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Operator: Greetings, and welcome to Torrid Holdings Inc.'s fourth quarter fiscal 2025 earnings conference call. At this time, all participants are in a listen-only mode. Please note this conference is being recorded. I will now turn the conference over to Chinwe Abaelu. Thank you. You may begin. Chinwe Abaelu: Good afternoon, everyone. Thank you for joining Torrid Holdings Inc.'s call today to discuss our financial results for the fourth quarter and full year of fiscal 2025, which we released this afternoon and can be found on our website at investors.torrid.com. With me today on the call are Lisa Harper, Chief Executive Officer, and Paula Dempsey, Chief Financial Officer. Ashlee Wheeler, Chief Strategy and Planning Officer, is also present and will be participating in the Q&A session. Before we get started, I would like to remind you of the company's safe harbor language, which I am sure you are familiar with. Management may make forward-looking statements, including guidance and underlying assumptions. Forward-looking statements may include, but are not limited to, statements containing the words expect, believe, plan, anticipate, will, may, should, estimate, and other words and terms of similar meaning. All forward-looking statements are based on current expectations and assumptions as of today, March 19, 2026. These statements are subject to risks and uncertainties that could cause actual results to differ materially. For further discussion of risks related to our business, see our filings with the SEC. This call will contain non-GAAP financial measures, such as adjusted EBITDA. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website. I will now turn the call over to Lisa Harper. Lisa Harper: Thank you, Chinwe, and hello, everyone. Thank you for joining us today. On today's call, I will review our fourth quarter and full-year 2025 performance and discuss the substantial progress we have made over the past two years. We have optimized our channel, product, and pricing platforms. With these foundational elements now in place, I will outline our primary focus for 2026, which is accelerating customer file growth through retention, reactivation, and acquisition. Finally, I will turn the call over to Paula to discuss the financials in detail and our outlook for the year ahead. I am pleased to report that for 2025, we reached the top end of our net sales outlook, delivering $1,000,000,000, and exceeded the high end of the adjusted EBITDA range, achieving $63,600,000. For Q4, we registered net sales of $236,200,000 and adjusted EBITDA of $5,100,000. These results reflect early progress in our strategic initiatives. Throughout the year, we made deliberate decisions to strengthen our foundation, optimizing our store footprint, launching our sub-brand strategy, pausing and relaunching our footwear category, and, later in the year, sharpening our product assortment around core franchises, fabrications, and silhouettes. The trends we experienced in Q4 give us confidence we are moving in the right direction and position us well for comparable sales growth in 2026. From a category perspective, we saw strength in dresses, demonstrating growth for four consecutive quarters. We also saw acceleration in sub-brands, and a turnaround in knit tops, which comped positively for the latter half of the fourth quarter. Jeans and activewear both gained momentum and are poised for growth in 2026. Additionally, we reintroduced footwear with great success, having paused the category to resource it in the elevated tariff environment. We sold out of the limited assortment in record time, and look forward to being back in the footwear business at scale and more profitably in 2026. As we close 2025 and enter 2026, we have strategically rightsized our channels, reinvigorated our product, and optimized our pricing platforms. With these foundational elements now in place, our primary focus for 2026 is accelerating customer file growth through targeted, segmented marketing to acquire new customers, reactivate lapsed ones, and increase purchase frequency among our most loyal customers. This is our number one priority, and we are deploying resources, talent, and capital accordingly. I will expand on this initiative momentarily, but first, an update on our channel optimization initiative. As we have discussed on prior calls, we identified up to 180 structurally unproductive stores for closure. These locations averaged roughly $350,000 in annual sales. We completed 85% of the closures by Q4, or 151 stores in 2025, and we have closed an additional 11 thus far in Q1. We are on track to finalize the full optimization plan by the first half of the year. Essentially, our channel platform is now optimized, supported by a more productive and strategically aligned store fleet. Our retention metrics validate that our strategy is working. Customer retention from last year's store closures is meeting and, in many cases, exceeding our model. This demonstrates the strength of our omnichannel ecosystem. We are also seeing customers shift to nearby stores in markets impacted by closures, driving increased traffic and transactions, and resulting in dramatically improved four-wall profitability in our remaining store fleet. Even more encouraging, our 2025 closure retention rates are outperforming 2024 results, with more customers shifting to our digital platform. Our enhanced retention strategies, including targeted multi-touch communications, are seamlessly migrating customers to nearby stores and online channels. What this tells us is simple. Our most loyal customers are truly channel agnostic. The seamless and frictionless omnichannel platform we have built, combined with our commitment to superior and consistent fit, allows our customers to remain highly engaged with confidence in their channel of preference. Our product platform is built and now scaling effectively. We entered 2026 with five sub-brands live and, critically, 80% of our assortment planning and buying decisions are now data-informed, covering both product selection and seasonality. 2025 was our learning year. We launched all five sub-brands and received real customer feedback across the board. We stayed agile, reading demand signals, adjusting buys midstream, chasing winners, and refining our assortment mix. Those learnings are now embedded in our 2026 plans. But we have done more than just learn. As we shared on our Q3 call, we fundamentally strengthened our merchandising foundation. We have implemented stronger guardrails in our merchandising process and built out a more robust assortment planning function, both of which I am directly overseeing. This represents a much more integrated way of working. Design, merchandising, planning, and product development now operate as a cohesive unit. The new guardrails keep us anchored in improving categories while still allowing us to expand strategically and maximize opportunity. It is a disciplined approach that balances innovation with reliability. Our sub-brands are driving meaningful growth. They generated over $70,000,000 in sales in 2025, and we are projecting roughly 60% growth in 2026 to approximately $110,000,000, growing from approximately 7% of total net sales in 2025 to 12% in 2026. Importantly, this growth is margin accretive. Sub-brands carry higher product margins than our core assortments because they are bought with scarcity and achieve higher full-price sell-through. But the benefits extend beyond margin. Our sub-brands are customer acquisition engines, attracting new shoppers, reactivating lapsed customers, and driving higher spend among our most valuable customers. These lifestyle concepts deliver the newness and excitement that broadens our appeal while deepening engagement with our existing base. Each brand, with their distinct positioning, inspired aesthetic, and lifestyle appeal, allows for broad reach and market share expansion. We are exploring multiple paths forward, not just through our direct channels, but also through pop-up experiences and expanded in-store assortments. We will be testing these concepts throughout the year to determine the best approach for scaling these sub-brands, representing a disciplined approach to their growth. As I mentioned, our intimate apparel business showed strong momentum in Q4. We are building on that strength with the relaunch of Curve, our intimate apparel brand, this February, and we will see the launch of two new bras in 2026. Bras are a pillar of our product portfolio that drives strong customer acquisition, reactivation, and long-term loyalty. Finally, as we discussed on our Q3 call, we refocused the foundation of our product assortment on core franchises, fabrications, and silhouettes that resonate with our customers. We had previously stepped away from essential fabrications like SuperSoft, a key favorite among our core customer base. Recognizing this gap, we began reintroducing these franchises in Q4 and immediately saw positive sales momentum and a turnaround in our tops business. Building on this success, we have introduced the knit dressing capsule collection built around that franchise, and we will expand in a meaningful way in 2026. In footwear, we selectively reintroduced a curated assortment as I mentioned, and the results are encouraging. We fundamentally restructured our sourcing strategy and assortment mix. This more disciplined approach delivers a shoe offering that drives stronger attachment rates and improved profitability. This will allow us to recapture both the direct revenue and attachment-driven sales we lost during the absence of footwear. The temporary pause of the footwear business had a 260-basis-point negative comp impact to the full year in 2025 and a 460-basis-point negative impact to the fourth quarter. Looking ahead, we will face a first-half headwind to comp and then a positive impact in the second half of the year. Now for an update on our opening price point strategy, which is exceeding our expectations. Developed in close partnership across merchandising, design, planning, and product development teams, this strategy is anchored in customer insight. We are successfully balancing customer demand for accessible price points with two nonnegotiables: margin discipline and product quality. Maintaining our quality standards while delivering accessible value remains imperative. OPP now represents approximately 30% of our total assortment and nearly 40% in stores, represented across jeans, leggings, non-denim bottoms, and anchored in tops and graphic tees. This collection of most-loved items is offered at an approachable value and provides everyday price parity across our e-commerce and brick-and-mortar channels. We are seeing the most-loved opening price point collection drive conversion and UPT in both channels, and we believe that this will be a critical component of customer file growth, driving reactivation, acquisition, and frequency. Built on our disciplined product development platform, this assortment is cost-engineered in support of opening price point value and leverages the strength of our sourcing. We have platformed fabric to enable speed. The combination of these efforts and the unit acceleration we see in the early stages of this initiative point to a highly accretive strategy with even greater runway ahead. As I have mentioned, our primary focus in 2026 is growing our customer file. We are implementing several targeted strategies to accomplish this critical goal. First, we are doubling down on reactivation of lapsed customers, leveraging our wealth of customer data to reintroduce customers to the expansive assortment offering of core, opening price points, and sub-brands. Second, and this goes hand in hand with reactivation, we are deeply committed to more informed customer segmentation and personalization across our owned and organic marketing channels. Early results are promising in our ability to drive incremental reactivation of lapsed customers and frequency among our most active. This includes greater email segmentation, personalized content and message strategies, testing initiatives, and the reintroduction of direct mail to augment owned marketing channels. Our intent is to work methodically through the full marketing funnel, continuing to allocate resources and investments to channels and tactics that drive positive ROAS and increase customer lifetime value. Third, we are strengthening the marketing and analytic infrastructure to support these efforts. We have redeployed senior marketing and analytical talent, oriented around individual marketing channels, messaging, and content strategies, in support of a more comprehensive and effective commercial plan that is laser-focused on customer file growth. And fourth, we are continuing to evolve and refine our loyalty program, of which over 95% of our active customers are engaged, with a focus on strengthening the value proposition, ensuring the program remains a meaningful reason for customer engagement with our brand, and most importantly, driving long-term retention and increased customer lifetime value. Our mission is clear: to leverage the foundational work we have completed across our channel, product, and pricing platforms to acquire new customers, reactivate lapsed customers, and increase purchase frequency among our most loyal shoppers. This is our number one priority, and we are deploying resources, talent, and capital accordingly. We know the most efficient path to customer file growth is through increased retention efforts and reactivation of our lapsed customer population, followed by new customer acquisition. We have over 7,000,000 lapsed customers who are reachable through owned marketing channels. The cost of reactivating these customers through segmentation and personalized communication costs roughly one-third of a new customer acquired through paid digital media channels. Leaning into this pool, leveraging in-house owned and organic marketing channels in a more strategic way, supports a marketing spend outlook consistent with prior years, in the 5% to 5.5% of net sales range. We have completed the substantial two-year transformation, strategically optimizing our channel, product, and pricing. Q4 results reflect early progress on our strategic initiatives, including the store footprint optimization, the sub-brand expansion, the footwear reintroduction, and a product assortment anchored in core franchises and opening price points. The foundational platform is now built. We are entering a phase of maximization and scale. I would like to take this opportunity to speak to the entire organization and thank them for their extraordinary dedication and resilience throughout the year and this transformational journey. Your hard work, adaptability, and commitment to excellence have been the driving force behind our progress. The operational improvements we have achieved would not have been possible without your daily efforts and unwavering focus on execution. I will now turn the call over to Paula Dempsey. Paula Dempsey: Thank you, Lisa. Good afternoon, everyone, and thank you for joining us today. I will begin with a review of our full-year 2025 results and our fourth quarter financial performance, then walk through the strategic progress we have made on our multiyear transformation and close with our outlook for fiscal 2026. Fiscal 2025 was a year of intentional structural change. We delivered full-year sales of $1,000,000,000 in line with our guidance and an adjusted EBITDA of $63,600,000, slightly ahead of expectations. Most importantly, we achieved this while simultaneously executing a significant transformation of our physical footprint, proactively managing an estimated $50,000,000 in gross tariff headwinds, and maintaining the inventory discipline that leaves us entering fiscal 2026 in a balanced inventory position. The headline result is this: we enter 2026 with a fundamentally stronger operating structure. Turning to the fourth quarter, net sales were $236,200,000 compared to $275,600,000 in the prior year. Comparable sales declined 10%, which includes 460 basis points of negative comp impact due to the temporary pause of the shoe business. Gross profit was $70,900,000 versus $92,600,000 last year, and gross margin was 30% compared to 33.6% in the prior year, reflecting promotional activities, product mix, and deleverage on a reduced sales base. SG&A expenses declined by $11,400,000 to $62,400,000 compared to $73,800,000 a year ago. As a percentage of net sales, SG&A leveraged 40 basis points to 26.4%. This is a meaningful proof point. Our cost structure is coming down drastically, supporting our EBITDA margin expansion, which is precisely the outcome our store optimization program was designed to produce. We expect this leverage to continue and accelerate through fiscal 2026 as the full benefit of our rationalized footprint flows through. Marketing investment decreased by $1,900,000 to $13,500,000. Net loss for the quarter was $8,100,000, or $0.08 per share, compared to a net loss of $3,000,000, or $0.03 per share, last year. Adjusted EBITDA was $5,200,000, a 2.2% margin, versus $16,700,000 and a 6.1% margin a year ago. We ended the quarter with $200,000,000 in cash and cash equivalents and $31,000,000 drawn on our revolving credit facility. Total liquidity at the end of the year, including available borrowing capacity under our revolving credit agreement, was $84,900,000, providing adequate liquidity to execute our plan. Inventory totaled $136,500,000, down 8%, reflecting both tighter receipt management and the intentional reduction of our store base. Aligned with our store optimization program, during the fourth quarter we closed 77 stores, bringing our full-year total to 151 closures for fiscal 2025. We expect to close up to an additional 30 stores by the end of the first half of fiscal 2026, at which point the program will be substantially complete. Customer retention rates from closed locations have performed consistently with historical levels, validating both the network strategy and the underlying brand health. Our customers are finding us where we remain open and online. We minimized exit costs by structuring closures around natural lease expirations wherever possible, significantly reducing the cash cost of the program and preserving liquidity. Most importantly, the financial impact is substantial and compounding. For fiscal 2025, we realized approximately $18,500,000 in lower operating expenses from this year's 151 closures, plus the 35 stores closed in the prior year. As we move into fiscal 2026 with a fully rationalized footprint, we expect to capture an additional $40,000,000 in expense savings. Now turning to our outlook. As Lisa mentioned, we entered 2026 in a much stronger position. We have strategically optimized our channels, products, and pricing platform. For the full year, we expect net sales of $940,000,000 to $960,000,000 and adjusted EBITDA of $65,000,000 to $75,000,000, representing margin expansion of up to 140 basis points versus fiscal 2025. Capital expenditures are expected in the range of $8,000,000 to $10,000,000, reflecting continued reinvestment discipline. For the first quarter, we expect sales of $236,000,000 to $244,000,000 and adjusted EBITDA of $14,000,000 to $18,000,000. The EBITDA expansion reflects the full-year benefit of our optimized cost structure and the compounding effect of those operating savings flowing through the P&L. It is worth providing some context on the bridge from our $40,000,000 in expected cost savings to our EBITDA guidance range calling for midpoint growth of 10% to $70,000,000. I want to be transparent about what is moving in both directions. On the offset side, the lower sales base naturally reduces gross margin dollars, which absorbs a portion of the cost savings. We are also resetting our incentive compensation program in fiscal 2026, which represents a meaningful year-over-year headwind as we return to a more normalized bonus structure. Taken together, these offsets explain the gap between the gross cost savings and the net EBITDA outcome. What the guidance reflects is a business where the structural cost work is fully embedded and the underlying earnings power is growing, even after absorbing those headwinds. In closing, the store optimization program is largely complete. The cost structure has been reset, inventory is aligned to our full-year plan, and this team demonstrated it can execute through complexity, tariff pressures, demand volatility, and a major operational transformation. Our path forward centers on growing our customer file and expanding EBITDA margin. We will now open for questions. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, you may press star and the number 2. If you would like to remove your question from the queue, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question comes from Janine Hoffman Stichter with BTIG. You may proceed. Janine Hoffman Stichter: Hi. Congrats on the progress. Was hoping to hear a little bit more about the learnings from the first year of sub-brands at 12% of sales next year. I think at one point, you had talked about it being 25% to 30% of the assortment. Is that still the right number? Just trying to reconcile those two figures. Lisa Harper: Hi, Janine. We are still very happy with the progress in that business. I think that we have made a decision to be more conservative about the growth cycle of that business. We are still happy the margin is a benefit overall. Some of the brands are incredibly strong. I would say out of the five brands, I would highlight Festi, Nightfall, and Retro as being very consistent performers, with Festi particularly being the number one sub-brand and with the largest opportunity for expansion. Belle Isle has a very high level of seasonality, so we are adjusting that, as it sells better in the first half of the year than the back half of the year. And we are still exploring the opportunity with Lovesick, which is the younger-oriented brand. We are still feeling very bullish and have seen very positive momentum in that business. We think that it will expand a little bit more in the front half than the back half, really because we will be lapping in the back half a full presentation of all brands, and we launched them sequentially in the first half of last year. I think I had said earlier in the mid-twenties as a mix. I think we will be more in the mid-teens as we play. I think we talked about going up to about $110,000,000 estimated opportunity this year. We are still very happy with how they are performing, and we will be testing some additional store-in-store opportunities as well as potential pop-ups later this year for sub-brands. As we see the stores performing better with the store optimization program, it gives us some room to add some of those businesses to stores, very judiciously, but to expand that opportunity. Janine Hoffman Stichter: Okay, great. And then maybe just on the retention and lapsed customer reactivation, what have you learned about the reasons why some of these customers have not stayed with the brand? And maybe just elaborate more on the communications that you are going forth with now to reactivate those lapsed customers. Thank you. Ashlee Wheeler: Hi, Janine. We have heard time and time again from lapsed customers that one of the primary reasons for spending less is economic pressure and price, which we have addressed through opening price point. In the prepared remarks, Lisa expanded on opening price point as an initiative that now represents about 30% of the business and will expand to be closer to 40%. We are seeing incredible response to that. We are seeing it as a vehicle to reactivate customers through a more approachable value pricing as well as acquire new customers that way. We are seeing it drive frequency among existing customers as well. Beyond that, we recognize with the 7,000,000 customers in our lapsed file who are marketable through our owned channels, we have enormous opportunity through more advanced targeted segmentation and personalization of messaging, using product affinity as a starting point as well as other demographic and price preference signals among that population to get them back into the brand. Lisa Harper: Thank you. Operator: Our next question comes from the line of Dana Telsey with Telsey Group. You may proceed with your question. Dana Telsey: Hi. Good afternoon, everyone. Can you talk a little bit about the cadence that you saw of sales during the holiday season, quarter-to-date what it looks like, any thoughts on how the shaping of this year is going with tariff expenses, what you have built into the model on margins with the puts and takes, and lastly, the return of footwear—how you expect that to come back, impact on margins? And are there other categories, Lisa, that you are looking to that could be sales drivers going forward? Thank you. Lisa Harper: I am going to do this backwards, and I am going to take the category conversation, and then I will talk about tariffs and categories, and then I will let Ashlee go through the rhythm of the business. We do have, obviously, tariff pressure in the first quarter, as everyone does, and we think we have managed this well, even with other types of supply chain challenges. We have very, very good relationships with our vendors, and they have been great partners with us, and so we have been able to manage that pretty consistently. From a category basis, the shoes are—just to remind you, when the tariffs came, we were running a pretty much, I would say, even EBITDA business in shoes from that specific shoe business, but we had a very high level of attachment to it. So we were keen on reengineering it to make sense both from a margin perspective as well as the customer acquisition modality and attachment to other types of products. We tested the new vendor structure and the new look and feel and quality of the product in November, and it was a resounding success. We are very happy with the results. We have some inventory coming in in the first half of the year, but we still have substantive headwinds, I would say, in the first quarter and second quarter related to footwear. We will be back in stock in the June–July time period, and we expect to have a benefit in that business in the back half. The way that we have tested it and the way that we are rolling it out allows us to expand margin in footwear as well as recapture the associated sales from customers who come to the brand through footwear. Other categories that we see expanding, outside of the OPP—which actually touches many of the categories of the business—I think denim, non-denim, tops, dresses, and sweaters in the back half. The other categories would be active. We have a fleece program rolling out that we think will be very advantageous, and then the expansion of OPP in some of these broader categories as we move forward. Those would be the bulk of the categories for expansion. Ashlee will go through the business rhythm. Ashlee Wheeler: Sure. Hi, Dana. We are pleased with fourth quarter, as communicated. Holiday performed as expected. We really saw improvement in the business in January. If you recall, we talked in our third-quarter call about chasing goods into core franchises and core fabrications, particularly in our tops business, and those goods arrived in late December or January selling, and we immediately saw the business turn in those categories. Our knit tops business, as an example, which is the second-largest department in our portfolio, started to comp positive as a function of those chase receipts. We continue to see really positive momentum in the categories that we have chased into, further supported by opening price point. As for the shape of 2026, footwear, as Lisa communicated, will continue to be a headwind in the front half of the year. The largest headwind will be felt in the first quarter, abates a little bit in the second quarter, and then will provide a benefit on a year-over-year basis starting in the third quarter when we launch the boot business in a fulsome way. Additionally, in the back half of the year, we will see the launch of two bras that will support expansion in the Curve business as well as some additional fleece programs and knit dressing capsules. So there is more to come in the back half of the year. Lisa Harper: Thank you. Operator: Our next question comes from the line of Brooke Roach with Goldman Sachs. You may proceed. Brooke Roach: Good afternoon, and thank you for taking our question. Lisa, I was hoping we could dive a little bit deeper into your marketing plans for the year, specifically around pricing, promo, and loyalty. What is changing in the loyalty program as you look to reactivate lapsed customers and increase dollars per spend on active customers today? And how does that tie into your plans for Torrid Cash and marketing? Thank you. Lisa Harper: Great. We have talked a lot about price, beyond the opening price point. As we survey our customers, more than half of our customers articulate that one of their reasons for lapsing would be their personal financial situation and that they would like to see more price parity in terms of both channel and opening price point in our core businesses. We have talked a lot about that, and that is moving forward. I would say the biggest shift that we will see this year in promotion is that we are putting less pressure on Torrid Cash redemption. That has been dwindling over time, and we have reset our expectations for the redemption in those categories. We will be able to pull back on our reliance on that piece. I think the other piece for us for the customers is price-point messaging versus percentage-off messaging, and I think all of those things are working well. We also have a lot more multiples in our promos right now—multiples in bralettes and knits and woven tops—those types of things that have tested very well for us and are exceeding our expectations. So promos will shift out of much reliance on Torrid Cash, a bit more into everyday opening price point opportunities and price parity between channels, which we also think is important. Loyalty has been pretty consistent for us. What we are looking to build in the loyalty piece is a bit more frequency. Retention is not as much of an issue there as we think we have opportunity in driving a bit more frequency among those loyalty customers with better segmentation. We just did a special sale for them a couple of weeks ago that we delivered in a very different way than we normally deliver. It was very well received, and the conversion on that was quite good. We are testing different tactics to highlight their loyalty levels and giving them more attention. We have also reinstituted the Icon level of our loyalty program, which is the top of those customers, so that we ensure that we continue to get very robust feedback from the loyalty customers. Some of the decisions that we have made are very much driven by the feedback that we get from our customers with every level of communication, every touch point that we have. I would say that we feel like there is a grassroots version of marketing that will augment what we do in more of the paid spend, and I will let Ashlee talk a little bit more about that. Ashlee Wheeler: Hi, Brooke. We recognize that we have an enormous amount of opportunity to leverage our owned and organic channels, particularly to reactivate customers but also to drive frequency among our existing loyalty members through really precise targeting and personalized or segmented content and messaging in a way that we have not historically. We have an enormous amount of data on our customers, with over 95% of them participating in our loyalty program. It gives us a great advantage to communicate to them in a more personalized way, and that is going to be one of our key focuses for the year. Additionally, we have reentered direct mail as a modality, an additional touch point. A portion of that will be allocated to loyalty customers or actives as a frequency-driving touch point, and we will really leverage that in a more powerful way toward acquisition and reactivation. Brooke Roach: Great. And then just one follow-up for Paula. As you look on a multiyear basis, do you think that double-digit EBITDA margins are achievable? And if so, how should we be thinking about the core drivers of achieving that recovery in margin rate? Thank you. Paula Dempsey: Hi, Brooke. Yes, I do believe so. Our plan has up to 150 basis points of EBITDA margin increase in fiscal 2026, and that is really through leveraging our SG&A platform. As we progress throughout the year, we are going to see that leverage increase more and more. Even with the Q1 guidance that we have provided, you will see us starting to leverage SG&A, and at the end of the year, you are going to see that gap increase and, therefore, drive that to the bottom-line profitability. So yes, 150 basis points of leverage this year is very much a possibility, and for that to continue to grow in the next few years is probably a good assumption. Brooke Roach: Great. Thanks so much. I will pass it on. Operator: Our next question comes from the line of Corey Tarlowe with Jefferies. You may proceed. Corey Tarlowe: Great, thanks. Lisa, I guess high-level strategic question. 2025 sort of felt like a defensive year, closing stores. What do you think more is left on the defensive side of the equation as opposed to when do you feel like you can really get to playing offense? And is that the way to think about what 2026 should be? And I have a follow-up. Lisa Harper: Hi, Corey. I do think about us pivoting into a more offense-oriented approach. I think what we have done to restructure the channel expense base, to expand product, and now refine—what we are talking about in terms of segmentation and refocus on owned and organic marketing efforts—is a great opportunity for us and should expand the customer file this year. We are also seeing the reinvigoration of the loyalty interest in the business through sub-brands. We are seeing those aspects of the business. I feel great about product. OPP is working very, very well and will expand. Sub-brands are working well and expanding. We have cut a substantive amount of fixed expense from underperforming stores. The stores that are open right now are exceeding our expectations in terms of their performance. We are starting to see that turn and have actually put a little bit more pressure on store sales as we move through the year, which we think is a better mix in terms of the margin opportunity there. My message overall is intended to share that we have accomplished this store closure very effectively and executed that very well. We have integrated and introduced OPP through multiple categories of the business and are pleased with how that is working. Our store profitability is improving. We are bringing back footwear. We are expanding other categories of the business. We do feel like we are in the position to start reaping the benefits of this as we move through the year. Corey Tarlowe: Got it. That is helpful. And then just as a follow-up, how are you thinking about pricing and promotions for 2026? Lisa Harper: One of the things that helps us with OPP is we actually generate a similar out-the-door price point as well as an enhanced margin, as we are cost-engineering these products due to volume opportunities. As I mentioned, Torrid Cash has less pressure on it this year, as we are moving into more aligned, integrated channel promotions that are more price-pointed. The last piece is targeted promotions throughout segmentation efforts that we think, early on, are showing nice results. So a much more targeted opportunity, using those promotions to reactivate and build frequency of our customers, and using the OPP product on one end and the sub-brands on the other to really engage a broad swath of our customers and build the basket. We are seeing early results in segmentation to be positive, early results in segmentation in the loyalty program to be positive. Being more personalized and surgical about those messages, both from a product and promotional basis, is what the business needs, and we are prepared to do that this year. Operator: Our next question comes from Dylan Carden with William Blair. You may proceed with your question. Dylan Carden: Hi. Can you guys hear me? Paula Dempsey: Yes. Dylan Carden: Awesome. I just want to ask a general question about your consumer. How are they behaving? How have they changed over the last six months? Are you expecting anything from refunds? Any changes in the performance of different demographics? Ashlee Wheeler: Performance within the customer file from a demographic basis has been very consistent. We have seen consumer behavior, or our customers' behavior, be very consistent as well. As Lisa talked about earlier, when we survey customers, the most frequent response we get is related to price or economic pressures that she is feeling, and we have been able to answer that with opening price point in a very effective way. Dylan Carden: Gotcha. So on the refunds, do you expect that to lift any of your OPP sales or anything on that front that you are embedding in the outlook? Ashlee Wheeler: We are encouraged with the trends of the business we are seeing now. Whether or not that is related to tax refunds, I cannot say for certain, but we are encouraged by the trends that we are seeing in the business so far this quarter. Lisa Harper: I would say we do not have anything outsized embedded into the guidance related to accelerated tax refunds. Operator: There are no further questions at this time, which now concludes our question-and-answer session. I would like to turn the call back over to Lisa for closing comments. Lisa Harper: Thank you. Thanks, everyone, for joining us today. We look forward to sharing the progress in the business as we move forward and we release Q1. Thank you. Operator: Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines, and have a wonderful day.
Operator: Good morning, everyone, and welcome to the Solo Brands, Inc. Fourth Quarter and Full Year 2025 Financial Results Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I would like to turn the floor over to Mark Anderson, Senior Director, Treasury and Investor Relations. Please go ahead. Mark Anderson: Thank you, and good morning, everyone. We appreciate you joining us for the Solo Brands, Inc. conference call to review the 2025 fourth quarter and full year results. Joining me on the call today are the company's President and Chief Executive Officer, John Larson, and Chief Financial Officer, Laura Coffey. This call is being webcast and can be accessed through the Investors portion of our website at investors.solobrands.com. Today's conference call will be recorded. Please be advised that any time-sensitive information may no longer be accurate as of any replay or transcript reading date. I would also like to remind you that the statements in today's discussion that are not historical facts, including statements about future financial and operating performance, liquidity and cash flows, covenant compliance, and strategic transformation goals, are forward-looking statements and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, by their nature, are uncertain and outside of the company's control. Actual results may differ materially from those expressed or implied. Please refer to today's earnings press release for our disclosures on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Solo Brands, Inc. assumes no obligation to publicly update or revise any forward-looking statements. Management will refer to non-GAAP measures, and reconciliations to the nearest GAAP measures are included at the end of our earnings release. We expect to file our Form 10-K in the coming days, which will include additional details on our financial results. Finally, the earnings release has been furnished to the SEC on Form 8-K. Now I would like to turn the call over to the company's CEO, John Larson. John Larson: Thank you, Mark, and good morning, everyone. Thank you for joining us today and for your continued interest in Solo Brands, Inc. Laura and I will begin by reviewing progress on the 2025 initiatives and provide some initial commentary on 2026 before opening the call to analyst questions. Since stepping into the CEO role in 2025, first on an interim basis in February and permanently in June, we have focused on executing a product-led turnaround while building a structurally leaner, profit-driven business. While this transformation is still in its early stages, I am encouraged by our progress simplifying the business, significantly reducing our cost structure, and generating positive operating cash flow for the third consecutive quarter. We believe that 2025 was a revolution and not a renovation—one defined by meaningful enterprise-level actions that position the company for the future. First, we reset the company's capital structure through a comprehensive refinancing. Next, our New York Stock Exchange listing was reinstated and our ticker symbol was changed to SBDS. Building a durable platform for growth required a comprehensive reset of the business at the Solo Stove division. We started by repairing relationships with retail partners by introducing greater discipline in marketing, pricing, and promotional activity, while prioritizing cash flow and bottom-line profitability. At the same time, we accelerated and, in some cases, added new innovative products to Solo Stove's product portfolio. Across Solo Brands, Inc., we consolidated operations during the year and reduced our run-rate SG&A by more than 30%, with further actions planned for 2026. But this is not just a cost exercise. We are reengineering how the company operates, elevating discipline, accountability, and decision-making across critical processes. In parallel work streams, we made strategic investments for the future across all of Solo Brands, Inc., building a strong pipeline of new product launches scheduled in 2025 that continues into 2026. Together, I believe these actions have repositioned the business with greater discipline, clarity, and a clear line of sight to profitable growth. In 2025, we delivered $317 million in net sales, introduced five new products, and maintained stable gross margins. While sales declined in the Solo Stove segment, Chubbies delivered more than 9% year-over-year growth driven by solid online demand and growth in our strategic partnerships. We continue to build and scale omnichannel brands supported by a product pipeline with strong momentum and durability. Reflecting the strength of that innovation, one of our Solo Stoves, the all-new Summit 24 smokeless fire pit, was recently reviewed by Forbes and named its best choice in the category for the year. The recognition underscores our team's dedication to innovative design, functionality, and high quality. If you recall, we reset our balance sheet in early 2025, which drove roughly $75 million of operational cash flows, primarily settling legacy accounts payable balances. Beyond the first quarter, we generated nearly $30 million in operating cash flow, delivering three consecutive quarters of positive cash generation. We believe this is clear evidence of a significantly improved operating model anchored in disciplined cost management and enhanced working capital management. We intentionally realigned pricing and promotional activity of Solo Stove to reinforce pricing integrity and reset retail partnerships. While this significantly impacted near-term sales results, it established a more disciplined foundation to support current and future retail partnerships. We generated roughly $19 million of adjusted EBITDA for the year and delivered a 52% increase in fourth quarter adjusted EBITDA, underscoring the operating leverage in our model as these changes take hold. We are clearly product-led, but disciplined in how we grow. Every launch must be margin accretive, supported by pricing integrity and coordinated promotions with partners to drive long-term value to our customers. In February, we launched a new women's swim brand that we believe is a natural extension of Chubbies. Over the years, many of the women who bought Chubbies for the men in their lives began asking for swimwear built with the same confidence, personality, and attention to fit but explicitly designed for women. Cheeky's is now sold through both direct-to-consumer channels and select retail. We believe it is important to keep the model intentionally simple: a relentless focus on customers and partners, and the launch of products that matter, measured by profitability and cash generation. With that, I will hand it to Laura for the financials. Laura Coffey: Thank you, John, and good morning, everyone. Let me start with a quick discussion of our previously announced corporate transaction. In December, we simplified our organizational structure by eliminating the Up-C structure, generally limiting the cash impact of the tax receivable agreement, and moving to a single class common stock effective 01/01/2026. We believe this streamlined structure is more attractive to investors and enhances good corporate governance. Before turning to the fourth quarter results, I want to provide some additional context for our ongoing transformation. Fiscal 2025 was a year of significant transformation across our organization. Changes to our sales, marketing, and retail partner strategy, as well as meaningful improvement to our internal operation, under John's leadership, significantly improved our ability to generate cash while working to build a sustainable business for the long term. We started by fundamentally reshaping our go-to-market strategy, changing how we reach customers, engage with partners, and generate sales. Given the magnitude of the transformation over the past year, we continue to focus on year-over-year performance while also monitoring sequential progress. With that perspective in mind, let me walk you through our fourth quarter results. Consolidated sales were $94 million, down 34.5% versus the prior-year quarter, driven by declines in direct-to-consumer (DTC) and retail sales channels, particularly within the Solo Stove segment. While fourth quarter sales were seasonally higher than quarter three in absolute dollars, we narrowed the year-over-year percentage decline by nearly 10 percentage points compared to the third quarter, reflecting meaningful progress. Adjusted gross margin for the fourth quarter was 61%, flat versus a year ago and up by 40 basis points from quarter three. With more disciplined, predictable pricing and promotional cadence, we expect further margin stability in 2026. As a result of our transformation initiative, we reduced fourth quarter SG&A expenses by 38.8% year over year, reflecting meaningful structural cost reductions across the organization. We lowered marketing and distribution costs and tightened overall expense. Distribution expenses decreased in line with lower sales volumes while marketing and other operating expenses declined through more disciplined, efficiency-focused spending. Restructuring and impairment charges totaled $75.5 million in the fourth quarter, of which $74.1 million was a non-cash impairment charge. In 2024, restructuring and other one-time charges were $52.5 million, the majority of which represented non-cash impairment charges in that quarter. Net interest expense for the quarter was $7.4 million, reflecting interest paid in kind on the term loan. We utilized the revolver during the fourth quarter and ended the year with no outstanding balance. We reported a net loss of $83.2 million in the fourth quarter, driven primarily by the non-cash impairment charges and restructuring costs previously discussed. Our non-GAAP adjusted net income was $2.3 million for the period, flat compared to a year ago but a significant sequential improvement from an adjusted net loss of $11.9 million in 2025. Adjusted EBITDA for the quarter was positive $9.6 million, or 10.2% of sales. This represented a significant 52% year-over-year improvement and a reversal of the negative EBITDA reported in the third quarter. Importantly, we generated positive operating cash flows for the third consecutive quarter, demonstrating the improved discipline and cash conversion of our operating model. During the last March 2025, we generated positive operating cash flow aggregating $28.6 million. These results are encouraging and reflect the progress in repositioning Solo Brands, Inc. as a structurally leaner, profit-focused organization. Full-year sales were challenged in 2025 due to the transformation initiatives at Solo Stove, resulting in net sales of $167.2 million. In contrast, Chubbies delivered full-year sales of $122.9 million, representing 9.1% growth. We launched five new Solo Stove segment products in 2025, and we are encouraged by online customer engagement through our DTC channel during the fourth quarter holiday selling season. We are continuing to engage with retail partners as they plan their 2026 assortment across Solo Stove, Chubbies, and our water sports brands. On the balance sheet, we ended the year with $20 million in cash and cash equivalents. Through disciplined working capital management and leaner operations, we reduced inventory balances by nearly 25% year over year. This improvement reflects tighter inventory planning, improved supply chain discipline, and our focus on converting earnings into cash. We will continue to monitor cash and inventories closely and are carefully managing all of our working capital. Our debt structure includes a $240 million term loan and a $90 million revolving credit facility, both of which mature in 2028. We ended the year with no borrowings outstanding under the revolver, and our weighted average interest rate for the year was 6.63%. At the end of the year, the term loan had $253.1 million outstanding, with a weighted average interest rate of 8.97% for the year. As of December 31, we are in compliance with all financial covenants and have no significant debt maturity until 2028. This provides both strength and flexibility as we execute the business's strategic transformation. A few other final topics to cover. We continue to closely monitor tariff exposure, including pursuing refund opportunities if and where applicable, while leveraging our diversified sourcing strategy to mitigate risk. Our approach to capital allocation remains disciplined. This year, we expect to invest approximately $34 million in growth capital, primarily focused on new product innovation that supports our long-term strategic priority. These investments support our innovation pipeline across Solo Stove, Chubbies, and water sports, which remain an important driver of future growth. We are also continuing to right-size our structure to align with today's demand environment, with sustained focus on profitability, efficiency, and cash generation. We believe that the ongoing execution of our profit-focused operating model positions us to improve our performance and deliver attractive long-term returns for our shareholders. Finally, as a reminder, the first quarter is our seasonally lightest sales quarter, and retail sell-ins with our partners occur during the quarter with related cash receipts recognized in the second quarter. As a result, we plan to utilize our revolving credit facility during the quarter and expect to repay those borrowings as cash is generated in the following quarters. This concludes my prepared remarks. John? John Larson: Thanks, Laura. In 2025, we set out to fundamentally transform the organization without overpromising, and the progress is tangible. Three consecutive quarters of positive operating cash flow and more than 50% improvement in fourth quarter EBITDA underscore that our actions are having a significant positive impact. Our methods and objectives are simple: stem the sales decline, invest in profitable growth, and convert revenue into earnings and cash more efficiently. Looking ahead to 2026, we have a clear focus on profitability at the channel, market, and product level. We plan to continue to invest in innovation across Solo Stove and Chubbies and have expanded our water sports assortment through our strategic partnership with Costco. In addition, DICK'S Sporting Goods, Scheels, Ace Hardware, and REI remain important strategic retail partners for our brands. We are also pursuing international opportunities where returns justify the investment and will remain disciplined in converting revenue growth into positive earnings and cash. Last week, we launched a significant lineup refresh at Solo Stove featuring a new fire pit series, a new griddle, and more cooler offerings. At Chubbies, we reimagined our iconic men's shorts for our fifteenth anniversary and extended the celebration with the launch of Cheeky's, our new women's swim brand. All of our lifestyle brands are unique, fun, and playful, encouraging consumers to enjoy the outdoors more during leisure time. The team and I are building a strong foundation that positions the company to be structurally leaner and more profitable, driven by disciplined expense management, cash generation, the strength of our brands, and communities. With continued execution, this platform is expected to drive sustainable long-term growth and lasting shareholder value. To close, we encourage investor engagement and look forward to speaking with new and existing investors. We plan to host two days of one-on-one meetings at the upcoming ROTH Conference on the West Coast in March. Please contact our IR team if you would like to meet with us or connect in person at the conference. With that, operator, I would like to open the line for questions. Operator: At this time, we will begin the question-and-answer session. Please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one. Our first question today comes from William Hamilton from Kestrel Partners. Please go ahead with your question. William Hamilton: Good morning, and congrats on the profit improvements. I was wondering if you could give us a sense as to how the categories performed across your different brands in the fourth quarter so we can get a sense as to market share changes for the Solo Brands, Inc. portfolio? John Larson: That is a good question, Will, and good morning. Thank you for taking the time. On the fire pit side, it has been pretty flat in terms of the category itself, but there is a lot of low-end competition. If you look throughout Amazon, there is a tremendous amount of low-end knock-off products that certainly do not meet our quality standard. I would say from a market share standpoint on units, we are certainly down, but at a much higher AOV, so we are performing fairly well there. When you look at Chubbies, it definitely has some market share gains in the areas with some of the new introductions they had on shorts lined last year. Although a small piece of the overall apparel category, there was some market share improvement there. William Hamilton: Okay, thanks. I know you have been focused on new products—maybe you could elaborate a little bit more as to how they performed in the quarter and how that informs your thoughts on 2026, and if you could share what percentage of fourth quarter sales were from these new products, or what would be, in your mind, success in 2026 for the new products in terms of share of revenue? John Larson: Great question. I am assuming you are focused a little bit more on Solo Stove with that, given the number of products we did launch. If you look at our sales in Q4, approximately 25% of the sales were from new products, given the number of products we launched. We did just launch a number of new products last week as well. We completed the full line of the all-new Summit series of fire pits. We added a portable steel fire 22" griddle, as well as adding a smaller cooler. I was just looking through it last night in detail. Over the last four or five days, six of our eight top-selling SKUs are products we have launched since the fourth quarter of last year, so we feel the reception has been fairly strong. The underlying question is the underlying demand on core products that we had, our core fire pits. That is a highly durable, long-lasting product. That is why our customers love it so much. For us to expand sales, we really need to sell accessories related to those products, try to reinvent the category, which we have done with the Summit series, and then those customers that love us so much—really try to move them into the adjacent categories, and that is what we are trying to do with those new products. William Hamilton: Got it. Okay, thank you. Last question just on OpEx. You obviously cut a lot last year. I think you indicated in your remarks you might be cutting more. How much restructuring or cost cutting is left, and could you give us some color on that? John Larson: I think I mentioned that at the end of third quarter as well. As we did see revenue decline in Q3, it became obvious that we need to be a structurally smaller, leaner, profitable company. We are using tools available to us—AI we view as a great tool for building efficiency. We are definitely looking at cost reduction in the coming year. We have not come out with the exact numbers, but structurally we are taking a significant amount out in payroll, just as we did last year. I believe in Q4, payroll was down about 27% year over year, and the rest of the initiatives that we put in are coming in. We will have that full run rate for 2026, but we are leaning down even further. I look at the consumer environment here—it is a little uneven. Customers are selective. Our AOVs are up, so the people who do want to shop are spending more. At the low end of discretionary spending, there are some costs moving forward. We are setting up the company to operate without counting on revenue to go up dramatically to drive our business model—just becoming leaner and really rightsizing the company at the right level. We are still investing in innovation, with new products coming out, and pushing in some new categories as we discussed earlier. William Hamilton: Alright. Thanks. Good luck. John Larson: Thank you, Will. Operator: Next question comes from Mitchell Sacks from Grand Slam. Please go ahead with your question. Mitchell Sacks: Hi. Can you talk a little bit more about the reset that you did in 2025 and what your concerns are for 2026 with all the different things that you have been doing from a cost-cutting and new product stance? John Larson: I am sorry, I did not hear the first part of your question, Mitchell. It kind of cut out. Mitchell Sacks: Yes. So you guys did a pretty good reset of the business in 2025—how you operate the business. Just talk about what your concerns are in 2026, what opportunities you see, and what the risks are. John Larson: Sure. I think there is a little bit of risk with the consumer market. We are not sure exactly what is going to happen with what is going on geopolitically in the world. Definitely, a reset in 2025. As I look at 2026, the challenge facing us is how do we stem the revenue decline in the Stove division and how do we begin to increase. That is why we are aggressively launching significant new products in adjacent categories. The griddles have been really well received. The small griddle is looking like it is very hot out of the chute, so we feel good about that. I think the all-new fire pit line has immediately moved up in our top sellers DTC after launching it just last week. That is the challenge. We are set up to flow through any revenue gains—they will flow right through the bottom line very efficiently and into cash flow because we have reduced our cost structure so dramatically. I look at that as our challenge right there. Thanks. Operator: Ladies and gentlemen, there are no additional questions at this time. I would like to turn the floor back over to John Larson for any closing remarks. John Larson: Thank you for continuing to follow our company, and we look forward to providing our first quarter results and updates on strategic initiatives in a couple of months. Have a great day. Operator: With that, we will be concluding today's conference call and presentation. We thank you for joining. You may now disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to the Taysha Gene Therapies, Inc.'s full-year 2025 financial results conference call. At this time, participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. You would then hear an automated message advising your hand is raised. To withdraw your question, please 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 today, Hayleigh Collins, Senior Director of Corporate Communications and Investor Relations. Please go ahead. Thank you. Good morning, and welcome to Taysha Gene Therapies, Inc.'s full-year 2025 financial results and corporate update conference call. Earlier today, Taysha Gene Therapies, Inc. issued a press release announcing financial results for the full year ended December 31, 2025. Hayleigh Collins: A copy of this press release is available on the company’s website and through our SEC filings. Joining me on today’s call are Sean Nolan, Taysha Gene Therapies, Inc.'s Chief Executive Officer; Sukumar Nagendran, President and Head of R&D; and Kamran Alam, Chief Financial Officer. We will hold a question-and-answer session following our prepared remarks. On today’s call, we will be making forward-looking statements, including statements concerning the potential of TSHA-102, including the reproducibility and durability of any favorable results initially seen in patients dosed to date in clinical trials, including with respect to functional milestones, to positively impact quality of life and alter the course of disease in the patients we seek to treat; our research, development, and regulatory plans for our product candidates, including the timing of initiating additional trials, reporting data from our clinical trials, and making regulatory communications with the FDA on the regulatory pathway for TSHA-102; the potential for the product candidate to receive regulatory approval from the FDA or equivalent foreign regulatory agencies; our ability to realize the benefits of Breakthrough Therapy designation for TSHA-102; our ability to drive long-term value for stockholders; and the market opportunity for our programs. This call may also contain forward-looking statements relating to Taysha Gene Therapies, Inc.'s growth, forecast cash runway and future operating results, discovery and development of product candidates, strategic alliances, and intellectual property, as well as matters that are not historical facts or information. Various risks may cause Taysha Gene Therapies, Inc.'s actual results to differ materially from those stated or implied in such forward-looking statements. For a list and description of the risks and uncertainties that we face, please see the reports we have filed with the SEC, including in our Annual Report on Form 10-K for the full year ended December 31, 2025, that we filed today. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, March 19, 2026. Taysha Gene Therapies, Inc. undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, except as may be required by applicable securities laws. With that, I would now like to turn the call over to our CEO, Sean Nolan. Sean Nolan: Thank you, Hayleigh. On to our full-year 2025 financial results and corporate update conference call. On today’s call, we will begin with a brief update on recent clinical, regulatory, and commercial readiness activities. Then Dr. Sukumar Nagendran, our President and Head of R&D, will provide a clinical update on the TSHA-102 program. Kamran Alam, our Chief Financial Officer, will follow up with a financial update, and I will provide closing remarks and then open the call up for questions. 2025 was a year of significant execution for Taysha Gene Therapies, Inc. We announced compelling REVEAL Phase 1/2 data across pediatric, adolescent, and adult patients with Rett syndrome treated with TSHA-102, received FDA Breakthrough Therapy designation for TSHA-102, and secured written FDA alignment on our REVEAL pivotal and ASPIRE trial designs, paving the way for a potentially streamlined path toward BLA submission. This progress has set the stage for what we expect to be a transformative year ahead for Taysha Gene Therapies, Inc. as we focus on completing the pivotal development of TSHA-102 and bolstering our commercial readiness efforts as we advance towards potential registration. We have maintained ongoing, constructive dialogue with the FDA over the past two years, which has enabled alignment on a pathway that we believe reflects the rigorous, systematic data collection and well-controlled study design and endpoints required by the FDA for a robust, data-driven application. In 2025, we finalized alignment with the FDA on our REVEAL pivotal trial protocol and statistical analysis plan in support of our planned BLA submission, and we were pleased to initiate the pivotal trial in 2025 with the dosing of our first patient. Multiple patients have now been dosed in the trial, with enrollment advancing across multiple sites. We remain on track to complete dosing in 2026. Importantly, both high- and low-dose TSHA-102 continue to be generally well tolerated, with no treatment-related serious adverse events or dose-limiting toxicities observed in the patients treated in both the REVEAL Phase 1/2 and REVEAL pivotal trials as of the March 2026 data cutoff. In addition to initiating our REVEAL pivotal trial, we recently received FDA clearance to initiate the safety-focused ASPIRE trial, following written FDA alignment on the ASPIRE trial design and data for inclusion in our BLA submission to support a broad label for TSHA-102 for patients aged two years and older with Rett syndrome. ASPIRE will enroll three females with Rett syndrome aged two to less than four years, evaluating the safety and preliminary efficacy of a single intrathecal administration of the high dose of TSHA-102, 1e15 total vector genomes scaled to account for the lower brain volume in the two to less than four-year-olds. The written alignment we reached with the FDA outlines that our planned BLA submission will include a minimum of three months of ASPIRE safety data, while the efficacy in the two to less than six-year-old population will be extrapolated from the data collected in the REVEAL pivotal trial to support the broad label. We are on track to complete dosing for ASPIRE in 2026. We believe this recent FDA alignment on ASPIRE, together with the alignment on a six-month interim analysis for the REVEAL pivotal trial, potentially streamlines our path toward BLA submission for TSHA-102. In 2026, we attended a Type C meeting with the FDA and reached written alignment on the CMC requirements for our planned BLA submission. Specifically, we further aligned with FDA on our proposed comparability approach between TSHA-102 material derived from the clinical and final commercial manufacturing processes. The FDA agreed that the approach may support pooling data from the REVEAL Phase 1/2 trials with data from the ongoing REVEAL pivotal trial and the ASPIRE trial for the planned BLA submission. Importantly, we believe this creates flexibility and will further strengthen the overall dataset for the BLA package by including longer-term data and enabling a comprehensive assessment of safety and efficacy data that has been generated across the entire development program. Additionally, the FDA endorsed our proposed process performance qualification, or PPQ, campaign strategy to support process validation for the BLA submission. This included the stability data package, the potency assay strategy, and the execution of BLA-enabling PPQ lots using the commercial manufacturing process, which we expect to initiate in 2026. This feedback aligns with the agency’s January 2026 guidance aimed at increasing flexibility on requirements for cell and gene therapies to advance innovation. With this alignment, we are confident that our CMC activities are on track to support our planned BLA submission in step with the pivotal dataset readout. We truly appreciate the consistent, constructive, and collaborative interaction we have had with the FDA to date and believe our regulatory progress highlights the strength of our data-driven approach and further supports our goal to bring TSHA-102 to patients with Rett syndrome as safely and expeditiously as possible. We will continue to engage with the FDA as we prepare for our planned BLA submission. In addition to our clinical and regulatory progress, we have continued to bolster our commercial readiness activities. As a reminder, Rett syndrome is a devastating, rare, and progressive neurodevelopmental disease with high unmet need and a profound lifelong burden for patients and caregivers. It is well-characterized clinically, defined by impairments across multiple clinical domains, including fine and gross motor function, communication, autonomic function, and seizures. While Rett syndrome is a heterogeneous condition that presents with different levels of clinical severity based on each patient’s distinct genetic background, natural history data show that patients follow a common trajectory regarding the achievement of functional developmental skills, with the likelihood of spontaneous gain or regain of developmental milestones falling to approximately zero after six years of age. The multi-domain impairments result in loss of independence, with most individuals requiring 24/7 care and lifelong support for daily activities, such as eating or sitting up, severely impacting quality of life for patients and caregivers. This burden and the limitations of currently approved therapies, which focus on symptom management and do not address the underlying genetic root cause, have created strong urgency for new treatment options capable of delivering functional improvements. We believe this urgency, combined with the estimated 15,000 to 20,000 patients with Rett syndrome across the U.S., EU, and UK, underscores the substantial market opportunity for TSHA-102. Within the U.S. specifically, patient estimates range from 6,000 to 9,000 patients based on claims data and epidemiology data. Because Rett syndrome is a neurodevelopmental condition, and based on the Phase 1/2 data we have reported to date across pediatric, adolescent, and adult patients, we believe that most patients with Rett syndrome can meaningfully benefit from treatment. TSHA-102 is uniquely designed to address the root cause of Rett syndrome and, as such, has the potential to meaningfully alter the natural history of the disease and offer patients the opportunity to achieve functional milestones that would otherwise not be possible according to natural history. Recently completed market research reinforces this opportunity, as it demonstrated high anticipated demand from both clinicians and caregivers in the U.S. and a clear preference for intrathecal administration. The research findings are compelling for two main reasons. First, the research suggests that clinicians anticipate broad adoption of TSHA-102 across pediatric and adult patients with Rett syndrome. Caregivers similarly indicated that they would actively pursue an improved gene therapy with a target product profile consistent with TSHA-102. Caregivers emphasized that improvements in existing function or the achievement of new functional gains would be meaningful for individuals with Rett syndrome, as they translate into greater independence in daily living, such as speaking in phrases, walking with support, or finger feeding, which we have observed in patients treated with TSHA-102 in REVEAL Part A. Second, clinical outcomes will be the ultimate driver; however, market research indicated that clinicians and caregivers strongly prefer intrathecal administration over direct-to-brain CNS delivery, citing its familiarity, accessibility, and scalability, enabling the potential to safely and efficiently treat patients across institutions, from large centers of excellence to regional and local institutions. This facilitates broad patient access. Specifically, intrathecal administration, as it is used to deliver TSHA-102, is a routine, minimally invasive delivery approach that does not require a surgical suite or delivery by a neurosurgery expert. This enables the potential for TSHA-102 to be delivered as an outpatient procedure, which in turn may meaningfully expand the treatment footprint, given that administration in the commercial setting will not be limited only to centers of excellence. We believe this broader footprint would enable us to reach patients where they are already receiving care and support, and this is scalable as adoption and demand grow. Finally, as we advance towards registration, we are continuing to build out our internal commercial infrastructure. To that end, we recently appointed Brad Martin as Senior Vice President of Market Access and Value, further strengthening our commercial leadership team. Brad brings over two decades of leadership experience in market and commercial strategy, pre-commercial and product launch planning, as well as payer and health system engagement within the gene therapy space. He previously held senior roles at Neurotech Pharmaceuticals, Sarepta Therapeutics, and AveXis. At AveXis, he played a crucial role in securing market access for the blockbuster gene therapy Zolgensma, for the treatment of spinal muscular atrophy. We plan to continue to build out commercial capabilities as we prepare for a potential commercialization, and we expect to share additional details on our TSHA-102 commercial strategy in the second half of the year. I would now like to turn the call over to Sukumar to discuss progress on the clinical front in more detail. Suku? Thank you, Sean. Sukumar Nagendran: As Sean mentioned, we believe we have made significant progress on advancing our Phase 1/2 program and the FDA alignment. As a reminder, we presented data from Part A of the REVEAL Phase 1/2 trial last year, demonstrating a 100% response rate from the 10 treated patients in both low- and high-dose cohorts. An 83% response rate was seen at six months post-treatment, with five out of six patients gaining or regaining one or more milestones defined across the six treated high-dose patients. In addition to the 32 developmental milestones, an average of approximately 19 gains per patient as captured by validated clinical assessments. We have observed a consistent pattern of early gains that was sustained, with additional gains over time. We will provide the six-month interim analysis for the REVEAL pivotal trial and efficacy data across all 12 pediatric patients treated in REVEAL Part A in the second quarter of this year, and all patients will average 12-month follow-up time points across multiple clinical outcome measures, as well as continued well-tolerated safety profile. Today, on the trajectory of the gain, loss, and regain of development provided for TSHA-102, the combined likelihood of spontaneous milestone gain or regain drops to 6.3% after age six compared to rates as high as 85% between the ages of one and five years. These findings align with our own analysis, which allows us to generate data across the broader population while significantly mitigating statistical risk by enrolling 15 patients aged six to less than 52 years in the developmentally regressed population of Rett syndrome, the population with the most stable baseline and lowest spontaneous improvement rate. Importantly, this design enables us to test our response rate against the known hypothesis of 6.7% at age six and older. As Sean mentioned, we have dosed multiple patients in our REVEAL pivotal trial. Enrollment continues to advance across multiple clinical trial sites. We expect to complete dosing in the REVEAL and ASPIRE studies in 2026. We believe our ongoing dialogue with the FDA over the last two years supports the potential path to registration. Looking ahead, we remain focused on our clinical trial execution and data generation as we work to complete patient enrollment and advance towards registration. We believe the thoughtful, data-driven approach we have taken in designing and executing our pivotal development strategy positions us to deliver. I would now like to turn the call over to Kamran to discuss financial results. Thank you, Suku. Kamran Alam: Research and development expenses were $86,400,000 for the year ended 12/31/2025 compared to $66,000,000 for the year ended 12/31/2024. The $20,400,000 increase was primarily driven by higher compensation expenses due to increased research and development headcount. Clinical trial and GMP expenses also increased during the year ended 12/31/2025 due to clinical trial activities in the REVEAL studies and BLA-enabling PPQ manufacturing initiatives. General and administrative expenses were $33,900,000 for the year ended 12/31/2025 compared to $29,000,000 for the year ended 12/31/2024. The increase of $4,900,000 was primarily due to higher compensation expenses and higher legal and professional fees, as well as debt issuance costs incurred in connection with the 2025 Trinity term loan that are recorded in general and administrative expense under the fair value option. Net loss for the year ended 12/31/2025 was $109,000,000, or $0.34 per share, compared to a net loss of $89,300,000, or $0.36 per share, for the year ended 12/31/2024. As of 12/31/2025, Taysha Gene Therapies, Inc. had $319,800,000 in cash and cash equivalents. During the fourth quarter, we raised an additional $50,000,000 in gross proceeds by utilizing our at-the-market, or ATM, equity offering program, with proceeds intended to support a potential commercial inventory build in 2027. We expect that our current cash resources will be sufficient to fund planned operating expenses into 2028. I will now turn the call over to Sean for his closing remarks. Hayleigh Collins: Sean? Sean Nolan: Thank you, Kamran. The progress we made in 2025 has set the stage for what we expect to be a transformative year ahead as we advance towards registration, and our confidence in a differentiated TSHA-102 gene therapy candidate continues to strengthen based on the recent developments highlighted today. With a favorable tolerability profile demonstrated to date, continued patient enrollment, and a well-defined regulatory and commercial path, we believe TSHA-102 has the potential to meaningfully address the genetic root cause of this devastating disease and provide meaningful benefit to a broad population of patients with Rett syndrome using a minimally invasive delivery approach. On behalf of the entire Taysha Gene Therapies, Inc. team, we remain committed to bringing a potentially transformative therapy to the Rett syndrome community. I will now ask the operator to begin our Q&A session. Operator: Thank you. Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Kristen Kluska with Cantor Fitzgerald. Your line is now open. Kristen Kluska: Hi, good morning everybody, and congratulations on all the progress. So you had a lot of comments about why the community might favor intrathecal administration. I wanted to first ask if you believe the community has a good understanding of why this route of administration gets to the brain. And then also, you listed several reasons why this might be more favorable. I am curious, both from the clinician standpoint as well as the parent or caregiver, if there is one item on that list that is standing out more than others. Thank you. Sean Nolan: Yeah. Kristen, thanks for the question. You know, I would say that the support for IT, there were manifold reasons why people wanted to go down that route. The most obvious is everyone can relate to a lumbar puncture. Right? I mean, most of the moms out there have undergone that to some extent. People are familiar with it. They know it is not scary. And I think the most interesting thing is people are taking what I think is a very pragmatic approach. They are basically saying, hey, listen. The clinical data are going to be the most important thing, and if the data are, let us say, equal, then I am going to go do the least invasive approach I can for the person that I love, for the very simple reason that it does not involve drilling burr holes and going into the ICU and having a neurosurgeon involved. As they learn more about that, I think they are just like, hey, you know what? If all things are equal here, at a minimum, then I am going to take what I feel is the safest approach and the easiest approach. I think from the clinical perspective, it is the same kind of a logic set where they are saying, listen. Ultimately, it is going to be the clinical data that is going to carry the day. But based on what we know right now, it is easy for us to do this lumbar puncture. And when they start to talk about the practical logistics of the sites, the throughput necessary for intrathecal delivery done in an outpatient is much easier to manage. You do not have to schedule suite time, surgeon time, things like that. So they are saying, in terms of being able to broaden the reach, go to regional and local hospitals, and make sure that, broadly, the Rett community has access to this therapy, it is a much easier route of administration to administer and provide great care to their patients. Hopefully, that helps. Kristen Kluska: Okay. Thanks. And just on that point, they do understand that this route of administration is reaching the brain, right? Sean Nolan: Yes. We did not get into—we did not explain to them the biodistribution. They are basically making the leap that if I administer it that way and the clinical data are good, it is going to where it needs to go. They do not care about biodistribution. They care about the fact that, is my loved one going to get better or not? And they are judging that based on the clinical data, which, you know, the product profile is just the data that we have shown to date. So we feel very—like, we were not surprised by these results at all, frankly. And I think it makes a lot of sense when you take a step back and just digest it all. Kristen Kluska: Thank you, Sean. Sean Nolan: Thanks, Kristen. Thank you. Operator: Our next question comes from the line of Salveen Richter with Goldman Sachs. Your line is now open. Salveen Richter: Good morning. Thanks for taking my questions. With the appointment of Brad Martin as Head of Market Access and Value, what will the first priorities be in this role? What are the key aspects of market access that Taysha Gene Therapies, Inc. should be focused on initially? And secondly, can you frame expectations for the update on longer-term safety and efficacy data from Part A? How many patients will we see, what kind of duration of follow-up, and what you are looking for in terms of the efficacy profile? Thank you. Sean Nolan: Yeah. Thanks, Salveen. To start with the second part of the question first, what you can expect to see is—to take a step back—last time we reported data, it was 10 patients, and at the high dose, we had six months of data on five of the six patients. So what we are planning to do in the Q2 update, you will see data on all 12 Part A patients, and we will have a minimum of 12 months of data on all patients. The report out will be inclusive of the primary endpoint, which would be milestones. We are also going to give an update on the skills, the improvements. That is the data that we presented at CNS last year. You will see the CGIs. You will see the R-MBA. So you will get a very comprehensive picture of the dataset. And what we hope to show is what we have been able to demonstrate to date, which is that the early improvements are sustained and we continue to see deepening of response over the course of time. If you remember, the first patient we dosed, by the time we report this data, will be about three years post-dose. So we are starting to generate some nice durability data, which is fantastic. As it relates to what the market access team is doing, there are a lot of steps to take, of course. We generally begin by making sure we are mapping out where the patients are. And then, what is the mix of the payers, so how much commercial pay is there? How much Medicaid pay is there? And then what we will do is make sure from a site activation perspective that we are thinking about the right way to roll this out. So as an example, because of our market research and what we have seen on the route of administration, what is going to be really nice is that we are going to be able to essentially get to the regional and local hospitals. We want to make sure, though, that we roll this out in a very thoughtful manner and anyone using TSHA-102 is very educated on how to do this, knows how to manage gene therapy patients, and that we are comfortable with them and their institution doing that. So part of it is mapping all that out so that we have a good sequence to the flow. And then, you know, beginning to work with the payers and talking to them about the market size, talking to them about the clinical data. And the approach that we have taken historically, Salveen, has been get in early with the payers, be very transparent about what type of—what is the volume of patients that they could potentially see, educate them on the disease state, and educate them on your dataset, and really just take them along on the journey. So we look to build relationships with the payers, and that is what the nice thing about Brad is—he has those relationships. He has done this multiple times. And it is never too early to start on this. You really want to get in as early as you can to really pave the road so that there are no surprises on the back end. Operator: Thank you. Our next question comes from the line of Biren Amin with Piper Sandler. Your line is now open. Biren Amin: Yeah. Hi, guys. Thanks for taking my questions. Congrats on all the progress. Sean, I noticed that the company had a successful Type C meeting with FDA this quarter on CMC for TSHA-102. So maybe on the BLA PPQ lots that you are initiating in the second quarter, when would these complete? And if the REVEAL interim data are positive, how soon do you think you can file the BLA after the interim data? Thanks. Sean Nolan: Hey, Biren. Can you repeat the first question? Yeah. So on the BLA-enabling PPQ lots that are initiating in the second quarter of this year, when would these complete? Kamran, do you want to take that? Kamran Alam: Yeah. Sure, Sean. So, Biren, nice to talk to you. Yeah. So the PPQ lots will be completed by end of this year. And in terms of the alignment with FDA, I will turn it over to Sean. Sean Nolan: Yeah. I think, Biren, the plan we have would be we can do the analysis, the interim analysis, once all patients dosed in the pivotal are at six months. That is when the blind would get broken. Obviously, that is going to be dependent on the last patient dosed. Right? So that is going to happen sometime in the second quarter, based on everything that we are tracking to, which looks good. And then we have to adjudicate all that data. We have to make sure it is correct. The next step, we would sit down with the FDA, go through that data with them, and work to align them on what the next steps could potentially be. Right? And so, post that and post getting minutes, we would come back to the market and give you the update. The reason we do not want to say what the data are before we meet with the FDA is that that is only half the story. Right? So we think it is important to meet with the FDA. And I think there are a couple of potential avenues that could happen. Right? I mean, the best-case scenario would be the agency is very pleased with the data and they tell us to proceed to file on the six-month dataset, in which case we would work to do that immediately. So to be clear, what we are doing in the background—we are writing the CMC modules, the preclinical modules. Those will be in the can and done. So if we get the clearance on the clinical, that would be the only piece that we would have to write, and then we could file the BLA and things would move forward relatively quickly. Another scenario could be the agency says, look, we think the data are good. Historically, we have always liked to see 12 months of data. We would like to see 12 months of data. In that instance, we would make the case, well, okay. But then let us start the rolling submission because we have got all this other stuff done. You already know the primary endpoint has been met. You are looking for some additional time. Okay. Now we would have made the case that the durability from Part A we can now pool based on our recent update on CMC would help us with that case upfront, the six-month course of action. But if they want that, I think even in that scenario, again, the only thing that they would have to review would be the clinical module at the end. So that still pulls things up a couple of quarters. And then the last scenario would be they want to do things the traditional way and wait for 12 months. I think even in that scenario, the nice thing about the interim data—and again, we would share this with the market—is that I believe what we would be able to show is that the product works. You have met the endpoint. You have met the statistics of things. Now it is just time and execution, which I think the market would respond very favorably to as well. So the way I look at it is the FDA gave us the option to do the interim analysis. I believe it is based on the data that we showed in the early responses that we showed and the rigor in which the data were collected. So, look, we have got a few good cards to play here, and we are looking forward to it as we step it through 2026. Biren Amin: Perfect. Thanks for taking my questions. Sean Nolan: Thanks, Biren. Operator: Thank you. Our next question comes from the line of Tazeen Ahmad with Bank of America. Your line is now open. Tazeen Ahmad: Hey. Good morning. Thanks for taking my questions. Can you talk about what you think the potential read-through from the recent negative opinion for Daybue from CHMP has for your program and also whether this changes what you think the commercial opportunity in Europe is? And related to that, what is your alignment currently with EU regulators on that? Sean Nolan: Sure, Tazeen. I do not think there is a read-through based on what happened to Acadia. For those of you that have been around since Suku and I joined the management team here, back in the days when everyone talked about CGI and RSBQ, we were on the opposite side of that, if you remember. For gene therapy, you had to be able to demonstrate that the eye could see that truly had impact on the patient and the caregivers and it was unequivocal. And so, we feel the data that we are generating is very unique. And really no one has been able to demonstrate restoration of function in a neurodevelopmental disease before, and we are able to do that in multiple patients and across multiple clinical domains. And we have got natural history that is absolutely stellar. It is unequivocal. I think Jeff Neul’s paper reinforces everything that we have done from a strategic perspective and supports our thesis on things. And then if we are able to demonstrate what is happening with the primary endpoint and people gaining these milestones, but then beyond that, what we are trying to emphasize on the script is when you look at milestone gains outside the primary endpoint, and you look at improvements that people are having, it is almost 20 per patient so far. That is based on what we reported last year. So it is a significant impact that you cannot ignore. And the other thing too I would point to in the natural history data—there is R-MBA data. So we can demonstrate in multiple ways against natural history how we are changing the course of disease and how this is a transformational treatment, which then gives us the power to capture value through price in a very meaningful way and get reimbursed for it. If you take a look at what happened with Sarepta, up until they had some of the unfortunate safety things, their launch was going great. And I would argue that the data that we are generating is quite demonstrable. We are not having to talk about a scale. We are not having to talk about a one- or two-point change in the North Star or a one-point change in the CGI. The payers do not care. The payers want to see functional gains. They want to see concrete improvements. That is what is going to lead to getting you approved. Hope that helps. Tazeen Ahmad: Yeah, Sean. And maybe just a quick follow-up. On Europe again, usually there is a pretty deep discount on price. But, again, just given that there would be a lack of therapies available, do you think that strengthens your position on pricing when it comes time to that? Sean Nolan: Yeah. I mean, I think we are going to be in a very strong position on price because of the data that we have and because of the high unmet need in the disease state. So we feel that—we are—obviously it is early days to get into what the actual price will be. But I think with where we sit and the data that we are capturing, and the fact that it is happening across multiple domains, and no matter what COA we are looking at, all the needles are moving in the right direction in a meaningful way, I think we will be able to capture the appropriate value. Sukumar Nagendran: Thank you. Operator: Our next question comes from the line of Maury Raycroft with Jefferies LLC. Your line is now open. Maury Raycroft: Hi, good morning. Congrats on the progress and thanks for taking my question. For the REVEAL Part A update first half of this year, do you plan to provide a sub-analysis showing the proportion of patients that achieve more than one developmental milestone by 12 months? And are you planning to show any patient-level data with vignettes? And if so, how are you setting expectations for number of patients and milestone gains that you can show in that update? Sean Nolan: Thanks, Maury. Yeah. To take the second part of your question first, we will likely highlight a couple of patient vignettes. And just to give you some perspective on why we show the data like we do, number one, we are going to have 12 patients’ worth of data. This drug is going to get approved or not approved in the aggregate. Right? The aggregate data is what you get approved on. So I think making sure it is clear—and we will share every endpoint that we are effectively capturing—and then the investor will get to judge the data and the probability of success in getting approved. So we think that is the most important thing. We think that is where the emphasis should be. I think highlighting a couple of patient vignettes would be helpful to basically show the early improvement and then the sustainability and the deepening of response over time, getting into more specifics about what is actually happening on a patient basis. So if we say that people are effectively gaining about 19 to 20 skills or milestones and improvements, let us tell you the story of what that looks like. Now if I did that for 12 patients, we would be on the call for five hours. So that is why we do not want to go through all 12 patients. We just want to highlight a couple things. And then, again, based on the aggregate, you can say, hey, I like this data or I do not like this data. But we think that is the right way to portray it. Can you remind me the first part of your question? Maury Raycroft: Yeah. Just some sort of a formal sub-analysis showing the proportion of patients that achieve more than one developmental milestone by 12 months. Sean Nolan: We will take that into consideration. We are still working on the ultimate way to portray things. We have got a few ideas on how to get at—you know, we have gotten some feedback from investors on what they would like to see. So we will take all that into consideration, and we look forward to that update. Maury Raycroft: Got it. Likewise. Okay. Thanks for taking my questions. Sean Nolan: Thanks, Maury. Operator: Thank you. Our next question comes from the line of Gil Blum with Needham & Company. Your line is now open. Gil Blum: Good morning, and allow me also to add my congratulations on the progress. Just a couple ones from us. So as it relates to your recent update on the ASPIRE study, was this in line with prior expectations? Was this faster, or this is just, you know, run of course here? And our second question, it is good to see submissions using your RMAT designation of the CMC materials. This is a known issue in this space. Are you guys going to receive any feedback on what you have already submitted ahead of completing your filing, or is this just going to happen later? Thank you. Sean Nolan: Okay. Let us take the ASPIRE. I would say—and Suku, jump in—I would say we got a pleasant surprise in that initially what we proposed to the FDA was a study of two to less than six-year-olds, and the FDA came back and said, listen, the brain volumes of a five-year-old and a four-year-old are effectively the same as a six-plus, so we feel that that data are already being captured and collected, and therefore they just wanted us to focus on the safety of the two- and three-year-old because they do have less brain volume. And so that was the experiment that they wanted us to run. We did recommend the three-month, and they agreed with that. I do not know, Suku, if there is anything else you found interesting about that whole thing? Sukumar Nagendran: No. I would add to that, Sean, that it is clear that the FDA is pretty comfortable with our safety and efficacy data up to a six-plus age group, and they are willing to let that dataset be used for the less than six. I mean, that two- to three-year-old, as you pointed out, because of the brain volume adjustment that is needed, they felt that was the appropriate age group for us to give them a small sample set on safety. And that could potentially be more than adequate for a complete BLA filing. Sean Nolan: Yep. Yep. And, Gil, your question about the CMC—can you just restate that? Gil Blum: Yeah. Just wondering because you have an RMAT designation, is there any feedback the FDA could provide you on what you have submitted ahead of completing your filing, or is that not part of—thanks. Sean Nolan: So, I mean, we have got—because of Breakthrough, it is an additional way to get access to the FDA. So we do have our first Breakthrough meeting with the agency coming up, and there will be more of those along the way. But we will use that to have a discussion around potential BLA submission scenarios and working to get at your question, which is, you have seen CMC, you have seen our preclinical—just working to gain alignment on the completeness of the packages that we are putting together and what we share with the FDA. So I think we are going to have really good line of sight to where we stand. CMC is a good example. We could not be in a better position right now. So back when we did our first commercial lot, the agency said they deemed that the clinical lot and the commercial lot were analytically comparable. Now that we have done more lots, they are continuing to say that. And now they are saying, if you continue to demonstrate this through PPQ, you can pool your data from Part A and from the pivotal and from ASPIRE because the product is the same. So that is the best you can possibly have right now, and I think that is an example of working closely with the agency. I know that they feel like there is nothing more on the preclinical side that needs to get done. It really is just generating the pivotal data and the ASPIRE data are going to be the last aspects of the submission package. Gil Blum: Excellent. Very helpful. Thank you. Sean Nolan: Thanks, Gil. Operator: Our next question comes from the line of Chris Raymond with Raymond James. Your line is now open. Chris Raymond: Hey, thanks guys and congrats from us on the progress. Just have maybe a competitive two-part question, I guess, and maybe also wanted to drill down a bit on the BLA filing timing question. So Neurogene has made some comments in the past couple weeks to the effect that the six-month time endpoint—from—they have gotten word from FDA that that is not clinically meaningful. And, Sean, I think I have heard you say, you know, the difference here is you guys will have 12-month data from Part A to supplement, and that is kind of the difference maker. But I guess, is that the only difference maker or, you know, is there potentially something else, like maybe the risk-reward of the therapy or other factors? And then the second point is—you got my attention with some of your market research commentary. And I think it is an aspect that could be pretty important. You know, you are talking about intrathecal administration being able to reach patients outside of large centers of excellence, and being able to dose patients at the community center. Do you have any detail around the breakdown of patients between these centers of excellence and out in the community, and from just sort of the setup there commercially, just assuming both therapies are on the market at some point? Sean Nolan: Yeah. I can say that the research we have done to date shows that about 50% of the Rett patients are associated with a center of excellence. That means that over the course of one year, there is one visit to the center of excellence. So that does not necessarily mean that it is the most convenient place for them to get the therapy. And put it another way, there are 50% more patients outside of the COEs. So we think it is very important to make sure that there is a network of care that gets to where the patients are. And so with the data we have, we are able to map where the patients are, and then we are going to take a very thoughtful approach about working through access to care and making sure that the people that are using this are well trained, the facility has the right mechanisms in place to support gene therapy and things of that nature. But what is nice about the intrathecal route is it allows us to broaden that footprint in a relatively straightforward manner. And getting access to patients is the most important thing. Suku, let us tag team the question on the meaningfulness of six months. I mean, I can just say the FDA never said that to us. So every case is unique. I guess the simplistic way I would answer that question is it depends what data you are generating in the first six months. And I think if those data are compelling from a clinical perspective, then the agency is going to take note. Sukumar Nagendran: Yeah. What I would add to that, Sean, is that I have not seen any data from Neurogene’s initial studies that show that they have actual clinical efficacy in the first six months post-dosing. And most of their clinical impact appears to come much later, maybe 10 months post-dosing. Usually, FDA looks at proof of concept before they agree to an earlier analysis. And we have six-month interim analysis from our Part A data that is more than convincing, that allowed them to say, yes, we can evaluate and bring the dataset in for actual review and approval if necessary. And then the second component is they always wind back to the construct because Neurogene’s construct is single-stranded. And single-stranded constructs usually take much longer to come together in the nucleus of the cell of interest and actually become efficacious from a protein production standpoint. So I think that may have played a role in also the six-month interim analysis being given to us while in that case there may have been some pushback. Sean Nolan: Yeah. The other thing too, just to highlight, Chris, Daybue got approved on 12-week data. So I think it is really just what is being demonstrated at a point in time. Right? We—Yep. Hope that helps. Chris Raymond: Yeah. Sure. Operator: Thank you. In the interest of time, we ask that you please limit yourself to one question. Our next question comes from the line of Jack Allen with Baird. Your line is now open. Jack Allen: Congrats on the progress made over the course of 2025. I wanted to ask briefly about how enrollment is going in the pivotal studies and what aspects you are looking to screen these patients on the basis of. Can you talk a little bit about the pre-dosing period in the trial and how you are identifying patients that are really apt for the clinical studies that you are enrolling right now? Sean Nolan: Well, Suku, we can tag team this. I would say, number one, Jack, there is consistency between Part A and Part B in that the severity of the patients is still a CGI-S between four and six. We did—one of the things we did—we have not provided the number—but one of the things we did put in the pivotal protocol is that, of the 28 milestones, there needs to be a certain number of open milestones to get into the study from a screening perspective. So that is probably the most interesting aspect of things that you are looking at. Suku, you want to talk about the enrollment and the progress that we are making? Sukumar Nagendran: Yeah. So, Jack, I mean, we have dosed multiple patients already. Multiple sites are active, and we are—frankly, I would say—we potentially have more patients than we need to actually screen and go forward. And we are well on our timeline when it comes to dosing all 15 patients and actually having results, hopefully, for the six-month interim analysis by the end of this year. I think that is where things are progressing at the present time. Sean Nolan: Yeah. Jack, I think one thing that is really important is that the training at the sites is super important, meaning we have created a standalone DMA. Right? That is the Developmental Milestone Assessment—our name for that—call it a new COA that we developed to standardize the data collection of the milestones. And the FDA—that was really where they spent most of their time with us—was how are you going to systematize and make sure that the data collection are rigorous to make sure that we understand at baseline what a patient could and could not do and then you replicate that in a consistent manner every single time you conduct the DMA. So that is really—Suku’s team has done a stellar job in activating the sites and training the sites and getting them up and running. But that really is, in our discussions with the agency, a fundamental aspect that we wanted to make sure we had our hands tightly around. Jack Allen: Great. Congrats on all the progress. Sean Nolan: Thanks, Jack. Operator: Our next question comes from the line of Yanan Zhu with Wells Fargo. Your line is now open. Yanan Zhu: Hi. Thanks for taking our questions. Wanted to follow up on the pooling of data between the Phase 1/2 and the pivotal study, given that that sounds like something—you know, why you did—that is why you did the manufacturing comparability study. So in what form will the data be pooled? Are we talking about a supportive dataset separate from the top primary endpoint analysis, or could the two studies combine into one and give one number in a label? And then I have one additional question. Thanks. Sean Nolan: I would, at a high level, say what the pooling allows you to do is multiple types of analyses looking at the totality of your data. So you can pool for safety. You can pool for efficacy. You can pool for age distribution. You can pool for a lot of different things. And the agency is going to do all those things anyway. The fact that you have got the ability to do that, though, does create the ability for you to support further your package because you have got different and, I would say, additive analytics that you can utilize to support the package that you are making. I do not know what else you would add to that, Suku. Sukumar Nagendran: Well, Sean, I would not add much else other than to say it gives us a comprehensive, large dataset in this rare disease of Rett syndrome that allows us to look at, as you said, multiple analyses, but also duration of efficacy, and impact on multiple milestone achievements over time. So I think it is a pretty comprehensive strategy that we have come up with. And frankly, the FDA agrees with us, given that they agree that, from a technical aspect, the clinical lots and the commercial lots that they are studying are both equitable. So I think it is a huge win for us to move this forward in a rapid manner. Yanan Zhu: Right. Thanks. Congrats for the ability to do that. And my follow-up question is on expectations for the upcoming data update. Now with 12 months of data on the milestones, what is the expectation for patients continuing to gain milestones between six and 12 months? And is there any chance to observe a loss of milestones, or is that captured in the data so that we have a sense of true durability? Thank you. Sean Nolan: Yeah. Yanan, we would expect that there are continuous gains that happen, continuous improvements that occur over the course of time. So that is what we would anticipate seeing in this dataset. I would say, in terms of loss of gains and things like that, it is not what you would anticipate. I can say that, you know, sometimes on the day of assessment, you can see something may not be demonstrated. Like, if one of the girls has the flu or a UTI, it is very possible that they are not feeling well, and they are not going to demonstrate something. It does not mean they lost it. And I can just say in what we have reported on to date, we have never seen a loss of any gain. So we will work to highlight that when we give the update in the first half. Kamran Alam: Thank you. Operator: Our next question comes from the line of Whitney Ijem with Canaccord Genuity. Your line is now open. Whitney Ijem: Hey, guys. I am going to ask one ASPIRE question in two parts. First is just to double check on the language around the extrapolation, is there any nuance there or like math involved, or is it just that the REVEAL efficacy will be assumed for the ASPIRE population? And then the second question is just on dosing in ASPIRE. I think there was mention of a scaling based on brain volume. So any color you can give on that? Sean Nolan: Yeah, Whitney. There is really no math on the extrapolation. It was really just whatever you see in the six-plus, that is going to get extrapolated into the younger age group. So that is where the alignment is with the agency. It is at a macro level. And then on the second part of the question on the scaling, yeah, it is a very consistent mathematical equation that you use from the preclinical to get to your human equivalent dose. And we will be using that same calculation in the two- to three-year-old. So, Suku, I do not know if there is anything more you would add to that. Sukumar Nagendran: All I would add, Sean, is that the calculation for the two- to four-year-olds is essentially equivalent to the 1e15 dose from an efficacy standpoint when we look at our preclinical models. Sean Nolan: Right. So in terms of what they are getting— Sukumar Nagendran: Exactly. Sean Nolan: Yes. Exactly. Sukumar Nagendran: So that makes sense, Whitney. So a two-year-old, even though they are getting less of a dose, it is equal to the 1e15 in a larger person. So they are getting the same therapeutic effect. Sean Nolan: Effect. Right. Whitney Ijem: Yep. Understood. That makes sense. Thanks so much. Sean Nolan: Thank you. Thank you. This concludes the question-and-answer session. I would now like to hand the call back over to Sean Nolan for closing remarks. Sean Nolan: We appreciate everyone taking the time to listen to our 2025 update and corporate update as well, and look forward to making progress throughout the year and providing an update in Q2. Take care, everyone. Operator: This concludes today’s conference. Thank you for your participation. You may now disconnect.
Operator: Good day. And welcome to the Chicago Atlantic BDC, Inc. Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star then 2. Note that this event is being recorded. I would now like to turn the conference over to Tripp Sullivan. Please go ahead. Tripp Sullivan: Thank you. Good morning. Welcome to the Chicago Atlantic BDC, Inc. conference call to review the company’s results. On the call today will be Peter S. Sack, Chief Executive Officer; Thomas Napoleon Geoffroy, Interim Chief Financial Officer; and Dino Colonna, President. Our results were released this morning in our earnings press release, which can be found on the Investor Relations section of our website and in our supplemental earnings presentation filed with the SEC. A live audio webcast of this call is being made available today. For those who listen to the replay of this webcast, we remind you that the remarks made herein are as of today and will not be updated subsequent to this call. Before we begin, I would like to remind everyone that certain statements that are not based on historical facts made during this call, including statements related to financial guidance, may be deemed forward-looking statements under federal securities laws because such statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. We encourage you to refer to our most recent SEC filings for information on some of these risks. Chicago Atlantic BDC, Inc. assumes no obligation or responsibility to update any forward-looking statements. Please note that the information reported on this call speaks only as of today, 03/19/2026. Therefore, you are advised that time-sensitive information may no longer be accurate at the time of any replay or transcript reading. I will now turn the call over to Peter S. Sack. Please go ahead. Peter S. Sack: Thanks, Tripp. Good morning, everyone. During the fourth quarter and the full year, the results continued to demonstrate that Chicago Atlantic BDC, Inc. is a uniquely positioned BDC investing primarily in direct loans to privately held companies in niche markets with the goal to deliver an attractive return while creating downside protection. We are one of the only public BDCs that is primarily focused on and able to lend to cannabis companies. We also focus on pockets of the lower middle market commonly overlooked by capital providers. We believe that this differentiation provides uncorrelated, distinct credit opportunities. Net investment income for the fourth quarter of 2025 was $0.36 per share and $1.45 for the full year, demonstrating the potential of the business model to generate a yield to book value of 2.7% for the fourth quarter and 11% for the year. During the fourth quarter, we executed on our pipeline, funding $31.7 million across seven new investments, including four new borrowers, effectively utilizing additional capacity on our credit facility. During the fourth quarter, the broader BDC market was impacted by negative sentiment among investors, with many more BDCs trading below net asset value by the end of 2025. Investors placed less reliance on book value as a primary valuation metric and focused more on potential dividend cuts and losses in existing loan books. They were concerned that the fraud in the private credit markets may have led to looser underwriting standards, potentially pressuring portfolio performance and driving higher defaults. Additionally, the drop in the Fed Funds rate in December has caused fears that this will weigh on earnings and dividends. Meanwhile, in global markets, companies operating in the software industry, which were heavily backed by private credit, fell out of favor with the perception that AI would eliminate the need for their services. And now there are developing concerns about the banks that have backed private credit. It is clear to us that Chicago Atlantic BDC, Inc. stock is being influenced by negative sentiment currently surrounding the private credit markets. I think it is important for us to reiterate how differentiated Chicago Atlantic BDC, Inc. is from the rest. Chicago Atlantic BDC, Inc. operates within a unique intersection of credit: the emerging sector of the U.S. cannabis industry and lower middle markets underserved by other capital providers. Our thesis is simple. We apply best-in-class sector expertise, highly developed relationship-based sourcing capabilities, and fundamental credit and investment principles to make debt investments to borrowers with limited sources of debt capital. We take advantage of limited lending competition to structure, first, what we believe to be differentiated downside risk in senior secured positions and, second, a highly outsized return profile relative to broader credit and lending portfolios. Our portfolio has extremely limited overlap with other private credit managers, and the drivers of current private credit market pressure simply are not relevant to us. We have limited exposure to software, receivable factoring, and no exposure to recent examples of fraud in some large syndicated facilities. Our focus areas have not experienced an over-allocation of capital leading to compressed yields that we see across other sectors of private credit. Our strategy is built on a disciplined focus on credit and collateral. We work collaboratively with our borrowers to create value, and our work is executed by a team of originators and underwriters with deep industry and rigorous risk management expertise. The metrics speak for themselves, so I will call out a few. The public BDC industry data points that I am about to mention are taken from Raymond James’ BDC Weekly Insights as of 03/13/2026, and Oppenheimer’s BDC Quarterly report as of 12/16/2025. Our weighted-average yield on debt investments as of 12/31/2025 was 15.8%, compared to 10.8% for the average public BDC. 99.5% of our portfolio is senior secured, compared to other BDCs that have an average of 24.9% exposure to subordinated debt, equity, and JV investments. 73% of the portfolio at par is either fixed rate or floating rate at floor, insulating the company against a drop in interest rates. Only 27% of the portfolio is impacted by a further decline in interest rates. We calculate that a 100 basis point drop in rates only impacts NII of the company by approximately 1%. Only 3% of the portfolio is currently exposed to the software industry. Our unique investment strategy is focused on underserved markets, providing no overlap in investments made by any other public BDC that we are aware of. We conduct full due diligence on new credits ourselves instead of relying on underwriting conducted by bankers or co-investors, and we carefully monitor the performance of each of our portfolio companies ourselves. The portfolio is under-levered with only $25.0 million of debt at quarter end and with a 0.08x debt-to-equity ratio. This compares with the BDC average of 1.2x debt-to-equity. Assuming full utilization of our $100.0 million credit facility during the year, we would still be well below industry averages of leverage. Lastly, we have no nonaccruals compared with an industry average of 3.3% of cost. Today, we announced a $0.34 dividend, marking the sixth consecutive quarter at that rate. Total dividends paid out for the year now total $1.36 per share. The platform is performing well, exceeding returns from the larger BDC market with low downside risk and an expanding opportunity set. Recent M&A in the cannabis market has increased our pipeline for 2026. In addition, in recent months, there has been positive momentum in cannabis policy. At the federal level, there was a meaningful shift in December 2025 with the current administration committed to pursuing the reclassification of cannabis from Schedule I to Schedule III. While this is not federal legalization, rescheduling would represent a significant federal policy change. As I have said before, rescheduling would dramatically increase cash flow after taxes for our borrowers. In the short term, this would translate into higher equity valuations of both public and private cannabis companies. There would likely be increased M&A activity and higher capital expenditures driven by the higher free cash flow of operators, leading to greater opportunity for our platform. In the medium and long term, there is lingering uncertainty that would continue to limit investment until federal regulators put in place a regulatory framework for cannabis as a Schedule III substance. This continued ambiguity will continue to create challenges for U.S. public listings and access to debt markets. We highlighted a slide in this quarter’s supplemental on how this may set the stage for improved industry economics without opening the door for increased lending competition. We believe that Chicago Atlantic BDC, Inc. is well positioned to benefit from these developments, although the success of our strategy is not dependent on these changes. We manage the business assuming the regulatory environment does not change. With this mindset, we will continue to pursue higher yields in niche markets where we believe the risk/reward is attractive, deploying available liquidity, all while continuing to build a portfolio with strong credit metrics and protections. We have carved out a unique strategy with above-market returns, opportunity for growth, and limited competition. We have demonstrated that this strategy delivers positive results. I will now turn the call over to Thomas Napoleon Geoffroy to discuss the numbers in greater detail. Thomas Napoleon Geoffroy: Good morning. Thanks, Peter. I want to highlight the investor presentation that was filed with the SEC this morning that serves as our earnings supplemental. I will start with the investment portfolio. We have 39 portfolio company investments. 25% of the portfolio is invested in non-cannabis companies across multiple sectors. The average credit investment size is approximately 2.4% of our debt portfolio at fair value. 73% of the debt portfolio is insulated from further rate declines due to either fixed rates or floating-rate floors. The gross weighted-average yield of the company’s debt investment portfolio is approximately 15.8%, which is in line with last quarter’s yield, and none of our loans are on nonaccrual status. As of 12/31/2025, the company had $25.0 million of debt outstanding, all of which was drawn from the revolving line of credit. As of 03/18/2026, the company had approximately $47.5 million of liquidity, comprised of $25.5 million of borrowing capacity under its $100.0 million credit facility, subject to borrowing base and other restrictions, and approximately $22.0 million of cash on the balance sheet. We started 2026 with ample liquidity and lower leverage than other BDCs, providing us the flexibility to deploy additional capital strategically. Financial highlights for the fourth quarter were: gross investment income totaling $14.2 million, compared to $15.1 million for the third quarter. The net decrease in investment income of approximately $0.9 million from the prior quarter was primarily due to one-time fees from unscheduled repayments recognized in the third quarter of approximately $2.0 million, which were partially offset by increases of approximately $0.7 million in amendment and origination fees and an increase of $0.4 million of interest income for the fourth quarter. Net expenses for the quarter were $5.9 million, compared to $5.6 million in the third quarter. Net investment income for the quarter was $8.3 million, or $0.36 per share, compared to $9.5 million, or $0.42 per share, in the third quarter. The decrease again was primarily due to the impact of one-time fees earned in the third quarter. Net assets totaled $303.4 million at quarter end. Net asset value per share was $13.30, compared to $13.27 in the third quarter. At quarter end, there were 22.8 million common shares issued and outstanding on a basic and fully diluted basis. I will now turn it over to Dino to talk about our originations efforts. Dino Colonna: Thanks, Tom. During the fourth quarter, we funded $31.7 million in new debt investments to seven portfolio companies. Four of these investments are new borrowers to the BDC. Of these new debt investments, 100% were senior secured, and 89% are floating-rate loans at their floor at quarter end. During the fourth quarter, we also had loan repayments and amortization totaling approximately $11.0 million, which included paydowns of $8.1 million. As of the end of the fourth quarter, there were approximately $25.0 million in total unfunded commitments for the portfolio. To date in 2026, we have funded $93.9 million in new investments to seven borrowers, of which three were new to the BDC. Included in this was a refinance of $38.3 million to our largest borrower. We are excited to have delivered a bespoke solution to the company that met their needs while maintaining an attractive and well-structured investment for the portfolio. We have had $55.7 million in payoffs from borrowers quarter-to-date, resulting in approximately $40.0 million in net originations thus far in 2026. The pipeline across the Chicago Atlantic platform as of quarter end, which includes cannabis and non-cannabis opportunities, totaled approximately $732.0 million in potential debt transactions. The breakdown of the opportunity set includes approximately $616.0 million in cannabis opportunities and approximately $116.0 million in non-cannabis opportunities. As Tom mentioned, we have approximately $48.0 million of liquidity to grow the portfolio, but as always, we will maintain our disciplined approach to underwriting and structuring investments that deliver above-market risk-adjusted returns. We have had to show patience in the past when the markets around us seemed to underprice risk, and that patience has paid off, because we have the portfolio strength and liquidity to go on offense when many other private credit managers are busy playing defense. Both the cannabis and non-cannabis verticals continue to perform well within the portfolio, while demand for new debt capital within the lower middle markets remains healthy. As Peter mentioned, recent M&A activity in the cannabis industry has been a positive for our pipeline. Our disciplined and thoughtful approach to sourcing and structuring investments has resulted in a portfolio with low correlation to other asset classes and the broader private credit markets. This differentiated portfolio has been intentionally constructed and is a direct result of how we approach creating value for our investors, and that includes investing in underserved market niches, which allows for favorable downside protection with pricing power. We have a limited reliance on sponsor-driven deal flow, so we tend to maintain control over underwriting, structuring, and documentation, and we believe that not chasing the ultra-competitive parts of the market translates to better credit performance in the long run. We perform our own rigorous due diligence on all of our investments, and our strategy remains almost entirely focused on first-lien senior secured loans that are structured with lender-friendly covenants. The underlying strength of the portfolio and structural protections from further interest rate risk have allowed us to continue to generate a stable and durable dividend. The underlying loans in the portfolio also continue to demonstrate significant health overall, with low net leverage, high interest coverage, and no nonaccruals. There is also no overlap with investments made by other public BDCs that we are aware of. And finally, the portfolio is underleveraged compared to industry standards. Periods of macro uncertainty tend to expose underwriting shortcuts and reward discipline. Market anxiety today is real; our consistent, repeatable approach has positioned us well for what we believe is an increasingly attractive deployment environment. We do not compete by chasing large sponsor-driven deals or by stretching on leverage, structure, or pricing. Our focus remains on disciplined sourcing, conservative structuring, and rigorous underwriting. It is how the platform was built, and it is how we intend to grow. We believe this approach has produced and will continue to produce an idiosyncratic credit opportunity that targets above-market returns with a strong emphasis on capital preservation. Thank you for your continued support. We look forward to updating you again next quarter. Operator, we are now ready for questions. Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, you may do so at that time. We will pause momentarily to assemble our roster. The first question today comes from Pablo Zuanic with Zuanic and Associates. Please go ahead. Pablo Zuanic: Thank you, and good morning, everyone. Just a two-part question. First, in terms of housekeeping, when you talk about the $732.0 million pipeline, is that for Chicago Atlantic Group as a platform or for LEND specifically? And then I was looking at the third quarter press release. I do not think a pipeline number was given then, but if you can talk about how much the pipeline grew between November and now, March, that is the first part of my question. The second part is that I know you addressed it in part, but we had this executive order talk about rescheduling. How are discussions playing out with potential borrowers? Has there been a cadence change? Maybe there were a lot of discussions in December and January, but here we are in March, and we still do not have news on rescheduling. Has that changed? If you can talk about the cadence and how the discussions have changed with operators in general. Thank you. Dino Colonna: Thanks, Pablo. On the pipeline, that is across the entire platform, and last quarter we reported approximately $600.0 million of a pipeline, so that is a nice increase to the $700.0 million and change we just mentioned. Peter S. Sack: Thanks. I will start with your last question, Pablo, as it relates to pipeline. Rescheduling, I think, has breathed a new, fresh air of optimism into the industry. We are seeing it from a couple of perspectives. We are seeing greater eagerness to execute on consolidation, as larger players see potentially a short window and execute acquisitions before rescheduling becomes effective. And then on the supply side, we are seeing greater eagerness of operators who have stayed on the sidelines, not pursuing exits in a very low valuation environment, starting to cross the sidelines and consider exiting or selling their businesses. All of that volume and transaction activity is positive for Chicago Atlantic BDC, Inc. because it creates more new opportunities to provide financing. And then, difficult to quantify across the industry, we are seeing a general stronger willingness for operators to invest in their businesses and invest in growth. Pablo Zuanic: And just to follow up on that same point at the state level, given the news flow in Virginia—Pennsylvania is more of a question mark—do you want to highlight any states where you are seeing more activity in terms of potential catalysts at the state level? Peter S. Sack: The thoughts are still early in Pennsylvania, but there is certainly eagerness in Virginia. I think the consolidation tends to be focused on states where the fundamental economics are attractive. We are still seeing lots of consolidation activity in Ohio, Missouri, and Maryland to some extent, and more mature states that have seen stabilization in their markets, including legacy states like Colorado and California. Pablo Zuanic: Thank you. And then, in terms of the credit facility, you gave the numbers for March 18—$100.0 million in total. Is there room to increase that revolver in 2026, or would that be difficult right now? Peter S. Sack: It certainly is possible, and there are other options of financing available to BDCs, including unsecured financing. Pablo Zuanic: But obviously issuing equity would not be an option given the discount to par value, right? Peter S. Sack: Right. Pablo Zuanic: Okay. Thank you. And then, I totally agree with the fresh air and new optimism in the industry, of course. But when I look at some of your new loans in the fourth quarter—about $14.0 million on a new company—there was just one new borrower on the cannabis side and, I think, three on the non-cannabis side. I do not know what that ratio is for the first quarter. I am just trying to say, yes, we have to focus on the par value, so there was more lent to cannabis than to non-cannabis, but in terms of operators, it seems that you are increasing much faster the number of borrowers in terms of operators on the non-cannabis side versus cannabis. Do you want to share some light on that? Or just by definition, loans to smaller to middle-market companies in non-cannabis will be smaller than cannabis loans? Dino Colonna: It is more the latter, and our non-cannabis positions in that portfolio are going to reflect a much more diversified portfolio of positions and issuers than our cannabis positions. Pablo Zuanic: And then you spoke about the first quarter new loans. You mentioned a bespoke solution for one of your operators. Do you want to share more color in terms of what that was specifically, and maybe on the borrower? Peter S. Sack: I am reluctant to provide the borrower’s name because we have not disclosed it in a specific filing. But in this case, this was a first-out/last-out financing in partnership with a large financial institution. We are finding that as the industry matures, partnership with bank partners can provide both attractive return and risk profiles for lenders such as Chicago Atlantic BDC, Inc., while also providing increasingly competitive and sustainable credit facilities for some of the larger, most creditworthy operators in the space. Pablo Zuanic: I am going to have two more questions, and apologies if there is anyone else on the queue. In terms of repayments that we saw in the fourth quarter and the ones we have seen so far in the first quarter, does that come out to be a bit of a surprise? At least in terms of my modeling, it is a lot more than I had expected, and I do not understand what is driving that. Or is it just normal for the course of business? Peter S. Sack: As far as payoffs in Q4, the payoffs have been idiosyncratic across a fairly large number of borrowers with relatively small individual positions. But I do think it is reflective of that broader transaction activity that has accelerated within the market. Broader transaction activity means both more frequent financing opportunities but also more frequent refinancing opportunities of our existing portfolio. With regard to originations and payoffs as a subsequent event, the large origination and the large paydown were connected and were the same borrower. Pablo Zuanic: Okay. That is good. Thank you. That is all for me. Operator: The next question comes from Mitchell Penn with Oppenheimer. Please go ahead. Mitchell Penn: Morning, guys. I am just following up on Pablo’s question. You talked about the states. Is it possible to get disclosures on which states these companies are in? Peter S. Sack: We will explore that for next quarter. Mitchell Penn: A second question: can you remind us, in terms of your valuations—BDCs all employ third-party valuation services, and they use them in different ways—can you walk us through how you use third parties and valuation services for your portfolio? Because it is a little different than most of the BDCs, as you mentioned. Peter S. Sack: We utilize a third-party valuation provider to value every position each quarter. Other BDC managers opt to use third-party advisers, in some cases, for each position only once per year, relying on internal evaluations through the balance of the year. We have opted to provide a more transparent and consistent approach. Mitchell Penn: Got it. Thanks. And my last question: what percent of the portfolio overlaps with REFI? Peter S. Sack: We have not published that number historically. I think we would take it under consideration for next quarter in conjunction with your question on state-by-state exposure. Mitchell Penn: Okay. Thanks. That is all for me. Thanks so much, guys. Peter S. Sack: Thank you, Mitchell. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
Operator: Good day, everyone, and welcome to the Destination XL Group, Inc. Fourth Quarter Fiscal 2025 Financial Results Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Ms. Shelly Mokas, Vice President of Financial Reporting and SEC Compliance at Destination XL Group, Inc. Please go ahead, Shelly. Shelly Mokas: Thank you, and good morning, everyone. Thank you for joining us on Destination XL Group, Inc.'s Fourth Quarter Fiscal 2025 Earnings Call. On our call today are our President and Chief Executive Officer, Harvey Kanter, and our Chief Financial Officer, Peter Stratton. During today's call, we will discuss some non-GAAP metrics to provide useful information about our financial performance. Please refer to our earnings release, which was filed this morning and is available on our Investor Relations website at investor.dxl.com for an explanation and reconciliation of such measures. Today's discussion also contains certain forward-looking statements concerning the company's long-range strategic plan and expectations for comparable sales and other expectations for fiscal 2026. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those assumptions mentioned today due to a variety of factors that affect the company. Information regarding risks and uncertainties is detailed in the company's filings with the Securities and Exchange Commission. I will now turn the call over to our CEO, Harvey Kanter. Harvey? Harvey Kanter: Thank you, Shelly, and good morning, everyone. I appreciate all of you joining us today for our fourth quarter 2025 earnings call. To begin, I want to provide a quick update on the merger agreement with FullBeauty Brands that we entered into on 12/11/2025. Since that date, we have been diligently working with our advisers, our attorneys, and the FullBeauty team to work through key deliverables required between signing and closing. A proxy statement will outline the combined company pro forma financials, the background, and rationale for this merger, and other information useful to investors will be one of the most critical elements to present to our shareholders as we seek their support for this merger. One key gating element to completing the proxy is the filing for our fiscal 2025 Form 10-K, which we expect to be completed later today. We are hopeful that the preliminary proxy statement will be completed and filed within the next 30 days, and we expect the transaction to close in 2026, subject to customary closing conditions and shareholder approval. As we move through this process, we will continue to provide updates as appropriate. I want to thank all of our employees for their hard work and dedication to our company as we work through this transaction. Now the second topic that I wanted to talk about is our operating results for year-end 2025 and early fiscal 2026. I expect many of you saw our press release from earlier this morning where we reported for 2025 that our comparable sales decreased 7.3% and our full-year comparable sales decreased 8.4% as compared to fiscal 2024. Prior to the severe arctic weather event in mid-January, which disrupted much of our nearly 300-store fleet, our Q4 quarter-to-date comp sales were down 5.8%. As we moved into 2026, we are optimistic. Our optimism is driven by the improved sales momentum that continued into February and improved to a negative 1.3%, and March is following a similar trend. Our expectations for 2026 are for continued comp sales improvement over the first two quarters, moving to breakeven before summer's end, and turning positive later this year. We have seen improvements in traffic to stores and average order value, which are both contributing to our recent trends. While we are only halfway through the first quarter, we are encouraged by the trends we have observed quarter-to-date. The positive shift in sales is a welcome departure from the major storylines in fiscal 2025, which reflected the ongoing challenges facing the big and tall retail sector. Given the directionally improving sales shift, we are continuing to focus our efforts on our strategic initiatives: FitMap, assortment, and strategic promotions, which are the elements we believe will provide a reason for the more discerning consumer to shop and purchase at greater levels. At the same time, we are and will remain highly oriented around our regimen and the discipline we have as the core pillars for running Destination XL Group, Inc. Our discipline to regimen revolves around tightly managing our expenses, proactively driving very structured inventory receipt flow and investment, and our work to protect margins in response to tariffs and promotions. The fruits of this as we exited fiscal 2025 were a clean inventory position, no debt, and $28.8 million in cash and investments, which provides flexibility and resilience as we navigate the year ahead. As I noted earlier, we are continuing to focus our efforts on our strategic initiatives: FitMap, assortment, and marketing, which we believe are the elements that matter most to our customer and our future. We have rolled out FitMap more broadly across the chain, expanded our private brand offerings, and sharpened our promotional cadence. We have enhanced the launch of our customer loyalty program and deepened our strategic relationship with Nordstrom. We believe the actions taken throughout 2025 have positioned us to capture a larger share of big and tall demand over time as we move forward. In 2026, at the highest level, our strategic focus remains to stabilize the business and continue to drive back to profitable growth. That means staying close to our customers, carefully controlling costs, leveraging our inventory, and being prudent with how, where, and when we invest cash and our capital. We know we must drive top-line revenue in the short term to deliver greater value, while continuing to build the long-term growth drivers: brand building, improved access and convenience, and a continuously better digital and loyalty experience. With that high-level voice-over now complete, I plan to focus on just two areas for the remainder of the call. First, I will provide a more detailed update about our performance in Q4 and highlight a few specific areas where we have made progress against our strategic plan. Second, I will outline in greater detail our plans, priorities, and the catalysts that we either have launched or are in the process of launching in fiscal 2026. We are not providing specific forward-looking financial guidance for fiscal 2026 at this time, but we will revisit this after completion of the merger. To start with a quick review of the fourth quarter, our comparable sales declined 7.3%, with stores down 8.6% and direct down 4.3%. The progression in comp sales across the quarter was mixed, with November down 5.3%, December down 6.1%, and January down 12.9%. As I have already noted, our sales results in January were impacted by severe arctic weather, but we have rebounded nicely in 2026. The sales story in Q4 was driven largely by traffic pressure in stores, with conversion holding up better than traffic and the average transaction value relatively steady but with a small uptick. In the digital business, performance was most impacted by a slight decline in conversion, reflecting both demand softness and a highly competitive promotional environment. During the holiday period, we again used targeted loyalty and strategic promotion events to provide customers with incremental value, and we saw periods where those offers helped improve engagement and sales efficiency. These results reinforce our view that to drive the top-line improvement in the near term, we need a disciplined, surgical promotional approach in 2026, focused on the cohorts and categories where the returns are strongest, while continuing to protect the long-term health of the brand. Another element that we managed well despite the challenging environment is inventory. Our inventory balance at the end of Q4 was $73.5 million, down 2.6% from $75.5 million last year and down approximately 28% from 2019. Our clearance penetration was 9.9% compared to 8.6% a year ago and remains below our historical benchmark of approximately 10%. Our buying strategy has remained deliberately cautious to mitigate risk while staying agile enough to flex up if demand improves. The team's discipline in receipt management and using selective markdowns to avoid any buildup of excess inventory, while working to protect merchandise margin, continues to be an important strength for Destination XL Group, Inc. When we look at our quarterly results through our merchandising lens, once again we saw our private brands outperform our national collection brands. Casual pants, denim, and tailored clothing were strong performers this quarter, and our Oak Hill tech pant continues to stand out. As we move from Q1 into Q2, we are excited about the bigger launch of ThermoChill, which incorporates technical fabrics more broadly than just the pants and shorts from the initial launch. Conversely, sport shirts and knit shirts were more challenging as classifications. National collections did improve over the prior quarter driven by more strategic use of promotion, with a more focused and disciplined framework that emphasizes relevance and value. We must continue to evolve our promotional strategy to drive stronger engagement with those customers who are more influenced by pricing. The next area I want to cover is new store openings. Our consumer research has consistently reinforced that better access to stores remains one of our more meaningful opportunities. Big and tall consumers tell us they do not shop with Destination XL Group, Inc. because there is no store near them or no store conveniently near them. Those insights continue to support a long-term opportunity to expand our footprint, which we have done over the last 24 months and opened 18 new stores in attractive white space and more highly penetrated markets across the U.S. This past year, we continued to improve access by opening eight new Destination XL Group, Inc. stores, converting two Casual Male retail stores and one Casual Male outlet to Destination XL Group, Inc. retail stores, and converting two Casual Male outlets to Destination XL Group, Inc. outlets. As we have shared in the last few earnings calls, given current economic headwinds, we paused further new store openings for this year. Our short-term store development plans will be more focused on converting a few remaining Casual Male stores to the Destination XL Group, Inc. format, store relocations, and other capital projects needed to maintain our existing store portfolio and distribution center, along with technology-related projects that support our business. For fiscal 2026, we expect capital expenditures to range from $8 million to $12 million, net of tenant incentives and primarily for technology and other infrastructure-related projects. Another strategic initiative that we continue to be excited about is our alliance with Nordstrom. We remain active on Nordstrom's online marketplace and continue to refine our assortment, onboarding initial brands and styles as we learn what resonates with the Nordstrom consumer. Customers primarily discover our products through nordstrom.com search and browse, and we continue to collaborate with Nordstrom on a more robust go-to-market plan that includes personalized content and email support. While this channel remains a relatively small percentage of total sales, we remain very optimistic about its long-term growth potential. I would now like to provide some color on the key strategic initiatives we are advancing in 2026 to strengthen our market position, improve the customer experience, and drive more profitable growth over time. These initiatives are grounded in the work we have done across FitMap, assortment, marketing, and technology, and they are designed to address both the opportunities of the big and tall category and the realities of today's environment, including heightened promotional pressure, tariffs, pricing headwinds, and demand shifts tied to GLP-1 usage. I will walk through each initiative now at a high level. First is scaling FitMap as a fleet-wide differentiator and activating marketing to increase adoption. Second, continuing to evolve our assortment, rebalancing our brand portfolio, expanding private brands, and strengthening opening price points to enhance value perception. Third, marketing: a more disciplined promotional framework and an evolved CRM and loyalty approach. Lastly, a dedicated effort around the digital experience, driving improvements informed by a comprehensive UX audit across discovery, product, and checkout. Now let me turn to FitMap, which we believe is one of the most differentiated assets in the big and tall space. FitMap is our proprietary contactless digital sizing technology for which we hold an exclusive license for Big and Tall Men until 2030. It captures 243 unique measurements and provides personalized size recommendations across 29 brands, helping remove one of the biggest friction points in apparel shopping: uncertainty around fit. Over the past three years, we have developed and tested FitMap, and to date, we have scanned more than 63,000 customers. We have now completed our initial rollout, and FitMap is live in 188 stores, and the mobile application is live as well, with our latest size recommendation engine allowing the in-store scan experience to align with the online fit recommendation tool. The result is a more seamless, consistent guest journey across channels. In 2026, the focus shifts from rollout to activation, and we are approaching that through a few concrete strategies. First, we are working to increase guest-level scanning penetration, both in stores and online, so more customers enter the FitMap ecosystem. Higher penetration supports better conversion, lower returns, and increased multichannel engagement. That will require operational reinforcement, associated coaching, and the right incentives to make scanning a natural part of the selling process. Second, we are using some of our marketing dollars to launch a marketing campaign to build awareness of FitMap, highlighting the benefits of scanning and reinforcing Destination XL Group, Inc.'s leadership in fit innovation. We began with an email program to generate early learnings and refine our messaging, and those insights now will inform the broader campaign. Third, we plan to test FitMap-enabled promotions, using scanning insights for personalized offers, loyalty-driven incentives, and targeted outreach to scanned guests, so we better understand how FitMap can drive incremental revenue and strengthen loyalty. We are already seeing promising signals in the data. Using lookalike modeling, we continue to observe that scanned guests deliver higher customer value and higher average order value than their control groups. Importantly, a meaningful driver of lift is what happens on the day of the scan, where associates are able to convert the fit moment into a broader outfitting moment, increasing units per transaction and average unit retail. We are also beginning to see a greater share of the incremental lift occur online after the scan experience, which is exactly the omnichannel behavior FitMap is designed to unlock. The next initiative I want to cover is assortment, specifically how we are rebalancing our brand portfolio, expanding private brands, and sharpening our opening price points to strengthen value perception. Over the next two years, we are strategically evolving the assortment to further prioritize private brands. Private brands deliver consistent fit, give us greater flexibility to balance trend with core essentials, and enhance value for the customer while generating higher margins, from 57% at the start of fiscal 2025 to more than 60% in fiscal 2026 and over 65% in fiscal 2027. To support that shift, we are reducing investment in underperforming national brands and redeploying that inventory and marketing capacity towards higher-return opportunities. We are doing this in a more disciplined way, aligning sales and inventory, driving productivity and faster turns, and leaning into the categories where we see momentum, such as casual bottoms, denim, and activewear across key private brands. This portfolio rebalance improves inventory efficiency, supports stronger GMROI, and gives us more control over storytelling and fit innovation both in store and online. Within that assortment work, opening price points remain an important part of the strategy. We will continue to broaden a more comprehensive opening price point offer to lower barriers to entry, respond to shifts in buying behavior, and further improve overall price-value perception. Combined with more intentional brand and product marketing, along with clear in-store presentation that reinforces each private brand's role, these actions are designed to build loyalty, drive customer acquisition, and position Destination XL Group, Inc. as the destination for big and tall men who want great style, great fit, and great value. Now let me provide you a little greater color on marketing, starting with promotions, then CRM and loyalty. Our view is to win a greater share of the big and tall market we must show up with value in a way that is relevant and targeted without undermining the brand. Over the past year, we have been refining our promotional approach with a more strategic framework where promotions are managed as a distinct category with clear objectives around timing, product focus, and customer targeting. The goal is to maximize the return on every markdown while supporting our broader strategic priorities. Within that framework, you should expect three complementary motions. First, what we call always-on value: everyday value-driving initiatives aimed at specific cohorts, available when the customer is ready to shop. We have intentionally moved away from broad storewide and sitewide discounting and toward offers that improve acquisition, increase shopping frequency, and reinforce confidence that Destination XL Group, Inc. is competitively priced. Second is the surgical use of targeted promotions by leveraging customer segmentation and behavioral insights. In 2026, our CRM approach is focused on improving performance in key lifecycle and behavioral segments where we see potential to change FOP behavior in a meaningful way. The intent is to deliver more personalized communications by brand, category, and shopping mission so that customers get offers that they feel are relevant and not generic. Third is loyalty. We see loyalty as an important lever to increase repeat revenue and reward our best customers. While our top tiers are performing and we continue to test incremental benefits, we also recognize that engagement in our classic tier has been limited. Addressing this challenge is part of the broader CRM work I just described, improving how we activate customers earlier in their lifecycle and giving them clear reasons to come back. Furthermore, we continue to build on enhancements to Destination XL Group, Inc. Rewards, including capabilities to make it easier for customers to earn and redeem benefits, and exploring additional tiering options over time. The key is to execute the vision while driving discipline in markdowns and responsibly deploying promotion where the returns are greatest. We do expect some margin pressure from the incremental promotions, but we continue to view a portion of these markdowns as a form of marketing investment to acquire and retain customers. Finally, let me shift to the digital experience. In 2026, our focus is to drive higher conversion and customer confidence through a simpler, more intuitive shopping journey. We are leveraging a comprehensive UX site audit to prioritize the highest-impact improvements and to further inform a focused roadmap across discovery, product detail, and checkout. This is practical work, reducing friction, clarifying navigation, and making it easier for customers to find the right product and the right size quickly. A few specifics: we are elevating our visual presentation with updated photography standards that create a more aspirational and less clinical experience across key parts of the site. We are also prioritizing improvements that reduce checkout friction and support more seamless site-to-store behaviors. Over time, personalization and shopping assist capabilities, including thoughtful use of GenAI, can help customers discover products faster and shop with greater confidence, especially in categories where fit drives decision making. We are also reshaping our demand generation mix. We transitioned to an affiliate agency at the end of the third quarter, and our new agency is helping overhaul the program from one that leans heavily on coupons and rewards to a more balanced approach that prioritizes reach and new customer acquisition. In parallel, we are building new affiliate and influencer programs designed to broaden awareness and introduce Destination XL Group, Inc. to more big and tall men who may not yet be in our ecosystem. I will now turn the call over to Peter Stratton for the financial results. Peter Stratton: Thank you, Harvey, and good morning, everyone. I appreciate all of you joining us on the call today. I am going to take a few minutes to provide you with some additional color on our fourth quarter and full-year financial performance. Let us start with sales for the fourth quarter, which came in at $112.1 million as compared to $119.2 million in 2024. Comparable sales decreased 7.3% for the quarter, with stores down 8.6% and the direct business down 4.3%. For the full year, total sales were $435.0 million compared to $467.0 million last year, and comparable sales decreased 8.4%, with stores down 6.9% and direct down 11.8%. Moving past sales, our financial statements include some wins and some challenges, which I will highlight for you next. Starting with gross margin, for 2025, gross margin inclusive of occupancy costs was 40.8% compared to 44.4% in 2024. The rate declined primarily due to lower merchandise margin and occupancy deleverage on lower sales. For the full year, gross margin inclusive of occupancy was 43.4% compared to 46.5% last year, again reflecting occupancy deleverage and the impact of tariffs and promotional markdown activity partially offset by a favorable mix shift toward private brand merchandise. The impact of tariffs on merchandise margins was 110 basis points in the fourth quarter and 50 basis points for the full year. As we enter 2026, we are continuing to monitor the situation with tariffs. Our sourcing exposure to any single country remains limited, as we have always had a broad and diversified supplier network. We believe the direct impact from tariffs under currently understood scenarios is manageable. We are also staying close to our national brand partners to understand how they are navigating tariffs and what, if any, impact that could have on pricing. We have taken selective price increases on certain programs this year, we have renegotiated cost sharing with our suppliers, and we have remained agile to opportunistically relocate programs across the globe. Our sourcing and merchandising teams are actively tracking developments and preparing mitigating actions as needed. Moving on to SG&A, SG&A expense for the fourth quarter was 42.4% of sales compared with 41.7% in 2024. For the full year, SG&A expense was $187.4 million, down from $198.3 million, or 5.5%, as compared to fiscal 2024. As a percentage of sales, SG&A expenses were 43.1% of sales compared with 42.5% last year. Marketing costs were 6.3% of sales for the fourth quarter, compared to 6.2% a year ago, and 6.1% of sales for the full year compared to 6.8% last year. On a dollar basis, marketing costs were down $5.2 million for the year. Adjusted EBITDA for the full year was $1.6 million compared to $19.9 million last year. We ended the year with $28.8 million of total cash and investments and no outstanding debt, with excess availability under our credit facility of $55.1 million. I also want to call to your attention an important judgment that we made in Q4 regarding our deferred tax assets. As we have discussed, the challenges we have faced in the big and tall sector over the past two years have weighed heavily on our operating results and contributed to our net operating loss in fiscal 2025. Realization of our deferred tax assets, which primarily relate to net operating loss carryforwards, depends on the generation of future taxable income. While we believe that profitability will return over the longer term, our current year net operating loss coupled with our near-term forecast presents sufficient negative evidence, which outweighs available positive evidence regarding the realizability of our deferred tax assets. Accordingly, we took a noncash charge of $20.4 million in the fourth quarter to establish a full valuation allowance against our deferred tax assets. The valuation allowance has no impact on our tax returns, cash taxes paid, or our ability to utilize our NOLs. I am now going to turn it back over to Harvey for some closing thoughts. Harvey? Harvey Kanter: Hopefully it is clear, and as I noted at the end of our prior earnings call, our team is working hard to navigate the cycle with discipline. We expect that the operating rigor we have in place and the foundational work we completed will position us to benefit meaningfully when demand improves. We remain excited and optimistic about the FullBeauty merger, the growth opportunities in the broader inclusive apparel sectors, and what we believe it will return to our shareholders. Lastly, as I wrap up and before we take questions, I want to thank the Destination XL Group, Inc. team that I work with every day. Their hard work and dedication in the stores, in the distribution center, in the corporate office, and in the guest engagement center provide the level of optimism for the opportunity ahead. The passion and commitment our team has for our underserved consumers is our reason for being, our purpose, and why we do what we do. Thank you for all your hard work and your commitment in our pursuit