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Operator: Good afternoon. This is the chorus call conference operator. Welcome, and thank you for joining the Fincantieri Full Year 2025 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Folgiero, Chief Executive Officer and Managing Director. Please go ahead, sir. Pierroberto Folgiero: Good afternoon, ladies and gentlemen, and welcome to Fincantieri's Full Year 2025 Results Call. We are proud to share with you the outstanding results achieved in 2025, which highlights Fincantieri's ability to capture the opportunities offered by the favorable macro trends in our markets, while maintaining financial discipline and ensuring flawless execution of our backlog. In 2025, we delivered tangible progress in the implementation of our strategy, exceeding expectations and creating significant value for all our stakeholders. This provides an exceptionally strong foundation on which to build the group's growth trajectory set out in the new 2026-2030 business plan. We achieved a double-digit revenue and EBITDA growth a strong margin expansion supported by continued efficiency initiatives and a profitable business mix, leading to the highest net profit in our industry at EUR 117 million, more than 4x higher than 2024. We also recorded a new all-time high in both order intake and total backlog, confirming the strength of our commercial positioning and remarkable growth potential. On the financial front, the group continues to make rapid progress in its deleveraging path with net debt-to-EBITDA up to 2.7x ahead of 2025 guidance provided last February at the Capital Markets Day. And there is more to come with new cruise and underwater orders already secured in early 2026 and a robust defense pipeline expected to translate into major contracts in the coming months. We also recently completed a rights issue of EUR 500 million via an accelerated book building process that allows us to further enhance our financial flexibility and provides optionality to support our selective inorganic growth strategy, also through M&A opportunities as well as to bring forward our deleveraging targets. It is worth noting that this capital increase was approved by the EGM in June 2024, in conjunction with the approval of the EUR 400 million rights issue completed in July 2024. And it's also to be noted that the free float as a result is now up 36%. Let's move to Page 4 for a summary of the financial and commercial highlights of the year. In 2025, we exceeded all targets set out in our guidance, further revised at the Capital Market Day, demonstrating the group's ability to deliver on its commitments and consistently outperform expectations. Revenues increased by 13% year-on-year, reaching approximately EUR 9.2 billion, supported by strong market tailwinds in the Shipbuilding segment and by the rapid expansion of the Underwater business. EBITDA margin grew significantly to 7.4% vis-a-vis 6.3% at the end of 2024. This increase is the result of the structural evolution of cruise into a profitable and cash-generative business and by the increasing contribution of defense and Underwater to revenue mix. The net debt EBITDA ratio improved to 2.7x, well ahead of the guidance provided at the end of 2024 and better than the revised guidance provided in February 2026. Finally, net profit reached the record level of EUR 117 million, demonstrating the remarkable turnaround achieved over the past three years and confirming the structural growth and profitability of the group. These results confirm the remarkable turnaround achieved by the group over the past three years, okay? Our revenues between 2022 and 2025 grew with a compounded average growth rate of 7.3% while our EBITDA increased by 3x over the same period. Our net income is now structurally positive. Lastly, our deleveraging process has been impressive, reaching 2.7x with further significant reduction projected going forward. Turning to Page 6. We delivered an outstanding commercial performance in 2025 with a record high order intake at EUR 20.3 billion and the book-to-bill equal to 2.2x compared to 1.9x in 2024, underscoring the strong demand in our core businesses, especially in building which posted an impressive 42% year-on-year growth. As a result, total backlog reached an all-time high of EUR 63.2 billion, equivalent to approximately 6.9 years of work based on full year 2025 revenues, ensuring strong visibility on the future growth. Let's now move to Page 7 to have a look at our order book. 2025 was also marked by the flawless backlog execution with 24 units delivered. We have a full slate of deliveries scheduled through 2036, with visibility further extended to 2037 thanks to the already mentioned order by Norwegian Cruise Line secured in early 2026. As of year-end 2025, our backlog includes 97 units, 36 in cruise, with the first two jumbo ships scheduled for delivery in 2029 and 2030, 20 in defense, five in underwater and 36 in offshore and specialized vessels, providing solid and long-term visibility for the years ahead. Let's move to Page 8 for an overview of the commercial opportunities ahead. The current macro trend offered significant growth opportunities in all of our business segments, which are actively monitoring as we speak. Of more than 500 commercial opportunities, we have looked at, we have selected a number of these to pursue through our participation in tender processes for an amount of approximately EUR 32.5 billion. In the past months, we have already successfully secured a number of orders, including important orders from NCL, Crystal, Viking and TUI in Cruise, orders in naval from the Italian Navy and ordering offshores for four vessels from Ocean Infinity and the largest order ever for WASS, for Torpedoes from the Saudi Navy. As I mentioned in our Capital Market Day, we also see short-term opportunities in naval in the coming months for approximately EUR 5 billion from the Italian Navy, the DDX, EPC call 2, LSS3 from export countries for frigates, from service contracts for the Middle East countries and from new programs from the United States Navy. Notably, last month, the United States Navy issued a request for proposal for a vessel construction manager to oversee the construction of the new medium lending ship class, identified Fincantieri Marinette our USA subsidiary as one of the two shipyards to be awarded for the construction with initial allocation of four vessels. Moving to our outlook for 2026, we confirm the guidance provided during the Capital Market Day with revenues in the range of EUR 9.2 billion to EUR 9.3 billion, EBITDA of approximately EUR 700 million with an EBITDA margin of around 7.5%. Adjusted net debt to EBITDA ratio at approximately 2x, which equates to 1.3x, including the capital increase completed in February 2026. Finally, net profit is expected to be higher than in 2025. Turning on Slide 10. Let me provide some color on the recent capital increase via ABB we successfully completed in February. As we communicated, the EUR 500 million capital increase is intended to further enhance our financial flexibility and provides optionality to support our selective inorganic growth strategy. Also through M&A opportunities, in particular in relation to unconventional underwater solution, where we see significant opportunities to expand our position. We are looking at the selective number of potential targets, which we will update you on the coming months. Now I will hand over the call to Giuseppe, who will discuss 2025 financial results in more details. Please Giuseppe. Giuseppe Dado: Thank you, Pierroberto. Let's move on, on Page 11, where we can comment order intake. Again, like we said before, EUR 20.3 billion, all-time high with a growth of over 32%. And a book-to-bill ratio well above revenues, 2.2x. This reflects the sustained growth in Fincantieri commercial pipeline that is supported across all segments by strong demand. Shipbuilding among these segments continued to deliver strong order intake reaching almost EUR 18 billion, up 42% compared to last year. Of course, these very strong order intake brings another -- a record total backlog at $63.2 billion, and I'm moving on Page 13, that covers almost 7x 2025 revenues and these results confirms the impressive growth trend already seen in 2024 and further increases long-term visibility of the business. Backlog grew by almost 33% to EUR 41.1 billion, up from EUR 31 billion in 2024. And we also have a very strong soft backlog that increased to EUR 22.1 billion compared to EUR 20.2 billion of 2024. We delivered 24 units from 11 different shipyards, 5 for cruise, 7 for defense and 12 for offshore. On Page 14, financials. Revenues reached almost EUR 9.2 billion, up 13.1% year-on-year with a strong contribution from shipbuilding that posted a 15.1% growth compared to 2024 within shipbuilding. Cruise revenues grew by 12.5% year-on-year. With production levels characterized by capacity saturation on the current shipyard footprint and reflecting the significant backlog acquired. Also, the Defense segment recorded a 20.7% increase year-on-year, partly driven by the finalization on the first quarter of 2025 of the contract for the sale of two PPA units to the Indonesian Ministry of Defense. Those two units were both delivered in the second half of the year. The underwater segment posted as well a sharp increase in revenues, up 88.2% and this comes from the consolidation of WASS submarine systems from January 2025, but also from the very strong performance of Remazel engineering that had a revenue growth of 25% year-on-year. And together with the accelerated advancement of the U212NFS submarine program for the Italian Navy. As with the offshore and specialized vessels and the Equipment Systems & Infrastructure segments, they both were substantially in line with 2024. On the following page, EBITDA. Well, at the group level rose sharply by almost 34% year-on-year to EUR 681 million with the margin up to 7.4% from 6.3% reported in 2024. Shipbuilding EBITDA grew by 29.3% to EUR 451 million with an EBITDA margin of 6.8%, up 0.8 percentage points compared to last year, this comes thanks to very favorable pricing dynamics. And improving efficiency in the cruise business. As a whole, the cruise business has improved also in terms of net working capital, thanks to the better payment terms. And of course, on top of it, there is the increasing contribution of the Defense business. The underwater, as expected, I would say, delivered an EBITDA of EUR 117 million with the margin of 17.6%. And this confirms the sector's premium profitability that we discussed on the Underwater Day in May. The offshore specialized vessel EBITDA reached EUR 72 million with an EBITDA margin growing to 5.3%, consolidating its positive path to margin improvement. The Equipment, Systems and Infrastructure segment delivered a strong contribution to the group's profitability. With EBITDA rising by 33% and EBITDA margin reaching 8.2% versus 6.1% in 2024. Drivers of this growth are, in particular, a significant contribution by the mechatronic business and higher margins in the Electronics and Digital Product cluster. And of course, last, but not least, the infrastructure cluster improved as well. On the following page, net profit for a record level, EUR 117 million the highest ever recorded by Fincantieri and over 4x the results we reached in 2024. This record result reflects the material growth in EBITDA partially offset by the increase in D&A, but this is mainly driven by the purchase price allocation following the acquisition of WASS Submarine Systems completed in Q1 2025. Of course, the effect will diminish throughout the years on this. EBIT increased to EUR 368 million from EUR 246 million in 2024. And last, but not least, thanks to our very strong financial discipline. The group benefited from a reduction in financial expenses. And this, of course, comes partly from the lower average debt recorded during the year. And also a positive contribution was provided by the decrease in the asbestos-related litigation cost, which declined for the third consecutive year. On the following page, the leverage impact and debt maturity profile at the end of 2025, adjusted net debt amounts to roughly EUR 1.3 billion. And of course, in order to ensure full comparability with 2024, these figures -- this figure includes noncurrent financial receivables, notably the loan granted to Virgin Cruises previously included in 2024 net debt and reclassified as noncurrent following the maturity extension agreed in December. Excluding these current -- these noncurrent financial receivable, net debt stands at EUR 1.8 billion roughly. Leverage ratio, net debt over EBITDA improved to 2.7x significantly lower than the 3.3x recorded as of year-end 2024 and further improving on the 2025 guidance provided in the Capital Markets Day, which was 2.8x. The leverage ratio, including noncurrent financial receivables stands at 1.9x EBITDA. As we have previously mentioned, we have generated in 2025 significant cash flow from operations, which, excluding the cash outflow for the purchase of WASS in early 2025, translates into a free cash flow generation of more than EUR 250 million. We have a very well distributed debt maturity profile with no significant long-term debt maturities until 2028, and we can rely on a solid capital structure with no covenants roughly 90% fixed rate liabilities, this is obtained through derivatives. Furthermore, the senior unsecured Schuldschein placement for EUR 395 million completed in July 2025, contributed to extending our maturity profile and reducing our average interest rate. After that, I will now hand the call back to Pierroberto for his closing remarks. Thank you. Pierroberto Folgiero: Thank you, Giuseppe. Let me now summarize our key takeaways on Page 18. During 2025, we have delivered record commercial and financial results with net profit, order intake and total backlog reaching an all-time high. These results provide a strong foundation for the years ahead in the execution of our 2026-2030 business plan. Margins further improved year-on-year, thanks to the structural evolution of Cruise into a profitable and cash-generative business and to the higher contribution of Defense and Underwater to the revenue mix. We benefit from an impressive backlog visibility further extended to 2037. This supports our margin profile through working capital optimization, capacity saturation and improved procurement efficiency. The current global geopolitical environment offers substantial growth in defense, which we expect to translate into new significant orders in the coming months. We are consolidating our position as the leading orchestrator in the underwater domain, expanding both our product offering and business development capabilities also through targeted acquisitions and strategic partnerships. The successful completion of the capital increase last February demonstrates strong market confidence, while providing additional financial flexibility and optionality to pursue the selective M&A strategy. We are only at the beginning of a secular growth trends, and we are ready to capture this opportunity. With that, we are now open to take your questions. Operator: [Operator Instructions] The first question is from Antonio Gianfrancesco of Intermonte. Antonio Gianfrancesco: I have two. The first one is on the year-to-date Cruise orders from Norwegian and Viking. Could you give us some indications on the margin profile of these new contracts compared to the current backlog? And more broadly, even on Cruise business. At Capital Markets Day in February, you indicated the profitability for the Shipbuilding division at 7% for 2026. Could you give us an indication about the evolution of the profitability in the Cruise segment for the coming years? The second one is on the recently announced memorandum of understanding with Navantia on European Patrol Corvette program. Could you please help us to better understand how you see this translating into actual order intake. And in particular, I was wondering if you consider this memorandum of understanding as one of the key building block behind the EUR 5 billion defense pipeline in six months, you indicated at the Capital Markets Day. Pierroberto Folgiero: Thank you for your questions. Cruise orders, NCL and Viking, we are not accustomed to disclose precise margins. We would rather prefer to let you appreciate what is behind this pickup in the percentage margin in this profitability. So basically, as we have been saying and doing and pursuing the Cruise business is going in the direction of saturation, saturation, meaning perfect "absorption of fixed cost" on the one hand, on the other hand, long-term visibility and backlog provides for long-term partnership with supply chain and vendors. So we can achieve, I would say, optimization in the terms and condition pricing, for example, of what we can achieve from supply chain. So the more we go in that direction, the more we see a reinforcement of profitability in the cruise, which is also benefiting from an additional dynamics on the revenue side on the pricing side. So on the cost side, saturation and procurement optimization. On the revenue side, there are positive developments in terms of pricing. So the scarcity effect is allowing us to increase our bargaining power with ship owners and somehow improve our negotiate position. Let me also add that there is a third dynamic in Cruise, which is not again related to the cost, which is not related to the revenues, but it's related to the risk profile. So the beauty of this long queue of order intake has to do with the fact that our not prototype ships but are repetitive ships. So many of the latest announcements, many of the latest awards are repetitive of an existing ship repetitive version of an existing ship, which is a terrific sorts of derisking. And conversely, it increases the possibility to convert contingencies accrued into extra margins at the right moment. So there is a series of concurrent effects that are driving our expectation of Cruise better and better. Let me add the fourth information which has to do with terms and conditions, payment terms and conditions. So we are also succeeding in improving to the maximum possible extent payment conditions in the direction of improving the working capital dynamics accordingly. Which dynamics is, as you may know, already improved by the stabilization of volumes, which is the prerequisite in order not to absorb working capital. So no precise answer. Sorry for that. For commercial regions, for strategic reasons, but as many site information as possible in order for you to appreciate what is behind this enhancement in profitability. Similarly, we believe that the Cruise for the years to come, which was your second question, will continue to improve margins. So the multiple engines I was describing before are expected to gain pace, gain traction, change gear and give us more and more satisfaction in the years to come. So we are definitely convinced that this, I would say, environment is truly healthy for Fincantieri Cruise division. On your second question about Spain about EPC about Navantia, I think it's a very important step, it is not an MOU only. It is beginning of a new, I would say phase in the European cooperation, the EPC program, which is a Corvette is in the process of moving to the second phase, which is the second call from EDF, from European Defense Fund, which is the relevant entity that is supporting with specific grants the development of this European Corvette. Italy and Spain and France are already there. Other nations are expressing interest namely Romania, namely Greece. So it is expected to be, let me say, kind of higher WASS of the sea, which will be remarkably powerful for European demand, but at the right moment also for exports out of Europe. So it's a way to align requirements among different navies with the aim of optimizing costs, the absorption of nonrecurring costs and creating an interchangeable interoperable platform that could be very competitive also at export level. Your question is if the ship is going to be ordered tomorrow morning, which is not the case because the EPC program is going from the initial engineering to the engineering for construction step. What is very important is that all the nations are expected or the founding nations, namely Italy, Spain and France, are expected to soon express their commitment to order their number of ships to this new entity. So very soon, we are going to move this platform from a paperwork to a construction exercise, with commitments, which, by definition, will be for many units with commitments coming from the founders, from the founding nations. I think that's it. Operator: The next question is from Marco Vitale of Mediobanca. Marco Vitale: The first one is on the outlook. If you would provide us some source to say indications in terms of what you expect by divisions. We noted that you say, sales target implies a flattish revenue trend. And I was wondering if you could add some few details on what are the key, say, underlying dynamics across business lines for year 2026 outlook. The next question on the, say, new U.S. program, the LSM that you mentioning, if you could do, we had read some, say, few articles. If you could add some say, details on the potential timing in terms of both order collection and also P&L impact that you expect from the new program. Last question is about, say, more general in terms of supply chain and discussion with the main cruise operator. We noted that the current, say, rise in geopolitical conflicts are also triggering as a side effect, lower tourist volumes for Cruises. I was wondering if -- I mean, if you share any insight in terms of the discussion you had with the main cruise operators could reassure your long-term business pipeline that you have with them? Pierroberto Folgiero: First question about 2026 outlook. Our business is very beautiful because it depends on the backlog. So 2026 revenues are not going to be disclosed by Fincantieri but will be self-disclosed by the deployment of the backlog existing at the end of 2025. So it's -- that's the beauty of being a project-driven company. So with respect to 2026, we have the production curves coming from the backlog we have already secured. And 2026 will be the year in which in terms of expectations, we expect a "kick in" of the defense order intake, which we experienced in 2025, as we experienced in 2025, it's a process of finalization and materialization, which is a little bit bureaucratic, but it is there, it is there. So that's what we -- that's why we expect 2026 to be so visible in terms of order intake. And obviously, it will become revenues accordingly as you deploy a few, I would say, project backlog for the future. So there's nothing weird. There is nothing unclear. It is, I would say, very visible and very -- it's the schedule. It's a schedule of production. And again, 2026 will be, at the same time, very interesting for the rest of the profit and loss. So I believe is already clear that our percentage margin is in the process of improving and also the net result as we have already appreciated 2025 versus 2024, our net profit is showing signs of, I would say, vitality. So I wouldn't call it flattish, revenues, my point, revenue is vanity. It's much more important that you look at what is happening at margins what is happening at the bottom line. And at the same time, what is happening in terms of order intake, which is the most interesting part of my answer. Moving to the geopolitical part of your question. Yes, we are aware that when you talk -- when you discuss, when you elaborate, about tourism, the concept of war, the concept of instability is, I would say, typical case of concern, but never happened. So people continue to travel obviously, not exactly in the overheated place. So obviously, if you have a resort in an overheated place. It is not going to be fully-booked, but the tourism can somehow adjust, I would say, trajectory, itinerary in a way that is smart enough to find beautiful places to go and cruise. So that's my overall elaboration about your point. Practically, we are not experiencing any negative feeling from the side of ship owners. Conversely, we continue to see a lot of energy, a lot of interest in occupying future slots for the sake of a long-term growth. Let me also add that we are securing orders in the Cruise business, which is the "Touristic" business all the way to 2037. So we strongly believe that from that time on the situation will be stabilized. U.S. On U.S., we received as the rest of the market very positively. The announcement of the U.S. Navy procurement with respect to the expected awards of the LSM series of ships to Fincantieri Marinette as one of the two, I would say, dedicated nominated shipbuilders. The process of transforming this announcement into an order is, I would say, expected to be very fast in the very short term. So let me say discussions are happening while we speak. Again, we don't rely in the short term on U.S. for volumes. So the agreement we achieved with U.S. is an agreement whereby we are kept harmless. So for the time being, it is not a business of volumes. So we don't look for volumes there. We don't need volumes there. Having said that, the agreement has multiple legs, one of the legs is the allocation and award of new classes of ships to the shipyard. And the agreement was achieved in the end of 2025, and we are receiving this communication from the Navy so early and so quickly. So let me say, we are very positive with respect to U.S. to U.S. We are very happy that we have created a new baseline, clearing all possible risks of the past. We don't need volumes. We need to procure the already achieved agreement translates with the velocity that we are experiencing together, but that's what we want to see. So we are very positive. And to cut the long story short, we believe that the contractualization is going to happen very, very soon. Operator: The next question is from Emanuele Gallazzi of Equita. Emanuele Gallazzi: I have three questions. The first one is a follow-up on the geopolitical topic. Very clear, your explanation on the ship owner side. I was wondering if you can discuss also on your cost side, which dynamics are you, let's say, seen on your input cost. The second one is on the capital increase or the M&A. You clearly mentioned that you are looking at some opportunity. If you can just discuss a little bit more on your strategy, if anything has changed post the -- or with the capital increase? And should we have to expect say, a big deal? Or are you looking more at small and selective deals adding technologies or know-how to your portfolio? And the last one is on WASS. We have seen two important orders coming from India and Saudi. Can you discuss more on deals? And have you seen an acceleration in the last month of, let's say, negotiation or tenders for WASS and generally speaking, for the whole underwater business. Pierroberto Folgiero: Thank you very much for your question. On your first question, we are in full control of the variables, of the economic variables that can be affected by the geopolitical issues or the famous geopolitical issue in the sense that the energy prices of Fincantieri are fixed for 2026. The same more or less is with gas procurement -- with gas oil procurement. So with respect to energy, we have the coverage in place for 2026 in order not to receive any, I would say, negative impacts. When it comes -- if we move to steel prices, it is the same in the sense that we have already fixed procurement costs, prices for approximately 90% of the quantities. So once again, we are in good shape. So energy and steel are the two major components with respect to which we are covered with respect to which we are continuing to monitor the situation. On your second question on M&A, we are very active. We have many dossier in our hands. We have very clear ideas of what we are looking for. Because we have been testing and shaping the market for this acceleration in the underwater in the last couple of years, all kind of transactions. There are different possible transactions. For sure, we are calling it, naming it selective M&A, meaning that we don't want to -- we are not looking for transformational M&A. So it is not something that is going to change the face of the company, but it's something that will sizably visibly accelerate the expansion in the underwater. So it has to do with the key technological blocks of the underwater, for example, propulsion systems. It has to do with another key component which is the electronics of the underwater. So any kind of software from command and control to telecommunications. And it has to do also with access to markets, including nondefense markets and business models. So we strongly believe that we can put on the table a lot of new technologies, and we are thinking in terms of M&A in order to envisage how to transform as quickly as possible those technology into integrated technologies, so our technology integrated with other technologies and how to accelerate the commercial reach in the direction of clients, not necessarily only on the defense side. So we will get back to you, but we are working hard in that respect. So we have a large business development and M&A team, which is being working and preparing since many months. And now that we have the capital increase ammunitions we will be more than happy to translate all this preparation into execution. On your third question, WASS is doing fantastically as Remazel is doing fantastically. So we are immensely happy of both acquisitions. Both companies are doing better than expected in any respect and are perfectly fitting with the rest of the group, creating synergies on the one hand, and expanding markets and giving access to adjacent market to Fincantieri commercial proposition. With respect to WASS, India and Saudi are very emblematic, are very indicative of the first and most evident item of the defense procurement in a moment like this. i.e., ammunitions. So the world realized that in the last years, many submarines or many naval assets were built, but with very limited, I would say, ammunition warehouses. So the defense expenditure is, first of all, an exercise of replenishment of warehouses. And in this respect, torpedoes are very clear and very evident. We are doing more than that. So we are evolving the product, thinking of how to adapt this kind of product to the world of drones. For example, in this respect, I think that WASS is ahead of the other competitors. So WASS is already able to supply drones with very light torpedoes, which is the new generation of surface drones. So yes, you want them to perform intelligence, surveillance and reconnaissance. That's the way military people call the first task of water drones underwater surface -- sorry, surface drones. But at the end of the day, you need also to go to a second phase, the second step, which is the step where the drone is also armed in order to be able to react on top of detecting the threat. This is what is happening also. So let me say WASS is remarkably centered, remarkably focused in this dynamic and then is working on the ad agencies. So what to do on sonars, how to be very effective on certain kind of sonar applications such as demining, which will be another priority, unfortunately enough, of the world. So it's going very well, and we are very happy with WASS. We are working also in order to expand the production capacity of WASS. So capacity boost is the title of the book for the new Fincantieri business plan and is consistently in a coherent way also the name of the book in WASS. So we are working in order to expand capacity because it's having a lot of demand that we need to increase capacity accordingly. Operator: The next question is from Gabriele Gambarova of Intesa Sanpaolo. Gabriele Gambarova: Just three from my side. The first one is on the SAFE program, the European Safe program, the EUR 150 billion program. I was wondering if you have any update on this program because it seems to me that this is a little bit in delay. This is my personal perception, but I don't know if you have any insight on this? The second demand. Then the second question is again on naval. I saw a slowdown in the top line in the fourth quarter 2025. I know that the backlog is very healthy. So I was wondering if you could give me some more detail on this trend we saw at the end of 2025, if there is an explanation, particular explanation. The second question, this is for naval. The second question regards the reverse factoring. I saw that it grew by EUR 200 million in 2025 to EUR 850 million. So I was wondering what could we assume for 2026, what is embedded in your guidance basically. And the last one regards M&A and the infrastructure. I saw that the business is doing very well is recovering after we closed the Miami, let's say, job order. I was wondering if you consider, if it's something that you would, let's say, assume to sell this business, which is doing well, but I think it's not core business. Pierroberto Folgiero: Very good. Thank you. On the SAFE program, let me disagree with you. Or partially agree with you in the Anglo-Saxon way, in the sense that SAFE is expected to be a fast track process, you know that there is a gate expected for June 2026. And we see all the horses running according to the race. So we don't see a delay. And again, it's for sure, a big rush because June is tomorrow morning. But all the, I would say condition precedents, condition precedent for SAFE to be activated on time out there. So I don't see your point. Again, it's a program that is asking nations to finalize a huge amount of contracts in a very limited time frame. So it is very difficult that you do it in advance. So the deadline is June. On the naval, again, all the production curves driving the revenue recognition not going according to expectations. So this is absolutely physiological. We have to consider that there is a change in the revenue curve of U.S., which is, for sure, to be considered when looking at last part of 2025 and 2026. Again, on the Naval, the point will not be the revenue level as rather the materialization of all the orders that we are expecting. On the factoring, I will leave the floor to Giuseppe, but let me remain with the microphone for an extra minute for infrastructure. So the infrastructure business is a source of satisfaction because of the turnaround we have achieved as a management team. So I think we did very well finalizing the bad experience in Miami, digesting all the tails and at the same time, preserving our reputation delivering impeccably what we had to deliver. So it's a sign of industrial strength, resilience, reliability, which is not obvious at all. The infrastructure business is, therefore, getting rid of Miami tails and therefore, expressing evidencing good margins, thanks to the discipline, thanks to the quality of our people. Let me say that the infrastructure business or at least a good part of it is proving to be, I would say, functional to Fincantieri strategy when it comes to naval basis, when it comes to protection of ports. So Fincantieri Infrastructure is a reality in marine works. And in the era of defense, in the era of expansion of defense infrastructure and in the era of expansion of protection of critical infrastructure to have a group of people that can take care of those jobs as a kind of end-to-end offering is proving to be interesting and successful. So let me say, at least a big part of Fincantieri infrastructure is leaving a second life in a sense, helping defense business of Fincantieri with an end-to-end offering. And at the same time, being the entry point of, for example, Fincantieri Underwater when it comes to protection of ports and protection of key marine and maritime infrastructure. So obviously, we retain all options opened. So we will leave also without Fincantieri infrastructure. It's not a best [indiscernible] component of Fincantieri business model. But as of today, we are very happy of having Fincantieri infrastructure in our group, because we are exploring and pursuing very interesting business model, whereby we integrate end-to-end the ship in the naval base, in terms of infrastructure works and we use them to enter the business of infrastructure protection with Fincantieri NexTech technologies, for example, on ports. On the factoring question, I leave the ground to Giuseppe. Giuseppe Dado: But it's very high. It's very simple. You can easily expect the same amount and the same levels we've reached in 2025. So this factoring is something that we put. It's something that helps our suppliers to finance themselves within their net working capital requirements. We expect to -- we factor in the same levels as of 2025. Operator: The next question is from Lorenzo Di Patrizi of Bank of America. Unknown Analyst: So the first one on Navis Sapiens. So you delivered your first vessel in February. Could you give us more color on the margin difference versus similar past vessels and what we should expect from the Navis Sapiens program in the next one, two years? And then secondly, so on the naval pipeline, actually on the pipeline in general, so you gave this figure EUR 32.5 billion. Can you give us more color on the pipeline outside of the EUR 5 billion in Naval. And also, for example, I'm thinking of India, in particular, is there an update there? And could you give us more details on what the country has in store in the next few years in terms of investments that you could benefit from? Pierroberto Folgiero: Thank you very much for your question. But let me say, Navis Sapiens is a transformational product. So the piece of news is that there is a ship sailing today where we speak which is having on board this new brain, which is a combination of new hardware and new software that is being validated by a ship owner in real life, in regular life. So this is the big news. This is the breaking news. Its transformational in the sense that it gives distinctiveness to Fincantieri offering simply because thanks to this new "instrument", the ship owner will benefit from improvement in the behavior of the ship and therefore, in the cost profile of the ship. So the first effect is that we are positioning Fincantieri product in a different way. So when you buy a Fincantieri ship, you will always buy a ship with a brain, then it will be up to you to leverage on this, and it will be up to you to install over the air, all the new applications, for example, for optimizing roots and consumptions or for optimizing maintenance and other key activities in terms of OpEx and costs. So consider it as a strategic step, which is, let me say, prolong in the future, way ahead in the future, the distinctiveness of Fincantieri product. Then obviously, it represents itself a product for our NexTech which is the technological pole inside Fincantieri organization. You know that we have created a joint venture with Accenture 70/30, which is practically writing the codes of this new system, which is made of a data platform according to the latest architecture laid upon our own automation systems. So in NexTech, we have a company that is taking care of automation system, and this company is now having on top of the layer of the automation system, this platform system. And the business model of NexTech will be to host on this platform as many third-party products as possible on top of selling internally produced internally developed applications to be sold to the ship owners on the platform. So it's a new concept. But the beauty of the story is that this concept is being adopted by one client. And it is on the air and is working very well. And we have in our business plan, some ramp-up of this product. And we have quite an extensive team working on that. And the initial results are very encouraging, and we are very happy with that. Second question is more color about naval order intake. I think there is no secret about the fact that the Italian Navy is expected to move the DDX program from the engineering study into construction. We are working relentlessly with the Navy with Orizzonte Sistemi Navali with Leonardo in order to quickly move forward in this respect. Then there are other initiatives with the same Italian Navy, for example, the LSS3, which is the third of the logistics ship class. And then there are a number of very hot non-Italian Navy prospects on which we are working a lot with respect to which we are very positive. Then obviously, the market is big. There are many opportunities. Again, we have a lot of tenders out in the short term, obviously, it has to be something that is already in the oven. It's ready in the kitchen. But in the surroundings of the kitchen, there are many, many, many opportunities. So it's very important that this good momentum kicks in terms of tangible orders. But again, we are not at all worried about what we're going to do in our naval shipyards. As you may know, we are already working in order to double our capacity. And again, if a couple of things happens, we are already fully booked even after doubling the capacity. India. India is an immense market with a very specific business model, which is the business model of Make in India. We are -- I would say, well known in India because we built two ships for them, two logistics ship for them, something like 10 years ago, more or less. There are many programs. We are in association with many local shipyards. The system is different because the naval construction of ships by law is to be awarded to state-owned shipyards. So it's very important to team up with the relevant ones. That's what we are doing. And then the second peculiarity of India is that in order to provide packages in terms of material, for example, you have to coproduce locally with partners. So this is something we are already doing. We are already working since years in the coal production and coal manufacturing of for example, certain components of propulsion systems. So the business model, it's a business model whereby you sell design packages, you sell material packages and then you cooperate in the construction with a local shipyard with a kind of construction management assistance. There are many programs that are going to be awarded in the next months. There is one that is very, very interesting, which is an LPD, which is a kind of small aircraft carrier kind of big ship. They have a big tender for LPD. But this is just an example of what we have been doing and how we are taking care and looking after the Indian market. Operator: The next question is from Sriram Krishnan of Deutsche Bank. Sriram Krishnan: Perfect. So I've got a couple of questions. The first one is actually on the Equipment division. Particularly the electronics cluster. Okay. So I just wanted to conclude that question which I had. So this question was on the Equipment division, particularly on the electronics cluster and the infrastructure. Clearly, despite modest growth in the top line. I think the margin was very impressive with the electronics business and in a very similar way, even in the infrastructure business, whether top line actually declined. And the margin was pretty impressive. So I wanted to understand, first, if there are any one-off items within this one in 2025. And how should we look at a sustainable margin of both these businesses in 2026 and going forward? That's the first question. The second question is to do with the U.S. order potential, the landing ships related to. We understand that you have received an order for four ships and the potential long term is well over 30. So I wanted to -- can you confirm if there will be only two shipyards involved in this program or there are more shipyards which are likely to be inducted into this? And as a follow-up or a very similar one, can you give us any update on the NGLS program as well in U.S. and which you are competing as well? Pierroberto Folgiero: On the U.S. part of the story, the U.S. Navy announced its intention to award for LSM to Fincantieri USA. And the contractualization is expected to happen according to contracts and negotiations that are going on in these weeks, in these days. As far as we understand, but it's not up to us, the construction strategy of the U.S. Navy is to select two shipyards, simply because according to their long-term planning, the expected number of ships is, if I don't go wrong more than 30, more than 30. So they want to have at least two parallel shipyards working together. Which is good, which is important, because it means that you create specialization, which is deeper requisite for performance and for reciprocal and mutual satisfaction. On the NGLS program, which was part of your second question, can you tell me more, please? Sriram Krishnan: So this is -- I understand I think Fincantieri Canada business apparently has won some sort of design and construction order with regards to the next-generation logistics program. I think overall size of this program is to procure somewhere around 12 to 13 ships in the long term. So I just wanted to understand where this leaves you are the only company who is involved in this one for the U.S.? Or how many ships are you envisaging as an order flow from this contract and so on? Pierroberto Folgiero: Well let me say, United States, we have a shipyard that is concentrated on civilian shipbuilding. And they are very active in barges and in other kind of ships. And then on top of it, we have company in Canada, it's called Vard Canada, which is very good in design packages either for coastal literal ships and for, I would say, commercial ships. So obviously, both entities are engaged in all the possible dynamics and projects in that part of the world. So I can, in general, confirm that there is a lot of action, a lot of movement and a lot of I would say, interest and commercial activity also in that segment, also in that quadrant. On the -- on your first question on electronics, I would rather give the floor to Giuseppe for some more detail. Giuseppe Dado: Yes. Well, I mean speaking of 2025 results vis-a-vis 2024 it's the other way. I mean, 2024 was affected by some one-offs and some write-offs that we did on certain projects. And therefore, the margin that we -- EBITDA margin that we achieved in 2025, 6.9%, is more, let me say, representative of what you're going to see in the coming years and in the business plan. With potentially, of course, some slow, but steady pickup throughout the years, thanks also to Navis Sapiens and all the innovation and deployment of new technologies that we envisage in the business plan. . Sriram Krishnan: And if I may just follow up on that one. How do you envisage the top line for infra business? We understand that things have stabilized a lot. Should we expect some sort of a pickup in business in intra? Or should things be largely stable? Pierroberto Folgiero: I'm sorry, the line is very bad. Can you repeat the question? We really can't hear you very well. Sriram Krishnan: My apologies. Is it any better now? Pierroberto Folgiero: Yes, yes, better. Sriram Krishnan: All right. Sorry about that -- my line. No, I just was following up with the infrastructure part as well. Do you think that this is going to be a largely stable sort of revenue for the info business going forward? Or how -- just wanted to view on the infra business at the top line level? Pierroberto Folgiero: The infrastructure business is having good prospects in France, again, driven by the backlog order intake which is becoming more and more evident. We have projected in the business plan, I would say, disciplined growth in terms of revenues, capitalizing on the, I would say, good returns and stable returns that we are -- that we have experienced in 2025. So the market is there in terms of marine works and other businesses of the company. The company is also focused on the steel fabrication. So steel structures, which are needed for multiple purposes, not only for shipbuilding, but also, for example, for bridges and things like that. So that's the second business of the company, they continue to experience stable demand. And so we are projecting it -- again, it is not where we want to put all our entrepreneurship. Our core business is elsewhere, but we're very happy that they are in good shape. And in particular, we are very happy when we can use them, as I was describing before, in order to increase the end-to-end offering of Fincantieri when we are interacting with the new Navy with an international Navy but also with our Navy. Whenever there is -- there are needed some marine works in order to accommodate the new fleet and also the new, I would say, technological infrastructure on top of physical infrastructure. So sensors, anti-drones, whatever is needed when you enlarge your base, your military base on top of your naval asset. Sriram Krishnan: Thank you so much, and apologies for the bad line. Pierroberto Folgiero: It was very good at the end. Thank you. Operator: Gentlemen, there are no more questions registered at this time. . Pierroberto Folgiero: Thank you very much to all. Goodbye. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.
Operator: Thank you for standing by, and welcome to the Karman Space & Defense Fourth Quarter and Full Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to Steven Gitlin, Senior Vice President of Investor Relations. You may begin. Steven Gitlin: Good afternoon, and thank you for joining Karman Space & Defense's Fourth Quarter and Full Fiscal Year 2025 Earnings Conference Call. I'm Steven Gitlin, Senior Vice President of Investor Relations and Corporate Communications, and I'm pleased to welcome you today. Joining me on today's call are Jon Rambeau, our new Chief Executive Officer; Tony Koblinski, our Director and former Chief Executive Officer; Mike Willis, our Chief Financial Officer; and Jonathan Beaudoin, our Chief Operating Officer. Before we begin, please note that on this call, certain information presented contains forward-looking statements that are based on current expectations, forecasts and assumptions and that involve risks and uncertainties. These are described on Page 2 of the earnings presentation we posted to our website this afternoon and in detail in Karman's reports filed with the SEC and the Form 8-K filed today with the SEC. I'd also like to note that we will discuss a number of non-GAAP financial measures today. Our press release, which we filed today, can also be found under the heading News and Events on the Investors section of our company website and contains a reconciliation of any non-GAAP financial measure to the most comparable GAAP measure. The content of this conference call contains time-sensitive information that is accurate only as of today, March 25, 2026. The company undertakes no obligation to make any revision to any forward-looking statements contained in our remarks today or to update them to reflect the events or circumstances occurring after this conference call. Now I would like to turn the call over to Jon Rambeau. Jonathan Rambeau: Thank you, Steve, and good afternoon. I'm excited to be with you all today as I assume my new role with Karman. I'm honored to have the opportunity to lead this impressive team and to represent them with more than 80 customers across the entire space and defense landscape. Karman's market position described on Page 3 and its track record of success, combined with its winning profitable growth algorithm, make this a very special company and a compelling opportunity. I've been working in defense for over 30 years, and I can't remember the last time I was this excited. Karman's deep engineering expertise and vertically integrated full-spectrum manufacturing capabilities position the company as a unique enabler for national security and the growing space economy. Karman's values resonate with me and none of them more than be relentless. Given that this is my first week in the role, I've asked Tony to summarize the strong financial and operational results the Karman team delivered in 2025 under his leadership. Tony? Anthony Koblinski: Thank you, Jon. It's great to have you as part of Karman, and I wish you tremendous success as you lead this team to new heights. Before I begin, I want to express my deep appreciation to our Board, our employees, our shareholders, and our customers for the trust you have placed in me and in the Karman team. Together, we have worked hard to make a meaningful difference for our customers. And in doing so, we've created significant value for both our employees and our shareholders, leading Karman has truly been a tremendous capstone on my career. Over the past several months, as the Board conducted a comprehensive search for my successor, we had the opportunity to meet a number of outstanding candidates, Jon Rambeau clearly stood out. We are fortunate he chose to join Karman, and I look forward to supporting him in my role as a director. I'm confident you will quickly appreciate his experience, leadership and ability to guide Karman through its next phase of growth. As for me, after a 44-year business career, I'm looking forward to taking things a little slower, spending time with my family and having a different kind of fun. Now turning to today's call, I'll begin with highlights from our fourth quarter and full year 2025 results. Mike Willis will then provide more detail on our financial performance and capital allocation priorities, Jon Beaudoin will follow with an update on how we are expanding capacity to meet accelerating demand, and Jon will close with his strategic outlook and guidance. We'll then open up the call for your questions. Now let's turn to our results. Our team delivered another quarter of record performance, driven by outstanding execution across the business and strong momentum following our February 2025 IPO. As shown on Page 4 of our earnings presentation, key fourth quarter highlights include: record quarterly revenue of $134 million, with growth across all three end markets. Record gross profit of $54 million. Adjusted EBITDA of $42 million, another quarterly record for Karman, and backlog reached an all-time high of $801 million. For the full year, we also delivered record financial results, with revenue and adjusted EBITDA ahead of the updated guidance we gave 2 months ago as part of our Seemann and MSC acquisition announcement. Full year revenue was $472 million. Gross profit of $190 million or 40% of revenue, and record adjusted EBITDA of $145 million. At the same time, we executed on a disciplined and strategic M&A agenda. During 2025, we completed three acquisitions: MTI, ISP and Five Axis, adding capabilities in advanced metallic solutions for extreme environments, energetic deployment systems, and precision solutions for liquid rocket engines. In January, we further expanded our platform with the acquisition of Seemann and MSC, extending our reach into Maritime Defense with long-standing positions on Columbia, Virginia and Seawolf class submarine programs. These businesses also deepen our expertise in composites and advanced materials, capabilities we will leverage across the entire Karman portfolio. Page 5 summarizes the 4 acquisitions completed since our IPO and the capabilities they bring to the company. Taken together, these actions position Karman exceptionally well to meet what we believe is a generational increase in demand across missiles, interceptors, hypersonics, UAS counter UAS, Maritime Defense as well as Space and Launch. For example, multiple prime contractors have recently outlined significant planned annual production increases across key missile programs we support, including approximately 100% growth in AIM-9X, 200% in THAAD and Standard Missile and 300% for PAC-3. We expect these programs to achieve their production rate goals over the coming years. This is a demand environment that we expect to persist through the end of the decade and beyond. Importantly, because this demand is tied to national security priorities, we believe it will continue to receive strong bipartisan support. In response to the demand signals, we have been proactive in expanding both capabilities and our capacity. Today, Karman operates across 8 states with more than 1 million square feet of design, development and manufacturing space. And our recently announced launch systems and nozzle manufacturing hub in Salt Lake City will further enhance our ability to support customer needs while positioning us closer to our key customers. We have a great deal to be proud of coming out of 2025 and even more to look forward to in the years ahead. With that, I'll turn the call over to Mike for a more detailed financial review. Michael Willis: Thank you, Tony. Q4 was another strong quarter in which our team continued to demonstrate its focus on supporting our customers. Shown on Page 6. Highlights include revenue of $134 million, represented a 47% increase compared to fourth quarter of fiscal year 2024. Gross profit grew 54% to $54 million, increasing gross profit margin at 40%. Net income rose over 300% to $8 million. Adjusted EBITDA jumped to $42 million, a 59% year-over-year increase. Adjusted EPS more than tripled to $0.11 per diluted share from $0.03, and backlog grew 38% year-over-year to $801 million. For clarity, our numerical calculation and definition of backlog has not changed. We simply updated the terminology from funded backlog to backlog, to better align with industry practice. Growth extended across all three of our end markets in the fourth quarter, shown on Page #7. Hypersonics and Strategic Missile Defense or SMD, revenue grew 42% year-over-year to $48 million, driven by expanded strategic missile programs, continued progress on NGI higher volumes on classified programs, and increased activities supporting hypersonic test beds. Space and Launch jumped 25% to $36 million, driven by the timing of orders for critical content supporting both legacy and emerging launch providers. In Tactical Missile and Integrated Defense Systems or IDS, was up 77% to $50 million, primarily driven by demand associated with the continued proliferation of advanced drone and loitering munitions and an increase in production rates for GMLRS. End market mix in the fourth quarter was as follows: Space and Launch represented 27% of quarterly revenue; Hypersonics and SMD, 36%; and Tactical Missiles and IDS, 37%. For the full fiscal year 2025, revenue of $472 million represented a 37% increase compared to 2024. Gross profit grew 44% to $190 million, resulting in a gross profit margin of 40%. Net income rose 37% to $17 million. Adjusted EBITDA jumped to $145 million, a 37% year-over-year increase, and adjusted EPS nearly tripled to $0.37 per diluted share from $0.13. End market mix for the year was as follows: Space and Launch represented 32% of annual revenue; Hypersonics and SMD, 32%; and Tactical Missiles and IDS, 36%. Moving forward, we will report a fourth end market beginning in the first quarter of 2026. Maritime Defense Systems will capture Karman's existing maritime programs and those of Seemann and MSC. We expect our 4 end markets to be relatively balanced in terms of revenue with no discernible seasonality. Now on the topic of seasonality, Karman like many other companies in our industry experienced a temporary slowdown in contracting activity during the fourth quarter of 2025, extending into the first quarter of 2026 due to the federal government shutdown. We continue to have discussions with our customers on program production needs and ramp-ups that are expected to materialize once contracts are let. Turning now to the balance sheet. We continue to prioritize growth as we consider capital allocation decisions. We ended the fourth quarter with $34 million in cash and equivalents, up $22.5 million from year-end 2024. We invested a total of $20 million in CapEx during the year to support growth, prioritizing new manufacturing equipment and floor space, including our Decatur, Alabama facility, our advanced clean room in Mukilteo, and our energetics testing complex in Skagit. With our acquisition of Seemann and MSC, our total debt increased to $768 million with an interest rate of SOFR plus 2.75%, an improvement of 75 basis points. We continue to expect our leverage ratio to decline to approximately 3x adjusted EBITDA by the end of 2026. Earlier this month, we increased our revolving credit facility from $50 million to $150 million to provide added flexibility as we expand capacity to meet anticipated surge in demand. Looking ahead, we expect a statutory tax rate for fiscal year '26 of 25.5% and now expect CapEx to be approximately 5% of revenue, equivalent to approximately $36 million. Note that we increased our CapEx rate to expand our capacity for the anticipated volume increase that Tony discussed. Now I'll turn the call over to Jonathan for a discussion of our operations and capacity expansion initiatives. Jonathan Beaudoin: Thank you, Mike. The demand environment that Tony described places our focus squarely on continued effective execution and the strategic deployment of capital to expand our capacity and meet the requirements of our customers. We are prudently investing in advance of contract receipt to ensure we enable the anticipated ramp in customer demand. Karman was formed to produce qualified proven systems at a rate that supports our customers' significant production output goals. We combine our deep understanding of real-world end-user requirements with the most advanced material and manufacturing technologies and then add the operating tools for efficient scale production. Karman essentially provides the agility and technology of a small business with the capacity and investment horsepower of a large business, it is exactly what our customers need to meet their mission requirements and production ramp-ups. We are frequently asked about potential capacity constraints, and we are fortunate to be able to rapidly respond and ensure that we are ready for current and future rates. We think of our capacity in four separate but related categories. First, the physical space and equipment with which we develop, test and manufacture products. We now have over 1 million square feet under roof. Tony mentioned our plans for a new Salt Lake City manufacturing hub, which will add nearly 200,000 square feet, quadruple our production capacity for loitering UAV launch systems and add valuable redundant nozzle manufacturing capacity. We expect this site to achieve initial operational capability in the fourth quarter of this year. We invested the majority of our $20 million in CapEx last year on capacity expansion projects at various sites. In addition, as we recently announced, we are equally co-investing with the government a total of $10 million to expand nozzle production capacity. These nozzles are key subsystems for solid rocket motors, which propel most missiles and many hypersonic systems. Next, we are well positioned to accelerate hiring and expand our talent base to drive increased output. Our workforce grew significantly in 2025 from 1,100 to 1,400 employees, this growth was fueled primarily by strategic acquisitions. We have enhanced our recruiting capabilities by adding experienced recruiters and expanding our calendar of recruiting events, enabling us to more effectively identify and attract top talent. Additionally, our presence across 8 states broadens and diversifies our talent pool, further strengthening our ability to attract top talent. Third, we are carefully monitoring our supply chain to identify any potential bottlenecks well before they can interrupt production and are making strategic moves to strengthen our position. Acquiring ISP last year helped us secure energetic formulations for multiple solutions we deliver to our customers. We are applying Karman's MG resin technology to tactical missiles and hypersonic systems, improving supply chain robustness. And our acquisition of Seemann and MSC provides us with deeper and expanded composite expertise, resin formulations and woven fabrics. Fourth, we are rolling out our Karman Operating System company-wide, this platform integrates our ERP system with advanced manufacturing execution and asset monitoring tools. By leveraging AI-enabled technologies, we expect to increase throughput, minimize downtime, improve yield, enhance workplace safety and automate administrative tasks, while allowing us to focus our resources where they matter most. As an example, we can now monitor real-time data for most of our specialized manufacturing equipment across multiple states and sites. These data as well as historical data can be interrogated with AI to determine choke points and develop action plans for improving utilization and ultimately increasing capacity. In the near future, we will be able to monitor all of our key manufacturing equipment to proactively prescribe preventative maintenance, speed repairs and evaluate utilization rates by site, program, device, shift and operator. Our integration of acquired companies is proceeding according to plan. Earlier this month, we held a welcome event at our Greenville, South Carolina and Gulfport, Mississippi sites. We were thrilled by the spirit and enthusiasm of the more than 200 teammates who attended our events. We expect to complete the integration of Seemann and MSC by the fourth quarter of this year. We have come a long way, and there is much work ahead but we are well prepared to support our customers' aggressive production ramp plans. Now I'll turn the call back to Jon for his comments on 2026 and beyond. Jonathan Rambeau: Well, thank you, Jonathan. Karman's financial and operational execution has been tremendous. Our position as a merchant supplier to nearly all prime contractors in the U.S. space and defense market differentiates us and defines our unique value proposition. Complementing strong organic growth with strategic acquisitions has continued to strengthen our competitive position, deepening existing capabilities and adding adjacent ones. This model and the performance of the team provide evidence that Karman is a new kind of space and defense company. And the demand environment could not be more favorable for Karman. Tony mentioned the dramatic production increase is planned for many programs Karman supports. Having led growth businesses in the past and made critical capital allocation decisions, I'm eager to lean in and help our customers achieve their multiyear goals through focused investment strategies and consistent performance. Our 2026 outlook reflects the near-term growth we anticipate summarized on Page 8. We now expect full year revenue of $715 million to $730 million and non-GAAP adjusted EBITDA of $207 million to $218 million. This represents 53% year-over-year revenue and 46% adjusted EBITDA growth, an additional growth above our previously communicated 2026 guidance given this past January. We continue to expect revenue growth to be roughly split between organic and inorganic. We also expect our first half to represent approximately 45% of total revenue and adjusted EBITDA for the year with sequential quarterly growth similar to that of last year. While we have confidence that additional growth vectors such as Golden Dome will materialize, timing of those remains uncertain. Strong market conditions and the Seemann and MSC acquisition expanded our backlog to more than $1 billion, providing approximately 80% visibility to the midpoint of our full year revenue guidance range as of March 20, 2026. We remain confident in our long-term outlook of strong organic growth, supplemented by strategic accretive acquisitions. This is a proven formula that has driven remarkable growth and profitability for the past 3 years. I'm focused on maintaining Karman's trajectory in the coming years. Thank you all for your time today. I'll be learning more about our company, the people and the technology that have made it successful as I visit our primary locations in the coming weeks. I look forward to meeting our shareholders and the analysts who follow us. I'm excited to lead this incredible organization at this important moment for our company, our industry and our nation. Now let's open up the call for questions. Operator: [Operator Instructions] Your first question comes from the line of Peter Arment with Baird. Peter Arment: And congrats, Tony. Thanks for all your support over the last year. Really enjoyed it. And Jon, congrats on the new role. Could you guys talk a little bit about what we're seeing potentially with multiyear frameworks for the primes on ramping up on not only interceptors, but missile production and how that might impact whether you guys are going to be part of those agreements given your customer relationships there and just how we might think of that? Jonathan Rambeau: Yes. This is Jon. Thank you, Peter. I appreciate the question. I guess the way I would address that is to say as time continues to march forward, we continue to have a little bit more clarity on how these frameworks are going to be implemented. And certainly, Karman will benefit from the outcomes of the frameworks. That being said, we still I think we'll need to work a little bit further with the primes to understand specifically what the demand profile is going to look like over what period of time. So if you think about the significant increases in production rates that are contemplated within those frameworks, we don't see any of that really materializing in the form of orders for Karman until at the earliest day of the fourth quarter of this year. So we really don't see that there's a lot of that in the 2026 guidance that we provided. But certainly, we see that starting to materialize in '27 and beyond. Peter Arment: Okay. And just a broader question, maybe, Mike, for just on capacity. You guys talked about CapEx 5% of revenues. Could you just remind us where capacity utilization stands today and your ability to kind of meet all the demand signals. Jonathan Beaudoin: Yes. It's always one that's tough to put a number on. It depends on the product and exactly where that constraint is. But we do have existing square footage to expand into before even the Salt Lake City facility. And then that will give us a tremendous boost in terms of square footage. But as we noted, it will quadruple our UAS launch capability. And then give us redundant capability for nozzle production and on certain critical programs, double our rate on those. So we feel good about our immediate capacity today, but we're going to quadruple and double it depending on the product in the near future. Operator: Your next question comes from the line of Ken Herbert with RBC Capital Markets. Kenneth Herbert: Congratulations again, Tony, and welcome, Jon. I first wanted to ask, the record backlog exiting '25, how should we think about the margin represented in the backlog? And do we see any -- as you're expanding the backlog, is there any sort of mix benefit as you think about margins over the next 1 to 2 years from what's in the backlog? Or conversely, are you seeing any incremental pressure on pricing from your customers that could potentially be a headwind as -- from a mix standpoint? Jonathan Rambeau: So I'd say as we exited the year with the $801 million of backlog, there's really no notable mix changes in that number, whether it be positive or negative. It's pretty steady course from what we're used to. But I would just make mention that as we talk about Seemann is coming into our portfolio and the backlog that they bring, we have discussed that they have a bit of a different profile just given the content on cost-plus contracts versus firm fixed. So that's going to change things in the near term. But over time, as those programs mature, we're going to work to put those into firm fixed contracts as well. Kenneth Herbert: Great. And just to clarify on the increased revenue guide for '26, I know heading into the year, you talked about 50%, basically 25% organic, 25% from the acquisitions. With the slight tweak upwards on the guide for '26 now, should we assume that the increase again is roughly sort of half organic, half acquisitions? It looked like initially much of the increase, albeit small, but much of the increase was driven by timing of the acquisitions? Jonathan Rambeau: There are a few factors there. Certainly, the timing of the acquisition on Seemann drove a lot of that change. So that would be the primary driver. But we still expect that in aggregate, we're going to have a pretty level split there between organic and inorganic. Operator: Your next question comes from the line of Clarke Jeffries with Piper Sandler. Clarke Jeffries: Just generally, I was curious, how has the last month changed your investment plans? Any part of the business that you may not have considered a priority for 2026 now 30 days later, you're considering a priority for this year? Michael Willis: I wouldn't say that it changed anything, call it more strengthening the convictions that we already had. So there's no, call it, shift in terms of our priorities, just gives us more conviction to lean into the investments we already had planned. Jonathan Rambeau: Yes. This is John. I guess just to add, we did take our planned CapEx expense up a bit for '26 as we look forward. We were thinking about 4.5%, I think, the last time we spoke. And as we've evaluated opportunities for growth, we decided 5% was a better number. So we're going to plan for that. Clarke Jeffries: Perfect. And then just exiting the year here with a really strong margin progression over the course of the year. I was wondering if you could maybe talk about M&A integration headwinds to EBITDA margins, whether underlying margin expansion is around that 50 basis points you've talked to earlier or higher than that? Just maybe some discussion around the EBITDA guide. Michael Willis: So from what we saw in the year, I'd say it was in line with expectations, and we've talked in the past about operating leverage bringing about 50 bps a year on expansion. But again, I would just point to -- and it's baked in our guide for '26, with that contract mix of Seemann and MSC and the heavy nature of cost-plus contracts, we do have that in our guidance numbers. And that's why you do see that is the primary reason, in fact for why adjusted EBITDA margin would be lower in '26 versus '25. Operator: Your next question comes from the line of John Godyn with Citigroup. John Godyn: First, I just wanted to chat a little bit about the supply chain. How would you characterize the supply chain at present? Any bottlenecks and any ramifications from what's going on in the Middle East? Jonathan Rambeau: Yes. This is Jon. I'll start and maybe hand it off to Jonathan. I guess one of the things I would start with saying here is that in the first few days I've been with the business, I spent some time with the team talking about both the growth trajectory as well as current operations. And as I ask questions, one of the things that surprised me was that there was not a significant concern raised to a large extent around supply chain. So as we look at the Karman operating model and strategy, the bringing together of pieces of the supply chain into the integrated family of Karman product lines that we have here today, I think we've really derisked to a great extent the supply chain concerns that would normally be seen at this layer of the overall defense supply chain. A couple of minor areas that I think Jonathan might want to talk to here but generally speaking, I would say supply chain risk is low. Jonathan Beaudoin: Yes. As our customers are engaging with us, collaborating with us on the rates and timing of the ramp-ups, we are in kind doing the same with our suppliers, going to them, communicating the planned rates, understanding what their capacities are so that they're ready to support us. And as part of that, we're looking to engage with them on longer-term deals so that we can secure our materials from a cost standpoint as well. John Godyn: Great. Very helpful color. And just changing gears on Golden Dome, I think your phrasing was you have a lot of confidence Golden Dome will materialize, but the timing is uncertain. Maybe we could just sort of unpack that, the confidence that it will materialize, but then also what is driving uncertainty on timing, whatever color you're willing to offer? Appreciate it. Jonathan Rambeau: Yes. I would say from a Golden Dome point of view, overall, it's clearly a priority initiative for the nation, and there's going to be a lot of emphasis on the program as we continue forward. How exactly all of the priorities of Golden Dome will be implemented is still a little bit unclear. And we, given where we sit in the supply chain, would anticipate that a lot of the volume to support Golden Dome will actually come through modifications to existing production programs. So think FAD, PAC-3, standard missile, for example, those types of programs are already in place and the adjustments could be made to the production rates. And in fact, those have already been largely communicated to the public. So I think that the timing, again, is the question. And as I said earlier, I think that we can perhaps start to see some of the upside driven by Golden Dome coming towards the end of the year in the form of orders with potential revenue as we start to look into 2027. Jonathan Beaudoin: The only thing I would add is Golden Dome is, call it, one vector of growth that we'll see. The supplemental, ammunition supplemental provides another opportunity. So we don't get a PO that says necessarily Golden dome. And so that is baked into the ramp-ups that we're collaborating with our customers on being able to support. Operator: Your next question comes from the line of Louie DiPalma with William Blair. Louie Dipalma: Congratulations, Tony, and congratulations, Jon. I was wondering for either Jonathan, Tony or Jon, can you discuss the trends that you're seeing in your space business with NASA, Blue Origin and ULA and some of your other customers? I think the recent Vulcan launch experienced an anomaly, and there's been some changes with the Artemis program. But can you describe at a high level the trends you're seeing and how that impacts your 2026 projections? Jonathan Rambeau: Yes. I think from a space perspective, the way we're looking at it is that the demand for space launch is going to remain strong. And so having a strong position across the space launch, call it, prime supply chain, I think we have a good position here. And while we may see, for example, a temporary setback for ULA as they work through some technical challenges and we may see others project perhaps more strong near-term opportunity to support launch initiatives or launch events, I should say, we have confidence that the trajectory we've been on will continue to be as it presses forward, even though the mix from one provider at the prime level to another may adjust. Anthony Koblinski: Yes. Again, our strategy is to support all the launch providers. So should one have a bump like ULA, we are supporting all of them. Interestingly enough, Artemis is showing some positive demand signals for us. So we do see opportunity there on both SLS and Orion to support that program. Louie Dipalma: Fantastic. And for you, Jon, you bring a unique perspective in that you came from L3Harris and you also came from Lockheed, which are 2 of Karman's larger customers. I was wondering, do you see opportunities for the defense primes to offload more of the research and development and offload more of the subsystems development to Karman? Do you think there's potential there for you to gain market share from your customers in terms of the production of these munition systems? Jonathan Rambeau: In both instances, I think the answer to your question would be yes. I think there's certainly more opportunity for Karman to support the primes. That's been part of the overall strategy of the company is to look at within the second tier of the supply chain and find opportunities to bring together companies that on their own may not have had the resources to invest at the levels required to scale in the way that the primes, both traditional and nontraditional primes are likely to be expected to in the coming years. And so we would look to be in additional adjacent areas of support, whether that be development or production and continue to scale the volumes of the products that we're supporting today. So yes, I see significant additional opportunities as time continues on. I would temper that by saying the opportunity that we see at this point in time is in the '26 guidance. Operator: Your next question comes from the line of Alexandra Mandery with Truist Securities. Alexandra Eleni Mandery: Nice results. I just wanted to ask, can you provide more color on the contract delays, including the size of the headwind to backlog and growth and if this is embedded in the outlook, if at all? Anthony Koblinski: The size of delay, that might be a little bit more difficult in terms of the exact figure itself. We are in constant contact and communication dialogues with our customers, and so that it is getting better. We have great confidence that it is truly just a delay, and it's a timing matter rather than will the orders come through. So we are confident in that our customers are also confident that it is really just a timing matter. Jonathan Rambeau: Yes. I think having just joined the company and certainly talking with other companies in the industry over the last 6 months, I think that the delays that Karman's experienced would be not inconsistent with what other companies in the industry experienced during that same period of time, if that helps. Alexandra Eleni Mandery: That make sense. Yes, perfect. And then I guess one other follow-up is that we've seen a push towards low-cost, high-volume production of munitions and weapon systems by the Department of War. So are you working with any new entrants that are playing in this space? Jonathan Rambeau: Yes, we are. We enjoy a really healthy position here at Karman. We're on over 130 programs, and we're working with 80 different customers, most of which are primes across the space and defense landscape. Certainly, all of the established primes as well as the newer entrants. So we're pretty well diversified from a coverage perspective. Jonathan Beaudoin: And we're built from a manufacturing standpoint to support those type of lower-cost, high-volume systems that are gaining traction and demand. As an example, ISP has a commercial offering of launch motors. And so we're able to leverage that commercial launch motors for DoD applications or DoW. Operator: Your next question comes from the line of Austin Bohlig with Needham. Austin Bohlig: Congrats on the solid results. The first question just has to do with the new updated guidance. And there's just some big supplemental packages possibly going through Congress related to the conflict in Iran. How should we think about potential upside with possible new funding that could be coming related to that war? Jonathan Rambeau: Yes. Thank you, Austin. Appreciate the question. I guess the first question is, if that supplemental continues to move forward, how long is it going to take to find its way into law and then into funding. Certainly, while we see there's good reason for that supplemental to be pushed forward based on what we're seeing now on the hill, it's a little bit unclear how long that's going to take to work its way through and the path is not going to be an easy one. So timing would be a question. If that were to move quickly, certainly, there might be something that could materialize before the end of this year. But again, our best guess at this point in time is those things that could present upside would likely materialize its orders as early as the fourth quarter of 2026, with real volume potentially in 2027. Austin Bohlig: Got it. And I guess, Jon, one more question for you. Just given your deep background in the space and just given Karman's history of being very acquisitive, I guess, like what capabilities do you think are most of interest that might make sense to go out and purchase via M&A? Jonathan Rambeau: Yes. Look, I've had an opportunity to spend some time with the team looking at the M&A pipeline, and it continues to be one that has a number of opportunities in it that are under various stages of evaluation. Certainly, as you're thinking about things that might be of interest to Karman, I would look at things that are complementary or adjacent to the things that we do today. If you look at how we put the company together to date, that's largely been how we've constructed it. And there tends to be value that accrues across the broader portfolio with each one of these portfolio businesses that we've acquired. One thing we've been really thoughtful about is we are a supplier to 130 companies, most of them primes. And so we're really thoughtful about not wanting to directly compete with our customers. So we're looking at how we can bring together pieces of the sub-tier supply chain in a more meaningful way that brings greater value to the primes than if they were to try to do these things themselves. or as traditionally in many cases, has happened to try to piece them together with a number of smaller businesses that just have less capacity to invest at scale. So that's the lens that we're putting over the landscape. We're also looking for high-technology IP-rich opportunities as has been our historical trend and our focus. Operator: Your next question comes from the line of Amit Daryanani with Evercore. Victor Santiago: This is Victor Santiago on for Amit. Congrats on the solid quarter and wishing Tony a happy retirement from the team. I want to ask about backlog. I understand that you guys don't guide by segment, but can you help us better appreciate the composition of your backlog and which segments might be driving the recent expansion? Michael Willis: I would just point you towards that we are seeing solid growth in now all 4 of our end markets. And the reason why I wouldn't maybe call out one in particular is because there is a timing aspect of contract awards, whether it's a space and launch commercial platform, award of longer-term contracts, now, of course, with maritime. So the composition can shift from one quarter to the next. In the longer-term horizon on a year, it's rather pretty well balanced in terms of bookings and what that looks like. But I would just leave it with all 4 have great growth drivers behind them. And we expect that, that trend is going to continue on all 4 of those end markets. Victor Santiago: Got it. And to follow up on the last question around M&A, just how can we think about Karman's appetite to do another acquisition following the Seemann and MSC acquisition, just given where net leverage is just over 3x? Jonathan Rambeau: Yes. This is Jon. Look, I would say, as I've come on board, it's impressed me how well Karman has perfected the process of M&A integration. And one of the things that's been really impressive to me, and as you know, can often trip up the integration process is culture. And what I've seen is that, first off, the core Karman business has a very healthy culture. And one of the things that really attracted me to this job as I got to know Tony and know the business was the way he's led this team is the way I would lead this team, and I will lead the team going forward. And the companies that have joined the portfolio are very enthusiastic about being a part of this business. They understand what's been happening here. They see it something special, and they want to become part of this team. And that's really made the integration process very straightforward. I've met with representatives from all of the component parts of the company in my short time here these last few days. And honestly, there's just a lot of enthusiasm, and that's made the integration process more straightforward. So back to the question of appetite, I think the appetite is there. If you think about the mix of organic and inorganic growth that we are projecting going forward, that will depend upon a certain amount of continued M&A activity. We won't get out over our ski tips and bite off more than we can chew. But I think there's a formula here. And as long as we stick to the formula, things will continue to go well. We'll continue to see that balanced mix of growth in the business for the years to come. Operator: Your next question comes from the line of Michael Leshock with KeyBanc Capital Markets. Michael Leshock: I wanted to follow up on the NASA Ignition program announced yesterday to accelerate work on the moon. And you talked about your ability to support the launch providers. But are there any other areas outside of just launch that you might have exposure to as NASA looks to build out the lunar base over the next decade, maybe within satellite technology or anything else there that you can highlight? Jonathan Rambeau: Yes. We do have some participation outside of strictly the launch component of the full equation. In fact, space vehicles is an area where we do have some work that's active. And Jonathan, I'm not sure how much we can say about that work, if you want to add anything to that? Jonathan Beaudoin: Yes. It's one of those where we look at the capabilities set that we have and they have broad ability to support our customers really kind of independent of what their mission ends up being. And so yes, we have built out at our Seattle facility, a large clean room to support spacecraft integration and assembly work. And so we would be able to support satellites, spacecraft from that facility, but certainly very engaged with the NASA and the prime customers on ignition program to see how we can support. Michael Leshock: Great. And then switching to hypersonics, just given the significant growth that we're seeing across the industry there and clearly, budget support for those initiatives -- is there any more color you can provide on how significant some of these growth opportunities could be within hypersonics over maybe the next year or 2? Jonathan Rambeau: Yes. I'm not sure how much I want to speculate on the growth of specific initiatives in hypersonics. I mean, clearly, it's a continued area of focus for our customers. It is an area where we do, again, we have participation across a number of programs that are in various stages of development. We have some that are classified. We have some that are a little more out in the open. And again, we follow our customers' lead on those. So I would say it will continue to be a significant focus for us. It's a part of our portfolio that continues to grow along with the other pieces. And I think we said that hypersonics and strategic missile defense grew for us about 31% year-over-year in '25. So it's a healthy growing part of the business. Operator: Your next question comes from the line of Ken Herbert with RBC Capital Markets. Kenneth Herbert: I appreciate the follow-up. I know the vast majority of what you sell, you're sole source, but are you aware of any specific efforts or even broader effort by your customers to try and add on second sources beyond yourself on any particular programs? And if so, how do you view that risk? And obviously, how do you then go about trying to prevent that? Jonathan Rambeau: Yes, Ken, certainly, it's something we've talked about. And I think that right now, we aren't aware of any initiatives of our customers to second sources for performance or capacity or any other reasons. As we look though at the increases that are contemplated, one of our highest priorities is, first off, to make sure we're performing and meeting our commitments to our customers today. And I've been in touch with many of our customers in the last several days here to reinforce our commitment, and we'll be meeting with them in the weeks to come here. Our focus is to make sure that we never become a choke point a bottleneck or risk for our customers. I mean, Jonathan mentioned the redundant. We're putting in additional capacity for nozzle production. We're also doing that deliberately at another location from our primary nozzle production and part of that is to provide some redundancy to our customers without having to contemplate going elsewhere to get redundancy for this critical capability. So it's something we think about. It's something we talk about. It's something that is part of our strategy. And certainly, we are committed not to be a choke point of bottleneck that would put our customers in a position, frankly, of a time-consuming and costly qualification of another source. Operator: That concludes our question-and-answer session. I will now turn the call back over to Steven Gitlin for closing remarks. Steven Gitlin: Thank you, Tiffany, and thank you all for your attention today and for your interest in Karman Space & Defense. An archived version of this call, all SEC filings and relevant company and industry news can be found on our website at karman-sd.com. We wish you a good day, and we look forward to updating you on our continued progress in the quarters ahead. Operator: This concludes today's call. Thank you all for your participation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to Pizza Pizza Royalty Corp.'s Earnings Call for the Fourth Quarter of 2025. [Operator Instructions] As a reminder, this conference is being recorded on March 25, 2026. I will now turn the call over to Christine D'Sylva, CFO. Please go ahead. Christine D'Sylva: Thank you. Good afternoon, everyone, and welcome to Pizza Pizza Royalty Corp.'s earnings call for the fourth quarter ended December 31, 2025. Joining me on the call today is Pizza Pizza Limited's President and Chief Executive Officer, Paul Goddard. Just a quick note that our discussion today will contain forward-looking statements that may involve risks relating to future events. Actual events may differ materially from those projections discussed today. All forward-looking statements should be considered in conjunction with the cautionary language in our earnings press release and the risk factors included in our AIF. Please refer to our earnings press release and the MD&A in the Investor Relations section of our website for a reconciliation and other disclosures related to non-IFRS measures mentioned on the call. As a reminder, analysts are welcome to ask questions after the prepared remarks. Portfolio managers, media and shareholders can contact us after the call. I'll now turn the call over to Paul for a brief business update. Paul Goddard: Thank you, Christine, and good afternoon, everyone. Thanks for listening in. We always appreciate it. This afternoon, we released our 2025 4th quarter and year-end results, which you can find posted on our website. While the macroeconomic conditions continued to deteriorate over the course of the year, our fourth quarter performance highlights the resilience of our operating company and the strengths of our brands, people and core fundamentals. During the year, we opened 37 new restaurants, bringing our 3-year total to 130 new locations opened across Canada. We started off 2025 strong. And for the full year, Pizza Pizza restaurants delivered same-store sales growth of 0.7% and Pizza 73 achieved sales growth of 1.9%. In the fourth quarter, our brands achieved a combined same-store sales increase of 0.2%. Pizza Pizza restaurants experienced a slight decline of 0.1% and while Pizza 73 reported same-store sales growth of 1.8% for the quarter. For the third consecutive quarter, we were happy to see growth in Pizza Pizza's organic delivery channel, which helped increase the overall average check. However, at both brands, we did see a decrease in transactions as we faced heightened competition and felt the impact of reduced consumer spending. So we saw a more cautious consumer environment develop throughout 2025, but we remained focused on executing our strategy. And as a reminder, that's really leveraging the strength of our brands, delivering compelling everyday value propositions, anchored in our core products and supported by menu innovation and maintaining a strong seamless customer experience across all channels. So starting with brand strength, Q4 is always our most important quarter, driven by key occasions like Halloween and New Year's Eve along with the turn of our major sports partnerships. This year, Pizza Pizza launched a new partnership with Vladimir Guerrero Jr., ahead of the Toronto Blue Jays playoff run, while Pizza 73 partnered with Ryan Lomberg of the Calgary Flames to strengthen our hockey positioning. Overall, it was a highly engaging quarter for both our marketing team and our brands. We continue to build on successful programs like Score a Slice and Score a Pie at Pizza 73, promotions across NHL and NBA partners nationwide. These initiatives drive customers to our apps and enable ongoing engagement that encourages repeat visits. And for fans watching the games at home, we offered free game day delivery, where on game days, customers receive their orders of no delivery charge. And that's certainly been a very popular promo for people too, which we're really happy about. Our partnership with the Blue Jays super star Vladimir Guerrero Jr. or Vlad, as he is known, literally and figuratively hit it out of the park. The campaign featured our Double XL 18-inch 3-topping pizza at a value price point of $19.99 and giving Canadians across the country a large, shareable and affordable pizza to enjoy during the games. It was actually really exciting for us when he and his agent reached out to us directly. So that was a great time of last year. We're really excited and really kudos to our marketing team for really executing well on that with him. And this promotion really exemplified how we effectively leverage brand partnerships while reinforcing our value propositions. Turning to our second pillar, value. We remain focused on delivering strong value across our core products. This was particularly important as we lap the sales tax holiday in December 2024 and as we saw customers becoming more diligent in how they choose to spend their money. We reinforced our position as a value leader through a range of price-conscious offerings. At Pizza Pizza, everyday offerings like the $19.99 mix and match and $15.99 pizza and pop deals remain customer favorites, complemented by limited time offers like the 20 wings for $20 deal, demonstrating our consistent commitment to providing high-quality meals but under $20. At Pizza 73, we continue to promote the Double XL offer and brought back the popular holiday helper promotion during the December period. Our core pizza category remains resilient, supported by offerings across all price points from slices and pickup specials for value-focused customers to more bundled options designed for families, gatherings and special occasions. While value remains critical, staying top of mind through innovation is also important. Our innovation pipeline allows us to attract new customers, trade up our existing pizza mix with more premium offerings and deepened brand engagement. This quarter, as an example, Pizza 73 launched the Volcano Pizza, generating strong consumer buzz and millions of impressions on social media. And due to its success there at Pizza 73, the Volcano Pizzas were rolled out to Pizza Pizza in Q1 of 2026. All of these efforts are underpinned by our third and most critical pillar, customer experience. We serve customers through multiple channels, including in-store, by phone, and on our organic digital channels and also on third-party food delivery platforms. In a highly competitive landscape, delivering a seamless end-to-end experience is essential. So to meet and exceed customer expectations, we continue to invest in our digital ecosystem with plans to relaunch our website, mobile apps and loyalty platform in 2026. At the same time, phone ordering remains an important channel, accounting for roughly 1/4 of our orders. Our customer contact center is fully staffed to ensure minimal wait times. On Halloween, our busiest day in company history our systems performed exceptionally well due to our robust, highly scalable and reliable technology infrastructure and exceptional people working together. So congrats to the team on your effort there on Halloween, it was record-setting. And beyond ordering, we are focused on ensuring our restaurants are accessible, modern and welcoming. This quarter, we have 90% -- 95%, pardon me, of Pizza Pizza locations and 50% of Pizza 73 locations refreshed which will further enhance customer satisfaction and engagement. Turning to our restaurant network. We ended the year with 815 locations in Canada, nice to cross that 800 mark. And that