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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: 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: 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 afternoon, and welcome to the Eton Pharmaceuticals, Inc. fourth quarter 2025 financial results conference call. At this time, participants are in a listen-only mode. Following the formal remarks, we will open the call for your questions. Please be advised that this call is being recorded at the company’s request. I will now turn the call over to David Krempa, Chief Business Officer at Eton Pharmaceuticals, Inc. Please proceed. David Krempa: Thank you, Operator. Good afternoon, everyone, and welcome to Eton Pharmaceuticals, Inc.’s fourth quarter 2025 conference call. This afternoon, we issued a press release that outlines the topics we plan to discuss on today’s call. The release is available on our website, etonpharma.com. Joining me on our call today, we have Sean Brynjelsen, our CEO, James Gruber, our CFO, and Ipek Erwan, our Chief Commercial Officer. In addition to taking live questions on today’s call, we will also be answering questions that are emailed to us. Investors can send their questions to investorrelations@etonpharma.com. Before we begin, I would like to remind everyone that remarks made during this call may contain forward-looking statements and involve risks and uncertainties that could cause actual results to differ materially from those contained in these forward-looking statements. Please see the forward-looking statements disclaimer in our earnings release and the risk factors in the company’s filings with the SEC. I will now turn the call over to our CEO, Sean Brynjelsen. Sean E. Brynjelsen: Thank you, David. Good afternoon, everyone, and thank you for joining us today. As you have seen, it has been a very active time at Eton. A number of major developments in recent weeks. We have some exciting topics to discuss today. During the call, we will review fourth quarter results, provide additional color on the Hemangiol acquisition, and an update on our recent FDA approval and commercial launch of Desmota. We will also cover growth trends in our on-market products and provide an update on clinical development programs. And finally, we will provide 2026 financial guidance and unveil our new long-term goals for the company. Let me start with our financial results. It was another strong quarter for Eton, capping off an outstanding year. 2025 was truly another transformational year for our company as we successfully launched three new products, Incrolex, Galzyn, and Kinduvi. These were not minor products. They represent important cornerstones of our long-term growth plan. These new products helped us more than double our revenue in 2025 compared to 2024 and set us up for major growth in 2026 and beyond. Our fourth quarter product revenue was $21.3 million, an increase of 83% year over year, driven by continuing strong performance from Alkindi Sprinkle and the addition of revenue from Incralex, Galzyn, Kandivy, and Kandivy. Galzen and Incrolex have continued to be great success stories for Eton. Both products were relaunched by Eton in early 2025 and contributed revenue well beyond our initial expectations for the year. A key goal for us is continuing to drive strong revenue growth while maintaining our focus on profitability through disciplined cost management and expanding margins, and I am pleased to report that we made meaningful progress on that in the fourth quarter, as our adjusted EBITDA margin was 29%, a significant improvement from 18% in the prior-year period. We also reported GAAP net income of $1.5 million and non-GAAP net income of $5.4 million. Looking ahead, we expect our profit margin profile to continue improving as revenue scales across our portfolio, and we will further discuss our profitability outlook later in the call when we communicate new long-term goals. Now let me turn to one of our most important recent developments, the approval and launch of our oral liquid formulation of desmopressin, Desmota, which received FDA approval in February for the treatment of central diabetes insipidus. Diabetes insipidus is a serious condition caused by inadequate production of the hormone vasopressin, and treatment with desmopressin is the standard of care. Dosing is patient-specific and must be individualized and fine-tuned over time, but there were historically no products available that could provide accurate low doses of desmopressin. As a result, clinicians and caregivers were forced to use workarounds, including splitting or crushing tablets. As the only FDA-approved liquid oral formulation, Desmota offers patients a treatment option that provides precision, consistency, and convenience, fulfilling a large unmet need frequently expressed to us by pediatric endocrinologists. Leveraging our established team of pediatric endocrinology rare disease specialists, we launched Desmota within two weeks of FDA approval. While we are still in the early phases of launch, I could not be happier with how this Desmota launch is going. I believe this was the most well-prepared we have ever been for a commercial launch. Our entire team was ready to execute on day one, and the initial demand and interest in the product has been incredibly encouraging. Our team has been hard at work promoting the product for two weeks, and we have already seen significant traction. Many institutions that were historically unreceptive to sales rep visits have reached out to us asking for meetings because they are interested in learning about the product. We have already seen a number of patients begin therapy in the first week and a half of launch. Another important aspect of the approval