of serving big and tall men and making Destination XL Group, Inc. the place where they can choose their style and wear what they want. We will now open for questions. Operator: If you would like to ask a question at this time, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from Jeremy Hamblin with Craig-Hallum. Jeremy Hamblin: Thanks for taking the questions. I wanted to ask a bit more about the FitMap technology, for which I think you have a license for the next five years. To give us a sense for the momentum that is building in that particular technology, I think you said you have scanned 63,000 customers to date. The rollout is live in 188 stores. Can you give us a sense for the incremental velocity? Of the 63,000, how many were scanned in 2025, and what type of training needs to be offered for your sales associates managing stores to maximize the opportunity behind that? Harvey Kanter: Jeremy, it is Harvey Kanter. I will attempt to walk you through that, and then Peter will supply any greater level of insight beyond what I remember to share. We have had FitMap moving forward in the most demonstrative way since September or October. I do not recall the exact specific cadence, but I will remind you that generally it was 25, 50, 62, 88 stores. That is how it went down in terms of the stores. Then the 88 up to 188, which was the 100 more stores, was really February and March completion. I think we literally just finished the last eight stores in the last 10 days, and we are now at 188 stores, and that is what we expect to be maturity, at least for the time being. The elements that we have been encouraged by as we have moved through this process: first is to get more people scanned, then from scanning to look at incremental revenue, the value of that consumer in the prior 12 months and in the post 12 months, which obviously is literally 24 months of time. For lack of a better way to say it, we have gone slow to go fast. When I say that, we did not get overly aggressive with respect to what we thought would happen. We were thoughtful. It is not overly intense in its capital or cash requirements to roll out to more stores, but what is more intense is the training and the process of engagement. Equally important is bringing the technology forward in more meaningful ways, which we have now done, inclusive of any mobile device. Initially it was the iPhone, which is the majority of how consumers engage with us in a mobile setting, and then Android in the last 30 days has been finalized. The reason I walk you through some of these elements is there are a lot of moving parts, and the thing that is probably the most challenging is getting trained and up to speed to ensure that our measurements, which are literally 243 digital measurements, standing there in your bike shorts, which takes less than 90 seconds, are right. If those measurements are not right, whether it is the custom-made clothing, which is something that we are delivering typically in three to four weeks to consumers based on ordering, which they have the capacity to order with different models and buttons and cuts and trim, or the application being used via the app at home, and then in both cases, the 29 brands we are mapping to, which is basically if you are buying something that might be Brooks Brothers, which is a more traditional block in terms of the way the style executes, you might be 2X, but if you are buying Hugo Boss, which is more European-inspired in its fit, you might be a 3X. The need to have each one of those independent sizes across all 243 measurements accurate and then apply that to the mapping or the custom is a process which we have just begun in earnest to train our team about. Our hope and expectation is incrementally we see double-digit incremental revenue from each customer in the 12-month post-scanning period. The customer value, post-scanning is measurably improved. The average transaction value for that scan and each purchase is greater. The frequency of shopping with us is greater. The units per transaction are greater, and the repeat rate of that customer coming back is greater. Directionally, the customer that has been scanned in the aggregate has done all of those things I just referred to. They are shopping with us more frequently. They are spending more money. They are buying more things. They are spending more money on day of visit. They are converting, and they are being scanned, in many cases, for custom-made clothing, which is delivered in three to four weeks. Those all add up over time, in our view over the next 12 to 24 months, to be a tremendous opportunity to grow the comp in those stores and to determine whether or not in smaller stores with less traffic, we can still bring forward an incremental T&L outcome. That would be the goal. I think I have covered pretty much all of it. Peter, if there is something else that I missed, feel free. There is a lot of ground there. Jeremy, why we are most excited is the proprietary element through the period of time we talked about into 2030 gives us an ability, which actually the provider has discussed on a podcast. I remember him saying they think they are so far ahead in the technology that by the time people catch up to where they are, they will be even farther down the road. That was in response to a question in that podcast where the interviewer asked the founder of the company we partnered with. That founder said, we think we are so far ahead that we are happy to share this because it was built around a belief that people buy clothes and then throw them away and fill landfills, and that is not great. His view was we are providing a way to get people to buy the clothes they want in the styles and sizes that fit in a way that no one else can, and we are happy to share that with others because by the time they catch up to us, our technology platform will be that much farther down the road. It represents a great opportunity for Destination XL Group, Inc., and the exclusivity of what it provides to engage customers is powerful. Jeremy Hamblin: That is intriguing. It has been tough out there in the big and tall market overall, not just for Destination XL Group, Inc. I wanted to get a sense for, as we enter 2026, the promotional environment that you are seeing. You noted that your customers have been gravitating a bit more towards private brands and away from the national brands. Can you give a sense for the competitive responses that you are seeing from other retailers in the big and tall category at store level, but also in what you are seeing in the online channel of business? Harvey Kanter: It is Harvey Kanter again. I will talk you through this, and then Peter can backfill at a level that makes sense. What we believe is that our customer, who is in the sea of all apparel—women’s, kids, men’s, men’s big and tall—is one of the categories that is probably most impacted by customer malaise and a reduced desire to spend money on clothing. He does not shop as frequently as a normal men’s customer, and not as frequently as a women’s customer. When you think about the multiple elements we are all living through and the volatility—whether it is tariffs, the impact of GLP-1 drugs, which we believe is having an impact in terms of the customer’s weight and how they are thinking about clothing, or the price of gas, food, groceries, going out to eat—all those variables are affecting the sector. A belief we have shared before is at some point he has to come back. He needs clothes. He has shopped for need, not want. He may still be shopping for need, not want for a period of time, but at some point, he needs clothes. He is wearing them out. We see certain elements like that. It may be remarkable, but our underwear business is strong right now. That is one of the markers that we look at to see he needs clothes and he has not bought them, and he will come back. There is a belief that he will come back in a period of time. Government subsidy and then lack thereof, inflation, interest rates, GLP-1 drug impact—there are a lot of moving components, including tariffs and what we have had to do to try to navigate and offset at some level. Looking backwards 12 months, who knows what will transpire in the next 12 months. When you put all that together, it is having an impact on a customer who does not love to shop. Our view, and we can see it, is the reason we called out the arctic challenge in January. We just reported November and December; we were basically minus six-ish. January became minus 12.9%. That impacted a quarter that was looking more like minus five and change to become minus seven and change. We did see, as we reported this morning, negative 1.3% in February, which is encouraging. That is a 600-basis point improvement from the quarter or even a 400-basis point improvement from the impact of the weather. Although you have not asked the question, I will lead you here. We are seeing some of the same challenge right now, literally a 1,000-basis point difference in regionality in the Northeast and Southeast and Midwest at moments in time as the storms pass through, and they have been significant. There are a lot of moving parts, and I cannot give you a black-and-white answer. We expect to move to breakeven before the summer, and then throughout the summer improve to the point we are driving comps in the back half of the year. Six weeks in, our business is better than six months ago and even four or five weeks ago in January. Got it. Jeremy Hamblin: And then a question on the private label or the private brand initiative. Going from 57% of inventory mix private brand to 65% in 2027, what would you expect the gross margin impact of that initiative to be over the course of those two years? Harvey Kanter: I will talk about it at a high level, and then Peter will circle back. The reality is our national brands on an IMU basis hover in the mid-50s. Our private brands on an IMU basis are in the mid-70s. There is a distinct starting point differential. The consumer is buying private brands mostly because they represent higher quality and a better fit, and that is because we are defining that very specific fit, whereas the national brands work with us, but they all have their own view of what that fit looks like. The value we are bringing to market is a demonstrably lower absolute price point. When you compare the quality and the fit, those values are enhanced. Ultimately, that gives us the ability to assort more deeply. We are bringing in more inventory, and we have the capacity to promote that product at some greater level in a profitable situation versus national brands. The flip side is national brands are at a higher price point. That is not to say we are getting out of national brands, but generally we are trying to navigate a different view of national brands. If we cannot get them to sell through prior to a markdown or liquidation, then that margin that is already initially short becomes that much shorter when you have to accelerate markdowns to manage that inventory. Peter might have more specifics, but net-net, it starts out higher and it ends higher, and the mix you have alluded to moves from 57% to hopefully 67% or greater. That 10-point differential on what literally is a 15- to 20-point differential on IMU does mean something to us. Peter Stratton: Harvey, I think you more or less answered it. Going from the mid-50s up to the mid-70s is how I would think about it, Jeremy. That will vary depending on what the product is, but at a very high level, I think that is a fair way to represent it. Jeremy Hamblin: So just to clarify, from a gross margin perspective, you would say maybe it could be 100 to maybe even 200 basis points to gross margin? Peter Stratton: It could be. I do not want to put a number out there so discretely because, as we have been talking about earlier, we have definitely been more promotional this year. You have seen that in the merchandise margins. There are different puts and takes, but overall, we should end up in a net positive the more that we shift to private label. Jeremy Hamblin: Understood. Alright, last one for me. In terms of looking at the store fleet today and the pausing of opening new units, which makes sense, how should we be thinking about the fleet? Obviously, economics have been impacted negatively by the comps and the lower margins. What are we thinking in terms of rightsizing the store fleet in 2026? Harvey Kanter: In 2026, we are not moving anywhere. We will look and hopefully reengage in 2027 with consideration of more stores. The answer to the question is based on the customer. We have direct shipments, and we can look at our direct business, which is roughly 30% of our revenue, and look at whether we are shipping to places we do not have store representation. In other markets like Houston, which we have used before as an example, Sugar Land in the southwest corner of Houston was not a geography within the Houston area that we were covering well. We clearly did, through our CRM analysis, see customers coming from there and how far they were traveling. That will drive what we would call white space opportunities in markets that we exist already, or potentially markets that we do not exist in vis-à-vis the direct business. What we have articulated before is we do not believe we are a 600- to 700-store chain. We do believe that we could be 325 to 350, maybe 400 stores, but we have not defined that specifically as much as generally saying that based on our research—which was fact-driven—customers have told us literally nearly 50% of the reason they do not shop with us is there is no store near them, or one-third of customers who do not shop with us said not conveniently near them. That is direct feedback that says if we open a store near you, we should see the market improve, and we do see that. You mentioned our stores initially did not open at the level that we expected. We think that is part and parcel of the overall sector challenges, but we can tell you with confidence and data that our stores continue to move towards maturity. The maturity curve is probably longer than we had hoped for and believed, but they are not standing still. They are continuing to move based on awareness, customer trial, and repeat rates, and improve as a performance of units overall with the 18 stores we have opened. Jeremy Hamblin: Got it. Thanks for taking my questions. Harvey Kanter: You bet. I think we are up to Keegan. Michael Baker: Hey, it is Michael Baker. Can you hear me? Peter Stratton: Hey, Mike. How are you? Harvey Kanter: First, before I ask a question, are you willing to talk about anything around the FullBeauty transaction? Sometimes management teams say we are not talking about it until it is closed. If you are, I would ask a couple questions on that. Mike, we have talked about the proxy coming out hopefully in a not too distant period of time in the future. At the moment, that is the extent of what we are going to talk about relative to that. There is a lot of information in there, which I think will be informative, but nothing beyond that on today's call. Michael Baker: Okay, just wanted to clarify that. Then a couple other quick ones here. When you have these storm events like you saw in January, you are a Northeast retailer and you see these types of things a lot. What is the recapture rate, or do you see a rebound, or does that typically end up being lost sales? Harvey Kanter: We see a rebound. I do not know that we can tell you it is one-for-one, but when you literally do not open 124 stores on a day—and in January, I know that number—it was 124. The next day was 84. Two days in a row, nearly a third of the chain. We can see the customer rebound. We can see a little bit of movement online, but we can definitely see a rebound. Is it one-for-one and we get it all back instantaneously? No, but we do see a rebound. Weather has been so drastic. Literally yesterday versus the day prior in the Southeast and the Northeast had just terrible winds and snow. We literally see thousands of basis point movement because of the stores not opening or not pulling. Michael Baker: I am in Boston. You are right. I felt that yesterday. One other one I wanted to ask you. You had mentioned in the answer to one of the previous questions an impact from GLP-1. I remember at one point the idea was customers would change sizes but still be within the big and tall ecosystem, so it might actually be a positive. I am not sure it is playing out like that. Can you talk about the impact of GLP-1, what you are seeing, and how that compares to your original thesis? Harvey Kanter: It has definitely evolved. I was in the stores last week traveling with our Chief Stores Officer and spent a lot of time in the California market. My commentary is anecdotal because we are unable yet to document some of the things we believe. We have done primary research, we have bought secondary research, and we have consumer research, and none of it is demonstrative at the greatest level that we feel has a very high correlation. Anecdotally, we did not think it was going to be impacting the business as much as we think it is today. I cannot characterize what that means in basis points. It is not like a 20% decline. What we see is that our consumer coming in is more needs-driven. He is on a weight-loss journey. In some cases, he may have bought Polo and Psycho Bunny, and now he is buying Harbor Bay. When asked, he says he is losing weight on GLP-1 drugs, and he is not uncomfortable telling us that. He says when he is done, he will come back to Polo, but right now he is going to buy Harbor Bay because it is great quality and a great shirt. It is literally $20-some versus Ralph Lauren might be $120. He is not done with his journey. We are seeing some customers size out of our size range or at least, competitively, they can shop at Nordstrom, which is a partner of ours, or Macy’s or other retailers because they are now a 1X as opposed to a 3X or 4X. We are also seeing a lot of customers that might be a 6X that are now at 3X. They are moving around. We have been told and see customers that are moving down in size, but also for whatever reason decide to get off the drugs, and they are moving back up. There is a lot of volatility. I do not know that we are going to see stabilization of the consumer relative to GLP-1 drugs for some period of time. We think it might be as much as 25% of our customers using them. Typically, weight loss of any kind, up or down, is a friend of ours. Right now, we are in a pattern where they are losing weight and they are trying not to buy clothes until they are done with that journey. We do think it will come back. We think it is a sector issue as opposed to doing something materially wrong or it being materially more competitive than it has been. There are benefits for our guests and customers in general losing weight and being healthy. We are navigating through that. Hopefully I have answered your question. It is a moving target, and there is not a black-and-white answer yet. Michael Baker: Thanks. That is clear. Appreciate the color. Harvey Kanter: Thank you all for joining our call today. We will talk with you next quarter, and I wish you the very best for spring. Stay warm. Michael Baker: Take care. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Welcome to the Biofrontera Inc. Fourth Quarter and Full Year 2025 Financial Results and Business Update Conference Call. Operator: At this time, all participants are in listen-only mode. After today's prepared remarks, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ben Shamsian, with Lithium Partners Investor Relations. Please go ahead. Ben Shamsian: Thank you. Good morning, and welcome to Biofrontera Inc.'s fourth quarter and full year 2025 financial results and business update conference call. Please note that certain information discussed during today's call by management is covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act. We caution listeners that Biofrontera Inc.'s management will be making forward-looking statements, and actual results may differ materially from those stated or implied by these forward-looking statements. The risks and uncertainties associated with the company's business are detailed in and are qualified by the cautionary statements contained in Biofrontera Inc.'s press releases and SEC filings, including the company's Annual Report on Form 10-K for the year ended 12/31/2025. Also, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast. Biofrontera Inc. undertakes no obligation to revise any forward-looking statements to reflect events or circumstances after the date of this conference call, except as required by law. During today's call, there will be references to certain non-GAAP financial measures. Biofrontera Inc. believes these measures provide useful information for investors, yet should not be considered as a substitute for GAAP nor should they be viewed as a substitute for operating results determined in accordance with GAAP. A reconciliation of non-GAAP to GAAP results is included in the press release issued today and is also available on the company's website at biofronteraus.com under the Investor Relations section. Please note management will be referencing adjusted EBITDA, a non-GAAP financial measure defined as net income or loss excluding interest income and expense, income taxes, depreciation and amortization, and certain other nonrecurring or noncash items, including changes in fair value of warrant liabilities, stock-based compensation, gain on sale of assets held for sale, and expense issuance costs. With that said, I would now like to turn the call over to Hermann Lubbert, CEO, Chairman, and Founder of Biofrontera Inc. Hermann Lubbert: Yes. Thank you, Ben, and thank you to everyone joining us this morning. Fiscal year 2025 was a transformational year for Biofrontera Inc. I am proud to say that we delivered record annual revenues of $41.7 million, representing about 12% growth over the prior year, capped by a record fourth quarter in which we generated revenues of $17.1 million, the highest quarterly revenue in our company's history, representing approximately 36% year-over-year growth. These results demonstrate the strength of our commercial execution and the growing adoption of Ameluz PDT across the dermatology community. As a consequence of the amendment in the contractual relationship with our former parent company, Biofrontera AG, I will explain in a few minutes. Q4 2025 was highly profitable for Biofrontera Inc., with an adjusted EBITDA of $4.9 million and an additional capital gain of $700,000 from the Serpi Investigator divestment, resulting in net income of $5.6 million. Let me take a moment to summarize what we accomplished in 2025, which resulted in this profitable fourth quarter and set the stage for an exciting 2026 and beyond. In October 2025, we closed a new asset purchase agreement with our former parent company, Biofrontera AG. The financial consequences were active already as of June 2025. This transaction is one of the most significant milestones in our history. We acquired all U.S. rights, approvals, and patents for Ameluz and RhodoLED, including the New Drug Application, the Investigational New Drug Application, all manufacturing rights and contracts, and all intellectual property. In December 2025, the FDA formally transferred the NDA and IND to us, giving Biofrontera Inc. full regulatory control in the United States. We also completed the transfer of 11 U.S. patents, 10 U.S. patent applications, and 19 international filings and registered designs. The financial implications of these transactions are significant. The new royalty or earn-out structure is 12% when annual U.S. Ameluz net sales are at or below $65 million and 15% in years where they exceed that threshold. This replaces a transfer pricing model that previously ranged anywhere from 25% to 35% of revenue. This change has already begun to improve our gross margin profile, leading to the highly profitable Q4, and Svet will provide more detail on the impact in a few moments. To support the AG transaction and our continued growth, we secured $11 million in funding through a private placement of Series C preferred stock led by Roseland Advisors and AIGH Capital Management. These healthcare-focused institutional investors share our belief in the long-term value of the Ameluz platform. We also completed the sale of our Xepi antibiotic cream license to Pelaos Therapeutics for initial proceeds of $3 million, with the potential for up to an additional $7 million in milestone payments. These transactions, combined with our strong fourth quarter revenue performance, give us the resources and financial flexibility we need to execute on our plan. We made remarkable clinical progress across multiple fronts in 2025, and that momentum has carried into early 2026. First, in superficial basal cell carcinoma, or sBCC, we submitted a supplemental New Drug Application to the FDA in November 2025 based on strong Phase III data from our 187-patient randomized, double-blind, placebo-controlled study. Complete histological clearance was seen in 76% of these tumors with Ameluz PDT compared to 19% with placebo. Complete clinical clearance was achieved in 83% of the lesions compared to 21% with placebo. I am pleased to report that the FDA has accepted this filing, and we have a PDUFA target action date of 09/28/2026. If approved, Ameluz would be the first PDT drug to treat a tumor in the United States, representing an additional commercial opportunity. Second, in actinic keratosis on the extremities and head, neck, and trunk, the last patient completed the treatment phase in 2025. The database was locked in January 2026. I am very pleased to report that in February 2026, we announced positive Phase III results; the study met its primary endpoint. Combined with the completed Phase I pharmacokinetic study, we anticipate filing a supplemental NDA in 2026 to expand the label for Ameluz to treat AK beyond the face and scalp on a treatment field of up to 240 square centimeters. With approximately 58 million American adults having at least one actinic keratosis lesion, treating extensive fields on the extremities, neck, and trunk represents a very large addressable market for our installed base of RhodoLED lamps. Third, in moderate to severe acne vulgaris, the treatment phase completed in Q3 2025 and the database was locked in January 2026. Last week, we announced positive Phase II results. The three-hour incubation protocol demonstrated a 58% reduction in inflammatory lesions with Ameluz compared to 37% with vehicle gel. PDT patient satisfaction was very high, with 86% of patients stating they would choose PDT treatment again. Based on these data, we plan to discuss the design of a future Phase III program with the FDA in 2026. Acne vulgaris is a chronic condition affecting millions of adults and adolescents, and we believe Ameluz PDT has the potential to offer a differentiated treatment option for the moderate to severe form of the disease. Our patent portfolio was significantly strengthened in 2025. We received approval for the new improved formulation of Ameluz, which removes the potentially allergenic propylene glycol, extending patent protection through December 2043. And just recently, we had positive news in our patent dispute with Sun Pharma. The U.S. Patent Trial and Appeal Board issued a final written decision finding all claims of Sun Pharma's patent unpatentable that we had challenged. This decision is a positive outcome in defending our market position, though we note Sun Pharma may seek further review. I would now like to turn the call over to George Jones, our Chief Commercial Officer, to provide a more detailed update on our commercial execution. George? George Jones: Thank you, Hermann, and good morning, everybody. I am pleased to walk you through our commercial progress for 2025. As Hermann noted, we delivered record revenues in the fourth quarter and achieved approximately 11% annual revenue growth. That revenue growth was driven by approximately $4.1 million in organic volume growth. What I want to emphasize today is the underlying quality of that growth and the executional improvements that powered it. First, looking at Ameluz unit volume growth. Ameluz unit volumes for full-year 2025 increased meaningfully. Fourth-quarter unit volumes were particularly strong at approximately 49,840 tubes, bringing the full-year unit volume to approximately 121,000 tubes. This represents approximately 10% volume growth over 2024. These unit growth milestones underscore the effectiveness of the executional changes we implemented in 2025, which I will discuss later in this section. Looking at RhodoLED lamp placements, during 2025, we placed approximately 85 RhodoLED lamps within dermatology practices, including approximately 70 of the newer XL model. As of 12/31/2025, our installed base stands at approximately 745 lamps across approximately 686 dermatology offices nationwide. Looking at our commercial execution, our revamped commercial strategy centered on refined customer segmentation, a more focused and data-driven targeting approach, and increased accountability delivered tangible results in 2025. We saw a significant increase in sales call activity during the year and, importantly, increased in-person activity, which we know drives the highest impact with our customers. Looking a little deeper into the business, our 2025 churn rate, which is a measure of lost business from accounts that have purchased from us in the past year, was the lowest since 2021. On top of this, we were able to open over 150 new accounts and gain significant volume of Ameluz tubes through these new accounts. Additionally, we launched an inside sales pilot in Q4 to cover vacant territories, white space, as well as smaller accounts that were harder for our in-person sales team to reach. Based on the success of this pilot, we are planning for a full rollout of inside sales in 2026. Overall, I am very encouraged by what I have seen in my first six months at Biofrontera Inc. I am impressed by the talent and the drive of the team, and excited by the overall trajectory of the business. The growing installed lamp base, expanding customer adoption, continued commercial strategy refinement, and the potential for near-term label expansions in sBCC and AK of the trunk and extremities give us multiple vectors for continued growth in 2026 and beyond. I look forward to updating you on our progress in coming quarters. With that, I will turn the call over to Fred Leffler, our Chief Financial Officer, to walk through the financial results. Fred? Fred Leffler: Thank you, George, and good morning, everyone. I will walk through our financial results for the fourth quarter and full year ended 12/31/2025. All comparisons are to the prior-year period unless otherwise noted. A full reconciliation of our GAAP to non-GAAP measures is included in the press release we issued earlier today and is available on our website. Starting with fourth-quarter 2025 results. Revenues for the quarter were approximately $17.1 million compared with $12.6 million in 2024. This is an increase of approximately 36%. This was the highest quarterly revenue in our company's history and was driven by strong Ameluz sales execution and pricing adjustments that we introduced in December 2025. Our related-party cost of goods sold, or COGS, decreased 45% year over year, driven by the transition from the transfer pricing model under our prior license and supply agreement to the significantly lower earn-out structure that came with the strategic transaction with Biofrontera AG that Hermann talked about a few moments ago. Under the new arrangement, the cost of revenues per unit declined steadily to about 15% compared with a range of 25% to 35% under the prior agreement. As a result, our gross profit on sales improved significantly, going from about 58% to 82% in 2025, which is a great outcome of all the hard work that everyone at Biofrontera Inc. put into this transaction. Total operating expenses for the quarter were $12.5 million compared with $14.3 million in 2024. With COGS excluded, costs were about $9.4 million in both years. Selling, general, and administrative expenses, SG&A, increased $300,000, or approximately 4%, to $4.8 million in 2025. This was mainly driven by legal costs. Research and development expenses were the same for the fourth quarters year over year at $800,000. This investment directly supported the clinical programs Hermann discussed a moment ago, including the work to complete the Phase III AK extremities trial and the Phase II acne trial. Operating income for the quarter was $4.6 million, a $6.3 million improvement from a net loss of $1.7 million in 2024. Net income for the quarter was $5.6 million, a $7.0 million improvement from a net loss of $1.4 million in 2024. This improvement was driven by the higher revenues and the materially lower cost of revenues resulting from the strategic transaction, which were partially offset by higher legal and R&D expenses. Turning to our non-GAAP measure, adjusted EBITDA for the quarter was $4.9 million compared with negative $1.4 million in 2024. This is an improvement of $6.3 million. Our adjusted EBITDA margin improved to positive 29% from negative 11% in the prior year, reflecting the favorable impact of higher gross profit and improved operating cost management. As a reminder, adjusted EBITDA excludes interest, taxes, depreciation, amortization, changes in the fair value of warrant liabilities, stock-based compensation, gain on sale of assets, and expense issuance costs. A full reconciliation can be found in our press release or on our website. Now turning to full-year 2025 results. Total GAAP net revenues for 2025 were $41.7 million compared with $37.3 million for the full year 2024, an increase of approximately 12%. The increase was primarily driven by $4.1 million in organic Ameluz growth associated with volume. Our related-party cost of goods sold decreased by $7.7 million, or 43%, to $10.1 million from $17.9 million in 2024, again driven by the transition from our former transfer pricing model under the prior license and supply agreement to the significantly lower earn-out structure that took effect in 2025. Under the new arrangement, beginning in July 2025, cost of revenue per unit declined steadily to about 15% compared to a range of approximately 25% to 30% under the prior agreement. Additionally, $2.0 million of purchase price accruals under the prior agreement were forgiven in connection with the closing. These reductions were offset by $2.2 million in earn-out payments under the new agreements. As a result, our gross profit on product sales improved significantly, going from about 50% to 74% for the full year 2025. We expect the full benefit of the new cost structure to be realized on an annualized basis in 2026, as the new 12% rate applied only to about 45% of the Ameluz sales volume in 2025. In the long run, we expect our gross profit margin to range between 80% and 85%. Total operating expenses for 2025 were $53.1 million compared with $54.5 million in 2024, a decrease of $1.5 million or about 3%. Within this, selling, general, and administrative expenses increased $4.0 million, or approximately 12%, to $38.4 million. The increase was driven by a $6.0 million increase in legal expenses related to patent claims, partially offset by a $1.1 million reduction in direct sales personnel expense from a lower headcount, $500,000 in savings from lower sales support activity levels, a $300,000 decrease in intangible asset amortization, and a $200,000 decrease in bad debt expense. Research and development expense increased $1.6 million to $3.7 million in 2025, reflecting our responsibility for all U.S. clinical trials for the full year, which only started in June 2024. This investment directly supported clinical programs Hermann discussed, including wrapping up all of the clinical trials mentioned earlier. Our operating loss for full-year 2025 was $11.3 million, a significant improvement from a net loss of $17.2 million in 2024, a reduction of approximately 34%. Our net loss for 2025 was $10.5 million, a significant improvement from the net loss of $17.8 million in 2024, a reduction of approximately 41%. This improvement was driven by higher revenues, materially lower costs from the strategic transaction, and a decrease in interest expense, partially offset by higher legal and R&D expenses. Turning to our non-GAAP measure, adjusted EBITDA for full-year 2025 was negative $10.6 million compared to negative $15.3 million in 2024, an improvement of $4.7 million or 31%. Our adjusted EBITDA margin improved to negative 25.4% from negative 40.9% in the prior year, reflecting the favorable impact of higher gross profit and improved operational cost management. I will refer you to our press release or website for more details. Finally, looking at our balance sheet and liquidity, as of 12/31/2025, we had cash and cash equivalents of $6.4 million compared with $5.9 million at 12/31/2024. During 2025, we received $11.0 million in gross proceeds from the private placement of Series C preferred stock, $3.0 million from the initial closing of the Xepi divestiture, and we generated $41.7 million in product revenue. Cash used in operating activities for the full year was $13.4 million, reflecting our net loss as well as changes in working capital. With the completion of the strategic transaction, we now have greater control over the supply chain, shorter lead times for our products, and improved inventory management. These operational improvements, combined with the significantly lower cost structure under the new earn-out agreement, are expected to reduce our cash consumption as we advance towards our goal of cash flow breakeven. As we have discussed in our filings, the support of our institutional investors, Roslyn and Biters and AIGH Capital, has been instrumental in positioning us to execute the strategic transaction and invest in our clinical pipeline. We are grateful for their confidence and commitment. With that overview of our business and financial results, we are ready to take questions from our covering analysts. Operator? Operator: Thank you. We will now begin the question-and-answer session. Today's first question comes from Bruce Jackson at The Benchmark Company. Please go ahead. Bruce Jackson: Hi, good morning, and thanks for taking my questions. I want to talk about the gross margin improvement that you are anticipating for 2026. Fourth quarter was quite strong. How do you think it plays out over the course of the year? And is it going to drop and then ramp again? And where do you see it exiting 2026? Fred Leffler: Yes, nice to talk to you again, Bruce. So the gross profit margins, we expect to be between 80% and 85%, and the reason for the range is because of the mix between Ameluz and device sales. But that has started on January 1, and we expect to be within that range from January 1 and throughout 2026. Bruce Jackson: And then, would you say you are going to be—how can I put this? Would you expect it to start at that 82% level and stay there? Or do you think it is going to be variable over the course of the year? Fred Leffler: I think it is going to start there. As I said, it could fluctuate a little bit depending on the product mix in our revenue and cost of goods sold. Bruce Jackson: Okay. Okay. That is all I have got right now. Thank you. Fred Leffler: Thanks, Bruce. Thank you. Operator: That concludes our question-and-answer session. I would like to turn the conference back over to management for closing remarks. Hermann Lubbert: Yes. Thank you. So if I summarize what we have said, first, we delivered record annual revenues and record first quarter revenues, demonstrating that our refined commercial strategy is working and that the Ameluz PDT platform continues to gain traction with dermatologists and their patients. Second, the completion of the strategic transaction with Biofrontera AG has fundamentally changed our business model. We now own and control all of our key U.S. assets, intellectual property, regulatory approvals, and manufacturing rights, and the new earn-out structure has materially improved our cost profile. The full annualized benefit of this new structure will flow through to our results in 2026. And third, our clinical pipeline is delivering results. We have a PDUFA date for superficial basal cell carcinoma in September 2026, positive Phase III results for AK on the extremities, and encouraging Phase II data in acne. Looking further ahead, we have planned studies in squamous cell carcinoma in situ and reduced-pain PDT. Biofrontera Inc. is the only company in the United States running FDA-controlled clinical studies in PDT for dermatology, and our patent protection extends through 2043. And finally, the combination of revenue growth, lower cost of revenues based on our new contracts, and disciplined expense management led to a strong profit in Q4, the first quarter where the new cost of goods became fully effective, and we expect these to meaningfully improve our financials in 2026 as we continue to advance towards cash flow breakeven. I want to thank our entire team for their dedication and hard work. I also want to thank our shareholders, the healthcare professionals who use our products, and, most importantly, the patients whose lives we are helping to improve in the fight against skin disease. Thank you all for your continued support. Have a wonderful day. Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Good morning, and welcome to Logistic Properties of the Americas’ fourth quarter 2025 earnings conference call. My name is Carly, and I will be the operator for today's call. At this time, all participants are in listen-only mode. Please note that this call is being recorded. There will be an opportunity for you to ask questions at the end of today's presentation. Now I would like to turn the call over to Camilo Ulloa, Investor Relations. Please go ahead, sir. Welcome to Logistic Properties of the Americas’. Camilo Ulloa: Fourth quarter and full year 2025 earnings conference call. My name is Camilo Ulloa with Logistic Properties of the Americas’ investor relations team. Joining me on today's call are Esteban Gaviria, our Chief Executive Officer, and James Smith Marquez, Chief Financial Officer. Before we proceed with our review of Logistic Properties of the Americas’ financial and operating results, please note that information presented during this call is intended for informational purposes only and does not constitute an offer to buy or sell any securities. Forward-looking statements made during this call are subject to a number of risks and uncertainties, which are discussed in Logistic Properties of the Americas’ filings with the SEC. Our actual results, performance, and prospective opportunities may differ materially from those expressed or implied in these statements. We undertake no obligation to update or revise any forward-looking statements after this call. We have prepared supplemental materials that we may reference during the call. We encourage you to visit our website at ir.lpamericas.com to download these materials. Please also note that all comparisons that we will discuss during today's call are year-over-year unless we note otherwise. Esteban will begin today's review. Esteban, please go ahead. Esteban Gaviria: Good morning, everyone. Thank you for joining our latest earnings call. Without a doubt, 2025 was a great and transformational year in many respects for Logistic Properties of the Americas. Not only did we make significant inroads into Mexico, our fourth operating geography that is characterized by sizable and promising submarkets, but also a year in which the increase in the scope and reach of Logistic Properties of the Americas’ real estate platform accelerated. Furthermore, our fundamentals are shining bright. To start off, we increased operating GLA by over 13%, while delivering a 23.3% increase in fourth quarter revenue and 14.3% for the full year. Benefiting from enhanced operating leverage, our earnings power also strengthened. We posted significant bottom-line profitability in 2025, our first full year as a public company. Particularly noteworthy in demonstrating the growth push that we had conveyed to the market was that net operating income grew by 29.8% in the quarter and 11.9% in 2025. Let me repeat that. NOI expanded almost 30% in the last 2025 compared to the same quarter the previous year. This level of growth speaks to the new speed that we envisage in 2026. In other words, Logistic Properties of the Americas’ NOI momentum is anticipated to be carried over into 2026, and we intend to continue building on top of it. By every key measure, we did everything we said we would accomplish in 2025. The year's impressive results reflect the continued maturation of our international logistics platform, the importance of adding solid talent to our teams, strong tenant demand across our markets, and the rental upside embedded in our portfolio. More specifically, our strong growth was also supported by achieving full occupancy across our operating portfolio, higher leasing rates, and the addition of the assets we acquired in Mexico last August. And despite having reached 100% occupancy by quarter-end, which provides clear evidence of the quality of our team, customer relationships, and real estate assets, we note that we still see opportunities to capture additional rental upside embedded in pockets of our property portfolio as leases roll over to higher market rates and as our new development projects come online this year. Moreover, we are only just getting started in Mexico, a far larger market where we see select opportunities to invest in expanding key logistics submarkets that have similar demand underpinnings and resiliency as our foundational markets. As announced last week, we took a major step towards visibly increasing our presence in Mexico through a strategic partnership we have forged with Fortem Capital, one of Mexico's leading institutional real estate investors, representing roughly a $200 million investment to be deployed over time. Under a master forward purchase agreement with Fortem, Logistic Properties of the Americas will progressively acquire stabilized, dollar-denominated Class A assets within Central Park 57, a modern large-scale industrial and logistics park that is strategically located along Federal Highway 57, a key logistics corridor in the state of Hidalgo. The park provides express connectivity to Mexico City, the State of Mexico, Querétaro, and Bajío, all of which are economically vibrant areas of the country that collectively account for approximately 35% of Mexico's population, and potentially even more economically based on purchasing power. Our high investment conviction is driven by the fact that this particular site offers a power-ready and cost-effective option for companies seeking dual highway connectivity along the greater Mexico City logistics corridor. Once completed, Central Park 57 will have approximately 2,100,000 square feet of GLA in a layout that will consist of eight buildings, which our partners with our systems will endeavor to have fully operational over the next couple of years, with Logistic Properties of the Americas ultimately becoming the beneficial owner of the park. To fund this purchase program, we expect to employ a combination of traditional debt financing, local equity partners, and Logistic Properties of the Americas’ proceeds from selective asset recycling initiatives in other geographies. Importantly, our institutional partnership with Fortem both accelerates and de-risks our expansion in Mexico, which will be a new phase of growth for Logistic Properties of the Americas and on a much larger scale. The partnership provides a clear line of sight to a substantive growth pipeline, one representing a 36% increase in GLA in our total operating portfolio as compared to year-end 2025. And because the partnership enables our international platform to sequentially acquire operating and delivered properties over time, this approach meaningfully mitigates construction and commercial risks. Regarding the overall market picture that we see for Mexico in 2026, we are encouraged by the recent U.S. Supreme Court ruling on tariffs, but remain mindful of shifting tariff policies, the USMCA negotiations, and continue to focus on resilient submarkets in Mexico that are driven by mostly domestic consumption rather than trade. Through that lens, our on-the-ground team and our growing network of local relationships, we continue identifying existing logistics assets as well as attractive development opportunities where there are pockets of strong demand for modern logistics facilities in key logistics corridors. The most recent data from Mexico's real estate market is also encouraging. In the fourth quarter, rents continued to gradually increase while net absorption improved on still limited new supply, as well as high and stable occupancy levels. Furthermore, construction activity was still restrained. Turning to our other markets, we are also pleased to highlight our stellar performance in them. Starting with Peru, PepsiCo has occupied Building 300 in Parque Logístico Callao, which is a significant driver of our fourth quarter growth. The new 254,000 square foot facility is LEED Gold certified and the first and only of its kind in Peru. Strategically located adjacent to Lima's international airport, the park also provides seamless connectivity to the marine port as well as direct access to the metropolitan area's more than 10,000,000 consumers. Additionally, construction of a fourth 215,000 square foot building within the park remains on time and on budget for delivery in the second quarter and will contribute additional revenue and NOI growth in 2026. Prior to breaking ground recently, the building was 100% pre-leased under a dollar-denominated contract, fully de-risking its development. With the addition of this building, Parque Logístico Callao will comprise four state-of-the-art Class A buildings totaling 863,000 square feet of gross leasable area. We now only have one more shovel-ready pad at this location for a fifth and final building that would add close to 210,000 square feet, which we believe we can pre-lease this year with development yields at or around 13%. This highlights the strong cycle and positioning Logistic Properties of the Americas has achieved in this constrained market of Peru. As a reminder, Logistic Properties of the Americas’ sites exemplify the high-barrier nature of the markets in which we operate. In many of these locations, land ownership is fragmented, making large-scale logistics development difficult, and therefore creating structural scarcity for institutional-quality logistics facilities in mission-critical locations. This is supported by our data. Undersupplied market conditions have given us pricing power and enabled us to achieve an 11% increase in rent per square foot across our aggregate regional portfolio last year. Another important contributor to our fourth quarter performance was the leasing of the remaining 97,000 square feet in Logistic Properties of the Americas’ operating portfolio in Bogotá, Colombia. What makes this lease particularly notable is that the tenant, a U.S.-listed warehouse club operator called PriceSmart, became a cross-border customer. Specifically, they were already renting space in one of our facilities in Costa Rica. This illustrates one of the defining advantages of Logistic Properties of the Americas’ platform: our unique ability to provide seamless multi-jurisdiction solutions to leading global and U.S. companies operating across the region. It is why we added Mexico to our platform last year, beginning with two prime logistics facilities in Puebla with a local equity partner, and we have now joined forces with Fortem to deepen Logistic Properties of the Americas’ presence in Mexico's dynamic market in a disciplined and effective manner. This will enable us to leverage long-standing tenant relationships as well as attract new companies that are also expanding in the country. We also continue to see growth opportunities in our foundational markets—Costa Rica, Colombia, and Peru. In a show of resilience and durability that surprises external observers, but not us, these economies continue benefiting from strong domestic consumption levels, rising commodity prices, especially in the metals and mining sectors, e-commerce penetration, and favorable demographic trends. Before turning the call over to James, we think it is important to address our share price performance. We continue to work tirelessly to ensure the market recognizes what we view as a significant dislocation, one that is disconnected from the fundamentals of our business. As we have noted previously, Logistic Properties of the Americas’ shares came under pressure last September following the expiration of the shareholder lock-up from our go-public transaction. Our central mission now, beyond sustaining the strong financial performance that underpins our expansion strategy, is to deepen our dialogue with the market, broaden investor awareness, and highlight the compelling investment opportunity we believe Logistic Properties of the Americas’ shares represent. As a relevant reference point, our book value per share stood at $8.12 as of year-end 2025. While book value does not capture the full picture, particularly the intangible value of our international platform’s near- and long-term growth potential, we remain committed to bringing greater visibility to what we see as a meaningful value opportunity. In that same spirit of visibility and relentless drive, we are marking Logistic Properties of the Americas’ tenth year in business with the next step in our brand's evolution. We have invested in strengthening our digital presence, and yesterday, we launched a renewed brand identity and website, both designed to reflect the company we have become over the past decade and our distinctive and valuable position within the publicly traded logistics sector. Our refreshed visual and marketing assets will also introduce a new ecosystem that captures the essence of Logistic Properties of the Americas’ value proposition: bridging local insight with global impact. This core message reflects the strength of our platform and the differentiated role we play for multinational customers, partners, and investors across the region. In short, Logistic Properties of the Americas’ vision and values emphasize a more purpose-driven organization as we enter our next decade of growth. We invite you to explore our new commercial website at lpamericas.com, which showcases this evolution and the opportunities ahead. With that, I will turn the call over to James to discuss our 2025 results in more detail. Thank you, Esteban, and good morning, everyone. James Smith Marquez: Our consolidated 2025 revenue increased 14.3% to $50.1 million, led by Peru and Colombia, which grew 31% and 14.8%, respectively. Costa Rica's revenue increased just under 1%, while our new facilities in Mexico contributed incremental revenue. The revenue growth was primarily driven by additional rents related to the stabilization of buildings in Peru during the year, the latest of which, as Esteban explained in his remarks, in addition to the stabilization of one building in Colombia, and other key drivers were lease renewals that were marked to market rates, contractual CPI-linked rate increases related to lease rollovers, mainly in Colombia, and the occupancy of previously vacant space in both markets. The new rates and leases increased average rent per square foot by 11% to $8.65, an increase that also benefited from favorable changes in FX rates. As we advance our growth strategy during the year, operating GLA increased 13.3% to 5,800,000 square feet across 34 properties. Leased GLA increased 6.3% to nearly 6,000,000 square feet, while development GLA in Building 200 in Parque Logístico Callao was unchanged at approximately 224,000 square feet. It is important to note that 84.1% of our development GLA is pre-leased. As Esteban pointed out, our development pipeline represents significant revenue and NOI growth in 2026, irrespective of any properties that we acquire under our recent purchase agreement with Fortem Capital or any other acquisitions we might make this year. Our 2025 operating expenses increased 16.8% to $1.2 million, largely in line with our projections for the year. The increase was mainly due to higher real estate taxes, operating costs such as maintenance repairs, expected increases in credit loss provisions, and higher land lease costs. SG&A increased 7.1% to $16.7 million, well below the 14.3% increase in full-year revenues and effectively increasing operating leverage. The most significant expenses were those related to hiring and salary increases, Colombia's alternative minimum tax, as well as the rebranding and digital marketing initiative that Esteban highlighted. Investment property valuation gain decreased by $11.7 million, or 36.2%, to $20.6 million in 2025. The decrease was primarily due to an $11.2 million valuation gain at Parque Logístico Callao, as the building, the largest in this park, mostly stabilized in 2024. Our $20.8 million in financing costs were 7.9% lower in 2025. The decrease was mainly due to securing lower interest rates on Logistic Properties of the Americas’ existing debt, more favorable interest rate environments in Costa Rica and Colombia, and the capitalization of interest related to the development of the two buildings within Parque Logístico Callao in Peru. We also maintain a healthy debt profile, with no significant debt maturing in the near term, and net debt to investment properties improving 150 basis points to 40.2%. Lastly, cash NOI increased 12.4% to $40.3 million in 2025, mainly reflecting the increased GLA as well as higher occupancy and rental rates during the year. That concludes our review. Operator, please open the call for any questions. Operator: At this time, we will open the floor for your questions. If you would like to signal a question on your phone, simply press star and one on your telephone keypad. Also, as a reminder, you may submit your questions online by using the Q&A on the webcast platform. Your first question comes from Andre Mazzini with Citigroup. Andre Mazzini: Yes, team, thanks for the call and the question here. So, if you can speak a little bit about the Mexico markets, a lot going there in terms of M&A in that space. So how you are seeing the market and this whole M&A activity, if it changes your strategy in any sense, consolidation in the Fibra space there in Mexico or not really your focus on, of course, until now, acquiring properties in the private market. If it does not really change how you are thinking about the Mexico market, all this kind of M&A activity in the public space we are seeing? Esteban Gaviria: Thank you, Andre, for joining the call and your question. Actually, it bolsters our confidence in that market. That interest and that activity level does make us think that consolidation might be underway. I do think there is going to be a form of segmentation, for one, such that there are going to be bigger players, allowing a platform like Logistic Properties of the Americas to play more in what I would say is the middle market. So these are billion-plus transactions, and we are going to be looking at opportunities between $100 million, $200 million, maybe even $300 million. And that market segmentation is going to be powerful. That is why, to name an example, the Fortem Capital deal that we agreed earlier this year is a reflection of that. So that is the first takeaway. One, it bolsters our confidence. Second, I think it starts to segment the market and allows us to play in a mid-market tier. The last point I would highlight is the fact that some portfolio pruning might be underway after those consolidation moves take place. And then, once again, Logistic Properties of the Americas will be on the lookout to grasp additional opportunities. So I think that is going to be a beautiful setup as we roll into the market and take a bigger presence. Andre Mazzini: Very clear. Thank you, Esteban. Operator: Again, if you would like to ask a question, press star one on your telephone keypad. It appears that we have no further questions at this time. We will now turn the call back over to Esteban for any closing remarks. Esteban Gaviria: Thank you, operator. I would like to end today's call with a few key takeaways. Number one, it was a transformational year during which we delivered again on what we had promised to our shareholders. The revenue growth and the earnings power of Logistic Properties of the Americas’ regional platform are accelerating. Our most recent results clearly demonstrate the strength of our unique business model, the substantial pricing power that we command across our underserved markets, and the proven ability of our highly experienced team to effectively execute our long-term growth strategy. Two, we have a solid development track record we extended last year, with a 13.3% increase in GLA. Building on top of that, we are establishing a strong foundation in Mexico, where we plan to make additional investments that strategically expand our platform to encompass more of this key market, focusing on select locations that are mission critical to multinational companies. As an internally managed real estate company, our fellow shareholders can count on us to continue investing with sharp focus on capital efficiency and long-term value creation. Moreover, active asset management will remain a strong value driver as well. And finally, having entered 2026 with full occupancy, we see significant rental growth ahead as we roll over leases to market rents and as new, largely pre-leased buildings become occupied in the first half of the year. With the visibility we have going into 2026, we anticipate that it will be another exciting year of high growth and additional strategic investments to substantially scale, further diversify, and augment the optionality and underlying value of Logistic Properties of the Americas’ vertically integrated regional logistics platform. Thank you again for joining us today. We look forward to seeing you on our next earnings call. Have a good day, everyone. Operator: This concludes today's conference call. You may now disconnect.
Operator: Greetings, and welcome to the Titan Machinery Inc. fourth quarter fiscal 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. It is now my pleasure to introduce your host, Jeff Sonnek of ICR. Thank you. You may begin. Jeff Sonnek: Thank you. Welcome to the Titan Machinery Inc. fourth quarter fiscal 2026 earnings conference call. On the call today from the company are Bryan J. Knutson, President and Chief Executive Officer, and Bo Larsen, Chief Financial Officer. By now, everyone should have access to the earnings release for the fiscal fourth quarter and full year ended 01/31/2026. If you have not received the release, it is available on the investor relations tab of Titan Machinery Inc.’s website at ir.titanmachinery.com. This call is being webcast, and a replay will be available on the company’s website as well. In addition, we are providing a presentation to accompany today’s prepared remarks, which can be found on Titan Machinery Inc.’s website at ir.titanmachinery.com. The presentation is directly below the webcast information in the middle of the page. We would like to remind everyone that the prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. These forward-looking statements are based on current expectations of management and involve inherent risks and uncertainties, including those identified in today’s earnings release and presentation, and in the Risk Factors section and other of Titan Machinery Inc.’s reports filed with the SEC. These risk factors contain a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements. Except as may be required by applicable law, Titan Machinery Inc. assumes no obligation to update any forward-looking statements that may be made in today’s release or call. Please note that during today’s call, we may discuss non-GAAP financial measures including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater insight into Titan Machinery Inc.’s ongoing financial performance, particularly when comparing underlying results from period to period. We have included reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures in today’s release. At the conclusion of our prepared remarks, we will open the call to take your questions. I will now turn the call over to the company’s President and CEO, Bryan J. Knutson. Please go ahead, Bryan. Bryan J. Knutson: Thank you, Jeff, and good morning to everyone on the call. I will start today with an update on our inventory optimization progress and operational focus areas, and then discuss the current environment across our segments before turning the call over to Bo for his financial review and comments on our fiscal 2027 modeling assumptions. Fiscal 2026 was a year where our team executed at a high level in a difficult environment. For the full fiscal year, we reduced total inventory more than $200 million, surpassing our $100 million target that we announced at the beginning of our fiscal year and our updated $150 million target we revised last quarter. Our inventory peaked in 2025 due to the heavy influx of equipment shipments as some supply chains normalized post-pandemic, and since that time, we have reduced total inventory by $625 million over this eighteen-month period. I am extremely proud of the disciplined work our team has done across all of our locations to make that happen in what continues to be a very challenging demand environment. This progress illustrates our intense focus on creating a more resilient enterprise and positions us well for strong results when market conditions improve. Importantly, the quality of our inventory has improved meaningfully. It is leaner, it is fresher, and it has a better mix of in-demand categories. But we are not done. We still have work to do across certain used equipment categories and some of our slower-moving seasonal new equipment categories. As we head into fiscal 2027, our focus shifts from inventory reduction toward product mix optimization as we look to continue to improve inventory turns through minimizing aged inventory and thus decreasing interest expense. Our customer care initiative remains central to our operating strategy and continues to demonstrate its value while at the bottom of the equipment cycle. Our parts and service businesses are currently generating over half of our gross profit dollars, providing critical stability in these tough times our industry is currently facing. Our customer care initiative keeps us closely engaged with our customers, allowing us to add value to their operations and positioning us well for when equipment demand eventually recovers. With our hard work and dedication to superior customer service, we expect stability in our parts and service business in fiscal 2027 despite another expected decline in equipment industry volume in North America. With that, I will turn to our segments. In domestic ag, the environment continues to be very challenging for our grower customers ahead of the upcoming planting season. Our OEM partners are calling this year the trough of the cycle, and the guidance we are providing today reflects that. Commodity prices remain well below breakeven for most growers, which continues to be the fundamental issue facing the industry. When you add in persistently high interest expense, increased input costs, and limited government support, we expect many growers to remain conservative in 2027 in terms of their equipment purchasing decisions. With respect to potential government support, seeing E15 passed into law is currently our customers’ biggest priority, followed by further adoption of biodiesel and sustainable aviation fuel, or SAF. Allowing E15 usage year-round would help alleviate the ongoing oversupply of corn and assist with energy independence. Furthermore, recent spikes in diesel prices highlight the need for increased production of domestic biodiesel. In construction, infrastructure and data center work continues to provide a solid baseline of activity, but residential demand remains softer. Many of our customers are cautiously optimistic as they look at their schedules for the year ahead. Despite the mixed outlook in the end markets we serve, we remain optimistic about the long-term fundamentals of this business, which is underpinned by ongoing housing shortages, infrastructure spending, and continued data center construction. In Australia, the market conditions have been similar to what we are seeing domestically but exacerbated by elevated input costs for diesel fuel and urea. However, after two years of historically low industry volumes, we are starting to see some more encouraging signs, and recent rainfall has helped improve soil conditions and farmer sentiment after an extended period of dry weather. Overall, our expectations are for modest industry volume growth in fiscal 2027. We continue to like our position in Australia. It is a major agricultural export market with strong fundamentals, and our dual brand strategy with Case IH and New Holland, which is now available in six of our fifteen rooftops, gives us more reach and more ways to serve our customers across our footprint. In Europe, we are pleased to have the majority of our German divestiture behind us, with some remaining wind-down activities carrying into the first quarter. As we head into the spring planting season in our Eastern European markets, we are cautiously optimistic that we will see modest improvement in industry volumes coming off of trough levels but expect them to remain well below historical averages in Romania and Bulgaria. The modest overall industry volume growth should partially offset an expected year-over-year decline given the normalization of our Romanian business, which had an exceptionally strong prior year driven by the EU subvention programs. In closing, I want to express my sincere appreciation to our entire team. We dramatically surpassed our inventory reduction goals and made meaningful improvements to our operations, and we did it while maintaining the exceptional customer service that differentiates us in the market. Our team’s focus and dedication throughout this year is what made our successes possible. We are executing on our initiatives, managing what we can control, and positioning the business to perform well as market conditions improve. With the actions we have taken thus far, we will emerge from this period a stronger company. I will now turn the call over to Bo for his financial review. Bo Larsen: Thanks, Bryan, and good morning, everyone. Starting with our consolidated results for the fiscal 2026 fourth quarter, total revenue was $641,800,000 compared to $759,900,000 in the prior-year period, reflecting a 14.6% decrease in same-store sales driven by weaker demand in our domestic ag, construction, and Europe segments, partially offset by growth in our Australia segment. Gross profit for the fourth quarter was $87,000,000 compared to $51,000,000 in the prior-year period, and gross profit margin was 13.5%, approximately double last year’s rate. The year-over-year improvement primarily reflects the lapsing of inventory impairments and other inventory reduction efforts in the fourth quarter of the prior year that significantly compressed equipment margins. Equipment margins in the fiscal 2026 fourth quarter continued to face pressure from softer retail demand and remaining aged inventory; however, margins have improved as inventory has returned toward healthier levels. This equipment margin improvement is expected to continue in fiscal 2027. Operating expenses were $95,700,000 for the fourth quarter of 2026, down slightly from the prior-year period. Our headcount and discretionary spending continue to be down year over year as a result of disciplined expense management. Floorplan and other interest expense was $9,600,000, representing a decrease of approximately 27% on a year-over-year basis and a decrease of 13% on a sequential basis. This progress reflects the significant reduction in interest-bearing inventory levels over the past year. In the fourth quarter, net loss was $36,200,000 with loss per diluted share of $1.59, which includes the recognition of a $0.78 non-cash valuation allowance that resulted in an increase in income tax expense. Importantly, I would note that this allowance was greater than our initial expectation, which called for a $0.35 to $0.45 headwind that was built into our adjusted EPS guidance on the third quarter call. Big picture, it is non-cash and does not impact our operating performance or our cash flows. However, it is an important variable influencing our reported results versus the expectations we set; hence, my emphasis to ensure the linkage is clear. Adjusted net loss, which excludes charges related to our German divestiture and related wind-down activities but includes recognition of the $17,800,000 non-cash valuation allowance I just mentioned, was $32,500,000, or a loss of $1.43 per diluted share. This compares to last year’s fourth quarter adjusted net loss of $44,900,000, or $1.98 per diluted share. To summarize, our underlying revenue and profitability was in line with what we had expected, as evidenced by looking at our pretax loss, which, in addition to being consistent with our expectations, has improved significantly versus the prior-year period. Now turning to a brief overview of our segment results for the fourth quarter. Our Domestic Agriculture segment realized sales of $406,700,000, reflecting a same-store sales decline of 22.8%, driven by continued softening in equipment demand as a result of weak grower profitability. Segment pretax loss improved to $9,900,000 compared to adjusted pretax loss of $56,300,000 in the fourth quarter of the prior year, reflecting the actions we have taken to accelerate inventory reductions and the resulting improvement that we have achieved over the past twelve months. In our Construction segment, same-store sales decreased 4.6% to $90,200,000, driven by lower equipment sales. Our inventory reduction initiatives have weighed on equipment margins in this segment as well. Adjusted pretax loss was $1,000,000 compared to a $1,100,000 loss in the fourth quarter of the prior year. In our Europe segment, sales increased 5.2% to $68,800,000, which included a $4,300,000 net benefit related to foreign currency fluctuations. On a constant currency basis, revenue was more or less flat year over year, reflecting the normalization of demand following the EU Subvention Fund-driven strength, which ended in the third quarter of this year. Pretax income for the segment was $1,800,000 compared to a pretax loss of $1,800,000 in the fourth quarter of the prior year. Excluding restructuring and impairment charges associated with the Germany divestiture, adjusted pretax income was $5,400,000 in this year’s fourth quarter. In our Australia segment, sales increased 16.7% to $76,100,000 compared to $65,300,000 in the fourth quarter last year, including a negligible foreign currency impact. Pretax income for the fourth quarter of 2026 was $2,500,000 compared to $2,300,000 last year. Now briefly summarizing our full-year fiscal 2026 results, total revenue was $2,400,000,000 for fiscal 2026 compared to $2,700,000,000 for fiscal 2025. Adjusted net loss for fiscal 2026 was $50,600,000, or a $2.22 loss per diluted share, which includes the non-cash valuation allowance but excludes the charges related to the Germany divestiture I discussed earlier. This compares to an adjusted prior-year net loss of $29,700,000, or a $1.31 loss per diluted share. Now on to our balance sheet and inventory position. We had cash of $28,000,000 and an adjusted debt to tangible net worth ratio of 1.7 times as of 01/31/2026, which remains well below our bank covenant of 3.5 times. For the full fiscal year, total equipment inventory decreased by $201,000,000 to $725,000,000. As Bryan described, this more than doubled our $100,000,000 target for the year. It is a meaningful accomplishment in this environment, and it positions us well heading into fiscal 2027. Importantly, as part of that inventory reduction, we saw significant improvement in the amount of aged equipment we have on our lots. Aged equipment, which we consider to be equipment that we have had longer than twelve months, peaked in fiscal 2026 and declined by approximately 45% to $174,000,000 in the second half of this fiscal year. This improvement in the health of our inventories has started to show up in higher equipment margins in the back half of the fiscal year, but we still have work to do on reducing the amount of aged equipment we have, and we are confident we will continue to make progress on that in fiscal 2027. With that, I will finish by sharing our initial outlook for fiscal 2027. Starting with our top-line modeling assumptions across our segments, for the Domestic Agriculture segment, we expect revenue to be down in the range of 15% to 20%, which is consistent with the depressed cash crop industry outlook we have discussed today. Looking ahead, we believe we are back in sync with broader industry dynamics following our aggressive inventory reduction activity over the last year and a half. Our Construction segment is expected to be in the range of flat to up 5%, which aligns to the more favorable industry fundamentals that are benefiting from infrastructure and other sector-specific tailwinds. Our Europe segment is expected to be down in the range of 20% to 25%. This decline reflects our exit from Germany, which contributed approximately $50,000,000 of revenue this past year, and reflects the normalization of sales in Romania following the strong performance of fiscal 2025. As a reminder, this segment grew 45% in fiscal 2026. Excluding this difficult comparison, we expect modest improvements in industry volumes off cyclical lows, but the Eastern European market remains challenged by the same broader ag cycle dynamics as our Domestic Agriculture business. For our Australia segment, we expect revenue to be up in the range of 10% to 15%. This growth includes activity from the acquisition we completed last fall and the modest improvement in industry volumes that Bryan previously mentioned. From a margin perspective, our fiscal 2027 assumptions consider consolidated full-year equipment margin to be approximately 8.4%, which compares to fiscal 2026’s full-year consolidated equipment margin of 7.3%. This margin assumption reflects improved inventory health but still factors in the need to finish driving down aged inventory, and it also reflects broader industry expectations that North America industry volumes will be down 15% to 20%, which implies the lowest level since the 1970s. Given that context, we are happy with how well we are positioned to manage through the trough and confident we will return to normalized equipment margin levels as industry conditions improve. Operating expense dollars are expected to decrease year over year, although we will continue to invest in our customer care strategy, which is supporting stability in our parts and service businesses, and overall operating expenses are expected to be approximately 17% of sales. Floorplan interest expense is expected to decline by approximately 25% following the significant inventory reduction that we achieved last year. In absolute terms, interest expense will continue to decline as we further reduce aged inventory throughout the year. Bringing it all together, we are introducing a fiscal 2027 modeling assumption range of an adjusted loss of $1.25 to $1.75, which compares to the $2.22 adjusted loss we realized in fiscal 2026. It is worth noting that given the U.S. tax valuation allowance that was booked this quarter, we will have a very low tax rate for fiscal 2027, with most of the tax expense and/or benefit being recognized in our international segments. We also thought it would be helpful to provide some specific below-the-line expectations in our press release to help bridge to our adjusted EPS outlook. Further, we have also added adjusted EBITDA to our outlook to help provide a clear view of the operating performance we are achieving today and as we look into the future as the cycle unfolds. So, we are also guiding to adjusted EBITDA in the range of $17,000,000 to $29,000,000, which compares to the $13,900,000 we generated in fiscal 2026. In summary, despite the expectation for historically low industry volumes for our Domestic Agriculture segment, we are positioned to benefit from the aggressive inventory reduction we have taken over the last couple of years. Thematically, this positions us to improve margins this fiscal year and begin building back our earnings power at an accelerated pace as the cycle eventually turns