkable progress, contributing meaningfully to the overall growth momentum of the company. During the past year, we acutely grasped users' evolving preferences and precisely captured emerging demand. This enabled us to once again deliver solid growth across all business segments, highlighting our excellence in strategic execution, operational efficiency and organizational agility. Throughout the year, our accommodation business sustained robust growth momentum and achieved a record high in room nights sold. In early 2025, we identified a notable shift in users' preference towards high-quality hotels. In response to the changes, we strategically reallocated operational resources to meet this evolving demand, resulting in an approximately 5 percentage point year-over-year increase in the proportion of high-quality hotels sold on our platform. In the meantime, we prioritized enhancing user experience. We not only offer the best value for money products and services, but also provided faster and more responsive support to user requests to further strengthen our presence in the mass market. As for our international business, we continue to enhance our product capabilities by deepening partnerships with third-party providers as well as expanding our product and service offering. In addition, we leveraged our domestic user base to drive cross-sell initiatives and execute the precision marketing campaigns targeting high potential users. All these efforts collectively led to nearly 30% growth in our international room nights sold in 2025. In terms of our transportation business, it continuously demonstrated strong resilience throughout the year. Over the past year, we placed a strong emphasis on improving both user experience and engagement. At the core of the efforts is our Algorithm-driven Huixing system, which leverages advanced algorithm capabilities to provide users with viable and accessible travel solutions by utilizing a comprehensive range of transportation options. The intelligent system significantly enhances the overall travel experience for users. In the fourth quarter, we launched skiing-themed marketing campaigns and rolled out various benefits to skiing enthusiasts so as to reinforce our positioning as an experience-driven platform and further engage our user base. On the international front, we focused on improving operational efficiency by implementing a more disciplined subsidy policy and expanding our VAS offerings. As a result, we achieved a balanced growth in both volume and revenue throughout the year with volume growth of nearly 25% for 2025. As mentioned at the beginning of the speech, 2025 marked a milestone year for our hotel management business with significant progress achieved. This year, we successfully completed the acquisition of Wanda Hotels and Resorts, a company that possesses a renowned portfolio of upper upscale and luxury hotel brands with strong market presence in China. In addition to its hotel management expertise, the company is the only hotel management firm in China with proven specialization in operating scale resorts. This unique capability can help us strengthen supply chain resources in the travel industry, thereby enhancing our influence and competitiveness. Furthermore, Wanda Hotels and Resorts operates its own in-house design institute which is recognized as one of the leading hospitality design teams in China and has received numerous prestigious international awards. The team possesses strong capabilities in designing and managing large-scale hotels as well as convention and exhibition centers. Its design solutions serve not only its own properties, but also high-end hospitality projects across the industry. Following the acquisition, the Wanda Hotels and Resorts team underwent a seamless integration process, resulting in a significant boost to its vitality and optimized organizational capacity and refined strategic direction. This strategic integration has improved our brand portfolio, strengthened our market presence and accelerated the sustainable growth of our hotel management business. Regarding our eLong hotel technology platform, we remain focused on expanding our geographical footprint while prioritizing quality growth throughout the year. The platform also offers technology-enabled hotel management solutions featuring a proprietary property management system, a smart marketing solution, [indiscernible] and service robots for automated in-room delivery. By the end of December, our total number of hotels in operation exceeded 3,000 with more than 1,800 in the pipeline. Looking ahead, we are committed to further expanding our asset-light hotel management business through network expansion and ecosystem enablement. This strategic approach will position us to achieve leadership in China's hotel industry and establish a second growth engine for the company. Traffic operation has been the foundation of our success, leveraging the Weixin Mini program, we have effectively reached a broad user base across China, in particular, those in lower-tier cities. Over the past year, the Weixin ecosystem continued to serve as a critical traffic channel, where we focused on enhancing operational efficiency. At the same time, our stand-alone app, a key driver of new user acquisition, demonstrated strong growth momentum over the past 4 quarters. To attract younger demographics, we rolled out a series of innovative products and engaging marketing campaigns to enhance user mind share and solidify our positioning as an experience-oriented travel platform. As such, the average DAUs of our stand-alone app posted more than 30% growth year-over-year in 2025. Additionally, social media has played an increasingly vital role in engaging users, particularly those younger audiences. During the year, we stepped up our efforts in social media platforms to connect with younger travelers and broadened our user reach through effective and targeted user engagement. We have accumulated the most extensive user base in China's OTA industry. For the 12 months ended December 2025, our annual paying users climbed to 253 million, representing a year-over-year growth of 6%. In addition, the accumulated number of passengers served on our platform over the past 12 months continued to expand and reached 2,034 million with an annual purchase frequency exceeding 8x per user. Moreover, our annual ARPU for the year further rose to RMB 76.8, reflecting a year-over-year growth of 5.5%. Besides our MPU also maintained a growth trajectory throughout the year and increased by 6% year-over-year to 46 million for 2025. As an innovation-driven company, we fully embrace new technologies such as Gen AI to transform our business. In December, we rolled out collaboration with Yuanbao, enabling users to access to our travel booking services via the Weixin Mini program by searching travel itineraries on Yuanbao app. In mid-March last year, we introduced our AI-powered travel planner, DeepTrip, which integrates the supply chain capabilities and market insights of our platform with the resuming capabilities of DeepSeek. Over the past few quarters, we have continuously refined its functionality, incorporating social features to enhance its shareability among users. In the fourth quarter, we embedded a map tool to give users a clearer visual representation of their travel destinations. By the end of December, approximately 6.8 million users in total have utilized DeepTrip. Additionally, we extended its application to some business scenarios by integrating DeepTrip into air ticketing service. We aim to address users' prebooking inquiries as well as helping them find competitive ticket prices, which not only improved operational efficiency, but also enhanced overall user experience. In customer service, AI now covers around 80% of user inquiries, demonstrating its important role in streamlining operations and enhancing user experience. Over the past year, we have consistently advanced the integration of AI in every phase of the customer service process, which not only reduced the workload of customer service staff, but also improved overall operational efficiency. Furthermore, we have made continuous advancements in AI capabilities to enhance its precision in identifying user requests and delivering timeless, contextually relevant and human-like responses. By leveraging AI-driven solutions, we aim to further optimize customer interaction, reduce response time and maintain seamless user support as we continue to grow. In pursuit of global excellence in ESG practices, we have achieved milestones in improving our ESG performance over the past few years. Notably, in 2025, our MSCI ESG rating was elevated to the top AAA level, surpassing 95% of global industry players. In addition, we were included in the S&P Global Sustainability Yearbook China for the third consecutive year, and we were also honored with the Industry Mover Award for our remarkable progress in driving sustainable development within our sector. All these achievements have not only demonstrated our leadership in ESG performance among global peers, but also reflected our resilience and excellence in corporate sustainability in the face of market uncertainties, evolving policy landscape and dynamic social development, we remain dedicated to further strengthening our ESG practices and contributing to a more sustainable future. I'll stop here and give the call to our CFO, Julian. He will share with you the detailed financials in the fourth quarter and for the year of 2025. Julian, it's your turn. Lei Fan: Thank you, Joyce. Good evening, everyone. Over the past quarter, China's travel industry showcased remarkable resilience driven by rising demand for immersive and experiential travel experiences across both traditional holiday hotspots and newly emerging destinations. Leveraging our profound understanding of evolving traveler preferences, we delivered another quarter of robust performance, capping off a highly productive year. In the fourth quarter of 2025, we achieved healthy growth in both top and bottom line. We reported net revenue of RMB 4.8 billion, representing a 14.2% year-over-year increase from the same period of 2024. We executed targeted marketing campaigns to strategically prepare for the 2026 Chinese New Year, while upholding rigorous cost discipline to ensure financial prudence. During the fourth quarter, our adjusted net profit rose to RMB 779.8 million, reflecting an 18.1% year-over-year growth. The increase was principally fueled by the enhanced economies of scale and the optimized operations of our OTA business. Our core OTA business revenue registered a 17.5% year-over-year increase to RMB 4.1 billion during the fourth quarter of 2025. Our accommodation reservation business achieved RMB 1.3 billion in revenue for the fourth quarter of 2025, representing a 15.4% increase from the same period in 2024. The revenue increase was primarily driven by growth in hotel room nights sold, coupled with a modest rise in ADR. In our domestic accommodation business, we proactively explored diverse accommodation scenarios to capture emerging growth opportunities, including themed offerings tailored to specific demand such as winter vacation and exam season space. For our outbound accommodation business, we strengthened cooperation with third-party partners to expand product offerings as well as our destination footprint catering to growing user demand. In the fourth quarter, our ADR once again achieved year-over-year growth, benefiting from growing consumer demand for high-quality hotels and our proactive adjustment to user subsidy strategies, supported by precise and disciplined marketing strategies. Our net take rate remained stable year-over-year. Our transportation ticketing revenue for the fourth quarter reached RMB 1.8 billion, marking a 6.5% year-over-year increase compared with the same period of 2024. During the past quarter, we heightened our focus on improving user experience. We actively expanded travel supply chain and enriched VAS offerings to deliver a broader range of mobility options and ensure seamless travel experience for users. As for our international air ticketing business, it achieved balanced growth in both volume and revenue, which aligns with our long-term strategy. In the fourth quarter, our international air ticketing revenue increased to more than 7% of our total transportation ticketing revenue. Our other business segment maintained stellar growth momentum with revenue reaching RMB 916.7 million in the fourth quarter, representing a growth of 53% year-over-year. This growth was mainly propelled by outstanding performance of our hotel management business and the consolidation of Wanda Hotels and Resorts. Our tourism business achieved a revenue of RMB 777.5 million, which was largely flat year-over-year. mainly due to our proactive reduction in prepurchased business as well as softer demand for Southeast Asia and Japan. In terms of profitability, our gross profit increased by 18.5% year-over-year to RMB 3.2 billion for the fourth quarter of 2025. The operating profit margin of our core OTA business remained flat year-over-year for the fourth quarter of 2025, while the operating profit margin of our tourism business has been affected by the one-off goodwill impairment. Our adjusted EBITDA increased by 28.6% and reached RMB 1.3 billion in the fourth quarter of 2025. Adjusted net profit grew by 18.1% to RMB 779.8 million in the fourth quarter of 2025. Adjusted basic EPS for the fourth quarter of 2025 was RMB 0.33 with a 17.9% year-over-year increase compared to the same period in 2024. Service development and administrative expenses in the fourth quarter of 2025 increased by 6.8% from the same period of 2024. Excluding share-based compensation charges, service development and administrative expenses in total accounted for 18.1% of revenue in the fourth quarter compared with 18.6% of revenue in the same period of 2024. Selling and marketing expenses in the fourth quarter of 2025 increased by 22.7% from the same period of 2024, excluding share-based compensation charges. Selling and marketing expenses accounted for 32.4% of revenue in the fourth quarter compared with 30.2% of revenue in the same period of 2024. Now let's move to our results for financial year 2025. Our net revenue in 2025 achieved RMB 19.4 billion, representing an 11.9% year-over-year increase. The core OTA revenue achieved RMB 16.5 billion, representing a 16% year-over-year increase. Our accommodation reservation revenue was RMB 5.5 billion in 2025, representing a 16.8% year-over-year increase. Our transportation ticketing revenue reached RMB 7.9 billion, representing a 9.6% year-over-year increase. Other business revenue for 2025 achieved RMB 3.1 billion, representing a 34.4% year-over-year increase. Our tourism revenue for 2025 reached RMB 2.9 billion, representing a 6.9% year-over-year decrease. In terms of profitability, our gross profit in 2025 increased by 15.7% year-over-year to RMB 12.9 billion. Adjusted EBITDA for 2025 improved by 26.9% year-over-year to RMB 5.1 billion. Meanwhile, adjusted net profit for 2025 increased by 22.2% year-over-year to RMB 3.4 billion. Adjusted basic EPS for 2025 was RMB 1.45 with a 20.8% year-over-year increase. As of December 31, 2025, the balance of cash and cash equivalents, restricted cash and short-term investments was RMB 12.3 billion. We highly appreciate our shareholders' consistent support and are committed to delivering sustainable capital returns. Our Board of Directors has proposed a final cash dividend of HKD 0.25 per share, marking a 38.9% increase from last year. This reflects our commitment to enhance capital returns to shareholders. Over the past year, China's travel industry has demonstrated increasingly prominent trends towards diversification and personalization as consumers place growing emphasis on emotional value and unique experience-driven travel opportunities. Notably, the 2026 Spring Festival represented the longest holiday period on record. During the 9-day holiday, consumers divided their holidays into multiple shorter trips such as homecoming visits and vacation travel. Incremental demand from multiple trips during the festival has driven robust growth in our business volume. In addition, the pilot implementation of spring and autumn vacations initially launched in Zhejiang and Sichuan has been expanded to include more regions such as Jiangsu and Anhui. We believe this initiative will help stimulate travel consumption and provide additional momentum to the growth of the tourism industry. Such supportive government policy, combined with sustained strength in user demand, fuels our optimism about the upward trajectory of China's travel industry in the coming year. Moving forward, we will remain focused on our core OTA business, providing users with diverse domestic and international travel products while sparing no effort to enhance user experience. As we continue to improve operational efficiency in domestic OTA operations, we will actively expand our outbound business to bolster our global brand presence. Additionally, our hotel management business will enter a new phase of high-quality growth, building a solid foundation for the company's long-term sustainable development. Concurrently, we will continue to adopt technological innovations as well as deepening the integration of AI technology with our supply chain capabilities, striving to better meet user needs. Last but not least, we will strengthen our corporate social responsibility to support the healthy development of the travel industry and to create greater value for our stakeholders. With that, operator, we are ready to take questions now. Thank you. Operator: [Operator Instructions] We will now take our first question from the line of [ Xi Wei Liu ] from Citi. Unknown Analyst: Xi Wei From Citi. Congratulations to the company on a solid operating performance. I have 2 questions. The first about outbound travel. There have been many flight cancellations between China and Japan recently. How has this impacted your outbound business? Could you share the regional breakdown of your outbound markets? And what are your 2026 targets for outbound revenue growth and profitability? The second about large model and AI strategy. The company has actually rolled out some partnerships with large models so far. In the long run, as AI model portals become more important, how will the company position itself? Joyce Li: Thank you, Xi Wei for the question. The first one is in terms of outbound travel. We did observe a decline in Japan-bound travel volume given the current circumstance. However, the overall impact on our business has been limited as outbound travel accounts for only around 5% to 6% of our total transportation and accommodation revenue. And at the same time, outbound travel demand remains resilient, and we have been seeing users shift to alternative destinations rather than cancel their travel plans. During the Chinese New Year holiday, shop to middle-haul destinations within a 5-hour flight regions such as South Korea, Singapore, Malaysia, Hong Kong and Macau remain among the most popular choices, while demand for Thailand also shown signs of gradual recovery. In addition, demand for long-haul travel increased year-over-year with European destinations such as Italy and Spain seeing particular strong growth. We have been actively adjusting our product offerings and marketing focus to capture this demand shift. Overall, given the relatively small contribution of our outbound travel to our core OTA business and the substitution effect across destinations, we do not expect a material impact on our overall performance. And looking ahead to 2026, our priority remains to further improve the quality of growth by enhancing pricing discipline, optimizing marketing efficiency and strengthening cross-selling from air tickets to accommodation and other travel products. At the same time, we will continue to deepen partnerships with global suppliers to improve service capabilities and user experience. Overall, we expect the international business to continue expanding in scale and become an increasingly meaningful contributor to our revenue. Over the next 2 to 3 years, growing business volume and expanding the user base will remain the key priorities while maintaining a strong focus on improving growth quality and profitability. We expect the revenue contribution from the outbound segment to increase to around 10% to 15% with increasing operating leverage over time. And in terms of the AI cooperation, our AI strategy focused on enhancing both user experience and operational efficiency as we continue to evolve from a traditional OTA toward a more intelligent travel platform. We see AI as a core capability that helps us better understand user needs, improving decision-making and optimize service delivery across the entire travel journey. At the same time, AI-driven efficiency improvements are significantly enhancing staff productivity and optimize our cost structure, which we believe will be an important driver of margin improvement over time. On the user side, we have integrated our proprietary travel-specific AI with advanced large language models to develop DeepTrip, which supports itinerary planning, travel inspiration and personalized product recommendations. By combining AI capabilities with our real-time supply and transaction ecosystem, DeepTrip provides a practical and actionable solution and enables a seamless end-to-end booking experience. We will continue to iterate its functionalities to better support users across different travel scenarios. And as a positioning of us, I think that we have been started exploring the partnership with large AI platforms and large model ecosystems. For example, we enabled traffic [ redirection ] from Yuanbao to our mini programs and apps. So our strategy is to actively participate in the emerging AI ecosystem by positioning our platform as a trusted travel service partner with deep market insights and a strong understanding of user behaviors. Leveraging our long-term accumulation of transaction data and operational experience, we are able to provide users with more accurate recommendations and practical bookable travel solutions on our AI platforms. Users who enter through AI platforms complete their bookings within our mini programs or apps and the related user and transaction data remain within our ecosystem. This allows us to maintain direct user relationships, accumulate valuable behavior insights and continuously optimize our product services and personalized recommendations. It also enables us to strengthen user engagement and lifetime value, which remains a key competitive advantage for our OTA platform. Going forward, we will continue to monitor development of the AI ecosystem and expand partnerships where it makes strategic sense, while maintaining our focus on strengthening our product service offerings, operational capabilities and user experience. Operator: We will now take our next question from Wei Xiong of UBS. Wei Xiong: First, I want to get your thoughts on regulations because recently, an OTA peer has been under antitrust investigation. So how should we think about the implications to the OTA sector? Do you foresee any impact on OTA's business model or lead to any change in the competitive landscape? Lei Fan: Thank you, Wei Xiong, -- please go on. Wei Xiong: Yes. Sure. So second question is on the hotel management business, which is set to become our second growth engine. So I wonder, could management elaborate your strategic focus and planning for this year? And what are the key operational goals and financial metrics that we look to achieve in 2026 and in the medium term as well? Lei Fan: Okay. Thank you for the question, Xiong, Wei. In terms of the investigations, as you mentioned, we closely monitor regulatory developments