加载中...
共找到 18,456 条相关资讯
Operator: Hello, ladies and gentlemen. Thank you for participating in the Fourth Quarter and Full Year 2025 Earnings Conference Call for FinVolution Group. [Operator Instructions] Today's conference call is being recorded. I will now turn the call over to your host, Yam Cheng, Head of Capital Markets for the company. Yam, please go ahead. Yam Cheng: Thank you, Wilco. Welcome to our fourth quarter and full year 2025 earnings conference call. The company's results were issued via Newswire services earlier today and are posted online. You can download the earnings release and sign up for the company's e-mail alerts by visiting the IR section of our website at http ir.finvgroup.com. Mr. Tiezheng Li, our CEO; and Mr. Jiayuan Xu, our CFO, will start the call with their prepared remarks and conclude with a Q&A section. During this call, we will be referring to several non-GAAP financial measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP measures and reconciliation to non-GAAP measures, please refer to our earnings press release. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties are included in the company's filings with the U.S. SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Finally, we have posted a slide presentation on our IR website, providing details of our results for the quarter. I will now turn the call over to our CEO, Mr. Tiezheng. Tiezheng, please go ahead. Tiezheng Li: Thanks, Yam. Welcome to our fourth quarter and full year 2025 earnings call. [Technical Difficulty] Operator: Pardon me, everyone. It looks like we have lost the audio. Please standby. Please proceed. Tiezheng Li: Thanks, Yam. Welcome to our fourth quarter and full year 2025 earnings call. 2025 was a significant year for us. It was FinVolution's 18th anniversary, much like a person stepping into adulthood, our company has grown from a passionate credit pioneer in China into a regional platform bridging the credit gap across Asia and beyond. This journey has been more than just about scaling. We've learned, adapt and built something valuable and lasting. 2025's challenging macro environment tested our resilience, but it also reaffirmed our strategic direction to advance our international expansion. To conclude the year, we delivered full year group revenue of RMB 13.6 billion, up 3.8% year-over-year. Net profit also rose to RMB 2.5 billion, a 6.6% increase from last year. The resilient financial performance was achieved despite the regulatory uncertainty in China in the second half of the year, which tempered the full year transaction volume to RMB 200 billion, down 2.9% year-over-year. Our local excellence global outlook strategy has unlocked diversification value and brought much needed resilience to our platform. In 2025, our international business grew significantly. Our volume increased by 38.6% and revenue rose by 32.0% year-over-year. Most notably, international business contributed 31% of revenue for the quarter, significantly higher than 21% just a year ago. As set out before, we target to grow this number to 50% in 2030, and we are confidently on track to achieve this goal. Today, we operate across both developing markets and most recently developed market with our recent entry into Australia. Underpinning this momentum is the quite evolution of our international strategy itself. In our early expansion, we focus on disciplined execution in each individual market. But as we scale across the region, we have learned that strength also lies in connection. We have deepened our capabilities at the platform level instead of each country operating as a stand-alone effort. We systematically captured the expertise, relationships and capabilities we developed in one market and recycle them to accelerate the derisk entry into the next. This means leveraging proven regulatory experience, product development, advanced risk analytics, centralized funding and regional ecosystem partnership across borders. This LEGO+ strategy transformed our international portfolio from a collection of local wins into an integrated platform with compounded platform level advantages. Today, we manage our business through 2 distinct lenses. The first is our mature market, China, which serves as our foundation for consistent profitability and cash generation. The second is our international markets, which include Indonesia, the Philippines and now Australia. These markets are characterized by high growth, scalable opportunities and increasing contributions to our overall portfolio. Now I would like to walk you through the key achievements and updates across both segments. First, our mature market, China. New regulations reshaped the operating landscape in the fourth quarter, as discussed in our Q3 earnings session. We prioritized risk over loan origination in Q4. That means tightened underwriting and enhanced risk controls. The result is a near-term moderation of loan origination volume to RMB 38.7 billion and loan balance to RMB 68.3 billion in the fourth quarter. These deliberate efforts began to pay off with risk containment. Vintage loss for new loan originations stabilized at 3.0%. Outstanding loan portfolio saw risk trending up in line with expectation with CM2 increased from 0.61% to 0.77% for the quarter. As we run down our existing loan book upon repayment and originate new loans at higher credit standards, we saw the overall portfolio risk start stabilizing in December. As we gradually exit the regulatory side with a heavily rich loan portfolio, compliance infrastructure and risk models, long-term profitability would eventually normalize. We anticipate a phase of industry consolidation once the full effect of the regulation is reflected, and we are well positioned to seize the opportunities. Within our portfolio, China will continue to provide the scale and cash flow foundation that allows us to invest confidently in our growth overseas. Second, our international markets, including Indonesia, the Philippines and now Australia, we have reached an encouraging milestones for Southeast Asia. Both Indonesia and the Philippines achieved full year profitability and contributed over USD 15 million in combined operating profit. Behind this financial outcome is a validation of a respectful locally attuned approach of our international playbook. Our highly localized approach drove strong user growth. We doubled our unique user base to 5.9 million across Indonesia and the Philippines for the full year. We also penetrated deeper into the consumer base with diverse product customized around local consumption preference. For example, our Buy Now, Pay Later solutions have been well received by consumers and ecosystem partners across online and offline channels. In the fourth quarter, we entered the Australian market with the acquisition of a respected lending platform, Fundo. This new foray is a well-considered move that draws on our experience in maturing regulatory regime in China and operational excellence in overseas market. First, our evolving experience in China has prepared for a mature regulatory environment. Over the years, we have navigated China's transition from high-growth emerging regulation towards a more rigorous consumer-focused framework. Our operating model has similarly matured towards a lower risk, more sustainable approach. This experience has equipped us with the regulatory maturity, compliance discipline and consumer-first mindset that align closely with the expectation of developed economies like Australia. Second, we have proven track record of building profitable businesses from the ground up overseas. We have successfully executed the 0 to 1 journey, not just once, but in multi-international markets, scaling operations to profitability. This capability in launching, localizing and scaling businesses abroad gives us strong conviction in our ability to replicate success in Australia. Moving on to respect tech innovation, a core part of how we build... [Technical Difficulty] Operator: Pardon me, everyone. We have lost the speaker's connection, please stand by while we get the back-up line connected. Your line is open, please proceed. Tiezheng Li: It's embedded directly into the application flow, breaking the journey into a clear logical steps and offering real-time guidance at each stage. The impact has been tangible. We are seeing fewer viewers drops off, higher completion rates and better overall conversation. It's a refinement that may sound small, but it meaningfully improves how user experience our platform. Localization and support of local communities also play a key role in our success overseas. In Q4, we launched an emergency humanitarian response following the severe flooding that struck Indonesia in late November 2025. We established emergency kitchens and fully equipped sanitation facilities to benefit approximately 1,800 affected residents across 6 locations in Sumatra. Our ESG efforts like this have driven an increase in our S&P CSA score for 7 consecutive years, reflecting our belief that how we grow is as important as how much we grow. Our commitment to responsible stewardship extends to our shareholders. We accelerated our buyback program this year with USD 107 million repurchased in 2025. It's a historical record since our IPO. This commitment is personal as well. In December, our Chairman and the management team recently invested an additional USD 1.9 million of their own capital in share buyback, a gesture of deep confidence in this journey we are on together. In addition of buyback, we are also announcing approximately USD 74.5 million in dividend for 2025. That translates to total shareholder return of approximately $182 million, equivalent to 50% payout. As we entered 2026, we do so with clarity, not certainty. We will manage our China business with patience, nurture our international segments with focus and continue investing in the technologies and partnerships that make sustainable growth possible. Our long-term vision remains to build a truly global FinVolution. Thank you for being part of this journey with us. I will now turn the call over to our CFO, Jiayuan Xu, for a deeper look at the numbers. Jiayuan Xu: Thank you, Tiezheng, and hello, everyone. Let me go through our key results for the fourth quarter and full year. Please refer to our earnings press release for further details. On a group level, our fourth quarter results reflect the near-term impact of our discipined China strategy and continued investment in international expansion. Group net revenue was RMB 3 billion. In 2025, China economy remained largely stable with GDP growth of 5%, maintained within reasonable range while in pursuit of high-quality development. On the industry front, the regulatory authorities released multiple new guidance for banks, consumer finance and the macro lending companies during the quarter, which aimed at lowering the overall financing cost. As the industry reconfigured its assets and funding in line with the new regulatory framework, we saw contraction in loan volume and pickup in risk in the second half of 2025. We are refining our underwriting parameters to focus on the high-quality borrowers and have gradually praised our marginal assets that used to be credible before the new regulation. This provided protection to the unit economics. Our IRR remained stable. As Tiezheng mentioned, the vintage loss of the newly originated cohort began to stabilize around 3% in Q4. More importantly, early risk indicators began to show sign of peaking in the middle of December with day 1 and 30 collection rate coming down afterwards. We continue to deepen our engagement with funding partners as the funding supply of dynamics start to normalize. In Q4, we added new funding partners and further reduced funding cost by 20 basis points quarter-on-quarter to 3.4%. Overall, our take rate held steady at around 3%. Closing the quarter, we booked RMB 2.1 billion revenue for China. In our international markets, we maintained a strong growth momentum in Q4 with the consolidation of our new Australia business, complemented by broad-based performance across our established markets in Indonesia and the Philippines. From a regional macro perspective, we navigated a period of moderate economic growth with accelerated GDP growth in Indonesia, offset by slower growth in the Philippines due to seasonal flows. Overall, we delivered robust results. Our international transaction volume reached RMB 4.1 billion or USD 0.6 billion for the quarter, up 41% year-over-year. And the unique borrowers grew to 3.8 million, a 133.8% increase year-over-year. Across the region, we are benefiting from a clearly regulatory environment. In Indonesia, the regulatory clarity provided by July's announcement to maintain the interest rate cap provided a stable framework. We proactively increased our customer acquisition investment, which drove transaction volume to a historical high of USD 0.3 billion, equivalent to 10% growth quarter-over-quarter. In the Philippines, a new interest rate cap is scheduled to take effect in April 2026. We believe this upcoming change will favor players with strong technology and operational capabilities, areas we are. We are already preparing in advance to accommodate the new pricing structure, driving on our relevant experience navigating similar regulatory transactions in multiple markets. We are confident in managing a smooth adaptation even as we anticipate some near-term moderation during the transaction period. We continued to upgrade customer quality and expand our diversified product offerings to credible consumers. During the quarter, we have added 1.6 million new borrowers, up 26% quarter-over-quarter. In Indonesia, our off-line consumption finance initiatives boost customer quality and engagement. Buy Now Pay Later solutions in mobile phone stores and other small ticket items drove an influx of new users, growing new borrower base by more than 3x year-over-year. In the Philippines, embedded e-commerce partnerships now contribute 43% of the country's volume compared to 30% a year ago. Total transaction volume in the Philippines reached USD 0.2 billion, a 64% of growth year-over-year. On new market, our recent entry into Australia marks a significant strategic expansion into a developed market. Australia represents a high-value English-speaking market with a mature regulatory framework that provides long-term operating stability. The combination of near-prime customers' unmet demand for digital lending, stable pricing structure and an underdigitalized market creates a significant opportunity for superior risk-adjusted returns. The Fundo acquisition allows us to leverage our core strength in data-driven risk pricing, operational efficiency and low-cost capital to grow in Australia efficiency while building a durable and diversified revenue stream for FinVolution Group. Moving on to shareholder return. We maintained our commitment to meaningful shareholder returns in 2025. We executed USD 40.7 million of buybacks in the fourth quarter alone, which is our largest quarterly buyback ever if we exclude the buyback concurrent with convertible issue in Q2. We also increased our dividend per share by 10.5% to USD 0.306 for the year. The progressive dividend and buyback for 2025 highlights our commitment to our shareholders during a year of volatility. In short, we navigated a complex environment and delivered resilient results in 2025. In light of the recent regulatory change in China, we expect full year 2026 group revenue to decline between 5% and 15% year-over-year. Our long-term goal remains to be 50% of revenue coming from international markets by 2030. We are stepping into the new year, not with grand promises, but with a quite steady confidence in the resilience of our model, the dedication of our teams and the solid partnerships we have built along the way. Thank you. I will now hand the call back to the moderator for Q&A. Operator: [Operator Instructions] Our first question today comes from Alex Ye at UBS. Xiaoxiong Ye: [Foreign Language] I have 2 questions here. The first one is about the company's shareholder return policy. So it's good to see the accelerated buyback pace since Q4. So can we expect this momentum to sustain in the near term given there are still a lot of uncertainty on the regulatory front? Second question is regarding the Chinese market. So based on the various regulatory tightening measures since last year, can you give us an update on some of your operational targets for this year for the domestic market, such as the loan volume growth, average loan pricing and sales and marketing budget? Jiayuan Xu: Okay. Thanks. I will take your questions. Well, your first question is about our share buybacks. Yes. As we have mentioned, we stepped up significantly in the fourth quarter, reached about $40.7 million. And this is a quarterly record for us. And for the full year 2025, total repurchase coming in at $107 million. Despite the domestic regulatory headwinds, our China business has remained resilient and our international business continued to deliver a very strong growth with improving profitability. So at the current valuation level, we see still the very attractive opportunities for us. So we are maintaining that purchase momentum. Just to give you some sense, in the first quarter so far, we have already executed another $38 million in buybacks. As of year-end '25, we had about $74 million remaining under our current $150 million buyback authorization. We will continue to review the program regularly to ensure our buyback policy remains consistent and sustainable. And beyond the corporate level activity, I also want to highlight the personal commitment from our Chairman and the senior management team. They have repurchased about $1.9 million worth of ADS around 370,000 shares using their own personal funds. This is a very clear signal of the long-term confidence in the company's core value. And your second question is about our forecast for our domestic business. Yes. In 2026, our China business will focus on what we call the high-quality operations. That means greater focus on sustainability, compliance and serving better quality customers. We are also extensively embracing the use of AI to drive efficiencies across customer acquisition, risk and the various key functions within our organizations. Here are some of our key priorities for information. As for the transaction volume in the first quarter, we typically would expect lower transaction volume due to Chinese New Year, and this year should follow the same pattern. And for the full year, it will really depend on the risk, the macro, the regulation, which we are closely tracking. At this point, we are focusing on strengthening our business operation and we will adapt as the conditions become clear. And for price, our price is shared by funding partners and the regulator guidance. We are continuously refining our models to balance risk and return with a compliance framework. We are also offering the better pricing to high-quality borrowers. This aligns with the regulator expectation and is good for building a stronger customer base in the long term. As for the customer acquisition, actually, last year, the reset in China market led to relatively moderate competition in marketing activities. Customer acquisition costs came down as a result. In Q4, our cost per new borrower declined by 15% quarter-over-quarter, while