includes 712 Pizza Pizzas and 103 Pizza 73 restaurants along with 4 international locations in Guadalajara, Mexico. During the year, we opened 12 traditional, 20 nontraditional Pizza Pizza locations as well as 5 traditional Pizza 73 restaurants. We closed 3 traditional and 11 nontraditional Pizza Pizza locations along with 5 Pizza 73 restaurants. And notably, 4 of the 5 Pizza 73 closures involve territory transfers to nearby locations. So it's really more of an aggregation exercise for a bigger territory, thereby minimizing any impact on overall sales. Looking ahead, we continue to see opportunities for growth within our restaurant network. However, we are taking a more disciplined approach, carefully selecting locations and formats to ensure long-term profitability, particularly in the context of rising costs. As I close out my comments, I expect that we will continue to face more headwinds across our system in the near future. Consumer confidence is still low. Businesses are facing rising costs, and there continues to be much uncertainty. However, we will continue to be there to provide our customers with the best food, made especially for them. Finally, I would like to thank you for the continued interest in Pizza Pizza, and I would like to thank our entire team of employees, franchisees and our operating partners for the support and resilience in this difficult macro operating environment. So thank you again for listening in, and I'll now hand it back to Christine to provide closing remarks and a financial update. Christine D'Sylva: Thanks, Paul. So just as a reminder, Pizza Pizza Royalty Corp. is a top line restaurant royalty corp. that earns a monthly royalty through a license agreement with Pizza Pizza Limited. In exchange for the use of the Pizza Pizza and Pizza 73 trademarks in its restaurant operations. Pizza Pizza Limited pays the partnership a monthly royalty calculated as a percentage of royalty pool sales. Growth in the corporates derived from increasing the same-store sales of the restaurants in the pool and by adding new restaurants to the pool. As previously announced on January 1, 2025, the royalties pool increased by 20 restaurants. So for fiscal 2025, there were 794 restaurants in the pool comprised of 694 Pizza Pizzas and 100 Pizza 73s. So briefly covering some financial results for the quarter. As Paul mentioned, same-store sales, the key driver yield for shareholders increased 0.2% for the quarter. Pizza Pizza restaurants were slightly down for the quarter, and same-store sales decreased by 0.1%, while Pizza 73 restaurants increased 1.8%. The combination of the 20 new restaurants added to the royalty pool on January 1 and the same-store sales resulted in an increase in royalty pool system sales and the corresponding royalty income. The partnership's royalty income earned as a percentage of royalty pool sales increased 2.3% to $10.6 million for the quarter. As a reminder, Pizza Pizza and Pizza 73 restaurants are subject to seasonal variations in their business. System sales for the first quarter of the year are generally the slowest while system sales in the last quarter are generally at their peak. Beyond royalty income, the partnership also earned some interest income on its cash and short-term investments. For the quarter, the partnership earned $31,000. This is a decrease from the prior year as the overall balance decreased and the interest rate applied on that balance decreased. Turning to partnership expenses. Administrative expenses, including listing costs as well as director, legal, professional and auditor fees decreased in comparison to the prior year. This quarter, they totaled $211,000 compared to $221,000 in the prior year. In addition to administrative expenses, the partnership is making interest-only payments on its $47 million credit facility. Interest paid in the quarter was $443,000. As a reminder, in March of 2025, the company renewed its credit facility for 3 years with maturity now set for April 2028. The balance of the facility remains unchanged. However, the credit spread increased slightly. Additionally, in April 2025, the partnership entered into new 3-year forward swaps. The 3-year interest rate swaps commenced when the existing ones expired. The new locked-in rate is 2.51%, which is an increase from the maturing swaps of 1.81%. So the all-in rate on the facility for the next 3 years will be 3.51% compared to maturing rate of 2.685%. So now after the partnership has received royalty and interest income and has paid its administrative and interest expenses, the resulting cash is available for distribution to its 2 partners based on our ownership percentage. Pizza Pizza Royalty Corp. shares in 73.8% of the partnership distributions. It pays taxes on its share of partnership earnings and the residual cash is available for dividends to company shareholders. Speaking about shareholder dividends, the company declared shareholder dividends of $5.7 million in the current quarter or $0.2325 per share, which was consistent with the prior year. The payout ratio in the quarter was 105% and resulted in the company's working capital reserve decreasing $300,000 and ending the year at $3.7 million. The $3.7 million working capital reserve is available to stabilize the dividends and fund other expenditures in the event of short- to medium-term variability in sales, which we have seen over the past few years. The company has historically targeted a payout ratio at or near 100% on an annualized basis, and any future dividend decisions will be made with this target in mind. That concludes our financial overview. I'd like to turn the call back to the operator to poll for questions. Operator: [Operator Instructions] Your first question comes from Derek Lessard of TD Cowen. Derek Lessard: I definitely think you guys are in an enviable position compared to your peers. Just on the -- like Q4 tends to be a little bit updated by the time everyone reports now, given that the quarter is kind of like it was 3 months ago, closed 3 months ago. Just curious, Paul, and you might have touched on it in your prepared remarks, but how do you -- maybe talk about the current environment, whether it's the consumer behavior you're seeing now, the macro backdrop. It's just obviously a lot more in the world than there was 3 months ago, and it seems to be changing daily, just to get your view on the overall market. Paul Goddard: Yes, it's a good insight, Derek, it's true. And you're right about the timing too, Q4 was a while ago. I think just generally, and I don't think this is a surprise to anybody, but just the macro environment, I think, just looks scarier than ever, really. I mean, right now, there's just so many things going on the geopolitical level. I mean there was so much concern on the, let's say, the U.S. tariff side a year ago, let's say, and that's still kind of the big question mark, but now it's sort of with all the geopolitical oil shock type thing happening in the Middle East and beyond. From an already sort of fragile consumer mentality, I think, things have gotten a lot scarier for the average consumer. So we just sort of sense that there's just greater caution. People are going to be extra careful, more careful than they already were being, I think, this year. So generally speaking, we do see that -- and we've come to this one before that people have pivoted from things like delivery to pick up in our case. They're still ordering, but we do notice people just generally ordering less, trying to save money and same on delivery platforms. I think some of them have seen reductions in volumes as well. So I mean I think it's just a scary market right now, very competitive. A lot of competitors are doing deep discounting. Everyone's desperate to get that value customer. And we are in an enviable place because we are known for value, which is great. And I think we did a great job with things like the XXL and even at Pizza 73, under $10 snack boxes and things like that. We have good offerings for people, but we do sense that overall transactions are challenged. I mean, just not only for us but others just in the macro picture is just not looking very good right now. Derek Lessard: Absolutely. And that's totally fair. I think it's clearly industry-wide. And I guess one question, too. So when you think about value, is it helping you guys win share in this environment? Or is it sort of -- is it primarily a tool to help everybody sort of hold the ground in a competitive market? Paul Goddard: Yes. It's very true. I mean it's really -- it's such a battleground for sure. And so I think we did have some data saying that in Q4, we did gain some share which is encouraging, but it's really a battle. It's really a slog out there. I mean we had some gains there, but not major, I would say. So we'll take it. We're happy with any gain in share right now, and we just need to push harder to get more, but it's -- we noticed as well, we had some data saying that pizza traffic transactions generally in Canada, I forget the source, but credible source saying that they're still growing and still positive, but it did drop off in the fourth quarter, the whole pizza sector. So we were -- we sort of felt that as well. And I think even North America wide, you're sort of seeing that trend, some pizza QSRs having some difficulties. So I think we actually, overall, we're very happy that we're able to eke out a positive year, but the macro environment is troubling. I mean, we see definitely headwinds, as I said, and we know how to pivot into that pretty well. But the fact that customers are hurting, and they're going to probably be ordering less food in general, not just from us but others. So we're conscious of that, and we'll have to be creative about how we deal with that, but it might be a while, I think, look, the way things are looking this year, there's just so much uncertainty in not only Canadian market, but geopolitically and globally with what's going on. I mean you can see things potentially with the oil shock continuing if you don't see a quick resolution, let's say in the Middle East and just the inflationary knock-on effects of expensive oil right down to the pumps and beyond, and that's a lot of important discretionary -- or nondiscretionary spend for a lot of people. So it really does have a massive trickle down, not only in Toronto, but all over Canada, all over the world. So we'll have to sort of see how that plays out. Derek Lessard: Absolutely. And I guess the -- are the competitive pressures more intense in certain markets? Or particularly urban or delivery heavy regions? Like how do you -- I guess, how do you manage that? Paul Goddard: Yes, I would say we tailor our marketing regionally anyway. We do notice differences. I would say -- we -- certainly in the urban environments where we're really well known for our established markets, I think, we still generally are pretty happy overall, but I mean it's patchy. I mean we'll get even in very successful urban markets that we'll do very successful in a geographic region, most stores, but you'll actually have a few stores that are anomalies there. And same with somewhere like BC, where we're certainly a newer brand there to most people. And a lot of those locations are more disparate. We're not -- we don't have huge urban concentration there yet, but it's a mixed bag. It's a mixed bag somewhere out there. And I don't think I would say it's because it's rural or less urban, let's say, it's just kind of the nature of it. It's -- we haven't really been able to ascertain regionally, there's certain weakness. It's more store by store. So we're trying to sort of make sure that we take lessons from the best performing stores, and we have kind of a very much internal optimization program internally to really motivate stores to hit a higher level in their performance. And then we try to share those learnings and do a lot of sort of community clustering of stores and get the operators to share their best practices and things like that. So it's kind of -- I don't notice anything specifically in certain regions. But I would say that we are happy overall with the organic delivery growth because that we've been really trying to push our organic apps and web. And I mentioned we are going to be making that even better. But we are really happy with how that's going and pickup wise, we do a great job as well, whether it's over the phone or through the app, for instance. So I think we do have those kind of multiple channels, which allow us some flexibility with good value offerings, but we are going to have to be extra creative going forward for sure because customers are hurting. Derek Lessard: Absolutely. And so I don't want to be the downer on the call, but I promise one last hard question on this. And I think you did talk about it in your prepared remarks. It feels like you're just -- in terms of your store development plans going to be a little bit more targeted given the inflationary pressures and the other pressures out there. Just maybe -- maybe just talk about how you guys feel about your pool of available franchisees. Paul Goddard: Yes. I think we're -- I mean, I think we feel pretty good about the pipeline for franchisees. I think probably what's more difficult is finding attractive real estate economics in the places where we want to be and also the construction cost. Because of the uncertainty, I think I commented on a prior call about cost of things like ovens, which we generally do source from the U.S. because they tend to be the best made and actually most affordable, but there's always tariff uncertainty. Are they going to -- they can rule it illegal, but I'm sure there's going to be some sort of attempt to still keep them in place. So we've seen some of the unit construction costs still be an issue. So it's not so much pipeline of the franchisee issue, we still see a lot of interest as it is. I guess, getting the real estate we want and the construction costs we want to make it a sort of very viable option. So -- and we often do see like, if anything, growth in the pipeline for franchisees, when times are tough like this. So I anticipate our -- I haven't seen our latest pipeline stats, but they're probably actually ballooning, but the other challenge is we don't always get franchisees where we want them, right? They'll say, "Well, I want to be in Toronto." And I'd say, well, we actually are pretty good in Toronto. We don't -- we have a little bit of growth here, but it's more of these rural locations across Canada or even some urban locations even in Vancouver. And in Quebec, we've got a pipeline of locations, sites we really like, but we're still -- I'd say we've been a little bit slower there lately selling some stores in the places that are not in urban Montreal. So that's really where we're -- getting the demand where the supply is, is sort of the trick. So we have been -- we're trying to be very responsible there and say, look, let's keep a really close eye on construction costs. We do have some ideas on how to just try and reduce our construction costs, maybe slightly smaller stores than we're already doing and certain materials and things like that. So that we still end up on budget. Because we are starting to see the beginning of -- we haven't seen it en masse, but I anticipate that we will see more headwinds with suppliers for different items, whether it's food, nonfood or construction with the headwinds that we see. Derek Lessard: Yes. Again, I think you guys are operating well given the environment. One positive is your -- is the performance at Pizza 73. Curious if you see -- is there any potential takeaways from that outperformance that you think you could roll out to the to the rest of the network, whether it's marketing, promo or anything else that's working for you out there that you might try at the Pizza Pizza banners? Paul Goddard: Yes. We always try and look at what are the things we can share across whether we take it West or bring it East. And 1 example, was that volcano thing, which we piloted out at Pizza 73 and it really did well there. And so we basically took a slightly different tone with it, but basically it's a very similar product with creamy garlic in the middle, which is popular here more so than Pizza 73. So that's 1 example. And I think just the create your own, the snack boxes out there, things like poutine, chicken under $10 price point have done well. And so that's something that we think, okay, perhaps we could promote those more heavily here. But here, obviously, we've got the slice market as well, and we've -- we've got a 2 for 6 slice model that's worked quite well, but we're looking at more of a $5 combo now that is more of a drink in a slice that we think will really help drive walk-in back here. But we always are looking to see which are the successful promos and positioning either brand. And we have -- we've got some new marketing resources relatively new that really -- I think it really hit stride there. Even though it's very much a battleground in Alberta too, but some of the initiatives we have, I think, are really getting some attention more with the Calgary Flames, the Edmonton Oilers with Gene Principe, the sportscaster now that's very famous and kind of did a cheeky TV commercial for us. So people notice that stuff and does seem to kind of put the Pizza 73 brand in a little more of a refresh light from what it was, I think, maybe being seen as before. So we always are looking at that from a marketing perspective and also IT and operations perspective, what -- how can we get the best of both brands. Derek Lessard: Yes. Okay. Perfect. And I guess without giving too much away, I know in your prepared remarks, you did talk about plans to upgrade the website and the app and again, without giving too much away. Just curious on what you are looking to accomplish with the revamp? Paul Goddard: Yes, I think it's just to get -- we're actually very happy with our loyalty program overall at Pizza Pizza. It has been very, very good. And we do see a lot of people that are very loyal as a result of it. But we think that there's just a way to enhance it in such a way that we just get -- frequency is a big one and just make us the preferred choice more often and just make it more multifaceted, a little easier to use and really just make it more intuitive on our web and apps. And we'll be putting dollars behind it once it's ready to really drive the benefits of the loyalty. So frequency. And then obviously, we're hoping to get more size and things too so that hopefully check does increase, albeit with a very value-conscious customer. But some of these things are built also for many years, right, not just this current environment. We're sure things will kind of bounce back at some point, but we still nevertheless need to build for the future. So I think we'll have value offerings that are threaded in with a loyalty program and that should help us, I think, hopefully get check and frequency really that and also just more traffic in general. So those are the levers because this will drive our same-store sales. Operator: [Operator Instructions] There are no further questions at this time. I would hand over the call to Christine D'Sylva for closing comments. Please go ahead. Christine D'Sylva: Thank you, everyone, for joining us on the call today. If you have any further questions after this call, please reach out to Paul and myself. Our information is on the release. And thank you for your continued support of Pizza Pizza, and we look forward to speaking to you again in May. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Planet 13 Holdings Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] Thank you. And I would now like to turn the conference over to Mark Kuindersma, Head of Investor Relations. Please go ahead. Mark Kuindersma: Thank you. Good afternoon, everyone, and thanks for joining us today. Planet 13 Holdings Fourth Quarter and Full Year 2025 financial results were released today. The press release, the company's annual report, Form 10-K, including the MD&A and financial statements are available on EDGAR, SEDAR+, as well as on our website, planet13.com. Before I pass the call over to management, we'd like to remind listeners that portions of today's discussion include forward-looking statements. The forward-looking statements in this conference call are made as of the date of this call. There can be no assurances that such information will prove to be accurate, or that management's expectations, or estimates of future developments, circumstances or results will materialize. Risk factors that could affect results are detailed in the company's public filings that are made available with the United States Securities and Exchange Commission and on SEDAR+. We encourage listeners to read those statements in conjunction with today's call. As a result of these risks and uncertainties, the results or events predicted in these forward-looking statements may differ materially from actual results or events. In addition, we will refer to both GAAP and non-GAAP financial measures. For information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures, please refer to today's press release posted on our website. Planet 13's financial statements are presented in U.S. dollars and the results discussed during this call are in U.S. dollars unless otherwise indicated. On the call today, we have Larry Scheffler Co-Chairman and Co-CEO; Bob Groesbeck, Co-Chairman and Co-CEO; and Steve McLean, Interim CFO. I will now pass the call over to Larry Scheffler, Co-CEO of Planet 13 Holdings. Larry? Larry Scheffler: Good afternoon, and thanks for joining us. Q4 was a better quarter where the work we've been doing begin to show up in the results. We're not yet where we ultimately want to be, but this was a meaningful step in the right direction. I'll walk through our operational performance. Steve will take you through the financials, and Bob will cover the strategic picture. In Q4, the SuperStore, including DAZED!, generated $9.2 million, essentially flat from Q3. The Las Vegas environment continues to be a genuine headwind. Visitor volume was down 6.3% year-over-year and the average visitor spending downtown fell 15.6% over the same period. As the destination experience built around the tourists, we feel both of these pressures. I'd also note that the F1 race in November displaced approximately 4 days of normal retail traffic at the SuperStore, and yet revenue still came in essentially flat with Q3. That tells you something about the underlying run rate of that business. Stripping out the F1 disruption, Q4 was actually a modestly better quarter than the headline suggests. Visitor volume on a sequential basis was flat, so the macro environment isn't deteriorating further, but we're not yet seeing the recovery that moved the needle at the SuperStore. Our neighborhood store network delivered $14 million in revenue with Florida representing $10.3 million of that total. I should note that the Florida results did include a onetime benefit from a loyalty accrual adjustment. Excluding that item and setting aside California, which we have now exited, we saw approximately 8% sequential growth over the remaining neighborhood stores in Florida, Illinois and Nevada. We called Q3 the trough last quarter and Q4 delivered the stabilization we expected. The foundation heading into 2026 is stronger. Combined, our SuperStore and neighborhood network generated $23.2 million in total retail revenue, compared to $21.3 million in Q3, a sequential improvement that reflects the stabilization we've been working towards. Wholesale revenue was $2 million compared to $2.1 million in Q3, though that decline was entirely attributable to winding down California operations. Nevada wholesale was up 38% sequentially, which reflects the hotels team restructuring we executed in Q2. It's encouraging to see the operational steps we took last year beginning to show up in the numbers, stabilization in the network -- in the neighborhood network, wholesale momentum in Nevada and a cleaner portfolio heading into 2026. The Nevada tourist environment remains a headwind, but we're positioned to benefit as year-over-year comparisons become more favorable. We've done the restructuring work. The 2026 focus is converting those actions into positive cash flow. With that, I'll turn it over to Steve to walk you through the financials. Steve McLean: Thank you, Larry. The operational stabilization that you described is showing up in the financial results, and I'll walk you through the details. In Q4, Planet 13 generated $25.2 million in total revenue compared to $23.3 million in Q3, sequential growth of approximately 8%. That improvement came during a seasonally soft period, which we view as a meaningful indicator that the operational work across our footprint is beginning to translate into the financial results. I do want to flag one item for modeling purposes. We completed the California divestiture in early Q1, which removes approximately $2.5 million to $3 million in quarterly revenue from the run rate going forward. Gross profit in Q4 was $11.2 million, representing a gross margin of 44.6%. That compares to a reported 21.3% in Q3, which was heavily impacted by a $3.5 million inventory reserve related to an excess of aged flower and concentrates in Florida. Q4 brings us back to where we expect this business to operate. We still see room to improve from here. The BHO lab approval in Florida will expand our product mix and strengthen pricing power. The California exit removes a market that was running well below our corporate margin profile, and the restructuring of our Nevada cultivation footprint removes costs that were a persistent drag on profitability. Bob will speak to the Nevada actions in more detail, but collectively, these are meaningful tailwinds that will increasingly show up in our numbers through 2026, and we expect gross margin to reflect that improvement in a material way. Sales and marketing expense declined 5% sequentially to $1.1 million, reflecting our continued focus on optimizing spend against profitability. G&A was essentially flat quarter-over-quarter at $12 million, with reductions in the period offset by higher audit and legal fees. We expect G&A to decline as the California overhead is eliminated, and we continue to find efficiencies across the organization. Adjusted EBITDA improved significantly in Q4, narrowing from a $4.1 million loss in Q3 to a $0.3 million loss, a $3.8 million sequential improvement. That result reflects the combination of revenue stabilization across our core markets and gross margin recovery. We're not satisfied with the loss, but the trajectory is clear and the path to positive adjusted EBITDA from here is well within reach. Turning to the balance sheet. We ended Q4 with $15.6 million in cash and restricted cash. The BHO lab was our last major capital project with construction complete, we do not anticipate meaningful CapEx in 2026. The California exit is a meaningful step in the right direction here. It removes a market that was consuming cash without a path to profitability, and its impact will be reflected starting in Q1. Combined with the revenue stabilization and margin recovery we've discussed, we expect our cash position to improve meaningfully throughout 2026. In summary, Q4 revenue improved sequentially, margins recovered to normalized levels and adjusted EBITDA moved materially in the right direction. The balance sheet actions and structural changes we've taken position us to continue that improvement through 2026. With that, I'll hand it to Bob. Robert Groesbeck: Thank you, Steve, and good afternoon, everyone. 2025 was a year of deliberate repositioning, exiting markets that were consuming capital without a credible path to profitability, strengthening our Florida foundation and bringing the cost structure in line with the realities of today's cannabis market. The results aren't yet where we want them, but the decisions we made last year were the right ones, and their impact is beginning to show up in the numbers, as Steve just walked through. The most significant structural step we took was exiting California, as mentioned. A market that had become a persistent drag on both margins and cash flow. We completed that transaction in the first half of February. While the exit creates a revenue headwind of roughly $2.5 million to $3 million per quarter, as Steve mentioned, that is more than offset by the margin and cash flow relief of removing an operation that didn't have a path to profitability in the current regulatory and competitive environment we encountered in California. Florida is where we are putting our resources. And the capital that was being consumed by California is now being redeployed into a market where we have scale, infrastructure and a clear path to improving returns. On the BHO lab, we've done everything on our end. The facility is complete, the infrastructure is fully in place and the application is pending with Florida regulators. Now this is entirely in their hands, and we remain hopeful for an approval by the end of Q1. When that approval comes, it closes a product gap that has put us at a disadvantage relative to competitors in the market for quite some time. It's been a long time coming, and we are ready to move the moment we get the green light. We also opened two new dispensaries in Q4, Pace near Pensacola and the land on the I-4 corridor between Orlando and Daytona. We also made important structural changes to our Nevada cultivation footprint. Baty was closed in January 2025. It was a high-cost, low output facility that was no longer defensible or viable in this pricing environment. Wagon Trail was closed at the end of December 2025 and represented the more significant cost reduction of the two. Both facilities are now dark. Importantly, we are still producing our full range of flower at Bell Drive with meaningful capacity available if needed. There being no reliance on third-party bulk flower. The consolidation of Bell Drive has also allowed us to meaningfully reduce that facility's cost structure. Taken together, these actions remove a persistent drag on Nevada profitability and position us to operate more efficiently as that market recovers. Those are the operational moves, the ones within our control. But for the first time in several years, the external environment is also beginning to shift in our favor. On March 18, the Clark County Commission passed significant new regulations targeting hemp retailers operating outside established compliance frameworks, cracking down on the sale of intoxicating hemp products and deceptive consumer practices. This is something Planet 13 has actively advocated for. For the past several years, we've watched unlicensed hemp operations proliferate across the strip, undermining both consumer safety and the competitive integrity of the licensed market. For years, that unlicensed proliferation, combined with the tourist headwinds in 2025, as Larry discussed, created real pressure on our Nevada revenues. These regulations are a meaningful step toward restoring the supply and demand balance this market desperately needs. The other significant regulatory development is the executive order from President Trump, directing support for rescheduling cannabis. If rescheduling is completed, 280E, which has been one of the most punishing structural burdens on licensed cannabis operators, is automatically removed. We don't have a firm time line, but for the first time, we have a federal attitude that is actively moving in the right direction. That has real implications for our balance sheet, tax position, our cost structure and earnings per share. It is the most consequential potential development the industry has seen today. After several years of navigating an increasingly difficult operating environment, tourist headwinds, illicit competition and a federal framework that penalized license operators, we are finally seeing the regulatory landscape move in our favor. Clark County and rescheduling are both meaningful tailwinds. And on top of that, the California exit and Nevada cultivation restructuring remove an internal drag that we chose to eliminate. We are not waiting on any of them. The work we are focused on every day is what we can control. Growing our Florida footprint, improving product quality, and continue to drive efficiency through cost structure. The goal for 2026 is straightforward, reach positive cash flow, demonstrate the earnings power of this portfolio and deliver on the commitment we've made to our shareholders. Looking ahead, Q2 will be the first clean quarter that reflects our repositioned portfolio. No California drag, improving Florida productivity, and a cost structure that is beginning to reflect the work of the past year. We expect that to be visible in the results moving forward. With that, I'll open it up for questions from covering analysts. Thank you. Operator: [Operator Instructions] And our first question comes from the line of Kenric Tyghe with Canaccord Genuity. Kenric Tyghe: If I could lead off on a BHO related question. It seems to be something of a moving target for reasons largely beyond your control, or at least certainly in quarter beyond your control. What gives you the confidence, or perhaps the hope that you will have this resolved by the end of this quarter? And if it's not, how material is that to your outlook? It certainly reads as if there have been some other pretty material improvements in Florida outside of the potential BHO lift. So any additional color or context there would be really valuable. Robert Groesbeck: Yes, I'll address the first part. And Steve, I'll let you address the financial side of it. From an operational standpoint, again, it's been a very frustrating endeavor. We've discovered over the last 6 months that securing timely approvals out of the OMMU in Florida has been difficult at best. And I can't really comment on why that is the case. We're not the only operator in that predicament. But we have literally submitted every single document required for approval. We've met every requirement of the OMMU. And we've gone through a series of RAIs back and forth. In every instance, we've provided timely responses. So I think we're there. And I think it's just a function now of staff getting into the application and giving us final approval. And we're currently optimistic that we've had multiple delays. And so we're realistic in that regard. But Steve, I'll let you address the financial impact of that. Steve McLean: Sure. And in addition to the BHO products, we've also had a big focus on the flower quality, the higher THC strains. We brought in some new strains that, in particular, grow well in greenhouse and our type of environment. We've had some third-party consultants go through that facility and optimize certain things. All of it is working in our favor and helping bring the quality of that flower up. And we're learning a lot in the process and all that stuff is going to -- is bearing fruit as we go forward, and we're seeing a lot of that. And there's also a lot of other products that we're looking at with various licensing partnerships with some of our other partners that will start to come online this year. So there's a lot of new products that are kind of going to help contribute to that. Overall, Florida, even now, it's cash flow positive. It's contributing. I think the worst is behind us, if you will. And I think the third quarter is really probably the low watermark there, and it's been -- the first quarter is looking a lot better, and we expect that's only going to continue. As far as like the actual revenue expected on BHO, it's hard to know at this point. So I'm hesitant to even throw numbers around, but it can only help having the additional products and in addition to the ones that I mentioned as well. Hopefully, that answers your... Kenric Tyghe: I appreciate the color Steve. That does. Maybe just if I close the loop then on the -- on my Florida questions. In terms of that Florida cultivation journey, I mean, you've highlighted improvements in yield, strain, strain availability, THC content, all positives. Where do you think you are on that journey today? And how much -- where do you think you're going? How far down the road are you? How far down the road you come? How much more runway do you think you have until you sit back and look at Florida as being fully dialed -- sorry, Florida cultivation being fully dialed? Steve McLean: Yes. Well, I mean, as far as our investment goes, I don't think there's anything more to do as far as investing money into the facility or anything like that. I think it's pretty dialed now, although it's tweaks. And as we go through and we discover which strains work better than others, we go heavier in those areas. We bring in newer strains that we try. And so this is going to be an ongoing evolution. It's never really going to end. We'll always continue to look at processes and things that will improve it. But I think we're pretty satisfied with what's coming out of there now. And I don't know that there's a ton left to do there. Operator: And our next question comes from the line of Pablo Zuanic with Zuanic & Associates. Pablo Zuanic: I mean, obviously, congratulations on the growth in Florida. I think you said $10.3 million in sales. That's about 35% sequential growth in the fourth quarter. So that's just a great number. And as you just explained, there's more upside into 2026. So I'm going to start with a bit of a follow-up to the prior question. But how quickly do you think you can start expanding SKUs, especially on the extract side of things with the BHO facility? How quickly can you start bringing in new brands, or licensing other brands into the market? I'm just trying to understand how quickly you can move the needle there. Let's start with that. Robert Groesbeck: Pablo, it's Bob. Great question. Again, I can't -- I'm not at liberty at this point to identify the parties we're negotiating with, or where we are in the process on bringing additional products into the pipeline. But we've made significant progress. We've got a number of approvals pending with the OMMU now on different product varieties and SKUs. And again, the bottleneck is just getting approvals out of the agency. And we're excited. We know that we'll have some exciting additional launches here next quarter, and we're continuing to build on those relationships. I wish I could be more precise than that right now, but it is actually -- it's tracking well. We've had very positive reception from the partners we're working with. And they're excited to be in Florida, and we're excited to be partners with them. So all I can say is stay tuned. And again, we should have some announcements out to the market here shortly. Pablo Zuanic: Okay. And then in terms of store count, what can we assume for 2026 in terms of net growth of stores in Florida? You opened two in the fourth quarter. I think there's been some shutdowns or relocations. If you can just talk about the footprint in Florida for 2026 plans? Robert Groesbeck: Yes, Steve, I'll let you address that on the CapEx side. Steve McLean: Yes. We have -- and I am excited about it. We are adding two additional stores that were already under contract. One in Sarasota that is -- it's already -- it's in the middle of the sort of the TI construction phase, and we expect that to be online in a matter of a couple of weeks to several weeks, not months. And then the second one is in St. Pete. And then beyond that, we're kind of in a -- kind of a wait and see on how that goes and how that lands and then we'll go from there. Pablo Zuanic: Okay. And then just one last one on Florida. Do you have any views in terms of where we are with the ballot process? I mean we all read the same headlines. They've been somewhat negative recently. Any comments you want to make there? Maybe there's reason to be more constructive in terms of the way things play out in November. But what do you think about that? Robert Groesbeck: Well, look, obviously, the headlines have been less than positive. I think, unfortunately, I believe Trulieve's initiated litigation, one of the larger MSOs have, or the ballot initiative organization. I'm not real optimistic in light of the decisions we've received thus far from the courts. It doesn't seem like -- I think there's a viable path. I think there's a lot of -- some significant issues on whether the votes were correctly tossed out or not countered rather, and these third-party noise with out-of-state canvassers. I wouldn't think the courts would give much attention to that. But unfortunately, they have. And the Supreme Court is really moved, lockstep with the governor's directives, and that's unfortunate. So there's not much time left here. So if something is going to happen, it's going to happen very shortly. We're going to miss the window to get the question printed on a ballot. So I wish I had more positive news. I'm just -- I'm not excited where we are. Look, I still remain convinced that Florida will transition to an adult market. It may not be this upcoming election now, unfortunately. But we're going to continue to scale and to operate and get better every day and compete in the market we're in. Pablo Zuanic: Yes. And then just one very last one. I mean, you've been very clear about what's happening in Nevada and obviously, about the sequential improvement, stabilization, you called it. Can you talk about any changes you've been doing more recently to the store, to the SuperStore itself, whether in terms of new services, assortment? I mean, we've heard before about museum and the lounge and all of that. But have there been any real tweaks or initiatives to boost traffic to the SuperStore? Robert Groesbeck: Well, yes, look, so we are fortunate to announce and we have announced, we have the cannabis -- what was originally the cannabis museum space completely under control. So that's back in our portfolio. We've been actively negotiating with several users of that space that would create an entertainment option for the complex. Again, I can't announce anything just yet, but we're very pleased with the discussions we've had, and we see that as a fantastic additive to the complex. And again, with DAZED!, we've seen a meaningful uptick there in traffic and revenue as we continue to promote the venue, get very high remarks from customers that have experienced the facility. So we're going to continue to do that. And then we've recently brought some enhancements into the facility itself, just artistic photo ops. We brought some of our materials up from the California location that we closed in Santa Ana and just create photo moments for customers, get them more engaged with the facility so they can share their experience with customers. And we've seen a real nice uptick there. And then also, we do have the restaurant open again. We're using a third-party contractor providing that service, but it's created -- or brought that amenity back, which has been very helpful and very well received by the customers. They like the opportunity to have not only food, but alcohol and cannabis under one roof. So we're going to continue to push that, market that, and we see good things. Operator: And our next question comes from the line of Brenna Cunnington with ATB Cormark Capital Markets. Brenna Cunnington: This Brenna on for Frederico. Congrats on the quarter. Just continuing on with Nevada and the SuperStore specifically. If I remember correctly, last quarter was a record quarter for DAZED!. Could we just get a little bit more color on how DAZED! did this past quarter? And any exciting things going on there? Robert Groesbeck: Thanks, Brenna. Steve, I'm going to turn to you to address -- you've got that on your computer there. I don't have it up on my screen. Steve McLean: Sure. And, DAZED!, it's actually been really exciting to see that facility kind of blossom over the last -- I'll call it, like 6 months now at this point. But it continues to exceed our plans. It's been a lot of fun for some of our partners and a lot of the customers to go in there for different events. And we've been having some fun with it. And I don't know what more to really say is other than it's really nice to see that facility do well and be successful. And I would say it's -- we're looking at about 25% plus revenue increase versus last year at the facility, and I see that continuing for the foreseeable. Brenna Cunnington: Amazing. Good to hear. So like in Nevada in general, like it's good to hear that the wholesale momentum is starting to come back. But it was mentioned earlier in the call that you're not seeing the recovery in the state that would be needed to really move the needle at the service store. So theoretically speaking, what would it take for Las Vegas to really come back? Robert Groesbeck: Oh boy, that's a -- Brennan, that's a tough question. Obviously, at the macro level, we need gas prices to go down. We need room rates to become more affordable and Las Vegas just to get more in line with what customers are willing to pay. There's a perception out in the universe that Vegas has become too expensive. And I think there's some merit to that in many respects. So I see some of the larger hotels now are putting together very, very significant discount packages to drive traffic. We believe that the short-term spike in gas will be short term rather, the spike in gas, which will benefit our continuing California traffic. But look, Vegas, the city went through a very significant downturn last year. And as the economy continues to improve at a macro level, we see Vegas coming back in a very significant way. We've been through this many times over the years. We've seen ups and downs here in the tourist sector. And it's going to come back and it will be as robust as ever. And we've got several mega resorts under -- one mega resort under construction with significant additions elsewhere, lots of traffic. We've got Major League Baseball coming soon. The only professional sports franchise we're missing is the NBA. And my guess is something will be inked this year for the next franchise. So it's an exciting time, and we're just getting positioned to take advantage of that. Now in light of the tourist drop, what we've done is repositioned to really go back and focus on the locals customers here. And we've made meaningful inroads there. And unfortunately, historically, we were about 80% of our customer base through the SuperStore was non-Nevadan. That's had a pretty significant impact on revenue and traffic. But now we've gone back to the locals and really kind of pushed this venue as well as an opportunity for them. And we're seeing results of a pretty aggressive marketing campaign to get them to this facility as well. So excited. Larry Scheffler: The only thing -- this is Larry Scheffler. I'll just add in that even though the tourism is down, I agree with everything Bob just said, but you got to realize we only touch 2% of the tourists coming to Vegas right now. So we have a lot of upside for us. What we've done. We've made major changes in our marketing department, in our social media outreach, stuff we've never done before. We had a little bit of -- for about 2 years, had a fairly weak marketing and social media department. We've made major changes on people heading it and support groups working underneath the new director. We're very happy with that. And I think all of you guys will see major changes and increases for Planet 13 upcoming this year. Brenna Cunnington: Okay. That's great color. And then just our final question is just looking at the margins. It's good to see that there's been a bounce back this quarter. So looking ahead and for modeling purposes, how should we be thinking about the gross margin and EBITDA margins in 2026? And what kind of cadence or margin build might we see throughout the year? Steve McLean: I'll take that. Sure. And look, the heavy lifting is kind of complete as far as reorganizing these cultivation facilities, pulling California out, especially in the last quarter and the trend that we were seeing there was very negative. In California, we saw a combined $1.7 million EBITDA loss. And so that was trending toward $2 million a quarter, and we've removed that from the go forward. So really excited to see what that does. Internally modeling this out and between that and what we've done in Nevada, we're expecting to see margins north of 50% starting in the first quarter. So really exciting versus where we've been in the last few quarters and having to battle through some of those challenges. From an EBITDA standpoint, it's a little more challenging, but we are expecting a positive EBITDA full year. I'm showing a small loss in the first quarter as we've had basically half of a quarter of California still in those results. But beyond that, every quarter looks positive. So that's all I can really give you at this point. Operator: And our next question comes from the line of Kenric Tyghe with Canaccord Genuity. Kenric Tyghe: Just a quick one on the hemp ban. It reads as if it's more material for you with your Vegas concentration than for Nevada more generally, just given the prevalence or sheer number of, let's call them, hemp stores operating in Vegas on the strip. Is that a fair characterization? And is there any way you could sort of handicap just how material that headwind has been and any potential sort of lift to the -- from that ban looking through '26? Larry Scheffler: Okay. So this is Larry Scheffler. Bob and I have been working on getting rid of these intoxicating hemp stores on the strip. As you know, licensed cannabis stores in the state of Nevada cannot be in the gaming corridor, about a mile either side of the strip, cannot deliver to the hotels. After 2 years' worth of work with the Clark County commissioners that control Clark County and the Las Vegas Strip, last Tuesday, they finally passed an ordinance outlying the hemp stores on the strip. They cannot sell any THC intoxicating flower, gummy squares or anything. In 120 days, that takes effect from last Tuesday. I spoke at the meeting, and we were -- in 2021, the state of Nevada did $1 billion in sales for licensed cannabis dispensaries. Last year, we did $700 million. That $300 million is attributable to being stolen from us by the hemp stores on the strip and in other areas in Clark County and Las Vegas. We paid tremendous amount of taxes, 3 or 4 or 5 other taxes that the hemp stores do not have -- do not fall -- do not have to pay. So we pay hundreds of thousands of dollars. So that is lost revenue to the state, the taxpayers of the state of Nevada. The Clark County commissioner saw that. Saw the dangers of mold and insecticides that is being sold on the strip with no testing whatsoever, other than the 0.3 testing to make sure it's hemp and in the right amount of THC when it's first harvested. They saw through all of it. They did a lot of work on this, a lot of studies. They're back to 6 to 0 in the boat. And again, the hemp stores selling these intoxicating hemp products on the strip will be done in 120 days. That's going to be a huge boom to us. We're predicting $1 million to $2 million per month we lost to the hemp stores on the strip because 81% of our customers are tourists. So that is another part that we anticipate a huge increase in revenue for us starting in 2026, the second half. Operator: And with no further questions, that concludes our question-and-answer session as well as today's call. We thank you for your participation, and you may now disconnect.
Operator: Good afternoon. This is the chorus call conference operator. Welcome, and thank you for joining the Fincantieri Full Year 2025 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Folgiero, Chief Executive Officer and Managing Director. Please go ahead, sir. Pierroberto Folgiero: Good afternoon, ladies and gentlemen, and welcome to Fincantieri's Full Year 2025 Results Call. We are proud to share with you the outstanding results achieved in 2025, which highlights Fincantieri's ability to capture the opportunities offered by the favorable macro trends in our markets, while maintaining financial discipline and ensuring flawless execution of our backlog. In 2025, we delivered tangible progress in the implementation of our strategy, exceeding expectations and creating significant value for all our stakeholders. This provides an exceptionally strong foundation on which to build the group's growth trajectory set out in the new 2026-2030 business plan. We achieved a double-digit revenue and EBITDA growth a strong margin expansion supported by continued efficiency initiatives and a profitable business mix, leading to the highest net profit in our industry at EUR 117 million, more than 4x higher than 2024. We also recorded a new all-time high in both order intake and total backlog, confirming the strength of our commercial positioning and remarkable growth potential. On the financial front, the group continues to make rapid progress in its deleveraging path with net debt-to-EBITDA up to 2.7x ahead of 2025 guidance provided last February at the Capital Markets Day. And there is more to come with new cruise and underwater orders already secured in early 2026 and a robust defense pipeline expected to translate into major contracts in the coming months. We also recently completed a rights issue of EUR 500 million via an accelerated book building process that allows us to further enhance our financial flexibility and provides optionality to support our selective inorganic growth strategy, also through M&A opportunities as well as to bring forward our deleveraging targets. It is worth noting that this capital increase was approved by the EGM in June 2024, in conjunction with the approval of the EUR 400 million rights issue completed in July 2024. And it's also to be noted that the free float as a result is now up 36%. Let's move to Page 4 for a summary of the financial and commercial highlights of the year. In 2025, we exceeded all targets set out in our guidance, further revised at the Capital Market Day, demonstrating the group's ability to deliver on its commitments and consistently outperform expectations. Revenues increased by 13% year-on-year, reaching approximately EUR 9.2 billion, supported by strong market tailwinds in the Shipbuilding segment and by the rapid expansion of the Underwater business. EBITDA margin grew significantly to 7.4% vis-a-vis 6.3% at the end of 2024. This increase is the result of the structural evolution of cruise into a profitable and cash-generative business and by the increasing contribution of defense and Underwater to revenue mix. The net debt EBITDA ratio improved to 2.7x, well ahead of the guidance provided at the end of 2024 and better than the revised guidance provided in February 2026. Finally, net profit reached the record level of EUR 117 million, demonstrating the remarkable turnaround achieved over the past three years and confirming the structural growth and profitability of the group. These results confirm the remarkable turnaround achieved by the group over the past three years, okay? Our revenues between 2022 and 2025 grew with a compounded average growth rate of 7.3% while our EBITDA increased by 3x over the same period. Our net income is now structurally positive. Lastly, our deleveraging process has been impressive, reaching 2.7x with further significant reduction projected going forward. Turning to Page 6. We delivered an outstanding commercial performance in 2025 with a record high order intake at EUR 20.3 billion and the book-to-bill equal to 2.2x compared to 1.9x in 2024, underscoring the strong demand in our core businesses, especially in building which posted an impressive 42% year-on-year growth. As a result, total backlog reached an all-time high of EUR 63.2 billion, equivalent to approximately 6.9 years of work based on full year 2025 revenues, ensuring strong visibility on the future growth. Let's now move to Page 7 to have a look at our order book. 2025 was also marked by the flawless backlog execution with 24 units delivered. We have a full slate of deliveries scheduled through 2036, with visibility further extended to 2037 thanks to the already mentioned order by Norwegian Cruise Line secured in early 2026. As of year-end 2025, our backlog includes 97 units, 36 in cruise, with the first two jumbo ships scheduled for delivery in 2029 and 2030, 20 in defense, five in underwater and 36 in offshore and specialized vessels, providing solid and long-term visibility for the years ahead. Let's move to Page 8 for an overview of the commercial opportunities ahead. The current macro trend offered significant growth opportunities in all of our business segments, which are actively monitoring as we speak. Of more than 500 commercial opportunities, we have looked at, we have selected a number of these to pursue through our participation in tender processes for an amount of approximately EUR 32.5 billion. In the past months, we have already successfully secured a number of orders, including important orders from NCL, Crystal, Viking and TUI in Cruise, orders in naval from the Italian Navy and ordering offshores for four vessels from Ocean Infinity and the largest order ever for WASS, for Torpedoes from the Saudi Navy. As I mentioned in our Capital Market Day, we also see short-term opportunities in naval in the coming months for approximately EUR 5 billion from the Italian Navy, the DDX, EPC call 2, LSS3 from export countries for frigates, from service contracts for the Middle East countries and from new programs from the United States Navy. Notably, last month, the United States Navy issued a request for proposal for a vessel construction manager to oversee the construction of the new medium lending ship class, identified Fincantieri Marinette our USA subsidiary as one of the two shipyards to be awarded for the construction with initial allocation of four vessels. Moving to our outlook for 2026, we confirm the guidance provided during the Capital Market Day with revenues in the range of EUR 9.2 billion to EUR 9.3 billion, EBITDA of approximately EUR 700 million with an EBITDA margin of around 7.5%. Adjusted net debt to EBITDA ratio at approximately 2x, which equates to 1.3x, including the capital increase completed in February 2026. Finally, net profit is expected to be higher than in 2025. Turning on Slide 10. Let me provide some color on the recent capital increase via ABB we successfully completed in February. As we communicated, the EUR 500 million capital increase is intended to further enhance our financial flexibility and provides optionality to support our selective inorganic growth strategy. Also through M&A opportunities, in particular in relation to unconventional underwater solution, where we see significant opportunities to expand our position. We are looking at the selective number of potential targets, which we will update you on the coming months. Now I will hand over the call to Giuseppe, who will discuss 2025 financial results in more details. Please Giuseppe. Giuseppe Dado: Thank you, Pierroberto. Let's move on, on Page 11, where we can comment order intake. Again, like we said before, EUR 20.3 billion, all-time high with a growth of over 32%. And a book-to-bill ratio well above revenues, 2.2x. This reflects the sustained growth in Fincantieri commercial pipeline that is supported across all segments by strong demand. Shipbuilding among these segments continued to deliver strong order intake reaching almost EUR 18 billion, up 42% compared to last year. Of course, these very strong order intake brings another -- a record total backlog at $63.2 billion, and I'm moving on Page 13, that covers almost 7x 2025 revenues and these results confirms the impressive growth trend already seen in 2024 and further increases long-term visibility of the business. Backlog grew by almost 33% to EUR 41.1 billion, up from EUR 31 billion in 2024. And we also have a very strong soft backlog that increased to EUR 22.1 billion compared to EUR 20.2 billion of 2024. We delivered 24 units from 11 different shipyards, 5 for cruise, 7 for defense and 12 for offshore. On Page 14, financials. Revenues reached almost EUR 9.2 billion, up 13.1% year-on-year with a strong contribution from shipbuilding that posted a 15.1% growth compared to 2024 within shipbuilding. Cruise revenues grew by 12.5% year-on-year. With production levels characterized by capacity saturation on the current shipyard footprint and reflecting the significant backlog acquired. Also, the Defense segment recorded a 20.7% increase year-on-year, partly driven by the finalization on the first quarter of 2025 of the contract for the sale of two PPA units to the Indonesian Ministry of Defense. Those two units were both delivered in the second half of the year. The underwater segment posted as well a sharp increase in revenues, up 88.2% and this comes from the consolidation of WASS submarine systems from January 2025, but also from the very strong performance of Remazel engineering that had a revenue growth of 25% year-on-year. And together with the accelerated advancement of the U212NFS submarine program for the Italian Navy. As with the offshore and specialized vessels and the Equipment Systems & Infrastructure segments, they both were substantially in line with 2024. On the following page, EBITDA. Well, at the group level rose sharply by almost 34% year-on-year to EUR 681 million with the margin up to 7.4% from 6.3% reported in 2024. Shipbuilding EBITDA grew by 29.3% to EUR 451 million with an EBITDA margin of 6.8%, up 0.8 percentage points compared to last year, this comes thanks to very favorable pricing dynamics. And improving efficiency in the cruise business. As a whole, the cruise business has improved also in terms of net working capital, thanks to the better payment terms. And of course, on top of it, there is the increasing contribution of the Defense business. The underwater, as expected, I would say, delivered an EBITDA of EUR 117 million with the margin of 17.6%. And this confirms the sector's premium profitability that we discussed on the Underwater Day in May. The offshore specialized vessel EBITDA reached EUR 72 million with an EBITDA margin growing to 5.3%, consolidating its positive path to margin improvement. The Equipment, Systems and Infrastructure segment delivered a strong contribution to the group's profitability. With EBITDA rising by 33% and EBITDA margin reaching 8.2% versus 6.1% in 2024. Drivers of this growth are, in particular, a significant contribution by the mechatronic business and higher margins in the Electronics and Digital Product cluster. And of course, last, but not least, the infrastructure cluster improved as well. On the following page, net profit for a record level, EUR 117 million the highest ever recorded by Fincantieri and over 4x the results we reached in 2024. This record result reflects the material growth in EBITDA partially offset by the increase in D&A, but this is mainly driven by the purchase price allocation following the acquisition of WASS Submarine Systems completed in Q1 2025. Of course, the effect will diminish throughout the years on this. EBIT increased to EUR 368 million from EUR 246 million in 2024. And last, but not least, thanks to our very strong financial discipline. The group benefited from a reduction in financial expenses. And this, of course, comes partly from the lower average debt recorded during the year. And also a positive contribution was provided by the decrease in the asbestos-related litigation cost, which declined for the third consecutive year. On the following page, the leverage impact and debt maturity profile at the end of 2025, adjusted net debt amounts to roughly EUR 1.3 billion. And of course, in order to ensure full comparability with 2024, these figures -- this figure includes noncurrent financial receivables, notably the loan granted to Virgin Cruises previously included in 2024 net debt and reclassified as noncurrent following the maturity extension agreed in December. Excluding these current -- these noncurrent financial receivable, net debt stands at EUR 1.8 billion roughly. Leverage ratio, net debt over EBITDA improved to 2.7x significantly lower than the 3.3x recorded as of year-end 2024 and further improving on the 2025 guidance provided in the Capital Markets Day, which was 2.8x. The leverage ratio, including noncurrent financial receivables stands at 1.9x EBITDA. As we have previously mentioned, we have generated in 2025 significant cash flow from operations, which, excluding the cash outflow for the purchase of WASS in early 2025, translates into a free cash flow generation of more than EUR 250 million. We have a very well distributed debt maturity profile with no significant long-term debt maturities until 2028, and we can rely on a solid capital structure with no covenants roughly 90% fixed rate liabilities, this is obtained through derivatives. Furthermore, the senior unsecured Schuldschein placement for EUR 395 million completed in July 2025, contributed to extending our maturity profile and reducing our average interest rate. After that, I will now hand the call back to Pierroberto for his closing remarks. Thank you. Pierroberto Folgiero: Thank you, Giuseppe. Let me now summarize our key takeaways on Page 18. During 2025, we have delivered record commercial and financial results with net profit, order intake and total backlog reaching an all-time high. These results provide a strong foundation for the years ahead in the execution of our 2026-2030 business plan. Margins further improved year-on-year, thanks to the structural evolution of Cruise into a profitable and cash-generative business and to the higher contribution of Defense and Underwater to the revenue mix. We benefit from an impressive backlog visibility further extended to 2037. This supports our margin profile through working capital optimization, capacity saturation and improved procurement efficiency. The current global geopolitical environment offers substantial growth in defense, which we expect to translate into new significant orders in the coming months. We are consolidating our position as the leading orchestrator in the underwater domain, expanding both our product offering and business development capabilities also through targeted acquisitions and strategic partnerships. The successful completion of the capital increase last February demonstrates strong market confidence, while providing additional financial flexibility and optionality to pursue the selective M&A strategy. We are only at the beginning of a secular growth trends, and we are ready to capture this opportunity. With that, we are now open to take your questions. Operator: [Operator Instructions] The first question is from Antonio Gianfrancesco of Intermonte. Antonio Gianfrancesco: I have two. The first one is on the year-to-date Cruise orders from Norwegian and Viking. Could you give us some indications on the margin profile of these new contracts compared to the current backlog? And more broadly, even on Cruise business. At Capital Markets Day in February, you indicated the profitability for the Shipbuilding division at 7% for 2026. Could you give us an indication about the evolution of the profitability in the Cruise segment for the coming years? The second one is on the recently announced memorandum of understanding with Navantia on European Patrol Corvette program. Could you please help us to better understand how you see this translating into actual order intake. And in particular, I was wondering if you consider this memorandum of understanding as one of the key building block behind the EUR 5 billion defense pipeline in six months, you indicated at the Capital Markets Day. Pierroberto Folgiero: Thank you for your questions. Cruise orders, NCL and Viking, we are not accustomed to disclose precise margins. We would rather prefer to let you appreciate what is behind this pickup in the percentage margin in this profitability. So basically, as we have been saying and doing and pursuing the Cruise business is going in the direction of saturation, saturation, meaning perfect "absorption of fixed cost" on the one hand, on the other hand, long-term visibility and backlog provides for long-term partnership with supply chain and vendors. So we can achieve, I would say, optimization in the terms and condition pricing, for example, of what we can achieve from supply chain. So the more we go in that direction, the more we see a reinforcement of profitability in the cruise, which is also benefiting from an additional dynamics on the revenue side on the pricing side. So on the cost side, saturation and procurement optimization. On the revenue side, there are positive developments in terms of pricing. So the scarcity effect is allowing us to increase our bargaining power with ship owners and somehow improve our negotiate position. Let me also add that there is a third dynamic in Cruise, which is not again related to the cost, which is not related to the revenues, but it's related to the risk profile. So the beauty of this long queue of order intake has to do with the fact that our not prototype ships but are repetitive ships. So many of the latest announcements, many of the latest awards are repetitive of an existing ship repetitive version of an existing ship, which is a terrific sorts of derisking. And conversely, it increases the possibility to convert contingencies accrued into extra margins at the right moment. So there is a series of concurrent effects that are driving our expectation of Cruise better and better. Let me add the fourth information which has to do with terms and conditions, payment terms and conditions. So we are also succeeding in improving to the maximum possible extent payment conditions in the direction of improving the working capital dynamics accordingly. Which dynamics is, as you may know, already improved by the stabilization of volumes, which is the prerequisite in order not to absorb working capital. So no precise answer. Sorry for that. For commercial regions, for strategic reasons, but as many site information as possible in order for you to appreciate what is behind this enhancement in profitability. Similarly, we believe that the Cruise for the years to come, which was your second question, will continue to improve margins. So the multiple engines I was describing before are expected to gain pace, gain traction, change gear and give us more and more satisfaction in the years to come. So we are definitely convinced that this, I would say, environment is truly healthy for Fincantieri Cruise division. On your second question about Spain about EPC about Navantia, I think it's a very important step, it is not an MOU only. It is beginning of a new, I would say phase in the European cooperation, the EPC program, which is a Corvette is in the process of moving to the second phase, which is the second call from EDF, from European Defense Fund, which is the relevant entity that is supporting with specific grants the development of this European Corvette. Italy and Spain and France are already there. Other nations are expressing interest namely Romania, namely Greece. So it is expected to be, let me say, kind of higher WASS of the sea, which will be remarkably powerful for European demand, but at the right moment also for exports out of Europe. So it's a way to align requirements among different navies with the aim of optimizing costs, the absorption of nonrecurring costs and creating an interchangeable interoperable platform that could be very competitive also at export level. Your question is if the ship is going to be ordered tomorrow morning, which is not the case because the EPC program is going from the initial engineering to the engineering for construction step. What is very important is that all the nations are expected or the founding nations, namely Italy, Spain and France, are expected to soon express their commitment to order their number of ships to this new entity. So very soon, we are going to move this platform from a paperwork to a construction exercise, with commitments, which, by definition, will be for many units with commitments coming from the founders, from the founding nations. I think that's it. Operator: The next question is from Marco Vitale of Mediobanca. Marco Vitale: The first one is on the outlook. If you would provide us some source to say indications in terms of what you expect by divisions. We noted that you say, sales target implies a flattish revenue trend. And I was wondering if you could add some few details on what are the key, say, underlying dynamics across business lines for year 2026 outlook. The next question on the, say, new U.S. program, the LSM that you mentioning, if you could do, we had read some, say, few articles. If you could add some say, details on the potential timing in terms of both order collection and also P&L impact that you expect from the new program. Last question is about, say, more general in terms of supply chain and discussion with the main cruise operator. We noted that the current, say, rise in geopolitical conflicts are also triggering as a side effect, lower tourist volumes for Cruises. I was wondering if -- I mean, if you share any insight in terms of the discussion you had with the main cruise operators could reassure your long-term business pipeline that you have with them? Pierroberto Folgiero: First question about 2026 outlook. Our business is very beautiful because it depends on the backlog. So 2026 revenues are not going to be disclosed by Fincantieri but will be self-disclosed by the deployment of the backlog existing at the end of 2025. So it's -- that's the beauty of being a project-driven company. So with respect to 2026, we have the production curves coming from the backlog we have already secured. And 2026 will be the year in which in terms of expectations, we expect a "kick in" of the defense order intake, which we experienced in 2025, as we experienced in 2025, it's a process of finalization and materialization, which is a little bit bureaucratic, but it is there, it is there. So that's what we -- that's why we expect 2026 to be so visible in terms of order intake. And obviously, it will become revenues accordingly as you deploy a few, I would say, project backlog for the future. So there's nothing weird. There is nothing unclear. It is, I would say, very visible and very -- it's the schedule. It's a schedule of production. And again, 2026 will be, at the same time, very interesting for the rest of the profit and loss. So I believe is already clear that our percentage margin is in the process of improving and also the net result as we have already appreciated 2025 versus 2024, our net profit is showing signs of, I would say, vitality. So I wouldn't call it flattish, revenues, my point, revenue is vanity. It's much more important that you look at what is happening at margins what is happening at the bottom line. And at the same time, what is happening in terms of order intake, which is the most interesting part of my answer. Moving to the geopolitical part of your question. Yes, we are aware that when you talk -- when you discuss, when you elaborate, about tourism, the concept of war, the concept of instability is, I would say, typical case of concern, but never happened. So people continue to travel obviously, not exactly in the overheated place. So obviously, if you have a resort in an overheated place. It is not going to be fully-booked, but the tourism can somehow adjust, I would say, trajectory, itinerary in a way that is smart enough to find beautiful places to go and cruise. So that's my overall elaboration about your point. Practically, we are not experiencing any negative feeling from the side of ship owners. Conversely, we continue to see a lot of energy, a lot of interest in occupying future slots for the sake of a long-term growth. Let me also add that we are securing orders in the Cruise business, which is the "Touristic" business all the way to 2037. So we strongly believe that from that time on the situation will be stabilized. U.S. On U.S., we received as the rest of the market very positively. The announcement of the U.S. Navy procurement with respect to the expected awards of the LSM series of ships to Fincantieri Marinette as one of the two, I would say, dedicated nominated shipbuilders. The process of transforming this announcement into an order is, I would say, expected to be very fast in the very short term. So let me say discussions are happening while we speak. Again, we don't rely in the short term on U.S. for volumes. So the agreement we achieved with U.S. is an agreement whereby we are kept harmless. So for the time being, it is not a business of volumes. So we don't look for volumes there. We don't need volumes there. Having said that, the agreement has multiple legs, one of the legs is the allocation and award of new classes of ships to the shipyard. And the agreement was achieved in the end of 2025, and we are receiving this communication from the Navy so early and so quickly. So let me say, we are very positive with respect to U.S. to U.S. We are very happy that we have created a new baseline, clearing all possible risks of the past. We don't need volumes. We need to procure the already achieved agreement translates with the velocity that we are experiencing together, but that's what we want to see. So we are very positive. And to cut the long story short, we believe that the contractualization is going to happen very, very soon. Operator: The next question is from Emanuele Gallazzi of Equita. Emanuele Gallazzi: I have three questions. The first one is a follow-up on the geopolitical topic. Very clear, your explanation on the ship owner side. I was wondering if you can discuss also on your cost side, which dynamics are you, let's say, seen on your input cost. The second one is on the capital increase or the M&A. You clearly mentioned that you are looking at some opportunity. If you can just discuss a little bit more on your strategy, if anything has changed post the -- or with the capital increase? And should we have to expect say, a big deal? Or are you looking more at small and selective deals adding technologies or know-how to your portfolio? And the last one is on WASS. We have seen two important orders coming from India and Saudi. Can you discuss more on deals? And have you seen an acceleration in the last month of, let's say, negotiation or tenders for WASS and generally speaking, for the whole underwater business. Pierroberto Folgiero: Thank you very much for your question. On your first question, we are in full control of the variables, of the economic variables that can be affected by the geopolitical issues or the famous geopolitical issue in the sense that the energy prices of Fincantieri are fixed for 2026. The same more or less is with gas procurement -- with gas oil procurement. So with respect to energy, we have the coverage in place for 2026 in order not to receive any, I would say, negative impacts. When it comes -- if we move to steel prices, it is the same in the sense that we have already fixed procurement costs, prices for approximately 90% of the quantities. So once again, we are in good shape. So energy and steel are the two major components with respect to which we are covered with respect to which we are continuing to monitor the situation. On your second question on M&A, we are very active. We have many dossier in our hands. We have very clear ideas of what we are looking for. Because we have been testing and shaping the market for this acceleration in the underwater in the last couple of years, all kind of transactions. There are different possible transactions. For sure, we are calling it, naming it selective M&A, meaning that we don't want to -- we are not looking for transformational M&A. So it is not something that is going to change the face of the company, but it's something that will sizably visibly accelerate the expansion in the underwater. So it has to do with the key technological blocks of the underwater, for example, propulsion systems. It has to do with another key component which is the electronics of the underwater. So any kind of software from command and control to telecommunications. And it has to do also with access to markets, including nondefense markets and business models. So we strongly believe that we can put on the table a lot of new technologies, and we are thinking in terms of M&A in order to envisage how to transform as quickly as possible those technology into integrated technologies, so our technology integrated with other technologies and how to accelerate the commercial reach in the direction of clients, not necessarily only on the defense side. So we will get back to you, but we are working hard in that respect. So we have a large business development and M&A team, which is being working and preparing since many months. And now that we have the capital increase ammunitions we will be more than happy to translate all this preparation into execution. On your third question, WASS is doing fantastically as Remazel is doing fantastically. So we are immensely happy of both acquisitions. Both companies are doing better than expected in any respect and are perfectly fitting with the rest of the group, creating synergies on the one hand, and expanding markets and giving access to adjacent market to Fincantieri commercial proposition. With respect to WASS, India and Saudi are very emblematic, are very indicative of the first and most evident item of the defense procurement in a moment like this. i.e., ammunitions. So the world realized that in the last years, many submarines or many naval assets were built, but with very limited, I would say, ammunition warehouses. So the defense expenditure is, first of all, an exercise of replenishment of warehouses. And in this respect, torpedoes are very clear and very evident. We are doing more than that. So we are evolving the product, thinking of how to adapt this kind of product to the world of drones. For example, in this respect, I think that WASS is ahead of the other competitors. So WASS is already able to supply drones with very light torpedoes, which is the new generation of surface drones. So yes, you want them to perform intelligence, surveillance and reconnaissance. That's the way military people call the first task of water drones underwater surface -- sorry, surface drones. But at the end of the day, you need also to go to a second phase, the second step, which is the step where the drone is also armed in order to be able to react on top of detecting the threat. This is what is happening also. So let me say WASS is remarkably centered, remarkably focused in this dynamic and then is working on the ad agencies. So what to do on sonars, how to be very effective on certain kind of sonar applications such as demining, which will be another priority, unfortunately enough, of the world. So it's going very well, and we are very happy with WASS. We are working also in order to expand the production capacity of WASS. So capacity boost is the title of the book for the new Fincantieri business plan and is consistently in a coherent way also the name of the book in WASS. So we are working in order to expand capacity because it's having a lot of demand that we need to increase capacity accordingly. Operator: The next question is from Gabriele Gambarova of Intesa Sanpaolo. Gabriele Gambarova: Just three from my side. The first one is on the SAFE program, the European Safe program, the EUR 150 billion program. I was wondering if you have any update on this program because it seems to me that this is a little bit in delay. This is my personal perception, but I don't know if you have any insight on this? The second demand. Then the second question is again on naval. I saw a slowdown in the top line in the fourth quarter 2025. I know that the backlog is very healthy. So I was wondering if you could give me some more detail on this trend we saw at the end of 2025, if there is an explanation, particular explanation. The second question, this is for naval. The second question regards the reverse factoring. I saw that it grew by EUR 200 million in 2025 to EUR 850 million. So I was wondering what could we assume for 2026, what is embedded in your guidance basically. And the last one regards M&A and the infrastructure. I saw that the business is doing very well is recovering after we closed the Miami, let's say, job order. I was wondering if you consider, if it's something that you would, let's say, assume to sell this business, which is doing well, but I think it's not core business. Pierroberto Folgiero: Very good. Thank you. On the SAFE program, let me disagree with you. Or partially agree with you in the Anglo-Saxon way, in the sense that SAFE is expected to be a fast track process, you know that there is a gate expected for June 2026. And we see all the horses running according to the race. So we don't see a delay. And again, it's for sure, a big rush because June is tomorrow morning. But all the, I would say condition precedents, condition precedent for SAFE to be activated on time out there. So I don't see your point. Again, it's a program that is asking nations to finalize a huge amount of contracts in a very limited time frame. So it is very difficult that you do it in advance. So the deadline is June. On the naval, again, all the production curves driving the revenue recognition not going according to expectations. So this is absolutely physiological. We have to consider that there is a change in the revenue curve of U.S., which is, for sure, to be considered when looking at last part of 2025 and 2026. Again, on the Naval, the point will not be the revenue level as rather the materialization of all the orders that we are expecting. On the factoring, I will leave the floor to Giuseppe, but let me remain with the microphone for an extra minute for infrastructure. So the infrastructure business is a source of satisfaction because of the turnaround we have achieved as a management team. So I think we did very well finalizing the bad experience in Miami, digesting all the tails and at the same time, preserving our reputation delivering impeccably what we had to deliver. So it's a sign of industrial strength, resilience, reliability, which is not obvious at all. The infrastructure business is, therefore, getting rid of Miami tails and therefore, expressing evidencing good margins, thanks to the discipline, thanks to the quality of our people. Let me say that the infrastructure business or at least a good part of it is proving to be, I would say, functional to Fincantieri strategy when it comes to naval basis, when it comes to protection of ports. So Fincantieri Infrastructure is a reality in marine works. And in the era of defense, in the era of expansion of defense infrastructure and in the era of expansion of protection of critical infrastructure to have a group of people that can take care of those jobs as a kind of end-to-end offering is proving to be interesting and successful. So let me say, at least a big part of Fincantieri infrastructure is leaving a second life in a sense, helping defense business of Fincantieri with an end-to-end offering. And at the same time, being the entry point of, for example, Fincantieri Underwater when it comes to protection of ports and protection of key marine and maritime infrastructure. So obviously, we retain all options opened. So we will leave also without Fincantieri infrastructure. It's not a best [indiscernible] component of Fincantieri business model. But as of today, we are very happy of having Fincantieri infrastructure in our group, because we are exploring and pursuing very interesting business model, whereby we integrate end-to-end the ship in the naval base, in terms of infrastructure works and we use them to enter the business of infrastructure protection with Fincantieri NexTech technologies, for example, on ports. On the factoring question, I leave the ground to Giuseppe. Giuseppe Dado: But it's very high. It's very simple. You can easily expect the same amount and the same levels we've reached in 2025. So this factoring is something that we put. It's something that helps our suppliers to finance themselves within their net working capital requirements. We expect to -- we factor in the same levels as of 2025. Operator: The next question is from Lorenzo Di Patrizi of Bank of America. Unknown Analyst: So the first one on Navis Sapiens. So you delivered your first vessel in February. Could you give us more color on the margin difference versus similar past vessels and what we should expect from the Navis Sapiens program in the next one, two years? And then secondly, so on the naval pipeline, actually on the pipeline in general, so you gave this figure EUR 32.5 billion. Can you give us more color on the pipeline outside of the EUR 5 billion in Naval. And also, for example, I'm thinking of India, in particular, is there an update there? And could you give us more details on what the country has in store in the next few years in terms of investments that you could benefit from? Pierroberto Folgiero: Thank you very much for your question. But let me say, Navis Sapiens is a transformational product. So the piece of news is that there is a ship sailing today where we speak which is having on board this new brain, which is a combination of new hardware and new software that is being validated by a ship owner in real life, in regular life. So this is the big news. This is the breaking news. Its transformational in the sense that it gives distinctiveness to Fincantieri offering simply because thanks to this new "instrument", the ship owner will benefit from improvement in the behavior of the ship and therefore, in the cost profile of the ship. So the first effect is that we are positioning Fincantieri product in a different way. So when you buy a Fincantieri ship, you will always buy a ship with a brain, then it will be up to you to leverage on this, and it will be up to you to install over the air, all the new applications, for example, for optimizing roots and consumptions or for optimizing maintenance and other key activities in terms of OpEx and costs. So consider it as a strategic step, which is, let me say, prolong in the future, way ahead in the future, the distinctiveness of Fincantieri product. Then obviously, it represents itself a product for our NexTech which is the technological pole inside Fincantieri organization. You know that we have created a joint venture with Accenture 70/30, which is practically writing the codes of this new system, which is made of a data platform according to the latest architecture laid upon our own automation systems. So in NexTech, we have a company that is taking care of automation system, and this company is now having on top of the layer of the automation system, this platform system. And the business model of NexTech will be to host on this platform as many third-party products as possible on top of selling internally produced internally developed applications to be sold to the ship owners on the platform. So it's a new concept. But the beauty of the story is that this concept is being adopted by one client. And it is on the air and is working very well. And we have in our business plan, some ramp-up of this product. And we have quite an extensive team working on that. And the initial results are very encouraging, and we are very happy with that. Second question is more color about naval order intake. I think there is no secret about the fact that the Italian Navy is expected to move the DDX program from the engineering study into construction. We are working relentlessly with the Navy with Orizzonte Sistemi Navali with Leonardo in order to quickly move forward in this respect. Then there are other initiatives with the same Italian Navy, for example, the LSS3, which is the third of the logistics ship class. And then there are a number of very hot non-Italian Navy prospects on which we are working a lot with respect to which we are very positive. Then obviously, the market is big. There are many opportunities. Again, we have a lot of tenders out in the short term, obviously, it has to be something that is already in the oven. It's ready in the kitchen. But in the surroundings of the kitchen, there are many, many, many opportunities. So it's very important that this good momentum kicks in terms of tangible orders. But again, we are not at all worried about what we're going to do in our naval shipyards. As you may know, we are already working in order to double our capacity. And again, if a couple of things happens, we are already fully booked even after doubling the capacity. India. India is an immense market with a very specific business model, which is the business model of Make in India. We are -- I would say, well known in India because we built two ships for them, two logistics ship for them, something like 10 years ago, more or less. There are many programs. We are in association with many local shipyards. The system is different because the naval construction of ships by law is to be awarded to state-owned shipyards. So it's very important to team up with the relevant ones. That's what we are doing. And then the second peculiarity of India is that in order to provide packages in terms of material, for example, you have to coproduce locally with partners. So this is something we are already doing. We are already working since years in the coal production and coal manufacturing of for example, certain components of propulsion systems. So the business model, it's a business model whereby you sell design packages, you sell material packages and then you cooperate in the construction with a local shipyard with a kind of construction management assistance. There are many programs that are going to be awarded in the next months. There is one that is very, very interesting, which is an LPD, which is a kind of small aircraft carrier kind of big ship. They have a big tender for LPD. But this is just an example of what we have been doing and how we are taking care and looking after the Indian market. Operator: The next question is from Sriram Krishnan of Deutsche Bank. Sriram Krishnan: Perfect. So I've got a couple of questions. The first one is actually on the Equipment division. Particularly the electronics cluster. Okay. So I just wanted to conclude that question which I had. So this question was on the Equipment division, particularly on the electronics cluster and the infrastructure. Clearly, despite modest growth in the top line. I think the margin was very impressive with the electronics business and in a very similar way, even in the infrastructure business, whether top line actually declined. And the margin was pretty impressive. So I wanted to understand, first, if there are any one-off items within this one in 2025. And how should we look at a sustainable margin of both these businesses in 2026 and going forward? That's the first question. The second question is to do with the U.S. order potential, the landing ships related to. We understand that you have received an order for four ships and the potential long term is well over 30. So I wanted to -- can you confirm if there will be only two shipyards involved in this program or there are more shipyards which are likely to be inducted into this? And as a follow-up or a very similar one, can you give us any update on the NGLS program as well in U.S. and which you are competing as well? Pierroberto Folgiero: On the U.S. part of the story, the U.S. Navy announced its intention to award for LSM to Fincantieri USA. And the contractualization is expected to happen according to contracts and negotiations that are going on in these weeks, in these days. As far as we understand, but it's not up to us, the construction strategy of the U.S. Navy is to select two shipyards, simply because according to their long-term planning, the expected number of ships is, if I don't go wrong more than 30, more than 30. So they want to have at least two parallel shipyards working together. Which is good, which is important, because it means that you create specialization, which is deeper requisite for performance and for reciprocal and mutual satisfaction. On the NGLS program, which was part of your second question, can you tell me more, please? Sriram Krishnan: So this is -- I understand I think Fincantieri Canada business apparently has won some sort of design and construction order with regards to the next-generation logistics program. I think overall size of this program is to procure somewhere around 12 to 13 ships in the long term. So I just wanted to understand where this leaves you are the only company who is involved in this one for the U.S.? Or how many ships are you envisaging as an order flow from this contract and so on? Pierroberto Folgiero: Well let me say, United States, we have a shipyard that is concentrated on civilian shipbuilding. And they are very active in barges and in other kind of ships. And then on top of it, we have company in Canada, it's called Vard Canada, which is very good in design packages either for coastal literal ships and for, I would say, commercial ships. So obviously, both entities are engaged in all the possible dynamics and projects in that part of the world. So I can, in general, confirm that there is a lot of action, a lot of movement and a lot of I would say, interest and commercial activity also in that segment, also in that quadrant. On the -- on your first question on electronics, I would rather give the floor to Giuseppe for some more detail. Giuseppe Dado: Yes. Well, I mean speaking of 2025 results vis-a-vis 2024 it's the other way. I mean, 2024 was affected by some one-offs and some write-offs that we did on certain projects. And therefore, the margin that we -- EBITDA margin that we achieved in 2025, 6.9%, is more, let me say, representative of what you're going to see in the coming years and in the business plan. With potentially, of course, some slow, but steady pickup throughout the years, thanks also to Navis Sapiens and all the innovation and deployment of new technologies that we envisage in the business plan. . Sriram Krishnan: And if I may just follow up on that one. How do you envisage the top line for infra business? We understand that things have stabilized a lot. Should we expect some sort of a pickup in business in intra? Or should things be largely stable? Pierroberto Folgiero: I'm sorry, the line is very bad. Can you repeat the question? We really can't hear you very well. Sriram Krishnan: My apologies. Is it any better now? Pierroberto Folgiero: Yes, yes, better. Sriram Krishnan: All right. Sorry about that -- my line. No, I just was following up with the infrastructure part as well. Do you think that this is going to be a largely stable sort of revenue for the info business going forward? Or how -- just wanted to view on the infra business at the top line level? Pierroberto Folgiero: The infrastructure business is having good prospects in France, again, driven by the backlog order intake which is becoming more and more evident. We have projected in the business plan, I would say, disciplined growth in terms of revenues, capitalizing on the, I would say, good returns and stable returns that we are -- that we have experienced in 2025. So the market is there in terms of marine works and other businesses of the company. The company is also focused on the steel fabrication. So steel structures, which are needed for multiple purposes, not only for shipbuilding, but also, for example, for bridges and things like that. So that's the second business of the company, they continue to experience stable demand. And so we are projecting it -- again, it is not where we want to put all our entrepreneurship. Our core business is elsewhere, but we're very happy that they are in good shape. And in particular, we are very happy when we can use them, as I was describing before, in order to increase the end-to-end offering of Fincantieri when we are interacting with the new Navy with an international Navy but also with our Navy. Whenever there is -- there are needed some marine works in order to accommodate the new fleet and also the new, I would say, technological infrastructure on top of physical infrastructure. So sensors, anti-drones, whatever is needed when you enlarge your base, your military base on top of your naval asset. Sriram Krishnan: Thank you so much, and apologies for the bad line. Pierroberto Folgiero: It was very good at the end. Thank you. Operator: Gentlemen, there are no more questions registered at this time. . Pierroberto Folgiero: Thank you very much to all. Goodbye. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.