recently. At this stage, we have not observed any material changes that would impact our day-to-day operations. Tongcheng has always operated with a strong focus on compliance and fair cooperation with our partners. We believe a well-regulated market environment is beneficial to the long-term healthy development for the company and also for the industry. We will continue to adapt our business practices as required to ensure full compliance in the company. Overall, we remain focused on executing our strategy and delivering sustainable growth and profitability improvement. In terms of the hotel management plan, I think Joyce will have her words. Joyce Li: Thank you, Xiong, Wei. Actually, following the completion of the Wanda Hotels and Resorts acquisition, the integration has progressed smoothly and is better than our expectations. We have achieved rapid organizational alignment, revitalized organization and teams and further refined the strategic direction of the business. Overall, the post-acquisition integration has been very successful. On the synergy front, we are beginning to see encouraging early results. The addition of the Wanda's upscale and luxury brands has enhanced our overall brand portfolio and strengthened our positioning in the middle to high-end segment of our hotel management business. At the same time, the integration has enabled better resource sharing across business development, operations and membership, which is gradually improving operational efficiency. It also further reinforced Tongcheng's presence within the accommodation supply chain. From the other perspective, Tongcheng also empowers Wanda Hotels and Resorts through our technology capabilities. By providing standardized system tools and digital solutions, we help improve internal operational efficiency while reducing research and development efforts and lowering system maintenance and third-party service costs. From a financial perspective, the acquisition has already delivered a positive contribution at the operational level as Wanda Hotels and Resorts is an established hotel management company with a solid operating track record. The consolidation has enhanced our revenue scale, optimized the business mix and strengthened the earnings visibility of the segment. As we move forward, our development strategy will remain disciplined with a focus on balancing scale expansion with operational efficiency and healthy returns, ensuring sustainable and high-quality growth of the business segment. With continued expansion of scale and improving operational efficiency, together with the contribution from Wanda Hotels and Resorts, we expect the hotel management segment to maintain strong revenue growth with a further improvement in profitability from 2026 onwards. Thank you. Operator: We will now take our next question from the line of Brian Gong of Citi. Brian Gong: Two questions here. First is, how do you -- how is the travel consumption trend for the industry in the first quarter considering recovery on hotel ADR. Do we still expect teens level on room nights growth this year? Second question is that recently, [indiscernible] has been under government's investigation. Do you think this will impact their cooperation with us and their stakeholding on us? [indiscernible] is adjusting their hotel business to comply with government's requirement. How will this impact the industry and us? Lei Fan: Okay. Thank you for the questions, Brian. In terms of the first quarter's performance and also the industry outlook, actually, during the Chinese New Year holiday, as we mentioned in the prepared remarks, the China travel market continued to demonstrate very solid demand. According to the Ministry of Transport, national passengers throughput during the 9-day Chinese New Year holiday reached a throughput record 8.2% year-over-year growth during the holiday with decent growth for both long-haul and short-haul travel. Our passenger throughput of railway and airline increased by around 10% and 7% year-over-year, respectively. Meanwhile, according to the industry statistics, overall hotel ADR increased during the Chinese New Year holiday among all segments. With demand for family reunions concentrated in the pre-holiday period, we observed a pickup in passenger throughput during the latter part of the Chinese New Year holiday this year. In response, we promptly adjusted our operational resources, strengthened supply coordinations with our partners and enhance the targeted marketing efforts to capture the rebound in travel demand and improve conversion efficiency in the latter part of Chinese New Year holiday. So as a result, we continue to outperform the industry in the first quarter and also during the 9-day Chinese New Year holiday with especially strong momentum in our accommodation business. Average daily room nights sold increased by 30%. Specifically, room night growth for 3-star and above hotels significantly outpaced that of lower-tier properties. This reflects our ability to respond effectively to changing user preferences as more travelers place greater emphasis on higher quality accommodation experiences. As a result, our hotel ADR in quarter 1 maintained a positive trend during the period and once again exceeded the industry average. For transportation business, we continue to focus on improving monetization, while average daily air ticket volume was broadly in line with the overall market. And also for the room nights growth in the full year of 2026, actually, I cannot provide a very clear numbers here because of the short booking window. But as we mentioned, looking into 2026, we continue to view the long-term fundamentals of China's travel market positively. Consumer preferences are increasingly shifting towards experiential-oriented spending with growing interest in event-driven and themed travel such as concerts, exhibitions and outdoor activities. At the same time, travel is becoming more integrated into everyday lifestyle, supporting more frequent and diversified travel demand. In addition, supportive policy measures aimed at expanding domestic consumptions and promoting high-quality tourism development provide a favorable backdrop for the whole industry. And also for the second question about the investigation, actually, we don't monitor any change on the cooperation with Trip and also, we don't monitor any change of the shareholder structures or potential change of the shareholder structures. So currently, as I mentioned in previous question, we're just focusing on our own execution and long-term competitiveness improvement. So actually, our strategy remains very consistent, focusing on enhancing our user value, improve the ARPU, strengthening our product and service capabilities and deepening cooperation with our suppliers through a mutual beneficial approach. And also, at the same time, we will continue to take a disciplined and prudent approach while monitoring the industry regulatory development. Thank you for the question. Operator: We will now take our next question from Yang Liu of Morgan Stanley. Yang Liu: I have 2 questions. The first one is also related with AI. Could management elaborate more about the DeepTrip's contribution to the business, especially on the business -- overall business volume and also cross-selling side? And my second question is regarding the marketing intensity this year, given the geopolitical risk in both China and Japan and also Middle East this year, will management adjust the outbound business marketing intensity? Yes, that is my second question. Joyce Li: Thank you. The first question is concerning our DeepTrip. As I mentioned, DeepTrip is our AI-driven travel planner that use the reasoning power of DeepSeek and our platform supply chain advantages to create personalized travel itineraries. Since launch, DeepTrip has served about 7 million users with orders placed through the platform steadily increasing over the past few months. Over the past quarters, we continue to enhance DeepTrip with the goal of strengthening user awareness and building long-term trust. We have been continuously upgrading its user-facing capabilities to support more comprehensive travel planning. Key enhancements include the integration of trend transfer data to enable seamless multimodal itineraries. The addition of social sharing features to improve engagement as introduction of a map tool in the fourth quarter to provide a more intuitive visualization of travel plans. In addition, DeepTrip has been embedded into our air-ticketing service to help users address pre-booking inquiries and identify more competitive fare options, delivering a more seamless booking experience. Beyond user-facing applications, we have also extended DeepTrip into different business scenarios to improve operational efficiency. We integrated customer service agent capabilities into DeepTrip to respond to customer inquiries directly within DeepTrip and guide users to human support when needed. For corporate clients, we piloted a travel booking suggesting tool customized according to travel profiles, business travel policies and past bookings. In the future, DeepTrip will continue to serve as a platform for understanding and addressing users' comprehensive travel needs across diverse scenarios. We will further leveraging our AI capabilities across various business segments to provide valuable solutions to users, thereby strengthening our competitive advantages. Additionally, we have begun the cooperation with [indiscernible] to acquire more traffic. We're also actively exploring potential collaborations with our AI agent platform to further broaden our reach and engagement opportunities. We remain committed to leading AI innovation, continuously increasing the investments in this area and delivering cutting-edge user-focused features to elevate our user travel experience. And in terms of the current circumstance in terms of outbound business, we have seen considerable growth potential in the outbound tourism market. As the travel habits evolve, more travelers are eager to explore the international destinations. The number of outbound tourists is still significantly lower than the domestic travelers, revealing a substantial opportunities for expansion in this area. At present, we believe that there are only a limited number of Chinese OTA players have the capabilities and resources to actively drive outbound business. This situation place us in a favorable positioning facing relatively low competitive pressure and allowing us to fully capitalize on the growth potential of the market. Again, our strategy and confidence are anchored in the long-term growth prospects of China's outbound industry and our competitive advantages. While we remain agile in our short-term tactics in response to the market conditions, I think our business momentum remains unaffected. Thank you. Operator: In the interest of time, we will take our last question from Thomas Chong of Jefferies. Thomas Chong: Congratulations on a solid set of results. My first question is about our future growth driver and the take rate trend for accommodation and transportation. And my second question is relating to margin. How should we think about the 2026 margin trend as well as the margin driver in the future? Lei Fan: Thanks for the question, Thomas. For growth, actually, the company's focus remains on achieving a high-quality growth in 2026 by balancing scale expansion with operating efficiency improvement, while continuously enhancing our user value and ARPU. So in the first quarter and also the second quarter, we will prioritize healthy and sustainable growth across our core OTA segments, supported by improved operational efficiency and more refined resource allocation. At the same time, we will continue to strengthen our competitiveness positioning and capture growth opportunity to future expand our market presence. Within the core OTA business, we anticipate that the accommodation business will grow faster than transportation business through the whole year. For accommodation business, we believe that the growth will be driven by volume expansion and ADR improvement, as we mentioned a lot of times. Our volume is expected to continue outpacing the market growth, while our ADR will benefit from the ongoing upgrade in hotel star mix driven by shifts in user preference. So we think it's enough to support a very nicely growth for accommodation business by these 2 reasons. So this year, in terms of the take rate of the accommodation, we expect that the take rate may be stable year-over-year at 2025. For transportation business, volume growth will be in line with the market and still one of the reasons of the revenue growth for transportation. While our take rate improvement driven by cross-sell and VAS will continue to contribute to the revenue growth of the transportation segment. Also, we expect the hyper growth for other revenue, mainly due to Wanda consolidation since the middle of October last year and the hyper growth of our original hotel management and PMS business and also our Black Whale business, the membership business. In terms of the profitability, as we promised, the margin improvement is one of the very important strategic priorities for the company. For the reasons, one, for our core OTA business, the improvement in operational efficiency will continue to be an important driver of profitability over time. In particular, we are leveraging AI technologies to enhance both customer service automation and R&D efficiency, which help improve staff profitability and overall operating efficiencies. For the development of our hotel management business, including eLong Hotel Technology platform and Wanda Hotels and Resorts, we will continue to support its high-quality expansion with a near-term focus on scaling the business, while the return profile is expected to improve progressively as the business matures. For our international business, we will maintain a very prudent approach as we continue to build the foundation for future growth and cultivate the company's next growth engine over the coming years. Last, in terms of the marketing investments, our marketing dollars may fluctuate slightly depending on market opportunity. For example, in quarter 4 last year and quarter 1 this year, we identified strong early booking demand for the 9-day Chinese New Year holiday period and therefore, increased our marketing investments to capture early demand and gain market share. At the same time, we will continue to strengthen ROI management across different marketing channels. So overall, we will continue to balance growth opportunities with disciplined cost management while focusing on improving operational efficiency across the business and improve our margins. Thank you. Operator: That's the end of the question-and-answer session. Thank you very much for all your questions. I'd now like to turn the conference back to Ms. Kylie Yeung, for closing comments. Kylie Yeung: Thank you. We are closing the call now. If you wish to check out our presentation and other financial information, please visit the IR section of our company website. Thank you, and see you next quarter. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.
Operator: Ladies and gentlemen, good afternoon. Welcome, and thank you for joining the Exor Investor and Analyst Call. Please note that the presentation is available to download on Exor website www.exor.com under the Investors and Media, Events & Presentations section. Any forward-looking statements Exor management makes are covered by the safe harbor statement included in the presentation material. Please note that this conference is being recorded. [Operator Instructions]. At this time, I would like to turn the conference over to your host, CEO, John Elkann. Please go ahead. John Elkann: Good morning, good afternoon and good evening to all of you. Thank you for being here today with us. 2025 was a difficult year in many different ways for Exor and for our companies. But it also has been a year that has helped us be more focused and be more resilient, which enables us as a company to be better prepared for another difficult year, which will be 2026. Today, we want to talk to you about our companies. We have less of them and we have more in health care. We want to speak to you about Lingotto who has reached a very important milestone in '25, reaching EUR 10 billion of assets under management driven by performance, which is exactly in line with our intentions of building an investment organization interested in performance, not in gathering assets. And finally, our financials that on the back of disposals have provided us with a strong balance sheet and also the opportunity in '25 of doing a large buyback of EUR 1 billion, which if you add to the ones that we've done in prior years taking into account our large discount has allowed us to buy up to close to 15% of our shares. Our portfolio today reflects the latest disposal, which is JD, which we were able to conclude and the money got wired yesterday, and it reflects a Exor as we move towards '26, which would be one of less companies where we'll be able to focus particularly on our larger ones. And that's where I'd like to proceed. And I'd like to start with Stellantis who has been the one that has encountered both external difficulties and internal difficulties in the course of '25. It is resetting itself and under the leadership of Antonio Filosa, it is addressing the many challenges that is confronted with, both externally but also internally. We are getting to an important year in '26 with the Capital Markets Day, where Stellantis, end of May, will present its future, where it intends to be very clear about how it will improve as a company and make sure that it is and will remain one of the leaders in what is a defining industry. Ferrari, on the other hand, has already spoke about its future in '25 in the Capital Markets Day, where it is committed to growing, but growing in a way in which the uniqueness of what it does continues to be unique. And '26 is a defining year with the launch of the Ferrari Luce, the first-ever electric car, which will also happen in the end of May with the third act of the launch that started at the Capital Markets Day presenting the technologies of the Ferrari Luce, which then had beginning of this year with the interiors and finally, the final car, end of May in Rome. I would like now to pass to my colleague, Benoit, to speak to you about Philips, which is a company in which we continue to invest in '25. And today, is in terms of value, the second largest company for Exor. Benoit Ribadeau-Dumas: Thank you, John. 2025 was the last year of the '23, '25 plan that we underwrote in 2023 when we invested in Philips for the first time. So it was good to see at the end of this plan, the company delivering a strong performance, a solid performance with, in particular, a strong margin expansion, which is the result of the ambitious reorganization and productivity plans that have been launched by the CEO, Roy Jakobs. And second, we saw also in 2025, and it was long awaited a peak in the order intake after years of moderate growth and it was -- it is paving the way for a new momentum of the company. The stock price so far has not been following the performance. So we have decided to increase our stake last year to reach 90% -- 19% economic rights. Also, we were glad to see the company announcing earlier this year the new plan, the new 3-year plan for 2026, 2028, after a phase where the focus was on execution and on exiting the quality crisis of the Sleep and Respironics business. This is a renewed ambition for the company, which is now targeting mid-single-digit sales growth and mid-teens profit margin. Of course, continuing the efforts that they launched on quality and productivity enhancement, but also accelerating in the delivery of new products fueled by AI and fueled by the high level of R&D that this company has always been part of. So we are a happy shareholder of Philips, and we are looking forward to seeing their next progresses. Suzanne on CNH. Suzanne Heywood: Thank you, Benoit. So CNH had a challenging year in 2025 because of the downturn in the agricultural market. exacerbated, of course, by some of the geopolitical events that have been going on as well as some of the changes in tariffs and that is expected to continue into 2026 as already communicated by the company. At its Investor Day in May '25, CNH presented its path to 2030, and we think this is very important because it includes a number of different measures that will strengthen the company and enable it to come out of this downturn in a strong way. One is expanding the margins of the company through the cycle. And an important part of that is addressing some of the quality issues that it needs to address within the company. It is also looking to launch a series of new products new technologies, in particular, those around precision farming, which, of course, are very, very important for our customers and also a focus on costs, in particular, supply costs for the organization. The company has a lot to do, but it also has a lot to look forward to as it comes out of this cycle, given its tremendous lineup of products, both on the agriculture side and on the construction side, so we look forward to continuing to be a shareholder in the company. I also want to take this moment to do an update on Iveco. This is an important moment for Iveco. Last year, we celebrated with Iveco the first 50 years of its history. And this -- and last year, we also agreed and are participating in 2 extraordinary transactions in relation to Iveco. The first of these is the sale of Iveco Defence to Leonardo. This is the Iveco Defence business, and this transaction closed on March 18 with the expectation that the dividends will be distributed at the end of April. This transaction for Iveco Defence secures a future for the defense business within Iveco, secures a future for it now with Leonardo, which will give it increased scale. The remainder of the business, which is the trucks, buses and engines business will be combined with Tata Motors through a tender offer, which we're expecting to close at the end of the second quarter. The total valuation of both of these transactions will be EUR 5.3 billion. I want to take this moment to thank the 2 CEOs that have led Iveco through the period since it was spun out of CNH back in 2022, Gerrit Marx and Olof Persson, and of course, their management teams as well. We wish all parts of the Iveco business, a very successful next 50 years within their new ownership. I now pass back to John. John Elkann: Thank you, Suzanne, and it's also the opportunity for me to thank the leadership team and all their colleagues at Iveco and wish Iveco an important journey ahead as it opens for the new future with Leonardo and Tata. Coming back to Exor, if we look at our unlisted companies, they delivered mixed results. The good news is that our bigger companies in terms of value have performed better than our smaller ones. Welltec had an extraordinary year, while Shang Xia continued to have a difficult year. We expect the overall companies that we have as unlisted to present themselves in '26 with strong plans ahead and continuing to do in aggregate well. I would like now to speak about Lingotto which had a very important year in 2025. Lingotto was founded in '23 to really converge all the different investment activities that we were doing in partnering and directly in Exor. We now no longer have any investments outside of our companies, which are the ones in which we are involved in their governance. And everything we do outside will be carried forward within the investment strategies of Lingotto who today are 4. Of these 4, the one that has performed the best is the intersection fund led by Matteo Scolari and the overall aggregate returns of the 4 strategies have allowed ingot to reach USD 10 billion under management. What is encouraging is this has been driven by performance and what was really -- it was really what we expected when we founded Lingotto an organization, an investment management organization where the principle is what the organization cares about. And investing is what they do in order to grow through performance rather than gathering assets. The good news is on the interest of specific parties, which we've been very selective in allowing to invest alongside us, the quality of the investors and also the quality of what their mandate is, of which most are linked to societal causes are encouraging to see how we have alongside us very capable investors which invest for important causes. I would like now to pass it to Guido to walk you through our financials. Guido de Boer: Thank you, John. So on this slide, we recap what John, Suzanne and Benoit mentioned previously. So our NAV per share started the year at EUR 178 the biggest movers in a negative sense were 3 of our largest companies, Ferrari, Stellantis and CNH contributing in total for a EUR 25 per share decline in our NAV per share. This was partly offset by decent performance of our other companies, as John just highlighted, an outstanding performance at Lingotto, going up 40% in the year. And in addition, we invested EUR 1 billion in buybacks at over a 50% discount which contributed EUR 4.7 per share, and EUR 2.5 per share. So overall, we ended at EUR 164.4, so down for the year. If we look at our objectives, which are twofold. The first one is a relative performance metric where we look at NAV per share versus MSCI World Index. And the second one is an absolute performance measure, total shareholder return. So to first go to the relative one. In 2024, we actually had a pretty good year at 9% NAV per share growth at a very challenging benchmark, where the Magnificent 7 did great in the MSCI went up by 25%. 