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Operator: Good day, and thank you for standing by. Welcome to the Inventiva Full Year 2025 Financial Report Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Nikodem, Head of Investor Relationship. Please go ahead. David Nikodem: Good morning, good afternoon, everyone, and thank for joining Inventiva's Full Year 2025 Financial Results and Business Update. Our press release was issued yesterday evening, and this webcast and slides will be available in the Investors section on our website following the call. Joining us on the call today are Andrew Obenshain, Chief Executive Officer; Jean Volatier, Chief Financial Officer; and Dr. Jason Campagna, Chief Medical Officer and President of R&D. I would like to remind everyone that statements made during today's conference call and during the Q&A session may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please refer to Slide 2 of the slides and our SEC and AMF filings for a discussion of associated risks. These statements reflect our views as of today and should not be relied upon as representing our views at any later date. With that, I will now turn it over to Andrew, starting on Slide 3. Andrew? Andrew Obenshain: Thank you, David. Good morning, good afternoon to everyone, and thank you for joining us. Since joining Inventiva 6 months ago, I've been struck by the depth of scientific conviction behind lanifibranor and the dedication of this team. Today, every resource, every decision and every member of this team is now aligned behind a single objective, advancing lanifibranor towards approval for patients with MASH. Let me start with our main focus, our global Phase III clinical trial NATiV3. Enrollment was completed in April 2025 and represented a landmark operational milestone for this company. Today, we are updating the expected timing of our top line readout to Q4 2026, reflecting the disciplined sequencing of our clinical and biostatistical milestones. We believe the data from the NATiV3 trial, if positive, has the potential to carry weight with regulators, physicians and most importantly, with patients. And we believe we are running this program with the rigor and precision all stakeholders deserve. On our pipeline and organizational focus, in the first half of 2025, we made the strategic decision to concentrate all of Inventiva's resources on lanifibranor and MASH. As part of this plan, in Q4 2025, we sold our global rights to odiparcil to Biossil and we may receive up to $90 million of potential regulatory and commercial milestone payments, as well as potential high single-digit royalties on future net sales if approved. While this transaction frees up our internal resources to fully focus on lanifibranor, we are pleased that odiparcil has found a new home where its development can continue, potentially in offering patients with MPS VI an opportunity for treatment. At the same time, we strengthened our leadership team to align with the level this opportunity demands. Jason Campagna joined as CMO and President of R&D. Martine Zimmermann joined as new EVP and Head of Quality and Regulatory Affairs; and Nazira Amra joined as our Chief Commercial Strategy Officer. We are building towards launch in a lean and targeted way, advancing our readout and NDA preparations while laying the early groundwork for commercialization in anticipation of potential approval of lanifibranor. And the opportunity is real. MASH has been underdiagnosed and undertreated for too long, but that is changing. More patients are being identified, more being diagnosed and entering care. Awareness is growing, screening is improving and metabolic disease is finally getting the attention it deserves. The numbers tell that story clearly. There are an estimated 18 million people in the U.S. living with MASH, but only around 10% have been diagnosed, and that number has grown by 25% compared to 2024 estimates. Among those diagnosed with clinically actionable F2 or F3 disease, only around 40% are currently under the care of a treating position. So while diagnosis rates are improving and the market is evolving, far too many patients with significant fibrosis remain without the care they need and face a real risk of progression to cirrhosis and liver failure. If our NATiV3 trial can replicate the 18% fibrosis improvement seen in Phase II, we believe lanifibranor could be well positioned as a potential best-in-disease oral therapy with significant commercial impact. Ultimately, our goal is to make a meaningful difference for patients and that is what drives everything we are doing. I will now turn the floor over to Jason, who will give a brief update on lanifibranor, our differentiated oral anti-fibrotic, and a potential new treatment option that we believe addresses the remaining unmet medical needs in MASH. Jason Campagna: Thank you, Andrew. Good morning and good afternoon, everyone. Let me start by reminding you of the mechanism of action and the development pathway of lanifibranor. Lanifibranor is a small molecule designed to induce anti-fibrotic, anti-inflammatory and beneficial vascular and metabolic changes by activating all 3 PPAR isoforms, alpha, delta and gamma in a balanced manner. This broad mechanism of action is designed to target the hepatic and extrahepatic drivers of MASH simultaneously and in one oral therapy. Lanifibranor was the first asset to achieve statistically significant improvement in the composite endpoint of both fibrosis improvement and MASH resolution in our Phase IIb NATIVE trial, after just 24 weeks of treatment with a favorable safety and tolerability profile. On the basis of these results from our Phase IIb the FDA granted lanifibranor breakthrough therapy and fast track designations. NATiV3, our pivotal Phase III clinical trial was designed to confirm and extend those findings in a larger, more diverse global population over 72 weeks and is intended to provide the data to enable successful marketing authorization in the United States and Europe. NATiV3 is a randomized, double-blind, placebo-controlled trial in patients with biopsy-confirmed MASH and stages F2 or F3 fibrosis, the core of the MASH treatment population. Those with significant disease burden and a high risk of progression to cirrhosis, liver failure and liver-related mortality. We specifically chose a clinically meaningful primary endpoint for NATiV3, fibrosis improvement and MASH resolution. And at 6 months in our Phase IIb the 1,200-milligram dose of lanifibranor showed a 24% treatment effect. NATiV3 was also deliberately designed to mirror the patient population of our positive Phase IIb and the real world as it exists today. A meaningful proportion of our patients have type 2 diabetes and other metabolic comorbidities, and a number are on background GLP-1 and/or SGLT2 inhibitor therapies, mirroring the patient's physicians actually see in their clinics, which we believe will ensure that we generate clinically meaningful data to support both NDA and MAA submission. In April of 2025, we completed enrollment, exceeding our original targets with over 1,000 patients in the main cohort and additional 410 patients with MASH and fibrosis stages F1 through F4 in an exploratory cohort. We anticipate sharing the top line results of our pivotal Phase III trial in Q4 of this calendar year, a moment, I believe, will be significant for the field and for the patients who need new treatment options. I will now turn the floor over to John for our financial review. Jean Volatier: Thank you, Jason. Good morning and good afternoon, everyone. So yesterday evening, we issued our press release with our full financial results for the year ended December 31, 2025. I will focus on the highlights. As of December 31, '25, we held EUR 230.9 million, close to EUR 231 million in combined cash, cash equivalents and short-term deposits. This position was built by 2 significant financing events in '25. First, the execution of the second tranche of our 2024 structured financing in May generating approximately EUR 108 million in net proceeds. And second, our U.S. registered public offering in November generating approximately EUR 139.4 million in net proceeds. We estimate that we are funded beyond our anticipated NATiV3 readout. Based on our current operating plan and cost structure, we estimate that our cash runway extends to the middle of Q1 2027 and to the middle of Q3 2027, assuming the full exercise of our tranche 3 warrants, which could generate up to an additional EUR 116 million. We confirm this way the cash guidance provided earlier. Our R&D expenses for the full year were EUR 87 million, primarily reflecting our pipeline prioritization and, to a lesser extent, the completion of NATiV3 enrollment in April 2025. Marketing and business development spend increased to EUR 5 million primarily due to expenses related to a planned pre-commercial investment as we prepare for a potential launch of lanifibranor if approved. G&A expenses of EUR 47.9 million include approximately EUR 20.3 million of noncash share-based compensation tied to the governance and organizational transition we implemented this past year. I will now turn the floor back to Andrew for closing remarks. Andrew Obenshain: Thank you, Jean. Inventiva enters 2026, well-funded, operationally focused and ready for a consequential chapter in this company's history. NATiV3 is fully enrolled. We've built a leadership team with deep medical, regulatory and commercial expertise, and our regulatory and commercial readiness work is progressing in parallel. Our anticipated top line readout in the fourth quarter of this year represents a genuine inflection point, not just for Inventiva, but for the millions of patients living with MASH, who still have no adequate treatment options. We are truly executing with the discipline and urgency this moment demands. Thank you for joining us today. We will now open the floor for questions. Operators, please go ahead and provide instructions for the Q&A session. Operator: [Operator Instructions] We will now take our first question. And our first question for today comes from the line of Seamus Fernandez from Guggenheim. Seamus Fernandez: Just a few quick questions. First, can you update us on how the performance of the trial has been in terms of dropouts? I know that there were some requirements from the tranches that were coming in that were successfully completed. But just wanted to get a sense of where the dropout rate was as you were kind of wrapping up enrollment. Second question is, can you help us understand how you're thinking about the performance of the 800 versus the 1,200-milligram dose in terms of both weight gain and then ultimately on fibrosis? Is the sort of change from a more typical 12-month endpoint to the 18-month endpoint geared to have the 800-milligram dose catch up to the 1,200 but also manage the potential tolerability or weight gain issues? And then to the last question is just what you're seeing in terms of the overall market interest. Madrigal continues to see very strong uptake in the U.S. How are you thinking about the opportunity to compete with Madrigal? What do you think is the threshold necessary? Andrew, you mentioned 18%. Just interested to know if you think 18% is the threshold where the impact is going to be substantial or is that more reference to the powering of the study? Andrew Obenshain: So, Morning, Seamus. Thanks for the questions. I'm actually going to take your third one first and then hand the first 2 over to Jason. So yes, just to be really direct, we think that if we replicate the Phase II trial and have an 18% effect on a fibrosis, we have an excellent drug. That is the clearing efficacy that we need for in order to have a very attractive market opportunity. We continue to see a lot of market growth, thanks to the entry of the 2 approvals and a lot of awareness around MASH. And there still continues to be unmet need, especially we see in that F3 diabetic patient population, where we think there'll be a very good entry point for lanifibranor. And then at 18% of fibrosis effect with our HbA1c lowering, we have a very good profile for that. Let me then turn the question over to Jason first on the drop-offs and what we've last discussed publicly there. And then the second question about the 800 catching up the 1,200 dose. Jason Campagna: Seamus. So let's take the first one. So you are correct. As part of the structured financing from 2024, there were covenants in there around the release of follow-on tranches that the early termination rate for the trial needed to be below 30%. That number was selected because the original powering analysis from the trial was built allowed for up to a 30% dropout rate. So that was the metric that was used, and we have disclosed publicly at the time of both the first and the second tranche release, which would have been in April of 2025, that we were below that threshold. I think now that we're tightening the guidance to Q4 of this calendar year, I think we were able to confirm we are well within that range and feeling quite good about where we've landed and are reaffirming that the trial is well powered to detect the primary endpoint with the size of the trial that we have and the early termination that we've seen. So the second question you asked about the 2 doses, I think you're landing sort of in the right mixture of elements that are important to us. So we agree with you that in theory, with additional time just because of the way PPARs work and the biology of the liver that that 800-milligram dose will have time to sort of catch up to the 1,200. It was already quite a good dose back in NATIVE, as you recall. But 6 months is relatively thin for a PPAR, which is a transcriptional modulator to sort of do its work. So the idea that you could see a deeper effect with that 800 dose at 18 months, it's very reasonable. But I think where you're landing around the potential dose responsiveness of the tolerability concerns, that is also very important to us. So take weight gain, which you mentioned. Weight gain is a traditional PPAR gamma mediated fluid retention event, and we know that, that fluid retention is highly likely to be dose dependent just from what's been shown with other PPAR agonists and our own data from NATIVE. So we think that potential to have really strong efficacy with both doses, which we were able to show in NATIVE, but may have a different tolerability profile at the lower dose could be meaningful for patients. So it's our hope that both will be positive, and we'll have that opportunity to discuss that with regulators. Operator: Our next question comes from the line of Yasmeen Rahimi from PSC. Unknown Analyst: This is Dominic on for Yas. The first one, we know that NATiV3 is a very large data set. As we're getting closer to top line data in 4Q, what are some of the quality control, I guess, protocols going on in the background to analyze the biopsy samples and what procedures are in place to ensure timely and thoughtful assessment of these biopsies? And then our second question is, can you just talk or help us understand, I guess, how you have how -- if you had any recent safety monitoring committed? And are you seeing anything on a blinded basis on the safety profile? Any color there would be helpful. Andrew Obenshain: Good morning, Dominic. So 2 questions. Let me take the second one first, and the first one over to Jason. Just on safety monitoring, there are periodic monitoring committee meetings every 6 months. You would know if they had said anything. Other than that, we really can't say anything about those meetings. Go ahead, Jason, on the biopsy. Jason Campagna: Yes. Thanks, Andrew. Dominic, so quality control and biopsy. Let me start by saying that the team we have here is outstanding. The clinical operation, the clinical development team have been immersed in the world of MASH clinical trials for the better part of a decade. So this is something that they know well and we carried that expertise forward. So you could think of quality control biopsy around 3 issues. Are we hurting the patient? Meaning at the bedside, are we doing the right things. Second, are we capturing the biopsy according to standard practice? So that's the length of the biopsy, the overall quality of the core, if you will. There's measurements and things that sort of go in and say check or not check. We have reviewed all of those and continue to do so right up until when we get to last patient, last visit later this year. And then lastly, finally, when the slides are sectioned prior to going off and being read, there's a quality control set there that looks at what actually gets made on to the slide. Afterwards, at that point, we are obviously blinded to all of that information. But there is a quality check in terms of are the reviewers, the readers staying on time and on track reading biopsies in the paired matter that's specified both in the protocol and the analysis plan. So I like the teams that we have in front of it and more importantly, I think that they are doing exactly the right work to keep us on track. Operator: Our next question for today comes from the line of Ritu Baral from TD Cowen. Ritu Baral: I want to drill down a little bit more upon final powering. You guys disclosed the over 1,000 final patient number. I think it's 1009 and the 90% powering. What's the effect size that, that powering is for on the primary combined endpoint? And what are your expectations for potential movement around placebo of that, I think it was 7% at the 6 month upon the final primary endpoint? And then I have a follow-up on market expectations around that F3 diabetic population that was mentioned. Andrew Obenshain: Thank you, Ritu. Jason, why don't you go ahead and answer that question? Jason Campagna: On the first one, we are not guiding to the actual effect size, but I can reiterate for you and for everyone what we have been saying. So first, we are with the sample size of over 1,000 patients. We are powered to over 90% on a primary endpoint of the composite fibrosis improvement 1 stage or more MASH resolution. That one has a higher placebo response than we showed in NATIVE, which as you know, was 7%; and two, a smaller treatment effect than we showed in NATIVE data about the 1,200 milligram dose. So that means the overall effect size that we are powered to is smaller. So a much more conservative view than the actual data that we showed in the Phase II program. We just talked earlier with Seamus that, that alongside our comfort with the early termination rates we have, we feel very good that the trial is structurally sound and that will give us an answer to the question one way or the other. Did lanifibranor work first at the 1,200-milligram dose? The testing is hierarchical. We can't get to the 800, unless you went on the 1,200. But that is the core question. We think the trial was well set up to deliver an answer to that question that is well powered and highly confident. I think to your second question around placebo response. The individual endpoints of fibrosis alone. I think everybody on the call knows this, fibrosis alone improvement or MASH resolution alone can be quite noisy. It's not clear after all these years of study why that is, but we do know that they're noisy. On the other hand, the composite endpoint, the primary endpoint of NATiV3, are with us and other sponsors have shown that, that endpoint is much less prone to placebo response. And that makes sense, Ritu, biologically, right? You have in 1 patient, they may on a placebo response move their fibrosis stage by 1 point or more, but the idea that they can also resolve their MASH spontaneously. What that 7% tells you was that in the wild, in the real world, that's incredibly uncommon and that makes total sense with the actual way that patients walk in. It's unusual if you leave them sort of sitting along without treatment, that both of those things will get better on their own. So the placebo response there actually reflects, we believe, the underlying biology, and it should remain very low. We've seen it by precedent, and it's our expectation for the trial that we're running. Ritu Baral: Very helpful. And then, Andrew, a question on how you guys and your own market research is viewing that F3 diabetic population. Do you have an approximate patient number? How is the diagnosis rate in that population changing versus the overall MASH population given the ADA focus on MASH and its messaging to diabetologists? Andrew Obenshain: Thanks for the question, Ritu. So in terms of size, there's about 375,000 patients total F2, F3, in under treatment of care right now. The largest segment is -- one of the largest segments is that F3 diabetic patient population, being 55% to 65% of the patients are diabetic, and about it splits roughly 50-50 in our market research between F2, F3. So that patient population is quite a large patient population overall. In terms of growth, we don't have the granularity down to that segment. However, I would just know anecdotally that F4 is one of the fastest-growing segments. And I think the diagnosis rates are increasing quite a bit overall for F2, F3, F4, just to the number of entrants into the market. So they are growing a minimally proportionate with the market in that segment. Ritu Baral: To that point, Andrew, can you tell us of the 410 expansion cohort patients, how many are F4. Do you know at this point? Andrew Obenshain: I'll pass that question. Jason Campagna: Yes. Confirming you're talking about the exploratory cohort, correct? Ritu Baral: The exploratory cohort, yes. Jason Campagna: We do have F4s in that cohort. They would have screen failed in that case, by histology, potentially other lab values for the actual main cohort in NATIVE. So they represent a sort of range of F4 from. They're all compensated by definition, meaning they have no clinical outcome events, decompensation events. But the range of severity with portal hypertension can be from none to evidence of clinically significant. And those -- that data is going to be quite interesting to us. We're not yet guiding on when we'll have an opportunity to get those data out. It's unclear right now if we have them at top line per se, or in the weeks that follow it in one way or another. But I think as we get closer to top line data, we should be guiding on that more tightly. Operator: Our next question today comes from the line of Thomas Smith from Leerink Partners. Thomas Smith: Just wanted to follow up on that F4 population. And I know you're capturing some of those patients in the exploratory cohort. Can you just expand a little bit on what you hope to learn from that exploratory cohort and how you're thinking about planning for the outcome study in F4s pending the NATiV3 data and perhaps how you're thinking about perhaps how some of those plans could change. We know we're going to get F4 outcomes data for Rezdiffra also in 2027. So some interesting timing around that data set relative to when you're planning on starting this F4 outcome study. Andrew Obenshain: Thanks for the question, Tom. Jason, go ahead. Jason Campagna: So there's a lot there. Let me make sure I get it all for you. So one, just in general, what are we expecting to learn from that cirrhotic population in the exploratory cohort. First, above all safety of lanifibranor in that population. Clearly, right, if you're going to bring in a new therapeutic into a more, let's say, sicker population, you want to obviously want to have safety headroom to do that. So approximately 75 patients we have in that cohort safety above all else. Second, it's not that, as you know, that cohort is not tracked systemically -- systematically, excuse me, for efficacy. That being said, we do anticipate having data of things on like LFTs, transaminases and other things that would point directionally towards whether the drug is biologically active. So really a pharmacology question, very important. We have done hepatic impairment studies with the drug, but looking at it in a real world and a clinical trial would be incredibly helpful. And I think lastly, it will give us a sense in our own hands of how those patients progress over time to later-stage disease. You could read about it, you can model it, you can look at other people's trial, but in your own trial we will see how many of those patients go on to actually have liver related or other events. And that will be incredibly helpful as we think about powering and sizing of an outcome-driven trial, which is what we're right now calling NATiV4, for lack of a better term. But make sure that, that gets to your question, Tom, on the value of that cohort to us? Thomas Smith: Yes, that's helpful. Jason Campagna: Great. So now look, you know the Madrigal data coming. I think yet we acknowledge that. We agree. I think our view is that positive data, if Madrigal were to show it, would only be helpful for the field period, full stop. The idea that we have now finally shown that the surrogate endpoint does correlate with clinical outcomes would be an enormous one for the field. Look no further than what happened in the cardio renal division with proteinuria in the last 6 years. Proteinuria was issued as a surrogate in 2019. I have 5 or coming 6 approved therapeutics for IgAN, that's an enormous win for patients. So we expect something like that would hope would happen here. But clearly, that would influence our thinking about how we think about populations and the ones that are most likely to develop liver-related outcomes because we want to get more of them since we know that the sort of door is open to show that the histology will map to clinical outcome. Operator: Our next question comes from the line of Michael Yee from UBS. Michael Yee: I have [ 32 ] myself. First question is on weight gain, can you remind or confirm the views that based on the phase II also, I think what you're sort of said in the ongoing Phase III that there is some initial weight gain, but that it plateaus and that you don't really see anything beyond a modest increase in some patients, at least in the phase II, and that plateaus and that was initially seen in the Phase III, and therefore, no concerns. The second question is, is there any view that either because of other drugs or because of longer time duration of 18 months versus 6 months here that, that could actually come down in some of those patients or at least come back down to baseline, is that possible? And then the third question is around getting the regulators comfortable with that, what I guess fluid retention effect in some patients and that there would be presumably no at least initial cardiac imbalance in any of the arms that you see and which you'll be able to talk about no imbalance in any cardiovascular events numerically or any SAEs of that nature when you disclose the data in the fourth quarter? Andrew Obenshain: Mike. You were a little soft, so I'm just going to repeat some of it. So there was a question about does weight gain indeed plateau and number one, if in the Phase II. Number two, does that weight gain -- is there a chance of that weight gain would actually go down in the Phase III, either due to concomitant medications or longer treatment? And then number three, some of the weight gain do -- if the weight gain is due to fluid is there any concerns about a cardiac imbalance in the trial. So for those 3 questions, I'll hand it over to Jason. Jason Campagna: Yes. Mike, good to talk to you again. So we have previously said and we'll reaffirm it here that the data that we have previously shown from the blinded look at NATiV3 back in September of 2024, and that we also disclosed at that time the FASST clinical trial in systemic scleroderma, which was a year trial with treatment of lanifibranor same doses in NATiV3, 800, 1200 milligrams, that the weight -- the fluid retention weight gain appear to plateau. I think we don't have any additional information to guide on that publicly, but I think that is what we've seen in both of the clinical trials so far. I think second, do we expect the weight to come down? It's well possible. I think there are a couple of factors at play. Take the LEGEND study, for example. We show that when patients are given SGLT2 inhibition in parallel with lanifibranor that there's almost no weight gain at all. There are many patients in the trial that are on SGLT2 inhibition and do not have the number for you off the top of my head. And we know that patients can be started on those therapeutics for management of diabetes or any other reason. So it is entirely possible and reasonable to believe that if patients are getting SGLT2 inhibitors or other diuretics to manage blood pressure, et cetera, that, that weight gain either the fluid retention, could be blunted or resolved so that the final landing spot, if you will, for any patient, might be lower than the peak weight gain that they had in the trial. But I think we'll see what the data show. Lastly, in terms of regulators, I think I can't speak for the FDA, but I can only speak to what I've read of everything they've put out. The fluid retention is a known phenomenon with PPAR gamma agonism, the thing about lanifibranor is it was designed to be different than other PPAR gammas, and we'll see what the data show. Our view is that it is a very different type of PPAR agonist. But that being said, the PPAR gammas is a known effect. It is on target. It is not idiosyncratic in any way. So FDA has shown with labeling and other work that they are comfortable with fluid retention, I think you're hitting on the right point, the cardiac. And as we've talked about and guided publicly over the years, we are not seeing congestive heart failure as a clinical issue in our program. It doesn't mean that we don't follow it. And it doesn't mean that you're thinking about how fluid retention may lead to that. That's certainly in the PPAR labels today, the gamma agonist, but it is just not something that we are generally seeing in our program, but we will be paying careful attention to it, and it's a dialogue we'll have with FDA. Operator: [Operator Instructions] Our next question comes from the line of Ellie Merle from Barclays. Unknown Analyst: This is Jasmine on for Elie. So as kind of a follow-up to Ritu's question. You talked about the overlap of MASH in type 2 diabetes as a segment where lanifibranor can be particularly attractive. But do you have a specific bar for what competitive data would look like in this population? And then specifically, how many type 2 diabetes patients do you think have undiagnosed MASH, and how do you plan to work to increase the diagnosis in this population and unlock that segment? Andrew Obenshain: So I'll take those 2 questions. First of all, just the diabetes and overlap with MASH, it is enormous, right? And there's -- I think there's about 18 million patients in the U.S. with undiagnosed MASH. At least half of those or more have diabetes at it's obviously way, way more than 375 under the treat or care. The way we see the market evolving is we've seen since about 2004 that market has grown about 20%. So it's clearly quite robust growth, and we do anticipate that to grow nicely. We, as a company, probably will not be pushing diagnosis, at least initially, there are enough patients coming in that we can focus on the patients being diagnosed -- the existing patients being diagnosed. That would obviously, maybe a later marketing strategy would be to actually increase diagnosis. And then your first question about -- I'm sorry, I forgot your first question already. Unknown Analyst: Just if you have like a specific bar in that population for what competitive data looks like? Andrew Obenshain: Yes. So the -- in terms of competitive data, the way we look at this is that the differentiated profile that we have is we work both on the liver and we're extrahepatic. We work on the body and we work on the liver. So we have direct anti-fibrotic effect. Again, as I said, that an 18% effect size, if we duplicated that in the Phase III trial, we feel it's a very competitive drug. And then the other thing we'll be looking at is HbA1c lowering, which was on average across the whole patient population, diabetic and nondiabetic in the Phase II, with just over 0.5 point, that would be an approvable diabetes medication years ago. So that combination of HbA1c lowering, combined with triglyceride lowering, HDL raising and the fibrosis effect, we think, has an extremely attractive profile for that diabetic F3 patient. Operator: Our next question comes from the line of Lucy Codrington from Jefferies. Lucy-Emma Codrington-Bartlett: Just one left, please. Regarding the confirmatory trial, just wanted to confirm, do you have an understanding with the FDA in terms of what underway means when it comes to granting accelerated approval? Is it enough just to have started that trial? And does this need to be by the time you file or by the time you get to approval? And then related to that, is starting that trial included in that mid 3Q cash runway with the third tranche of warrants? Andrew Obenshain: Yes. So yes, it is included. Starting that trial is included in the cash runway of that mid-Q3 runway. Jason, you want to talk about what's necessary for the trial? Jason Campagna: Yes. Lucy, I think you have the broad brushstrokes of it, right, but just something on the language. So accelerated approval is only at the time of the review. What we're looking to get is conditional approval under Subpart H, which is you've got marketing authorization and then the trial, as you note, confirms your surrogate and then you get full approval. Whether accelerated is only a question of how long it takes the FDA to actually review the file. With that, I'm just trying to make sure that we're all clear on that, that we -- you have the broad brushstrokes, right? But the individual rules are discussed with each sponsor at the time of the pre-NDA meeting and then during the mid-cycle review. But the general framework is you need to have most of the trials structurally in place, protocol approved at the time you were filing the drug and it needs to be moving on the definition of moving is going to be something FDA will define for us. We will be prepared. We have our CROs selected, the protocol is approved, may even have sites open. All of that is in the future. But at the time we file, we will meet the FDA position of trial meaningfully underway. And then at the mid-cycle review, you need to show continued progress on that. So they will check again that made a much more detailed look around enrollment nerves, site activation curves, et cetera. Again, each sponsor has their own detailed agreement with FDA on that, and it is our plan, of course, not only to have those conversations, but to make sure that we're meeting those requirements. So that when we are offered if we're fortunate enough to make it there, and we offered, the conditional approval, that trial will be well underway at that point. Lucy-Emma Codrington-Bartlett: Got it. Thank you, and thank you for clarifying on the terminology. Operator: Our next question for today comes from the line of Annabel Samimy from Stifel. Jayed Momin: This is Jayed on for Annabel. Congrats on the progress. Just 2 for me. The first one is around the use of background GLP-1 in the trial. What are your expectations on the potential impact of having that background GLP-1 use on [ lani ] effect size of those patients? And my second question is around the AIM-MASH tool that was nearly FDA qualified as a supportive tool to help with histological assessments. Do you have any plans to maybe leverage that to control or minimize variability? Andrew Obenshain: Yes. Thanks, and thanks for the question on the impact on the lani effect size based on background GLP-1 and the tools. So go ahead, Jason. Jason Campagna: Yes. So in confirming we do have, and we've previously shared that we have about 14% or so of the population in NATiV3, that's across both cohorts, that have background GLP-1 use at the time of randomization. That could be semaglutide, older drugs, liraglutide, dulaglutide, et cetera. So it's not only limited to the modern GLP-1. And I think its effect on treatment response should be minimal, and that should -- it will sound tongue in cheek, it's not intended to be. It's because that when you enter the clinical trial independent of what drugs you're on, whether you've lost weight by any other measure, independent of a GLP-1, you're entering the trial issue have that F2, F3 disease with active MASH. So whatever it is, one, those drugs are not doing it for you or your lifestyle modifications; and second, that the doses that we're using are really the diabetic doses. So they don't -- they are not anticipated to have much of an effect at all. We're simply seen that in the clinical trial data. I think to the second question about the tools, are you talking about PathAI specifically or just more general non-invasives? Jayed Momin: Yes, no, it's the PathAI tool. Jason Campagna: Yes. It's an interesting idea, right? But if you -- looking at it really simply, what PathAI lets you do is substitute one human pathologist for a digital pathologist and then you need a second pathologist to read. It's still the same idea of 2 plus 1 consensus. In this case, 1 of the 2 is PathAI. It's interesting. It's not something that in NATiV3, we anticipate taking much advantage of. But it is something we're thinking very closely about for NATiV4, potentially using that as the -- in the exploratory cohort presently from NATiV3 to see how we may be going to pull more data out of those patients that happen to have a biopsy. Operator: Our next question for today comes from the line of Rami Katkhuda from LifeSci Capital. Rami Katkhuda: I guess can you remind us of lanifibranor's FC and F2 versus F3 patients in the Phase II study and how those differences may impact expectations for NATiV3 just given the higher proportion of F3 patients enrolled? Andrew Obenshain: Go ahead, Jason. Jason Campagna: Rami, just to qualify, you want the proportion of patients in NATiV2 or the responses of the F2, F3? Rami Katkhuda: The responses, please, between the F2s and F3s. Jason Campagna: The sample sizes are simply too small to break out what we have done. We think the analysis that's more helpful, it's in our corporate materials, is that when you strip away the F1s in that trial. You get down to about 188 F2, F3 across all 3 arms. You can see that the effect size actually slightly goes up. What we guide to is that it remains unchanged. So the drug seems to work equally well in more advanced fibrosis in patients with earlier disease. So you're not getting much of a free glide on those F1s, if you will. I think second, when we look at NATiV3, as Andrew talked about earlier, this is a contemporary MASH market. The majority of patients showing up and clinics today that have F3 disease, will have diabetes. So we think that aligns pretty well with the outside world. And we're pretty comfortable with what we've seen from our Nature publication back in 2024, that the drug not only works equally well in earlier and late-stage disease, but the adiponectin levels actually go up equally well across all cohorts and it's that adiponectin that's really driving, we think, well correlated with the clinical response. So we like where we're landing with NATiV3 and the likelihood of efficacy in both those F2 and F3 patients. And as a reminder, we're stratified by fibrosis stage and diabetes and NATiV3, so we're going to cut those data in a number of different ways to sort of get where you're headed with your question. Operator: Our next question comes from the line of Srikripa Devarakonda from Truist Securities. Unknown Analyst: This is Anna on for Kripa. So 2 questions from us. First, looking ahead a little bit in terms of the MASH guidelines, would you expect an update on the MASH guidelines this year? And how are you thinking about getting [ lani ] into the MASH guidelines? And then second question, in terms of cash, what kind of needs to happen for you to have access to that third tranche? Is it based on kind of Phase III success only? And are you looking at any other non-dilutive sources of funding such as partnerships? Andrew Obenshain: Thanks for the questions. So on the MASH guidelines, I think we will wait -- we need to get data first before we have any conversations about putting lanifibranor into the MASH guidelines. On cash, the tranche 3 is a positive endpoint, and we hit a positive endpoint in our trial, and then when those 77 million shares of EUR 50 become exercisable, and the investors have 45 days to exercise them. So that's how that mechanically works. So positive trial equals cash coming in, so as long as the stock price is above the EUR 50. We are always looking for ways to increase our cash runway. And we've obviously in a very strong cash position right now. In terms of partnerships, right now, our plan is to commercialize lanifibranor ourselves. Going forward, we think that there's plenty of access to capital, either in the equity markets or other kind of capital sources that we don't necessarily need to partner lanifibranor. Operator: Our next question comes from the line of Sushila Hernandez from Van Lanschot Kempen. Sushila Hernandez: Could you elaborate on your regulatory and commercial infrastructure? What steps are you taking to act with speed once the data is here, also considering your cash runway? Andrew Obenshain: Yes, good question. So yes, so we are being very careful stewards of our capital right now before data. So a lot of -- the regulatory team is fully staffed, and I would include the quality team on that, too, because that's necessary, to make a really good filing with the FDA. So we have invested. We've increased the size of that team and the talent on the team in the course of this year. From a commercial standpoint, really focused on strategic commercial execution. So being led by Nazira Amra, really focused on market access, the market research. I'm going to include in the broad commercialization medical affairs there. So the strategic role that won't really set us up for success in the future. We will not staff up aggressively in commercial until we have positive data. Operator: This concludes today's question-and-answer session. I will now hand the call back to Andrew Obenshain, CEO of Inventiva for closing remarks. Andrew Obenshain: Thank you so much. Thank you, everyone, for joining the call this morning. We certainly have an exciting remainder of the year coming up for Inventiva, and we look forward to engaging with you all as we go forward. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect.
Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Koil Energy's Fourth Quarter and Full Year 2025 Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, Tuesday, March 31, 2026. A detailed disclaimer related to Koil Energy's forward-looking statements is included in the press release issued Monday morning and filed with the SEC. It is also available on the company's website, koilenergy.com or upon request. A reconciliation of non-GAAP financial measures used in the press release and on today's call is included in the press release and on the website. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Koil Energy also undertakes no obligation to revise any of its forward-looking statements to reflect events or circumstances after the date made. At this time, I'd like to turn the call over to CEO, Erik Wiik. Erik Wiik: Good morning, everyone. Thank you for joining us today. In this briefing, I'll be presenting an overview of our financial performance for the fourth quarter and the entire year of 2025. I'll also share an update on our strategic road map and discuss how Koil Energy is positioned for further growth. Finally, I'll be happy to answer any questions you may have. I'm incredibly proud of the Koil Energy team for delivering an outstanding quarter and achieving a new milestone in our growth journey. In the fourth quarter, we achieved a revenue of $7.3 million and EBITDA of $700,000, resulting in a 10% margin. This represents a 22% year-over-year increase in quarterly revenue and 14% sequential growth from the third quarter of 2025. Koil Energy is growing again. For the full year 2025, we achieved revenue of $24 million, marking a 6% year-over-year increase. Adjusted EBITDA was $1 million in 2025 compared to $3.5 million in 2024. The reduction was driven by investments tied to our growth initiatives. Koil remain focused on long-term growth by deploying free cash flow to acquire new rental equipment, fund growth-related expenses, including development of the intellectual property, the establishment of our Brazil operations and bidding activity that supports our international sales pipeline. These investments are already delivering positive growth results. And with that overview, I'll now turn the call over to our Chief Financial Officer, Kurt Keller. Kurt Keller: Thank you, Erik. Let me walk through our fourth quarter results in more detail. For the 3 months ended December 31, 2025, Koil Energy generated revenues of $7.3 million, a 22% increase compared to revenues of $5.9 million the same period last year. Gross profit for the quarter totaled $2.5 million or 35% of revenue, representing a 5% increase in gross profit compared to $2.4 million or 41% of revenues in the fourth quarter of 2024. The decline in margin reflects the shift in revenue mix and volume. Sequentially, quarter-over-quarter, gross margin improved from 32% of sales to 35%. Selling, general and administrative expenses during the quarter equaled $2.1 million. The increase was largely driven by increased sales efforts and legal assistance with patents, master service agreements and international contracts. Moving to net income. We reported a gain of $370,000 for the fourth quarter, which translates to a $0.03 earnings per diluted share. This compared to net income of $541,000 or $0.04 per diluted share recorded in the fourth quarter of 2024. This reduction in earnings reflected higher SG&A expenses. The full year's financials reflected a 6% increase in revenue, driven by a 45% increase in service revenue. The relatively modest overall growth was primarily due to a slump in fixed price contract revenues in the first half of the year. Gross margin increased steadily throughout the year from 32% to 35%. The gross margin for the full year was 33%, down from 39% in 2024. This was driven by increased direct overhead as a result of 15% higher head count levels and lower labor utilization during the first half of 2025. Selling, general and administrative expenses were $8.3 million for the year compared to $6.2 million incurred during the previous year. EBITDA for the year was $960,000, which was $2.6 million lower than in 2024. The reduction reflects $1.3 million in expenses related to our growth initiatives, with $680,000 resulting from higher head count levels, and lower utilization in the first half of 2025 and a $570,000 receivable write-down, which we are actively pursuing through legal action. This led to a breakeven earnings per share compared to $0.22 per share the previous year. Turning to our balance sheet. As of December 31, 2025, we reported $4.8 million in working capital, including $1.5 million in cash and $4.7 million in net receivables. This compares to $5.7 million in working capital at year-end 2024 with $3.4 million in cash and $2.8 million in net receivables. The shift is primarily due to the timing of billing and collections tied to fixed price contract milestones. Before I hand the call back over to Erik, I want to briefly acknowledge that while 2025 was not the year we had hoped for, the significant improvements throughout the year that led to a great fourth quarter, demonstrate the ability of the Koil team to carefully manage our growth journey. During 2025, we restructured and strengthened the finance team and successfully implemented NetSuite as our new ERP system. Our focus remains on profitable growth disciplined execution and scaling investments appropriately. Thank you. Erik Wiik: Thank you, Kurt. My congratulations to the men and women of Koil Energy. And particularly our sales team delivering a record order intake in 2025 and our service team who delivered a 45% annual growth in service revenue. The culture of Koil can be described as exceptional responsiveness and safe workmanship. This is our business DNA. Speed and collaboration are cornerstones of our work culture. Our clients continue to entrust us with critical project awards. For instance, during the year, we installed over 70 multi quick connector plates for Beacon Offshore Energy at its Shenandoah Deepwater field in the Gulf of America. We secured a significant contract to supply steel to flying leads and associated equipment for a project in the Gulf of America. We also announced the award of a significant contract for control equipment for a subsea isolation valve system. Earlier in the year, we won a significant contract to supply multi quick connector plates for a high-pressure system in the Gulf of America. Although we secured numerous smaller contracts on a weekly basis, it is a significant and major awards that drive our growth. We are very excited for our future. In 2026, our team will remain focused on growing the company and delivering on our growth strategy. The consensus among our customers is that global energy demand continues to rise. Deepwater fields naturally decline at an average rate of 7% per year underscoring the urgency for new development just to maintain current output. From our perspective, we're seeing global operators allocate more capital towards deepwater and ultra deepwater developments, particularly in Brazil, the U.S. and West Africa. Subsea tieback developments continues to gain momentum as a preferred approach among offshore operators. These projects allow operators to access nearby reservoirs, utilize available topside capacity and leverage existing subs infrastructure. A key advantage of subsea tieback development is the potential for shorter payback periods than traditional greenfield projects. Leveraging existing assets, these projects frequently have the potential to achieve first oil within 2 years of final investment decision. Proven practical design backed by a deep team experience in subsea development and commissioning plays a critical role in ensuring reliability and staying on schedule. Koil Energy, is in a uniquely strong position to win subsea tieback projects. Billing activity and order intake for subsea tieback projects continued to increase throughout the year. During 2025, we have continued to invest in new talent and additional assets to support our long-term growth strategy. We remain disciplined in balancing profitability with investment and are confident that our expanded capabilities position us well to execute on our growing backlog. We remain focused on our strategic objective to becoming the leading provider of integrated subsea distribution systems and services globally. One indication of subsea activity is the number of subsea trees awarded and later installed. For both greenfields and brownfields, industry analysts such as Westwood Global Energy Group on March 6, 2026, reported an expected increase from 247 subsea tree awards in 2025 to 296 awards in 2026, a 20% increase. Koil's product sales tend to correlate with subsea tree awards as we supply the controls infrastructure linking subsea trees to the topside production facility. Analysts also expect subsea tree installation activity closely correlated with Koil service activity to increase by approximately 8% even when compared against last year's elevated installation levels. We are 2 years into an ambitious 3-year strategy focused on achieving continued profitable revenue growth. While our growth strategy continues to push Koil's business performance domestically, we have also advanced our international activities. Our facility in Macae, Brazil is up and running. While we are waiting for a significant contract in that region, we are currently serving clients with rental equipment that we built in country. The bidding activity in South America is at its highest level and we are pleased to share that we are now qualified to bid for key customers in that region. While Brazil is our main focus, we continue to pursue opportunities in the North Sea, together with our alliance partner, SubseaDesign. We have also hired a channel partner, pipeline network, LLC to pursue service work in Africa and Southeast Asia. Before we conclude, I would like to share that we are currently refining our growth strategy and setting ambitious new goals through 2030. We look forward to presenting these plans at an in-person and online investor conference in Houston on May 7 and 8, 2026. The held in conjunction with the Offshore Technology Conference, OTC Formal invitations will be in shortly. That concludes our prepared remarks today. So I'll turn the call back to the operator to take investor questions. Operator? Operator: [Operator Instructions] The first question today comes from [ Mike Travels ], private investor. Unknown Shareholder: Question is the Iran war and increasing oil prices, what kind of a scenario assessment? Can you tell us when you get into the situation with oil prices increasing, increasing fast? Are your customers increasing their activity? Are they taking a wait and see? Is this more profitable for them? Is it better, worse or no change? What can you tell us? Erik Wiik: Well, that's a question for someone with a higher pay grid than me perhaps. But thank you, Mike, for the question. So I'll refer to our customers what they say. And last week, we had the CERAWeek in Houston. This is an excellent conference where you have not only executives from various international oil companies present, but you also have government officials from various countries that are engaged in oil and gas policies. So two things relate to this. First of all, as you said, the oil price going up. And for a while, we don't know how that will go and how long it will stay. But while it does, obviously, our customers are getting their cash flow improved. They always have and referring to a similar situation in the past, they always have projects sitting on the shelf that they would like to develop, but didn't get included in the budget. So when cash flow increase, what we often see is that we release more projects for that reason. Obviously, that has very little to do with the business case, the long-term business case because all these projects take years to develop. So who knows what the oil price is going to be 5 to 7 years from now. But the other part of this that again, referring to what I learned from my customers, is that the [ foremost ] trait as being something we always have talked about but not too often, perhaps in the recent years. We always knew it was a risk when so much of the resources come from that region. But now we know it's real. That risk is now on everybody's mind. And even if there is hopefully a piece coming shortly here, we will have this in mind. Too many resources are coming from one place. So officials from various countries have reflected that they obviously want to make sure that they have resources in their country or with a trusted neighbor. And for sure, the subsea developments is the best way to address that. There are so many subsea regions around the world and so many countries participate in developing subsea developments. And we hear now that they're more interest in going after that resource than perhaps before this conflict. Unknown Shareholder: That sounds like somewhat of a positive assessment long term, though. Erik Wiik: Well, I hate to connect our earnings to a conflict, but that's what I learned from these people, yes. Unknown Shareholder: Right. Can you give us more color on the longer-term growth plan that you mentioned going out to 2030? Erik Wiik: Yes. So we are preparing that now. We have been working so far on a 3-year strategy. The road map is now 2 years into the 3-year plan. So obviously, we need to hammer out some more details on what we're going to do in the next 3 years or actually 4 years, which gets us to 2030. So that is what we're working on right now. And then we plan to present that at an investor conference in the second week of May, the 7th and 8th of May. Unknown Shareholder: And is that -- is there going to be a link for us to watch that? Erik Wiik: Absolutely. So you can either be present here or we're going to have an online conference as well. Operator: [Operator Instructions] The next question comes from [ Peter Michelman ], private investor. Unknown Shareholder: I was wondering what is your exact head count today in Houston and Brazil, respectively. Erik Wiik: So the exact head count is 68 today. Is that correct? Kurt? Kurt Keller: If you don't include Brazil. And then if we include our people in Brazil, we have three people in that are dedicated to Brazil. Unknown Shareholder: Okay. And with respect to operations in Brazil, are you -- it doesn't sound like you're doing any fabricating with employees in the new facility. It's with subcontractors. Erik Wiik: So the initial work we did was with the subcontractors and -- but then we brought the equipment to the facility for inspection there and also had contractors working at the facility to do inspection and then we shipped it to the field. So all the -- is complete. Unknown Shareholder: And as time proceeds in Brazil and you -- let's say, you get a significant contract. What kind of margins do you see compared to Houston on fabrication and service work, respectively. I mean, the labor is a bit cheaper and the facility lease is cheaper, but then I imagine that -- when you facilitate a sale, it's going to be less revenue? Or how would that work? Erik Wiik: So our margin policy will be the same there as it is here. So we're trying to get the same margin on every project basically. And -- but as you indicated, winning the first project, perhaps we have to go lower, but not necessarily. We think that Brazil is a mature competitive region. You can manage risk well and the competition there is not necessarily you want to lose money either. So it doesn't mean that we necessarily need to give up margin. But as you indicated in the beginning, it might be a little less. Unknown Shareholder: So you're looking 40% target, 35% to 40% range roughly? Erik Wiik: So yes, the gross margin range, we want to be in the high 30s with that, then 40% would be a great target, absolutely. Unknown Shareholder: All right. What became of the receivable turned bad debt from last quarter or the engineering firm in Britain? Kurt Keller: We are still pursuing that, and we received a default judgment here in the States and now are going after them in U.K. legal system. Unknown Shareholder: And is that a long and winding road, so to speak? Kurt Keller: It's one that's maybe not as clear a path as the U.S., but it is in the U.K. And so... Unknown Shareholder: There is a path. Operator: This concludes our question-and-answer session. I'd like to turn the conference back over to Erik Wiik for any closing remarks. Erik Wiik: All right. Thank you, operator, and our thanks to all of you who joined our call today. We appreciate your interest in Koil Energy and look forward to the next earnings call. This concludes our call. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day. Thank you for standing by. Welcome to the Solesence Fourth Quarter and Full Year 2025 Conference Call. Today's call is being recorded. During this call, management will make statements that include forward-looking statements within the meaning of the federal securities laws, which are pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This conference call may contain statements that reflect the company's current beliefs, and a number of important factors could cause actual results for future periods to differ materially from those stated on this call. These important factors include, without limitation, a discussion of a customer to cancel a purchase order or supply agreement, demand for acceptance of the company's personal care ingredients, advanced materials and formulated products, changes in development and distribution relationships, the impact of the competitive products and technology, possible disruption in commercial activities occasioned by public health issues, terrorist activities and armed conflicts and other risks indicated in the company's filings with the Securities and Exchange Commission. Except as required by federal securities laws, the company undertakes no obligation to update or revise these forward-looking statements to reflect new events, uncertainties or other contingencies. I'll now hand the conference call over to Kevin Cureton, President and Chief Executive Officer. Please go ahead, sir. Kevin Cureton: Thank you, operator, and thank you to our investors, brand partners and teammates who are joining us today. Today, we will provide more guidance on our 2026 plan and the strategy we initiated at the end of 2025, which aims to take our company forward to enhance consumer health and well-being while delivering outstanding results to our investors. This initiative is called Transform and Transcend. Before we delve into our plans, we will review our 2025 results. To walk you through how we wrapped up 2025, I'll turn the call over to our CFO, Laura Riffner. Laura? Laura Riffner: Thank you, Kevin. I will begin with a review of our fourth quarter 2025 results before moving to full year performance and our 2026 outlook. For the fourth quarter, revenue was $12.5 million, roughly even compared to the previous year. Fourth quarter 2025 gross profit was $3.4 million compared to $2.8 million for the same period in 2024. Gross margin was 27% in the fourth quarter of 2025 compared to 22% in the same period in 2024. Our results were affected by transition costs and operational inefficiencies in manufacturing resulting from our facility consolidation. Operating expenses in the fourth quarter of 2025 were $3.2 million compared to $2.8 million in the same period in 2024. This figure included relocation charges as we transitioned from 3 facilities to 2. Solesence reported net income for the quarter of $163,000 compared to a net loss of $558,000 the previous year. Turning to the full year 2025. Revenue reached a record $62.1 million, up 18.6% from $51.9 million in 2024. This was primarily driven by a large-scale launch in the first half of 2025 as well as 20 new brand partners who launched products in 2025. While revenue growth was substantial, full year gross profit was $16.1 million compared to $16.2 million in 2024. As Kevin noted in our third quarter call last November, our margins were compressed by 3 key areas. The first is labor costs. Elevated labor costs this period were primarily driven by extended process changeovers and related downtime as we scaled our production volume. The second is product design, which relates to start-up and quality costs associated with a complex launch in the first half of 2025. Third, inventory control, which represented the most substantial headwind to margins this period. Driven by our efforts to grow while scaling production, we experienced yield volatility and associated losses, which impacted our bottom line. We are now prioritizing cycle counting and preproduction staging to improve production flow as we continue to expand. With the above results, we delivered adjusted EBITDA of $4.2 million, less than 7% of revenue. As we look ahead, our 2026 guidance focuses on operational health. As a result, we are establishing a 30% gross margin floor as our target for the year. We expect EBITDA improvement in 2026, returning to double digits as we realize 6-figure annual savings from our facility consolidation and the elimination of 2025's operational inefficiencies. A critical goal in 2026 is to increase our free cash flow by reducing safety stock and improving procurement operations. We began 2026 with momentum from 2025, driven by organizational changes and the launch of the Transform and Transcend initiative. Still, our first quarter results will be impacted by investments in training and restructuring associated with Transform and Transcend as well as by changes in customer order patterns, largely due to retail dynamics and weak sell-through from one of our large mass market customers. Our current ship in open orders stand at just under $33 million as compared to a year ago when they were at $38 million. While we anticipate a period of revenue normalization, we plan to improve EBITDA relative to 2025 and remain confident in our ability to achieve our full year guidance. I'll turn it back over to Kevin to provide more details about our transform and Transcend initiative. Kevin? Kevin Cureton: Thank you, Laura. As we look back on 2025, it is important to reflect on our company's journey over the last 12 months, indeed, the past 2 years. During that period, our company nearly doubled its revenue. As I noted in our press release, this affirmed both the value we bring to the industry and our ability to establish ourselves as a leading innovator and manufacturer of SPF-infused beauty products. We increased our patent portfolio by 20%, which now numbers over 120 and through this expanded position, created a valuable picket fence that protects our market position and provides one-of-a-kind leverage for our brand partners as they grow. While we achieved these important business milestones, we invested in building our manufacturing infrastructure which both modernized our production capabilities and expanded capacity, which will enable us to generate over $200 million in revenue without further major investment. In October of 2025, we showcased a new product, Day Mode Hero Concealer. Day Mode is a hybrid product that combines skin care and color cosmetics with skin longevity claims, including UV protection and leverages 2 new technology platforms that we will bring to market in 2026. This prototype product was recently named a finalist across 4 categories of the Cosmetics & Toiletries Alle Awards. These categories are wellness, anti-aging and skin care, color cosmetics and UV protection. While the winners will not be announced until later in 2026, the cross-category recognition for this multifunctional concealer demonstrates the broad and enduring appeal of our innovations and affirms that our technology and product stories resonate with brands and industry experts alike. Through these developments, we have built a company on the cusp of changing the health and well-being of millions of people while dynamically growing our enterprise value, but there is still more work to be done. In our Q3 call, I spoke about 3 specific areas where our operating model needed changes that were revealed by our rapid growth. These areas are product design, labor efficiency and inventory control. While we achieved record-breaking revenue this year, our business processes were tested by the sheer volume and complexity of our success. As Laura highlighted, these challenges led to lower-than-planned income performance. As we face these challenges, we also saw that our opportunities to simultaneously increase profitability and growth were being limited by our execution. As a result, we launched the initiative that today we are formally introducing to our investors, Transform and Transcend. It is a framework we will use to ensure our financial performance aligns with our technological excellence in order to secure a path forward for sustainable profitability. This is a road map designed to fundamentally correct the operating challenges we have identified while amplifying the innovation platform we created, ultimately resulting in what we believe will be significantly increased enterprise value. The Transform and Transcend initiative is built on 4 core pillars. The first pillar is operational excellence through the implementation of lean management principles. We began work on this first and foundational pillar in November 2025. Through lean management principles, we are equipping our company with the processes and discipline to meet or exceed our brand partners' requirements while aggressively eliminating the inefficiencies we have identified across our business. A key tenet of this is a modernized sales inventory and operations planning process, or SIOP. These improvements will address the labor inefficiencies, inventory control issues and yield losses we saw in 2025. We plan to increase our gross profit margin by at least 5% by the end of this year compared to 2025. The second pillar is technology-driven expansion. Starting in late Q2 to early Q3 2026, we plan to expand our addressable market by introducing new product categories. These include bringing the technologies behind the prototype Day Mode Hero Concealer product to market. We are leveraging our 120 patents with new formulation innovations to move into adjacent prestige beauty segments like scalp care, where our technologies can provide an immediate competitive advantage. The third pillar is our shift toward a product development and supply model that enables us and our brand partners to capture more value and a greater share of wallet. This includes an emphasis on turnkey supply and collaborative marketing to drive sell-through and leverage increased consumer recognition of Solesence branded technologies. We kicked off our first major co-marketing activation 2 weeks ago with brand partners, Colorescience and Bloomeffects. The fourth and final pillar is collaborative globalization. Beginning in the first quarter of 2027, we plan to support select brand partners as they expand into international markets. Given the regulatory complexity of the global SPF market, this pillar represents an opportunity to modify our service model in those regions, increasing margins by 10% or more relative to our domestic benchmarks. The change in leadership, starting with my appointment as President and Chief Executive Officer, was made to achieve profitable growth for our company, including the development and implementation of the Transform and Transcend initiative. As you know, in support of our profitable growth objective, we also added a seasoned CFO, Laura Riffner, to our team in September of 2025. This represents the first time that we added a C-suite level of finance and accounting professionals to our team who has demonstrated success in our industry. We also recently added Yoolie Park as Vice President of Brand Partnerships. Yoolie brings over 20 years of experience in component supply and turnkey manufacturing. Her mandate is to institutionalize our new commercial strategy and help us further deepen and expand our relationships with existing and new brand partners. Looking ahead into 2026, beauty sectors remain resilient and consumers continue to view beauty as an affordable luxury with SPF-infused skin care at the intersection of essential and discretionary spending. Consumers are more critically examining how protecting their skin, their largest organ impacts their overall well-being. As a result, we believe SPF infused beauty will be a central aspect of the more than $500 billion global beauty and personal care market. We remain excited about how closely our products and technologies are aligned to consumer demand and the value our strategic brand partners see in our consumer products. Before we go to Q&A, please keep these thoughts in mind. Following 2 years of growth that significantly outpaced the industry average, 2026 will be a year focused on execution, which is at the heart of what the Transform and Transcend program will yield. It is this focus accompanied by the associated restructuring and investment that is a necessary step to transform our operational execution in order to transcend beyond the traditional CDMO model. Ultimately, this will turn Solesence into a strategic innovation partner that drives superior financial performance for both our brand partners and our company. Operator, we are now ready for the Q&A. Operator: [Operator Instructions] Our first question comes from Tony Rubin, who's an investor. Unknown Analyst: So I heard a lot of interesting words in the call, but I was hoping you could drill down to [ GrassTechs. ] In 2024, you had EPS of $0.07 per share. And Laura, you talked about increasing EBIT, but didn't really provide an EPS goal. So my question on that aspect is, will EPS in 2026 be at or above the 2024 levels? And kind of a related question is, Kevin, previously, you had suggested that gross margins would return to at least the mid-30s level. And on this call, Laura mentioned a floor of 30%. So I hope you would both agree that maximizing shareholder value is the purpose of a company. So with those goals in mind, could you address those 2 specific items? Kevin Cureton: Thank you, Tony, and thanks for joining. So what we'll do is have Laura address your first question and also can provide some color on the gross margin area, and then I may offer additional color to that. Laura? Laura Riffner: Thank you for joining us today. Regarding the EPS, we aren't prepared to provide guidance on that this morning. As I did mention, we are expecting and targeting an increase in EBITDA to return to double-digit numbers in 2026. Regarding the 30% gross margin floor. On that, Tony, our guidance is intentionally conservative. And while we are -- we have that as our guidepost, our intention is to leverage the Transform and Transcend initiative to improve that number. Kevin Cureton: I think Laura has answered both those questions very well. So there's nothing additional I can offer at this point other than, again, reaffirming our guidance is on an annual basis and that we are taking a conservative approach to that guidance, but expect to obviously focus on improving enterprise value, which ultimately will increase the value to our shareholders. Operator: Our next question comes from James Lieberman with American Trust Investment Services. James Lieberman: And I want to actually congratulate you for all the transitions that are going on. Most people don't fully appreciate what you've accomplished over the last couple of years. And in terms of consolidating manufacturing into your new facility, I'm sure that's a major step, and you have to be extremely careful about doing that transition so that you don't have real supply issues and manufacturing issues that could have been more difficult to meet your customers' goals. But can you address some of the questions of if you have an aspirational say that you could grow the company to be $200 million, is there sort of like a some sort of road map to get there in terms of the kind of new products you're coming out with, the relationships with your customers and how you see the market sort of, say, like a 2- to 3-year period? And also, can you give us an aspirational profit margin? So you're hitting on all cylinders. Could you reach as high as like a 40%? Can you address those areas? Kevin Cureton: Jim, thank you for your thoughts, and I appreciate your involvement in our company for as long as you have been. So thank you. There's a lot you offered there. We'll try and start by addressing, yes, the consolidation was successful. And in fact, through that consolidation, we did not have any impact or negative impact on OTIF. We actually continue to have a high performance on time and in full while we conducted that consolidation. So we're excited about that and excited about what contributions that consolidation will have in terms of improving our overall financial performance. When looking beyond the current state and being aspirational in a careful manner this morning, that is really at the heart of the Transform and Transcend plan. What we talked about in our prepared remarks was to really address some of our operational execution challenges so that we could amplify our innovation platform. We're really in a unique position based upon the type of IP that we've created, the type of protection that it builds around our brand partners and for us and uniquely addresses what's really the most important or really preferred area for consumers, which is mineral-based sunscreen is preferred by all consumers or at least at 70% of women as one of our resources say. So we're building a platform that really is targeting the areas that are growing the fastest. We're working with brands that are the fastest growing. We work with the middle market brands primarily, and those are the brands that are the fastest growing in the industry, and we're addressing a critical area that also is driving the change in the marketplace. So all of those things point to us resuming the type of growth that we've had in the past, which is growing at a multiple of the industry's growth rate. And so we anticipate that to happen. We also have talked in the past, Jim, about getting full value of the technology that we provide through the Transform and Transcend initiative, we also mentioned some of the changes that we're making relative to increasing our share of the value chain. And quite honestly, along with that, the share of the value chain that our brand partners have as well. Those initiatives or that specific initiative, along with the rest of what we've described in Transform and Transcend will help to significantly increase our gross profit margin performance and therefore, in the end, our EBITDA, so that we are targeting levels that you mentioned and maybe even greater. All of that takes time, as you know, and as you have appreciated over the many years you've been part of our investor community. And so we're excited about what's going to start, but we know that it will take some time for us to get to all of those objectives, but we're really excited about where we are and where it's headed. Operator: [Operator Instructions] Our next question comes from Stefano Bolis, an investor. Unknown Analyst: I have 2. The first is, are you still planning to have a dedicated investor call, as you mentioned last time? And the second is on the BASF volumes. In the last 3 years, they have been decreasing. So one would have expected after the lawsuit story that this is because they needed more, not because they needed less. So how do you see this trend moving forward on BASF? Kevin Cureton: Thank you, Stefano. I appreciate your call in today. So a couple of questions there. Let's take the last one first and just guide that as with many of our brand partners, even those that we are well known like BASF or publicly known, maybe a better way to state it, like BASF, we are very careful not to provide specific guidance on their performance. There -- we are permitted to acknowledge those brands, but not really provide specific guidance on their performance. So I'll not be able to provide more than that. We certainly continue to partner with them closely and have a good working relationship with BASF. Operator: Our next question comes from Wayne Rowan, who is an investor. Wayne Rowan: Yes. I'd like to thank you for your integrity and not trying to gloss over things. That's much appreciated. Nobody likes BS. Why have we struggled so much on production? Because it seems like we've been struggling with that for quite a while now. And then the other thing is, did we lose a brand partner, a place where we sold a lot of product? Or did I mishear that? I'm a little old and sometimes my hearing ain't so good. And then do you anticipate -- the other thing I'd like you to address is why it took so long to get this call this quarter. And then you anticipate an improvement in sales this year, and thank you for your hard work and tell Jeff hello too. Kevin Cureton: Thank you, Wayne, for continuing to be a committed investor in our company. We certainly are committed to providing as much transparency as we can. And I hope as you -- and Stefano, I did not address your first question, which was related to the investor call. It is our intent to provide improved communications to the investors. Now that we've communicated a little bit more relative to the Transform and Transcend program, we will be prepared to continue that process going forward. What we had talked about, again, I'll first finish up by addressing Stefano's question regarding the investor call. What we really talked about was an investor presentation. We do believe that is something that is important for us to present, and we will have further information and guidance that we'll provide in the months to come. So thank you again for that question, and we'll move on to some of Wayne's questions now. So Wayne, you had several questions, and thank you for our team helping me to track all of them. The first one is related to production. And I believe, as we mentioned in the script, one of our challenges has been that we've simultaneously grown at a multiple of the industry's growth rate and installed new capability. And what our emphasis has been over that time has been to make sure that we met the quality standards that are necessary for a cGMP production, which has its own unique challenges, but also to make sure that we're meeting the on-time and in full performance that's necessary to keep products on the shelves for our brand partners. So that simultaneous challenge certainly has been one that hasn't translated into the gross profit margins that we would like to see, but we've now reached a place through the plans that we have in front of us that we are confident in our ability to perform well in the future. I think the next question that you had, Wayne, was related to a brand partner. We did not mention in any of our guidance that there was any loss of any brand partner, just to be clear. What we guided was that there were some challenges that one of our brand partners was having in sell-through in the mass market. Laura Riffner: The next question, Wayne, I believe, was why it took so long to schedule the call. We prefer to schedule the call after our year-end audit is completed. And the scheduling of the audit gets done quite literally almost a year in advance. So by the time the audit was scheduled with our auditing firm and finalized, it's simply just how long it took to get it scheduled. Kevin Cureton: Yes. So the last question was related to the sales target. And again, thanks, Wayne, for all the questions. The sales targets, as we've guided, is that this year will be a period of normalization. And so that is on a full year basis, the guidance that we can provide at this point. We are excited about the future of our business. We continue to be excited about the addition of our new Vice President of Brand Partnerships, Yoolie Park, who brings over 20 years of experience in turnkey manufacturing. And that in and of itself has already helped us in terms of our ability to more effectively deepen the relationships that we have with some of our key brand partners and put new brand partners in front of us in a way that will materially improve and grow our company over the years to come. Operator: I'm not showing any further questions at this time. I'd like to turn the call back over to Kevin for any further remarks. Kevin Cureton: Thank you, Kevin. Before we sign off, I wanted to just give you a final thought on our future. Back in 2019, when our consumer products line was less than $2 million, we said the future of Sun Care is the future of beauty. Today, with over $50 million in revenue from our consumer products line and a global patent estate to support it, that vision has been validated. However, our 2025 results showed us that scale without operational excellence will not enable us to create a platform for our company to achieve our goal of dynamic growth in our enterprise value. That is why 2026 is our year of transformation. Through Transform and Transcend, we are removing inefficiencies from our operations, modernizing our supply chain and refining our partner base and ways of working with them to ensure mutual success at both the top and bottom lines. We are doing the hard work now to ensure that our proprietary technologies and consumer preferred products translate into the best-in-class financial returns our shareholders expect. We are confident by stabilizing our foundation this year, we are setting the stage for the next 5 years to be the most profitable in our company's history. Thank you for your continued support. Have a great day. Operator: Thank you. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.