Operator: Good afternoon. Thank you for attending GCT Semiconductor Holding, Inc. fourth quarter and full year 2025 financial results call. Joining the call today are John Schlaefer, GCT Semiconductor Holding, Inc.'s Chief Executive Officer, and Edmond Cheng, Chief Financial Officer, to discuss our fourth quarter and full year 2025 results. During this call, certain statements we make will be forward-looking. These statements are subject to risks and uncertainties, including those set forth in our safe harbor provision for forward-looking statements that can be found at the end of our earnings press release and also in our Form 10 that will be filed today, which provide further detail about the risks related to our business. Additionally, except as required by law, we undertake no obligation to update any forward-looking statement. I will now turn the call over to John Schlaefer. John Schlaefer: Thank you, and thanks everyone for joining us today for our fourth quarter and full year 2025 earnings call. I will begin by discussing the operational milestones we achieved during the year as we executed on our strategy to transition the company toward full 5G commercialization. Following my remarks, our CFO, Edmond Cheng, will walk through the full year financial results in greater detail. 2025 was a defining year for GCT Semiconductor Holding, Inc., as we reached several key milestones in the transition from our development to commercialization of our 5G chipset. Over the past year, we have focused on bringing our 5G chipset technology to commercial readiness while expanding our ecosystem of partners and customers who are preparing to deploy and integrate our 5G platform across a growing set of applications. After the launch of sampling with lead customers in June, in the fourth quarter, we shipped more than 1,900 5G chipsets for commercial use. These shipments represent early commercial volumes that support initial deployments and customer testing programs and mark continued progress toward our broader production ramp. While still small in scale relative to the long-term opportunities ahead, these shipments demonstrate that our production pipeline is now actively supporting real-world deployment and preparing for high volumes as customers move through their rollouts. We expect this momentum to continue generating sequential growth in 5G chipset shipments throughout 2026. Speaking of customer rollouts, another important milestone achieved during the quarter was Gogo’s new broadband 5G air-to-ground service powered by GCT Semiconductor Holding, Inc.'s 5G chipset. As our first network operator to bring a live network to market using our technology, this milestone validates the performance and reliability of our 5G platform in one of the most demanding wireless connectivity environments and demonstrates the readiness of our chipset technology to support real-world commercial deployments. The launch also underscores the growing demand for GCT Semiconductor Holding, Inc.'s 5G solutions and reinforces our positioning for broader 5G commercialization and market penetration. As additional customers advance through testing, certification, and deployment phases, we expect the success of Gogo's launch to serve as a strong validation point for other customers evaluating our technology and to support further adoption in 2026 and the years ahead. In parallel with these developments, we continued expanding our strategic partnerships to broaden the applications and markets for our semiconductor solutions. During the quarter, we signed a licensing agreement with one of the world's largest satellite communications providers, under which our 4G and 5G chipsets will integrate into the partner's user equipment to support global, resilient, and high-bandwidth connectivity across both satellite and terrestrial networks. This integration will enable direct-to-satellite applications across the partner’s rapidly expanding network, creating new 5G chipset sales opportunities for GCT Semiconductor Holding, Inc., while positioning us at the intersection of terrestrial wireless infrastructure and satellite connectivity. Shipments for this program are expected to begin as early as 2026. More broadly, this collaboration places both companies at the forefront of emerging 5G-to-space networks designed to extend connectivity worldwide, including in underserved regions, and supports the industry's transition toward more integrated terrestrial-satellite infrastructure. By combining our advanced 5G semiconductor technology with a global satellite footprint, we are helping enable a new era of always-on connectivity that is more resilient, flexible, and accessible than ever before. We also announced a partnership with Skylo to expand seamless global satellite connectivity for next-generation cellular-to-IoT devices. As part of this collaboration, our teams are working jointly toward chipset and module certification that will enable ubiquitous connectivity across satellite-enabled networks for a wide range of IoT applications. This initiative further demonstrates the flexibility of our architecture and the growing number of connectivity environments our platform can operate in. Collectively, these partnerships reflect our broader strategy to position GCT Semiconductor Holding, Inc. at the intersection of several major technology trends, including the expansion of 5G networks, the rapid growth of connected devices, and the increasing integration of satellite connectivity with terrestrial wireless infrastructure. In addition to these commercial developments, we also took steps to strengthen our financial flexibility and ensure we have the resources necessary to support the upcoming production ramp. During the fourth quarter, we entered into a $20 million convertible note facility with an initial $1 million advance. This financing provides us with additional optionality to support working capital requirements, production readiness, and strategic growth initiatives, while minimizing dilution at the current stock price for shareholders. Taken together, the progress we achieved throughout 2025 reflects a company that has successfully transitioned from the development phase of its 5G program toward the early stages of commercialization and volume production; expanded our ecosystem of partners; advanced multiple customer programs through evaluation, design, and optimization phases; and began supporting live network deployment using our chipset platform. As we look ahead, our focus is on scaling operations to support the commercialization of our 5G chipset. This includes aligning our supply chain partners, strengthening production readiness, and continuing to support customers as they move from evaluation to deployment. We believe the groundwork laid over the past year positions us well for the next stage of growth as production volumes increase and additional network operators begin featuring GCT Semiconductor Holding, Inc.-enabled 5G devices. I will now turn the call over to Edmond to discuss the full year results. Edmond? Edmond Cheng: Thank you, John. While 2025 represented a transitional year for our financial performance, it also reflected the deliberate investment required to bring our 5G chipset platform to commercial readiness while managing our capital allocation and optimizing our cash flow. As we have discussed in prior quarters, the transition from our legacy 4G product cycle to our next-generation 5G platform created a temporary gap in revenue while customers completed development and integration efforts. We believe this transition reached its trough during 2025. We are now at the inflection point as commercialization progresses. Reflective of this, total revenue in the fourth quarter increased 76% sequentially from the third quarter, demonstrating early momentum as our 5G programs begin contributing to the top line. We expect this sequential improvement to continue into 2026 as additional deployments roll out and production volumes ramp. With that context, I will now review our full year 2025 financial results. Further details can be found in the 10-Ks that will be on file with the SEC. Net revenues decreased by $6.3 million, or 69%, from $9.1 million for the year ended December 31, 2024 to $2.9 million for the year ended December 31, 2025. The change was due to a decrease of $3.6 million in product sales and a decrease of $2.6 million in service revenues. The lower product sales were driven by lower 5G reference platform sales as we continue transitioning into 5G, while service revenue decreased due to the completion of a substantial service project during the prior-year period. Cost of net revenue increased by $0.6 million, or 16%, from $4.1 million for the year ended December 31, 2024 to $4.7 million for the year ended December 31, 2025, largely due to additional production overhead costs. Our gross margin for the year ended December 31, 2025 was negative. This primarily reflects the current level of product revenue, which is not yet sufficient to fully absorb our production overhead cost and therefore is not fully indicative of the underlying profitability of our products and services. We expect margins to improve as product volumes increase, particularly as our 5G chipset sales begin contributing more meaningfully to revenue later in 2026 following the commercial launch in 2025. Research and development expenses decreased by $3.3 million, or 19%, from $17.3 million for the year ended December 31, 2024 to $14.0 million for the year ended December 31, 2025, largely due to the completion of a 5G chip project, which resulted in a $3.3 million reduction in professional services from Alpha. This reduction was partially offset by a $0.9 million increase in personnel-related costs due to our higher engineering headcount, a $0.3 million increase in stock-based compensation expense due to the issuance and vesting of share-based awards, and a $0.4 million increase in preproduction and engineering supply related to our 5G initiative. Sales and marketing expenses were relatively flat year over year, totaling $3.9 million for the year ended December 31, 2024 compared to $4.2 million for the year ended December 31, 2025. General and administrative expenses increased by $5.7 million, or 53%, from $10.8 million for the year ended December 31, 2024 to $16.5 million for the year ended December 31, 2025. The increase was primarily due to changes in our credit loss estimate for receivables, which resulted in a $2.8 million expense in 2025, compared to a $0.4 million benefit in 2024, resulting in a $3.2 million net increase to G&A expenses. Stock-based compensation expense increased by $3.2 million from $2.0 million for the year ended December 31, 2024 to $5.2 million for the year ended December 31, 2025. The increase was primarily due to the issuance of equity-classified common stock warrants to investors in 2025. Personnel-related costs increased by $0.6 million. These increases were partially offset by a $1.2 million decrease in professional services and other costs due to lower transactional activities during the year. Turning briefly to liquidity, we closed the year with cash and cash equivalents of $0.6 million. We also had net accounts receivable of $2.6 million and net inventory of $0.9 million. Subsequent to year-end and as of February 2026, we had cash and cash equivalents of $9.4 million. In addition, we maintain access to our at-the-market equity program of up to $75 million and have ample capacity on the remaining $125 million of our $200 million shelf registration statement, which was effective since April 1, 2025. These capital resources provide us with flexibility to support working capital needs and execute on our commercialization strategy as we scale production. Looking ahead, we expect sequential growth in both revenue and 5G chipset shipments throughout 2026, as additional customers move into commercial deployment phases. As this transition continues, our financial priorities remain focused on maintaining operational discipline, preserving capital flexibility, and supporting the production ramp necessary to convert our growing customer pipeline into meaningful revenue. With this, I will turn it back to John. Thanks, John. John Schlaefer: 2025 represented a pivotal year for GCT Semiconductor Holding, Inc. as we transitioned from development to commercialization of our 5G platform. We began supporting live network deployments, expanded our ecosystem of strategic partners, and initiated commercial 5G chipset shipments that marked the early stages of our production ramp. While our financial results still reflect the transitional nature of this period, we believe the foundation established over the past year positions us well for the next phase of growth. Our focus moving forward is on executing efficiently as we support customer launches, expand production volumes, and convert the growing demand for our technology into sustained revenue growth. I would like to thank our employees, partners, and shareholders for their continued support and commitment. As we enter this important next chapter for the company, we are encouraged by the progress we have made and look forward to building on this momentum during 2026. I will now turn the call over to the operator, who will assist us in taking your questions. Operator: Thank you. We will now open for questions. To remove yourself from the queue, you may press 11 again. Our first question comes from the line of Craig Ellis of B. Riley Securities. Your line is open, Craig. Craig Ellis: Guys, congratulations on getting the 5G chips starting to ship for revenue in the fourth quarter. John, I wanted to start with one with you, and it takes off on that point and some of your comments that you are engaging with more partners and programs and a priority this year as scaling. Can you just talk a little bit on two fronts? First, on fixed wireless access, can you talk a little bit more about the visibility that you have from customers for ramps through the year and how material you think things might be, not looking for guidance, but just help give us a sense for what you are seeing. And then given that there has been so much success with the company, and the way you are engaging with satellite and ground-to-air programs, just help us understand as you look at 2026, when revenues there could start to materialize and to what extent? Thank you. John Schlaefer: Yeah. Thank you, Craig. So, yeah, FWA is still a really important vertical for us, and we are focused there strongly. The lead customers that we are working with there are focused on that area. So we expect that we will be shipping more into that market this year, and we will have some growing backlog as early as in Q2 for the lead customers. And then on the satellite front, we already have some product that is shipping for NTN applications. We are expecting that this new partner that we just talked about will be shipping into that in the second half of the year, and we think that is going to be a very important second vertical for us that we have gotten a lot of attention for, for 5G products as well as pairing with some of our 4G products as well. Craig Ellis: And I will give it a shot, although I am unsure if you can speak to this specifically. But can you help us size the trajectory of revenue as we go through this year, John? I know the company has its eye on $25,000,000 since that is the level where I think it would look for adjusted EBITDA breakeven and profitability. But any sense on how these different contributors add up and layer in for specific revenues as we hit the middle of the year and then the end of the year? John Schlaefer: Yeah. It is a little hard to lay them all in right now because their schedules are still a little vague to us. We are thinking that the point that you just mentioned would be probably in the Q1 period. And, yes, Q1 next year, so 2027. But we are going to have to see how that actually lays in. It could happen faster, but we are really waiting for some visibility that will come in the Q2 time frame for us as we start seeing some backlog for these programs lay in. Craig Ellis: That is helpful. And then, Edmond, I will switch it over to you, then I will jump back in the queue. First, nice to see gross margins coming in at 32% in the quarter. As you see revenues rising sequentially through the year, how should we think about gross margins? And then as a follow-up, operating expense was a little bit higher in the fourth quarter than what we were looking for, but you also noted some special charges on a calendar year basis. Can you just talk about what drove the sequential increase in operating expense quarter on quarter in addition to gross margin? Thank you. Edmond Cheng: First of all, related to your question about the gross margin, we do not think that this year's gross margin is representative of what we can achieve in 2026 going forward because of the low volume of our product revenue. From that sense, we believe that going forward, our gross margin should be in the range of maybe the high 30s to low 40s when our product becomes more mature and our product revenue ramps to a level representing the normal level of revenue. In terms of operating expenses, this year our OpEx is higher, as we explained, that there are two areas of which we feel will be one-off type of situations for this year, which will not continue into next year. One is refocusing on cleaning up our balance sheet, looking at, basically, some risk management, looking at the receivable part of it, so in a way that we feel that this part of it is under control. This is cleaned up from that perspective, and we know it will not continue into this year from that perspective. The second portion of it is a special situation: this year we issued warrants to some investors which we account for as a G&A expense, and this portion we do not expect to continue into 2026. So we expect the G&A running expenses to be going back to a normal run-rate level which is very similar to what you experienced in the 2025 run rate, maybe adjusted to some normal inflation rate. Other than that, it all depends on whether our next development programs continue on our product roadmap and our R&D expenses, and that is something that we constantly monitor in terms of the revenue ramp and how much we can afford to spend on the R&D side to continue on our product roadmap. Craig Ellis: That is really helpful, Edmond. And if I could just jump back for one more for John. John, given that we are at an early stage with 5G and you have a couple of customers that have taken product, can you just help us understand as you interact with those customers, what are you hearing from the customers about the product, its strengths, how they plan to use it, etcetera? Thank you so much, guys. John Schlaefer: Yeah. So they are happy. Happy with the product, happy that they have been able to roll out their unique solution. They have also been telling us that our level of support for their unique applications is actually very good. So it is an enabling device for their particular application and as well as it gives them options on their future road map. So it is all positive, and we think that we are going to see additional revenue and volume going forward as their volumes increase. Craig Ellis: Thanks, John. Thanks, Edmond. Operator: Thank you. Our next question comes from the line of Lisa Thompson of Zacks Investment Research. Please go ahead, Lisa. Lisa Thompson: Hi. Thanks for the call. And you have answered a few of the questions I have, but I still have some more. So can we first go back to the satellite communications company that you just signed a license with? Is there some way you can quantify the potential for that business? Have you sized up how much they could possibly take from you? John Schlaefer: Yeah. We think it can be actually quite large. We are talking about in the million-unit-plus type of quantities. And, yeah, so we are very optimistic about it, and it will have a large position going forward. Lisa Thompson: Is that an annual number or a total number? John Schlaefer: That right there is, I would say, the low end of their annual number. Lisa Thompson: Nice. And are you sole supplier, or are you one of some others? John Schlaefer: This particular application, it looks like we are the sole supplier, but I would expect that they would have—you know, that volume that I am talking about would be our volume. I would like to be a sole supplier for as long as I can be, but I have to believe that everybody is doing what they can to de-risk their supply chain. But we are providing some unique customization that makes the product sticky, and we will try to add as much value as we can as we go forward. Lisa Thompson: Very nice. So good stuff about the customers. How many customers did you ship to in Q4, and what does it look like in Q1? John Schlaefer: The quantities in Q4 were three. But as far as the production or the commercialization part of that, that was one main customer. And then we would think that for Q1, that would be in the range of three to five. Lisa Thompson: Okay. So it is starting. Let me just clarify what, Ed, what you said about expenses. Are you saying that Q1 G&A would be around $3 million? Or is it not coming down that fast? Edmond Cheng: Yeah, Lisa. I am looking forward to the OpEx. There are some special charges in Q4, but the normal run rate should be around $8 million to $8.5 million per quarter going forward. Lisa Thompson: Okay. And that includes Q1? Edmond Cheng: Yes. Okay. Lisa Thompson: Alright. Let us see. What else I have here? At some point, we had a conversation, and you said you were supply limited in Q4. What was that about? Is that still a thing? John Schlaefer: Well, in Q4, that was really just where the wafers were and what we could actually produce in the quarter. That is a standard issue we have to deal with when we are ramping anything. In the Q4 time frame, I think it was mainly a result of the fact that testing was not as optimized as it could be and the throughput was lower. So in Q1, testing throughput has increased significantly, and so that automation, which we will be optimizing going forward even more because we want to squeeze as much yield out of our products as we can, is pretty much in place. Lisa Thompson: Okay. Great. Well, that is good. I think that is all my questions for now. Thank you. Operator: Thank you, Lisa. Thank you. To ask a question—there appear to be no further questions in queue. Ladies and gentlemen, thank you for joining us. That concludes our fourth quarter and full year 2025 conference call. A replay will be available for a limited time on our website later today.
Operator: Good afternoon, and welcome to LogicMark, Inc.'s fourth quarter and full year 2025 conference call. The speakers today are Chia-Lin Simmons, Chief Executive Officer, and Mark J. Archer, Chief Financial Officer. During this call, management will make forward-looking statements, including statements regarding LogicMark, Inc.'s future performance, operational results, and anticipated product launches. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For more information about these risks, please refer to the risk factors described in LogicMark, Inc.'s most recently filed Annual Report on Form 10-K, subsequent periodic reports filed with the SEC, and the press release issued in connection with this call. The information discussed on this call is accurate only as of today, 03/25/2026. Except as required by law, LogicMark, Inc. undertakes no obligation to update or revise any forward-looking statements. It is now my pleasure to turn the call over to Chia-Lin Simmons. Please go ahead. Chia-Lin Simmons: Good afternoon, everyone. Thank you for joining us. To review our financial and operational results and discuss the outlook for our company and industry. 2025 was a year of progress for LogicMark, Inc. as we translate the product innovation into measurable financial gains. We delivered continued momentum across our core product lineup, maintained strong gross margin, and ended the year with a healthy balance sheet that supports our growth aspirations. These results reflect disciplined execution and a clear alignment between our technological investments and commercial outcomes. In the fourth quarter, revenue increased 36%, gross profit increased 43%, and gross margin improved by 340 basis points compared with the prior-year period. Most importantly, quarterly revenue has increased year-over-year in six of the last seven quarters. For the full year, revenue increased 15% to $11.4 million, gross profit improved to $7.6 million, and gross margin remained strong at 66.8%. We also ended the year with $9.5 million in cash and investments, and no long-term debt. Our performance in 2025 shows continued momentum across our core product lineup. Fourth quarter growth was driven by strong demand for Freedom Alert Mini and the upgraded Guardian Alert 911 Plus. For the full year, revenue growth was driven primarily by higher sales of the Freedom Alert Mini. We believe this progress shows that product innovation is turning into commercial success. Before turning to our go-to-market strategy, I want to briefly explain what is different about LogicMark, Inc. today. Over the past several years, we have been working to evolve LogicMark, Inc. from a traditional hardware provider into a larger, broader connected care platform. That evolution includes a more diversified product portfolio, stronger software and data capabilities, and a deeper intellectual property foundation. We are encouraged not only by the growth itself, but also by the consistency of demand across channels. We are seeing Freedom Alert Mini increasingly adopted as a first-time solution for families navigating aging-in-place decisions. At the same time, Guardian Alert 911 Plus continues to resonate with customers seeking simplicity and reliability. That pattern reinforces our view that our portfolio is aligned with the market evolution. A less obvious but essential component of the LogicMark, Inc. story is our intellectual property portfolio. Since June 2021, we have implemented a deliberate strategy to protect the technology we are building, and today, our portfolio includes more than 45 issued or pending patents. These expanded innovation foundations are being built over a relatively short period and in a highly strategic manner, reflecting the strength of our R&D team. A significant milestone in 2025 was a patent grant covering the core architecture of our Care Analytics Management Processor, WCAMP. This intelligence layer powers our Caring Platform as a Service, or CPaaS. We have also filed under a Patent Cooperation Treaty, which preserves our ability to seek patent protection in more than 150 countries as we evaluate broader market opportunities. Building on that foundation, our LogicMark, Inc. Digital Twin technology creates AI-powered behavioral mirrors that can help predict falls and other risks before incidents occur. These capabilities underpin our activity metrics features, an important element of our differentiation in proactive senior care, which is also helping us further expand our subscription service revenue. Just as important is what this portfolio represents strategically. We are no longer simply a hardware company with software wrapped around it. We are building a defensible, software-defined platform grounded in proprietary AI-powered monitoring, token-based data privacy, and connected IoT ecosystems. We believe these investments will further position LogicMark, Inc. to compete on the strength of its products and technologies. This platform strategy is now reflected directly in the products we are bringing to market. In 2026, we continue to prioritize sales growth in the B2B channels across government and healthcare sectors. There are also opportunities to expand into the consumer channel. From a sales perspective, LogicMark, Inc. is transitioning from reinventing a new technology roadmap and sustainable business models to building the commercial required to monetize these capabilities. The additions to our business development team strengthen our leadership at an important point in our evolution. They bring deep healthcare and government sales experience, as well as connectivity market expertise, to enhance our ability to scale distribution, expand partnerships, and support our transition to a broader, connected care platform. From a product perspective and standpoint, in government care, our renewed five-year GSA contract enhanced access to federal procurement opportunities and, together with our long-standing work with the VHA, strengthens our ability to service and capture additional revenue. We are also taking steps into senior living facilities by leveraging our newly expanded team's decades of experience in additional areas such as behavioral health and rehabilitative therapy. Products such as our Freedom Alert Max now integrate medicine reminders and proactive activity metrics, supporting our broader strategy to move from reactive alerting to more proactive, data-driven care. These features eliminate the need for separate smartphone applications. Caretakers can schedule detailed dosage information through LogicMark, Inc.'s Freedom Alert Caretaker app. Should a user fail to confirm that they have taken their medication, the system logs this data for analysis to identify potential falls or emergency risk. Together, these proprietary features strongly incentivize the adoption of bundled monitoring and switching services, helping to develop a highly scalable recurring revenue base. We are also excited to share that LogicMark, Inc. continues to drive innovation and develop new solutions in 2026. Our product pipeline includes a wearable watch expected to launch in the third quarter. The watch includes features we believe should be standard for aging loved ones, including fall detection and geofencing, as well as LogicMark, Inc.'s flagship capabilities such as activity tracking and medication reminders. For the wristwatch solution, we plan on introducing a new feature: advanced biometric data. Second, we are in a beta testing phase of our connected home hub with assisted living, senior living, and independent living partners. The system integrates our CPaaS platform, predictive cloud services, caregiving apps, and a proprietary AI-powered fall detection technology that operates without wearing wearable devices at home. This is especially helpful in bathrooms, where slips in the shower can be fatal. The hub connects with other systems and environmental sensors to enhance safety, enabling us to partner with connected home and health tech providers to offer a more comprehensive aging-at-home experience. These team and product investments are intended to deepen customer engagement and broaden our mix of monitored and connected care revenue opportunities over time. We are expanding our monetization beyond one-time device sales to include multiple subscription levels, connected care services, and select licensing opportunities. Turning to the broader market outlook, we continue to see a favorable demand environment, supported by aging in place, growing preference for at-home care, increasing technology adoption among older adults, and wider use of connected monitoring and data-driven insights. A recent Berg Insight industry report estimated that approximately 6.5 million people in North America were using telecare or medical alert solutions at the end of 2025. The report also estimates that the market value of medical alert solutions in North America will grow from approximately $3.7 billion in 2025 to $5.6 billion in 2030. We believe LogicMark, Inc. is well positioned to capture additional share of this growing market through a portfolio that spans no-monthly-fee devices, monitored mobile solutions, and connected care and connected home offerings designed to meet evolving customer needs. Across healthcare, housing, and consumer technology, the shift toward home-based care continues to accelerate. Families increasingly want solutions that help their elder adults remain independent while staying connected to caregivers. Driven by demographic trends and a growing demand of the sandwich generation, families are adapting homes for aging relatives through safety upgrades and living arrangements such as in-law suites or backyard cottages, alongside growing use of connected health tools outside traditional clinical settings. At the same time, rising technological progress is increasing expectations, particularly around the ease of use for older adults and their caregivers. As AI-enabled health platforms, wearables, and smart devices become more common, families are looking for solutions that fit naturally into daily life without adding complex or cognitive burden. This further distinguishes general consumer safety products from trusted, purpose-driven systems like ours that are designed for real-world caregiving needs. In this environment, solutions that emphasize reliability, simplicity, and caregiver peace of mind are becoming increasingly important. We believe that allows LogicMark, Inc. to play a meaningful role in the evolving home care ecosystem. As you will hear from Mark, we have continued to invest thoughtfully in sales, product development, and supply chain resilience, balancing near-term revenue opportunities with actions that strengthen the platform for long-term growth. With an expanded sales and business development team, and multiple monetization pathways, including potential IP licensing, we believe LogicMark, Inc. is equipped to drive revenue growth, improve profitability, and play a meaningful role in a growing care economy. I will now turn the call over to Mark J. Archer. Mark J. Archer: Thanks, Chia-Lin. I will start with our fourth quarter results, then cover full-year performance. Starting with the fourth quarter, revenue was $3.1 million, up 36% from $2.2 million in the prior-year period. Gross profit increased 43% to $2.1 million, and gross margin improved to 69.8% from 66.3%. The improvement reflected higher volume, higher margins on our upgraded Guardian Alert 911 Plus, and a favorable product mix. Total operating expenses were $3.8 million compared to $3.7 million in 2024. The increase primarily reflected higher selling and marketing expenses to support growth, partially offset by lower general and administrative costs. Net loss for the quarter improved to $1.6 million from $3.7 million a year ago. Diluted loss per share was $1.96 compared with over $1,000 per share in the prior-year period, and the per-share figures reflect the October 2025 reverse stock split and related retroactive adjustments in share counts. Now switching to the full year, revenue increased 15% to $11.4 million from $9.9 million in the prior year. Gross profit improved 15% to $7.6 million, and gross margin remained essentially flat at 66.8%. The increase in annual revenue was primarily related to sales of Freedom Alert Minis. Full-year operating expenses were $15.5 million, up from $14.3 million in 2024. The year-over-year increase was primarily driven by higher selling and marketing expenses, including increased compensation costs for the sales team and one-time recruitment costs for new sales leaders. In addition, we incurred increased research and development consulting costs tied to the relocation of certain contract manufacturing from China to Taiwan, which will help us minimize our risk of punitive tariffs going forward. We also incurred higher legal fees to protect our IP portfolio. Lower advertising expense partially offset these changes. One additional point worth highlighting is expense discipline. Operating expenses increased by approximately $100,000, or 3%, in the fourth quarter and 9% for the full year. This reflects continued investment in growth while maintaining control over the broader operating cost base. Net loss for the full year improved to $7.5 million from $9.0 million in 2024. Net loss attributable to common and preferred stockholders was $7.8 million, or $13.06 per basic and diluted share, compared with $9.3 million, or, again, over $1,000 per basic and diluted share in the prior year. As with the quarterly per-share figures, the yearly comparisons reflect the reverse stock split that we completed in October. Now quickly turning to the balance sheet and liquidity, we ended the year with $9.5 million in cash and investments, $9.7 million in net working capital, and no long-term debt. During 2025, cash used in operating activities was $5.1 million, and we invested approximately $1.4 million in product and software development. Financing activities provided $12.1 million of net cash during the year, including $14.4 million of gross proceeds from our February 2025 registered secondary offering. We remain focused on disciplined execution, efficient investment in people and technology, and continued progress toward improved operating performance. We expect ongoing expansion of subscription monitoring and digital care features integrated into the company's AI-enabled care and analytics platform, further strengthening the recurring revenue base. Finally, with 2026 almost concluded, we expect revenue to be up in the 10% to 15% range compared with 2025. We will now open for questions. Operator: Thank you. If you would like to ask a question, please press 11 on your telephone. You will then hear an automated message advising your hand is raised. If you would like to remove yourself, press 11 again. We also ask that you wait for your company name to be announced before proceeding with your question. One moment while we compile the Q&A roster. First question that I have coming for today is Marla Marin of Saks. Your line is open. Marla Marin: Thank you. So you have had some very strong results this quarter and for the past few quarters, really nice revenue increases. As you continue to expand the portfolio and into your target market in terms of new demographics, how are you getting the word out that this is not the same company that it was just a couple of years ago? Mark J. Archer: You want to take that, Chia-Lin? Chia-Lin Simmons: Yes. Hi. Thank you, Marla, for the question. Yes, we understand what you are asking, which is, you know, we have done quite a lot in terms of, you know, shoring up revenue and, you know, in the process of launching some amazing new products. And so we have actually also invested in, you know, a lot more PR and more visibility for the company as well. I mean, we, you know, are more of a B2B company with that focus, and so from that respect, we have spent more time, for example, in the past year and will continue to do so in 2026, attending the numerous sort of trade shows that, you know, are basically applicable to the B2G world as well as the B2B world. And so we have had, in the one that we have done thus far in 2026, some tremendous sort of feedback on the products that are in the pipeline as well as the products we already have in our portfolio. So we are very excited to get some of those direct buyer feedback, and as mentioned, you know, we are also in part getting some of this word out, doing early beta testing with senior living and independent living facilities for our new connected home hub product as well. Marla Marin: Okay. Thank you. And Chia-Lin, I think you mentioned, you know, the concept of aging in place, and I have been reading a bit about it, and it seems to me that that sort of creates a little bit of a positive tailwind for what you are also trying to accomplish. Can you give us a little bit more color on exactly what you see there in terms of people increasingly wanting to age in place? Chia-Lin Simmons: Yes. So the stats do not lie. I mean, they are incredibly, I think, positive for the sort of direction where we are heading in the company today. If you look at a survey of, you know, people 50 and over, 90% of them want to age at home. And so that puts more of a larger tailwind behind us in terms of the kind of solutions we are providing, especially as we are launching and looking at beta testing a new product that is a connected home solution. You know, the reality is that, you know, of course, we are very focused on mobile on the go, and you can, you know, see that in terms of our investments into the wrist wearable products, right? But, you know, providing a potential beta and, assuming all sort of goes well with our beta and as we are sort of getting feedback from, you know, potential clients such as, you know, assisted living and independent living facilities, that gives us that capability to sort of get a better feel for what else and the other features we need to build out for this connected hub product. Many, many, many falls in the home happen when people are not wearing their wearable device because they are in the shower. As much as our products are IP67 and, you know, waterproof for that solution, most people do not want to wear a wristwatch or a lanyard product into the shower. That just does not happen, but yet so many falls occur in the bathroom and shower where privacy should be guaranteed, and a solution that does not involve wearing a sort of wearable should be in place. And so we are very bullish on, you know, what we are seeing in terms of the beta trials as it is going on. And so what that brings into the forefront is that very few people today in the world that are living in the medical alert business are trying to connect not just a sort of, you know, home-based, you know, fall detection—like whether that is, you know, radar, LiDAR, millimeter wave, whatever they are using to sort of look at tracking movement or some type of connected home solution—but that connection and solution also is tied to a wearable device because you are not going to, you should not have to, deal with two separate solutions just because you are aging at home. You should be able to have a solution when you are in a shower that connects to the same solution that you are going to, you know, get up and, while your device is charging—wearable device is charging—you are using the bathroom at night, will still be protected. And as you strap on that wristwatch and go out to the world and go shopping at Safeway, and you are walking there and you fall, all of those things should be connected to one ecosystem and one experience, right? Your caretaker should not have to use two or three different types of ecosystems and apps and services to basically help keep you safe. And that is where we think that, directionally, things should be going. Not everybody is sort of focused on one small slice of the solution, and what we are really trying to do is build an ecosystem where everybody could, like, participate so that people aging in place, of which there are a ton of, you know, are able to do so in a smooth, easy, simplified way versus trying to sort of hack together two or three different systems, which I think is much more difficult to do. Marla Marin: That makes sense. And does that mean that, in terms of your goal to, over the long term, potentially license out some of the technology that you are developing and that you are also protecting via patents, the licensing component of the strategy will become increasingly more important over time to provide a whole, you know, holistic solution like that? Chia-Lin Simmons: Yes. Absolutely. I mean, we have been extremely thoughtful since I joined the company in June 2021 to build a really strategic interlocking IP portfolio so that we can really build something that would keep out our competitors but also build the ecosystem that can be inclusive. So if you think about sort of a connected home environment today, even the connected home we live in today, your ecobee does not really want to oftentimes talk to, you know, the connected lock thing, which does not want to talk to something else. And then there is the Apple solution, and there is X solution and Y solution. So our interest is to try to build something that, for lack of a better word, is a senior-proofing of your home. Just like when people have a baby, they have nine months to plan for baby-proofing their home, making sure everything is safe. How do we provide a sort of plug-and-play experience that allows people to sort of set up immediately to have that comfort, right? And that means the inclusion of partners working in areas that we do not really have strength in. I mean, I am never going to build a blood pressure monitor product. That is difficult, and, you know, but that data today is often unconnected, and it sits in a pod of data. And so, in order to decipher whether or not, you know, there are patterns of change in your blood pressure, it has to go into a whole another sort of app and service and then maybe through another service where you maybe have to do some sort of analysis as a human to sort of look at that, and maybe you will not be able to compute the data out of, like, six months’ worth of data that is fluctuating day to day, right? I think human brains have really great capacities, but looking for minute day-to-day changes on a longitudinal sort of perspective is very difficult. But you can imagine us partnering with, potentially, a blood pressure monitor company to help sort of, you know, feed that data to the caretakers because the caretakers have an app that is basically tracking the daily monitoring of falls. So it is an easy opportunity for us to sort of share that data as well, you know, so that they have reassurance. But you could also imagine then, because we have geofencing for people with Alzheimer’s and early memory care issues, that perhaps we want to connect our connected home hub to a connected lock company. Because before you start roaming out of that, like, half-mile radius from your home, perhaps the early pattern is that you open your door at 3 AM at night, and then you step out into your yard. You do not know why you are there. You go back in again. And so that actually becomes an erratic pattern that then starts happening more and more frequently before you even run outside of that geofencing that we set up with you. So imagine that we are able to try to get ahead of that and see some of the potential behavioral changes and patterns, partner with folks such as in all of these different categories where we do not have strength. We have no experience in connected door lock, or back. Partnership and IP licensing and all of those can actually help bring, again, a turnkey solution for somebody who is looking to age at home and give their caregivers that reassurance that all of these things interplay well together. Marla Marin: Okay. That sounds like an incredibly interesting roadmap. So now I am switching gears a little bit. Mark, you know, you mentioned a disciplined approach to operating expenses. Should we think that, going forward, you will continue to focus on containing costs wherever you can, and then balancing, obviously, some of the investments that you want to make in order to grow the company? Mark J. Archer: Yes, you should very definitely plan on that. And, you know, the big pivot for us was 12 to 18 months ago where we switched from investing so much in new product development to investing in sales and marketing, commercializing the products that we developed. And I think we are in a pretty good situation with the team now. We did add some additional people in 2025, so the goal is to keep that growth as near to single digits as possible going forward. And there is a real effort in the company to be aware of where we are doing that. We are also looking at AI as an opportunity to take costs out of the business, and we have already implemented a couple of programs on that end. Marla Marin: Okay. Great. That is good to know. And then two last questions, mostly housekeeping. One, you had a very strong fourth quarter, and I am wondering, you know, do you anticipate that there will be some seasonality over time, even as you continue to sort of, you know, expand your target addressable market and your product portfolio? Are you thinking there will be some seasonality? Mark J. Archer: So I think as to the core VA business, there is some seasonal aspect to it. Not a lot. There is some seasonal aspect. As we have started focusing on B2B sales, I think, you know, there will be a ramp-up of that, and I think that will affect the quarterly results, not so much from a seasonal standpoint but from a ramp standpoint. And we also have started an initiative to license our intellectual property, and so that will also impact quarterly results, but, you know, not on the smooth, more on an opportunistic basis. Marla Marin: Okay. Thanks so much for taking my questions. Mark J. Archer: Thank you. Operator: At this time, this does conclude the Q&A session. I would like to turn the call back over to Chia-Lin for closing remarks. Please go ahead. Chia-Lin Simmons: Thank you. Let me close by highlighting a few key points from today's discussion. LogicMark, Inc. entered 2025 with a clear plan and executed against it. That combination of revenue growth, margin strength, and liquidity provides us with momentum in 2026. The work we have done to expand the platform, broaden distribution, and strengthen our intellectual property is not just about this quarter or this year. It is about making sure that, as this market grows, we have the right foundation, product roadmap, and channel strategy. There is more work to be done, and the building blocks are in place. Improving operational leverage, scaling monitored and connected care revenue, and continuing to convert research and development investments into commercial outcomes are priorities for this team in 2026. We are grateful for the support of our shareholders, partners, and team. We look forward to updating you on our progress throughout the year. Thank you. Operator: This does conclude today's program. Thank you so much for joining. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to Journey Medical's Full Year 2025 Financial Results and Corporate Update Conference Call. [Operator Instructions] Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A webcast replay of this call will be available approximately 1 hour after the end of the call for approximately 30 days. I would now like to turn the conference call over to Jaclyn Jaffe, the company's Senior Director of Corporate Operations. Please go ahead, Jaclyn. Jaclyn Jaffe: Good afternoon, and thank you for participating in today's conference call. Joining me from Journey Medical's leadership team are: Claude Maraoui, Co-Founder, President and Chief Executive Officer; Joseph Benesch Chief Financial Officer; and Ramsey Alloush, Chief Operating Officer and General Counsel. During this call, management will be making forward-looking statements, including statements that address among other things, Journey Medical's expectations for future performance, operational results, financial condition and the receipt of regulatory approvals. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Journey Medical's most recently filed periodic reports on Form 10-K and Form 10-Q, the Form 8-K filed with the SEC today and the company's press release that accompanies this call, particularly the cautionary statements in it. Today's conference call includes non-GAAP financial measures that Journey Medical believes can be useful in evaluating its performance. You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. For a reconciliation of this non-GAAP financial measure to net loss, its most directly comparable GAAP financial measure, please see the reconciliation table located in the company's earnings press release. The content of this call contains time-sensitive information that is accurate only as of today, Wednesday, March 25, 2026. Except as required by law, Journey Medical disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to Claude Maraoui, Co-Founder, President and Chief Executive Officer of Journey Medical. Claude Maraoui: Thank you, Jaclyn, and good afternoon to everyone on the call today. 2025 was a milestone year for Journey Medical as we successfully launched Emrosi, our internally developed best-in-class oral treatment for the inflammatory lesions of rosacea. Emrosi was made available to pharmacies in late March of last year, and our promotional activities began in early April. I am pleased to report that during the 3 quarters of 2025 in which Emrosi was commercially available, the product achieved $14.7 million in net sales. With regard to our full year 2025 performance, we delivered total net product revenue growth of 11%, and we improved our gross margin by nearly 3.5 percentage points compared to the 2024 period. Importantly, our business was able to make solid financial progress despite pressure on our Accutane franchise and other legacy products due to generic competition. With regards to our focus on improving profitability of the business, I am pleased to report that we generated positive adjusted EBITDA as well as positive EBITDA in the fourth quarter of 2025. Given our expectation for continued sales growth and additional leverage from our established commercial sales organization, we expect to remain adjusted EBITDA positive in 2026 and the foreseeable future. With our solid cash position of approximately $24 million, I believe that Journey is well positioned to execute on our business plan and grow sales and profitability with the resources that we have in place. One of the key highlights for 2025 is the strong prescription volume that we generated with Emrosi. Total Emrosi prescriptions were approximately 53,000 since promotion began in April of last year, which we believe is a very strong start. In the fourth quarter alone, total prescription volume for Emrosi grew nearly 50% sequentially compared to the third quarter last year, and growth is continuing in Q1 of this year. Our sales organization continues to promote the superior efficacy of Emrosi compared to the only other branded oral rosacea treatment, Oracea, in addition to Emrosi's placebo-like safety and tolerability profile. Notably, the extremely positive head-to-head results against Oracea and placebo in Emrosi's Phase III clinical trials are playing out in the real world. Physician feedback continues to be very positive, and the rising refill rate for Emrosi continues to demonstrate that patients are pleased with the results. Emrosi's superior efficacy and rapid onset of action compared to Oracea with effects seen in as little as 2 weeks are key benefits that we believe are supporting the demand and patient refill behavior. Along with the high satisfaction rate that we are seeing with our current customers, we continue to expand adoption of Emrosi in more dermatology practices. We ended 2025 with approximately 3,200 unique prescribers of Emrosi, reaching our initial goal of prescribers in the top deciles that routinely write for Oracea and similar products. While we were able to meet our initial prescriber target quite rapidly, we continue to increase this number. And today, we are disclosing that over 3,500 unique dermatology prescribers have now written at least 1 script for Emrosi. I'll now provide some additional color on our managed care and market access progress for Emrosi as this is an important component of the value inflection that we expect in 2026. Prescription demand continues to track ahead of reported revenue. That dynamic is primarily driven by the timing of downstream health plan coverage decisions and formulary implementation cycles, which are progressing as expected for a newly launched branded dermatology product. At present, approximately 100 million commercial covered lives have access to Emrosi. This includes contracts in place with 2 of the top 3 group purchasing organizations in the United States. These agreements provide the framework for broader downstream payer adoption as individual health plans complete their internal review and P&T processes. As we mentioned on our third quarter earnings call, we anticipate contracting with the third major GPO by late Q1 or early Q2 of this year, and we remain on track to meet this objective. Importantly, we are not solely focused on breadth of coverage, but also the quality of coverage, including tier positioning, step edit requirements and prior authorization criteria to ensure that the value of Emrosi's differentiated clinical profile is appropriately recognized. As coverage expands and formulary policies mature throughout 2026, we expect to see improved reimbursement rates, reduced reliance on our co-pay bridging program and an increase in Emrosi sales and overall operating margin expansion. Our sales professionals continue to focus on building new prescription demand for Emrosi as we believe it is important to broadly develop positive physician and patient experiences with the brand. In addition, critical mass and prescription volume also factors into the evaluation of reimbursement and pricing policies with the downstream health plans. Along with the strong prescription demand, our market access discussions are supported by several important clinical and publication milestones. These are Emrosi's head-to-head superiority data versus Oracea, the publication of Emrosi's Phase III efficacy and safety results in JAMA Dermatology and the updated treatment algorithms from the National Rosacea Society. These third-party validations are meaningful in payer evaluations, particularly as plans assess clinical differentiation and long-term health economic impact. We believe that Emrosi's rapid onset of action, placebo-like tolerability and superior facial clearing and lesion reduction profile position it well for continued formulary inclusions. As these initiatives materialize, we expect a meaningful inflection in revenue conversion relative to prescription demand. While we have commented on our expectations for positive EBITDA this year, we plan to offer more detailed financial guidance later in the year once we have better clarity on the downstream health plan adoption of Emrosi. I mentioned earlier that Emrosi's positive Phase III clinical trial results were published in JAMA Dermatology and that the National Rosacea Society updated their treatment algorithms, highlighting Emrosi's position as an effective therapy for rosacea treatment. Both of these publications were issued in the first half of 2025 and support Emrosi's superior clinical efficacy in treating rosacea, its favorable safety profile and the product's convenient once-daily oral dosing. This year, we expect to announce up to 3 new journal publications on Emrosi. We also believe that Emrosi has potential to be incorporated into the consensus treatment guidelines for rosacea, which should support further market and health plan adoption. In addition, we remain active at key dermatology medical conferences across the United States to build awareness and momentum behind the Emrosi brand. Last year, we presented clinical data at 2 medical conferences, the Society of Dermatology Physicians Associates Summer Conference in June and the 2025 Fall Clinical Dermatology Conference in October. We plan to attend an exhibit at this year's American Academy of Dermatology meeting at the end of this month, where we kicked off Emrosi's launch last year. Given the market penetration that we have achieved so far with rosacea prescribers, we believe that this large-scale conference will help us further increase brand awareness and prescriber adoption of Emrosi. Additionally, we expect to exhibit and potentially present a clinical data later this year at other dermatology conferences. With regard to our broader product offering, we plan to launch 1 or 2 additional incremental dermatology products later this year. We believe that the launch of these products can also benefit from our dermatology conference presence in addition to direct promotion by our sales organization. And with that, I'll turn the call over to our CFO, Joe Benesch, to review our 2025 financial results. Joseph Benesch: Thank you, Claude, and good afternoon to everyone. I will now walk you through our financial results for the full year 2025. Total revenues for the year were $61.9 million, representing a 10% increase compared to $56.1 million for 2024. The increase reflects incremental net product revenue related to the successful U.S. commercial launch of Emrosi. Turning to margins. Gross margin for 2025 was 66.2% compared to 62.8% in 2024. The improvement reflects a favorable product mix with higher margin contributions from Emrosi and QBREXZA, along with lower overall inventory period costs. SG&A expenses totaled $44.4 million for 2025, up approximately 10% from $40.2 million for 2024. This increase reflects additional operating activities to support the launch and continued expansion of Emrosi. We reported a GAAP net loss of $11.4 million or $0.47 per share basic and diluted for 2025 compared to a GAAP net loss of $14.7 million or $0.72 per share in 2024. On a non-GAAP basis, both EBITDA and adjusted EBITDA improved year-over-year. EBITDA improved by $5.2 million, narrowing from a loss of $9.2 million in 2024 to a loss of $4 million in 2025. Adjusted EBITDA was a positive $2.9 million for the full year 2025 compared to $800,000 in 2024, reflecting further progress towards our goal of sustainable profitability. We ended the year with $24.1 million in cash compared to $20.3 million at December 31, 2024. Working capital at year-end was $29.4 million, up from $13 million a year ago, an increase of $16.4 million. In summary, we delivered a year of strong execution. We achieved year-over-year revenue growth driven primarily by the launch and uptake of Emrosi, improved gross margins versus the prior year, reflecting a more favorable product mix and operating leverage, resulting in narrow net losses and positive adjusted EBITDA. Importantly, we closed 2025 with a healthy cash position that we believe supports our ongoing operations and commercial growth into the foreseeable future. Looking ahead, we remain focused on disciplined expense management and margin expansion as we continue to scale Emrosi's commercial footprint and strengthen our product portfolio. With this focus, we believe we are well positioned to deliver improved and sustainable profitability over the upcoming quarters. Thank you very much. I will now turn the call back over to Claude. Claude Maraoui: Thank you, Joe. To summarize, 2025 was a transformational year for Journey Medical as Emrosi had a strong market debut and became our flagship commercial product. We generated approximately 53,000 total prescriptions for Emrosi in 2025 after launching the product in April, and scripts continue to show strong sequential growth as we head toward the product's first year on the market. Notably, the run rate for Emrosi total prescriptions exiting 2025 calculates to over 126,000 annually. We are continuing to expand the base of unique prescribers for Emrosi after meeting our initial goal of 3,200 dermatology writers in 2025. With approximately 15,000 dermatologists in the U.S., 17 million Americans suffering from rosacea and over 6 million rosacea prescriptions written in 2025, we believe there is significant room for Emrosi to grow and become a leading dermatology brand. Importantly, the growing base of Emrosi prescribers enables more and more patients to experience Emrosi's best-in-class efficacy and rapid onset of action relative to Oracea, the only other branded oral rosacea treatment. In the third quarter, we saw approximately 1 refill for every new prescription written for Emrosi. And at the end of 2025, the ratio was at 1.4 refills to each new prescription. Given the chronic nature of rosacea, characterized by frequent episodes of relapse, the long-term value of each rosacea patient can be significant to our business. We believe the prescription trends so far demonstrate that we are making good progress and that initial patient experiences are converting into long-term brand loyalty. As a result, we expect the ratio of refills to new Emrosi prescriptions to continue to grow. While our base business came under some pressure last year due to competitive challenges, we continue to grow our sales, expand our gross margin, and we achieved our objective of becoming EBITDA positive exiting 2025. In 2026, we expect to continue improving upon the financial performance as adoption of Emrosi grows, downstream health plan coverage increases and Emrosi sales accelerate and track more closely with prescription growth trends. While we focus on building the Emrosi franchise, we also plan to launch up to 2 niche dermatology products this year to augment our base business and our revenue growth. We believe that this year, we will demonstrate the leverage that we have in our business, given our established dermatology commercial infrastructure and Emrosi's significant growth potential. And with our solid balance sheet, we believe that we are in a strong position to deliver on our business plan and execute on our core objectives, which are as follows: to improve the lives of patients, offer dermatology health care providers innovative treatment options and create long-term value for our shareholders. Thank you. Operator, we are now ready to open the lines for Q&A. Operator: Thank you. [Operator Instructions] First question comes from Scott Henry with Alliance Global Partners. Scott Henry: A lot of progress and certainly profitability is a huge accomplishment. So congratulations for that. I did just want to dig in a little bit on the Emrosi prescriptions. I guess, first, just the trends. Q1 has been kind of flattish, but it did kind of tick up in December. So I don't know if some people bought ahead of time and the trends just taking time to flow out. Obviously, the co-pays reset. I just want to get your thoughts on Q1 prescriptions. And more importantly, do you think you've kind of finally got back up to a steady state where we should expect growth on a weekly basis? Claude Maraoui: Scott, thanks for the question. Yes, I think as we leave Q4 and enter Q1, as you mentioned, there certainly is the new insurance deductible resets. So that typically will slow patient visits to their doctor. I think you add that as well to the severe storms up and down the East Coast. They were pretty brutal and severe. I think that's a factor as well. And then overall, even in February, you've got shorter months. And so all of these compounded, it's hard to really compare Q4, which typically would be one of the strongest quarters, to Q1 as a reset. I can tell you, like you also just mentioned, March has come back in very strong. And we still anticipate and expect that our Q1 total prescriptions will surpass our Q4 number. So we haven't lost any steam at all, and we continue to expect substantial growth with Emrosi moving forward. Scott Henry: And do you feel that sequentially, your momentum is building, so Q2 should be well stronger than Q1? Is that your kind of internal feel at this point in time? Claude Maraoui: Yes. You're going to see a nice build and momentum with this. Again, if you think about it, 53,000 scripts in just 9 months. When we look at Q4 with the 27,000 annualized, you're looking at 126,000 scripts for the year, and we certainly expect to be well past that overall. So we've got momentum on our side. This is a phenomenal message. The efficacy is established. We have superiority against Oracea. We're focused on Oracea. And the fact that it has -- Emrosi has rapid onset, not only as early as 2 weeks, Scott, but we work in half the time that Oracea does. So in 8 weeks, we are equivalent to Oracea in 16 weeks of therapy. So that really catches the attention of HCPs and dermatologists. And the fact that we have this great proprietary formulation, the lowest strength minocycline on the market, 25% immediate release, 75% extended release, so we call it modified release, and it's really working well. It's offering safety like placebo side effects. So I think all of that together is really good. I will add one more thing. We are planning to increase our sales force in single digits here, and that should be ramped up no later than the first part of Q3. So we'll also have extra people on the ground across the states. Scott Henry: Okay. And just one more question, which is a little bit in the weeds. The challenge in predicting revenue for any quarter is heavily dependent on how much revenue comes in per script, which can be a function of inventory and many other things. And I think Q2, it was about [ 380 ], which was a big inventory build. So we have a lot higher number. Q3 was, using my numbers, was about [ 270 ], which is, I think, where we thought it would kind of stay because that's around where you would expect with a gross to net adjustment. But Q4, it came in at closer to [ 180 ]. So a lot lower revenue per script. So kind of 3 questions go into that. One, why do you think it is? Is that the co-pay? Is there something unique that happened? Two, where do you think it goes to in terms of -- is [ 270 ] still an achievable target? And three, when do we think we get to that steady state? Revenue per script, hard to predict in the short term, but easier to predict in the long term. Just so any color you could give there would be appreciated. Claude Maraoui: Sure. Yes, absolutely. So using your methodology in terms of calculating what the script level was for Q4, I believe you mentioned [ 180 ]. That is not a good indicator in terms of our long-term net pricing. And certainly, I would not use that number there. As we look at the progress we've made throughout the year, and the first quarter was Q2 for us commercially when we launched. We had about 7,000-plus prescriptions. We moved that up in Q3 up to 18,000 prescriptions. And then we hit 27,000 prescriptions in Q4 to close out the year. So the commercial team and the marketing team have done an excellent job going out there and getting adoption and so forth with acceptance with our physician base. And it's really provided very good patient experiences that dermatologists are seeing. So we've really accelerated the ramp on the prescriptions. And what you're really seeing is simply a function of reimbursement. So the mix of reimbursed prescriptions and those that come under our co-pay bridging program were more in -- portion of the scripts were not being reimbursed and therefore, hit our co-pay assistance program. So that's really what you see there. In 2026, we've said that we've signed up 2 of the 3 top GPOs. We expect the third GPO here to come on board imminently. So that's a good positive for us. And again, reimbursement will change that mix in that gross to net. Also, I would tell you that with the launch in April and our 1-year anniversary coming up, a lot of the plans have the new-to-market block or the new-to-market moratorium. And that will be lifted and allow us to have, again, more impact as we move through 2026. So we believe coverage is going to come on this year, and it's going to be a breakthrough year for Emrosi for sales as well as profitability. So that gross to net has a lot of upward pressure on it. Operator: The next question comes from Mayank Mamtani with B. Riley Securities. Mayank Mamtani: On the last point, Claude, on the gross to net with 2 of 3 GPOs coming on board and the third imminently also coming on board, can you maybe just give us a little bit more color like you did on your full year expectation? Again, I understand you may not give us revenue guidance, but like you gave us the script volume expectation for this year relative to what you analyzed in the fourth quarter. What is sort of your base case gross to net for this year now that you're sort of going to get past the 1-year mark. It would be helpful if you can maybe bracket something quantitatively. Claude Maraoui: Sure. So I guess 2 parts to your question. In terms of managed care and health care plans, I'm going to have Ramsey Alloush, our Chief Operating Officer, jump in and give you some background on that. Ramsey Alloush: Yes. Sure, Mayank. And just to briefly answer your question, we expect -- I'm not going to speak really quantitatively, but we do expect improvement throughout 2026, gradual quarter-over-quarter. And as we hit certain milestones with national formularies and getting adoption for Emrosi to become a covered drug on formulary, we expect, again, incremental gain in terms of gross to net. The first year of any launch, as Claude mentioned, you're typically going to have new-to-market block and these moratoriums where payers and plans are really going to want to see the drug play out. They're going to want to see how it's looking in the real world, what demand looks like, and they want to assess it financially as well. So our first 12 months was really focused on what we like to call Phase I, which is the GPO contracting, and we contracted with the 2 largest in 2025 with the third year to come on board. And that really grants us, if you will, access, which is really the framework, the universe of commercial lives, which once we sign this third GPO, we'll have access to over 150 commercial lives. Now access and coverage are 2 different things, right? Access is the framework. Coverage, we define a little bit more narrowly. Coverage is where you have these national plans that can now adopt under the GPO contracts and actually do. And what we like to consider a frictionless type of a transaction where you're likely to get a patient to adjudicate all the way through to a prescription is what we call quality coverage, and that's a single-step therapy or through any oral and potentially or any topical or not a double step, but a single step through either one of those. And so now that we've reached sort of that 1-year anniversary mark, we've already sort of preempted in terms of these national formularies that we're having discussions with. We have continued negotiations, continued clinical. I think from the clinical side, it's a no-brainer. And so where they're assessing it is what is the budget going to be, what's the budget impact, what does financial modeling look like, adding Emrosi. Of course, it behooves the GPO to have Emrosi on formulary for their plan participants because these are rebate dollars for them. So that helps them and that helps the system. So that's the way they look at it. And so we do expect incremental growth here on the gross to net, and that's really a function, as Claude mentioned, of reimbursement, which ultimately will put less and less pressure on the co-pay. But during the launch, of course, you're going to have demand lag -- revenue lag your demand. We're focused on wide stream adoption. The commercial team has done an excellent job with doctors, with new patients, refills and so on and so forth. Our job is on the back end, really, as you mentioned, that gross to net and optimizing that. Unfortunately, in the ecosystem, we don't really control timing. So from a timing perspective, Phase I is nearly complete here with the third to come on board. And really, the hard work will continue getting formulary coverage for Emrosi, and that's where you'll start to see improvement in gross to net in '26 and throughout '27 and beyond. Mayank Mamtani: Super helpful color. Go ahead. Claude Maraoui: Mayank, if I can follow up a little bit, too. You're asking for some -- to quantify a little bit. Look, the run rate annualized out of Q4 is 126,000 prescriptions running into 2026. We certainly expect to be well above that. But I think it's important to really look at NRxs and TRxs. And the current ratio in Q4 was for every 1 new prescription, we were getting 1.4 refills. So together, you're at 2.4 per patient and our 16-week clinical trials. So there was 4 months of therapy there. We believe and anticipate that the refill rates will continue to grow with this product. And I'd like you to remember that this is a chronic condition. As fantastic as Emrosi is, it's still not a cure. So patients will get symptomatic relief, they'll get their clearing, but then they will relapse and come back and have a flare-up. So the value of each of these new patients that come on in 2025, we're going to get a number of those coming back to us in 2026. It's hard to give you and quantify a number of that, but keep that in mind. And additionally, we are going out there as the field force is on a consistent day-to-day basis, asking for new prescriptions for these patients that are coming in that are actually new. So it becomes a snowball effect here over time. So time is on our side. Obviously, the long-term view, we've got great IP going out to 2039. But in the short term here in 2026, we can already take advantage of that. So those numbers are going to be real important. And right now, we're doing about 4,000 new prescriptions per month on a basis, and we expect that number to rise throughout the year. Mayank Mamtani: Yes. We're definitely closely following that. And then you mentioned some presentation publications for Emrosi. Any ones we should be particularly paying attention to from a health economic standpoint or things like durability, even return patients you're seeing in real world that you just alluded to? And finally, these 2 niche derm product launches that you talked about, maybe just put the picture together on how you're thinking of marketing, overall spend beyond the sales rep incremental spend that you talked about, just so we understand how first half versus second half looks like from a bottom line standpoint? Claude Maraoui: Sure. Yes. So regarding the 2 products that we can potentially launch here, we're definitely seeing one play out. We see that happening in the second half of 2026 here and possibly 2. So that's how that outlook is doing. We're calling that part of the base business and -- in the base business in 2025, and that's all business outside of Emrosi. We did about $46 million in revenues. We expect that base business to continue to be stable. We feel like the regression that we saw in Accutane has done its part. That was about $6.5 million or so that we went down in revenues. So all prescriptions are looking strong from Q3 to Q4. It's been stable. And we have good trends right now with Accutane in Q1 of 2026. So the added product and the launch, we do have expenses already built into our budget. This would be in a P3 position and where we would have pulse promotion with this, utilizing our full and entire sales force. We're not taking our eye off of Emrosi. That will be obviously first out of the bag for us and dominating compensation programs for our representatives. The second product will continue to be QBREXZA, followed by the launch product as we introduce it into the marketplace. Not really giving too much details on that just due to competitive reasons. So we'll give you more information as we get closer on that, Mayank. Mayank Mamtani: The publication presentation for Emrosi? Claude Maraoui: So yes, we're expecting 2 to 3 publications, and we're just -- those we have to keep in terms of what those aspects are. They're obviously all about Emrosi, but we'll let you know, and we should expect to see at least one of them hit here in the very near future. So we'll give you information as we can. Operator: The next question comes from Brandon Folkes with H.C. Wainwright. Brandon Folkes: Congrats on the progress. Maybe the first one from me. Can you just help us understand the inventory movement in Emrosi and the broader portfolio in 4Q? I know you talked about the overall working capital balance at year-end. So I'd just be interested in terms of inventory in the channel at year-end across the portfolio. And then I'll ask the same one now, and it sort of tacks on to what's been asked already. How do gross to net now at this stage of the launch compared to your expectations prior to launch and when we had talked about and framed peak sales in the past. Any way to characterize sort of where you are on the gross to net now versus how you thought about gross to nets and how that would track before launch? Claude Maraoui: Okay. Sure. So we'll take the first part regarding the inventory. Very much on track with units sold and prescriptions on demand. So -- and that's pretty much across the entire line. So that is well within standards. Then on the second part, you mentioned gross to net and where it's come to our expectations. I think we're on track, certainly. So far today's numbers, [ 280 ] as the average for 2025. That certainly is within line and expectation. So that's certainly meeting our internal expectations. And again, that's what was just mentioned here on the call by another analyst. So that's number one because we don't typically give out our gross to net numbers. In terms of where we expect our gross to net, right now, I would tell you that the expectation moving forward is an increase due to the reimbursement progress that we're going to make with the downstream health care plans. So the expectation is upward pressure as we move forward into 2026. Joe, if there's anything else you'd like to add on that? Joseph Benesch: No, I think just to expand on what you said, our real goal is to maximize the gross to net and optimize the gross to net, optimize the margins and optimize the over product contributions from all products into the EBITDA and adjusted EBITDA numbers. So just to expand on what you said. Claude Maraoui: Yes. And finally, I think you asked about the peak sales regarding Emrosi. Look, we're very bullish. We see this product as becoming one of the leading branded dermatology products out there in medical therapeutics. This is a ripe target market, 17 million people suffer from this, well over 6 million prescriptions are being written for this target market on an annual basis, and we're just really getting going here and our adopter base in terms of where we ended the year hitting our target of 32 unique prescribers. We've broken our targets into deciles. We've made some really strong penetration in those, especially the decile 6 through 10. So we feel pretty good about how we're moving along here. And being added to the potential guidelines of the National Rosacea Society in the upcoming months, I think, is just more validation for the brand and acceptance. So I think it's looking really positive as we continue to move forward. Brandon Folkes: And one just clarification, if I may. You mentioned upward pressure. Are you talking about net revenue per script going up or gross to net going up? Claude Maraoui: Yes, meaning that as reimbursement goes up, less subsidies from our co-pay assistance program will be utilized. So the profitability of an Emrosi script would be going up. Gross to net would be going up in a positive manner. Operator: The next question comes from Thomas Flaten with Lake Street Capital Markets. Thomas Flaten: Joe, there was a pretty substantial increase in accounts receivable in the fourth quarter. Is that cash we can expect you to recognize as we go through '26? It was just an unusual number for you guys. Any commentary on that? Joseph Benesch: Yes. So really, I can't tell you. Some of the [ accounts ] we have collected most but not all of that cash, so it will impact our first quarter. I think it was just more of a timing thing at year-end. Nothing major there, just the timing of the orders. Thomas Flaten: Got it. And then sticking with Joe, as Emrosi continues to gain better coverage, [ GTMs ] improve, and it becomes a bigger component of your revenue line, how should we think about gross margins as we roll through '26? Joseph Benesch: Yes. So really happy with the margins and how they're progressing. Of course, the product sales mix is always going to be the biggest driver. So as Emrosi and QBREXZA, our high-margin products, become more of that mix, we're going to continue to see better margins. And in addition, we really try to manage the -- and optimize the period costs that go through, the shipping costs, testing costs, et cetera. So we've made a lot of leeway into decreasing those costs. So looking forward, I expect some really nice margins going forward into 2026 and beyond. Thomas Flaten: Great. And then, Claude, the product launches that you mentioned, are these products you already have in-house? Is it [ BD ] on the come? And anything you can do to characterize kind of conditions they serve, overall market size that you're addressing? Anything just to give us some more context would be great. Claude Maraoui: Yes. I would look at them as really incremental product additions into the portfolio to really assist in helping the base business. And again, that's defined as everything outside of Emrosi really grow and expand in the internal product that we've been developing as well as an additional licensing deal. So in terms of the categories, I'll get into that later in the year as we come closer to launch, Thomas. Operator: This concludes our question-and-answer session and Journey Medical's Full Year 2025 Financial Results and Corporate Update Conference Call. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and welcome to Modiv Industrial, Inc. Fourth Quarter 2025 Conference Call. [Operator Instructions] On today's call, management will provide remarks and then we will open up the call for your questions. [Operator Instructions] Please note this event is being recorded. And I would now like to turn the conference over to Sara Grisham, Chief Accounting Officer. Please go ahead. Sara Grisham: Thank you, operator, and thank you, everyone, for joining us for Modiv Industrial's Fourth Quarter and Full Year 2025 Earnings Call. We issued our earnings release after market close today, and it's available on our website at modiv.com. I'm here today with Aaron Halfacre, Chief Executive Officer; Ray Pacini, Chief Financial Officer; and John Raney, Chief Operating Officer and General Counsel. Before we begin, I would like to remind you that today's comments will include forward-looking statements under the federal securities laws. Forward-looking statements are identified by words such as will, be, intend, believe, expect, anticipate or other comparable words or phrases. Statements that are not historical facts, such as statements about our expected acquisitions and dispositions and business plans are also forward-looking statements. Our actual financial condition and results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of the factors that could cause our results to differ materially from these forward-looking statements are contained in our SEC filings, including our reports on Form 10-K and 10-Q. With that, I would like to turn the call over to Aaron. Aaron, please go ahead. Aaron Halfacre: Thanks, Sara. Hello, everyone. I hope you're doing well. Crazy times. So I know I'm looking forward to this call. I'm sure you are, too. Let me start off by saying that Sara just read the standard preamble that everyone has that talks about forward-looking statements. And I spend the vast majority of my time thinking about forward things. But the historical things and the things that are measured, the accounting are really important. And I just -- this is a point in time because this is going to be Ray's last earnings call, even though Ray is going to be with us for the remainder of the year, it's his last official earnings call, and John is going to be taking over the helm. And I just really want to speak and thank our team. So Sara, John, Winnie, Lamont, Jason, all the accounting team, in particular, which is candidly more than half of our company, does such a good job and they make my job easier so I can spend all this time talking about the forward thinking things and dealing with these things that don't always have measurable outcomes. And that messy part of it that I do is that much easier because of how good they are. So I appreciate that they're all here and just wanted to welcome Sara to the call, even though she's always been there in the background, she's going to be part of the call now along with John going forward. And of course, Ray. So with that, let me sort of -- shifting gears. I'm sure we're going to have a whole host of interesting questions. I have no idea if I can answer your interesting questions, but I will do my best. But first, let's let Ray have the stage and do his thing. Ray? Raymond Pacini: Thank you, Aaron. I'll begin with an overview of our fourth quarter operating results. Rental income for the fourth quarter was $11 million compared with $11.7 million in the prior year period. The decrease in rental income reflects expiration of our lease with Costco on our office property in Issaquah, Washington, which was sold to KB Home on December 15, 2025, and expiration of our lease with Solar Turbines on an office property in San Diego, California, which we plan to market for sale upon receiving approval from the City of San Diego for a lot split. Fourth quarter adjusted funds from operations, or AFFO, was $4 million compared to $4.1 million in the year ago quarter. The $30,000 decrease in AFFO reflects a $554,000 decrease in cash rents, which was partially offset by a $299,000 decrease in cash interest expense, $138,000 decrease in preferred stock dividends, a $40,000 decrease in property expenses and a $15,000 decrease in G&A. AFFO per share decreased from $0.37 per share in the prior year period to $0.32 per share for the fourth quarter of 2025. The decrease in AFFO per share was primarily due to a 1.7 million share increase in diluted shares outstanding, which reflects previously disclosed issuance of operating partnership units during the first quarter of 2025, along with the issuance of common shares in our ATM and distribution reinvestment plan. Interest expense for the quarter was $1.1 million higher than the comparable period of 2024, primarily due to amortization of off-market interest rate swaps. With respect to our balance sheet and liquidity, as of December 31, 2025, total cash and cash equivalents were $14.4 million, and we had $30 million available to draw on our revolver. Our $262.1 million of consolidated debt outstanding consists of a $12.1 million mortgage on one property, excluding a $12.1 million mortgage on the Santa Clara property that was owned by tenants in common and therefore, not consolidated as of December 31, 2025, and $250 million of outstanding borrowings on our $280 million credit facility. Following the January 2026 extension of our credit facility, we do not have any outstanding debt maturities until July 2028. Based on interest rate swap agreements we entered into in January 2026, 100% of our indebtedness as of December 31, 2025, held a fixed interest rate with a weighted average interest rate of 4.15% based on our leverage ratio of 45.1% at quarter end and the January amendment to our credit facility. I'll now turn the call back over to Aaron. Aaron Halfacre: Thanks, Ray. Let's just -- operator, let's just go to questions, it'd just be easier. Operator: [Operator Instructions] And your first question comes from the line of Gaurav Mehta from Alliance Global Partners. Gaurav Mehta: I wanted to ask you, I think in your -- in the press release, you talked about receiving multiple offers and spending some time on one of those and not pursuing it. So I just want to get some more color on what those reasons were for not pursuing the offer. Aaron Halfacre: I figured you'd ask that. And I don't really have an answer that I can give you other than to say that we, at that moment, didn't see a secure path forward. So we stepped back from discussions. And I think that -- I think fundamentally, there was -- the vast majority of the stuff there was good. It's just that we -- our job is to protect our investors and to make sure that we have put forward the requests that we need to make sure that our investors are going to get what they're going to get. And it was just a process. I think that it was a generally positive exchange. And sometimes these things happen where it's just like it's not quite flowing. So that's about all I could say. It doesn't give you much. But as it relates to that, we just -- in that particular moment, we didn't see a secure path forward. And so we stepped back from discussions. Gaurav Mehta: All right. Maybe on 2026, I was wondering as far as asset recycling, should we expect any -- are you guys expecting to sell any assets this year? And then maybe some comments on the acquisition environment that you guys are seeing? Aaron Halfacre: So yes, on a go-forward basis, the recycling will -- as I mentioned in January, we will start to pick up in earnest. I'd say the stuff that's happened in the last 2 or 3 weeks might -- is going to cause -- it's hard, right? It's hard for pipelines. It's hard for dispositions because you've got rates just gyrating all over, and that just really stings confidence for buyers and sellers in general. And I think appetite is always there, but it's hard. It's just hard. If you're a buyer, you're pricing in a huge margin of safety because you could be wrong. And if you're a seller, you don't want to sell and do a deal that you would regret literally 30 days later, right? And so the landscape has changed a lot. So I think -- the near term, it's a little bit harder, a little bit cloudier, but it's not -- candidly, it's not any different than before. But let's assume that the trend long term, barring $200 barrels of oil is that we will eventually find REITs returning to favor. I think all of us here on the call probably presume this at some point. It's certainly been long in the tooth, and we would have liked to see it sooner, but this is the narrative we have. So we will continue to honor our recycling. I think the way we're thinking about the recycling and this is a couple of different phases. The first phase is really looking at like we have some noncore assets, particularly office. Those are going to get -- we're going to get rid of those, right? There's only 2 office properties we have. One is Solar, which, as you know, went -- or not Solar. It's the property in San Diego that was formerly leased to solar turbines. They left at the end of September. That's why we had a little bit of falloff, which is inevitable in rents in the fourth quarter. That property is a great property to sell to an owner user. We've actually had quite a bit of interest for it. The interest has been above the appraised value of the property. The reason why we haven't sold it yet or the flip side, the reason why we haven't leased it is that it was or it is on the same technical parcel as our WSP property. So they're right next to each other. This is a property that was acquired by the prior legacy team. We've had it. We have been working through the bureaucratic process that is not uncommon in any county or city since 2021, 5 years now trying to get that parcel split in -- so that it has its own parcel and we can sell it separately. We are so close to that. We are at a final very detailed scrutiny like filing -- refiling parcel maps. I mean there could be little things like ADA slopes on things. All that stuff is done. We're super close to that. Once we have that in hand, then we will take that property to market. The reason why we haven't leased it is because, look, I think the owner -- the right user of that is an owner user or some sort of tenant who might want a 5-year lease or might want a gross lease or -- we want long-term industrial manufacturing tenants on that lease basis, you can't -- that's not going to fit that box. That box has a better use. So we will sell that one. That's an office property technically. It's really a flex space. If you look at it now from when it was before, it's like completely open, clean shell, it's ready to go, right? So that will get sold. My guess right now, if you were to put a gun to my head, that's like, call it, $7 million to $8 million, right? So it's not a huge number. The other office property is OES. OES has this purchase option. We're talking to them. They -- like it's a blue -- I mean that's an investment-grade tenant, but it's a government, right? That's got -- we think that's a super sticky asset, but it's not a net lease manufacturing asset. So we're going to -- and it is office. It's a balancing act we've waited. We don't -- if we sold it 2 years ago, I'd probably sell like a 10 cap. I mean who wants to do that when you've got really good rent that's coming in. And so we have to be patient. But at some point, you're like, okay, you got to should or get off the pot. And so we'll clean that one up. And that's -- that will happen ideally by the end of the year. I don't -- we're going to be thoughtful about the timing. We're not going to force it, but it's moving forward so no longer to wait. So that's the obvious part. People ask about the Kia dealership. It's a noncore asset. That one is -- the conundrum of that one, that is a layup to recycle, right? We've seen interest in that one, not offers, but interest at or below the cap rate that it's appraised at. It's a very attractive asset, but it's a big one. It's $70 million, call it, property. That was a 1031 -- I mean excuse me, an UPREIT transaction from about 5 years ago. So we have a really low tax basis on that one. So it's super sensitive. And so if you're going to sell it, you have to make sure you already know what to buy. And to buy, I don't want to buy a $70 million industrial manufacturing facility. I would be better served buying sort of 3 $23 million industrial manufacturing facilities and rolling it into it, right? And so that will be an accretive transaction because we'll talk about the forward pipeline here in a bit. But that cap rate that it's selling at, we would sell the Kia is at least and if not more, 100 basis points tighter than what we can redeploy it. So that would be generated. But we have to line that up because you can't just take it to market. You would get bids undoubtedly. A lot of those bids would be fast closing bids. And then you would be left with a short window to 1031 designate. So we're -- we'll be patient on that one in terms of noncore. That will happen when we find the right target to roll it into. So setting that noncore aside, obviously, we move the office. And then from there, we have a lot of short WALTs. And our short WALT philosophy is that we will do our darnest to see if they will extend. We will have conversations with them. We are starting to have those conversations if they're willing to extend and not just extend like 2 years, like they can really give us something that makes us decide we might want to keep it for longer term or if they don't, realizing that let's just clean up the WALT. Even though they're great tenants, I think our goal is -- our vision is let's get to a rock-solid portfolio long term. We understand that as leases get shorter and you see this in sort of O and W.Carey, that you get down to the option periods and CFOs and things like that typically just -- they just exercise 5-year renewals, 5-year renewals, they exercise their option periods. That's normal. But we have a period of time right now that we can positively -- have a positive arb by selling certain assets, even if they're shorter WALT and creating more AFFO by reallocating them into longer WALT and having a more solid portfolio. So we'll spend time this year looking at -- Northrop was one of those properties -- we got an unsolicited offer that came in. It was worth our time. It was worth our energy. We gave them -- we were patient with it. We were not in rush for them to do their due diligence. We were not in rush for them to close because we do need to roll it into a replacement property ideally. There's other uses for it, too. I won't get into that, but we could use that money fungibly, but that was one that is an example. That's a property that it's a short WALT. We got an offer that was compelling and we took it. So that's on the plate. We will see more of that activity. Separate from that phase is we have a few industrial credits that I would probably like to recycle through. There are nothing wrong with them. They're perfectly fine. They're just smaller. They're less institutional. And so they would -- I think recycling those at the right time, and that might be this year, it might be early next will allow us to just clean ourselves up that much more. And when I say clean up, it doesn't mean more dirty. It just means I want to polish it as best we can because I think the process that we've been through with these offers and the interest and -- it's helped us say, hey, if we do these things and extract the value for our shareholders, then we're going to be in a really solid position. Outside of that, we have a few -- and I mentioned this before in January, sort of some opportunistic assets that are great assets. They may not be manufacturing assets. They are certainly lower cap rate assets that at the right time, if we got ready or we had clearly identified things to buy, we would roll those as well, right? And so you will see more activity over the course of the year, barring something bigger and strategic happening, you'll see more activity in the course of this year. And yes, we're not -- those weren't just words, those were actions that we're going to take. I think the interesting thing about all this is they're all -- as I mentioned before, they're all tax sensitive in terms of we have low basis. If we don't redeploy them in 1031, investors are going to have taxable events. And we just -- that's not how you're supposed to manage the REIT. So we're trying to be thoughtful about that. But -- so the selling of the assets is actually pretty easy. You can happen pretty quickly and you -- a lot of brokers ready to go. If you put a property on there, you probably are sold in 60 days if you really wanted to, but comfortably 90. The problem is finding replacement properties that line up. And I'd say over the course of our journey, I've gotten and the team has gotten a lot more selective in the terms of you want really good manufacturing products. So the product that they're manufacturing has got to be really good. We've gotten that right. You want to make sure that the lease structure is really good. You want to make sure that the financials of that tenant are really good. You would ideally like that tenant to only have one source of manufacturing, which is your thing or you have control all their manufacturing so that you can't get rejection, make sure you proceeding, God willing if it ever happens, but you're addressing that through credit. And you'd also really like to have good location as best as you can. And then on top of that, a good cap rate. Those are a lot of fine wish list, and you can't be the princess and the pea about it. You have to really be compromised in marginal areas if you have to, but we don't have to right now, and we've been patient. But the pipeline has been episodic. It's been erratic. We started to see pipeline come out in January. Some of it is just like we still -- sometimes we're still waiting for the OMs, right? They're like, and it's like the OEMs haven't come out. Well, why? Because the person on the other end is concerned about selling, right? We might want to be bidding with a margin of safety. They're wanting to sell with security. But they know they're going to get -- this is a stable ground and that they go and go out in the market, they're going to execute on what they think they are and in fact, they're going to just change on them. So it's a little bit of weird time in that regard. And so we're looking at our box, the buy box, making sure we're looking -- we're looking at a lot of things. I'd say price talk about overall is interesting. If you go look at the $22.19 NAV per share we have, which like everyone has an NAV, right? Some people use a street analyst NAV. Most REITs have an internal NAV of some sort. We have -- our internal NAV happens to be done by a blue-chip appraisal firm, Cushman & Wakefield, and they've been doing it for, I don't know, 6 years. there's consistent history if you go piece it together. And so you're like, appraisals are full of s***, right? They don't -- they're not real, but they actually are pretty indicative. I would tell you that we have -- I can think of 3 properties in our portfolio in the last 6 months where we have received unsolicited offers that are at or below the cap rate that is implied in our appraisals. So -- and we've all -- I think we all understand, particularly now in this environment that there's a fairly large disconnect between private real estate and public real estate and public real estate is just taking it on the chin repeatedly. So we understand that. So that $22.19 NAV, I think round numbers, it's an implied 6.8% cap rate. First, you think, well, you're not trading anywhere near that, and we're not. And price talk, we've seen and the price talk is maybe like an appraisal, it is indicative of something. It doesn't mean it's transactional, but it's in the range of possible. There's a $200 million portfolio going out there today. It has a tenancy that's very similar to our largest tenancy in terms of the sector. And it's got -- they're talking 6.75% on that one. We saw another property where someone was talking 6.75%. Now that's broker talk. They're leading a little bit. Do I think it's going to trade there? Probably it's going to trade wider than that, might be 7%, might be 7.25%. But clearly, you're seeing stuff between 6.75% and 7.5% right now. You just got to find the right thing. Sometimes you'll find something that might -- if something is 7.5% and it's just dog doodoo, you don't want to pay 7.5%. If something is great and it's a 7%, then you can do it. But sometimes there's dog doodoo that 6.75% too. Everyone is trying to do their own thing. But I would say that the pipeline right now, and it's a little bit of a strobic effect when you see it, sometimes it's there, sometimes it's not, like back on, it's tighter than it was a year ago. It does feel tight to me. Whereas a year ago, I was probably saying 7.5% to 7.75%, now the talk has gotten tighter. I think that might be a little bit of the optimism that we saw 3 or 4 weeks ago. And now I'm not really hearing calls for the last 2 weeks, but I think everyone is kind of holding their breath, right? I mean the first weekend with the conflict, we were like, oh, is this going to be like the last time where we just bombed them and then we went back to our business. And then no, it's not extended. And then we've gotten all as a collective, gotten ADHD. We're like, oh, no, it's been an 18-day war. I mean, historically, we had wars that lasted for years. So I don't know if you can hold your breath on this one. It might be over soon, it might not be. It's certainly volatile, and you certainly got to stick to your knitting. But it's a long-winded way of saying that we see opportunity. We're looking at it. We're just being extremely thoughtful. It takes an inordinate amount of patience, which is very hard to do. It's very hard to do. It's not fun. It's not sexy. It's -- I wish I was an AI company. That would be fun. But we're not. So sorry for the long-winded answer. I hope that helps. Gaurav Mehta: I appreciate it. That's all I had. Operator: And your next question comes from the line of Jay Kornreich from Cantor Fitzgerald. Jay Kornreich: In line with a lot of your comments there, obviously, a lot of questions on the macro perspective at the moment. And I guess if we could just wrap up all those comments you just made about the transaction front and how you're thinking about that going forward. Do you still feel on track to get the portfolio to the 100% pure-play manufacturing industrial over the next 24 months? Or does maybe the time line shift just with everything that's going on at the moment? Aaron Halfacre: Yes, I do because I always like to underpromise and overdeliver whatever the phrase is. So that 24 months, I think if things are rosy and the market starts hitting its stride, that's a 12-month process, right? So it can be a lot tighter. Again, the bottleneck is having the right assets to acquire and the right assets to acquire will become much more evident when the market gets a little bit more stable. So -- and theoretically, just putting out our portfolio, I could -- if I identify the right portfolio of assets as an example, and I had the right timing to buy them, that I could almost in effect, do it in one fell swoop, right? So just mathematically, if you think about it, it's not going to happen likely because it's hard to find these things, but it doesn't mean it can't happen. It doesn't mean we are not looking. But if you found a $100 million portfolio of assets that you like that you could line up to purchase that met your box, and then you sold your -- you could take your assets out to market, they would all be reversed 1031 or forward 1031 designated exchange and you're done in one fell. It's the pipeline that matters. So yes, I do think 24 months is very realistic and doable. Jay Kornreich: Okay. I appreciate that. And then just one follow-up. And I recognize that there's a little commentary you can provide on the potential acquisition offers that you received. But can you maybe just from a different angle, talk about what's perhaps brought you more on the radar of others more recently as an acquisition target, maybe relative to a year ago? Is it the state of interest rates? Is it the progress you've done on the asset recycling efforts? Is it something else? Just what do you think has brought you more into the light of others looking for a portfolio like yours? And how do you expect additional potential inbounds moving forward? Aaron Halfacre: That's a good question. So I think, look, we've seen REIT M&A -- the discount for public REITs to private real estate has been persistent. We started to see REITs get picked off. In some ways, you could argue why hasn't there been more M&A volume, but there's still been a decent amount of M&A activity, right? So in our space, you obviously had the real germane thing you had sort of Fundamental, which was not public, but they got taken out by Starwood. You had Plymouth taken out. You had Peakstone taken out. Broader than that, you got Alexander & Baldwin, you just had the NSA deal. We've had a lot of different names get consumed. I think a lot of them were smaller cap names, which means that there's a greater buyer pool of people who can afford to take those out. So I think there's been a trend where for a while now, I mean, if you had raised a value-added opportunistic fund in '23, you've got a 3-year investment window maybe or you raised it in '24, you've got a 3-year deployment window that you had to get it deployed. At some point, people are starting to deploy and they were waiting and they're waiting. And I think we saw early signs -- we started seeing signs as early as the third quarter of last year where activity started to pick up, and we've seen a fair number of those things. And so once that starts happening, people start looking, right? If you're -- once you decide you're a seller, then you're potentially a seller, so that attracts buyers. But if you're starting a buyer, you start to look for things to buy, right? And so I think that's been the first thing. I think the near-term volatility in rates and global economic pictures, it's frustrating that on the margin. But again, I don't think it's changing directionally where things are at is that people see attractive positive leverage, long-term positive leverage opportunities in public real estate, either public to public or like we saw with Public Storage or it's a public to private, right? And we've seen this at different times. And look, there are probably too many REITs out there. There are too many undercapitalized REITs out there and we are in one of those buckets. We understand people say why did you ever go public? Well, we -- at the time we were a nontraded REIT, and we knew that we didn't provide immediate liquidity, we would be gating and no one wants to gate as BREIT, ask Starwood REIT that thing. They're much bigger, so they can afford to do it, but no one wants to do that. So we provide liquidity for that generation of investors, and we've recycled. And we've just been in a rough time. But we've created a valuable portfolio. I don't -- I can't -- off the top of my head, I would think our share price is a ridiculously wide cap rate to the assets. And so that's what's attracting people. They're like, hey, you've got 14 years, you've got 2.5% in place. You've got manufacturing tenants that don't have obsolete -- arguably that the real estate is already obsolete in the sense that it's not whizbang. It's been doing this stuff for 40 or 50 years. It's really good durable real estate, and it's still here, right? If you bought a 2018 vintage data center, it's already obsolete. You're already having to replace all the guts on it other than the shell of a box. If you bought a 1999 warehouse, it's obsolete, right? Our stuff arguably is not that sexy. It's older real estate, but it doesn't have any more obsolescence value. You're buying a core income-producing value. And with the EBITDA rent coverage and the fixed charge coverage ratio of our tenancy, it's a strong portfolio. And if you look long term and think, hey, long term -- not right now, though, because if you look at in the futures market, the ZB or the UB in the long bond area, they've sold off, right, which is counterintuitive in the short term with the war, they typically rally, but they sold off, which base rates gone up. But if you think longer term that we'll have a yield curve that suggests that long-duration assets with low leakage in terms of NOI and particularly the advent that we can start putting private capital into retired 401(k)s and things like that, there's a natural demand for this nice pool of portfolio. We are synergistic, right? I'll give you the color that the people looking at us, we're not looking for the team. They're looking at the assets. I wish they were looking for the team. It would be fun to do that, but they're looking at the assets. And you can -- this portfolio, you can strip out -- it's pretty simple. You can strip out the G&A and it becomes accretive. We're not opposed to selling. We're just wanting to make sure it's the right value for our investors because we're not desperate. We're not going to just give it away that might be a great payday for me because all I do is I have equity like everyone else, but we're going to do the right thing. And the right thing will come about. And in the meantime, we're going to pay that $0.10 a share per month and get done. But -- so I think the interest is because there's really good value coupled with there's people who have money and they're starting to decide they want to make allocation. I think the last element is, look, there are arguably 4 small cap industrial REITs that I can think of -- and maybe you can include ILPT in there, so maybe that's 5. But of those 5, ILPT and Gladstone are externally managed. So good luck with that, right, getting the whole of those. And the other 3 were Plymouth, Peakstone and us. And clearly, we're the smallest. And so I think that's part of it, too. There's just like if you want to pick up this sector or you like the space, there's not a whole lot you can do, right? So that's where we're at. Operator: [Operator Instructions] Your next question comes from the line of John Massocca from B. Riley Securities. John Massocca: So I know you kind of talked a lot about the inbound interest after the January '20 update. But I guess, given that you've seen that, does that maybe spark an interest in running a kind of strategic alternatives process earlier than that, I guess, maybe that kind of post 24-month time line that was kind of talked about in that update. Just kind of curious how that changes your mindset, if at all. Aaron Halfacre: I think that -- I think the interest suggests to me that people know there's value here and that they know that we can clean up the portfolio. And look, again, the portfolio is not dirty, but if it's more polished, it's going to be more valuable. And so they see a window of opportunity if they can take it out cheaper than what it will be in the future, that's their job. Their job is to try and take it -- keep the upside for themselves and give you a few shekels. I think what this suggests to me is that barring someone closing that value gap -- and again, closing that value gap does not mean $22. Let's just all be clear. No one is going to do that. No investor in the right mind or buyer in the right mind is going to do that. But there's no upside, right? They don't -- they want it bad. They just buy a bond, right? So they need upside, but our investors need upside. And so there's -- it's a dance of where that is. But what it suggests to us is that if we didn't have -- like if you look at -- if I'm going to go buy a used car, and that car has got a little bit of rim rash in the back wheel or there's a little bit of scratch. I'm going to use that to get lower price. But what we have the ability to do is clean that -- polish that portfolio up. And so that it's even more valuable. So if you flash forward in this environment, let's think about where we're at right now. We're in a super crazy rate environment, right, where people are dealing with inflation and bonds are doing this, it's crazy. And you're like, what do you expect if you went and ran a process now or in 6 months, right? If you did it where you flash forward, you clean up your portfolio, you're humming, you're good, the rate environment is stable. Maybe it's lower, but it's certainly stable. You've clearly gotten what it is. You know you can extract more value, and you've done that. And let's say that is in 24 months. Let's just put that hypothetical situation there. In that 24 months, our investors, assuming no change in our dividend, no increase or decrease in our dividend, which, look, I'm not going to decrease in the dividend, but let's assume no increase either. That's $2.40 of income in the next 2 years and a higher value of your portfolio to execute. So you would try to buff out the scratches. You would try to get rid of the rim rash. You would get yourself in an environment where your type of car that is for sale is in demand. And so doing so prematurely would suggest 1 of 2 things in my mind, would suggest doing so prematurely is running a shred process to be clear, which suggests either, one, your leadership doesn't want to do it or can't stomach it. And look, it's not fun sometimes, but we got -- we don't have weak stomach here. Or two, do you think you can't do any better? Otherwise, why would you do that? Why would you shortchange the investor? You just wouldn't. If there an opportunity comes along that closes the value gap and you say, well, okay, this is pretty good. This is going to give them a chance to redeploy their capital or this is going to be another public currency where they can get -- continue to get dividends and part in the REIT upside. There's a lot of different ways to look at this. If someone could do that better, we're all ears. But it doesn't mean just because you've gotten interest that you should not sell, right? If you've gotten really -- and if you did go into an offer unless it was an offer where you felt secure and there was no go-shop associated with it, you're effectively having a process there. So that's -- I think really thinking about it philosophically to think about what does the strat als process suggest. I think there's been a lot of REITs out there that have -- that are undergoing strat als processes, even if they're quiet or they're done some publicly. And there are -- I don't know if this is the right time to do that. Why are you trying to sell right now if you have to. If someone wants to, that's one thing. But why would you try to sell? John Massocca: Okay. That makes sense. Maybe on a more detailed level, and apologies if I missed this in the prepared material. What were the terms of -- or the potential terms of the Melbourne, Florida office sale? Or is that kind of TBD? Aaron Halfacre: The terms are well known, but I'm not to us. And I -- as a respect to that buying party and respect to us, I like to keep those silent until after the fact. Suffice it to say is we have slightly over $400,000 of earned money that's gone hard. And this has been a process. We've given them a long -- this was not a fast deal. It was an organized methodical one. And so once it closes, I'll inform you of what it was. And I'll tell you right now, just to be clear, what we don't have right now, and we're working on that, we don't have a replacement property identified yet. We don't need to worry about this one. So that's okay in terms of the tax sensitivity. Why is that? Well, because we're selling Kalera, and let's just all be honest, we took a loss on Kalera. And so that creates a tax loss that shelters the gain on this one. So we have a little bit of time to be thoughtful about the redeployment of that. But it's scheduled to close in the second quarter. And once it closes, which my guess is we will -- well, we will absolutely tell you what happens on it once it closes. John Massocca: Okay. And maybe with Kalera, the former Kalera property in mind, can you remind us what the kind of, I guess, cost of carry was for that in 4Q or kind of the OpEx costs associated with that asset in 4Q that's going to go away now that you sold it in January? Like roughly. Aaron Halfacre: Ray, do you know roughly on top of -- it's not -- it wasn't terrible... Raymond Pacini: Yes. I mean I think it was running about $20,000, $30,000 a month. John Massocca: Okay, that's it for me. And Ray, appreciate all the help over the years that you've shown on these calls. Operator: There are no further questions at this time. Please proceed. Aaron Halfacre: Everyone, thank you so much. I know we came out a little bit later. That was because of the aforementioned offers. I don't like to come out as late, but it didn't seem -- we are a pebble in -- causing a ripple in the ocean that is raging right now. So I appreciate all that did join. Wishing you the best of luck for your families and your portfolios and talk to you again for next quarter. Thanks so much. Operator: This concludes today's call. Thank you for participating. You may all disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Remgro Limited Interim Results Presentation. [Operator Instructions] Please note that this event is being recorded. I will now hand over the conference to Chief Executive Officer, Jan Durand. Please go ahead, sir. Jan Durand: Good morning, everybody. Thank you for joining us this morning, and welcome to our interim results presentation for the 6 months period ended 31st of December 2025. Today, we'll unpack our financial performance for the first half of this financial year. And has become our standard approach, we will also spend time on the performance of our key portfolio companies that continue to shape our overall results. With that in mind, the outline of today's presentation will be as follows. Firstly, I will give an overview of the salient features of our performance, including the wins that reflect our focused execution against our strategic priorities. Secondly, our Chief Investment Officer, Carel, will give an update on some of the key corporate actions that are central to our portfolio simplification and optimization journey. Then Neville, our CFO, will take you through the financial results in more depth. And finally, I will turn to updates from our major investments. The CEO of Mediclinic, Ronnie; and the CFO, Jurgens, will speak to Mediclinic's results and progress on strategic priorities. Then after that, the Managing Director of Heineken, Jordi and his newly appointed Chief Finance Officer, Radovan, will together do the same for Heineken Beverages. And then the CEO of Maziv, Dietlof will do the same for CIVH. And finally, the COO of RCL, Paul, will provide highlights of the results they reported on earlier this month. I will then close off the presentation by looking at our areas of focus going forward before opening the floor for questions. This morning, I'm extremely pleased to present interim results that show sustained strong earnings growth across our portfolio. Even more encouraging is that this earnings momentum has translated into strong cash generation at the center, enabling us to return value to our shareholders with a significant uplift in our interim dividend. For this period under review, headline earnings increased by 38.5%. And alongside this, cash earnings at the center strengthened materially with dividends received at the center up roughly about 34%, supporting an interim dividend increase of approximately 80%, a significant return of value to our shareholders. The main drivers of this earnings growth were stronger contributions from Mediclinic, CIVH, Rainbow and Heineken Beverages. Ignoring the distributions over the period, our INAV increased by 1.6% over the period, which is more modest than the growth of our earnings and a function of valuation movement across our listed and unlisted portfolio. But this is a good indication that the increase in the underlying earnings of our company substantially reflect our own valuation models. As I reflected on this marked progress, it is clear that these results demonstrate the resilience of our portfolio, the benefits of disciplined, focused execution and strong partnerships with our various management teams. By the same token, it would be remiss of us not to reflect on the impact of the operating environment, which we and our investee companies continue to operate, which I'm sure this audience is all too familiar with. Global trade tensions, geopolitical instability and muted domestic growth remain persistent headwinds. Although extensively analyzed the speed of changes and the resultant unpredictability make forecasting the impact difficult at this stage. Very importantly, for us, we must not forget about our colleagues of ours that work in the affected regions. Our thoughts are with them in these difficult circumstances, and we applaud them for the resilience and the courage that they show. Instead of dwelling what is outside our control, though, our focus remains where it matters most, managing what is within our control, strengthening the performance of our core businesses, progressing portfolio simplification and maintaining disciplined capital allocations. These have underpinned the gains we are presenting today. On this slide, I want to highlight a few of the positive outcomes that this strategic focus has yielded. I have spoken about the robust growth in earnings and sustained momentum, which we have now seen consistently over multiple reporting periods. This, we believe, speaks to the strategic clarity and disciplined execution. I am pleased with the commitment of our executive teams at the underlying investee companies, which in partnership with Remgro is actively driving performance, which can be seen in the strong contributions from our previously challenged investees. We're especially pleased with the long-awaited implementation of the CIVH/Vodacom transaction, which positions us to capture the growth potential we've articulated for some time. We've also made some strong progress in simplifying the portfolio, including the sale of our remaining interest in BAT, the distribution of our media assets and more recently, the monetization of part of our interest in FirstRand, which has significantly derisked our balance sheet. The proposed restructuring of the Mediclinic -- of the Mediclinic business further aligns this investment to our strategy and simplifies the group further. The results of all of these deliberate efforts can be seen in the cash generation profile I spoke of earlier, with our sustainable dividends received up by almost 34%. In addition to this incredible growth, special dividends received have also further strengthened our balance sheet and offer a strategic optionality to navigate the current volatility, but also in pursuing future growth opportunities. Ultimately, these results are a clear payoff from strategic clarity, focused execution and consistency. Very importantly, whilst we are and must celebrate these wins, performance optimization with a dynamic execution across our portfolio remains key to maintain this momentum, particularly with reference to some of our business that are still facing some challenges currently like RCL, especially regarding regulatory issues and the challenging market dynamics, but Paul will elaborate on this further. We also experienced some sharp focus on the volume pressures through aggressive pricing trends that we see in the overall beverage market that impacts Heineken Beverages. Jordi will also go into that in a bit more detail. Even so, we remain confident in the long-term growth potential of the portfolio. Today's results show that our focus is working, and our job is to remain sustain this momentum. The question of our capital allocation posture understandably featured prominently in all discussions. We think about capital allocation through 3 pillars: strengthening the balance sheet, supporting portfolio growth and delivering value to our shareholders. The strengthened balance sheet of us has created a solid foundation for growth while enabling a meaningful improvement in returns to our shareholders through higher dividends and other value-accretive returns of capital. We continue to consider and evaluate options to crystallize value and including -- that includes share repurchases. We are actively assessing new investment opportunities with greater emphasis on building our new business development pipeline. Key for us is that we view our strong balance sheet as a critical and strategic asset, particularly in this period of heightened volatility. We have been intentionally conservative in our cash preservation posture and believe that this positions us well to act on growth opportunities as they come. I will now hand over to Carel to provide an update on our key corporate actions. Carel Petrus Vosloo: Thank you, Jannie, and good morning, everyone. I wanted to provide an update on corporate actions at 2 of our investee companies. The first one of those is at CIVH, and shareholders would be familiar with the Vodacom transaction that we've been talking about for the last number of years now. So -- as shareholders would remember, Vodacom injected cash and shares into Maziv for a 30% shareholding in Maziv and then also acquired shares at the CIVH level for ZAR 1.8 billion, and that resulted in a pre-implementation dividend from Maziv and then -- from Maziv into CIVH and from CIVH ultimately to shareholders. As Jannie mentioned, we're very pleased to have got this transaction done towards the end of last year. Vodacom brings a very strong strategic partner to our business. It allows us to accelerate the scaling of the network, including to previously underserviced communities, also gives us greater balance sheet flexibility and really pleased to finally have got this done. The second transaction is the second leg of the Herotel acquisition. Again, we remind shareholders that Herotel is a service provider, mostly in secondary towns or secondary cities and rural towns. They've got an incredibly strong management team, a really great recipe for rolling out infrastructure in this segment of the market and a great complement to what we currently have in Vumatel. So again, very excited at the prospect of getting this transaction done. It increases our infrastructure, our economies of scale and improving unit economics. So just to reflect a little bit on the time line for these 2 transactions, where we've come from to where we are. It's now almost 5 years ago when we initially announced the Vodacom transaction at the back end of 2021 and fair to assume it had a fair run-up to get to that point of announcement. So it feels like we've been busy with this for a while. But soon after that, we announced the first leg of the Herotel transaction. So the acquisition of that first 48% that was in early parts of 2022. And then things took a little while, but very pleased in August last year to finally get the approval from the competition authorities for the Vodacom transaction. And then relatively soon after that, at the beginning of December, we implemented that transaction. Just to remind people, when Dietlof here to speak about the results for CIVH, that's up to the end of September. So it doesn't yet include the Vodacom assets in those numbers. But obviously, in time to come, we'll see the impact of that. Back to the time line then in December of last year, we were then also pleased to obtain the competition authorities approval for the second leg of the Herotel transaction. And the only CP that's outstanding there is the Casa approval. And we hope that would be imminently forthcoming. So to remind people what that then looks like in terms of the shareholding structure. Previously, CIVH used to own 100% of Maziv. Vodacom now is introduced alongside CIVH with that 30% interest. They obviously bring their assets and the cash or they brought their assets and cash and in the process of integrating those assets into Vuma and DFA. At the bottom of the slide, you can then also see whether the warehousing vehicle that trust sits as a shareholder in Herotel with a 49.9%. And when that transaction is approved, hopefully, Herotel would end up with 99.9% of -- Vuma would end up with 99.9% of Herotel. Maybe it's a slightly more interesting slide. Hopefully, we -- there are so many moving parts on the valuation of CIVH that we thought we should unpack them separately. And the first part that we thought would be useful to explain to shareholders is just the impact that the Vodacom transaction has on our valuation as existed at the end of last year, so at the end of June, our year-end, June '25. So this is not an updated valuation that you will see later, and Neville will talk to that. But just to give you an impression of the impact of the valuation on our the impact of the transaction on the valuation as it stood. So ZAR 15.8 billion was the INAV value that we attributed to CIVH. If you then add the Vodacom assets and shares that they brought and apply our pre-dilution interest to that, that increases the value by ZAR 7-odd billion. Vodacom rather CIVH then paid a pre-implementation dividend, which was upstream from Maziv. So Remgro's share of that was ZAR 2.66 billion. So that comes out of the value. And then, of course, we diluted by 30% alongside other shareholders for Vodacom's entry. That takes another ZAR 5.7 billion out. And then we applied the discounts that were embedded in our valuation to the Vodacom assets that were added, but we also slightly increased noncontrolling discount to the overall valuation. And after all of that washes out, you will see that the valuation ends up almost at exactly the same place where it started, the 15.8% after you take into account the dividend that's been received and now sits in cash in our hands. So just what remains for CIVH on these, let's call them legacy transactions. On the Vodacom side, investors would remember there was also a 5% option for Vodacom to buy an additional 5% in Maziv effectively directly from Remgro. That transaction, the price for the transaction is a fair market value that will be determined at that point in time, but there is an underpin to that price of ZAR 43.7 billion. That number might not sound particularly familiar, but just to explain that, the transaction value for the base deal was ZAR 36 billion, and that stepped up to ZAR 37 billion for this option. Then you have the ZAR 11 billion of assets and shares that came in from Vodacom less the pre-implementation dividend that came out of Maziv of ZAR 4.2 billion, and that gets you to the ZAR 43.7 billion. So that's the floor value, if you like, for the exercise of this option. We extended the option period to the end of March 2027. Then on the Herotel side, upon approval of the second leg on the acquisition of the 49.9% stake from the trust. CIVH will acquire those shares and then we'll inject those shares into Maziv for additional shares. The price for that, again, would be at fair market value as would be determined at that point in time, but again, with the underpin of ZAR 2.75 billion. Vodacom would likewise bring cash for that same amount. That's ZAR 8.25 million at the full price, and that cash would be upstream from Maziv into CIVH, and that would effectively restore CIVH or rather Vodacom's 30% stake in Maziv. So a few sort of complicated steps, but the only thing to tune into there is the end product would be that Herotel would sit inside or 99.9% of Herotel would sit inside Vuma and CIVH would have an additional ZAR 825 million round of cash. On to the second transaction that we -- or second [indiscernible] want to talk about, which is Mediclinic. Towards the end of last year, we announced the proposed transaction and the in-principle agreement that we reached with MSC to exchange our respective interest in Hirslanden and Mediclinic Southern Africa. So as per the announcement, what we had agreed is that after this exchange, Remgro would end up with 100% of Mediclinic Southern Africa and MSC with 100% of Hirslanden. And that will be done on a value-for-value basis, so basically exchange it for equal value. And we would continue as 50-50 owners of the rest of the business, which is our Middle Eastern business and then also the 29.8% stake that we own in Spire. An important feature of that transaction is that the exchange ratio or the values that we used were arrived at with the balance sheets as they existed at the end of June last year. So to keep the integrity of those valuations, we've got a lockbox in place on both the Southern Africa side and in Hirslanden. And simply what that means is that the value and the cash that accrues in those respective entities are trapped in those entities for the benefit of the future owners. So to the extent that there are dividends that need to flow out or capital injections that need to go into either of those businesses, that would be adjusted and then there would be a sort of cash equalization mechanism to cater for that. The future operating model is in progress, but what will ultimately happen is that the group services will be increasingly decentralized and we'll get to a point where each 3 of those regions can basically operate as independent businesses. We foresee that there would be some limited transitional services that would be provided. But substantially, the businesses will be able to operate on their own. Just to recap on the rationale, which we had set out in the announcement as well. We believe that aligning the shareholding with the markets where the respective shareholders have the deepest understanding and the greatest conviction on strategy that would improve the agility in execution. And certainly, from Remgro's point of view, we think that it aligns with our own investment thesis of having ownership, full ownership of a market-leading asset in our home market that we know and understand. Just to remind the audience what it is about Mediclinic Southern Africa that Remgro finds attractive. It's a large hospital group. We've got 20-odd percent share of the private hospital market, 50 hospitals, 15-day clinics, really strong management team, market-leading EBITDA margins and consistently healthy earnings and cash flow generator. The picture is not particularly complicated of how it will change. You'll see at the moment, our partners, MSC and ourselves own into a vehicle that owns -- that owns 100% of the 3 regions and then also the stake in Spire, as we mentioned, and that will simply change so that those 2 regions, Switzerland and Southern Africa are owned by the shareholders directly. A few more sort of steps and gymnastics to get there, but the picture in the end is quite easy to tune into. Hopefully, a slide that's helpful to for investors just to understand how we get to the answer. There's no new information on this slide. So this is information that is available either in the initial announcement and on the Mediclinic results announcement for September. But we thought helpful perhaps to step people through how one gets to sort of a value equality between these 2 regions. We announced in December that the implied EV/EBITDA multiples for Southern Africa and Switzerland were 6.3 and 9.4%, respectively. So if you apply those multiples to the last 12-month EBITDA as that existed at the end of September, and then you can calculate the enterprise value and just to look at the dollar enterprise values for South Africa, that means just short of $1.6 billion in the case of Hirstlanden that comes to $3.3 billion, almost $3.4 billion. So clearly, Hirstlanden is a meaningfully bigger business if you just look at the enterprise value. But then in the second last column, you can see we overlay the debt and other, which is mostly the noncontrolling interest. And that then reduces the equity value in both businesses to around $1 billion. Again, these are not the exact numbers as per our valuation. The main reason being that this is using balances as of the end of September as we published and also FX rates at the end of September. As I mentioned before, our valuation date was at the end of June. So the actual numbers are slightly different, but we still thought a useful indication to help people just to understand how one would get to roughly equal values. And then lastly, just to say what remains to be done. We're in the process of finalizing agreements and negotiating the final terms. We will hope to get that done as soon as is practically possible. That will obviously allow us to file the regulatory filings and get that process underway and also to continue to work on the separation and finalizing the operating models for the various businesses and then obtain the relevant third-party consents are required, none of which we think would be problematic. So we look forward to updating shareholders again in future on progress. But with that, I'll hand over to Neville to take us through the financial results. Neville Williams: Thank you, Carel, and good morning, everyone.The key message of this interim results announcement is that the earnings growth momentum experienced during the 2025 financial year continued during this first half of this current financial year, culminating in the strong growth in headline earnings. So for the period -- the 6-month period under review, Remgro's headline earnings increased by 38.8% from ZAR 3.7 billion to ZAR 5.2 billion, while headline earnings per share increased by 38.5% from ZAR 6.72 to ZAR 9.31. This graph depicts an overview of the main drivers of the increase in headline earnings and can be summarized as follows. The increase in headline earnings is mainly due to increased contributions due to improved operational performances from Mediclinic up by 55%, their contribution. Rainbow, up by ZAR 280 million, which is more than 100% due to the surge in profitability. CIVH up by more than 100%. And this represents a breakthrough to sustained profitability. And Heineken Beverages also in a positive turnaround phase, up by more than 100% from a low base. Also, there was an increased contribution from TotalEnergies, up by ZAR 330 million, mainly due to a once-off transit pipeline cost refund received during this period. And the increase was -- there was also lower finance costs due to the redemption of the preference shares during the prior period, and that's an increase of around ZAR 95 million. This increase was partly offset by a lower contribution from RCL Foods, down by 31%, largely driven by weaker performance from the Sugar business unit. We will provide more detail on these operational results during the presentation. This graph depicts the evolution of and growth momentum of dividends received at the center since financial year 2021. The bottom line is the interim period and the blue line is the full year momentum. Dividends received from investee companies is the main component of our cash flow at the center. In line with the growth momentum in cash flow and headline earnings during the 2025 financial year, Remgro experienced strong cash flow generation at the center for this period under review, mainly due to a 34% increase in sustainable ordinary dividends received from investee companies amounting to ZAR 2.4 billion. In the previous period, we've received ZAR 1.8 billion from investee companies. And this amount excludes the special dividends related to corporate actions, mainly the CIVH pre-implementation dividend. Just want to emphasize that the Board takes into account a full year view of cash flow at the center when considering the interim and the final dividends for the year. This graph provides an overview of the material changes in the valuations of our unlisted investments as well as the movement in market values of our listed investments during the period under review. Remgro's INAV per share increased by 1.6% from ZAR 292.34 at 30 June 2025 to ZAR 297.3 at 31st December 2025. And they will see the main drivers impacting positively on the growth in INAV includes an increase in net cash, up by ZAR 3.7 billion, increase in market value of our listed investments first rand up by 20% and Discovery up by 6% and Rainbow by 21% as well as increases in valuations of some of our unlisted investments, HeinBev up by 12% and Siqalo Foods up by 9%. These increases were partly offset by a decrease in the market value of OUTsurance, which was down by 8.5% and RCL Foods down by 8.2% as well as the unbundling of eMedia holdings. So if you look at the block there on overall, on average, the material unlisted investments valuations increased by 2.3%, while the listed market values decreased by 3.7% -- if you look at the block, the INAV before net cash and CDT actually decreased by 0.5% and from ZAR 0.5 billion to the ZAR 1.6 billion is the uplift in the cash balance from period to period. The net cash increased by ZAR 3.7 billion, mainly due to the CIVH pre-implementation dividend of ZAR 2.66 billion received upon the completion of the CIVH/Vodacom transaction in December 2025. Total increase in INAV is 3.4% if adjusted for distributions made during the period under review, which include the final dividend of financial year 2025 of ZAR 2.48 as well as the special dividend of ZAR 200 that was paid during this period under review as well as the unbundling of eMedia Holdings. The value was around ZAR 0.75 per share. I want to make a few remarks about our valuation methodology. We use standardized methodologies and apply them consistently ensuring the methodology is aligned to best practice. We continue to use the discounted cash flow methodology as our primary valuation approach and use calibrated peer multiples as reasonability checks of our outcomes. During the 6-month period, discount rates came down, but we were careful to also moderate the terminal growth assumptions to reflect lower implied long-term inflation. We believe the outcome is valuations which are reasonable but conservative and can stand up to scrutiny. The following graphs show the movement of the valuations and implied multiples of the 5 largest unlisted investments in Remgro's portfolio. These investments represent approximately 83% of Remgro's unlisted portfolio. Changes in portfolio valuations reflect a mix of different factors across the various investments. In most cases, changes have mainly been driven by lower cost of capital with some adjustments to financial forecast and a moderation of terminal growth assumptions, as noted earlier. Overall, looking at the multiples, they have remained reasonable when compared to a calibrated peer set. Moving into results overview per pillar. Similar to our year-end presentation and in addition to the INAV and headline earnings disclosure per pillar, we also disclosed the cash dividends received for the 6 months as well as the last 12 months headline earnings and dividend yield for improved transparency. The health care pillar consists of Mediclinic, which is the single biggest investment in Remgro's portfolio and contributes approximately 24% to INAV and approximately 26% to headline earnings. If you look at the valuation of Mediclinic, just remarks on the process. At year-end, we use a third party to perform an independent valuation, which is audited by EY's valuations team. At interim, our corporate finance team prepares the valuation, applying a methodology which is closely aligned with the third parties' methodology. Remgro's valuation of its 50% stake in Mediclinic Group increased by 7.4% in U.S. dollars. That's Mediclinic's reporting currency in the context of improved overall performance resulting from good execution on key business priorities in each region. With the rand strengthening by 6.6% over the 6-month period, that valuation increase translates to 0.2% in rand terms. The valuation is an aggregate of the DCF of the latest business plans for each of the 3 regions. The implied EV over EBITDA multiple is 9.5x, calculated using Mediclinic September 2025 published results. This represents a blend of the multiples of the 3 component parts, each of which we compare to a relevant peer set. Ronnie and Jurgens will unpack Mediclinic results later in the presentation. The consumer products pillar consists of RCL Foods, Rainbow, Heineken Beverages, Siqalo and Capevin and contributes approximately 16% to INAV and 29% to headline earnings. The platform showed mixed performance for the period. RCL Foods, Siqalo and Capevin saw a decline in headline earnings for the period with Rainbow increasing substantially. Dividends contribution also improved due to contributions by RCL Foods, Siqalo and Rainbow compared to the comparative period. RCL Foods contribution to headline earnings decreased, as I said, by 31%, while the underlying headline earnings from continuing operations decreased by just under 22%, largely driven by challenges experienced by the Sugar business unit during the period under review. Paul will elaborate in more detail on RCL Foods results later in the presentation. The contribution by Rainbow increased substantially by 110% to ZAR 535 million from ZAR 255 million in the comparative period. We are very pleased with Rainbow's results for the 6-month period, and Martin and his team do a great job unpacking those results in the recent webcast that is available on Rainbow's website. I would also encourage you to view that there. HeinBev's valuation for its 18%, Rainbow's valuation for its 18.8% interest in HeinBev increased by just under 12% over the 6-month period to ZAR 7.5 billion. In summary, the increase in the valuation is attributed to factors including improved operating margins and decreased cost of capital, offset by reduced terminal assumptions. HeinBev's contribution to headline earnings amounted to a profit of ZAR 155 million, delivering a turnaround from a loss of ZAR 11 million in the comparative period. This solid financial performance was underpinned by margin expansion and disciplined cost management. Jordi and Radovan will elaborate in more detail on Heineken Beverages' results later in the presentation. Siqalo Foods valuation increased by 9.1% over the 6-month period. Siqalo operates in a persistently challenging trading environment, marked by ongoing commodity cost pressures and constrained volume growth. The valuation benefited from a lower cost of capital, offset by slightly moderated financial forecast. The headline earnings contribution amounted to ZAR 237 million, representing a decrease of 6.7%. As said before, the trading environment remained challenging due to constrained economic growth with consumers still under financial strain. Their business volumes remained constrained and decreased by 2.7%, mainly due to the spirits category market volume declining by 2.1% over the last 12 months. The profit margins held steady due to a price increase implemented in March 2025. And by focusing on savings initiatives, the business managed to offset some inflationary costs and increase brand marketing investments. The financial services pillar contributes 21% to INAV, 15% to headline earnings and 17% to dividends received at the center. OUTsurance Group is the most significant investment here. Their contribution to headline earnings increased by 14.3% to ZAR 713 million, mainly due to OUTsurance Holdings normalized earnings increasing by 12.6%. The increase in earnings was driven by strong performance in South Africa and solid organic growth. OUTsurance Group released their interim results on the 11th of March 2026. The valuation of Remgro's 57% stake in CIVH increased by 2.7% from ZAR 15.8 billion at 30 June 2025 to ZAR 16.2 billion. This ZAR 16.2 billion excludes the CIVH pre-implementation dividend of just under ZAR 2.7 billion, which Remgro received. And on a like-for-like basis, including the dividend, the valuation increase is 19.6%. With the implementation of the Vodacom investment into Maziv in December 2025, Remgro's effective stake in CIVH's operating subsidiary, Maziv reduced from 57% to approximately 40%. It is pleasing to see CIVH's potential is now starting to deliver meaningful financial performance with strong structural fiber demand and expanding network and greater penetration, Maziv has delivered good revenue and earnings growth through increased subscribers and average revenue per user. The valuation benefited from a reduced cost of capital, partially offset by an increase in discounts as Dietlof will describe later, including those due to the capital structure changes. Given the valuation date of 31st December 2025, the valuation includes the Vodacom assets at acquisition cost with customary Remgro discounts applied rather than adding a forecast DCF for these assets. The 30 June '26 valuation will be done on a business plan with these assets fully integrated into the respective businesses of DFA and Vumatel. CIVH's contribution to headline earnings amount to a profit of ZAR 123 million, reflecting a sustainable breakthrough into profitability from a loss of ZAR 141 million in the comparative period. And these earnings is accounted for up to 30 September 2025. Dietlof will elaborate in more detail on CIVH results later in the presentation. The industrial pillar companies are mostly profitable on a sustainable basis and consistent dividend payers with high cash conversion ratios as seen in the contribution to headline earnings and dividends received, also with attractive earnings yields and dividend yields. The valuations are also not very demanding. Looking at Air Products valuation increased by 3.1% in the period. The small increase in value is largely as a result of a decreased cost of capital, offset by slightly lower financial forecast, reflecting the tough operating environment. Total Energies valuation reduced by 2.4% in the 6 months. The decrease in value was mainly driven by balance sheet changes, combined with a lower terminal growth rate applied. From a results perspective, Air Products' contribution to headline earnings increased by 11.4% to ZAR 380 million. This increase is due to moderate growth in tonnage and supply chain businesses strong performance in the pipeline business and improved volume and margins in packaged gases, driven by effective commercial management and ongoing cost discipline. TotalEnergies contribution to Remgro's headline earnings increased by more than 100% to ZAR 311 million, but this increase was mainly driven by a once-off transit pipeline cost refund, Remgro's portion being ZAR 218 million in this period and a good marketing performance, partly offset by lower sales due to refinery supply constraints experienced during this period. The net cash at the center increased by ZAR 3.7 billion to ZAR 12 billion over the reporting period and mainly due to the CIVH pre-implementation dividend of approximately ZAR 2.7 billion. In addition, to the FirstRand stake at the market value of -- on 31st December 2025, and that ZAR 6.8 billion is the after CGT valuation. The total liquidity at the center amounted to just under ZAR 19 billion. Since December 2025, ZAR 52 million FirstRand shares have been disposed of for an after CGT proceeds of ZAR 4 billion. I think the gross proceeds was just under ZAR 4.9 billion. As already said, Remgro experienced strong cash flows at the center for the period under review, mainly due to a 34% increase in ordinary dividends received from investee companies amounting to ZAR 2.4 billion. The comparative 6 months, the amount was ZAR 1.8 billion, and this excludes the pre-implementation dividend of ZAR 2.7 billion, which is included in the special dividends received bar of ZAR 2.8 billion. Remgro also sold its portfolio stake in BAT for net proceeds of ZAR 1.1 billion and paid a special dividend of ZAR 2 per share during the period under review, landing at an increase of ZAR 3.666 billion for the period under review. This graphs depict the evolution and steady growth in dividends paid since 2021. That's a low base because that year was impacted by the COVID pandemic. Remgro doesn't have a specific dividend policy, but the general guidance is a payout ratio of approximately 50% of the cash flow at the center or a 2x cover ratio. And that's depending on the specific circumstances impacting solvency at liquidity at the time of declaration and also considering the foreseeable future. You'll see that in 2025, the cover or the payout ratio was 50% -- and I think that conservative posture was at that stage in September when the Board decided on a dividend, the CIVH/Vodacom transaction hasn't yet been concluded. So the interim dividend, Board declared an interim ordinary dividend of ZAR 1.73 per share, up by 80.2% from the ZAR 0.96 per share in the comparative period. The rationale for this increase is that based on the strong liquidity position, the Board has adjusted the dividend cover to approximate 1.5x for the foreseeable future. In addition, also the weighting between the interim and final dividends have also been adjusted towards the interim dividend Therefore, the increase of 80% is more pronounced at this interim stage and is not an indication of future dividend increases. So this brings me to the end of my presentation. I will now hand over to Ronnie and Jurgens to talk through Mediclinic's results. Carel van der Merwe: Thank you, and good morning. Before I start, I would like to just mention that the conflict in the Middle East is top of mind for us at Mediclinic at the moment, and Jurgens will unpack the situation in a few minutes. To position our strategy and key priorities at Mediclinic, we will start by providing a fresh perspective on the market shifts that continue to take place and our strategical and tactical responses there too. Throughout our history and perhaps more importantly, as we move forward, Mediclinic's success will depend on our ability to adapt, evolve and consistently deliver expertise you can trust. That commitment continues to anchor our strategy. In setting our strategy, we consider the following key external pressures that impact on how we define our business. First of all, consumers. In the current and future environment, consumers expect same or next-day health care access, proactive communication and also convenient community-based or virtual care. Second is payers. As a consequence of the rising cost of health care globally for various reasons, payers are increasing tariff pressures and steering care towards lower care settings. And thirdly, competitors. In this dynamic environment, our competitors are consolidating the market and new competitors emerge, leveraging digital channels to capture the front door access to health care. And our response is to defend and strengthen our inpatient core while building a broader, cost-efficient health care ecosystem. In doing so, we aim to, first of all, strengthen our core business by establishing systemically relevant clinical powerhouses that anchors our reputation and also our service offering. Secondly, to expand our clinic -- outpatient clinic and day case networks and deepen our home care services as well as outpatient services, establishing a spectrum of service and operational footprint, also increasing the touch points with clients and driving scale. Thirdly, to invest in superior client experience, ensuring that clinical care is epic center of what we do and embed -- also embed digital solutions to facilitate access to coordinate care, to orchestrate referrals as well and thereby driving lifetime value for our clients. Our North Star remains clear. We aim to be the provider of choice, enhancing the quality of life in every interaction with our clients. Then moving on to progress on priorities. Our key priorities that are aligned with our broader strategy are aimed at focused and decisive execution to sustain growth while improving performance. With reference to the key priorities discussed in December of last year, we continue to make good progress. In our results for the 6 months ended 30 September '25, which we will discuss in more detail later, Jurgens will do that. We've seen strong volume growth across all 3 divisions as well as care settings. This growth has been complemented by a shift in specialty mix towards a higher acuity as well as continued growth across our continuum of care, reflecting in our strategic initiative towards clinical powerhouses as well as growth in related businesses. Alongside growth, we are optimizing performance improvement and driving operating margins through improved efficiency. As communicated before, we are in the process of our operating model review aimed at, amongst other things, driving cost efficiency, empowering our facilities to drive growth and being agile to respond to the market changes. We set ourselves a target of total savings of up to $100 million by the end of financial year '27. To achieve this, each division has set clear objectives through defined initiatives over a 1- and 2-year horizon. Up to the end of September '25, our combined progress reached $63 million of savings. We remain confident in our ability to reach and hopefully even surpass our target savings. Throughout the group and particularly in the Middle East, we are establishing clinical powerhouses supported by digital access to health care services. In September last year, we consolidated Mediclinic Al Noor Hospital and Mediclinic Airport Road Hospital in Abu Dhabi into a single integrated flagship medical powerhouse at an extended Airport Road campus. The consolidated 265-bed facility at more than 74,000 square meters and supported by an additional investment of AED 122 million represents a significant commitment to clinical excellence, advanced infrastructure and superior client experience. In November '25, we launched a new app in the Middle East, which has extended our referral network as well as our virtual platform in the region. Through a combination of growth and efficiency, together with disciplined capital allocation, we've reduced leverage and improved our return on invested capital. With the improvement in earnings, our return on invested capital has now reached 5.1% from 4.2% in March '25, while our leverage ratio has improved in the recent reporting periods to the current 3.1x. And then I'm handing over to Jurgens. Thank you. Jurgens Myburgh: Thank you very much, Ronnie, and good morning, everyone, and thank you for the opportunity. The group delivered pleasing results for the 6 months ended 30 September 2025, driven by underlying volume growth, particularly in the Middle East, a favorable specialty mix and continued implementation of the operating model review, as referenced by Ronnie. Revenue increased by 10% to $2.6 billion and is up 5% in constant currency terms, driven by strong growth in patient activity across all 3 divisions and care settings and a favorable increase in the specialty mix driving average revenue per admission. Adjusted EBITDA increased by 23% to $397 million, up 18% in constant currency terms. The group's adjusted EBITDA margin was 15.5%, supported by a combination of revenue growth and cost efficiencies. Adjusted earnings were up 91% at $159 million, reflecting the strong operating performance, together with the reduced depreciation and amortization and net finance charges. The group delivered cash conversion of 84%, impacted by low collections in Switzerland and Southern Africa, and we continue to target 90% to 100% conversion rate at year-end. Looking at this in more detail by division and starting with Switzerland, revenue was in line with the prior period at CHF 930 million, driven by an increase in underlying volumes, offset by the impact of ongoing negotiations on doctor tariffs in Western Switzerland, affecting our hospitals, in particularly Geneva and Lausanne. Inpatient admissions grew by 0.6% and general insurance mix increased to 53.3%. Adjusting for the impact of Geneva and Lausanne, inpatient admissions grew by 1.8% and the insurance mix was more in line with the prior period. The occupancy rate was 53.4%. Outpatient and day case revenue increased by 7% to CHF 211 million, contributing some 23% to total revenue during the period. As a direct result of the ongoing turnaround project, including the effective management of employee benefit and contractor costs, operating expenses declined by 2% compared with the prior period, delivering a 14% increase in adjusted EBITDA to CHF 122 million. The adjusted EBITDA margin increased from 11.4% to 13.1%. Adjusted earnings increased from a loss of CHF 1 million in 1H '25 to a profit of CHF 31 million in the first half of this financial year. In year-to-date trading, Switzerland continues to be impacted by the volume shortfall in Western Switzerland. This notwithstanding -- as a consequence of good volume growth across the rest of the business and continued progress in our turnaround project, we're targeting marginal revenue growth and stable EBITDA margins in this financial year on the back of what was already a very good second half of the previous financial year. The ongoing tariff disputes exacerbated by the change in outpatient tariff dispensation will impact our cash conversion in the region over year-end. Looking then at Southern Africa, revenue for the period increased by 8% to ZAR 12 billion. Compared with the first half of last year, paid patient days increased by 2% with day case growth exceeding inpatient growth. Occupancy remained stable at 69.9%. Average revenue per bed day was up 5.3% compared with 1H '25, reflecting year-on-year tariff increases and specialty mix changes. Adjusted EBITDA increased by 12% to ZAR 2.2 billion, resulting in an adjusted EBITDA margin of 18.5%. Adjusted earnings increased by 36% to ZAR 861 million. In year-to-date trading, the division has continued to see steady growth in bed days sold and this, together with disciplined cost management, is targeted at delivering revenue growth ahead of inflation and stable EBITDA margins. Finally, then in the Middle East, in trading up to the end of February 2026, the month before the conflict started, the Middle East experienced good revenue and EBITDA growth on what was already a strong comparative period in the second half of the previous financial year. The consolidation of our facilities in Abu Dhabi City has surpassed our expectations. Consequently, we were anticipating revenue growth for FY '26 in the mid- to upper single digits and an incremental improvement in the EBITDA margins. The onset of the conflict in Iran and its proliferation to the broader region has introduced significant volatility in the short term and uncertainty in the medium- to long-term performance of the business. Our primary concern, of course, lies with the safety of our people and patients, and we sincerely appreciate the resolve shown up to now. In the month to date, this is now for March of this year, trading has been extremely volatile with some days materially below and others above expectations and is further obscured by Ramadan and the Eid holidays. In the medium term, over the next 6 months, we're preparing for an impact on volumes due to the at least temporary movement of people out of the region. The longer-term impact on the performance of the business will depend upon the intensity and duration of the conflict indirectly and more directly on its impact on the population of the UAE and the broader macroeconomic environment. Our business in the Middle East is financially and operationally robust, and we will prepare ourselves for every eventuality depending on the outcome of the conflict. In the meantime, we closely integrated with the health care authorities and facilities in both Abu Dhabi and Dubai, seeking to provide care to those who need it and making sure we do so in a safe environment for our patients and staff. With that, I'll hand over to the Heineken team. Jordi Borrut: Thank you, and good morning, everybody. My name is Jordi Borrut, and I'm accompanied -- I'm the Managing Director of Heineken Beverages, and I'm here accompanied by Radovan Sikorsky, who's recently joined as our Finance Director, but who has been at Heineken for nearly 30 years. Moving to the presentation. Before I -- we go into the results, I'd like to highlight the macroeconomic environment and the opportunity for Heineken Beverages in the countries where we operate. If you look at the map, Heineken Beverages is a company that operates in 13 markets across the Southern Africa, as you can see, with the main markets being, of course, South Africa and Namibia, but also important markets like Kenya, Botswana, Uganda, Tanzania. And we have a strong local network of local productions in South Africa and Namibia and Kenya with in-market distributors and commercial operations. And like in some of the more developed markets where we see a muted growth in the alcohol consumptions, in the case of Heineken Beverages, the market and the footprint where we operate still offers a significant headroom for growth. And that's true for the international markets outside South Africa and Namibia because if you look at the key markets, we have a strong population of nearly 200 million inhabitants with a growth of about 2% to 3% per year and a significant headroom for alcohol consumption driven by low per capita of many of these markets. It is true that our main market remains South Africa, but there again, although the per capitas are higher there. As we said, the market remains resilient and continues to grow at about 2% to 3% per annum with significant opportunities for Heineken beverages in some categories like in beer, where our market share is still below 20%. Finally, we've got opportunities driven our multi-category portfolio, which allows us to tap into different consumer occasions segments and price points, leveraging our portfolio that we've now been able to manage and execute in a better way. And we have a capital-efficient organization. As we produce mainly in South Africa and Namibia for the entire African markets, allowing us to leverage the production capacities of this market. Moving to the next slide. I'd like to reflect on the 5 priorities, which if you recall from last year, these are the same priorities we highlighted a year ago. The difference is that post integration since September '23, the main focus for the company was, of course, the integration of the 2 of the 3 entities. And in that side, we focus on Pillar 4 and 5 which was about the efficiency, leveraging the synergies, driving down the fixed and variable expenses and also creating a one company from a people perspective. With that being achieved now with our case fill and service levels having improved significantly, the organization being now stable, our focus has shifted to the top line growth. And that's basically the top 3 pillars in our strategy. And looking at those 3 pillars, I'll start with the first one, winning in beer. This reflects mainly in the South African market, where, as I said, we have the biggest opportunity for growth, and it's the largest category in South Africa. Here, we want to continue to drive growth through our portfolio, mainly in Amstel and Windhoek in the mainstream categories and continue to premiumize Heineken post the shift from its nonreturnable to returnable bottle as well as to optimize the profitability of the category. If you look at the second pillar, build brands with power. This talks about our drive to build strong power brands at national level. We have, as Heineken beverages, more than 60 brands now across the different categories. So we've been very choiceful to select the 12 key brands such as Savanna, Bernini, Amarula, that we really want to drive nationally as power brands. But next to that, we want to complement and we are complementing this brands with local strong regional brands that have a very strong connection with consumers in those markets, such as Richelieu or Viceroy and that's the power of the combination of the strong national with local regional brands. The third pillar talks about customers and consumers and how we want to drive a closer connection with consumers and customers through partnership with our route to markets and retailers. We've been improving significantly our capabilities there with joint business plan with better insights and information, which we want to leverage to offer better propositions to these consumers and customers. Now the focus on this top line growth doesn't mean that we will abandon the 2 other pillars that remain critical to our business. And as you will see, by results explained by Ronnie, has been the main driver of our performance. So we will continue to drive efficiency in variable expenses, and we will continue to drive engagement score. Currently, our engagement score sits at 80%, and that's 12 percentage points better than 2 years ago post integration, which