back in our favor. For the time being, we continue to set prudent expectations and look forward to demonstrating our execution in the quarters ahead. This concludes our prepared comments. Operator, we are now ready for the question-and-answer session of our call. Thank you. Operator: We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. One moment please while we poll for questions. Our first question comes from the line of Liam Burke with B. Riley Securities. Please proceed with your question. Liam Burke: Thank you. Good morning, Bryan. Good morning, Bo. Bryan J. Knutson: Morning. Liam Burke: We are looking—I mean, we were looking at a best case in the corn pricing of about $5. It is inching up there. It is improving directionally. Not at $5 yet, obviously. But is there any movement by the farmer community to start getting interested in loosening the purse strings? Or does it have to be at $5 and above where everybody gets comfortable on the equipment purchase? Bryan J. Knutson: Yes. There has definitely been some upside here in the last week or two in the market, so that has been positive to see. Like you said, for a lot of growers, we are still below breakeven at these levels. And then you just take some of the uncertainty as well. So, you know, possibly somewhere between another $0.50 and a buck on corn here, which, with certain fundamentals coming together, looks like there is a possibility for at this point. So that too looks more optimistic than even a month ago, so we will see where that tracks. And then just consistency as well, just at this point with the long-term fundamentals that are in place, the current supply and demand, and the oversupply we have of corn and soybeans, directionally they are looking at, you know, just a short-term spike does not give them a lot of confidence. But as things progress here, if the conflict continues on and we see increased stability there and, again, prices uptick further, that definitely will help confidence, and that is something that we are monitoring closely. You know, we have also been to D.C. quite a bit in the last year lobbying for our farmers and trying to do what we can for commodity prices. We will be there again next week. Friday, March 27 next week, there is a Celebration of Agriculture Day at the White House that we are looking forward to. And as we get near the end of the month here, there should be some stuff coming out with the RVOs, and we have been really pushing for E15, passing that into law and greater adoption, and all the benefits that could come with that for reducing prices at the pump as well as energy independence, and, again, helping alleviate some of the ongoing oversupply of corn. Liam Burke: Great. Thank you. And understanding that the timing of an upcycle is difficult to predict, but you are comfortable in some future upcycle that you are sized right to maximize the leverage in how the business is run? Obviously, you have been managing for the down cycle, but you are in a position to maximize the upside leverage? Bo Larsen: Yes, absolutely. I mean, as we stand here today, we are excited as we look forward. Just for a little bit of context in terms of the guidance for this year, North America industry volume down 15% to 20%—what does that really mean? Well, calendar year 2025, the year that just ended, industry volume on the major categories that help drive our business was already 10% lower than the trough in calendar years 2015–2016, and so this year, if you assume that down 15% to 20%, you are talking about industry volume 25% lower than the prior trough. So as we stand here as well positioned as we are, obviously, we want the P&L to reflect more, but we are extremely confident in terms of how quick that can turn around and really flexing our muscle on the upside as things improve even modestly in the right direction. So, sure, everything we have been working towards the last two years is not just about managing the downside, but it is about making sure that we are running things ready for when things do turn around. All of our efforts on customer care strategy, driving the parts and service business—how do we support customers well, how do we gain maximum share of wallet by delivering what they need—all of that stuff is coming along, and I can appreciate that it is not necessarily something that you or investors get to see every day. But we just get more and more confidence and more excitement about the team we have, the playbook that we have been executing, and how well positioned we are to really show our strength as ultimately, you know, growers get support in the right direction and they see improved profitability. Liam Burke: Great. Thank you. Operator: Thank you. Our next question comes from the line of Ted Jackson with Northland Securities. Please proceed with your question. Ted Jackson: Thanks very much. I have got a few. I am going to start with the bigger one, then some that are just more around the model. On the larger, you know, in terms of the guidance that you have set, I am curious with regards to what is baked into it rather than just the OEM guides itself. I mean, are you assuming that China comes in and honors its commitments to buy more beans as we roll through 2027? And is there anything baked into it with regards to E15 or the aviation fuel? That is my first question. Bryan J. Knutson: Yes. Thanks, Ted. Yes, so generally speaking, what we do have baked in is that China essentially honors the commitments that have been put out there, not materially any more or less than that. Certainly, if they did come to the table with more, that would help. And then nothing on E15, so certainly that would be a shot in the arm and upside to what we have guided. Ted Jackson: And then just another one kind of at a macro level. With the war we have with Iran, which is, you know, now we are in the several weeks of it, have you noticed any perceived shift in terms of sentiment within your territories with regards to that? I mean, you know, all I get is stuff out of the paper, and I live in a pretty left-leaning local paper environment, so most of what I get is pretty negative with regards to the farmer, but is the farmer feeling anything in terms of impact at this point with regards to higher fertilizer prices, diesel prices? I mean, we are not even in the planting season. I mean, has there been some kind of shift, some kind of additional concern? Just a little color there. Bryan J. Knutson: Yes, certainly a few moving pieces there, and even differences from our U.S. farmers to our Australian farmers. So just looking at some of the routes through the Strait of Hormuz there, and you look at that impacting fertilizer and fuel prices even more for our Australian customers, still able to get it, but certainly a delayed and elevated pricing. And then with similar impacts to Europe and then the U.S. there. So those are some additional increases to input costs that are already high. You look at over the years here, fertilizer has been the input that has generally gone up the most and has the most impact on their P&L. And so with that becoming harder to get here and fertilizer further is also a negative. But overall, actually, as the corn market and other commodities tick up here and kind of follow along with the price of crude, that has an opportunity to be a positive as that expands and maybe potentially here outpaces the increase in inputs, which is certainly a likely scenario. So there is definitely a number of things in play there, Ted, but a scenario where it actually is likely potentially more positive for our growers. Ted Jackson: Would you think it would be neutral and it may be more positive? But it sounds like it seems like in your view at worst, it is a net— Bryan J. Knutson: Yes. I think it depends how long it lingers on and what happens with the commodity markets there. It does start to spread a bit. So as corn goes to—if corn were to go to six, and then it lingered on further and potentially to seven, as an example, it starts to pull away from what the increase in fertilizer prices has been, especially for a lot of our growers here in the U.S. and the Midwest. They prebuy a good chunk of their fertilizer, so it could end up being more of a 2027 calendar impact for them on that. So, again, as weird as it sounds, there is some upside potential there depending on how this plays out for our growers. Ted Jackson: Okay. And then just a couple of model questions, and I will let other people take over. Bo, I was curious what the view was for CapEx for 2027 and then maybe a discussion about tax rate given all the kind of moving parts in there either at a percentage rate or something around a dollar. Bo Larsen: Yes. So first for CapEx, I mean, in this environment, as you would imagine, being prudent and pulling back. So excluding any investment in rental fleet, which kind of comes in and out, we are guiding to about $15,000,000 of CapEx, really just pulling back to prudent levels there a little bit on facility and some vehicles, for example, but smaller than I would say would be typical. From a tax rate perspective, there can certainly— I mean, as a general statement, the tax rate in the U.S. is expected to be near zero. There will be a little bit of noise there with some deferred, but essentially, the valuation allowance is largely wiping that out. And given the significance of the U.S. to the rest of it, it really drags the whole thing down near zero. So in the release, we have guided to a range of $0 to $1,000,000 of total tax expense. From an Australia perspective, no real noise there; you can think about their rate in that 30% range. And then from a Europe perspective, again, their blended rate in the high teens is what I would expect. Balancing all out, a lot of this stuff is netting down close to zero would be our expectation for the year. One more thing on that too, I guess, just to make it clear: the need for a valuation allowance is kind of an established standard that has been out there in terms of a three-year rolling loss. We went through the same thing in the last downturn, put on a valuation allowance, and a couple years later took it off. You know, the cyclicality of our business and especially from a dealer P&L perspective, some could certainly argue that this three-year rule is not necessarily accomplishing what it is trying to. And long story short, all I am trying to say is high degree of confidence that a couple years later, we are going to take that back off, and you are going to see a big positive, which, of course, we will call out as releasing the valuation allowance. Ted Jackson: Okay. Thanks for the answers. I will get out of line. Thank you. Operator: As a reminder, if anyone has any questions, you may press 1 on your telephone keypad to join the queue. Our next question comes from the line of Ted Jackson with Northland Securities. Please proceed with your question. Ted Jackson: Dang. I own you guys. Well, let us talk about some sports stuff. Now other questions for you, Bo, to turn the model. So again, depreciation and amortization, and then the impairment charges. Can you give some kind of color on what you see there rolling through in 2027? And then over on OpEx, when I think about OpEx, you are going to have OpEx down. You are going to have investments, though, and some other things. So I assume the down is on sales commissions given the volumes, but maybe talk a little bit about how, as you think about sales—typically, you kind of thought about your sales portion of your OpEx or your selling commission being about 25% of equipment gross margin, but does that kind of assumption still hold as we think about 2026? Or given the weak volumes, are you going to have to kind of make up a little bit to make sure those guys get a living? Those are my next two questions. Bo Larsen: Yes. So I will break those into pieces. You will have to remind me if I forget one. I will start on the commission side of things. Recently, our commission has been north of that 25% mark. In a healthy environment with normal margins, it is in that 25%. So I would say we are coming down closer to the 25%. We have been elevated above that but kind of normalizing here as our margins are coming up. So that is how I would think about that from a commission perspective. You know, just broadly on OpEx—and, again, this is not just something that changes in a month. We have been at this now over the last couple years as we have looked at where the industry has been going and what we have needed to do. Largely speaking, the rest of our OpEx is people, and it is our people that are helping support our customers. So we have managed headcount down prudently. But back to the question that kind of started all of this—are you guys positioned for when things turn around—and that is the balance that you have to strike. We have got a great team that supports our customers well across our entire footprint and all of our geographies, and just managing prudently down as much as we can but without overdoing it, that is kind of the balance we have struck. So that drives a lot of the decline in OpEx there. So from a 17% perspective, in absolute dollar terms, I feel good about the work we have done. The 17% is more reflective of the pullback we are expecting here in North America ag. Remind me where we started here—you had two others. Ted Jackson: Yes. I asked just about, kind of just picking in 2027, how to think about depreciation and amortization as we are driving through towards our EBITDA numbers. And then, you know, for the last several quarters, a lot of impairment charges rolling through. Are we going to continue to see that through 2027? Or is that going to dial back? Bo Larsen: Yes. Good question. So a good portion of the impairment charges were specifically related to the Germany divestiture and wind-down activities. There is a small amount of Germany activity left here this year. I do not expect it—it will be a negligible P&L impact. And then from other impairments, I would say expecting that to be a little bit lower as well, I mean, south of $2,000,000 in total is kind of the thought process there, just as you are looking at your normal impairment analysis based on where you are at from an industry perspective. So yes, I guess relief in that regard. And then—sorry, there was one other one here. What did you say before that? Ted Jackson: No, I just kind of asked—I had you, and it seems like it is my Q&A. I have just kind of decided I would ask what you thought depreciation, amortization might be. Bo Larsen: Yes. Depreciation and amortization has been kind of in the mid-thirties, $35,000,000-ish. Expecting it to come down slightly, really not changing drastically there. Ted Jackson: Okay. And then the impairment, just to make sure I understand, when I think about 2027 aggregate across the year, you see like a continued amount of small impairment charges of roughly $2,000,000 across the whole— Bo Larsen: Yes, and that is really fairly similar to what this year was ex-Germany activity as well, so not much there. Ted Jackson: Okay. I noticed I am the only guy getting Q&A out before and after the—right—prewriting my questions. So, hey, well, you know, one thing, just taking the opportunity for the broader audience and all of the analysts covering us—across our sales mix by geography: ag down 15% to 20%, CE flat to up 5%, Europe down 20% to 25%, Australia up 10% to 15%. Blended average, wise, midpoint of the guidance implies revenue down 14% to 15%. But I would say, as we have thought about it—and it is certainly not a perfect science quarter to quarter—I am thinking more Q1 down like 20%-ish and Q2, Q3, Q4 somewhere in the down 12%–13% range that gets you to the full year. In other words, Q1 comp down sharper, and just wanted to call that out so people work that into their expectations. If you think about just how the cadence of last year was, first half had about 47% of our revenue, whereas historically, it is about 45%, and that was just the theme of last year and kind of softening as we went through the year, so normalizing that a bit. Just wanted to put that out there. Bo Larsen: Hey, that does bring up one kind of just little tip and tiny question. You know, you typically do have a stronger fourth quarter. You did have one this year. I would assume most of it this year was less about farmers coming in flush and buying and more about Titan Machinery Inc. trying to push off in your efforts to take your working capital to where you want it to be. So, one, am I correct with that? And then, two, as I think about 2027, I mean, we are going to be at a point where I would imagine by the time we exit the year, recovery or not, your inventories are going to be aligned. The trough is well beyond a typical trough of a cycle. Do you see in the fourth quarter of this year—how are you going to have more of an impact with regards to some of the things with big, beautiful build that you would see a little bit more of a flush from the farmer in the fourth quarter 2027? So those are my two. It is kind of a little color maybe on 2026 and how you think about 2027 in the fourth quarter. Bryan J. Knutson: As you pointed out, Ted, in Q4—again, I just give tremendous compliments to our team and the discipline that we did. When we came out at the beginning of the year with our $100,000,000 inventory reduction target, that was an extremely lofty goal, and our team more than doubled that reduction. That was due to our efforts in, you know, really boots on the ground and creative marketing campaigns and pulling growers off the sidelines and getting rid of that excess inventory. So, great execution. And like you said, that was not just farmers coming in in Q4 and looking to purchase. And then as we— that does, again, position us tremendously well. Yes, I think you hear that confidence from us, how good we feel about where our business is positioned right now. We have got a little bit of cleanup yet to do in a select few categories and some certain seasonal new equipment categories. We will work through that here throughout this year, but that is really fine-tuning. Every dealer I have ever seen always has a mix of that in any economy. So we are just going beyond even what we normally would do. We are just getting into an extremely healthy state here. So we are positioned when this does uptick, and we have done many of the things internally—very stringent cost controls and expense reductions, as Bo pointed out. And we will stay lean here, and then, as it recovers, which at some point it will, as we talked about, the replacement demand just continues to grow here and just waiting for that uptick in profitability for our growers, as it depends on the commodity prices and, again, how that ties back to the supply and demand ratios. And then our cattle producers, livestock producers, are still sitting quite well, and we look forward to that continuing. The more years that they do well, the more they will start to spend, so there is certainly potential there. And then the fundamentals in construction—you know, there is a big data center that has been going on here for a while two hours south of our office, and an hour and a half here another one going up right in Fargo that is starting here, a $3,000,000,000 data center, and, again, throughout our Midwest footprint. And then just overall, some of the things with infrastructure and, at some point here, we have got to address the residential housing shortage, so that is also a good long-term fundamental for construction. So there are a lot of good fundamentals in play here. Again, we will see what happens with the commodity prices and with the RVOs here, especially in, potentially, as I mentioned, as soon as March here. E15 is a great opportunity for our country, and it is right there, and it would really help alleviate this oversupply. And if we address some fertilizer constraint and price issues, which, again, through further research and development and some other things could help with, then the table is really set. I mean, the American grower can raise a lot of corn if given the opportunity, and we can supply the world a lot of corn and beans and other commodities. And the way the equipment is advancing and how professional our growers are— the stage is set very well here. As we go into 2027, our company has never been positioned better. Bo Larsen: One more thing real quick just from a Q4 perspective. Q4 is a big presale quarter, and it was last year as well, so a lot of equipment that was being delivered was deals that were being discussed in the summer and early fall. So I would point to the same thing here. This summer and early fall will really set the stage for what the end of the year looks like. Obviously, there can be some incremental buying at end of the year, and there always is, but that is a big one. We set prudent expectations based on where the market is at today. Bryan mentioned several factors; we have talked about several factors today that can move it north of that. We have set expectations based on what has materialized thus far. But, as usual for every year here, as we really get into the summer and we see what that presale looks like, we work with OEMs to really see where the market is—that will set the stage more for what the back end of the year looks like. Ted Jackson: Okay. Thanks for everything. Bryan J. Knutson: Thanks. Ted Jackson: Thank you. Operator: And we have reached the end of the question-and-answer session. Therefore, I will now turn the call back over to management for closing remarks. Bryan J. Knutson: Again, I just want to thank our team for their buy-in, tremendous execution, and discipline to make the hard decisions and put forth all the effort they did to position us where we are today. And I thank everybody on the call for your participation and look forward to updating you next quarter on our results. Operator: Thank you. And this concludes today’s conference, and you may disconnect your line at this time. Thank you for your participation. Have a great day.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Curis, Inc. fourth quarter 2025 business update conference call. At this time, all lines are in a 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 today, Thursday, 03/19/2026. I would now like to turn the conference over to Diantha Duvall, Curis, Inc.’s Chief Financial Officer. Please go ahead. Diantha Duvall: Thank you, and welcome to Curis, Inc.’s fourth quarter 2025 business update call. Before we begin, I would like to encourage everyone to go to the Investors section of our website at https://www.curis.com to find our fourth quarter 2025 business update press release and related financial tables. I would also like to remind everyone that during the call we will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and actual results may differ materially. For additional details, please see our SEC filings. Joining me on today’s call are James E. Dentzer, President and Chief Executive Officer; Jonathan B. Zung, Chief Development Officer; and Ahmed M. Hamdy, Chief Medical Officer. We will also be available for a question-and-answer period at the end of the call. I will now turn the call over to Jim. James E. Dentzer: Thank you, Diantha. Good afternoon, everyone, and welcome to Curis, Inc.’s fourth quarter business update call. We continue to make steady progress in our TakeAim Lymphoma study in primary CNS lymphoma, one of the rarest and most difficult to treat of the NHL subtypes. As a reminder, the TakeAim Lymphoma study is a single-arm registrational study with an ORR endpoint that is evaluating emavusertib in combination with ibrutinib after a patient has progressed on BTKi therapy. After collaborative discussions with the FDA and EMA, we expect the study to support accelerated submissions in both the US and Europe. We continue to make good progress on enrollment in this registrational study and appreciate the ongoing support of our clinical investigators, key opinion leaders, and regulatory authorities. As you recall, last quarter we engaged with a number of KOLs who were excited and highly supportive about expanding our emavusertib studies into additional NHL subtypes. They were especially interested in exploring emavusertib’s potential to fundamentally change the treatment paradigm for CLL patients, where the current standard of care is BTKi. Over the last decade, BTK inhibitors have become the standard of care in CLL and NHL because of their ability to help patients achieve objective responses. However, these responses are typically partial responses, not complete remission. The result is that patients treated with a BTK inhibitor end up having to stay on it in chronic treatment for the rest of their lives. Additionally, because they never achieve complete remission, many of these patients develop BTKi-resistant mutations, and ultimately their disease progresses. We are looking to improve upon the current standard of care by adding emavusertib to a patient’s BTKi regimen, applying a dual blockade to the two biologic pathways driving CLL. This dual blockade can enable patients whose NHL subtype partially responds to a BTK inhibitor to achieve deeper responses with the combination, including the ability to achieve complete remission or undetectable disease and the potential for time-limited treatment. If we are successful, adding emavusertib to BTKi could change the treatment paradigm in CLL, reducing the risk of developing a treatment-resistant mutation and improving a patient’s overall quality of life. The first step in testing this hypothesis in CLL is our proof-of-concept study in patients currently on BTKi monotherapy who have achieved partial remission but have been unable to achieve complete remission or undetectable MRD. We have begun activating clinical sites in the US and Europe and expect to have initial data at the ASH Annual Meeting in December. With that, let us turn to AML. At the ASH meeting in December, we presented data for our ongoing AML triplet study, which is evaluating the triple combination of emavusertib with azacitidine and venetoclax in AML patients who have achieved complete remission on aza/ven but remain MRD positive. These data were for the first two cohorts where patients received emavusertib for either seven or fourteen days in a 28-day cycle in addition to their azacitidine and venetoclax treatment. In this study, five of eight evaluable patients were able to achieve MRD conversion; that is, they were able to convert from MRD positive to undetectable disease. We are very encouraged by these initial data and the exciting potential of combining emavusertib with azacitidine and venetoclax. As you can see, we had a very productive quarter, and we look forward to a very exciting 2026 as we are advancing our registrational study in PCNSL and initiating our proof-of-concept study in CLL. With that, I will turn the call over to Diantha for the financial update. Diantha Duvall: Thank you, Jim. Curis, Inc. reported net income of $19.4 million, or $1.23 per share, for Q4 2025, as compared to a net loss of $9.6 million, or $1.25 per share, for the same period in 2024. The net income in 2025 is due to a $27.2 million one-time non-cash gain attributable to our sale of Erivedge to Oberland. Curis, Inc. reported a net loss of $7.6 million, or $0.58 per share, for the year ended 12/31/2025, as compared to a net loss of $43.4 million, or $6.88 per share, for the same period in 2024. Research and development expenses were $5.8 million for Q4 2025, as compared to $9.0 million for the same period in 2024. The decrease was primarily attributable to lower manufacturing, employee-related, and clinical costs. Research and development expenses were $28.3 million for the year ended 12/31/2025, as compared to $38.6 million for the same period in 2024. General and administrative expenses were $2.9 million for Q4 2025, as compared to $3.4 million for the same period in 2024. The decrease was primarily attributable to lower employee-related costs. General and administrative expenses were $14.0 million for the year ended 12/31/2025, as compared to $16.8 million for the same period in 2024. Curis, Inc.’s cash and cash equivalents as of 12/31/2025, together with initial gross proceeds of $20.2 million received in January 2026 and expected gross proceeds of up to an additional $20.2 million from the exercise of the January 2026 PIPE financing Series B warrants upon the public announcement of dosing of the fifth CLL patient in our TakeAim CLL study, expected later this year, should enable our planned operations into 2027. We will now open for questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star 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 star followed by the number two. If you are using a speaker phone, please lift the handset before pressing any keys. One moment please for your first question. Operator: Our first question comes from the line of Kripa Devarakonda from Truist Securities. Your line is now open. Kripa Devarakonda: Hi, guys. Thanks so much for taking our question, and congrats on the progress. Just one quick question in terms of how you are thinking about prioritizing the trial progress between the pivotal PCNSL versus CLL and AML? James E. Dentzer: Sure. Thanks for the question, and thanks for calling in. As you can imagine, we are very thoughtful about how we are prioritizing our resources. The January financing puts us on a very solid course, but we are still prioritizing our resources to be as efficient as we can in our spend. With that said, we are definitely prioritizing NHL ahead of AML. Right now, we have a dual-pronged strategy where we are pushing forward very aggressively in PCNSL—that is one of the smallest and most rare of the subtypes of NHL—as well as CLL, which is inarguably the largest. PCNSL, of course, is going to be for registration approval, and we are moving ahead right on track on that one. With CLL, we have just started that study. In terms of spend, I would say the bulk of our spend is going toward PCNSL, and in these early days CLL is much smaller, but I imagine that over time that will get larger. My hope is that by the time we get to the end of the year, we will have made significant progress toward a registrational data set in PCNSL, and hopefully have some initial data, our first view, at CLL. Those two are clearly our first priorities. As we are able to raise more cash, and we can get more work started, I think that is when we start to look at AML. Right now, the bulk of the work in AML is more analyzing what steps we want to take as we have more resources and what makes the most sense, and making sure that operationally our focus is on PCNSL and CLL. Operator: Our next question comes from the line of Yale Jen from Laidlaw & Company. Your line is now open. Yale Jen: Great. Thanks a lot, and I appreciate taking the questions. Just two up here. The first one is in terms of the PCNSL. You mentioned the enrollment is on track. Could you give us any updates at this moment? Then I have a follow-up. James E. Dentzer: Sure. We are trying not to give enrollment on PCNSL other than we are on track for what we have suggested. As you all know, it is very hard to find these patients. We get a patient or two a month, but it is pretty choppy. You might go one month where you do not get any patients, and then the next month you get three. I would say right now we are enrolling patients, and on balance I think everything is going according to plan. If we are correct, I have said in the past that we are somewhere in that 12- to 18-month range from full enrollment. That would place us at full enrollment with the potential to file after six months of following patients somewhere in the 2027 range. We could well be in a position by the end of the year that we are really close to that full enrollment number, and we have some nice data to talk about. But I do not expect we are going to have a whole lot to say ahead of then. Yale Jen: Okay. Great. That makes a lot of sense. Then maybe just a quick question for modeling for next year. Given that you have this $27 million non-cash item as well as reduced revenue in the fourth quarter of last year, should we model that there will be no meaningful revenue for 2026 and maybe beyond before your product approval and other stuff? Thanks. Diantha Duvall: Sure. So, Yale, that is correct. We will have no meaningful revenue. Revenue effectively ended in November 2025. From a cash flow perspective, remember that we had sold the right to about 85% of those royalties to Oberland prior to giving them the remaining 15%. From a cash flow perspective, the remaining 15% of those cash flows are now going to Oberland. There will be no revenue and the remaining 15% of cash flows, but it is not a meaningful impact to cash flows. James E. Dentzer: Yes. What you saw in the release is really the non-cash wind-down of that arrangement. It was a very small revenue stream associated with Erivedge in the last couple of years, and we sold what was remaining to Oberland to clean it all up. We are now completely independent of the Erivedge stream. Yale Jen: Okay. Great. That is very helpful, and congrats with the good balance sheet and the advance of programs forward. James E. Dentzer: Thank you. We really appreciate that. Operator: Our next question comes from the line of Li Watsek from Cantor. Your line is now open. Tanya Brown: Hey, team. This is Tanya Brown around for Li. Congrats on the progress. Just a question from us on the expected or potential update at ASH 2026 on CLL. Just curious what kind of data we should be expecting, how many patients you expect to be able to share at that point, and how you would determine success at that early stage? James E. Dentzer: Sure. I am going to start answering that one, and then I will ask Dr. Hamdy to chime in as well. First and foremost, let us not get too far ahead of ourselves. That is in December, and I think as we get closer we can provide more guidance on what we are looking to talk about. At this stage of the game, it is an execution story. We are getting our sites open, we are enrolling patients, and hoping to be in a position that we have some data to talk through in December. This is more about our plans and our expectations at this point. As we get closer to the conference, of course, we can narrow that down and talk a little more specifically. The second part of your question—what would define success in this first proof-of-concept study—that is a wide-ranging one, and I might ask Dr. Hamdy to chime in on his thoughts. Ahmed M. Hamdy: Sure. Thanks, Jim. As Jim mentioned earlier, we are trying to change the CLL treatment paradigm. BTK inhibitors only get patients to partial responses with MRD positivity. We are aiming to deepen that response and see that patients are moving toward a complete remission and, hopefully, MRD negativity. We still do not understand the kinetics of response in the combination, where we are aiming to inhibit both pathways—the BCR signaling pathway and the TLR pathway—aiming to inhibit the NF-kappa B pathway, which is a driver of the disease, at a much deeper level. We have to dose a lot more patients to understand how fast that conversion from PR to CR happens, and I do not intend to venture there just yet, but I am quite hopeful that by ASH we will have some meaningful data to present. James E. Dentzer: Let me expand on that a little bit more because I know at least for some of the investors who may be listening to this call, a little reminder is helpful. As Dr. Hamdy mentioned, we know there are two pathways driving disease in these patients—the BCR pathway and the TLR pathway. Historically, the standard of care is BTKi. BTKi blocks the BCR pathway, and it works; you are blocking one of the two pathways driving disease. That said, it is also why patients are only getting partial response; they are not getting complete remission because they are only blocking one of the two pathways. In our previous studies, and certainly in our ongoing study in primary CNSL—another NHL subtype where standard of care is BTKi—if you add emavusertib to it, if you add a blockade of the TLR pathway on top of the blockade of the BCR pathway, you get deeper responses. We have seen complete remission, and we have seen time-limited treatment. Our goal is to see if we can repeat that success across all five of the subtypes of NHL where BTKi gets used. The biggest of them by far is CLL. We are very excited about getting into that study and seeing what effect we can have. At this stage, we are learning. The mechanism tells us that it should work. Our previous studies tell us it should work. We cannot wait to see the data, frankly. I hope that longer explanation is helpful. Tanya Brown: May I ask a follow-on? James E. Dentzer: Please. Of course. Tanya Brown: Have you dosed your first patients yet in this study? James E. Dentzer: We have not disclosed that yet. What we are saying for now is that we are in the process of initiating the study. We have sites opening in the US and Europe, and our hope is to have data by the time we get to ASH. We are going to try to get out of the path of month-by-month reporting on where we are in enrollment, if that is alright. Tanya Brown: Thank you so much. James E. Dentzer: Great. Thank you. I really appreciate it. Operator: There are no further questions at this time. I will now turn the call over to James E. Dentzer. Please continue, sir. James E. Dentzer: Thank you, and thank you, everyone, for joining today’s call. As always, thank you to the patients and families participating in our clinical trials, to our team at Curis, Inc. for their hard work and commitment, and to our partners at Aurigene, the NCI, and the academic community for their ongoing collaboration and support. We look forward to updating you again soon. Operator? Operator: Thank you. Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Scholastic Corporation Reports Third Quarter Fiscal Year 2026 Results. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question-and-answer session. To ask a question, please press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. I would now like to hand the conference over to your speaker today, Jeffrey Mathews, Executive Vice President, Chief Growth Officer, and President, Scholastic Education. Jeffrey Mathews: Hello, and welcome everyone to Scholastic Corporation's fiscal 2026 Third Quarter Earnings Call. Today on the call, I am joined by Peter Warwick, President and Chief Executive Officer, and Haji Glover, our Chief Financial Officer and Executive Vice President. As usual, we have posted the accompanying investor presentation on our IR website at investors.scholastic.com. You may download it now if you have not already done so. We would like to point out that certain statements made today will be forward-looking. These forward-looking statements, by their nature, are subject to various risks and uncertainties, and actual results may differ materially from those currently anticipated. In addition, we will be discussing some non-GAAP financial measures as defined in Regulation G. The reconciliations of those measures to the most directly comparable GAAP measures can be found in the company's earnings release and accompanying financial tables filed this afternoon on a Form 8-K. This earnings release has also been posted to our Investor Relations website. We encourage you to review the disclaimers in the release and investor presentation, and to review the risk factors disclosed in the company's annual and quarterly reports filed with the SEC. Should you have any questions after today's call, please send them directly to our IR email address, investor_relations@scholastic.com. I will now turn the call over to Peter Warwick to begin this afternoon's presentation. Peter Warwick: Thank you, Jeff. Good afternoon, everyone, and thank you for joining us. In the third quarter, Scholastic Corporation advanced our strategy to support long-term growth and enhance shareholder value. A key milestone was the successful completion of our sale-leaseback transaction involving our New York City headquarters and Jefferson City distribution facility last December. This unlocked more than $400 million in net proceeds and represented an important step in optimizing Scholastic Corporation's balance sheet. Consistent with our disciplined approach to capital allocation and our belief that the company's shares represent a highly accretive investment, we moved quickly to return cash to shareholders under an upsized $150 million share repurchase authorization we have nearly exhausted. We have already bought back more than 4,400,000 shares for approximately $147 million in the open market, or $33.30 per share on average. With a view toward further optimizing our balance sheet and enhancing shareholder value, today, we are announcing long-term net leverage targets for the company, as Haji will discuss. As a next step, the board has authorized a $300 million share repurchase authorization comprising a $200 million modified Dutch auction tender offer, with the remaining $100 million to be used for repurchases in the open market. The offer price range has been set to $36 to $40 per share. Assuming it is fully subscribed, the tender offer would represent approximately 25% of Scholastic Corporation's shares outstanding as of quarter end. This is yet another step in the capital allocation strategy we have been executing since fiscal 2022, already returning over $650 million to shareholders through share repurchases and dividends while continuing to invest in initiatives that support long-term growth. Haji will provide additional details later in the call. Turning to our operating performance, third quarter results were in line with expectations as we continued executing on initiatives supporting long-term growth and margin expansion. As a reminder, this is typically one of our smaller quarters for revenue and profitability given the seasonality of our business. Based on our performance to date and outlook for the remainder of the year, we are reaffirming our fiscal 2026 adjusted EBITDA and free cash flow guidance. We expect full-year revenue to be approximately flat compared to the prior year, reflecting year-to-date softness in Education and very strong comps in Trade a year ago. Let me now turn to our segment performance, beginning with Children’s Book Publishing and Distribution. Last quarter, Children’s Book Group combined powerful publishing and beloved franchises with unique school-based distribution channels. Through Book Fairs, Trade publishing, and our proprietary school network all working together, we reach children and families and connect them with stories in ways no other company can replicate. Book Fairs once again demonstrated the strength of Scholastic Corporation’s unique school-based channels. Fair counts continue to grow year to date, and we are benefiting from higher revenue per fair, strategic merchandising and pricing initiatives, lower cancellations, and greater adoption of eWallet. That is a digital payment account that allows families to preload funds for students to spend at the fair, increasing participation and simplifying transactions. We have also experienced strong redemption of Scholastic Dollars, the reward currency schools receive for hosting Book Fairs. A key innovation this year is the launch of Discovery Fairs, the first new format we have introduced in more than a decade. These fairs feature curated collections that focus on science, technology, engineering, arts, and math, alongside hands-on science and art kits designed to bring discovery-based reading and learning into the fair experience. Early pilots have already shown robust demand. Building on the partnership we announced last quarter with sensation Mark Rober, which reaches more than 70 million subscribers, we are beginning to bring his highly popular science and engineering brand CrunchLabs to students through Scholastic Corporation’s publishing and school channels, including new books, activity guides, and Klutz-branded products. As we look ahead, Book Fairs remain one of Scholastic Corporation’s most powerful channels to reach children and families and represent a meaningful long-term growth opportunity for the company. In Book Clubs, our other school-based channel, results continue to reflect evolving classroom and teacher engagement patterns. The program is expected to reach nearly 300,000 teacher sponsors nationwide this year, providing Scholastic Corporation with a direct connection to classrooms across the country. We saw sequential improvement from the fall as recent program improvements, including updated flyers, improved digital ordering, and targeted promotions, strengthened teacher engagement and participation. In Trade publishing, Scholastic Corporation’s publishing portfolio and global franchises continue to resonate strongly with kids around the world. Third quarter results were solid, though down relative to the prior year, reflecting shifts in the publishing calendar compared to a year ago, along with the impact of adverse winter weather and other short-term impacts on the retail book market. Following the successful launch of Dav Pilkey’s Dog Man: Big Jim Believes in quarter two, momentum across Pilkey’s publishing universe remains strong. The latest title in the series held the number one children’s title for seven consecutive weeks and was the number one overall title across the industry in both November and December, while backlist titles also continued to perform strongly on bestseller lists. Looking ahead at quarter four, Pilkey’s universe expands into the fast-growing category of children’s manga with Captain Underpants: The First Epic Manga publishing in April. The Hunger Games franchise continued to generate strong global demand with the latest title in the series, Sunrise on the Reaping. This book has now sold approximately 5.4 million copies and remained on bestseller lists since its release last March, including 50 consecutive weeks on the young adult bestseller list and currently ranking number three nearly a year after its initial release. More recent special editions, as well as the award-winning audiobook, have helped sustain momentum across the series. We expect continued Hunger Games momentum from paperback and movie tie-in editions ahead of the Lionsgate film adaptation of Sunrise on the Reaping this fall. Our Wings of Fire series also continues to engage readers globally with the recent release of the graphic novel edition of Talons of Power, which debuted at number one overall in December and currently holds the number three position on the New York Times Graphic Books and Manga bestseller list. Furthermore, in the first week of the new quarter, we published Wings of Fire No. 16: The Hybrid Prince, the highly anticipated new installment in the series and the first in several years. The book debuted as the number one title overall across both children’s and adult categories, already captivating avid fans and new readers of this thrilling dragon series around the world. Turning now to Scholastic Entertainment. In the third quarter, this division continued expanding the reach of our IP across digital platforms and new audiences. We advanced our pipeline of media development and production as we begin work on major new projects expected to be announced in the coming months. Greenlight activity also is improving, and with it, the strength of our development slate, supported by our in-house production and animation capabilities. We grew viewership and reach across our digital platforms, particularly YouTube and Scholastic TV, as families continue discovering Scholastic Corporation’s stories and characters in new ways. Our Scholastic-branded YouTube channels generated more than 85 million views in the quarter, up over 200% year over year, with audiences spending over 21 million hours watching our content. On YouTube last quarter, we expanded our network of branded channels with two new curated hubs, Scholastic STEAM and Scholastic International, surfacing our content to a larger global audience. At the same time, our Scholastic-branded set-top TV app continued to scale as a trusted destination for families seeking high-quality children’s programming in an increasingly crowded digital media landscape. The platform now offers more than 800 episodes across Scholastic Corporation properties and is available across major streaming ecosystems, including Roku, Apple TV, Fire TV, and Android platforms. Since launching this fall, the app has already generated nearly 100 million minutes watched and more than 5 million views, with engagement averaging about 30,000 views per day. Growing audiences across our digital platforms create new opportunities to extend our stories and characters across books, digital platforms, television, and consumer products. One example of this is our Clifford the Big Red Dog franchise, where increased engagement across digital platforms and media is helping introduce the character to a new generation of kids and reinforcing demand for the books. Book sales across all Clifford titles have grown meaningfully this financial year compared to the prior year. Turning now to Scholastic Education, where we are making meaningful progress executing our strategy to transform the business for growth. Revenues were down 2%, representing a significant deceleration of the declines we saw in the first and second quarters of the year. Importantly, profitability improved year over year. In January, we appointed Jeff Mathews as the permanent President of the division, after he stepped in to lead this division on an interim basis last June. Jeff also continues in his role as Chief Growth Officer. Under his leadership over the last nine months, the team has refined the go-to-market strategy and streamlined the product portfolio to align more closely with district and school needs. We have also taken significant steps to sharpen our focus on the areas where Scholastic Corporation is best positioned to help children achieve their full potential through literacy, partnering with districts, schools, teachers, families, and communities while improving the cost structure and operating discipline of the segment. District and school spending on supplemental curricula and resources, including our instructional programs, classroom libraries, literacy resources, and professional services, remains tight given continued funding uncertainty and the ongoing transition of the U.S. education system to science-based approaches to literacy instruction. As seen in last quarter’s results, more effective and efficient go-to-market execution and stronger product alignment with the science of reading are having a positive impact. We continue to close the gap with the prior year as we stabilize this portion of the business and position ourselves for growth in a recovering market. It is important to remember, however, that as a product category, supplemental curricula and resources represented only approximately 25% of Scholastic Education’s revenues last year. Unlike most educational publishers that primarily compete in the instructional space, Scholastic Education also has significant business lines dedicated to serving teachers, families, and community partners. Building on the power of our trusted brand, our solutions give children access to engaging books and magazines and enable their development as readers while empowering teachers and families through evidence-based tools and support. Funding here is significantly more diverse than for instructional sales, spanning district and school budgets, state and philanthropic grants, and teacher and parent purchases. It is not surprising this portion of the division is less volatile and has consistently outperformed relative to the school- and district-focused segment. In fact, teacher, family, and community-focused sales here have grown significantly relative to pre-pandemic levels. With modest investment in our non-school channels and in our existing product, this segment of our business represents a significant growth opportunity in the years ahead. Looking ahead, we believe Education is well positioned to continue stabilizing performance in fiscal 2026 with a goal of returning to growth in fiscal 2027. Turning now to our International segment. Our major markets continued to benefit from the strength of Scholastic Corporation’s global publishing franchises in quarter three, even as year-over-year comparisons reflected the timing of this year’s publishing compared to last fiscal year. During the quarter, we saw strong contributions from markets including Australia and the United Kingdom, where we continue to benefit from operational improvements across the business. Demand for English-language learning materials continues to expand globally, representing a long-term opportunity, as schools and families increasingly seek high-quality literacy materials. Looking ahead, we remain focused on growth and margin improvement in our international operations. In summary, our third quarter results reflect progress executing the strategy we put in place to strengthen Scholastic Corporation’s operating performance and create long-term value. The actions we are announcing today, including leverage targets and the new share repurchase authorization, including the tender offer, reflect our continued commitment to disciplined balance sheet management and shareholder value creation while investing to drive sustainable growth. I will now turn the call over to Haji. Haji Glover: Thank you, Peter. And good afternoon, everyone. As usual, I will refer to our adjusted results for the third quarter, excluding one-time items, unless otherwise indicated. Please refer to the tables in today’s earnings press release and SEC filings for a complete discussion on one-time items. As Peter discussed earlier, during the quarter we completed the sale-leaseback transaction related to our New York City headquarters and the Jefferson City distribution facilities. This generated over $400 million in net proceeds to be used in line with our capital allocation priorities. As noted last quarter, these highly accretive transactions will reduce adjusted EBITDA by approximately $14 million on a partial-year basis in fiscal 2026, primarily reflecting incremental lease expense and the elimination of rental income previously recognized on these assets. Please see last quarter’s earnings presentation for a reconciliation of the estimated partial-year and pro forma full-year P&L impact of the sale-leaseback transactions. Let me begin with our consolidated financial results. In the third quarter, revenues were $329.1 million compared to $335.4 million in the prior-year period. Adjusted operating loss was $24.3 million compared to $20.9 million in the prior-year period. Adjusted EBITDA was approximately breakeven compared to $6 million in the prior-year period, primarily reflecting the partial-year impact of the sale-leaseback transactions, offset by higher gross profits in Children’s Book Group reflecting company-wide cost discipline. Excluding the sale-leaseback transaction partial-quarter impact of $3 million on adjusted operating loss and $6.7 million on adjusted EBITDA, adjusted operating loss was $21.3 million and adjusted EBITDA was $6.7 million, approximately in line with the prior year. Net loss was $3.5 million compared to a net loss of $1.3 million in the prior-year period. On a per diluted share basis, adjusted loss increased to $0.15 compared to a loss of $0.05 last year. Turning to our segment results, in Children’s Book Publishing and Distribution, revenues for the third quarter decreased 3% to $197.6 million, reflecting timing of major publishing releases compared to the prior year, partly offset by continued strength in Book Fairs. Segment adjusted operating profit improved to $8.9 million from $7.6 million in the prior-year period, reflecting the benefit of higher Book Fair revenues and continued cost discipline. Book Fairs revenue increased 2% to $113.3 million in the quarter, primarily driven by higher revenue per fair. We expect higher fair count and revenue per fair to contribute to revenue growth in our Book Fairs business this fiscal year. Book Club revenues were $14.6 million in the quarter, relatively flat compared to $15.2 million a year ago, reflecting lower teacher participation at the start of the school year, partly offset by recent program improvements that have increased participation sequentially from the fall period as teacher sponsor counts stabilize. We anticipate these trends continuing into the remainder of the year. In our Trade publishing division, revenues were $69.7 million in the third quarter compared to $77.4 million in the prior year, a decrease of 10%. These results reflect the timing of this year’s publishing calendar compared to the prior year, when the third quarter benefited from a major Dog Man release. Looking ahead, we remain optimistic about sustained momentum across our major global franchises. Given the timing of this year’s publishing plan, coupled with short-term disruption on retail purchasing patterns, including the impact from severe winter weather, we expect Trade to be slightly below the prior year on a full-year basis. Turning to our Entertainment segment, revenues increased by $3.2 million to $16 million compared to $12.8 million in the prior year, primarily driven by increased episodic deliveries and higher production services revenues. We remain positioned for growth in the fourth quarter and into fiscal 2027, reflecting recent greenlight momentum and revenue recognition typical for media development and production. Segment adjusted operating loss was $2.5 million compared to $2.4 million a year ago. Turning to our Education segment, revenues were $56.1 million in the third quarter compared to $57.2 million a year ago, a decrease of 2%, reflecting lower spending on supplemental curriculum products as school and district spending continues to experience near-term funding uncertainty. We have seen moderating declines throughout the fiscal year as the transformation of this business begins to take hold. Segment adjusted operating loss improved to $5.2 million compared to a loss of $6.9 million in the prior-year period, reflecting a lower cost structure, improved operating discipline, and the benefits of reorganization initiatives implemented over the last several quarters. Ahead of what we expect will be a gradual market recovery, we expect profitability in the fourth quarter, ahead of growth in fiscal 2027. Turning to our International segment, revenues were $58.7 million in the third quarter compared to $59.3 million a year ago. Excluding the $3.5 million year-over-year impact of favorable foreign currency exchange, segment revenues declined $4.1 million, primarily driven by the publication timing of Dog Man compared to the prior year. Segment adjusted operating loss was $4.7 million compared to $2 million in the prior-year period, reflecting lower revenues. We continue to expect modest declines in revenues and profitability in this segment following strong Trade performance in fiscal 2025. Unallocated overhead costs increased by $3.6 million to $20.8 million in the third quarter, primarily reflecting $3 million of higher rent expense and lower rental income previously recognized on the New York City headquarters property, all related to the sale-leaseback transactions. Now turning to cash flow and the balance sheet, in the quarter, net cash used by operating activities was $30.5 million compared to $12 million in the prior-year period, primarily driven by higher tax payments related to the sale-leaseback transactions, partially offset by lower royalty payments. Free cash flow in the third quarter was $407 million compared to free cash use of $30.7 million in the prior-year period, reflecting approximately $400 million in net proceeds from the sale-leaseback transactions completed during the quarter. The company fully repaid the outstanding balance on its unsecured revolving credit facility and ended the quarter with net cash of $90.6 million compared to net debt of $136.6 million at the end of fiscal 2025. As a result, interest expense in the quarter was significantly lower year over year. As part of our broader capital allocation strategy, we are establishing long-term net leverage targets of 2.0x to 2.5x adjusted EBITDA for the company. We believe this target range effectively balances balance sheet strength and our ability to continue investing in long-term growth opportunities on the one hand, with balance sheet efficiency and our ability to enhance shareholder returns on the other hand. I want to emphasize that this is a long-term target as we move toward these leverage levels over time. We have already taken near-term steps to accelerate capital returns to shareholders, supported by the significant liquidity unlocked in December. We have already returned approximately $147 million to shareholders through open-market share repurchases, representing the repurchase of more than 4,400,000 shares since completing the sale-leaseback transactions in December. In the third quarter, the company also distributed $5.1 million through its regular dividend. As announced earlier today, the board has authorized a new $300 million share repurchase authorization comprising a $200 million modified Dutch auction tender offer at $36 to $40 per share, with the remainder available for open-market repurchases. This is another disciplined step to return excess cash to shareholders. We expect the tender offer to commence on Monday, March 23, 2026, and to remain open until Monday, April 20, subject to customary conditions. This transaction is expected to be funded through a combination of available cash on hand and borrowings under our credit facility. Following the completion of the tender offer, we expect to maintain substantial liquidity to pursue our capital allocation priorities. Full details regarding the tender offer will be included in the tender offer statement to be filed with the SEC. With these actions in place, the company has taken measured steps to return excess capital to shareholders while maintaining a strong balance sheet and supporting long-term growth initiatives. Now for our outlook. In the fourth quarter, we continue to anticipate revenue growth in our School Reading Events and Entertainment divisions, partly offset by lower year-over-year revenues in our Trade and International divisions, reflecting strong prior-year comparisons when the publishing schedule benefited from the major Hunger Games release in 2025. We expect fiscal 2026 revenue to be approximately in line with the prior year, reflecting strength in Book Fairs offset by year-to-date softness in Education and strong prior-year comps in Trade, as I just discussed. On a full-year basis, we have reaffirmed our outlook for fiscal 2026 adjusted EBITDA of $146 million to $156 million, which includes a partial-year impact of approximately $14 million from the sale-leaseback transactions. As typical for our seasonal business, we expect a return to profitability in the fourth quarter following the seasonal operating loss in the third quarter. We remain focused on driving favorable operating margins as we continue to benefit from our lower cost structure. We have also reaffirmed our fiscal 2026 free cash flow outlook to exceed $430 million, reflecting the proceeds from the sale of our real estate assets, as well as operating cash flow in excess of our CapEx and prepublication needs. As for the impact of tariffs, we continue to expect approximately $10 million of incremental tariff expense in our cost of product this fiscal year. We are closely following changes in policy and will provide additional details as needed once greater clarity emerges. Thank you for your time today. I will now turn the call back to Peter for his final remarks. Peter Warwick: Thank you, Haji. In conclusion, we are pleased with our team’s progress during the quarter to advance our strategic plan and execute another step in our capital allocation strategy, including quickly and efficiently returning excess cash to shareholders. As we look to quarter four and beyond, we continue to benefit from the strength of our global franchises, trusted brand, and unique school-based channels, while expanding the reach of our stories and characters to audiences. At the same time, we will continue to reposition our Education business for growth. I would like to thank our employees, authors, illustrators, and creators for their dedication and hard work, as well as our shareholders for their continued support. Thank you very much. I will now turn the call over to Jeff. Thank you, Peter. Jeffrey Mathews: With that, we will open the call for questions. Operator? Operator: Thank you. Press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. One moment for questions. Our first question comes from Brendan McCarthy with Sidoti & Company. You may proceed. Brendan McCarthy: Great. Good afternoon, everybody. I appreciate you taking my questions here. Just wanted to start off looking at the rest of the fiscal year and specifically the fourth quarter. Just achieving the flat revenue target for the full fiscal year, it looks like it implies roughly 2% growth in the fourth fiscal quarter compared to the prior-year period. I just wanted to walk through some of the different factors at play there. I know that will exclude about $3 million in rental income in the quarter, and also a challenging comparison in the Trade channel, sales from The Hunger Games release in 2025. I am just curious as to your confidence in achieving that 2% growth target for the quarter? Peter Warwick: Hi, Brendan. It is Peter here. I think Book Fairs are the major factor that we see in the fourth quarter in terms of revenue growth. It is a big quarter for Book Fairs, and we have been doing very well, and all the initial indications that we have got so far are positive. So that is one of the key factors. We also, of course, have to take into account, as you mentioned, the Trade timing issue that we do have to deal with, so Trade is not going to exceed the revenues that we got in the fourth quarter last year because of the big success of Sunrise on the Reaping. The other factor is really in Education, because we have been progressively closing the gap in Education against the prior year, and we are anticipating that the reduction that we have been seeing will be much less of an impact in the fourth quarter. It is a big quarter for Education, and it has been encouraging to see that in that segment we have been doing progressively better each quarter. We actually performed on the bottom line better in the third quarter than we did in the same third quarter last year, and so we are anticipating that all the work that Jeff and everybody has been doing in Education will begin to yield some results in the fourth quarter. So that is why we are feeling that we can be there or thereabouts on our revenues for the year. Brendan McCarthy: Understood. I appreciate the detail there. And in the Education business, I think it is great to see the magnitude of top-line declines has been improving. It looks like in each quarter of this fiscal year. Can you talk about the sales pipeline for the fourth quarter as it relates to the different products being, you know, summer reading packages, supplemental materials, and maybe the state- or the state-sponsored programs as well? Peter Warwick: In terms of the actual sales pipeline, we are obviously expecting to do well with summer reading because this is the quarter when a lot of that happens. One of the great things that we have seen with our sales pipeline is that it has been improving each quarter—quarter two is better than one, three better than two, and fourth looking better than three. So that is where we expect to do well, with summer reading. We are also expecting to do well with the Knowledge Library and with the book packs that we have been putting together that support science of reading. And we have also got the usual for the fourth quarter; we have good initiatives in line for the Books to Home through the programs that we do with the various states. Brendan McCarthy: Understood. Thanks, Peter. And a similar question on the adjusted EBITDA guidance. It looks like you will need about $80 million in adjusted EBITDA in Q4 to hit the guidance range for the full fiscal year. Again, I know there is an impact from the sale-leaseback transaction—$14 million for the full second half of the fiscal year. Any other factors there that give you confidence that you will hit the guidance range? Haji Glover: Hey, Brendan. This is Haji. How are you doing? Brendan McCarthy: Good, Haji. How are you? Haji Glover: I am alright. As we noted in the script today, we definitely are seeing some favorability from our cost mitigation actions that we have been taking throughout the year. So that is why we feel very confident in the fourth quarter. And plus, as you know from watching us over the years, the fourth quarter is our second biggest performing quarter. It is just a little bit more profitable because of all the cost actions that we have made throughout the year. That is really why we are very confident about the fourth quarter from a profitability standpoint. Brendan McCarthy: That is great. And looking at the Entertainment segment, it looks like solid revenue growth there year over year in the third fiscal quarter. Are you really starting to see the pickup in greenlighting activity flow through to preproduction and ultimately the revenue? Peter Warwick: Yes, we are. We have had a number of greenlights that have happened in the third quarter. We have just had a fairly significant one greenlit at the beginning of this week, post-closing for the third quarter, and that is looking good. It is looking better than it was, put it that way. I think that we have seen the bottom of that entertainment market. We have talked to one or two other companies who are involved in entertainment; they are seeing pretty much the same sort of thing. So I think entertainment has turned the corner. It is not going to grow explosively; it is going to be steady growth, but I think that the growth that we see now in that marketplace will sustain the revenues, activities, and bottom line that we have baked into our fourth quarter, and also set us up well for our fiscal year 2027. Brendan McCarthy: That is great. And from an operating income perspective there in the Entertainment segment, are you looking for positive operating income in Q4, or will that flow through in fiscal 2027 maybe? Haji Glover: We should see a little bit of profitability in the fourth quarter from them, from an EBITDA basis. Brendan McCarthy: Got it. Okay. Great. I appreciate the detail. That is all for me. Operator: Thank you, Brendan. Brendan McCarthy: Thanks. Bye. Operator: Our next question comes from Drew Crum with B. Riley Securities. You may proceed. Drew Crum: Okay. Thanks. Hey, guys. Good afternoon. Peter, just on the Book Fairs business to start, a few weeks into the current quarter, it sounds like you are pretty encouraged by what you are seeing, how the business is tracking. Any specific KPIs you can point to behind the confidence in the outlook? Peter Warwick: We can point to, first of all, the number of fairs, which is up, so that is good. Also, the revenue per fair is looking in line or better with what we were anticipating. And we have also had fewer cancellations than the prior year. Those are really the big three in terms of performance. So we are feeling good about that. And, thankfully, this year any bad weather was during the time when there were not very many Book Fairs. Compared to some other years, that has been a factor, but we have not really had that in our fairs this year. So things are looking promising. Drew Crum: Got it. Okay. And then maybe for Jeff or Haji—you guys narrowed the revenue guidance range for the year, it looks like; I know, a $15 million to $25 million downgrade to the top end. Our interpretation is this is specific to the Education segment. Was it a shortfall in fiscal 3Q relative to your internal model? Is the business not tracking to your previous plan for fiscal 4Q, or is it a combination of both factors? Because I thought you guys did a pretty nice job of narrowing the year-on-year decline—that is the first part of the question. And did I hear correctly that you expect that business to grow top line in fiscal 2027? Jeffrey Mathews: Drew, it is Jeff Mathews here. Great question. So on the adjustment in the top-line outlook, I want to be clear that we mentioned year-to-date Education results. The change in outlook was really more related to some of the dynamics we saw last quarter in Trade. I will let Haji talk about that. As far as the fiscal 2027 outlook for Education, of course, we have not provided guidance for next year. Our goal very much from the beginning has been to return this business to growth. We know that is its opportunity, and it is the mandate the team and I have. We will provide more outlook on that, but clearly we are encouraged by the sequential improvements in the business. The cost savings that we have taken, restructuring very strategically, have given us the runway to make some investment in the growth that we will need to drive for next year. Haji, do you want to take the first part on guidance? Haji Glover: Yes. On the Trade business, as we mentioned before, we had a very strong fourth quarter with the Sunrise on the Reaping book that came out, so we are dealing with that. But at the end of the day, we see other groups like Entertainment performing well in the fourth quarter, so that is why we are expecting some good news. And then you take the impact of the sale-leaseback—if you back that out from an adjustment basis, I think that is about $6 million on the top line as well. The other organizations, in terms of, like Peter had mentioned earlier, we definitely see some strong performance in the CBG group, mainly Fairs, and a leveling off in the Clubs business within that group. Drew Crum: Got it. Okay. And then maybe, Haji, one last one for you. I am not sure you are going to answer this, but I will try. The language you use for the 2.0x to 2.5x net leverage target—being “longer term”—how soon could we see the business reach that threshold? Haji Glover: Like I said before, we are definitely not going to jump in and go right up to 2.0x or 2.5x day one. Right now, as you know, we are in a net cash position. But once we go into the tender, if we fully execute the tender, that would only pull us to a little bit under 1.0x net leverage turn. So we feel very comfortable with that number. Like I said, this is a very historical moment for Scholastic Corporation—just setting out targets in general. So I am confident in our future and making sure we continue to manage our balance sheet effectively. One point I do want to mention on that: we will be saving some working capital draw as well on our debt because, due to our seasonality, we do not have a lot of revenue coming in this period, so we would have to draw on that. So that would increase the leverage, but that is seasonal. Drew Crum: Thank you. Alright. Operator: And this concludes our question-and-answer session. I will pass the call back to Peter Warwick for any closing remarks. Peter Warwick: Thank you very much, and thank you to all of you for joining our call today. As you know, we appreciate your support. We will continue on our strategy to strengthen Scholastic Corporation’s operating performance and create long-term value as we move through the end of fiscal 2026. So again, thank you all for your support, and goodbye. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the NeurAxis, Inc. fourth quarter 2025 financial results. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Ben Shamsian, Investor Relations. Please go ahead. Ben Shamsian: Thank you. Good morning, everyone, and thank you for joining us for NeurAxis, Inc.’s fourth quarter and full-year 2025 financial results and corporate update conference call. Joining us on the call today is Brian Carrico, CEO of NeurAxis, Inc., and Timothy Robert Henrichs, CFO of NeurAxis, Inc. At the conclusion of today's prepared remarks, we will open the call to questions. If you are listening through the webcast, please follow the operator's instructions, or you can send me an email at nrxx@listenpartners.com with your question. If you are dialed into the live phone line, you can again follow the operator's instructions. Today's event is being recorded and available through the webcast information provided in the press release. Finally, I would like to call your attention to the customary safe harbor disclosures regarding forward-looking information. The conference call today will contain certain forward-looking statements, including statements regarding the goals, strategies, beliefs, expectations, and future potential operating results of NeurAxis, Inc. Although management believes these statements are reasonable based on estimates, assumptions, and projections as of today, these statements are not guarantees of future performance. Time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Actual results may differ materially as a result of risks, uncertainties, and other factors, including, but not limited to, the factors set forth by the company's filings with the SEC. NeurAxis, Inc. undertakes no obligation to update or revise any of these forward-looking statements. With that said, I will now turn the call over to Brian Carrico, Chief Executive Officer of NeurAxis, Inc. Brian, please proceed. Brian Carrico: Good morning, and thank you for attending our fourth quarter and full-year 2025 earnings call. During today's call, I will highlight the continued execution of our commercialization strategy for IV Stem, our neuromodulation technology for both the pediatric and adult patient populations. The continued execution has set the stage for the growth we expect in 2026. Today, we will recap Q4 and quickly turn to the first quarter, which I believe is most important and what everyone is looking to hear. To recap Q4 in a nutshell, we continued our commercial scaling strategy, we picked up 45 million covered lives for our proprietary PNFS technology, and were granted a federal FSS contract with IV Stem as our first listed product to allow our teams to sell within the VA. Following my remarks, Timothy Robert Henrichs, our CFO, will review our financial results for 2025. Let us first talk about the commercial execution of reimbursement progress. As we have mentioned in the past, the years leading up to January 1 focused on achieving two critical milestones: securing a Category I CPT code and obtaining written insurance policy coverage to enable widespread, sustainable growth. Once it became clear that the Category I CPT code would become effective on January 1, 2026, we implemented a more focused commercial strategy, and that strategy remained unchanged through the first quarter. The objective for the first quarter was straightforward: deploy the strategy, gather real-world data, and learn as much as possible about what drives adoption and what gaps remain. With the knowledge gained during Q1 to date, we now have a much clearer and more actionable growth roadmap. For the first time, the story has become significantly easier to understand. With a Category I CPT code in place, more than 100 million covered lives, our focus has shifted from access creation to execution, identifying what remains missing and closing those gaps to unlock maximum growth. Today, I will outline what we have successfully put in place, what we have learned, and where our execution efforts are focused going forward. Overall, I am extremely pleased with the first quarter performance across all fronts, including revenue progressions, stronger-than-expected operational fundamentals, and, importantly, the clarity gained around the remaining drivers of growth, which allow us to now begin deploying a more comprehensive commercial strategy. We will provide detailed KPIs and financial metrics on our next earnings call when we will have a full quarter of operating data. From an adoption standpoint, we are seeing excellent performance from accounts that have a Category I CPT code, strong medical policy coverage, a physician champion, and dedicated IV Stem clinic time each week. Conversely, institutions with only partial or limited policy coverage are submitting fewer patients, as physicians still perceive that a meaningful portion of patients lack reimbursement certainty. In line with our plan and expectations, overall patient submissions have increased significantly following the implementation of the Category I CPT code. While a small number of hospitals with strong policy coverage have not yet reached expected utilization levels, these cases are not representative of broader trends. As anticipated, expansion of our commercial footprint remains essential, and we will now begin to scale these capabilities alongside growing reimbursement access. Importantly, the most important piece of knowledge I set out to understand in Q1 was whether insurance companies without PNFS written policy coverage would cover IV Stem with the Cat I code, or if we would indeed need written policy coverage to see patients covered. We have confirmed that payers do not provide coverage based solely on the CPT code, and therefore, medical policy coverage remains essential. While I will not discuss specific payer negotiations today, we are very confident in our positioning with the remaining key payers. The potential impact is significant, particularly when considering the current submission growth is being driven by only approximately 10% of children's hospitals nationwide. Our strategy, therefore, remains laser-focused on expanding medical policy coverage while simultaneously increasing the commercial footprint. Securing additional payer coverage remains our highest priority. At the same time, our internal prior authorization team continues to expand, helping hospitals reduce administrative burden, improve reimbursement confidence, and ultimately increase patient access—a critical step toward broad national adoption. We continue to make meaningful progress with the nation's largest payers and remain in active dialogue as multiple payers approach scheduled medical policy review cycles through 2026. In late December, we announced policy coverage from a major national health insurer, spanning multiple states and representing about 45 million health plan members. Our advocacy efforts center around the urgent need for pediatric coverage and the clinical risks of the off-label drugs with FDA black box warnings. Based on external expert opinion, we believe we have the most comprehensive payer engagement effort in our industry. Discussions with payers have been constructive, and we are confident this multichannel approach will drive favorable policy consideration. That said, we expect policy changes and prior authorization improvements to unfold gradually, not overnight. I now want to focus on and highlight the catalyst for what we expect to be continued revenue growth in the coming quarters. Two elements remain key to IV Stem's success. First, the insurance coverage for access, which I just discussed in detail. Second, commercial footprint expansion in several areas. Now that we have 100 million covered lives and continue to see positive payer momentum supported by the clinical practice guidelines, commercial readiness for 2026 is paramount. In addition to the insurance element just mentioned, the commercial execution is equally important and the primary focus of our commercial team. As the new CPT code takes effect and coverage becomes more available, it is paramount for children's hospitals to have enough dedicated time slots each week to treat patients in need. Our commercial organization is fully aligned for the 2026 transition. We have prioritized target accounts based on their utilization potential and launched comprehensive education and outreach, including direct engagement with 75 children's hospitals who previously ordered IV Stem, which does not include new accounts in Q1; division chief meetings with detailed RVU and financial modeling, which will become more and more important; comprehensive partnership with NASBIG, beginning with the CME-accredited presentation—we did one in November and will do another one this spring; integrated marketing, which highlights the positive reimbursement shift, which appears as strong or better than we expected; field programs focused on the clinical and economic value of the new CPT code; and we are working closely with all stakeholders to ensure there are dedicated weekly time slots available for patient treatment with IV Stem. These coordinated efforts are cultivating awareness, positioning IV Stem for broad adoption now that the new CPT code has taken effect. Most importantly, these efforts require people, so we are in the process of hiring experienced and successful people on several fronts, including medical science liaisons to ensure our data is well known and top of mind; we are hiring market development specialists to ensure the financial stakeholders understand the positive economics behind the IV Stem procedure; a digital marketing expert focused on ensuring we have a presence in front of all patients and physicians; and salespeople to make sure we are covering all aspects. We will hire each position and duplicate those positions that are most successful in the areas where we have the most opportunity. This brings me to our commercial strategy for IV Stem in adults. As many of you know, the Category I code for IV Stem applies equally to adult patients, as it reflects the same physician work using the same device technology. What may be less widely understood, however, is that while IV Stem has FDA clearance for adult use, that clearance was based on extrapolation from adolescent clinical data rather than a large standalone adult randomized study. With that said, it is important to note that several studies using our technology have included young adults in their twenties. And, importantly, the underlying pathophysiology of these conditions is not meaningfully different between adolescents and adults. The FDA recognized this overlap, along with the alignment across Rome diagnostic criteria and the device's favorable safety profile, in supporting broader use. Nonetheless, broad medical policy coverage for adults is not expected in the near term. Based on what we learned during the first quarter, we believe payer coverage in the adult population will likely require completion of a large randomized controlled trial. Importantly, this does not change our execution priorities. Our primary commercial focus will remain within the children's hospitals, where coverage expansion continues to accelerate, as well as within the Veterans Administration system. That said, we are pursuing the adult IV Stem opportunity through two parallel strategic pathways. First, we have executed an agreement with the Cleveland Clinic to conduct a randomized controlled trial evaluating IV Stem specifically in adult patients with functional dyspepsia. This study is designed to generate the clinical evidence required to support future medical policy coverage. Second, as previously highlighted as one of our key fourth quarter milestones, we were awarded a Federal Supply Schedule, or FSS, contract enabling commercial access to the U.S. Department of Veterans Affairs. The VA health care system serves nearly 7 million active patients annually, with functional dyspepsia estimated to affect approximately 3% of this population. Given the typical adoption timelines within the VA, I did not expect Q1 orders. However, we are already seeing multiple facilities placing orders, with a growing number moving through the process. We are actively dedicating commercial resources to this channel to expand our sales footprint as utilization data and clinical adoption continue to develop. Stepping back, the most important point is this: the fundamental barriers that historically limited adoption are now being systematically removed. With the Category I code in place, expanding medical policy coverage, accelerating patient utilization, and a scalable commercial infrastructure now operational, we believe IV Stem has entered the early stages of its true commercialization phase. Execution is now the primary driver of growth. As coverage expands and utilization continues to scale across hospitals, payers, and federal health care systems, we believe the gap between clinical demand and current adoption will continue to close. Our focus remains disciplined, data-driven, and centered on building long-term sustainable value. To summarize what we learned in Q1 to date: children's hospitals that have strong insurance policy coverage, at least one physician champion, and adequate IV Stem clinic time are performing extremely well. The void of any one of these three is a barrier to making sure every child has access. Written insurance coverage is essential to patients being treated through insurance. We learned which gaps need addressed as clinical reinforcement to ensure all physicians are aware of the data, along with keeping IV Stem top of mind. We learned communication is key to understand which barriers or perceived barriers still exist. We learned the economics are very strong for the PNFS procedure in children's hospitals. Delivery of this information to the administrators and financial stakeholders in the children's hospitals will be a strong focus of our team going forward. And finally, revenue has been surprisingly better than I expected in Q1. It has also been heavier at the top than I expected, but that is great in the fact that we now know what a children's hospital with all pieces in place can do, and that is outstanding for our future. Make no mistake. We have work to do and gaps to fill, but the hurdles we face today are nowhere near the hurdles we have overcome to be in this situation. We have never been better positioned operationally, commercially, or strategically than we are today, and we believe the progress underway in 2026 represents the beginning of a multiyear growth cycle for the company. I will now turn the call over to our CFO, Timothy Robert Henrichs, to discuss the financials. Timothy Robert Henrichs: Thank you, Brian. And let me add my welcome to everyone joining us on this call. These financial results were included within our press release, which was issued earlier this morning, and were also provided in more detail within our 10-K. I will provide some additional details in key areas such as our financial results and liquidity position, as well as an outlook on certain areas. The 2025 marked the sixth straight quarter of double-digit revenue growth year over year. 2025 was a year of significant milestones for the company, including FDA indication expansion to functional abdominal pain and functional dyspepsia with associated nausea symptoms in both children and adults; IV Stem label expansion from 11–18 years of age to eight and up, including an increase of devices per patient for a course of treatment to four; the published NASPA and academic society guidelines; the new Category I CPT code and RVUs; the introduction of the RED device; an FSS contract; and, last but not least, medical policy coverage representing approximately 45 million health plan members from a major national health insurer in December. The accomplishments position the company extremely well as we continue to grow revenue with stronger gross margins and operating expense leverage. With that, I will go through the financial highlights in detail. Revenues in Q4 2025 were $968,000, up 27% compared to $761,000 in Q4 2024. Unit deliveries increased 35% compared to the prior year, due to volume growth from patients with full reimbursement health insurance; a market shift from our historical mix of the company's discounted financial assistance program outpacing the growth of higher-margin full reimbursement patients. In fact, 2025 marked the seventh straight quarter of double-digit unit growth. Although our average selling price in Q4 2025 was lower than in 2024, it reached its highest level in 2025, thanks to the mix shift to our more profitable reimbursement channel. As previously mentioned, we picked up our largest insurance payer in Q4, who gave immediate effect of full reimbursement that helped drive the mix shift. Given the Category I CPT code that went effective on January 1, we expect the positive mix shift impact on revenue will continue into the first quarter. Revenues in fiscal year 2025 were $3.6 million, an increase of 33% compared to $2.7 million in fiscal year 2024. Unit deliveries increased 44% due to both patients with full reimbursement health insurance coverage and those participating in our discounted financial assistance program, with the latter slightly outpacing on the growth front for the full year. Gross margin in Q4 2025 was 85.4% compared to 86.4% in Q4 2024. Despite the meaningful mix shift from discounted financial assistance to full reimbursement coverage in the quarter, the primary drivers for the 100-basis-point decrease are reserves established for excess and obsolescence inventory and the growth of the RED device in the quarter, which has a substantially lower gross margin than IV Stem. Gross margin in fiscal year 2025 was 84.2% compared to 86.5% in fiscal year 2024. Despite our increase in revenue, the 230-basis-point gross margin decline was due to higher discounting and growth in our financial assistance programs in particular during the first three quarters, and then excess and obsolete charges on inventory related to our RED device. Despite the decline in our gross margin in the fourth quarter, we expect to reverse that trend in 2026 as the new Category I CPT code became effective on January 1, which will transition currently discounted device sales to full reimbursement revenue with insurance coverage. Total operating expenses in Q4 2025 were $2.5 million, an increase of 20% compared to $2.1 million in Q4 2024. We measure and manage our operating expenses along three functions: selling, research and development, and general and administrative. As we continue to grow at a double-digit pace, we realize that investors will benefit from a more transparent presentation of our selling and research and development costs, as those are indicators of our future success. As a result, we reclassified $297,000 and $57,000 from general and administrative expenses into selling expenses and research and development costs, respectively, in Q4 2024 to conform to the current period presentation. Selling expenses in Q4 2025 were $518,000, a 31% increase compared to $396,000 in Q4 2024. The increase is due to sales commissions that are directly related to our higher sales volume, a temporary commission structure to facilitate growth and adoption in new states, and higher targeted marketing costs as we prepared for IV Stem's Category I CPT code that became effective on January 1. Research and development expenses in Q4 2025 were $137,000, an increase of 15% compared to $120,000 in Q4 2024. The increase is reflective of higher year-over-year spending on a medical research project. General and administrative expenses of $1.9 million in Q4 2025 were 17% higher than the $1.6 million in Q4 2024. The increase was due to the introduction of a long-term incentive plan in 2025 that did not exist in 2024, and third-party costs incurred to enhance the company's systems and internal control environment, partially offset by the absence of certain one-time, nonrecurring consulting and advisory costs incurred in 2024. Total operating expenses in fiscal year 2025 were $10.8 million, an increase of 14% compared to $9.5 million in 2024. As a note, similar to my comments earlier on the fourth quarter, we reclassified $1.1 million and $228,000 from general and administrative expenses into selling, and research and development costs, respectively, for the full fiscal year 2024 to conform to the current period presentation. The increase in operating expenses year over year was due to higher selling expenses from commissions, headcount, and marketing costs focused on health insurance carriers, and a one-time nonrecurring legal settlement. Our operating loss in Q4 2025 of $1.7 million was 17% higher compared to a $1.5 million loss in Q4 2024, and our net loss in Q4 2025 was $1.7 million, 18% higher compared to $1.4 million in Q4 2024. Our higher gross profit from increased quarterly sales year over year was offset by the higher operating expenses that I just discussed. Our operating loss in fiscal year 2025 of $7.8 million was 9% higher compared to a $7.2 million loss in fiscal year 2024. Our higher gross profit from increased sales year over year was offset by the higher operating expenses. Our net loss in fiscal year 2025 of $7.8 million was 5% lower compared to $8.2 million in fiscal year 2024, primarily due to higher sales and the absence of one-time nonrecurring settlements related to a convertible note dispute and certain pre-IPO Series A preferred stock shareholder claims incurred in 2024, partially offset by higher operating expenses. Cash on hand as of 12/31/2025 was $5 million. Our free cash flow in Q4 2025 was $2.5 million, higher than our core quarterly burn rate of $1.5 million, due to higher marketing expenses as we successfully focused on health care insurers for additional coverage and an inventory build to prepare for the increased demand in Q1 2026 related to the January 1 effective date of IV Stem’s Category I CPT code. Since then, we have improved our current liquidity position here in 2026 by raising an incremental $2.6 million through our at-the-market equity facility and the exercise of warrants. Our current cash balance is over $6 million. Given our current Q1 burn rate, our balance sheet provides us with sufficient capital to execute on our growth plans, with no near-term need for additional financing at this time. We still have approximately $1.2 million remaining in our existing ATM facility, which, if utilized strategically for further growth, would extend our liquidity position further, along with future warrant exercises. With that, I will turn the call back over to Brian. Brian Carrico: Thanks, Tim. To summarize, we are very happy with the way Q1 is coming along. I would just say that revenue, as I said, is better than I expected. Most importantly, we have learned what gaps need to be filled, and we can finally be able to turn this into the commercial strategy and hire the people to have the comprehensive footprint that we need. I will now turn this back to the operator, and I look forward to questions. Operator: Thank you. As a reminder, to ask a question, please press star 11, and to withdraw your question, please press star 11 again. The first question will come from Chase Richard Knickerbocker with Craig-Hallum. Your line is open. Chase Richard Knickerbocker: Good morning. Thanks for taking the questions, and congrats on all the progress here. Lots of things to go through, but maybe first, Brian, in Q1, can you give us a sense for the magnitude of inflection in PA requests and any improvement in PA rates since that Level I code? And then, last on that front, with that large payer win in Q4, can you confirm under that coverage policy that there is not a PA that is being required in the market right now? Thanks. Brian Carrico: Yes, Chase, good to talk to you. Two good questions. Let us first talk about the prior authorization. We do—and this number will change—but in the first quarter, if we did $100 in revenue in Q1, $20 is revenue that comes from accounts that we do the prior authorizations for. So I can only speak for what we see. We are continuing to do prior authorizations for more and more children's hospitals. The submission rate is up close to 10x from what we saw in 2025. That is first, which is outstanding. That does not mean the approval rate is that high. On the Q1 call, I will give more specifics about the exact numbers that we see, and I will also talk about approval percentage that we see. For example, if last year 1% of submissions were approved, and this year it is 2%—now those are just made-up numbers, and they are not even close to accurate—but I will give more information on the approval rate and percentage to give everybody a general idea along with some examples on the Q1 call. Regarding the large payer, that is correct. There is no prior authorization required from the large payer as long as they have the correct diagnosis codes in place. That has been very beneficial. I will go ahead and get ahead of one of these questions coming with that payer. Yes, of course we are seeing a direct effect from a revenue standpoint in certain areas where that payer has significant presence. But at the same time, we have countless children's hospitals that—let us just say their hospital has 20% or 25% of their patients with that payer. That sounds wonderful, but when the other 75% of their patients are not covered, they are still essentially not treating. Maybe one or two of their physicians are, but as a group, they are not treating because they still view this as a health equity issue. If the majority of their patients cannot have access to it, they are not giving access to even that small group. With bigger payers and additional larger payers coming on board, you will not just get the benefit of that new large payer. You will get the benefit of the payers we have plus the new one because they want to see that 50%, 60%, 70% of their patients are covered before they start to offer this across the board with all physicians from a referring standpoint. There are other small barriers that will just take time, and I can give more examples of those around IV Stem clinic time as we get further into the questions. Chase, I hope that answers your question. If not, I will go into more detail. Chase Richard Knickerbocker: No, good color. Maybe along those lines, on the number of accounts since January 1 with all these developments aligning, can you give us a sense for the number of new accounts? And then on your highest adopters—I think some of those have a fair amount of exposure to that payer you won at the end of the year—can you give us a sense for utilization trends there, if you have seen a meaningful inflection in Q1? It certainly sounds like you have, but maybe just some color there. Brian Carrico: Yes, it has been top heavy. I would just say that I have been pleasantly surprised with the children's hospitals that have access to and are heavy with that payer, and had IV Stem clinic time already built in. Those that can adapt to that and have physician champions are doing extremely well. But as I mentioned on the call, if they only have that one payer or they do not have the IV Stem clinic time put in place, I will give you an example. One of the states that is 80% that payer has submitted to us—just call it 20 patients in the first eight weeks of the year. You would think that 75%–80% of those patients would be from that payer, and it is not the case. Only 25% were. So let us use numbers of five out of 20. Of those patients, five were from that payer. The other 15 were other payers from around the country or other payers we do not have policy with. Although only 25% of their patients are with that payer, they are already booking IV Stems out to September. Now they are fixing that. They are adding more IV Stem clinic time. But when I spoke to the account last week, the director said, “We have to put together a plan. We have to present those to a committee, and that has to go to another committee. This is going to take until May or June.” The point is the good news is they are treating a tremendous amount of patients even though it is only 20% or 25% of their patients that are being approved. It takes time. These children's hospitals take time. The good news is that excellent financial story, which I referenced, and now that we have learned much more about the payments in the last four or five weeks, that becomes a much bigger piece of this story because it allows the children's hospitals to— they are not going to lose money, and in fact, they should be, as a general rule, in a very good financial position with the more patients they treat. So this is a win for the patient, a win for the facility. We need more policy coverage. But it is a long-winded way of saying that children’s hospitals that are heavy with the payer that we had—and look, we have got another 55 million covered lives—and we have seen great growth in some of those accounts where we already had that policy coverage, but the Category I code was missing, and now we are seeing a significant uptick in prior auth submissions. I think the overall message here is that as happy as we are with the accounts that are treating, there are still many treating no one, and that is outstanding news for the big picture. We feel very confident in our position with the larger payers, and that is all I am going to say. I knew for several months before we got the large payer in December that it appeared we were going to get that, and I did not say anything, and I am not going to say anything now about other payers and the position we are in. We feel like this should be the first-line treatment or a first-line option for these kids based on the evidence, and that is our stance. Again, a long-winded way of saying we are very pleased fundamentally when the pieces are in place, and when something is missing, at least now we know what is missing and how to address that, and we are doing so aggressively. Chase Richard Knickerbocker: Got it. I know you are not giving 2026 guidance at this time. I wanted to get some initial thoughts, if you have them. I understand it is very dynamic. Maybe the best way for me to ask it is: as we sit here in Q1—you had about a 20% sequential inflection from Q3 to Q4—with all this commentary, I would expect that materially accelerates. Any goalposts that you could give us for the revenue inflection that you are seeing thus far through Q1? Brian Carrico: No. I think I may have mentioned in Q4 that I thought Q1 had the potential to be light or in line with Q4 just because of the delay in prior authorizations in January and because of IV Stem clinic time getting set up, like the example I just gave. I am only going to say that I am pleasantly surprised. We have five or six weeks until the next call. I will just wait and give detailed KPIs. We are going to give some nice KPIs going forward that are relevant to growth and show the opportunity, and I am going to wait until then to do so. Chase Richard Knickerbocker: Great. Tim, just last one. Right way to think about SG&A growth in 2026 as you are expanding your commercial capabilities? Timothy Robert Henrichs: Yes. When we move into 2026, when you look at our three buckets, we have one large payer. It is not if, but when we get another large payer, we will then invest back into our selling expenses and our commercial team. Brian Carrico: But I— Timothy Robert Henrichs: I do not think that rate would be much different than the rate that we are seeing at our current pace. I do believe our R&D expenses will tick up because we are continuing to enhance the device here in 2026. From a G&A perspective, year over year, remember in 2025, we had a one-time nonrecurring legal settlement. The charge was about $630,000, so that will be a tailwind. That in and of itself would put us ahead of next year, but we have been really focusing on G&A expenses and either taking them down or keeping them flat so that we have the runway to invest in R&D and in selling expenses. I expect increases in selling. I expect increases in R&D. I am not expecting much of an increase per se in G&A, but that can all change for all the right reasons as we pick up additional health insurance coverage and need to invest in the business. I do believe we are going to get operating expense leverage. To your question, Chase, we are not going to add operating expenses anywhere near the pace that revenue is going to grow, and that is going to help us from a cash flow perspective as well. Chase Richard Knickerbocker: Great. Thanks, guys. Congrats again. Operator: Thank you. The next question is going to come from Lindsay Leeds with MicroCap Opportunities. Your line is open. Lindsay Leeds: Thank you, and congratulations on a strong Q4. I wanted to ask about the hospital rollouts. You were talking about a hospital that was scheduling all the way into September. What can you say about what kind of staff the hospital needs to schedule these, and what are the barriers to getting that program rolling? Brian Carrico: Well, those are two very separate questions. First, what staff is required depends on the size of the children's hospital, how many physicians are treating, and how many physicians are referring. We have children's hospitals with champions where there might be 25 or 50 physicians, and there are only one or two specific physicians that are treating IV Stem, and only their patients are treating IV Stem. This goes back to needing more and more IV Stem clinic time so that everyone can refer their patients, and we are working through that. The staff that is needed—you need a nurse practitioner or a physician's assistant or a physician to place the device. So that is important. From a barrier standpoint—and let me back up, Lindsay—if you have two new patients per week every week, then because there are four devices per week, that means you need two new patients per week. After four weeks, you have eight placements, and they continue to roll over. You would need, say, a Tuesday morning from 8:00 to 12:00. You need eight 30-minute slots. You would need to staff that, and this is where the economics come into play. That is our job to make sure that is clear as we meet with these children's hospitals. From a barrier standpoint, I mentioned an example a second ago of a children's hospital where they have known since February they were already booking out March, April, May; now they are into September. Now that they get to these committees, that should come back, and they should have plenty of time beginning in, let us call it, May or June at the latest. But then I expect they will need to expand again. When I look through Q1, we have some outstanding results, but I would argue that only one children's hospital is treating at capacity. Even that hospital—there are three or four or five large payers that they do not have, which means they are not even treating those patients. So no one is at capacity. When you talk about who is treating as many patients—every patient that they see that truly needs this—I would argue that only one children's hospital is doing so. That is very good news. This is very new. Having everything that they need in place is very new, and they still do not have all the payer coverage that they need. The barriers can be many, Lindsay. You are talking about the department. You are talking about the physicians and who is treating and who is referring. You are talking about the chief of the division. You are talking about the chair of pediatrics, the chief revenue officer, the VP of finance, the CFO. Depending on the size of the hospital, there could be many barriers, many committees that prevent this or slow this down regardless of the clinical need and the clinical demand. We are working through that. The good news is, at least at the top, there is no resistance there. It is a matter of process and time. This is where, now that we have the information—I have been very clear in the past about measuring twice and cutting once when it comes to spending money. Making sure you have a revenue source is important, and at least understanding the people that you need to put in place before you just go hire. The great news from Q1 is that it has been very clear to us, and we are aggressively hiring to fill these positions to be able to grow and make sure that we are covering 50, 75, 100, 125 children's hospitals. We will do that, and it is going to be a process. But fundamentally, it is better than expected in the places where we have the pieces in place. Lindsay Leeds: Okay. Thank you. Are you able to talk about your Veterans Affairs program? Will you be hiring additional staff in Q2, or do you know how long it will take you to know the trajectory of that rollout? Brian Carrico: Well, a few things about the VA. The response and the reception of this technology and the data behind the technology has been stronger than I expected—better than we expected. As I said on the call, I did not expect orders in Q1. The VAs, by nature, move a little slower, but we have seen several facilities order, and we are seeing reorders, which is excellent. As I see more facilities order and more reorders, we will be a little quicker to hire more people, and we are looking at a bigger-picture commercial rollout where we are considering making the reps that are covering the VA also cover children's hospitals. You start to have a national sales force and national payer landscape. It does not make sense to have—I am in Indiana, so I will use that as an example—it does not make sense to have someone in Indiana calling on the VAs and someone else in Indiana calling on the children's hospitals. We need to be able to scale the commercial operation. As we continue to transition throughout 2026, we will move towards that model. One thing that sticks out to me is there was an article I read two weeks ago about the VA: the FSS contract is just a license to go to the VA and be able to move the technology. I would argue that anytime you have an FDA indication, it is just a license to be able to go to the hospital and sell. This is really no different. Are there some barriers in the VA from a resource standpoint? Of course. There are resource barriers in children's hospitals. There are resource barriers everywhere. This has been no different, but I am pleasantly surprised with the uptick in response and positive feedback and initial adoption in the VA. So yes, as we move into Q2, I expect there will be additional hires. I expect by 2027 that we are beginning to marry the children's hospitals and the VA from a commercial standpoint. We will talk more about that as we get closer. Make no mistake. We have been very lean, and that is because we needed a revenue source in the Category I CPT code and an FSS contract. As lean and calculated as we have been, we are going to be measured and calculated going forward, but we are going to be very aggressive from a commercial standpoint. Lindsay Leeds: Excellent. Do you have any adult data at all that you are able to take with you to the Veterans Affairs hospitals to promote this IV Stem treatment, or are you basing that mainly on the pediatric data? Brian Carrico: There is no large randomized controlled trial yet. But there is absolutely adult data. First off, the fMRI data that was done at the Atlanta VA was done at the Atlanta VA, showing cognitive changes in patients using the technology. Many of our studies have patients in their twenties. From a pathophysiology difference, there should be no difference between a 21-year-old and a 45-year-old. The physicians have understood this, and we have gotten very little pushback on the fact that there is no large randomized controlled trial in adults. As I mentioned, we have begun that trial at the Cleveland Clinic in adults, and we expect that to be very meaningful. We are also expecting a publication in a study with patients up to 35 years of age in the coming months from an institution. On the surface, that might appear as a barrier, but it has not been a barrier to date, and I do not expect it to be a large barrier if you understand the science. Lindsay Leeds: Okay. Perfect. Thank you so much. That is all my questions. Operator: The next question comes from Karen Sterling with Kingswood Capital Partners. Your line is open. Karen Sterling: Thank you. Good morning. Hi, Brian. I would like to pick up where Lindsay left off on the IV Stem trial in adults. Could you give us a little bit more detail on how that trial is laid out and what your expectations are? How do you expect it to benefit the company going forward? Brian Carrico: I expect a large randomized controlled trial at the Cleveland Clinic with a sham arm, in addition to all the data we already have from a mechanistic standpoint. As I mentioned, the other study that is going to be published soon in patients up to 35 should be strong enough to convince the academic society, who in turn can request coverage from payers. I expect this to help gain us insurance policy coverage on the adult side. One thing I have not talked about is the amount of inquiries and requests from adult gastroenterologists to utilize IV Stem. The reality is it would be on a cash basis. There is no patient assistance program due to federal guidelines on the adult side now that there is a Category I CPT code. This is a cash pay, and there is no insurance coverage on the adult side. This is extremely important to us. It is why we are doing such a large study. From a medical device standpoint—look, this is not a pharmaceutical. It is not a drug. It does not have the same risk and side effects, of course, which is one of the many reasons that a pharmaceutical trial is so large. But for a medical device, from a power calculation standpoint, this will be a really strong study at the Cleveland Clinic, and that is the goal of the study. It may take, let us call it, 18 months to do this study. We will know more in the next 90 days about how many patients are being enrolled, and we will be able to have a closer idea and prediction as to when this study will be completed. Then, because we have the data and we already have the indication, we will be able to go directly to the insurance companies. Karen, that is the ultimate goal. This is an extremely large market opportunity. As we talked about earlier, this was the first FDA indicated, approved, or cleared treatment specifically for functional dyspepsia in adults. Right now, the focus is on the VAs, where there is an FSS contract, and we can help people. In the interim, the focus is on this study and ensuring that it is done as quickly and efficiently as possible. Karen Sterling: Got it. Okay. Apart from the approved indications in dyspepsia and IBS, do you have any plans for opening up additional expansion markets? Brian Carrico: Now are you talking about additional countries, or are you talking about additional indications? Karen Sterling: Additional indications. Brian Carrico: We have a few studies in place. We have the randomized controlled trial for cyclic vomiting syndrome, which would also be in children's hospitals—the same call point, pediatric gastroenterology. We have a couple of other studies that are underway. I would point to the cyclic vomiting syndrome study as potentially the most meaningful. Karen Sterling: Okay. Can you give us a timeline on that? Brian Carrico: That is probably also 18 months out, similar to the adult RCT. Karen Sterling: Okay. Perfect. Thank you. And— Brian Carrico: And it is on clinicaltrials.gov. There is another study in post-op pain at UPMC. It is about a 300-patient RCT showing opioid reduction or lack of opioid use—eliminating the use of opioids in open bowel surgery. That should be done this spring. There is a lot to discuss about that before I am going to discuss it publicly. Our focus is on the children's hospital. The opportunity there is incredible, and that is where our focus is. Karen Sterling: Thanks very much. Operator: Thank you. I am showing no further questions in the queue at this time. I would now like to turn the call back over to Brian for closing. Brian Carrico: Thank you. Thank you all very much for being with us today. I look forward to communicating with everyone again soon. If there are follow-up meetings or follow-up calls or additional questions, as most of you know, I look forward to those and am happy to meet. With that, have a great day. We will talk soon. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Thank you for joining us, and welcome to Planet Labs PBC fiscal fourth quarter and full year 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. I will now hand the conference over to Cleo Palmer-Poroner, Director of Investor Relations. Please go ahead. Cleo Palmer-Poroner: Thanks, Operator, and hello, everyone. Welcome to Planet Labs PBC’s fiscal fourth quarter and full year 2026 earnings call. I am joined by Will Marshall and Ashley Johnson, who will provide a recap of our results and discuss our current outlook. We encourage everyone to please reference the earnings release and earnings update presentation for today's call, which are available on our Investor Relations website. Before we begin, we would like to remind everyone that we will make forward-looking statements related to future events or our financial outlook. Any forward-looking statements are based on management's current outlook, plans, estimates, expectations, and projections. Inclusion of such forward-looking information should not be regarded as a representation by Planet Labs PBC that future plans, estimates, or expectations will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions as detailed in our SEC filings, which can be found at www.sec.gov. Our actual results or performance may differ materially from those indicated by such forward-looking statements, and we undertake no responsibility to update such forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. During the call, we will also discuss historic and forward-looking non-GAAP financial measures. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. We believe that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. For more information on the non-GAAP financial measures, please see the reconciliation tables provided in our press release issued earlier today, which is available on our website at investors.planet.com. Further, throughout this call, we will provide a number of key performance indicators used by management and often used by competitors in our industry. These and other key performance indicators are discussed in more detail in our press release and our earnings update presentation, which are intended to accompany our prepared remarks. I will now turn the call over to Will Marshall, Planet Labs PBC CEO, Chairperson, and Co-Founder. Over to you, Will. Will Marshall: Thanks, Cleo, and welcome, everyone, joining us today. Last year was transformational for Planet Labs PBC, and I am proud of everything that our team accomplished. We made incredible progress in the Satellite Services market, signing a €240,000,000 agreement funded by Germany, and a nine-figure deal with Sweden, capping off three such deals in twelve months. We launched 40 satellites, including four of our high-resolution Pelican satellites, invested strongly in AI, and announced a cutting-edge partnership with Google to demonstrate satellites for compute in space. We delivered record annual revenue, adjusted EBITDA profitability, positive free cash flow, and accelerated our revenue growth. And we laid out a strong foundation for the year ahead, enabling us to continue that growth acceleration. So let us dive in. To briefly summarize the full year results, we generated a record $308,000,000 in revenue, representing approximately 26% year-over-year growth. Non-GAAP gross margin was 59% for the year, adjusted EBITDA profit came in at $15,500,000, and free cash flow was $53,000,000, representing our first full fiscal year of non-GAAP profitability, an excellent milestone for the team as we strike a balance between profit and growth. Q4 was also a record for revenue, representing 41% year-over-year growth, and our fifth consecutive quarter of adjusted EBITDA profitability. For the second sequential quarter, we achieved Rule of 40, which is our revenue growth plus adjusted EBITDA margin. And on an annual basis, we achieved Rule of 30, a full year earlier than we anticipated. End-of-period backlog was over $900,000,000, approximately 79% growth year on year, providing us with excellent visibility to accelerating our revenue growth for the coming fiscal year. Defense and Intelligence was a major area of strength for us in FY 2026, underpinned by global dynamics. Full-year growth was 50% year on year, driven by strong performance in our Data Subscriptions, Solutions, and Satellite Services. To recap our role here, Planet Labs PBC was founded on a core mission of making information about our world visible, accessible, and actionable to help both sustainability and security globally. As the geopolitical landscape shifts, security is an urgent mandate for governments worldwide, and our customers face mission-critical decisions in an increasingly complex and chaotic world, and this mission is critical to them. We view security as inextricably linked to sustainability. Resource scarcity and climate disasters are not just environmental issues. They are direct threat multipliers or even triggers for conflict. The Defense and Intelligence sector is essential to realizing our mission. Our customers rely on us to help identify unknown unknowns, detect changes and warning signals that they did not know to look for before they escalate into crises. This is a critical part of our purpose. To highlight a few recent customer wins in this area, during the quarter, we received two awards from the U.S. Defense Innovation Unit. We were awarded a seven-figure extension of our pilot in support of Indo-Pacific Command to deliver vital indications and warnings. The short-term contract demonstrates how customers can leverage Planet Labs PBC data and AI-powered analytics to monitor sites of strategic interest for critical changes and threats. DIU also exercised an option under the existing Hybrid Space pilot with Planet Labs PBC for just under $1,000,000 to demonstrate the cutting-edge capabilities for our high-resolution Pelican satellites. During the quarter, NATO’s Allied Command Transformation also extended its agreement with Planet Labs PBC to deliver persistent space-based surveillance and enhanced indications and warning capabilities. The award underscores Planet Labs PBC’s position as a trusted and essential partner for customers seeking strategic indications and warnings across broad domains. Finally, last month, the U.S. Missile Defense Agency selected Planet Labs PBC as a prime contractor for the SHIELD IDIQ contract vehicle. Planet Labs PBC will now compete for awards under that program. Turning to our Civil Government sector, where full-year revenue was flat year over year, to share some recent highlights, during the quarter, Planet Labs PBC was awarded a seven-figure renewal and expansion by the German Federal Agency for Cartography and Geodesy, or BKG. Under the one-year renewal, BKG will continue its countrywide partnership through which employees of more than 400 German federal institutions gain access to Planet Labs PBC’s data and solutions for a wide variety of uses. As an example, this expansion will allow BKG to track permafrost thawing across the Arctic. In January, we announced an enterprise-scale agreement with Slovenia’s Surveying and Mapping Authority to provide comprehensive satellite data and high-resolution tasking capabilities across the country’s civil public administration in support of agriculture, urban planning, and disaster management. Shifting to the Commercial sector, where annual revenue was down year on year, while this trend was expected given our increased focus on large government customers and the headwinds in agriculture, we remain confident in the Commercial sector as a significant market opportunity for Planet Labs PBC, especially as we continue to advance our AI-enabled solutions. To share a few customer highlights from the quarter, specifically around our work in Energy, we were awarded a renewal at San Diego Gas & Electric, which utilizes Planet Labs PBC data and analytics to monitor vegetation health and conditions within their service areas to manage risk of wildfires during the dry season. We also signed a strategic partnership with AiDash, establishing Planet Labs PBC as the preferred provider of daily and weekly fuel monitoring data for utility wildfire risk mitigation across North America. Through the partnership, leading investor-owned utilities are already using Planet Labs PBC data to identify where and when to deploy fuel treatment resources, reducing ignition risk and targeting high-priority clearance with precision that was not previously possible. Turning to our Satellite Services business, in January, we announced a nine-figure, multiyear deal with the Swedish Armed Forces to rapidly deliver a suite of satellites, space-based data, and solutions to support Sweden’s peace and security operations. In terms of our existing contracts for Satellite Services, our teams are continuing to execute well. We are progressing with the builds for our contract with JSAT and beginning to serve dedicated capacity under the German-funded contract. We continue to find that our Satellite Services contracts are a win-win-win. The customer guarantees their sovereign space capabilities in their desired area of interest; our other clients will benefit from increased capacity and revisit rates in the rest of the world; and Planet Labs PBC receives capital to forward fund our fleet buildouts. They also bolster our Data and Solutions as countries want both the speed and scale of our Data and Solutions and the sovereignty of our Satellite Services technology. Through our AI-enabled solutions, we accelerate time to value, become more deeply embedded in our customer operations, and gain more direct visibility to our customers’ operational needs. We are leaning into these synergies across our product offerings. We are continuing to see demand from around the world for Satellite Services, driven by the current geopolitical landscape and the demand for sovereign space systems. Our competitive edge here is twofold. Firstly, our proven track record, having launched over 650 Earth imaging satellites, by far the most of any commercial company. Our second is speed. We are able to launch the first satellites within a few months of contract signing, as shown with the partnership funded by Germany, far faster than traditional aerospace. The demand is significant, and reflected in our pipeline which has grown appreciably in both number of deals and average deal size since we spoke about this at our Investor Day in October. We are leaning into this demand by expanding our manufacturing capacity in San Francisco and building out our second manufacturing location in Berlin. On the Solutions side, I am pleased to report that our integration of Bedrock Research is going very well. The team is helping us scale rapidly and deliver AI-based solutions, notably standing up 600 new monitoring sites within three hours compared to a weeks-long process when we first launched the service. This deep domain area expertise, paired with our ongoing advancements in AI, has allowed us to expand the number of sites we are monitoring around the world, drastically reduce the time needed to implement, and enable our customers to scale across broader geographic areas. During the quarter, Planet Labs PBC expanded its technology collaboration with NVIDIA on multiple fronts. With Planet Labs PBC’s proprietary dataset and NVIDIA’s compute, we can enable significant new capabilities. This includes exploring the use of NVIDIA’s accelerated GPU-based computing platform for Planet Labs PBC data processing, enabling faster, more efficient processing for all of our customers; testing NVIDIA’s new Thor processor for in-space use, enhancing super-resolution and other AI processing capabilities; and more. As announced earlier this week, we are collaborating to build the world’s first scaled GPU-native AI engine for satellite data and drive huge advances in efficiency and latency. More generally, we anticipate that AI will be transformational to our business this year. Let me give a bit of broader context. While LLMs offer users the incredible ability to have conversations with the text of the Internet, they know very little about the physical world. Real-world models need real-world data, and Planet Labs PBC has it. Our deep data archive, averaging over 3,000 collections for every point in the Earth’s landmass, represents a treasure trove for indexing the physical world and training next-generation models. As Wikipedia was the foundation dataset for LLMs, we believe that Planet Labs PBC’s Daily Scan is foundational to real-world models. Furthermore, AI itself is commoditizing software development, making data the key differentiation in AI. And why does this matter? Because it has the potential to unlock a huge market. While Planet Labs PBC is currently seeing tremendous traction for AI-based solutions in Defense and Intelligence, these developments are making border area monitoring scalable and accessible for other applications and sectors. Ultimately, we believe this will result in generic applications democratizing access to Earth intelligence and unlocking markets far faster. Specifically, we think that more generic AI solutions will soon empower nontechnical users to go from a concept to a bespoke application in under an hour. We expect expanding these capabilities will benefit our current customers and drive new opportunities in markets such as agriculture, insurance, energy, supply chain, and finance. For the year ahead, our top priorities are executing against our current contracts across both Data and Solutions and Satellite Services, and scaling up to capture the massive opportunity before us. We see strong demand, so we are investing into our growth, including the technology roadmap. We are doubling our satellite manufacturing capacity. We are scaling our Pelican fleet with multiple launches scheduled this year. We are launching demos of our Owl and SunCatcher spacecraft. And we are investing in AI for existing solutions and the aforementioned more generic capabilities. In sum, last year we saw the start of returns on our investments into Satellite Services. This year, we expect to see the start of returns on our investments in AI. We sit uniquely at the intersection of space and AI revolutions, and Planet Labs PBC is the first space-and-AI company. By year’s end, we believe Planet Labs PBC’s Earth intelligence will deliver transformational global impact as our customers leverage space and AI to transform data into action. We are leaning in to meet the moment, and we are playing to win. With that, I will turn it over to Ashley to discuss our financials. Over to Ash. Ashley Johnson: Thanks, Will. It was indeed a fantastic year, underpinned by strong execution and key wins in Satellite Services. I would like now to cover the results in more detail. Revenue for the fourth quarter came in at a record $86,800,000, representing approximately 41% year-over-year growth. Full-year revenue was $307,700,000, representing approximately 26% year-over-year growth. Outperformance in the quarter was driven primarily by strong usage from our Defense and Intelligence and Civil Government customers as well as new wins that came in during the quarter. During fiscal 2026, our Defense and Intelligence sector revenue grew more than 50% year on year. The Commercial sector was down modestly year on year, and the Civil Government revenue was flat, driven in large part by the end of our contract with Norway for their NICFI program. Turning to our regional revenue breakdown, growth was distributed across the globe in fiscal 2026 with approximate revenue growth of 41% year over year in Asia Pacific, 48% in EMEA, 11% in North America, and down about 2% in Latin America. As of the end of fiscal year 2026, end-of-period customer count was 897 customers, slightly down on a sequential basis, reflecting our direct sales team’s intentional shift to focus on large customer opportunities and leveraging our self-serve platform to provide access to our data for other customers. As a reminder, Planet Labs PBC Insight platform customers are not included in our end-of-period customer count. Given our focus on larger customers and the shift to a self-serve model for the long tail of the market, we believe this metric has become less relevant for investors and is not proactively monitored by management. We believe our retention rates on ACV are far more constructive measures of our business health and opportunity. Therefore, we plan to discontinue this metric beginning with the 2027 fiscal year. We continue to see strong revenue growth and thus a solid increase in revenue per customer as a positive indicator that our sales team’s focus on landing and expanding high-value accounts is yielding results. As we shift to some of our ACV metrics, I want to remind you that our Satellite Services contracts are not included in ACV, although they are included in our RPOs and backlog, which we will discuss in a moment. Recurring ACV was 98% of our end-of-period ACV book of business, reflecting our continued focus on selling subscription data contracts and solutions as opposed to one-time professional or engineering services. Approximately 85% of our end-of-period ACV book of business consists of annual or multiyear contracts, lower than prior periods, as we have seen a higher proportion of large, shorter-term government contracts signed in recent quarters. Net dollar retention rate at the end of fiscal year 2026 was 116%, and net dollar retention rate with winbacks was 118%. Our non-GAAP gross margin for fiscal year 2026 was 59%, compared to 60% in fiscal year 2025. For Q4, our non-GAAP gross margin was 57%, compared to 65% in 2025, reflecting investments in support of our Satellite Services contracts and a mix of contracts including AI-enabled partner solutions. Our gross margins came in better than expected for the quarter and the year, primarily driven by the revenue outperformance in the quarter. Adjusted EBITDA profit was $15,500,000 for fiscal year 2026, better than expected, primarily driven by revenue outperformance and disciplined OpEx spend. Fiscal year 2026 marks our first year of delivering adjusted EBITDA profitability on an annual basis, a milestone we are incredibly proud of. Adjusted EBITDA profit for Q4 was $2,300,000, also better than expected, marking our fifth sequential quarter of adjusted EBITDA profitability. Capital expenditures in FY 2026, which include our capitalized software development, were approximately $81,500,000. Capital expenditures in Q4 were approximately $23,000,000. To echo Will’s remarks, we are currently in a growth CapEx investment cycle as we lean into market demand, scale up our manufacturing capacity in Berlin, and build out our next-generation fleets. Turning to the balance sheet. We ended the year with approximately $640,000,000 of cash, cash equivalents, and short-term investments, an increase of approximately $418,000,000 year on year, driven by our issuance of convertible debt and free cash flow profitability. In fiscal year 2026, we generated approximately $134,400,000 in net cash from operating activities and $52,900,000 in free cash flow, representing our first year of achieving positive free cash flow on an annual basis. Our focus remains on managing the business to enable sustainable cash flow generation through efficient growth across our Data, Solutions, and Satellite Services revenue streams. At the end of FY 2026, our remaining performance obligations, or RPOs, were approximately $852,400,000, up about 106% year over year, of which approximately 34% apply to the next twelve months and 65% to the next twenty-four months. We estimate our backlog, which includes contracts with a termination-for-convenience clause, to be approximately $900,000,000, up approximately 79% year over year. Approximately 37% of our backlog applies to the next twelve months, 67% to the next twenty-four months. Let me now turn to our guidance for the first quarter and full fiscal year 2027. For Q1, we are expecting revenue to be between $87,000,000 and $91,000,000, which represents approximately 34% year-on-year growth at the midpoint. We expect non-GAAP gross margin for the quarter to be between 49% and 51%. The step-down is driven by our Satellite Services contracts, the mix of deals with AI-enabled partner solutions, and investments in our next-generation fleets. Our range for adjusted EBITDA in the quarter is expected to be between minus $6,000,000 and minus $3,000,000, reflecting our investments to drive sustained growth. We are planning for capital expenditures of approximately $17,000,000 to $23,000,000 in the quarter. For the full fiscal year 2027, we expect revenue to be between $415,000,000 and $440,000,000, representing approximately 39% growth at the midpoint. We believe our backlog provides us with strong visibility to our revenue, which is enabling us to raise our growth expectations for the year. Our non-GAAP gross margin for the year is projected to be between 50% and 52%, in line with our prior expectations and driven by the forecasted mix of business. We anticipate margins will expand as we realize returns on our growth investments in subsequent years. We are targeting adjusted EBITDA profit for fiscal 2027 of between breakeven and $10,000,000, reflecting our desire to maintain EBITDA profitability on an annual basis even as we continue to invest in our space systems capabilities, AI-powered solutions, and our global sales and marketing organization. We also aim to deliver Rule of 40 for this fiscal year, where Rule of 40 is our revenue growth rate plus adjusted EBITDA margin. We are planning for approximately $80,000,000 to $95,000,000 in capital expenditures for the year, reflecting the necessary investments in our next-generation satellites to meet accelerating market demand. Even with these operating and capital expenditures, we expect to be free cash flow positive on an annual basis again in fiscal year 2027, with a focus on sustaining and expanding free cash flow generation into the future. As a reminder, while cash flow can vary quite significantly quarter to quarter, based on the timing of cash collections and capital outlays for procurements, our ultimate objective is generating sustainable annual positive cash flow. To close, the incredible momentum we generated in fiscal year 2026 provides us with a strong foundation for the future. Given the strength of our backlog and our robust pipeline, we have significant visibility into our continued revenue growth. As our revenue scales, we anticipate non-GAAP gross margin expansion as well as Rule of 40 for fiscal year 2028 and beyond. This gives us the confidence to invest into the massive market opportunity unfolding in front of us, and as Will mentioned, we are leaning into these trends and playing to win. As always, Will and I are incredibly grateful for the outstanding dedication and teamwork of our Planeteers around the globe. Fiscal year 2026 was a standout year because of you. And we are excited for the year ahead. Operator, that concludes our comments. We can now take questions. Operator: Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, press star 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Your first question comes from the line of Colin Canfield from Cantor. Your line is open. Please go ahead. Colin Canfield: Can you perhaps update us on the timing and the scaling of both the SunCatcher opportunity as well as sounds like a pretty nascent geo-intelligence platform with NVIDIA? And then if you could maybe talk about how much of that was included in the set of opportunities from the Investor Day. Thank you. Will Marshall: Well, both are very exciting opportunities, and in a way both involve both a space component and an AI component. Let me talk to the Google one first since you brought that up. SunCatcher is going well. It is early days. Just to recap that project, you know, this is about putting their TPUs into space. It is an early tech demo that is what we are doing right this second for them. There is a lot of interest in that space that you have seen in recent months. It is very exciting. It is heating up. But we are focused on executing towards those research goals. And there is a big potential market there long term. As Sundar put it, I think within ten years, he expects most compute spending to go into orbit, and that is a big amount of money. That is a huge, huge market to go after, but we are at very early days. So, you know, it is exciting. We are staying focused on executing on those early missions. And then to NVIDIA, yes, that is also exciting. It was great to announce that extension of our partnership. It is also a research partnership at this stage. You all know about the fact that we have been putting those NVIDIA GPUs into orbit on our Pelican spacecraft, which is pretty cool. This is actually more focused on the compute on the ground, how we leverage the GPUs in particular to speed up our data processing pipeline. In an increasingly fast-changing world, people want those answers really quickly. And GPUs have the potential to really speed things up. And we have seen some early results that are very promising, with big speedups like 100x on certain parts of our codebase. Getting answers to our clients faster is really important. So research collaboration, they are leaning in, and we are leaning in too. It is very exciting. But as to the revenue implications, I do not know if you wanted to touch on that. Colin Canfield: Actually. I mean, I would just remind you that the— Ashley Johnson: SunCatcher partnership is structured as an R&D partnership, so it is recognized as contra R&D expense. And with respect to the NVIDIA partnership, that is really just a research collaboration. Colin Canfield: Got it. And then as we think about imputing working capital tailwind or tailwinds for 2027, is there a right framework to think about it maybe as like a percentage of the backlog increase or kind of high level, what are the building blocks on working capital that we should consider? Ashley Johnson: First of all, I just want to correct myself. I made a misstatement on my prior answer. It is not contra revenue. It is contra R&D expense. Thanks for letting me clarify that. As for your second question in terms of the building blocks for working capital, obviously, as I said, as we are acquiring investments to execute on our backlog, that includes all of the capital expenditures we need to make to build out the Pelicans for our customers. That obviously will weigh into the procurement quarter to quarter. The nice thing about the way these contracts are structured is they typically provide us upfront capital to match the timing of those expenses, at least on an annual basis. There may be differentials quarter to quarter as to when we make procurements and when we receive milestone payments. So as I said in the prepared remarks, cash flow is expected to vary quarter to quarter, but on an annualized basis, these contracts really enable us to operate the business in a free cash flow positive way. Colin Canfield: Got it. Thank you for the color. Appreciate it. Operator: Your next question comes from the line of Ryan Koontz from Needham & Company. Your line is open. Please go ahead. Ryan Koontz: Great. Thanks for the questions, and congrats on a great quarter and outlook. Starting with maybe some of the segment—your real strength you saw in Europe in the quarter. I wonder if you can maybe unpack that for us, what were some of the drivers behind that? Obviously, a lot of Defense work there, but any kind of color you can give us on the European market and how that has been progressing so well for you? Will Marshall: Yes. Well, maybe I can kick it off. I spent quite a big fraction of the quarter in Europe going to a number of capitals, speaking to a lot of our customers there. The demand is off the charts, and we are leaning into it as best we can both for our data and AI solutions and Constellation Services. We talked about the interest in that going up. Yes. I mean, it is back to the geopolitical dynamics. Right? That is what is underneath this and driving a lot of this demand. They need their own sovereign systems. They need it quickly. They need speed and sovereignty, and we can provide both those things. Speed: immediate access to our present satellites. Sovereignty: building satellites dedicated for them. And even that, we can do very swiftly compared with anyone else, and our history of having launched hundreds of satellites really puts us in a great position to do that. So that is the sort of demand signal. Ashley, towards the breakdown, I do not know if you want to comment at all on that. Ashley Johnson: We provide the breakdown in the materials. I would just say, you know, we have historically had a very strong presence in Europe, and have a strong team in Berlin foundationally, and we have built on that with acquisitions that have given us presence in the Netherlands as well as in Slovenia, and that really helps us when we are engaging with governments across both their Civil and Defense and Intelligence needs. Will Marshall: If I could just add one final thing, of course, our commitment to building satellites there in Berlin adds to that interest. I mean, we both needed it for expansion and it lent into the European demand because, of course, that helps connect the dots there. Ryan Koontz: Sure. That is great. And just any comments around supply chain right now? Is it getting more difficult to acquire the types of kind of key components you need on the supply chain side? Will Marshall: Not really. No. We are not seeing anything material. Ashley Johnson: Obviously, it is something that we track carefully. Our teams are always seeking to diversify our supply chain sources. Ryan Koontz: Got it. Thanks so much, guys. Ashley Johnson: Thank you. Operator: Your next question comes from the line of Edison Yu from Deutsche Bank. Please go ahead. Edison Yu: Thank you very much, and congratulations on the quarter. I want to come back to the AI element. You talked a little bit about LLMs. What is the latest status on the Anthropic partnership, and have we kind of progressed further from kind of just testing or early testing the models or the training? Will Marshall: Yes. I mean, in AI in general, as I said, we are moving from this world of LLMs that can tell you things about the text of the Internet to how models are increasingly trying to move towards real-world models. And real-world models needing real-world data. I have this stack that is necessary. We are doing these research collaborations that we have mentioned, and they are very exciting. What they are really building a foundation towards is, you know, we have been building these bespoke solutions, these what we call AI-based enabled solutions for our broad area PlanetScope Daily Scan—so Maritime Domain Awareness solution, the Global Monitoring solution, and the Area Monitoring solution for Civil Government. And those are really good, and they are starting to take off. And that is what is driving a lot of great growth that you are seeing in the numbers. But AI has this potential of making that more generic. That is, anyone can turn up, build their own bespoke application of equivalent fidelity in short order, like maybe within an hour, and, you know, in a completely bespoke way for their needs. That is just on the horizon. And so what we are focused on with those research collaborations is how we can build towards that capability, and that is what—I mean, what is so exciting about that is the ability to unlock all the potential of our data, especially for Commercial and Civil Government markets where we have been less focused of late because of the strong interest on the Defense and Intelligence side, but are huge markets for Planet Labs PBC. So, basically, that is the direction and leaning of those partnerships. It is enabling us to build out that capability to expand the TAM. Edison Yu: Absolutely. And just a follow-up on that, to get there, what do you see as the biggest—I do not know if you want to say bottleneck or thing we should look out for. Is it a question of just needing more compute? Is it a question of just, you know, it takes time—more training? How do you think about the path there and the bottlenecks? Will Marshall: Oh, it is complex and evolving in that the space is changing so fast. I mean, literally, we are seeing capabilities that just a couple months ago we were not able to do because of the advances in especially coding. Like, that makes it now that you can even build whole applications very quickly. So we are just seeing that potentially take off much faster than we thought. There is nothing really standing in the way per se. We have the data. That is the critical ingredient, and it is the differentiating ingredient for AI. And as I said briefly, like, I mean, in many ways, AI is commoditizing more the software layer that is making the AI piece—the data piece—most useful for AI, you know, and so that is very differentiating that we have such a unique dataset coming into it. So there is nothing holding us back there, and it is moving very fast. And that is why I was saying that I think you are going to start to see this come to fruition this year. And so watch this space. Edison Yu: Amazing. Thank you. Operator: Your next question comes from the line of Christine Lee Weg from Morgan Stanley. Please go ahead. Christine Lee Weg: Hi. This is Gabby on for Christine. Congratulations on the quarter. Given your recent decision to extend the satellite imagery delay in the Middle East to fourteen days as a result of the ongoing conflict, have you seen any changes in customer behavior, and are there any potential contractual implications that we should maybe be aware of? Will Marshall: Yes. I mean, the short answer is nothing material. Look, what we are focused on there is helping our critical customers in the region do the things they need, which is get critical answers fast, and trying to help them through that. We are focused and mainly heads down on supporting those customers in this critical time as best we can. The delay is a lot to do with the balance of thinking about those operational needs and making sure we do not put people in harm’s way and very genuine needs, at the same time as the transparency and accountability mission that we care about and ensuring all of our actors get access eventually. So it is a carefully thought through decision and we are just trying to do our best to help the people that need it. Christine Lee Weg: Great. Thank you. Super helpful color. And if I could have a quick follow-up. I mean, you announced the Satellite Services agreement with Sweden in January. Can you just talk about how you are seeing the pipeline for similar deals progressing relative to what you had laid out at the Investor Day? And what are you seeing in terms of conversion timelines and potential scale of upcoming opportunities? Will Marshall: Yes. I mean, as I have mentioned in my prepared remarks, since that October Investor Day, both the number and the average size of those deals has been increasing. And so, I mean, just to give you a sense that it is a strong market demand right now, even stronger than we had said then. And, you know, it is a bit too early to talk about sort of average deal length because these are very few in number. Right? So I have not got any comments to that effect, but overall, the demand is very strong. Christine Lee Weg: Great. Thanks so much. Operator: Your next question comes from the line of Jeff Van Rhee from Craig-Hallum Capital Group. Please go ahead. Jeff Van Rhee: Great. Thanks for taking the questions, guys, and congrats—a lot here to love. Let me start first with Civil/Commercial—about 40%, a little less than that as a percent of revenues. What do you think when you look at those markets—obviously, D&I is killing it. You have got a lot of sovereign deals flowing through, it makes sense to be pursuing those deals. I am wondering how you think about Civil and Commercial and what dynamics have to play out for those markets to reaccelerate? Will Marshall: Well, as I said—see earlier answer to Edison about the AI piece—because that is what unlocks these things and enables that. And we are just on the precipice of that. And so yes, I see that beginning to come this year. And just to be clear, in my opinion, the biggest markets are those two segments, not Defense and Intelligence. And we think that is a long and sustaining and really great market. But the Civil Government market is huge. The Commercial market is huge. There are so many, but it has been lacking those critical solutions. Here, we have a generic way of crossing that chasm to the follow-on solution that enables us to unlock that market. And so we know those capabilities—that those answers—are latent in our data, and this gives the bridge to the actual solution that the customers need. So, I mean, you know, it is back to my earlier point: AI is going to enable it, and I think we are going to see beginnings of that really take off this year. Jeff Van Rhee: Yes. And over to the sovereign deals for a second. I mean, obviously, what—three mega deals here roughly trailing twelve months, give or take. It sounds like the pipeline has expanded. It sounds like you are thinking deal count there should improve. I mean, just any other observations on those sovereign deals—on the magnitude of the growth in the pipeline? Sounds like it really accelerated even further potentially in the last ninety days. Will Marshall: No. I did not want to quantify that, but I just give you a sense that it is really growing and it is very strong. And, yes, that is it. Ashley Johnson: The only other thing that I would add, Jeff, which I think is an important point, is that when we are selling these sovereign capabilities, we are coupling with that our Data and Solutions. And it actually is the synergies across that that is a competitive differentiator because we can drive value to these customers out of the gate. We can give them visibility and intelligence that they did not have before as we work with them over the longer-term contract to build out what their sovereign capabilities will ultimately be. And so it is worth pointing out that actually a lot of our backlog growth is in Data and Solutions. In fact, that part of the backlog has almost doubled year over year. Jeff Van Rhee: Wow. That is great color. Last one if I could, just on the Owls. Any updates there that you could share? Will Marshall: Yes. I mean, we are building that tech demo as we announced last year towards that improved Daily Scan capability. The team is working hard on it. It is going well. It is quite an incredible capability that we are obviously building there. Just to remind everyone that we are moving towards one-meter scan rather than three-meter, and that is roughly 10 times more data per unit area of the ground. And roughly a 10x improvement in latency as well because they will be equipped with both onboard compute systems as well as satellite-to-satellite comms so that we can get the data back as well. So those things are all going to be faster as well. So much lower latency—at 10x there too. So it is really a significant improvement on that system. And, yes, we are looking forward to launching a demo. Jeff Van Rhee: Sounds great. Thanks, guys. Ashley Johnson: Thanks, Jeff. Operator: Your next question comes from the line of John Gooden from Citibank. Please go ahead. John Gooden: Hey, guys. Thanks for taking my question. Really appreciate it. I just wanted to square off the backlog strength and all of the positive commentary with revenue guidance. The revenue guidance is fantastic. Do not get me wrong. But even so, it just seems like there is upside to it based on the commentary of, you know, incredibly strong demand signals, particularly in Europe, as well as the fact that as a percentage of the backlog that you guys have right now, it does not seem like the revenue guide is a particularly large percentage versus maybe how you set guidance in the past. Ashley Johnson: Yes. It is obviously a good question, John. We are in a really favorable position right now in terms of the level of visibility that we have. Obviously, there is a lot of execution that goes into turning backlog into revenue, and we are laser focused on that. And in terms of setting guidance, I think what you have seen from us, particularly in recent periods, is we try to give ourselves room for the fact that, you know, on these big mission-critical types of transactions and contracts, there are things that can shift from quarter to quarter, and we want to give room in our guidance for that to happen so that we can keep our customers, you know, front and center around execution. Similarly, we have a great pipeline, but when those deals land, given how big they can be, they can really impact revenue in the year. And so we tend to assume that new signings are back half-loaded, which gives us opportunity to deliver upside if that does not end up being the case, if it ends up landing sooner, but does not put us in a position where we are out over our skis in terms of the numbers we have given you. John Gooden: That makes a lot of sense. It sounds like, you know, that there are some layers of conservatism in there, which is appropriate, and we will see how that plays out throughout the year. If I could ask one more, just in terms of the activities in the Middle East, the conflict there, do you feel that that has additionally kind of turbocharged the demand for your product in any way? I know the backdrop is strong, but has that had an obvious impact, you know, as sort of a recent event? Will Marshall: Well, obviously, there is a huge amount of focus in that, and we are—but, again, as I said earlier, we are just focused on delivering pieces—doing mission-critical things. We are trying to focus on that, but we will see. It is early days. Ashley Johnson: Yes. I think, you know, one of