Operator: Good morning, ladies and gentlemen, and welcome to the Charlotte's Web Holdings, Inc. 2025 Fourth Quarter Conference Call. [Operator Instructions] This call is being recorded on Tuesday, March 31, 2026. I would now like to turn the conference over to Cory Pala, Director of Investor Relations. Please go ahead. Cory Pala: Thank you, and good morning, everyone. Thank you for joining us today for Charlotte's Web Q4 2025 earnings conference call -- provide some color around the recent developments around BAT transaction, the Medicare opportunity, regulatory momentum and other progress. Afterwards, we will take questions from our analysts. As always, before we begin, please note that certain statements made during this call, including those regarding our future financial performance, business strategy and plans, constitute forward-looking information within the meaning of applicable security laws. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause actual results to differ materially. We direct you to review the cautionary language in this morning's earnings release as well as the risk factors and other important considerations that are detailed in our regulatory filings, particularly in our most recent Form 10-K report. During the call, we will also refer to supplemental non-GAAP accounting measures, including adjusted EBITDA, which do not have standardized meanings prescribed by GAAP. Please refer to the earnings press release for descriptions of these measures and reconciliations to their most directly comparable GAAP financial measures. And with that, I'll now hand over the call to Charlotte's Web's CEO, Bill Morachnick. William Morachnick: Thanks, Cory. Good morning, and thank you for joining us today. I want to say right up front that this is not business as usual for Charlotte's Web. We've had several key announcements that have tremendous positive impact on our business that I'm excited to share with you. So let me also add that this includes another quarter of demonstrated progress for our push towards achieving scalable profitability. But first, let me start with the most recent development. Last night, we announced a financial transaction with British American Tobacco in relation to its existing convertible loan note. This transaction has 2 primary components. First is the conversion of BAT's outstanding $55 million convertible debenture, plus approximately $10 million in accrued interest in the common shares of Charlotte's Web at a conversion price of CAD 0.94 per share. This eliminates our largest balance sheet liability entirely and avoids approximately $3 million in future annual interest for the next 3.5 years. The second component is a new equity investment of $10 million through a private placement. This is fresh capital coming into the business to support the execution of our key strategic initiatives, including our upcoming participation as a leader in the CMMI Medicare pilot programs. So in total, BAT's combined equity commitment under this transaction is approximately $75 million. And following completion, BAT will hold approximately 40% of the company on a non-diluted basis. Among other things, this transaction provides clarity and stability around BAT's existing investment decision. Let me also provide some additional background on why we believe this is the right transaction at the right time and appropriate in the current circumstances. The original debenture was issued in November 2022 at a conversion price of CAD 2 per share. Due to several issues, including the ongoing federal regulatory delays around consumable hemp, it was extremely unlikely that BAT would voluntarily convert its debt anytime soon. If this debt burden were left unaddressed and continued to accrue interest at 5% per year, the company would have faced an additional $12 million or more in aggregate interest from now through the maturity date in November 2029. This transaction eliminates all of that. The net effect is a dramatically simplified equity-based capital structure. We go from carrying significant debt obligations to a clean balance sheet with a well-capitalized long-term investor. The additional $10 million in fresh capital strengthens our working capital position and provides flexibility to pursue multiple exciting growth opportunities. All right. So now let me turn to our most exciting recent growth opportunity the Center for Medicare & Medicaid Innovation pilot program, or CMMI. Under the CMMI pilot program, for the first time, seniors gained access to science-backed CBD products through a federally authorized Medicare pilot, and Charlotte's Web is positioned to be a participant within this program. Just 10 days ago, CMS, which is the Center for Medicare and Medicaid Services issued additional guidance that significantly clarifies and strengthens this opportunity. CMS established the Substance Access Beneficiary Engagement Incentive or Substance Access BEI, which will be the specific mechanism through which the pilot will operate. Notably, the guidance confirmed that the hemp-derived CBD products, including nonintoxicating full-spectrum products containing up to 3 milligrams per serving of naturally occurring THC are eligible under the program. This means our core portfolio of full-spectrum CBD wellness products qualifies under this federally authorized program. Under the Substance Access BEI, participating health care organizations primarily accountable care organizations, or ACOs, and oncology providers may purchase eligible hemp-derived CBD products for the Medicare patients with up to $500 per beneficiary annually available. To provide some clarity, it's important to note that Medicare does not directly reimburse these products. Rather, the ACO purchases hemp CBD products directly and furnishes them to its patients. The economic rationale is that if these products contribute to lower utilization of higher-cost services, the ACO may benefit through reduced total cost of care. As a result of that, the ACO may have an incentive to support adoption of the Substance Access BEI. Participants in the ACO REACH Model and the Enhancing Oncology Model are anticipated to begin offering the Substance Access BEI beginning April 1, which is tomorrow with the ACO LEAD Model expected to follow in January 2027. I want to be really clear about what this means. This represents an established health care integration pathway. It operates with CMS authorization, physician oversight, patient support through the program's partner Realm of Caring and structured outcomes data collection. To facilitate the pilot, Charlotte's Web will offer products intended to support eligible patients through a secure online health care portal. The initial phase is focused on senior patients receiving care through the ACO REACH provider. Over time, this type of model has the potential to be applied more broadly within the Medicare population, which currently includes approximately 67 million beneficiaries. And looking ahead, there is a second potentially much larger Medicare pathway development. In November, CMS proposed for the first time, allowing Medicare Advantage plans to be included -- to include hemp-derived CBD products in their benefit design. That is a separate program from the CMM pilot and it represents a potential expansion of CBD access into the broader Medicare Advantage system, which covers roughly half of all Medicare beneficiaries. The timing of additional details for this program are still being finalized, but we remain confident that our quality standards and compliance infrastructure position us well for this potential opportunity. All right. Let me take a moment now to talk about the federal regulatory status. Despite ongoing challenges, recent federal policy developments are showing progress for hemp-derived CBD. Congressman Morgan Griffith, who's the Chairman of the House Energy and Commerce Subcommittee on Health, which oversees the FDA, advanced the Hemp Enforcement, Modernization and Protection Act known as the Hemp Act. This proposed legislation would establish a science-based federal framework for hemp-derived products under the FDA oversight. We are actively working with our one hemp partners through the markup process. The Hemp Act is expected to proceed through regular order in the House Energy and Commerce Committee this year with potential pathways for advancements for broader legislative vehicles, including Congress' continuing resolution in September. At the same time, we recognize that multiple legislative approaches to hemp regulation are under active consideration in Congress. And we remain actively engaged with policymakers and stakeholders across these efforts and will support the most effective path forward to achieve a durable science-based federal framework. It's clear that a broader federal solution is critical. Recently issued Substance Access BEI guidance explicitly permits hemp-derived CBD products containing up to 3 milligrams of THC per serving under the CMS program. This would certainly seem to be a direct signal from the federal government that full spectrum products are considered safe and appropriate. Okay. Now let me turn to DeFloria, which is one of our most compelling long-term potential opportunities outside of our core consumer business. This is our collaboration with Aragen Bioscience and British American Tobacco. Last year, DeFloria received FDA clearance to proceed with Phase II clinical trials for its investigational new drug. This botanical IND is for the treatment of irritability associated with autism spectrum disorder. It represents a natural alternative to pharmaceuticals that are often poorly tolerated. It uses our proprietary full spectrum CBD extract derived from a patented hemp cultivars and we believe it represents the most advanced cannabinoid drug program utilizing the FDA's botanical drug pathway. Building on favorable results from Phase I, which established the dosing parameters for the Phase II program, DeFloria has been actively preparing for entry into Phase II clinical trials. Preparations are substantially advanced, and the program is expected to initiate midyear, subject to the customary development activities and resource alignment. Phase II consists of multiple studies across distinct patient populations. These studies will evaluate safety and tolerability and provide early signals of therapeutic effectiveness to inform a subsequent Phase III program. A reminder, as stated in this morning's press release, the potential strategic value to Charlotte's Web shareholders is significant. Clinical advancement through FDA regulated pathways validates the therapeutic potential of our proprietary genetics and strengthens the scientific foundation underlying our entire consumer business. We also hold exclusive commercial manufacturing rights to ultimately receive FDA approval which is clearly a significant long-term revenue opportunity. And we currently own approximately 1/3 of DeFloria, providing us with direct exposure to massive value creation as the program advances. With that high-level update, I'll now ask Erika to walk us through the Q4 and full year financials, and I'll return after her remarks to discuss our business execution and outlook. Erika Lind: Thank you, Bill, and good morning, everyone. As Bill noted, our 2025 financial results reflects 2 years of disciplined execution to stabilize the business return to growth and fundamentally restructure our cost base to drive to profitability. Let me walk through the key metrics, and I'll keep this concise so we can focus the balance of our time on the strategic discussion. Consolidated net revenue for Q4 2025 was $13.3 million. Q4 delivered a strong sequential rebound of 15.8% recovering from the Q3 dip driven by the planned B2B restructuring. Q4 also came in up 4.7% versus the prior year's $12.7 million in revenue. Growth was driven by continued direct-to-consumer momentum across our diversified botanical wellness portfolio, including expanded sleep and functional gummy mushroom offerings, the Brightside low-dose hemp THC gummy line and new minor cannabinoid formulations. Gross profit for Q4 was $5 million with a gross margin of 37.5%, and I want to provide important context around this number. The reported margin was significantly impacted by a nonrecurring $1.3 million inventory charge related to the disposal of legacy gummy products that did not meet our quality standards, which alone reduced gross margin by about 10 percentage points. Excluding this item, the underlying gross margin performance improved meaningfully. In-house manufacturing, net of onetime inventory charges contributed approximately 400 basis points of margin benefit in the quarter, validating our vertical integration strategy. We also saw improvements in the B2B channel mix following our Q3 restructuring driven by a reduction in trade spend. Our direct-to-consumer promotional efficiency improved as we shifted from broad discounting to targeted cohort-based campaigns. We expect gross margin to normalize toward our historical 50% range as we lap transitional items and as production efficiencies continue to scale. Total SG&A expenses were $10.6 million in Q4, consistent with the prior year and slightly higher than Q3. The quarter included several discrete nonrecurring items that impacted comparability, including a $600,000 state sales tax audit accruals and certain contract termination and timing adjustments. Excluding these items, our underlying operating expense base remained consistent with the structurally lower cost profile established throughout the year. Total net loss for the fourth quarter was $11.4 million or $0.07 per share compared to a net loss of $3.4 million or $0.02 per share in Q4 of 2024. Looking at full year results. Consolidated net revenue of $49.9 million increased 0.5% year-over-year, modest but significant as it was our first annual revenue increase since 2021. Full year SG&A expenses were $42 million, a 21.2% decrease from $53.3 million in 2024. This reflects the successful execution of our comprehensive cost optimization strategy, which has now reduced annualized SG&A by approximately $33.6 million or 44.5% over the past 2 years. We believe our cost restructuring is now largely complete. Going forward, we expect quarterly SG&A for the core business to remain in a normalized range of approximately $10 million to $11 million. Excluding anticipated launch spend for the previously mentioned Medicare coverage program. Net loss for the full year was $29.7 million or $0.19 per share compared to $29.8 million or $0.19 per share in 2024. This year, the full year net loss included a noncash change of $6.4 million in the fair value of the company's debt derivative and our investment in DeFloria. However, notably, our operating loss for 2025 improved by more than 36% to $20.3 million, a significant improvement from the $32 million operating loss in the prior year further demonstrating the impact of our cost restructuring. Turning to our cash flow and liquidity. Fourth quarter net cash used in operating activities decreased to $1.9 million compared with $5.5 million in the prior quarter and $1.8 million in Q4 of 2024. For context, quarterly cash change reflects the timing of cash outlays relative to accrual-based expense recognition so there is a natural variability quarter-to-quarter. In addition, our third quarter expenses always experienced a greater cash outlay than other quarters due to the timing of business insurance renewals. That said, the Q4 result demonstrates continued progress. Cash and working capital as of December 31, 2025, were $8 million and $21.7 million, respectively. It is important to note that this cash position does not reflect the BAT private placement, which adds $10 million in fresh capital, strengthening our liquidity and working capital position heading into this next critical phase. Before I hand it back to Bill, I do want to underscore the financial significance of the BAT transaction, which fundamentally changes our financial position. The transaction is transformational for our balance sheet eliminating material liabilities and adding fresh working capital. We are evolving from a company carrying significant debt obligations into one with a clean equity-based capital structure and a highly aligned strategic partner with a stable operating base, improving gross margins from in-house manufacturing and the capital to pursue the growth opportunities now emerging, we are well positioned for the next chapter. With that, I'll turn the call back to Bill to discuss our business execution and outlook. William Morachnick: Thanks, Erika. All right. So let's bring this all together. 2025 was a defining year for Charlotte's Web. We stabilized the business. We returned to annual revenue growth for the first time in 4 years, reduced our cost base by 44% over 2 years. Launched our boldest product innovations to date and laid the operational groundwork for what comes next. And I want to share one more data point that speaks directly to operational readiness. This month Charlotte's Web completed its annual NSF dietary supplement good manufacturing practices audit and received zero findings. For those unfamiliar, that's the gold standard of manufacturing compliance for dietary supplements. And achieving zero findings is an exceptional result. It reflects the discipline and the rigor of our quality team and validates the manufacturing infrastructure that underpins everything we do, from the products on our website to our qualification for federal health care programs. When we say Charlotte's Web is built to meet the standards that regulated health care requires, this is exactly what we mean. Let me share with you quickly what excites me about what's ahead. The CMMI Medicare pilot program, the presidential executive order, bipartisan legislative momentum for a rational federal framework, the advancement of DeFloria through FDA clinical trials and now a clean balance sheet with a well-capitalized strategic partner standing behind us. These are not speculative possibilities. They are real catalysts unfolding now that have the potential to fundamentally transform the scale and scope of our business. We built Charlotte's Web for moments exactly like this. Our brand, our science, our manufacturing capabilities and our regulatory engagement have positioned us to be at the forefront of the hemp industry's integration into mainstream health care. I want to take a minute to thank all of our shareholders for your continued confidence and patience. I know this has not been an easy ride, but the work of the past 2 years is now converging with the most favorable external environment our industry has ever seen, and we intend to capitalize it. Operator, we're now ready for questions from our analysts. Operator: [Operator Instructions] First question comes from Pablo Zuanic from Zuanic & Associates. Pablo Zuanic: Good morning, everyone. Look, I obviously have a lot of questions that I want to ask here given all the very positive news and of course, positive performance. Let me start with the CMS program. A few questions there. Precisely, when we talk about participating centers, what are these participating centers in the CMMI program? Which type of companies, are these established doctor offices or are these new setups, can Charlotte's Web own some of these participating centers. If you can give more color in terms of what are the participating centers in the CMMI program? Mindy Garrison: Well, good morning, Cory. This is Mindy Garrison here with Charlotte's Web, and thank you so much for your question. The participating centers are health care organizations that are already enrolled in specific CMS Innovation models. There are 3 actual models at play right now. The first 2 are ACO REACH and Enhanced Oncology Model or the EOM program, both of which can begin offering CBD, the Substance Access BEI hemp-derived products starting tomorrow, April 1. The third is an ACO LEAD Model, which is expected to launch in January of 2027. So these are not actually new facilities created for this program, they are established physician practices, health care systems, all combining together under an accountable care organization that are managed -- managing Medicare patient populations. The initial cohort under ACO REACH and the Enhanced Oncology Model, address approximately 2 million Medicare beneficiaries. Over time, as additional models come online, particularly the LEAD model and potentially the Medicare Advantage model, the addressable population will expand significantly towards a broader 67 million Medicare beneficiary base. And please excuse my mistake Pablo. Again, I really appreciate your question. Pablo Zuanic: And then just a follow-up on the same subject. Who is going to fund the $500 per patient per year under the BEI. Is that Medicare? Or is someone else funding that? And as part of that question, I'm assuming that the participating center will issue a prescription and the patient will go on your portal and order the product from you. So if you can just clarify in terms of who funds the $500 and then the logistics in terms of how the patients can access the product. Mindy Garrison: All right. Thank you, Pablo. Another really great question. And there's an important distinction here in that Medicare is not directly reimbursing these products. The participating ACOs and EOMs that I just talked about a few moments ago, will purchase the eligible hemp-derived CBD products using its own funds and furnishing them to its Medicare beneficiaries as part of their broader care strategy. The economic rationale for an ACO to participate in the Substance Access BEI and the hemp-derived products is that it will contribute to better patient outcomes, lower total cost of care, reduced hospitalizations, fewer high-cost interventions and lower pharmaceutical utilization. So they benefit through the savings under the CMS model. So the $500 per beneficiary annually represents a maximum of amount that the ACO can invest per patient, funded from the ACO's own program economics, not from a Medicare fee-for-service system is a value-based care incentive, not a traditional reimbursement. To get to your second question about logistically how will this work? Charlotte's Web has built a portal specifically for ACO and EOM programs to access the hemp-derived products that will be eligible under the Substance Access BEI program. They will order the products as if you were issuing a subscription to a pharmacy, except it would be through our portal. And those products would then be drop shipped to the patient's home. So it is a little bit different in that it's actually not a prescription. It's a recommendation from a health care provider to begin utilization of hemp in the service of helping their patients become healthier and live healthier lives. Pablo Zuanic: That's very helpful. And then on the same subject, what revenues does Charlotte's Web will expect from CMMI pilots in 2026 and 2027. I'm not sure if you can talk about guidance here. And as I ask that question, I wonder whether the participating centers will be able to buy from other companies or is Charlotte's Web were the only one pretty much in the pilot. But any guidance the company can give would be helpful. William Morachnick: Yes, sure. Pablo. So I think the way to think about it without giving you a ton of specificity around modeling is this is really early days in the pilot program. So I think I mentioned earlier, it literally starts tomorrow. For that TAM that Mindy just referenced that 1.7 million, 1.8 million folks in the ACO, the patients in there and then another couple of hundred thousand in EOM. I don't foresee massive revenue opportunity for, let's say, the balance of this year. We have to build out the education for the participants. I'm going to frame it as the channel participants, which are these medical and health care practitioners and networks. So they've got to understand the value proposition that CBD represents. They've got to get comfortable with it before they're going to make the recommendations that Mindy referred to. So it's going to be a gradual build over the next 12, 18 months. And we're really positioning ourselves for how this program scales out. So we'll see an uptick, say, in that 2 million TAM over coming quarters, not a whole lot initially. And then as the Medicare Advantage program progresses, then you're talking about a very large number, I think I referenced it in my earlier talk there, Medicare Advantage is about half of the 67 million participants in overall Medicare so that turns into a very large TAM. But we've got to see the specifics around that program and how it's going to flow and what the economics are. In terms of who else is participating, there is no exclusivity. But presumably, there are going to be continuing standards that have to be followed for anyone participating in the program around quality, around safety, around efficacy. So we really like the way we're positioned because we believe we're at the highest standard as that goes. And we've got a really fulsome robust go-to-market strategy immediately to do the kind of training that I was referring to earlier as well as establishing the portal for both the consumer and the health care practitioner. So we feel very confident about the way it's going to scale, but I think it's just -- it's too premature to start modeling around that for your purposes. Pablo Zuanic: No, that's great color, Bill. And one last question on the CMS program. How is the CMS program going to be reconciled with the potential hemp ban that's going to become effective November 12, 2026. William Morachnick: Yes. You always ask the hard question, Pablo. So here's where it stands at the moment, as you're aware, but for all the folks listening. At this current time, we've got the "Hemp ban" that could trigger in November of this year. That's the way that the language in the Ag [ Appropriations ] Bill that was inserted in the continuing resolution in the fourth quarter of last year [ reads ] such that if we're capped -- if the industry is capped at 0.4 milligrams of THC per container, it basically demolishes the CBD industry as we know it. At the same time, talk about cognitive dissidence that makes your head blow up. We are deploying a program for seniors that has a 3-milligram THC cap per serving. So dramatically different scenarios. We're working very closely through our resources in Washington, D.C. and beyond to come up with a very meaningful science-backed approach to where these things can get synchronized to where there is federal regulation that has a consistency that can operate across the country that can deliver the level of efficacy that's required. So at this moment in time, it exists in a way that you framed it, if I may, that we have a potential ban on the horizon. At the same time, we're deploying a program to address seniors that have dramatically different product components to it. So we have to see how the next several months play out but we're feeling good and confident that the Griffith's bill as well as the way the FDA is looking at things is going to land in a place that is much more like the Substance Access BEI is trending as opposed to the language that we saw at the end of last year. Pablo Zuanic: I guess, Bill, before I move on, maybe just a quick follow-up. I mean, would there be a concern that maybe the participating centers will wait to have clarity on the ban before they start getting involved or not necessarily? William Morachnick: It's a fair concern and I can only share with you in the conversations that we've had thus far because we've already done our outreach to potential participants. So ACOs and EOM practices, we're seeing -- I would categorize it as a reasonably high level of enthusiasm for what we have to offer. They're very intrigued by the power that CBD brings to their patients for those need states that we talked about, that their patients suffer to a large degree from. So lack of sleep, anxiety and pain, and they're looking at CBD with a very high level of curiosity and open mind in this of how this can be a phenomenal alternative, both from a cost perspective and an efficacy perspective. So again, I think it's too early to know if I was to say, I don't have a big enough sample set to say where that will go directionally. But early indicators are leaning much more towards we want to get on board with this now because we want to provide these solutions to our patients as soon as possible. Pablo Zuanic: That's good. Look, I'll just move on to some questions about the quarter. Obviously, congratulations on the 16% quarter-on-quarter sales growth. Give more color in terms of what drove that. I know you had something in the prepared remarks, but more color in terms of what drove that? And is that sustainable? Erika Lind: Pablo, this is Erika. Thanks for the good question there. So obviously, for the increase that we had, there were several factors. We have had continued D2C momentum because our portfolio continues to diversify, and we're doing much more targeted campaigns to broaden the top of the funnel. We also purposely restructured our B2B channel so that we removed a lot of the underperforming accounts. And we also think because of that, we've got some retail customers who transitioned to our D2C portal, which has been very positive for us. And then Q4 also benefits from a strong holiday season as with many companies. So it's really the combination of those things that produce really the strongest growth we've had in quite some time. Pablo Zuanic: And then just in terms of your balance sheet, obviously, I'm looking here at the year-end '25, right, $8 million cash, you still have negative -- I mean, negative operating losses. But you do have the BAT transaction now. Maybe just to address on a pro forma basis, the state of the balance sheet and your path forward on cash management and also cash flow generation, specifically I'm asking CapEx there. Erika Lind: Sure. And I appreciate the question, and I -- and the chance to really provide context because I know it's something that people are really sensitive about right now. So obviously, we had $8 million in cash to end the year, but it does not reflect that $10 million in fresh equity through the private placement. That placement clearly significantly strengthens our liquidity and cash position. So -- but I think it's really as important to note that this conversion eliminates our $55 million in the debt principle plus the $10 million in interest and prevents us from having to pay another $12 million for the balance of the note. So that really gives us a lot of optionality. On the operating side, as you know, we worked really hard to rightsize this business. Over the past few years, we've reduced OpEx by 44.5%. That's significant. And obviously, we're going to maintain that cost discipline because that's the norm for us now. We will have some launch costs related to the Medicare pilot program, but our leaner cost structure, improved margins, the steady consumer demand that we're seeing and the additional working capital for the BAT transaction, really strengthens everything for us. And I do want to stress to shareholders that the completion of this transaction requires approval from the majority of the shareholders. BAT obviously does not vote on it. So the decision rests entirely with the independent shareholders. And I strongly want to remind everyone that their vote matters. I encourage you to enter your vote as soon as you receive your proxy, it only takes a minute online. And that would make a huge difference for us and our consumers. Pablo Zuanic: Right. And on the same subject, in terms of the BAT transaction, why did management and the Board think this was the right time to do it at this point? Erika Lind: I'll expand a little bit on Bill's commentary on that. Obviously, we have some extraordinary opportunities ahead of us. And the Medicare pilot programs DeFloria FDA pathway require us to be properly capitalized. We have to be unencumbered by debt, and we have to be positioned to execute. In this case, the opportunity drives the transaction. I -- to talk numbers a little bit, I do recognize that the conversion price is lower than the original CAD 2. But the implied enterprise value per dollar of revenue is actually higher today than it was in '22 and I think it's important for people to understand that. The lower share price reflects the company's reduced revenue base and the industry headwinds. It does not give preferential treatment to BAT. The current transaction is struck at a higher implied EV to revenue multiple at about 3.5x compared to the original '22 deal, which was at about 2.1 to 2.5x. Even though the share price is lower, the enterprise value per dollar of revenue is actually higher today. BAT is paying more per dollar of revenue and not less. And I think that's a reflection of CMMI and the DeFloria catalyst that didn't exist back then. I also know that there are some dilution realities to this. The debenture reduces the debt but it's -- the conversion reduces the debt, but that's not new money. And in terms of enterprise value, that's approximately neutral. The market capitalization increase while debt decreases by the same amount. And what fundamentally changes is the company's risk profile. The debenture overhang, the interest burden and the refinancing risks are all eliminated. This clean balance sheet all else being equal, justifies a lower risk premium, which means the same enterprise value translate to a higher fair value for equity holders over time. And the private placement represents the incremental dilution from new capital, which is approximately 5% of post-conversion shares. We believe that is a modest cost for meaningful working capital at a critical time to capitalize on our growth opportunities. Pablo Zuanic: Yes. And the only comment I would make is that, obviously, I agree that this was a source of overhang, right? I mean the stock -- your stock is up 14% up today. So seems that it was an overhang. So the clarity is helping and investors are responding positively to that. The last question on the subject. BAT now is going to own around 40% of Charlotte's Web, right? We know that BAT also own stakes in Organigram. They own stake in Sanity Group, which was acquired by Organigram. Can BAT own more than 50% of Charlotte's Web at some point or are there restrictions given that they are U.K.-based. Erika Lind: So a couple of important points on that. There are no restrictions based on the fact that they're U.K.-based. The investment is made through BT DE investments or what we call BDI. And that's a Delaware incorporated subsidiary. They will be the direct holder of the shares. However, in the agreement, there is a part 49% cap of ownership and anything beyond that would have -- would be a subject to the applicable securities laws, TSX rules and also potentially shareholder approval depending on the circumstances. So we did build into the agreement of 49% cap that protects us from that. Anything else would have to go through some measures. BAT has been very supportive. They're a noncontrolling strategic partner. And there's a governance framework in the investment rights agreement that's designed to preserve the Board independence and the management autonomy regardless of BAT's ownership. Pablo Zuanic: Right. Understood. Look at the very last question. There were some headlines this week about the FDA submitting a CBD Compliance and Enforcement policy to the White House for review. What do you expect from this week's OIRA meetings? William Morachnick: It's -- I haven't been successful thus far, Pablo speculating where these things are going to land. I want to give this a little bit of time to see how it plays out. We're really head down focused on this transaction was just completed and how we ramp up our readiness for the CMMI program. There's just so much noise in the system right now between federal regulatory, state regulatory, CMMI versus the other things that you brought up. I want to give this a beat to play out a little bit. We've got contingency plans under any potential outcome. But I think it's just -- it's too early and too speculative right now. Pablo Zuanic: Right. And if I may just ask a quick follow-up, right? So I mean, given the way the headline reads, CBD compliance and enforcement policy, is this something to make it consistent with the CMS program? Or is this something to address this hemp ban in November because I guess, I'm confused in terms of the timing and what does it relate to specifically? Because it has repercussions for both, right, in theory, for the CMS program and for what the ban may be in November. And I know maybe it's too early to say, but thank you. William Morachnick: Yes. I mean you're raising the root of why I have an upset stomach most mornings trying... Cory Pala: Bill, your line is disconnected or muted. I'm in a different office, so I can't tell if they've completely disconnected. Pablo, are you still there? Pablo Zuanic: Yes, I am, but we can leave it for a separate follow-up call if you want, Cory. Yes. Cory Pala: Yes. At the end of the day, it's too soon to know exactly where these meetings are going to go in the next few days. We are encouraged that they're occurring but too soon to speculate on exactly where that's going to go. But at the end of the day, we are seeing a convergence of policy. So that's encouraging. Okay. Well, then with that, we seem to have technical difficulties on our end, but that was your final question, I think. So we'll close it off here. I would like to thank everybody for participating on the call today. Pablo, thanks as always for your in-depth questions. And we will look forward to speaking to you all again in the coming months. Thank you. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.
Operator: Good morning. My name is Desiree, and I will be your operator today. At this time, I would like to welcome you to Imunon's Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] I would now like to turn the call over to Peter Vozzo of ICR Healthcare Investor Relations representative for Imunon. Please go ahead. Peter Vozzo: Thank you, Desiree. Good morning, everyone, and welcome to Imunon's Fourth Quarter and Full Year 2025 Financial Results and Business Update Conference Call. During today's call, management will be making forward-looking statements regarding Imunon's expectations and projections about future events. In general, forward-looking statements can be identified by the words such as expects, anticipates, believes or other similar expressions. These statements are based on current expectations and are subject to a number of risks and uncertainties, including those set forth in the company's periodic filings with the Securities and Exchange Commission. No forward-looking statements can be guaranteed, and actual results may differ materially from those such statements. I also caution that the content of this conference call is accurate only as of the date of the live broadcast, March 31, 2026. Imunon undertakes no obligation to revise or update comments made during this call, except as required by law. With that said, I would like to turn the call over to Dr. Stacy Lindborg, Imunon's President and Chief Executive Officer. Stacy? Stacy Lindborg: Thank you, Peter, and good morning, everyone. Joining me on the call this morning is Dr. Douglas Faller, our Chief Medical Officer; and Mr. Jeff Church, our Interim Chief Financial Officer, who likely needs no introduction given his tenure with Imunon. He'll be walking through and reviewing our financial results for the fourth quarter and full year of 2025. Mr. Michael Tardugno, the Executive Chairman of our Board, is also on the line and will be available for Q&A. We entered 2026 with strong momentum following a truly transformational year in 2025. Our proprietary IL-12 immunotherapy, IMNN-001, continues to demonstrate its potential to redefine frontline treatment for women with newly diagnosed advanced ovarian cancer based on all available data thus far, both translational and clinical. And IMNN-001 is rapidly advancing in the OVATION 3 pivotal Phase III study. The urgency of this program remains front and center for our efforts to create value for our shareholders and to address the unmet need in ovarian cancer, which continues to claim far too many lives as the standard of care traditional chemotherapy in the frontline setting has not advanced in over 30 years. In our OVATION 2 study, IMNN-001 demonstrated the first ever overall survival benefit in a randomized frontline clinical trial for this patient population with a final overall survival readout showing continued improvement in median overall survival across the trial through 3 different analyses that were conducted. Starting first with the original Phase II clinical trial data readout in July of 2024, which was across all endpoints. The median overall survival benefit was reported as 11.1 months. The median overall survival improvement observed in the subsequent clinical data readout in December 2024 was 13 months. And as we disclosed this week, has now expanded to 14.7 months in the final review of the trial results. Moreover, patients treated with PARP inhibitors as maintenance therapy in addition to IMNN-001 and standard of care chemotherapy demonstrated a median increase in overall survival of more than two years. The timing of this final analysis was defined in the protocol to occur when the last patient enrolled in the trial had reached three years post treatment, and these truly unprecedented Phase II results have given our laser-focused execution of the ongoing rigorous Phase III trial, which was as agreed to with the FDA, is designed to confirm the Phase II results and support full regulatory approval. Throughout 2025, we showcased the strength of these Phase II clinical data and the compelling translational insights at major scientific forums highlighted by the platform presentation at the 2025 ASCO Annual Meeting and the simultaneous publication of the OVATION 2 study results in the peer-reviewed journal, Gynecological Oncology. We capped off the year with a highly successful R&D Day we hosted in November in New York City, and the investment community and leading clinicians heard directly from key opinion leaders about Imunon's ability to turn immunologically cold tumors hot, to remodel the tumor microenvironment and deliver meaningful clinical survival benefits to women with newly diagnosed advanced ovarian cancer where none had existed before. This momentum carried into 2026 with OVATION 3 trial enrollment well ahead of plan. In a protocol that is virtually identical to the Phase II study, OVATION 3 is a 1:1 randomized trial to evaluate IMNN-001 plus standard of care neoadjuvant and adjuvant chemotherapy, which includes interval debulking surgery versus the standard of care alone in women with treatment-naive advanced ovarian cancer. The adaptive trial design with interim analyses for early efficacy stopping rules provides 95% power on the primary endpoint of overall survival while offering the potential for accelerated time lines of a BLA for full approval. Key updates since our Q3 2025 results conference call underscore the strength of our Phase II foundation and the accelerating progress in Phase III based on the strong response from patients, our clinical trial investigators and the broader medical community. And I'll just highlight a few areas, starting with site activation status. Phase III trial enrollment remains strong with 7 clinical sites actively enrolling patients and up to 43 additional high-quality centers under evaluation or in start-up mode. Returning investigators from the OVATION 2 study have been joined by new top-tier centers, many proactively reaching out following our data presentations and publications. We have contracted a global CRO to support rapid advancement of Phase III trial site activation and the study overall. Turning to enrollment velocity. Building on the strong progress we reported in late 2025, patient randomization and treatment in the Phase III trial have continued at an impressive pace and enrollment remains ahead of plan. The early sites have delivered higher than the assumed rate of 0.3 patients per month with some sites delivering as high as one patient per month. This early momentum driven by the compelling Phase II study overall survival benefit positions us well for continued acceleration of site activation and patient enrollment. Our goal is to have approximately 80 patients enrolled in the trial within the next 12 months and enrollment completed in 2029. Turning to regulatory and design validation. Based on the FDA's endorsement of overall survival as the primary endpoint of the Phase III trial combined with a robust statistical framework and precedent in oncology clinical drug development, OVATION 3 continues to derisk the path to a potential regulatory approval in both the U.S. and Europe. On translational data and the MRD trial data, we have data from the ongoing Phase II minimal residual disease or MRD study in collaboration with Breakthrough Cancer Foundation. This trial further reinforces IMNN-001 novel mechanism of action with demonstration of preferential uptake of peritoneal macrophages, profound tumor microenvironment remodeling, complete pathological responses and durable IL-12 and interferon gamma expression with excellent tolerability, even in combination with bevacizumab. We've successfully capped our enrollment in the MRD study at 30 patients, allowing the trial to meet all core objectives and upon completion, channel resources and highly productive sites fully into the Phase III OVATION 3 trial. Preliminary data from the Phase II MRD study continue to align with the overall survival benefit shown in the Phase II OVATION 2 study and support potential label expansions in the future. I'll now turn over the call to Dr. Douglas Faller for clinical commentary. Douglas? Douglas V. Faller: Thank you, Stacy. The enthusiasm within the gynecologic community that we saw at our R&D Day in November and throughout 2025 has only grown. The Phase II OVATION 2 clinical data showing a clinically meaningful 14.7 month median overall survival benefit and the ability of Imunon to activate both innate and adaptive immunity continue to resonate strongly with our investigators. Our multiple presentations at leading congresses in 2025 highlighted Imunon's unique profile, localized IL-12 delivery with negligible systemic exposure, favorable safety and clear signals of immune activation predictive of superior outcomes. Interestingly, after seeing our data presentations, many investigators have been approaching us asking us to join our Phase III OVATION study rather than vice versa. I find this kind of initiative to be most unusual in my long experience conducting clinical trials and also very gratifying. It further supports the consensus of the significant potential of IMNN-001 to address the unmet medical needs in newly diagnosed ovarian cancer. OVATION 3 has leveraged this interest from day 1. As Stacy said, study start-up was completed in record time and early sites have exceeded enrollment forecast. Safety data remains clean, mirroring the excellent tolerability seen across our IMNN-001 clinical programs. The Phase II MRD study has provided real-time confirmation of the favorable safety profile with no dose-limiting toxicities, no discontinuations due to IMNN-001 and very encouraging trends in progression-free survival and MRD negativity. These consistent findings across our studies give us high confidence as we scale the Phase III pivotal trial. Back to you, Stacy. Stacy Lindborg: Thank you, Douglas. Before turning to our financial update, I want to highlight that 2025 was defined by disciplined execution and strategic focus. We advanced the most important development program in our history while navigating a challenging capital markets environment with prudence and foresight. Our multipronged financing strategy, combining targeted equity raises, opportunistic ATM usage and ongoing partnership discussions has allowed us to extend our cash runway while minimizing dilution and advance IMNN-001 as quickly as possible. Shareholder equity remains paramount. Every decision is stress tested against our commitment to fully fund the OVATION 3 study with long-minded investors. We're making solid progress on this front and believe that once we secure a lead investor, we will be able to assemble a syndicate quickly. While the markets are improving and our ongoing calls with strong investors remain highly encouraging, we recognize that this time -- this process inherently takes time. We will continue to balance the ultimate goal of financing the trial with long-term oriented investors against the need to prudently extend our cash runway. We firmly believe that successfully completing this full financing is in the best interest of all of our constituents, including patients who are at the center of everything we do and all shareholders as we believe this will enable our investors to realize significant value. We are encouraged by continued interest in potential nondilutive partnerships for our TheraPlas technology platform and IMNN-001. On the financing side, prudence of our -- prudent use of our ATM facility and warrant exercises supplemented our cash position in 2025. Monthly cash usage has been further optimized, and we announced a strategic reorganization in February 2026 to reduce nonessential costs and to sharpen our operational focus exclusively on OVATION 3, streamlining operations and focusing scientific leadership while preserving all critical expertise in the interest of all Imunon stakeholders. These actions, combined with our continued manufacturing efficiencies, which are great, are designed to deliver on our milestone with maximum efficiency. Now over to Church for a review of our fourth quarter and full year 2025 financial results. Jeff? Jeffrey W. Church: Thank you, Stacy. Details of Imunon's fourth quarter and full year 2025 financial results were included in the press release we issued this morning and in our annual report on Form 10-K, which we filed before the market opened this morning. As of December 31, 2025, cash and cash equivalents were $8.8 million, reflecting disciplined cash management and net proceeds from warrant exercises and targeted ATM uses during the year. We project that this cash balance, together with our ongoing financial activities and cost-saving initiatives extends our operating runway into the second half of 2026. Research and development expenses for 2025 were $7.8 million, which was significantly lower than 2024, primarily due to the completion of the OVATION 2 study, optimization of the MRD study and focused spend on the OVATION 3 study manufacturing and start-up activities. General and administrative expenses were down 8% year-over-year through streamlined operations and renegotiated commitments. Net loss for 2025 was $14.5 million or $6.83 per share compared to $18.6 million or $16.94 per share, reflecting meaningful improvement driven by our cost discipline. I just would like to remind everyone that all share and per share amounts reflect the 15-for-1 reverse stock split effective in July 2025 and the 15% stock dividend declared in the third quarter of 2025. With that financial review, I'll turn the call back to Stacy. Stacy Lindborg: Thank you, Jeff. And Desiree, with that, we'll open the call for questions. Operator: [Operator Instructions] Our first question comes from the line of Emily Bodnar with H.C. Wainwright. Emily Bodnar: My first one, have you presented the final data from OVATION 2 to the FDA, particularly on the PARP inhibitor patient population? And have you received any feedback from the FDA on focusing on this patient population first in your OVATION 3 study? And then maybe if you could just kind of outline how you're thinking about upcoming milestones and catalysts for 2026 and any OVATION 3 updates that you're considering for this year? Stacy Lindborg: Thanks, Emily. A very well formulated and comprehensive question. So let me take it in steps. So first, we have not presented the OS data to the FDA. We are incredibly excited by the fact that it continued to improve. But really, this last analysis reinforces exactly the plans that we have in place. I think you specifically asked about the PARP-treated patients. And while this is even a larger effect than what we see in the intent-to-treat population, we know that this is a relatively small group in the trial, and it becomes important that we're replicating the findings. So we will be presenting the data to the investor community, and we'll also be presenting it to the clinical community. In fact, we got an abstract submitted over the weekend to a meeting that will really afford us to have some great discussions with potential new principal investigators. So our focus right now is really around the Phase III trial ensuring that we're continuing to build the amazing momentum and excitement in the medical community around this data and then ultimately delivering on the trial. So maybe I'll stop there really quickly and see if there's anything else, Douglas, you want to add to the latest data. Douglas V. Faller: Just that although we're very excited about the results in the patients treated with PARP inhibitors, we're equally excited about the results that we see in the entire population. And this greater than a year increase in survival is, as you know, Emily, unprecedented in ovarian cancer. No one has seen anything like this in the entire time I've been practicing medicine. So the ability as we replicate this in the Phase III, this will be incredibly meaningful for patients and the whole population of patients is what I'm getting at, not just the patients who received PARP inhibitors. If they continue to benefit as much as they did in the Phase II, that's wonderful. But we're focused on benefiting -- providing benefit to the entire population of newly diagnosed women with advanced ovarian cancer. Stacy Lindborg: Thank you. Emily, if I remember correctly, the other questions were focused around upcoming catalysts and our plan for this year and beyond. And I would say that we have catalysts that we're going to be very excited to report back, one of them being around the momentum of the trial. And so you heard in my prepared remarks, that we are -- our goal is to have 80 patients enrolled by this time next year. And reporting our momentum will be a very critical component of ultimately the overall time line that we've been committed to. So that will be one catalyst. We will continue to have presentations at medical and scientific congresses. We have samples -- tissue samples still from OVATION 2 that we intend to analyze and have in the near term, a comprehensive analysis and publication around translational data that we think will really be very compelling for the scientific and medical community that we'll be able to go beyond what we've presented to date. And I think that will be a very meaningful contribution. We have the potential for partnership progress that may provide opportunities to extend the runway further. And of course, we are continuing with our strategic goal of financing the trial with long-minded investors. And those are all things that we're very, very actively involved with. So our plans for 2026 really are going to be focused on our funding for the company, making sure we have the cash runway and that we are really increasing our institutional base in the -- in parallel. And then second, enrolling the trial and ensuring that we're spending a lot of time with our partners that are involved in this trial and the broader medical community as we're really helping translate the value for women newly diagnosed and bringing forward a product that really should revolutionize the standard of care. Operator: Our next question comes from the line of James Molloy with Alliance Global Partners. James Molloy: Could you walk us through -- I know you gave excellent guidance, very clear guidance on 80 patients by this time next year and 2029 to complete enrollment of the trial. Could you walk us through what potential cut points for interim looks we might be able to anticipate going forward over the next 12 months? Stacy Lindborg: Yes. Great question, James. Thank you. So the interim analyses, which have been laid out are all very carefully designed through comprehensive simulations, which are always looking at the time frame in which you might expect to be able to see a successful hit, if you will, so a p-value that would allow you to file your BLA. And as you know, we've described this in the past, and we've had reviews of our protocol. We've designed these steps for there to be 2. So the important component, given what we know very well from the literature and other Imunon agents, we need to observe patients long enough to be able to see events in the control arm for there to be really the ability to have success. So we've designed these interims to occur after the point that we would have fully enrolled trial. And we expect based on the simulations that we've done in the past that the first interim would occur about a year after that. So that is what we're actively working towards. And it's, as always, designed to allow for if we see a bigger effect than we have assumed in the protocol, this interim, in fact, the first interim may provide and would provide an opportunity for us to act more quickly than waiting. But it also is important that we're being very careful with these interims and of course, because you're using type 1 error rate as you're ultimately doing these formal analyses. So that's kind of a bit of an insight into how we balance the various dimensions and what we can expect going forward. James Molloy: And then maybe a follow-up question on the final data on the OVATION 2 showing the excellent survival data. How did that change the potential partnership environment, if at all, that you can share with us? Stacy Lindborg: So it's obviously very early. We just released the data last week. We are participating tomorrow in the MedInvest Biotech & Pharma Investor Conference, and we are getting new inquiries that are occurring even as of this week. But I expect that to continue to develop. These kinds of partnerships, whether they're geographic in nature or they're more fundamental with big pharma really ultimately has to fit with a strategy and an interest and an intent from a timing standpoint. So -- but we're very pleased to see renewed and new inquiries. Operator: Next question comes from the line of Jason McCarthy with Maxim Group. Jason Mccarthy: Going back to OVATION 2, is there going to be an opportunity when you continue to mine that data? Will you have anything related to minimal residual disease or any SLL, looks for MRD or any more immune data that might be suggestive of T cell memory or something that's keeping these patients' disease kind of in check and that could be driving these longer-term survivors? Stacy Lindborg: Yes. Maybe I'll start and then I'd like Douglas to pick up. So we won't have anything from OVATION 2 that relates to the minimal residual disease or second look laparoscopy because it's an additional procedure that is not part of standard of care, and therefore, it wasn't implemented in OVATION 2 nor will it be implemented in OVATION 3. So that is an exploratory and it's an endpoint that I think has gotten a lot of interest as a potential predictor of overall survival that was incorporated into what we call the MRD study. So the OVATION 2 won't give insights into that, but we will continue to contribute not only to our own learnings, but also the literature from the trial that we're doing in combination with breakthrough cancer. But we do have other data that we'll be able to get from OVATION 2, and I'll let Douglas go into some of that. Douglas V. Faller: Yes, we've been -- over the last 9 months or so, as you know and alluded to, we've been releasing more and more translational data, and we have additional translational data to present, and we will -- we're planning on publishing that also. This may include looking at peripheral responses in addition to the responses that we've shown so dramatically in the tumor and the tumor microenvironment. So we're very excited about the translational data. Just to expand on what Stacy said, even though we call one of our trials MRD, MRD is not really officially established for ovarian cancer. There's no -- there are no criteria that have been shown to be predictive of a patient's outcome. The MRD study is an approach to start working on that. But that data has yet to evolve. And we will try to determine over time what the best approach to MRD might be for it to be predictive in ovarian cancer. It's something of great interest. This is in part why breakthrough cancer got involved in the MRD study because they also would like to be able to generate a test like MRD, which could be predictive of patient outcomes. And in addition, in our Phase III, we will be looking at circulating tumor DNA. This may end up being a marker for MRD. It's not established yet in ovarian cancer, but our trial might be one of the ones that could establish circulating tumor DNA as a predictive marker. So that's yet to come. Jason Mccarthy: Great. Are there going to be updates from the MRD study in 2026 that we could look towards as potential catalysts? Stacy Lindborg: It's possible. I think that it will ultimately depend really on the -- our interactions with the study PI, [ Dr. Amir Jazaeri. ] We know that he presented data that was very exciting to see the analytical data, and he decided to really take a cohort of patients and analyze them together rather than continuing to analyze patients over time, individual patients over time. And the clinical data, of course, will be continuing to evolve. So we're in early discussions with him around where we may present that in the medical community, and we'll be thinking very much about bringing forward insight. It will be an exciting other arena for information. Jason Mccarthy: And I don't know -- last question. I don't know if I'm overlapping what James had asked previously about enrollment timing. But when you get to the 80, are you going to release any details on the HRD status of the patients just so people can get a sense of the percentages that are in the trial or maybe in the trial? Stacy Lindborg: It's an interesting question. I think right now -- and if I just step back and I look at what we've learned with this final analysis, our -- the overall effect that we've observed in the all-comers population has continued to grow so substantially that while the underlying genetics, which right now plays a critical role in the maintenance therapy and become central to how the treating community is taking care of patients. What's interesting is that our principal investigators are probably as excited about the effect in the HR-proficient patients as they are in the HRD positive. And so it will continue to be a very interesting and important part of our Phase III trial. But I think that we will really be looking holistically at the full trial and be very excited because we're able to influence and extend the life of an all-comers population. So it's -- that's my thinking of this. And I think that we'll have to think very carefully about the exposure that we give to an ongoing Phase III trial. It's an open-label trial, and we'll have the ability where we find it important from an investor standpoint to think about maybe secondary endpoints and provide updates, but those will be taken with great caution just to preserve the integrity of the trial. Douglas, anything more? Douglas V. Faller: Yes. The only thing I wanted to add is, although this is an open-label study because to preserve data integrity, we and the company are blinded in terms of efficacy, not safety, but efficacy. So we will not even ourselves be seeing the efficacy data as the trial progresses in terms of the primary endpoint. Jason Mccarthy: Okay. So just also -- sorry, one more, just a hypothetical. I'm not sure if you'd have the answer for this or not. There is a trial that's going to read out in the second half of this year for an oncolytic virus in the relapsed/refractory setting for PROC for ovarian cancer that the expectation is that it can resensitize to platinum. So for chemotherapy, it suggests that if they're successful that it could change the standard of care potentially even in the neoadjuvant setting. And I'm bringing it up because this trial is going to take a long time OVATION 3 and if you thought about how some potentially new therapies that could be on the market could influence how patients are managed by the time you get to the OVATION 3 full top line data. Douglas V. Faller: Thank you for that question. We're certainly very aware of the drugs that are being developed in the relapsed/refractory space, both platinum-sensitive and platinum-resistant. The most patients, interestingly, their tumors are sensitive to platinum. The idea that you'd have to sensitize patients in the neoadjuvant setting or the adjuvant setting really is not something that is at all mainstream. Most patients do respond to chemotherapy. Unfortunately, durable responses are rarer and then you get into second and third-line treatments. As you know, there have been at least one and soon two drugs approved in different settings in second, third, fourth line patients who are not being treated with platinum again. And that's wonderful. We're very happy that there are drugs that provide a bit of a survival benefit in second or third line. But as we all know on the phone and in this call, putting the best therapy upfront and making the biggest impact on the tumor is critical if you're going to treat ovarian cancer successfully. So we're very happy to be in frontline, very proud of the fact that we're in frontline, and we believe that we will be providing advantage over time in terms of increases in survival to the patients that we are treating. Operator: Next question comes from the line of Kemp Dolliver with Brookline Capital Markets. Brian Kemp Dolliver: First, are the savings from the restructuring of any significance that we would see them -- the impact of them in the first half of this year? Stacy Lindborg: So Kemp, really, what we reported as a strategic restructuring really is around ensuring that we are using all of our resources to the best of our ability and focused on Phase III. So we're ensuring that we have the ability to hire and bring in needed expertise for the future as we're thinking about the commercial setting, and we're looking to the upcoming year and beyond. So it really is not about a pure number, but it is about just an ongoing evolution of making sure that we're taking the talent we have in-house that we're focusing our attention for each person to ensure that we're bringing the most value possible and that we're really removing anything that is off target from the OVATION 3, which is our sole focus right now. Brian Kemp Dolliver: Okay. And with regard to your commentary regarding the pace of enrollment at the site level, I'm going to split a hair, if I can, because it may be informative. Is that pace increasing, say, month-to-month? Or is it just -- has it just been consistently above your forecast? Stacy Lindborg: So I'll give you -- we only have, of course, the time frame from the very first patient to now. But we see that for the entire trial, we are above the assumption of 0.3 patients per month per site. So the -- if you look across all the sites, the average is above that. And when we -- the numbers that I was reporting of these sites that actually are delivering one patient per month or even just slightly below, that is across the whole time period that they're delivering. So I do think you tend to see kind of episodic enrollment that can happen, but the numbers that we're reporting are not singular months. They're summarizing the entire time thus far. And I do think we're hearing phenomenal feedback. We're spending time in the site -- in our sites that are actively enrolling patients. We're having calls regularly as well. These conversations in terms of the data, we get to see a broader set of the community, for example, with the abstract we were putting in over the weekend, you have quite a few PIs that were part of OVATION 2. They all got to be on this abstract and to see the excitement and their responses. Gratitude for being included and really just pure excitement with the data. Douglas, why don't you comment more? Douglas V. Faller: No, that's exactly right. This is the first time that they had seen the final data in terms of survival, and there was a great deal of enthusiasm. As you might expect, they were very happy that their patients have seen this much benefit. Stacy Lindborg: So we really think this will be a difference maker for OVATION 3 compared to OVATION 2. Going into OVATION 2, we had a lot of promise. We had a mechanism of action that made a lot of sense, was very clearly established in the literature. Phase III now, we have evidence of a clinical effect that's never been seen. And we continue to really hear that, that becomes very critical. We can actually see the numbers that are entering prescreening, and we see a very high rate ultimately coming through to randomization with really the exceptions being things like inclusion criteria not met, that will always be the case or inability, perhaps somebody that's traveled a very long way and doesn't feel like they can make the schedule. But really, the rate of being exposed to this potential the way that our -- one of our PIs who's been involved with our program for a long time, talks about this with patients is you're going to get the standard of care, which you'll get in this trial. If you do not have interest in research and in this protocol, if you want to consider being in this protocol and if you're randomized to the experimental arm, then you have a chance at a product that may extend your survival. So it's been a very straightforward discussion as they're describing it to us, and we're getting, as we might expect, a positive response from patients and from the sites. Operator: And our last question comes from the line of David Bautz Bouts with [indiscernible] Research. Unknown Analyst: So I just have a couple of financial questions. So as resources become available, is the company going to look to open additional sites in the U.S.? Or will you be looking ex U.S. to get any international sites open? And then as far as payments for the Phase III trial, I guess I'm just trying to look at how is it being paid for? Did you have a bulk paid upfront? Is it pay as you go? Like how is it structured? Stacy Lindborg: So David, great questions. I was having a little trouble hearing you. So let me respond to your questions. And if I don't hit on them, we'll have you ask further. So we are actively enrolling and accelerating the enrollment of trials. And right now, those are focused in the U.S., although we have sites in Canada that we know are very interested, and we have had conversations as we're looking to consider the strategy of if we want to accelerate further adding a European country as well. So we've already had some discussions with leading sites in Central Europe. So that's a conversation that we expect to advance over the next year. But right now, we believe that we'll be able to meet our enrollment accelerations, and we have a lot of confidence with the sites that we're going after and we're starting with in the U.S. So we think that's actually the best way to start. In terms of payments for the trial, these trials are structured -- this trial is structured pretty traditionally. You have contracts with individual sites. There are start-up fees and then fees as patients are being treated as part of the protocol. We have an ability to take advantage of what is standard of care and to have that be paid through the traditional routes and some of the procedures not be due to be paid by Imunon and we've taken full advantage of that to really structure the contracts accordingly. Operator: This concludes the Q&A. I'll turn the call back to Dr. Lindborg for closing remarks. Stacy Lindborg: Thank you, Desiree, and thank you all for joining this call. With the Phase III study enrolling ahead of plan, as we've just been talking about, the enduring strength of our Phase II overall survival data and the compelling translational evidence that Douglas spoke about and our sharpened financial discipline, we really know that Imunon is well positioned for milestones that will create value inflection in 2026 and beyond. We remain steadfast stewards of the resources you have entrusted to us and are fully committed to delivering a potential paradigm shift for ovarian cancer treatment while creating lasting shareholder value. We thank you for your continued support and look forward to future calls. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.
Stuart Smith: Welcome, everyone, to the KULR Technology Group Fourth Quarter and Full Year 2025 Earnings Call. I'm your host today, Stuart Smith. In just a moment, I'm going to be joined by the Chief Executive Officer for the company, Michael Mo, as well as the Chief Financial Officer for the company, Shawn Canter. Both of those officers will be giving their opening remarks, and that will be followed by a question-and-answer section with management. And again, we want to thank you for those questions. Now before I begin, I would like you to listen to the following safe harbor statement. This call contains certain forward-looking statements based on KULR Technology Group's current expectations, intentions and assumptions that involve risks and uncertainties. Forward-looking statements made on this call are based on the information available to the company as of the date hereof. The company's actual results may differ materially from those stated or implied in such forward-looking statements due to risks and uncertainties associated with their business, which include the risk factors disclosed in KULR Technology Group's Form 10-K filed with the Securities and Exchange Commission on March 31, 2026, as may be amended or supplemented by other reports the company files with the Securities and Exchange Commission from time to time. Forward-looking statements include statements regarding the company's expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as anticipate, believe, could, estimate, expect, intend, may, should and would or similar words. All such forward-looking statements that are provided by management on this call are based on the information available at this time, and management expects that internal expectations may change over time. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Except as otherwise required by applicable law, the company assumes no obligation to update the information included on this call, whether as a result of new information, future events or otherwise. Now with that, I'm going to turn the call over to Michael Mo, Chief Executive Officer of KULR Technology Group. Michael, the call is yours. Michael Mo: Thank you, Stuart. Good afternoon, everyone. Thank you for joining. 2025 was a difficult year for our shareholders and for our company. Share price declined significantly, and we recorded a net loss of approximately $62 million. The majority of this loss was driven by onetime and noncash items, but it was still a loss. Our investors, shareholders, internal team members and I all felt the effects of this loss. We recognize the impact this has had, not just on our investors and shareholders, but also on our employees and partners who are deeply invested in our success. I feel that way alongside all of you. I want to acknowledge this directly. Equally as important, I want to separate what affected performance in 2025 from what matters most to the business going forward. In 2025, KULR continued to grow and invest in its core business, the KULR ONE battery platform for energy storage systems. Adversity brings clarity. It sharpens our focus, reinforce our discipline and remind us exactly what must be done. We're taking these lessons forward with urgency and intent. Our foundation is strong, our direction is clear, and we committed to executing with precision and accountability in 2026. What I want to do today is go through what we built in 2025, what we believe is the right foundation and what realistic 2026 growth execution looks like. KULR designs and builds advanced battery systems for autonomous platforms, digital infrastructure, electric transportation and space exploration. KULR ONE is our battery platform. Our progress in 2026 will be judged by core battery revenue growth and improvements in gross margin as volume and automation increase. The mission for 2026 is clear: eliminate distractions and execute with discipline. Our singular focus is to build and sell more KULR ONE batteries. That's the work, and we will do it relentlessly. I would now like to walk you through some of the 2025 financial reportings and the situation surrounding them. Shawn Canter will provide a full financial summary during his portion of the call. Under GAAP accounting, KULR recognized an unrealized mark-to-market adjustment of $13.8 million on its Bitcoin holdings for 2025. The adjustment reflects the change in Bitcoin price at the end of 2025. While this is an expense, it's not a cash expense. We have maintained our Bitcoin treasury of approximately 1,082 Bitcoins without selling any coins. We invested in and formed a distribution relationship with a private exoskeleton company. In late 2025, that company filed for insolvency. We took the full write-off of approximately $6.9 million. Clearly, this investment did not work out. The investment and the distribution relationship with this entity have been ended and the full account is in the 10-K. The lesson is clear. We must be disciplined in how we allocate capital and resources, prioritizing the growth of our core battery platform and focusing on opportunities where we have greater operational control, strong commercial visibility and direct alignment with our strategic priorities. Battery platform revenue, which is product sales plus contract services was $7.3 million in 2025. That's the commercial baseline we're scaling from in 2026. Revenue was $16.1 million, up 51%. Most of that growth came from Bitcoin mining and battery research grant dollars. The number that matters most to us in 2026 is the battery platform revenue. That's the business we're building KULR ONE around, and that's where we need to demonstrate growth. $7.6 million is where we start. I would also like to address the product sales gross margin of 1% in 2025. KULR ONE gross margin at current production volume reflects the economics of an early-stage manufacturing ramp. Three factors are driving the current cost structure. First, material pricing at current volume is high. Second, the fixed facility costs are spread across a production base that has not yet reached high throughput. Third, each new customer program carries engineering and design costs that are concentrated in early production runs before volume scales. As programs mature and volume increases, those program level costs will be absorbed across a larger number of units. All 3 of these factors compressed margin at the start of a production ramp. They will improve as volume grows. To address these, 3 actions are already in motion. First, programs that began as early prototypes are transitioning to production. Many KULR ONE Air drone battery programs are moving along that curve. Each program that crosses from prototype to volume production shifts from a cost center to a margin contributor. Second, we're installing an automated production line in second half of 2026. Automation reduced per unit labor cost and improves yield consistency at scale, both of which will directly impact gross margin. Third, the KULR ONE platform itself is maturing. As more programs are built on the same modular architecture, engineering and design work required to onboard new customers decrease. That ratio continues to improve as platform accumulates application experiences across defense, aviation, telecom and data center use cases. In summary, we do not view 2025 margin profile as the end state of the business. We view it as the current economics of low-volume production before programs mature, automations in place and production volume grows. What we built in 2025 is the foundation for our growth in 2026. Our headquarters facility is a vertically integrated battery production center from design, prototyping, cell screening, qualification test to volume production. We're working with domestic battery cell suppliers to strengthen our NDAA compliant supply chain and our customer base has grown across 6 diverse industries. We have an experienced and dedicated team, solid financial resources and a broad customer base to grow our business. We have learned the difficult and valuable lessons. We're now focused on execution, ship more batteries. You may ask the question, why now? Why 2026 is the year for change? High-growth markets that KULR serves, autonomous platforms, direct energy systems, digital infrastructure, they all share a common technical constraint, power density. The demand for high-power battery pack has emerged, and that's the biggest growth driver for us. The requirement is not simply to store more energy, but to deliver at high C-rates than the standard battery. Oftentimes, this must be done in challenging environments that include extreme temperatures, high G-force, vacuum conditions and underwater pressure without thermal failure. That's not a commercially available battery problem. That's a specialized battery problem. It requires a battery architecture specifically designed for high-power and thermal stress operation. Simply put, these customers often cannot rely on off-the-shelf battery packs. They need high performance, safety and reliability, all in one package that can deliver fast at commercial prices. KULR ONE is built to that specification. It starts with building the right architecture and then select the right battery cell partners. KULR ONE is a modular and customizable architecture to meet customer needs across multiple end markets. We currently have over 30 active customer development programs in KULR ONE Air, KULR ONE Space, Guardian and Triton, which is our new maritime platform. Those programs are at different stages from evaluation to development through more advanced commercialization work. They represent a broad pipeline of revenue growth for KULR ONE as we move these customers from design into production revenue in 2026 and beyond. KULR's cell partnership reflect the same focus. We have worked with both Amprius and Molicel for a long time. They focus on high-power and high-energy density batteries. Those partnerships are a deliberate long-term strategy to maintain access to the most capable battery cell technology available as power density requirements with KULR's markets continue to advance. The combination of KULA ONE system architecture and advanced power cells from our partners give our platform a development road map that extends well beyond the current production configurations. Next, I'll give you an update on our KULR ONE Air. KULR ONE Air, which was launched last year to support the drone industry is now expanded beyond just air-based autonomous systems. Just in the KULR ONE Air category, we have over 20 active engagements to develop specialized battery systems for many high-profile unmanned systems companies that operate in the air, ground and maritime markets. The intensive work accomplished in 2025 to ramp our engagement with these demanding customers will start to become apparent in 2026 as their programs and system evolve from development to deployment. Let me share with you why KULR ONE Air is the right platform for this market. Autonomous systems like drones and robots operate by executing rapid and high-intensity physical action. Their motors accelerate a takeoff. Gimbals stabilize under heavy load. Sensors are firing at the same time and their control systems respond in milliseconds. Each of these actions demand a large amount of current and power delivered instantaneously. Energy batteries, the kind of optimize for energy density and releasing it gradually over a long period of time cannot respond fast enough and sustain the discharge rate, these actions require without overheating or collapsing the voltage. A power battery is designed around the opposite priority. It's built to deliver power at 5 to 20x faster than energy batteries. It also needs to sustain that output through repeated high demand cycles, and it needs to manage the heat generated by the power without failure. For autonomous system where the motor, the sensors and the computers are all cranking at peak current at the same time, only a power optimized architecture can keep up. The engineering challenge of a power battery is not simply to build a bigger or stronger version of an energy battery where heat and thermal stress is manageable. For power batteries, heat dissipation becomes the primary engineering constraint. The design needs to be lightweight enough for the platform to fly and high component and manufacturing quality to sustain the performance. For example, a single defect in welding and soldering joints will result in such a high-energy battery creating a resistance point that at high discharge rate generates enough localized heat to drive the entire pack into thermal runway. KULR ONE address each one of these constraints through a combination of engineering expertise, proprietary technology, thermal control, component integrity and build precision. That's what separates KULR ONE battery that perform in the field from one fails under operational load. Our current engagements span agriculture, survey, law enforcement, defense drone programs and surface and subsea maritime vehicles. The breadth of the applications reflect the platform's configurability. It's the same KULR ONE architecture adopted to the specific power, weight and certification requirements for each platform. KULR has shipped thousands of these drone battery packs to date. We're engaged with 2 of the leading unmanned aerial system companies in the United States with a combined production volume target to approach 10,000 packs per month in second half of 2026. These are active engineering partnerships with production time lines, pack configuration and qualification schedules already in place. Another point -- another important point I'd like to make is about supply chain resilience, namely NDAA compliance that stands for National Defense Authorization Act. The NDAA compliance is a procurement requirement for government and defense adjacent customers. KULR entered a joint development collaboration with Hylio to design, prototype, qualify and manufacture NDAA-compliant battery systems in Texas. Hylio is a Texas-based designer and manufacturer of drones for agriculture and public sector programs where NDAA compliance becomes important. Both the batteries and the drones are made in the United States. Next, I'll give an update on our other KULR ONE programs. KULR ONE Space and KULR ONE Guardian are the 2 programs that set the performance standards for the entire KULR ONE portfolio, both operating environments where battery failure is not recoverable, human space flight, deep space missions and active military operations. The engineering standards that we develop for these programs are what the rest of the KULR ONE platform is built on. Every performance requirement met in the spacecraft or combat system, propagation resistant, thermal stability under extreme conditions, certification under scrutiny raised the engineering baseline that KULR ONE Air, Max and Triton inherit. Customers in defense drones, electric aviation, AI data center programs are buying into this architecture that has already been qualified in the most demanding operating environment. KULR continue to see adoptions across the space sector. The XLT and the Reach series batteries are in active use across multiple satellites in both LEO and GEO applications. The Reach series currently is in multiple unit deployment on 4 partner satellites. Next, I'll talk about what are the competitive advantages of the KULR ONE platform. The #1 competitive advantage for the KULR ONE platform is the performance, safety and quality standards the platform was built to. KULR ONE's core IP originated by the work we've done with NASA Johnson Space Center. The architecture was designed for human-rated spaceflight applications, environments where battery failure is not a recoverable event. Zero propagation failure has a propagation containment. That heritage is the engineering foundation that makes KULR ONE the correct choice for applications where performance and safety are both nonnegotiable. A perfect example of that advantage is our partnership with Robinson Helicopters. Robinson Helicopter Company has manufactured more civil helicopters than any other company in the world in its 50-year history. They have manufactured more than 14,000 helicopters. The procurement standards for safety critical systems are established and rigorous. They valued KULR ONE and selected to be their next electric aviation platform. That decision is important because it further validates the engineering standards KULR ONE was built to. Under this co-development agreement, KULR will design and integrate a lightweight, high-performance battery architecture for the eR66 battery-electric helicopter demonstrator. We're building a dual life architecture, which means that each pack is engineered from day 1 for 2 years. First for primary flight cycle and a certified second life energy storage application. This model creates 2 revenue streams for KULR. The primary use case are rapid organ and tissue transport, emergency response and short-haul operations where zero emission performance and low acoustic signature are operational requirements. Second life energy storage is for industrial and digital infrastructure applications. Execution speed is another KULR ONE advantage. Not speed is a marketing claim, but speed as a demonstrated and repeatable engineering capability. In November 2025, we received a purchase order for a 400-volt battery system to power a Counter-UAV (sic) Counter-UAS direct energy platform. Five weeks later, we developed -- we delivered a complete design package to work in prototype. Achieving that time line was made only possible because of the deliberate engineering foundation we built in 2025, including model-based electrical and thermal simulation, proprietary cell selection, design for safety architecture and in-house integration running electrical, mechanical and firmware developed, all in parallel. This system is scheduled to enter production in 2026. Next, I'll provide an update on KULR ONE platform for digital infrastructure and AI data center applications. Our digital infrastructure strategy addresses 2 distinct but related segments, telecom network backup and AI data center power. Both require battery systems that must perform reliably, but in different operating environments. Telecom sites face grid instability across diverse geography, while AI racks increasingly require battery integration closer to the compute equipment itself rather than rely on centralized UPS systems. Telecom operators depend on the battery backup as a primary protection against grid interruptions. 5G infrastructure laws are raising the performance and uptime requirements for those systems beyond what legacy lead acid installation can meet. In January 2026, KULR was awarded a 5-year preferred battery supply agreement from Caban Energy, a Miami-based company that deliver energy as a service to telecommunication operators across 12 countries. As part of that transaction, KULR has taken full control of the battery manufacturing equipment and process, and we've commenced production. Production battery packs were delivered to Caban in Q1 of 2026. We plan to consolidate full operation into our Texas facility in Q2 to improve efficiency, reduce overhead and centralize operation as we grow. We now have the supply chain set up for the 48-volt 100-amp hour battery production and the focus is to deliver batteries to meet growing Caban demands. Beyond that agreement, we're in active engagements with telecom operators and service providers directly with our KULR ONE battery as a Service offering. These are separate from the Caban channel and represent KULR's effort to build direct recurring revenue relationships in the telecom segment. Data centers have traditionally handled battery backup the same way with large power systems installed in a dedicated room, separate from the computing equipment they protect. That model is changing. As AI workloads grow and hardware running them becomes more power intensive, the industry is moving towards battery backup installed directly inside the computing rack. The battery is no longer just a facility utility. It's become part of the compute infrastructure itself. That shifts create a different set of requirements. A battery that operates inside the rack next to the processor, it protects needs to meet much higher safety standards and need to handle higher voltages and respond much faster than conventional backup systems. At the end of last year, KULR joined the Open Compute Project as a Platinum member. OCP is an industry body whose specifications define how hyperscalers and large cloud operators build their infrastructure. Platinum membership places KULR in the working groups writing the next generation of power standards and position us inside the relevant technical working groups and help us to build a product in line with where the market is going. In the same month, KULR created a joint development collaboration with a leading global battery cell manufacturer to develop the KULR ONE MAX BBU for AI scale data centers. KULR leads the system design, safety engineering and certification, while the cell partner supplies the battery cell platform for the life of the commercial program upon certification. The opportunity is significant, and it depends on certification, qualification and customer adoption time lines. The same trend that are driving record level battery demand in large data centers is also driving demand at the edge. AI inference, the process of running AI models to generate response is moving out of the central data centers into network itself closer to the end user. That means that the computer hardware and the battery backup protecting it must operate in telecom facilities, cell towers and distributed network nodes. The environmental and reliability requirements at these locations are more demanding. This is where the AI data center opportunity and the telecom opportunities converge. The battery requirements are related, the customer base overlap and KULR ONE is the same architecture to save both. Next, Shawn Canter will discuss financial highlights. Shawn? Shawn Canter: Thanks, Mike. 2025 was an important year for KULR. As Mike mentioned, it marked a transition to a scalable product-focused model. Let me touch on a few points from 2025 before we get to the Q&A. KULR generated over $16 million in revenue in 2025. This is a 51% increase over the prior year. As we have previously discussed around our focus on product, our product revenue increased and our service revenue declined. Product revenue was up 39%, while service was down 50%. Again, while we expect to have some service business, we anticipate continued growth to come from the product side of the business as we scale into the large end markets Mike discussed earlier. Product revenue came from 47 customers in 2025. Revenue per customer was approximately $108,000 or 56% higher than 2024. Services revenue came from 34 customers, the same as 2024. Services revenue per customer in 2025 was approximately $65,000 or 50% lower than 2024. Mike touched on gross margins earlier. We have set out in detail information about gross margin, R&D and SG&A in the Form 10-K filed today. KULR recorded an approximately $62 million net loss for the year. There is an aggregate of approximately $33 million of noncash expenses on the income statement that contribute to the net loss. These represent almost 55% of it. As Mike mentioned, the largest of these is an approximately $14 million mark-to-market expense due to the decline in the price of Bitcoin. As a reminder, in the second and third quarter, Bitcoin's ascending price contributed a noncash gain to those quarter's results. Now let's get to the Q&A. Back to you, Stuart. Stuart Smith: All right. Thank you very much for that, Shawn. And as mentioned, that now takes us into the question-and-answer portion for our call today. And here's the first question. Can management speak to which markets are seeing the most momentum today and where early customer interest is starting to turn into repeat business and meaningful revenue? Michael Mo: Yes, Stuart, I'll take that one. I would say the KULR ONE Air for the autonomous platforms are the clearest near-term production momentum. It has expanded beyond the airborne drones to surface and subsea maritime applications as well as land applications. We now have over 20 active customer development agreements or programs across our KULR ONE Air platform. Thousands of battery packs have already been shipped and 2 of the leading drone companies in the U.S. have active production time line with us, pack configurations, qualification schedules in place, and we're looking at over 10,000 battery packs per month later 2026. I would say that's the market has the highest momentum these days. Stuart Smith: Thank you for that, Michael. Here's the next question. Could you give an update on where KULR is positioned in the AI data center backup power market? And what investors should be watching for to know whether this can become a meaningful source of growth? Michael Mo: Yes. We start developing our AI data center BBU product in 2025. And at the end of 2025, we joined the OCP platform membership and which positions us inside the working group that writes the next generation of the power standard for these hyperscaler infrastructures. So now we're building products to meet where the market is heading for the next cycle of growth. 2026 is the year that we really need to work with our BBU cell providers on the UL 9540 certification and work with the hyperscaler customers on integration work. And I would say that 2027 is the year that we can see revenue opportunities. Stuart Smith: Next question. Where do things stand in telecom and energy infrastructure? And what still needs to happen before those opportunities can start contributing in a bigger way? The Caban announcement was a great start. Michael Mo: Yes. We've taken control of the battery manufacturing equipment and process from Caban, and we've commenced production. Production battery types have been delivered to the customer, and we plan to consolidate that into our Webster facility in Q2 and improve efficiency to reduce costs and also centralize operation as we grow. We now have supply chain set up for the 48-volt 100-amp hour battery production, and the focus is now to deliver batteries to meet the customers' needs. In addition, we are in active engagements with telecom operators and service providers directly to provide KULR ONE batteries as a battery as a service offering that's separate from the combined channels. So we're starting to test the water to offer that as the battery as a subscription service. And the goal is to lower the total cost of ownership for operators to replace the lead acid batteries into lithium-ion batteries. Stuart Smith: Michael, since KULR is involved in several areas like aerospace, defense, telecom, e-mobility and data centers, where is management most focused right now? And where will most of the company's attention and resources go over the next year? Michael Mo: Yes. The focus for 2026 is simple, build and sell more KULR ONE batteries. The management is most focused right now on the KULR ONE Air platform. That's the one that shows the highest growth with our customers. I think I repeated it now that we have over 20 active customer engagements for the autonomous systems for air, land and maritime, and we shipped thousands of the battery packs for the customers. And this is the one that we see the highest growth in 2026. Stuart Smith: Looking at the rest of 2026, what are the biggest goals and milestones investors should be on the lookout for? And what would management consider a successful year? Michael Mo: Well, I think that the -- across our portfolio, the KULR ONE Space and Guardian products will continue to gain customer traction. As you know, the private space exploration and the DLW the market is also very growing very quickly. The telecom batteries, we're shipping volume to our customers to meet their demands. We have some new telecom operators that hopefully will get contracts in 2026 for Battery as a Service. Keep in mind that these operating engagements can take some time, but I think it could be a very good recurring revenue business for us. The first is the -- but the most important is the KULR ONE Air product that's going to ramp and scale with our customers. And I think the baseline is 10,000 packs per month as we get our automated production line going. So I think these are the big ideas for our goals. Stuart Smith: Okay. Excellent. Next question then, how stable and repeatable is the KULR ONE platform revenue base becoming? Michael Mo: Yes. Like I said in the prepared remarks, what has fundamentally changed for KULR in 2026 compared to previous years is that the need for power battery pack has emerged for these very fast-growing new markets, autonomous platforms, digital infrastructure and direct energy. KULR ONE is engineered from the ground up to serve this paradigm shift. And our customer engagements are now broader industry coverage. The customers are very diversified in different markets. And we also have a lot more customers and they all have their programs that's running, and we're customizing our solutions specifically for their programs. And these customers have their own road map to ramp in volume in 2026. And that gives us more confidence and build our production capability to serve these customers on schedule. We're certainly moving to a more stable and repeatable product sales business model in 2026. Stuart Smith: All right. Michael, next question is, as space-based AI data centers become more of a long-term discussion point, does KULR see a potential role there given its background in space applications, thermal management and battery safety? Michael Mo: Well, first of all, I think this is a long-term conversation, and it is not something KULR can focus on in 2026. But the space-based AI data center is probably one of the biggest and the hardest idea right now. Elon Musk talked about it. He believes that the best way to solve the difficulties of building AI data center on earth is to move them into space. And at GTC 2026, NVIDIA launched the Space-1 Vera Rubin module along with their Thor and Jetson platform. And these are engineered to deliver AI performance for the open data centers. And on top of that, how to cool chips in space is still an unsolved problem. These data centers will definitely need to use space-proven batteries. And some of these private space companies that NVIDIA is working with for space AI data centers are already KULR customers. So I think there might be opportunities, but not particularly a focus for us in 2026. Stuart Smith: Understood. Here's the next question. You have recently announced drone partnerships with Hylio, a backup power partnership with Caban Energy and a standards body looking to modularize AI data center building blocks. These 3 initiatives represent a large market opportunity, but how much, if any, will you see in 2026? Michael Mo: Yes. Hylio and Caban are both 2026 revenue contributors, Caban in production by now and grow for the remainder of 2026. Hylio is an active engineering collaboration right now and revenue will follow qualification and production milestones as program move from prototype to volumes. And we do expect that the Hylio revenue in second half of 2026. The AI data center BBU business, as I talked about, it will be more like a 2027 business for us. Stuart Smith: Michael, here's the final question for today's call. In regards to your ability to power drones. Given the recent developments globally, are you aligning yourself with companies that plan to rapidly increase output as a result? Michael Mo: Yes. KULR ONE Air for drone, autonomous platform is the focus for KULR 2026. We have many active engagements for air, land, maritime applications. And many of them will go to production in 2026. And we're setting up an automated production line for those platforms, for those batteries in -- to be in operation in second half 2026. Also related to the drone is the counter drone direct energy systems, and we develop a 400-volt battery for a customer in 5 weeks' time from when we receive the PO. And that's actually a record time for a system like that. And these systems will go into production in 2026. Another one that's really important is NDAA compliant. So that's for domestic production. A lot of times, that's a structural requirement for government drone programs. And this is why we partnered with Hylio to build made in U.S.A. batteries and drones together. So we are very well positioned to serve many of these customers that's growing very fast for both defense and commercial applications in 2026. Stuart Smith: Well, as mentioned, that's our final question for today's call. I do want to point out, as we do in all of these calls that all you need to do is pull up the press release that came out for this call, which came out March 26, and continue to send your questions in throughout the quarter leading up to our next call. We appreciate all of those who did submit calls for questions for today's call. And I would like to thank Michael Mo, CEO for KULR Technology as well as Shawn Canter, the CFO for KULR Technology Group for joining us here today. That concludes our call, and I will now turn the call over to our operator. Operator: Thank you. This does conclude today's webcast and conference call. You may disconnect at this time, and have a wonderful day. Thank you once again for your participation.