our acquisition expense ratio declined by 22%. Now we consider the current acquisition cost is quite attractive, especially when you compare the lifetime value a new customer can potentially bring. So we maintain a relatively proactive customer acquisition in the first quarter 2026, and we will keep a close eye on our customer acquisition strategy dynamically. Operator: Our next question comes from Cindy Wang at China Renaissance. Yun-Yin Wang: [Foreign Language] I have 2 questions. First, could you give us the trend in Q4 and January to March for day 1 delinquency rate and 30-day loan collection rate? Based on the changes in early indicators, how do you see this round of the credit cycle? Has it approached to the end or still in the middle of the cycle? Second, the revenue contribution from overseas market increased significantly in Q4. How do you view the revenue contribution from overseas market this year? And what customer acquisition strategy are employed in Indonesia and Philippines? Jiayuan Xu: Okay. Thank you, Cindy. And I will take your questions. Well, your first question is about the risk metrics for our domestic business. Yes. Actually, we have seen an increase in risk overall but it appears to be contained, especially from the current vantage point. And during the quarter, we saw risk picking up from the end of September, accelerating in October, moderating, but still trending up in November and finally peaking in the middle of December. Average early risk indicators in Q4 increased slightly from Q3. They were up from 5% to 5.5% and the 30-day loan collection rate down from 88% to 86%. So the CM2 flow rate as a result increased from 0.61% in Q3 to 0.77% in Q4. And in the first quarter 2026, following the gradual runoff of our legacy loans from the high-risk customers, the quality of the existing loan portfolio continued to improve. Meanwhile, the new loans are originated at high credit standard and have better credit quality. So as a result, our day 1 delinquency has trended down in January and February for 2 consecutive months. For example, the early risk indicators show initial signs of recovery, returned to the level somewhat closer to the end of September last year. Now the current day 1 delinquency has lowered to around 5%. Having said that, we continue to be diligent on risk until the sign of recovery is clear. And your second question is about our overseas market. Yes. In terms of the 2026 international revenue contribution, we expect our international business to maintain its rapid growth momentum this year. And for this year, we are guiding international revenue to account for roughly 30% of our full year total. And the profitability should scale nicely as well. We are looking at a meaningful step from the USD 15 million operating profit we delivered in 2025. And let me share some updates for the customer acquisition in Indonesia and Philippines. Well, we have built a pretty systematic approach to customer acquisition. It really comes down to 3 things: the precision traffic acquisition, embedding ourselves into high-frequency spending scenarios and then looking in user loyalty through brand and experience. Those combination helps us move beyond just acquiring users. It's about capturing deeper lifetime value. In terms of the online acquisition channels, across our international markets, we use mainstream channels like Google, Facebook, Instagram and TikTok. Backed by our data models and years of execution experience, we can reach our target audience pretty efficiently. Those channels are not easy to master. They have high operating barriers. But once you crack the code, they can help you build a strong brand recognition and capture full user lifetime value. And once our model is validated, it becomes a sustainable growth engine for the local business. And second, moving beyond the traditional online advertisement, we focus on deeper integration with local ecosystem. For example, in Indonesia, our MF license was an important channel for our ecosystem expansion. It allowed us to expand from pure online cash loans into offline installment lending, cover things like 3C products, home appliance and furniture. We are now showing up where people actually spend the money. The results speak for themselves. We cross 3 million new customers in '25, 3x of last year. This year, we will keep expanding that offline footprint and build out a true multichannel acquisition network. And in the Philippines, our approach is partnership-driven. We have integrated with lending e-commerce platforms to offer Buy Now Pay Later product at online checkout. That now accounts for 36% of our volume in 2025. We have also teamed up with Smart, a major telecom operator for Buy Now Pay Later products on mobile top-ups. And also, we are working with Carousell, the regional secondhand marketplace to embed financial service into their platform. Those thinking are simple, meet users in their daily routines, make the financial service part of experience and the customer acquisition happens steadily. Operator: And our next question comes from Jing Yujie with CICC. Yujie Jing: [Foreign Language] Let me translate my questions. which is about the overseas market expansion. You mentioned in the meeting that we plan to enter development markets such as Australia. Could you share the strategic thinking behind this decision? And what's the current competitive and regulatory environment in development markets? Also, could you briefly talk about the company's development plans? Tiezheng Li: Thanks, Yujie. I will take your question. I will answer your question in 3 parts. First is why developed markets. Let's think of it this way. We are taking the mature experience we have built in China. It's actually aligned pretty close with developed market regulations and combining it with a scalable growth engine we've proven in Southeast Asia. So we are exporting our capabilities to a new frontier. We think developed markets offer something really valuable, large [ Spanish ] personal loan markets that are ready for digital transformation. By entering this market, we are not just chasing growth. We are building resilience. A more balanced geographical portfolio helps us hedge against volatility in any single market. And frankly, being one of the new fintech platform that can credibly operate across both emerging and developed markets evaluates our global brand and influence. And second, why Australia? Australia presents a clear structure opportunities. The unsecured personal loan market there is around AUD 33 billion. It is sizable. And we watched nonbank players steadily gain shares from traditional banks over the past few years. So as one of the first Chinese players to enter, we have first-mover advantage. And looking at the general operating landscape, we see a somewhat moderate competition. Digitalization level remains moderate. There's no major dominant player in the space. So for a technology-driven platform like Solution, it's an ideal entry point. And added to that regulatory environment that's both robust and transparent, giving us the clarity and the stability we need for long-term sustainable operation. So Australia became the natural -- became our first choice for our push into high-income, highly regulated markets. Third, why Fundo? Fundo has an ACL license. It typically requires a long expensive process to guide and ongoing compliance costs are significant. By acquiring Fundo, we effectively bought ourselves a fast path into Australian market. It lets us enter faster at lower cost and with the ability to immediately upgrade an existing operation rather than starting from the scratch. And the Fundo business already self-sustaining and profitable with strong risk controls in place. And more importantly, Fundo's level of digitalization and automation already put it ahead of most local competitors. That made it an ideal candidate to plug into our LEGO+ global platform. Looking ahead to 2026, our focus is straightforward, sharpen our risk models and refine operations and optimize funding costs to keep improving the unit economies. We are confident we can help Fundo to accelerate its growth, both in origination volume and revenue. Operator: Thank you. That concludes our question-and-answer session. I'd like to turn the conference back over to the company for any closing remarks. Yam Cheng: Okay. Thank you. Thank you once again for joining us today. If you have any further questions, please feel free to contact FinVolution Group's IR team. This concludes the conference call. You may now disconnect your line. Thank you so much. Operator: Thank you. Once again, that does conclude the conference call. You may disconnect your line at this time, and have a wonderful day.
Operator: Good day, and thank you for standing by. Welcome to the Telos Corporation Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Allison Phillipp. Please go ahead, ma’am. Allison Phillipp: Good morning. Thank you for joining us to discuss Telos Corporation's fourth quarter 2025 financial results. With me today is John B. Wood, Chairman and CEO of Telos Corporation; G. Mark Bendza, Executive Vice President and CFO of Telos Corporation; and Mark D. Griffin, Executive Vice President of Security Solutions. Let me quickly review the format of today's presentation. Mark will begin with remarks on our fourth quarter 2025 results and 2026 outlook. Next, John will follow up with concluding commentary. We will then open the line for Q&A, where Mark Griffin, Executive Vice President of Security Solutions, will also join us. The fourth quarter financial results were issued earlier today and are posted on the Telos Corporation Investor Relations website and this call is being simultaneously webcast. Additionally, we have provided presentation slides on our Investor Relations website. Before we begin, I want to emphasize that some of our statements on this call, including all of those relating to 2026 company performance, plans, and operations, are forward-looking statements and are made under the safe harbor provisions of the federal securities laws. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ for various reasons, including the factors described in today's financial results summary and comments made during this conference call and in our SEC filings. We do not undertake any duty to update any forward-looking statements. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are supplemental and clarifying measures to help investors understand Telos Corporation’s financial performance. These non-GAAP financial measures should be considered in addition to, and not as a substitute for or in isolation from, GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, in our fourth quarter results summary and on the Investor Relations portion of our website. Please also note that financial comparisons are year over year unless otherwise specified. The webcast replay of this call will be available on our company website under the Investor Relations link. With that, I will turn the call over to Mark. G. Mark Bendza: Thank you, Allison, and good morning, everyone. We have a lot of good news to share again this quarter. We are pleased to report another strong quarter and an exceptional finish to an incredibly strong 2025. Before turning to the slides, let me highlight three key takeaways for the quarter and the year. First, we delivered significant revenue growth and exceeded our guidance across key financial metrics every quarter, including the fourth quarter. Second, our continued focus on disciplined program execution, rigorous operating expense management, and working capital efficiency drove strong operating leverage, excellent incremental adjusted EBITDA margins, and robust cash flow. Third, we returned capital to shareholders through share repurchases. Looking ahead, large programs in Telos ID continue to ramp, and earlier this month, we expanded the confidential IT security work that we are performing for the federal government. Given this momentum, we remain well positioned for another year of double-digit revenue growth, adjusted EBITDA margin expansion, strong cash flow, and additional share repurchases in 2026. Our board of directors recently increased our share repurchase authorization from $50,000,000 to $75,000,000 to support our capital deployment activity. With that overview, let us turn to slide three. We delivered another quarter of strong execution and exceeded our guidance across key metrics. Revenue increased 77% year over year to $46,800,000, exceeding our guidance range of $44,000,000 to $46,300,000. This performance was primarily driven by strong execution in Telos ID and the ramp of large programs. We expect large programs in Telos ID to continue growing into 2026. As we continue to scale the business, our focus remains on program execution combined with operating expense management. During the fourth quarter, we approved a company-wide restructuring plan designed to further streamline operations and position the company for additional growth and adjusted EBITDA margin expansion in 2026. As a result of these actions, we expect adjusted operating expenses to decline in 2026, even as revenue continues to grow at a double-digit rate. The restructuring plan resulted in a $1,500,000 charge during the quarter, including approximately $500,000 recorded in cost of sales. Separately, our review of intangible assets resulted in a $14,900,000 noncash goodwill impairment within the Secure Networks segment. This charge represents a full write-off of the segment's goodwill and reflects the decline in contract backlog as several large programs reached their natural completion in recent periods. Secure Networks represents a meaningful portion of our business development pipeline and we continue to pursue new contracts in that segment. In total, these items resulted in a $16,400,000 charge in the quarter. Turning to gross margins, GAAP gross margin for the quarter was 35%. Excluding the $500,000 charge included in cost of sales, gross margin was 36%, while cash gross margin was 41.9%. Both metrics exceeded our guidance range, primarily reflecting performance in Telos ID. As a reminder, due to the diversity of our revenue streams, gross margins will naturally fluctuate depending on the mix of revenue recognized in a given quarter. Turning to operating expenses and adjusted EBITDA, our focus on expense management translated into strong overall profitability. Adjusted operating expenses came in approximately $1,000,000 better than our guidance assumptions. As a result of better-than-expected revenue, cash gross margin, and operating expenses, adjusted EBITDA exceeded the high end of our guidance range. Adjusted EBITDA was $7,300,000, compared to our guidance range of $4,000,000 to $5,700,000. Adjusted EBITDA margin was 15.6%. Turning to cash flow, strong cash generation remains a priority. Operating cash flow in the quarter was $8,000,000. Free cash flow was $6,300,000, representing a free cash flow margin of 13.4%. This performance reflects the success of our company-wide working capital initiatives as well as our revenue growth and gross margin profile. Our strong cash generation, when combined with our highly liquid balance sheet, provides flexibility to invest in growth initiatives while also continuing to return capital to shareholders. Let us now turn to slide four for a brief recap of our year-over-year performance for the full year 2025. We delivered an exceptional year in 2025 despite the challenging macro environment within the U.S. federal government. Revenue increased 52% to $164,800,000. Growth was driven by new program wins in both 2024 and 2025, as well as the continued ramp of our TSA PreCheck program. At the same time, we significantly improved the efficiency of our operating model. Cash operating expenses declined by $8,000,000, or nearly 12%, reflecting the impact of the expense management initiative we launched at the end of 2024. As a result, adjusted EBITDA was $18,100,000, representing a $27,800,000 improvement year over year. Adjusted EBITDA margin expanded nearly 20 percentage points to 11%, and incremental adjusted EBITDA margin was 49.1%. In other words, for every dollar of revenue growth, the company generated more than $0.49 of additional adjusted EBITDA. Cash generation also improved significantly. Free cash flow was $21,300,000, representing a $61,000,000 improvement year over year, and free cash flow margin was 12.9%. Finally, we returned significant capital to shareholders. During the year, we deployed $13,600,000 to repurchase approximately 4.3% of our outstanding shares at an average price of $4.38 per share. Our capital allocation priorities remain consistent: investing in organic growth, maintaining a liquid balance sheet, and returning capital to shareholders. With that, let us turn to slide five to discuss our outlook for 2026. As we enter 2026, we expect the continued ramp of large programs and recent new business to drive another year of strong growth, adjusted EBITDA margin expansion, and robust cash flow. For the year, we forecast revenue to grow 14% to 21% year over year to a range of $187,000,000 to $200,000,000. Substantially all of our forecast represents revenue from existing programs. The revenue range is primarily driven by the third-party hardware and software component of our IT GEMS program as well as the confidential IT security work that we are performing for the federal government. We forecast cash gross margin of approximately 37% to 39.5%, lower than 2025 primarily due to revenue mix and the timing of certain prepaid expense recognition in cost of sales. We forecast cash operating expenses to be approximately $1,500,000 to $4,000,000 lower year over year, reflecting the benefits of the expense management plan approved in the fourth quarter. Based on these assumptions, we forecast adjusted EBITDA of $20,600,000 to $28,000,000, representing an adjusted EBITDA margin of 11% to 14%. Lastly, we forecast another year of robust cash flow and share repurchases. Turning to the first quarter, we forecast revenue to grow 44% to 47% year over year to a range of $44,000,000 to $45,000,000. We forecast cash gross margin to be over 39%. We forecast cash operating expenses to be approximately $1,000,000 lower year over year, reflecting the expense management plan approved in the fourth quarter. We forecast adjusted EBITDA of $4,500,000 to $5,000,000, representing an adjusted EBITDA margin of 10.2% to 11.1%. Lastly, we forecast another quarter of strong cash flow. With that, I will turn it over to John for concluding commentary. John B. Wood: Thanks, Mark. Before I wrap up, I want to spend a few minutes on where we are as a business and where we are headed. As Mark noted, 2025 was an exceptional year financially, but the numbers reflect something much more fundamental, and that is the investments we have made in our people, our systems, and our customer relationships are paying off. Our 90% of total revenue, and the momentum there is strong. Let me touch on a few areas. Starting with Xacta, our cyber governance, risk management, and compliance platform continues to be the standard for the most security-conscious organizations in the world. Demand for automated GRC solutions is growing as our customers recognize the value in incorporating machine-readable data sets for more actionable compliance and risk