2025, we actually had a much easier comparable because those similar 7 companies did not perform as well. but we actually declined in NAV per share, as I just showed you. And on the back of an increase in the discount, our total shareholder return is below our NAV per share growth. So then moving to the measures that we track every year to make sure we operate in an efficient and disciplined way. The first one we track is free cash flow over dividend. As a measure of the financial health that we have in terms of cash flows. That is still at a very healthy level at almost 6x, notwithstanding a decline in the dividend of Stellantis. Management cost over GAV. So an indication of how efficiently we manage our overhead is world-class it went up largely driven by the decrease in GAV increasing it as a percentage. And also loan-to-value which measures how aggressively we are levered is down to 6.9%, notwithstanding the reduction in GAV. And that's primarily because we realized EUR 3 billion of proceeds from the sale of Ferrari shares. We reinvested that partially, but we also increased our cash position. So we're in a healthy place there. So if we look at our balance sheet, which is critical in these turbulent times, we are very strong. So our loan-to-value ratio is at 6.9%. Our bond maturities are very well spread out. We refinanced EUR 600 million in 2025. And now that has a maturity in 2035. We have a payment coming up of $170 million of a private placement, which we can finance out of our cash position. And on top of this low repayment requirement in the coming years, we have a EUR 1.1 billion credit facility, which we extended and doubled in the year. and we have a EUR 1.4 billion cash position as of December 2025. So in a very healthy position indeed. So these are the financial slides that I would like to present, and I want to hand over to John for the concluding slides. John Elkann: Thank you, Guido. We entered '26 with momentum. We have to complete the transactions that we have announced. On the back of those, as Guido mentioned, we will have been strengthening our balance sheet with close to EUR 3 billion additional resources. And if we look at the returns of what we have been divesting, we're speaking about 1.4x on cost. Now in moments like the ones we are living, which are uncertain times, what is key is to have liquidity and preserve capital. So we feel that having close to EUR 4 billion, as we conduct and conclude the transactions that I described puts Exor in a very strong position in an uncertain moment of time. I would like to conclude by giving you which are the priorities that we have as a company. We want to focus and focus particularly on our larger companies because that's where we believe the greatest value is. We want to continue to simplify our portfolio by conducting to closure the transactions that we have announced and continue to divest from our other assets. And we are committed to a strong balance sheet, which is even more valuable in moments like the ones we are living and be ready to deploy capital with discipline when the time is right. I would like to thank you all for your commitment. I would like to thank you all for believing in Exor. We realize that '25 was a difficult year on the back of a difficult year that '24 was. We are also very aware that the environment in which we find ourselves is uncertain in '26 but we do feel that the last 2 years have strengthened us and we enter this difficult year stronger than we were in the last 2 years. This is why I wanted to conclude with the quote that I have at the end of our letter which I deeply believe is one of the strengths that we have as an organization. Thank you, and we look forward to answering your many questions. Operator: [Operator Instructions]. We are now going to proceed with our first question. And the questions come from the line of Monica Bosio from Intesa Sanpaolo. Monica Bosio: Good morning, everyone, and good afternoon, everyone. I have basically 2, 3 questions. The first one is, obviously, cash is king in this tough environment. But maybe should we assume that no deal will be announced across the entire 2026 and that the time frame will be longer. And the last conference call, the company clearly stated its interest for 3 main sectors, the health care, the luxury and the technology with no clear priority. Are still the sector where the company wants to invest or maybe something else changed in the selection list. And another question is on deployment of the cash. Following the EUR 1 billion buyback in 2025. I was wondering if the company is willing to execute another buyback program in the future? And if yes, could the buyback be taken into consideration jointly with the new investments? Or could it be considered only in case no significant investments opportunities arise? John Elkann: [Foreign Language]. Monica, those were all incredible questions. The timing is really linked to making sure that we find the opportune investment. And I think that in times like the ones we're living on one side, one needs to be prudent. On the other side, one needs to be patient. And we want to make sure that we are sufficiently patient to capture the best possible opportunity. In terms of interest of sectors, we remain convinced that the sectors that you mentioned are interesting sectors, technology, luxury and health care with interesting valuations. But we also think that we should be open to other sectors and not preclude ourselves better opportunities if we were to find them. We also think that the companies that we own within the sectors in which we're present remain interesting, which is the reason why we have deployed money in '25 in Philips and bioMérieux. And if you add our investment in Institut Mérieux plus bioMérieux is de facto our fifth largest investment today. So the fifth most largest company if you combine Institut Mérieux with bioMérieux. In terms of buyback, as I mentioned, we have been aggressively buying back shares, EUR 2.5 billion in the last years, which is approximately close to 15% of our capital. and with wider discounts, which we look at very favorably because they are the opportunity to do buybacks, which is a way to invest in ourselves are opportunities that, of course, we will continue to look and look with discipline. As of now, we believe that, as you said, cash is king, and it is a moment where making sure that we do have a fortress balance sheet is important. And that is also the case for our companies. we believe that our companies are all with very strong balance sheets, which is the most important thing when you do enter in uncertain times as we have learned in the past. So as much as I feel bad about '24 and '25, I also realize that they have helped us both at Exor and our companies to enter these uncertain times much stronger. Operator: We are now going to proceed with our next question, and the question comes from the line of Martino De Ambroggi from Equita SIM. John Elkann: You must be happy about Iveco. Martino De Ambroggi: No. Not anymore. The first question is on Lingotto. Could you elaborate on what is the strategy going ahead? And I don't know if it's possible just to have a fair value, current fair value, considering what happened in the past few weeks in the market turmoil. I don't know if you have an indication you can provide. The second is on the additional divestitures because if I understood correctly, you were talking about more divestitures. Is there any clue on what could be a moving part going ahead? And third, I know I repeat basically every year the same question, but now it's quite a long time with a discount to net asset value, well in excess of 50% and this morning, even much, much higher. What are the 3 main reasons justifying such a high discount in your view? Just to have a very -- your personal impression. And last, the environment is getting worse and worse. Could you provide us an update on your view on the Stellantis environment and risks considering what is going to happen? John Elkann: There's a lot of questions. So Lingotto, the strategy is very much the one that was stated in the letter that I wrote as the founder of Lingotto in '23. So this is an organization that wants to attract exceptional investors and make sure that they can do what they love, which is investing. We have 4 distinct strategies, as we have described in the past, and those remain consistent with what the strategies are. which allows us to have a diversified sets of strategies, which are different from what we do directly as Exor and it allows the right discipline also being able to have selectively third-party capital from, as I mentioned before, very solid investors. In terms of the recent events, we don't comment on where we stand on mark-to-market. And if you look at the opportunity of the discount, we actually have viewed that in a positive way because it has allowed us to buy back shares as we've done in the past. I think that it is important to stress that in moments of uncertainty, you're better off being patient than rushing, which is why for any capital allocation. Is it in buying our own companies investing more in Lingotto strategies, investing in a new company or doing buybacks? We remain prudent but studious of what would be the different alternatives. Stellantis was able to raise through an hybrid issuance which increased already a strong balance sheet and the overall execution that is being carried forward is on the right track. Giving today any further information on Stellantis is not desirable because we are, as you know, in end of May, we will be assisting to the Capital Markets Day of Stellantis. Thank you, Luigi. Operator: We are now going to proceed with our next question. And the questions come from the line of Luuk Van Beek from Degroof Petercam. Luuk Van Beek: Yes, I have 2 questions. So first of all, have you reviewed your portfolio for the potential impact of higher energy prices and any other things that are happening in the world to see the exposure and the risk level? And the second question is on the discount to NAV. Do you consider to take any measures other than just executing the strategy and delivering and testing on that reducing the discount? John Elkann: Energy prices is premature to actually see the inflationary pressures. But that is definitely something that our companies are working actively in understanding the inflationary pressures that are happening and what type of impact that would have on some of their cost structure. We believe that the discount is actually an opportunity, and that's something that we have been able to capture in the past. Operator: We are now going to proceed with our next question. And the questions come from the line of Alberto Villa from Intermonte SIM. Alberto Villa: Actually, First of all, congratulations for the annual report. It is very clear and very nice also to read. So congratulations to the team. And secondly, going back to Lingotto, it's now more than 11% of your GAV thanks to the performance and looking at the composition of the investments. The vast majority, 70% is the intersection strategy. So the public investments that had a great 2025. I was wondering if in the future, you expect to maybe take advantage of the performance to reduce a little bit the exposure to Lingotto or maybe to mix a little bit more into the to shift a little bit more into the other strategies and how you feel about private markets? So there has been a lot of rumors about the outlook for these asset classes, especially in the U.S. So wondering if you want to share with us your thoughts on that. John Elkann: Thank you. And I will, with Guido, convey your message on our annual report. There was a lot of work in doing it. So our colleagues will be very happy that you appreciated it. Lingotto is made of different strategies. We had committed in '22 on the back of the disposal of PartnerRe, EUR 6.5 billion, which had been divided EUR 5 billion into 1 large investment and into 3 to 5 smaller investments. And we executed that with Philips being the large investments and LifeNet, TagEnergy, Clarivate and Institut Mérieux being 4 smaller investment, whilst EUR 1.5 billion would have been deployed in investments, which back then were Lingotto strategies and ventures, and that has been done. We've also said that as we would be realizing the investment in what used to be Exor Ventures now managed by Ora, we would be recycling it within the strategies of Lingotto. The actual exercise that we do internally the portfolio review is exactly meant on one side to try and see how we think about what we own and the opportunity ahead. As of now, we're not considering allocating more capital to Lingotto strategies, but equally, we're not considering reducing our exposure to Lingotto strategy. Alberto Villa: Any thoughts about the private markets situation? John Elkann: In credit? Alberto Villa: Yes. John Elkann: Luckily, we're not exposed to the credit market, and we are increasing our net cash position the actual environment, as you know, is very tight. Operator: We are now going to proceed with our next question. And the questions come from the line of [ Nicola Gude from Alexco Capital ]. Unknown Analyst: Sorry to come back to the discount theme. But I mean the discount today is such that the shares are at [ 0.44 ] on the dollar, which means if you invest $100 in your share, it's $125 of value and actually probably much more because the shares are depressed in the portfolio, too. And so obviously, compared to that, it's a high bar for the acquisition of a new company. And I guess, is there room to do both in the sense you're mentioning a firepower of $2.5 billion for an acquisition. But why not return, say, $1 billion here and now and then do a $2.5 billion acquisition or something along those lines? Why is there any -- why can't both be done at the same time, I guess, because that would certainly go a long way to create NAV per share, which is the objective at the end for shareholders. John Elkann: So as I mentioned, we haven't committed to no allocation as we speak. What we have committed to is to make sure that we have a strong balance sheet, and we have liquidity. As it pertains to how we will invest it everything is open, and we will make sure that we will be disciplined in how we proceed. Operator: [Operator Instructions]. We are now going to proceed with our next question. And the questions come from the line of Andrea Balloni from Mediobanca. Andrea Balloni: I have a couple. First one is on the potential share buyback. I understand the reason why this year, you are pretty cautious. What could trigger a different decision from a macro standpoint over the rest of the year? What would you consider to be a potential positive catalyst or trigger to start eventually a share buyback program? And my second question is on the potential investment that you are considering. You have mentioned a relevant size and also a material stake that may be taken by Exor. Yet, are you scouting among listed companies such as in the case of Philips or should we expect an investment in private companies? John Elkann: Those are very good questions. On the first one, Today, we have compounding uncertainties. We have uncertainties around the overall commerce that has been triggered by changes between tariffs and regulations. We have uncertainties linked to conflicts that are happening in different parts of the world. We have uncertainties linked to markets that are moving in different directions. And finally, we have uncertainties on the deployment of a substantial new technology, which is AI, which has the power of fire or electricity, hence going to impact in many ways, the way in which companies operate, both in what they do and how they do it. So this is an environment in which we believe that it's important to be prudent and patient in order to really make sure that we can take the best out of it and I remain optimistic about the future of Exor and our companies and in some ways, having had to go through very difficult internal and external situations in the course of '24 and '25 equipped us well to what is ahead. In terms of what are we looking for, we believe that Philips is a good example of the type of companies that Exor would be a good owner of. And that is a function of 3 things. One size we have said last year that we'd like to deploy more than 5% in one company. Second, we think that public markets offer interesting opportunities. And we believe that companies that have a large shareholder or a reference shareholder empirically have proven to perform better within their industry or within an index. And third, we think that the opportunity of sectors where some of these changes that we were describing before, can lead to improvement in these companies. Our role factors that we think describe Philips as a good example. And as of now, we have been, as Benoit mentioned, been very happily involved and the outcomes so far have been good for the company and for Exor. Andrea Balloni: And a follow-up, please. Would you consider to invest a part of this fire power in some of the investments you already have in the portfolio? I'm thinking about Stellantis, Ferrari and other companies, which had a very bad trend recently. I was wondering if you might consider to increase your stake. John Elkann: As I mentioned before, that's a very good question, and that's why today making firm commitments of capital where is where I'd like to be prudent and patient because where would we invest we'd invest in our companies. We know them well. That's what we did last year in Philips and bioMérieux. We would invest in Lingotto strategies. As of now, I said, there's no intention in doing that. We would invest in new opportunities and new Philips or we would be investing in ourselves through a buyback which, as most of you have told us, is definitely very attractive, and we would agree with that. And we think that the bigger the discount is, the more attractive it is. And we have been quite deliberate and decisive in doing that over the last years. So today, we want to make sure about 2 things. One, are we equipped Exor and our companies to go through turbulent times. We believe so. Secondly, are we sufficiently patient to try and understand what is happening in order to be able to underwrite within those 4 possible allocations of capital, what is the one where we as an organization and a Board feel that, that's the best usage of capital, which we want to be disciplined in doing in the best interest of our shareholders. Andrea Balloni: Thank you. Operator: This concludes the question-and-answer session on the phone. I will now hand over for the written questions. John Elkann: So we have a question from ING, which is about the economics of our investment in Lingotto and how Exor benefit -- how it -- benefits. I will pass it to Guido. Guido de Boer: Thank you, John. So we are an investor in ingot Lotos funds. So through that fund, we receive the returns after performance fees. What helps us is that we also own the asset manager, we have co-investors in Covéa and many others that help share the cost of the infrastructure. So in that way, it makes for us a very efficient way to invest behind some of the most talented investors in the world. So I hope that answers your question. There were some follow-up questions from another person on the assets under management for Lingotto. Would you like to take that? Or shall I -- so I wouldn't say that there is a maximum in terms of assets under management for Lingotto as a whole. For individual strategies, there are and they're depending on the type of strategy. For us, what is key is that like John mentioned earlier, the objective for Lingotto not to be an asset gatherer, but an investment manager that delivers outstanding performance. So we will be very cautious that we don't grow the capital too much that it goes at the expense of performance. So that is maybe a bit more philosophical answer, but I think that is critical behind our thinking on assets under management for Lingotto. So those were the questions that we had on the webcast. If there's nothing else or I don't know if you want to make any further remarks, John. John Elkann: Thank you, Guido. Thank you all, and we'll make sure to make '26 the best possible year out of very uncertain and difficult circumstances. Thank you. Operator: Thank you all for participating. You may now disconnect your lines. Thank you.