Gary Friedman: There are pieces that furnish the home. And those who define it. There are places you visit. And those you remember. There are spaces you move through. And those have moved you. Welcome to the world of RH. Albert Einstein's Three Rules of Work: Out of clutter, find simplicity; from discord, find harmony; in the middle of difficulty lies opportunity. Seem especially relevant at this moment. We're compounding clutter from tariffs, global discord as a result of war, and the most dire housing market in decades can make it difficult to separate the signal from the noise. It's important to remember necessity is the mother of invention. And our most important innovations were birthed during the most uncertain times. Transforming a nearly bankrupt Restoration Hardware into RH, the leading luxury home brand in North America was not a feat for the faint of heart. While the external challenges are somewhat familiar, our internal opportunities are massively different. We're not closing stores and fighting to survive. We're building a never seen before brand that's positioned to thrive. Before we get into the details of our strategy, let's start with a few facts that should quiet some of the noise. In 2025, RH achieved revenue growth of 8% and 2-year growth of 15%, far outpacing our furniture industry peers by 8 to 30 points. Adjusted EBITDA reached $597 million, or 17.3% of revenues versus $539 million or 16.9% of revenues in 2024. Free cash flow of $252 million versus negative free cash flow of $214 million in 2024, an increase of $466 million year-over-year. Those results were despite 2025 being our peak investment year with $289 million of adjusted CapEx to support our global expansion plus an additional $37 million to purchase the Michael Taylor, Formations and Dennis & Leen brands to support the launch of our new concept, RH Estates, a strong performance considering the unusual circumstances. Let me shift your focus to our strategy and how we expect our growth to accelerate over the next several years. We believe there are those with taste and no scale, and those with scale and no taste. And the idea of scaling taste is large and far-reaching. We believe our goal to position RH as the arbiter of taste for the home will prove to be both disruptive and lucrative as we continue our quest at building one of the most admired brands in the world. We like to use a simple question to frame our significant opportunity. Who is the home brand for the luxury customer? The LVMH, Hermes, Cartier or Cucinelli customer. RH has curated the most compelling collection presented in the most inspiring spaces in the world. Our brand attracts the leading designers, artisans and manufacturers, scaling and rendering their work more valuable across our growing global platform. Our product is both categorically and stylistically dominant, enabling RH to address the largest market of any brand of its kind. We curate across the 7 major product categories: furniture, upholstery, outdoor, lighting, linens, rugs and decor, and we integrate across the 3 dominant product styles, traditional, contemporary and modern, which we refer to as RH Estates, RH Interiors, and RH Modern. RH Estates, our newest brand extension, launching this spring, will address the traditional market where the RH brand is currently underpenetrated. 60% of luxury homes feature classic or traditional architecture, which influences the majority of furniture purchasing behavior. RH Estates will feature the introduction of RH Bespoke Furniture, customizable collections from our recently acquired Michael Taylor, Joseph Jeup, Formations and Dennis & Leen to the trade brands. RH Estates will also include the introduction of RH Couture Upholstery by Dmitriy & Co., tailor-made sofas, sectionals and chairs of arguably the highest quality upholstery available anywhere in the world. Designers will be able to order custom made sizes and finishes plus specified COM fabrics. RH Bespoke Furniture and RH Couture Upholstery will enable interior design firms to now specify RH for their most discerning clients and custom projects. RH Estates will also include collections from many of the most talented designers and artisans in our industry. Let's take a look at some of their work. [Presentation] Gary Friedman: RH Estates will premiere at the opening of RH Milan, the gallery on the Corso Venezia, a 70,000 square foot former palace, during Salone, the largest design show in the world with an estimated 500,000 visitors descending on the city that week. The launch of RH Estates will include a dedicated source book, mainly mid-May, and international advertising campaign and freestanding Estates Galleries in Greenwich, Connecticut and the San Francisco Design District opening early summer. And the West Hollywood Design District opening in 2027. We believe RH Estates will become our largest and highest margin brand extension, driving significant growth over the next several years. Let me shift your attention to our multidimensional physical-first global ecosystem, the world of RH. That goes far beyond a typical multichannel approach, inspiring customers to dream, design, dine, travel, and live in a world thoughtfully curated by RH, creating an emotional connection unlike any other brand in our industry. The question we often are asked is why physical first in a digital world? Let me explain. Furniture remains the least digitized large retail category with an 80-20 store to online split, with luxury furniture estimated to be as high as 95.5%. Why do stores still dominate? Comfort, scale, finish and quality are hard to judge online. Even when customers purchase on a website, most experienced the product in a store, we believe the physical manifestation of a brand will continue to be significantly more valuable than an invisible online way. We also believe most retail stores are archaic windowless boxes that lack any sense of humanity. That's why we don't build retail stores. We create inspiring spaces. Spaces that are a reflection of human design, a study of balanced symmetry that creates harmony. Spaces that blur the lines between residential and retail, indoors and outdoors, home and hospitality, spaces with garden courtyard, rooftop restaurants, wine and barista bars. Spaces that activate all of the senses and spaces that cannot be replicated online. While most have been closing or shrinking the size of their stores, we've been building some of the largest and most immersive spaces in the history of our industry. Let's take a look at our most recent work. [Presentation] Gary Friedman: We believe our investments in building completely unique, immersive experiences in Paris, Milan and London, we'll set the stage for RH to become a truly global luxury brand. It's important to understand that there are several strategically significant businesses embedded in our galleries, including RH Interior Design, where we become the largest residential interior design firm in the world, with projects from San Francisco to Sydney, Los Angeles to London, Miami to Milan, and Dallas to Dubai. We offer design services, including interior architecture, landscape architecture, art and antique curation and turnkey installations. Another important business embedded in our galleries is RH to the trade, a specialized team that calls on services and supports interior design firms assisting in the design, curation, delivery and installation of many of their projects. RH Hospitality operates beautifully integrated restaurants, wine and barista bars in our galleries that generate significant traffic and brand awareness. While our galleries might see several hundred customers per week, our restaurants feed several thousand. With 26 restaurants in operation today and are scheduled to reach 40 by the end of 2027, RH is 1 of only 7 globally owned and operated luxury restaurant brands with 20 or more locations worldwide. We believe our galleries create a unique competitive advantage that will likely never be duplicated in our lifetime as the cost of construction at the luxury level has doubled post-COVID. To address that challenge, we've developed several immersive new gallery concepts that will enable us to scale in a faster and more capital-efficient manner. The first, the most revolutionary is what we call an RH design compound, currently in development in Naples, Miami and Walnut Creek, a compound is 6 to 8 independent buildings connected by beautifully landscaped garden courtyards with a sun-filled atrium restaurant anchoring the project. Due to the absence of multiple stories that require steel structures, grand staircases, elevators, complex mechanical systems and long development time lines, we believe we can build design compounds significantly faster and more capital efficient than our prior design galleries. Another new approach to deploying the RH brand in a faster and more capital-efficient manner is what we call a design ecosystem, currently under construction in Greenwich and Palm Desert and in the development process in West Hollywood Design District. An ecosystem is a multi-building brand presence on a street, in a neighborhood, design district or shopping center. Our first ecosystem will be in Greenwich, Connecticut, and includes our gallery at the Historic Post Office, our new outdoor gallery opened last year, and our new RH Estates Gallery with an integrated restaurant opening in the former Ralph Lauren building this summer. We've also developed a new single-story gallery, ranging from 15,000 to 20,000 square feet with a dramatic courtyard restaurant targeting secondary markets. We're currently under construction in Los Gatos, California and are in design development for galleries in Richmond and Milwaukee. We have been extremely pleased with our performance of our first freestanding RH Interior Design office in Palm Desert, California and have plans to open a second interior design office in Malibu this fall. In total, we have an opportunity to expand our presence in 27 existing markets, and open 1 of our new design concepts in 48 new markets across North America, representing a $2 billion opportunity. Let me shift your attention to our business model and balance sheet. While we believe it's prudent to plan conservatively this year due to uncertainties around interest rates and inflation, and have planned revenue growth in the 4% to 8% range in 2026. We do expect growth to accelerate to 10% to 12% in 2027, and reach $5.4 billion to $5.8 billion by 2030. Adjusted EBITDA in the 14% to 16% range for 2026, reaching 25% to 28% by 2030. We expect cash flow of $300 million to $400 million in 2026, and $500 million to $600 million in 2027, inclusive of $200 million to $250 million of asset sales each year. We expect cumulative cash flow of $3 billion by 2030, inclusive of the asset sales and expect to be debt-free by 2029. While one might look at the current market discord and argue that RH has been in the wrong place at the wrong time. I would argue we've used this period to position our brand to be in the perfect place at the perfect time. Let me explain why. There are two important factors that will meaningfully expand the size of our market over the next 10 years. One is the exponential spending of high and ultra-high net worth consumers on the home. Ultra-high net worth consumers with a net worth above $20 million, own on average 3.7 homes, billionaires own 10. Ultra-high net worth consumers spend 6.4x more on home furnishings than a consumer with a single primary residence. Two, is the estimated $30 trillion to $38 trillion wealth transfer projected to take place over the next 10 years, which is more than double the past 10 years. Not only does the absolute dollar amount more than double, it's estimated that the dollars transfer from one to an average of 7 people. It's possible over the next 10 years our market will be multiple times larger than the past 10 years. When you combine that with our efforts to elevate and expand our product, globally expand our platform, generate significant revenues and brand awareness with our immersive hospitality venues, I would argue that the RH brand is in the perfect place at the perfect time. And we will emerge from this period of clutter, discord and difficulty as one of the highest performing and most admired brands in the world. Allison Malkin: [Operator Instructions] Your first question comes from the line of Simeon Gutman with Morgan Stanley. Simeon Gutman: First question, I want to talk about demand signals from the consumer. This has been a transitional period for the company. I realize the demand is outpacing a lot of other home furnishing companies, but it's come at a pretty big cost to margin. So expectations around demand improving while we see the margin of the business begin to turn. That's my first question. Gary Friedman: Simeon, the margin pressures somewhat disconnected and unrelated from the demand. The margin pressures really from -- kind of the investment cadence we have as far as expanding the business throughout Europe and some of the margin pressure coming from the tariffs, from a transition and timing and resourcing. But you basically have kind of an inflection point of we're in kind of a peak investment period from a capital and an expense and cost perspective based on the investments we're making, both from a global expansion and North American expansion point of view and from a product point of view with the launch of RH Estates. I think you have to think about the launch of RH Estates in Q2, we'll have significant costs with sourcebook and advertising and launching costs, without having much revenue until we get into the third and fourth quarter. And Estates is, remember is basically running late. Our original plan was to have Estates in the third and fourth quarter last year. So we have some timing issues. I think when you think about the significant investments we're making, both from a capital and expense perspective, and we're going through kind of an unpredictable time. So I think that's why it's important as you're looking at the business, you're looking at the model, if you're thinking about being an investor here, you have to have a longer-term view than a shorter-term view in periods like these. And in many ways a lot of people are going less than we're going right as people are pulling back and trying to manage the margin side of their business, we're investing in the most significant way we have in our history, and that's just going to create some timing dislocations from an earnings perspective. Simeon Gutman: And then my follow-up, you made a couple of executive leadership changes, one, a new President and two, a second person. And in the release you talked about potentially helping monetize some of the real estate. So can you talk about both of those hires, what prompted them? And then what does it speak to about the direction of the business you are heading in? Gary Friedman: Well, I think it's explained in the press releases. I don't know if there's anything different than that. We mentioned -- we're extremely happy to have Dave Stanchak rejoined Team RH. He's -- has made a significant impact while he was here, both from a North American transformation point of view and a global transformation point of view and was involved in really setting up the structure of the real estate for European expansion. And so it's good to have Dave back. And I think, Dave, it's probably the most, I think experienced real estate executive on a retail point of view because he's -- both -- not someone who's just been involved with mall leasing and -- which is typical, when you think about most retailers, Dave's been involved in real estate investments. He is an investor. He's had his own shopping centers and controls real estate themselves. So he comes out from an investor perspective, a much bigger perspective and it's a kind of a transformational leader as you think about a unique business like ours and the platform we're building, which is unlike anything anybody else is doing or has done at a level of quality and locations and so on and so forth. So there's not anything that I didn't talk about, I think, in the press release. And then with Veronica's joining RH, we've known Veronica for a long time. We've been able to observe her and her leadership and her ability to build what we think is one of the leading manufacturing businesses in North America for an upholstery point of view. But mostly what we, I think, think about here is not just the upholstery part of our business. But if you think about the best luxury models in the world, whether you're looking at Vuitton or Hermes, or CHANEL or others, one of the things that's very unique with their business models as they have a very concentrated core business, 80% of their business is in the leather goods and accessories part of the business. It's very similar to our business from a penetration point of view, 80% of our business is furniture, that's typical if you look at the home furnishings business. So if you're in all categories, that's going to directionally be the mix depending on how you position those categories. And we think there's an opportunity when you look at our business from a global scale and building a unique platform that's synergistic and appropriate for the unique platform we're building from the selling side. I think we've built -- have built and are building the most unique physical selling platform in the world. And I think it deserves and will be positively impacted by building the most unique manufacturing and sourcing platform in the world. So eliminating, when you think about the inefficiencies of manufacturing, when you don't -- when you don't control your distribution, there's quite a bit. So long term we think we can build a unique manufacturing platform. And as I said in the press release, a combination of owned joint venture and outsourced that can be very unique and significantly accretive from a -- we think both a revenue and a cost perspective and a margin perspective. So yes, so we're excited. We think Veronica is the best person in the industry we've met. I think she's a unique talent leader. She's an engineer by education and experience, and has a big -- and very big and kind of strategic view of manufacturing and sourcing. So it's a new level of talent in the company. We've never had someone this kind of pedigree and experience and talent, and we think she's going to do some incredible things long term. Allison Malkin: Your next question comes from the line of Steven Forbes with Guggenheim Securities. Steven Forbes: Gary, with Milan and London slated to open here in short order, curious if you could give us an update on RH Paris and/or just comment on the anticipated revenue contribution from the broader RH International strategy behind the 2030 reference year you laid out in your prepared remarks. Obviously, just looking today, any color to help support or build conviction around those longer-term outlooks you laid out today? Gary Friedman: Not sure if I get that question correctly. Jack Preston: The impact of international as it relates to the 2030 targets, how we think about that growth of that. Gary Friedman: Yes. Well, I think what we've articulated most recently over the last few quarters and really since, I think, our start, really that the opening of Paris, Milan and London is kind of the brand foundation to build on when you think about European expansion. There are the three most important cities in Europe, we think they're important from a positioning of the brand and a brand awareness point of view. And all three of those are really the besides, again, RH England, which is out in the countryside, which was important from a brand impression and awareness perspective and how to kind of make an entry into the European market. But these really are where we have significant investments in the presentation of the product that hospitality experience, which we think is going to be critical long term to building brand awareness throughout Europe. And then one of the keys here is really not just these key stores because if you -- as we assess the business in Europe, and we have since day 1, I believe that the basic distribution and where the sales will come from will be long term, more important in suburbs and second home markets than cities that the cities are really going to be the key to brand awareness and driving the brand, positioning the brand, and we'll do significantly more revenues, we believe, in Paris and Milan and London than we will in other cities. And if we were ranking them, clearly lending, we believe, going to be the biggest market for us as it should be. But our distribution of business is significantly suburbs and second home markets in North America. 90%, 92% of our business is in suburbs and second home markets. And second home markets are kind of like a suburb, right? And about 8% of our business is in the cities. And we think that distribution is going to be similar throughout Europe. And if you looked at Apple's real estate strategy and you look at their distribution throughout Europe, which we believed was a good kind of model for us to look at as far as a higher-end consumer. And you looked at like Apple's North American kind of distribution versus our North American distribution, their penetration in suburbs, our penetration in suburbs. There are similarities there. We're more highly penetrated into second home markets than they are. Most people have their phone with them. But one of the keys for, I think, Dave is joining the company, too, is just to continue that leadership into Europe and building out into the suburbs and into the second home markets to cover the business. So strategically, we're setting up the business in the kind of key markets that you would from a brand and awareness perspective and not that we don't think that the business is going to have revenues there. We just think the biggest revenues are going to come long term when you think about the longer-term plan as we expand into the suburbs and [ certain end ] markets where people really buy much more furniture, both indoors and outdoors. Steven Forbes: Maybe just a quick follow-up. Obviously, great to hear Dave rejoining the company. You talked about -- you talked about $250 million of asset sales in each of the next 2 years. This is sort of a 2-part question. One, can you speak to sort of the value of the non-core assets or the assets that you don't plan to operate in the future versus the value of the assets RH is still planning to operate in the future. And then maybe any color on sort of timing for 2026 asset sales as we think through the potential interest expense savings. Gary Friedman: As far as that mix, I'd say the majority of the asset sales are assets that we will be operating that are in a sale leaseback kind of properties and then there's some investment properties that we had in Aspen. And a few other things that we've decided not to pursue for whatever reason, we own a building in Milan -- not Milan, excuse me, Madrid, and we're not going to pursue the development of that. We're fine with the location we have today. And so it's just looking at -- taking a look at our balance sheet and just turning the facets into cash, as we said we would be doing. So we've said we have about $0.5 billion of real estate assets that we could monetize. And we're going to begin to monetize those. Dave has got tremendous experience on that end of real estate. So -- and he feels very confident in what we're going to be able to do. And some of these are properties that we had purchased and had developed over the last 2 to 3 years, I guess. You got to think about a lot of our investment horizons are pretty long from a -- when you think about some of the galleries that we've built, you've got significant time to design and develop and get through the approval process and then you've got significant time building them. So you have a relatively long holding time. And I think post-COVID, all of the construction cost have went up, particularly at the luxury level. And those prompted us as we communicated in the video, to develop just other faster, more flexible ways to deploy the brand. And when you think about the design compounds and think about where the first couple are going in Naples, we're taking that what was formerly a Nordstrom's site in Walnut Creek, we're taking what was formerly a Neiman Marcus site. And then in Miami, we're developing kind of a parking lot size kind of a key visible area in Miami, that was kind of Bank of America. But we think about those opportunities to be significantly faster and more capital efficient. We've built most of our big, kind of, I'd say, the higher investment, higher capital side of the business, we've been transforming the real estate here now for 15 years. And so even on a European and global point of view, I would say that we have Sydney coming, but that's a different model that's really being built by the developer. It's not going to take much capital from RH. But yes, we have significant assets. We're going to now monetize, turn into cash, and then we've got some assets in Aspen and other things like that, that will monetize over time. So yes, so a lot of that will come off the balance sheet. I don't know, Jack, do you have anything to add on? Jack Preston: No. I think from a timing perspective, Steve, we'll just keep you posted. We're not ready to commit us to show the cadence to 2026, and we'll just update you as things as appropriate. Allison Malkin: Your next question comes from the line of Max Rakhlenko with TD Cowen. Maksim Rakhlenko: So first on Estates, can you provide color on how you're thinking about scaling the collection? We know when the books will hit, but how are you thinking about the cadence of the product rollout into the galleries? How are you looking by inventory, et cetera? Just if you could compare and contrast this collection versus the Modern and Interiors launches that you had a couple of years back. Gary Friedman: Sure. So the books will hit kind of mid-May, and we will -- we've got a handful of stores that will get the initial product that we'll be able to kind of test and then we and get some reads on, but we feel very confident in this selection. So we went out with a bigger inventory by -- and a lot of it based on just the data. You got 60% of luxury homes in America that have classic and traditional architecture. So -- and it is really the next big trend. As you think about how the trends cycle through, this trend is a lot of the product you're going to see cycle through, it's why we've made some of the acquisitions that we made, whether it's the Michael Taylor brand and the famous diamond table and so on and so forth to really be able to not only have authority, but be able to have intellectual property rights for a lot of the kind of key products that are going to come. And so we just think it's going to be a big building trend. But in the second half will be -- and how many galleries do we think? 30? Unknown Executive: I think -- yes. Gary Friedman: About 30, 40 galleries -- our top 30, 40 galleries in the large design galleries, we'll take over the first floor with RH Estates. So this is a significant launch and a significant bet. Maksim Rakhlenko: Got it. That's helpful. And then just a two-parter on margins. If you could just isolate how you're thinking about the impact of tariffs for 2026, both the cadence and magnitude as I don't think you discussed that in the letter this time around. And then separately, if we exclude tariffs and some of the timing shifts that you discussed earlier on the call, how healthy is sort of your -- or how healthy are your product margins as we think about the long-term targets you laid out? How much higher can the product margins go as you do continue to add these new collections that I think come with much higher margin. So if we just think about the core, where can the business go from a product margin perspective? Gary Friedman: Yes. I think -- I mean, we're not giving detailed margin forecast. But our margin -- our product margins are relatively healthy, except for some bumps we're going through from a tariff point of view. I think we've been able to perform reasonably well. If you exclude kind of the weight that we have from this investment cycle and the drag from Europe and you kind of take a look at the business. And I think one of the things we're doing, as we think about this business, a lot of times with brands as you go through the history of brands, you've got kind of the levels and the transformations you make to kind of get to where you want to go. And this next -- this cycle we're in now, it's a key investment cycle. Clearly, we've spent a lot of capital. We've made big investments to kind of position the brand not only in North America, but positioned in Europe for the long term. And once you get past those cycles, we're going to have great leverage. Opening galleries like we're opening and restaurants like we're opening or significant costs, especially when you're doing them in a different country. There's just more travel, more expense from hiring people and building new organizations and so on and so forth. So from a -- I just think, it's not just the product margins, it's really just the overall margin structure of the business once we go post peak here on this investment cycle, both from a capital and from an expense and cost point of view. I think the model of this business is going to look like one of the best models people have ever seen in our industry. So if not the best model, I think it's going to be the best model anyone seen. So we feel confident in that. I mean, we're also just -- from a global perspective, navigating through very uncertain times. And we do have a product mix that is going to be somewhat more cyclical and have more of a drag. So when you're really focused on the furniture business versus the home furnishing, the broader furnishings business, accessories business, tabletop business, kitchen businesses and so on and so forth. You're going to have more weight during times like these. So that's going to require you to fight for more business. But that's throughout our history. We've always fought through the business in times like these. We've always been more promotional than less promotional in times like these. And we think it's times like these that there's a lot of fallout. And there's going to be a lot of competition that's not going to make it through these times. There's been greater fallout in the furniture business. As most people know, over the last few years than in any time in history. And I think there's going to -- as long as the housing market remains difficult, there's just going to be a lot less competition, and we're going to be better positioned than we've ever been for the other side of the cycle. As we build out the assortment, especially in the Estates over the -- think about the Estates expansion over really a 5-year horizon from a product point of view, I'd say over the next 5 years as Estates assortment is going to grow, it's going to build, it's going to become more dominant. The trend is going to -- that wave is going to keep building over the next 5 to 10 years, right? So I think about the whole model of the business in this way, we're very confident in the long-term model. I think what confuses people is most public companies go public and they kind of manage the business, right? They have a simple rollout and they're going to do so many stores a year and the stores are all the same and everything is really predictable and most of them go through their rollout cycle of 5 to 7 to 10 years, however -- what amount of time they stay relevant for. And then usually, becomes kind of a dated concept over time. And that's why we like to say that most retail malls or graveyard for short-lived ideas. Most retail companies don't even concepts don't live out the first term or second term of their leases. So we're going through one of those investment cycles that will leapfrog this business forward and you're looking at kind of peak investment cycle and kind of trough kind of economic cycle, right? So and even with those two, you still get a business here with a kind of a mid-teens EBITDA margin to high teens EBITDA margin. And once you get past this cycle, there's a lot of leverage in this model. So... Jack Preston: Max, I'll add on tariffs. So in Q4, we talked about last year tariffs having an impact of 90 basis points in terms of a drag. And Q4, we had talked about $170 million. We ended up at $190 million in Q4. And the way we characterized that in the last call is that, that's ultimately by Q4, you're fully baked into the sort of prior tariff regime. Obviously, things have changed now with the Supreme Court decision. But tariffs come out in and out of turn, as you know. And so while in the -- let's say, in the first half, you might have some tailwinds from that relatively lower rate that exists under Section 122 today. Who knows what happens in the second half. There's obviously a sprint to replace all those tariffs and potentially more as Trump first said under Section 301 in the back half. So we're just -- we're playing by year being -- as you know, we're nimble and we're dynamic. But as far as last year's tariff impact was sort of fully baked in at Q4, the bit of an indicator as to how it plays out in the first half, but obviously, the math will tell you that there's going to be some relief there as far as that tariff drag is concerned. So we'll keep you updated if there's -- as things play out. Obviously, we're watching it like you guys are watching. Allison Malkin: Your next question comes from the line of Steven Zaccone with Citi. Steven Zaccone: I wanted to ask about the cadence of the year from a revenue growth perspective because the first quarter, obviously calling for revenue to be down, but in the full year, it looks like an acceleration in the back half. Can you just talk through the points of the acceleration? I assume Estates is a big piece? How much is International? Any details you could share would be helpful. Gary Friedman: Well, yes, clearly, International and Estates, the cycling of -- Estates across the entire platform, International from opening cadence and just what we think the growth in the first couple of years. We really -- RH England is kind of our best point of history and -- we know how that ramps. So we expect the International stores to have a ramp to them over the first several years. But when you think about the back half, sure, you've got openings in North America, you've got openings in Europe. You've got Estates, which will -- in Q3, Q4, you'll start seeing the revenues flow from demand in Q2. And you'll see a ramp in Estate. You'll have a second mailing of the book. You'll have newness in both Interiors and Modern. So all of those things combined, we believe is a big step up in the business in the second half. And we would have expected more in the back half of last year and the first half of this year because Estates would have been part of that cadence. Steven Zaccone: Okay. Understood. And then the second question I have is just on the margin recovery of the business, right, because we've been an investment period for the business for some time, and I think you've used the term leapfrog in terms of margins in the past. For the longer duration investor, when you look at the business, what do you think is the biggest factor holding back margins for improving? Is it just the fact that some of the investments have taken a little bit longer and have been a little bit higher than expected? Has it been the top line, the macro environment? How do we think about some of the unlocks to see that margin improvement on the other side come back stronger? Gary Friedman: I think you've just outlined it. Yes, I mean we've -- we're in peak investment cycle in trough -- economic cycle, especially from a home point of view. So the -- I mean, not just trough investment cycle, you've had the whole kind of chaotic tariff cycle, that has caused kind of significant disruption on the business. I mean we've resourced 40% of our assortment business of our size -- resourcing 40% of your core assortment, which is really -- 40% of the assortment is bigger -- it's a larger part of the business. So, yes, it's all of those things together, Steve. So this is a good time to buy our stock. This is when people create generational wealth, right? This is no different than trough times in a real estate market, trough times in any kind of a transitional time for an industry or business. And all businesses in our industry get hit in these times and all businesses that survive to the other side, get a lift in this time. I think what's different is we've historically been investors during times like this is when we've seen the biggest opportunities. But this time is, I think, different than previous times because we're in a kind of a real peak investment cycle. We're opening Europe, we're launching new businesses. And so the opportunity to have a leapfrog, if we're more right than wrong, and we don't have to be completely right, we just have to be directionally right here. And so we say don't let perfect be the enemy of great. And yes, we've got a lot of experience here in this company. We've been doing this a long time. And I think we've proven that we've been a lot more right than a lot more wrong. I mean if you think about the transformation from what was Restoration Hardware before, to what is RH today, if you think about the transformation of this brand, over a 20-plus year period and try to say, name other brands that have made transformations like that, name other brands that are positioned like we are. These are the times that businesses like ours separate ourselves even further from the pack. But you have to make those investments, you have to take that level of risk to be able to do that. So we are not kind of a management culture or leadership culture. And we're constantly innovating and investing, but this is one of those significant cycles. It just happens to be -- during a significant down cycle, especially focused on our industry. And so -- but we're in a better position than we've ever been from a historical point of view to weather the storm. And I think if you just think about what does the next 5 years look like from an investment point of view. I mean we're going to come off, if you take that -- the $37 million and the $289 million, you've got kind of a peak type of investment year historically. And then we come off that peak. And we come into the $250 million to $260 million, and then that's going to drop to $150 million to $170 million a year. So you think about the company growing, the capital investment period coming down, and it's not just the capital, right -- the investment, but it's also all the expense that's connected to that capital. All the expense that's connected to bringing up those stores, training the people, building the infrastructure, building the distribution capability in the business, all the marketing and advertising that supports a launch, all the time and energy to kind of build out the assortments, develop all the products at scale to create a leapfrog, not to kind of slightly outperform. But it's no different than taking a $300 million business that was losing $40 million a year. That was Restoration Hardware and creating RH, that's a $3.5 billion business. I mean that -- think about what the next cycle looks like. The next cycle is, I think, even more magnified that -- we -- our framework for the model. And the biggest pieces of the model are the pieces we're talking about. If I was on the outside, looking at this, I'd say, hey, what is the outlook for capital investments as they go forward and not just thinking about the capital, but what is the expense, the cost investments that are connected to that capital, how does that change over the next 5 years? And how does it change over the next couple of years, right? Just over the next couple of years, the investment cycle is post peak, and it's going to turn down and accelerate in a downward way just as revenues are going to accelerate in a positive way, right? And when you have those two things going in different directions, that's when you have inflection points in return on invested capital, on margins, earnings, et cetera, et cetera. So the framework for the math is pretty simple. I think the strategy because it's never been seen before is -- can be suspect and could be hard to understand. There can be less believers than more believers at certain times. So look, I don't blame anybody for kind of saying, "Hey, this is -- it looks like an uncertain time to invest," whether it's in our stock or any stock in our category. But especially, you've got to kind of believe in the longer-term debt here. And we think this is going to be the -- one of the best bets that people will make as referenced by my personal investment here. So that's how we think about it. Allison Malkin: Your next question comes from the line of Michael Lasser with UBS. Michael Lasser: Gary, you've laid out this ambitious and aspirational plan to take advantage of what seems like a very large and growing addressable market, and yet the market is not really willing to give you the amendment, sort of a doubt. And part of that is RH has been averse to and does not really look at its business on a same-store basis, which is understandable, and that's long how you've articulated it. But at this point, that has defaulted to the narrative where RH needs to grow concepts and its physical footprint in order to drive growth, and that comes with a significant cost. And as a result you may not be able to realize its aspiration, understanding that it's come a long way from its origin, but it's the market's relying heavily on the recent experience. So why based on the recent experience is the default of the market wrong? Gary Friedman: I think it's what I just said. You have to think about peak investment period and what hopefully is a low point in the trough from a market perspective. It's -- again, I think if you pull out the investments, just pull out the European drag of the investment -- think about -- we're investing in Europe. The European market is worse than the American market right now. It's -- we're investing at a time you likely would like to not invest, but you can't make long-term real estate investments and expect to get them all right, right? So the -- why is the simple model, Michael, of saying I'm cycling peak investments, and I'm cycling hopefully what is trough growth, right? And we've got significant growth opportunities as we've laid out. And the cost, they're going to kind of go away. So a lot of people thought Amazon wasn't going to make a lot of money until he did, right? That's -- I think it's that simple. Think about -- yes, I think the key is don't bake this cost structure into your model right now. You're looking at the -- a peak cost structure, both from capital and an expense perspective. These galleries that we're opening are the most expensive galleries that we've opened, both from a capital and a cost point of view. Michael Lasser: Got you. Very helpful. So put it in parlance that the investment community would think about it is, essentially this is, the peak of the disruption, there will be significant same-brand growth that will lead to sizable margin expansion, especially as the investments moderate. Now the counterpoint would be, hey, we're living in a world of high uncertainty between the geopolitical, technological and other factors. So what would be the sensitivity to your outlook for free cash flow in the event that sales in the back half just don't materialize like you would expect. And without asking you to show your hand, but it is important to the investment case, what options would you pursue in the event you needed more financial flexibility to execute on your strategy? Gary Friedman: Yes. I think it's a great question, Michael. Look, we've got the ability to pull back investments further, right? When I think about the major strategic investments that we had -- we had to decide to go international, invest into Europe, years ago, right? These weren't short-term decisions. These were 5, 6, 7, 8 years ago, right? We're making some of these decisions and investments. And those decisions are easy -- are not easy to pull back on, right? But we're cycling those. We've got a lot of flexibility. When you think about the next wave of investments, whether it's expanding in North America, whether it's expanding in Europe, you're looking at much smaller investments, you're looking at much more flexible real estate, many more choices, et cetera, et cetera. And you're just not going to have the same kind of cost. I mean we're going to -- the cost of building some of the new concepts that we've laid out, just the way we're thinking about deploying capital in North America through compounds and ecosystems and secondary market galleries that are in the 15,000 to 20,000 square foot range. Just the real estate risk, the investment risk of those, the financial participation of developers and landlords is much higher than when you're investing in major cities internationally. It's just a very different investment cadence. And we just have a lot -- and you don't have the same time horizon, right? So there's just a lot more flexibility. And -- so when I look at -- I would say, peak investment, peak risk right now. You're looking at peak investment, peak risk. And who knows from day-to-day or hour-to-hour about the geopolitical and economic environment. Of course, this is -- it's kind of different times. And there's major news headlines are made by tweaks and post today, right, and they happen all day long. So I just think that if you're just trying to say, okay, how do I think about the go forward? There's just a lot less risk. There's a lot more risk, I'd say, over the last couple of years than over the next couple of years. I mean there's -- is there further risk in the housing market? There always could be further risk. There always could be other things. I mean, could the war escalate? Could China try to take Taiwan? Could -- yes, there's a lot of things that can go the wrong way. We can all kind of imagine what those look like. But it's no different in calculating what the federal funds rate is going to be, right? Like everybody has been wrong on that. And unfortunately, that's been bad for our business, right? They're supposed to be 3 cuts to the federal funds rate this year. Now it looks like there's going to be no cuts, then there might be hikes. Does that create some short-term risk? It does. Can we navigate through that? We can. Do we have more upside to downside in the second half from a revenue -- demand and revenue point of view? We do. But I kind of say, look, if I was on the outside of this today and I had the information that the outside world has that we're giving you today. I'd say it's or you could -- I would -- look, I bought the stock at what, $2.16 a share, I bought $10 million of the stock. I was wrong, which is at the low point. But I don't see too much more downside risk in the model. Most of the work is behind us, building the galleries, getting the people trained, bringing up restaurants internationally. We -- the product side, I think, is a lot less risky. We're not going into some unknown aesthetic or trend we're betting on what is kind of the biggest market, the traditional classic market. And it just so happens, if you look at the trend that's going to come through, that is going to be the next trend. So -- but yes, your question is correct. We have toggles we can pull. We have assets that we can monetize. And we're pretty good at navigating 3 times like this. We've got it. Yes, this is my 26th year here. So I've seen cycles and the teams seem cycles, and we've navigated through. I would face somewhat similar times, not completely similar times. Allison Malkin: Your next question comes from the line of Brad Thomas with KeyBanc Capital Markets. Bradley Thomas: Gary, first, I wanted to follow up a bit more about the RH Estates line. And you, I believe, alluded to working more with designers and decorators in this. And so I was hoping you could talk a bit more if the selling process or how you go to market needs to be different on this line that seems to have so much potential for you? Gary Friedman: Well, we do a big business with design -- interior designers today. We have, I think, like I outlined in my comments that we have multiple businesses embedded in our galleries. We have a trade team that services interior designers and decorators, that's a meaningful part of our business. We think it will become a bigger part of our business, especially with the launch of RH Bespoke Furniture and RH Couture Upholstery because that's going to open up the ability to have kind of more customizable product from a size, fabric, finish, so on and so forth. And that will open up -- I think it should open up that market pretty significantly. We have some other strategies to address that market that you'll hear more about, that will kind of support what we're doing from a marketing point of view. So yes, Estates, I think, is when you think -- again, if you think about kind of the high-end part of the business that we're going to address with Estates, and that's just kind of the beginning. We'll also address that throughout the entire brand. But let's say, a stage represents the launch of RH Bespoke Furniture and the launch of RH Couture Upholstery kind of framing those. Think about those across the whole business long term. Bradley Thomas: That's helpful. If I could ask a follow-up on the 2030 margin targets. Just wondering if there's any high-level framework to think about perhaps how International fits into that, and how much mix or leverage of sale -- from sales factors into that? Gary Friedman: Yes, I mean, we have some data now. We kind of know as we've opened some of these, how they're evolving, how to think about, how they might evolve and grow. And so I think we have very reasonable targets internationally, mixed into this. I don't think there's anything that's a stretch perspective. So when you look at -- you just look at the total composition of kind of the top line accelerating in the out years to 12% growth. I think the way I'd think about that is you've got about 4 to 5 points from the platform expansion, you've got 3 to 4 points, maybe 5 points from the product expansion. And you've got -- at some point here, we think, there's a couple of points from the housing market coming back. I mean, I don't think we're going to be in a 9- or 10-year downturn of the housing market. Let's hope not. But if it doesn't come back, it's not like we've got a big number out there for the housing market. We've got kind of a 2- to 3-point hope in the out years of that plan that we'll see some lift in the housing market. If we see a lift in the housing market, you could see -- I mean, based on where it's been, I mean, you could argue there's a 10-point lift from the housing market in the out years. And if that happens, you don't have us growing at 10% to 12%, you have us growing at 18% to 22%. Allison Malkin: Your final question comes from the line of Marius Morar with Zelman. Marius Morar: Just a quick question on the growth outlook for next year. Gary, I think on -- in the video, you mentioned that it's a bit conservative. I was just wondering at the low end, do you sort of embed any sort of deterioration in the housing market or maybe an increase in interest rates? Gary Friedman: Yes. I think we're conservative throughout the second half. I mean, obviously, we have embedded the growth from our platform and the new galleries and the galleries that are cycling, and we've got growth from Estates and some of the newness and expansion of the assortment in Interiors and Modern. But do we have the housing market getting worse? I'd say we have embedded in this -- the current environment right now, which I believe is worse and mostly from a geopolitical point of view and a perception point of view, of more things can go wrong then maybe can go right. And I think that's how the market's generally risk times like these, when you've got uncertainty and you've got global tensions and war and oil issues and the endless amount of things that oil impacts, right? So, yes, I mean -- but did the housing market gets better when interest rates came down somewhat? Not really. Is the housing market going to get worse if they go back? If we get 25, 50, 75 basis points, you get three hikes. I don't think it gets much worse. I think you've got to think back in history and say, in 1978, we sold -- there's 4.06 million homes sold, and that was a low point. And in 2003, '04 and '05, you had 4.06 million homes sold on average, 4 million to 4.06 million of somewhere about 4.03 million. And that's -- and that's with 53 -- I think it's 53% more people, right? So it's hard to believe it gets worse than this to get worse in this for a small period. I mean, none of us have seen a world war in our lifetimes, right? Is there a risk of a world war? I don't think so. I mean I think, cooler heads will prevail. But this is uncertain times. So I think the -- whether the interest rates go up or down 25 to 75 basis points? I don't think it's going to change much in the housing market. If the interest rates go up 300 or 400 basis points, I think that's different. I think they go down 100 basis points with pricing coming down, which is pricing is coming down across the market, I think you're going to see a housing market acceleration. So I'd say short term, handicap it, as even. I think we're seeing pressure right now. Longer term, I think you have to kind of handicap it as a positive because we've never -- we've never seen -- we're now in the fourth year of the worst housing market in 40 to 50 years. That hasn't happened in my lifetime, I've never seen 2 down years -- seen 1.5 down years in my career. I've never seen 3 down years, and I surely never seen a fourth down year. I don't think anybody has. So how long does it stay here? I don't know. It's all today the new normal and build out from here. At some point, I think how the market comes back. And I think it's more likely to come back than go down. But if the interest rates are moving 50 to 75 basis points to 100 basis points, I don't know if that moves the needle plus or minus. On the minus side, you're getting closer to affordability, right? On the upside, you could have some moderate slowing. I think the bigger thing is if we have real inflation and interest rates have to rise 300, 400 basis points, that's a problem. Marius Morar: That's helpful. And maybe a quick follow-up. In the first quarter guidance, do you also embed any drag from the back order and special order similar to the drag you had in the fourth quarter? Gary Friedman: Jack, do you want to take that? Jack Preston: Yes. Yes, that's something that's going to take probably until the second half to fully resolve itself just because of the complexities of resourcing. So that is just -- yes, there's something that... Gary Friedman: We take that drag in, yes. Marius Morar: Is it getting worse in the first quarter? Jack Preston: There's some modest impact that that's over and above what we felt in Q4. And then so then we'll see the resolution of that in the second half. Gary Friedman: It's basically from the amount of resourcing and just the new factories being brought up in different countries, being able to ramp up fast enough. And so that's the biggest hit is coming from tariff-related resourcing of furniture, outdoor furniture, specifically metal outdoor furniture. Lighting is a big one. Rugs is a big one, and furniture is a big one. If you think about our business and you've got -- you take the furniture part of the business includes about 80%. And then you take lighting and rugs, which are the next biggest pieces, those are all being impacted. But you've got to -- by far biggest part of our business has been all impacted in a bigger way. Resourcing things like bedding, pillows, [ throws ], accessories, picture frames, things like that, which are not -- from a percentage point of view, not a very big part of our business, much easier to resource those things, much easier to move picture frames, pillow cases, [ throws ], tabletop, glassware, accessories, things like that much, much more easier. When you talk about ramping furniture factories, lighting factories, rug factories, moving those categories just more complex. And so those have been just slower to scale and transition. And when you think about just the -- being on the manufacturing side or manufacturing partners moving from one country to another, building factories, scaling them. And then all of a sudden, having tariffs change and going, "Oh, God, what do I do now? By doing the right thing, I mean, think about the rug business. And we -- for a while there, I mean, India was a big source of rugs, and you get hit with the 50% tariff and you're sourcing rugs to other countries. There's not that many places that have that kind of capacity to move those businesses. So same thing with lighting. Lighting is very different than any other kind of an item. Again, the more accessories, more seasonal parts of the business, you want to resource Christmas ornaments, things like that, very simple. When you're resourcing the core part of our business, much more complex. Allison Malkin: That concludes our question-and-answer session. I will now turn the call back over to Gary Friedman for closing remarks. Gary Friedman: Thank you. Well, thank you, everyone. We know this is an uncertain time in our business. Hopefully, we've shed some light to give you more certainty and more confidence in our outlook and our strategy. We believe this is the most important period in our history, and we've never been more excited about the outlook and what we believe will be the outcome. So we look forward to talking to you soon. Thank you for all the leadership and partnership from our teams and our partners all around the world. Everybody is working hard to kind of get to the next place. And so thank you. Allison Malkin: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good day, and welcome to the Bitfarms Fiscal 2025 Conference Call. [Operator Instructions] Please note, this call is being recorded. I would like to turn the call over to Jennifer Drew-Bear from Bitfarms Investor Relations. Please go ahead. Jennifer Drew-Bear: Thank you, and welcome to Bitfarms Fiscal Year 2025 Conference Call. With me on the call today are Ben Gagnon, Chief Executive Officer and Director; and Jonathan Mir, Chief Financial Officer. Before we begin, please note this call is being webcast with an accompanying slide presentation. Today's press release and our presentation can be accessed on our website under the Investors section. Turning to Slide 2. I'd like to remind everyone that certain forward-looking statements will be made during the call, and that future results could differ from those implied in this statement. The forward-looking information is based on certain assumptions and is subject to risks and uncertainties. And I invite you to consult Bitfarms 10-K for a complete list. Also, please note that references will be made to certain non-GAAP financial measures, and therefore, may not be comparable to similar measures presented by other companies. We invite listeners to refer to today's press release and our 10-K for definitions of the aforementioned non-GAAP measures and their reconciliations to GAAP measures. Please note that all financial references are denominated in U.S. dollars, unless always noted. And now turning to Slide 3. It is my pleasure to turn over the call to Ben Gagnon, Director and Chief Executive Officer. Ben, the floor is yours. Ben Gagnon: Good morning, everyone, and welcome to our fiscal year 2025 earnings call. In 2025, we made a bold decision to walk away from our legacy business, Bitcoin, and build the infrastructure in North America for what comes next, HPC and AI. It was a year of deliberate and consequential transformation with a clear mandate. Secure North American pipeline, strengthen our balance sheet, accelerate site development, and position ourselves to engage customers from a place of operational momentum at the peak of the energy bottleneck constraining the growth of AI. I can say with confidence and pride that we accomplished exactly what we set out to do. The foundation you see today, the capital structure, the sites, the team, the strategy was engineered through deliberate choices, developed with discipline and built to propel us forward. We made foundational changes to reposition the business and made 100% of our focus on North American HPC infrastructure development. No half measures, no compromises and in time, no Bitcoin. We built a new company. And while we are presenting as Bitfarms today, tomorrow marks our beginning as Keel infrastructure. The name says it all. A Keel is the bottom of structural component of a vessel. It's what keeps it stable and moving forward in the right direction regardless of the condition above the water line. It is structural, it is essential, and it is exactly how we see our role in the HPC and infrastructure landscape. We are not here to compete with hyperscalers or neoclouds. We are here to enable them. Our focus is providing the critical and largely invisible foundation that will allow the world's most advanced AI platform to deploy on time and scale without interruption. We expect to close the re-domiciliation and finalize our rebranding efforts tomorrow, April 1, and we'll begin trading under the ticker KEEL, 2 business days after completion of the transaction on the Nasdaq and the TSX. We are entering this new phase from a position of strength. With over 2 gigawatts in our pipeline, Keel is a regional leader with some of the largest power land portfolios in some of the highest demand markets in North America and with robust financial strength to execute against our plan. Our current liquidity is far in excess of the CapEx budgeted to get us through permitting and ultimately to start signing leases, giving the company significant financial flexibility to execute on our strategy. And our strategy is equally as clear. We are designing all of our site and campus developments as either powered shell or co-location facilities. We believe this is where we can deliver the most value to shareholders and serve our potential customers at the speed and to the specifications they need. We were originally exploring in parallel to co-location the potential benefits of pursuing a small amount of GPU as a service at our Washington site, Moses Lake, where due to the lowest cost power for data centers in the country and a relatively smaller footprint, we believe it could be an avenue to drive additional shareholder value. Since our last quarterly call, we have spoken with an increased volume of potential customers. And it's clear from those conversations, the most accretive business model for the site is one of co-location. This is not specific to Moses Lake and applies to all of our other sites as well, where demand is even higher. So we will focus on what we do best, being an infrastructure developer and owner. This plays directly to our core competencies. We are a team of developers united by disciplined action, building cost-effective institutional-grade infrastructure at the pace our customers require. The same capabilities have built our energy platform, speed to market, capital discipline, operational rigor precisely what HPC and AI deployments demand today. This is just the natural extension of what we do best. So with all the pieces in place and with the overwhelming support of our shareholders who voted over 99% in favor of the HPC and AI pivot, the U.S. redomicile and the rebrand. Starting tomorrow, we are Keel infrastructure. Turning to Slide 4. When we sat on our pivot, we developed a 3-year transformation plan, one that as of today, we are nearly halfway through completing. In 2025, we did the intensive foundational work for our transformation, including the Stronghold acquisition, securing more power in Pennsylvania, rebalancing the portfolio to North America, a $588 million raise fully institutional and oversubscribed, our U.S. GAAP transition, New York headquarters and establishing a new executive team. This work is done. With power and land secured in some of the power markets that matter most, a team of internal experts and strategic partners that have built data centers for the largest companies in the world and a balance sheet engineered to see us through 2026, we are well positioned to continue our site development and deliver against the time lines, our prospective hyperscalers and neocloud customers need. 2026 is all about execution. Effective tomorrow, we will have completed our redomiciliation to the United States and officially rebranded as Keel infrastructure. Two major milestones that position the company for the next phase of growth. With that complete, we expect the next significant milestones to come from executing against our development at Panther Creek, Sharon and Moses Lake, where we are moving full steam ahead and working diligently across three simultaneous and active work streams. One, finalizing permits, which we expect to be done in the coming months. Two, continued work on architecture and engineering in line with ongoing customer conversations and requirements. And of course, three, our go-to-market to secure highly financeable leases with investment-grade tenants. Commercialization is well underway. The upcoming milestones investors can expect are completion of preconstruction activities like permitting, progress in customer engagement and ultimately lease execution, which we are confident we can achieve this year and will be major catalysts. 2026 is also the year where we expect to leave Bitcoin and Bitcoin mining behind. While we were probably one of the first miners to commence wind down of our Bitcoin mining exposure to reinvest that capital into infrastructure for HPC and AI, we will be accelerating those efforts in 2026 as site developments progress. 2027 is all about delivery. This is the year when we anticipate that sites would come online, we'd begin delivering megawatts to customers, HPC and AI revenue really begins and we complete our transition to a premier North American HPC and AI infrastructure company. By the end of 2027, we expect Keel will be a proven infrastructure developer and a regional leader across Pennsylvania, Washington and Quebec, and we will just continue to grow and scale from there in 2028 and beyond to over 2 gigawatts as we execute against our expansion capacity. Turning to Slide 5. In HPC infrastructure, power, location and time lines are everything. We hold something scarce and valuable secured power, land and expansion capacity in Pennsylvania, Washington State and Quebec. Some of the most in-demand markets with some of the biggest barriers to entry. We know it and so do our potential tenants. Our campuses offer solutions to hyperscalers and neocloud's greatest scaling problems, location, proximity and fiber connectivity to major metro areas and data center clusters solving for latency issues and giving our tenants proximity to their own customers and other data centers. Time lines. Our robust secured power for '26, '27 and with expansion capacity in 2028 is highly coveted in an environment where energy capacity is hard to find and multiyear waitlists are the norms. We create value for tenants by enabling them to deploy years earlier by leasing from us rather than to invest in growing organically. An energy-efficient cool climate, the lower the PUE, the more critical megawatts. Panther Creek is a great example of seeing the hyperscaler and neocloud's appetite at play. While there is a lot of interest in the site last year, inbound customer activity surged after we secured zoning in February. This is not a coincidence. It is the proof point and one that we've been making for the last year, but may still be confusing to some investors. So we'd like to be clear that investment-grade tenants value derisk sites where they can move from lease to revenue fast. The more we advance, the better our leverage. The better our leverage, the better the leases, and the more long-term value we create for shareholders. Turning to Slide 6. It is indisputable that power is the binding constraint for AI infrastructure deployment and will remain so for the coming years. Leading investment banks, Goldman Sachs, JPMorgan, Wells Fargo, Guggenheim, Moelis, they've all published extensively on this. And the consensus is clear. New power generation cannot come online fast enough to meet AI demand today, tomorrow or in the next 5 years. This bottleneck is structural, not cyclical. Hyperscalers and neoclouds that used to plan on 12-month horizons are now locking in 24- to 36-month supply chain commitments. Not tied to specific projects, but as platform level agreements and are now actively competing for the power and land to deploy it. While you are probably familiar with this information, here you can see a summary of the five development sites. The power we have secured and in some cases, the incremental power opportunities that make up our 2.2 gigawatt pipeline. Turning to Slide 7. I want to take a moment to put our current valuation context because there is a meaningful disconnect between where we trade today and the value we are positioned to capture as a company. When we analyze our current valuation against our peers, the picture becomes clear, at approximately $1.9 million per available megawatt of secure 2027 capacity, we're trading in the middle of a Bitcoin miner Group, valued at roughly $1.7 million to $2.1 million for 2027 megawatt meaning we are being valued based on having power but not what we are doing with it. For shareholders and bondholders, we see three distinct catalysts, each capable of driving meaningful reratings. The first is obviously lease execution. Across our sector, companies that have signed leases trade at $4 million to $6 million per 27 megawatts, a 2 to 3x premium to where we are today. This is the market's consistent signal driven entirely by lease execution, not facility delivery, not revenue generation, just signed leases. A signed lease secures revenue and financing derisking the developments. The market pays for that with nearly 500 megawatts actively being commercialized today and visibility on permitting across Panther Creek, Sharon and Moses lake, this catalyst is well within reach. The second catalyst and arguably the most powerful for long-term holders is securing our expansion capacity. 2/3 of our 2.2 gigawatt portfolio or approximately 1.5 gigawatts is expansion capacity, which we believe the market is assigning little to no value. While securing these megawatts is a process that will take more time, we believe additional megawatts can be secured in the second half of 2026 requiring very little CapEx while representing significant embedded value as powered land even before a lease is signed or there is a shovel in the ground. The third catalyst is delivering in 2027. Once facilities are derisked through commissioning and begin generating revenue under long-term contracts, the development risk should drop dramatically and the operator valuation numbers become transformational yet again. We are not taking a leap of faith on technology, our ability to see our power or market demand. The tech is here. The power is secured, the sites are advancing, the inbound demand is real, but the market has not yet priced in is the transformation that happens when a developer becomes a counterparty when we move from site advancing to lease executing. This is the main opportunity ahead of us to accelerate permitting, execute leases, secure our expansion capacity and ultimately deliver to our customers. This is how we will create value for our shareholders and bondholders. Turning to Slide 8. Our execution plan is defined by six areas, each supporting our ability to deliver at the pace and scale our future customers require. First, we've secured our deep bench of talent by adding over 60 years of infrastructure and development in over 50 years of data center construction experience combined in just the past few months. People have delivered at scale for the most demanding customers in the world. Jonathan Mir joined as CFO, bringing 25 years of energy infrastructure strategy and project finance expertise. We have also added an SVP of construction and of power, a VP of HPC Operations and Head of permitting to oversee the execution of these critical functions. We've assembled the right team to execute on our vision. Second, we are engaging the right industry leaders as partners, T5, Turner Construction, Corgan, [ WWT ], Vertiv. These firms have built data centers for the world's largest hyperscalers not once but hundreds of times. When customers look at our project partners, which will be available on the new website when it launches tomorrow, they will see that we have also assembled the right partners to ensure better outcomes. Third, we have the capital required to bring our sites to market. As of March 27, 2026, our liquidity stands at $520 million in cash and Bitcoin, which we expect is much more than the CapEx budgeted to get us to a lease at Panther Creek, Sharon and Washington. Jonathan will go into more detail on our capital position and financing strategy shortly, but the headline is simple. We're well funded and can move fast. Fourth, a disciplined Bitcoin exit. It is clear we are no longer a Bitcoin miner. However, with strong, robust liquidity, we can have a disciplined approach to our exit strategy. We will continue to operate up until the time sites need to be prepared for construction maximizing free cash flow before selling the miners. We will also opportunistically sell Bitcoin into strength to capture and reinvest every dollar we can into HPC and AI infrastructure. Fifth, power assets that cannot be replicated. Our megawatts sit in regions with large barriers to entry, Pennsylvania, Washington State and Quebec, all have multiple year waitlists. No one is cutting the line. Our 350 megawatts at Panther Creek, 110 megawatts at Sharon and 18 megawatts in Washington were secured before the AI demand wave made these markets highly coveted. This isn't power others can easily replicate giving us competitive edge with high-quality tenants to understand these markets and are hungry for assets like ours, which leads us to our sixth point. In this market, speed to power is what drives value. For our customers, the opportunity cost of delayed deployment is huge. So the priority is getting capacity online as quickly as possible. Every day of delay is lost revenue. As a result, power availability and certainty of delivery are the primary drivers of lease economics. This dynamic has pushed lease rates higher since our Q3 call, exactly as we said it would. The opportunity in front of Keel infrastructure is real. We now have the assets and the team is ready. I'm so proud of what we built in 2025, and I'm confident in what we'll deliver in 2026 and 2027. With that, I'll turn the call over to Jonathan. Jonathan Mir: Thanks, Ben. Turning to Slide 9. I joined the team 5 months ago. My focus has been on sharpening our approach to capital allocation, strengthening our balance sheet and capital structure and ensuring the financing actions support long-term shareholder value creation. I've had a front row of the depth of talent, the operational discipline and the strategic momentum across Bitfarms. I work closely with our operations and development teams both to understand the current trajectory of our assets and to ensure our capital plans are aligned with the opportunities ahead. What stood out to me is the extraordinary potential we have driven by the quality and potential of our sites, a strong balance sheet, the best liquidity position in the company's history and a broad team that's both deeply engaged and committed to excellence. We're moving quickly and with purpose. I'm pleased to be here with you today and discuss the progress we're making. I'll use this time to walk through our performance for fiscal year 2025 and outline our current capital strategy that we believe supports the accretive growth we're targeting for 2026 and beyond. Turning to Slide 10. Before discussing our financials for the quarter, I want to briefly frame the results are presented this quarter. As of Q3 2025, the Paso Pe facility in Paraguay has been classified as held for sale. As a result, all revenues, operating costs and asset balances associated with Paso Pe are treated as discontinued operations in our fiscal year 2025 financials. So when I refer to continuing operations, I am speaking exclusively about our North American platform, the foundation of our transition into HPC and AI infrastructure. With that, revenue for fiscal year 2025 was $229 million, up 72% year-over-year. Operating loss for fiscal year 2025 was $150 million including noncash depreciation of $98 million and $28 million of impairment charges. This compares to an operating loss of $28 million in 2024, which included $102 million of noncash depreciation and $4 million of impairment charges. Net loss for 2025 was $209 million or a $0.38 loss per basic and diluted share compared to a 2024 net loss of $7 million or $0.02 loss per basic and diluted share. The differences between 2024 and 2025 were driven by a number of factors, including change in fair market value of digital assets, primarily due to the decline of Bitcoin prices and realization of gains on disposal of Bitcoin during the year. Two additional items also impacted year-over-year comparability. First, we saw a loss of $68 million, reflecting changes in our derivative assets and liabilities. Second, 2025 impairment charges were $25 million higher than in 2024. For the year, our adjusted EBITDA was $29 million compared to $31 million in 2024. Turning to Slide 11. 2025 was a deliberate year of balance sheet optimization and improvement, providing the foundation for our next phase of growth. We successfully issued an oversubscribed $588 million convertible offering, significantly expanding our liquidity. And in February, we repaid the Macquarie debt facility eliminating legacy debt, simplifying our capital structure and freeing the company from covenants. Each of these supports the pursuit of our HPC infrastructure strategy. The Macquarie facility had been originally used to accelerate development at Panther Creek, funding critical project activities, including long lead time item procurement and substation work. Retiring the facility was a strategic decision, strengthens the balance sheet and gives us the flexibility to secure a more cost-effective financing at either the parent or project level. Our current cash position of $520 million provides the runway to advance Panther Creek, Sharon and Moses Lake through lease execution without accessing capital markets. Though we may do so if attractive opportunities arise that improve our ability to deliver the best possible long-term risk-adjusted shareholder returns. Macquarie was an excellent partner, and we appreciate their support so early in our pivot to HPC AI infrastructure. Turning to Slide 12. As we pivot to commercialization of our development sites, we have a clear financial strategy based on three principles. Capital allocation, capital formation and capital structure. Taken together, they are designed to deliver the best possible long-term risk-adjusted shareholder returns. First, capital allocation. We deploy capital into projects where the earnings potential exceeds their weighted average cost of capital. We rotate capital from businesses that are noncore or earning less than optimal returns and deploy the capital into higher return investments. Second, capital formation. Our financing strategy is designed to fund our very large growth opportunities while maintaining the liquidity needed for a stable base of operations. We will be opportunistic in our financing execution. We will fund construction of our data center projects using project or parent level bet and project or parent level equity or equity-linked offerings. We're taking a disciplined approach and at this time, are well capitalized to actively commercialize and execute leases across Panther Creek, Sharon and Washington. Third, capital structure. Our capital structure is designed to capture the best possible long-term risk-adjusted shareholder returns while also retaining overall corporate flexibility and support growth. Our objective is to operate with a deliberate liquidity strategy in order to enable clear-headed commercial decisions and capital allocation decisions rather than having liquidity drive time lines. Stepping back, our road map is clear. We are building a regionally focused high-growth HPC AI infrastructure platform, grounded in disciplined capital allocation, a strengthened balance sheet and a development cadence that maximizes returns and minimizes risk. We're funded through the key derisking stages, permitting and leasing across Moses Lake, Sharon and Panther Creek and we're entering 2026 with momentum, optionality and a balance sheet engineered for growth. We have the right people, assets, liquidity and strategy and we're well positioned to capture for our shareholders the long-term value potential we have today. With that, I'd like to return the call to Ben for closing remarks. Ben Gagnon: Thanks, Jonathan. A little over a year ago, as our team began actively integrating AI into both our business and our daily lives, we came to a realization. This isn't just another technology cycle. It's a paradigm shift. More comparable to the industrial revolution than the Internet revolution. The fundamental measure, productivity capacity is no longer calories or joules, but tokens. This became strikingly clear 2 weeks ago at NVIDIA GTC, where I witnessed hundreds of companies applying AI to everything from straightforward tasks by cleaning and image generation to extraordinary complex applications, including protein folding, cystic simulations and even brain surgery. Walking the conference floor, speaking to the attendees, one thing was unmistakable. We've only begun to scratch the surface of AI's potential. Yet even in these early days, AI is already empowering individuals, communities and companies to accomplish exponentially more. We're witnessing Jevons Paradox unfold simultaneously across every industry, thanks to AI, where improved efficiency can paradoxically drive higher, not lower demand. It is literally never cost less to transform an idea into an action, a product, an image, a refined concept, a service or countless other outlets. The possibilities are truly limitless, and while no one can predict exactly how AI will reshape our future, uncertainty remains. It will require enormous amounts of power. Our 2.2 gigawatts of capacity and strategically position land across Pennsylvania, Washington and Quebec sit directly in the path of this transformation, and we intend to capitalize on that opportunity for our shareholders. We look forward to the opportunities ahead. With that, I would like to open the call to Q&A. Operator, please go ahead. Operator: [Operator Instructions] And our first question comes from Mike Grondahl with Northland. Mike Grondahl: First question, Ben, you talked about your decision not to go the GPU rental route at Moses Creek. And just the colocation route, could you talk a little about what a couple of the major drivers were that got you to that decision? Ben Gagnon: Yes, it's a great question, Mike. When we first started talking about in Q3, we were always evaluating this alongside with the colocation. We're trying to maximize the value for shareholders. So we're always going to evaluate multiple different business models at our sites. And because they have the lowest cost energy and all these other benefits, we thought it would make a lot of sense. But as we've continued to have increasing amounts of customer conversations for Washington and other sites. It was just really clear to us that the best opportunity for us is to just remain a pure-play infrastructure developer and owner and let these customers who really want these megawatts lease these megawatts. Mike Grondahl: Got it. Got it. And then maybe secondly, you articulated, I'll say, a philosophy a quarter or 2 ago about waiting and waiting on signing a lease as terms were continuing to improve kind of implying you're going to be really patient and wait on a lease. Could you kind of update how you're thinking about that lease execution strategy and the potential timing around it? Ben Gagnon: Yes. Our strategy on lease execution has been consistent. It remains consistent today. Our view is that the best way to maximize value for shareholders is to get the best terms in a lease because that's going to be what is going to be driving our NOI and our multiple. And so when we're looking to sign 10- to 15-year agreements, it's really important for us to take the -- maybe a little bit more time than investors may want us to in order to get better terms for longer. When it looks at what is really driving the value in these lease economics, one of the biggest elements is risk, and we've spoken to this multiple times over the last couple of months. And the biggest risk for most of the people -- to go out there and have conversations and get a lot of interest. And in some cases, you could even sign a lease prior to getting permits. But all of that risk is going to be priced into the agreement, you're going to be locked into it for 10 to 15 years, and that's going to negatively impact the long-term value that we're creating for shareholders. So our strategy has been incredibly consistent. And the benefit for us is that we are operating in high demand markets with high barrier to entry. So it takes a little bit longer to get permits going in Pennsylvania or in Washington than it does in Texas, which is the easiest market in the United States for that. But we believe that drives a lot of extra value because it's way more scarce, it's way harder to acquire and there's just not as much optionality. Operator: Our next question comes from Brett Knoblauch with Cantor Fitzgerald. Brett Knoblauch: Maybe to start, could you maybe just go into detail on what permits at what sites you guys are waiting to receive? Ben Gagnon: So permits is a complicated process, and we are develop -- we're getting permits across multiple sites in multiple jurisdictions. So they all have different rules, different regulations, different time lines, different reviews, different authorities. So it's far too much detail to get into exactly what permits are remaining on all the different sites. But we are continuing to make good progress and kind of -- we're looking at the visibility over the next couple of months. And with what we've had so far with the community engagement success that we've had so far, we think that in the coming months, sometime around the mid- to late summer time. we should be achieving the full permitted status across at least one, if not all of the sites. Brett Knoblauch: And then maybe just on the leasing environment across the different sites that you guys have. I guess we were under the impression that maybe Sharon would be first to go given it's relatively further along. Is that still how you guys are thinking about it? And then in the presentation when you guys kind of list the power pipeline and road map. How much of that is from generation on site that you guys are looking into? And do you have any update on where you guys are with respect to sourcing that generation? Ben Gagnon: Yes, sure. So the -- to answer the second part of your question first, all the power that we're talking about developing for our HPC and AI data centers right now is grid connected. So the two operating power plants that we have at Scrubgrass and Panther Creek. Currently, that math is not in those charts for the secured capacity or the site development plans. But in Scrubgrass particular, we are working to expand the generation capacity there with natural gas. So we've been working to tap into the Tennessee Natural Gas Pipeline. We're achieving pretty good results there with the engineering firms. There's still probably another month or two to go before we're getting a clear path forward on the engineering plans. But Scrubgrass is our more of our pipeline site. And so those -- that power generation opportunity is more of a 2028 and 2029 time line. Everything else is grid connected, it's secure today or it's currently active. And sorry, Brett, I'm blanking on the first part of your question, would you mind repeating it? Brett Knoblauch: Yes. Just on maybe the cadence of which sites are -- quicker to go? Ben Gagnon: Yes. So really, that's going to be driven by success on permitting time lines in the customers. So all three of the sites, Moses Lake, Sharon and Panther Creek are all actively in our go-to market right now. Every single one of those has customers engaged under NDA, and they have for quite some time. And so we're continuing to push forward on those conversations and those negotiations. Really, I think what investors should think about with regards to permits, permits are more of a closing condition to a lease, right? They're really not a starting condition to a negotiation. So we have these conversations and these negotiations simultaneously while we're working towards permitting. As permitting gets closer and closer, the negotiations will also get closer and closer in tandem and the first site to get leased is likely to be the first site to be permitted. Operator: Our next question comes from Stephen Glagola with KBW. Stephen Glagola: Just on that last point, if you could clarify the sequencing here between like notice to proceed and lease execution. So in other words, like can you pre-sign leases contingent on notice to proceed? Or is like notice to proceed required before any major customer would commit to a lease? Ben Gagnon: For a customer commit to binding in our view, they're going to want NTP, and that's based on the number of conversations that we are continuing to have and there probably are some customers who would be interested to sign prior to NTP, but those aren't the investment-grade counterparties that we're really seeking to engage with. Stephen Glagola: Okay. And then just one more. How are you thinking about like Vera Rubin hardware availability in '26 and like early '27? And to what extent could that variability in supply influence the timing of lease discussions at your sites? Ben Gagnon: Yes. That's a good question, Stephen. We've been talking about Vera Rubin, I think, since Q3 call because all of our sites are basically coming online in 2027. So we're trying to make sure that they are designed for the highest level of equipment that's coming out in '27 and '28, which is the Vera Rubin. In terms of supply, we haven't seen any impact so far. I understand there's always geopolitical uncertainty in the world that may impact those supply chains. But given that energy is such a huge bottleneck, and it's always been a huge bottleneck on the growth. I don't think that there is going to be a geopolitical situation that's going to make the bottleneck change from energy over to GPUs. So we don't have any expectation right now that, that's going to have any impact on leasing or demand for sites because power is still such an extreme bottleneck. It's hard to imagine what's going to overshadow that geopolitically. Operator: Our next question comes from Michael Donovan with Compass Point. Michael Donovan: Congrats on the progress. Can you provide an update on ESA progress, specifically Panther Creek's ISA to ESA conversion? Ben Gagnon: Yes. So that's a great question, Mike. As investors probably know, we have 350 megawatts secured ESA with PPL. But in addition to that, we also have an ISA that enables us to draw down approximately 60 megawatts from the grid, and that's associated with the existing transmission line and substation for the power plant that we currently have operating. In order to get that converted over, it's really more of a regulatory matter. And so it's hard to put an exact time line as to when those stamps are going to be received, but there's no infrastructure that needs to be built. There's no CapEx that needs to be spent. Really, it's just a matter of getting the regulatory approval to convert a nonfirm service into a firm service, and that would enable us to increase our capacity beyond 350 megawatts to what we probably expect is going to be maybe 400 megawatts or possibly slightly more. We expect this is going to happen this year, but it's hard to put an exact time line on it, given it's a regulatory matter. Operator: Our next question comes from Brian Kinstlinger with AGP. Brian Kinstlinger: Last quarter, Ben, you communicated, you expected the GPU as a service and Moses Lake site would be targeted for, I believe, the first quarter for go-live. How are you shifting to co-location change the timing if at all? And my second question is, can you talk about also how the global memory shortage is impacting your site development or changing your near-term needs or planning for lead times? Ben Gagnon: Yes. So two parts to that question. In terms of switching from a GPU as a service to co-location just changing the business model doesn't really impact the development time line. So we don't really see any delay there associated with changing from GPU as a service, just to co-location. Really, it's just a matter of how we want to allocate our capital and how we want to focus the business. When it comes to the memory shortage. As a pure-play infrastructure developer and owner that really is not coming into our calculus very much, mostly that's a customer situation for them to resolve with their own supply chain because we're not the ones investing in the GPUs and the compute and the servers. Operator: Our next question comes from Martin Toner with ATB Cormark Capital Markets. Martin Toner: Good morning. Can you guys elaborate or [indiscernible] can you kind of give us some time line thoughts there? Ben Gagnon: So I'm going to repeat the question because it was a little quiet, just in case nobody else or other people had difficulty hearing. I believe the question was, can you give some time lines as to how we might be able to expand Panther Creek to 500 megawatts and beyond? So in order for us to move beyond the 350-megawatt ESA that we have secured, there's really two sources for expansion. The first is converting over that ISA from non-firm service to firm service that I just spoke to a minute ago. And that's really a regulatory matter that we expect to be resolved sometime this year. It could be tomorrow, it could be a few months from now. And then when it comes to expanding beyond that, what we have to do with that is we have to actually have new power applications. The good thing here is that the utilities are actually looking to invest in new generation in the area. So in this particular instance, and we weren't actually applying for new power. We actually have the utility call us and ask us how much more power we could take on site. Given the bottleneck constraint on power, that was obviously a very welcome call over here at Bitfarms to receive. And it's a pretty unusual one in the industry, but they're looking to scale up generation capacity in the area, specifically to service our site at greater capacity. So this is probably going to be 2 to 3 years time line because there's a lot of process involved with spinning up new generation and building those new transmission lines. But for a lot of our customers, what they really want is the fastest pathway to energization and a clear path to scale over multiple years. And so this really lines up with what the hyperscalers and what the neoclouds are searching for. Martin Toner: That's great. Hopefully, you can hear me better. Can you clarify when you expect to sign your first lease? Ben Gagnon: So I can't get into a specific time line. But in terms of milestones, as I spoke to earlier, it's really about clearing NTP as kind of the last closing condition or last milestone for us to sign a lease. So I think for the investors and the analysts on the call, the important thing to keep track of, especially over the next coming months is the continued progress that we have towards NTP because once NTP is clear, that's basically the last thing standing between us and a signed agreement. Martin Toner: Got it. Great. And last one from me. Can you talk a little bit about why mining exahash in Q4 was at the level that it was at? Ben Gagnon: So we continue to scale back our mining exposure as we continue to focus on our U.S. HPC infrastructure investments. So we haven't made any investments into Bitcoin mining. We're not spending any money on upgrades or new miners, and we're actively working to scale down the fleet and actively working to spin off assets like we have in Paraguay that are not suitable for conversion. So investors should continue to expect our hash rate to continue to trickle down over 2026 as we continue to execute on this transition to HPC and AI. Operator: Our next question comes from Mike Colonnese with H.C. Wainwright & Company. Michael Colonnese: So, Ben, I'm just curious, after securing the remaining permits across the three sites, which sounds like likely to take place in the coming months here, what does the time line look like from a data center construction and delivery standpoint? It sounds like you're pretty optimistic that revenue generation could commence as soon as next year, but any additional color there would be helpful. Ben Gagnon: Yes. I mean, really, this is the year of execution in 2027 is the year of delivery. And so at all three of our projects that we talked about today, Panther Creek, Sharon and Washington, we all expect them to come online and start delivering megawatts and start generating revenue to customers in 2027. We'll continue to provide updates as we go along. And I think once we have cleared NTP and we have signed leases, there's going to be a lot clear visibility that we can provide to investors for each specific project and their specific time lines. Michael Colonnese: Got it. And then back to Bitcoin mining operations, it sounds like you're progressively going to be scaling back hash rate as you bring some of the HPC AI data centers online. I guess what's the best way to think about hash coming offline and kind of flowing through your operating results over the near term here? Ben Gagnon: I'll speak to it at a high level and then maybe I'll pass it off to Jonathan for some further clarity. But right now, the Bitcoin mining remains profitable, but it's not it's not very -- it's marginal. So it's still contributing to the business. But really, it's not the focus of the business. It's not where we're investing our time, it's not where we're investing our efforts. And given that we have been so successful last year in raising capital and strengthening our balance sheet. It's really not super impactful for the developments that we have this year, the operations or the CapEx. So we'll just continue to scale that down, trying to maximize value in the disciplined exit. If it makes more sense to maybe sell some miners a little bit earlier then we might need to in order to begin instruction, we'll evaluate that as we will always do to maximize value for our shareholders. But really, we kind of see this as a pretty minor element of our balance sheet and a minor element of the financial plan for this year. Jonathan, do you want to add anything further? Jonathan Mir: Only that when we think about our liquidity going forward, the strategic objective is to ensure we are well capitalized through the lease process and beyond without the need to raise any new capital in the markets and that takes into account the current state of Bitcoin mining operations. It's not assuming any improvement in the economics there. So our plan is built on conservative assumptions around the status of the Bitcoin market. Operator: Our next question comes from Nick Giles with B. Riley Securities. Nick Giles: Good morning, Keel team. In the interim period where Bitcoin mining operations are wound down, but kind of pre-revenue generation on the HPC side, could the generating assets at Panther Creek and Scrubgrass be utilized in any way such as the PJM capacity auction? Ben Gagnon: So those power plants do actually participate in PJM capacity auctions. We've done that for quite some time. And so we do benefit from the capacity payments that we received there. Nick Giles: Got it. Okay. And any order of magnitude of what those could be kind of in the 2026 planning year? Ben Gagnon: So I mean, really, it's -- we've kind of maxed out on the capacity auction payments. They set a ceiling, and that's where the capacity auction payments closed. Nick Giles: Got it. Understood. Maybe one for Jonathan. You've made some progress on the capital structure, but just was hoping for any additional comments you might have on what you're looking for in an initial debt package, how you're seeing term shift and kind of what tools you have at your disposal during construction and kind of post energization. Jonathan Mir: Good question. Thanks, Nick. So our basic approach is to compare and contrast our financing options down at the asset level and upstairs at the parent level. And certainly, one of the things that we've seen in the market that has caught our attention like everyone else, is the tightening of spreads between folks issuing high-yield debt in the market that would seem like quite attractive levels for strong investment-grade counterparties or credit wraps. And those converging towards the levels seen in bank-originated classic construction of project financing. So we'll be -- each of those has its own advantages in terms of simplicity of managing the actual capital once it's raised versus negative carry costs. And as we get closer to a funding point, we'll make the decision as to what seems best for our shareholders in terms of how we decide to finance. I'm sorry, Nick, I was just going to say that the markets for our space and for infrastructure generally seem calm right now. Operator: Our next question comes from Brian Dobson with Clear Street. Gregory Pendy: It's Greg Pendy in for Brian Dobson. Just I guess one final one. Just I guess, one final one. Just on the redomiciling to the U.S., are there any implications to costs or structural implications in terms of ownership that we should be aware of as you enter this over the next couple of days? Ben Gagnon: One of the benefits and reasons for the redom is that we will now be eligible for inclusion in indices that require -- want to be a U.S. domiciled company. So for example, we'll be eligible for inclusion in the Russell 1000 and the Russell 3000 as well as for ownership in any other fund who was otherwise limited to the purchase of U.S. securities. We view that as being quite helpful in terms of moving our shareholder base to one that is institutional and long term. There are no other -- there are no cost or flexibility implications in our end. We simply see this as a nice path forward with a lot of benefits for our shareholders. Operator: Our next question comes from Bill Papanastasiou with Chardan Capital Markets. Bill Papanastasiou: Just wanted to touch on the Washington side and decision to shift towards colo. Can you confirm that this won't have any material impact on the purchase commitment that was entered into November? Or is the team considering the shift in development allocation to other sites? Ben Gagnon: Thanks, Bill. No impact on the capital commitments and the equipment we've already purchased for the Washington site by changing business models. In fact, actually, it just helps to reduce the CapEx because we're no longer paying for the compute. Bill Papanastasiou: Understood. And then how should we generally be thinking about maintenance CapEx on existing Bitcoin mining sites as you gradually shift over to AI HPC here? Ben Gagnon: We're not making any investments into the Bitcoin mining sites. Basically, we're just continuing to keep them up and running. And so no further investments are being made in the sites into new sites or into new miners. Operator: Thank you. This concludes the question-and-answer session. I'd like to turn the call back over to Ben Gagnon for closing remarks. Ben Gagnon: Thank you very much, everyone, for joining our call today and really look forward to speaking to you next time as Keel Infrastructure. Have a great day. Operator: Thank you for your participation. This does conclude the program. You may now disconnect.