information on a continuous or ongoing basis. We are well positioned to capture that demand. During the year, we launched Xacta AI, bringing meaningful AI-driven risk and compliance insights to our customers' complex environments. Our AI integration within the Xacta platform focuses on a novel and secure approach to utilize highly contextualized and enriched datasets, resulting in high-confidence, risk-focused recommendations and insights. Xacta AI saves customers time and effort by delivering expert-level guidance related to a customer's specific circumstances and their risk tolerance. To date, 400 Xacta AI licenses have been sold to two major federal government customers, and the new prospect response has been very positive. We see Xacta AI as a meaningful differentiator as we compete for new business in 2026 and beyond. Our Telos ID business remains a significant growth driver. Our TSA PreCheck enrollment program ramped nicely throughout the year, supported by strong travel demand. We also continue to expand our broader identity and biometric portfolio, including ID vetting and aviation channeling services. Enrollment is a scale business, and our biometric solutions now process millions of identity transactions annually across the nation. We are pleased with the progress we are making and have the potential for additional growth in these areas. Beyond these programs, earlier this month, we expanded the confidential IT security work that we are performing for the federal government. Now turning to the broader market, over 90% of our revenue comes from governments here and around the world. Our customer base spans the Department of War, the intelligence community, Department of Homeland Security, multiple civilian agencies, and the Five Eyes Nations. These customers are funded to address enduring national security and compliance missions. Cybersecurity, identity verification, and secure communications are not discretionary line items for these organizations. They are indeed mission critical. We recognize that the federal spending environment is receiving heightened scrutiny and we are monitoring it closely. However, in general, the programs we support continue to be well funded, operationally essential, and in many cases tied to mandated security and compliance requirements. That gives us confidence in the durability of our revenue base. Our growth opportunities and pipeline are driven by strategic positioning and well-funded national security priorities, including the ever-changing cybersecurity threat environments, digital enterprise solutions, and modernization of core infrastructures. Our pipeline remains strong at over $4,200,000,000. We have seen a shift in awards to the right as a result of the government shutdown, funding constraints, and a more detailed review from the government of submitted bids. We expect additional award decisions on previously submitted bids over the course of 2026. With that, I would like to wrap up on slide number six. In summary, 2025 was a transformational year for Telos Corporation, marked by strong revenue growth, significant adjusted EBITDA margin expansion, and a dramatic improvement in cash generation. We successfully executed on large programs and secured new business. At the same time, our continued focus on cost management and working capital efficiency enabled us to convert growth into meaningful improvements in profitability and cash flow. Importantly, we also returned capital to shareholders through our share repurchase program while maintaining a highly liquid and flexible balance sheet. As we enter 2026, the continued ramp of large programs and recent new business positions us well for another year of double-digit revenue growth. At the same time, the expense management plan approved in the fourth quarter enables us to drive further operating leverage and adjusted EBITDA margin expansion as we scale. In short, we believe our strong program execution and expense discipline are creating a business that is increasingly profitable, cash generative, and positioned for long-term value creation for our customers and our shareholders. With that, we are happy to take questions. G. Mark Bendza: Operator, please open the line for Q&A. Thank you. Operator: Thank you. Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question is going to come from the line of Zachary Cummins with B. Riley Securities. Your line is open. Please go ahead. Zachary Cummins: Hi. Good morning, Mark and John. Congrats on the strong results to end the year. Mark, maybe just starting with the initial guidance for the year. It sounds like it is largely driven by expansion with existing programs. So can you talk about what is going on in the pipeline—like a few opportunities maybe were pushed to the right—in terms of does that provide potential upside versus the initial guidance, or what are some of the puts and takes when we think about your initial outlook? G. Mark Bendza: Yes. So let me start, and maybe I will turn it over to Mark Griffin for his comments on the pipeline. First, we are very encouraged by how our existing programs have evolved since November when we originally indicated $180,000,000 of revenue in 2026. As I said in the script, we have grown the confidential IT work that we were performing for the federal government. That is something that we started back in the third quarter of last year. That body of work continues to expand with the federal government, so that is a very encouraging development. Second, our IT GEMS program continues to ramp and will continue to ramp into 2026. There are revenue streams within that program that we had a partial year of revenue last year, so we are going to have full annualization this coming year in 2026. Based on orders that we have received in that program since November, we are getting more and more visibility into how 2026 is shaping up for that program. So that is trending extremely well also. Lastly, on TSA PreCheck, transaction volumes have been trending very well for us since November as well as market share gains. So we have improved our outlook for that program as well. The good news, as you said, is that $187,000,000 to $200,000,000 is primarily a function of existing programs and there is very little contingency in terms of additional new business go-get to achieve those numbers. Regarding the pipeline, I will turn it over to Mark. Mark D. Griffin: Hello, Zach. As John mentioned, there is a significant value in the pipeline. The analysis that we have done to date indicates about 20% of that value is in the first half of this year. That gives us a good line of sight on additional opportunity that we would then also bring into the year. It is a mixture of the pipeline across the different business lines. The majority is still within Security Solutions but supported by Secure Networks as well. So we are very bullish on the pipeline right now with a good chunk of it in the first half of this year from an award point of view. Zachary Cummins: Understood. And just my one follow-up question for Mark is around your gross margin assumptions for this year. I think you outlined it a bit in your script, but can you give us the key puts and takes on why we are seeing a little bit of compression in the assumed gross margin this year versus 2025? G. Mark Bendza: Yes. Historically, if you look back over the last five years, our weighted average gross margins are typically in the upper 30s. That is what you are seeing for 2026. The year-over-year dilution in 2026 is really driven by a few key things. First, the third-party hardware and software on our IT GEMS program represents the lowest margin of revenue streams in our portfolio. That revenue stream is growing year over year, and so you are going to see some dilutive impact from the growth of that lower-margin revenue stream. Second, as we discussed in prior periods, we have some expenses on our TSA PreCheck program—actually, pretty meaningful expenses on the TSA PreCheck program—that were prepaid over the last few years, and now that expense is being compressed and recognized through the P&L and through cost of sales in a relatively short period of time, especially in 2026. So we are getting some artificial gross margin pressure from that GAAP accounting phenomenon. That alone is a couple hundred basis points into 2026. Third, the rest of the portfolio is actually accretive year over year. Gross margins are expanding in the rest of the portfolio once you normalize for those two items that I just mentioned. I will also point out that although cash gross margins are forecasted to contract in 2026, adjusted EBITDA margins are forecasted to expand, and that is a function of top-line growth and lower OpEx all lining up nicely to drive adjusted EBITDA margin expansion. Zachary Cummins: Understood. Thanks for taking my questions, and best of luck with the rest of the quarter. G. Mark Bendza: Thanks, Zach. Operator: Thank you. One moment for our next question. Our next question comes from the line of Matt Cliche with Needham and Company. Your line is open. Please go ahead. Matt Cliche: Hey. Good morning, guys. This is Matt Cliche over at Needham. Thanks for taking our questions. When we think about the strong revenue performance and guide for next year, is there any sort of framework you can provide on how much Xacta is contributing or the size of the cohort that will come up for renewal in 2026? G. Mark Bendza: So our renewal rates are excellent, Matt. We experience, I would say, very little to no revenue loss in a typical year on Xacta renewals, generally speaking, year to year. So as we forecast from one year to the next, renewals tend to be a very low variable for us as we forecast our revenues in a typical year. Matt Cliche: Okay. Great. And then what exactly are you seeing in terms of Xacta AI attach rates or momentum? What are you hearing from the agency side? John B. Wood: Matt, you were breaking up a little bit, but I believe your question was what are we seeing in terms of Xacta AI demand, attach rate, and volume of conversations with new prospective customers. Our plan is to go after existing customers who already use Xacta to start with, and there we are in the tens of millions of dollars of opportunities—several tens of millions of dollars of opportunities. I think our customers are really excited because if they are able to see the kind of outcomes that we have seen in our testing, then they could see as much as a 90% reduction in the time and effort it takes to get to an Authority to Operate. Matt Cliche: That is great. Thank you so much. Sorry for the connectivity issues there too. John B. Wood: No problem. Thanks for your question. Operator: Thank you. One moment for our next question. Our next question comes from the line of Rudy Kessinger with D.A. Davidson. Your line is open. Please go ahead. Rudy Kessinger: Hey, guys. Thanks for taking my questions, and apologies if this might have been asked. I had to drop off for a bit here and jump back on. In the 2026 guide, the revenue growth, how much of that revenue growth is tied to the one large DMDC contract? G. Mark Bendza: The one large CNBC contract—I would say relative to the $180,000,000 that we mentioned in November, it is roughly a third of the improvement from the November outlook. Rudy Kessinger: Okay. That is a good way to think about it, I think. So there certainly is some new business win contribution in there. Okay. And then for this year, as you look at the pipeline—realistic pipeline that you could potentially win this year in terms of revenue contribution this year or into 2027—what does that pipeline look like today, and how many large highly likely deals do you have in that pipe? Mark D. Griffin: Hey, Rudy. In 2026, we have, supposed to be awarded in 2026, about 64 opportunities that are supposed to hit. Thirty-four of those, as I mentioned, are in the first half of the year, representing about 20% of the value of the pipeline. So we expect most of that is going to hit by the June timeframe, and based on the timing of that and the rollout of that, you are probably talking about some modest revenue in 2026 but then ramping and building in 2027 as well. Rudy Kessinger: Okay. And then last one for me. Clearly, the expense discipline has been great to see and the improved EBITDA margins as well. At the same time, gross margin, even your cash gross margin, continues to come under pressure. It is going to come down again this year as well. What strategies do you have in place to maybe help put a floor in that cash gross margin? Do you think that range you gave this year can be a floor? And how should we think about that line longer term? G. Mark Bendza: Yes. Some of the commentary I have made in the past, and I will reiterate today, is that we do have a lot of different revenue streams and a lot of different margin profiles. Quarter to quarter, year to year, total company gross margins will fluctuate based on mix. The margins that we are guiding for 2026, on the surface, are in line with where margins have been over the last five or six years. Keep in mind, as I mentioned earlier, there are about 200 basis points of more accounting-oriented year-over-year dilution associated with that compressed expense recognition, which is well in excess of actual cash expense in cost of sales. If you adjust for that, we are still in that low 40s cash gross margin. So I think we are in a really good spot. In terms of the recent dilution that we have seen over the last few quarters associated with the IT GEMS revenue mix, I would say this year, we should pretty much be at the full dilutive effect. Does that help to answer your question? Rudy Kessinger: Yes. Yes, it does. Thank you. Operator: Okay. Thank you. I am showing no further questions at this time, and I would like to hand the conference back over to John Wood for any further remarks. John B. Wood: Thank you very much. I want to thank our shareholders for your ongoing support. With robust and recession-resistant markets, well-funded customers, and a decades-long track record of serving the world's most security-conscious organizations, Telos Corporation has a really strong foundation for the future. So, again, thank you. This concludes today's Allison Phillipp: conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.
Operator: Good day, and thank you for standing by. Welcome to Science Applications International Corporation's Fourth Quarter Fiscal Year 2026 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to John Raviv, Vice President of Investor Relations. Please go ahead. John Raviv: Good morning, and thank you for joining Science Applications International Corporation's Fourth Quarter Fiscal Year 2026 Earnings Call. My name is John Raviv, Vice President of Investor Relations, and joining me today to discuss our business and financial results are Jim Reagan, our Chief Executive Officer, and Prabhu Natarajan, our Chief Financial Officer. Today, we will discuss our results for the quarter that ended January 30. Please note that we may make forward-looking statements on today's call that are subject to known and unknown risks and uncertainties that could cause results to differ materially from statements made on this call. I refer you to our SEC filings for a discussion of these risks. In addition, we will discuss non-GAAP financial measures and other metrics, which we believe provide useful information for investors. These non-GAAP measures should be considered in addition to and not a substitute for financial measures in accordance with GAAP. A more fulsome explanation of these measures can also be found in our SEC filings. It is now my pleasure to turn the call over to our CEO, Jim Reagan. Jim Reagan: Thank you, John, and thanks to everyone for joining our call. I am happy to be here as CEO, and I am grateful to our board, to our team, and to all of our stakeholders for the faith that they have put in me to continue the critical work of sharpening our focus, strengthening our execution, and driving better results. After a thorough search for a permanent CEO by a leading executive search firm, the board concluded that, among other things, maintaining continuity and leadership, along with deep industry knowledge, was essential to Science Applications International Corporation's long-term success. After careful consideration, they selected me for the role. And, honestly, when I stepped in as interim CEO in October, I did not expect to enjoy the role as much as I have. One of the most rewarding aspects has been working alongside an outstanding team supporting critical customer missions and creating value for our stakeholders. This includes my partnership with our CFO, Prabhu Natarajan, whose leadership has been invaluable. So while accepting the permanent role was not my original intention, I am humbled and honored to have this opportunity. Since joining the board in 2023, my appreciation for Science Applications International Corporation's past achievements, current strengths, and future potential grew even deeper with a career focused on operational excellence and value creation across this industry. I am excited to continue building on our strong foundation to deliver meaningful results to all of our stakeholders. FY 2027 is a year of commitment. We are committed to our strategy to align and focus the portfolio. We are committed to improving our internal processes and external results. And as always, we are committed to serving our customers' most important missions, including elevated operational tempo around the globe. The tragic reality of war underscores the importance of mission expertise and customer intimacy that companies like Science Applications International Corporation have cultivated over many years. It also demands that our industry continue to invest and innovate to deliver capabilities and capacity. This is what we have done for decades and this is what we will continue to do. Science Applications International Corporation's legacy of innovation and commitment to high-value customer priorities are valuable assets. At times, we may have struggled to convert these assets into consistent performance. But we are making discrete changes across the company to improve our results. I want to focus briefly on business development, where we recently hired a seasoned Chief Growth Officer to the leadership team to prioritize BD and drive higher win rates for recompetes and new business. This involves being selective as we approach cost-plus, less-differentiated work. And it means leaning into the pursuit of opportunities where we have a greater right to win and higher rates of customer retention. This is addition by subtraction. Being selective in some areas frees up resources to pursue others. This means that we are going to be more focused with our bidding in FY 2027 and we are now aiming for $25 billion to $28 billion of submissions where we expect to support our dual goals of growing the top line and improving margin. The team is also performing well on our existing book of business, removing indirect costs, and achieving higher growth in higher-margin programs. This supports double-digit margins going forward. And as I said last quarter, we are committed to building on this progress in three ways. First, sharpening our focus on execution to increase capacity for investment in the business. Second, more efficiently deploying our financial resources