is a testimony of the good work and the unified culture of the company. By the way, we've been ranked the #1 top employer in the FMCG in South Africa recently. Now moving to the next slide, just to highlight on the key commercial activities continuing in the top line growth that we've executed throughout the peak season, specifically in this first half, 6 months. Without going into all the details, I would like to stress that our execution commercially has improved significantly in the last year. And that we measure in the way we execute the campaign compliance execution as well as the number of outlets we visit and execute against. It's important to say that the organization now is organizing channels. And that's reality for South Africa and for Namibia. And that's relevant because different channels have very different roles for consumers in the alcohol segment. The what we call fragmented channel is the most important one, and that's where we have the largest sales force. There, we do flagship activations, but we drive visibility and availability of our brands. Then we have the modern trade channel where -- the drive is to joint business plan with our retailers and drive shelf visibility and in-store execution and leverage the strength and the power of our portfolio. And finally, more than on-premise channel, which is not so relevant from a volume perspective, but it's very important from an image perspective, where our teams are focused on experiential execution and focus on the top-tier on-premise outlets to drive partnerships. With that visibility on the commercial key activities, I'll pass the word to Rado to give us a highlight on the financial performance of these first 6 months. Radovan Sikorsky: Thank you, Jordi. Good morning, everybody. Nice to be here at the Remgro Analyst Conference. Yes. So the result, it's a nice green picture for us, I have to say. We have nice revenue growth of 2% coming to over ZAR 31 million, which is nice to see. We see that the second half, the HBSA, the local South African operation is really coming to the fore. So that's nice to see as well. And if we look at the earnings, a really strong growth, right? So a strong performance overall. Now the margins have expanded very nicely in terms of our mix. But a lot of work has been done on productivity, on the variable costs in terms of driving efficiencies there as well by the supply chain team. And of course, we're getting the leverage of the revenue on our fixed cost which is driving a really strong bottom line performance, as you can see on the slide. In terms of our cash performance, also very strong cash performance coming through really strong in the peak, our cash flow management. So in the seasonality of our business, in the last 3 months, very strong cash flow performance, which has really helped us in terms of improving our net debt performance there as well. So if we go to the next slide, so just overall, a bit more on his summary. You can see in the waterfall, the ZAR 392 million increase in headline earnings, the profit before tax, that is really the underlying part of the business, which is now largely coming through in terms of the total performance of the business, but also in terms of the ZAR 370 million, which is a combination of the equity earnings that we are getting from some of our minority holdings, that's also coming through nicely as well. And we had a few one-offs that we are cycling from the previous year as well. And of course, there is the increase in our taxation with the improved result, bringing us to a reported headline earnings of ZAR 824 million and that adjusted for the IFRS amortization, we come to a total of just over ZAR 1 billion headline earnings for the 6-month period. Jordi Borrut: Thank you, Rado. Now moving to the final slides of our presentation. If you look at the revenue, as Rado explained, our revenue growth at 2%, still below our long-term ambition of revenue. But important to mention that revenue was mainly driven by the beer category, which performed significantly well with Amstel and Windhoek doing well and robust gains beer across the Africa regions in general. Ciders was resilient with Savanna being a resilient brand and Bernini as a standout performance. And then we have negative performance on wine and spirits, specifically on the boxed wine on the value wine and on spirits on the gin and spirits business, although important to reflect that on the brown spirit where we have our strength, we performed much better, brandy and whiskeys. If you look at the next slide, looking at the revenue contribution for market, what you will see is that South Africa remains the biggest contributor of revenue but Namibia has an important role to play in revenue and also in profitability. I want to remind the -- that Namibian breweries is stock listed in the Namibia Stock Exchange. And you can see the full results in their website. And finally, HBI, the international business outside South Africa and Namibia, delivered strong growth in top line. And as we said before, we see huge opportunities in the potential of these markets as we expand our footprint across many of these new opcos. In conclusion, moving to our last slide, the macroeconomic environment remains volatile with a slow economic in South Africa, although we see stabilization. And it's important to mention that the alcohol consumption, specifically in South Africa continues to be resilient, as I said before. And rather than being suppressed, it's shifting to different segments. So we see a consumer shifting to value and more premium. And the good news is we can play in both through our portfolio and price points. Of course, we are monitoring the conflict of Iran. It has a significant an impact in our HBI volume, which is not significant. The volumes we sell in the Middle East from a commercial perspective are not significant, are mainly in the non-beer and they are not very relevant in the scope of HBI and Heineken beverages, but the impact is more in the oil and the transport impact that it will have, it can have in our company and we're monitoring that very closely. Although we don't see any supply chain disruption at this stage and we don't see talking to our partners and suppliers. From an industry, the markets, as I said, continues resilient, but there's a heightened competition, both from the competitors and illicit market that is really affecting us, specifically on the spirits and on the white spirits. But we continue to see many opportunities, first, because of the strength of our portfolio. We have really broad portfolio that allows us to tap into different occasions and price points. Innovation continues to be a pipeline for growth as we have seen in the previous 6 months and we will continue to drive a disciplined cost and capital allocation, as we've shown in the results. Finally, we see a margin recovery, and we expect to continue delivering a margin recovery in the next years. Thank you so much. And now I'll pass on to Dietlof for CIVH. Dietlof Maré: Thank you, Jordi. Good morning, everybody. I would like to do the presentation in 3 steps, a little bit of a strategic overview, then a market analysis, and then the financial update. So I think close to our purpose, we believe in connecting South Africa, changing lives, giving data and abundance to South Africa. And I think with that, we're unlocking the scale and we play a part in this digital future of South Africa. And that's the purpose and our belief, and that's what we believe we must need to actually change our South Africa do business and compete with rest of the world. So if you look at it from a Maziv point of view, the focus was really to increase the free cash flow. And we did that in different ways. We monetize the assets. So we've got very strong consumer Vuma assets. So really looking at penetration rates. We looked at the value of it, we looked at ARPUs, generating as much cash on these assets as possible. Then we also looked at DFA, the enterprise side. We had to really monetize the network. And we took 12 million fiber kilometers of fiber out the grounds, and we rehabilitated the network to monetize basically that asset. The result of that was a 31% increase in free cash flow before CapEx of ZAR 1.5 billion. But I think more important, and we did touch on that was this positive momentum on the headline earnings across the group. And that's what we have to continue, and we obviously have to sustain that going forward. So from a DFA point of view, really the upgrades, the 12,000 kilometers that we replaced in the metros were key for us. We're future-proofing the network. We're getting closer to the end customer, getting closer to the premise of other end customers, giving us the ability to install quicker, to obviously look at the customer experience side and to create value for especially the fibre to the business sector in South Africa. What is very positive is also our fiber to the sites and fiber to the towers, that underpins our cash flow across the group and across the enterprise segment. This is linked to these blue-chip MNO companies, long-term contracts. And we're building the business around this sustainable revenue within the sector. So we still saw a 7% increase in linked growth across the enterprise segment. Although we slowed down a little bit linking stores because we were upgrading and rehabilitating the network a little bit. We had to obviously control that, that impact our revenue a little bit. And it did increase our cost a little bit because we had to do huge amounts of work on the stabilization and rehabilitation of the network. But we future-proof the network. So we've got a new fiber technology in very close on the DUDCs, which is this underground, dry underground cabinets very close to the premise of the businesses and buildings in South Africa. So we believe we'll see the benefit. We will see the short- to medium-term benefit of that. From a Vuma side, really focusing on the penetration rate. We took the penetration up to 44%. We also improved the economics network versus the revenue conversion, seeing a revenue growth of 15% across the group. And really, I mean, we started building because of the holding pattern of not building really under the Vodacom deal. We started slowly building again 200,000 homes over the period. But we slowly, slowly getting the uptake to go and getting the engine to move to obviously address the underserved areas in South Africa. From a massive Vodacom point of view, very positive news for us as a group. It took a little bit long for us to get the deal over the line, but the deal is over the line. I think we're seeing a strengthening of our balance sheet, and that will enable us to accelerate the growth and expand it scale throughout South Africa. What we love is that we've got this untapped, unconnected market in South Africa that we can actually play in with a huge demand for fiber. Enterprise growth, yes, we have to include and integrate the assets from Vodacom into the business as quickly as possible and then monetize on the assets and drive the additional EBITDA that comes in from the deal. I think that's the key focus for us on Vodacom. Really, if you look at the DFA side of the business, stable cash flows underpinned by obviously the fiber to the sites and fiber to the tower businesses. What we see in the market is 5G rollout, really, really accelerating across South Africa. And with 5G and 5G densification comes access to fiber. You can't densify 5G and roll out 5G across South Africa without fiber solution. And that plays into our hands a little bit on the site sides of the business. There's 47,000 sites across South Africa, long-term contracts, blue-chip companies, all the MNOs. And we have got that relationship with those MNOs. So we got 12,600 sites connected to fiber. It's a 1% growth. It's 120 sites that we connected over the time. It's a little bit linked to our metro coverage at this point. But as we expand, as we incorporate some of the Vodacom assets, I mean, that footprint will increase. But what this does is, as you chase towers, you will -- you also open up businesses to fiber-to-the-home, fiber to the business and additional revenue streams as you build out your network from the metros. So very positive segment for me within the DFA, stable at this point. From a business connectivity point of view, this is where we're seeing 400,000 customers across South Africa. And it's broken up in 2 parts. You've got a metro connection side, that's building the access within these metros out. And we're seeing -- even though we didn't connect so much, we were controlling the connections a little bit on driving our network because of the network rehabilitation. We still saw it grow by 4% year-on-year to 6,000 links. But interesting, and more exciting is the fiber-to-the-business connections where we see with modernizing the networks, we saw a growth of 9%, although we were controlling it a little bit. We saw 9% on links to -- just under 55,000 links across South Africa. So we're seeing the strong SME demand for affordability and reliable fiber. And I think that's the thing. Linked to customer experience, this is the critical thing that we believe we should get right to monetize the network from a business and a metro point of view. Vumatel, biggest fiber to the home provider in South Africa. Over 2 million homes passed. Uptake of increase -- uptake 44% across the base. So what we're seeing is very stable growth in the core. We're seeing Reach and Key also growing exponentially. But what we're seeing is there's also this expansion segment that we have to address because the need is there for connected South Africa. So we split that always into the 3 segments. The core segment, 2.2 million homes in that segment. It's quite a mature market. It's penetrated. It's 34% overbuilt. We got a very good market share in this of 41%. You can see there we didn't build a lot of homes as the market is quite penetrated. But we saw a stable 3% to 4% growth in subscribers. That uptake going to blend it across the base at 45%. But what we've seen more positively is that our early adopter areas, the areas that we built right in the beginning is touching 77%, 80% uptake, which is very positive. From a reach point of view, very good markets, 5.6 million homes, very little overbuilt. We got a big market share in this segment. 1.1 million homes we've passed in the segment. You can see we didn't build a lot over the last period, only 3% because we were in the holding pattern because of Vodacom, but we're slowly, slowly now driving that build out because of the stronger balance sheet and then also the deal that was confirmed. Subscribers grew by 21% across the base. And the uptake going to 43%, which is for us, a phenomenal story, which we will just build on monetizing this asset. What we're seeing is Key and Reach areas that's -- the only differentiation there of split there is the household income. That's under 5,000 and a month income in the key markets. But what we see is, as we go into the reach markets, which are becoming a little bit smaller, you're actually touching the key markets as well. So we're going to start combining these markets because if you pass the reach homes you have to connect the key homes as well because they're a little bit interlinked. So really, these are the markets. This is where we're going to expand. This is where we're going to build the 1 million homes that we committed at the commission. And this is where we believe that the future revenue growth will come from -- in the organization. If you look at it from a financial point of view, strong financial results, 11% revenue growth year-on-year, 11% EBITDA growth, but I think back to the headline story earnings story, positive in Vumatel, positive in CIVH, and DFA maintaining a positive headline story. And this is what we want to build on. So if you look at the revenue, 15% in Vumatel, 50% growth year-on-year to ZAR 2.1 billion and EBITDA, 18% up to ZAR 1.5 billion for the period under review. But more importantly, we're seeing very positive movement on operating earnings of 60% year-on-year of over ZAR 1 billion relating then back to a headline earnings of ZAR 254 million for the period, a 287% increase. DFA remained stable, 4% growth, I think, impacted a little bit by the links that we slowed down on a little bit of additional cost in the structure that will normalize going forward, but still a strong 4% growth year-on-year in revenue, 4% EBITDA growth, operating earnings 2% up ZAR 592 million, and then 10%, strong 10% growth on headline earnings to ZAR 219 million. From a CIVH point of view, revenue 11% up to ZAR 3.7 billion, EBITDA, ZAR 2.4 billion, also 11% up, but more positive is obviously the operating earnings 49% up and then a very, very positive movement on the headline earnings to ZAR 216 million for the period under review. So as I said, focused on free cash flow. So really, we saw a strong free cash flow coming in backed up by the EBITDA growth. We saw the 11% growth on EBITDA. But what you also see is cash after tax and interest also growing by 31% year-on-year. And I think that's very, very positive. And then if you look at the additional cash generated of ZAR 256 million year-on-year, giving us then a very positive net cash surplus for the year. If you look at the future, I think for the future, we will continue monetizing the asset, I think, really driving the uptake and the value propositions that we deliver on our current fiber-to-the-home assets. We have to capitalize on the network upgrades and rehabilitation that we do. And the segment that we're going to focus on really is the fiber to the business segment where we were seeing this huge demand of growth going forward. Then we're obviously going to integrate the Vodacom assets into the business quickly and monetize it as fast as possible. That's both metro fiber and the fiber-to-the-home type of assets. And then with a stronger balance sheet, we have to obviously start expanding, again, start building the way we used to build and really making sure that we keep our market share within the fiber-to-the-home space in South Africa. Lastly, I think we must keep executing on this positive headline earning story that we showed in this result presentation. Thank you. P. Cruickshank: Thanks, Dietlof. Good morning, everybody. Just moving into some headlines for RCL Foods. I will focus most of today's conversation on sugar and the dynamics that are playing out in that market and touch briefly on our other business units. But just few very briefly updates on progress against our top strategic priorities, and I'll just call out a few of the more material ones under right growth in Future Fit, which are our 3 strategic pillars. Starting with net revenue management, and that is the frequency and depth of our promotional activity across our brands, with savings exceeding our own internal targets in that space. so progressing well. We have some innovation projects in baking, which have been launched within the period and then also post the period, one being sourdough bread and buns in KZN, and Gauteng more recently, in March, our PIEMAN'S POCKETS innovation launch. And whilst early days in both, early signals are good, and those innovations are gaining traction. Building brand equity in a branded food business is crucial. Our equity scores across our brands have improved in the period. And despite our results, we continue to commit our investment into those brands to ensure that our equity remains strong and grows. And we don't start saving money against our marketing spend. Lastly, to call out as continuous improvements with low inflation and a consumer under significant pressure, which has been touched on in other segments of the presentation. Continuous improvement and savings targets remain crucial to protect the consumer from price increases that may come through. From a numbers perspective, we went through this in our results, but all numbers across the board are unfortunately negative, mainly driven by sugar, which I'll unpack in more detail, including our return on invested capital dropping below 10%. Just EBITDA performance, waterfall, and I'll just focus on the middle section. And the waterfall unpacks most of the reconciling items related to the prior period on the left with the one reconciling item in the current period being IFRS 9, which is immaterial. So EBITDA down 14.9%. Let me start with groceries. Improved performance in groceries driven by margin improvements in culinary, largely a result of continuous improvement in net revenue management activities, which I referred to earlier as well as improved volumes in our pet food business. Baking is a story of 2 halves, milling and breads volume under pressure and down in both of those segments, but being offset by improved performance in specialty and our PIEMAN'S business. and sugar the story that I'll unpack in a lot more detail, ZAR 250 million down on the prior year. Just to unpack the long-term historical performance, and this really is about putting context to the sugar result, but let me start with the gold bars at the bottom, and that reflects the other parts of the business, predominantly made up of groceries and baking. Steady improvement over the last 5 years, with the exception being F24 which was the load shedding year, which impacted our Randfontein plant significantly, but in that context, the other parts of the business continued their steady improvement, but overshadowed by the sugar performance of ZAR 387 million EBITDA for the period. The important context is we consistently said that '24 and '25 were record years, and that has unfortunately played out. But the ZAR 387 million, you can see the impact in context of the prior period, call it, '22 and '23 also significantly down. And I'll talk to you why in a minute. But it does give you a good indication of the volatility of sugar and the impact it plays on RCL Foods' portfolio. Just unpacking the sugar industry dynamics, and there's 2 parts here, the dollar-based reference price and Tongaat. I'll come back to why we talk about a competitor and why it's important in a minute in our results. But let me start with the dollar-based reference price. And effectively, that's the referral to the tariff that is in place to protect the sugar industry. Let me just start with why is the tariff important in sugar? And international sugar markets and prices is effectively a dump price. All international producers exceed their local supply. It's an economies of scale initiative and to make sure that you protect your local production for fluctuations in our agricultural performance, you generally oversupply, have excess supply than your local market. And as a consequence, the international price, which is often referred to in cents per pound is a dump price onto the market. All countries that are invested in sugar have a protection mechanism in place, including ours. Our challenge is ours is currently underwater. So it is cheaper to import because the dollar-based reference price has not moved with inflation since it was implemented in 2019. Detailed on the slide is some of the truing and fraying between ITAC and SASA. What I'll just focus on is that the second bullet ITAC is subsequently declined both applications in January '26 and launched their own investigation, which we think will speed up the review and hopefully arrive at an answer sooner rather than later, and we're optimistic in that regard. Delays have obviously had a significant impact. This has been going on since October '24. And to date, 160,000 tonnes of imports came into South Africa. Deep sea imports as we refer to them, coming through the ports a further 30,000 tonnes has come in subsequent to the 31 December cutoff for the period. And just to explain that, effectively, what happens is that tonnage displaces local sales and forces the industry to export that volume at a significant discount. So your revenue adjustment from the decrease price between local price and exports is effectively what displaces your profit and it flows straight to the bottom line, and that's how [ ZAR 250 million ] is made up. Just to talk about Tongaat and why it's important is that the industry works on a division of proceeds model. So all revenue that is sold, be it local or export is pooled and based on a formula is allocated between the millers and the growers with 64% of that proceeds going to the growers. This mechanism is put in place to ensure that there is fairness between millers and growers and to protect the growers in times of strife like we have now. So that is why Tongaat survival from a commercial perspective is important. They filed for provisional or the Business Rescue Partners filed for provisional liquidation on the 12th of February. That case will be heard in the middle of April, and there is significant activity and counter applications that are in place. So we are not sure at this point how that may actually play out. Just on the final point, I spoke about the commercial reasons for Tongaat to survive but there's also a social reason, and they have significant impact of KZN, particularly in the rural communities. And we are hopeful that a solution will be found as soon as possible. This is also been ongoing for many years, and they went into business rescue in October 2022. And then finally, looking forward, just to touch on one thing that's not on the slide, as we mentioned a couple of times in the presentation is the war in Iran and the impact from a food perspective on fuel and other fuel-related costs, particularly into packaging and supply of raw materials into our plants. At this point, and it's very difficult, almost impossible to control this to fuel supply. There's no indications of concern. We get regular updates and are monitoring that carefully. We do move significant volumes of raw materials around the country and obviously finished product. So it is worrying and it's something that we are monitoring closely. The impact of the oil price and its cost impact will be assessed as we go along with, obviously, price increases being a last resort to mitigate that impact across the group, and we'll monitor that as we go. Just I've spoken about sugar, so I'm not going to touch on that one. I'll just briefly touch on pet, and we refer to restoring service levels in our pet food business and the audience will be aware that subsequent to us reporting our results, we did recall pet product from the market, and we are busy getting our plants back up and running, which will hopefully be fully -- in full production soon. And then we move into a phase of rebuilding our brands and service levels as a consequence of that impact. And I think I'm handing over to Jannie. Jan Durand: Thank you, Paul. Earlier in this presentation, I touched upon the macroeconomic environment which we operate in currently and as you all are aware, Ronnie and Jurgens has spoken about our direct interest in the Mediclinic. And so it's really affecting us as well. And so in February, the global backdrop has become even more volatile with the Iran U.S. conflict now creating a genuine energy market shock, the sharp market swings we've seen reflect growing concern about sustained disruption in the region central to global energy flows and the potential for broader destabilization spill over. And I think nobody knows what's going to happen. I don't even think President Trump knows what he wants to do there exactly. And the degree of volatility seen in the market since reflects a market that is struggling to price the risk of sustained disruption in the region that remains central to global energy flow. You've all seen the chart 20% of oil flow through that. But the indirect impact on fertilizers, the agricultural sector is also a concern for us. This reinforces our concern that the consequences of a prolonged conflict may be broader and more destabilizing than the immediate headlines suggest. In contrast, the South African backdrop continued to improve since December with modest growth momentum, easing inflation and continuous progress in the reform agenda. Nonetheless, household remain -- pressure remains acute and global volatility for [indiscernible] these gains. This is actually the reality of the backdrop against we're actually operating with now. And also we're going to operate within the second half of the financial year. We expect some impact but our strength and fundamentals, consistent delivery and a resilient balance sheet position us well to navigate these uncertainties and challenges. As I round up, I want to pause and remind us of our strategic priorities with the execution of up until now has given us enough proof points of success. As you can see on the slide, our priorities remain unchanged. They are not short term. That requires a sustained and deliberate attention and today's results show clear progress in this regard. Looking at the year ahead, I'm excited to continue building on the progress of the current year. We will do this through continued active partnership with our management teams and co-shareholders to drive sustainable performance in our underlying portfolio. We'll keep sharpening and simplifying the Remgro portfolio as we've done now while pursuing disciplined value-accretive capital allocation opportunities in a manner that takes into account the risk posed by the current operating environment. Our sustainability priorities remain a key area of focus, and we are committed to improving disclosure, strengthening the ESG alignment across the group and advancing climate-related scenario analysis. We will be better placed to talk to our progress on this at the year-end. These remain the 3 key priorities for us as a management team, which we believe, done right, will aid our efforts in achieving our goal of crystallizing value for our shareholders. Beyond our portfolio, South Africa's muted GDP growth, strained consumers and high unemployed rates continue to pose challenges. The indirect effects of the current conflict will magnify this impact, the quantum which are difficult to predict right now. As I said earlier, our portfolio is certainly not immune from this impact. We are realistic about the scale of these challenges, but our team is energized, resilient and committed to applying creative solutions where needed. This will enable us to make a positive contribution for the benefit of our shareholders and the wider community in which we operate, and that is also in line with our purpose. I'm grateful for the tireless work of our teams and respective management teams and encouraged by what we've been able to deliver as reflected in today's good results. I really thank you for your time, and I thank you for my colleagues for their time for doing this presentation, and we will now open the floor for questions. Thank you very much. Operator: [Operator Instructions] I will now hand over to Lwanda to go through webcast questions. Lwanda Zingitwa: Thank you, and good morning. Lots of congratulatory messages Jannie and the team on a great set of results and particular excitement about the dividend level. Maybe just to get into some of the simpler questions before we go over to Ronnie and Jurgens on a lot of questions around the Middle East. The -- just on the cash buildup, and this is for you Jannie and Carel, how should we be thinking about the buildup in the group? Is it a question of special dividends to expect in the future? Or are we talking about potentially additional investments in the portfolio, appreciating that it's difficult at this stage to make assumptions around the market. Jan Durand: I think just on the cash buildup, I think in uncertain times, it's the optionality and also the defensiveness of sitting on the cash is quite -- give us some comfort. I mean, not long ago, we were sitting on debt. So we didn't time the war, but I think it's now for the time being, it's good to sit on that cash to have in reserve for what might happen going forward. I think what you will see, as Neville has explained in the dividend payout, we've reduced the cover ratio. And that is what we'll continue to evaluate. If we sit on a significant cash pile that we think is defensive, we might even look -- relook at some of those cover ratios and pay a higher dividends. Doesn't really matter if it's a special or a normal dividend. I mean, from our perspective, a dividend is capital return to the shareholders. But its also does nicely to link the normal dividend due to the underlying cash flow on a yearly basis, what you receive and what you pay out in an investment holding company. So I think we might see some increased dividend, but it depends on the circumstances going forward. And it's quite unsure of what might be happening going forward. I don't know if you want to add anything to that, Carel? Carel Petrus Vosloo: No, Jannie, I think you've covered it. Lwanda Zingitwa: And for you, Carel, can you just talk through the valuation of Capevin and whether there's been any further interactions with Campari on a way forward? Carel Petrus Vosloo: Yes. Certainly Lwanda. So the Capevin, just for context, is ZAR 1 billion, I think, that we're carrying it at roughly that sort of level. So a relatively modest exposure. But to give you a sense, we've taken the value down a little bit. I think we were at around [ ZAR 15.5 ]. Now we're at about [ ZAR 13.5 ]. So it's a bit lower than where it was. That's a long way away from the most recent meaningful transaction in the shares or specifically the Campari shares to get to that question. There's certainly many ongoing conversations with Campari, the fellow board member with us on the Board, so we engaged with them frequently, but certainly not on anything to do with our respective shareholdings. It is -- and now we'll be clear that the values at which we are currently carrying the stock, I don't think resembles at all, but we think the value of this investment is, we are very calm and reassured by very high-quality brands and assets that we have. This is a particularly difficult time for the spirits industry and we will be patient. I can't speak for Campari and their plans, but we're certainly focused on doing the right things for the business in the near term. Lwanda Zingitwa: Thanks, Carel. And while you're in valuations, do you anticipate any changes or material changes in how you think about valuations on the back of changes in bond yields that have taken place since December? Carel Petrus Vosloo: That's obviously something that's an important input into our valuations. So in the last 6-month period, bond yields came down a fair bit I think it was 170-odd bps that the risk-free rate came down. We were very thoughtful and careful not to get over our skis on taking the impact of that straight through the valuations. So we were -- we made sure that we also temper longer-term growth rates to reflect lower long-term inflation assumptions that are now embedded in the long-term yields and also where we thought it was necessary to apply a bit more moderation to forecast, we also did that. So firstly, to say that I think we were careful in not allowing the lower yields to run away with our valuations. Do we expect that, that could be a headwind going forward? So we did have a look at the impact of yields between the year-end and where we are now, and there's obviously been a bit of an uptick not nearly giving back all the gains that were made in the 6-month period. But certainly, some of it was given back. So I expect there will be a bit of a headwind, and we will need to assess that at the end of the year. Lwanda Zingitwa: Thanks, Carel. And Ronnie and Jurgens, I think Jurgens covered some of this in the presentation, but there's quite a number of questions on the Middle East and the impact of the war. And maybe if we group them into 3 themes, 1 being how do we think about the impact from an occupancy perspective? And then secondly, being the impact of your reliance on the expert community on your volumes? And then the last one being supply chain disruptions impacting hospital suppliers that you would ordinarily import into the Middle East? Carel van der Merwe: Thanks, Lwanda. I'm going to start, and then I'm going to hand over to Jurgens. I just want to make 3 broad comments. The first one is, first of all, the safety of our staff and our patients are of utmost important to us. That's priority number one. The priority number 2 is business continuity, which at the moment is a day-to-day affair basically because things change on a daily basis. And then point number 3 is scenario planning for the immediate short and medium term, which is what we're busy with. They have many moving parts currently. But to get into more of the detail of the questions, Jurgen's over to you. Petrus Myburgh: A couple of things. Firstly, when we talk about the significant volatility that we've had in March so far, just to give a little bit of context to that. Firstly, it's been Ramadan, and that in and of itself has a somewhat disruptive impact on the business. That was followed as is the case with the Eid holidays. There was a movement of the spring school break within the month as well. And then, of course, the war and the start of it in the beginning of the month and the continuance of it throughout the month. And so as I indicated when I spoke about this earlier is, obviously, at the start, we saw an impact on particularly our outpatient volumes. But as this has progressed, we've seen some days that are significantly below what we'd expect it to be and some days above where we expect it to be. And so qualitatively, we can talk about this as being a volatile environment and really difficult to predict at this point. And as a consequence, quantitatively saying that what we have in the Middle East is a financially and operationally robust business that's in the process of planning for every eventuality. And that's incredibly important because whatever that eventuality looks like, as Ronnie indicated, short, medium to long term, short term, we do expect people movements to take place, and we do expect that to impact our volumes, let's say, up to the end of what would be their summer to the end of August. But more medium to long term, how do we think about the growth prospects of this business and how does it impact some of our planning and how do we look at the balance between organic and inorganic growth within that context as well. So I think qualitatively, this throws up many considerations and all of which we're currently working through, but just quantitatively difficult to try and be predictive about this given the volatility that we're experiencing. Lwanda Zingitwa: A question for Jordi and Radovan online. Just the performance of Heineken since December, so how trade has been since the peak period and how you think about that in the context of the concentration of public holidays in the month of April? Jordi Borrut: Yes. Thanks. So as you can imagine that the first quarter of the year is difficult still to read, first, because in this first quarter, typically, all the companies increased prices following the excise announcement. And that price increase has changed significantly across different companies. And that has a big impact pattern in the buying of the route-to-market distributors. So there's a very significant change and differences in the price increases and the buying patterns and then Easter hasn't come forward, which means also the buildup of volume for the Easter holidays is also different. So in that sense, it's still a difficult quarter to rate. It would be much better to read it at the end of April. Having said that, what we see overall, the underlying trend is that the market, as I said before, remains resilient, which is good news, and we continue to operate at a trading level, which is in line with our expectations. So I think so far, that's what I would say. Lwanda Zingitwa: Thanks, Jordi. Similar question for you, Paul, on the food side and how trade patterns have been since December. And maybe a second question, while we're at it is whether we can expect sugar prices to rise with the potential rise of commodity prices on the back of the conflict? P. Cruickshank: Thanks, Lwanda. So a similar trend in food consumption demand over the last 2.5 months, which previously has been volatile, 1 month up, 1 month down, and we're seeing that trend continue. Volume remains challenged, and it is a bit of a fight to get to that volume amongst all the food producers. So no real change to what we saw in the first 6 months from a volume perspective. Jordi touched on the switcher Easter that obviously plays out in March in our world because most of the demand and power falls happening now. I touched on pets and that quantum is unknown. And obviously, we haven't been supplying the market fully over the last while. So that is having an impact. Then moving to the second question on sugar. So the international price of sugar has moved up from about $0.14 to $0.1570 per pound, somewhere around there. So that would have an impact on imports into South Africa. We have heard that Brazil is obviously switched to ethanol. That is the luxury that they present themselves with and we've heard that a number of supply contracts have been canceled out of Brazil for sugar. So that will play positively into the import situation in South Africa. Our sugar industry in South Africa has not taken a price increase for 18 months. And obviously, there is a lot of having a significant impact on the ZAR 250 million problem that we have between one period and the other. The price -- will there be a sugar price increase? In my mind, that is dependent on the tariff. Almost entirely, if the tariff comes, we will need to take a PI as industry. And there will be an agreement with that tariff on what that PI will be as there was with Masterplan 1, which was you can do multiple times a year, if you like, but it needs to be within the parameters of inflation. So that's what we expect to be part of that condition. Lwanda Zingitwa: Thanks, Paul. Ronnie and Jurgens, any guidance you can give on the plans to exit Spire as yet? Carel van der Merwe: So Spire has been under strategic review for a while, and there's a possible sale process going on. It was announced over the weekend on Monday that discussions with 2 parties have been -- came to an end or a possible sale, but there are still discussions with other parties going on. So that's on the one hand. On the other hand, we're working closely with management as well as with the Board to look at all sorts of scenarios and the eventualities. So in the instance if there is no sale at the moment, how do we reposition the business? How do we develop the business further from a strategic perspective? And how do we improve the performance of the business, given the current scenario in the U.K. market, where NHS commissioning has dropped significantly. Lwanda Zingitwa: Thanks, Ronnie. And the last question on the webcast, Carel, it would be strange if it didn't come up, but what is it that is holding back buybacks and given that the discount to INAV remains elevated and your cash levels are also elevated on the back of the first when stake sale? Carel Petrus Vosloo: So Lwanda, I think the same answer as Jannie gave earlier. So I think some of the things that we're concerned about and that caused us to be cautioned are things that are playing out in the market. Investors would have heard from -- even our Chairman of the AGM that there's a cautiousness about where we are. And I think that's reflected in our current posture on the capital structure. And that remains. If we had to ask what stands in the way, that's the biggest thing that stands in the way are sort of cautious posture at the moment. But we will obviously assess that as time moves on and events unfold. Lwanda Zingitwa: Thanks, Carel. Can we take questions on the Chorus call, please? Operator: Of course. The first question we have comes from Shane Watkins of All Weather Capital. Shane Watkins: Congratulations on a much improved performance. I must applaud you and your team. I really just wanted to follow up on what Ronnie was saying regarding Spire because the concern that I have is that what is good for the Spire Board may not be the same thing that is good for Mediclinic or indeed Remgro. And if I'm dead honest, it's not clear to me that the Spire board has shown themselves to have good judgment in the past. So I just wonder what you guys can do to clean up the structure and exit this investment. I don't think everyone's interest are necessarily aligned in the situation. Carel van der Merwe: Thank you, Shane. You're correct. Not everybody's interests are aligned of all the stakeholders that are in this situation. However, I just want to mention a couple of things. I think, first of all, as we've always been quite clear. We look at long-term value creation for shareholders in this instance, at Spire as well. We've never been interested in all sorts of short-term actions or activities. If it's not going to be in the long-term best interest of the business, its employees, its patients and its shareholders. So that -- having said that, we're working closely with the Board, with the Chair, the current Chair and with management on figuring out what are -- what's going to be the best way forward for this business, should there be no sale process at this point in time. And those are the things we have control over. So -- or not necessarily control, but we can give strong inputs into that. And that's what we're busy doing and we're making use of our own experiences and insights into health care in general to do so. It's a very difficult trading environment at the moment for all the reasons that have been outlined in the press and what I said about NHS commissioning. Shane Watkins: Ronnie, are the buyers that remain legitimate and serious buyers? And by when do you think the process may conclude either way? Carel van der Merwe: Cannot say. It's a process that we don't have access to at the moment, as you can imagine. Carel Petrus Vosloo: Shane just to add, there obviously very narrow timelines which we can comment on these sort of things. So even to the extent that Ronnie had insights, he might not be free to share those. I think we take that commentary on board, and we'll reflect on that as well. But I think difficult for us to be more specific than that. Shane Watkins: Okay. I mean I think the point that I was just making earlier was that for you, it's not so much important at what price you exit, but rather that the structure is cleaned up where there may be other parties that are more price-sensitive or sensitive as to how their role may change, if the transaction took place. Petrus Myburgh: Yes. Understood. Fair comment, Shane. We take it on board. But as Ronnie -- the operationally a couple of things going on. And then obviously, from a corporate transactional perspective, but then also what other value drivers are there within the business, transformational value drivers that we can pursue that drive sustainable long-term value for the business. And I think in that regard, we're aligned with the Board in how we think about that and the avenues through which we can seek to achieve that. So -- but thank you. Comment taken on board. Shane Watkins: Okay. Well, I just want to conclude by applauding the Remgro team on a significantly improved performance. It's great to see. Operator: At this stage, there are no further questions on the conference call. Jan Durand: If not... Lwanda Zingitwa: There are no further questions. Jan Durand: Nothing on the web. Okay. Then just thank everybody for attending, and thanks to all my colleagues for all the efforts and things that have gone into the results and the presentation. Thanks, everybody. Have a good day. Operator: Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.
Operator: Good afternoon. Thank you for attending today's Q4 and Full Year 2025 Marchex Earnings Conference Call. My name is Tamia, and I will be your moderator for today's call. [Operator Instructions]. I would now like to pass the conference over to your host, Frank Feeney, Chief Operating Officer at Marchex. Francis Feeney: Good afternoon, everyone, and welcome to Marchex's business update and fourth quarter and full year 2025 conference call. Joining us today are Russ Horowitz, our Chairman of the Board; Troy Hartless, our President, and Brian Nagle, our Chief Financial Officer. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements, including references to our financial and operational performance, and actual results may differ materially from those contemplated by these forward-looking statements. Risks and uncertainties that could cause these results to differ materially are set forth in today's earnings press release and our most recent annual or quarterly report filed with the SEC. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements for subsequent events. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. The earnings press release is available in the Investor Relations section of our website. At this time, I want to turn the call over to Russ. Russell Horowitz: Thank you, Frank. I'm going to start off with a few thoughts and then hand the call over to Troy, Brian and then Frank again. The main item I'd like to reiterate is that we feel the company is at a very positive inflection point, both strategically and operationally. We've come a long way in expanding our customer footprint, evolving our product and technology capabilities and starting to create real sales momentum. With this progress and deeper strategic understanding, which is against the backdrop of the very real and very massive AI revolution, we've gained proprietary insight into what we believe may be a much bigger market opportunity, one where we evolve beyond mainly providing strategic analytics to vertical market-leading companies, to one where we accelerate delivering more comprehensive solutions that address high-value impact needs across the entire customer acquisition and optimization journey. At the end of the day, our customers fundamentally rely on our AI-driven strategic insights to more efficiently drive growth-oriented customer acquisition. We believe there is a significant opportunity for us to rapidly expand into highly measurable AI-powered bundled solutions, which provide the strategic insights our customers need, the automated actions those insights inform and the outcomes those actions achieve. We believe that there are significant untapped opportunities within our existing customer base and within each of our current verticals. We believe selling such bundled solutions across this entire customer value chain can accelerate our business and make us much more valuable within our vertical markets, as AI opens new product possibilities that can help businesses grow meaningfully while driving efficiencies. At Marchex, we view ourselves as a meaningful AI beneficiary, based on how rapidly we are now able to leverage AI to develop and deploy new products into our customer base that can deliver high customer value as well as new company revenue opportunities. In fact, we're being relied on to help many customers navigate the rapidly evolving and complex world of introducing AI and evaluating agentic possibilities to impact customer acquisition and retention. We see significant new business potential in introducing agentic workflows for customers who are integrated on the new Engage platform. Additionally, AI is making our business more agile and efficient to operate. The combination of these factors, including our vast amount of first-party data and vertical expertise are key elements in our improving outlook for meaningful business acceleration as we move through the year. With that, I'll hand the call to Troy to briefly discuss the fourth quarter. Troy Hartless: Thank you, Russ. In the fourth quarter, we achieved our goal of the primary completion of our technology platform migration by the end of the year. While this involved our migrating approximately 1,000 customers to the new platform and some resulting revenue dilution and offsets, we believe that we are now in a strong position with our ability to leverage new AI capabilities and more rapidly deliver innovative solutions to our customers. With this significant infrastructure project finally behind us, in 2026, we believe that we are well positioned to focus on accelerating our revenue growth and delivering margin expansion during 2026. Over the course of the past year, Marchex has significantly expanded our product platform capabilities for customers and prospects. Over this time, we have launched our new unified user interface across Marchex's product suite, new vertical AI capabilities and various other new products and features, and there is much more to come over the course of 2026 and beyond. In addition, with the previously announced proposed acquisition of Archenia. Marchex and Archenia have created a collaboration framework, and we have been jointly developing and selling initial products that reflect the combined capabilities of the two companies. Product examples of this collaboration, which leverage Marchex's data and AI signals and Archenia's AI tool sets and user interface, include conversational AI agents, which increase customer bookings and appointment rate and AI-verified outcomes, which drive increased revenue on a pay-per-event basis. We are currently in trials with a handful of customers and expect to launch more next month and beyond. While these combined selling efforts are early, we have had initial positive indications of adoption of the combined solutions for Marchex's existing customers in the Home Services and Auto Services verticals. We believe our ability to sell these and other combined solutions, which reflect the bundling of AI-driven insights, actions and outcomes to our installed customer base, will be a meaningful revenue growth catalyst in 2026 and beyond. As a reminder, we have a core focus on select very large vertical markets where the combination of our expanding AI capabilities, built on years of operating with first-party data across these verticals, give us the ability to deliver unique solutions for world-class market-leading companies. To that end, we deliver industry-specific AI solutions for automotive, auto services, home services, health care, advertising and media as well as other industries and sub-verticals. With that, I will turn the call over to Brian to provide an overview of the fourth quarter financial results. Brian Nagle: Thank you, Troy. Revenue for the fourth quarter of 2025 was $10.8 million, which is down from $11.5 million for the third quarter of 2025. We saw favorable impact of new sales and existing customer up-sells benefit the company in the quarter. We also saw some offsets to that growth due to migration activities from our legacy platforms onto our new Marchex Engage platform. For operating expenditures, we saw efficiencies throughout the business as we benefited from the realignment of the organization and the completion of certain technology platform initiatives during 2025. We anticipate that our gross profit margins can continue to improve over time as we are carrying an overall lower cost structure going forward, which could enable meaningful future operating and financial leverage for the business as new products and features sell through. On the balance sheet, cash decreased to $9.9 million from $10.3 million at the end of the third quarter of 2025. The decrease in cash was primarily due to the timing of customer payments at the end of the quarter. Moving to guidance. Revenue in the first quarter of 2026 reflects the migration revenue dilution from the final platform switchover in December 2025, which impacted revenue run rates entering 2026. With this noted, in the first quarter of 2026, we currently anticipate that revenue will be in the range of fourth quarter 2025 levels and that adjusted EBITDA will be $500,000 or more. Based on the growth initiatives previously noted by Troy and other positive factors, we currently anticipate that for the second quarter of 2026, revenue will sequentially increase as compared to the first quarter of 2026, with adjusted EBITDA potentially increasing to more than $1 million. In addition, with our ongoing product and feature launches on the new technology platform, we currently anticipate that we can see sequential quarterly revenue increases during 2026 and that over the course of the year, we can see revenue growth on a run rate basis in the 10% range from 2025 year-end levels. We also currently anticipate that in the course of 2026, the combination of anticipated increasing revenue growth, combined with lower overall operating expenses can lead to adjusted EBITDA margins of 10% or more. With that, I will hand the call over to Frank. Francis Feeney: Thank you, Brian. I would like to take a moment to provide an update on the Archenia transaction. In November 2025, Marchex announced that we had entered into an Agreement In Principle or AIP, to acquire 100% of the stock of Archenia from its stockholders. A special committee of Marchex's Board of Directors consisting solely of independent directors approved Marchex entering into the AIP because certain of the sellers are related parties. The AIP contemplates the parties entering into a definitive purchase agreement relating to the transaction. Conditions to entering into the definitive agreement include receipt of audited financial statements of Archenia for such periods as required by SEC rules and receipt of a customary fairness opinion by a financial adviser selected by the special committee. Archenia has engaged RSM US LLP to audit the Archenia financial statements and the special committee has engaged Craig-Hallum Capital Group, LLC as its financial adviser. Conditions to closing the transaction shall include approval of the transaction by a majority of Marchex's disinterested stockholders. The closing date, in the event a definitive agreement is entered into and the transaction is approved by disinterested stockholders, is anticipated to occur in June 2026. For your reference, Archenia is a performance-based customer qualification and acquisition company, which transforms consumer intent into AI-verified outcome-based results. Leveraging advanced AI signals, natural language analytics and automated decisioning, Archenia detects consumer intent and advertiser value in real time, optimizing customer acquisition campaigns dynamically across channels. With machine learning models that continuously refine qualification accuracy and ROI, Archenia enables its customers to pay for verified AI-validated outcomes such as appointments, sales and high-intent conversations. We believe that our potential combination with Archenia, if successfully consummated, would create a vertically-focused AI-driven customer acquisition and outcome optimization platform, integrating deep insights, automated actions and verifiable outcomes. Additionally, we believe that the expanded AI-driven product offerings across insights, actions and outcomes, could create more ways to win new business with the bundling of solutions could create customer value, stickiness and risk mitigation. We believe that the potential combined company could have the opportunity to achieve greater revenue scale and growth, higher margins, expanded market reach and enhanced strategic flexibility, which could include, first, a potentially expanded addressable market with opportunity to cross-sell and bundle. We believe the combined ability to sell insights, actions and outcomes would meaningfully expand our addressable market into a new large vertical markets. Additionally, we believe we could have the ability to relatively quickly offer or bundle Archenia's outcome-based solutions to many of Marchex's insights-based enterprise customers. Second, greater potential revenue, scale and growth. Marchex believes that revenue run rates for the potential combined company are approximately $15 million quarterly or approximately $60 million annualized, which could grow in the 15% to 20% range in the course of '26. Third, we see the potential for adjusted EBITDA expansion. We believe that our adjusted EBITDA margins are anticipated to trend up to 10% or more in 2026 and that Archenia could contribute additional positive adjusted EBITDA beyond these levels. And finally, Rule of 30 to Rule of 40 trajectory. For reference, the Rule of 30 to 40 metric represents the combination of annual revenue growth rates plus adjusted EBITDA margins. If we're able to achieve the anticipated revenue run rate growth in the 15% to 20% range and combine this with improving adjusted EBITDA margins of double digits, the combined company could be positioned to potentially achieve these Rule of 30 to 40 metrics over time, which we believe helps highlight the unique opportunity of the combined company if consummated. With that, I will hand the call back to Russ for closing remarks. Russell Horowitz: Thank you, Frank. I want to close out today's call by thanking all of our investors, partners and other stakeholders for your ongoing support. Additionally, I want to deeply thank our employees for their unique expertise, sense of urgency and continued commitment while we execute on what we believe is an increasingly dynamic opportunity. And with that, I'll hand the call back to the operator for Q&A. Operator: [Operator Instructions] The first question comes from Ross Koller with Koller Capital. Ross Koller: I have a few on the go-forward business. First, Russ, can you provide any color on how the selling efforts for the combined capabilities are going so far? What kind of feedback are you getting? Russell Horowitz: Yes. Look, so far, the joint sales calls have been very positive and very much strategically operational. We've so far prioritized creating and selling the products that bring together the best of the combined capabilities of both Marchex and Archenia and where the customer data clearly highlights how the customer problem, our unique solution to it and the value impact that we can deliver. And we've had just a short amount of time to get this started, we actually already have multiple orders in hand from the installed customer base for these new products. We're now focused on launching and scaling these opportunities, and we think as we grow the list of customers adopting these products and then start stacking the wins together, we're going to see a very positive cumulative revenue effect. In today's release, we specifically referenced that we're out there selling conversational AI agents and AI-verified outcomes on a pay-per-event basis into the auto services and home services verticals. This is going to be continuing expanding with additional customers and also move into other verticals as well. Ross Koller: Awesome. Russ, can you talk about the opportunity set inside the installed base? I mean, what percentage of the base could be targeted to the new capabilities? And how large can the company grow just inside that base? Russell Horowitz: It's a really good question, and it's one we spend a lot of time assessing. If you think about our business overall, our top 50 customers represent about 80% of our revenue. And when we look at the new product capabilities, we believe that they are very relevant and very applicable to the vast majority of those top 50 as well as other customers beyond the top 50. In the past, Marchex has stated our belief that we have a $100 million revenue opportunity overtime. On a combined basis, we believe that the $100 million revenue run rate is much more tangible and achievable much sooner even with just the existing customer base. The joint sales efforts so far are validating that these are the right initial revenue goals and the right prioritized approach. So with everything we've learned so far, we just view this all as a profitably focused sprint to $100 million in revenue run rate. Ross Koller: Awesome. And Russ, lastly, can you walk us through the IR strategy going forward and how you'll be reintroducing the story to investors? And how are you thinking about the current stock valuation? Russell Horowitz: Well, yes, I'll start with the second question first. Look, clearly, we don't -- we feel the current stock price doesn't reflect our value or even the incremental value we believe we're in the process of both creating and validating. But we understand it's up to us to deliver the financial results and provide the customer and product stories for people to understand our value impact and to start seeing us the way we're really now seeing ourselves, which is a dynamic and unique company. And specifically, we're an exciting emerging AI growth story. So we think we're at an inflection point. We know the burden is on us to prove it with our results. But getting to the first part of your story, kind of with all this in mind, we just recently hired a new IR firm, PondelWilkinson, to help us get a lot more active in reaching out to new investors and helping us tell our story and make sure that we're really landing this, in a way we think is differential and unique. So we're going to be much more active, particularly with the Archenia transaction potentially closing shortly. Beyond that, when we think about our stock, throughout our history, we've had times where we've done stock buybacks. We've done self-tender offers. We've declared regular and special dividends, and as a reminder, right now, we do have an existing $3 million share buyback program authorized. So we're going to continue to assess all of our options. But again, first and foremost, under any scenario, we know the best way to get our value recognized is to outperform and communicate well. So that's what we're focused on right now, particularly since our May reporting cycle is only 6-weeks away. And we're excited for May to come because we think we're in a position to hopefully reinforce with some of those stories and some of those points of progress and pointing to how the results can unfold through the course of the year. Appreciate those questions. Operator: The next question comes from Mike Latimore with Northland Capital Markets. Vijay Devar: This is Vijay Devar for Mike Latimore. A couple of questions. The first one, did bookings grow sequentially and year-on-year? Russell Horowitz: Yes. On the first one, bookings were similar to the prior quarter. And when you look at the seasonal impact, we view that as a favorable result. And when you look at the trajectory kind of beyond the quarter, but month-to-month, particularly as we're getting out there with new solutions, we see accelerations of bookings as we're ending Q1 and going into Q2 in a way that we think can potentially meaningfully move the math. Vijay Devar: Okay. And how about call volumes following normal seasonal patterns? Russell Horowitz: Yes. Right now, call volumes have been relatively consistent in the past at times, we've spoken about those as being a bit of a drag that we need to overcome as part of our growth. But right now, not as much the case as it has been historically. Right now, the primary variables are customer expansion, up-selling the new products and getting the benefits or stacking effect of what we're starting to see unfold based on the joint efforts to go sell the combined capabilities. Beyond that, we are having success with some up-sells, and I do believe that we are in a position to win more new customers on the traditional products. But the real catalyst that we see is with these products that really unlock the strategic insights into action and outcome-based products, and we're getting a lot of validation with the early sales efforts, and we see the opportunity to significantly expand within the existing base, which is the quickest way, again, for us to really favorably move the math on our financial results. Operator: There are currently no more questions remaining at this time. So I'll pass it back over to the team for closing remarks. Russell Horowitz: Look, I just want to thank everybody for participation in the call, the very thoughtful questions, and again, reiterate with our investors and stakeholders the appreciation for your ongoing support, and we look forward to seeing and hearing you again very shortly with our forthcoming May announcement as well. Thank you, everybody. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Precigen, Inc. Full Year 2025 Financial Results and Business Updates Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on Wednesday, 03/25/2026. I would now like to turn the conference over to Steven Harasym. Please go ahead. Steven Harasym: Thank you, operator, and thank you to all those joining us. For our fourth quarter and year-end 2025 update call. Joining me today are Helen Sabzevari, our President and CEO; Phil Tennant, our Chief Commercial Officer; and Harry Thomasian, our CFO. Before we begin our prepared remarks, I remind everyone that we will be making certain forward-looking statements. These statements are based on our current expectations and beliefs. We encourage you to review the slide in the presentation and in our SEC filings, which include risks and uncertainties that could cause actual results to differ from today's forward-looking statements. With that, I will now turn the call over to Helen. Thank you, Steven. Helen Sabzevari: I would like to extend a warm welcome to all those joining us for our update call today. In the short time since the early and full approval of Pap smear in August, the standard of care first-line treatment for adults are our peak We are seeing a tremendous progress with the first ever therapeutic commercial launch in RRP. These substantial advancements constitute a pivotal milestone for all stakeholders impacted by RRP including patients, their families, healthcare providers, and the RRP Foundation. As we commenced commercial sales in Q4, Precigen, Inc. has completed the transformation from an R&D company to a product revenue-generating commercial biotech company. Phil will detail the specifics of the launch progress later in the call. But I wanted to highlight the accelerating trajectory we are seeing in the revenue growth. We do not plan to provide the revenue guidance on a regular basis, but instead focus on indicators we believe are important for gauging progress of the launch trajectory from a long-term perspective. That said, as we are only a few days away from completion of Q1, which is the first full quarter of Papzimia's commercial sales, we think it is helpful to provide investors with color on the Pap smear itself ramp up. As reported in our 10-K, net product revenue for Q4 2025 was $3.4 million with shipments commencing in November. As prescribers at major medical centers and community practices continue to add Pap smear to their practice, we are seeing a strong momentum in Q1. As a result, based on the commercial activity to date, we expect revenues in Q1 to exceed $18 million. This is a clear sign of the enthusiasm we are seeing from patients and physicians alike, leading to a robust uptake in the therapy. I will now provide a brief recap on the reasons we believe we are seeing such a strong interest in Pap smear. Papzimias received full FDA approval with a broad label for adult RRP with no restriction based on the number of prior surgeries. This reflects the truly transformative clinical data including unmatched efficacy, a strong and durable ongoing responses, and a pivotal study powered by prospectively defined primary endpoint of complete response rate. Thanks to its mechanism of action, Tapsinis also offers the potential for redosing if needed which is being evaluated in the clinic now. With the full approval powered by unmatched efficacy, we have significantly raised the bar for any future competitor entering the adult RRT space. Let's examine the key facts which led to FDA's approval. Proximus directly addresses the root cause of RRP by eliciting a targeted immune response against HPV 6 and 11. To be clear, we enrolled and treated more severe RRP patients and achieved an unmatched complete response rate with an impressive durability of responses with more than three years of follow-up, which is echoed and appreciated by physicians in the field. It not only surpassed the highest statistical bar using the most rigorous efficacy endpoint ever evaluated in RRP but produced the strongest data demonstrated in the field to date. Given the underlying cause of RRP, these results readily extrapolate to less severe patients as reflected in the FDA's broad label approval for Pap smear. In contrast, extrapolating results from a less severe population to a more severe cases is far more challenging and less reliable. What I just detailed has been supported by landmark consensus paper sponsored by the RRP Foundation, and authored by 16 leading U.S. physicians specializing in RRP published in Laryngoscope, a top peer-reviewed journal in the field. The paper recommends Papsimians as the first immunotherapy which is the newest standard of care and preferred first-line treatment for adults with recurrent respiratory papillomatosis, or RRP. These developments represent a pivotal advancement for the RRP community, prioritizing medical therapy over repeated interventions to improve patient outcomes. I will now turn the call over to Phil for details around our commercial launch. Phil? Thank you, Helen, and hello, everyone. Phil Tennant: I'm delighted to share the most recent highlights of our launch efforts with comments on Q4 results, but also bringing everyone up to speed on the exciting progress we are making with the PapSimius launch in Q1 of this year. As mentioned earlier, we made great progress in Q4 in setting the platform for accelerated brand uptake. This included continued progress in expanding payer coverage, further activation of accounts across the country, and the initial prescriptions for Papsenius. As we speak today, I can give you more granularity on some of the leading indicators of strong launch performance. Our patient numbers continue to grow. As of J.P. Morgan in mid-January, we had over 200 patients in the Precigen, Inc. patient support hub. As of today, that number is well over 300, indicative of the pent-up demand for the new standard of care for adults with RRP. Payer coverage continues to expand. In early January, we had approximately 170 million lives covered which has now increased to approximately 215 million including nearly all major payers across commercial, Medicare, and Medicaid. Including regular Medicare and Medicaid fee-for-service lives means that we now have approximately 90% of insured lives covered in the U.S., which is phenomenal progress for a rare disease drug like Pap smear. Brand utilization is accelerating across the country in both the large institutions and academic centers as well as in the community setting. Pleasingly, we are seeing utilization across a range of patient severities, which speaks to the broad label of the brand. And finally, as Helen mentioned, the publication in January of the expert consensus paper clearly positioning patsymia as the first choice for adult patients with RRP is a significant statement of intent from the KOL community and a testament to the strong efficacy and safety profile of the drug. The significant increase in revenues anticipated in Q1 that Helen mentioned clearly shows how the healthcare system is embracing the first and only approved medicine to treat adult RRP. We are very pleased with the momentum we are seeing and will, of course, provide final revenue numbers during our Q1 earnings call later next quarter. In terms of outlook, we expect these trends to continue, assisted by the assignment of the permanent J-code from April 1, and supported by the continued durability of response that we are seeing in patients. We expect continued institutional activation as well as significant utilization within community practices. We look forward to sharing further progress with you at the Q1 call as we continue to drive this fundamental transition of a debilitating condition that has been surgically managed for over 100 years into one that is now therapeutically managed. I'll now turn the call over to Harry for an overview of our financials. Harry? Thanks, Phil. Harry Thomasian: We sure are exciting times for both Precigen, Inc. and the RRP community as a whole. I want to spend a couple of minutes discussing our results for the year ended 12/31/2025 and our financial position as of that date. Revenue for the year totaled $9.7 million versus $3.2 million in 2024, resulting in an increase of $5.8 million or 149%. This increase was primarily driven by the commencement of Pepsimio's product revenue which totaled $3.4 million in 2025. It should be noted that the first sale of Pepsimios was recorded in November 2025, thus revenue for the year only reflects a partial first quarter of the Pepzymyos launch. While speaking of revenue, I do want to reiterate that the 2026 is showing a tremendous ramp of Papzymyos revenue from the 2025. As Helen mentioned, based on our commercial activity to date, we expect revenue for 2026 will exceed $18 million. We're thrilled with the early launch results and encouraged by the launch trajectory. I also want to repeat that we do not plan on providing forward-looking revenue projections in the future. Due to the timing of our year-end earnings call being close to the first quarter end, which provides us an understanding of where we believe first quarter revenue is trending, we feel we can provide this guidance as a help to our investors' understanding of the Paximios launch trajectory. Continuing with expenses on our statement of operations. Research and development expenses decreased by $11.7 million, or 22.1%, compared to the year ended 12/31/2024. The decrease was primarily driven by a $9.4 million reduction in costs as a result of the strategic prioritization of the company's pipeline announced in 2024. In addition, the company, upon FDA approval of Pepsimios, began classifying manufacturing-related costs to inventory, which ultimately will be recorded as costs of products and services when the related inventory is sold. Manufacturing costs related to Papsimios were recorded as research and development expenses prior to the FDA approval of Pepcimios. Selling, general, and administrative expenses increased by $28.8 million, or 69.8%, compared to the year ended 12/31/2024. This increase was primarily due to a $27.3 million increase in costs incurred related to Pepsimio's commercial activities. Our net loss attributable to common shareholders was $429.6 million, or $1.37 per share, for the year ended 12/31/2025. These results include two large noncash items related to our preferred stock-related warrants in 2025. In 2025, the preferred stock was converted to common shares and the warrants were reclassified to equity. Thus, such items will not recur in the future. These noncash items hold $318.5 million, or $1.02 per share, of the $1.37 loss per share reported. Turning to the balance sheet. We ended the year with $100.4 million of cash, cash equivalents, and investments. Based on our current projected business plans, we believe that these funds plus anticipated cash to be received from Pepsimio sales will fund operations through cash flow breakeven, which we currently expect to occur by the 2026. For more information on our financial statements, I refer you to today's press release and our 10-Ks which were filed with the SEC after market closed this afternoon. With that, I'd like to turn it back to Dr. Sabzevari. Helen Sabzevari: Thank you, Harry. I wanted to briefly provide other portfolio updates. Are actively advancing plans to commence a papillomial clinical trial in pediatric RRP population. We hope to have this initiated in the fourth quarter of this year. Additionally, we have begun efforts for geographic expansion. This is seen with the validation of the marketing authorization application to the EMA for Papsenia. Of note, we are seeing positive feedback from thought leaders in Europe on the prospects of a new medical standard of care. To that end, we are also pleased to announce that we will be sponsoring activities around the third annual RRP Awareness Day in June. This will present another opportunity to help spread global awareness of this disease and the newest standard of care for its treatment. Other than capsidium, we continue to advance the platform with PRGN-2009. This program utilizes the same AdenoVerse technology as pap smears. PRGN-2009 is designed to activate the immune system to recognize and target HPV 16 and 18, the root cause of HPV-associated cancers such as head and neck and cervical cancers that represent almost 5% of all global cancer. Patients. PRGN-2009 is currently being investigated in combination with pembro in multiple Phase 2 clinical trials in head and neck cervical cancer. I'm very excited about the prospects of this program and look forward to updating you in our upcoming Q. With that, I will now turn the call over to the operator for Q&A. Operator? Operator: Thank you. Ladies and gentlemen, we will now begin the and answer session. Should you have a question, please press the star key followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star key followed by the number two. One moment please while we assemble the queue. Your first question comes from Jason Butler of Citizens Bank. Your line is now open. Jason Butler: Hi, thanks for taking the questions and congrats on the progress. Specifically, really thanks for giving the 1Q guidance. That's really helpful. Two questions for me. First, can you help us think about how you guys are planning the flow of patients from the hub to receiving reimbursed drug? Do you expect the majority of the 300 patients to ultimately get reimbursed treatment? And then what kind of time frame, understanding it's still early in the launch? And then second question, are you now at the point where patients are starting to get their second dose in the treatment regimen? And can you give us any color about, like, you know, the proportion of patients that are that are eligible or are getting the second treatment? Thank you. Helen Sabzevari: Hi, Jason. Thank you for the questions. And definitely, I think for the first question, I'm going to defer it to Phil. Phil, maybe you can go through that. Phil Tennant: Yeah. Well, obviously hi, Jason. We are obviously very pleased about the continued recruitment of patients into our hub. And just a reminder that that is not the complete picture because we are seeing significant conversion of patients from our hub, but we are also seeing utilization from patients that are not in our hub as we have talked about previously. That is not the complete picture, the Precigen, Inc. support hub. So we are pleased that we are seeing patients being treated from both sources. In terms of that conversion speed, you know, clearly the patients that are in our hub, that is a clear intent from the market that those patients are in need of treatment. And we want to make sure that the vast majority, if not all of those patients, are converted onto treatment. That is obviously our goal. In terms of the speed at which that is being that will happen and the patients will be converted, it really will vary by patient by patient and institution by institution. What we have done in the fourth quarter and continue to do in the first quarter is get all the pieces of the puzzle in place. In particular, the payer coverage and obviously the identification of patients. Now it is really up to the IDNs to continue to be activated. And once you have all of those things in place, the actual prior authorization with the payer should only take a matter of weeks. But really it is about the activation of the IDNs, and that is, for some patients, the rate-limiting step. But we have made great progress throughout Q4 and into Q1 in terms of converting those patients. I was just going to make another point about the hub because, obviously, we mentioned we will have the permanent J-code as of April 1, and that will streamline and smooth the whole process by which patients pass through from our benefit verification, institutional readiness, and then prior authorization with the payers. So that is going to be a help as we go into Q2. Helen Sabzevari: RHOP, clearly, the patient keep coming in, and you are absolutely correct that they are converted. And but this is a continuous process for the hub. It is not a onetime thing that the patient comes as patients get basically prepped and treated, then new patients are entering to our hub. But it is very important to stress what Phil mentioned. That our hub is not the only source for the patients. There are a number of other hubs that, for instance, large centers, they have their own hubs. And they can be entering, and we have seen that for the enrollment. In regard to the second question that you had as far as have the patient moved from the first treatment to second, absolutely. The patients are moving through all their treatments, and some of them that have started last year, for instance, they have moved through their last treatments. So this is, as I mentioned, is a very fluid momentum in the hub that patients enter. They get prepped, and Phil can speak further to that. And as they go through their treatment, other patients walk in. Jason Butler: Great. Thanks again and congrats again on the quarter. Helen Sabzevari: Thank you. Operator: Your next question comes from Swayampakula Ramakanth of H.C. Wainwright. Please go ahead. Swayampakula Ramakanth: Thank you. Good afternoon, Helen and team. It's great great to notice that not only the launch is going well, but certainly this year this year or this quarter, actually has ramped up quite bit. Having said that, just trying to understand a little bit more of of the of the nuances. Especially with the you know, with with the flow of patients. Through the through the hub into the into the conversion And, also, how is the J-code you know, how how is that helping out in terms of adding more patients? You know, not only in the in the the in in this quarter, but also getting them up for the next quarter. I would think that it takes a certain amount of time between the patient coming into the into the clinic and then getting the the therapy. Phil Tennant: Okay. Thanks for the question. So it is Phil here. The J-code really does simplify the workflow and billing process from both provider perspective and a payer perspective. We are looking at some analogs of rare disease launches that some payers have been hesitant to take on the financial risk and you know that accords with our experience. But now with the permanent J-code, that sort of disappears, and it is a streamlining of the administrative process and it increases certainty and, of course, speed at which these patients should be processed. Helen Sabzevari: Yeah. And maybe I can add that RK. This is not specific to Papsenius. This is for any drug that is out there, including all the checkpoint inhibitors. There is always that transition. And then it would be the streamlining and making it easier on some of the centers to do that. And I think this is the trajectory that we see which we are extremely excited to go from Q4 to Q1 exceeding, as we have said, $18 million. It is very important in the preparation that the team did at the early onset of approval after approval. And really, appreciating the number of the payers that the team got in the first in beginning of the fourth quarter. Because as we all know, for patients entering to the hub and even in the other hubs, the reality of the situation stands with the payers, making sure that all of the elements for getting treated is there, and big part of that was the payers' approval. And now with more than 200 million lives covered, which is an amazing amount. This is why you are seeing the trajectory of very fast acceleration from the Q4 to Q1 going from where we were in Q4 to excess of $18 million in Q1. And I think this is quite exciting, and we are having now all of the components of the commercialization in place the payers, the hubs, the institute coming in, and finally, the J-code. This just makes it for the next trajectory as we move to the Q1, Q2, and Q3, and Q4. Swayampakula Ramakanth: Perfect. No. I certainly sense the excitement and what you are experiencing. Thinking about the MAA and also the European potentially, European launch. You know, in terms of your discussions with the with the regulatory body there, you know, where are things now? And do you do you expect the approval you know, in the '27, or should we assume it is going to be later? And also, in terms of of of the launch, you know, so should we send the Phil back to Europe and, you know, get that launch going over there? Helen Sabzevari: Yeah. So as, you know, we had submitted our EMA application as we shared with the market last year. And it has been the application is under review. So we are excited about that. And I think from for instance, what we are receiving, from physicians across Europe. And, we just had a presentation at UroGen, which is one of the major conferences in the field of HPV and especially on RRP. There has been a tremendous enthusiasm from the physicians, really looking forward to having this first line and a standard of care of therapy, which is now at the U.S., also to be applied in Europe. So we are looking forward, obviously, as the CLA undergoing review in Europe, and we obviously will not it will be I think, your assumption around the time. It is it perhaps is a good guess, but we will leave it to the European authorities when they have decision and they communicate we will definitely share with market. So we look forward to that as well. Thank you. Thanks for taking my questions. Sure. Operator: Your next question comes from Brian Cheng of J.P. Morgan. Please go ahead. Brian Cheng: Hey, guys. Thanks for taking our questions this afternoon. A couple from us. Can you clarify on the 18,000,000 revenue guidance here? Is the 18,000,000 guidance inclusive of collaboration and service revenues? In addition of Pepsi news product revenue. It's 18 only referring to Pepsi meals product revenue? Harry Thomasian: Hey, Brian. This is Harry. Good to talk to you. Yeah, that $18 million which you said, we expect revenue to exceed includes only FAFSAM. No other Brian Cheng: Okay. And can you talk about the 18,000,000 projection Is there a stocking effect that accounts into the projection compared to patients that have received Pepsi meals. And then maybe just on top of that, can you talk about the number of doctors that are now actively prescribing a Pepsi And how effective is the conversion rate from your patient hub compared to the academic hub? Yes. Thanks, Brian. Phil Tennant: In terms of the stocking, so there is very little stocking that we see. We do see a range of orders in terms of the vials that are ordered. Remember, each institution can order one vial at a time. Or they can do all four vials at a time. We do see some fours and twos, but predominantly, it is ones, but we do see a mix. So but very little stocking as such from the institutions. In terms of the number of doctors, I mean, obviously, the number of prescribers is increasing and we have all for all the reasons that we have talked about and we see that increasing momentum as we hit in Q1. We have obviously still got more work to do and more prescribers to bring on board, but we are very excited by the response that we are getting from the institutions and the prescribers. And that number is increasing consistently. Helen Sabzevari: Yeah. And maybe what I can add, Brian, to this is clearly the consensus paper is really has now make it very clear that pap smear is is the first and only standard of care for RRP and for all adult RRP, which is actually very interesting because we see the enrollment of the patient or treatment of the patient across the severity of the disease. And this is another important point that we have said according to the label that was given to Pap smear which is for broad RRP patients regardless of severity, and that is exactly what we are seeing as far as the treatment is concerned and how the physicians are taking up this treatment. Phil Tennant: Hey, Brian. Just your question on hub versus versus versus non hub. I mean, what I would say there is that we are seeing conversion from both sides. And, you know, patients that are in our hub and patients who are not in our hub, and we are seeing, you know, a significant contribution from both. Brian Cheng: Thank you. Operator: Your next question comes from Michael Dufour of Evercore. Please go ahead. Michael Dufour: Hi, guys. Thanks so much for taking my questions and congrats on the obvious products progress you have had in the launch. Two questions for me. You called out community uptake as a pleasant surprise, like I know it is early, but as the community channel develops, what have you learned about what different differentiates community sites that become repeat prescribers versus those that adopt more of a wait and see approach? And I a follow-up. Phil Tennant: Yes. Thanks, Michael. It is Phil here. Look, we always had community in our sites. That was an obvious part of our strategy. I think what we saw when we were soon out of the blocks after the approval was the extreme interest from the community in utilizing Atsymeos. And we have various mechanisms in place so that we can for a low cost, provide them all the logistics they need to use an uptake the drug. So we actually think the community is going to be a significant contributor to our overall business as we go forward for those reasons. And the initial experience is very positive. Rutul Shah: And I can add this is Rutul, Mike. I can add to it. As Phil pointed out, what we have done is in in addition to our end-to-end cold chain validated logistics in place, as Phil pointed out, we have multiple solutions now available for community practices who may not have cold chain storage to acquire them at very low cost as well as just-in-time shipments to essentially completely avoid need for the cold storage. So that is also aiding in our efforts to get them on board and continue to prescribe, Papadimias. Michael Dufour: I see. Very helpful. And my last questions are, if there is any color you could add on the current channel mix of U.S. payers and how we should think about gross to net cadence for the balance of the year? Thanks. Phil Tennant: Yes. I will let Harry talk to gross to net. In terms of the payer mix, it is pretty much as we expected and we communicated prior to launch, which was about 60% to 65% commercial. And that is indeed what we are saying. Then the rest Medicare, Medicaid and it is on the government channel. So, yeah, 65% or so is commercial. Harry Thomasian: Hey, Mike. This is Harry. On the gross to net we have historically guided and we continue to guide. We anticipate the gross to net will be in the high teens, low twenties. And we have seen those play out as we have seen revenue to date. Michael Dufour: Excellent. Thank you. Operator: There are no further questions at this time. I will now turn the call back over to Dr. Saba Zavari. Please continue. Helen Sabzevari: Thank you again for joining us for our year-end 2025 update call. As you can see, we are making tremendous progress on the pepsinius commercial launch. We are looking forward to providing the full Q1 results and detailed commercial progress in May. Have a good evening. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, and welcome to the Navan, Inc. Q4 fiscal 2026 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. You will then hear an automated message advising your hand is raised. To withdraw your question, press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Ryan Burkart, Vice President of Investor Relations. Please go ahead. Ryan Burkart: Thank you, operator. Good afternoon, everyone, and welcome to Navan, Inc.'s fourth quarter fiscal 2026 earnings conference call. With me on the call today are Ariel Cohen, our Chief Executive Officer and Co-Founder; Aurelien Nulf, our Chief Financial Officer; and Michael Sindosich, our President. Before we begin, during the course of today's call, we may make forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially, including the risks and uncertainties described in our earnings press release, our quarterly report on Form 10-Q filed with the SEC on 12/15/2025, and our other filings with the SEC. In addition, on today's call, we will refer to non-GAAP income and loss from operations, non-GAAP operating margin, non-GAAP gross margin, and free cash flow, which are non-GAAP financial measures that provide useful information for investors. Reconciliations of these non-GAAP financial measures to their corresponding GAAP financial measures, to the extent reasonably available, can be found in our earnings press release. With that, it is my pleasure to turn the call over to Navan, Inc.'s CEO and Co-Founder, Ariel Cohen. Ariel Cohen: Hi, thanks everyone for joining. I hope that you had the time to read our prepared remarks. And I have one thing to say, we are doing it. We just closed a very good Q4 and a year with incredible results. Our NPS in Q4 is at 47. This is an all-time high. Our CSAT is at 96 and maintained very high, and this is a proof point for meeting our mission: to make travel easy for every traveler by being the best travel agency on the planet. The 35% Q4 year-over-year revenue growth and the non-GAAP operating profit in the quarter are demonstrating the leadership position that we are at. We are executing very well on both our motion and our PLG motion. So if you think about it, in Q4, we signed net new GBV that is over 50% more compared to Q4 in the previous year. This is a huge growth rate. We are displacing legacy players because we offer great user experience, real savings, and proven AI value to date. This also brings us very close to the rule of 40 for the first time in our history. And the icing on the cake, we actually turned free cash flow positive for the first time in our history, and a year ahead of our plan. Now I want to take a step back and talk about AI because as an AI leader in the travel space, I am getting a lot of questions. What does it mean for travel, for the space? So I want to really take the moment and explain. So first of all, we, Navan, Inc., are a travel agency. It means that we care about every step of the travel experience, from the moment that you are planning your trip, while you are on the go and something happens, until you return home and you need to expense the trip. We care about travel for travelers, for the executive assistant that needs to support you, for the business travel managers that are managing the entire travel program in an organization, for CFOs, for accountants, for everybody that is involved in travel. Travel is a huge part of the OpEx, and it means that a lot of people will care about it. And Navan, Inc. is the best solution for you. So that is the first thing. Second, we have created in the last ten and a half years the best real-time travel infrastructure on the planet. We call it Navan Cloud, and it is our connectivity to everything in the travel world through software. It requires global licenses, suppliers' contracts, and massive financing for the payments business. And then the most important part is our agent orchestration platform. When you interact with us, we seamlessly orchestrate an AI agent that can book your trip, change your trip, get your money back, give you any information about your trip with human agents. In fact, we basically married human intelligence and judgment with artificial intelligence to create the best experience for our customer. The proof points are in our high NPS and CSAT, ongoing gross margin expansion, and the acceleration of gaining market share. The reason and the most exciting release of Navan Edge, our latest breakthrough in agentic AI, is bringing the power of a hyper-personalized executive-level travel assistant to the unmanaged travel market, which we estimate at $57,000,000,000 of TAM. The bottom line here is only we are a leader in the AI travel space, and it is very clear that we and our customers are a huge beneficiary of AI. We also recently announced the migration of the Reed & Mackay customers to our AI platform, so they will be able to enjoy the benefits of both worlds: their really amazing high-end VIP service that can step in when you are stuck in an airport, with everything that our AI platform is creating. For FY 2027, we are going to focus on high growth, scaling in all channels, and with all of our offerings, accelerating our innovation, which means that we will continue to invest in AI and to release new products and capabilities using our AI platform, and we will continue to demonstrate financial discipline. And with that, before I turn over the call to Aurelien, who will talk about our results, I am actually very excited to have Aurelien as part of the team. I have been working with Aurelien in the last three weeks, and it was just amazing. And I am actually happy that he has the opportunity to talk with you on this historic quarter for us. So thank you. Aurelien Nulf: Awesome. Thank you. Thank you so much. Ariel, it is such a great privilege for me to join Navan, Inc., the Navan, Inc. team. Such a great moment. Such a great momentum in the business. As you know, I saw the power of our platform firsthand when I was a customer myself. And I know it is not just a layer on top of an old tech. It is clearly a clean-sheet redesign that addresses a huge market of $185,000,000,000. Looking at the numbers, Q4 revenue was $178,000,000, up 35% year over year, while our GBV reached $2,300,000,000, up 42% year over year, a growth acceleration driven by an incredible go-to-market momentum and faster than expected enterprise onboarding and ramps. Addressing the GAAP figures, this was mainly driven by a strategic one-time move. You will notice our GAAP operating margin was negative 50% in Q4. We decided to retire the Reed & Mackay brand for new sales, resulting in a $36,200,000 non-cash amortization charge. As Ariel just mentioned, this is a very intentional move that will ultimately deliver the power of the Navan, Inc. platform to the Reed & Mackay customers. Our non-GAAP operating margin was breakeven, a remarkable 1,100 basis points improvement over last year. We are driving leverage across the board, with our non-GAAP operating expenses being down as a percentage of revenue, even as we invest in more product innovation and our incredible go-to-market strategy. We ended the year with a very strong balance sheet: $741,000,000 in cash and short-term investments against just $125,000,000 in debt, mainly related to our expense business. We expect this great momentum to continue in fiscal 2027. And from a guidance perspective for the full year 2027, we expect revenue between $866,000,000 and $874,000,000, or 24% growth at the midpoint, and a non-GAAP operating profit between $58,000,000 and $62,000,000, a 7% margin at the midpoint. For Q1 fiscal 2027 specifically, we expect revenue between $204,000,000 and $206,000,000, which represents 30% growth as we head into a seasonally strong spring, with non-GAAP operating profit expected to be in the range of $4,500,000 to $5,500,000. Navan, Inc. is proving that we can grow fast when we are becoming a disciplined and engine, have an incredible mission, the right product, and the right team to execute. And with that, we will open it up for questions. Operator: Thank you. As a reminder, to ask a question, please press. To withdraw your question, please press 11 again. Due to time restraints, we ask that you please limit yourself to one question and one follow-up. And our first question will come from the line of Steven Enders with Citi. Your line is open. Steven Enders: Okay, great. Thanks for taking the questions here. I guess just to start, I want to get a better understanding for the bookings momentum that you are seeing in the business. I think you called out 50% growth in bookings there. Just how do you view the sustainability of that growth and what you are seeing in the sales pipeline? And I guess as we think about that 50% number, I mean, I guess, it kind of implies an acceleration versus the 42% GBV growth we saw this quarter. So just how should we think about the potential for overall GBV growth to excel further from here? Aurelien Nulf: Great. Hi, Steve. I am going to tag in with Michael on this one, but I am going to start with highlighting the 42% GBV growth we saw in the fourth quarter, right? So incredible momentum. And Michael is going to speak to why we are seeing this momentum with our customers so far. But, clearly, this acceleration of our booking growth is very, very exciting. What I just want to really clarify here is the 50% I mentioned is the new signed GBV. So the new signed GBV is something we are looking at internally. It is a data point we are looking at internally; it is the total annual travel spend that we exchange from new customers that we just signed during the quarter. So it is what we know is going to fuel our revenue going forward, and we are seeing great momentum there. So we believe we are going to keep seeing very strong booking growth going forward. Michael Sindosich: Yeah, and maybe I will give a little bit of color on what we are seeing. First of all, I do not know how many people on the call here have been in sales before. But what I can say is it feels so damn good to be able to walk into any room at any size of customer around the globe and believe in our bones that we can support their travelers better than anyone else on the planet. And so we take that energy into these customers, and we really explain what we deliver. And when we think about what matters to our buyers, first of all, we deliver 15% median savings off of your current travel budget compared to whatever you are currently using. That is huge. Travel budgets are big, and at a time now, people are really focused on being able to save money. Next, if we can tell you that through AI and through our products, we can book in seven minutes or less on average, compared to forty-five minutes. Think about how many travelers are booking day in, day out. They are really employees that need to go win customers or drive the business forward. And we are saving a ton of time. More than 70% of our expenses are automated. We just launched the Expense AI agent where you can just drop in your receipt and it will automatically code your expenses. And then, you know, we have a saying internally: when it rains, Navan, Inc. shines. We just had massive storms. There are wars going on. And your employees or customers' employees are typically waiting on hold or sending emails to get a hold of their travel agent, when 50% of our support is completely automated with Ava. And then you can also call in 24/7/365 in a bunch of different languages. Ultimately, it is a really high NPS. It is really high feedback. Showing really new AI capabilities that are actually launched and deployed that travelers are using every single day. And then everyone loves the system, so they use it. You can actually manage from a duty-of-care perspective. And when things are crazy, the thing that you need is visibility on where your employees are and then people who can support them. So I think that is kind of why we win. And then we see a lot of tailwinds in the industry. We eliminate frankly cobbled-together solutions, legacy booking tools, legacy TMCs. We have our customers that are happy talking in back rooms and really sharing why they are buying Navan, Inc. because people would rather listen to their friends; they do not want to listen to our sales team, so that is a big tailwind for us. And then lastly, there is a lot of consolidation in the space. We have seen that consistently over the last couple of years. And so there is a lot of turmoil, while we are steady. We are growing fast. We have happy customers. And all those things ultimately result in our RFP volumes increasing hundreds of percent, which we saw and told you earlier. So I think that is the confidence that we use when we walk into a new sale. Steven Enders: Okay. That is great to hear. I guess just to follow up, you mentioned some of the uncertainty out there, conflict, war out there. Just maybe what impact has that had on what you are seeing from bookings activity or from the impact that is having on the business? And I guess on the other side of that, just how are you incorporating that ongoing conflict into the outlook here? Aurelien Nulf: Yeah. It is a great question. So far, we have seen very minimal impact. We have a very, very low volume exposed to the Middle East. In fact, low single-digit volume exposed to the Middle East. So we are not seeing any significant impact at this point. It is very hard for me to sit here today and say that I can predict everything that is going to happen in the world. But what I can tell you is during our Q4, we saw actually a lot of disruption to travel. When you think about the winter storms on the East Coast, we had this war in the Middle East, TSA also has been disrupted recently. And that is exactly what Michael just mentioned. That is when our platform really stands out as being the right tool for people to use. But what I would say from a guidance perspective, our forecast today assumes what is a typical amount of disruption we are expecting to see in the world. Nothing more, nothing less. Disruption is part of the business. That is something we know and manage very, very well. Yeah, that is the color I can provide. Steven Enders: Okay. Perfect. Appreciate you taking the questions. Steven Enders: You bet. Thank you. Operator: One moment for our next question. That will come from the line of Samad Samana with Jefferies. Your line is open. Samad Samana: Hi, good evening. Thanks for taking my questions. Great to see the strong close to the fiscal year and the strong outlook for fiscal 2027. Just a couple of things. Maybe first, on the Reed & Mackay transition, can you help us maybe think through what the benefit of that will be going forward beyond the branding component? Should we expect maybe better unit economics there? Should we think about that it makes it easier to sell so that you are not describing it separately? Just help us think about both the financial impact and then the selling impact there. And then I have one follow-up question. Ariel Cohen: Yeah. Hi, Samad. So first of all, we actually always, always, always in Navan, Inc. work it back from our customer. So the main reason for accelerating the integration of Reed & Mackay into the Navan, Inc. platform is that that is what our customers want. We have endless discussions with customers that are telling us on one side, I do want to have the ability to sometimes talk with an agent and a really, really, really good travel agent, especially if I am stuck, especially if it is an extremely complex trip. Sometimes I just want to offload the entire thinking to somebody else. I am actually willing to pay for it. So that is on one side. On the other side, I see a lot of things in your platform that I cannot get with a travel agent. For example, the level of access to content that we have: different types of airlines, low-cost carriers that even VIPs want to use when they are in Europe, the ability to change stuff instantly, to book stuff immediately. These are things that we are hearing from our VIP customers, the C-level, the executive assistants that they want to see. So basically, bringing a solution that marries the two together, we see it as a huge upside. We see it as an upside for the sales organization, for our sales organization to upsell Reed & Mackay for all of our 12,000 customers. So definitely an upside. And there is another upside here: the economics of our AI platform—gross margin, unit economics—are completely different than the economics of the Reed & Mackay platform. The Reed & Mackay platform, think about it as very, very similar to any kind of travel management company that you are familiar with, while in the Navan, Inc. platform, it is really an AI-driven platform. So there are mainly two benefits here. On the top line, we will see more people using our VIP offering. And then from a unit economics perspective, it is definitely a higher gross margin business. Aurelien Nulf: And maybe some financial color that I can add here. You can see in the prepared remarks that we just published that the Reed & Mackay business is roughly 20% of our total revenue for FY 2026, and they had a growth rate that was significantly lower than the core Navan, Inc. platform. In fact, the core Navan, Inc. platform grew in the high forties from a GBV perspective and just above 40% from a revenue perspective. So there is clearly a very, very different dynamic there. And what I would say, to wrap on this topic, is the net revenue retention rate for Navan, Inc. overall in 2026 was 107%. So it was slightly lower than 110% we have seen in the past, and it was fully driven by the Reed & Mackay dynamics, because the core Navan, Inc. platform’s net revenue retention was 110%, very stable there, and if you add the ramp of our new customers, it was even above 120%. So we are seeing very strong retention in our core business, but it was a little bit offset by this dynamic within the Reed & Mackay business. It is the reason why we are very excited about migrating those customers to the Navan, Inc. platform. Samad Samana: Really helpful. And then maybe just as a follow-up, if I unpack the fiscal 2027 guidance, very good growth. Just can you help us get some context around how you are thinking about GBV growth versus usage yield, especially given the context of the usage yield in the fourth quarter was much better than investors were expecting? Thanks again for taking my questions. Aurelien Nulf: Yeah. Absolutely. So we guided to 24% revenue growth. We are seeing a lot of acceleration in the business right now, and the platform is growing very, very nicely with a great momentum Michael just described with our customers. But it is very, very early days in the year, and so we have a prudent approach to our guidance with those 24%. I am expecting bookings to grow slightly faster than revenue. So that means we may see a 30-basis-point year-over-year change in 2027 versus what we saw in 2026. And that will be mainly driven by the Reed & Mackay dynamic that we just described, but also a mix across the different channels and across the different customers. We now have a very diversified base of customers and they all have different characteristics. The enterprise business has a slightly lower yield than a smaller company for many different reasons we discussed. But we have a lot of opportunities to also optimize this yield percentage with our payment business, with meetings and events. And so, I am very excited to see the momentum from a bookings perspective and this great guidance we are able to share on the revenue side as well. Operator: Thank you. One moment for our next question. And that will come from the line of Gabriela Borges with Goldman Sachs. Your line is open. Noah: Hi, this is Noah on for Gabriela. Thanks for taking the question. Given the expense control, cash expense control that you guys have managed to show, we were wondering if that impacts at all your strategy for payments. You noted in the prepared remarks that financing that you have for that side of the business, that is a moat that you have versus some of the nascent companies. So we were just wondering are you more willing to move into that space in terms of the terms you offer and things like that? Thank you. Aurelien Nulf: Yeah. We are growing the payments business. In fact, we were up 19% year over year in Q4. So there is meaningful growth here. What I would add to that is that coming out of our IPO, we have a very, very clean balance sheet. We have a very strong balance sheet with $741,000,000 of cash, cash equivalents, and short-term investments, and small debt, and that is going to help us over time grow this business as we are upselling customers. This is a huge opportunity for us, and frankly, I think we are only scratching the surface of what we can do with this business. So you should expect us to keep being very aggressive from the SaaS perspective there, and really lead to more upsells in the marketplace. Noah: Great. Thanks. Thank you. Operator: One moment for our next question. And that will come from the line of Sitikantha Panigrahi with Mizuho. Your line is open. Sitikantha Panigrahi: Great. Thanks for taking my question. I want to go back to the fiscal 2027 guidance to understand the factors you have embedded into it. We see a lot of different factors. You know, airlines, mainly Delta, talked about strong corporate travel momentum for this year, and then we see some kind of offset with the war. And also, internally, you are seeing a lot of strong momentum. I am just wondering what are the puts and takes you have embedded into your guidance? Aurelien Nulf: Yeah. That is a great question. As we have said, we are seeing great momentum in the business. Again, 42% GBV growth in Q4, very strong momentum. We have not seen any impact from any geopolitical tensions right now in our business. In fact, we believe historically, business travel has been pretty resilient. It is a category where you see people traveling; they need social interactions with their customers, with their coworkers. So people are really craving those in-person interactions, and so we keep seeing corporate business travel to be a very strong category. In fact, the GBTA index right now is showing growth in mid- to high-single digits year over year, way faster than the TSA checks, which are more in the low single-digit range of growth. So we think corporate travel will be very strong. But on top of that, we are getting share. Our bookings are growing fast; they are accelerating. And so no matter what happens in the industry, we are getting share. And so we are seeing a lot of momentum—more customers joining our platform, onboarding faster than ever. And so we believe that the combination of a very strong industry, very strong dynamics, and the momentum we have in our business right now is going to help us grow the business very significantly in 2027. Ariel Cohen: I want to add something to this. You should think about the two storms that we had in January, which really created huge interruptions in the eastern part of the U.S. Business travelers obviously cannot travel when the airport is closed. There is no question about that. But they will travel the week after. And if you support them well during the storm and really help them to reschedule the trip, this trip is going to happen. This is why you actually do not see any impact on our business when these things are happening. This is how much business travel is way more stable than any other type of travel. And to add to what Aurelien was talking about, the SLG channel, we just gave you a number of 50% growth year over year in one quarter. This feeds our system for the next years to come. So that is one thing. PLG—this is people coming to us from Instagram, from TikTok, and starting to be a customer—is going extremely fast. And we have just released a very important release that is based on our agentic platform, which is Navan Edge, which we have huge expectations for. And although it is early, we see really good signs there. So we are actually very, very confident about our forecast. And we are very aware of the various interruptions that are out there. Aurelien Nulf: And we are prudent, right? As I said, it is very early days. We know we just grew our revenue in Q4 by more than 30%. We guided to a 30% growth in Q1, 24% for the year. But we are prudent; very early days. Sitikantha Panigrahi: Yeah. That is great. And I was going to ask this Navan Edge question. And specifically on the demand side that you are seeing right now, are you seeing travelers from your unmanaged market that are signing up now independently, or is this primarily from your existing Navan, Inc. corporate customers, where they are extending that usage to their employees for unmanaged travel? What kind of trends are you seeing on the Navan Edge side? Ariel Cohen: Yeah. It is actually an amazing question. So first of all, Navan Edge targets non-Navan, Inc. users and customers. So that is the targeting there, and everybody that is using the platform right now are non-Navan, Inc. customers and users. So that is basically a completely new market for us. And we are only targeting that market, and we see better signs than what we thought we were going to see. But again, very early days, but very, very, very promising. So that is one side. On the other side, because we are running on an agentic platform—and what does it mean, agentic platform? You have capabilities. This is our connect to everything that happens. And then all of the knowledge. Some of the knowledge is in our actual code. Some of our knowledge is in a travel agent’s head, and the ability to capture these skills and marry them together with capabilities and deliver it as an agent. We are an agentic platform. That is what we have been building here in the last three years. So once you see an agent—an AI agent—that is doing something extremely well in the Navan Edge platform, let us take booking a restaurant for you, we are actually taking this agent and providing it in the main Navan, Inc. platform. So our customers are actually benefiting from the development of agents in the Navan Edge and in the Navan main platform. So both are benefiting from it. The platforms are feeding each other with different AI agents, and different human agents, by the way, in both platforms. But the target from a go-to-market perspective and the users on the Navan Edge platform are only non-Navan, Inc. customers from the unmanaged segments. Operator: Thank you. One moment for our next question. And that will come from the line of Scott Berg with Needham. Your line is open. Scott Berg: Hi, everyone. Really nice quarter here. I guess, two questions for me. I guess in the shareholder letter that was written there, the prescripted remarks, you talked about adding restaurant bookings to the platform. That is obviously new to the Navan, Inc. platform. How should we think about the economics, maybe the inventory that is available there? And any implications in terms of your guidance from that new offering this year? Ariel Cohen: Yeah. So the way that we are thinking about Navan, Inc., and think about it also where everything is going. People really care about meeting face to face, about being there. But they also care about their experiences. So it is no longer just a transaction: I need to book a trip. When I am planning the trip, I want to feel that you know who I am, you know how I am thinking about this trip, what kind of hotel I want to be at, the type of airline that I like, who I am loyal to. My loyalty is a really, really big component in travel. But then I am arriving, and I am taking my Lyft, my Uber, my black car, and I am getting to the hotel. And now it is night, and I can have a business dinner. I can meet with a coworker. We see this as part of the trip. In fact, in Navan, Inc., we see every aspect of being there as part of the entire journey. Part of this is obvious: you book stuff. Part of this, we really care to match what you want and what you need with our platform, and then how you pay for it. So this is the payment business. This is the expense management business, and so on. So basically from every direction. So getting into restaurants was a very obvious move for us, and this is actually when AI is important. We can build an endless amount of things. Travel is endless. You can think about it as Amazon. Ariel Cohen: It is just endless. You can sell flights, you can sell cars, you can sell hotels, but there are red flags, so experiences while you are on the go—it just ends it. And because AI is so powerful, we are actually accelerating our roadmap across the board. So you are going to see us releasing more and more offerings—basically AI agents—to our customers across the board; restaurants is one of them. Aurelien Nulf: And I would add, since you asked about the economics, Navan Edge is not a significant contributor to our 24% year-over-year revenue guidance. It is early days. It is a new category that we want to redefine here. We have a completely new product. We are very, very excited. We are ahead of our expectations from an acquisition perspective and a conversion perspective, but it is still early days. Although it is the biggest part of our addressable market—$56,000,000,000 is the size of the addressable market, what we call the unmanaged market—so very, very exciting. Scott Berg: Understood. Thank you. Very helpful. And then from a follow-up perspective, the new premium offering that is going to replace Reed & Mackay there, what is different about that, whether it is experience or maybe some of the products offered there? Help us understand if there are really any differences or if it is going to be something similar. Ariel Cohen: Yeah. We first of all call it now Navan Pro. So that is part of the change of the brand, and it is part of the Navan, Inc. platform. And it is really, as I talked about at the beginning, this focus on orchestration of when we deploy AI—when we are actually having a really good, highly personalized discussion with you with an AI agent—and when we are deploying a real agent. And all of us, I am sure, have experienced them both in their life. And you have this thing that there is a point that you are starting to yell at the voice representative. And that is not the experience that we have created here. The experience here is so amazing. It is so seamless. The seats are there, the satisfaction is almost the same as a human being, and in a lot of cases, people will prefer it because it is faster and never makes mistakes. So this is an AI platform and the benefit from that. But when you marry it with really the best, most experienced VIP agents that you can think of, and you marry the two together, you are getting a really, really good experience when you plan your trip, when you are at the airport, when you are coming back, and that is really what we are doing here. I have mentioned AI earlier. I can do today way more things with our engineering department, with our product department, with our designers. And that is why you will see us accelerating delivery of stuff to our customers in the years to come. That is what you are going to see from Navan, Inc. Operator: Thank you. One moment for our next question. And that will come from the line of Jed Kelly with Oppenheimer. Your line is open. Jed Kelly: When we listen to the airlines on recent conferences and everything, they are really leading with how corporate travel is leading the results and driving a lot of their growth. Is there something they are doing with direct investment with NDC and leaning into corporate travel and then that is benefiting? And can you just explain how you are benefiting from some of the growth we are seeing with the benefit of corporate travel for the airlines? Ariel Cohen: Yeah. 100%. First of all, Navan, Inc. is the leader in that, which means that we connect to airlines, sometimes, actually a lot of the cases, directly through the NDC protocol. We are also using GDSs. We will sometimes connect to airlines with GDSs. As I said earlier, we took the decision eleven years ago to connect to everything, and it is about trust. It is about the trust with our travelers, with our customers, to tell them that 100%, if it is out there, you are going to see it in the platform. What NDC gives you is the ability to merchandise, to take it farther, to buy stuff together. I do not know how many of you have stepped in an airplane and suddenly you do not have the Wi-Fi, and you need to kind of in a very slow way buy Wi-Fi for the flight. So that is an example of something that you can attach if you are going through NDC. You can attach it at the time that you are buying the ticket, when you are selecting the seat, and so on. And it is just one example of merchandising, of assuring the right price at that moment, the right class, etcetera. So the experience that NDC is giving to our customers is extremely good. It is part of what I was talking about earlier, Navan Cloud. And when you are marrying that ability to connect to the airline directly with the knowledge of what to book for you—that is basically the skills of the agent—you are creating a really, really good experience for the traveler, but also for the company, because you are assuring the right price. Therefore, you are making sure that nobody is overspending on the travel expense. Jed Kelly: Great. That is helpful. And then just as a follow-up, we recently saw OpenAI pull back from within their app, and Walmart cited that they were not seeing great results. Are there any parallels to what we saw with OpenAI and just the complexity of all the underlying travel technology and just how hard it is to complete travel transactions, even if you think in just a normal LLM AI experience? Thanks. Ariel Cohen: 100%. The reason that I took the time at the beginning of this discussion to explain our platform—the first complexity when you are a travel agency is not just to connect to stuff. Obviously, we are connected to everything. And, by the way, there is no travel agency on this planet that took the time, the effort, the money to connect to everything globally. I am talking in China, in India, obviously in Europe, in the U.S., everywhere in the world. So that is the first thing. But connectivity is just one thing. It is about knowing the airline rules about everything that you do. There are various internal classes. What happens when you cancel a trip? How exactly you are going to get the credit back? How you are going to apply it later? It is actually very complex per airline, per hotel, per any type of inventory that is out there. And what I have just described, this is I would say a third of what our platform does. Then there is all of the knowledge. The knowledge means that when you want to book this flight, I know exactly what type of airline class I will book for you. What type of room—there are endless amounts. You think a hotel that has 100 rooms, there are 100 rooms. The amount of permutations there is endless, which means that there are a lot of skills that you need to marry with that. And we have said it time and again, we are basically creating a seamless orchestration between people—real live agents that sometimes are working in the back, sometimes are talking with you—with AI agents. The reason is travel is so complex, and business travel is even more, but payment is extremely complex. So the complexity level here requires a combination of AI—and we think that we are one of the leaders in this space—when it comes to travel with the agreements that I have talked about earlier, the airlines’ agreements, the licenses that you need to get, the amount of money that you need to raise in order to provide credit in the credit card business, and so on. So the level of complexity here is huge. And I have been saying it in the past: everybody can create nice demos. To actually doing it—the only one that is doing it in the AI world is Navan, Inc. Operator: One moment for our next question. And that will come from the line of Keith Weiss with Morgan Stanley. Your line is open. Keith Weiss: Sitting in for Christopher Quintero. Congratulations on a really solid quarter. Maybe two questions, if I may, bringing Aurelien Nulf into the conversation, it is always very interesting to hear from a CFO when they first join the company. I think CFOs look at companies very similar to how we and investors do. And particularly at this point in time when there is so much uncertainty and so much investor concern around software companies broadly, including Navan, Inc. So maybe what was it that got you comfortable and got you excited about joining Navan, Inc. as CFO at this point in time? And maybe that will help us get more comfortable with the durability of this story. Aurelien Nulf: Yeah. That is a great question. First of all, I would say I do not see ourselves as a software company, so maybe that helps answering that question a little bit. When Ariel and I discussed me taking the role, we really discussed how we can transform an industry. We are a travel agency, and we are doing it very, very well because we are leveraging very cutting-edge technology, which is obviously something that got me excited. But really, the mission—people are mission-driven here. And when you walk in the door, like day one, I met a lot of people that are very passionate about our travelers and how they can make their traveling experience seamless and frictionless. So that is super important to me—joining a company of people that are so excited about what they are doing and their mission is obviously super important. The size of the addressable market is huge—$185,000,000,000—huge opportunity. I think we are only scratching the surface today, although we are getting share and we see so much momentum in the business, it was very clear to me that given the quality of the sales team, the quality of product, the quality of our marketing, and the passion of the team, we had something very, very special here that we can take pretty far. So I would say those are the different things that I have been really looking at. And then on top of that, a clear vision of how we are going to drive profitability, generate free cash flow, etcetera, is also top of mind for us as a company, and I think it is something that got me very, very excited. Keith Weiss: Got it. And maybe a follow-up on that. Earlier in the commentary, you guys talked about approaching rule of 40, not quite there yet. As we are modeling out the company over the next couple of years, should we be thinking about that as a north star in terms of how we should be looking at where Navan, Inc. is going to be heading? Aurelien Nulf: I would not say it is a north star. I think it is a good benchmark that people have been using across many different industries. Honestly, I do not see that as a limiting factor. We have a lot of ambition. And when we see, again, the momentum in this business and how differentiated our platform is versus what our competition is offering, I do not see that as a ceiling, to be very clear. We have guided to strong growth for next year. As I said, we are prudent and it is very early in the year. We also guided to margin expansion, which is pretty awesome given the level of growth we have seen in the business. We are extending our margin. And on top of that, we turned free cash flow positive one year earlier than we initially anticipated. So I think the rule of 40 is interesting and is a good benchmark. But clearly, that is not a ceiling for us. Operator: And one moment for our next question. That will come from the line of Patrick Walravens with Citizens. Your line is open. Patrick Walravens: Oh, great. Thank you, and congratulations on all the success. Ariel, I have three trips I need to book after this call, so I hope I can do them all in seven minutes on Navan, Inc. My question is about the RFPs. Michael, you were talking about, I forget exactly what you said, but I think you said hundreds of percent. So I was wondering if you could just give us more details about what you are seeing in the RFPs, where you are seeing them from, how that is different from maybe a year ago, and whether being public is helping drive those inbound inquiries. Michael Sindosich: Yeah. Great question. And by the way, you will definitely book your trips in less than seven minutes. So let me know if you cannot. But really, thank you so much for being a customer. It really means a lot. When I think about RFPs—so who runs an RFP? It is typically a larger company. So our commercial segment and our lower mid-market segment, oftentimes we can make a switch without going out to an RFP, but the larger and more global the company, they will typically run an RFP to do that. So to answer your question directly, where do we see the acceleration of the RFPs? It is upmarket. That does not mean it is not an indication of the increased demand downmarket as well. As Ariel mentioned, the PLG segment is growing extremely fast. And 50% growth in new GBV from our SLG market includes commercial, mid-market, and enterprise. So we see it across all segments. And RFPs come from larger customers. Patrick Walravens: Cool. And does being public—are you noticing that make a difference? Michael Sindosich: Yeah. Yes. Sorry, I was just going to answer that. Thanks. We do. There are a lot of smaller travel agencies or expense management platforms or payments platforms that are not public today. And that level of transparency is something that we see as an advantage because it means that we are durable. It means that we are not hiding anything. When we were private before, we would have to talk about questions about revealing our finances and things like that. And today, we are at a state where we can say, hey, just go listen to the last earnings call or look at our press release. So I think it is giving a lot of confidence, one, on our numbers, but then, two, on the durability of us. When we engage in an enterprise deal, typically, they might have been on their incumbent for twenty years. And when we are pitching someone, we want to be their incumbent for the next twenty years and beyond. And if you think about a couple hundred thousand employees, travel and expense, it is not just a feature that you launch to some subset of the employees. It is a full rip and replace globally for all employees. And so while we do the implementations extremely fast, it is something that requires change management; someone does not want to switch in two years, if that makes sense. Ariel Cohen: Yeah. Great. Thank you very much. Operator: Thank you. One moment for our next question. And that will come from the line of Andrew DeGasperi with BNP. Your line is open. Ari Friedman: Hey, this is Ari Friedman sitting in for Andrew. I just had one question. In terms of investments, we are noticing a meaningful uptick in hiring in your salesforce. What is the typical ramp for a sales rep before they are fully productive? And do you guys know how much more productive approximately a fully ramped rep is? Thanks. Michael Sindosich: Yeah. It is a good question. So we are hiring across our different go-to-market channels. So the ramp time is usually pretty correlated to the segment that the rep is starting at. We have a lot of SDRs, which are the ones that are pipeline generation. They are doing a lot of cold calls and emails for the sales reps. They get promoted into the commercial segment. And if someone is internally being promoted, we see that ramp time a little bit faster because they know the company, they know the system, the value props, etcetera. So that is a pretty fast ramp. And then if we were to hire from the outside someone like an enterprise rep, you start thinking about those deal cycles, which can be relatively long. So a big enterprise company—maybe it is a six-month sales cycle. And then with the whole RFP, and then it is an implementation and a launch a little bit later. So it can extend from, let us call it a year until really ramped in all the knowledge, to a couple of weeks down-market for us. So that is how we think about it, and we are growing across all the different segments. Operator: One moment for our next question. And that will come from the line of Blair Abernethy with Rosenblatt Securities. Your line is open. Blair Abernethy: Just wanted to ask you, as we are entering 2027, how are you thinking about the expense management subscription business and driving further penetration into your base, and how you are looking at driving new customer adoption going forward. Ariel Cohen: Yeah. First of all, we are actually thinking about it as an end-to-end solution. So customers that are using our expense management business as well as the payments business basically see better results in terms of an ability to understand what is their total travel and expense budget, how much they are spending, are they spending it correctly, can they save money there, etcetera. Also their employees—and if you think about who is traveling, the employees that are traveling are usually the most important employees in the organization. This is your enterprise sales team. This is your corporate team. This is your entire C-level. So saving their time is critical. When you use our payments and expense business, you swipe a card and that is it. Nobody else needs to do anything. On top of this, nobody needs to sit in the finance team and reconcile. And from a saving money perspective, you get immediately the feedback—was that in policy or not, was this expense exaggerated or not, and so on. It is actually really part of our offering and really what supports our end-to-end solution. We have mentioned in the past that we had some constraints in this business because of our payments business. And the IPO actually unleashed this constraint, and you can see that we returned to growing in these two businesses: the payments business and the expense business. And remember that in all of our businesses, there is some lag between sales and what you are actually seeing. So we are extremely bullish on the expense business. We are extremely bullish on the payments business. But we really see it as an end-to-end solution for our customers. And we just think that they will benefit more if they are using the entire suite. Blair Abernethy: That is great. Thank you. Operator: One moment for our next question. And that will come from the line of Dan Jester with BMO Capital Markets. Your line is open. Dan Jester: Great. Thanks for taking my question. And maybe just a follow-up on that last one. Are you seeing at time of initial sale, are you seeing customers take more offerings as you release innovation in the expense management space, as you release innovation around meetings and events? Are you seeing customers take those at the beginning, or are these still things that we should expect will be cross-sold over time? Ariel Cohen: I will take the beginning of it, and then Michael, who is in the field all day long, will continue. The first thing that I would say—and I kind of alluded to this earlier—once we move to be an agentic platform, it actually allows us to develop faster. So that is really, really important. But the second thing, we can reuse. I will give you an example of a feature that we recently released on the expense management side. There is an expense agent there that if you did not use our credit card, you just did it manually with your own credit card, you have a manual expense. You can actually take 20, 30, 100 receipts, put them in an upload to the system, which takes less than, I do not know, ten seconds. We automatically analyze the entire thing. We reconcile each for you. We reconcile it for the finances. It looks like magic. I do not think that anybody in the expense management world is doing something that is even close to that level of technology. But that was developed in the expense management team. And we think that that kind of capability, this agent, is actually relevant all over our platform. In fact, we even think that it is relevant in Navan Edge. So you will see this functionality coming across the board. I can say the exact same thing about our focus on meetings and events. Meetings and events was an off-platform service, and you saw that we recently announced our BoomPop integration to actually allow meetings to be on-platform. So what you will see from us from a technology and product perspective is that the offering is becoming stronger and stronger by coming together. And I will let Michael maybe provide more color, but the reasons that we are doing it are driven by the requests and what we are seeing in the field. Michael Sindosich: Yeah. And to answer your question, are we selling more products at the time of the first sale for the customer? The answer is yes. So we approach our sales in a couple of ways. One is, we have a sales rep that goes and finds a new customer, and we understand what products they need and want us to supply to them. That might be just travel. That might be travel and payments. It might be travel, payments, expense, meetings and events, VIP, all the suites that we have. And then they go and they launch and they have a great experience. We also have an upsell team. And so that upsell team is working very, very closely with the account management, who are constantly talking to the customers every single day, week, or month, or even during quarterly business reviews with the account. And then we bring those solutions to those as well. So we do see us attaching more products at point of sale, but we also see a lot of success in upselling the various solutions that we have for the customer. Dan Jester: Great. Thank you very much. Operator: One moment for our next question. And that will come from the line of Mark Schappel with Loop Capital. Your line is open. Mark Schappel: Hi. Thank you for taking my question. Ariel, could you discuss the legacy displacement opportunity, which appears to have accelerated this quarter, and maybe where you are seeing the strongest traction? Ariel Cohen: Yeah. Definitely. I think generally, we see this growth accelerating on all channels. So this means when we displace—that is what we call the managed segment—but also in our PLG channel, when we are new, when it is the first time that this customer is managing travel. I think the best person to describe exactly how we see it in the field is Michael. So Michael, maybe you can take it. Michael Sindosich: Yeah, if I caught the question correctly, you are saying the acceleration in the legacy space—is that correct? So, I kind of described it earlier. We walk into a room almost confused why the customer has not come to Navan, Inc. yet. And usually, the customer starts to see that once we are talking to them. If we are going to save you 15%, we are going to have you book in less than seven minutes versus forty-five. We are going to deliver this NPS and the CSAT and all the things that we have talked about before. Usually, it is about making sure that we prove that we have reached a scale to support that customer and that we are global enough to do that. And we have done a lot of work to continue to expand upmarket and globally using acquisitions that we have made around the world, and we have built partnerships to be able to support these customers. And so what do we see on the other side that is driving customers to us? There was a big acquisition with CWT, which is a big player in the space. There used to be three big travel agencies: Amex, BCD, and CWT. So CWT was acquired. And then you saw Egencia, which is more of the online booking platform that was built out of France, was also acquired. And then, I am sure you can read headlines, but there are other companies that are having some turmoil. And so we think that has created quite a lot of tailwinds for us. People are saying, oh, let me go check out this new Navan, Inc. platform. By the way, my CEO and everyone on my board is telling me to start using AI in my platform, and I want parity in my company, and I want to start transforming my finance operations to be more efficient. And so if we can prove the savings and the time, we can prove that we are global and we can support customers, and we can give them five references to go talk to that are similar to them—that they have made the transition to Navan, Inc. and they will never look back. It is a really compelling story. And I think that is why we are winning specifically in the legacy managed space. Mark Schappel: Thank you. Operator: Thank you. And today’s final question will come from the line of John Roberts with Feet Partners. Your line is open. John Roberts: Hi, guys. Thank you for taking my question. Just to start, I wanted to ask a quick one. What was net revenue retention for you guys exiting or just for the fiscal year 2026? I did not see that in the presentation. And then just regarding product attach, can you maybe stack rank which of these three additional products are most commonly being attached? And then maybe how long on average is it taking for customers to get to this level? Just any commentary here would be super helpful. Thank you. Aurelien Nulf: Sure. Hey, John. This is Aurelien. So on net revenue retention, I just mentioned on the call earlier that it was 107% for 2026. So we are seeing very stable revenue retention on the Navan, Inc. platform side—stable at 110%—which is even above 120% when we include the ramp of the new customers joining the platform. But it was 107% for 2026, and that slight contraction is mainly due to the Reed & Mackay dynamics that we discussed on the call. Maybe Ariel or Michael, do you want to take the second part of the question? Ariel Cohen: Yeah, sure. So I can take it. I think the question was around attach and then stack ranking. Michael Sindosich: So the product that we have first and foremost and is attached everywhere is our travel. So our transient travel product, which is the employees traveling for the company. Then the next product is we see a big attach into what we call leisure. So a lot of people are booking personal travel on our platform. It is a separate experience. It does not show up in the admin dashboard. You cannot use the company card. But what you can use is the rewards that we give the traveler. So we actually pay the traveler rewards when they save the company money, which is part of how we get to that 15% savings. And so if I am going on a work trip to New York and I want to stay for the weekend, I can actually book that leisure trip in the Navan, Inc. platform, which we see good attach there. The next we build into is actually our travel payment. So this is getting into our payments product. I can put a Navan, Inc. corporate card, log into the platform. It is actually not one card, but we create a unique credit card number—16 digits—for every new booking, and it perfectly reconciles your travel bookings and those expenses for your admins, and a traveler will never have to do an expense report for a flight or a hotel or a rail that was booked in our platform. So we see a lot of adoption there. That then naturally leads into our expense platform. You can then buy our expense platform, and now we own the entire context whether someone is traveling or not. We actually see more than 70% of employee expenses are in some way, shape, or form tied to a trip. I am either booking that trip, or I am on the trip and I am at a restaurant or a taxi or however you spend the money. So we expand into that product. Then there is also the VIP product, which Ariel talked about as part of our Navan Pro offering with Reed & Mackay. So that is a product that we would upsell or sell at the point of sale to the C-suite or people who need VIP level of support. And then the last product that I can think of at least right now is our meetings and events. So as we gain that customer, we manage their corporate travel. A lot of times, they might have an exec off-site or an FKO or a customer conference, and they will leverage our meetings and events services. So off the top of my head, I am pretty sure that is the exact order of the penetration and the percent of adoption that we have of the various products. Operator: Thank you all. This concludes today’s program. You may now disconnect. Goodbye.
Operator: Good afternoon, ladies and gentlemen, and thank you for your patience; your conference will begin shortly. Once again, thank you for your patience; your conference will begin shortly. Good afternoon, and welcome to WidePoint Corporation's Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Matthew, and I will be your operator for today's call. Joining us for today's presentation are WidePoint Corporation's President and CEO, Jin Kang, Chief Revenue Officer, Jason Holloway, and Chief Financial Officer, Robert George. Following their remarks, we will open the call for questions from WidePoint Corporation's publishing analysts and major investors. If your questions were not taken today and you would like additional information, please contact WidePoint Corporation's investor relations team at wyy@gateway-grp.com. Before we begin the call, I would like to provide WidePoint Corporation's Safe Harbor statement that includes cautions regarding forward-looking statements made during this call. The matters discussed in this conference call may include forward-looking statements regarding future events and future performance of WidePoint Corporation that involve risks and uncertainties that could cause results to differ materially from those anticipated. These risks and uncertainties are described in the company's Form 10-K filed with the Securities and Exchange Commission. Finally, I would like to remind everyone that this call will be made available for replay via a link in the Investor Relations section of the company's website at https://www.widepoint.com. Now I would like to turn the call over to WidePoint Corporation's President and CEO, Jin Kang. Sir, please proceed. Jin Kang: Thank you, operator, and good afternoon, everyone. Thank you for joining us today to review our financial and operational results for the fourth quarter and full year ended 12/31/2025. To begin, I would like to immediately address the topic that is top of mind for all stakeholders, provide some clarity, and reaffirm WidePoint Corporation's competitive positioning for the Department of Homeland Security CWMS 3.0. As many of you are aware, the timing of the CWMS 3.0 award has experienced continued delays that are out of our control. It is important to emphasize that these delays are entirely the result of broader federal government headwinds over the past several months, including government and DHS shutdowns, funding disruptions, and DHS leadership changes, and are not indicative of any change to WidePoint Corporation's competitive standing or prospect for our work. Competitive strengths we offer DHS continue to distinguish us from other competitors in the award process. Some of our competitive advantages include our FedRAMP authorized status, robust past performance, ITMS being the command center platform and system of record for DHS, small business classification, facility security clearance, alignment across a new statement of work, and the best value to government. Our confidence and positioning remains unchanged, and we firmly believe WidePoint Corporation is the most qualified partner for DHS. As discussed during last quarter's call, we received a six-month extension under the CWMS 2.0 contract, consisting of a two-month base period followed by four one-month option periods. This extension provides DHS flexibility to select the CWMS 3.0 award winner or issue an additional extension. When all current and pending task orders are considered, approximately $80 million in contract ceiling remains under the CWMS 2.0 contract. As such, we expect to see some form of an update from DHS by the middle of the second quarter, whether it be the CWMS 3.0 award announcement or another extension period under the CWMS 2.0 contract. We believe WidePoint Corporation is well positioned under either outcome. An extension would allow us to continue performing our work under this existing CWMS 2.0 contract with no material impact on our day-to-day operations. If an award decision is announced during the quarter, we continue to believe WidePoint Corporation is the best positioned to win the recompete. In the meantime, WidePoint Corporation will continue to operate business as usual. Rest assured, we will remain fully engaged and proactive in supporting DHS, and CWMS 3.0 will remain a top priority for our organization as we navigate these uncertain times. WidePoint Corporation's operation and business continuity remains resilient, as we successfully weathered the government shutdown in late 2025 and the current DHS shutdown. With the current DHS shutdown, we are still seeing activities ongoing for operations and administration at DHS. Invoices are still being processed, contracts and task orders are continuing to actively be modified, and we have not seen any material slowing of administrative activities. While we have no insight into how long this current shutdown will persist, WidePoint Corporation remains well equipped to adapt. Moving on to some Q4 highlights. We ended on a high note following some of the headwinds experienced during 2025. As outlined in our Q3 earnings call, the strategic steps taken to stabilize our cost structure while maintaining staff levels and continuing to invest back into the business position us to deliver stronger results during 2025. Q4 revenues were $42.3 million, adjusted EBITDA was approximately $460,000, and free cash flow was $335,000, representing the 34th consecutive quarter of positive adjusted EBITDA, ninth consecutive quarter of positive free cash flow, and growth on a sequential basis. Sequential growth is a trend we expect to continue, especially as we begin to recognize revenue under the SaaS carrier contract and begin to land our DaaS opportunities in the pipeline. Q4 presented a glimpse into our robust margin-accretive contract pipeline. Back in November, we were awarded a $40 million to $45 million SaaS contract to deploy our ITMS platform for a major mobile telecom carrier. We are progressing through the implementation process at this stage, and we continue to remain on track to begin recognizing the margin-accretive SaaS revenue under this contract starting in 2026. As we begin to scale the number of devices managed under this contract, we expect to see notable quarterly enhancements to our margin profile and growth across our bottom-line results. Additionally, last October, we announced a managed mobility contract with the U.S. Customs and Border Protection under the CWMS 2.0 contract. This award has a period of performance of one base year and one option period, extending through December 2026, with total task order ceiling exceeding $27.5 million. We are pleased to announce superior performance under this contract started in October, which has supported our Q4 results and will continue to do so for future quarters. We remain confident in CBP eventually extending the period of performance beyond the one-year base period. An important development over the past several months has been our initiative to transition select existing clients towards an as-a-service model. Jason will expand on the strategy behind this initiative, but we are pleased to share that we are currently working to migrate two IT MSP clients to our DaaS model, which we expect will enhance revenue visibility. While delay in contract award can be frustrating, they are typical in working with large enterprises that are prospective customers for WidePoint Corporation. However, we recognize that these processes can take time, often longer than expected, and we remain flexible and responsive as we work to meet our potential future customers' needs and requirements. We remain hopeful and cautiously optimistic about landing a number of opportunities in our pipeline throughout 2026. We are fully committed to working through any potential headwinds, whether timing-related delays or other external headwinds, and demonstrating to our shareholders the strength and depth of our pipeline. With that, I will now hand the call over to Jason, who will provide additional insight into our sales and marketing initiatives. Jason? Jason Holloway: Thanks, Jin, and good afternoon, everyone. Over the past several quarters, we continue to highlight the depth and quality of WidePoint Corporation's commercial and government pipeline. As we have discussed, the SaaS contract with one of the three major carriers awarded in Q4 served as a major accomplishment and shows the types of opportunities currently in our pipeline. Implementation under this agreement continues to progress. We recently completed a portion of the minimum viable product, or MVP, functionality testing and are currently awaiting additional datasets from the carrier to complete further functionality testing. Overall, progress remains very positive, and we expect material growth under this agreement over time. Device as a Service continues to present immense upside potential, and we believe will deliver a compelling ROI as these opportunities materialize. Q4 marked the official opening of our DaaS facility in Columbus, Ohio. Since then, we have begun supporting large mobile equipment configuration and accessory sales, depot maintenance for IT as a Service customers, and device recycling activities. We are pleased to have the infrastructure in place and ready to execute, and we are now awaiting final approvals from the prospective client to move forward and begin contract performance. As we have consistently emphasized, these discussions are with large commercial and government enterprises, including several Fortune 100 organizations. While timelines can be extended, we remain cautiously optimistic that a number of these opportunities will convert, which will allow us to finally demonstrate the scale and potential of our DaaS offering. Additionally, WidePoint Corporation's DaaS offering has the potential to play a role in the upcoming LA 2028 Olympic and Paralympic Games. We are actively in discussions with CDW regarding how WidePoint Corporation can support their efforts as a subcontractor for this large-scale event. As a longtime strategic partner, WidePoint Corporation recently supported CDW's activities at the Winter Olympics in Italy, and our solutions align seamlessly with their needs. We look forward to continuing to build on this longstanding partnership and supporting LA 2028 when called upon. We remain confident that our DaaS pipeline will materialize, especially given the value that our solutions provide. Mobile Anchor continues to grow with a number of clients. Specifically, HUD OIG is entering into its second year and expanding our WidePoint Corporation-derived credentials. We are also in a Mobile Anchor pilot with the DOJ to upgrade their derived credentials to WidePoint Corporation's capabilities. Phase one of the pilot is for 1,000 credentials with a goal of growing up to 130,000 credentials by 2027. Mobile Anchor is close to getting another pilot with Treasury, duplicating the same scope as the DOJ, with the potential for 120,000 derived credentials. We are progressing nicely with the FAA with the goal of getting to 90,000 credentials. Additionally, we are in early discussions with the Department of Energy, consisting of multiple national labs and technology centers. Stay tuned for additional updates. Lastly, as Jin mentioned, we have begun engaging select clients to begin shifting them towards an as-a-service delivery model. We are receiving very positive feedback from our current customer base that are wanting to make the switch. With WidePoint Corporation opening its DaaS logistics facility, this gives us several additional offerings that are once again being very well received by the current customer base. Stay tuned for additional information on future calls regarding this exciting extension. With that, I will now turn the call over to Bob to discuss our financial results. Bob? Robert George: Thanks, Jason, and thanks to everyone for joining us today. I am pleased to share the details of our financial results for the fourth quarter and the full year ended 12/31/2025. Total revenue for the quarter was $42.3 million, an increase of $4.6 million, or 12%, from the $37.7 million reported for the same period last year. Our full year revenue was $150.5 million, an increase of $8.0 million, or 6%, from the $142.6 million reported last year. I will now provide a further breakdown of our fourth quarter and full year revenue. Our carrier services revenue for the quarter was $26.8 million, an increase of $2.2 million compared to the same period last year. Carrier services revenue for the year was $91.9 million, an increase of $5.1 million compared to last year. The increase was primarily due to a new task order we received in the fourth quarter from Customs and Border Protection, or CBP, for 30,000 new lines of service. Our managed services fees for the quarter were $10.5 million, an increase of $1.1 million from the same period last year. This increase was also partially driven by the new CBP task order. For the year, our managed services fees were $39.1 million, an increase of $3.3 million from last year. The increase was primarily a result of implementing a new commercial contract for a U.S. government end customer late in 2024, compared with a full twelve months reflected in 2025, and the task order with CBP in 2025. Billable services fees for the quarter were $1.1 million, and for the year, $5.4 million, both relatively consistent with 2024. Reselling and other services in the fourth quarter was $3.9 million, a $1.2 million increase from last year. The increase reflects underlying growth partially offset in the prior year by nonrecurring adjustments. For the year, reselling and other services were $14.2 million, a decrease of $728,000 from the same period last year. The decrease was driven by a partial termination of a software resale contract by a customer. The company has since received a corresponding vendor credit for the refund issued to the government customer. Reselling and other services are transactional in nature, and the amount and timing of revenue may vary significantly from period to period. Gross profit for the fourth quarter was $5.8 million, or 14% of revenues, compared to $4.8 million, or 13% of revenues, in the same period in 2024. Gross profit for the year was $21.0 million, 14% of revenues, compared to $19.0 million, or 13% of revenues, in 2024. The higher gross margin as a percentage of revenues is related to increased gross margin experienced in our managed services. The more significant metric of gross profit percentage excluding carrier services was 38% in the fourth quarter compared to 36% in the same period last year. For the year, gross profit percentage excluding carrier services was 36% compared to 34% last year. Our gross profit percentage will vary from period to period based on our revenue mix. Sales and marketing expenses in the fourth quarter were $747,000, or 2% of revenue, compared to $560,000, or 1% of revenue, in the same period last year. Sales and marketing expenses for the year were $2.7 million, or 2% of revenue, compared to $2.3 million and 2% of revenues last year. We expect to see further dollar increases here as we continue to invest in sales and marketing efforts, though we expect sales and marketing to be lower as a percentage of revenues in the future. General and administrative expenses in the fourth quarter were $5.2 million, or 12% of revenues, compared to $4.3 million, or 11% of revenues, in the same period of 2024. General and administrative expenses for the year were $19.7 million, or 13% of revenue, compared to $17.6 million, or 12% of revenue, last year. The dollar increases primarily relate to increases in employee compensation and health insurance costs. We expect general and administrative expenses to increase as our business grows but to remain constant or lower as a percentage of revenue. In the fourth quarter, depreciation expense was $648,000 compared to $233,000 in the same period last year. This was driven by a catch-up adjustment identified through a routine asset review where we determined that certain items previously classified as construction in process should have been placed in service earlier, so we aligned depreciation timing accordingly. As a result, the fourth quarter is not indicative of our ongoing run rate and should not be annualized when modeling 2026 depreciation. Depreciation expense was $1.3 million for the year 2025, compared to $1.0 million last year. Adjusted EBITDA, a non-GAAP measure, for the fourth quarter was $460,000 compared to $631,000 for the same period last year. Adjusted EBITDA for the year was $1.1 million compared to $2.6 million last year. The decrease in adjusted EBITDA compared to last year is primarily a result of sales pipeline opportunities shifting to the right. While most of the significant items in the pipeline were ultimately realized, free cash flow for the quarter, which we define as adjusted EBITDA minus capital investments, was $335,000 compared to $593,000 in the same period last year. Free cash flow for the year was $814,000 compared to $2.5 million in the same period last year. Net loss for the quarter was $849,000, or a loss of $0.09 per share, compared to a net loss of $356,000 and a loss of $0.04 per share for the same period last year. Net loss for the year was $2.8 million, a loss of $0.28 per share, compared to a net loss of $1.9 million and a loss of $0.21 per share in the same period last year. Our annual adjusted EBITDA and free cash flow results were impacted primarily by 2025, during which we experienced headwinds as several SaaS and DaaS opportunities were pushed to the right. As Jin and Jason have discussed throughout the call, while we have encountered timing-related delays, these opportunities remain firmly present within our pipeline and have the potential to materially impact adjusted EBITDA, free cash flow, and ultimately position WidePoint Corporation to achieve positive EPS over time. In response to these delays, we took deliberate steps to stabilize our cost structure while maintaining staffing levels and continuing to invest in the business, which drove a meaningful improvement in both adjusted EBITDA and free cash flow during the second half of the year. For context, during the first six months of 2025, adjusted EBITDA and free cash flow totaled $276,000 and $155,000, respectively, as compared to adjusted EBITDA of $804,000 and free cash flow of $659,000 in the second half. Additionally, we are encouraged by the continued implementation progress under our carrier SaaS contract. While there will be a ramp-up period, our goal is to be fully scaled by 2026. As Jin mentioned, revenue recognition on this contract is expected to begin during 2026, where we expect to see positive impact toward our margin profile. Lastly, moving to the balance sheet. We ended the year with $9.8 million in unrestricted cash. We also have additional liquidity options available with our revolving line of credit facility providing us with $4.0 million in potential borrowing capacity, although we do not anticipate having to rely on this facility. In addition, WidePoint Corporation has plans to file a prospectus to establish an at-the-market offering program, or an ATM. This step is a strategic measure designed to enhance financial flexibility and to provide optionality as we continue to execute our growth initiatives. Importantly, we have no current plans to utilize an ATM program at prevailing market valuations, which we believe do not fully reflect the company's long-term prospects. Further, the establishment of an ATM should not be interpreted as an indication of near-term capital use. Any potential use of the program would be evaluated carefully and undertaken only in connection with clearly defined, value-accretive opportunities that support our long-term strategy and enhance shareholder value. This completes my financial summary. For a more detailed analysis of our financial results, please refer to our Form 10-K, which was filed prior to this call. With that, I will turn the call back over to Jin. Jin Kang: Thank you, Bob, and thank you, Jason. To close out the call, I would like to outline where we will continue to invest time and resources in, which we believe will serve as a key catalyst for future growth. Our near-term focus will continue to remain centered on CWMS 3.0. As DHS operations eventually resume, funding disputes are resolved, and ultimately, as the award is announced, we remain confident that WidePoint Corporation will be called upon for the third time. CWMS 3.0 carries a $3.0 billion contract ceiling over ten years. This offers the potential for significant revenue visibility over the next decade. In the interim, we will continue to support DHS under the CWMS 2.0 contract, including any additional extension periods that may be issued should the CWMS 3.0 award be delayed. Additionally, our ultimate goal is to further improve our margin profile. We believe our SaaS and DaaS pipeline will play a significant role supporting this objective, and through our new initiative to expand as-a-service delivery model within our existing client base, we are proactively driving future margin expansion. In the near term, continued progress on the implementation of our carrier SaaS contract will be critical. Our team remains optimistic about what 2026 may hold for us and will diligently work to showcase exactly what our pipeline holds for WidePoint Corporation. This concludes our prepared remarks. We will now open for questions. Operator, will you please open the call for questions? Operator: Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press 1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you are listening on speakerphone to provide optimum sound quality. And once again, if you have any questions or comments, please press 1 on your phone. Your first question is coming from Barry Sine from Litchfield Hills Research. Your line is live. Barry Sine: Hello. Good evening, gentlemen. Jin Kang: Hi, Barry. Good to hear you. Go ahead. Likewise. Barry Sine: Couple questions, if you do not mind. But the first, I want to clarify what you have been talking about on the transition on the DaaS awards, and just clarify in, you know, straightforward language. What exactly are you doing? Looks like you have built a new warehouse in Columbus, Ohio. What were you doing previously for those customers? What are you doing in the future? The other question I have on that is the press releases; you have begun proactively engaging with existing clients, and I thought in the script you said that you have already begun the conversion process with two clients. So I am a little confused on a couple of points on that. Jin Kang: Sure. No problem. I will address those points here. In terms of what we are doing with DaaS, we have a lot of opportunities in our sales pipeline that are very close, but they have pushed to the right. We thought several of these we were going to capture in 2025, which is now pushing into 2026. One of the big ones that we talked about is the LA 2028 Olympics and the Paralympics. That is a large opportunity for us with our partner CDW. While we are waiting for these opportunities to close, we are in the process of converting some of our IT as a Service customers to a Device as a Service customer. And what that means is that we will be able to smooth out the revenue streams so that we can have better visibility into those streams as well as making them more predictable, also making them a little bit more profitable. So we are doing that. And the reason why we are able to do that is because we have invested in our logistics space, our DaaS space that we leased out in the beginning of last year, and we have now, you know, phase one, which is getting all of the construction done and all of the electricity and the computer systems in there, and moved our logistics department into that facility. And we finished that, and we had a ribbon-cutting ceremony at the end of last year. And now we are prepared to start doing all of the depot maintenance, all of the logistics services, software configuration, imaging, recycling; all of those things are now moved into that facility. And so we are converting some of our existing customers to the DaaS model to, one, get more predictability in revenue, as well as making them more profitable. Barry Sine: So just to drill down a little bit more, previously, when it was IT as a Service, it was purely software licensing, and so there was nothing physical involved. Now it will actually be physical devices provisioned out of your Columbus warehouse. Is that correct? Jin Kang: Sort of. So, the IT as a Service did include hardware, but a lot of the hardware was like a single purchase, very lumpy devices that we had actually purchased on behalf of our customers, and we implemented them, we managed them, and maintained those devices. But now what we are doing is that we have this depot maintenance capability and have all of the hardware, and so we are managing 360-degree support services for all of the hardware that we now will provide for our IT as a Service customer. Barry Sine: And is that lower margin or higher margin now that you are handling more devices? Jin Kang: It will be higher margin, slightly higher. And it will be more predictable because we are not doing tech refreshes on, you know, like, every 12 months or every 18 months. We will do these tech refreshes on behalf of our customer, and we will maintain those devices, and we will not have that lumpiness in our hardware sales. Barry Sine: Okay. My second question is around Spiral 4. You won a major, major contract. You were one of several carriers with the United States Navy. That was some time ago. We did not hear too much about that in today's earnings call. Could you give us an update where we are on Spiral 4? Jin Kang: Yes. We did win that major contract, the Spiral 4 contract. And since then, we actually captured eight contracts, eight new task orders underneath it. I believe the total contract value is $3,031,000,000 in top line. So we are in the performance on that, and we are in various stages of various task orders that we put proposals in. So we are bullish that we will capture more task orders in 2026. Barry Sine: And they are still coming in at a, you know, a somewhat regular basis? The task orders? Jin Kang: Yes. As an IDIQ contract, as old contracts expire, they will put it out for bid, request for quotes, and then we will put in our quotes against other winners. I think that there were six other winners, and so we will put our proposals in when those RFQs come out and, many times, hopefully, we will win more contracts than our competitors. Barry Sine: Okay. And shifting gears, my last question is more around the balance sheet. You seem to have a high-class problem, that you have got almost too much cash. You are almost at $10 million in cash on the books. On a per-share basis, that is pretty high. My, you know, you obviously you are not going to do a draw on the ATM, which is a very smart idea at the stock price. My guess would be uses of cash either acquisition; you have done acquisitions in the past, but you have been pretty cautious on pulling the trigger. Or buybacks. Am I, you know, it does not sound like this one. It sounds like capital expenditures are going to go down, so we can kind of rule that out. What should we think about the cash? How can we turn that asset on the balance sheet into value for shareholders? Jin Kang: Yes. So we do have a reasonable amount of cash, and we have been sort of slightly increasing our cash balance over the years. And, as you say, we did do an acquisition of ITA back in 2020 with cash that we generated from operations. As you know, the federal government has a tendency to shut down every now and then. And so what we have been able to do is to weather those shutdowns by having, you know, what I think Jamie Dimon may have said before, a fortress balance sheet, if you will. And so what we want to do is we want to make sure that we have enough working capital, and I think we do. We have not had to draw down on our line of credit in recent memory. But if there is a protracted shutdown of the federal government, or if there is a slowing of invoice payments as a result of that, we may need the cash. But you are right. We are not going to be using our capital like drunken sailors. We will be, excuse me, we will be judicious about our capital and how we spend it. In terms of, you mentioned ATM, we do not have any plans to go out and execute any of the sales under that plan because, exactly as you say, we have plenty of net working capital. And we put that out there as a good housekeeping item in case that we can be opportunistic. When certain catalytic events happen, we want to be prepared to be able to raise capital for purposes of acquisition or building a fortress balance sheet. Barry Sine: It sounds like you got an angry phone call from a drunk sailor with that comment. The last question is cash flow during a government shutdown. Do you still get paid? I know you are still providing the services, and they are extending you. But does cash flow in, or is that what you are getting at when you are saying you want a fortress balance sheet? Jin Kang: Yes. During government shutdowns, sometimes the nonessential personnel—and that usually equates to some administrative staff or people that are processing invoices—and sometimes there is a slowing of the invoice payment. Although we have not experienced that. You know, Bob, did you want to add anything to that? No. It is good. Robert George: Pretty much say what you said, Jin. I mean, we have not seen—I mean, we are monitoring cash daily, and we are seeing the same level of inflows there. You know, we are just being really careful because you never know if somebody ends up not going to work and not processing something. So it is a pretty long cycle, right, in terms of creating a bill and sending it. So it could have a downstream effect, so we are just being really careful. Jin Kang: Yes. We want to make sure we can weather any of these slowdowns from the government. Barry Sine: And just continuing on the cash balance, it seems to me in the past what you have said is that you are still expecting that there may be another large acquisition, so you want to keep your powder dry for that. And you have not been as aggressive on share buybacks. Is that posture still correct? Jin Kang: Yes. I mean, the first order of business is making sure that we have enough working capital. Two, we want to keep our powder dry in case there is an accretive acquisition that we need to act quickly upon. And I think being prepared for those headwinds in terms of various government shutdowns, we want to be prepared for that. We want to be resilient, and hopefully, we will be able to continue to add to that balance as we continue to operate here. As we close on some of these new opportunities, we should be able to put more cash onto our balance sheet. And we are looking around for potential acquisitions, but they are far and few in between. So, Bob, you want to add? Robert George: I would also add, you know, growth takes working capital. Right? So, I mean, we do not want to be hamstrung if, when some of these large DaaS opportunities come, there is not a huge amount of initial investment, but, you know, just the general working capital drain on growth. We want to make sure we are prepared to deal with that. Barry Sine: Okay. Thank you very much, gentlemen. Those are my questions. Jin Kang: Great. Thank you, Barry. Always a pleasure. Operator: Thank you. Your next question is coming from Casey Ryan from WestPark Capital. Your line is live. Casey Ryan: Good afternoon, gentlemen. Pretty good update for what felt like maybe a little bit of a treacherous quarter. Activity. So I just wanted—carrier services popped up quite a bit, and maybe there were some one-time items, Bob, that you were laying out. But I just wanted to ask about why it was a little bit bigger in the quarter, and it seems like a positive. But I just wanted to understand that number a little bit better to start off with. Robert George: Yes. A lot of the quarter was driven by CBP. And, you know, there is a command services component and a carrier services component. So, you know, that is—I do not know the exact number, but most of that sequential growth is CBP. Casey Ryan: Okay. Great. Jin Kang: Yes. Customs and Border Protection. Yep. Yep. Casey Ryan: Right. And just for those of us who are trying to be good civic students, where does CBP fall? I know it is part of DHS, I think, but is it part of ICE, or no, it is separate? Jin Kang: No. Customs and Border Protection is a separate component of DHS, and their mission is to handle various customs-related issues versus immigration issues. Casey Ryan: Got it. Okay. Thank you. I also, just going through the 10-K as we are looking, commercial revenues looked strong in the quarter, and, you know, it did grow 6% year over year in total. That is an exciting metric, and I think, obviously, it is sort of—that is the category where we see these higher-margin contracts flowing going forward, I think. Is that the right way to think about that line item, sort of commercial? Jin Kang: Yes and no. I mean, our efforts have been continuing to increase our revenues on the commercial side, but at the same time, we are also looking at growing the revenues on the federal government side. So as we said in the past, we have now paid for our fixed costs. So any new customers that we add on as we go forward are going to be that much more profitable. Like the carrier contract that we signed with one of the big three, that will be all commercial revenue, and it will be fairly high margin as well. We are also adjusting some of our rates on our federal government customers as well to adjust for the various inflationary things that happened over the last four or five years. And so as we add on new customers, we will be that much more profitable. Our gross margins—our goal has always been, for non-carrier services revenue, to get to near 50% in gross margins. And so it was good to see that our gross margin went from, you know, 33 and change to, like, 38%, I believe, in Q4. So we are continuing to make progress towards that. Casey Ryan: Yeah. Well, no. And that is kind of, I guess, what I am really focusing in on. It is really tremendous progress. So if we track this commercial revenue line, do you feel like 2026—not to put guidance out there—but it feels like if some of these things break your way, it could be a pretty strong growth year for that revenue line, commercial revenue specifically? Jin Kang: Yes. And Bob just reminded me that the commercial line is one of these large integrators that we are doing our identity management for. And so we should see more of that as Jason mentioned about the Mobile Anchor opportunities. And those things will be—some of them will be—commercial. Of course, all of the carrier contracts that we have are going to be commercial. So we should see continued increase in our commercial revenues. And, of course, we have got the CWMS 3.0 that, again, if that happens this year—hopefully, it will happen in the next couple, three weeks—hopefully, the DHS will be back, they will be fully funded, and, you know, the award announcement made. And if that happens as well as some of these DaaS opportunities, it will be a great 2026. Casey Ryan: Yeah. Well, I mean, certainly, just playing with Excel, we can get ourselves in trouble, but we can see that the margin contributions will be very positive. Right? Jin Kang: Right. Casey Ryan: So just to be quick, if the government shutdown ends—I know in the past you guys have tended to put out annual revenue guidance and sort of backed away from that just given the uncertainty around this—but if it all settles down, then we get back to a more normalized period. Do you think it would be your preference to kind of reinstate that at some point, say, Q1 or Q2, to sort of offer out sort of a full-year annual guidance number? Jin Kang: Yes. That is a great question. And our normal process had been to provide guidance in our Q1 call, usually May, middle of May. We are planning to do so, and we are hopeful that by May, Congress would have acted and would have approved the DHS full funding for DHS. And then the CWMS 3.0 award announcement will be made, and we will be able to provide a pretty accurate guidance. But, in absence of that, we may have to delay full-year guidance until, you know, perhaps after Q1. And so, but we are hopeful to provide guidance, as I said, in our Q1 call. Casey Ryan: Okay. Okay. Great. And then, sorry for the long list of questions. I just wanted to ask actually about a press release you guys put out—I think it is dated February 18. It was for a bottler, but it was for managed services, sort of enterprise hardware and software contract. I just wanted to ask about that and see. Is that sort of for mobile devices only, or is that sort of broader and more inclusive? Because I thought it was a real exciting commercial type win. Jason Holloway: Hey, Casey. No. It is not for mobile devices. That is under our IT MSP, or as-a-service group. So it is a mix of a number of things. And as we said in our prepared remarks, we are going back, and we are actually trying to get some of these folks to make the switch over to the Device as a Service. So we are very excited about that opportunity, and we have a lot of momentum in that area. But, yeah, so just stay tuned because that particular account is scheduled to grow in the second half of 2026. So we are cautiously optimistic that it is moving in the positive direction. Casey Ryan: Okay. Terrific. And, sort of the contract award in this segment, is that kind of a one-year, or is it a type? Just so we understand what the duration is like. A lot of your government contracts, right, are sort of much longer in duration, but maybe on the commercial side, it is just one year, or maybe it is three years. I do not know. Jason Holloway: No. This particular contract is a one-year, but our typical commercial contracts are anywhere between three or five years. But this particular one is a one-year, and, like I said, we hope to grow this in the second half. And if we do, then that will turn into a multiyear award. Casey Ryan: Yeah. Well, it is just a great proof point over on the commercial side for what you guys are able to do. So I just thought it was worth digging into a little bit. It seems very positive. Jin Kang: Yes. We are making—that is one of our priorities—to continue to grow our commercial side, so that as we diversify our revenue sources from commercial and government, when there is a shutdown or some other things that happen on the federal side, we can weather those things a little bit better. And so we made a conscious effort to continue to push to grow the commercial side as well as grow on the government side. Casey Ryan: Yeah. Well, thank you for taking my questions. I think with all the headwinds, it is a really super quarter. I mean, the outlook looks very positive for 2026. So thank you. Jin Kang: Great. Thank you, Casey. Operator: Thank you. At this time, this concludes our question and answer session. If your question was not taken, please contact WidePoint Corporation's IR team at wyy@gateway-grp.com. I would now like to turn the call back over to Mr. Jin Kang for his closing remarks. Jin Kang: Thank you, operator. We appreciate everyone taking the time to join us today. As the operator mentioned, if there were any questions that we did not address today, please contact our IR team. You can find their full contact information at the bottom of today's earnings release. Thank you again, and have a great evening. Operator: Thank you for joining us today for WidePoint Corporation's Fourth Quarter and Full Year 2025 Conference Call. You may now disconnect.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. Any member of our team will be happy to help you. Operator: Good morning, and welcome to Paychex, Inc.'s third quarter fiscal 2026 earnings call. Participating on the call today are John B. Gibson and Robert Lewis Schrader. Following the speakers’ prepared remarks, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press 2 on your telephone keypad. As a reminder, this conference is being recorded. Your participation implies consent to our recording of this call. I would now like to turn the call over to Robert Lewis Schrader, Paychex, Inc.'s Chief Financial Officer. Robert Lewis Schrader: Thank you for joining us to discuss Paychex, Inc.'s third quarter fiscal 2026 results. Our earnings release and presentation are available on our Investor Relations website and we plan to file our Form 10-Q within a couple of business days. This call is being webcast live and will be available for replay on our Investor Relations portal. Today’s call includes forward-looking statements that refer to future events and involve some risk. 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. We will also reference non-GAAP financial measures. A description of these items, along with the reconciliation of non-GAAP measures, can be found in our earnings release. I would now like to turn the call over to John B. Gibson, Paychex, Inc.'s President and CEO. John B. Gibson: Thanks, Bob. Hello, everyone. I will cover this quarter's operational highlights, and Bob will come back and discuss our financial results and outlook, and then we will open it up for your questions. We delivered a strong quarter with revenue up 20% and adjusted operating income up 22% year over year, driven by effective execution and progress advancing our strategic priorities, most notably the Paycor integration and acceleration of our transformational AI initiatives. In this very dynamic environment, financial strength is important, and our free cash flow generation continues to be robust, as Bob will highlight later. Amid a dynamic macro backdrop, our clients’ workforce levels remained stable, supported by our solutions that help manage costs and source talent in a tight labor market. In a highly regulated industry, our compliance depth, advisory expertise, and award-winning platforms provide a clear competitive advantage in navigating a constantly changing and complex regulatory environment. As we embed AI into our expert-enabled technology, we are strengthening that advantage by leveraging our vast data to scale our expertise, enhance productivity, and elevate client outcomes. As you all know, we operate in HR, benefits, and payroll, some of the most mission-critical aspects of a business. And we are honored that 800,000 clients rely on us for trusted support and advice. For many of our clients, we effectively serve as their HR department, managing a foundational part of their business. Their people. Errors paying employees, withholding taxes, and administrating benefits carry significant regulatory and reputational risk, driving demand for trusted compliance solutions where accuracy matters most. Demand for our comprehensive advisory and benefit solutions remains strong, differentiating us from the tech-only providers. Clients are increasingly turning to our HR professionals for strategic advisory expertise and assistance over routine transactional support. Robust revenue growth in retirement, ASO, and PEO highlights the durability of our model and reinforces our expectations of a long secular growth runway for these businesses. Our ASO and PEO worksite employee growth continues to outpace the industry, reflecting our value in navigating regulatory complexity and ensuring compliance, often for clients with no or, as I said, limited HR support. Our PEO business remains strong with high-single-digit worksite employee growth, driven by robust demand and record retention rates. Our PEO solution empowers small businesses to offer competitive benefit packages on par with Fortune 500 companies, aiding talent attraction and retention in a tight labor market. January enrollment in our at-risk 40 MPP medical plan went well and in line with our expectations, helping drive sequential revenue growth. We received positive feedback on the new AI-driven benefits intelligence we embedded in the enrollment workflow this year. It leverages employee-specific data to recommend plan choices and streamline benefits selection. We continue extending our SMB benefit leadership with Paychex Perks, our award-winning digital marketplace offering affordable, transferable benefits to our clients’ employees. Perks is a compelling growth opportunity that empowers our clients to offer meaningful benefits with no added cost to the employer or administrative burden. In the first 18 months, Perks has grown to over 25 benefit offerings, with purchases from nearly 350,000 unique employees, creating a direct end-user relationship with portable benefits that they can keep if they change employers. By bringing enterprise-level benefits down market, we are enabling our clients to better compete for talent and addressing a historically underserved market. The Paycor integration continues to progress well. We remain on track to exceed our fiscal 2026 synergy targets we discussed last quarter. Leading indicators such as bookings and broker referrals have reaccelerated to pre-acquisition levels, and we are adding sales headcount to capture the demand we see. We are gaining momentum cross-selling Paychex, Inc. ASO, PEO, and Retirement Solutions to Paycor's clients, and we continue to win larger-than-expected ASO deals and broker-referred PEO opportunities. This momentum reflects the hard work and alignment of our teams and positions us well going into fiscal year 2027. Our Paychex Flex and Paycor platforms were recognized as industry-leading HCM solutions with two 2026 Lighthouse Tech Awards. This achievement underscores our commitment to empowering businesses with modern AI-powered solutions that simplify HR processes and drive business outcomes. Integral to our growth strategy, we continue to accelerate embedding AI into our workflows. This amplifies our expertise with human-in-the-loop oversight and strong governance. We now have over 500 AI-powered capabilities and agents that can drive higher productivity and smarter decisions and outcomes. Our generative AI-powered employment law and compliance platform processed tens of thousands of inquiries this quarter, helping clients and Paychex, Inc. HR experts navigate complex and always-changing wage and employment law. Internally, we are expanding AI use cases to enhance the client experience and sales effectiveness. Following successful pilots last quarter, we are scaling the use of our voice and email agents for payroll processing, enabling service teams to focus on proactive higher-value advisory support. We also expanded our agentic AI sales and service tools to the entire sales team with a goal to drive revenue growth and efficiency. AI agents orchestrated real-time information across service and product systems, equipping thousands of service personnel to support clients more effectively. This agent swarm architecture really removes prior friction and serves as a foundational capability to future agentic developments. Our strategic AI investments are bolstering our leadership in HCM innovation. We are moving from insight and efficiency tools to proactive agents that leverage our vast and growing dataset to complete work to drive business success. Payroll and HR, as we know, are mission critical and highly regulated functions where accuracy and compliance matter more than automation alone. We believe Paychex, Inc.'s proprietary payroll data, regulatory expertise, and advisory relationships create a sustainable advantage that will enable us to responsibly embed AI into our solutions while maintaining a durable competitive moat. In our business, trust is critical. It is not just what you do, but how you do it that matters to prospects, clients, partners, employees, and key stakeholders. That is why I am proud that Paychex, Inc. was once again named one of the World’s Most Ethical Companies by Ethisphere for the eighteenth time. This rare achievement highlights our unwavering commitment to ethical operations and corporate responsibility. Supporting communities is also integral to our identity, and I am pleased that Paychex, Inc. was recognized as a leading corporate partner by United Way Worldwide, reflecting our commitment to making a positive impact where we live and work. Lastly, I would like to thank our team for the exceptional hard work during this busy year-end season and through a very, very challenging year of integration. The work that they have done to support our clients to come together is truly exceptional and I think really is positioning us well as we move into fiscal year 2027. I will now turn the call over to Bob to discuss our financial results and outlook. Robert Lewis Schrader: Thank you, John. I will start with our third quarter financial results, then provide an update on our outlook. Total revenue increased 20% over the prior year to $1.8 billion. This represents an acceleration in the organic growth of the business relative to the first half of the year. Management Solutions revenue grew 23% to $1.4 billion driven by product penetration and price realization. Paycor contributed approximately 19 percentage points to growth. PEO and Insurance Solutions revenue increased 9% to $398 million, driven primarily by strong growth in the number of average PEO worksite employees as well as an increase in PEO insurance revenues. Interest on funds held for clients increased 33% to $57 million, largely due to the addition of Paycor balances. Total expenses increased 24% to just over $1.0 billion, primarily driven by the Paycor acquisition. Excluding Paycor, we estimate that expenses grew in the low single digits during the quarter. Operating income margin was 43.8%, and adjusted operating income margins increased approximately 80 basis points to 47.7% driven by increased productivity and cost discipline while increasing our investments in AI. Diluted earnings per share increased 9% to $1.56 per share, and adjusted diluted earnings per share increased 15% to $1.71 per share. Our financial position remains strong with cash, restricted cash, and total corporate investments of $1.8 billion and total borrowings of approximately $5.0 billion as of the quarter close. Our cash flow generation continues to be a strength of our model. Operating cash flows were nearly $2.0 billion year to date, and our free cash flows increased 27% year over year. After the quarter closed, we repaid the initial $400 million tranche of debt from our Oasis acquisition that matured in March. Our recent $1.0 billion stock repurchase authorization underscores our commitment to delivering long-term shareholder value. We returned $463 million this quarter and over $1.5 billion year to date to shareholders in the form of cash dividends and share buybacks, and our 12-month rolling return on equity remains robust at 41%. Shifting to our guidance for FY 2026, which is based on current market conditions, we reaffirm our prior fiscal 2026 outlook except for raising our interest on funds held for client expectations. Interest on funds held for clients is now expected to be in the range of $200 million to $210 million. All other guidance metrics remain unchanged. Turning to the fourth quarter to provide you a little bit of color, we would anticipate fourth quarter growth to be approximately 12% with an adjusted operating margin of 41% to 42%. The fourth quarter growth rate reflects a couple of dynamics. First and foremost, I think most of you know we anniversary the Paycor acquisition during the quarter, and to a lesser extent Q3 benefited modestly from the timing of certain items relative to Q4. However, our second half outlook remains consistent with our expectations and the organic revenue growth acceleration we saw in Q3. We believe Paychex, Inc. has never been better positioned to succeed in the AI era of HCM to deliver shareholder value. Our business fundamentals remain strong. As the best operators, we have unrivaled operating and free cash flow margins with an opportunity for further expansion. Our financial strength and the durability of our business model are evident in our consistent performance as a Rule of 50 company. We are committed to returning capital to shareholders and confident in our ability to deliver sustained value through continued revenue and earnings growth. I will now turn the call back over to John for questions. John B. Gibson: Thank you, Bob. We will now open the call to questions. Operator: Thank you. If you would like to ask a question, press 1. To leave the queue at any time, press 2. We do ask that you limit yourself to one question and one follow-up. Once again, that is 1 to ask a question. And our first question comes from Bryan C. Bergin with TD Cowen. Your line is now open. Please go ahead. Bryan C. Bergin: Hi, guys. Good morning. Thank you. Bob, can you put some finer points, just first on the level of organic growth in the third quarter and then bridge that forward to your commentary on the fourth quarter. If you can kind of unpack that 12% growth across the business, I think that would help. Robert Lewis Schrader: Yeah. Bryan, I think consistently, even if you go back to Q4 of last year, the organic growth of the business has been a bit weaker. I think a lot of that had to do with comparability issues, particularly in the PEO business with our MPP plan in Florida. But if you go back to Q4 of last year, I think we have seen sequential improvement each quarter in the organic growth of the business. So if you look at first half total revenue organic growth, it was roughly 4% and that improved from Q1 to Q2. And then when you look at the back half, whether it is Q3 or Q4 combined, we would expect it accelerated in Q3, and we would expect to see similar organic growth performance in Q4. And so you are now getting to a back half organic growth rate that is closer to 6%. And then when you put the two of those together, it is roughly 5% on a full-year basis. And so again, I think there are a couple drivers of it. One, to be fair, is the easier compare on the PEO business. I mean, I think you will see that the headline PEO number sequentially went from 6% last quarter to 9%. There are some timing things there, but there is certainly a strength in the underlying operating performance of the business, particularly in the PEO, and we can get into that probably in maybe some later questions. But we did anniversary the headwind from the MPP enrollment. So that is why you are definitely seeing the combination of an easier compare and stronger operating performance driving accelerated organic growth in the back half of the year. Bryan C. Bergin: Okay. As far as the 4Q exit rates that are implied, as we think forward into fiscal 2027, any important considerations that you want to share? Robert Lewis Schrader: Yeah. I will maybe head off the question that I am probably going to get. As it relates to next year and guidance, we are in the early stages, I would tell you, of our operating plan and are going to finalize that over the next six to eight weeks. And I know we kind of established a precedent coming out of COVID in providing maybe some more details around what we were thinking for the year. I think we needed to do that given some of the uncertainty in the environment back then. Our preference now is to build the plan, come out in Q4 like we historically did and consistent with what our competitors do, and provide guidance at that point in time. That being said, we obviously have visibility to what is out there in the models and FactSet. And when I look at that, I really do not see any reason that I need to steer you in one direction or another. I am fairly comfortable with what is out there. And I think, Bryan, what you will see is the organic growth rate, whether it is Q3 or Q4—we are really looking at the back half because there are some timing differences, particularly in the PEO, between Q3 and Q4—when we look at the organic growth rate in the back half of this year, it pretty much aligns with what is assumed from a consensus standpoint for next year. Operator: Thank you. And we will take our next question from Mark Steven Marcon with Baird. Your line is now open. Mark Steven Marcon: Thanks for taking my questions, and nice performance this quarter. I am wondering if you could talk about a couple of things. One, you did mention that Paycor was seeing new broker engagements or a renewal of some of the broker engagements and that pipeline. I was just wondering if you could talk about new sales, generally speaking, during the core selling season. What did you end up seeing this year, and how would you describe the competitive environment, win rates, etc.? John B. Gibson: Hey, Mark. This is John. I would say the competitive environment is stable and the same. It is competitive. I would not say I have seen much change there. From a sales perspective, I am very pleased with our performance in Q3, not only in line with our expectations but, quite frankly, we were accelerating PAR and bookings growth in the third quarter. And we have kind of seen that sequentially as we come out of the disruption, as you know, at the start of the year with the integration of teams, continuing to grow there. PEO, double-digit bookings; Paycor, double-digit bookings as well. We actually see bookings in the PAR referral continuing to accelerate back to pre-acquisition levels. We are actually adding headcount in the enterprise space. Again, remember, Paycor for us is a brand for the enterprise market, 100 plus, and we think that is a great opportunity for our HR outsourcing services as well as technology solutions. And so we are going to continue to go after that as well. So we continue to gain momentum, I think, across the board, and we feel good about where we are positioned going into 2027, both in terms of our competitive positioning and our headcount. And I think you really look at it. We are entering 2027 with all of the integration work behind us that we did early in the beginning of this fiscal year, and we are entering with not only an aligned team, but really the most comprehensive and, I think, flexible and innovative set of solutions in the marketplace, and so I feel good about where we are. Mark Steven Marcon: That is great to hear. And then I thought the gross margin performance was particularly impressive. You know, when we take a look before defining gross margin as revenue minus the direct costs, and part of that was obviously the higher interest income off of the float. But beyond that, it looks like it is doing extremely well. How much of that is related to some of the AI initiatives that you have put in place in terms of embedding AI across your service infrastructure and making them more productive versus, you know, other initiatives that you put in place in terms of perhaps shifting some of your costs to lower-cost labor markets like India, and how much more can we do there? Because it has been fairly impressive. I am wondering if this is basically setting us up for, you know, continued margin expansion for multiple years. John B. Gibson: Mark, I think that we have a long track record of being able to drive, as the best operators, margin expansion as we grow revenue in the business. And I think you are going to continue to see that. We use every lever imaginable to do that. I think that when you look at AI, as you know, we have been using AI in predecessor-type models for many, many years, since I have been here. And now with this new technology that almost every day something new is coming out, what we are seeing is pretty impressive. It is pretty incredible. Some of the things we are doing in terms of generative AI models, which we have now released to scale after the pilots—doing voice payroll, doing email payrolls. What we are seeing early stages in our beta groups in sales using our sales guru tool and what we are seeing from a service perspective. So I feel good about what the opportunities are. Look, if we grow the top line, we are going to be able to grow margins and expand margins over time. Then when you look at these new tools that we can put in our arsenal, as the best operator I really feel good about where we are. And I would say that on 2027, we are just getting in. That is a big debate right now. I think that is the big question—how do you begin to quantify the real positive impact from sales productivity, the way we are using it in marketing, what the potential is from a service perspective. So I can assure you we are going to have some very lively discussions next week during our planning sessions about exactly the potential that this technology has both to drive the top line but also to continue to expand margins. So I think there is more room ahead. And every year, something new comes out. And we are innovators in that regard. We are going to grab every tool we can to continue to drive efficiency. Thank you. Operator: We will go next to Tien-Tsin Huang with JPMorgan. Your line is now open. Tien-Tsin Huang: Hey, thanks. Hi, John and Bob. I wanted to ask on the advisory work that you talked a little bit about. I think that is probably underappreciated in terms of what Paychex, Inc. does there. How AI-proof is the advisory side of the business? You know, because I get the question quite a bit that, you know, can rules-based advice from AI come in and supplant what Paychex, Inc. does on the advisory side? But I am guessing that a lot of your advisory work is centered around compliance and very complex data issues that only Paychex, Inc. has. Can you maybe elaborate on that? John B. Gibson: Yeah. Look, Tien-Tsin, I think this is something I think is extremely interesting for people to understand. For the vast majority of our clients, we are their HR department. Right? So not only do we provide them the advice, we literally are talking to them and holding their hand when they are making some of these decisions and supporting them. You look at our PEO, the most comprehensive part of our model, we are actually in a co-employment arrangement. We are actually helping represent them and deal with their employee situations, which are numerous, I may add, in today’s world. And so we are actually doing so much more that there is no way that I think technology is going to replace that, at least that I see in the short term. Now to your point, we actually own the patent on using agentic AI in a mesh form and structured and unstructured data to answer HR and compliance status. Why is that? Because we have a huge compliance regulatory team that is constantly keeping that system up to date. What I will tell you is the changes in Akron, Ohio are not automated. Someone has to go onto Akron’s website, has to look at it, has to interpret it, has to watch what is going on in Ohio courts to understand how it is being interpreted, and then put that into a system to be able to respond to a client who is asking a question about whether or not they can terminate a client in Akron, Ohio or not. So I think that part of it—both the AI-embedded tools, now we have actually launched those tools inside of our HR generalists—we are actually seeing pretty significant productivity improvements since we have done that. Our clients—we are embedding that into our platforms so our clients can gain access to that. I think that is going to drive more efficiency. But at the bottom line, for most of our clients, and increasingly upmarket, we are becoming the HR department and HR partner for helping people manage people. So as long as our clients have people, they are going to need Paychex, Inc. holding their hand and helping them understand how to work with those people, in my opinion. Tien-Tsin Huang: Yeah. Well, I will say your opinion is very important, John. That is why I am asking. And so thank you for going through that. Maybe just as a follow-up, thinking about these agents as they get deployed and, as you said, the proprietary data that you have, does this get monetized through your normal way—pricing that you typically would put through in the spring—or do you think of this as a new monetizable opportunity for Paychex, Inc.? John B. Gibson: Well, I think we have been monetizing our data and providing insight going back to the early days. We won the 2022 best use of AI in HCM with our retention insights. That was before all this AI madness fell us. And the fact of the matter is that we have been doing that. We monetize that with our clients and actually provide them insights about how to retain their clients. I think what you are seeing today is we are applying it into our products and services to improve the user experience. We are putting it in there to be able to improve insights that we can provide in other areas such as benefits. We mentioned what we are doing in the PEO, which was just phenomenal—the way the tool helped advise clients’ employees on what benefits package was right for them. So I think you are going to continue to see us use it to really drive better outcomes. And you made a critical point. In order for AI to work, you have to have a large, robust dataset. And the other thing that we have learned, particularly when we are building the agentic AI models for payroll, you had to have a constantly moving set of data. And so the way I look at it is this flywheel effect. Now that we are capturing every interaction that we have from an HR, payroll, and compliance perspective with our clients through every form of communication, every interaction we have with them or one of their employees adds to our dataset. And with our tools constantly looking and doing the analysis around what are common trends, we are getting more insights. And those insights are allowing us to be more proactive with our clients. So as the transactional work gets automated, it frees up our time to be able to gain more insights, and then the system is proactively giving our HRGs a list of insights that they can then call clients and make recommendations on, whether that is compensation, whether that is retention, whether that is workplace trends that we are seeing in specific geographies that they need to be aware of. So I think it is just going to continue to improve the value that we have, and I think it is also going to improve the outcomes that our clients see. Operator: Thank you. We will move next to Brian Keane with Citi. Your line is now open. Brian Keane: Yeah. Hi. Good morning. Was hoping you guys could just talk a little bit about the strength of PEO insurance. It jumped above the range at 9%. Can you talk a little bit about some of the drivers and some of the sustainability as we head into the fourth quarter? Robert Lewis Schrader: Yes. Maybe I will start and then John can add some color. I think it is twofold, Brian, as I alluded to earlier. Think strength in the underlying operating performance of the business. So we saw double-digit demand for PEO. We continue to see record WSE retention in PEO. We saw high-single-digit worksite employee growth. You know, this business is all about worksite employees, and we continue to outpace the competitors in that space with our ability to drive worksite employee growth. So the underlying operating performance is strong. January is the big annual enrollment, so we anniversary two things. We anniversary the tougher compares from the prior year when MPP was down. We got through that annual enrollment. And I would tell you, enrollment in our MPP is up modestly. So you have an easier compare, we drove the enrollment. And then when you zoom out a little bit, and you look at medical enrollment across all the PEO—not just the at-risk business in Florida, but across the entire PEO space—our medical enrollment was up high-single digits, near double digits, as we went through this annual enrollment period. And I think that is the strength of the PEO value proposition: the ability for us to offer to our small business clients the ability to offer medical insurance and workers’ comp insurance, leveraging our scale to be able to offer affordable benefits to them. You know, we had a pretty good year-end enrollment related to that. So it is really a combination of all those factors. I would also just say, and I have alluded to this a little bit, on the agency side we had some timing benefit. You get some timing between Q3 and Q4 between carrier bonuses. SUI revenue can be a little bit stronger in Q3, a little bit weaker in Q4. And so relative to our expectations, there was a little bit of timing that came into Q3, but all in all, really strong performance and pretty much what we planned in the back half of the year, and it is nice to see that coming to fruition. John B. Gibson: Yeah. I just want to add to this. I mean, the PEO performance is amazing, outpacing the industry, I think, rather significantly. Double-digit revenue growth, double-digit bookings, seeing success upmarket. I think this is another point—again, I will make it. It is going to be interesting. We are having success with the Paycor sales team into the broker channels positioning PEO upfront. So this is one of those what I call revenue geography problems. So a Paycor rep is out and they are talking to a broker. What would have normally been, because all they have was HCM to sell, an HCM sale— all of a sudden, the discussion comes about what the problem is, and we have got multiple solutions. And now we are selling a PEO. And we had some, and it is larger deals than what we typically would see coming in. So in January, that was another big positive that, quite frankly, I think is going to continue to help us and move forward. I would also say, because I do want to say this, look, the agencies were certainly still a drag in the quarter to the segment. But we saw sequential improvement. And I would actually say even in bookings, which is the precursor to revenue moving, we actually saw solid bookings there in the quarter. And so I am pleased with the teams—made a lot of changes there. We have made some changes in the agency. We are trying to be more innovative because the market is the market. Health care issues are health care issues. Soft workers’ comp is soft workers’ comp. We are building strategies to work around those situations, and the team is making some progress there. So that also contributed a little bit as well. Other thing that I think is that I would point out for you guys to go back and look at, and I think it is probably a story that we plan on duplicating in the enterprise space. If you go back and look at our PEO success, and you go back to 2020 to 2025 and look at those five years, I think you are going to find that our CAGR of worksite employee growth is in the double digits and far surpasses any of the other providers that I am aware of, both public and private, in terms of growth. Now what was the setup for that? 2018, we make an acquisition of Oasis. Prior to that, we made a decision that strategically we were going to position the company as an HR advisory company, that we believe there was more than technology that our clients were going to need and want. We started to really grow our business organically. We then went and made an acquisition. One year after that acquisition, we are growing that business at industry, and we are gaining share in that industry. I think that is exactly what you should expect us to try to do, and we are doing, with the Paycor acquisition. We saw the opportunity to take HR advisory solutions upmarket. We wanted more capability to be able to do that, more distribution. And now we are a year into it, and I think we are well positioned to duplicate the story that we did in PEO in the enterprise space. Brian Keane: Got it. Got it. And just a quick follow-up, Bob. The 12% revenue growth you called out for Q4, I think that is a point below the Street. Yeah. But it sounds like some timing—maybe there was a slight benefit, some of the stuff you just talked about, obviously, in the PEO business from Q3 to Q4. But organically, the organic growth does not move much. Maybe just talk about some of the benefit maybe if Q3 should be stronger organically than Q4. Robert Lewis Schrader: No. I think you would probably see a slight uptick, a continued acceleration in the organic growth of the business in Q4 relative to Q3. So we should see sequential improvement there. And I mean, as you guys know, we do not give quarterly guidance. I am trying to give you some color each call to help you with your models going forward. I would tell you, we were intentionally conservative last quarter when we kind of provided some color on Q3. Obviously, Q3 is a big quarter for us. You have year-end. You have selling season. We have our year-end processing fees, which is a lot of money and margin that hits in the month of January. We had our large enrollment in the PEO. So we were intentionally conservative. I would tell you Q3 was in line and a bit better than our expectations. And as I mentioned, there were some puts and takes between Q3 and Q4, and largely the back half of the year was in line with our expectations. And again, you will continue to see some sequential improvement in the organic growth of the business, assuming we deliver the forecast and guidance. You will continue to see some sequential improvement in the organic growth of the business, which I think positions us well, as John mentioned, as we move into FY 2027. Operator: Thank you. We will move next to Andrew Owen Nicholas with William Blair. Your line is now open. Daniel Jester: Hi, guys. Good morning. This is Daniel on for Andrew today. Thank you for taking my questions. Real quick, just turning back to the revenue timing. It sounds like that was mostly concentrated in PEO. Is there any way you can size how large that was, and looking forward, can sequential growth in PEO specifically continue into the fourth quarter off of that? Robert Lewis Schrader: Yeah. I think the growth rate in Q4 will be lower because of some of those things. I do not have the exact percentage. And I think, again, if we look at it, the two quarters combined, Daniel, you will see a sequential—or if you look at back half—because of some of those puts and takes between the quarters, you will see a fairly significant lift in the organic sequential growth of the PEO and Insurance in the back half relative to the first half. But the overall growth rate, I think, when you start doing the math, you will see that the math is going to show you that the growth rate is going to be a little bit lower in Q4 than Q3. But when you put the two of them together, it is a fairly big step up in the sequential organic growth relative to the first half of the year. Daniel Jester: Great. And then for my follow-up, going back to the mention of a reacceleration of referrals and bookings to pre-acquisition levels. Can you add any incremental detail on specific areas of momentum there and maybe just level set, after a few quarters of integration, where the lion’s share of the synergy opportunities now sit, whether that is on the revenue or the cost side. John B. Gibson: Yeah. Yeah, Daniel. What I would say is very pleased with the acceleration we have seen each quarter. As we came through the first quarter when we did all of the reorganization, as we talked about, we made a conscious decision when the deal closed almost a year ago now—April a year ago—that we were going to get the hard work out of the way. And we saw the opportunity rather than dragging it out. So we took—we did that. And, of course, from the time you announced the deal in January of last year to the time that we closed the deal in April, as you can imagine, a lot of competitive noise in the market, a lot of questions from brokers about what is going to happen, and we could not say much. As we have gotten our story out there and gained momentum, continued to build momentum each of the quarters. And as we said, we have gotten ourselves back to where we were pre-acquisition, both in terms of bookings volume—was double digits, again, year over year—and broker engagement. So I would say it is getting back to kind of where we were, except for now we have the cross-sell opportunity. So I would say expense synergies are pretty much behind us at this point in time. We have taken those actions. We have exceeded the expectations that we laid out. Part of the deal model. Now you are in what I call normal DNA, best operators, continuing to improve the model of both companies and look for opportunities. Where the opportunity is now, and we continue to build momentum, is around the cross-sell inside the client base—401(k)s, ASO, PEO, all of our other products and services. You will be seeing us putting our Perks product into the Paycor ecosystem as well. So that is where we see the opportunity as we roll into fiscal year 2027. Operator: Thank you. We will go next to Kevin McVeigh with UBS. Your line is now open. Kevin McVeigh: Great. Thank you so much. Hey, I wonder, can you just remind us what the initial Paycor revenue and expense synergies were and where we are today on those? Because it seems like you have been doing a nice job on the integration. But just remind us what, again, the revenue and expense synergies were—I guess we are bumping up on a year. I think that that would help. Robert Lewis Schrader: Yeah. Kevin, if you go back to, I think, when we originally announced the deal—and now I am kind of losing track of the quarters—but at one point in time, I think the expense synergies were in the $80 million to $90 million range. I think the last update that we gave was that we expected those to be in the $100 million range. And as John said, now we are kind of moving into BAU. We will continue to look for opportunities, and we have not stopped even though we kind of exceeded our target. And I think we have ideas, certainly in areas around procurement and things like that. I think there are additional opportunities. But that was kind of the last update on the expense synergy. And then I think the update we gave on revenue synergies was a current-year update. We expected it to contribute 30 to 50 basis points of growth this year. I would say we are probably on the high end of that. And as John said, we are building momentum. And really, listen, I think that the expense synergies are not why we did the deal. I think they probably justified the purchase price, but really the value creation opportunity longer term with this deal is the cross-sell. We know we are extremely effective and have driven a lot of growth in our model selling and expanding the share of wallet within our existing client base. When we look at where that growth has come from—our higher-value solutions, ASO, PEO, retirement solutions—those, as John mentioned, play well more upmarket. And so, listen, I think we are excited about the opportunity. Paycor average client size is quite a bit larger than ours, and those clients are more apt to have some of the needs that those solutions meet. We are trying to be intentional and cautious and thoughtful in going after the opportunity. We know that we are extremely effective at doing it. It might not always be the best client experience, and so we are trying to go after it the right way, and we are building a lot of momentum there. And as we move forward, we expect to continue to be able to capitalize on that opportunity. Kevin McVeigh: Helpful. And then just a real quick follow-up. John, you had some great commentary on AI opportunity. As you think about AI across a 100-person client as opposed to an 8, is the go-to-market strategy on that different in terms of the consumption patterns, or how are you positioning for—because, obviously, you serve a terrific market from kind of micro to medium. Just any thoughts on the shift in the go-to-market through an AI lens? John B. Gibson: Well, I think, Kevin, I will take a shot at it. As I said, for the vast majority of our clients, we are their HR department. And you mentioned the eight-man company—they do not have an HR director. Right? Probably do not have any payroll person. I think the thing that you find with our ASO and our PEO business is that a lot of the clients are foregoing building that capability. Right? So what they are saying is, why would I build a department when I can leverage Paychex, Inc. at scale—their technology, now you get their datasets and our insights and our HR expertise and depth of knowledge—and, oh, by the way, we have actually employment lawyers on staff that support those people. So you are getting a lot more capability. So people are avoiding building HR departments. So I think the value proposition there is I am going to leverage something at scale. And AI really makes—if you are a scale player—really makes a big difference, is what I will tell you. Because I have a lot more insights about what restaurants are paying in Rochester, New York or San Francisco. I have got that data. I can bring that together and now present it in a way to give you advice. If you had your own HR director, you are not going to get that. So those are things we can do. When you get into 100 plus, and I would actually say even larger than that, what has been a pleasant surprise to us as we have had more conversations with the Paycor client base is how much they are looking for our support. So now you are talking at a 250- or 500-person company that does have an HR department that is probably understaffed and underequipped, and we can bring our expertise, our technology, our additional support staff, and begin to augment their HR organization and allow their people to spend more time on strategic HR activity. So I think when you start looking at companies trying to figure out how do I become more efficient, what I think you are going to find companies ask themselves is, yeah, do I apply AI into my HR department and try to make it a little more efficient? Or should I really radically think about my HR department differently? Right? Should I go and leverage someone who can provide both the tools and the people and have the breadth of the data we have to provide the insights? Is that a better alternative? And that is a, you know, traditional enterprise HR outsourcing value proposition. I think AI allows us to do that at scale. And do it at all sizes of market. So one of the things we have actually begun to introduce at Paycor that they have is a managed payroll and a managed benefit offering. So now, you know, where typically the tech players say, here is the tool, knock yourself out, we are now—and we are getting clients that are asking us—would you mind doing it for us or doing it with us? And so now we are approaching that market with either you can buy our tech and get technical support, or you can come and we can do it for you. So I am really excited about the opportunity here. And I think at scale, AI takes large datasets. We have large datasets, and I think we can add value to our clients and their HR departments regardless of whether they are eight people or 100 people. Operator: Thank you. Our next question comes from Samad Saleem Samana with Jefferies. Hi, good morning, and thanks for taking my questions. Samad Saleem Samana: Good to hear it sounds like trends are getting pretty good. You had mentioned recently that maybe the initial land per client was a little bit smaller than historical or fewer add-on modules at the point of sale. I am curious if you have seen that trend change as well. Was that a onetime kind of occurrence—what you saw last quarter—and if that has improved. And then I have one question. Thank you. John B. Gibson: Yes. So I would say that the market has been relatively stable in that regard. I think we probably had higher expectations going into the year about the number of modules that we would be able to add, and I would say that did not change much in Q3 selling season from what we saw before. Samad Saleem Samana: Understood. And then in the PEO business, I think that as we all try to figure out what is happening under the hood in terms of different verticals and what the employment outlook looks like there. Can you remind us what the kind of vertical exposure inside of the PEO business is broadly speaking versus, let us call it, white collar, blue collar? And then related, just as you think about that high-single-digit PEO WSE growth, how much of that is driven by net new deals versus headcount growth within the installed base? Thank you again. John B. Gibson: Yeah. So on the industry thing, again, as big as we are, we take every—we are very broad in terms of where we are. Now I would say that when you look at our aggregate business, because we did an analysis on this, and you look at the actual job codes of our employee bases across the business, I would say there is not a major variance in the PEO business. We skew a little bit more towards the blue and gray than what you would see in the general workforce. Again, some of that has to do with your large enterprises are more white collar. So get above 5,000-10,000, you have more white-collar type of jobs. So a little bit more blue and gray across the business, and I think that applies to the PEO. We had good net new client and worksite employee gain in the PEO. Robert Lewis Schrader: I would say that is the entire driver. I mean, headcount within the installed base has been relatively flat, and it is most years. I mean, it is driven by the double-digit demand that we talked about, Samad, as well as the record retention. So it really is net new that is driving the growth in worksite employees. Operator: Thank you. We will go next to Ramsey El-Assal with Cantor Fitzgerald. Your line is now open. Ramsey El-Assal: Hi. Thank you for taking my question this morning. I wanted to ask about something you mentioned, which was that Paycor bookings had reaccelerated to pre-acquisition levels. How should we think about the bookings conversion to revenues for Paycor relative to legacy Paychex, Inc.? Do the larger clients translate into sort of a slower conversion process or not so much? John B. Gibson: Yeah. It is a little longer than what we are used to. I think that that is a fair—so there is a couple-quarter lag, as near as I can tell. Again, just what I see in the data is a couple quarters. Obviously, depends on the size of the client, but it is much longer than ours where you could sell them and implement them in the same day, same week. So yep. Ramsey El-Assal: And is that the same for—I mean, I would understand that would be the case for sort of a new client implementation, but does that also apply to cross-sell or new product attach? Or is that something that you can kind of turn on more quickly? John B. Gibson: Yeah. That is far more quickly. I mean, again, those cadences—if you recall, one of the things again that we did is to drive all the disruption upfront. And we integrated all of our ancillary products within, I think it was probably the first quarter post the acquisition. So those things are very similar to the legacy Paychex, Inc. Operator: Thank you. Our next question comes from James Eugene Faucette with Morgan Stanley. Your line is now open. James Eugene Faucette: Great. Thank you very much. I wanted to ask a quick macro question and I guess tie it to a margin question. You mentioned that you still see kind of a tight labor environment. Just wondering if you can provide any anecdotes or color on that comment. And then as it relates to margins, I know you said that you expect there is some margin expansion to go. Just wondering how we should think about the Paycor integration and how that matures and, you know, getting past some of these acquisition-related costs because they still look elevated. Just looking for a little color on the timing around those couple things. Thanks a lot, guys. John B. Gibson: Okay. Well, I think on the macro side, what we said is and what we see is that it has been relatively stable. It is really a low-fire and a low-hire type of environment right now. We have not seen a significant change in this fiscal year in terms of the small business index that we report. And, again, I think we are in a dynamic environment right now where, again, what we hear from clients—particularly in the small end of the market, less than 50—is continued inability to find qualified people for the jobs that they have open. We are doing a lot of things to try to support them there. Then I think you have got a degree of potential hesitancy to add in this uncertain environment as you move upmarket. But, again, when we look across the business, it has been relatively flat in payment levels. Robert Lewis Schrader: Yeah. And just on the integration-related stuff question as it relates to margin, James. I mean, we are backing a lot of stuff out, so that is really not included in the adjusted operating margins. You know, I think if you were to look at our margins from a GAAP standpoint, they are still pretty high, probably in the 40% range. But I think John hit on it. I think we still think there is room as we move forward as we continue to embed AI in all of our processes across the company. We feel like there is still plenty of room to expand margins. That is certainly part of our DNA, and we are always trying to make that trade-off of trying to find ways to be more productive and more efficient so we can expand margins, continue to deliver the strong earnings growth that our investors have become accustomed to, and at the same time make sure that we are investing back into the business, which is a priority for us to make sure we have a sustainable model as we move forward. So, you know, we will continue to—that has been our model. That is how we go about our business here. And I think today, adjusted margins are high from a non-GAAP standpoint, but given some of the advancements in technology, we feel like we still have a runway to be able to shuffle all those different priorities and expand margins. James Eugene Faucette: Thanks so much, John. Thanks, Bob. Operator: Yep. Thank you. Our next question comes from Daniel Jester with BMO Capital Markets. Your line is now open. Kyle Aberastri: Hey, good morning. This is Kyle Aberastri on for Dan Jester. Thank you for squeezing me in here. Just a quick one from me. I was wondering if you guys quantified how much impact the annual form filing revenue had on the business in the quarter? Thank you. Robert Lewis Schrader: How much impact they had? I mean, it is always a large number in Q3. I would say probably consistent with maybe where it was in prior years. Obviously, it is pretty high-margin revenue, so that is why you see the higher margins in Q3 relative to the rest of the year. I would say the one comment related to the year-end filing, definitely saw a little bit better price realization. The discounting on that was better than what we had seen historically and certainly a little bit better than what we had assumed in our forecast. That is a lever that sales reps can use, particularly as they are getting towards the end of the calendar year and selling new deals. That is kind of a discounting lever that they use. And we fly a little bit blind in finance because we do not really know how that is going to come through until it actually bills in January. I would tell you that the discount on it and the price realization was a bit better than what we assumed. But not a big growth driver year over year and similar performance probably to what we have seen in past years. Operator: Thank you. Our next question comes from David Grossman with Stifel. Your line is now open. David Grossman: Good morning. Thank you. I think last quarter, your bias was the low end of the revenue growth range. And I am just wondering, in reiterating the guide, are we still favoring the low end? Or just given some of your commentary about the third quarter and going into the fourth quarter, are you feeling better about the business and feeling maybe we are better than the low end? Robert Lewis Schrader: Yeah. I think we would stay where we are at, David. That is why we reiterated, as we mentioned. Listen, I think we were a little bit conservative in what we guided towards in Q3. There were some puts and takes. I mean, obviously, we feel good about the business. We felt good about the business last quarter as well. It is nice getting through Q3 and putting up the quarter that we had. John mentioned a lot of positive momentum. I would have to say it is probably one of the stronger selling seasons that I have seen in a while, and we have a lot of momentum in a number of businesses. So we feel good. Obviously, that translates into the P&L further down the road, particularly when you are talking about the enterprise space. And so I would say largely the back half, as I mentioned, is in line with our expectations, and that is why we are kind of leaving it where we had said it was going to be last quarter. David Grossman: Got it. And sorry to kind of stick on the financials here, but just—you did make a general comment about a certain level of comfort with where consensus was for next year. And I know you do not want to make any specific comments about next year, but is there anything now that you are a combined company about how we should think about pays or pricing in Management Solutions going into next year? Particularly given now that we have got Paycor in the base? I know it sounds like pays look like they are, you know, pretty stable, but I thought I should just ask the question. Anything you want to call out there in either pays or pricing? John B. Gibson: No. David, I do not think there are any changes that we are making in any of our assumptions. I think, as you know, we had clients of all sizes before we had Paycor. We have added more upmarket. But I think relative to our assumptions and what we are expecting, we are expecting a very similar macro environment that we are seeing right now in a very uncertain time. And that is the other thing that I am sure Bob and I are going to be having a lot of conversations about. And by the time we consult with the board in a few months, and we come back to you, hopefully, we have even more certainty about the external environment and what the risks are going into 2027. So we are trying to be prudent here. As you can imagine, this is a very unique time on a macro basis. And every day something could change that could impact where we are. Right now, we feel in good shape. What we are seeing is a stable macro environment, no signs of recession in any of our data or indicators—nothing that would indicate that we would change what we are thinking in terms of pays on any of our segments at this point in time. Operator: Thank you. Our next question comes from Jacob Smith with Guggenheim Securities. Your line is now open. Jacob Smith: Quick one—just, you are a second company in the mid-market through Paycor really talking about expanding headcount to capture opportunity. Just what are you seeing out there that is giving you conviction? John B. Gibson: Well, I think the key thing is going into that, we have a list of—we know who the clients are and prospects are, and we have territories, and we have open territories that we want to fill. And we are continuing to expand that. I think before we bought Paycor, they were expanding headcount because they saw more opportunity. And we believe now with our comprehensive offerings that we have, the opportunity has expanded. And so that is what gives us confidence to be able to expand the headcount and go after and capture the upmarket not only for HCM, but as I said, really bringing our entire HR advisory value proposition to the enterprise market. Jacob Smith: Great. Thanks for taking my question. Operator: Thank you. Our next question comes from Ashish Sabadra with RBC Capital Markets. Your line is now open. Ashish Sabadra: Thanks for taking my question. I was wondering if you could provide some color on the year-on-year growth in Paycor in the quarter. And if you could quantify the contribution for form filings for Paycor in the quarter? Thanks. Robert Lewis Schrader: Yeah, Ashish. I mean, I think as we have talked about in the past, the lines are somewhat blurred and have become increasingly blurred between what is Paycor and what is Paychex, Inc., based on our early-on decision to integrate those two businesses. And so I think if we look at it, our best estimate is if you were to look at the organic growth of the Paycor business, it was consistent in Q3 with what we saw in the first half of the year, which is in that upper-single-digit range. I would tell you what is less blurred—and this is how we will talk about the business as we move forward—is when we look at our enterprise business. So when we look at our client base above 100, irrespective of which sales organization sold it, which platform that it was on, that business has been growing. I would tell you in the first half of the year, it was growing upper single digits. And in Q3, it grew around 10%. And so that is how we are managing the business. That is how John and I are thinking about it. That is how we are going to market. And as we move forward, after we anniversary the acquisition and we provide color on the different areas of the business and how they are performing, that is how we are going to be looking at it. And, again, I think that is similar and maybe not too different than what the other assets in that space are growing at. And our expectation would be that we would prospectively be growing at or above the other assets in that segment of the market. And that is currently where that space performed in Q3. Ashish Sabadra: That is very helpful color. I was just wondering if you had some initial thoughts on pricing for next year and how does that trend compare to your historical range? And also maybe a quick one on discounting. You made some comment around discounting was much lower—I think that was specifically for forms filing. I was wondering if you could comment on discounting for ASO in general. John B. Gibson: Thanks. Yeah. So I want to say this. We are going into our budget meeting. This is where we discuss competitively how we want to position ourselves going into the next market. We have a tradition of being able to drive value to our clients and get price accordingly. So I am not going to make any comments on how we are going to set pricing going into next year at this time. So I do not want to give anybody a heads up. But I think our model and our long-term model is still in existence and viable. But we are not going to talk about the exact ranges we are looking at. Operator: Thank you. Our next question comes from Scott Darren Wurtzel with Wolfe Research. Your line is now open. Scott Darren Wurtzel: Hey, guys. Thanks for squeezing me in. I will limit it to one. Just going back to the PEO—I mean, it sounded like your commentary on enrollment sounded pretty positive. And I remember, I think, you guys made some changes to benefits offerings and everything. But I also wonder, is there any element of—you think that employees are maybe just sort of adjusting to this higher health care premium inflation environment, and that could also be, you know, kind of helping to drive some of this enrollment growth that we have seen as well? Thanks. John B. Gibson: Yeah. Yeah, Scott. I think everyone is adjusting. I think we adjusted our plan designs. I think employees are adjusting in terms of what they are going to do, and employers are adjusting how they are going. You know, I mentioned the use of AI. I will say this. In tests where AI was used and where it was not, the choices that employees made, I think, improved their outcomes and improved our outcomes. So what do I mean by that? As you know, you can immediately go to the cheapest plan. But given your circumstances or what you spent last year or changes that may have happened in your life relative to dependents, that may not be the most economic plan for you to participate in. These AI tools’ ability to model that for you—to maybe make the middle plan choice versus the lower plan choice—is, like I said, a better outcome for the participant and, of course, that impacts benefit for us as well because it is a higher-priced plan. Scott Darren Wurtzel: Great. Thanks, guys. Operator: Thank you. Our next question comes from Kartik Mehta with Northcoast Research. Your line is now open. Kartik Mehta: John, you talked about Paycor revenue synergies as we go into FY 2027 and the opportunity to really take advantage of that. I am wondering how the Salesforce alignment is going because I am guessing that is part of the revenue synergies that you would be able to capture. John B. Gibson: Yeah. So on the alignment question, just so everyone is kind of clear, Kartik—and this is, I think, the challenge and that, you know, hopefully, we do not talk about Paycor anymore going forward—because Paycor for us is a brand that we are using to go and target the enterprise market, as we are designing 100 plus. And we have taken all the assets of the company regardless of where they were, and we have placed them in that business unit for that unit to focus on that particular market. We are doing marketing there specifically for that target segment. So now we are spending marketing money in that segment. We are putting sales reps into that segment to go after that segment. And we are going to capture as much of the market as we can at 100 plus. Now once, let us say, a lead comes in digitally from marketing spend at Paycor, and we look at that lead and we go, hey, that looks like a great PEO opportunity, we are going to move that over to the PEO. Right? And so now all of a sudden, you have got an expense that is on the Paycor side of the equation. Same thing is happening with our reps as well. So we have got this segment—if this is your question—the segmentation of the Salesforce is clear. How we are going to market from a brand perspective is clear. And then what we are doing is, both in terms of using our AI and also our incentives for all of our sales reps, making sure we have every sales rep in the market looking and representing the entire capabilities of the company. And so that goes back to every rep is representing the comprehensive capabilities of the company, whether that is technology, whether that is the platform, whether that is do it yourself, do it for you, or do it with you. We are offering every rep in every market the capability to do that, if that makes sense. Kartik Mehta: Yeah. And then just a follow-up question, Bob. And this might be crazy considering it is Paychex, Inc., but I thought I would ask anyway. Any thought about potentially using a little bit of leverage to buy back stock considering the stock price is? Robert Lewis Schrader: Yeah. I mean, Kartik, listen. I think you saw—we just recently announced a new share buyback authorization significantly larger than what we have had in the past. And when you look at—you know, there is obviously, at least in my opinion, a disconnect between the underlying fundamentals of the business and the valuation, and that obviously, you know, I was always taught to buy low and sell high. And so you have seen us be a little bit more opportunistic there. I would tell you, I do not think we have necessarily changed our overall philosophy around share buybacks, but we know we are going to have to buy shares back in the future to offset dilution. And we have done more of that this year than what we normally would have, as you guys can see in some of the disclosures. So, you know, I do not ever want to say never. Our leverage is pretty low. That is obviously a board-level decision. And as you can imagine, I am assuming a lot of CEOs and CFOs in this market are having these conversations with their board on a regular basis, and John and I are certainly doing that. And so we will continue. We have lots of priorities from a capital allocation standpoint. Certainly, we want to continue investing in the business. But we will continue to have those conversations. So I do not want to say never, but it is something that we will continue to evaluate. Operator: And our next question comes from Jason Alan Kupferberg with Wells Fargo. Your line is now open. Jason Alan Kupferberg: Thanks, guys. Good morning. I wanted to ask about Management Solutions specifically. I think the organic growth was 4% in the quarter. I think that is the same as we saw last quarter. Do we expect that to accelerate in Q4? And if so, is that because you will start to lap Paycor during the quarter? Or would there be other accelerants we should be considering? Thanks. Robert Lewis Schrader: Hey, Jason. Yes. I would say, you know, I think it was 4% in Q2 and 4% in Q3. I would tell you, one was around up and one was probably around down. So you are also seeing sequential improvement in the organic growth of Management Solutions as well. Part of it is when you get to Q4, we would expect that to continue and maybe accelerate a little bit. To the point that you are making, you are anniversarying the acquisition, so now we have a scale business that is growing faster than the overall growth of the business. So that would be accretive to the organic growth. And then we are continuing to build momentum on the synergy opportunity, and I think that showed up in the Q3 selling results, and that will eventually make its way into the P&L. And so you should see improvement in Management Solutions organic growth as we move into Q4 as well. Jason Alan Kupferberg: Okay. Understood. And then just a clarification. I know we are not changing EPS guidance, but we did up interest income guide a little bit, which I would have thought would have lifted the EPS—I do not know—maybe a percent or so. I mean, there is only a quarter left in the year. So just curious, is it just some conservatism there leaving the EPS guide as is? Or are you going to reinvest some of that upside? Slight combination of both? Robert Lewis Schrader: I think we are certainly going to look for opportunities as we move through the balance of this year to invest. We want to get out of the gate strong when we get into next fiscal year. So it is always balancing those trade-offs, Jason. You know, John and I will manage through that as we go through the quarter and see where the opportunities are. But it is really a combination of maybe a little conservatism and where we may potentially want to take advantage and make some investments as we end the year. John B. Gibson: Yes. The great position we find ourselves in is we have plenty of opportunities for investment coming out of the third quarter that have the opportunity to both accelerate growth and accelerate margin expansion. And that is—you know, we have got a lot of decisions to make over the next couple weeks as we go through our planning process. And anything that we are thinking is a good investment in the first quarter in 2027, I do not think we want to wait to make that investment. So we are certainly trying to contemplate that as we go into our planning session next week. Operator: Thank you. At this time, there are no further questions in queue. I will now turn the meeting back to John B. Gibson. John B. Gibson: Okay. Well, thank you, everyone. Just to highlight, we delivered strong double-digit revenue and earnings growth, continuing to reflect, I think, very strong execution and focus of the teams. I do want to call out, you know, we are approaching a one-year anniversary mark of the acquisition of Paycor. And I want to call out the Paycor team in particular. The group has been through a lot. If you think back a year ago this day and what we were starting to prepare for and take the organization through, and I think the way that we have responded and the way we have continued to come together and build momentum at this fiscal year has come together has been just really impressive. I said it a year ago: we will be better together. And we are better together. And, you know, I point you to the example of what we did in the PEO industry and how we focused on that strategically many years ago. I think that is a good model for us to replicate as we go into fiscal year 2027 and beyond in the enterprise space. So I think Paychex, Inc. has never been better positioned than it is today. I think we have differentiated ourselves in the marketplace repeatedly. I think in this new AI era, our scale, our breadth, our capabilities from an expertise perspective, and the fact that we are dealing in mission-critical type of work where errors are costly—I think that you are going to continue to find more and more clients of all sizes turn to Paychex, Inc. to be their HR department and to provide them leading-class technology and advisory solutions in the years ahead. So I like where we are positioned, and I want to thank you for your interest in Paychex, Inc. Thank you. Operator: This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.