Operator: Good day, and welcome to the Bitfarms Fiscal 2025 Conference Call. [Operator Instructions] Please note, this call is being recorded. I would like to turn the call over to Jennifer Drew-Bear from Bitfarms Investor Relations. Please go ahead. Jennifer Drew-Bear: Thank you, and welcome to Bitfarms Fiscal Year 2025 Conference Call. With me on the call today are Ben Gagnon, Chief Executive Officer and Director; and Jonathan Mir, Chief Financial Officer. Before we begin, please note this call is being webcast with an accompanying slide presentation. Today's press release and our presentation can be accessed on our website under the Investors section. Turning to Slide 2. I'd like to remind everyone that certain forward-looking statements will be made during the call, and that future results could differ from those implied in this statement. The forward-looking information is based on certain assumptions and is subject to risks and uncertainties. And I invite you to consult Bitfarms 10-K for a complete list. Also, please note that references will be made to certain non-GAAP financial measures, and therefore, may not be comparable to similar measures presented by other companies. We invite listeners to refer to today's press release and our 10-K for definitions of the aforementioned non-GAAP measures and their reconciliations to GAAP measures. Please note that all financial references are denominated in U.S. dollars, unless always noted. And now turning to Slide 3. It is my pleasure to turn over the call to Ben Gagnon, Director and Chief Executive Officer. Ben, the floor is yours. Ben Gagnon: Good morning, everyone, and welcome to our fiscal year 2025 earnings call. In 2025, we made a bold decision to walk away from our legacy business, Bitcoin, and build the infrastructure in North America for what comes next, HPC and AI. It was a year of deliberate and consequential transformation with a clear mandate. Secure North American pipeline, strengthen our balance sheet, accelerate site development, and position ourselves to engage customers from a place of operational momentum at the peak of the energy bottleneck constraining the growth of AI. I can say with confidence and pride that we accomplished exactly what we set out to do. The foundation you see today, the capital structure, the sites, the team, the strategy was engineered through deliberate choices, developed with discipline and built to propel us forward. We made foundational changes to reposition the business and made 100% of our focus on North American HPC infrastructure development. No half measures, no compromises and in time, no Bitcoin. We built a new company. And while we are presenting as Bitfarms today, tomorrow marks our beginning as Keel infrastructure. The name says it all. A Keel is the bottom of structural component of a vessel. It's what keeps it stable and moving forward in the right direction regardless of the condition above the water line. It is structural, it is essential, and it is exactly how we see our role in the HPC and infrastructure landscape. We are not here to compete with hyperscalers or neoclouds. We are here to enable them. Our focus is providing the critical and largely invisible foundation that will allow the world's most advanced AI platform to deploy on time and scale without interruption. We expect to close the re-domiciliation and finalize our rebranding efforts tomorrow, April 1, and we'll begin trading under the ticker KEEL, 2 business days after completion of the transaction on the Nasdaq and the TSX. We are entering this new phase from a position of strength. With over 2 gigawatts in our pipeline, Keel is a regional leader with some of the largest power land portfolios in some of the highest demand markets in North America and with robust financial strength to execute against our plan. Our current liquidity is far in excess of the CapEx budgeted to get us through permitting and ultimately to start signing leases, giving the company significant financial flexibility to execute on our strategy. And our strategy is equally as clear. We are designing all of our site and campus developments as either powered shell or co-location facilities. We believe this is where we can deliver the most value to shareholders and serve our potential customers at the speed and to the specifications they need. We were originally exploring in parallel to co-location the potential benefits of pursuing a small amount of GPU as a service at our Washington site, Moses Lake, where due to the lowest cost power for data centers in the country and a relatively smaller footprint, we believe it could be an avenue to drive additional shareholder value. Since our last quarterly call, we have spoken with an increased volume of potential customers. And it's clear from those conversations, the most accretive business model for the site is one of co-location. This is not specific to Moses Lake and applies to all of our other sites as well, where demand is even higher. So we will focus on what we do best, being an infrastructure developer and owner. This plays directly to our core competencies. We are a team of developers united by disciplined action, building cost-effective institutional-grade infrastructure at the pace our customers require. The same capabilities have built our energy platform, speed to market, capital discipline, operational rigor precisely what HPC and AI deployments demand today. This is just the natural extension of what we do best. So with all the pieces in place and with the overwhelming support of our shareholders who voted over 99% in favor of the HPC and AI pivot, the U.S. redomicile and the rebrand. Starting tomorrow, we are Keel infrastructure. Turning to Slide 4. When we sat on our pivot, we developed a 3-year transformation plan, one that as of today, we are nearly halfway through completing. In 2025, we did the intensive foundational work for our transformation, including the Stronghold acquisition, securing more power in Pennsylvania, rebalancing the portfolio to North America, a $588 million raise fully institutional and oversubscribed, our U.S. GAAP transition, New York headquarters and establishing a new executive team. This work is done. With power and land secured in some of the power markets that matter most, a team of internal experts and strategic partners that have built data centers for the largest companies in the world and a balance sheet engineered to see us through 2026, we are well positioned to continue our site development and deliver against the time lines, our prospective hyperscalers and neocloud customers need. 2026 is all about execution. Effective tomorrow, we will have completed our redomiciliation to the United States and officially rebranded as Keel infrastructure. Two major milestones that position the company for the next phase of growth. With that complete, we expect the next significant milestones to come from executing against our development at Panther Creek, Sharon and Moses Lake, where we are moving full steam ahead and working diligently across three simultaneous and active work streams. One, finalizing permits, which we expect to be done in the coming months. Two, continued work on architecture and engineering in line with ongoing customer conversations and requirements. And of course, three, our go-to-market to secure highly financeable leases with investment-grade tenants. Commercialization is well underway. The upcoming milestones investors can expect are completion of preconstruction activities like permitting, progress in customer engagement and ultimately lease execution, which we are confident we can achieve this year and will be major catalysts. 2026 is also the year where we expect to leave Bitcoin and Bitcoin mining behind. While we were probably one of the first miners to commence wind down of our Bitcoin mining exposure to reinvest that capital into infrastructure for HPC and AI, we will be accelerating those efforts in 2026 as site developments progress. 2027 is all about delivery. This is the year when we anticipate that sites would come online, we'd begin delivering megawatts to customers, HPC and AI revenue really begins and we complete our transition to a premier North American HPC and AI infrastructure company. By the end of 2027, we expect Keel will be a proven infrastructure developer and a regional leader across Pennsylvania, Washington and Quebec, and we will just continue to grow and scale from there in 2028 and beyond to over 2 gigawatts as we execute against our expansion capacity. Turning to Slide 5. In HPC infrastructure, power, location and time lines are everything. We hold something scarce and valuable secured power, land and expansion capacity in Pennsylvania, Washington State and Quebec. Some of the most in-demand markets with some of the biggest barriers to entry. We know it and so do our potential tenants. Our campuses offer solutions to hyperscalers and neocloud's greatest scaling problems, location, proximity and fiber connectivity to major metro areas and data center clusters solving for latency issues and giving our tenants proximity to their own customers and other data centers. Time lines. Our robust secured power for '26, '27 and with expansion capacity in 2028 is highly coveted in an environment where energy capacity is hard to find and multiyear waitlists are the norms. We create value for tenants by enabling them to deploy years earlier by leasing from us rather than to invest in growing organically. An energy-efficient cool climate, the lower the PUE, the more critical megawatts. Panther Creek is a great example of seeing the hyperscaler and neocloud's appetite at play. While there is a lot of interest in the site last year, inbound customer activity surged after we secured zoning in February. This is not a coincidence. It is the proof point and one that we've been making for the last year, but may still be confusing to some investors. So we'd like to be clear that investment-grade tenants value derisk sites where they can move from lease to revenue fast. The more we advance, the better our leverage. The better our leverage, the better the leases, and the more long-term value we create for shareholders. Turning to Slide 6. It is indisputable that power is the binding constraint for AI infrastructure deployment and will remain so for the coming years. Leading investment banks, Goldman Sachs, JPMorgan, Wells Fargo, Guggenheim, Moelis, they've all published extensively on this. And the consensus is clear. New power generation cannot come online fast enough to meet AI demand today, tomorrow or in the next 5 years. This bottleneck is structural, not cyclical. Hyperscalers and neoclouds that used to plan on 12-month horizons are now locking in 24- to 36-month supply chain commitments. Not tied to specific projects, but as platform level agreements and are now actively competing for the power and land to deploy it. While you are probably familiar with this information, here you can see a summary of the five development sites. The power we have secured and in some cases, the incremental power opportunities that make up our 2.2 gigawatt pipeline. Turning to Slide 7. I want to take a moment to put our current valuation context because there is a meaningful disconnect between where we trade today and the value we are positioned to capture as a company. When we analyze our current valuation against our peers, the picture becomes clear, at approximately $1.9 million per available megawatt of secure 2027 capacity, we're trading in the middle of a Bitcoin miner Group, valued at roughly $1.7 million to $2.1 million for 2027 megawatt meaning we are being valued based on having power but not what we are doing with it. For shareholders and bondholders, we see three distinct catalysts, each capable of driving meaningful reratings. The first is obviously lease execution. Across our sector, companies that have signed leases trade at $4 million to $6 million per 27 megawatts, a 2 to 3x premium to where we are today. This is the market's consistent signal driven entirely by lease execution, not facility delivery, not revenue generation, just signed leases. A signed lease secures revenue and financing derisking the developments. The market pays for that with nearly 500 megawatts actively being commercialized today and visibility on permitting across Panther Creek, Sharon and Moses lake, this catalyst is well within reach. The second catalyst and arguably the most powerful for long-term holders is securing our expansion capacity. 2/3 of our 2.2 gigawatt portfolio or approximately 1.5 gigawatts is expansion capacity, which we believe the market is assigning little to no value. While securing these megawatts is a process that will take more time, we believe additional megawatts can be secured in the second half of 2026 requiring very little CapEx while representing significant embedded value as powered land even before a lease is signed or there is a shovel in the ground. The third catalyst is delivering in 2027. Once facilities are derisked through commissioning and begin generating revenue under long-term contracts, the development risk should drop dramatically and the operator valuation numbers become transformational yet again. We are not taking a leap of faith on technology, our ability to see our power or market demand. The tech is here. The power is secured, the sites are advancing, the inbound demand is real, but the market has not yet priced in is the transformation that happens when a developer becomes a counterparty when we move from site advancing to lease executing. This is the main opportunity ahead of us to accelerate permitting, execute leases, secure our expansion capacity and ultimately deliver to our customers. This is how we will create value for our shareholders and bondholders. Turning to Slide 8. Our execution plan is defined by six areas, each supporting our ability to deliver at the pace and scale our future customers require. First, we've secured our deep bench of talent by adding over 60 years of infrastructure and development in over 50 years of data center construction experience combined in just the past few months. People have delivered at scale for the most demanding customers in the world. Jonathan Mir joined as CFO, bringing 25 years of energy infrastructure strategy and project finance expertise. We have also added an SVP of construction and of power, a VP of HPC Operations and Head of permitting to oversee the execution of these critical functions. We've assembled the right team to execute on our vision. Second, we are engaging the right industry leaders as partners, T5, Turner Construction, Corgan, [ WWT ], Vertiv. These firms have built data centers for the world's largest hyperscalers not once but hundreds of times. When customers look at our project partners, which will be available on the new website when it launches tomorrow, they will see that we have also assembled the right partners to ensure better outcomes. Third, we have the capital required to bring our sites to market. As of March 27, 2026, our liquidity stands at $520 million in cash and Bitcoin, which we expect is much more than the CapEx budgeted to get us to a lease at Panther Creek, Sharon and Washington. Jonathan will go into more detail on our capital position and financing strategy shortly, but the headline is simple. We're well funded and can move fast. Fourth, a disciplined Bitcoin exit. It is clear we are no longer a Bitcoin miner. However, with strong, robust liquidity, we can have a disciplined approach to our exit strategy. We will continue to operate up until the time sites need to be prepared for construction maximizing free cash flow before selling the miners. We will also opportunistically sell Bitcoin into strength to capture and reinvest every dollar we can into HPC and AI infrastructure. Fifth, power assets that cannot be replicated. Our megawatts sit in regions with large barriers to entry, Pennsylvania, Washington State and Quebec, all have multiple year waitlists. No one is cutting the line. Our 350 megawatts at Panther Creek, 110 megawatts at Sharon and 18 megawatts in Washington were secured before the AI demand wave made these markets highly coveted. This isn't power others can easily replicate giving us competitive edge with high-quality tenants to understand these markets and are hungry for assets like ours, which leads us to our sixth point. In this market, speed to power is what drives value. For our customers, the opportunity cost of delayed deployment is huge. So the priority is getting capacity online as quickly as possible. Every day of delay is lost revenue. As a result, power availability and certainty of delivery are the primary drivers of lease economics. This dynamic has pushed lease rates higher since our Q3 call, exactly as we said it would. The opportunity in front of Keel infrastructure is real. We now have the assets and the team is ready. I'm so proud of what we built in 2025, and I'm confident in what we'll deliver in 2026 and 2027. With that, I'll turn the call over to Jonathan. Jonathan Mir: Thanks, Ben. Turning to Slide 9. I joined the team 5 months ago. My focus has been on sharpening our approach to capital allocation, strengthening our balance sheet and capital structure and ensuring the financing actions support long-term shareholder value creation. I've had a front row of the depth of talent, the operational discipline and the strategic momentum across Bitfarms. I work closely with our operations and development teams both to understand the current trajectory of our assets and to ensure our capital plans are aligned with the opportunities ahead. What stood out to me is the extraordinary potential we have driven by the quality and potential of our sites, a strong balance sheet, the best liquidity position in the company's history and a broad team that's both deeply engaged and committed to excellence. We're moving quickly and with purpose. I'm pleased to be here with you today and discuss the progress we're making. I'll use this time to walk through our performance for fiscal year 2025 and outline our current capital strategy that we believe supports the accretive growth we're targeting for 2026 and beyond. Turning to Slide 10. Before discussing our financials for the quarter, I want to briefly frame the results are presented this quarter. As of Q3 2025, the Paso Pe facility in Paraguay has been classified as held for sale. As a result, all revenues, operating costs and asset balances associated with Paso Pe are treated as discontinued operations in our fiscal year 2025 financials. So when I refer to continuing operations, I am speaking exclusively about our North American platform, the foundation of our transition into HPC and AI infrastructure. With that, revenue for fiscal year 2025 was $229 million, up 72% year-over-year. Operating loss for fiscal year 2025 was $150 million including noncash depreciation of $98 million and $28 million of impairment charges. This compares to an operating loss of $28 million in 2024, which included $102 million of noncash depreciation and $4 million of impairment charges. Net loss for 2025 was $209 million or a $0.38 loss per basic and diluted share compared to a 2024 net loss of $7 million or $0.02 loss per basic and diluted share. The differences between 2024 and 2025 were driven by a number of factors, including change in fair market value of digital assets, primarily due to the decline of Bitcoin prices and realization of gains on disposal of Bitcoin during the year. Two additional items also impacted year-over-year comparability. First, we saw a loss of $68 million, reflecting changes in our derivative assets and liabilities. Second, 2025 impairment charges were $25 million higher than in 2024. For the year, our adjusted EBITDA was $29 million compared to $31 million in 2024. Turning to Slide 11. 2025 was a deliberate year of balance sheet optimization and improvement, providing the foundation for our next phase of growth. We successfully issued an oversubscribed $588 million convertible offering, significantly expanding our liquidity. And in February, we repaid the Macquarie debt facility eliminating legacy debt, simplifying our capital structure and freeing the company from covenants. Each of these supports the pursuit of our HPC infrastructure strategy. The Macquarie facility had been originally used to accelerate development at Panther Creek, funding critical project activities, including long lead time item procurement and substation work. Retiring the facility was a strategic decision, strengthens the balance sheet and gives us the flexibility to secure a more cost-effective financing at either the parent or project level. Our current cash position of $520 million provides the runway to advance Panther Creek, Sharon and Moses Lake through lease execution without accessing capital markets. Though we may do so if attractive opportunities arise that improve our ability to deliver the best possible long-term risk-adjusted shareholder returns. Macquarie was an excellent partner, and we appreciate their support so early in our pivot to HPC AI infrastructure. Turning to Slide 12. As we pivot to commercialization of our development sites, we have a clear financial strategy based on three principles. Capital allocation, capital formation and capital structure. Taken together, they are designed to deliver the best possible long-term risk-adjusted shareholder returns. First, capital allocation. We deploy capital into projects where the earnings potential exceeds their weighted average cost of capital. We rotate capital from businesses that are noncore or earning less than optimal returns and deploy the capital into higher return investments. Second, capital formation. Our financing strategy is designed to fund our very large growth opportunities while maintaining the liquidity needed for a stable base of operations. We will be opportunistic in our financing execution. We will fund construction of our data center projects using project or parent level bet and project or parent level equity or equity-linked offerings. We're taking a disciplined approach and at this time, are well capitalized to actively commercialize and execute leases across Panther Creek, Sharon and Washington. Third, capital structure. Our capital structure is designed to capture the best possible long-term risk-adjusted shareholder returns while also retaining overall corporate flexibility and support growth. Our objective is to operate with a deliberate liquidity strategy in order to enable clear-headed commercial decisions and capital allocation decisions rather than having liquidity drive time lines. Stepping back, our road map is clear. We are building a regionally focused high-growth HPC AI infrastructure platform, grounded in disciplined capital allocation, a strengthened balance sheet and a development cadence that maximizes returns and minimizes risk. We're funded through the key derisking stages, permitting and leasing across Moses Lake, Sharon and Panther Creek and we're entering 2026 with momentum, optionality and a balance sheet engineered for growth. We have the right people, assets, liquidity and strategy and we're well positioned to capture for our shareholders the long-term value potential we have today. With that, I'd like to return the call to Ben for closing remarks. Ben Gagnon: Thanks, Jonathan. A little over a year ago, as our team began actively integrating AI into both our business and our daily lives, we came to a realization. This isn't just another technology cycle. It's a paradigm shift. More comparable to the industrial revolution than the Internet revolution. The fundamental measure, productivity capacity is no longer calories or joules, but tokens. This became strikingly clear 2 weeks ago at NVIDIA GTC, where I witnessed hundreds of companies applying AI to everything from straightforward tasks by cleaning and image generation to extraordinary complex applications, including protein folding, cystic simulations and even brain surgery. Walking the conference floor, speaking to the attendees, one thing was unmistakable. We've only begun to scratch the surface of AI's potential. Yet even in these early days, AI is already empowering individuals, communities and companies to accomplish exponentially more. We're witnessing Jevons Paradox unfold simultaneously across every industry, thanks to AI, where improved efficiency can paradoxically drive higher, not lower demand. It is literally never cost less to transform an idea into an action, a product, an image, a refined concept, a service or countless other outlets. The possibilities are truly limitless, and while no one can predict exactly how AI will reshape our future, uncertainty remains. It will require enormous amounts of power. Our 2.2 gigawatts of capacity and strategically position land across Pennsylvania, Washington and Quebec sit directly in the path of this transformation, and we intend to capitalize on that opportunity for our shareholders. We look forward to the opportunities ahead. With that, I would like to open the call to Q&A. Operator, please go ahead. Operator: [Operator Instructions] And our first question comes from Mike Grondahl with Northland. Mike Grondahl: First question, Ben, you talked about your decision not to go the GPU rental route at Moses Creek. And just the colocation route, could you talk a little about what a couple of the major drivers were that got you to that decision? Ben Gagnon: Yes, it's a great question, Mike. When we first started talking about in Q3, we were always evaluating this alongside with the colocation. We're trying to maximize the value for shareholders. So we're always going to evaluate multiple different business models at our sites. And because they have the lowest cost energy and all these other benefits, we thought it would make a lot of sense. But as we've continued to have increasing amounts of customer conversations for Washington and other sites. It was just really clear to us that the best opportunity for us is to just remain a pure-play infrastructure developer and owner and let these customers who really want these megawatts lease these megawatts. Mike Grondahl: Got it. Got it. And then maybe secondly, you articulated, I'll say, a philosophy a quarter or 2 ago about waiting and waiting on signing a lease as terms were continuing to improve kind of implying you're going to be really patient and wait on a lease. Could you kind of update how you're thinking about that lease execution strategy and the potential timing around it? Ben Gagnon: Yes. Our strategy on lease execution has been consistent. It remains consistent today. Our view is that the best way to maximize value for shareholders is to get the best terms in a lease because that's going to be what is going to be driving our NOI and our multiple. And so when we're looking to sign 10- to 15-year agreements, it's really important for us to take the -- maybe a little bit more time than investors may want us to in order to get better terms for longer. When it looks at what is really driving the value in these lease economics, one of the biggest elements is risk, and we've spoken to this multiple times over the last couple of months. And the biggest risk for most of the people -- to go out there and have conversations and get a lot of interest. And in some cases, you could even sign a lease prior to getting permits. But all of that risk is going to be priced into the agreement, you're going to be locked into it for 10 to 15 years, and that's going to negatively impact the long-term value that we're creating for shareholders. So our strategy has been incredibly consistent. And the benefit for us is that we are operating in high demand markets with high barrier to entry. So it takes a little bit longer to get permits going in Pennsylvania or in Washington than it does in Texas, which is the easiest market in the United States for that. But we believe that drives a lot of extra value because it's way more scarce, it's way harder to acquire and there's just not as much optionality. Operator: Our next question comes from Brett Knoblauch with Cantor Fitzgerald. Brett Knoblauch: Maybe to start, could you maybe just go into detail on what permits at what sites you guys are waiting to receive? Ben Gagnon: So permits is a complicated process, and we are develop -- we're getting permits across multiple sites in multiple jurisdictions. So they all have different rules, different regulations, different time lines, different reviews, different authorities. So it's far too much detail to get into exactly what permits are remaining on all the different sites. But we are continuing to make good progress and kind of -- we're looking at the visibility over the next couple of months. And with what we've had so far with the community engagement success that we've had so far, we think that in the coming months, sometime around the mid- to late summer time. we should be achieving the full permitted status across at least one, if not all of the sites. Brett Knoblauch: And then maybe just on the leasing environment across the different sites that you guys have. I guess we were under the impression that maybe Sharon would be first to go given it's relatively further along. Is that still how you guys are thinking about it? And then in the presentation when you guys kind of list the power pipeline and road map. How much of that is from generation on site that you guys are looking into? And do you have any update on where you guys are with respect to sourcing that generation? Ben Gagnon: Yes, sure. So the -- to answer the second part of your question first, all the power that we're talking about developing for our HPC and AI data centers right now is grid connected. So the two operating power plants that we have at Scrubgrass and Panther Creek. Currently, that math is not in those charts for the secured capacity or the site development plans. But in Scrubgrass particular, we are working to expand the generation capacity there with natural gas. So we've been working to tap into the Tennessee Natural Gas Pipeline. We're achieving pretty good results there with the engineering firms. There's still probably another month or two to go before we're getting a clear path forward on the engineering plans. But Scrubgrass is our more of our pipeline site. And so those -- that power generation opportunity is more of a 2028 and 2029 time line. Everything else is grid connected, it's secure today or it's currently active. And sorry, Brett, I'm blanking on the first part of your question, would you mind repeating it? Brett Knoblauch: Yes. Just on maybe the cadence of which sites are -- quicker to go? Ben Gagnon: Yes. So really, that's going to be driven by success on permitting time lines in the customers. So all three of the sites, Moses Lake, Sharon and Panther Creek are all actively in our go-to market right now. Every single one of those has customers engaged under NDA, and they have for quite some time. And so we're continuing to push forward on those conversations and those negotiations. Really, I think what investors should think about with regards to permits, permits are more of a closing condition to a lease, right? They're really not a starting condition to a negotiation. So we have these conversations and these negotiations simultaneously while we're working towards permitting. As permitting gets closer and closer, the negotiations will also get closer and closer in tandem and the first site to get leased is likely to be the first site to be permitted. Operator: Our next question comes from Stephen Glagola with KBW. Stephen Glagola: Just on that last point, if you could clarify the sequencing here between like notice to proceed and lease execution. So in other words, like can you pre-sign leases contingent on notice to proceed? Or is like notice to proceed required before any major customer would commit to a lease? Ben Gagnon: For a customer commit to binding in our view, they're going to want NTP, and that's based on the number of conversations that we are continuing to have and there probably are some customers who would be interested to sign prior to NTP, but those aren't the investment-grade counterparties that we're really seeking to engage with. Stephen Glagola: Okay. And then just one more. How are you thinking about like Vera Rubin hardware availability in '26 and like early '27? And to what extent could that variability in supply influence the timing of lease discussions at your sites? Ben Gagnon: Yes. That's a good question, Stephen. We've been talking about Vera Rubin, I think, since Q3 call because all of our sites are basically coming online in 2027. So we're trying to make sure that they are designed for the highest level of equipment that's coming out in '27 and '28, which is the Vera Rubin. In terms of supply, we haven't seen any impact so far. I understand there's always geopolitical uncertainty in the world that may impact those supply chains. But given that energy is such a huge bottleneck, and it's always been a huge bottleneck on the growth. I don't think that there is going to be a geopolitical situation that's going to make the bottleneck change from energy over to GPUs. So we don't have any expectation right now that, that's going to have any impact on leasing or demand for sites because power is still such an extreme bottleneck. It's hard to imagine what's going to overshadow that geopolitically. Operator: Our next question comes from Michael Donovan with Compass Point. Michael Donovan: Congrats on the progress. Can you provide an update on ESA progress, specifically Panther Creek's ISA to ESA conversion? Ben Gagnon: Yes. So that's a great question, Mike. As investors probably know, we have 350 megawatts secured ESA with PPL. But in addition to that, we also have an ISA that enables us to draw down approximately 60 megawatts from the grid, and that's associated with the existing transmission line and substation for the power plant that we currently have operating. In order to get that converted over, it's really more of a regulatory matter. And so it's hard to put an exact time line as to when those stamps are going to be received, but there's no infrastructure that needs to be built. There's no CapEx that needs to be spent. Really, it's just a matter of getting the regulatory approval to convert a nonfirm service into a firm service, and that would enable us to increase our capacity beyond 350 megawatts to what we probably expect is going to be maybe 400 megawatts or possibly slightly more. We expect this is going to happen this year, but it's hard to put an exact time line on it, given it's a regulatory matter. Operator: Our next question comes from Brian Kinstlinger with AGP. Brian Kinstlinger: Last quarter, Ben, you communicated, you expected the GPU as a service and Moses Lake site would be targeted for, I believe, the first quarter for go-live. How are you shifting to co-location change the timing if at all? And my second question is, can you talk about also how the global memory shortage is impacting your site development or changing your near-term needs or planning for lead times? Ben Gagnon: Yes. So two parts to that question. In terms of switching from a GPU as a service to co-location just changing the business model doesn't really impact the development time line. So we don't really see any delay there associated with changing from GPU as a service, just to co-location. Really, it's just a matter of how we want to allocate our capital and how we want to focus the business. When it comes to the memory shortage. As a pure-play infrastructure developer and owner that really is not coming into our calculus very much, mostly that's a customer situation for them to resolve with their own supply chain because we're not the ones investing in the GPUs and the compute and the servers. Operator: Our next question comes from Martin Toner with ATB Cormark Capital Markets. Martin Toner: Good morning. Can you guys elaborate or [indiscernible] can you kind of give us some time line thoughts there? Ben Gagnon: So I'm going to repeat the question because it was a little quiet, just in case nobody else or other people had difficulty hearing. I believe the question was, can you give some time lines as to how we might be able to expand Panther Creek to 500 megawatts and beyond? So in order for us to move beyond the 350-megawatt ESA that we have secured, there's really two sources for expansion. The first is converting over that ISA from non-firm service to firm service that I just spoke to a minute ago. And that's really a regulatory matter that we expect to be resolved sometime this year. It could be tomorrow, it could be a few months from now. And then when it comes to expanding beyond that, what we have to do with that is we have to actually have new power applications. The good thing here is that the utilities are actually looking to invest in new generation in the area. So in this particular instance, and we weren't actually applying for new power. We actually have the utility call us and ask us how much more power we could take on site. Given the bottleneck constraint on power, that was obviously a very welcome call over here at Bitfarms to receive. And it's a pretty unusual one in the industry, but they're looking to scale up generation capacity in the area, specifically to service our site at greater capacity. So this is probably going to be 2 to 3 years time line because there's a lot of process involved with spinning up new generation and building those new transmission lines. But for a lot of our customers, what they really want is the fastest pathway to energization and a clear path to scale over multiple years. And so this really lines up with what the hyperscalers and what the neoclouds are searching for. Martin Toner: That's great. Hopefully, you can hear me better. Can you clarify when you expect to sign your first lease? Ben Gagnon: So I can't get into a specific time line. But in terms of milestones, as I spoke to earlier, it's really about clearing NTP as kind of the last closing condition or last milestone for us to sign a lease. So I think for the investors and the analysts on the call, the important thing to keep track of, especially over the next coming months is the continued progress that we have towards NTP because once NTP is clear, that's basically the last thing standing between us and a signed agreement. Martin Toner: Got it. Great. And last one from me. Can you talk a little bit about why mining exahash in Q4 was at the level that it was at? Ben Gagnon: So we continue to scale back our mining exposure as we continue to focus on our U.S. HPC infrastructure investments. So we haven't made any investments into Bitcoin mining. We're not spending any money on upgrades or new miners, and we're actively working to scale down the fleet and actively working to spin off assets like we have in Paraguay that are not suitable for conversion. So investors should continue to expect our hash rate to continue to trickle down over 2026 as we continue to execute on this transition to HPC and AI. Operator: Our next question comes from Mike Colonnese with H.C. Wainwright & Company. Michael Colonnese: So, Ben, I'm just curious, after securing the remaining permits across the three sites, which sounds like likely to take place in the coming months here, what does the time line look like from a data center construction and delivery standpoint? It sounds like you're pretty optimistic that revenue generation could commence as soon as next year, but any additional color there would be helpful. Ben Gagnon: Yes. I mean, really, this is the year of execution in 2027 is the year of delivery. And so at all three of our projects that we talked about today, Panther Creek, Sharon and Washington, we all expect them to come online and start delivering megawatts and start generating revenue to customers in 2027. We'll continue to provide updates as we go along. And I think once we have cleared NTP and we have signed leases, there's going to be a lot clear visibility that we can provide to investors for each specific project and their specific time lines. Michael Colonnese: Got it. And then back to Bitcoin mining operations, it sounds like you're progressively going to be scaling back hash rate as you bring some of the HPC AI data centers online. I guess what's the best way to think about hash coming offline and kind of flowing through your operating results over the near term here? Ben Gagnon: I'll speak to it at a high level and then maybe I'll pass it off to Jonathan for some further clarity. But right now, the Bitcoin mining remains profitable, but it's not it's not very -- it's marginal. So it's still contributing to the business. But really, it's not the focus of the business. It's not where we're investing our time, it's not where we're investing our efforts. And given that we have been so successful last year in raising capital and strengthening our balance sheet. It's really not super impactful for the developments that we have this year, the operations or the CapEx. So we'll just continue to scale that down, trying to maximize value in the disciplined exit. If it makes more sense to maybe sell some miners a little bit earlier then we might need to in order to begin instruction, we'll evaluate that as we will always do to maximize value for our shareholders. But really, we kind of see this as a pretty minor element of our balance sheet and a minor element of the financial plan for this year. Jonathan, do you want to add anything further? Jonathan Mir: Only that when we think about our liquidity going forward, the strategic objective is to ensure we are well capitalized through the lease process and beyond without the need to raise any new capital in the markets and that takes into account the current state of Bitcoin mining operations. It's not assuming any improvement in the economics there. So our plan is built on conservative assumptions around the status of the Bitcoin market. Operator: Our next question comes from Nick Giles with B. Riley Securities. Nick Giles: Good morning, Keel team. In the interim period where Bitcoin mining operations are wound down, but kind of pre-revenue generation on the HPC side, could the generating assets at Panther Creek and Scrubgrass be utilized in any way such as the PJM capacity auction? Ben Gagnon: So those power plants do actually participate in PJM capacity auctions. We've done that for quite some time. And so we do benefit from the capacity payments that we received there. Nick Giles: Got it. Okay. And any order of magnitude of what those could be kind of in the 2026 planning year? Ben Gagnon: So I mean, really, it's -- we've kind of maxed out on the capacity auction payments. They set a ceiling, and that's where the capacity auction payments closed. Nick Giles: Got it. Understood. Maybe one for Jonathan. You've made some progress on the capital structure, but just was hoping for any additional comments you might have on what you're looking for in an initial debt package, how you're seeing term shift and kind of what tools you have at your disposal during construction and kind of post energization. Jonathan Mir: Good question. Thanks, Nick. So our basic approach is to compare and contrast our financing options down at the asset level and upstairs at the parent level. And certainly, one of the things that we've seen in the market that has caught our attention like everyone else, is the tightening of spreads between folks issuing high-yield debt in the market that would seem like quite attractive levels for strong investment-grade counterparties or credit wraps. And those converging towards the levels seen in bank-originated classic construction of project financing. So we'll be -- each of those has its own advantages in terms of simplicity of managing the actual capital once it's raised versus negative carry costs. And as we get closer to a funding point, we'll make the decision as to what seems best for our shareholders in terms of how we decide to finance. I'm sorry, Nick, I was just going to say that the markets for our space and for infrastructure generally seem calm right now. Operator: Our next question comes from Brian Dobson with Clear Street. Gregory Pendy: It's Greg Pendy in for Brian Dobson. Just I guess one final one. Just I guess, one final one. Just on the redomiciling to the U.S., are there any implications to costs or structural implications in terms of ownership that we should be aware of as you enter this over the next couple of days? Ben Gagnon: One of the benefits and reasons for the redom is that we will now be eligible for inclusion in indices that require -- want to be a U.S. domiciled company. So for example, we'll be eligible for inclusion in the Russell 1000 and the Russell 3000 as well as for ownership in any other fund who was otherwise limited to the purchase of U.S. securities. We view that as being quite helpful in terms of moving our shareholder base to one that is institutional and long term. There are no other -- there are no cost or flexibility implications in our end. We simply see this as a nice path forward with a lot of benefits for our shareholders. Operator: Our next question comes from Bill Papanastasiou with Chardan Capital Markets. Bill Papanastasiou: Just wanted to touch on the Washington side and decision to shift towards colo. Can you confirm that this won't have any material impact on the purchase commitment that was entered into November? Or is the team considering the shift in development allocation to other sites? Ben Gagnon: Thanks, Bill. No impact on the capital commitments and the equipment we've already purchased for the Washington site by changing business models. In fact, actually, it just helps to reduce the CapEx because we're no longer paying for the compute. Bill Papanastasiou: Understood. And then how should we generally be thinking about maintenance CapEx on existing Bitcoin mining sites as you gradually shift over to AI HPC here? Ben Gagnon: We're not making any investments into the Bitcoin mining sites. Basically, we're just continuing to keep them up and running. And so no further investments are being made in the sites into new sites or into new miners. Operator: Thank you. This concludes the question-and-answer session. I'd like to turn the call back over to Ben Gagnon for closing remarks. Ben Gagnon: Thank you very much, everyone, for joining our call today and really look forward to speaking to you next time as Keel Infrastructure. Have a great day. Operator: Thank you for your participation. This does conclude the program. You may now disconnect.
Operator: Good afternoon, everyone, and thank you for participating on today's Fourth Quarter and Full year 2025 Earnings Conference Call and Webcast for Barfresh Food Group. Joining us today is Barfresh Food Group's Founder and CEO, Riccardo Delle Coste; and Barfresh Food Group's CFO, Lisa Roger. Following prepared remarks, we will open the call for your questions. The discussion today will include forward-looking statements. Except for historical information herein, matters set forth on this call are forward-looking within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about the company's commercial progress, success of its strategic relationships and projections of future financial performance. These forward-looking statements are identified by the use of words such as grow, expand, anticipate, intend, estimate, believe, expect, plan, should, hypothetical, potential, forecast and project, continue, could, may, predict and will and variations of such words and similar expressions are intended to identify such forward-looking statements. All statements other than the statements of historical fact that address activities, events or developments that the company believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made based on experience, expected future developments and other factors that the company believes are appropriate under the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond control of the company. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those indicated by such forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of date they are made. The contents of this call should be considered in conjunction with the company's recent filings with the Securities and Exchange Commission, including its annual report on Form 10-K and the quarterly reports on Form 10-Q and current reports on Form 8-K, including any warnings, risk factors and cautionary statements contained therein. Furthermore, the company expressly disclaims any current intention to update publicly any forward-looking statements after this call, whether as a result of new information, future events, changes in assumptions or otherwise. In order to aid in understanding of the company's business performance, the company is also presenting certain non-GAAP measures, including adjusted gross profit, EBITDA, adjusted EBITDA, which are reconciled in the tables and business update release to the most comparable GAAP measures and certain calculations based on its results, including gross margin and adjusted gross margin. The reconciling items are nonoperational or noncash costs, including stock compensation and other nonrecurring costs, such as those associated with the product withdrawal, the related dispute, certain manufacturing relocation costs and acquisition-related expenses. Management believes that the adjusted gross profit, EBITDA and adjusted EBITDA provide useful information to the investors, because they are directly reflective of the performance of the company. Now with that, I will turn the call over to the CEO of Barfresh Food Group, Mr. Riccardo Delle Coste. Please, sir, go ahead. Riccardo Delle Coste: Good afternoon, everyone, and thank you for joining us for our fourth quarter and full year 2025 earnings call. I'm very excited to report that 2025 has been a transformational year for Barfresh. One that has fundamentally repositioned our company for sustainable growth and profitability. The fourth quarter capped off an exciting year, in which we achieved record revenue of $14.2 million, completed a strategic acquisition that gives us control of our own manufacturing capabilities and secured financing that positions us to unlock over $200 million in revenue capacity. Before I discuss our quarterly and full year results, let me provide context on the strategic milestones that have reshaped our business model. In early October, we completed the acquisition of Arps Dairy, which has fundamentally changed how we operate. This acquisition brought us an operational 15,000 square foot processing facility where we immediately commenced production, along with a 44,000 square foot state-of-the-art manufacturing facility in Defiance, Ohio. We're already realizing immediate benefits from enhanced supply chain control and operational efficiency with approximately 90% of our revenue mix now manufactured in-house, giving us the ability to deliver orders that we previously would not have been able to deliver without the acquisition. After years of being constrained by third-party manufacturers, which created operational challenges, revenue limitations and increased operating costs, we now have control over the majority of our production. Our updated time line for the remaining construction and equipment installation at our larger facility is extended to the fourth quarter of 2026 due to the timing of financing. In March of 2026, we secured a $7.5 million senior convertible note financing that delivers transformative benefits. These proceeds enable us to pay off the existing mortgage on the larger Defiance facility, meaning we now own our manufacturing plant, free and clear. The financing also accelerates construction completion, enabling us to move into the enhanced facility before the end of 2026. Additionally, as previously announced, we would approve for a $2.4 million government grant to install specialized equipment necessary for full-scale production operations. For the fourth quarter of 2025, we achieved record revenue of $5.4 million, representing a 94% year-over-year revenue growth. For the full year of 2025, we achieved record revenue of $14.2 million, representing a 33% year-over-year growth. The fourth quarter and full year revenue growth was driven by the inclusion of the newly acquired Arps Dairy. Growth in our base business for 2025 was limited by the supply constraints of our co-manufacturing model underscoring the strategic necessity of acquiring Arps Dairy. With the limited manufacturing supply we have been focused on maintaining results and working on recovering lost customers, but now as we move into 2026 with enhanced capacity coming online, we are also focused on acquiring new ones. We've seen strong uptake across our existing Twist & Go portfolio and our Pop & Go 100% juice freeze pops have gained meaningful traction with several large school districts. I'm particularly excited to highlight a significant win we announced recently that demonstrates our continued momentum and competitive strength in the education channel. We successfully secured a 7-year bid award, with the largest school district in Nevada, representing the fifth-largest school district in the entire United States. This district serves over 300,000 students across the region, making it one of the most substantial wins in the K-12 channel. This win is especially meaningful for several reasons. First, it validates our ability to compete successfully for and secure placements, with the largest school districts in the country. And second, with our enhanced manufacturing capabilities through the Arps Dairy acquisition and our expanded product lineup, we are well positioned to support this district's needs reliably and consistently. This represents a major milestone in our expansion within the K-12 education channel and strengthens our position as we continue pursuing similar large-scale opportunities nationwide. Despite wins like this fifth largest district in the nation, we remain at only approximately 5% market penetration in the education channel overall, which represents substantial runway for growth. And we have tremendous growth opportunities within the districts we currently serve. A key priority throughout the fourth quarter and into fiscal 2026 has been protecting our base business and rebuilding relationships with customers who are impacted by the supply constraints we experienced earlier in the year. We successfully brought back customers who had temporarily removed our products due to our earlier supply shortfalls with many reintroductions occurring in the fourth quarter. Our approach has been straightforward and relationship-focused. We've stayed in close contact with these school districts through our broader broker network and our own sales team, communicating transparently about our manufacturing progress and our transition to owned facilities. Because these customers are already familiar with our products and have seen the positive response from students, the reintroduction process is more streamlined. This focused effort to win back displaced customers while simultaneously pursuing new district opportunities, positions us well for sustained growth as we're both recovering lost ground and expanding our market presence. The manufacturing capacity issues that constrained our first half performance were mostly resolved by year-end with the acquisition of Arps Dairy's processing plant and the contribution from our smoothie bottle co-manufacturing partners, which provided additional production capacity, giving both existing and prospective customers confidence in our ability to deliver reliably. The combination of record fiscal 2025 revenue, successful school district penetration, including major wins like the fifth largest school district in the nation, and our expanding manufacturing capabilities positions us well as we execute on our fiscal 2026 plan. We've built significant operational momentum, and with our owned facility, providing enhanced control and capacity, we're ready to capitalize on the substantial market opportunities ahead. With that overview of our strategic progress and market momentum I'll now turn it over to Lisa to walk through the detailed financial results for the fourth quarter and full year. Lisa Roger: Thank you, Riccardo. Let me walk you through our fourth quarter and full year financial results in detail. Revenue for the fourth quarter of 2025 increased to $5.4 million, representing our highest quarterly revenue in company history. Revenue for the full year of 2025 was a record $14.2 million compared to $10.7 million in the same period of 2024. This growth was driven by our Arps Dairy acquisition, which contributed $2.9 million. Gross margin in the fourth quarter of 2025 was 3% compared to 26% for the fourth quarter of 2024. Adjusted gross margin for the fourth quarter of 2025 was 4%, compared to 30% in the prior year period. Adjusted gross margin for the full year of 2025 was 22% compared to 37% for the full year of 2024. The decrease in gross margin resulted from transitioning Barfresh production to the company's new facility to capture long-term operational efficiencies and scale benefits, which involves typical startup and implementation costs that temporarily impacted margins. Additionally, we continued Arps Dairy's existing milk processing business, which operates at different margin profiles than our core business and can experience commodity pricing fluctuations that may impact revenue, but provide stable milk supply and support production and diversification. These are strategic investments in our long-term growth and opportunities. We expect incremental margin recovery to occur throughout the year and accelerating in the second half of 2026 when the equipment enhancements are completed and the new facility is commissioned. Net loss for the fourth quarter of 2025 improved to $763,000 compared to a net loss of $852,000 in the fourth quarter of 2024. Net loss for the full year of 2025 was $2.7 million compared to a net loss of $2.8 million in the prior year period. Selling, marketing and distribution expenses were $783,000 compared to $872,000 in the fourth quarter of 2024. Selling, marketing and distribution expenses for the full year of 2025 were $3.2 million compared to $3.1 million in the same period of 2024. G&A expenses for the fourth quarter of 2025 were $922,000 compared to $607,000 in the same period last year. G&A expenses for the full year of 2025 were $3.2 million compared to $3 million in the same period of 2024. Adjusted EBITDA for the fourth quarter was a loss of approximately $1.1 million compared to a loss of approximately $563,000 in the prior year period. For the full year of 2025, our adjusted EBITDA was a loss of approximately $2.1 million compared to a loss of $1.3 million in the same period of 2024. We expect to achieve positive adjusted EBITDA in fiscal year 2026 as we realize the full benefits of our integrated manufacturing model and complete our facility optimization. Turning to our balance sheet. As of December 31, 2025, we had approximately $2.3 million of cash and accounts receivable and approximately $1.7 million of inventory on our balance sheet. In March 2026, we secured a subscriptions for a $7.5 million senior convertible note financing. The proceeds were used to pay off the existing mortgage on our manufacturing facility in Defiance, Ohio, as well as other obligations and will accelerate construction completion, which will position the company to control its manufacturing destiny with significantly expanded production capacity. In addition, as previously announced, we were recently approved for a $2.4 million government grant to purchase and install specialized equipment necessary for full-scale production operations. The financing structure gives us significant financial flexibility. The ability to pay in either cash or registered stock preserves cash for operational needs during the construction phase and owning the facility free and clear, positions us to access additional capital through mortgage and equipment financing as may be required for any remaining investments. Now I will turn the call back to Riccardo for closing remarks. Riccardo Delle Coste: Thank you, Lisa. As I reflect on 2025, this year represents an inflection point for Barfresh. We delivered record revenue of $14.2 million and fundamentally repositioned this company for unprecedented growth. The strategic decision we made this year acquiring Arps Dairy and securing the financing to facilitate the completion of construction on our new state-of-the-art facility mean we are no longer constrained by third-party manufacturers or limited production capabilities. We now control our own destiny. Looking ahead, we have multiple powerful drivers of growth working in our favor. First, our own manufacturing capabilities through Arps Dairy give us direct control over production, enhanced operational efficiency and the flexibility to innovate and scale new products more rapidly. Second, once our facility expansion is complete, we will have capacity to support over $200 million in annual revenues, a significant leap in our production capabilities. The new equipment and optimized facility layout will create greater operational efficiencies, increase profit margins and provide the scalability to support aggressive growth plans. Third, we're still in the early innings of penetrating our core education channel with massive runway ahead of us. Our recent school district wins demonstrate that we're gaining traction and rebuilding momentum. Fourth, Beyond our core product lines, the expanded facility opens significant opportunities for manufacturing, both for new products owned by Barfresh and co-manufacturing for third parties, creating additional revenue streams that leverage our state-of-the-art capabilities. Now turning to our fiscal 2026 outlook. As we advance our initiatives for the year, we are making thoughtful progress on the integration and optimization of our 44,000 square foot facility. While the implementation is taking slightly longer than initially anticipated, the new equipment and optimized facility layout will create greater operational efficiencies, increase profit margins and provide the scalability to support our growth plans once fully operational. Given our updated facility and equipment time line, we are adjusting our fiscal 2026 revenue guidance to a range of $28 million to $32 million, and our adjusted EBITDA guidance to a range of $3.2 million to $3.8 million. While this represents a more conservative ramp-up schedule than our initial projections, it still reflects substantial year-over-year growth of 97% to 125% on revenue from both the full year inclusion of Arps Dairy's revenue and growth of legacy Barfresh products. We remain confident in the transformational nature of the platform we are building and believe fiscal 2026 will represent a pivotal year that demonstrates the power and scalability of our integrated model. For the first quarter of fiscal 2026, we expect revenue in the range of $5 million to $5.2 million and to be adjusted EBITDA breakeven, which is also impacted by our updated equipment time line. As we progress through the year and complete our facility enhancements, we expect year-over-year quarterly improvement in both revenue and profitability. We are building a scalable, profitable business model that positions us to capitalize on significant market opportunities while delivering sustainable long-term value creation for our shareholders. The integrated manufacturing model we're building will enable us to pursue opportunities with improved economics and operational control that simply weren't possible before. The operational momentum we demonstrated in 2025, combined with owning our own manufacturing facility and dramatically expanding our capacity positions Barfresh for what we expect to be exceptional growth beyond fiscal year 2026. We look forward to updating you on our progress as we move through 2026 and demonstrate the full potential of what we've built. And with that, I would like to open up the line for questions. Operator? Operator: [Operator Instructions] And our first question comes from the line of Thomas McGovern with Maxim Group. Thomas McGovern: First one, just as we're gaining additional clarity on the supply chain ramp here and the initiatives that are underway to kind of stabilize everything after some of the shakiness we've seen in the past. I'm just curious how the conversations have gone with -- in terms of reengaging the school districts that you might have lost due to some supply chain disruptions in the past. Just maybe unpack that for me. And then my second question relates specifically to your guidance, right? If we look at that, we're clearly expecting some growth in the back half of the year. Maybe walk me through what you're expecting in terms of timing? And then kind of what some of the underlying assumptions for that full year guidance is, is that based on essentially just your base business, including conversations that have kind of come to fruition? Or does that assume that certain relationships or contracts that are up in the air will be signed as we're entering maybe the new school year for '26, '27? Riccardo Delle Coste: Yes, sure. Thomas, so the customers that we're talking with and have been constantly engaged with love the product. we're really just now focused on keeping that communication up. We're reaching out to customers that have taken off the product due to no supply. We're going through the bidding process again. A lot of the customers are just waiting for us to have product come back into distribution in certain markets or their bid to come back around with their distribution partners. The fortunate part is that we're in the bidding cycle again now. So we're having added again to customers, and we're getting new ones as well. So we're in a very fortunate position that we've got some great customers that love our product, and they want to keep using it and the kids love the product. And as we're now getting product back out into the market in different parts of the country, we're just staying in close contact with them and working towards whatever obstacles they may have from a timing perspective in their own establishments. Does that make sense? Thomas McGovern: Yes, absolutely. And then just kind of maybe walk me through some of the underlying assumptions for the revenue -- the implied revenue growth in the back half or quarters 2 through 4? Riccardo Delle Coste: Yes. So the implied revenue obviously includes both the Barfresh business and the Arps business going forward. We would typically have a more severe drop off with Barfresh products in the second quarter, for example. With the Arps business, we actually have the addition of the ice cream mix, which is quiet in the winter months. So it's actually quite counter seasonal to the rest of our business. And then in the -- so in the second quarter, we'll have a higher than expected for our products revenue. And then in Q3, you'll have the addition of still of the ice cream mix-type products together with the Barfresh products as well, which is our biggest -- typically our biggest quarter. So the growth is coming by the combination of the 2 businesses, based on the base business that we have as well as some foresight with some of the new accounts and bids that we're winning. Thomas McGovern: Understood. And then just one more question for me. I mean, especially as you guys are kind of diversifying your seasonality, if you will, or with your product portfolio, you should expect some counterweight there, which is great. Just also curious, I know it's not as large of a component of revenue now, but as we look at channels outside of education, in the past, we've talked about foodservice and military as potential growth channels for you guys. Is there any updates on that front? And can you talk maybe a little bit about strategy and how innovation or new product launches might play a role in expanding your presence in those channels? Riccardo Delle Coste: Yes. I mean there are so many opportunities in terms of different channels for us to focus on. I mean, we've got a huge market that we're only in a 4% to 5% market penetration of in the education channel. And we haven't even been able to keep up with supply up until now in that channel alone. So we do feel that there's an enormous amount of opportunities in other channels, whether it's food service, whether it's even retail, petrol and convenience, we just haven't had the supply to get there. So we have been in this -- protect our base business mode for the last couple of years. Now that we have the manufacturing capacity, and we're in control of that we're now going to be getting back into aggressive sales mode. And that aggressive sales mode is going to be exploring the various channels out there and how we can best exploit these opportunities. Operator: [Operator Instructions] And our next question comes from [indiscernible]. Unknown Analyst: Congratulations, Riccardo and Lisa, on the record Q4 and this acquisition. I think, it has definitely changed the story where last year, the company was supply constrained. But I think at this juncture, the company -- the business just controls its own destiny. So it's really a great move. I have 2 questions. One is in terms of the production capacity, I think it was mentioned on the press release that with this new enhancements to the facility done, where it will -- basically, you'll have a capacity to support about $200 million in revenue at some point. Can you share on what's the production capacity that you have at the moment? And how does it scale? When do you get to that point? That's number one. And then number 2 is in terms of the guidance, 28% to 32%, very strong guidance. And as you mentioned, that includes the base business and the Arps business. From the base business side, does the guidance include the business that you already have signed up? And is there an upside to as you go in the school season and sign more school districts? Riccardo Delle Coste: Yes. So let me start with the first question on the capacity, and we'll circle back to the second one. The existing facility is an older facility. We're operating in there, and we're able to service to get what we need, and that will see us through up until we get to the new facility. It's not ideal, but it's working, and we're able to get product out that had we not done the acquisition, we would not have been able to supply customers. That's how important this acquisition actually was for us. When we get into the new facility, which will be later this year, the infrastructure will all be there. The base infrastructure for the processing will also be there. So it's really going to be a matter of as we ramp up and want to do more things, whether it's more products, we'll have additional capacity on our existing lines, plus room to install new lines. So we're going to have a lot more flexibility in how we grow the business, and where those revenues come from. That's why this is such an important acquisition for us because not only is it going to be instrumental in growing our base business and our base product portfolio, but it's also going to give us an enormous amount of opportunities in the future. As we look at the revenue in the base business, we're looking at 2026 as a stabilizing year for the business. And that includes the customers that we have both in the Barfresh business and the Arps business, a little bit of growth in terms of being able to acquire and get back to some of these customers that we've lost and really setting us up for a very exciting 2027, especially once the new facility is done, and we get a really significant jump in efficiencies to the bottom line. Unknown Analyst: Got it. Got it. And then one more on the recent signing of this Nevada large school district. I mean, for a 7-year deal, I mean, that's also I think it's -- from an outside, I mean, it just looks like -- I mean, the business, and you have so much confidence to supply the product to sign such a long-term deal. And in the past, I mean, Barfresh has been able to sign similar kind of deals like with Los Angeles School District at some point, but I think you guys were supply constrained. Anything you can share on what the pipeline really looks like? I mean, does this just changes where you are not really just going after like smaller school districts, is not where you just intend to go after larger school districts and you have the confidence to be able to? Riccardo Delle Coste: We will. We will. We really are focused on just making sure that we get out of the old facility into the new facility. So that we start talking to those larger accounts and really starting to build that pipeline and being able to go after the business aggressively. And that's just something that we couldn't do before because we couldn't supply. Unknown Analyst: Okay. And on that facility upgrade, what is the time line? I think you said end of 2026. Riccardo Delle Coste: It will be before the end of the year. Operator: [Operator Instructions] All right. And it looks like there are no further questions at this time. So with that, I would like to thank everyone for their participation, and this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time, and have a wonderful rest of your day.