to drive growth. And third, prioritizing yield and bid quality across our business development function, which, taken together, enables us to inject speed and innovation into our core capabilities to drive better growth and continued margin expansion. Turning to results, as we discussed in our preannouncement last month, fourth-quarter revenue was below our initial expectations largely due to procurement delays and customer disruptions as the environment continues to be uneven. However, I am encouraged by our margin performance despite this top-line choppiness, with FY 2026 margin of 9.7%. And we see improvement ahead as we guide to 10 adjusted EBITDA margin at the midpoint for FY 2027, the first time the company is guiding to double-digit margin on a full-year basis. Cash flow continues to be exceptional, thanks to efforts across the organization. And despite revenue finishing about 5% below our initial guidance from last year, our free cash flow exceeded our guidance by 10%. This demonstrates strong execution as well as the resilience of our business model. We expect another year of organic contraction in FY 2027, largely due to recent recompete losses in the large enterprise IT market. While we are encouraged to hear senior leaders emphasize fixed price, outcome-oriented contracting, we have yet to see these laudable goals translate into reality evenly across our customers as some continue to use acquisition approaches where it is hard to differentiate. Instead, we are focused on opportunities where clients establish clear outcomes that enable Science Applications International Corporation to deliver innovation and measurable value throughout the life of the program. Across our civilian enterprise IT portfolio, these principles have driven stronger performance and elevated win rates. Our successful work with Treasury, Commerce, Transportation, and the State of Texas demonstrates our cost-effective strategy for modernizing and supporting vital networks. By continually evaluating new technologies and delivering enhancements, we sustain long-term partnerships like the State Department's Vanguard program, which we have supported for fifteen years. Looking ahead, we are collaborating with clients to pilot and implement AI-powered agents to stabilize and secure critical networks. The speed of these innovations is essential for helping our customers address the evolving threat landscape and meet affordability objectives. While this large enterprise IT market has weighed on our results, it is a shrinking piece of the pie, from 17% of company revenues in FY 2025 to an expected 10% in FY 2027. And we have good visibility into most of this remaining portfolio. It includes the tCloud takeaway, has four years of performance remaining, and includes the Vanguard program, which is performing exceptionally well. These are both fixed-price or T&M enterprise IT contracts, the kind of work where we can differentiate and have the greater right to win. In the meantime, we continue to be excited about what made Science Applications International Corporation great to begin with: delivering innovative science, technology, and engineering solutions in support of the security of the United States and its allies. For instance, our GMAS program sustains and upgrades radar critical to homeland defense. Our DHS work delivers integrated hardware and software solutions to help secure the border. Our JRE data link router provides real-time battlespace awareness. Our recent COBRA and TENCAP HOPE awards support multi-domain warfighting by enabling rapid technology insertion, integration, and innovation. And our munitions programs enhance combat capability and capacity. These are all customer priorities for securing the present and winning the future. We are also investing in areas with the highest and clearest demand signals, whether it is expanding production capacity on key programs or investment for greater innovation and differentiation. We are currently engaging with customers at the highest levels to increase our throughput across multiple efforts. And our continued focus on executing against the $100 million in cost reduction targets is expected to provide us with operational and financial flexibility to continue to invest in areas with the greatest return potential while continuing to improve our margins. Our recently announced enterprise transformation initiative is the first time the company has done a bottoms-up review of its processes and procedures since the split in 2013. We have some of our best people committed to this project, which should result in a more efficient Science Applications International Corporation, with increased investment capacity to support innovation, growth, and margins. We are also encouraged that we will be making this journey in a supportive budget environment marked by large appropriations already in place with expectations for further budget growth ahead. I can speak for our board in saying that we see significant opportunity to drive value for our shareholders, create greater opportunities for our employees, and most importantly, continue the mission of supporting our customers and our country. I will now turn the call over to Prabhu. Prabhu Natarajan: Thank you, Jim, and good morning to those joining our call. My comments today will focus on a review of our fourth quarter and full year results, our outlook for FY 2027, and the meaningful opportunities we see to create value for shareholders. Turning to slide four, our fourth-quarter results were consistent with the update we provided on February 11. We reported fourth-quarter revenue of $1.75 billion, representing an organic contraction of approximately 6% due primarily to a $60 million year-over-year reduction of low-margin revenue from the Cloud One program we no-bid and a $45 million headwind related to a nonrecurring software license sale in the prior-year fourth quarter. Full-year revenue of $7.26 billion declined approximately 3% organically primarily due to our decision to no-bid low-margin Cloud One revenue, which was an approximately $200 million headwind for the year. We reported adjusted EBITDA of $181 million in the quarter, resulting in a margin of 10.3%, which reflects strong program execution and recently enacted cost-efficiency efforts. This performance contributed to full-year margin of 9.7%, which is roughly 20 basis points ahead of the guidance we provided last quarter. We continue to see meaningful opportunities to improve margins in the near future while also investing to drive innovation and growth. Adjusted diluted earnings per share was $2.62 in the quarter, and $10.75 for the year, and benefited from stronger margins and a favorable tax rate which offset lower revenues. Free cash flow was $336 million in the quarter, and resulted in full-year free cash flow of $577 million, a robust result as we remain focused on maintaining our peer-best cash conversion and deploying the capital to maximize long-term value for all stakeholders. Turning to slide six, I want to put the fiscal year 2026 results in context. It was a year of multiple disruptions, including internal leadership changes, budget headwinds, and significant customer workforce impacts. While we saw top-line pressure, we are proud of the team's resilience and hard work to achieve robust margins and cash flow. Our reported EBITDA at year-end was 2% below our initial guidance last year, and free cash flow was better than our initial guidance. We see similar dynamics compared to the initial FY 2026 targets we shared about three years ago. As Jim said, these results demonstrate the resilience of our business model and the enduring nature of our mission work, although we know we have work to do to improve growth. Turning to slide seven, we are reaffirming the guidance for fiscal year 2027 we provided on February 11. As we indicated at that time, we expect total revenue in a range of $7.0 billion to $7.2 billion, representing organic contraction of 2% to 4%. The year-over-year decline is driven mainly by recompete losses, which we have previously discussed. Collectively, we expect these programs to represent a headwind of approximately $400 million in FY 2027. We expect to partially offset this headwind with the continued ramp-up of new business wins from FY 2025 and FY 2026. Our guidance for adjusted EBITDA in a range of $705 million to $715 million reflects margins between 9.9% to 10.1%, representing a year-over-year increase at the midpoint of approximately 30 basis points. And we are executing our cost-efficiency efforts which we believe can drive upside to our margin outlook. We have also begun a multiyear enterprise transformation journey to unlock significant value and eliminate burdensome and outdated business processes to create a more agile organization focused on innovation, speed, and growth. We will provide an update on our Q2 call relative to progress on this initiative. Our adjusted diluted earnings per share guidance of $9.50 to $9.70 is unchanged from our previous FY 2027 guidance last quarter with the lower top line offset by a decline in our share count. We are maintaining our guidance for free cash flow of at least $600 million, which will translate into over $14 of free cash flow per share. As we have previously highlighted, our FY 2027 guidance reflects approximately $70 million in nonrecurring cash tax benefits from recent legislation. Even without this benefit, in FY 2028, we expect to generate at least $530 million in free cash flow, or approximately $13 of free cash flow per share. As Jim indicated, we recognize the significant value-creation potential that exists based on our ability to deliver more sustained revenue growth in the future. As a result, I want to discuss some of the key risks and opportunities moving forward. As I mentioned, our guide for an organic revenue decline assumes that our recompete losses are only partially offset by the continued ramp on previously won work. There are several large wins ramping at a slower rate than we expected, likely due to budget uncertainty and the lingering effects of a more resource-constrained customer procurement function. Total revenue from these programs was $350 million in FY 2026, and we are assuming $500 million in FY 2027 based on reasonable assumptions. This compares to a potential run rate in excess of $800 million based on contract value and period of performance. While there is potential downside, should some of this ramp not materialize, we believe that on balance, the upside scenario is more likely over the next twelve to eighteen months based on customer demand and supportive budgets. This could be a meaningful tailwind. In addition, our strong pipeline and alignment with customer priorities, which we expect to be well funded in a trillion-dollar-plus defense budget, are strong indicators of future growth. As we previously said, outside of our cost-plus enterprise IT work, our win rates on both recompetes and new business are in line with or higher than industry standards. Turning to slide eight, our pipeline and submission goals are more focused on these higher-return efforts, reflecting initial results of our renewed BD discipline. While submission levels are lower than our previous target, we view them as sufficient to achieve our goals. And we expect trailing book-to-bill to improve over the course of the year as we play more offense than defense this year on our captures. We recognize that an increasingly favorable budget backdrop is only relevant if we can improve enterprise-wide performance, focus on the markets where we have the strongest right to win, and deliver for our customers. The leadership that Jim has provided in these areas and his emphasis on focus and accountability across the company has had tangible results over the past several months. I am confident that our efforts will continue to translate into significant value creation for our shareholders in the coming years. With that, I will turn the call over for Q&A. Operator: And wait for your name to be announced. To withdraw your question, please press 11 again. In the interest of time, we ask that you limit yourself to one question and one follow-up. Our first question comes from Jeremy Jason on behalf of Citi. Jeremy Jason: Hi, this is Jeremy Jason on John Gaudin. Team, I just want to kind of hit things off by saying, Jim, congrats on your role. I just want to ask, now that you have moved from the interim role to the permanent one, what is the single most significant sort of portfolio pivot you believe is required to align the company with the next roughly ten years of government budget priorities? And more importantly, what is the message you want to say to the investor base who are trying to bridge that between your experience and the specific issues like recompetes have hampered growth in recent years? Jim Reagan: Yeah. Well, thanks for your kind words, Jason. I think that for, first of all, the moment that I stepped from being an interim to being the permanent person in charge, it was pretty amazing how my perspective changed from managing the day to day and being focused on getting our business development function back in gear, which is still a focus of mine, but adding to that the need to reassess our strategy, which is a process that we normally undertake during the summertime and I am actively engaged in right now. I think it might be premature for me to announce any strategic pivots other than a couple of notes that are probably worth providing for you. First of all, the first thing that I think that we needed to do, and I think of it as a bit of a pivot, is to get focused on those areas where we have the right to win and those areas where customer retention is the reward for innovation and strong performance. And the thing that we have been seeing over the last year has been the things that are more commoditized where you are not only finding it more difficult to differentiate and keep customers but it is also more difficult to get paid for the hard work that we do. On some of the more vanilla enterprise IT, things are things that we want to continue doing to the extent we have got it, but also to deemphasize it as kind of a strategic imperative. So that, I think, is the first epiphany that it did not take very long for me and Prabhu to wrap our heads around. I think that the next thing is to start moving into some pretty hard focus on realizing the benefits of the business model we acquired with SilverEdge. We think that the things that we have acquired from them on the intellectual property side as well as some of the capabilities that we have to serve our intelligence customers with AI enablement in classified networks is something that we think is extensible beyond the customers that they brought with them, and we are working to leverage that. Probably have more to talk about in terms of any further strategic pivots as we work through the strategy process through the season. Probably you are going to get that. I am not interested. Okay. Thanks. Appreciate it, Jason. Thank you so much. Operator: Our next question comes from Jonathan Siegman with Stifel. Sebastian Rivera: Hey. Good morning. This is actually Sebastian Rivera on for Jonathan Siegman. Congrats to Jim as well on the full-time position now. I guess we would love to kind of hear your thoughts regarding the FY 2027 guidance, roughly $35 million of CapEx here. I get it does not suggest too much change relative to last year, and I believe that FY 2026 number was about $4 million lower than the year prior. And I guess would have thought the changed environment today kind of creates incremental opportunities to invest, but we would love to get your thoughts there. Jim Reagan: Sure. And appreciate the question, Sebastian. Because, you know, with what we have today in hand, we think that the CapEx is adequate to meet the current demand signals that we have on programs that require production capacity that largely exists in a number of our, for the programs where we actually make things. But I think that in Prabhu's remarks, he mentioned that we have a flexible business model, and we are in active discussions with customers about what they might see as the need to ramp up production on certain programs. And to the extent that we get the demand signals, which, by the way, I have talked to senior leadership at the Department of War. They understand very clearly that industry, when they receive demand signals, they could pivot. We are no exception. To the extent that we get demand from customers to ramp up production of certain weapons capabilities, we are prepared to increase the plant capacity, increase space, spend money on tooling, to meet those demands. The revenue and the take rate on those is not reflected in the guide today. But to the extent that there is any reason to update it in future, we will certainly let you know. But so I think that the short answer to your question, Sebastian, is we have a business model, and we are prepared to flex it. And we are prepared to spend more money on additional capacity to the extent that our customer comes to us and asks for it. Prabhu Natarajan: Hey, Sebastian. Prabhu here. Thank you for the question. I think the only thing that I would add to Jim's response is that we are investing where we see clear demand signals. And we are engaging with customers at their highest levels on some of these opportunities. I would also think of the $100 million cost reductions as freeing up capacity for investment that may not show up in CapEx necessarily, but it does provide us some ammunition to be able to invest in some differentiation as we go to market in a handful of areas. Finally, I would also say that investment takes many forms. We actively think of the investments that we make to include the time we spend with customers, helping understand needs, shaping solutions to fit the needs, and then actually actively investing in a business development and capture function that allows us to be more differentiated when we offer, I think, real solutions. We are also investing—SilverEdge is a classic example of investing a couple hundred million off our balance sheet to be able to fund, to bring some real new capabilities into the organization. And I think finally, but certainly not the least important of which, is we are actively building capabilities, whether that is mission labs, or our Mission Data Platform, or our classified. There are areas that show up beyond a CapEx line that we are investing in. And finally, I would foot-stomp the fact that we are investing in some really key talent, and Jim talked about the Chief Growth Officer we brought to the company. But we are investing in some real talent inside the organization, refreshing our org structure. And so our investment has taken multiple forms. But we are very comfortable that we are investing in line with the signals that we are getting, and we are frankly not waiting for contracts to start the investment. We are trying to get ahead of where the needs are going to be so that we can be ready for when those things show up in a pipe somewhere. So thank you for the question. Sebastian Rivera: Thank you. Very helpful. I just a quick— Operator: Our next question comes from Gavin Parsons with UBS. Thank you. Good morning. Gavin Parsons: Good morning. Jim, I mean, you have been sharpening the BD process for a few months now. I know that