Operator: Good day, everyone, and welcome to Leatt Corporation Fourth Quarter 2025 Results Conference Call. [Operator Instructions] Please note, this call may be recorded. [Operator Instructions] It is now my pleasure to turn the conference over to Michael Mason. Please go ahead. Michael Mason: Thanks, Reza. Good morning, and welcome to the Leatt Corporation investor conference call to discuss the financial results for the fourth quarter and full year 2025. My name is Michael Mason. The company issued a press release today, Tuesday, March 24, 2026, at 8:00 a.m. Eastern and filed its report with the SEC. The press release is posted on Leatt's website at leatt-corp.com. This call is being broadcast live and may be accessed on the company's website. An audio replay of this call will be available for 7 days and may be accessed from North America by calling 1 (844) 512-2921 or 1 (412) 317-6671 for international callers. The replay pin number is 11161317. A replay of the webcast will be available immediately following this call and will continue for 7 days. Certain statements in this conference call may constitute forward-looking statements. Actual results could differ materially from those discussed in this call. Leatt Corporation does not undertake any obligation to update such statements made in this call. Please refer to the complete cautionary statement regarding forward-looking statements in today's press release dated March 24, 2026. The company will make a presentation on the quarterly results and then open the call to questions. I'd now like to turn the call over to Mr. Sean MacDonald, CEO of Leatt Corporation. Good afternoon to you in Cape Town, Sean. Sean MacDonald: Thank you, Mike, and thank you all for joining us today. 2025 was a remarkable year for us, fueled by strong international demand for our innovative products, improved stocking dynamics, encouraging ordering patterns and a surge in consumer direct sales. The global demand for our products and an expanding Leatt brand that reaches a much wider group of riders around the world are helping us to build tremendous traction and momentum. We achieved double-digit revenue growth for the fifth consecutive quarter and year-over-year growth for the sixth consecutive quarter following the post-COVID industry-wide inventory overhang. Total global revenues for the year were $61.91 million, a 41% increase over 2024. International revenues were $44.64 million for the full 2025 year, up 47% year-over-year as our distributors continue to reorder and restock in line with global demand and stocking dynamics. Customer direct sales, an important focus for us, increased by 44% year-over-year and dealer direct sales with our reorganized and reenergized domestic sales force increased by 22%. For the fourth quarter of 2025, revenues increased by 43% year-over-year and gross profit as a percentage of sales increased to 46% as domestic sales continue to grow, and we continue to ship our new products. Net income for the quarter was $465,000, an increase of 204% over last year. We closed the year with robust double-digit revenue growth in all of our major product categories in 2025. It's a testament to the expertise of our creative design and engineering team and continued strong brand momentum. Helmet sales grew by 59% year-over-year. Sales of our flagship neck brace increased by 18%. Body armor revenues increased by 29%, which included a 40% increase in footwear sales and sales in our other products, parts and accessories category increased by 56% as technical apparel sales continued to show strong progress. Gross profit as a percentage of sales for the year increased to 44% year-over-year as domestic trading conditions continue to improve and our supply chain team achieved logistical efficiencies despite some uncertainty around global trade tariffs. For the full year 2025, income before tax was $4.41 million, an increase of $7.1 million compared to the full year of 2024. Net income for the year 2025 increased by 248% to $3.26 million, which we believe is a testament to our ability to generate strong revenues and robust margins. As we announced in December, our Board authorized an extension of our share repurchase program to purchase shares of outstanding Leatt common stock valued at up to $750,000. The program has been extended to March 31, 2026. We believe that this demonstrates our continued confidence in the strength of the company and our business plan as well as our commitment to enhance long-term shareholder value. Now I will turn to more details on sales of our product categories for the full year 2025 compared to 2024. Sales of our flagship neck brace designed to prevent potentially devastating sports injuries to the cervical spine were $2.89 million. an 18% increase, primarily due to a 35% increase in the volume of neck braces sold. Neck braces represented 5% of our total revenues for the year. Our body armor products are comprised of chest protectors, full upper body protectors, upper body protection vests, back protectors, knee braces, knee and elbow guards, off-road motorcycle boots and mountain biking shoes. Body armor revenues were $28.98 million, a 29% increase over 2024. The increase was due primarily to a 22% increase in the sales of upper body and limb protection products and a 40% increase in footwear sales, comprised of motorcycle boots and mountain biking shoes. Body armor products represented 47% of our total revenues for 2025. Helmet sales were $13.31 million, a 59% increase, primarily due to a 33% increase in the volume of helmets sold during the year. Helmets represented 21% of our revenues for the 2025 year. Our other parts, products and accessories category is comprised of goggles, hydration bags and apparel items, including jerseys, pants, shorts and jackets as well as aftermarket support items. Other products , parts and accessories sales were $16.73 million, 56% increase in the sales volumes of our MOTO, MTB and ADV technical apparel lines designed for off-road motorcycle, mountain biking and adventure motorcycle riding. Other products, parts and accessories represented 27% of our total revenues for the year. Now I will turn to our financial results in a bit more detail. Total revenues for the fourth quarter of 2025 were $16 million, a 43% increase compared to $11.2 million for the fourth quarter of 2024. Net income for the fourth quarter was $465,000 or $0.07 per basic and $0.07 per diluted share as compared to a net loss of $447,000 or $0.07 per basic and $0.07 per diluted share for the fourth quarter of 2024. Total revenues for the full year 2025 were $61.91 million, a 41% increase compared to revenues of $44 million for the full year 2024. This increase in worldwide revenues is attributable to a $6.52 million increase in body armor sales, a $4.92 million increase in helmet sales, a $6 million increase in other products, parts and accessories sales and a $450,000 increase in net sales. Net income for the full year 2025 was $3.26 million or $0.53 per basic share and $0.51 per diluted share, up by 248% compared to a net loss of $2.2 million or $0.35 per basic share and $0.34 per diluted share for 2024. Leatt continued to meet its working capital needs from cash on hand and internally generated cash flow from operations. And at December 31, 2025, the company had cash, cash equivalents and restricted cash of $13.23 million compared to $12.37 million at December 31, 2024, and a current ratio of 4.9:1. Looking forward, the momentum we are achieving at all levels of our business has our entire team energized and optimistic about the future of the company. Although there are some potentially challenging geopolitical headwinds globally, domestic sales at the dealer level are gaining very promising traction, participation remains strong and international ordering patterns remain robust, all driven by strong demand for Leatt products around the world. Sales of our adventure motorcycling lineup of apparel, helmets and boots backed by positive industry reviews and our proven ability to develop exciting and durable products continues to exceed our expectations and contribute strongly to our revenues. We look forward to delivering a pipeline of new innovative products to the growing ADV market over the next several quarters. Total operating costs increased by 12%, and we do expect working capital investments to grow in the coming periods, reflecting our strong drive to continue building a global multichannel team of sales and marketing professionals in emerging and developed markets. The team is building and leveraging revenue opportunities by enabling our brand to reach a much wider group of riders of all levels around the world. We are confident that we have sufficient liquidity to fuel this growth. As always, we are very proud of our design engineering and innovation expertise focused on technical innovations and functional rider protection. These innovations are being increasingly recognized by riders at all levels all over the world as well as by our peers. Our team was honored twice at Eurobike 2025 for our 5.0 Gravity Helmet and our 6.0 HydraDri jacket designs. In conclusion, we are very enthusiastic about the future. With a growing portfolio of innovative products in the market and in the pipeline, a focus on elevating and amplifying our brand and a robust balance sheet position to fuel growth, we remain confident that we are very well positioned for future growth and sustained shareholder value. As always, we'd like to thank our entire Leatt family, our dedicated employees, business partners and team riders for their continued strong support. With that, I'd like to turn the call over to the operator for questions. Operator: [Operator Instructions] We'll take our first question from Olivier Colombo. Olivier Colombo: Congrats on the fantastic performance of 2025. I'm looking for future growth as well this year. I had 3 questions for you this afternoon. The first one is regarding the U.S. business, which saw a very significant growth of 27%. This is quite an achievement. How happy are you with this performance? And what are you taking -- what are you doing to push those U.S. sales even higher to match the overall international growth of 41%? Sean MacDonald: Thanks, Olivier. Good to hear from you. I think we're very happy with the performance. It's been quite a strong turnaround in the U.S. We have a brand-new management and sales team in place. We have a reenergized and refocused group of sales representatives on the motorcycle and the mountain biking side in place, all highly motivated to take sales in the U.S. to the next level. So I think it's a very strong performance. I'm proud of the team there. And I think this is just the beginning of what we can achieve in the U.S. I think we've managed to gain some significant footprint through our outreach to dealers around the country. We've managed to grow our consumer direct sales in the U.S. significantly also. So we really are pushing on all cylinders there. I think in future, you can expect us to continue to build up the team and to improve our dealer penetration across the country as well as our direct-to-consumer business, which is a strong focus area for us, balancing that out with our B2B business. So a strong push on the distribution side in the U.S. and also a very strong focus on marketing. We've got a new Head of Marketing Global, Nick Larsen, and he is very enthusiastic about the future and the opportunities that we still have. There will be a strong focus on the U.S. market, where I think we still got a lot of market share that we can still gain. So big opportunities in the U.S. for sure. Olivier Colombo: Perfect. My next question is regarding the tariffs. How much do you think the tariff situation has hurt your business in the U.S.? Sean MacDonald: It's an interesting question to quantify. I think it definitely has had an impact. Of course, we've tried our best to mitigate that as far as possible. We have had some price increases. But having said that, if I look at complete brands, the supply chain is very similar, and there have been increases across the board. I think the biggest impact has perhaps been due to the uncertainty that tariff situation created in terms of global trade. But the dollar has obviously weakened and it started to strengthen again. And for us, that is beneficial in Europe for sure. it impacts the retail selling price in Europe when the dollar gets a bit weaker. But the tariff uncertainty around the world definitely did impact our business, particularly in the first half of the year. I do think that we acted quite quickly. We got support of our suppliers. We increased pricing without doing anything that takes the price points outside of where the consumers are at. And we analyze the market very, very carefully to make sure that we were acting within market constraints. So I think it definitely did have an impact. I do not think it was extreme though. Olivier Colombo: Perfect. And my final question is, how much growth came from the new customers and distributors versus distributors restocking? Sean MacDonald: I think it was a combination of things in terms of -- on the distribution side. I think the biggest factor has been an increase in the demand for Leatt products. So of course, that leads to restocking. And that's certainly been the biggest contributor of the growth on the international side. If I look at the new customers that we brought on, we have new customers in emerging markets and also in some developed areas. I mean we had really strong sales to those customers as well, and they're very energized by the sell-through that they've experienced. So we are expecting that to carry on driving sales and reordering patterns in the future. So primarily restocking due to an increase in demand, but a really nice contribution from new customers as well. Operator: [Operator Instructions] It appears we have no further questions. I'll turn the call back to the speakers for any additional or closing remarks. Sean MacDonald: Thank you all for joining us today. We are looking forward to our next call to review the results for the 2026 first quarter. Operator: This concludes today's program. Thank you for your participation, and you may disconnect at any time.
Operator: Good morning, ladies and gentlemen, and welcome to the LENZ Therapeutics Year-end 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded. At this time, I would like to turn the call over to Dan Chevallard, Chief Financial Officer. Please go ahead. Daniel Chevallard: Thank you. Good morning, and thank you for joining us today. My name is Dan Chevallard, Chief Financial Officer of LENZ Therapeutics. We are joined today by Evert Schimmelpennink, our President and Chief Executive Officer; and Shawn Olsson, our Chief Commercial Officer; as well as Dr. Marc Odrich, Chief Medical Officer, who will join us for the question-and-answer session. Before we begin, I would like to remind you that this call will contain forward-looking statements regarding LENZ's future expectations, plans, prospects, corporate strategy, regulatory and commercial plans and expectations, cash runway projections and performance. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors and risks, including those discussed in our filings with the SEC and which can also be found on our website. In addition, any forward-looking statements represent only our views as of the date of this webcast and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements. The company encourages you to consult the risk factors contained in our SEC filings for additional detail, including in our 2025 Form 10-K, which will be filed later today. With that, I will now turn the call over to Eef. Evert Schimmelpennink: Thank you, Dan. Good morning, everyone, and thank you for joining us. We are now about 5 months into the launch of this. I would summarize where we are today in 3 simple observations. First, the product clearly works, something I know many of you are also hearing as you do your own bucket checks. Second, what we're seeing so far suggests the promising share of patients who buy the product tend to refill. And third, we are clearly building a new treatment category. And while new categories take time to develop, the signals we are seeing reinforce our confidence that this can become the blockbuster market opportunity we have always envisioned. At this early stage of the launch, our priority is putting the right foundations in place. This category can scale and adoption can accelerate over time. Importantly, we are executing this launch from a position of significant financial strength. We closed the fourth quarter with over $292 million in cash, which gives us the resources and flexibility to continue investing in building this category. Let me take you through each of these observations, starting with the product itself. Across the field, we continue to hear consistent feedback from both doctors and patients. The clinical performance we saw in our trials is translating directly into the real world. This works quickly with many patients noticing the effect within about 30 minutes and with the benefits of near vision typically lasting throughout the workday. Importantly, we're also seeing the same broad patient profile we observed in our clinical program. That breadth matters when you consider the scale of the opportunity. Presbyopia affects approximately 128 million people in the United States, and this is the first and importantly, the only once-daily eye drop capable of addressing such a broad segment of that population, which is what ultimately creates the opportunity for a large and durable category. From launch through the end of this quarter, we believe that we are on track to have sold over 45,000 boxes of this prescribed by more than 10,000 eye care professionals, creating a strong and rapidly expanding base of physicians adopting the product. In fact, the number of prescribing doctors we have seen at this stage of the launch already significantly exceeds what we observed with several recent eye care product launches. Importantly, we are seeing strong productivity within that base. As we look deeper into prescribing behavior, we're seeing a very encouraging pattern among our highest volume prescribers. When we normalize for the same script volume of around 45,000 scripts and compare prescribing frequency across top deciles of our ECPs, the data suggests that our top 1,000 prescribers are filling over 40% more scripts per doctor than what was observed at a comparable point in the VUITY launch. And based on the same data, we estimate that the total amount of prescribing doctors that took VUITY to get to this volume is approximately 2x . What this tells us is that once physicians understand how to integrate this into their practice, they are successful with it. We view this as an important signal because it suggests that the opportunity is not only to continue to bring more physicians into the category, but also to increase productivity across the broader ECP base as we learn from these top prescribers and use those insights as a blueprint to scale across the field. Equally important, we are seeing encouraging early signals around patient persistence. What we are seeing so far suggests that patients who try the product and choose to purchase it often continue using it, which is exactly the behavior we hope to see at this stage of the launch. Our sample strategy is a key part of this. By allowing patients to try the product first, we see a natural self-selection dynamic, but patients who experience the benefit and choose to purchase are more likely to continue using it. This does mean that the early new patient numbers developed differently compared to the launch of VUITY, where patients often had to purchase the product before trying it. That approach led to a faster initial ramp, but also a rapid drop-off as many patients did not continue therapy. Our approach is designed to build a more durable patient base from the start, even if that results in a more gradual early ramp in new patients. While the refill signals we're seeing are encouraging, the pace at which new patients are coming on to therapy is therefore developing more steadily, which is consistent with what we often see when an essentially new treatment category is being established. These are the typical dynamics you see when new categories are introduced and new prescribing habits are being developed. And importantly, they are very addressable through focused execution in the field, combined with effective consumer marketing. Let me discuss that some more. From our conversations in the field, there are 2 themes that emerge with ECPs as they build prescribing habits that will get this recommended to more patients more often. First, ECPs must learn how to best work this into their patient discussion and start from a place of unfamiliarity with respect to how to counsel patients on a presbyopia eye drop. Second, many physicians primarily think of this for early emerging presbyopes, patients who are just beginning to experience near vision challenges. The reality is much simpler. This can be introduced during a routine exam with a short 10-second discussion, and it works for a much broader patient population than only emerging presbyopes. Changing that mindset and helping physicians integrate the product naturally into their exam flow is a key focus for us. Based on what we've learned over these first months of launch, we are leaning in operationally to accelerate adoption. We've sharpened our physician messaging to address the 2 themes I just discussed. Specifically, our sales force is working closely with eye care professionals on how to naturally integrate this into the patient proposition and introduce the products during a routine exam by a simple, quick discussion. At the same time, we are reinforcing the breadth of the patient population. This works across a wide range of presbyopes, including contact lens wears, patients with prior LASIK, patients and not only the early emerging presbyopes. In addition, we are expanding our field presence to a total field organization of 117 reps. This expansion will allow us to increase call frequency with existing prescribers while also expanding the number of physicians we actively cover, enabling us to react to strong inbound interest from doctors who are not currently in our target panel, but who are already prescribing this because patients are asking about it or because they learned about the product through other channels. We are making this investment because we see a clear opportunity to accelerate adoption in the field, further integrating this into everyday clinical practice. Besides physician efforts, creating a new category also requires consumer awareness, and we are continuing to build the consumer side of the category. Many of you have complemented us on our direct-to-consumer campaign, which features Sarah Jessica Parker and asked when we expect to see that translate into prescription trends. As a reminder, we launched our DTC campaign in mid-January with February representing the first full month of activity. We are encouraged by the early signals we're seeing. The campaign is resonating with consumers and clearly driving engagement. Website traffic is now running roughly 5x higher than our baseline levels. And during national activations, we've seen spikes of up to 10x normal traffic. At the same time, consumer activation in a new category takes time. Across consumer-driven categories, people typically need to see it at 5 to 7x what they act on it. In our case, the journey from awareness to prescription naturally takes longer. The consumer first sees the advertisement, learns about the product, schedules an appointment with the eye care professional, receives a sample and only then transitions to purchasing a prescription. Pharmaceutical direct-to-consumer campaigns like ours, therefore, typically take at least 2 quarters to translate into prescription trends. What we are seeing today are encouraging early indicators of that process, and we would expect a more meaningful impact on script volume as we move into the second half of the year. In other words, the consumer awareness engine is now beginning to build momentum, while in parallel, we continue to focus on helping physicians integrate this more consistently into their patient discussions. With that, let me briefly summarize where I believe we are today. We have a product that clearly works and is delivering the real-world results we expected to see. We are seeing encouraging early signals around patient persistence, and we have already built a strong and rapidly growing foundation of prescribing physicians. At the same time, we're building a new treatment category, which naturally takes time. But as I've noted, the early signals we're seeing give us confidence that we are on the right path. With the operational actions we're taking in the field, expansion of our sales force and a growing consumer awareness driven by our direct-to-consumer campaign, both the physician and consumer adoption engines are now beginning to build momentum. And as prescriber habits build and consumer awareness grows, we expect to see an acceleration in new patient starts from that foundation. The opportunity in front of us remains exactly what we've always believed it to be, a large and