is that Desmota received a clean label with no age restriction. In fact, the FDA’s indication even includes adults. This means that our addressable market will not be solely the 3,000 to 4,000 children in the U.S. We will also be able to meet the therapeutic needs of the 9,000 to 10,000 adults living with central diabetes insipidus. Our historic market assessment and $30 million to $50 million peak sales forecast were based solely on the pediatric market. However, we believe there could be a meaningful incremental opportunity within the adult population for patients who have difficulty swallowing tablets, require precise and titratable dosing, or simply prefer a liquid option. While the percentage of adults needing a liquid or precise dose will likely be smaller, the population is roughly three times as large, so it could be a quite meaningful number of patients. This month, we are launching a pilot initiative where our existing sales team will target high desmopressin-prescribing adult endocrinologists. We will assess the opportunity over the next 90 days, and if we see traction with the adult patient community, we will expand our commercial efforts to fully capture this additional opportunity. Regarding pricing, the dosing varies by patient, but we believe we will net an average of approximately $80,000 per patient per year. As I said, it is still too early in the launch to say definitively, but all initial signs are pointing to a successful launch for Desmota. For now, we are confirming our guidance of $30 million to $50 million in potential peak sales. We should know more in the coming quarters and we will update our outlook accordingly. Desmota also benefits from strong intellectual property protection via multiple patents extending to 2044, which we believe positions the product as a critical long-term value driver for Eton. Turning now to our other pediatric endocrinology assets. When we acquired Incrolex in December 2024, the product only had 67 patients on therapy. We saw a tremendous opportunity to increase awareness and education of severe primary insulin-like growth one deficiency, otherwise known as SPIGFD. In conjunction with our relaunch of Incralex in January 2025, we kicked off an extensive disease and therapy education campaign complementing physician engagement efforts of our seasoned pediatric endocrinology sales team. This included targeted outreach to health care providers, strong conference engagement in the endocrinology space, peer-to-peer presentations, and strategic collaboration with patients and patient advocacy groups. Incrolex is approved for pediatric patients aged two and up and is highly effective at increasing height during critical development years. Because earlier diagnosis leads to better outcomes, increasing awareness and improving time to diagnosis are central to our strategy, ensuring that every patient achieves their full therapeutic potential. We are already seeing encouraging progress. Since acquiring the product, we have meaningfully reduced the average age at which patients begin therapy and continue to see steady growth in the treated population. Based on ongoing discussions with physicians in the community, we remain confident that a significant opportunity for growth remains within the existing indication. We now have over 100 patients on treatment, and our goal is to reach 120 patients by year end. So far this year, we have seen the number of patient age-outs and closures decline significantly from the level we saw earlier in 2025 prior to our last earnings call. Long-term, we see a big opportunity in harmonizing the patient definition between the U.S. and the EU. In the U.S., a patient meets the label criteria if their IGF-1 levels are more than three standard deviations below the median. In Europe, where Incrolex is also available, the definition is two standard deviations below the median. And based on the European patient registry data collected over the past 15 years, we believe that Incrolex is a safe and effective treatment for patients with IGF-1 levels between minus two and minus three standard deviations. We held a meeting with the FDA in December to discuss label harmonization, which we believe was positive. As a result, we submitted the final proposed study protocol to the FDA in February, and we expect to receive their feedback—either clearance to proceed or comments—later this month. Once the FDA signs off, we will initiate the study with our CRO, and we expect to see the first patient dosed in the third quarter of this year. Our proposed study is an open-label study of approximately 30 patients tracked for five years or until they reach full adult height, with a primary endpoint of change in average annual height velocity at month twelve compared to pretreatment height velocity. Given that it is an open-label study, if the data is as compelling and clear as we expect it to be, we believe there may be an opportunity to approach the FDA with interim data after a couple of years. The study is expected to cost approximately $1 million per year. If we are successful with this label harmonization, we believe that the Incrolex market opportunity could increase fivefold in the United States. Also in our pediatric endocrinology portfolio, we continue to see strong growth from our adrenal insufficiency franchise Alkindi Sprinkle and Kindivy. 