is ongoing. How long does that take you to build momentum and actually start converting that to revenue and how much opportunity is there on a shorter-term basis to drive maybe some OCG growth? Jim Reagan: Yeah. It is a great question, Gavin. I think that there is kind of two elements to that answer. The first one is to say that, as you know, the sales cycle in this business, converting a proposal into revenue, can take a painfully long period of time in some cases, not in all. I think that to the extent that our team is able to move the needle on win rates on work that is already in production in the proposal shop and build some more innovation, perhaps even some more discipline around how the finished product comes out, that can move the needle on win rates within six months. I think it is probably worth noting that while we were disappointed by the outcome on a couple of these large recompetes during the year, our win rates on new work in the year, but the most recent quarters, has been in line with our expectation and industry averages. So I think that we are really pleased with that and with, you know, less exposure in FY 2027 to the large recompetes like we had some significant exposure last year. I feel really good about our ability to achieve the kind of book-to-bill that we need to get us back on a growth trajectory after we have lapped out the impact of these losses that we have recently experienced. I think that the last comment that I would have, and Prabhu might want to amplify on this as well, is that one of the things that I think that we are doing really well already is ensuring that the spend and investment on capture and winning work is focused on the $28 billion or so of opportunities that we have the greatest opportunity to win, to differentiate, to drive margin improvement in the business, in addition to whatever margin improvement we are going to be seeing out of the business initiatives that we have been outlining. This year, we have called it addition by subtraction earlier, and what that really means is that focusing on the things that will drive higher win rates and higher opportunities to retain customers for longer. Prabhu Natarajan: Thank you, Jim. Hey, Gavin. Appreciate the question. Maybe a couple of data points on the guide itself. We are right now assuming about a 2% to 3% OCG in our current baseline guide for fiscal 2027. That is consistent with our 2% to 3% last year, which was the lowest of the five years that I have been here. So while we are not expecting things to get better, we do not expect things to get worse either on those, and therefore, on balance, I would say bias to the upside to the extent that the enacted budget translates into tangible procurement action over the course of the next three quarters or so. I think, as Jim said, I would foot-stomp the fact that our win rates on non-enterprise IT work—some of the work we do on the engineering side as well as the mission IT side—our win rates on new have approached 50% or more at various points over the last couple of years. So our win rates really demonstrate, I think, that we have the right to win in these areas. And I think just as importantly, our recompete win rates on noncommoditized enterprise IT is sort of in that 85% to 90% range. So good win rates outside of the commoditized enterprise IT work and, again, while it does not help lose these recompetes, the reality is I think there is very little of that left in the portfolio at this point. As we said in the prepared remarks, about 10% left of revenues from large, I would say, cost-plus EIT work. And so I do think that on balance, we are probably at the other side of this slope here. And given that we have about 5% of recompete headwinds, with the $400 million or so that we disclosed, the reality is the absence of this headwind going into next year is going to be a tailwind in and of itself. So again, I think we feel good about where the positioning is. None of this matters. None of what I say matters unless we execute well, and this is a message internally as well as externally. But we have got to keep every recompete that comes our way. And we have to keep up the win rates on new, and that is where the focus is for the team. Gavin Parsons: Thank you for that. Operator: Our next question comes from Sheila Kahyaoglu with Jefferies. Sheila Kahyaoglu: Morning, guys. Thank you. Congrats, Jim and to Joe as well. Maybe two questions if I could start. The first question would be just on the, you know, what do you think on the enterprise IT work? And I know Prabhu did a good job of this at conference, so thank you, Prabhu, for that. Like, what changed? Was it a Science Applications International Corporation decision? Did the competitive landscape change? And then as we think about the $25 billion pipeline, how do we think about Science Applications International Corporation getting on the offensive? Jim Reagan: I will start. I think Prabhu might amplify on my enterprise IT answers. I think that what we have seen is increasingly customers—there is a handful of our customers that are buying based on what I might say is kind of more of a cookie-cutter recipe for what they are looking for, where it is heavily embedded with network management, network uptime, help desk support, things that are harder to differentiate than in the things that blend more of a mission focus in with the IT side. Think about on the—maybe one of the more toward mission IT, it is probably supporting networks that support the warfighter and networks that blend multiple areas of information and synthesize it into a pane of glass for people that do mission planning. Those are the things that we think that we can continue to excel at or earn our share on recompetes and new work. So I think that when we stepped back and took a hard look at different flavors of enterprise IT work, that gave us some greater visibility into the kind of things that we would continue to pursue, continue to win, and the things that we are probably going to deemphasize in our pipeline going forward. Probably everything, Dan. Yeah. Prabhu Natarajan: Sheila, a couple of things I would probably want to add. I think the recognition that, you know, being selective on, I would say, cost-plus enterprise IT was sort of a conclusion we came to over the course of the last several months. I think, if you looked at the track record of where our largest recompete challenges have been, and it does not take a bunch of research to get to NASA Aegis, parts of Cloud One, U.S. CENTCOM, Army RITS, I think the common thread line running through all of these is that it is very hard to differentiate on predominantly cost-plus work where it is very hard to separate yourself from the competition. And sometimes the magic is in how one writes a proposal more than what the delivery on the ground looks like. So I think it is just a recognition that we have come to. We also had perhaps more of that enterprise IT work in our pipeline five years ago than we do today. So that has been a gradual evolution. Our decision to consciously no-bid $200 million of compute and store as part of Cloud One—candidly, we contracted 3%. All of that 3% was related to one decision to no-bid that Cloud One contract. That was a recognition that we communicated externally that, you know, that is not the kind of work we want to be doing long term as we think about focusing the resources of the company into meaningful areas that will truly, I would say, restore and reassess the legacy of this company. So I think it is an evolution of what we have come to in terms of our own portfolio. Broadly speaking, I would say if you looked at competitors and where win rates are for enterprise IT versus non-enterprise IT work, you will see some of the same, I am going to say, volatility in recompete win rates within our competitors. I think the reality was we had more of it than perhaps others, but you should expect to see some of the same volatility. And then finally, on the pipeline question, the only thing I would add to the comment that we are playing more offense than defense is the fact that our pipeline is inflecting to higher levels of non-EIT work, mission work, engineering work, and more of our opportunities on our submits this year and next year are more towards the takeaway side than the recompete side. Our largest single recompete coming up is our Vanguard Department of State program that we are feeling really good about. Had it for fifteen years. We have done it for fifteen years, and candidly, I think that is our sentiment underlying the narrative that we get to play a little bit more offense this year than we have had the luxury of the last couple of years. Thanks, Sheila. Operator: Our next question comes from Gautam Khanna with TD Cowen. Gautam Khanna: Good morning and congratulations, Jim. And John and Joe. I wanted to just ask, within the midpoint of the guidance, maybe if there is any parameter you could tell us on how much you have to quite go get. You know, you told us about on-contract growth, but based on the backlog you have today, how do you get to—what do you still need to bid and turn, if you will, in the year? And then if you could just remind us of when the year-over-year headwinds on the $400 million of recompete losses abates, you know, when is the last quarter that that becomes the headwind, that one moves out of the numbers? Thank you. Prabhu Natarajan: Hey, Gautam. Prabhu here. Thank you for the question. I will take the guidance one. In terms of the negative two to negative four of contraction, as I said earlier, we are assuming nominal amounts of OCG, 2% to 3% of OCG, and not a ton in the way of new business go-get. And so I think very much focused on what is within our control this year, and not a lot of assumptions built in around what we need to win in order to actually get to the guide that we have out there. So I think there is always going to be a mix of some recompetes and new that is in the mix in the business. Our backlog is sufficient with our trailing twelve-month book-to-bill of 1.1. I think the backlog exists for us to get to the guide without a lot of heroics this year. But that is how we wanted to position the conversation coming into this fiscal year compared to perhaps last year where we had a little more in the way of go-gets and, of course, we had a tremendous amount of disruption from those and other procurement disruptions over the course of the year. So I think it is very much a guide that we have control over, that the team is fully committed to, and does not take a ton of heroics for us to get to over the course of the year. But candidly, that means we just have to put our head down and execute every single quarter. In terms of the headwinds, on a quarterly basis, I think I would say it is fair to assume that the headwinds are going to persist with us for all four quarters of the year. I think that is probably the most sensible way to think about it. Naturally, there will be some changes over the course of the quarter as we lap on some programs and lapped into some other programs. But the reality is you should assume that there is about four quarters of headwinds and that Q1 of next year is probably going to be the cleanest quarter on a compare basis. Gautam Khanna: Terrific. Thank you. Alright. Goodbye. Operator: Our next question comes from Colin Canfield with Cantor Fitzgerald. Colin Canfield: Hey, thank you for the question. Maybe focusing on FAR 3.0. If you could talk a little bit about federal acquisition regulation and essentially what you are hearing in terms of kind of the next set of objectives look like, what that means for Science Applications International Corporation, and any sort of timing around outcomes. Thank you. Jim Reagan: Sure. I had the chance to meet with a senior Department of War official about that just this past Friday, along with some other CEOs in a small forum. And I think that, first of all, there is tremendous urgency that we have not seen in decades around procurement reform in general, including updates and upgrades to the FAR. There is a lot that I think we can expect to see stripped down and stripped out, and some new provisions put in there are going to be really aimed at improving speed and throughput from the defense industrial base. I think that with that said, there is going to be some spotty implementation. And there is a large acquisition community that needs to be retrained, needs to be upskilled, reskilled. But in the meantime, when the need exists, I think that our customer in the building is going to be relying on things like OT, OTAs, other innovative contracting vehicles, including the use of commercial pricing and commercial contracting mechanisms to get what they need done faster. That said, we do have a commercial operating segment that is available, and we are actively using it to bid some of these things that the customer is needing. We have made some changes in our own procurement and contracting organization to be ready to meet the requirement for speed. And we have an internal initiative aimed at not just handling it from the procurement side, but also how we bid differently. And that is one thing that our new Chief Growth Officer is actively engaged at so that we can meet the customer demand when they bring it to us. Colin Canfield: Got it. Got it. And then maybe as you think about kind of your future as a hardware integrator, can you just perhaps talk about kind of your relationship and your opportunity set across the branches? We have seen obviously a lot of capital start to flow into VC-developed products, but not as much focus on kind of the integration of all of the capabilities. Right? There are the leading players, but you still have a lot of stuff that is kind of series B, series C, that fundamentally will need something like Science Applications International Corporation's kind of acquisition pipeline or the creds around national security and the cleared folks. So can you just maybe talk about, within that context so far, how you think about Science Applications International Corporation's ability to go and integrate a lot of these kind of earlier-stage products? Thank you. Prabhu Natarajan: Hey, Colin. Prabhu here. I will take that one. I think you are hitting on something that is incredibly important. The strength of the total defense industrial base is going to be relevant and necessary to deliver what the warfighter needs. And so I think there are folks like Science Applications International Corporation that are in the ecosystem that have for decades brought evolving capabilities to the warfighter because we have an acute understanding of how the mission works. And I do not think that that demand signal is going to look any softer in the next five years. So we are actively partnering with venture companies. We have a venture program that we are very proud of, that we actively bring capabilities, integrate them in the number of hardware-software integration centers we have across the country, whether that is Huntsville, or Charleston in South Carolina, or in Crane, Indiana, where we do a tremendous amount of hardware and software integration, and we are just getting better at that kind of work. And there is a decent chunk of it in our pipeline, and so I do think that we have the sort of mission set, if you will, where our expertise and our mission and our domain understanding is going to be critical as we graduate more of these smaller companies into the larger ecosystem. So we are looking forward to partnering with them. And, as you know, this is how this business, this industry, has evolved over the last, I would say, fifty years, and I do not expect the next twenty or thirty to look any different. I think, to be fair, some of the new entrants have put, I think rightfully so, pressure on the incumbents to deliver faster, better capability, and at cheaper prices. I think that competition is a good thing. So we are looking forward to it, and we are doing a really nice job integrating some really good capability into the ecosystem. Colin Canfield: That is great color, Prabhu. Thank you. Prabhu Natarajan: You bet. Operator: Our next question comes from Tobey Sommer with Truist. Tobey Sommer: Thanks. You mentioned the evaluation that you have ongoing is the first, I think, bottoms-up evaluation on processes and so forth since the split, but the company has been trying to address these issues for a number of years. Maybe the process is different this time, but the pursuit is an ongoing one. How do you manage the culture and the morale when you are sort of reexamining something that has been kind of a focal point? And do you envision any changes in compensation as being helpful in achieving your end? Jim Reagan: Toby, I appreciate that question. I think at least once or twice every week, I get an email from one of our 23,000 employees applauding what we are doing and giving me some real-life examples of things that we could do differently to help them get their jobs done easier. Sometimes they are seemingly mundane, but still important. Some of them are things that I would not have been made aware of had someone not sent me an email directly. And I look at that. I read it. I send it to the team in the program office that is running this. So I would say that the employees are saying, finally, we are doing some things to get some of the gunk out of the system. Gunk is a technical term for me on this, and we are definitely working hard in getting this program to get things working better, faster, more efficient, not just for our internal teams, but it also will translate into gains for our customers as we are able to be a bit more nimble. So I would say that there is tremendous receptivity to this, and I think that it is going to allow us to make decisions faster, get stuff done faster, but also take a lot of the cost that is going to fall out of that and reinvest it into the things that we have been talking about in terms of growth. I think that we have the capability with that to add more account management teams, people who are walking the halls of the building, to bring new ideas to customers and increase the daily communication about what we need to do to help them be more successful. And with that, I think it is probably one of the most important things that we are going to get done this year. Operator: Our next question comes from Noah Poponak with Goldman Sachs. Noah Poponak: Hey, good morning, everyone. Morning, Don. Is it possible to give us the details of recompetes of size that you have in your fiscal 2027 and fiscal 2028, just kind of cover the next two years, which programs, when, and how big are they for you now in revenue? Prabhu Natarajan: Hey, Noah. Prabhu here. I will take the first stab at this. I think, you know, if I think about significant programs, as you know, with 10% to 20% of the business comes up for recompete every year. So if I think about the largest recompetes out there, Department of State Vanguard is the single largest program that is going through a recompete cycle in fiscal 2027. Okay? And that program, as we know, the scope of the program is increased. We are on year fifteen of that program, and we have been qualified to bid and compete for work on four of the five workstreams. The one workstream that we chose not to bid because it would have created the OCI for us for the other four workstreams. So