underpenetrated market with 128 million presbyopes in the United States and a product that can meaningfully improve how patients manage their near vision. Our focus now is straightforward, continue executing, continue expanding adoption and continue building what we believe can become a blockbuster category. With that, I will now turn the call over to Shawn to give more insights into our commercial strategy. Shawn Olsson: Thank you, Eef, and good morning, everyone. As a quick reminder, presbyopia is the largest unmet vision condition in the United States. It affects approximately 128 million people, a population nearly 4x larger than those of dry eye. In fact, presbyopia affects more Americans than dry eye, demodex, childhood myopia, macular degeneration, diabetic retinopathy and glaucoma combined. This is uniquely positioned to address this opportunity and performing exactly where it matters. The product works and early persistent signals are encouraging. Because this is a new category of creation, as Eef noted, ramp in new patients is developing gradually as physicians are starting to build the habit of introducing an eye drop option during routine visits. We're focused on accelerating uptake by sharpening our physician messaging, expanding our sales force to increase reach and frequency and building consumer pull through DTC so that more patients are offered VIZZ in the exam room and more come in asking about VIZZ. I will unpack these details and insights across our key strategic pillars. Doctors recommend us and consumers request us by name. Focusing first on our eye care professional strategy. We are encouraged by the progress of doctors who recommend this. Just 5 months into launch, aided awareness is already at 98% and unaided awareness is already at 79%. As a reminder, unaided awareness means that dye doctor brought up VIZZ in the survey as an eye drop to treat presbyopia unsolicited. So both metrics are above our targets and demonstrating that ECPs are very aware of VIZZ. In the same survey, we're also seeing accuracy of key VIZZ messages resonating with ECPs as they're prompted to write in what they know about VIZZ. We see consistent answers such as pupil selective, different MOA, not pilocarpine . The results demonstrate that ECPs understand VIZZ well. Confidence in VIZZ is also clear as reflected by more than 14,000 ECP locations enrolled in our . And most importantly, we expect to have over 10,000 prescribing ECPs by the end of Q1, which exceeds what we observed with several recent eye care product launches, including MIEBO and XDEMVY at this stage of their launch. In addition to the broad ECP prescriber base, we're also seeing ECP confidence as over 55% of these doctors have written VIZZ multiple times. As we look at the first 5 months of launch, we're also gaining important insights that continue to reinforce our confidence in the opportunity for VIZZ. First, we're seeing that access to optometrists and ophthalmologists is not a meaningful barrier for VIZZ, as evidenced by our consistent execution of our field team, which continues to deliver approximately 7 calls per day. Secondly, our sampling strategy is working. We see that most patients are able to obtain a sample. And when they do, it helps identify those who like the product, which in turn has supported encouraging refill rates. In terms of prescriber mix, it remains about 80% optometry and 20% ophthalmology with our expected top prescribers performing as anticipated. As Eef stated earlier, once these ECPs have integrated this into the practice, they're successful with it as data suggests, our top 1,000 ECPs are filling over 40% more scripts per doctor than what was observed at a comparable point with VUITY. Interestingly, we're also seeing adoption broaden across lower decile writers, which is an encouraging sign for the depth of the opportunity. Particularly notable is the growing number of eye care professionals writing VIZZ multiple times who never wrote VUITY. We view that as an important proof point. It suggests that VIZZ is not simply capturing prior prescribers in this category, but it's expanding physician engagement with the prescription presbyopia opportunity more broadly. And finally, while others enter this market, their limited success means this remains a true category build effort. We're working to build new prescribing habits and overcome legacy prescriptions from prior products. And our market research confirms there is still an opportunity to further educate ECPs that VIZZ is not just for early presbyopes and how to more routinely integrate VIZZ's discussions into the standard eye exam. Based on what we've learned in these initial months, we've already begun to implement clear steps to accelerate adoption. We're expanding -- we're excited to expand our field organization from 88 representatives to 117 representatives, as I noted earlier, which will allow the in-field organization to cover a broader set of ECPs who are already prescribing VIZZ and increase call frequency with eye care professionals. This expands the outside field team's reach to approximately 15,000 ECPs. We believe that added reach and frequency are important to supporting behavior change needed to build the category and integrate VIZZ as a routine part of the presbyopia discussion. We've already begun recruiting the expanded field and expect to be fully onboarded in Q2. At the same time, the field is focusing on the messages that matter most to bring up VIZZ more often, including the broader inclusion criteria from our clinical studies, which included moderate advanced presbyopia and strong success that we're seeing in the moderate advanced presbyopes as well as practical tools to make offering VIZZ to patients a simple and seamless addition to the office visit. Moving to our consumer strategy of driving patients to request VIZZ by name. We're encouraged by the early momentum we're seeing. Since launch and through the end of March, we expect to have sold more than 45,000 monthly packs of VIZZ. And importantly, this is proving to be a product that works for patients and is generating encouraging refill behavior. We are already seeing patients come back for refills, transition from 1-month to 3-month prescriptions and in many cases, start directly with a 3-month order, which reinforces our view on the benefit of the product that the most important near-term driver of growth is focusing on increasing NRxs. To support that, in addition to our work we just discussed with ECPs to bring VIZZ into the conversation more often, we've recently launched our direct-to-consumer campaign and have seen strong early uptake that I'll outline shortly. Our spokesperson, Sarah Jessica Parker, is resonating well with VIZZ consumers and our advertising is now running across a broad mix of high-impact media, including YouTube, Instagram, TikTok, ESPN, Paramount+, Uber, Pinterest and other platforms, helping us reach consumers where they spend their time and driving not only sustained increase in web visits, but up to a 10x increase in visits to vizz.com. We've also begun activating influencers across a diverse set of audiences from well-known reality personalities to recognizable voices in sports media and iconic actors who are now the Presbyopic age. In addition, we're seeing strong pickup across broad media platforms, including Good Morning America, New York Live, The New York Times and Late Night TV. As we look at what we are learning from our early consumer launch efforts, our consumer mix today is approximately 60% female and 40% male, with the majority of users between the ages of 45 and 65, which is consistent with the audience we target and expect it to reach. As we highlighted earlier, it typically takes a couple of quarters to see DTC take hold, and we're encouraged by the early performance indicators of our advertising, where click-through rates and cost per impressions are exceeding relevant benchmarks. For example, our early lift in brand awareness from YouTube is performing 2x above benchmark, and we're seeing similar lifts across both men and women demographics. Just as importantly, these campaigns are giving us useful insights into how our various creative assets perform across women and audiences, including which visuals, messages and executions are resonating the most strongly with consumers. Even with our early encouraging DTC metrics, we're actively optimizing our creative ads and media placement to maximize impact. We're increasing investment allocation behind the higher-performing media placements while reducing the allocation to lower-performing media, allowing us to concentrate resources where we are seeing the strongest response. We're also introducing new permutations of creators into the mix, which bring up the everyday frustration with reading glasses, which we believe is an important point of recognition as consumers consider VIZZ. Starting in April, we will pilot linear TV commercials in select markets across our top states to test patient response. Linear advertising is your traditional TV commercials on your common network stations like ABC, NBC and cable through typical providers like Comcast. Together, these actions will continue to optimize our media mix, ad messaging and build additional consumer demand for VIZZ. We're encouraged by the progress we've made. We are seeing broad physician adoption, growing commercial demand and encouraging early repeat behavior and the first signs that our consumer campaign is beginning to activate that market. We continue to believe this is a category of one. As the only approved presbyopia eye drop with up to 10 hours of duration, this offers a differentiated profile that we believe is well aligned with the need of both consumers and eye care professionals as demonstrated by the ECP adoption and encouraging patient persistence. I'd now like to hand the call over to Dan Chevallard, our CFO, to step through our financial results. Daniel Chevallard: Thank you, Shawn. As both Dave and Shawn have outlined, the fourth quarter and recent period of launch has been a tremendous time for LENZ as we have proudly introduced this into the U.S. marketplace, representing a novel solution for the treatment of presbyopia with the 128 million Americans frustrated with their near vision. As has been highlighted, this is a true market build and one that we're doing from a position of financial strength. This morning, I'd like to focus my remarks into 3 sections. First, summarizing our 2025 financial results, and discuss our outlook on 2026 capital allocation, and I will conclude by highlighting the significant progress made on the global expansion of VIZZ through our international partnership strategy. First, and as has been mentioned, we continue in the launch of VIZZ from a position of financial strength, ending 2025 with approximately $292.3 million in cash, cash equivalents and marketable securities. We remain debt-free and ended 2025 with approximately 31.3 million shares of common stock outstanding. Our Q4 results were highlighted by net product revenues of approximately $1.6 million in our first quarter of product launch with over 20,000 monthly paid and filled prescriptions. As you will recall, we launched VIZZ with availability through 2 consumer channels. The first, our e-pharmacy receives prescriptions from the ECP, processes individual orders and ships product directly to the consumer's home. We recognize revenue when our product is delivered to the consumer. Our second channel, the more traditional retail pharmacy is a channel supplied by our network of wholesalers. As is typical through this channel, we recognize revenue when shipments of VIZZ are received by the wholesaler, not upon delivery to the patient. Turning now to our operating expenses. We have discussed in previous quarters our planned ramp in spend as we move into launch, specifically driven by our commercial strategy. Our total Q4 operating expenses was approximately $40 million, including $4 million of noncash stock-based compensation expense compared to $31.4 million in Q3 of 2025. Importantly, net cash burn in the fourth quarter was approximately $32 million. Cost of goods sold in the fourth quarter totaled $400,000 and was primarily driven by indirect product costs associated with nonrecurring manufacturing processes. Going forward, we anticipate this to trend to an approximately 9% direct product gross margin. Total SG&A expenses increased to $39.6 million in Q4 2025 or approximately $35.9 million net of noncash stock-based compensation compared to $9.4 million for the same period in 2024, driven almost entirely by the establishment of our sales force and launch of VIZZ, including a significant nonrecurring investment in Q4 to enable the launch of our DTC campaign in early Q1 of 2026. Sequentially, quarter-over-quarter, SG&A increased by approximately 43% from $27.6 million in the third quarter. In recent quarters, we have discussed the importance of capital allocation at LENZ and the significant weighting of our SG&A spend towards sales and marketing to support VIZZ. In Q4, approximately 80% of our SG&A was driven by sales and marketing, with the remaining representing general and administrative expenses. This is a trend that we expect to continue. Total research and development expenses decreased to 0 in Q4 2025 compared to $5.9 million in the same period last year. Sequentially, R&D expenses decreased quarter-over-quarter by 100% from $3.8 million in the third quarter. This reduction was anticipated and was primarily a result of the conclusion of our positive Phase III CLARITY study and subsequent approval of VIZZ in July. Finally, our net loss per share, both basic and diluted, was $1.16 per share in the fourth quarter of 2025 on a net loss of $35.9 million compared to a net loss per share of $0.46 in the fourth quarter of 2024 on a net loss of $12.7 million. As we look ahead to 2026, I wanted to highlight a few points to help further characterize our P&L. First, on the revenue front, and after our first quarter of sales, we noted a better-than-anticipated blended gross to net ratio of approximately 90% or $67 per monthly package of VIZZ. Additional non-gross to net costs of the respective distribution channels have consistently resulted in a net cash per unit of $60 per monthly package with the difference flowing into our SG&A line. This net cash per unit of $60 is consistent with our long-standing expectations. Our Q4 2025 cash burn was substantially in line with our go-forward quarterly expectations over 2026. The recently initiated sales force expansion was in our 2026 operating plan. We will continue to target an allocation of approximately 75% to 80% of our OpEx to sales and marketing with an aim to maintain reasonably flat G&A spend period-over-period. R&D spend now becomes a de minimis line item on the P&L. The last point I'd like to highlight is an update on our recent progress advancing the global expansion of VIZZ through our international partnership strategy. We've seen significant progress across the globe in recent months and now anticipate potential approvals in multiple geographies in early 2027. Breaking that down, as we initially announced in Q3 of last year, the NDA review in China is now well underway. In May 2025, we executed a commercialization agreement with Lotus Pharmaceutical and are happy to report that of the 8 country license in Southeast Asia, we have NDA submitted and under review in 3 countries, including South Korea, Thailand and Singapore. As announced in early March, we recently submitted our central marketing authorization application to the European Medicines Agency for approval in Europe with our submission to the Medicines and Healthcare Products Regulatory Agency or MHRA in the U.K. to follow. Théa, our commercial partner in Canada, continues to make progress towards their submission to Health Canada and significant regulatory activities are already underway with Lunatus, our commercial partner for the recently signed 9 country distribution agreement in the Middle East region. In total, 5 ex U.S. NDA or equivalent submissions have been completed, and we anticipate over 10 to be completed by the end of this year with multiple potential approvals possible in 2027. In summary, we feel confident about where we are both financially and strategically, and the team is well positioned to execute and advance VIZZ on the back of a strong balance sheet with a broad strategic network of partners making regulatory advancements globally. With that, I'll turn the call back over to Eef. Evert Schimmelpennink: Thanks, Dan. To conclude, I'm incredibly proud of the LENZ team and the progress we are making in these early months of launch. We're seeing what we hope to see, a product that clearly works, encouraging early signals of patient persistance and a growing base of prescribing physicians. We are now focused on accelerating new patient adoption through disciplined execution in the field and continued investment behind the category. We believe we are in the early stages of building what can become a significant and durable market. As we continue to execute and prescribing habits built and consumer awareness grows, we expect to see an acceleration in new patient starts from this foundation. We look forward to updating you on our continued progress in the quarters ahead. With that, I'd like to open up the call for questions. Operator: [Operator Instructions] your first question comes from Stacy Ku with TD Cowen. Stacy Ku: We really appreciate all the detailed commentary on the VIZZ launch so far. We have a couple of questions. So first, maybe further discuss that sampling dynamic to NRx and the retention that you're seeing, how is refill, let's say, high level tracking to your internal expectations so far? So that's the first question. And then second, as you're trying to broaden patient demand, maybe talk a little bit more about the investments and where you think they can help with the friction points that you listed. Do you believe that select television advertising plans will also take about 2 quarters to lift prescriptions? We're asking because from what we remember, our consultants told us that VUITY ads were everywhere. Of course, the prescribers were not necessarily prepared to set expectations on VUITY's efficacy profile, which has been your focus, but just help us understand that dynamic. And maybe a reminder on the size of the VUITY sales force as you're expanding your sales force as well. And then the third question is on the prescriber additions. If you're willing to comment, what percentage are from your initial target group versus the imbalance from patient demand? And are you seeing a certain practice profile where the prescriber becomes a repeat? Evert Schimmelpennink: Thanks, Stacy. Appreciate your questions. Let me start off with the NRx and refill dynamic and give a little bit more color, and then Shawn will talk about the DTC and ECP question. So we feel very good about where we are actively, as I've mentioned, accelerating adoption. If you look at the strong foundation that we've built with the over 10,000 prescribing ECPs and more than 45,000 boxes sold, we believe that that's a great start. And what matters most early is to see that the product works, as I've mentioned, that we see that patients who choose the purchase continue to use it, and we're seeing both. So new patient starts are developing as expected for a new category that takes a little time, like I mentioned. We're actively working to continue to accelerate that as per plan. So significantly or specifically, we're expanding our sales force, like I mentioned, we're adding 29 reps to drive both breadth and frequency. And Shawn will probably talk about that a little bit more as he answers your ECP question because that allows us to increase coverage of physicians that are already showing interest, but also increases how often we engage with those existing prescribers. And along that, as I mentioned, we'll continue to build the consumer demand through DTC, and that ties into your second part of the question, I think. So as we now pivot into the refills, we know that this is a refill-driven category and early signals are encouraging. We're seeing patients come back and reorder. If we now look at that cohort of patients that got that first order in Q4 or the first quarter of our launch, we're seeing them come back and reorder. We're seeing patients move from initially a 1-month pack now to a 3-month pack, suggesting that they are committed and they're liking the product. We're also seeing patients that are new to the product now actually starting initially on multi-month supplies. So in our mind, that tells us that they had a chance to sample the product, the sampling strategy works. They self select and they like the product enough to start off with treatment. So all of that, we feel is very consistent with the product that's delivering for patients. And it's still early. So we want to make sure that we see this dynamic develops over multiple quarters. But again, the patterns that we're seeing so far are aligned with what we would expect. So with that, let me switch over to Shawn to talk about DTC and ECP. Shawn Olsson: Thanks, Eef. Thanks for the questions. When we look at broadening the patient demand and where we're focusing our investments to help, our primary focus has always been digital advertising to hit the patients where they are. So we know what these patients look like, and we knew that prior to launch, right? We knew that they make over $100,000 a year. They're mostly between 45 and 65. They're in major city centers. And that digital marketing is working. What we look at every single day is what's our click-through rates of different ads, what's our cost per impressions of not only different ads but different media placements. So inside that digital aspect, it's really a lot of optimizing, right? Do we actually see more benefit when we're putting the assets on YouTube versus when we put them on Instagram and how that translates to visits to our website. So that's a lot of optimization. The influencer standpoint, same thing. We look at the influencers post and we say, okay, we saw the post by Heather Dubrow and she got 650,000 views. What does that look like and what does it translate? So a lot of that is optimizing. With the addition of linear, what we're also seeing is there are select markets where the patients are early adopters. And therefore, as we continue to evolve and optimize that media mix, it's a good opportunity to bring linear TV in those select markets and test that response and we continue to optimize to get that broader adoption. You are correct. When VUITY launched, they're putting a big substantial media plan out there. We're being much more focused with targeting each individual that we want to drive in versus driving a shotgun approach of telling all 125 million people about it to make sure we have an efficient campaign. You also brought the sales force size. Looking into more and more about the VUITY launch, it appears they had a sales force of roughly 300 people specifically focused on VUITY. So therefore, our expansion from 88 to 116 (sic) [ 117 ] also makes sense, but it's also a more rationally sized sales force. So jumping into that, which was the second part of your question on the target groups of ECPs and where are they sitting. So our field, the outside portion of the field was focused before on about 12,000 eye care professionals that covered decile 4 through 10 of VUITY, 10 being the highest prescribers. And we continue to see that today. Our decile 10 doctors are our highest prescribers as well. And we have the inside sales team covering the lower deciles. The growth from targeting 12,000 to 15,000 ECPs at the outside field is because we were seeing those lower decile ones prescribing repeatedly as well as