2025 was Alkindi’s fifth full calendar year on the market, and its strongest year yet in terms of number of patients on therapy and number of new patient referrals. This momentum reflects the continued impact of our focused efforts to expand awareness and adoption of pediatric-appropriate hydrocortisone dosing and to reduce friction for both physicians and caregivers, making it easier for providers to diagnose, prescribe, and initiate therapy for children with adrenal insufficiency. Kin Divvy was developed to address the needs of patients that had an aversion to the texture of the Alkindi granules or who preferred a liquid option, and it is the first and only FDA-approved oral solution of hydrocortisone. Similar to Desmota, the liquid dosage form allows for mixing and accurate dosing tailored to patient needs and does not require refrigeration, mixing, or shaking. Together, Alkindi and Candivi allow us to offer physicians multiple pediatric-appropriate hydrocortisone options, enabling them to choose the formulation that best fits the needs of each child and caregiver. For our combined franchise, our target market is the estimated 5,000 children under the age of eight in the U.S. with adrenal insufficiency. We believe we have captured around 12% of the market to date, and there is still a long runway ahead of us. Eton remains confident that the franchise can achieve peak annual sales of at least $50 million, which requires only around 20% market share, and we ultimately believe that Eton can capture even greater market share if we are successful in expanding the Candivis label. Candivis is currently approved for patients five and over, but we believe the largest unmet need is within children under five. The FDA restricted the age due to limited availability of safety data of the three active ingredients when these ingredients are used in combination. However, we have developed a new formulation which substantially lowers levels of these excipients, and Eton held a meeting with the FDA in the fourth quarter where the agency indicated they were receptive to a label expansion. The agency requested that we run a bioequivalency study and then submit our supplement to the existing NDA. Last week, we dosed the first patient in that bio study and now plan to submit the supplement as soon as the final study is available, which we currently expect to be in the third quarter. The FDA indicated the submission would receive a 10-month review, allowing for a potential launch by mid-2027. Next, I would like to discuss our recent acquisition, which we are very excited about. Earlier this month, we announced the acquisition of Hemangiol, the only FDA-approved treatment for infantile hemangiomas that require systemic therapy. Infantile hemangiomas are noncancerous vascular tumors that typically appear shortly after birth and, in severe cases, can lead to serious complications including loss of vision, trouble breathing, or permanent disfigurement. An estimated 5,000 to 10,000 infants are treated with Hemangiol annually in the United States. We have been clear with our acquisition strategy. Eton seeks opportunities where we can meaningfully add value to a product. We are unlikely to earn remarkable returns and create value for shareholders if we are purchasing assets only to maintain the status quo of their current level of revenue and earnings. We look for opportunities where a rare disease company-wide expertise in commercial infrastructure can unlock significant growth and profitability. Similar to how we successfully executed on Galzin and Incralex last year, we believe there is a significant opportunity for value creation with Hemangiol. Hemangiol had the product characteristics we looked for. It treats a rare condition with a small prescriber base. It is the only FDA-approved treatment in its class. It has a strong safety and efficacy profile, and there is a meaningful opportunity to improve operational efficiency and margin performance. Our team is hard at work preparing for our May 1 relaunch of the product. One of the key opportunities we see is optimizing the product’s distribution model with our dedicated rare disease infrastructure and proven go-to-market capabilities. Currently, the product goes through the traditional pharma distribution model, utilizing the large national wholesalers, open pharmacy distribution, and significant payer rebating. While this may make sense for higher-volume products, we believe transitioning to our rare disease-focused distribution model can significantly lower costs, improve the patient and provider experience, and significantly strengthen the long-term economics of the product by reducing gross-to-net deductions. In addition, we will implement our best-in-class Eton Cares patient support program, which we believe will improve the treatment journey for families and expand access to treatment. For instance, we will be offering our standard zero commercial copay for patients, where today most patients are paying $55 a month on their copay. Hemangiol will also establish a third strategic call point for us. The majority of prescribing occurs within pediatric dermatology, but care for these patients can also involve pediatric hematology-oncology who specialize in vascular anomalies. This is a highly concentrated specialty with roughly 400 pediatric dermatologists and a smaller number of specialized pediatric hematology-oncology physicians actively managing these patients. While we look for other bolt-on opportunities within pediatric dermatology, the Hemangiol opportunity is certainly large enough on its own to justify the dedicated commercial effort. In tandem with the transaction, we are hiring seven new commercial employees that were previously working for the seller and fully dedicated to Hemangiol. They will start with Eton on April 1, and we are excited to have them joining our organization. This existing team had done an excellent job growing Hemangiol in recent years, and we believe their current relationships, combined with Eton’s rare disease infrastructure, expertise, and capabilities, will position the product for accelerated momentum following the relaunch