Operator: At this time, participants are in listen-only mode. Following management’s prepared remarks, we will open the floor for Q&A. Before asking a question, please identify yourself and the organization you are working for. Please also note the call will be recorded. Simultaneous English translation will be available for this call. You can select your preferred language by clicking Interpretation in the Zoom toolbar. Our December quarter and full year 2025 results were released earlier today and are now available on our investor relations website at ir.miniso.com. Joining us here today are Guofu Ye, our Founder and CEO, and Eason Zhang, our CFO. Before we proceed, I would like to refer everyone to the Safe Harbor statements in our earnings press release, which also apply to this call, as management will be making forward-looking statements. Please also note, we will be discussing certain non-IFRS financial measures today. These measures are described and reconciled to their most directly comparable IFRS measures in our earnings release, and in our filings to the SEC and the Hong Kong Stock Exchange. Unless otherwise stated, all figures are in RMB. In addition, we have prepared a presentation featuring financial and operational highlights for today's call. If you are joining via Zoom, you will be able to see the slides. They will also be available on our IR website. I will now turn the floor over to Guofu Ye. Guofu Ye: Good day, everyone. Welcome to MINISO Group Holding Limited’s 2025 December quarter and full year earnings presentation. 2025 was a year of steady growth and continued breakthroughs for the group. Throughout the year, revenue growth followed a strong and constantly accelerating trajectory, rising from 80.9% year-over-year in Q1 to 32% in Q4, surpassing the upper end of our prior guidance and also reaching RMB 6.25 billion in quarterly revenue, marking the first time we have crossed the RMB 6 billion quarterly revenue milestone. Looking at our core brands in detail, MINISO brand recorded its fastest growth rate in nearly eight quarters in Q4 with revenue up by 28%, reaching RMB 5.65 billion. Meanwhile, TOPTOY delivered exceptional momentum, posting 112% year-over-year growth in Q4, with quarterly revenue approaching RMB 600 million, demonstrating the powerful dynamics of our multi-brand portfolio. This year, we achieved higher revenue growth with fewer net new store openings than 2025, with a greater share of the growth driven by same-store sales, reflecting a more efficient and higher-quality growth model, reaffirming the resilience and the long-term growth potential of our multi-IP plus multi-category and globalization business model. Today, against the backdrop of the group's full-year operating performance, I will share with you the significant progress that we made in the past year regarding meaningful strategy, particularly focused on the breakthrough in brand innovation and store experience enhancement. First, let us take a look at MINISO China. In the fourth quarter, the MINISO brand generated revenue of RMB 5,650,000,000. Mainland China contributed RMB 2,870,000,000, growing by 25%, representing 51% of the total. MINISO’s overseas revenue reached RMB 2,780,000,000, up by 31%, accounting for 50% of the total, reflecting robust, balanced growth driven by both domestic and international operations. Let us first talk about strategic initiatives in MINISO Mainland China business. In Q4, MINISO domestic same-store sales grew by mid-teens, a record high for the year, with average daily sales per store surpassing the level achieved in 2023. Given 2023 was largely driven by a surge in post-pandemic pent-up demand, MINISO’s ability to exceed those peak levels demonstrates structural improvement rather than cyclical tailwinds. We have every confidence that, assuming a more supportive macro environment and a gradual recovery in consumer sentiment in 2026, with our stronger brand equity, superior store positioning, more agile supply chain, and competitive standing, we will be able to outperform the industry by a wide margin, capturing more share in the market. By the end of Q4, our domestic franchisee count reached 1,157, a historical high. Franchisees vote with their support. That is the most authentic market signal, and they partnered with us because they have witnessed firsthand the traffic momentum and the financial patterns of our large-format stores. The trust has been earned store by store, IP activation by IP activation. It is something that we hold in the highest regard. At our 2024 Investor Day, we articulated our vision to make MINISO the go-to happy destination for international consumers worldwide. Today, the vision has been realized, one MINISO Land store at a time. By the end of 2025, we had already opened 26 MINISO Land format stores in Mainland China, securing prime locations in tier-one cities like Beijing, Shanghai, Guangzhou, and Shenzhen, and also distinctive retail destinations in Haikou and Guiyang. In January, the MINISO Land opening in Grandview Mall in Guangzhou attracted nearly 10,000 visitors on its opening day, generating RMB 450,000 in sales, a new record for the South China region. Equally impressive is the MINISO Land flagship opening in lower-tier cities in Urumqi and Nantong. The Nantong store soft opening drove 80% year-over-year growth in overall mall foot traffic. Urumqi’s store, featuring a three-story impressive space and a portfolio of 100 IP collaborations, quickly established itself as a regional premier destination. Such high-quality experience stores are, at their core, the engine for IP operations. Through authentic spatial design and curated product presentation, mature consumer and sensory, perceivable and tangible experiences bring IP value to life. They can also help us continue to improve our brand IP ecosystem. MINISO Land stores combined with robust IP activations have become the go-to platform for creating citywide mainstream brand momentum. Tens of thousands of consumers share their experiences on Xiaohongshu, Douyin, and WeChat Moments. That is the reason I always tell you our physical stores are MINISO’s most powerful brand billboards and our most enduring source of consumer traffic. MINISO is not the first brand to pursue a large-format store trajectory. But why can others not follow? The answer comes down to just one thing: a successful large-format store must be built on the conditions of owning proprietary product development capacity. Without in-house design and R&D capacity, a large-format store is nothing but an empty shell. Behind that, we have more than one decade of supply chain deployment, a network of more than 1,500 global suppliers, and a design team of over 1,000 professionals. In this process, no one will be able to copy the successful story unless they build the core capacities. MINISO moved even further ahead. In support of our MINISO Land strategy, we established a seven-tier store format mix in 2024 and continued to refine and evolve it through 2025. Our goal is to ensure every city, every trade area, and every consumption scenario will be served by the MINISO format precisely. In the past, I mentioned the intention to systematically upgrade our store portfolio. I also would like to share with you the reason behind such initiative: why every new store we open must be a large-format, high-quality MINISO Land format store. If we look at our journey, we navigated two distinctive strategic phases: first, rapid global store expansion to build scale; followed by strategic IP positioning, transitioning ourselves from a value-priced variety store into an interest-driven consumption destination. We achieved milestones in both phases. Now we move into the third phase, an immersive retail transformation centered on MINISO Land. It is not only about increasing store size; it is the integration of the store capacities built across the first two phases. Leveraging larger space, creating immersive environments, forging genuine emotional connections, and driving repeated visitors, we are transforming from selling products to selling experiences, from a traffic-driven business to a loyalty-driven, consumer-centered one. People never lack good products. They are truly seeking compelling destinations, memorable experiences, and moments. With our IP-driven formats and designs precisely meeting those needs, we can inspire consumers to share and continue to come back to generate purchase. Regarding international markets, our overseas revenue approached RMB 2,800,000,000 in Q4, an all-time high, representing 31% year-over-year growth. Our overseas store net adds were 159 stores, bringing a full-year net increase of 465 stores. Our largest overseas market, the United States, delivered a full-year growth of more than 60% and in Q4, same-store growth was more than 20%, ahead of our prior expectations. At our Q1 2024 earnings call, I stated improving store operating quality in North America was our corporate priority in 2025. A year on, MINISO U.S. business delivered comprehensive improvements in store quality, operational efficiency, and consumer engagement. For stores, new store quality was further improved. New stores in 2025 have all-time high growth by double-digit numbers; average transaction value and transaction volume are improving, driving meaningfully higher unit-level profitability and conversion rates. At the same time, our mature stores demonstrated strong operating rigor. Leveraging a refined same-store performance tracking model, we established stores to deliver revenue growth in both average daily sales and transactions, improving alongside gains in foot traffic and purchase frequency, especially for our Plaza store format. We opened 48 Plaza locations in 2025. They generate higher attachment rates and average transaction value. The average ASP outperformed most of our estate, establishing a more flexible and economically resilient new store expansion channel. Operationally speaking, we have crossed the base expansion strategy, improving logistics efficiencies and warehouse cost. Employee retention improved, revenue per headcount increased, and labor cost as a percentage of sales declined, achieving a dual optimization on cost and productivity. On the consumer side, membership in the U.S. market grew by 150% year-over-year. Member-driven sales exceeded 50% of total revenue for the first time. Together, those results mark the U.S. market’s transition from a new investment phase into a phase of high-quality, profitable growth, becoming our most resilient and dynamic engine for global expansion. This actually gives us greater confidence for our global rollout strategy. The operational challenges we encounter in other markets were also encountered and navigated in both China and the U.S. We are going to leverage our experience from China and the U.S. to continue unlocking profit potential for international operations. Thirdly, let me talk about TOPTOY. TOPTOY sustained its strong compound growth momentum in Q4 with revenue up 112%, reaching nearly RMB 600,000,000 in Q4. In terms of store footprint, by the end of 2025, TOPTOY operated a total of 334 stores, including 30 international stores in Thailand, Malaysia, Indonesia, and Japan. Brand global expansion continued to accelerate. Domestically speaking, TOPTOY’s growth strategy is centered on a high frequency of proprietary product launches to drive same-store sales. The proprietary IP, Youyou, rapidly gained momentum with sales of more than RMB 200,000,000 and is likely to double in 2026. By 2025, TOPTOY has built a proprietary IP portfolio of more than 20 brands. In 2020, I first introduced interest-driven consumption. The consumer’s core needs are rapidly shifting from pure functional value to emotional and experiential value, which has been fully validated by the market. MINISO stands as one of the most significant beneficiaries and pioneers of this consumption transformation. With our immersive experience and multi-category proprietary development capacity, those are our key and hardest-to-replace competitive moats in the IP-driven consumption era. Our strategic vision is to become the world’s leading IP-driven retail platform. My strategy has been ever clearer. Along the way, we have demonstrated the execution of our strategic development is right. We also witnessed firsthand the genuine and sustainable enthusiasm we have from consumers. For the past year, we delivered strong results in both China and the U.S. The road ahead is strong, but with each step forward, our conviction and confidence only deepen. That is all for my remarks. I will now turn the call over to Eason to walk you through the financial highlights for Q4 and full year. Thank you. Eason Zhang: Thank you. Thanks to Mr. Ye. Welcome, you all. Coming next, let me walk you through MINISO Group Holding Limited’s financial results for Q4 and full year 2025. I will also provide you the outlook. I should also say that all the units would be RMB unless otherwise stated. Let me start by reviewing financial performance for Q4 and full year. In Q4, revenue grew by 32.7%, surpassing the upper end of our prior guidance of 20% to 30%, driven by the outperformance across all business segments. MINISO Chinese Mainland Q4 revenue grew by 25%, exceeding our prior guidance of high-teens growth. MINISO’s overseas Q4 revenue grew by close to 31% year-over-year, ahead of our guidance of low- to high-20s percentage growth. TOPTOY Q4 revenue grew by 112%, above our guidance of 80% to 90% growth. Q4 momentum lifted full-year group revenue growth by 26.2%, exceeding our prior full-year guidance of approximately 25% in the interim result. In Q4, MINISO Chinese Mainland net and same-store sales growth reached mid-teens. U.S. same-store sales exceeded 20%, both surpassing our prior Q4 guidance of lower double-digit same-store growth. Both markets delivered high single-digit same-store sales growth for the full year, in line with our formal guidance but ahead of the internal expectations we had when we provided the guidance back in November. Adjusted operating profit rose by 12% in Q4, in line with our prior guidance of double-digit growth. Full-year adjusted operating profit reached RMB 670,000,000, aligned with our guidance. In Q4, our adjusted operating profit margin was 17%. Especially in 2025, we have already narrowed down the margin compression. Let us take a look at revenue. We have already created three revenue milestones in this quarter. First of all, single-quarter GMV exceeded RMB 10 billion for the first time. Quarterly revenue surpassed RMB 6,000,000,000 for the first time, and full-year revenue crossed RMB 20,000,000,000 for the first time, benefiting from outstanding performance across all of our business lines and over expectations. By brand, MINISO generated Q4 revenue of RMB 5,650,000,000, a 27.7% increase. MINISO China continued to demonstrate great growth. In Q4, its average growth is the highest for the past eight consecutive quarters. MINISO overseas revenue was RMB 2,780,000,000, up by 30.5%. TOPTOY revenue was RMB 600,000,000, up by 112%, also having a triple-digit year-over-year growth with very strong momentum that exceeded our expectations. Turning to the full year, group revenue reached RMB 21.44 billion in 2025. A few highlights I would like to share with you: MINISO Mainland China full-year revenue crossed the RMB 10,000,000,000 milestone for the first time. In such a consumption background, it grew by around 70%. Overseas full-year revenue was RMB 6.86 billion, up by close to 30%. TOPTOY full-year revenue was RMB 1.9 billion, maintaining very strong growth. In terms of geographic revenue mix, Mainland China revenue grew by 22%, accounting for 60% of total revenue. Overseas revenue grew by 33%, representing 40% of total revenue. Let us take a look at the same-store sales performance. MINISO Mainland China Q4 same-store sales continued sequential acceleration reaching mid-teens, beyond our expectation. Looking back to the full-year trajectory of MINISO China same-store sales: from a negative mid-single digit in Q1 to positive low single digit in Q2, to high single digit in Q3, and finally mid-teens in Q4. Sequential progression delivered mid-single-digit same-store growth for the full year, already exceeding our initial target in 2025. As I have already shared with you, delivering the improvement in domestic same-store sales required many hard efforts. In terms of internal management, same-store performance has been built into KPIs. We also have the digital infrastructure making the business flow more digital and intelligent to improve one-team empowerment. Operationally, we improved store SOPs with supply chain optimization, ensuring sustained contribution from top-selling SKUs and minimizing potential sales losses. The product development efficiency has been further improved. We actually have more contribution from new SKUs and speed-to-shelf of new product launches. Lastly, inventory was kept healthy. Regarding operations, we are also working on three fronts including consumer, product, and channel. For consumers, we improved in-store conversion. Our extensive store network serves as a large-scale testing ground and rich data pool. By deploying additional foot-traffic counters, we are able to capture high-frequency store-level data that help to further optimize our store and operations. We also have diversified marketing activations. For example, this year, we have the One-Day Store Manager program on RED, outdoor street pop-ups, as well as in-store meet-and-greet signing events and celebrity store visits, which became viral moments on social media, driving organic brand amplification through fan engagement. Regarding product, let me give you two points. We capitalize on seasonal and holiday product trends while at the same time managing IP and non-IP merchandise with profound understanding. We leverage the traffic-driving power of IP products to generate attachment purchases and lead the basket contribution of non-IP items. Regarding channel, we improved our existing store portfolio. We upgraded and improved 300 stores with tangible results. Regarding MINISO overseas, same-store sales performance differs from region to region. First of all, in Asia and in Latin America, same-store performance lagged behind other international markets. However, our strategic direct-operated markets, the United States and Europe, delivered very good results. Especially our key strategic direct-operated market, the U.S., delivered low-20s percentage same-store growth in Q4, supporting our previous guidance. We are driven by a strong end market and continued polish of our stores. You can also see healthy improvement of same-store profit margins. Through disciplined dollar-driven site selection and cost-based store opening approaches, U.S. back-end overhead costs declined by low single digits, providing further tailwinds to U.S. business profitability. It is also worth noting that in 2025, the U.S. business faced meaningful tariff headwinds. Against a backdrop of significant macroeconomic uncertainties, our team responded with exceptional foresight, sharp market insights, and agile execution, and still delivered standout results. Such results validate our robust business model. Such strength in and out is actually the foundation for our confidence to navigate economic cycles. Where the domestic market, as our strategic home base, delivered sequentially accelerating positive same-store sales growth in a highly competitive market, which demonstrates our strategic model and exceptional execution capacity of the team, creating a favorable spot for further growth. In 2026, successful stories and playbooks from China and the United States will be exported to Southeast Asia. With respect to the challenges in Southeast Asia, we believe the headwinds already met the bottom, and in 2026, through comprehensive upgrades of our channel strategy, product assortment, and organizational structure in Thailand and beyond, we will be able to continue to improve the business in Southeast Asia. Regarding stores, total store count approached 8,500 by the end of 2025. In Mainland China, the net adds were 182 stores compared with 460 in 2024. Recall, MINISO Mainland China revenue growth was around 10% in 2024; however, in 2025, it was close to 70%. In other words, with a clear indication that we have transitioned toward a higher-quality and more-productive growth model with fewer net new stores. MINISO overseas net adds were 465, bringing the year-end total to 3,583. TOPTOY net adds were 58 stores. TOPTOY started global expansion in 2024; within one year, we have 30 stores internationally, present in Malaysia, Indonesia, Thailand, Japan, and Macau. By the end of 2025, our domestic MINISO Land format store portfolio included 26 destinations across 90 cities nationwide. The large-format and flagship stores collectively accounted for 10% of our domestic store count, yet contributed nearly 20% of our domestic GMV. This number will continue to ramp up, which helps validate that big stores drive speed, results, and margin. In 2026, we will accelerate the release of this momentum. You will see locations including SDF in Sanya, David City in Zhengzhou, and Grand Gateway Plaza in Shanghai continue to come online. In 2025, we opened our first overseas MINISO Land at Samyan Mitrtown in Thailand with very strong market reception, which helps us understand the substantial potential of our overseas formats. In 2026, we will continue to bring the immersive brand experience to more retail destinations across the world. For our overseas directly operated markets led by the United States, we plan to have strategic new openings before Q4, so that Q4 will be fully concentrated on in-store operational excellence and experience optimization. When the peak shopping season arrives, we will be able to fully maximize the growth momentum. Regarding gross profit margin, it was 46.4% compared with 47% in the same period last year. For 2025, the GP margin was 45%, flat. For the past five years, our GP margin jumped from 28% to 45%, driven by our brand innovation, globalization, and IP strategy. During the year, we made selective gross margin adjustments across product categories, which enabled better sales performance and overall increases in GP margin. In the near future, we are going to continue to manage the balance between margin rate and sales volume, maintaining healthy, high-quality growth. Regarding operating expenses, operating expenses in Q4 grew by 45.3%. Sales expense grew by 47.4%, 3% higher than the same period last year. Administrative expense grew by 36.3%, accounting for 5% of revenue, flat with last year. The increase in sales expense was attributable to the growth in direct-operated store costs, licensing fees, and advertising and marketing expenses. First of all, our international expansion is still in the early stage. Direct-operated stores need rent and manpower, which was 1 percentage point higher than the previous year, accounting for 40% of total revenue, with the total cost growth at 40%. However, it is already a deceleration from the 54.5% growth rate in the first nine months of 2025. Secondly, license fees grew by 107% year-over-year, accounting for 3% of revenue, up by 1 percentage point compared with 2024. This also reflects our proactive upfront investment in IP strategy. Thirdly, advertising and marketing expense grew by 30%, slightly below the rate of revenue growth in Q4, with the ratio to revenue remaining flat compared with 2024. The increase in A&M then led to adjusted operating flow. Q4 adjusted operating profit grew by 7.7% and adjusted operating profit margin reached 17%. For the full year, adjusted operating profit, no matter on an M/M or Y/Y basis, continued to be well managed. From the P&L perspective in Q4, GP margin declined by 60 basis points because Q4 2024 was our highest GP margin quarter on record, and also direct-operated store cost ratio increased by 1 percentage point, licensing fee ratio increased by 1 percentage point, with a further contribution from miscellaneous items of a few tens of basis points, resulting in a total adjusted operating margin impact of 3 percentage points. For the full year, GP margin was flat versus 2024, mainly due to the direct-operated store ratio increasing by 2 percentage points, licensing and other fees increasing by 1 percentage point, resulting in a 3 percentage point impact. At the same time, you can also see that in Mainland China, from the business unit perspective, the China franchise business saw a margin decline by only basis points against a backdrop of approximately 70% revenue growth, reflecting our conservative approach for gross margin in exchange for healthy volume. At the same time, the growth was also contributed by our super warehouse and e-commerce operation, with a modest dilutive effect on margin. The group-level margin decline was primarily attributable to compression in overseas margin. For example, direct-operated store revenue as a proportion of total gross overseas revenue increased from one-third in 2024 to more than half in 2025. Outside of North America, other directly operated markets remain in the early investment phase and carry lower margins. By contrast, our overseas agent and franchise revenue, which carry higher margins, grew at a relatively slower pace. In our financial statements, we also have some non-IFRS adjustments. There are five points. First, share-based compensation (SBC) was RMB 150,000,000 in Q4 and RMB 370,000,000 for full year 2025, which used to be RMB 85,000,000 in 2024. The increase was mainly because of the equity incentive plan we made for the team. The second is the loss from the derivative fair value changes and the CB issuance cost. The third is the interest expense on CB and the YH investment-related loans. In Q4, convertible bonds interest expense was RMB 51,000,000, of which RMB 47,000,000 are non-cash. Interest expense on the acquisition loan related to YH was RMB 24,000,000. In 2025 full year, the convertible bonds interest expense was RMB 190,000,000, among which RMB 170,000,000 were non-cash interest; on the YH acquisition loan it was RMB 867,000,000. The fourth point is share of YH post-tax loss. In Q4, YH’s net loss was RMB 1,840,000,000. Fifth, we also had fair value changes of the redemption liability arising from preferred shares. The change was related to RMB 150,000,000 to RMB 160,000,000, related to the strategic financing completed last year. In aggregate, the adjustments impacted approximately RMB 900,000,000 in Q4 and RMB 1,690,000,000 for the full year to arrive at adjusted net profit. Excluding the items discussed above, the adjusted effective tax rate was 20.2% for Q4 and 20.1% for full year. Q4 adjusted net profit grew 7.6%, reaching RMB 850,000,000. However, as a result of our active share repurchase and consolidation program, our adjusted EPS grew slightly faster. The adjusted diluted EPS in Q4 grew by 9.4%; full-year reached 7.8%. Regarding working capital, by the end of 2025, inventory turnover was 100 days versus 91 days in the same period last year. In Mainland China, inventory turnover was 74 days. Internationally, inventory turnover was 228 days. The increase in overseas inventory days reflects strategic inventory built ahead of the anticipated tariff impact, booking the cost at favorable levels. We also established local direct sourcing that can help finance inventory pressure and ensure continued new product replenishment. In the near future, we will also adjust our overseas inventory and overall efficiency. By the end of 2025, our cash reserve was RMB 7.1 billion, remaining healthy. In 2025, full-year net cash generated from operating activities was RMB 2,580,000,000, accounting for 90% of full-year adjusted net profit, a reflection of our business’s high earnings quality and strong cash generation. On capital allocation, we will maintain our commitment to rapid business growth. In 2025, we obtained a waiver from the Hong Kong Stock Exchange to repurchase up to RMB 1,800,000,000. We continued repurchases to showcase our commitment and confidence. Looking at 2025 full year, returns to shareholders accounted for RMB 1,900,000,000, about 66% of full-year adjusted net profit, including RMB 540,000,000 in share repurchases and RMB 1.36 billion in dividends. The Board has announced a final dividend of RMB 810,000,000, representing 50% of second-half 2025 adjusted net profit, which is expected to be paid in April. Last but not least, closing remarks and outlook. Looking back at our financial performance over the past five years from 2021 to 2025, revenue CAGR reached 21% and adjusted net profit CAGR reached 44%. Looking to 2026, we expect group revenue will have a high-teens growth rate; three-year CAGR from 2023 to 2026 would be no less than 22%. We expect same-store sales to continue to ramp up. In 2026, same-store sales in key markets like China and North America will maintain healthy low single-digit growth. We plan to have net new store adds of 510 to 550 for the full year, sticking to quality rather than quantity. In 2026, we will balance growth and efficiency, pursuing profitable growth and profit backed by strong cash flow. We expect both adjusted operating profit and adjusted net profit will accelerate their growth rates in 2026. In terms of seasonality, the peak rate season for offline retail in North America and Europe is in the second half of the year. For many Western offline brands, 60% to 70% of annual revenue is generated in H2. Our direct-operated revenue from North America and Europe will continue to grow. Around 60% of the revenue is expected to come from H2, and H1 to account for 40% of total contribution. In 2026, revenue growth will be no less than 25%. China same-store sales will maintain high single-digit growth. North America same-store will deliver strong mid- to high-double-digit growth. It is worth noting Q1 profit will include a significant investment gain from specific investments. It was generated from a test investment we made a few years ago. The company is quite positive on AI. We invested in an AI company. That company has been IPO-ed. The company’s share price appreciated, generating a substantial fair value gain, bringing us an extra RMB 850,000,000 to RMB 900,000,000. It is worth noting that such gains will not showcase our primary business. We plan to exclude this item from adjusted operating profit and adjusted net profit. That is all for our prepared remarks. We will now open for questions. Operator: Ladies and gentlemen, please change your Zoom display name to include your institution name. In order to accommodate more analysts and investors, please raise no more than two questions each time. Thank you. First, let us welcome Michelle from Goldman Sachs, please. Michelle (Goldman Sachs): Hello? Mr. Ye and Eason, thanks for giving me the chance to raise a question. Congratulations on the company achieving such nice growth in a volatile market. I have two questions. First, regarding the domestic market: last year, we drove solid same-store sales growth through refined store operations, stronger faster sales execution, and store network upgrades. Looking ahead to 2026, as Eason has already provided guidance, is it possible for you to be more elaborate on the key levers to drive further same-store sales improvement? The second question is regarding the U.S. market. We do notice the sales were looking right in the United States market. However, localized sourcing would somewhat pressure your GP margin. What are your priorities for merchandise supply chain and store expansion this year? What is the expected impact on margin improvement? That is the two questions I have. Thank you. Guofu Ye: Thank you. Our core levers for driving domestic same-store sales in 2026 are clear. There are three: the right IP, for example the Jennie co-branded product, which can help to further consolidate our revenue and brand impact; the second one is the right product; the third one is the right experience. Regarding the right product, we attach equal importance to product quality and ASP, and we also open large stores to provide full customer experience. You can also see that the Jennie collaboration was first launched exclusively at MINISO Land and select pop-up locations, creating a fully immersive IP experience. The limited-time pop-up at Hong Kong Plaza in Shanghai generated RMB 2,200,000 in sales on the opening day, setting a new single-day record for any MINISO in 2025. This not only validates the extraordinary power of our Land format store as a primary destination for IP launches, it also demonstrates a fundamental truth: prime offline experience combined with top-tier IP content is the golden formula for unlocking global consumer demand and maximizing IP value. As many of you may know, Hong Kong Plaza is a top shopping mall, which is quite influential, and all these stores and brands are super luxury brands. We were able to move into such department stores to launch our IP product. This represents recognition from the top shopping malls and recognition from top, valuable consumers. At the same time, breakout IP products expand our customer reach beyond existing audiences, elevating average transaction value and strengthening repeat purchase behavior. Together with our store operations, they form a powerful virtuous circle. Enhanced store formats provide superior showcases and a vibrant environment for IP, while IP products, in turn, provide targeted and highly loyal customer bases, jointly driving sustained high-quality same-store sales growth. For us, IP business is never purely about selling product. We have sought to leverage MINISO’s global supply chain capacity, category development, equity, and omnichannel reach to give every great IP and every talented creator a bigger stage, and to build more enduring IPs that stand the test of time and earn long-term consumer affection. The Jennie collaboration is a new area we are tapping into, working with internationally well-known celebrities. In the past we had image IP and content co-IP; however, the collaboration with Jennie showcases a new co-branded IP with CDPR release, which provides ample room for future cooperation. You see that for one of our peers, they had a collaboration with Lisa which brought extraordinary global value. Working with celebrities, we will be able to continue to improve and maximize IP value. They are all world top artists and KOLs. At the same time, I would also like to share with you, based upon our latest operating data, we expect domestic same-store sales growth in Q1 will be quite aggressive. In 2026, we hope that we will deliver more surprises. We hope more investors will keep a look at that and our working with more celebrities in the near future. The second question you asked about is product and IP strategy. We will continue to deepen our dual-engine approach of top-tier IP collaboration plus local market adaptation. On one side, we will intensify our partnership with leading global IPs. On the other side, we will further expand our assortment in high-margin categories like home goods, plush, and blind box. Just now you mentioned the U.S. market. In terms of local direct sourcing, we will optimize our SKU architecture to focus on high-velocity and high-margin items, achieving a better balance between scale expansion and GP margin. I just traveled back from the United States. In 2026, we are going to have a more precise analysis on what products need to be sourced locally, and what need to be shipped from China. Sometimes sourcing from China represents higher margin. In 2025, due to volatile tariff policy, we actually already left some room for local sourcing. However, in 2026, we believe tariff turmoil has already gone. We will be more certain and clear on what will be exported from China to the U.S. and what will have localized sourcing. Regarding margin, let me be frank. At the procurement and headquarters sourcing level, we need to further improve our efficiency, optimize the merchandise mix, and then improve the GP margin structure as a whole. Our target is to further improve operating margin in 2026, with a more pronounced recovery expected in H2 of the year. We provide a six-month buffer in H1 of this year. We believe H2 of 2026 will be great, including our Land store format. Internally, we keep a look at increasing ASP and also the price per item. We are working very hard to further improve ASP as well as per-product GP margin. Thank you. Operator: Thanks to Mr. Ye. Coming next, let us welcome Samuel from UBS. The floor is yours, Samuel. Samuel (UBS): Thank you. Thanks for giving me the chance to raise a question. I am Samuel from UBS. I have a few small questions. First, Mr. Ye, in your prepared remarks, you mentioned something regarding IP. I would like to ask you regarding your proprietary IP. What is the progress on proprietary IP? What are the sales targets and the strategic plan for 2026? What are the key third-party IP priorities? Anything you can share with us? My second question is regarding overseas markets, specifically the Mexico market. In 2025, Mexico faced headwinds. What is the outlook for 2026? My final question, I would also like to ask Eason. You mentioned you invested in an AI company. Can you disclose the name of that company? Thank you. Guofu Ye: Three good questions. Let me respond to the first one. First of all, let me talk about our IP, starting with Youyou. With less than six months of its launch in 2025, Youyou has already surpassed revenue of more than RMB 100,000,000. From January to March 2026, Youyou-related sales were already RMB 165,000,000, around RMB 50,000,000 per month. According to this trend, in 2026, for Youyou only, our sales will be RMB 600,000,000. If we also combine the international market, it is going to be RMB 800,000,000 or even RMB 1,000,000,000, likely to hit the RMB 1,000,000,000 revenue milestone. The revenue was beyond our expectation. Youyou is actually a Chinese proprietary IP. If you take a look at our IP portfolio, Youyou is the first one to have revenue exceeding RMB 100,000,000; it took less than six months. There is no other Chinese proprietary IP that could ramp such revenue growth as fast as Youyou. It truly demonstrates our product and IP operation tactics and strategy and our robust confidence and operations of IP management. As we are working on that, we will be able to deliver faster growth. In terms of product approach, we will carry forward the successful logic. We will define the structure and landscape for the designer toy market, maintaining category innovation as a primary driver of IP growth. All three product generations of Youyou released outstanding commercial results. The first generation remains most popular; till now, the average transaction value is still about RMB 400, and the third-generation product demand goes beyond our supply. At the same time, we are also clear that product sales are not the only dimension of IP management. We place greater emphasis on healthy, sustainable development of our IP. We will not sacrifice IP longevity for the sake of short-term sales revenue. I believe 2026 will be a great year for Youyou. We are very likely to have more products working with internationally outstanding IPs. For example, IPs from the Disney family are going to have a co-branded wave with Youyou. That is how our proprietary IP works with international IP for co-branding. Up to now, we have completed a full pipeline of 30 to 40 proprietary IPs. Among them, we have IPs from South Korea, Japan, and Thailand, and from all parts of the world. Especially Kumado, Chiba, and Chuchu have completed the full proprietary process from creative design to product readiness, and they will be introduced to global consumers in the months ahead. Through those pipelines, we aim to fundamentally reshape market perceptions of the MINISO IP category and product potential, creating more robust IPs that deeply resonate with consumer needs. I also would like to tell you, on May 17, we are going to have the MINISO Photo Gallery put into operation in Shanghai. That is going to be another key artist we are going to work with. That artist’s one painting masterpiece can sell for tens of millions of RMB. When our MINISO art gallery is put into operation, we are going to engage more audiences to work with us. Reflecting on what led Youyou to break through successfully, I think we did three things right. First, we constantly held to our core conviction of category innovation to drive explosive IP growth. Product innovation is quite important. The first generation of Youyou is outstanding. The success of Youyou readily allows us to recalibrate our direction for product innovation and how category innovation will be for the IP business. MINISO has been deeply dialed into the industry for many years. We have built world-class capacity in multi-category product development and adapted to consumer insights that help us rapidly convert a creative IP concept into best-selling products. Secondly, we work on IP narrative first and product commercialization second, ensuring that IPs develop their own soul and emotional resonance with consumers before products are launched, to crystallize the value, not the other way around. Thirdly, we build a fully integrated, end-to-end closed loop from upstream creative ideation to back-end supply chain to all the omnichannel distribution, enabling rapid response to consumer demand and efficient product iteration and launch. The IP incubation model is also the way that underpins our future capacity for next-generation blockbuster IPs. This is also a meaningful three-part competitive moat: world-class category development capacity, early-stage IP potential detection capacity, and high-momentum multichannel global distribution capacity. Those are the three strengths that will continue to empower the growth of our OIPs. As you may already note, our flagship and new Land format stores have many Youyou installations. That is quite important for IP promotion. You know that we have a store in Causeway Bay, Hong Kong. When we did not have our proprietary IP, we could only showcase Disney IP. Next month, we are going to have the Youyou artist installations at that store. For any IP, you have to make sure you expose the IP, especially your proprietary IP, at the store. That is our unique advantage of over 8,000 stores worldwide. With installations and Youyou’s presence in the store, that will be the best way to promote the IP at our own stores and make it visible and touchable by the consumer. The third point regarding the third-party IP and proprietary IP portfolio, I have nine words: more IP, more portfolio, globalization. In other words, we need to have global licensed IP plus proprietary IP. International IPs have their advantages. Some already have movies, well-curated content, and strong fanbases. Proprietary IPs also have the attribute of scarcity. If it is only a MINISO proprietary IP, it will protect our business strengths. By having international IP plus proprietary IP, that would be the best business combination. As we are working together, we will be able to make sure we have a stable business and more work to be done. For example, recently, we have the Jennie collaboration and we saw the Instagram movement on WeChat and Xiaohongshu a lot. If it were linked only to proprietary IP, I do not think the popularity would be that good. That is the reason I believe multi-IP, multi-category works for sure. Improving consumer experience also contributes to business stability in the long run. We need to be forward-looking rather than short-sighted. We must fully validate that third-party IP plus proprietary IP is the golden formula. We hope you can see after two to three years whether my words will be validated by the market or not. Till now, we also contracted some incubation of independent original artists and we are also incubating IP projects. Starting from 2026, in 2027 or beyond 2028, our proprietary IP development is going better. From the financial performance standpoint, proprietary IP outperforms third-party IP on gross margin contribution, owing to stronger consumer loyalty, pricing power, and absence of licensing cost. Third-party IP, in turn, provides powerful complementary benefits in new customer acquisition, audience expansion beyond our existing base, and also provides us very good content marketing advantages. The two are highly synergetic, together driving sustained and high-quality growth of our IP-related business. You know that for MINISO, the brand impact continues to ramp up. Many international IPs proactively approach us to work together. Even Jennie, the international top artist, worked with us. Jennie has a nickname as Miss Chanel because Jennie is the brand ambassador for many luxury products. Jennie has been happy with MINISO because of our strong brand and customer experience. Let me now attend to the question regarding the Mexico market. I just came back from Mexico. I am fully confident in that market. I believe it is going to be better in the near future. Mexico is going to be top three in the global arena. I met face to face with the GM of Mexico. We need to do brand operations in Mexico and develop the Land store format. We need a mix of Land and franchise stores. The top 100 shopping malls in Mexico should have GFA more than 800 square meters. In that way, the Mexico market will see explosive growth. You know that I went to Mexico and they have 100 Zara stores. All those stores have been taken in good shopping malls. Mexico’s landscape is very much like China. Their GDP per capita and the consumption structure are very much like China, with lower manpower cost. Mexico is actually in the best time for offline business development. We hope Mexico could become a benchmark market we have in Latin America. When Mexico thrives, the Latin America market will be driven. We are fairly confident in the Mexico market, and we have high expectations. We now define Mexico as our benchmark market. We will spend more effort and resources to make this market right. We have a very clear strategy for Mexico; same-store sales growth and future growth will be quite promising. My first point: you can see in 2026, Mexico will also have fast high-single-digit growth. However, it is still before the explosive growth of the Mexico market. It is still taking the old business model, old format. If they follow my line of thinking, a few stores could be transformed into Land or flagship stores. There is one store with Hermès, Chanel, and Dior as the neighborhood, and these stores should satisfy something unique rather than value for money. So I asked them to please close down that store and reformat it to sell popular IP and premium products. Mexico is often taken as a backyard of the United States. People come to Mexico who really want to shop something unique. We find Mexico is a market with great opportunities. We found that Mexico has a great array of high-quality shopping malls with very strong traffic flow. So we are not going to sell daily necessities. We are going to translate them into flagship stores, sell IP and trendy toys along with immersive experience, and drive interest consumption to improve ASP. I believe after Q2, Q3, and Q4, performance in Mexico will meet expectations. We will retrofit our stores and upgrade top 100 shopping mall locations in Mexico. I believe the performance of that 100 in Mexico will be doubled. The first question was asking about our investment. We were quite lucky to invest in a company named MiniMax. That is an AI company. MiniMax is being applied at our company very well, and I also would like to continue to work with MiniMax. We invested in MiniMax when they still had a very low valuation. Now the return is looking pretty good. So the name of that company is MiniMax. That is all. Okay? Operator: Thank you, Samuel, for your question. Due to time, ladies and gentlemen, please make sure you raise just one question per time. Coming next, let us welcome Renbo from CICC. Yanran Bo (CICC): Hello, Mr. Ye and Eason. Thanks for giving me the chance to raise my question. My name is Yanran Bo from CICC. Just one question from me. In 2025, it seems YH is pressuring your margin and financial statement. What would be your plan for YH business? Thank you very much. Guofu Ye: First of all, I need to clarify to all MINISO investors: my primary focus has always been and will always be MINISO. It is our foundation and the core driver of our future growth going forward, and it is also the foundation to make MINISO great. So you can be reassured 90% of my energy and time will be on MINISO. MINISO will always be my highest priority. My investment in YH will not distract my attention from that. Regarding YH, we have completed a management team transition with Wang Shouchen appointed as YH CEO. Under his leadership, YH has its own complete management team that is now independently responsible for the day-to-day operation and strategic execution of the business. Regarding YH’s future, we still feel confident. For MINISO and me, myself, I still would like to say MINISO will still be my highest priority, and it is also the cornerstone for the company to further expand and make MINISO truly great. I always notice the market development and momentum of MINISO is quite unique worldwide. We will seize the opportunity, continue to ramp up our business, and make MINISO great. Thank you. Okay? Operator: Thanks to Mr. Ye. Coming next, let us welcome Shu Di from Huatai Securities. Shu Di (Huatai Securities): Okay. Thank you. I am Shu Di from Huatai Securities. Congratulations on the company delivering a satisfying scorecard to the market, which is truly in line with refined operations. Mr. Ye, you have already introduced a proprietary IP strategy. We have already noticed in 2026 you take it as an operating year for proprietary IP. For the dimensional elevation for proprietary IP, what is the organizational structure of the proprietary IP team now? What pipeline and marketing initiatives should we look forward to in 2026? Thank you. Guofu Ye: We define 2026 as the evolution year for our proprietary IP. The foundational first step is the comprehensive organizational restructuring and level design of our IP business. We established a dedicated IP business group with full accountabilities across the IP value chain from creative incubation to product development to omnichannel operation. Our leader of merchandise has been placed into the IP business group. We are putting very experienced people to take the lead of the IP business group—the best and most capable people to run the IP business—so you can already notice how important IP business will be for MINISO. You can see that, directly, in many companies people are just using new managers to run new businesses. It is quite risky. We remain confident in our new business. We are using the most capable individuals to run the new business. That is what we do at MINISO. The most capable individuals and the capable team are running the new business, IP business, and that business is fully independent as a new business group. Regarding team build-out, we have completed targeted headcount expansion in IP operation, product management, and creative design, and we also established two new back-end R&D departments including CMF (color, material, finish) and ink and powder development. We are among a few companies that started to enter into material study. So for our trendy toys, we not only do IP, we also do product design and material study and color study and finish study, stressing that IP product manufacturing from supply chain building to product quality continues to consolidate the foundation for long-term IP growth. That is what we did in 2025. We will have the fabrics and raw material aspects, and we have a CMF unit that is established in Dongguan, very close to our headquarters. Regarding marketing and communication, we are working to build global IP influence through a diversified range of activations. For example, attending international art fairs and fashion weeks. On May 17, we are going to have the MINISO Photo Gallery put into operation in one of the best art centers in Shanghai. That also helps to showcase our standing within the artist community. For continued updates, we are going to have our own photo gallery not only in Shanghai, but also a new one in Hong Kong, because Hong Kong is actually the hub for global artists. We are going to build such photo galleries in Hong Kong too. By leveraging those photo galleries, we are going to engage the best artists worldwide, continue to ramp up collaborations, and also leverage KOLs to amplify our brand reach. Last year, for Credit Katy Kitty as well as other international artists, we started to work with them for marketing events. Even some of the short videos and secondary creations have been quite popular. There are many secondary creation contents of Youyou, and even within secondary incubation or content creation, Douyin is actually ranking number one among all IPs. The fans are quite active. Certainly, at retail we actually have IP-specific zones, translating brand impact into actual sales. In Guangzhou, we also have the Artist Street that is about 50 square meters GFA. We are going to allow new artists and new products to be showcased in those Artist Streets, having interactions with consumers. I believe that by so doing, we will be able to continue to scale our investment in proprietary IP incubation, creating an ecosystem and back-end R&D capacity. Our investment is for long-term healthy development of IP, not short-term traffic speculation. We focus on building high-quality IP that accumulates enduring brand value and generates sustainable cash flow, cementing a robust second growth curve for the company’s long-term future. That is our strategy now. In the near future, as we continue to improve our business capacity, we will have new IPs and new strategies to truly unlock the value of IP. Operator: Coming next, let us welcome Anne from Jefferies, please. Anne (Jefferies): Thank you. Mister Ye, thank you very much. I have a question for your SSSG. What is the current same-store sales performance? What about store expansion or site selection? And also the operating margin level in different markets, especially in the directly operated stores overseas. In the past, you were still in the investment stage. When are we going to expect operating return improvement? Thank you. Eason Zhang: Thank you. I am Eason Zhang. Let me help respond to your question. I think for the past 12 months, our growth philosophy is getting more clear: same-store sales growth as a foundation and new store expansion, especially high-quality ones, as incremental upside. Those are working in tandem. For SSSG, our 2026 goal to deliver a positive SSSG globally is quite challenging; however, we have ways to make it happen. Because in international markets, we still have some agent stores. It is not easy to make their growth positive. However, with good assortment, we have every confidence we will be able to handicap them. Regarding store expansion, I have already mentioned a net increase of 510 to 515 high-quality stores globally, with China and international markets serving as a twin engine for growth. In China, we plan net new adds of 120 stores; the majority of them will be the Land format and large-format stores. We will also close our underperforming small stores and continue to optimize the existing portfolio. In 2026, besides same-store sales growth, the high-quality new stores opened in 2025 and 2026 will contribute meaningfully in subsequent years as they mature. In China, we will still harvest good growth, but net growth will be only 120. In international markets, net store growth will be 250 stores, covering North America, Europe, Southeast Asia, and Latin America, deploying a combination of Land format flagship stores plus high-quality standard stores in prime retail destinations. As Mr. Ye mentioned, we need to move into the world-class business streets to improve the brand potential. Regarding North America, same-store growth already exceeded 20% in January and February 2026. We expect OPM to have a low single-digit improvement. In Europe, since the start of 2026, we see SSSG grow by double digits. Store expansion is progressing steadily. For example, in Poland, we opened two stores which are quite efficient working on 20 toys only, making lucrative profits. In Europe, we have another four direct-operated markets. Those are still in the early-stage investment. We hope OPM could be improved further. In Mexico, since the start of 2026, we see SSSG growth being a positive number, and we believe Mexico with the agent model still provides a stable operating profit margin. In Southeast Asia, we see some challenges. However, for MINISO, our business model is globalization. No matter if some markets have been challenged, we can leverage our global expansion to diversify our investment portfolio. We have some challenges in Southeast Asia; however, we are going to return to positive SSSG, working on Indonesia, primary locations, to have new stores. Overall, SSSG and OPM trajectory across all key markets remain healthy, which also showcases that we are still in a fast expansion and growth period. The key drivers are four: optimizing stores, product operations, scale expansion, and, lastly, well maintaining cost and expenses. Thank you. Operator: Thank you, Eason. Next question, let us welcome Madam Xu from CCB International. Please. Madam Xu (CCB International): Thank you. Mr. Ye and the management team, I have a question regarding the Southeast Asia market. Southeast Asia was the first start for international expansion. In 2025 I made a visit in Southeast Asia. The performance of Southeast Asia has been a concern of investors. What is the inventory in the Southeast Asia market? Are you going to adjust operations and product strategy there in 2026? Thank you. Guofu Ye: Regarding the question for the Southeast Asia market, I think in 2026 there will be a huge adjustment. MINISO started our global expansion ten years ago. We made major investments in Mainland China. In 2026, we are going to adjust four key markets: Thailand, Malaysia, Philippines, and Indonesia. In Thailand, we were quite successful and the Land format stores delivered tangible results. Indonesia is going to copy the Chinese model. Southeast Asia is quite close to China, and the consumption pattern is very much impacted by China. The lessons and success we made in China can help guarantee success in Southeast Asia. Recently, we went to Malaysia to have a MINISO Land store with very nice performance. In 2026, we are going to continue to copy what we do in China to key markets in Southeast Asia. I believe after the 2026 adjustment in H1, then in H2, Southeast Asia is going to provide you a good turnaround. We have a very clear and transparent strategy. We are going to execute it right. Madam Xu (CCB International): Thank you, Mr. Ye. No further questions from me. Operator: Okay? We are going to accommodate the final question. Jingyi Yang from Yangtze River Securities, please. Tina Yang (Yangtze River Securities): Thank you. Thanks to the team. Mr. Ye and the management team, I am Tina Yang from Yangtze River Securities. I have a question for you. Regarding the store renovation and upgrade program, is it possible for you to tell us what the strategy for 2026 will be? How many stores do you expect to renovate in 2026? What are the results from the completed renovations so far? Thank you very much. Guofu Ye: In 2025, we completed renovation for 290 stores. The results were highly impressive. Renovated stores’ average sales uplifted by 40% to 50%. The improvement is not attributable to a single factor, rather a simultaneous improvement of foot traffic, conversion rate, and ASP. They are all being improved. At the same time, rent as a percentage of sales has declined meaningfully. Staff productivity and sales per square meter are rising significantly. Single-store profitability has improved too. More importantly, you can see that last year, major landlords have been getting more supportive, and we also got greater support from landlords who are happy to provide better and larger locations to allow us to have Land stores and larger formats. With prime locations, cheaper rent has been provided. In 2026, with our proprietary IP development, some shopping malls and department stores are happy to present the best locations for us to do aesthetic IP exposure and IP presence. That can really showcase how the resources we will be offered. In 2026, we are going to accelerate renovation and adjustment. Underperforming stores will be upgraded and moved to prime locations. 2026 is a year for accelerated renovation. I have already mentioned in the near future 80% of stores need to be renovated and upgraded. With our proprietary IP development, in the near future our stores are going to be quite unique, quite differentiated, and they are going to be more influential in the landlord’s mind and be able to get good leasing terms. That way, I believe assets will contribute to our business growth and profitability in China. Thank you. Operator: Thanks to all the investors and analysts for your time for this conference. If you have any further questions, please reach out to the IR team. Thanks for your attention to MINISO Group Holding Limited. See you next quarter. Thank you.
Operator: Thank you very much, and good afternoon, ladies and gentlemen. Welcome, and thank you for joining our conference on the financial year 2025 results. My name is Jeroen Eijsink, and this is the first time I'm addressing you in my role as Chief Executive Officer of HHLA. I'm very pleased to be here today together with my fellow Executive Board member, Annette Geiss, to guide you through HHLA's performance in the 2025 financial year. Over the past 6 months since assuming the role on October 1, 2025, I've taken the time to get to know HHLA in depth. This has included spending a great deal of my time at our terminals in Hamburg as well as visiting our European subsidiaries such as Metrans and PLT Italy. Above all, I have met many of the people who ensure around the clock that supply chains continue to function. What I have seen during this time is a company with strong substance and committed teams. HHLA is operating in a challenging environment, but it is well positioned to address the challenges ahead. At the same time, I have also gained a clear understanding of where we need to improve and where we will focus our efforts going forward. Let me now briefly summarize the past year 2025. The year was shaped by a demanding market environment. Persistent geopolitical tensions and continued economic weakness in Germany weighed on supply chains and reduced planning certainty. At the same time, global trade flow shifted with declining volumes on North American routes and growth in Far East trades, particularly with China. Another factor during the year was the reorganization of liner services following the formation of new shipping alliances, most notably the launch of The Gemini Cooperation by Hapag-Lloyd and Maersk. In addition, MSC gradually shifted its Hamburg services to HHLA over the course of 2025. For the Port of Hamburg, this resulted in a noticeable reallocation of traffic flows, while all major alliances continue to be handled reliably by HHLA. In this dynamic environment, we focused on strengthening our operational base. We continued to modernize our Hamburg container terminals, building on our automation expertise at CTA and advancing our reorganization and expansion measures at CTB. At the same time, we strengthened our European Intermodal network by further expanding the activities of our Rail subsidiary, Metrans. For instance, we announced the modernization of our terminal in Slovakia and laid the foundation stone for a new site in Hungary in 2025. Most recently, we secured a 50% stake in a Romanian terminal to establish our first intermodal facility there. With investments like these, Metrans strengthened its position in Southeastern Europe. Even in a challenging geopolitical environment, we remain committed to our long-term strategic priorities. These include our continued engagement in Ukraine marked by the acquisition of a majority stake of 60% in the Intermodal Terminal Batiovo. Operationally, this all translated into solid growth. Container throughput increased by more than 5%, while Container transport rose by almost 11%. Supported by this volume growth, both revenue and EBIT made good progress. Revenue in the Port Logistics subgroup increased by about 10% and EBIT rose by more than 20%. At the same time, profit after tax and minority interests was burdened by a one-off and noncash tax effect. It was not cash-effective, but had a significant impact on net income for the year. Against this backdrop, the Executive Board, together with the Supervisory Board have decided to propose to the Annual General Meeting that no dividend will be distributed for the 2025 financial year. The focus remains on financing capabilities and a disciplined capital allocation to support the persistently high-level of strategic investments ahead. With that, I would now like to hand over to Annette, who will take you through the performance of our segments in more detail, starting with the Container segment. Annette Walter: Thank you, Jeroen, and good afternoon, everyone. Let's move directly to the performance of our Container segment. As Jeroen has already mentioned, we recorded overall growth in container throughput of 5.4%. Volumes at the Hamburg container terminals increased by 4.8% to almost 6 million TEU. The key drivers in overseas traffic were volumes to and from the Far East, especially China, as well as South America, Africa, Australia and the Middle East. By contrast, the North America shipping region declined strongly. Volumes in feeder traffic increased significantly year-on-year. This development was supported mainly by traffic with Finland, Poland and other German ports. However, cargo volumes from Estonia, Latvia and the U.K. declined. The proportion of seaborne handling by feeders was slightly above the previous year's level at 19.6%. At our international container terminals, throughput volume rose strongly by 19.2% to 339,000 TEU. Especially in Italy, we saw remarkable volume growth at the HHLA PLT Italy, which really makes us proud. At CTO, we resumed seaborne handling in the third quarter of 2024 and we were able to continue operations throughout 2025, also, still with certain limitations. This base effect leads to the significant year-on-year increase expected for 2025. Volumes at the multifunctional terminal at HHLA TK Estonia declined slightly on the other hand. Segment revenue climbed significantly by 9.0% year-on-year to EUR 843.2 million. This was supported by higher throughput volumes and beneficial shift in the modal split. On top of that, HHLA's international container terminals made a positive contribution to revenue growth with a strong performance of PLT Italy standing out once again. EBIT costs increased by 11.5% compared to the previous year. This was mainly driven by extensive automation efforts, the positive volume trend and correspondingly higher capacity utilization. Personnel expenses also increased, reflecting union negotiated wage settlement and the additional deployment of personnel from the general port operations pool. In addition, expenses for consultancy and related services as well for purchase services, rose strongly. As a result of necessary investments, depreciation expenses increased moderately. The earnings safeguard measures implemented at the Hamburg container terminal since March 2023 had an offsetting effect, but were not sufficient to fully compensate for the cost increases described. Against this backdrop, EBIT declined by 6.4% to EUR 73.6 million, while the EBIT margin decreased by 1.5 percentage points to 8.7%. So let's move on now to the Intermodal segment. Transport volumes in the Intermodal segment made particularly good progress over the year. As a result, container transport rose by 10.9% to 198,200 TEU compared to the previous year. Rail transport rose year-on-year by 11.2% to 171900 TOU. This strong volume growth was largely driven by traffic with the North German seaports as well as traffic in the German-speaking countries. Moreover, the transport volumes of Roland Spedition in the previous year were only included from June onwards. Road transport rose significantly by 8.7% to 263,000 TEU. This development was helped in particular by the recovery of transport volumes in the Hamburg region. With an increase of 12% to EUR 797 million, revenue outperformed the volume development. In addition to routine price adjustments, this was partly due to the further increase in Rail share of the total intermodal transport volume from 86.5% to 86.7%. EBIT increased by 23.9% to EUR 103.7 million. The main reason for this strong EBIT growth was the increase in transport volumes despite an opposing effect from ongoing operational difficulties caused by construction work on major transport roads and congestion at the North-German seaports. Let's turn briefly to the Logistics segment, where we have pooled for instant vehicle logistics consultancy as well as digital and leasing services. In the reporting period, the consolidated companies generated a revenue of EUR 92.8 million, representing an increase of 10.9% compared to the previous year. The rise is attributable to the leasing company for intermodal traffic and to vehicle logistics. After reporting a loss in the previous year, the segment returned to a positive operating result of EUR 6.5 million in 2025. The performance within the segment varied across the individual companies. Whereas the Leasing company and Vehicle Logistics made strong earning contributions, our Innovative business activities fell short of the prior year result. At-equity earnings also made encouraging progress, increasingly by 27.5% to EUR 5.7 million in the reporting period. Coming back to the Port Logistics subgroup as a whole, let's have a look now at our cash flow development. The reporting period, cash flow from operating activities of EUR 257 million mainly comprised earnings before interest and taxes as well as write-downs and write-ups on nonfinancial assets. The main items with an opposing effect were interest payments, trade receivables and other assets as well as income tax payments. Investing activities resulted in a net cash outflow of EUR 307 million, up almost EUR 26 million on the previous year. This development was largely due to payments for investments in large-scale equipment at the Hamburg container terminals as part of our efficiency program. As a result, free cash flow of the Port Logistics subgroup was a negative amount of EUR 50 million. Cash flow from financing activities totaled EUR 0.4 million. On the one hand, new financial loans of EUR 140 million, on the other hand, opposing effects from dividend payments and settlement obligations to shareholders of the parent company and to noncontrolling interest as well as from repayments on bank loans and payments for the redemption of lease liabilities. Overall, our available liquidity at the end of December 2025 remained at a robust level of EUR 180 million. Before I hand back to Jeroen, I would like to briefly address our dividend proposal. At this year's Annual General Meeting, the Executive Board and the Supervisory Board will propose, not to distribute a dividend for the 2025 financial year, neither for the Class A nor the Class S shares. As we already mentioned before, earnings per share are at a very low level. At the same time, we are currently investing at a high level in order to modernize our terminals and ensure that our infrastructure is fit for the years ahead. Against this backdrop, we have decided to retain the available funds within the company to safeguard our ability to invest and to finance our projects. This represents a responsible prioritization in favor of the long-term stability and future strength of HHLA. That concludes my remarks. For the review of our ESG performance, an update on the squeeze-out and an outlook for the 2026 financial year, let me now hand back to you, Jeroen. Jeroen Eijsink: Thank you, Annette. Let me start with the sustainability topic. Sustainability is not an image project for us. It's increasingly becoming a hard competitive factor. Our customers are paying much closer attention to low-carbon supply chains, and we are actively helping them achieve their targets. To do so, we are making investments in three key areas: energy-efficient systems, electrified equipment fleets and automated processes with significantly reduced emissions. There are already very concrete examples of this across our operations. At CTA, our tractor units are now fully electrified. At CTB, automated guided vehicles are helping us to significantly reduce diesel consumption, and at CTT, we are operating hybrid van carriers that are already designed to be converted to battery or hydrogen power. As a result, almost half of our total energy consumption is already covered by renewable sources today. This clearly demonstrates that technological innovation and sustainable solutions go hand-in-hand at HHLA. This is not only an ambitious aspiration, it's operational reality. Accordingly, this is also reflected in our EU taxonomy indicators, where we once again achieved very strong results. All of these measures are decisive steps towards our long-term objective to achieve climate-neutral production across the entire HHLA Group by 2040. Before we turn to the outlook for 2026, I would like to briefly address another topic that has been high on our agenda since the beginning of the year. In addition to our operational and financial performance, the squeeze-out request announced in early January by the Port of Hamburg Beteiligungsgesellschaft SE, HHLA's majority shareholder has required considerable attention. So where do we currently stand in the process? The amount of the cash settlement is currently being determined by an independent expert. Following this, the squeeze-out will require approval by the Annual General Meeting in June. Of course, the Executive Board will accompany this process in a responsible and constructive manner. Let me conclude by briefly addressing the current market situation and our outlook for the 2026 financial year. Recent developments in the Middle East once again pose significant challenges for international shipping. They continue to affect global trade routes, sailing schedules and supply chains and as a consequence, also have an impact on European ports and logistics corridors. At present, we are seeing a market rise in uncertainty. Shipping lines are adjusting schedules at short notice, opting for alternative routes and in some cases, accepting extensive detours. This results in longer transit times, higher operating costs and greater operational complexity along the supply chain. Against this backdrop, the outlook shown on this slide is subject to a degree -- a high degree of uncertainty. At the same time, the progress we've made in recent years in modernizing our infrastructure and expanding our European network provides a solid basis for our expectations for the current financial year. Overall, we expect a positive development for the current financial year. We anticipate a significant year-on-year increase in container throughput and a strong year-on-year increase in container transport. Moreover, strong revenue growth is expected from the Port Logistics subgroup compared to 2025. EBIT is likely to be between EUR 160 million and EUR 180 million. To further increase efficiency and expand capacity in the Container and Intermodal segments, capital expenditure in the Port Logistics subgroup will be in the range of EUR 400 million to EUR 450, around half of this amount will be invested in the Container segment with the majority going to the Hamburg container terminals. These investments will focus on the efficient use of existing terminal space in the Port of Hamburg and the expansion of our foreign terminals. The other half will be used primarily to further expand our own transport and handling capacities for our Intermodal activities. With this outlook for the current year, I would like to close my remarks on our 2025 financial results. Annette and I are both happy to take your questions now. Operator: [Operator Instructions] Ladies and gentlemen, there are no questions at this time. I would like to turn the conference back over to Jeroen Eijsink for any closing remarks. Jeroen Eijsink: Ladies and gentlemen, thank you very much for your interest in HHLA. Before we conclude, I would like to leave you with a closing thought. HHLA remains a central pillar of European logistics. Our international network strengthens our resilience, broadens our positioning, enhances our competitiveness. Our investments consistently focus on reliability, efficiency and sustainability, guided by our commitment to continuously improve customer satisfaction. We are determined to stay on this course. Thank you.
Operator: Good day, everyone, and welcome to the CXApp Fourth Quarter 2025 Earnings Call. [Operator Instructions] It is now my pleasure to hand the floor over to your host, Khurram Sheikh. Sir, the floor is yours. Khurram Sheikh: Thank you, Matthew. Good afternoon, everyone, and thank you for joining CXApp Fiscal Year 2025 Earnings Call. I'm joined today by our Chief Financial Officer, Joy Mbanugo. I am Khurram Sheikh, Chairman and CEO of CXApp. Before we begin, I want to frame today's discussion. 2025 was a year of deliberate transformation. 2026 is a year of AI-driven acceleration. Today, we will walk you through what we accomplished, where the market is heading and why we believe 2026 represents a true inflection point for CXAI, as we know, you pronounce as sky. With CXAI, we are moving beyond simple workplace apps to an autonomous agentic platform where we define the employee experience. Let me start by directing your attention to our safe harbor statement over the next few slides. Please read at your leisure once you have the slide deck. All right. For those newer to the CXAI story, let me give you a quick snapshot of who we are. CXApp trades on NASDAQ under the ticker CXAI. We're headquartered in the San Francisco Bay Area with offices in Toronto and Manila, giving us a global engineering and delivery footprint. CXAI is a global AI-native workplace experience platform deployed across 200-plus cities, 50-plus countries with over 1 million plus users. We built this with a lean and highly technical team with over 70% focus on R&D, which is critical given our pivot into Agentic AI. Importantly, we now have 39 patents filed, including a new provisional filed on Agentic AI just recently, and we're really proud of that filing because it is a landmark in our space. And then we also have -- already have 18 granted patents. This patent portfolio is not -- is a meaningful competitive moat. This is not just a product company. This is becoming a defensible AI platform company. We maintain enterprise-grade compliance with ISO 2701, SOC 2 and GDPR certification. This is a global enterprise-ready platform with the security credentials that Fortune 500 procurement teams aspire to. So very proud of that. We're proud of the accomplishment of the team over the last year, and we're going to share with you what this strategic transformation has been about and why this is a really great point for our investors to understand what is really happening in the market. So I want to start with the market. Why is this timing right for CXAI, right? We are seeing a fundamental market shift in enterprise workplace technology. Three forces are converging simultaneously. First, hybrid workplace orchestration. Fortune 500 enterprises are actively procuring unified platforms that consolidate desk booking, room booking, parking, dining and attendance into a single workflow. They want calendar and HR system integration with AI-driven smart bookings. The days of coming together 5 or 6-point solutions are ending. Secondly, AI and specifically Agentic AI have moved from nice-to-have to require or must-have. Enterprise buyers are now mandating AI agents with 3-year road map. They want conversational assistance, proactive suggestions, auto routing and AI-enhanced incident reporting. This is not a future requirement. This is the current RFP today. And this is why we're seeing this good momentum because we've seen a lot of RFPs from large enterprise that are exactly what we've been working on. And thirdly, we have started our journey with indoor intelligence and IoT, the Internet of Things. Enterprise want interactive map with real-time occupancy data from IoT sensors, wayfinding, colleague finders and visitor management with multimodal physical and access control. That kind of gives us a new advantage in terms of the AI world. It gives us that localization and edge experience. So CXAI, CXAI sits at the intersection of all these 3 trends. We're not chasing the market, the market is coming to us now. And that's why we see as way, way different from 2025. Now what is happening with Agentic AI and the defining trend there? Let me put some numbers behind the AI opportunity. By the end of 2026, Gartner estimates that 40% of enterprise apps will feature task-specific AI agents, up from less than 5% in 2025. This is an 8x increase in a single year, and workplace is identified as a primary deployment domain booking, service request, contextual suggestions. This is exactly what we built. The AI agent market currently sits at $7.8 billion and is projected to reach $52 billion by 2030. Gen AI model spending alone is growing at north of 80% in 2026. On the adoption side, 88% of organizations now report regular AI use in at least 1 business function. Enterprise software spending is up to around 15% year-over-year, driven primarily by AI investment. The validation from Fortune 500 buyers is clear. They now require AI agents, conversation systems and AI road maps in their procurement decisions. They are specifying exactly what CXAI does. And as you all know, we didn't pivot to AI. We've been building towards this for years. The market has now validated our thesis. So what I see is this is really a platform shift, Agentic AI becoming the control layer of enterprise software and CXAI is positioned directly in that layer as the interception on workflows, data and physical environment. You heard at GTC, Jensen talked about physical AI. We are the physical AI for that workplace environment. So I'm super excited about the direction the market is heading and what we've been accomplishing over the last 2 years with our Agentic AI platform. It's interesting when I have been working with our sales team on all the different opportunities that come in. It is super interesting to watch that our competition is actually no longer there because with our Agentic platform, our clients are coming to us saying, this is what we actually want. We want you to be successful and build it for us. So all the new clients coming in are asking for Agentic AI as critical, as part of the road map. Without it, they will never deploy a solution and the existing customers are naturally evolving to this very rapidly. So let me summarize also what has been the strategic transformation in 2025 and what do we actually do? We executed a comprehensive strategic transformation built on 4 pillars. First, we focused on high-quality recurring revenue. We mean a deliberate decision to prioritize subscription revenue over onetime services and implementation fees. That shows up clearly in the numbers, which our CFO, Joy, will walk through shortly. Secondly, we implemented an AI-driven cost structure. As you know, we have a partnership with Google where we are implementing a lot of the GCB-based solutions. We're a big AI user. We're using Gemini. We're using all the different tools out there with different providers. I won't name all of them because some of them maybe have said that we're not using them, but we're using a number of those guys. But it's all driven towards productivity and to drive operational efficiency, reduced cloud cost in automating the process that previously required manual effort, that AI-driven cost structures across all our functions, be it engineering, be it sales, be it marketing, and that has resulted in, as you've seen the numbers, a much reduced cost structure for us. Thirdly and most importantly, we built our platform from the ground up as an AI-native CXAI platform. This wasn't a bolt-on. We will talk about BOND and CORTEX. They were our key orchestration and intelligence layer solutions. We had designed from day 1 as core platform components, not afterthought. And fourth, we balance short-term impact with long-term scalability. Yes, revenue declined in 2025, and we're transferring above that, but the revenue we have today is dramatically higher quality and the platform we built positions us for a sustainable, scalable growth in 2026 and beyond. I'm going to talk a little bit more about the impact of all of that to our clients and to the end market. This slide illustrates the fundamental transformation we made and how our product delivers value. Because a lot of the customers ask a question, so what? Why is this so important to me, what's the ROI? What's the value? And given all the information out there on AI and Agentic AI, all the promising we made, why is our solution relevant? And this is where we want to show you what the legacy systems are and what our system. We're going to describe those systems in detail later, but I want to show the value and outcome, right? If you look at the legacy world, workplace tools required multiple clicks, manual configuration, fragmenting analytics across different tools. That's what most of our competitors still offer, right? With our AI platform, we replaced those pain points with 4 core capabilities. BOND + CORTEX replaces multi-click workflows with instant actions and autonomous workflows. CXAI VU replaces static analytics with real-time insights that produce actionable outcomes. Our One-Map engine and experience engine replaces fragmented tools with a single source for all workplace data and actions. And finally, our Zero-Touch deployment replaces months of manual configuration with site deployments measured in days now versus months. This is an incremental improvement. This is a category shift from SaaS to intelligent AI platform. And it's the reason enterprises are choosing CXAI over legacy alternatives. And that's being delivered from us in terms of our design, our capability and how we thought about making this system frictionless for our clients. So I'm going to pause now and turn it over to the CFO, Joy Mbanugo to go through the financial results, and I'll be back with the strategic implications for 2026. Joy, over to you. Joy Mbanugo: Thank you, Khurram. Let me walk you through the financial results for fiscal year 2025. I want to start by framing how we think about the past year. As Khurram mentioned, fiscal year 2025 was a year of intentional and strategic reset. We made very deliberate decisions to exit lower quality revenue, transition the platform from SaaS to AI and build a more durable foundation. Those decisions had a short-term cost, and you'll see that impact on the top line. But the underlying health of the business has improved meaningfully, and I want to walk you through exactly why. Starting with the headline numbers on Slide 10. Total revenue came in at $4.6 million compared to $7.2 million in the prior year. I'll address the decline directly in a moment, but first, let me highlight what moved in the right direction. Subscription revenue now represents 98% of total revenue up from 87% a year ago. That shift matters because subscription revenue is recurring, predictable and very high margin. It's a foundation that every AI -- before it was SaaS, and it's the foundation that every AI company wants to be built on, and we're essentially there. Gross margin expanded to 87% in up 5 points from 82% in 2024. That improvement came from disciplined cloud cost management and platform efficiency gain. It demonstrates the operating leverage in our model. We ended the year with a really healthy cash balance of $11.1 million as of December 31, strengthened by various capital raises throughout the year. And that gives us a real runway to execute for the rest of this year. So we have enough cash to cover our expenses for the next 6 quarters. On a per share non-GAAP basis, our diluted earnings per share was negative 58%, improving from last year, which was negative $1.2. So yes, revenue decline, but the business that remains is fundamentally stronger than what we started the year with. Can we go to the next slide? So now I go line by line on the P&L, so you have a more robust picture of what happened over the last year. Revenue was $4.6 million, down 36% year-over-year. This reflects 3 things: the exit of noncore and low -- noncore contracts and professional services, customer churn during our platform transition and reduced bookings during the positioning period. We expect that some of this decline, and it's the cost of doing the reset correctly. Cost of revenues dropped 55% from $1.3 million to $578,000. That declined significantly outpaced the revenue decline, which is exactly what drove the margin expansion. We became materially more efficient at delivering the product. Gross profit was $4 million at 87% gross margin, up 5% -- up 5 points year-over-year. For context, that puts us in best-in-class with other companies in this area. This is a structural improvement, not a onetime event. Now on to operating expenses. Total OpEx was $21.6 million, up 10% from $19.6 million. I want to be direct about what drove that. R&D modestly increased by 4%, but that was intentional and we'll continue to invest in R&D while we continue to invest in AI and improve in the product. We believe that this investment is what's going to position us for double-digit growth in 2026. Sales and marketing was cut by a significant 36% as we use AI in our marketing efforts and made our go-to-market motion leaner, more targeted enterprise sales approach. G&A increased 10% and part of that is restructuring related, we're actively managing this down this year. The most important part in OpEx is the goodwill impairment of $2.1 million. This is a noncash accounting charge. It does not reflect cash outflow. It does not affect operations, and it's not recurring. It is the primary reason that OpEx increased year-over-year. Excluding that item, our operating cost base was essentially flat. Loss from operations was $17.6 million. Adjusted for the goodwill impairment of $2.1 million, the underlying operating loss was approximately $15.4 million, roughly in line with the prior year even as we continue building this platform. Now let's walk through the EBITDA bridge. If we can go to the next slide, please. Going through EBITDA and adjusted EBITDA, this is really important because this shows where some of the operational improvement comes from. Starting at a net loss of $13.5 million for the year, is already a meaningful improvement from $19.4 million of last year. And in back interest, taxes, depreciation, we arrive at negative EBITDA at $10 million compared to negative $15.6 million EBITDA in 2024. That is a 35% improvement year-over-year. This is a number I would point you to as the clearest measure of our operational progress in 2025, their trajectory is definitely trending in the right direction. Now adjusted EBITDA came in at negative $9.8 million compared to negative $8.3 million in 2024. I want to address this directly because on the surface, it could look like a step backwards. And I don't want that to go unexplained. The entire difference comes down to 1 line, our change in fair value of derivative liabilities. And if you remember from last year, this is related to our convertible notes. In fiscal year 2024, this line item was a positive $3.2 million and it flattened adjusted EBITDA. In 2025, it looked to a negative $4.5 million. That is a $7.7 million noncash swing driven entirely by mark-to-market accounting on derivative liabilities. This has 0 impact on our cash position, 0 impact on our operations. It is purely an accounting timing item. If you strip that 1 item out, adjusted EBITDA improved year-over-year. The other adjustments are pretty straightforward, stock-based comp, $2.8 million to $2.1 million of goodwill impairment, we already discussed in smaller items that net close to zero. The real punchline is that our $11.1 million cash balance more than covers our cash-based operating loss. We have the necessary runway to execute, and the hard part of this transition is behind us. If you remember last year, we ended with a significantly lower cash balance. And so we're starting off 2026 very, very strong. Now let's talk about pipeline and sales momentum, which is really exciting to discuss. As Khurram mentioned earlier, I think if we were at this time last year, we had momentum, but the momentum we see now as enterprises move towards Agentic genetic AI is really exciting. And even at CFO conferences and other tech conferences, you can see the excitement and the flurry of activity as people think about moving away from pure SaaS platforms and look into adopting Agentic AI. So where does that leave us as we head into 2026? The pipeline is growing. We are seeing expansion activity within existing enterprise customers. Accounts that have been on the platform are now asking for more. We are seeing new vertical opportunities that we're not pursuing 12 months ago, and we are seeing early signs of acceleration in bookings. In Q4 2025, we had really strong bookings and that has really continued into this year. On the market signal side, 3 things stand out. First, enterprises are consolidating, as you can see in the news, they're moving away from point solutions towards unified experience solutions that is exactly what CXAI is. The procurement conversations we are having today are fundamentally different from a year ago. Buyers are not comparing us to individual tools, they are evaluating us as a complete platform. Second, and very importantly, Agentic AI has become a buying requirement. Executive buyers like CFOs and real estate -- people that own real estate are now specifying AI agents, conversational agents and 3-year AI road map as a baseline requirement before they sign, before you even having a conversation, and we have built exactly that. The platform spent rebuilding is what enterprise procurement teams are now asking for by name. Third, and this is the 1 that gives us the most confidence, customers are telling us that they need our agentic capabilities to make their final buy decision. That is a closing signal, that is pipeline converting. 2025 was a strategic reset, 2026 is where that investment pays off. With that, I'll turn it back to Khurram, who will go through the rest of the presentation. Khurram Sheikh: Thank you, Joy. So let's talk about 2026 outlook. Looking ahead to 2026, we expect AI-driven acceleration to deliver double-digit growth. Let me outline the 4 pillars of our outlook. First, our Agentic AI platform, BOND + CORTEX is in market now and it's generating a lot of enterprise interest. As I said, all the RFPs we've responded to, all the wins that we're getting in this quarter and the coming quarter are all driven because customers have tested and evaluated and understood that what we have, is our road map, is the right thing. And this is our primary growth engine for 2026 is because of that differentiation. Secondly, we expect large enterprise wins and a strong power pipeline conversion as Joy mentioned, we've been involved with a lot of these RFPs for a while. I think it's very competitive. And the competition is not just smaller companies. They're also looking at much larger enterprises that are looking into solutions in our space. And the good news is we are winning. And we're winning big in terms of these client opportunities. So I'm very hopeful on that. These deals are in our funnel today are larger and more strategic than they were ever before. And the reason is because Agentic AI is so critical to an enterprise. It is not a senior manager level decision. This is a C-level decision. At the CIO, the CTO, the CHRO, the Head of Real Estate and even the CEO of the company. This is [ sacrosan ] for them. So that's why they're deliberately taking the time to test it, to validate. They do the RFP and then they show up in our labs, CXAI labs here in the Bay Area and they're wowed by our engineers and our team, and they go back and tell their procurement guys, we need to get CXAI. And that's what's happening. And so I'm super excited about that. So we're confident we're going to achieve those large enterprise. They take a little longer, but they are for the long run. Certainly, strategic partnerships and particularly in vertical AI. And this is creating new distribution channels for us. We'll talk about our TouchSource partnership, that alone gives us access to over 11,000 digital directory deployments. Huge opportunity for us to partner with them and to scale our business through those distribution channels. And we'll talk about more in the coming weeks and months, but that is super exciting 1 for us right now. And fourth, we are committed to sustainable, high-quality revenue growth. We will not sacrifice the quality of our revenue base to chase top line numbers. Growth will come from subscription expansion, not onetime fees. So we stay with that philosophy. I think with the Agentic AI world, the monetization mechanism changing too from not just pure subscription, but also for outcome-based, and I think we're super excited about those opportunities, especially with the new clients who are coming in with a fresh perspective of the market. The 2025 reset is behind us. We entered 2026 with a stronger product, cleaner revenue, better margins and a validated market demand. That, to me, gives me confidence and hope that we're going to be super successful in 2026. So let me talk about some of these elements in more detail. And I'll start with the product road map. So this is a clear evolution and revolution from CXAI. CXAI 1.0 is our current platform. That's where all our current clients have. It's a single code base, delivering space booking, navigation, enterprise, SSO integrations and the full mobile app experience. This is what's in production with everybody, and this is still going to be around for a long time because it's the basis. And it gives us a strong leverage in terms of building CXAI 2.0, which is our major evolution, and it's going to be released in June 2026 with our new clients as well as the existing clients who are upgrading there. And this includes our behind the scenes or access control and [ Agentic ] system, plus our One Mapping engine, delivering a unified One Map experience. It has the Agentic AI interface powered by BOND and CORTEX. Achieves full web parity with our mobile experience and enables Zero-Touch campus deployment. CXAI 2.0 is the version that unlocks our next phase of enterprise open. So all the new clients I talk about are getting CXAI 2.0. They're already having their sandboxes, they're doing their first MVP deployments. And by June, they will be launching their campuses, their first deployments with that, and this is going to be the growth engine for all the new clients and then the existing clients are all wanting to upgrade to CXAI 2.0. So a huge opportunity for us, and this has been the making in the last 12 months. Looking further ahead, our future vision is CXAI Sky. What I mean by that is tongue-in-cheek, it's really the full Agentic AI-driven user experience with predictive intelligence. It includes reactive and generative UIs, zero-friction onboarding and also enables a new segment besides the large enterprise it enables mid-market expansion. This is where the platform really goes, and this is where the opportunities with the distribution partners, with what we mentioned TouchSource earlier in terms of certain vertical markets, a huge opportunity. This is now an MVP right now in our labs, in our CXAI labs. So if you're in the Bay Area and you want to play with CXAI Sky, come talk to us, we'll give you access. We're testing it in all labs. We're going to go to certain initial clients locally here, but this, we think, is a big opportunity for us in both 2026 and 2027. So building for the future already. And by the way, we're just not building features. We're building a platform that gets smarter and more autonomous with every single deployment. So this platform is solid. It's very exciting, and we just also filed our provisional patent, a broad patent on Agentic AI. I've got the number in there when we talk about it in the next slide about the Agentic AI platform, but it really is a landmark in our industry and we're very excited about it. We're going to have multiple filings beyond this. But I want to go under the hood since we filed the IP, the patent provision is there, I want to go under the hood and tell the world what we actually have done and what are our very strong technology team here in CXAI labs has accomplished. One of the things on the left you see is our Unified Data Fabric. This is the ingestion layer that connects IoT sensors for occupancy data, calendar systems for scheduling, enterprise systems like HRIS and IT and spatial data from maps and navigation. This is kind of combining all the integrations we do, and now we're going to connect them all together. That data flows into our Intelligence and Orchestration layer, which has 2 engines, CORTEX is our intelligence engine. It handles predictive analytics, natural language processing, context understanding and intelligence extraction. BOND is our Agentic partner. It provides autonomous orchestration, proactive recommendations, task execution and multisystem control. Think of BOND as a multi-agent solution that allows multiple agents to work together, orchestrate and then with CORTEX knowing the personal recommendations, the preferences the things that matter contextually and making the right decision. What we do is something super unique that nobody else does because we take in account what's really happening in the campus, in the site at Agentic AI, what is happening within the enterprise, and we stay within the enterprise. That is really the core of our IP and patents and what we believe is going to unlock a lot of shareholder value. On the right, you see the actual outcomes this produced. And this is what our clients want. This is what our users want, smart navigation and wayfinding, instant booking of rooms, desks and services, workforce analytics for real-time decision support, space optimization with automated utilization management and proactive context-aware alerts. This is where the world is headed. This is what they want, and we are going to be delivering this very soon to all our clients. The key insight here is that we are transforming passive data into proactive operational force multipliers. This is not a dashboard. It's a system that takes action on behalf of the enterprise, and that's the core of Agentic AI. So let me talk about this another pillar, which is really our strategic partnerships. And we believe this is going to be transformative for our distribution. Our partnership with TouchSource is a joint marketing, sales and product strategy that extends and also embeds CXAI's Agentic AI as the intelligence layer for TouchSource existing base of over 11,000 digital directory deployment. We signed an MOU. We've signed a marketing and co-selling agreement with them. We're super excited working with the team, and we've had -- we've already got some really key targets lined up. This partnership really extends our workplace AI capabilities from enterprise offices into physical commercial real estate, lobbies, common areas, health care facilities, retail spaces and mixed-use properties. The verticals we're tackling together include enterprise office, health care, retail and these mixed-use properties. Each of these represents a significant expansion of our addressable market. What makes this partner compelling is the math. TouchSource already has 11,000-plus deployed screens. We're providing the AI intelligence layer that makes those screens dramatically more valuable. This is a capital-efficient growth channel. And as you recall from me we also have a product, the CXAI Kiosk that we're selling into our enterprise clients, the large clients, and all of them are wanting to have the ability to scale that and knowing that we're the software layer, TouchSource already has those kiosk capabilities in different form factors with the hardware sizes and with the different media players. So it's a really great partnership, and we hope to sell both ways, meaning that we're enabling the Agentic AI Orchestration layer to those kiosks, and vice versa, we're also partnering with them to deploy their kiosks in our enterprise environment where every single floor needs a multiple of them. So there's a huge expansion opportunity. The teams are working very closely. We're going to start giving you updates from this partnership, but this is really a very interesting model for us and it allows us to go beyond the indoor campus environments that we've been in, but to get to a larger piece of the puzzle. And with the CORTEX BOND-based Agentic AI platform, this is going to be much, much simpler and easier for us to do than what we'll be doing for our enterprise clients. All right. So let me just bring it all together in terms of a summary of what we just shared with you. When you think of the bigger picture, the product market fit is confirmed now. Fortune 500 enterprises requirements now match CXAI's capabilities precisely. AI and Agentic AI moved from optional to mandatory in procurement. So no longer it is like, oh, maybe we'll check this out. It is becoming the right standard, and it is becoming critical. So anybody who doesn't have it is not going to be part of these discussions. And this is where, like I said at the start, we see ourselves really ahead of the competition in our space and even the big guys that are playing the space do not have the capability that we have. Secondly, our addressable market exceeds $100 billion, spanning digital workplace platforms is $77 billion with a 20% CAGR and AI assistance at $3.35 billion, going to $21 billion at a 45% plus CAGR. And the timing could not be better. 40% of enterprise after adding AI agents in 2026, that is from Gartner, they're really on top of it and they feel like this is where every app has to go. And the enterprise software spending is also increasing north of 15% year-over-year. And hybrid work is permanent now. It's no longer a transition. It is -- there is going to be there and the platform consolidation is accelerating. So in a nutshell, 2025 reset is complete. 2026 is about scaling the platform and capturing the opportunity. While we believe CXAI is positioned at the center of Agentic AI, enterprise workflows and physical space in thousands and we're excited about what's ahead. Our foundation is stronger than it has ever been. We have a differentiated AI platform, and we are entering the next phase of growth. This is the right company in the right market at the right time. Okay. Let me go to some Q&A. Joy, do you want to check if there are any questions from the audience? Joy Mbanugo: Yes. Absolutely. I think we have a good handful of questions. I think I'll start with questions around our stock because there seem to be quite a few. There's 1 on are you in danger of being delisted and the second 1 related to the stock is, what is your time line on becoming compliant and what is the action plan? And I'll take the first part of it, Khurram, if you want to take the second part. So first, we did receive a delisting notice from NASDAQ, but we received an extension and we have until September, and we do plan on being compliant before September and there are multiple ways we can get there, but we believe we'll get there through growth. Khurram, do you want to add anything? Khurram Sheikh: Absolutely. Look, we are very focused on that. When NASDAQ gave us extension, they understood that we have met all the requirements for listing, except the bid price, so all the other requirements are met in terms of shareholder equity, in terms of market cap, in terms of other requirements that NASDAQ has. The only requirement is the bid price. And we believe that given that we are severely undervalued and we believe that with the results we're going to be demonstrating to the market in the coming months and the momentum we have with our wins as well as our Agentic AI platform, we believe that we can meet that level. And then we also have mitigating factors. So we will be confined much before our September date. That is our goal, and our Board is fully committed to that. Joy Mbanugo: Okay. Next question. What can investors look forward to from the company in the near future? I'll take the first part of it again. And Khurram, if you want to take the second part. From a growth standpoint, like we mentioned, we're not giving specific guidance, but directionally, we expect to grow in the double digits, and we're already seeing great momentum with landing new customers and new logos for 2026. Khurram Sheikh: No, absolutely. And we made the press release, I think, in Q4, we had 5 large clients renew in the fourth quarter. All those clients are also expanding with the Agentic AI this year. And as Joy mentioned, we've got the 20 plus in the pipeline. We believe we're closing deals. There are things in contract right now. They're in contract with us right now, and there are other deals coming our way. So we're pretty excited about moving them from pilots and initial discussions to now contracts and hopefully scale deployments in 2026. So it's a pretty exciting time at the company, and our team is fully focused on executing those contracts and making sure they deliver. And I think if we deliver even a small percent of those, we're going to hit the double-digit number. So I think we believe that, that is very realistic. And we believe there will be more happening hopefully, in the coming weeks and months as these customers go from their pilots to their first appointment. Joy Mbanugo: Next question, and Khurram I'll have to punt this over to you. How do you plan on setting yourself apart from other AI companies? Khurram Sheikh: That's a great question. And in our space, if you look at our landscape, there's a lot of companies that have been around for a while in the new space management and other space. And that market is getting commoditized, and those companies are really at a very low margin. Secondly, you see people that have built apps. As you see, the SaaS model is on the threat. And so when you think about Agentic AI, there are only a handful of companies that actually can do it. I think the large AI companies are focused on horizontal solutions. We believe we are a vertically integrated solution that is really tied to campus environment, campus intelligence, intelligent AI system inside buildings. And that's where we have the big moat. And our BOND and CORTEX are designed to provide the same level of Agentic interface that you see in the horizontal apps, but in a more burdening integration -- integrated way with the security and privacy that are needed by our clients. And as a reminder, all our clients -- most of our clients are large financial guys, they are not going to -- they don't compromise on security and privacy. So I think that is a core part of our offering and core part our IP. And that sets us apart, right? So when I look at the competition, I think it's more about -- naturally competition is good, but I feel like we've got a significant advantage of others. And even when winning these RFPs, we have very large companies competing with us that don't have the depth of the capability that is required by the client. So I think that is my focus is really that differentiation. And you will see more and more filings on the patents as we move forward as we started implementing these solutions. But it's going to be a competitive space for sure, but it's going to be a much growing space because now these clients are looking at full transformation across the whole enterprise. They're not looking at just the space booking function or the desk booking function. They're looking at everything they do inside the enterprise and in a hybrid fashion. And we provide that solution today, and we're going to grow that capability over time. Joy Mbanugo: Okay. And the last 2 questions are sort of related on deal size and revenue growth. So I'll ask the longer one. Can you contextualize the double-digit growth target relative to 20-plus customer pipeline? How much conversion that would imply how much is new customers versus expected expansion? Was there a total of 5 major customer renewals in 2025, more or less. And for renewal contracts, how much do you see ARR increasing on average? I'll take some of this, Khurram, if you want to take the second half. So there are more than 5 renewals in 2025. How much is new versus expected expansions, I think we expect more growth on the new logo side just because we haven't seen it, but I think healthy on the expected expansion. And then renewal contracts, how much do you see ARR increasing? Hard to tell right now we have large renewals to happen in Q1 and then more throughout the year. So I don't have that exact figure at the moment. Khurram, if you want to take the double-digit growth relative to the 20-plus customer pipeline, do you want to take that? Khurram Sheikh: Yes, absolutely. So as Joy said, we don't just have -- 5 customers renewed in Q4. We've had many more renewals than that. I think on the deal size and the -- it depends on clients. A lot of our clients start with a couple of hundred thousand and then go to higher. And so think of that as the baseline. But a lot of our clients, as you know, are in this -- they're doing this a strategic move. This is through RFPs and a lot of diligence. So from their perspective, this is a multimillion dollar opportunity or multimillion dollar total value for contract, but it's over a number of years. So we believe the starting point is there, but they're making long-term decisions. They're doing -- these deals are 3-year deals. They are 3-year commitments, okay? So they're not just a single year. Let's see what happens. These folks are really wanting to do multiyear deals. So I think that's the exciting part. But on deal size, yes, it depends on the client. If a client has 100-plus campuses, you can imagine that's going to be much larger than somebody who has 10. But the interesting piece I would tell you is, and this goes back to our product capability and others, there's a client that has around 10,000 employees, not the 50,000, 100,000, but they also do around 10,000 events, and they're super excited about our Agentic AI event module because they want to now create events on demand and have all these different events. So from that customer, you would have -- you could -- potentially even have more revenue just from the events module than the employee engagement modules. So there's a lot of opportunity in the growth of these businesses because Agentic AI is going across all their different functions, whether it's space management, whether it's event management, whether it's food ordering. So we see this as even a bigger opportunity. But again, we're starting off on a good piece. And now we just need to make sure that we can execute and deliver and get these customers onboarded as soon as possible. But I see a very bright future for Agentic AI across different dimensions of our space. Joy Mbanugo: That was the last question. Khurram Sheikh: Okay. Great. Well, thank you, everybody, for joining our call. Joy and I are super excited to be hosting you today. We will look forward to future discussions. We are going to have our Q1 earnings call coming up, we're going to have our Annual Shareholder Meeting. We're going to be super proactive out there. We were a little bit under the cover because of the 10-K had to be filed and with the IP and patents. Now that we file those 10-Ks available, you can go read it. The patent has been issued. We're going to be super vocal in the market, and we look forward to sharing with you the positive news on our upcoming deployments, and we look forward to hosting the next earnings call in the next, I think, 30 to 45 days, but we'll keep you posted. Thank you, everybody.