a good portion that we actually called in our analysis NA. These are doctors that have never written VUITY. So we have doctors that never wrote VUITY that are now wanting to write VIZZ. And so a good way to think about it is our target initial group from outside sales was 12,000 ECPs, and we've now grown that to 15,000 ECPs because of those deciles that were not targets. Now when we do that, we're growing not only the number of targets, but when we expand this field from 88 to 117, what you're also seeing is the ECPs per rep is getting smaller. So we can get in that doctor office more often and really work with them to make sure they can get to that 10-second conversation to bring it up to every patient and understand that they can offer this to more patients, not the early presbyopes. So hopefully, that answers your question, Stacy. Operator: Your next question comes from the line of Yigal Nochomovitz with Citigroup. Yigal Nochomovitz: Just a few questions here. I'm wondering if you could spend a little more time talking about these top 1,000 writers in terms of their behavior and how they approach the conversation with the patient, their knowledge of the product. I know you mentioned that many of the ECPs that are familiar with VIZZ believed apparently erroneously that it was only for the early presbyopes and not for the other categories you mentioned, Shawn, like the contact lens wearers, the ones with prior LASIK and the pseudophakic. So I'm just curious how that crept into the message that some people apparently didn't understand that it was for a much, much broader set. And how are you planning to help correct that perception and then discuss the behavior of these top writers that seem to get it and have gotten it from the very beginning. So that was my first question. Evert Schimmelpennink: Thanks, Yigal. Great question. Shawn and I will tag team on that a little bit. So just to double-click on the stats that I shared. So very encouraging for us to see those 2 things that I have shared. One is that it's only taking us about half of the amount of prescribing doctors to get to the same script volume that VUITY got to at 45,000. So I think what that tells us is that doctors are enthusiastic. They like working with a drug, and they especially like working with a drug that's efficacious. And if you in that group, like look at the top 1,000, you see that they're actually writing 40% more. So those are the doctors that wrote the most for VUITY, they're writing even more for us. And your question on what makes them different. Again, I'll hand over to Shawn shortly, is really around they figured out how to, one, bring this up consistently and easily and quickly and offer it as an alternative option to their patients, setting the right expectations around what to expect from an eye drug and then realizing that, as you've mentioned as well, this is truly something that they can offer to pretty much every eligible presbyope in the practice. So I think that's what makes them different. And we're obviously trying to follow it up and share that with all the other doctors out there already prescribing and all the new ones that we're tapping into. So with that, I'll hand it over for Shawn to give some even more color on that. Shawn Olsson: Yes, absolutely. And thanks, Yigal, for the question. So Eef hit on a lot of the key points, but jumping in a little bit deeper. So our top 1,000 prescribers, again, they're tied to those higher decile accounts. So these are doctors that are more comfortable implementing new technologies, historically are also higher prescribers. But this is something that they're more used to doing in general on a day-to-day basis. What we're seeing is they follow that standard process, which we always continue message, make sure you give the patient a sample and a script, right? Allow all the patients to try it and then give them the script as well. And as they've said, they offer up as an option to more patients. They've figured out how to do the 10-second pitch, how to offer it and set the right expectations. In terms of your questions on the understanding of the broader use, why are some still thinking only about the early presbyope, this is really an effect of the previous product on the market, which really was tested in a younger population and the efficacy really only worked in that very early emerging presbyope. Therefore, people naturally go there. It is taking work to make sure people understand that we really did show just as much success in moderate advanced presbyopia. And then we show them the graphs to actually show those that have worse presbyopia gain more lines. And that's a process to understand that this product truly does work for that full scope of presbyopes. Yigal Nochomovitz: Okay. Awesome. And then this is really quick. Just maybe for maybe Shawn also. This is just more of an operational question. You mentioned doing the TV ads. I think that wasn't in the original blueprint. I'm sure it was one of your scenarios. But I assume this doesn't mean that your emphasis and investment in terms of targeting the regional influencers, one layer below the SJPs that, that's still in place as it was with the initial plan. And then also, are you able to track -- I know Eef mentioned the conversion to -- the uptick in the web traffic when you have various campaigns that are delivered to the market. Are you able to track the conversion rates there? And are you seeing higher conversion to Rxs as a result of these waves of coming to the website? Shawn Olsson: Great question, Yigal. So first, talking about the TV ads. So our strategy remains the same on primarily focused on digital ads and the influencers. So we never plan to do broad national linear TV campaigns. However, what we're seeing is there are key markets that are prescribing a lot more often than others. And so this is a perfect opportunity to drop linear advertising on network TV and cable in those targeted markets in a responsible, financially responsible way to see what type of response we see. So that's the opportunity that's now provided itself with linear TV. So think of these as key markets, we test the response. And in testing those response, you need exactly what you just brought up. How does that translate to then visits to the web and then does that then translate to actual scripts later on. And that's exactly what we're continuing to look at every day. So we can see when we actually run different ads in different markets, how that then responds to web traffic. I think we're early on in DTC, so we don't have a pure correlation from the web traffic to then a script later on. There isn't a connection there, but it's something that we'll continue to look at for correlation to make sure we continue to further optimize those DTC ads. Operator: Your next question comes from the line of Marc Goodman with Leerink Partners. Unknown Analyst: This is Alyssa on for Marc. So you previously had highlighted 3 different patient categories as the foundation of the advertising strategy. Could you update us on which of those segments are driving the early adoption today? And then secondly, I might have missed this, but on the distribution, can you clarify whether prescriptions are being fulfilled entirely through the e-pharmacy channel or if retail is now kind of contributing to that? And how is the mix between those 2, if so? Shawn Olsson: Great. Thanks for the question. So if you think back to our strategy in terms of early adopters, we want to focus on those that are in contacts. We want to focus those that have had post refractive surgery and what we call the active lifestyle. So we commissioned a survey of patients that have recently received the product. And what we're seeing is those targets are right. When we actually look at the data, we're seeing about half of the patients on this have worn contacts. About 1/3 of them have had LASIK in the past and that about 1/4 of them have had BOTOX in the past 12 months. Now that quarter number is a little bit biased because we have an equal split of men and women, about 60% female, 40% male in terms of our prescriptions. And BOTOX does tend to be about 90% women, 10% men. So that would lift up that percentage overall. But we feel good about our targets that we're focused on there. And then in terms of the mix of retail as well as the pharmacy, both meaningful channels, we have not broken out or shared that mix yet. Operator: Your next question comes from the line of Biren Amin with Piper Sandler. Biren Amin: For Q1, can you maybe tell us what the split is between the 1-month pack and the 3-month pack? My second question is, I think previously, you had estimated 5 refills per year. In your early adopters, do you feel that, that still would align with your annual refill projections? And then third question is, can you talk about how many of the samples in Q4 converted to scripts in Q1? I think that would be a good barometer of patient experience. Evert Schimmelpennink: Thanks, Biren. Great questions. And obviously, we all know that ultimately, these statistics are going to be very important to track the progress of the launch. We're also remaining with what we said before that refill -- actual refill percentages is something that we really start to look at in the second half of the year and start to communicate that. But what we do see at the moment on your various questions is that, like I mentioned earlier, that 3-pack is important in the market, and we're seeing that move. Again, this is early days. So like for many of the statistics and the parameters that we've spoken about, we really want to see a couple of quarters and see how this clearly develops before we feel that it's a reasonable number that we can start to share. Same goes for refills. Like I mentioned earlier, we're encouraged by what we're seeing. We also need to remind ourselves that the cohort that we currently can follow is the one from Q4 of last year. So our first 3 months of being in the market with this, the first consumers have a chance to buy this product. And that's probably a mix between initially when we just started to bring samples out, consumers that bought the product without having sampled and later in the quarter, that now most of the people will have had a chance to sample. So on top of that, you see that somebody bought a 3-pack, for example, in December, which is clearly happening, you wouldn't expect that person to come back until maybe late Q1 or even into Q2. So that means that the numbers that we're seeing now, we're really looking at them more as a barometer than the actual number. But clearly, like we shared, what we're seeing is encouraging us, and we feel that we have a product that does live up to what we want to see, a product that people like, that once they order it, they are sticky and they continue to buy it. Operator: Your next question comes from the line of Jason Gerberry with Bank of America. Unknown Analyst: This is Melanie on for Jason. First, can you share any more details about indicators that are most encouraging regarding the DTC program that can spur growth? And secondly, anything you can share about key thresholds you're looking to see in NRx and refills in the second quarter? Shawn Olsson: Thanks, Melanie. I appreciate it. So in terms of the DTC program, when we think of our DTC, what we're really looking to see is are we driving consumer activation, right? And so in terms of this stage of a DTC program, where we're still fairly early on, the easiest items to look at that we're looking for, for indicators are, are we driving awareness? And are we driving increases in web traffic? And are we doing it at a responsible financial spend. So the indicators we continue to look at are, are we increasing people that are going to website? Not only are we seeing a sustained increase in website visitors, we're seeing up to a 10x increase in web visitors depending on what we're running. That's very good. When I look across the metrics of our DTC, I'm looking at what are we paying per 1,000 impressions, what are we paying per click. Again, what we're seeing right now with our ads, we're testing well. We're actually doing better than benchmarks for click-through rates as well as spend per impression. So that's looking positive. And then what we're continuing to look at is as we talk to the patients, serving them, did they see an ad, did that drive come in? And so those are all the metrics that we're continuing to look at. Evert Schimmelpennink: The second question was around key thresholds that we're looking for as we enter into the second quarter. But I think just looking back to what I shared earlier, there's 2 elements that we're focusing on and that Shawn just highlighted as well, activating the doctors to bring it up to more patients more often. Obviously, that's something that's ongoing. And then really starting to see that DTC play out. Those things all take a little bit of time, which is why we've said that the DTC, this is not only for us, but in general, any Nielsen report that you pick up will show you that it takes at least 2 quarters to really see that translate into DTC. I think early indicators that Shawn talked about that we're seeing are very positive. And similarly, with the expansion of the sales force happening in Q2, we would expect that to take a little bit of time for that to take effect. But we really are expecting more of a step change in acceleration of new patients as both of these mechanisms fully take a hold closer to the second half of the year. Operator: Your next question comes from the line of Lachlan Hanbury-Brown with William Blair. Lachlan Hanbury-Brown: I guess the first, I'd be curious what you're finding in terms of how often or how many samples doctors giving out. Are you finding the reps when they go back the fridge is empty or they still have some? Do they have to go back earlier? Just I've spoken to a few docs that tend not to give the samples, they prefer to write a script. So kind of curious to see what you're seeing on the sampling and the volume front there. And then maybe a second one on the prescribers. Curious what you're seeing in terms of the time it takes for them to go from a single prescription to become a repeat prescriber? Is it -- there's a cohort of doctors that basically immediately prescribe it to multiple people and then others that prescribe one and takes much longer? Or is there a trend you're seeing there? Evert Schimmelpennink: Thanks, Lachlan. Good questions. Let me start off with the sampling and then double-click a little bit more on the sampling strategy and the conversion and how we think about that. So sampling in our case is really designed to bring the right patients into the therapy. So it's a central part of our strategy as we've highlighted early on because the product has such an immediate and observable effect. So we want to get samples out there, and that's how what we focused on to get as many samples as needed to as many offices as possible to make sure that those patients can really experience the product first and then self-select into the therapy. And we're seeing that, that's working. We believe that currently, probably more than 90% of people that start with this or new patients have had a sample first. So again, that strategy is working. What's also important is to understand how the sampling works. So the samples are dispensed, as you've mentioned, directly by physicians. So once our reps leave the samples with the doctor, there's no way for us to track individual samples and how they're being handed out to patients and how many are being handed out. But what we do see is that most of the doctors now are handing them out. But you are right that there's a group of doctors that just prefers to write a script directly. We'll continue to work with them to actually start to change that habit as well. So we actually don't really look at conversion as a key metric at this point. Samples for us are very cost effective and it's really a way to get as many people as we can to try the product, make sure they like it and then they self-select in. Like I said earlier, that this will lead to indeed a much more sticky patient population. I think your second question was around prescribing dynamics. What we see is that, as you would expect at this stage, there's a mix like Shawn highlighted, there's a great amount of doctors that are already doing what we would like them to do, provide a sample together with a script. There's also a group of doctors that wants to sample first and have the patient call back. If they like it, they write a script, the doctors that, to your point, write a script immediately put out a sample. So all the different flavors that you can think of are currently out there. And that's the focus of us now to take that blueprint of doctors that we know are very successful with the product, that high percentages of the patients converting and start to apply that or keep that to the rest of the doctor cohorts. Operator: Your next question comes from the line of Matthew Caufield with H.C. Wainwright. Matthew Caufield: Can you speak more to the nuances you're seeing in terms of that initial refill patients? Like, for instance, have the refills been predominantly those early presbyopes so far? Shawn Olsson: Yes, great question. So when we look at the consumer, just given a little bit more detail. So when we dig into it and look at those people that are adopting the fastest, and we're seeing the refills come through. Again, what we're seeing when we break it down, it's 60% women, 40% men. Predominantly that 55- to 64-year-old, there are certain states that we see perform better than others. And when we dig into them, they are our target patients that are doing it. It is, as I stated earlier, half of those patients have worn contacts in the past. About 1/3 of them have had LASIK. And I said 1/4 of them have had BOTOX. But again, that's a bit biased by the mix of male, female. So we are right on that core target. We're hitting the right patients that want to use it. I think the most important thing is they get the sample and try it because that self-selection is so important. And that's what really drives that repeat behavior is getting them to self-select in, try the product, know it's for them and then continue to use it. So I think that's the important nuance to focus on. Operator: That concludes our question-and-answer session. As I'm showing no further questions, thank you for your participation, and we will now conclude today's conference call. You may now disconnect.
Walter Hess: So good morning, everybody, here in Zurich and at the webcast. It's a pleasure for us to present our full year results 2025. With me today is Daniel Wuest, our CFO. My name is Walter Hess. I'm CEO. Let's go straight to the highlights of 2025. We delivered on our promises, and we met the financial targets 2025. We achieved 11.1% of revenue growth and minus 48% adjusted EBITDA. And with that, we achieved our guidance. The growth of Rx was 33.2% and of non-Rx, 7.1%. The digital services with a growth of 110%, so a remarkable growth rate again and a significant profitability contribution, it's a contribution margin free, which is more than 50% already of the total company. Our AI Health Companion, which we have started to launch in October last year as a beta version in our app has been adopted really very fast. Already every third app user is utilizing this AI health assistant. And with the strong liquidity position of CHF 160 million by end of the year, we are very confident to execute in 2026 and 2027 according to our plans. We are fully aware of the challenging and also critical market environment. However, we today focus on the future on our successful transition and on our path to breakeven and to cash generation. We do that by giving you an update on our strategy first, followed by a business update and then the financial update and outlook given by my colleague, Daniel, before we come to the Q&A session. There are some real important megatrends in health care, which have a big impact on our business. And we see us at the sweet spot of the 3 major megatrends. One is the demographic change, which gives a structural shift towards prevention and longevity, but mainly also towards a higher chronic care demand. It's the growth of the pharmaceutical market, a market which is not dependent on the business cycles as we see right now in this difficult environment worldwide. Last year, the market size in Germany of pharmaceuticals reached already EUR 62 billion. It's a huge potential for us being captured with electronic prescriptions. And the third megatrend is the digitalization in health care, which is even accelerated now by AI. And also there, we are at the forefront with our digital and AI health platform. How our response to these megatrends looks like, we would like to show you with a short video. It's a video about our health companion, which is live in the app already since last October. [Presentation] Walter Hess: As you can see, we are evolving from a transaction-led retail business into a health platform that orchestrates and covers the full customer and patient journey. By merging the online pharmacy with a marketplace not only for products but also for health services, digital health services and telemedicine orchestrated by the AI Health Assistant alongside with a state-of-the-art retail media business, we have created a platform which is unique and it's a novelty in Europe. This trustworthy and integrated platform with more than 12 million active customers, more than 1,000 marketplace sellers and more than 6,500 established doctors in Germany allows us to capture the full value of the entire journey. It makes our business fundamentally more defensible and less dependent on linear retail market growth. With the structural foundation now firmly in place, we are ready to ignite the platform flywheel and accelerate our scale at low marginal cost. And with that, let's move to the business update now. And of course, starting with Rx. What you see here is the sustained quarterly growth of our Rx business. And I can already confirm now that this will continue in Q1 2026. Last year, we achieved a growth rate of -- a growth of 33%, which leads to a 1.8% higher revenue in Q4 last year compared to the first quarter in '24, just when eRx started in the German market. If it comes to the quality of the eRx customers, I have to mention that the European and the German Court of Justice last year they confirmed -- reconfirmed that we are allowed to give bonus to our customers and patients. Therefore, we have restarted to do it in July last year with the result of increased retention and higher order frequency of new and of existing customers. And this led to a 3x higher retention rate and order frequency of customers that they are getting now also bonus with eRx compared with the customers, the previous customers that sent to us the paper prescriptions. Also, the average order value is growing quarter-by-quarter. In Q4 last year, the average order value of an eRx order was already at EUR 128. And just a few days ago, we have waited a long time. The doctors and insurance associations communicated that they have agreed now on a chronic care flat rate for doctors, and they will start 1st of July. But it's limited to a few diseases and to specific customer segment groups. In our view, it's a good start. It's a start in the right direction, in the direction of a more efficient and a more customer-centric health care in Germany. And it's a start of a catalyst, which is called repeat script, which we have already integrated in our product as we speak right now. It was important that in the first 5 to 6 quarters, we could -- we invested in creating awareness for the CardLink solution, the solution that customers, patients can read in prescriptions digitally. We