in May. We were pleased that because of our strong cash flow generation in 2025, we were able to pay for the $14 million Hemangiol acquisition entirely with cash on hand and avoid any dilution or incremental debt. This will make the transaction even more accretive to our earnings. With our ongoing plans to streamline distribution, shrink the gross-to-net gap, optimize revenue, and expand access, we believe Hemangiol can be one of Eton’s largest products in 2027. Now let me turn to Galazim, which was another very impressive contributor for the year. When we acquired the product, we expected to be able to grow the product over time, but the product has actually performed well ahead of our expectations. When Eton relaunched in March 2025, we made major investments into physician education, patient awareness, and access support, and those investments are clearly paying off. Through Eton Cares, we know that more people than ever are able to access their medication, and we have heard from many patients that were previously forced to take non-FDA-approved zinc supplements because they could not afford their copay obligations. They are very grateful to now be able to receive the FDA-approved treatment. In addition, we have found that many patients and providers were unaware of the availability of Gallicin or were unaware of the advantages of the prescription product. We have also seen renewed interest from patients and physicians. Now that we know that Eton Cares will provide patients with access to medication regardless of potential insurance pushback or lack of insurance, physicians can prescribe the product with confidence and not worry that the patient will call them back in a week to complain about high copays or looking for alternatives. The benefit to physicians is twofold. First, they have increased comfort knowing that the FDA-approved Galzan is manufactured to pharmaceutical standards for quality, potency, and consistency, whereas the over-the-counter products are not. Second, patients taking the prescription product require periodic refills and return visits, so they have much better compliance with follow-up visits and regular lab monitoring and make any needed dose adjustments. Many over-the-counter users end up failing to return for regular visits, contributing to worse patient outcomes. I am pleased to share that last week, we reached 300 active patients on Galcen, a big accomplishment just one year after our launch. We still believe there are at least 800 Wilson disease patients in the U.S. taking zinc therapy and potentially over a thousand, so most of the market still relies on the non-FDA-approved zinc products. We view this as a substantial opportunity for us to potentially more than double our thousand patients in the coming years. Through our deep collaboration in the Wilson disease community on Galzin, we have seen the strong desire for an extended-release version of Galazin and ET700 was developed to address this need. Currently, Galzin must be taken three times per day with patients fasting both before and after each dose. It is an onerous schedule that can often lead to noncompliance, especially with the middle-of-the-day dose. Eton has developed a proprietary, patent-pending extended-release formula. Our clinical batches have been manufactured, and we are ready to initiate a proof-of-concept positron emission tomography, or PET, study to verify that our proprietary delayed-release formulation can effectively block copper absorption. The study should begin in April, and we expect top-line results later this year. If we are successful, we expect to initiate a dose-ranging study and pivotal clinical trial in early 2027. If approved, we are confident that ET700 has the potential for more than $100 million of peak annual sales. We have also made strong progress advancing our internal pipeline, and in fact, 2026 is set to be by far our busiest year ever in terms of clinical studies. Eton has already touched on the anticipated studies for Candivy, Incralex label harmonization, and ET700, and we also plan to run PK studies on AMGLIDIA and ET800 later this year. Our goal is to submit the AMCLIDIA NDA by the end of this year and the ET800 NDA in 2027, so our pipeline for new product launches in the coming years remains very strong. Overall, 2025 was a standout year for Eton, and we have set the stage for an even stronger 2026, which is reflected in our 2026 financial guidance. We expect 2026 revenue to exceed $110 million and to deliver an adjusted EBITDA margin of at least 30%. As we wrap up 2025 and set our plans for 2026, it was a good moment to reflect on how far we have come and where we are headed. A few years ago, I outlined three long-term goals for the company. Goal number one, have 10 commercial products. Goal number two, reach a $100 million revenue run rate. Goal number three, reach a $1 billion market cap. At this time, we had just three products when the goal was announced. We had only $20 million of revenue and a $100 million market cap. While these goals may have seemed miles away from the outside, internally, we had strong conviction in the opportunity ahead of us, and I believed that these goals were much more attainable than the market perceived them to be. I am pleased to share that we have now achieved two of these long-term goals. With the acquisition of Hemangiol, we have reached 10 commercial products, and as you have heard, we are expecting more than $100 million of revenue this year. While there is still work to do on the market cap goal, we are confident that if we continue executing our strategy and delivering consistent, profitable growth that we expect to achieve, the long-term value creation will be reflected in our stock price. I believe it is important