that is the single largest recompete that we have. Beyond that, we always have programs that are in the, I am going to say, $75 million to $150 million range. Let us call it 1% or 2% a year. We always have one or two of those every year, but in reality, we are also bidding a multiple of that in the form of takeaway opportunities in the pipeline. So I tend to not think of those actively as, you know, sort of significant recompete risk. I think the reality is the way we are approaching this, Noah, is keep as much of the work share on Vanguard as possible, hopefully even eke out a little gain there. But our baseline assumption right now for this year is that we have accommodated all kinds of contingencies into the minus two to minus four. But Vanguard is probably the only one that is worth calling out right now. Noah Poponak: When will you be recompeting that? And can you size it for us approximately annual revenue for you? Prabhu Natarajan: Yeah. So we will be going through a recompete cycle on Vanguard. Again, it is going to go by workstream to workstream. There are four workstreams that will get recompeted over the course of this year. We are the incumbent. We will be competing for all four. We have been qualified to compete, and we are in the down-selected category. And so it is unlikely to materialize in terms of impacts to revenue anytime, I would say, safely in the first half of this year. If anything, we may have some nominal impacts in the second half. But I say nominal. So more of the impacts, if we were to be in an unfortunate position of not keeping most of that work, most of that impact will be felt next year and not this year. So that is how I would probably preface it. Noah Poponak: Okay. And then would it be possible to talk about how the funding environment has evolved year to date? I know that is a short-term question. Maybe it gets into splitting hairs. But just given the, as you described, the funding of obligated dollars has been slow and choppy and uneven. In January, it sounded like some in the industry saw that getting better. I am just curious if that improved through the quarter or got worse through the quarter? Is it better or worse today or the same versus how the year ended? Prabhu Natarajan: Yeah. I am going to say, the health warning here is that whatever I say now is probably going to be OBE probably at the end of the week. But here is what we have seen. I think it is true that January for outlays was better than the preceding three months for sure. I think on outlays, as you know, there is probably about a three-month lag between outlays and revenue performance. So a good January month on outlays means that April, May should look healthier than it would have looked otherwise. I think the more important milestone that we are tracking to is a milestone in the second quarter of our fiscal year, sort of the June, July, August timeframe. Certainly, June or July, if you look at where the agencies are relative to their—relative comparing outlays to the appropriations or the budget amounts, I think that will tell us if we are going to see a year-end flush in terms of money that needs to be spent before the end of the government fiscal year. So that is probably the clearest goalpost that we would say is out there. But in reality, we do think that the appropriations have to get spent; therefore, the money will have to come. I think for us, it is very much a question of timing and how quickly is the spigot going to open up. And this is where the constraints on the government procurement functions have been difficult to size and estimate. But hopefully, things get better here, certainly in the second half, from the summertime through the end of the fiscal year, Noah. Then perhaps, an immediate change in the first quarter of this fiscal year for us. Noah Poponak: I understand. Okay. Thank you. Operator: I am showing no further questions in queue at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day. And thank you for standing by. Welcome to the OPAL Fuels Inc. Fourth Quarter and Full Year 2025 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded. I would now like to turn the conference over to your speaker for today, Todd M. Firestone, Vice President, Investor Relations. Please go ahead. Todd M. Firestone: Thank you, and good morning, everyone. Welcome to the OPAL Fuels Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. With me today are our Co-CEOs, Adam J. Comora and Jonathan Gilbert Maurer, as well as Kazi Kamrul Hasan, OPAL Fuels Inc.’s Chief Financial Officer. OPAL Fuels Inc. released financial and operating results for the fourth quarter and full year 2025 this morning, and those results are available on the Investor Relations section of our website at investors.opalfuels.com. The presentation and access to the webcast for this call are also available on the website. After completion of today’s call, a replay will be available for 90 days. Before we begin, I would like to remind you that our remarks and answers to your questions contain forward-looking statements, which involve risks, uncertainties, and assumptions. Forward-looking statements are not a guarantee of performance, and actual results could differ materially from what is contained in such statements. Several risk factors that could cause or contribute to such differences are described on slides 2 and 3 of our presentation. These forward-looking statements reflect our views as of the date of this call, and OPAL Fuels Inc. does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this call. Additionally, this call will contain discussion of certain non-GAAP measures. A definition of non-GAAP measures used and a reconciliation of these measures to the nearest GAAP measures are included in the appendix of the release and presentation. Adam will begin today’s call by providing an overview of the quarter’s results and recent highlights. Jonathan will then give a commercial and business development update, after which Kazi will review financial results. We will then open the call for questions. I will now turn the call over to Adam J. Comora, Co-CEO of OPAL Fuels Inc. Adam J. Comora: Good morning, everyone, and thank you for participating in OPAL Fuels Inc.’s Fourth Quarter and Full Year 2025 Earnings Call. We are pleased to be here today and look forward to discussing our 2025 results, our outlook and plans for 2026, and the current macro and regulatory environment. Starting with full-year and fourth-quarter results, we are pleased the year ended strongly and adjusted EBITDA finished at $90.2 million, within our guidance. On the surface, 2025 adjusted EBITDA was a flat year versus 2024; however, production grew 28%, which was masked in our financial results by several factors, including 22% lower RIN prices. Despite the macro headwinds faced by our Fuel Station Services segment throughout 2025, we are pleased we achieved strong growth in the segment. I will offer some high-level thoughts here at the top of the call regarding outlook for 2026, and Kazi will share more details later. For RNG production outlook in 2026, we continue to be encouraged by our improved operations team, new opportunities to improve gas collection, and greater efficiencies at our plants, all driving incremental production growth from our existing assets. For our Fuel Station Services segment, we are beginning to see improving macro conditions and other factors that could make 2026 an inflection point for new fleet adoption of CNG and RNG in heavy-duty trucking. It is important to note that these business development activities would not necessarily have a direct benefit to 2026 financial results. It typically takes us about a year to build a fueling station and begin selling fuel. So for 2026, this segment will still be feeling the effects of the sluggish 2025 business development activity, but we are hopeful new fleet deployments will begin setting the segment up for stronger growth in 2027 and beyond. I do want to comment on some policy developments as well. As many of you likely saw, on February 25, the EPA sent to OMB the final SET rule with updated 2026 and 2027 RVO targets. The rule is expected to be released shortly. Although we have seen strengthening bipartisan support of RNG, with proactive, positive tax policy from the Republican-led House and Senate—specifically, the extension of the 45Z tax credit through 2029—in our view, the cellulosic category within the RFS has not been as much a focus for policymakers as liquid agricultural biofuels. That being said, we do believe the recent relative stability in the D3 RIN market will continue and could have an upward bias with the broader biofuels complex. I also want to comment on our new $180 million preferred stock facility provided by Fortistar. The additional capital from this facility can be targeted for incremental infrastructure investments across the RNG value chain. Our vertically integrated business model—from producing RNG to providing access to transportation fuel offtake for CNG and RNG—drives advantaged project returns relative to market peers and helps unlock the value of OPAL Fuels Inc.’s project opportunities. In closing, I would remind listeners, since going public nearly four years ago, our compounded annual growth rate for RNG production and adjusted EBITDA is 32% and 22%, respectively. We are excited about where OPAL Fuels Inc. is positioned. Our integrated model is resilient, and our results demonstrate the value of controlling the product we sell from production through dispensing to our customers. I will now turn the call over to Jonathan. Jonathan Gilbert Maurer: Thank you, Adam, and good morning, everyone. 2025 and early 2026 were important periods for OPAL Fuels Inc. from an operational standpoint as well as in strengthening our capital structure and positioning the company for the next phase of growth. Recently, we successfully completed a $180 million Series A preferred facility, which allowed us to fully repay an existing $100 million preferred investment and further strengthen the company’s liquidity position. In addition, we drew approximately $128 million under our senior secured credit facility, which provides improved visibility to execute on our project portfolio. On the upstream side, our focus remains on improving performance across our existing operating assets while advancing the next wave of RNG projects currently in construction and development. Production from facilities commissioned late in 2024 significantly increased during 2025 and sets up a stronger 2026 operating position when compared to this time last year. I want to highlight that our upgraded operating teams have done well in bringing efficiencies to drive higher production. Despite an extraordinarily cold winter resulting in difficult operating conditions, same-facility sales growth has been meaningful, and we expect this trend to continue. Also contributing to our 2026 production growth is a full year of operations at our Atlantic facility, which came online in late 2025 and is performing well, ramping quicker compared with recent project experience, driven by higher gas flows at the landfill, allowing us to operate at higher production levels entering 2026. Looking ahead, we continue to progress our projects in construction, as we expect them to contribute to the next phase of growth for the company. On the downstream side, we continue to expand our Fuel Station Services platform, which supports RNG and CNG fueling infrastructure for heavy-duty trucking fleets. At year-end, we have grown to 61 OPAL Fuels Inc.-owned stations. While the trucking and logistics sector experienced macro softness during 2025, market fundamentals stabilized and have improved entering 2026. These improving macro fundamentals are supporting a reengagement by fleets on their deferred truck purchases. OPAL Fuels Inc. believes CNG and RNG are garnering more attention as a replacement for diesel due to lower and more stable fuel costs, regulatory clarity regarding combustion engines, and long-term tailwinds from sustainability initiatives. Many fleet operators remain highly focused on fuel cost stability and carbon reduction, and RNG and CNG continue to be among the most practical solutions for large-scale heavy-duty fleet decarbonization. As a reminder, CNG and RNG are fueling only 2% of the heavy-duty trucking market and represent a large growth opportunity. Our downstream platform provides critical services and infrastructure for the fleets as they transition. Expanding this infrastructure also supports the long-term economics of our RNG production platform by providing direct access to transportation fuel markets. While large-scale deployments will take time to fully translate into financial results, the work we are doing today is positioning OPAL Fuels Inc. for meaningful growth in this segment over the coming years. We continue allocating capital to the Fuel Station Services segment, positioning OPAL Fuels Inc. to deliver on our 2026 operating plan and beyond. I will now turn the call over to Kazi to discuss the quarter’s financial performance. Kazi? Kazi Kamrul Hasan: Thank you, Jonathan, and good morning to everyone joining today’s call. This quarter showed continued operational progress across the platform. This morning, we issued our earnings press release, posted an updated investor presentation on our website, and filed our Form 10-Ks. Before walking through the details, I would frame our financial performance around three key points. First, the resilience of our earnings despite commodity headwinds in 2025. Second, continued operational growth across both our RNG and Fuel Station Services platforms. And third, the strengthening of our liquidity and capital position to support disciplined growth in 2026 and beyond. Our 2025 results demonstrate the strength of our platform. In the fourth quarter, revenue was $99.8 million and adjusted EBITDA was $34.2 million, compared with $80.0 million and $22.6 million in the same period last year, driven primarily by increased production and recognition of 45Z tax credits. For the full year, OPAL Fuels Inc. generated adjusted EBITDA of $90.2 million, essentially flat year over year despite declining environmental credit prices. D3 RIN pricing declined roughly $0.70—equivalent to approximately $33 million in adjusted EBITDA—with our realized RIN price averaging $2.45 in 2025 compared to $3.13 in 2024. This decline offset much of our operational progress achieved during the year. I would also remind listeners that the ISCC pathway, which expired in November 2024, contributed in excess of $10 million to adjusted EBITDA in 2024. Operational growth across the platform helped offset these headwinds. RNG production reached 4.9 million MMBtu in 2025, representing 28% growth year over year, with fourth-quarter production exceeding 1.3 million MMBtu, up approximately 24% from 2024. As recently commissioned facilities moved through their first full year of operation—including a full year of Atlantic in 2026—we began to see the benefits of scale and EBITDA flow-through embedded in the platform. Our Fuel Station Services segment continues to strengthen the stability of our earnings mix. In 2025, segment EBITDA increased to $46.7 million from $38.4 million in 2024, 22% higher than 2024. Although this segment exhibited strong growth in 2025, it was below our guidance, primarily due to deferred investment decisions by our fleet partners regarding new stations and new truck purchases. This quarter’s results also reflect the restatement of our G&A presentation, where facility-specific G&A is now allocated to operating segments rather than corporate. We restated 2024 for comparability and will apply this approach going forward, as we believe it better reflects segment economics. Turning to liquidity and capital deployment, we ended the year with $184 million of total liquidity, including approximately $30 million of cash and short-term investments, $138 million of undrawn capacity under our term facility, and $16 million of revolver availability. Capital expenditures and investments in joint venture projects for the quarter were approximately $16 million, primarily related to new RNG facilities and OPAL Fuels Inc.-owned fueling stations, and $90 million for full-year 2025. In 2025, we monetized approximately $43 million of investment tax credits. Our current liquidity is further bolstered by the recent closing of the $180 million Series A preferred facility, operating cash flow, and drawdown of the remaining $128 million of availability under our term loan facility. Looking ahead, we are providing 2026 adjusted EBITDA guidance of $95 million to $110 million, representing approximately 14% growth at the midpoint compared to 2025. We expect RNG production between 5.4 million and 5.8 million MMBtu, representing more than 14% growth versus 2025, driven primarily by improved performance from our existing asset base, continued ramp of recently commissioned projects, and marginal contributions from projects entering service during 2026. Our guidance also considers what has been a challenging winter to start 2026. Additionally, we are assuming approximately $15 million to $20 million of 45Z credits during the year. Stepping back, our financial strategy remains clear. We are focused on growing operating and free cash flow and allocating capital within the capacity of our operating cash flow, balance sheet strength, and access to capital markets. OPAL Fuels Inc. is generating an increasingly balanced and durable earnings base, with the flexibility to accelerate growth where returns justify it. With that, I will turn the call back over to Jonathan for closing remarks. Jonathan? Jonathan Gilbert Maurer: In closing, we remain well positioned for continued disciplined execution of our strategic growth objectives and the expansion of OPAL Fuels Inc.’s vertically integrated platform. I will now turn the call over to the operator for Q&A. Thank you all for your interest in OPAL Fuels Inc. Operator: Thank you. As a reminder, if you would like to ask a question, please press 11 on your telephone. You will hear that automated message advising your hand is raised. We also ask that you please wait for your name and company to be announced before proceeding with your question. Our first question for today will be coming from the line of Derrick Whitfield of Texas Capital. Your line is open. Derrick Whitfield: Good morning, all, and congrats on a strong year-end update. Adam J. Comora: Thanks, Derrick. Thanks, Derrick. Good morning. Derrick Whitfield: Starting with liquidity and your growth outlook on slide six. With the preferred financing behind you, could you speak to what the next phase of growth looks like for OPAL Fuels Inc. beyond the projects that are currently in your development queue? And if you could also just comment on how much CapEx is required to bring those projects in your development queue online. Adam J. Comora: Yes, thanks, Derrick. This is Adam here. I will maybe start, and then if Kazi or Jonathan want to fill in. I think most, or hopefully most, saw that we updated our liquidity position on March 10 and currently have about $160 million of liquidity available to complete the projects that we had noted that are in construction. It is about 2.8 million MMBtu of in-construction projects, and some Fuel Station Services fueling stations as well. In addition to