have seen that the incremental cost of new customers that we had to find and to acquire via upper funnel channels like TV, out-of-home or radio were ineconomic with regard to the relation of customer acquisition costs to customer lifetime value. Therefore, we have started to shift, and we have done it in Q4. We have shifted and we have reduced the marketing spend into the Rx acquisition. And we have started to prioritize on performance marketing channels to ensure that we remain in the economic zone, which you see on the slide, it's the green zone with our customer acquisition costs in relation to customer lifetime value. But in addition, we have a growth lever, which is the direct bonus and the exemption from co-payment, which in combination, gives us the right mix to continuously grow with our eRx business. Let's come to the non-Rx business now. Here, you see we grew by 7.1% last year. If we talk only about the OTC and BPC business, the growth was 4.8%. But this growth came with the discontinuation with Zur Rose brand, which accounted for 2% to 3%. So effectively, the growth of the OTC and BPC business last year with the remaining brands was between 7% and 8%. It also came with an improved marketing performance, leading to higher customer retention and better customer lifetime value of our OTC and Beauty Personal Care customers. The digital services continue to grow remarkably with 110% on revenue growth with continuous really attractive margin. Both will go on also this year and beyond. On Slide #13, you see that our core brand, DocMorris, accelerated really rapidly last year and grew by more than 20%. So this shows a clear proof point for the successful execution of our brand strategy that we have defined at the beginning of last year. At the same time, our sub-brands, Medpex and Apotal were managed well and kept at a slight growth, contributing positively to the overall platform performance. Let's deep dive a little bit in the 2 parts of the digital services, as a TeleClinic, the telemedicine platform and the Retail Media business. TeleClinic first. The number of treatments in 2025 was 2 million, which is a growth year-over-year of more than 50%. A patient in an average had a doctor on the screen, in the app within 5 minutes. That's amazing. Imagine how long it takes until you have an appointment and you see a local doctor if you have an emergency. TeleClinic is available 24/7 with GPs and specialists. And almost half of all the treatments have been done outside the opening hours of the doctor practices that shows the importance of this telemedicine pillar as part of the health care of the standard health care in Germany, but also in other countries. As said before, so the number of doctors already reached more than 6,500 and is continuously growing. But the most important and the key success factor for TeleClinic is the strong partner network, which is secured by long-term contracts. It's with insurance, digital health providers and doctor associations. To expand this partner network is the most important key strategic priority in TeleClinic also for this year and the years after and also expanding the services they give to these partners, be it insurance companies or doctor associations. In 2025, TeleClinic achieved a revenue of EUR \26 million. But please be aware, this EUR 26 million, that's not comparable with retail revenue. Retail revenue with relatively low margins. Here, we talk about take rate revenue with much higher margins and a complete different value. TeleClinic is the leading platform for statutory and private health care in Germany. And telemedicine is a key pillar also for the new ministry in Germany. It's part of the coalition agreement. And now as they are preparing the digital -- the new digital strategy, so TeleClinic is part of the primary care, but also of the emergency care solution of the future regulation. You see it's still a huge potential for telemedicine in general. The market penetration of telemedicine is still below 0.5%. So we are still at the very beginning and already now EUR 26 million of take rate, mostly take rate revenue. In '26, we expect a mid-double-digit revenue growth and a further increase of the EBITDA margin. Our Retail Media business, we started with it 3 years ago, and we are meanwhile the leading retail media health care platform in Germany. We could prove to the advertisers and their brands, the brands you all know that by using our retail media platform, they can strongly increase engagement and strongly increase conversion and achieving really attractive RAS metrics. Last year, -- with Retail Media, we generated a double-digit euro million revenue with really high margin, even higher than with the telemedicine platform. And also in the upcoming years, '26 and further, we expect continued strong and profitable growth of our Retail Media business. So let's come back to the health companion, where we have launched our AI Health Assistant in last October in the app. Right now, we are rolling it out in all our web applications. So during March and April, you will see more and more visibility of the assistant also in our web. The health assistant is the central intelligence of our platform. Here you see on this slide, Slide #17, 3 specific use cases of our health assistant. In the area of the transactional AI commerce, we integrated conversational intelligence in our search bar in order to give personalized responses and recommendations to every customer and patient using our app. In the center, you see the AI assistant, providing AI-generated advice-oriented insights and becoming more and more a trusted health adviser for our customers and patients. And on the right-hand side, -- the assistant acts as proactive health orchestrator, seamlessly guiding the user, for example, from having a symptom to a doctor, be it the local doctor or a telemedicine doctor from TeleClinic, of course, or guiding them to a skin check service. And there, by the way, within only 2 months that we have this service live, we could detect already more than 200 skin tumors and melanomas with our service and our digital health assistant. So by managing health in one place as we do, the AI assistant helps to maximize the patient and customer lifetime value and accelerates our transition to a digital and AI health platform. So on Slide #18, we are really very proud that today, together with Google, we could announce an incredible strategic partnership. We have chosen Google in order to leverage on their cutting-edge AI capabilities and infrastructure. Google has chosen us in order to combine their most advanced technologies with our deep digital health care and pharmaceutical expertise. Together, -- in this partnership, we are defining and delivering new seamless health products in the future in order to make health care better and more accessible. One point which was really important for us and which we secured is that we keep the full sovereignty of our data while meeting also the highest requirements for data privacy and security. Let me conclude this first part with the strategy and the business update. We have spent the last few years in building this platform engine. Now we have started to drive it. Our strategy is set. Our positioning is unique, and our priority is on relentless execution, just to unlock the full value of our DocMorris platform. And with that, I would like to hand over to Daniel for the financial update and the outlook. Daniel Wüest: Thank you, Walter, and also a very warm welcome from my side to the people here in the room and the ones on the webcast. First of all, I want to provide you with some further insights on the financial performance of '25, but then much more important also to provide you with the outlook and the guidance and specifically how we will achieve EBITDA breakeven in the course of '26 and then subsequently, free cash flow breakeven in the following year, meaning in '27. Let's start with a quick look back on the financial year '25. As Walter already have mentioned it, we could secure comfortable and good top line growth of 11.1 percentage in local currency. And I'm very proud that all the business lines have contributed to this growth. Of course, Rx and Digital Services had the lion's share of the growth with Rx growing more than 33% and digital services above 110%. Reported revenues, which are the revenues without Apotal showed even a better performance and grew with 12.4% in local currency. There, you already see that the growth of Apotal was below the average of the group and also to a small part, also the growth of the segment EU. I'm very proud also that the gross margin of the group increased by 90 basis points to 22.2% despite the reallocation of marketing expenses from marketing into bonus and co-payment, which had an impact that will be directly deducted from sales and therefore, has a negative impact on the gross margin. And therefore, the 90 basis points are even more remarkable. As you know, we only started with the co-payment and the bonus basically from Q4 onwards and until Q3, we did a lot of additional upper funnel marketing spend. Let's quickly deep dive into the 2 segments, where I will focus on segment Germany because that's the lion's share of the contribution. You see segment Germany a growth rate excess of the group of 11.7% also fueled by Rx and digital services. Even here, the gross margin is even developed a little bit better, 10 basis points more with 100 basis points in addition and that also with the reservation that the payment of bonus and the co-bonus will have a negative impact on gross margin, but will then be reversed on the CM3 level contribution margin 3 level because it's just a reallocation of direct marketing spend to bonus and co-payment. Segment EU, a modest growth. I think we would have expected a little bit higher growth, but they managed also to improve the gross margin by 40 basis points. But unfortunately, given the low growth and the indirect cost base that didn't manage then to have a positive effect on the EBITDA level, while that's the reason why that segment EU is still slightly EBITDA negative. With that, let's come to our KPIs, which all look very promising and which kind of pleasant in our view. Let's start with the active customers. For the first time, we have also included the TeleClinic customers because that's a significant number of customers. But let's, first of all, stick to the online pharmacy customers, which showed a substantial increase of 700,000 from 10.3 million to CHF 11 million. You remember Walter said told you that the discontinuation of the Zur Rose brand, and you can assume that a few hundred thousand customers have been lost. We have not adjusted for that. And without that, the number would even look better. But we are very pleased what we see here. Also, TeleClinic increased the customers on the platform by 300,000 from 0.9 million to 1.2 million, and both numbers are on an ongoing basis, increasing. Also in relation to the app downloads, I think there's an active tracking of the app downloads. I think it's an indication, but definitely not the one and only. But also here, you see a decent increase of 200,000 app downloads compared to '24, and we reached 2.1 million app downloads in '25. Now let's come to the average order values or the basket sizes. First of all, on Rx, you see an increase of EUR 4, which is by itself already a remarkable increase. But you have also seen a few slides before that in Q4, the average order size was EUR 128. And you see really that in the first 3 quarters, the average basket size was much lower compared to Q4, where we really started our efficient and dedicated marketing, and that also tells you something about the quality of the newly acquired customers. One remark, please note that our basket size is calculated excluding VAT -- just for reasons, if you compare other baskets, you always have to make sure that if it's with or without VAT, given that the VAT in Germany is 19% that makes pretty some difference. If you gross it up our basket, then it would be much higher than the [ EUR 114 ]. On OTC, Walter mentioned it, we focused also on economic and customer lifetime value and the economy of the customers. Therefore, slight decline from 42% to 41%, but basically almost stable and nothing to worry about it. The order frequency also here, good development from 3.9 to 4.0x. OTC remained flat with 2.0 orders per year. The repeat order rate, which was already extremely or very high and decently high at 76%, further increased to 77%, which is also a very good value. And just all in all, shows the quality and the quality of our existing, but also of our new clients, which we have acquired during the last year. Now let's quickly talk about a few highlights or perceived lowlights based on the first reactions. I do not want to go you through line by line through the whole P&L. I think the top line and gross margin, we have discussed. Let's focus on the different cost pillars. Personnel expenses, there, I'm very pleased we could lower the respective ratio by 50 basis points. That's the first -- showing the first positive impact on our managing the indirect costs, which are basically to 100% personnel costs, but also shows the improved efficiency where we really go through the processes and kind of automatize and also using KI to better allocate resources, and that has already a very nice impact in '25 on the personnel cost ratio, and there will be some much further leverage in the coming years. Marketing expenses, as mentioned, rose by over CHF 11 million. And there, we are talking only direct marketing expenses. We have said we shifted basically from direct marketing, not completely, but partially to indirect marketing, which you see as a decline or lower revenues. And therefore, it's not only the CHF 11 million, but you have to add a small single-digit million to really see the full additional marketing impact, which has been done in '25. Distribution expenses, there, the ratio unfortunately went into the wrong direction. On an absolute level, that shows the increase of the -- the orders, which come with higher distribution costs. But on top of that, we have seen a substantial increase of logistic costs, transport costs, given kind of the high demand for logistic services, but we think that, that should be come to an end. And otherwise, if it will be ongoing, and we have already started with that, that we have to pass it to the clients with different models that either they pay for earlier delivery or other models just to kind of compensate for any potential further distribution and logistic cost increases. I think reported EBITDA was CHF 1.6 million lower than the adjusted EBITDA, where the adjustments come from. We have a net restructuring cost with the closure of -- that's net minus CHF 1 million because we could also sell the property, and therefore, it's only net minus CHF 1 million. We also adjusted CHF 2 million positive EBITDA contribution through the sale of the Swiss properties. And then we made additional provisions for legal cases in the magnitude of CHF 2 million. I think in our business, that's business as usual and nothing to worry because you notice that every second week there, someone is kind of putting a claim against the online pharmacies. And therefore, we have kind of just for the corporate practice some legal provisions in the amount of CHF 2 million. On the net financial result, that also seems to be kind of going completely into the wrong direction with CHF 12 million additional net financial result. But just to call you down, it's the CHF 12 million are all noncash. It's CHF 5 million FX impact on our intercompany loans. You know we fund those in Swiss francs and give the intercompany loans in euro to our companies. And at the end of the year, we have to kind of compare it then with the actual euro value. And as you all know, the euro substantially devaluated against the Swiss franc. There, CHF 5 million from that side. And last year, we had a positive effect of CHF 4 million. If you add it up, then you are at CHF 9 million. And the other CHF 3 million, which would then add up to the CHF 12 million, and that has a cash effect, but it will level out. That was the early repayment and repurchase of the '26 convertible bond because, as you remember, the offer was 103.5%, and we had to take that as a financial expenses. But on the other hand, we will save more than the CHF 3.5 million in this year because we do not have to pay the coupon of 6.875% of the '26 convertible bond anymore. So therefore, if you deduct the CHF 12 million, basically exactly the same net financial result. And just for your information, going forward, we have now redeemed the CHF 26 million fully 250 million outstanding, 3% coupon, 7.5% and then you have to add CHF 4 million to CHF 5 million of IFRS 16 financial expenses, and that brings you to roughly CHF 12 million of real cash out interest financial expenses for the coming future. Also on tax, you have seen we have not paid, but recorded CHF 12 million tax -- negative tax burden. Also there, no cash at all. There's 0 cash has gone out. It must be also somehow logical because we have recorded still a loss. The reason for that is that the deferred tax assets where we have tax loss carryforwards of several hundred million. And given a little bit lower growth in Rx and in some of our subsidiaries, that's just a manual thing, and we had to devalue the deferred tax asset, the positive ones, and that was this booking of this CHF 12 million, no cash effect at all. And given that it's based on a 5-year plan, the next year, we most likely have to do it the other way around, and then you will see there a positive contribution, but also with no tax effect. So far to the P&L, the balance sheet, I keep it very short. I think as a CFO, I'm very relaxed with this balance sheet. It has been substantially strengthened in last year with the rights issue in May, but then also with the partial refinancing of the '26 convertible bond so that we now have a very strong liquidity base of CHF 160 million. The net debt has been reduced to CHF 138 million and the equity ratio, which was strong already before, is now even stronger and amounts to 50%. As you may have read, we had redeemed the remaining CHF 22 million of the '26 convertible bond by beginning of March. And that's what I said as from now on, we only have the CHF 50 million and the CHF 200 million convertible bond outstanding, which are the only financial and interest-bearing debt besides the CHF 4 million to CHF 5 million lease payments, which we have also to pay on an annual basis. Let's have a quick look on the indirect cost and the net working capital. Indirect cost, everything goes into the right direction. From my view, not -- the arrow is not yet steep enough, but it will definitely steepen 7.2%. That's nothing you can be or I as a CFO can be proud of. But as I said in the past, you can be assured that this ratio will become significantly below 5% in our midterm plan, and you will see on an annual basis, further improvement on that area. Net working capital, also there, maybe -- that's because the liquidity position was so comfortable or is so comfortable, maybe not that focus by the end of last year. We had some overstocking of CHF 11 million, but that was based on a very strong Q4, which already started by the end of Q3, and we had really to overstock and the flu season also was kind of skewed towards the end of the year. We have done it a little bit too much. I think definitely CHF 5 million could have been less stocking. And then what's kind of -- I do not like very much is the CHF 9 million accounts receivable there, let's call it, sloppiness and I take it on my part, but that is also a nice asset to reverse in this year and the coming years. So far, everything on the cost, net capital and indirect cost side on track. And now let's go into details how we will achieve EBITDA breakeven in '26 and then subsequently free cash flow breakeven in '27. And we heard some complaints that we have now introduced CM3 contribution margin 3. I would say, okay, maybe the analysts have not yet in the spreadsheet, but I think it's the highest transparency you can really get from our end and what is CM3? CM3 is the last line of operating profit. You only have to deduct indirect costs and then you are at EBITDA. And I think that's definitely kind of, in our view, how we steer the company and how we -- and that's really the basis and the fundamental of our target and our mission to become EBITDA breakeven, and that's the reason why we want to share that with you. As you can see in '25, and you see the value of digital services, basically 3/4 or even more than 3/4 of CM3 contribution came from digital services, while the online pharmacy, that's Rx and OTC, BPC, including EU are keeping up substantially in the second half. That's the green part of the bar. For '25, we are very open and nice and even put the number on it, slightly grounded, but nevertheless, a very good indication. And then you see where -- why we are so confident that we will reach EBITDA breakeven. There will be a substantial contribution from digital services. As you know, they grow top line. And as Walter said, it's basically take rate equals gross margin, more or less the slight reduction equals EBITDA. But also the online pharmacy is substantially keeping up in '26. You see that the green bar, and they are almost on an equal level in absolute terms with digital services with the CM3 contribution, okay, they are on the top line much bigger, and that should not be a surprise. But having said this, in '26, even Rx, and that's really exceptional, will be CM3 positive. That's due to our very focused and increased marketing efficiency, which has been substantially double-digit negative still in '25. And you see the same pattern goes on for the first half in '27 and the first half '22. We will increase the CM3 margin by more than 300 percentage by 3 percentage points and more than double the CM3 contribution in absolute terms in 2026. And you see there will be -- there's not the end that will be ongoing also into '27. I think that's really important because if you now have CM3, you deduct the indirect cost and then your EBITDA level. And how that looks, we go even further into the detail on the next slide. That's the -- that's really kind of to the heart of what the CFO usually not any longer in Excel, but in sheets keeps and does not share with anyone. But here, you see the phasing of our EBITDA ramp-up. The basis is Q4 '25. In Q4 '25, we had still a negative EBITDA, but it was in the area of minus CHF 7 million, which is a huge positive development due to the rights issue, we had to report Q1 '25 EBITDA, which was minus CHF 16 million. Q4, we were down at minus CHF 7 million. And Q4 is really the run rate for our journey -- EBITDA journey in '26 with Q1 being somewhere in the area of Q4 because we see the same trends, the same patterns, the same dynamics, improvement in Q2, which is usually the first 2 quarters are not the best ones. It has some seasonality in our business, but not too much because there is additional measures included. Then Q3, we are, at this point in time, confident that we will reach EBITDA breakeven and Q4 will then be EBITDA positive. And this altogether, you will see first half the lion's share of the negative EBITDA contribution and the second half of the year, there we will hopefully see kind of a positive EBITDA contribution. And that leads us -- that's a little bit that will come now later to our guidance, but you see that it's minus CHF 10 million to minus CHF 25 million is our guidance for the EBITDA. As I said, -- it's CM3, that's the bridge, the minus CHF 48.2 million. Then the CM3 contribution, I said more than double. That's -- we haven't put the numbers there, but you also have something