to keep pushing the organization forward towards ambitious but achievable long-term goals. As a result, we are setting some new long-term goals today. First, we want to build the largest rare disease portfolio in the United States. Among the dedicated rare disease companies, we are already near the top, and reaching 13 or 14 commercial products will position Eton as having the largest portfolio of any dedicated rare disease company in the United States. We believe that this is very achievable in the coming years through both our internal pipeline and business development activities. Second, we want to exit 2027 at a $200 million revenue run rate. This requires roughly doubling our revenue within the next 24 months, and we see a very realistic path to doing this: continued growth of Alkindi, Incrolex, Galzin, a successful integration and relaunch of Hemangiol, strong launch of Desmota, and the expected launch of Candivy’s expanded label in 2027. Plus, we remain confident that we can close at least one more product acquisition that will provide incremental revenue before 2027. Third, we want to reach a 50% adjusted EBITDA margin in 2028. Profit has always been a central focus of our company. Unlike many of our peers in the industry, we are not pursuing revenue growth at the expense of profitability. We have made continued progress in our profit margins and expect to continue to see improvement as we grow. Our adjusted EBITDA margins first turned positive from product sales in 2024 when we reported an 8% margin; that grew to 20% in 2025, and we expect to be over 30% this year. With continued revenue growth, we expect to see the benefits of operating leverage that can drive us to 50% EBITDA margins in the coming years. With our existing base of commercial and operational infrastructure, as well as our products continuing to grow, an outsized portion of that growth should fall to the bottom line. Our fourth and final goal is to reach $500 million of revenue by 2030. Again, we believe that this is an achievable goal through our three-pillar growth strategy. First, our existing portfolio has strong organic growth prospects. This includes Incrolex, Alkindi, Tendivi, Galvan, Desmoda. All of these products have achieved just a fraction of the market share that we think they can reach in the years ahead. Second, our existing pipeline has several large programs that could add significant revenue by 2030. This includes ET700, which we believe has peak revenue potential well in excess of $100 million annually on its own, plus our Incralex label expansion opportunity, Amglidia, ET800, and other programs in development that we have not yet announced. And finally, we will layer on more business development deals. We believe we have proven our ability to close, integrate, and create significant value through acquisitions, and we expect to sign more deals like Incrolix, Gelatin, and Hemangiol, which will further boost our revenue in the years to come. It is clear that we have come a long way over the last few years, but I truly believe that we are just getting started. We have found a proven winning strategy, assembled the right team, accumulated a diversified portfolio of growing products, and built an attractive pipeline to fuel long-term growth. We are in the best position we have ever been. Thank you for your continued support, and we look forward to keeping you updated on our critical developments in the months and the years ahead. With that, I will hand it over to James, our Chief Financial Officer, to discuss the financials. James R. Gruber: Thank you, Sean. Our fourth quarter revenue increased 83% to $21.3 million, compared to $11.6 million in 2024, and revenue was comprised entirely of product sales in both periods. Revenue growth in the quarter was driven primarily by increased sales of Alkindi Sprinkle, plus the addition of sales from Incralex, Galzan, and Candivy. As we discussed previously, our third quarter revenue included a meaningful contribution from Incralex outside the U.S., tied to the transition of that business to a new licensing partner. Looking strictly at U.S. product sales, our revenue grew sequentially by 8% in the fourth quarter relative to the third quarter. We expect our reported total revenue to resume sequential quarterly growth in 2026 and continue to ramp throughout the year. Cost of sales for the fourth quarter was $8.2 million, compared to $5.2 million in 2024. Adjusted gross profit, which adjusts for the impact of acquired inventory step-up adjustments and intangible amortization, was $15.5 million in 2025, or 73%, compared to adjusted gross profit of $6.8 million and 59% in the prior-year period. The margin improvement was driven by favorable product mix, as well as manufacturing cost efficiencies as the products grow. Hemangiol and Desmota are both expected to have margin profiles well above our company average, so they should be positive contributors to future gross margins. We may still see a slightly lower adjusted gross margin in early 2026 due to margin-dilutive orders of Incralex outside the U.S. as our licensing partner ramps up their distribution efforts in more countries. But on a full-year basis, we expect adjusted gross margin to be comfortably above 70%, and this margin is expected to continue to ramp and reach between 75% and 80% in the coming years. R&D expenses for the quarter were $1.8 million, an increase of $2.7 million compared to negative $0.9 million in the prior-year period, due primarily to increased expenses associated with our development activities. In addition, during 2024, Eton’s ET400 product was granted orphan drug designation by the FDA, which resulted in Eton receiving a $2.0 million refund of the NDA filing fee that was paid and expensed