Operator: Good day, and welcome to the Elauwit Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Matt Kreps with Darrow Associates. Please go ahead. Matthew Kreps: Good morning, and thank you all for joining us today to discuss Elauwit's Fourth Quarter and Full year 2025 financial results and business update. The earnings release covering our 2025 results is now available on the Investors page of our website at investors.elauwit.com. We plan to file our Form 10-K for the full year today as well. I would encourage you to review the full text of the release and accompanying financial tables in conjunction with today's discussion. This conference call is being webcast live and will be available for replay on our Investors page. Speaking today on the call are Executive Chairman, Dan McDonough; Chief Executive Officer, Barry Rubens; Chief Financial Officer, Sean Arnette; and Sebastian Shahvandi, our Chief Growth Officer. We will cover our prepared remarks on the business and financial results, then open the call for questions from our analysts and institutional investors. Please note that during this call, management will make projections and other forward-looking statements regarding our future performance. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in the earnings release as well as other risks that are more fully described in Elauwit's filings with the SEC. Our actual results may differ materially from those projected in the forward-looking statements. We encourage you to review our filings with the SEC for additional information on factors that could cause actual results to differ from our current expectations. Elauwit specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law. We will also reference adjusted EBITDA, which is a non-GAAP financial measure. A description of adjusted EBITDA, along with a reconciliation of adjusted EBITDA to the most comparable GAAP financial measure can be found in our earnings release. And with that, I will now turn the call over to Dan. Please go ahead. Daniel McDonough: Thank you, Matt, and thank you to everyone who has joined today's call. I'll begin today's call with an overview of the business, then pass to Sebastian for an update on our rapidly expanding sales program. Barry will have a discussion around our operations, and then Sean will provide a few highlights from the financial results. Since we are still a newer company to Nasdaq, let me give a quick summary of our business. Elauwit is a technology-driven broadband infrastructure provider focused on delivering high-speed Internet to multifamily and student housing communities. We install and activate carrier-grade gigabit service via fiber and WiFi 6 access throughout the entire property. We then generate long-lived recurring revenue from these properties under 2 financial models: managed service and Network as a Service, which we refer to as NaaS. Uniquely, we integrate the property owner into the revenue chain, driving new revenue and value creation for them. Ultimately, we expect to create a win-win-win scenario, where we generate high-margin revenue streams for Elauwit, elevate the resident experience and unlock value for property owners. In addition to a growing number of units already under contract, we have a robust and quickly expanding pipeline of new installations, giving us visibility into our growth ahead. To deliver on this, we have built a scalable operating model that we believe can grow to handle almost any number of units and in any location as we take share in a large and fragmented addressable market. At its core, the Elauwit model represents simplicity, service and profit. When a resident moves into an apartment or other multifamily housing unit, they sign a lease, then begin the arduous process of securing Internet access. This usually means a lengthy sign-up process, waiting several days for a technician to be available and then taking a day off work for an open-ended install appointment. Typically, the property owner isn't even participating in this revenue stream. Elauwit simplifies and improves every facet of this experience. The property is prewired with enterprise-grade networking equipment, offering the resident better service and faster speeds. When the resident signs their lease, the Internet fee is included on their rent invoice as a standard cost, but usually at a 10% to 15% less expense than the conventional products I just described. Instead of waiting days for an install, they get their log on credentials when they get their keys, providing immediate Internet access, not just in their unit, but property-wide in all of the amenities. That alone is a compelling case, but we take it one step further by integrating the property owner into the monthly recurring revenue from the service, which provides a source of profit and the increased recurring cash flow that can increase the value of their property. We offer 2 approaches to this incredible service in what we estimate is more than a $25 billion market opportunity. For both approaches, the entire property is turned on and serviced and the monthly fee is included in the resident's cost by default, ensuring full subscription to the services. Option 1 is a managed network approach, whereby the property owner pays us an upfront fee to construct and install the network throughout the property. The property owner then collects a monthly fee from the resident that goes in part to them for their installation cost and profit and partly to us for our services under a 5- to 7-year contract. This model works well in new construction or with large and financially sophisticated properties seeking retrofit upgrades. Option 2 is Network-as-a-Service, or NaaS, a deal for retrofits for smaller property owners. Under this model, we can use our public company balance sheet to install and own the network, then collect a higher recurring monthly fee from the property owner to operate under an 8- to 10-year contract. Both models mirror the data center or alarm company model where customers stay for years, generating what we expect will be high-margin service revenue. We are now moving ahead quickly to expand our pipeline of targeted managed services and Network-as-a-Service opportunities with a major marketing and sales campaign. Sebastian will speak more to this point in a moment, but I'm very pleased with the initial results of our newly unleashed revenue engine, and I look forward to what the year ahead can bring. And that brings me full circle to my opening comment that Elauwit represents a compelling growth case of high-value recurring and long-lived revenue. And with that, I'll turn it over to Sebastian to talk through our new sales and marketing program to deliver on that opportunity. Sebastian Shahvandi: Thanks, Dan. We've built a fully integrated go-to-market engine that brings together inbound and outbound strategies into a single coordinated system. At the center of this model is a clear, consistent focus on customer experience, ensuring that every interaction from the first touch to long-term partnership is intentional, seamless and value-driven. Our approach is powered by a modern AI-enabled marketing and sales stack, custom designed not just for speed and scale, but for relevance and personalization. We're leveraging a broad set of AI tools to enhance data quality, improve targeting precision and deliver a more meaningful engagement at every stage of the journey. Our programs span multiple ICT and persona-driven channels, including our website, targeted account-based outreach, organic and paid social media and structured outbound campaigns. Let me give some additional detail to illustrate just some of the diverse channels we're using to identify and engage property owners. A central pillar of our 2026 strategy is an aggressive industry event calendar, 22 regional events and conventions. However, our approach is not focused on booths and exhibiting. Instead, we invest in pre-event outreach to identify and schedule one-on-one meetings with decision-makers before we ever arrive. And early results are encouraging. With just 3 of the 22 events completed, event source deals currently represent approximately 1,800 units in our active pipeline. Adding to this, paid media efforts are gaining attraction with about 6,000 units in active bidding sourced via paid ads and 127,000 impressions across Google, LinkedIn and Meta ads. Our channel partner program is also demonstrating significant forward motion with almost 7,000 units of new business pipeline attributed to the partner activity. All in, we're actively targeting approximately 2,000 new business accounts right now, representing an addressable base of roughly 12 million units through these and other strategies. And I want to remind everyone, the results reflect only a couple of months of initial work given our RevOps organization was only formally launched at the beginning of Q1. Even so, business attributed to the new RevOps organization now represents 63 opportunities, 13,000 units in discussion and an addressable base of roughly 315,000 units in total across the property owner portfolios. New business sales currently represents 254 opportunities. The continued momentum in new logo growth reflects both increased marketing activity and deeper alignment with customer needs driven by stronger engagement over the last 90 days. But it isn't just about new properties. We can also mine our existing customer base for more properties. Our current customer base represents approximately 387,000 addressable units for expansion, and our focus remains on deepening relationships and continuously improving the customer experience. From a solution mix perspective, approximately 88% of our pipeline is comprised of managed services, 9% on managed services finance and 5% as Network-as-a-Service. While many early-stage opportunities are currently positioned as managed services, we see a strong opportunity to expand NaaS adoption as deals progress, particularly with smaller portfolio customers where flexibility and ease of deployment are critical components of the customer experience. As we continue to scale this engine, we're already seeing improvement in both deal creation and pipeline velocity. Just as importantly, we're creating a more efficient and customer-centric sales process. This includes a soft quote process built for our Network-as-a-Service offering, enabling us to reach consideration in the funnel weeks faster than before. Our goal is to reduce the sales cycle, while improving the overall buying experience. We're already seeing a strong indicator of traction, pipeline growth and increased alignment between our go-to-market efforts and the needs of our customers. With that, I'll turn the call over to Barry. Barry Rubens: Thank you, Sebastian, and good morning, everyone. We're excited to be here and to deploy our expanded balance sheet for growth. Elauwit built a strong base as a private company, but being a listed company provides the access to capital to expand our market reach and drive growth. With our enhanced balance sheet, we are now funded to pursue the 70% of the market opportunity that was available, but not accessible to us before by virtue of the Network-as-a-Service model. While Sebastian described our rapidly growing sales opportunity set, once signed, we track our revenue-generating business across 3 nested metrics. Those are contracted units or those waiting to be built or in the process of installation, activated units, units that are fully installed and turned on for service, but may not be fully billing yet due to onboarding and billed units, units that are fully generating monthly recurring revenue under our managed service or NaaS contracts. As a reminder, Activated units represent the rollover period throughout the 12 months following installation, and we onboard their costs pro rata to align with property lease renewals. In short, when we complete an installation, we know that we have 12 months of growth ahead, then long-term sticky recurring revenue for years to follow. Giving some numbers to the categories based on December 31, 2025 counts, contracted units, those waiting to be built or in the process of installation, along with units we currently serve increased 34% to 34,067 from the 25,375 at the end of the prior year period. Activated units, units that are fully installed and on but may not be fully billing yet due to onboarding increased 92% to 22,255 from 11,588 at the end of the prior year period. Build units, units that are fully generating revenue under our managed services or Network-as-a-Service contracts increased 77% to 16,445 from 9,279 at the end of the prior year period. And our pipeline continues to grow, taking a slightly different filter on the numbers Sebastian presented, -- of the 121,000 units in our pipeline, we now have 9,221 units in the contracting process. Those have been verbally awarded to us by the property owner. And we have 32,968 in the proposal phase. I should remind everyone that the majority of new contracted units remain as managed services, since we only began selling NaaS proactively as a model following our IPO in the fourth quarter last year and added our sales team in the first quarter of this year. I should also note, and Sean will elaborate more, that our revenue includes the recurring services sales as well as installation sales. While we have largely been focused on managed services to date, we expect recurring revenue to increase as a percentage of total revenue over the coming years due to: 1, the rising number of billed units on long-term multiyear contracts; and 2, the rising contribution of network installation -- Network as-a-Service installations that bill typically at a higher monthly rate. We anticipate that recurring revenue will grow steadily because of the sticky nature of these contracts and may be enhanced further by the shift in favor of Network-as-a-Service throughout 2026 and well into 2027. I'd also like to take a moment to note that our sales universe is vast. We're currently in about half the states and our business model uses a highly scalable call center for service to residents, plus contracted installation teams that we can easily flex and scale as needed with minimal cost to us. This approach means that rather than targeting specific markets, we can readily go anywhere our property owner clients want us to provide service. We believe we have good growth visibility just from the business we have already contracted and exciting upside from the new sales team to expand our growth prospects, providing a compelling business built on a growing percentage of recurring revenue under long-term profitable contracts. And with that, I'll hand it over to Sean to briefly cap some of our business highlights from the quarter and year-to-date. Sean Arnette: Thank you, Barry. Today, I'll walk through financial highlights of our fourth quarter and full year 2025 that continue to show robust growth. Revenue for the fourth quarter increased 85% to $6.1 million compared to the $3.3 million for the prior year period. Cost of revenue increased to $5.5 million for the fourth quarter compared to $3 million for the prior year period. As noted in our previous call, network construction activity, both in terms of cost and margin can be lumpy and incur substantial costs upfront, but leads to long-lived recurring revenue. Gross profit increased to $0.5 million for the fourth quarter compared to $0.3 million for the prior year period. Our gross margin for the fourth quarter period remained at 8.6% compared to the prior year period. Management is currently implementing cost reduction actions intended to bring our network construction gross margin back into our expected range of approximately 15%. Operating expenses were $2.8 million for the fourth quarter compared to $1.3 million for the prior year period. As planned, we are investing in sales and marketing expansion coming into 2026 to drive additional growth in top line sales and recurring revenue. We reported an operating loss of $2.2 million for the fourth quarter compared to an operating loss of $1 million for the prior year period. Net loss was $2.3 million compared to $1.1 million for the fourth quarter last year, driven by our investment in our sales and marketing teams as well as public company-related expenses. Adjusted EBITDA in the fourth quarter was a loss of $2.2 million compared to a loss of $1 million for the prior year period. On a full year basis, revenue increased 154% to $21.6 million compared to $8.5 million for the prior year period, demonstrating increased network construction and activation activities driving the ramp in our recurring service revenues. Cost of revenue increased to $17.6 million for the year compared to $7.3 million for the prior year period. Gross profit increased 244% to $4.0 million for the year compared to $1.2 million for the prior year period. Our gross margin for the full year increased to 18.5% compared to 13.7% for the prior year period, primarily due to increased network activations and greater recurring services revenue in which we realized higher gross margin levels than with our network construction activities. Operating expenses were $7.7 million for 2025 compared to $4.4 million for the prior year period. Growth in our network construction and operations teams, investment in sales and marketing and expenses associated with the preparation for an existence as a publicly traded company drove the increase. With our NASDAQ IPO and related capital raise, we now have a balance sheet capable of funding increased Network-as-a-Service activity and other initiatives designed to drive growth and increase the contribution from long-term recurring revenue sources. With that, I'll turn the call back over to Dan. Daniel McDonough: Thanks, Sean. I'd like to remind everyone that we are available to meet with institutional investors. If you would like to arrange a meeting, please do so through one of the investor events, if attending or via Matt Kreps, our Investor Relations contact, whose contact information on our results release and on the IR website. And with that, I'd like to ask the operator to open the call for questions. Operator: [Operator Instructions] The first question today comes from George Sutton with Craig-Hallum. Unknown Analyst: This is Logan on for George. I want to start with the -- I believe it was 9,000 units in the contracting phase and 32,000 units in the proposal phase, if I got those numbers right. Barry Rubens: You are correct. Unknown Analyst: Okay. Great. How fast would we expect those to potentially move to being contracted units? And I would extend that question to the 8,000 units of incremental bidding opportunities that you called out in the press release. Just how long would it take to potentially win those? Barry Rubens: The majority of the 9,200 units in the contracting process will be complete in -- by the end of April. And the majority of those units are to be completed by the end of 2026. If I look at the 33,000 units in the proposal process, -- and I simply apply the success rate we indicated we had last -- in earlier periods of 25% to that, which I think is going to be low. That would represent another 8,000 units that we'd expect to have contracted before the end of the year. Unknown Analyst: Got it. Helpful. I'm curious if you could talk about what you're seeing or hearing with some of the really large property managers out there who have shown a desire to potentially move portfolios over to a managed WiFi structure. Just is it an area that you feel like you're making some progress? And how material are some of those opportunities right now? Barry Rubens: I'll take that question. The process of larger companies moving their portfolios over to typically managed services because they are larger companies with established balance sheets is accelerating throughout the marketplace. We are actively involved with conversations with several parties that have a desire to move their portfolios rapidly over to managed services over the course of the next several years. And we believe it could have a material impact on our results looking at 2026 and 2027. So -- in addition to that, as we're seeing larger companies very rapidly make this move over to managed services, it's not lost on me that midsize and smaller companies are paying attention. I literally was in a meeting this past week where someone indicated they felt like they would be at a disadvantage, if they did not move forward with this and capture the 200 basis points of NOI that's available to them. So what we're seeing is an accelerating movement to managed services, led by larger companies. We think that's going to be followed by medium and small-sized companies. Unknown Analyst: Got it. So it certainly sounds like there's a lot of early success with kind of the new sales and marketing efforts. I'm curious, as we sit here today with, I think you said 5% of the pipeline being Network-as-a-Service, how do you go about trying to increase that share over the next year from a sales and marketing perspective? And just any color on kind of the strategy to expand that part of the business would be helpful. Barry Rubens: Sebastian, would you like to handle that? Sebastian Shahvandi: Yes, absolutely. Great question. Look, as we have a focused approach to where we're targeting and how we're going about it, our -- some of our focus is going towards the smaller customer base or the smaller prospects that have moved to lighter portfolios and capital is not readily available for them. In order to get to the kind of NOI increase that they want, the Network-as-a-Service offering is the best offering for them that they can start quicker with real capital out of their pockets. And so by targeting those specific size portfolios, we're able to have more penetration into that growth side of that business as well. Operator: The next question comes from Derek Greenberg with Maxim Group. Derek Greenberg: Just continuing off the last one. I was wondering maybe how you view the potential time line in terms of beginning to generate revenue from the Network as a Service offering. Sebastian Shahvandi: Well, Barry, I can take this as well. Sure. Look, Network-as-a-Service offering is a conversion, right? It's not like new builds that we have to wait after the contract is signed for the property to be built up and so on. Network-as-a-Service, typically, if you look at from contracting being done inside, you can look at 3 to 6 months for it to get started depending on the size of the property and the kind of the work that needs to go into it. We're also seeing on a lot of these conversations that we're having with the Network-as-a-Service offering with the current prospects is the conversation moves a little bit faster than new builds as well. So all in all, as I mentioned, post contract signing, you can think about 3 to 6 months to starting the revenue side. Derek Greenberg: Okay. Great. And then in terms of just your expenses. I was curious looking at the fourth quarter this year, how much of G&A was like onetime expenses related to the IPO? And what do you expect expenses to kind of revert to or hover around going forward? Barry Rubens: Sean, I'm going to let you handle that question, if that's okay. Sean Arnette: Sure, absolutely. Derek, we certainly did have an increase in our SG&A in the fourth quarter due to the offering. I think, it was in between 15% and 20% of that was onetime in nature that we don't anticipate continuing. Fully expecting SG&A to come down a bit as we move into 2026 here with a slow ramp through the year in line with the growth of the business. Derek Greenberg: Got it. That's helpful. And then in terms of sales and marketing and specific with the new team investments in that area, I was wondering maybe at scale, what you project it could represent as maybe a percent of sales or percent of total expenses? What do you expect the investments in that to get to over time? Barry Rubens: Sebastian, you and I have gone through that before. Why don't you talk about kind of what the target run rate is for new sales and marketing expenses. And then, Sean, we can put it into a perspective with respect to overall cost of the organization. Sebastian Shahvandi: Sure. I mean for 2026, I think it's around $1.5 million for sales and marketing combined. Sean Arnette: And in terms of overall SG&A, we're looking for that to be about 20% of the expense of the business. Derek Greenberg: Okay. Great. That's super helpful. My last question is just on gross margins. I was wondering if you could maybe talk a little bit about the potential for the business overall as recurring revenue scale. Barry Rubens: Sean, I'm going to let you handle that question. I think it's still in line with what we discussed during the IPO. Sean Arnette: Yes, absolutely, Barry. Derek, the long-term forecast hasn't changed from the discussions at the end of last year during the IPO process. Ultimately, we expect around 15% gross margin on our network construction activities, whereas the recurring service revenue is really where we're going to generate the gross margin for the business with managed service projects realizing in the neighborhood of 60% gross margin over time and Network-as-a-Service projects closer to 75% over time. Operator: The next question comes from [ Deane Pernis ] with Pernis Research. Unknown Analyst: Congrats on the quarter. Had a couple of questions. Number one was in regards to Network as a Service with your sales and marketing. So when you first, I guess, start conversations with these customers, do they -- are they aware of your services? Does it kind of start from a level of 0? Or are they already kind of familiar with services you provide? I'd love to just know more about that. And secondly, on kind of future financing, I would love to know how you're planning on financing future growth through equity versus debt and if you're in talk with any capital partners or facilities that you're in talks with? And just how you feel about the balance sheet as of right now? Barry Rubens: Dean. Thanks for joining the call. Good to hear from you. Sebastian's team has been engaged most recently with folks. So I think on that first part of the question in terms of the familiarity that our customers have, maybe Sebastian, you can add some color to that. And then I thought Sean could handle the balance of that. Sebastian Shahvandi: Happy to. So as far as your first question, do they know us as far as what offerings we have? The way we approach it is this. When we are going after prospects, as I mentioned earlier on our earnings kind of report, the approach is very strategic. It's very well targeted. So we have a really good idea of the portfolio size of customer base we're going after. And in that way, as we approach them, we know which ones to position first and second. That being said, we don't exclude any of the offerings that we have. But if we're going after someone who has a smaller portfolio, we let them know that the NaaS offering with 0 capital expenditures from their side could be more attractive to them. And then if they have funding available or capital available for themselves, we provide them the managed service offering as well. So it's not a one or the other. It's more of here's everything that we have available, starting with the size of the customer, the persona we're going after and who we're talking to at that point. Sean Arnette: Sorry, Dan, I'll address the rest of the question in terms of the balance sheet, which for Elauwit is stronger than it's ever been right after the IPO. We feel great about the position we're in and the ability to leverage that balance sheet for project financing. So when we look out, we certainly expect to be able to fund Network-as-a-Service projects predominantly from debt with a small bit of equity capital off the balance sheet. We are talking with a variety of different type of capital partners working to tease out the most efficient way of delivering financing for these type of projects. But we do have one existing relationship as disclosed in our filings with Endurance Financial, a debt partner that has supported us from the early days and ability to move very quickly should Network-as-a-Service opportunities come about quickly, but certainly looking to find a bit of efficiency in terms of how we fund projects moving forward. Operator: This concludes our question-and-answer session and concludes the conference call today. Thank you for attending today's presentation. You may now disconnect.
Operator: Good evening. Thank you for attending today's Super Hi International 2025 Q4 and Full Year Earnings Conference. The company leaders are present to the conference are Ms. Yang Lijuan Executive Director and CEO; and Ms. Qu Cong, CFO and the Secretary of the Board. The content of today's meeting may contain forward-looking statements, including, but not limited to, the company's statements on its strategies and business plans as well as the outlook for its performance. The content released by this conference at the earnings conference as well as the comments and responses to your questions only represent the views of the management as of today. Please refer to the latest safe harbor statement in earnings press release, which applies to all the conference calls. The meeting is conducted in Chinese with an external institution providing simultaneous English translation. In case of any discrepancies, the Chinese content shall prevent. The meeting presentation materials have been uploaded to the company's Investor Relations page for your reference. Now we remind Ms. Yang Lijuan, Executive Director and CEO of Super Hi International to review the company's performance in fourth quarter 2025. Lijuan Yang: Thank you. Host. Dear investors and analysts, good evening. I am Yang Lijuan, Executive Director and CEO of Super Hi International. I'm here to brief you on the company's performance in the fourth quarter and the full year of 2025. In 2025, under the strategy of focusing on both employees and customers, the company took the initiative to offer benefits to these core groups. We have witnessed a sustained growth in revenue and customer traffic with the quality of growth improving in the fourth quarter of 2025, that the company's overall operation continued the recovery trend of the first 3 quarters, the customer traffic of Haidilao restaurant reached 8.31 million persons times in this quarter, driving the overall average table turnover rate of Haidilao restaurant to 4x per day, an increase of 0.1x per day year-on-year. At the same time, the company's delivery business and other businesses continue to contribute to revenue in this quarter. Company's total revenue reached the U.S. dollar 230 million, an increase of 10.2% compared with USD 208.8 million in the same period last year. And month-on-month increase of about 7.5% from the third quarter, indicating that our investment in optimizing product cost performance ratio and reaching consumption scenarios and improving service experience that have gradually been recognized by customers. Looking back to the full year of 2025, for Haidilao restaurants operated by the company received a total of 32 million diners. The overall average table turnover rate of the restaurants reached 3.9 turns per day, and the same-store average table turnover rate reached 4 turns per day both an increase of 0.01 turn per day compared with the same period last year. Total revenue in 2025 was USD 841 million, an increase of 8% year-on-year. Now I shared with you some of our continuous efforts in business improvement. First, adhere to offering benefits to customers and employees and consolidated the foundation of store management in 2025 on the basis of focusing on both employees and the customers. We further clarified and implemented the proactive strategy of offering benefits to customers and employees throughout the year. In terms of the employee development, we have continuously optimized from multiple dimensions, such as salary and welfare, daily care and training and development, enhancing the sense of belonging of the diversified team. Up to now, we have about 90 reserve backbones and nearly half of whom are foreign key staff laying a talented foundation for diversifying management. In the frontline management, on the basis of a formulating corporate line principles, we have turned the focus of work to frontline stores in the regional divisions, allowing them to focus more on the market customers and employees themselves. This transformation has released very obviously, frontline vitality in the second half of the year in many excellent service cases and the management practices have been spontaneously created by regional divisions in stores. At the same time, we also encourage management, the team in various regions to conduct cross-departmental and cross-city store inspections that conducts a comparison learning and reflection in on-site work, in conjunction with the dual store management and multi-store management policies, we extend excellent management capabilities to more stores and to further expand the talent training action. Second, to create a unique Haidilao and continue to invest in customer experience this year in our work of focusing on customers that we have formulated the differentiated service plans for different scenarios such as birthdays, parent-child activities, the diners and late-night snacks and implemented the scenario-based services in [ holdings ] such as dishes, peripheral products and decorations with a more substantial investment. In terms of our products, we have continued to promote localized new product launches in various countries with a total of more than 1,000 optimized new launches throughout the year. This year, we focused on the implementation of fresh-cut food scenario. Fresh-cut meat is quite novel for overseas consumers. We have simultaneously equipped with the declaration of open kitchen, fresh-cut workshop, which can bring a better consumption upgrade experience. At present there are a total of 57 SKUs over fresh-cut beef and pork series covering 13 countries. As of December 31, the average click-through rate of the fresh-cut meat series products in overseas countries reached 12.21%. This year, we have continued to innovate in the takeout scenario, launching faster food categories such as spicy boiled food cups, fried snacks and wraps and noodles. At the same time, we launched and promoted on multiple platforms and expanded delivery coverage at the annual takeout revenue increased 68.1% year-on-year, effectively reaching customer groups beyond the dine-in meals, in terms of space and service, we selected some pilot stores to carry out the transformation of nightclub scenarios, upgrading lighting, sound effects and the interactive experience. The improvement of table turnover rate during late night snack hours in pilot stores is more obvious than not similar stores around us. In addition, we have actively explored the innovative marketing models in many countries and driven a certain degree of talk-of-town popularity and customer traffic support of the through the dual track strategies of celebrity co-branding and IP authorization. In terms of cost performance ratio, we have authorized the teams in various countries to make a reasonable adjustment in pricing, portion size and plating allowing customers to better feel the cost performance ratio. This is also one of the important reasons why our table turnover rate remained stable in the traditional off season in the first half of the year. Thirdly, enhance the capability of the headquarters and promoted the upgrading of organizational efficiency and digitalization. We have made several important progress in the capacity building of the headquarter this year. In terms of supply chain, we have continuously increased the production capacity of our own central kitchens strengthened the hierarchical management and the bargaining power of global suppliers. The continuous efficiency improvement of the supply chain since this year has offset the gross profit pressure brought by the customer benefit strategy to a certain extent, proportion of the employee cost that has also gradually approached this level of the same period last year. In terms of digitalization and organizational efficiency we have actively explored the application of AI technology in management to improve the operational efficiency of the headquarters and stores. We have also further integrated the coordination mechanisms of products and marketing guided menu optimization and the data evaluation informed in normalized product management cycle of new launch evaluation and iteration. Up to now, the scale of our overseas members has continued to expand and the application of digital tools in the members activation and scenarios reach has gradually deepened. As of the end of 2025 with the number of overseas and members of Haidilao has exceeded 8.5 million. Fourthly, the expansion of store network and the wood picker plant are promoted in parallel. In terms of expansion, we still adhere to the bottom-off strategy where country managers are responsible for site selection and implementation. The headquarters control the quality and pace. In 2025, we opened a total of 13 Haidilao stores throughout the year, covering 9 countries, including Malaysia, South Korea, Indonesia, Japan, United States, Australia, Canada, UAE and the Philippines. In the meantime, we continue to optimize the store network layout in hand and make adjustments at the right time. In 2025, we closed a total of 9 stores in Singapore, Thailand, Malaysia and Japan, some due to lease expiration, others due to active adjustments among the 3 locations that have completed the format transformation from Haidilao to the second brand and been incorporated into the Pomegranate Plan for unified operation. As of the end of 2025, we operated a total of 126 Haidilao stores overseas. In terms of store opening quality, the number of stores we have signed contracts for and should be opened it still remains in double digits with a steady overall expansion pace, we have not relaxed that -- the requirements of our profitability and implementation of a quality of new stores, 50 in terms of Pomegranate Plan, we have implemented at a steady pace of advancing gradually and verifying was a polishing the plan. As we go along this year, we continue to incubate prototype stores in the second brand, projects in different countries around multiple catering trucks, such as the hotpot, BBQ, smart spicy cups and in terms of the implantation mechanism, we adhere to bottom-up approach in the terms. The teams in various countries identify trust and promote the site selections and implantation based on the local market whilst the headquarters focuses on the construction of the middle office capabilities, such as product R&D, brand marketing, informization and business analysis forming front-end and back-end coordination. We can also show you some of the results this year. In terms of progress, we have some specific achievements that we will report to you this year, projects such as [ spa power barbecue and HiboMalatanian ] the Japanese Izakaya are progressing as an the some of which have achieved a single store probability proving that our exploration of new formats overseas is feasible. In addition, 3 original Haidilao locations were transformed into second brand operations throughout 2025, and the Pomegranate Plan has begun to link with the optimization of the existing store network rather than being an isolated new thing from the perspective of operating data, the revenue contribution of related business has also continued to increase. Other business revenue increased by 61.4% year-on-year and the substansive contributions have begun to be seen in reaching the revenue structure and expanding the customer base. And next, we'll still adhere to a prudent pace of advancement to continue to polish the proven project, buildup information, digitalization and the mid-of the support capabilities and on this basis, gradually improve replication efficiencies and enrich the company's format layout and growth sources. Looking forward into the future, we take becoming a leading global comprehensive catering group as our long-term development goal and continue to improve in 5 aspects, the customer experience, the restaurant network, operational improvement in new business and headquarter capabilities. The above is my introduction to the business development in situation. So now please welcome Ms. Qu Cong to introduce the financial situation to you all. Cong Qu: Thank you. Ms. Lijuan and next, I will report to you on the financials of the company. Our total revenue for the full year 2025 was USD 840.8 million, an increase of 8% compared with the same period last year. Operating revenue of Haidilao restaurants was USD 790 million, accounting for about 94% of the company's total revenue, an increase of 5.7% compared with last year, take out revenue USD 19 million, increase of 68.1% year-on-year. Other business revenue was USD 31.8 million, increase of 61.4% year-on-year mainly due to the continued expansion of the revenue contribution from restaurants incubated under the Pomegranate Plan and the continuous penetration of peripheral products such as hot pot condiments among local consumers and in retail channels. Full year table turnover rate of Haidilao restaurant was 3.9 turns per day and the same-store turnover rate was 4 turns per day, both an increase of 0.1 turn compared with 2021 in achieving steady improvement in operating quantities against the background of a continuous expansion of the store network -- from the perspective of the annual rhythm, the year-on-year revenue growth rate of each quarter was 5.4%, 8.5% to 7.8% and 10.2%, respectively, with the growth momentum and strengthening quarter-by-quarter and reaching the annual highs in the fourth quarter, reflecting that our continued investment in optimizing product cost performance ratio reaching consumption scenarios and improving service experience. In terms of the raw material costs accounted for 33.6% revenue increase of 0.5% over last year due to our active optimization restaurant dish quality and increase in the proportion of fresh products, which brought certain fluctuations in raw material cost in the short term, employee costs accounted for 33.9%, an increase of 0.6 percentage over last year in 2025. We systematically reached the salary and welfare for the frontline employees and increased the investment in employees daily care. Rental accounted for 2.9% of revenue increase of 0.3 percentage points compared with the same period last year. Quarter and electricity expenses of 3.4% for revenue, a decrease of 0.2 percentage points compared with last year. Depreciation and amortization accounted for 9.8% of the revenue decrease of 0.6 percentage points compared with last year. Above changes are mainly due to dilution of a promotion proportion of relevant expenses by the increase in revenue, other operation-related expenses accounted for 11.3% of revenue increase of 1.4 percentage points over last year, mainly due to the increase in our outsourcing services piece for restaurants as well as the company's increased investments in continuous promotion of the Pomegranate Plan and the brand building regional expansion in 2025. Our full year operating profit was USD 37.4 million, operating profit margin, 4.4% decrease compared with 2024, from a perspective of quarterly trends against the background we actively increased the investment in the first half of the year. Operating profit margin had a low of 1.9% in the second quarter recovered significantly from the third quarter and rebounded from 5.9% to 5.7% in the third and fourth quarters, respectively, with a clear recovery trend in the second half of this year. This resulted in line with our forecast at the beginning of the year, and this has laid a solid foundation for the company's long-term healthy development under the comprehensive influence of above factors after tax net profit to 2025 was USD 36.3 million in any substantial increases compared with 2024, significant improvement in net profit and is mainly due to the favorable impact of 2025, the global exchange trend on the company's multicurrency asset and liabilities. So now looking at Q4, achieved a total revenue of USD 230 million, an increase of 10.2% compared to the same period last year, month-on-month to 7.5% from third quarter, mainly due to expansion of the store network compared with last year, continuous improvement of table turnover rate the peak season, in fact, driving double growth of customer traffic and average customer spending among the operating revenue of a Haidilao restaurant with USD 211.9 million accounting for 92.1% of company's total revenue increase of 6% compared with the same period last year. Takeout revenue was USD 6.8 million substantial increase of 94.3% compared with the same period last year continued high-speed growth and other business revenue was USD 11.3 million, increase of $109.3 million compared with same year last year. We can continue to see the success of Pomegranate Plan with further evidence in our fourth quarter. Fourth quarter of 2025 raw material cost is USD 76 million. The gross margin, 66.6%, a decrease about 1 percentage point compared with same period of last year, mainly due to the short-term cost increase brought by optimization of further materials employee cost was USD 74 million, accounting for 32.2% of revenue, basically same as same period last year, improvement compared with the third quarter mainly benefiting from the increase in revenue scale in fourth quarter rental expenses is USD 6 million, accounting for 2.8% of the revenue basically same as the same period of last year. Quarterly, electricity expenses at USD 7 million, accounting for 3.1% of revenue, a decrease of 0.3 percentage points compared with the same period last year. Depreciation and amortization was USD 21.5 million, accounting for 9.4% of the revenue, a decrease of about 0.9 percentage points compared with the same period last year. Total revenue and other operating expenses of USD 29 million, accounting for 11.7% of revenue increased about 1.1 percentage points and mainly due to the promotion of Pomegranate Plan, brand building and the store expansion. Q4 company's operating profit was h-h. $12.98 million operating profit margin, 5.7%, decreased about 2.7 percentage points and basically, the same as third quarter, the decline in the profit margin is mainly due to active investment on the cost side, which is in line with our overall rhythm of continuously offering benefits to customers and the employees and net exchange losses in the fourth quarter was USD 3.8 million, mainly due to the revaluation impact of exchange rate fluctuation. Under this impact, in Q4, our after-tax net profit was USD 4.47 million achieving profitability by end of 2025 on and our capital reserve is USD 270 million compared with USD 250 million at the end of 2024, mainly due to the net cash inflow generated from annual operating activities. In terms of performance of the restaurants in Q4, we have served a total of 8.31 million customers, an increase of 3.89% compared with the same period in 2024. Company's average table turnover rate was 4 turns per day, increase of 0.1 turn compared with the same period of last year. Our average customer spending was USD 25.4 increase of U.S. dollar at 0.4% compared with the same period last year, mainly because we continue to optimize the this structure and marketing measures to providing consumers with a more differentiated choices. Average daily revenue per restaurant was $18,800, slight increase from the same period last year. And we can see that if the Asia performance is the most outstanding. It has increased about 0.3 turns compared to the same period of last year, reaching 5.1 turns and hence this is mainly thanks to the operating efficiency in Japan and South Korean markets as well as the incremental contribution of the newly opened stores, the average customer spending remaining at USD 28. North America, roughly the same as last year at 4.1 turns per day. In terms of average daily revenue per restaurant is USD 24,100 in the same period, roughly the same as -- same period of last year, and the average customer spending in North American market was the USD 41.4. It rebounded from USD 41 in the same period net increase of 2 Haidilao restaurants in North America in this quarter supported revenue growth. Other regions, the table turnover rate in the fourth quarter were 3.9% affected by ramping up period of newly opened restaurants during the same period. Average daily revenue per restaurant is a USD 24,300 slight adjustment from USD 26,100. Average customer spending for the USD in Southeast Asia total of 5.3 million customers and in terms of the average customer spending USD 19.3 slightly the same as last year maintaining stable operation overall. In the fourth quarter, same period revenue was $195.4 million, an increase of 2.3% for the same-store growth, achieving positive growth for Southeast Asia, we can see 12.8% year-on-year growth and for other regions, they are at 1%, 0.2%, 0.5% year-on-year. For North America, Southeast Asia and for regional same-store performance is pretty much consistent with the overall trend, and I'm not going to go into further details. So this concludes our presentation. We now go into the Q&A session. Operator: [Operator Instructions] The first question comes from [ Jong Yezhang ] from [ Yezhang ] Securities. Unknown Analyst: Ms. Yang and Ms. Qu, This is [ Jong Yezhang ] from [ Yezhang ] Security. I have two questions. The first one is on store opening. May I please ask for the next 3 years and what your store opening plan and looking at the different regions, what the approximate quantity given that there are certain global geopolitical changes and will this affect your current store opening plans? My second question is on the brand equity? And what indicators do you use to judge the strength of your brand in terms of Haidilao branding in various countries? And what is the strength and for the countries that you're not doing so well? And how would you further strengthen your brand equity in those countries. Cong Qu: Thank you. Mr. [ Yezhang ]. I will answer your first question in terms of store opening. For store opening, we continue to focus on bottom to up and we're not going to have a specific target. And in terms of our selection of the stores and in terms of the business district maturity preparation for the local team, those are more important. The present most of these plants, they will be opened up in 2026. In terms of regions, the East Asia is where we have the most confidence, we can see that single store model in Japan and South Korea have been very fine. We have also noticed that North America achieved a net increase in the fourth quarter. And for Southeast Asia, we have a large base. Hence, the focus is on optimizing the existing stock and improving quality of single stores, Middle East, Europe, Australia, and we'll be following and watching the market closely. You also talked about the geopolitical frictions and the work going on at the moment. So for our Middle East deployment, of course, for the short term, that will come as a headwind. But in terms of geopolitics and our approach is that. So we will not be making unified decisions on contractions or accelerations, but it is really country managers to make their judgments call because they are the ones who know the best about the local situation. And again, it is still bottom to upper hand, so we will maintain very prudent. In terms of your second question, how do we evaluate our brand power? and I'll have Ms. Yang to answer this question. Lijuan Yang: So you can see that these would be reflected in our internal indicators, and we mainly look at the following areas, for instance, and number one is the quality of natural growth of the members, the customer registered. Voluntarily and repurchase without relying on promotions or discounts. And second, steady growth of table turnover rate in peak season again, which reflects our customers' willingness to visit certainly continues to increase in the proportion of local customers. If the market mainly relies on the Chinese customers and then the brand barrier is fragile. Number four is the spread of word of mouth that we continue to follow the natural discussion volume and the emotional tendency in a local social media in each market by market. By markets, in the mature markets such as South Korea and Southeast Asia, the brand awareness is high and the local customer base is solid. Japan is growing rapidly with a remarkable progress in the past year. In addition, in some markets where we have entered a short-term -- short time and the brand awareness is still in the early stage, and Asian customers are still the main support. For markets with a relatively weaker brand power, our strategy has several levels. So first, the localized products and the services to make local consumers to feel that a Haidilao dishes are made for them. Secondly scenario-based marketing strategies such as Star co-branding and IP authorization have a higher leverage effect in the market with a weak brand awareness; and number three, be patient, we will not easily abandon a market because of a poor short-term data, but we will carefully evaluate which stores need adjustments based on performance. Thank You. Operator: So the next question comes from CITIC Securities [ Wei Jaba ]. Please go ahead. Unknown Analyst: Thank you. I have two questions for the management team. And the number one is with respect to the Pomegranate Plan. Ms. Yang has mentioned this in detail. Could you please share with us about some of the single store models and the profit levels of the representative of brands in this area? And what are the subsequent development plan? And my second question is about 2026 to 2027. How do you look at this in terms of customer experience and the employee benefits? How do you look at this? And how will this be reflected in operating indicators such as the expense ratio? Cong Qu: Okay. Thank you, Mr. [ Wei ] for your question. The first question, will ask Ms. Yang to answer your question. Lijuan Yang: Thank you, Mr. [ Wei ]. The Pomegranate Plan has achieved some specific results this year. Sparkora BBQ and the Canada Hi Bowl Spicy Hot Pot and the Japanese Izakaya are all progressing as planned and some of them have already achieved a single store profitability. This is a very important signal for us, proving that it is feasible to build a second brand overseas. For single store models, there are great differences among different brands in the markets. At moment, it's difficult to give a unified figure because we're now basically are literally crossing the river by touching the stones and it is not yet the time for large-scale replication and we consider there are mainly 3 factors, whether brand is worth promoting first whether a single store can make a profit without headquarter subsidies. Second, whether the model can be replicated to opened a second store in the same market. And thirdly whether the local team has the ability to operate independently. Only when all 3 conditions are met, will we consider accelerating the expansion. The other business revenues increased by 61.4% year-on-year in 2025, with the substantive contributions starting to emerge behind this growth in this follow-up, we will adhere to a prudent pace of first polish in the successful projects and build the middle platform to support capacity and gradually improve the replication efficiency. At this stage, we still focus on independent research and in incubation and selection, no clear acquisition plans at the moment. Operator: And let's wait for the next question. Cong Qu: I'll take your second question. 2025, this is a year of our active investment concentrated in the first half of the year, operating profit margin hit a bottom of 1.9% in the second quarter, but rebounded to 5.9% and 5.7% in third and fourth quarters of the second half of the year, showing a clear recovery trend. Entering into 2026, our investment strategy has shifted from increasing to optimizing the established the employee benefits of standards and customer service quality will not be reduced, and we'll continue to pay attention to any unreasonable aspects in dish and pricing. However, the strategy running in period has passed, the corporate correction has been briefly improved. The investment direction will be more precise and the more attention will be paid to the input/output ratio reflected in the expense ratio, the ratio of the employee cost of revenues is expected to gradually spin out with the revenue growth, the continuous efficiency improvement of supply chain will support the proportion of the raw materials, the fee of food delivery platforms will rise with the business growth. But the investment in brand building and the consulting will be more focused. Overall speaking, the expense ratio structure in 2024 will be optimized to a certain extent compared with the 2025, but we will not set a specific profit margin target and then reverse deduced business behavior. We will not shrink investment in customers and employees for the sake of short-term good profit margins, but they will be more precise. Thank you. Operator: And we now go into the next question, is Mr. Lai Shengwei coming from CICC. Shengwei Lai: Can I please ask about the raw material cost, and we can see that the price of the beef in [indiscernible] has recent shop team recently, and there are external environmental disturbances and how do you look at the future gross profit margin trends? How would the company hedge against the pressure of rising raw material costs? My second question is about the different store level operating profit and margin across different regions, which regions may perform relatively poorly in 2026 further? And improvement measures that the management might take? Lijuan Yang: Thank you, Mr. Lai for your questions. So first question on raw material, this is our key focus. 2025 raw material accounted for 33.6% of our revenue for the whole year, an increase of 0.5 percentage points compared with 2024, mainly due to the increase in food material costs driven by business expansion. For instance, we have introduced fresh fruit cutting. Our response measures are mainly in threefold: first centralized procurement and hierarchical supplier management to continue to strengthen the bargaining power with the global suppliers. And none of the scale effect has already been partially reflected in 2025. Secondly, continuously to improve the production capacity of our central kitchens, reduce the dependence on external processing. Number three, menu structure optimization, we have established an evaluation system of click rate, coverage rate, gross profit margin and continuously iterate the items with no gross profit contribution to avoid inefficient SKUs occupying procurement resources. Overall, we expect the ratio of raw materials to revenue will remain basically stable in 2026. Your second question, in terms of store level profit margin by region separately. We do not disclose those, but we can give you some directional judgments. East Asia is the region with the healthiest single store model at present with a table turnover rate of 5.1x in Q4, average revenue of USD 20,800 per single store. Profit contribution at the restaurant level has improved significantly. North America remains above USD 24,000 with a high absolute value, but the rent and labor costs are correspondingly be higher. Southeast Asia has a large base of stores with a great individual differences. Some mature stores performed very well and a few individual stores are still in the adjustment stage. If we look at the future improvement potential, the table turnover rate of some stores in Southeast Asia has not reached the expected level in 2026. So we'll focus on promoting the operational improvement of these stores, including deepening of product localization and upgrading of the services scenarios. The newly opened stores in North America need time to ramp up their performance and we have expectations and patience for this. The improvement direction over each region in 2026 is a clear and will not change our long-term judgment call on any of the regions due to short-term fluctuation. Operator: Next question. We have Ms. [indiscernible] from [indiscernible] securities. Unknown Analyst: Thank you for this opportunity. I have three questions. here to ask the management team. The first one is short term, we can see that right now -- Japanese relations are being affected. And so I don't know whether this would affect your table turnover rate performance. And second, about average customer spending -- we can see that 2025 average [indiscernible] trending downwards has helped with the increase in the customer traffic in 2026, what about your pricing? Would you continue to reduce your price. In terms of the mid and long term, how do you balance this short-term profit concessions? And as well as profit margin balance, how do you strike a balance between those two? And my next question is on the stores because in 2025, you have closed certain stores, underperforming stores. Right now, what is the proportion of the current store network that are still in loss or have a low operating profit margin? Going forward, how would the company evaluate those companies when you consider whether those should be close or -- what are the key indicators? Lijuan Yang: Thank you, Ms. [ Li ] for your questions. So your first question, the performance of the Japanese region in terms of what we can see right now, our operation has not been affected and our turnover -- table turnover rate is maintaining stable in terms of proportions of local customers that continue to rise, the consumption scenarios are also relatively rich, impact over short-term certain fluctuations on the overall operation is limited. This is the result of our persistent localization operation and in-depth cultivation of local customers. We have not yet been impacted, but we will continue to follow up on the external environment closely. In terms of the adjustment or reduction in average customer spending in 2025. And this is not simply about a price reduction. This is about making customers feel better in terms of cost performance, such as pricing rationality, portion science, plating and the service experience. So some of those are our active adjustments and some of these are superimposed with the structural changes on the other hand, such as the number of stores in different countries, the increase in local customers, the changes in average number of people per table and so on. Our direction in 2026 will remain to ensure Haidilao's position as the mid- to high-end restaurants whilst subordinating to the improvement of customer perceived value, healthier and fresher tissues, better new product launch experience and more dimensional consumption choices in the mid- and long-term profit concession and profit margins are not an opposing relationships. The customer flow growth and the customer stickiness brought by profit concessions are the foundation for the long-term improvement of profit margin for every 0.1% increase in the table turnover rate and the positive impact on the store level profit margin is quite considerable and the profit concessions and the profitability for a positive cycle with a time lag. In 2025, and we have closed down 9 shops and 3 of those have actually changed to a second brand. And for us, it's not giving up on those companies. And out of these 126 companies that we are running overall speaking, and overall quality is improving. We're not really able to disclose to you about the specific number of the ones that are not doing so well, were underperforming stores, but I can give you some guidance and when we look at a store whether any adjustments need to be made, mainly three aspects. Number one is to see the operating -- number one is to see whether there is any visible improvement in the pathways. Second, the trend of the table turnover rate and not only just at a single time point, but also in the past 6 to 12 months, rather, for instance, a store with a continuously declining table turn rate and even if it's not in loss at the current stage, we will also intervene. And in terms of the ones that we're seeing a positive turnaround, and we'll encourage the local managers and the division head to further improve. Number three, we look at whether the problems are management related, which we will change and update the management. And if it is about the market related and then we'll review our overall market strategy and to make adjustments accordingly. That's my answer. We also hope that the company can achieve better results in the future. [Audio Gap] Hildy Ling: My first question is about your strategy, focusing on both customers and the employees. And we can see that in Q4, the table turnover rate has improved. So if I look at this strategy itself, it in terms of the strategy itself and how will this drive the table turnover rate? And secondly, how do you look at the customer satisfaction? And because in 2026 in terms of this strategy, how would you continue on with the customer satisfaction strategy? And my next question is still asking about the Middle East impact on your business. For the Middle East, of course, that market will be affected and for European, how do you look at the European market expansion and deployment? Those are my 2 questions. Cong Qu: Thank you, Hildy, for your question. The first one with respect to focusing on both customers and the employees, hence, giving profit concessions to customers and our employees, and we not only look at the numbers, but also customer behavior. Last year, our overseas members has exceeded 8.5 million with a continuous natural growth. The second overall overseas table turnover rate has been rising continuously. Customers' willingness to visit actively is increasing. Whether it is repeat purchase or new customers that they're both increasing. And number three, same-store sales growth rate has maintained positive growth throughout the year, reaching 2.2% in the fourth quarter. Among them, the same-store growth in Eastern Asia was 12.8%, indicating that our stores have closer connections with the surrounding customers and our overall grasp of the business district customer group is improving. In terms of the local customers, we have seen that there is an increase in the number and the proportion of the customers who place the orders in local languages. So for instance, in South Korean market, the proportion of the bills placed in Korea exceeds 90%, which is the most direct signal of brand localization and the performance of a repurchase rate varies across the regions, in the regions with a strong growth momentum, both customer acquisition and the repurchase performance and are improving simultaneously in relatively mature regions. So the contribution of our regular customers is more prominent, and we have not disclosed the specific figures of the repeat purchase, but the repeated behavior of members is a core indicator that our system continuously to track. For 2026 is that the customer base construction brought by profit concession strategy will continue to take effect. This -- we have believed that last year, this is a long-term investment and not simply a short-term move. For your next question, Middle East and Europe, yes, indeed, geopolitics is indeed an unavoidable external variable for our overseas restaurant operations. We have a business and the deployment in Middle East and Europe, we have 2 stores in the Middle East at the moment for the short term in terms of some of the projects that we are working on. It has been affected negatively, but we also have authorized to the country manager. They are the ones who know the market very well and to ask them to determine the pace and the timing. In Europe, we also focus on different stores, and we are constantly visiting those stores, but whether we would sign the contract or not, depending on the location such as customer footfalls and looking at the country's macroeconomy as well as the number of population, et cetera. So there are quite a lot that we need to consider. So it's all about the bottom to up and we are very prudent, but we're very, very positive as well for the market. Operator: Thank you, Ms. Qu, for your answer. Hildy Ling: We also hope that next year, we'll see better results from your strategies. Operator: Next question comes from Jun Zeng from Huatai Securities. Jun Zeng: So how do you look at the customers' satisfaction? And at the moment, do you think that the table turnover rate is already quite satisfied? And can you please also share with us in terms of the same-store improvement for the future, how to consider the price dimension? Lijuan Yang: Thank you Mr. Zeng. And stability of table turnover rate is a result of our continuous investment in the past 2 years. There are several directions. We can continue to tap into the potential. Number one is optimization of a time period structure to present our potential for improving table turnover is mainly in off-peak hours, especially the late-night snack scenarios we have carried out a nightclub style, seeing transformation in some pilot stores. And going forward, we'll be looking at some other different investment methods and different types of sales to help us better promote the transformation. And the second is on the customer stickiness. And we already have done quite well, but we do believe that there is a lot of improvement. For instance, using digital tools to reactivate the members and to be able to reach them precisely. And we will want to make the customers change from knowing Haidilao being used to comeing to Haidilao. And number three is the enrichment of the scenarios, not only the birthdays, the parent child activities, the dinners, the late-line snacks and each have an independent customer group. This is the most direct way to improve the table turnover rate and based on different customers at different time periods in terms of the pricing, we are not going to actively raise the average customer spending nor are we going to offer disorderly profit concessions in pursuit of customer flow. And I think that the headquarters that does not have a one-size-fits-all approach, and we'll continue to monitor the market and which is more sustainable than simply our price adjustment. Jun Zeng: That's all very clear, and I also wish the company a bright future going forward. Operator: Thank you, analysts and investors online. We will see you next time. That concludes our conference result announcement today. And thank you, everyone, for joining us on the call. Thank you. Goodbye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good day, and welcome to the BRC Group Holdings Fourth Quarter and Full Year 2025 Financial Results Conference Call. My name is Isabelle and I will be your Evercall moderator. The format of the call includes prepared remarks from the company, followed by a question-and-answer session. [Operator Instructions] And I will turn the call over to Bryant Riley from BRC Group Holdings. You may now begin. Bryant Riley: Thank you, and good afternoon. We appreciate everyone joining us. To start, we are pleased to report that our 10-K was filed on time. It's an important milestone for our counterparties, shareholders and the organization as a whole. With that, for nearly 30 years, BRC Group Holdings has been defined by a key principle, our willingness to be opportunistic. In the deals we took on, the capital we deployed, the companies we backed and the businesses we built. Over the years, our team has grown adept at rising to the challenges associated with capitalizing on those opportunities. The last 2 years required the firm to apply those same skills to itself, rebuilding our balance sheet, shifting operations, refocusing parts of the platform and positioning BRC GH for what comes next. We made some hard decisions along the way, but we made them deliberately and we made them so that we could get back to doing what we do best. The bedrock of success of BRC GH's platform is our ability to bring together diverse companies, aligning them to partner creatively for our clients and building a collaborative ecosystem, advisory, capital markets, wealth management, principal investments and businesses that generate recurring steady cash flow. That combination creates real value for clients and shareholders alike. Over the past 2 years, we made the difficult decision to sell some of those businesses to strengthen our balance sheet. As we sit here today, the model is intact as exemplified by our recent results. Our Communications Business Group continues to generate consistent predictable cash flow. Our broker-dealer executes complex transactions, raise significant capital for our clients and continues to grow and add talent. In our investment portfolio, anchored by our position in Babcock & Wilcox delivered results that reflect the hands-on work our team put into our portfolio over many years. In 2025, we reported net income available to common shareholders of $299.4 million and earnings per share of $9.80. We reduced net debt significantly and continue to invest in the businesses and people that drive the platform. We welcomed the new CFO, Scott Yessner, enhanced our finance staff and transitioned to BDO as our auditing partner. Looking at the opportunity in the market for BRC GH, the small and mid-cap market we've always served is at an inflection point. Traditional lenders have pulled back, generalist firms can't cover the complexity, companies in the space need experienced partners will understand the capital structure, know the equity story and can move with speed uncertainty. That's our lane, and it's been our lane for 30 years, and the demand for what we do is growing. To that end, yesterday, we announced BRC Specialty Finance, a dedicated platform that addresses this exact issue, which is very exciting for us. Also yesterday, the Delaware Court of Chancery dismissed, in full, the Marstons versus Riley derivative action, finding that the planet failed to adequately plead demand futility. BRC GH believes this outcome reflects the integrity of its Board and the governance processes. We will not be commenting further on pending litigation. We're proud of what we accomplished in 2025, and we're committed to building upon these results. We are laser focused on continued growth and maximizing profitable outcomes. The world is changing fast, AI included, and we will continue to make the shifts necessary to stay relevant and competitive. Finally, we need to take a moment to acknowledge our team. These past few years have been a demanding period for the firm. Our people leaned in, stayed focused on clients and kept us moving forward, showing exactly what the platform is built on. There are a competitive advantage, the continuity, experience, institutional knowledge, we cannot be more proud of what this team has accomplished. I will now turn the call over to Co-CEO, Tom Kelleher, for a few additional comments. Thomas Kelleher: Thanks, Bryant. As mentioned in our earnings release, we completed a number of strategic and operational objectives throughout the year. In March 2025, we closed the sale of Atlantic Coast recycling for a purchase price of approximately $102 million with net cash proceeds to BRC GH of approximately $69 million after adjustments. In April 2025, we sold a portion of our W2 Wealth Management business representing 36 financial advisers and approximately $4 billion in assets under management for a net consideration of $26 million. In June 2025, we completed the sale of GlassRatner Advisory and Capital Group and B. Riley Farber advisory, generating cash consideration of approximately $118 million. While every one of these divestitures was a challenging decision to make, they fit with our strategy to deleverage the platform and focus the business going forward. With the GlassRatner sale, we executed a Transition Services Agreement, or TSA, whereby we operationally supported that business through the end of 2025. Similarly, we also executed a TSA with our 2024 partial sale of Great American and that TSA was also completed at the end of 2025. In 2025, we also completed a multiyear project to consolidate the clearing arrangement for our Wealth Management business, which streamlines back-office operations and will materially lower costs. Effective January 1, 2026, we rebranded as BRC Group Holdings, reflecting our evolution from a financial services platform into a diversified portfolio of distinct businesses, spanning financial services, communications, retail and investments across equity, debt and venture capital. Like many other firms, BRC GH has begun deploying artificial intelligence tools. We standardized around Claude a year ago and are well positioned to capitalize on the opportunities presented by this emerging technology. More than half our corporate staff is using AI tools. Across our operating companies, AI adoption has accelerated guided by a centralized team focused on developing and expanding these capabilities throughout the enterprise. The story heading into 2026 is straightforward, a stronger balance sheet, a growing business and a market that needs exactly what we offer. Our CFO, Scott Yessner, will now walk through the financials in detail. Scott, Over to you. Scott Yessner: Thank you. I'm pleased to share an update on our 2025 financial performance, investment holdings and liquidity. To start, I'd like to walk through our financial performance for the fourth quarter and full year 2025. Year-over-year, fourth quarter revenues were $279 million compared to $179 million and full year revenues were $968 million compared to $746 million. The increase in fourth quarter year-over-year revenue was driven by $68 million on higher trading gains on investments, primarily in Babcock & Wilcox common stock and by a loss of $72 million in fair value adjustments on loans receivable in 2024, which were offset by lower service and fee income of $33 million, which was comprised of $15 million in lower investment banking revenue and $20 million in revenues related to exited businesses. These fee declines were partially offset by higher net investment advisory fees related to a fund that holds SpaceX. The full year 2025 revenue increase was driven by $183 million in higher trading gains due to $126 million in investment appreciation, primarily in Babcock & Wilcox and a loss of $325 million on fair value adjustments on loans in 2024. The year-over-year revenue increase was offset by $150 million of lower service and fee revenues and $64 million in lower interest income from securities lending. The components of lower service and fee revenue decline were $66 million lower revenue from exited businesses of Revel, Noggin and the Stifel Wealth sale, partially offset by higher net investment advisory fees related to a fund that holds SpaceX. Further, $44 million lower Communication Business Group subscription revenue, driven by subscriber attrition and a divestiture of a Lingo wholesale business, and finally, $22 million of lower investment banking revenue. Fourth quarter operating expenses were $218 million compared to $345 million in 2024 and full year operating expenses in 2025 were $892 million compared to $1.24 billion in 2024. The $128 million fourth quarter year-over-year reduction of operating expenses was primarily due to costs from exited businesses and a $78 million goodwill impairment in 2024. The $352 million full year reduction of operating expenses was due to $186 million from exited businesses and lower cost of sales linked to revenue declines. $61 million lower interest expense from securities lending and a $104 million goodwill impairment in 2024. Our administrative costs have been elevated in the past 2 years, particularly on professional fees. As we return to a normalized operating cadence, we expect to reduce these costs and will update in the future calls. Continuing down the income statement. Fourth quarter other income, excluding interest expense, was $38 million compared to a loss of $59 million in 2024. And full year other income excluding interest expense was $247 million compared to a loss of $270 million. The $98 million fourth quarter year-over-year increase was primarily driven by fair value total markups of $66 million on Babcock & Wilcox stock and double down Interactive Holdings. The $516 million full year year-over-year increase was due to gains of $86 million on gain on sale of deconsolidation businesses, $76 million in Babcock & Wilcox stock value increase $67 million on senior note exchanges, $34 million in equity gains on the JOANN's GA Group liquidation deal and $273 million in investment markdowns in 2024. Fourth quarter interest expense was $20 million compared to $31 million in 2024 and interest expense for the full year of 2025 was $93 million compared to $133 million in 2024, which was driven by debt reduction of $347 million during 2025. These details culminate with fourth quarter net income attributable to common shareholders in 2025 of $85 million compared to $900,000 in 2024 and full year net income attributable to common shareholders in 2025 of $299 million compared to a net loss of $772 million in 2024. Fourth quarter adjusted EBITDA in 2025 was $104 million compared to a loss of $114 million in 2024 and full year adjusted EBITDA in 2025 was $231 million compared to a loss of $568 million in 2024. Please refer to the reconciliation tables in our earnings press release for the adjusted EBITDA calculations. Next, I'll review our segment operating performance. Our segment presentation has been revised with the following changes. Our former Communications segment has been separated into 4 reportable segments, which we aggregate and described as the Communications Business Group. The Capital Markets segment had a few investment entities reclassified as nonreportable segments. These NAs are now captured in Corporate and Other. The Capital Markets segment, which is comprised solely of B. Riley Securities, had fourth quarter and full year revenues of $93 million and $265 million and segment income of $53 million and $89 million. The revenue and segment income increases are primarily due to a fair value increase in Babcock & Wilcox in trading gains. Core Investment Banking revenues were lower by approximately $222 million in 2025, which was a result of lower banker headcount, reduced client engagement from among things, late SEC filings at the corporate parent. The Wealth segment had fourth quarter and full year revenues of $47 million and $176 million and operating segment income of $8 million and $15 million. After completing the sale of $4 billion in assets under management in April 2025, the wealth segment completed a back-office integration and cost reduction program. Wealth ended 2025 with $13 billion in assets under management and 197 registered representatives. The Communications Business Group is the aggregate results of Lingo, MagicJack, Marconi and United Online Reportable segments. The Communications Business Group had fourth quarter and full year aggregate revenues of $63 million and $250 million and aggregate income for the fourth quarter and full year of $13 million and $47 million. The results exceeded our expectations in 2025. While the Communication Services have a declining customer base, we have a strong team who does a very good job of servicing our customers and offering a very profitable and strong cash flow business. We will continue to evaluate opportunities to leverage this business model. The Targus business, which comprises the Consumer Products segment had fourth quarter and full year revenues of $49 million and $182 million and operating segment loss of $4 million and $16 million. Lower revenues, inventory write-downs, goodwill impairments and tariff costs led to the 2025 operating loss. Tariff costs were approximately $4 million, which have been submitted for reimbursement. We'll update if the reimbursement is realized. Tariffs, complex, chip shortages remain risk to the business in 2026. After several years of declining sales from the consumer product surge around the time of COVID, sales revenues have stabilized year-over-year in the fourth quarter of 2025 and into the first quarter of 2026. We are evaluating options to refine our pricing model and cost structure as key opportunities in 2026. Next, I would like to provide an update on the company's Investment Holdings portfolio. which are reported in our balance sheet in Securities and Other investments, Loans Receivable at fair value and Equity Investments. Investments are held across the consolidated entities where valuation changes are booked as revenue and either trading gains or realized and unrealized gains, depending on the entity. Securities and other investments increased by $165 million to $447 million at year-end 2025. The increase was primarily driven by a $129 million value increase in Babcock & Wilcox and a $28 million increase in partnership interest and other related to our carried interest in funds that own SpaceX. At 12/31 2025, the Babcock & Wilcox stock price used in the valuation was $6.34. The company owned approximately 27.5 million shares at December 31, 2025, and at March 31, 2026. The SpaceX carried value was marked at $421 per share at 12/31 2025. Securities and other investments are reported in the 10-K table with subtotals, including public equities, private equities, corporate bonds and other fixed income securities, along with partnership interest and other. In the public equities in addition to the Babcock & Wilcox valuation change, DoubleDown Interactive and Synchronoss were lower primarily from selling a portion of the holdings with small changes in price. The private equities subtotal amount, which has over 60 investments, including the Venture Capital portfolio, had $34 million in new investments, $10 million in liquidations and the balance of the year-over-year change due to valuation updates. The venture capital portfolio has a few maturing investments that may be realized in the next 12 to 24 months. Corporate bonds increased $2.7 million, primarily due to an increase in value, partnerships and other investments increased primarily due to the SpaceX security interest value increase identified earlier. We operate the securities and investment portfolio to maximize shareholder returns and to support operational funding and liquidity requirements. Continuing with investment holdings loans receivable at fair value declined $64 million in 2025 to an ending balance of $26 million at 12/31 2025. Loan lending activity included approximately $110 million of fundings and $170 million of repayments, primarily driving the balance decline. Exela Technologies represents $21 million of the remaining balance, of which approximately $15 million is due in 2026. We expect to continue to fund loan and credit structures for our clients