the things that we have seen in these types of situations is you do see an increase in usage as there is just more urgency in getting as much data as possible around the situation. You know, but ultimately, as Will said, situations like this can be very dynamic. John Gooden: Got it. Thank you. Operator: Your next question comes from the line of Trevor Walsh from Citizens. Please go ahead. Trevor Walsh: Great. Hey, all. Thanks for taking my questions. Will, you called out the SHIELD IDIQ in your prepared remarks. Can you maybe just give us a sense—I know early days on this, very large project and a lot of it is TBD—but can you give us a sense of how you are thinking about that opportunity? Is that something where it is just kind of bread-and-butter Planet Labs PBC Earth observation data that you would be providing for that as you go after contracts and opportunities there, or might it even look like something more akin to Satellite Services where you might be building spacecraft that are fairly nontraditional for you guys, but just being used for all the things that are part of that project? Will Marshall: Well, yes, as you say, it is early days. It is obviously a big opportunity. There is, you know, huge budget behind it. But the specific ways in which we fit in will have to be figured out as we understand the architecture, and they are still working on many of those aspects. There are, of course, ways in which our present datasets could fit into that—early warning of certain things, strategic analysis across broad areas. That obviously makes sense. But right now, that is merely a vehicle, and we will compete on awards within that, and that is the same for all the people that have got awards under that system. So, yes. But obviously, finding unknown unknowns—there could be specific missions, but it is very early days to be thinking about that. What I will say is that we are continuing to lean into specific opportunities that are very live right now, like with LUNO, with our Navy, and others. So, you know, we are seeing a lot of interest in cislunar awareness around the world. So the department has a lot of interest across the board, and we are leaning into it. Trevor Walsh: Great. Awesome. Appreciate that. Ashley, maybe just one follow-up for you. I appreciate the color you gave around free cash flow. I know you guys are not giving an official guide, but just given how strong you guys ended this current fiscal year and we think about 2027, there is obviously—there can be a bit of a step down from just going $50,000,000 to something that is just generally positive. So just want to make sure we do not get—just given the CapEx spend and everything else, could you just give us a little bit of maybe guardrails to how we think about that for 2027? Would be great. Ashley Johnson: Yes. I mean, first, I will just reiterate the point that I made. We definitely expect there to be pretty significant fluctuations quarter to quarter. Just like I said, timing of procurement versus timing of milestone payments can cause, you know, one quarter to be much more positive and another quarter to be, you know, significantly negative. So that is one caution that I would provide, and that makes it a little bit harder to give, you know, very precise guidance around it, which is why I have not. And to your point, you know, depending on how much more of this opportunity we continue to realize, it would not make sense for us to optimize expanding free cash flow on the year versus setting ourselves up to both deliver against the contracts we have and to bring more on. So if that offers enough color to you without giving specific guidance, which I am really not in a position to do, we are not focused on, you know, kind of sustaining or expanding free cash flow from last year, but really focused on balancing it quarter to quarter and leaning into the market. Trevor Walsh: That makes sense. That is helpful. Thanks, Ashley. Will Marshall: Thank you. Operator: Your next question comes from the line of Greg Pendy from Clear Street. Please go ahead. Greg Pendy: Hey, guys. Thanks for taking my question. Just one quick one—just so that I understand kind of the approach on this year of leaning in, in terms of the Commercial and Civil side. I mean, it is hard to think back, but, you know, you did have a cost rationalization program at one time, and your Sales and Marketing is down around 15% from fiscal 2024, yet your revenues are up roughly 40%. So is it kind of that the customers through Anthropic will figure out how to use the data and how valuable it is into their daily workflows, or do you think that, you know, you will need some boots on the ground to educate the Civil and Commercial markets? Thanks. Ashley Johnson: Yes, Greg, it is a very good callout. We did, you know, realign the team across the board to really focus on where we had the largest account opportunities, which I think did disproportionately impact, you know, how much resource we were putting behind going after a more distributed Commercial market. And as we said, we were building out the platform to enable smaller customers to really access the data on a self-serve basis. I think as we are growing those markets and leaning into the AI that Will highlighted, we will be making some targeted investments in those markets where we are seeing the most traction out of the gate. So we do have feet on the street going and meeting with customers and demonstrating for them. And that is a really exciting part of these new capabilities that we have, as we can really show, not tell, in these customer meetings, all the things that you can—all the insights you can extract—from the data to answer their specific questions. So we did a lot of training with our sales team earlier this year, really showing them how to use these tools and demo environments. Obviously, the world has changed a lot in the last six years. You can do a lot of that without putting people on airplanes, but it will require some investment across Sales and Marketing. And I did highlight that as one of the investment areas for us this year. Greg Pendy: That is very helpful. Thanks a lot. Operator: Your next question comes from the line of Alex Latimore from Northland. Please go ahead. Alex Latimore: Hey, guys. Excellent quarter. Alex Latimore on here for Mike Latimore. I had one question—I just wanted to hit on guidance one more time. Good raise on guidance. I was wondering if you could talk about what assumptions are factored into that raise on guidance. Does this assume any new eight-plus-figure wins or any commentary there? Ashley Johnson: Yes. Thanks, Alex. I would say we are very balanced in terms of how we think about those types of opportunities that may be in our pipeline, because, obviously, those could swing outcomes based on whether they come in or not. So typically, what we will look at is a pipeline of opportunity where, if an eight-figure deal were to fall out of the pipeline, what type of backup we have for that opportunity, and then probability-adjusted. So we are definitely looking at active opportunities, probabilities, and then giving ourselves room for those deals where maybe we do not have enough pipeline to make up for that one landing on time or in the year, which gives us opportunity to outperform. And, like I said earlier, it does not put us in a position where we feel over our skis. Alex Latimore: Awesome. And then one more—I just wanted to hear if there are any footholds in the Golden Dome initiative. I understand there was a $10,000,000,000 incremental add to the Golden Dome initiative for space-based capabilities. I am not sure if you are seeing any demand there for Planet Labs PBC systems, but any commentary around Golden Dome would be helpful. Will Marshall: Yes. I sort of said all that I can on that at the minute. It is very early days as they are architecting that system, and potentially that is—you know, the SHIELD IDIQ, just to be clear, is going down that path. And so that answer was about that. And, again, it is a framework that we have, and now we will bid for actual awards under that program. But we do not know what they are exactly yet. Then when we do, we will respond. But per my earlier answer, the general thing is giving domain awareness and other things that could be useful for that. But we obviously have to wait and see what comes through that. Alex Latimore: Awesome. Excellent quarter. Thanks, guys. Ashley Johnson: Thank you. Operator: Your next question comes from the line of Caleb Henry from Quilty Space. Please go ahead. Caleb Henry: Hi, guys. Thanks for the call. Couple of questions on satellite manufacturing. Actually, first one—sorry—on Pelican. I have noticed that you guys lowered one of the Pelican satellites a little past 400 kilometers recently. Is that part of a larger fleet migration to a very low Earth orbit? Or is there another way that we should think about that? Will Marshall: Yes. We lower spacecraft, of course, to the operational ~30-centimeter ultimate resolution target for those missions. But no changes to the plan. Those were just operational adjustments, as we will start with the satellites in a slightly higher orbit and bring them down to operational orbits as we progress. By the way, on Pelican, you may want to look in the associated deck with this earnings. There are a few really cool pictures of some of the fast timelines that we had—three pictures in about an hour. It is very exciting to see and a great performance of that system. So it is very exciting, and we have got multiple launches for more of those systems going up this year. So it is exciting times. And was there a broader question about the manufacturing? Caleb Henry: Yes. I definitely have to look through these pictures. But looking at the contract for Sweden and tying that into manufacturing, can you give a sense of when those satellites are supposed to be delivered and how many satellites? Is that sort of the reason for the ramp-up in manufacturing space in California? Will Marshall: Nothing specific I am going to say specifically to that customer, but we are ramping up because of the demand overall. Right? And we are building fleets for multiple customers as well as for our own system, and that demand is obviously already clear such that we are expanding here in San Francisco and in Berlin. Caleb Henry: Okay. And then last question. Just curious if you could shed more light on what makes 2026 the year you first anticipate seeing a return on investment on AI. Was there more of an “aha” moment that happened, or is this just the natural evolution of the years of investment and how customers use Planet Labs PBC data? Will Marshall: Yes. And that is an oversimplification because, I mean, we have had revenue from AI a fair bit before. What I mean is in terms of the big way in which AI can unleash those other market potentials, and I think we are going to really start to see those generic solutions that I mentioned—ways in which anyone can turn up, build an application that is relevant to their needs, and then start getting value. That unlocks other markets that we have been talking about for years latent in our data—energy, insurance, finance, and so on. And so I think that it is just more that I see that all the pieces are coming together such that that will come to fruition this year, and you will start to really see that take off. Just like, you know, the Constellation Service—or Satellite Service—has really started to take off in FY 2026. Operator: Thank you. That is all the time we have for questions today. I will now turn the call back to Will Marshall, CEO and Co-Founder, for closing remarks. Will Marshall: Well, I would just say that, obviously, it is great to see the business doing great, both in the Satellite Services and in the AI-powered Solutions side. And we are very proud of the financials that we reported today. Not just beating the revenue expectations, but I am especially proud of the backlog improvement to $900,000,000 and achieving the Rule of 40 again in the quarter. And it really has set us up for a strong foundation for this coming year. And given that backlog and confidence in our pipeline, we have projected quite strong growth again for this year, and even for years that follow, which is why we are investing this year strongly into that market opportunity. And like I was just saying, this will be the year of AI for Planet Labs PBC, and I think this bridge to the solutions gap will unleash a huge opportunity later in enhanced data. I just want to end by thanking our teams, as we started, around the globe that have enabled all of this to be possible. Thanks again for joining, everyone. Operator: This concludes today’s call. Thank you all for attending. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Intuitive Machines, Inc. Fourth Quarter and Full Year 2025 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 again. Please be advised that today's conference is being recorded. I will now turn the conference over to Stephen Zhang, Head of Investor Relations. Please go ahead. Stephen Zhang: Good morning. Welcome to the Intuitive Machines, Inc. fourth quarter and full year 2025 earnings call. Chief Executive Officer, Stephen Altemus, and Chief Financial Officer, Peter McGrath, are leading the call today. Before we begin, please note that some of the information discussed during today's call will consist of forward-looking statements, setting forth our current expectations with respect to the future of our business, the economy, and other events. The company's actual results could differ materially from those indicated in any forward-looking statements due to many factors. These factors are described under forward-looking statements in the company's earnings press release and the company's most recent 10-Ks and 10-Qs filed with the SEC. We do not undertake any obligation to update forward-looking statements. We also expect to discuss certain financial measures and information that are non-GAAP measures as defined in the applicable SEC rules and regulations. Reconciliations to the company's GAAP measures are included in the earnings release filed on Form 8-Ks. Finally, we posted an earnings call presentation to our website which provides additional context on our operational and financial performance. You can find this presentation on our investor relations page at intuitivemachines.com/investors. I will now turn the call over to Stephen Altemus. Stephen Altemus: Good morning, everyone. 2025 was a transformational year for Intuitive Machines, Inc. We began with a focus on execution and growth. As we look back and reflect we completed our second lunar mission, expanded into national security space programs, closed the acquisition of Kinetics Aerospace, and announced the acquisition of Lantaris Space Systems. Looking forward, these acquisitions significantly expand our scale, addressable market, and growth opportunities. As a result, we expect 2026 revenue to approach $1 billion, nearly a 5x increase from 2025. Our combined portfolio has a diversified revenue mix with approximately 40% commercial business, 40% civil space, and 20% national security customers, evolving towards a balanced portfolio across all three customer bases. Today, the United States' strategic importance of the moon continues to intensify with the President's executive order to lead the world in space exploration and return Americans to the moon by 2028. To do so, NASA is currently preparing for Artemis II while reformulating Artemis III. In parallel, the agency has increased the cadence of robotic and human missions going to the moon to compete with China. Our strategy will continue to be moon-first infrastructure, and we are focused on growing the business across all space domains: LEO, GEO, cislunar, and out to Mars and beyond. Through our early missions, we established the technical foundation of the company with a mission-driven model where revenue was tied to a concentrated customer base and mission outcomes were binary, like delivering NASA payloads to the lunar surface. These early delivery missions under CLPS established one of the first commercial pathways to the moon and we believe give us a competitive advantage to future growth in the space domain. Our mission built the operational expertise required for long-duration, persistent, infrastructure systems that will support sustained surface operations. At the same time, Lantaris Space Systems was operating on a larger scale, more established spacecraft platform market, with its 300 series, 500 series, and 1,300 series satellite systems which operate in more mature, expansive markets with consistent and predictable revenue generation. Historically, the Lantaris model was straightforward: build reliable, cost-effective spacecraft to a customer's specifications and hand it over for operational life which should exceed 10 years. Bringing these capabilities together, both Intuitive Machines, Inc. and Lantaris, creates a fundamentally different company. Today, we are focused on taking proven production platforms and applying them to new growth markets as a prime operator. Our operating model is organized around three integrated capabilities. They are to build, to connect, and to operate space infrastructure. Build is where we design, manufacture, and deliver spacecraft, landers, satellites, surface systems, propulsion and avionic systems, for government and commercial customers. This represents our business today. Starting later this year with IM-3 or Mission 3 and our first lunar data relay satellite, our connect capability integrates deployed assets into communications, navigation, command, control, and data relay networks that enable persistent connectivity. Our Near Space Network Services contract, which includes data services, navigation, and timing capabilities, accelerates how quickly we can reach our third capability, which is to operate. This is where we provide mission operations, hosted payload services, and other infrastructure-based offerings like the Lunar Terrain Vehicle services. As we look at these three capabilities—build, connect, operate—each progresses the business towards higher-margin services, anchored by multibillion-dollar recurring revenue programs like LCBS, the TDRS service, Mars Telecom Network service, and Fission Surface Power. With the combined power of Intuitive Machines, Inc. and Lantaris, the company can now pursue opportunities as a prime for defense programs, proliferated network infrastructure, and other infrastructure operations with higher procurement win probabilities, driven by our scale, our technologies, and capabilities. Our current execution is grounded in the work our teams are building today for LEO, GEO, and lunar domains. In low Earth orbit, our team continues to execute under the Space Development Agency's proliferated warfighter space architecture. Deliveries of the final 300 series satellite buses under Tranche 1 Tracking Layer are underway, with launch expected later this year. Work also continues on Tranche 2 and the recently awarded Tranche 3 Tracking Layer programs, which support proliferated constellations designed to detect and track missile launches. The 500 series platform, currently supporting high-resolution Earth observation for Vantor, formerly Maxar Intelligence, is part of a NASA-selected team for the Earth Dynamics Geodetic Explorer mission called EDGE. This award demonstrates how the 500 series spacecraft design can support commercial imaging, science missions, and national security applications. Moving outward to geostationary orbit, the 1,300 series spacecraft is the industry's most proven GEO communications platform. Operating companies rely on these satellites in geostationary orbit as part of a multibillion-dollar communications market. Over the last 40 years, Lantaris has served customers as the world leader in geocommunication satellites, with over 3,000 aggregate years on orbit with 99.99% operational availability. The 1,300 series production line includes EchoStar, DISH Network, and two SiriusXM satellites. EchoStar 25 successfully launched last week. Our team is currently performing the satellite's on-orbit system checks before starting high-power direct-to-home broadcast services across North America. SiriusXM 11 is undergoing final performance and integration testing with shipment expected in the second quarter. Production of SiriusXM 12 continues in parallel. Satellites in this class are designed to operate for more than a decade and support services such as broadband connectivity, media distribution, aviation communications, and enterprise networks on Earth. Based on the 1,300 series, and designed for NASA's Lunar Gateway Station, this first-of-a-kind Power and Propulsion Element is the highest-powered solar electric propulsion spacecraft ever built. NASA has invested over $1 billion in the PPE and the system is nearly complete. In January, the agency announced the PPE successful power-up confirming its ability to provide power, high-rate communications, attitude control, and the ability to maintain and maneuver between orbits. In the second quarter, we will integrate the spacecraft's rollout solar arrays in preparation for final delivery to NASA. We have the ability to leverage the spacecraft design for future applications. At our Texas headquarters, with new expertise provided from Lantaris, we are building our first lunar data relay satellite and expect that satellite to launch with our IM-3 mission, which we believe will start the operational task orders portion of the $4.82 billion Near Space Network Services contract. We expect this first of five satellites to support future lunar missions which are all progressing through testing and integration in preparation for our next two contracted delivery missions. IM-3 is progressing well, as all robotic mechanisms from our Maryland facility delivered in the fourth quarter. Now our team is working on lander assembly, integration, and test for the mission later this year. IM-4 remains on track for 2027, and the mission plan includes flying two additional lunar data relay satellites to open more connect services under the Near Space Network Services contract and recognize higher-margin revenue servicing, specifically NASA's Artemis IV human landing mission. The lunar data relay satellites are our first connected space infrastructure assets. They are connected to Earth by our partners' global ground stations. Collectively, this forms a secure space data network, a communications navigation architecture we intend to offer as a subscription data service with recurring revenue in conjunction with pay-by-the-minute operations. We believe most of the market understands networks being provided for Earth from space, whether it is internet, satellite radio, or broadband. It is important to understand the distinction, however. We are creating a network for space from space—an internet for the solar system. Today, NASA provides that capability through the Deep Space Network. Spacecraft operators request time on that network and pay for access to communicate with their deep space missions. Deep space communications bandwidth, though, is limited and is multiple times oversubscribed. For example, NASA has indicated that live video from Artemis II will likely be transmitted at a low resolution. Intuitive Machines, Inc. is working to solve that challenge. Higher data rates require our relay satellites and additional communications infrastructure operating between the moon and Earth. On Earth, Intuitive Machines, Inc. is expanding its network coverage, adding a new ground station partnership in Australia, and working to upgrade additional partner facilities around the world. The Australian just successfully downlinked data from the James Webb Space Telescope, confirming that it can operate within NASA's existing network and reduce its bandwidth constraints. For space, Intuitive Machines, Inc. continues to evolve globally, signing a strategic agreement with Leonardo and Telespazio to connect our lunar relay systems together and support European exploration missions. The next phase for the company is to operate the built and connected spacecraft as long-term infrastructure. The immediate opportunity for that model is already captured in the Near Space Network Services contract. While the always-on network provides subscription-based data connection, additional value comes from operating hosted payloads and sensors to create new markets for science, reconnaissance, and exploration. The near-term catalyst for higher-margin infrastructure operations is surface mobility. The Lunar Terrain Vehicle program is structured as a long-duration service where the provider builds, delivers, and operates the vehicle on the surface over many years. When selected, the vehicle will become a mobility infrastructure asset on the moon connected to our space data network generating recurring revenue for NASA and commercial customers over time. Moving forward, the company sees growth opportunities from an operator's perspective. These opportunities include tracking and data relay satellite services, Mars Telecom Network Services, and the Missile Defense Shield program, while also adapting the 1,300 series spacecraft class for Space Force for highly maneuverable satellites and evolving our satellite platforms for applications in the burgeoning orbital data center market. To support these growth opportunities, last month we completed a $175 million strategic equity investment to advance communications data processing networks, including extending flight-proven satellite platforms. Intuitive Machines, Inc. intends to invest in expanding its Near Space Network Service and establish a solar system internet. Through investments in the Lantaris platforms, and specifically the 1,300 series, the company believes it can grow market share in geostationary orbit, expand capability around the moon, extend capability to Mars, and support emerging high-power on-orbit data processing and edge computing. I will now turn the call over to Peter McGrath for the financial results. Peter McGrath: Thank you, Steve. Thanks to everyone joining us today. As Steve mentioned, we made strategic moves last year to transform Intuitive Machines, Inc. to become the next-generation space prime, providing delivery, data, and infrastructure services, emphasizing growth in communications, navigation, and space data network for defense, civil, and commercial markets. The decision to acquire Lantaris positions the company for sustainable long-term growth. As a reminder, we closed the Lantaris acquisition on January 13. Therefore, the 2025 financials do not include Lantaris. Q4 financials do include the impact of Kinetics, which was completed on October 1. Before reviewing the quarter, I want to highlight earlier this month we were awarded a multiyear contract as part of the Space Development Agency's Tranche 3 Tracking Layer, which expands our roles supporting the national security space architecture. This award reinforces our diversification and market expansion into national security programs, supporting sustained long-term growth in backlog and revenue. Back to the quarter, Q4 2025 revenue was $44.8 million, driven primarily by CLPS, ALMS, and NSNS execution. While Q4 revenue reflected program timing and government budget delays, we exited the year with strong contract momentum and major awards already announced in early 2026. Since year end, we were awarded the SDA Tranche 3, as referenced, and we expect decisions on large programs, including Lunar Terrain Vehicle services and NASA's CLPS CT-4 mission. O&M revenue was $14.7 million in the quarter. For the year, excluding revenue was up approximately 65% year over year, driven by continued growth across all key programs such as CLPS, the LTV work we were doing, and NSNS. Q4 gross margin came in strong at $8.5 million, which represents a 19% positive gross margin. The gross margin improvement was driven primarily by higher-margin services revenue such as NSNS as well as continued cost reductions across our fixed-price contracts. Q4 was also our first quarter with Kinetics, and as previously discussed, Kinetics historically generates approximately 14% positive EBITDA and even higher gross margins. SG&A was $40.2 million in the quarter, including $10.8 million of acquisition-related transaction costs associated with the Lantaris acquisition. We also increased IRAD investment to align with our long-term growth strategy. Excluding these costs, underlying operating expenses remain consistent with prior quarters as we continued investing in program execution and infrastructure to support growth. Operating loss for the quarter was $33.1 million versus a loss of $13.4 million in 2024, driven primarily by acquisition-related transaction expenses as well as continued investment in program execution and infrastructure to support the company's growth. Adjusted EBITDA was negative $19.1 million in the quarter, compared to negative $11.2 million last year, driven primarily by growth investments I just mentioned. Operating cash used was $7.3 million in the quarter, with capital expenditures of $15.6 million, primarily for our first NSNS satellite, resulting in negative free cash flow of $22.9 million in the quarter. For the year, free cash flow was negative $56 million, an $11.7 million improvement versus 2024. Free cash flow improved year over year despite higher capital investment in the NSNS constellation. This improvement was driven by $43.3 million less operating cash used, partially offset by a $31.5 million increase in capital expenditures. We ended the year with a cash balance of $583 million, which includes $15 million of cash outflow for the acquisition of Kinetics. Since year end, $430 million of the cash was used for the acquisition of Lantaris, along with additional post-close reconciliations that align with the $450 million cash portion of the purchase price. We have a transition service agreement in place that will continue through the third quarter. As Steve mentioned, in February we completed a $175 million capital raise anchored by institutional investors to strengthen the company's balance sheet and provide capital to support the continued execution of our growth strategy. Following this capital raise and outflows related to the Lantaris acquisition, our cash balance as of February was $272 million. As a reminder, this includes additional acquisition-related transaction and integration costs, as well as the start of some investment costs we outlined as part of our recent capital raise. Following the acquisition and our recent capital raise, we believe we have sufficient liquidity to fund current operations while continuing to invest in strategic growth initiatives. Backlog at year end was $213.1 million, compared to $235.9 million in 2025, reflecting the timing of several large program awards that were delayed by the government shutdown and appropriations process. Approximately 60% to 65% of our backlog is expected to be revenue in 2026 and the remaining 35% to 40% in 2027 and beyond. Q4 backlog includes $22 million of new bookings, driven primarily by NSNS, as the fourth quarter is typically where we see the largest re-up in task orders for the following year. As of February month end, our combined company backlog is estimated at $943 million, which includes the recent award SDA Tranche 3 Tracking Layer contract, which was originally expected in Q4, but does not yet include key upcoming awards such as the next CLPS mission, LTV, Golden Dawn, and other commercial satellites. Looking ahead, we expect additional backlog growth for several large multiyear NASA and national security programs currently moving through the government procurement cycle, including NASA's lunar terrain vehicle services, the next CLPS mission, Golden Dawn Initiatives, and the next phase of Fission Surface Power and orbital transfer vehicle programs. We will also continue to bid on large GEO bus via the 1,300 series platform. Historically, these were roughly one to two new satellite buses per year, which provides a solid base for our commercial market. As part of our growth strategy, we are making investments to increase flexibility of the satellite on orbit through the introduction of digital processors, which we believe increases future market share opportunities. This, along with other investments in the 1,300 series satellite, will expand our total addressable market. As of March 11, our total shares outstanding are 216.8 million, with 159.4 million shares of Class A and 57.4 million shares of Class C. This includes the shares issued for both the Lantaris acquisition as well as the $175 million capital raise. Moving on to guidance, 2026 will be a transformational and record year for the company. With the acquisition of Lantaris completed in January, Intuitive Machines, Inc. enters 2026 as a fundamentally stronger, more competitive, and more diversified space infrastructure company. Intuitive Machines, Inc. now operates across all space domains—from lunar services to proliferated national security space architectures and commercial GEO platforms—which, when combined, significantly expands both our addressable market and revenue base. For 2026, we expect revenue in the range of $900 million to $1 billion, representing a transformational step up in scale for the company. Importantly, roughly two-thirds of our expected 2026 revenue is already supported by contracted backlog, giving us strong visibility into our outlook. On the profitability side, we expect continued margin improvement and are targeting a positive adjusted EBITDA for the full year. The primary drivers are scale from the Lantaris acquisition, expected growth in higher-margin service revenue such as NSNS and navigation services, and continued operational efficiencies across our fixed-price contracts. Since closing the Lantaris acquisition on January 13, we continue to finalize the combined company pro forma financial presentation and expect to provide that additional detail shortly. Before we get to Q&A, I want to take a moment to highlight our strong financial performance in 2025. We were able to grow the top line across all our key programs while expanding gross margins, offsetting the impacts of ALMS and the government shutdown. On the cash side, we continue the trend of reducing free cash flow burn year over year while simultaneously investing in growth and CapEx for our NSNS constellation. Adjusted EBITDA profitability and positive free cash flow continues to be in sight, supported by higher-margin service growth. To accelerate that growth, we made very strategic and targeted acquisitions this year. These acquisitions have further diversified the business to more evenly split between civil, defense, and commercial. With the acquisition of Lantaris and strong momentum across national security, civil, and commercial markets, Intuitive Machines, Inc. has entered 2026 as a more competitive and diversified space infrastructure company with size and scale. We believe this positions us to deliver record revenue, achieve positive adjusted EBITDA, and continue scaling our role in the emerging space economy. With that, operator, we are now ready for questions. Operator: Thank you. And a quick reminder before we start the Q&A, please limit yourself to one question only. Use your keypad to raise your hand. And if you would like to withdraw your question or your question has been answered, please press 1 again. We will now open for questions. Our first question comes from Josh Sullivan from JonesTrading. Please go ahead. Josh Sullivan: Hey, good morning. I just wanted to key in on the Lantaris integration. Where are you ahead of schedule? Where are the hurdles, and what has been the customer response? Stephen Altemus: The integration of Lantaris with Intuitive Machines, Inc. is going very well, Josh. The customers are all excited about the opportunities that the business combination creates. We are working on a transition service agreement with Vantor, the parent, to carve out things like the IT, the accounting system, the payroll system, and make sure that those systems are fully up and running so that the business can stand alone and be merged with Intuitive Machines, Inc. All that is going well ahead of schedule. There was a plan for a nine-month period of time for that transition to occur, and, as I said, we are well ahead of schedule. We are really excited about the combination and what the future holds for us. Josh Sullivan: Great. Thank you for the time. Thank you. Operator: Our next question comes from the line of Suji DeSilva from ROTH Capital. Please go ahead. Suji DeSilva: Good morning. You talked about national security growing in the mix and trying to make it sort of a third, third, a third across the company. Can you talk about the key programs, if you have won them or if you have in the pipeline, to help increase the national security in the mix? Stephen Altemus: We talked about the Space Development Agency's Tracking Layer Tranche 1, 2, and 3. Tranche 3 is the latest award with L3Harris for 18 satellites. We just announced that here recently, and there is a potential to upsize those satellites. In addition, we have proposals in for Golden Dome to build 300 series satellites for those programs. In addition, we have another orbital transfer vehicle development undergoing. We have been through Phase 1 and Phase 2, and we are expecting award or advancement to Phase 3. We have been through critical design review, and now we are headed to the next phase to full development of that transfer vehicle. We are very excited about the potential here in national security space and some of the developments we are doing and the proposals we have in the mix. Suji DeSilva: Thanks, Steve. And then on calendar 2026, your revenue guidance there—talk about the linearity perhaps, Pete, first half versus second half, given you have backlog visibility. And what would drive potential 2026 upside in your guide? And just maybe you can touch on LTV and where they are in the program selection process. Peter McGrath: I will start the last one. Our understanding is they are ready to make an award decision on LTV. It is just timing. We are waiting to hear when they actually make that award. In terms of the revenue guidance, I would say it is pretty level throughout the year. Just note that when we talk about integrating Lantaris into our financials, the acquisition was closed on January 13, so we lose about half a month of January in revenue from them. You will have that one anomaly probably in January, but beyond that you will see a pretty steady state through the year. Stephen Altemus: And in terms of upside, Suji, against the guidance there is potential, as the Artemis program reformulation occurs. You have seen the Administrator call for acceleration of some of the Artemis missions. Part of our Near Space Network contract—if they want to restructure that and accelerate that—there might be some upside this year associated with acceleration to support the near-term Artemis missions. Suji DeSilva: Okay. Thanks. Congrats on the progress. Stephen Altemus: Thank you. Operator: Our next question comes from the line of Andres Sheppard from Cantor Fitzgerald. Please go ahead. Andres Sheppard: Hey, everyone. Thanks for taking our questions and congratulations on a great quarter and on the acquisition. I will limit myself to one question just to be respectful of my peers. I will maybe ask a two-part question, if I may. Steve, you touched on this in your prepared remarks a little bit. Maybe for those that are less familiar with Lantaris, at a high level, what are the things that Intuitive Machines, Inc. can do now that maybe it could not do previously? And the second part of the question coming back to the LTV: it looks like we are awaiting an imminent decision. Do we have a sense of how that decision might be determined? In other words, are we expecting perhaps two award winners, or a primary and backup? Just a little more color there on the latest. Thank you. Stephen Altemus: Andres, good morning. Concerning the LTV in particular, Pete mentioned that briefly. I think the Artemis II mission and the reformulation of Artemis III, IV, V, and VI was the priority for the agency, and now you will see—we expect you will see—follow-on procurements at the next level coming out here shortly. We have been waiting. As you know, we believe the decision has been made. There was an opportunity; the bid asked for one and a half awards, which means one primary award and a half of an award to have a hot backup contract, if you will. We will wait and see. There is a potential—the agency likes to have competition—so there is a potential there will be two full awards. We will just have to wait and see. But we feel it is imminent. That is all the words we are getting at this point. We will be standing by and waiting for the good news. Now for the other question—what can I do now with Lantaris? It is very exciting. We think about the series of satellite buses, the production line, the capabilities that that company has, the high reliability that they have with their satellites in orbit. We take that capability and we add it to our data relay constellation. Providing satellites in and around the moon gives us also an opportunity to repackage the Power and Propulsion Element and offer that in different markets, whether it is a comm node around the moon, a data center kind of construct, or nuclear propulsion. There are a lot of different things that can be done—versatility—by putting the innovation that Intuitive Machines, Inc. brings to all the markets with that reliable, production, high-quality satellites. We are very excited to get moving on the growth initiatives across commercial, civil, and national security space. Peter McGrath: I will add we have already submitted two proposals post closing that we probably would not have submitted if we had not had a combined company. Andres Sheppard: I see. Wonderful. Excellent. Well, thank you, Steve. Thank you, Pete. Congrats again on the quarter. We will pass it on. Stephen Altemus: Thank you. Operator: Our next question comes from the line of Austin Moeller from Canaccord Genuity. Please go ahead. Austin Moeller: Hi. Good morning. I was just wondering if you could talk about some of the operational changes that have been made at Lantaris to make the business better positioned to perform on firm fixed-price contracts, given the possibility of cost overruns during production depending on what kind of bus it is? Stephen Altemus: Morning, Austin. Chris Johnson, the President of Lantaris, has done a fantastic job streamlining the business, making it efficient, eliminating terms and conditions in some older contracts that were onerous for the business. They have streamlined production. They have invested in the 300 series, and we have seen that produce programs in national security space. They bid in the appropriate margins and have the right-sized workforce and the right-sized facility complement. I am very proud of the work they have done, and it was an opportunity for Intuitive Machines, Inc. to come in and acquire the business when it was on its feet, strong, and producing. The future is very bright for us as a combined business. Austin Moeller: Great. Thanks for the color. Operator: Our next question comes from the line of Edison Yu from Deutsche Bank. Please go ahead. Edison Yu: Hey, thank you for taking our question. There has been a lot of talk about data centers in space. You just talked a lot about connectivity on the moon, Mars, solar system. How do you think about this type of architecture in terms of what it looks like, and are there certain technical capabilities that Lantaris brings that you can perhaps highlight? Thank you. Stephen Altemus: Good morning, Edison. I think there is a lot of difference of opinion on where the actual customer base will be for on-orbit data centers and what the architecture for on-orbit data centers will be. We are studying that very carefully right now. I think what Lantaris brings to the table is this Power and Propulsion Element—the most powerful power-generating spacecraft ever built—that has the ability to be a node in a data center. If you think about data centers in particular, there is the storage element, the transmission element, and the edge computing element or the high-speed computing. I think edge computing in space and doing decision-making in space is the key to the future of data centers, as opposed to replacing terrestrial-based data centers. I am skeptical about large, extremely large proliferated constellations in low Earth orbit. They have their challenges, both in power generation and in thermal management. Thinking about it with a set of large and small nodes together, maybe up in the GEO belt, is probably a better architecture, and that is where we are aiming at this point. Operator: Our next question comes from the line of Jonathan Siegmann from Stifel. Please go ahead. Jonathan Siegmann: Good morning, Steve, Pete, and Steve. Thanks so much for taking my question, and congratulations on closing the acquisition in a busy couple of months. One more question on LTV. I thought the Artemis restructuring was all positive for your markets, but the actual acceleration of Artemis V, which I understood is the mission that the LTV was supposed to be launched on, and the delay in the award—can you talk about whether there is enough time to complete it when it is awarded? Or is this something that is going to change the structure or the exact mission? Thank you. Stephen Altemus: We expected award in the November timeframe, and so there are several months' delay in the award. In our construct, what we proposed was a delivery on a SpaceX Falcon Heavy with a lander. It is called Supernova. It is our heavy cargo lander, derived from our Nova-C lander, which has been to the South Pole twice. We are in charge of our own destiny flying on Falcon Heavy—non-related to Artemis directly. We are not tied to the sequence of events for Artemis V. We are flying independently per our architecture, and that gives us an edge to move that around and be in more control of the schedule. I do not see any significant delays to what we proposed. Jonathan Siegmann: Fantastic. And I will just slip in another one that we got that I did not have a great answer for. We have seen some second thinking about the transport layer by the SDA and relying on SpaceX constellation. Our understanding is the Tracking Layer, however, is completely independent of that. I was hoping you could confirm that thought and explain a little bit about why the Tracking Layer that you participate on is not really in the threat of being outsourced to an existing constellation. Thank you again. Stephen Altemus: You are correct in that the Tracking Layer is not affected here by this thinking, and all indications from the customer are that it is going to continue and continue to grow and be replenished as we move forward. I do not have any insight into those discussions internally to the government or with SpaceX, so I cannot comment on that in particular. Operator: Our next question comes from the line of Michael Leshaw from KeyBanc Capital Markets. Please go ahead. Michael Leshaw: Hey, good morning. I wanted to ask on the space superiority executive order that was signed in December, and the strong support there for establishing a lunar presence. Did that pull forward any of your longer-term growth initiatives? Obviously, there could be some near-term challenges with the government shutdown, but does the administration's support for a lunar presence accelerate any initiatives or shift your focus at all? Thanks. Stephen Altemus: We are working directly with NASA to look at ways to move efforts forward faster. The agency is coming out with some streamlined acquisition guidelines to be able to let procurements out faster and is asking for commercial companies to figure out ways to bring investment to the table, to add to the federal dollar, to speed up development activities to accelerate our presence in space and accelerate astronauts' boots on the moon. Our efforts are specifically focused on putting in the necessary infrastructure in and around the moon to enable sustained presence at the moon. The executive order that was signed is complementary to our work; our business is complementary to that executive order, and we are aiming to support it as best we can. Operator: Our next question comes from the line of Ronald Epstein from Bank of America. Please go ahead. Smith Styro: Hi. Good morning. This is Smith Styro on for Ron today. I just wanted to ask about how you see the competitive landscape evolving given the reformulation of Artemis, increased interest from SpaceX, Blue Origin, and some other players. Is it more challenging? Do you see opportunities for extended applications? Any color you can give around that. Stephen Altemus: From what I understand about NASA's plans for the lunar economy and space exploration, the Administrator has called for a higher cadence of missions to fly more equipment to the moon to learn about sustained presence on the moon. There will be more rovers, more landers, more satellites in and around the moon as a result of this push for sustained presence on the moon. I think that is excellent news for Intuitive Machines, Inc. The vendor pool from CLPS 1 will persist to CLPS 2.0. All the authorization and appropriations language that we have seen includes the follow-on CLPS, and we have heard from the Administrator that he would like to see a launch a month to the moon in the future. Calling for that kind of cadence of missions and repetitiveness really does improve reliability in our systems and allows us to grow a more sustainable business. We are very excited about it. Operator: Our next question comes from the line of Griffin Boss from B. Riley Securities. Please go ahead. Griffin Boss: Hi, good morning. Thanks for taking my question. I want to dig a little bit deeper into what you just mentioned there, Steve, on CLPS 2.0. I know we are patiently awaiting LTV and other contracts like CT-4 or GX, others, but CLPS 2.0 is a new one on the horizon. Obviously, there was an RFI out earlier this year. I am sure Intuitive responded to that. Do you have any insight where that stands or, more definitively, what the scale and scope could be, acknowledging that CLPS 1.0, I think, was about $2.5 billion? Do you have any insight as to if that scale for CLPS 2.0 will increase given the increased cadence of lunar landing that the Administrator has talked about? Stephen Altemus: I do expect CLPS 2.0 to be larger than CLPS 1. We have introduced ideas in our RFI response to the agency and some white papers—unsolicited—to increase the cadence of missions, and we are seeing that that is what is being called for. We have to think through how to increase production to meet that cadence of missions. We have requested things like block buys where you can buy several missions at a single time, and that would increase production rates and increase supply chain throughput. We have also introduced the concept of heavier cargo because we will be bringing bigger and larger elements to the surface, much like LTV, and so the call for heavier cargo is necessary, and we put that input in also. Larger vehicles. What else is interesting is the move from the Science Mission Directorate—CLPS 1.0 was part of the Science Mission Directorate. We have seen that move over to the Exploration Mission Directorate, and so you will see more engineered systems, surface infrastructure systems being called for in CLPS 2.0. The exact dollar amount—I am not certain what that will be as the agency figures out how it is going to rejigger their budget. But it is all positive from what I am hearing. Griffin Boss: That is great color. Thank you, Steve. Appreciate you taking the question. Operator: Our next question comes from the line of Jeffrey Van Rhee from Craig-Hallum. Please go ahead. Daniel (for Jeffrey Van Rhee): Good morning. This is Daniel on for Jeff. Just on the organic growth profile, I know you said previously Lantaris had been running around $630 million in revenue. I do not know if you have an updated number for full year 2025, but on a combined basis, it looks like maybe it is around teens organic growth for 2026. Maybe just walk in our expectations on organic growth. Peter McGrath: By the way, we have not provided year end yet. We are closing out our performance here, and we should have them out near term. That will give you the 2024–2025 year-end combined. In terms of growth, when we look at our guidance, we are looking at it as a combined company now. There is a lot more integrated capability that we are bringing forward, so it is a little harder to parse it out. Arguably, of it, you are looking at about 66% of the revenue coming out of Lantaris and the other 33% coming out of us. That is a rough magnitude kind of look. We will get more granularity after you see the pro formas and as we move into visibility through the quarters. Operator: Thank you. Operator: Our next question comes from the line of Greg Pendy from Clear Street. Please go ahead. Greg Pendy: Hey, thanks for taking my question. Just a quick one here. I think you had addressed the low-hanging fruit on NSNS given bandwidth constraints at Deep Space Network for the initial launch and also how commercial has only grown. But could you touch on the defense side? Hearing a lot how the moon is the ultimate high ground, and how that demand for NSNS may have changed from where it was a year ago, given what other countries might be doing with their ambitions on the moon. Thanks. Stephen Altemus: As far as international business goes, you heard us announce a strategic partnership with the Italian companies, Leonardo and Telespazio. They have an ESA-funded program called Moonlight to put communications satellites and some navigation satellites around the moon for European business. We struck a partnership to tie our networks together so the networks are larger. We are also working initiatives with JAXA Japan to do a similar thing, to create a standard and to create coverage in a way that supports the Japanese market, the European market, and the U.S. market combined. That is very exciting for us, and we are clearly seen as a leader here, setting the tone for how these networks will evolve and be interconnected and interoperable. On the national security side, space domain awareness is of critical importance, and having assets in and around the moon and lunar space is very important for understanding what the traffic model is around the moon and where things are moving. There has been expressed interest in using our network for those reasons also. Operator: That is very helpful. Thanks a lot. Okay, and that concludes the Q&A portion of this call. I will now turn it back over to Stephen Altemus for any closing remarks. Stephen Altemus: Thank you for your questions today, everyone. You heard our strategy, and at its core, it is about building a business with greater durability and higher value over time. We are executing on our strategy and moving from single mission-based operations towards long-duration infrastructure services. That is the path we are on, and that is how we are thinking about the company's future. The future is bright. Thank you very much today. You will be hearing more from us in the future. Operator: The meeting has now concluded. Thank you all for joining, and you may now disconnect.
Operator: Good afternoon, and welcome to the Relmada Therapeutics, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the prepared remarks, we will conduct a question-and-answer session. As a reminder, this conference call is being recorded and will be available for replay on the Relmada Therapeutics, Inc. website. I would now like to turn the call over to Brian Ritchie from LifeSci Advisors. Please go ahead, Mr. Ritchie. Brian Ritchie: Good day, everyone, and thank you for joining us today. This afternoon, Relmada Therapeutics, Inc. issued a press release providing a business update and outlining its financial results for the three months and year ended December 31, 2025. Please note that certain information discussed on the call today is covered under the Safe Harbor provision of the Private Securities Litigation Reform Act. We caution listeners that during this call, Relmada Therapeutics, Inc.'s management team will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in Relmada Therapeutics, Inc.'s press release issued today and the company's SEC filings, including in the Annual Report on Form 10-K for the year ended December 31, 2025, filed after the close today. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast on March 19, 2026. Relmada Therapeutics, Inc. undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. With me on today's call are Relmada Therapeutics, Inc.'s CEO, Dr. Sergio Traversa, who will briefly provide a summary of recent business highlights; Dr. Raj S. Pruthi, Relmada Therapeutics, Inc.'s CMO, Oncology, who will provide an NDV-01 program update; and Relmada Therapeutics, Inc.'s CFO, Maged S. Shenouda, who will provide an update on cipranolone and a review of the company's Q4 financial results. After that, we will open the line for a brief Q&A session. Now, I would like to hand the call over to Sergio Traversa. Sergio? Sergio Traversa: Thank you, Brian. Good afternoon and welcome everyone to the Relmada Therapeutics, Inc. Fourth Quarter and Year-End 2025 Conference Call. 2025 has been a transformational year for Relmada Therapeutics, Inc., marked by significant progress for our lead program NDV-01. As a reminder, NDV-01 is a sustained-release formulation of gemcitabine and docetaxel. We are developing this investigational product candidate for the treatment of non-muscle invasive bladder cancer, or NMIBC. Most recently, we reported compelling responses and durable 12-month efficacy data for our ongoing Phase II study of NDV-01. We achieved FDA alignment for our planned registrational Phase III RESCUE programs. We fortified our team and we substantially strengthened our balance sheet. As we reflect on our recent accomplishments and planned next steps, I would like to highlight four key areas. First, NDV-01. We believe that the strength of the recently reported 12-month follow-up data could position NDV-01 as a potential best-in-class therapy for the treatment of NMIBC. Furthermore, the strength of the clinical data and the unique, easy-to-administer sustained-release formulation give us confidence that NDV-01 has the potential to provide what urologists and patients with NMIBC need: a simple, durable, effective treatment that readily fits into real-world practice settings. We plan to initiate the Phase III RESCUE program in the middle of this year. Our Phase III regulatory strategy, agreed upon with the FDA, includes two independent registrational pathways. Pathway one is focused on adjuvant therapy following TURBT in patients with intermediate-risk bladder cancer, which affects about 75,000 patients in the United States. Pathway two is focused on second-line treatment in BCG-unresponsive patients, which represents about 5,000 patients in the United States. Second, cipranolone. Cipranolone has previously demonstrated proof of concept in Tourette syndrome. It is a disorder characterized by compulsive behavior. We are getting ready to begin a proof-of-concept study in Prader-Willi syndrome in the middle of this year. And third, our team. We substantially strengthened our development team with the appointment of Dr. Raj S. Pruthi, a highly regarded physician-scientist and urologic oncologist, as Chief Medical Officer, Oncology. In addition, we established a scientific advisory board comprised of similarly distinguished peers to further support the NDV-01 program, including Dr. Yair Lotan from the University of Texas Southwestern Medical Center and Dr. Kates from Johns Hopkins University School of Medicine. Fourth and last, financial strength. We just completed a successful $160 million private financing. Based on existing forecasts, these funds plus our existing cash balance provide Relmada Therapeutics, Inc. with capital through 2029 and, importantly, through the completion of the planned NDV-01 program. Looking ahead, 2026 is poised to be another important year of value creation for Relmada Therapeutics, Inc., with the initiation of our Phase III RESCUE program for NDV-01 in bladder cancer and the Phase II proof-of-concept trial for cipranolone in Prader-Willi syndrome. With that, I also would like to express my appreciation for the trust and support of our investors, employees, collaborators, and the patients who participate in our studies. Next, I will turn the call over to Dr. Raj S. Pruthi, who will provide a review of the NDV-01 program, including 12-month follow-up data from the ongoing Phase II study and the summary of our Phase III plans. Raj? Raj S. Pruthi: Thank you, Sergio. Good afternoon, everyone. It is a privilege to share an update on the clinical progress we have made this year, headlined by the truly compelling and best-in-class results for NDV-01 in NMIBC. Bladder cancer is a high-frequency cancer that has a major impact on the lives of patients, generally diagnosed in their early to mid-70s. High recurrence rates and burdensome treatments disrupt quality of life at a time when patients are eager to enjoy life. I want to touch on three topics during today's call. One, an overview of the NDV-01 12-month data. Two, a summary of our planned Phase III program. And three, a discussion of how NDV-01 might fit into the practice of urologic oncology. As Sergio noted, NDV-01 is a novel, sustained-release intravesical formulation of two chemotherapy agents, gemcitabine and docetaxel, or GemDosi, as we say. Our program builds on physicians' established familiarity with the efficacy and safety profile of conventional GemDosi. More specifically, in patients who are unresponsive to BCG, this combination offers a salvage, bladder-sparing option that may help avoid a radical cystectomy. Moving on to the 12-month data, we are pleased to report that NDV-01 has demonstrated a high response rate and durable 12-month efficacy from the ongoing Phase II study. We believe these data stand out in comparison to the other benchmark programs and could position NDV-01 as a best-in-class treatment option for patients with bladder cancer if approved. The study is an open-label, single-arm trial in patients with high-risk NMIBC. Patients receive six biweekly doses, every other week times six, followed by monthly maintenance for up to one year. Patients undergo regular assessments with cystoscopy, pathology, and, if needed, biopsy. The study was designed to enroll up to 70 patients with high-risk NMIBC. The primary endpoints are safety and complete response rate at 12 months. Secondary endpoints are duration of response and event-free survival. The data demonstrated a 12-month complete response rate of 76% with a favorable safety profile. Notably, the study also showed a 12-month complete response rate of 80% in the BCG-unresponsive population, one of the most difficult-to-treat segments of NMIBC. These findings support the advancement into the Phase III registrational program, which we are calling RESCUE. The program will evaluate NDV-01 in both second-line BCG-unresponsive disease and in intermediate-risk disease as an adjuvant therapy following TURBT. When you look at the complete responses, or CR, at any time in the overall population, we see a CR anytime of 95% based on 38 patients. Among those with BCG-unresponsive disease, we see a CR rate at any time of 94%. Given the burdensome nature of recurrent bladder cancer treatment, safety is a critical element of our product profile. We continue to be encouraged by the favorable safety profile observed for NDV-01 across our clinical program. In the 12-month data set for NDV-01, no patients had progression to muscle-invasive disease, no patients underwent a radical cystectomy, no patients had a grade 3 or higher treatment-related adverse event, no interruptions or discontinuations of treatment due to adverse events occurred, and most treatment-related adverse events were at the grade 1 level. Moving on to the planned Phase III RESCUE program. We believe our 12-month response and durability data compare quite favorably to the current commercial and development-stage trials. We have constructed our Phase III registrational pathways to maximize our probability of success and create the most efficient path to FDA approval. The entire RESCUE registrational program was designed in alignment with the FDA to provide two separate approval pathways. We expect to secure U.S. IND clearance and initiate the Phase III RESCUE program in the middle of this year. Let us review the two studies that form the RESCUE program. Registrational pathway one focuses on the evaluation of NDV-01 in patients with intermediate-risk bladder cancer as an adjuvant therapy following TURBT surgery. We estimate there are about 70,000 to 75,000 patients each year in the U.S. in this setting. This study is planned to be an open-label, randomized, controlled trial. Since there are no approved treatments for adjuvant intermediate-risk NMIBC, the study will evaluate NDV-01 versus observation. The primary endpoint is disease-free survival, or DFS. Secondary endpoints include high-grade recurrence-free survival, progression-free survival, and quality-of-life metrics. We feel that the opportunity to incorporate NDV-01 into patient care post-TURBT is very attractive, and it could pave the way for an important clinical indication and broader adoption. Registrational pathway number two is focused on the evaluation of NDV-01 in the second-line setting in patients who are BCG-unresponsive with carcinoma in situ, or CIS, or refractory to first-line therapies approved or in development. We estimate that there are about 5,000 patients per year in the U.S. in this setting. Since these patients have few, if any, effective treatment alternatives to radical cystectomy, the study is designed as a single-arm, open-label trial. The primary endpoint is CR anytime. Secondary endpoints will include the duration of response, or DOR, progression-free survival, and recurrence-free survival among responders. We expect to report the initial three-month response data from this study by the end of 2026. We are excited about this pathway because it could offer a rapid route to approval. Before I hand the call over to Maged, I would like to make a note about how we feel NDV-01 might fit into clinical practice. NDV-01 is formulated to create a soft matrix in the bladder to enhance local bladder urothelial exposure and minimize systemic toxicity. It is delivered in the office in less than five minutes. This simple formulation and administration model has the potential to optimize the delivery experience for patients and providers, offering a level of simplicity and time savings that stands out amongst the others. Our Phase II data give us high confidence in our registrational program. By addressing a clear unmet need with a unique sustained-delivery profile, we believe NDV-01 is uniquely positioned to redefine the standard of care in bladder cancer. We look forward to initiating the RESCUE registrational program at an estimated 80 sites in North America in the middle of this year, and we will work to bring NDV-01 to bladder cancer patients as soon as possible. Maged? Maged S. Shenouda: Thanks, Raj, and good afternoon, everyone. Today, I will spend a few minutes on 2025 financial results. Because cipranolone modulates GABA, one of the most important neurotransmitters, it is defined as a GABA or GABA-modulating steroid antagonist. Cipranolone's novel action on the GABA neurotransmitter pathway gives it the potential to normalize the activity of the GABAA receptor and alleviate the repetitive symptoms of compulsivity disorders. These disorders affect millions of people around the world and include indications such as obsessive-compulsive disorder, Tourette syndrome, and Prader-Willi syndrome. We are preparing to initiate a proof-of-concept study in Prader-Willi syndrome in mid-2026. Our immediate efforts are dedicated to completing study preparations, including engaging with the FDA on our proposed trial design and establishing a robust supply chain. Moving now to our financial results. As noted earlier by Brian, this afternoon, Relmada Therapeutics, Inc. issued a press release announcing our business and financial results for the fourth quarter and twelve months ended December 31, 2025. During this call, I will review our fourth quarter 2025 financial results and refer you to our press release and Form 10-K filing issued this afternoon for financial information for the last twelve months. Starting with our cash balance, Relmada Therapeutics, Inc. closed 2025 with a cash balance of $93 million. This includes net proceeds of approximately $94 million from an underwritten stock offering announced on November 5, 2025. This compares to cash, cash equivalents, and short-term investments of approximately $45 million at December 31, 2024. On March 9, 2026, the company announced a $160 million private financing with net proceeds of approximately $150 million. This financing, along with our cash balance as of December 31, 2025, is expected to provide sufficient resources to fund company operations through 2029, including completion of the Phase III RESCUE program for NDV-01. Moving through our fourth quarter financial results, research and development expense for the three months ended December 31, 2025, totaled $8.1 million compared to $11.0 million for the three months ended December 31, 2024, a decrease of $2.9 million. The decrease was primarily driven by a decrease in study costs associated with the completion of two Phase III trials for REL-1017, partially offset by increased costs related to the start-up of the Phase III NDV-01 trials and Phase 2b cipranolone study, and additional R&D personnel. General and administrative expense for the three months ended December 31, 2025, totaled $12.3 million compared to $8.1 million for the three months ended December 31, 2024, an increase of approximately $4.2 million. The increase was primarily driven by an increase in compensation costs, partially offset by a decrease in stock compensation costs. Net cash used in operating activities for the three months ended December 31, 2025, totaled $14.6 million, compared to $8.8 million for the three months ended December 31, 2024. The net loss for the three months ended December 31, 2025, was $19.9 million, or 27¢ per basic and diluted share, compared to a net loss of $18.7 million, or $0.06 per basic and diluted share, for the three months ended December 31, 2024. Before we open the call for questions, I will turn back to Sergio for some closing comments. Sergio? Sergio Traversa: Thank you, Maged. In closing of our prepared remarks, I would like to share that I am very confident and optimistic about our clinical programs and the long-term prospects for Relmada Therapeutics, Inc. As we are getting ready to initiate the RESCUE registrational program for NDV-01, we are focused on execution and looking forward to updating you on our progress in the coming quarters. Operator, I would now like to open the call for questions. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. One moment, please, while we poll for questions. Our first question is from Uy Sieng Ear with Mizuho Securities. Uy Sieng Ear: Hey, guys. Congrats on the great data and the financing. Yeah, it seems like you did a lot of work this quarter. Maybe we are getting some questions on whether you will present additional data from your Phase II study. Should we expect, going forward, updates every three months, and will you also have data at AUA by any chance? That is the first question. The second question that we have been getting is there is some concern that the second-line patients may not be necessarily second line, but maybe, by the time they get to your regimen, it could be their third line. Please help us understand what you are doing to ensure that those patients are truly second-line patients. And the third question is, you indicated that you have three-month data from your Phase III BCG-unresponsive second-line patients. Will this be from the entire patient population, or would this be an interim from a portion of the number of patients that you expect to enroll. Thanks. Sergio Traversa: Thank you, Uy, for the questions. I think Raj can answer these questions. I will pass it to Raj. Raj S. Pruthi: Thank you, Sergio. Good to hear from you, Uy. Regarding the data, we will be presenting updated 12-month data at the AUA. It has been accepted to AUA. We will also be presenting a trial in progress as we get RESCUE going. Our plan is to focus on introducing data, and to your last question, in the BCG-unresponsive second-line group, starting at the end of the year. As we start the trial in midyear, we should have some three-month data to share externally by the end of the year, as it is a single-arm, open-label study. Our thought is then to have, at a cadence of about every three months, additional updates as we get six-, nine-, and twelve-month follow-up on that data set. You provided an excellent question on second line, third line, fourth line. We are indeed limiting the number of prior therapy lines to two. So you can have had one line of therapy and still have been BCG-unresponsive, for example, while allowing a second line to be an alternative intravesical. We are also going to look at 15 patients at three months for those who received one prior line of therapy versus two, just to make sure there is nothing concerning in this open-label study that would warrant exclusion. This is reflective of the conversations we have had with the FDA. But it is a good question, and we are limiting the number of third or fourth lines. Uy Sieng Ear: Thank you. Operator: Our next question is from Farzin Hak with Jefferies. Congrats on the progress, and thank you for taking my questions. Farzin Hak: I have one on the operational standpoint. The NMIBC space is becoming congested with active trials and drugs approved, too. What is your expectation for enrollment cadence across your two studies, and can the drug’s in-office profile potentially serve as a recruitment advantage? Sergio Traversa: Thank you, Farzin. Raj, do you want to take that? Raj S. Pruthi: Thank you. Yeah, Farzin, good to hear from you. I think you are right. The high-risk, BCG-unresponsive space has been crowded, but I think ours, coming in as a second-line therapy, provides a unique advantage. There are no drugs that have been approved in that setting and none that I am aware of that are even being investigated as a pivotal study in that setting. So I think we have a competitive advantage in that we can go to sites that, even with drugs in development, can follow them in this unique path. The same for intermediate risk. Right now, it is becoming an area of broader interest. CG Oncology, for example, has an intermediate-risk trial that looks like it is ahead of schedule and accrued very rapidly. I think there is a lot of interest from investigators in intermediate-risk patients. I expect us to enroll that study pretty rapidly and ahead of schedule like CG did. Thanks for the question, Farzin. Farzin Hak: Got it. And then for the second-line high-grade settings, beyond the primary endpoint of CR rate at any time, has the FDA stipulated a minimum duration of follow-up required for all patients by submitting the NDA? Raj S. Pruthi: Another great question. They have not required a minimum follow-up. They said they want to see CR anytime, as you said, and durability of response or duration of response. I think the wording they used, which I think is important, is they want to see the totality of the data. They want to see that you have a response and there is some level of durability. They have not specified what that number is. Farzin Hak: Got it. Thank you so much. Operator: Thank you, Farzin. Your next question is from Christopher with Lucent. Christopher: Hey, guys. Thanks for the question. I was wondering, given the population differences between your Phase II and Phase III RESCUE, what are you expecting to see in terms of the CR rate at the three-month mark, as well as what we should be benchmarking against with the status of the field? Sergio Traversa: Thank you, Chris. Raj, do you want to take this one as well? Raj S. Pruthi: Yes. Thanks, Chris. Thanks for the question. In the intermediate-risk study, we structured the trial statistics around a two-year RFS of 75%. That is reflected in the literature with GemDosi. With what we have seen in this population and with sustained release, we should exceed that, but that is our target number and it drives the statistics. It is an event-driven study with a target of 128 events. Regarding the BCG-unresponsive second-line, if you look historically, in first line the first drug approved was valrubicin in 1998 at 8% 12-month CR, followed by Keytruda at 19% and then other programs in the 24% range. So I am glad the FDA was not fixated on a certain number, but I think that threshold should be at those levels or lower than what we have seen in first-line therapy, just as precedent. Christopher: Got it. Thanks for the question. Operator: Our next question is from Kelsey Goodwin with Piper Sandler. Kelsey Goodwin: Hey, thanks so much for taking my question and congrats on the recent clinical update. Regarding that update, on the patient baseline characteristics and the CIS versus papillary split, how should we be comparing this data set to that of competitors with primarily CIS patients? And do you have any data to support that GemDosi looks similar in CIS and papillary patients? Sergio Traversa: Hi, Kelsey. It is Sergio here. Raj, it seems that this one also is for you. Raj S. Pruthi: Great question, Kelsey. Starting with the last part of your question, as a clinician you often think if the patient is BCG-unresponsive, this might be more virulent, but we do not often parse whether it is CIS versus papillary. Some people show pure CIS behaves better, but T1 actually is worse, so it is a mixed bag. For GemDosi, there is an article by Steinberg in 2020 in the Journal of Urology that looked at heavily pretreated patients, and at 12 months the RFS or CRs were 60% in the CIS population and 61% in papillary, so there is not a marked difference typically. If you go back and look at our data, our 12-month CR in BCG-unresponsive is 80%, and our 12-month CR in the overall population is 84%. That includes four patients with CIS; we had four out of four with complete response at any time and two out of two at 12 months. These are small numbers, but they still compare quite favorably. Even if you take NDV-01 and the BCG-unresponsive population, including CIS, and compare it to the best-in-class categories, I think their 12-month CR was 74%. Taking our entire cohort, we are significantly higher, so I think it is still best in class. I hope I answered your question. Kelsey Goodwin: That is super helpful. Thank you so much for that. And one follow-up: with respect to the intermediate-risk setting and that market overall, how much do you think that market might need to be built out by these early launches, given we have not had an approved agent until last year? Thanks so much. Raj S. Pruthi: You bet, Kelsey. Right now, we mentioned there are about 75,000 to 80,000 patients with intermediate-risk disease. If you look at the data now, only about 35% of those patients receive adjuvant therapy. What is important in our studies and in CG’s study is that in our intermediate-risk population, we include small, less than 3-centimeter Ta high-grade patients. That is very important because 20% of the intermediate-risk disease is these high-grade Ta patients, and those are the ones, probably more than anybody, who need adjuvant therapy to prevent recurrence. Going back, while about 35% receive adjuvant therapy, I think that number will grow as you see data from Moonlight or from PIVOT-006 or from our RESCUE intermediate study. As we get data, it gives patients confidence that there is an agent that might reduce the risk of another TURBT and gives urologists confidence that there is an agent they can deliver in the office that will reduce TURBT risk for patients. It is only going to grow. Kelsey Goodwin: That is great. Thank you so much. Operator: Thank you, Kelsey. Thank you. This concludes our question-and-answer session. I would now like to hand the floor back over to Sergio Traversa for any closing remarks. Sergio Traversa: The closing remark is a big thank you to everybody that has allowed Relmada Therapeutics, Inc. to get where we are now. We created data with a drug that can really help patients with bladder cancer. We are looking forward to updating everybody on our progress. Thank you, and enjoy the rest of the day. Thank you. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.