a prior quarter. R&D expense for 2026 depends on the timing and final protocol of the numerous studies that we have planned for this year, and we believe it will likely increase from the $7.8 million in 2025 but will remain below $10.0 million for 2026. General and administrative expenses for the quarter were $8.9 million, compared with $6.7 million in the prior-year period, primarily due to increased promotional and launch-related investments associated with the expansion of our product portfolio, an increase in compensation and benefit expenses due to increased general and administrative headcount, and an increase in FDA program fees. On an adjusted basis, which removes the impact of share-based compensation, transaction-related costs, and other one-time expenses, G&A expense was $7.8 million, compared to $5.8 million in the prior-year period. We have talked extensively about the one-time increase of additional investments made in 2025 to support our long-term growth, driving increased spending in SG&A. However, we are pleased that the increased G&A investment was substantially less than our growth in revenue. One of the factors driving increased G&A spend is the FDA’s annual program fees. For all NDA products, the FDA charges a program fee each year. The FDA grants an exemption for products that have orphan designations if the parent company has gross sales of less than $50 million. Eton has previously received these exemptions and thus avoided the fees. However, starting with the 10/01/2025 annual program fees, Eton no longer qualified for an exemption. For the FDA’s fiscal year 2026, the annual program fee is $442,000 per strength for NDA products. As of October 2025, when the annual fee was assessed, Eton had eight unique strengths, for a total annual fee of $3.5 million. The annual fee is prepaid on October 1, and for accounting purposes, the expense is amortized throughout the year. As a result, $0.9 million was recorded as an SG&A expense in Q4 2025. These program fees are estimated to drive an incremental $2.8 million increase in SG&A spend for 2026 over 2025. Regarding overall SG&A spending for 2026, we have two main growth drivers: FDA program fees and Hemangiol. The FDA program fees are estimated to add an incremental $2.8 million expense over 2025, and the Hemangiol acquisition is expected to add $3.5 million in annualized SG&A spend, and about $2.5 million in the partial year 2026. Separately from those two one-time step-ups, we believe that our base SG&A spending would have increased by less than 10% in 2026. Adjusted EBITDA for 2025 was $6.2 million, 29% of revenue, compared to $2.1 million, or 18% of revenue, in 2024. Again, adjusted EBITDA will likely see large fluctuations quarter to quarter depending on the timing of inconsistent R&D expenses and ex-U.S. Incralex orders, but we expect the full-year adjusted EBITDA margin to be above 30%. Total company GAAP net income was $1.5 million for the quarter, compared to a net loss of $0.6 million in the prior-year period. Net income per basic and diluted share during the quarter was $0.06 and $0.05, respectively, compared to a net loss per basic and diluted share of $0.02 in the prior-year period. On a non-GAAP basis, we reported net income of $5.4 million for 2025, compared to $0.7 million in the prior-year period, and diluted earnings per share of $0.19 for 2025, compared to $0.02 per share in the prior-year period. Eton finished the fourth quarter with $25.9 million of cash on hand. We had an operating cash outflow of $11.6 million in 2025, compared to an operating cash inflow of $12.0 million in the previous quarter. The fourth quarter included $12.4 million of Medicaid rebate payments as multiple quarters’ worth of Incralex rebates were paid in Q4, $3.5 million of the aforementioned FDA program fees, and $1.4 million of inventory payments associated with the one-time transition of ex-U.S. Incralex distribution in Europe. Looking forward, we expect to generate significant operating cash flow throughout 2026 and beyond. This concludes our remarks on fourth quarter results. We will now open for questions. I will turn it back over to the Operator for Q&A. Operator: We will now open for questions. To ask a question, please press star-1-1 on your telephone. To remove yourself from the queue, you may press star-1-1 again. Our first question comes from the line of Chase Knickerbocker of Craig-Hallum. Your line is open, Chase. Chase Richard Knickerbocker: Good afternoon. Congrats on all the progress here. A lot to get to. But maybe just first on Hemangiol. You mentioned that that could be one of your largest products in 2027. That implies quite a lot of growth from kind of the roughly $12 million in 2025 sales. Can you walk us through your assumptions on how the product gets there? What do you think from a volume perspective? And then what does that assume as far as any actions on price or gross-to-net improvements? Thanks. Sean E. Brynjelsen: Hi, Chase. This is Sean. Thanks for the question. We believe we will increase the number of patients on product, partly that zero copay was preventing a lot of patients from using the product. It previously had a higher copay amount and went to other alternatives. So we think that is part of it that will certainly drive more patient adoption. We will be raising awareness, working with the advocacy groups, and certainly detailing the product at a much more aggressive level. Would you want to use that word? But to the task, we want to be able to reach out, make sure that all the patients that can use the product will get the product. And in terms of the pricing, we have not made any final decisions on that. We will launch it on May 1, and we will see where we end up on that. But our philosophy has