to calculate. And then the indirect costs where we are really working hard and try to bring them down, but that's according to budget, still some negative contribution, and that will lead us to the EBITDA guidance, which you see on the screen of minus CHF 10 million to minus CHF 25 million. I think CM3 is a very important pattern to get there, but also in combination with operational and marketing efficiency. And then we will also very tight CapEx management and also on the indirect costs. You see we have many layers where we can play and really optimize to get -- to achieve our target, first of all, in '26 to become EBITDA breakeven in the course of '26. But then with the same patents and instruments, we will become free cash flow positive also in the course of '27. That brings me now to the guidance for First of all, for '26, the short-term guidance, we have pretty broad guidance on the top line, mid-single digit to low teens. Reason for that is that we achieve EBITDA breakeven also with relatively modest growth, which is more the left side of the mid-single digit. But we also see patterns that we could even become EBITDA breakeven with accelerated growth. And that's the reason why we just want to keep the flexibility to play EBITDA versus growth, especially on the marketing side, and that's one explanation for the rather broad guidance. And as you know, we try to definitely come out at the right end of the guidance. But given, let's say, the different patterns, we will then have to narrow it during -- in the course of the financial year '26. As a soft guidance, how does that translate into kind of the business segments? Rx will be around 20%, which is kind of basically in line what Walter showed before. We cut the 20% noneconomic customers that comes with kind of a little bit lower but much more profitable growth on Rx. OTC, we stick to the mid-single digit as we have been before and as we have demonstrated that, that's possible. And digital service, there we will see mid-double digit growth as digital service combined and with a substantial increase of the EBITDA margin of the already very high EBITDA margin, but there will be further appreciation of the margin. I talked about EBITDA, minus CHF 10 million to minus CHF 25 million. That's kind of -- that also needs to be said an improvement of 300 basis points or 3 percentage points of the EBITDA margin. That's coming from the wrong direction, but I think it's still substantial, such kind of relative increase. And then CapEx, roughly CHF 30 million, maybe rather at the high end and we are positive that could be maybe slightly lower as we have seen in '25 with CHF 27 million. That will lead us to our ultimate goals, EBITDA breakeven and free cash flow breakeven in '26 and '27. And with this 2 years, taking into consideration that we have to really drive profitability, maybe a little bit against growth. The midterm guidance, we are very pleased that we basically can confirm the midterm guidance, which we put out in -- ahead of the rights issue. Of course, it's not 20% CAGR anymore. It's 15% CAGR anymore. But I think the most -- the best or the most impressive thing in my view is that we can keep the 8%. We can even stay more behind it because given that the relative growth of Rx goes down, and that makes the relative weight of digital service even bigger at the back end. And therefore, the business mix is really in favor of us with kind of having OTC, which is very important also for customer acquisition for Rx, but also for our TeleClinic and Retail Media business. Rx, which is decently growing and then digital services with high EBITDA contribution and high growth, which will have a higher relative share at the back end of our 5-year business plan, meaning that this is true for 2030, basically covering 5 years. CapEx has also been reduced by CHF 5 million. I think we are comfortable with CHF 30 million average CapEx rate. And I think that's basically the guidance where we are -- what we are aiming for and where we are kind of being measured to. And before I hand over to Walter because he's already jumping up, just 2 subsequent events, which you have seen on the convertible bond, I've already talked about. The closure of Ludwigshafen, which we announced also today, just some -- I cannot say, highlights, but some financials to that. We will have onetime restructuring costs between EUR 3 million to EUR 4 million. If you take the midpoint, then you should be at the right spot. But these are we are talking euros. Out of this [ EUR 3 million ] to EUR 4 million, EUR 2 million have an impact on EBITDA because these are severance payments and the remaining part is below EBITDA. That's kind of onerous contracts because we have lease agreements which we have to -- due to IFRS immediately to write off, but that will be an impairment between EBITDA and EBIT. We will adjust for that, roughly EUR 2 million. But I think the very positive effect is that we will have at least from '27 onwards, EUR 2 million -- in excess of EUR 2 million annual recurring savings because we are moving the 3.5 million parcels from Ludwigshafen to Heerlen, where we have ample of capacity. There will be better capacity utilization in Heerlen. The handling and packaging is 2x more efficient than in Ludwigshafen because we are in Helen fully automated. And therefore, I think the EUR 2 million is a baseline annual savings, but there is definitely potential for more to come. And then last but not least, current trading, I said, we have seen the positive trend from Q4 ongoing in Q3. Everything is according to plan, meaning budget. And also, I think that gives us a lot of comfort to kind of handle and managing this challenging but very exciting times ahead of us until we are free cash flow breakeven. Thank you very much for your attention, and I'm happy to hand over to also again. Walter Hess: Yes. Thank you, Daniel. So just before we close and open the Q&A session, -- in the last 2 years, we have not only built the platform engine, as shown before, we have also built a high-performing leadership team, as you can see here on the slide, a leadership team that bridges the gap between traditional retail excellence and disruptive health tech and AI innovation. And I can assure you also in the name of the whole team that we are fully committed to execute the defined goals and to transform our platform into tangible shareholder value. It's not only at the level of the management, it's also a change which is mirrored at the Board of Directors. And therefore, we have informed that we nominate 3 new members of the Board that we will present to the AGM. It's Thomas Bucher, a well-known, seasoned CFO with a lot of experience in listed and private companies. It's Nicole Formica-Schiller. She's an expert in AI and digital health transformation, but also regulation on a European and the German level. And she has also a wide network in Germany, in the health care sector and a deep understanding of the regulatory landscape in Germany. And it's Thomas Reutter, an experienced corporate and capital markets lawyer. So these board nominations ensure that management and Board is perfectly synchronized with the company's vision and AI-first platform strategy and also shall provide the necessary stability to the company. And with that, we are at the end of the presentation. We had to tell you a lot to give you a lot of information. But now let's immediately move to the Q&A session. Operator: [Operator Instructions] Walter Hess: Okay. We will share the mic. Laura Pfeifer-Rossi: Here is Laura Pfeifer, Octavian. I have a question on your sales outlook for this year. So what is the primary swing factor within your guidance range? Is it mainly driven by uncertainty around Rx growth? Or is it rather related to OTC performance? And maybe specifically on OTC, could you elaborate on what you are currently observing in terms of competitive dynamics? Walter Hess: To the first and second part. Daniel Wüest: No, I think, Laura, the swing factor is definitely Rx, which -- and as I said, we have kind of -- we play operating profit against growth. And given that the co-payment and the bonus, which have been developing not in the entire group because we only did kind of a pilot with some selected Rx customers developed very well in Q4, and we rolled out kind of this concept to the whole DocMorris just recently. That really is kind of the swing factor and also the reason for the wide range of the guidance. I think you can assume that OTC, BPC, that's the mid-single digit, meaning something between 3% and 7%, not much deviation. Also, the absolute volume is high. The digital services, double-digit -- mid-double-digit growth and -- but on a relatively low revenue -- absolute revenue level and the swing factor is really Rx, whether that's kind of let's say, 10% or 40%. But that's not that you take that as just to show you what kind of the volatility could be on Rx. Walter Hess: Yes. And you mentioned the competitive landscape and the price pressure. I guess you meant there, in the course of last year, we have adapted our pricing strategy, improved our strategy. You have seen the improvement in the gross margin. That's a result of it. But in general, we don't see now a change on prices or price levels in the market. In our market, pricing, the pressure is always on, but not now a big change with new market entrants coming in. Urs Kunz: Urs Kunz Research Partners. Regarding midterm, is that around 2030. And then on your midterm growth target of 15%, I still find that a little bit high, the OTC part is growing at mid-single digit, I guess, in your outlook in midterm. And I guess on the digital service side, I don't know if you can have this mid-double-digit range also percentage range all the way in the midterm future. So that -- if I then go back to the Rx that should be higher than 20% Rx growth to reach this 15%. Am I right about that? Daniel Wüest: Yes, you are perfectly right. And I think what you need to really consider given EBITDA breakeven and free cash flow, as said that we have to limit the growth and really play on our marketing efficiency. And that's also why we stated in the guidance that the fine print in the [indiscernible] that it's back-end loaded in '26 and '27, you will definitely see lower Rx growth than what will then come again from '28 to '30 onwards. And if you said it's substantially about 20%, and I will -- I can sign into that. But it will be 20% in the first 2 years, but then we will substantially be keeping up again. Urs Kunz: And where do you take how this belief that it's higher than 20%. It's just that you put in more marketing again then or you see the market growing faster after 27% in online? Daniel Wüest: Yes. I think it's really kind of the -- that we then have other or once we are free cash flow positive, we can then really also not that we fall back in the old patterns that you won't see then kind of us spending all of a sudden CHF 30 million in TV again. But I think with the bonus and the co-payment that's a very strong instrument. But as said, at some point in time that you are in balance with growth and profitability, we have, for the time being, still certain limitations and there, you can definitely kind of play that even more aggressive. Walter Hess: And sorry, what we also will see is a platform dynamic kicking in. So you have seen the partnership also with Google. So where we have joint development teams also with them, developing new services, adding services to the platform. And this will drive traffic, will drive engagement, will drive loyalty. So we will see the effects there definitely within even 1 to 2 years already. Urs Kunz: Midterm is 2030 or? Daniel Wüest: 2030. Sibylle Bischofberger Frick: Sibylle Bischofberger, Bank Vontobel have 2 market questions. First, I remember the market share of online pharmacies was about 5, 6 years ago, about 1.3% in Germany. How has it developed? How much is the market share now? And how much do you want -- how much growth do you expect in the next couple of years? And the other interesting market, telemedicine, you mentioned 0.5% market share. Where do you expect it to be in the next couple of years? Walter Hess: So on the Rx, yes, it was 1.3 5, 6 years ago. It went down before eRx started to 0.75%. And since eRx was available now also for online pharmacies, it went up to roughly 1.7%. And where will it go? That's the 1 million question. So we have, for our assumptions, taken a really conservative view in our midterm plans of 5% to 6% in 5 years. But frankly speaking, we think it will be more. It will ramp faster. But in our plans, we did not go now more aggressive than 5% to 6%. And on telemedicine, so yes, the share as shown, the penetration is lower than 0.5%. TeleClinic is roughly at 0.3% so has about 60%. And where will it go? So it depends on how fast the digital strategy of the ministry will be defined and will go live and how prominent telemedicine will be in this different kind of future care pillars. And it's too early to say where it goes. But anyway from 0.5, it will definitely go northwards, definitely. And remember, it's -- we have 2 kind of businesses. We have a retail business, but we also have a digital service business with completely different metrics, valuation, et cetera. And there is a strong growth really already going on and will continue. Daniel Wüest: And I think if you are interested, I recommend you to read Page 175 of our financial report where all the details in relation to the goodwill impairment is, which we honor past. But there you have kind of the assumption, the current market share of telemedicine and Rx and what our underlying assumptions are. It's in Rx 1.7% and in 2030, 5%, 1.7% to 5%. And that's the overall market share. I think then for the whole market. And telemedicine, it's even more astonishing, 0.5%. And in 5 years' time, the penetration should be 1.6% -- that's what we base our goodwill impairment test, and you could also assume that, that's basically then somehow reflected in our business plan. Walter Hess: So no more questions here in the room in Zurich. So let's move to the webcast and adding questions from there. Operator: We have one question from Gian Marco Werro from ZKB. Walter Hess: Yes. Hi, Gian Marco. Please go ahead. Gian Werro: Hello. Thank you. I hope there's no echo on your side. So first question is the growth outlook for TeleClinics. You mentioned mid-double-digit revenue growth. Why not 80% or 90% again this year because the penetration is still so low? Do you not do more marketing also there? Because in my view, it's really so such a comfortable way to get a doctor appointment in Germany, and there must be a huge demand from the doctor and from the patient side. So from a top line perspective. And then the profitability of the overall services business, is that still fair to assume that you are meaningfully above the 55% EBITDA margin for this business? And you mentioned you want to increase the margin for TeleClinic, but can you give us a bit more detail about your margin improvement target also for the whole services business, that would be interesting. And then just a third question, if I may, if I have the opportunity, the logistic cost is just something -- I mean, you already elaborated on it. But don't you see risk of patients ordering then less or if they have to pay really then for even more for the delivery services, especially considering your growth expectations in Rx and OTC. Walter Hess: To the first question, the growth rate. So you can consider that the growth in absolute values remains at more or less the same level. And then you have to take in consideration that you always have to integrate new network partners, larger ones. And once you integrated them, the growth curve starts to slow down and then you integrate new ones. At the moment, the regulator is justifying the new digital strategy. And for example, the doctor associations -- we talked to several of them. They are ready, but they just want to wait until they know now what the regulator regulates -- and so this is the dynamic of the growth that we have predicted for this year. If it comes to the margin, you mentioned 55%. So some of the services are even higher. Some of the services are below this 55%. And I think -- yes. Daniel Wüest: I think on the margin, not sure where this 55% are coming from. I think as of currently, TeleClinic has margins in the low 30s that will substantially increase over time over the next 5 years to the figure you -- you mentioned, I would say that's kind of 45%, 50%, that's kind of a reasonable run rate. And on the other hand, Retail Media, that's also very highly profitable. That one is already on higher EBITDA margins, but will also kind of in a balanced model will be somewhere around 50% EBITDA margin. And I think that's the mix. You will see this year an overproportional increase of EBITDA contribution given that we do not have a triple-digit growth at TeleClinic. And I think it's always kind of 1 year, a little bit less growth, but then substantial improvement of profitability. The next year, strong growth, maybe a little less profitability than 1 year of consolidating everything, increasing margin. And I think that's -- but the overall pattern and growth pattern is very strong, but it's not a linear line. It's kind of some years with a little bit hold back on the top line, but push the bottom line and therefore, even faster. Walter Hess: And your third question about logistics, do you refer to what to the closing of Ludwigshafen or... Daniel Wüest: No, to the logistic costs. And I think there, Gian-Marco, it's not that we say, I think we do it a little bit more professional, not saying that you have now to pay EUR 2 more. I think you have definitely other measures. First of all, kind of not reducing, let's say, the order that you can say, okay, if you order until 5, you get it next day, you can even lower your logistic cost if you say, okay, if you order until 4, then you get it next day because that has already another price tag on the -- with the carrier. And you could also play then with the basket size, which is kind of then free of shipping just to balance this logistic cost. And we see it in the whole market. You see, for example, DM free of delivery charge is EUR 60, our friendly competitor and -- and thus, we are much lower. But I think you have many things to play and to optimize your logistic costs. And it's not a problem of DocMorris, it's kind of the whole online and not even Rx and OTC online, but the online industry, and we will just follow the market and to not getting -- being hit by higher logistic costs. Operator: And we have one more question from Jan Koch from Deutsche Bank. Jan Koch: Two questions. The first one is on your 2026 guidance, which essentially only implies less than 4% sequential growth per quarter. Why is this the case? And given that your group guidance is quite wide this year, is there a scenario where you accelerate Rx growth in 2026? And then secondly, you mentioned a strong liquidity position of CHF 160 million. But if I take the CHF 160 million at the end of 2025 and consider that you paid back the CHF 20 million convertible and consider a negative free cash flow in probably in the mid- to high double digits in 2026, you will start 2027 with probably less than CHF 100 million. Free cash flow is still expected to be negative next year, and you might have to refinance your 2028 convertible next year as well. So how do you plan to achieve this? Are you open to sell a minority share in TeleClinic? Walter Hess: Yes. Let me take the first question and then Daniel, the second one. So on the sequential growth, as we have shown before, the guidance, we have given us some space so that we can maneuver between growth and marketing spendings. And this is also what we see in the first quarter that it goes in a really good direction already. And -- if it continues like this, so we can go more to the upper end, but we want to be flexible in reacting. And for us, the priority this year is completely on becoming breakeven in the course of the second half year, possibly on the second half year in total. And therefore, we need this flexibility and we take for us this flexibility. And on the second question. Daniel Wüest: Yes. I think just to start top down, you're right with the CHF 160 million, you have to deduct the CHF 20 million or CHF 22 million, but let's deduct the CHF 20 million, that makes it easier for calculation. That's CHF 140 million. And you are also right that you can assume for this year and next year, negative free cash flows, but they will be substantially even already this year lower than last year and in '27 that the indication that in the course, of course, we aim for as low as possible negative free cash flow, but that should be not kind of the 2 figures added up should still leave us with a very comfortable remaining cushion of liquidity until we will become then for the full year free cash flow positive in '28. In relation to the refinancing of the '28 maturity, I think once we have demonstrated and shown that we are on the right path, -- that's then something which we will tackle by then. It's clear that we do not fully redeem the CHF 200 million, and it's also clear that it does not make sense from just -- at least that's what I learned at university, okay, acknowledging that was some time ago, but that the fully debt financed balance sheet is definitely not an efficient balance sheet. And I think let's take it one step after the other, and we have ideas. And you referred to kind of -- if I'm right, selling a minority stake of TeleClinic. And I think, of course, that it's a very valuable asset, which we have in our hand, but it's extremely valuable within our platform and therefore, definitely not any or the first priority to monetize TeleClinic at this point in time. Jan Koch: Understood. And one follow-up, if I may. Are you going to report EBITDA in Q3 and Q4 this year again so that we can track your progress? Daniel Wüest: Let's see. I think could well be. I think that -- and I think it would be important that at least we give you a very good indication where we are heading to. And I think this nice picture, which we draw in our presentation, you can basically on a quarter-by-quarter basis, track us and see whether the 2 guys in front of you have not only overpromise, but also deliver on that. But we have to see, but most likely, yes. Walter Hess: Okay. Then we come. Daniel Wüest: I just want to say that's the benefit of lunchtime. Walter Hess: Last question. Unknown Analyst: Not going to look. No. On the AI companion digital assistant. As I understand, you're not getting any money for it. Marketing and any plan that on later stage you get some money out, because you mentioned these 100 people they got saved from cancer. At the end, I think somebody is happy to pay something.. Walter Hess: Did anybody say we do not get any money out of it? I cannot remember. No, it's what we see and we measure very carefully, of course. We see an impact -- a positive impact on traffic already. We see a positive impact on engagement already. We see the conversion rates going up as soon as we can take someone by the hand and guide through the platform. And we see a significant increase of conversion rate. And this brings us already additional money. And as you have seen on the platform, the marketplace, this marketplace is a marketplace also for health services. And on a marketplace, you want to earn money. And we are filling this marketplace also with health services, and we will get additional margins, revenues and margins from there as well. Okay. So with that, we come to the end. Thanks a lot. It was a little bit long. Sorry for that, but we had a lot of information for you. Thank you for joining, and we wish you all a pleasant and happy day. Bye-bye. Thank you.