that liquidity position to complete what we have announced, we have also got $60 million unused drawn capacity on the preferred facility, plus operating cash flows that continue to grow and are also available for new capital deployment. We have a number of robust project opportunities between new biogas rights, conversion projects on our renewable power, and what we are really getting excited about is allocating more capital to the Fuel Station Services business. If you just look at what is in construction today and what that could contribute to EBITDA and cash flow, we always talk about rough guidance of $20 per MMBtu of EBITDA and cash flow from RNG production. If you do the math on what we have in construction and earmarked with that $160 million of liquidity that is available today, based on how these things come out of the gates, that could be another 2.0 million of production in the early days of production. We think we are in a really good spot to grow our EBITDA and operating cash flow from what we have announced so far. We have a number of projects on the upstream side that we think are really good candidates to deploy and invest capital. We are always going to be mindful of our balance sheet and making sure that our liquidity and leverage ratios stay lockstep with the cash flow generation of the business. You should expect us to talk about some new projects on the RNG production side, and we are really hopeful and optimistic that a larger part of our capital will be getting deployed into fuel stations. I know there will be some questions later on fleet conversions and what our outlook is there. You should think about OPAL Fuels Inc. as a growth company. If you look at our four-year track record, we think we have the capital in place and operating cash flow to continue to grow in those sorts of fashions as you look at us over the next several years. Derrick Whitfield: Great. And then maybe perhaps for Jonathan. You have accomplished a nice increase in your inlet utilization levels in 4Q. Could you speak to some of the drivers and also highlight where you expect utilization levels to level out based on some of the capture opportunities Adam referenced in his prepared remarks. Jonathan Gilbert Maurer: Sure, and thanks for the question. We are really proud of the team that we have been building on the operations side. We have been growing our capabilities both on the upstream and downstream side, and I think this is reflected over the course of the year in terms of the operations of these projects, which we measure through the efficiency and availability of the projects, which has increased over the course of 2025 from the roughly 70% level closer to the 80% level now that we are seeing. So really strong kudos to the team for doing that. In terms of where we are headed with it and what the possibilities are, you really see the opportunity for continued improvement there, and we think about kind of an 85% to 86% utilization level as something that ought to be readily achievable. In certain instances, we are able to keep that as well. You combine that utilization with our open and growing landfills that our projects are located on, as well as the headroom for additional capacity—the projects are larger than the amount of gas coming out. As a result, we see growth not only from operating the projects better but also from the growth in the gas. That gives us a lot of optimism in 2026. You have hit on a focus of ours this year. We are going to be very focused on growing that utilization, growing the gas, and resulting in better output per project—for each of the projects and for the whole portfolio in total. We are looking forward to that. Thanks. Derrick Whitfield: That is great, guys. Sounds like it is very capital-efficient growth for you in 2026. Operator: Thank you. One moment for the next question. Our next question is coming from the line of Matthew Blair of TPH. Your line is open. Matthew Blair: Thank you, and good morning, everyone. Maybe just to stack on to the last question, are there any specific examples of things that you are changing going forward to help improve operations, and are there any specific assets where you are really looking to improve the overall utilization? And then also, I think there was a comment that most of the growth is coming from the existing asset base, but just want to check, are Cottonwood and Burlington still expected to start up in 2026? I guess the idea would be that due to the ramp process that probably would not help out too much on 2026; that would really help out more in later years. Is that the right way to think about it? Thank you. Jonathan Gilbert Maurer: Yep. Thank you very much. First off, most of the growth in output that we are looking forward to this year is coming from the same-store sales. We have really incorporated very little from those projects into our guidance. While we do continue to focus on those projects in construction and bringing them online, as I said, I think our focus really is on operating efficiencies and availabilities for our existing projects. In terms of some specific examples, some of our projects, for example, have no nitrogen rejection units associated with them. In projects like that, we are focused on tuning gas to a higher quality—higher methane and lower amounts of nitrogen and oxygen. For other ones with nitrogen rejection, we are focused on increasing the amounts of the gas there. In terms of the teams themselves, we are really focused on training across the platform in each of the units. These are process-driven projects, and the processes require a balance across the quality of the gas, the quantity of the gas, the membrane CO2 rejection, the nitrogen rejection, PSAs, etc. Balancing that has been a bit of a learning process for the team over the last couple of years. That is why we are seeing the continued improvement there. Other projects that are closer to, or at, their nameplate capacity, in terms of gas, we are focused on improving the quality of the inlet gas so that for every unit of gas that comes in, if you have more methane in that unit of gas, then you will have greater output. We are focused on those aspects as well, and we just see that focus continuing during the course of the year with our output increasing. Adam J. Comora: I would just add there, this is Adam. There are no significant delays in either of those two projects. We just think it is best to be conservative in terms of the exact timing and the exact ramp. So we have focused our guidance around just improving the operations at the existing facilities. Matthew Blair: Okay. Sounds good. Thanks for the color. And then could you talk about the relationship going forward with NextEra? They called the preferred, but I think they also have an equity ownership in OPAL Fuels Inc. and then a fairly extensive commercial relationship with you. Is anything changing on those fronts? Adam J. Comora: I will take that one. NextEra has been a terrific partner of ours for a long period of time, and we do still work with them quite closely on that environmental credit trading agreement that you referenced. They still are 50% owners in our Noble and Pine Bend projects. We continue to work with NextEra, continue to view them as a good partner. We advocate side by side with them on a lot of key issues and do not see anything really materially changing from that perspective at this point. Matthew Blair: Sounds good. Thank you. Operator: Thank you. One moment for the next question. Our next question will be coming from the line of Ryan James Pfingst of B. Riley Securities. Your line is open. Ryan James Pfingst: Just curious about a KPI you have referenced in the past. Do you have a goal for how much MMBtu capacity you would like to place into construction in 2026? Adam J. Comora: This is Adam here, and I appreciate the question. We do see a significant, strong pipeline of new project opportunities to place into construction, both from new greenfield biogas rights that we have secured and also renewable power conversion projects, which we have a few sizable ones in our portfolio. As I was trying to reference in an earlier question, we also see other opportunities in our Fuel Station Services segment to invest in fuel stations. We also see opportunistic M&A opportunities, and we will continue to invest capital in our business, being mindful of our balance sheet strength and liquidity. We feel that as we are allocating capital across those different segments, different opportunities may not be all on the production side. They may be in these other areas of our business, which, by the way, there are so many reasons why we like the Fuel Station Services segment—diversity of earnings stream, open-ended growth opportunity where we think diesel-to-CNG could be a really interesting, large growth potential, and a little diversity away from some of the regulatory policy out there. We do not think it is wise just to talk about one segment for where we are investing capital. We do expect to put more RNG projects into construction. We have a large RNG production growth profile just from what we have announced already. That is how we are thinking about it, but you should expect us to continue to invest in production assets. Ryan James Pfingst: Appreciate that color. And it leads up to my follow-up, which is around CapEx, and that number for 2026 looks like $154 million this year. Curious if you could give us a sense of the breakdown between RNG projects and fuel stations there. Kazi Kamrul Hasan: Let me give you a bit of a carryover from what Adam just mentioned. The $154 million primarily includes most of the committed construction projects we have and a little bit of committed downstream dispensing station investments as well. So the lion’s share is production, and a smaller part is dispensing stations. I want to reiterate that, as you have heard from Adam, we would prefer not to provide guidance specifically around where we are going to make the most of our investments. Every investment will be competing for the dollar that is available from our capital, operating cash flow, and the future capital availability from the capital markets. We are going to be a little bit more judicious, so that is where I am going to end it. Operator: Thank you. One moment for the next question, please. The next question will be coming from the line of Adam Samuel Bubes of Goldman Sachs. Your line is open. Adam Samuel Bubes: Hi. Good morning. It sounds like you are seeing some green shoots in Fuel Station Services, but as you alluded to, because of the lag, it is maybe a 2027 story. What level of growth are you embedding in guidance for Fuel Station Services in 2026? And is low 20s the right way to think about margins in that segment on a sustained basis, or are there any levers for margin expansion? Adam J. Comora: Adam, this is Adam here. A couple of things. Yes, you are correct; there is always, just like on our RNG project investments that take 18 months or so on average, when you invest the capital and when you start recognizing revenues, EBITDA, and cash flow. Fuel Station Services has a slightly shorter cycle when we invest in new fuel stations, but we really think of 2026 as the business development activity that sets the stage for future growth. So in 2026, we are not anticipating the same levels of growth in Fuel Station Services that we have experienced after the next several, but we are really excited about some of those green shoots. We can go into what those macros are, where we see them alleviating, and some interesting market structure dynamics that we think we are breaking through there. As for margin expansion, from a margin perspective, it is a higher-margin business when we own fuel stations and dispense RNG at those stations versus typical construction and service margins. We do anticipate, as we own more fueling stations, that the margins will naturally move higher in that segment, and that is where we see a lot more of the growth coming. Kazi Kamrul Hasan: When we do the Fuel Station Services capital investments, we definitely rely on a base level of dispensing volume, but in more cases than not, we see embedded growth in fuel dispensing—similar to the growth we have in production on the upstream side. We also see the throughput going through these stations in the downstream side as well. There are similar types of growth embedded there, and we do expect that to be realized. Adam J. Comora: You should also understand that there is certain inter-segment tightening in the dispensing market, which also assists in margins on the Fuel Station Services side. Adam Samuel Bubes: And then maybe as the natural follow-up there, based on your conversations with customers and what you are seeing in the macro environment, what is giving you that underlying confidence and visibility for a potential inflection in 2027 and the potential rise in natural gas vehicle adoption? Adam J. Comora: I appreciate that question. It is something that I think about quite a bit as I look both to the U.S. market and what is happening overseas in places like China, which, by the way, I think is deploying about 30,000 natural gas engines, the X15, each year. China is on a path to have its heavy-duty trucking move up to 20% to 25% of its fuel mix. We have not gotten there yet in the U.S. We are at about 2%, which is really interesting when you think about it, given the position the U.S. has in natural gas as a commodity and the low cost and stable nature of that versus diesel and oil. Specifically in 2025, there were macro headwinds that were affecting some of our largest customers in the logistics and trucking space—tariffs, a continued freight recession, some overhang on combustion engines, and initial testing of the X15-liter engine. All of those factors delayed some investment decisions, either around deferred new truck purchases or new station purchases. As we are now moving into 2026, a lot of those fleets have started acclimating to the macro environment and started thinking about new truck purchases and reengaging. You have now moved through the X15 testing phase, so fleets are more comfortable with the technology and the performance. The volatility and absolute price that folks are starting to see in diesel and oil are really making natural gas a lot more attractive, and then you layer in the fact that it also assists those that are thinking about their sustainability metrics or emissions profiles. It is really setting up for what we think are investment decisions here in 2026 around this technology. CNG and RNG have proven themselves as something that works for fleets. Those are some of the things that have either alleviated or are new potential positive macros with what we have seen with diesel and oil prices. One thing that is interesting about the U.S. versus China is the market structure. Here in the U.S., you still have to work through not only the engine price, the OEMs, and the dealerships in order to get that product to market. We are encouraged that a lot of those things are starting to break through. One other interesting one here in the U.S. I will touch on is fuel surcharges, where the economics look good on paper, and then fleets have to think about how to deal with fuel surcharges and make sure that it does not disrupt how they are doing business. We are seeing movement across that whole spectrum of either macros or market structure here, and we are cautiously optimistic that the business development activity will accelerate in 2026 and then really provide some visibility into 2027 and beyond. Adam Samuel Bubes: Very interesting. Thanks so much. Operator: Thank you. If you would like to ask a question, please press 11 on your telephone. One moment for the next question. Our next question is coming from the line of Betty Zhang of Scotiabank. Your line is open. Betty Zhang: Thanks. Good morning. Thanks for taking my question. In your opening remarks, you mentioned the RFS. I just wanted to get your take on the cellulosic side. Do you expect any impacts on D3 RINs, and what are your expectations there? Adam J. Comora: I appreciate that question. This is Adam again. As we had noted and people probably saw, the EPA did send their final rule over on 2026–2027 to OMB, and we hope that recent geopolitical events do not slow down the process, as we have seen a little bit of an oil price shock and that sort of thing. We hope that the EPA still sticks to ordinary course of business timing and it gets released pretty soon. What I would say about the cellulosic category is we feel really good about the bipartisan support that we have in Congress as it pertains to tax policy and how they view RNG in the spectrum of smart or pragmatic policy on where folks should invest. I would say it still feels like the cellulosic category is not getting the same level of attention as liquid agricultural biofuels, where it seems apparent there is clear focus to support those areas and really lean in. From the cellulosic category, it is not a lean-out; it is not a lean-in; it is business as usual. I do not think we are really expecting any real surprises there, and we think the cellulosic category remains stable. As I said in the prepared remarks, there could be an upward bias in the cellulosic category with the entire biofuels complex. It just does not feel like it is the area of focus, and there are other areas where the EPA may be trying to emphasize. Betty Zhang: Great. Appreciate the detailed answer. For my follow-up, I wanted to ask on 2026 EBITDA guidance. Would you be able to share a bit more color between your different segments? Adam J. Comora: I am going to pass it over to Kazi in a moment here. We are not giving specific segment guidance because that will also be driven by where we invest capital and that sort of thing. One thing I do want to caution folks about is the challenging operating environment that we have experienced so far in the first quarter. I know there is another wave of storms that is rolling through right now. It was factored into our guidance, but there was a challenging start to the year with the snowstorms, which impact production a little bit and impact operating costs a little bit. We do not give specific quarterly guidance; I just wanted to caution folks on the first quarter. I will pass it over to Kazi. Kazi Kamrul Hasan: Thanks, Adam. This is a great question. As Adam noted, we have had a hard winter. Obviously, it is going to have an impact on our upstream production and likely on how much we are dispensing through our dispensing network, too. For the year, think about the growth we have seen on upstream production—similar type of growth we can expect. Downstream, 2026, as Adam mentioned, is going to be a more pivoting year. Most likely, the growth would be more around 2027 or onwards. I will stay away from giving you specific guidance, but you can look at our existing breakdown; that should give you an understanding of what we are adding. Operator: Thank you. I am not showing any more questions in the queue. I would like to turn the call back over to Adam J. Comora for closing remarks. Please go ahead. Adam J. Comora: We appreciate everybody logging in today for their interest in OPAL Fuels Inc., and we look forward to sharing more updates in the future. Operator: This does conclude today’s programming. Thank you all for joining. You may now disconnect.