always been to be at the lower end of rare disease pricing, and so as a general rule, that is our approach. And it is largely based upon how many patients are out there and making sure that the pricing is competitive with the rare disease products out. Chase Richard Knickerbocker: Got it. And maybe just on Desmota, on how you see the pace to peak. The value proposition is pretty similar to the idea behind Kindivy. You obviously know all these physicians already, selling to multiple assets. How do you think about the time to peak sales, as far as being potentially quicker here because of those dynamics? Sean E. Brynjelsen: Well, I do not know if I could comment too much on the time to peak sales, but I can tell you the launch has gone well. We are very pleased. We are getting scripts continuously. Doctors are very excited about the product. I will say I believe the launch to peak sales will be far quicker than what we had in Alkindi. This is a very specific unmet need. Obviously, Alkindi was an unmet need in a bit of a different way. But unlike Alkindi, there were not a lot of compounders out there compounding desmopressin, so doctors are thrilled to have the product. We know that the uptake has been right according to plan, if not better. So I would say that it will be faster. We guided to that $30 million to $50 million. Million—you know, I am hoping we are well on our way there in, you know, six months or so. Chase Richard Knickerbocker: Got it. And maybe just last kind of two-parter here. Maybe just one for James on how you see cash flow conversion from EBITDA in 2026. And then, Sean, just lastly, on that $200 million run rate exiting 2027, could you delineate between what might come through BD and how you see the existing portfolio today performing to get to that run rate at the end of 2027? Thanks for taking the question. Sean E. Brynjelsen: Yeah, sure. James, why do you not take the first part? James R. Gruber: Sure. Maybe we can try to give some context on the Q3, Q4 cash flow of 2025. 2026 will firmly be in positive operating cash flow territory. We will have some timing with supplier commitments, namely with Incralex, that will be planned for the second half of the year. In the first half of the year, there should be not nearly as much as we experienced in 2025, but some of the larger-than-average volume with study orders in Europe for Incralex. But other than that, we are firmly in positive operating cash flow territory. We will start making debt principal payments, which will be new in 2026. 2025, but even with that, we will be generating a lot of positive cash flow. Sean E. Brynjelsen: Okay. And then, Chase, regarding your question on the $200 million run rate, as you know, and as I think we have demonstrated throughout the history of our company, we generally set goals which are achievable. We believe the $200 million run rate in Q4 of next year is entirely achievable, primarily based on what we have on deck. This does not really include new product deals, licensing, that type of thing. We believe that Hemangiol will be a great product for the company. We believe Desmota will continue to grow quickly. We are seeing higher sales than ever on Alkindi and Kindivy. Those continue to increase. We are very pleased with the Incralex business and how that grows, and it has been nice because we have not lost as many of the older patients, and now we are gaining momentum and going forward on that. That has been solid. And really, all areas of the business are functioning well. There are a lot of growth prospects in the coming quarters in terms of the revenue. Hitting the $200 million run rate in Q4 next year, I think, is entirely achievable. We will be providing further updates on future conference calls to try to better ascertain what is the number, what can it be, and that type of thing. Chase Richard Knickerbocker: Awesome. Thanks again. Sean E. Brynjelsen: Sure. No problem. Welcome. Operator: Thank you. Our next question comes from the line of Madison Wynne El-Saadi of B. Riley Securities. Your line is open, Madison. Madison Wynne El-Saadi: Hey, guys. Thanks for taking our question, and congrats on a lot of positive updates here. Maybe to follow up on Desmota, it sounds like you are having interest both de novo and from existing. Could you characterize if the majority of interest is from the existing Alkindi population? How much of it is de novo? Also curious if you are seeing already some adult patient interest. And then secondly, on Incralex, as you prepare for this registry study, just wondering if you had any payer discussions regarding potential internal payer reimbursements for the registry patients, if that is something that is possible. Thanks. Sean E. Brynjelsen: Sure. So, Madison, I am going to have Ipek, our Chief Commercial Officer, answer the first part of your question with regards to Desmota and the pediatric versus adult. Ipek Erwan: Hi, Madison. So I think you are right. From our script, more than 97%–98% of our existing relationships with pediatric endocrinology are actually our target prescribers for central diabetes insipidus, which is for Desmota. So these relationships are already there from day one of launch, which was March 9. Our team was already talking to these physicians. There is a lot of excitement from key writers, thought leaders, big institutions already in the past two weeks. What we are excited about is call points that our team traditionally have not gone after, which are the adult endocrinologists, like Sean mentioned. We gave our team, two weeks ago when we launched the product, more than 3,000 new targets, and they just started going after those. We talked to several who are big in the adult space. Some of them actually end up still keeping the