in 2026. For the last balance sheet line item in our investment holdings, equity method investments were $90 million at 12/31 2025, increasing $5 million from December 31, 2024, increase was primarily due to $4 million of investments transferred from partnerships. The GA Group investment formerly Great American, comprises $83 million of the 12/31/25 balance. In 2025, the GA Group had good financial performance and hired new executives to support their expansion, including a new CEO. Due to the GA Group capital structure, we've recorded the investment using the hypothetical liquidation at book value method. Well, we don't anticipate this booking method will result in a significant movement in our balance sheet valuation periodically, we believe the value will grow over the next few years. Having grown GA Group since 2014, we know this business well. We'll continue to update business performance periodically and seek to participate in equity and debt deals as partners to GA Group, as we did in 2025 with a $34 million equity gain in the JOANN's liquidation equity earnings and the lending we provided to GA Group in 2025. Next, I'll provide an update and remarks on our liquidity and capital. At year-end December 31, 2025, cash, restricted cash and cash equivalents balance was $229 million compared to $247 million at December 31, 2024. In 2025, BRC Group produced total debt by $347 million, which included a $147 million RILYN bond redemption on February 28, 2025, $127 million in bond exchanges and $98 million in pay downs of term loans offset by $23 million of other increases in debt borrowings. Net debt declined $437 million in 2025 to $627 million at December 31, 2025. As we enter 2026, we have 3 senior note series maturing in 2026 for a total principal amount of $457 million with an additional $16 million in scheduled paydowns on a subsidiary lending facility. On March 30, 2026. The Riley K senior notes were fully redeemed for approximately $96 million, inclusive of accrued interest. Remaining in 2026 and based on the balances at 12/31 2025 we have $178 million in principal amount of RILYN in senior notes due September 30 and $177 million in principal amount of Riley G notes due December 31, maturing. On March 12, we announced $30 million in senior note reductions through Section 39 exchanges and buybacks, which are across the senior note series, including all 3 series in 2026. We will continue to use capital actions and also use cash generated from operations and investment liquidations to fund the scheduled senior note paydowns and support our operations. Continuing interest expense in 2025 totaled $93 million. In 2026, interest expense based on scheduled paydowns is estimated to be approximately $81 million expected to be lower due to the debt exchanges already announced in our anticipation of continuing these capital actions. To conclude, our capital and liquidity plan in 2026 is to fund our emerging credit market opportunities, support our clients with capital and advisory services, support holding investments to their optimal assets, while funding the remaining senior note redemptions in 2026. Thank you for the opportunity to share this update today. We look forward to answering your questions. I'll turn the call back to the operator for a Q&A session. Operator: [Operator Instructions] Our first question comes from Amer with Imperial Capital. Amer Tiwana: Guys, first of all, congratulations on filing the 10-K. Am I reading this correctly that the remaining $350 million you'll potentially use the investment portfolio as the primary source and some cash flow from operations? Or there are other levers that you intend to pull as well? Bryant Riley: So thanks for the questions. And Scott, feel free to join in. I think the way that we've looked over the last 2 years, if you try to put in a playbook you would have changed directions 15x. So our portfolio is opportunistic. You don't know it's going to pop up in different ways. I think the year ago, it wasn't known that we had -- and we hadn't counted as much of a SpaceX partnership, ownership that we had. And -- and so there's just -- it's a pretty big book. And we've got a fair amount of assets, and we're going to be opportunistic. So I wouldn't point to one thing or another. I would point to a combination of opportunities, whether it's SPAN Swaps, which we've done a lot of, whether it's buying bonds in the market or selling some investments, all of those things will be considered. Scott or Tom, do you want to add anything to that? Thomas Kelleher: Yes. Thanks, Bryant. Really appreciate the question. And I think Bryant had summarized it very well. The way we look at it is we have investments and assets to the company that we want to maximize the value to. And we also have opportunities to supply capital to our clients. And so we balance all those different factors against our liquidity requirements for those bond redemptions. And so we have some high cash flow generating businesses and other opportunities, and then the capital actions that Bryant had levered on. So we'll be opportunistic and make the best decision for the shareholder, but we have many different levers in which to pay down the redemptions this year. And I'd also just note that the redemptions because we have had these capital actions so far this year. The principal balance on the RILYN's due in September 30 is $167 million. And then the Riley G's are -- which are due on December 31, 2026, they're down to $170 million. So those have already reduced from our reported in our 10-K. Amer Tiwana: My next question is, when you guys look at BRF, I know you guys have talked about a SPAC transaction. Is there any sense of the timing for that? Bryant Riley: Well, if anyone talked about a SPAC transaction, maybe it was -- yes, we have not talked about a stock transaction. We have carved it out so that it is an entity that you can -- there is some equity ownership by the management team, some of the partners there, and it's an asset of BRC and we're always evaluating our assets to maximize value. But it's very much an integrated part of our business as well and it does feed off -- we still do feed off of each other in terms of creating opportunities, whether it's myself being involved on the BRF side or some of the BRF helping on the wealth management side. And so we're really -- when we did have a carve-out to identify that asset a little more clearly. I would view those as still pretty integrated. Amer Tiwana: Congratulations you guys have accomplished an incredible amount over the last year or so. So it's been pretty frenetic in terms of things that have happened. But seems like you guys have found yourself in a very good spot at this point in time. So congratulations. Operator: Our next question comes from Sean Haydon of Charles Lane Capital. Sean Haydon: Thanks for all the information and congrats on the recent developments. Bryant, in your prepared remarks, you spoke of a, I believe, the word Specialty Finance Platform within the boundaries, could you kind of expand on that? And is that going to be something that's going to be on balance sheet or shared with investors? How should we kind of think about that going forward? Bryant Riley: Sure. So Thanks, Sean. This is not incredibly different from what we've done for a long time, helping facilitate transactions. And as we mentioned in our in our press release, there is a gap in the market for more short-term loans, especially around public companies when you're willing to also underwrite not only the business, but the equity and all the assets of the estate. And so we will -- we did a loan -- we completed a loan. I think it's done maybe was done today, but it was for a public company, a $10 million loan against receivables and those receivables go directly a lot, so we take a fee off of those and they'll pay us back in 4 months, but they had a direct use for that. There's not a lot of places you can go for that type of transaction. We certainly have a lot of relationships, just like anyone does that has a loan business like that, where we will consider syndicating. We have a dedicated family office that is -- partnership is a wrong word. It's not formalized, but we have a high degree of confidence that, that family office will be a participant to the extent we want to do some things bigger. So on balance sheet, depending on timing, depending on size, syndicated depending on timing, depending on size. I think the most proprietary thing and the reason that we wanted to make sure that we were in this business is, one, it's serving clients that are long-term clients, and we think we can put that in perspective. Two, we don't think it's a hugely competitive market because most lenders need a duration of their capital and a defined MOIC and have very kind of strict mandates within the lending portfolio. So we think we can be opportunistic and also be really good partners. And so we're really excited about formalizing it. And we think we're already seeing just from that press release, we're seeing opportunities. So that's how that will work. Does that answer your question? Sean Haydon: Yes. Yes. No, that was helpful. And then kind of piggybacking on the first question from the previous person where are you guys comfortable bringing the balance sheet in terms of net debt? I mean should we expect it to be lower? And how should we kind of think about it getting there? Bryant Riley: So that's -- it's a question every day based on your cash flows and realize this year, our expenses -- our cash flows were hit quite a bit because of these expenses associated with the financials and changing orders and all the legal things. And so we expect to get some tailwinds there. We think that from operations, obviously, there's going to be meaningful cash flows. And we look at it all the time. If you were to take to market our portfolio now, the debt-to-EBITDA on a trailing basis would not be hugely uncomfortable, but that's net debt, right? So we have to constantly hit these things. I don't think there's -- I don't think there's a number of mine. We just want to make sure that we can, one way or another, be on the offense and helping our clients and being able to utilize capital to do that. And so that will always be mindful of that, and we'll balance that against whether we need to utilize other methods, selling an asset or doing bond swaps. So I can give you a target. I could tell you that we feel pretty good about where we are right now, obviously, relative to where we were 18 months ago, and we're just going to keep grinding away. Sean Haydon: Yes. I guess obviously, we don't have to get any specifics here, but directionally, when those maturities come up in the latter half of the year, should we expect replenishment from that? Or is that going to be the level we should expect going forward once they've matured. Thomas Kelleher: I kind of answered the same way I answered the prior call or if -- in this business, 6 months and 9 months is like equivalent to 5 years in a legit business, if things changed 18 different ways. And I just -- I would I couldn't tell you exactly what the next steps are going to be other than we feel really comfortable about our -- about 2026 and going forward. So I would love to give you an exact linear description on the next steps, but we're just going to continue to think through what is best for the overall business and where we are in markets and how markets are. And if we're seeing a ton of opportunities, as Scott said, to put money to work at really good rates are really good opportunities that we'll be thoughtful of that. But it's similar to how we got to March. I mean, by the time we got to March, there was $96 million of maturities, and we had tipped away at them from a couple of different ways. And that's how I would think about September and December. Sean Haydon: Congrats. It's been a ride. Bryant Riley: Well, I know you've been on the ride, and we appreciate it, going forward and accomplished a lot and just are charging forward. Operator: [Operator Instructions] Our next question is a follow-up from Amer of Imperial Capital. Amer Tiwana: I just wanted to dig into the Great American business. Can we talk a little bit about what -- how do you guys value the business on your balance sheet? And secondly, you guys had invested some additional capital for the JOANN liquidation. Can you talk about what kind of returns you got are expecting on those investments? Scott Yessner: Yes. I was going to just touch on the accounting and the booking and that part of it, and then turn to you, Bryant. Yes. So there's -- the nature of the capital structure at GA Group after we did sold a portion and now have roughly 43% to 45% of that business. Because of that structure, we had to use an accounting treatment hypothetical liquidation and book value method. And it just sort of gives you a book value of that company. And when you think about the value of a firm like the GA Group, the balance sheet is not primarily the element to it. It's a fantastic business, which you know, we've honed for well over a decade. And so the part of the reason for my remarks on the call was just to identify that the -- well, we will communicate its performance as we are required to the 10-K of the actual business, the valuation on the balance sheet won't move much, and we think that's helpful to communicate to our shareholders and analysts to understand that the performance of the business may not necessarily be reflective of a hypothetical liquidation, but value, which I know everyone is very good at understanding book value versus market value. And so that's how -- sort of how to think about it is that we want to communicate the performance in its P&L sense and earnings sense, but may not be able to reflect the actual valuation change in the balance sheet. And with respect to the equity. The equity returns that we earned on the JOANN's deal, that was -- those are very, very high. We -- that was a very, very successful deal for us, something that we were very comfortable in being with as part of our means of organizing that partnership with Oaktree, the majority owner now. And those are equity participations in transactions or something that we want to supply capital for and continue to. And we also provided some lending last year to that business operation. And so we want to outside of our ownership through that equity investment, provide additional capital to support the business. So Bryant, I'd like to pick it up from there. Bryant Riley: No, that was perfect. Yes, I wouldn't add anything more. Operator: Our next question comes from Jonathan of JH Lane Partners. Unknown Analyst: I had a couple of quick ones for you guys. Number one is -- what is your ability to sell any of your shares in Babcock for liquidity purposes? Are there any restrictions associated with that given your significant ownership stake of the company. I have 2 other follow-ups. Maybe if you just want to answer that one first, and then I'm happy to get to the other questions. Bryant Riley: We are -- we've been very involved in BW in a number of ways and advisory roles, et cetera. But in terms of restrictions outside of being restricted because we would have information. Our shares are subject to 144A requirements, which means that because we own a fair amount of shares, we would have to measure the volume per month of those shares, but the volume of that company is far more than the shares that we own. So we do have a requirement to follow some volume restrictions based on our ownership, but they are not -- they don't come into play with volumes here. Thomas Kelleher: Okay. Great. And then just on the -- I've been following the story for a little bit. You guys have made obviously, a lot of progress. Is there any general comment you could comment you could provide to the broader market about changes maybe at the governance level given, obviously, it's obviously great that you got the positive litigation rule today or yesterday. But for someone new to the story and perhaps for people to just understand, there's a lot that went on here in the last couple of years. Have you had changes to the Board, other than changing your auditor is the law firm that you had worked with closely over the last couple of years, still kind of involved in your company at all? Like how can we understand kind of OldCo and NewCo, just understanding that is this kind of a new company, a new stage, obviously, some of the management have been the same, but is there any kind of fresh moves on the board and just a sense how we're going into the... Bryant Riley: There hasn't been any new member to the board. I think you can tell by -- as you may know we had a lot of governance around investigations and things like that. I think that center newer to the story, and I certainly appreciate the dynamics around FRG. But BW which you spoke of was not a dissimilar situation. That's a 20-year relationship with the management team and that company, obviously, with our help and with the number that the management team has really ended up having great returns for us. And so you're balancing things that you've done in the past and things -- and the way you're going to look in the future and what is best for the business. And I think that certainly, we have -- Scott Yessner is here, and we've implemented I think the proper amount of procedures, and I think our Board is incredibly additive and we have a new auditor, which we're very thankful for. And so I wouldn't -- I think that's how I'd answer it. I think I feel good about the procedures we have in place and balancing the opportunities with creating the right environment for everyone. And I think the disclosures we're providing, that Scott is providing is more and more, and we're trying to walk the right line between thinking about the dynamic of an FRG, but also realizing that a lot of the opportunities we have in front of us are going to be -- we need to take advantage of. So Tom or Scott... Thomas Kelleher: Yes, that's very helpful. And I appreciate it. I just would note that obviously, like a situation like Babcock is just now such a meaningful part of the situation where in the past, like obviously, FRG ended up being a very significant part of the story, obviously, not comparing the 2, but just in terms of like as a percentage of your value and assets is something cognizant from the ex markets in terms of people that invest with you, obviously, that's the more diversified you could be, I think, the better. And then the last question I had would be, is there any update on liquidity or maybe your cash position or something you could provide to us as of 3/31 or post those transactions we did in post the bond pay down that was -- that took place at the end March, I guess now. Bryant Riley: Yes. So I mean, we're going to be back on the phone, hopefully, in 5 weeks, right? I think maybe my [ otters ] are listening. So that's absolutely a hope or 4 or 5 weeks. So we'll get back to -- we're not providing guidance right now. So hopefully, we... Operator: [Operator Instructions] Bryant Riley: I think, operator, I think we're good. Thank You. Just before we go, I'll just speak personally as we've gone through this last couple of years and where we are and the momentum we have, and I'm just humbled by the team that we work with every day, and the new team members, it's been just an amazing experience to be able to be in a situation where you watch arms and you go and you battle and and we're seeing the rewards of that. And I think that the people that have been fighting through it are seeing the rewards of that. So very thankful for this team, very thankful for for TK and Scott and everybody else from our team on the call, and we're excited to be able to have a quarterly earnings call that will be normal and normalized and have a regular cadence. So thank you very much, and we really appreciate everyone for joining. Operator: This concludes today's Evercall. A replay will be made available shortly after today's call. Thank you, and have a great day.
Operator: Good afternoon, ladies and gentlemen, and welcome to the GEN Restaurant Group, Inc. Fourth Quarter 2025 Earnings Call. [Operator Instructions] This call is being recorded on Tuesday, March 31, 2026. And now I would like to turn the conference over to Tom Croal, the company's Chief Financial Officer. Please go ahead. Thomas Croal: Thank you, operator, and good afternoon. By now, everyone should have access to our fourth quarter 2025 earnings release. If not, it can be found at www.genkoreanbbq.com in the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements within the meaning of federal securities laws, including, but not limited to, statements regarding growth plans and potential new store openings as well as those types of statements identified in our annual report on Form 10-K for the year ended December 31, 2025, and our subsequent reports filed with the SEC. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements represent our views only as of the date of this call and are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect. We refer you to our SEC filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q for a more detailed discussion of the risks that could impact on our future operating results and financial condition. Except as required by law, we undertake no obligation to update or revise these forward-looking statements in light of new information or future events. During today's call, we will discuss some non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are available in our earnings press release and our SEC filings, which are available in the Investor Relations section of our website. Now I'd like to turn it over to our Chairman and CEO, David Kim. Wook Kim: Thank you, Tom, and good afternoon, everyone. The fourth quarter continued to be a very challenging environment for all restaurants in the business. Since the majority of our customer base is Hispanic in many of our markets, and they have been put under extreme pressure through the immigration enforcement, our customers have retracted and are very afraid to come out. This significantly reduces our customer traffic. Additionally, just as we felt we were turning the corner, the increase in the fuel prices because of the war has reduced customer discretionary spending. All of this has led to a decrease in our same-store sales. In spite of this, we completed our business plan for the year, including opening new stores, continuing to deliver an exceptional service and build our brand recognition. We opened 15 restaurants in 2025, including six located in South Korea for a total of 57 restaurants in operation. In the first quarter of 2026, we opened two additional restaurants in Tucson, Arizona and Denton, Texas. As a result of the changing economic environment, we have made several directional changes through initiatives designed to improve the company's value proposition. First, we're managing our portfolio of restaurants that have recently entered into a joint venture with Chubby Cattle International to partner on five of our non-performing restaurants. We will own 49% and Chubby Cattle will own 51% of these restaurants, which will be operated under the Chubby Cattle brand. This transaction creates a $4.5 million write-down, but will create five profitable restaurants that will generate strong EBITDA in the future for which we are entitled to 49% of the profits, which will enhance our overall profitability as a company. Second, we also have several operational initiatives to improve the financial results of our restaurants. We have adjusted our menu to streamline options in response to stubborn increase in our food cost. We have enhanced our incentive program with restaurant managers, focusing them on short-term financial results. We have tested new boba drinks as well as soju drinks, which have shown promising sales during the launch. After two quarters of research and preparation, we started to explore our new digital platform to enhance our customers' experience online. Additionally, we recently launched our GEN loyalty program and are accepting cryptocurrency for payments. Lastly, we're launching our new enhanced e-commerce website, which will be selling much more of our GEN branded products. Finally, as we slow down our restaurant development, we have initiated an AI program to create efficiencies and reduce corporate overhead. As a further update, our Costco gift card program continues to sell exceptionally well. During 2025, we sold approximately $29 million in gift card to Costco, which is 150% increase over last year as this program has greatly exceeded expectations due to our strong brand recognition. As CEO of GEN, I've contemplated for some time how we can expand a GEN Korean products and experience around the country without the heavy capital outlay to build restaurants everywhere. This is why we decided to enter into the consumer packaged goods called CPG business. We began by offering fresh frozen ready-to-cook Korean branded meats. These products feature the exact same meats and recipes used in our restaurants, ensuring an authentic experience. The CPG business has done very well in recent years. Many smaller companies have entered this business and are doing very well as current customer profile tends to seek smaller brand names. Companies like Kevin's, Marie Callender's, California Pizza Kitchen, P.F. Chang's and Bonchon Japanese Sauces have created large businesses with valuations reaching over $400 million to $800 million in a relatively short period of time. We previously announced the creation of a new division within the company to develop and sell CPG products to grocery stores. We started with four SKUs by testing our products at over 30 locations in Southern California in October of 2025. The customer response was incredible and the business blew up. Early this month, we announced that we had expanded our CPG business to over 800 locations in various supermarkets. With the strength of our restaurant labor force, GEN has deployed trained team members to local grocery stores to demo our products. This has been very successful in the early stages of moving products to consumers. Most grocery store demos done by other companies are done by employees with no product knowledge. The expertise our restaurant staff has to present these demos creates a dynamic sales presentation that exponentially increased the sale of our products. Additionally, because of our well-known GEN brand and the great taste in Korean food, it is easy for our staff to introduce our products. Our concept is simple. We bring our restaurant experience into your homes just as in our restaurants, where guests cooked their own meal using fresh frozen meats. Our grocery products allow customers to create that same hands-on dining experience and exact same case in their own kitchen. Unlike most restaurant brands in the frozen food aisle, GEN is able to deliver the exact same quality you would expect in dining in our restaurants. These are not typical TV dinners, where food is different from the restaurant level. Our products represent thoughtfully crafted meals made with same high-quality ingredients we serve at our restaurants. Introducing our products to grocery store chains takes time to set up in their IT systems, organized shelf space and complete the delivery and distribution chain. Once this initial setup is completed, the growth of this segment significantly speeds up, allowing us to achieve significant sales. By the end of 2026, we are projected to have our CPG products in 1,500 to 2,000 locations across the United States. We estimate that our CPG products could be carried to 7,000 to 8,000 locations by the end of 2027. With this expanded growth, we believe we can achieve a run rate of over $100 million in annual revenue as soon as 3 years. After accounting for slotting fees and promotional market investments, the company projects an EBITDA margin in the high teens. GEN's strong brand recognition is a key driver behind our retail momentum and a testament to the connection we've built with our consumers through our restaurants, gift cards at Costco and social media. Korean food is under penetrated, but the most sought out food in the ethnic food category. As we grow this business, GEN will offer many Korean food SKUs under the GENK food ecosystem. Due to early retail reception from both buyers and consumers. GEN is accelerating its CPG expansion trajectory and expect CPG to be a meaningful growth driver with strong margins. As a result, GEN will be working with investment bankers in the CPG space to explore possible investments, logistics and supply line partners to help grow this business and increase shareholders' value. With a solid operating model, meaningful expansion across both core and new concepts, we're executing with focus and discipline. Now I'd like to hand over the call to Tom for a detailed look at our fourth quarter and year of 2025 financial performance. Thomas Croal: Thank you, David. During the fourth quarter, we generated total revenue of $49.7 million compared to $54.6 million for the fourth quarter of 2024, a decrease of $4.9 million. As we previously reported, due to the global tariffs early in the year and extreme pressure through immigration enforcement, we experienced a downturn in our restaurant customer traffic during the remainder of 2025, which resulted in same-store sales dropping by 11.6% for the fourth quarter and some of our peers are experiencing the same downturn. For the year ended December 31, 2025, revenues totaled $212.5 million compared to $208.4 million in 2024, an increase of $4 million or 2%. Revenues increased by approximately $14 million from our new restaurant openings, offset by a same-store sales decrease of approximately $10 million. Consistent with our previous messaging, same-store sales are not the metric that defines our success, I can't stress that enough. Our AUV revenue is still over $5 million per restaurant in the casual dining space. This is a very elite level. Cost of goods sold as a percentage of company restaurant sales increased by 285 basis points to 36.9% in the fourth quarter of 2025 compared to the fourth quarter of 2024. The increase reflects inflationary cost increases, more new restaurant in operation and a minor impact from our premium menu. For the full year of 2025, cost of goods sold as a percentage of revenue increased from 33% in 2024 to 34.7% in 2025. As a result of the inflationary impact on our meat prices, we implemented a $1 price increase at the majority of our restaurants in the first quarter of 2026, which equates to about a 2.5% price increase overall. Payroll and benefits as a percentage of company restaurant sales increased by 97 basis points in the fourth quarter of 2025 to 31.8% compared to the fourth quarter of last year. For the full year, payroll and benefits as a percentage of company restaurant sales remained relatively flat from 2024 to 2025. Occupancy expenses as a percentage of company restaurant sales increased by 253 basis points to 11.2% compared to the fourth quarter of last year. For the full year, occupancy costs as a percentage of restaurant sales increased from 8.4% in 2024 to 10% in 2025. This is primarily due to higher rent at some of our new locations, along with the decrease in same-store sales for 2024 to 2025. Other operating expenses as a percentage of company restaurant sales increased 261 basis points to 12.4% compared to the fourth quarter of 2024. For the full year, other operating expenses as a percentage of restaurant sales increased from 10.3% in 2024 to 11.4% in 2025, primarily due to the decrease in same-store sales. G&A, excluding stock-based compensation during the fourth quarter was $6 million compared to $5.7 million in the year ago period. For the full year, G&A, excluding stock-based compensation was $23 million in 2025 compared to $18.4 million in 2024. This increase is primarily due to increased personnel required for new restaurant development and additional advertising, marketing and legal expenditures. G&A expenses in the fourth quarter remained flat with G&A expenses in the third quarter of 2025. Additionally, due to our decreased new restaurant openings in 2026, we expect there to be a reduction in G&A as we move forward. In the fourth quarter, we had a net loss before income taxes of $12.5 million, which equated to $0.36 per diluted share of Class A common stock compared to a net loss before income taxes of $1.2 million, which equated to $0.04 per diluted share of Class A common stock in the fourth quarter of 2024. The fourth quarter 2025 reflects higher costs associated with new restaurant development in addition to a $5.5 million provision for asset impairment and $1.3 million in preopening costs for new restaurants. For the full year of 2025, the company had a net loss before income taxes of $20.3 million, which equated to $0.59 per diluted share of Class A common stock. If you look at adjusted net income, a non-GAAP measure, we had a net loss of $5 million or $0.09 per diluted share of Class A common stock in the fourth quarter of 2025 compared to adjusted net income of $1.4 million or $0.04 per share in the fourth quarter of last year. For the full year, we had an adjusted net loss of $3 million or $0.09 per diluted share of Class A common stock compared to adjusted net income of $11.6 or $0.33 per share last year. As a result of the decrease in sales and the inflationary-driven increase in costs, our restaurant level adjusted EBITDA for the fourth quarter of 2025 was $3.9 million or 7.9% of total revenue compared to $9.3 million or 17% in the fourth quarter of 2024. The restaurant level adjusted EBITDA was $29.4 million or 13.8% for the year of 2025 compared to $36.9 million or 17.7% in 2024. Total adjusted EBITDA for the fourth quarter of 2025 was negative $2.7 million as compared to $2.1 million in the fourth quarter of 2024. After removing preopening costs from both periods, adjusted EBITDA for the fourth quarter of 2025 was negative $2.1 million compared to $3.7 million for the fourth quarter of 2024. For the full year, total adjusted EBITDA for 2025 was $0.7 million compared to $13.3 million for 2024. After removing preopening costs from both periods, adjusted EBITDA for the year of 2025 was $6.3 million compared to $18.6 million in 2024. Turning to our liquidity position. As of December 31, 2025, we had approximately $2.8 million in cash and cash equivalents. We have the majority of our $20 million revolving credit facility available. We anticipate using a portion of our revolving credit facility as we continue to open limited new restaurants in the future and grow our grocery store initiatives. In 2026, we have significantly slowed our new restaurant growth plans and focus our efforts on improving operations and margins at our existing restaurants as well as growth through our grocery store initiatives. Before concluding, I want to reiterate what we said on previous calls. Our balance sheet reflects $173 million in lease liabilities as required under GAAP through the new ASC 842 lease accounting standards. These are not financial obligations in the form of long-term debt, but rather the accounting recognition of our future lease commitments. Importantly, they are offset by $146 million in operating lease assets. To wrap up, we're targeting full year revenues of $215 million to $225 million in 2026 and achieving restaurant-level adjusted EBITDA margins in the 15% to 15.5% range. By the end of 2026, we anticipate being at an annual run rate approaching $250 million in revenue. This concludes our prepared remarks. We'd like to thank you again for joining us on the call today. We are now happy to answer any questions that you may have. Operator, please open the line for questions. Operator: [Operator Instructions] And your first question comes from the line of George Kelly from ROTH Capital Partners. George Kelly: I wanted to start just with -- Tom, you ended with your expectations for 2026. And I was hoping that we could drill into your revenue guide a little more. I think you said $215 million to $225 million. If you could give the retail contribution that's baked into that as well as -- on the core restaurant business, your comp expectations and net openings, anything that you're comfortable giving just to -- that's baked into that guide? Thomas Croal: Yes, George, we are -- on the retail side, we're working towards getting to a $20 million run rate by the end of this year. And so we should be in the $10 million range in the retail for this year, which would then put the restaurants in $205 million range looking at the low end. George Kelly: Okay. So $205 million. And what kind of -- the net openings that you talked about slowing down your opening pace. What is that? What are your expectations with respect to openings and closures? Wook Kim: So there will be no -- we haven't really contemplated on the closures. We did do a deal with the Chubby Cattle Group, which we're very optimistic and excited about. In terms of the new store openings, we opened two, we have one -- five under construction, and that will be completed this year. Maybe we'll squeeze in 1 or 2 more towards the end of the year or the beginning of '27. George Kelly: Okay. So 2 to 5 under construction, 1 or 2 more and then closures are not baked in outside of the Chubby Cattle partial divestiture. Okay. Understood. Wook Kim: Okay. As of this time, yes. George Kelly: Okay. And then last question for me, back to the retail business. You said, I think, high teens contribution margins somewhere in that range. What should we think about the kind of getting to scale there? Do you anticipate making a lot of upfront investments in 2026 as you scale the business, maybe behind promotion or just G&A infrastructure. How should we think about near-term profitability in the retail business? Wook Kim: Sure. The infrastructure costs, we're leveraging the current infrastructure we have at the restaurant side. So we don't anticipate a lot at all in terms of infrastructure cost. We will be reducing the construction infrastructure in the GEN side considerably because we're going to cut down on that side of the business. In terms of the capital, it's purely inventory now because there's a lag time between the order that's ordered and some products come from South Korea and some products are made in the U.S. So it depends on how the orders come in. Why we have such a larger number from a run rate versus actual is when you start having an interest in the larger markets order, once the order is in, you have to go through their channels of how to get -- to be on their system, i.e., their SKUs, their accounting. There's a lot of insurance. There's a lot of setups. Once the setup is done then the cash flow of money coming in and what's sold and the repeated business it's very seamless. So it works very well. The margins that we've talked about all account for the various discounts, the various slotting fees, et cetera. So when we said it will be in the high teens, that accounts for all that. And after taking all that out, we will be -- we're looking at the high teens. George Kelly: Okay, okay. And maybe if I could just squeeze in one more. The numbers you gave, your longer-term expectations around the retail business are big as far as store count and revenue productivity, et cetera. And the business is still early stage. So the question is, what is it that you've seen so far that gives you confidence in that longer-term expectation? Maybe it's the velocities you're doing or the performance outside of Southern California looks good. Like can you just give us a sense of what makes you confident? Wook Kim: Yes, several things. The -- after signing up with larger brokerage firms, and I'm actually personally making these travels and talking to the senior buyers. The numbers of supermarkets around the country is significantly higher than I expected. This is not just the Walmarts of the world. These are small regional players in the hundreds per their own sections of their markets. We, as of today, can tell you that all the meetings we've had, we have not had a single turndown of the buyers turning down our products and the continuation of interest especially we are in the Korean barbecue business and Korean-related products because of the tailwind that we're getting from the cultural changes and the customer pattern behavior on the ethnic food side. There's continuation of data is coming out saying, it's the highest demanded, but the lowest penetrated food in the United States. So that helps a lot, and it's backed by the cultural changes of movies, getting recognized, Netflix' on the K-drama, the bands, the BTSs, et cetera, et cetera, that's all fueling this. So it's a huge benefit of all the cultural younger generation knowing this food -- Korean food is actually getting the buyers from these larger institutional supermarkets, not just having interest in buying our products. Now the ones that we already in now that have placed products on the shelves. They don't keep products on the shelves if they don't have velocity. So our velocity is above their -- every retailer has their own lines of what velocity that each ones have to hit, and we are actually above their velocities, especially for a new line like this, they're very, very excited. We're very excited too. It's unusual, they say from this industry to have a hit rate of 100%. I'm sure the more we see, we will start to have challenges of certain areas, not buying our products. But it's unusual where products are presented and they bought it. So even if we introduce all the products, the lease that we've had so far is one group buying 2 out of the 4. And then we have other products growing, too. So I'm a believer that just selling into the markets is not a business model, is the continuation of -- yes, consumers coming back to buy it is actually a better measurement. So as of today, it's a small sample, but the amount of bookings that we have from supermarkets to ordering from us, and what we have in the system, that's why we are able to comfortably project those numbers. Operator: [Operator Instructions] At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Kim for any closing remarks. Wook Kim: Thank you very much for your time and listening to our quarterly call. Thank you. Thomas Croal: Thank you very much. Operator: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Tony Dammicci: Welcome, everyone, to the MDB Capital Holdings Fourth Quarter and Full Year 2025 Update Conference Call. Thanks very much for joining us today. [Operator Instructions] Before we begin the formal presentation, I'd like to remind everyone of several important things. Today's conference call is being recorded. A question-and-answer session will follow the formal presentation. [Operator Instructions] Remember, questions can only be seen by the moderator. Please remember that statements made on this call and webcast may contain provisions, estimates or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You're cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Also, please be aware that we are not obligating ourselves to revise or publicly release results or any revision to these forward-looking statements in light of new information or future events. Throughout today's discussion, we'll attempt to present some important factors relating to our business that may affect our predictions. You should also review our most current Form 10-K for a complete discussion of these factors and other risks, particularly those under the heading of Risk Factors. A press release detailing these results, which crossed the wire this afternoon is available in the Investor Relations section of our website, mdb.com. A replay of this call will also be provided later on mdb.com. Your host today is Chris Marlett, Chief Executive Officer and Co-Founder of MDB Capital Holdings. He'll be joined later by George Brandon, MDB Capital President and Head of Community Development. Chris will lead an update on the fourth quarter ending December 31, 2025. At this time, I'll turn the call over to Chris Marlett. Chris? Christopher Marlett: Thanks, Tony. Well, thanks, everyone, for joining today. I'm excited to be here and talk to you about what's been happening. It's been a while since our last call, and the year has gotten off to a really interesting start. And so I thought I'd first kind of just talk about our agenda, which I know most of you are very, very interested in where our assets are, what we think about our current investments and what we see for the future. But I wanted to take some time to give you sort of a view from the way we're looking at building this business and why we're so optimistic for the future of MDB. We just published, which you should all have as shareholders, a year-end shareholder letter, which will talk to a lot of what we're going to talk to today, but in a bit more detail. If you can get through it, it's about 9 or 10 pages. But I think it does a pretty good job of giving you a real good view of where we see the business, where we're headed and why we're excited about the future. So with that, I'll start off with just reminding everybody our story, really, we've taken this proven model of launching companies about 1 every 18 months where we helped to conceive of a big idea, bring it and position it for being public and having value in the public markets and then taking them public. And we did that before we were public, and it was a very nice business. And of course, the reason we decided to go public was that we believe we could scale that to 3 to 5 launches a year, maybe not overnight, but we really believe that we could do that, have a lot more impact and build a real organization to build public venture really kind of into an asset class where we could actually build portfolios for our investors as opposed to just most of our investors historically had 1 or 2 of our companies in their portfolio. So we did that for 29 years. We just did our 18th IPO. Never a failure means we never failed to get an IPO done. And every one of them, except for the last one, which is very new. It's only a couple of months old, have traded at a very significant premium to the IPO price. And that really, I think, speaks to what we've done from an asymmetric value positioning perspective, bring companies public at a reasonable valuation and the promise of them caused them to trade at values much higher than what we took them public at. All those companies had the opportunity to raise additional follow-on capital, and we create a lot of equity value, not just fees. And so the scaling is really what we're talking about. So talking about where we came from, and I've been in the business now for 40 years. And my mission has always been before we even started MDB was how do we get to the truth quickly? How do we understand the companies that we're getting behind or the opportunities we're getting behind and creating -- or in many times, creating these companies in conjunction with inventors or universities or entrepreneurs. And so in the old days, we would look at 10-Ks and 10-Qs. We literally have to call Washington and get these filings. And it was a very haphazard approach to trying to learn about companies. These were all public companies. If we had a private company, we were going to take public. The information challenge was really crazy. As a result of the Internet, we launched PatentVest in 2003, which enabled us to really understand deep tech very much in a clear way because we could get our minds around what somebody owned and how it was differentiated from somebody else out there in the technology landscape. And that gave us, in our mind, a real ability to really understand the critical elements to building leadership. And this leadership we saw was the critical element for these companies being able to trade at $1 billion valuations or have the potential to trade at $1 billion valuations. And as we refined it, we -- in our screening criteria and our processes and trained our analysts, we could start to filter companies where instead of going from a handful in the old days or maybe 100 a year after PatentVest, we got into the point where we could review thousands per year really because we could get through an idea in an hour or 2 by understanding did they have the ability to be a leader in a technology vertical pretty quickly with the development of PatentVest. But we still had really a bottleneck, and we've really experienced that bottleneck over the last couple of years since going public at MDB, which is we can find a big idea, we can pull it together. But really, that process of getting a position to create real value in the public marketplace is a very, very labor and time-intensive process. So the deep diligence and all the market insertion risks and competitive mapping and the business IP strategy and then getting the -- really getting the company positioned to be able to communicate its value add is very tough. And it's still tough. It's always tough with a big idea. And that would consume hundreds, if not thousands of hours. And it would take many months to get these companies ready to go public. And so this has really been our reality and quite frankly, our biggest challenge in scaling that we've had. But I have to say, and I referenced in my letter that AI really is a game changer for us, and we are committed as an organization to using it at every level. I would tell you that even the last 90 days has just been kind of earth-shattering for us in the ability for us and our teams to really solve that information challenge that almost every company faces, and we certainly face in getting these companies ready for being public. And so when you think about the Internet, it really did a great job of catalyzing and organizing that information, but it really created sort of overload in inertia. You had almost too much information. Even when we were looking at patent data, when we first started, you would look at -- you would do a screen and you would look at thousands of patents. Well, getting to those thousands of patents was virtually impossible. It would take really unbelievable amount of man hours to make that happen and really understand how a company could differentiate itself from the other companies in that field. And so what AI has really done and really done in a very, very tangible way, literally in the last 90 to 120 days is it eliminates that inertia. It really connects the dots at an unprecedented speed. And when you couple that with our expert analysts that have created the SOPs, if you will, to actually screen through these companies like we did very manually before, those SOPs applied through agentic models in AI has really become almost unbelievable. And what we're seeing, whether it's with patents or whether it's with new business opportunities, we're able to get to the truth super-fast. We're able to connect dots we could never connect before. And this is going to have an unbelievably profound impact on our business. And I know AI is sort of the catchword of today and every AI company that comes in to look for funding, I'm always very skeptical of. But I can tell you that as far as using really off-the-shelf AI, things like Claude day-to-day within our operation and now building SOPs and agents to effectively execute what we can do doesn't mean we're going to actually lay off anyone or fire anybody like has been put in the press. What it enables us to do now is really scale in an unbelievable way. So the transformative impact in a real tangible setting is becoming real. And we really believe that our ability to effectively boil the ocean of opportunities is achievable. And we're in the process of continuing to develop these agents where we can literally look not only for new companies through our patent data, but from grant databases, from conferences, anywhere we go where we see opportunities where we can feed it in with our specific criteria, these agents can now do the work of hundreds of analysts and then start to boil the ocean and get these things narrowed down to where now our analyst team who are experts in understanding whether or not these are real genuine opportunities can be boiled down very, very fast to a very small stack of companies. But even if, let's say, 5% of the opportunities made it through our screen, whether it was companies that were brought to us by friends or colleagues, the real hard work was the deep due diligence. And that deep due diligence was very -- that took -- that's what took the hundreds, if not thousands of hours to do. And in fact, every one of these companies were facing the same thing. They're trying to get to the answers quickly. The Boards are trying to figure out what strategy to employ. And the information divide is just really, really difficult, especially when you're talking about deep tech or disruptive technology. And so we really estimate that we can compress that time by 2/3. It's really astounding. And you're going to see it, obviously, as investors, right? So you can put in every one of our deals. You can put the prospectus in, you can query it. And you guys are getting the questions quicker. And we're seeing it already in the last 90 days the questions we're getting from investors and the insights we're getting from investors is really astonishing. I mean it's really -- it's fun for us because our mission is to get to the truth as fast as possible. And so we're experiencing this real time. It's like something I've never seen before. But then when you actually want to prepare that company and take it public, it would take from 6 to 18 months. And I think we're going to be able to get this done in weeks. Like we -- to give you an example, we just started on the S-1 for Paulex to take it public. Our team could actually put together a pretty good draft for the S-1 pretty darn quickly. And I think -- and again, we're still in the early stages of really implementing all these processes within our organization. But whether it's the financial models, the business strategy, the IP positioning, we see this being done in weeks, not months, which has -- when you talk about the scale issue that we're -- that we faced, we're seeing this as a total game changer for our ability to scale. And so -- but throughout our business, whether it's through PatentVest, through all of our investor diligence, I mean this whole thing is going to change. It's going to change how our community reacts to deals. It's going to change how deals get distributed. It's going to change it at every level, and we're seeing it real time right now. So over the -- since we've gone public, one of the things that I don't think has been very apparent to everybody that has really just been focused on figuring out what one of our deals is worth or whether they should buy it or what eXoZymes might be worth is that we've been investing in MDB Direct in our clearing operations and patent vest to really build those as separate discrete assets. Yes, they're very obviously critical and important in our daily operating business, but they really are distinct assets in their own right. And we've been investing about $4 million annually since the IPO on these assets. And that is super apparent because we've been able to take and stand up these 2 enterprises to where they now, in our mind, have significant independent value and in effect, big ideas that are going to be launched off into their own entities very soon. So in MDB Direct, what we did was super unique. And we knew that scaling IPOs, especially public venture IPOs was going to -- was not a thing that is done with traditional institutional investors. Traditional institutional investors are looking for ideas that are much more highly developed. And so a lot of these companies that are sort of in the development phase or going public, a lot of them were starting to get funded by crowd funding and other platforms like this, Reg A+, things like that. And now we're seeing things -- companies like Robinhood now being key distributors for these kind of offerings for big companies like the big major underwriters. And distribution is changing in a very, very dynamic way. But the key differentiator is clearing. So folks like Robinhood had to become -- had to go self-clearing. They used to clear it through other people. Most of the broker-dealers that operate in the microcap marketplace, none of them are -- or virtually none of them are self-clearing. But they're recognizing to be able to operate and access these investors, clearing could be a clear differentiator. And clearing is also the ability to be profitable. In many cases, stock loan margin lending, et cetera, these things are key cash generators for any company in our space that has any kind of assets that are built on their platform. And so we know that what we've built here is a very, very valuable asset. And so it took 5 years of work with our vendors and our software developers and what have you to get this up and running. And it's a super valuable asset. And I think that we're looking forward to being able to scale that asset and at the same time, create value and monetize the asset. So really, the big opportunity for MDB Direct is a strategic partnership to monetize the asset and also help solve our distribution challenges at scale. I talked about in the letter a bit, but when you go from one company every 18 months with a very small community and effectively a few relationship managers that work within our organization to go to 3 to 5 companies a year and really start to scale this, we have to basically solve the distribution challenge. And so again, I spoke about public venture as sort of being a very much of an individual investor-oriented asset class, where you can look back to the IPOs of even companies like Amazon and Tesla that went public through larger underwriters, but the institutional investors were not major players that drove valuation in those companies. And even today, SpaceX is talking about going public and raising a lot of money. Elon Musk is smart enough to know that he needs to have retail distribution, and he's figuring out ways to do that in the offering because he knows they're going to end up being the people that really want to own the stock. And the institutional investors many times came a lot later. And so we see an opportunity with these firms that don't have self-clearing that are recognizing that distribution is going to change that this is a real opportunity to partner with other -- either other firms to spin this off as its own entity, to sell it outright and then clear through those -- clear through whoever we sell it to. But we see this as a very valuable asset. To our knowledge, there's no other clearing firms for sale or partnering capability right now. When we were looking to do this, we were looking at -- there was only one clearing firm that was set up for sale or for partnership. And that firm, even with a lot of challenges and really not a huge platform, sold for tens of millions of dollars. And so we see this as really exciting. It's now operational. It's working, and we're now just starting active discussions with various folks, and we're seeing this as really a force multiplier, not only generate some value for the shareholders, but also partner on distribution, which I think could be a really great thing for what we're doing as we have the ability to curate more big ideas. And PatentVest, just the other big idea, just as big as clearing was, was to become a law firm. So we had built a patent research company before and sold it before we had gone public. And that company was very limited by the fact that we weren't a law firm because we really -- we could do research, but we couldn't really render opinions. We had to be careful with attorney client privilege. A lot of our analysts were in Latin America, which made a lot of people nervous. But with that, we were able to sell to a U.K.-based law firm because in the U.K., they were able to go public. And then as we went forward and the ABS program became a possibility, we became one of the first ABS IP law firms, and it's been really phenomenal. And Javier Chamorro, who runs the operation has done a great job of getting this up and going to where we have all the core operations of a law firm from patent prosecution to foreign prosecution management to docketing to maintenance fees, all the various things you need to do to do that in addition to all the front-end research that enables us to start to provide a lot more value and create higher quality patents and higher -- a better experience for small companies and large companies that are looking to be more efficient and create higher quality. So what we see is by being the first potential ABS law firm to go public, which makes a lot of sense and take this from being a real legal process to a business process, we can now partner with these big law firms like we used to before we sold the patent research business. And we think that big law is facing an existential crisis with regard to what's happening in patent prosecution. A lot of the big law firms see that prosecution is a process business and that their high-level legal talent really can be best focused on strategy and litigation. And we're having some great discussions with these law firms, and we're looking forward to seeing this develop. It turns out it's a huge business. So if you look at patent prosecution in the U.S., I think $10 billion to $15 billion is a conservative figure for how big that business is in the U.S. And we really think that we can garner a really meaningful share of that business by partnering with big law firms. And we're really excited about this. And I think that the AI legal tech market is boomed. Obviously, there's been tons of money going into that market. We don't want to call ourselves an AI legal tech company because really what we are as a law firm that is going to embrace AI. And I think that a lot of these platforms that have been funded, there's probably -- I wouldn't be surprised if there's 100 AI legal tech law firms out there currently. And I think we're in this really great position to be able to participate in this area, create a lot of value, and we're looking to spin this out as an independent entity and finance it before year-end, as we touched on last year. And so our portfolio assets, we have 2 portfolio assets outside of MDB Direct and PatentVest that I think can create a lot of value. And obviously, eXoZymes which is, is public in Paulex, which we recently funded and are planning to take public later this year are, again, $1 billion market cap potential just like everything else we've done historically. And so talking about eXoZymes, eXoZymes is at a really critical point in its development. And I think that what had happened with eXoZymes is that initially, the strategy was let's go out and partner with pharmaceutical companies to go help them make stuff they can't make. We recognized at eXoZymes as I'm on the board there that, in fact, we could make things that nobody else could make. And if we could do that, why wouldn't we just make them and sell those products. And so that's where it's going. And I think that the promise of synbio is about ready is upon us because companies like Ginkgo Bioworks, everybody thought that they had cracked the code for being able to scale manufacturing in synbio when, in fact, they hadn't. And they created a lot of partnerships and they had a lot of sort of irons in the fire. What we realized is focusing in on a couple of really big ones was really super critical and making sure that we could scale manufacturing. And so as you've seen -- hopefully, you've seen is that some of the press releases is that, that technology is now being turned over to contract manufacturers and being demonstrated that it scales. -- which is something that's never really been done in our experience in synbio. So it's -- again, this is a company that -- I don't know that anyone is going to want to value synbio at $20 billion again, but I think that the headroom on this, when you look at the current market value of the company is pretty immense, and we're pretty excited that we're at this critical point now. And Paulex, I won't spend a lot of time on. We're going to have an update for those of you that participated in Paulex. But quite frankly, we're hoping to initiate the clinical trial in September at the same time the IPO goes. Again, another game-changing potential drug that would touch both type 1 and type 2 diabetes by producing insulin, by helping the body to produce insulin again or produce more of it. We started the company with some of the same folks that we started prevention with that know diabetes and that we've had a lot of success with. So we're very excited. And I think that I look forward to this IPO later this year. And we're super excited that the clinical trial results could start to emerge at the end of this year or early next year that could be really groundbreaking. So when you look at our 4 principal assets as it stands right now, eXoZymes as a current sort of market valuation. At year-end, it was about $45 million. The stock has come down a little bit. It's about $30 million in market value currently of what we own. Paulex, we own 7.1 million shares of that, and it's yet to be seen what we'll price the IPO at, but it could be a very substantial asset. And MDB Direct, again, not making promises on the value, but clearing firms of this type have sold for tens of millions of dollars or -- and I think we're in an environment where the value of this could be much greater with where the world is going from a distribution perspective of new offerings. And of course, PatentVest, we've been investing in for a long time, has, in our mind, a lot of value. We've invested many millions of dollars in the development of PatentVest since 2003 and even more so since we've been public to get it ready as a law firm and ready for launch. And then a combination of our cash, current assets through marketable securities, less all the current liabilities at year-end was about $22.3 million. And one of the sort of footnotes was we thought we were going to get Buda Juice done before year-end, but it ended up trickling into January. So it will give us some benefit in the first quarter. So when you look at the financial overview, I'm trying to simplify it as much as possible. Obviously, you can read the 10-K for yourself, but we have about $10 million in fixed operating expenses, and we burned about $5.7 million if you look at the cash flow statement for the year. And -- but if you look at the investment we've made in the clearing ops and PatentVest, it was about $4 million, which was $4 million as part of the $10 million. So if you effectively took the $4 million off of the $5.7 million, we would have -- in effect, burned $1.7 million. So I think that a lot of people, when they're looking at our operating statements, I don't know that, that's super clear to everybody. So if post the spinout of our clearing platform and PatentVest, our OpEx will go down to about $6 million a year, which when you now look at the number of companies we can launch and how much equity we earn in those companies, we have huge financial leverage. Even if you look at the equity position that we earned from co-founding Paulex this year, that equity is certainly worth -- in our minds, a lot -- worth a lot more than what we burned from a cash perspective this year. And so we think we generated significant equity value that's really not apparent in fiscal year 2025. But going forward, we've seen this leverage as being really unbelievable. And so I think that all of our things have $1 billion capabilities. And if we can launch 3 or 5 a year on a $6 million in OpEx base, I think we're going to have really, really -- we could drive a lot of really important shareholder value. So what can go wrong? Well, we are -- this is not public, sure thing. It's public venture, right? And so what I would say is that there's a lot of interesting things going on that we face since we've started. There's obviously a lot of macro and global risk. I have no idea how it's going to turn out nor do I want to venture a guess. The microcap market conditions have been very difficult. A lot of these companies because of the venture markets and small public markets were having such a difficult time. So many of these companies face such horrible dilution. There were lots of institutional investors investing in the space, but the dilution of these small companies was just horrific. And so we're hoping to see that change hopefully soon. Obviously, execution risk, not only our execution risk, but obviously, our portfolio companies have to execute. And this distribution gap that we're looking to solve is probably the biggest worry I have. And I'm not too worried about AI execution risk. We're already seeing those tools work for us. And with regard to clinical and regulatory risk, those are always something to be faced with all the life science companies we're involved with. So the path forward is pretty straightforward. We're now positioned to launch 3 to 5 high-quality companies a year. Again, that's going to depend a lot on our distribution and how we can build that. We've got a lot of -- we've talked about it in the past. We're doing a lot of things in partnering with other distribution partners. And so we're hoping to make that happen in addition to what we're doing with spinning out the clearing platform. And we're obviously going to spin out PatentVest as well and monetize that. And this cost scale efficiency improvement, I think, is only getting better as we get better at what we're doing. And as always, shareholders retain preferred access to MDB deals. And so I want to thank you all for having faith in what we're doing here at MDB. And it's been a really tough couple of years for us, watching our stock go down for the last couple of years since we took this company public. And so I'm going to use that for a second here to editorialize for 1 second. I know I've ran a bit over on this presentation. We're up to 37 minutes, but I'm going to try and make this as quick as possible. So we've had a lot of people that have stuck in there, but a lot of people have sold our stock or the stock wouldn't have gone down. And I think a lot of people have been disheartened. And I think part of what I will take credit for is this was a lot harder than we originally thought to get up and going. I could use the market backdrop as an excuse, but the reality was is that we thought we had it in the bag. And when you looked at the -- let's call it, the batch of companies we did right before we -- let's call it, the grouping of companies we launched right before we went public, all of them went to $1 billion valuations. And if that had happened after we were public with our current batch, we would not be having this conversation right now. And I think that a lot of our investors were like, well, yes, you got lucky with prevention, one of the drugs worked and it's sold and -- but -- or how much are you really involved? Well, the reality was we started that company, those assets wouldn't have been licensed. There wouldn't have been, in my mind, that opportunity and certainly not in a public realm, hadn't we been able to help make that happen. If you look at POS Biosciences, investors have had -- it still trades, I think, for $1.5 billion valuation or so, maybe close to $2 billion. I don't know where it's at right now. But investors have had multiple opportunities to make many multiples of their investment for where we took that public. And even when you look at the most challenging one, which was Cue Biopharma, this company achieved $1 billion valuation on the promise. The technology worked, but it also highlights the difficult parts of what we do, which is the company has got to execute. And that technology, we haven't given up on it. We still think the technology is brilliant, and it should be broadly available to patients, but it's had some challenges. But when I look at the current batch of companies that we have here today, when you look at all 4 of the principal assets we have, I really believe all those have $1 billion capability. And obviously, if all of them hit $1 billion, it would be a crazy return to shareholders. I'm not saying that's going to happen, and I don't expect it to happen. But it would not surprise me if any one of them hit $1 billion valuation. And I think that when you couple that with the pipeline of things that we see that we have coming, it seems inconceivable to me that we're not going to find one of these companies to hit $1 billion valuation again and reward shareholders. So again, it's not a promise. It's with all the caveats, but that's the way we're seeing things and why we're excited. So with that, I'm going to open it up to questions. I think, George, why don't you come back... George Brandon: Let's just jump into it. [Operator Instructions] I'm going to start right off. Chris, I know you hit the positions we have the biggest stake in, but I just got a question on, can you talk a little bit about Cue, ClearSign and Beam and then also a question on Buda. That was unusual for us to do Buda. So can you just give a little bit of a view on those positions that many of our shareholders still hold? Christopher Marlett: Yes, yes. So ClearSign has certainly been on that long commercialization journey. And that's a company that Anthony knows much better than me. But from the -- and it's a very small position within our firm. But it -- they have been on this commercialization journey and their unique burner technology is more relevant than ever. We're going to be burning a lot more natural gas. And so I think that, that company is scaling. And I still think the prospects for that company are quite good. With regard to HeartBeam, HeartBeam did something that most people thought was impossible to get an FDA approval for a pocket 12-liter ECG, what's not told in that story is that, that ECG is even better than a 12-liter in many ways. And as they've signaled, could be the first device to be able to detect a heart attack, which is a game changer would save millions of lives. The commercialization journey is not easy for any of these small companies. And so -- but HeartBeam, we're still super -- we think everybody in the ECG space or health monitoring space, AI space should want to partner with HeartBeam because they have the most sensitive ambulatory ECG in the planet. Period. End of story. So we're very hopeful that the team is going to execute on making sure one of those partnerships happen, which will bring scale to a really unbelievable technology that could save millions of lives. Buda, I addressed it in the shareholder letter. You can look at it, but Buda, everyone said, well, geez, why are you going away from deep tech or what have you? Well, it was a bit serendipitous because a friend of mine really was the CEO of the company, and he was visiting me in Nicaragua, we were sitting around and he said, well, here's what I'm doing. And I said, my God, you're building a whole new category in a category that's going to be everything. So when you look at Buda, they have the opportunity to be not only the fresh juice leader, which is not widely known that is you can't really buy fresh juice at scale in most markets like Walmart and Kroger across the country. And -- but this fresh movement is going big. And now ever since we started the thing, man, every one of these markets need a fresh element because all the shelf-stable processed foods are all going to get shipped by Amazon. And quite frankly, everything is going against processed foods. So it was the opportunity to basically participate in what could be one of the biggest global shifts we've seen. Anybody that's shopped at markets in Europe knows that you're not -- people go shopping a couple of times a week because they want fresh. They don't want they don't -- they're not eating preservative foods for the most part in Europe. So this is a massive, huge opportunity, and we saw an opportunity to bring that to our community. It's a unique company that could be the leader in the space, and it happens to be profitable. And so we're super excited about it. And what else did I miss? George Brandon: And Cue Bio. Christopher Marlett: And Cue Bio. So Cue is struggling. I think they've struggled putting together a cohesive management and Board and getting that technology to commercialization. But that being said, they partnered with Boehringer Ingelheim and also partnered with ImmunoScape on 101. And now they're about ready to put 401 in the clinic. All of these are massive game-changer type opportunities. The stock doesn't reflect it. You'd never guess by looking at the stock that it has any value. But in fact, we believe that all 3 of those opportunities, those shots on goal are super valuable. And we're really -- we're still just as bullish about the technology as possible as we've ever been, but they've had their challenges in getting the execution side of it done. George Brandon: So a question on -- moving on to eXoZymes in that conference call. We're going to jump right off this call and go right into Exosymes's year-end call here that starts in 15 minutes. So we'll wrap up before that. But what are you looking at for, obviously, they're going to have to raise money. What's the dilution going to look like in your mind? I'm getting a question on what do you -- how do you think the dilution works? And how does that work when you're looking at an asymmetrical opportunity? Christopher Marlett: Yes. So the great thing about Eosymes is that, again, much like if you think about mDBVat a $10 million OpEx level to create big opportunities, eXoZymes is the same way. Exosymes has about $10 million in OpEx to create huge opportunities. Now they've created now 2 gargantuan opportunities in NCT and cannabinoids. And they're going to talk all about that, so I won't go into it too deeply. But the combination of government grants and now that those opportunities being on the doorstep of commercialization. These aren't science projects anymore. These are -- so dilution is in our mind, is going to be relatively minimal because this is not like putting drugs in clinical trials. This is not -- they can outsource manufacturing. So it is super capital efficient. And we've worked really hard and they've worked really hard to create a high-impact organization to focus on big, huge platforms, where they can be -- where they can generate -- we're talking about TAMs in the hundreds of billions with the 2 platforms they're in. And they have the ability to be a major player in those platforms with a relatively small operating budget, which really speaks to how impactful their technology is. The reality is nobody believed they could do it. Nobody believed it would scale. I would just tell you, throw all your best scientists at it, go visit the company, go see where they're at, and you're going to see that this could be the biomanufacturing. This could really be the start of a huge biomanufacturing revolution. And in fact, the U.S. government, we can't continue to outsource manufacturing, especially pharma and nutritional supplement manufacturing overseas. And so -- this is a huge initiative. I think you're going to see continued government grants coming to them. And so I just think that it's in the right place at the right time. And now we just got to go out and tell the story. George Brandon: A question on PatentVest. How systematically or structurally, how do you see that spin out? If I'm a shareholder of MDB, how is that going to impact me? Do you have an idea of what that path is on valuation and spin out? I know you said, hey, you weren't really sure about what the valuation is going to be. But how -- if I own a share of stock, what am I going to see as a shareholder? Christopher Marlett: Well, the good news about both the clearing -- MDB Direct, the clearing ops and PatentVest is we own 100% of both of them. So we're starting with a much larger share of those than we do with the other companies we have ownership in. And -- and so our objective is to do a round of financing to bring in partners. So we want to bring in folks, I can't mention names, whether it be law firms, big corporate strategics or other strategics, and we're talking to various strategics right now. Our goal is to get that funded and out of MDB as a company. Then we look -- we're going to look forward to taking it public in 2027 and the method in which we do that and how we do it, it's not really completely formulated yet. But that's going to be largely dictated by what we do on the partnering front here in the short run and funding it as its own independent division here shortly. George Brandon: Can you talk a little bit about what your deal pipeline looks going forward in the next 12 to 24 months? Christopher Marlett: It's really interesting because the deal pipeline is great, and it's -- I can only see it getting better. So the biggest point is really our ability to get them sold, right? We have to get them packaged and sold. And so right now, with where we're at, the biggest constraint isn't the number of companies we're seeing. It's really going to be to work out the distribution side of the equation and get those and get that done. So I think once we do that, who knows how many we can do a year. So like I said, we -- the biggest issue is solving the distribution thing. Obviously, our stocks, some have done okay, some haven't done as good as we hoped. And obviously, if a couple of them work out pretty good, then that puts wind in the sails of everybody. But we really need to add incremental distribution. Our community is still relatively small. We have -- while we have a couple of thousand shareholders, we only have 675 active accounts. So it's still very small. And we're trying to broaden distribution so that we don't have a couple of really large investors in our deals. We're trying to broaden that a bit. And so as we do that, then our ability to get more of them done is going to increase. So I'm not worried about the number of companies that we can launch. I'm worried about just making sure that we can find investors for them all. George Brandon: Okay. So I got a question here that -- it's a good question, but I'm just going to read it. I normally paraphrase, but would or have you considered a SaaS model for PatentVest that in turn for its analysis? This would serve not only to generate revenue but attract IP contribution to increase IP content to evaluate the combination of IP to uncover unexplored opportunities. Christopher Marlett: Yes. So I think to be 100% blunt, I think SaaS is going to be crushed by AI. George Brandon: Go into that a little bit. How, why, and why do you think that? Christopher Marlett: Yes. So just to give you an idea. We -- just to give you one segment that's a really, really big core thing of what we do. So -- let's take patentability, which is what is largely called prior art search, right? So any new vendor that comes up with a new idea wants to do a patentability or should do a patentability analysis. So heretofore, you would -- maybe if you were -- you would subscribe to a patent database, you would go out, you would do your own patentability analysis and search, you would maybe pay PatSnap $10,000 or $12,000 a year or $15,000 a year to go do that. And it would kind of get you part of the way there, maybe, right? And you kind of -- you get a lot of data and you'd say, well, maybe this works. An expert user would use PatSnap in maybe 5 or 6 other databases and then get to a really, really good patentability, but very few people did it because it was too expensive and too time consuming. We've now -- just to give you an idea, what we were doing is we had expert trained analysts in Latin America with PhDs and master's degrees in science. They would do a patentability analysis in 45 hours. Now even though the cost was lower by doing it in Latin America, 45 hours is still a huge amount of inertia to actually go through and actually do that work. We took the same SOPs for doing a patentability analysis, now run by that same expert analyst that we have in Latin America, with AI, where we basically programmed the agent. We programmed the agent ourselves with a popular AI vendor where the software needed to run that analysis was completely done in-house without a software developer, mind you, okay? We can now do that patentability analysis with our expert, patent searcher in 1.5 hours, and it's better. And that's today. We're doing that right now. I'm telling you it's going to completely change the SaaS business. So these folks that are out there building AI solutions, curated AI solutions, I think they're going to -- I'm very skeptical of the value of them because we're building them with off-the-shelf AI solutions today with our own people. They're not even software developers. And so the curated data that we have that we've invested in for all these years is super valuable now because it's got to be done behind a wall, right? And we don't think that people should be putting their investments or their inventions into ChatGPT and doing this. So that gives you a reason why I think SaaS is going to be -- I think human in-the-loop IP development is the future. and we have a shot to be a leader in it because we're an ABS firm, because we have attorney client privilege, because we have the ability to basically turn this into a unified business process, I don't see it as a SaaS business going forward. George Brandon: Okay. Well, we're at the end here, and I'm going to go ahead and turn it back to you and let you go ahead and close it out. Christopher Marlett: All I can say is thanks. It's been a very tough road the last couple of years since we've been public. But I hope that by listening to where we see things going that you have a bit more enthusiasm and you have the ability to kind of keep the faith and hang in there. We're super excited about the future for the firm. We're getting better and better every day. We're not -- the entire team here is working their ass off to make things happen. It's been a rough thing. We haven't given people raises. We've taken back RSUs. We've really backtracked a lot and a lot of the expectations that we had for ourselves were not met. But you just don't give up. You never say die, you just keep going. And we -- I appreciate everybody at the firm that's done it. It's not been easy. It's been a lot of really difficult discussions. But that being said, when I look at what's bubbling up from what we have, I'm super excited. So I'll leave it at that. Tony Dammicci: George? George Brandon: You want me made the ending? Well thank you, everybody, for coming. Tony, that was your job. You're supposed to jump on there, close it out, start it, close it out. Tony Dammicci: That's all right. I'm ready to do it. So we'll say thank you very much for attending today's presentation. This will conclude our conference call. George Brandon: All right. Thank you, guys. Appreciate it. Tony Dammicci: Bye.