Operator: Good evening, and welcome to Dyadic International, Inc. Full Year 2025 Conference Call. Currently, all participants are in a listen-only mode. As a reminder, this conference call is being recorded today, 03/25/2026. I would now like to turn the call over to Mrs. Ping Wang Rawson, Dyadic International, Inc.'s Chief Financial Officer. Please go ahead. Ping Wang Rawson: Thank you, operator. Good evening, and welcome, everyone, to Dyadic International, Inc.'s full year 2025 conference call. I hope you have had the opportunity to review Dyadic International, Inc.'s press releases announcing financial results for the year ended 12/31/2025. You may access our release and Form 10-Ks under the Investors section of the company's website at dyadic.com. On today's call, our President and Chief Operating Officer, Joseph P. Hazelton, will review our full year 2025 business and corporate highlights, and provide a commentary on the strategic direction of the business. Our CEO, Mark A. Emalfarb, will provide an update on our biopharmaceutical programs. And I will follow with a review of our financial results in more detail, after which we will hold a brief Q&A session. At this time, I would like to inform you that certain commentary made in this conference call may be considered forward-looking statements, which involve risks and uncertainties, and other factors that could cause Dyadic International, Inc.'s actual results, performance, scientific or otherwise, or achievements to be materially different from those expressed or implied by these forward-looking statements. Dyadic International, Inc. expressly disclaims any duty to provide updates to its forward-looking statements, whether because of new information, future events, or otherwise. Participants are directed to the risk factors set forth in Dyadic International, Inc.'s report filed with the SEC. It is now my pleasure to pass the call to our President and COO, Joseph P. Hazelton. Joe? Joseph P. Hazelton: Thank you, Ping, and thank you everyone for joining. Since I stepped into the President's role in June 2025, our focus has been very clear: to accelerate Dyadic International, Inc.'s transition from a development-stage platform company into a commercial, product-driven biotechnology business with multiple paths for revenue. Over the past nine months, we have made significant progress executing against that strategy. We have completed a corporate rebrand to Dyadic Applied Biosolutions, aligned the organization around commercialization, strengthened our technological capabilities through CRISPR licensing, secured manufacturing through our expanded partner Fermox partnership, and most importantly, we began moving products into the market. And I want to emphasize this point upfront. Our reported revenues today still reflect the company in transition; the underlying business has clearly advanced towards commercialization. In less than one year, we have matured from early-stage product development to commercial product launches, distribution agreements, initial product sales and multiple revenue-generating partnerships. Life sciences is our most advanced business, with the clearest near-term product revenue and repeat purchasing. We are building a portfolio of recombinant animal-free proteins for use in cell culture media and molecular biology workflows. These are not speculative markets. They are large, established and growing markets that support biologic manufacturing, cell and gene therapy, cultivated meat, as well as diagnostics and research. These markets are rapidly shifting away from traditional animal-derived inputs towards state-of-the-art recombinant, high-quality, consistent, and scalable alternatives, which aligns directly with our production platform. I want to highlight recombinant albumin as our leading example of progress in life sciences. Albumin is one of the most widely used proteins in biotechnology, critical for stabilizing biologics, supporting cell growth, and improving formulations across diagnostics, therapeutics, and research. Traditional human and animal-derived sources introduce variability and supply limitations. However, through our partnership with ProLiant Health and Biologics, we are now producing recombinant human albumin which was commercially launched in early 2026. The Prolyte product, recombinantly produced using Dyadic International, Inc.'s production platform, delivers consistent, high quality, and scalable supply while avoiding the risks associated with animal-derived products. The Proliant collaboration is a profit-sharing arrangement in which Dyadic International, Inc. participates directly in commercial success as ProLiant expands commercial sales through their already established global sales channels. This is our first example of a Dyadic International, Inc. platform-enabled product reaching commercial scale with recurring revenue potential driven by our partner’s sales growth. Now turning to our animal-free recombinant transferrin. Transferrin is a critical component of serum-free cell culture media, delivering iron essential for cell growth and viability. It is widely used across biopharmaceutical manufacturing, cell and gene therapy, and cultivated meat. We are developing both bovine transferrin for cost-sensitive, high-volume markets like cultivated meat, and human transferrin for higher-spec applications, such as cell and gene therapy and biopharmaceutical production. A high-value recurring consumable, transferrin demand scales with customer production, directly linking their growth to our revenue. We have further advanced our commercialization capability through an OEM distribution agreement with IVT BioServices, enabling global sales of our animal-free recombinant products, such as DNase I and transferrin, through IVT's established distribution channels. This accelerates market penetration while supporting both near-term revenue and positioning us for long-term volume growth as products are adopted into customer workflows. DNase I is a widely used, high-value enzyme with applications across bioprocessing and molecular biology workflows. DNase I is used to remove residual DNA and is essential in areas such as cell and gene therapy manufacturing, biologic production, RNA workflows, and research and diagnostics. We have completed production validation and, together with Fermox, launched recombinant RNase-free DNase I as our first product commercialized under our expanded partnership with Fermox. As adoption grows, we expect progression from sampling to qualification to routine purchasing, driving steady volume growth. We are also advancing growth factors, specifically fibroblast growth factor, or FGF. FGF stimulates cell growth and is a key cost driver in cell culture systems, particularly in cultivated meat and advanced therapeutic applications. In 2025, we achieved our first sales of FGF, an important milestone reflecting technical validation and initial revenue. Growth factors are typically among the higher-value inputs in cell culture systems, and as a result can generate meaningful revenue even at modest volumes. We view this as the start of a broader portfolio targeting both high-volume, cost-sensitive markets like cultivated meat and premium applications such as cell and gene therapy. Our life science development has evolved into a multiproduct portfolio serving large, recurring end markets with multiple revenue channels, including direct product sales, distribution partnerships, and profit-sharing arrangements. These are markets where product adoption typically progresses from sampling to follow-up and into scaled use, and we are now entering the early stages of that curve. As these products move into routine use, we expect to see increasing repeat orders and revenue growth through 2026 and beyond. Turning to Food and Nutrition. This segment represents a significant opportunity driven by the global shift towards sustainable animal-free proteins and functional ingredients. Our strategy here is to leverage our DAPIBUS platform for large-scale, cost-effective production of proteins that replicate the nutritional and functional properties of traditional dairy and food ingredients, while partnering with companies that have established market access and application expertise. Another important development in 2025 was our agreement with RigBio to develop and commercialize animal-free recombinant bovine alpha-lactalbumin for global health and nutrition markets. Alpha-lactalbumin is a key whey protein naturally present in human breast milk, which is essential for early childhood development due to its high nutritional value and amino acid composition. Demand is increasing for scalable, non-animal-produced recombinant alpha-lactalbumin to better replicate the benefits of human milk. This program includes funded development, milestone payments, and revenue participation, which aligns with our capital-efficient model of near-term funding and long-term royalties in a large, growing market where even modest market penetration can translate into meaningful revenue, given the scale of global demand. We are also advancing our human lactoferrin program where we have established a stable production strain and are now optimizing yields and performance. Lactoferrin is a high-value functional protein used in infant nutrition, dietary supplements, and wellness products due to its antimicrobial and immune-supporting properties. Compared to traditional sources, recombinant animal-free offers improved consistency and scalability. We see potential for both direct sales and partner-driven revenue as we move towards commercialization. Another product approaching commercialization is recombinant bovine chymosin with our partner, Incyte, targeting the 2026 launch. Chymosin is a key enzyme in cheese production, enabling the coagulation of milk proteins into curds. To date, we have received upfront access fees and milestone payments with potential royalties during commercialization. This program reflects our capital-efficient partnership model of generating upfront fees and milestones while building long-term royalty streams without assuming downstream commercialization risk. More broadly, our Food and Nutrition pipeline continues to expand across non-animal dairy proteins and food enzymes, supported by growing demand for sustainable and functional ingredients. As these programs advance towards commercialization, we expect increasing milestone achievements and product launches with more meaningful contribution from recurring revenues beginning in 2026. In the Bioindustrial segment, our focus is on scaling our technology into large-volume applications through strategic partnerships with an emphasis on capital efficiency and manufacturing leverage. A key component of this strategy is our expanded collaboration with Fermox Bio, which provides access to commercial-scale manufacturing and additional product development opportunities in multiple markets. This enables faster commercialization without investing significant capital in our own large-scale infrastructure, an important advantage in cost- and volume-driven markets. One example is N3xi, an enzyme cocktail produced using our DAPIBUS platform that converts agricultural residues into fermentable sugars for biofuels and other industrial applications. Fermox has fulfilled its first large-scale order and is expanding sampling and commercial activity, including in the Asia Pacific region, demonstrating both performance and scalability in industrial settings. From a business model perspective, our collaboration with Fermox is structured around participation in product economics, typically through profit-sharing arrangements. This provides exposure to high-volume markets with scalable revenue potential while limiting our capital exposure. More broadly, our DAPIBUS platform is being applied across industrial segments including biomass conversion, pulp and paper processing, sustainable materials and bio-based manufacturing, such as microcrystalline cellulose and advanced nanomaterials. These markets are increasingly focused on efficiency and sustainability, where enzyme performance and cost profile are key drivers of adoption. We are also leveraging the platform's advantages of speed, yield, and cost efficiency from the bio within biopharmaceutical applications through partner-funded programs, enabling continued development without impacting near-term commercial execution. With that, I will now turn the call over to Mark A. Emalfarb, Dyadic International, Inc.'s CEO, to provide an update on these collaborations. Mark? Mark A. Emalfarb: Thank you, Joe, and good evening, everyone. We continue to advance our partner-funded biopharmaceutical collaborations applying our C1 platform into vaccines and antibody development through a non-dilutive, capital-efficient model. Across multiple programs, including infectious disease vaccines and monoclonal antibodies, we are seeing consistent expression, proper protein folding, and functional activity, supporting performance comparable to mammalian and insect cell production systems. To highlight a few efforts, our Gates Foundation collaboration continues to progress, with approximately $2,400,000 received to date under a $3,100,000 grant. Early data shows C1-derived monoclonal antibodies targeting RSV and malaria are comparable to CHO-produced material, supporting further development. In our CEPI collaboration, with the Fondazione Biotecnologie Senese, we are advancing recombinant vaccines, including scale-up towards GMP manufacturing, with an H5 avian influenza antigen currently in preclinical evaluation. We are also working with leading domestic and international organizations, including the NIAID, NIH, the Scripps Research Institute, Oxford University, UVAX Bio and NVAC, and the European Vaccine Hub, supporting a growing number of vaccine and antibody programs. These collaborations continue to generate an expanding body of data that not only validates the performance of our C1 platform across diverse targets, but also reinforces the scalability and broad applicability as we move into our product development and commercial execution. Within these efforts, we are advancing respiratory vaccine antigen programs, including ongoing RSV work with UVAX Bio, and separately, we have initiated a new collaboration with the Scripps Research Institute focused on pre-fusion antigens and multivalent vaccine candidates targeting RSV, human metapneumovirus (hMPV), and parainfluenza virus type 3 (PIV3). Early preclinical studies indicate that C1-produced RSV pre-fusion antigens performed comparably to mammalian-produced antigens while demonstrating potentially improved neutralizing antibody responses relative to insect cell production-based systems. These respiratory indications represent a large global vaccine opportunity where scalable manufacturing remains a key constraint. Our C1 platform is designed to address this through high-yield expression and efficient production of complex pre-fusion antigens, potentially enhancing efficacy while also improving cost efficiency and shortening overall development timelines. Overall, these collaborations continue to validate our C1 technology while building value through potential licensing, milestone payments, and royalties, which is incremental to our near-term product-driven revenue model. With that, I will now turn our call over to Chief Financial Officer, Ping Wang Rawson, who will walk through our full year 2025 financial results. Ping Wang Rawson: Thank you, Mark. I will now go over our key financial results for the year ended 12/31/2025 in more detail. You can find additional information in our earnings press release and Form 10-Ks which we filed earlier today. For the year ended 12/31/2025, total revenue was $3,090,000 compared to $3,500,000 in 2024. The decrease was primarily driven by lower R&D collaboration activity and reduced license and milestone revenue, partially offset by a $1,860,000 increase in grant revenue from the Gates Foundation and CEPI. Cost of R&D revenue declined to $600,000 compared to $1,200,000 in 2024. Gates and CEPI grant-related costs totaled $1,720,000 in 2025 compared to $0 in 2024. Internal R&D expenses increased modestly to $2,160,000 in 2025 from $2,040,000 in 2024 as we continue to invest in advancing our internal product pipeline towards commercialization. G&A expenses decreased to $5,760,000 in 2025 from $6,130,000 in 2024, driven by lower compensation and insurance costs. As a result, loss from operations was $7,190,000 in 2025 compared to $5,900,000 in the prior year. Net loss was $7,360,000, or $0.23 per share, compared to a net loss of $5,810,000, or $0.20 per share, in 2024. We ended the year of 2025 with approximately $8,600,000 in cash, cash equivalents, restricted cash, and investment-grade securities. Our net cash used in operating activities was approximately $5,700,000 in 2025. Looking ahead to 2026, we expect disciplined cash usage while prioritizing high-impact R&D programs and grant-funded activities. We also anticipate growth in product revenues across our life sciences, and food and nutrition markets, driven by new product launches in cell culture media while maintaining operating expenses generally in line with 2025 levels. Based on our current operating plan, we believe our existing cash resources provide a runway into 2027. However, we will continue to evaluate additional capital resources, including strategic partnerships and capital market activities, to further strengthen our balance sheet and support long-term growth. Next, I would like to briefly address the rationale for establishing an ATM facility. This is primarily about flexibility. The ATM gives us the ability to access capital opportunistically, depending on market conditions, pricing, and trading volume, rather than being forced into a larger, more dilutive transaction. It is also a more efficient financial tool used by the majority of micro-cap biotech companies with lower cost, narrower risk, and less market disruption. Importantly, putting an ATM in place now allows us to be proactive and prepared if favorable market windows open. That said, this does not mean we will use it. The ATM simply provides optionality and we will only access it if and when it makes sense. Overall, it is a common and flexible tool that complements other financing and partnership opportunities, and we intend to use it prudently with a focus on shareholder value. With that, I will now ask the operator to begin our Q&A session. Each caller will be allowed one question and one follow-up question to provide all callers with an opportunity to participate. If time permits, the operator will allow additional questions from those who have already spoken. I will ask the operator to begin our Q&A session, after which Joseph P. Hazelton will provide closing remarks. Operator? Operator: Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Matt Hewitt with Craig-Hallum. Please proceed. Matt Hewitt: Obviously, a very successful start to the year given the number of new partnerships and collaborations that you have announced. I am just curious, as we think about some of these product launches, how should we be thinking about the timing and kind of how the ramp of product revenues will progress over the course of this year, and quite frankly, more importantly, as we get into 2027 and 2028. Joseph P. Hazelton: Hey, Matt. It is a great question. And it is kind of a balance, right? It is a balance of how much inventory do we try to produce versus what the current needs are in the market. Obviously, having distribution agreements set up through IVT, and we are pursuing others, we are trying to balance the needs we have currently with the market expectations that we anticipate later this year. So we do, I guess, look at it as a slow ramp because the products do need to be into the market and qualified for use in the workflows that they are being ordered for. So while some, if it is like a research type of a use, that is usually a quicker pickup and a quicker conversion than something in the cell and gene therapy. So it kind of depends on use case as well. Right now, I would anticipate it is kind of a slower start, but as these companies get used to the products and as they get into the market and get established in the workflows, you can see that significantly start to pick up. And obviously, our goal is to sign more distribution agreements, so we can have larger product volume opportunities rather than just with individual companies. Matt Hewitt: Got it. And on the license front, obviously, and you just noted this, that you are looking to sign more collaborations. Do you anticipate that those collaborations, those new agreements, would incorporate some type of an upfront license fee? Or is it more important to get the correct distribution and having the agreement in place than necessarily getting upfront cash? Joseph P. Hazelton: That is another great question because I hate to give this answer because I always hate when I get it, but it depends. It depends on the product. And it also depends on the market. In certain cases, with alpha-lactalbumin, when we have existing strains that we have characterized at least to a certain extent, we do expect and drive for some upfront revenues. There are other markets that are a little more exploratory in the food nutrition space or in the bioindustrial; maybe we do not have a strain already developed. In those cases, it may be dependent on how far along we are in the progress of the product. But typically, we try to push for larger upfront access fees when the products are further along in their development phase. Those that are a little bit earlier in the development phase are a little more difficult because the customer has to fund additional work in development, which makes them a little reticent to provide larger upfront fees. We are trying to accelerate some of that through our own internal R&D development like transferrin. We are moving that through rather rapidly in terms of doing cell proliferation assays and other technical validation of the product that we feel will enable us to maintain or even drive some of those higher revenues. But every product is a little bit different. Every market is a little bit different. The further along we can take them, I mean, it is the same thing in biopharmaceutical, right? If you get to Phase 1, the product is worth more than preclinical. Phase 2, it is worth even more. It is similar in this; it is just you can achieve those milestones a little quicker. We can get them to technical validation a lot faster in the research and diagnostic space than we can with, just say, the GMP space. Matt Hewitt: Got it. All right. Thank you. Operator: Thank you. Our next question comes from the line of John D. Vandermosten with Zacks. Please proceed. John D. Vandermosten: Great. Thank you. So you guys have announced several new expansions of existing agreements and new arrangements since the last quarter's report. How are you making changes internally, I guess, to manage that with internal sales and marketing function? My next question is on pricing. How much control does Dyadic International, Inc. have over pricing with all of the various arrangements that you have signed? And I guess I am thinking of that in two ways. One, is that maybe these are just market prices and it is take it or leave it. And then secondly, perhaps how competitive can you be since you have a lower cost structure than some of the other products out there? Joseph P. Hazelton: John, first of all, another great question and thanks for being on tonight. The key thing for us is that the expansion of partnerships actually increases our own capabilities in some cases. Fermox has a dedicated business development team. They obviously have dedicated manufacturing. IVT, same thing. They have a designated sales team that supports their products across their distribution channels in the markets. So every time we do a deal, we do try to evaluate what other capabilities these partners bring into the mix and, like I said, Fermox expands our own capabilities. And then obviously, something like IVT gives us additional kind of boots on the ground, which is important for us as well because we do not have that. And then you have deals like with ProLiant. ProLiant, and I do not know if you have seen some of what they have been putting out, but they have done a very good job of putting a good data package around their recombinant albumin product which is Albufree DX. And as you can see, they have not only just a large media presence, but they also have a large infrastructure presence in terms of a global distribution and customer network that has now been engaged. So all of our partners we try to evaluate based on what else they can bring to the table and how quickly they can help us commercialize and accelerate these products. Another great question. In our partner programs, obviously, we have some visibility into that process, but it is partner-led. But in things like the distribution agreements, we obviously built our margins in ahead of time. So regardless of what the product ends up being in the market for, we have already made our money on that and made our revenue. So again, depending on the segment we are looking at or partner you are looking at, at times we have more control, like through a distribution agreement or through the growth factors that we are selling into, but it also depends on the market. So when negotiating with cultured meat companies, they are obviously much more price-sensitive than someone looking at using our transferrin for cell culture media applications in cell and gene therapy. So we have flexibility in terms of the markets that we are going into. We have greater flexibility with products that we control. But obviously, in certain cases, like with albumin, it is not as price-sensitive of a market right now. It will be increasingly so, as every market ends up being. But for the most part, they do tend to be market-driven. But the ones that we are able to control further are the ones that we have the greatest opportunity to improve our margins on. Mark A. Emalfarb: Yes. Well, John, think also that there is a big drive in all these industries and these applications for animal-free proteins. And as you can see from ProLiant and the data, as Joe talked about, they are comparing the natural albumin to the animal-free product that they are putting out, and the data is quite compelling. So, you know, the regulatory agencies and these industries like pharmaceuticals, even food and nutrition, there is a drive towards removing animal components both in the media and as the final product. So we are seeing a big push in that direction. And in some of the strains, as Joe talked about, we have very hyper-productivity and a lot of margin to play with. But we are not going to give up margin if we do not have to. In the snow-wash industry way back, we made something for $1, sold it for $8, obviously became more competitive as it did, we had the margin to reduce the price but still be competitive for the long term. So I think those are the things that you need to think about, and the market in general; animal-free proteins are exploding on a worldwide basis. John D. Vandermosten: Okay. Thank you, Joe. Thank you, Mark. Operator: Our next question comes from the line of Louis Titterton, a private investor. Please proceed. Louis Titterton: Hi guys, how are you? Good. How are you? Good. Good. This is probably an impossible question to answer, but in your planning, your financial planning, when do you think you might hit breakeven? Joseph P. Hazelton: That is always the million-dollar question. And you are right, it is not something I can answer definitively. The short answer is obviously we want to do it as quickly as possible. But we also have to be realistic and feasible in our approach. We do not want to make bad decisions that seem like maybe they can help us in the short term, but ultimately may not be in the best interest of the organization. And I will give an example of something like transferrin. Transferrin, we know it is an extremely valuable product. And while if we did something rather drastic sooner, we could bring in probably a nice chunk of money, it is not what is best for the company in the long term. The longer we continue to control these products, the better off we are going to be. But the goal, obviously, is to be as revenue-positive as quickly as possible. And I think the products that we have give us the ability to do that. We just need more of them. We need to get them commercialized and into the system. But as you look out into the future, I do not think it is going to be an extremely long time, but I cannot give you a definitive answer. Louis Titterton: No problem. Thank you very much. Appreciate it. Thank you. Operator: Our next question comes from the line of Tony Bowers with IntroAct. Please proceed. Tony Bowers: Hi, Joe. It is probably difficult to know at this point what a sustained higher energy environment might mean. I can see it could make cultured food much more attractive versus farm-raised. But do you feel any buzz about that when you were at recent conferences? And then the second question for Mark. On the biopharmaceutical programs. Great that you have so many people engaged now. If they get comfortable with the benchmarks, is the result that they just put this on the shelf and wait for a pandemic to hit? Or do you see opportunities to actually start making at least some seasonal vaccines? Joseph P. Hazelton: Sure. So it is actually interesting you say that, but there are actually a lot of different factors that are pushing this drive in the food space and not just energy. But obviously there is a larger push on the regulatory and the consistency aspect. I think that is probably the larger push, Tony, in that space. There has been greater variability in, just say, naturally produced products than there has been previously. And I do not know whether that is due to just differences in the process or if it is that they are trying to make too much too quickly. But the biggest topic that was at this conference was really the regulatory scrutiny around plant- and animal-derived products because the FDA, as well as other regulatory organizations, are looking into how you are extracting these resources from both animals and plants and the materials that go into it. So there is obviously an energy component to that, but there is also a regulatory component in terms of safety. And I think that is probably the bigger one that I see moving the food nutrition category. As well as the ability to have specialized nutrition. So, like you are seeing in the biopharmaceutical space, they talk about individualized medicine. That is now starting to be talked about in these alternative protein conferences as, can we make things obviously specifically geared towards elderly patients with diabetes or children with certain genetic ailments. It is very interesting. I think we are still miles away from seeing those on the market. But we definitely do see a shift towards these more efficiently scalable non-animal proteins for these uses. Mark A. Emalfarb: Well, I think if you think about it, alpha-lactalbumin and lactoferrin are made in such small amounts from milk. So even if you wanted to make it, it is not affordable. It is not accessible. And so somehow it has got to be made in an alternative manner if you want to have infant formula with the nutritional benefits or an adult health drink since we all age, right? So those are great opportunities where the margins—if we can produce these at the right levels at the right cost with DAPIBUS—the gates are just wide open for applications. Now it is going to take time from a regulatory perspective for some of those things, like an infant formula, to get put on the market. But as Joe pointed out, just like with ProLiant, so many partners we have, they have been in these industries for decades. They have the application knowledge, experience, the market access. So if we hit these things at the right yield and right cost with DAPIBUS, we are right in the game. On the biopharmaceutical side, it is not about just pandemic preparedness. People are now waking up and recognizing that, for example, the work we did with UVAX on the RSV and the pre-fusion, they have a better structure of the complexity of the antigen design. Same thing with Scripps with the other RSV, the hMPV, and the PIV3 potential trivalent. These things are huge needs out there in the world. And if we can just get the funding to move those forward, not just with Scripps and these institutes; there are people out there that we are talking to that potentially can fund some of these things. These are multibillion-dollar opportunities. So it is not just about pandemic. The pandemic gave us the opportunity to get into humans to show safety, efficacy, and tolerability in the vaccine space, or in the non-human primate space. So all these things, whether it is Gates, CEPI, they are opening the gates and the doorways to future products. It could be shingles, it could be HPV, there are all kinds of opportunities out there to drive these things forward. And those are all being funded independently. And the same technologies and those benefits not only apply to pharma; we will be able to use some of that for DAPIBUS to make even a better production strain for higher productivity and vice versa on both sides of the equation. Tony Bowers: That is great. Question for Ping on the recognition of grant revenue. Is it straight-line recognition or does it become a little bit more profitable at the end? Ping Wang Rawson: It is not a straight line, Tony. It is basically based on GAAP that we are recognizing the revenue as a percentage of the cost incurred for the entire project. So, basically, it is really a percentage of completion if you are into how it is calculated? Tony Bowers: Got it. Thank you. Operator: Our next question comes from the line of John D. Vandermosten with Zacks. Please proceed. John D. Vandermosten: So Joe, bigger picture, what is the utilization rate right now for manufacturing in the United States? And I know it was tight a few years back and then with tariffs and onshoring, and probably some new builds as well, has it changed materially? Joseph P. Hazelton: As far as capacity in the U.S. versus ex-U.S.? John D. Vandermosten: Correct. Yeah. Joseph P. Hazelton: I think you are right. I have not seen a drastic shift, but it is shifting. Not just the onshoring, but obviously the safety components and obviously tariffs and the political environment is driving some of that. But obviously not having to ship very expensive products worldwide is also attractive. And if you can make them here at home—I mean, ProLiant, obviously, is a great example, right? If they can manufacture here in the U.S. where they do their upstream rather than somewhere else, you obviously lower your risk in terms of bringing that product into the country. So I definitely have seen an uptick. There is definitely a lot of new things going in. We actually talked with a CDMO that is not even complete yet, but has a three-year wait in terms of manufacturing capacity. So I think the need is there. The question for me is going to be, can we ever hit true cost metrics to produce some of these GMP products here in the U.S. at the price point that these other countries will be? Like if you are producing it in the U.S., could you actually meet some of the cost metrics in Europe that you are going to need to hit? And that, I do not know. I do not know if it is going to change whether or not the whole reason that there is not a lot here today is just the cost. And I do not know if that is going to really change just because we have more capacity. Hopefully, it will drive the cost down, but I still do not know. Mark, do you have any thoughts on— Mark A. Emalfarb: Well, I think the efficiencies with a cell line that can pump out more product and yields can help drive the, let us say, difference between the costs because it is not labor intensive. And with AI and all these process optimizations, you could get to the point where really in the U.S. you could produce things at very near the same cost you can overseas because you are taking labor out. So to be honest with you, I think that we are heading in the right direction. Not only from a government regulatory perspective on pursuing onshoring the supply chain. And one of the things that we deal with all the time, for example, with BARDA recently, and there are a couple of conferences coming up, is the supply chain disruption. It was just not—you could see it with oil, right? Now it is constantly occurring and it is rearing its head. It is in the fertilizer, it is in the oil. It was in the pandemic. So people are realizing now that we have to have onshore capacity. Again, we are global. To be honest with you, we can pop our strain in India, could be China, it could be Europe, it could be in South Africa, could be in Bangladesh, it could be in America. But with AI and automation, that difference is going to just close the gap. So we will not have, per se, the gap that we have had in the last 20, 30 years with India and China; we are going to close that gap through innovation. That is why people are looking at faster-growing cell lines that can produce more for less, with cheaper media. John D. Vandermosten: Okay. Thank you. Operator: Thank you. There are no further questions at this time. I would like to pass the call over to Dyadic International, Inc.'s President and COO, Joseph P. Hazelton. Joseph P. Hazelton: Thank you. As we close, I want to take a step back and put our progress into context. Over the past year, we have made a definitive transition from a development-focused organization to one that is now executing on commercialization. We have restructured the business, secured manufacturing, expanded our partner network and, most importantly, began launching products and generating early revenue across multiple channels. While our reported financials today still reflect that transition phase, the underlying business has changed meaningfully. We now have commercial products in the market, manufacturing and distribution in place, a growing number of opportunities moving from sampling into qualification and toward repeat purchasing. Looking ahead, our focus is execution. We are focused on scaling product sales in life sciences, advancing partner-led programs in food and nutrition, expanding our bioindustrial footprint through Fermox, and continuing to leverage our platforms to create additional revenue opportunities. As these efforts progress, we expect to see increasing conversion and product sales, repeat orders, and a broader base of recurring revenue through 2026 and beyond. We believe the foundation is now in place, and our priority is to build on that foundation to deliver sustained revenue growth and long-term value creation. Thank you for your continued support and we look forward to updating you on our progress. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
Operator: Good day, ladies and gentlemen. Thank you for standing by and welcome to the Health In Tech, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will follow at that time. As a reminder, we are recording today's call. Now I will turn the call over to Lori Babcock, Chief of Staff for the company. Ms. Babcock, please proceed. Lori Babcock: Thank you, Operator, and hello, everyone. Welcome to Health In Tech, Inc.'s fourth quarter and full year 2025 earnings conference call. Joining us today are Mr. Tim Johnson, Chief Executive Officer, and Ms. Julia Qian, Chief Financial Officer. Full details of our results can be found in our earnings press release and in our related Form 10-Ks filed with the SEC. These documents will be available on our Investor Relations website at healthandtechinvestorroom.com. As a reminder, today's call is being recorded, and a replay will be available on our IR website as well. Before we continue, please note that today's discussion includes forward-looking statements made pursuant to the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on information available as of today, and involve risks, uncertainties, and assumptions that could cause actual results to differ materially from those expressed or implied, including those discussed in our annual report on Form 10-Ks for the period ended 12/31/2025, filed with the SEC. Please review the forward-looking and cautionary statement section at the end of our earnings release for various factors that could cause actual results to differ materially from forward-looking statements made today during our call. Except as expressly required by federal securities laws, we undertake no obligation to update and expressly disclaim the obligation to update these forward-looking statements to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events. We may also refer to certain financial measures not in accordance with generally accepted accounting principles, such as adjusted EBITDA, for comparison purposes only. Our GAAP results and reconciliations of GAAP to non-GAAP measures can be found in our earnings press release. With that, I will now turn the call over to our CEO, Mr. Johnson. Operator: Thank you, Lori, and good afternoon, everyone. We appreciate you joining us today. Tim Johnson: 2025 was a pivotal year for Health In Tech, Inc. It marked our first year as a public company. But more importantly, it was a year in which we demonstrated that our AI-enabled underwriting marketplace, distribution-led growth model, and technology platform can scale within a large, underpenetrated, self-funded health insurance market. For the full year 2025, revenue increased 71% to $333.3 million, reflecting strong execution across our core growth drivers. When we look at what drove this performance, three factors stand out: distribution expansion, platform advancement, and program innovation. First, distribution. Our business scales through distribution, with brokers and TPAs serving as the primary channel through which employers access self-funded health plans. As a result, the breadth and productivity of our distribution net are directly correlated with our growth trajectory. In 2025, we expanded our network to 858 brokers, TPAs, and agency partners, representing a 34% year-over-year increase. Importantly, we believe we remain at a very early stage of market penetration. There are approximately 1,100,000 insurance brokers in the United States, and even with over 800 distribution partners on our platform, our penetration remains well below one-tenth of 1%. Similarly, within an estimated $0.9 trillion self-funded health care market, our scale represents only a fraction of the total addressable opportunity. The key takeaway is that while we delivered strong growth in 2025, we believe that the long-term runway for expansion remains substantial, particularly as we continue to scale distribution and engagement across our partner network. Second, platform development. A core inefficiency in this industry is that underwriting remains highly manual, time intensive, and difficult to scale, particularly in the large employer segment. In 2025, we expanded our Enhanced Do-It-Yourself Benefit Systems, or EDIBS, to support employers with over 100 employees, extending our capabilities beyond the small-group market where we initially established strong product-market fit. This is a meaningful step up-market. Larger-group underwriting is characterized by long sales cycles, fragmented workflows, and significant operational friction. Our platform addresses these challenges by compressing underwriting timelines for larger employers from approximately three months to roughly two weeks, which enhances broker productivity, improves the client experience, and increases placement efficiency. We believe this speed and automation represent a durable competitive advantage, particularly as the market increasingly demands faster, data-driven decision-making. Before I move on, I want to address one of the most important questions we hear from investors: What is our AI advantage, and why is it not easily replicable? The short answer is that our advantage is not just the AI model itself. It is the combination of proprietary data and integrated workflow and distribution. On data, we have been applying AI within our platform since 2021, well before AI became a headline theme. Because we operate within employer-sponsored insurance, we have built a HIPAA-governed dataset tied directly to real underwriting activity and plan design structures, rather than relying on generic or publicly available healthcare data. As employer groups renew over time, we continuously incorporate new cohorts and real-world outcomes, which allows our models to improve through ongoing feedback loops embedded in actual production environments. On workflow, many solutions in the market focus on narrow point applications of AI, for example, automating a single administrative function or a discrete vendor process. While those tools can provide incremental efficiency, they do not address the broader structural inefficiencies in the system. What we have built is a fully integrated platform that connects underwriting, plan design, stop-loss, administration, and vendor coordination in a single workflow. This enables brokers to move from quote to bindable, execution-ready solutions significantly faster, while reducing fragmentation for employers. In other words, our AI is most valuable because it is embedded within an operating marketplace, not deployed as a stand-alone tool. On distribution, technology alone is not sufficient. Distribution is critical. We have established a growing network of brokers, TPAs, and carrier integrations actively using the platform, and that real-world usage drives continuous data generation, improves model performance, and increases platform stickiness over time. As we scale, the data becomes richer, the workflow becomes more efficient, and the competitive advantage compounds. Third, program development. We continue to advance our three-year rate stabilization program, which is designed to address one of the most persistent challenges in employer-sponsored healthcare: pricing volatility. Employers are increasingly focused on predictability, while brokers are seeking solutions to improve retention and simplify long-term planning. Our program is structured to provide greater pricing stability over a multiyear period, supported by a fixed remittance framework and stop-loss protection. Strategically, we believe this offering can deepen client relationships, improve retention, and support expansion into larger employer segments where budgeting stability is a critical decision factor. Now let's talk about 2026 strategic priorities and outlook. As we move into 2026, our priorities remain focused on scaling the platform and accelerating adoption. First, we will continue to expand our distribution footprint. Second, we are continuing to invest in platform development and AI capabilities, with a goal of evolving into a fully integrated marketplace that extends beyond underwriting to include claims administration, cost-containment solutions, and broader plan management capabilities. In January 2026, we enhanced the platform to offer more than 100 preconfigured, customized stop-loss programs, translating complex underwriting and plan design into a scalable, repeatable framework. This drives shorter sales cycles, improved conversion visibility, and greater scalability while maintaining flexibility for employer-specific needs. We are providing full year 2026 revenue guidance of $45,000,000 to $50,000,000, representing approximately 35% to 50% year-over-year growth. Our confidence is supported by our ability to compress time to revenue, enabling new features to scale within one to two quarters compared to 12 to 24 months in traditional insurance environments. We are also strengthening our technology foundation through our partnerships with Siclim, an AWS Advanced Tier Service Provider. We are building more integrated, AI-driven platforms. I will now turn the call over to Julia Qian, our CFO. Thanks, team. Julia Qian: Good afternoon, everybody. I appreciate you joining us today. I will work through our fourth quarter and the full year 2025 financial performance, then provide additional context around our operating model, margin profile, capital allocation priorities, and ongoing product investments. Before continuing to the numbers, I want to briefly address seasonality and timing dynamics. Employer decision cycles, particularly around renewals, do not always align cleanly with the calendar quarter, which can create some variance in quarterly results. As such, we believe year-over-year performance is a more meaningful way to evaluate the business rather than sequentially. On that basis, our trends remained strong throughout 2025. Importantly, our revenue model is contractually driven and recognized over a 12-month policy period, which supports forward-looking revenue visibility and an increased recurring revenue profile. Turning to revenue now. For the full year 2025, total revenue increased 71% year over year to $33,300,000. In the fourth quarter, revenue increased 53% to $7,500,000. This performance reflects continued adoption of our AI-enabled underwriting marketplace, supported by expansion in both distribution and enrolled employees. Our distribution network grew to 885 brokers, TPAs, and agencies, an increase of 34% year over year. Enrolled employees increased to 22,515, up 23% year over year. As more partners onboarded to the platform, we are seeing increased quoting activity, higher bind ratio, and improved conversion efficiency, reinforcing the scalability of our model. As Tim mentioned, we are providing full year 2026 revenue guidance of $45,000,000 to $50,000,000, representing about 35% to 50% growth year over year. This is supported by the visibility in how our recurring revenue flows through from the prior year and the remainder of the year, as well as strong distribution and fully deployed platform capability. When we look at profitability, we continue to demonstrate operating leverage as the business scales. Adjusted EBITDA for the full year was $4,100,000, which is about 12.3% of revenue, an increase of 81% year over year. Net income, our most comparable GAAP measure for the full year, was $1,200,000, representing about 4% of revenue, an increase of 91% year over year. For the fourth quarter, adjusted EBITDA was $300,000, compared to $500,000 in the prior year. Net income for the fourth quarter was negative $300,000, compared with negative $100,000 in the prior year. Again, our GAAP results and the reconciliation of GAAP to non-GAAP measures can be found in our earnings release. The fourth quarter reflects planned reinvestment in go-to-market initiatives, broker engagement, and program development, along with peak enrollment activity as well as investments supporting new product launches. Full year pre-tax income was $1,700,000. Fourth quarter pre-tax loss was $400,000, reflecting the timing of investments. Turning to operating expenses, we continue to drive improved operating efficiency while maintaining disciplined investment in growth initiatives. Total operating expenses were $19,400,000 for the full year, representing 58% of revenue, a 16% improvement year over year. In the fourth quarter, operating expenses were $4,300,000, or 57% of revenue. Breaking these down, for the full year, sales and marketing expenses were $4,200,000, about 13% of revenue, reflecting our efficiency in the distribution-led go-to-market strategy. General and administrative expenses were $13,700,000, 41% of revenue, improved year over year as we scale. Research and development investment included $3,200,000 in capitalized software development and $1,600,000 expensed, representing approximately 5% of revenue. Our R&D investments are focused on platform expansion, underwriting automation, and scalability across the marketplace ecosystem. As we think about growth beyond 2025, we are continuing to increase high-value capability into our existing platform. We plan to initiate the beta test of a new data-driven solution that integrates physiological and claims data to generate actionable value insights. We believe these represent a very meaningful step forward, enhancing decision-making across underwriting and plan management. More broadly, these initiatives reflect our strategy of building additional value-added services on top of an already commercialized, scalable platform, which we expect to support the durability of growth and increase operating leverage even further. AI remains a core investment initiative alongside our other programs. We believe that applying AI within a regulated employer-sponsored insurance environment can materially improve the speed, consistency, and decision quality across both underwriting and member-facing work. We will continue investing in AI-driven automation and underwriting support, while maintaining proper human oversight where it matters most. From a financial perspective, when these investments are directly aligned with our model, they support faster adoption, higher retention, improved efficiency, and greater operating leverage as we scale. Turning to cash flow and the balance sheet. For the full year 2025, we generated $3,100,000 of positive operating cash flow. Accounts receivable days reduced to 14 days in 2025 from an already efficient 29 days in 2024, demonstrating the predictability and efficiency of cash collection in our business model. We invested $3,200,000 in platform development software and still generated positive cash flow from operations, ending the year with $7,700,000 in cash and cash equivalents. With that, I now turn back to the Operator for Q&A. Tim Johnson: Thank you. Operator: We will now begin the question-and-answer session. The first question will come from Allen Klee with Maxim Group. Please go ahead. Allen Klee: Yes, hi. Good quarter. I wanted to start with your larger employer offering you have rolled out. Could you give us the feedback you have gotten and what you are hearing from your partners that are involved in selling it? Thank you. Julia Qian: Sure, Allen. I can cover that. Yes, Tim can talk about the business part, and I can talk about the financials. We announced the entry to the large employer space last year. The financial contribution is very fresh in 2025 because that is starting in the fourth quarter and officially launched this September, and you will see more benefits in 2026. So Tim can answer business-related questions. Tim Johnson: Yes. As Julia said, the sales cycles on those are pretty long, so we are just now really starting to pick up some sales through it. We have a product launch coming up at the end of next month where it really helps speed the process up for the large groups. Right now, we just agreed to underwrite large group, bring them in to make sure that we had a really good process, and then the system that we have built is coming up next month. We have tested it a lot with a lot of brokers and internally, and the speed with which it is performing is really helpful for anybody that uses it. Allen Klee: Okay. Thank you. And then for the three-year rate stabilization offering, which is extremely valuable in today's market, what is the feedback? You are in beta right now. So anything you can say about the feedback and how you're thinking about potential interest and when? When that interest—I know you said second half—but any thoughts of how you think about the inflection of how that might ramp? Tim Johnson: Yes. It is really an attention-grabber for government entities, municipalities, these entities that rely on budgeting heavily. So they have to understand, through a tax base, what they have to budget for. When you can do that for three years, there are a lot of cities, states, governments, counties—they are all interested in looking at it, and we are right now just starting to put together some information so we can gather some of their submission data, start to put some programs together for them, making sure that it looks right and fine-tune it. So there is a lot of attention around it. Seriously, we just got it started a month, month and a half ago, where we could go out and talk about it with our partner—our insurance carrier—that was putting it up and we are working with. So there is a lot of attention around it, but you are right. We have not really started the quoting process yet where we have got much going on that we can put some business on the books. Julia Qian: Yes. So, Allen, that is exactly what we said before. We anticipate it is going to go well. The beta test has a lot of traction. It should be officially launched and announced with all the partners involved in the second half of the year. I think it is still on track. Yes. We will try to see whether we can do a Q3. Allen Klee: Third quarter. Julia Qian: Hopefully the end of second quarter and the beginning of third quarter. This is something we are looking at. Allen Klee: Maybe just following up on my first two questions, what are your thoughts in terms of the amount of renewals you think will be available for both the large employer and the three-year rate stabilization? Do you think that most of it will come more at the end of 2026 when plans renew, or do you think that there is good opportunity in 2026? Julia Qian: So, Allen, today we do not have renewals in the large group business. Most of our business is small- and medium-sized groups, but we only started last year, September, and when we have functionality going on, we start to pick up some pace this year. So we do not really have a renewal from any prior-year business book, but we can see we gain share from other places. So we get new customers. Those will be all new customers. Allen Klee: Three-year both, three-year in the large group. Yes. But what I meant is that plans—if most plans renew in January—does that mean that there will not be a lot available that you can sell to? Tim Johnson: You are correct. July 1 and January 1 are, especially for municipalities, their effective dates. They start on July and January. So again, we are probably not going to get a lot of business on July with the municipalities in that. We will pick up some other clients. But January is clearly going to be the biggest effective date for us on that. Allen Klee: Okay. That is great. And then just one more, then I will get back in the queue. You mentioned you initiated beta testing of physiological data and claims data to get insights. Could you just expand on that a little more? Julia Qian: Yes. So physiological data is when people wear devices to track their physiological information—heart rate and blood pressure—and then we have, as claims data, a lot associated with individuals’ health information. So when we get the data, hopefully it can produce insights. We just got to the start and the beta test for this year. That is something the product will watch for. It can be very interesting. And on the data part, it will really help the user get more additional insights on the correlation of their health condition versus their medical condition. So we just got to the beta test, and we will share with the market the due cost. Allen Klee: Thank you so much. Operator: The next question will come from M Marin with Zacks. Please go ahead. M Marin: Thank you. So I am wondering, you were talking a little bit about your entrance now into the large organizations spectrum of sales. And the sales cycle, as you said, is long. Do you expect that there will be any difference versus smaller organizations in terms of stickiness or retention, or from what you know about the overall industry, do you think it will be pretty much comparable to what you have already experienced in your business? Tim Johnson: Yes, I think that the stickiness will come because of the ease of use of the system—the tool, EDIBS. It is extremely easy and efficient. It is easier for a broker to provide a submission to an underwriter through the system. The system uses a lot of AI technology to organize all of that and parses the data into an organized fashion for the underwriter. It is a layup for the underwriter to, when it eventually comes out the other end of the system, underwrite and do their job, which is all they want to do. So once we can show that the turnaround time on getting the information in, understanding the information, and then getting a proposal back—we are really trying to reduce that timeframe significantly. And if you are in this business, you know that a lot of times it takes a long time for various reasons. But the system that we have built, we really think we can dramatically—I say we are going to easily cut it in half, if not more. M Marin: Okay. And so I know it is very early in the process because you just really completed the beta testing not that long ago, but are you surprised at the level of interest or potential interest that you are expecting or seeing in your pipeline amongst that sector of the overall customer base? Tim Johnson: Yes. We were just talking about that earlier today. In fact, the way that we have positioned ourselves and the people that we are already talking to about it—just trying to get feedback and get through all the beta—you know, internally, my underwriter can now look at and quote up to 20 groups in a week. She used to be able to do that in a month, and now she does it in a week. And just conversations like that around other people in that space, in the underwriting space, they are very excited to see it and test it out. So yes, we hope it is going to be a big splash. M Marin: Switching gears a little bit, over the past several quarters you have announced a number of different partnerships or business affiliations to expand the services you can offer or expand distribution. Do you have an ongoing pipeline of other potential affiliations that you are looking at and considering in order to further expand your service offerings? Tim Johnson: Yes. The tool itself has really expanded who we traditionally thought our market was. So now, besides just brokers and TPAs using the system to quote groups, we are looking at other industries or other vendors within our industry that want to use the tool because it makes their job even easier. We are all in this business, and we designed the product to help us, because we underwrite—we do all these things. But it is expanding beyond just us to where other people want to use the tool. And that kind of goes back to my other answer on the other question you asked. But yes, it is expanding a lot. Julia Qian: Yes. That is multiple. We are looking at these as multiple different legs to grow for the company. So in terms of sales distribution, just to remind everybody, there are 1,100,000 of these sales agents in the country, and we only scratched the surface. So whatever works, we will continue to build a high-functional sales team, continue to acquire brokers, and provide education. One part of entering the large group space will help us to get the larger brokerage houses, because the more product offered, the more stickiness—people are more inclined to deal with one system to use it. So this is part of the strategy for us to offer more services and try to get more brokers onboard. We do not have some particular list, because now we consider the entire universe is 1,100,000, and there are particular things we want to think about and where our high-functional salespeople have the most relationships. Then we would go down the list of the rest in the country. We really do not have particular things. Additionally, the new functionality we are building, we are surprised to see, can be offered as additional sales to generate more revenue, as the capability is needed by other users as well. Mhmm. M Marin: Which would also further enhance your operating leverage, you think? Julia Qian: Yes, definitely. Look, when we started, I often say we are the Amazon selling the bookstore and sell the books at our bookstore, and then we realized people really like to put the store online. So we are like, okay. Now, with a lot of functionality we are developing for our own internal use—because we are part of the customer zero, using the functionality to deal with the manual process, make our automation, make that easier, simpler, use AI—and then we realized a lot of companies like ours on the market also suffer from the manual process. Then we can offer that as an additional service. M Marin: Okay. Thanks so much. Thanks for taking my questions. Operator: The next question is a follow-up from Allen Klee of Maxim Group. Please go ahead. Allen Klee: Yes, hi. You talked about how you want to expand to roll out cost containment and claims paying. Is the business model here that kind of what you said of the—like, you are the store, and these are the different things that get added—and you would take a fee or a percent? How do you envision—like, you are partnering with other firms—or how do you envision how you get paid on it? Julia Qian: So, Allen, we are building—we are the marketplace. So today, the marketplace does two things: create self-funded products, self-funded programs, and put programs together, and also does the underwriting and bundles together through the AI process. In the near future, as the marketplace function expands, we will offer that as a service for other carriers, other MGUs, other people who want to come to the marketplace—not just purchase the product. They also want to use the functionality doing their underwriting. They want to create their customized product. So these are the things we are thinking about, which we already get quite a lot of traction on. It has not launched currently, has not launched this year, has not been in the business model last year. But with more and more traction, we think we will make that available in the very near future. We have not thought about the pricing because there are so many different pricing models we can charge. We can have set pricing. We can have different features, different pricing. There are so many ways people are willing to pay for different functionality. So since this has not been launched and we have not finalized the price, we have a lot of ideas through the conversation with potential customers. Allen Klee: Okay. You announced a partnership on the prescription side, I think. Could you talk about what that can do for your offering? What I am referring to is the Vertical Art Administrators. Tim Johnson: Oh, yes. They are a TPA. They just happen to be owned by a PBM. So it is just another distribution source for us. Allen Klee: Okay. So on the prescription side, that is not an area of focus right now, I assume, right? Tim Johnson: Not really. I mean, we are going to do what we can to manage the drug costs, but as you recently saw, the government is stepping in to try to make some corrections. So it is kind of in flux right now. We do not want to commit to anything and then have something taken away from us. So we are just going to sit back and watch what happens for a while. Allen Klee: Okay. That makes sense. Is there any feedback on the conference you held in Davos and any relationships that you got out of it, or just thoughts on how it went? Tim Johnson: Yes. I thought it went great. We met a lot of good people. Those relationships are still fruitioning. We are trying to figure out how we take advantage of all of them. We got a lot of good attention from that. A lot of people are still talking about it, in fact. Tim Johnson: Okay. Allen Klee: And then maybe lastly on the AI side, just in terms of how you are looking to apply it in 2026, what would you say the biggest initiatives will be? Tim Johnson: The biggest initiatives for AI in 2026? Yes. It is going to be continually improving our own processes. We are really the proof of concept for a lot of these things, and we test it before we take it out. But our system continually needs improvement. We are talking about the claims—I want to clarify—those are the stop-loss claims. Those are not first-dollar TPA claims that we are looking at. We are looking at how MGUs intake claims, and how AI can be used to make that more efficient, because it is a very manual process. So everything we touch, we are looking at applying AI to it to see if we can solve the issue by speeding it up or eliminating intervention by having people get in the middle of it. There are all sorts of different ways that we are looking at AI, but it is improving that entire process of getting information: how you get it, when you get it, what you do with it, where it goes, and where it is stored, and how fast can I get access to it? Allen Klee: Okay. Great. Thank you so much. Tim Johnson: Thanks, Allen. Operator: Thank you. Seeing no more in the queue, let me turn the call back to Mr. Johnson for closing remarks. Tim Johnson: Thank you, Operator, and I thank all of you. I appreciate everyone joining the call today. If anyone has any follow-up questions, please do not hesitate to reach out to us. We appreciate your interest and look forward to keeping the dialogue open. Thanks, everyone. Operator: Thank you all again. This concludes the call. You may now disconnect.
Operator: Thank you for standing by. This is the conference operator. Welcome to the AGI Fourth Quarter 2025 Results Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] Before we begin, we caution listeners that this call may contain forward-looking information and discussion and that actual results could differ materially from such forecasts or projections. Further, in preparing the forward-looking information, certain material factors and assumptions were used by management. Additional information about the material factors that could cause actual results to differ materially from the forecast or projections and the material factors and assumptions used by management in preparing the forward-looking information are contained in our fourth quarter MD&A and press release, which are available on the AGI website. I would now like to turn the conference over to Paul Brisebois, Interim President and CEO of AGI. Please go ahead, sir. Paul Brisebois: Thank you, operator, and good morning, everyone. I'm pleased to be speaking with you today from our corporate headquarters in Winnipeg. Our CFO, Jim Rudyk, is here with me, and we are eager to use this call as a kickoff to a new era for AGI. Before getting into a more detailed discussion on the quarter as well as other relevant business and corporate updates, I would like to first introduce myself and share a few more details on my professional background. I've spent my entire career, which spans nearly 30 years in the global agriculture business with a strong foundation in sales leadership, marketing, business development and operations. I've been an executive with AGI since 2012, played a large part in the growth that we have accomplished going from a $300 million company to a $1.4 billion company, most recently leading our North American Farm and Global Portables businesses. That role has kept me close to our customers and provided a clear view of the operating levers that drive performance across AGI. Agriculture is a compelling industry. People must eat and global demand continues to grow, but it is also cyclical, shaped by factors such as weather, geopolitics, interest rates and government policy to name a few. While I've seen significant change over the years, the fundamentals remain constant. Crops are grown every season and grain must move from the field to storage to processing and ultimately to end markets. The industry generally follows a predictable seasonal rhythm and understanding that rhythm is essential to understanding our customers, what matters, what's urgent and where they need the most support. As the leader of the company, having decades of hands-on operating experience is particularly important as we navigate a cyclical North American market while managing through significant change internally. To support the pace of change and provide the appropriate level of strategic input, governance and oversight, AGI has also made several important changes to the Board of Directors in recent months. Led by our Board Chair, Dan Halyk, the Board now collectively brings a strong mix of hands-on operating experience, deep agriculture sector experience, restructuring and value creation knowledge, capital markets expertise, deep institutional knowledge from AGI's formative years in addition to meaningful shareholder representation. Overall, this is a Board that is well positioned, well equipped and well aligned to support a renewed focus on operating fundamentals, improving shareholder returns and enhancing return on invested capital metrics. I look forward to working closely with our Board as we execute on our corporate priorities and strategies. Before getting into more detail on our current strategic priorities and recent restructuring activities, I'll provide some brief comments on our fourth quarter results, which Jim will expand on later in the call during his prepared remarks. Fourth quarter revenue increased 4% year-over-year to $396 million, supported by strength in our Commercial segment, particularly in international markets, offset by continued softness in the North American Farm segment, Canada in particular. However, adjusted EBITDA decreased to approximately $48 million, down 38% and our adjusted EBITDA margin compressed to 12.2%, roughly 830 basis points year-over-year. Given the extent of margin compression in the quarter, it's important to be direct about the drivers of this result. First, within our Farm segment, lower volumes for permanent storage and handling, especially in Canada, reduced overhead absorption and impacted profitability. Second, within our Commercial segment, we experienced execution-related cost pressures on various traditional equipment-only projects in Brazil, including cost overruns, warranty charges, remediation expenses and bad debt write-offs. For clarity, when we refer to our traditional Brazil operations, this includes everything other than the large-scale projects we've recently engaged in. Third, in our North American commercial business, a combination of product mix and production efficiency issues weighed on margins. Taken together, these items contributed to the bulk of the fourth quarter margin outcome. They also reinforce why we initiated a new phase of restructuring early in 2026. As we move forward in 2026 and beyond, we have three key guiding principles, which taken together shape our actions and priorities. The first is simplification. We will continue to streamline layers, clarify accountability and standardize core processes among other activities in a concerted effort to structurally reduce the overall complexity of how we operate. We are simplifying the organization end-to-end from the high-level organizational structure to how decisions are made day-to-day. The objective is to move faster with better discipline. The second is customer focus. We are refocusing resources on what matters most to customers from quoting through delivery and how we manage key accounts. The objective is to make customer-first thinking a core part of our culture and day-to-day operations. The third is reducing debt and managing cash flow more broadly. We are operating with tighter financial discipline to improve cash generation and conversion. Outside of managing debt through operating cash flows, we are reviewing our options and alternatives to help accelerate debt repayment. As we work through 2026 in consultation with our Board, we will continue to calibrate our strategy and priorities with greater precision and through the lens of ROIC metrics. Given the amount of change underway, we believe it's important to share our current direction as of today, so stakeholders understand the priorities guiding execution and resource allocation in the near term. In our renewed commitment to enhance the AGI customer experience and simplify operations through the start of 2026, we have begun and are continuing to undertake a comprehensive strategic restructuring initiative. This process focuses on streamlining our operations and aligning our decision-making processes more closely with our customers' needs. By simplifying our business structure, we aim to empower our teams to respond more swiftly and effectively to customer feedback and market demands, ensuring a more agile and customer-focused approach. These actions include four main changes. First, we restructured the top level of the company, what we call the executive operating team, going from a team of 17 down to a team of 8 to facilitate accelerated decision-making and improved execution. Second, we implemented a significant overhaul of the North American business to simplify the leadership structure and reduce layers of siloed functions. The objective is to strengthen day-to-day execution and improve the speed of effectiveness of our response to customers and changing market conditions across North America. As part of this alignment, several smaller business units, including feed, food and digital are being integrated into the broader North American organization, all of which will now operate under a single regional leader. Third, a streamlining of certain corporate functions and leadership capabilities to our Winnipeg headquarters, consolidating activities previously managed elsewhere. And finally, after careful consideration and evaluation of our current operational landscape, we have made the strategic decision to terminate our ERP implementation. The ERP implementation has been challenging, delayed, resource-heavy and ineffective to date, raising concerns on the realization of expected benefits. Our executive team reviewed the ERP decision through the lens of simplicity, customer focus and cash flow management, coming to the conclusion that we must cease implementation and refocus on other priorities. In addition, we have also suspended the dividend going forward effective immediately. The objective of all of these actions are straightforward. They are aligned with our strategic focus areas of simplifying our business, increasing customer focus and managing cash flow to reduce debt. Collectively, these actions will drive annualized SG&A cost savings of at least $20 million. In addition, terminating the ERP will enable about $20 million of cash cost avoidance over the next two years. Further initiatives to help remove cost and simplify the organization are under review. Stepping outside of these immediate actions, we have also made some other targeted refinements to our corporate strategy, including a decision to halt any new large-scale projects that include general contracting and financing elements in Brazil or elsewhere until balance sheet capacity improves, while continuing to pursue equipment-only opportunities in Brazil that are aligned with the company's traditional operating model and a comprehensive internal review of our alternatives to reduce leverage and accelerate debt repayment. In addition, we are placing an increased focus on metrics such as return on invested capital to guide strategic decision-making alongside updates to corporate compensation structures, both of which are aligned with the objective of improving shareholder returns. Moving to some comments on order book and overall market conditions. We ended the year with an order book of $543 million, down 26% year-over-year, primarily reflecting the execution of several significant projects in our International Commercial segment. In the Farm segment, areas of North America have shown some early signs of improvement, notably in our year-end early order program for 2026. With this provides some cautious optimism for 2026 Farm segment results could show an improvement over 2025. It is still early in the year and visibility remains limited. We'll need to get further into the season for additional validation of the demand picture and how to place 2026 within the broader agriculture cycle. In commercial, order intake softened in late 2025 and into early 2026, reflecting longer customer decision-making and project review cycles. Finally, an important note on the underlying makeup of our 2025 results so we can be clear for listeners, analysts and shareholders as they set expectations for 2026. Our full year results in 2025 benefited from significant revenue connected to large-scale projects in Brazil, which included general contracting and financing components. That said, backfilling this volume of revenue with traditional commercial business projects to replenish the order book to 2025 levels will be challenging. Overall, the demand environment remains an issue in the near term, but we're leaning in, keeping opportunities in our pipeline moving forward, staying close to customers and simplifying the organization so we can execute better and be ready to capture growth opportunities as conditions improve. To wrap up, I'm grateful and genuinely honored to be in the position to lead AGI through this next chapter. We see both challenges and opportunities ahead, and our team is ready to execute. We are firmly committed to strengthening alignment with shareholder returns and recognize that this is an area where improvement is required. Enhancing value creation for shareholders is a core priority, and we are taking deliberate steps to better align our strategic decision-making, capital allocation and incentive structures with this objective. We are fully aware and aligned on the need for action to drive consistent, measurable improvement in shareholder returns and alignment. Jim, over to you. James Rudyk: Thanks, Paul, and good morning, everyone. I'll begin with a brief review of Q4 results and then discuss other key financial metrics. Starting with Farm. Farm segment revenue declined year-over-year in the fourth quarter, reflecting continued challenging market conditions across North America, including soft crop prices and ongoing uncertainty related to trade and tariff policies. Revenue decreased 8% to $123 million, with the decline concentrated in Canada. Canada Farm revenue decreased 34% year-over-year, impacted by slow demand across both portable and permanent grain handling equipment and declining, though still elevated dealer inventory levels alongside an overall cautious approach to purchasing behavior by farmers and end users. In contrast, U.S. farm revenue increased 11%, reflecting improved volumes versus prior periods, particularly in portable grain handling equipment, and early signs of potential stabilization across certain portable and permanent categories. That said, demand remains below historical norms and visibility into sustained improvement remains limited entering 2026. International Farm revenue increased 36% year-over-year, led by strong demand in Australia, though the overall contribution from international regions remained modest in relative terms. Adjusted EBITDA for the Farm segment declined 39% to $19.8 million and margin compressed from 24.1% to 16%, driven primarily by lower volumes and margin pressure on permanent handling and storage solutions in Canada. Now turning to the Commercial segment. Commercial segment revenue increased year-over-year in the fourth quarter, driven primarily by large-scale comprehensive projects in international markets with Brazil again delivering a strong quarter and complemented by solid contributions from our EMEA region. Overall segment revenue increased 10% to $273 million, with international commercial revenue up 18% to $206 million, reflecting the mix of large projects, notably in Brazil. In North America, U.S. commercial revenue increased 9% on continued execution of projects secured earlier in the year, while Canada commercial revenue declined significantly as the prior year period benefited from substantial project wins. And in Q4 2025, a few major projects were pushed from Q4 into Q1 2026. Adjusted EBITDA for the Commercial segment declined 39% to $33 million and margins compressed from 21.6% to 12%. The decline was driven primarily by execution-related pressures on traditional projects in Brazil that led to cost overruns, warranty charges and remediation expenses as well as product mix and production efficiency issues in our North American commercial business. While we are executing a plan to mitigate the margin pressure, we do expect some of these margin challenges to persist for both the Brazilian and North American commercial businesses into 2026. Moving on to adjusted EBITDA and a few comments on specific line items within that reconciliation. Some of the key items to note include transactional, transitional and other representing a mix of legal accruals, asset disposal costs and personnel expenses. A meaningful component this quarter of transactional expenses included a $21 million purchase of the interest of related parties for some of the large-scale Brazilian projects. This represented the purchase of our Brazilian construction partners' equity interest in three of the large-scale projects. While this would normally be recorded as an equity transaction, it was expensed due to the timing of when the transactions close. Another key item is our ERP implementation costs, which will soon be removed given the strategic decision to terminate this activity going forward. Finally, I'll provide a few comments on a few of our focused financial metrics, including free cash flow and leverage. Free cash flow in Q4 was negative, driven mostly by temporary working capital requirements associated with large-scale international commercial projects in Brazil. Improving cash flow is a paramount objective for both management and the Board. Of the negative $111 million of free cash flow in 2025, a very significant portion of this was tied to these large-scale projects in Brazil. As we monetize existing receivables and halt further investment, the cash flow pressure related to large-scale projects in Brazil should subside. From a leverage standpoint, our net debt leverage ratio was 4.7x at year-end compared to 3.9x at quarter-over-quarter and 3.1x year-over-year. We recognize that leverage is elevated and improving free cash flow generation and reducing leverage are key priorities. It is worth noting that our syndicate remains highly engaged and supportive. In Q1, we finalized an amendment agreement with the majority of our lending group that extends our senior credit facility maturity date out to 2030. One key element of our deleveraging plan is the investment vehicle established in Brazil to monetize financing receivables provided by AGI. To date, this vehicle has generated $7 million of inflows, and we have made progress on securing additional inflows in the near term. This structure is designed to relieve working capital, support delivery of large projects, improve cash conversion and strengthen leverage metrics over time. We are working through some of the detailed administrative aspects of the monetization process, and we expect meaningful progress on the long-term accounts receivable monetization efforts shortly. For clarity, it is worth reiterating that following our strategic choice to stop pursuing large-scale projects in Brazil, which require general contractor and financing components, we will refrain from entering new customer or project agreements that would increase our long-term receivables or otherwise use our balance sheet. When our balance sheet improves, we may revisit, but for now, the priority is on reducing debt. In closing, our go-forward focus is clear: improve execution, restore margin performance, strengthen cash conversion and reduce leverage. With that, I'll turn it back over to the operator. Operator: [Operator Instructions] The first question today comes from Gary Ho with Desjardins Capital Markets. Gary Ho: I want to start off with the Commercial segment. It was fairly weak. I think it was mentioned execution-related pressures in equipment-only projects in Brazil, mentioned cost overruns, higher warranty and remediation expenses and also comments around North American production inefficiencies. Can you elaborate on these items? And also related, maybe for Jim as well, of your $48.3 million reported EBITDA, it looks like you didn't back out some of these onetime items, they are commercial or otherwise like bad debts, et cetera. Can you maybe quantify these nonrecurring items that's in your Q4 EBITDA? Paul Brisebois: Gary, it's Paul here. Thanks for the question. I'll answer the first question, and then I'll turn it over to Jim. With regards to the execution-related cost overruns, about half of that of the issues were in cost overruns, warranty charges and then half was in bad debt write-off. To be honest, when we look at our Brazil business, the pace of growth in our Brazil operations outpaced our capabilities to execute, and that creates challenges in the business, and that's why we had the cost overruns, warranty charges and unfortunately, a couple of customers from a bad debt perspective. We've installed a new business leader in our Brazilian business. We're focused on technical accounting review on large-scale projects, and a full review of project management and procurement practices going forward. So we feel that all of these are addressable in our Brazil business as well as in the North American commercial business when we talk about product mix and production efficiency issues. We had lower margin product that we were selling in Q4 and then inevitably had some production efficiency issues, which led to lower margins. James Rudyk: And Gary, just on your follow-on there, no, we did not back these out. These are our operating costs. We've got a number of initiatives to address them. We're working hard to ensure they are not recurring, but they were not backed out. We do expect to still have some challenges, particularly in Q1 as we work through our restructuring plan, but we thought it made sense to leave them in just our normal cost of goods sold or SG&A as opposed to backing them out. Gary Ho: And sorry, Jim, are you able to kind of quantify what those could have been if it was? James Rudyk: Well, so in terms of specifically the Brazil costs or are you talking about all in general? Gary Ho: Yes, all in general. James Rudyk: Yes. So of the overall impact on our margins, about 1/3 of them are attributable to each of the three categories. So lower farm volumes, the Brazil impact and then North America commercial, they'd be about 1/3 each of them of the total dollar impact year-over-year. Gary Ho: Okay. Great. Okay. And then maybe I'll just move on just one other one for Paul. You listed kind of four operational initiatives in your prepared remarks. Can you elaborate kind of what's been achieved up to today? Are the leadership streamlining and unifying of North American ops complete? Or should we expect some noise throughout this year? I just want to hear the time line for these initiatives. Paul Brisebois: Yes, you bet, Gary. So we have restructured our executive team going from 17 down to 8. So that's been done. David Postill, who is leading our North American business is in the process of restructuring that business. And so that will happen within the next 30 days. Many of the activities in terms of looking at offices and relocating roles have been -- taken place already and will continue to in the next 30 days. And we're trying to do this as efficiently as possible, as quickly as possible and keeping in mind a focus on the customer to make sure that nothing is impacted in a negative way in terms of our customer experience. And we believe through our restructuring and getting closer to the customer in terms of removing layers of the business will benefit us with regards to execution going forward. Operator: The question comes from Steve Hansen with Raymond James. Steven Hansen: Look, I understand the desire to level set expectations here, and I think that makes sense. But I think you're going to have to give us a little bit more in terms of what you expect for the margin profile here given how radical the move has been to the downside. I know you suggested some of these margin challenges are expected to persist. Does that mean we should account for similar margin profile for the next couple of quarters? I mean, how do we -- do we get back to a normalized level where we were before? I mean some degree of directional support here would be useful because, frankly, getting punched in the face like this is a little bit unexpected. So just a bit more clarity around where we're going from a margin perspective would be the first point, and then I'll get to free cash flow. Paul Brisebois: Yes, you bet, Steve. And I'm familiar with getting punched in the face. I'm a hockey player as well. And this was a tough quarter. So Q4 was tough and we had challenges. We believe that those challenges are all addressable. Q1, we believe will be -- continue to be tough as we work through this. We're not satisfied, obviously, with that margin outcome. The restructuring that we've put in place is designed to improve our execution, restore our margin and strengthen our cash conversion. And the target is to get back to historical margins going forward. So Q4, Q1 tough and driving towards more historical margins after that. Steven Hansen: Okay. Helpful to a degree. Maybe just on free cash flow then, we've had -- I think you cited at just over $110 million of negative free cash in the year. All the actions that you're taking seem to make logical sense. But when can we actually expect to see positive free cash flow in the coming period here? And then I understand, again, on a related note, your banks and syndicate have been supportive here, but are we at risk of any sort of covenant-related breaches at some point in the future? James Rudyk: Yes. Thanks, Steve. Yes. So free cash flow, you probably -- as you read through the press release and our comments, obviously, is elevated, it's very serious. We're taking it very serious, big focus on it. A lot of the initiatives, the restructuring plans, all the things that we're doing are focusing on free cash flow. From a -- if you look year-over-year, the bulk of it of the negative has to do with our investment in these large turnkey projects. And I'll just speak quickly on that. So we did monetize some of it in Q4, a small amount, $7 million. We talked about this in the past, where it's administratively very slow and burdensome process in Brazil to get all of the steps necessary to then get the cash. The cash is in motion. Progress continues. We have calls every couple of days focusing on it. And as we've mentioned in the past, we expect to monetize between $80 million to $100 million shortly within -- by H1. That will make a big difference to our free cash flow. Q1 will still be tough, though. We expect negative free cash flow in Q1, candidly. And then as the funds come in from the monetization of the Brazil business, that will turn things around. But make no mistake, there's still challenges as we work through the restructuring plan, but our focus is on generating positive free cash flow going forward. In terms of your covenant question, as you know, the bank covenants exclude our debentures. And so we are in compliance. And we have a great group of banks, 11 banks in our syndicate. They're very supportive. We just extended the maturity date. So no concerns on the covenants. Operator: The next question comes from Tim Monachello with ATB Capital Markets. Tim Monachello: First question here, just a clarification. You lumped in the dividend cut and some of the restructuring efforts. And I just want to be clear here, is that dividend included in the $20 million of cost savings you're expected? Or I would assume it's not... Paul Brisebois: No, good question, and it's not included in the $20 million of cost savings. And just for context, Tim, our Board reviews our dividend each period in the context of the business and where we're at. And given our priorities to manage cash and pay down debt, a decision was made to postpone it, to hold on. Tim Monachello: Okay. Great. And then second question, I just want to dive into what you're seeing on the ground in the Commercial segment, understanding that your -- so the breadth of opportunities that you're looking at in Brazil, in particular, has shrunk with, I guess, the change in your offering around general contracting and financing options. But you also mentioned a slowdown in, I guess, the commercial order cycle. So maybe you can elaborate on what you're seeing on the ground in terms of demand and the market outlook in the commercial side of the business relative to how you had described it in past quarters? Paul Brisebois: Yes, you bet. So I'll talk about the broader commercial business, North America. First, we're seeing good quote activity, but we're not seeing customers move forward on that quote activity at this time. So everybody is a little bit cautious and not pulling the trigger with regards to projects at this time. Now that could open up. We're very happy to see the quoting activity happening. So that's a good sign. When we look at our EMEA business, Rest of World, it had a fantastic year in 2025 with a lot of execution on those projects happening and getting finalized in 2025. We see a smaller order book. And we've started to see a little more traction. That being said, there's been some small projects that have been impacted in the Middle East because of the conflict there and -- but it won't have any kind of material impact. And then when we look at the Brazil business, a challenge for us will be to replace the $183 million of revenue that we did in large-scale projects in 2025 that were financed. And so we've made a decision that we are no longer doing those projects going forward with regards to financing. We will participate with regards to equipment sales. And that decision is made from a cash flow perspective to ensure that we're getting cash as we do the projects and getting paid as those projects are finalized. So with that, we believe that the challenge going into 2026 for Brazil, in particular, will be to fill that gap of the $183 million that we accomplished in 2025. Tim Monachello: So the slowness in, I guess, order cycling that you've seen or I guess, the willingness of customers to actually place orders is mostly outside of Brazil? Paul Brisebois: That's right. Tim Monachello: Okay. And then just the $180 million of large project revenue in Brazil in '25, how does that compare to total commercial revenue in Brazil? And how much of those large projects are still in backlog for '26? James Rudyk: Yes. It's a significant amount, Tim. It's -- '25 in particular, was a big year for the turnkey projects. So it's more than half of the amount. Tim Monachello: And how much do you expect to process of those large projects in '26? James Rudyk: In '26 -- so yes, good question. So there is -- 2 of the projects still have some work being done in 2026. We'll complete them through this year. It's a big gap that we need to fill, let's put it that way. Operator: The next question comes from Michael Tupholme with TD Cowen. Michael Tupholme: So it's clear that a lot of these efforts are intended to improve free cash flow and in turn, improve the balance sheet. Jim, wondering with the leverage ratio where it is now, how we should think about that evolving over the course of the year, where you think that can be come the end of the year? And as part of that, also wondering how you're thinking about refinancing or repaying the senior unsecured debenture that comes due at the end of this year. James Rudyk: Yes. Thanks, Michael, for the question. Yes. So leverage ratio is high, 4.7x. It must improve, no doubt about it. And if you look at our initiatives, we're really, really focused on those -- getting those -- and we're going to improve it through a number of ways. You've got improving our earnings, so SG&A savings that we've called out, delaying the ERP implementation that will free up quite a bit of cash flow over the next couple of years. A big part is our decision to pause any of the financing opportunities with some of these large customer opportunities. That will free up quite a bit of working capital. So we expect to have some meaningful improvements in that leverage ratio through 2026. In terms of the refinancing, you're right, we have a debenture that's due in December. We expect to refinance that debenture likely with a similar type instrument, but that will be something that we'll likely pursue and try to get done Q2, Q3 time frame. Michael Tupholme: Okay. Related to the question here about improving the balance sheet. I guess there was mention in the release of reviewing the portfolio of assets with the intent of refocusing on core business lines. I guess the sort of two part here. So first thing is where is that portfolio review at and how material could the proceeds from that be? Just trying to understand if this is something we really need to be focused on or if this is sort of more marginal in terms of the potential impact. Paul Brisebois: It's a good question. So we have gone through an extensive review of all of our available options to reduce debt. We've looked at it from our priorities of simplifying the business, having a customer focus and cash flow to reduce debt. We've identified the most actionable options and are focused on this goal for the coming months. So there is some low-hanging fruit. And when I say that, we have facilities that are not operating right now that we could sell for cash. We have land that's available to sell for cash. And then we have other assets within the portfolio where we're looking at it that can range from either smaller but more actionable to large opportunities that can have a significant impact on our debt reduction. And we're taking all of those into account with a focus on debt reduction. Michael Tupholme: Okay. That's helpful. And maybe just to clarify though. So nothing has actually been finalized yet. You've got sort of a good set of opportunities here that things you could act on, but nothing has been completed to this point. Paul Brisebois: That's correct. The internal review has been done, and we're actioning things that are in the queue. Operator: The next question comes from Maxim Sytchev with National Bank. Maxim Sytchev: My first question, I guess, pertains to the rollback of the ERP implementation. And I guess as you commented in your prepared remarks around getting closer to the clients and sort of more agility, et cetera. I'm just wondering how do you balance these kind of competing priorities around presumably less data over time while trying to sort of accomplish operational priorities. James Rudyk: Yes. Thanks, Max. So the ERP project, it's been ongoing for quite a while. It's extremely resource heavy. It does consume lots of cash. And importantly, too, it's a distraction to a lot of people, especially in the time when we're trying to simplify the business, focus on the customer and get back to basics. And so with our extreme focus on freeing up free cash flow, we decided that it made sense to stop this project. We need to focus on execution. We need to conserve cash. This will -- is a good mechanism to free up some of that cash. And now in terms of your -- what does that mean in terms of the future? I think that who knows? I mean we've got systems. We've operated for a lot of years with our current systems. Once we get our execution done, figure out our processes, get that streamlined, things will get reassessed. But for now, this has made the most sense to do. Maxim Sytchev: Okay. And then in terms of -- recently, we're seeing fertilizer pricing obviously spiking. I'm just curious to see what you may be seeing closer sort of on the ground? Because I mean, you made a comment around commercial, but maybe anything farm related, that would be helpful. Paul Brisebois: Yes, you bet. So we were pleasantly surprised actually with our order book through our early order program that happens in Q4. We saw an uptick with regards to that order book versus 2024, which was a positive sign. So we remain cautiously optimistic on our farm business. The reality is the reason we remain cautiously optimistic is it really is dependent now on when farmers go into planting season which will happen in the next month or so, depending on region. And as they see their crops come up and obviously, with input prices, as you mentioned, with fertilizer prices going up, they're putting -- they put all of their resources into that first. And then once they see their crops come up and if they are looking good and commodity prices are decent, then we'll have an opportunity to maybe get more optimistic or less optimistic about the second half. But right now, we feel pretty good with regards to that order book and better than what we anticipated going into 2026. Operator: The next question comes from Jacob Efrosman with Strive Global Holdings. Jacob Efrosman: The question is for Paul. I was wondering as it relates to offloading some of your assets to free up your balance sheet. Was there any manufacturing assets that would be based in Canada or North America that you'd be looking at offloading in the next few months? Paul Brisebois: Thanks for the question. We're reviewing all of our global assets. So we haven't determined what that looks like on a North American basis at this time. Operator: We have a follow-up from Steve Hansen with Raymond James. Steven Hansen: Two quick follow-ups, if I might. Paul, maybe too early, but I mean, how are you thinking about the tariff situation as we move into CUSMA renegotiations? I'm thinking about the bin side in particular. I don't seem to be too worried about the Auger portable side, but the bin side is one where there might be more risk to the portfolio. How do you plan and adapt for that as we move into that process? Paul Brisebois: Yes. That's a great question, Steve. 2025 was challenging to say the least with regards to tariffs. It did have an impact on our overall margins on the farm business, particularly on the storage side throughout the year. And I'd say not only on the cost of the tariff, but the inefficiencies that it created when it was on again, off again, what we were shipping, where we were shipping. So that was a big challenge. And we are constantly thinking about that as we move forward, trying to understand what the future looks like with whether there's a USMCA in place or not. We happen to have our bin manufacturing equipment still available to us packaged up in Grand Island. And we are looking at all available options to ensure that we can be competitive on a North American basis in the storage business going forward. So I'll leave it at that, Steve. We're definitely considering what our options are going forward under a regime where it makes it difficult to participate in the U.S. business from our Canadian facility. Steven Hansen: Okay. Helpful. And just maybe one last one on a more positive note. I just wanted to go back to perhaps the green shoots in the portable business in the U.S. That was actually a pleasant surprise. And I know you've spoken to the order book improving. But I mean, are you seeing broad-based support there, Paul? I mean, how do you think about pricing? What do you think is driving that sort of earlier stage sales cycle? I'm just trying to get a sense for how real this improvement is out there because it has been the bigger drag for the past, frankly, two years. Paul Brisebois: Yes. Yes, absolutely. Good point. So 2024 was a challenging year for the U.S. portable business. We put in -- we had a lot of inventory, retail inventory. We put in programs -- rebate programs to support our dealers to help move product to the farm. And those rebate programs essentially went on for 14 months to really focus on it. We had all of our sales team focused on inventory counts to understand, and we typically do historical inventory counts of our retail network. So watching that closely was really critical for us. And what we saw was our inventory was coming down. And we saw in Q4 a good reduction of that retail inventory in the U.S. in particular, which facilitated better early order program. And I think the dealers themselves were pleasantly surprised with regards to the sales that they achieved in Q4, and that's why we saw a better early order program. And we just -- we had some market share information results that just came through. And we've been successful in terms of maintaining our share where we have large share and successful in gaining share where we had lower share of the business. So it's been positive the work that the team has done in a difficult market. And so just to wrap that up, U.S., it's coming around. Canada, obviously, was a big challenge, and that's why Q4 was impacted. And we see that we'll probably be in a position in Q4 of '26 where Canada feels the same thing in terms of coming around. And I guess, -- the goal and what we're working towards is that Q4 '26 shows marked improvement going forward into 2027. Operator: We have a follow-up from Michael Tupholme with TD Cowen. Michael Tupholme: Yes. So maybe just building on that last answer you provided, Paul. It does sound like you're sort of encouraged about some of the things you're seeing within Farm. I guess on a full year basis, anything further you can help us with in terms of how to think about from a top line perspective, progression of Farm and where that puts you at the end of the year on a year-over-year basis? And similarly, on the commercial side, just there seems to be sort of more moving pieces there and difficult comps. But you still do -- notwithstanding the fact that the order book is down, there's still some -- presumably some orders that come in or some activity, pardon me, on the commercial that flows in, in the first half of the year. So just anything on the top line you can help us with on the two segments beyond what you've already kind of provided would be helpful, if possible. That's the first one. I have one other one after that. Paul Brisebois: Yes. Difficult to kind of give any concrete numbers on that. So -- and not comfortable at this time really giving any guidance as it relates to top line or bottom line in terms of margin that we're doing. Our team really right now is just focused on simplifying our business, focusing on our customers, paying down debt, doing everything that we need to do to drive the business forward and want our team just to continue to focus on it. So I don't want to speculate on what the numbers could look like. Michael Tupholme: Okay. Understood. The second follow-up is just around the cost savings you expect, just to be clear. So the $20 million of annualized savings, does that kick in at that level of annualized savings beginning in the third quarter, so sort of $5 million a quarter starting in Q3. Is that how to think about this? Paul Brisebois: I think that would be a decent way to think about it. We're going to try and do things faster than that. But to be cautious on it, I would say, managing that through Q3 going forward is a good way to look at it. Michael Tupholme: Okay. And then -- sorry, just as an extension of that, like with everything you're doing now, if you go back to some of the past commentary around margins, I mean, this year, there was an expectation of some -- before today, there was some expectation even then about some things that would weigh on the margins a little bit, particularly the mix between farm and commercial. But I guess there have been some commentary about longer term, like an 18% to 20% EBITDA margin within the business. Does everything you're doing today allow you to get back to that plus something even higher? Or is the effort here just to kind of get back to even that kind of a level? Just trying to understand kind of the longer term and what all of these initiatives are likely to do as far as profitability. Paul Brisebois: Yes. It's a good question. We want to get back to historical margins. I would say getting to 20% is probably pretty difficult at this time. The changes that we're making are absolutely focused on improving our margin. But at this time, I think it's difficult to really say how long it will take to get back to higher teens. We'll see that over time in terms of the progression with regards to the strategy by simplifying our business, taking cost out of the business, getting closer to the customer. If that turns into driving more sales in a more efficient way, then obviously, we'll see some margin improvement. But right now, we're just targeting to get back to historical margins as the first point versus stretching ourselves in that 18% to 20% range. Operator: We have a follow-up from Tim Monachello with ATB Capital Markets. Tim Monachello: I've got a few, but they're quick. On the ERP cost savings for $20 million, how does that relate to -- I think you're looking for around $15 million per year of costs in '26, '27 related to that implementation, so roughly $30 million. So is that delta, the $10 million, I guess, cost that will be incurred to in-house some of the capabilities that you're thinking about that? James Rudyk: Yes. Thanks, Tim, for that clarifying thing. Yes. No, there's just some costs that we've incurred to date through the year that obviously need to be paid. And then there's just some wind-down costs. Tim Monachello: Okay. And that ERP, like anything that has been implemented to date that is useful? Or is everything getting rolled back and you're basically have to start from scratch on it? James Rudyk: We've learned a lot. I mean we have a big team that has been involved. We've learned a lot about processes that we need to follow, approaches that we need to follow. So a lot of knowledge that we benefited from that will be retained as we move forward. Tim Monachello: Okay. Within the restructuring initiatives, I don't see anything really that relates to capital spending. So can you talk a little bit about how you're thinking about CapEx this year and maybe next, where we should be thinking about that? Anywhere you can say about CapEx? Paul Brisebois: Yes, you bet. So obviously, maintenance CapEx is a priority across all of our facilities. And then as it relates to incremental CapEx beyond maintenance, we'll be looking at that through an ROIC lens and making decisions that make sense and drive our return on invested capital as much as possible. So we'll be keeping a close eye on it, and it will need to hit defined metrics to be able to get approval moving forward. Tim Monachello: Do you want to provide any guidance on what should be a range where we think CapEx will come in '26? James Rudyk: No. So still early days. I think if you look back at what we spend from a maintenance perspective and intangibles, those will be similar. And then from what we've categorized as a growth bucket, those will be limited. And as Paul mentioned, we're very aligned in terms of prioritizing what we spend on, and we'll only move forward on anything if the return on invested capital is greater than our WACC. Tim Monachello: Okay. And then the onetime costs of $20 million in H1 '26, should we expect that to be spread evenly in Q1, Q2? Or is that going to be front-end loaded? James Rudyk: Probably close. Tim Monachello: Okay. And then how are you guys thinking about the longer-term leverage target now? I think 2.5x is the old target. There are a lot of things in earnings we've seen lately, so it could be confusing. Is that still the range you're thinking of? Or are you thinking lower now? James Rudyk: No, still working to get to the end of that 2.5x as quickly as possible, a little detour in the last year. But as you can tell by the initiatives we put in place, massive focus on getting that down as quickly as possible. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Paul Brisebois for any closing remarks. Paul Brisebois: Thanks, Chloe. I appreciate it. Everyone, I just want to comment on -- obviously, a lot of change. Q4 was a difficult quarter. Q1, we believe, will be a difficult quarter as well. And as we do this change, I want to reiterate our focus areas. It is around simplifying the business, making our business more streamlined, empowering our employees across AGI to do good work and feel like they've been successful every day in their role when they come to work. And that's what the whole goal of our restructuring is around simplification. And that's to get closer to the customer. And so that's driving our customer focus. And the goal is that by the end of 2026, our customers tell us that we've substantially improved from our quote to delivery execution and improved our quality going forward. And if we accomplish that where we have employees that are engaged closer to our customers, customers that feel like we've been successful, then we'll achieve our goal with regards to cash flow and debt reduction. And the goal there would be that shareholders really see stabilized margin performance going forward, improved cash flow and tangible progress on our debt reduction. So I just want to be clear with those that are listening or that will listen later. That is our goal, and that's what the executive team here at AGI, eight of us are focused on as well as the broader employee group across AGI. So I want to thank all of our employees that are going through the change and looking forward to working with them in terms of achieving the goals that we've set out. Thank you, everyone. Operator: This brings a close to today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.
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