pediatric patients. So they definitely see room, and it is the right therapy for several adult patients as well, and they also see the pediatric patients based on the region and institution. So there is definitely a dual-path opportunity that is incremental to our relationships there. Sean E. Brynjelsen: Understood. And remind me again the second part of your question. Madison Wynne El-Saadi: And then on Incralex, if there have been any early payer discussions related to— Sean E. Brynjelsen: No. Yeah. The payer discussions have not happened because we feel it would not be any different. If we get the label expansion, there should not be any issues with payers. Right now, if a doctor has to even prescribe something off label from time to time due to a medical need and can demonstrate that, there will be reimbursement. But generally speaking, what we want to do is initiate that study as soon as possible. That protocol feedback should happen by the end of this month. And I am quite confident that we will be undertaking the study later this year. And obviously, it is going to have a huge impact on our Incralex sales. We are hoping that when we are a portion of the way into the study—it is open label—we can go to the agency and get that label updated as soon as possible. Madison Wynne El-Saadi: Got it. Congrats again, guys. Sean E. Brynjelsen: Thank you. Thank you. Operator: Our next question comes from the line of Swayampakula Ramakanth with H.C. Wainwright. Your line is open, RK. Swayampakula Ramakanth: Thank you. This is RK from H.C. Wainwright. Good afternoon, Sean and James. So, I mean, obviously, there is a lot of things to chew here, and all good stuff. In terms of the ongoing business, especially focusing on Galzin, you said you have already eclipsed 300 active patients at this point. And then we can still see about 500 remaining out there and possibly on OTC products. What portion of that is achievable in the immediate couple of quarters? And how much contribution of that are you assuming going into 2027, when you are trying to hit that $50 million per quarter in the fourth quarter? Sean E. Brynjelsen: Thanks, RK, for the question. Obviously, we got to 300 patients much faster than we had expected. It continues to increase week over week. I am going to ask Ipek, actually, to comment a little bit more on the second part. Ipek Erwan: Hi, RK. I think your diagnosis of the fact that the next chapter of growth needing to come from the OTC products is correct. The good part is, in the Wilson disease space, the centers of excellence are pretty established. And at this point, after a year into launch, we have pretty strong relations and ongoing initiatives with several of these Centers of Excellence health leaders and the top prescribers. So we do know where some of these patients—some of that Wilson population—is. I think based on our projections, I am confident to say within that time frame that you mentioned, we would be able to get to half of the remaining population out there who are on zinc therapy or some form that is not FDA approved. Between everything that we are doing in the field with these prescribers, as well as the awareness and education initiatives that we are closely working on with the Wilson Disease Association, which is the key patient advocacy group—really a lot of patients are very much in sync and present in that community as part of this community. Swayampakula Ramakanth: Great. So my next question is on the label expansions or the indication expansions that you are trying to achieve. One is on Incralex. What specific feedback do you need from the FDA at this point in terms of harmonizing the definition of SPIGFD and to get your study going? And the second part is on the Kindivy one. If the patient population gets increased successfully below age five, what sort of population are we assuming that you will have access to? Sean E. Brynjelsen: Sure. On Incralex, we have already received feedback from the agency on that. We took the feedback and put that in the form of a protocol. So, they send you feedback, the general letter—they say we want to see this and this and this. Then you formalize that in a scientific protocol. That takes a number of weeks, then you submit it to the agency. They then should look at that, make sure that they feel you incorporated their thoughts and comments. And hopefully when we get it back, there are few or no changes. If that is the case, which it should be unless they change their mind, then our belief is we can start the study. We hope to have that protocol back by the end of this month. So that is that one. And then regarding the Tyndivi formulation, we should have that wrapped up for the study here shortly, get it submitted in the third or fourth quarter—maybe third quarter; I am guessing third quarter submission—and then it will launch next year. The population is really intended for under five. That is really what the whole product was about. We believe it will do in excess of $20 million of additional revenue in a rather short quarter. Swayampakula Ramakanth: Okay. And then the last question is on the inventory burn-off. How much is the remaining inventory step-up from the acquisitions, and to be fully amortized through the P&L? James R. Gruber: Yeah. Very well. There will be a slight amount remaining in early 2026, but a small fraction. We burned through most of it in 2025. Swayampakula Ramakanth: Perfect. Thank you. Thanks for taking all my questions. James R. Gruber: Thanks. Operator: Thank you. That is all the time we have for Q&A today and does conclude today’s conference call. Thank you for participating. You may now disconnect.
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.
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