Operator: Good morning, and welcome to Aveanna Healthcare Holdings Inc. Fourth Quarter 2025 Earnings Call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I would like to turn the call over to Debbie Stewart, Aveanna Healthcare Holdings Inc. Chief Accounting Officer. Thank you. You may begin. Debbie Stewart: Thank you, and good morning, and welcome to Aveanna Healthcare Holdings Inc. Fourth Quarter 2025 Earnings Call. I am Debbie Stewart, the company's Chief Accounting Officer. With me today is Jeffrey S. Shaner, our Chief Executive Officer, and Matthew Buckhalter, our Chief Financial Officer. During this call, we will make forward-looking statements. Risk factors that may impact those statements and could cause actual future results to differ materially from currently projected results are described in this morning's press release and the reports we file with the SEC. The company does not undertake any duty to update such forward-looking statements. Additionally, on today's call, we will discuss certain non-GAAP measures we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of these measures can be found in this morning's press release, which is posted on our website, aveanna.com, and in our most recent Annual Report on Form 10-K when filed. With that, I will turn the call over to Aveanna Healthcare Holdings Inc. Chief Executive Officer, Jeffrey S. Shaner. Jeff? Jeffrey S. Shaner: Thank you, Debbie. Good morning, and thank you for joining us today. We appreciate each of you investing your time this morning to better understand our Q4 and full-year 2025 results and how we are moving Aveanna Healthcare Holdings Inc. forward in 2026. My initial comments will briefly highlight our fourth quarter and full-year 2025 results, along with the steps we are taking to address the labor markets and our ongoing efforts with government and preferred payers to create additional capacity. I will then provide updates on the recently announced Family First Home Care acquisition and how we are thinking about 2026 strategic initiatives and our full-year 2026 guidance before turning the call over to Matt. Now, moving to highlights of the fourth quarter and full-year 2025. Revenue for the fourth quarter was approximately $662 million, representing a 27.4% increase over the prior-year period. Fourth quarter adjusted EBITDA was $85 million, representing a 54% increase over the prior-year period, primarily due to the improved rate and volume environment and continued cost savings initiatives. Revenue for the full-year 2025 was approximately $2.433 billion, representing a 20.2% increase over the prior-year period, and full-year 2025 adjusted EBITDA was $320.8 million, representing a 74.8% increase over the prior-year period. As a reminder, our fourth quarter and full-year 2025 results did benefit from the 53rd week due to our accounting calendar. As we sunset 2025, I think it is important to reflect on the three-year strategic transformation that we have successfully navigated. I am proud of the Aveanna Healthcare Holdings Inc. team of leaders, employees, and caregivers that believe in our mission and helped execute the key strategies that returned Aveanna Healthcare Holdings Inc. to our current performance. As we look forward, we remain deeply committed to our preferred payer and government affairs strategies that continue to drive our growth in all three operating divisions. As we have previously discussed, the labor environment represented the primary challenge that we needed to address to see Aveanna Healthcare Holdings Inc. resume the growth trajectory that we believed our company could achieve. It is important to note that our industry does not have a demand problem. The demand for home and community-based care continues to be strong, with both state and federal governments and managed care organizations asking for solutions that create more capacity while reducing the total cost of care. Our Q4 and full-year 2025 results highlight that we continue to align our objectives with those of our preferred payers and government partners. By focusing our clinical capacity on our preferred payers, we achieved solid year-over-year growth in revenue and adjusted EBITDA. We also experienced improvement in our caregiver hiring and retention trends by aligning our efforts with those payers willing to engage with us on enhanced reimbursement rates and value-based agreements. While we continue to operate in a challenging environment, our preferred payer strategy supports our ability to achieve normalized growth rates in all three of our business segments. Since our third quarter earnings call, I am pleased with the continued progress we have made on several of our rate improvement initiatives with both government and payer partners as well as continued signs of improvement in our caregiver labor market. Specifically, as it relates to our private duty services business, our government affairs strategy for 2025 was twofold. First, we advanced our legislative agenda to improve reimbursement rates in at least 10 states. And second, we continued to advocate for Medicaid rate integrity on behalf of children with complex medical conditions. Our strong advocacy presence with both federal and state legislatures as well as solid support from our governors across our national footprint provided significant value in 2025. As it relates to private duty services rate updates, we achieved 10 rate enhancements in 2025, which was in line with our expectations. As we reset our legislative goals for the new year, we expect to achieve high single-digit state rate enhancements for 2026. After three years of meaningful rate movement in our PDS states, we are generally in a good place as we navigate 2026 and focus on cost-of-living type rate and wage adjustments moving forward. Now moving on to our preferred payer initiatives. Our goal for 2025 was to increase the number of private duty services preferred payer agreements from 22 to 30. We added eight additional preferred payer agreements in 2025, achieving our goal of 30. Aveanna Healthcare Holdings Inc. preferred payer strategy continues to gain momentum and allows us to invest in caregiver wages and recruitment efforts to accelerate hiring and staffing of nurses for our patients. As we reset our preferred payer goals for 2026, we believe there is still ample room to grow in our current geography as well as new states that we enter through acquisitions. With that in mind, our goal for 2026 is to add eight additional agreements with a target of 38 preferred payers by the end of 2026. Additionally, our Q4 preferred payer agreements accounted for approximately 57% of our total private duty services MCO volumes. This positive momentum in preferred payer volumes continues to highlight the shift in our caregiver capacity and recruitment efforts towards our preferred payer partners. We believe this important volume metric will grow to the low 60% in 2026 as we continue to align our capacity with our payer partners. Moving to our preferred payer progress in home health. Our goal for 2025 was to maintain our episodic payer mix above 70% while returning to a more normalized growth rate. I am extremely pleased to report in Q4 our episodic mix was 78% and our total episodic volume growth was 25% compared with the prior-year period. The continued investment in clinical outcomes, sales resources, and a focused approach to growth is paying dividends with Q4 total admissions of 10,400, or 22.4% growth over the prior-year period. We ended 2025 with 45 preferred payer agreements in home health. Our dedicated focus on aligning our home health caregiver capacity with those payers willing to reimburse us on an episodic basis has led to double-digit year-over-year growth in home health total episodes and improvement in our clinical and financial outcomes. As we reset expectations in home health for 2026, we believe our episodic payer mix will remain above 75% with organic growth rates approaching double digits. We also expect to sign additional preferred payer agreements in home health and are now targeting more than 50 agreements by the end of 2026. Finally, as we have achieved our desired preferred payer model in private duty services, home health, and hospice, we are proceeding with a similar strategy in our medical solutions business. We are in the late stages of implementing our preferred payer strategy in medical solutions and believe it will be fully realized in 2026. At year-end 2025, we had 18 preferred payers, and we expect that number to grow with a target of 25 total agreements in 2026. As we achieve our desired preferred payer model, our gross margins have stabilized in our desired range as we align our clinical capacity with those payers that value our services and pay us in timely fashion. I am pleased with our Q4 volume growth of approximately 92,000 unique patients served, or positive 3.4% over the prior-year period. As we think about medical solutions revenue growth in 2026, I would expect us to remain in the mid-single-digits growth for the next few quarters and then return to double-digit growth by the end of the year. We are encouraged by our rate increases, preferred payer agreements, and subsequent recruiting results. Our business has demonstrated solid signs of recovery as we achieve our rate goals previously discussed. Home and community-based care will continue to grow, and Aveanna Healthcare Holdings Inc. is a comprehensive platform with a diverse payer base providing a cost-effective, high-quality alternative to higher-cost care settings. Now turning to our recently announced transaction to acquire Family First Home Care, a Florida-based company with a great reputation for quality in-home pediatric care. I want to extend a warm welcome to our Family First teammates. I am thrilled to continue our acquisition growth story with great companies like Thrive Skilled Pediatrics and Family First Home Care. Both companies continue to build upon the Aveanna Healthcare Holdings Inc. brand of high-quality, compassionate care in the most cost-effective setting, the comfort of our patient's home. We expect the Family First transaction to close sometime in Q2 with normal regulatory approvals. I look forward to updating you on our progress over the coming quarters. Before I turn the call over to Matt, let me comment on our strategic plan and outlook for 2026. We will focus our efforts on five primary strategic initiatives. First, strengthening our partnerships with government partners and preferred payers to create additional capacity and growth. Second, improving clinical outcomes and customer engagement scores while lowering the total cost of care. Third, implementing high-priority artificial intelligence and automation efforts to improve operational efficiency and productivity gains. Fourth, growing through acquisitions while improving net leverage and generating positive free cash flow, and finally, engaging our leaders and employees in delivering our Aveanna Healthcare Holdings Inc. mission. Based on the strength of our fourth quarter and full-year 2025 results and the continued execution of our key strategic initiatives, we anticipate 2026 revenue in the range of $2.54 billion to $2.56 billion and adjusted EBITDA in the range of $318 million to $322 million. We believe this 2026 outlook provides a prudent view considering the challenges we still face with the evolving environment and does not include the impact of the Family First acquisition. In closing, I am incredibly proud of our Aveanna Healthcare Holdings Inc. team and their dedication to executing our strategic plan while holding our mission at the core of everything we do. We offer a cost-effective, patient-preferred, and clinically sophisticated solution for our patients and families. Furthermore, we are the right solution for our payers, referral sources, and government partners. With that, let me turn the call over to Matt to provide further details on the quarter and our 2026 outlook. Matt? Matthew Buckhalter: Thank you, Jeff, and good morning. I will first talk about our fourth quarter and full-year 2025 financial results and liquidity before providing additional details on our outlook for 2026. Starting with the top line, we saw revenues rise 27.4% over the prior-year period to $662.5 million. We achieved year-over-year revenue growth in all three of our operating divisions, led by our Private Duty Services, Home Health and Hospice, and Medical Solutions divisions, which grew by 28.1%, 27.3%, and 21.3% compared to the prior-year quarter. Consolidated gross margin was $213.3 million, or 32.2%. Consolidated adjusted EBITDA was $85 million, a 54% increase as compared to the prior year. This growth reflects an improved rate environment, increased volumes, as well as enhanced operational efficiencies. As Jeff mentioned, this year's fourth quarter included an additional 53rd week, which had a positive impact on both revenue and earnings. As a result, the current fiscal year reflects an extra week of business activity compared to a typical year. Now, taking a deeper look into each of our segments. Starting with Private Duty Services, revenue for the quarter was approximately $541 million, a 28.1% increase, and was driven by approximately 12.4 million hours of care, a volume increase of 17.9% over the prior year. Q4 revenue per hour of $43.74 was up 10.2% compared to the prior-year quarter, primarily driven by preferred payer volume growth and the rate enhancements previously discussed. We remain optimistic about our ability to attract caregivers and address market demands for our services when we obtain acceptable reimbursement rates. Turning to our cost of labor and gross margin metrics. We achieved $149.9 million of gross margin, or 27.7%. The cost of revenue rate of $31.62 in Q4 was up $3.15, or 11.1%, from the prior-year period. Our Q4 spread per hour was $12.12, reflecting continued normalization as we make ongoing adjustments to caregiver wages to support higher volumes and improve clinical outcomes. Moving on to our Home Health and Hospice segment. Revenue for the quarter was approximately $69.3 million, a 27.3% increase over the prior year. Revenue was driven by 10,400 total admissions with approximately 78% being episodic, and 14,000 total episodes of care, up 25% from the prior-year quarter. Medicare revenue per episode was $3,223, up 3% from the prior-year quarter. We continue to focus on rightsizing our approach to growth in the near term by focusing on preferred payers that reimburse us on an episodic basis. This episodic focus has accelerated our margin expansion and improved our clinical outcomes. With episodic admissions well over 70%, we achieved our goal of rightsizing our margin profile and enhancing our clinical offerings. We are pleased with our Q4 gross margin of 53.7%, representing our continued focus on cost initiatives to achieve our targeted operating model. Our Home Health and Hospice platform is dedicated to creating value through effective operational management and the delivery of exceptional patient care. Now to our Medical Solutions segment results for Q4. During the quarter, we produced revenue of $52.5 million, up 21.3% over the prior-year period. Revenue was driven by approximately 92,000 unique patients served, and revenue per UPS of approximately $570, up 17.9% over the prior-year period. Gross margin was approximately $26.2 million, or 50%, for the quarter. Medical Solutions' Q4 revenue, gross margin, and reimbursement rate benefited from a reserve release driven by stronger-than-expected cash collections on claims we had previously estimated as uncollectible. We expect results to normalize in Q1 with gross margins returning to the 43% to 45% range. As Jeff mentioned, we continue to implement initiatives to be more effective and efficient in our operations to achieve our targeted operating model. We are accelerating our preferred payer strategy in Medical Solutions by aligning our capacity with those payers that value our resources and appropriately reimburse us for the services we provide. We expect margins to normalize and UPS to accelerate its growth as we implement our targeted operating model. While I am pleased with the integration efforts to date, we are entering the final push to complete our efficiency efforts and return to sustained year-over-year volume growth in Medical Solutions. In summary, we continue to fight through a difficult environment while keeping our patients' care at the center of everything we do. It is clear that aligning caregiver capacity with preferred payers who value our partnership is the right path forward at Aveanna Healthcare Holdings Inc., and throughout 2025, with the strong momentum from Q4, we are optimistic these trends will continue into 2026. We will continue to pass through wage improvements and other benefits to our caregivers in the ongoing effort to better improve volumes. Now moving to our balance sheet and liquidity. At the end of the fourth quarter, we had liquidity of $529 million, representing cash on hand of approximately $193 million, $110 million of availability under our securitization facility, and approximately $226 million of availability on our revolver, which was undrawn as of the end of the quarter. We had $24.5 million in outstanding letters of credit at the end of Q4. On the debt service front, we had approximately $1.49 billion of variable-rate debt at the end of Q4. Of this amount, $520 million is hedged with fixed-rate swaps, and $880 million is subject to an interest rate cap which limits further exposure to increases in SOFR above 3%. Accordingly, substantially all of our variable-rate debt is hedged. Our interest rate swaps extend through June 2026, and our interest rate caps extend through February 2027. Looking at cash flow, cash generated by operating activities was $125.9 million, and free cash flow was $131 million. We are encouraged by our strong cash collections and cost efficiency efforts, which drove solid operating and free cash flow in 2025. We expect similar cash flow performance in 2026. As a reminder, the first quarter is typically our seasonal low point for both operating and free cash flow, with improvement expected throughout the rest of the year. Before I hand the call over to the operator for Q&A, let me take a moment to address our outlook for 2026. As Jeff mentioned, we expect full-year 2026 revenue in the range of $2.54 billion to $2.56 billion and adjusted EBITDA in the range of $318 million to $322 million. This guidance does not include any impact from the Family First acquisition, which we expect to close in late Q2. As outlined in our recent 8-K, we are paying $175.5 million in consideration, or approximately 7.5x post-synergy EBITDA. We plan to fund the transaction and related fees with cash on hand and our securitization facility. As we reflect on our Q4 results, I would like to take a moment to express my sincere gratitude to all of our Aveanna Healthcare Holdings Inc. teammates. These strong results would not have been possible without your hard work and dedication. Looking ahead, I am excited for the continued execution of our 2026 strategic plan and look forward to providing you with further updates at the end of Q1. With that, let me turn the call over to the operator. Operator: Thank you. At this time, we will be conducting a question-and-answer session. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. As a reminder, we ask that you please limit to one question and one follow-up. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, while we poll for questions. Operator: Our first question comes from A. J. Rice with UBS. Your line is now live. A. J. Rice: Hi, everybody. Congratulations on the Family First acquisition. Obviously, that is a decent-sized deal for you. And I think you have said you are going to fund that with cash and short-term borrowings. How should we think about the impact that is likely to have on leverage? And can you give us any early read on whether there is accretion there, or the trajectory on the margin contribution over time? Matthew Buckhalter: Yes, A. J., we are really excited to welcome the Family First team into the Aveanna Healthcare Holdings Inc. family. They have really strong clinical outcomes and really disciplined operations, and that makes them a really nice cultural fit and operational fit into our family. We value this transaction, as I said in the script, at about 7.5x post-synergy EBITDA. You could see that, on a very short-term basis, having a very minimal impact on our leverage profile. But with the generated free cash flow that we will produce in 2026, you should see us flat to slightly down as the year progresses. On a pro forma basis, with both of those pieces taken into consideration, we still plan on deleveraging in 2026; however, slightly—not the large jumps that you have seen in the past two years. Jeff, anything else? Jeffrey S. Shaner: Yes, I think, A. J., it is well said by Matt. We have gotten leverage down to just right at 4x. As Matt said, we should end 2026 in that range with the Family First addition, and it is just another nice transaction. Thrive was a great transaction for us. It densified our services and allowed us to be better payer partners, with Thrive mainly in Texas. This is a Florida-focused deal for us, and it is just a nice merger of two great companies. We have to clear some regulatory hurdles over the next month or two, and are excited to get through those and get on to doing business with the Family First team. It is a really nice acquisition for us to start the year. A. J. Rice: Okay. Just maybe as a follow-up on the preferred provider arrangements that you are doing. At this point, do you have pretty good geographic coverage across your footprint, or are there still major geographies where you do not yet have it, and is the idea that the incremental eight that you did last year, the incremental eight this year—is that more density, multiple managed care Medicaid programs that you are contracting with in a given geography, or is it still just trying to get the broad coverage? Jeffrey S. Shaner: That is a great question. The eight we won in 2025 and the additional eight that we are anticipating for 2026 are in the current geographies that we have. I will say current geographies post the Thrive acquisition because we added New Mexico and Kansas as two additional Medicaid states. So as we think about executing on the 38-goal for this year, it is still densifying our current geographies. I would tell you, at this point, we have landed most of the major payers in the major markets, so we are rounding out some of our payer partnerships. And then I think the next steps for us, as you think about what is next for Aveanna Healthcare Holdings Inc. from a Medicaid standpoint, we still want to fill in the states like Ohio, West Virginia, Kentucky, Tennessee. That is still an open area today where we do not have any Medicaid services. So those four or five states in the heartland we really want to fill in. That is how we think about additional M&A in the back half of 2026 and going into 2027 on the Medicaid side of the business. Thanks, A. J. A. J. Rice: Alright. Thanks. Operator: Our next question is from Brian Gil Tanquilut with Jefferies Group. Your line is now live. Brian Gil Tanquilut: Hey, good morning, and congrats on this acquisition. Maybe, Matt, as I think about to start, when I think of Family First, any other color you can share with us in terms of how we should be thinking about revenues—and I guess we can back to the EBITDA contribution—but just any KPIs, any metrics that you can share with us? And then kind of related to that, Jeff, is this one of those deals where clearly you are identifying Florida with a deal? Is this one that has been supported or encouraged by the payers where they have asked you in the past to go to new markets? Matthew Buckhalter: Awesome questions, Brian. And obviously, on 2026 financials themselves, the impact will depend on the timing of closing of this, obviously. That said, we really expect this to be a really smooth and efficient integration, consistent with how the team successfully integrated the Thrive acquisition and brought that team on to the Aveanna Healthcare Holdings Inc. platform. On the revenue side, it is in the ballpark of $120 million of revenue. And then you can run the math for the 7.5x based upon purchase price. All that depending on a pro forma basis, 2026—we will see how that really lands just based upon closing timing. Jeff, you want to add on? Jeffrey S. Shaner: Yes. Brian, I think you hit it. Thrive was right down the middle of the fairway, densifying our payer needs in Texas. This one is primarily Florida-focused. Both companies have great reputations in the Florida market today, well respected by the MCO payers. Florida is an MCO market; MCO payers are incredibly important to us. But this acquisition helps us round out the areas in Florida that we were not in, so it does give us geographic expansion within Florida. It allows us to service effectively every county in the state of Florida. And, again, our payer partners are very supportive of our growth. I think this one is right down the middle of the fairway just like Thrive. And again, excited to get through the regulatory approvals here in Q1 and Q2 and get this closed up in the latter half of Q2. Brian Gil Tanquilut: No, that makes sense. And, Matt, any chance you can help us bridge the 2026 EBITDA given I think you have, like, almost roughly $20 million of one-timers in 2025, there is an extra week, and then there is Thrive in there. So just trying to get that bridge and the guidance from 2025 actuals. Matthew Buckhalter: Yes. So on the EBITDA, Brian, take that roughly $320 million. We came out earlier this year and talked about, hey, bridge that back down to the $300 million based upon the retro rate increases, the cash collections, and that 53rd week itself. So really your jumping-off point should be around that $300 million, going up to that range of $320 million as we currently sit organically without any M&A inclusive in there. On the revenue side of things, the 53rd week and Thrive do a really nice offset to one another—within 20 basis points themselves. And so we are still going to be in that 5%+ organic revenue growth as we currently sit today. But that is back in line with our normal expectations, that 5% to 7% range on revenue and that high single digits or mid- to high-single digits on EBITDA. So back into a normalized idea of Aveanna Healthcare Holdings Inc. Jeffrey S. Shaner: And, Brian, the thing I will add to that is what Matt said is on the EBITDA growth implied about 7%. Again, we tried to, in my comments, lay out that we expect our PDS government rate wins to be sub-10 this year. Last year, we landed right at 10, and that is a net number from positive and negative increases. So we expect that number to land somewhere between six and eight state rate increases this year, and we expect them to be more cost-of-living oriented. So I will call it the 1% to 5% Medicaid rate wins—less number of total wins, less percentage per win—that is really what we are factoring into our guidance as we start the year. I think as we get to May, close Q1, close Family First, we will have a much better feel for how the year plays out, especially with our legislative efforts being in session right now in the first half of the year. Brian Gil Tanquilut: Awesome. Thanks, guys. Jeffrey S. Shaner: Thanks, Brian. Operator: Our next question comes from Raj Kumar with Stephens. Your line is now live. Raj Kumar: Hi. Good morning. Maybe just focusing on the preferred payer arrangements and thinking about the Home Health and Hospice book. I guess maybe thinking about you see an episodic mix trending above 75%. And I think you have previously hinted you would not be surprised if it got as high as 80%. So maybe just thinking about what is embedded into 2026. And then maybe just any framing around any membership impacts given how volatile the membership was during AEP on the Medicare Advantage side. Just any color on that would be helpful. Jeffrey S. Shaner: Yes, Raj. Great question. And I am going to take that as a compliment to our Home Health and Hospice business. Like you, we are incredibly proud of their results. I think we mentioned it—pushing 25% organic year-over-year admission and episodic growth is, I would tell you, first-class, best-in-class results. And they have done it from just blocking and tackling. They have done it from just being really good at providing great clinical outcomes and the right level of care to the right payers and the right patients. So we are really robust. Now that we have got a more clear path from a federal home health rate standpoint, we continue to lean in. This is an area that we want to grow through both organic and inorganic M&A-related activities this year. Clinical outcomes are almost four and a half stars on average for our home health locations—I think it is 4.3 stars where we sit today. Gross margins in the 53% to 54%, great cash collections. As you said, episodic mix approaching 80%, and we are growing north of 10% year over year—right now 20%. We are off to a great start to the year in Q1. These teams are having a great start to the year. So I think everything we would say is we are going to continue to lean into home health and continue to grow it. My concern with the trends of managed Medicare? No. I think we are doing our playbook in this business, and our team is just kicking butt and taking names right now. So we are really excited about where we are as we ended 2025 and, equally important, as we sit here kind of halfway through Q1—really excited about what these teams have done for the business model. Raj Kumar: Got it. And then maybe just on the Medical Solutions business, 2025 was a year of optimization around preferred payer strategies. As we think about 2026 and given where the reimbursement dynamics were, any kind of framing around what would be an appropriate run rate when we exclude the reserve dynamics favorability in the quarter? Debbie Stewart: Yes, Raj, you called it out. During the quarter, gross margin and the revenue reimbursement rate were elevated, and that was from a reserve release that we recorded driven by improved cash collections on previously reserved claims. Without the inclusion of that reserve release, the Medical Solutions gross margin was slightly elevated compared to our guide, but we do expect it to normalize in Q1, getting back to that 43% to 45% range. Matthew Buckhalter: Yes. Well said, Debbie. And to put the dollars in there, those contributed $2.5 million to $3 million of additional revenue and EBITDA in the quarter. So not overly material to earnings, but it shows up in the Medical Solutions metrics and gross margin just due to its size. On the modernization efforts, though, Raj, we are really excited about what the team has been able to do and what they have accomplished so far. As we move into 2026, we expect to see preferred payer numbers significantly increase. Currently, we are sitting at 18. We expect that to continue to grow as we become better aligned and put our capacity with those who support us. There is a little bit of work to do at the same time. So we plan on wrapping this up in the front half of 2026, and that is when you will see us return back to a double-digit growth number organically in this business, and gross margins, as Debbie pointed out, sustaining in that 43% to 45% range. Raj Kumar: Great. Thank you. Operator: Our next question is from Ben Hendrix with RBC Capital Markets. Your line is now live. Ben Hendrix: Hi. This is Drew Starritt on for Ben Hendrix. You have previously mentioned continued wage pass through into 2026. Can you quantify the magnitude and timing of these increases? Matthew Buckhalter: Yes. Drew, I think the way to look at it is that spread rate that we talk about a lot. Q4 was at $12.12, which is coming back down in line. But we have continued to push through wages. As we talked about the entire year in 2025, we had some initiatives in place to really drive our volumes, and you see it impacting and really growing our volumes. This really came down, and you can see it in our gross margins. We settled in that 28% range, which was on the higher end of the range that we give for that business and in line with our expectations. Looking ahead, we will continue to actively manage spread, as we do every single day, to meet the needs of our preferred payers and our payer partners. Drew Starritt: Got it. Thank you. Operator: Our next question comes from Benjamin Michael Rossi with JPMorgan. Your line is live. Benjamin Michael Rossi: Good morning. I appreciate you taking my questions and appreciate the earlier comments regarding your state contracting. I guess shifting focus to California, which still seems to be the outlier here on home-based nursing rates, what do you think is the realistic 2026–2027 scenario for California here between, call it, no change, the cost-of-living type increase in that 1% to 5% range, or maybe a structural reset? And then under each of those scenarios, do you have any commentary on impact to your PDS spread rate per hour or maybe your broader market share strategy given your stance to not exit California? Jeffrey S. Shaner: Yes. Thanks, Ben. We met with the Governor of California as early as last week. We are not in the budget. There is no PDN rate increase in the 2026–2027 budget for California as it exists today. We are still lobbying and advocating to be in the May—what is called the May Revised—budget. If I am scoring that as a handicap, I would say it is less than 10% or 15% that PDN makes it in any shape, way, or form in the California budget. We are certainly not expecting it, and we have not modeled that. Over time, I hate to say it, but as our other markets have grown at the 20%, 22%, 25% year-over-year growth rate in PDS, California has unfortunately just gotten smaller and smaller from a materiality standpoint for the company. We still care deeply about our California patients. We still care deeply about California operations. We advocate very hard. Like I said, we met with the governor last week, and we continue to meet with his staff and push forward. But today, as it sits today, I am not expecting any material change that will stopgap. A cost-of-living increase is potential, but I would say is unlikely. There is nothing baked in our guidance that California has a change in heart in 2026. Benjamin Michael Rossi: Understood. Thanks for the additional comments there. I guess just as a follow-up, we have heard from some other healthcare facilities names regarding spillover impact from some of the delayed respiratory season and then some of the additive weather-related pressures from some of the winter storms. When you think about your 2026 outlook, how are you factoring any of the respiratory or weather-related impacts during Q1? Thanks. Jeffrey S. Shaner: That is well said. We did not put it in our prepared remarks, but we have had to fight through—like all of our peers—mainly snow and significant snow throughout the entire country. I would love to say the Northeast, but everything from Texas all the way up through Maine. Our team is doing a good job fighting that through. We have a no-excuse mentality here at Aveanna Healthcare Holdings Inc. We just fight through everything that comes our way. I do not think we changed our guidance based on weather. But like our peers, we have had to fight through two or three weeks of weather in the first ten weeks of the year. I will not say it was nothing, but it is just something we handle. We move on, and we are glad weather for the most part is behind us at this point and back to business. So I do not think it will have any material impact. Matt mentioned in his prepared comments, as a reminder, Q1 is our largest payroll tax quarter. So keep in mind as you think about guidance, Q1 is seasonally low for our margin, mainly driven by the payroll tax on our labor cost. Thanks, Ben. Operator: Our next question comes from Andrew Mok with Barclays Bank. Your line is now live. Andrew Mok: Hi, good morning. Given the recent increase in oil prices, can you remind us how much travel is reimbursed for your caregivers and how much fuel represents as a percentage of total revenue and total cost? Thanks. Jeffrey S. Shaner: Hey, Andrew. Good morning. Great question. Eighty percent of our revenues are driven off of shift care in the home where we do not reimburse any form of mileage or fuel. It is primarily because our nurse goes from his or her home right to the home of the patient. They are there for eight or ten or twelve hours, and they go home. So the vast majority of the business at Aveanna Healthcare Holdings Inc. has zero tied to gas prices from a reimbursement standpoint. Our Medical Solutions has some impact on a minimal amount from our drivers. The business that it does impact is our Home Health and Hospice business, and that is about 12% of our total revenue. So it is not a nothing impact for us, but thankfully, with the size and scale that we are and the diversity of our payer mix and our business mix, it is not as meaningful as it would be to some of our large home health and hospice peers. Andrew Mok: Got it. Maybe just as a follow-up, can you provide a little bit more color on the pace of pass through to caregivers on PDS and how you expect the spread to materialize throughout the year? Matthew Buckhalter: Yes, Andrew. I would go back to the gross margin line item here—27.7% in Q4. A little bit of PTO utilization, holiday pay, etc., occurs in Q4, so a little bit of extra compression in there. But our range should be in that 27% to 28% gross margin for the Private Duty Services segment. We are close to it now. As we continue to drive reimbursement rates—as Jeff mentioned, single high digits on the government affairs side—as we continue to add eight more preferred payers, as we continue to organically grow our preferred payers, we will take those rate wins and be able to continue to push them down to our caregivers, still aligning to that 27% to 28% gross margin. Jeffrey S. Shaner: Thanks, Andrew. We appreciate it. Operator: Our next question comes from Pito Chickering with Deutsche Bank. Your line is now live. Pito Chickering: Hey, good morning, guys. If I think about the PDS business model, the preferred payer strategy makes a ton of sense just due to the pretty large savings for managed Medicaid, and obviously it is more of a niche market. But about home health—it is a huge market with a lot of nurses employed. Can you just walk us through why you can replicate the preferred payer strategy in the home health segment? Jeffrey S. Shaner: Good morning, Pito. I think, one, our discipline around episodic payer mix. A year or two ago, people questioned whether or not being above 70% was attainable long term. I would say at this point, we have put that behind us and said being above 75% is our long-term strategy. Over time, payers have come around. At first, payers did not like the episodic conversation three, four, five years ago, but when you do not bend your backbone and you keep your clinical capacity focused on the right payer base—meaning episodic payers—eventually we have found that our payers do come back around. Clinical outcomes drive the story. Great clinical outcomes lead to good financial outcomes. In our Home Health and Hospice business—specifically home health—we have been able to stand behind great clinical outcomes. I think that when you look at eight quarters in a row being above 75% and we are approaching 80% now on an episodic basis, at this point, this is the business model. We are not moving from it, and our payers have caught up to us. I want to give a shout to our payer team. We have a world-class payer team, and our home health and hospice payer leader has done a fantastic job. She has been amazing. Kudos to our payer team. They are out every day continuing to beat the drum, but they will not take fee-for-service, low-dollar contracts because of how valuable caregivers and clinicians are in today’s world. Thank you for noticing, by the way. Pito Chickering: Okay. Fair enough. And then one more on Family First. How much of the $120 million of revenues are in Florida versus the other six states? And how fast can you roll out the preferred payer strategy in Florida in those new markets? And as I think about the opportunity there, I assume it is more acceleration of the $120 million of revenues versus a around 20% margin business that the business has today? Jeffrey S. Shaner: Yes. Think of the revenue base being two-thirds Florida, one-third everywhere else. Certainly, Florida is the state that we focused on. They do have meaningful business in other states outside of Florida, but Florida is where we focused and what made the most strategic rationale. They have really good relationships in the state of Florida today from a payer standpoint. We have very good relationships as well. The feedback we have gotten early from the payers is very supportive and congratulatory on the standpoint of providing more cost-effective, patient-preferred, win-win type scenarios. At the end of the day, these are two great companies, both providing great care. It is not like Aveanna Healthcare Holdings Inc. is superior in its service. Family First does a really nice job providing care in their seven states. We think this is good for patients. We think this is good for employees. This is good for payers. It will take us a little bit of time. As we saw with Thrive, it takes about a half a year or so to get through the integration-related efforts—systems, back office, benefits—to then really get to the expansion of care. We hope Family First will close at some point in mid to late Q2, and by the end of the year, we are wrapping up Family First. I want to hit on again: we are committed to growing our Home Health and Hospice business through accretive M&A. I think you will see us get back to the home health focus—both de novo and tuck-in M&A. Pito Chickering: Great. Thanks so much, guys. Operator: Our next question comes from John Ransom with Raymond James. Your line is now live. Hey, there. John Ransom: So if we think about the core EBIT growth this year being just below 7% on a consolidated basis—$318 million to $320 million-ish—how does that look by segment? What are the highest growth segments versus the lowest growth segments of your tree as we think about modeling? Matthew Buckhalter: Historically, Medical Solutions and Home Health and Hospice have been our highest organic growth segments, John. We have Medical Solutions going through its modernization efforts at this time. We talked about low single-digit growth in the front half of 2026 but returning to high single digits to double-digit growth in the back half of 2026. There is a little bit of mutedness in H1 compared to H2. Home Health and Hospice is hitting out of the gate strong just as they finished the year strong. That will continue to be at high single digits to double digits growth. We think PDS returns back into the normalization—3.5% to 4% volume growth—add in a point to a point and a half of rate growth, getting back to your 5% to 7% kind of range itself, or 3% to 5% on the upper end of that one. That is how we have it modeled out and how we are thinking about it in 2026 and beyond. Jeffrey S. Shaner: And, John, just being cost-effective and efficient in the back office, corporate office—we are down to 4.5% corporate cost as a percentage of revenue. We think we can keep making that a little better. You were about to bring this up, so I want to highlight generating a meaningful amount of cash flow. I appreciate you highlighting that great point. That $131 million of free cash flow last year was well beyond our expectations, and really kudos to Matt and Debbie and the team for executing on that. Generating that kind of cash moving forward just gives us optionality to continue to do deals like Family First and to use cash. We are excited about the opportunity to do that. Thanks for asking. John Ransom: You are welcome. The other question is just the PDS rate outlook. I mean, you are adding eight preferred payers, but you are only calling for 1% to 1.5% rate. Is that conservative, or are we missing something? Jeffrey S. Shaner: No. I think it shows how far along the spectrum we are in the strategy. When we first started, we were getting 10% of volume, 15% of volume. Some of these now we are tucking in are smaller in nature. They are still niche oriented. They are really important. Even a 1% volume mover, if we can move it into a preferred payer, matters. Think of us being further along the maturity spectrum in preferred payers, which is why we love the idea of additional states because it opens up new markets for us. As we think of Thrive, New Mexico and Kansas were so important because they opened up two brand new MCO markets for us. As we think of preferred payers going from 30 to 38, we are continuing to round out some of those final tweaks in our current markets and really focused on new expansion. John Ransom: Yeah. Last one for me. I know we are a little over time. If we think about the synergy between the nutrition segment and the pediatric segment, but I think about home care, hospice, and personal care—the market is kind of mixed. Is there really that much synergy between the three businesses? Does it help you with payer? Does it help you with nurse recruiting? What is the synergy? And I guess where I am going—with hospice M&A multiples being in the teens—if somebody came to you with a 15x multiple offer for your hospices, is that something you would consider, or do you really think you want to knit all these pieces together? Jeffrey S. Shaner: It is, first of all, a very thoughtful question. I will say this. Yes, obviously, the enteral nutrition business is incredibly synergistic to the PDS business. They operate as a referral entity incredibly well together. We have a lot of crossover in the referral source and the payer conversations between those two businesses. The opposite is true between our PDS and our HHH business. There is very little synergy from a referral source standpoint—even a payer standpoint—they are very different conversations, as you know. Why we love being in both businesses—one, the diversification. As we see right now, the last three years, Medicaid has been the darling. Right now, it is swinging back to Medicare being more the darling. We like the idea of being larger in both of these businesses, and we would like to be larger in the HHH business over time. We think of growth rates where businesses like home health and hospice can grow in double-digit year-over-year organic growth. We like that from a growth algorithm. We are committed to all three segments, excited about all three segments. We just want to get back to blocking and tackling this year and being really good at executing our business plan. Thanks, John. Operator: We have reached the end of the question-and-answer session. I would now like to turn the call back over to Jeffrey S. Shaner for closing comments. Jeffrey S. Shaner: Thank you, operator, and thank you for your attention. We look forward to catching up in mid-May on our Q1 2026 results. Thank you, and have a wonderful day. Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Dan Schleiniger: Good morning, and thank you for joining Arcos Dorados Holdings Inc. Fourth Quarter and Full Year 2025 earnings webcast. With us today are Luis Raganato, our Chief Executive Officer, and Mariano Tannenbaum, our Chief Financial Officer. Today’s webcast is being recorded and will consist of prepared remarks from our leadership team, accompanied by a slide presentation that is also available in the Investors section of our website at ir.arcosdorados.com. To better follow the presentation, please note that you can set your view to full screen on the webcast platform. Additionally, you can submit your questions at any time during the presentation using the Q&A function on the bottom of the screen. After we conclude our opening remarks, we will answer your questions. Today’s call will contain forward-looking statements and I refer you to the forward-looking statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. In addition to reporting financial results in accordance with generally accepted accounting principles, we report certain non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial results as compared with GAAP results, which can be found in today’s earnings press release and conference call presentation, as well as the audited financial statements filed today with the SEC on Form 6-Ks. I will now turn the call over to Luis. Luis Raganato: Thank you, Dan, and good morning, everyone. The 2025 marked a solid finish to the year with double-digit revenue growth, expanded margins, and strong adjusted EBITDA growth despite ongoing cost and consumer pressures in certain markets. Importantly, we exited the year with improving trends, particularly in Brazil, as well as continued momentum in Mexico and SLAD. Mariano and I will take you through the highlights of the financial results for the fourth quarter and full year 2025, as well as how we see 2026 developing. As I have mentioned in prior calls, our focus remains centered on three priorities: optimizing the performance of today’s business, maximizing returns on capital investments—especially those related to growth—and preparing the company for tomorrow’s business trends. The fourth quarter demonstrated progress across all three areas. Our teams executed with discipline on pricing, cost control, and marketing relevance while continuing to invest in high-return restaurant development and digital capabilities. Total revenue reached $1.3 billion, representing 10.7% growth. Revenue growth was supported by 16% higher systemwide comparable sales, in line with the blended inflation of the 21 markets in the Arcos Dorados Holdings Inc. footprint. Comparable sales growth was primarily driven by average check, reflecting disciplined pricing, effective promotional execution, and the continued strength of our digital and loyalty platforms. Guest traffic trends were generally stable compared with the third quarter. Adjusted EBITDA totaled $172.7 million, up 17.2% year over year, representing an 80 basis point expansion of the adjusted EBITDA margin. This included a net taxes benefit in Brazil that Mariano will explain in more detail. For the full year, systemwide comparable sales growth was in line with the company’s blended inflation rate, with particularly strong performance in Mexico, Argentina, and several other SLAD markets. Brazil and a couple of NOLAD markets faced a challenging consumption environment last year, but we began to see some improving trends toward the end of the year. Total revenue in 2025 grew by almost 5% in U.S. dollars. Full year adjusted EBITDA was the highest in the company’s history. Boosted by the net tax benefits we recognized, together with strong U.S. dollar growth in both SLAD and NOLAD, this tax benefit more than offset the impact of higher food and paper costs, and lower consumption in the Brazilian market. The strength of our marketing, digital, and loyalty platforms has helped differentiate us from the competition by enhancing the brand experience across all channels. We also expanded the brand’s presence in 2025 by opening 102 restaurants and bringing the modernized percentage of the portfolio up to 73% at year end. Let us take a look at a few of the initiatives we used to generate sales growth in the quarter. Marketing activities strengthened consumer connections with the brand through a series of campaigns and initiatives. The highlight for most markets was a fully integrated menu strategy leveraging the cultural relevance of the Stranger Things Netflix series, which boosted sales, drove high levels of engagement, and meaningful brand conversations among consumers. Several markets also offered compelling value platforms, including Economic in Brazil and Mac Parmenos in Chile, both of which performed well with price-sensitive consumers. Menu innovation in the quarter included a new chicken sandwich in Colombia and limited-time flavors within the dessert category, such as Ovomocini in Brazil. Finally, Happy Meal sales were a bright spot for several markets. During the quarter, we ran engaging campaigns for all ages, built around popular licenses such as Friends, Zootopia 2, and Business Vivints. Digital penetration reached its highest level with 62% of total sales coming from digital channels—mobile app, delivery, and self-order kiosks. Digital channel sales grew 18.7% versus the prior year quarter, with self-order kiosks, delivery, and loyalty showing particularly strong performance. Sales growth in delivery has been strong for several years, which is why the strong performance in self-order kiosks is so important. It demonstrates the continued relevance of the on-premise restaurant experience in the Latin American QSR industry. The loyalty program had 27.2 million registered members at year end and is now available in all main markets, completing the planned 2025 rollout and covering more than 90% of all restaurants in the Arcos Dorados Holdings Inc. footprint. At the divisional level in the fourth quarter, we saw continued strength in SLAD with sequential improvements in both Brazil and NOLAD, contributing to consolidated top-line growth. In Brazil, where restaurant industry traffic was down all year, we saw modest sequential improvement in comparable sales growth. We also maintained a significant market share advantage versus all competitors by leveraging the strength of the digital platform and popularity of the loyalty program. Almost three out of every four transactions were generated through digital channels, and about 30% of total sales came through the loyalty platform. These results were supported strongly by the annual Make It Friday campaign, which capitalizes on the popularity of the Black Friday shopping day to drive mobile app downloads and digital engagement. It is worth noting that the relative strength of the Brazilian real versus the prior year quarter also contributed to U.S. dollar revenue growth in the period. In NOLAD, comparable sales grew 1.7% versus the prior year quarter, with strong guest traffic growth in several markets. As was the case in the first nine months of the year, Mexico was the main contributor in the fourth quarter, with comp sales growth of 5.6%, or 1.5 times the country’s inflation. Importantly, we began seeing improved trends in several other NOLAD markets and also benefited from the stronger Mexican peso and Costa Rican colón versus the prior year quarter. SLAD’s comparable sales increased by 49.5% versus the prior year quarter, or 1.2x blended inflation, driven by strong execution in Argentina. We also saw continued momentum in other markets such as Colombia and the Dutch West Indies. Digital channel penetration reached a new high, and market share gains were particularly strong in Argentina and Chile where guests responded well to the quarter’s marketing campaigns. Over to you, Mariano. Mariano Tannenbaum: Thanks, Luis, and good morning, everyone. Consolidated adjusted EBITDA in the fourth quarter grew by more than 17% versus the prior year quarter as reported. While both periods benefited from tax-related items, even excluding these items, adjusted EBITDA grew by almost 14% in U.S. dollars year over year with a 30 basis point margin expansion. For the first time in 2025, the fourth quarter included lower Food and Paper costs as a percentage of revenue in Brazil. This is a sign that our marketing strategies and supplier negotiations are working as they were designed. The main impact on consolidated Food and Paper costs in the quarter related to some mix shifts in NOLAD and higher beef costs in Argentina. Payroll expenses were up as a percentage of revenue due to the comparison with last year’s quarterly result, which included the tax benefit in Brazil. Excluding this benefit, payroll expenses improved by about 60 basis points as a percentage of revenue. It is worth noting that over the last few years, certain markets have experienced elevated labor costs, but we have been implementing initiatives and technologies that have successfully offset these pressures. Currently, payroll expenses are among the lowest in our history as a percentage of sales. As you have heard on recent calls, we are very focused on capturing efficiencies at every level of the business, not just in the restaurants. With that, we made the difficult decision to reduce our G&A expenses through a reduction in headcount. This process, which was completed during 2026, was designed to focus resources on the projects and investments we believe will generate the most shareholder value. Our adjusted EBITDA definition excludes reorganization and optimization charges, so you will see an $8.7 million add-back associated with this initiative in the EBITDA reconciliation. Finally, the fourth quarter included a net tax benefit in Brazil arising largely from the same items we recognized during the third quarter. We recorded a benefit of $20.5 million mainly as other operating income, and below the line we recorded $13.3 million of interest income. With that, the full P&L impact of this net tax benefit was recognized in 2025. As a reminder, full year adjusted EBITDA includes $106.1 million and interest income includes $52.9 million from this benefit, for a total impact of $159.0 million in 2025. Importantly, we have already begun to apply the credit to tax liabilities in 2026. We expect to utilize the tax credit over the course of the next five years with an annual cash benefit of around $30.0 million. In terms of full year 2025 results, we are encouraged that even though Food and Paper costs rose due mainly to significantly higher beef costs in Brazil, we were able to fully compensate the impact on restaurant margins by capturing efficiencies in payroll, and occupancy and other operating expenses. In Brazil, excluding the tax impacts from both 2024 and 2025, adjusted EBITDA grew 3% in U.S. dollars with margin compression of about 160 basis points. The margin decline was primarily related to the higher royalty rate in Brazil in 2025—remember that royalties were equalized starting in 2025, with a higher royalty rate in Brazil more than offset by a lower royalty rate in NOLAD and SLAD. The other restaurant-level cost and expense line items in Brazil improved versus the prior year. NOLAD generated solid U.S. dollar EBITDA growth in the quarter despite some margin pressure in Food and Paper costs as well as G&A. Meanwhile, SLAD delivered another strong quarter to close out a very good year, which included 26.1% U.S. dollar EBITDA growth and almost two percentage points of margin expansion. In addition to operating efficiencies, we are implementing certain projects to improve the efficiency of our capital structure and capital allocation decisions, including the recent liability management transaction, completed during 2026. In December, our Brazilian subsidiary secured $150.0 million in new bank debt that matures in 2029. This is why you see the increase in total financial debt as well as cash and cash equivalents at the 2025 year end, but a stable leverage ratio versus year end 2024. We entered into certain derivative instruments to hedge the interest rate and maintain the foreign currency exposure of our long-term debt. As a result of these transactions, the new bank debt has an estimated U.S. dollar cost of 2.53%. The proceeds of the new debt were used to fund a tender offer for $135.0 million of our 2029 sustainability-linked bond, which has a 6.8% interest rate. The tender was completed earlier this month. Among the benefits of the transaction are a reduction of the average U.S. dollar cost of our long-term debt and the more efficient capital structure both at the consolidated level and in Brazil. Additionally, moving forward, this new local debt increases the deductibility of our interest expenses. In terms of capital allocation, last year, we exceeded openings guidance by adding 102 restaurants to our footprint while deploying less total capital expenditures versus the prior year. Importantly, about half the total CapEx in 2025 was used to fund restaurant openings. For 2026, openings guidance is for 105 to 115 restaurant openings and total capital expenditures between $275.0 million and $325.0 million, with a goal of improving returns on investments through better cash margins and lower per-unit opening CapEx. Also for 2026, the Board of Directors has declared cash dividends of $0.28 per share, up from $0.24 last year, payable in equal installments on a quarterly basis this year. Although it is early, we began the year with good momentum by focusing on factors we control. We expect the underlying profitability trends of the fourth quarter to continue. Importantly, we are seeing the potential for a higher gross margin this quarter and throughout 2026. When sales growth normalizes, we believe this focus on cost and expense discipline will generate incremental margin improvement opportunities in other lines of the P&L as well. Back to you, Luis. Luis Raganato: Thanks, Mariano. Let me wrap up with a few final thoughts. We are encouraged by business momentum entering 2026 and confident we are positioned to deliver sustainable growth, expand profitability, and create long-term shareholder value. Our priorities remain unchanged: disciplined execution, improved returns on invested capital, and continued strengthening of the McDonald’s brand into the future. As Mariano mentioned, early results in 2026 have been relatively strong. Although current events have introduced some uncertainty, we believe in the resilience of the Arcos Dorados Holdings Inc. business model. We see a more normalized consumer environment as the year progresses, and we have a strong marketing plan to strengthen the bond with consumers across income levels. In the short term, we are monetizing the significant market share advantage we built over the last several years. There is no other QSR operator in Latin America and the Caribbean capable of delivering the omnichannel experience guests prefer in an increasingly digitalized world, and we believe longer-term sales trends will recover and we will have even more opportunities to generate value. Thank you for joining today’s call. Dan, back to you. Dan Schleiniger: Thanks, Luis. We will now begin the Q&A session. You can submit your questions using the Q&A function on the bottom of the screen. Please limit yourself to one or two questions so that I can read, understand, and convey them to the speakers. We will now pause briefly to compile your questions. Great. Okay. We have several questions already in the queue. We will try to get to all of them if we can. Good morning again, everyone. Froylan Mendez, JPMorgan: Can you please explain the higher taxes paid during the quarter and if we should expect this higher level going forward? Eric, Santander: Good morning all. Thanks for taking our questions. This quarter income tax was quite elevated. Could you help us understand the moving parts behind such high levels? And how should we think about this line in 2026, especially following the capital structure optimization? Mariano Tannenbaum: Thank you, Dan. Good morning, everybody, and thanks, Froy and Eric, for the question. Regarding the ETR, remember that we analyze the effective tax rate on a full-year basis, not on a quarter-by-quarter. For the full year 2025, it is important to note that the ETR of Arcos Dorados Holdings Inc. was 37.7%, an improvement of almost five percentage points versus 2024, and reasonably close to the regional statutory rates. This reflects the mix of earnings across countries and some discrete impacts, particularly in Brazil. Going to the fourth quarter, the rate was high compared to 2024, but this was in line with our projections. The quarter includes some one-off adjustments—in this case, in Chile and Colombia—higher tax charges in Argentina related to FX and inflation. But it is important to note that there are no structural changes behind that number. So, again, if you go to the full year, 37.7%, five percentage points better than in 2024. Looking ahead, 2026, we expect a full-year ETR in line with what we had for the full year in 2025. Of course, again, there may be quarterly variability, particularly early in the year, but the annual profile remains stable, and we are not seeing any structural changes on our ETR. Of course, during the year, we will continue to look for efficiencies and to look into ways to reduce that number. Dan Schleiniger: We will stick with you before I send a couple of other questions that I think will be yours as well. Can you give more color on the drivers of margin expansion in Brazil and SLAD? Mariano Tannenbaum: Perfect. First of all, we are very pleased with margins in Brazil, specifically with the gross margin. As we have been mentioning during 2025 in the previous calls, the impact of the increase in beef in Brazil was very high and impacted us, particularly in the first half of the year. Now in the fourth quarter of 2025, for the first time in the year, we are seeing an improvement—small, of 10 bps—but we are seeing an improvement that we expect will continue during 2026 in Brazil and in the other two divisions, and we have a favorable outlook for the rest of the year. But it does not end here—the margin expansion or the improvements we have seen in Brazil during the quarter. Excluding the one-off related to payroll in 2024, we have seen an improvement in payroll of 90 bps, mainly due to productivity and headcount, and also an improvement in occupancy and other operating expenses, mostly driven in this case by improving delivery margin. So we are very pleased when you exclude the one-offs related to payroll in 2024 and you exclude the impact of the gross-up of royalties also in 2024. The expansion in Brazil—we are very pleased with that. Regarding SLAD that you also asked about, Froy, payroll expenses, royalties, and other expenses—we saw leverage in all of those lines, having a better other operating income as well, and a flattish G&A in the division. But SLAD has seen an improvement of 180 bps regarding the same quarter of 2024, from 10.8% in 2024 to 12.6% in 2025. Sorry. Froylan Mendez, JPMorgan: Given the recent depreciation of Latin currencies, does this change your outlook for top line and margins versus the time you shared guidance? Mariano Tannenbaum: Well, if we look at the average for the two main currencies, let us go to the Brazilian real and the Mexican peso. In 2026 so far, and we are almost approaching the end of the quarter, the Brazilian real had an average of 5.2 versus 5.86 for the same period of last year, and the Mexican peso an average of 17.4 compared with an average of 20.4 in the first quarter of last year. So we are seeing an appreciation of the currency that, adding the inflation rate, the real appreciation is even higher. We are not seeing that depreciation of the currencies. Of course, in January, at some point, the real was a bit more appreciated than what it is now, which, of course, given the worldwide events that we are experiencing, we are seeing an increase in volatility, but the FX are performing much better than everybody expected at the end of last year and even at the beginning of this year. And you know that when Latin currencies are appreciated and, on top of that, with modest levels of inflation, we are seeing real appreciation of the currencies that, at the end, have a positive impact in our results. Eric, Santander: Secondly, how should we think about Brazil’s comp sales throughout 2026, bearing in mind all of the initiatives undertaken by the company, and the additional resources from the increase in income tax rate exemption level in Brazil? Luis Raganato: Okay. Thank you very much, Eric, for the question. And to answer that, I have to go a few steps into 2025, where the market had a very challenging year, with industry volumes down mid- to high-single digits versus 2024, and this happened since the first quarter of the year, with the additional pressure of the increase in beef costs that somehow made us make an adjustment in our strategy. And the pressure to consumption came especially, or was related to, factors related to disposable income. And, however, given this context, throughout the fourth quarter and full year, we managed to deliver positive comp sales and better margins. So, about the consumption, we believe that consumers, particularly lower-income consumers, are being more rational with their spending power, and even though there is not a lot of room for higher pricing, we are working through a combination of pricing and mix to increase average check, trying to offset those volume declines, protecting our margins. So what happened in the fourth quarter was that the contribution to sales came more from average check and channel shifts than volume, because, as I said, we are trying to strike a balance between sales growth and profitability. And what we are seeing today, these first months of the year, is that we are seeing similar consumption trends. And our performance in the first quarter is about in line with our expectations, and what we expect from the second quarter and on is that consumption levels are going to normalize. Still, our focus during this quarter and the rest of the year is going to be to build healthy comparable sales. Dan, back to you. Jonathan Schwartz, ION Group: In addition to a lower rate and no longer needing to hedge part of the U.S.-denominated debt into Brazilian reals, are there any other monetary benefits of raising debt in Brazil or in BRL, i.e., lowering pretax accounting results that lowers tax, avoidance of taxes for taking money outside the country, etcetera? Mariano Tannenbaum: Johnny, how are you? Thanks for the question. I will walk you through the transaction, and I will try to answer your several questions here. Why did we do, in this case, this liability management exercise? We identified a market opportunity to lower the cost of our debt. You will start seeing that, of course, during the full year 2026. We structured, in this case, three bilateral loans with three different banks and coupled them with derivatives to synthetically maintain our debt in U.S. dollars. Avoiding, of course, paying the cost of carry in Brazil was key in these transactions, and we ultimately repaid our 2029 U.S. dollar denominated debt. In this case, the resulting cost of these transactions ended in an estimated pretax cost of 2.53% on an annual basis—that is the interest rate—which compares, in this case, with the 6.18% coupon of the senior notes 2029. And, on top of that, in January, we launched the tender offer and successfully repaid $135.0 million of these notes. And this transaction, going to your second part of your question, enabled us to capture an even larger tax shield, therefore having advantages from a tax perspective as well. So I hope that with this flow your questions are answered. Alvaro Garcia, BTG Pactual: On Brazil sales, Economy, are you seeing any interesting behavior from cohorts buying the Konamiqi, i.e., adding other items to their order or increased traffic? Luis Raganato: Thank you, Alvaro, for the question. Good morning. As I said, the situation in Brazil regarding volumes is directly related with the slowdown that we see in the consumption. So this value platform, the economic value platform that is a national value platform, is giving us the chance to somehow shield or to protect our market share. For those who do not know about this, it offers a very attractive price point and it gives the opportunity to our guests to build their own menu, and it has a very good margin. So, so far, the platform has very good results. And, yes, we do have some add-ons. The value platform is still going on during the first quarter. And, most importantly, what it did is that we were able with that kind of actions, even though the sector is down, we were able to maintain our market share, leading our nearest competitor by a factor of two. We were able to maintain that gap. This is going to position us very well when the operating environment improves, and we expect that to be around the second quarter and on into 2026. Alvaro Garcia, BTG Pactual: Headcount reduction: can you give more color on the headcount reduction—both financial impact and strategically why it makes sense for the organization? Froylan Mendez, JPMorgan: Can you quantify the impact of the headcount reduction going forward in terms of SG&A reduction, as a percent of sales or any other metric that we can use to understand the impact? Melissa, Bank of America: Can you provide some additional information on the restructuring charge, including drivers of the decision, areas impacted, and anticipated savings? Mariano Tannenbaum: Thank you, and thanks, everybody, for the question. In this case, maintaining strong discipline over G&A expenses continues to be one of Arcos Dorados Holdings Inc.’ top priorities and is aligned with Luis’ message when he assumed his position. We consistently pursue initiatives aimed at improving efficiency and optimizing our G&A structure, always supporting the needs of the business. In full year 2025, G&A as a percentage of revenues remained flat excluding one-off items that affected 2024. Notably, and this is relevant, during 2025 we delivered a 50 basis point improvement in G&A over revenues, also excluding those one-offs. But, in line with our commitment to long-term shareholder value creation and enhanced cash generation, and supported by efficiency gains from technology investment, we implemented a G&A reduction over the last few months that is already completed. The objective in this case was to preserve operational excellence while better aligning resources with activities that are more critical to sustaining growth and strengthening our platform for the future. In terms of numbers, our ongoing cost base has been reduced by more than $10.0 million on an annualized basis and, in this case, positions us to generate operating leverage in 2026. Of course, then there are other moving parts that affect the G&A, as you all know, like FX movements and share price movements, but, in this case, the core cost base is $10.0 million less in the payroll line. And this restructure has been made in the three divisions and at the corporate level. Melissa, Bank of America: Why was CapEx for 2025 below initial guidance despite a higher number of openings? Is this FX-related? And how does investment per unit and ROI for recent openings compare with previous vintages? Max Joseph, Investor: Can you provide more detail on 2025 CapEx outside of new restaurant openings, and how much was allocated to restaurant modernizations, technology initiatives, maintenance, and other categories? Mariano Tannenbaum: Thanks, Melissa and Max, for the question. In 2025, we remained focused on optimizing capital spending while fully executing our planned openings and modernization program. It is important to note that we did not obtain the savings by switching to cheaper restaurant formats. We maintained—indeed, we exceeded—the guidance, and we maintained the number of freestanding openings that we planned at the beginning of the year. In the second half of the year, we accelerated initiatives to be more efficient with localized suppliers. We did rightsizing of the restaurants—so a lot of focus on the construction phase—coupled with FX movements that had some benefits on imported elements that go inside the restaurant, specifically at the kitchen level, but all those allowed us to reduce the per-unit cost without, as I mentioned before, compromising quality or scope. This area, it is important to note, has been a main focus for the entire finance and development teams during 2025, and the objective was to maximize return on investments while maintaining the quantity of our restaurant openings. So, as a result of all these, we were able to surpass the plan—opening 102 restaurants instead of the guidance that was 90 to 100—but with lower capital intensity, and we are very pleased with the results we obtained that contributed to increase and improve the free cash flow of the company. Dan, you were going to ask about 2026. Melissa, Bank of America: What is the allocation of your 2026 CapEx budget across restaurant openings, reimaging, technology, and other areas? Max Joseph, Investor: Are you planning to increase modernization rate to hit your year-end goal of Experience of the Future of 90-plus percent? Mariano Tannenbaum: Perfect. Just as a reference, in 2025, approximately 80% of the total CapEx was allocated to development CapEx and 20% to non-development CapEx that includes mainly technology. For 2026, given that we increased a bit the guideline of openings, our expectation is—and also because we are going to finalize and modernize more restaurants—we are expecting that from the total guidance we gave you in January, approximately 85% will be allocated to development and 15% will be allocated to technology and other types of investments. Julia Rizzo, Morgan Stanley: Are there already signs of same-store sales recovery in 2026 in Brazil and NOLAD? And when do you expect same-store sales to reach inflation levels according to the company’s algorithms? Luis Raganato: Thank you, Julia, for the question. And, I mean, our plan is designed to deliver comparable sales growth about in line with inflation level as the year progresses. And we do have a strategic marketing plan that is very robust, not only in Brazil and NOLAD, but in SLAD also. You saw that in the fourth quarter, for example, we have in Brazil actions, like I was telling just a few minutes ago, about EconoMakie that drives volume, but we also had the Stranger Things action that brings the love for the brand. So we think that the situation in Brazil is going to last for a while. We are prepared for that. And, as I said, our challenge is to build healthy comp sales. And, in the case of NOLAD, we had a slightly different case because even though we did have a challenging and a highly competitive environment across most markets, comparable sales grew 1.7% with positive volume. This was supported by a slight shift in product mix and competitive pricing strategies. Overall, sales growth was driven more by volume than by average check. And the highlight of the fourth quarter was Mexico and Puerto Rico. And looking ahead, we remain confident because Mexico is going to sustain the trend and we believe that Panama and Costa Rica are taking the right actions to rebalance average check and guest traffic trends. So we expect to see that reaching that inflation or about in line with inflation for the second semester. Julia Rizzo, Morgan Stanley: Can we explain NOLAD’s margin fall despite the royalty rate being 100 basis points better? And what should we expect for NOLAD margins in 2026? Mariano Tannenbaum: Perfect. Thanks, Julia, for the question. Well, margins in NOLAD during the last quarter of last year were challenged due to sales growing below blended inflation, and as we always mention, when we have sales growing below inflation, then you start having deleverage in several fixed cost lines. On top of that, we have seen some Food and Paper cost pressures during the last quarter. Remember that during the full year 2025, NOLAD did not experience Food and Paper pressures in the first half of the year, but started having some pressures in the second half of the year. The good news here is that we saw improvements in occupancy and other operating expenses, and we managed to keep payroll almost in line with prior year. Recall in 2024, the payroll line was under pressure in NOLAD due to increases in minimum wages in several markets such as Puerto Rico, Panama, Costa Rica, and Mexico. So we are pleased to see that in 2025, through productivity gains, we saw leverage in this line. We are also very pleased with Mexico’s results—that is the division’s largest market—where comp sales grew well above inflation, and we expect to generate leverage during 2026. Going back to the Food and Paper line, and as I mentioned when I was asked about Brazil, in the case of NOLAD—and let me add, in the case of SLAD as well—we have seen very good signs during the first quarter of this year that, of course, is still ongoing, but early results are showing an improvement in Food and Paper costs in the three divisions and, in the case of NOLAD, particularly in NOLAD. So the fourth quarter was not great, we agree, but we are seeing some good news starting 2026, and we are very pleased with how we have managed the payroll line. Remember that between payroll and Food and Paper are the two most important cost lines in our income stream in our P&L. Thiago Bortolucci, Goldman Sachs: Related to same-store sales in Brazil. At 2% same-store sales growth, I assume traffic in Brazil is at least mid-single-digit negative. How has it evolved sequentially versus the third quarter? To which factors would you attribute this evolution? What are the drivers for an eventual inflection in 2026? Dan Schleiniger: I think Luis addressed this earlier, Thiago. I think you sent this while he was answering a similar question, so I will try not to be repetitive. Thiago Bortolucci, Goldman Sachs: What is your base case for beef prices in Brazil in 2026? And how have you prepared your menu board for the next twelve months in the context of the costs? Mariano Tannenbaum: Okay. Thanks, Thiago. In Brazil, the main pressure—I will try not to be that repetitive—but the main pressure on Food and Paper this year came from beef inflation, which was up about 30% over the last twelve months. The good news is that we have seen two consecutive quarters of sequential improvement and that the trend has continued into early 2026. So we feel confident in our ability to continue recovering gross margin in this respect, and the recent appreciation of the real also helps, especially for our imported items. It is important to mention that our pricing strategy remains disciplined and aligned with inflation, with CPI, so we are avoiding aggressive actions that compromise long-term health of the business. And, as Luis mentioned, our new affordability platform is performing very well so far. Luis Raganato: Alright. Thank you, Thiago, for the question. Good morning. The good news about our menu board is that, under one brand, we have all the categories. We do have beef, and we have our core items, our core sandwiches. We have our value platform and we do have our premium sandwiches. So in beef, we are really well covered. Then we have the chicken category that, with the launch of the McCrispy Chicken, has reinforced and is now an engine of growth. And then we have desserts. We are focused on trying to recoup the levels that we had pre-pandemic. Then we have beverages, for example, and coffee, that many of our main competitors around the region do not have the chance to talk about all the categories. So our menu board is very healthy. We have an opportunity not only to increase our top line but to improve our margins trying to push these other categories. So I would say that, Thiago, it is important to say that in the region 2025 was challenging, and one of the great outputs of 2025 is, for example, we managed to shield our market share around the region—we gained one percentage point versus 2024—and we maintained the gap versus our main competitors two times more. So I already talked about Brazil that had 2.2 times last year, but we have the case of Colombia, Mexico, Costa Rica, Panama. Taking into consideration our internal research, we have more than two times in those countries in comparable footprints and more than three times in markets like Argentina, Uruguay, or Chile in comparable footprints also. So, going back to the question that you had, just to give you a little bit more color, we have seen sequential improvement that is reflected in our market share, in comparable sales, and, of course, in margins. And, as we have mentioned in other calls, our target is to bring sustainable top-line growth and to improve operational efficiency. Our focus is in every line of our P&L. This should drive profitability. This should generate free cash flow, and, of course, create shareholder value. Dan Schleiniger: We actually have no more questions in the queue, so we have reached the end of the Q&A session. Thank you once again for your interest in Arcos Dorados Holdings Inc. and for joining today’s webcast. We look forward to speaking with you again in May on our first quarter 2026 earnings webcast. Until then, stay safe and have a nice rest of your day.
Operator: Good morning, and welcome to the Ocean Power Technologies Fourth Quarter and Full Fiscal Year 2025 Earnings Conference Call. A webcast of this call is also available and can be accessed by a link on the company's website at www.oceanpowertechnologies.com. This conference call is being recorded and will be available for replay shortly after its completion. On the call today are Dr. Philipp Stratmann, President and Chief Executive Officer; and Bob Powers, Senior Vice President and Chief Financial Officer. [Operator Instructions] Now I am pleased to introduce Bob Powers. Please go ahead, sir. Robert Powers: Thank you, and good morning. After the market closed yesterday, we issued our earnings press release and filed our annual report on Form 10-K for the period ended April 30, 2025. Our public filings are available on the SEC website and within the Investor Relations section of the OPT website. During this call, we will make forward-looking statements that are within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include financial projections or other statements of the company's plans, objectives, expectations or intentions. These statements are based on assumptions made by management regarding future circumstances over which the company may have little or no control and involve risks, uncertainties and other factors that may cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. Additional information about these risks and uncertainties can be found in the company's Form 10-K and subsequent filings with the SEC. The company disclaims any obligation or intention to update the forward-looking statements made on this call. Finally, we posted an updated investor presentation on our IR website. Please take a moment to review it as it provides a nice overview of our company and strategy. Now I am pleased to introduce Dr. Philipp Stratmann. Philipp Stratmann: Good morning, and thank you for joining us today. Fiscal 2025 was a transformational year for OPT. We delivered real measurable value in a global market undergoing rapid change, and we entered fiscal year '26 positioned to lead in the sustainable data-driven blue economy. Today, I'll walk you through our most important achievements, the momentum they've created and the opportunities ahead as we execute our strategic growth plan. In fiscal '25, OPT was granted a U.S. Department of Defense Facility Security Clearance at the Secret level, a milestone that significantly expands our eligibility for classified defense work. This clearance not only affirms OPT's compliance with federal security protocols, but also opens the door to high-value multiyear programs where few companies are even allowed to compete. It expands our addressable market and deepens our partnership potential. Let's talk about backlog and visibility. I'm incredibly excited to announce that we entered fiscal '26 with $12.5 million in funded backlog, the highest in our history. This reflects multi-quarter fulfillment of both international defense and commercial contracts and signals strong customer confidence in our solutions and our ability to execute. It is a clear indicator that our strategy is working and that demand is real and growing. Over the past year, we deployed our artificial intelligence capable Merrows and WAM-V platforms across the Middle East, Latin America and the Indo-Pacific, establishing a meaningful global footprint in allied defense and commercial markets. These deployments validate not just demand, but our readiness to deliver. They demonstrate that our autonomous platforms can operate across maritime, surface and subsea domains in some of the world's most demanding environments. That's real-world mission relevance and it sets us apart. We also expanded key partnerships with defense, drone and subsea leaders, including Red Cat, Teledyne Marine and regional integrators in the Middle East and Latin America. These partnerships extend our reach, improve integration and distribution and help reduce customer acquisition costs. They are a force multiplier for OPT, enabling faster scale, broader validation and deeper market access, especially in regions where local partners accelerate our credibility. OPT's WAM-V platforms were selected to participate in the U.S. Navy's Project Overmatch autonomy exercises, one of the Pentagon's most advanced and future-focused initiatives. Our involvement speaks volumes. It reflects a high-trust relationship with the Navy, confirms our alignment with multi-domain interoperable system goals and positions OPT for access to future large-scale defense procurement channels. This year's performance reflects the strength of our disciplined operating model. We're executing with a streamlined team and leaner OpEx structure, yet delivering more for our customers, our partners and our shareholders. By aligning resources with top priorities, we've increased our operating efficiency without compromising our delivery capability or innovation road map. This positions us not only to weather volatility, but to scale with purpose as demand accelerates. We view this phase of lean execution not as a constraint, but as a foundation. With core systems, processes and leadership in place, we are prepared to scale responsibly as opportunities mature. We have retooled our go-to-market engine with purpose and position. Under new leadership, our sales organization has been redesigned to drive mission alignment, speed and scale, not just transactions. We've upskilled the team, deepening their ability to engage on operational needs and procurement realities across defense and maritime domains. At the same time, we've expanded internationally, matching talent to strategic growth corridors in NATO aligned Latin America and Middle Eastern markets. Complementing this internal transformation is a growing network of region-specific resellers, force multipliers who understand local dynamics and are helping us deliver OPT solutions faster and further than ever before. This is not just a strategic investment. It's already delivering results. We're seeing improved customer engagement, higher win rates and increasing traction in markets where we previously had limited presence. This go-to-market evolution is a foundational pillar of our growth strategy, enabling us to solve real-world customer missions at scale. We are taking some important steps to reduce our customer acquisition costs. First, as I just mentioned, we have repositioned our commercial team to place greater emphasis on achieving more scalable, repeatable sales. Second, we are expanding our dedicated demonstration fleet to accelerate customer engagement and close new business in less time and with greater efficiency. Finally, we have realigned our operations and development teams to drive best-in-class customer experience through more innovation and enhanced operational execution. In turn, that empowers us to concentrate more on deepening relationships with existing customers and expanding value-added services like training. Our commitment to continuously strengthen our commercial effectiveness and operational agility underscores our professionalism and readiness as a leading provider in autonomous maritime systems. Becoming an AUVSI Trusted Operator marks an important milestone in this evolution. Additionally, I want to highlight a significant milestone that speaks to the discipline and maturity we're building across OPT. Just 2 weeks ago, we achieved ISO 9001 certification for our quality management system, a globally recognized benchmark for excellence in engineering, manufacturing and service delivery. This is not just a compliance achievement. It is a reflection of OPT's evolution into a scalable, repeatable and process-driven provider of maritime solutions. Whether we are deploying a WAM-V for autonomous ISR missions activating a PowerBuoy for persistent offshore power or integrating Merrows to enhance maritime domain awareness. We are now doing so under a globally standardized framework of quality and continuous improvement. For our customers, ISO 9001 is often a prerequisite for long-term engagement. It is a signal that we're not just innovative but dependable at scale. In fact, we're already seeing this resonate with procurement teams who have told us that certification materially strengthens our position in upcoming opportunities. Internally, this also reinforces our operational foundation as we expand internationally and engage with increasingly complex supply chains and mission profiles. It's about delivering excellence consistently, which is exactly what the market demands from the next generation of maritime intelligence providers. We believe this certification will meaningfully support our growth strategy while deepening the confidence of our partners, investors and customers alike. Finally, fiscal year 2025 brought headwinds, particularly in defense, where election-related uncertainty and the pending administration transition delayed procurement activity. Combined with broader macroeconomic volatility, these factors slowed pipeline conversion, resulting in revenue below expectations and a shortfall against our Q4 calendar '25 profitability target. Still, OPT ended fiscal '25 with strong momentum, record backlog, a growing pipeline and increasing demand across core markets. These results reflect the strength of our positioning and the resilience of our team. We remain confident that fiscal '26 will mark a step function in execution as we advance towards sustained growth, profitability and long-term value creation. In closing, we have turned the corner. OPT is no longer just about wave energy. We provide full-service maritime domain awareness that is persistent and deployed from platforms that enable multi-asset capabilities. We have become a multi-solution platform company, one that's enabling customers to operate further offshore, stay deployed longer and lower costs through intelligent autonomy. Our strategy has been simple but disciplined, diversify, scale and improve margins. We've moved beyond grant-funded R&D into real commercial contracts. We've expanded into defense, energy and international markets, and we're focused on repeatable, scalable services that drive long-term value. We're not pitching potential, we are executing. Every contract validates our pioneering efforts to develop our model. We are well positioned to meet all challenges in our prosperous horizons and capitalize on the heavy lifting completed to date. The technology has proven is continuing to accelerate. The customers are buying. With capital in hand, platforms in the water and a growing global footprint, OPT is no longer proving it's scaling. Thank you for your continued support. I will now turn it over to Bob, who will walk through our financial performance in more detail. Robert Powers: Thanks, Philipp. Let's begin with our financial performance for the year. Fiscal 2025 was a record year for revenue. We generated $5.9 million, a 7% increase over the $5.5 million recognized in the prior year. What makes this growth especially meaningful is that it was achieved alongside a 26% reduction in operating expenses, which I'll cover in more detail shortly. The revenue growth reflects the strength of our strategy, the discipline of our execution and the growing demand for OPT's autonomous and maritime solutions. One of the biggest drivers was our expansion in Latin America, which made a meaningful contribution to both our FY '25 revenue and the $12.5 million in backlog Philipp referenced. This underscores our focus on diversifying revenue across high-growth international markets, and we believe it sets the stage for future expansion. Looking ahead, scaling revenue remains a key priority as we convert backlog into deliveries and expand into new channels. Our focus remains squarely on delivering consistent performance and long-term value for shareholders. Turning to expenses. Operating expenses for fiscal 2025 totaled $23.4 million, down 27% from the $32.2 million in FY '24. This $8.8 million reduction reflects deliberate organization-wide efforts to optimize headcount, reduce third-party costs and tighten expense control across all functions. This level of cost discipline, combined with top line growth shows that we're building a model with meaningful operating leverage, a critical step towards sustainable profitability. As a result, our loss for the year improved by 22% from $27.5 million to $21.5 million. This progress shows we're staying disciplined with spending while still growing the business and meeting our customer commitments. On the balance sheet, as of April 30, 2025, our total cash position, including cash, restricted cash, equivalents and short-term investments stood at $6.7 million compared to $3.2 million for the close of FY '24. Just after year-end, we further strengthened our liquidity by securing a $10 million unsecured debt financing from an institutional investor. This investment represents a clear market endorsement of OPT's platform, technology road map and long-term value creation strategy. Their participation not only bolsters our capital base, it also equips us to execute on our record backlog, scale up international operations and pursue near-term profitability with greater confidence. On cash flow, net cash used in operating activities for the year was $18.6 million, an improvement of over 38% compared to the $29.8 million in FY '24. This reduction reflects the impact of our cost management initiatives, but partially offset by final payouts related to bonuses and earn-outs accrued in the prior fiscal year. That concludes our financial update. We're encouraged by the demand signals we're seeing across defense and commercial markets and energized by the progress we've made. As Philipp noted, new initiatives, particularly our strategic partnerships and international deployments position us to capitalize on momentum, expand our customer base and continue advancing towards scalable recurring growth. As we move into Q1 of FY '26, our focus is on executing backlog deliveries, converting demonstrations into multiyear deals and maintaining tight expense control. Thank you again for your support. Operator: [Operator Instructions] Our first question is coming from Glenn Mattson from Ladenburg Thalmann. Glenn Mattson: Congrats on the strong growth in backlog and pipeline. I'm curious a little bit more about the pipeline. Just can you give us some understanding and background about how you compile that number and just some background around the conversion and how well -- how mature some of that is? So just color on that would be great. Philipp Stratmann: Yes, absolutely. Glenn, thanks for being on. The way -- as you've seen, the way we look at our pipeline, it is everything that is an actual opportunity where we're under discussions with a customer. With the retooling of the commercial team, and you've seen we recently onboarded a new SVP for Commercial, Jason Weed, who's a retired U.S. Navy captain and others that we've brought on. We've really positioned the company to now start increasing and accelerating the conversion rate as we're looking at what is a qualified opportunity or opportunity under negotiation with the customer to then focusing on the delivery portion of the pipeline and then converting that to revenues. With the key appointees in the present administration in place, we feel very confident about seeing an increase in the conversion rates. And equally, as the world starts recognizing that a hybrid fleet and unmanned operations in the ocean are a critical portion of operations, we look forward to participating in that. So I think as we stated, these are qualified opportunities, opportunities under negotiation, and we are increasing -- or we're feeling confident about increasing the conversion rate as we move through the current fiscal year. Glenn Mattson: And then I guess as a follow-up, the -- you've done a great job cutting costs. Can you just talk about your capacity and ability to meet demand should it accelerate faster than you expect or... Philipp Stratmann: Yes, absolutely. We've got -- obviously, we've got the facility in New Jersey, where we got just under 60,000 square feet. We got our smaller prototyping facility in the Bay Area in Northern California. And under the leadership of our operational team, we have redesigned the layout of parts of our facilities so that we can scale up more quickly. But obviously, as you pointed out on the cost cutting, we're doing so in a way that is conscious of working capital. so that we can convert as and when required without front-loading too much into inventory prior to starting the conversion. Operator: Next question is coming from Peter Gastreich from Water Tower Research. Peter Gastreich: Peter from Water Tower. So congratulations to the team on your results and executing on your strategy in 2025. It's really great to see this meaningful momentum in your backlog and also the cost cuts. It looks like you're well positioned starting off in 2026. I just have a couple of questions. One on the backlog and the other is on the gross margin. Just related to the backlog, could you talk -- first of all, so thanks for the previous question on that as well. But could you please talk about the breakdown of the backlog in terms of product type? Any type of color you can give on that would be great. Philipp Stratmann: Thanks for being on, Peter. And it is -- what we are pleased with in the backlog is the fact that it is a very healthy split between buoys, vehicles and associated services. What we're also starting to see, and as I mentioned in my remarks earlier, with becoming an AUVSI Trusted Operator, we're seeing an uptick in service revenues related to training that are sitting in -- starting to sit in backlog and certainly sitting in the pipeline. So we feel good about the fact that this is not based on one single one of our solution, but truly is part of what we set out to do, which is deliver autonomous persistent and resident ocean intelligence, whether that is buoys, vehicles, enabled software that sits at the edge across them or whether it is services that are related to getting these items deployed. Peter Gastreich: Okay. And yes, just a question on the gross margin. So over the last year, your gross margin was on the decline and -- just looking out towards your backlog right now and eventually having that feed through, how should we be thinking about how your gross margin would be evolving sort of broadly going forward? Philipp Stratmann: Yes. I think we're seeing an uptick again where gross margin is going to start heading. Some of that has been related to the fact, as Bob mentioned, we've been working on projects such as Overmatch and others, which have been revenue generating, but more focused on larger scale demonstration efforts. As we transition further into operational use of the systems, we look forward to seeing that corresponding uptick in gross margins, which are driven to some extent by the service revenues that I just mentioned as those, a, they're recurring; and b, they do carry with them a higher gross margin when we start delivering them. Operator: Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments. Philipp Stratmann: Thank you for being a shareholder and for supporting our ongoing growth and execution of our strategy. We look forward to continuing to deliver for you, our customers and all of our stakeholders. Thank you. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.