Operator: Good day, and thank you for standing by. Welcome to the nCino Fourth Quarter and Fiscal Year 2026 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Harrison Masters, Vice President, Investor Relations. Harrison Masters: Good afternoon, and welcome to nCino's Fourth Quarter and Fiscal Year 2026 Earnings Call. With me on today's call are Sean Desmond, nCino's Chief Executive Officer and Greg Orenstein, nCino's Chief Financial Officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies and the anticipated performance of our business. These forward-looking statements are based on management's current views and expectations, entail certain assumptions made as of today's date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry and global economic conditions. nCino disclaims any obligation to update or revise any forward-looking statements. Further, on today's call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com. With that, I will turn the call over to Sean. Sean Desmond: Thank you, Harrison, and thank you all for joining us today. I want to start by saying how proud I am of the entire nCino team for the results we achieved in fiscal '26 and especially in the fourth quarter. We exceeded our financial guidance across every key metric and delivered an exceptional ACV result, up 17% year-over-year, which we believe was largely driven by customers embracing our AI strategy and product innovation. The team executed incredibly well, and we're seeing the momentum in the market as more prospects are engaging with and choosing nCino and existing customers are expanding and deepening their commitments with us, in large part because of how we are embedding AI throughout the nCino platform. I'll get into the details shortly, but with over 170 customers of all sizes, including global, enterprise, regional and community banks and credit unions having already purchased AI intelligence units as of the end of fiscal '26, we believe nCino is rapidly becoming the de facto AI platform for financial institutions across the globe. For those of you just getting familiar with our story, nCino plays a mission-critical role for our customers and the global financial services market. Financial institutions will continue to struggle with legacy fragmented systems that limit growth, hinder financial performance, restrict their ability to leverage data as a competitive advantage and create poor user experiences. nCino solves these problems with AI-powered intelligent automation on a unified, scalable platform. We are the only platform for managing lending, onboarding, account opening and portfolio management across all major lines of business for financial institutions across the globe. This is why the nCino platform serves as a system of record for the most critical operations of banks, credit unions and IMBs of all sizes in now over 25 countries. Throughout fiscal '26, I talked about the confidence I had in our team, our technology and strategy and our market-leading position. I also said the foundation was in place and that our fiscal '26 performance would come down to execution, including against our AI strategy. This past year's results only strengthen my conviction about what's ahead for nCino as we walk hand-in-hand with our customers into a new era of AI where data, context, guardrails, security, trust and a deep understanding of how financial institutions operate matter more than ever. As banks further embrace automation and think about using AI as an accelerant to do this, they're choosing nCino because nCino is their process. We connect their data, operate as their system of record and enable them to comply with numerous rules and regulations. nCino is an essential Tier 1 mission-critical platform that amplifies their ability to more profitably generate revenues in a regulatory compliant manner. At the start of fiscal '26, I laid out a few strategic initiatives where I believed we had an opportunity to excel with focused execution. I'm very proud of what the team delivered in these areas, and the fourth quarter put an exclamation point on what was a tremendous year for the company. First, in the U.S. enterprise market, we delivered our best sales quarter in over 4 years, which included a mortgage expansion with a top 40 bank and cross-selling commercial to our largest consumer lending customer. Second, in EMEA, we leaned in with new leadership, a new go-to-market strategy and a clear execution plan. We delivered our largest deal of the year with a marquee net new customer win in Austria, and I'm thrilled with the momentum the EMEA team is seeing. I'm also thrilled with the momentum we continue to see in Japan, as highlighted by the fourth quarter signing of one of the largest banks in the world for a commercial lending transformation. I want to congratulate the Japanese team for tripling their total ACV in fiscal '26 from fiscal '25. Third, it's gratifying to see our existing customers continue to validate our AI strategy as they move to our new platform pricing framework to access our growing AI capabilities. We saw expanded commitments from some of our largest accounts, and our ACV net retention rate improved to 112% or 109% organically and in constant currency, up from 106% in fiscal '25. Consistent with what we saw throughout fiscal '26, we closed a number of early renewals in the fourth quarter, including a fresh 5-year commitment from our largest customer by ACV. And those customer commitments go beyond dollars. Critically, they come with trust. More and more customers are choosing to share data with us because they want the insights and benchmarking that only nCino can deliver. Today, almost 500 financial institution customers representing over $11 trillion in assets have granted nCino the right to process their data into a proprietary and anonymized data set, one that powers the development of our products, fuels best-in-class industry insights and sharpens the accuracy of our intelligent services. This proprietary data set that nCino has carefully aggregated and curated for the better part of a decade gives nCino a unique unmatched global perspective on how to more profitably and efficiently operate a financial institution, how work moves seamlessly through the bank, where bottlenecks form, where exceptions happen and what great looks like at scale. We have already put this data set to work through our product called nCino Operations Analytics, which helps customers pinpoint inefficiencies, track cycle times and win rates and benchmark performance against anonymized peers. That benchmarking provides valuable and actionable insights as customers get a true baseline, a clear path to ongoing operational and process improvements and real-time demonstrable ROI as they adopt our AI capabilities. It also informs how we build AI and deploy agents that are practical, relevant, reliable and trustworthy in real bank environments. And it goes a step further. Because of our API foundation and integration gateway, we can seamlessly connect data across a bank's technology stack as well as the key third parties. That broad 360-degree view of a financial institution's customers has been nCino's calling card in the market since we started the company. Before I turn things over to Greg to talk through our financials in more detail, I want to spend a few minutes addressing the elephant in the room as we have all heard the narrative that AI will replace SaaS. For some categories of software, that may very well be true. But the highly regulated business of banking is different and nCino's position and value proposition in banking is different from what you're seeing across the broader SaaS landscape. Bottom line is we believe AI will be a tremendous tailwind for nCino as it becomes central to how financial institutions operate and compete and how we're scaling and operating the company. Here's how we see the world evolving and how nCino fits in. AI is moving quickly from help me write and help me search to help me complete meaningful productive tasks so I can focus on other work to grow my business more efficiently and profitably. And in a financial institution, the work is not generic. It's onboarding, it's underwriting, it's credit reviews. It's monitoring, assessing and managing risk. It's opening accounts. It's work where the data is sensitive, strictly adhering to the rules is essential. Regulatory compliance is nonnegotiable and the cost of being wrong can be extremely high, not only financially but reputationally. To make all this work, AI needs a foundation to run on. In banking, that foundation is the data and regulatory infrastructure nCino provides. That's why we feel extremely confident about our position. We are the system of record and user experience for many of the most important processes in a financial institution. And every capability has been built with regulatory compliance in mind. As AI becomes more capable, that makes our platform even more relevant because AI needs a place where it can safely understand context and then take action in an efficient, controlled, secure, trusted and regulatory compliant way. You'll hear a lot of discussion in the market about AI commoditizing the application layer. We understand why people raise that point because it's undeniable that AI-driven software makes writing code easier and cheaper. But in the highly regulated mission-critical world of banking, deploying that code in a safe and compliant way is harder. Because of this, we believe AI agents actually increase the value of our underlying platform and system of record. An agent can't operate in a vacuum. It needs trusted data, industry context and guardrails, and it needs to be traceable and auditable. And the platform that connects the user to the data and records the actions taken becomes the natural home for these AI-driven experiences. nCino is that platform. All this leads to how we're approaching AI agents. Our role-based agents, what we call digital partners, were designed to work alongside banking professionals inside the nCino platform, guided by what we've learned from almost a 1.5 decades of usage patterns across our lending customer base and what those patterns mean for speed, consistency and results. Now let me connect that strategy to what we're seeing in the business today. First, adoption is real and usage is growing. While much of the SaaS industry continues to debate how best to respond to the agent economy, community, regional enterprise and global banks, credit unions and IMBs are already using nCino's AI capabilities in production today, not just as a pilot or beta, but as part of how they do lending and banking work. Customers are not just buying AI access, they're using it, and we can see that directly in the increasing consumption of intelligence units on our platform, with banking adviser usage up over 25x in March compared to usage in October. For years, we have said that nCino is not only in the software business, we are in the change management business and moving every customer from contract signing to implementation to pilot to using nCino's AI and production as an integral part of the day job is the sole focus of our forward deployed engineering team. We also continue to see the halo effect we talked about before. nCino's AI innovation and product strategy is showing up as a clear differentiator in competitive conversations. I have mentioned over the past couple of quarters that it's helping drive earlier renewals, and it's becoming another reason new customers are engaging with and choosing nCino and current customers are expanding their relationship with nCino. Second, when we talk about AI, we try to keep it simple. We care about outcomes. The question isn't how many features or how many agents exist. The question is, how much time and money did the financial institution save? How much risk was serviced earlier and mitigated and how much did consistency, efficiency and profitability improve, all while helping to ensure the financial institution operates in accordance with various rules and regulations and provides an enjoyable and compelling user experience for its customers. That's why when we look at banking adviser and our digital partners, we focus on practical wins. In the past, a single relationship review meant painstakingly pulling documentation from systems, manually identifying the relevant data points, followed by hours and hours of analysis. With agentic credit reviews, released as part of the analyst digital partner family last quarter, nCino summarizes in seconds what changed, highlights the drivers, cites the underlying data and helps draft the follow-ups. And the work stays inside nCino with the right permissions, the right documentation and the right audit trail. The bank gets faster answers, more consistent reviews and more capacity for higher-value work, like being in front of customers and growing relationships. This focus on outcomes is exactly why we transitioned our pricing model, and I'm pleased to report that as of the end of fiscal '26, we have already moved approximately 38% of our ACV away from seat-based pricing to platform pricing. Third, our data is not just a competitive moat. It is the foundation for a new category of proprietary intelligence capabilities, benchmarking, predictive risk, operations analytics and other capabilities and products you will hear about as the year progresses that we believe will create entirely new value for our customers and new revenue streams for nCino. We strongly believe that proprietary domain-specific real-world data is the most valuable asset in an AI economy and no other company has the data nCino has. And that data moat compounds with every customer we add in every line of business we expand into. Finally, I want to emphasize something that is especially important in banking. Trust. In a regulated environment, close enough isn't good enough. AI has to be deployed in a way that respects policies and data privacy, aligns with the bank's risk tolerance, which varies from institution to institution and produces results both the institution and regulators can confidently rely on. One of our stockholders recently conveyed, they were reminded how embedded nCino is within a bank's internal and external controls, risk management and governance processes when a top 5 U.S. bank explained to them that they have over 500 exemption workflows configured in nCino that guide every deterministic step of the lending process and that they rely on that process to manage risk, regulatory compliance and audit trials. That's why we're building AI into the nCino platform, where our customers already have the industry context, the controls and the ability to measure outcomes over time. As the Agentic operating system for financial institutions, nCino will be the backbone delivering AI with the same compliance guardrails, the same regulatory audit trails, the same institutional policy logic and the same lending decision framework they have grown to trust and rely on. And that's also why we believe our approach will uniquely scale, not by asking banks to bolt generic AI onto complex processes, but by delivering banking-specific AI that reflects how banks actually operate on a platform that has demonstrated time after time the ability to scale to support some of the largest financial institutions in the world. So stepping back, we feel really good about where we are. While still early, we're seeing strong excitement and increasing momentum in AI adoption and growth in usage as measured by intelligence unit consumption. Our sales pipeline looks great, and we believe our AI agents make nCino even more valuable and sticky to our customers because we connect the user, the process and the data in a trusted, controlled, regulatory compliant environment. In summary, we believe the agent economy expands our addressable market. The outperformance against our financial guidance, the acceleration of ACV bookings, the reacceleration of subscription revenue growth and the improvement and strength of our retention KPIs are all reflections of the impact AI is already having on the business, and we're just getting started. As I wrap up my prepared remarks, I want to welcome a new member to the nCino leadership team. I cannot be prouder of how our sales and marketing teams performed in fiscal '26. And to build on that momentum, we are further investing in our go-to-market organization. Today, we are excited to announce that nCino has hired Keith Kettell as our new Chief Revenue Officer. Keith is a seasoned operator who brings deep financial services, enterprise sales, large global company and scaling expertise to the company. We believe Keith's experience and vision are a great addition to the company to help us further accelerate our subscription revenues growth and take nCino to the next level. With that, I'll hand the call over to Greg to walk through our financial results. Gregory D. Orenstein: Thank you, Sean, and thanks, everyone, for joining us this afternoon to review our fourth quarter and fiscal year 2026 financial results. Please note that all numbers referenced in my remarks are on a non-GAAP basis, unless otherwise stated. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call. Turning to our fourth quarter results. Total revenues were $149.7 million an increase of 6% year-over-year and $594.8 million for fiscal '26, an increase of 10% over fiscal '25. Subscription revenues were $133.4 million in the fourth quarter, an increase of 7% year-over-year and $523.1 million for the full year an increase of 12% over fiscal '25. Organic subscription revenues were $132.2 million in the fourth quarter, up 6% year-over-year and $505.9 million for fiscal '26, an increase of 8% year-over-year. As a reminder, our fourth quarter organic subscription revenues comparison is negatively impacted by an approximately 3% headwind resulting from onetime subscription revenues that occurred in our international business in the fourth quarter of fiscal '25 as the result of a contract buyout. Please see Slide 14 of our fourth quarter earnings presentation for additional details on the components of our subscription revenues over performance. International total revenues were $32.9 million in the fourth quarter, down 1% year-over-year or down 6% in constant currency. International total revenues were $131.5 million in fiscal '26, up 13% year-over-year or 11% in constant currency. International subscription revenues were $28.4 million in the fourth quarter, up 1% year-over-year or down 4% in constant currency in light of the difficult comparison from the onetime contract buyout last year previously noted. International subscription revenues were $109.5 million in fiscal '26, up 19% year-over-year or 16% in constant currency and 5% organically. We had our largest international gross bookings year in company history and with ACV as a leading indicator of future subscription revenues growth, we look forward to our international subscription revenues growth rate once again being accretive. Professional services revenues were $16.3 million in the fourth quarter, a decrease of 1% year-over-year. Full year professional services revenues were $71.6 million, flat year-over-year. As we have previously highlighted, we are emphasizing professional services gross profit growth over professional services revenues growth and expect to see this reflected within our financial results by the second half of fiscal '27 due in large part to our ongoing initiatives, leveraging AI to accelerate our implementations. Non-GAAP operating income for the fourth quarter of fiscal '26 was $34.7 million or 23% of total revenues compared with $24.4 million or 17% of total revenues in the fourth quarter of fiscal '25. Please see Slide 14 of our fourth quarter earnings presentation for additional details on the components of our non-GAAP operating income over performance. Non-GAAP operating income for the full year was $129.4 million or 22% of total revenues compared with $96.2 million or 18% of total revenues in fiscal '25. Non-GAAP net income attributable to nCino for the fourth quarter of fiscal '26 was $42.8 million or $0.37 per diluted share compared to $22 million or $0.19 per diluted share in the fourth quarter of fiscal '25. Non-GAAP net income attributable to nCino for fiscal '26 was $122.7 million or $1.07 per diluted share compared to $84.5 million or $0.72 per diluted share in fiscal '25. As expected, churn year-over-year continue to trend down towards historic norms and settled to a 3-year low in fiscal '26 of $18.2 million or 4% of prior year subscription revenues. We ended the quarter with cash and cash equivalents of $88.7 million, including restricted cash. Free cash flow was $12.5 million in the fourth quarter of fiscal '26, up from negative $10.4 million in the fourth quarter of fiscal '25. Free cash flow for fiscal '26 was $82.6 million up 55% compared to $53.4 million in fiscal '25. We repurchased approximately 1 million shares of our common stock in the fourth quarter at an average price of $25.84 per share for total consideration of $25 million under the $100 million repurchase authorization announced on December 8, 2025. When added to the stock repurchases made through the third quarter last year, we repurchased a total of approximately 5 million shares of our common stock in fiscal '26 at an average price of $25.18 per share for total consideration of $125 million. In addition to the $75 million that remains available under the December 2025 share repurchase authorization, today we announced a $100 million accelerated share repurchase program. We expect to fund this repurchase program with available free cash flow and with a portion of the $200 million term loan expansion of our existing credit facility, which we also announced today and which was funded by some of our largest customers. A portion of the proceeds from this term loan will also be used to reduce the outstanding balance under our revolving credit facility. We ended the year with 620 customers that contributed greater than $100,000 to fiscal '26 subscription revenues, an increase of 13% from fiscal '25. Of these, 114 contributed more than $1 million to fiscal '26, an increase of 9% from fiscal '25 and 14 contributed more than $5 million to fiscal '26 subscription revenues flat with fiscal '25. ACV as of January 31, 2026, was $602.4 million, an increase of 17% year-over-year. On an organic constant currency basis, ACV grew 13% year-over-year in fiscal '26. ACV net retention rate in fiscal '26 increased to 112% or 109% on an organic constant currency basis, up from an ACV net retention rate of 106% in fiscal '25 and reflecting growing demand for our AI-powered platform and solutions among our customer base and success implementing our new asset-based pricing framework. Subscription revenue retention rate in fiscal '26 was 110% or 106% on an organic constant currency basis compared with a subscription revenue retention rate of 110% in fiscal 2025. Note that the subscription revenue retention rate was negatively impacted by the difficult compares in the third and fourth quarters this past year. Additionally, a significant amount of the existing customer expansion that drove the ACV net retention rate improvement occurred in the fourth quarter, so the subscription revenues from those deals are not yet reflected in the subscription revenue retention rate. Turning to guidance. For the first quarter of fiscal '27, we expect total revenues of $154.5 million to $156.5 million, with subscription revenues of $137 million to $139 million, an increase of 8% and 10%, respectively, at the midpoint of the ranges. Non-GAAP operating income in the first quarter is expected to be approximately $38 million to $40 million. Please note that effective for fiscal '27, we will be providing annual guidance for free cash flow in lieu of quarterly and annual guidance for non-GAAP net income attributable to nCino per share as we believe annual free cash flow is a more meaningful measure of our financial performance. For fiscal year '27, we expect free cash flow of $132 million to $137 million, up 63% year-over-year at the midpoint of the range, which reflects our guidance range for non-GAAP operating income less certain assumptions, including approximately $15 million of interest expense, $6 million in cash taxes and $1.5 million of fixed asset purchases. Please recall that our cash collections from customers is highest in the first quarter, which does introduce seasonality to free cash flow. Turning to ACV. For fiscal year '27, we expect net additions of $60 million to $65 million on a constant currency and organic basis, which would bring our fiscal '27 ending ACV to $662.5 million to $667.5 million, representing 10% ACV growth at the midpoint of the range. After a few difficult years for the banking industry, large deals have again become a healthy part of our business, and our sales performance during the fourth quarter included several multi 7-figure net new and upsell wins. While we are confident in our go-to-market organization and the repeatability of the sales activity that drove these multi 7-figure wins in fiscal '26, these large deals can be inherently difficult to predict in both their timing and eventual sizing. In order to continue to prudently manage expectations on the booking side of the equation, our ACV guidance framework reflects win percentages that are higher than the approach we took for ACV guidance in fiscal '26, but lower than the win percentages we actually achieved last year. Also, recognizing that the fourth quarter has historically been, and we expect it to continue to be the largest gross bookings quarter for us each year, similar to this past year, you should not anticipate quantitative revisions to our ACV guidance throughout the year. For fiscal '27, we expect total revenues of $639 million to $643 million, with subscription revenues of $569 million to $573 million, representing growth of 8% and 9%, respectively, at the midpoint of the ranges. Excluding U.S. mortgage, our guidance assumes 10% to 11% year-over-year subscription revenues growth. Please reference Slide 15 in our earnings presentation for assumptions around our subscription revenues guidance. As you will note, consistent with the guidance philosophy we instituted last year, our guidance assumes approximately 1% growth in U.S. mortgage subscription revenues. While we recognize mortgage industry volume forecasts are currently indexed higher than what this growth rate reflects, for guidance and internal business planning purposes, our intention is to continue to be prudent around expectations for U.S. mortgage. To help you reconcile our subscription revenues guidance with our fiscal '26 ACV result, please consider the following: one, a portion of the ACV booked in fiscal '26 contributed to subscription revenues last year. Two, recall that we define ACV as the highest annualized subscription fee under a customer contract and when subscription fees increase during a contract term, the revenue recognition rules require that they are straight line, which leads to subscription revenues being less than ACV for such contracts. Three, churn experienced in fiscal '26 would have generally been from legacy contracts under our old seat-based activation model, where ACV more closely approximated subscription revenues. And four, subscription revenues from mortgage overages are not included in ACV. We expect non-GAAP operating income for fiscal '27 to be $165 million to $170 million. Finally, I'll leave you with a few additional comments to assist with your modeling that should be construed as supplemental to our formal guidance. First, international subscription revenues are expected to be accretive to overall subscription revenues growth in fiscal '27, beginning with the first quarter. Second, we expect to reduce stock-based compensation expense in fiscal '27 as a percentage of total revenues by approximately 100 basis points year-over-year from the 12% reported in fiscal '26. As a reminder, during our initial Investor Day in September 2023, we referenced a long-term stock-based compensation expense target of 6% to 8% of revenues. Third, effective January 2026, nCino is self-insuring for medical benefits, which may introduce some volatility to health care expenses in fiscal '27 as we make our way through the first year of the program. But ultimately, we expect this approach to be a more cost-effective alternative to traditional third-party insurance. And finally, our subscription revenues outlook includes revenues from both contracted and planned ACV bookings that we attribute to our AI products. Our customers are validating our AI strategy, reinforcing that it is innovative and compelling and the month-over-month increase in the consumption of intelligence units is trending quite well. At the same time, our experience has taught us that overall, financial institutions are going to adopt AI at a very deliberate pace. Accordingly, and consistent with our guidance philosophy, while we expect to sell incremental bundles of intelligence units this year, our fiscal '27 subscription revenues guidance does not yet contemplate this. In closing, I want to thank my nCino colleagues for all of their hard work and efforts successfully executing on our fiscal '26 operating plan. We entered fiscal 2027 with a ton of sales momentum and our sales pipeline, which Sean noted looks great, is up meaningfully from this time last year even after achieving the best gross bookings fourth quarter in company history. The intelligence unit usage trends we are seeing are very exciting and reinforce that our AI capabilities and AI strategy are resonating incredibly well with the market. We have the data, the products, capabilities and global reach, a unique and unmatched AI strategy, a reputation for innovation and for taking care of our customers and a phenomenal customer base that trusts nCino to successfully guide them on this AI journey. It is an incredibly exciting time to be part of nCino, the company leading the financial services industry into the world of AI-powered banking, just as we led the financial services industry into the world of cloud banking. As evidenced by our financial guidance, we feel really good about our headcount and expense plan and our ability to continue generating increasing non-GAAP operating income and free cash flow. Our financial guidance also reflects reaccelerating subscription revenues growth, and we believe the pieces are in place for that upward subscription revenues growth trend to continue. We remain confident that we are on track to achieving Rule of 40 around the fourth quarter of this fiscal year. And while the high end of our financial guidance for fiscal 2027 suggests a Rule of 40 mix of around 10% subscription revenues growth and 30% non-GAAP operating income margin in the fourth quarter, we are keenly focused on driving that mix more towards subscription revenues growth. With that, I will open the line for questions. Operator: [Operator Instructions] Our first question comes from Alex Sklar with Raymond James. Alexander Sklar: Sean or Greg, on the positive sales pipeline commentary and the ACV outlook, can you just frame what you saw in terms of the change in close rates or win rates in the back half of the year versus prior years? You referenced coming in above? And then how you approach the ACV outlook from a pipeline coverage perspective versus last year? Sean Desmond: Yes. Thanks, Alex. First of all, we did highlight early in the year our renewed focus on the execution discipline of pipeline growth and our emphasis and prioritization around demand generation in the marketing machine, right? So I think some of that played out in the back half of the year as our pipeline increased, conversion rates were healthy, but we just had a larger pipeline, and we're seeing that continue into this year over last year as well, and that's why we're so excited about the outlook. Overall, by solution, by geography, it's pretty balanced. And obviously, we're seeing nice momentum in our international business that we highlighted on the call. But I think a lot of it is around the discipline of just pipeline management overall. And when you have a larger pipeline, conversion rates can stay pretty steady and you'll have a larger ACV outcome. Alexander Sklar: Okay. Great. And then, Sean, you gave a lot of great color on the Banking Advisor adoption, 170 customers now on the platform. I think you have over 100 skills now versus 2 a year ago. Can you just frame where you're actually seeing the greatest usage across that portfolio of capabilities and skills? And then in terms of the magnitude of a 25x growth in credit usage versus October, maybe help frame how many of those customers are approaching kind of the upper end of their purchase credit allotment? Sean Desmond: Yes. Listen, first and foremost, our executive leadership team as well as the entire company is maniacally focused on adoption of Banking Advisor and our Agentic solutions. And I think we've been very thoughtful about selling our customers large enough blocks of intelligence units upfront to give them the runway that will enable them to navigate the adoption curve and see the benefits and kind of settle into the new experience, which is really important as you're managing the change. The last thing a customer wants is to feel nickel and dimed when they're adopting something new, right? So we didn't want to put them in a position where we sell blocks in small portions where immediately they have to re-up. And I think we can draw some parallels and analogies to the personal experiences that we have, right, with whatever chat interface you might use. The last thing you want is in the first month to be asked for an increase in your monthly subscription, right? So what we're focused on, first and foremost, is that adoption. And we're pivoting a lot of the energy of the field towards sitting side-by-side with customers and getting them comfortable with that. And then I would expect over time, as this settles in, we'll look into the next block of intelligence units. But in particular, your question around what are we seeing traction in, listen, our agenda credit reviews are really exciting, which falls under our analyst digital partner umbrella. Locate and file has been a mainstay since day 1 that we launched banking advisor, and we're seeing a lot of traction with credit monitoring as well as auto spreading. Operator: Our next question comes from Joe Vruwink with Baird. Joseph Vruwink: Great. Just to stay on some of the AI debates. Lending is a very complicated process. And part of that complexity, I'm sure we can appreciate ties to all the different systems and data and decisions that go into it. I guess the risk is that AI models can be good at orchestration. Are you seeing that type of capability and it starts to eat into nCino's differentiation? Or does it cause you to think about how the platform is currently architected and maybe doing some things differently to match up against what AI makes possible? Sean Desmond: Yes. Thanks, Joe. I appreciate the question and certainly understand a lot of the narrative that's going on in the market today. And some of the realities have changed with the AI capabilities, no doubt. For instance, we all know the coding has never been easier, right? And what we need to focus on is the reality that there's a difference between standing up an overnight user experience and deploying that code and maintaining that code in a highly regulated industry. That's still hard if you weren't built from day 1 in a compliant way for the regulators, if you don't own the workflow, if you don't own the data and you don't have the trust relationship, then these AI tools aren't going to stand you up overnight. All that being said, we've acknowledged that workflow is relative old news. And what we're focused on is an Agentic operating system future where we can instrument the platform with agents that tap into our own embedded intelligent workflows and mine that data and provide a differentiated experience. And we believe that is very unique. And the right question right now is not necessarily who's best positioned to deliver overnight because I've yet to see somebody to take a customer live even in the past year that was threatening that posture this time last year. What I think the right question is who's best and most uniquely positioned to capitalize on AI and banking, and we think that's nCino. Joseph Vruwink: That's helpful. On the Intelligent credits, do you have any metrics you can share maybe around efficiency gains or P&L impact that customers using the credits have seen so far? Or maybe is there a spectrum of outcomes you're seeing between heavy and light users? Can you kind of present to your customer base that here are examples where greater consumption is actually translating into greater benefits and you start to build referenceability in kind of that way. Sean Desmond: Yes. And thanks for highlighting the focus on outcomes that we have here at nCino. Listen, I don't really wake up in the morning excited about people adopting AI. I get excited about them getting real outcomes. And when I talk to bank CEOs, around the world, they care about what impact we can have on their top line and what impact we can have on their bottom line, right? It's all about revenue efficiency and cost savings. And so I think we're seeing really good gains and traction, specifically around credit monitoring, which is why I highlighted that credit analyst. And in some cases, we're seeing months to days and days to minutes in terms of getting [indiscernible]. We plan on highlighting at site some direct outcomes sharing their experiences on leveraging those units. But safe to say that as I wake up every morning with the CEO agent stack of my own that highlights intelligent units consumption, there's a direct correlation between the outcomes our customers are getting and the intelligence units they're drawing down on across the spectrum of banking advisers. Operator: Our next question comes from Michael Infante with Morgan Stanley. Michael Infante: On pricing, obviously, it sounded like a really strong result with 38% of revenue now on the new pricing model. Any incremental commentary you can share just in terms of price realization for the fiscal 4Q renewal cohort versus your plan? And in the instances where customers did push back. Can you sort of speak to some of the instances or initiatives you have in place to retain those customers, either in terms of ancillary product of attach of things like banking adviser and/or lower price realization? Sean Desmond: Yes. On the pricing front, first and foremost, I want to highlight that we started on the pricing journey nearly 3 years ago. And I really point that out because we're not reacting to anything here. We had a vision for how outcomes would be the end game for software companies like nCino. And so we prepared for this. The pricing has now been out there for a little over a year. And what I would tell you is that we are exceeding our internal plans and targets, and that momentum even picked up in Q4 versus the prior quarters. And while nobody likes a price increase and nobody likes change, I think that we're very prepared for that. And by and large, those customers are going very well. I'm proud of our account teams in the field. Those aren't necessarily easy conversations. But what I would say is they're more focused on education and enablement and drawing direct lines to the outcomes that our customers are going to get over time versus the old per user per seat model. So the value exchange is becoming apparent to our customers. And because of that, we're seeing early renewals. We're exceeding our targets, and we're leaning in heavily. It's been really accretive to our business. Michael Infante: Helpful, Sean. And then maybe just a quick follow-up on gross margins. I know it's fairly early in terms of thinking about banking advisory monetization. But do you expect the consumption of those incremental credits to be gross margin accretive? Should we be focusing on incremental gross profit dollars? How are you sort of thinking about the inference cost and customer usage intensity when usage exceeds expectations? Sean Desmond: Yes. Listen, I would absolutely expect these to contribute toward gross margins and really both, right? I mean what we're doing in terms of instrumenting our customers with the ability to come to decisions faster over time. we expect the value exchange to play out, right? And I think they're going to be in a position where they can exchange some of the labor cost and add their labor force to more high-value activities and put their employees in front of the customer, right? And that's where they want to be. And we're going to automate the things that happen in the middle and back office, and that's going to drive margin efficiency for our customers. Ultimately, that will flow through to nCino as well. Gregory D. Orenstein: And Michael, just to add, I mean, one of the benefits of seeing the usage tick up quite well is that it gives us the opportunity to stress test our gross margin model as we ramp up, and so we've been able to see that over the last few months is again 25x from October to March. And again, so far, we feel good about it. Operator: Our next question comes from Chris Kennedy with William Blair. Cristopher Kennedy: Can you provide an update on the credit union initiative? Sean Desmond: Yes, something we're very excited about. We mobilized the team, as you know, early last year that wakes up and sleeps, eats and breathes as well, just that credit union market. I'm proud of the way they've run toward the opportunity, have established relationships and credibility in that space and understands the problems we're solving for those customers. I think that's a matter of really being able to tell the same nCino value proposition story in a way that resonates more deeply with the credit union space, and that's given us the opportunity to even envision how we can think about road map in a different way and how we kind of augment the platform and the experiences that we deliver and think beyond some of the traditional experiences we serve up. So we've got good momentum there. The team is fully activated. The pipeline is growing as we head into this year, and we plan on selling the entire platform to our Credit Union customer base. Cristopher Kennedy: Great. And then just as a follow-up, historically, you've given ACV by category. Can get an update between mortgage, commercial and consumer? Gregory D. Orenstein: Yes, Chris, we don't have that for this call, maybe at another public forum, we'll be able to provide that breakdown for you. Operator: Next question comes from Ryan Tomasello with KBW. Ryan Tomasello: I guess starting with the organic subs guide. You're talking about 10% to 11% growth ex mortgage for the year. I appreciate the commentary on international being accretive this year, but I was hoping you can just put a finer point on the drivers there. Ex mortgage, particularly with respect to the U.S. business ex mortgage in terms of subs growth outlook. Gregory D. Orenstein: Yes. Thanks, Ryan. I mean, overall, I think business perspective, whether it's by product or geo, I think we feel really good about the sales momentum that we're seeing in the market. Our customer base generally is quite healthy. Balance sheets are healthy, lending activity has been up. And I think that is driving, again, demand for nCino -- for our products. And I would also go back to AI is a big driver for that as well. You can't leverage AI. You can't leverage this revolutionary technology unless your house is in order. And that's the business that we're in. We're in coming in and transforming your bank so that you can operate on a platform and to be able to leverage not just your data, but the data that nCino has across our whole customer base that's given us the rights to leverage that data as part of our product offering. I would point you to the appendix in the back of the earnings call presentation that we put up, you'll see a nice walk in terms of our year. And the other thing I'd highlight again is the continued downward trend in churn, which, as we know over the last couple of years, has been unusual for us, right, heightened churn, but that coming back more towards historic norms has been a big positive to getting our growth trajectory back towards an upward motion and one that we can build on. Ryan Tomasello: I appreciate that, Greg. And then just following up, just kind of on the subs cadence for the year. The 1Q guide round numbers looks like 9% to 11% organic subs growth versus 9% to 10% for the full year. Just trying to reconcile that with your comments earlier, Greg, about being confident in being able to continue to drive this acceleration in subs growth and just how we should think about this cadence throughout the year with respect to that Rule of 40 target. Gregory D. Orenstein: Yes. Thanks, Ryan. I think you should assume that mortgage comps in the second and third quarter are a little bit tougher. And so that from a trajectory standpoint is something that you should take into account in your modeling. Operator: Our next question comes from Aaron Kimson with Citizens. Aaron Kimson: Sean, can you talk about why now is the right time to bring Keith in to run sales? And what is type 2 priorities will be in fiscal '27? It seems like the sales team is executing well. Sean Desmond: Sales team is executing phenomenally well. And we are -- we have been marching towards a point in time where we were going to appoint a Global Chief Revenue Officer. That's going to help us scale to $1 billion and beyond in terms of where we're going on the revenue growth side. And that has been in the works for some time. What I would share with you is that we had a model in place where Paul Clarkson, who ran our North America sales operation is stepping aside for personal reasons, and Keith is coming in to consolidate the global org and we'll have a tight partnership not only in North America, but in EMEA and Asia PAC and with our partner organization, and Keith has a lot of experience in these areas. He's been somebody we've known for a long time in our network, not only his days at Salesforce, but also at Alloy. And we're super excited about his leadership. He's not only a great experienced leader who's operated in this vertical and has deep relationships with our customer base, but also is a great culture fit for nCino. So yes, the sales organization is operating fantastically well in large part due to Paul Clarkson's leadership. And Paul is stepping aside for personal reasons and Keith is the perfect guy to step in at this point in time and take us to the next level. Aaron Kimson: Understood. And then as a follow-up, it's good to see the mortgage win with a top 40 bank where they also use your commercial lending, small business lending and treasury products. Are you getting to a point in mortgage sales cycles now where you have a better idea of how the move up market with nCino mortgage is going now that you're 3 quarters in there from when you really rolled it out after the Investor Day last year at nSight and at the larger FIs, you finding that existing relationships and other parts of the bank are helping you get a foot in the door on the mortgage side of the house or that the buyers are just generally separate in those big organizations? Sean Desmond: The answer is yes. We are learning from experiences there. As you know, we made the jump from our mortgage solution in the IMB space full on towards some of the largest banks in the world. And we're excited that we have a top 30 bank in the U.S. on the platform, and that naturally gets the attention of the peer group and the cohorts to the point where we start getting some inbound calls for nCino to participate in forums at that level. We're also getting traction in the community and regional bank space as well as the credit union space with the mortgage solution. And I think our teams now have some of the experience and quite frankly, some of the attitude and confidence that it takes to go aggressively sell that across lines of business. It's not uncommon that I would be meeting with our customer base, whether it's a CEO or Chief Lending Officer, or somebody in the C-suite that would proactively bring up on their side and recommend that we talk to the mortgage leader in their business. So that is happening and it's happening pretty organically. Operator: Our next question comes from Saket Kalia with Barclays. Saket Kalia: A nice finish to the year. Greg, maybe for you. I think we said we've got about 38% of ACV on platform pricing now, which is great to hear. I'm curious, have any of your top 20 banks made that transition yet. And were there any learnings from those customers in particular that you feel you could build upon? Gregory D. Orenstein: Yes. Thanks, Saket. The answer is yes. I mean, I think with every deal, you learn something new. We certainly try to. But to Sean's point, this is something that we started in terms of this pricing transition going back about 3 years. First off, internally and testing with our customers. Again, one of the great things about the wonderful customer base we have as we work very closely with them to get their thoughts and input. And so the rollout has frankly exceeded my expectations, not just from the uplift that we've talked about, but as well just in terms of the execution and you would have heard Sean's prepared remarks, our largest customer by ACV renewed for a 5-year deal, and that would have been on the new platform pricing model. So we do have some of our larger customers already on it. And again, I think it's gone quite well, quite pleased -- we're quite pleased with the execution there. Saket Kalia: That's great to hear. Maybe for my follow-up. It was great to hear you reconfirm the Rule of 40 expectation. Is it may be fair to say that, that rule of 40 is achievable based on the ACV that you've already booked here in fiscal '26? Or is it dependent on some of the new bookings that you anticipate this year as well? Gregory D. Orenstein: It would include some new bookings. Again, the slide I referenced earlier, Saket, in the appendix, I think it's Slide 15, you'll see a nice walk that we tried to lay out, so you could see the contribution from bookings last year and what we came into the year with, which is quite a bit of visibility. But we do have -- we do have some work to do this year. And again, I think as we look at our pipelines, as we look at the activity in the market, and frankly, as we look at the excitement that we see in here and feel around AI, we come into this year feeling good about the plan that we have. And it's actually Slide 16, if you look in that deck. Operator: Our next question comes from Charles Nabhan with Stephens. Charles Nabhan: Just 1 quick one for me. Looking back over the past couple of years, you've done several acquisitions. Wondering if you could provide us an update on the progress you've made on Sandbox and DocFox, any positives or negatives? And just an update on the traction you're getting on those solutions in the market. Sean Desmond: Of course, taking those each on its own from a Sandbox standpoint, that has actually become the foundation and the backbone of our integration gateway and the MCP layer that we expect to control how agents access data in the nCino moat, right? So that's very strategic. We're not necessarily selling -- looking to that as a stand-alone revenue engine, but as a strategic foundational platform that sets us up to be the agentic operating system of the future for banks. So we're really excited about that. And from a DocFox standpoint, we remain very compelled by the opportunity with complex commercial onboarding that continues to come up in nearly every conversation as an adjacent problem our customers are solving to the one that we solve so well around commercial loan origination. And so those opportunities in the pipeline are growing. We have acknowledged in past calls that it was going to take us the better part of the prior fiscal year to complete the technology integration work. And now we're looking to convert some of that pipeline here in the first half of this fiscal year. So we're really excited about onboarding coming into full focus as it's kind of been mainly in the background and the R&D room. Now it's coming into the sales machine. Operator: Our next question comes from Adam Hotchkiss with Goldman Sachs. Adam Hotchkiss: Sean, where are bank CIOs leaning in most to AI from your perspective, whether that's nCino or otherwise? And how does that differ across financial institution side? I'm just curious if smaller to midsized banks or maybe more likely to lean into packaged AI use cases. And are you seeing any appetite for some of the larger banks, in particular, to try to do anything? And how is the -- I'm just trying to understand ultimately what banks are out there trying versus not trying from an experimentation perspective and then how nCino fits into that? Sean Desmond: Sure. And in our landscape and as you've acknowledged, I appreciate the tee up there and market segmentation. Undoubtedly, the further down market you go, the bigger the appetite those customers have for prepackaged solutions that we would serve up the agents, right? And we would actually build and deploy the agents. And what's so powerful about our platform as we render those in the existing workflow, right? At nCino, AI lives in the workflow, so the context is already there. The user doesn't have to change their behavior and the trust and compliance are inherited and the data moat is leveraged. So those banks absolutely get that. As you go upmarket, the same value proposition applies but you absolutely have, what I would say, more curious in experimental groups within the organization who are being chartered with, hey, if we build our own agents, what would that experience look like, right? And those customers, just the same need context, they want trust and compliance and they want to tap into nCino data. So we have thoughtfully architected a platform as we evolve in our journey that would enable customers to do both. And we're seeing enterprise banks that are asking us to actually sit side-by-side and co-develop some of these agents and look at those experiences. So it's all exciting. I do think that what comes up most for me when I'm talking to customers about the outcomes they want to go back to that credit monitoring experience is very powerful. The ability to reduce the time spent analyzing the scores and reams of documentation and data to get to a proactive monitoring position over time, and that's not only upfront to do a deal, but that's maintenance. That's pretty common. And then, of course, you know that we have banking adviser skills embedded across the experiences. So that's one that stands out. They are looking for low-hanging fruit. They are looking for quick wins, and we can serve those up, and that's exactly how we've architected our digital partners. Adam Hotchkiss: Okay. That's really helpful, Sean. And then Greg, just on the Slide 16 that fiscal '27 growth algorithm, I really appreciate the detail there. Any way to think about how that contribution mix between contracted in the prior year and forward bookings compares to ultimately what you did in fiscal '26 just from a mix perspective would be helpful to understand. Gregory D. Orenstein: Yes, Adam, I think you can assume it's comparable. Operator: Next question comes from Terry Tillman with Truist Securities. Terrell Tillman: I'll keep it to 1 question, but as typical, there's probably multi parts to it. On the early renewals, it seems like that's a good sign of the interest in the new innovation. But could you all quantify how much early renewals impacted or benefited the strong 4Q ACV? Or the in-year ACV target? And the kind of the second part of this is with the early renewals, I think you did say that one did a contractual renewal at 5 years. But what is the duration looking like on early renewals versus the original contract? And then just do they tend to consume or sign up for more banking adviser or skills versus the non early renewals? Just double-clicking more on early renewal activity would be great. Gregory D. Orenstein: Yes. So in terms of the renewal trajectory and momentum, I'd point you to the ACV you mentioned that we disclosed going from -- it was 102%, I think back in fiscal '24 up to 106% and then up to 112% or 119% at constant currency organic basis, Terry. So again, really like that trend. And I think that's reflective of, again, the customer relationships that we have and also, again, just the breadth of our product that we can go back to our customers and sell them more. And again, a lot of those discussions actually AI, whether it ends up being an AI discussion or not, being able to go talk about AI provides an opportunity for us to explore where else we may be able to add value to our customer base. And so all that's exciting, and I think all that's helping to drive the momentum that we saw last year and that we came into this year with. Operator: Our next question comes from Koji Ikeda with Bank of America. Unknown Analyst: This is [ George McGrehan ] on for Koji Ikeda. And I know that you guys already talked about the relationship between sub revs and ACV. But I kind of wanted to ask this simplistic question, and apologies if it's a bit redundant, but if you could humor me. So fiscal year '26 sub revenue came in higher than ending fiscal year '25 ACV. But the initial guidance for fiscal year '27 sub revenue doesn't quite get us to ending fiscal year '26 ACV. What's kind of the relationship there? And how would you kind of describe the level of conservatism in this fiscal year '27 sub revenue guide? Gregory D. Orenstein: Yes. Thanks for the question. Just going back to some of the earlier comments, there's a few things to keep in mind when you're trying to reconcile the ACV performance in our sub-rev guide. One is, again, a portion of the ACV that we got actually contributed to subs revs last year. So you need to take that into account. Again, the way that we've always defined ACV is the high point of a contract. And when there's increased pricing during a contract, right, the rev rec rules require you to straight line that. And so your actual revenue is going to be short or fall short of what your ACV is and what that exit contracted amount is would be another thing to take into account. The third thing is churn that we experienced last year would generally have been from our older seat-based pricing model. And the ACV and subscription revenue would have been more aligned under that historic model that we had. And then finally, again, as you think about subs revs, keep in mind that our mortgage overages don't fall into ACV. And so those are some of the deltas to take into account when you're trying to reconcile the ACV performance we had in fiscal '26 and the initial guide that we've given for sub revs for fiscal '27. Operator: Our next question comes from Eleanor Smith with JPMorgan. Eleanor Smith: I think I'll keep it to 1 as well. I know many products can be implemented in a matter of weeks or months. But when you land a large new customer as you did in Japan this quarter, how long does it take to implement a large customer like that? And when do you begin recognizing revenue? Sean Desmond: Sure. And listen, I think on average, it's a reality with the efforts we've put into rotating a lot of our energy in our field, PSO organizations toward our forward deploy engineer as well as applied intelligence groups to reducing overall implementation times. And that's showing up and they're compressing nicely, and we're getting customers live in time frames that are actually exceeding my expectations. Specific to the large Japanese deal, that's a multinational deployment that is probably unique in its own regard with respect to some of the coordination that needs to happen upfront before we even start thinking about deploying nCino. So there's some of that that's happening right now. once we get hands on keyboards with nCino, I expect that we'll hammer through that project in months. But there's a lot of upfront prep work when you're bringing a global organization together across 26 countries that needs to happen, that will probably elongate the time that we can announce something very exciting with respect to a go-live on that particular bank. Gregory D. Orenstein: Yes. Ella, with respect to the rev rec, just recall with platform pricing, it's going to be straight lined over the term. And it would generally start a month or two after contract signing, when we would start billing just based on the terms of the contract. Operator: Our next question comes from Nick Altmann with BTIG. Nicholas Altmann: Just on the renewal base. I know you guys mentioned 38% of the ACV base is renewed to the new pricing. But can you just talk about where you expect that mix to trend as it relates to the 2027 ACV guide and whether that contemplates some continuation in the early renewal activity that you guys have been seeing? Gregory D. Orenstein: Yes. Thanks, Nick. Yes. As it relates to fiscal '27. I mean, we would expect a similar performance as we had in fiscal '26 in terms of the renewal cohort that comes up. Recall historically, the average contract length of our bank operating customers is upwards of 4 years. And so break that down generally a quarter over that 4-year period. We are seeing accelerated renewals. And so I think we're ahead of plan for that. So again, we would expect a similar performance. Keep in mind in terms of the comp because it's a similar performance, you won't see that onetime kind of step-up that we had this past year, which was the first year really of the step-up. And so just keep that in mind from a compare standpoint as move into fiscal '27. Operator: Our next question comes from Ken Suchoski with Autonomous Research. Kenneth Suchoski: I'll keep it to 1 as well. I wanted to dig into the long-term moat of the business a little bit because it seems like people are -- investors are questioning the terminal value of these -- of software companies more broadly. You mentioned how banking is a highly regulated business and how that's different. Could you just talk a little bit about how nCino works -- if and how nCino works with regulators and how that might impact the ability to remain entrenched and prevent new companies from coming into the space? And then secondly, it sounds like data is going to be one of the key sort of aspects to the moat longer term. So are we at the point where the network effects of the data are strong enough to keep nCino in the lead? Or is there this sense of urgency across the business to try to build up that aspect of the moat? Sean Desmond: Thank you. And yes, we do believe that the future long-lasting durable software companies that are going to be the generational companies that can survive inflection points like these are going to be able to deliver AI embedded within existing business processes and in particular, in this banking vertical to lend context and within the guardrails of regulation. And beyond regulation, you have to consider things like security, there's trust and there's that data moat that you talked about. And we believe that what's unique about nCino is we started accumulating this data 14 years ago, right? So we are absolutely not sitting here reacting and aggressively trying to build up our data moat overnight because that was the original vision of nCino. When I joined this company in 2013, I had a conversation with our founding CEO on the power of sitting at the intersection of the things that we do and where we do them. And if we could serve that data up with meaningful insights that would be very compelling. And we just happen to now be in the era of AI. So while other companies are scrambling to deliver user experiences overnight with no foundation of data, we're actually continue to build on 14 years of buildup. And we just -- we're not arrogant about it, but we believe our data moat is unparalleled and unique, and nobody else has the type of contextual view on how capital flows through workflows in financial institutions. So we're excited about that, and we believe that's going to propel us we'd lean into it. As far as the regulation, I would first point you to the fact that we have hundreds of bankers that work at nCino, they come from that world, right? In many cases, sitting in those chairs side-by-side with the chairs of the regulators for careers before software. And that's very unique in terms of how you think about product management. And now in the world of prompt engineering and imagining experiences very quickly, doing that without that human riding shotgun with you is where I'd be nervous, right? That's where you start getting into hallucinating on public cloud data that you think regulation lives in the public cloud. It does not and the bankers understand that. And that's why we're excited about that, and we maintain the relationships with these types of people in the space. Operator: Thank you. I would now like to turn the call back over to Sean Desmond for any closing remarks. Sean Desmond: Thank you all for joining us today. We do look forward to seeing many of you at nSight, which is our annual user conference in May, where we will be showcasing many of these agentic experiences we're talking about with customers on stage delivering outcomes. Hope to see you there. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the everplay group plc Full Year Results Investor Presentation. [Operator Instructions] Before we begin, we would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from everplay group plc. Mikkel, good afternoon, sir. Mikkel Weider: Good afternoon, and thank you very much. And welcome, everyone, to this 2025 results presentation. I am, as mentioned, Mikkel Weider, I'm the CEO of everplay; and with me is, Rashid Varachia, our CFO. We'll take you through the year of 2025 and look a little ahead. But since most of you probably haven't met me before, I should probably say just a few words about myself. So I have started several gaming companies during my life, including Nordisk Games, which grew to 1,300 employees via M&A and organic growth. I was the founder and CEO for 7 years. So we invested in or acquired 9 different game studios, including Avalanche, Supermassive, Raw Fury and MercurySteam. I have been at something like 15 different boards, mostly game companies and worked with games of all sizes from indie games and UGC to AAA. So when they called last year from everplay, I was engaged with a handful of different game companies, but I thought the opportunity sounded a little too exciting. So I really like the strategy and the people I met during the process. So I said, yes. And I started on January 5, just a couple of months ago, and I will talk a little about my early findings and thoughts later in the presentation. But first, let's look at 2025. So 2025 saw solid revenues of GBP 166 million, which is up 5% when excluding physical distribution and the performance of our new releases were really good. We saw an 11% growth in adjusted EBITDA for the year, reaching GBP 48.5 million, of course, which represents a 29% margin, which is up 3.1% from the previous year. We will pay a total dividend for the year of 2.9p per share, representing a payout of GBP 4.2 million in total. We ended the year with almost GBP 52 million in cash despite active M&A activities and dividend payouts. Overall, we are set to grow. We have a very nice pipeline of games coming out, many new partnerships and a strong back catalog. So our strategy remains on track. So what happened more in 2025? Well, we launched 11 new titles. They overall performed very well. They actually generated 80% more revenues than all the new titles in the past year. We signed several new large partnerships. We took a minority stake in Super Media Group connected to a strategic partnership with Bulkhead. We acquired the rights of the popular Hammerwatch franchise, including a range of long-term publishing rights. Now if we look a little at the specific companies, Team17, our largest company, had a very nice year, reached more than GBP 100 million in revenue and 20 million units sold. I would also say the quality of our new releases in 2025 were a lot higher than the previous year, reaching an average user score of 87% compared to only 61% the year before. So a big shout out from me to everyone who worked on these games. Date Everything! was the breakaway hit of the new releases with more than 750,000 copies sold. Yet our back catalog still accounted for 75%, which I think is really good and very high compared to most game studios out there. And I would say it's fair to say that 2026 looks even better with more than 10 new games coming out, which is more than twice the releases of last year and also including some really big ones, Hell Let Loose, Golf With Your Friends 2 and Wardogs. It's worth mentioning that the brunt of releases will come out in the latter part of the year. Now astragon, on the other hand, had a less good year than Team17. We terminated the physical distribution business, which hurt the top line, but streamlined our business. But we also saw underwhelming launches of the 2 main new titles during the year. Seafarer had a rocky launch in early access with several box and issues and Firefighting Simulator: Ignite was a better launch, but still saw less traffic and sales than we hoped for. So we are currently improving and adding content to both games. Seafarer will come out of early access and into full launch at the end of the year and should be in a much better shape at that point. We also lacked important large update for our main titles, which we are changing now onwards. In 2026, we look forward to several new releases, whereas not all have been announced yet. We are cautiously optimistic for the year. Lessons have been learned and more content is coming out. As for Team17, the larger launches will also fall in the second half of the year. So of course, when one company is under delivering, it's, of course, nice to have a portfolio of companies. So we are not too dependent on a few launches. And StoryToys had a really, really great year. Revenues rose an impressive 25% to GBP 30 million. And StoryToys did 740 updates during the year, which is about 3 launches per workday and 40% more than the previous year. And we ended the year with 376,000 active subscribers. Growth came from several places. StoryToys had a highly successful launch of the LEGO DUPLO app, LEGO Bluey app, which had more than 1 million downloads in the first month and also reached #1 in the app stores. StoryToys also secured several new partnerships and license agreements, including some large partnership with both Netflix and Apple. If we look ahead, 2026 has started well. We crossed 300 million downloads in the beginning of the year, and we have a lot of content coming out mostly on existing apps, but also a couple of new and unannounced apps. And now over to Rashid for a more financial review. Rashid Varachia: Lovely. Thank you, Mikkel. Hi, everyone. So group revenues were broadly flat year-on-year at GBP 166 million, but excluding the physical distribution, which we exited during the year, they were 5% up year-on-year. And the growth drivers coming from the success of our new title releases such as Date Everything!, Bluey, Worms Across The Worlds and Apple Arcade and then the new strategic partnership deals with Netflix Games. Team17, as mentioned by Mikkel, was 8% up year-on-year, reaching a record GBP 106 million with 20 million units sold. Six new games drove a 700% increase in new release revenues and outstanding performance from titles such as Date Everything!. Other titles included SWORN and Worms Across The Worlds and Apple Arcade. Back catalog contracted by 13%, mainly due to strong performance from Dredge in 2024 and revenue generated from fewer new title releases in the prior year. astragon was the only division which contracted with a decline of 33%, in part driven by a strategic decision to exit low-margin direct physical distribution. Excluding physical distribution, astragon revenues decreased by 18%. Two new titles were released during the year, Firefighting Simulator: Ignite and Seafarer: The Ship Sim, both performing unfortunately below expectations. But we're expecting the business to bounce back in 2026. And then finally, on StoryToys, outstanding performance where revenues were up 25% to GBP 30.4 million. They released 740 app updates. Subscriber numbers increased to 376,000 with peak monthly active users of 12.9 million, reaching 286 million lifetime downloads. Performance driven by a major new Netflix and Apple game partnerships, including LEGO DUPLO World and Barbie Color Creations, along with 3 launches on Apple Arcade Greats. Next slide, please. Thank you. New release revenue increased 80% to GBP 41 million versus GBP 23 million in FY '24 due to an increased number of titles and stellar performance of Team17 titles and LEGO Bluey from StoryToys. Our back catalog contributed 75% of group revenues, which was in line with its 5-year average. The total back catalog revenue were GBP 125 million, which was a 13% decline versus prior year. This was on the back of an exceptionally strong FY '24, which grew by 27%. First-party IP revenue declined 9% to GBP 56 million, reflecting a softer performance at astragon. Team17 was up 2%, supported by Hell Let Loose and Golf With Your Friends. And finally, on this slide, third-party revenue grew 4% to GBP 110 million with strong contributions from the overcooked franchise, Date Everything!, Dredge and LEGO DUPLO World. Gross profit increased significantly by 10% to GBP 76.3 million, where gross margins increasing by 4.4% to 46%, mainly due to exit from physical distribution business and no material impairment. And just as a reminder, during FY '24, a GBP 4.6 million charge was booked for title impairment. Overall, royalty payments were lower year-on-year due to a favorable sales mix at Team17 and a higher weighting of StoryToys revenue, which carry lower royalty levels. And then finally, expense development costs increased modestly to support expansion onto new subscription services, for example, Worms Across The Worlds on Apple Arcade and LEGO DUPLO World. Significant improvements on adjusted EBITDA, which grew just over 11% to GBP 48.5 million. Adjusted EBITDA margin also increased 3.1%, reflecting higher gross margin and flat admin costs. Acquisition-related adjustments declined from 13.8% to GBP 12.1 million due to the end of acquisition-related incentive payments. And net finance income increased to over GBP 1.2 million, and the effective tax rate increased from 24% to 25.5%. And then finally, adjusted EPS increased 7% to 25.7p. There was an GBP 8.2 million increase to GBP 33.3 million on capitalized development costs. This was due to Team17 and the new titles such as Golf With Your Friends 2, Hell Let Loose: Vietnam and astragon, both Police Sim and Ranger's Path. The current year for cap dev in terms of FY '26 is forecasted to be GBP 45 million. Again, this is mainly due to the investments in first-party IP such as Wardogs, the Hell Let Loose franchise, which we have much better visibility over. However, this has led to an increase in terms of cap dev. And then finally, on cash, our cash position was GBP 51.9 million versus last year and increases were driven by our dividend payment during the year, increased tax and then also increase in acquisition-related payments. But overall, our variances included working capital and capital development. And as mentioned earlier by Mikkel, I'm pleased to announce a 2.9p per share dividend. Mikkel Weider: Yes. And now I wanted to say a couple of words about my first 3 months. It's, of course, always interesting to start in a new business and coming into a company with fresh eyes, so -- and see a little from the outside. So I wanted to take this opportunity to give my view on the company after close to 3 months in. So yes, it's always a little exciting to start a new job. Is everything as good as they told you in the hiring process? Or do you uncover larger problems once you're on the inside? Well, fortunately, I can say that the company is in better shape than I had hoped for. Yes, there is stuff to work on for sure. But overall, I'm very impressed with the company and the organization despite the stock being pretty weak in the recent weeks. There is a good energy, I think, in the company and the culture is strong. While there has been several changes in the management in the last years, especially in Team17, I feel we have a range of great people now to take the company to the next level, and we are well positioned for growth. The back catalog is also as strong as I could have hoped for, which creates stable cash flows and predictability, which is really nice, of course. I already like the vertical strategy of the company with focus divisions before I joined. But getting on the inside, I can really appreciate the focus of each division. If you like an astragon or StoryToys game, you'll most likely like the new games coming out from them as well, and Team17 can also do a lot of cross-promotion between titles. Some of the stuff I would like to focus more on in the coming years are to have a stronger tech focus, including AI. I also like to look more at processes and reutilization. So we want to add more service elements and upsells for evergreen titles, for example, having more paid DLCs attached to our bigger games. And I'm also looking at how we can work more together and create synergies across the group. And of course, we want to do more M&A. So over the last 18 months, my predecessors have worked with different strategic pillars. And I think there overall has been good progress on these pillars in 2025, and these are pillars that I support as well. So there was an ambition to strengthen our first-party IPs that is IPs and games we fully own ourselves, something I definitely think is a good idea. And in 2025, we launched 2 new titles with first-party IPs. And we have 10 projects in the pipeline for our owned IP. So I think there has been good progress there. Another focus has been to find and grow new innovative third-party games that is games made by other companies with their IPs. There has been solid progress here as well. Date Everything! was a breakaway hit, and we have more than 10 new third-party games coming out already in 2026. A third focus has been to be very mindful of costs and to improve margins. Gross margins, they are up 4.4% and adjusted EBITDA was up 3.1%, which makes the company a very profitable one compared to a lot of our peers. And finally, we wanted to drive more growth. Well, adjusting for the removal of physical distribution, the company did see growth after all, and we also managed to acquire IPs and games for the future back catalog. On the organization side, there has been several changes. Aside from having a new CEO, me, if you're in doubt, Team17 promoted Harley Homewood to be the General Manager in November, and he's really doing a good job so far. In Team17, we have recently regrouped our games in 3 overall pillars with a franchise director for each, so we more easily can reutilize knowledge, technology and do cross-promotion within the clusters. In astragon, we have exited the distribution business, but also slimmed the organization overall to focus on the core titles, and we now have a more simplified organization, making it easier to get higher margins again. In general, we want to scale without adding proportionally more people. I think it's important to stay nimble and agile and use technology and processes in smarter ways. An example of that, Team17 has more than twice the amount of launches in 2026 compared to last year, while not adding to the total headcount. I think that is quite impressive. Finally, we have hired a few additional central resources to assist all divisions. And overall, we are creating a stronger foundation for organic growth and acquisitions. As mentioned, I want us to become stronger in tech and AI. And as many of you know, AI has evolved a lot the last months, really empowering developers in tech. New tools and AI will allow us in everplay to, a, create more and larger and richer games while not adding costs; and b, also help us optimize our internal processes and logistics. In general, I actually think AI will result in a greater demand for publishers like us, someone who can help developers games to stand out in the crowd. With more games being launched, discoverability will definitely be key onwards. So in many ways, AI strengthens our reasons to be. In the meantime, it's, of course, very important we follow the evolution closely to reap the fruits, we need to be at least early adopters. We need to be stellar in marketing and publishing, and we need to be very agile and adapt to changing technologies while still doing it in an ethically correct way. We've been working with AI for a while. We have an AI council and AI tools for all our people. And we have various cases across the group, cases we want to expand on and distribute across the group. Some examples, StoryToys are actively using AI in engineering, doing 40,000 lines of code per month. We're also using AI in QA several places, for example, for performance testing and [ automatization ]. But as mentioned overall, we can go further, and I want to empower our employees even more. And now a short break from talking. Let's watch a show reel of some of the games coming out this year. [Presentation] Mikkel Weider: A lot of nice games, if you ask me. So some of the bigger titles this year are Hell Let Loose: Vietnam, Golf With Your Friends 2, Bus Simulator, Silver Pines, Wardogs and some pretty interesting unannounced titles we look forward to presenting later in the year. And now for the last slide of the presentation. Overall, I believe we are well positioned to continue the growth with a strong pipeline and back catalog. As mentioned earlier on, some of the larger games are scheduled for the second part of the year, which gives some additional weight to H2 results. But overall, we are confident we can deliver the adjusted EBITDA for 2026 in line with the current market expectations. Looking to the midterm, we are investing in several of our larger first-party franchises with games coming out over the next couple of years. We are very happy about these investments, and we think they will bring great returns and strengthen our portfolio considerably. And with these words, I think we can conclude the presentation. We will now take questions hosted by James Targett, our Head of Investor Relations. So James, come on board and tell us if you have some questions already. James Targett: Yes. Thank you, Mikkel. I do have some questions, which have come in from shareholders. First of all, your thoughts on capital allocation, particularly how you think about M&A versus share buybacks currently? Mikkel Weider: Do you want to say some words on that, Rashid? Rashid Varachia: Yes. Obviously, capital allocation, very important to us. We're hugely cash generative, and we're always very conscious in terms of how that cash has been deployed. But we also -- it's also important to note last year was the first year whereby we actually reported a dividend payment. And so we will continue in terms of our journey in terms of capital allocation. We want to do M&A, and it's great that we have the funds to do M&A. But in terms of share buyback, it's very unfortunate where we find ourselves with our share position and share price position this week. And it's something that the Board will continue to review and discuss, but no immediate plans for any action on that at the moment. James Targett: Thanks, Rashid. Mikkel, one for you on AI. There's been a lot of narrative over the last few months that AI will disintermediate software businesses, make them less relevant. Could you address that directly for everplay and outline why developers won't be able to go straight to players and bypass Team17 or everplay? Mikkel Weider: Yes. No, no, I think it's a very interesting topic. So first of all, we don't see clear indications that there will be like one person in a basement ticking a button and suddenly having a wonderful game. There will certainly be a lot of low-quality games out there, but games of a certain quality will need like a team around them. However, that -- those teams, they can really be empowered by AI. And we are very used to working with small and agile teams of like 3, 4, 5, 7 people. And I think that's really what you need to make a quite powerful games -- game these days. I would be a little more worried if we had like 300 people working on a AAA game, and we've been working on it for 3 years on a very old engine, and it's coming out in 2 years or something like that. But I actually think we are really well positioned to work with smaller agile teams using powerful tools. Now of course, yes, there will be -- I'm sure there will be a lot more content coming out, but then it will be super important to have someone help kind of like connect the gamers with this content. And here, I think we are, again, really well positioned, helping teams out there where they can focus on making cool games, and we can get them in front of a much bigger audience. So maybe a little like today where everyone of us on this call, we can easily upload a video to YouTube, but is it going to be watched very much? Well, most likely not. And whereas there are some really big content creators out there who are very professional in their output. And that's where we want to be, like either the professional YouTubers or the -- or like closer to the Netflix. And it's not like Netflix has not been able to grow while YouTube was there. So I think we're going to live pretty well actually in that intersection, you can say. But again, we have to be on the top of our game here, like we can't just sit and wait for this to happen, like we're going to actively embrace it. And hopefully, we'll be a disruptor instead of getting disrupted ourselves. I think we have a good chance of that. James Targett: Thanks, Mikkel. Rashid, one for you. Are you concerned about the rise in development costs compared to the previous years? And how does this support the midterm growth? Rashid Varachia: Yes. So not concerned, James, because there's reasons for the increase. We came off the back of '24, whereby it was an all-time low in terms of cap dev. We had impairments back in '23, early part of '24. But this is a growth for our future. So I'm hugely excited. We've got some fantastic new games coming. We've already said this year, there's going to be at least 15 games, 15 new games. And it's investment, as I said earlier, into our first-party titles. And towards the end of last year, we invested in the Super Media Group, the Bulkhead team who are responsible for Wardogs, a fantastic game, massively excited. The games coming out later this year, but that does require capital investment. So a combination of Wardogs, our own IP and the team at StoryToys are also growing significantly. Unfortunately, we can't announce everything on this call, but there's some really great games coming from the StoryToys team as well. So that has led to an increase in cap dev, and the way we like to -- well, how I like to forecast is I'm fairly conservative. That's reflected in the numbers, and we should see growth in future years. Last year, we had 3 upgrades. So all being well, we'll beat the current expectations. James Targett: Thanks, Rashid. A question on how we decide about acquiring IP versus building IP internally. Maybe that's more for you, Mikkel. Mikkel Weider: We'll do both, you could say. Our core business is to build our own like to grow organically and invest in games that we -- as we do today. And then, as Rashid also mentioned, sometimes when we know something is working, we can take -- we can do a bigger investment in that title based on like, let's say, Hell Let Loose. It's such -- there's such a huge fan base. So it feels much more safe to kind of like do more within that IP than trying something completely new. On the M&A side, we are interested in looking around, and we're going to be super structured about it. And we're going to be highly picky with what we potentially buy. We're going to say no and no and no and no, and then maybe we're going to say yes to something because it has to sit really well with us for us to buy something. We are -- would potentially like to buy IPs and games, so assets because we can actually handle assets in our company, which is much better than in my previous company, for example, where we always had to buy like a full team that can handle everything themselves. This time around, we can buy assets and then take care of them for the next 5, 10 years. We can also buy a studio or a company, but then it has to be really fitting with our values and it has to -- that our due diligence has to be very thorough whether we want to take them in or not. And you could say that we -- on our wish list are titles that can bolster our existing divisions and to make a new kind of like forest division would require that it's like really like a standout opportunity. So we'll be active, but very cautious on what we potentially would be buying. And now I'm going to -- I saw a question on the list here as well. And we can, of course, evaluate whether we should buy shares in our own company if we think we are more attractive than anything out there. That's, of course, something to -- we'll be considering along the way as well to get most bang for the buck. James Targett: Rashid, what is the amortization policy for capitalized development costs on larger first-party titles such as Hell Let Loose: Vietnam and Golf With Your Friends 2? Rashid Varachia: Yes, it's very conservative, James. It's 2 years with month 1 being 30% and that hasn't really changed. And it's something which I reviewed when I first came on board. We've taken feedback from PwC as well. And the expectation was we would increase that. But again, with the very nature of how I tend to do things, I'd like to leave it conservative. The Board agrees, we should leave it how it is. But the tail for our titles is much longer than it's ever been. And I think it's a good point -- good place to mention our back catalog because as we said earlier, our back catalog represents nearly 75% of our total revenue. And when we look at our back catalog and we look at the aging of our back catalog, there's still over 50% of our back catalog, which is coming from titles, which is 4 years plus. So a, demonstrating the longevity of our titles, but also the number of titles that we have actually, what I call in the hopper, which is 150-plus titles that we have. So there's no concerns there in terms of our amortization policy. James Targett: Thanks, Rashid. A question from Mikkel. How does everplay, specifically Team17 and astragon focusing on the PC and console business aim to stand out among the growing number of indie and AA releases every year? Mikkel Weider: Well, several answers to that one. One is that we can -- as opposed to most other, we can actually do cross-promotion. So hey, if you like Construction Simulator, you might really like Bus Simulator, for example, like where we stick within our verticals. If you like Hell Let Loose, maybe you're going to love Wardogs. So I think cross-promotion is something that we can do and which is harder for the other. We are great in kind of like getting to a bunch of different platforms, which is quite hard for smaller entities like you don't just immediately get on Xbox or PlayStation or new consoles coming up. So I think the distribution is we have more direct consumer access than a developer typically would have. We know how to operate social media and marketing and outreach and where it gives the most bang for the bucks. Honestly, most developers, they are not very interested in a lot of these things that we are doing, and they are not -- therefore, not very good at it. And we just need to keep being at the forefront of marketing and getting games in front of eyes of other people. So we are also strengthening actually our marketing department, for example, in Team17 because this will be core for us in the future. And then maybe we'll have technology handle some of the -- be more active in other parts of the organization, where -- which is not our core focus. So yes, it's -- we need to keep improving, of course, and being at the forefront. James Targett: Okay. And actually, our last question, maybe one you could both answer to finish with. Is there any particular game this year that you're most excited about? Mikkel Weider: What do you say, Rashid? What are you excited about? Rashid Varachia: I say one, James. I'm going to say 2. I'm going to go Wardogs because it looks fantastic, and it's a bit of me, love a bit of shooting. And then I'm going to go Golf With Your Friends because I'm rubbish playing it. I need to practice a little bit more. Mikkel Weider: You mean you are obviously playing it in real life. Okay. Yes. Okay, then Golf With Your Friends 2 is a little more. Yes, those are good titles. I'm also personally excited about, of course, the Hell Let Loose that we mentioned. I think that like a classical franchise like Bus Simulator has been with us for so many years. And sometimes instead of killing dragons and shooting some, it is actually very, very relaxing and soothing to drive a bus instead. So I think that's going to be good fun. And then, of course, some of the more like indie titles like Silver Pipes, for example, I think looks really exciting. James Targett: Okay. Well, yes, plenty to look forward to. Well, that's all the questions. So yes, Mikkel, over to you. Mikkel Weider: Well, thank you very much, everyone, for joining this call. It's been a pleasure, and thank you so much for banking everplay. Operator: Perfect, guys, if I may just jump back in at this point, and thank you very much indeed for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback. On behalf of the management team of everplay group plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.