Operator: Welcome to Comtech Telecommunications Corp.'s Conference Call for the Second Quarter of Fiscal 2026. As a reminder, this conference call is being recorded. I would now like to turn the call over to Maria Ceriello, Senior Director of FP&A of Comtech. Please go ahead, Maria. Maria Ceriello: Thank you, operator, and thanks, everyone, for joining us today. I'm here with Ken Traub, Comtech's Chairman, President and CEO; and Mike Bondi, our CFO. After Ken and Mike's remarks, they will be available for questions together with Daniel Gizinski, President of our Satellite and Space Communications segment; and Jeff Robertson, President of our Allerium segment. Before we get started, please note we have a detailed discussion of the quarter in the press release and 10-Q we issued this afternoon, which are available on our website as well as the SEC's website. Certain information presented in this call will include, but not be limited to, information relating to the future performance and financial condition of the company, the company's plans, objectives and business outlook and the plans, objectives and business outlook of the company's management. The company's assumptions regarding such performance, business outlook and plans are forward-looking in nature and always involve significant risks and uncertainties. Actual results could differ materially from such forward-looking information. Any forward-looking statements are qualified in their entirety by cautionary statements contained in the company's SEC filings. With that, I will turn it over to Ken. Ken? Kenneth Traub: Thank you, Maria, and good afternoon, everyone. I appreciate you joining us today. I'm going to discuss some key trends, and Mike will discuss our financials in more detail. Comtech continued on its positive trajectory of improvement as we delivered our fourth consecutive quarter of positive operating cash flow and ended the quarter with approximately $50 million of total liquidity. With net bookings of $175 million in the quarter, we've achieved a book-to-bill ratio of 1.64x, increased our backlog to $732 million and maintained our revenue visibility at approximately $1.1 billion. As previously disclosed, we've streamlined our product lines and are more selective in the customer orders we accept. As a result of these deliberate decisions as well as the temporary impact of the U.S. government shutdown, consolidated net sales decreased from $127 million in the second quarter of fiscal 2025 to $107 million this past quarter. But importantly, we increased gross profit from $34 million to $36 million, increased our gross profit percentage from 27% to 34% and increased adjusted EBITDA from $2.9 million to $9.1 million. These improvements are due to the initiatives we have implemented to enhance operational efficiency, reduce the cost structure and focus our product development and sales efforts on strategic higher operating margin products. As a result of our improved performance and stronger financial position, we continue to see increased support and enthusiasm from both current and prospective customers, vendors and employees. Now I will provide some commentary on our business units. Our Satellite and Space Communications business continues to improve as a result of our transformation initiatives under Daniel Gizinski leadership. As anticipated, net sales in the Satellite and Space segment declined by 31% as a result of the company's decision to phase out and eliminate certain low-margin and working capital-intensive revenues as well as the impact of the recent U.S. government shutdown. Examples of revenues that have been phased out include contracts for services such as the Very Small Aperture Terminal, or VSAT satellite Systems and Services contract and the Global Field Services Representative, or GFSR contract as well as legacy troposcatter-related products and services. As part of this repositioning, S&S is pursuing sales of innovative, higher-margin solutions such as digital common ground modems, network solutions and rapidly deployable multipath radios, which we refer to as MPRs. Despite the decrease in net sales, S&S improved its operating income to $2.5 million in the second quarter of fiscal 2026 compared to $1.2 million in the second quarter of fiscal 2025. The year-over-year improvement in Satellite and Space operating income primarily reflects the cost reduction and optimization initiatives we have implemented, partially offset by increased research and development expenditures. In terms of recent accomplishments, in the second quarter, among other key wins, Satellite and Space was awarded over $5.5 million of funded orders from several international government end customers who purchased our troposcatter family of systems, including our multipath radios and Modular Transportable Transmission Systems, which we refer to as MTTS. Satellite and Space also received incremental funding in excess of $4.5 million for ongoing training and support of complex cybersecurity operations for U.S. government customers. We have begun deliveries of initial production units to our prime contractor in support of a next-generation satellite modem contract. We anticipate transitioning into full production during fiscal 2026. A second next-generation product with the same prime contractor has significantly progressed in development, and it, too, is expected to begin production deliveries in this fiscal 2026. Furthermore, we have recently begun deliveries of our first digital common ground 7000 high-speed, small form factor, software-defined modems to Lite Coms for integration, interoperability and performance testing across diverse government and commercial satellite communications applications and ground terminal configurations. DCG-7000 modems support DVB-S2X, along with other protected waveforms, and incorporate modern cybersecurity design principles, including integrated transmission security, also known as TRANSEC for over-the-air transmission. These are important milestones as they signify the long-awaited migration from low-margin, nonrecurring engineering efforts to higher volume production with improved operating margins and faster cash conversion cycles. Now I'll provide some commentary on our Allerium segment. Allerium led by Jeff Robertson, continues to perform well. Net sales were $56.2 million, an increase of 6.2% compared to the second quarter of fiscal 2025. Compared to the prior year period, Allerium experienced higher net sales in all 3 product areas: location-based next-generation 911 and call handling solutions. Such increase reflects the continued adoption of Allerium solutions by new customers as well as the migration of more PSAPs onto Allerium's Next-Generation 911 core services, cloud-based platforms and monthly recurring revenue streams. Allerium's operating income was $5.5 million compared to $3.4 million in the second quarter of fiscal '25. The year-over-year increase reflects higher net sales and gross profit, both in dollars and as a percentage of segment net sales. Allerium is also moving forward with cloud-based and AI-infused software applications designed to deliver advanced emergency communication platforms to its customers. In the second quarter, Allerium received over $107 million of incremental funding toward a multiyear contract extension valued in excess of $130 million by Allerium largest customer, a leading U.S. telecommunications company in the United States. Allerium was also awarded in excess of $10.5 million in multiyear funding towards the deployment of a new next-generation 911 system in the South Central region of the United States. With these and other key strategic wins in the U.S., Canada and Australia, we believe Allerium's position as a trusted leader in 911, Next-Generation 911 and public safety applications translates well to delivering similarly sophisticated solutions for other types of emergencies. Before turning it over to Mike to cover the financials in more detail, I would first like to address one more development of significance during the quarter. As previously disclosed, in March 2024, Comtech terminated Ken Peterman, its President and CEO at the time, for Cause. Also as previously disclosed, Mr. Peterman filed a claim against the company with the American Arbitration Association, claiming he was owed direct contractual damages in excess of $6 million and consequential damages in excess of $35 million. Comtech has defended itself against Mr. Peterman's claims and filed counterclaims against Mr. Peterman seeking damages for breach of fiduciary duty, malicious prosecution, abuse of process, breach of contract and defamation. In January of this year, Mr. Peterman's Counsel wrote to the American Arbitration Association with 2 motions. First, he voluntarily asked to withdraw Mr. Peterman's claims against Comtech; and second, they sought dismissal of Comtech's counterclaims against Mr. Peterman. In January 2026, the arbitrator granted Mr. Peterman's motion to withdraw all of his claims against Comtech in the arbitration, but rejected Mr. Peterman's motion for dismissal of Comtech's counterclaims. Accordingly, Comtech's counterclaims are still pending against Mr. Peterman. Finally, I would like to thank our shareholders for their strong support, including the approval of all of the company's proposals at the fiscal 2025 Annual Meeting of Stockholders on March 9. With that, I'll turn the call over to Mike to walk through the financials. Mike? Michael Bondi: Thank you, Ken, and good afternoon, everyone. Overall, the successful turnaround continues to take root. We are pleased to be delivering another quarter of improved profitability and operating cash flows relative to our recent past. Now let's turn to the financials. Net sales for the second quarter were $106.8 million. This compares to $126.6 million in the second quarter of last year. As Ken just referenced, net sales reflect the impact of the decision to phase out certain low or no-margin revenues in our Satellite and Space Communications segment as we continue to streamline our product lines and focus on strategic, higher-margin opportunities while optimizing cash flow. Timing delays as a result of the recent but prolonged U.S. government shutdown also impacted S&S orders and net sales this past quarter. As for Allerium, Allerium's growth continued this past quarter with Allerium reporting higher net sales in all 3 product areas as compared to the prior year period. Gross profit in the second quarter was $36.2 million or 33.9% of net sales, representing an increase from $33.7 million or 26.7% of net sales in the second quarter of fiscal 2025. This improvement demonstrates the progress we are making in improving our product mix, including our ongoing shift back to higher volume production orders in our satellite ground infrastructure solutions product line. The improvement in our quarterly gross profit percentage builds upon the improving quarterly trend achieved throughout all of fiscal '25 and the first quarter of fiscal '26. In our second quarter of fiscal 2026, we reported an operating loss of $1.2 million, which compares to an operating loss of over $10 million in the second quarter of last year. Our second quarters for each year reflects several noncash and onetime charges as further discussed in our Form 10-Q filed earlier today. Excluding such items, our consolidated operating income for the second quarter of fiscal 2026 would have been $6.2 million or 5.8% of net sales as compared to roughly breakeven in the second quarter of last year. The improvement primarily reflects higher gross profit, both in dollars and as a percentage of consolidated net sales and lower selling, general and administrative expenses, including lower restructuring costs, no proxy solicitation costs and lower amortization of stock-based compensation, offset in part by higher CEO transition costs that included a net benefit from the recovery of certain legal-related expenses in the prior year period. The improvement in our financial performance resulted in $9.1 million of adjusted EBITDA for the second quarter, a 200% plus increase over the $2.9 million in the second quarter of last year. As Ken mentioned, net bookings were $175.4 million in the second quarter, resulting in a strong book-to-bill ratio of 1.64x. This compares to 0.63x in the prior year comparable period. Bookings for our second quarter included over $107 million of incremental funding towards Allerium's multiyear contract extension with a large domestic Tier 1 mobile network operator. The improvements in our financial performance also resulted in $4.9 million of positive operating cash flows for the second quarter of fiscal 2026 compared to roughly breakeven cash flows in the second quarter of last year. As Ken mentioned, this marks our fourth sequential quarter of positive operating cash inflows. The significant improvement from a year ago reflects favorable changes in net working capital requirements due primarily to improved accountability and process disciplines as well as the timing of and progress toward completion on contracts accounted for over time, including related shipments, billings and collections against those contracts. These activities allowed us to further reduce receivables and inventory levels from July 31, 2025. Also, as a result of our enhanced liquidity, operating cash flows in the more recent period reflect our concerted efforts to maintain lower levels of accounts payable in order to improve the efficiency of our supply chains. Now turning to the balance sheet. As previously disclosed, we amended our credit facility and subordinated credit facility on October 17, 2024, March 3, 2025, and again on July 21, 2025, to, among other things, suspend testing of the net leverage ratio and fixed charge coverage ratio covenants until the 4-quarter period ending on January 31, 2027. These amendments, combined with our significantly improved operational and financial performance led to our enhanced financial flexibility and importantly, removal of our going concern disclosures in our fiscal 2025 Form 10-K filed in November of 2025. As of January 31, 2026, total outstanding borrowings under our credit facility were just about $125 million. Of such amount, $7.6 million was drawn on the revolver loan. And during the second quarter, we repaid $10 million against the revolver loan and made our scheduled principal payment against the term loan. Total outstanding borrowings under our subordinated credit facility were $102.8 million, including interest paid in kind or accrued on the $35 million subordinated priority term loan. Such total does not include the $32.5 million of make-whole amounts associated with the $65 million portion of the subordinated credit facility. The liquidation preference of our convertible preferred stock was $213.4 million, excluding potential increases under certain circumstances. And our available sources of liquidity on January 31, 2026, totaled $49.9 million, which includes qualified cash and cash equivalents of approximately $30.2 million and the remaining available portion of the revolver loan of $19.6 million. Now with that, let me please turn the call back over to Ken. Ken? Kenneth Traub: Thank you, Mike. To sum up briefly, Comtech has executed a successful transformation and is now a much stronger company. Our revitalized financial health is increasingly reassuring to our current and prospective employees, customers and vendors. I believe this creates a positive flywheel effect as our recent strengthening of our financial position is reassuring to employees, which aids in retention, recruitment and motivation, reassuring to customers, particularly those that rely on us for mission-critical technologies and services and reassuring for vendors who now see us as a reliable partner ready to deepen critical relationships. As a reminder, Jeff and Daniel will be joining us for Q&A. With that, operator, please open the call to any questions. Operator: [Operator Instructions] We'll take a question from Keith Housum with Northcoast Research. Keith Housum: Ken, as we look at the revenue in the quarter, how much of that revenue decline was due to the fiscal discipline you guys are showing versus prior quarters? And perhaps how much was from the federal business? And is that federal business that kind of lost or pushed out to later quarters? Kenneth Traub: So first of all, Keith, welcome. Nice to have you. And if you compare this year to last year, pretty much all of the decline in satellite and space is the result of phasing out old legacy business that was very low margin and not good business to have. That's the GFSR, the VSAT contract and the legacy troposcatter. In addition, we did have delays due to the government shutdown. That was offset by new revenue, particularly in the launch of the next-generation troposcatter products as well as the digital ground modem. Keith Housum: Great. Great. As we look forward, is there any more of that low-margin business that still has to be worked off just because of prior commitments or anything of that nature? Kenneth Traub: No. We phased that revenue out. Keith Housum: Okay. Great. And then this is kind of new to the story here. Just trying to understand the 2 modems that are hopefully going to reach production sometime here in the second half of the year. Is there any way to kind of dimensionalize the opportunity just as kind of we think about the opportunity for the end of the year and perhaps outwards as well? Kenneth Traub: Keith, can you repeat the question? Keith Housum: Yes. Just on the 2 contracts that were going towards hopefully to production here in the second half of the year. I'm just trying to understand if I can -- if you guys can dimensionalize here or provide some context about what the true opportunity is for Comtech. How do we think about it perhaps in revenue or number of units or anything? I'm just trying to get my hands around what the opportunity might be. Kenneth Traub: We want to be careful in the specifics. But Mike, you want to give them some guidance on that transition? Michael Bondi: Sure. Keith, in terms of the 2 -- there's multiple modems that are coming online actually. One is already in low rate production, and we are expecting that to kick in, in the second half. This is a platform that we think will survive for many years. The other program, which we refer to as the EDIM program. We're just about finishing up with development and gearing up for production towards the tail end of the fiscal year. And that's another, I would say, very long-term program. It's the successor to the EBEM modem that was sold by Viasat, and that was like a 10-year program. And I want to say tens of thousands of modems were sold over that period of time. So that's like if you think about the installed base that we're going to likely upgrade, maybe not every one of those systems, but there's a good quantity out there to upgrade. Keith Housum: Great. Okay. I appreciate that. And if I can get one more in here, if you guys don't mind. Jeff, nice to meet you here over the phone. In terms of Allerium, I understand in the PSAP space, AI is being introduced quickly amongst yourself and competitors. Can you perhaps provide a little bit of color about how you guys are embracing AI with your product portfolio? I guess, this is the first part. And the second part, how far along are you guys in the transition to the cloud for your customers? Or are you guys already there? Jeff Robertson: Yes. Thanks, Keith, both great questions. So as it comes to AI and the PSAPs, which are the 911 and dispatch centers, it's -- where it's mostly coming into play is they're being bombarded with many different forms of information during an emergency request for help. And we're using AI to kind of collect all the different sources of data and paint a simple emergency response picture so that they can dispatch the right emergency personnel and first responders to appropriate scene. So that's where we're seeing most of the work being done with AI. But throughout our company, we're also using it in other areas for productivity enhancement, whether it be for development and coding or other just administrative tasks. But from -- I think your question was more on the product. But where we're seeing it early on is in the gathering of the information during a request for help or emergency. On the second part of your question as it relates to cloud, I think we're a good ways away. I would say we're 3 quarters of the way down the road in moving our products to cloud. You're seeing announced last year a new product called Mira, which is coming out shortly, is our cloud-based 9-1-1 call handling platform. We've had some really good feedback in the market for that. But we're also moving many of our services we provide in the NextGen 9-1-1 core services, we'll be moving to a private cloud infrastructure. So I'd say we're 3/4 of the way through. Operator: [Operator Instructions] And at this time, there are no further questions in queue. I will now turn the meeting back to Ken for any additional or closing remarks. Kenneth Traub: Well, thank you all for joining us today, and we look forward to speaking with you again soon. Thank you all. Have a good evening. Michael Bondi: Take care. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
President Trump has said that public companies should have to report earnings only twice a year.
US stock benchmarks are now bouncing much higher as oil retreats. Participants are reacting positively to the few ships that successfully crossed the Strait of Hormuz.
A possible delay to a meeting between Donald Trump and Xi Jinping may not derail the broader U.S.-China truce taking shape on trade and strategic issues.
President Donald Trump said Monday that some U.S. allies are not willing to join a coalition to protect tankers in the Strait of Hormuz. Trump said some countries have agreed to help, but he declined to name them.
Prediction markets on Kalshi and Polymarket correctly predicted most Academy Award winners, as trading volume tied to the Oscars surged.
The Trump Administration is shifting to Section 301 tariffs, targeting countries for alleged child labor, after Supreme Court setbacks on reciprocal tariffs. Section 301 offers a firmer legal foundation and more presidential discretion, likely resulting in tariffs with greater staying power and fewer immediate legal vulnerabilities.
The IPO market will be slow until big names like SpaceX, OpenAI, and Databricks go public, says Matthew Witheiler, head of late-stage growth at Wellington Management. He discusses what will drive some of these high value startups to go public and what potential returns are still to be had, with Caroline Hyde and Ed Ludlow on “Bloomberg Tech.
The Iran was isn't something to be ignored. It is big enough that it could actually stop the rally in its tracks, experts say.
Every day more than $4 billion worth of goods cross the United States' borders with Canada and Mexico—U.S. auto parts headed for car factories in northern Mexico, cartons of Mexican avocados bound for California supermarkets, Canadian aluminum destined to become cans of Campbell Soup.Much of this bustling cross-border commerce is duty-free, thanks to the US-Mexico-Canada Agreement, or USMCA, that President Donald Trump negotiated with America's northern and southern neighbors during his first term.But the future of the USMCA , which took effect July 1, 2020, is cloudy as the three countries begin what could be a tempestuous attempt to renew the pact this year. The United States is demanding changes to the treaty, and the top U.S. trade negotiator told Politico in December that Trump would be willing to pull the United States out of the pact if he can't get the deal he wants.
When geopolitical tensions flare up, the natural assumption is that gold should immediately surge.
It's time to get defensive with your portfolios, says Eddie Ghabour, with his firm turning underweight on tech and growing its investments in gold. He adds that a "lose-lose" scenario with the FOMC's stance on rate cuts, paired with heightening tensions in the U.S.-Iran War, will lead to a 10% correction in the S&P 500.
The BDC sector trades at near-historic P/NAV discounts, reflecting extreme bearish sentiment and perceived systemic risk. Recent high-profile bankruptcies and SaaS sector fears have been misapplied to BDCs, whose exposures are more diversified and structurally protected.
“Numerous countries have told me they're on the way,” says U.S. president.
Bill Gurley, Benchmark general partner, said he sees an artificial intelligence "reset" coming. Gurley said, "bubbles only exist when the actual wave is real," and the AI wave has made a lot of people rich quickly.
Justin Bergner, Portfolio Manager at Gabelli Funds says a 10-15% pullback could be ahead and shares exactly where smart investors should be investing before the market turns around.