Operator: Greetings, and welcome to the Tejon Ranch Co. fourth quarter 2025 earnings call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. It is now my pleasure to introduce Nicholas Ortiz, Senior Vice President of Corporate Communications. Please go ahead. Nicholas Ortiz: Good afternoon, and welcome to Tejon Ranch Co.’s fourth quarter 2025 earnings call. My name is Nicholas Ortiz. Joining me today are Matthew Walker, President and Chief Executive Officer, and Robert Velasquez, Senior Vice President and Chief Financial Officer. Today’s press release, Form 10-Ks, and this webcast are available on our investor website. A replay will be posted after we conclude. That site is investors.tejonranch.com. Today’s remarks may include forward-looking statements. These statements are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. These factors are detailed in our SEC filings, including our most recent Forms 10-Q and 10-K. We assume no obligation to update any forward-looking statements. We may reference non-GAAP measures. These measures should be considered in addition to, not as a substitute for, GAAP results. Reconciliations to the most directly comparable GAAP measures and reasons why we use non-GAAP are included in today’s filings and are posted on our website, again, investors.tejonranch.com. After prepared remarks, we will address questions. Shareholders were invited to submit questions by email in advance. With that, I will turn the call over to Matthew. Matthew Walker: Good afternoon. I am Matthew Walker, President and CEO of Tejon Ranch Co. Thank you for joining us. For this, our second earnings call, we will be using the same format as last November. I will share my perspective and turn it over to our CFO, Robert Velasquez, who will cover our financials, and then we will answer questions. As we did last quarter, we will be answering each shareholder question that is asked. So moving on to this quarter, I would like to talk about where we have been and where we are headed. For the quarter, our operating income was up compared to the fourth quarter 2024, while our net income was down. Our net income reflects one-time proxy defense costs, but our overall operating performance was strong, which we will explain as we go through our segments. For the year, our $49,600,000 in revenue and $24,200,000 in adjusted EBITDA both improved over 2024. Our company’s economic driver remains our commercial real estate business. Commercial revenue was up $1,000,000 for the quarter and $3,500,000 for the year, led by two land sales. One of which was a hotel site and the second, a back-end payment on our Nestlé transaction from 2025. In farming, we had one of the stronger years in recent memory. This was supported by an on-bearing year for pistachios. Farming revenue was up 20% over the same quarter last year, and up nearly 26% annually. I am pleased to report that our farming revenues were the highest in a decade. Income from our joint ventures was down for the quarter and down for the year. While our industrial real estate JVs performed well, our travel center JV with TA Petro was impacted by reduced car and truck traffic on Interstate 5. This led to lower fuel sales and fuel margins as well as lower sales in our travel centers and restaurants. On the positive side, we have seen encouraging signs from the Outlets at Tejon, with December generating the highest retail sales of any month since we opened in 2014. There are many factors in play, but among them is the positive impact of the new Hard Rock Tejon Casino, which opened in November. So far, the casino’s impact has been extremely encouraging, and we look forward to further positive benefits from the casino in 2026. Last fall, I talked about commitments made by the board with respect to corporate governance. Today, I am pleased to report that our board is delivering on those commitments. First, as I hope you saw this morning, we filed an 8-K announcing a proposal to provide shareholders with the right to call a special meeting. We are proposing that our shareholders or groups of shareholders owning at least 25% of the outstanding shares can call for a special meeting. Our proposal is consistent with the majority of public companies, and we think it better aligns us with our shareholders. Shareholders will be able to vote on this proposal as part of their proxy ballot prior to the annual meeting in May. Second, I have spoken in the past about our board size and composition. We filed an 8-K earlier this month announcing the decision by our board to reduce in size from 10 to 9. Also, the board decided that two board members, in the event that they are elected this May, would step down by May 2027, which would bring our board size down to 7. In addition, as part of our board size reduction, the board voted to eliminate our executive committee. These changes reinforce that our board is committed to positive governance change. Next, we will be holding our annual meeting on-site at the Ranch on May 13. We invite each of our shareholders to attend. We will also provide an opportunity for our shareholders to attend virtually. It will be a good opportunity to see our assets up close and also a chance to spend time with our management team and board. Following the annual meeting, we will be hosting tours of the Ranch including the Tejon Ranch Commerce Center, the Terra Vista apartment community, and the Hard Rock Tejon Casino, and we hope you can join us. Registration information will be provided with your proxy statement. Last year, we completed a number of cost-saving measures. Looking ahead, I want to communicate that we are not done yet. We are continuing to streamline our operations and have targeted an additional $1,000,000 of overhead savings by 2027. When you add all of this up, our operating business is showing signs of positive momentum. However, I want to emphasize that cost improvement alone is not our only goal. As a company, we must put more of our assets to work generating higher cash flow, producing more earnings, and increasing value for our shareholders. I described my first year at the company as setting the table. This consisted of taking a close look at all aspects of the business, formulating a strategy, and then communicating that strategy to the market. This year, we are working on activating those plans. Right now is an exciting time for the company as we look to grow our revenue base and realize the benefits of our cost savings to drive more earnings growth. With all this as a backdrop, I would like to turn the call over to our Chief Financial Officer, Robert Velasquez, so that he can go through the quarterly financials. Robert Velasquez: Thank you, Matt, and good afternoon, everyone. I will focus my remarks on our fourth quarter results, provide some additional detail on segment performance, and then briefly discuss liquidity. For the fourth quarter of 2025, net income attributable to common stockholders was $1.6 million, or $0.06 per diluted share, compared to $4.5 million, or $0.17 per diluted share, in 2024. Revenues and other income, including equity in earnings from unconsolidated joint ventures, increased 8% to $23.3 million compared to $21.6 million in the same quarter last year. Adjusted EBITDA for the quarter was $11.4 million, an increase of 9% compared to $10.5 million in the prior period. Turning briefly to segment performance, commercial and industrial real estate generated $4.2 million in revenue for the quarter, compared to $4.1 million in the prior-year period. Operationally, the portfolio remains strong, with the industrial portfolio fully leased and the commercial portfolio approximately 98% leased, which includes the Outlets at Tejon at 93% occupancy at year-end. Equity in earnings from unconsolidated joint ventures totaled $2.1 million in the fourth quarter, compared to $3.3 million in the prior-year period, reflecting lower earnings from the travel center joint venture. Farming revenues for the quarter were $12.2 million, an increase of 26% compared to $9.7 million in 2024, reflecting the impact of the pistachio harvest on the on-bearing year cycle as well as improved performance across other permanent crops. Adjusted farming EBITDA before fixed water obligations increased to $4.4 million in the fourth quarter from $3.4 million in the same quarter last year, with margins improving modestly as higher crop production drove operating leverage. Mineral Resources revenue totaled $2.4 million for the quarter, compared to $2.5 million in the prior-year period, reflecting lower oil and natural gas production volumes, and pricing. I am pleased to introduce a new reporting segment and a milestone for the company. For the first time, we are reporting a segment dedicated to our multifamily revenues and expenses. As lease-up activity at Terra Vista at Tejon gained momentum, we evaluated whether the business warranted its own segment and concluded that it did. Here is where things stand. During the quarter, the company recognized $536,000 of multifamily revenue, reflecting leasing activity at Terra Vista at Tejon, which commenced leasing early in 2025. Phase one of the project, consisting of 228 units, was completed during the year, and the property continues to progress through a lease-up phase. Turning briefly to our balance sheet, as of 12/31/2025, cash and marketable securities totaled approximately $24.9 million. Available capacity on our revolving line of credit facility was approximately $66.1 million. Total liquidity was therefore approximately $91.0 million. We believe our liquidity position provides sufficient flexibility to continue advancing development initiatives while maintaining balance sheet discipline. With that overview, I will turn it back to Matt. Matthew Walker: Thanks, Robert. To close, our direction is clearer. We are strengthening our core business, tightening our cost structure, and concentrating on leveraging our assets to generate recurring cash flow. At the same time, our board has made significant progress in governance and shareholder alignment. We remain committed to providing you, our shareholders, with clear communication and accountability. We will now open for questions. We will respond to the questions that have been submitted. So please just give us a moment to get those pulled up. Alright. Nicholas Ortiz: Thank you, Matt. We received 11 questions before the deadline. We will read each one as submitted, as we did last quarter, and identify the submitter. Before we begin, I just want to thank all of our investors who submitted questions for their engagement. Our first question: When will TRC management and its self-serving board finally respect and benefit all the shareholders as its prime goal rather than the selfish history of self-enrichment? When will management stop being a disgrace and finally unlock the assets of the company for the benefit of its owners, not its management who, for decades, only sought the benefits for themselves? The question is from Samuel Koenig. Matthew Walker: Okay. I understand the question, Samuel, and I understand the sentiment and the frustration behind it. I have been at the company for just over a year now. And in that time, I have scrutinized our operations looking for opportunities to grow our revenue base and reduce our costs. We have been able to reduce our workforce by 20%. We have cut millions from our overhead. We have also taken a much more proactive approach with our shareholders. We held an Investor Day last October. We are now hosting earnings calls like the one we are having right now, and those include a format where individual shareholders like yourself can engage in a direct dialogue with management. We provided additional financial disclosures like the ones that Robert just mentioned, plus investment scorecards and hurdle metrics to better explain our business to shareholders. These are all examples of the company’s new approach. You alluded to accountability with executive compensation. Right now, we are in the process of finalizing our proxy statement. When it is released, I think you will see how our existing compensation structure is responsive to the company’s financial performance and how it addresses the accountability issue in a meaningful way. And in addition, we have been working on a revised compensation plan, which will be covered in the upcoming proxy, that further aligns us with shareholders and increasingly ties our performance to share price improvement. Moreover, I personally made adjustments to my compensation to further align myself with shareholders. Furthermore, a few weeks ago, as we discussed just a few seconds ago, our board shared its plan for governance reform. We reduced the board size. We eliminated the executive committee. Today, we announced the proposal for a shareholder meeting right. Our board is, on top of that, we have increased representation from our shareholder base compared to where we were a few years ago. I think you should know that our board is not monolithic, and our board members have diverse opinions and they are not afraid to share them. So these are just a few of the things that we are working on between management and the board to enact change for the better. Taken in aggregate, we have made a positive difference in the last year. I cannot speak to all the things that you mentioned before I joined the company, but what I can tell you in the answer to your question is I do think that we are on our way to demonstrating accountability and creating value for our shareholders. Next question. Nicholas Ortiz: Next question. As California continues to tighten regulations on traditional rodenticides, including the 2021 restriction on second-generation anticoagulants, how is Tejon Ranch approaching wildlife-friendly or nonlethal rodent control methods across its almond, pistachio, and cattle operations? And is this an area where you see potential for innovation or outside partnership as proof of your broader sustainability and environmental stewardship commitments? The question is from Eli Simo. Matthew Walker: So one of the things that I have grown to appreciate on the Ranch in my first year here is how interconnected the various businesses are and how important it is to take a long-term view of the Ranch and its stewardship. The Ranch really is a special place that requires active management. Our team has been doing this for nearly two hundred years. The vast majority of the Ranch is also part of the Tejon Ranch Conservancy, and that means we have numerous rules and restrictions that are designed to protect the Ranch and the wildlife that calls the Ranch home. And I can see some of that wildlife outside of my window as we speak. Your question gets to how we balance our farming business with our game management business. We take our responsibility to grow crops seriously and to do so in a sustainable manner, just as we are committed to safely operate a high-quality hunting program and one that respects the stewardship of our wildlife resources. We approach pesticide and wildlife management with an integrated framework. We emphasize prevention and habitat management over reliance on any single tool or chemical approach. And all of that means if the regulatory environment evolves, we are well positioned to adapt because that philosophy is already embedded in how we operate everything that we do here. Nicholas Ortiz: We have two questions from the same submitter. I am going to read them both before you respond, Matt. The first question is this: As of year-end, we have roughly $300,000,000 of invested capital in Mountain Village and Centennial combined. These assets generate no income, and between the associated water costs, land management, and continual development planning, they continue to impede our ability to generate acceptable returns on invested capital. How are you going to grow returns on invested capital to an acceptable level over the next few years while we continue to hold on to these assets? Even with no additional investment, these projects would need to go from generating losses to contributing over $20,000,000 of annual income simply to earn a minimal ROIC. The next question is: We would greatly appreciate hearing how the company will be able to significantly increase ROIC and earnings over the next five years while we continue to have $300,000,000 of capital tied up in these projects. Both questions are from Justin Lebo. Matthew Walker: Thank you for your questions, Justin. As Nick said, let me take those together. They are important topics and I want to recognize that there are varying opinions on this. Let me share our perspective and build on what I have said and what I have written in the past. Our master-planned communities have been an important component of our overall business plan for several decades. You are right. They have required a significant capital investment. My goal is to move our communities into active implementation so that they can begin to generate cash flow and a return on our invested capital as you noted. Reality is that this is going to take a few more years. There are many examples of public companies who are operating in this master-planned community space from Florida to Texas to right here in California. Each of them has had to go through some degree of effort to complete their approvals, to complete their design, and to finish their infrastructure before they can start producing revenue. And all of that takes time and capital. We are no different, and we have consistently communicated that to the market. Fortunately, we have other businesses that also generate cash, and we hope to increase that while our community development ramps up. When you look at the other companies developing MPCs, you can see that there is significant cash flow that is generated, which achieves an attractive ROIC, and we would expect that our master-planned communities can generate significantly more than the $20,000,000 of annual income that you mentioned. Also, our business plan is to utilize third-party joint venture equity, so that should help a little bit too. On Mountain Village, we started the capital raising process. And on Centennial, first and foremost, our approach is to complete a reentitlement effort, which will result in significant value creation and preserve the value of our investment to date. As we mentioned in our press release, that project is advancing through the reentitlement process and will soon be entering a more public stage, and we expect to be in front of Los Angeles County later this year. Alright. Nicholas Ortiz: Next question: Have there ever been any outbound efforts or inbound inquiries to monetize the Mountain Village and Centennial, or the land held under the conservation agreement? What is the status, and what is your thinking about this? This is a question from David Ross. Matthew Walker: Thanks, David. As we mentioned before and in my answer to the previous question, there have been outbound capital raising efforts in the past related to Mountain Village. As I mentioned in my letter last fall, and in my previous remarks today, we are in the process right now of capital raising for that project. As it relates to inbound inquiries, we are always happy to chat with anyone who has an interest in our business, including our land. And as I just previously mentioned, Centennial is in a little bit different position given its ongoing reentitlement status. Nicholas Ortiz: Alright. Our next question is: Given the large amount of investments the company has made in Mountain Village and Centennial over the last thirty years, would not the highest and best use of capital be to monetize these assets and focus on Grapevine and TRCC? How do you justify the alternative? This is a question from Paul Ross. Matthew Walker: Hi, Paul. I do not look at Mountain Village and Centennial as being mutually exclusive with Grapevine and TRCC. The Commerce Center is already a huge focus for us, and I think you can see from our notable investment at Terra Vista we are committed, economically and strategically, to TRCC. We are also committed to expanding and developing out TRCC, and we plan to do so. The same goes with Grapevine. I have tried to state the case for Mountain Village and Centennial. What I would add is that with respect to any of the company’s assets, the ones I have spoken about or the ones I have not, we need to maintain flexibility so that we can adapt to market conditions and any opportunities that might arise, so that we are deploying our capital on a go-forward basis in the most advantageous way possible. I have tried to be clear that capital allocation is one of the most important things that we do here at Tejon Ranch Co. Nicholas Ortiz: Alright. Are you satisfied with the pacing and absorption of the apartments? Will you expand into phase two or bring in a partner? This is a question from Stuart Ross. Matthew Walker: Stuart, I appreciate the question. Yes. We are pleased with our current lease-up at Terra Vista, and I am happy to say that we are now 70% leased. We are approaching our one-year anniversary, which is exciting. We brought on Greystar to manage the apartments, so we are benefiting from the horsepower of the nation’s largest multifamily owner and manager. They are leveraging their platform in Los Angeles and Northern Los Angeles County to expand into Kern County. We have also done a good job with programming and events and things like that, and our tenants really enjoy living there, and we hope to have them for years to come. On phase two, yes, the plan is to expand into our second phase. It really, for us, comes down to a capital allocation and prioritization decision. There are a number of ways that we can proceed. Fortunately, the amenity complex from phase one is already in place, so there are efficiencies that would come in developing that second phase. Nicholas Ortiz: Next question. As of the end of this year, the company has close to $600,000,000 of invested capital on its own balance sheet, while our joint ventures, fully owned commercial real estate assets, and Mineral Resources segments generate roughly $20,000,000 of annual recurring profits, or total annual net operating profit after taxes has never exceeded $3,500,000 in any of the past three years. To achieve a sustainable return on invested capital of just 5%, a reasonably low expectation for a shareholder, you would need to either grow total net operating profit to over $30,000,000 per year or remove a substantial amount of capital from the business. How will you be able to achieve this over the next few years? This is a question from David Spear. Matthew Walker: Thanks, David. Let me see if I can provide some additional thoughts on top of what I already said earlier on this topic. You are absolutely right. Big picture, we need to take more of our company’s balance sheet, and we need to convert those assets into cash flow production. And this needs to happen as quickly as possible. And believe me, I feel the urgency. Beyond our master-planned communities, and I think this is what you were getting at, is we need to increase our cash flow from all of our non-MPC assets as well. So there are a number of ways that we can address this. First, we need to drive bottom-line improvements across our existing operating assets through active asset management. We are doing all sorts of things. We are renegotiating contracts. We are looking for lower-cost alternatives. We are finding better ways to be more efficient across our different segments. Second, we need to continue to advance our business plan, as I mentioned before, particularly at TRCC, where we have a consistent track record of producing high-yielding commercial real estate assets, particularly in the industrial sector. This is a priority for us, and we are working hard to move forward, and it is critical that we do this, and it is a critical way for us to increase our cash flow. Third, we need to think out of our commercial real estate box, and we need to leverage our key differentiating asset, and that is our 270,000 acres of land, and we need to monetize that land. So our team is hustling. You would be surprised at who is interested in utilizing our land. So overall, it is a balanced approach, and it is going to take a combination of singles and doubles and more than that to move the cash flow needle to where it needs to be, whether you are talking about EBITDA or NOPAT or net income. Okay? Our next question. Nicholas Ortiz: Given that the Tejon Ranch property is in proximity to Los Angeles, will the company consider holding an Investor Day at the company headquarters rather than in New York, as was done previously? This question is from Richard Rudgley. Matthew Walker: Good question, Richard. I think you are onto something. I have some good news to report on this front, which we talked about a little bit before. There really is not any substitute to seeing Tejon Ranch firsthand. There is a lot to see, and even for the people who have toured over the past couple of years with us, I think there is reason to come out. As I mentioned earlier, we are pleased to share that our upcoming annual meeting will be on May 13. It is going to be right here at the Ranch. It will be a hybrid format, so shareholders can participate in person or remotely. We are going to have a lot of the same components that we did for last October’s Investor Day in New York. So we will be giving a presentation about the company. We will take your questions just as we did in New York. But since we are on-site, we will also be hosting property tours of the Ranch. Our goal is to make it immersive and informative, and it will be a great way for shareholders to interface with our management team while also getting a close-up look at some of our recent additions. And these would include our Terra Vista apartments and our new neighbors at the Hard Rock Tejon Casino, which ought to be packed no matter when it is that we have to go. And good for them, as I have mentioned before. We are going to be sending out details on the event shortly. We will be taking reservations for our tours, so stay tuned. And then as it applies to a dedicated Investor Day, we will start planning for that after our annual meeting. So your feedback, Richard, is noted and appreciated. Nicholas Ortiz: Next question. How much is estimated to be needed to fund the development of Centennial, as well as separately, Mountain Village? And will a shareholder rights offering be considered as a way to fund some of this to limit dilution of future profits? This is a question from Bob Edwards. Matthew Walker: Thanks, Bob. We have not disclosed publicly the future all-in development cost of Mountain Village or Centennial. While I can appreciate the desire for you to see that, it is something that we would intend to share closer to groundbreaking. As with any large-scale master-planned community, construction is phased, and we recycle the cash flow on the front end to minimize how much equity is required. And as I noted earlier in the call, we would plan to use third-party joint venture equity as opposed to a rights offering to avoid dilution of our shareholders. Okay. Which is our eleventh and final question. Nicholas Ortiz: What level of confidence do you have that Los Angeles County will approve the Centennial development, and what timeline do you project for potential approval? This is a question from Steven Chats. Matthew Walker: Hi, Steven. Good question. I have touched on Centennial some already, but let me answer your question with some more detail. First off, we are not going to prejudge any regulatory outcome, and we want to be respectful of the process before it proceeds. But I will say this: Our confidence in advancing Centennial to approval is high. It is important to note that our relationship with Los Angeles County remains genuinely strong; throughout this entire process we have built a long-standing partnership with the County, which has been extremely productive. The challenge at this stage is not really the County; it is the pace of any legal process that may unfold. And that is a distinction that is worth noting. So as it relates to Centennial, we have been working hard to prepare a comprehensive plan, which we believe addresses the court’s previously identified issues. What is encouraging is that the list of open issues continues to narrow. We have been through a lot on this project. It includes the Antelope Valley regional area planning process, which identified the site for economic development and growth. We worked on the General Plan. There has been new case law on fire protections, you name it. We have consistently taken the approach that we should show up, engage, and then move through the process just like we have successfully done at TRCC, at Mountain Village, and at Grapevine, which are all today fully entitled and fully litigated. This year at Centennial, we will be moving into a more public phase of environmental review, and as I mentioned before, we hope to be in front of Los Angeles County and the Board of Supervisors later this year. Centennial does shine a spotlight on something broader, and that is California’s need to modernize its environmental review framework. We are active in those conversations at the state level, and we think there is real momentum at last to enact positive reform. But we are not waiting for a policy miracle. We have demonstrated that we know how to get through a process. We have done it multiple times. And we are confident that we will get Centennial approved. So if that is all, I would like to thank everyone for providing questions. As I mentioned earlier, we also look forward to our upcoming annual meeting in May right here at the Ranch, and we hope you will join us here. So thank you very much, and have a good day. Operator: Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Greetings, and welcome to the Caleres, Inc. fourth quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, the conference is being recorded. I would now like to turn the call over to your host, Liz Dunn, Senior Vice President, Corporate Development and Strategic Communications. Thank you. You may begin. Liz Dunn: Thank you, Melissa. Good morning. Thank you for joining our fourth quarter earnings call and webcast. A press release with detailed financial tables as well as our quarterly presentation are available at caleres.com. Please be aware today’s discussion contains forward-looking statements, which are subject to several risks and uncertainties. Actual results may differ materially due to various risk factors, including those disclosed in the company’s Form 10-K and other filings with the U.S. Securities and Exchange Commission. Please refer to today’s press release and our SEC filings for more information on risk factors and other factors which could impact forward-looking statements. Copies of these reports are available online. Discussing our operational results, we will be providing and referring to adjusted operating earnings results and, in some cases, we will be discussing our results excluding the impact of Stuart Weitzman. Additional details on non-GAAP measures as well as others featured in today’s earnings release and presentation are available in the reconciliation tables on our earnings release and on caleres.com. The company undertakes no obligation to update any information discussed on this call at any time. Joining me today are Jay Schmidt, President and CEO, and Dan Carpel, Senior Vice President and Interim CFO and CAO. Our call will begin with prepared remarks followed by a Q&A session to address any questions you have. With that, I will turn the call over to Jay. Jay? Jay Schmidt: Good morning. Earlier today, Caleres, Inc. reported fourth quarter sales and earnings. Earnings per share exceeded our guidance, with sales modestly above our guidance and gross margin better than expectations. Brand Portfolio sales performance in the quarter was driven by continued strength in owned e-commerce and international performance, underscoring key strategic growth vectors for the company. Lead brands once again outperformed, reinforcing their role as Caleres, Inc.’s primary growth engine, and we once again gained market share. At Famous Footwear, we continue to see encouraging signs that our strategic initiatives are working. Our Flair remodels are consistently outperforming the fleet and remain an important growth lever as we elevate the in-store experience. We leaned further into our strategy to elevate and edit the brand and product assortment, and we are seeing consumers respond to a curated mix of premium and in-demand brands. And for the quarter, we gained market share in shoe chains. We were pleased that Caleres, Inc. ended 2025 with momentum in both segments of our business. 2026 will be a build-back year where we begin to build back our earnings power driven by the strategic growth factors and initiatives that are already in place and working. We will say more on that in a moment, but first, let me provide more detail on fourth quarter performance. Brand Portfolio sales on an organic basis increased 1.5% in the quarter and 20.3% when factoring in Stuart Weitzman. Lead brands in total were up 2% organically and represented nearly 60% of Brand Portfolio sales. Owned e-commerce continued to see outsized growth, and our international business was strong. According to Circana, our Brand Portfolio gained significant market share in both women’s fashion footwear and total footwear during the quarter. Boots, particularly tall shaft, were a standout category, complemented by strength in flats and loafers, solid performance in dress, and continued momentum in sneakers. Sam Edelman delivered another very strong quarter with sales growth that exceeded expectations and outperformed the broader premium market. Performance was broad-based across categories, anchored by exceptional results in dress, casuals, and boots, where the brand saw success in both proven icons and new styles. Wholesale sales exceeded plan, reflecting strong demand across core product franchises. Owned e-commerce saw double-digit growth and higher full-price selling in the quarter, closing out a record-setting year. Sam Edelman’s licensing initiatives added incremental growth and visibility, highlighted by a successful fragrance launch with rapid sell-through and expanded national distribution. We continue seeing positive results from our Sam Edelman stores, which now tally 111 doors—56 owned and 55 franchised—with 107 of them international. Stuart Weitzman delivered solid fourth quarter progress as we continue strengthening the foundation of Caleres, Inc.’s newest lead brand. We successfully integrated Stuart Weitzman onto Caleres, Inc. platforms as we completed the quarter both on time and on budget. During this transition process, we implemented a new organization structure, moved teams into new headquarters in New York and Shanghai, completed the relocation of our U.S. and Canadian warehouses, and liquidated a significant volume of aged inventory globally. Operationally, fourth quarter sales were driven by core boots and booties alongside new dress and social styles. As we clear out aged inventory, we are successfully reducing discounting and flowing newness to support improved specialty retail and e-commerce performance. At quarter end, Stuart operated 73 retail locations worldwide, including 50 in China and 23 in North America, with the latter spanning full-price, outlet, and shop-in-shop formats. We remain committed and confident in our plan to bring the brand to breakeven in 2026. Allen Edmonds delivered a very strong fourth quarter with broad-based growth across all channels and continued momentum with the consumer. Performance was led by strength in brick-and-mortar stores, owned e-commerce, and wholesale, with particularly strong demand for dress, loafers, sneakers, and boots. Wholesale momentum, driven by key national partners, strong store-level productivity, and expanded distribution, continued. The Reserve Collection, the most elevated product in the Allen Edmonds brand, continued to scale meaningfully, attracting a highly valuable customer who shops more frequently, spends more annually, and shows higher loyalty engagement. This special collection is available at the majority of our 58 Allen Edmonds stores, including our 18 Port Washington Studio stores, which continue to outperform, reflecting the power of an elevated store experience and recent enhancements to the format. Naturalizer made meaningful progress in the fourth quarter with improving e-commerce sales momentum and new and retained customer growth. Owned e-commerce performance was a standout supported by strength across on-trend product categories, including boots, dress, sport, and sandals, with particular success in tall boots. Marketing efforts were increasingly focused and effective, with refined targeting, strong influencer content, and compelling storytelling driving higher-quality traffic, higher conversion, and higher average order value. These efforts translated into customer growth across both new and returning shoppers, with strong engagement from younger and core generations. And shortly after quarter end, we launched our newest collaboration with Casemaker and style icon June Ambrose. June’s collaboration is building awareness for the Naturalizer brand with new consumers, and June’s Styletics collection sells at significantly higher retails, mostly through naturalizer.com. Vionic closed the fourth quarter with strength in e-commerce and international channels, compelling new product launches, and growing interest in sport and performance walking. Vionic’s wearable well-being positioning has high emotional resonance with consumers. We are pleased with the growing momentum in sport lifestyle and performance walking categories, underscored by Vionic’s first sport collaboration with wellness advocate Gabby Reese, which we launched in January and supported with a robust marketing campaign. International sellers in the quarter closely mirrored those in the U.S., illustrating consistent global demand for the brand’s key styles. Brand awareness is growing for Vionic, particularly with younger and more affluent consumers. Moving on to Famous Footwear. In the quarter, total sales decreased 1.2% and comp sales increased 0.1%, in line with our expectations. E-commerce outperformed stores, but average unit retails were up in both channels. We continue to see the Famous consumer respond strongly during peak shopping periods, with more positive comps during the holiday period followed by more modest results in January. E-commerce sales accelerated and were up double digits for the third straight quarter. The launch of Jordan earlier in the year contributed steady momentum throughout the holiday season, remaining a top-10 brand and reinforcing Famous’s ability to launch leading brands and deliver powerful results. Famous continues to enhance its consumer experience through the Flair format. We ended fourth quarter with 57 Flair locations, which generated a 4.5% sales lift overall and a 6-point sales lift for stores converted in the last year. The success of Flair continues to bolster Famous’s ability to amplify elevated brands and products. We plan to build on that momentum with additional Flair openings in 2026, ending with a range of 65 to 75 locations by year end. From a divisional perspective, men’s performed best in the quarter, kids performed in line with the total, and women’s underperformed slightly. However, fashion boots were a standout category in total. Top growth brands for the quarter were Skechers, Jordan, Birkenstock, Timberland, Sorel, Brooks, and Columbia, while our Caleres, Inc. brands outperformed at Famous Footwear, with sales up mid-teens and a higher margin rate on lower inventory. We continue to make progress on our elevate-and-edit strategy at Famous, with outperformance from premium brands. In 2026, we plan to accelerate this strategy by expanding higher-demand brands and products while exiting underperforming labels. We are also expanding immersive brand takeovers that have been driving outsized growth at key points across the seasons, with multiple takeovers planned for core brands throughout 2026. In summary, Caleres, Inc. made progress on our strategic growth objectives in 2025, including lead brands, international, direct-to-consumer, enhanced customer experience, and edit-and-elevate. Joining us today on the call is Dan Carpel. Dan returned to Caleres, Inc. as Chief Accounting Officer in 2025 and has assumed the additional role of Interim CFO. He is well-versed in our company, and I am pleased to welcome him to the call. Dan will walk you through our guidance in detail, but I wanted to provide some color on what we are expecting for the year. As we look forward, 2026 is shaping up as a build-back year, characterized by relatively modest organic sales growth but meaningful earnings recovery. We have several encouraging green shoots leading us to a place of optimism. Our market share continues to build. Our international business is up, and our owned e-commerce business is up quarter-to-date across the Brand Portfolio. Famous Footwear is seeing slightly down comp store sales, with e-commerce up high single digits quarter-to-date. Our tariff mitigation strategies have taken hold, and we successfully completed our Stuart Weitzman systems integration, which sets the stage for improved profitability in the brand. We also made progress across our centers of excellence, which we have shifted internally to calling centers of expertise. We are finding the greatest success by deliberately leveraging Caleres, Inc.’s core capabilities at scale. This includes expanding our international, accelerating owned e-commerce, and establishing more disciplined planning and costing capabilities. In addition, now that three of our five lead brands have brick-and-mortar stores, we have launched a specialty retail operations team to elevate performance and the consumer experience. We have also established a marketing operations center of expertise to enhance our data, analytics, and media buying. These centers of expertise are helping us move faster and operate more consistently and efficiently. And international specialty retail and e-commerce are where we are seeing some of our earliest improvements with Stuart Weitzman. We see a meaningful opportunity to build on this foundation not just as it relates to Stuart, but for our whole company as we move through 2026, with more to come. So, while the market remains volatile, based on what we know today, we are providing guidance with a realistic view of the risks and the opportunities ahead of us, including geopolitical risk and tariff changes. Our sales growth is coming from our proven growth vectors and the annualized benefit from our recent acquisition, and our earnings bridge is clear. I will now turn the call over to Dan for the financial results and our outlook for 2026. Dan? Dan Carpel: Thank you, Jay, and good morning, everyone. During today’s call, I will provide additional details on fourth quarter results as well as our expectations for 2026. Please note that my comments will be on an adjusted basis, and I will note when they exclude Stuart Weitzman. For the fourth quarter, sales were $695.1 million, up 8.7%. Sales on an organic basis, excluding Stuart Weitzman, decreased 0.1%. Organic sales increased in the Brand Portfolio segment and declined at Famous Footwear. Notably, both segments saw an improvement in the trend versus the first half of the year. Sales for Stuart Weitzman were $56.3 million. Brand Portfolio sales were up 1.5% on an organic basis and up 20.3% including Stuart Weitzman. Lead brands in total, excluding Stuart Weitzman, grew about 2% with growth in both North America and international. Famous sales were down 1.2%, with comparable sales up 0.1%. Comparable sales increased slightly in November and December and declined low single digits in January. Consolidated gross margin was 42.9%, down 10 basis points versus last year, reflecting lower margins in Brand Portfolio and relatively stable margins at Famous Footwear. Stuart Weitzman was modestly accretive to gross margin. Brand Portfolio gross margin, excluding Stuart Weitzman, was down 130 basis points due to tariffs as well as markdown allowances, somewhat offset by favorable channel mix. Brand Portfolio gross margin was 41.6%, down 10 basis points to last year including Stuart Weitzman. Famous gross margin was 42.5%, essentially flat to last year, with a greater proportion of clearance sales to total offset by higher clearance margin. SG&A expenses increased $48.3 million, or 18.3%, to $310.0 million. The increase was primarily driven by expenses of $39.0 million related to Stuart Weitzman. As a percentage of sales, SG&A was 44.6% and deleveraged 370 basis points. Operating loss in the quarter was $11.6 million, and operating margin was negative 1.7%. Excluding Stuart Weitzman, operating earnings were $0.5 million, and operating margin was 0.1%. Operating margin at Brand Portfolio was 2.4%, and was 6.8% excluding Stuart Weitzman. Operating margin at Famous was 0.8%. Net interest expense was $4.7 million, up $0.7 million to last year due to higher average borrowings. Approximately $1.4 million was interest expense associated with the acquisition of Stuart Weitzman. The weighted average borrowing rate in the quarter was down about 25 basis points to last year. Tax rate was 25.4% for the quarter, and 28.9% for the full year. Fourth quarter earnings per diluted share were a loss of $0.36 and earnings per diluted share excluding the acquisition of Stuart Weitzman were a loss of $0.06. For the full year, sales increased 1.3% in total and declined 2.5% on an organic basis excluding Stuart Weitzman. The acquisition added $102.2 million of sales during the year. Brand Portfolio sales increased 7.3% and declined 1% on an organic basis. Famous Footwear sales for the full year declined 3.6%, with comp store sales down 2.3%. Gross margin for the full year was 43.5%, down 135 basis points. Brand Portfolio gross margin declined 170 basis points to 42%, primarily reflecting a 160 basis point impact from tariffs. Stuart Weitzman added 40 basis points to the Brand Portfolio gross margin for the year. Famous Footwear gross margin declined 90 basis points to 43.2%. SG&A expenses for the full year increased $92.5 million, or 7.4%, to $1.2 billion, primarily reflecting $71.0 million of Stuart Weitzman expense. As a result, SG&A was 42% and deleveraged 290 basis points. On an organic basis, SG&A expenses were $1.1 billion. Operating earnings for the full year were $43.0 million, and operating margin was 1.6%. Excluding Stuart Weitzman, operating earnings were $66.3 million, and operating margin was 2.5%. Brand Portfolio operating margin declined 630 basis points, as tariffs, SG&A deleverage, and Stuart Weitzman dilution all contributed similar amounts to the decline. Famous Footwear operating margins declined 250 basis points, with both gross margin declines and SG&A deleverage on lower sales. Adjusted earnings per diluted share were $0.61 for the full year and $1.19 excluding the impact of Stuart Weitzman. Turning to the balance sheet, we ended the fourth quarter with $2.83 billion in cash, $296.5 million in borrowings, and $238.0 million in liquidity. Inventory at quarter end was $610.5 million, up $45.0 million to last year, of which $57.0 million was for Stuart Weitzman. Excluding Stuart Weitzman, organic inventory was down $12.0 million, with Brand Portfolio inventory down 6% and Famous Footwear up 2%. Now turning to our outlook. We continue to face an evolving tariff environment. Our guidance is built on the assumption that new tariffs will be enacted that will largely replace the prior IEPA tariffs. This could prove conservative, but until we have clarity on the level of additional new tariffs, these assumptions appear prudent. We are maintaining a flexible approach to sourcing and will continue to seek the best country metrics for our quality and price needs. Additionally, the conflict in the Middle East introduces risk to our outlook. As of today, we are experiencing modest business disruption with our Middle East business partners. The region is less than 1% of our total business, though an important part of our longer-term international growth opportunity. We are carefully monitoring the situation and working with our partners to mitigate risk. However, with oil prices on the rise, the risk of economic slowdown has increased. The low end of our guidance anticipates some slowdown related to the economic impact of the current geopolitical conflicts but does not anticipate growing issues. For the first quarter, we expect consolidated sales to increase mid- to high single digits compared to last year. For Famous, sales are expected to be down low single digits to flat, with comparable sales down 2% to up 1%. For Brand Portfolio, sales are expected to be up mid-teens inclusive of low single-digit organic growth. Consolidated gross margin to improve 120 to 140 basis points compared to last year. Modest deleverage of SG&A compared to last year due to the inclusion of Stuart Weitzman. With discrete items impacting the quarter, we expect a tax rate of 30% to 32%. GAAP earnings per diluted share of $0.21 to $0.26 and adjusted earnings per diluted share of $0.25 to $0.30, as we expect to incur approximately $2.0 million in remaining Stuart Weitzman acquisition and integration costs. For the full year 2026, we expect consolidated sales up low- to mid-single digits compared to last year. Famous Footwear sales down low single digits to flat compared to last year, with comp store sales of down 1% to up 1%. Brand Portfolio sales up low double digits compared to last year, inclusive of low- to mid-single-digit organic growth when excluding Stuart Weitzman. Gross margin up 140 to 180 basis points compared to last year, driven mostly by the Brand Portfolio as our tariff mitigation strategies improve and with favorable customer and brand mix. SG&A rate relatively flat compared to last year, with cost-saving measures largely offset by increases in incentive and merit build-back and other selective investments. Interest expense of approximately $18.0 million and a full-year tax rate of 28% to 30%. As a result, we expect GAAP earnings per diluted share of $1.31 to $1.61, or adjusted earnings per diluted share of $1.35 to $1.65 due to the aforementioned Stuart Weitzman acquisition and integration costs. CapEx of approximately $55.0 million to $60.0 million that we will continue to evaluate based on macroeconomic conditions and performance. With that, I would now like to turn the call back over to the operator for Q&A. Operator: Thank you. To ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset. Our first question comes from the line of Ashley Owens with KeyBanc Capital Markets. Please proceed with your question. Ashley Owens: Hi, thanks, and good morning. So maybe just starting with the quarter. I know there was concern about potential risk to sales volatility in the bottom line, and that did not really play out here. Could you just help us bridge if there was any volatility you recognized and what some of the offsets were? And then, more importantly, is there any go-forward risk with ongoing factoring reps here? How should we think about it as more one-time in nature? Jay Schmidt: Okay. So first of all, we did provide an estimate mid-January, and that did actually play out. We did not ship Saks for the balance of the month, and we were fully reserved on the bad debt. However, other areas of our business were strong enough to offset the $0.06 that we did play out, and I think that was a key reason for it. It just came in better. Our gross margin impact on tariffs was 40 basis points in the Brand Portfolio in the quarter, which was also better than our expectation. Ashley Owens: Okay. Got it. And can you hear me clearly? So, for just as a follow-up then, as we think about gross margin in the embedded recovery story here, can you help us parse out what is already in the exit rate for the year versus what still needs to come through from either mix or a tariff mitigation standpoint in 2026? Thanks. Jay Schmidt: Yes. So, on the margin, we think about guidance in 2026, you will see relatively flat margins on the Famous business. And as it relates to the Brand Portfolio side, we will see recovery around the tariff side of the business. Also, with mix, we think about Stuart Weitzman as incremental margin accretion because of the margin levels that they play, as well as other mix in our lead brands driving that up. Ashley Owens: Got it. That is super helpful. Thank you. Operator: Thank you. Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question. Dana Telsey: Hi. Good morning, everyone. I like the term “build-back year” for 2026. And as you think about the build-back year for 2026, on the Brand Portfolio side, how are you thinking about wholesale with Saks—the $0.06 impact I think you may have expected, or up to $0.10 for the year—how are you planning that this year? What are you shipping them or not shipping them? And with the market share gains that you saw in shoe chains at Famous Footwear in the fourth quarter, key drivers of that—new brands being added—how do you think about the addition of new brands and categories that you are adding in them? And then just lastly, the shaping or cadence of the year—anything on margin profile, whether it is lapping of tariffs, that we should expect to see, and does the rising energy prices—how is that an impact? Thank you. Jay Schmidt: Dana, I will start and then we will fill in along the way. So first of all, we are seeing our key points of our business on the Brand Portfolio continue to support our guidance. We said our order book is in line with that guidance right now. Our owned e-commerce trend line right now looks very good for the Brand Portfolio, and we are seeing international up on it as well. That has been quite good. We are seeing those key drivers coming through with our lead brands, so we continue to see that come through. With Stuart, as you have noticed, we feel like all of the work that was done in the back half of ’26 leads us to a place where they can start to build back their business, and that really goes straight across all of their channels and geography and everywhere. While we are not guiding specifically by brand, we will see good momentum coming through there, which is great. And then finally, on the Saks piece—right now, we do not have anything new to report on that, but we are prepared to go forward at this moment with the wholesale book that we have, and actually, that does support at least our guide for the quarter. We will tell you more when we have more to say, but otherwise, it looks pretty good. And then you also mentioned about Famous Footwear—what drove that market share gain back—and that was, as you had suggested, the lead brands coming through in Famous Footwear was actually the big driver for that. And as we had said earlier, Famous had a nice lift in holiday, really going after that more gift-giving piece. We felt very good about it and saw the brands that I did mention. We had good momentum from Skechers, Birkenstock, Sorel, Timberland, others. And, obviously, the big Jordan piece proved very powerful during holiday, so that was a big win for us too. Again, it just supports our guidance going forward and the momentum we are seeing. Dan Carpel: And, Dana, you had asked a little bit about the spread of margin during the quarter. Just to reinforce the guidance, we said consolidated in the first quarter was going to go up 120 to 140, and then for the full year, 140 to 180. And so you will see results throughout each of those quarters as we look at the year. Liz Dunn: And then, Dana, one more thing on market share. You mentioned new brands. On the Brand Portfolio side, while Stuart Weitzman did add to our market share, we gained market share in women’s fashion footwear on an organic basis as well. Operator: Thank you. Our next question comes from the line of Mitch Kummetz with Seaport Research. Please proceed with your question. Mitch Kummetz: Yes. Thanks for taking my questions. Jay, in your prepared remarks, you talked a little bit about quarter-to-date performance—Brand Portfolio, e-com, and then also at Famous. And I was wondering if there is any way to parse out the impacts that you might be seeing from tax refunds versus, more recently, higher gas prices and maybe just the overall impact from the war in Iran? And I do have a couple of follow-ups. Jay Schmidt: Yes. So, just to characterize right now, we did see on our Brand Portfolio strong owned e-commerce comp performance coming through, which supports our guide. The good news is that from all the key brands we have seen it now on all four of our lead brands—Sam Edelman, Allen Edmonds, Naturalizer, and Vionic. We are also starting to see a nice turnaround at Stuart Weitzman on their e-commerce business where that was not something that we saw in the back half of this year. So it looks like a lot of the team’s work there coming through is working. As it goes over to the Famous side—so kind of a little different story—we had a good February, I would say, and that was through some good performance on some of the big brands there that continued, Skechers being one of them, where we did have a brand takeover there, and that worked very well. We also did sell through some clearance there too, which did support the business there. As we walk into March, it is a little bit of a mixed story right now, and we are monitoring it day by day, week by week. In addition to the geopolitical situation, there was some weather impact, and we do have an Easter shift timing. So right now, as I said, what we are looking at supports our current guide, and we will report more when we know it, but we are managing it week to week. Mitch Kummetz: And then between Famous and Brand Portfolio, could you talk a little bit about what you are seeing from a category performance quarter-to-date? And I am also specifically curious what you are seeing in terms of sandals as we are entering the spring/summer season, and any kind of standout drivers there as you see that playing out over the balance of the season? And I have one last question. Jay Schmidt: Yes. So, on the Famous side, we continue to see a very strong Birkenstock business, and you know it well. It is clogs and sandals—that is where we are—and we are seeing strength in both of them every single week. We are also seeing some good selling on sandals from Crocs, which I think is very good and will overall support that business trend as we look forward. On the Brand Portfolio, we are seeing some good sandal business, particularly in the thong category coming through, on kitten heels, and that has been a key winner. But we are seeing it a little bit more on the fashion side. And even in Vionic, we are seeing very nice sandal strength as of very recently, now that all the inventory is here, with both casual thongs, and we are also seeing casual footbeds work well in that business. It certainly was not supported by weather, Mitch, so we really think it is driven by newness right now, and that does at least give us optimism as we look forward. Mitch Kummetz: And then my last question, just on Stuart Weitzman. You talked about being breakeven for the year. Can you talk a little bit about how you see that playing out by quarter, especially in the first quarter, and what is embedded in the guidance in terms of Stuart? Jay Schmidt: Yes. I will start, and then Dan can cut in. We have completed most of the cost-savings work. Getting it onto our systems was a big piece of that—moving the head TSA, getting it into our distribution center. As we think about Stuart Weitzman SG&A, we have some big buckets, I would say—distribution and logistics being one, facilities being one. We did complete, in January, a restructuring, so that was a big piece of it. And then, moving to the gross margin side of things, we moved through a significant amount of aged inventory. We talked about that last quarter—it was $25 million in inventory. You can see it on the balance sheet that that is where we are. So that positions us in a much stronger place. If you think about Stuart Weitzman’s business, it is a seasonal business, and so there will be some movement there. But in total, we feel very confident that we have positioned the business to return to breakeven in 2026. Longer term, as we have said, we do not think there is anything we see with the business that would not suggest it can operate at the profit margins we are quite comfortable earning for the rest of our Brand Portfolio. Dan, anything to add? Dan Carpel: No. I think, to your point, if you look at our Q3 and Q4, we lay out the with and without with clarity there, and you can see the impact of Stuart Weitzman on that business. And to Jay’s point, a lot of these significant changes have been made. We are on our systems now and, structurally, we are there. So we are certainly not seeing those types of results that we saw in Q3 and Q4 as we walk back to breakeven in the full year ’26. Mitch Kummetz: Alright. Thank you. Operator: Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I will turn the floor back to Mr. Schmidt for any final comments. Jay Schmidt: Thank you for your continued interest in Caleres, Inc. Before we close, I would like to recognize the dedication of our teams across the company and across the globe who have shown tremendous determination and resilience this year. We are encouraged by the early momentum building in our business through all of our strategic initiatives, and we look forward to an improved, more profitable 2026. Thank you. Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, everyone, and welcome to the Movado Group, Inc. Fourth Quarter 2026 Earnings Conference Call. As a reminder, today's call is being recorded and may not be reproduced in full or in part without permission from the company. At this time, I would like to turn the conference over to Allison C. Malkin of ICR. Please go ahead. Allison C. Malkin: Thank you. Good morning, everyone. With me on the call today are Efraim Grinberg, Chairman and Chief Executive Officer, and Sallie A. DeMarsilis, Executive Vice President and Chief Financial Officer. Before we get started, I would like to remind you of the company's safe harbor language I am sure you are all familiar with. The statements contained in this conference call which are not historical facts may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties, all of which are described in the company's filings with the SEC, which includes today's press release. If any non-GAAP financial measure is used on this call, a presentation of the most directly comparable GAAP financial measure to this non-GAAP financial measure will be provided as supplemental financial information in our press release. I will now turn the call over to Efraim Grinberg, Chairman and Chief Executive Officer of Movado Group, Inc. Efraim Grinberg: Thank you, Allison. Good morning, everyone, and welcome to Movado Group, Inc.'s fourth quarter and full year conference call. Joining me today is Sallie A. DeMarsilis, our Executive Vice President and CFO. After our prepared remarks, we will be glad to take your questions. After a challenging fiscal 2025, we are pleased to return to growth in fiscal 2026. Revenue increased 2.7% to $171,300,000 and adjusted operating income grew 28.7% to $34,800,000, reflecting strong execution across our strategic priorities. These results exceeded our expectations and improved as the year progressed, with fourth quarter sales up 5.6% to $191,600,000, led by our U.S. wholesale and retail business. Adjusted operating income grew by 6.2% for the quarter to $14,400,000. We also generated strong operating cash flow of $57,900,000 and ended the year with $230,000,000 in cash and no debt, which gives us significant flexibility as we move forward. These results were helped by a strong euro, offset somewhat by the impacts of a very strong Swiss franc. During the year, we advanced our strategic priorities, which focused on four key areas. Let me discuss highlights of each. First, putting the customer at the center of everything we do. This focus continues to guide how we operate across all channels. Digitally, we strengthened our engagement with consumers, and we are seeing the benefits of a more connected omnichannel approach. From a category standpoint, we saw continued strength in both the fashion watch and accessible luxury segment in the U.S. Importantly, we are seeing increased participation from younger consumers, along with a strong return of women into the category driven by smaller case sizes and jewelry-inspired designs and fresh styling. In our company stores, we delivered a strong holiday season with sales up 9% for the fourth quarter driven by higher average selling prices, improved merchandising, and better in-store execution. Our teams have done an excellent job elevating the consumer experience at the point of sale. Second, delivering consumer- and brand-focused innovation. Innovation was a major driver of our momentum, particularly in the fourth quarter. Across our portfolio, traditional watches are resonating strongly, especially with younger consumers who are responding to new shapes, sizes, and design expressions. Within the Movado brand, we had an excellent quarter. Wholesale sales grew over 25%, and our e-commerce business increased 18%, reflecting the success of our brand refresh initiatives we began implementing about eighteen months ago. From a product standpoint, we had a number of exciting highlights, including continued strength in our mini bangle collection, which is performing very well with women across multiple shapes; strong demand for our Movado 1917 Heritage Collection, which is resonating with both men and women; ongoing growth in higher price point automatic watches, led by the Museum Classic Automatic; and encouraging traction in jewelry, particularly with our Ono collection. Looking ahead, we are excited about the pipeline of innovation we will bring to consumers. We will be introducing Valeura, a beautiful new women's Museum watch; expanding our Movado Bold offering with Verso S; and launching a new heritage model inspired by the original Movado Kingmatic. We are also expanding our jewelry collections, including our new Curve line for women. Our licensed brands also delivered strong innovation and growth. Coach performed very well, driven by Gen Z engagement and the continued success of the Sami family, along with Caddie and Reese. We are clearly capturing the momentum of the parent brand with Gen Z consumers. Hugo Boss saw strong momentum with Grand Prix and growth in women's with the May collection. Lacoste continued to perform, led by the LC33 and strength in men's jewelry, particularly the Metropole bracelet. In Tommy Hilfiger, we are seeing a strong response to new shapes, smaller case sizes, and trend-right design. In Tommy Hilfiger men's, we have also seen success with Oxford, inspired by the traditional Oxford shirt. In Calvin Klein, we saw a strong reaction to our innovation in watches with the introduction of our new Pulse Mini, our unique circle-in-the-square watch design. We also received a favorable response to our CK Motion for him and believe that men's represents a significant opportunity going forward. Finally, Olivia Burton continued its growth in both the U.K. and the U.S., driven by Mini Grove and Grosvenor, supported by our Mini to the Max campaign. Overall, we are very encouraged by the return of consumers to the fashion watch category, particularly women, and we believe we are well positioned to capitalize on that trend. This brings us to our third strategic priority: connecting with consumers through compelling storytelling across digital and communication platforms. This is an area where we have made meaningful progress. During the holiday season, our Movado campaign featuring brand ambassadors including Ludacris, Christian McCaffrey, Julianne Moore, Jessica Alba, and Tyrese Halliburton performed very well. What made it effective was the authenticity of the storytelling, with each ambassador sharing how they personally connect with our brand. We amplified this across digital channels, social platforms, and through influencers and content creators, allowing us to reach consumers in more relevant and engaging ways. Looking ahead, storytelling will be even more important as we celebrate Movado's 145th anniversary. We are developing a series of campaigns that highlight our Swiss heritage, craftsmanship, and the growing interest in our vintage timepieces, which we believe will further strengthen our emotional connection with consumers. As a company, we will also be amplifying our investments by expanding our consumer insights capabilities, further reinforcing the importance of placing the consumer at the center of each of our brands' universe. And finally, driving profitability and strengthening our gross margins. This remains a key focus for us. Despite external pressures, including tariffs, we were able to maintain stable gross margins while significantly increasing operating income. This reflects the disciplined execution of our teams across pricing, sourcing, product mix, and cost management. As we move forward, our initiatives are clearly focused on improving profitability. This includes continuing to shift our mix towards higher-margin products; driving more full-price sell-through through stronger brand positioning while reducing promotional activity; and improving efficiency across our supply chain and operations. We see a clear path to margin expansion over time as we continue to execute against these priorities. Overall, we are very pleased with the momentum in the business as well as the strong execution and collaboration our teams have demonstrated in advancing our strategic initiatives. The investments we have made over the past several years are delivering results, and we believe we are well positioned for continued growth. At the same time, we remain mindful of the broader environment. The conflict in the Middle East has introduced additional uncertainty in global markets. We are closely monitoring the situation while supporting our teams and partners in that region. I will now turn the call over to Sallie A. DeMarsilis to review our financial results in more detail. Then we will be happy to take your questions. Sallie A. DeMarsilis: Thank you, Efraim, and good morning. For today's call, I will review our financial results for the fourth quarter and fiscal year. My comments today will focus on adjusted results. Please refer to the description of the special items included in our results for the fourth quarter and full year of fiscal 2026 in our press release issued earlier today, which also includes a table for GAAP and non-GAAP measures. We were very pleased with our overall top-line performance for fiscal 2026, which delivered 2.7% growth over fiscal 2025 and included a year-over-year increase of 5.6% in the fourth quarter. For the fourth quarter of 2026, sales were $191,600,000 as compared to $181,500,000 last year, reflecting growth in our own brands, licensed brands, and in our company stores. In constant dollars, net sales increased 1.8%. By geography, U.S. net sales increased 11.2%. International net sales increased 1% compared to the fourth quarter of last year, with strong performances in certain markets such as Europe and Mexico, offset by a weaker performance in the Middle East, where we are making progress rebuilding this important market. On a constant currency basis, international net sales decreased by 5.9%. We held gross margin nearly flat at 54.1% of sales as compared to 54.2% in the fourth quarter of last year. We absorbed increased U.S. tariffs with favorable channel and product mix, increased leverage of lower fixed costs over higher sales, and the favorable impact of foreign currency exchange rates. Operating expenses were $89,300,000 as compared to $84,800,000 for the same period of last year. The increase was driven by higher performance-based compensation, partially offset by a planned reduction in marketing expenses. Higher sales and gross margin dollars more than offset the increase in operating expenses, resulting in operating income increasing $900,000 to $14,400,000 compared to $13,500,000 in 2025. We recorded approximately $600,000 of other non-operating income in 2026 as compared to $1,400,000 during the same period of last year. Income tax expense was $17,000,000 in 2026 as compared to $3,100,000 in 2025. Net income in the fourth quarter was $13,000,000, or $0.57 per diluted share, as compared to $11,500,000, or $0.51 per diluted share, in the year-ago period. Now turning to our fiscal year results. Sales were $671,300,000, an increase of 2.7% from fiscal 2025. In constant dollars, the increase in net sales was 1%. U.S. net sales increased by 4.3%. International sales increased 1.6% but decreased 1.5% on a constant currency basis. Gross profit was $363,600,000, or 54.2% of sales, as compared to $353,100,000, or 54% of sales, last year. The increase in gross margin rate was due to favorable channel and product mix and increased leverage of lower fixed costs over higher sales, partially offset by increased U.S. tariffs and the unfavorable impact of foreign currency exchange rates. Operating income was $34,800,000, or 5.2% of sales, compared to operating income of $27,100,000, or 4.1% of sales, in fiscal 2025. We recorded approximately $4,500,000 of other non-operating income in fiscal 2026, which was primarily comprised of interest earned on our global cash position, as compared to $6,600,000 during the same period of last year. Net income was $30,400,000, or $1.34 per diluted share, as compared to net income of $25,400,000, or $1.12 per diluted share, in the year-ago period. Now turning to our balance sheet. Cash at the end of the fiscal year was $230,500,000, and we had no outstanding debt. Accounts receivable were $102,000,000 as compared to $93,400,000 at the same period of last year. This increase was driven by timing and the mix of our business. Inventory at the end of the fiscal year, which included $3,100,000 of IEEPA reciprocal tariff, was $158,300,000 as compared to $156,700,000 at the same period of last year. Capital expenditures were $4,500,000, and depreciation and amortization expense was $9,400,000. As it relates to share repurchases, during fiscal 2026, we repurchased approximately 208,000 shares. As of 01/31/2026, we had $46,100,000 remaining under our 12/05/2004 authorized repurchase program. Subject to prevailing market conditions and the business environment, we plan to utilize our share repurchase plan to offset dilution in fiscal 2027. Given the current economic and geopolitical uncertainty, including the unpredictable impact of the current Middle East conflict and ongoing tariff developments, the company has elected to not provide a fiscal 2027 outlook at this time. We will now open for questions. Thank you. Operator: We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before speaking. One moment, please, while we poll for questions. Our first question comes from the line of Owen Rickert with Northland Capital. Please proceed with your question. Owen Rickert: Hi, Efraim. Hi, Sallie. Thanks for taking my questions here. First for me, Movado.com grew 18% in 4Q 2026. What is driving that strong performance? Is it traffic, conversion, higher ASPs, or is it a combination of all of that? And maybe how are you thinking about the D2C mix of the business longer term? Efraim Grinberg: Thank you for that question, Owen, and good to talk to you. We see a number of things driving it, and I think you actually touched on all of them. It is a higher level of engagement from consumers and the connection that Movado is making with new innovation and shapes and sizes across our product segments, also driving higher price points with the growth of automatic watches, particularly for men. We are really encouraged. I think D2C will continue to play a significant role in our business, but so will our wholesale business. We saw growth in most of our biggest customers, particularly during the fourth quarter, and a lot of those trends continued into the first quarter. It is exciting to see the engagement across the Movado brand. Owen Rickert: Got it. And secondly for me, U.S. net sales grew about 11.2% in the quarter. Can you break down how much of that growth was volume-driven versus price-driven, and how you expect that mix to evolve throughout fiscal year 2027? Efraim Grinberg: I think it is mostly volume-driven. We passed some very minimal price increases last year, mostly to try to offset tariffs somewhat. We have passed a second price increase in the first half of this year across multiple brands. We are really looking at the consumer returning to the fashion watch category as well as the accessible luxury category, particularly in the United States. As I highlighted in my comments, we see the strength of women in the category, and they are the main shoppers in the marketplace. It is great to have them back after a long period of time where there was probably less interest in watches from women, but to see younger women lead that effort in brands like Coach and Movado is really exciting. Owen Rickert: Great. And then you called out tariffs as a partial offset to gross margins during the quarter and the year. Can you quantify the total tariff drag on gross margin in basis points for fiscal year 2026? And then, if possible, what is embedded in your internal planning assumptions for fiscal year 2027? Sallie A. DeMarsilis: Sure, Owen. I will take that and hopefully get you all the information you are looking for. The IEEPA tariffs this past fiscal year hurt us in our cost of goods sold by about $10,000,000. In basis points for the year, it was 150 basis points. It was a little more than $3,000,000 a quarter toward second, third, and fourth quarter of this year, just based on the timing of it. So the fourth quarter was impacted by about 180 basis points in gross margin. That recaps what happened this past fiscal year. Going forward, we have some information now and are using our current tariff information in our current plans for the next fiscal year, which is closer to about a 10% tariff on top of what is a normal duty. Efraim Grinberg: Correct. Sallie A. DeMarsilis: Hopefully, that answers what you are looking for. Owen Rickert: Absolutely. Thank you. And then lastly for me, you repurchased roughly 208,000 shares in fiscal 2026. Under that current program and given the approximately $46 million remaining and strong cash balance, what would accelerate the pace of buyback activity? Efraim Grinberg: It is a combination of factors. We are always very prudent with our cash balances and want to make sure that the dividend is solid, and it has been and continues to be important for us, and I believe important for our shareholders. Then we try to offset dilution with our share repurchases. I would expect that to occur as we move forward, especially with our significant cash balances. Owen Rickert: Great. Thanks for taking my questions. Efraim Grinberg: Thanks, Owen. Thank you, Owen. Operator: Our next question comes from the line of Hamed Khorsand with BWS Financial. Please proceed with your question. Hamed Khorsand: Good morning. I will start with a follow-up on the tariffs. I know last year you had been highlighting maybe potentially saving because of the revision to the Swiss tariff. Do you think that still exists now, and how much of that would be able to help in this fiscal year? Efraim Grinberg: Good to talk to you today, Hamed. At one point, for about a six-week to two-month period, Swiss tariffs went to 39%. We brought in very little during that period of time with the idea that 39% tariffs would not be long lasting. I do not think we will see a major benefit this year because we did not bring in a lot of inventory at those types of tariff, only on things that we needed to have in a timely manner. If anything, it might have caused our inventories to be a little lower at the end of the year and as we entered this year, particularly in the Movado brand, which is the one that was most impacted by the 39% tariff rates. The new tariff rate the Swiss and the U.S. agreed to was a 15% tariff, but right now, it is a 10% plus about 6% to 8% duty rate on top of that. We do not really know which one will be the permanent tariff rate going forward. As we highlighted in the comments, there is still a lot of volatility around tariffs because there is a statute being used to impose the current 10% rate that is above the current duty rates, whereas the 15% was an all-inclusive rate when the Swiss and the United States negotiated that. Hamed Khorsand: Given the high growth rate out of your wholesale segment, is that because you think your wholesalers and retailers were underinvested in inventory and they are catching up, or was that driven by demand? Efraim Grinberg: It was really driven by demand. It was driven by sell-through, and we still have retailers right now chasing inventory, and that is one of the things that we are focused on because sales were better in Q4 in Movado, particularly in the wholesale channel. We are focused on rebuilding our inventory and accelerating the delivery of those products on our best-selling products in Movado. Hamed Khorsand: And my last question is, given the increase in number of units sold and how much you should be producing, will there be some sort of operational efficiency here? Efraim Grinberg: Ultimately, as volume increases—and we did benefit, I believe, this year a little bit from leveraging our supply chain infrastructure over greater volume—as volume increases, it should help to leverage our gross margin and cost of goods sold. Hamed Khorsand: Are you assuming anything in 2027 right now? Efraim Grinberg: Sallie, I will turn that over to you. Sallie A. DeMarsilis: As Efraim mentioned in his comments, we are focused on improving our profitability, and as part of that, we are looking at the efficiencies that you were just talking about through supply chain or other operations. We do not provide forward-looking outlook, but it is something our teams are focused on, and what you just mentioned is very much a part of it. As demand grows, you can get leverage on your purchases and so forth with increased units. Hamed Khorsand: Okay. Great. Thank you. Operator: We have no further questions at this time. Mr. Grinberg, I would like to turn the floor back to you for closing comments. Efraim Grinberg: Thank you. I would like to thank all of you for joining us today. We are really pleased with how our year turned out and where our brands stand right now. We hope that this conflict is short-lived and that business can return to a somewhat normal basis on a global basis. Thank you again for participating today. Thank you. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.